Enterprise Timber, Inc. v. Washington Title Ins. Co.

• Court: Washington Supreme Court
• Writing for the Court: NEILL; HUNTER
• Citation: Enterprise Timber, Inc. v. Washington Title Ins. Co., 76 Wn.2d 479, 457 P.2d 600 (Wash. 1969)
• Decision Date: 07 August 1969
• Docket Number: No. 39446
• Parties: ENTERPRISE TIMBER, INC., Appellant, v. WASHINGTON TITLE INSURANCE COMPANY, Respondent.

Page 479

76 Wn.2d 479

457 P.2d 600

ENTERPRISE TIMBER, INC., Appellant, v. WASHINGTON TITLE INSURANCE COMPANY, Respondent.

No. 39446.

Supreme Court of Washington, Department 2.

Aug. 7, 1969.

McLean, Klingberg & Houston, R. Graham Cross, Longview, for appellant.

Skeel, McKelvy, Henke, Evenson & Uhlmann, William E. Evenson, Joseph T. Henke, Seattle, for respondent.

NEILL, Judge.

This is an action to recover on a policy of title insurance issued by defendant, and for attorney's fees. The $30,000 title policy insured a timber mortgage held by plaintiff against all loss caused by defects in the mortgagor's title, except for defects arising from 'rights or claims based upon instruments or upon facts not disclosed by the public records but of which rights, claims, instruments or facts the insured has knowledge.'

Plaintiff is one of a group of Washington corporations owned and controlled by Stanley B. Rose. A group of Oregon corporations are owned and controlled by Anthony Fernandez. A series of loans were made from the Washington corporations to various of the Oregon corporations at the behest of Mr. Fernandez, that last of which was a $6,000 loan by plaintiff to one of the Oregon corporations, American Wood Products, Inc. To secure such loan and other prior advances, American Wood Products, Inc., allegedly executed a note for $30,000, secured by a mortgage covering timber which was to be acquired with the $6,000 loan. Plaintiff's counsel required a title insurance policy covering this mortgage; so an order for title insurance was transmitted to defendant. April 18, 1963, defendant issued the policy covering the mortgage.

In June, 1963, a suit was filed by Antone Rose (no relation to Stanley Rose) against the plaintiff herein and other defendants alleging a fraudulent conspiracy and asking that his (Antone Rose) deed to American Wood Products, Inc., and the mortgage from American Wood Products, Inc., to plaintiff herein be reformed or declared void. Plaintiff here--a defendant in that fraud action--tendered defense of the action to the title company. The title company rejected the tendered defense of that action, basing its disclaimer on the exception in the title policy quoted above. After trial, a decree was entered in the fraud action setting aside the deed from Antone Rose to American Wood Products, Inc., and declaring the mortgage from American Wood Products, Inc., to Enterprise Timber, Inc., to be void. The judgment in the fraud case vitiating the mortgage was based on findings that Enterprise Timber, Inc., was not a bona fide mortgagee for value, but rather that it took the mortgage with knowledge of facts and circumstances which placed it on notice of the fraudulent conveyance from Antone Rose to the mortgagor, American Wood Products, Inc.

Following final judgment in the fraud case, Enterprise Timber, Inc., brought this action to recover the face amount of the mortgage insurance and attorney's fees in its defense of the fraud action.

Upon conclusion of plaintiff's evidence in a trial before the court, the action was dismissed on defendant's challenge to the sufficiency of the evidence. Plaintiff appeals.

Plaintiff assigns error to: (1) the trial court's ruling sustaining defendant's motion challenging the sufficiency of the evidence; (2) the trial court's finding of fact to the effect that plaintiff had notice of facts sufficient to put it on inquiry and that, as a result of its failure to investigate, plaintiff was chargeable with constructive knowledge of the fraud perpetrated by Mr. Fernandez; (3) the trial court's finding of fact that plaintiff did not want to know the particulars of Mr. Fernandez's deal, but was willing to risk an additional $6,000 in hope of recouping larger prior advances; and (4) the trial court's finding that no note for $30,000 evidencing the debt secured by the mortgage was known to exist.

In granting a motion challenging the sufficiency of the evidence in a nonjury trial, the trial court has a choice of approaches. First, the court may accept plaintiff's evidence as true, granting him every reasonable inference therefrom, and rule as a matter of law that plaintiff has failed to establish a prima facie case. Alternatively, the court may weigh the evidence and enter findings of fact and conclusions of law. See N. Fiorito Co. v. State, 69 Wash.2d 616, 419 P.2d 586 (1966); O'Brien v. Schultz, 45 Wash.2d 769, 278 P.2d 322 (1954).

It is apparent that here the court followed the latter course. In such case, our review is limited to ascertaining whether the findings of fact are supported by substantial evidence, and, if so, whether the findings support the conclusions of law and judgment. N. Fiorito Co. v. State, Supra.

The trial court's finding of fact No. 10, assigned as error by plaintiff, contains the most crucial factual determination:

10. Stanley B. Rose and his * * * corporations know or had...