Murnan v. Stewart Title Guar. Co.
| Decision Date | 30 October 2008 |
| Docket Number | No. 1:08cv2.,1:08cv2. |
| Citation | 585 F.Supp.2d 825 |
| Parties | Alexandra P. MURNAN, Trustee, Plaintiff, v. STEWART TITLE GUARANTY COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
Kenneth Allen Martin, The Martin Law Firm, McLean, VA, for Plaintiff.
Sean Patrick Roche, Odin Feldman & Pittleman PC, Fairfax, VA, for Defendant.
This is a diversity action for breach of a title insurance policy. Plaintiff, Alexandra Murnan, in her capacity as Trustee of the Murnan Springhill Trust ("Trust"), purchased a title insurance policy ("Policy") from defendant Stewart Title Guaranty Co. ("Stewart Title") insuring the title of a property held in the Trust and identified as 1150 Springhill Road in McLean, Virginia ("Property"). In addition to serving as Trustee, Murnan was also (i) the sole holder of the right to revoke the trust and (ii) the sole beneficiary of the Trust for the duration of her life. At the time she purchased the Policy, a number of Internal Revenue Service ("IRS") tax judgments were pending against Murnan in her personal capacity. Later, she claims, a sale of the Property to a third party foundered because the IRS tax judgments against her in her personal capacity operated as liens on the Property. Murnan, as Trustee, subsequently defaulted on the mortgage payments for the Property, and the Property was sold at a foreclosure auction for an amount less than she would have received from the sale that had previously foundered.
At issue on the parties' cross-motions for summary judgment are the following questions:
4. Whether recovery is nonetheless barred by the Policy's exclusion for liens that are "created, suffered, assumed or agreed to by the insured claimant."
These questions have been fully briefed and argued and are now ripe for disposition.
For the reasons that follow, Murnan, as Trustee, is entitled to summary judgment on these questions.
The following facts material to the resolution of the cross-motions for summary judgment are derived from the record as a whole and are undisputed.
Between 1986 and 2003, Murnan, in her personal capacity, was the subject of numerous federal tax and other judgments, including, inter alia, approximately thirteen tax lien judgments1 by the IRS. The record indicates that the IRS filed Notices of Federal Tax Liens ("NFTLs") in Fairfax County Circuit Court for at least three of those tax judgments, totaling $121,746.99.2 Each NFTL states, in pertinent part, as follows:
As provided by sections 6321, 6322, and 6323 of the Internal Revenue Code, [the IRS is] giving a notice that taxes (including interest and penalties) have been assessed against the following-named taxpayer. We have made a demand for payment of this liability, but it remains unpaid. Therefore, there is a lien in favor of the United States on all property and rights to property belonging to this taxpayer for the amount of those taxes, and additional penalties, interest, and costs that may accrue.
(Emphasis added). Subsequently, on January 13, 2004, the IRS sent a letter to Murnan rejecting her request for a certificate of discharge of her federal tax liens. The letter advised Murnan that the outstanding tax liens against her at that time totaled approximately $292,899.46.
In January 1998, Unger Murnan, Murnan's uncle, purchased the Property for $350,000. More than three years later, on June 20, 2001, Murnan executed a written trust agreement creating the Trust. The agreement provides, in pertinent part, that:
1. Murnan is the grantor of the Trust;
2. the Trust is an express, inter vivos, revocable trust, revocable by the grantor, Murnan, at Murnan's sole discretion;
3. "the Grantor transfers, and the trustee accepts, in trust the real property known as 1150 Springhill Road, McLean, Virginia...."3 4. the assets that are the subject of the Trust shall be listed in "Schedule A," a document to be attached to the agreement; and
5. the lifetime beneficiary of the Trust is Murnan, and upon Murnan's death, the future beneficiaries are Murnan's three children.
On June 21,2001, the day after executing the trust agreement, Murnan transferred $10 into the Trust. Four days later, Unger Murnan executed a deed transferring the Property to Murnan in her capacity as Trustee in exchange for $10 and Murnan's agreement, as Trustee, to assume an existing mortgage on the Property that then totaled approximately $420,905. Murnan, acting as Trustee, then recorded the Property in an appendix to the Trust agreement as a Trust asset acquired June 25, 2001.
In October 2001, approximately four months after forming the Trust, Murnan, acting as Trustee, executed a balloon deed of trust with First Mount Vernon Industrial Loan Association ("Mt.Vernon") increasing a prior loan4 from $57,000 to $84,020 and using the Property to secure the increased loan. Between May and October 2002, Murnan, acting as Trustee, increased the loan through a number of modifications to the Mt. Vernon balloon deed of trust, ultimately raising the total loan amount to $216,301.80. Mt. Vernon secured one such increase by obtaining a deed of trust for the property that entitled Mt. Vernon to foreclose on the Property in the event Murnan defaulted on the loan. Thus, when Murnan subsequently defaulted, Mt. Vernon recorded the deed of trust thereby taking title to, and ownership of, the Property on November 19, 2002.
Approximately two months later, on January 23, 2003, Murnan executed a sales contract to reacquire the Property from Mt. Vernon on behalf of the Trust. In the sales contract, which included a warranty that title was free from all liens not otherwise mentioned, the parties specifically acknowledged a prior lien on the Property—namely, the original mortgage that was on the Property when Unger Murnan transferred it to the Trust—and provided that this lien would be discharged at settlement. Neither Murnan, nor Mt. Vernon mentioned the outstanding federal tax judgments against Murnan in her personal capacity.
At some point subsequent to signing the sales contract with Mt. Vernon, but prior to closing, Murnan contacted Stewart Title regarding issuance of a title insurance policy on the Property. At some point circa January 28, 2008, Stewart Title commissioned a search of the Fairfax County land records with respect to the Property and Murnan. As a result, Stewart Title learned of the IRS tax judgments and NFTLs that had been filed against Murnan in her personal capacity.
On February 14, 2003, Murnan, acting as Trustee, executed a settlement statement regarding Mt. Vernon's sale of the Property to her that provided, inter alia, for (i) an $819,684.08 contract sales price; (ii) payoff of the initial mortgage on the Property; (iii) cash payment to Mt. Vernon in the amount of $282,242.50; (iv) a new loan from C.W. Cobb & Associates to Murnan, secured by the Property, in the amount of $860,000; (v) cash payment to Murnan of $6,160.44, the amount of the loan in excess of the contract sales price adjusted for various settlement charges and taxes; and (vi) title insurance on the property to be issued by Stewart Title for a $4,650 premium.
At closing a week later, on February 21, 2003, Mt. Vernon delivered a general warranty deed for the Property to Murnan on behalf of the Trust. That same day, Murnan, acting as Trustee, executed a deed of trust mortgaging the Property to S.K. Matricardi and Neil I. Title for $860,000, with the noteholder listed as C.W. Cobb & Associates. Murnan then recorded the deed to the Property on February 24, 2003.
On February 24, 2003, the same day Murnan recorded the deed to the Property, Stewart Title issued the Policy. The Policy, delivered in Virginia, provides, in pertinent part, that:
1. the Policy insures "against loss or damage ... sustained or incurred by the insured by reason of," inter alia, "[a]ny defect in or lien or encumbrance on the title" or "[u]nmarketability of title";
2. the Policy excludes from coverage, inter alia, "defects, liens, encumbrances, adverse claims or other matters [that are] created, suffered, assumed, or agreed to by the insured claimant";5
3. the "insured" is defined in relevant part as the "insured named in Schedule A"; "Schedule A" lists the "insured" as "Alexandra P. Murnan, Trustee for the Murnan Spring Hill Trust"; and
4. the Policy excepts from coverage a number of items listed in "Schedule B," including:
a. the new mortgage obtained on the Property upon its reacquisition from Mt. Vernon;
b. any taxes subsequent to 2002; and
c. a water main easement that Stewart Title discovered in its records searches
Stewart Title admits that it was aware of the IRS tax liens6 against Murnan in her individual capacity at the time the Policy issued. Stewart Title further admits that it had a copy of the Trust agreement when it issued the Policy, and hence knew that Murnan was both the Trust's life beneficiary and the sole holder of the discretionary power to revoke the Trust. Stewart Title avers that, at the time it issued the Policy, it believed that the IRS tax liens against Murnan did not attach to the Property's title because they were filed against Murnan in her...
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...maintained control over the property she placed in trust under the 2010 revocable trust agreement. See Murnan v. Stewart Title Guar. Co. , 585 F.Supp.2d 825, 834 (E.D. Va. 2008), vacated in part on other grounds , 607 F.Supp.2d 745 (E.D. Va. 2009) ("[A] grantor who retains the sole discreti......
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Murnan v. Stewart Title Guar. Co., 1:08cv2.
...facts are fully set forth in a prior Memorandum Opinion and need not be repeated here. See Murnan v. Stewart Title Guar. Co., 585 F.Supp.2d 825 Page 746 On October 30, 2008, Murnan, as Trustee, was granted partial summary judgment. See id.; see also Murnan, 585 F.Supp.2d 825 (E.D.Va.2008) (......