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Nortaro Homes, Inc. v. Chicago Title Insurance

December 15, 1999


Appeal from the Circuit Court of Du Page County. No. 97--MR--730 Honorable Robert E. Byrne, Judge, Presiding.

The opinion of the court was delivered by: Justice Galasso

On October 7, l997, plaintiff, Notaro Homes, Inc., filed a four-count complaint against defendant, Chicago Title Insurance Company, alleging that defendant's failure to disclose to it the existence of a recorded amendment (amendment) to the City of McHenry's (City) zoning ordinance resulted in the purchase of a City lot upon which an intended apartment building could not be built. In count I, plaintiff sought a declaratory judgment regarding the parties' rights under the title insurance policy. Count II alleged breach of contract. In count III, plaintiff pleaded negligent misrepresentation in the title insurance commitment and policy. Count IV alleged a violation of the Consumer Fraud and Deceptive Business Practices Act (Act) (815 ILCS 505/1 et seq. (West 1996)). Defendant filed a motion to dismiss all four counts pursuant to sections 2--615 and 2--619 of the Code of Civil Procedure (735 ILCS 5/2--615, 2--619 (West 1996)). Subsequently, plaintiff voluntarily dismissed count I. After a hearing, the trial court granted the motion to dismiss counts II through IV. This timely appeal followed.

On appeal, plaintiff raises the following issues: (1) whether the trial court erred in dismissing counts II through IV and (2) whether plaintiff should be allowed to replead counts II through IV.

The record reveals the following facts. On November 6, l967, the City's governing body passed ordinance No. 0-67-36.5, which amended the zoning ordinance to prohibit the construction of more than 20 dwelling units on 10 lots and a portion of an eleventh lot. The property acquired by plaintiff was subject to the amendment's restrictions. The amendment included a legal description of the property affected and was later recorded on June 29, 1969, with the McHenry County recorder as document No. 69-9530.

In late 1994, plaintiff contracted to purchase a vacant lot in the City. This lot was located immediately adjacent to the same or similarly sized lots, each of which had been improved with four-unit apartment buildings. Plaintiff wanted to construct, lease, and/or sell a three-unit apartment building on the lot, which was located within an R-4 multifamily zoning district. The total 1993 property taxes billed on the lot amounted to $84.36. Prior to purchasing the property, plaintiff received a title insurance commitment from defendant. The commitment did not disclose the existence of any defects, liens, or encumbrances against the subject lot. In early January, l995, plaintiff purchased the lot for $30,000. On January 9, l995, defendant issued a title insurance policy, which made no mention of the amendment.

Subsequent to its purchase of the lot, plaintiff was advised by the City of the amendment to the zoning ordinance and was told that no dwelling units could be constructed on plaintiff's lot. In March of l995, plaintiff filed a formal claim with defendant, which denied the claim in April 1995. In its complaint, plaintiff alleged losses and expenses in excess of $80,000.

At the conclusion of the hearing on defendant's motions to dismiss, the trial court stated in relevant part:

"I am going to dismiss the case with prejudice. I believe the policy controls. The policy says they didn't have to do this. I respectfully disagree with [plaintiff's counsel] as to the ordinance enforcement encumbering the title. I think the policy specifically excludes this action. The Plaintiff here is not an individual without experience in zoning issues. It is Notaro Homes, Incorporated. It should have known to check the zoning rather than rely on the title commitment. This is a sophisticated business entity, not just some individual buying a lot. *** I am going to give [plaintiff] a chance to replead. I am saying in my opinion, based on this contract, that you could not plead a set of facts that would give you a cause of action."

The appropriate standard of review was set out by this court in Joseph v. Collis, 272 Ill. App. 3d 200 (1995):

"When a complaint fails to state a cause of action or shows on its face that the plaintiff is not entitled to the relief sought, the complaint is subject to a motion to dismiss. [Citation.] *** A section 2--615 motion attacks the legal sufficiency of the complaint by asserting that it fails to state a cause of action upon which relief can be granted. [Citation.] In considering a motion to dismiss under section 2--615, all well-pleaded facts are admitted and must be taken as true. [Citation.] Conclusions of law or conclusions of fact *** are not admitted. [Citation.] On review, the allegations of the complaint are to be interpreted in the light most favorable to the plaintiff. [Citation.] A complaint should not be dismissed for failure to state a cause of action unless it clearly appears that no set of facts could be proved under the allegations which would entitle the party to relief. [Citation.] *** A reviewing court is not required to defer to the trial court's judgment on a motion to dismiss and will review the matter de novo." Joseph, 272 Ill. App. 3d at 206.

Plaintiff initially argues that defendant breached its contract with plaintiff by failing to report accurately all defects in title and all liens and encumbrances. Specifically, plaintiff argues that the amendment was an encumbrance affecting the marketability of title; that defendant violated its contractual duty to report accurately all defects in title and all liens and encumbrances of record; that the recording of the amendment amounted to its enforcement and, thus, that the amendment fell within the exception to the exclusion; and that the amendment also fell within the exception to the exclusion because it constituted notice of the defects, liens, or encumbrances upon the property resulting from restrictions contained in it. In response, defendant generally argues that it was not liable under its contract with plaintiff. Specifically, defendant contends that the amendment was not a defect, lien, or encumbrance that affected the marketability of title and that, under the policy, defendant was not obligated to disclose the amendment.

Before addressing these arguments, we will briefly address a dispute between the parties as to whether any potential contractual liability arises under the subject title commitment and the title policy. Plaintiff maintains that we are required to consider any contractual liability of defendant under both the title commitment and title policy, while defendant argues that the title commitment expressly states that all liability under said commitment ceased to exist when the title policy was issued. We note that the determination of this argument is of little consequence, as the trial court based its dismissal of this cause on other considerations. We conclude that, based upon the express language of the title policy, any contractual liability of defendant would arise solely under the policy.

The title policy's section entitled "Exclusions From Coverage" contains the following language:

"The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damages, costs, attorneys' fees or expenses which arise by reason of: 1. (a) Any law, ordinance, or governmental regulation (including but not limited to building and zoning law, ordinance, or regulation) restricting, regulating, prohibiting or relating to (i) the occupancy, use, or enjoyment of the land *** except to the extent that a notice of the enforcement thereof or a notice of a defect, lien, or encumbrance resulting from a violation or alleged violation affecting the land has been recorded in the public records at Date of Policy."

The purpose of title insurance is to protect the transferee of real estate from the possibilities of loss through defects that may cloud the title. First National Bank v. Stewart Title Guaranty Co., 279 Ill. App. 3d 188, 192 (1996). The title insurance policy insures against defects or clouds in the title to the land, not the land itself. First National Bank, 279 Ill. App. 3d at 192. Further, contracts of insurance should receive a practical, reasonable, and fair construction consonant with the apparent object and intent of the parties viewed in light of their purpose. First National Bank, 279 Ill. App. 3d at 193. Where provisions in an insurance policy are clear and unambiguous, a court will apply the provisions as they are written, giving the policy's words their plain and ordinary meaning. Britamco Underwriters, Inc. v. J.O.C. Enterprises, Inc., 252 Ill. App. 3d 96, 100 (1993). Courts will not strain to find an ambiguity where none exists. Britamco Underwriters, 252 Ill. App. 3d at 100.

Plaintiff first maintains that the amendment was an encumbrance adversely affecting the marketability of title. We do not agree. The subject policy defines "unmarketability of title" thusly:

"[A]n alleged or apparent matter affecting the title to the land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A to be released from the obligation to purchase by virtue of a contractual condition requiring the delivery of marketable title." (Emphasis added.)

The instant amendment is expressly excluded from coverage. Accordingly, even assuming arguendo that the amendment is an encumbrance, under the terms of the policy the existence of the recorded amendment cannot subject defendant to contractual ...

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