Kremer v. Lawyers Title Insurance Corp., 2004 VT 91 (VT 9/8/2004)

• Decision Date: 08 September 2004
• Docket Number: No. 2003-419, April Term, 2004,2003-419, April Term, 2004
• Citation: 2004 VT 91
• Court: Vermont Supreme Court
• Parties: Richard Kremer, M.D. and Andrea Kremer v. Lawyers Title Insurance Corp.

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2004 VT 91

Richard Kremer, M.D. and Andrea Kremer v. Lawyers Title Insurance Corp.

No. 2003-419, April Term, 2004

Supreme Court of Vermont

September 8, 2004

Appealed from: Windsor Superior Court, Docket No. 331-7-02 WRCV, Trial Judge: Alan W. Cook.

ENTRY ORDER

In the above-entitled cause, the Clerk will enter:

¶ 1. Plaintiffs, insureds, appeal an order of the superior court granting summary judgment for defendant insurer on plaintiff's breach of an insurance contract claim. Plaintiffs contend the court erred in concluding that their title insurance was not triggered by what they allege to be a municipal permit violation, even though the town has not found or alleged any violation. We affirm.

¶ 2. As an initial matter, the significance of our ruling in this case is likely limited as the Legislature has declared, subsequent to the facts giving rise to this case, that no encumbrance on title results from failure to obtain a municipal land use permit, see 27 V.S.A. § 612(a), and that the statute eliminating such encumbrances is to be applied retroactively, 1999, No. 46, § 15(b). That legislation aside, however, in this unusual case where purchasers of real property contend that their own home was in violation of municipal septic regulations despite testimony of the town septic officer to the contrary, we find no permit violation as a matter of law, and thus no defect in title from which title insurance coverage could arise.¹

¶ 3. The following facts are undisputed. On July 1, 1996, plaintiffs Richard and Andrea Kremer purchased a home in Norwich, Vermont. On the same day, they purchased a title insurance policy from defendant Lawyers Title Insurance Corporation ("Lawyers Title"). The policy insured against "[a]ny defect in or lien or encumbrance on the title" of the premises. The policy excluded from coverage defects in title arising from any zoning law violation except to the extent that "a notice of a defect .. . or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy."

¶ 4. In 1995, the previous owners, Charles and Jeanne Richards made improvements to the house including the addition of two bedrooms and a bathroom. An additional septic drain pipe connected the new bathroom to the existing drain pipe. Prior to construction, the Richardses received a zoning permit in 1994, the application for which appears in the Norwich town records. Attached to the application is a floor plan for a "Proposed Master Bedroom Suite" depicting a bedroom and an unlabeled space with features of a bathroom. The form language on the application states: "Town health regulations require a separate permit for new sewage disposal systems or replacement/repair of existing sewage disposal systems. A permit from the State of Vermont may also be required." Philip Dechert granted the Richardses a zoning permit, and his signature appears at the bottom of their application. At the time, Dechert was both the septic officer and zoning administrator for the town of Norwich.

¶ 5. Soon after the Kremers purchased the house in 1996, the septic system failed. They brought suit against the Richardses for a breach of deed warranty, misrepresentation, and fraud. These claims settled for $82,000.00.

¶ 6. The Kremers also sued Lawyers Title, alleging that the Richardses' failure to obtain a septic permit was a defect in title. The trial court granted Lawyers Title's summary judgment motion, agreeing with Lawyers Title that there was no defect or encumbrance at the time of sale and that the public records did not, therefore, provide notice of any defect Here, the Kremers' argument turns entirely on their interpretation of the word "extend" as it was used in the septic regulations in effect in 1994 . They argue that an "extension" of a septic system unambiguously includes an increase in the burden on the system. Because an increase in bedrooms is an increase in the burden on the septic system, they argue, the septic regulations required a septic permit for the addition of bedrooms to a home. They also contend that the term "extend" clearly applies to the additional drain pipe connecting the new bathroom to the existing septic drain pipe. After reviewing the applicable regulations, we find both of these arguments without merit.

¶ 7. In reviewing an award of summary judgment, we apply the same standard as the trial court, that is whether there are any genuine issues of material fact and whether any party is entitled to judgment as a matter of law. White v. Quechee Lakes Landowners' Ass'n, 170 Vt. 25, 28, 742 A.2d 734, 736 (1999); V.R.C.P. 56(c)(3). We give the opposing party the benefit of all reasonable doubts and inferences in determining whether a genuine issue of material fact exists. Gerrish v. Savard, 169 Vt. 468, 469, 739 A.2d 1195, 1196 (1999). "Summary judgment is mandated where, after an adequate time for discovery, a party `fails to make a showing sufficient to establish the existence of an element' essential to [its] case, and on which [it] has the burden of proof at trial." Poplaski v. Lamphere, 152 Vt. 251, 254-255, 565 A.2d 1326, 1329 (1989) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (construing Fed. R. Civ. P. 56(c))).

¶ 8. We turn then to the question of whether the Kremers have made a sufficient showing that the failure to obtain a septic permit when the Richardses made their additions resulted in a violation of the septic regulations. The Kremers and Lawyers Title cite to slightly different dictionary definitions of the term "extend." Compare Random House Dictionary 684 (1988) ("to enlarge the scope of"), with Webster's Ninth New Collegiate Dictionary (Merriam-Webster Inc. 1999) ("to stretch out . . . to cause to be longer"). It is a firmly established rule in this state that any uncertainty in land-use regulations must be construed in a way that is favorable to the property owner, that is, against the alleged land-use violation. In re Vitale, 151 Vt. 580, 584, 563 A.2d 613, 616 (1989) (citing Murphy Motor Sales, Inc. v. First Nat'l Bank, 122 Vt. 121, 124, 165 A.2d 341, 343 (1960)). Here, therefore, we must construe any ambiguity in the term "extend" against the Kremers' alleged septic permit violation.

¶ 9. More importantly, we take the meaning of "extend" as it is used in the regulations from consideration of the regulations as a whole. E.g., Conservation Law Found. v. Burke, 162 Vt. 115, 121, 645 A.2d 495, 499 (1993) (recognizing that when we interpret regulations, we view them as a whole).

¶ 10. The permit section of the regulations in effect in 1994 reads: "No person shall construct a new individual sewage disposal system, nor extend nor replace an old one within the Town of Norwich, unless he holds a valid permit for the same . . . ." Norwich, Vt., Town Regulations to control contagious disease by regulating the installation of individual sewage disposal systems § V(1) (1973). The permit section makes no reference to the addition of bedrooms. In fact, the only reference to bedrooms in all of the septic regulations in effect in 1994 appears in the "Detailed Specifications" section governing the size of a septic tank. Detailed Specifications § 2.2 (1973) (size of septic tank to correspond to number of bedrooms); Detailed Specifications — May 1994 § 1.2 a.-b. (same). In the instant case, plaintiffs do not allege any septic permit violation related to the size of the septic tank.

¶ 11. In contrast, the septic regulations as amended in 1997 explicitly require a septic permit for the addition of bedrooms and plumbing. Norwich, Vt., Sewage Disposal System Ordinance § 3.4.1-2 (1997). The 1997 ordinance requires owners of single family residences to obtain a septic permit or approval of the sewage officer for any "change of use" of the property. Id. § 3.4.2. "Change of use" includes "the addition of plumbing or running water" and "the addition of bedrooms." Id. § 3.4.1. Significantly, whereas the septic regulations in effect in 1994 apply "to entirely new installations of individual sewage disposal systems or to extension or complete replacement of existing ones," Norwich, Vt., Town Regulations § II (1973) (emphasis added), the amended regulations state "[a]ll sewage disposal systems shall be built, altered, repaired and used in accordance with this ordinance," Norwich, Vt., Sewage Disposal System Ordinance § 3 (1997) (emphasis added). The term "extend," as used in the regulations in force in 1994, appears to have been replaced by the term "alter" in 1997. Because the...