Pennymac Holdings, LLC v. First Am. Title Ins. Co.

PENNYMAC HOLDINGS, LLC v. FIRST AMERICAN TITLE INSURANCE COMPANY

No. 2758

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2018

November 30, 2020

Circuit Court for Worcester County

Case No. 23-C-16-000544

UNREPORTED

Leahy, Wells, Sharer, J. Frederick (Senior Judge, Specially Assigned), JJ.

Opinion by Leahy, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

Appellant, PennyMac Holdings, LLC ("PennyMac") appeals from an order entered in the Circuit Court for Worcester County on October 4, 2018 granting summary judgment in favor of appellee, First American Title Insurance Company ("First American"). The circuit court found, first, that PennyMac's causes of action based upon First American's denial of claims under a title policy issued to PennyMac's predecessor in interest were filed more than three years after denial of the claims. Second, the court determined that the title policy was not a contract under seal; therefore, it did not qualify as a specialty subject to the twelve-year limitation period set forth in Maryland Code (1973, 2013 Repl. Vol., 2019 Supp.), Courts and Judicial Proceedings Article ("CJP"), § 5-102(a).¹ Accordingly, the circuit court entered summary judgment because PennyMac's claims under the title policy were barred by the applicable three-year statute of limitations. The record does not demonstrate, however, that the court addressed Penny Mac's claims that First American breached its obligations under a closing protection letter, issued by First American on November 4, 2006 (the "Closing Protection Letter"), to reimburse PennyMac's predecessor in interest and assigns "for actual loss" incurred in connection with the closing.² PennyMac timely noted its appeal and presents two questions for our review:

"1. Did the lower court err in entering summary judgment against PennyMac finding that PennyMac's [] breach of Contract Claims for indemnity are time-barred subject to a three-year statute of limitations?"

"2. Did the lower court err in finding that the title policy was not a contract under seal, subject to a twelve-year statute of limitations?"

For the reasons that follow, we hold that the circuit court correctly determined, as a matter of law, that the title policy was a simple contract and not a contract under seal. After resolving this threshold issue, and respecting our holding in Stewart Title v. West, 110 Md. App. 114 (1996), we affirm the grant of summary judgment in favor of First American on the claims brought under the title policy because they accrued more than three years before the underlying action was filed. The circuit court erred, however, in failing to address PennyMac's breach of contract claims under the Closing Protection Letter. Accordingly, we affirm, in part, but reverse the circuit court's grant of summary judgment disposing of the entire case. We remand for further proceedings, consistent with this opinion, for the circuit court to consider whether, and if so, when, PennyMac suffered an actual loss under the Closing Protection Letter.

BACKGROUND

The Refinance Transaction

PennyMac is in the business of purchasing distressed consumer loans. On or about October 26, 2012, PennyMac purchased a portfolio of approximately 1,900 loans from CitiMortgage. The portfolio included a loan for a condominium at 6801 Atlantic Avenue, #1N, Ocean City Maryland 21042 (the "Property") purchased by Jeffrey Burgee in May 2005.

On November 7, 2006, Mr. Burgee refinanced the existing loans on the Property with a new loan ("Loan") from New Century Mortgage Corporation ("New Century"), pursuant to a promissory note ("Note") in the original principal amount of $480,000. Mr. Burgee intended that the Loan would be secured by a deed of trust on the Property in favor of New Century ("Deed of Trust"). However, the Deed of Trust was not recorded. PennyMac currently holds the Note.

In connection with the closing for the Loan, First American issued the Closing Protection Letter on November 4, 2006. The Closing Protection Letter provides that First American will reimburse New Century "for actual loss incurred by [New Century] in connection with such closing when conducted by the Issuing Agent, Approved Attorney, or Approved Closing Services Vendor and when such loss arises out of:"

1. Failure of the Issuing Agent, Approved Attorney, or Approved Closing Services Vendor to comply with your written closing instructions to the extent that they relate to: (a) the status of the title to said interest in land or the validity, enforceability and priority of the lien of said mortgage on said interest in land, including the obtaining of documents and the disbursement of funds necessary to establish such status of title or lien; or (b) the obtaining of any other document, specifically required by you, but not to the extent that said instructions require a determination of the validity, enforceability or effectiveness of such other document; or (c) the collection and payment of funds due you; or

2. . . .

Although TransContinental Title Company ("TransContinental") is listed as the Approved Closing Services Vendor in the Closing Protection Letter, the closing was handled by Lawyers Title Company. As alleged in the underlying complaint, "Lawyers Title failed to ensure that the Deed of Trust was recorded, and the Deed of Trust remainsunrecorded[.]" According to the record, the original deed of trust was, and remains, missing; consequently, PennyMac could not rectify Lawyers Title's error.

First American also issued a title policy³ ("Title Policy") in 2006 for the benefit of New Century, and "its successors and/or assigns, as their interest may appear." The Title Policy is a Short Form Residential Loan Policy from the American Land Title Association ("ALTA") and expressly "INSURES THE INSURED IN ACCORDANCE WITH AND SUBJECT TO THE TERMS, EXCLUSIONS AND CONDITIONS SET FORTH IN THE AMERICAN LAND TITLE ASSOCIATION LOAN POLICY (6-17-06), ALL OF WHICH ARE INCORPORATED HEREIN." Policy (6-17-06) states:

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B, AND THE CONDITIONS, BLANK TITLE INSURANCE COMPANY, a Blank corporation (the "Company") insures as of Date of Policy and, to the extent stated in Covered Risks 11, 13, and 14, after Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of:

* * *

2. Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is not limited to insurance against loss from (a) a defect in the Title caused by

* * *

(vi) a document not properly filed, recorded, or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or

* * *

9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. This Covered Risk includes but is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage

* * *

(c) the Insured Mortgage not being properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered;

* * *

(f) a document not properly filed, recorded, or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or

* * *

10. The lack of priority of the lien of the Insured Mortgage upon the Title over any other lien or encumbrance.

* * *

The Company will also pay the costs, attorneys' fees, and expenses incurred in defense of any matter insured against by this Policy, but only to the extent provided in the Conditions.

(Emphasis added). The Title Policy bears the corporate stamp/seal, which states: "FIRST AMERICAN TITLE INSURANCE COMPANY * CALIFORNIA * INCORPORATED SEPTEMBER 24, 1968." The stamp/seal is opposite the signatures of the president of First American and is attested by its secretary.

Transfers of the Property

On March 15, 2007, Mr. Burgee transferred an undivided one-half interest in the Property to his sister and her husband, Laura and Thomas Loiero, for $150,000. Mr. Burgee subsequently transferred his remaining one-half interest to the Loieros on October 21, 2011, for no consideration. The Loieros then transferred their entire interest in the Property to their wholly-owned company, Premiere Maison, LLC.

Title Insurance Claims

On December 4, 2012, CitiMortgage, the predecessor to PennyMac, submitted a claim under the Title Policy. In a letter dated December 14, 2012, First American denied the claim.⁴

After PennyMac purchased the Loan (along with other distressed loans on other properties), it submitted its first claim under the Title Policy on April 16, 2013. In its claim, PennyMac stated: "In our review of title for the purpose of foreclosing on the deed of trust, a claim of title of interest which is adverse to the title to the estate, interest, or lien of the insured has been determined by the undersigned as follows: Subject DOT is not on record." First American denied this claim in a letter dated April 18, 2013, explaining that it had previously denied the identical claim on December 14, 2012 and likewise denied the April 16, 2013 claim for the same reason. First American attached a copy of the December 4, 2012 denial.

A little more than a year later, on or about June 16, 2014, PennyMac again requested indemnification coverage from First American but on this occasion, Penny Mac made the demand under the Closing Protection Letter. In conjunction with this claim, PennyMac "informed First American that it was initiating litigation [against Mr. Burgee and others] to enforce its equitable interest on the Property and demanded that First American indemnify its litigation costs per the terms of the Title Policy." First American responded in a letter dated June 24, 2014, refusing to indemnify PennyMac...