Union Sav. Bank v. Lawyers Title Ins. Corp..

• Decision Date: 28 December 2010
• Docket Number: No. 10AP–226.,10AP–226.
• Citation: 191 Ohio App.3d 540,946 N.E.2d 835
• Parties: UNION SAVINGS BANK, Appellant,v.LAWYERS TITLE INSURANCE CORPORATION et al., Appellees.
• Court: Ohio Court of Appeals

191 Ohio App.3d 540

946 N.E.2d 835

2010 -Ohio- 6396

UNION SAVINGS BANK, Appellant,

v.LAWYERS TITLE INSURANCE CORPORATION et al., Appellees.

No. 10AP–226.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided Dec. 28, 2010.

Lerner, Sampson & Rothfuss, Cincinnati, Rick D. DeBlasis, and Cynthia M. Fischer, for appellant.Steven E. Elder Co., L.P.A., Steven E. Elder, Wilmington, and Michelle L. Polly–Murphy, for appellee Lawyers Title Insurance Corporation.SADLER, Judge.

{¶ 1} Plaintiff-appellant, Union Savings Bank (“appellant”), appeals the judgment of the Franklin County Court of Common Pleas, which granted summary judgment to defendant-appellee, Lawyers Title Insurance Corporation (“appellee”), on appellant's claims for breach of contract, negligence, and breach of fiduciary duty. For the following reasons, we reverse as to appellant's breach-of-contract claim, but affirm as to appellant's negligence and breach-of-fiduciary-duty claims.

{¶ 2} In May 2003, Jerry and Jacqueline Benis filed a loan application with appellant, seeking to refinance the first mortgage on their home. Their loan application advised appellant that besides their first mortgage with Wells Fargo, they had an outstanding mortgage with Fifth Third Bank (“Fifth Third”). Appellant thereafter submitted a written request for title commitment from appellee, with whom it had a long-standing business relationship. In the request, appellant advised appellee of the Wells Fargo first mortgage and the outstanding Fifth Third mortgage. Appellee's subsequent title search revealed, however, that Fifth Third had two outstanding mortgages on the property. Lawrence Press, appellee's assistant area manager, prepared a written title opinion and provided it to appellant on June 19, 2003. The title opinion identified three outstanding mortgages on the property: (1) a mortgage to Fifth Third, recorded on May 25, 2001, to secure the original principal amount of $140,000, (2) a mortgage to Prospect Bank (assigned to Wells Fargo), recorded on October 28, 2002, to secure the original principal amount of $275,000, and (3) a mortgage to Fifth Third, recorded on January 7, 2003, to secure the original principal amount of $52,000.

{¶ 3} Prior to closing on the loan, appellant, on August 14, 2003, provided appellee with written closing instructions, which directed appellee to “p/o Wells Fargo” and “subn. 5/3d.” The parties agree that “subn. 5/3d” means “subordinate Fifth Third Bank.” The closing instructions also directed appellee to fax a copy of the title work, the HUD–1 settlement statement, the initial escrow disclosure, and appellee's funding sheet for review by appellant before the closing.

{¶ 4} Thereafter, a subordination request was submitted to Fifth Third requesting subordination of only the outstanding mortgage recorded on January 7, 2003. Thereafter, a subordination agreement was prepared, subordinating only that mortgage. The subordination agreement, executed on August 12, 2003, was signed by representatives of Fifth Third that same day. Appellee closed the loan on August 18, 2003. The settlement statement prepared by appellee in connection with the closing indicates that appellee received a closing fee of $175, a title examination fee of $75, and a recording handling fee of $15. Laura Sheets, an operations manager with appellant, signed the subordination agreement on September 8, 2003.

{¶ 5} Approximately two years later, the Benises defaulted on their loan with appellant. In appellant's ensuing foreclosure action, the Fifth Third lien omitted from the subordination agreement was determined to take priority over appellant's mortgage.¹ At the subsequent sheriff's sale, $194,161.36 of sale proceeds were distributed to satisfy the unsubordinated Fifth Third lien.

{¶ 6} On May 23, 2008, appellant filed a complaint against appellee for negligence and breach of contract. On March 26, 2009, appellant filed an amended complaint adding a claim for breach of fiduciary duty. Appellant's negligence claim asserted that appellee, acting as appellant's escrow/closing agent, had a duty to properly close the loan, and breached that duty by failing to ensure that appellant's mortgage had first priority over all other liens and encumbrances and/or to ensure that all other liens were paid in full. Appellant's breach-of-contract claim asserted that a contract existed between appellant and appellee and that appellee breached the contract by failing to ensure that appellant's mortgage had first priority over all other liens and encumbrances and/or by failing to ensure that all other liens were paid in full. Appellant's breach-of-fiduciary claim asserted that a fiduciary relationship existed between appellant and appellee and that appellee breached the duty by (1) failing to close the loan with the ordinary skill and diligence reasonably expected of an escrow agent, (2) failing to follow the closing instructions provided by appellant, (3) failing to seek clarification of any ambiguous instructions provided by appellant, and (4) failing to ensure that appellant's mortgage had first priority over all other liens and encumbrances and/or to ensure that all other liens were paid in full.

{¶ 7} Appellee filed a motion for summary judgment on June 26, 2009. On July 9, 2009, appellant filed a combined memorandum opposing appellee's motion for summary judgment and cross-motion for summary judgment. However, on July 9, 2009, the trial court filed a sua sponte order striking appellee's summary-judgment motion for failure to comply with Loc.R. 12.01 of the Franklin County Court of Common Pleas.

{¶ 8} Thereafter, on July 21, 2009, appellee filed a conforming motion for summary judgment. Appellee asserted several arguments, three of which are pertinent here. Appellee first argued that appellant's negligence and breach-of-fiduciary-duty claims were barred by the four-year statute of limitations set forth in R.C. 2305.09(D). Appellee argued that appellant's tort claims accrued on August 18, 2003, the date of the closing or, at the very latest, on September 8, 2003, when appellant's representative executed the subordination agreement. Appellee argued that as of those dates, appellant knew or should have known that although two separate Fifth Third mortgages encumbered the property, only one had been subordinated. Accordingly, argued appellee, appellant's tort claims, filed March 26, 2009, were barred by the applicable statute of limitations.

{¶ 9} Appellee next argued that appellant's breach-of-contract claim failed because no contractual relationship existed between the parties, as the parties had not executed a formal escrow agreement setting forth their relationship and responsibilities. Appellee further asserted that even if appellant's closing instructions were to be construed as a contract, that contract was ambiguous because it mentioned only one Fifth Third mortgage, did not provide any recording information for the mortgage or account number, and did not indicate that appellant's mortgage was to be in first-lien position.

{¶ 10} Finally, appellee argued that because there was no contractual relationship between it and appellant, and because appellant sought only economic damages related to the unsubordinated Fifth Third mortgage, the economic-loss rule barred appellant's tort claims.

{¶ 11} On July 30, 2009, appellant filed a combined memorandum opposing appellee's motion for summary judgment and a cross-motion for summary judgment. Appellant first asserted that a valid contract existed between it and appellee, evidenced by the fact that appellant had asked appellee to perform the loan closing by sending appellee the request for title commitment, and appellee agreed by performing the closing and being paid for that service. Appellant argued that this contractual relationship required appellee to comply with appellant's written closing instructions. Appellant denied that its closing instructions were ambiguous, arguing that the only reasonable interpretation of the instruction to “subn. 5/3”—given that appellee was aware of the two outstanding Fifth Third mortgages—was that appellee was to subordinate, or at least confirm the subordination of, both Fifth Third mortgages.

{¶ 12} Appellant next asserted that appellee's statute-of-limitations defense was without merit. Appellant argued that its tort causes of action did not accrue at the time of the loan closing because at that point, appellant had suffered no determinable damages. Appellant argued that its tort claims were not ripe, and, thus, the statute of limitations did not begin to run until it suffered determinable damages on March 17, 2008, the day the payout of the sheriff's-sale proceeds occurred and Fifth Third's unsubordinated lien took priority over appellant's lien.

{¶ 13} Finally, appellant asserted that the economic-loss rule did not preclude its tort claims.

{¶ 14} On March 8, 2010, the trial court issued a decision and entry that (1) granted appellee's July 21, 2009 motion for summary judgment, (2) denied as moot appellee's June 26, 2009 motion for summary judgment, and (3) denied appellant's July 9, 2009 and July 30, 2009 cross-motions for summary judgment. As pertinent here, the trial court found that no contractual relationship existed between appellant and appellee and that both the applicable statute of limitations and the economic-loss rule barred appellant's negligence and breach-of-fiduciary-duty claims. The trial court filed its final journal entry on March 17, 2010.

{¶ 15} Appellant timely appeals, raising three assignments of error:

The trial court erred in granting defendant-appellee Lawyers Title Insurance Corporation's motion for summary judgment by finding that there was no contract between Union and Lawyers Title.

The trial court erred in granting defendant-appellee Lawyers Title Insurance Corporation's motion for summary judgment by finding that the statute of...