Gildenhorn v. Columbia Real Estate Title Ins. Co., 193

• Decision Date: 03 April 1974
• Docket Number: No. 193,193
• Parties: , 96 A.L.R.3d 1177 William GILDENHORN v. COLUMBIA REAL ESTATE TITLE INSURANCE COMPANY.
• Court: Maryland Court of Appeals

Page 387

271 Md. 387

317 A.2d 836, 96 A.L.R.3d 1177

William GILDENHORN v. COLUMBIA REAL ESTATE TITLE INSURANCE COMPANY.

No. 193.

Court of Appeals of Maryland.

April 3, 1974.

A. Slater Clarke, Washington, D. C., for appellant.

Michael A. Schuchat, Chevy Chase, for appellee.

Argued before SINGLEY, SMITH, DIGGES, LEVINE and ELDRIDGE, JJ.

SMITH, Judge.

William Gildenhorn (Gildenhorn) sued Columbia Real Estate Title Insurance Company (Columbia) and District-Realty Title Insurance Corporation (District) in a five count declaration. ¹ Count 1 was against the appellee, Columbia, for alleged breach of contract relative to its title policies 7883, issued July 28, 1966, and 7884, issued March 1, 1966. ² Count 2 was a claim for punitive damages against Columbia for this alleged breach of contract. Count 3 was against District for its alleged breach of contract on a title policy issued by it. Count 4 was a claim against District for punitive damages for its alleged breach. Count 5 was against Columbia and District for conspiracy, about which we shall have more to say later.

Within the time limited by rule, Columbia filed a special plea of limitations, followed by a motion for summary judgment. The trial judge ruled in favor of Columbia on all three counts against it, counts 1, 2, and 5. Pursuant to Maryland Rule 605 a, he made a finding that there was no just reason for delay and directed entry of a final judgment in favor of Columbia against Gildenhorn.

The first question with which we are here presented is whether the trial judge erred in concluding that, under a five year claim provision in the insurance policies, counts 1 and 2 were not seasonably filed. A subsidiary question to that is whether these policies are specialties. The second question is whether count 5, the conspiracy count, was timely filed.

I

Suit was filed on September 13, 1972. The title policies pertained to deeds of trust on real estate owned by Rollin Hills Apartments, Inc., securing loans made by Gildenhorn. The trial judge summarized the pertinent facts relative to the first two counts of the declaration:

'Gildenhorn alleges that Columbia breached its obligation to defend him against certain 'title challenges' covered by the policies. The 'title challenge' involved was a suit brought by Rollin's Trustee in Bankruptcy during February, 1967, in the U.S. District Court, seeking an injunction to prevent Gildenhorn from proceeding further to foreclose on the Rollin's properties in the Prince George's County Circuit Court. On

March 13, 1967, the Trustee obtained the injunction against plaintiff's foreclosure suits. Thereafter counsel for plaintiff sent a written notice to defendant, dated March 23, 1967, requesting Columbia 'to take whatever steps are necessary for the protection of Mr. Gildenhorn in accordance with your policies.' This notice was restated in writing by Gildenhorn's counsel to Columbia on June 26, 1967, but defendant did not act or defend as requested in both communications.'

The two title policies issued by Columbia had the following testimonium clause:

'IN WITNESS WHEREOF, Columbia Real Estate Title Insurance Company has caused its corporate name and seal to be hereunto affixed by its duly authorized officers.'

Below that was printed the name of the corporation with facsimile signatures of the president and secretary below that. The corporate seal was printed over those signatures. To the left was a provision for countersignature. The policies had been countersigned by a representative of Maryland Title & Escrow Corporation.

Paragraph 5 of the conditions and stipulations of the two policies stated:

'Notice of Loss-Limitation of Action. In addition to the notices required under paragraph 4(b), a statement in writing of any loss or damage for which it is claimed the Company is liable under this policy shall be furnished to the Company within sixty days after such loss or damage shall have been determined, and no right of action shall accrue to the Insured under this policy until thirty days after such statement shall have been furnished, and no recovery shall be had by the Insured under this policy unless action shall be commenced thereon within five years after expiration of said thirty-day period. Failure to furnish such statement of loss or damage, or to commence such action within the time hereinbefore specified, shall be a conclusive bar against maintenance by the Insured of any action under this policy.'

Gildenhorn reasons that Maryland Code (1957), Art. 57, § 3, provides a 12 year statute of limitations as to a specialty, that the policies in question are specialties, and that, because of the provisions of Code (1957, 1972 Repl.Vol.) Art. 48A, § 377B, the five year limitation provision in each policy is inapplicable. Section 377B states:

'All provisions and stipulations contained in any contract of insurance . . ., whatsoever, heretofore or hereafter issued, fixing the time in which suits or actions may be instituted under or upon any such contracts at a period of time less than that provided at the time of the issuance or delivery of any such contract by the laws or statutes of Maryland in respect of limitations are hereby declared to be against State public policy, illegal and void, and no court in this State shall give any effect to any provisions or stipulation in any such contract mentioned in this section; nor shall any defense to liability under any such contract be based upon any such shorter limitation period.'

That section was enacted by Chapter 487 of the Acts of 1966, effective June 1, 1966. In the view we take of this case, we are not obliged to determine whether that section could be applicable to policy 7884, issued March 1, 1966. See, however, Ghingher v. Pearson, 165 Md. 273, 281-284, 168 A. 105 (1933).

Citing Leonardi v. Standard Acc. Ins. Co. of Detroit Mich., 212 F.2d 887 (2d Cir. 1954), 18 G. Couch, Insurance § 75:80 (2d ed. Anderson 1968) states relative to applicability of contractual limitations:

'An action by an insured to recover damages for breach of a contractual obligation to defend was not an action on the policy to recover upon any claim or for any loss under an insuring clause and thus was not barred by the contractual limitation of 2 years.' Id. at 760.

In the latter case, Judge Medina said for the court:

'The present action was not commenced until July 17, 1950, some four years after the entry of the judgment in favor of Gulf Oil against Leonardi. Standard contends that recovery by Leonardi of the amount paid in settlement of the judgment is barred by Condition G of the Workmen's Compensation and Employers' Liability policy, which provides as follows:

'No action shall lie against the company to recover upon any claim or for any loss under paragraph One (b) foregoing unless brought after the amount of such claim or loss shall have been fixed and rendered certain either by final judgment against this employer after trial of the issue or by agreement between the parties with the written consent of the company, nor in any event unless brought within two years thereafter.'

'But this action is brought by the insured to recover damages arising from the insurer's breach of its contractual obligation to defend contained in paragraph Two (b), and is not an action on the policy 'to recover upon any claim or for any loss under paragraph One (b)' of the policy, against which the insurer expressly agreed to indemnify the insured. In Lawrence v. Massachusetts Bonding & Insurance Co., Sup., 1916, 160 N.Y.S. 883, 885 where this specific question was considered, Judge Irving Lehman wrote:

'In determining the rights of the parties in this action it seems to me that the most important consideration is that the action is not brought to enforce the agreement to indemnify the plaintiff for loss and expenses, but is brought for damages for failure to defend an action. * * * The limitation in the policy is, I think, by its plain terms intended to cover an action for such loss and expenses, and is not intended to cover an action for damages caused by the breach of the covenant to defend. Inasmuch as the limitation applies only to actions brought to recover any loss or expense 'under this policy.' against which the defendant expressly agreed to indemnify the plaintiff, while this action is brought to recover damages for breach of contract to defend, the present action is subject only to the limitation of the statute, and not to any limitation provided in the contract. * * * The contract never contemplated that the defendant would breach its contract, and it contains no provisions for an action for such breach of contract. Such an action, consequently, is governed by the ordinary rules of law governing actions for breach of contract.'

'We agree with this conclusion and the reasoning on which it is based.' Id. at 890-891.

To similar effect, see 45 C.J.S. Insurance § 933 (1946) stating relative to the effect of failure or refusal to defend:

'Insurer's breach of contract by refusal to defend puts an end to its right to demand insured's compliance with the terms of the contract . . ..' Id. at 1059.

Cases cited for that proposition include U.S.F. & G. v. Nat Pav. Co., 228 Md. 40, 178 A.2d 872 (1962); St. Luis Dressed Beef & P. Co. v. Maryland Casualty Co., 201 U.S. 173, 26 S.Ct. 400, 50 L.Ed. 712 (1906); and Missionaries of Co. of Mary, Inc. v. Aetna Cas. & S. Co., 155 Conn. 104, 230 A.2d 21 (1967), among others.

In U.S.F. & G. v. Nat. Pav. Co., supra, the company relied upon a provision relative to coverage which said that it would pay on behalf of the insured sums which the insured should 'become legally obligated to pay as damages because of bodily injury,' and condition nine in the policy which provided that no action should lie against the company unless as a condition precedent thereto the insured had fully complied with the terms of the policy and there should be no action unless the...