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Lender Wins Claims for ‘Partial Title Search’

Although an agreement between plaintiff lender and defendant settlement company said the settlement company would provide “partial title searches as shown in public records only,” the lender wins its contract and warranty claims against the settlement company after the company’s post-loan title search on a Norfolk parcel pledged by a principal of the borrower of $2 million showed a lesser ownership interest and several liens against the Norfolk parcel; a Hanover Circuit Court says damages will be determined at trial.

Per the parties’ agreement, Delaware law applies to the construction and interpretation of the agreement. Section 1 of the agreement states that the customer (ULC) engages Transunion (MDA) to provide the real estate settlement services identified on Schedule 1 of the agreement in accordance with the terms in the agreement and Transunion accepts such agreement. Schedule I of the agreement sets forth the specific services to be provided to ULC, including “Property and Title Solutions,” which are identified in Schedule 4. Schedule 4 defines “Property Solutions” to include a “Property Search Report.”

MDA argues the contract is clear and unambiguous in that it did not impose upon MDA a contractual duty to perform a complete and accurate title search. MDA relies on Schedule 4 wherein MDA only promised to provide “partial title searches” as opposed to complete title searches. MDA also points out that nowhere in the contract does it state that MDA promises to provide an “accurate” title search.

ULC is not alleging MDA failed to do a complete title search outside the public records. Rather, ULC is alleging MDA’s failure to provide a proper title search as shown in the public records constitutes a breach of the agreement.

An objective, reasonable reading of the contract in its entirety leads the court to conclude that Schedule 4 of the agreement is clear and unambiguous. It is clear that under the agreement, MDA had a contractual duty to provide ULC with current ownership information for residential properties, including current vested owner, tax information, effective date of search, mortgages/liens and encumbrances and a full Legal Description, as shown in the public records. Schedule 4 does not merely state that the “reports are partial title searches.” It states that the reports are partial title searches as shown in the public records only. The court cannot find that a reasonable person in the position of the parties would have interpreted Schedule 4 to mean that MDA was only required to conduct a search of the public records and submit an inaccurate or partial report of their findings.

It is undisputed that the title report dated Dec. 20, 2006, provided by MDA to ULC indicated the property was owned solely by William A. Goldstein and that there were no judgment liens against the property. It is also undisputed that this information was erroneous. MDA’s updated title report of April 8, 2009, revealed that in December 2006, William A. Goldstein owned only a one-half interest in the property and that there were several tax and judgment liens against the property.

The court grants ULC’s request for partial summary judgment on the issue of breach of contract.

Further, the court finds that MDA provided a warranty in its Dec. 20, 2006, title report that the public record information contained in the report was accurately reported from the public record sources available as of the effective date of this report. The disclaimer of warranties provision in the parties’ agreement has no bearing on the warranty provided in the title report. There is no dispute that the information contained in the Dec. 20, 2005 title report was in fact inaccurate. The court finds that MDA breached the warranty it provided to ULC in its Dec. 20, 2006 title report.

The breach of warranty claim and the breach of contract claim are entirely separate. It is undisputed that the title report is not a part of the parties’ agreement and that the parties did not enter into a written agreement that would modify Section 5(d) (“Exclusive Remedy”) of the agreement (pertaining to actual damages). The court cannot find that the $25,000 limitation contained in the title report applies to ULC’s breach of contract claim. The court grants ULC’s request for summary judgment on the issue of damages, finding the parties’ agreement allows for actual damages, which are to be proven at trial.

United Leasing Corp. v. MDA Lending Solutions Inc. (Harris) No. CL 09000712-01, Feb. 15, 2011; Hanover Cir.Ct.; James E. Kane, Karen E. Daily, Kristi L. Johnson for the parties. VLW 011-8-049, 7 pp.

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