Constr. Fin. Servs., Inc. v. Chi. Title Ins. Co.

CONSTRUCTION FINANCIAL SERVICES, INC., Appellant

v.CHICAGO TITLE INSURANCE COMPANY, Appellee

No. 04-12-00375-CV

Fourth Court of Appeals San Antonio, Texas

Delivered and Filed: May 1, 2013

MEMORANDUM OPINION

From the 131st Judicial District Court, Bexar County, Texas

Trial Court No. 2010-CI-11173

Honorable David Peeples, Judge Presiding¹

Opinion by: Marialyn Barnard, Justice

Sitting: Catherine Stone, Chief Justice

Marialyn Barnard, Justice

Luz Elena D. Chapa, Justice

AFFIRMED IN PART; REVERSED AND REMANDED IN PART

This is an appeal from a summary judgment in favor of appellee Chicago Title Insurance Company ("Chicago Title") on appellant Construction Financial Services, Inc.'s ("Construction Financial") claims for breach of fiduciary duty, violations of the Texas Deceptive Trade Practices Act ("DTPA"), negligence, and breach of contract. On appeal, Construction Financialraises six issues challenging the summary judgment. We affirm in part and reverse and remand in part.

BACKGROUND

In February 2007, Construction Financial, a lending company, loaned $2,250,000.00 to Wren Alexander Investments, LLC. ("Wren"). The loan was to allow Wren to purchase a 551-acre ranch in Medina County, Texas. This transaction was closed at Texas Heritage Title Company, which later recorded the Deed of Trust in Medina County, Texas. Approximately a month later, Wren decided to borrow another $650,000.00 from Construction Financial. Construction Financial agreed to loan the additional funds to Wren. Charles Michael Scott, president of Construction Financial, averred that as additional collateral, a ranch tenant, Charles Pircher, agreed to pledge a quarter horse worth several hundred thousand dollars. As was its practice, Construction Financial wanted to close this transaction at a title company. Scott testified that Construction Financial almost always closes loan transactions at title companies, even when it does not purchase title insurance, because a title company takes responsibility for filing the loan papers with the proper authorities.

According to Scott, Wren Alexander, the owner of Wren, recommended the parties use Chicago Title for the closing. Both companies had used Chicago Title for previous closings, and both Scott and Alexander believed Chicago Title to be a professional and competent title company. Importantly, both Scott and Alexander were personally familiar with one of Chicago Title's escrow officers, Mary Furgason. Alexander told Scott he was "close personal friends" with Furgason, and Scott admitted he knew her as well, having dated her at one time.

Scott said Alexander called and told him Chicago Title and Furgason had agreed to handle the closing on the $650,000.00 loan. In anticipation thereof, Construction Financial forwarded closing instructions to Chicago Title and its attorneys forwarded the loan documents.Alexander stated in his deposition they did not have an "appointment" with Furgason for the closing. But, Scott testified in his affidavit that Alexander told him Furgason would be available for the closing at Chicago Title on April 4, 2007. In his deposition, Scott admitted he could not recall if the date and time were coordinated through Furgason.

On April 4, 2007, Scott, Alexander, and Pircher went to the offices of Chicago Title. The parties met in Furgason's office. After the documents were signed, they were notarized by Furgason. According to Scott, Furgason "specifically agreed that Chicago Title would file the Deed of Trust in the real property records." Alexander stated that after the documents were signed and notarized, he heard Furgason ask Scott if he would like her "to file those papers for you." Furgason, in her deposition, testified she had no recollection of the closing or the events surrounding it; she participates in twenty to sixty closings each month. When she was first alerted some years later that there was a problem, she called Alexander, with whom she has a close, personal relationship, and asked him to refresh her memory. Based on her conversation with Alexander, Furgason stated during her deposition that there was no "agreement" for Chicago Title to close the loan transaction. Rather, as a courtesy to Alexander, Furgason said she would notarize the loan documents and file them. She specifically denied entering into any agreements "with these guys." Furgason testified neither she nor Chicago Title received any fee for the services. Scott stated in his affidavit he was unaware there was no fee paid or that Furgason was doing the work as a courtesy to Alexander, who as the borrower would have typically paid any closing costs. Scott claimed if he had known, he would have insisted that fees and costs be paid.

According to Scott, in the summer of 2008, Wren fell behind on its monthly loan payments. When Wren was unable to bring its loan payments up to date, Scott sought to foreclose and sell the ranch. It was during this process that Construction Financial's attorneyslearned that although the deed of trust for the original $2,250.000.00 loan was properly filed in the property records of Medina County, the deed of trust for the subsequent $650,000.00 loan was mistakenly filed in the Bexar County property records. Accordingly, the lien on the ranch and the quarter horse for the $650,000.00 was not perfected. Scott informed Furgason of the problem and asked her to file the deed of trust in Medina County. Furgason told him she did not have a copy of the deed of trust as Chicago Title had no file on the loan transaction. Scott testified he delivered his copy of the deed of trust to Chicago Title which then filed it in the Medina County property records on August 15, 2008. Scott testified he did not know about the filing problem when he originally received his copy of the deed of trust because the document did not state where it had been filed. However, near the top of the document, in capital letters, the deed of trust stated "THE STATE OF TEXAS COUNTY OF MEDINA" and within the property description on the first page of the deed of trust, it stated in capital letters the property is "SITUATED IN MEDINA COUNTY, TEXAS." Scott stated it never occurred to him the document would be filed anywhere but Medina County.

Furgason, individually and as a representative for Chicago Title, testified the deed of trust should have been sent to a title company in Medina County for filing pursuant to Chicago Title's normal procedures. It was mistakenly placed in a bin for documents to be filed in Bexar County, where it was ultimately filed. There is no dispute the document was misfiled.

As a result of the misfiling, Construction Financial found itself behind two other lienholders with regard to the $650,000.00 loan. Between the closing and the time Construction Financial was able to perfect its lien, Wren borrowed an additional $900,000.00, secured by the same property. Moreover, the Internal Revenue Service filed a multi-million dollar tax lien on the property in April 2008. These liens were perfected and superior to the lien held by Construction Financial. Facing foreclosure, Wren filed for bankruptcy. When the ranch wassold pursuant to a Bankruptcy Court order, Construction Financial was paid in full on the original $2,250,000.00 loan, but received nothing with regard to the $650,000.00 loan. Rather, the lienholders who loaned Wren $900,000.00 were paid in full, and the remaining proceeds from the sale of the ranch, $1,192,612.46, were paid to the IRS.

On July 6, 2010, Construction Financial filed its original petition against Chicago Title. In its subsequent live petition, Construction Financial alleged claims for: violations of section 17.46 of the DTPA, breach of fiduciary duty, breach of contract, and negligence. As an affirmative defense to Chicago Title's claim of limitations, Construction Financial pled the discovery rule.

Construction Financial and Chicago Title filed competing motions for summary judgment with regard to the breach of fiduciary duty cause of action, and Chicago Title filed traditional and no evidence motions for summary judgment with regard to the other causes of action. The trial court ultimately rendered judgment that Construction Financial take nothing on its claims, setting forth the bases for its decision in the order. Specifically, the trial court:

• denied Construction Financial's motion for summary judgment and granted the one filed by Chicago Title with regard to the breach of fiduciary duty claim, stating there was no fiduciary relationship between either Chicago Title and Construction Financial or Furgason and Construction Financial because Furgason's gratuitous favor in notarizing and filing the documents did not create such a relationship;

• granted Chicago Title's traditional motion for summary judgment on the basis of limitations as to the negligence² and DTPA claims, specifically stating the discovery rule did not toll the statute of limitations, and further granted summary judgment in favor of Chicago Title on the DTPA claim, stating Construction Financial was not a consumer; and

• granted Chicago Title's motion for summary judgment as to the breach of contract claim, stating there was no evidence of a written or oral contract, and no consideration from Construction Financial to Chicago Title.

Construction Financial filed a motion for new trial, which was overruled by operation of law. It thereafter perfected this appeal.

ANALYSIS

In six issues, Construction Financial challenges the trial court's summary judgment order, contending:

• there are disputed issues of fact as to whether the parties were in a fiduciary relationship;

• with regard to the breach of fiduciary duty claim, Construction Financial proved as a matter of law that Chicago Title had a fiduciary duty to file the deed of trust in the proper county;

• Chicago Title did not prove as a matter of law that Construction Financial's negligence claim was barred by limitations;

• there are disputed issues of fact as to

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