No. 88-551

IN THE SUPREME COURTOF THE STATEOF MONTANA
1989

AETNA FINANCE COMPANY, a corporation, Plaintiff and Appell-ant,-VSCOURT E. BALL and TOWE,BALL, EMRIGHT & MACKEY,a partnership,
Defendants and Respondents.

APPEAL FROM: District Court of the Thirteenth Judicial District, In and for the County ofYellowstone, TheHonorable Diane G. Barz,Judgepresiding.

COUNSELOF RECORD:

ForAppellant:
Robert J. Phillips; Snavely & Phillips, Missoula, Montana

For Respondent: Richard E. Gillespie;Keller,Reynolds,Drake,Sternhagen & Johnson,Helena,Montana

- -- Submitted on Briefs: April 27, 1989

-. L:I L-" Decided: June 15, 1989 liMr. Justice L. C. Gulbrandson delivered the Opinion of the Court.

Aetna Finance Company (Aetna) appeals the final judgment entered September 9, 1988, by the Thirteenth Judicial District Court in favor of the defendants. The court held that Aetna's attorney, defendant Court Ball, fulfilled his duty to advise Aetna as towhether a proposed borrower had a mortgageable interest in certain real property, such that Aetna could obtain a secured interest in theproperty, and whether themortgagee titleinsurancewould appropriately insure this secured interest. Therefore, defendants were held not liable for any legal malpractice. Weaffirm. The issues presented for our review are as follows: 1. Did attorney Ballhave a duty toassure thatclient Aetna had a valid secured interest and that it received mortgagee title insurance covering that secured interest? 2. Did the attorney breach this duty to his client? The ownership history of that realproperty centralto the issues raised in this appeal is quite lengthy and involved. We will detail only those stipulated facts regarding this property which are directly relevant to the legalmalpractice issuesraisedby Aetna. On September 9, 1980, Anne Zemple executed a trust agreement conveying in trust a certain parcel of real property in Gallatin County to Henry Richner. Richner, as trustee, assumed the responsibility of making improvements to the property. To this end, Richner secured a loan for $25,000 from Aetna on August 7, 1981. This loan was secured by a trust indenture prepared by attorney Ball and signedby Richner. Ballprepared this trustindenture per instructions from Aetna after having advised Aetna toensure that Richnerhad authority to grant a security interest in the property. In response,Aetna obtained from Zemple a Consent to Mortgage which gave her agreement to a mortgage of the property as security for this loan. OnMarch 2, 1983,Richner executed,without designation of capacity, a Quit Claim Deed conveying his interest in the property back to Zemple. Thereafter, Richner began making arrangements with Aetna to obtain another loan totaling $38,829.66. OnNovember 4,1983,theUSLIFE Title InsuranceCompany (Company) issued a commitment for title insurance which stated it would generally insure title to the property from all claims except those affecting title and arising out of the trust agreement dated September 9, 1980 and/or the Quit Claim Deed executed on March 2, 1983. The Company later issued a mortgagee title policy containing these exceptions. During ameeting inBall'soffice onNovember 11, 1983, Aetna informed him of Richner's request for an additional loan against the property. Ball testified that after examining the Quit Claim Deed and title commitment, he advised Aetna to determine if the trustwas still effective, and if so,to obtain another Consent toMortgage from Zemple. Ball then prepared a consent form, and Aetna subsequently obtained thenecessary signature. Ball also advised Aetna to get the two above-mentioned exceptions on the title insurance commitment removed. During a telephone conversation on November 18, 1983, Aetna told Ball that the Company would delete the Quit Claim Deed Exception. Consequently, Ball advised Aetna it could proceed with the closing of the loan, and he subsequentlyprepared a trust indenturewhich Richner then signed. Ball was present at the closing of this loan that sameday.Ball prepared a post-closing written opinion on November 21, 1983, upon request of Aetna, stating that the trust indenture signed by Richner had created a valid security interest in the property sufficient to enableAetna to obtain mortgagee title insurance. Ball testified that this opinion was based upon review of the Consent to Mortgage, the title commitment naming Richner as the vested trustee owner, and Aetna's verbal assurance that the Company would delete the Quit Claim Deed exception. Ball did not see the mortgagee title insurance policy, which was issued November 21, 1983 and which in fact retained the two exceptions,prior to issuance of thiswritten opinion. Richner defaulted on his loan obligation on January 3, 1984. Ball,acting on behalf of Aetna, commenced foreclosure proceedings. Zemple filed suit against Aetna and Ball to obtaindamages and apermanent injunction against foreclosure of the trust indenture. Aetna filed a counterclaim against Zemple and a third party complaint againstBall. The lawsuit againstAetnawas subsequently settledby Zemple's payment of $23,998.26 to Aetna in exchange for Aetna's reconveyance of the trust indentures, cancellation of the promissory notes, and dismissal of the counterclaim against Zemple. Thereafter, the court ordered a realignmentof the remaining parties withAetna as theplaintiff and Ball and his law firm as defendants. Following a non-jury trial on July 5 and 6, 1988, the District Court issued its findings and rendered judgment in favor of defendants in this realigned lawsuit. The court held that Ball had not assumed the duty of guaranteeing that the title company would issue appropriate coverage insuring Aetna's interest in the property. Rather, Ballwas employed

as an attorneywith limited duties and he fulfilled theseby advising Aetna how to proceed to insure its interest in theproperty. Defendants thus were held not liable for any loss Aetna incurred by virtue of its loss of a security interest in the property, an interest which had guaranteed repayment ofmonies loaned to Richner. Aetna alleges that Ball had a duty to ensure that it received a security interest and appropriate title insurance for that security interest. Aetna contendsBall's failure to fulfilltheseduties constituted abreach of contractaswell as negligence. Thiswhole case turns onadeterminationofwhatduties Aetna retained Ball to fulfill. The parties dispute the specific duties for which the attorney-client relationship

was created, and not the general duties owed clients in general. See generally, Huszagh and Molloy, Legal Malpractice: A Calculus For Reform, 37 Mont.L.Rev. 279, 335

(1976) (recognizing the two subparts to the duty element). This dispute is one ofmaterial fact. The broad standard of reviewurged by Aetna,whichwould allow this Court tomake a determination of this case based upon our own findings, therefore is not applicable to this case. Such a broad standard ofreview would be applicable only if the factswere relatively uncontested. See, e.g., Johnson 

### v. Division of Motor Vehicles (1985),219Mont. 310, 312, 711 P.2d 815, 816. Because a factual dispute exists as to the specific duties Ball was obligated to perform,we will rely on the District Court's findings and presume that they are correct unless unsupported by substantial, credible evidence and thus clearly erroneous. As stated in Rule 52(a)

## , M.R.C~V.P.: Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of thewitnesses.The District Court examined the nature of past legal dealings between Aetna and Ball to determine the terms of their attorney-client contractual relationship. The court didnot abuse itsdiscretioninascertaining the exactduties Aetna intended Ball to perform from an examination of the parties' conduct. We have previously held thatwhen contract terms are ambiguous, the conduct of the parties is the best indication of the true intentof the parties atthe time of contracting. E.g., Souders v. Montana Power Co. (1983), 203 Mont. 483, 486, 662 P.2d 289, 291; Rumph v. Dale Edwards, Inc. (1979), 183Mont. 359, 368, 600 P.2d 163, 168. A court then must interpret the terms of a contract so as to give effecttothisinitialintent. See § 28-3-301, MCA. From an examination of the parties' conduct, the District Court determined that the parties intended Ball to determine if the proposed borrower had a mortgageable interest which could act as security for the proposed loan. Moreover, Ball was to review the title commitment to determine if this secured interestwould be covered under an appropriate mortgagee title insurance policy. If Aetna did not have a valid interest, Ball was to advise Aetna what actions to take to obtain such a valid security interest and/or appropriate title insurance coverage. Aetna, not Ball, had the responsibility for acting upon this advice. The courtconcluded thatBall fulfilledthese advisory duties and thus he was not liable for any negligence orbreach of contract. Substantial credible evidence exists in support of the court's findings as to the nature of the duties Ball was retained toperform. Ball testified thatAetna hired him to advise it as to the validity of the security interest and title insurance coverage, to issue a written opinion as to the validity of each, to prepare the trust indenturedocument, and to attend the closing. He testified that he

was not expected to ensure the validity of the security interest or appropriatenessof the title insurance coverage. In Ball's opinion, Aetna routinely handled all these other details and problems, arising in regards to loan transactions,to save the costof attorney's feesand thereby to remaincompetitive in the lending market. Memos from a telephone conversation and meeting prior to the 1981 loan by Aetna reveal that Ball assumed the responsibility only for advising Aetna of the stepsnecessary to ensure appropriate mortgagee title insurance coverage. Memos from a November 11, 1983 meeting with Aetna again reveal that Ball only advised Aetna of steps it should take to ensure a valid security interest and appropriate title insurance in regards to the proposed 1983 loan. Moreover, Ball testified he advised Aetna to obtain a consent to mortgage from Zemple, which Aetna subsequently obtained. Ball also testified he advised Aetna to ensure appropriate mortgagee title insurance coverage by having the title company remove from the policy those two exceptions detrimental to insurance coverage. A telephone call from an Aetna representativeonNovember 18, 1983, asdocumented ona message pad, indicated that Aetna had assumed the duty of resolving thoseproblemsbrought to its attentionby Ball and had induced the title company to delete the quit claim deed exception. Ball testified that his subsequent written opinion was based upon this telephone assurance that Aetna, in fact, had acted upon his legal advice. Given all the foregoing evidence indicating Ball routinely assumed only an advisory responsibility regarding Aetna's security interest and mortgagee title insurance, we hold that the District Court's findings, thatBall did nothave aduty to ensure the validity of the security interest and the appropriateness ofmortgagee title insurance coverage, were not clearly

erroneous. The evidence indicated thatBalldidnot "delegate" to Aetna a duty toensure the accuracy of the securityinterest and appropriateness of mortgagee title insurance. Rather, Aetna only contracted with Ball to obtain his advisory opinion about whether or not a valid security interest and appropriate mortgagee title insurance existed, and if not, what steps to take to achieve appropriate coverage. The District Court thus did not abuse its discretion in finding that Ball had fulfilled all those duties undertaken and, consequently, in holding Ball not liable for breach of contract. The judgment of the District Court

### -5S affirmed. '/

Justice.

Weconcur: 

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