Park v. First American Title Insurance ( 2018 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 25, 2018
_________________________________
Elisabeth A. Shumaker
Clerk of Court
KANG SIK PARK, M.D.,
Plaintiff - Appellant,
v. No. 17-4125
(D.C. No. 2:17-CV-00280-DAK)
FIRST AMERICAN TITLE INSURANCE (D. Utah)
COMPANY,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT *
_________________________________
Before TYMKOVICH, Chief Judge, LUCERO, and HARTZ, Circuit Judges.
_________________________________
Kang Sik Park appeals the district court’s dismissal of his suit against First
American Title Insurance Company (“First American”) as time-barred. Exercising
jurisdiction under 28 U.S.C. § 1291, we reverse and remand.
I
In 2006, in relation to a loan to Peter and Virginia Lamb, Park obtained a
commitment from First American to insure a real estate deed of trust for property in
Salt Lake County, Utah. 1 On recording of the deed of trust, First American issued a
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
lender’s title insurance policy which insured against loss by virtue of “[a]ny defect in
or lien or encumbrance on the title,” “[u]nmarketability of the title,” “invalidity or
unenforceability of the lien of the Insured Mortgage upon the title,” and other issues. 2
The lender’s title insurance policy requires that Park notify First American of
litigation or claims asserting an interest in the property “promptly in writing.” If
prompt notice is not provided, “all liability of [First American] shall terminate with
regard to the matter or matters for which prompt notice is required.” However,
“failure to notify [First American] shall, in no case prejudice the rights of any
Insured under this policy unless [First American] shall be prejudiced by the failure
and then only to the extent of the prejudice.”
In the event of litigation concerning title, and “[u]pon written request by the
Insured . . . , [First American], at its own cost and without unreasonable delay, shall
provide for the defense of an Insured.” If the “policy permits or requires [First
American] to prosecute or provide for the defense of any action or proceeding,” the
insured is required to provide “all reasonable aid.” First American retained the
options of either paying out a claim to the insured or “sett[ling] with parties other
1
Because are reviewing the district court’s dismissal under Fed. R. Civ. P.
12(b)(6), we take the following facts from Park’s complaint. See Wilson v. Montano,
715 F.3d 847, 852 (10th Cir. 2013).
2
Although the policy was not attached to Park’s complaint, “if a plaintiff does
not incorporate by reference or attach a document to its complaint, but the document
is referred to in the complaint and is central to the plaintiff’s claim, a defendant may
submit an indisputably authentic copy to the court to be considered on a motion to
dismiss.” GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381, 1384
(10th Cir. 1997)
2
than the Insured.” Finally, a section titled “Limitation of Liability” provides that
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 or interest of the Insured or to the lien of the Insured
Mortgage, as insured.”
A number of third parties filed an action in Utah state court in September
2010, seeking to quiet title to the insured property. In October 2015, the state court
ruled that certain documents under which the Lambs claimed interest in the property
were not authorized by all of the owners, or purported to convey an interest the
grantors did not possess. Park’s deed of trust was accordingly also invalidated.
Park made a claim to First American under the policy, but the insurer refused
to pay. He then filed suit in Utah state court alleging breach of contract, breach of
the covenant of good faith and fair dealing, breach of implied-in-fact contract, and
unjust enrichment. First American removed the case to federal court and moved to
dismiss. The district court concluded that Park’s claims were time barred and
granted First American’s motion. Park timely appealed.
II
We review a district court’s dismissal under Rule 12(b)(6) de novo. Cty. of
Santa Fe v. Pub. Serv. Co., 311 F.3d 1031, 1034 (10th Cir. 2002). In reviewing a
12(b)(6) dismissal, we accept all well-pled allegations contained in the complaint as
true. Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006). A statute of
limitations bar is an affirmative defense, but may be resolved on a motion to dismiss
3
if “the dates given in the complaint make clear that the right sued upon has been
extinguished.” Aldrich v. McCulloch Props., Inc., 627 F.2d 1036, 1041 n.4 (10th Cir.
1980).
The parties agree that Park’s claims are governed by Utah Code § 31A-21-
313(1)(a), which requires that “[a]n action on a written policy or contract of first
party insurance shall be commenced within three years after the inception of the
loss.” In interpreting this Utah statute, we endeavor “to reach the same result that
would be reached in state court.” Etherton v. Owners Ins. Co., 829 F.3d 1209, 1223
(10th Cir. 2016). The district court concluded that Park suffered a loss when he was
served in the quiet title action, and thus his claims were time barred because they
were not filed within three years of that date. We disagree.
Courts in Utah have decided several cases interpreting the language at issue,
although our research has not uncovered any cases specifically dealing with title
insurance policies. Nevertheless, we view related authorities applying § 31A-21-
313(1)(a) to other types of policies as informative given that the statute’s broad
coverage.
In Tucker v. State Farm Mutual Automobile Insurance Co., 53 P.3d 947 (Utah
2002), plaintiffs sought to recover for personal injuries sustained in an automobile
accident. Id. at 948. In November 1996, the insurer provided partial payment but
denied certain expenses. Id. at 949. The Utah Supreme Court held that plaintiffs
were on notice as of November 1996 that the insurer “did not intend to fully
reimburse [their] medical expenses” and therefore the plaintiff’s claim, filed in
4
September 2000, was time barred. Id. at 952. The “inception of the loss,” the court
explained, “refers to the time when the loss was first incurred or began to accrue.”
Id. In addition, the court noted that Utah law prohibits an action against an insurer
until the insurer denies full payment. Id. (citing Utah Code § 31A-21-313(4)(c)). It
held that, “[i]n a case involving the alleged failure to pay [personal injury] benefits,
the inception of the loss occurs no later than the date on which the insurer refuses to
pay the disputed [personal injury] benefits, and such a refusal to pay constitutes
denial of full payment under section 31A-21-313(4)(c).” Id. (quotation and alteration
omitted).
In Anderson v. Beneficial Fire & Casualty Co., 442 P.2d 933 (Utah 1968), the
plaintiff sought insurance benefits for equipment that he discovered had been lost in
August 1965. Id. at 933. In July 1966, the insurer denied coverage. Id. His policy
required that any suit be “commenced within 12 months next after inception of the
loss.” Id. The court held that the period began to run on the date the equipment went
missing rather than the date the insurer denied benefits. Id. The district court in the
current case also relied on Canadian Indemnity Co. v. K & T, Inc., 745 F. Supp. 661(D. Utah 1990), which concerned a claim for breach of duty to defend. Id. at 662.
Relying on Anderson, the Canadian Indemnity court held that “‘inception of the loss’
contained in an insurance policy relates to the first moment that the loss was
incurred, not from the moment of the alleged notification to the insured that the
insurer would not comply with the terms of the contract.” Id. at 664. Accordingly,
5
“[i]n a suit for an alleged breach of an insurer’s duty to defend, the insured’s first
loss occurs when the insured first incurs expenses of defense.” Id.This court has considered § 31A-21-313(1)(a) in the context of an action
brought under the Employee Retirement Income Security Act of 1974. See Lang v.
Aetna Life Ins, Co., 196 F.3d 1102 (10th Cir. 1999). The plaintiff in that case
received long-term disability benefits from her insurer from 1979 to 1991. Id. at
1104. In June 1991, the insurer notified plaintiff that it no longer considered her
disabled and discontinued payments. Id. We held that “[t]he statute of limitations
was triggered not by the plaintiff’s personal disability in 1979 but only upon the
insurer’s alleged breach in 1991.” Id. at 1105.
The district court perceived some tension between the foregoing cases. We
conclude that any potential inconsistency dissipates if one focuses on the specific
loss alleged in each case. As the Utah Supreme Court has noted, determining the
beginning of a limitations period can be an “intensely fact-dependent inquiry.”
Russell Packard Dev., Inc. v. Carson, 108 P.3d 741, 746 (Utah 2005). To determine
when a loss is first incurred, we must define with particularity the loss at issue. In
Anderson, plaintiff sought to recover for lost equipment, and thus the loss began
when it went missing. 442 P.2d at 933. In Canadian Indemnity, the plaintiff sued for
funds expended in defending an action, and thus the loss began when plaintiff
incurred defense costs. 745 F. Supp. at 664. In both Lang and Tucker, the loss
occurred when the insurers stopped providing benefits. Lang, 196 F.3d at 1105;
Tucker, 53 P.3d at 952.
6
In this case, Park’s claimed loss is the invalidation of his interest in the
property caused by the defect in title. We conclude that the inception of this
particular loss was the date the state trial court issued its ruling. That reading is
consistent with the terms of the policy, which insulates First American from liability
“until there has been a final determination by a court of competent jurisdiction”
undermining the insured’s interest. First American points to other provisions in the
policy concerning its duty to defend and the parties’ respective rights and duties
during litigation. But Park is not claiming a loss based on failure to tender a defense.
Similarly, Park is not advancing a claim based upon clouded title caused by the
initiation of a lawsuit. We express no view on the date the limitations period might
begin for such claims; instead, we hold that Park’s specific loss began when the state
trial court ruled. 3
III
For the foregoing reasons, we REVERSE and REMAND for further
proceedings consistent with this order and judgment.
Entered for the Court
Carlos F. Lucero
Circuit Judge
3
First American urges us to affirm on various alternative grounds. We decline
to do so. “The better practice on issues raised below but not ruled on by the district
court is to leave the matter to the district court in the first instance.” Greystone
Constr., Inc. v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272, 1290 (10th Cir. 2011)
(quotation and alteration omitted).
7