No. 24883-2-II.The Court of Appeals of Washington, Division Two.
Filed: June 22, 2001. DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION
Appeal from Superior Court of Pierce County, No. 97-2-08755-0, Hon. Leonard W. Kruse, July 2, 1999, Judgment or order under review.
Counsel for Appellant(s), Lance C. Dahl, Preston Gates Ellis Llp, 5000 Columbia Center, 701 Fifth Avenue, Seattle, WA 98104-7078.
Counsel for Respondent(s), Fredrick R. Burgess, Burgess Fitzer Leighton Phillips PS, 1501 Market St, Ste 300, Tacoma, WA 98402-3333.
Ronald B. Leighton, Gordon Thomas Honeywell Malanca Peterson Daheim, P.O. Box 1157, Tacoma, WA 98401.
Dianne K. Conway, Gordon Thomas Honeywell Malanca, P.O. Box 1157, Tacoma, WA 98401.
Ronald B. Leighton, Gordon Thomas Honeywell Malanca Peterson Daheim, P.O. Box 1157, Tacoma, WA 98401.
Dianne K. Conway, Gordon Thomas Honeywell Malanca, P.O. Box 1157, Tacoma, WA 98401.
Nancy M. Allo, Chae Associates, 24823 Pacific Hwy S #108, Ste 104, Kent, WA 98032-5478.
HOUGHTON, J.
Lawyers Title Insurance Corporation (Lawyers Title) appeals a trial court order granting summary judgment dismissing its lawsuit against the law firm of Anderson, Burrows Galbraith and two of its lawyers, Grant Anderson and Sang Chae.[1] We affirm.
FACTS
Soon Baik retained Anderson, Burrows Galbraith (the Law Firm) to probate the intestate estate of her deceased husband, Jae-Kon Baik. Jae-Kon Baik died in Oregon, although he owned substantial residential and commercial properties in Washington. The Law Firm delegated work on the estate to a Rule 9[2] intern, Sang Chae. Chae retained Hyun Park to prepare the estate tax return. After what appears to have been a collaborative effort with Soon Baik and Chae, Park concluded that the estate owed no taxes. In order to reach this conclusion, Park relied upon the affidavit of immigration attorney Bart Klein, which characterized Jae-Kon Baik as a resident of the United States for estate tax purposes. Klein based his conclusion upon Chae’s determination that all of the Baik property was community. Chae based his conclusion upon the information Soon Baik provided to him concerning the source of the funds used to purchase property in the United States. He said that Soon Baik told him the money to buy the property came from marital earnings.
On December 30, 1991, the Baik estate settled litigation brought by Jae-Kon Baik’s brother. The settlement called for the transfer of some Snohomish County residential property to the brother by quit claim deed.
The brother then transferred the property to his two children, who applied for title insurance through Lawyers Title. The preliminary title report excepted estate taxes.
Lawyers Title hired an independent firm named `Exams by the LB, Inc.’ (Exams) to review the probate file, an action in which Lawyers Title never engaged. In its report to Lawyers Title, Exams noted that no inheritance tax releases[3] were on file. Chae testified that Lawyers Title contacted him in mid-July 1992, seeking a status letter on the estate tax return. On July 13, 1992, Chae, now a licensed attorney, wrote a letter to Lawyers Title: `By this letter I am informing you that, based on our tax preparation, no estate taxes are due and owing to the state or federal government. Likewise, to my knowledge, no other taxes are outstanding against the estate . . . Please bill Mr. Baik $50.00 for my time.’ Clerk’s Papers at 224. Lawyers Title removed the estate tax exception and issued a title policy for the residential property. On July 20, 1992, Soon Baik filed a Declaration of Completion of Probate in Snohomish County Superior Court in which she asserted `{t}he amount of State Inheritance Tax and/or Federal Estate Tax due as the result of the decedent’s death has been determined, settled and paid.’ Clerk’s Papers at 722.[4] Lawyers Title issued a title policy on the residential property in July 1992 with no estate tax exceptions.
In November 1992, Chae asked Lawyers Title to provide title insurance for some commercial property the Baik estate was selling. No exception to estate taxes was noted on the preliminary title report. The probate report from Exams again stated `{d}eclaration of completion says taxes were paid; no release in file.’ Clerk’s Papers at 180. Roberta Robbins was the senior title officer from Lawyers Title on both the residential and commercial property files. She testified that she never saw a reference to the opinion letter in the commercial property file. There was no cross-reference in the commercial property file to the residential property file and Robbins did not specifically recall the commercial property transaction. Robbins stated, `I have no knowledge that {the examiner} knew about the previous file{,}’ and that she would not expect him to. Clerk’s Papers at 184. She testified that if a title officer were to remove an exception or make another important decision on the basis of information not contained within the file, he or she would normally cross-reference that information. She also testified that she remembered thinking that the opinion letter must have been conclusive as to all property in the Baik estate. Lawyers Title issued the title insurance policy on the commercial property in January 1993, with no estate tax exceptions.
On July 21, 1995, the IRS determined that the Baik estate owed $392,733, including an $18,702 penalty for failure to timely file the estate tax return. The primary reason for the increase in estate value was a recharacterization of Jae-Kon Baik’s property as separate rather than community. Lawyers Title eventually paid the IRS $618,195.53 in taxes, interest, and penalties and filed a lawsuit, alleging, inter alia, that the Law Firm and two of its lawyers, Grant Anderson and Sang Chae, engaged in negligent misrepresentation and fraud.[5] In May 1999,[6] the Law Firm[7] moved for summary judgment. The trial court granted the motion and dismissed Lawyers Title’s claims against all of the defendants. Lawyers Title appeals the summary judgment order only as to dismissal of the negligent misrepresentation claims.
ANALYSIS Negligent Misrepresentation
Lawyers Title contends that the trial court erred in dismissing its negligent misrepresentation claims. It further asserts that the question of whether Lawyers Title justifiably relied upon a representation is a genuine issue of material fact and should not have been decided on summary judgment.
In opposition, the Law Firm does not contest that Lawyers Title relied upon the statement in issuing the residential property title insurance policy. Instead, it argues that assuming there was reliance, it was unjustifiable as a matter of law. Analyzing a negligent misrepresentation claim involves asking: (1) whether a misrepresentation was made; (2) whether a party relied on the misrepresentation and; (3) whether the party was justified in doing so. Restatement (Second) of Contracts § 522 (1979).[8]
At summary judgment, the Law Firm set forth three arguments: (1) Chae’s opinion letter was not a misrepresentation; (2) if the opinion letter was a misrepresentation, Lawyers Title unjustifiably relied upon it; and (3) partial summary judgment was appropriate because the opinion letter referred only to the residential and not to the commercial property. After argument, the trial court dismissed all of Lawyers Title’s claim. In ruling on the motions, it did not indicate upon which ground it granted the motion. Nevertheless, because our review is de novo, we may affirm the trial court on any ground the pleadings establish and the record supports. Mountain Park Homeowners Ass’n v. Tydings, 125 Wn.2d 337, 344, 883 P.2d 1383 (1994). For the following reasons, we hold that reasonable minds could not differ that Lawyers Title unjustifiably relied upon the Law Firm’s representations. Standard of Review The party moving for summary judgment bears the burden of showing the lack of any genuine issue of material fact and entitlement to judgment as a matter of law. Whatcom County v. City of Bellingham, 128 Wn.2d 537, 549, 909 P.2d 1303
(1996). Summary judgment may be appropriate although a fact is genuinely disputed; the fact must be material. `A material fact is one upon which the outcome of the litigation depends.’ Fischer-McReynolds v. Quasim, 101 Wn. App. 801, 808, 6 P.3d 30 (2000) (internal quotations omitted). On appeal, we view all facts and reasonable inferences in the light most favorable to the nonmoving party. Tydings, 125 Wn.2d at 341.
We affirm a judgment as a matter of law when reasonable minds could only reach the same conclusion as the trial court. See Douglas v. Jepson, 88 Wn. App. 342, 945 P.2d 244 (1997), review denied, 134 Wn.2d 1026 (1998).
In order to explain why Lawyers Title unjustifiably relied, we turn first to the purpose of title insurance:
Examination of record title or an abstract of the record title of real property is both an esoteric and a painstaking process. Evaluation of the status of title requires considerable expertise. It was for these reasons that the concept of title insurance was developed and similar reasoning has made the furnishing of title insurance a successful business . . . A policy issues based upon the informed opinion of title examining experts employed by the company that title is in the condition expressed in the policy. As a matter of public policy a duty is imposed upon the title company to make a thorough and competent search of the record title.
Lawyers Title Ins. Co. v. D.S.C. of Newark Enters., Inc., 544 So.2d 1070, 1072 (Fla.Dist.Ct.App. 1989) (internal citations omitted).
Thus, Lawyers Title had an independent duty to investigate. In other words, Lawyers Title’s right to rely on a representation is inseparably linked to its duty to use diligence in interpreting representations made to it. Puget Sound Nat’l Bank v. McMahon, 53 Wn.2d 51, 52, 330 P.2d 559
(1958). Here, Chae’s letter stated that `based on our tax preparation, no estate taxes are due and owing{.}’ Clerk’s Papers at 224. The Law Firm further provided a Declaration of Completion of Probate. Lawyers Title argues that these constituted a representation upon which it could justifiably rely. We disagree.
Lawyers Title’s own guidelines require that if a decedent dies intestate, the company must obtain an `indemnity bond signed by an approved surety company . . . protecting {the} Company against any debts or estate or inheritance taxes{.}’ Clerk’s Papers at 290-91. Furthermore, in order to protect it against potential liability for federal estate taxes, Lawyer’s Title requires that a title policy issued before complete administration[9] of an estate must contain an exception for estate taxes unless the estate procures a bond that indemnifies the company against loss due to the omission of the exception. Neither Chae’s letter nor Soon Baik’s declaration stated that there had been a complete administration of the estate. Although a Declaration of Completion of Probate cannot be filed before an estate is completely administered,[10] it does not warrant that an estate is completely administered or has no tax liability, nor is it intended to do so. RCW 11.68.110(2). It serves as a notice to heirs of their distributive share of an estate and of the fees claimed by the personal representative, lawyers, appraisers, or accountants. A personal representative will not file the declaration until he or she believes the estate is completely administered for practical reasons, because the intended effect of the declaration is to divest the personal representative of his or her powers. RCW 11.68.110(2). Lawyers Title failed to comply with its own guidelines by either excepting liability for estate taxes or procuring an indemnification bond, and failed to fulfill its independent duty to investigate. Thus, it unjustifiably relied upon the Law Firm’s representations.[11] Affirmed.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
WE CONCUR: SEINFELD, J., HUNT, A.C.J.