385 P.3d 670
Okla. Civ. App.2015Background
- Choate purchased six lots and a 28,000 sq. ft. building in Seminole, OK, on Sept. 28, 2005, and obtained an owner’s title insurance policy through Cadenhead Title (agent owned by attorney Ivie Cadenhead III).
- On Jan. 7, 2007, the building was destroyed by arson; the City later arranged demolition/cleanup immediately after the fire.
- Choate alleged Cadenhead had undisclosed conflicts (served on the former owner church board and was City Attorney) and that the City had a prior policy to raze certain downtown buildings—facts Choate claims were not disclosed in the title process and caused a title defect/unmarketability.
- Choate sued the title insurer (now Fidelity Title) for breach of contract (title policy), bad faith, negligence, and negligent retention; insurer moved to dismiss for failure to state a claim; trial court dismissed with prejudice; Court of Civil Appeals reversed and remanded for reasons; on remand the trial court clarified reasons and again dismissed with prejudice; Choate appealed.
- The appellate court reviewed whether Choate pled facts that could bring his loss (destruction of a building affixed to the land) within the title policy coverage (defect, lien/encumbrance, or unmarketability), and whether other tort theories or procedural complaints survived dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract (title coverage) | Choate: City’s pre-purchase policy to remove/demolish buildings (and agent’s nondisclosure) created a defect/encumbrance or unmarketable title covering the building loss. | Insurer: Title policy covers defects in title/encumbrances, not physical loss to a building; no recorded matter affected ownership or title; no claimants to title. | Held: Dismissed — loss was to the building (physical condition), not title; no recorded title defect alleged; policy did not cover the claimed loss. |
| Bad faith (insurer duty) | Choate: Agent’s failures and nondisclosure (imputed to insurer) support bad faith. | Insurer: There was a legitimate coverage dispute; withholding coverage not unreasonable. | Held: Dismissed — because coverage dispute was legitimate given lack of title-defect theory, bad faith fails. |
| Negligence / duty to monitor agents | Choate: Insurer negligently placed/failed to monitor Cadenhead, should have required disclosure of conflicts that affect marketability. | Insurer: No duty to monitor agents for speculative conflicts; statutory regime required abstract examination by attorney and Choate did not allege that requirement was breached. | Held: Dismissed — Choate did not allege breach of statutorily required abstract/examination or facts showing a duty to investigate/monitor was violated. |
| Negligent retention | Choate: Insurer knew or should have known of Cadenhead’s conflict and failed to remove him. | Insurer: Issue not preserved on appeal (not raised in petition in error). | Held: Dismissed as unpreserved. |
| Recusal / procedural objections | Choate: Trial judge should recuse; post-remand summary judgment and amendment should have been allowed. | Insurer: Proper procedures were followed; Choate failed to comply with briefing rules and recusal procedures. | Held: Dismissed — trial judge did not abuse discretion; Choate failed to follow in-camera Rule 15 disqualification procedure and summary-judgment filing rules. |
Key Cases Cited
- Rogers v. Quiktrip Corp., 230 P.3d 853 (Okla. 2010) (motions to dismiss reviewed de novo; dismissal tests legal sufficiency)
- Smith v. City of Stillwater, 328 P.3d 1192 (Okla. 2014) (pleading—dismissal appropriate only when plaintiff can prove no set of facts entitling relief)
- Christian v. American Home Assurance Co., 577 P.2d 899 (Okla. 1977) (insurer’s implied duty of good faith and fair dealing explained)
- Allison v. Gilmore, Gardner & Kirk, Inc., 350 P.2d 287 (Okla. 1960) (principal liable for agent’s acts only when within scope of authority)
- Porter v. Oklahoma Farm Bureau Mutual Insurance Co., 330 P.3d 511 (Okla. 2014) (contract interpretation: unambiguous policy language enforced as written)