Choate v. Lawyers Title Ins. Corp.
| Decision Date | 11 December 2015 |
| Docket Number | Case No. 113,372 |
| Parties | William W. CHOATE, Individually, Plaintiff/Appellant, v. LAWYERS TITLE INSURANCE CORPORATION, Now Fidelity Title Insurance, Defendant/Appellee. |
| Court | United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma |
William W. Choate, CHOATE & CHOATE, P.C., Seminole, Oklahoma, for Plaintiff/Appellant,
Melvin R. McVay, Jr., Clayton D. Ketter, Catherine L. Campbell, PHILLIPS MURRAH, P.C., Oklahoma City, Oklahoma, for Defendant/Appellee.
Opinion by Wm. C. Hetherington, Jr., Chief Judge:
¶ 1 This action for breach of contract, implied duty of good faith and fair dealing (bad faith), negligence, and negligent retention was filed by Plaintiff William W. Choate (Insured) against Defendant Lawyers Title Insurance Corporation, now Fidelity Title Insurance (Title Insurer), seeking recovery under the title insurance policy issued to Insured for fire damage to a building on the insured property. The trial court's judgment dismissing Insured's claims and finding the defects in his petition are incurable is AFFIRMED.
HISTORY OF THE CASE
¶ 2 According to the petition, Insured purchased on Sept. 28, 2005, six lots within the city limits of Seminole, Oklahoma (the Property) with a 28,000 square foot steel framed masonry building (the Building) previously owned and occupied by the First United Methodist Church of Seminole (the Church). On the same date, Insured purchased from Title Insurer's predecessor an Owner's Policy of Title Insurance (the Title Policy) through its agent, Cadenhead Title Insurance (Cadenhead Title), owned and operated by its principal, Ivie Edward Cadenhead, III (Attorney).
¶ 3 Two years later, on January 7, 2007, the Building was severely damaged in a fire determined by the State Fire Marshal investigator to be caused by arson. On a later unknown date, Insured's "complaints" were denied by Title Insurer's predecessor. On February 4, 2013, Insured filed his petition against Title Insurer.
¶ 4 Under the petition's "Facts Common to All Counts," Insured alleges the following: In 1999 the Church sought to relocate to a new building on other property for which it "solicited [Attorney] to procure a bid for the razing of [the Building]," who then "served on the Board of Trustees for [the Church]." The Church's "intent to raze their church building was memorialized in the City of Seminole files by Church memorandum, evidencing the irrevocable commitment to demolish the ‘old’ building." The Church later decided to sell the Property with the Building, listed it with a local real estate agent, and in 2001, conveyed it all by general warranty deed to Insured's predecessors in title, from whom he later purchased the property in September 2005.
¶ 5 After purchase and/or closing on the property, Insured alleges "later investigation revealed the City of Seminole policy decision evidenced "by letter from a former City employee who had knowledge that the City Manager and members of the Code Enforcement Division determined before [Insured's] purchase that [he] would never receive a[n] ‘occupancy certificate’ " for [the Building]." He further alleges the employee's letter detailed 1) "a meeting in which the same employees discussed delaying the fire department's response to any fire at [the Building]" and 2) a "policy decision" of the City of Seminole (City) "to remove several downtown buildings, including [Insured's] building, that [City] deemed "dilapidated and blighted structures " in need of condemnation.
¶ 6 The day after the Building burned, Insured alleges City, "without notice to [Insured] or his consent and before he could assess the fire damage or the state fire marshal could conduct their investigation," procured a contractor to demolish the entire building for alleged "safety reasons," leaving nothing but a pile of rubble. City paid to remove the rubble which "left a vacant lot where the Building used to stand." According to Insured, such removal "effected [City's] policy that [Attorney] failed to disclose in his Owner's Policy of Title Insurance issued to [him] through Cadenhead Title."
¶ 7 Insured alleges Attorney served on the Church's Board of Trustees and "as City Attorney for [City] at the times relevant when [Insured] purchased the [Property]," and "therefore had knowledge of the plans and the commitment of the City to raze the church building before [Insured] had purchased the Building" and "knew or should have known of [City's] policy to remove" the Building. He further alleges that "after the fire loss" his investigation discovered Attorney's "undisclosed conflict" and his failure to disclose his knowledge of City's policy "that resulted in the eventual loss of the Building."
¶ 8 Incorporating by reference all prior allegations in each of the petition's four "counts," Insured specifically alleges as a breach of contract that the Policy and Cadenhead Title "failed to disclose" Attorney's role as City Attorney, Church Board member, and his knowledge of City's policy to remove several downtown buildings. Insured alleges City's policy decision "created a defect in or lien or encumbrance on the title that directly and adversely affected (sic) the unmarketability of the title to the financial detriment of [Insured]." Under the same theory, Insured further alleges the express terms of the Title Policy make Title Insurer responsible for the "errors and omissions of or torts committed by its agents" and that Title Insurer breached its "limited liability exclusion" to Insured's "financial detriment ... by failing to monitor its agents such as Cadenhead Title and thereafter allow [Insured's] title to be adversely affected (sic) by the (2) defect in or lien or encumbrance on the title and the (3) unmarketability of the title." Insured lastly alleges "as direct and proximate result of [Title Insurer's] breach of contract, he "suffered financial losses due to the loss of the building and the loss of other monies paid by Insured to repair the building before the building was razed by the City of Seminole."
¶ 9 Under "Count II: Negligence," Insured alleges Title Insurer had a duty: 1) to use ordinary care and skill when placing its agent, Cadenhead Title, in such a position with Insured that the agent would cause him harm; and 2) a duty to monitor and investigate their agents and also to require the agent to disclose any potential conflicts of interest that might adversely affect the marketability of the title insured by Title Insurer. Insured alleges because his property was located in the city limits of Seminole, Attorney's role as City Attorney "placed in him direct conflict with [Insured] because [his] property would be subject to the jurisdiction of [City's] municipal codes and ordinances that [Attorney] would be responsible for enforcing." Because Cadenhead Title failed to disclose Attorney's knowledge of City's policy decision to remove several downtown buildings, Insured alleges Title Insurer breached its duty to Insured to his financial detriment by negligently failing to monitor its agents and thereafter allow Insured's title to be adversely affected by a "defect in or lien or encumbrance on the title" and "unmarketability of the title."
¶ 10 Under the "Negligent Retention" count, Insured alleges Title Insurer knew or should have known Attorney had a conflict of interest "because his role as City Attorney would place him adverse to the title policy holders that had real property within the city limits of Seminole." He also alleges Title Insurer breached its duty to use reasonable care "in training its employees and agents by its failure to conduct a reasonable investigation into Cadenhead Title's conflict of interest" and "remov[ing] Cadenhead Title once [Title Insurer] knew or should have known of the unreasonable risk of conflict of interest to Insured." As direct and proximate result of Title Insurer's negligence, Insured alleges he "suffered financial losses due to the loss of the building and the loss of other monies [he] paid to repair [the Building] before [it] was razed by [City]."
¶ 11 For bad faith, Insured alleges Cadenhead Title's failure to properly investigate and disclose encumbrances is imputed to Title Insurer "that issued the Owner's policy... to [Insured] through the acts of its agent, Cadenhead Title, and that had the express and implied authority to act."
¶ 12 Instead of filing an answer, Title Insurer moved to dismiss Insured's petition for failure to state a claim upon which relief can be granted pursuant to 12 O.S. 2011 § 2012(B)(6), attaching portions of the Title Policy on which Insured relied throughout his petition but did not attach. Insured opposed the dismissal motion, attaching his own affidavit and several exhibits referenced in that affidavit. On September 27, 2013, the trial court filed a Journal Entry granting Insured's Motion to Dismiss and dismissing the case with prejudice.
¶ 13 Insured appealed the dismissal. In an unpublished opinion (Case No. 112,286), Division IV of the Oklahoma Court of Civil Appeals reversed the trial court's dismissal order, concluding it lacked reasons for the decision and the required 12 O.S. 2011 § 2012(G) finding that no defect can be remedied, and remanded the case for further proceedings (Choate I ). The mandate issued April 10, 2014, directed the District Court "to enter of record the above judgment and to issue process or take further action as required by the order or opinion issued in this appeal."
¶ 14 Following remand, Insured filed a "Motion for Summary Judgment and in the Alternative Motion for Pretrial Conference," and 3 days later, Title Insurer filed a "Motion to Clarify Journal Entry Granting Motion to Dismiss." The record shows at the hearing on the post-remand motions, objections and replies that Insured advised the trial court he had additional evidence to demonstrate dismissal was inappropriate and warranted discovery....
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