Metro Bank v. Miss. Valley Title Ins. Co.

• Decision Date: 19 September 2012
• Docket Number: CASE NO.: CV-10-RRA-03353-M
• Parties: METRO BANK, an Alabama Banking Corporation Plaintiff, v. MISSISSIPPI VALLEY TITLE INSURANCE COMPANY, a Mississippi Corporation, Defendant.
• Court: U.S. District Court — Northern District of Alabama

METRO BANK, an Alabama Banking Corporation Plaintiff,

v. MISSISSIPPI VALLEY TITLE INSURANCE COMPANY,a Mississippi Corporation, Defendant.

CASE NO.: CV-10-RRA-03353-M

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA MIDDLE DIVISION

Dated: September 19, 2012

MEMORANDUM OF OPINION

This action is a dispute over title insurance that arises out of two loans which the plaintiff, Metro Bank, made to individuals for construction of a home in Etowah County, Alabama. Defendant Mississippi Valley issued title commitments and title insurance policies to Metro Bank in connection with the mortgages securing those loans. The plaintiff sues the defendant for breach of contract and negligence, contending that the plaintiff did not know about a deed restriction when it made the loans. It demands that the defendant indemnify it for losses incurred as a result. The case is before the court on the defendant's motion for summary judgment. (Doc. 27.)

STANDARD

In considering a motion for summary judgment, the court must determine whether the moving party is entitled to judgment as a matter of law. Summary judgment may be granted only if there are no genuine issues of material fact and the movant is entitled to judgment asa matter of law. Fed. R. Civ. P.56. In making that assessment, the court must view the evidence in a light most favorable to the non-moving party and must draw all reasonable inferences against the moving party. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). The burden of proof is upon the moving party to establish his prima facie entitlement to summary judgment by showing the absence of genuine issues and that he is due to prevail as a matter of law. See Clark v. Coats & Clark, Inc., 929 F.2d 604 (11th Cir. 1991). Once that initial burden has been carried, the non-moving party may not merely rest upon his pleadings, but must come forward with evidence supporting each essential element of his claim. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Barfield v. Brierton, 883 F.2d 923 (11th Cir. 1989). Unless the plaintiff, who carries the ultimate burden of proving his action, is able to show some evidence with respect to each element of his claim, all other issues of fact become immaterial and the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Bennett v. Parker, 898 F.2d 1530 (11th Cir. 1990).

FACTS

During and shortly after World War II, the United States Army maintained a military installation in Alabama known as Camp Sibert. Camp Sibert covered approximately 36,000 acres in Etowah County and portions of St. Clair County. At least part of the activities of Camp Sibert included training in chemical weapons use and decontamination. (Doc. 28-16, pp. 5(16)-6(17).) Soldiers trained with mustard, tear gas, lewisite, and phosgene. After the camp was closed, the federal government sold the land back to its former owners pursuantto the Surplus Property Act. The general character of this property is "wooded, open, and there is some residential development in that area and there are houses along the road in different places." (Doc. 28-1, p. 7(23).) The area has been successfully developed for both residential and commercial purposes. (Doc. 28-2, p. 16(60).) The U.S. Army Corps of Engineers has been involved in environmental remediation of the former Camp Sibert essentially since the camp closed around 1945. The Corps of Engineers' work has been to determine what was done, where it was done, and if there are any environmental problems that need to be addressed anywhere on the Camp Sibert property. The Corps of Engineers divided the Camp Sibert property into several different "sites." The sites were designated based on the Army's use of Camp Sibert.

One site was designated by the Corps of Engineers as Site 2A. Karl Blankinship is the project manager for the Corps of Engineers for the Camp Sibert remediation. He testified that his group found "chemically contaminated soil" there. (Doc. 28-16, p. 17(61).) The Corps of Engineers has removed some chemically contaminated soil from Site 2A and disposed of it. Site 2A is adjacent to Perman Lake Road in Rainbow City, Alabama. Site 2A was used to train soldiers in the decontamination of different items. The Corps of Engineers geophysically mapped Site 2A, and numerous soil and groundwater samples were taken from the site. On Site 2A, the Corps of Engineers investigated four burial pits that had previously been decontaminated and found some chemically contaminated soil within the burial pits. These pits were investigated in approximately 2008. One of the four pits is located close to the boundary of the property at issue in this case. (Doc. 28-16, p. 25(96).)

Mr. Blankinship has no knowledge of any actual harm to any living thing resultingfrom possible contamination on Site 2A. However, he cannot say that there was nothing harmful there. (Doc. 28-16, p. 29(109).) At the time of Blankinship's deposition, the Corps of Engineers had not left site 2A.

Located within the former boundaries of Camp Sibert is an 11.5 acre parcel in Rainbow City, Alabama, located at 701 Perman Lake Road (the "Hallmark property"). As with the other tracts that were formerly part of Camp Sibert, this tract was transferred back to private hands long ago. On or about December 15, 2004, William Ronald Knight, the then owner of the Hallmark property, sold the parcel to Joseph Hallmark and his wife, Johnnie Hallmark. A portion of this property might be within Site 2A. Metro Bank has not done any investigation, testing, or surveying of its property to determine whether there is any contamination on it.

The sale is interesting because of the particulars of the deed. In transferring all of the Camp Sibert properties back to its former owners, the U.S. Government used deeds which recite that the "property was subjected to contamination by the introduction of unexploded and dangerous bombs, shells, rockets, mines, and charges, either upon or below the surface thereof." (Doc. 28-5, p. 2.) The deeds go on to represent that "the Corp of Engineers, War Department, has caused the property to be inspected and has decontaminated the same to the extent deemed reasonably necessary." (Doc. 28-5, p. 2.) The peculiarities of the Camp Sibert deeds are familiar to real estate attorneys in and around Etowah County, and those attorneys routinely have approved titles to such property for decades. At this time, the presence of such a deed in a chain of title in Etowah County is unremarkable and expected in certain locations.

The deed in the instant case, however, is slightly different. When the Hallmarksbought the property in December 2004, there was a deed from the United States of America by the Federal Farm Mortgage Corporation to Ernest Moore in the chain of title. The date of the transfer from the United States to Ernest Moore was September 21, 1949. While this deed contains the same language described above, it also contained language stating that the property was "[r]estricted to grazing purposes only." (Doc. 28-5, p. 2.) It is this language which causes the problem in the instant case.

Knight's attorney in the sale of the property to the Hallmarks was Gadsden real estate attorney Mike Haney.¹ Haney states that the instant deed is the only deed from the former Camp Sibert property which contains the "restricted to grazing purposes only" language. When Haney saw this language he wrote to federal officials about the language in an attempt to clarify its meaning. In response to his letter, Haney received a letter dated December 6, 2004 from the Office of the General Counsel of the United States Department of Agriculture. The letter stated that the Federal Farm Mortgage Corporation had been abolished in 1961 and that all of its assets had been "long ago liquidated." (Doc. 28-7, p. 2.) The letter further stated that:

I want to advise you that USDA has no restriction in force, and I see no scenario where there would be any enforcement of the language "restricted to grazing purposes only" placed on your client's property in a deed from the now defunct Federal Farm Mortgage Corporation ("FFMC"). The FFMC is not an agency of USDA. This restriction would not be enforced by our office, or by anyone else we can think of, as the FFMC and its powers and functions were abolished over 40 years ago in 1961 per 12 U.S.C. 1020.

(Doc. 28-7, p. 2.)

Haney then prepared the deed from Knight to the Hallmarks. That deed expressly referenced the 1949 deed, providing that the property was conveyed subject to "[t]erms, conditions and reservations as set out in that certain deed recorded in Book 415, page 449, Probate Office, Etowah County, Alabama." (Doc. 28-8, p. 2.) Haney says that this would give notice to any future purchaser of the restriction. Haney calls this provision, "just good real estate practice." (Doc. 28-1, p. 18(67).) The legitimacy of this transaction is not contested. Instead, the problem in this case arises from the later transaction entered into by the Hallmarks.

When the Hallmarks decided to build a home on the property, they borrowed $148,000.00 from Metro Bank as a construction loan. At the request of Metro Bank, George Day, on behalf of Mississippi Valley, issued title insurance commitment No. V500213 with an effective date of January 2, 2005, committing to insure Metro Bank, as mortgagee, in an amount up to $148,000.00. George Day is a real estate attorney, with thirty years of experience, practicing in Gadsden, Alabama. Day is also a title agent for Mississippi Valley. He issues title insurance commitments, performs title searches, and issues policies for Mississippi Valley. Upon receiving a request for a title commitment, Day's practice is to obtain a chain of title from Etowah Abstract Company, examine the instruments on the chain of title, then prepare and issue the commitment. If the commitment...