District Court Grants Summary Judgment for Title Insurer Due to Statute of Limitations

The United States District Court for the Northern District of California recently granted summary judgment for Commonwealth Land Title Insurance Company (“Commonwealth”), finding that the insured failed to bring the claim within two years of its discovery. See Hayward Prop., LLC v. Commonwealth Land Title Ins. Co., 2021 WL 4503457 (N.D. Cal. 2021). In the case, CNF Properties (“CNF”) owned the property at issue.  The property was originally four parcels before CNF converted it into two parcels (“Parcel One” and “Parcel Two”) in 1997. However, because the tax parcels were not adjusted when the property was converted from four to two parcels, the boundaries of the tax parcels did not follow the lines for Parcel One and Parcel Two.  Parcel One contained some, but not all, of tax parcels 40 and 43.

In 1998, CNF conveyed Parcel One to Consolidated Freightways Corporation of Delaware (“Consolidated”). In 2002, CNF conveyed Parcel Two to Con-Way Transportation Services (“Con-Way”). Plaintiff purchased Parcel One from Consolidated in 2002 and defendant Commonwealth issued plaintiff a title insurance policy for the property. The deed, however, was erroneously recorded with a property description of a property located in a different town in the county. In 2003, the Alameda County Assessor’s Office sent a letter to Plaintiff’s agent noting that (i) the deed named the wrong town, and (ii) the legal description for Parcel One did not describe all of tax parcels 40 and 43 and that if plaintiff intended to purchase all of these parcels, the description needed to change.  A corrected deed naming the correct town was acquired by plaintiff in 2003, but was never recorded. In 2016, a successor to Con-Way sued plaintiff to quiet title among the parcels, claiming that it owned portions of parcel 43. Plaintiff sued Commonwealth for breach of contract and negligence for losses incurred because of the defects in title, arguing that the policy insured title for all of parcel 43.

Commonwealth moved for summary judgment on both counts, and the Court granted the motion. As to the breach of contract claim, Commonwealth showed that plaintiff discovered the alleged title defect in 2003 when it was made aware of the issue with the description of the property and the corrected deed. As such, its claim for breach of the policy was untimely, as California law dictates that an action founded upon a title insurance policy is subject to a two-year statute of limitations, with the period running from discovery of the alleged defect. As to the negligence claim, plaintiff’s claim was based on Commonwealth’s purported role as a title and closing agent. Commonwealth argued in response that it was not, in fact, either a title or closing agent, facts that plaintiff eventually acknowledged. The Court therefore dismissed the claim and denied plaintiff’s motion for leave to amend its negligence counts, noting that even if it could support a claim of negligence on an alternative theory of liability, the action would be time-barred for the same reason the contract claim was.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.