NO. 95-099
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996
INSURED TITLES, INC . ,
now doing business as TRW,
Plaintiff and Respondent,
v.
LEE McDONALD,
Defendant and Appellant.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable John S. Henson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Nancy K. Moe; Ellingson & Moe, Missoula, Montana
Harold V. Dye; Dye Law Office, Missoula, Montana
For Respondent:
Gregory W. Duncan; Harrison, Loendorf & Poston,
Helena, Montana
Submitted on Briefs: January 4, 1996
Decided: January 30, 1996
Filed:
n
i
Clerk
Justice W. William Leaphart delivered the opinion of the Court.
Lee McDonald appeals from the Opinion and Order of the Montana
Fourth Judicial District Court, Missoula County, granting TRW's
motion for summary judgment determining that the exclusions to the
title insurance policy applied. We affirm.
We consider the following issues on appeal:
1. Did the District Court err in granting TRW's motion for
summary j udgrnent?
2. Did the District Court err in determining that Exclusion
No. 1 eliminated coverage in light of this Court's holding in
McDonald v. Jones?
This is McDonald's second appeal arising out of his interest
in certain real property located in the Seeley Swan Valley.
McDonald v. Jones (l993), 258 Mont. 211, 852 P.2d 588. Irene H.
Jones owned 12.63 acres of land in the Seeley Swan Valley. In
1981, Jones conveyed two acres of her land to Ownership of America
.
(Ownership) However, there was no agreement as to which two acres
of the 12.63 acre tract were to be conveyed. On April 13, 1981,
Jones executed a warranty deed conveying two acres to Ownership.
The deed contained the following land description:
That portion of Lot numbered Seven (7) of Section Six (6)
in Township Twenty (20) North of Range Sixteen (16) West
of Montana Principal Meridian, Montana, lying West of
Federal Aid Secondary 209 right-of-way and containingtwo
acres more or less and further accurately described by
plat on file with the party of the first part and party
of the second part. Party of the first part herein
reserves all minerals under the above description.
No plat was ever filed with the Missoula County Clerk and
Recorder, and the Clerk's office erroneously treated the conveyance
as a transfer of the entire 12.63 acre tract. The Missoula County
Treasurer changed the tax records upon recordation of the deed and
sent all further tax notices for the entire 12.63 acre tract to
Ownership. Ownership failed to pay any of the real property taxes.
Consequently, on July 20, 1983, Missoula County took a tax sale
certificate on the entire tract due to nonpayment of taxes. Jones
received no notice of the pending tax sale. On August 13, 1985,
prior to taking a tax deed to the entire tract, Missoula County
assigned its interest in the tax certificate to McDonald for
$738.92, which represented the unpaid taxes, interest and
penalties. On April 28, 1986 and on May 5, 1986, McDonald
published a notice for application for tax deed in the local
newspaper. The notice contained the following legal description
"[all1 of Gov't Lot 7 lying West of Federal Aid Secondary #209 R/W
in SW4 (Plat E) of 6-20N-16W, M.P.M." On August 27, 1986, the
Missoula County Treasurer executed a tax deed to McDonald as
grantee which contained the following legal description:
Book 163 page 228 SUID #I078409
Pt of Lot T W of R/W in SW 1/4 Plat E Section 6 Township
20 Range 16 12.63 Acres
That portion of Lot numbered Seven (7) of Section Six (6)
in Township Twenty (20) North of Range Sixteen (16) West
of Montana Principal Meridian, Montana, lying West of
Federal Aid Secondary 209 Right-of-wayand containing two
acres more or less and further accurately described by
Plat on file with the party of the first part and party
of the second part. Party of the first part herein
reserves all minerals under the above description.
McDonald filed a Notice of Claim of Tax Title in the Missoula
newspaper on August 25, 1986 and September 1, 1986. The legal
description in this notice was the same as in the application for
tax deed.
Ownership contacted McDonald and agreed to give him a quit
claim deed to the property. McDonald prepared the quit claim deed
and it contained a different legal description than that used in
the warranty deed from Jones to Ownership. The deed McDonald
prepared deleted all reference to the two acre limitation contained
in the Jones to Ownership warranty deed and the word "all" was
inserted at the beginning of the legal description. McDonald had
actual notice of the two acre limitation contained in the Jones to
Ownership deed but chose to ignore the limitation. McDonald
obtained a policy of title insurance from Insured Titles (now TRW) .
Although TRW's "chain of title sheet" references the Jones to
Ownership two acre sale, the policy purported to cover the entire
12.63 acre tract. McDonald asserted that under the policy TRW was
required to defend the entire 12.63 acre tract. In 1990, TRW filed
a complaint against McDonald for declaratory judgment seeking to
determine its duties under the title insurance policy. Motions for
summary judgment were submitted by both McDonald and TRW. McDonald
asserted that TRW had breached its title insurance policy and had
acted in bad faith. TRW contended that it had satisfied its duties
of defense and indemnity in negotiating a settlement in which it
agreed to secure a two acre parcel for McDonald. At that time,
however, the District Court did not rule on the motions due to the
pending appeal to this Court in the underlying case of McDonald v.
Jones. In McDonald v. Jones, McDonald was attempting to quiet
title in the entire 12.63 acre parcel. The district court granted
summary judgment in favor of Jones finding that the Jones to
Ownership deed was void. McDonald was unsuccessful in his bid to
quiet title in the 12.63 acre tract. We affirmed the district
court's determination that the Jones to Ownership deed was void and
that McDonald was entitled to none of the property.
Following our opinion in McDonald, the District Court
determined that the summary judgment motions were properly before
the court and that judicial notice could be taken of the underlying
case. The District Court determined that the exclusions of the
title insurance policy applied and, further, that McDonald
knowingly altered the legal description of the property thus
defeating coverage under the policy. Pursuant to Rule 59,
M.R.Civ.P.,McDonald filed a motion to amend this ruling. Although
the District Court ruled that the motion was time barred, the
District Court addressed the merits of his argument. McDonald
appeals from this determination. In his motion, McDonald asserted
that the issue of whether TRW breached its duty to defend was not
addressed in the District Court's order. McDonald argued that
TRW's voluntary filing of a quiet title action against Jones acted
as a judicial admission regarding TRW's duty to defend. TRW
countered that it undertook the quiet title action under a
reservation of rights and, upon later investigation, determined
that the policy exclusions had been triggered and, therefore, that
TRW was justified in withdrawing from the quiet title action
1. Did the District Court err in granting TRW's motion for
summary judgment?
In reviewing a district court's grant of summary judgment we
use the same criteria as that used by the district court; we are
guided by Rule 56, M.R.Civ.P. Chilberg v. Rose (Mont. 1995), 903
P.2d 1377, 1378-79, 52 St.Rep. 1038, 1039 (citing Minnie v. City of
Roundup (1993), 257 Mont. 429, 431, 849 P.2d 212, 214). Thus, we
determine whether a genuine issue of material fact exists and
whether the moving party is entitled to judgment as matter of law.
Chilberq, 903 P.2d at 1378-79. In the instant case, the facts of
this dispute regarding the transactions and the chain of title were
fully resolved in the underlying case of McDonald v. Jones.
McDonald asserts that even assuming the District Court were
correct in its determination regarding Exclusion No. 1 of the title
insurance policy, which would exclude coverage because of the
violation of the subdivision and platting act, genuine issues of
material fact regarding TRW's alleged breach of its independent
duty to defend title should have precluded the grant of summary
judgment. We note that if the asserted claim is not covered by the
policy, then the insurer has no duty to defend the insured. City
of Bozeman v. AIU Ins. Co. (1993), 262 Mont. 370, 376, 865 P.2d
268, 272-73; New Hampshire Ins. Group v. Strecker (1990), 244 Mont.
478, 480, 798 P.2d 130, 132. As McDonald himself points out, an
insurer may step out of a suit once it clearly and unequivocally
demonstrates that the plaintiff's claim against the insured no
longer falls within the policy's coverage. Burns v. Underwriters
Adjusting Co. (1988), 234 Mont. 508, 510, 765 P.2d 712, 713;
Babcock & Wilcox Co. v. Parsons Corp. (8th Cir. 1970), 430 F.2d
531, 538. Further, TRW argues that the case does not involve a
duty to defend, rather, it involves TRW's prosecution of a quiet
title action on McDonald's behalf. We conclude that the District
Court did not err in determining that by negotiating the two acre
settlement with Jones, TRW had satisfied its obligations under the
policy and that it did not breach its duties. McDonald himself
altered the legal description of the property and that alteration
was at the heart of this dispute. No material issues of fact
existed, and the District Court was correct in concluding that TRW
had satisfied its obligations under the policy.
2. Did the District Court err in determining that Exclusion
No. 1 eliminated coverage in light of this Court's holding in
McDonald v. Jones?
In the underlying case of McDonald v. Jones, TRW provided
counsel under a reservation of rights. Condition and stipulation
3(c) of the title insurance policy provided that TRW had the option
to pay or otherwise settle any claim asserted against an insured.
Based on its investigation, TRW concluded that, at most, McDonald
was entitled to two acres. TRW presented McDonald with the offer
of two acres, or the fair market value of the two acres. However,
McDonald refused TRW's offer. Once TRW tendered this offer and
McDonald refused, TRW determined that it had satisfied its
obligations under the policy.
After TRW determined that it had satisfied its obligations
under the title insurance policy, TRW filed its declaratory
judgment action seeking a determination that the exclusions to the
policy had been triggered by McDonald's conduct. McDonald asserts
that Exclusion No. 1 was improperly invoked. Exclusion No. 1 of
.
the policy excepted coverage for:
Any law, ordinance or governmental regulation (including
but not limited to building and zoning ordinances)
restricting or regulating or prohibiting the occupancy,
use or enjoyment of the land, or regulating the
character, dimensions or location of any improvement now
or hereafter erected on the land, or prohibiting a
separation in ownership or a reduction in the dimensions
or area of the land, or the effect of any violation of
any such law, ordinance or governmental regulation.
As this Court noted in McDonald, in the Jones to Ownership
conveyance a separation in ownership or a reduction in the
dimensions or area of the land had occurred in violation of the
Montana Subdivision and Platting Act. Thus, under Exclusion No. 1,
a violation of the Montana Subdivision and Platting Act would be
sufficient to defeat coverage under the policy
Additionally, in its Opinion and Order the District Court
stated that "all of these [exclusions and conditions], singularly
or taken as a whole, are sufficient to invoke the exclusions to
coverage under the policy." Exclusion No. 3 of the policy
excepted coverage for:
Defects, liens, encumbrances, adverse claims, or other
matters (a) created, suffered, assumed or agreed to by
the insured claimant; (b) not known to the company and
not shown by the public records but known to the insured
claimant either at date of policy or at the date such
claimant acquired an estate or interest insured by this
policy and not disclosed in writing by the insured
claimant to the company prior to the date such insured
claimant became an insured hereunder; (c) resulting in no
loss or damage to the insured claimant; (d) attaching or
created subsequent to date of policy; or (e) resulting in
loss or damage which would not have been sustained if the
insured claimant had paid value for the estate or
interest insured by this policy.
The District Court concluded that "McDonald is not a bona fide
purchaser for value. McDonald admits to having actual notice of
the two acre limitation . . . . Furthermore, McDonald paid no
consideration to Ownership of America in exchange for the quit
claim deed." Thus, as the District Court determined, even if
Exclusion No. 1, which would exclude coverage because of the
violation of the subdivision and platting act, were improperly
invoked against McDonald, exclusion 3(b) applied because although
the warranty deed was deficient in designating which two acres of
the parcel were to be severed, the deed clearly put McDonald on
notice of the two acre limitation. Further, the court noted that
exclusion 3(a) applied because McDonald's alteration of the legal
description illustrated his knowledge of the discrepancy regarding
the size of the parcel and demonstrated that the defect in the
description was one "created, . . . or agreed to by the insured
claimant."
Next, McDonald argues that the "independent concurrent cause"
doctrine provides for coverage because this Court "invalidat[ed]
the Jones-Ownership of America warranty deed on two independent
grounds: uncertainty and violation of the Montana Subdivision and
Platting Act. " McDonald asserts that where there are multiple
possible grounds for coverage for a single happening, then coverage
exists if any of the grounds are valid. However, the uncertainty
that originated this dispute resulted from the failure to comply
with the Montana Subdivision and Platting Act. Thus, the two
causes are not independent causes, rather, they are interdependent
causes. As the District Court noted, "the deeds were void due to
operation of law, stemming from the initial failure to comply with
the Montana Subdivision and Platting Act."
Finally, McDonald asserts that Exclusion No. 1 conflicts with
§ 33-25-214,MCA, and that the "efficient proximate cause doctrine"
provides for coverage. However, McDonald failed to properly raise
these issues at the District Court. Issues not properly raised at
the District Court will not be considered on appeal. Accordingly,
we decline to address these issues for the first time on appeal.
Marsh v. Overland (Mont. l995), 905 P.2d 1088, 1093, 52 St.Rep.
1099, 1102 (citing Lane v. Smith (1992), 255 Mont. 218, 221, 841
P.2d 1143, 1145) .
We hold that the District Court properly determined that there
were no genuine issues of material fact and that TRW was entitled
to judgment as a matter of law.
Affirmed.
We concur:
Justices
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