Levy Gardens Partners 2007, L.P. v. Commonwealth Land Title Ins. Co.

• Decision Date: 31 January 2013
• Docket Number: No. 12–30010.,12–30010.
• Citation: 706 F.3d 622
• Parties: LEVY GARDENS PARTNERS 2007, L.P., Plaintiff–Appellant v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant–Appellee. Levy Gardens Partners 2007, L.P., Plaintiff–Appellant Cross–Appellee Commonwealth Land Title Insurance Company, Defendant–Appellee Cross–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

706 F.3d 622

LEVY GARDENS PARTNERS 2007, L.P., Plaintiff–Appellant

v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant–Appellee.Levy Gardens Partners 2007, L.P., Plaintiff–Appellant Cross–AppelleeCommonwealth Land Title Insurance Company, Defendant–Appellee Cross–Appellant.

No. 12–30010.

United States Court of Appeals, Fifth Circuit.

Jan. 31, 2013.

Daniel Lund, Ryan Matthew McCabe, Montgomery Barnett, L.L.P., New Orleans, LA, for Plaintiff–Appellant Cross–Appellee.

Larry Feldman, Jr., Senior Litigation Attorney, Fred Sherman Boughton, Jr., Michelle Lee Miller, McGlinchey Stafford, P.L.L.C., New Orleans, LA, for Defendant–Appellee Cross–Appellant.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before STEWART, Chief Judge, and GARZA and ELROD, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Levy Gardens Partners 2007, L.P. (“Levy Gardens”) appeals the district court's decision following a bench trial ordering Commonwealth Land Title Insurance Company (“Commonwealth”) to pay Levy Gardens $605,000 pursuant to Levy Gardens's title insurance policy with Commonwealth. Levy Gardens asserts it is entitled to over $7 million under the insurance policy. Commonwealth cross-appeals the district court's grant of any relief to Levy Gardens, asserting the insurance policy does not insure against any of Levy Gardens's losses. We AFFIRM.

I

This case arises out of a failed Levy Gardens multi-family housing project in New Orleans. In November of 2007, the City of New Orleans, Department of Safety and Permits sent Levy Gardens a letter stating the zoning determination of its property was “R.O.,” which permits multi-family housing. The City then issued Levy Gardens four building permits for the property. The City's law department subsequently sent Levy Gardens an opinion letter originally prepared for a city councilmember, advising that its proper zoning designation was R.O. Afterward, Levy Gardens purchased title insurance from Commonwealth in connection with this project on October 7, 2008. Section 8 under the “Conditions” heading in this insurance policy reads in relevant part:

8. DETERMINATION AND EXTENT OF LIABILITY

This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured Claimant who has suffered loss or damage by reason of matters insured against by this policy.

(a) The extent of liability of the Company for loss or damage under this policy shall not exceed the least of

(i) the Amount of Insurance

...

(iii) the difference between the value of the Title as insured and the value of the Title subject to the risk insured against by this policy

...

Section 3 under the same heading requires the insured to give the insurer notice of claims, stating:

3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT

The insured shall notify the Company promptly in writing ... in case of any litigation as set forth in Section 5(A) of these Conditions.... If the Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the Company's liability to the Insured Claimant under the policy shall be reduced to the extent of the prejudice.

This insurance policy also includes a “zoning endorsement” that reads:

1. The Company insures against loss or damage sustained by the insured in the event that, at the Date of Policy,

a. According to applicable zoning ordinances and amendments, the Land is not classified Zone RO (as to that portion of Lot L that was Lot 3A–6–1A–1) & B2 (as to that portion of Lot L that was Lot 3A–6–1A–2C);

b. The following use or uses are not allowed under that classification: multifamily housing (as to that portion of Lot L that was Lot 3A–6–1A01); parking (as to that portion of Lot L that was Lot 3A–6–1A–2C).

2. There shall be no liability under this endorsement based on

a. Lack of compliance with any conditions, restrictions, or requirements contained in the zoning ordinances and amendments, including but not limited to the failure to secure necessary consents or authorizations as a prerequisite to the use or uses. This paragraph 2.a. does not modify or limit the coverage provided in Covered Risk 5.

b. The invalidity of the zoning ordinances and amendments until after a final decree of a court of competent jurisdiction adjudicating the invalidity, the effect of which is to prohibit the use or uses.

c. The refusal of any person to purchase, lease or lend money on the Title covered by this policy.

This endorsement is issued as part of the policy. Except as it expressly states, it does not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsements, (iii) extend the Date of Policy, or (iv) increase the Amount of Insurance. To the extent a provision of the policy or a previous endorsement is inconsistent with an express provision of this endorsement, this endorsement controls. Otherwise, this endorsement is subject to all of the terms and provisions of the policy and of any prior endorsements.

The insurance policy limit is $18,323,070.

The East New Orleans Neighborhood Advisory Commission (“ENONAC”), a state body, filed suit in state court seeking a writ of mandamus, and on November 12, 2008 the state civil district court ordered the City to determine which parts of Levy Gardens's property were properly designated R.O. (the “2008 judgment”). The City complied with the mandamus order by filing an affidavit from the director of the Department of Safety and Permits that found all of Levy Gardens's property was properly designated R.O.

After the 2008 judgment, the City Council of New Orleans passed an ordinance that required enforcement of the most restrictive regulations that apply to Levy Gardens's property (the “2008 ordinance”). ENONAC then brought another suit in state civil district court seeking a preliminary injunction based on the 2008 ordinance. The state court held Levy Gardens's desired use was prohibited under an ordinance passed in 1985 (the “1985 ordinance”). The state court held the 1985 ordinance was not overridden by the Comprehensive Zoning Ordinance passed in 1995 (the “1995 CZO”), which, were it not for the 1985 ordinance, would have allowed Levy Gardens's desired use. The state court applied the 1985 ordinance over the 1995 CZO for two reasons. First, the 1995 CZO states in part, “Whenever these regulations contain an actual, implied, or apparent conflict, the more restrictive regulation shall apply unless specified otherwise.” Second, the 2008 ordinance, like the 1995 CZO, requires application of the most restrictive regulations to Levy Gardens's property. Because the 1985 ordinance is more restrictive than the 1995 CZO, and because the 1995 CZO does not expressly repeal the 1985 ordinance, the state court held the 1995 CZO and the 2008 ordinance require application of the 1985 ordinance to Levy Gardens's property. Therefore, the state court issued a preliminary injunction enjoining Levy Gardens from building unless Levy Gardens successfully underwent a “conditional use process” to secure special permission from the city council to be exempt from zoning regulations (the “2009 judgment”).

Levy Gardens then notified Commonwealth of the litigation, but referenced the incorrect policy number in its letter. Levy Gardens appealed the decision, and the Louisiana Fourth Circuit Court of Appeal affirmed the trial court. The Louisiana Supreme Court denied certiorari.

Levy Gardens then resumed contacting Commonwealth, at first using the incorrect policy number again. Levy Gardens and Commonwealth exchanged many letters, mostly sent by Levy Gardens, but Levy Gardens did not actually review the policy until later. Levy Gardens ultimately instituted the instant action in state court, then, after a non-diverse defendant was dismissed, removed it to federal district court. The district court first granted summary judgment to Levy Gardens, finding the insurance policy provided Levy Gardens with coverage. The district court then held a bench trial on the amount of damages. The district court issued its judgment in an oral decision, making five findings: (1) Levy Gardens is entitled to only the diminution in value of the property as a result of the application of the 1985 ordinance; (2) the meaning of “loss or damage” in the zoning endorsement is defined by Section 8 of the policy to mean loss in value of the title because the policy is not ambiguous in this regard; (3) the zoning endorsement is not stand-alone coverage; (4) Commonwealth's conduct does not warrant statutory penalties; and (5) Levy Gardens is entitled to $605,000, which is the difference in value between the title of its insured property with and without the 1985 ordinance zoning encumbrance.

Levy Gardens appealed, asserting the policy covers all of its losses resulting from the application of the 1985 ordinance, including the money it spent on preparing for development. Levy Gardens also asserts the district court should have imposed penalties on Commonwealth. Commonwealth cross-appealed, asserting Levy Gardens is not entitled to any coverage under the policy.

II

We review grants of summary judgment de novo on appeal, applying the same standards as the district court. Burge v. Parish of St. Tammany, 187 F.3d 452, 464 (5th Cir.1999). “[T]he party moving for summary judgment must ‘demonstrate the absence of a genuine issue of material fact....’ ” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (quoting Celotex v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). A dispute is “genuine” if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir.2000). A fact issue is “material” if its resolution could affect the outcome of the action. Id. When reviewing summary judgment decisions, we construe all facts and inferences in the light most favorable to the non-moving party....