CHICAGO TITLE INSURANCE COMPANY, individually et al. v. HATCH MOTT MAC DONALD

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6746-04T36746-04T3

CHICAGO TITLE INSURANCE COMPANY,

individually and as subrogee to

Outdoor World Corporation,

Plaintiff-Appellant,

v.

HATCH MOTT MAC DONALD

(f/k/a KILLAM ASSOCIATES),

Defendant-Respondent,

and

MATTHEW V. ECKER, JAMES WALZ

and CLARENCE DeVAUL,

Defendants.

___________________________________________________________

 

Argued November 8, 2006 - Decided December 21, 2006

Before Judges Lisa and Holston, Jr.

On appeal from Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-123-03.

Andrew P. Zacharda argued the cause for appellant (Tompkins, McGuire, Wachenfeld & Barry, attorneys; William C. Sandelands, of counsel and on the brief; Mr. Zacharda, on the brief).

Raymond J. Michaud argued the cause for respondent Hatch Mott MacDonald (Marshall, Dennehey, Warner, Coleman and Goggin, attorneys; Mr. Michaud, on the brief).

PER CURIAM

This subrogation case arises out of a boundary line dispute between Outdoor World Corporation (Outdoor World) and John James Germanio, adjoining property owners in Dennis Township. Ticor Title Insurance Company (Ticor), the predecessor in interest to plaintiff, Chicago Title Insurance Company (Chicago), issued a title insurance policy to O.W. Acquisition Corp (O.W.) in connection with O.W.'s 1988 purchase of a 162 acre year round campground (the property) from Outdoor World in Dennis Township.

On October 7, 1981, Outdoor World acquired the property for $900,000 from Tater's Lake & Shore Campground (Taters). On March 11, 1988, O.W. acquired the property from Outdoor World for $1,564,822.97.

Clarence DeVaul (DeVaul) prepared a survey dated September 4, 1981 when Outdoor World purchased the property from Taters. DeVaul also prepared a survey dated May 20, 1988 for O.W.'s acquisition of the property from Outdoor World. The 1988 survey is identical in all respects to the 1981 survey and was certified as true and accurate to Ticor. Both surveys depict a straight boundary line between Outdoor World's northern boundary line and the southern boundary line of the parcel owned by Germanio. A dirt road, located just south of this straight line boundary runs along the entire length of the boundary line and was used by Outdoor World as part of its campground. Outdoor World used the end of the dirt road as an organic composting site.

Ticor issued an owners title insurance policy (policy) dated March 15, 1988 in the amount of $1,564,823, insuring the deed from Outdoor World to its insured, O.W., the legal description for which was based upon DeVaul's 1988 survey. Ticor insured O.W.'s acquisition against "loss or damage which the insured shall sustain by reason of any encroachments, overlaps, boundary line disputes and easements." This language appears in the March 15, 1988 survey endorsement attached to and made part of the policy, which removed the survey exception contained in Schedule B of the policy.

On October 9, 1989, Edward G. Duckinfield, Jr., P.L.S., of John G. Reutter Associates, informed Outdoor World of a possible shortage of land along the northerly property line common to Lots 71.01, 70.02 and 71.02. The letter, which was marked as exhibit P-19 at a February 15, 2005 deposition, in connection with this litigation, reads in applicable part:

We want to bring to your attention the following:

"(1) An apparent overlap of approximately 30 feet on the northerly line extending off Corson Tavern Road claimed by Atlantic City Electric Company. (See protraction of Lot 79.)"

On December 16, 1998, Germanio became aware that Outdoor World was using a portion of his property as an organic dump. Bill Jackson, a hunter Germanio permitted to hunt on his land, informed Germanio that he had observed Outdoor World dumping on Germanio's property. On December 17, 1998, Germanio filed a complaint with the Cape May County Department of Health (DOH). Michael Boulay, an environmental specialist with the DOH conducted an investigation into Germanio's complaint and determined that there were several loads of trash and debris along the power line right of way and a composting area encroaching on Germanio's property. He spoke with Donald Delaplain, the general manager of Outdoor World. Delaplain agreed to remove all of the debris.

On or about July 26, 1999, Germanio filed a complaint in the Chancery Division against Outdoor World, claiming that Outdoor World had illegally dumped organic and other waste along the common border between their properties. He also complained that fences and campers encroached upon his property. The complaint also alleged that Outdoor World was using Germanio's dirt road without permission. Germanio filed an amended complaint in September 1999, claiming ownership of some of the land on which Outdoor World had obtained approvals. The complaint sought removal of debris from Germanio's property, the removal of the fencing and campers being stored on his property, an injunction against further use of his property, and to quiet title. Because the removal of the survey exception from the policy obligated Chicago to defend Outdoor World's lands against boundary disputes and boundary issues as set forth in the 1988 DeVaul survey, Chicago defended Outdoor World in the Chancery Division litigation. On August 18, 1999, Outdoor World's regional manager certified in this litigation that Outdoor World had used the disputed area as an organic dump for a period greater than fifteen years.

In 1994, Outdoor World sought to expand its operations by increasing the number of campsites on the Property from 411 to 731. It retained Killam Associates (Killam), the predecessor to defendant Hatch Mott MacDonald (H.M.M.), to perform a property survey and prepare a site plan for the expansion project. James Walz and James A. Mott, employed by Killam, prepared a third property survey dated September 23, 1997, which was certified as true and accurate to Outdoor World. Also, Matthew Echer, a professional engineer employed by Killam prepared a Campground Expansion Site Plan for Outdoor World. On August 27, 1998, the expansion project received preliminary site plan approval from the Dennis Township Planning Board, conditioned on Outdoor World acquiring final approval from the New Jersey Department of Environmental Protection (DEP). Outdoor World then applied to the DEP for environmental permits to develop the northern portion of the property. The final approvals had not been granted when Germanio first raised an issue with respect to the boundary in 1998. The state permits were granted on July 22, 1999 and had an expiration date of July 22, 2004.

On October 22, 2002, Michael Hyland, P.E. prepared a boundary survey on behalf of Outdoor World. In Hyland's survey, General Note 3 identifies errors in the March 11, 1988 deed from Outdoor World to O.W. Hyland indicates that the errors in the 1981 and 1988 deed boundary descriptions cause the boundary not to close and that DeVaul's survey was the basis for the legal description in the 1988 deed.

After the conclusion of a bench trial, the Chancery Division entered judgment on June 13, 2001 in favor of Germanio. The judgment would have required Outdoor World to deed Germanio approximately 11 acres. According to Outdoor World, if the judgment were to stand, it would have lost its site plan approval and environmental permits, and it would not have been able to complete its planned development. On August 9, 2001, Outdoor World's motion for a new trial was granted and the Chancery Division's judgment was vacated.

On June 14, 2002, Chicago, Outdoor World, and Germanio entered into a "Confidential Settlement Agreement and Release," wherein Germanio gave up his claim to the acreage, and the parties entered into a "boundary line agreement." The parties agreed that the boundary line between the parties' mutual border was as established in the March 11, 1988 deed, which was based on DeVaul's 1988 survey. The settlement agreement resulted in plaintiff paying $400,000 to Germanio in full satisfaction of Germanio's claims against Outdoor World.

Chicago, on March 19, 2003, filed a subrogation action in the Law Division against DeVaul and H.M.M. based upon the subrogation clause in the 1988 title policy, which states:

Whenever the Company shall have settled a claim under this policy, all rights of subrogation shall vest in the Company unaffected by any act of the insured claimant. The Company shall be subrogated to and be entitled to all rights and remedies which the insured claimant would have had against any person or property in respect to such claim had this policy not been issued[.]

[Emphasis added.]

Chicago alleged that DeVaul's negligence in preparing the 1981 and 1988 survey resulted in incorrect metes and bounds descriptions in the deeds it insured. These metes and bounds descriptions were recited in the title policy issued to Outdoor World. DeVaul was dismissed from the action based on the operation of the statute of limitations. N.J.S.A. 2A:14-1.

In its Law Division complaint, Chicago alleged that as a result of the negligently prepared Killam survey and site plan, Chicago was obligated to protect the validity of Outdoor World's site plan approval and environmental permits, as a result of which it suffered as damages settlement monies paid to Germanio to settle the Chancery Division action and attorneys fees and expert fees in defending the property's title.

Chicago's allegations against H.M.M. are based upon Killam's September 22, 1997 plan of survey, prepared by James Walz, P.L.S. The plan notes identified in the 1997 Killam survey indicate that the survey relates back to Killam's prior plan of survey dated November 27, 1995 from which the outbound information was taken. The September 1997 survey incorporates field information obtained on August 14, 1997, relating to the location of wells on Outdoor World's property. The information from Killam's 1997 plan of survey was incorporated in the site plan used to obtain the preliminary site plan approval and permits. However, at the time Germanio informed Outdoor World of its trespass on his land, the DEP application had not been submitted.

Chicago filed a motion for partial summary judgment in its Law Division declaratory judgment action against H.M.M. on May 13, 2005. Chicago sought a judicial declaration that because it was subrogated to the rights of its insured it was entitled to sue H.H.M. On May 27, 2005, H.H.M. filed a cross-motion for summary judgment seeking to dismiss Chicago's complaint with prejudice.

On June 27, 2005, the court issued a memorandum decision denying Chicago's motion for partial summary judgment and granting H.M.M.'s motion to dismiss Chicago's complaint with prejudice. The decision was memorialized in orders dated June 27, 2005.

The court's memorandum decision states:

The policy at issue was issued on March 15, 1988. Such policy contained an endorsement that provided coverage in the event that the property OWC purchased, as described in a survey by Clarence DeVaul, encroached on the property of another. . . . Specifically, the polic[y]at issue states, "based upon a survey made by Clarence DeVaul dated May 20, 1988 the Company hereby insures against loss or damage which the insured shall sustain by reason of any encroachments, overlaps, boundary line disputes or easements. . . ." Based upon this language, it is clear that Chicago Title's obligation to defend OWC's title was triggered by a claim challenging the boundary line as surveyed by Clarence DeVaul. Subsequent to DeVaul's survey, Germanio brought suit against OWC contending that OWC was encroaching on his land. Ultimately, that suit was settled.

Chicago Title has pointed to no relevant portion of the insurance contract that would otherwise demonstrate that it has a subrogation right to pursue a claim against Hatch Mott MacDonald ("Hatch"). Hatch formally Killam Associates, surveyed the property in 1998. OWC retained Killam's services in order to obtain certain permits. Subsequent to the work being provided, the Germanio litigation ensued regarding the boundary line dispute. Chicago Title contends that the 1998 survey was performed negligently, and absent such negligence, the true boundary line would have been discovered. However, Chicago title's contention does nothing to change the fact that the 1988 Ticor policy specifically stated that it would only be obligated to defend OWC's title based upon the DeVaul survey. Therefore, the 1998 survey has no relevance on Chicago Title's obligation to defend OWC's title. In addition, at oral argument on these motions, it became clear that Plaintiff's subrogor had knowledge of the boundary dispute with Germanio before the Defendants performed and submitted their survey of 1998. That knowledge is imputed to Plaintiff and results in a substantial diminution in Plaintiff's claim that Defendants' faulty survey caused the Plaintiff to pay more for the land that they otherwise would have and would result in speculation on the amount of damages. Accordingly, this Court does not find that Chicago Title has any rights of subrogation against Hatch.

Chicago filed a motion seeking reconsideration which was denied on August 8, 2005. Chicago then filed a notice of appeal on August 25, 2005 appealing the August 8, 2005 order. We affirm.

Chicago presents the following arguments for our consideration:

POINT I.

SINCE THE TRIAL COURT ERRED AS TO A MATTER OF LAW, THIS COURT SHOULD APPLY A DE NOVO STANDARD OF REVIEW.

POINT II.

THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY RULING THAT CHICAGO HAD NO RIGHT OF SUBROGATION TO PURSUE HATCH MOTT.

POINT III.

THE TRIAL COURT'S DECISION TO DISMISS THE CASE MUST BE REVERSED BECAUSE, BY RESOLVING DISPUTED FACTS AGAINST CHICAGO, THE TRIAL COURT FAILED TO PROPERLY APPLY THE SUMMARY JUDGMENT STANDARD.

POINT IV.

THE TRIAL COURT'S DECISION TO DISMISS THE CASE MUST BE REVERSED BECAUSE IT WAS BASED ON FINDINGS OF FACT THAT WERE CONTRADICTED BY THE RECORD.

This court uses the "same standard that governs trial courts in reviewing summary judgment orders." Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). An order for summary judgment will be entered if "the pleadings, depositions, answers to interrogatories and admission on file, together with the affidavits . . . show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2.

In order to determine whether there is a genuine issue of material fact that precludes summary judgment, the trial court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). If no genuine issue exists then this court must decide whether the trial court's ruling on the law was correct. Prudential, supra, 307 N.J. Super. at 167.

Chicago contends that the trial court committed reversible error by ruling that it had no right of subrogation to pursue H.M.M. Chicago contends that its subrogation rights were created under both common law and contract law.

In Standard Accident Insurance Co. v. Pellecchia 15 N.J. 162, 171 (1954), the Supreme Court reviewed the common law right to subrogation. The Supreme Court stated that "subrogation is a device of equity to compel the ultimate discharge of an obligation by the one who in good conscience ought to pay it." Standard, supra, 15 N.J. at 171. The Court determined:

This doctrine that recovery is permitted only if the subrogee shows a "superior equity" is asserted in the many cases of subrogation, where the subrogation is based on the defendant's tort. For example, in a case where property is destroyed by the negligence of a third party and the insurer pays the insured the amount of his damage, the insurer-subrogee in seeking to recover against the third party must necessarily prove that it was the third party's negligence that caused the damage, and at the same time he cannot prevail if the third party shows that the damage resulted from the insured's contributory negligence. In short, in these tort actions the insurer-subrogee steps into the shoes of his insured and is bound by the principles of the law of negligence which would control if the insured himself were bringing suit.

[Id. at 178.]

Thus, under common law principles, Chicago could collect as subrogor only if Outdoor World would have been able to collect against H.M.M. Chicago, in this case, has failed to provide any evidence that H.M.M.'s site plan survey caused any measurable damages to Outdoor World based on the allegations in Germanio's Chancery Division complaint.

The Supreme Court explained:

The right does not arise out of contract but rather exists without the consent of the insured, Fire Association of Philadelphia v. Schellenger, 84 N.J. Eq. 464, 465 (E. & A. 1915), although of course the parties may by agreement waive or limit the right, Ganger v. Moffett, supra, 8 N.J. 73, 80, Fire Association of Philadelphia v. Schellenger, supra, 84 N.J. Eq. 464, 466. The subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could have recovered, Sullivan v. Naiman, supra, 130 N.J.L. 278, 280, Connecticut Savings Bank of New Haven v. First National Bank & Trust Co. of New Haven, 138 Conn. 298, 84 A.2d 267, 270 (Sup. Ct. Err. 1951). He is subject to all legal and equitable defenses that the third party may have either against him or against the insured and there can be recovery only if the cause is just and enforcement is consonant with right and justice, Bater v. Cleaver, supra, 114 N.J.L. 346, 354.

[Id. at 172-73.]

"[A] title insurance policy is a contract of indemnity under which the insurer, for a valuable consideration, agrees to indemnify the insured in a specific amount against loss through defects of title to . . . realty on which the insured has interest." Enright v. Lubow, 202 N.J. Super. 58, 67 (App. Div. 1985), certif. denied, 104 N.J. 376 (1986). "Title policies, like other policies of insurance, are construed to give effect to the intention of the parties as manifested by the reasonable meaning of policy terms. . . . Accordingly, exceptions to coverage are construed strictly against the insurer." Amidano v. Donnelly, 260 N.J. Super. 148, 154 (App. Div. 1992), certif. denied, 133 N.J. 435 (1993).

Consequently, this court must decide whether the March 15, 1988 title policy by which Chicago's predecessor insured Outdoor World's deed description, based on the 1988 DeVaul survey, provides, by its subrogation clause the right to pursue a cause of action against H.M.M., resulting from its defense and settlement of the Germanio Chancery Division action against Outdoor World.

In this case, the subrogation clause in the policy limits the subrogation right of Chicago. The subrogation right created by the title insurance contract is contained in paragraph eleven of the policy under conditions and stipulations. It states:

Whenever the Company shall have settled a claim under this policy, all right of subrogation shall vest in the Company unaffected by any act of the insured claimant. The Company shall be subrogated to and be entitled to all rights and remedies which such insured claimant would have had against any person, or property in respect to such claim had this policy not been issued, and if requested by the Company, such insured claimant shall transfer to the Company all rights and remedies against any person or property necessary in order to perfect such right of subrogation and shall permit the company to use the name of such insured claimant in any transaction or litigation involving such rights or remedies.

[Emphasis added.]

We are convinced that the right to subrogation granted by this clause is limited by the risk insured against. The policy endorsement reads: "Based upon a survey made by Clarence DeVaul dated May 20, 1988, the company hereby insures against loss or damage, which the insured shall sustain by reason of any encroachments, overlaps, boundary line disputes or easements . . . ."

We are satisfied that the language of the endorsement limited Chicago's subrogation rights to damages arising from the boundary line dispute arising from the metes and bounds description contained in the March 15, 1988 deed from Outdoor World to O.W. The deed description was based on the 1988 DeVaul survey description. Chicago's obligation to defend was triggered by Germanio's Chancery Division action challenging the boundary line as surveyed by Clarence DeVaul. The subsequent surveys by Killam, which were commissioned by Outdoor World in connection with its applications for preliminary site plan approval and DEP approval were not relied upon by Chicago when it was required to defend the 1988 title, which Ticor insured and which was based exclusively on the deed description provided by the 1988 DeVaul survey. Clearly Killam's surveys were not used to prepare the legal description contained in Outdoor World's filed deed. Therefore, Chicago is not able to produce any evidence that Killam's survey was responsible for any of Outdoor World's physical use, encroachment, and trespass into Germanio's land as alleged by Germanio in the Chancery Division action, which according to Outdoor World's regional manager had taken place over a fifteen year period.

Our careful review of the record shows that Outdoor World did not rely upon any survey produced by H.M.M./Killam in its use of Germanio's land. The events contained in the allegations in Germanio's complaint all predate the Killam survey and result from Outdoor World's use of the land, beginning in 1981, when it purchased the property from Tater. Outdoor World conducted its use of the property on its belief that the acreage in dispute belonged to it based upon DeVaul's survey legal description. Outdoor World's trespasses on Germanio's land necessarily, therefore, predate the survey performed by H.M.M.'s predecessor, Killam, for site plan approval purposes. The Killam survey did not alter or require the alteration of the Outdoor World deed. Indeed, an integral part of Outdoor World's settlement with Germanio was an agreement to the boundary line Outdoor World thought it already had as contained in its recorded 1988 deed. Further evidence that there was no reliance by Outdoor World on the Killam survey is the fact that notice of a possible shortage of land along the northern property boundary was given to Outdoor World in 1989 by Edward G. Duckinfield, Jr., P.L.S. This notice notified Outdoor World at least four years prior to it commissioning Killam to conduct a survey in connection with its contemplated expansion. Killam's survey clearly was not a cause of the Germanio litigation. Therefore, Chicago cannot demonstrate that its insured, Outdoor World, sustained any damage "by reason of encroachments, overlaps, boundary line disputes or easements" that were causally connected to the H.M.M/Killam survey performed in 1998.

Chicago can only recover from H.M.M. if it can prove that it was H.M.M.'s negligence that caused Outdoor World damage. Standard Acc. Ins. Co., supra, 15 N.J. at 178. The allegations raised in Germanio's complaint and the admissions by Outdoor World clearly do not implicate Killam's survey as a reason for Outdoor World's physical use and encroachment on Germanio's land. Thus, Killam's survey was not a contributing factor to the damages Germanio alleged were sustained by him as a result of Outdoor World's trespass on his property. Since Outdoor World could not recover from H.M.M., Chicago is also barred from recovery from H.M.M., as subrogor.

 
We are convinced that Chicago failed to demonstrate a contractual or common law right of subrogation. Therefore, the relevant evidence viewed in the light most favorable to Chicago is insufficient for a rational fact-finder to conclude that Chicago has incurred damages proximately caused by the negligence of H.M.M., under the law of subrogation. Brill, supra, 142 N.J. at 520.

Affirmed.

O.W. merged with Outdoor World on March 31, 1988 and became known as Outdoor World.

(continued)

(continued)

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A-6746-04T3

 

December 21, 2006