Bank of America Na v. Fidelity National Title Insurance Company
316 Mich. App. 480
| Mich. Ct. App. | 2016Background
- Bank of America (BOA) sued title insurer Fidelity National Title Insurance Company (FNTIC/LTIC) under Closing Protection Letters (CPLs) after several mortgage loans proved fraudulent or went into default; consolidated appeals arise from multiple lower-court docket files.
- CPLs promised indemnity for BOA’s "actual loss" arising from fraud or dishonesty by the closing/title agent in handling BOA’s funds or documents.
- Evidence alleged same-day property flips, counterfeit cashier checks, falsified HUD‑1 statements, undisclosed disbursements, and participation or knowledge by closing‑agent employees in the frauds (transactions: Buie, Holmes, Marks, Williams, among others).
- Trial courts granted summary disposition for FNTIC on BOA’s CPL breach claims in some dockets and denied BOA summary relief on FNTIC’s counterclaims; courts also invoked the full‑credit‑bid rule to bar certain claims and awarded fees/costs based on case evaluation results.
- The Court of Appeals addressed (1) whether genuine issues of fact existed as to CPL coverage, (2) whether FNTIC’s counterclaims/defenses based on BOA underwriting or late notice survived as a matter of law, and (3) whether the full credit bid rule barred BOA’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CPLs cover losses "arising out of" closing‑agent fraud/dishonesty | CPL language indemnifies BOA for actual losses caused by closing‑agent fraud/dishonesty; factual record shows agent knowledge/participation | CPLs don’t cover because BOA’s own underwriting or later repurchase/sales break causal chain | Reversed summary dismissal: genuine factual disputes exist on agent knowledge/participation and causation; CPL claims proceed to trial |
| Whether FNTIC can rescind CPLs or assert defenses based on BOA’s underwriting practices | N/A (BOA) — BOA sought summary disposition to dismiss those counterclaims | FNTIC: BOA’s underwriting was material; rescission or declaratory relief justified; contributory negligence bars recovery | Affirmed for BOA: underwriting not material to CPLs; rescission and related defenses/affirmative defenses fail as a matter of law |
| Whether BOA’s allegedly delayed notice prejudiced FNTIC under CPL notice condition | BOA: February 2008 letters gave sufficient prompt notice enabling investigation | FNTIC: notice was years later and prejudiced investigation and subrogation rights | Held for BOA: BOA’s February 2008 notice was adequate; FNTIC failed to prove specific prejudice |
| Whether the full credit bid rule bars BOA’s CPL claims against nonborrower third parties (title insurer) | BOA: full credit bid rule applies only to mortgagee‑mortgagor value/deficiency questions and does not bar contract claims against nonborrowers | FNTIC: BOA’s full credit bids preclude recovery on related claims | Held for BOA: full credit bid rule does not bar contract/CPL claims against nonborrower third parties (court follows Michigan Supreme Court guidance in FATCO) |
Key Cases Cited
- Hackel v. Macomb County Comm’rs, 298 Mich. App. 311 (standard of review for summary disposition)
- Bank of America, N.A. v. First American Title Ins. Co., 499 Mich. 74 (Mich. 2016) (FATCO) (CPL interpretation; full credit bid rule limited as to nonborrower third parties)
- New Freedom Mortgage Corp. v. Globe Mortgage Corp., 281 Mich. App. 63 (closing protection letter context and prior full‑credit‑bid discussion)
- Fifth Third Mortgage Co. v. Chicago Title Ins. Co., 758 F. Supp. 2d 476 (S.D. Ohio 2010) (res judicata/underwriting immateriality under title policy language)
- Fifth Third Mortgage Co. v. Chicago Title Ins. Co., 692 F.3d 507 (6th Cir. 2012) (affirming district court on underwriting irrelevance)
- Walsh v. Taylor, 263 Mich. App. 618 (summary disposition (C)(10) standard and evidentiary review)