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Green Tree Servicing, LLC v. Chicago Title Insurance Co.

Court of Appeals of Missouri, Eastern District, Fifth Division

October 4, 2016

GREEN TREE SERVICING, LLC, Plaintiff/Appellant,
v.
CHICAGO TITLE INSURANCE COMPANY, Defendant/Respondent, and TITLE PRO, LLC, Defendant.

         Appeal from the Circuit Court of Jefferson County Honorable Darrell E. Missey

          Philip M. Hess, Chief Judged

         Introduction

         Green Tree Servicing, LLC ("Appellant") appeals the judgment of the Circuit Court of Jefferson County granting Chicago Title Insurance Company's ("Respondent") motion to dismiss Counts I and II of Appellant's petition seeking damages against Respondent for vexatious refusal to pay and breach of contract. This case is about a dispute over a title insurance contract between the parties, and Respondent's denial of Appellant's claim for coverage under said contract after Appellant's lien, which was insured by Respondent, was wiped out in a foreclosure sale. Appellant notified Respondent of its claim approximately six months after the foreclosure sale. Respondent argued, and the trial court agreed, that Appellant failed to provide timely notice of its claim. On appeal, Appellant argues that it notified Respondent promptly once it had actual notice of its claim, and that the trial court erred in determining, as a matter of law, that it did not provide timely notice under the contract. We agree.

         Factual Background

         In January, 2004, Borrower granted a home equity deed of trust ("Home Equity Deed of Trust") to Citibank, FSB, for $40, 000, which Citibank recorded in March, 2004. On February 10, 2005, America's Wholesale Lender, Appellant's predecessor insured ("Predecessor"), loaned Borrower $166, 800 in order to refinance a loan secured by real property located at 407 Sun Field Lane, Festus, Missouri ("Property"). To secure payment of the loan, Borrower executed a Deed of Trust ("Refinance Deed of Trust") secured by the Property in favor of Predecessor on April 12, 2005. Ticor Title Insurance Company, now a subsidiary of Respondent, issued a loan policy of title insurance ("Policy") to insure the Refinance Deed of Trust. The Policy insured Predecessor against "the invalidity or unenforceability of the lien of the insured mortgage upon the title."

         Predecessor and Citibank entered into a subordination agreement on February 4, 2005, in which Citibank agreed to subordinate its Home Equity Deed of Trust to the Refinance Deed of Trust. Predecessor retained Title Pro, LLC to handle the closing of the Refinance Deed of Trust. Title Pro agreed to record the subordination agreement, but it failed to do so.

         In August 2011, Borrower was in default on the Home Equity Deed of Trust, and Citibank decided to foreclose on the Property. Citibank sent timely notice of foreclosure to Predecessor and other parties with interest in the Property by certified mail. Predecessor did not notify Respondent or its subsidiary of the foreclosure. Predecessor did not attend or otherwise attempt to stop the sale of the Property. CitiMortgage Inc. bought the Property at the foreclosure sale in September 2011 and recorded a trustee's deed. On March 1, 2012, Citibank conveyed the Property to a bona fide purchaser. The purchaser encumbered the Property with a deed of trust in favor of FortuneBank on March 2, 2012.

         In early March 2012, Predecessor ordered a title report on the Property. On March 7, 2012, Predecessor received the title report which revealed that its Refinance Deed of Trust had been extinguished by the 2011 foreclosure sale. Predecessor then requested a copy of the Policy, which it received on March 13, 2012. On that same date, Predecessor discovered that its subordination agreement with Citibank not been recorded until March 12, 2012.

         On March 14, 2012, Predecessor filed a claim with Respondent for coverage under the Policy due to Predecessor's interest in the Property being wiped out as a result of the sale of the Property and its subsequent transfer to a bona fide purchaser. Respondent denied the claim on the grounds that Predecessor had failed to provide Respondent with prompt notice of the claim as required by the Policy contract. The Policy contract stated, in relevant part, that:

The insured shall notify the Company promptly in writing. . . (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 the lien of the insured mortgage, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy, or (iii) if title to the estate or interest or the lien of the insured mortgage, as insured, is rejected as unmarketable. If prompt notice shall not be given to the Company, then as to the insured all liability of the Company shall terminate with regard to the matter or matters for which prompt notice is required; provided however, that failure to notify the Company shall in no case prejudice the rights of any insured under this policy unless the Company shall be prejudiced by the failure and then only to the extent of the prejudice.

         Furthermore, under the Policy contract, "knowledge" was defined as "actual knowledge, not constructive knowledge or notice which may be imputed to an insured by reason of the public records. . . or any other records which impart constructive notice."

         In June 2013, Predecessor assigned "all beneficial interest" under the Refinance Deed of Trust to Appellant. In May 2014, Appellant filed suit against Respondent and Title Pro, LLC. Count I of Appellant's petition was a vexatious refusal claim, Count II was a breach of contract claim, and Count III was a negligence claim. In Count I and Count II, Appellant alleged that Respondent had refused to pay Predecessor's claim without reasonable cause or excuse and in violation of the Policy contract. Respondent filed a motion to dismiss Counts I and II pursuant to Rule 55.27(a)(6)[1] for failure to state a claim upon which relief can be granted. In September 2014, the trial court granted Respondent's motion to dismiss Counts I and II, finding that "[Appellant] did not timely notify [Respondent] of its claim as required by the contract of insurance and therefore is barred from recovery." Appellant filed a motion to reconsider, which the trial court denied. The trial court granted Respondent's motion for summary judgment on Count III of the petition in December 2015. Appellant then filed its Notice of Appeal in January 2016, appealing the trial court's dismissal of Counts I and II.

         Standard ...


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