N. Fork Land & Cattle, LLLP v. First Am. Title Ins. Co.

• Decision Date: 24 November 2015
• Docket Number: No. S–14–0314.,S–14–0314.
• Citation: 362 P.3d 341
• Parties: NORTH FORK LAND & CATTLE, LLLP, Appellant (Plaintiff), v. FIRST AMERICAN TITLE INSURANCE COMPANY, Appellee (Defendant).
• Court: Wyoming Supreme Court

362 P.3d 341

NORTH FORK LAND & CATTLE, LLLP, Appellant (Plaintiff),

v.FIRST AMERICAN TITLE INSURANCE COMPANY, Appellee (Defendant).

No. S–14–0314.

Supreme Court of Wyoming.

Nov. 24, 2015.

Representing Appellant: M. Gregory Weisz of Pence and MacMillan LLC, Laramie, Wyoming.

Representing Appellee: James R. Salisbury and Anthony M. Reyes of Riske, Salisbury & Reyes, P.C., Cheyenne, Wyoming. Argument by Mr. Salisbury.

Before BURKE, C.J., and HILL, KITE^* , DAVIS, and FOX, JJ.

KITE, Justice, Ret.

[¶ 1] North Fork Land & Cattle, LLLP (North Fork) appeals from the district court's order granting summary judgment in favor of First American Title Insurance Company (First American). The district court ruled that North Fork was not an insured under title insurance policies issued by First American to North Fork's predecessors and, therefore, was not entitled to assert claims for damages resulting from an undisclosed encumbrance on the properties.

[¶ 2] We conclude the district court did not apply the appropriate test to determine the meaning of the insurance contract, and, when the correct rules are applied, North Fork qualifies as an insured successor. Consequently, we reverse and remand.

ISSUES

[¶ 3] North Fork presents the following issues for review:

I. Whether the district court improperly added language to a title insurance policy requiring that in order for a transfer of real property to qualify as a transfer by "operation of law" that the transfer must have been done only involuntarily, and therefore whether summary judgment was appropriate when the non-moving party provided uncontroverted evidence showing that it is entitled to coverage as a fiduciary/corporate successor to the named insured in the policy.

II. Whether the named insured party in a title insurance policy retained an estate and interest in the real property when the named insured was the co-organizer, general partner, limited partner, manager and beneficiary in a limited liability limited partnership that owns the real property and the named insured is entitled to a distribution in kind upon dissolution of the entity.

III. Whether the domestication and name change of a foreign limited liability limited partnership from Colorado to Wyoming and recording of a quitclaim deed done to memorialize the name change of record caused the loss of the warranty of title to the limited liability limited partnership from which it obtained title to the real property.

First American does not offer a separate statement of the issues on appeal.

FACTS

[¶ 4] Between 1983 and 1999, Ronald and Carol Hansen purchased five separate properties and combined them to form a ranch in Fremont County, Wyoming. The Hansens held title to four of the properties as husband and wife. They obtained title insurance on the properties from First American and were named personally as insureds. Mr. Hansen held title to the other parcel as trustee of his revocable trust, and the First American title insurance policy listed him as an insured in that capacity.

[¶ 5] In November 2000, Mr. Hansen conveyed the trust property to himself and his wife, and the Hansens then conveyed all of the properties by warranty deed to Hansens' North Fork Ranch, LLLP (HNF), a Colorado limited liability limited partnership. The limited liability limited partnership was created by the Hansens specifically for estate planning purposes, and Mr. Hansen passed away shortly after the conveyances. Wyoming later enacted legislation authorizing limited liability limited partnerships, and, in 2009, HNF converted to a Wyoming limited liability limited partnership and changed its name to North Fork Land & Cattle, LLLP. HNF quitclaimed the properties to North Fork to update the recorded legal title of the properties.

[¶ 6] In 2008, the district court declared that Bunker Road, which crosses three of North Fork's properties, was established as a county road by Fremont County in 1913. King v. Bd. of County Comm'rs of the County of Fremont, 2010 WY 154, ¶ 9, 244 P.3d 473, 476 (Wyo.2010). HNF intervened and contested the county road in the King action. This Court affirmed the county road designation in 2010. Id., ¶ 1, 244 P.3d at 474.

[¶ 7] First American failed to disclose that Bunker Road burdened the properties when the title insurance policies were issued to the Hansens. North Fork submitted notices of claims under the title insurance policies, asserting it was damaged by the Bunker Road encumbrance. First American did not respond to North Fork's claims, and North Fork filed suit against the insurer.

[¶ 8] First American filed a motion for summary judgment on several bases. The district court granted summary judgment in favor of the insurer, concluding that North Fork did not meet the definition of "insured" under the title insurance policies and the Hansens could not be held liable under the warranty provisions of the policies because HNF transferred the properties to North Fork by quitclaim deeds. North Fork appealed.

STANDARD OF REVIEW

[¶ 9] Our standard of review for a summary judgment order is de novo. Fayard v. Design Comm. of the Homestead Subdivision, 2010 WY 51, ¶ 9, 230 P.3d 299, 302 (Wyo.2010) ; Wyo. Med. Ctr. v. Wyo. Ins. Guaranty Ass'n, 2010 WY 21, ¶ 11, 225 P.3d 1061, 1064 (Wyo.2010). Summary judgments are governed by W.R.C.P. 56(c) :

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. A summary judgment, interlocutory in character, may be rendered on the issue of liability alone although there is a genuine issue as to the amount of damages.

Reviewing a summary judgment decision,

we have exactly the same duty as the district judge; and, if there is a complete record before us, we have exactly the same material as did [the district judge]. We must follow the same standards. The propriety of granting a motion for summary judgment depends upon the correctness of a court's dual findings that there is no genuine issue as to any material fact and that the prevailing party is entitled to judgment as a matter of law. This court looks at the record from the viewpoint most favorable to the party opposing the motion, giving to him all favorable inferences to be drawn from the facts contained in affidavits, depositions and other proper material appearing in the record.

McGarvey v. Key Pro. Mgmt. LLC, 2009 WY 84, ¶ 10, 211 P.3d 503, 506 (Wyo.2009), quoting Nowotny v. L & B Contract Indus., 933 P.2d 452, 455 (Wyo.1997).

[¶ 10] Interpretation of the contractual language is a matter of law for the court, provided the language is clear and unambiguous. Cheek v. Jackson Wax Museum, Inc., 2009 WY 151, ¶ 12, 220 P.3d 1288, 1290 (Wyo.2009) ; Vargas Ltd. Partnership v. Four "H" Ranches Architectural Control Comm., 2009 WY 26, ¶ 11, 202 P.3d 1045, 1050 (Wyo.2009). If the language is not clear or there are other material issues of fact, summary judgment is not appropriate. Fayard, ¶ 10, 230 P.3d at 302.

DISCUSSION

[¶ 11] The legislature addressed title insurance in the Wyoming Title Insurance Act, Wyo. Stat. Ann. §§ 26–23–301 through 336 (LexisNexis 2015). Section 26–23–303(a)(xxi) defines a title insurance policy, in relevant part, as:

(xxi) "Title insurance policy" or "policy" means a contract wherein, subject to the stated terms and conditions, a title insurer insures, guarantees or indemnifies owners of real or personal property or the holders of liens or encumbrances thereon or others interested therein against loss or damage suffered by reason of:

(A) Defects in, adverse claims, liens or encumbrances in the title to the stated property;

(B) Unmarketability of the title to the stated property;

(C) Guaranteeing, warranting or otherwise insuring by a title insurance company the correctness of searches relating to the title to property;

(D) Defects in the authorization, execution or delivery of an encumbrance upon such property[.]

....

[¶ 12] Consistent with the statutory definition, this Court provided an overview of the purposes of title insurance in Haines v. Old Republic Nat'l Title Ins. Co., 2008 WY 31, ¶ 10, 178 P.3d 1086, 1089 (Wyo.2008) (internal citations omitted):

A title insurance policy protects the insured against loss or damage as a result of defects in or the unmarketability of the insured's title to real property. [T]he duty owed to an insured that arises through the issuance of a title insurance policy is contractual and subject to the policy's stated terms and conditions.

Title insurance policies provide indemnification to insureds damaged by title defects.

The predominant view today is that title insurance—at least as to its first party aspect—is a contract of indemnity, and not a contract of guaranty or warranty. Consequently, a title insurer does not "guarantee" the status of the grantor's title.

As an indemnity agreement, the insurer agrees to reimburse the insured for loss or damage sustained as a result of title problems, as long as coverage for the damages incurred is not excluded from the policy....

Id. at 1090, quoting Stewart Title Guaranty Co. v. West, 110 Md.App. 114, 676 A.2d 953, 960–62 (1996) (emphasis in original).

[¶ 13] Resolution of the case at bar requires interpretation of the title insurance policies. The policies are standard American Land Title Association (ALTA) forms from 1970 through 1992, and they all contain the same relevant language. Two provisions of the title insurance policies are particularly important to this case. Paragraph 1(a) defines an "insured" as:

The insured named in Schedule A, and, subject to any rights or defenses the Company may have had against the named insured, those who succeed to the interest of such insured by operation of law as distinguished from purchase including, but not limited to, heirs, distributees, devisees, survivors, personal representatives,

...