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US Bank, N.A. v. HLC Escrow, Inc.

United States Court of Appeals, First Circuit

April 25, 2018

US BANK, N.A., AS LEGAL TITLE TRUSTEE FOR TRUMAN 2013 SC3 TITLE TRUST, Plaintiff, Appellant,
v.
HLC ESCROW, INC.; FIRST AMERICAN TITLE INSURANCE COMPANY, Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. George Z. Singal, U.S. District Judge]

          Benjamin P. Campo, Jr., with whom Douglas McDaniel & Campo LLC PC was on brief, for appellant.

          David A. Soley, with whom Glenn Israel, James G. Monteleone, and Bernstein Shur were on brief, for appellee First American Title Insurance Company.

          Kevin P. Polansky, with whom Christine M. Kingston and Nelson Mullins Riley Scarborough LLP were on brief, for appellee HLC Escrow, Inc.

          Before Howard, Chief Judge, Selya and Lipez, Circuit Judges.

          LIPEZ, Circuit Judge.

         When Sara and Douglas Trask refinanced their mortgage in 2007, their new mortgage incorrectly identified a parcel of unimproved land, rather than the adjacent parcel of improved land that encompassed their residence. The current holder of the 2007 mortgage -- U.S. Bank -- sued the closing agent -- HLC Escrow, Inc. -- and the title insurer -- First American Title Insurance Company ("First American") -- in 2016. U.S. Bank's complaint included causes of action for negligence and "duty of care" against HLC Escrow, and negligence, unilateral mistake, and violation of Maine's Unfair Claims Settlement Practices Act ("UCSPA") against First American. The district court dismissed the complaint, declining to apply Maine's twenty-year statute of limitations for personal actions on certain types of contracts and financial instruments, and further concluding that Maine's six-year limitations period for civil actions barred the bank's claims. See Me. Rev. Stat. Ann. tit. 14, §§ 751, 752.

         We affirm the district court's judgment in substantial part, vacating only its dismissal of U.S. Bank's UCSPA claim against First American. With respect to that claim, we conclude that it was timely filed, as the claim had yet to accrue when First American denied U.S. Bank's initial insurance claim in May 2010.

         I.

         The Trasks entered into a mortgage agreement with Sun Mortgage New England, Inc. in February 2005. The parties agree that the mortgage encumbered an improved parcel of land along Stream Road in Winterport, Maine. In April 2007, the Trasks refinanced their mortgage with Home Loan Center Inc. d/b/a LendingTree Loans. The property description in the 2007 mortgage identifies a far less valuable parcel of unimproved land also along Stream Road, and also owned by the Trasks. HLC Escrow acted as the closing agent for the transaction, and First American insured the title of the encumbered property. First American also supplied the legal property description for the mortgage. Following a series of assignments, U.S. Bank took ownership of the 2007 mortgage in March 2014.[1]

         After defaulting on the 2007 mortgage, the Trasks filed a Chapter 7 petition for bankruptcy in December 2009. Three months later, the Trasks filed an adversary complaint against U.S. Bank, asking the bankruptcy court to limit U.S. Bank's mortgage lien to the unimproved parcel. Subsequently, U.S. Bank filed an insurance claim with First American. The insurance claim asserted coverage based on the mortgage's errant identification of the unimproved parcel. In its letter denying the insurance claim on May 10, 2010, First American explained that the policy did not cover the improved parcel, and insured only the parcel actually identified by the mortgage -- that is, the unimproved parcel. U.S. Bank filed another insurance claim in early 2011. First American denied this second claim in February of that year, offering the same explanation as it did in denying the first claim.

         On June 10, 2011, the bankruptcy court entered a judgment concluding that the trustee of the Trasks' bankruptcy estate had an interest in the improved parcel superior to U.S. Bank's. The Bankruptcy Appellate Panel for the First Circuit affirmed that ruling in December 2011. See In re Trask, 462 B.R. 268 (B.A.P. 1st Cir. 2011). U.S. Bank filed a foreclosure action on the unimproved parcel in December 2013, obtained a favorable judgment in December 2014, and took title to the unimproved parcel following a public sale in April 2015. It then filed its third insurance claim with First American in February 2016. First American denied the claim on May 13, 2016, noting its previous denials, and reasserting its prior interpretation of the policy.

         US Bank responded to First American's latest denial by filing suit in state court on August 9, 2016. As noted above, the complaint alleges counts of negligence and duty of care against HLC Escrow, [2] and negligence, unilateral mistake, and violation of the UCSPA against First American. The UCSPA claim asserts that First American "failed to effectuate prompt, fair, and equitable settlement" of U.S. Bank's 2016 insurance claim, "where liability was reasonably clear, " and "knowingly misrepresented to U.S. Bank pertinent facts or policy provisions relating to coverage at issue."[3] The complaint does not mention U.S. Bank's earlier-filed insurance claims.

         HLC Escrow removed the case to federal court, and both defendants filed motions to dismiss under Federal Rule of Civil Procedure 12(b)(6). The motions asserted, inter alia, that U.S. Bank's claims were time-barred by Maine's six-year statute of limitations for civil actions. See Me. Rev. Stat. Ann. tit. 14, § 752. First American took the position that U.S. Bank's claims against it accrued no later than May 10, 2010, the date on which it denied U.S. Bank's initial insurance claim. Included as attachments to First American's motion to dismiss were copies of U.S. Bank's 2010 claim letter, First American's letter denying that claim, and First American's letters denying U.S. Bank's 2011 and 2016 insurance claims. First American did not include copies of U.S. Bank's 2011 and 2016 claim letters.

         US Bank opposed the motions to dismiss by arguing that Maine's twenty-year limitations period for personal actions on certain types of contracts and financial instruments applied to its causes of action against both defendants, making them timely. See Me. Rev. Stat. Ann. tit. 14, ยง 751. As to its claims against First American, U.S. Bank alternatively argued that Maine's six-year statute of limitations did not begin to run until First American denied its 2016 insurance claim. According to U.S. Bank, its initial 2010 insurance claim did not trigger the statute of limitations because that claim was premature. The bank did not "experience[] damages that would demonstrate a cognizable loss" until it took title to the unimproved parcel in April 2015, following the foreclosure proceedings. When it then filed its ...


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