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Closing Protection Letter Lacking “Successors and Assigns” Language Does Not Lead to Dismissal of Complaint

Posted By USFN, Wednesday, February 5, 2014
Updated: Monday, October 12, 2015

February 5, 2014


by Jennifer McGrath
Hunt Leibert – USFN Member (Connecticut)

In JP Morgan Chase Bank N.A. v. Old Republic National Title Insurance Company, Bridgeport Superior Court, CV12-6029085 S (May 6, 2013), defendant Old Republic filed a motion to dismiss the plaintiff’s claim for indemnification under a closing protection letter. Old Republic contended that the absence of “successors and assigns” language prevented assignment.

The originating lender, Washington Mutual, had transferred the note and closing papers to WaMu Trust with LaSalle Bank as Trustee. JP Morgan Chase was the servicer and note holder.

The bank’s complaint alleged:

  • Old Republic issued a letter of protection naming an approved attorney to induce the refinancing lender to advance its monies;
  • The letter of protection promised indemnification for actual losses arising out of either the approved attorney’s failure to follow instructions, or his fraud;
  • The lender advanced its monies conditioned upon obtaining a first mortgage;
  • The approved attorney provided a title binder and policy identifying that the loan would be recorded in a first mortgage position;
  • The approved attorney failed to pay off the prior encumbrances, misappropriated the lender’s monies, and did not record the loan in a first mortgage position.

In objecting to the motion to dismiss, the plaintiff cited JP Morgan Chase Bank and FDIC v. FATIC, 795 F. Supp. 624, 628 (E.D. Mich. 2010), for the title company custom of issuing “a closing protection letter to verify the [approved attorney’s] authority to issue title policies and to make the financial resources of the national title insurance underwriter available to indemnify lenders for the local agent’s errors or dishonesty with escrow funds.”

The plaintiff also pointed to Rumbin v. Utica Mutual Ins. Co., 254 Conn. 259 (2000) and David Caron Chrysler Motors LLC v. Goodhall’s Inc., 304 Conn. 738, 748-9 (2012), as having pronounced a general rule recognizing the necessity of permitting transfer of contractual rights to an assignee and viewing with disfavor attempted restraints on alienation of contractual rights.

In conclusion, Chase noted that Old Republic’s letter of protection had no “anti-assignment” language in it and, instead, provided assurance that the breadth of indemnification language expressly embraced a “lender secured by a mortgage (including any other security instrument) of an interest in land.” What could an assignment of mortgage be “but another security instrument”?

The judge ruled from the bench, sustaining the plaintiff’s objection and denying Old Republic’s motion to dismiss.

Editor’s Note: The author’s firm represented the plaintiff in the proceedings summarized in this article.

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