Chicago Title Ins. Co. v. Runkel Abstract & Title Co.

• Decision Date: 06 April 2009
• Docket Number: No. 08-cv-341-bbc.,08-cv-341-bbc.
• Citation: 610 F.Supp.2d 973
• Court: U.S. District Court — Western District of Wisconsin
• Parties: CHICAGO TITLE INSURANCE COMPANY, Plaintiff, v. RUNKEL ABSTRACT & TITLE COMPANY, Defendant.

Page 973

610 F.Supp.2d 973

CHICAGO TITLE INSURANCE COMPANY, Plaintiff, v. RUNKEL ABSTRACT & TITLE COMPANY, Defendant.

No. 08-cv-341-bbc.

United States District Court, W.D. Wisconsin.

April 6, 2009.

John Rothstein, Andrew Paul Beilfuss, Cristina D. Hernandez-Malaby, Quarles & Brady LLP, Milwaukee, WI, Michael Kasdin, Thomas Francis Geselbracht, DLA Piper, Chicago, IL, for Plaintiff.

William P. Croke, Von Briesen & Roper, S.C., Milwaukee, WI, for Defendant.

OPINION AND ORDER

BARBARA B. CRABB, District Judge.

In this civil action for monetary relief, plaintiff Chicago Title Insurance Company alleges that defendant Runkel Abstract & Title Company breached its agency agreement with plaintiff when it failed to exempt a properly recorded restrictive covenant from a title insurance commitment that it issued on behalf of plaintiff. Plaintiff seeks indemnity from defendant for its losses resulting from the breach. Jurisdiction is present. 28 U.S.C. § 1332.

Before the court are the parties' cross motions for summary judgment. Dkt. ## 18 and 25. Plaintiff contends that it is entitled to judgment as a matter of law because defendant has admitted breaching the agency agreement. Although defendant admits that it erred in not exempting the restrictive covenant, it moves for summary judgment on the ground that plaintiff forfeited its right to indemnity under Wisconsin law by failing to give defendant an opportunity to protect its interests. Because the parties agreed that defendant breached the settlement agreement and I find that plaintiff did not forfeit its right to indemnity under state law by failing to act in good faith toward defendant, I am granting plaintiff's motion for summary judgment as to liability on its breach of contract claim. Defendant's motion for summary judgment will be denied.

Additionally, plaintiff has moved to strike evidence submitted by defendant in support of its motion for summary judgment as inadmissible and asked the court to disregard any proposed facts relying on the evidence. Dkt. # 36. Plaintiff asserts that an October 24, 2007 settlement letter between the parties in which plaintiff purportedly makes admissions concerning its liability is inadmissible under Fed.R.Evid. 408. Plaintiff also contends that statements made to a newspaper by unknown Wausau property owners about rezoning of the property at issue are inadmissible hearsay under Fed.R.Evid. 801(c). Defendant has not opposed the motion. Because I agree that the settlement letter and property owner statements are inadmissible, I will disregard them and any proposed fact relying on them. Accordingly, plaintiff's motion to strike will be denied as unnecessary.

For the purpose of deciding this motion, I find from the parties' proposed findings of fact and the contract executed by the parties that there is no genuine issue with respect to the following material facts.

UNDISPUTED FACTS

Plaintiff Chicago Title Insurance Company is a Nebraska corporation that is authorized to write title insurance in Wisconsin. Defendant Runkel Abstract & Title Company is a title agency incorporated in Wisconsin, with its principal place of business in Marathon County, Wisconsin.

On September 13, 1999, the parties entered into a written agency agreement, which was in full force and effect on or about December 6, 2005. The agreement granted defendant authority to "validate, countersign, issue and deliver commitments, policies and endorsements" for plaintiff and required defendant to perform its duties "with due regard to recognized title insurance underwriting practices and in accordance with the rules and instructions" of plaintiff. The agreement contained an indemnification clause, which stated that defendant "shall be liable to and agrees to indemnify and to save harmless [plaintiff] for all attorney's fees, court costs, expenses and loss or aggregate of losses resulting from" omissions or other inaccuracies in any commitment or policy and "errors and/or omissions in the abstracting or examination of title." With respect to claims, the agreement stated that defendant "shall lend all reasonable assistance, without charge to [plaintiff], in investigating, adjusting or contesting" a claim but "shall not be required to act as or provide counsel in connection with said claim." The agreement also prevented defendant from adjusting any claim for loss for which plaintiff might become liable unless defendant first obtained written approval from plaintiff.

On or about December 6, 2005, defendant issued a title insurance commitment on behalf of plaintiff to WM Development, LLC for an 88-acre property adjoining the municipal boundaries of Wausau, Wisconsin. At the time WM purchased the property, it was zoned A-1 agricultural and was burdened with a restrictive covenant, which limited 33.33 acres of the property to single family residential or agricultural use. Defendant failed to exempt the restriction from the coverage of the title insurance commitment. In a fax dated April 19, 2006 to WM's counsel, defendant admitted the defect and admitted that it should have excepted the defect from the coverage of the title insurance commitment it issued on behalf of plaintiff: "The restriction was overlooked in [the] title examination and erroneously omitted from [the] title commitment."

WM made a claim for damages against plaintiff for the decrease in value of the property attributable to the defect in title. WM put extreme pressure on plaintiff to resolve the claim during 2006, threatening to sue plaintiff for bad faith if it failed to do so. On October 10, 2006, plaintiff and WM entered into an agreement for binding appraisal, which provided that an appraiser would assess the property's diminished value pursuant to a "joint instruction letter." Plaintiff and WM agreed that the appraiser's determination would be binding and uncontestable. Marvin Pilgrim, who works for defendant, recommended an appraiser whom WM and plaintiff agreed to accept.

On October 2, 2006, plaintiff's attorney submitted a draft joint instruction letter to WM's attorney and sent a copy to Pilgrim. Plaintiff and WM extensively negotiated the contents of the joint instruction letter, especially the terms related to the property's use, zoning and restrictive covenant. WM asserted that the value of the loss should be based on the property's intended use as a combined development of single family and multifamily residences. WM argued that the property would have been rezoned to permit all of those uses had a portion of it not been encumbered by the restrictive covenant. Plaintiff asserted that pursuant to the policy, the loss should be measured by WM's use of the property as of the exact date on which the defect was discovered.

Although the original appraiser declined to assess the property, plaintiff and WM submitted a joint instruction letter to appraiser Ralph Banke on or around December 18, 2006. The resulting instruction letter did not adopt plaintiff's position but reflected a compromise between plaintiff and WM. It instructed Banke to determine "the diminution in value of the [33 acres] caused by the defect in title as of the date of the discovery of the defect," or April 14, 2006, by providing two values: the fair market value of the property subject to the defect (the "burdened value") and the fair market value of the property based on the assumption that no such defect existed (the "unburdened value"). Plaintiff agreed to pay WM the loss, or the difference between the unburdened value and the burdened value. In negotiating the joint instruction letter, plaintiff's attorney hoped that implicit in the letter was the direction to the appraiser that he value the property with its existing zoning.

Sometime after December 18, 2006, plaintiff's attorney told Pilgrim about the settlement negotiations and explained to him that plaintiff most likely would expect defendant to pay for the loss. Plaintiff's attorney advised Pilgrim that defendant should put its errors and omissions insurance carrier on notice. Pilgrim responded that the effect of the claim might capsize his company.

On January 5, 2007, Banke issued a report assessing the diminished value of the 33 acres at $833,250.00. He produced two valuations: one for the property in its present condition with deed restrictions and the second with an anticipated zoning change. Plaintiff apprised defendant of the status of the claim and provided copies of draft appraisal agreements. Defendant did not attempt to control or otherwise interject its opinion into the pending litigation or the settlement of the claim. On January 19, 2007, Pilgrim told plaintiff's attorney that defendant would be sending notice of the claim to its insurance carrier. On January 22, 2007, plaintiff's attorney notified Pilgrim in writing of the indemnity provision in the agreement and plaintiff's expectation that defendant cover plaintiff's losses and expenses resulting from the title defect.

In a February 21, 2007 letter to plaintiff's counsel, WM notified plaintiff that it was in default of their binding appraisal agreement. On February 27, 2007, plaintiff's counsel wrote Banke, pointing out that he had failed to follow instructions provided in the joint instruction letter and asked that he complete the appraisal as instructed. At that time, plaintiff also filed suit against WM in state court seeking an order declaring in part that the parties had not yet received an appraisal as contemplated by the agreement. WM took the position that the joint instruction letter was silent on the rezoning issue and if plaintiff had wanted Banke to make other assumptions, it should have negotiated those as part of the joint instruction letter.

Ultimately, plaintiff settled the claim by paying WM the assessed loss amount of $833,250. Plaintiff incurred attorneys fees in excess of $111,829.73 in investigating and settling the claim with WM. Although plaintiff has demanded that de...