IDC Props., Inc. v. Chi. Title Ins. Co.
| Decision Date | 21 July 2022 |
| Docket Number | 21-1757 |
| Parties | IDC PROPERTIES, INC., Plaintiff, Appellant, v. CHICAGO TITLE INSURANCE COMPANY, Defendant, Appellee. |
| Court | U.S. Court of Appeals — First Circuit |
Kevin Vendituoli, with whom IDC Properties, William E. O'Gara, Matthew C. Reeber, Aaron L. Weisman, and Pannone Lopes Devereaux & O'Gara LLC were on brief, for appellant.
Steven E. Snow, with whom Partridge Snow & Hahn LLP and Robert K. Taylor were on brief, for appellee.
Before Barron, Chief Judge, Lynch and Gelpí, Circuit Judges.
This appeal concerns a suit under Rhode Island law by IDC Properties, Inc. ("IDC") against its title insurer, Chicago Title Insurance Company ("CTIC"). The United States District Court for the District of Rhode Island granted summary judgment to CTIC. We affirm in part and reverse in part.
We set forth below the undisputed facts relevant to this appeal. We draw them from the record and two earlier cases involving IDC and the properties at issue that were decided by the Rhode Island Supreme Court. See Am. Condo. Ass'n v. IDC, Inc., 844 A.2d 117 (R.I. 2004) ( America I ); Am. Condo. Ass'n v. IDC, Inc., 870 A.2d 434 (R.I. 2005) ( America II ).
In January 1988, Globe Manufacturing Co. ("Globe") recorded a declaration of condominium for the Goat Island South Condominium on twenty-three acres of Goat Island in Newport, Rhode Island. America I, 844 A.2d at 120. Two months later, Globe issued the First Amended and Restated Declaration (the "FAR Declaration"), which superseded the initial declaration of condominium. Id.
The FAR Declaration -- which the parties agree is the operative one for purposes of this appeal -- provided that the Goat Island South Condominium included five "Master Units." The FAR Declaration defines the term "Master Unit" to "mean a physical portion of the Goat Island South Condominium designated for separate ownership or occupancy or designated as a Sub-Condominium." The FAR Declaration defines a "Unit," by contrast, to "mean a physical portion of a Sub-Condominium designated for separate ownership or occupancy."
Three of the Master Units contained independent condominiums (the "Sub-Condominiums") and are not at issue here. Two other units -- which the parties ultimately called the "West Unit" and the "South Unit" and which are at issue here -- contained only undeveloped land. Id.
Rhode Island's Condominium Act defines the relevant procedures for the creation of condominiums and governs important aspects of their operation once created. The Act defines a "unit" as "a physical portion of the condominium designated for separate ownership or occupancy." R.I. Gen. Laws § 34-36.1-1.03(28). By those terms, both "Units" and "Master Units" under the FAR Declaration qualify as a "unit" under the Act. Cf. America II, 870 A.2d at 438-39 (). Under the Act, "all portions of a condominium other than the units" are "[c]ommon elements." R.I. Gen. Laws § 34-36.1-1.03(4). Common elements are subject to the common ownership, use, and control of each unit owner. America II, 870 A.2d at 443 ; cf. America I, 844 A.2d at 120 n.5 ().
The Act also references certain types of "special declarant rights" that declarants of condominiums may reserve in the declaration of condominium. These may include the right to "[c]omplete improvements" in the condominium or the right "[t]o exercise any development right." R.I. Gen. Laws § 34-36.1-1.03(26). Pursuant to a "[d]evelopment right[ ]," a declarant may take certain specified actions, including "creat[ing] units, common elements, or limited common elements within a condominium." Id. § 34-36.1-1.03(11).
In the FAR Declaration, Globe reserved a development right to create in the West Unit a condominium of not more than eight residential units. Globe did not reserve an equivalent development right, however, for the South Unit. IDC separately reserved the right "to construct additional buildings and other improvements on any Master Unit."
The Goat Island South Condominium also included other land that was not part of any Master Unit, including land designated the "Reserved Area." In the FAR Declaration, Globe reserved a development right to withdraw the Reserved Area from the Goat Island South Condominium and hold it in fee simple, or, alternatively, to convert the Reserved Area into a sixth Master Unit.
The FAR Declaration provided that the development rights that it reserved expired on December 31, 1994. It further provided that they could be exercised through that date.
In 1992, Globe transferred all of its interests in the Goat Island South Condominium to Island Development Corporation. Island Development Corporation (which should not be confused with IDC, the plaintiff and appellant in this case) held those interests for the next two years.
In April 1994, as the December 31, 1994 deadline for exercising the development rights in the FAR Declaration approached, Island Development Corporation recorded the Third Amendment to the declaration of condominium. The Third Amendment purported, in relevant part, to postpone the date on which the development rights would expire to December 31, 1999. America I, 844 A.2d at 123.
On October 19, 1994, IDC acquired Island Development Corporation's interests in the Goat Island South Condominium. Id. at 122 n.9. IDC then purchased a title insurance policy from CTIC, effective October 21, 1994 (the "Policy"). That policy insured against up to $10 million of "loss or damage" incurred by a defect in "[a]ll right, title, and interest in" the South Unit, West Unit, and "development and special declarant's rights in and to" the Goat Island South Condominium "as created by the Declaration of Condominium dated as of January 12, 1988." The Policy included exclusions for "[d]efects, liens, encumbrances, adverse claims or other matters ... created, suffered, assumed or agreed to by the insured claimant" or "attaching or created subsequent to Date of Policy." The Policy also included a condominium endorsement.
IDC adopted the Fourth and Fifth Amendments to the declaration of condominium on November 15, 1994, and December 28, 1994, respectively. America I, 844 A.2d at 123-24. Both amendments, like the Third Amendment, purported in relevant part to extend the date on which the development rights would expire, ultimately to December 15, 2015. Id. at 123-24, 124 n.11.
On December 29, 1994, IDC recorded the Sixth Amendment to the declaration of condominium. Id. at 131. In the Sixth Amendment, IDC purported to exercise the development right that it had reserved in the Reserved Area. IDC did so through the Sixth Amendment by converting the Reserved Area into the "North Unit." No development in the Reserved Area had occurred as of that time, however. Id. at 125.
In 1997, IDC sought insurance for its title to the North Unit from both Commonwealth Land Title Insurance Co. ("Commonwealth") and CTIC. On December 12, 1997, Commonwealth offered to issue a $5 million title insurance policy for the North Unit. Three days later, CTIC declined to make an offer of insurance for IDC's title to the North Unit. IDC accepted Commonwealth's offer. Commonwealth Land Title Ins. Co. v. IDC Props., Inc., 547 F.3d 15, 18-19 (1st Cir. 2008). In 1998, IDC constructed a banquet hall in the Reserved Area. America I, 844 A.2d at 125.
On May 29, 1999, the associations of the Sub-Condominiums filed suit against Island Development Corporation, IDC, and Thomas Roos, the president of both organizations, in Rhode Island state court. Id. at 119, 125. The plaintiffs alleged that Island Development Corporation and IDC had not properly followed the procedures set forth in the Rhode Island Condominium Act when they extended the deadline for the development rights to be exercised in the Third, Fourth, and Fifth Amendments and that, in consequence, each of those amendments was void ab initio. Id. at 125 & n.13. The plaintiffs then further alleged that, due to IDC's failure to comply with the Condominium Act, IDC's "reserved interest in the undeveloped units ceased to exist, thus implying that fee simple title then vested in" the associations of the Sub-Condominiums. Id.
The plaintiffs sought a declaration that the Third, Fourth, and Fifth Amendments were "void ab initio" and a declaration that IDC "no longer had any ownership interest or voting rights in the disputed master units," or, alternatively, "compensatory damages." Id. at 125 n.13. Their complaint also included additional counts not relevant to this appeal. Id.
The state court granted partial summary judgment to the plaintiffs. Id. at 126. That judgment extended to all of the counts relevant to this appeal. Id. at 125. IDC appealed to the Rhode Island Supreme Court, which affirmed the entry of summary judgment in America I. Id. at 135.
The Rhode Island Supreme Court held in that case, in relevant part, that IDC's attempts to extend the deadline to exercise the development rights through the Third through Fifth Amendments to the declaration of condominium had been futile, because "the Third, Fourth, and Fifth Amendments were void ab initio" under Rhode Island law (the validity of the Sixth Amendment had not been challenged). Id. at 125 n.12, 130. The Rhode Island Supreme Court explained that this was so because the Rhode Island Condominium Act required that extensions of the time limit to exercise a development right be approved by unanimous consent of all the unit owners of the Goat Island South Condominium. Id. at 128-29. Because the Rhode Island Supreme Court found that IDC -- despite contending otherwise -- had not obtained...
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