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JBGR LLC v. Chicago Title Insurance Co.

Supreme Court, Suffolk County

November 13, 2018

JBGR LLC, ELLIOT WR GOLF LLC, INSURE NEW YORK AGENCY LLC, HURNEY WR GOLF LLC, DEMPSEY WR GOLF LLC, AND WALSH WR GOLF LLC, Plaintiffs,
v.
Chicago Title Insurance Company, Defendant.

          Former Attorneys for Plaintiffs JBGR LLC, Insure New York Agency LLC, Hurney WR Golf LLC, Dempsey WR Golf LLC and Walsh WR Golf LLC

          WICKHAM, BRESSLER & GEASA, P.C. Attorneys for Plaintiff Elliot WR Golf LLC

          FIDELITY NATIONAL LAW GROUP Attorneys for Defendant Chicago Title Insurance

          Elizabeth Hazlitt Emerson, J.

         Upon the following papers read on these motions and cross-motion for summary judgment; Notice of Motion and supporting papers 152-202; 220-272; Notice of Cross Motion and supporting papers 279-313; Answering Affidavits and supporting papers 314-354; 355-356; 361-381; 386-397; Replying Affidavits and supporting papers 398-409; 414-415; 421; it is, ORDERED that the motion by the defendant, Chicago Title Insurance Company, for summary judgment dismissing the complaint is granted; and it is further

          ORDERED that the cross motion by the plaintiff Elliot WR Golf LLC for summary judgment and sanctions is denied; and it is further

          ORDERED that the motion by the plaintiffs JBGR LLC, Insure New York Agency LLC, Hurney WR Golf LLC, Dempsey WR Golf LLC, and Walsh WR Golf LLC for summary judgment is denied.

         In 1994, Paul Elliot, an experienced real estate investor and developer, was a shareholder of 1994 Soundview Golf, Inc. ("Soundview"), which purchased 286 acres in Wading River, New York (the "Property"). Soundview planned to build a residential community around an 18-hole golf course on the Property. By 1999, development of the golf course had been started; the roads and infrastructure were substantially complete, and 140 building lots had been sold. Elliot then sold his interest in the project to Thomas Costello, who continued to work on the development d/b/a Great Rock Golf, Inc. By 2005, 140 homes had been built, and Elliot entered into negotiations with Costello to repurchase the Property. On January 19, 2006, Great Rock Golf, Inc., entered into a contract of sale with Great Rock Golf 2006 LLC, of which Elliot was the managing member. On April 12, 2006, Great Rock Golf 2006 LLC assigned its right to purchase the Property for $9.97 million to the plaintiff LLCs. Elliot is a member of the plaintiff Elliot WR Golf LLC. As part of the purchase price, the plaintiffs gave Great Rock Golf, Inc., a promissory note in the principal amount of $2.97 million secured by a second mortgage on the Property and guaranteed by the individual members of the plaintiff LLCs. The plaintiffs intended to build another 55 residences on the Property, but they learned in 2009 that development had been limited to 140 homes pursuant to a declaration signed by Elliot and recorded on December 24, 1997. Also in 2009, Great Rock Golf, Inc., assigned the note and mortgage to its shareholders, including Costello. When the plaintiffs and the individual guarantors defaulted, Costello and the other shareholders of Great Rock Golf, Inc., commenced an action in this court (Index No. 28474-11) to recover on the note and guarantees. By an order dated July 23, 2012, the court granted their motion for summary judgment and awarded them damages in the principal amount of $2.97 million.

         The plaintiffs in this action were defendants in the aforementioned action. They commenced this action against the defendant, Chicago Title Insurance Company, who issued a title insurance policy in connection with the sale of the Property from Great Rock Golf, Inc., to them in 2006 (the "Policy"). The plaintiffs alleged that they were unaware of the 1997 declaration that restricted development of the Property to 140 homes (the "Declaration") and that they detrimentally relied on the defendant's title search, which failed to advise them of the Declaration. The plaintiffs alleged that the defendant is obligated to indemnify them for their losses because the Policy failed to exclude the Declaration from its coverage. The defendant's motion to dismiss the complaint was denied by an order of this court dated January 17, 2013. By a subsequent order of this court dated October 1, 2013, the defendant's motion to renew and reargue its motion to dismiss was also denied. Both orders were affirmed by the Appellate Division (128 A.D.3d 900). Discovery is now complete, and the case has been certified ready for trial. All parties move for summary judgment.

         In support of summary judgment, the defendant contends, inter alia, that the Declaration is not covered by the Policy because it is not a defect in title or lien or encumbrance on title. The defendant contends that the Declaration is a governmental restriction on the plaintiffs' use of the property, which is not covered by the Policy and is specifically excluded from coverage under Exclusion 1(a). The plaintiffs contend in opposition and in support of their motion and cross motion for summary judgment, inter alia, that the Declaration is an encumbrance on the property that runs with the land and, as such, is a title defect covered by the Policy. It is undisputed that the Declaration is not listed as a exception to coverage in Schedule B of the Policy.

         The Policy provides, in pertinent part, as follows:

"SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, CHICAGO TITLE INSURANCE COMPANY... insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of:
1. Title to the estate or interest described in Schedule A being vested other than ...

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