United Bank v. Insurance Company

• Court: Court of Appeals for the First Circuit
• Decided: February 12, 1999
• Docket: 98-1903
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-1903



                           UNITED BANK,



                      Plaintiff, Appellant,



                                v.



                 CHICAGO TITLE INSURANCE COMPANY,



                       Defendant, Appellee.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                    FOR THE DISTRICT OF MAINE



         [Hon. Eugene W. Beaulieu, U.S. Magistrate Judge]


Before



                     Boudin, Circuit Judge,

                                

                 Coffin, Senior Circuit Judge,

                                

                   and Lynch, Circuit Judge.


Richard Silver with whom Russell, Lingley & Silver was on

brief for appellant.

     Joel C. Martin with whom Petruccelli & Martin was on brief for

appellee.


February 12, 1999


BOUDIN, Circuit Judge.  In 1992, United Bank of Bangor,

Maine, loaned Northern Products, Inc. ("Northern") $1.15 million. 

The loan was guaranteed by Falcon, Inc., a company under the same

ownership as Northern, and secured by a mortgage on Falcon's

sporting lodge and 900-acre wilderness property in Maine (the

"Spencer Lake property").  The Spencer Lake property includes two

miles of lakefront, but its only road access runs from Route 201

for seventeen miles over a road on privately owned land.

  Northern, the previous owner of the Spencer Lake property

before its transfer to Falcon, held a deeded right of way for

eleven of the seventeen miles.  Ernie Caliendo, owner of both

Northern and Falcon, had obtained a revocable $100-per-year license

granting a right of access over the remaining six miles.  That

license, which had been obtained with the assistance of attorney

Thomas Needham, expired in 1990 and was not renewed.

  During negotiations over the terms of the l992 loan,

United Bank had received from Needham, acting as an agent for the

insurer, a certificate of title from Chicago Title Insurance

Company, Inc. ("Chicago Title") in April 1992.  The certificate

said that access to the property was via "private right of way,"

and it indicated that title for this private right of way had been

checked.  The certificate purported to serve as temporary insurance

against loss or damage due to a "failure of [the certificate] to

reflect correctly the record title"; it further provided that it

would be "of no further force and effect" after Chicago Title

issued United Bank a permanent insurance policy.

  Shortly thereafter, United Bank closed the loan with

Northern and entered into a more permanent lender's title insurance

contract with Chicago Title.  Under the policy, Chicago Title

insured United Bank (up to $1.15 million) for "loss or damage"

resulting from, inter alia, "unmarketability of title" or "[l]ack

of a right of access to and from the land."  The policy was subject

to exceptions, but they are not immediately pertinent here.  It

also stated that the policy represented "the entire policy and

contract" between the insured and Chicago Title.

  By the summer of 1994, Northern had become unable to meet

its loan repayments, and Caliendo sought and won United Bank's

approval to conduct a nonjudicial sale of the Spencer Lake

property.  Alan Nowicki entered the highest bid at the auction and

signed a sales contract obligating him to pay $925,000 for the

entire parcel.  Months later, Nowicki sued Falcon, Caliendo, and

United Bank alleging that he had been promised "deeded access" to

the property by a representative of the bank. 

  Chicago Title disclaimed any obligation to defend or

indemnify against losses caused by the Nowicki lawsuit.  United

Bank then successfully thwarted Nowicki's attempt in state court to

delay the sale of the Spencer Lake property to a new buyer, and the

property was auctioned in December 1995 for $890,000 (the bidders

having been told that access depended in part on an expired license

and advised to make their own inquiries).  According to United

Bank, Nowicki has apparently lost interest in the controversy,

although his lawsuit remains pending.

  When Chicago Title refused to defend against the Nowicki

lawsuit, separate suits were brought against Chicago Title by

Falcon, under a title policy it had obtained in 1986, and by United

Bank under the 1992 policy already described.  The Falcon lawsuit

was  decided in favor of Chicago Title on summary judgment, and the

dismissal was affirmed by this court in an unpublished opinion. 

Falcon, Inc.  v. Chicago Title Ins. Co., No. 96-2249, 1st Cir.,

June 12, 1997.  As United Bank was not a party to that case, we do

not treat that unpublished decision as governing the present

litigation, see Loc. R. 36.2(b), but our decisions to the extent

they overlap are not inconsistent.

  United Bank's lawsuit, which is the subject of the

present appeal, sought a declaratory judgment that Nowicki's suit

was covered by Chicago Title's policy; United sought damages for

the costs of defending the Nowicki lawsuit and for losses suffered

"as a result of unmarketability and lack of access" to the

property.  In addition to the cost of the Nowicki lawsuit, the

complaint asked for reimbursement for expenses incurred in

maintaining the property during the litigation and the reduced

price received compared to what Nowicki had been willing to pay in

the original contract.  

  In the district court, the parties agreed to proceed

before a magistrate judge under 28 U.S.C.  636(c).  Chicago Title

moved for summary judgment, which the magistrate judge granted.  He 

said that the policy promised to indemnify against losses due to

the lack of a "right of access"; and he held that such a right of

access did exist under state law--namely, by water over Spencer

Lake.  On this premise (and viewing the "unmarketability" provision

as redundant), he ruled that Chicago Title had no duty to defend or

to indemnify.  United Bank now appeals.

  At the outset, it is helpful to distinguish between

Chicago Title's duty to defend and its duty to indemnify against

losses due to specified causes, such as a lack of a "right of

access."  The two may overlap but are not identical.  Under the

express  language of the policy, the duty to defend exists where

the law suit "asserts" an adverse claim alleging a defect in title

or "other matter" insured against by the policy.  Thus, a lawsuit

asserting lack of a right of access could be covered even if a

right of access were later proved to exist.

  Under Maine precedent, the duty to defend is determined

more or less mechanically by comparing the allegations in the

underlying lawsuit (here, Nowicki's complaint) with the insurance

policy putatively creating the duty to defend (here, Chicago

Title's 1992 policy covering the bank) to determine if "there

exists any legal or factual basis which could be developed at trial

which would obligate the insurers to pay under the policy." NE

Properties, Inc. v. Chicago Title Ins. Co., 660 A.2d 926, 927 (Me.

1995) (quoting Baywood Corp. v. Maine Bonding and Casualty, 628

A.2d 1029, 1030 (Me. 1993)).

  Here, the thrust of Nowicki's suit, so far as access is

concerned, is his express claim in the complaint that he was

specifically promised by United Bank--an attorney is named as the

one making the promise--not merely actual access or even a right of

access, but "deeded access."  To make that allegation match the

policy in this case, we would have to accept either that the policy

insuring a "right of access" actually means to insure "deeded

access," or that although Nowicki's complaint refers to deeded

access, the complaint shows "through general allegations" a

"possibility" that the claim falls within the policy.  Gibson v.Farm Family Mut. Ins. Co., 673 A.2d 1350, 1352 (Me. 1996).

  The Chicago Title insurance policy nowhere provides any

assurance of deeded access.  All that is protected is a "right of

access," which could be secured in a variety of ways.  No doubt

deeded access--e.g., a perpetual easement granted in a deed by the

owner of the intervening property--would be more valuable than,

say, an easement by necessity under state law or a year-to-year

license for a fee, such as that originally secured by Caliendo but

allowed to lapse.  Read according to its terms, the policy does not

cover a lawsuit whose gravamen is the promise of something

different from and more valuable than a generic right of access.

  Nor is this a case where the allegations of the complaint

are "general" and a "possibility" remains of specifics being

furnished that would bring the complaint within the ambit of the

policy.  The duty to defend in such a case exists under Maine case

law where the general allegations may invoke coverage and no

specifics exclude the possibility.  Here, the specifics were

furnished and do exclude coverage: counts I and III of Nowicki's

complaint are both specifically grounded in an alleged promise of

"deeded access" (count II is concerned only with relief).  

     On this appeal, United Bank's first and main response is

that the policy should not be read standing alone.  United Bank

points out that the original certificate of title issued by Chicago

Title, essentially a report by Needham on his title search as of

March 1992, states that access to the property is by "private right

of way."  Taken in conjunction with surrounding language, this

could be read as asserting that "title" to such a right of way had

been established.  The language of the certificate is somewhat less

precise than this, but we will assume that it could have been so

read or at least created an ambiguity that might be litigated.

     The difficulty with the bank's argument is that Chicago

Title's certificate by its terms explicitly disclaimed liability

after the policy issued, and the policy itself explicitly purports

to be an integrated document stating the full scope of Chicago

Title's obligations.  It would contradict both provisions (the

disclaimer and the integration clause) to read into the policy an

assurance that there existed not just a right of access, but a

"private right of way" confirmed by a title search.  Whether or not

there might have been some reformation remedy under Maine law need

not be considered, cf. Yaffe v. Lawyers Title Ins. Co., 710 A.2d

886 (Me. 1998), for no such remedy was invoked.

     The case does not end with our conclusion that Chicago

Title had no obligation to defend the Nowicki lawsuit and is not

liable for United Bank's expenses in defending the lawsuit or for

delays in the sale of the property that were caused by the suit. 

There remains the possibility that United Bank did suffer loss from

lack of a "right of access"; if there were something less than a

right of access, presumably the property would have been worth

somewhat less to the ultimate purchaser, enlarging the deficiency

United Bank claims to have suffered on the mortgage.  We say

"somewhat less" with trepidation because--even if  we assume that

Falcon had something less than a "right of access" (the next

question to be addressed)--the reduction in value may be

negligible.  After all, the intervening land owner had been willing

to give a right-of-way license for $100 a year; and nothing in the 

record suggests that the new owner--who paid almost Nowicki's price

for the land--anticipated any difficulty in obtaining such a

license or obtaining effective access by other means.  An affidavit 

by Caliendo, offered by the bank in the district court, states that

he told Nowicki that

     the road in from Rt. 201 was a wide, heavily

     traveled woods road, frequently used for

     recreational use, and that the public used

     this woods road constantly and that the road

     was part of the 'Land Share' program providing

     access for the public to the woods.  We

     discussed how this access situation was common

     in the woods of Maine, and that although I had

     at one time obtained a license agreement to

     use the road, I felt it was not necessary.

     The magistrate judge by-passed this issue by concluding

that a "right of access" existed to the Spencer Lake property

without regard to access through the intervening property.  He

concluded that under Maine case law, a right of water access can be

treated as a right of access; and because the property at issue

fronts on Spencer Lake and no one disputes that Spencer Lake is a

public lake to which public access is available, the policy's

assurance of a right of access had been met.  

     We are not comfortable with this answer.  It appears to

be true under Maine case law that water access can be sufficient to

defeat a claim of a right to an easement by necessity across

another's land.  See Amodeo v. Francis, 681 A.2d 462, 466 (Me.

1996).  And United Bank does not dispute that an owner of the

Spencer Lake property would have a "right" to reach Spencer Lake

over the property of other fronting landlords and a "right" to use

Spencer Lake to reach the property in question.  But its opposition

to summary judgment certainly does raise a question whether in this

case water access is effective.

     United Bank offered an affidavit of Caliendo directed

specifically to access.  It says that although the property fronts

on Spencer Lake, "it is not possible to use the lake to gain useful

access"; the boat ramp at the other end of the lake belongs to the

paper company and in any event the road to it is "snowed in all

winter"; heavy equipment needed to develop the property cannot be

moved in by boat; and even for passengers, a boat cannot be used to

get to the part of the lake where the property's lodge is located

"if the water level is too low."

     Even without more--and there is a bit more although not

in affidavit form--this seems to us to raise a factual question

whether water access, even if a "right," is meaningful access in

this case.   No Maine case furnished to us suggests that the "right

to access" protected by title insurance would make water access

sufficient if such access were not realistic access.  Water access

in this case may or may not be meaningful, but it is not clear how

its adequacy could be decided in favor of Chicago Title on summary

judgment, given the bank's affidavit.

     Chicago Title tells us that there is access by seaplane

landing on the lake and that visitors to a recreational property

often travel in this manner.  Possibly there are situations in

which a right of access in this manner is all that is required. 

But there is no case law cited to us showing that this is always so

for all property, and common sense recoils from such a suggestion. 

Thus, we conclude that--if there is no "right" of land access (and

perhaps there is one "by necessity")--the record creates an issue

of fact as to whether a "right" by any other means (assuming one

exists) is adequate in this case.

     With reluctance, we are therefore obliged to remand the

case for further proceedings on the issue whether there existed an

effective "right of access" to the property, by land or otherwise,

and if not, whether the lack of such a right diminished the value

of the property.  Caliendo's first affidavit quoted above, claiming

that land access was freely available and a license almost a

formality, makes us doubtful that the bank has much prospect of

substantial damages on this score, especially since the bank

conceded in interrogatory answers that (so far as it knew) "access

has never been blocked or threatened."

     A further reason for our dismay at further proceedings

rests on a different affidavit, this one provided by United Bank's

own president, Bruce Bartlett.  In recounting the history of his

dealings with Caliendo, Bartlett refers to Nowicki's concern about

the lack of "deeded access over the six miles" and continues:

          I recall that Caliendo had brought this

     up at the time of the loans, and that it is a

     common situation in the woods.  His attorney

     provided us with a clean title policy, so I

     was under the impression that this state of

     affairs was not a problem.



          Being familiar with the north woods and

     the logging business, this did not seem

     troubling to me.  The Boise Road off Rt. 201

     has been a heavily used public access to the

     woods for years, and I have never heard of

     this being a problem.



This, coupled with several of the bank's interrogatory answers,

suggests that when United Bank made the original loan or loans to

Northern and obtained the  certificate and policy, it knew what

level of land access existed.

     Before United Bank takes more of the district court's

time in this matter, we think that United Bank needs to reflect

carefully about whether it has a serious claim for reduced value

based on the "right of access" clause in the policy where access

was apparently available for a nominal payment.  Conversely, since

Chicago Title's agent also apparently knew the true situation, a

split-the-difference payment might be less costly to it than

further litigation and the risk of paying all of the difference

between some "true" value of the property with a right of access

and the later sale price.

     To conclude, we affirm the judgment of the magistrate

judge insofar as he dismissed the duty to defend claim and reverse

the judgment and remand for further proceedings insofar as he

dismissed a claim of loss due to the alleged lack of a right of

access to the property.  Each side will bear its own costs on this

appeal.

     It is so ordered.