Sims v. Sperry, 90CA1064

Decision Date12 March 1992
Docket NumberNo. 90CA1064,90CA1064
PartiesBilly Don SIMS and Yvonne Ava Sims, Plaintiffs-Appellees, v. Charles P. SPERRY, Third-Party Plaintiff-Appellant, v. TRANSAMERICA TITLE INSURANCE COMPANY, Third-Party Defendant-Appellee. . V
CourtColorado Court of Appeals

Robert Simpson, Lakewood, for plaintiffs-appellees.

Williams, Trine, Greenstein & Griffith, P.C., Mari C. Bush, Cohen & Cohen, William M. Cohen, Boulder, for third-party plaintiff-appellant.

Dietze, Davis and Porter, P.C., Peter C. Dietz, Robyn W. Kube, Boulder, for third-party defendant-appellee.

Opinion by Judge DAVIDSON.

Third-party plaintiff, Charles P. Sperry, appeals from the summary judgment entered in favor of plaintiffs, Billy Don and Yvonne Ava Sims, for rescission of a warranty deed and from a judgment entered after a bench trial in favor of third-party defendant, Transamerica Title Insurance Company, on Sperry's claims of breach of its duties to defend and to indemnify. We affirm in part and reverse in part.

These issues arise out of a series of real estate transactions fraudulently conducted by real estate agent Kenneth Reese. In August 1985, Sperry invested $108,000 in four properties recommended to him by Reese. Reese delivered to Sperry warranty deeds to these properties, as well as contracts from third parties for the sale of three of these parcels. However, none of these contracts closed and Sperry demanded return of the earnest money deposits.

In response, Reese told Sperry that a wealthy buyer would purchase the properties if Sperry would release the original purchasers from their contracts. Sperry agreed, but again this deal failed.

Reese finally suggested that if Sperry would release this buyer as well, Reese would exchange Sperry's properties for other properties which would be easier to sell. Reese and Sperry executed this as a written settlement agreement between them.

As part of this settlement agreement, Sperry received from Reese warranty deeds and title insurance commitments from Transamerica for the new properties, which included parcels of land owned by the Simses and by Kenneth Wheeler. Transamerica had issued approximately 700 title policies in the past through Reese. Reese and Sperry signed the settlement agreement at a closing held at Transamerica's office, and the title insurance policies for the Simses' and Wheeler's parcels were issued to Sperry in May 1986.

In October 1986, Wheeler sued Reese seeking damages for fraud and sued Sperry seeking rescission of the deed. The Simses filed a similar suit against Reese and Sperry in April 1987, which was consolidated with the Wheeler action.

Sperry requested that Transamerica conduct his defense, but Transamerica determined that both Wheeler's and the Simses' claims against Sperry were outside the title insurance policies' scope of coverage or were within specific exclusions and therefore refused to defend Sperry in those actions. Thereafter, Sperry filed a breach of contract claim against Transamerica for its refusal to defend him in the two lawsuits.

In February 1987, the trial court entered a default judgment against Reese on a motion by Wheeler, and in April 1989, the court granted Wheeler's motion for summary judgment for rescission of the deed against Sperry.

In October 1987, the trial court entered a default judgment against Reese on a motion by the Simses. In July 1989, the trial court granted the Simses' motion for partial summary judgment for rescission of the deed which transferred the Simses' property to Sperry.

Sperry's claims against Transamerica were tried to the court in January 1990. It found that there was no duty to indemnify and no duty to defend. Sperry appeals both the summary judgment in favor of the Simses and the judgment in favor of Transamerica.

I.

Sperry raises two contentions of error regarding the entry of summary judgment against him on the Simses' rescission claim. We note initially that this court affirmed the trial court on these same issues in Sperry's appeal from the summary judgment for rescission entered in favor of Wheeler in Wheeler v. Sperry, (Colo.App. No. 90CA0336 and 90CA0387, June 20, 1991) (not selected for publication).

A.

We disagree with Sperry's first contention that the Simses' judgment against Reese for damages for loss of the Sperry property was an election of remedies and that it was therefore error for the trial court to allow the Simses to seek rescission of the deed against him.

Election of remedies is a harsh doctrine which should not be unduly extended. H & K Automotive Supply Co. v. Moore & Co., 657 P.2d 986 (Colo.App.1982). The purpose of this doctrine is to prevent a double recovery by the innocent party. Stewart v. Blanning, 677 P.2d 1382 (Colo.App.1984).

We note initially that Sperry sued Reese, in part, in order to make a claim under Colorado's Real Estate Recovery Fund. Section 12-61-301, et seq., C.R.S. (1991 Repl.Vol. 5B). One requirement for payment under this statute is that the applicant obtain a "final judgment ... against a real estate broker [for] negligence, fraud, willful misrepresentation or conversions of trust funds." Section 12-61-302(1), C.R.S. (1991 Repl.Vol. 5B).

Here, the original default judgment against Reese included $90,000 as the value of the parcel of property Reese had fraudulently transferred from the Simses to Sperry. Thereafter, the trial court granted the Simses' motion to amend the default judgment to provide for an appropriate reduction of the judgment against Reese in the event of a rescission of the transfer of the property to Sperry.

By its ruling, the trial court ensured that the Simses would not receive a double recovery and accomplished the purpose of the election of remedies doctrine. Thus, there was no error.

B.

Sperry next contends that the trial court erred in granting the Simses' motion for summary judgment on their rescission claims. We disagree.

In evaluating a summary judgment, a reviewing court may determine only whether the law was correctly applied and whether a genuine issue of material fact exists. Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo.1988).

Here, the trial court determined that:

[T]here is no genuine issue of material fact with regard to the question of delivery of the deed, it being clear that Reese was not authorized to deliver the deed, and finding further that Mr. and Mrs. Sims lacked an intent to convey present interest in the property to Charles P. Sperry, and that there was no consideration for the deed.

Delivery is essential to the complete execution of a deed so as to pass title. Larison v. Taylor, 83 Colo. 430, 266 P. 217 (1928). Delivery requires proof that the grantor parted with possession and control or any power over the deed, for the benefit of grantee, and that he intended to do so presently and unconditionally. Without such intent, the grantor's delivery is not binding, even if the deed is subsequently recorded. Curtiss v. Ferris, 168 Colo. 480, 452 P.2d 38 (1969).

Here, contrary to Sperry's assertion, there was evidence before the court that the Simses did not intend to pass a present interest to Sperry unconditionally and that the Simses received no consideration.

In the contract for sale, purportedly from Sperry, the Simses agreed to sell the property upon the "conditions stated herein." Sperry's payment to the Simses of the $90,000 purchase price was a condition of the transfer. However, in his deposition Sperry stated that he paid no money to the Simses, or to Reese on their behalf, but rather that Sperry forgave Reese's personal debt to Sperry in exchange for the property. Additionally, Billy Sims stated in his deposition that he received nothing in return for the transfer.

Because this evidence was unrefuted, no genuine issue of material fact existed as to the question of delivery, and title did not pass. See Curtiss v. Ferris, supra.

II.

Sperry's next contentions relate to his claims against Transamerica. At trial, Sperry and Transamerica stipulated that the court's decision regarding Transamerica's duties to defend and to indemnify Sperry under the facts of Wheeler's lawsuit would govern in the Simses' lawsuit. Therefore, no evidence concerning the Simses' action was presented to the court, and we refer hereafter only to Wheeler's claims against Sperry.

A.

Sperry contends that the trial court erred in ruling that Transamerica had no obligation to defend him against Wheeler's claims. We agree.

The determination of the duty to defend depends on the terms of the insurance policy and the interpretation of those terms based upon principles of contract law. An insurer seeking to avoid its duty to defend bears a heavy burden. Its duty to defend arises when the underlying complaint against the insured alleges any facts that might fall within coverage of the policy. It is enough that the allegations state a claim which is potentially or arguably within the policy coverage, and if there is doubt as to whether a theory of recovery within the policy coverage has been pleaded, the insurer must accept the defense of the claim. However, there is no duty to defend if the insurer can establish that the allegations in the complaint are either clearly not covered by the insuring language or are solely and entirely within exclusion provisions. Hecla Mining Co. v. New Hampshire Insurance Co., 811 P.2d 1083 (Colo.1991); see American Motorists Insurance Co. v. General Host Corp., 946 F.2d 1489 (10th Cir.1991). We note that the trial court did not have the benefit of our supreme court's decision in Hecla Mining when it issued its rulings.

Here, Transamerica's duty to defend is contained in the policy's "Conditions and Stipulations." It provides:

The Company, at its own cost and without undue delay, shall provide for the defense of an insured in all litigation consisting of actions or proceedings commenced...

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