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Inc. v. Commonwealth Land Title Insurance Co.

United States District Court, M.D. Tennessee, Nashville Division

April 10, 2015

FV-1, INC. IN TRUST FOR MORGAN STANLEY MORTGAGE CAPITAL HOLDINGS, LLC
v.
COMMONWEALTH LAND TITLE INSURANCE COMPANY, et al.

MEMORANDUM

TODD J. CAMPBELL, District Judge.

Pending before the Court are Defendants' Motion for Summary Judgment (Docket No. 25) and Plaintiff's Motion for Summary Judgment (Docket No. 28). For the reasons stated herein, Defendants' Motion for Summary Judgment (Docket No. 25) is GRANTED in part and DENIED in part, and Plaintiff's Motion for Summary Judgment (Docket No. 28) is GRANTED in part and DENIED in part.

FACTS

This action arises from a claim filed by Plaintiff against a title insurance policy issued by Defendant Commonwealth Land Title Insurance Company ("Commonwealth") to Plaintiff's predecessor, Branch Banking & Trust ("BB&T"). The policy was issued in connection with a mortgage loan from BB&T to Lisa Vaske and Brian Vaske in July of 2007. The Note from the Vaskes to BB&T was secured by a Deed of Trust which was recorded in the Register of Deeds Office in Sumner County, Tennessee.

Statewide Title and Escrow of Tennessee, LLC ("Statewide") was, at the time of the subject mortgage, a Tennessee limited liability company owned by Lisa Vaske. During the time at issue, Statewide was Defendant's authorized agent for issuing title insurance commitments and policies in Tennessee. The Title Insurance Agency Agreement ("Agency Agreement") between Defendant and Statewide appoints Statewide as Defendant's agent "solely for the purpose of issuing, on [Defendant's] forms, title insurance commitments, policies and endorsements on real estate located in the State of Tennessee." Docket No. 28-1.

The Agency Agreement states that Statewide is not authorized to engage in any business in the name of Defendant except as specifically authorized therein. The Agency Agreement also requires prior written consent of Defendant before Statewide commits Defendant to insure title to property in which Statewide or any of its owners, its partners or any entity controlled by Statewide has an interest.

Statewide issued a title policy to BB&T on behalf of Defendant at the closing of the Vaske mortgage. Statewide not only issued the subject title insurance policy, but it also acted as the closing agent for purposes of escrow, closing and other settlement functions related to the closing of the Vaske loan. It is undisputed that BB&T expected Statewide to disburse loan funds in accordance with its closing instructions and the settlement statement. It is also undisputed that the closing instructions listed, as one of the payoffs, a $143, 268.92 mortgage to Countrywide Home Loans and that Statewide closed the loan without paying off the mortgage to Countrywide Home Loans.

In April of 2011, Plaintiff (as successor in interest to BB&T) submitted a title insurance claim to Defendant, indicating that several title defects had been discovered, including the Countrywide Home Loans mortgage. On May 16, 2011, Defendant notified counsel for Plaintiff that it had received the claim. That letter from Defendant to Plaintiff's counsel stated, among other things:

Upon proper foreclosure of the insured mortgage and the current insured's acquisition of the property at foreclosure sale or upon the insured's acquisition of title by deed in lieu of foreclosure, coverage will continue in favor of the Insured in accordance with the terms and provisions of the Policy.
In order to expedite the resolution of this matter, the Company offers to issue its standard letter of indemnity to another title insurance underwriter with respect to the Item. In the alternative, the company will consider issuing new title insurance at standard rates, to a third party purchaser(s) or its lender(s), taking exception to the Item, but insuring against any loss or damage due to the Item(s).

Docket No. 28-15.

On September 16, 2011, the holder of the Countrywide Home Loans mortgage foreclosed on the subject Property. Plaintiff supplemented its claim with Defendant on August 15, 2012. On August 30, 2014, Defendant issued a letter to Plaintiff denying its claim under the subject policy and rescinding its offer of indemnity in the May 16, 2011 letter.

Thereafter, Plaintiff filed this action in state court, and Defendant removed it to this Court. Plaintiff's Amended Complaint (Docket No. 11) alleges causes of action against Defendant for breach of contract, negligence, and bad faith refusal to pay. The parties have filed cross-Motions for Summary ...


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