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Lawyers Title Insurance Corp. v. Groff9/17/2002
Hillsborough-northern judicial district
Submitted: March 6, 2002
The defendant, David M. Groff, Esq., appeals from a judgment in favor of the plaintiff, Lawyers Title Insurance Corp., on its claims for breach of contract and negligence. Following a bench trial, the Superior Court (Conboy, J.) ruled that the defendant was vicariously liable for a title search conducted by a third party. We reverse.
The relevant undisputed facts follow. In 1991, the parties entered into an agreement which made the defendant the plaintiff's agent for the purpose of issuing title insurance policies. Under the agreement, the defendant was to " eceive and process applications for title insurance in a timely, prudent, and ethical manner with due regard to recognized title insurance underwriting practices and in accordance with the . . . instructions of [the plaintiff]." None of the duties specified in the agreement were delegable without the other party's prior written consent.
The agreement prohibited the defendant from committing the plaintiff "to a risk which [the plaintiff] has determined to be an extra-hazardous risk or which [the defendant] knows to be based upon a disputed title" without the plaintiff's written approval. It also prohibited him from issuing a commitment, policy or endorsement unless it was "based on reports or certificates of title made by either attorneys at law approved by [the plaintiff], . . . or on reports or certificates of staff employees of [the defendant], or on reports of others approved in advance by [the plaintiff] at [the defendant]'s request." The agreement required these reports and certificates to "be supplemented by abstracts of title whenever required by [the plaintiff]." Whenever a report or certificate was based upon an abstract of title, the defendant could not issue a commitment or policy thereon unless the plaintiff approved "the person, firm or corporation which prepared such abstract."
The agreement made the defendant liable to the plaintiff for all "losses resulting from acts or omissions of [the defendant]," including his failure to exercise "due care and diligence" in committing the plaintiff to risks by issuance of policies or to comply with either the terms of the agreement or the plaintiff's instructions.
In November 1998, the defendant was the settlement agent and attorney for a lender in a real estate transaction involving property in Londonderry. Prior to closing, he retained a title abstractor as an independent contractor to conduct a title search and prepare an abstractor's report. The title abstractor negligently failed to find and disclose a construction mortgage on the property. The defendant thus issued title insurance policies to both the lender and the buyers without excepting the mortgage. As a result, at closing, the construction mortgage was not discharged, and the defendant disbursed more than $128,000 directly to the seller.
The mortgagee later asserted its rights and threatened to foreclose on the property. The plaintiff paid the mortgagee over $152,000 to obtain an assignment of the mortgage and then discharged it. After obtaining a partial recovery from the seller, the plaintiff sued the defendant to recover $72,340.81, the difference between what the plaintiff paid the mortgagee and what it received from the seller, plus attorney's fees and costs.
The plaintiff asserted four claims against the defendant: negligence arising from duties the defendant owed it; negligence arising from duties the defendant owed to the lender, to which the plaintiff was subrogated; breach of contract; and breach of fiduciary duty. The trial court ruled in the plaintiff's favor on th
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