Title: Ruby Drilling Co., Inc. v. Title Guar. Co. of Wyoming, Inc

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Ruby Drilling Co., Inc. v. Title Guar. Co. of Wyoming, Inc1988 WY 15750 P.2d 674Case Number: 87-71, 87-72Decided: 02/18/1988Supreme Court of Wyoming
RUBY DRILLING CO., INC., 
A WYOMING CORPORATION, APPELLANT (PLAINTIFF),

v.

THE TITLE GUARANTY 
COMPANY OF WYOMING, INC., A WYOMING CORPORATION, APPELLEE (DEFENDANT), CAMPBELL 
COUNTY ABSTRACT COMPANY, (DEFENDANT).

THE TITLE GUARANTY 
COMPANY OF WYOMING, INC., A WYOMING CORPORATION, APPELLANT 
(DEFENDANT),

v.

RUBY DRILLING CO., INC., 
A WYOMING CORPORATION, APPELLEE (PLAINTIFF), CAMPBELL COUNTY ABSTRACT COMPANY, 
(DEFENDANT).

Appeal from the District 
Court, CampbellCounty, Timothy J. Judson, 
J.

Peggy Taylor 
Pfau of Daly, Maycock, Anderson and Taylor, P.C., Gillette, for Ruby Drilling Co.

Barry G. 
Williams of Williams, Porter, Day & Neville, P.C., Casper, for Title Guar. Co. of Wyoming, 
Inc.

Before THOMAS, CARDINE, URBIGKIT and MACY, JJ., 
and GRANT, District Judge.

URBIGKIT, 
Justice.

[¶1.]     Reciprocal appeals were 
filed in title insurance litigation resulting from a real estate installment 
sale - unpaid well-drilling charge/purchase default controversy. With stated 
issues of denied insurance company defense, questioned damages and judgment lien 
encumbrance on equitable title purchase interest resulting in a trial decision 
adverse to plaintiff, we note the nature of this action as complicated, and this 
court's adjudicative result of affirmance on both appeals.

[¶2.]     Appellant Ruby Drilling 
Co., Inc. (Ruby), as the written assignee of an alleged claim against a local 
title agency and parent underwriter, Title Guaranty Company of Wyoming, Inc. 
(Title Guaranty), details its appeal issues as:

"1. DID THE TRIAL COURT 
ERR IN CONSTRUING THE CONTRACT TO FIND APPELLEE-DEFENDANT WAS NOT PROVIDED 
SUFFICIENT NOTICE TO DEFEND BECAUSE OF A SETTLEMENT WHICH CAME AFTER THE NOTICE 
AND FURTHER ERR BY FINDING THAT BREACH OF DUTY TO DEFEND COULD NOT BE 
HEARD?

"2. DID THE TRIAL COURT 
ERR IN FINDING APPELLANT-PLAINTIFF'S ASSIGNOR HAD SUFFERED NO DAMAGES BECAUSE OF 
A SETTLEMENT NOT MADE OR ENTERED INTO FOR THE BENEFIT OF THE INSURANCE 
COMPANY?"

Title Guaranty 
trends the issues to an evidentiary context:

"1. Was there substantial 
evidence to support the Trial Court's finding that the Appellee Title Guaranty 
was not given timely notice to allow it to enter a defense or otherwise 
participate in the resolution of the dispute between the Rodnes and Appellant in 
Civil Action No. 13904 in the District Court, Sixth Judicial District, 
Campbell County, Wyoming?

"2. Did the Trial Court 
err in finding that the Rodnes suffered no damage?"

[¶3.]     Title Guaranty, 
successful in the trial court and now cross-appellant, asks this court as 
similarly but positively stated by Ruby as appellee:

"I. DID THE TRIAL COURT 
ERR IN NOT GRANTING THE APPELLANT-DEFENDANTS' MOTION FOR SUMMARY JUDGMENT IN THE 
FOLLOWING PARTICULARS:

"a. Failure to find that 
coverage under the title insurance policy terminated pursuant to Paragraph 2 of 
the Conditions and Stipulations of the policy;

"b. Failure to find that 
coverage under the title insurance policy terminated pursuant to Paragraph 7 of 
the Conditions and Stipulations of the policy.

"II. DID THE TRIAL COURT 
ERR IN ITS RULINGS THAT A JUDGMENT LIEN EXISTED ON THE PROPERTY WHEN MR. AND 
MRS. RODNE ENTERED INTO A CONTRACT FOR DEED FOR THE PURCHASE OF THE 
PROPERTY?"

[¶4.]     In favoring Title 
Guaranty in the Ruby appeal, we will not consider the diligently argued but 
academic concerns of the now moot cross-appeal.

FACTS

[¶5.]     In order to understand 
this "well" litigation, the pleaded issues first need understanding. Appellant 
Ruby as property purchase-interest assignee, sued the local title agency as well 
as the parent underwriter, Title Guaranty, for $30,000 as the title insurance 
policy face amount for damages from a claimed insured title defect derived from 
a judgment lien obtained by Ruby against a defaulting prior purchaser. In his 
conclusions of law, the trial court stated:

"(1) Pursuant to the 
terms of the insurance policy issued by defendant [Title Guaranty], sufficient 
notice was not provided in order to allow them to enter into the defense of the 
lawsuit.

"(2) By the terms of the 
settlement agreement, the Rodnes [second purchasers or property 
purchase-interest assignor] were made whole by repayment of the purchase price 
for the down payment and the installments on the purchase price that they 
made."

[¶6.]     In 1982, Ruby drilled a 
water well for Kevin and Cheryl Hance on property being purchased by an 
installment contract from the subdivision developer, Landex Corporation. The 
Hances did not construct a residence on the property and did not pay for the 
well, nor did they maintain payments on the installment contract.1 Effectuating the forfeiture 
attributes of the installment contract, Landex "repossessed" the vacant tract, 
as improved by the well, and arranged a $30,000 resale to Leif and Genice Rodne, 
which sale closed on April 6, 1984. Some two months earlier, Ruby had obtained a 
district court default judgment against the Hances, then residing in Montana, on an 
open-account claim for the well drilling bill of $15,106. Immediately after the 
Rodnes closed, they moved a newly purchased house trailer onto the property, and 
then, returning to the tract within a few days, discovered that the well 
equipment had been removed and the well filled with dirt. Ruby, although it had 
obtained the judgment, now at a later time and without permission had gone onto 
the property, removed the equipment and "deactivated" the well which it had 
previously drilled.

[¶7.]     Not surprisingly, on 
discovering the destroyed well, which ended plans to move onto the property into 
the trailer from a rental then expiring, Rodnes not only screamed, but sued, 
including as defendants both Ruby and Landex. The litigation, with cross-claims, 
rapidly moved forward for a trial scheduled in mid-summer. Some time between 
filing of the suit and trial date, Title Guaranty received "notice" of a claim, 
which in itself has a curious dimension since neither Title Guaranty nor its 
insured were named as a party defendant (cross-claimant, counterclaimant, or 
third-party defendant) in the litigation. With regard to Ruby, Rodnes had 
alleged:

"10. That on or about 
April 10, 1984 the defendant Dale Ruby and the defendant Ruby Drilling, Inc. 
through its employees trespassed on the property without the permission of the 
plaintiffs and rendered the water well unusable by removing various portions of 
the well, including the pump and wiring, and by backfilling the remaining water 
well casing with dirt.

* * * * * 
*

"13. That the plaintiff 
Dale Ruby and the defendant Ruby Drilling, Inc. have willfully, wantonly and 
purposely stolen portions of plaintiffs' water well rendering it unfit for use 
thus causing damage to the value of the plaintiffs' real property and depriving 
plaintiffs of the use of their property."

As to 
Landex:

"17. Defendant Dale Ruby 
and defendant Ruby Drilling, Inc. claim that the defendant Landex, as the record 
owner of the property, acquiesced to the drilling of the well by the defendant 
Ruby Drilling, Inc. and that portions of the well were removed pursuant to 
defendant Landex's refusal to pay for the cost of the water well improvement to 
the property. 

"18. That should the 
position of defendant Dale Ruby and defendant Ruby Drilling, Inc. be upheld, 
then the plaintiffs will not have received what they bargained for in purchasing 
the property. The defendant Landex's classified ad specified that the property 
was improved with a `well' and the Warranty Deed executed on April 6, 1984 
includes `all improvements situate thereon'. The water well was an improvement 
on the property as of the date of closing."

[¶8.]     The complaint did not 
allege an insured title defect; but perforce, the answer of Ruby, in 
justification of its malicious damage, alleged a judgment lien on the real 
property by virtue of the default judgment obtained against Hances. How that was 
to serve as a defense to the criminal and tortious trespass or 
property-destruction act is not clarified in pleading. Ruby also crossclaimed 
against Landex, alleging unjust enrichment arising from the Rodne sale at a 
price higher than the original sale to Hance by virtue of the well (as now 
destroyed) for which Ruby had not been paid. The gravamen of the next lawsuit as 
now here on appeal arises from this contention of Ruby that its crossclaim and 
defense created a duty of Title Guaranty to defend Rodnes, created by title 
insurance issued for Rodne as insured purchaser.

[¶9.]     Before the immediately 
scheduled trial, and before Title Guaranty had made any final arrangements for 
disclaimer or defense, the Rodne/Ruby/Landex lawsuit was settled by an 
assignment by Rodne of the installment contract to Ruby, the Landex reduction in 
sale price by approximately $11,000 to a total amount of $18,739.01, which was 
the balance that would have remained in the event the Hance contract had 
remained in full force and effect. Ruby paid $4,000 to Rodne, 
and:

"3. Rodnes agree to, and 
do hereby, assign and convey unto Ruby all of their right, title and interest in 
said contract for deed and shall be relieved of all further obligations and 
liabilities with regard to said agreement.

"4. Said agreement for 
deed shall hereafter be between Landex as seller and Ruby as buyer and said 
agreement for deed shall be, and it hereby is, amended and modified to provide 
that the total purchase price shall be $18,739.01 and said purchase price shall 
bear interest at the rate of 13% per annum and shall be payable in equal monthly 
installments, including principal and interest, of $280.00 each, beginning on 
the 25th day of July, 1984, and on the 25th day of each month thereafter until 
April 1, 1994, at which time the entire remaining unpaid balance of the purchase 
price, together with all interest due thereon, shall be due and payable in 
full.

"5. Ruby and Landex agree 
that they shall place in escrow appropriate warranty deeds and quitclaim deeds 
along with escrow instructions pursuant to the provisions of said Agreement for 
Sale of Real Property assigned hereunder and that all of the terms and 
provisions of said agreement for sale shall be binding upon the parties hereto, 
provided that Landex shall be under no obligations to provide title insurance to 
Ruby for said Lot 26 and further provided that Ruby shall have the right to 
assign said contract for sale to third persons, provided that Ruby shall 
continue to remain liable for the performance of all obligations under said 
agreement, including the payment of all payments when due.

"6. Rodnes shall, and do 
hereby, assign unto Ruby all right, title and interest in and to that certain 
title insurance policy issued by the Title Guaranty Company of Wyoming, Inc. on 
Lot 26 of the Red Rock Estates, Campbell County, Wyoming, policy # 17-7370-0. In 
the event that Ruby shall receive any funds from said Title Guaranty Company 
pursuant to a claim upon said policy, either as a result of litigation or 
settlement, Rodnes shall have the right to receive the first $1,000 of any 
amount collected.

"7. Rodnes agree to 
dismiss their complaint against Ruby and Landex with prejudice and Landex and 
Ruby agree to dismiss their cross-claims against each other with prejudice. All 
of the parties hereto further release each other from all claims, demands or 
liabilities arising, either directly or indirectly, out of or on account of the 
subject matter of this litigation, including without limitation, the warranty to 
the title to real property to Lot 26 of the Red Rocks Estates and the title 
insurance policy issued thereon as described above. It is the intent of this 
Settlement Agreement and Release that all of the parties hereto will be made 
whole as the result of this settlement and that neither party shall have a claim 
nor a right against any of the other parties, either directly or indirectly, 
hereafter. This Agreement and Release shall be for the benefit of and shall be 
binding upon the parties hereto and their heirs, successors and 
assigns.

"8. Ruby agrees that he 
shall refrain from execution upon the judgment against Hance in Civil Action # 
13199, Campbell County, Wyoming, against Lot 26 
of the Red Rocks Estates."

[¶10.]  This lawsuit seasonably followed by Ruby 
against Title Guaranty and the local agency, with pleading for a damage recovery 
in the amount of the $30,000 title policy. Answers, in addition to a general 
denial, asserted five affirmative defenses.2 Ruby made an extensive argument 
before the trial court, and again here, that the title company violated a "duty 
to defend." Rodne, from the answer filed by Ruby and consequent assignment from 
Rodnes, transferred that right in assigned collectable damage. Additionally, 
appellant asserts that the amount of the default judgment against Hance 
constituted a valid lien against the legal title ownership of Landex, and that 
by virtue of the title policy issued to Rodne, Ruby, as the assignee, was 
entitled to recover even though the settlement agreement released rights against 
the purchase interest which they had acquired. Finally, a contentive thread is 
discernible, even though the validity of any contended lien was never determined 
and a settlement resulted which essentially transferred the property to Ruby at 
a value which removed any attribution of the value of the well or the cost of 
drilling the well, that the unpaid well drilling bill should constitute a 
determinable element of damages, despite the prior litigation 
settlement.

[¶11.]  In declining to either expand or define 
the intrinsic title principles and insurance questions which can be 
extrapolated, or even to reflect on the question of whether a tortfeasor can 
recover from an insurance company for the effect of its own tortious conduct by 
assignment from the injured party, we simply affirm the determination that no 
damages were shown, even if the title insurance policy might be assignable (not 
determined), or there was a title defect (not concluded), or even if a duty to 
defend someone was created and then violated in undefined dollar damage. Had 
Ruby executed on its default judgment pursuant to § 1-17-414, W.S. 1977 
providing for sale of a judgment debtor's equitable or other interest in realty, 
all they could have reached was the defaulted status of the buyer, which 
obviously had little discernable value. The settlement agreement provided them 
exactly what they could have gotten, which was the opportunity to pay off the 
property at the same remaining value as it could have been acquired by an 
equitable execution process.3 If in fact there was a title 
problem, that problem was resolved when Ruby got the property at exactly the 
same terms as it could have acquired the property in the event that it had 
proceeded through execution sale. Equity for execution was only available, 
provided as an unproven fact on this record that the executory installment 
contract was still in effect in any fashion when judgment was obtained. We 
concur with the trial court that no recoverable damages were proved by 
appellant, and consequently affirm.4 Willmschen v. Meeker, Wyo., 750 P.2d 669 
(1988). To the extent that a sufficiency-of-the-evidence context is presented, 
there is proper and adequate evidence under our normal appellate rules to 
affirm. Hance v. Straatsma, 
Wyo., 721 P.2d 575 
(1986).

[¶12.]  Affirmed.

FOOTNOTES

1 Used was a typical 
Wyoming real 
estate installment contract with escrowed deed for conveyance to buyer to be 
delivered upon payment in full, and a quitclaim deed to seller deliverable to 
evidence transaction termination upon default. This type of transaction, 
colloquially but imprecisely referred to as contract for deed, is an installment 
contract with equitable title transfer and seller-retained legal title until 
completion of payments to be followed with conveyance. In accord with the more 
carefully arranged installment contracts, a notice document was filed to 
evidence the existence of the executory sales transaction. Upon default, the 
quitclaim deed is released from escrow and recorded to authenticate a forfeiture 
by a recordable instrument to clear record title.

2 It takes some hard 
looking and thinking to understand how Ruby expected to recover from an 
assignment of a claim arising from its own tortious conduct. The concept of 
merger is also presented if the claim sounded in title defect after contract 
assignment to Ruby who, if there was a title defect, was the "owner" of that 
claim and could not consequently owe or execute against itself, and particularly 
so after the release of rights of execution on the property in settlement 
agreement. Bolln v. La Prele Live Stock Co., 27 Wyo. 335, 196 P. 748 
(1921).

3 Although unannounced in 
complaint, there was another thread of contention in trial-court memoranda, 
appellate brief, and oral argument that the assignment of "all right, title and 
interest they have in any claims against Campbell County Abstract, The Title 
Guaranty Company of Wyoming, Inc., and any and all parties responsible for 
failure of title under that certain policy" invoked more claim than title 
insufficiency as obtained by assignee, such as unsettled legal fees and 
miscellaneous damage, since a failure to defend caused Rodne to settle. In this 
regard, the cash settlement to Rodnes was not proved to be less than their title 
insurance damages, even if, as here undecided, such an unliquidated claim was 
assignable.

4 We will leave for 
inquiry in a future case the interesting concept that a tortfeasor can settle 
with the claimant and take an assignment for the purpose of recovery of 
intangible losses sustained by virtue of the tortfeasor's conduct. Likewise, one 
piece of indispensable evidence is missing from this record for even this court, 
by first-time review, to determine whether any equitable interest of the first 
buyer existed at the date of entry of the default judgment so that a lien could 
result. The file does not show when notice of termination and forfeiture was 
given by Landex to Hance. Consequently, the recording of the quitclaim deed is 
of little significance if appropriate written notice under the terms of the 
installment contract, which in itself is not of record, had been earlier given. 
Neither a representative of Landex nor the Hances testified in this trial, and 
it is not possible to determine what did occur. The obvious losers in the 
transaction were Rodnes, by inconvenience and disturbance, as well as from loss 
in resale of the purchased house trailer for which they were paid $4,000, in 
part, and Landex, which lost the difference between the Rodne sale price and the 
reduced amount to be paid by Ruby. Ruby got the property for its apparent value 
after they had destroyed the well.