After getting differing responses from a Louisiana court and local government regarding the proper use of property purchased, the owner of the property sued the title insurer, arguing its policy endorsement covered the current zoning dispute.
The case is Millennium Group I, LLC v. First American Title Insurance Co., et al. (U.S. District Court for the Eastern District of Louisiana, No. 20-3159).
Millennium Group I, LLC purchased property in St. Tammany Parish, La., on Aug. 20, 2003. In connection with its purchase, Millennium obtained a title policy from First American Title Insurance Co., as well as an endorsement insuring Millennium against loss or damage sustained in the event multi-family uses were not permitted.
St. Tammany Parish zoned the property as multi-residential. However, on May 6, 2004, the Oak Harbor Owners Association denied the company’s request to build a multi-residential unit. It demanded the lots remain a boat service area. Oak Harbor filed suit in St. Tammany in 2004 seeking to prevent Millennium from building multi-family residences and limiting the use of the property to a boat service area. On Dec. 14, 2004, the court held covenants and restrictions burdened the property and prevented Millennium from building multi-family units. The trial court’s judgment was affirmed by the Louisiana First Circuit on appeal on May 5, 2006.
St. Tammany Parish issued Millennium a violation notice in 2017, requiring it to use the property only as multi-residential units contrary to the law as set forth in the judgment. On Aug. 22, 2019, a St. Tammany administrative hearing officer issued a ruling requiring Millennium to discontinue the use of the property as a boat service area.
Millennium sued First American, arguing the title policy endorsement covered the current situation or, due to the negligence of First American and/or its employees/agent Mahony Title Services LLC, was the incorrect endorsement/rider to cover the situation that Millennium requested and paid for.
First American moved to dismiss the claims against it, arguing the claims are prescribed. It argued the latest date that Millennium had notice of building restrictions on the property conflicting with the zoning guaranteed under the policy endorsement was May 5, 2006, when the First Circuit Court of Appeal affirmed the trial court’s judgment. First American also argued the claim for negligence could only be pursued against an agent, not the insurer.
U.S. District Judge Mary Ann Vial Lemmon granted First American’s motion to dismiss, noting that claims for breach of contract prescribe in 10 years. She held the 10-year prescriptive period applies to Millennium’s claim under the terms of the policy and the one-year prescriptive applies to its claim of negligence against First American.
“Millennium argues that the First American policy either did, or should have, covered the current situation, where Oak Harbor is forbidding the use of the property for multi-family units and requires that it be used for a boat service area, while St. Tammany parish requires that the land be used for multifamily and not as a boat service area,” Vial Lemmon stated. “Millennium further argues that its cause of action did not accrue until St. Tammany changed the allowed use, either in Aug. 22, 2019, when it required Millennium to discontinue using the property as a boat service area, or in 2017, when it required it to be used for multi-family residential units.
“The face of the complaint alleges that Millennium was aware of the St. Tammany Parish zoning laws in 2003 zoning it as A-5 and A-6, when it purchased the property, and was aware that it could not build multi-family in 2006 at the latest, when the Oak Harbor judgment became final,” she continued. “Accordingly, Millennium was aware of its current zoning situation since 2006, and its cause of action accrued then. In order to survive a motion to dismiss, Millennium bears the burden to come forward with evidence that prescription was suspended, interrupted, or renounced. Millennium has not done so. Thus, Millenium’s contract claim is prescribed due to the passage of over ten years, and the negligence claim is prescribed due to the passage of over a year.”