COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 71877 FIRST AMERICAN TITLE : INSURANCE CO. : : JOURNAL ENTRY PLAINTIFF-APPELLANT : : AND v. : : OPINION ISAAC HAGGINS : : DEFENDANT-APELLEE : : DATE OF ANNOUNCEMENT OF DECISION: JANUARY 29, 1998 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas, Case No. CV-283964. JUDGMENT: AFFIRMED. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiff-appellant: Robert A. Wood, Esq. Midland Title Security, Inc. One Erieview Plaza, Suite 500 Cleveland, Ohio 44114-1720 For Defendant-appellee: Michael Troy Watson, Esq. Watson & Watson, Attorneys The Lincoln Building, Suite 400 1367 East Sixth Street Cleveland, Ohio 44114 -2- SWEENEY, JAMES D., J.: Plaintiff-appellant First American Title Insurance Company (First American) appeals from the trial court's judgment in favor of the defendant-appellee Isaac Haggins. First American, as subragor of its insured, Pebblebrook Properties, Inc. (Pebblebrook), filed this action to recover money it paid on an outstanding mortgage on property located at 872 Yellowstone Road, Cleveland Heights, Ohio. Subsequent to a bench trial, the court found that the appellant suffered damages through its own fault, and entered a defense verdict. Many of the facts pertinent to the resolution herein are undisputed. The property was originally owned, subject to a mortgage held by Cardinal Federal Savings, by Wayne Littlejohn and Delphine Littlejohn. The mortgage was assigned by Cardinal to Schmidt Mortgage Company, who in turn assigned it to Home State Savings Association. While the mortgage was held by Home State, Schmidt retained the servicing rights to the loan. Subsequent to the folding of Home State, the Resolution Trust Corporation sold the note to Hunter Savings Association. In 1981, the Littlejohns sold the property to the appellee for the sum of $25,550.27. The appellant submitted as evidence a tax assessment form signed by the appellee, and based upon this document, the appellant asserts that the appellee assumed the balance of the mortgage. The appellee, a licensed real estate broker, owned the property for approximately thirty-four days. The property was purchased from the appellee by Paul Winfrey for the -3- sum of $50,000.00. The warranty deed given to Winfrey by the appellee made no mention of the outstanding mortgage. Both the appellee and Mrs. Haggins testified at trial that the mortgage was paid off in full out of the proceeds of the sale to Winfrey. The record demonstrates that Winfrey made payments on a mortgage off and on until 1988. At this point an action in foreclosure was filed by Schmidt agaist Winfrey. See Cuyahoga County Court of Common Pleas case number 163711. Winfrey filed for bankruptcy thereby staying the foreclosure. Payments by Winfrey resumed, the foreclosure action was held in abeyance, then Winfrey stopped payments once more. The foreclosure action proceeded, and Winfrey again filed for bankruptcy. In January 1994, Winfrey, by a warranty deed, sold the property to Pebblebrook for the sum of $36,500.00. Title Xperts Agency, Inc., an agent of First American, performed the title search for the sale and discovered neither the foreclosure action nor the bankruptcies. Pebblebrook purchased a title guarantee policy from the appellant. In May 1994, Pebblebrook and Title Xperts received notification of the existing mortgage lien and the pending foreclosure action. Title Xperts notified the appellant, who ultimately paid the mortgage balance of $26,007.95. The appellant filed this action as the subragor of Pebblebrook pursuant to the contract between them seeking reimbursement for the mortgage. The appellant set forth two counts, the first for breach of warranty and the second for unjust enrichment. -4- The trial court in its decision determined that: 1) appellant admitted its obligation to pay for the damages suffered by Pebblebrook; 2) that appellant breached its contract with its insured; and, 3) that the breach was the proximate cause of the damages suffered by Pebblebrook. The court made no finding with respect to the appellant's contention that Pebbelbrook's damages were caused by the appellee's breach of warranty. Specifically, the court held that: 1) the breach of warranty, if any, was at best a remote cause of the damages; and 2) that the proximate cause of Pebblebrook's damages was a breach of its title guarantee by the appellant and not by a breach of the covenant of warranty of the appellee. The appellant sets forth the following four assignments of error: THE TRIAL COURT ERRED IN FINDING THAT THE PLAINTIFF/APPELLANT BREACHED ITS CONTRACTUAL OBLIGATION UNDER THE TITLE GUARANTEE ISSUED TO PEBBLEBROOK PROPERTIES, INC. AND THAT SUCH BREACH WAS THE PROXIMATE CAUSE OF PLAINTIFF/APPELLANT'S DAMAGES. THE TRIAL COURT ERRED IN FAILING TO HOLD THAT THE COVENANT OF SEISIN AND COVENANT AGAINST ENCUMBRANCES IN THE HAGGINS DEED TO WINFREY EXTENDED TO SUBSEQUENT EVENTS. THE TRIAL COURT ERRED IN UTILIZING ONE OF THE ELEMENTS OF A TORT ACTION, I.E. PROXIMATE CAUSE, TO DECIDE A CONTRACT CASE. THE TRIAL COURT ERRED IN NOT FINDING FOR THE PLAINTIFF/APPELLANT ON ITS SECOND CAUSE OF ACTION FOR UNJUST ENRICHMENT. In the first assignment of error, the appellant asserts that it did not breach its contract with Pebblebrook, rather, when it -5- paid the mortgage it fulfilled its contractual obligation to its insured. In the second assignment of error, the appellant argues that it was permitted to seek reimbursement for its loss from the appellee, a remote grantee, and was not required to seek recovery from Winfrey, the immediate grantee. In the third assignment of error, the appellant states that the court erred in using tort theories to resolve a contract cause of action. Finally, in the fourth assignment of error, the appellant asserts that the appellee's failure to pay off the mortgage lien resulted in the appellee's being unjustly enriched in the amount of the mortgage payoff. It must first be stated that the arguments presented by the appellant are all based upon the assumption that the appellee failed to pay the mortgage and improperly conveyed a warranty deed to Winfrey. While this certainly may have been the case, the record indicates that the trial court heard evidence that the reason a warranty deed was used for the transfer was because the appellee had, in fact, paid the mortgage. If the appellee is to be believed, it was the mortgagee bank who was unjustly enriched by the amount of the mortgage, not the appellee. This court notes that the trial court specifically chose to make no finding of fact as to who committed the error, the appellee in failing to pay the mortgage, or the mortgagee in failing to record the satisfaction of the note. Instead, the trial court essentially found that while the appellant was subrogated to the rights, if any, of its insured, Pebblebrook, nonetheless, it was -6- not permitted to recoup its losses from the appellee because of its own professional negligence in failing to ascertain both the outstanding foreclosure and bankruptcy cases. In order to entitle one to subrogation, his equity must be strong and his case clear. State v. Jones (1980), 61 Ohio St.2d 99. Where an imperfect title search has been performed and relied upon by a lender, equity will not reward such negligence by applying the doctrine of subrogation in favor of the negligent party. Jones, supra, citing to Ft. Dodge Building & Loan Assoc. V. Scott (1892),86 Iowa 431. To do so would encourage carelessness. Id. While the facts in Jones, supra, differ from the ones sub judice, the principle applied by the Ohio Supreme Court may be applied herein. The Jones court determined that where one's own negligence precipitates a loss, a court may apply the precepts of equity to deny subrogation. Here, the trial judge determined that even if the appellee breached the warranty and/or was unjustly enriched, the failure by the appellant to uncover outstanding litigation indicative of a cloud on the title, precluded it from recovering its losses from the appellee. While the trial court may have utilized different language in its opinion than the Ohio Supreme Court, this court finds that the trial court used the same logic and reached the same conclusion. The appellant's assignments of error are overruled. Judgment affirmed. -7- It is ordered that appellee recover of appellant his costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. ANN DYKE, P.J., and DIANE KARPINSKI, J., CONCUR. ______________________________ JAMES D. SWEENEY JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the .