Johnson v. U.S. Title Agency, Inc.
91 N.E.3d 76
Ohio Ct. App. 9th2017Background
- In 2010 Richard G. Johnson obtained an $815,581 construction-to-permanent loan from KeyBank to renovate his home and used U.S. Title (US Title) as closing/escrow agent; Chicago Title issued title policies.
- KeyBank provided written Closing Instructions requiring documents be executed "exactly as typed"; the construction loan contained a contractor "Consent Clause" (subordination of contractor liens) that was typed but not signed by Berns Custom Homes (the contractor).
- Johnson (through counsel Wachter) alleges he gave verbal closing instructions to US Title requiring the same protections KeyBank obtained (e.g., contractor consent, endorsements excluding mechanics‑liens exceptions, future‑advance protection).
- After Johnson fired Berns, Berns and subcontractors recorded mechanics liens; KeyBank refused further draws and disputes arose over priority and insurance coverage.
- Johnson sued US Title and Chicago Title asserting breach of contract (including breach of Closing Instructions and title/CP coverage), specific performance, negligence, breach of fiduciary duty, and bad faith; trial court granted summary judgment to defendants; the court of appeals reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to enforce KeyBank's Closing Instructions / third‑party beneficiary | Johnson contends he is an intended third‑party beneficiary of the lender's Closing Instructions and may enforce agent compliance (including document execution and title protections). | Defendants argue Johnson is not a party to KeyBank's written instructions and thus lacks standing to sue for their breach. | Court: Genuine issue of material fact exists; Johnson may be a third‑party beneficiary and has standing to pursue breach based on the Closing Instructions. |
| Effect of unsigned contractor "Consent Clause" on mortgage priority | Johnson argues US Title's failure to obtain contractor signature prevented subordination, causing loss of mortgage priority and covered by CP Coverage/title remedies. | Defendants contend the policies/exclusions and the timing of liens preclude coverage and that Johnson caused the lien problem. | Court: Whether agent breached Closing Instructions (and whether that triggers CP Coverage/title remedies) is a factual question for remand; trial court erred granting summary judgment. |
| Applicability of Closing Protection Coverage (CP Coverage) | Johnson asserts CP Coverage indemnifies him for agent failures to follow applicable instructions that affected lien priority and title status. | Defendants point to CP Coverage exclusions for mechanics' liens and coverage limits only to matters insured by title binder/commitment/policy; also argue R.C. requires "written" instructions for CP Coverage breach. | Court: CP form excludes mechanics' liens on its face, but CP also covers failure to comply with applicable written closing instructions; disputed factual issues (including whether relevant instructions existed and were agreed to) preclude summary judgment. |
| Negligence / fiduciary duty / bad faith claims against US Title | Johnson claims US Title owed fiduciary and professional duties as escrow/closing agent and negligently failed to follow Closing Instructions and procure proper coverage; bad faith for refusing claims. | Defendants contend duties arose from contract only (no independent tort), Johnson provided no written instructions, and exclusions/causal facts bar coverage and bad faith. | Court: Whether duties were breached and whether tort or bad‑faith claims survive summary judgment depends on factual findings (remanded). |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (de novo standard on summary judgment)
(sets the appellate standard of review for summary judgment) - Dresher v. Burt, 75 Ohio St.3d 280 (party moving for summary judgment bears initial burden)
(framework for summary judgment burdens) - Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64 (summary judgment elements)
(elements required to grant summary judgment) - Murphy v. Reynoldsburg, 65 Ohio St.3d 356 (resolve doubts for nonmovant)
(summary judgment must be construed in favor of nonmoving party) - Kostelnik v. Helper, 96 Ohio St.3d 1 (procedural‑motion presumption when not ruled on)
(motion not ruled on when case concludes is ordinarily presumed overruled) - Allstate Ins. Co. v. Campbell, 128 Ohio St.3d 186 (insurance policy interpretation)
(policies construed by plain and ordinary meaning) - Chicago Title Ins. Co. v. Huntington Natl. Bank, 87 Ohio St.3d 270 (title insurance is a contract)
(title policy interpreted as contract; focus on plain language) - Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322 (notice requirement to insurer)
(failure to give insurer required notice can defeat a coverage action) - Nichols v. Chicago Title Ins. Co., 107 Ohio App.3d 684 (distinguishing contract and tort duties)
(discusses duty and viability of negligence claims where duties arise from contract)