It is important to keep track of the bad guys, and here is one operating in Baltimore City.

I just obtained a $31,000 judgment against a fellow who has been "title squatting" in Baltimore City. Take a look at the complaint that was filed in the circuit court and you'll see a very simple scheme, particularly in an economy where so many properties are being abandoned by their record owners. Another lawyer has been chasing him for the same conduct, and so I share the facts of my case and an outline of the scheme to alert those of you handling claims in Baltimore City to this type of fraud.

Here's the scheme, step-by-step:

• True owner of the property, "Good Realty LLC" allows its charter to lapse with the Maryland State Department of Assessments and Taxation.
• Mr. Kutchera, the title squatter, identifies the property and forms a new entity, called "Good Realty, LLC."  Notice the slight change in the name, by adding a comma after "Realty."
• Mr. Kutchera entices a settlement company to assist in the transfer of title to the property from "Good Realty" into his other entity, Acuity Real Estate Investments, LLC.
• Mr. Kutchera and Acuity then sell the property to an unsuspecting purchaser, who intends to renovate the property and place it on the rental market.
• Mr. Kutchera and Acuity take back owner financing for all but closing costs and the purchaser's deposit.
• True owner wakes up and sues buyer, alleging that she bought nothing from a thief. And he's right.

It's a close call on whether the settlement company should have caught this scheme on the sale from Mr. Kutchera to the innocent buyer.  Because he had already conducted a sham transaction to transfer title into his longstanding Acuity entity, it was not expected that the settlement company would go back to a prior transaction to investigate the bona fides of the limited liability company.

What was particularly galling about this case was Mr. Kutchera's early demands for payment under the owner financed deed of trust, and his threats of foreclosure. It didn't take much to demonstrate the true fraud to Mr. Kutchera's lawyer, who then withdrew from the engagement.

I suspect that this form of fraud is not limited to this case, and the one being handled by another lawyer.  And if Mr. Kutchera is doing it, then there are surely others engaged in the same scheme.

Be vigilant.

A title insurer's duty to defend may not terminate until the check is written!

A New York case feeds the debate about when a title insurer's duty to defend ends. In Busch v. Fidelity National Title Ins. Co., 2011 N.Y. Slip Op. 03948, 2011 WL 197259 (N.Y.A.D. 3 Dept.), the title insurer offered money to its insured for diminution in value caused by a neighbor's claimed easement over the insured's property.  Fidelity stopped paying for the insured's counsel, and the insured continued the litigation for several years, hiring a succession of lawyers.

Fidelity was sued by its insured, who sought recovery of fees he spent in the litigation.  Fidelity took the position that its duty to defend ended when it made an offer to pay for diminution in value.  The insured alleged that there was no such agreement made.

The appellate court said that more litigation was necessary to flesh out the terms of the offer, and whether there was a settlement.  It was important to the court that Fidelity never tendered a settlement check. But the court was clear that an offer, alone, does not terminate the duty to defend.  There must be  a tender of money, a signed agreement or a release.

So, my claim handling friends, what is the lesson?  It is sound practice, in any state, to tender a check and obtain a signed document.  And if the check is not negotiated, or the agreement is not signed, the insurer is left to either continue defending or to file a declaratory judgment action that seeks relief from the policy.