Hart v. Ticor Title Ins. Co.

• Decision Date: 27 March 2012
• Docket Number: No. SCWC–29467.,SCWC–29467.
• Citation: 272 P.3d 1215,126 Hawai'i 448
• Parties: Charles Mitchell HART and Lisa Marie Hart, Petitioners/Plaintiffs–Appellants, v. TICOR TITLE INSURANCE COMPANY, Respondent/Defendant–Appellee.
• Court: Hawaii Supreme Court

126 Hawai'i 448

272 P.3d 1215

Charles Mitchell HART and Lisa Marie Hart, Petitioners/Plaintiffs–Appellants,

v.TICOR TITLE INSURANCE COMPANY, Respondent/Defendant–Appellee.

No. SCWC–29467.

Supreme Court of Hawai‘i.

March 27, 2012.

Philip J. Leas, Calvert G. Chipchase, and Christopher T. Goodin (of Cades Schutte LLP) for petitioners/plaintiffs-appellants.

Wayne P. Nasser, Francis P. Hogan, and Connie C. Chow (of Ashford & Wriston) for respondent/defendant-appellee.

RECKTENWALD, C.J., NAKAYAMA, ACOBA, DUFFY, and MCKENNA, JJ.

Opinion of the Court by DUFFY, J.

Petitioners/Plaintiffs–Appellants Charles Mitchell Hart and Lisa Marie Hart ("the Harts") filed a timely application for a writ of certiorari ("Application"), urging this court to review the Intermediate Court of Appeals' ("ICA") July 21, 2011 summary disposition order and September 21, 2011 judgment on appeal, which affirmed the judgment of the district court of the first circuit ("district court") entered on December 4, 2008 ("judgment")¹ in favor of Respondent/Defendant–Appellee TICOR Title Insurance Company ("TICOR") on the Harts' claim for breach of contract. The district court's judgment also specified that the Harts' motion for partial summary judgment filed on October 21, 2008 was denied, and awarded TICOR attorneys' fees of $5,000.00 and costs of $281.49.

We accepted the Harts' Application, which presents the following questions:

A. Whether the ICA gravely erred in concluding that TICOR had no duty to defend the Harts against the State's claim to any interest in the Harts' property that may have escheated to the State where the ICA determined there was no duty to defend only by relying on procedural defects in the State's claim and the State's subsequent abandonment of the claim.

B. Whether the ICA gravely erred in upholding the award of attorneys' fees and costs to TICOR.

Based on the analysis below, we vacate the ICA's judgment and reverse the judgment of the district court in favor of TICOR. We also vacate the district court's award of attorneys' fees and costs to TICOR. We remand the case to the district court with instructions (1) to enter judgment in favor of the Harts, and (2) to determine an award of attorneys' fees and costs to the Harts, with the specific instruction that the Harts' award be limited to the period of time from the Harts' tender of defense to TICOR until the escheat claim reached resolution through written court order.

I. BACKGROUND

A. The Harts' Title Insurance Policy

This appeal arises from TICOR's refusal to defend the Harts under their title insurance policy against an escheat² claim asserted by the State of Hawai‘i. The Harts purchased a title insurance policy from TICOR for their property comprised of two lots in Ewa Beach ("Policy"); TICOR issued the Policy on July 13, 2005.³ The Policy provides, in relevant part:

Subject to the exclusions from coverage, the exceptions from coverage contained in Schedule B and the conditions and stipulations, TICOR Title Insurance Company, a California corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A, sustained or incurred by the insured by reason of:

1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title;

3. Unmarketability of the title;

4. Lack of a right of access to and from the land.

The Company will also pay the costs, attorneys' fees and expenses incurred in defense of the title, as insured, but only to the extent provided in the Conditions and Stipulations.

(Emphasis added). Additionally, the Policy includes the following "Conditions and Stipulations," in relevant part:

4. Defense and Prosecution of Actions: Duty of Insured Claimant to Cooperate

(a) Upon written request by the insured and subject to the options contained in Section 6 of these Conditions and Stipulations [entitled "Options to Pay or Otherwise Settle Claims: Termination of Liability"], the Company, at its own cost and without unreasonable delay, shall provide for the defense of an insured in litigation in which any third party asserts a claim adverse to the title or interest as insured, but only as to those stated causes of action alleging a defect, lien or encumbrance or other matter insured against by this policy. The Company shall have the right to select counsel of its choice (subject to the right of the insured to object for reasonable cause) to represent the insured as to those stated causes of action and shall not be liable for and will not pay the fees of any other counsel. The Company will not pay any fees, costs or expenses incurred by the insured in the defense of those causes of action which allege matters not insured against by this policy.

The Policy contains the following "Exclusions from Coverage," in relevant part:

9. Claims arising out of customary and traditional rights and practices, including without limitation those exercised for subsistence, cultural, religious, access or gathering purposes, as provided for in the Hawaii Constitution or the Hawaii Revised Statutes.

10. Rights or claims of persons or entities other than the insured involving or arising out of: mineral or metallic mines; geothermal resources; water; fishing, commerce or navigation; creation or loss of the land or any portion thereof by accretion, avulsion, erosion or artificial means; persons residing on or otherwise in possession of the land or any portion thereof; trails, roadways or other rights of way, including without limitation any such rights or claims under Chapter 264, Hawaii Revised Statutes.

Additionally, Schedule B to the Policy provides, in relevant part:

All matters set forth in the paragraphs below the caption "Exclusions from Coverage" on the inside cover of this Policy and the following matters are expressly excluded from the coverage of this Policy and [TICOR] will not pay loss or damage, costs, attorney's [sic] fees or expenses which arise by reason thereof.

...

2. Location of the seaward boundary in accordance with the laws of the State of Hawaii and shoreline setback line in accordance with County regulation and/or ordinance and the effect, if any, upon the area of the land described herein.

B. The Harts' Land Court Proceeding

On August 2, 2005, the Harts filed a Land Court petition to consolidate their two lots into one parcel.⁴ In response to the Harts' proceeding, the State of Hawai‘i ("State") filed an answer to the Harts' petition for consolidation ("Answer") on October 24, 2005. The State's answer asserted present interests in the Harts' property, in relevant part:

THIRD DEFENSE:

... [the] State denies any allegations adverse to its interest in or affecting [the Harts' property], which are as follows:

1. The State owns the submerged land up to the upper reaches of the wash of the waves, including the erosion areas.

2. The State owns all mineral and metallic mines of every kind or description on the property, including geothermal rights, and the right to remove the same.

3. The State reserves the rights of native tenants in the property.

4. The State reserves all right, title, interest[ ] or claim to waters having their source upon or flowing over or under the property.

5. The State reserves an easement for the free flowage of waters through, over, under[ ] and across the property.

6. The State reserves any interests in the property that may have escheated to the State.

7. The State reserves any other interests in the property that may be revealed during the course of this Petition proceeding.

(Emphasis added). The State then requested the following affirmative relief from the Land Court regarding its escheat claim:

Wherefore, [the] State prays that the Court rules that:

...

6. The State has reserved any interests in the property that may have escheated to the State[.]

Later, on October 30, 2006, the State again asserted these same claims in its answer to the Harts' amended petition for consolidation ("Answer to Amended Petition"). Ultimately, through its answer and answer to amended petition, the State twice asserted its present interest in the Harts' property by way of escheat and twice asked the Land Court for affirmative relief.

The Harts tendered their defense against all the State's claims to TICOR on November 7, 2005. TICOR refused the Harts' tender on January 4, 2006. TICOR's January 4, 2006 response collectively categorized the State's claims, reservations and defenses as the "State's Claims." TICOR explained that because the Harts did not specify which of the "State's Claims" they were tendering to TICOR, TICOR assumed that the tender was "for the defense of the State's water and mineral rights, native tenants' rights, erosion and shoreline setback claims." Based on the Policy's Exclusions for Coverage and Schedule B, TICOR concluded that defense of these specific claims was excluded under the Policy.

The Harts replied on January 9, 2006, contending that TICOR "cited no policy exclusion for [the escheat] claim, and the [P]olicy insures that the State owns no interest in the insured property by way of escheat. Thus, [TICOR] is obliged to defend against that claim." TICOR disagreed. Significantly, however, in a March 9, 2006 letter to the Harts, TICOR conceded that a claim of escheat is not excluded from coverage, but contended that "[w]hile escheat to the state is not a matter which is excluded from coverage, it does not appear that the [S]tate is currently making any claim of escheat." Rather, the State "has merely reserved its right to make that claim at some point in the future." Accordingly, in TICOR's view, the State did not assert any "claim" that fell within the Harts' Policy coverage.

Consequently, the Harts proceeded to defend against all of the State's claims in Land Court. The Harts filed a motion for summary judgment to resolve all encumbrances on title claimed by the State ("Motion for Summary...