Old West Annuity and Life Insurance Co. v. Progressive Closing & Escrows Inc., (10th Cir. 2003)

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UNITED

STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

OLD WEST ANNUITY AND

LIFE INSURANCE COMPANY,

Plaintiff-Appellee,

v.

PROGRESSIVE CLOSING &

ESCROWS, INC.; EDWARD JONES,

doing business as Progressive Closing

& Escrows, Inc.,

Defendants-Appellants.

No.
name="1">02-7082

(D.C. No. 01-CV-593-S)

(E.D. Okla.)

ORDER AND JUDGMENT
name="txt*">(*)

Before TACHA, Chief Judge, BRORBY, Senior

Circuit Judge, and HARTZ,

Circuit Judge.

After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties' request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore

ordered submitted without oral argument.

In this diversity breach of contract action governed by Oklahoma law,

Progressive Closing & Escrow, Inc. and Edward Jones dba Progressive Closing

& Escrow, Inc. (Progressive) appeal the district court's grant of summary

judgment in favor of Old West Annuity and Life Insurance Company (Old West).

We affirm.

The material facts of this case are not in dispute. The parties agree that

Old West contracted with Progressive to close a $357,500 loan to certain

borrowers on a forty-acre parcel of undeveloped commercial property and to place

Old West in a first lien position on the property. Progressive closed the loan on

October 29, 1999, but Old West was placed in a third lien position, behind two

other mortgage loans that had been recorded on August 11, 1999. Old West

eventually foreclosed on the property, but received none of the foreclosure

proceeds because of its third lien position. It then brought a breach of contract

claim against Progressive.

Progressive argued the contract was ambiguous and invoked a supervening

impractibility defense. The district court rejected these arguments and granted

summary judgment in Old West's favor. Further, the district court ruled that the

proper measure of damages was "'the amount of money that is needed to put [Old

West] in as good a position as it would have been if the contract had not been

breached.'" Appellant's App. at 75 (quoting Okla. Unif. Jury Instructions (OUJI)

Civil 2d No. 23.51); see also Okla. Stat. tit. 23, § 21. Specifically, the

district

court ruled that damages would be the loan amount minus any payments received

by Old West toward reduction of the loan. The parties then stipulated that, under

the measure of damages determined by the district court, Old West's damages

totaled $357,464.65.

"We review the district court's grant of summary judgment de novo,

applying the same legal standard used by the district court." Simms v. Okla.

ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326

(10th Cir. 1999). "Summary judgment is appropriate 'if . . . there is no genuine

issue as to any material fact and . . . the moving party is entitled to a judgment

as a matter of law.'" Id. (quoting Fed. R. Civ. P. 56(c)). "The interpretation

of an

insurance contract is governed by state law and, sitting in diversity, we look

to the law of the forum state," here, Oklahoma. Houston Gen. Ins. Co. v.

Am. Fence Co., 115 F.3d 805, 806 (10th Cir. 1997).

Plaintiff first contends the contract is ambiguous because it did not

obligate Progressive to warrant, guarantee or insure that Old West would be

placed in a first lien position. In relevant part, the contract instructs Progressive:

Do not close or fund this loan unless ALL conditions in these closing

instructions . . . have been satisfied.

* * *

You are authorized to disburse funds on the Borrower's behalf and to

record all instruments when you comply with the following:

*This loan must record in a 1st lien position prior to the Loan

Commitment expiration date.

Appellant's App. at 54.

Progressive argues that these terms are somehow inherently contradictory

and, because there are no qualifiers or conditions, that reasonable jurors could

differ on the scope of the agreement. Under Oklahoma law, "[a] contract term

is ambiguous only if it can be interpreted as having two different meanings."

S. Corr. Sys., Inc. v. Union City Pub. Schs., 64 P.3d 1083, 1088, n.12

(Okla. 2002). "The Court will not create an ambiguity by using a forced or

strained construction, by taking a provision out of context, or by narrowly

focusing on the provision." Id. at 1089. We agree with the district court that

the contract is not ambiguous. Indeed, Progressive has admitted it assumed

a contractual duty to file a mortgage on Old West's loan such that Old West

would have a first lien position. Appellant's App. at 23, 45; Appellant's Br.

at 12.

Next, Progressive contends the district court erred in rejecting its

supervening impractibility defense. Progressive claimed that it had contacted

a third-party abstractor to perform a title search, or "gap search," from the time

the abstract of the property had last been brought current to the date of the loan

closing and had received a verbal report from the abstract company that the title

was clean.(1) Citing Restatement Second of

Contracts § 261,(2) Progressive

contends

it was relieved of its duty to perform under the contract because a supervening

event made performance impracticable, namely, a competing lien was filed before

Old West's was recorded. Appellant's Br. at 10. Progressive further argues this

supervening event occurred through no fault of its own because the third party

abstractor informed it that title was clean. These arguments are without merit.

A § 261 impracticability defense requires a party to show that

non-occurrence of the event was a basic assumption upon which the contract

was based. See Seaboard Lumber Co. v. United States, 308 F.3d 1283,

1294-95

(Fed. Cir. 2002) (citing United States v. Winstar Corp., 518 U.S. 839, 904 (1996),

and § 261). To the contrary in this case, the risk of a competing lien was

precisely the type of foreseeable event contemplated by the parties, and precisely

why Old West instructed Progressive not to close or fund the loan unless Old

West's loan would be recorded in a first lien position. Indeed, the existence of

competing liens was not even a "supervening" event, as they had already been

recorded at the time of the contract and the closing.

Progressive's argument that it is not at fault because it received a verbal

report of a clean gap search from a third party abstractor is also unavailing.

Ordinary principles of contract law recognize that an obligor cannot free itself of

contractually created duties by delegating them to another, without the consent of

the persons to whom it is obligated. See Headrick v. Rockwell Int'l Corp.,

24 F.3d 1272, 1278 (10th Cir. 1994); Minnetonka Oil Co. v. Haviland, 155 P.

217,

219 (Okla. 1916); Restatement (Second) of Contracts § 318(3). Old West did not

consent to any delegation of Progressive's obligations under the contract to the

third-party abstractor. Progressive's argument that it did not assume a duty to

perform a gap search is disingenuous. It agreed under the contract to provide

a title insurance commitment, and acknowledged it was required by the title

commitment to perform a gap search. See Appellant's App. at 30, 31. More to

the point, it assumed a duty not to close or fund the loan unless the first lien

position condition was met, and it failed in that duty. In short, the district court

correctly ruled that Progressive breached its contract as a matter of law.

Finally, Progressive contends the district court erred in determining

damages. It agrees that the proper measure of damages is the amount of money

needed to put Old West in as good a position as it would have been absent

a breach. See Okla. Stat. tit. 23, § 21, OUJI 23.51. It contends,

however, that the

district court invaded the province of the jury when it ruled the amount of the

loan, less any payments made by the borrower, constituted those damages.

It argues a jury could have concluded that, had Old West received a first lien

position in the absence of a breach, it could have successfully foreclosed on the

property and, therefore, the measure of damages should be one of two appraisal

values given for the property at the time of the foreclosure. We disagree.

Progressive breached the contract by funding the loan when it had not met

the pre-conditions for doing so. Returning those funds to Old West most directly

compensates it for the damages proximately caused by the loss of those funds.

Moreover, under Oklahoma law, the amount awarded for breach of contract "must

be ascertainable 'in some manner other than by mere speculation, conjecture or

surmise, and by reference to some definite standard.'" John A. Henry & Co., Ltd.

v. T.G. & Y. Stores Co., 941 F.2d 1068, 1071 (10th Cir. 1991) (quoting Great

W. Motor Lines, Inc. v. Cozard, 417 P.2d 575, 578 (Okla. 1966)). Progressive's

proposal to use a speculative appraisal amount based on a foreclosure sale in

which Old West is, hypothetically, the first lien holder, does not satisfy this

criteria. We find no error in the district court's determination of the proper

measure of damages.

The judgment of the district court is AFFIRMED.

Entered for the Court

Wade Brorby

Senior Circuit Judge

FOOTNOTES

Click footnote number to return to corresponding location in the text.

*. This order and judgment is not

binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. The court

generally disfavors the citation of orders and judgments; nevertheless, an order

and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

1. The abstract company claimed it

does not issue verbal gap search reports

and the closing statements do not indicate any payment for a gap search. As

noted below, this dispute is not material to Old West's breach of contract claim

against Progressive.

2. This provision states, "Where, after a

contract is made, a party's

performance is made impracticable without his fault by the occurrence of an event

the non-occurrence of which was a basic assumption on which the contract was

made, his duty to render that performance is discharged, unless the language or

circumstances indicate the contrary."

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