Court Opinion

ID: 1015308
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:31:06.079969+00
Date Added: 2024-06-11T12:39:57.828569
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 03-2227

THE FOUNTAINHEAD TITLE GROUP CORPORATION, a
Maryland corporation,

                                                Plaintiff - Appellee,

           versus

COURTHOUSE SEARCH OF     NORTHERN   VIRGINIA,   a
Virginia corporation,

                                                Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema, District
Judge. (CA-02-1838-A)

Argued:   October 27, 2004                 Decided:   January 27, 2005

Before WIDENER, WILLIAMS, and MICHAEL, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Brian Timothy Fitzpatrick, SIDLEY, AUSTIN, BROWN & WOOD,
L.L.P., Washington, D.C., for Appellant.       Stacey Ann Moffet,
ECCLESTON & WOLF, P.C., Baltimore, Maryland, for Appellee.      ON
BRIEF: Eric Jensen, JENSEN & ASSOCIATES, P.C., Richmond, Virginia;
Frank R. Volpe, SIDLEY, AUSTIN, BROWN & WOOD, L.L.P., Washington,
D.C., for Appellant.    Matthew W. Lee, ECCLESTON & WOLF, P.C.,
Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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PER CURIAM:

            In this diversity action, Courthouse Search of Northern

Virginia    (Courthouse)         appeals          a    jury     verdict    in     favor   of

Fountainhead Title Group Corp. (Fountainhead) for $200,000 on

negligence and breach of contract claims.                       Courthouse argues that

the evidence was insufficient to sustain the jury’s negligence

verdict and that Fountainhead waived its right to the collateral

source    rule   for    both    claims     by         introducing      evidence    that   it

recovered $175,000 from its insurer. For the following reasons, we

affirm.

                                           I.

            Fountainhead is a mortgage settlement and title insurance

company with its headquarters in Maryland and offices in several

neighboring states, including Virginia.                       In 2000 Fountainhead was

hired as settlement agent for a $200,000 secondary mortgage loan

from Champion Mortgage (Champion) to Luis Quinonez.                            The loan was

secured     by   real    property        in       Virginia       owned     by     Quinonez.

Fountainhead contracted with Courthouse to perform a title and

judgment search and to record the deed of trust against Quinonez’s

property.

            Courthouse         conducted          three       searches    of     Quinonez’s

property. The first search, performed on August 23, 2000, revealed

no outstanding judgments against Quinonez as of July 31, 2000.                            On

October    16,   2000,   a     second    search         showed     a   judgment     against

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Quinonez in favor of Bank of America for $1,039,007.43 that had

been entered on August 25, 2000.       Fountainhead ignored the second

report, believing it to be a duplicate of the initial search, and

conducted settlement of the loan on October 16, 2000.        Following

settlement Fountainhead asked Courthouse to conduct a “bring-to-

date” title search before the deed of trust was recorded.          On

October 24, 2000, before the “bring-to-date” search, Fountainhead

disbursed the loan proceeds to Quinonez. The next day, October 25,

2000, Courthouse performed the final search and did not uncover or

report the Bank of America judgment or any other problems to

Fountainhead.    Courthouse also recorded the deed of trust in favor

of Champion on October 25.

            The following spring, Quinonez, who had not paid the Bank

of America judgment, defaulted on the secondary mortgage loan from

Champion.    The value of the property was insufficient to pay both

creditors, and Champion had no recourse against the property

because Bank of America’s judgment was recorded prior to Champion’s

deed of trust.    Fountainhead agreed to cover Champion’s $200,000

loss.

            Fountainhead sued Courthouse for negligence and breach of

contract in connection with Courthouse’s failure to report the Bank

of America judgment before recording the deed of trust. During the

trial Fountainhead revealed that it had paid only $25,000 of the

$200,000 to Champion and that its errors and omissions insurance

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carrier had paid the remaining $175,000.           The jury found in favor

of Fountainhead on both its negligence and contract claims and

awarded    $200,000   in   damages.        Courthouse   filed   a    motion   for

judgment notwithstanding the verdict, which was denied. Courthouse

appeals.

                                      II.

            Courthouse argues it was entitled to a directed verdict

on the negligence claim either because Courthouse’s breach did not

cause Fountainhead’s damages or because Fountainhead committed

contributory negligence.       In the alternative, Courthouse contends

that Fountainhead’s damages should have been limited to $25,000

because of the $175,000 payment Fountainhead received from its

insurance carrier. Courthouse also argues that the substantive law

of Virginia, rather than that of Maryland, governs the negligence

claim.    A court may grant a directed verdict against a party on any

issue for which there is no legally sufficient evidentiary basis

for a reasonable jury to find in favor of that party.               Fed. R. Civ.

P. 50.    We review de novo a district court’s denial of a motion for

judgment as a matter of law.      Konkel v. Bob Evans Farms, Inc., 165

F.3d 275, 279 (4th Cir. 1999).

                                      A.

            In a diversity action the choice of law rule of the forum

state, in this case Virginia, determines which state’s law governs

each claim.    Quillen v. Int’l Playtex, Inc., 789 F.2d 1041, 1044

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(4th Cir. 1986).        Under Virginia law the substantive law of the

state in which “the place of the wrong” occurred -- “defined as the

place where the last event necessary to make an act liable for an

alleged tort takes place” -- governs Fountainhead’s negligence

claim. Id. (internal quotation marks omitted). The district court

held that Maryland law applied to the negligence claim because the

last event necessary to make Courthouse liable to Fountainhead

occurred in Maryland.         This event was Fountainhead’s reliance on

the bring-to-date search report that gave rise to Champion’s claim

against Fountainhead.

            Courthouse does not dispute that Fountainhead’s injury

took place in Maryland, but argues that the termination of its

services, not the injury, was the last event necessary to give rise

to the cause of action.        Courthouse performed all of its services

in    Virginia,   and   its   services      concluded    before    Fountainhead

suffered   any    injury.      Injury    is   an   essential      element   to   a

negligence cause of action, and there is no support for the

proposition that a cause of action for negligence can accrue before

there is an injury.       The district court correctly determined that

“[h]ad [Fountainhead] not relied on the results of defendant’s

search, it would have no cause of action for negligence.”              J.A. 50-

51.     Because   Fountainhead’s     reliance      and   injury    occurred      in

Maryland, Maryland law governs the negligence claim.

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                                        B.

             Courthouse argues it was entitled to a directed verdict

on   its   claim   of   contributory     negligence        because   Fountainhead

disbursed    the    funds    before   the    deed    of    trust   was    recorded.

Similarly,       Courthouse    argues       that    Fountainhead’s       premature

disbursement of the loan proceeds should have precluded a jury

finding    that    Courthouse’s   breach      was    the    proximate     cause    of

Fountainhead’s injury.         For both arguments Courthouse primarily

relies on a single Fountainhead witness, who testified that the

company “should not have” disbursed the funds when it did.                        The

same witness also testified, however, that Fountainhead would have

taken action to reverse the disbursement of funds had Courthouse

notified Fountainhead of the Bank of America judgment.                   Courthouse

introduced no evidence on the question of whether the timing of

Fountainhead’s loan disbursement was a breach of any duty to

Champion.     Nor did it introduce evidence to rebut Fountainhead’s

position that it would have been able to stop the disbursement had

it been notified of the Bank of America judgment by Courthouse.

While the testimony from Fountainhead’s witness could have provided

the jury with a basis for ruling in Courthouse’s favor on the

negligence claim under either theory, the jury was well within its

purview     in     holding     that     Courthouse’s        negligence      caused

Fountainhead’s injury and that Courthouse had not met its burden of

proof on the issue of contributory negligence.

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          Courthouse argues in the alternative that damages should

be limited to $25,000 because Fountainhead waived the collateral

source rule by introducing evidence that it had received $175,000

from its insurer.    The collateral source rule permits an injured

party to recover the full amount of provable damages regardless of

any   compensation   received    from    collateral   sources    such   as

insurance.   Kremen v. Maryland Automobile Insurance Fund, 770 A.2d

170, 174-75 (Md. 2001).         Limiting Fountainhead’s recovery to

$25,000 would amount to a windfall for Courthouse because the jury

found Courthouse caused $200,000 worth of damages.              Courthouse

concedes that a Maryland court has never held that a plaintiff

waives application of the collateral source rule by introducing

evidence of recovery for its damages from collateral sources.           We

conclude that the district court correctly applied the collateral

source rule in this case.

                                  III.

          We affirm the judgment based on the jury’s verdict of

$200,000 in favor of Fountainhead on its negligence claim. Because

the jury’s award compensated Fountainhead for “either or both” of

its two claims, we need not reach Courthouse’s arguments on the

breach of contract claim.

                                                                  AFFIRMED

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