TC X, INC. v. COM. LAND TITLE INS. CO.

• Decision Date: 21 February 1995
• Docket Number: C.A. No. 0:93-640-17.
• Citation: 928 F. Supp. 618
• Court: U.S. District Court — District of South Carolina
• Parties: TC X, INC., and TC 126, Inc., Plaintiffs, v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant.

928 F. Supp. 618

TC X, INC., and TC 126, Inc., Plaintiffs, v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant.

C.A. No. 0:93-640-17.

United States District Court, D. South Carolina, Rock Hill Division.

February 21, 1995.

COPYRIGHT MATERIAL OMITTED

Braxton Craig Collins, Mitchell Myron Willoughby, Willoughby Law Firm, Columbia, South Carolina, Charles T. Speth, II, Jeffrey Morcom Nelson, Haynsworth, Baldwin, Johnson & Greaves, P.A., Columbia, S.C., for plaintiffs.

Michael W. Tighe, Suzanne Hawkins, Louis Lang, Callison, Tighe, Robinson & Hawkins, Columbia, S.C., for defendant.

ORDER

JOSEPH F. ANDERSON, Jr., District Judge.

This action involves a dispute over the proper interpretation of a title insurance policy issued by the Defendant, Commonwealth Land Title Insurance Company (Commonwealth), to Plaintiff TC X, Inc. (TC X).

The court bifurcated discovery in this matter, allowing discovery on the issue of liability to proceed and holding in abeyance discovery on the issue of damages.

The Plaintiffs, TC X and TC 126, Inc. (TC 126), have moved for summary judgment on the issue of liability as to the first cause of action in the complaint, which alleges that Commonwealth breached the title policy. Commonwealth has moved for summary judgment on the issue of liability on the Plaintiffs' first cause of action, as well as on the Plaintiffs' second and third causes of action, which allege a bad-faith breach of the title policy and a violation of the South Carolina Unfair Trade Practices Act (UTPA), S.C.Code Ann. § 39-5-10 et seq. (Law.Coop.1985), respectively. The court heard oral argument on these motions on July 11, 1994, at which time the court took the motions under advisement. Because of the complexity of the issues involved, the court scheduled reargument of the motions, which was heard on October 25, 1994. For the reasons set forth below, Commonwealth's motion is granted, the Plaintiffs' motion denied, and the complaint is dismissed with prejudice.

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). It is well established that summary judgment should be granted "only when it is clear that there is no dispute concerning either the facts of the controversy or the inferences to be drawn from those facts." Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987).

The moving party has the burden of showing the absence of a genuine issue of material fact, and the court must view the evidence before it and the inferences to be drawn therefrom in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Viewed in the light most favorable to the Plaintiffs, the facts are as follows:

On November 30, 1988, TC X purchased from TC 126 approximately 377 acres of mostly undeveloped land located in Tega Cay, South Carolina. TC X was a new corporation, which had been formed for the purpose of financing the acquisition and development of this property (Title X property). TC X obtained financing for the acquisition of the Title X property under a program administered by the Department of Housing and Urban Development (HUD) pursuant to Title X of the National Housing Act, 12 U.S.C. §§ 1749aa-1749ll (1988) (repealed 1989).

The Title X program gave HUD discretionary authority to insure mortgages for land purchase and residential development in connection with new subdivisions and new communities. Under the Title X program, improvements that were to be installed by the developer and financed with the mortgage proceeds were to include, water and sewage systems, roads, streets, curbs, gutters, sidewalks, storm drains, and the like. 54 Fed.Reg. 33,039 (Aug. 11, 1989). Title X projects were to be designed for residential use, although a proportional amount of related nonresidential use was permitted. Id.

When TC X purchased the Title X property, it was subject to the claims of the Catawba Indian Tribe of South Carolina set out in the case entitled Catawba Indian Tribe of South Carolina, a/k/a The Catawba Nation of South Carolina v. State of South Carolina, et al., C/A No. 80-2050-6.¹

In conjunction with TC X's acquisition of the Title X property, Commonwealth provided a lender's title insurance policy, which was satisfactory to HUD, and an owner's policy, each in the amount of $8.4 million.

The language in dispute in this case is contained in Paragraph 9 of Schedule B to the owner's title policy,² which reads as follows:

This policy insures against loss or damage which the Insured may sustain by reason of any right or claim of title which has been or may be asserted, of record or not, by or on behalf of any Indian or Indian tribe arising out of any treaty or any other transfer of land based on the Indian Non-Intercourse Act of 1790 or any similar state or federal law including any matter raised by the pending lawsuit filed in the United States District Court for the District of South Carolina bearing Civil No. 80-2050-6, entitled Catawba Indian Tribe of South Carolina, also known as the Catawba Nation of South Carolina v. State of South Carolina, et al. This policy includes insurance against loss or damage by reason of unmarketability of title (as hereinafter defined) on account of said defect. With respect to said defect the offer of any title insurance company licensed to transact business in the State of South Carolina, including this company, to insure at its regular rates the title to the land herein described in the manner herein set forth above shall be conclusive evidence of the marketability of the title hereby insured. The company agrees that upon request of any mortgagee or vendee of the insured, or the mortgagee of such vendee, to issue its policy containing the same affirmative coverage set forth above, but subject to the same condition.

Paragraph 9 provided, among other things, a limited form of marketability of title coverage for the insured. It did so by defining marketability of title as insurability of title. If title to the Title X property could be insured by a title insurance company, then that title was "marketable" regardless of the pendency of the Catawba Indian claim.³

Paragraph 9 was not part of the preprinted portion of the title policy, nor was it standard Commonwealth language. Further, there is no evidence that Paragraph 9 or similar language had been used previously by Commonwealth. In fact, the evidence indicates that Commonwealth proposed two entirely different exceptions dealing with the Catawba Indian claim, both of which were rejected by HUD.

The exception that became Paragraph 9 was proposed by and came from the office of Arvin Rosen, who was one of several attorneys representing TC X in the loan transaction. On November 17, 1988, Mr. Rosen's office telecopied the exception to the office of James Blakely, an attorney from the South Carolina law firm of Nelson Mullins Riley & Scarborough, who acted as local counsel for TC X. The next day, November 18, 1988, Mr. Blakely telecopied the exception he had received from Mr. Rosen's office to Commonwealth's Atlanta, Georgia office. On that same date, the exception was approved for inclusion in the lender's policy by Annette Gamble of Commonwealth, and Dennis Hoover, an attorney in Mr. Rosen's office, telecopied to Mr. Blakely TC X's request that the exception be included in the owner's policy.

On November 30, 1988, R & V Title Agency, on behalf of Commonwealth, issued to TC X the title policy, which contained Paragraph 9.

The dispute between the parties over the proper interpretation of Paragraph 9 arose as a result of a proposal to build a $50 million conference center on a portion of Section 20 of the Title X property. The conference center concept arose after the Title X property was acquired by TC X, and after the title policy was issued. As a result of discussions between TC 126 and Shinn-Bodycott Development Company ("Shinn-Bodycott"), TC 126 and Shinn-Bodycott formed a joint venture on August 25, 1989, known as Conference Center Associates Joint Venture ("Conference Center Associates"), to develop and build the conference center. The written joint venture agreement between the parties provided that TC 126 was to acquire Section 20 from TC X and then convey Section 20 to Conference Center Associates.

In accordance with its development responsibilities under the joint venture agreement, Shinn-Bodycott retained the services of Gary Swindell, an attorney with the North Carolina firm of Moore & Van Allen. It was Mr. Swindell's responsibility to obtain sufficient title insurance to attract a lender for the conference center project. Mr. Swindell approached Commonwealth and, on behalf of Conference Center Associates, requested a title insurance policy in the amount of $50 million, the estimated cost of development and construction for the conference center. This request was made after the Fourth Circuit had reversed the District Court and had remanded the Catawba Indian case to the District Court for trial. Catawba Indian Tribe v. South Carolina, 865 F.2d 1444 (4th Cir.) (argued Apr. 6, 1988, decided Jan. 23, 1989), cert. denied, 491 U.S. 906, 109 S.Ct. 3190, 105 L.Ed.2d 699 (1989).

Commonwealth declined to issue a $50 million title insurance policy, but did issue a commitment to Conference Center Associates for a title policy in the amount of $8.4 million. This commitment contained the same exception that was contained in Paragraph 9 of Subsection B of the title policy. Mr. Swindell did amass commitments from other title insurance companies amounting to more than $50 million, all of which...