Mazel v. Las Cruces Abstract & Title Co. (In re Lamey)
| Decision Date | 02 July 2020 |
| Docket Number | Adv. No. 18-01057-t,No. 14-13729 ta7,14-13729 ta7 |
| Parties | In re: BRYAN A. LAMEY, Debtor. EDWARD MAZEL, chapter 7 trustee, and UNITED REAL ESTATE LAS CRUCES, LLC, Plaintiffs, v. LAS CRUCES ABSTRACT AND TITLE COMPANY, FIDELITY NATIONAL TITLE INSURANCE COMPANY, and TCNM, LLC, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Mexico |
Plaintiffs sued defendant Fidelity National Title Insurance Company for allegedly violating the New Mexico Unfair Insurance Practices Act, NMSA § 59A-16-1 et seq. (the "UIPA"). Before the Court is Fidelity's motion for partial summary judgment on the claim. The Court concludes that Fidelity's motion is well taken and should be granted.
Most of the facts relevant to the motion are set forth in the Court's Omnibus Findings of Fact, entered March 20, 2020, doc. 159. The facts are incorporated by reference. Capitalized terms not defined in this opinion have the meanings ascribed to them in the omnibus findings. Additional material facts are provided in the Court's discussion of the issues to which they relate. The Court also took judicial notice of its own docket and the docket of the state court foreclosure action brought by KZRV.
Summary judgment is appropriate where "there is no genuine dispute as to any material fact" thereby entitling the moving party to judgment as a matter of law. Fed. R. Civ. P. 56(a). "A dispute is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and a fact is material when it "might affect the outcome of the suit under the governing substantive law." Bird v. W. Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In ruling on a motion for summary judgment, the Court is required to "view the facts and draw reasonable inferences in the light most favorable to the party opposing the . . . motion." Scott v. Harris, 550 U.S. 372, 378 (2007).
At the summary judgment stage, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249. However, Id. at 249-50.
New Mexico's UIPA, based on a Model Unfair Insurance Practices Act drafted by the National Association of Insurance Commissioners, regulates trade practices in the New Mexico insurance industry "by defining, or providing for determination of, practices in this state which constitute . . . unfair or deceptive acts or practices." NMSA § 59A-16-2. A person "who has suffered damages as a result of a violation of [the UIPA] by an insurer or agent" may recoveractual damages. NMSA § 59A-16-30. Attorney's fees and punitive damages may also be awarded under certain circumstances. Id.; NMRA Civ. UJI 13-1718.
URELC1 asserts that Fidelity violated two sections of the UIPA. The first is § 59A-16-4(A),2 which provides:
URELC argues that Fidelity violated this section when it issued the Owner's Policy without obtaining a release of the KZRV Mortgage. URELC asserts:
Fidelity stated that it would issue policies if the Requirements were complied with. One of the Requirements was to record a release of the KZRV Mortgage, which was never completed. Thus, Fidelity issued policies of title insurance without adhering to all of the requirements as it clearly stated it would. As such, this statement by Fidelity was FALSE.
To prevail on a § 59A-16-4(A) claim, URELC must show that Fidelity misrepresented a "benefit, advantage, condition or term" of the Owner's Policy. Examples of valid claims under this section include disclosures about insurance rates, Woodworker's Supply, Inc. v. Principal Mut.Life Ins. Co., 170 F.3d 985, 994 (10th Cir. 1999), and finance charges, Azar v. Prudential Ins. Co., 133 N.M. 669, 688-89 (N.M. App. 2003).
URELC relies on the "Requirements" section of the title commitment Fidelity issued. The reliance is misplaced. The purpose of a title commitment is to prepare "for the issuance of a policy, but it is not a promise or an undertaking by the insurer that further work will be performed or that a risk will be insured." Barlow Burke, Law of Title Insurance, § 12.02 (3d Ed. 2019-2). "[A] title commitment is simply and solely a declaration of the title insurer's willingness to insure a defined title, at a future date, after a contemplated transaction is consummated and to indemnify at that time for covered defects according to the terms and conditions of the specified promised policy." First Midwest Bank, N.A. v. Stewart Title Guar. Co., 823 N.E. 2d 168, 182 (Ill. App. 2005). While the title commitment issued to URELC required the release of the KZRV mortgage, Fidelity had no duty to secure the release. Pearman v. Stewart Title Guaranty Co., 108 N.E. 3d 342, 347 (Ind. App. 2018) ( ; Malinak v. Safeco Title Ins. Co. of Idaho, 661 P.2d 12, 15 (Mont. 1983) ().
The "Requirements" in the title commitment are not representations about the policy's "benefits, advantages, conditions, or terms." Rather, they are conditions to Fidelity's obligation to issue the policy. Fidelity may adhere to or waive those conditions, in its discretion. Fidelity's decision to close the transaction in reliance on Maese Sr.'s promise to obtain a release of the KZRVMortgage did not alter the "benefits, advantages, conditions, or terms" of the Owner's Policy. URELC got exactly what it bargained for: a title insurance policy that insured its ownership of the Property, free and clear of all liens except the LANB Mortgage.
URELC would shift Fidelity's role in the loan and purchase transaction from the title insurer to URELC's closing agent and fiduciary. That is not an accurate description of Fidelity's job. Rather, Fidelity had only to disclose to URELC the title it would insure and then, at closing, issue a conforming title policy. Fidelity did that. URELC was responsible for getting releases of the three mortgages on the Property. Fidelity made no misrepresentation about the policy's terms or benefits. Fidelity's unfortunate reliance on Maese Sr.'s promise was not a misrepresentation.
URELC also argues that Fidelity's denial of its claim under the Owner's Policy shows that Fidelity misrepresented the terms of the insurance policy. The argument fails. Denial of coverage under an exception is not evidence that the policy's terms were misrepresented. If it were, then all coverage denials would generate UIPA claims. Whether or not Fidelity was within its rights to deny coverage (to be dealt with elsewhere), the denial certainly was colorable, based upon, inter alia, Maese Sr.'s statements and actions. Denial of the claim is not relevant to Fidelity's duties under § 59A-14-4(A).
What went wrong in the purchase and loan transaction had nothing to do with Fidelity's representations about title insurance and everything to do with Maese Sr's broken promise. See, e.g., Modisette v. Foundation Reserve Ins. Co., 427 P.2d 21, 25 (N.M. 1967) (); Azar, 133 N.M. at 687-88 (). Fidelity is entitled to summary judgment on the § 59A-16-4(A) portion of URELC's UIPA claim.
URELC's other UIPA claim is based on § 59A-16-20(E), which requires insurers to attempt "in good faith to effectuate prompt, fair and equitable settlements of an insured's claims in which liability has become reasonably clear." URELC argues that Fidelity violated § 59A-16-20(E) by failing to conduct a reasonable investigation of URELC's claim before denying it.3
A bad faith claim raises the issue of the insurer's objective reasonableness. NMRA Civ. UJI 13-1705 & Committee Commentary ("[T]he good faith of the insurance company is determined by the reasonableness of its conduct[.]"); Allsup's Convenience Stores, Inc. v. North River Ins. Co., 976 P.2d 1, 17 (N.M. 1998) (); NMRA Civ. UJI 13-1702 ( ).
Inherent in the requirement that an insurer attempt, in good faith, to effectuate fair and equitable settlements is that the insurer properly investigate the insured's claim. Sloan v. State Farm Mut. Auto Ins. Co., 85 P.3d 230, 237-38 (N.M. 2004); see NMRA Civ. UJI 13-1702 (...
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