The potential buyer of 60 acres of land sued a title insurer for negligence and negligent misrepresentation after the title insurer and its agent conducted the sale of the 60 acres from the sellers to another party.
The case is Springbrook Village Batesville LLC and Eunoia Development Group LLC v. Southeast Indiana Title Inc., Douglas Amberger, and Chicago Title Co. Inc. (Court of Appeals of Indiana, No. 21A-CT-2603).
Springbrook Village Batesville LLC and Eunoia Development Group LLC entered a contract with members of the Nobbe family to purchase 60 acres of land in Franklin County, Ind. The contract was scheduled to commence on March 25, 2018, and to close on Aug. 18, 2020. In December 2018, Springbrook Village assigned the Nobbe contract to Eunoia.
In November 2018, Springbrook Village and Margaret Mary Community Hospital entered a contract for the hospital to purchase 14.5 acres of the 60-acre parcel. However, the purchase agreement did not close and expired by its terms on March 31, 2019. On April 1, 2019, the hospital filed a memorandum of purchase agreement with the Franklin County, Ind. Recorder’s Office.
The hospital and the Nobbe family then entered into a purchase agreement for the entire 60-acre parcel of land. Southeast Indiana Title Inc. was hired to conduct the title search and handle the closing. Chicago Title Co. Inc. underwrites title policies for Southeast Indiana Title. On June 4, 2019, Southeast Indiana Title issued a preliminary title commitment to the hospital that did not include the April 1, memorandum of purchase agreement. The commitment excluded coverage for any loss resulting from a contractual relationship and or litigation between Springbrook Village and/or Eunoia against the hospital and the sellers. On June 11, the hospital filed a termination and release of memorandum of purchase agreement.
On June 13, 2019, Springbrook informed the hospital that Springbrook had an existing purchase agreement with the Nobbe family for the 60-acre parcel of land. The next day, the hospital shared the information with Southeast Title. The purchase agreement between the hospital and the Nobbe family closed the same day and the Nobbe family conveyed the property to the hospital via warranty deed. Chicago Title issued the hospital its final title policy. On Aug. 22, 2019, the hospital filed a complaint to quiet title against Springbrook in the Franklin Circuit Court. Eunoia filed a counterclaim against the hospital.
Springbrook filed suit against Southeast Indiana Title and Chicago Title on June 10, 2021. It filed individual counts for negligent misrepresentation, negligence and in concert liability against Southeast Indiana Title, Douglas Amberger and Chicago Title.
Southeast Indiana Title and Chicago Title filed motions to dismiss Springbrook’s suit. On Oct. 18, 2021, the trial court granted their motions to dismiss. Springbrook appealed.
The appellate court affirmed the trial court’s decision, concluding that Springbrook failed to show that it was prejudiced by the trial court dismissing its complaint with prejudice. Additionally, it found the trial court did not err when granting Southeast Indiana Title’s and Chicago Title’s motions to dismiss.
Springbrook first argued that the trial court erred in dismissing its negligence claim against Southeast Indiana Title. The court noted that to prevail on the claim, Springbrook had to show Southeast Indiana Title owed a duty to Springbrook; Southeast Indiana Title breached that duty; and Springbrook suffered compensable injury proximately caused by Southeast Indiana Title’s breach of duty. It further noted a duty of reasonable care arises out of a relationship between parties.
“Here, the record is clear that there is no contractual or professional relationship between Springbrook and Southeast Indiana Title,” the court stated. “Further, there is no statutory relationship. Therefore, the undisputed facts demonstrate that Southeast Indiana Title had no relationship with Springbrook that would normally give rise to a duty.”
It further stated, “We find that public policy considerations weigh against finding a duty. Imposing a duty on title insurers to third parties identified in land records with whom they have no relationship would severely limit their ability to provide title services.”
It concluded that because Southeast Indiana Title did not owe Springbrook a duty of care, Springbrook’s negligence claim against Southeast Indiana Title must fail.
Springbrook also argued that the trial court erred in dismissing the complaint’s negligent misrepresentation counts.
“Negligent misrepresentation claims, similar to negligence claims, require a showing of duty,” the court stated. “In Integrity, our Supreme Court addressed an action for negligent misrepresentation and held that a title company could be found liable for a lender’s pecuniary losses under the tort of negligent misrepresentation even if the title company and the lender did not have a contractual relationship. Springbrook attempts to expand Integrity to include all third parties by arguing that Southeast Indiana Title and Chicago Title should be held liable under the ‘public duty exception’ of negligent misrepresentation outlined in Restatement (Second) of Torts Section 552.
“Here, neither Southeast Indiana Title nor Chicago Title is a public official, and neither is required by law to file information for the benefit of the public,” the court continued. “Further, as noted in Integrity, ‘preliminary title reports are normally relied on by insureds, escrow agents, and lenders, not the public at large or unrelated third parties.’ The facts of Integrity also do not support an expansion to third parties such as Springbrook. In Integrity, Texcorp Mortgage Banker issued a mortgage to a buyer of real property. Texcorp then contracted with Integrity Land Title Corp. to prepare a title commitment. Integrity failed to note a foreclosure judgment in its commitment. U.S. Bank N.A. then succeeded Texcorp’s interest and filed a third-party claim against Integrity. Thus, the third-party relationship between U.S. Bank and Integrity is not like that of Springbrook and Southeast Indiana Title and Chicago Title because Springbrook does not succeed in interest a party who had a contractual relationship with Southeast Indiana Title or Chicago Title. We conclude that Southeast Indiana Title and Chicago Title did not owe Springbrook a public duty. Therefore, the trial court did not err in dismissing the negligent misrepresentation claim.”