The Great Wall of China was constructed, modified, and rebuilt over 2,000 years to prevent war with northern invaders. In the City of Brotherly Love, a different wall was the cause of two courtroom battles. The property owner at 631 North Broad Street in Philadelphia, 631 LP, wanted to demolish the southern wall as part of their plan to build residential apartments.
Their neighbors, Congregation Rodeph Shalom (CRS) objected to the plans, asserting their ownership interest in the southern wall. Litigation to determine ownership ensued, and both property owners turned to their title insurer to cover the costs, which turned out to be the same company.
The insurer only chose to defend one.
The winner and loser in these battles were determined by one important detail: a common survey exception found in one insured’s title policy.
The details of a title insurance policy matter, especially the exceptions
While both 631 LP and CRS obtained title insurance from Commonwealth Land Title Insurance Co, only CRS had a survey performed prior to purchasing their property. In reviewing CRS’ letter to the Department of Licenses and Inspections, there are some inconsistent claims to the extent of their ownership, implying total ownership in some cases while in others referencing its recorded deed and survey demonstrating it owned a “portion of the South Wall.”
631 LP filed a lawsuit against CRS, arguing sole ownership of the South Wall, and seeking declaratory relief and quiet title. CRS filed a motion for an injunction against 631 LP’s demolition plans. The court granted the motion, finding that the southern wall was a “party wall that stood on both sides of the property line.” Ultimately, the court entered a permanent injunction against 631 LP from demolishing any part of the southern wall without CRS’ consent.
Both 631 LP and CRS requested their insurer to pay for their litigation expenses pursuant to each of their title policies. However, Commonwealth only accepted CRS’ claim for coverage, arguing that CRS only claimed that it owned the portion of the wall located on its property, and not any part of the covered land described in 631 LP’s policy.
Additionally, Commonwealth invoked the survey exception as grounds for denying their claim.
In response, 631 LP filed suit against Commonwealth, alleging that the underwriter breached the policy by failing to defend them against CRS in the underlying action and that the choice to defend CRS constituted a violation of the Pennsylvania Bad Faith Statute.
The final ruling
Both parties filed cross motions for summary judgment heard by U.S. District Judge J. Curtis. The judge granted Commonwealth’s motion and denied 631 LP’s motion.
The statement made by the judge highlights how CRS’ survey was a pivotal factor in the decision.
“CRS’ claims were particularly unambiguous because they were made in direct reference to its deed and 2011 survey of the 619 Property,” Joyner continued. “CRS attached the survey and deed to the Underlying Answer, both of which clearly indicate the 619 Property line runs through the South Wall. CRS’ claims with regard to “its portion” of the South Wall were clearly in specific reference to the five inches of the South Wall found on the 619 Property. Based on the record before us, we find that CRS’ statements in the Underlying Action cannot reasonably be construed to be making a claim against land located on the 631 Property.”
While Judge Joyner noted that 631 LP had a compelling argument that the initial letter to Philadelphia's Department of License and Inspections implied claims of ownership to a portion of 631 LP’s portion of the wall, the final ruling was based on CRS’ stance in the actual litigation.
Joyner also stated that the exception contained plain language that excused Commonwealth’s duty to defend 631 LP in disputes that arise from boundary issues that a survey would have disclosed.
A standard title policy may not be right for you
The trouble with a title policy is that it’s often only as good as its exceptions. This was clearly demonstrated in the case of 631 LP. In order to avoid the same fate, homebuyers and real estate investors should be familiar with their title insurance policy’s requirements, exceptions, and exclusions.
How to win a boundary dispute:
- Review the Title Commitment before the final title policy is issued.
- Understand what land is covered by the policy by reviewing the legal description on the Title Commitment. This is usually found in the Schedule A section in an ALTA Title Commitment.
- Review the exceptions to see if any undesirable ones may be removed, like a survey exception.
- Get a land survey to determine if there are any encroachments that may disrupt your plans for improvements.
A land survey should be ordered for every real estate transaction
Boundary issues are a problem for residential real estate as well. In fact, one of the most common title insurance claims is related to boundary or survey issues.
Buyers of both residential and commercial real estate properties should get a survey if they want to avoid the same fate as 631 LP.
Three Reasons to always order a land survey:
- It will establish if the legal description is correct and tell you exactly what you are buying.
- Most underwriters require an updated survey in order to remove the exception on the title policy.
- Any encroachments will be revealed, so you can make appropriate decisions about plans for improvements, re-negotiate the deal based on the information, or walk away if the deal is unsatisfactory.
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