Lee v. Duncan

• Decision Date: 05 April 2005
• Docket Number: No. 24840.,24840.
• Citation: 870 A.2d 1,88 Conn.App. 319
• Court: Connecticut Court of Appeals
• Parties: Johnson LEE v. William M. DUNCAN et al.

870 A.2d 1

88 Conn.App. 319

Johnson LEE v. William M. DUNCAN et al.

No. 24840.

Appellate Court of Connecticut.

Argued January 14, 2005.

Decided April 5, 2005.

Alan R. Spirer, Westport, for the appellant (plaintiff).

Jeffrey R. Babbin, with whom was Aaron Singer, New Haven, for the appellees (defendants).

BISHOP, DiPENTIMA and McLACHLAN, Js.

DiPENTIMA, J.

The plaintiff, Johnson Lee, appeals from the summary judgment rendered by the trial court in favor of the defendants, William M. Duncan and Patricia M. Duncan. Although the plaintiff raises several issues on appeal, the dispositive one is whether the defendants had notice of the plaintiff's interest in a condominium unit at the time they purchased it. We conclude that they did not and, accordingly, affirm.

The background facts and procedural history are not in dispute. This appeal involves a condominium complex known as the Waterford of Greenwich. The plaintiff was a former developer of the complex. During foreclosure proceedings, the plaintiff and BSB Greenwich Mortgage Limited Partnership (BSB) entered into an agreement regarding the uncompleted complex, which was incorporated into an amended stipulated judgment of strict foreclosure entered in the United States District Court for the District of Connecticut on April 28, 1995. Paragraph thirty of that judgment provided the plaintiff an option on the "final unsold unit" of the complex.¹

On June 6, 1995, a certificate of foreclosure was filed in the Greenwich land records indicating that BSB had acquired "absolute" title to the Waterford complex. It made no mention of the plaintiff's option. In addition, the plaintiff recorded an uncertified copy of the amended stipulated judgment of strict foreclosure in the land records on January 3, 1996. The copy was incorrectly indexed in both the grantor and grantee indices with the plaintiff as the grantor and BSB as the grantee. It also incorrectly identified the property as located on Valley Drive.

BSB subsequently developed, marketed and sold the complex units. In late January, 1998, the defendants entered into a purchase and sale agreement with BSB for the purchase of unit one for $1,275,000. At the time, two other units remained unsold. Those two units were later sold, the closings of which occurred on February 26, 1998. Thus, as of February 26, 1998, the last unsold unit in the complex was unit one.

Throughout March, 1998, the plaintiff and BSB exchanged correspondence regarding the plaintiff's right to unit one pursuant to paragraph thirty of the stipulated judgment. By letter dated March 27, 1998, the plaintiff informed BSB that "I am entitled to a unit, as originally agreed.... [BSB] should deed me [unit one] to complete our agreement." Despite the plaintiff's claim, BSB proceeded with the sale of unit one to the defendants, never informing them of the plaintiff's option pursuant to the stipulated judgment or his March 27, 1998 claim to unit one.

Prior to closing, the defendants purchased a title insurance policy from the Chicago Title Insurance Company (title insurer). The title commitment attached to the policy made no reference to the stipulated judgment or to any interest that the plaintiff might claim in the unit. Likewise, the statutory warranty deed signed by Roderick O'Connor, vice president of BSB, was silent as to the plaintiff's interest. Moreover, on April 17, 1998, O'Connor executed a unit owner's affidavit stating that "there are no tenants or other persons who are in possession or have a right to possession of this unit" and that there were no applicable rights of first refusal. O'Connor also completed an owner's special title and survey report, in which he represented that no person had "claimed to have any interest in [the] property ... which you dispute and do not recognize as being a valid claim." The defendants closed on the property on April 17, 1998.

Almost one year later, by complaint dated March 30, 1999, the plaintiff filed an action in the Superior Court against the defendants, alleging rights to unit one superior to those of the defendants. The defendants, in turn, filed a third party complaint against BSB, claiming indemnification under the statutory warranty deed and alleging fraud concerning the affidavits provided by BSB at the closing. On March 31, 1999, the plaintiff initiated proceedings in the United States District Court against BSB, seeking an order in aid of enforcement of the stipulated judgment. The District Court rendered judgment in favor of the plaintiff against BSB in the amount of $1,275,000 with interest of 10 percent per year from April 17, 1998, until payment.

In his action against the defendants, the plaintiff sought an order requiring them to convey to him "all of their right, title and interest to [u]nit [one]," as well as compensatory damages. In response, the defendants raised seven special defenses.² Both the defendants and the plaintiff filed motions for summary judgment. By memorandum of decision dated October 31, 2003, the court rendered summary judgment in favor of the defendants on three separate grounds.³ From that judgment the plaintiff appeals.

The plaintiff claims that the court improperly granted the defendants' motion for summary judgment. Summary judgment is appropriate when "the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. ... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law ... and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." (Citations omitted; internal quotation marks omitted.) Barrett v. Montesano, 269 Conn. 787, 791-92, 849 A.2d 839 (2004). "Our review of the trial court's decision to grant [a] motion for summary judgment is plenary." LaFlamme v. Dallessio, 261 Conn. 247, 250, 802 A.2d 63 (2002).

In its memorandum of decision, the court concluded that the defendants lacked either actual or constructive notice of the plaintiff's claimed right. We consider each in turn.

I

"[O]ne who has actual notice of equitable rights not of record is nevertheless bound to recognize them." Home Owners' Loan Corp. v. Sears, Roebuck & Co., 123 Conn. 232, 240, 193 A. 769 (1937). The plaintiff acknowledges that the defendants were not personally aware of the plaintiff's claimed right at the time of closing. Rather, the plaintiff posits that the title insurer was an agent of the defendants. Because the title insurer allegedly had knowledge of the plaintiff's claimed right,⁴ the plaintiff contends that that knowledge must be imputed to the defendants.

The burden of proving agency is on the party asserting its existence. New England Whalers Hockey Club v. Nair, 1 Conn.App. 680, 683, 474 A.2d 810 (1984). "An essential factor in an agency relationship is the right of the principal to direct and control the performance of the work by the agent." McLaughlin v. Chicken Delight, Inc., 164 Conn. 317, 322, 321 A.2d 456 (1973); see also Gateway Co. v. DiNoia, 232 Conn. 223, 240, 654 A.2d 342 (1995). Such control is lacking in the present case. The purchase and sale agreement between BSB and the defendants required the defendants to accept "such title to the [u]nit as [the title insurer] would be willing to approve and insure...."

A title insurance policy is a contract of indemnity under which the insurer agrees to indemnify the insured in a specified amount against loss through defect of title to real estate. See Cohen v. Security Title & Guaranty Co., 212 Conn. 436, 439, 562 A.2d 510 (1989). Accordingly, the relationship between an insurance company and the insured is essentially contractual. See 11 L. Russ & T. Segalla, Couch on Insurance (3d Ed.1998) § 159:5; Walker Rogge, Inc. v. Chelsea Title & Guaranty Co., 116 N.J. 517, 540, 562 A.2d 208 (1989).

"[A] policy of title insurance does not represent an agreement or assurance that a contingency insured against will not occur, but, generally, promises to pay damages, if any, caused by any defects to title that the title company should have discovered but did not...." 11 L. Russ & T. Segalla, supra, § 159:8. Investigation of the title to a particular property prior to issuance of a policy is done not to protect the interests of the insured, but rather the insurer. As the Texas Court of Civil Appeals explained: "[T]he company, before issuing a policy of title insurance, must necessarily take steps to inform itself of the status of the title to be insured. ... In performing these activities, the company does not act in behalf of the party to be insured, but acts exclusively for itself. Therefore, up to the point where the insurance company commits itself to issue a policy upon certain conditions, the unilateral conduct of the insurance company or its agents in investigating the title does not create an agency relationship." Tamburine v. Center Savings Assn., 583 S.W.2d 942, 948-49 (Tex.Civ.App.) (writ refused, October 24, 1979). Likewise, the Arkansas Supreme Court has held that title searches are "undertaken to allow [the insurance company] to determine the risk and liabilities against which they were insuring. Thus, any acts of negligence in the title search... should not have been imputed to [the policyholders] because no agency relationship was present." Newberry v. Scruggs, 336 Ark. 570, 575, 986 S.W.2d 853 (1999).

This court has neither been presented with nor has it found any authority indicating that a title insurance company's activities in investigating the title to a particular property prior to the issuance of a...