Pres. Capital Consultants, LLC v. First Am. Title Ins. Co.
| Citation | 751 S.E.2d 256,406 S.C. 309 |
| Decision Date | 20 November 2013 |
| Docket Number | No. 27330.,27330. |
| Court | United States State Supreme Court of South Carolina |
| Parties | PRESERVATION CAPITAL CONSULTANTS, LLC, Respondent, v. FIRST AMERICAN TITLE INSURANCE COMPANY, Appellant. Appellate Case No. 2012–209186. |
OPINION TEXT STARTS HERE
Shaun C. Blake and W. Cliff Moore III, of Adams and Reese, LLP, of Columbia, for Appellant.
Susan Elizabeth Driscoll and James W. Sheedy, of Driscoll & Sheedy, P.A., of Charlotte, NC, for Respondent.
First American Title Insurance Company (First American) appeals the circuit court order granting summary judgment in favor of Preservation Capital Consultants, LLC (Preservation Capital). First American argues the circuit court misconstrued the terms of a title insurance policy in finding Preservation Capital was entitled to recover under the policy. This Court certified this case for review pursuant to Rule 204(b), SCACR. We affirm.
In December 2004, Atlantic Carolina Retail, LLC (Atlantic) loaned $3,075,000 to Monarch Development, LLC (Monarch Development). Atlantic collateralized the loan by taking a mortgage on three properties in Charleston, South Carolina: (1) 635 King Street (King Street parcel), (2) 141 St. Phillips Street (St. Phillips parcel), and (3) Pinehaven Shopping Center (Shopping Center parcel). Atlantic purchased a title insurance policy (the policy), valued at $3,075,000, from First American to insure these mortgage interests against potential title defects. Subsequently, Atlantic assigned the mortgages and secured debt to Preservation Capital, a related entity owned by the same group of investors.
In 2008, Monarch Development sold the St. Phillips parcel and paid Preservation Capital $250,000 to release its lien on that property. Subsequently, Monarch Development defaulted on its loan agreement with Preservation Capital. Thereafter, Preservation Capital performed a title search on the King Street and Shopping Center parcels in preparation for foreclosure. Preservation Capital discovered Monarch Development never owned the King Street parcel; instead, Monarch Holdings, LLC (Monarch Holdings) owned the property at the time Preservation Capital purported to take a mortgage interest. Monarch Holdings later transferred the property to a third party without payment or notice to Preservation Capital. On the date of transfer, the King Street parcel was valued at $590,000 and was subject to a $244,665 lien held by First Palmetto Savings Bank, which was recognized in the policy as senior to Preservation Capital's purported mortgage interest. Thus, but for the title defect, Preservation Capital would have been able to collect $345,335 from sale of the King Street parcel—the value of the parcel after subtracting the amount of the senior lien.
Preservation Capital ultimately foreclosed on the Shopping Center parcel. Atlantic purchased the property at the foreclosure sale by way of a credit bid for $3,250,000. At the time of the foreclosure sale, Monarch Development's debt to Preservation Capital had risen to $3,641,190. Thus, after foreclosing on the Shopping Center parcel, Monarch Development owed Preservation Capital a remaining balance of $391,190. Thereafter, Preservation Capital filed a claim under its policy with First American for $345,335—the amount it was unable to collect on the King Street parcel due to the title defect. First American denied coverage.
The policy provides it insures against loss or damage, not exceeding the policy limit of $3,075,000 listed in Schedule A, sustained or incurred by reason of “[t]itle to the estate or interest described in Schedule A being vested other than as stated therein.” Section 2 of the policy, titled, “Continuation of Insurance,” governs situations in which the insured acquires title to the collateral through foreclosure. Section 2 provides:
(a) After Acquisition of Title: The coverage of this policy shall continue in force ... in favor of ... an insured who acquires all or any part of the estate or interest in the land by foreclosure ....
.... (c) Amount of Insurance: The amount of insurance after the acquisition [shall not] exceed the least of:
(i) the amount of insurance stated in Schedule A; [or]
(ii) the amount of principal of the indebtedness secured by the insured mortgage as of Date of Policy, interest thereon, expenses of foreclosure, amounts advanced pursuant to the insured mortgage to assure compliance with laws or to protect the lien of the insured mortgage prior to the time of acquisition of the estate or interest in the land and secured thereby and reasonable amounts expended to prevent deterioration of improvements, but reduced by the amount of all payments made....
Section 9, titled, “Reduction of Insurance; Reduction or Termination of Liability,” provides:
(b) Payment in part by any person of the principal of the indebtedness, or any other obligation secured by the insured mortgage, or any voluntary partial satisfaction or release of the insured mortgage, to the extent of the payment, satisfaction or release, shall reduce the amount of insurance pro tanto. The amount of insurance may thereafter be increased by accruing interest and advances made to protect the lien of the insured mortgage and secured thereby, with interest thereon, provided in no event shall the amount of insurance be greater than the amount of insurance stated in Schedule A.
(c) Payment in full by any person or the voluntary satisfaction or release of the insured mortgage shall terminate all liability of [First American] except as provided in Section 2(a) of these Conditions and Stipulations.
Section 14, titled, “Liability Limited to this Policy; Policy Entire Contract,” provides:
(a) This policy together with all endorsements, if any, attached hereto by [First American] is the entire policy and contract between the insured and [First American]. In interpreting any provision of this policy, this policy shall be construed as a whole.
(b) Any claim of loss or damage ... shall be restricted to this policy.
(c) No amendment of or endorsement to this policy can be made except by a writing endorsed hereon or attached hereto signed by either the President, a Vice President, the Secretary, an Assistant Secretary, or validating officer or authorized signatory of [First American].
After First American denied coverage on the King Street parcel's title defect, Preservation Capital filed this action. Both parties moved for summary judgment. Preservation Capital argued it was entitled to coverage under section 2 of the policy because it could have collected $345,335 from the sale of the King Street parcel but for the title defect, noting that even after acquiring the Shopping Center parcel, Monarch Development owed Preservation Capital a balance of $391,190. First American, on the other hand, argued section 9(b) of the policy terminated coverage because Preservation Capital acquired the Shopping Center parcel valued at $3,250,000, which is beyond the policy's face value of $3,075,000.
Initially, the circuit court denied both motions, finding summary judgment was improper because the policy language was ambiguous. In response, the parties filed a joint motion for reconsideration, stipulating the policy was unambiguous and no genuine issues of material fact existed. Thereafter, the circuit court granted summary judgment in favor of Preservation Capital, finding the policy provided coverage in this instance because Preservation Capital did not acquire the King Street parcel and suffered a loss due to a title defect.
The circuit court found the “language of [section] 9, read consistently with [section] 2(c), yields the same amount of insurance, $452,731.48.” The circuit court noted that at the time of the foreclosure sale, Monarch Development owed Preservation Capital $3,641,190. Consequently, the $3,250,000 credit bid Preservation Capital was awarded on the Shopping Center parcel did not satisfy the debt in full; instead, the credit bid simply reduced the debt to $391,190. The circuit court further noted the debt appreciated to $452,731.48 by acquiring interest from the date of foreclosure until the entry of judgment in this action, which is covered by the policy. Therefore, the circuit court concluded, coverage remained in the amount of $452,731.48. The circuit court noted, however, that Preservation Capital could recover only to the extent of its loss resulting from the King Street parcel's title defect—$345,335.
Whether the circuit court erred in granting summary judgment in favor of Preservation Capital.
In reviewing a grant of summary judgment, the appellate court applies the same standard as the trial court under Rule 56(c), SCRCP. Quail Hill, L.L.C. v. Cnty. of Richland, 387 S.C. 223, 234, 692 S.E.2d 499, 505 (2010). Summary judgment is proper if, viewing the evidence in a light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), SCRCP.
First American argues the circuit court erred in granting Preservation Capital's motion for summary judgment and misconstrued the policy to provide coverage beyond the stated policy limit. First American contends section 2(c) is inapplicable because it relates to property acquired through foreclosure, and although Preservation Capital acquired the Shopping Center parcel via foreclosure, it did not acquire the King Street parcel through foreclosure or otherwise. First American further contends section 2(c) is not intended to define the amount of insurance remaining on the policy where one property is acquired through foreclosure, but other properties are not and continue to serve as collateral under the insured mortgage. Instead, First American asserts section 9 governs Preservation Capital's claim. First American argues section 9(b) dictates that coverage declines as the debt is paid, and...
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