BV Jordanelle, LLC v. Old Republic National Title Insurance
830 F.3d 1195
10th Cir.2016Background
- BV (mortgagee) obtained a mortgage and a title insurance policy from Old Republic on a parcel within the Aspens Property; policy effective 2008.
- BV foreclosed on the borrower (PWJ Holdings) in 2009 and acquired title at trustee’s sale.
- A Jordanelle improvement district later levied assessments in July 2009 that created a municipal lien senior to BV’s mortgage; PWJ never paid assessments.
- The improvement district foreclosed in 2010; state court allowed the foreclosure in 2012, extinguishing BV’s interest.
- BV sued Old Republic in federal court for breach of the title policy (claiming coverage for loss of the property and for failure to defend BV in the state litigation); district court granted judgment on the pleadings for Old Republic.
- On appeal, the Tenth Circuit reviewed de novo under Rule 12(c) and applied Utah law to interpret the policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Risk 2 (defect, lien, encumbrance existing at policy date) covers loss from the later municipal assessment | BV: prior notice/creation resolution and physical improvements made assessment inevitable, so encumbrance existed when policy issued | Old Republic: only an actual assessment or lien existing at policy date constitutes an encumbrance under Utah law | Held: No coverage; Vestin II controls—only an actual assessment/lien existing at policy issuance triggers Risk 2 |
| Whether Risk 2(c) (survey-discoverable encroachments) covers loss from physical improvements already on site | BV: physical improvements on parcel were encroachments disclosed by survey and thus covered | Old Republic: complaint alleges loss from foreclosure, not loss from encroachments; claim not pleaded | Held: Not considered—BV did not plead a distinct encroachment claim, so Risk 2(c) not available |
| Whether Risk 3 (unmarketable title) applies | BV: (raised on appeal) policy covers loss as unmarketable title | Old Republic: argument not raised below | Held: Forfeited—argument raised first on appeal and not preserved; court declines to consider plain-error without argument |
| Whether Risks 5, 8, 11 apply (subdivision enforcement, governmental taking, statutory mechanics-type lien) | BV: Assessment related to subdivision enforcement (Risk 5); Creation Resolution/lien amounted to governmental taking (Risk 8); assessment lien functions like statutory lien for improvements (Risk 11) | Old Republic: Risk 5 requires recorded notice of intent to enforce by policy date (absent); Risk 8 covers takings that predate policy; Risk 11 covers liens for services/labor/materials, not municipal assessment liens | Held: No coverage under Risks 5, 8, or 11—the required recorded notice or pre-policy taking is absent, and the municipal assessment is not a mechanics/statutory construction lien |
| Whether insurer had duty to defend BV in state-court foreclosure action | BV: insurer must defend because underlying suit challenged the priority of the mortgage and sought relief within policy coverage | Old Republic: duty to defend arises only if underlying allegations could result in liability under the policy | Held: Issue inadequately developed on appeal (BV failed to identify underlying claims and record); court declines to address and affirms dismissal |
Key Cases Cited
- Vestin Mortg., Inc. v. First Am. Title Ins. Co., 139 P.3d 1055 (Utah 2006) (holds policy language covering "defect in or lien or encumbrance on title" applies only to actual assessment/lien existing at policy issuance)
- Brewer v. Peatross, 595 P.2d 866 (Utah 1979) (earlier Utah Supreme Court decision on duty to disclose existence of special improvement district in warranty-deed context; discussed but superseded by Vestin II for this issue)
- Speros v. Fricke, 98 P.3d 28 (Utah 2004) (articulates Utah standard for insurer's duty to defend: underlying allegations that, if proved, could result in liability under the policy)
- Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138 (10th Cir. 2000) (Rule 12(c) motions reviewed under the same standard as Rule 12(b)(6) motions)