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Wade v. Stewart Title Guaranty Co.

Court of Appeals of Illinois, First District, Fifth Division

June 30, 2017

JOSEPHINE WADE, Plaintiff-Appellant,
v.
STEWART TITLE GUARANTY COMPANY, Defendant-Appellee.

         Appeal from the Circuit Court of Cook County. No. 13 L 14015 The Honorable James E. Snyder, Judge Presiding.

          GORDON PRESIDING JUSTICE delivered the judgment of the court, with opinion. Justices Hall and Lampkin concurred in the judgment and opinion.

          OPINION

          GORDON PRESIDING JUSTICE.

         ¶ 1 The instant appeal arises from a breach of contract dispute regarding a title insurance policy for a multiunit residential building in Chicago, Illinois. Plaintiff, Josephine Wade, the purchaser of the property, filed suit against defendant, Stewart Title Guaranty Company, alleging that defendant failed to timely remove defects on the property's title. Plaintiff claimed that defendant's delay in curing the title defects resulted in the demolition of the property because plaintiff was unable to obtain a loan to rehabilitate the property to comply with the City of Chicago's building code. Following a bench trial, the trial court found in favor of defendant, finding that defendant did not breach any duties it owed to plaintiff under the policy. Plaintiff appeals the judgment entered by the trial court. We affirm.

         ¶ 2 BACKGROUND

         ¶ 3 I. Complaint

         ¶ 4 On December 11, 2013, plaintiff filed a two-count complaint[1] against defendant, alleging that plaintiff purchased a title insurance policy from defendant on December 6, 2006, in conjunction with plaintiff's purchase of a two-unit, residential property located on Washington Street in Chicago (Washington property). Under the terms of the policy, defendant agreed to provide plaintiff title insurance in the amount of $187, 200 against any loss or damages resulting from any defects on the title to the Washington property. The complaint alleges that defendant represented in the policy that the only defects on the title were the mortgage plaintiff had secured to purchase the Washington property and unpaid real estate taxes from 2005 and 2006. Relying on these representations in the policy, plaintiff closed on the property on November 21, 2006.[2]

         ¶ 5 The complaint alleged that subsequent to the closing, plaintiff learned of two additional defects to the title of the property. First, she learned that on September 29, 2006, the City of Chicago had instituted a housing court action due to building code violations on the property and had recorded a lis pendens on the property. Additionally, she learned that on October 3, 2007, Deutsche Bank had filed a foreclosure action on the Washington property due to the seller's default on a second mortgage dated May 23, 2003, that had been unknown to plaintiff.[3] The complaint alleges that defendant eventually paid off the second mortgage to Deutsche Bank under the policy in order to remove the Washington property's title defects. However, the complaint alleges that the unpaid second mortgage on the title prevented plaintiff from obtaining a loan to finance required repairs to the property. Due to plaintiff's inability to finance the repairs, the complaint alleges that the progression of the housing court action resulted in a demolition order entered on July 2, 2012, against the Washington property. The complaint alleges that plaintiff would not have closed on the Washington property had she been aware of the two defects against the title of the property.

         ¶ 6 The complaint set forth two counts. Count I was for breach of contract and alleged that defendant "breached its obligations under the Policy by failing to reimburse plaintiff for her direct losses in the value of the Property and the cost of its demolition due to the undisclosed, existing and insured (a) Deutsche Bank lien and (b) Housing Court Action." Plaintiff alleged she fully performed her premium payment obligations. Plaintiff alleged she suffered damages as a result of defendant's breach of the policy in excess of $100, 000.

         ¶ 7 Count II was for a violation under section 155 of the Illinois Insurance Code (Insurance Code) (215 ILCS 5/155 (West 2012)). Plaintiff alleged that despite multiple requests to pay the amounts owed to Deutsche Bank and the housing court action under the policy to remove the title defects, defendant refused to pay and, instead, pursued litigation. The complaint alleged that "defendant has acted vexatiously and unreasonably" and had acted in bad faith in violation of the Insurance Code.

         ¶ 8 Attached to the complaint was the title insurance policy issued to plaintiff, dated December 6, 2006. Under the policy, defendant agreed to insure plaintiff against "loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the Insured by reason of any defect in or lien or encumbrance on the title." The policy excluded from coverage, "defects, liens, encumbrances, adverse claims or other matters created, suffered, assumed or agreed to by the insured claimant."

         ¶ 9 Section 3 of the policy was entitled "Notice of Claim to be given by Insured Claimant" and provided, in relevant part:

"The insured shall notify the Company promptly in writing[4]: *** (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy."

         Section 17 of the policy provided that "all notices required to be given to the Company and any statement in writing required to be furnished the Company shall include the number of this policy and shall be addressed to the Company at P.O. Box 2029, Houston, Texas, 77252-2029."

         ¶ 10 Section 4 was entitled "Defense and Prosecution of Actions; Duty of Insured Claimant to Cooperate" and provided, in relevant part:

"Upon written request by the insured and subject to the options contained in Section 6 of these Conditions and Stipulations, the Company, at its own cost and without unreasonable delay, shall provide for the defense of an insured in litigation in which any third party asserts a claim adverse to the title or interest as insured, but only as to those stated causes of action alleging a defect, lien or encumbrance or other matter insured against by this policy."

         ¶ 11 Section 4 further stated: "The Company shall have the right, at its own costs, to institute and prosecute any action or proceeding or to do any other act which in its option may be necessary or desirable to establish the title to the estate or interest, as insured, or to prevent or reduce loss or damage to the Insured."

         ¶ 12 Section 6, which was entitled "Options to Pay Or Otherwise Settle Claims; Termination of Liability, " provided additional options for defendant in the event a claim under the policy arose. Specifically, section 6(a) provided the option:

"To pay or tender payment of the amount of Insurance under this policy together with any costs, attorneys fees and expenses incurred by the insured claimant, which were authorized by the company up to the time of payment or tender of payment and which the Company is obligated to pay."

         ¶ 13 Section 6(b) provided defendant the option to pay or otherwise settle with parties other than the insured. Section 6(b) allowed defendant to:

"(i) pay or otherwise settle with other parties for or in the name of an insured claimant any claim Insured against, under this policy, together with any costs, attorneys' fees and expenses incurred by the insured claimant, which were authorized by [the] Company up to the time of payment and which [the] Company is obligated to pay; or (ii) to pay or otherwise settle with the insured claimant the loss or damage provided for under this policy, together with any costs, attorneys fees and expenses incurred by the insured claimant which were authorized by [the] Company up to the time of payment and which [the] Company is obligated to pay."

         ¶ 14 Section 9, entitled "Limitation of Liability, " then provided:

"If the Company establishes the title, or removes the alleged defect, lien or encumbrance *** in a reasonably diligent matter by any method, including litigation and the completion of any appeals therefrom, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused hereby."

         ¶ 15 Plaintiff additionally attached to the complaint an "Agreed Order of Injunction and Judgment" entered on December 1, 2009, against the Washington property in connection with the housing court action. The order dismissed the housing court action on the Washington property provided that plaintiff did not "rent, use, lease, or occupy the subject premises and shall keep the same vacant and secure until further order of the court." Further, the order required plaintiff to notify the City of Chicago and the court 30 days after any sale, transfer, or change in ownership. The order required plaintiff to schedule an inspection by June 1, 2010, to verify compliance with the order.

         ¶ 16 Also attached to the complaint was an "Order of Demolition, " entered on July 2, 2012, in which the housing court found the Washington property "dangerous, hazardous, unsafe and beyond reasonable repair under the Unsafe Building Statute, 65 ILCS 11-31-1 (1996)." The City of Chicago was ordered to demolish the building located on the property. The order also granted the City of Chicago costs for the demolition.

         ¶ 17 II. Motion to Dismiss

         ¶ 18 On March 4, 2014, defendant filed a motion to dismiss plaintiff's amended complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2012)). Defendant argued count I of plaintiff's complaint failed to allege sufficient facts to state a cause of action for breach of contract. Further, defendant argued count II of plaintiff's complaint should be dismissed, as section 155 of the Insurance Code did not apply to defendant as a title insurance company.

         ¶ 19 On June 6, 2014, the trial court granted defendant's motion to dismiss in part. The trial court denied defendant's motion to dismiss count I of plaintiff's amended complaint, finding plaintiff alleged sufficient facts to state a cause of action for breach of contract. However, the trial court dismissed count II of plaintiff's amended complaint with prejudice. The trial court found that plaintiff could not bring a claim under section 155 of the Insurance Code against defendant, as the Insurance Code did not apply to title insurance companies.

         ¶ 20 III. Amended Complaint and Third-Party Complaint

         ¶ 21 On August 10, 2015, plaintiff filed a second amended complaint. Count I of the second amended complaint contained an identical breach of contract cause of action as previously alleged in plaintiff's prior complaint. The second amended complaint included under the dismissed second count's heading, "Count II was dismissed and is not pled in this Amended Complaint." Plaintiff also included a third count for breach of contract. The new count alleged that defendant failed to provide any payments to plaintiff or for the benefit of the property for three years. The complaint alleged that this failure amounted to a breach of the title insurance policy, which required defendant to correct defects in the title "in a reasonably diligent manner." The complaint further alleged that defendant's delay caused plaintiff's inability to secure a rehabilitation loan to prevent the demolition of the Washington property.

         ¶ 22 On August 19, 2015, defendant filed a third-party complaint against Victor Love, the son of plaintiff and the person from whom plaintiff had purchased the property. While the third-party complaint is not at issue on appeal, we nevertheless briefly discuss it, since the parties went to trial on both complaints. The third-party complaint contained one count for subrogation, which alleged that Love had failed to disclose the second mortgage and the housing court action to defendant at the closing of the property. Defendant sought compensation from Love after defendant paid $15, 000 to remove the second mortgage lien from the Washington property's title.

         ¶ 23 IV. Motion to Dismiss

         ¶ 24 On September 11, 2015, defendant filed a motion to dismiss count III of plaintiff's second amended complaint pursuant to section 2-615 of the Code, arguing that count III was duplicative of count I of plaintiff's complaint as both were claims for breach of contract and were supported by the same allegations. On October 7, 2015, the trial ...


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