Gebrayel v. Transamerica Title Ins. Co.

• Decision Date: 18 April 1995
• Citation: 888 P.2d 83,132 Or.App. 271
• Court: Oregon Court of Appeals
• Parties: George GEBRAYEL, Appellant, v. TRANSAMERICA TITLE INSURANCE COMPANY, a California corporation; and Yamhill County Title & Escrow, Inc., an Oregon corporation, Respondents, and Spectrum Properties, Inc., an Oregon corporation, Defendant. 9205-03308; CA A80392.

Page 83

888 P.2d 83

132 Or.App. 271

George GEBRAYEL, Appellant, v. TRANSAMERICA TITLE INSURANCE COMPANY, a California corporation; and Yamhill County Title & Escrow Inc., an Oregon corporation, Respondents and Spectrum Properties, Inc., an Oregon corporation, Defendant.

9205-03308; CA A80392.

Court of Appeals of Oregon.

Argued and Submitted May 6, 1994.

Decided Jan. 4, 1995.

Review Denied April 18, 1995.

[132 Or.App. 272-A] Ridgway K. Foley, Jr., Portland, argued the cause for appellant. On the briefs were M. Elizabeth Duncan, Foley & Duncan, Portland, Douglas R. Hookland, Michael J. Scott and Furrer & Scott, Tigard.

Jonathan M. Radmacher, Portland, argued the cause for respondents. On the brief were Don G. Carter and McEwen, Gisvold, Rankin, Carter & Streinz.

Before DEITS, P.J., and RIGGS and HASELTON, JJ.

RIGGS, Judge.

Plaintiff appeals from the grant of summary judgment on his claims for breach of the duty to defend, breach of escrow instructions, negligent misrepresentation and fraud. We affirm.

We review the record in the light most favorable to plaintiff, the party opposing the motion for summary judgment. Yartzoff v. Democrat-Herald Publishing Co., 281 Or. 651, 655, 576 P.2d 356 (1978). This case concerns a title insurance policy issued by defendant Transamerica Title Insurance Company (Transamerica) through its agent, defendant Yamhill County Title and Escrow (Yamhill) to plaintiff. ¹ The policy covered the title to three adjacent parcels of real property in Yamhill County. Before the purchase, Yamhill had issued a third and final preliminary title report on July 30, 1987, which provided that the policy would be issued

"subject to the usual printed conditions and stipulations and exclusions from coverage appearing in such policy form and the following:

"1. The rights of the public in and to that portion of the herein described property lying within the limits of streets, roads and highways."

The title policy was issued on September 11, 1987, and included "schedule B," which provided:

"This policy does not insure against loss or damage, nor against costs, attorney's fees or expenses, any or all of which arise by reason of the matters shown or referred to in this schedule * * *

"Part I [printed exclusions]

" * * * * *

"3. Easements, liens, or encumbrances, or claims thereof, which are not shown by the public record * * *

" * * * * *

"Part II [special exclusions]

"1. The rights of the public in and to that portion of the herein described property lying within the limits of streets, roads and highways."

In addition, the title policy included the following special exclusion in part II, not found on any previous title report ("exclusion 2"):

"2. Easement, if any, for an existing logging road as disclosed by partitioning approval, recorded: September 29, 1976, Film Volume 115 Paeg [sic ] 022."

This exclusion was inserted by Yamhill after Yamhill received a telephone call from the seller shortly before closing that alerted Yamhill to a possible claim of easement rights over the property. At no time prior to closing did Yamhill communicate any information about the possible claim to plaintiff.

In February, 1988, Virginia Moyer filed an action against plaintiff seeking (1) to establish a way of necessity; (2) to reform a deed in plaintiff's chain of title to reserve an easement or (3) to obtain an implied easement. ² On February 23, plaintiff rejected the title insurance policy, because it included exclusion 2, which was not set forth in the preliminary title report. In March, Transamerica acknowledged that exclusion 2 should not have been written into the policy and agreed to rewrite the policy without the exclusion. At the same time, plaintiff also tendered defense of the Moyer action to Transamerica. Transamerica rejected the tender of defense, because the claims were not based on any public records and, therefore, were excluded from coverage under exclusion 3 in Part I of the policy.

In November, 1989, Debra Duffield commenced an action against plaintiff seeking to review the county's denial to occupy land as a public or county road, to reform two 1921 deeds to establish a county road or to find an implied or prescriptive easement over plaintiff's property. Once again, plaintiff tendered defense to Transamerica, and Transamerica rejected the tender of defense, because all the claims asserted in the Duffield action were excluded from coverage under either exclusion 3 in Part I or under exclusion 1 in Part I.

Plaintiff mounted a defense to those two actions and incurred substantial attorney fees and costs. Plaintiff then commenced this action against defendants, as well as the seller of the property, seeking to recover damages on a number of theories. Eventually, plaintiff settled with the seller, and the court granted summary judgment to defendants on all of plaintiff's claims. Plaintiff now appeals the grant of summary judgment on his claims for breach of the duty to defend, breach of escrow instructions, negligent misrepresentation and fraud.

In reviewing a grant of summary judgment, we must determine whether there is a genuine issue of material fact and whether defendants are entitled to judgment as a matter of law. Seeborg v. General Motors Corporation, 284 Or. 695, 699, 588 P.2d 1100 (1978); Robinowitz v. Pozzi, 127 Or.App. 464, 467, 872 P.2d 993, rev. den. 320 Or. 109, 881 P.2d 141 (1994).

Plaintiff first argues that the trial court erred in granting summary judgment to defendants on plaintiff's claim for breach of the duty to defend the Moyer and Duffield claims. An insurer's duty to defend under an insurance contract is broader than its obligation to pay. Sch. Dist. No. 1 v. Mission Ins. Co., 58 Or.App. 692, 696, 650 P.2d 929 (1982), rev. den., 294 Or. 682, 662 P.2d 725 (1983). The scope of the duty to defend is determined by comparing the terms of the insurance policy with the allegations of the complaint, to determine whether the allegations of the complaint show that there is a possibility that the policy provides coverage for the claims made. Ledford v. Gutoski, 319 Or. 397, 399, 877 P.2d 80 (1994); Ferguson v. Birmingham Fire Ins., 254 Or. 496, 507, 460 P.2d 342 (1969); Delta Sand & Gravel Co. v. General Ins. Co., 111 Or.App. 347, 350, 826 P.2d 82, rev. den., 314 Or. 175, 836 P.2d 1344 (1992). Any facts not alleged in the complaint are irrelevant in determining the existence of the duty to defend. Ferguson v. Birmingham Fire Ins., supra, 254 Or at 505, 460 P.2d 342.

Moyer's second amended "application for way of necessity" alleged three theories to establish an easement. ³ Plaintiff asserts that Moyer's second claim, for reformation of a deed, was based on recorded documents. ⁴ However, a reading of the complaint demonstrates that Moyer specifically denied any reliance on the documents to establish her easement. ⁵ All three of Moyer's claims were excluded from coverage under exclusion 3 in part I of schedule B as claims for easements not shown by the public record.

The Duffield complaint alleged a number of claims for relief, but they all stem from one of two theories: (1) that Duffield is entitled to travel over plaintiff's land because of an implied or prescriptive easement or (2) that Duffield is entitled to travel over plaintiff's land because of a county road, local access road or public road. The first theory, that there is an implied or prescriptive easement, is excluded from coverage under exclusion 3 in part I of schedule B as claims for easements not shown by the public record.

The second theory, that there exists a road over plaintiff's land, is specifically excluded from coverage by exclusion 1, Part II of schedule B, which provides for the exclusion of coverage for claims based on

"the rights of the public in and to that portion of the herein described property lying within the limits of streets, roads and highways."

Plaintiff argues that this exclusion is ambiguous, that he reasonably believed that it excluded from coverage only "claims for a portion of land immediately adjacent to the actual traveled portion of a public road." However, for a term in an insurance contract to be ambiguous, it must be capable of two plausible interpretations. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 470, 836 P.2d 703 (1992). "It is not permissible to apply a strained meaning to unambiguous language," in order to create an ambiguity where none would otherwise exist. Mortgage Bancorp. v. New Hampshire Ins. Co., 67 Or.App. 261, 264, 677 P.2d 726, rev. den., 297 Or. 339, 683 P.2d 1370 (1984). The plain language of exclusion 1 excludes coverage for "property lying within the limits of streets, roads and highways." Duffield's action sought to establish either a "county road," a "local access road" or a "public road." In this context, there is no ambiguity and the exclusion operates to deny coverage for Duffield's claims. ⁶

Neither of the complaints submitted to Transamerica show that there is a "possibility that the policy provides coverage." Accordingly, we hold that the court correctly granted summary judgement in favor of defendants on plaintiff's claims for breach of the duty to defend.

Plaintiff next argues that the court erred in granting summary judgment on his claim for breach of escrow instructions. Plaintiff makes two related arguments. First, he argues that defendants included exclusion 2 in the title insurance policy contrary to the escrow instructions, which provided that the title insurance policy should issue subject only to the listed exclusions. Second, he argues that defendants breached their duty to act with neutrality by inserting that exclusion into the policy without informing plaintiff of the possible claim of easement rights.

Plaintiff is correct that defendants breached the escrow instructions. The title policy issued with exclusion 2 even though the escrow instructions provided that the policy should issue only...