The Superior Court of Connecticut recently granted a title insurance company’s motion to strike certain defenses raised by homeowners in the title company’s unjust enrichment claim against them arising out of incorrectly wired funds. See Fid. Nat’l Title Ins. Co. v. Vontell, 2019 WL 4513087 (Conn. Super. Ct. Aug. 29, 2019). In the case, the homeowners purchased a property in 2000 and executed a mortgage that ultimately was assigned to Wells Fargo. In 2006, they executed a mortgage to Fremont, with the proceeds from the Fremont loan intended to pay off the Wells Fargo mortgage. The title insurance company issued a loan policy to Fremont insuring Fremont as the first mortgage on the property. However, the loan proceeds were mistakenly used to pay off a mortgage on another property owned by the same homeowners. Years later, Fremont made a claim with the title insurance company, and the title insurance company accepted the claim and paid $115,000 to Wells Fargo to ensure Fremont’s first priority lien. The title insurance company then brought this action against the homeowners (for unjust enrichment) and the closing agent (for indemnification). The homeowners filed an answer with special defenses, including laches, unclean hands, and that they were a third-party beneficiary of either the policy or the title insurance company’s settlement agreement with Wells Fargo. The title insurance company filed a motion to strike these defenses.
The Court granted the title insurance company’s motion. First, it found that laches did not apply. Even if the title insurance company knew of the issue in 2007—as the homeowners alleged—it had no contractual duty to act until Fremont filed a claim. “In short, the [homeowners] have not sufficiently alleged or explained how Fidelity had an equitable obligation to act sooner as they allege without Fidelity having an explicit legal obligation to act sooner under the title insurance policy.” Second, the Court held that unclean hands could not apply because the homeowners “have utterly failed to articulate any facts to support a claim that Fidelity engaged in any dishonest behavior or any wilful misconduct in honoring its obligations under the title insurance policy, and in negotiating and resolving the mortgage priority dispute on the . . . property which was not of its making.” Finally, the Court rejected the defense that the homeowners were the third-party beneficiaries of either the title insurance policy with Fremont or the settlement agreement with Wells Fargo, noting that the homeowners failed to show any intent by the contracting parties to confer this status on the homeowners.