SDS Title, LLC v. Arnold

1

SDS TITLE, LLC, et al. v. DARLENE ARNOLD, et al.

No. 2262-2019

Court of Special Appeals of Maryland

November 8, 2021

Circuit Court for Montgomery County Case No. 461010-V

Graeff, Beachley, Eyler, James R., (Senior Judge, Specially Assigned), JJ.

OPINION ^[*]

GRAEFF., J.

Steven D. Soto and SDS Title, LLC ("SDS Title") appellants, filed a complaint in the Circuit Court for Montgomery County, alleging various torts against appellees, the Maryland Insurance Administration ("MIA") and its employee, Darlene Arnold. Appellees filed a motion to dismiss, which the circuit court granted.

On appeal, appellants present the following questions for this Court's review, which we have combined and rephased slightly, as follows:

1. Did the trial court err in dismissing appellants' claims based on quasi-judicial immunity?

2. Did the trial court err in making a finding of fact as to the duty element of negligence?

3. Did the trial court err in not recognizing the previous MIA civil proceedings as prior process?

For the reasons set forth below, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual History

Steven D. Soto is an attorney and the sole owner of SDS Title. In 2016, he was employed by Evergreen Settlement Company, Inc. ("Evergreen"). His duties included, among other things, conducting title examinations and real estate settlements.

On April 29, 2016, Mr. Soto served as the closing agent for Evergreen on a residential real estate transaction. Mr. Soto gave a subordinate instructions to wire the proceeds of the sale to the seller. The seller's email address was hacked, and the subordinate received a fraudulent email directing the employee to wire the sellers' proceeds from the sale, in the amount of $411, 548.06, to a fraudulent bank account. Thereafter, the staff issued a wire recall, which resulted in the recovery of $51, 623.00 of the sellers' proceeds.

On May 13, 2016, the sellers filed a complaint with the Maryland Insurance Commissioner alleging gross negligence on the part of Evergreen. They also filed a complaint in the Circuit Court for Montgomery County against Evergreen and Mr. Soto. Evergreen filed a third-party complaint against the sellers' realtor and the bank to which the settlement proceeds were wired.

Evergreen filed a claim with its insurance carrier, Houston Specialty Insurance Company ("Houston"), which was denied. In response, Evergreen filed a complaint with the MIA disputing Houston's denial of insurance coverage.^[1]

On June 19, 2017, all parties to the sellers' action in the circuit court entered into a confidential settlement agreement and executed a joint tortfeasor release. Nevertheless, the sellers' complaint with the MIA remained. Appellants allege that, in this administrative action, appellees submitted a falsified finding of facts, which resulted in disciplinary action against Mr. Soto, Evergreen, and Evergreen's president and licensed insurance producer, Susan L. Chang.

In an order dated October 31, 2017, the MIA made detailed factual findings, including the following:

38. On April 29, 2016, the scheduled settlement date, [appellants] received an e-mail allegedly from the Consumers' realtor with instructions to void the wire information received from the Consumers on April 28, 2016, stating that the Consumers closed that account and that the Consumers by fax will provide new bank account information to wire their settlement proceeds.

39. Shortly after receiving the e-mail from the realtor, [appellants] received a facsimile allegedly from the Consumers, revising the wire instructions and providing new bank account information. [Appellants] overlooked the numerous typographical errors in the facsimile transmission, including the misspelling of the Consumers' names and the realtor's name. Other red flags including the fact that the fax came from a (760) area code (Southern California), and the time of the fax is listed as GMT (United Kingdom time) were overlooked.

40. Nevertheless, [appellants] wired the Consumers' settlement proceeds on April 29, 2016, in the amount of $411, 548.06 to the bank account provided in the facsimile. At no time during this real estate, [sic] transaction had the Consumers ever communicated with [appellants] via facsimile.

41. [Appellants] failed to closely examine and independently verify the accuracy of the revised disbursement instructions. [Appellants] also failed to have the Consumers execute a new or an Amended Affidavit to ensure:

1) That the Consumers did intend to revise the original executed Affidavit,

2) That the fax was sent by the Consumers, and

3) That the settlement proceeds were wired to the correct bank account.

42. [Appellants] did not contact the Consumers to confirm the change to the wiring instructions in writing with the initials or signatures from the Consumers.

* * *

47. By the conduct described herein, [Ms.] Chang violated §§ 10-126(a)(1), (2), (3), (12), (13), and 10-126(f) of the Insurance Article. [Appellant] Soto's conduct violated §§ 10-126(a)(1) and (13).^[[2] Evergreen's conduct violated §§ 10-126(a)(1), (2), (3), (12), (13), (b) [sic] and 10-126(f). As such, [appellants] are subject to disciplinary action under the Insurance Article.

The MIA ordered, among other things, that Mr. Soto, Evergreen, and Ms. Chang pay, jointly and severally, an administrative penalty of $2, 500, that their title insurance producer licenses be suspended for a period not to exceed six months, and that they pay, jointly and severally, restitution to the sellers in the amount of $34, 925.06. Mr. Soto, Evergreen, and Ms. Chang requested a hearing on that order.

In early November 2017, Mr. Soto formed a new title company named SDS Title. On January 23, 2018, he submitted to the MIA an application for an entity title insurance producer license for SDS Title. Mr. Soto alleges that the MIA deliberately withheld processing the license to pressure him to resolve his claim against the MIA.

On April 30, 2018, Mr. Soto notified the Treasurer of the State of Maryland and counsel for the MIA of his intent to file suit against the MIA, its Chief Enforcement Officer, Darlene Arnold, and its Assistant Chief Enforcement Officer, Stephanie Zeigler-Palmer. Mr. Soto asserted that, after the settlement was reached with the sellers, Ms. Palmer requested that Evergreen pay the sellers "an additional amount of approximately $34, 000.00," but Evergreen refused because it had settled the case with the sellers and obtained a release from them. He alleged:

6. After Evergreen, based on its full release, refused to pay the requested payment to the Seller, acting with malice and ill will, Palmer and Arnold submitted an altered and falsified proposed finding of facts to a second commissioner, Erica J. Bailey, who was not aware of the original order, in order to obtain a retaliatory ruling against Evergreen, its owner, Susan Chang, and its counsel, myself. This order was signed on October 31, 2017. (See MIA v. Susan Chang, Steven Soto and Evergreen Settlement, MIA No. 2017-10-036)

7. Despite having personal knowledge that I had no personal involvement in the change of wire instruction, Palmer and Arnold submitted a false finding of facts stating that I was personally involved in the change of wire instructions (See Id. paragraphs 38-42), that I "willfully" violated MD insurance laws (See Id. paragraph 47) and that I have "shown a lack of trustworthiness or competence."

8. In an attempt to obtain a putative Order from the second commissioner, Palmer and Arnold deliberately and purposefully omitted crucial exculpatory information from this second finding of facts, including that multiple emails were received by Evergreen from the account of the Agent which had been "verified" on "several prior occasions," the phone call Evergreen received confirming the wire instructions and that the fax had the correct contact information of the Seller. As a direct result of these deliberate omissions, the finding of facts in the second order state that, "[Appellants] failed to closely examine and independently verify the accuracy of the revised disbursement instructions" which directly contradicts the previous ruling stating that Evergreen, "fully verified the accuracy of the wire transfer changes." (Id.)

9. This second order, which is awaiting a hearing pursuant to § 2-210 of the Insurance Article and Code of Maryland Regulations 31.02.01.03, orders that, inter alia, I individually pay an administrative penalty of $2, 500.00, that my Maryland title insurance producer license be suspended for a period not to exceed 6 months, that I pay $34, 925.06 to the Clients and that I take a Maryland Pre-Licensing Course.

10. The undersigned has and will continue to be forced to disclose this administrative action on all license and insurance applications in perpetuity, which has already resulted in higher premium payments and other irreparable harm.

11. On or about January 23, 2018, the undersigned submitted a license application with the MIA for an entity title insurance producer license for SDS Title, LLC. It has been over three months and this license has not been processed by the MIA. It is my belief that members of the MIA are deliberately impeding the licensing of SDS Title, LLC. This breach of due process has resulted in the inability to operate the business and irreparable economic harm.

On May 17, 2018, the MIA issued an entity title insurance producer license for SDS Title. The following day, the MIA issued a consent order, which included the following finding of fact:

18. Further investigation since the initial order has lead [sic] the MIA to determine that proceeding against Steven D. Soto for violations outlined in the initial

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