United States District Court, N.D. Alabama, Northeastern Division
MEMORANDUM OPINION AND ORDER
K. KALLON, UNITED STATES DISTRICT JUDGE.
National Title Insurance Company (“Fidelity”)
filed this action against Tracy and Kristi Wooden (the
“Woodens”) and Smartbank, seeking legal and
equitable relief related to a title policy it issued to the
Woodens. Doc. 1. Fidelity maintains that the Woodens were
partially responsible for creating a defective legal
description of the property the Woodens purchased from
Smartbank and also were not financially harmed by the defect.
Doc. 96 at 8. Therefore, Fidelity maintains that the title
policy it issued should exclude Lot 5 which was included in
the legal description based on a purported mistake.
Id. The Woodens contend that they believed that the
property they purchased from Smartbank included Lot 5, that
they did not create the legal defect in the property
description, and that they are due compensation for the loss
under the title policy. Doc. 98 at 12-23. Smartbank maintains
that it never represented that it owned Lot 5 in the property
sale to the Woodens and should not be held liable for the
defective property description. Doc. 95 at 3-6.
on their varying contentions, the parties have pleaded the
following claims: Fidelity asserts six claims including
reformation (Count I) and declaratory judgment (Count II)
against the Woodens and Smartbank, negligent
misrepresentation (Count III) and unclean hands/estoppel from
opposing reformation efforts (Count IV) against the Woodens,
and contingent claims for breach of contract (Count V) and
breach of warranty (Count VI) against Smartbank in the event
the Woodens prevail against Fidelity, docs. 91, 96; (2) the
Woodens countered with claims against Fidelity for
declaratory judgment (Count I), breach of contract and
judgment for interest (Count II), and bad faith refusal to
pay (Count III), doc. 98; and (3) Smartbank filed
counterclaims against Fidelity and crossclaims against the
Woodens seeking reformation (Count I) and declaratory
judgment (Count II), doc. 95.
before the court are the parties' partial motions and
cross-motions for summary judgment. Specifically, Fidelity
moves on its own reformation and declaratory judgment claims,
as well as on the Woodens' counterclaims against it. Doc.
112. For their part, the Woodens seek summary judgment on
their counterclaim for declaratory judgment, on all of
Fidelity's claims against them, doc. 114, and on
Smartbank's crossclaims for reformation and declaratory
judgment, doc. 115. Finally, Smartbank has moved on its
reformation claim and Fidelity's breach of contract claim
against it. Doc. 116. For the reasons stated fully below, the
court finds that only Fidelity's motion related to the
Woodens' bad faith claim is due to be granted.
LEGAL STANDARD FOR SUMMARY JUDGMENT
Rule 56(a) of the Federal Rules of Civil Procedure, summary
judgment is proper “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56. “Rule 56 mandates the entry of summary judgment,
after adequate time for discovery and upon motion, against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986) (alteration in original). The moving party
bears the initial burden of proving the absence of a genuine
issue of material fact. Id. at 323. The burden then
shifts to the nonmoving party, who is required to “go
beyond the pleadings” to establish that there is a
“genuine issue for trial.” Id. at 324
(citation and internal quotation marks omitted). A dispute
about a material fact is genuine “if the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
summary judgment motions, the court must construe the
evidence and all reasonable inferences arising from it in the
light most favorable to the non-moving party. Adickes v.
S. H. Kress & Co., 398 U.S. 144, 157 (1970); see
also Anderson, 477 U.S. at 255. Any factual disputes
will be resolved in the non-moving party's favor when
sufficient competent evidence supports the non-moving
party's version of the disputed facts. See Pace v.
Capobianco, 283 F.3d 1275, 1276, 1278 (11th Cir. 2002)
(a court is not required to resolve disputes in the
non-moving party's favor when that party's version of
events is supported by insufficient evidence). However,
“mere conclusions and unsupported factual allegations
are legally insufficient to defeat a summary judgment
motion.” Ellis v. England, 432 F.3d 1321, 1326
(11th Cir. 2005) (per curiam) (citing Bald Mountain Park,
Ltd. v. Oliver, 863 F.2d 1560, 1563 (11th Cir. 1989)).
Moreover, “[a] mere ‘scintilla' of evidence
supporting the opposing party's position will not
suffice; there must be enough of a showing that the jury
could reasonably find for that party.” Walker v.
Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citing
Anderson, 477 U.S. at 252).
simple fact that all parties have filed partial motions for
summary judgment does not alter the ordinary standard of
review. See Chambers & Co. v. Equitable Life
Assurance Soc., 224 F.2d 338, 345 (5th Cir. 1955)
(explaining that cross-motions for summary judgment
“[do] not warrant the granting of either motion if the
record reflects a genuine issue of fact”). Rather, the
court will consider each motion separately “‘as
each movant bears the burden of establishing that no genuine
issue of material fact exists and that it is entitled to
judgment as a matter of law.'” 3D Med. Imaging
Sys., LLC v. Visage Imaging, Inc., 228 F.Supp.3d 1331,
1336 (N.D.Ga. 2017) (quoting Shaw Constructors v. ICF
Kaiser Eng'rs, Inc., 395 F.3d 533, 538-39 (5th Cir.
2004)). The court notes that although cross-motions
“‘may be probative of the non-existence of a
factual dispute'” they “‘will not, in
themselves, warrant [the granting of] summary
judgment.'” United States v. Oakley, 744
F.2d 1553, 1555 (11th Cir. 1984) (quoting Bricklayers
Int'l Union, Local 15 v. Stuart Plastering Co., 512
F.2d 1017, 1023 (5th Cir. 1975)).
April 2010, Smartbank acquired a deed at a foreclosure sale
to a 635-acre property consisting of undeveloped lots in an
area known as Long Island Overlook that is located in Jackson
County, Alabama. Doc. 96-3. The foreclosure deed included all
but one lot within the property, known as “Lot 5, Phase
II, ” which the previous owner, Southern Group, LLC,
had transferred to another individual the prior year. Doc.
113-2. Three months after acquiring the property deed,
Smartbank agreed to sell the property to the Woodens for
$800, 000. Doc. 96-4. The contract described the property as
“land located in Jackson County, Alabama” and
“635 acres owned by Seller known as the Long Island
Overlook property.” Id. at 2. The contract
also included placeholder language stating that “the
legal description is to be replaced with a title
company's legal description upon completion of the title
examination.” Id. at 7.
Warranty Title created a description of the property without
explicitly referencing individual subdivision lots, and RLS
Group LLC provided a “corners survey” of the
property which included Lot 5 of “Final Plat Long
Island Overlook-Phase 2.” Doc. 113-8. RLS's survey
work and descriptions of the property, which erroneously
included Lots 5 and 38 but left out Lot 39, were used for the
legal description in the Special Warranty Deed Smartbank
issued to the Woodens. Docs. 113-11; 113-23.
obtaining the deed, the Woodens purchased a title insurance
policy from Fidelity. Doc. 113-21. The policy incorporated by
reference the property description in the foreclosure deed to
Smartbank (which did not include Lot 5) and the property
description in the Special Warranty Deed (which included Lot
5). Id. at 6. The policy Fidelity issued is a
standard one covering risks related to title being vested
other than as stated in the property description, defects in
lien or encumbrance on the title, and unmarketable title.
Id. at 3. The policy excluded coverage for
“defects, liens, encumbrances, adverse claims, or other
matters . . . created, suffered, assumed, or agreed to by the
Insured Claimant.” Id.
Title subsequently discovered the mistakes in the property
description and presented the Woodens with a revised
instrument to reform the Special Warranty Deed. The Woodens
refused to sign, maintaining among other things that they are
due coverage for Lot 5 under the policy Fidelity issued.
Docs. 27-2; 113-23. Thereafter, Fidelity filed this lawsuit
seeking in part to reform the policy to exclude Lot 5 and a
declaratory judgment that it has no obligation to provide
coverage for Lot 5. Doc. 96.
before the court are the parties' partial motions for
summary judgment on reformation and declaratory judgment
claims, as well as various claims for breach of contract, bad
faith, negligent misrepresentation, and unclean
hands/estoppel. The court will address the motions
collectively beginning with the reformation and declaratory
judgment claims, followed by the breach of contract and tort
claims. In ruling on these motions, in light of
the evidentiary objections the Woodens raise, see
doc. 120 at 4-5, the court has not relied on Patty
Martin's affidavit or Smartbank's June 2010
appraisal. The court will address the parties'
contentions on these two matters if Fidelity seeks to
introduce them at trial.
Fidelity and Smartbank's Contract Reformation
Alabama law,  “when a [contract] through mutual
mistake of the parties, or mistake of one of the parties, and
fraud or deception on the part of the other . . . contains
substantially more or less than the parties intended, . . .
it will be reformed to express the true intention of the
parties.” Pullum v. Pullum, 58 So.3d 752, 756
(Ala. 2010) (citing Ala. Code § 8-1-2 (1975)). Although
courts can use reformation to make the contract conform to
the parties' intentions, Original Church of God, Inc.
v. Perkins, 293 So.2d 292, 293 (Ala. 1974), the remedy
is “not available to make a new agreement.”
Highlands Underwriters Ins. Co. v. Elegante Inns,
Inc., 361 So.2d 1060, 1064 (Ala. 1978). To invoke
reformation, a party must show “(1) mutual mistake, (2)
mistake of one party and inequitable conduct on the part of
the other party, or (3) fraud.” See, e.g.,
Ala. Code § 8-1-2 (1975); EBS ...