National Credit Union Admin. v. TICOR TITLE INS.
| Citation | 873 F. Supp. 718 |
| Decision Date | 10 January 1995 |
| Docket Number | Civ. A. No. 92-10753-PBS. |
| Parties | NATIONAL CREDIT UNION ADMINISTRATION, In Its Capacity As Liquidating Agent of Barnstable Community Federal Credit Union, A Federally Insured Credit Union, Plaintiff, v. TICOR TITLE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
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Douglass A. Hale, Wynn & Wynn, Raynham, MA, for plaintiff.
Raymond J. Brassard, Rackemann, Sawyer & Brewster, Boston, MA, for defendant.
Plaintiff National Credit Union Administration ("NCUA"), in its capacity as liquidating agent of Barnstable Community Federal Credit Union ("BCFCU"), seeks a declaratory judgment that the title insurance policy issued by defendant, Ticor Title Insurance Company ("Ticor") to BCFCU on a Cape Code motel is in full force and effect. It has also asserted a breach of contract claim. Ticor asserts that there is no coverage under the policy because BCFCU suffered and agreed to the mortgage which was senior to its own mortgage on the subject property. Both sides have moved for summary judgment. For the reasons stated below, the Court DENIES the plaintiff's motion for summary judgment and ALLOWS the defendant's motion for summary judgment.
The record discloses the following undisputed facts. In July, 1986, James K. Smith ("Smith"), then Vice President of BCFCU and a member of its board of directors, executed an offer to purchase the Earl of Sandwich Motor Lodge (the "Property") in Sandwich, Massachusetts from Edward and Natalie Ostrom (together, the "Ostroms") for a price of $1,275,000. It was executed by Smith "for Duke Realty Trust". Attached to that offer was a document, also executed by Smith, providing that the buyer would grant the sellers a first mortgage on the Property in the amount of $800,000. No copies of the offer and appended document were in BCFCU's files when the NCUA examiners reviewed those files.
Two Purchase and Sale Agreements were then executed. The first, dated August 3, 1986, listed Duke Realty Trust (the "Trust"), Ambrose Devaney ("Devaney"), Trustee, as the buyer, and listed the purchase price as $1,450,000. The second, dated August 18, 1986, listed John L. Schulenburg ("Schulenburg") or nominee, as the buyer, and listed the purchase price as $1,275,000. When the NCUA examiners reviewed BCFCU's files, the files contained a copy of the August 3, 1986 agreement, but did not contain a copy of the August 18, 1986 agreement.
The October 2, 1986, minutes of the BCFCU Board of Directors Meeting, at which Smith was present, reveal that a loan to the Duke of Earl Realty Trust in the amount of $625,000 was approved by the Board. The loan was to be secured by a first mortgage.
On October 30, 1986, Ambrose L. Devaney, Trustee of the Duke of Earl Trust, purchased the Property from the Ostroms. The following instruments, each dated October 30, 1986, were duly executed and recorded in the Barnstable County Registry of Deeds in connection with Devaney's purchase of the Property: (a) The Declaration of Trust of the Duke of Earl Trust was recorded at Book 5376, page 48; (b) The deed, which recited a purchase price of $1,000,000, from the Ostroms to Devaney, as Trustee, was recorded at Book 5376, Page 52; (c) A mortgage to the Ostroms in the face amount of $800,000 was recorded at Book 5376, Page 54; and, (d) A mortgage to BCFCU in the face amount of $625,000, which secured a $625,000 loan by BCFCU to Devaney, as Trustee, was recorded at Book 5398, Page 260. The mortgage to the Ostroms was a first mortgage; the mortgage to BCFCU was a second mortgage.
The closing of the October 30, 1986, loan to Devaney and the related mortgage was attended by at least the following individuals: Robert Cohen, counsel for BCFCU in the matter and agent for Ticor in issuing all title insurance policies; the Ostroms; and, their counsel, Peter N. Conathan; Devaney; Smith; Richard D. Mangone ("Mangone"), BCFCU's principal financial officer; and Schulenburg. The fact that the Ostroms were to receive a first mortgage was discussed with, or in the presence of, all individuals. There is no evidence as to whether Smith and Mangone were present in their capacity as beneficiaries of the trust, officers of BCFCU, or both.
Devaney, as Trustee, also executed an adjustable rate note, dated October 30, 1986 in the face amount of $800,000, payable to the order of the Ostroms. The note was guarantied by both Devaney in his individual capacity, and Smith. The Trust's Certificate of Beneficial Interests, dated October 30, 1986, shows Smith, Mangone, Devaney, and Schulenburg as the beneficiaries of the Trust. Devaney was indemnified against any loss suffered on account of the note payable to BCFCU by the Trust's other beneficiaries, other than his proportionate share.
At all relevant times, Cohen in addition to his role as counsel for BCFCU at the closing, was a policy issuing attorney for Ticor. In connection with the closing, Cohen issued a title insurance policy to BCFCU. The policy insured BCFCU's interest as a first mortgagee in the Property. The policy did not refer to the mortgage held by the Ostroms.
In June, 1987, Devaney and BCFCU refinanced the October 30, 1986 loan. The records of BCFCU show that the Executive Committee approved a loan to the Duke of Earl Realty Trust in the amount of $617,994, to be secured by a first mortgage. On June 15, 1987, Devaney, as Trustee, executed an adjustable rate mortgage note in the principal amount of $617,994.20 and a mortgage to BCFCU securing payment of the note. There was nothing in the mortgage to indicate that it was subordinate to any other mortgage.
Cohen, who was BCFCU's counsel in connection with the closing of the June 15, 1987, loan and related mortgage, issued a Ticor title policy dated June 15, 1987, insuring BCFCU's interest in the Property as a first mortgage in the amount of $617,994.20. The policy did not refer to the first mortgage held by the Ostroms. At the time it was executed, Smith, Lynn Vasapolle (BCFCU's Treasurer), Cohen and Devaney knew that the June 15, 1987, mortgage was junior to the Ostroms' mortgage. Smith executed the discharge of the credit union's 1986 mortgage in connection with the loan's refinancing. From October 30, 1986 through June 15, 1987, Mangone was chairman of the supervisory committee of the credit union.
On March 13, 1991, the NCUA Board issued an order of conservatorship with respect to BCFCU. On April 3, 1991, Cohen telecopied a letter to Dan Buckley of BCFCU, in which he recognized and apologized for the "clerical error" in the Duke of Earl title insurance policy. He states: "Dear Mr. Buckley: A short time ago, before the NCUA take-over, Lynn Vasapolle brought to my attention the fact that she thought there was an error in the Duke of Earl title insurance policy in that the Credit Union's position should be shown as a second mortgage and not as a first mortgage ... In reviewing my file, the status of the Credit Union as a second mortgage is well documented ..." Included in the insurance declaration pages in the files of BCFCU when the NCUA examiners reviewed the files was a business pro property coverage part declarations page showing the mortgage holder name to be BCFCU, as well as a sheet showing the mortgage holders to be the Ostroms and BCFCU. The names of the Ostroms appeared before that of BCFCU, but there was nothing to indicate that one was a first mortgage and one was a second mortgage.
On June 28, 1991, the NCUA closed BCFCU and appointed itself liquidating agent. On July 9, 1991, the Ostroms conducted a foreclosure sale of the Property. The high bid at that sale was $750,000.00 from the Ostroms. No proceeds from that sale were paid to BCFCU or the NCUA. The NCUA now seeks to collect the full amount of the title insurance policy, $617,994.20. Ticor has refused to pay the claim on the basis that it falls within exclusion 3(a) of the policy.
A motion for summary judgment must be granted if:
The pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as matter of law.
Fed.R.Civ.P. 56(c). Febus-Rodriguez v. Betancourt-Lebron, 14 F.3d 87, 91 (1st Cir. 1994) (internal quotes and citations omitted).
When faced with cross-motions for summary judgment, the court is not required to write separately on each motion. See Bellino v. Schlumberger Technologies, Inc., 944 F.2d 26, 33 (1st Cir.1991). It must, however, "evaluate each cross-motion on its own merits," Id. (citation omitted), while "viewing the facts on the record and all inferences therefrom in the light most favorable to the nonmoving party." Kelly v. Blue Cross & Blue Shield of R.I., 814 F.Supp. 220, 223 (D.R.I.1993).
Ticor contends that exclusion 3(a) of the title insurance policy it issued to BCFCU bars the NCUA's claim for damages. The policy...
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