Court Opinion

ID: 7879523
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:19:41.873565+00
Date Added: 2024-06-11T16:31:31.301257
License: Public Domain

McFADDEN, Judge,
concurring in part and dissenting in part.
I concur fully in all but Divisions 3 and 4.1 respectfully dissent in Division 3 and concur in the judgment only in Division 4.1 would hold, as to Division 3, that the title insurance company, First American, has no liability on the subject claim and, as to Division 4, that the insurance company is consequently entitled to summary judgment on the attorney fees claim against it.
The issue that divides us is the construction and application of Section 7 (a) of the policy, which sets out the extent of the insurer’s liability on the subject claim. To paraphrase Section 7 (a), it sets that liability at the least of three specified amounts: (i) the amount of coverage available; (ii) the value of the property interest insured; or (iii) the amount of the loss.
More particularly, our disagreement focuses on Section 7 (a) (ii). Like Presiding Judge Doyle, I would hold that Section 7 (a) (ii) is *469enforceable. But she and I part ways as to its proper construction. I am persuaded by the argument of the title insurance company, that the parties agreed only to coverage of the value of the title insured — that is, the value of the security interest its insured, Stillwater, was to have acquired — and that the insurance contract was not intended to cover the full benefit of the insured’s bargain with its borrower. And I am persuaded that Section 7 (a) (ii) gives effect to that intent by specifying that the insurer would be liable only for the principal amount of the secured debt, not for interest or for other payments to which the insured may have been entitled under the terms of its agreement with its borrower.
Section 7 (a) (ii) specifies that the insurer’s liability shall not exceed “(ii) the amount of unpaid principal indebtedness secured by the insured mortgage ... as reduced under Section 9 ... at the time [of] the loss or damage, . . . together with interest thereon.”
Section 9 repeatedly makes clear that those reductions include payments and parts of payments that, as between insured Stillwater and its borrower, would be allocated to interest. Section 9 provides:
(a) All payments under this policy, except payments made for costs, attorneys’ fees and expenses, shall reduce the amount of the insurance pro tanto. However, any payments made prior to the acquisition of title to the estate or interest as provided in Section 2 (a) of these Conditions and Stipulations shall not reduce pro tanto the amount of the insurance afforded under this policy except to the extent that the payments reduce the amount of indebtedness secured by the insured mortgage.
(b) Payment in part by any person of the principal of the indebtedness, or any other obligation secured by the insured mortgage, or any voluntary partial satisfaction or release of the insured mortgage, to the extent of payment, satisfaction or release, shall reduce the amount of insurance pro tanto. The amount of insurance may thereafter be increased by accruing interest and advances made to protect the lien of the insured mortgage and secured thereby, with interest thereon, provided in no event shall the amount of insurance be greater than the Amount of Insurance stated in Schedule A.
(c) Payment in full by any person or the voluntary satisfaction or release of the insured mortgage shall terminate all liability of the Company except as provided in Section 2 (a) of these Conditions and Stipulations.
(Emphasis supplied.)
*470It is undisputed that the initial principal amount of the loan was $4.75 million and that the foreclosure proceeds were $5.6 million. The foreclosure proceeds in this case are payments identified in Section 9 (b), emphasized above, in that they are payments on the principal and other obligations (e.g., interest) secured by the insured mortgage. Read together, Sections 7 (a) (ii) and 9 require that the amount of the foreclosure proceeds be subtracted from the principal amount and provide that, as the sum is less than zero, the insurance company has no liability.
Contrary to the majority opinion, Section 7 (a) (ii) is not incomprehensible. It is not too vague and uncertain to be enforced.
The cardinal rule of contract construction is to ascertain the intent of the parties at the time they entered the agreement. If that intention is lawful and sufficient words are used to arrive at the intention, it shall be enforced irrespective of all technical and arbitrary rules of [contract] construction.
Gonzalez v. Crocket, 287 Ga. 430, 433 (696 SE2d 623) (2010) (citation omitted). This rule requiring us to give a contract “that meaning which will best carry into effect the intent of the parties,” as with other pertinent rules of contract interpretation, must be applied before we can reach a conclusion concerning whether a contract has the required definiteness to be enforced. See McLendon v. Priest, 259 Ga. 59, 60 (376 SE2d 679) (1989).
“[Wjhenever possible, a contract should not be construed in a manner that renders any portion of it meaningless.” Schwartz v. Schwartz, 275 Ga. 107, 109 (2) (561 SE2d 96) (2002) (citations omitted). “The construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part[.]”OCGA § 13-2-2 (4).
We must therefor presume that when the parties included in Section 7 (a) (ii) a provision that First American’s liability “shall not exceed . . . the amount of unpaid principal indebtedness secured by the insured mortgage ... as reduced under Section 9 ... at the time [of] the loss or damage, . . . together with interest thereon,” they intended the phrase “as reduced under Section 9” to have some meaning.
It is true that Section 9 addresses the amount of coverage provided by the policy as a whole, while Section 7 addresses First American’s liability for particular claims. This does not make it impossible, as the majority contends, to discern meaning from the *471reference to Section 9 within Section 7. While insurance coverage and liability for a particular claim are different, they are closely related. Indeed it would be remarkable if the formulae for calculating them did not contain overlapping elements. So there is no logical impediment to incorporating components of Section 9’s formula for calculating insurance coverage into Section 7 (a)’s formula for calculating liability. Both sections can and should be read to reflect the parties’ intent to cover only the value of the insured’s security interest and not to extend coverage under the policy to the full benefit of the insured’s bargain with its borrower. So the phrase “as reduced under Section 9” should be construed to mean that the calculations prescribed in Section 9 for determination of the coverage provided by the policy as a whole are to be adapted to the calculation of First American’s liability under Section 7 (a) (ii) for the particular claim at issue.
By clear implication, Section 7 (a) (ii) prescribes that the payments used in the formula for calculating insurance coverage under Section 9 are also to be used in the formula for calculating liability under Section 7. But even if, as the majority asserts, the phrase “as reduced under Section 9” renders Section 7 (a) (ii) incomprehensible, we are authorized and directed to add language to make that implied prescription explicit. OCGA § 13-2-2 (6) directs, “In extreme cases of ambiguity, where the instrument as it stands is without meaning, words may he supplied.”
Section 7 (a) (ii) unambiguously expresses the parties’ intent that First American not be liable for more than the amount of the unpaid principal indebtedness. While it would be entirely possible and sensible to write a policy to impose liability for accrued interest as well, the language of this policy did not do so.
Presiding Judge Doyle’s special concurrence would have us interpret the phrase “unpaid principal indebtedness,” as that phrase is used in Section 7 (a) (ii), to — in effect — include both principal and interest. But even if we ignore Section 9, that interpretation is unsustainable. It is contrary to the plain meaning of that phrase. The phrase refers only to principal. See OCGA § 13-2-2 (2) (words in contracts “generally bear their usual and common signification”).
OCGA § 7-4-17, cited in the special concurrence, is not applicable here, even though it controls allocations of payments to principal and interest. That Code section regulates the rights and obligations of debtors and creditors, not insurers and insureds. And that Code section does not undertake to define “unpaid principal indebtedness.”
It is true that Section 7 (a) (ii) does contain language providing that the insurance company can be liable for “interest thereon.” But that language refers to interest on the amount the insurance company owes to its insured. That language does not contradict the other *472language limiting the amount the insurer owes its insured on this claim to the principal amount of the indebtedness.
Decided December 13, 2013
Hawkins, Powell, Thackston & Young, H. Lane YoungII, Jackson A. Dial, for Doss & Associates.
Morris, Manning & Martin, Lewis E. Hassett, Shannon A. McNulty, John B. Vitale, for First American Title Insurance Company, Inc.
Foltz, Martin & Knapp, Halsey G. Knapp, Jr., Jonathan E. Hawkins, for Gerova Asset Backed Holdings, L.P.
Here that unpaid principal indebtedness, and therefore the insurance company’s liability on the policy, is zero. The foreclosure proceeds in this case constituted a payment on the loan. See Balboa Life & Cas. v. Home Builders Finance, 304 Ga. App. 478, 479 (1) (697 SE2d 240) (2010). At $5.6 million, those proceeds alone exceeded the amount of principal that Stillwater loaned to its borrower. First American has no liability to Stillwater under Section 7 of the policy and is entitled to summary judgment thereon.