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El Dorado Homes v. Fire Ins. Exchange
Edward and Anita Hollowell borrowed money from Rolf Schwalbe, Mary Lee Schwalbe, and Leonard F. Jones (Schwalbe and Jones) and gave Schwalbe and Jones a deed of trust on their property to secure the loan. Later, the Hollowells borrowed more money from Schwalbe and Jones, and gave Schwalbe and Jones a second deed of trust. The Hollowells obtained insurance against loss to the property from defendant Fire Insurance Exchange (FIE). The insurance policy included an endorsement making Schwalbe and Jones the loss payees. Under the endorsement, if a loss occurs and FIE is not liable to the Hollowells for the loss (because, for example, the loss is the Hollowells fault), FIE has the option of receiving an assignment from Schwalbe and Jones of the Hollowells debt and deed of trust in exchange for paying Schwalbe and Jones the amount owed on the Hollowells debt.
The residence was destroyed by fire. The Hollowells filed a claim with FIE, which denied the claim on the ground that the loss was the Hollowells fault.
The property was subsequently purchased by plaintiff El Dorado Homes, LLC (El Dorado), who paid the debt secured by the second deed of trust. El Dorado and Schwalbe and Jones entered into an agreement whereby Schwalbe and Jones purported to assign to El Dorado their claim against FIE for insurance proceeds, provided that any proceeds received must be first applied to the debt. The agreement does not contemplate the possibility that FIE will exercise its option to receive an assignment of the debt and deed of trust.
El Dorado, as Schwalbe and Joness assignee, sued FIE to recover the proceeds. FIE moved for summary judgment, which the trial court granted. We hold that the judgment must be reversed because FIE has failed to meet its initial burden of production with respect to a triable issue of material fact. FIE is required to demonstrate either that it has paid El Dorado the amount of the loss or that it has exercised its option to receive an assignment of the debt and deed of trust in exchange for payment of the amount of the debt. The judgment is reversed.

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