Chicago Title v. Arkansas Riverview Dev.

• Decision Date: 29 August 2008
• Docket Number: No. 4:07CV00554 JLH.,4:07CV00554 JLH.
• Citation: 573 F.Supp.2d 1152
• Parties: CHICAGO TITLE INSURANCE COMPANY, Plaintiff/Counter-Defendant v. ARKANSAS RIVERVIEW DEVELOPMENT, LLC, Defendant/Counter-Claimant.
• Court: U.S. District Court — Eastern District of Arkansas

573 F.Supp.2d 1152

CHICAGO TITLE INSURANCE COMPANY, Plaintiff/Counter-Defendant v. ARKANSAS RIVERVIEW DEVELOPMENT, LLC, Defendant/Counter-Claimant.

No. 4:07CV00554 JLH.

United States District Court, E.D. Arkansas, Western Division.

August 29, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Garland J. Garret, Richard T. Donovan, Rose Law Firm, Little Rock, AR, for Plaintiff/Counter-Defendant.

Beverly A. Rowletth, Richard Shane Strabala, Mike Huckabay, Huckabay, Munson, Rowlett & Moore, P.A., Gregory M. Hopkins, Frank Stewart Headlee, Hopkins Law Firm, P.A., Little Rock, AR, for Defendant/Counter-Claimant.

OPINION AND ORDER

J. LEON HOLMES, District Judge.

Chicago Title Insurance Company brought this action seeking a declaration of its rights and obligations under an owner's title insurance policy issued to Arkansas Riverview Development, LLC. Chicago Title invoked jurisdiction pursuant to 28 U.S.C. § 2201 and 28 U.S.C. § 1332 as Chicago Title is a Missouri Corporation, Arkansas Riverview Development is an Arkansas Company, and the amount in controversy exceeds $75,000. Arkansas Riverview Development filed counterclaims against Chicago Title for breach of contract and negligence. Chicago Title has moved for summary judgment on Arkansas Riverview Development's claims for breach of contract and negligence. Arkansas Riverview Development has moved for partial summary judgment on its claim for breach of contract.

I. THE SUMMARY JUDGMENT STANDARD

A court should enter summary judgment if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. FED.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986); Cheshewalla v. Rand & Son Constr. Co., 415 F.3d 847, 850 (8th Cir.2005). The party moving for summary judgment bears the initial responsibility of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). If the moving party carries its burden, "the nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting FED. R.Civ.P. 56(e)). A genuine issue for trial exists only if there is sufficient evidence to allow a jury to return a verdict for the nonmoving party. Anderson, 477 U.S. at 249, 106 S.Ct. at 2511. When a nonmoving party cannot make an adequate showing on a necessary element of the case on which that party bears the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552.

II. THE UNDISPUTED FACTS AND PROCEDURAL HISTORY

On December 16, 2003, Gary Canada and the Arkansas Bar Foundation entered into an offer and acceptance for the purchase of real property by Canada from the Bar Foundation. Canada assigned his interests in the offer and acceptance to Arkansas Riverview Development, LLC. The offer and acceptance described the property to be conveyed as follows:

Lots 4, 5 and 6, Block 99, Original City of Little Rock, and the contiguous portion of the east-west alley located within Block 99, Original City of Little Rock, Pulaski County, Arkansas, subject to a Lease with the City of Little Rock dated March 15, 1971, as amended and extended, containing all of the real property owned by the Arkansas Bar Foundation known as the Arkansas Bar Center, together with all appurtenances thereto, including, without limitations, air rights.

In the 1970's, the Bar Foundation built a building partly on Lots 4, 5 and 6, Block 99, Original City of Little Rock, which the Bar Foundation owned in fee simple, and partly in adjacent airspace above Garland Street, which was owned by the City of Little Rock and the rights to which were leased to the Bar Foundation. That building remained standing in the same location, partly on Lots 4, 5 and 6 of Block 99 and partly in the airspace above Garland Street, when Arkansas Riverview Development entered into the transaction with the Bar Foundation.

The Bar Foundation originally leased rights to the airspace above Garland Street from the City pursuant to a 99-year lease executed on May 10, 1971, recorded in Book 1345 at page 146. The original lease required the Bar Foundation to obtain the City's written consent prior to assigning the rights therein to a third party but stated that such consent would not be unreasonably withheld. The lease also provided a right of first refusal to "Camelot Inn—Little Rock, Inc. or its successors in the ownership and operation of the convention center hotel to be constructed over Garland Street west of the premises leased herein." The lease was amended on February 20, 1973, and extended on November 23, 1994. The 1973 amendment related largely to the relationship between the hotel and the Bar Foundation building to be built adjacent to the hotel. Among the provisions in the 1973 amendment are a provision allowing the west wall of the Bar Foundation building to abut the hotel and a provision imposing a height restriction on the Bar Foundation building of 427.0 feet (MSL Datum).

Some time shortly after execution of the offer and acceptance on December 16, 2003, a real estate agent requested that Beach Abstract & Guaranty Company, as agent for Chicago Title, provide title insurance for Arkansas Riverview Development. Chicago Title contends that no request was made for title insurance for the leasehold interest in the airspace over Garland Street but only for the real property that had been owned in fee simple by the Bar Foundation. Arkansas Riverview Development contends that title insurance was requested for the airspace over Garland Street. Beach Abstract, acting as agent for Chicago Title, issued a title commitment for a fee simple estate for the following property: "Lots 4, 5 and 6, Block 99, Original City of Little Rock, Pulaski County, Arkansas AND the East-West alley in Block 99, Original City of Little Rock, Pulaski County, Arkansas."

On April 29, 2004, the parties closed the transaction, and a warranty deed was issued from the Bar Foundation to Arkansas Riverview Development for the following property: "Lots 4, 5 and 6, Block 99, Original City of Little Rock, Pulaski County, Arkansas AND the East-West alley in Block 99, Original City of Little Rock, Pulaski County, Arkansas. Subject, however, to all easements, rights of way and restrictions of record." The closing did not include an assignment of the Bar Foundation's leasehold interest in the airspace above Garland Street. On May 4 2004, Chicago Title issued its policy insuring Arkansas Riverview Development's title to Lots 4, 5 and 6 of Block 99.

In early 2006, Arkansas Riverview Development obtained a building permit pursuant to which it began renovation of the Bar Foundation building. The renovation included adding stories to the multistory portion of the building, which was built largely in the airspace above Garland Street. Arkansas Riverview Development then became aware that it had not received an assignment of the Bar Foundation's leasehold interest in the airspace above Garland Street and requested that the Bar Foundation execute an assignment. On February 1, 2006, the Bar Foundation executed an assignment of the lease to the airspace "effective the 29th day of April, 2004." The City was not requested to consent nor did it give written consent to the assignment.¹ Neither did the Bar Foundation give a right of first refusal to Capitol City Hotel Limited Partnership, the owner of the Doubletree Hotel, which then occupied the building previously occupied by the Camelot Hotel.² On May 10, 2006, the Chief Executive Officer of the City Advertising and Promotion Commission sent a letter to the Bar Foundation and Arkansas Riverview Development contending that the airspace lease had been violated by the failure of the Bar Foundation to obtain the City's consent before the "attempted conveyance" of the lease, the failure of the Bar Foundation to give notice of the "attempted conveyance," to Capitol City Hotel Limited Partnership, a violation of the height restriction in the 1973 amendment to the airspace lease, and other matters.

On July 12, 2006, the City of Little Rock sent to Arkansas Riverview Development a notice that its building permit was being revoked because the application for the permit did not accurately reflect the ownership of the property. On July 14, 2006, Arkansas Riverview Development commenced an action in this Court against the City of Little Rock and Capitol City Hotel Limited Partnership seeking to enjoin revocation of the building permit on due process grounds, seeking a declaration that the assignment of the airspace rights was valid, and seeking to quiet title to the airspace rights. This Court preliminarily enjoined revocation of the building permit. The parties later settled that action. Part of the evidence in that case was that the new construction adding to the multistory portion of the Bar Foundation exceeded by a few feet the height limitation in the 1973 amendment to the lease. Part of the settlement involved a cash payment by Arkansas Riverview Development to Capitol City Hotel Limited Partnership for release of its claim to a right of first refusal on the airspace rights, and part of the settlement entailed an exchange whereby the City of Little Rock conveyed the airspace rights in fee simple to Arkansas Riverview Development in return for the parking garage below the property. Also as part of the settlement, the violation of the height restriction was resolved.

Arkansas Riverview Development made a claim against the title insurance policy for the sums it paid to settle with the City of Little Rock and Capitol...