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ELIOPOULOS v. NATION'S TITLE INS. OF NEW YORK

January 16, 1996

THOMAS ELIOPOULOS, Plaintiff,
v.
NATION'S TITLE INSURANCE OF NEW YORK, INC., a.k.a. U.S. LIFE TITLE INSURANCE COMPANY OF NEW YORK, TITLE USA INSURANCE CORPORATION OF NEW YORK, INC., and TRW TITLE INSURANCE OF NEW YORK, INC, Defendant.



The opinion of the court was delivered by: MCAVOY

 Plaintiff Thomas Eliopoulos brought suit against defendant Nation's Title Insurance of New York, Inc., for its alleged breach of a title insurance policy, seeking monetary damages and injunctive relief. Pursuant to a settlement agreement dated October 30, 1995, plaintiff received $ 165,000 in return for withdrawing his primary cause of action against defendant. Defendant moves for summary judgment with respect to plaintiff's two remaining causes of action.

 I. Background

 A. Facts

 By deed dated November 30, 1981, from Else Sortire Young to Thomas Eliopoulos, plaintiff acquired ownership and title to a parcel of land known as "Glenburnie on Lake George," a pre-existing subdivision in the Town of Putnam, New York ("the Property"). Plaintiff claims that when he purchased the Property, he intended either to sell lots as configured on the original subdivision map, or to reconfigure the lots and sell them as reconfigured. (Compl. P 14.) Although plaintiff supposed that he could sell lots as originally configured without government approval, he believed that he would need permission from the Adirondack Park Agency ("APA"), a New York State agency, before reconfiguring them. (Id. at PP 15-16.)

 On February 19, 1982, in connection with his acquisition of the Property, plaintiff purchased from defendant, then known as the U.S. Life Title Insurance Company of New York, a $ 500,000 title insurance policy ("the Policy"). (Id. at PP 17-19.) The Policy was modified in 1982 and 1983 to reflect survey readings by the land surveyors Coulter and McCormack. (Id. at PP 5-6.) The parties do not dispute that the Policy has been in full force and effect at all times relevant to this action.

 In 1983, a series of state court actions commenced between plaintiff and Arthur Oldham, II, concerning the ownership of a portion of a road on the Property known as "Lake George Avenue." On October 25, 1991, the Supreme Court rendered a decision in favor of Mr. Oldham, which was reduced to a judgment in early 1992. After plaintiff unsuccessfully appealed the decision and the judgment, the amount of acreage on the Property he owned pursuant to the deed decreased. As a result, plaintiff claims, Lot No. 9 lost roughly 75% of its fair market value and Lot No. 7 lost all of its fair market value. (Id. at PP 34-35, 37-39.) Plaintiff alleged in his first cause of action that despite his notice and demands, defendant refused to compensate him for either loss. Pursuant to the settlement agreement, plaintiff has withdrawn this cause of action.

 Beginning in 1992, plaintiff became aware of nine alleged encroachments on the Property, each of which, he asserts, clouds his title to property covered by the Policy. Plaintiff claims that he brought each alleged encroachment to the attention of defendant and requested that defendant take steps to defend against them and to remove the clouds on his title, but that defendant refused to honor the Policy or to take action to remove the clouds on plaintiff's title.

 Plaintiff alleges that as a result of the encroachments, claims, and clouds upon his title to the Property, he has (1) lost the right to use, sell, or occupy any of the roads and lots subject to encroachments; (2) incurred taxes upon and costs associated with portions of the Property as to which his rights have been impeded or extinguished; (3) incurred costs and fees; and (4) been deprived of the ability to reconfigure lots and roads to APA specifications so as to improve the configurations of the existing subdivision. (Id. at P 61.) Plaintiff seeks a declaration that defendant must take steps to clear plaintiff's title to the Property and that its failure to do so constitutes a breach of contract, and an order directing defendant to take steps to resolve the alleged clouds on plaintiff's title, or in lieu of such injunctive relief, to pay him the costs reasonably associated with retaining independent counsel to do so.

 2. Summary Judgment Standard

 Under Fed. R. Civ. Pro. 56(c), if there is "no genuine issue as to any material fact . . . the moving party is entitled to a judgment as a matter of law . . . where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986), on remand, 807 F.2d 44 (3d Cir. 1986), cert. denied, 481 U.S. 1029 (1987). The burden to demonstrate that no genuine issue of material fact exists falls solely on the moving party, Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317 (2d Cir. 1975), and the trial court must resolve all ambiguities and draw all inferences in favor of that party against whom summary judgment is sought. Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985) cert. denied 484 U.S. 918, 98 L. Ed. 2d 226, 108 S. Ct. 269 (1987). The Court has examined plaintiff's complaint in light of the preceding considerations.

 III. Discussion

 A. Title Insurance Policies

 Federal courts exercising diversity jurisdiction must apply state substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). The parties agree that New York law should control. Under New York law, a title insurance policy "is a contract by which the title insurer agrees to indemnify its insured for loss occasioned by a defect in title." Smirlock Realty Corp. v. Title Guar. Co., 52 N.Y.2d 179, 418 N.E.2d 650, 653, 437 N.Y.S.2d 57 (N.Y. 1981). It represents the insurer's opinion that the title is valid, "backed by an agreement to make that opinion good, in case it should prove to be mistaken, and loss should result in consequence to the insured." First Nat'l Bank & Trust Co. v. New York Title Ins. Co., 171 Misc. 854, 12 N.Y.S.2d 703, 710 (N.Y. Sup. Ct. 1939).

 As with other insurance contracts, the title insurance policy defines the title insurer's obligations. Cummins v. U.S. Life Title, 40 N.Y.2d 639, 357 N.E.2d 975, 975, 389 N.Y.S.2d 319 (N.Y. 1976); see also Citibank, N.A. v. Chicago Title Ins. Co., 214 A.D.2d 212, 1995 N.Y. App. Div. LEXIS 9623, at 8, 632 N.Y.S.2d 779. (N.Y. App. Div. 1995). If the insurer wishes to exclude coverage from its policy obligations, it must do so in clear and unmistakable language. Rajchandra Corp. v. Title Guar. Co., 163 A.D.2d 765, 558 N.Y.S.2d 1001, 1004 (N.Y. App. Div. ...


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