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No. 98-616 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1999 MT 230 

296 Mont. 115

987 2P.d 1151

SCOTT AND CAROLYN MILLER, 

Petitioners and Appellants,

v.

TITLE INSURANCE COMPANY OF

MINNESOTA, 

Defendant and Respondent.

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark,

The Honorable Thomas. C. Honzel, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

John R. Alke, Michael F. McMahon, Hughes, Kellner, Sullivan & Alke;

Helena, Montana

For Respondent:

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Gary L. Davis, Luxan& Murfitt, PLLP; Helena, Montana

Submitted on Briefs: February 25, 1999 

Decided: September 28, 1999

Filed:

__________________________________________

Clerk

Justice Jim Regnier delivered the opinion of the Court.

● ¶Scott and Carolyn Miller commenced this action against Title Insurance Company 

of Minnesota on October 28, 1997, in the First Judicial District Court, Lewis and 

Clark County, for breach of contract, breach of the implied covenant of good faith 

and fair dealing, and violations of the Montana Unfair Trade Practices Act. On May 

1, 1998, Title Insurance Company moved for summary judgment, and thereafter, the 

Millers moved for partial summary judgment with respect to their breach of contract 

claim. On September 9, 1988, the District Court granted Title Insurance Company's 

motion for summary judgment and denied the Millers' motion for partial summary 

judgment. On September 16, 1998, the District Court entered judgment in favor of 

Title Insurance Company. The Millers appeal from that judgment. We affirm.

● ¶The issue presented on appeal is whether the District Court erred when it granted 

Title Insurance Company of Minnesota's motion for summary judgment and denied 

the Millers' motion for partial summary judgment.

FACTUAL BACKGROUND 

❍ ¶In November 1988, Scott and Carolyn Miller purchased a home in Helena, 

Montana. At the time they purchased the home, they purchased a title 

insurance policy from Minnesota Title, now known as Title Insurance 

Company, through its agent Helena Abstract & Title Company. This policy 

defined the term "public records" as: "those records which by law impart 

constructive notice of matters relating to said land." 

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■ ¶Prior to the issuance of the insurance policy, the Millers received two 

title commitments from Title Insurance Company, which did not 

specifically define the term "public records." However, under the 

Conditions and Stipulations section, the commitment states:

3. Liability of the Company under this Commitment shall be only to the 

named proposed Insured and such parties included under the definition 

of Insured in the form of policy or policies committed . . . and such 

liability is subject to the insuring provisions and the Conditions and 

Stipulations and the Exclusions from Coverage of the form of policy . . . 

which are hereby incorporated by reference and made a part of this 

Commitment except expressly modified herein.

■ ¶In August 1996 the Millers began excavation to construct a 

garage on their property. During that excavation and construction, 

the Millers learned that a neighbor's water and sewer lines ran 

across their property. Specifically, the lines ran beneath the 

location of the new garage. At the time the water and sewer lines 

were installed, both the dominant and servient estates were under 

common ownership.

■ ¶The Millers determined that the easement established for the 

neighbor's water and sewer lines, as identified by records located 

in the city engineer's office, rendered their title unmarketable. 

Consequently, they submitted a claim to Title Insurance 

Company. The Millers requested that Title Insurance Company 

cure the title defect by securing the relocation of their neighbor's 

water and sewer lines, and by reimbursing them for legal 

expenses they had and would incur in curing the title defect. Title 

Insurance Company denied the claim based on a coverage 

exclusion in the policy, which limited coverage to easements of 

public record. Nothing in the Millers' chain of title, recorded in 

the Lewis and Clark County Clerk and Recorder's office, revealed 

the existence of the water and sewer lines. However, the lines 

were shown in the records of the Helena City Engineer and Water 

Department.

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STANDARD OF REVIEW 

■ ¶Our standard of review in appeals from summary 

judgment rulings is de novo. Motaire v. Northern Mont. 

Joint Refuse Disposal Dist. (1995), 274 Mont. 239, 242, 

907 P.2d 154, 156 (citing Mead v. M.S.B., Inc. (1994), 264 

Mont. 465, 470, 872 P.2d 782, 785). When we review a 

district court's grant of summary judgment, we apply the 

same evaluation as the district court based on Rule 56, M.R.

Civ.P. Bruner v. Yellowstone County (1995), 272 Mont. 

261, 264, 900 P.2d 901, 903. In Bruner, we set forth our 

inquiry:

The movant must demonstrate that no genuine issues of 

material fact exist. Once this has been accomplished, the 

burden then shifts to the non-moving party to prove, by 

more than mere denial and speculation, that a genuine issue 

does exist. Having determined that genuine issues of fact 

do not exist, the court must then determine whether the 

moving party is entitled to judgment as a matter of law. We 

review the legal determinations made by a district court as 

to whether the court erred.

Bruner, 272 Mont. at 264-65, 900 P.2d at 903 (citations omitted). 

DISCUSSION 

■ ¶Did the District Court err when it granted Title 

Insurance Company of Minnesota's motion for 

summary judgment and denied the Millers' motion 

for partial summary judgment?

■ ¶The District Court concluded that since the 

insurance policy unambiguously defined the term 

"public records," it could not offer an alternative 

interpretation. The District Court pointed out that the 

insurance policy unambiguously limited coverage to 

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encumbrances of which Title Insurance Company 

had constructive notice and that the Millers could not 

point to any statute declaring that records in a city 

engineer's office provide constructive notice. As a 

result, the District Court concluded that the 

reasonable expectations doctrine did not apply and 

entered summary judgment in favor of Title 

Insurance Company. 

■ ¶Millers contend that the term "public records" as 

defined in the insurance policy is ambiguous, 

uncertain, and unclear and the limiting effect of that 

definition violates their reasonable expectations. Title 

Insurance Company responded by stating that the 

records located in the city engineer's office are not 

public records as defined by the policy, and 

therefore, the existence of the underground lines was 

not an insured matter.

■ ¶Millers assumed a broad definition of "public 

records." They argue that pursuant to § 2-6-101, 

MCA, the "public writings" statute, it was reasonable 

for them to expect prior to receiving the policy and 

after reading the title commitment, that the term 

"public records" included all public records relative 

to their property and specifically, in this case, those 

records relating to sewer and water lines 

encumbering their property as maintained by the City 

of Helena Engineer's Office and Water Department.

■ ¶The purpose of Title 2, Chapter 6, Part 2 of the 

Montana Code Annotated is as follows:

[T]o create an effective records management 

program for executive branch agencies of the state of 

Montana and political subdivisions by establishing 

guidelines and procedures for the efficient and 

economical control of the creation, utilization, 

maintenance, and preservation of state and local 

records.

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Section 2-6-201, MCA. Section 2-6-202(1), MCA, 

defines "public records" as:

"Public records" includes any paper, correspondence, 

form, book, photograph, microfilm, magnetic tape, 

computer storage media, map, drawing, or other 

document, including all copies thereof, regardless of 

physical form or characteristics, that has been made 

or received by a state agency in connection with the 

transaction of official business and preserved for 

informational value or as evidence of a transaction 

and all other records or documents required by law to 

be filed with or kept by any agency of the state of 

Montana.

Local government public records are similarly 

defined except that the definition is limited to those 

records made, received, or kept by a local 

government. See § 2-6-401(2), MCA. However, the 

title insurance policy at issue in this case specifically 

defines "public records" as "those records which by 

law impart constructive notice of matters relating to 

said land." (Emphasis added.)

■ ¶Pursuant to the Montana recording statutes, 

"constructive notice," as found in the definition 

of "public records," is described as:

(1) Every conveyance of real property 

acknowledged or proved and certified and 

recorded as prescribed by law, from the time it 

is filed with the county clerk for record, is 

constructive notice of the contents thereof to 

subsequent purchasers and mortgagees.

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(2) A certified copy of any such recorded 

conveyance may be recorded in any other 

county, and when so recorded the record 

thereof shall have the same force and effect as 

though it was of the original conveyance. 

Section 70-21-302, MCA, (emphasis added). 

Section 70-21-209, MCA, defines what 

instruments are to be considered recorded:

An instrument is deemed to be recorded when, 

being duly acknowledged or proved and 

certified, it is deposited in the county clerk's 

office with the proper officer for record.

(Emphasis added.)

■ ¶The Millers contend that they relied on 

the ambiguous term "public records" in 

the title commitment, which was not 

defined, when they purchased their 

home. They assert that they interpreted 

"public records" to mean "those records 

which relate to their property and that are 

open to the public to review and 

inspect." The Millers explain that, upon 

reviewing the title commitment, they 

expected and understood that any 

adverse interest, easement, claim, 

encumbrance, or lien that was not shown 

by the public records, would not be 

insurable based upon the exceptions 

stated in the title commitment. The 

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Millers maintain that the phrase "by law" 

within the definition of "public records" 

in the policy does not adequately inform 

an insured that an examination of the 

Montana recording statutes codified at 

§§ 70-21-101, et seq., MCA, is required 

in order to determine what is meant by 

the term "public records."

■ ¶We have held that the interpretation of 

an insurance policy is a question of law. 

See Leibrand v. National Farmers Union 

Property & Cas. Co. (1995), 272 Mont. 

1, 6, 898 P.2d 1220, 1223 (citation 

omitted). "Ambiguity exists only when 

the contract taken as a whole in its 

wording or phraseology is reasonably 

subject to two different interpretations." 

Canal Ins. Co. v. Bunday (1991), 249 

Mont. 100, 105, 813 P.2d 974, 977 

(citation omitted). A clause in an 

insurance policy is ambiguous "when 

different persons looking at the clause in 

light of its purpose cannot agree upon its 

meaning." Leibrand, 272 Mont. at 6, 898 

P.2d at 1223 (citations omitted).

■ ¶Under Montana law, "[t]he language of 

a contract is to govern its interpretation if 

the language is clear and explicit and 

does not involve an absurdity." Section 

28-3-401, MCA. In Canal, we 

determined that "[i]f the language of a 

contract is unambiguous and subject to 

only one meaning, there is no basis for 

the interpretation of the policy coverage 

under the guise of ambiguity." Canal, 

249 Mont. at 105, 813 P.2d at 977.

■ ¶In this case, the term "public records" 

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defined in the title policy is not 

reasonably subject to two different 

interpretations. The title policy issued to 

the Millers specifically defines "public 

records" as "those records which by law 

impart constructive notice of matters 

relating to said land." This is entirely 

consistent with existing Montana 

statutory law and Montana recording 

procedures, which require that 

documents affecting title to real property 

be recorded with the county clerk and 

recorder of the county in which the real 

property is located. See §§ 70-21-201, et 

seq., MCA. By law, upon filing and 

recordation with the proper officer in the 

county clerk's office, subsequent 

purchasers and mortgagees are deemed 

to have constructive notice of a 

conveyance of real property and its 

contents. See § 70-21-302(1), MCA. In 

addition, judgments docketed in the clerk 

of the district court's office become liens 

on the real estate owned by the judgment 

debtor. See § 25-9-302, MCA. These are 

the records that impart constructive 

notice of matters relating to real property 

and, for the purposes of this case, are the 

"public records" defined in the title 

policy. 

■ ¶The applicable Montana statutes, 

therefore, do not impose a duty upon title 

insurers to search city engineer or water 

department records. Pursuant to Montana 

law and the title policy at issue, a title 

insurer is only under a contractual duty 

to investigate the documents properly 

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recorded or docketed and which 

themselves, or through their contents, 

impart constructive notice of liens and 

encumbrances, including easements.

■ ¶According to Title Insurance Company, 

the contract definition of "public 

records," in conjunction with the 

Montana statutes relating to recorded 

instruments (§ 70-21-209, MCA) and 

constructive notice (§ 70-21-302, MCA), 

make it clear that title insurers and 

abstractors search only record title in the 

offices of the clerk and recorder and the 

clerk of court in the county in which the 

real property is located. Pursuant to 

Montana's statutory scheme, documents 

recorded or filed in the office of the clerk 

and recorder or clerk of court impart 

constructive notice. Nowhere in the 

insurance policy or Montana statutes 

related to recording is there a suggestion 

that the records of the city engineer and 

water department impart constructive 

notice to purchasers of real property. 

While documents located in a city 

engineer's office or water department 

may be subject to public inspection as 

public records under § 2-6-202(1), MCA, 

such documents do not by law impart 

constructive notice. Accordingly, we 

agree with Title Insurance Company and 

conclude that the term "public records" 

in the Millers' policy is not ambiguous.

■ ¶ Alternatively, the Millers contend that 

even if no ambiguity is found in the 

contractual definition of "public record," 

it is within their reasonable expectations 

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that such encumbrances on their real 

property, regardless of where they were 

recorded, would be covered by their title 

insurance. Title Insurance Company 

contends that the Millers' expectation is 

not reasonable because no title 

underwriter could maintain copies of 

such a broad assortment of records, nor 

could any local title company research 

those records every time a request for 

title insurance was presented.

■ ¶"The reasonable expectations doctrine 

provides that the objectively reasonable 

expectations of insurance purchasers 

regarding the terms of their policies 

should be honored notwithstanding the 

fact that a painstaking study of the policy 

would have negated those expectations." 

American Family Mut. Ins. Co. v. 

Livengood, 1998 MT 329, ¶ 32, 292 

Mont. 244, ¶ 32, 970 P.2d 1054, ¶ 32. 

Nevertheless, we have determined that 

"the reasonable expectations doctrine is 

inapplicable where the terms of the 

policy at issue clearly demonstrate an 

intent to exclude coverage." American 

Family, ¶ 33. The reason for this 

determination is that an insured's 

"expectations which are contrary to a 

clear exclusion from coverage are not 

'objectively reasonable'." American 

Family, ¶ 33.

■ ¶The policy at issue in this case clearly 

states that it does not insure against loss 

or damage by reason of "easements, or 

claims of easements, not shown by the 

public records." As indicated previously, 

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the policy defines the term "public 

records" as "those records which by law 

impart constructive notice of matters 

relating to said land." This language 

clearly demonstrates an intent to exclude 

coverage for easements, or claims of 

easements, not shown by the public 

records. As such, the District Court 

correctly determined that the reasonable 

expectations doctrine does not apply. 

Thus, the Millers' expectations which 

were contrary to the clear exclusion of 

coverage were not objectively reasonable.

■ ¶Affirmed.

/S/ JIM REGNIER 

We Concur:

/S/ J. A. TURNAGE

/S/ KARLA M. GRAY

/S/ WILLIAM E. HUNT, SR.

/S/ TERRY N. TRIEWEILER 

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