J-A30027-15


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

STEWART TITLE GUARANTY COMPANY                    IN THE SUPERIOR COURT OF
                                                        PENNSYLVANIA
                            Appellant

                       v.

HERITAGE LAND TRANSFER CO.

                            Appellee                   No. 442 EDA 2015


               Appeal from the Judgment Entered March 9, 2015
               In the Court of Common Pleas of Chester County
                        Civil Division at No(s): 12-12637


BEFORE: MUNDY, J., JENKINS, J., and FITZGERALD, J.*

MEMORANDUM BY JENKINS, J.:                        FILED December 24, 2015

        Stewart Title Guaranty Company (“STGC”) appeals from the judgment

entered against it and in favor of Heritage Land Transfer Co. (“Heritage”)

following a bench trial in the Chester County Court of Common Pleas. We

vacate the judgment and remand for further proceedings.

        Pursuant to the January 15, 1997 Title Insurance Underwriting

Agreement between the parties (“Agency Agreement”), STGC appointed

Heritage as its nonexclusive limited agent to, inter alia, issue title

commitments and title policies on STGC’s behalf in the Commonwealth of

Pennsylvania.       N.T., 6/5/2014, at 66-67.       Section 5 of the Agency

Agreement contained a “Division of Loss and Loss Expense” clause stating:

____________________________________________


*
    Former Justice specially assigned to the Superior Court.
J-A30027-15


          The term ‘Loss’ shall include the amount paid to or for the
          benefit of the insured as well as loss adjustment expense
          including any cost of defending the claim resulting in the
          loss.

          (a) On each such loss due to the fraud or intentional act or
          omission of [Heritage] or its employees, representatives,
          or agents, or due to the negligence thereof [Heritage] shall
          be liable to [STGC] for the entire amount of such loss
          including, but not limited to, attorneys’ fees, litigation
          expenses, and costs of settlement negotiations, such
          losses included but are not limited to:

              (1) Failure of title plant to disclose matters causing
              losses.
              (2) Failure to discover or report any instrument of
              recording affecting title.
              (3) Violations of escrow instructions.
              (4) Failure to follow underwriting guidelines and/or
              instructions of [STGC].
              (5) Failure to prepare a title policy which shows defects
              and matters affecting title disclosed in the title search
              or which should have been disclosed in the title search.

Pl. Trial Exh. 22, at 5; N.T., 6/5/2014, at 49, 70.

       In April 2001, North American Mortgage extended a loan to Steven

and Leslie Jones, which was secured by a mortgage dated April 12, 2001

(“North American Mortgage”). N.T., 6/5/2014, at 13. Heritage handled the

title and settlement work for this loan. Id. This mortgage was not recorded

until July 24, 2001.1        Id. at 14.        Heritage handled the title work and

____________________________________________


1
  The parties dispute whether Heritage failed to fulfill its obligations
regarding the recording of the mortgage.      STGC claims Heritage was
negligent because the deed was not recorded until three months after the
mortgage was signed. Appellant’s Brief at 9. Heritage claims it submitted
the mortgage for recordation in May and any delay in the recording of the
mortgage was due to the governmental offices. Appellee’s Brief at 3-4.



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settlement for the North American Mortgage and issued to North American a

lender’s Policy of Title Insurance (“Title Policy”), underwritten by STGC. Id.

at 18. The Title Policy insured that the North American Mortgage was a first-

position lien against the property. Id. at 17; Pl. Exh. 4.

      On June 22, 2001, PNC Bank extended a line of credit in the amount of

$140,000.00 to Mr. and Mrs. Jones, which was secured by an open-end

mortgage (“PNC Mortgage”).      N.T., 6/5/2014, at 14.       This mortgage was

recorded on July 13, 2001, 11 days before the North American Mortgage was

recorded. Id.

      On May 17, 2006, Washington Mutual, Assignee of the North American

Mortgage, submitted a claim to STGC under the Title Policy because of the

existence of the superior PNC Mortgage lien.       N.T., 6/5/2014, at 13-15.

After the claim was submitted, the North American Mortgage was assigned

to U.S. Bank, N.A., as trustee. STGC retained Michael P. Coughlin, Esq., as

counsel in connection with the notice of claim.      Id. at 20.   Mr. Coughlin

contacted First Financial Bank, the assignee of the PNC mortgage requesting

First Financial’s consent to subordinate the PNC Mortgage to the North

American Mortgage. Id. at 23. First Financial did not consent. Id. at 24-

25.

      A July 1, 2006 property appraisal valued the property at $500,000.00.

N.T., 6/5/2014, at 23. At that time, U.S. Bank was owed $440,000.00 and

First Financial was owed at least $140,000.00. Id.




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      STGC commenced an action on behalf of U.S. Bank and against First

Financial, asserting claims for quiet title, equitable subrogation/unjust

enrichment, and equitable lien. N.T., 6/5/2014, at 26-29.

      The litigation was “hotly contested.”   N.T., 6/5/2014, at 32.   Judge

Griffith denied summary judgment motions filed by both parties and the

parties prepared for trial. Id. at 33. During trial preparation, STGC learned

that the amount owed to First Financial had increased from approximately

$140,000.00 to approximately $173,102.25, that the amount owed to U.S.

Bank had increased from approximately $440,000.00 to approximately

$518,585.00, and that the value of the property had decreased from

approximately $500,000.00 to approximately to $440,000.00. Id. at 34-35,

37.

      The parties entered settlement discussions.    N.T., 6/5/2014, at 36.

STGC offered to pay Harleysville, successor in interest to First Financial,

$35,000.00 in exchange for execution of a subrogation agreement.       Id. at

36. Harleysville countered, offering to execute the agreement in exchange

for $173,102.25. Id. at 37.

      The parties attended a settlement conference on November 25, 2008,

with trial scheduled for December 9, 2008.     N.T., 6/5/2014, at 37; N.T.,

6/6/2014, at 56. Heritage did not attend the conference. STGC, however,

presented evidence that it notified Heritage of the conference prior to its




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date.2     N.T.,    6/6/2014,     at    57-58.     At   the   conference,   the   judge

recommended the parties settle for $75,000.00, and the parties “reluctantly”

agreed. Id.

       On November 26, 2008, STGC notified Heritage of the settlement

terms, and Heritage did not claim the settlement was unreasonable. N.T.,

6/5/2014, 38; N.T., 6/6/2014, at 58.              STGC sought indemnification from

Heritage, which refused. N.T., 6/5/2014, at 84.

       On November 30, 2012, STGC commenced this action by writ of

summons.      On February 15, 2013, it filed a complaint seeking contractual

indemnification.

       The trial court conducted a non-jury trial on June 5, 2014, June 6,

2014, and June 12, 2014.               On October 3, 2014, it issued its decision,

entering judgment in favor of Heritage and against STGC. On October 13,

2014, STGC filed post-trial motions, which the court denied on January 16,

2015. STGC filed a notice of appeal on February 5, 2015.

____________________________________________


2
  Heritage claims it did not have notice of the conference. Carmen Rego,
president and CEO of Heritage, testified that he informed STGC’s counsel
that Heritage wanted to be involved in the process, but did not learn of the
settlement until his employee Brian Haines informed him that the parties
had reached a settlement. N.T., 6/6/2014, at 182, 204-208. Mr. Rego
claimed that Sharon Burke, a paralegal for STGC’s counsel, was incorrect
when she stated Mr. Haines was Heritage’s in-house counsel. Id. at 206.
STGC presented evidence that it forwarded emails to Mr. Haines, whom it
believed was Heritage’s in-house counsel, notifying Heritage of the
settlement and trial dates and admitted as an exhibit the forwarded emails.
Pl. Exh. 42.



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      On March 6, 2015, this Court ordered STGC to file a praecipe in the

trial court for the prothonotary to enter judgment, and STGC complied. On

March 9, 2015, the prothonotary entered judgment.

      Both STGC and the trial court complied with Pennsylvania Rule of

Appellate Procedure 1925.

      STGC raises the following claim on appeal:

         Whether the [t]rial [c]ourt erred as a matter of law and/or
         abused its discretion when it failed to find that [STGC],
         established that the [s]ettlement entered into with
         [Harleysville] was reasonable and [that STGC] was,
         therefore, entitled to recovery from [Heritage] by way of
         contractual indemnification.

Appellant’s Brief at 5.

      This Court’s review of a non-jury trial verdict is

         limited to a determination of whether the findings of the
         trial court are supported by competent evidence and
         whether the trial court committed error in the application
         of law. Findings of the trial judge in a non-jury case must
         be given the same weight and effect on appeal as a verdict
         of a jury and will not be disturbed on appeal absent error
         of law or abuse of discretion. When this Court reviews the
         findings of the trial judge, the evidence is viewed in the
         light most favorable to the victorious party below and all
         evidence and proper inferences favorable to that party
         must be taken as true and all unfavorable inferences
         rejected.

Christian v. Yanoviak, 945 A.2d 220, 224 (quoting Hart v. Arnold, 884

A.2d 316, 330–331 (Pa.Super.2005)). The trial court’s findings are binding

on appeal, “where they are based upon the credibility of the witnesses,

unless it appears that the court abused its discretion or that the court’s

findings lack evidentiary support or that the court capriciously disbelieved

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the evidence.” Id. (quoting Hart, 884 A.2d at 331). “Conclusions of law,

however, are not binding on an appellate court, whose duty it is to

determine whether there was a proper application of law to fact by the lower

court.” Id. (quoting Tagliati v. Nationwide Insurance Co., 720 A.2d

1051, 1053 (Pa.Super.1998)). “With regard to such matters, our scope of

review is plenary as it is with any review of questions of law.” Id.

      The trial court and Heritage allege STGC waived its claim challenging

the trial court’s finding that STGC failed to establish the settlement was

reasonable because STGC’s 1925(b) statement was vague and not concise.

We find STGC did not waive its claims.

      STGC appealed from the trial court’s order finding in favor of Heritage

and against STGC. The order included the following footnote:

         In this case, [STGC] reached a settlement and made a
         voluntary payment to a third party and then brought this
         suit against [Heritage] claiming that it was entitled to
         indemnification. No judgment was rendered against
         [STGC] herein which significantly alters [STGC’s] burden of
         proof. “In [Wise Shoes, Inc. v. Blatt, 479, 164 A. 89, 91
         (Pa.Super.1933)], we stated, ‘The right of indemnity
         against the actual wrongdoer exists whether the one held
         liable in the first instance pays the loss voluntarily or has a
         judgment recovered against him. The fact of voluntary
         payment does not negative the right to indemnity. It
         merely varies the degree of proof needed to establish the
         liability of the indemnitor.” [Martinique Shoes, Inc. v.
         New York Progressive Wood Heel Co., 217 A.2d 781,
         783 (Pa.Super.1966) (emphasis added).

         “To establish a right to indemnification where a case is
         resolved by settlement, the party must establish that the
         settlement was reasonable, that the underlying claim was
         valid against it, that the claim is within the coverage of the


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J-A30027-15


       agreement, and that any counsel fees were reasonable.”
       [McClure    v.   Deerland     Corp.,   585    A.2d   19
       (Pa.Super.1991)]. Where a claim against an indemnitee
       has been settled, the burden falls on the indemnitee to
       prove that the settlement was reasonable. [Martinique
       Shoes, Inc. v. New York Progressive Wood Heel Co.,
       217 A.2d 781 (Pa.Super.1966)].” [County of Delaware
       v. J.P. Mascaro & Sons, Inc., 830 A.2d 587, 593
       (Pa.Super.2003) affd, 873 A.2d 1285 (Pa.2005)].

       “The seminal case in Pennsylvania concerning a suit for
       indemnification by an agent against a principal is
       [Tugboat Indian Company v. A/S Ivarans Reden, 5
       A.2d 153 (Pa.1939)]. . . . In that case, our Supreme Court
       held, ‘[I]n order for a party to recover indemnity where
       there has been a voluntary payment [settlement], it must
       appear that the party paying the settlement was himself
       legally liable and could have been compelled to satisfy the
       claim.’ Id. [at] 153. . . . Tugboat asserted that such a
       secondarily liable defendant may settle the claim
       voluntarily and recover against the person from whom it
       was entitled to indemnity if the settlement was fair and
       reasonable and if it gave proper notice. ... In rejecting this
       assertion, our Supreme Court held that one who has ample
       opportunity to have his rights litigated and can utilize all
       processes of law to protect himself against an unwarranted
       demand, but chooses to compromise the claim, is not
       entitled to a right of recovery over by way of subrogation
       or indemnity, since payment thus made is not compulsory.
       The Court further held that ‘Pennsylvania cases are
       unanimous in denying restitution to a person who,
       contending that another has no valid claim against him,
       nevertheless makes payment solely because of the threat
       or the institution of litigation to enforce the demand.’
       Id.,[] at 155.

       This holding was reiterated in Martinique Shoes, Inc.
       [217 A.2d at 781], where we reaffirmed the principle that
       a party making a voluntary payment assumes the risk of
       being able to prove the actionable facts upon which his
       liability depends as well as the reasonableness of the
       amount which he pays. See also [Fox Park Corporation
       v. James Leasing Corp, 641 A.2d 315, 317
       (Pa.Super.1994)] (party which settles claims and then
       seeks indemnification must be able to prove its liability and

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J-A30027-15


         the reasonableness of its settlement payments).” Willard
         v. Interpool,. Ltd., 758 A.2d 684, 687-688 (Pa.Super.Ct.
         2000).

         In this case, [STGC] simply did not meet the burden of
         proof established by the aforecited cases.

Order, 10/3/2014, at n.1.

      Although the 1925(b) statement was lengthy, STGC had no guidance

as to the basis of grant of judgment, which was in a one-paragraph order,

with a footnote stating the elements of the claim and finding STGC failed to

meet its burden. Further, after the trial court opinion clarified that it based

its verdict solely on an alleged failure to establish the settlement was

reasonable, Appellant narrowed its claim to focus on this issue. STGC did

not waive its issue. See Eiser v. Brown Williamson Tobacco Corp., 938

A.2d 417, 428 (Pa.Super.2007) (“the number of issues raised in a Rule

1925(b) statement does not, without more, provide a basis upon which to

deny appellate review where an appeal otherwise complies with the

mandates of appellate practice”).

      Where a case is resolved by settlement, to establish a right to

indemnification, the plaintiff “must establish that the settlement was

reasonable, that the underlying claim was valid against it, that the claim is

within the coverage of the agreement, and that any counsel fees were

reasonable.”   County of Delaware v. J.P. Mascaro & Sons, Inc., 830

A.2d 587, 593 (Pa.Super.2003) (quoting McClure v. Deerland Corp., 585

A.2d 19 (Pa.Super.1991)). “[T]he burden falls on the indemnitee to prove




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that the settlement was reasonable.” Id. (citing Martinique Shoes, Inc. v.

New York Progressive Wood Heel Co., 217 A.2d 781 (Pa.Super.1966)).

     The trial court concluded STGC failed to meet its burden of proving the

settlement was reasonable, stating:

        In this case we are simply not satisfied with the quantum
        and quality of the evidence presented by plaintiff on this
        issue. [STGC] presented evidence that it disputed the
        validity of the claim that a subsequent loan had priority
        over the lien of its insured. [N.T., 6/5/2014,] at 29.
        [STGC] brought suit against the subsequent lender to
        establish that [STGC’s] insured did, indeed, have first
        priority.

        The litigation was contested and eventually settled for
        more than [STGC] wanted to pay, N.T.[, 6/5/2014,] at 38,
        (and, of course, much less than [Harleysville] wanted to
        receive.) [STGC’s] witness further testified that the Judge
        supervising the settlement conference “recommended” the
        settlement. But noticeably absent from [STGC’s] evidence
        is any discussion as to its analysis of why the amount of
        the settlement was reasonable. Was [STGC’s] complaint
        without merit? Was the argument of the subsequent lender
        strong? What analysis, if any, did [STGC] undertake to
        come to the conclusion that it should accept the Judge’s
        recommendation? This evidence is totally absent, which,
        in our opinion, is conclusive on this issue. [STGC] did
        present evidence that it invited [Heritage] to participate in
        the settlement, that [Heritage] declined, and that after the
        conference it notified [Heritage] of the amount of the
        settlement and that [Heritage] did not complain about the
        amount of the settlement or state that it believed the
        settlement to have been unreasonable or that [STGC]
        should not have settled the case. [N.T., 6/6/2014,] at 55-
        58. This evidence does not change the fact that [STGC]
        had the burden of proof on these issues at this trial.
        [Heritage] presented evidence that [STGC] believed it was
        going to prevail in the claim against it and “everything was
        going to be fine,” [Id.] at 204, and that [Heritage] had
        notified [STGC] that [Heritage] wanted to be “very
        involved in the process” of resolving the claim against

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        [STGC]. [Id.] at 206. In summary, we find the evidence
        insufficient for us to conclude that [STGC’s] settlement of
        the claim against it was reasonable.        Beyond having
        testified that a judge supervising a settlement conference
        recommended        the   settlement,5   [STGC]    presented
        absolutely nothing. [STGC] presented the witness who
        could have testified as to the factors which [STGC]
        considered in entering into the settlement and [STGC’s]
        analysis of the claims and defenses which led [STGC] to
        the decision to enter into the settlement, but never asked
        him to testify on those issues.      Even after having now
        reviewed the transcript of the trial testimony, we find
        unanswered the question “Why did [STGC] agree to this
        settlement?”       Without an answer to that question
        supporting the contention that the amount of the
        settlement was reasonable, we find that [STGC] cannot
        prevail in this action.
           5
              Such recommendation is more often an indication
           of the amount the judge believes the parties will
           agree to than an independent evaluation of the
           merits of the case.

Opinion, 4/22/2015, at 6-8.

     The trial court erred in finding STGC presented insufficient evidence to

establish the settlement was reasonable. In addition to the testimony cited

by the trial court, which included testimony STGC informed Heritage of the

settlement conference and the settlement amount, and Heritage did not

object to the amount, additional evidence established the reasonableness of

the settlement. STGC established the PNC mortgage was recorded first and

presented evidence of the value of the property, as well as the amounts

owed on the two mortgages, indicating there were insufficient funds to cover

the mortgages.   N.T., 6/5/2014, at 33-35.    It submitted evidence of the




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settlement negotiations, during which it offered $35,000.00 and the

defendant countered with $173,102.25. Id. at 36-37.

      Further, by settling, STGC avoided the risk that it would lose at trial.

It presented evidence that its claims were not without risk, as Pennsylvania

is a first-to-file state, and there was no evidence to explain why the

mortgage deed was not recorded.     N.T., 6/5/2014, at 20-23, 30, 38, 58-59.

Therefore, the risk it would not succeed at trial was real.    Although STGC

attempted to detail the elements involved in the underlying action, the trial

court stated it knew the law behind the claims and that the testimony could

be saved for rebuttal. Id. at 31.

      The evidence presented by STGC established reasonableness, as it

presented information concerning the values at issue, the risks of trial, which

was scheduled to begin shortly after the conference, and of the positions of

the parties prior to settlement, in addition to the evidence that Heritage did

not challenge the amount as unreasonable. See J.P. Mascaro & Sons, 830

A.2d at 593-94 (finding settlement reasonable where Delaware County

Solicitor testified “that the $75,000 settlement of the federal claim was fair

and reasonable, falling within the range of payments made by the

municipalities group” and testified “that the reason other municipalities were

not joined in the state action was due to Delaware County’s interest in

resolving the matter quickly, avoiding further possible litigation with those

municipalities”).




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      Although the trial court, as fact-finder, was free to believe or

disbelieve the evidence and determine credibility, the court did not find any

of STGC’s witnesses to be incredible. Rather, it stated STGC did not present

evidence of reasonableness. Accordingly, we find the trial court abused its

discretion and its findings lacked evidentiary support. See Christian, 945

A.2d at 224.

      Heritage next claims the trial court opinion not only found that STGC

failed to establish the settlement amount was reasonable, but also found

STGC failed to establish the third-party claim against it had merit.

Appellee’s Brief at 9-10. It concludes that, because STGC did not challenge

this finding in its appellate brief, it waived the claim and, therefore, STGC’s

indemnity claim fails because it did not establish the third-party claim had

merit. Id. at 10-11. We disagree.

      In its 1925(a) opinion the trial court stated:

         [STGC’s] statement contains many ‘issues’ as to which we
         did not find against [STGC]. In several paragraphs and in
         various ways, [STGC] does state that we erred in finding
         that the burden of proof of the reasonableness of the
         settlement was on [STGC] and that [STGC] had failed to
         carry its burden. That issue is the only one which we will
         address in this opinion, since [STGC’s] failure to prove that
         its settlement of the third-party claim against it for which it
         seeks indemnification from [Heritage] in this case was
         reasonable was the sole basis for our decision.

1925(a) Opinion, 4/22/2015, at 2. The trial court then made the following
statement, relied upon by Heritage, regarding the merits of the underlying
claim:

         As noted above, there is also an absence of evidence to
         support the conclusion that the claim against [STGC] was

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          valid, another element of [STGC’s] claim in this case as to
          which [STGC] has the burden of proof.

1925(a) Opinion, 4/22/2015, at 7 n.4.3

       The trial court said its sole basis for finding against STGC was STGC’s

failure to establish the settlement was reasonable. Although it made passing

reference to a failure to establish the underlying claim, it did not provide

further reasoning for this conclusion, and the other prior statements

regarding the validity of the third-party’s claim are ambiguous.         We find

STGC did not concede this argument, as the trial court stated it based its

verdict solely on its belief STGC did not establish the settlement was

reasonable.
____________________________________________


3
 The trial court also made the following statement regarding the basis of its
decision:

          It is true that with respect to some of the issues set forth
          in the 1925(b) statement, we did not make an explicit
          finding in favor of [STGC]. Inasmuch as we deemed the
          failure to have proven the reasonableness of the
          settlement to be fatal to [STGC’s] case, we did not
          specifically address other issues. For the most part, we
          would have found in favor of [STGC] on these other issues
          had we been required to address them. If [STGC] prevails
          in this appeal, all of these issues will again be in play in
          the next trial.

1925(a) Opinion, 4/22/2015, at 2 n.2. The trial court made the following
statement regarding the merits of the underlying claim: “It is also at least
arguable that [STGC] did not prove the validity of the third-party claim
against it, another prerequisite to [STGC’s] claim against [Heritage] in this
case.” Id. at 2 n.3.




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        Judgment vacated.       Case remanded for proceedings consistent with

this memorandum. Jurisdiction relinquished.4

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 12/24/2015




____________________________________________


4
    Heritage’s application to dismiss denied.



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