JP Morgan Chase Bank, N.A. v. First American Title Insurance Company
OPINION AND ORDER denying 67 Motion for Summary Judgment; denying 97 Motion for Summary Judgment; granting in part and denying in part 99 Motion for Summary Judgment. Signed by District Judge Marianne O. Battani. (BThe)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
JP MORGAN CHASE BANK, N.A.,
FEDERAL DEPOSIT INSURANCE
Case No. 09-14891
HON. MARIANNE O. BATTANI
FIRST AMERICAN TITLE INSURANCE
OPINION AND ORDER DENYING FIRST AMERICAN’S FIRST AND SECOND
MOTIONS FOR SUMMARY JUDGMENT AND
GRANTING IN PART AND DENYING IN PART FEDERAL DEPOSIT INSURANCE
CORPORATION’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Intervening Defendant American Title Insurance
Company’s (“First American”) First and Second Motions for Summary Judgment (Doc. 67;
Doc. 97) and Intervening Plaintiff Federal Deposit Insurance Corporation’s (“FDIC”) Motion
for Summary Judgment (Doc. 99). As receiver for Washington Mutual (“WaMu”), FDIC
brings an indemnification claim against First American pursuant to a Closing Protection
Letter (“CPL”) that First American issued to WaMu in connection with a residential loan
WaMu made to Ha Truong. First American argues that FDIC does not have standing to
assert a claim under that CPL, and even if it did, it has not suffered any indemnifiable
“actual loss.” FDIC contends that it has standing, First American has admitted facts that
establish liability, and WaMu has suffered “actual loss” in excess of $1.7 million. For the
reasons that follow, the Court DENIES First American’s motions and GRANTS IN PART
and DENIES IN PART FDIC’s motion. Specifically, FDIC’s motion is granted as to liability,
but denied as to damages.
STATEMENT OF FACTS
First American is a title insurance carrier that is authorized to issue title policies in
Michigan. First American issues policies through a network of “issuing agents” authorized
to bind it to policies. Patriot Title Agency LLC (“Patriot Title”) was one of First American’s
issuing agents during the relevant period.
On September 10, 2007, Patriot Title closed a real estate transaction in which WaMu
loaned Ha Truong $4.5 Million (“the Truong Loan”) for the purchase of a luxury home in
Grosse Ile Township, Michigan (“the Property”). First American authorized Patriot Title to
issue First American title insurance commitments and acted as First American’s “issuing”
agent during this transaction. Patriot Title also acted as the “closing agent.”
First American issued a CPL to WaMu in connection with the Truong Loan. The
CPL contained First American’s promise that if Patriot Title engaged in fraud with respect
to WaMu’s loan funds, then First American would “reimburse” WaMu for its “actual loss.”
Addressed to WaMu and “its successors and/or assigns as their interest may appear,” the
When title insurance of First American Title Insurance Company is specified
for your protection . . . in connection with closings of real estate transactions
on land located in the state of Michigan in which you are to be . . . a lender
secured by a mortgage . . . the Company, subject to the Conditions and
Exclusions set forth below, hereby agrees to reimburse you for actual loss
incurred by you in connection with such closings when conducted by the
Issuing Agent . . . referenced herein and when such loss arises out of: . . .
2. Fraud or dishonesty of the Issuing Agent handling your funds or
documents in connection with such closings.
(Doc. 99 Ex. A). In addition to the CPL, Patriot Title also issued to WaMu a Commitment
to provide it with a First American Title Insurance Policy (“Title Policy”).1
In March 2008, First American discovered that Patriot Title fraudulently procured and
closed the Truong Loan. After an investigation that was prompted by numerous complaints
regarding Patriot Title, First American learned that Patriot Title, via its principal officer
Randy Saylor, created a fictitious entity to act as the “seller,” recruited Truong to act as a
sham “buyer,” and absconded with more than $4.5 million after WaMu wired the funds into
Patriot Title’s escrow account. As a result of Patriot Title’s fraud, WaMu did not obtain an
effective mortgage lien on the Property, there was no recorded deed vesting title in Truong,
and a prior mortgage on the Property had not been discharged. In order to remedy the
apparent title defects, First American acquired title and possession of the Property in June
In September 2008, the Office of Thrift Supervision took over WaMu for lack of
adequate liquidity. FDIC was appointed as WaMu's receiver and immediately sold a
majority of WaMu's assets to J.P. Morgan Chase Bank ("Chase"). The agreement between
FDIC and Chase was set forth in a single form document known as the Purchase &
Assumption Agreement (the "P&A Agreement"). (Doc. 67 Ex. D). Chase acquired the
Truong Loan and related Title Policy under the P&A Agreement. To extinguish any
First American explains that it never issued a title policy to WaMu pursuant to
the Commitment. For the purposes of this motion, the parties, and the Court, assume a
policy should have been issued. (Doc. 107 at 4 n.2).
possible claims that Chase could bring under the Title Policy, First American tendered a
quitclaim deed for the Property to Chase. Chase refused to accept, maintaining that it was
entitled to monetary damages under the Policy.
On December 16, 2009, First American filed suit against Chase in the Wayne
County Circuit Court seeking a declaration that it had fulfilled its obligations under the Title
Policy, and redress for Chase's alleged breach of contract. (09-14915 Doc.1). The next
day, Chase sued First American in this Court for breach of contract, fraud,
misrepresentation, and sought declaratory relief as to First American's obligations under
the Title Policy. (Doc. 1). Chase removed First American’s state court action to this Court
and the two actions were consolidated.
In April 2010, FDIC moved to intervene and filed suit against First American to
enforce the CPL. (Doc. 25). Chase and FDIC have stipulated that Chase did not acquire
WaMu’s CPL claim under the P&A Agreement. (Doc. 108 Ex. A). On April 11, 2011, the
Court entered a Stipulated Order of Dismissal With Prejudice Of Claims Between Chase
and First American. (Doc. 116). The Stipulation did not resolve FDIC’s CPL claim against
First American. The parties’ cross motions for summary judgment are now before the
STANDARD OF REVIEW
Summary judgment is appropriate only when there is “no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro.
56(a). The central inquiry is “whether the evidence presents a sufficient disagreement to
require submission to a jury or whether it is so one-sided that one party must prevail as a
matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Rule 56
mandates summary judgment against a party who fails to establish the existence of an
element essential to the party's case and on which that party bears the burden of proof at
trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
The moving party bears the initial burden of showing the absence of a genuine issue
of material fact. Celotex, 477 U.S. at 323. Once the moving party meets this burden, the
non-movant must come forward with specific facts showing that there is a genuine issue
for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In
evaluating a motion for summary judgment, the evidence must be viewed in the light most
favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
The Court “must lend credence” to the non-moving party’s interpretation of the disputed
facts. Marvin v. City of Taylor, 509 F.3d 234, 238 (6th Cir. 2007) (citing Scott v. Harris, 127
S.Ct. 1769, 1775 (2007)). The non-moving party may not rest upon its mere allegations,
but rather must set out specific facts showing a genuine issue for trial. Fed. R. Civ. P.
56(c)(1). The mere existence of a scintilla of evidence in support of the non-moving party's
position will not suffice. Rather, there must be evidence on which the jury could reasonably
find for the non-moving party. Hopson v.DaimlerChrysler Corp., 306 F.3d 427, 432 (6th Cir.
First American contends that FDIC lacks standing to bring a claim under the CPL
because it no longer owns the related Title Policy. First American explains that its
obligations under the CPL and Title Policy are integrated, and therefore, FDIC cannot
“sever” the CPL from the Title Policy and maintain an independent CPL claim. The Court
Title insurance underwriters generally issue title insurance polices through local
“issuing agents.” 2 JOYCE PALOMAR, TITLE INSURANCE LAW, § 20:11 (2010). The “issuing
agents” typically close the underlying real estate sale and also act as the parties’ “closing
agents.” Id. As is customary in the industry, the title insurance underwriter usually issues
a closing protection letter in connection with the transaction “‘[t]o verify the agent's authority
to issue the underwriter's policies and to make the financial resources of the national title
insurance underwriter available to indemnify lenders and purchasers for the local agent's
errors or dishonesty with escrow or closing funds.’” New Freedom Mortg. Corp. v. Globe
Mortg. Corp.(“New Freedom”), 761 N.W.2d 832, 842 (Mich. App. 2008) (quoting PALOMAR,
§ 20:11). The closing protection letter is designed to persuade the underwriter’s customers
to trust their agents, thereby increasing policy sales. Id. at 842-43.
A closing protection letter is an indemnity agreement, not an insurance policy.2 In
a closing protection letter, “the underwriter agrees to indemnify the lender for any problems
that arise from the closing agent's failure to properly apply the funds, as set forth in the
closing instructions, and the title insurance commitment. Bergin Financial, Inc. v. First
American Title Co. (“Bergin”), 397 F.App’x. 119, 125 (6th Cir. 2010) (quoting Ticor Title Ins.
Co. v. Nat'l Abstract Agency, Inc., 2008 WL 2157046, at *5 (E.D. Mich. May 22, 2008); see
also, Freedom Mortg. Corp. v. Burnham Mortg., Inc.,720 F.Supp.2d 978, 1003 (N.D. Ill.
2010) (“[T]he [closing protection letter] is a contract of indemnification and specific liability,
not an insurance policy.”).
Consequently, the closing protection letter provides the
FDIC and First American agree that a closing protection letter is a contract of
indemnity. (Doc. 97 at 10; Doc. 108 at 11).
addressee with certain additional assurances independent of the underwriter’s duties under
the title policy. J. BUSHNELL NIELSEN, TITLE & ESCROW CLAIMS GUIDE, § 14.1 (2d ed. 2007).
The additional assurances in a closing protection letter are separate and distinct
from the coverage afforded under a title policy. A title policy “is merely a contract to
indemnify the insured for any losses incurred as a result of later found defects in title ... it
insures only that the title to such property is unencumbered by unknown liens, easements,
and the like which might affect the property's value.” First Fed. Sav. and Loan Assoc. v.
Transamerica Title Ins. Co., 19 F.3d 528 (10th Cir. 1994); see also Focus Inv. Assocs., Inc.
v. American Title Ins. Co., 992 F.2d 1231, 1236-37 (1st Cir. 1993); Gibraltar Sav. v.
Commonwealth Land Title Ins. Co., 905 F.2d 1203, 1205 (8th Cir. 1990). Comparatively,
the closing protection letter contains the underwriters promise to reimburse the addressee
if loss results from an agent's failure to follow closing instructions or to apply settlement
funds in a honest fashion. New Freedom, 761 N.W.2d at 842; see also, PALOMAR, § 20:16.
The main purpose of a closing protection letter is to make underwriters contractually
responsible for loss caused by their agent’s misconduct at closing. Bergin, 397 F.App’x at
125; see also, Metmor Financial, Inc. v. Commonwealth Land Title Ins. Co., 645 So.2d 295,
297 (Ala. 1993); PALOMAR, § 20:11. Thus, closing protection letters and title policies protect
against entirely different risks.
The Michigan Court of Appeals recognized the coverage distinctions between a
closing protection letter and a title policy in New Freedom. The plaintiff in New Freedom,
a lender who held both a closing protection letter and the related title policy, sued the title
insurer under the closing letter for losses sustained in connection with the issuing agent’s
failure to follow the plaintiff’s closing instructions. New Freedom, 761 N.W.2d at 835. The
appellate court affirmed the trial court’s dismissal of the claim because the plaintiff failed
to establish that the issuing agent’s conduct at closing created liability under the terms of
the letter. Id. at 845-46. In so holding, the court acknowledged that an aggrieved
addressee can bring a closing protection letter claim independent of title policy issued in
connection with the letter. Id. at 843. The court flatly stated that since the purchase of a
title policy is the consideration that supports the insurer’s promise in the letter, “a breach
of contract action may be maintained independent of the title insurance policy.” Id.
In addition to New Freedom, other courts have allowed an addressee to bring a
closing protection letter claim independent of the title policy. In Lehman Bros. Holdings,
Inc. v. Hirota (“Hirota”), 2007 WL 1471690 (M.D. Fla. 2007), the court held that the plaintiff,
a lender holding both a closing protection letter and the related title policy, could proceed
under the closing letter to collect losses sustained in connection with the title company’s
closing agents’ alleged mortgage fraud scheme in which they induced the plaintiff to fund
thirteen loans based on false information. Similarly, in Lawyers Title Ins. Corp. v. New
Freedom Mortg. Corp. (“Lawyers Title”), 655 S.E.2d 269, 274 (Ga. App. 2007), the
appellate court found that a title insurer is required to indemnify the addressee under a
closing protection for losses incurred as a result of the title agent closing a sham
transaction, provided the adressee can establish at trial that the agent acted with an intent
to deceive. In both of these cases, neither plaintiff brought a claim against the title insurer
under the related title policy. With the above discussion in mind, the Court returns to First
The CPL is not integrated into the Title Policy because First American’s
indemnification obligations under the letter are separate and distinct from its duties under
the Title Policy. New Freedom, Hirota, and Lawyers Title stand for the proposition that an
addressee can bring a closing protection letter claim independent of the related title policy.
The Court acknowledges that those courts were never specifically asked to rule on whether
an addressee could bring a closing protection letter claim independent of a claim under the
related title policy. The Court also notes that the plaintiffs in those cases held both a
closing protection letter and a title policy.
However, the opinions are nevertheless
persuasive because they establish that the coverage afforded under the letter is wholly
separate from the coverage under a title policy. See also, Lawyers Title Ins. Corp. v.
Edmar Const. Co., Inc., 294 A.2d 865 (D.C. 1972) (underwriter liable under a closing
protection letter for its agent’s embezzlement of closing funds even though underwriter
never issued a title policy). The protections under the instant CPL are not supplemental
or ancillary to the Title Policy, they cover an entirely different category of loss. “The primary
protection of the Letter remains as to the risk that the title agent or approved attorney will
steal the money delivered to closing.” NIELSEN, § 14.1. The protection offered in the CPL
has nothing to do with title defects.
New Freedom precludes First American’s contention that the CPL is not supported
by consideration. The court in New Freedom expressly recognized that the purchase of
a title policy is the consideration that supports the insurer’s indemnification promise in a
closing protection letter. New Freedom, 761 N.W.2d at 835. Accordingly, WaMu’s
purchase of the Title Policy is the consideration that supports First American’s promise in
the CPL to indemnify WaMu. The consideration does not evaporate simply because FDIC
sold the Title Policy to Chase. First American could have tethered the CPL’s protection
to the Title Policy in the “Conditions and Exclusions” section of the letter, but it did not.
Contrary to its position, First American is not exposed to double liability under the
circumstances presented. To satisfy its obligations to Chase under the Title Policy, First
American acquired the Property from the record owner for $2,082,852.60 and tendered it
to Chase. (Doc. 1 at 5; Doc. 84). Although Chase initially disputed whether First American
could discharge its duties by tendering a quitclaim deed, after Chase sold the Property for
$1,909,732.90, First American and Chase resolved the Title Policy claim. (Doc. 116).
Under the CPL, FDIC is seeking $1,771,593.07 (plus interest), which is the difference
between the book value of the Truong loan on the date of the sale to Chase and the original
loan amount. (Doc. 99 at 20). Assuming FDIC recovers this amount, First American’s total
liability would be $3,854,445.67, which is less than the $4.5 million its agent stole. (Doc.
99 at 3-5). Under the circumstances presented, there is no risk of double recovery
because First American’s aggregate liability under both the Title Policy and the CPL does
not exceed the amount that WaMu entrusted to Patriot Title.
First American’s Liability Under the CPL
The parties dispute whether FDIC is eligible to receive indemnification offered under
the terms of the CPL. “An indemnity contract is construed in the same manner as other
contracts.” DaimlerChrysler Corp. v. G Tech Professional Staffing, Inc., 678 N.W.2d 647,
649 (Mich. App. 2003) (citations omitted). “The primary goal in the construction or
interpretation of any contract is to honor the intent of the parties.” Rasheed v. Chrysler
Corp., 517 N.W.2d 19, 29 n. 28 (Mich. 1994). The intent of the parties is gleaned from the
words used in the instrument. UAW-GM Human Resource Center v. KSL Recreation
Corp., 579 N.W.2d 411, 414 (Mich. App. 1998) (citation omitted). “[A]n unambiguous
written indemnity contract must be enforced according to the plain and ordinary meaning
of the words used in the instrument.” DaimlerChrysler, 678 N.W.2d at 649 (citation
Seizing on the phrase “[w]hen title insurance of First American Title Insurance
Company is specified for your protection . . . in connection with closings of real estate
transactions . . . in which you are to be . . . a lender secured by a mortgage,” First American
argues that the CPL only protects a lender currently holding a mortgage that is insured
under a First American policy. Since FDIC sold both the Truong Loan and Title Policy, it
lost coverage under the CPL. FDIC responds by arguing that once the CPL’s protections
apply, nothing in the language of the CPL divests WaMu of indemnification rights because
it sold the Loan and Title Policy to Chase. The Court agrees with FDIC.
First American issued the CPL to persuade WaMu to trust Patriot Title with over $4.5
million in connection with the closing of the Truong Loan. The CPL was executed prior to
closing. The language of the CPL provides that coverage attached upon execution
because WaMu was “to be” a lender holding a mortgage and the Commitment “specified”
that First American would issue WaMu a title policy if certain conditions were satisfied.
FDIC subsequently stepped into WaMu’s shoes by operation of law and acquired WaMu’s
rights under the CPL. There is no provision in the CPL which provides that WaMu would
lose its indemnification rights if it subsequently sold the Truong Loan and Title Policy.
Consequently, FDIC did not forfeit WaMu’s protections under the CPL. Moreover, even
after the transfer, FDIC continues to have a significant interest in the underlying transaction
FDIC and First American agree that the CPL is unambiguous. (Doc. 97 at 10;
Doc. 108 at 10).
because it sold the Loan to Chase at a loss attributable to Patriot Title’s admitted fraud.
The Court rejects First American’s argument that WaMu has not suffered any “actual
loss” as a result of Patriot Title’s fraud. The CPL obligates First American to “reimburse”
FDIC for its “actual loss” that “arises out of” the “[f]raud or dishonesty” of Patriot Title in
handling the Loan funds. (Doc. 99 Ex. A). “It is well settled that an action for indemnity
accrues when liability of the indemnitee becomes fixed (contract of indemnity against
liability), or when the indemnitee has suffered an actual loss or damages (contract of
indemnity against loss or damage). Rouge Steel Co v. Suli & Sons Cartage Inc., 2004 WL
1621191, *2 (Mich. App. 2004) (citing Sherman v. Spalding, 132 Mich. 249, 251; 93 N.W.
613 (Mich. 1903).
First American admits that Patriot Title committed fraud by diverting WaMu's loan
funds for the benefit of its principal. (Doc. 107 at 10). WaMu’s “actual loss” was the
$4,543,593.07 which was misappropriated. It recognized this loss pre-receivership. FDIC
is willing to agree it recovered $2,772,000.00 of this amount from Chase under the P&A
Agreement, which represents the “book value” for the Truong Loan. (Doc. 99 at 14). FDIC
explains it reduced the Loan’s “book value” by $1,771,593.07 because it discovered the
fraud. Id. For the purposes of this motion, it seeks to collect the difference between the
“book value” and original disbursement under the CPL. The CPL was designed to cover
this type of loss.
To avoid this conclusion, First American asks the Court to shift the point at which the
loss is measured. First American claims the “actual loss” occurred when WaMu sold the
Truong Loan to Chase for less than the original loan amount. Thus, WaMu’s “actual loss”
was of its own making and not caused by Patriot Title’s fraud. The Court rejects First
American’s position and finds Patriot Title’s fraud was the most direct, natural, and
foreseeable cause of WaMu’s loss.
C. First American’s Affirmative Defenses
The CPL and The P&A Agreement
Based on its own interpretation of the P&A Agreement, First American contends that
FDIC sold the CPL claim to Chase and FDIC has no standing to bring suit. The Court
declines to visit the interpretation issues because First American has not shown how it
escapes the well-established rule that a stranger to a contract has no standing to challenge
the parties’ mutual understanding of their own contract. See City of Grosse Pointe Park
v. Michigan Municipal Liability and Property Pool, 702 N.W.2d 106, 114 (Mich. 2005). FDIC
and Chase agree that FDIC retained the CPL claim and have signed a Stipulation
acknowledging the same. (Doc. 108 Ex. A). The Court will not interfere with the parties’
intent. See Rasheed, 517 N.W.2d at 29 n. 28; UAW-GM Human Resource Center v. KSL
Recreation Corp., 579 N.W.2d 411, 414 (Mich. App. 1998).
First American contends that had WaMu's underwriting been more stringent, it would
have discovered the fraud. It cites Powers v. Apcoa Standard Parking, Inc., 259 F.Supp.2d
606 (E.D. Mich. 2003) in support of its position. The court in Powers reviewed the standard
to be applied when construing a contract of indemnity that purports to indemnify against the
consequences of ones own negligence. The court noted that such a contract "is subject
to strict construction and will not be so construed unless it clearly appears that it was
intended to cover the indemnitee's own negligence." Id. at 609 (citation omitted).
First American cannot avoid its indemnification obligations by arguing that WaMu
was negligent in underwriting the Truong Loan. Even if the CPL fails to expressly cover
losses arising from WaMu's own negligence, in light of Foodland Distributors v. Al-Naimi,
559 N.W.2d 379, 382 (Mich. App. 1996), WaMu's negligence is irrelevant. In Foodland, the
appellate court stated "one accused of fraud may not raise as a defense the carelessness
of the party defrauded." Id. (citing Rood v. Midwest Matrix Mart, Inc., 87 N.W.2d 186, 19192 (Mich. 1957)). Additionally, as correctly argued by FDIC, contributory negligence is not
a valid defense in a breach of contract case. Nelson v. Nw. Sav. & Loan Ass’n, 381
N.W.2d 757, 759 (1985). Thus, WaMu's failure to discover the fraud does not provide a
basis for First American to avoid its indemnity duty under the CPL. See also, Lawyers Title
Ins. Corp. v. New Freedom Mtg. Corp., 285 Ga. App. 22, 645 S.E.2d 536 (2007) (rejecting
a contributory negligence defense raised in response to a closing protection letter claim).
Furthermore, even assuming that First American could raise a contributory
negligence defense, it has failed to establish a prima facie case of negligence. Specifically,
First American has not offered testimony on the applicable standard of care and has
presented no evidence the WaMu breached that standard. Absent this evidentiary support,
First American's critique of WaMu's underwriting process falls flat.
Impairment of Subrogation Rights
FDIC's sale of the Truong Loan did not impair the value of First American’s
subrogation claim. The CPL’s subrogation clause provides:
When the Company shall have reimbursed you pursuant to this letter, it shall
be subrogated to all rights and remedies which you would have had against
any person or property had you not been so reimbursed. Liability of the
Company for such reimbursement shall be reduced to the extent that you
have knowingly and voluntarily impaired the value of such right of
(Doc. 97 Ex. A). First American acknowledges that FDIC retained WaMu’s fraud claims
under the P&A Agreement (Doc. 97 at 17). By operation of the subrogation clause, if First
American compensates FDIC for Truong and Patriot Title’s fraud, “[First American] shall
be subrogated to all rights and remedies which [FDIC] would have had against [Truong and
Patriot Title] had [FDIC] not been so reimbursed.” Even though FDIC sold the Truong Loan
to Chase, and along with it the ability to seek a deficiency judgment against Truong, FDIC
did not impair the value of First American’s subrogation claim. First American is allowed
to “step into the shoes” of FDIC and sue Truong and Patriot Title for fraud if it pays FDIC
under the CPL.
First American argues the CPL claim is barred because FDIC did not promptly notify
First American of its intent to make a separate claim under the CPL. The CPL provides
that “[w]hen the failure to give prompt notice shall prejudice [First American], then liability
of [First American] shall be reduced to the extent of such prejudice.” (Doc. 97 Ex. A). First
American explains it did not receive notice that FDIC would be filing a CPL claim until April
2010, but admits that it received notice of WaMu’s Title Policy claim on April 18, 2008.
The Court rejects First American’s “failure to give timely notice” defense. The record
shows First American discovered Patriot Title’s fraud well before WaMu had any knowledge
that the fraud had occurred. (Doc. 99 at 18). There can be no doubt that First American
was preparing to defend the case, whether the claims were brought under the Title Policy
or the CPL. Accordingly, First American suffered no prejudice that warrants any lessening
of its liability under the CPL.
Although FDIC is entitled to summary judgment on liability, the Court finds there is
a genuine issue of material fact on FDIC’s damages. For the purposes of this motion, FDIC
is willing to give First American a $2,772,000.00 credit on its liability under the CPL. (Doc.
99 at 14). FDIC explains that WaMu reduced its “actual loss” by $2,772,000.00 when it
sold the Truong Loan for book value to Chase. Therefore, First American remains liable
for the difference between the book value and the original loan amount, which is
$1,771,593.07. FDIC claims that WaMu reduced the book value due to Patriot Title’s fraud.
(Doc. 112 at 2). First American rejects FDIC’s concession and persuasively argues that
no one can say with any certainty how much Chase paid for the Truong Loan. (Doc. 107
at 14-17). What WaMu received from Chase is material because that amount reduces
WaMu’s “actual loss,” which directly affects the amount of First American’s liability under
the CPL. Consequently, there is a genuine issue of material fact on FDIC’s damages.
For the reasons discussed above, IT IS HEREBY ORDERED that First American’s
First and Second Motions For Summary Judgment (Doc. 67; Doc. 97) are DENIED and
FDIC’s Motion for Summary Judgment (Doc. 97) is GRANTED IN PART (as to liability) and
DENIED IN PART (as to damages).
IT IS SO ORDERED.
s/Marianne O. Battani
MARIANNE O. BATTANI
UNITED STATES DISTRICT JUDGE
DATED: June 10, 2011
CERTIFICATE OF SERVICE
Copies of this Order were mailed to counsel of record on this date by ordinary mail and
s/Bernadette M. Thebolt
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