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Wells Fargo Bank, N.A. v. Stewart Title Guaranty Co.

Nos. 21-4111 & 21-4115. 12/12/2022. D.Utah. Judge Bacharach. Title Insurance—Title Defect—Valuation of Loan Collateral—Prejudgment Interest.

December 12, 2022

Wells Fargo Bank, N.A. (Wells Fargo) entered into a loan agreement with Talisker Finance, Inc. (Talisker). Under the loan agreement, Talisker gave Wells Fargo a security interest in Parcels A, B, and C, which were owned by Talisker’s affiliates. Wells Fargo insured the title to the parcels with Stewart Title Guaranty Company (Stewart) (policy). The policy provided that Wells Fargo would obtain from Stewart the amount that the collateral had diminished in value if a title defect existed. Talisker defaulted on the loan, and it couldn’t deliver good title on roughly 127 acres within Parcel B, so Wells Fargo made a policy claim. The parties couldn’t agree on the amount that Stewart owed Wells Fargo, and Wells Fargo sued Stewart. The district court awarded Wells Fargo $3,210,200 as the value of the segment of Parcel B that Talisker’s affiliates didn’t own (the lost parcel), which included the value of the land and the improvements thereon.

On appeal, Stewart argued that the loss of the collateral didn’t diminish the value of the collateral as a whole. It maintained that the district court acknowledged that the title defect hadn’t diminished the value of the collateral. Here, the district court found a diminution in value under the policy based solely on the value of the lost parcel. Stewart’s contrary interpretation disregards the context of the district court’s discussion, which included a finding that the lost parcel didn’t affect the remaining collateral’s value, so its argument fails.

Stewart also argued that the improvements to the lost parcel should be disregarded because Wells Fargo hadn’t intended to include them in the collateral, since Wells Fargo had appraised the parcels earlier without the improvements. Here, the policy unambiguously included the improvements in Parcel B: high-speed chairlifts, a telecommunication facility, and a ski patrol building. Accordingly, the district court reasonably relied on the unambiguous language in the loan agreement to infer that Wells Fargo had intended to obtain a security interest in all of Parcel B. Therefore, the district court didn’t clearly err by including the value of the improvements when valuing the lost parcel.

Stewart further contended that the district court erred in awarding Wells Fargo $3,210,200, noting that no witness had used this figure as the total value. Here, the court used Stewart’s expert’s valuation of the land at $330,200 and Wells Fargo’s expert’s valuation of the telecommunications facility and the two high-speed chairlifts at $2,860,000. The parties agreed on the value of the ski patrol building at $20,000. The court then added these amounts to the value of the land, arriving at a total of $3,210,200. Stewart did not identify any errors in this calculation. Accordingly, the district court did not err in the award amount.

Wells Fargo argued that it should have been awarded prejudgment interest and the district court erroneously concluded that too many uncertainties existed to award prejudgment interest. Under Utah law, prejudgment interest is available for damages that are complete and are measurable by established evidence rules and known standards of value. Utah courts focus on the ability to fix the loss at a definite time and to calculate the amount accurately in accordance with well-established damages rules. In this case, the district court didn’t consider whether the damages were fixed, but both parties’ appraisers valued Wells Fargo’s loss as of the date on which Wells Fargo tried to foreclose on the lost parcel. Therefore, the district court should have fixed the loss on that date. In addition, the land and the improvements had defined market values and the district court used a measure of damages subject to calculation, so a prejudgment interest award was required. Accordingly, the district court erred.

The liability determination and the calculation of the diminution in value to the collateral were affirmed. The denial of prejudgment interest was reversed, and the case was remanded to determine the amount of prejudgment interest owed to Wells Fargo.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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