Shotwell v. Transamerica Title Ins. Co., 44768

CourtUnited States State Supreme Court of Washington
Citation91 Wn.2d 161,588 P.2d 208
Decision Date21 December 1978
Docket NumberNo. 44768,44768
PartiesJonathan G. SHOTWELL & Candace Shotwell, his wife, Respondents, v. TRANSAMERICA TITLE INSURANCE COMPANY, Petitioners.

Taylor & Taylor, S. Brooke Taylor, Port Angeles, for petitioners.

Niichel & Rutz, Mr. David V. Johnson, Port Angeles, for respondents.

STAFFORD, Justice.

Petitioner Transamerica Title Insurance Co. seeks review of the Court of Appeals decision in Shotwell v. Transamerica Title Ins. Co., 16 Wash.App. 627, 558 P.2d 1359 (1976). We affirm the Court of Appeals, but on narrower grounds.

In 1974 respondents Shotwell purchased unimproved property bordering upon the west bank of the Elwah River. It was described in their conveyance as:

The Northwest Quarter of the Northwest Quarter, Section 34, Government Lot 4, Section 27; Government Lot 1, Section 28; all in Township 31 North, Range 7 West W.M., EXCEPT right of way for existing roads. Situated in Clallam County, State of Washington.

(Italics ours.) Prior to the purchase, Transamerica issued respondents a preliminary commitment for title insurance in which it agreed to issue its policy subject only to exceptions listed in the commitment and in the policy form. The commitment excepted from title protection: "2. Right of way for existing roads."

Subsequently, Transamerica issued its title policy insuring respondents against loss or damage sustained by reason of:

Any defect in, or lien or encumbrance on, said title existing at the date hereof, Not shown in Schedule B . . .

(Italics ours.) Schedule B lists five specific exceptions and contains four general exception clauses. Of the five specific exceptions only No. 2 is relevant. It reads "2. Right of way for existing roads." Of the four general exception clauses, only two are relevant. They read:

1. . . . public or private easements, streets, roads, alleys or highways, Unless disclosed of record by . . . Decree of a Court of record . . .

2. . . . rights or claims based upon instruments or upon facts Not disclosed by the public records but of which rights, claims, instruments or facts The insured has knowledge.

(Italics ours.) Both the preliminary commitment and title policy described the property insured in language identical to that contained in respondents' conveyance.

At the time respondents purchased the property a narrow road and a dike were located thereon. The road was between 10 and 15 feet wide and began near the southwest corner of the property. From there, the road, insofar as visible, traversed the property in a northeasterly direction but terminated 200 feet short of the Elwah River.

At each end of this visible road the county had erected markers to identify it as belonging to the county. The dike began at the northeasterly terminus of the visible road, as indicated by the county markers, and continued to the property's border on the Elwah River. At the time of purchase respondents were aware of the visible road, the county markers, and the dike.

Following respondents' purchase of the property and the issuance of Transamerica's title policy, respondents learned Clallam County had title to a right-of-way across the property. The county's title had been established in 1944 by decree entered in Clallam County Cause No. 9075. This county right-of-way transected the Entire property and was 40 feet in width.

Upon learning of the 1944 decree, respondents filed this action claiming coverage under the title policy. They alleged that the existence of the county right-of-way constituted an encumbrance for which insurance was provided. It was respondents' theory that the policy's failure to specifically refer to either the 1944 decree or to the county right-of-way entitled them to recover losses sustained by reason of the county's right-of-way.

At trial it was established that the 10-15 foot wide road was "generally" located within the county right-of-way. Further, respondent Jonathan Shotwell was found to have considerable experience in real estate matters, roads, easements and rights-of-way, although neither he nor his wife were found to have had knowledge of the right-of-way established by the 1944 decree when they purchased the property.

The trial court entered two conclusions of law in support of its judgment dismissing the complaint. First, the court held that the preliminary commitment and title policy specifically excepted the county right-of-way for the "existing public road." Second, the trial court concluded that the existence of the visible road and county markers together with the specific exception of the "right of way for existing roads" in the legal description, preliminary commitment, and title policy were sufficient to put a reasonable person on notice of the existence of the full 40-foot right-of-way.

Respondents appealed. The Court of Appeals sua sponte held (1) that Transamerica had a duty to conduct a reasonable search which arose by implication from the insurance contract; and (2) that a policyholder has a reasonable expectation that he will be specifically informed of title defects revealed by such a search even though he has or should have had knowledge of the general nature of the defect. The Court of Appeals determined that Transamerica had breached this duty, reversed the trial court and remanded the cause with directions to ascertain respondents' damages.

Transamerica petitioned this court for review asserting that a duty to search and specifically disclose title defects imposed burdens upon it not contemplated by the insurance contract. We granted review because of the novel approach adopted sua sponte by the Court of Appeals.

We recognize such a "duty" might arise from the combined expectations of a title policy applicant and the service to be performed by title insurance companies. See Williams v. Polgar, 43 Mich.App. 95, 204 N.W.2d 57 (1973); Pruett v. Mississippi Valley Title Ins. Co., 271 So.2d 920 (Miss.1973); Hawkins v. Oakland Title Ins. & Guar. Co., 165 Cal.App.2d 116, 331 P.2d 742 (1958); Dorr v. Massachusetts Title Ins. Co., 238 Mass. 490, 131 N.E. 191 (1921); Restatement (Second) of Torts § 552 (1965). See also Comment, Title Searches: Tort Liability in California, 7 Santa Clara Lawyer 257 (1967); Q. Johnstone, Title Insurance, 66 Yale L.J. 492, 493-499 (1957); Comment, Title Insurance: The Duty to Search, 71 Yale L.J. 1161 (1962); J. Curtis, Title Assurance in Sales of California Residential Realty: A Critique of Title Insurance and Title Covenants with Suggested Reforms, 7 Pac.L.J. 1 (1976); S. Quiner, Title Insurance and the Title Insurance Industry, 22 Drake L.Rev. 711, 714-717 (1973). However, even assuming such a "duty" might conceivably be warranted, there are several reasons for declining to impose one here. First, neither party submitted a brief on the issue. The absence of full adversary review of an issue warrants caution when considering such a departure from long-established precedent. Further, under the facts and the law governing this case, there is no need to impose such a "duty." Thus, we treat the appeal as if it had been addressed to us originally.

The question is solely one of law involving the correct interpretation to be given the Exclusionary phrase "right of way for existing roads." Transamerica, relying on the language "right of way," contends the exclusionary phrase excludes the county's 40-foot right-of-way established by the 1944 decree. On the other hand, respondents emphasize the language "existing roads" in support of their contention that the exclusionary phrase excludes a right-of-way the same width and length as the existing road, I. e., the visible road.

We note that each party places undue emphasis upon isolated portions of the exclusionary phrase. Insurance contracts should be interpreted in light of the actual language used and with respect to the policy as a whole, not in terms of isolated segments. See Witherspoon v. St. Paul Fire & Marine Ins. Co., 86 Wash.2d 641, 650, 548 P.2d 302 (1976); Morgan v. Prudential Ins. Co., 86 Wash.2d 432, 434, 545 P.2d 1193 (1976). However, a review of the unchallenged facts and the entire insurance policy reveals the reason for the parties' differing constructions of the same language.

Initially, we contrast the 1944 decree with the exclusionary phrase "right of way for existing roads." The 1944 decree established a County right-of-way, 40 feet in width, transecting the Entire property. The decree describes the right-of-way by metes and bounds. In stark contrast, Transamerica's policy Lacks any specificity whatsoever in its attempt to exclude the same right-of-way. The policy is vague in three material respects: (1) it fails to legally describe the right-of-way; (2) it fails to incorporate the 1944 decree by reference or Otherwise ; and (3) it gives the policyholder no indication that the right-of-way, which Transamerica attempts to exclude, is a public one. In the place of precision based upon facts disclosed by the public records, the policy merely excludes a "right of way for existing roads" yet the only road "existing" is 10-15 feet wide extending between the county markers.

Partially because of the vague exclusionary language, there is no way to determine whether Transamerica was in fact referring to the county right-of-way established by the 1944 decree. This is particularly true in light of the general exception clauses also contained in Schedule B. Both subsections (1) and (2), by negative implication, provide coverage for public easements, streets, roads, alleys, highways, rights or claims which Are disclosed by public record. Here, the county's right-of-way was disclosed by public record and thus under the Policy's own language arguably is Completely insured.

Finally, another disparity arises if we examine the road as it actually was located on the property. The only road actually Existing on the property was between 10 and 15 feet in width...

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