Kirwan v. Chicago Title Ins. Co.

• Decision Date: 20 June 2000
• Docket Number: No. A-99-498.,A-99-498.
• Citation: 9 Neb. App. 372,612 N.W.2d 515
• Parties: Gerald R. KIRWAN, Jr., and Leona Kirwan, husband and wife, appellants and cross-appellees, v. CHICAGO TITLE INSURANCE COMPANY, appellee and cross-appellant.
• Court: Nebraska Court of Appeals

612 N.W.2d 515

9 Neb. App. 372

Gerald R. KIRWAN, Jr., and Leona Kirwan, husband and wife, appellants and cross-appellees, v. CHICAGO TITLE INSURANCE COMPANY, appellee and cross-appellant.

No. A-99-498.

Court of Appeals of Nebraska.

June 20, 2000.

David A. Domina and Nora M. Kane, of Domina Law, P.C., Omaha, for appellants.

Richard J. Butler and Derrick J. Hahn, of Butler, Galter & O'Brien Law Firm, Lincoln, for appellee.

IRWIN, Chief Judge, and SIEVERS and MOORE, Judges.

SIEVERS, Judge.

Gerald R. Kirwan, Jr., and Leona Kirwan (the Kirwans) brought this action against their title insurer, Chicago Title Insurance Company (Chicago Title), to recover attorney fees they incurred in successfully defending a suit involving the insured property, which is in South Dakota. Each party moved for summary judgment. The Holt County District Court granted Chicago Title's motion for summary judgment, finding that the Kirwans learned of the adverse claim to their property after the title insurance commitment was issued but before the policy was issued and that because the Kirwans did not disclose the claim to Chicago Title as required, coverage was precluded.

BACKGROUND

This case arises from a suit filed in South Dakota in which David Vanderwerf (David) and his parents, Harry and Betty Vanderwerf, asserted an adverse claim against a South Dakota ranch which the Kirwans had purchased.

South Dakota Litigation.

In March 1991, Robert and Eva Matthews sold and conveyed property to the Kirwan Ranch, a South Dakota partnership, and David as tenants in common, for the purchase price of $192,000. The general partners of the Kirwan Ranch were James T. Kirwan (James); his spouse, Shirley; and their sons James P. Kirwan and William P. Kirwan. The partners and David executed a mortgage to the Matthewses for $123,000. In addition, Harry, Betty, and David provided a total of $83,300. Harry and Betty requested that only David's name appear on the deed. David was obligated to pay his share of the mortgage to the Matthewses.

From 1993 to 1995, the partners experienced financial difficulties. In an attempt to alleviate this situation, James asked an attorney to prepare a quitclaim deed from David to the partners. On September 6, 1995, William, on behalf of the partners, asked David to execute the quitclaim deed. David was told that the deed was not going to be recorded, but would be used as security for a loan from a Yankton bank. (It was later learned that the Yankton bank had made no such request.) David was told that when the partners received the loan money, they would buy out David's interest in the land. David immediately signed the quitclaim deed, and without his knowledge, it was recorded that same day, on September 6,1995.

The partners, without David's knowledge, entered into a contract to sell the property to the Kirwans (Gerald Kirwan is James' first cousin). The contract was executed, and the deed was signed on December 12, 1995. The Kirwans' mortgage was ultimately through First Trust National Association (First Trust). Chicago Title issued a title commitment to the Kirwans, which became effective on April 1, 1996. A title insurance policy from Chicago Title, which became effective on May 16, 1996, was ultimately issued to the Kirwans. The deed to the Kirwans for the property was recorded on April 15, 1996. The Kirwans did not have any notice of the arrangement between David and the partners when the Kirwans entered into the agreement. David learned of the contract to sell the property to the Kirwans about 2 months after he signed the quitclaim deed.

On April 5, 1996, the Vanderwerfs' lawyer wrote a letter to Gerald Kirwan, stating David's claims to the property. It arrived on April 7 or 8, 1996, 1 week after closing and 4 months after the contract was recorded. In the letter, a lawsuit was threatened to enforce the Vanderwerfs' rights in the property. This was the first notice the Kirwans had of the Vanderwerfs' claim.

On May 16, 1996, the Vanderwerfs brought suit against the partners, the Kirwans, and First Trust, to set aside the transfer and void claims to the property by the Kirwans and First Trust. That lawsuit ultimately went to the South Dakota Supreme Court, which found that the Kirwans were bona fide purchasers for value without notice and that First Trust was a mortgagee in good faith and for value, thereby rejecting the Vanderwerfs' claims. See Vanderwerf v. Kirwan, 1998 SD 119, 586 N.W.2d 858 (1998).

Present Litigation Involving Chicago Title.

When suit was filed by the Vanderwerfs, the Kirwans immediately contacted Chicago Title for defense of the claim. Chicago Title began representing the Kirwans as well as their lender, First Trust, as a policy beneficiary. However, Chicago Title later withdrew its defense of the Kirwans. The Kirwans then hired their own legal counsel and successfully defended the Vanderwerfs' suit, including the appeal.

Chicago Title's position is that it had no duty to defend because the Kirwans learned of the adverse claim after the commitment was issued and before the policy was issued, but the Kirwans failed to inform Chicago Title of the claim, which results in preclusion of coverage for the Vanderwerf litigation. The Kirwans' attorney received the title commitment issued by Chicago Title on or about April 15, 1996. The title commitment had an effective date of April 1, 1996, and it included "Conditions and Stipulations" as follows:

If the proposed Insured has or acquires actual knowledge of any defect, lien, encumbrance, adverse claim or other matter affecting the estate or interest or mortgage thereon covered by this Commitment... and shall fail to disclose such knowledge to the Company in writing, the Company shall be relieved from liability for any loss or damage resulting from any act of reliance hereon to the extent the Company is prejudiced by failure to so disclose such knowledge.

The Kirwans' title insurance policy from Chicago Title, which became effective on May 16, 1996, contains the following provision in the "Exclusions from Coverage" section:

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of:

....

3. Defects, liens, encumbrances, adverse claims or other matters:

....

(b) not known to the Company, nor recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy[.]

The South Dakota Supreme Court's opinion stated that the Kirwans learned of the Vanderwerfs' claim on April 7 or 8, 1996, while the Kirwans' belief was that only after closing on April 9, 1996, did they learn of the Vanderwerfs' claim. Nonetheless, the Kirwans admit that neither they nor their attorney disclosed the Vanderwerfs' title claim to Chicago Title between April 9, 1996, and when the suit was filed 40 days later. Chicago Title learned of the claim on or about June 21, 1996, when the Kirwans' attorney forwarded a copy of the Vanderwerfs' lawsuit to an agent of Chicago Title to tender defense of the action. As earlier stated, Chicago Title defended for a time, but withdrew, and the Kirwans completed the defense on their own—the basis for the recovery sought herein.

The Kirwans filed suit in the Holt County District Court against Chicago Title to recover their defense costs. Each side filed motions for summary judgment. The district court granted Chicago Title's motion for summary judgment and denied the Kirwans' motion. The district court found that the Kirwans did not have to reimburse Chicago Title for its expenses associated with defending the Kirwans' lender, First Trust. The court also awarded Chicago Title $3,664.38 for legal fees spent to defend the Kirwans before withdrawing its defense of the suit.

The Kirwans appeal the district court's entry of summary judgment in favor of Chicago Title, and Chicago Title cross-appeals the denial of an award for attorney fees it incurred in defending First Trust.

ASSIGNMENTS OF ERROR

The Kirwans assert, restated, that the district court erred in granting summary judgment in favor of Chicago Title and denying the Kirwans' motion for partial summary judgment. Chicago Title cross-appeals, asserting that the district court erred in failing to award Chicago Title attorney fees incurred in the defense of First Trust in the Vanderwerf litigation.

STANDARD OF REVIEW

Summary judgment is proper only when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Knudsen v. Mutual of Omaha Ins. Co., 257 Neb. 912, 601 N.W.2d 725 (1999). In reviewing an order of summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment was granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Knudsen v. Mutual of Omaha Ins. Co., supra.

Although the denial of a motion for summary judgment, standing alone, is not a final, appealable order, when adverse parties have each moved for summary judgment and the trial court has sustained one of the motions, the reviewing court obtains jurisdiction over all motions and may determine the controversy which is the subject of those motions or make an order specifying the facts which appear without substantial controversy and direct further proceedings as it deems just. Shivvers v. American Family Ins. Co., 256 Neb. 159, 589 N.W.2d 129 (1999); American Family Ins. Group v. Hemenway, 254 Neb. 134, 575 N.W.2d 143 (1998).

The interpretation and construction of an insurance contract or policy involve questions of...