631 N. Broad St., LP v. Commonwealth Land Title Ins. Co.

Decision Date23 August 2018
Docket NumberCIVIL ACTION NO. 17-02805
Parties631 NORTH BROAD STREET, LP, Plaintiff, v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Eastern District of Pennsylvania
MEMORANDUM

Before the Court are Defendant's Motion for Summary Judgment (Doc. No. 10), Plaintiff's Response in Opposition thereto and its own Cross-Motion for Summary Judgment (Doc. No. 13), and Defendant's Reply (Doc. No. 12). For the reasons set forth below, we grant Defendant's Motion for Summary Judgment and deny Plaintiff's Cross-Motion for Summary Judgment.

This case arises from 631 North Broad Street, LP's ("631 LP") title insurance policy with Commonwealth Land Title Insurance Company ("Commonwealth"). At the heart of 631 LP's Complaint is its allegation that Commonwealth breached the policy when it refused to pay for 631 LP's litigation expenses in a dispute with the owner of a neighboring property. Commonwealth has moved for summary judgment on the grounds that the underlying litigation did not trigger its duty to defend, and that even if such an obligation was triggered, the policy's survey exception excused its obligation.

This Motion is fully briefed and ripe for the Court's adjudication. The Court has considered the parties' submissions and decides this matter without oral argument. Fed. R. Civ. P. 78; Loc. R. Civ. P. 7.1(f).

I. FACTUAL BACKGROUND

On November 6, 2015, 631 LP purchased a parcel of real property located at 631 North Broad Street, Philadelphia, Pennsylvania (the "631 Property"). 631 LP received the 631 Property by deed, which was recorded with the City of Philadelphia Commissioner of Records on November 10, 2015. (631 LP Ex. C; Commonwealth Ex. 3-A). In relation to its purchase of the 631 Property, 631 LP obtained a title insurance policy (the "Policy") from Commonwealth. (631 LP Ex. A; Commonwealth Ex. 1-A).

Under the Policy, Commonwealth became obligated to "provide for the defense of [631 LP] in litigation in which any third party asserts a claim covered by [the Policy]." (631 LP Ex. A; Commonwealth Ex. 1-A, at 6). The Policy's coverage extended to the boarders of the 631 Property, as described in Schedule A of the Policy. (631 LP Ex. A). The land described in Schedule A matches the language of the property's deed.1 Id. The Policy furtherestablished 631 LP's coverage by noting that the Policy's coverage "does not include any property beyond the lines of the area described in Schedule A." Id. Lastly, the Policy explicitly stated that Commonwealth's "obligation is limited to only those stated causes of action alleging matters insured against by this policy[,] not [] causes of action that allege matters not insured against by this policy." Id.

The Policy also included a common survey exception. (631 LP Ex. A, Schedule B). Through the survey exception, Commonwealth would be excused from paying 631 LP's costs, attorneys' fees, or expenses which arose by reason of "[e]asements, encroachments, overlaps, shortages of area, boundary line disputes and other matters affecting title that an accurate and complete survey would disclose." (631 LP Ex. A; Commonwealth Ex. 1-A).

The parties do not dispute that 631 LP did not have a survey performed prior to purchasing the 631 Property. (Def.'s Br. in Supp. of Mot. for Summ. J. at 7; Pl.'s Br. in Opp. to Mot. for Summ. J. at 13). The parties also do not dispute that a wall located on the southern boarder of the 631 Property (the "South Wall") extends approximately five inches onto a neighboring parcel located at 619 North Broad Street, Philadelphia, Pennsylvania (the "619 Property").

The 619 Property is owned by Congregation Rodeph Shalom ("CRS"). (631 LP Ex. H; Commonwealth Ex. 1-B). CRS received the 619 Property by deed, which was recorded in July 2009. (631 LP Ex. D; Commonwealth Ex. 4-1).2 In relation to its purchase of the 619 Property, CRS also purchased a title insurance policy from Commonwealth. Id.

631 LP eventually tried developing the 631 Property into residential apartments. (631 LP Ex. H; Commonwealth Ex. 1-B). On October 27, 2015, 631 LP filed an application for Zoning/Use Registration Permit with the Department of Licenses and Inspections. (631 LP Ex. D; Commonwealth Ex. 3-B). 631 LP requested a zoning variance to expand and convert the existing office building into residential apartments without having to include the number of parking spaces required under the zoning code. Id. 631 LP's development plans included demolishing the South Wall.

On February 17, 2016, CRS objected to 631 LP's application by submitting their own letter to the Department of Licenses and Inspections. (631 LP Ex. B; Commonwealth Ex. 3-D). In its letter, CRS objected to 631 LP's application on a number of grounds, one being that 631 LP's demolition of the South Wall would violate CRS' ownership interest in the South Wall. Id.

In reviewing the letter, it appears that CRS was inconsistent about the extent of its purported ownership interest in the South Wall. In a few instances, CRS' more general statements can be interpreted as claims of total ownership of the entire wall. See e.g., id. at 2 ("the wall is owned by [CRS]"); id. at 3 ("[CRS] Owns the Wall"). However, in other instances in the letter, CRS did limit its claimed ownership interest to the portion of the South Wall located within the bounds of its deed and as reflected in a survey of the 619 Property performed in 2011, both of which CRS directly referenced and attached to the letter. Id. at 3-5.

The Department of Licenses and Inspections ultimately denied 631 LP's plans to remove the South Wall. In response, 631 LP filed a lawsuit against CRS (the "Underlying Action"). (Commonwealth Ex. 3). Seeking declaratory relief and to quiet title, 631 LP claimed that it was the sole owner of the South Wall, and that it was therefore entitled to demolish the South Wall without CRS' consent. Id. ¶¶ 33-34, 38-48.

In direct response to 631 LP's claim that it owned the entire South Wall, CRS stated in its answer (the "Underlying Answer") that, in fact, CRS owned a portion of the South Wall. CRS attached as an exhibit to the Underlying Answer a copy of the 619 Property's deed and the 2011 survey showing "the portion of the South Wall owned by Defendant." Id. at ¶ 5. Indeed, CRS consistently defined "its portion of the South Wall" withreferences to its recorded deed and survey. Id. at ¶¶ 12, 20, 26, 32. These attachments show exactly where the property line runs through the South Wall separating the 619 Property from the 631 Property. (Commonwealth Ex. 4-1).

Relevant to the dispute at hand, both 631 LP and CRS requested Commonwealth pay for their litigation expenses in the Underlying Action pursuant to each of their title insurance policies. (Commonwealth Ex.'s 1-C, 6). Commonwealth accepted CRS' claim for coverage because 631 LP claimed ownership in the entire wall, including the portion that encroached on the 619 Property. (631 LP Ex. I; Commonwealth Ex. 1-C). In its denial letter to 631 LP, Commonwealth stated that CRS' claims in the Underlying Answer did not implicate land covered under the Policy. Because CRS only claimed that it owned the portion of the wall located on the 619 Property, CRS' claims did not affect the covered land described in Schedule A of 631 LP's Policy. Id. Commonwealth also invoked the survey exception, stating that it had no obligation to provide coverage under the Policy because an accurate and complete survey would have disclosed the encroachment or boundary dispute relating to the South Wall. Id.

After it filed its Underlying Answer, CRS filed a motion for a preliminary injunction to enjoin 631 LP from demolishing the South Wall. (631 LP Ex. D; Commonwealth Ex. 4). On March 1, 2017, the Court of Common Pleas granted the motion, finding that theSouth Wall was a party wall that stood on both sides of the property line. (631 LP Ex. H; Commonwealth Ex. 1-B). The Court of Common Pleas ultimately ruled in favor of CRS on 631 LP's claims and entered a permanent injunction prohibiting 631 LP from demolishing any part of the South Wall without CRS' consent. Id.

On March 15, 2017, 631 LP made an additional request for coverage, which Commonwealth again denied. (Commonwealth Ex. 1-E). Once again, Commonwealth explained that it had no obligation to provide coverage under the survey exception. Commonwealth also stated that "the definition of land insured by the Policy does not include any property beyond the lines of the area described or referred to in Schedule A; specifically any portion of the [619 Property]." (631 LP Ex. K; Commonwealth Ex. F).

631 LP commenced this lawsuit on May 31, 2017 alleging that Commonwealth had breached the Policy by failing to defend 631 LP in the Underlying Action, that Commonwealth's conduct in defending CRS estopped it from refusing to defend 631 LP, and that Commonwealth's breach constitutes a violation of the Pennsylvania Bad Faith Statute, 42 Pa. C.S. § 8371. Commonwealth moves for summary judgment in its favor on all three claims, while 631 LP cross-moves for summary judgment on its claim for breach of contract.

II. LEGAL STANDARD

When ruling upon a motion for summary judgment, the courts are generally guided by the language contained in Fed. R. Civ. P. 56(a):

A party may move for summary judgment, identifying each claim or defense - or the part of each claim or defense - on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion.

In reading this rule, it is clear that summary judgment is appropriately entered only when the movant shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Willis v. UPMC Children's Hospital of Pittsburgh, 808 F.3d 638, 643 (...

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