Schwartz v. Stewart Title Guar. Co.

• Decision Date: 19 July 1999
• Docket Number: No. 74450.,74450.
• Citation: Schwartz v. Stewart Title Guar. Co., 134 Ohio App.3d 601, 731 NE 2d 1159 (Ohio App. 1999)
• Parties: SCHWARTZ, Appellant, v. STEWART TITLE GUARANTY COMPANY, Appellee.
• Court: Ohio Court of Appeals

134 Ohio App.3d 601

731 NE 2d 1159

SCHWARTZ, Appellant, v. STEWART TITLE GUARANTY COMPANY, Appellee.

No. 74450.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Decided July 19, 1999.

COPYRIGHT MATERIAL OMITTED

Donald P. McFadden and Judith L. Layne, for appellant.

Hahn, Loeser & Parks, L.L.C., Kim M. Hastings, for appellee.

JAMES M. PORTER, Administrative Judge.

Plaintiff-appellant Mark C. Schwartz appeals from the summary judgment entered in favor of defendant-appellee Stewart Title Guaranty Company on plaintiffs claim under a title insurance policy for attorney fees resulting from his efforts to cure alleged defects in title to his condominium. Plaintiff contends that undisputed issues of material fact entitled him to coverage and indemnity under the title insurance policy as a matter of law. We find no error and affirm summary judgment in favor of defendant-appellee.

To understand the issues on appeal, it is necessary to outline the substantial background and earlier litigation from which this case arose.

Schwartz purchased an unfinished condominium unit (Unit 306) in the Murray Hill Condominiums in 1989. He customized its interior. Stewart Title issued a standard form policy of title insurance to Schwartz on Unit 306, effective March 2, 1990. When the roof began to leak and the parking garage and swimming pool were not "rehabilitated" as promised by the developers, Schwartz filed a fifteencount complaint against various parties, including the architect and developer of the condominium (collectively referred to as the Murray Hill Company or "MHC"). See Schwartz v. Giltz et al., C.P. No. 214429, filed on July 15, 1991. ("Schwartz I"). That same day, Schwartz sent a letter to Stewart Title giving notice of the suit and claiming a title defect in that, although the record owner of the Murray Hill Condominiums was the Murray Hill Company, an Ohio corporation, the declaration of the condominium listed the owner as the Murray Hill Company, an Ohio general partnership. In an August 22, 1991 follow-up letter, Schwartz also advised Stewart Title that his furnace room encroached into the common area of the condominium.

In Schwartz I, Schwartz sought more than two million dollars in compensatory and punitive damages for numerous alleged construction and contract deficiencies. In addition, he sought a declaratory judgment in Schwartz I that Unit 306 was not part of a condominium under Ohio law, due to the partnership/corporation name discrepancy, and sought to void the purchase agreement for Unit 306.

Stewart Title engaged coverage counsel to independently assess Schwartz's alleged claims under the title insurance policy. In a letter dated October 17, 1991, Stewart Title responded to Schwartz's claims declining coverage. The letter explained that the policy required Stewart Title to defend only third-party adverse claims against the insured, and that no third party had made an adverse claim affecting title, nor had title been rejected as unmarketable. Further, the letter explained that the indemnity provisions of the policy had not been triggered by actual damage to Schwartz.

Although Stewart Title disclaimed any duty to do so, it undertook to assist MHC in its efforts to cure the partnership/corporation misnomer that Schwartz complained of. To that end, Stewart Title hired attorney Jay Rosenberg, a Cincinnati attorney and title expert, to review the document history for MHC and recommend whether and how the technical name deficiency could be cured. Rosenberg drafted and provided to MHC an affidavit pursuant to R.C. 5301.252, which was executed on November 6, 1992, and filed.

The Schwartz I case was tried before a referee in common pleas court. The trial took twenty-one days, presented twenty witnesses and voluminous exhibits, and concluded in November 1993. Stewart Title was not a party. On June 16, 1994, the referee rendered a comprehensive forty-six-page report. Among the findings and conclusions rendered were the following:

"That the `corporation-partnership' misnomer which created the discrepancy between the Disclosure Statement and the Declaration was nothing more than a simple human error.

"Neither Schwartz nor any of the other unit owners testified to any difficulties with mortgage loans or other financing arrangements arising from an alleged title defect. Title to Unit 306 has never been challenged or questioned by any one other than Schwartz.

"That efforts were undertaken to cure the `corporation-partnership' misnomer by way of affidavit, which was prepared at the cost and direction of Stewart Title.

"That by Murray Hill Partnership executing a deed to Murray Hill Corporation, it could `clear any question as to title integrity.'

"That Schwartz's theory that his unit was unmarketable due to the `corporation-partnership' misnomer was untenable because the defect was curable."

The referee rejected Schwartz's prayer to declare his purchase agreement for Unit 306 voidable. With respect to Schwartz's claim that Unit 306's furnace room encroached upon the condominium's common area, there could be no reimbursement to Schwartz. The referee noted that unanimous owner consent by exchange of quitclaim deeds to the encroachment could cure the problem, but if such consent were not forthcoming, he recommended that MHC redesign Unit 306 to Schwartz's satisfaction. In a journal entry dated September 22, 1995, the trial court adopted the report of the referee and entered orders accordingly.

The parties appealed the Schwartz I judgment. The appeal was dismissed when the parties to the MHC lawsuit entered into a settlement agreement. The settlement agreement provided:

"That MHC would pay $550,000 to Schwartz, his attorney, McFadden, and four other unit owners, and an additional $7,000 to Schwartz to be used by him to redesign his unit due to the furnace room encroachment.

"That amendments would be drawn to bring all of the condominium documents in compliance with R.C. Chap. 5311 and specifically R.C. 5311.25, thereby curing alleged title defects.

"That a Motion to Vacate the September 22, 1995 Journal Entry would be submitted which stated that all of Schwartz's claims which were raised, or could have been raised therein, were settled."

On June 14, 1996, Schwartz sold Unit 306 to Robert and Nancy Derwae for $179,000. Chicago Title issued a standard form policy of title insurance to the Derwaes without reservations or exceptions.

On April 4, 1996, Schwartz brought the instant case to recover attorney fees incurred in Schwartz I in order to quiet title resulting from the partnership/corporation name discrepancy and the furnace room encroachment. The complaint alleged counts for breach of contract, declaratory judgment, bad faith, and breach of fiduciary duty. Schwartz never clarified on the record whether the approximately $200,000 in fees he sought represented all or only a portion of the fees incurred in Schwartz I.

Stewart Title claimed that there were no adverse claims against the title that it was obliged to defend under its policy and plaintiff suffered no injury or loss for which he was entitled to indemnity. Plaintiff claimed Stewart Title was obligated to pay the legal expense of quieting his own title because Stewart Title failed to honor its commitments under the policy. The trial court found "that no adverse claim to title was made. Therefore under the contract, Defendant did not owe an affirmative duty to the Plaintiff." Summary judgment was granted for Stewart Title and denied for plaintiff. Both parties agree that the case turns on a interpretation of the policy. Both contend that the language of the policy is clear and unambiguous and favors the application for which each contends.

We will address plaintiffs assignments of error in the order presented.

I

"The trial court erred when the trial court granted defendant-appellee title company's motion for summary judgment on plaintiff-appellant's claims one, five and six on the finding that no adverse claim to title was made and that the defendant-appellee title company did not owe an affirmative duty to the plaintiff-appellant insured to cure the plaintiff-appellant insured's unmarketable title which title the title company had insured to be marketable."

Under Ohio law, the insured bears the burden of proving both the existence of a loss and coverage under an insurance policy. Inland Rivers Serv. Corp. v. Hartford Fire Ins. (1981), 66 Ohio St.2d 32, 34, 20 O.O.3d 20, 21-22, 418 N.E.2d 1381, 1383; Reverend Ferris E. Kleem v. Nationwide Ins. Co. (Oct. 6, 1983), Cuyahoga App. No. 46027, unreported, 1983 WL 2622.

Appellate review of summary judgments is de novo. Grafton v. Ohio Edison Co. (1996), 77 Ohio St.3d 102, 105, 671 N.E.2d 241, 244-245; Zemcik v. La Pine Truck Sales & Equip. Co. (1998), 124 Ohio App.3d 581, 585, 706 N.E.2d 860, 863. The Ohio Supreme Court recently restated the appropriate test in Zivich v. Mentor Soccer Club (1998), 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201, 203-204:

"Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is no genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion and that conclusion is adverse to the nonmoving party, said party being entitled to have the evidence construed most strongly in his favor. Horton v. Harwick Chem. Corp. (1995), 73 Ohio St.3d 679, 653 N.E.2d 1196, paragraph three of the syllabus. The party moving for summary judgment bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264, 273-274."

Once the moving party satisfies its burden, the nonmoving party "may not rest upon the mere allegations or denials of the party's pleadings, but the party's response, by affidavit or as otherwise provided in this rule, must...