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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
STEWART TITLE GUARANTY COMPANY : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : JOHN MCCLAIN AND MITCHELL PRINCE, : : Appellants : No. 3423 EDA 2014
Appeal from the Order Dated October 20, 2014 In the Court of Common Pleas of Montgomery County Civil Division No(s).: 2010-36314
BEFORE: GANTMAN, P.J., MUNDY,J., and DUBOW, J.
MEMORANDUM BY DUBOW, J.: FILED APRIL 12, 2016
Appellants John McClain and Mitchell Prince, defendants below, appeal
from the Order dated October 20, 2014, granting summary judgment to
Appellee Stewart Title Guaranty Company, plaintiff below, in its declaratory
judgment action regarding title insurance Appellee issued to Appellants. The
trial court properly concluded that Appellee was not obligated to defend and
indemnify Appellants in a quiet title action that U.S. Bank filed against the
property at issue and we affirm.
FACTUAL AND PROCEDURAL HISTORY
This action is the fourth action pertaining to a parcel of land in Lower
Merion Township known as 624 Montgomery School Lane (the “Property”). J. A03012/16
The following facts, gleaned from the certified record and our prior opinions,
are relevant to the instant action.
In 2001, Michael and Theresa Power purchased the Property. The
deed recorded in Montgomery County at that time included a legal
description of the Property as two adjoining parcels – Lot A, a vacant lot;
and Lot B, upon which a house sits (“2001 Deed”).
In 2002, the Powers consolidated the lots into a single lot by deed in
order to obtain a swimming pool permit (“2002 Deed of Consolidation”). The
conjoined property was assigned a single tax parcel number and is known by
a single address of 624 Montgomery School Lane.
In 2005, Appellants entered into an Agreement of Sale to purchase the
Property from the Powers. Prior to closing, Appellants obtained title
insurance from Appellee. Appellee utilized the services of Northeast
Executive Abstract (“NE Abstract”) to provide the correct legal description of
the Property for title insurance, the vesting deed, and the mortgage.
Several days before settlement, Appellee issued a five-page title
commitment. Schedule C on the fifth page, however, incorrectly listed the
legal description for the Property. Instead of listing the consolidated legal
description for both Lot A and Lot B, the legal description listed Lot A only.
The title insurance policy was amended on September 23, 2005,
approximately two months after the sale, but still listed the incorrect legal
description for the Property.
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When Appellee prepared the deed for the 2005 sale, Appellee repeated
the error from the title commitment and only listed the legal description for
Lot A (“2005 Deed”).
At closing, Appellants borrowed $825,000 from Wells Fargo to buy the
Property. Appellants’ mortgage recited the proper address and tax parcel
number for the entire Property, but contained the same error as the other
documents: a legal description for the Property that only listed Lot A. No one
realized that the legal description in the 2005 Deed, title insurance policy,
and mortgage was incorrect.
Mortgage Foreclosure/Quiet Title Action – Montgomery County
Sometime after 2006, Appellants stopped paying their mortgage, and
in March 2009, U.S. Bank filed a mortgage foreclosure action against the
Property in Montgomery County.1 It was during the pendency of the
foreclosure action that U.S. Bank and Appellants discovered that the legal
description of the Property in the 2005 Deed and mortgage was incorrect
and only reflected the legal description of Lot A and not the legal description
for the consolidated Lot A and Lot B.
On June 14, 2010, U.S. Bank filed a quiet title action in Montgomery
County against Appellants and the Powers, seeking, among other things,
reformation of the legal description in the 2005 Deed as well as the
1 In 2006, Well Fargo transferred the mortgage on the Property to U.S.Bank.
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mortgage. The court consolidated the quiet title and mortgage foreclosure
actions.
Both U.S. Bank and Appellants filed Motions for Summary Judgment.
The trial court granted U.S. Bank’s Motion for Summary Judgment, holding
that the legal description be reformed to reflect the consolidation of Lot A
and Lot B, placing the mortgage in first position, and entering an in rem
judgment against the Property. US Bank National Association v.
McClain, No. 3062 EDA 2014 (Pa. Super. filed Oct. 16, 2015), slip op. at 6
(citation omitted). Appellants appealed and this Court affirmed.
Quiet Title Action - Delaware County
In June 2010, Appellee contacted the Powers, who executed a “2010
Deed of Correction” that mirrored the legal description in the 2002 Deed of
Consolidation and listed the legal description of the Property to include the
consolidation of Lot A and Lot B. The 2010 Deed of Correction did not,
however, include that Appellants were joint tenants with right of
survivorship. The Powers did not deliver the 2010 Deed to Appellants.
In August 2011, while the U.S. Bank mortgage foreclosure/quiet title
action was pending in Montgomery County, Appellants filed an action in
Delaware County against the Powers. Appellants sought to amend the legal
description in the 2005 Deed to show that the Property consisted of two
unconsolidated lots as described in the 2001 Deed and to list Appellants as
joint tenants with right of survivorship.
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After a bench trial, Judge Green issued an order rejecting Appellants
position that the 2005 Deed should list the lots as unconsolidated. Rather,
Judge Green ordered that the legal description of the Property in the 2005
Deed reflect the consolidation of Lots A and B as set forth in the legal
description in the 2002 Deed of Consolidation. The trial court also listed
Appellants as joint tenants with the right of survivorship.
Appellants appealed and this Court affirmed the Delaware County
Order. This Court further held that Appellants had constructive notice at
closing that they were purchasing Lots A and B, which the Powers
consolidated in the 2002 Deed of Consolidation. See John L. McClain and
Mitchell Prince v. Michael V. Power and Theresa Power, No. 1933 EDA
2013 (Pa.Super. filed Sept. 18, 2014), slip op. at 20.
The Instant Declaratory Judgment Action
After U.S. Bank filed its quiet title action in Montgomery County,
Appellants demanded that Appellee defend and indemnify them in the
mortgage foreclosure/quiet title action that U.S. Bank filed in Montgomery
County pursuant to the terms of the title insurance policy.2 Appellee refused
to defend and indemnify Appellants, and instead commenced the instant
action in Montgomery County by filing a Complaint for Declaratory
Judgment, pursuant to the Uniform Declaratory Judgments Act, 42 Pa. C.S.
2 Appellants ultimately admitted that Appellee was not responsible for defending or indemnifying them in the mortgage foreclosure action.
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§§ 7531 et seq., seeking a declaration that Appellee is not obligated to
defend or indemnify Appellants in the quiet title action that U.S. Bank filed in
Montgomery County.
All parties filed Motions for Summary Judgment. Judge Del Ricci
granted Appellee’s motion, finding that the title insurance policy did not
require Appellee to indemnify and defend Appellants in the Montgomery
County action. The court also denied Appellants’ Motion for Summary
Judgment. Appellants timely appealed.
ISSUES
Appellants raise the following eight issues for our review:
1. Must this action be dismissed for failure to join US Bank and Northeast Executive Abstract Agency, which have a “claim or interest which would be affected by the declaration” making them necessary and indispensable parties?
2. Must the Plaintiff, Stewart Title Insurance Guaranty Company, provide a defense to the plaintiffs in a quiet title action under the policy of title insurance when the allegations in the complaint attack the Defendants’ title to their property and the policy covers defects in the title?
3. Must the Plaintiff, Stewart Title Insurance Guaranty Company, defend attacks on the Defendants’ title to their property that claim it is not described as actually insured?
4. Did the court err in granting summary judgment in finding no duty on the part of Stewart Title Guaranty Company to defend or indemnify the defendants which Stewart failed to produce the policy of insurance in question?
5. Must the Defendant [sic], Stewart Title Insurance Guaranty Company, provide a defense and indemnity to the plaintiffs in a quiet title action when the defendants did not have actual notice of the defects in their title as insured but only had contractive
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notice and the policy provides coverage when there is only constructive notice?
6. Must the Plaintiff, Stewart Title Insurance Guaranty Company, indemnify the Defendants when they suffered a demonstrated loss as a result of Stewart’s error in insuring the property was two separate lots when there was actually a deed of consolidation recorded before settlement that was not disclosed to the plaintiffs and which diminished the property’s value?
7. Did the court err in granting summary judgment to the plaintiff when defects in the Defendants’ title as alleged in the quiet title complaint were solely created by Stewart Title and not by the Defendants?
8. Must the Plaintiff, Stewart Title Insurance Guaranty Company, provide a defense to the Defendants in a quiet title action under the policy of title insurance when the quiet title action is funded by the Plaintiff and the policy obligates the Plaintiff to pursue all legal actions at its own expense and not at the expense of the Defendants?
Appellants’ Brief at 3-4.
LEGAL ANALYSIS
We review an Order granting summary judgment to determine
whether the trial court abused its discretion or committed an error of law.
Criswell v. Atl. Richfield Co., 115 A.3d 906, 908 (Pa. Super. 2015)
(citation omitted). Our scope of review is plenary. Id. As this Court has
held:
In reviewing a trial court's grant of summary judgment, we apply the same standard as the trial court, reviewing all the evidence of record to determine whether there exists a genuine issue of material fact. We view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Only where there is no genuine issue as to any material fact and it is clear that the moving party is
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entitled to a judgment as a matter of law will summary judgment be entered. All doubts as to the existence of a genuine issue of a material fact must be resolved against the moving party.
Id. at 908-909 (citation omitted).
We review a trial court’s decision in a declaratory judgment action
narrowly. “Because declaratory judgment actions arise in equity, we will set
aside the judgment of the trial court only where it is not supported by
adequate evidence”. Nationwide Mut. Ins. Co., v. Cummings, 652 A.2d
1338, 1340-41 (Pa.Super. 1994) (citations omitted). “The test is not
whether we would have reached the same result on the evidence presented,
but whether the trial court’s conclusion can reasonably be drawn from the
evidence.” Id. at 1341 (citations omitted).
Issue # 1
In their first issue, Appellants aver that U.S. Bank, as the plaintiff in
the underlying quiet title action, and NE Abstract are indispensable parties to
this action because they have a “claim or interest which would be affected
by the declaration” regarding insurance coverage. Appellants conclude that
because neither the bank nor the abstract company were joined in the
declaratory judgment action, our courts have no jurisdiction.
The Declaratory Judgments Act provides that “[w]hen declaratory
relief is sought, all persons shall be made parties who have or claim any
interest which would be affected by the declaration, and no declaration shall
prejudice the rights of person not parties to the proceeding.” 42 Pa.C.S.
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§7540. Courts do not have jurisdiction to consider a declaratory judgment
action if the proper parties are not joined. Pennsy. Ins. Guar. Ass’n v.
Schreffler, 520 A.2d 477 (Pa.Super. 1987).
An indispensable party is “one whose rights are so directly connected
with and affected by litigation that he must be a party of record to protect
such rights....” Columbia Gas Transmission Corp. v. Diamond Fuel Co.,
346 A.2d 788, 789 (Pa. 1975).
Appellants rely on Vale Chemical Co. v. Hartford Acc. and Indem.
Co., 516 A.2d 684 (Pa. 1986). Vale had manufactured and sold
diethylstilbestrol (“DES”). After a DES victim sued Vale, Vale filed a
declaratory judgment action against its insurers to determine whether the
insurance policies at issue provided Vale coverage for the DES lawsuit and
thus, the insurers had a duty to defend Vale in those lawsuits. The trial court
granted summary judgment in favor of Vale against the insurance
companies, and this Court affirmed. The Supreme Court reversed, and held
that the DES victim was an indispensable party to the Declaratory Judgment
action because she had an interest in whether Vale had insurance coverage
for her lawsuit against Vale.
The Pennsylvania Supreme Court has honed the test to determine
whether a party is an indispensable party to an action, and has held that the
court should consider at least these four factors:
1. Do the absent parties have a right or interest related to the claim?
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2. If so, what is the nature of that right or interest?
3. Is that right or interest essential to the merits of the issue?
4. Can justice be afforded without violating the due process rights of absent parties.
Mechanicsburg Area School District v. Kline, 431 A.2d 953, 956 (Pa.
1981).
In this case, the sole issue is whether Appellees must provide title
insurance coverage to the Appellants. This is purely a case of contract
interpretation. U.S. Bank, who filed a mortgage foreclosure action against
Appellants and sought to have the 2005 Deed reflect the parties’ intention at
closing, has no interest in whether the Appellee will defend and indemnify
Appellants in a quiet title action. U.S. Bank’s sole interest is to exercise its
right to collect a debt that Appellants did not pay and the court will not
adjudicate that right in this Declaratory Judgment action.
Similarly, NE Abstract has “no claim or interest which would be
affected by the declaration under the insurance policy.” As discussed later in
this Opinion, the analysis in this Declaratory Judgment action is whether the
litigation in Montgomery County was a “claim adverse” to Appellants’
property interest. Even assuming that NE Abstract mistakenly listed an
incorrect property description, NE Abstract has “no right or interest essential
to the merits” of whether the language of the title insurance policy imposes
on Appellee the obligation to indemnify and defend Appellants.
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We also find the analysis in Vale to be inapposite. Vale involved the
rights of a third party who could potentially benefit from the interpretation of
the insurance policy. In this case, the only potential beneficiaries from the
court’s interpretation of the insurance policy are Appellants. Neither
U.S.Bank nor NE Abstract will ever benefit from the court’s interpretation.
Accordingly, they are not indispensable parties and Appellants’ first issue,
thus, fails.
Issues # 2, 3, 5, and 8
Appellants’ second, third, fifth, and eighth issues all relate to the
interpretation of the title insurance contract and its application in the quiet
title action. Appellants argue that because the quiet title action “attacks
[Appellants’] title to their property, [Appellee] must now be compelled to
honor that portion of the policy that contractually requires it to pay the
costs, attorneys’ fees and expenses incurred in defense of the title as
insured.” Appellants’ Brief at 24, 45 and 47.
Appellants specifically argue that pursuant to paragraph 4 of the title
insurance policy, Appellee must provide Appellants with their “costs to
defend the actions brought by [Appellee] in the first place.” We disagree.
The interpretation of an insurance policy is a question of law.
Travelers Cas. & Sur. Co. v. Castegnaro, 772 A.2d 456, 459 (Pa. 2001).
“When interpreting an insurance policy, a court must ascertain the intent of
the parties as manifested by the language of the written agreement. When
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the policy language is clear and unambiguous, the court must give effect to
the language of the contract.” Id.
The title insurance contract at issue requires Appellee to indemnify and
defend Appellants in litigation “in which any third party asserts a claim
adverse to the title or interest as insured.” Title Insurance Policy, Amended
Complaint for Declaratory Judgment, Exhibit A (emphasis added).
Paragraph 4 of the policy provides that Appellee “shall have the right, at its
own cost, to institute and prosecute any action … which in its opinion may be
necessary or desirable … to prevent or reduce loss or damage to the
insured.” Id.
Neither party has asserted that there is ambiguity in the language of
the contract and we discern none. We, thus, turn to Appellants’ issues.
We first note that the purpose of title insurance is to “indemnify those
who actually suffer the loss” and “to cover possibilities of loss through
defects that may cloud or invalidate titles.” Sattler v. Phila. Title Ins. Co.,
162 A.2d 22, 25 (Pa.Super. 1960)(emphasis added), and Rood v.
Commonwealth Land Title Insur. Co., 936 A.2d 488, 492 (Pa.Super.
2007). Coverage is triggered if the Complaint in the underlying action avers
facts that would support a recovery covered by the policy. General
Accident Ins. Co. of America v. Allen, 692 A.2d 1089, 1095 (Pa. 1997).
The insurance policy here provides that Appellee “shall provide for the
defense of an insured in litigation in which any third party asserts a claim
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adverse to the title or interest as insured, but only as to those stated
causes of action alleging a defect, lien or encumbrance or other matter
insured against by this policy.” Paragraph 4(a), Title Insurance Contract,
supra (emphasis added).
In the Montgomery County quiet title action, U.S. Bank requested that
the court “(a) declare that [Appellants] own valid fee simple title to the
entire Property, i.e., both lots; [and] (b) reform the legal descriptions in the
2005 Deed and the Mortgage to include the metes and bounds description of
the entire Property, i.e., both lots[.]” Complaint of US Bank, Mont. Co. CCP
Docket No. 2010-15604-0.
A quiet title action that seeks to increase Appellants’ holdings is not “a
claim adverse to” Appellants’ title or interest as insured. In this case, the
quiet title action was for the purpose of expanding the legal description in
the deed so that it included both Lot A and Lot B and would comport with the
Appellants’ expectations when they purchased both lots in 2005.
Appellants rely on Titeflex Corp. v. Nat’l Union Fire Ins. Co., 88
A.3d 970, 981 (Pa.Super. 2014), appeal denied, 105 A.3d 737 (Pa. 2014), to
support their position that an “insurer is obligated to defend its insured if the
factual allegations of the complaint on its face encompass an injury that is
actually or potentially within the scope of the policy.” Appellant’s Brief at 25
(citation omitted)(emphasis added). As we noted, the quiet title action only
increased Appellants’ holdings and did not cause any injury.
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Appellants further argue that they were, in fact, injured by the quiet
title action increasing their property holdings because the quiet title action
resulted in the mortgage securing both lots and preventing Appellants from
selling off one lot.
We find this argument to be disingenuous. When Appellants
purchased the Property, Wells Fargo lent Appellants sufficient funds to
purchase both lots in exchange for a mortgage on both lots. Due to clerical
error, the mortgage was only recorded on one lot. The fact that the trial
court in the quiet title action ordered that the mortgage be placed on both
lots does not mean that Appellants “lost” a property interest in the quiet title
action. Appellants never had the right to own Lot B without a mortgage on
it.3 Accordingly, Appellants’ second, third, fifth, and eighth issues fail.
Issue #4
In their fourth issue, Appellants aver that the trial court erred in
granting summary judgment because Appellee did not produce a copy of the
original title policy issued on or around July 22, 2005, “despite discovery
requests to do so.” Appellants’ Brief at 33. Rather, they note, Appellee
3 There is no doubt that Appellants at closing knew that they were purchasing both lots and financing the purchase of both lots with a mortgage on both lots. This Court has already held that at the time of closing, Appellants had constructive notice that they were purchasing, and the bank was placing a mortgage on, both lots. See John L. McClain and Mitchell Prince v. Michael V. Power and Theresa Power, No. 1933 EDA 2013 (Pa.Super. filed Sept. 18, 2014). This Court would go even farther and find that Appellants had actual notice that it was purchasing both lots and financing the purchase of both lots with a mortgage on both lots.
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annexed a copy of the amended title insurance policy dated September 23,
2005, that Appellants now aver they “never consented to … and there is no
proof of such.” Appellants’ Brief at 34. This issue, appearing to raise
principles sounding in discovery compliance and contract validity, is waived
for failing to develop it as required by our appellate rules.
“The argument portion of an appellate brief must include a pertinent
discussion of the particular point raised along with discussion and citation of
pertinent authorities.” In re Estate of Whitley, 50 A.3d 203, 209 (Pa.
Super. 2012) (quoting Estate of Lakatosh, 656 A.2d 1378, 1381 (Pa .
Super. 1995)). “This Court will not consider the merits of an argument which
fails to cite relevant case or statutory authority.” Id. (quoting Iron Age
Corp. v. Dvorak, 880 A.2d 657, 665 (Pa. Super. 2005)). “Failure to cite
relevant legal authority constitutes waiver of the claim on appeal.” Id; see
Pa.R.A.P. 2119(a).
In their brief discussion of this fourth issue, Appellants quote one case
for the proposition that “a contract of insurance cannot be changed without
consent of both parties.” Appellants’ Brief at 34, quoting Murray v. John
Hancock Mutual Life Ins. Co., 69 A.2d 182, 183 (Pa. Super 1949).
Appellants cite no authority and provide no analysis to support their
proposition that summary judgment was improper because Appellee
annexed the amended title policy to the complaint. Because Appellants have
failed to develop this issue as required by Pa.R.A.P. 2119, it is waived.
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Issue #6
In their sixth issue, Appellants aver that, contrary to the trial court’s
1925(a) Opinion, they suffered a monetary loss because having separate
lots would have enabled them to sell the vacant lot, valued at $125,000, to
avoid the foreclosure action altogether. They aver that the Deed of
Consolidation “diminished the property’s value.”
In its Rule 1925(a) Opinion, the trial court opined
[Appellants’] contention that the Property was an A/B Lot and only unimproved Lot A was subject to the Mortgage was spurious and self-serving. It is apparent to the [c]ourt that such a claim was an attempt to prevent and/or forestall foreclosure on the valuable portion of the Property – that being the part where the house was located. Further, as previously discussed, the purpose of title insurance is to protect those who actually suffer the loss. Here, the record is clear that there was no such loss suffered by [Appellants].
Trial Court Opinion, dated 3/25/15, at 12.
We agree with the trial court that the Delaware County action resolved
Appellants’ issue with respect to the Property they knew they had. In raising
this sixth issue, Appellants are attempting to relitigate that which this Court
addressed in McClain v. Power, No. 1933 EDA 2013, discussed supra. This
they may not do. See Commonwealth v. Starr, 664 A.2d 1326, 1331 (Pa.
1995) (noting that under the law of the case doctrine, an appellate court
may not alter the resolution of a legal question previously decided by the
same appellate court). Appellants’ sixth issue is, thus, without merit.
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Issue #7
In their seventh issue, Appellants aver that the trial court should not
have granted the Appellee’s Motion for Summary Judgment because
Appellee created the defects in the deed and title.
As noted above, the instant declaratory judgment action pertains to
the interpretation and application of the title insurance contract. In its quiet
title action, U.S. Bank’s sole interest was the correction of the metes and
bounds description for purposes of the mortgage. The responsibility for the
defect that caused the need for reformation of the deed and mortgage was
not an issue. We decline to review this issue in the context of this
declaratory judgment action. See Pa.R.A.P. 302(a) (“issues not raised in
the lower court are waived and cannot be raised for the first time on
appeal”).
CONCLUSION
After careful review of the record, the trial court’s well written 1925
(a) Opinion, and the parties’ briefs, we conclude that the evidence supports
the trial court’s determination. We find that the trial court did not abuse its
discretion or err as a matter of law in granting summary judgment to
Appellee.
Order affirmed. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 4/12/2016
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