Booth v. ATTORNEYS'TITLE GUARANTY FUND, 990551.

• Decision Date: 09 February 2001
• Docket Number: No. 990551.,990551.
• Citation: 2001 UT 13,20 P.3d 319
• Parties: Jacqueline BOOTH and Donald Tevini, Plaintiffs and Appellants, v. ATTORNEYS' TITLE GUARANTY FUND, INC., a corporation, William L. Benge, Moab Travelodge Limited Partnership, and Charles Critchlow, Defendants and Appellees.
• Court: Utah Supreme Court

20 P.3d 319

2001 UT 13

Jacqueline BOOTH and Donald Tevini, Plaintiffs and Appellants, v. ATTORNEYS' TITLE GUARANTY FUND, INC., a corporation, William L. Benge, Moab Travelodge Limited Partnership, and Charles Critchlow, Defendants and Appellees.

No. 990551.

Supreme Court of Utah.

February 9, 2001.

J. Randall Call, Salt Lake City, and James L. Dawson, San Jose, CA, for plaintiffs.

Theodore E. Kanell, Mark J. Williams, Salt Lake City, for defendants.

RUSSON, Associate Chief Justice:

¶ 1 Jacqueline Booth and Donald Tevini appeal the seventh district court's grant of summary judgment in favor of Attorneys' Title Guaranty Fund, Inc. ("ATGF"), William Benge, and Charles Critchlow. The court held that title to the Moab Travelodge motel ("Travelodge") was marketable, Booth and Tevini had sustained no injuries, and the statute of limitations precluded any claim of fraud. We affirm.

BACKGROUND

¶ 2 Richard Rose and Robert Rudl were general partners of the Moab Travelodge Limited Partnership ("MTLP"). The partnership was formed in 1980, and MTLP's primary asset was the Travelodge in Moab, Utah. Rose acted as the managing general partner of MTLP from its formation.¹

¶ 3 Rudl filed a voluntary petition for chapter 7 bankruptcy² in California in 1983 or 1984 and thereafter became inactive as a general partner of MTLP. At no time did Rudl's bankruptcy trustee act as a general partner of MTLP.

¶ 4 On February 13, 1985, Rose filed for personal bankruptcy in California under chapter 11.³ In October 1989, this proceeding was involuntarily converted to a chapter 7 proceeding, and the California bankruptcy court appointed a trustee.

¶ 5 On June 6, 1985, after Rose had filed for personal bankruptcy in California, MTLP filed for chapter 11 bankruptcy in Utah. As part of its bankruptcy proceedings, MTLP filed an amended disclosure statement to its bankruptcy plan, designating Rose as manager of the ongoing concern and providing that Rose be paid $1000 per month as compensation for this responsibility.

¶ 6 The Utah bankruptcy court filed an order confirming the MTLP bankruptcy plan on December 14, 1986. The order provided: "Upon the entry of the Order of Confirmation the Debtor [MTLP] shall be entitled to manage its affairs without further order of the Court." The confirmation order also stated: "The Court shall retain jurisdiction of this Chapter 11 case pursuant to and for the purposes set forth in 1127(b)⁴ of the Code. . . . (c) Order a sale of assets. (d) Supervise such other matters as may be set forth in the Order of Confirmation."

¶ 7 In the summer of 1989, Booth and Tevini, both California residents, visited Rose in Moab. Booth knew Rose and Rudl and had lent $40,000 to MTLP in 1982. That loan was secured by a trust deed on the Travelodge. Booth acknowledged in her deposition that because she was a creditor of MTLP, she had previously received a notice of the MTLP bankruptcy by mail. Booth also stated in her deposition that she had started receiving monthly payments on the note about one and one-half years before MTLP filed for bankruptcy, and the payments continued after the filing.

¶ 8 While visiting Moab, Booth and Tevini decided to purchase the Travelodge. Booth and Tevini were aware that Rose was in personal bankruptcy at that time, but Booth claimed Rose had told her MTLP was no longer in bankruptcy. In August 1989, Tevini submitted an earnest money sales agreement to MTLP to purchase the Travelodge for $1,725,000 subject to a tax deferred exchange involving other property Tevini planned to sell.⁵ Rose signed the agreement on behalf of MTLP on September 3. Tevini then arranged for Lloyd Kendall at LAM in California to act as the accommodator in the tax deferred exchange, and Rose arranged for ATGF to serve as the escrow agent, as well as to provide title insurance.

¶ 9 In preparation for the closing, ATGF and LAM exchanged documents. It is not certain exactly which documents were sent and received, but all parties agreed that the cover page of the ATGF title commitment was sent to and received by LAM. Kendall, Booth, and Tevini all acknowledged having seen the title commitment cover page before completing the closing. At the bottom of the cover page, in bold print, was the statement: "This Commitment must contain Schedules A and B and be duly validated by this signature." It was signed by William Benge as authorized agent.

¶ 10 Schedule B of the title commitment listed the exceptions to title such as judgments, liens, and bankruptcies. Kendall claimed Tevini had made him aware that there may be a bankruptcy issue. Therefore, Kendall claimed that when he did not receive schedule B of the title commitment, he advised Booth and Tevini that they should wait to receive and review that information before they closed on the Travelodge. Booth and Tevini admitted that they knew they did not have the entire title commitment prior to closing.⁶ Nevertheless, without schedule B, on January 10, 1990, Booth and Tevini closed on the first portion of the tax deferred exchange.⁷ A promissory note was placed in escrow with First Western National Bank so that payments could be received on the note and disbursed pursuant to the terms of the escrow agreement.

¶ 11 Sometime in January 1990, shortly after closing on the first portion of the tax deferred exchange, Booth and Tevini went to the office of John Richardson, the case administrator for the trustee in Rose's personal chapter 7 bankruptcy in California, to discuss the sale of the Travelodge.⁸ Richardson allegedly told Booth and Tevini that the sale could not take place unless Rose's trustee had been notified. Nevertheless, Tevini claimed that he and Booth gave Richardson all the documents regarding the sale to review and Richardson said he would get back to them. Tevini claimed that approximately one week later, Richardson called and told him that Tevini and Booth had apparently paid fair market value for the Travelodge and that the trustee approved the sale.

¶ 12 In April 1992, MTLP's bankruptcy attorneys sent a letter to the Travelodge regarding the closure of MTLP's chapter 11 bankruptcy. Booth and Tevini saw this letter when they picked up their mail at the Travelodge in May 1992. Tevini claimed that shortly thereafter, he and Booth contacted ATGF and expressed concerns regarding marketability of the Travelodge's title.

¶ 13 The Utah bankruptcy court closed MTLP's bankruptcy case by entry of a final decree on August 16, 1992. Booth and Tevini eventually made a claim against ATGF under their title policy on the Travelodge. They alleged they had suffered damages because title to the Travelodge was clouded due to the fact that approval for the sale had never been acquired from the California court with jurisdiction over Rose's chapter 7 bankruptcy. They also claimed that Rose did not have the authority to act for MTLP because he was in chapter 7 bankruptcy when he executed the sale.

¶ 14 The ATGF title insurance policy insured Booth and Tevini against loss or damage sustained or incurred, up to $1,725,000, as a result of "1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the title; and 4. Lack of a right of access to and from the land." In addition, schedule B provided the exceptions that indicated the chain of title. However, despite claims that they could not obtain refinancing for the Travelodge, Booth and Tevini admitted that they never made any written application to any lender for any refinancing.

¶ 15 To resolve the question of whether the Travelodge title was marketable, ATGF, Booth, and Tevini filed a joint motion to reopen the MTLP chapter 11 bankruptcy case in May 1994. They asked the Utah bankruptcy court to issue an order holding that the sale of the Travelodge was authorized under the terms of MTLP's confirmed bankruptcy plan. Booth and Tevini filed a supplemental motion, and MTLP filed an objection to the motion to reopen. Once the case was reopened, ATGF moved for a finding that Rose was authorized to execute the sale and for the court's approval of the sale. In June 1995, the Utah bankruptcy court concluded that pursuant to its bankruptcy plan, MTLP was entitled to manage its affairs without further order from the court; the provision of the plan that concerned continuing jurisdiction of the bankruptcy court to order a sale of assets was permissive, not mandatory; and bankruptcy court approval was not necessary for MTLP to sell the Travelodge.

¶ 16 In February 1995, Booth and Tevini filed a complaint in Grand County, Utah, naming ATGF, Rose, MTLP, Benge, Critchlow (issuer of the title policy), and others as defendants. The complaint alleged breaches of contract and warranties; fraud and conspiracy to defraud; breach of fiduciary duty and constructive fraud; violation of the implied covenants of good faith and fair dealing; negligence; and action to quiet title.

¶ 17 Defendants took the position that it was unnecessary for Booth and Tevini to seek to quiet title, and asserted that there had been no valid claim under the title policy nor any defect in the title to the Travelodge. Defendants did not oppose the motion to quiet title, and in December 1995, the district court ordered judgment quieting title in Booth and Tevini. However, the district court specifically did not make any finding with regard to the necessity for bringing the action to quiet title. In addition, the district court reserved unto the individual defendants any and all defenses they may have had relative to any of the other claims filed in the complaint.

¶ 18 On April 1, 1996, Booth and Tevini filed an amended complaint. This complaint alleged (1) breach of contract against Rose and MTLP; (2) fraudulent misrepresentation against Rose and MTLP; (3) breach of contract against ATGF; (4) fraudulent concealment against ATGF and Benge; (5) breach of the...