What “Loss” Does An Owner’s Policy Of Title Insurance Cover?

Lesson. Title insurance generally covers “actual losses” arising out of the existence of a title defect, not losses from the conduct of the insured or personal dealings between people.

Case cite. Hughes v. First Am. Title Ins. Co., 167 N.E.3d 765 (Ind. Ct. App. 2021)

Legal issue. What “actual loss” arose from an undisclosed easement.

Vital facts. Owners purchased real estate and obtained a policy of title insurance from Title Company. Unbeknownst to Owners, the prior owners (sellers) had granted an easement across the entire south side of the real estate. After Owners learned of the easement, they submitted a claim to the Title Company, which acknowledged coverage for the easement that Title Company had not disclosed to Owners.

The subject title insurance policy covered against "actual loss, including any costs, attorneys' fees and expenses provided under this Policy." Such loss must have resulted from one or more of the enumerated covered risks, one of which was that "[s]omeone else has an easement on the Land." Title Company obtained an appraisal of the diminution in value of the real estate caused by the existence of the easement. The appraisal assigned a loss of $3,000. Owners would not accept that amount.

Meanwhile, Owners sued the easement holder to challenge the validity of the easement or, in other words, to terminate it. Apparently things got a little contentious in that dispute as Owners used “tire poppers” to try to block use of the easement. In the end, the case turned out poorly for Owners, and the court ordered Owners to pay $61,000 in attorney fees and costs to the easement holder.

Owners then sued Title Company seeking to recover losses from both the easement and the prior lawsuit, including reimbursement of the $61,000.

Procedural history. The trial court granted Title Company’s motion for summary judgment, and Owners appealed.

Key rules. An insurance policy is a contract and is subject to the same rules of construction as other contracts. “The purpose of title insurance is to insure that title to the property is vested in the named insured, subject to the exceptions and exclusions stated in the policy.”

“Title insurance is a contract of insurance against loss or damage caused by encumbrances upon or defects in the title to real estate.” Ind. Code § 27-7-3-2(a); see also Ind. Code § 27-7-3-2(g)(2) (defining "title policy" as "a policy issued by a company that insures or indemnifies persons with an interest in real property against loss or damage caused by a lien on, an encumbrance on, a defect in, or the unmarketability of the title to the real property").

In Indiana, the measurement of damages resulting from an easement is “the difference between the value of the property with the defect and the value of the property without the defect.” In other words, "actual loss is the diminution in value of the property caused by the easement."

Importantly, title insurance “does not insure against the conduct of the insured and does not cover matters involving personal dealings between individuals.”

Holding. The Indiana Court of Appeals affirmed the summary judgment in favor of Title Company. Owners were to be reimbursed for the actual loss suffered in reliance of the title policy, limited to the diminution in value caused by the existence of the easement ($3,000).

Policy/rationale. Owners contended that “loss” included the $61,000 arising out of the judgment in the suit against the easement holder because “it was a loss that resulted from a covered risk (i.e. the easement).” The Court rejected that argument: “the actual loss of the insured [here, Owners] is the difference in value of the property with the encumbrance [here, the easement] and its value without the encumbrance.” The Court reasoned:

Only title to the parcel was insured … not any actions [Owners] took to keep the easement holder from using the easement. Stated another way, the [61k] loss was not a result of the existence of the easement; rather, the loss [Owners] seek to recover is a result of their actions concerning the easement….

Although it was not a part of the Hughes opinion, depending upon the circumstances a title insurance company might fund—on behalf of its insured—a lawsuit to challenge the validity of an easement. Evidently that did not happen in Hughes, possibly because Title Company determined the easement was in fact valid.

Related posts.

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Part of my practice includes litigation surround title insurance claims. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


American Banker: Small Banks, Credit Unions Warned To Brace For Pandemic Aftershock

Here is an article by Ken McCarthy and Jim Dobbs in the Community Banking section of the American BankerSmall banks, credit unions warned to brace for pandemic.

One of the interesting opinions featured in this piece is that problem loans may not surface until 2023, when many of us initially felt it would be a Fall 2020 issue.

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I represent lenders, as well as their mortgage loan servicers, entangled in loan-related disputes. If you need assistance with such a , please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

 


Judgment Requiring Payment Of Sum Certain Through Monthly Installments Until Paid Or “Until Death” Does Not Create Judgment Lien

Lesson. If the amount of a money judgment is contingent, then the judgment will not give rise to a statutory lien on the real estate of the obligor (or borrower).

Case cite. Harris v. Copas, 165 N.E.3d 611 (Ind. Ct. App. 2021)

Legal issue. Whether a divorce decree providing that Husband would pay Wife $75,000 in $500 monthly installments until paid in full or until Wife’s death constituted a money judgment entitling Wife to a lien against the marital home.

Vital facts. Husband and Wife divorced, and the decree provided, among other things, that Husband would become the sole owner of the marital home and that "[Husband] will pay [Wife] the sum of $75,000.00 at $500.00 a month starting June 15th 2017 until paid or death of [Wife].” The situation later became complicated for a variety of reasons, but for purposes of today’s post Wife contended that the divorce decree created a judgment lien on Husband’s real estate. She recorded a lis pendens notice against the marital home as part of her efforts to collect.

Procedural history. Husband filed a petition for, among other things, an order to dismiss the lis pendens notice. The trial court granted the petition and ruled that the contingent nature of the judgment “took it out of the purview of the judgment lien statute.” Wife appealed.

Key rules.

Indiana’s judgment lien statute (I.C. § 34-55-9-2) provides in relevant part:

All final judgments for the recovery of money or costs in the circuit court and other courts of record of general original jurisdiction in Indiana, whether state or federal, constitute a lien upon real estate and chattels real liable to execution in the county where the judgment has been duly entered and indexed in the judgment docket as provided by law[.]

Harris expressed that a “judgment for money is a prerequisite for the application of the judgment lien statute. A 'money judgment' is ‘any order that requires the payment of a sum of money and states the specific amount due, whether labeled as a mandate or a civil money judgment.’" Under Indiana law: "A money judgment must be certain and definite. It must name the amount due."

Holding. The Indiana Court of Appeals affirmed the trial court and held that Wife did not hold a statutory judgment lien on the marital home.  The holding necessarily included the dismissal of the lis pendens notice.  

Policy/rationale. Wife asserted that she held a $75,000 lien based upon the idea that the divorce decree constituted a money judgment against Husband that automatically created such lien. The Court disagreed, reasoning:

If the parties had simply agreed that [Husband] would pay [Wife] $75,000 in monthly $500 installments, there would be no dispute that [Wife] held a money judgment against [Husband]. However, the inclusion of the term "until paid or death of [Wife]" made the amount ultimately due to [Wife] unknowable and unascertainable because it could not be predicted when [Wife] would die. This is the antithesis of a statement of a "specific amount due" required of a money judgment.

The Court took the view that the divorce decree was not, in fact, a money judgment. It appears that the Court viewed the decree simply as a form of payment plan that, while enforceable, did not operate as the kind of judgment that could become a lien.

Related posts.

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I represent judgment creditors and lenders, as well as their mortgage loan servicers and title insurers, entangled in lien priority disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


7th Circuit: Absent “Concrete Injury” Plaintiffs Have No Standing To Bring FDCPA Claim

Lesson. Mere annoyance or intimidation by language in a demand letter, without any concrete harm resulting from such language, is insufficient for a plaintiff to have standing to file a FDCPA action.

Case cite. Gunn v. Thrasher, 982 F.3d 1069 (7th Cir. 2020)

Legal issue. Whether a true statement in a demand letter nevertheless injured the plaintiffs.

Vital facts. Plaintiffs owed their homeowners’ association $2,000. The HOA hired a law firm, which sent a demand letter to plaintiffs that contained this sentence:

If Creditor has recorded a mechanic’s lien, covenants, mortgage, or security agreement, it may seek to foreclose such mechanic’s lien, covenants, mortgage, or security agreement.

The HOA subsequently sued plaintiffs for breach of contract (damages) but not for foreclosure. The plaintiffs responded by filing suit against the HOA’s law firm in federal court under the Fair Debt Collection Practices Act (FDCPA). Although the plaintiffs conceded that the disputed sentence in the letter was both factually and legally true, they contended that the sentence was false and misleading because it would have been too costly to pursue foreclosure to collect the 2k debt.

Procedural history. The USDC for the Southern of Indiana dismissed the complaint on the basis that a true statement about the availability of legal options “cannot be condemned” under the FDCPA. Plaintiffs appealed.

Key rules. “Concrete harm” is essential for a plaintiff to have standing to sue in federal court. Article III of the Constitution “makes injury essential to all litigation in federal court.”

Holding. As a practical matter, the 7th Circuit agreed with the District Court. However, rather than affirming the District Court’s ruling on the defendant’s dispositive motion, the 7th Circuit remanded the case with instructions to dismiss for lack of subject matter jurisdiction.

    See also: Larkin v. Finance System, 982 F.3d 1060 (7th Cir. 2020) and Brunett v. Convergent Outsourcing, 982 F.3d 1067 (7th Cir. 2020). The 7th Circuit decided these two Wisconsin cases at the same time as Gunn and applied the same injury/standing rules.

Policy/rationale. The plaintiffs failed to allege or argue how the contested sentence in the demand letter injured them. Although they were annoyed and intimidated by the letter, that does not constitute a concrete injury. The Court reasoned:

Consider the upshot of an equation between annoyance and injury. Many people are annoyed to learn that governmental action may put endangered species at risk or cut down an old-growth forest. Yet the Supreme Court has held that, to litigate over such acts in federal court, the plaintiff must show a concrete and particularized loss, not infuriation or disgust. Similarly many people are put out to discover that a government has transferred property to a religious organization, but Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464 (1982), holds that a sense of indignation (= aggravated annoyance) is not enough for standing.

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My practice includes the defense of mortgage loan servicers in consumer finance litigation. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


Indiana Supreme Court Affirms Denial Of Owner's Motion To Set Aside Tax Deed

Ind. Land Tr. Co. v. XL Inv. Props., LLC, 155 N.E.3d 1177 (Ind. 2020) is a thorough and definitive opinion by our state's highest court regarding whether a county auditor provided adequate notice to a landowner of an Indiana tax sale.  As is typical, these tax sale cases are fact sensitive and legally complicated, and frankly are difficult to summarize in a standard-size blog post.  Please read the entire opinion if you're confronted with a similar problem.  For purposes of today's post, I'll simply quote Justice David's introduction, which really says it all: 

Before the State sells a delinquent property, the Due Process Clause of the Fourteenth Amendment requires that the owner of the property be given adequate notice reasonably calculated to inform him or her of the impending tax sale. While actual notice is not required, the government must attempt notice in a way desirous of actually informing the property owner that a tax sale is looming. If the government becomes aware that its notice attempt was unsuccessful—such as through the return of certified mail—it must take additional reasonable steps to notify the owner of the property if practical to do so.

In this case, property taxes went unpaid on a vacant property from 2009 to 2015 resulting in over $230,000 in outstanding tax liability. The county auditor—through a third-party service—sent simultaneous notice of an impending tax sale via certified letter and first-class mail to the tax sale notice address listed on the deed for the property. The owner of the property, however, had moved from its original address several times and never updated its tax address for the property with the county auditor. The certified letter came back as undeliverable, but the first-class mail was never returned. After a skip-trace search was performed for a better address and notice was published in the local newspaper, the property eventually sold and a tax deed was issued to the purchaser. The original owner was ultimately notified of the sale when the purchaser filed a quiet title action and searched for a registered agent. The original owner then moved to set aside the tax deed due to insufficient notice.

The central question before our Court today is whether the LaPorte County Auditor gave adequate notice reasonably calculated to inform Indiana Land Trust Company of the impending tax sale of the property. As a corollary question, we also confront whether the Auditor was required under the circumstances of this case to search its own records for a better tax sale notice address when the notice sent via certified mail was returned as undeliverable. We find the Auditor provided adequate notice and was not required to search its internal records. We therefore affirm the trial court's denial of Indiana Land Trust's motion to set aside the tax deed.

The Court held that, under the facts of the case, the auditor "provided notice reasonably calculated, under all the circumstances, to apprise [the owner] of the pendency of the action and afforded them an opportunity to present their objections."  

See also:

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My practice includes representing parties in connection with contested tax sales. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


7th Circuit: Communications Were Not “False, Misleading, Or Deceptive To The Unsophisticated Consumer” In Violation of the FDCPA

Lesson. Per the Seventh Circuit, “Congress did not intend the FDCPA to require debt collectors to cast about for a disclosure formulation that strikes a precise balance between providing too little information and too much. The use of an itemized breakdown accompanied by zero balances would not confuse or mislead the reasonable unsophisticated consumer.”

Case cite. Degroot v. Client Servs. 977 F.3d 656 (7th Cir. 2020)

Legal issue. Whether allegedly false or misleading statements by a collection agency violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e, by using false, deceptive, and misleading representations or means to collect a debt, or 15 U.S.C. § 1692g by failing to disclose the amount of the debt in a clear and unambiguous fashion.

Vital facts. Debtor defaulted on credit card debt, and the credit card company assigned the debt to Collection Agency. The Debtor sued Collection Agency following a couple of collection letters Debtor received. (The opinion details the letters.) Debtor claimed that the second letter “misleadingly implied that [the credit card company] would begin to add interest and possibly fees to previously charged-off debts if consumers failed to resolve their debts with [Collection Agency].” Specifically, Debtor alleged that he was "confused by the discrepancy between the [letter 1’s] statement that 'interest and fees are no longer being added to your account' and [letter 2's] implication that [credit card company] would begin to add interest and possibly fees to the Debt once [Collection Agency] stopped its collection efforts on an unspecified date."

Procedural history. The District Court granted the Collection Agency’s motion to dismiss. Debtor appealed.

Key rules. The FDCPA requires debt collectors to send consumers a written notice disclosing "the amount of ... debt" they owe. 15 U.S.C. § 1692g(a)(1).

This disclosure must be “clear.” "If a letter fails to disclose the required information clearly, it violates the Act, without further proof of confusion."

"A collection letter can be 'literally true' and still be misleading ... if it 'leav[es] the door open' for a 'false impression.'"

“A debt collector violates § 1692e by making statements or representations that ‘would materially mislead or confuse an unsophisticated consumer.’"

Holding. The Seventh Circuit affirmed the District Court and held that the Collection Agency’s communications “were not false, misleading, or deceptive to the unsophisticated customer.”

Policy/rationale. The key issue in Degroot was whether Collection Agency, by providing a breakdown of the debt that showed a zero balance for "interest" and "other charges," violated §§ 1692e and 1692g(a)(1) by implying that interest and other charges would accrue if the debt remained unpaid. The Court set out the test it faced:

To determine whether [Collection Agency’s] letter was false or misleading, we must answer two questions. The first is whether an unsophisticated consumer would even infer from the letter that interest and other charges would accrue on his outstanding balance if he did not settle the debt. If, and only if, we conclude that an unsophisticated consumer would make such an inference, then we move to analyze whether the inference is false or misleading.

The Court reasoned that the itemization (debt breakdown) at issue could not be construed “as forward looking and therefore misleading”:

That interest and fees are no longer being added to one's account does not guarantee that they never will be, because there is no way—unless the addition is a legal or factual impossibility—to know what may happen in the future. That is why a statement in a dunning letter that relates only to the present reality and is completely silent as to the future generally does not run afoul of the FDCPA. While dunning letters certainly cannot explicitly suggest that certain outcomes may occur when they are impossible … they need not guarantee the future. For that reason, the itemized breakdown here, which makes no comment whatsoever about the future and does not make an explicit suggestion about future outcomes, does not violate the FDCPA.

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My practice includes the defense of mortgage loan servicers in consumer finance litigation. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.