Mattson Ridge, LLC v. Clear Rock Title, LLP

• Citation: 824 N.W.2d 622
• Decision Date: 12 December 2012
• Docket Number: No. A10–1483.,A10–1483.
• Parties: MATTSON RIDGE, LLC, Respondent, v. CLEAR ROCK TITLE, LLP, et al., Appellants.
• Court: Supreme Court of Minnesota (US)

824 N.W.2d 622

MATTSON RIDGE, LLC, Respondent,

v.CLEAR ROCK TITLE, LLP, et al., Appellants.

No. A10–1483.

Supreme Court of Minnesota.

Dec. 12, 2012.

Syllabus by the Court

1. Title was unmarketable when several professionals in the field expressed well-founded doubts about the adequacy of the legal description of the property.

2. Because the title insurer's breach of a title insurance policy was not the cause of respondent's lost profits, respondent is not entitled to recover in excess of the policy limit.

3. Under the facts of this case, respondent was entitled to recover lost profits, up to the amount of the policy limit, as its actual loss or damage from the unmarketable title.

John M. Koneck, Brian S. McCool, Grant D. Fairbairn, Fredrikson & Byron, P.A., Minneapolis, MN, for respondent.

Nell E. Mathews, Christopher R. Sullivan, Lindquist & Vennum P.L.L.P., Minneapolis, MN, for appellants.

Bradley N. Beisel, David J. Krco, Beisel & Dunlevy, P.A., Minneapolis, MN, for amici curiae Minnesota Land Title Association and American Land Title Association.

OPINION

STRAS, Justice.

This case relates to a title insurer's obligations when a policyholder claims that title to a covered parcel of property is unmarketable and that the policyholder has suffered damages due to the unmarketability of the title. Respondent Mattson Ridge, LLC, purchased the property at issue and obtained a title insurance policy from appellant Ticor Title Insurance Co. An ambiguity in the legal description of the property, however, prevented Mattson Ridge from reselling the property to a third party. Mattson Ridge thereafter filed an action seeking a declaration of Ticor's obligations under the policy and alleging breach of contract against Ticor. The district court concluded that Ticor was liable after finding that title to the property in question was unmarketable, but the court limited Mattson Ridge's recovery to the face value of the policy. The court of appeals affirmed the finding of liability, but held that Mattson Ridge was entitled to recovery in excess of the policy limit. We affirm in part, reverse in part, and remand for reinstatement of the district court's award of damages.

I.

Mattson Ridge, LLC, is a real estate firm formed in 2004 to take advantage of economic growth in the Chisago Lakes area. In March 2005, Mattson Ridge entered into an agreement with Harold and Judith Shoberg to purchase approximately 64 acres of undeveloped farmland near Chisago City (“the Property”) for $1,286,000. After Mattson Ridge closed on the Property in September 2005, it secured a title insurance policy from Clear Rock Title, LLP, which acted as issuing agent for Ticor Title Insurance Co. (collectively “Ticor”). The policy provided, among other things, that Ticor would insure “against loss or damage, not exceeding the amount of insurance stated in Schedule A, sustained or incurred by the insured by reason of ... [u]nmarketability of the title.” The amount of insurance stated in Schedule A was the same amount Mattson Ridge paid for the Property: $1,286,000.

Around the time Mattson Ridge closed on the Property, the area real estate market began to peak. As a result, Mattson Ridge received several offers from developers to buy the Property at prices ranging from $2,600,000 to $2,900,000. On October 21, 2005, Mattson Ridge entered into a purchase agreement with Thompson Builders and Contractors (“Thompson”) to sell the Property for $2,900,000. The purchase agreement required Mattson Ridge to convey marketable title by the closing date of May 30, 2006.

Shortly after signing the purchase agreement, Thompson began preparing the Property for development, including ordering an environmental review, hiring site engineers to create grading and lighting plans, and seeking plat approval from Chisago City. Problems with the title to the Property, however, prevented Thompson from completing the transaction. The agent from whom Thompson sought title insurance, Commercial Partners Title, LLC, informed Thompson that the legal description of the Property “appear[ed] ambiguous and should be surveyed and reformed.” Commercial Partners refused to issue Thompson a title insurance policy unless Mattson Ridge cured the ambiguity. Without title insurance, Thompson was unable to receive final approval of its plat from Chisago City or secure financing for its purchase.

Commercial Partners' title objection related to the legal description of the Property, which described the parcel as follows:

The North 1/2 of the Northwest 1/4 of Section 25, Township 34, Range 21, Chisago County, Minnesota, excepting however, two acres, more or less, in the Northwest corner of the Northwest 1/4 of Northwest 1/4 of said Section 25, described as follows: Commencing at the Northwest corner of said Section 25; thence South 30 rods to the intersection of road leading from the county road at or near Charles Magnuson's place in Sunrise City; thence along the center of the road to where said road crosses the section line; thence along the North line of said Section, 24 rods to the Northwest corner of said Northwest 1/4 of Northwest 1/4 or to the place of beginning.

Excepting therefrom, all that part of the Northwest 1/4 of Northwest 1/4, Section 25, Township 34, Range 21, Chisago County, Minnesota, which lies Southerly of State Aid Road No. 19 and Easterly of State Aid Road No. 80.

The portion of the description to which Commercial Partners objected was the call of “thence South 30 rods to the intersection of road leading from the county road at or near Charles Magnuson's place in Sunrise City.” Mattson Ridge agreed that the legal description's reference to “Charles Magnuson's place” rendered the call ambiguous because it was unclear who Charles Magnuson was, where his “place” was located, and whether he would remain at that place. An attorney representing both Thompson and Mattson Ridge also expressed concern about the ambiguity in the legal description. In addition, before issuing its title policy to Mattson Ridge, an agent from Ticor identified the Property's legal description as “vague.”

Mattson Ridge sought assistance from Ticor in correcting the ambiguity in the Property's title, but Ticor denied coverage under the policy. Mattson Ridge then moved forward on its own, hiring a surveyor to draft a new legal description and instituting an action in Chisago County District Court to register title to the Property.¹ The court entered an order and decree of registration on July 16, 2007, declaring Mattson Ridge the owner of the Property and providing a new legal description that removed the reference to “Charles Magnuson's place” and instead relied on current street names to set the boundaries of the Property. Thompson then obtained a new, unconditional title commitment from Commercial Partners and prepared to close on the Property. By that time, however, the declining real estate market prevented Thompson from obtaining acceptable financing. After several extensions and modifications of the purchase agreement, Thompson cancelled the purchase agreement because it could not secure financing. Mattson Ridge failed to find a new buyer for the Property.

Mattson Ridge sued Ticor, seeking a declaration of Ticor's coverage obligations under the policy and alleging breach of contract. The district court granted summary judgment to Mattson Ridge on the question of liability, concluding that title to the Property was unmarketable and that Ticor therefore breached its duty to defend and indemnify Mattson Ridge with respect to the ambiguous title description.

The district court held a trial on damages. At trial, Mattson Ridge elicited testimony that Thompson was prepared to move forward and close on the Property at the agreed—upon purchase price of $2,900,000 if the title to the Property had been marketable. Mattson Ridge's appraiser, Robert Strachota—whose testimony the district court found “credible and helpful”—testified that the purchase price for the Property was consistent with its fair market value. According to Strachota, however, the title defect decreased the value of the Property to between $290,000 and $725,000. Moreover, by the time Mattson Ridge remedied the title defect on July 15, 2007, Strachota estimated that the Property had decreased in value to approximately $1,300,000. The parties stipulated at trial that Ticor could not have completed title registration any sooner than Mattson Ridge. The parties also stipulated that Mattson Ridge's expenditure of $11,169 in attorney fees and costs to register the title was a reasonable amount.

The district court awarded Mattson Ridge $1,297,169 in damages. In doing so, the court accepted the purchase price of $2,900,000 as the fair market value of the Property with marketable title and Strachota's estimate of $290,000 to $725,000 as the value of the Property subject to the defect. The difference in value between the value of the Property with and without marketable title, the court calculated, was between $2,175,000 and $2,610,000. However, because the title insurance policy limited Ticor's liability to the face value of the policy, the court capped Mattson Ridge's recovery at the policy limit of $1,286,000 and awarded an additional $11,169 to account for Mattson Ridge's out-of-pocket expenses in registering the Property.

The court of appeals affirmed the finding of liability, agreeing that the legal description's ambiguous reference to “Charles Magnuson's place” made the title unmarketable. See Mattson Ridge, LLC v. Clear Rock Title, LLP, 2011 WL 2175832, at *3–4 (Minn.App. June 6, 2011). But the court reversed the award of damages, concluding that Ticor's breach of the insurance contract rendered Ticor liable for all losses proximately caused by its breach—including amounts in excess of the policy limit. Id. at *6. We granted Ticor's petition for further review.

II.

The first question presented in this case is whether the district court...