Chi. Title Ins. Co. v. Bristol Heights Assocs., LLC, 34040.

• Decision Date: 07 May 2013
• Docket Number: No. 34040.,34040.
• Citation: 142 Conn.App. 390,70 A.3d 74
• Court: Connecticut Court of Appeals
• Parties: CHICAGO TITLE INSURANCE COMPANY v. BRISTOL HEIGHTS ASSOCIATES, LLC, et al.

142 Conn.App. 390

70 A.3d 74

CHICAGO TITLE INSURANCE COMPANY

v.BRISTOL HEIGHTS ASSOCIATES, LLC, et al.

No. 34040.

Appellate Court of Connecticut.

Argued Nov. 14, 2012.

Decided May 7, 2013.

Jeffrey J. Tinley, Waterbury, with whom, on the brief, was William F. Gallagher, New Haven, for the appellant (named defendant).

Christopher F. Girard, Hartford, with whom was Edward V. O'Hanlan, Stamford, for the appellee (plaintiff).

BEACH, ESPINOSA and DUPONT, Js.^*

ESPINOSA, J.

The defendant Bristol Heights Associates, LLC,¹ appeals from the judgment of the trial court rendered in favor of the plaintiff, Chicago Title Insurance Company, in connection with the underlying civil action in which the plaintiff sought a declaratory judgment to determine its obligations under a title insurance policy (policy) issued to the defendant for real property located near Daniel Road and Kingswood Drive in the city of Bristol (property).² The defendant claims that the trial court improperly (1) found that the defendant breached the policy by failing to cooperate with the plaintiff's coverage investigation, thereby prejudicing the plaintiff; (2) found that the defendant's payment under protest of the tax lien on the property was voluntary, such that it violated the policy and prejudiced the plaintiff; (3) found that the plaintiff was relieved of its coverage obligation to the defendant when the plaintiff's right of subrogation was unimpaired; and (4) refused to consider evidence supporting the defendant's claim that the plaintiff acted in bad faith.³ We affirm the judgment of the trial court.

The following facts as found by the court and procedural history of the case are relevant to our resolution of this appeal. On May 25, 1994, Lew J. Volpicella purchased the property involved in the underlying action and received a quitclaim deed from PB Real Estate, Inc. (PB Real Estate). At the time of the purchase, the property was a single parcel of land. Formerly, the property had been subdivided into 147 lots. The subdivision expired on March 3, 1993. The city of Bristol (city) never sent a bill to Volpicella for taxes due on the October 1, 1993 grand list. The payments due from Volpicella for the July, 1994 and January, 1995 installments of that tax went unpaid. On May 31, 1995, the city recorded tax liens for the October 1, 1993 grand list under PB Real Estate; the liens were filed individually against the 147 lots even though the property was a single parcel as of March 3, 1993. The city gave notice of the liens to PB Real Estate, but not to Volpicella. Volpicella paid the taxes on the property for the grand lists after 1993, and no overdue balance was reflected on any of the bills that he received. The city failed to apply any of Volpicella's subsequent tax payments to the oldest, past due balance that it claimed was due from the 1993 grand list.

Volpicella entered into an agreement with the defendant in which he became a member of the defendant and conveyed the property to the defendant. Volpicella conveyed the property by way of a warranty deed dated April 2, 2003, which was subsequently recorded on May 8, 2003. The deed contained no exception for the tax liens on the 1993 grand list. Volpicella was given an unsecured promissory note for $800,000 as the consideration for the conveyance. At the time of the transfer of the property, the defendant purchased from the plaintiff the policy, which insured title to the property. The defendant's attorney, Richard P. Kuzmak, served as the plaintiff's issuing agent with respect to the policy. When Kuzmak performed a title search on the property, he did not locate the city's tax liens against the property because they were filed against the subdivided lots owned by PB Real Estate, not Volpicella.

On August 16, 2005, the defendant received a demand from the city for payment of the 1993 taxes. The defendant never notified Volpicella that it was asserting any claim against his warranty deed, and it did not request that he pay the tax liens. On September 1, 2005, Kuzmak wrote a letter to one of the plaintiff's attorneys, Phillip Fanning, regarding the receipt of the tax lien, in which he requested a meeting. In a meeting on October 27, 2005, Kuzmak requested that Fanning and the plaintiff not do anything about the liens because the money the defendant owed Volpicella under the promissory note exceeded the amount of the tax lien and because the validity of the tax liens was in question. Fanning did not believe that the meeting was related to a claim by the defendant under the policy, but rather believed it was for the purpose of discussing the title issue that had arisen.

Kuzmak also notified Volpicella's attorney, James Ziogas, that he knew the liens violated a covenant in the warranty deed. The defendant believed that the legitimate tax liability on the property was $11,000 and that, due to the covenants of the warranty deed from Volpicella, the tax liability was his responsibility. In the fall of 2005, Kuzmak, Ziogas and members of the defendant met with city officials in an effort to resolve or compromise the liens with the city. They ultimately were unable to resolve or compromise the liens. No request was ever made for Fanning to participate in any meeting or telephone call between the defendant, its representatives and the city.

In late 2005, the defendant began to refinance the debt related to the property. A mortgage related to these efforts, which was secured by the property, was due to be repaid on February 26, 2006. During this time, the defendant did not provide any information to Fanning or the plaintiff about any potential refinancing, and it did not request that the plaintiff issue a new policy to insure over the lien to facilitate the refinance. The plaintiff acknowledged receipt of a title claim from the defendant on December 27, 2005, in response to a letter sent by Kuzmak to the plaintiff's claims office. The plaintiff assigned the claim to attorney Norma B. Levy for investigation. In late December, 2005, or early January, 2006, Kuzmak sent a letter to the plaintiff advising that the city was considering referring the tax liens on the property to corporation counsel for the collection of the tax.

Levy immediately investigated whether the liens were valid, whether there were viable defenses to the city's threatened claims and whether the liens were covered under the policy. At the request of Levy, Kuzmak performed a legal analysis regarding the validity of the liens, the results of which indicated that the proper assessment of the property would have produced a substantially smaller amount of tax. Levy believed that there were viable defenses to any action initiated by the city. While conducting her investigation, Levy obtained three extensions of time before the city would refer the matter to outside counsel to initiate collection efforts so that the plaintiff could continue to investigate the claim. The tax collector never indicated that the city was going to commence a foreclosure action.

On March 8, 2006, the defendant paid the tax liens on the property in full. As of that date, the city had not initiated a foreclosure action or referred the matter to outside counsel for collection. At trial, it was stipulated that the defendant did not notify the plaintiff or obtain its consent prior to paying the liens.

The plaintiff filed the operative revised complaint in the underlying action on May 30, 2007. In the complaint, the plaintiff sought a declaratory judgment that (1) the defendant's coverage under the policy was precluded due to the defendant's prior knowledge of the tax liens when it took title to the property; (2) the defendant's coverage under the policy was precluded because the defendant suffered no loss by paying the taxes when it owed Volpicella $800,000 on the promissory note; (3) the defendant's voluntary payment of the taxes excluded coverage under the policy pursuant to subsection 9(c) ⁴ of the conditions and stipulations section of the policy; (4) the plaintiff's obligations under the policy were terminated due to the defendant's breach of its duty to cooperate under sections 4 and 5⁵ of the conditions and stipulationsin the policy; and (5) the defendant breached the implied duty of good faith and fair dealing inherent in their contractual relationship.⁶ The defendant filed a counterclaim alleging breach of contract, breach of the covenant of good faith and fair dealing, and a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42–110a et seq.

On December 30, 2009, the court, Hon. Joseph M. Shortall, judge trial referee, granted a motion for summary judgment filed by the plaintiff regarding the defendant's bad faith and CUTPA claims, leaving the defendant's breach of contract count as the only remaining counterclaim to be resolved at trial. On February 2, 2009, the defendant withdrew all three counts of its counterclaim. On September 8, 2010, the court granted the plaintiff's motion to restore to the docket the defendant's withdrawn counterclaim for breach of contract, “subject to all relevant rulings of the court prior to, and following, its withdrawal on February 2, 2010 (# 218.50).”

On August 18, 2011, the court rendered judgment in favor of the defendant as to count one of the plaintiff's revised complaint regarding the defendant's prior knowledge of the taxes, count two regarding the loss suffered by the defendant and count five regarding the defendant's alleged bad faith. The court rendered judgment in favor of the plaintiff as to count three regarding the defendant's voluntary payment, count four regarding the defendant's breach of the duty to cooperate under section 5 of the conditions and stipulations ⁷ in the policy and the defendant's counterclaim. The present appeal followed. Additional facts will be set forth as necessary.

I

The defendant raises several claims related to the court's finding that it breached...