After being sued by another deed holder to quiet title and her lender to foreclose on the property, a property owner in Queens sued its title insurer and title agent, alleging they failed to timely record her deed, failed to use the escrow funds to pay off existing mortgages, made three unauthorized wire transfers and breached their duty to defend her in the other actions.
The case is Vanessa Sammy v. First American Title Insurance Co., et al., Robert Tambini (Supreme Court Appellate Division, Second Department, New York, 2019-12720).
On March 16, 2007, Vanessa Sammy entered a contract to purchase property in Queens, N.Y., from Astenie Sainvil. The closing took place on May 31, 2007. Sammy purchased title insurance issued by Expedient Title Inc., as agent for First American Title Insurance Co., from Robert Tambini, an officer of Expedient who prepared the title commitment.
To purchase the property, Sammy borrowed $570,000 from Countrywide Home Loans Inc., secured by a mortgage in favor of Countrywide. At the closing, Sammy delivered to Expedient a deed memorializing the conveyance of the property from Sainvil to Sammy to be recorded in the Office of the City Register of the City of New York, and approximately $519,000 to be held in escrow and used to satisfy two existing mortgages encumbering the property. On Oct. 30, 2007, a deed dated Sept. 28, 2007, memorializing the conveyance of the property from Sainvil to nonparty South Ozone Park Realty Holdings Corp., was recorded. Sammy’s deed was not recorded until 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 on the property. Countrywide alleged Sammy defaulted on her obligations under the mortgage on Sept. 1, 2007, and thereafter.
Sammy filed the current suit against First American and Expedient Title in October 2008. The complaint alleged they failed to timely record her deed, failed to use the escrow funds to pay off the existing mortgages, 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 and Countrywide actions.
After discovery, Expedient and Tambini moved for summary judgment dismissing the cause 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 separately moved for summary judgment dismissing the causes of action to recover damages for breach of the title policy, negligence, conversion, and breach of the duty to defend.
Sammy opposed both motions and cross-moved for summary judgment. On Oct. 8, 2019, the trial court 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 on or after May 21, 2013, denied that 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 appealed and First American and Expedient separately cross-appealed.
The appellate court ordered that the cross appeal by Expedient Title be dismissed as abandoned. It also ordered that “the order is modified, on the law, by (1) deleting the provision thereof denying 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 insofar as asserted against the defendant First American Title Insurance Company as sought to recover defense costs incurred by the plaintiff before May 21, 2013, in an action entitled South Ozone Park Realty Holdings Corp. v Sammy, commenced in the Supreme Court, Queens County, under Index No. 1214/08, and substituting therefor a provision granting that branch of the plaintiff’s cross motion, and (2) deleting the provision thereof denying that branch of the plaintiff’s cross motion which was for summary judgment on the cause of action to recover damages for negligence insofar as asserted against the defendant Expedient Title, Inc., and substituting therefor a provision granting that branch of the plaintiff’s cross motion; as so modified, the order is affirmed insofar as appealed from and as cross-appealed from by the defendant First American.”
It stated that contrary to Sammy’s contention, the lower court properly granted those branches of the defendants’ respective motions which were for summary judgment dismissing so much of the cause of action to recover defense costs incurred by Sammy in the South Ozone action on or after May 21, 2013. It noted that an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify an insured under any policy provision.
“Here, the allegations in the complaint in the South Ozone action potentially give rise to a claim covered by the plaintiff’s 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 the plaintiff on or after May 21, 2013. Exclusion 3(a) expressly excludes coverage for ‘defects, 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 further noted that the lower court properly denied the branch of Sammy’s cross motion 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. The court held that Sammy failed to establish that the allegations of the complaint in the Countrywide action potentially give rise to a claim covered by the policy. The court also held 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.
It then said the lower court, “erred in denying that 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 based on the application of the law of the case doctrine. Nevertheless, on the merits, that branch of First American’s motion was properly denied. The evidence submitted by First American in support of its motion similarly failed to establish, prima facie, that the plaintiff did not have legal ownership or an immediate superior right to the escrow funds, which were tendered to Expedient as an agent of First American, or that First American did not exercise unauthorized dominion over those funds in failing to use them to pay off the existing mortgages encumbering the subject property.”