Before purchasing property in Brooklyn, N.Y., the buyer required the seller to modify a restrictive covenant that included a building height restriction. It then filed a claim with its title insurer, arguing the modified restrictive covenant did not enable it to proceed with its construction plans for the property. The title insurer denied coverage and the property owner filed suit.
The case is 50 Clarkson Partners LLC v. Old Republic National Title Insurance Co. (Supreme Court, Appellate Division, Second Department, New York, No. 2019-08595).
50 Clarkson Partners LLC entered an agreement to purchase property in Brooklyn encumbered by a restrictive covenant which included a building height restriction. Its obligation to close was subject to a condition precedent that the seller enter into an agreement with the adjacent property owners to modify the restrictive covenant to allow 50 Clarkson Partners to perform certain construction. The seller subsequently executed an agreement to modify the restrictive covenant and 50 Clarkson Partners proceeded with the closing. After the closing, 50 Clarkson Partners filed a claim with Old Republic National Title Insurance Co. pursuant to its title insurance policy. It argued that the modified restrictive covenant did not enable 50 Clarkson Partners to proceed with its construction plans for the property. Old Republic disclaimed coverage on the grounds including that the claim fell within exclusion 3(a) of the policy.
50 Clarkson Partners LLC filed suit in August 2018 to recover damages for breach of contract and for a judgment declaring losses allegedly incurred by 50 Clarkson Partners were covered by the insurance policy. It alleged that the modified restrictive covenant was not included in the exemption from coverage under the policy. Old Republic moved to dismiss the complaint. The trial court granted Old Republic’s motion and 50 Clarkson Partners appealed.
The appellate court affirmed and modified the lower court’s decision.
It “ordered that the order is modified, on the law, by deleting the provision thereof granting that branch of the defendant’s motion which was pursuant to CPLR 3211(a)(7) to dismiss the cause of action for a judgment declaring that losses allegedly incurred by the plaintiff are covered under a title insurance policy issued by the defendant, and adding a provision thereto deeming that branch of the motion to be for a declaratory judgment in the defendant’s favor, and thereupon grating that branch of the defendant’s motion; as so modified, the order is affirmed, with costs to the defendant, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment, inter alia, declaring that the losses allegedly incurred by the plaintiff are not covered under the subject title insurance policy.”
It noted, “In considering a motion to dismiss pursuant to CPLR 3211(a)(7), the court must accept the facts as alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. ‘Where a court considers evidentiary material in determining a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), but does not convert the motion into one for summary judgment, the criterion becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one, and unless the movant shows that a material fact as claimed by the plaintiff is not a fact at all and no significant dispute exists regarding the alleged fact, the complaint shall not be dismissed’”
“’[U]pon a motion to dismiss for failure to state a cause of action, a court may reach the merits of a properly pleaded cause of action for a declaratory judgment where no questions of fact are presented [by the controversy]. Under such circumstances, the motion to dismiss the cause of action for failure to state a cause of action should be treated as one seeking a declaration in [the] defendant’s favor and treated accordingly,’” the court stated. “Here, the defendant’s evidentiary submissions demonstrated that the plaintiff’s claim fell within exclusion 3(a) of the policy. Thus, the defendant demonstrated that material facts alleged in the plaintiff’s complaint were not facts at all, and that no significant dispute exists regarding them. The parties’ remaining contentions either need not be reached in light of our determination or are without merit. Accordingly, the defendant established its entitlement to a declaratory judgment in its favor and dismissal of the remaining causes of action pursuant to CPLR 3211(a).”
“Since this is, in part, a declaratory judgment action, we remit the matter to the Supreme Court, Kings County, for the entry of a judgment, inter alia, declaring that the losses allegedly incurred by the plaintiff are not covered under the subject title insurance policy,” the court continued.