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UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

GMAC MORTGAGE, LLC, Plaintiff, v. FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant.

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CIVIL ACTION NO. 12-10180-WGY

ORDER OF CERTIFICATION YOUNG, D.J. I. INTRODUCTION Along the interface between the general law of insurance (statutory and decisional) in Massachusetts and that specialized type of insurance known as title insurance, there are a number of questions of first impression. These questions are of February 28, 2012

significant import today due to the mortgage meltdown. GMAC Mortgage, LLC ("GMAC") sued First American Title Insurance Company ("First American") claiming that, because First American chose to cure a certain title defect by filing an action, it was obligated to defend GMAC against all related claims. On February 10, 2012, this Court held that in the unique circumstances presented by the title insurance policy, First

American was not obligated to pay for the defense of the related claims not covered under the title insurance policy. GMAC

Mortgage, LLC v. First Am. Title Ins. Co., Civil Action No. 1210180-WGY (D. Mass. Feb. 10, 2012). This decision resolved an issue of first impression at the trial level. II. PRIOR PROCEEDINGS After holding a bench trial, the Court found the following facts. In 2001, Mr. Thomas E. Moore ("Mr. Moore") and his wife,

Elizabeth A. Moore ("Mrs. Moore") resided at 2 Country Lane, Billerica, Massachusetts (the "Property"), title of which was held solely in the name of Mr. Moore. Findings and Rulings 2:16-

20, GMAC Mortgage, Civil Action No. 12-10180-WGY (D. Mass. Feb. 10, 2012). Mr. Moore refinanced the Property through GMAC's Id. at 2:20-22. The

predecessor, GN Mortgage Corporation.

transaction provided that Mr. Moore would execute a note and a mortgage on the Property, then convey the Property from himself to himself and Mrs. Moore as tenants by the entirety. 3:3-7. Id. at

Mr. Moore was to sign both the note and mortgage while Id. at 3:8-10.

Mrs. Moore was to sign only the mortgage.

At the closing, GMAC's attorney, acting concurrently as agent for First American, issued a 1992 standard American Land

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Title Association ("ALTA") policy of title insurance (the "Policy") to GMAC from First American.1 Id. at 3:11-19.

GMAC's attorney made two significant errors in executing mortgages however. Id. at 4:4-6. reverse order. First, Mrs. Moore never signed the mortgage.

Second, the deed and mortgage were recorded in Id. at 4:6-9. That is, the deed from Mr. Moore

to Mr. and Mrs. Moore as tenants by the entirety was recorded first, then the attorney recorded the mortgage, thus subordinating the mortgage in the chain of title to the Moores' title as tenants by the entirety. Id. at 4:9-13.

In 2007, Mr. Moore died and by operation of the property laws of the Commonwealth of Massachusetts, sole title to the Property vested in Mrs. Moore - title superior to that of the mortgagee, GMAC. Id. at 4:14-18. Mrs. Moore, acting in good

faith, continued to make the mortgage payments, totaling approximately $44,000, until she eventually defaulted. 4:19-24. GMAC began foreclosure proceedings against the Property in 2009. Id. at 5:1-4. At this time, GMAC neither held good title Id. at

to the Property, as title was vested solely in Mrs. Moore, nor did it have any clear right to repayment of the underlying note,

Title insurance, more akin to a good than a service, requires a one time payment and insures that the financial institution that extends significant funds to a borrower has good title to the property used to secure its loan. Id. at 3:19-4:3. 3

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as the statute of limitations had long since expired to collect on the note following Mr. Moore's death.2 When GMAC was made aware of the defect in the title, it made demand for a defense on First American. Id. at 6:6-7. First

American determined that it was liable under the Policy for the defect in title. Id. at 6:6-11.

Under the Policy, First American could pursue one of three options to resolve the defect in title. First American could (1)

negotiate with the property owner, Mrs. Moore, to resolve the title defect at First American's cost, Policy of Title Insurance, First American Title Insurance Company, No. 100640675 MAL ("Policy")

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