Opinion
J-A29036-16 No. 451 WDA 2016
01-20-2017
NORTHWEST SAVINGS BANK, Appellant v. FIDELITY NATIONAL TITLE INSURANCE COMPANY AND THE CLOSING COMPANY OF PA
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Order entered December 23, 2015 in the Court of Common Pleas of Butler County, Civil Division, No(s): 13-11107 BEFORE: DUBOW, MOULTON and MUSMANNO, JJ. MEMORANDUM BY MUSMANNO, J.:
Northwest Savings Bank ("Northwest") appeals from the Order granting the Cross-Motion for Summary Judgment filed by Fidelity National Title Insurance Company ("Fidelity"), and denying Northwest's Motion for Partial Summary Judgment. We affirm.
As this appeal was filed from an Order dismissing only Counts I and II of the Amended Complaint, it appeared that Fidelity's counterclaim remained pending, along with Northwest's claims against The Closing Company of PA ("TCCPA"). Therefore, a Rule to show cause as to why this appeal should not be quashed as interlocutory was issued. Northwest responded to the Rule, and indicated that the Order appealed from disposed of Fidelity's counterclaim. Northwest further indicated that it would enter a default judgment against TCCPA. Northwest thereafter submitted proof to this Court of the May 5, 2016 default judgment taken against TCCPA. Having been presented with satisfactory evidence of finality, this court discharged the Rule on May 10, 2016, on the basis that the December 23, 2015 Order appealed has been rendered final and appealable. Accordingly, Northwest's prematurely taken appeal has been perfected. See Johnston the Florist , Inc. v. Tedco Constr. Corp., 657 A.2d 511, 513 (Pa. Super. 1995) (holding that, when an appeal has been filed prior to the entry of judgment, jurisdiction in appellate courts may be perfected after an appeal notice has been filed upon the docketing of a final judgment).
In its Opinion, the trial court set forth the relevant factual and procedural history, which we adopt for the purpose of this appeal. See Trial Court Opinion, 5/9/16, at 1-4.
On appeal, Northwest raises the following issues for our review:
1. Whether the [trial court] properly interpreted the title insurance policies at issue and relevant law to conclude that Northwest "assumed" or "agreed" to pre-existing mortgages intending to be paid off[?]Brief for Appellant at 2-3.
2. Whether the [trial court] properly used a "balancing of the equities" approach in contract interpretation to assert that [Northwest] consented to the existence of priority mortgage liens in a case requiring contract interpretation[,] and in light of the fact that TCCPA committed fraud solely within the scope of an authorized title insurance agent?
3. Whether the [trial court] erred as a matter of law by failing to consider the subsequent and intervening fraud of Fidelity's title insurance agent in connection with the closing protection letter issued by Fidelity?
4. Whether the [trial court] erred by concluding that no material facts remain in dispute, including a conclusion regarding an intent by Northwest to assume or agree to pre-existing mortgages?
As Northwest's first and second issues are related, we will address them together. In its first issue, Northwest contends that, pursuant to the plain language of the final Loan Policy of Title Insurance ("the Final Policy") issued to Northwest by Fidelity, through its title agent, TCCPA, Northwest "was protected against [] defects in title, including any defect arising where Northwest would not have the priority lien." Id. at 16. Northwest argues that the trial court erred by finding that Fidelity was not bound by the language of the Final Policy, which, Northwest asserts, should indemnify it "against the exact occurrence which arose" in this case. Id. Northwest asserts that, in arriving at its conclusion that Northwest was not entitled to coverage, the trial court incorrectly interpreted the Section 3(a) exclusions, as set forth in the Final Policy. Id. Specifically, Northwest claims that the trial court erred by determining that Northwest "assumed" or "agreed" to the existing priority liens held by Citizens Bank of Pennsylvania ("Citizens") and Charter One ("Charter"), based on Northwest's knowledge of the liens prior to entering into the mortgage loan agreement with Thomas and Lisa McIntyre for the refinancing of their home ("the McIntyre transaction"). Id. at 16-17.
Northwest argues that, in reaching its conclusion, the trial court improperly concluded that an insured with knowledge of existing liens unequivocally assumes or agrees to those liens. Id. at 17. Northwest contends that the trial court's conclusion is contrary to industry practice and the holding and reasoning of American Sav. & Loan Ass'n v. Lawyers Title Ins. Corp., 793 F.2d 780 (6th Cir. 1986), which, Northwest asserts, is the established standard for the interpretation of the Section 3(a) exclusions. Brief for Appellant at 17. Northwest contends that, in order to exclude title coverage, "the prospective insured must specifically know the defects it wishes to assume and demonstrate some 'degree of intent' to take the property, and title insurance, subject to these defects." Id. at 18 (citing Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., 2011 U.S. Dist. LEXIS 16446 (E.D. Pa. 2011). Northwest asserts that, where, as in this case, there is mere negligence or innocent conduct of the insured, title coverage should not be denied. Brief for Appellant at 18, 21. Northwest points to the holding in Beneficial Mut. Sav. Bank v. Stewart Title Guar. Co., 36 F. Supp. 3d 537 (E.D. Pa. 2014), and claims that the facts of that case are distinguishable from those in the instant case. Brief for Appellant at 20 (arguing that "Northwest has unequivocally affirmed, and documented throughout, that it intended to receive the first priority, and sole lien[,] against the McIntyre [p]roperty by the refinancing loan.").
Northwest argues that "there are no documents in this case revealing intent by Northwest to take anything less than the first priority mortgage" and that "Fidelity has relied solely on the language of the Final Policy that is ambiguous at best, and inapplicable under a proper analysis of Am[erican] Sav. & Loan." Id. Northwest contends that it "directed the title agent to pay[ ]off Citizens and Charter[,] and to provide Northwest with the first priority mortgage[,]" and "only accepted the issued Final Policy due to the misrepresentation of Fidelity's title agent removing the Citizens and Charter[] liens from the exceptions in the [F]inal [P]olicy received after the loan closing." Id. at 20-21.
Northwest asserts that, despite acknowledging Northwest's innocence, the trial court erred by using a "balancing of the equities" approach to determine that Northwest "was in the better position to assume the risk in [the] transaction[,] and that the liens were not subject to coverage under the Final Policy." Id. at 21, 22. Northwest claims that "[t]he only conduct identified by the [trial c]ourt remotely relevant to any 'negligence' by Northwest was the fact that it forwarded the funds and payoff schedule to TCCPA[,] directing how the loan funds were to be distributed[,] to ensure that the proper parties received payment." Id. Northwest argues that it is "untenable to find that [this] conduct was in any way 'improper' much less something beyond 'mere negligence.'" Id. at 21-22.
In its second issue, Northwest contends that, despite its determination that both Northwest and Fidelity were largely blameless, the trial court erred by granting summary judgment in favor of Fidelity, "despite the issuance of a closing protection letter which indemnified [Northwest] if Fidelity's agent absconded with the proceeds." Id. at 23. Northwest asserts that "[t]his conversion was hidden from Northwest through the issuance of a Final Policy that deleted the exceptions to coverage and represented the existing mortgages to be paid." Id. Northwest claims that the trial court "committed a fundamental err[or] by resolving a question requiring strict contract interpretation" by using a "balancing of the equities" approach. Id. at 24. Northwest argues that the trial court "compounded the error by failing to recognize the critical issue of TCCPA's fraud, as the title agent," in "misappropriating the funds advanced by Northwest for closing." Id. (emphasis in original). Northwest points out that TCCPA was involved in the McIntyre transaction both as the title agent and the settlement agent, and contends that the trial court erred by determining that "all of TCCPA's misdeeds were done in its role as a settlement agent, such as misappropriating the loan funds, and [were not] attributable to its role [as] Fidelity's authorized title agent." Id. at 24-25. Northwest asserts that "TCCPA's conduct, in stealing the [closing] funds and then issuing a title policy to cover its tracks and avoid a claim under the closing protection letter insured by Fidelity, straddle both the settlement agent and title agent roles." Id. at 25-26. Northwest claims that, when removing the Citizens and Charter liens from the Final Policy, TCCPA was acting in its role as authorized title agent. Id. at 26. Northwest argues that Fidelity was permitted to use the fraud of its own title agent to avoid liability under the closing protection letter. Id. at 27.
In its Opinion, the trial court addressed Northwest's first and second issues, set forth the relevant law, and concluded that the issues lack merit. See Trial Court Opinion, 5/9/16, at 5-8. We agree with the reasoning of the trial court and affirm on this basis as to Northwest's first and second issues. See id.
As Northwest's third and fourth issues are related, we will address them together. In its third issue, Northwest contends the trial court failed to recognize that, but for the fraudulent issuance of the Final Policy by TCCPA, Northwest would have had the opportunity to seek relief under the closing protection letter issued by Fidelity. Brief for Appellant at 28. Northwest asserts that TCCPA's actions constitute subsequent and intervening acts of fraud, which prevented Northwest from discovering the fraud or taking steps to act under the closing protection letter. Id. at 29. Northwest claims that the trial court's failure to recognize this fact, and permit Northwest to recover under the Final Policy or closing protection letter, constitutes reversible error. Id. at 31.
In its fourth issue, Northwest contends that the trial court failed "to acknowledge the uncontroverted factual record identifying that Northwest had no intent to assume and agree to the prior liens." Id. at 32. Northwest asserts that the trial court further erred by determining "that all misconduct performed by TCCPA is solely attributable to its role as a settlement agent without reference to the fraudulent title policy." Id. Northwest claims that discovery revealed genuine issues of material fact regarding instructions provided by Fidelity to its title agents. Id. at 33. Northwest argues that the evidence demonstrates that Fidelity routinely permitted the title agents to perform obligations with loan proceeds. Id. Northwest contends that, despite this evidence, the trial court "improperly determined that Fidelity did not authorize TCCPA to handle any funds[,] and that Fidelity could not be liable for any action arising from that activity even though the closing protection letter issued by TCCPA[,] as a Fidelity agent[,] expressly indemnified against the closing agent absconding with settlement funds." Id.
In its Opinion, the trial court addressed Northwest's third and fourth issues, set forth the relevant law, and concluded that the issues lack merit. See Trial Court Opinion, 5/9/16, at 8-9. We agree with the reasoning of the trial court and affirm on this basis as to Northwest's third and fourth issues. See id.
Order affirmed. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 1/20/2017
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