Malinak v. Safeco Title Ins. Co. of Idaho, 81-196

• Decision Date: 19 April 1983
• Docket Number: No. 81-196,81-196
• Citation: 661 P.2d 12,203 Mont. 69
• Parties: Paul MALINAK, Plaintiff and Appellant, v. SAFECO TITLE INSURANCE COMPANY OF IDAHO, and Lincoln County Title Company, Defendants and Respondents.
• Court: Montana Supreme Court

Page 12

661 P.2d 12

203 Mont. 69

Paul MALINAK, Plaintiff and Appellant, v. SAFECO TITLE INSURANCE COMPANY OF IDAHO, and Lincoln County Title Company, Defendants and Respondents.

No. 81-196.

Supreme Court of Montana.

Submitted March 31, 1982.

Decided Feb. 25, 1983.

Rehearing Denied April 19, 1983.

Murray, Kaufman, Vidal & Gordon, Leonard L. Kaufman argued, S.Y. Larrick argued, Kalispell, for plaintiff and appellant.

Warden, Christiansen & Johnson, Todd A. Hammer argued, Murphy, Robinson, Heckathorn & Phillips, I. James Heckathorn argued, Kalispell, for defendants and respondents.

SHEEHY, Justice.

On November 9, 1982, this Court issued an opinion holding that the appeal taken by the appellant Paul Malinak was not timely and we ordered the appeal dismissed. 39 St.Rep. 2046. In petitioning for reconsideration and rehearing, Malinak pointed out that this appeal was from a partial judgment in the District Court that such partial judgment was not appealable until the District Court, directed the entry of a final judgment and determined that there was no just reason for delay under Rule 54(b), M.R.Civ.P., and that when the District Court did so direct the entry of final judgment in this case, the appeal had been timely filed by Malinak. This Court, in reviewing the steps taken for appeal as shown in the record, missed that point, for which this author accepts complete responsibility. In determining the petition for reconsideration and rehearing, we found that the appeal was timely filed, granted rehearing and reconsideration, ordered that our opinion of November 9, 1982, be withdrawn, and reinstated the appeal.

We come now to consider this appeal on its merits. Malinak appeals from a summary judgment granted by the District Court, Nineteenth Judicial District, Lincoln County, determining in effect that he had no right of recovery against the title insurance companies which are defendants in this case.

We determine that the summary judgment must be reversed, and the cause remanded for further proceedings in the District Court.

Malinak purchased 640 acres of land in Lincoln County, Montana, in 1970. At the time he purchased the property, he was aware that St. Regis Paper Company, a New York corporation, had rights to timber on the land, although he was not sure of the extent of those rights.

In 1973, a St. Regis representative informed Malinak that a timber reservation owned by St. Regis would expire in 1973, and requested of Malinak a one-year extension. Malinak granted the request of a one-year extension. At the same time, Malinak sought to exchange other timber rights which he believed were his on the land for additional grazing rights from St. Regis.

In 1975, Malinak entered into a contract to sell his land to Gerald Williams. Malinak's realtor, Heller-Mark and Company of Denver, requested a commitment of title insurance from Lincoln County Title Company. The title company conducted a search of the records in Lincoln County and prepared a commitment for title insurance through Safeco Title Insurance Company of Idaho. The commitment was dated July 10, 1975.

Malinak reviewed the title commitment and advised his realtors that the exceptions listed in Schedule B of the title commitment, nos. 6 and 9 were in error. Each of these exceptions on the title commitment related to merchantable timber claims apparently vested in St. Regis Paper Company and to J. Neils Lumber Company through prior recorded instruments. At Malinak's behest, Heller-Mark and Company requested Lincoln County Title Company to check the restrictions, and to delete them.

Thereafter Lincoln County Title Company prepared a "date down endorsement," dated July 14, 1975, in which those exceptions were deleted. It delivered the commitment, with the date down endorsement, to Malinak and Heller-Mark and Company.

The sale to Williams fell through and later negotiations for the purchase of Malinak's property were conducted and a sale to Lowell L. Novy and Canwood Pacific Land Company was completed by Malinak. In the transfer, Malinak warranted title to the lands he was selling to Novy without the timber reservations, relying on the commitment for title insurance which he had received. On December 29, 1975, Safeco Title Insurance Company of Idaho, through its agent Lincoln County Title Company, issued its policy of title insurance in accordance with the title commitment as modified by the date down endorsement. No exception was noted in the policy for the timber rights or reservations belonging to St. Regis.

In the fall of 1977, St. Regis notified Novy of its plan to cut and remove trees from the land Novy was purchasing from Malinak. Novy demanded payment from Safeco Title Insurance Company for the timber rights on his land. On January 27, 1978, Safeco notified Malinak that if it had to pay Novy for the timber rights, which Malinak warranted to Novy, it would seek to be reimbursed by Malinak. Malinak received a second letter from Safeco's associate general counsel on February 8, 1978, in which Safeco said that it had retained a Great Falls law firm to research the issue of the validity of St. Regis' timber reservations. The letter stated that research showed that St. Regis' claim to the timber was likely to be valid.

On March 13, 1978, Malinak intervened as a plaintiff in Novy's lawsuit to enjoin St. Regis from cutting timber on the lands sold to Novy. Malinak also named Lincoln County Title Company and Safeco Title Insurance Company as defendants.

Malinak's claim for relief against Safeco and Lincoln Title was for damages involving travel costs, expenses, attorneys fees and other damages which he incurred in attempting to defend Novy's right to the timber. Malinak's complaint alleges that he relied on the correctness of the title commitment as amended by the date down endorsement in warranting all timber rights to Novy. Malinak's complaint sought recovery on the grounds of negligence and breach of warranty.

Safeco Title has paid to Novy the value of the timber rights, and the only remaining parties are Malinak, Lincoln County Title and Safeco Title Insurance Company.

A summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file show there is no genuine issue as to any material fact and that the moving parties are entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P. In this case, Malinak principally contends (1) that the District Court erred in determining that the title insurance companies were not liable as a matter of law to Malinak, and (2) that a genuine and material issue of fact existed as to Malinak's state of mind with respect to his knowledge as to the status of his timber rights on the land. Therefore, Malinak contends that the summary judgment against him was improper.

In a recent case, Lipinski v. Title Insurance Company and Flathead County Title Company (1982), Mont. 655 P.2d70, 39 St.Rep. 2283, this Court held that a title insurance company was liable to its insured for failure to determine and disclose certain ditch right easements which a search of the record title would have revealed. Malinak contends here for a different aspect of the liability of a title insurance company, that is, liability to the vendor or seller of the land, for providing to the seller a title commitment which fails to disclose to the seller defects in the seller's title, where the seller relies on the title commitment to warrant the title he is selling.

Title insurance is a contract to indemnify the insured against loss through defects in the insured title or against liens or encumbrances that may affect the insured title at the time the policy is issued. Walters v. Marler (Cal.App.1978), 147 Cal.Rptr. 655, 83 Cal.App.3d 1. Undoubtedly the named insured in a...