First Citizens Bank & Trust Co. v. Stewart Title Guar. Co., Court of Appeals Nos. 11CA2639

• Citation: 320 P.3d 406
• Decision Date: 02 January 2014
• Docket Number: Court of Appeals Nos. 11CA2639,12CA0873 & 12CA1554
• Parties: FIRST CITIZENS BANK & TRUST COMPANY, a North Carolina chartered commercial bank, Plaintiff–Appellee, v. STEWART TITLE GUARANTY COMPANY, a Texas corporation; Stewart Title Company a/k/a Stewart Title Colorado, a Texas corporation, as successor by merger to Stewart Title of Colorado, Inc., a Colorado corporation d/b/a Stewart Title of Colorado—Aspen Division, Defendants–Appellants.
• Court: Court of Appeals of Colorado

320 P.3d 406

FIRST CITIZENS BANK & TRUST COMPANY, a North Carolina chartered commercial bank, Plaintiff–Appellee,
v.
STEWART TITLE GUARANTY COMPANY, a Texas corporation; Stewart Title Company a/k/a Stewart Title Colorado, a Texas corporation, as successor by merger to Stewart Title of Colorado, Inc., a Colorado corporation d/b/a Stewart Title of Colorado—Aspen Division, Defendants–Appellants.

Court of Appeals Nos. 11CA2639, 12CA0873 & 12CA1554

Colorado Court of Appeals,
Div. I.

Announced January 2, 2014

[320 P.3d 409]

City and County of Denver District Court No. 10CV8064, Honorable Catherine A. Lemon, Judge.
Gorrell Giles Gollata PC, Teryl R. Gorrell, Denver, Colorado; Friesen Lamb, LLP, Stephen M. DeHoff, Denver, Colorado, for Plaintiff–Appellee.

Sweetbaum Sands Anderson PC, Alan D. Sweetbaum, Denver, Colorado; Fulbright & Jaworski L.L.P., L. Poe Leggette, Allison Woolston, Denver, Colorado, Katherine D. Mackillop, Houston, Texas, for Defendants–Appellants.

Opinion by JUDGE LICHTENSTEIN

¶ 1 Defendant, Stewart Title Guaranty Company (Stewart), appeals from the trial court's judgment following a bench trial finding it had breached its title insurance contract with plaintiff, First Citizens Bank & Trust Company (FCB).¹ Stewart also appeals from the trial court's judgment awarding FCB attorney fees and costs. Stewart separately appealed these judgments, and we have consolidated the appeals, at its request, for the purposes of this opinion. We reverse the trial court's award of attorney fees to FCB for its lawsuit against Stewart and otherwise affirm its judgments.

I. Background

¶ 2 In 2007, UWB issued a construction loan to Leathem S. Stearn to build a private residence on his property in Pitkin County. UWB had agreed to loan Stearn the money in exchange for a promissory note and deed of trust secured by the property. In connection with the loan, UWB requested a title insurance policy from Stewart.

¶ 3 Stewart's agent, Stewart Title Company (STC), discovered that record title to the property was vested in a company associated with Stearn (Ute). As a result, it issued a title commitment containing a requirement that Ute convey title to Stearn. This requirement was never satisfied.

¶ 4 Stewart issued a title insurance policy (the policy) stating the property was vested in Stearn and that the deed of trust was valid and enforceable. Ultimately, UWB closed the loan in-house, without an STC representative present. Thereafter, Stearn defaulted on the loan.

¶ 5 Because Stearn did not personally hold title to the property, rendering UWB's deed of trust invalid, UWB contacted Stewart seeking coverage for losses under the policy. Stewart issued a letter denying coverage based on an exclusion in the policy.

¶ 6 UWB initiated this action against Stewart and STC asserting breach of contract, bad faith, equitable estoppel, negligent misrepresentation,

[320 P.3d 410]

and vicarious liability against Stewart and its agent.

¶ 7 UWB also initiated collateral litigation against Stearn, seeking to overcome the defective deed of trust. FCB subsequently acquired most of the assets and the liabilities of UWB, thereby becoming UWB's successor and the plaintiff in these actions. The collateral litigation is still pending.

¶ 8 The trial court granted summary judgment in favor of STC and dismissed it from the case. Following a bench trial, the trial court concluded that Stewart's asserted exclusion did not preclude coverage of FCB's claim. The court determined that Stewart waived policy exclusions and defenses not asserted in its denial of claims letter or answer. It ultimately entered judgment in favor of FCB on its breach of contract claim and awarded FCB $6,379, 196.10 in damages. However, the court entered judgment in favor of Stewart on FCB's other claims.

¶ 9 Stewart appeals the trial court's judgment on FCB's breach of contract claim. It also separately appeals the final judgment awarding FCB attorney fees.²

II. The Policy

¶ 10 Stewart contends that the trial court erroneously held that Exclusion 3(a) of the policy did not bar coverage for FCB's (formerly UWB's) claim. We disagree.

A. Standard of Review

¶ 11 A title insurance company's obligations depend on the terms of the insurance policy, and the interpretation of those terms is based upon principles of contract law. Sims v. Sperry, 835 P.2d 565, 568 (Colo.App.1992). Thus, we review the trial court's interpretation of the policy de novo. Allstate Ins. Co. v. Huizar, 52 P.3d 816, 819 (Colo.2002) ( “The interpretation of an insurance policy is a matter of law, which an appellate court reviews de novo.”).

¶ 12 The words of a contract should be given their plain meaning according to common usage, and strained constructions should be avoided. Id. An insurance policy is ambiguous if it is susceptible of more than one reasonable interpretation. Cary v. United of Omaha Life Ins. Co., 108 P.3d 288, 290 (Colo.2005). Any ambiguity in an insurance policy is construed in favor of providing coverage to the insured. Id.

¶ 13 The insurer bears the burden of establishing that an exclusion applies. See Am. Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991). In this regard, we defer to the trial court's credibility determinations and will not disturb its findings of fact unless they are so clearly erroneous as not to find support in the record. See Page v. Clark, 197 Colo. 306, 312–13, 592 P.2d 792, 796 (1979).

B. Analysis

¶ 14 Stewart contends that FCB's claim is barred by Exclusion 3(a) of the policy, which provides:

The following matters are expressly excluded from coverage of the policy and the Company will not pay loss or damage, costs, attorney's fees or expenses, which arise by reason of: ... 3. Defects, liens, encumbrances, adverse claims, or other matters:

(a) created, suffered, assumed or agreed to by the insured claimant;

Specifically, Stewart asserts that because UWB closed the loan inhouse, it was required to obtain a deed from Ute conveying title to Stearn but did not do so. Consequently, it asserts that UWB created, suffered, assumed, or agreed to the defect for which it sought coverage, barring FCB's claims.

¶ 15 In Sims v. Sperry, a division of this court interpreted identical language found in Exclusion 3(a) of the policy. 835 P.2d at 568. There, the division concluded that the language

[320 P.3d 411]

of this exclusion was susceptible of two reasonable interpretations:

Generally, the term “created” has been construed to require a conscious, deliberate, and sometimes affirmative act “intended to bring about the conflicting claim,” in contrast to merely an inadvertent or negligent act.

On the other hand, “created” also can be interpreted to mean ... a deliberate act which the insured intentionally undertook and which led to the...