Falmouth Nat. Bank v. Ticor Title Ins. Co.

Decision Date07 September 1990
Docket NumberNo. 90-1335,90-1335
Citation920 F.2d 1058
PartiesThe FALMOUTH NATIONAL BANK, Plaintiff, Appellant, v. TICOR TITLE INSURANCE COMPANY, Defendant, Appellee. . Heard
CourtU.S. Court of Appeals — First Circuit

Douglas A. Hale, with whom Wynn & Wynn, P.C., Raynham, Mass., was on brief, for plaintiff, appellant.

Mary E. O'Neal, with whom Masterman, Culbert & Tully, Boston, Mass., was on brief, for defendant, appellee.

Before CAMPBELL and TORRUELLA, Circuit Judges, and CAFFREY, * Senior District Judge.

CAFFREY, Senior District Judge.

This is an appeal of an order of the United States District Court for the District of Massachusetts 1 dismissing the plaintiff's, The Falmouth National Bank ("Bank"), complaint without prejudice for failure to state a claim. The Bank brought this diversity action against the defendant, Ticor Title Insurance Company ("Ticor"), to recover for Ticor's failure to pay a loss sustained by the Bank as an insured under a mortgagee's title insurance policy. The alleged loss resulted from an adverse decision by the Massachusetts Supreme Judicial Court in the case of Thibbitts v. Crowley, a case specifically covered by the policy. The complaint alleged two counts, one for breach of the title insurance policy and a second count for violation of Mass.Gen.L. ch. 93A, Section 11. Ticor moved for an order dismissing or, in the alternative, staying all proceedings until the disposition on remand of the case which was pending in state court. The district court allowed Ticor's motion. On appeal, the Bank argues, as it did below, that Ticor's liability was "definitely fixed" according to the terms of the policy when the Supreme Judicial Court rendered its decision, and therefore, that Ticor breached the policy by failing to pay within thirty days. Thus, the Bank argues that the district court erred as a matter of law in dismissing the complaint as premature. Ticor, on the other hand, argues that its liability will not be "definitely fixed" until the final determination of the Bank's losses on remand. After reviewing the record and the appellant's arguments, we affirm the district court's dismissal of the complaint without prejudice.


The relevant facts are not in dispute. On May 22, 1985, John F. Thibbitts ("Buyer") entered into a purchase and sale agreement with Patrick M. Crowley ("Seller") for land located in Mashpee, Massachusetts. Thibbitts assigned his rights under the agreement to South Cape Industrial Park, Inc. ("South Cape"). 2 Thereafter, a dispute arose, and the Buyer sued the Seller in state superior court. The parties entered into a consent judgment which called for a conveyance on or before March 9, 1987. Difficulties arose at the closing, and when it became clear that the sale would not be consummated on the date set by the consent judgment, the Buyer brought an ex parte motion to extend time for performance. The judge granted that ex parte motion, extending the closing date to March 23, 1987. The closing did in fact go through on that date, the Seller conveying the Mashpee property to the Buyer, South Cape, for $1,250,000.00. At the same time, the Buyer executed a note and granted the Bank a mortgage to secure the note in the amount of $2,150,000.00. The amount of this loan in excess of the purchase price was to be advanced as a construction loan according to a set payment schedule.

In April, shortly after the closing, the Seller appealed the judge's order extending the time for performance under the consent judgment to the Massachusetts Appeals Court. Thereafter, the Supreme Judicial Court, on its own initiative, agreed to hear the appeal. The Bank did not learn of the Seller's appeal until September, at which time it notified the title insurer, Chicago Title Company ("Chicago"), of the pending appeal. When Chicago refused to insure any further advances from the Bank to the Buyer, the Bank similarly refused to disburse any more money. To remedy this situation, the Buyer arranged to have Ticor provide title insurance to the Bank. This policy provided coverage up to the amount of $2,150,000.00, and in a special "Note I," affirmatively insured against all loss, including attorney's fees, arising out of the appeal, final decision, judgment or award of the state court action Thibbitts v. Crowley.

Subsequent to the issuance of this policy, the Supreme Judicial Court held that the judge below had lacked the authority to extend unilaterally the time for performance under the consent judgment. Thibbitts v. Crowley, 405 Mass. 222, 226, 539 N.E.2d 1035, 1038 (1989). The Supreme Judicial Court therefore remanded the case to Barnstable Superior Court for reconveyance and for such other proceedings as were necessary, including making adjustments for the passage of time and for the Buyer's improvements to the property. Id. at 230, 539 N.E.2d at 1040.

As a result of the decision, the Bank made a claim to Ticor in a letter dated July 12, 1989 for payment of all losses. They set this amount at $1,915,878.46 plus interest, which represented the principal indebtedness outstanding on the Buyer's loan obligation. Ticor responded to the letter stating that the claim was premature, and that it would not pay until the Barnstable Superior Court, on remand, established the amount of actual damages. When Ticor refused to pay, the Bank sent a demand letter pursuant to Mass.Gen.L. ch. 93A. Since that time, both Ticor and the Bank have sought and were granted permission to intervene in the state court action.

The Bank instituted this action in Federal District Court for the District of Massachusetts for payment under the policy. Ticor moved for dismissal on the grounds that the complaint was premature given the Supreme Judicial Court's remand to the Barnstable Superior Court. The district court allowed that motion, holding that "liability" as used in the policy does not merely mean a determination regarding title, but also includes losses and damages, and therefore, that liability had not been "definitely fixed."

It is this determination that the Bank is appealing. After a careful review of the record, we affirm the district court's dismissal without prejudice of both counts of the complaint.


The parties' dispute is basically one of contract interpretation. Application of the terms of an insurance policy to established facts is a question of law. Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146, 439 N.E.2d 234, 237 (1982); Robert Indus., Inc. v. Spence, 362 Mass. 751, 755, 291 N.E.2d 407, 409-10 (1973); Ober v. National Casualty Co., 318 Mass. 27, 31, 60 N.E.2d 90, 91 (1945). Thus, our review of the district court's dismissal of the plaintiff's complaint is plenary.

Title insurance policies are subject to the same rules of construction that apply to other types of insurance policies. Brown v. St. Paul Title Ins. Corp., 634 F.2d 1103, 1107 (8th Cir.1980); Lawyers Title Ins. Corp. v. Research Loan & Inv. Corp., 361 F.2d 764, 768 (8th Cir.1966); Sandler v. New Jersey Realty Title Ins. Co., 36 N.J. 471, 479, 178 A.2d 1, 5 (1962); 9 Appleman, Insurance Law and Practice Sec. 5201 (1981). The overall goal in interpreting an insurance policy is to ascertain the expectations of the parties. Cullen Enter., Inc. v. Massachusetts Property Ins. Underwriting Ass'n, 399 Mass. 886, 900 n. 27, 507 N.E.2d 717, 725 n. 27 (1987); Eureka Inv. Corp., N.V. v. Chicago Title Ins. Co., 530 F.Supp. 1110, 1118 (D.D.C.1982), aff'd in relevant part and rev'd in part, 743 F.2d 932 (D.C.Cir.1984).

In attempting to discern the expectations of the parties, Massachusetts courts look at the insurance contract as a whole in order to effectuate its overall purpose. Cullen Enter., Inc., 399 Mass. at 900 n. 27, 507 N.E.2d at 725 n. 27; Ober, 318 Mass. at 31, 60 N.E.2d at 91 (1945); see Lawyers Title Ins. Corp., 361 F.2d at 768. The corollary of this rule is that whenever possible, each word in an insurance policy should be considered and given some meaning. Feinberg v. Insurance Co. of N. Am., 260 F.2d 523, 527 (1st Cir.1958).

When considering an insurance policy in its entirety, the general rule is that any ambiguity should be construed against the insurer as it is the insurer who supplies the contract. Marston v. American Employers Ins. Co., 439 F.2d 1035, 1039 (1st Cir.1971); Liberty Mut. Ins. Co. v. Tabor, 407 Mass. 354, 362, 553 N.E.2d 909, 914 (1990) (quoting Transamerica Ins. Co. v. Norfolk & Dedham Mut. Fire Ins. Co., 361 Mass. 144, 147, 279 N.E.2d 686, 688 (1972)); Lawyers Title Ins. Corp., 361 F.2d at 768. The rationale behind interpreting ambiguities against the insurer would not seem to apply as strongly when the transaction is between two parties of equal sophistication and equal bargaining power. Eagle-Picher Indus., Inc. v. Liberty Mut. Ins. Co., 682 F.2d 12, 21 n. 6 (1st Cir.1982), cert. denied, 460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983); First State Underwriters Agency of New England Reinsurance Corp. v. Travelers Ins. Co., 803 F.2d 1308, 1314 n. 5 (3d Cir.1986); Industrial Risk Insurers v. New Orleans Pub. Serv., 666 F.Supp. 874, 881 (E.D.La.1987); McNeilab, Inc. v. North River Ins. Co., 645 F.Supp. 525, 547 (D.N.J.1986), aff'd, 831 F.2d 287 (3d Cir.1987); D. Burke, Jr., Law of Title Insurance 59 (1986); see Commercial Ins. Co. of Newark, N.J. v. Gonzalez, 512 F.2d 1307, 1313 n. 11 (1st Cir.), cert. denied, 423 U.S. 838, 96 S.Ct. 65, 46 L.Ed.2d 57 (1975).

We now turn to an application of these principles to the mortgagee title insurance policy in dispute. The first step is to examine the specific language of the provisions at issue. The Bank points to Paragraph 6 of the insurance policy, a standard provision in mortgagee policies. See Burke, supra, at 499. Paragraph 6 is entitled "Determination and Payment of Loss," and reads as follows: "(c) When liability has been definitely fixed in accordance with the conditions of this policy, the loss or damage shall be...

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