Matthew Fogg v. Fidelity National Title Insurance Company ( 2014 )


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    DISTRICT OF COLUMBIA COURT OF APPEALS
    No. 13-CV-0216
    MATTHEW FOGG, APPELLANT,
    v.
    FIDELITY NATIONAL TITLE INSURANCE COMPANY, APPELLEE.
    Appeal from the Superior Court of the
    District of Columbia
    (CAB-454-12)
    (Hon. Anthony C. Epstein, Trial Judge)
    (Submitted January 9, 2014                                  Decided April 24, 2014)
    Douglas R. Taylor for appellant.
    Griffin Vann Canada, Jr., and Bradford S. Bernstein, Miles & Stockbridge
    P.C., were on the brief, for appellee.
    Before BLACKBURNE-RIGSBY and MCLEESE, Associate Judges, and
    NEBEKER, Senior Judge.
    BLACKBURNE-RIGSBY, Associate Judge: Appellant Matthew Fogg seeks
    review of an order granting summary judgment to appellee Fidelity National Title
    Insurance Company (―Fidelity‖). Fogg specifically challenges the trial court‘s
    order on the basis that the trial court erred in: (1) determining that Fidelity had no
    duty to defend Fogg in a third-party lawsuit pursuant to the ―eight corners rule‖;
    2
    and (2) failing to conclude that Fidelity owed a fiduciary duty of disclosure to
    Fogg. We affirm.
    I.
    In 2008, Matthew Fogg loaned Newbirth Investment & Development
    Company (―Newbirth‖) $700,000 for the purchase of a commercial property
    located at 2914 Sherman Avenue, N.W. (―the property‖). The loan was secured by
    the property and was to be repaid in two installments, the first of which was due on
    March 1, 2009.      Newbirth purchased the property from Sherman Avenue
    Management Corporation (―SAMC‖) on October 31, 2008.                    Worldwide
    Settlements (―Worldwide‖) acted as the settlement agent for that transaction and
    provided Newbirth with title insurance from Fidelity.
    Newbirth later defaulted on the loan from Fogg.         Rather than institute
    foreclosure proceedings against Newbirth, Fogg agreed to purchase the property
    outright in consideration for the sum of $225,000 and cancellation of Newbirth‘s
    debt. Milestone Title (―Milestone‖) acted as the settlement agent for this second
    sale. As part of its services, Milestone performed a title examination, finding that
    Fogg had the only lien of record against the property.         Additionally, at the
    3
    settlement on April 8, 2009, Fogg purchased title insurance from Fidelity, through
    its agent Milestone, in the face amount of $225,000 and paid a premium of
    $1,282.50.
    On June 18, 2009, SAMC filed suit against multiple defendants, including
    Fogg, in the Superior Court of the District of Columbia. SAMC alleged that it had
    made a $200,000 loan to Newbirth that was now in default and sought to have an
    equitable lien imposed on the property because the deed of trust that was supposed
    to secure SAMC‘s loan was never recorded. The complaint alleged that ―[w]hen
    taking title to the Property, Fogg was aware of [SAMC‘s] loan to Defendant
    Newbirth and [SAMC‘s] claim of a security interest in the Property, and . . . Fogg
    is therefore not a bona fide purchaser for value and without notice of [SAMC‘s]
    claim.‖
    Fogg requested that Fidelity defend him in the SAMC lawsuit. Fidelity
    refused to defend Fogg in the SAMC suit because it determined such a defense was
    not covered by Fogg‘s title insurance policy. Fidelity contends that its denial of
    coverage is supported by paragraph 5(a) of the conditions to the policy and
    4
    paragraphs 3(a) and 3(b) of the exclusions from coverage of the policy,1 which
    state in pertinent part:
    CONDITIONS
    5.     DEFENSE AND PROSECUTION OF ACTIONS
    (a) Upon written request by the Insured . . . the
    Company, at its own cost and without unreasonable
    delay, shall provide for the defense of an Insured in
    litigation in which any third party asserts a claim covered
    by this policy adverse to the Insured. This obligation is
    limited to only those stated causes of action alleging
    matters insured against by this policy. . . . [The
    Company] shall not be liable for and will not pay the fees
    of any other counsel. The Company will not pay any
    fees, costs, or expenses incurred by the Insured in the
    defense of those causes of action that allege matters not
    insured against by this policy.
    ***
    EXCLUSIONS FROM COVERAGE
    The following matters are expressly excluded from the
    coverage of this policy, and the company will not pay
    loss or damage, costs, attorney‘s fees, or expenses that
    arise by reason of:
    3.    Defects, liens, encumbrances, adverse claims, or
    other matters:
    1
    In its initial correspondence with Fogg, Fidelity cited to paragraph 3(a) of
    the exclusions from coverage of the policy to support its denial of coverage. In its
    motion for summary judgment, Fidelity additionally cited paragraph 3(b) of the
    exclusions from coverage of the policy.
    5
    (a) created, suffered, assumed, or agreed to by the
    Insured Claimant;
    (b) not Known to the Company, not recorded in the
    Public Records at Date of Policy, but Known to the
    Insured Claimant and not disclosed in writing to the
    Company by the Insured Claimant prior to the date the
    Insured Claimant became an Insured under this policy[.]
    Fidelity also cited the ―eight corners rule,‖ set forth in Stevens v. United General
    Title Insurance Co., 
    801 A.2d 61
    (D.C. 2002), to support its denial of coverage.
    The rule states: ―[T]he duty to defend is determined generally by the terms of the
    insurance policy and the allegations in the complaint against the insured[.]‖
    
    Stevens, supra
    , 801 A.2d at 67 (citation and internal quotation marks omitted).
    Applying Stevens, Fidelity relied on paragraphs 5(a) and 3(a) of the relevant
    portions of the insurance policy, and it looked to the facts alleged in the SAMC
    complaint to determine that Fogg‘s alleged knowledge of SAMC‘s security interest
    excluded Fogg‘s request for defense from coverage.
    Fogg retained his own counsel after Fidelity declined to represent him and
    ultimately prevailed in the SAMC suit after a jury found that Fogg was in fact a
    bona fide purchaser for value, without notice of SAMC‘s purported security
    interest. Fogg then brought the instant lawsuit against Fidelity, seeking to recover
    $950,000 in damages for breach of contract and breach of fiduciary duty. Fidelity
    moved for summary judgment as to all counts, arguing that paragraphs 3(a) and
    6
    3(b) of the exclusions from coverage to the policy excluded defense of the SAMC
    suit from coverage. Additionally, Fidelity argued that paragraphs 15(a) and 15(b)
    of the conditions to the policy expressly limited Fidelity‘s liability to the terms of
    the insurance contract. Finally, Fidelity argued that no fiduciary relationship exists
    between a title insurer and insured. Paragraphs 15(a) and 15(b) of the conditions to
    the policy state in pertinent part:
    CONDITIONS
    15. LIABILITY LIMITED TO                 THIS    POLICY;
    POLICY ENTIRE CONTRACT
    (a) This policy together with all endorsements, if any,
    attached to it by the Company is the entire policy and
    contract between the Insured and the Company. In
    interpreting any provision of this policy, this policy shall
    be construed as a whole.
    (b) Any claim of loss or damage that arises out of the
    status of the Title or by any action asserting such claim
    shall be restricted to this policy.
    On January 29, 2013, the trial court granted Fidelity‘s motion for summary
    judgment on the basis that defense of the SAMC lawsuit was excluded from
    coverage by paragraph 3(b) of the exclusions from coverage to the policy, and that
    Fogg‘s breach of fiduciary duty claim, which he argued was not based on the title
    insurance policy, was precluded because under the ―express, unambiguous
    language of [paragraph] 15(b) . . . ‗[a]ny claim of loss or damage that arises out of
    7
    the status of the [t]itle or by any action asserting such claim shall be restricted to
    [the] policy.‘‖
    II.
    A.
    Fogg raises two issues on appeal. We first address his contention that
    Fidelity breached a fiduciary duty of disclosure. We note at the outset that Fogg‘s
    breach of fiduciary duty claim is not based on the terms of the insurance policy, as
    he concedes in his brief. Nonetheless, Fogg seeks to establish: (1) that Worldwide,
    which acted as the settlement agent for the first sale of the property from SAMC to
    Newbirth, had knowledge of a ―secondary loan transaction‖; (2) that knowledge
    should be imputed to Fidelity because Worldwide was authorized to issue title
    insurance on Fidelity‘s behalf; and (3) that Fidelity owed Fogg a fiduciary duty of
    disclosure beyond the terms of their contractual relationship.
    The policy plainly limits a claim for loss or damage to its terms as set forth
    in paragraphs 15(a) and 15(b) of the conditions to the policy.           While Fogg
    concedes that ―there is no dispute over the terms and provisions of the [insurance]
    8
    policy,‖ he argues that Fidelity had a fiduciary duty of disclosure based on an
    ―apparent conflict of interest‖ that arose because Fidelity issued title insurance to
    two buyers of the same property in two separate transactions. We agree with the
    trial court that, on its face, there is no conflict of interest when an insurer issues
    title insurance to different buyers of the same property. We are not persuaded that
    the act of issuing title insurance, and thereby entering into a contractual
    relationship with the insured, creates a fiduciary duty beyond the terms of the title
    insurance policy. Consequently, Fogg‘s breach of fiduciary duty claim fails.
    Moreover, even if the policy covered Fogg‘s breach of fiduciary duty claim,
    which it does not, Fogg ignores another provision of the policy — the ―Schedule B
    Exceptions from Coverage‖ — which state in paragraph 6 that any title search and
    examination conducted in connection with the issuance of a title insurance policy
    is solely for the benefit of Fidelity.     Accordingly, the title examination that
    Worldwide conducted at the time of the first sale was not for Fogg‘s benefit, and
    he cannot use that title examination as the factual predicate for his breach of
    fiduciary duty claim.
    9
    B.
    We turn next to Fogg‘s argument that the trial court erred in denying him
    coverage in the third party lawsuit and in granting summary judgment in favor of
    Fidelity by relying on Stevens. Fogg argues that the ―eight corners rule,‖ set forth
    in Stevens, does not apply in his case because his case is distinguishable from
    Stevens. Alternatively, he argues that Stevens should be overruled. We disagree.
    ―In reviewing a grant of summary judgment[,] . . . this court must
    independently review the record to determine whether genuine issues of material
    fact exist and whether the movant is entitled to judgment as a matter of law.‖
    
    Stevens, supra
    , 801 A.2d at 65–66 (citations, internal quotation marks, and
    brackets omitted). We review the record in the light most favorable to the non-
    movant, and any doubt regarding the existence of a factual dispute is to be resolved
    against the movant. 
    Id. at 66.
    An insurance policy is a contract that this court
    construes according to contract principles.      
    Id. ―Where insurance
    contract
    language is not ambiguous, summary judgment is appropriate because a written
    contract duly signed and executed speaks for itself and binds the parties without
    the necessity of extrinsic evidence.‖ 
    Id. (citations, internal
    quotation marks, and
    brackets omitted).
    10
    We are unpersuaded by Fogg‘s attempts to distinguish his case from Stevens.
    Contrary to Fogg‘s contention, Stevens is applicable to the instant matter because
    the facts are very similar and the insurance policy language is identical to the
    policy language at issue in this case.2 In 
    Stevens, supra
    , 801 A.2d at 67, we
    reiterated that an insurance company‘s ―duty to defend depends only upon the facts
    as alleged to be, so that the insurer‘s obligations should be measured by comparing
    the policy it issued with the complaint filed in the underlying case.‖ (citation,
    internal quotation marks, and brackets omitted); see also Levelle, Inc. v. Scottsdale
    Ins. Co., 
    539 F. Supp. 2d 373
    , 377 (D.D.C. 2008) (―District of Columbia courts
    follow the so-called ‗eight corners rule‘ with respect to insurance coverage
    disputes.‖ (citation omitted)).   Furthermore, ―[t]he obligation to defend is not
    affected by facts ascertained before suit[,] or developed in the process of
    litigation[,] or by the ultimate outcome of the suit.‖ 
    Stevens, supra
    , 801 A.2d at 67
    (internal quotation marks omitted) (citing Boyle v. Nat’l Cas. Co., 
    84 A.2d 614
    ,
    615 (D.C. 1951)). Based on these considerations, our jurisdiction, like the majority
    2
    Fogg attempts to distinguish his case by arguing that the underlying
    complaint in Stevens alleged active or intentional deception on Stevens‘ part in that
    Stevens knew of a prior contract for sale but induced the owner to ignore that
    contract and sell the property for a higher price. In contrast, Fogg claims that the
    underlying complaint in this case mentioned only Fogg‘s knowledge of a
    secondary lien without any discussion of how he obtained that knowledge,
    suggesting that Fogg played a more passive role than Stevens, or, at a minimum,
    did not intentionally disregard SAMC‘s security interest when purchasing the
    property. This argument is not persuasive.
    11
    of jurisdictions, adheres to the ―eight corners rule,‖ which has been explained as
    follows:
    Under the ‗eight corners rule,‘ an insurer‘s duty to defend
    is determined by comparing the complaint . . . with the
    policy. If the facts alleged in the complaint . . . would
    give rise to liability under the policy if proven, the
    insurer must defend the insured. . . . The rule potentially
    allows an insurer to deny its insured a defense even if the
    insurer is aware of facts which, if pleaded, would entitle
    the insured to a defense . . . .
    
    Id. at 66
    n. 4 (citation and brackets omitted). Accordingly, Stevens‘ ―eight corners
    rule‖ is directly applicable to Fogg‘s case.
    First, the insurance contract, in paragraph 3(b) of the exclusions from
    coverage from the policy, plainly excludes ―loss or damage, costs, attorneys‘ fees,
    or expenses that arise by reason of . . . [d]efects, liens, encumbrances, adverse
    claims, or other matters . . . not Known to [Fidelity], not recorded in the Public
    Records at Date of Policy, but Known to the Insured Claimant . . . .‖ Second, the
    complaint against Fogg alleged in paragraph 22 that ―Fogg was aware of
    [SAMC‘s] loan to . . . Newbirth and [SAMC‘s] claim of a security interest in the
    Property[.]‖ SAMC‘s claimed security interest constitutes a ―lien, encumbrance,
    [or] adverse claim,‖ and by alleging that Fogg ―was aware,‖ SAMC alleged actual
    knowledge of its security interest. Third, Fidelity denies knowledge of SAMC‘s
    claimed security interest. Fourth, SAMC admitted that its deed of trust was never
    12
    recorded, and Milestone‘s title search revealed that the only lien against the
    property was Fogg‘s. Consequently, because of the paragraph 3(b) exclusions
    from coverage, Fogg‘s alleged knowledge of SAMC‘s unrecorded security interest,
    and Fidelity‘s lack of knowledge regarding the same, we conclude that Fidelity had
    no duty to defend Fogg.
    Fogg alternatively asks us to overrule Stevens by adopting a ―factual
    exception test‖ to the ―eight corners rule.‖ That test, as explained in Fitzpatrick v.
    American Honda Motor Co., Inc., 
    575 N.E.2d 90
    , 93 (N.Y. 1991), upon which
    Fogg relies, would ―require the insurer to provide a defense when it has actual
    knowledge of facts establishing a reasonable possibility of coverage[.]‖ See also
    
    Stevens, supra
    , 801 A.2d at 70. We are not persuaded that Fidelity had actual
    knowledge of any outside lien, especially in light of the fact that Milestone‘s title
    examination revealed nothing more than Fogg‘s security interest in the property.
    Even if Fidelity knew of some outside lien, we decline to adopt the ―factual
    exception test.‖ See 
    Stevens, supra
    , 801 A.2d at 71; see also M.A.P. v. Ryan, 
    285 A.2d 310
    , 312 (D.C. 1971) (―[N]o division of this court will overrule a prior
    decision of this court[.]‖ (footnote omitted)). We passed on a previous opportunity
    to adopt the ―factual exception test‖ by reference to countervailing policy
    13
    considerations in favor of the ―eight corners rule,‖ because the ―factual exception
    test‖ would cause uncertainty for insurers who would ―be less clear as to what, if
    any, investigation [they] must make into a demand to defend and when it is
    permissible to decline representation.‖ 
    Stevens, supra
    , 801 A.2d at 71 (citing
    
    Fitzpatrick, supra
    , 575 N.E.2d at 96–97 (footnote omitted) (Alexander, J.,
    dissenting)).   We were also wary of the potential for additional collateral
    proceedings. The ―factual exception test‖ would obligate courts ―to look beyond
    the allegations in the complaint to discover the ‗actual‘ facts, or at a minimum
    whether the insurer ‗knew‘ or perhaps even ‗should have known‘ of such ‗actual
    facts.‘‖ 
    Id. Finally, we
    expressed concern over the possibility that the ―factual
    exception test‖ could ―place the insured in the position of dictating the theory of
    the action[.]‖ 
    Id. This could
    ―conceivably requir[e] the carrier to defend a claim
    the plaintiff has no intention of asserting merely because allegedly there are ‗facts‘
    which support such a claim.‖ 
    Id. The facts
    of this case and our precedent do not
    counsel us to otherwise adopt the ―factual exception test.‖
    Accordingly, we affirm the judgment of the trial court.
    So ordered.
    

Document Info

Docket Number: 13-CV-0216

Judges: Blackburne-Rigsby, McLEESE, Nebeker

Filed Date: 4/24/2014

Precedential Status: Precedential

Modified Date: 8/31/2023