21st Mortgage v. Aegis Ins. Security CA2/5 ( 2021 )

Filed 12/8/21 21st Mortgage v. Aegis Ins. Security CA2/5
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
21ST MORTGAGE B308468
CORPORATION,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. 19CHCV00157)
v.
AEGIS INSURANCE SECURITY
COMPANY,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los
Angeles, County, Melvin D. Sandvig, Judge. Affirmed.
The Dreyfuss Firm and Lawrence J. Dreyfuss for Plaintiff
and Appellant.
Murchison & Cumming, Edmund G. Farrell and Christy
Gargalis for Defendant and Respondent.
______________________________
Plaintiff and appellant 21st Mortgage Corporation (21st
Mortgage) appeals the judgment in favor of defendant and
respondent Aegis Insurance Security Company (Aegis) based on
the trial court’s order granting summary judgment against 21st
Mortgage on its sole remaining cause of action against Aegis, for
breach of written contract. The trial court granted summary
judgment on the basis that the one-year statute of limitations on
fire insurance policy actions mandated by Insurance Code section
2071,1 which was an included term in the insurance policy at
issue, had expired before 21st Mortgage initiated the lawsuit.
On appeal, 21st Mortgage argues that its claim was not
barred by the limitations period because, prior to the expiration
of the one-year statute of limitations, Assembly Bill No. 2594
((2017–2018 Reg. Sess.) (Stats. 2018, ch. 639, §§ 1–2) (Assembly
Bill 2594)) amended section 2071 to impose a mandatory two-
year statute of limitations for fire loss related to a state of
emergency, which applies to 21st Mortgage’s claim for total loss
of a manufactured home in the Creek Fire. 21st Mortgage
further argues that there is a material issue of disputed fact
regarding the actual cash value of the home, an issue that the
trial court did not reach.
We affirm the trial court’s order granting summary
judgment. The plain language of amended section 2071,
subdivision (d)(1), states that its provisions “govern a policy
originated or renewed on or after the effective date of this act,”
and it is undisputed that the policy originated prior to September
21, 2018, when Assembly Bill 2594 became effective. Because we
affirm the trial court’s order on this basis, we need not address
1 Allfurther statutory references are to the Insurance Code
unless otherwise indicated.
2
the issue of whether the parties’ disagreement regarding the
actual cash value of the home creates a triable issue of fact that
would survive summary judgment.
FACTS AND PROCEDURAL HISTORY
The majority of the facts are undisputed. In 2017, Inocente
and Ivonne Salinas owned a manufactured home in Sylmar and
obtained a loan from 21st Mortgage secured by the home. In the
course of underwriting the loan, 21st Mortgage obtained an
appraisal conservatively valuing the home at $123,250.
Aegis issued a $125,000 insurance policy on the home to
the Salinases with a coverage period of May 25, 2017, through
May 25, 2018. 21st Mortgage was identified as the lienholder on
the policy. As relevant here, the policy provided that in the
event of a covered loss, if the manufactured home was not
repaired or replaced, Aegis would pay the lowest of (1) the actual
cash value of the manufactured home before the loss, (2) the
difference between the actual cash value immediately before the
loss and the actual cash value immediately after the loss, (3) the
cost to repair the manufactured home, (4) the cost to replace the
manufactured home with a manufactured home of like value, or
(5) the amount of insurance shown on the Declarations Page.
The manufactured home was completely destroyed in the
Creek Fire on December 5, 2017. On the same day, the governor
of California declared a state of emergency due to the Creek and
Rye Fires.
The Salinases submitted a claim to Aegis for their loss on
December 5, 2017. On December 15, 2017, an adjuster for Aegis
inspected the house and “observed the dwelling, other structures
3
and personal property to be a total loss due to the nearby
wildfire.” Aegis prepared an estimate that identified the
replacement cost value on the property as $129,995.32 ($4,495.32
over the policy limit of $125,000). Aegis determined the actual
cash value of the property to be $62,071.66, the total recoverable
depreciation to be $63,428.34, and the net claim (less a $500
deductible) to be $61,571.66.2 On December 29, 2017, Aegis
informed the Salinases that it had requested checks in the
amount of $61,571.66, on which 21st Century might be listed as
payee and advised the Salinases that any suit on the policy must
be brought within one year of the loss. Aegis issued a check
payable to the Salinases and 21st Mortgage on the same day. On
January 23, 2018, Aegis informed the Salinases that it would be
closing the claim as all known exposures had been resolved.
Aegis again advised that any suit against it must be brought
within one year.
In June of 2018, the Salinases contacted Aegis to request
another check in the amount of $61,571.66, because the check
they sent to 21st Mortgage had gotten lost. In August of 2018,
21st Mortgage contacted Aegis to inquire as to why Aegis had
paid only $61,571.66. Aegis provided 21st Mortgage with the
estimate for the loss. It advised 21st Mortgage that the policy
included replacement cost coverage but that depreciation was
only recoverable once repair and/or replacement of the home had
been completed. Aegis informed 21st Mortgage that the insured
had one year from the initial payment to recover the withheld
2 21stMortgage disputes the actual cash value of the
property, which its appraiser estimated to be in excess of
$120,000 at the time of the fire, but does not dispute that Aegis
advised the Salinases as stated.
4
depreciation. In September of 2018, 21st Mortgage informed
Aegis that the home would not be replaced.
On February 27, 2019, 21st Mortgage, as lienholder and an
additional named insured, filed the complaint in the instant
matter against the Salinases and Aegis, alleging four causes of
action. 21st Mortgage sought declaratory relief against Aegis in
the first cause of action and claimed breach of written contract in
fourth cause of action.3 On April 30, 2019, 21st Mortgage filed a
first amended complaint asserting the same causes of action
against Aegis. With respect to the fourth cause of action, 21st
Mortgage alleged that Aegis was required to pay the full
replacement cost of the home but refused to do so. Additionally,
the purported cash value that Aegis paid was less than the actual
cash value of the home.
On June 11, 2019, Aegis demurred to the first amended
complaint. The demurrer was sustained without leave to amend
as to the first cause of action for declaratory relief. On July 17,
2019, Aegis answered the remaining fourth cause of action of the
first amended complaint for breach of the written insurance
contract and asserted the statute of limitations as an affirmative
defense.
On January 22, 2020, Aegis moved for summary judgment
on the fourth cause of action. As relevant here, Aegis argued that
21st Mortgage’s claim was barred by the statute of limitations.
The one-year limitations provision was a mandatory term of the
policy pursuant to sections 2070 and 2071, and has been held
3The second and third causes of action for waste and
breach of written contract were asserted solely against the
Salinases, who are not parties to this appeal.
5
valid and enforceable. Absent tolling or estoppel, nothing more
than the passage of time must be shown to bar an action.
California tolls the limitation period from the date that the
insured files a claim until the insurance provider closes the claim.
The claim was closed on either January 23 or January 26, 2018.
Accordingly, the limitations period began to run on January 26,
2018 at the latest and expired by January 26, 2019, prior to 21st
Mortgage filing the lawsuit on February 27, 2019. 21st
Mortgage’s claim was therefore barred.
21st Mortgage opposed the summary judgment motion on
March 24, 2020. 21st Mortgage argued that its claims were not
barred by the one-year statute of limitations, because the
applicable statute was section 2051.5. Section 2051.5 provides
that under a policy that requires payment of the replacement cost
for a loss, the policy may not set a time limit of less than 12
months from the date of the first payment. However, in the event
of a loss relating to a state of emergency, as in the instant case,
the time limit may not be less than 36 months.
Following additional discovery, 21st Mortgage filed a
supplemental memorandum of points and authorities in
opposition on July 1, 2020. 21st Mortgage argued that, if the
applicable statute was instead section 2071, the claim still was
not barred, because an amendment to section 2071 provides that
where a state of emergency has been declared the time to bring
suit is extended to 24 months after inception of the loss. The
home was completely destroyed in the Creek Fire on December 5,
2017, and the governor of California had declared a state of
emergency that same day due to the fire. Thus, the 24-month
extension applied. 21st Mortgage anticipated that Aegis would
argue that the amendments to section 2071 became effective on
6
September 21, 2018, after the fire occurred on December 5, 2017,
and therefore did not apply. 21st Mortgage argued that the
amendment became effective approximately four months before
the limitations period ended in late January of 2019, and
therefore applied to the claim. Under California law, a new
statute that enlarges the statutory limitations period applies to
all actions that are not already barred by the statute of
limitations. 21st Mortgage would only be time-barred if the
limitations period had expired before the legislation took effect on
September 21, 2018. The lawsuit was timely filed within the two-
year limitation period.
Aegis replied on July 9, 2020. Aegis argued that 21st
Mortgage was relying on cases involving the personal injury
statute of limitations, which do not apply to the statute of
limitations for a written insurance policy. Aegis asserted that
the amendments to sections 2051.5 and 2071 applied
“prospectively” only; statutes are not to be given retrospective
operation in the absence of clear legislative intent. Here, there
was no express language in the Insurance Code indicating that
the statutes were to be applied retroactively, so they should be
applied prospectively only. 21st Mortgage’s assertion that an
amended statute applies if the statute of limitations has not run
at the time of the loss relied on cases involving personal injury,
not applicable in the insurance context. The applicable statute of
limitations was the one in place before the amendments to the
Insurance Code.
Following a hearing on the matter, the court granted the
motion for summary judgment. The court found that the
applicable statute was section 2071 and not 2051.5, as the
insureds did not intend to replace the home. The statute in effect
7
at the time that the policy was entered into provided for a one-
year statute of limitations. In general, a statute applies
retroactively only if it expressly states that it does. As the
amended version of section 2071 containing the 24-month
extension of the statute of limitations did not state that the
statute applies retroactively, it did not apply to the policy. The
cases relied upon by 21st Mortgage involved personal injury and
did not apply in the insurance context. The action was barred by
the one-year statute of limitations.
21st Mortgage timely appealed.
DISCUSSION
Standard of Review
A defendant may be entitled to summary judgment when
“all the papers submitted show that there is no triable issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c);
Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347
(Hampton).) To meet its initial burden, a defendant moving for
summary judgment must show “one or more elements of the
cause of action . . . cannot be established, or that there is a
complete defense to the cause of action.” (Code Civ. Proc., § 437c,
subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th
826, 850 (Aguilar).) If the defendant makes this showing, the
burden shifts to plaintiff to produce admissible evidence showing
a triable issue of material fact exists. (Code Civ. Proc., § 437c,
subd. (p)(2); Aguilar, supra, at p. 850.) “‘“The plaintiff . . . may
not rely upon the mere allegations or denials of its pleadings . . .
8
but, instead, shall set forth the specific facts showing that a
triable issue of material fact exists . . . .” ([Code Civ. Proc.,
§ 437c], subd. (o)(2); [citations].)’ [Citations.]” (Andrews v. Foster
Wheeler LLC (2006) 138 Cal.App.4th 96, 101, fn. omitted.)
We review de novo the trial court’s grant of summary
judgment. (Hampton, supra, 62 Cal.4th at p. 347; Hartford
Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277,
286.) We take the facts from the record that was before the trial
court and consider all the evidence set forth in the moving and
opposing papers except that to which objections were made and
sustained. (Code Civ. Proc., § 437c, subd. (c); Hampton, supra, 62
Cal.4th at p. 347.) “We liberally construe the evidence in support
of the party opposing summary judgment and resolve doubts
concerning the evidence in favor of that party.” (Yanowitz v.
L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037; accord, Hampton,
supra, 62 Cal.4th at p. 347.)
Analysis
On appeal, the sole issue that we need to consider to
resolve this matter is whether the amendments made to section
2071, which would extend the limitations period to 24 months
and thereby render 21st Mortgage’s claim timely, are applicable
to the insurance policy.4
421st Mortgage concedes on appeal that “Section 2071
appears to be the applicable Insurance Code section,” and
abandons the argument initially made to the trial court that the
governing statute is section 2051.5. 21st Century apparently now
agrees with the argument made below by Aegis, that section
9
“The expiration of the applicable statute of limitations is [a]
complete defense. [Citations.]” (Professional Collection
Consultants v. Lauron (2017) 8 Cal.App.5th 958, 965.) Section
2070 mandates that “[a]ll fire policies on subject matter in
California shall be on the standard form” in section 2071. No
additions or omissions are permitted unless favorable to the
insured. (Ibid.) Prior to 2019, the standard form for fire policies
included the following limitation clause: “No suit or action on
this policy for the recovery of any claim shall be sustainable in
any court of law or equity unless all the requirements of this
policy shall have been complied with, and unless commenced
within 12 months next after inception of the loss.” In 2018,
following multiple devastating fires throughout the state, the
governor signed Assembly Bill 2594, urgency legislation that
added the following exception to the limitation clause: “If the loss
is related to a state of emergency, as defined in subdivision (b) of
Section 8558 of the Government Code, the time limit to bring suit
is extended to 24 months after inception of the loss.” Assembly
Bill 2594 also amended section 2071 to include the following
provision: “The amendments to this section made by the act
[Assembly Bill 2594] adding this subdivision govern a policy
originated or renewed on or after the effective date of this act.”
(§ 2071, subd. (d)(1), fn. omitted.) These amendments became
effective on September 21, 2018.
When interpreting a statute, “[w]e first consider the words
of the statute[], as statutory language is generally the most
reliable indicator of legislation’s intended purpose.” (McHugh v.
Protective Life Insurance Company (2021) 12 Cal.5th 213, 227.)
2051.5 would only apply if the home had been replaced, which it
was not here.
10
“‘If the language is unambiguous, the plain meaning controls.’
[Citation.]” (People v. Leiva (2013) 56 Cal.4th 498, 506.)
Here, although the trial court went beyond the plain
language of the statute to determine that it was not retroactive
and did not apply to 21st Mortgage’s claim, we need not address
retroactivity in the insurance context, as the plain language of
section 2071 resolves the issue.5 (See People v. Orozco (2018) 24
Cal.App.5th 667, 673 [“‘“‘[W]e may affirm a trial court judgment
on any [correct] basis presented by the record whether or not
relied upon by the trial court’”’”].)
21st Mortgage conceded that the insurance policy on the
Salinases’ home covered the period from May 25, 2017, through
May 25, 2018. It necessarily follows that the policy could not
have originated later than May 25, 2017. It is not alleged that
the policy was renewed after Assembly Bill 2594 became effective
on September 21, 2018. Accordingly, pursuant to section 2071,
subdivision (d)(1)’s requirement that the amendments govern
only policies originated or renewed on or after September 21,
2018, the date Assembly Bill 2594 became effective, 21st
Mortgage’s claim is time-barred.
5 Although it is unnecessary to look beyond the language of
the statute to discern legislative intent, we note that the
Legislature clearly expressed that the emergency legislation was
intended to aid the victims of future fires and was thus
prospective. (See Assem. Bill No. 2594 (2017–2018 Reg. Sess.)
(Stats. 2018, ch. 639, §4 [“In order to provide protections, at the
earliest possible time, for victims of future wildfires, it is
necessary that this act take effect immediately”]).)
11
DISPOSITION
We affirm the trial court’s order granting Aegis’s motion for
summary judgment. The parties are to bear their own costs on
appeal.
MOOR, J.
We concur:
RUBIN, P.J.
KIM, J.
12