Misrepresentation and Title Insurance (10th Cir., Colorado)

In Stewart Title v. Dude (nominated for a great case name of the day salute) Mr. Dude failed to disclose a $1.9M mortgage when trying to get another $500k mortgage on the property.  The first mortgage had not been properly recorded, and did not show up in a title search.  Later, the house was sold and the $1.9M that should have been paid to the bank was paid to Mr. Dude.  When the bank threatened the new owner with foreclosure, Stewart Title stepped up and paid off the bank.  Stewart Title then went after Mr. Dude to get its money back. 

The jury found for Stewart Title and awarded actual and punitive damages.  On appeal, Dude argued that the verdict should be overturned because any reliance on Dude's misrepresentation was not "justifiable":

The precise work performed by the adjectival epithet “justifiable” when it comes to the reliance element in fraud is more than a little elusive. Everyone agrees it operates to allocate the risk of loss to an actually deceived plaintiff in some circumstances. But that may be where the agreement ends. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 108, at 750 (5th ed. 1984). Some understand the law as requiring the plaintiff to ferret out the facts from even the vaguest intimations or else bear the risk of loss. Id. Others read it as imposing no duty to investigate at all and allocating the risk of loss only to the most foolish of plaintiffs. Id. Happily, to decide this case we don’t have to decide this debate. Mr. Dude presents two discrete theories of justifiable reliance and we can limit our discussion in this appeal to their terms without touching broader and more difficult questions.

First Mr. Dude said there was no justifiable reliance because Stewart Title knew I was lying.  Second, Mr. Dude argued that Stewart Title had constructive notice of the lien. 

This is a fraud dispute on appeal after a trial where the jury was properly instructed and Mr. Dude is left to argue only the insufficiency of the evidence to support its verdict. To prevail in these circumstances, Mr. Dude faces the daunting job of having to show that “the evidence points but one way [his way] and is susceptible to no reasonable inferences supporting the party opposing the motion; we must construe the evidence and inferences most favorably to the non-moving party.” 

He failed to do so. There could be no constructive notice where the lien was not properly filed.  Whether the bank’s failure to properly file its lien and whether Stewart Title had an obligation to pay the lien was not raised below. 

Another clear opinion from Judge Gorsuch.
 

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