Stewart Title Guar. Co. v. Residential Title Services, Inc., Case No. 05C1197.

• Decision Date: 27 March 2009
• Docket Number: Case No. 05C1197.
• Citation: 607 F.Supp.2d 959
• Parties: STEWART TITLE GUARANTY COMPANY, Plaintiffs, v. RESIDENTIAL TITLE SERVICES, INC., and Maxum Indemnity Company, Defendants. Residential Title Services, Inc., Third-Party Plaintiff, v. Misook Choi Kim a/k/a Jennifer Mi Sook Kim, Third-Party Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

607 F.Supp.2d 959

STEWART TITLE GUARANTY COMPANY, Plaintiffs, v. RESIDENTIAL TITLE SERVICES, INC., and Maxum Indemnity Company, Defendants.

Residential Title Services, Inc., Third-Party Plaintiff, v. Misook Choi Kim a/k/a Jennifer Mi Sook Kim, Third-Party Defendant.

Case No. 05C1197.

United States District Court, E.D. Wisconsin.

March 27, 2009.

COPYRIGHT MATERIAL OMITTED

Leon W. Todd, Thomas L. Shriner, Jr., Laura Schulteis Kwaterski, Foley & Lardner LLP, Milwaukee, WI, for Plaintiffs.

James V. Noonan, Mitchell A. Lieberman, Ralph T. Wutscher, Patrick J. McCann, II, Noonan & Lieberman Ltd., Chicago, IL, for Defendant Residential Title Services, Inc.

DECISION AND ORDER

LYNN ADELMAN, District Judge.

Plaintiff Stewart Title Guaranty Company ("Stewart") brings this breach of contract action against defendants Residential Title Services, Inc. ("Residential"), and Maxum Indemnity Company ("Maxum"). I have diversity jurisdiction.¹ Before me now is Stewart's motion for summary judgment.

I. STANDARD OF REVIEW

Summary judgment is required "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 judgment as a matter of law." Fed. R.Civ.P. 56(c). The mere existence of some factual dispute does not defeat a summary judgment motion; "the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis omitted). For a dispute to be genuine, the evidence must be such that a "reasonable jury could return a verdict for the nonmoving party." Id. For the fact to be material, it must relate to a disputed matter that "might affect the outcome of the suit." Id. In evaluating a motion for summary judgment, I draw all inferences in a light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, I am is "not required to draw every conceivable inference from the record-only those inferences that are reasonable." Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir.1991). In evaluating a summary judgment motion, I may consider only evidence that is admissible at trial. Sokaogon Chippewa Cmty. v. Exxon Corp., 2 F.3d 219, 224-25 (7th Cir.1993).

In the present case, defendants raise several affirmative defenses. Defendants bear the burden of proving affirmative defenses at trial. See, e.g., Lobermeier v. Gen. Tel. Co. of Wis., 119 Wis.2d 129, 148, 349 N.W.2d 466 (1984); Christensen v. Equity Coop. Livestock Sale Ass'n, 134 Wis.2d 300, 303, 396 N.W.2d 762 (Ct.App. 1986); Advance Pipe & Supply Co. v. Wis. Dep't of Revenue, 128 Wis.2d 431, 439, 383 N.W.2d 502 (Ct.App.1986). Thus, to defeat Stewart's summary judgment motion, defendants must make a showing sufficient to establish the existence of the elements essential to such affirmative defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This is so because one of the principal purposes of the summary judgment procedure is to isolate and dispose of claims and defenses lacking factual support. Id. at 323-24, 106 S.Ct. 2548.

Neither Stewart nor either defendant has requested a jury trial, and the time for making such a request has expired. Thus, if a trial is required, it will be a bench trial. Rule 56 makes no explicit distinction between jury and bench trials. However, the rule is designed as a pretrial mechanism for "asses[ing] the proof in order to see whether there is a genuine need for trial," and whether there is such a need may depend on whether trial would be to the court or to a jury. William Schwarzer, Alan Hirsch & David Barrans, The Analysis & Decision of Summary Judgment Motions, 139 F.R.D. 441, 474 (1991) (quoting Fed.R.Civ.P. 56(e) advisory committee's notes (amended 1963)). When evidentiary facts are in dispute, when the credibility of witnesses may be in issue or when conflicting evidence must be weighed, a full trial is necessary regardless of whether it is a bench or a jury trial. Id. But when the question for decision involves drawing inferences from undisputed evidence, or interpreting and evaluating evidence to derive legal conclusions, a trial may not add to the judge's ability to decide. Thus, when the disputed issue is one of ultimate fact, a bench trial is often unnecessary; the considerations that militate in favor of a jury trial do not apply. Id.; see also Cent. States S.E. & S.W. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1374 (7th Cir.1992) (stating that where the factual issues involve characterization, and the opponent of summary judgment has no right to a jury trial, a formally "factual" issue may be resolved on summary judgment).

In the present case, there are no disputed lay facts and no issues of witness credibility. The question for decision involves the evaluation of and drawing of inferences from undisputed evidence.

II. FACTS

In 2002, Misook Choi Kim ("Kim") sought a $200,000 loan from BNC Mortgage, Inc., ("BNC"), which she asserted would be secured by a mortgage on residential property in Caledonia, Wisconsin. BNC agreed to the loan and in turn, sought a title insurance policy from Stewart for the purpose of protecting its interest in the Kim property. In 1998, Stewart entered into an underwriting agreement with Residential ("the Agreement"), authorizing Residential to issue title insurance policies in Stewart's name.

The Kim/BNC transaction was scheduled to close on November 27, 2002. On about November 8, 2002, Residential conducted a title search with respect to the Kim property. The effective date of such search was October 22, 2002.² In the second or third week of November, Residential updated the search. The effective date of the updated search was November 1, 2002. On November 5, 2002, Countrywide Home Loans, Inc. ("Countrywide") recorded a mortgage in the amount of $175,000 on the Kim property in the Register's office. Subsequently, the closing date of the Kim/BNC transaction was postponed and rescheduled for December 26, 2002. Residential did not further update its search. On December 26, the Kim/BNC mortgage closed, and Residential served as the closing agent. On January 15, 2003, Residential issued a title insurance policy to BNC in the amount of $200,000, insuring BNC in the event that its mortgage on the Kim property did not have priority over any other encumbrance.

In December 2004, Countrywide instituted a foreclosure action on the Kim property. As the first recorded mortgage, Countrywide's mortgage had priority over BNC's. In order to place BNC in the first lien position insured by the title policy, Stewart paid Countrywide $194,508.42.

I will state additional facts in the course of this decision.

III. DISCUSSION

In a diversity case, I apply state substantive law including choice of law rules. Wood v. Mid-Valley, Inc., 942 F.2d 425, 426 (7th Cir.1991). I apply the law of the forum state unless the parties point to an outcome-determinative conflict among potentially applicable state laws. See id. at 426-27. In the present case, the parties point to no such conflict. Thus, I apply Wisconsin law. I resolve the matter as I believe the Wisconsin Supreme court would. Baltzell v. R & R Trucking Co., 554 F.3d 1124, 1130 (7th Cir.2009). If there is no prevailing authority from that court, I give great weight to the holdings of the Wisconsin appellate courts. Id.

In interpreting the Agreement, I give effect to the parties' intentions, Johnson Controls, Inc. v. Employers Ins. of Wausau, 264 Wis.2d 60, 85, 665 N.W.2d 257 (2003), and I ascertain those intentions by looking at the language of the contract. State ex rel. Journal/Sentinel, Inc. v. Pleva, 155 Wis.2d 704, 711, 456 N.W.2d 359 (1990). I interpret the language as a reasonable person would. Danbeck v. Am. Family Mut. Ins. Co., 245 Wis.2d 186, 193, 629 N.W.2d 150 (2001). If the language is unambiguous, I merely apply it. State v. Peppertree Resort Villas, Inc., 257 Wis.2d 421, 432, 651 N.W.2d 345 (Ct.App.2002). If the language is ambiguous, I may consider extrinsic evidence to ascertain its meaning. Id. at 432-33, 651 N.W.2d 345.

The Agreement requires Residential to "issue title policies according to recognized underwriting practices [and] the rules and instructions given by [Stewart]...." (Decl. of David J. Silberman Ex. A at 2.) It provides that "[e]ach title policy shall ... correctly reflect the status of title as of the date and time of said policy with appropriate exceptions as to liens, defects, encumbrances, and/or objections disclosed by the search and examination of title ...." Id. It states that Residential shall not "insure over a title defect, lien, or encumbrance" without plaintiff's written consent, id. at 3, and that

[o]n each loss ... due to the negligence [of Residential], Residential shall be liable to [Stewart] for the entire amount of such loss .... Such losses include but are not limited to:

....

(2) Failure to discover or report any instrument of record affecting title.

....

(4) Failure to follow underwriting guidelines and/or instructions of [plaintiff].

(5) Failure to prepare a title policy which shows defects and matters affecting title disclosed in the title search or which should have been disclosed in the title search.

Id. at 4.

The Agreement does not define "negligence." However, under Wisconsin law, a plaintiff can recover damages for a defendant's negligence where there is (1) a duty of care on the part of the defendant; (2) a breach of that duty; (3) a causal connection between the defendant's conduct and the injury; and (4) an actual loss as a result of the injury. Transp. Ins. Co. v. Hunzinger Const. Co., 179 Wis.2d 281, 293, 507 N.W.2d 136 (Ct.App.1993). When determining the standard of care owed by a defendant t...