Stewart Title Guar. v. Greenlands Realty, L.L.C.

• Decision Date: 20 July 1999
• Docket Number: No. CIV. A. 97-3577.,CIV. A. 97-3577.
• Citation: 58 F.Supp.2d 370
• Parties: STEWART TITLE GUARANTY CO., Plaintiff, v. GREENLANDS REALTY, L.L.C., Defendant, v. Stewart Title Guaranty Co., Title Company of New Jersey and Sun International of North America, Inc., Additional Counterclaim Defendants.
• Court: U.S. District Court — District of New Jersey

58 F.Supp.2d 370

STEWART TITLE GUARANTY CO., Plaintiff, v. GREENLANDS REALTY, L.L.C., Defendant, v. Stewart Title Guaranty Co., Title Company of New Jersey and Sun International of North America, Inc., Additional Counterclaim Defendants.

No. CIV. A. 97-3577.

United States District Court, D. New Jersey.

July 20, 1999.

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Stuart Alderoty, David P. Kalm, Leboeuf, Lamb, Greene & Macrae, L.L.P., Newark, NJ, for Plaintiff and Additional Counterclaim Defendant, Stewart Title Guaranty Company and Additional Counterclaim Defendant, Title Company of New Jersey.

Linda J. Cohen, Cozen and O'Connor, Westmont, NJ, Robert W. Hayes, Cozen and O'Connor, Philadelphia, PA, for Defendant, Greenlands Realty, L.L.C.

Philip B. Seaton, Gregory A. Lomax, Kozlov, Seaton, Romanini, Brooks, & Greenberg, Cherry Hill, NJ, for Additional Counterclaim Defendant, Sun International of North America, Inc.

OPINION

ORLOFSKY, District Judge.

This case requires me to revisit the concept of marketability of title,¹ and consider whether every defect in title renders title unmarketable. I must also examine the nebulous line dividing the realm of contract law from that of tort law by applying the New Jersey Supreme Court's holding in Walker Rogge, Inc. v. Chelsea Title & Guaranty Co., 116 N.J. 517, 562 A.2d 208 (1989).

The dispute arises out of an agreement between Defendant, Greenlands Realty, L.L.C. ("Greenlands"), and Additional Counterclaim Defendant, Sun International of North America, Inc. ("Sun"), in which Sun agreed to purchase property known as 1315 Boardwalk, located in Atlantic City, New Jersey from Greenlands. Sun terminated this purchase agreement, claiming that title to 1315 Boardwalk was neither marketable nor insurable. Plaintiff and Additional Counterclaim Defendant, Stewart Title Guaranty Company ("Stewart Title"), who insured title to the property, and Additional Counterclaim Defendant, Title Company of New Jersey ("TCJ"), who investigated titled for Stewart Title, have moved for summary judgment on Count II of their Complaint and on all counts asserted against them in Greenlands's Counterclaim.² Specifically, Stewart Title and TCJ (collectively, the "Title Companies") argue that Stewart Title has fulfilled all of its obligations under the title insurance policy it issued to Greenlands, and that all of Greenlands's tort claims are precluded by the "Economic Loss Doctrine." This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332, as there is complete diversity of citizenship between the parties, and the amount in controversy is in excess of $75,000, exclusive of interest and costs.

In my last opinion in this case, filed May 12, 1999, I concluded that the title to 1315 Boardwalk was marketable. Thus, I will consider the Title Companies' motion for summary judgment in light of that holding.

For the reasons set forth below, I find that there are several genuine issues of material fact with respect to whether or not the Title Companies acted in good faith, honestly, and with reasonable diligence in their dealings with Greenlands. As a result of this finding, I hold that I must deny the Title Companies' motion for summary judgment on: (1) Count II of the Complaint, which seeks a declaratory judgment finding that Stewart Title has fulfilled its obligations under the title insurance policy issued to Greenlands; (2) Count III of the Counterclaim, asserting a claim for slander of title against the Title Companies; (3) Count V of the Counterclaim, asserting a claim for breach of contract against Stewart Title; and (4) Count X of the Counterclaim, asserting a claim under the New Jersey Unfair Trade Practices Act, N.J. Stat. Ann. § 56:8-2,³ against the Title Companies. Therefore, I will deny the Title Companies' motion for summary judgment on Counts III, V, and X of the Counterclaim.

These same genuine issues of material fact require that I grant in part, and deny in part, the Title Companies' motion for summary judgment with respect to the part of Count VIII of the Counterclaim, which alleges a claim of bad faith, that relates to Stewart Title's conduct in connection with the title insurance policy that it issued to Greenlands. By contrast, I hold that Greenlands may only assert a claim for bad faith in connection with a contractual relationship. Because I have found that there is absolutely no evidence in the summary judgment record that Greenlands had a contractual relationship with TCJ, I will grant the Title Companies' motion for summary judgment on Count VIII of the Counterclaim asserted against TCJ. Further, I will also grant the motion for summary judgment with respect to Greenlands's allegations, asserted as part of Count VIII of the Counterclaim, that Stewart Title acted in bad faith while negotiating a commitment for title insurance for Sun.

Finally, I will grant the motion for summary judgment on: (1) Count IV of the Counterclaim, which alleges a claim of breach of fiduciary duty against Stewart Title, because, under Walker Rogge, the availability of contractual remedies to Greenlands prohibit it from pursuing tort remedies; (2) Count VI of the Counterclaim, which alleges a claim of negligent title search against TCJ, because there is no evidence in the summary judgment record that TCJ voluntarily assumed the duty to conduct a title search; (3) Count VII of the Counterclaim, which asserts a breach of contract claim against TCJ, since there is no evidence in the summary judgment record that Greenlands and TCJ entered into a contract; and, (4) Count IX of the Counterclaim, which asserts a claim of negligent misrepresentation against the Title Companies, because, under Walker Rogge, Greenlands cannot pursue tort remedies where it has a remedy available in contract.

I. FACTUAL AND PROCEDURAL BACKGROUND

I have already addressed the factual background of this case in my Opinion of May 12, 1999. The issues presented by the Title Companies' motion for summary judgment, however, require that I consider additional events beyond those discussed in my last Opinion. Accordingly, I will focus my discussion of the factual background on events not considered in my previous Opinion, however, where necessary I will repeat some of the background from my last Opinion.

On April 29, 1996, Joseph Zoll ("Zoll") entered into an agreement to purchase property, located at and known as 1315 Boardwalk, in Atlantic City, from F.W. Woolworth's ("Woolworth") for $1,100,000. See First Amended Counterclaims ("Counterclaim"), filed Mar. 13, 1998, ¶ 8. "After Zoll signed the contract to purchase 1315 Boardwalk, `Greenlands Realty, L.L.C.[, of which Zoll is] a managing member[,] was formed and [Zoll] assigned [his] rights under the Woolworth agreement to Greenlands which then exercised those rights by purchasing the property.'" Stewart Title Guaranty Co. v. Greenlands Realty, L.L.C., Civil Action No. 97-3577, 1999 WL 308713, at *2, 58 F.Supp.2d 360, ___ (D.N.J.1999) (quoting Affidavit of Joseph Zoll in Support of Defendant/Counterclaim Plaintiff Greeland[s] Realty, L.L.C.'s Motion for Summary Judgment ("Zoll Cert."), filed Nov. 19, 1998, ¶ 3).

The property consisted of "two parcels, the `main parcel' and the `strip,' a threefoot wide segment of land running from the main parcel to the street." Id.; see also Certification of William P. Fitzgerald, dated Nov. 17, 1998, Ex. B (Ponzio Survey showing map of the property).⁴ "The main parcel front[ed] the boardwalk and the strip connect[ed] the back of the main parcel with South Carolina Avenue, which is 110 feet from the western edge of the main parcel." Id. Both Zoll and Woolworth, however, did not realize that the strip was part of the property. See Counterclaim ¶ 11. That is, Woolworth did not realize that it had title to the strip. "As part of the closing of Greenlands'[s] purchase of the Property from Woolworth, a survey of the lot was made by Arthur Ponzio[, which] revealed that [the s]trip ... constituted part of the ... lot being sold by Woolworth." Certification of Robert Hayes ("Hayes Cert."), Dec. 18, 1998, Ex. 14 (Verification of William W. Shultz, Esq., in Support of Defendant/Counterclaim Plaintiff Greenlands Realty, L.L.C.'s Motion for Summary Judgment, Oct. 2, 1998, ¶ 3). "Upon discussing the results of this survey with Woolworth, the company agreed to convey that [s]trip of land to Greenlands as part of the closing of the entire tax block and lot which Woolworth owned and was selling to Greenlands." Id.

On April 26, 1996, just three days before Zoll signed the purchase agreement with Woolworth, Zoll obtained a commitment for title insurance from Stewart Title, covering just the main parcel and not the strip, since, at the time, Zoll did not know that the strip was part of 1315 Boardwalk. See Hayes Cert., Ex. 3 (Commitment for Title Insurance, issued by Stewart Title, dated Apr. 26, 1997). The title commitment attached all of the deeds for the property, the results of a title search performed by TCJ. See id. Neither the commitment for title insurance nor the set of deeds, however, included an abstract of title.⁵ See id. Further, although Greenlands alleges in its Counterclaim that it "entered into a contract with [TCJ] to abstract title to the Property for the independent purpose of verifying good and marketable title to the entire Property when Greenlands purchased it from F.W. Woolworth Co," Counterclaim ¶ 12, Greenlands could not provide a copy of this abstract when requested to do so by counsel for the Title Companies. See Certification of Stuart Alderoty ("Alderoty Cert."), filed Dec. 18, 1998, Ex. B (Letter from David P. Kalm, Esq., to Douglas R. Widen, Esq., dated Dec. 2, 1997, requesting a copy of the abstract); see also Brief in Support of Motion for Summary Judgment on Plaintiff's Complaint and Dismissing Counterclaims as to Stewart Title Guaranty Company and the Title Company of New Jersey ("Pl.'s Brief"),...