36 A.3d 985
Md. Ct. Spec. App.2012Background
- Parcel (1.145 acres) was conveyed to Dr. Khan in 1982 and later included in the Miller Tract sold to the Partnership in 1986 without reflecting Khan’s prior conveyance.
- Cambridge (under Chicago Title) issued a title policy in 1982–1986 that did not reflect Khan’s prior deed; Cambridge later went out of business.
- Columbia issued a policy under Safeco in 1986 that took no exception to Khan’s prior conveyance; Safeco later merged with Chicago Title.
- In 1994–1995, the Partnership subdivided the Miller Tract; portions were conveyed to NVR and Lynwood, leaving no interest in the Parcel.
- In 2001, the Partnership learned of Khan’s prior conveyance when Khan’s sale to Timbers surfaced; the Partnership repurchased the Parcel from Timbers to cure the title defect at a cost of $191,510.88 total.
- Khan sued for trespass (District Court) and Chicago Title sued for declaratory relief in federal court; the federal court awarded damages, which the Fourth Circuit partially reversed.
- In 2004–2009, the Howard County Circuit Court awarded damages for negligent title searches; the Maryland Court of Special Appeals reversed and held the Title Companies owed no tort duty independent of the title insurance contract and Chicago Title was not vicariously liable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a tort duty exists for title examiner negligence | Partnership argues independent tort duty arises despite contract. | Title Companies contend duty is contractual; Jacques limits independent tort duty. | No independent tort duty; restricted to contract. |
| Proximate cause and causation of damages | Negligence proximate cause of the economic loss from title defects. | Any loss is limited to policy terms; no independent tort causation. | Partnership’s damages not recoverable in tort; policy limits apply. |
| Vicarious liability of Chicago Title for Title Companies’ negligence | Chicago Title as principal is liable for agents’ negligent searches. | Agency limited; no broad vicarious liability beyond policy scope. | Chicago Title not vicariously liable for negligent title searches. |
| Existence and scope of agency between Title Companies and insurers | Agency extends beyond issuance of policies; controls closing activities. | Agency limited to issuing title insurance; no control over other actions. | Agency limited to issuance of policies; no broad control for tort liability. |
| Effect of title insurance policy on tort claims | Policy should not cap tort damages in negligence claims. | Policy is the contract instrument; damages limited to policy terms. | Policy controls; tort damages barred absent legislation/public policy change. |
Key Cases Cited
- Corcoran v. Abstract & Title Co. of Maryland, Inc., 217 Md. 633 (1958) (title examiner's duty is contractual in nature)
- Jacques v. First Nat'l Bank of Maryland, 307 Md. 527 (1986) (tort duty may arise from contractual relations in certain contexts)
- West v. Stewart Title Guaranty Co., 110 Md. App. 114 (1996) (title insurer contracts of indemnity; not a marketable-title guarantee)
- Lewis v. Long & Foster Real Estate, Inc., 85 Md. App. 754 (1991) (abstractor liability limited by contract terms and intrinsic duties)
- Stone v. Chicago Title Insurance Co., 330 Md. 329 (1993) (foreseeability in damages under negligence/contract context)
- Chicago Title Ins. Co. v. 100 Inv. Ltd. P'ship, 355 F.3d 759 (4th Cir. 2004) (Fourth Circuit on insurer’s liability scope for title issues)