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Fidelity National Title Insurance Co. v. Wooden

United States District Court, N.D. Alabama, Northeastern Division

January 11, 2019

TRACY C. WOODEN, ET AL., Defendants.



         Fidelity 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.

         Based 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.

         Presently 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.


         Under 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).

         On 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).

         The 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)).


         In 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.

         Subsequently, 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.

         After 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.

         Warranty 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.

         III. ANALYSIS

         Presently 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.[1] 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.

         A. Fidelity and Smartbank's Contract Reformation Claims

         Under Alabama law, [2] “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 ...

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