A homebuyer in New York City filed suit against her title insurer and title agent for failing to timely record her deed, failing to use escrow funds to pay off existing mortgages on the property and breaching their duty to defend her in two separate actions regarding her purchase. The case eventually went to the Supreme Court of the State of New York Appellate Division: Second Judicial Department.
The case is Vanessa Sammy v. First American Title Insurance Co., et al., Robert Tambini (Supreme Court of the State of New York Appellate Division: Second Judicial Department, No. 2019—12720).
Vanessa Sammy entered a contract to purchase property in Queens, N.Y., from Astenie Sainvil on March 16, 2007. The closing took place on May 31, 2007, at which time Sammy purchased a title insurance policy from Expedient Title Inc., as agent for First American Title Insurance Co., from Robert Tambini, an officer of Expedient.
Sammy borrowed $570,000 from Countrywide Home Loans Inc., secured by a mortgage on the property. At closing, Sammy delivered to Expedient a deed to be recorded in the Office of the City Register of the City of New York and $519,000 to be held in escrow and used to satisfy two existing mortgages on the property. On Oct. 30, 2007, a deed dated Sept. 28, 2007, conveying the property to South Ozone Park Realty Holdings Corp. was recorded. Sammy’s deed was recorded on Dec. 6, 2007.
In January 2008, South Ozone filed suit against Sammy to quiet title to the property. In March 2008, Countrywide filed suit against Sammy to foreclose its mortgage, alleging that Sammy had defaulted on her obligations under the mortgage on Sept. 1, 2007.
In October 2008, Sammy filed suit against First American, Expedient and Tambini, alleging they failed to timely record her deed, failed to use the escrow funds to pay off the existing mortgages on the property, made three unauthorized wire transfers totaling $50,030, from the escrow funds to nonparties, and breached their duty to defend Sammy in the South Ozone action and the Countrywide action. It sought to recover damages for breach of the title policy and negligence, as well as the defendants’ alleged breach of their duty to defend Sammy in the South Ozone and Countrywide actions, and for conversion.
Expedient and Tambini moved for summary judgment dismissing the causes of action to recover damages for breach of the title policy, negligence and conversion insofar as asserted against them, and breach of the duty to defend insofar as asserted against Expedient. First American filed a separate motion for summary judgment, seeking to dismiss the causes of action to recover damages for breach of the title policy, negligence, conversion and breach of the duty to defend insofar as asserted against it. Sammy opposed both motions and cross-moved for summary judgment.
The trial court issued an order on Oct. 8, 2019, granting the branches of the defendants’ respective motions which were for summary judgment dismissing the cause of action to recover damages for breach of the duty to defend insofar as asserted against Expedient and First American as sought to recover defense costs incurred by Sammy in the South Ozone action on May 21, 2013, denied the branch of First American’s motion which was for summary judgment dismissing the cause of action to recover damages for conversion insofar as asserted against it, and denied Sammy’s cross motion. Sammy appeals, and First American and Expedient separately cross-appealed.
The appellate court first found that the cross appeal by Expedient must be dismissed as abandoned. It then noted that the trial court properly granted the branches of the defendants’ respective motions which were for summary judgment dismissing so much of the cause of action to recover damages for breach of the duty to defend insofar as asserted against Expedient and First American as sought to recover defense costs incurred by Sammy in the South Ozone action.
“Here, the allegations in the complaint in the South Ozone action potentially give rise to a claim covered by Sammy’s title insurance policy,” the court stated. “However, the defendants established, prima facie, that Exclusion 3(a) of the title insurance policy applied to bar coverage in the South Ozone action for defense costs incurred by Sammy on or after May 21, 2013. Exclusion 3(a) expressly excludes coverage for ‘[d]efects, liens, encumbrances, adverse claims, or other matters’ that are ‘created, suffered, assumed, or agreed to by the insured claimant.’ In support of their respective motions, the defendants submitted an affidavit executed by the plaintiff in connection with the South Ozone action dated May 21, 2013, in which she stated that she has ‘no objection’ to South Ozone’s claim to title of the subject property, and “no longer ha[s] any claim against [South Ozone] with regard to their ownership of the property” (hereinafter the May 21, 2013 affidavit). This evidence was sufficient to establish, prima facie, that on May 21, 2013, the plaintiff agreed to the adverse claim asserted against her in the South Ozone action. The duty to defend in the South Ozone action therefore falls within Exclusion 3(a) of the title insurance policy as of that date.
“However, the Supreme Court should have granted that branch of the plaintiff’s cross motion which was for summary judgment on so much of the cause of action to recover damages for breach of the duty to defend as alleged that First American breached its duty to defend the plaintiff in the South Ozone action before May 21, 2013,” the court stated. “In opposition to the plaintiff’s prima facie showing that the allegations in the complaint in the South Ozone action potentially give rise to a claim covered by the plaintiff’s title insurance policy, First American failed to meet its heavy burden of demonstrating that, prior to the plaintiff’s execution of the May 21, 2013 affidavit, the allegations in the South Ozone complaint cast the pleadings wholly within a policy exclusion and that there is no possible factual or legal basis upon which First American was obligated to defend the plaintiff under any policy provision in the South Ozone action.”
It noted that the lower court properly denied the branch of Sammy’s cross motion which was for summary judgment on the cause of action to recover damages for breach of the duty to defend as alleged that First American breached its duty to defend Sammy in the Countrywide action because Sammy failed to establish that the allegations of the complaint in the Countrywide action potentially give rise to a claim covered by the policy.
It also said the lower court properly denied the branch of Sammy’s cross motion which was for summary judgment on the cause of action to recover damages for conversion.
“Here, in support of her cross motion, the plaintiff submitted an affidavit in which she stated that, at the closing, the defendants took possession of the ‘sale proceeds’ in the amount of $519,000, which amount ‘was intended to be used to pay-off existing mortgage notes,’ and that the defendants failed to use the sale proceeds to pay off the mortgage notes and instead made three disbursements from the escrow funds to nonparties,” the court stated. “This evidence failed to establish, prima facie, that the plaintiff, as the purchaser of the subject property, had legal ownership or an immediate superior right of possession to the escrow funds, which she described as ‘sale proceeds.’”
The appellate court said the lower court properly denied the branch of Sammy’s cross motion for summary judgment to recover damages for breach of the title policy against Expedient because Sammy failed to establish the existence of a contract between herself and Expedient.
It then held that the lower court should have granted the branch of Sammy’s cross motion for summary judgment on the cause of action to recover damages for negligence asserted against Expedient.
“Here, the plaintiff established, prima facie, that Expedient assumed a duty to her to timely record the deed executed by Sammy in connection with her purchase of the subject property, and to hold the escrow funds in order to satisfy the two existing mortgages encumbering the subject property. The plaintiff further established that Expedient breached those duties by failing to timely record the deed, and by failing to use the escrow funds to satisfy the two existing mortgages encumbering the subject property. In opposition to the plaintiff’s prima facie showing, Expedient failed to raise a triable issue of fact.”