Chicago Title Ins. v. 100 Inv. Ltd. Partnership

• Citation: 355 F.3d 759
• Decision Date: 22 January 2004
• Docket Number: No. 02-2474.,02-2474.
• Parties: CHICAGO TITLE INSURANCE COMPANY, Plaintiff-Appellant, v. 100 INVESTMENT LIMITED PARTNERSHIP, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

355 F.3d 759

CHICAGO TITLE INSURANCE COMPANY, Plaintiff-Appellant, v. 100 INVESTMENT LIMITED PARTNERSHIP, Defendant-Appellee.

No. 02-2474.

United States Court of Appeals, Fourth Circuit.

January 22, 2004.

Argued: December 4, 2003.

Decided: January 22, 2004.

COPYRIGHT MATERIAL OMITTED

ARGUED:

Richard Eugene Hagerty, Troutman Sanders, L.L.P., McLean, Virginia, for Appellant. James E. Carbine, James E. Carbine, P.C., Baltimore, Maryland, for Appellee.

ON BRIEF:

Cathryn A. Le, Troutman Sanders, L.L.P., McLean, Virginia, for Appellant.

Before NIEMEYER, MICHAEL, and GREGORY, Circuit Judges.

Affirmed in part and reversed in part by published opinion. Judge Niemeyer wrote the opinion, in which Judge Michael and Judge Gregory joined.

OPINION

NIEMEYER, Circuit Judge:

In this appeal, we determine whether, under Maryland law, a title insurance company must indemnify its insured for (1) expenses incurred by the insured to resolve a defect in title to land when the expenses were incurred after the insured conveyed the land away; and (2) the cost of defending an action for trespass filed after the policy period, based on damage sustained during the policy period. The district court entered summary judgment, holding that the insurance company was responsible for both the expenses incurred in resolving the defect in title and the costs of defending the trespass action.

For the reasons that follow, we reverse the district court's ruling that the expenses incurred by the insured in resolving the title defect were covered, and we affirm its ruling requiring a defense of the trespass action.

I

In 1986, 100 Investment Limited Partnership ("100 Investment") assembled a 300-acre tract of land in Howard County, Maryland, which it intended to develop for residential homes. As part of the assemblage, 100 Investment purchased a 1.145-acre tract from Frances L. Miller and Mildred C. Miller, sisters-in-law, receiving from them a special warranty deed dated October 14, 1986. In connection with the 300-acre assemblage, 100 Investment purchased title insurance from Safeco Title Insurance Corporation, paying a premium of more than $7 million. The effective date of that title policy was December 18, 1986.

In furtherance of its development efforts, 100 Investment subdivided the 300-acre tract and subjected it to a "Declaration of Covenants, Easements, Charges and Liens." It also deeded common areas to the Lyndwood Association, Inc., a homeowners association. The 1.145-acre Miller tract itself became part of a conveyance that 100 Investment made to a homebuilder, NVR Homes, Inc. The deed to NVR Homes, dated July 7, 1995, included only a special warranty — "Grantor covenants that it will warrant specially the property hereby granted and conveyed."¹ NVR Homes ultimately conveyed the 1.145-acre Miller tract, now subdivided, to three separate homeowners.

As it turned out, some four years before 100 Investment purchased the 1.145-acre Miller tract, the Millers had conveyed the same property to the Ahsan S. Khan M.D., P.A., Profit Sharing Plan ("Khan Profit Sharing Plan"), and in 2001, Dr. Khan conveyed the 1.145-acre Miller tract to Meadowridge Properties, Inc. Meadowridge Properties, in turn, conveyed the property to Courtyards at Timbers, LLC, a developer that was also assembling property. When 100 Investment learned in July 2001 of this competing conveyance, it repurchased the 1.145-acre Miller tract from Courtyards at Timbers for $175,000, enabling 100 Investment then to "clean up" title to the 1.145-acre tract that it had conveyed to NVR Homes.

Also, in March 2002, Dr. Khan commenced an action against 100 Investment for trespassing on the 1.145-acre Miller tract during the period 1986-1995, when 100 Investment purportedly owned the tract.

100 Investment notified Chicago Title Insurance Company, the successor to Safeco Title Insurance Corporation, of the double conveyance and requested that Chicago Title indemnify 100 Investment for the $175,000 that it paid to repurchase the 1.145-acre Miller tract, plus the costs of reacquisition. In addition, shortly after Dr. Khan commenced the trespass action, 100 Investment requested that Chicago Title defend it in that litigation. Chicago Title denied both requests, stating that when 100 Investment conveyed the 1.145-acre Miller tract to NVR Homes in July 1995, its coverage with respect to that property ended.

Chicago Title then commenced this action for a declaratory judgment that its coverage determinations were correct. 100 Investment filed a counterclaim for a determination that it was covered and for damages, with respect to both the reacquisition of the 1.145-acre Miller tract and the defense of the Khan litigation. The parties stipulated to the operative facts, and the district court decided the case on cross-motions for summary judgment. In entering judgment in favor of 100 Investment, the district court concluded that Chicago Title was obligated both to indemnify 100 Investment for the expenses of reacquiring the 1.145-acre Miller tract and to provide 100 Investment with a defense in the Khan litigation. The court entered a money judgment in favor of 100 Investment in the amount of $201,744.37 for the cost of acquiring the 1.145-acre Miller tract and $64,123.29 for attorneys fees incurred in defending the Khan litigation, plus any additional expenses that 100 Investment might incur in that litigation.

From the district court's judgment, Chicago Title filed this appeal.

II

Chicago Title argues that because 100 Investment "completely disposed of any purported interest 100 Investment had in the Disputed Tract, 100 Investment was no longer covered under the General Statement of Coverage" contained in the title insurance policy. Chicago Title also argues that because the deed by which 100 Investment conveyed the disputed trust to NVR Homes did not contain a warranty of title, coverage terminated in 1995 when the tract was conveyed.

100 Investment contends that under the terms of the title insurance policy, so long as 100 Investment owned any interest in the "land," defined by the policy to comprise the 300-acre assemblage, coverage continued after 100 Investment's conveyance of the Miller tract to NVR Homes. 100 Investment continued to own 12 acres of the 300-acre tract, so in its view, it was still covered under the policy. Alternatively, 100 Investment contends that coverage continued after the Miller tract conveyance because 100 Investment continued to have warranty obligations in connection with the Miller tract. These obligations arose, according to 100 Investment, when (1) it subdivided the property and certified the plat; (2) it imposed the Declaration of Covenants on the 300-acre assemblage, stating that 100 Investment was "the owner of all [the] land"; and (3) it represented to the homeowners association in its conveyance of common areas that it had effectively subdivided the property and imposed restrictions on "all of [the] real property in [the assemblage]." The representations made in those documents were, it argues, "covenants of warranty" that imposed on 100 Investment continuing obligations after its conveyance to NVR Homes — obligations for which it was covered by the policy.

Our resolution of these coverage issues is governed by the contractual terms contained in the insurance policy. Under Maryland law, which applies in this case based on diversity jurisdiction, insurance policies are to be construed as are any other contracts. See Catalina Enterprises, Inc. Pension Trust v. Hartford Fire Ins. Co., 67 F.3d 63, 65 (4th Cir.1995). Accordingly, courts applying Maryland law to insurance contracts must, as with any other contract, "ascertain and give effect to the intentions of the parties at the time of contracting." Id.

By its terms, the title insurance policy in this case insured 100 Investment "against loss or damage ... sustained or incurred by the insured by reason of [t]itle to the estate or interest described in Schedule A [a fee simple interest in the 300-acre assemblage] being invested otherwise then as stated therein." The policy states that coverage is subject to the exclusions, exceptions, conditions, and stipulations contained in it. One of the "Conditions and Stipulations" in the policy provided that coverage would continue "as long as [the] insured retains an estate or interest in the land ... or so long as such insured shall have liability by reason of covenants of warranty made by such insured in any transfer or conveyance of such estate or interest." In short, the policy provided coverage for as long as the insured "retain[ed] an estate or interest in the land," and the coverage extended for as long as the insured had "liability by reason of covenants of warranty" given in the transfer of the land.

A natural reading of this policy language evinces the intent of the parties to limit the scope of title protection to the period running from the effective date of the policy until the insured conveys away its...