Opinion ID: 2602159
Heading Depth: 2
Heading Rank: 1

Heading: contract claim against first american

Text: ¶ 22 The first issue on appeal is whether the trial court properly granted First American summary judgment on Holmes's contractual claims. The trial court ruled in its order granting First American summary judgment that Holmes had no enforceable third-party beneficiary right in the contract between Cook, Cook Development, and First American. Holmes has not appealed this ruling. Thus, the only possible contract claims that Holmes may have against First American would be predicated upon a direct contract between Holmes and First American.
¶ 23 In the order granting summary judgment to First American, the trial court concluded that claims under the title insurance policy were barred as a matter of law by section 9(b) of the First American Title Insurance Policy. Holmes asserts that the trial court erroneously granted summary judgment to First American because there is a question of material fact as to whether First American took appropriate action as required by the title insurance policy First American issued as insurer to Holmes as insured. ¶ 24 A title insurance policy, like other insurance policies, serves as a contract between the insurer and the insured, and as such `is subject to the general rules of contract construction.' Miller v. USAA Cas. Ins. Co., 2002 UT 6, ¶ 49, 44 P.3d 663 (quoting S.W. Energy Corp. v. Cont'l Ins. Co., 1999 UT 23, ¶ 12, 974 P.2d 1239); accord First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 836 (Utah 1998). Thus, unless the language of the policy is ambiguous or unclear, we construe it according to the policy's `plain and ordinary meaning.' Miller, 2002 UT 6 at ¶ 49 (quoting First Am. Title Ins. Co., 966 P.2d at 836). Further, we construe the individual provisions of the insurance policy in light of the policy as a whole. Id. at ¶ 49. Whether the trial court was correct in construing the insurance policy to preclude Holmes from suing under it is a question of law that we review for correctness. Rivera v. State Farm Mut. Auto. Ins. Co., 2000 UT 36, ¶ 29, 1 P.3d 539.
¶ 25 We need not address whether First American took appropriate action because the policy did not require appropriate action. The plain language of section 4(b) of the policy provides that First American  may take any appropriate action under the terms of this policy. (Emphasis added.) The plain, ordinary, and accepted meaning of the word may is `permissive' or `discretionary,' generally indicating that an individual is either permitted or [h]as a possibility to do something. Black's Law Dictionary 993 (7th ed.1999). The parties use the word may in section 4(b) of the policy to set forth their intention that First American has the option to take appropriate action, but is not required to do so. See generally, e.g., Strawberry Elec. Serv. Dist. v. Spanish Fork City, 918 P.2d 870, 882 (Utah 1996); State v. Mohi, 901 P.2d 991, 1006 (Utah 1995). Inasmuch as appropriate action is not mandated by the policy, the need to determine if First American took appropriate action is obviated.
¶ 26 Further, according to the plain language of the policy, by defending Holmes in the Keystone litigation and successfully establishing title to the 323-acre parcel in Holmes as against Keystone, First American fully performed its obligations under the insurance policy. Section 9(a) of the policy provides: (a) If [First American] establishes the title, or removes the alleged defect, lien or encumbrance, or cures the lack of a right of access to or from the land, or cures the claims of unmarketability of title, all as insured, in a reasonably diligent manner by any method, including litigation and the completion of any appeals therefrom, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused thereby. (Emphasis added.) ¶ 27 First American cured any claims of unmarketability of title by succeeding in establishing title in Holmes by litigation. Section 9(a) expressly provides that litigation is a reasonably diligent manner of establishing title and curing any alleged title defects. Therefore, according to the plain language of section 9(a), First American has fully performed its obligations with respect to that matter and cannot be liable for any loss or damage caused thereby.
¶ 28 Moreover, First American contracted in section 9(b) to limit its liability under the policy in the event of litigation. See generally Pac. Am. Constr. v. Sec. Union Title, 1999 UT 87, ¶ 5, 987 P.2d 45 (`[P]arties [to a title insurance contract] are free to define the exact scope of the policy's coverage....' (citation omitted) (alteration in original)). Section 9(b) states: (b) In the event of any litigation, including litigation by [First American] or with [First American's] consent, [First American] shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals therefrom, adverse to the title as insured. (Emphasis added.) ¶ 29 In the policy, First American contracted to have no liability to Holmes under the policy unless a court rendered a final judgment adverse to Holmes's title. See generally Booth v. Attorneys' Title Guar. Fund, Inc., 2001 UT 13, ¶ 32, 20 P.3d 319 (noting that courts will address damages only if the title is found to have been unmarketable). In this case, First American defended Holmes in the Keystone litigation, including paying all costs incurred in defending Holmes's title. The result of the Keystone litigation was favorable to Holmes, not adverse, because title to the 323-acre parcel was quieted in Holmes, Keystone's claims to the property were thwarted, and Keystone's lis pendens was removed from the title record. Accordingly, section 9(b) precludes Holmes from recovering further against First American beyond the costs First American incurred defending Holmes's title when the Keystone litigation quieted title in Holmes as against Keystone and no adverse final determination resulted.
¶ 30 Holmes also contends that First American assumed and breached other first-party contractual duties to Holmes beyond those established in the title insurance policy. However, we decline to address this issue on appeal as it was never properly raised below. ¶ 31 This claim was originally raised in Holmes's memorandum in opposition to First American's motion to dismiss/for summary judgment, and was not raised in the complaint. A plaintiff cannot amend the complaint by raising novel claims or theories for recovery in a memorandum in opposition to a motion to dismiss or for summary judgment, Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir.1989); McDowell v. Sullivan, 132 F.R.D. 501, 502 (N.D.Ill.1990), because such amendment fails to satisfy Utah's pleading requirements. See Utah R. Civ. P. 7, 8, 9, 10. Holmes's claims must therefore be restricted to the grounds set forth in the complaint. Mitchell v. Palmer, 121 Utah 245, 251, 240 P.2d 970, 972 (1952). Thus, because Holmes failed to raise a breach of contract action in its complaint against First American that was not predicated either upon third-party beneficiary liability or upon the title insurance policy, any claim that First American assumed and breached additional contractual duties to Holmes was waived.