Santos v. Sinclair

• Decision Date: 07 December 1994
• Docket Number: No. 16452-3-II,16452-3-II
• Citation: 884 P.2d 941,76 Wn.App. 320
• Court: Washington Court of Appeals
• Parties: John D. SANTOS, Appellant, v. Richard SINCLAIR et al., TICOR TITLE INSURANCE COMPANY OF CALIFORNIA, Respondents.

Page 320

76 Wn.App. 320

884 P.2d 941

John D. SANTOS, Appellant, v. Richard SINCLAIR et al., TICOR TITLE INSURANCE COMPANY OF

CALIFORNIA, Respondents.

No. 16452-3-II.

Court of Appeals of Washington,

Division 2.

Dec. 7, 1994.

Richard C. Nelson and Eric Steven Nelson, Nelson & Associates P.S., Seattle, for appellant.

Russell A. Austin, Bellevue, for respondents.

BRIDGEWATER, Judge.

John D. Santos appeals an order granting summary judgment to Ticor Insurance Company and denying Santos's motion for summary judgment. We reverse.

The facts are undisputed. Melvin and Sally Stephens ("Stephens") owned a parcel of land in Grapeview, Washington that they short platted into three separate tracts in January 1980.

Stephens recorded Short Plat 702 in Mason County on January 16, 1980. Short Plat 702 contains the legal description of Tract 2, a description that includes an easement running across Tract 2 to Lombard Road for the benefit of Tract 3. Short Plat 702 contains the legal description of Tract 3, a description that includes the easement across Tract 2 for the benefit of Tract 3. Short Plat 702 also contains a sketch of the three tracts and of the alleged easement running from Tract 3 across Tract 2 to Lombard Road.

On March 1, 1980, Stephens sold Tract 2 to Richard and Claire Sinclair ("Sinclair") by real estate contract, with the contract reserving the easement to Stephens, their heirs, and their assigns. In November 1989, Stephens sold Tract 3 to John Santos, the appellant, by way of a recorded real estate contract that also purported to convey the easement across Tract 2.

In March 1990, Santos purchased a title insurance policy from Ticor Title Insurance Company of California ("Ticor"), a policy that insures against loss or damage sustained by reason of a defect in or incumbrance on title, the unmarketability of title, the lack of a right of access to and from the land, and other losses.

Santos used the easement road over Sinclair's property, but in 1990 a dispute arose and Sinclair blocked Santos's use of the road. Santos then filed a claim with Ticor, believing that his policy insured the easement road over Sinclair's land, but Ticor denied his claim, maintaining that the easement either was not covered or was excepted from coverage. Santos then sued Sinclair, Stephens, Home Title (Ticor's Agent), and Ticor for various causes of action pertaining to the disputed easement.

The scope of the coverage of the policy is the subject of this appeal. Schedule A, paragraph 4 of the policy describes the land insured by the policy. Schedule B of the policy provides that the policy does not insure against loss or damage which arise by reason of a number of exceptions from coverage. The exceptions in controversy in Schedule B are (1) Special Exception 2 and (2) Standard Exception B.

Finally, Home Title stamped a notation onto a copy of the sketch in Short Plat 702, which it then attached to the policy. The meaning of the notation is also in controversy.

The court below granted Ticor's motion for summary judgment, denied Santos's motion for summary judgment against Ticor, and dismissed Ticor from the action, holding that the title insurance policy clearly, unambiguously and expressly excepts the easement from Santos's policy with Ticor. Santos now appeals to this court, asking that the summary judgment in favor of Ticor be reversed and Santos's summary judgment motion be granted. Santos also asks for costs and reasonable attorney's fees. The other parties to the action are not involved in this appeal.

A motion for summary judgment shall be granted if the moving party shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. CR 56(c). When facts are not in dispute and the issue of insurance coverage depends solely on the language of the policy, the interpretation of insurance policy language is a question of law; thus, appellate review of the trial court's decision is de novo. Roller v. Stonewall Ins. Co., 115 Wash.2d 679, 682, 801 P.2d 207 (1990). Here, since the facts are not in dispute and the issue of coverage turns on the language of the various parts of the policy, the interpretation of this policy is a question of law and our review is de novo.

The general rules of interpreting the language of an insurance policy are well-settled:

If policy language is clear and unambiguous, the court may not modify the contract or create an ambiguity. An ambiguity exists if the language is fairly susceptible to two different reasonable interpretations. If an ambiguity exists, then the court may attempt to determine the parties' intent by examining extrinsic evidence. If a policy remains ambiguous even after resort to extrinsic evidence then this court will apply the rule that ambiguities in insurance contracts are construed against the insurer. The rule strictly construing ambiguities in favor of the insured applies with added force to exclusionary clauses which seek to limit policy coverage.

(Footnotes omitted.) American Star Ins. Co. v. Grice, 121 Wash.2d 869, 874-75, 854 P.2d 622 (1993), opinion supplemented, 123 Wash.2d 131, 865 P.2d 507 (1994). Further, language should be interpreted in accordance with the way it would be understood by an average person, rather than in a technical sense. American Star, 121 Wash.2d at 874, 854 P.2d 622.

I

Santos first argues that the easement is included in Schedule A of the policy. Schedule A, paragraph 4 describes the land insured as:

TRACT(S) 3 OF SHORT PLAT NO. 702, AS RECORDED JANUARY 17, 1980, UNDER AUDITOR'S FILE NO. 372103, AND BEING A PORTION OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER OF SECTION 7, TOWNSHIP 21 NORTH, RANGE 1, W.M.

Tract 3 of Short Plat 702, in turn, states the legal description of Tract 3 as being

the East 250-feet ... TOGETHER with an easement for road and utilities purposes, ... over the existing old road which meanders east and west through the South-half (S 1/2) of the property ... connecting the property herein to the Lombard Road.

(Italics ours.) Thus, Santos argues, Schedule A expressly includes the easement in the policy's coverage through incorporation by reference to Short Plat 702.

Ticor responds that coverage in a title insurance policy is limited to the property specifically described in the policy, citing Transamerica Title Ins. Co. v. Northwest Bldg. Corp., 54 Wash.App. 289, 773 P.2d 431, review denied, 113 Wash.2d 1008, 779 P.2d 727 (1989) as authority. Based upon this rule, Ticor argues that because Schedule A, paragraph 4 does not explicitly describe any easement being insured, the policy's coverage does not include the easement.

Title insurance policies are to be construed in accordance with the general rules applicable to all other contracts. Miebach v. Safeco Title Ins. Co., 49 Wash.App. 451, 453, 743 P.2d 845 (1987), review denied, 110 Wash.2d 1005 (1988). It is well established that if the parties to a contract clearly and unequivocally incorporate by reference into their contract the terms of some other document, those terms become part of the contract. See, e.g., Brown v. Poston, 44 Wash.2d 717, 719, 269 P.2d 967 (1954) (where subcontractor contracted to perform plastering work on building "as per plans and specifications," both of such documents were thereby incorporated by reference into the contract); Washington Trust Bank v. Circle K Corp., 15 Wash.App. 89, 93, 546 P.2d 1249, review denied, 87 Wash.2d 1006 (1976) (where memorandum to lease referred to an earlier contract between the parties, memorandum held to have incorporated terms of the earlier contract by reference); Turner v. Wexler, 14 Wash.App. 143, 148, 538 P.2d 877, review denied, 86 Wash.2d 1004 (1975) (where real estate contract referred to terms of an earlier real estate contract between parties, terms of earlier contract held incorporated by reference into later contract).

Here, the title insurance policy issued by Ticor clearly and unequivocally incorporates by reference the legal description of Tract 3 in Short Plat 702, which includes the disputed easement. The bare words contained in Schedule A, paragraph 4 give only a vague description of the land insured. If the terms of Short Plat 702 are ignored, the land insured under Schedule A would be described only as "... A PORTION OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER OF SECTION 7, TOWNSHIP 21 NORTH, RANGE 1, W.M.", a description that encompasses all three tracts. It is thus clear that by specifically referring to the land insured in the policy as "TRACT(S) 3 OF SHORT PLAT NO. 702" the parties intended to use the more exact legal description of Tract 3 contained in Short Plat 702.

Moreover, Ticor relies improperly on Transamerica Title, for the proposition that coverage in a title policy is limited to the property specifically described in the policy. Transamerica has been overruled by Denny's Restaurants, Inc. v. Security Union Title Ins. Co., 71 Wash.App. 194, 859 P.2d 619 (1993),...