Always Buy Title Insurance

A yellow sign on a streetlight reads "Home for Sale/We speak Spanish [in Spanish]/No Credit Check"

Everyone told me that buying and renovating a house would be more work than I anticipated, and I believed them. I never expected that, in fewer than two years, while I was spending my life savings renovating an 1895 rowhouse, I would need my title insurance to sue a Texas LLC for $2.7 million over the title.

I wanted a house where I could start a band.

I had started with a goal my Montana roots told me I could attain. I wanted to be able to play my drums and to play in a band. All of the Washington, D.C., Craigslist ads stated in unequivocal terms: “Drummer Wanted. Must Have Practice Space.” Combining my frugal living with the proceeds from two years spent at a large law firm, I saved enough for a house with a basement in the city. I couldn’t afford an updated one, so I saw remodeling in my future. The hours and hours spent with my dad fixing houses, and my summer at Nelson’s Ace Hardware in Whitefish, Montana, convinced me I could handle it.

After six months of shopping, I found a three-story rowhouse with a basement in a neighborhood developing so fast the New York Times published an article calling it a “hip strip.” This house was so hip that no one had meaningfully renovated it since 1895. I plotted and planned for eighteen months, installed new windows and did other maintenance, so I could live there. After the architect drafted plans and I obtained permits, we gutted the house to remove all of the plaster, plumbing, wiring, and wooden framing. I was living in two rooms on the third floor. The house had no internal access to the basement, so I descended three floors, going outside, and back into the house for any running water. It was hell, and I still carry the scars.

I needed to flip the kitchen around, so I could introduce a dining space that the house never had. The plans required us to remove a structural wall to install a steel column and a steel I-beam. Completing that last structural change would allow my contractor to install the new wiring and plumbing and ultimately put the house back together. On a fateful day in August 2010, my contractor and the mason visited to discuss the practicalities of removing that wall. Of course, there, in the deepest depths of the remodeling, the Texas LLC struck.

The Texas LLC Breaks-In.

My contractor did not just call me during the middle of a settlement conference. He called, he left emails, and he texted; my phone was exploding. I learned from my contractor that, while I was at work, Hallbrook Homes, LLC’s, (the Texas LLC) Maryland agent padlocked my brand new, steel front door to the upstairs, broke into the basement, pounded signs in the yard selling my house, and hung more signs on a nearby light post. He jammed a business card between the padlock and my door that read, “Call Me ASAP! You Should Not Be in This House!” In the cab ride home, I felt like I was going to crawl out of my own skin trying to figure out what happened.

My fingers could barely dial the number on the card from my apoplexy, but I reached one of the Texas LLC’s agents. She knew my house. I learned my house’s notoriety around that office because she knew enough to tell me immediately that the Texas LLC had bought my house at a tax sale in 2006, that their tax deed was superior to my 2008 mortgage deed, and that they owned my house. She referred me to the lawyer who was handling the tax deed.

I called, and only the paralegal could take my call. His calm contrasted with my manifesting anxiety. He emailed me the District of Columbia Superior Court default judgment and order directing the Mayor to issue a deed for my house to the Texas LLC. Seeing the court orders crushed me. My legal training taught me how courts loathe reopening cases, and I saw a closed case.

Ownership reflects an illusion of control.

When the Texas LLC invaded my house, I believed it took from me every material good for which I had worked and suffered my entire life. By asserting that now it owned all of my property and all of my money and all of my toil, the Texas LLC forced me to confront, over the days ahead, the reality that ownership is an ephemeral security. Before then, I believed a fiction that no one can take from me my control over material objects. I was wrong. We rent everything. Someone can swoop in and take the physical goods we believe we control, and while we believe the law will help us regain our property, the complex machinery for that simple task will take massive amounts of time. In the end, it may not even work.

I found freedom in believing that even if the Texas LLC could take my house, life would go on. I could create more and build again. But I was not giving up easily. If they wanted my house, I was going to fight them until they pried it from my fingers. I planned to sue everyone involved—the bank that sold me the house, the title company that handled the sale, the title company that handled the refinance, the bank that handled the refinance, and anyone else I could find—and I was going to give up only after a bloody battle resulting in the law clearly allowing the Texas LLC to take my home from me.

I sued the Texas LLC for $2.7 million.

I called my title company who referred me to my title insurance company—who knew that these were different companies? It took four days to reach the American Title representative who covered D.C., Debbie Asero. She was at a conference and had little interest in my situation. Almost no one takes advantage of title insurance, so she did not fully appreciate my urgent situation. I reached her boss. He was a lawyer, and he appreciated the gravity of my predicament. American Title immediately hired Council, Baradel, Kosmerl & Nolan, P.A., in Annapolis, Maryland.

American Title chose that law firm, in part, because they had succeeded in the only other title lawsuit based on the recording statute in my case, D.C. Code § 42-1207(a)-(b) (2010); Trustees v. Anderson, 905 A.2d 181 (D.C. 2006). Although American Title had hired Council, Baradel, I was the client, and I called the shots. The relationship worked just as automobile insurance hires attorneys for its clients.

I thought about filing a motion for a temporary restraining order, but I did not expect the Texas LLC to return to my house. Nevertheless, the Texas LLC failed to respond to our attempts to contact it to resolve the situation. After two months without response, we sued them for $2.7 million. Pettinato v. Hallbrook Homes, LLC, No. 7788-10 (D.C. Super. Ct. Oct. 15, 2010). This included $2 million in punitive damages and various claims in the alternative. We sued them both as if I owned the house and as if I did not own the house. If I had superior title, I sued for trespassing and for property destruction; if I did not have superior title, I sued for unlawful eviction and, essentially unjust enrichment by which I wanted to reclaim the money I had invested in my house thinking, reasonably, it was mine.

Lawsuits take a long time.

I was living in hell when the Texas LLC broke in, and I knew the litigation would take at least two years but maybe longer. Although I had steeled myself to survive six months of construction and was four months into that process, I could not continue to live that way for two more years. In my insurance contract, I found a provision under which my insurance company would pay for living space if title issues prevented me from living in my house. Ms. Asero told me that my situation did not qualify because I had been living in the house, and I could continue to live there. Her boss saw the merit in my complaint, though. He told me that he thought my case was strong and that I could continue the renovations, continue my plans, and finish the house.

I did not give up so easily because I saw that my unjust enrichment claim by which I could recoup my investment was valid as long as I was investing with the reasonable belief that the house was mine; but now that I had a reasonable doubt that the house was mine, it weakened any claims for unjust enrichment for the additional money I would invest in the house. I told Asero’s boss that I would continue the renovations, but that if it resulted that I could not recoup that additional investment from the Texas LLC, I would sue American Title for it. Without actually accepting my terms, he told me that American Title would decline to pay for a lease for me while the litigation was continuing.

A six-year-old statute saved my house

In England and America, we have been litigating title for a thousand years, so I expected that a formula would determine title to the house. Indeed, D.C. Code § 42-1207, passed only six years before my situation arose, plainly resolved the case in my favor. Generally, if a buyer has no notice that someone else owns the house, by recording or otherwise, that buyer is a bona fide purchaser whose title is superior even if the prior owner had sold the title to or lost the title to someone else. Here, my house’s prior owner, Robert Venson, had failed to pay his property taxes. The District just wanted its taxes, so it allows other people to pay outstanding property taxes, and if the property owner does not repay the new taxpayer, that other person can obtain title by filing a lawsuit.

In almost all circumstances, the property owner redeems the property by paying the new taxpayer, and, in D.C., with 18% accrued interest. The Texas LLC paid Venson’s property taxes, but Venson had not redeemed, so the Texas LLC filed a lawsuit to obtain title to my house. Under the common law, that lawsuit would have given me notice of the outstanding claim on title, but D.C. Code § 42-1207 required the Texas LLC also to record a piece of paper, a notice of lis pendens, with the clerk and recorder, so title companies could easily uncover other claims to title. The Texas LLC’s lawyers had not completed this step, so I was a bona fide purchaser, and my title was superior to the Texas LLC’s title.

The prior owner was running a scam.

My neighbors later told me about Venson. They told me he used to roll up in a new Lincoln or Cadillac every few months when they saw him. My google search brought up the FBI and U.S. Department of Justice websites. He had been playing a shell game across Maryland and D.C. from about 2004 to about 2008 as real estate prices were rising with no end in sight—before the Great Recession. Venson bought houses low, had a friend appraiser appraise the properties higher, and borrowed equity against the new appraised value. Then, he used that money to float the housing payments for the many properties he owned. When his money began running low, he repeated the scam. By the time I had found him, the court had sentenced him to ten years for fraud. No one ever connected my property to his pattern of fraud.

A row of houses lines 13th Street Northwest in Columbia Heights, DC. Only my green one has color in this picture.
My Columbia Heights Rowhouse

I won the privilege of continuing to pay my mortgage.

None of that mattered for my lawsuit, though. The bank had foreclosed on Venson long ago, and I had bought it from the bank. My case eventually settled. When all parties appropriately assess litigation risks of a case, parties usually settle to avoid the attorney and expert fees from litigation. We did that here, too. When the Texas LLC finally understood the case and its poor legal position, and when the judge threatened to hold a hearing on the merits without allowing the Texas LLC any discovery, it agreed to settle. It sought its property taxes from the District, and my title insurance paid me about $7,000 in my hard losses for a ruined front door and lost income from an inability to rent my rooms as I had planned.

About eighteen months after the Texas LLC’s agents broke into my house, the judge signed the order quieting title in my name. My nightmare ended. By then, I had rented out two rooms in my house. I had founded two bands to practice in the basement. We’re playing together still. The renovations have continued because the property had been neglected for so many years, but I am happy simply to be able to spend my time and money on a house that I own—as much as anyone can own anything.

[UPDATED October 10, 2017: added captions and pictures and fixed typos]

1 thought on “Always Buy Title Insurance”

  1. Grasshopper, you have forgotten your Montana roots. In D.C. its called litigation…here its simply called 12 Gauge.

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