Worthey v. Sedillo Title Guaranty, Inc.

• Decision Date: 20 July 1973
• Docket Number: No. 9603,9603
• Parties: Louie L. WORTHEY and Mildred E. Worthey, Plaintiffs-Appellants, v. SEDILLO TITLE GUARANTY, INC., and American Title Insurance Company, a corporation, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 667

512 P.2d 667

85 N.M. 339

Louie L. WORTHEY and Mildred E. Worthey, Plaintiffs-Appellants, v. SEDILLO TITLE GUARANTY, INC., and American Title Insurance Company, a corporation, Defendants-Appellees.

No. 9603.

Supreme Court of New Mexico.

July 20, 1973.

Gallagher & Ruud, David R. Gallagher, Albuquerque, for plaintiffs-appellants

Modrall, Sperling, Roehl, Harris & Sisk, Joseph E. Roehl, Bruce D. Black, Albuquerque, for defendants-appellees.

OPINION

OMAN, Justice.

This is an appeal by plaintiffs from a judgment entered in favor of defendant, American Title Insurance Company, hereinafter called Title Company, and dismissing plaintiffs' complaint against this defendant. The judgment was entered pursuant to the provisions of Rule 41(b), Rules of Civil Procedure (§ 21--1--1(41)(b), N.M.S.A.1953 (Repl. Vol. 4, 1970)), after plaintiffs had completed the presentation of their evidence at trial. We affirm in part and reverse in part.

Defendant, Sedillo Title Guaranty, Inc., hereinafter called Sedillo, was the Title Company's agent in Albuquerque and actually sold and delivered to plaintiffs a mortgagee policy of title insurance on the Title Company's form. Plaintiffs were insured under the policy against loss up to the amount of $10,000, which is the amount plaintiffs loaned the mortgagor in July 1966.

It developed that an instrument evidencing a prior lien on the real estate was in existence and of record. The record of this prior lien was either overlooked by Sedillo, or for some other reason was not mentioned in or excepted from coverage under the policy. The mortgagor became delinquent on the indebtedness secured by the mortgage lien to plaintiffs. Plaintiffs' attorney, some time before March 8, 1967, learned of the existence of the prior lien. On March 8, 1967, plaintiffs filed suit to foreclose their lien, and the holder of the prior lien was named as one of the defendants. These foreclosure proceedings were concluded by a judgment and decree in which it was determined and adjudicated that the prior lien constituted the first, prior and paramount lien upon the real estate, and plaintiffs' mortgage lien constituted a second and inferior lien thereon. The property was subsequently sold at a foreclosure sale and the proceeds thereof applied on the indebtedness secured by the prior lien.

Plaintiffs then brought the present suit against the Title Company and Sedillo. Judgment was entered for the Title Company but against Sedillo, and, as above stated, plaintiffs have appealed from the judgment entered for the Title Company. They rely upon four separately stated points for reversal, and these points will be considered in the order of their presentation in the brief in chief.

The first is that:

'The judgment below is erroneous for the reason that the defendant American Title Company did not establish that it was prejudiced by any failure of the insured to comply with any notice conditions of the policy, nor did it establish, if it were prejudiced, the extent of such prejudice.'

Insofar as plaintiffs' position under this point is concerned, it is assumed they failed to comply with the notice provisions of the policy. The two issues presented are:

(1) Was there evidence to support the trial court's findings to the effect that plaintiffs' failure to notify the Title Company prejudiced it?

(2) If there was actual prejudice to the Title Company, was the extent of such prejudice proven?

Upon dismissal of a plaintiffs' case under Rule 41(b), supra, the trial court weighs the evidence and gives to it such weight as the court believes it deserves. Komadina v. Edmondson, 81 N.M. 467, 468 P.2d 632 (1970); Giles v. Canal Insurance Company, 75 N.M. 25, 399 P.2d 924 (1965). On appeal the evidence will be examined by the appellate court only to the extent necessary to determine whether it gives substantial support to the trial court's findings. Giles v. Canal Insurance Company, supra. In making this determination, the evidence will be viewed in its most favorable light to support the findings, and evidence inconsistent with or unfavorable to the findings will be disregarded. Trujillo v. Romero, 82 N.M. 301, 481 P.2d 89 (1971); Giles v. Canal Insurance Company, supra. Substantial evidence is that relevant evidence which is acceptable to a reasonable mind as adequate support for a conclusion. State ex rel. Reynolds v. Lewis, 84 N.M. 768, 508 P.2d 577 (1973); State Farm Mutual Automobile Ins. Co. v. Gonzales, 83 N.M. 296, 491 P.2d 513 (1971). Only the trier of the facts may weigh the evidence, determine the credibility of the witnesses, reconcile inconsistent or contradictory statement of a witness or of witnesses, and decide where the truth lies. State ex rel. Reynolds v. Lewis, supra.

The notice provision in the policy with which we are here concerned provides in pertinent part:

'* * * provided, however, that failure to notify shall in no case prejudice the claim of any insured unless the Company shall be actually prejudiced by such failure and then only to the extent of such prejudice.'

The first notice by plaintiffs to the Title Company at its home office, as expressly required by the policy, was not received until eighteen months after plaintiffs' complaint had been filed and over a month after judgment had been entered adversely to the plaintiffs in the foreclosure suit to which reference is above made. The Title Company was thereby denied its rights under the policy to defend against the claims of the prior lienhoder and to make timely efforts to recover under its right of subrogation from the mortgagor, or from other who might well have been involved in what appears to have been a fraudulent scheme. The Title Company had the right to protect the title it insured and also to mitigate its damages. Stewart Title G. Co. v. Lunt L. Co., 162 Tex. 435, 347 S.W.2d 584 (1961).

Without trying to detail the chain of events over a period of about eighteen months in court, or what the evidence clearly suggests might have been accomplished by the Title Company in defending plaintiffs and, thus, itself, against liability under the policy of insurance, or in mitigating its possible loss, we are convinced the evidence does substantially support the findings by the trial court that the Title Company was actually prejudiced by plaintiffs' failure to give it notice within the time and at the place required by the policy.

As to the extent of such prejudice, the Title Company made no request for a finding on this issue. Plaintiffs requested a finding that if '* * * prejudice did result to the American Title Company by the absence of such formal written notice, the extent of such prejudice was never established.'

We agree with plaintiffs that the prejudice with which we are here concerned is prejudice measured in terms of money, since the Title Company's obligation under its policy was expressed in terms of dollars. Plaintiffs have asserted, the Title Company takes no issue therewith, and we agree that the burden was on the Title Company to establish actual prejudice to it and the extent of such prejudice. It failed to establish the extent thereof, or at least there was no finding as to the extent.

The Title Company has suggested that a reasonable inference to be drawn from the evidence is that the prejudice sustained by it equalled or exceeded the maximum amount of its liability under the policy. Even if there were evidence from which this inference might reasonably be drawn, it is not for us to draw such an inference. As indicated above, it is for the trial court to determine all issues of fact. The failure of the trial court to make a finding on this material issue of fact would ordinarily be regarded on appeal as a finding against the Title Company, upon whom rested the burden of proof thereon. Gibbons and Reed Company v. Bureau of Revenue, 80 N.M. 462, 457 P.2d 710 (1969); Tsosiev. Foundation Reserve Insurance Company, 77 N.M. 671, 427 P.2d 29 (1967); Begay v. First National Bank of Farmington, 84 N.M. 83, 499 P.2d 1005 (Ct.App.1972).

However, the refusal of the trial court to make plaintiffs' requested finding on this issue would ordinarily be regarded on appeal as a finding against plaintiffs. Gallegos v. War, 78 N.M. 795, 438 P.2d 636 (1968). See also Clark v. Foremost Insurance Co., 80 N.M. 584, 458 P.2d 836 (Ct.App. 1969).

In any event, it is obvious the tria court declined to find this issue in favor of plaintiffs, and it failed to find thereon in favor of the Title Company. This essential factual issue has not been decided. Thus, the judgment must be reversed and the cause remanded for further proceedings upon the issue of the extent of prejudice.

In their second point, plaintiffs assert that:

'The actual knowledge of the title defect received by the Title Company's agent constituted a compliance with the policyholder's notice requirement.'

The following is the pertinent finding of the trial court as to notices given by plaintiffs of the adverse claims:

'7. On March 8, 1967, and prior thereto, plaintiffs knew of adverse claims but gave no notice nor statements required by the policy. In April and May, 1967, plaintiffs gave oral and written notice to Sedillo Title Guaranty, Inc. In said Cause numbered A 25709 (the foreclosure suit filed by plaintiffs on March 8, 1967), the defendant, Virgil Justice filed answer on June 2, 1967, together with counterclaim and cross-claim alleging a mortgage prior in time dated July 14th and recorded July 19, 1966, which mortgage was subsequently decreed to be found prior in time to that of plaintiffs. Partial judgment was entered of record on September 26, 1967; deposition of Justice was taken December 8, 1967, trial on the merits was held February 20, 1968, deposition of Milburn E. Nutt, Trustee, was taken in May, 1968, the Trial Court rendered its opinion by letter of June 14, 1968, and supplemental decree of foreclosure was filed August 1, 1968. Plaintiffs gave no...