Summary
observing that a party “cannot claim prejudice through its own failure to conduct an adequate investigation”
Summary of this case from Stevens ex rel. Stevens v. Hickman Cmty. Health Care Servs., Inc.Opinion
No. 09-157-BLS1.
April 25, 2011, April 27, 2011.
MEMORANDUM OF DECISION AND ORDER ON OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT
SAA Group, LLC ("SAA") brought this action against Old Republic National Title Insurance Company ("Old Republic") seeking indemnification under a title insurance policy issued by Old Republic insuring a mortgage granted to Washington Mutual Bank ("WAMU") on property located at 415 Lindsey Street, Attleboro, Massachusetts.
Old Republic has now moved for summary judgment on SAA's claim against it. For the following reasons, Old Republic's summary judgment motion is allowed.
BACKGROUND
The pleadings, affidavits, and memoranda set forth the following facts. Old Republic is a Minnesota corporation with its usual place of business in Andover, Massachusetts. SAA, is a Delaware limited liability company with its usual place of business in Woburn, Massachusetts. SAA is affiliated with the Ablitt Law Offices, P.C. ("Ablitt"), of Woburn, Massachusetts.
On or about June 27, 2002, Fleet National Bank ("Fleet") filed an Open End Mortgage in the Bristol County Registry of Deeds on property at 415 Lindsey Street in Attleboro, Massachusetts ("the Property") that was intended to secure a $120,000 home equity line-of-credit loan it had made to Ricky and Linda Greigre. In 2003, the Greigres decided to refinance that debt with a loan from the Washington Mutual Bank ("WAMU"), to be secured by a mortgage on the Property, in an amount greater than the Fleet loan. To protect its interest, WAMU purchased a title insurance policy from Old Republic, through its agent, Lenders Title Services, Inc. ("LTS"), whose President is Suzanne Accardo ("Accardo").
In advance of the closing, LTS obtained from Fleet the pay-off amount of $120,899, for the Greigres' home equity loan. LTS handled the closing of the refinancing on or about January 28, 2003, and in connection therewith, recorded WAMU's mortgage in the Bristol County Registry of Deeds. On February 4, 2003, LTS delivered a check to Fleet in the amount of $120,899 in payment of the Greigres' home equity loan. Fleet, however, did not freeze or close the Greigres' home equity loan, and did not send LTS a discharge of its mortgage. Fleet's failures apparently allowed the Greigres to re-borrow $120,000 against their home equity line-of-credit within days of the closing. At some point after February of 2003, Bank of America, N.A. ("BoA") acquired Fleet.
Late in 2005, the Greigres' defaulted on their WAMU loan. WAMU engaged the Harmon Law Offices ("Harmon") to foreclose on its mortgage. In conducting a title examination on the Property, Harmon noted that Fleet's prior mortgage had not been discharged. On November 22, 2005, Harmon advised LTS of this encumbrance on the Property, and LTS in, turn, contacted BoA On December 12, 2005, WAMU assigned the Greigres' Note and mortgage to DLJ Mortgage Capital, Inc. ("DLJ"). In turn, DLJ engaged Select Portfolio Services, Inc. ("SPS") to act as its attorney-in-fact and loan servicer in connection with the foreclosure of the WAMU/DLJ mortgage on the Property. SPS engaged the law firm of Ablitt Charlton ("Ablitt") to conduct the foreclosure proceedings on behalf of DLJ.
On January 31, 2006, in an apparent response to LTS's inquiry, BoA executed a Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on February 14, 2006, that discharge was recorded in the Bristol County Registry of Deeds. On February 21, 2006, BoA executed a second Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on March 6, 2006, that discharge was recorded in the Bristol County Registry of Deeds. However, at the times that these mortgage discharge notices were filed, the Greigres still owed Fleet n/k/a/ BoA at least $120,000 on their home equity line-of-credit loan.
On March 29, 2006, BOA — asserting "clerical error and mistake" — executed a Revocation of Discharge of Mortgage. which was recorded in the Bristol County Registry of Deeds on June 30, 2006.
On November 15, 2006, BOA commenced a declaratory judgment action against the Greigres, DLJ and another in the Bristol County Superior Court (the "Bristol Action") seeking to void and revoke its discharge of the Fleet mortgage. On December 7, 2006, BOA recorded a Memorandum of Lis Pendens against the Property with the Bristol County Registry of Deeds. Although Ablitt and DLJ had become aware of the Bristol Action by not later than November 20, 2006, DLJ did not take any steps to defend itself in that case.
On January 4, 2007, Ablitt, representing DLJ, sent a claim letter to Old Republic informing Old Republic that "a recent title examination for the purpose of foreclosing on the said mortgage indicates that a senior mortgage exists in favor of Fleet National Bank in the principal amount of $120,000." The letter did not disclose, mention or reference the Bristol Action. Old Republic acknowledged receipt of the claim letter the same day, and, as a matter of course, issued a Future Policy Indemnity Letter in which it agreed to "issue a new policy to the successful bidder at the foreclosure sale . . . without exception for this problem."
On February 8, 2007, BOA was awarded a default judgment in the Bristol Action, thereby restoring its mortgage to first position ahead of DLJ's. Old Republic was not expressly informed of the Bristol Action by DLJ, SPS, Ablitt, or SAA until October 30, 2007. Moreover, Old Republic was not informed of BOA's default judgment until December 12, 2007. Consequently, Old Republic was prevented from intervening in the Bristol Action and asserting a variety of viable defenses. Nonetheless, Old Republic informed DLJ that, should DLJ be successful in having the default judgment vacated, Old Republic would defend DLJ in the Bristol Action. DLJ, SPS, Ablitt, and SAA took no steps to remove the default judgment.
On or about April 15, 2008, BOA conducted a foreclosure of the Fleet Mortgage, thereby extinguishing the WAMU Mortgage. DLJ/SPS was the high bidder at the foreclosure sale and agreed to buy the property for $150,000. Ablitt paid both the bid deposit of $5,000, and the purchase price of $150,000 on behalf of DLJ in connection with the foreclosure sale.
On January 8, 2009, DLJ executed an Assignment of Claim in favor of SAA. SAA then sought indemnification under the Old Republic policy by virtue of this assignment. Old Republic refused., and the present action followed.
DISCUSSION
A motion for summary judgment shall be granted if admissible evidence "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Mass. R. Civ. P. 56(c). The moving party must affirmatively demonstrate that there are no genuine issues of material fact in dispute. Pederson v. Time, Inc., 404 Mass. 14, 17 (1989). "This burden . . . may be satisfied by demonstrating that proof of that element is unlikely to be forthcoming at trial." Flesner v. Technical Comm. Corp., 410 Mass. 805, 809 (1991). In response, the nonmoving party "must set forth sufficient facts showing that there is a genuine issue for trial." Key Capital Corp. v. M S Liquidating Corp., 27 Mass. App. Ct. 721, 728 (1989), quoting Mass. R. Civ. P. 56(e). A party may not rest on "conclusory statements, general denials, and factual allegations not based on personal knowledge" in opposing a motion for summary judgment. LaBrecque v. Parsons, 74 Mass. App. Ct. 766, 768 (2009).
I.
The first issue is whether Old Republic, by virtue of its refusal to pay SAA's claim, breached the terms of its title insurance policy. "The interpretation of an insurance policy is a question of law for the trial judge and the reviewing court." Sullivan v. Southland Life Ins. Co., 67 Mass.App.Ct. 439, 442 (2006). In construing the meaning of an insurance contract, the court must give words their fair meaning in light of the subject matter. Davis v. Allstate Ins. Co., 434 Mass. 174, 179 (2007). The court is bound to interpret an insurance contract from the "viewpoint of a reasonable insured, in order to effectuate the main manifested design of the insurer and insured. Id. at 185.
A.
In assessing whether Old Republic breached the terms of its title insurance policy, the dispositive issue before this court is whether DLJ, SPS, or Ablitt provided Old Republic with timely and effective notice of the pending Bristol Action, such that Old Republic could adequately defend SAA's mortgage interest in that action. Paragraph Three of the Conditions and Stipulations of the title insurance policy provides in pertinent part that:
"The insured shall notify [Old Republic] promptly in writing (i) in case of any litigation as set forth in Section 4(a) below, (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest or lien of the insured mortgage . . . If prompt notice shall not be given to the [Old Republic], then as to the insured all liability of the [Old Republic] shall terminate with regard to the matter or matters for which prompt notice is required."
Given the foregoing language, the court must determine whether Old Republic (1) received notice under the policy, and (2) assuming notice was not given, whether Old Republic was actually prejudiced as a result. The court concludes that SAA did not satisfy the notice requirement of the Old Republic insurance policy.
In Johnson Controls, Inc. v. Bowes, 381 Mass. 278 (1980) the Supreme Judicial Court held that "where an insurance company attempts to be relieved of its obligations under a liability insurance policy not covered by G.L. c. 175, s 112, on the ground of untimely notice, the insurance company will be required to prove both that [(1)] the notice provision was in fact breached and [(2)] that the breach resulted in prejudice to its position." 381 Mass. at 282 (1980); see also Darcy v. The Hartford Ins. Co., 407 Mass 481, 490 (1990) (holding that "an insurer would be able to disclaim coverage because of an insured's breach of the notice . . . provisions in a policy only if the insurer could prove that any such breach actually prejudiced its position"). Importantly, the Court noted that the basic purpose of a notice requirement is to allow the insurance company "seasonable investigation of the facts relating to litigation." Johnson, 381 Mass. at 281. "A reasonable notice clause is designed to protect the insurance company from being placed in a substantially less favorable position that it would have been in had timely notice been provided, e.g. being forced to pay a claim against which it has not had an opportunity to defend effectively." Id. at 282 (emphasis added).
G.L. c. 175, § 112 applies specifically to motor vehicle liability policies.
In Darcy, the Court explained that the length of time which elapses before an insurer receives notice "will always be a relevant factor to be considered in determining whether actual prejudice has been shown by an insurer, and the longer the delay, the more likely that prejudice exists." Id. at 486. However, the Court further stated that before an insurer denies coverage based on untimely notice, the insurer must show some other facts or circumstances that indicate that the "insurer's interests have actually been harmed." Id. The Court cited "loss of critical evidence, or testimony from material witnesses . . ." as examples of sufficient facts or circumstances that qualify as prejudicial. Id. Ultimately, the Court in Darcy rejected the insurance company's argument disclaiming coverage under the policy, because although the insurer had received tardy notice of the pending lawsuit from the insured, any prejudice suffered by the insurance company was the result of the insurance company's failure to conduct an adequate investigation. Id. at 487.
The Joint Statement of Undisputed Facts in the present case shows that Ablitt sent a "claim letter" to Old Republic on or about January 4, 2007. However, the parties disagree as to the effect of this letter. Old Republic asserts that the letter did not provide adequate notice to it because the letter did not state or identify the then pending Bristol Action. Consequently, Old Republic argues that notice was not "prompt," because it was made aware of the Bristol Action for the first time in October of 2007 — nearly eleven months after DLJ itself became aware of the lawsuit.
The claim letter sent by Ablitt to Old Republic was defective in several respects. According to the parties' Joint Statement of Undisputed Facts, the claim letter bore the incorrect date (Jan. 4, 2006 instead of Jan. 4, 2007), listed the incorrect policy number, and named the wrong insured lender.
While SAA admits that its claim letter never explicitly referenced the Bristol Action, it contends that the language was sufficient to cause Old Republic to conduct an inquiry of the claim, and that any reasonable investigation by Old Republic would have uncovered the Bristol Action.
Even construing the facts in a light most favorable to SAA, SAA's argument is unavailing. The language of the insurance policy is clear: in the event of litigation, DLJ was required to "promptly" notify Old Republic "in writing" about any "litigation." Implicit in the policy's plain language is notion that when notice is given, such notice must contain a certain level of specificity regarding the pendency of any litigation, such that Old Republic could seasonably defend DLJ's mortgage interest. Instead, the claim letter stated only that, "A recent title examination for the purpose of foreclosing on the said mortgage indicates that a senior mortgage exists in favor of Fleet National Bank. . . ." The letter made mention of, or reference to the Bristol Action.
Acceptance of SAA's argument — that the claim letter, in conjunction with Old Republic's duty to investigate, provided Old Republic with sufficient notice of the Bristol Action such that its refusal to pay was a breach of contract — effectively requires the insurance policy to be interpreted to mean that, upon notice of a claim, Old Republic bore the responsibility of notifying itself of any pending litigation. This clearly was not the intent of the parties. While it is true that Old Republic has a duty to investigate, under the contract DLJ had an obligation to notify Old Republic explicitly of the Bristol Action. Because the claim letter did not provide adequate notice, this court concludes, as a matter of law, that Old Republic did not receive written notice of the Bristol Action until October 30, 2007, when Old Republic received a fax from Ablitt Law referencing the lawsuit. Given that eleven months elapsed between the time when DLJ and Ablitt first learned of the Bristol Action and the time when they adequately notified Old Republic, the notice of that action was not "prompt" within the meaning of the policy.
B.
Given that DLJ was untimely in providing notice to Old Republic, it must still be shown that DLJ's failure in this regard actually prejudiced Old Republic. Moreover, the untimely notice must have been the proximate cause of the prejudice caused to Old Republic — that is, Old Republic cannot claim prejudice through its own failure to conduct an adequate investigation. The court concludes that: (1) due to DLJ's untimely notice, Old Republic was actually prejudiced and (2) that prejudice was not caused by Old Republic's nonfeasance.
Old Republic contends that had it received timely notice of the Bristol Action, it would have taken steps to defend DLJ's mortgage interest before a default and default judgment were entered in that action. Old Republic asserts that due to DLJ's failure to provide adequate notice of the suit, Old Republic was required to forfeit several defenses that it could have advanced in the Bristol Action prior to the entry of a default judgment. For its part, SAA admits that these defenses were available. Thus, "[Old Republic] was placed in a "substantially less favorable position than it would have been in had timely notice been provided." Johnson, 381 Mass. at 282. Moreover, an insurer's inability to advance viable legal theories, because the insured permitted a default judgment to enter prior to notifying the insurer, satisfies Darcy's requirement that there be specific "facts or circumstances" that show that the insurer has been prejudiced.
Old Republic did not receive notice of the Bristol Action until nearly nine months after a default judgment had been entered against DLJ in favor of Bank of America.
Among the available defenses were the following: (1) an estoppel defense based upon Bank of America's two discharges, which were recorded with the Registry of Deeds; (2) an equitable subrogation defense based upon the fact that the DLJ/WAMU mortgage proceeds were used to pay off a then-existing first mortgage ahead of the Bank of America line of credit; (3) a defense of negligence based upon Bank of America's failure to close out its line of credit despite receiving instructions to do so; and (4) a defense of breach of Bank of America's agreement to close the credit line and discharge its junior mortgage.
The prejudice done to Old Republic was not of its own doing. SAA incorrectly interprets the Court's decision in Darcy to mean that regardless of whether DLJ's claim letter contained specific mention of the pending Bristol Action, Old Republic was not justified in denying coverage under the policy because it was Old Republic's failure to conduct a reasonable investigation that caused the prejudice.
SAA's argument is fatally flawed. First, Darcy is factually distinguishable from the present case. There, the decision turned in part on the fact that the insurer received actual written notice of the underlying tort suit, which was still in the process of being adjudicated. 407 Mass. at 487. Consequently, the insurer still had ample opportunity to protect its interest prior to judgment, and whatever "prejudice" befell the insurer was the product of its own insufficient investigation. Id. Here, the claim letter did not disclose the existence of any underlying action. Second, even assuming that explicit written notice of a pending suit is not a condition precedent to SAA's argument, Old Republic's investigation was reasonable in light of the information provided. First, upon receiving the claim letter, Old Republic took steps to decipher the claim — the letter bore the incorrect date, listed the incorrect policy number, and named the wrong insured lender. Next, Old Republic immediately communicated with LTS, which had closed the WAMU mortgage loan. Then, acting on what Ablitt had communicated in the claim letter, Old Republic proceeded to issue a "Future Policy Indemnity Letter" to DLJ agreeing to issue a new policy to the successful bidder at the foreclosure sale.
ORDER
For the foregoing reasons, Old Republic National Title Insurance Company's Motion for Summary Judgment is ALLOWED .
MEMORANDUM OF DECISION AND ORDER ON THIRD-PARTY DEFENDANT BANK OF AMERICA'S MOTION FOR SUMMARY JUDGMENT
In this action, Lenders Title Services, Inc. ("LTS") and Suzanne Accardo ("Accardo") brought a third party claim against Bank of America, N.A. ("BOA"), seeking contribution pursuant to G.L. c. 231B, and for breach of an implied contract. Both claims arise from an alleged failure to discharge an open-ended home-equity line of credit mortgage given to BOA's predecessor in interest.
BOA has now moved for summary judgment on LTS' claims against it. For the following reasons, BOA's motion for summary judgment is allowed.
BACKGROUND
The pleadings, affidavits, and memoranda set forth the following facts. Old Republic National Title Insurance Company ("Old Republic") is a Minnesota corporation with its usual place of business in Andover, Massachusetts. SAA Group, LLC. ("SAA") is a Delaware limited liability company with its usual place of business in Woburn, Massachusetts. SAA is affiliated with the Ablitt Law Offices, P.C. ("Ablitt") of Woburn, Massachusetts.
On or about June 27, 2002, Fleet National Bank ("Fleet") filed an Open End Mortgage in the Bristol County Registry of Deeds on property at 415 Lindsey Street in Attleboro, Massachusetts ("the Property"), that was intended to secure a $120,000 home equity line-of-credit loan it had made to Ricky and Linda Greigre. In 2003, the Greigres decided to refinance that debt with a loan from the Washington Mutual Bank ("WAMU"), to be secured by a mortgage on the Property, in an amount greater than the Fleet loan. To protect its interest, WAMU purchased a title insurance policy from Old Republic, through its agent, Lenders Title Services, Inc. ("LTS"), whose president is Suzanne Accardo ("Accardo").
In advance of the closing, LTS obtained from Fleet the pay-off amount of $120,899, for the Greigres' then existing home equity loan. LTS conducted the closing of the refinancing on or about January 28, 2003, and in connection therewith, recorded WAMU's mortgage in the Bristol County Registry of Deeds. On February 4, 2003, LTS delivered a check to Fleet in the amount of $120,899, in full payment of the Greigres' home equity loan. Fleet, however, did not freeze or close the Greigres' home equity loan account, and did not send LTS a discharge of its mortgage. Fleet's failures apparently allowed the Greigres to re-borrow $120,000 against their home equity line-of-credit within days of the closing. At some point after February of 2003, BOA acquired Fleet.
Late in 2005, the Greigres' defaulted on their WAMU loan. WAMU engaged the Harmon Law Offices ("Harmon") to foreclose on its mortgage. In conducting a title examination on the Property, Harmon noted that Fleet's prior mortgage had not been discharged. On November 22, 2005, Harmon advised LTS of this encumbrance on the Property, and LTS in, turn, contacted BOA. On December 12, 2005, WAMU assigned the Greigres' Note and mortgage to DLJ Mortgage Capital, Inc. ("DLJ"). In turn, DLJ engaged Select Portfolio Services, Inc. ("SPS") to act as its attorney-in-fact and loan servicer in connection with the foreclosure of the WAMU/DLJ mortgage on the Property. SPS engaged the law firm of Ablitt Charlton ("Ablitt") to conduct the foreclosure proceedings on behalf of DLJ.
On January 31, 2006, in an apparent response to LTS's inquiry, BOA executed a Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on February 14, 2006, that discharge was recorded in the Bristol County Registry of Deeds. On February 21, 2006, BOA executed a second Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on March 6, 2006, that discharge was recorded in the Bristol County Registry of Deeds. However, at the times that these mortgage discharge notices were filed, the Greigres still owed Fleet n/k/a BOA at least $120,000 on their home equity line-of-credit loan.
On March 29, 2006, BOA — asserting "clerical error and mistake" — executed a Revocation of Discharge of Mortgage, which was recorded in the Bristol County Registry of Deeds on June 30, 2006.
On November 15, 2006, BOA commenced a declaratory judgment action against the Greigres, DLJ, and another in the Bristol County Superior Court ("the Bristol Action") seeking to void and revoke its discharge of the Fleet mortgage. On December 7, 2006, BOA recorded a Memorandum of Lis Pendens against the Property with the Bristol County Registry of Deeds. Although Ablitt and DLJ had become aware of the Bristol Action by not later than November 20, 2006, DLJ did not take any steps to defend itself in that case.
On January 4, 2007, Ablitt, representing DLJ, sent a claim letter to Old Republic informing Old Republic that "a recent title examination for the purpose of foreclosing on the said mortgage indicates that a senior mortgage exists in favor of Fleet National Bank in the principal amount of $120,000." The letter did not disclose, mention or reference the Bristol Action. Old Republic acknowledged receipt of the claim letter the same day, and, as a matter of course, issued a Future Policy Indemnity Letter in which it agreed to "issue a new policy to the successful bidder at the foreclosure sale . . . without exception for this problem."
On February 8, 2007, BOA secured a default judgment in the Bristol Action, thereby restoring its mortgage to first position, ahead of DLJ's. Old Republic was not expressly informed of the Bristol Action by DLJ, SPS, Ablitt, or SAA until October 30, 2007. Moreover, Old Republic was not informed of BOA's default judgment until December 12, 2007. Consequently, Old Republic was prevented from intervening in the Bristol Action and asserting a variety of viable defenses. Nonetheless, Old Republic informed DLJ that, should DLJ be successful in having the default judgment vacated, Old Republic would defend DLJ in the Bristol Action. DLJ, SPS, Ablitt, and SAA took no steps to remove the default judgment.
On or about April 15, 2008, BOA conducted a foreclosure of the Fleet Mortgage, thereby extinguishing the WAMU Mortgage. DLJ/SPS was the high bidder at the foreclosure sale and agreed to buy the property for $150,000. Ablitt paid both the bid deposit of $5,000, and the purchase price of $150,000 on behalf of DLJ in connection with the foreclosure sale.
On January 8, 2009, DLJ executed an Assignment of Claim in favor of SAA. SAA then sought indemnification under the Old Republic policy by virtue of this assignment. Old Republic refused, and the present action followed.
DISCUSSION
A motion for summary judgment shall be granted if admissible evidence "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Mass. R. Civ. P. 56(c). The moving party must affirmatively demonstrate that there are no genuine issues of material fact in dispute. Pederson v. Time, Inc., 404 Mass. 14, 17 (1989). "This burden . . . may be satisfied by demonstrating that proof of that element is unlikely to be forthcoming at trial." Flesner v. Technical Comm. Corp., 410 Mass. 805, 809 (1991). In response, the nonmoving party "must set forth sufficient facts showing that there is a genuine issue for trial." Key Capital Corp. v. M S Liquidating Corp., 27 Mass. App. Ct. 721, 728 (1989), quoting Mass. R. Civ. P. 56(e). A party may not rest on "conclusory statements, general denials, and factual allegations not based on personal knowledge" in opposing a motion for summary judgment. LaBrecque v. Parsons, 74 Mass. App. Ct. 766, 768 (2009).
I. Contribution
In its third-party complaint, LTS argues that if it is found to be liable to SAA, then BOA should be forced to contribute to any monetary judgment as a joint tortfeasor. General Laws c. 231B, § 1 states that:
Except as otherwise provided . . . where two or more persons become jointly liable in tort for the same injury to person or property, there shall be a right of contribution among them even though judgment has not been recovered against all or any of them. . . . The right of contribution shall exist only in favor of a joint tortfeasor. . . .
Joint tortfeasors are defined as "two or more tortfeasors who contributed to the claimant's injury and who may be joined as defendants in the same lawsuit." Black's Law Dictionary 1627 (9th ed. 2009).
In Hayon v. Coca Cola Bottling Co., 375 Mass. 644, 648-49 (1978), the Supreme Judicial Court held that the equitable basis for permitting claims for contribution is to "remed[y] . . . the unfairness of allowing a disproportionate share of the plaintiff's recovery to be borne by one of several joint tortfeasors." The meaning of the phrase "liable in tort" should be accorded a broad interpretation and persons who qualify as tortfeasors should not be limited in scope. Id. at 649; McGrath v. Stanley, 397 Mass. 775, 781 (1986). In order for a defendant to assert a claim for contribution under G.L. c. 231B, § 1, the primary plaintiff need not have named the third-party defendant as a party in the original action. See McGrath, 397 Mass. at 781. Rather, all that is required is that "the party from whom contribution is sought could have been liable in tort." Id.
BOA reasons that because G.L. c. 231B, § 1 applies only to claims involving "liability in tort," then LTS' third-party claim must fail because SAA does not assert a "tort-type" claim against LTS. Rather, SAA's claim against LTS sounds only in contract. LTS disputes BOA's characterization and points to SAA's use of the language "breach of duty" in its complaint as evidence of a tort-based claim.
This court has already examined the issue of whether LTS' negligent performance of its contractual duties provided a simultaneous and independent basis for relief in tort. In its Memorandum of Decision and Order granting SAA's summary judgment motion against LTS, the court concluded that SAA did not assert a tort-type claim against LTS. Rather, SAA's claim against LTS sounded only in contract. Thus, on the issue of contribution, BOA must prevail as a matter of law given that G.L. c. 231B, § 1 applies exclusively to tort claims.
Because BOA has prevailed on this point, the court does not address the parties' arguments regarding the statutes of limitation.
II. Breach of Implied Contract
LTS next argues that BOA can be held liable for breaching an implied contract between the parties. "In the absence of an express agreement, an implied contract may be inferred from (1) the conduct of the parties and (2) the relationship of the parties." T.F. v. B.L., 442 Mass. 522, 526-27 (2004) (citing W.A. Snow Iron Works v. Chadwick, 227 Mass. 382 (1917)). "An implied contract requires proof that there was a benefit to the defendant, that the plaintiff expected the defendant to pay for that benefit, and that the defendant expected, or a reasonable person should have expected, that he or she would have to pay for that benefit." Id. "When the defendant was, or should have been, aware of the plaintiff's expectations in this regard, the defendant's failure to object can create a contract." Id.
Here, no implied contract existed between BOA and LTS. Rather, the only contractual relationships that existed were between (1) LTS and SAA and (2) BOA and the Greigres. Thus, while LTS and BOA may have had business interaction with one another in light of their other contractual relationships, such behavior did not amount to an implied contract. Neither party had a reasonable expectation that the benefit provided by their relationship would require return payment. To the contrary, BOA's role in the transaction resulted from its contractual relationship with the Greigres, while LTS's role in the transaction was the product of its contractual relationship with SAA. Because no implied contract existed between the parties, it is unnecessary to address the issue as to whether there was an implied indemnification agreement.
III. Indispensable Party
Finally, LTS asserts that BOA's motion for summary judgment should be denied because BOA is an indispensable party within the meaning of Mass. R. Civ. P. 19 This Rule states that:
A person . . . shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action. . . .
On this point, LTS's argument fails because BOA is already a party to the action. "Joinder of additional parties is not necessary to accord complete relief among those already parties. . . ." Commonwealth v. Town of Andover, 378 Mass. 370, 373 (1979). In other words, Rule 19 operates to join additional parties to an action in order to prevent inequity; however, Rule 19 does not preclude the court's ability to eliminate a party from an action where equity does not require its involvement.
ORDER
For the foregoing reasons, Third-Party Defendant Bank of America's Motion for Summary Judgment is ALLOWED.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS, LENDERS TITLE SERVICES, INC. AND SUZANNE ACCARDO'S MOTION FOR SUMMARY JUDGMENT
SAA Group, LLC ("SAA") brought this action against Lenders Title Services, Inc. ("LTS") for breach of contract in connection with LTS's role as closing agent for Washington Mutual Bank ("WAMU"), SAA's predecessor in interest, and the issuance of a mortgage on property located at 415 Lindsey Street, Attleboro, Massachusetts.
Lenders Title Services has now moved for summary judgment on SAA's claims against it. For the following reasons, Lenders Title Services summary judgment motion is denied.
BACKGROUND
The pleadings, affidavits, and memoranda set forth the following facts. SAA is a Delaware limited liability company with its usual place of business in Woburn, Massachusetts. SAA is affiliated with the Ablitt Law Offices, P.C. ("Ablitt") of Woburn, Massachusetts. LTS is a corporation with its usual place of business in Johnston, Rhode Island.
On or about June 27, 2002, Fleet National Bank ("Fleet") filed an Open End Mortgage in the Bristol County Registry of Deeds on property at 415 Lindsey Street in Attleboro, Massachusetts ("the Property") to secure a $120,000 home equity line-of-credit loan it had made to Ricky and Linda Greigre. In 2003, the Greigres decided to refinance that debt with a loan from WAMU, to be secured by a mortgage on the Property, in an amount greater than the Fleet loan. To protect its interest, WAMU purchased a title insurance policy from Old Republic, through its agent, LTS, whose president is Suzanne Accardo ("Accardo").
In advance of the closing, LTS obtained from Fleet a full pay-off amount of $120,899, for the Greigres' home-equity loan. LTS conducted the closing of the refinancing on or about January 28, 2003, and in connection therewith, recorded WAMU's mortgage in the Bristol County Registry of Deeds. On February 4, 2003, LTS delivered a check to Fleet in the amount of $120,899 in full payment of the Greigres' home-equity loan. Fleet, however, did not freeze or close the Greigres' home-equity loan and did not deliver to LTS a discharge of its mortgage. Fleet's failures apparently allowed the Greigres to re-borrow $120,000 against their home equity line-of-credit within days of the closing. At some point after February of 2003, Bank of America, N.A. ("BOA") acquired Fleet.
Late in 2005, the Greigres' defaulted on their WAMU loan. WAMU engaged the Harmon Law Offices ("Harmon") to foreclose on its mortgage. In conducting a title examination of the Property, Harmon noted that Fleet's prior mortgage had not been discharged. On November 22, 2005, Harmon advised LTS of this encumbrance on the Property, and LTS in, turn, contacted BOA. On December 12, 2005, WAMU assigned the Greigres' Note and mortgage to DLJ Mortgage Capital, Inc. ("DLJ"). In turn, DLJ engaged Select Portfolio Services, Inc. ("SPS") to act as its attorney-in-fact and loan servicer in connection with the foreclosure of the WAMU/DLJ mortgage on the Property. SPS engaged the law firm of Ablitt Charlton ("Ablitt") to conduct the foreclosure proceedings on behalf of DLJ.
On January 31, 2006, in an apparent response to LTS's inquiry, BOA executed a Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on February 14, 2006, that discharge was recorded in the Bristol County Registry of Deeds. On February 21, 2006, BOA executed a second Discharge of Mortgage with respect to the Greigres' 2002 Fleet home equity line-of-credit loan, and on March 6, 2006, that discharge was recorded in the Bristol County Registry of Deeds. However, at the times that these mortgage discharge notices were filed, the Greigres still owed Fleet n/k/a BOA at least $120,000 on their home equity line-of-credit loan.
On March 29, 2006, BOA — asserting "clerical error and mistake" — executed a Revocation of Discharge of Mortgage, which was recorded in the Bristol County Registry of Deeds on June 30, 2006.
On November 15, 2006, BOA commenced a declaratory judgment action against the Greigres, DLJ, and another in the Bristol County Superior Court ("the Bristol Action") seeking to void and revoke its discharge of the Fleet mortgage. On December 7, 2006, BOA recorded a Memorandum of Lis Pendens against the Property in the Bristol County Registry of Deeds. Although Ablitt and DLJ had become aware of the Bristol Action by not later than November 20, 2006, DLJ did not take any steps to defend itself in that case.
On January 4, 2007, Ablitt, representing DLJ, sent a claim letter to Old Republic informing Old Republic that "a recent title examination for the purpose of foreclosing on the said mortgage indicates that a senior mortgage exists in favor of Fleet National Bank in the principal amount of $120,000." The letter did not disclose, mention or reference the Bristol Action. Old Republic acknowledged receipt of the claim letter the same day, and, as a matter of course, issued a Future Policy Indemnity Letter in which it agreed to "issue a new policy to the successful bidder at the foreclosure sale . . . without exception for this problem."
On February 8, 2007, BOA was awarded a default judgment in the Bristol Action, thereby restoring its mortgage to first position ahead of DLJ's. Old Republic was not expressly informed of the Bristol Action by DLJ, SPS, Ablitt, or SAA until October 30, 2007. Moreover, Old Republic was not informed of BOA's default judgment until December 12, 2007. Consequently, Old Republic was prevented from intervening in the Bristol Action and asserting a variety of viable defenses. Nonetheless, Old Republic informed DLJ that, should DLJ be successful in having the default judgment vacated, Old Republic would defend DLJ in the Bristol Action. DLJ, SPS, Ablitt, and SAA took no steps to remove the default judgment.
On or about April 15, 2008, BOA conducted a foreclosure of the Fleet mortgage, thereby extinguishing the WAMU mortgage. DLJ/SPS was the high bidder at the foreclosure sale and agreed to buy the property for $150,000. Ablitt paid both the bid deposit of $5,000, and the purchase price of $150,000 on behalf of DLJ in connection with the foreclosure sale.
On January 8, 2009, DLJ executed an Assignment of Claim in favor of SAA. SAA then sought indemnification under the Old Republic policy by virtue of this assignment. Old Republic refused, and the present action followed.
DISCUSSION
A motion for summary judgment shall be granted if admissible evidence "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Mass. R. Civ. P. 56(c). The moving party must affirmatively demonstrate that there are no genuine issues of material fact in dispute. Pederson v. Time, Inc., 404 Mass. 14, 17 (1989). "This burden . . . may be satisfied by demonstrating that proof of that element is unlikely to be forthcoming at trial." Flesner v. Technical Comm. Corp., 410 Mass. 805, 809 (1991). In response, the non-moving party "must set forth sufficient facts showing that there is a genuine issue for trial." Key Capital Corp. v. M S Liquidating Corp., 27 Mass. App. Ct. 721, 728 (1989), quoting Mass. R. Civ. P. 56(e). A party may not rest on "conclusory statements, general denials, and factual allegations not based on personal knowledge" in opposing a motion for summary judgment. LaBrecque v. Parsons, 74 Mass. App. Ct. 766, 768 (2009). When appropriate summary judgment may be entered against the moving party. Mass. R. Civ. P. 56(c).
I.
There are two separate but intertwined claims before the court, one sounding in contract and the other in tort. The first claim relates to whether LTS fulfilled its contractual obligations to WAMU despite providing clear title nearly three years after the transaction took place. The second claim is whether LTS is liable in tort for failing to provide Fleet contemporaneously with (1) the Greigres' pay-off check and (2) authorization to close the line of credit and discharge instructions. This decision addresses each potential basis for liability in turn.
Fleet's initial mortgage discharge was subsequently voided in the Bristol Action.
A.
In assessing whether LTS breached the terms of its contract with WAMU, this court must determine what LTS's primary obligations were under the contract. The interpretation of an unambiguous, written contract presents a question of law for the court. Hiller v. Submarine Signal Co., 352 Mass. 546, 549-50 (1950). A court must interpret an unambiguous contract according to it plain meaning. S. Union Co. v. Dep't of Public Util., 458 Mass. 812, 820 (2011). Contract language is ambiguous "only if it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one." Id., quoting Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998).
According to the "Lender's Closing Instructions," LTS was obligated to satisfy the following condition relating to the title of the Property:
[LTS] is to clear the title of all liens and encumbrances to insure that [WAMU] holds a valid first lien position . . . [and] the Policy must be free and clear of all items not accepted herein and [LTS] indemnifies and holds [WAMU] harmless from any and all costs, damages, and liability, which may result from exceptions on the title no so accepted.
Joint Appendix of Exhibits, Tab 11.
Additionally, the parties explicitly agreed that "the loan [was] scheduled to close on 2/3/2003 . . . [and] [t]he loan must close on 2/3/2003." If the loan failed to close, "[LTS] must return all funds and documents to [WAMU]."
In Massachusetts, "parties have the right to make a stated time for performance the essence of the contract." Porter v. Harrington, 262 Mass. 203, 207 (1928). Unless such a provision is waived by the parties, these agreements are binding on the parties, and "are given effect in equity and law." Id.; see also Preferred Underwriters v. New York, N.H. H.R Co., 243 Mass. 457, 463-64 (1923). In situations where parties do not indicate that time is of the essence, parties must perform within a reasonable amount of time. Id.
In the present case, the parties take differing views as to the effect of the contractual language. LTS argues that its contractual obligation to provide "clear title" was satisfied the moment BOA recorded the mortgage discharge — albeit three years after the fact. LTS reasons that the recordation was conclusive evidence of the removal of the encumbrance on the Property, and that it elevated WAMU's mortgage to first position. LTS concludes that because WAMU's mortgage was eventually placed in first position, it cannot be found to have breached the terms of the contract.
SAA does not dispute that the recordation had the temporary effect of placing WAMU's mortgage lien in first position. Rather, SAA argues that LTS breached the contract by failing to contemporaneously provide Fleet with (1) the Greigres' pay-off check and (2) the Greigres' authorization to close the line of credit and discharge the Fleet mortgage. SAA reasons that these failures allowed the line of credit to remain open just long enough to allow the Greigres to redraw against it. In turn, this failure led BOA to eventually file the Bristol Action and to undo the discharge. Additionally, SAA contends that LTS breached its contract with WAMU simply by failing, for three years, to put WAMU's mortgage interest in first position.
Based on the parties' arguments, the court concludes that SAA must prevail on its breach of contract claim. First, the contract plainly states that performance was due on February 3, 2003. Based on this express provision, the court concludes as a matter of law that the parties intended "time to be of the essence." Such an intent makes perfect sense within the context of the transaction because any delay could have — and did in fact — result in the very situation now at issue. Accordingly, LTS breached its contract with WAMU by failing to provide Fleet with the documentation necessary to close the line of credit and discharge the mortgage on February 3, 2003. It is evident that Fleet could not possibly "close" the account without all the requisite paperwork in-hand. Failing to provide Fleet with the Greigres' authorization to close the account and discharge instructions until February 12, 2003 resulted in significant adverse consequences, and was a clear breach of contract.
The portion of the agreement setting forth the closing date provision reinforces the parties' intent that the transaction be time sensitive. Directly preceding the "checked" box, by which the parties indicated their intent that the closing occur on 2/3/2003, there is an "unchecked" box that, if checked, would have meant that 2/3/2003 was an "estimated closing date." The juxtaposition of the two boxes (i.e. "estimated closing date" versus "firm closing date"), and the parties' affirmative election of the latter, is dispositive as to the parties' intent regarding time of performance.
The parties' intent that "time be of the essence" produced an even more glaring breach — the Fleet mortgage remained undischarged for nearly three years. The fact that three years elapsed without any party taking notice or questioning LTS's material failure, does not excuse the fact that the WAMU mortgage remained in second position. Thus, in violation of contract's terms, the Property remained encumbered by the Fleet mortgage long after the agreed upon closing date, and LTS did nothing to rectify the situation. Moreover, LTS's argument that its contractual obligation was satisfied upon BOA discharging its mortgage is unavailing. This argument ignores the three year hiatus during which LTS ignored its contractual duty to ensure that WAMU's mortgage was in first position. The fact that BOA was successful in having the discharge revoked only exacerbates LTS's breach by once again encumbering the Property.
The court concludes that LTS materially breached its contract with WAMU by failing to expeditiously move to ensure that the WAMU's mortgage enjoyed first position, and SAA is entitled to summary judgment in its favor on this claim. See Mass.R.Civ.P. 56(c).
B.
The next issue is whether LTS' negligent performance of its contractual duties provides a simultaneous and independent basis for relief in tort. "To prevail on a negligence claim, a plaintiff must prove that the defendant owed the plaintiff a duty of reasonable care, that the defendant breached this duty, that damage resulted, and that there was a causal relation between the breach of the duty and the damage." Jupin v. Kask, 447 Mass. 141, 146 (2006).
The question is therefore whether LTS owed WAMU a duty of care. The court concludes that it did not. It is true that parties entering a contract are obligated to both perform the agreed upon services and to perform those services using ordinary care. See Abrams v. Factory Mut. Liability Ins. Co., 298 Mass. 141, 143 (1937) ("When a party binds himself by contract to do a work or to perform a service, he agrees by implication to do a workmanlike job and to use reasonable and appropriate care and skill in doing it. This is true whether the work consists in building a house, repairing an automobile, treating a patient or defending against a claim or a lawsuit."); see also Hartford Cas. Ins. Co. v. New Hampshire Ins. Co., 417 Mass. 115, 118 (1994). However, that a party might breach its contract by failing to exercise a reasonable and appropriate level of skill does not transform that contractual obligation into a special duty of care recognized in tort law. See Jupin, 447 Mass. at 146. A duty in tort "finds its source in existing social values and custom." Mullins v. Pine Manor College, 389 Mass. 47, 51 (1983)). By contrast, any obligation between contracting parties arises out of the agreement itself.
Accordingly, the court concludes that LTS did not owe WAMU any special duty of care, and therefore SAA's negligence claim against it must fail as a matter of law.
ORDER
For the foregoing reasons, Defendants, Lenders Title Services, Inc. and Suzanne Accardo's Motion for Summary Judgment is ALLOWED in Part and DENIED in part. Summary judgment shall enter in favor of SAA Group, LLC on its breach of contract claim against the defendants pursuant to Mass.R.Civ.P. 56(c), and summary judgment shall enter in favor of the defendants on SAA Group, LLC's negligence claim.