Valcon Am. Corp. v CTI Abstract of Westchester

[*1] Valcon Am. Corp. v CTI Abstract of Westchester 2010 NY Slip Op 51522(U) [28 Misc 3d 1228(A)] Decided on March 16, 2010 Supreme Court, Orange County Cohen, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 16, 2010
Supreme Court, Orange County

Valcon America Corp. and Robert Valentine, Plaintiffs,

against

CTI Abstract of Westchester, DONALD W. MIRRO, ESQ., MATTHEW BENNETT, ESQ. and CHICAGO TITLE INSURANCE COMPANY, Defendants.



5882/2008



Law Offices of Craig E. Johns

Attorneys for Plaintiff

154 S. Middletown Road

Nanuet, New York 10954

McMillan, Constable, Maker & Perone, LLP

Attorneys for Defendant Chicago Title Insurance Company

2180 Boston Post Road Larchmont, New York 10538

Winget, Spadafora & Schwartzberg

Attorneys for Defendant CTI Abstract of Westchester

45 Broadway, 19th Flor

New York, New York 10016

The McDonough Law Firm, LLP

Attorneys for Defendants Mirro and Bennett

145 Huguenot Street

New Rochelle, New York 10801

Jeffrey A. Cohen, J.

In August 2004, plaintiff Robert Valentine ("Valentine") engaged the services of attorneys Donald W. Mirro ("Mirro") and Matthew Bennett ("Bennett") to provide legal services in conjunction with his purchase of real property located in the Town of Minisink, New York (the "Parcel").

A title search/abstract was performed by CTI Abstract of Westchester, Inc. ("CTI")[FN1]. CTI's November 15, 2004 "Title Abstract Report" disclosed within the chain of title a deed containing a restriction that prohibited building upon the parcel "until such time as the premises is serviced by a central sewage system" (the "Deed Restriction"). (Complaint at ¶ 21.) This restriction also appeared as a Note on the approved subdivision map, Number 2583 (the "Map Restriction").

On November 29, 2004, the transfer of title to the Parcel was completed and a title insurance policy was issued by Chicago Title ( the "Title Policy") which contained an exclusion from coverage relating to the Map Restriction (the "Exception"). Plaintiffs allege that the Exception was omitted by a CTI representative prior to the transfer of title to the Parcel.

As indicated by the record, sometime after the closing, the plaintiffs applied for a building permit and Valentine "learned that there existed the restriction indicating that no construction of homes could take place on the [Parcel] ...until same could be serviced by a central sewer system...". (Affidavit in Opposition at ¶7.) Valentine contacted defendants Mirro and Bennett, who had the Deed Restriction removed thus permitting the Town of Minisink to issue a building permit. (Affidavit in Opposition at ¶8.) During this period, but before any construction on the parcel commenced, correspondence in September 2005 from Mirro[FN2] and by Paul S. Baum, Esq.[FN3], indicates that Chicago Title had notice of a potential claim on the Title Policy.

In 2006 plaintiffs began constructing a single family residence on the Parcel. [*2]The construction activity prompted a lawsuit, commenced on December 6, 2006, seeking an injunction by neighboring homeowners seeking to enforce the restrictive covenant that barred construction on the parcel until public sewers were available (the "Lawsuit").

By short form order dated December 26, 2007, the Hon. Elaine Slobod, J.S.C. granted summary judgment to the neighboring homeowners and issued a permanent injunction against Valentine from further construction on the Parcel until the public sewers were available (the "Injunction").

By summons and complaint filed June 4, 2008, plaintiff commenced the instant action. The complaint contains two (2) causes of action. The first as against Mirro and Bennett sounding in negligence. In the second cause of action, plaintiff seeks damages for CTI's negligence. More particularly, plaintiffs allege that CTI failed to properly advise of the restrictions within the chain of title that restricted or prohibited plaintiff from constructing a single family residence on the Parcel. Plaintiff identifies CTI as an agent of Movant Chicago Title Insurance Company. Answers were filed and issue was joined.

Chicago Title now moves for summary judgment. Plaintiffs oppose the motion.

Discussion

A party seeking summary judgment bears the initial burden of production of evidence as well as the burden of persuasion. Alvarez v. Prospect Hospital, 68 NY2d 320, 508 NYS2d 923, 501 NE2d 572 (1986). Failure of a moving party to tender sufficient evidence to demonstrate as a matter of law the absence of a material issue of fact results in a failure to tender a prima facie entitlement to summary judgment and requires denial of the motion, regardless of the sufficiency of the opposing papers. Gstalder v. State, 240 AD2d 541, 658 NYS2d 680 (2nd Dept.,1997). Once that initial burden has been satisfied, the burden shifts to the opponent who must establish a triable issue of fact by producing admissible evidence, that when viewed in the light most favorable to the nonmoving party, precludes entry of judgment in favor of the movant as a matter of law. Marine Midland Bank, N.A. v. Dino & Artie's Automatic Transmission Co., 168 AD2d 610, 563 NYS2d 449 (2nd Dept 1990). Despite all this, the burden of persuasion, "always remains where it began, i.e., with the proponent of the issue. Thus if the evidence on the issue is evenly balanced, the party that bears the burden must lose.'". Rodriguez v. OD & P Construction, Inc., 194 Misc 2d 284, 288, 752 NYS2d 799, 802 (N.Y.Sup.,2002), citing, Director, Office of Workers Compensation Programs v. Greenwich Collieries, supra , 512 U.S. at 272, 114 S. Ct. 2251; 300 East 34th Street Co. v. Habeeb, 248 AD2d 50, 683 NYS2d 175 (1st Dept.1997).

The liability of the title insurer to its insured is governed and limited by the terms and conditions contained in the title policy. Citibank, N.A. v. Commonwealth Land Title Insurance Company, 228 AD2d 635, 645 NYS2d 826 (2nd Dept., 1996). The subject Title Policy at issue here requires the insured

to notify the Company promptly in writing (I) in case of any litigation as set forth in Section 4(a) below, (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy...If prompt notice shall not be given to the Company, then as to the insured [*3]all liability of the Company shall terminate with regard to the matter or matters for which prompt notice is required; provided, however, the failure to notify the Company shall in no case prejudice the rights of any insured under this policy unless the Company shall be prejudiced by the failure and then only to the extent of the prejudice. (Title Policy at ¶3.)

Chicago Title claims that the first time it learned of the Lawsuit or the Injunction was when plaintiff commenced the instant action. (See affidavit in support at ¶8.) To the extent Chicago Title was not aware of the Lawsuit or the resultant Injunction until after all opportunity to modify or appeal was barred, such delay constitutes actual prejudice. Wainco Funding v. First American Title Ins. Co. of New York, 219 AD2d 598, 599, 631 NYS2d 81, 82 (2nd Dept., 1995).

Accordingly, plaintiffs' failure to notify Chicago Title of the Lawsuit until long after the Injunction was issued bars recovery under the Title Policy since the Title Policy requires timely notice of any claim. The lack of any notice prevented Chicago Title from taking any steps to mitigate its liability and protect its interests. Id.; see also, Hovdestad v. Interboro Mut. Indem. Ins. Co., 135 AD2d 783, 522 NYS2d 895 (2nd Dept.,1987)[Insurer was relieved of duty to defend or indemnify due to prejudice caused by untimely notice given to it more than four and one-half years after claim was interposed and after all pretrial discovery was completed as insurer was effectively deprived of the opportunity for meaningful participation in pretrial discovery proceedings.] Chicago Title met its initial burden in seeking dismissal of the instant action as against it.

In opposition, plaintiffs raise two issues. First, they direct the Court's attention to the September 2005 letters from Mirro and by Paul S. Baum, Esq., which indicate that Chicago Title had notice of a potential claim on the Title Policy. While these letters may constitute notice of a potential claim, they not constitute proof of actual notice of the Lawsuit.

Second, plaintiffs point to the possibility that their former attorney may have such proof and need the opportunity to conduct discovery. In reply, Chicago Title persuasively argues that since the only person identified as possibly having relevant information is plaintiffs' own former counsel, the request to delay summary judgment must be denied. Plaintiffs are attempting to obtain CPLR 3212(f) relief in a roundabout way. However, in order to invoke CPLR 3212(f), the plaintiffs must show that the evidence necessary to support their opposition to the motion for summary judgment is within the exclusive "knowledge or control" of the moving party. Pearsall v. Saracco, 305 AD2d 650, 759 NYS2d 886 (2nd Dep't, 2003).

Plaintiffs have failed to raise a question of fact in opposition to Chicago Title prima facie showing. Accordingly, Chicago Title is granted summary judgment.

Even if notice were not an issue, summary judgment would still be warranted.

Plaintiff allege that CTI was negligent in failing to properly advise of the restrictions within the chain of title that restricted or prohibited plaintiff from constructing a single family residence on the Parcel. Assuming arguendo that CTI was negligent in [*4]its searches[FN4], and that such negligence can be imputed to Chicago Title, any action for damages arising from such negligent search is precluded.

It is the well settled law of this State that "a cause of action for negligence in searching title does not lie in an action on the policy." Citibank, N.A. v. Chicago Title Ins. Co., 214 AD2d 212, 216, 632 NYS2d 779, 781 (1st Dept.,1995), app. dismissed, 87 NY2d 896, 663 NE2d 921, 640 NYS2d 879.

A contract of title searching is distinct and separate from the policy of title, with "liability for a negligent search arises from the former." L. Smirlock Realty Corp. v. Title Guarantee Co., 70 AD2d 455, 465, 421 NYS2d 232, 239 (2nd Dept., 1979), mod. on other grounds, 52 NY2d 179, 437 NYS2d 57, 418 NE2d 650(1981). "In the case of a title insurance policy, the insurer undertakes to indemnify the insured if the title turns out to be defective.... The doctrine of skill or negligence has no application to a contract of title insurance." Maggio v. Abstract Title & Mortgage Corp., 277 A.D. 940, 941, 98 NYS2d 1011(4th Dept., 1950). Thus "title insurance [is] viewed as being more in the nature of a covenant of warranty against encumbrances...." L. Smirlock Realty Corp. v. Title Guar. Co., 52 NY2d 179, 188, 437 NYS2d 57, 418 NE2d 650(1981).

Where, as is the case here, "the certificate of title has merged in the subsequently issued title insurance policy, any action for damages arising out of the search whether sounding in tort or contract is foreclosed." L. Smirlock Realty Corp. v. Title Guarantee Co., supra , 70 AD2d at 465, 421 NYS2d at 239. For this reason as well, no action can be maintained as against Chicago Title for CTI's alleged failure to properly advise of the restrictions within the chain of title that restricted or prohibited plaintiff from constructing a single family residence on the Parcel.

Chicago Title's motion for summary judgment is GRANTED.

The foregoing constitutes the Decision and Order of this Court.

/S/HON. JEFFREY A. COHEN, J.S.C. Footnotes

Footnote 1:It is alleged that Mirro and Bennett hold an ownership interest in CTI.

Footnote 2:Mirro letter dated September 26, 2005 (the "Mirro Letter").

Footnote 3:Plaintiffs' prior counsel sent a letter dated September 28, 2005 to Chicago Title notifying them of a potential claim against the Title Policy.

Footnote 4:And thus necessarily ignoring that the Title Abstract Report revealed the Map Restriction.