GMAC Mortg., LLC v. First Am. Title Ins. Co.

• Citation: 464 Mass. 733,985 N.E.2d 823
• Decision Date: 04 April 2013
• Docket Number: SJC–11161.
• Parties: GMAC MORTGAGE, LLC v. FIRST AMERICAN TITLE INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts

464 Mass. 733

985 N.E.2d 823

GMAC MORTGAGE, LLC

v.FIRST AMERICAN TITLE INSURANCE COMPANY.

SJC–11161.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 4, 2012.

Decided April 4, 2013.

Richard E. Briansky for the plaintiff.

Jason A. Manekas, Boston, for the defendant.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

SPINA, J.

This case involves multiple litigations among three parties—First American Title Insurance Company (First American), the insurer; GMAC Mortgage, LLC (GMAC), the insured mortgagee; and Elizabeth Moore, the homeowner—arising out of a defect in the title to Moore's home. First Americanbrought suit on behalf of GMAC in the Land Court, seeking to reform the deed to Moore's property or to equitably subrogate her interest in the property behind GMAC's mortgage. Because of the Land Court's jurisdictional restrictions, Moore then initiated suit in the Superior Court against GMAC, alleging intentional infliction of emotional distress and violation of G.L. c. 93A for GMAC's unfair and deceptive conduct in pursuing foreclosure, and “money had and received” for mortgage payments alleged to have been made to GMAC in error. Because the two actions were closely related, the Chief Justice for Administration and Management ordered, pursuant to his power under G.L. c. 211B, § 9(xix), that the Land Court action be transferred to the Superior Court and consolidated with Moore's action. However, after the order of transfer, but before the Land Court action was docketed in the Superior Court, counsel for GMAC removed Moore's litigation to the United States District Court for the District of Massachusetts. Therefore, the Land Court action never formally was consolidated with Moore's action in the Superior Court. However, GMAC raised counterclaims in Moore's action, now in the United States District Court, that duplicated the reformation and equitable subrogation claims asserted in the Land Court, and an attorney for First American appeared on behalf of GMAC in the Federal court to prosecute these title-related counterclaims. GMAC retained its own attorney to defend against the remainder of Moore's action.¹ Therefore, all claims in both the original Land Court and Superior Court actions were a part of the Federal court case. The case settled on the first day of trial.

GMAC filed a complaint and request for injunctive relief against First American in the United States District Court seeking, in relevant part, to recover from First American the costs GMAC incurred in defending against Moore's three claims.² Following a bench trial, the United States District Court judge determined that First American had no obligation under its title insurance policy to pay GMAC's defense costs. However, recognizing that the question of the scope of a title insurer's duty to defend presented an issue of first impression in the Commonwealth, the judge stayed the proceedings pending this court's response to two questions that he certified pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981). The certified questions are:

“1. Under Massachusetts law, when there is an overlap between one or more of the counts of the complaint and the terms of this standard title insurance policy, does the insurer have a duty to defend the insured against all claims in the action?” ³

“2. Under Massachusetts law, when a title insurance contract gives the insurer the right to engage in litigation to cure a defect covered by the policy, does an insurer initiating litigation have a duty to defend the insured against all reasonably foreseeable counterclaims? ” (Emphasis supplied.)

We answer “No” to both questions.

1. Facts. Because our task is limited to responding to the certified questions, we do not delve deeply into the factual complexities of this case. We merely recount several significant facts as the court judge found them.

Moore and her husband, Thomas, lived in a home in Billerica, the title to which was in Thomas's name. In 2001, for the purpose of refinancing the property, Thomas executed a note and a mortgage to GMAC's predecessor corporation (which obtained a title insurance policy from an agent of First American), and a deed conveying the property from himself to himself and his wife as tenants by the entirety, G.L. c. 184, § 8. The parties intended for the mortgage to be recorded before the deed creating the tenancy by the entirety. However, the deed was mistakenly recorded before the mortgage. Thomas died in 2007. The undisputed consequence was that record title to the property vested solely in Moore, to the exclusion of GMAC. See Coraccio v. Lowell Five Cents Sav. Bank, 415 Mass. 145, 150–152, 612 N.E.2d 650 (1993). See also H.J. Alperin, Summary of Basic Law § 15.31, at 161, 165–168 (4th ed. 2007). Moreover, GMAC no longer had a clear right to repayment because the short statute of limitations to collect on the underlying note, signed only by Thomas, expired one year after his death. G.L. c. 190B, § 3–803 ( a ) (formerly G.L. c. 197, § 9).

Pursuant to the title insurance policy it issued to GMAC, First American could resolve this title defect ⁴ either by negotiating with Moore, by negotiating with GMAC (to assume title and proceed as it thought fit), or by initiating litigation to cure the title defect. First American chose the latter course, and the present litigation ensued.

2. Preliminary issues. Before we reach the certified questions, we briefly dispose of two threshold issues: whether to answer the certified questions at all, and whether the title insurance contract covers the causes of action asserted in Moore's action.

a. Whether to answer the certified questions. First American urges that we refrain from answering the certified questions on the ground that they are untimely and unnecessary, as the United States District Court judge already reached a decision based on the law as he reasonably predicted it. We decline to accept First American's invitation to avoid this case in its entirety. Because the present matter remains pending the case is administratively closed and the proceedings stayed, our response to the certified questions will determine the ultimate outcome. See S.J.C. Rule 1:03. Moreover, as the judge noted, there is no controlling precedent in the decisions of this court that addresses the issues raised in the certified questions. See id. See generally J. Goldschmidt, Certification of Questions of Law: Federalism in Practice 35–39 (1995). Therefore, we will not forgo the opportunity to weigh in on a significant question implicating, in the words of the judge, the “interface between the general law of insurance (statutory and decisional) in Massachusetts and that specialized type of insurance known as title insurance.”

b. Whether the title insurance contract covers Moore's claims. GMAC asks that we conclude that the policy covers the three counts Moore asserted in her complaint on the ground that the allegations in her “complaint are ‘reasonably susceptible’ of an interpretation that they state ... a claim covered by the policy terms.” ⁵Continental Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143, 146, 461 N.E.2d 209 (1984). The United States District Court judge concluded that Moore's three causes of action against GMAC for intentional infliction of emotional distress; violation of G.L. c. 93A; and “money had and received,” “although ... inextricably intertwined, and related to the title defect ... were not covered under the title insurance contract.” “The interpretation of a contract is a question of law for the court.” Eigerman v. Putnam Invs., Inc., 450 Mass. 281, 287, 877 N.E.2d 1258 (2007). Courts decide this type of question routinely, and such decisions are reviewable. See, e.g., C.A. Acquisition Newco, LLC v. DHL Express (USA), Inc., 696 F.3d 109, 112 (1st Cir.2012), quoting OfficeMax, Inc. v. Levesque, 658 F.3d 94, 97 (1st Cir.2011). However, we do not sit in review of the United States District Court judge's decision in the present case. Therefore, we assume that Moore's stated causes of action are not covered pursuant to the title insurance contract, and consider only whether First American was nevertheless obligated, by virtue of the implicated title defect, to defend GMAC against the entire action as a matter of law. See Philadelphia Indem. Ins. Co. v. Chicago Title Ins. Co., 871 F.Supp.2d 744, 753 (N.D.Ill.2012) (duty to provide complete defense arises as matter of State law); Little Italy Dev., LLC vs. Chicago Title Ins. Co., U.S. Dist. Ct. No. 1:11CV112, slip op. at 5 (N.D. Ohio June 24, (2011) (same). See also Simplex Techs., Inc. v. Liberty Mut. Ins. Co., 429 Mass. 196, 199, 706 N.E.2d 1135 (1999) ( Simplex ), citing Camp Dresser & McKee, Inc. v. Home Ins. Co., 30 Mass.App.Ct. 318, 322, 568 N.E.2d 631 (1991) (“That some, or even many, of the underlying claims may fall outside the coverage does not excuse [the general liability insurer] from its duty to defend these actions”).

3. Certified questions. In Massachusetts, general liability insurers have a broad duty to defend their policy holders. See, e.g., Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 368, 667 N.E.2d 1149 (1996); Boston Symphony Orch., Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10, 545 N.E.2d 1156 (1989). Because “[i]t is not uncommon for a lawsuit against an insured to assert some claims that are covered by the insurance policy and others that are not,” the general rule in Massachusetts in the general liability insurance context is that “an insurer must defend the entire lawsuit if it has a duty to defend any of the underlying counts in the complaint.” Liberty Mut. Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d 54, 63 (1st Cir.2001)( Liberty Mut. Ins. Co.), citing Mt. Airy Ins. Co. v. Greenbaum, 127 F.3d 15, 19 (1st Cir.1997). Said differently, “if an insurer has a duty to defend one count of a complaint, it must defend them all.” Mt. Airy Ins. Co. v. Greenbaum, sup...