Royal Properties, Inc. v. Arizona Title Ins. & Trust Co.

• Decision Date: 01 December 1970
• Docket Number: No. 2,CA-CIV,2
• Citation: Royal Properties, Inc. v. Arizona Title Ins. & Trust Co., 476 P.2d 897, 13 Ariz.App. 376 (Ariz. App. 1970)
• Parties: ROYAL PROPERTIES, INC., an Arizona corporation, and Royal Properties, Inc., a Nevada corporation, Appellants, v. ARIZONA TITLE INSURANCE & TRUST COMPANY, an Arizona corporation, Appellee. 865.
• Court: Arizona Court of Appeals

Page 897

476 P.2d 897

13 Ariz.App. 376

ROYAL PROPERTIES, INC., an Arizona corporation, and Royal Properties, Inc., a Nevada corporation, Appellants, v.ARIZONA TITLE INSURANCE & TRUST COMPANY, an Arizona corporation, Appellee.

No. 2 CA-CIV 865.

Court of Appeals of Arizona, Division 2.

Dec. 1, 1970.

Rehearing Denied Jan. 15, 1971.

Lesher & Scruggs, by Monte C. Clausen, Tucson, for appellants.

Stuart Herzog, Tucson, for appellee.

KRUCKER, Judge.

This appeal arises out of one phase of litigation concerning the construction of an indemnity provision in a trust agreement.¹This litigation followed in the wake of the Arizona Supreme Court decision in Arizona Title Insurance & Trust Company v. Hunter, 103 Ariz. 384, 442 P.2d 831(1968), which affirmed a judgment in favor of the vendors-beneficiaries against the title company.

In order to expedite the financing and development of certain real property, the vendors conveyed the property in trust to Arizona Title, the trust agreement naming the vendors as 'first beneficiary' and Royal Properties, the vendee, as 'second beneficiary'.The Arizona Supreme Court held that Arizona Title had misinterpreted the extent of its duties and powers under the trust agreement and therefore had breached its duty to the vendors.

After payment of the judgment, Arizona Title sued Royal Properties to recover the amount of the judgment, interest thereon, reasonable attorney's fees and court costs.It claimed a right to indemnification under the following provision of the trust agreement:

'C.If Trustee shall pay or incur any liability to pay any money on account of this trust, or incur any liability to pay any money on account of any litigation as a result of holding title to the trust property or otherwise in connection with this trust, whether because of breach of contract, injury to person or property, fines, or penalties under any law, or otherwise, the Beneficiaries jointly and severally shall pay on demand to Trustee with interest thereon at the rate of 8% Per annum until paid, all such payments made by Trustee together with the expenses, including reasonable attorney's fees, and they shall indemnify and hold Trustee harmless of and from any and all liabilities incurred by it for any reason whatsoever in connection with this trust.Trustee shall have a lien on trust property to secure performance of the obligations of the Beneficiaries under this trust, which lien shall be senior to the respective interest of the Beneficiaries. * * *'

Arizona Title moved for summary judgment on the grounds that, as a matter of law, it was entitled to judgment pursuant to the foregoing provision for indemnity.(ActionNo. 113348.)Royal Properties filed an amended answer which asserted the defenses of laches and estoppel.The motion for summary judgment was denied.Subsequently, after both cases were consolidated, Arizona Title again moved for summary judgment and this time partial summary judgment was granted on the issue of liability.A date was set for trial to determine the amount of interest due and a reasonable amount of attorney's fees.

Appellants contend that in order for the trial court to have granted summary judgment, it must have concluded either (1) the 'hold harmless' provision of the trust agreement entitled Arizona Title to indemnification, notwithstanding its breach of trust (express contract), or (2)the appellants' conduct was such that Arizona Title was entitled to indemnification (implied contract).We reject alternative two as a basis for the ruling since Arizona Title's claim as set forth in its respective pleadings, was predicated solely on the express contract of indemnity.We therefore confine our review to a determination of whether Arizona Title's losses were within the purview of the 'hold harmless' provision.

In this jurisdiction, we are committed to the majority view as to construction of indemnity agreements--the indemnitee is not entitled to be compensated for losses occasioned by its own wrong unless the indemnity agreement expresses such intention in clear and unequivocal terms.Southern Pacific Company v. Gila River Ranch, Inc., 105 Ariz. 107, 460 P.2d 1(1969);Thornton v. Marsico, 5 Ariz.App. 299, 425 P.2d 869(1967).We believe this principle is equally applicable to the instant 'hold harmless' provision notwithstanding its broad language.As stated in Corbett v. Benioff, 126 Cal.App. 772, 14 P.2d 1028(1932), wherein a trustee attempted to escape liability for his wrongful conduct in a suit brought by a beneficiary:

'In our...