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Parties Involved:
American Savings and Loan Association
Appellee
Title Insurance Company of Minnesota
Appellant

Document Text:

PUBLISH .FILED 

Umted Staws Court of Appeals 

'Tenth Circuit 

UNITED STATES COURT OF APPEALS JAN 311999 

ROBERT L. HOECKER 

Clerk 

TENTH CIRCUIT 

TITLE INSURANCE COMPANY OF MINNESOTA, ) 

a Minnesota corporation, ) 

) 

Pl aintiff-Appellant, } 

) 

v. ) 

) 

AMERICAN SAVINGS AND LOAN ASSOCIATION, ) 

a california corporation, individually ) 

and as successor in interest to STATE ) 

SAVINGS & LOAN ASSOCIATION, a ) 

Cal i fornia corporation, } 

) 

Defendant-Appellee. ) 

No. 87-1493 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 86-K-468) 

Debo rah A. Sperlak (Edward B. Towey and J. Scott Needham with her 

on the brief) of Loser, Davies, Magoon & Fitzgerald, Denver, 

Colorado, for Plaintiff-Appellant. 

Roger P. Thomasch (Mark Wielga with h i m on the brief), of Ball ard, 

Spahr, Andrews & Ingersoll, Denver, Colorado, for DefendantAppellee. 

Befor e LOGAN, LEAVY,* and BRORBY, Circuit Judges. 

*The Honorable Edward Leavy, Circuit Judge, United States Court of 

Appeals for the Ninth Circui t , sitting by designation. 

PER CURIAM. 

Appellate Case: 87-1493 Document: 01019724004 Date Filed: 01/31/1989 Page: 1 
Ti tle Insu rance Company of Minneso ta (Title ) commenced this 

declarato.ry judgmen t action , with jurisdiction based on diversity 

of citi zensh ip , seeking a bench rul ing that certa in title 

insurance policies it issued did not require it to defend o r 

indemni fy American Savings and Loan Association (American) in 

American's capacity as a third-party defendant in a state court 

ac tion . The district court held that, as a matter of law, Title 

had a du t y to defend under the policies. 

The facts of th is case are not in dispu te. Ameri can's 

predecessor in interest, Stat e Savings & Loan Association (Stat e 

Savings) made loans o n ce rtain condominium units in Colorado 

secured by a deed of trust on each unit. These deeds of trust 

wer e ins ured by utilizing standard form title insurance policies 

purchased from Titl e. American , as the successor in interest to 

State Savings, eventually foreclosed on the properties and then 

assigned its interest to a subsidiary which brought suit aga inst 

the bo rrowers i n a Col orado state court to recover defici e ncy 

j udgments. Some of the borrowers filed a third-party complaint 

aga inst American alleg ing that, among other things, the loans were 

ill egal and void under Colo. Rev. Stat . § ll-43-101 (Repl. Vol . 

1987). American, relying on the te rms of the title insurance 

policies, made demand on Title to defend and indemnify . Title 

denied coverage and then commenced t his action. 

In the district court , Title moved for summary judgment 

relying on paragraph 4 of the "exclusions from coverage" provision 

of the policies which states as follows : 

2 

Appellate Case: 87-1493 Document: 01019724004 Date Filed: 01/31/1989 Page: 2 
The following matters are expressly excluded from 

coverage of this policy: ••• 4. Unenforceability of 

the lien of the insured mortgage because of failure of 

the insured at Date of Policy or of any subsequent owner 

of the indebtedness to comply with applicable "doing 

business" laws of the state in which the land is 

situated. 

Title argued that § 11-43-101 is a ''doing business" law within the 

meaning of the exclusion and American's alleged violation of that 

statute warranted no coverage. American filed a cross motion for 

summary judgment challenging the constitutionality of the statute. 

Colo . Rev. Stat. § 11-43-101 states, in full: 

Any foreign savings and loan association which conducts 

a savings and loan business as defined in section 

11-40-103 shall not sell its shares or accounts or make 

new loans in this state. Violation of this section 

shall subject the offender and its officers, agents, and 

representatives, upon conviction thereof, to a fine of 

not more than five hundred dollars, or to imprisonment 

in the county jail for not more than six months, or to 

both such fine and imprisonment, and each separate 

business transaction in violation of this section shall 

constitute a separate offense; but nothing in this 

section shall be construed to prohibit a foreign 

association from transacting business in respect to 

executory contracts in force on May 17, 1939. 

The district court declined to consider the constitutional ity 

of § 11-43-101 and denied Title's motion for summary judgment, 

holding that the statute is not a "doing business" law within the 

meaning of the exclusion but rather a criminal statute. 

Therefore, the exclusion did not apply and Title was obligated to 

defend American in the state court action. 

On appeal the parties concede that Colorado law governs the 

interpretation of the title insurance policies. Under Colorado 

law the words used in an insurance contract should be interpreted 

according to their ordinary and obvious meaning absent a showing 

3 

Appellate Case: 87-1493 Document: 01019724004 Date Filed: 01/31/1989 Page: 3 
of ambiguity. United Bank of Pueblo v. Hartford Accident & 

Indemni fication Co., 52 9 F.2d 490, 49 3 (lOth Cir . 1976). Clauses 

i n insurance contracts which limit coverage must be in clear and 

unequivoca l la nguage . State Compensation Ins. Fund v. Wangerin, 

736 P.2d 1 246 , 1248 (Colo. App . 1986). 

There ar e no reported decisions from Colorado that have 

expressl y referred to any Colorado statutes as the "doing business 

laws" of the state. However, s imilar words have been used by 

courts in other jurisdictions to describe state statutes that 

regulat e corporations by prescribing the terms and condi t ions upon 

wh ich c o rporations wi l l be permitted to do business in the s t ate. 

See Foxco Indus., Ltd. v. Fabric World , Inc., 595 F. 2d 976 {5th 

Cir. 1979)(discussing Alabama's "doing business statutes"); AMAF 

Int 'l Corp. v. Ra lston Purina Co., 428 A.2d 849 (App. D.C. 

198l)(discussing the District of Columbia 's "doing business 

statute"); Schultz v . Hins haw, 

(1973)(discussing Ariz o na ' s "doing 

significant that § 11-43-101, 

20 Ari z . App. 524, 514 P.2d 277 

business statutes " ) . It is 

in an ea rlier formu la tion, was 

characterist i c of a classi c 11 doing businesstt law 

required fore ign savings and loan associations to 

certificate of author i ty before conducting business in 

See Co lo. Stat . Ann. ch . 25 § 35 (1935). 

because it 

obtain a 

Colorado . 

Does § 11-43-101's transformation from a statute which placed 

c o nd itions upon foreign savings and loan associations seeking to 

c o nduct business in Colorado to a sta tute which imposed crimi~al 

pena lties against foreign savings and loan associations t hat 

originate loans in Colorado render it not a "doing business" law? 

4 

Appellate Case: 87-1493 Document: 01019724004 Date Filed: 01/31/1989 Page: 4 
We think not. Section 11-43-101 still regulates foreign savings 

and loan associations. Merely because the statute now regulates 

by prohibitions rather than by conditions does not make it 

distinguishable from a representational 11 doin_g business" law. 

Likewise, § 11-43-lOl's imposition of criminal sanctions is not 

atypical of a "doing business" law . See ~' Mass. Gen. Laws 

Ann. ch . 181, § 13 (West 1987). 

In its brief on appeal, American has argued as an alternative 

ground for affi rmance that even if S 11-43~101 is a "doing 

business 11 law within the mean ing of the exclusion provision, the 

exclusion is still not triggered because S 11-43-101 does not 

render liens unen forceab le and the exclusion only excludes 

coverage due to the ''(u]nenforceability of the lien" arising from 

the failure to comply with "doing business" laws. This argument 

is ultimately self defeating because the premise relied on by 

American to avoid application of the exclusion, i.e., that 

§ 11 -43 -101 does not void liens, necessarily admits there is no 

injury or harm for wh ich the policies provide coverage. 

Accordingly, the judgment of the United States District Court 

for t he District of Colorado is REVERSED. 

5 

Appellate Case: 87-1493 Document: 01019724004 Date Filed: 01/31/1989 Page: 5