Com. Land Title Ins. Co. v. Kci Techs., Inc.
Com. Land Title Ins. Co. v. Kci Techs., Inc.
Opinion of the Court
Plaintiff Commonwealth Land Title Insurance Company ("Commonwealth"), a title insurance company, seeks judgment against defendants KCI Technologies, Inc. ("KCI") and Wiles Mensch Corp. ("WMC"), both of which conducted surveys of a particular plot of land in Washington, D.C. under service contracts with land developer Infrastructure Capital Group, LLC or its affiliate ICG 16th Street Associates, LLC (collectively "ICG" or "Insured"). Commonwealth alleges that, because both surveyors were negligent in conducting the land surveys upon which it relied in issuing *108title insurance policies to ICG, the Defendants are liable for the payout it made under ICG's title claim seeking reimbursement for additional costs incurred as a result of the inaccurate surveys. The Defendants have filed separate motions to dismiss for failure to state a claim. As jurisdiction and venue is proper in this Court,
I. BACKGROUND
At issue in this case are four different land surveys conducted on the same plot of land between 2006 and 2014; two of which were conducted by KCI and two of which were conducted by WMC. In 2006, ICG purchased the land lot at 900 16th Street NW, Washington, D.C. for the purpose of constructing a new commercial office building. Compl. ¶¶ 4-7. ICG hired KCI to conduct and produce a land title survey. Id. ¶ 8; see also id. Ex. A ("KCI Professional Services Agreement" dated June 22, 2006).
In December 2012, ICG hired WMC to conduct a Boundary, Topographic and Utility Survey ("WMC 2012 Survey") which identified a party wall that encroached on the property by two to three inches. Id. ¶¶ 15-16. In May 2013, WMC re-conducted the same survey ("WMC 2013 Survey") and stated to ICG that the encroachment was four inches. Id. ¶ 19. ICG subsequently again commissioned KCI to conduct an ALTA/ACSM Land Title Survey, which was issued in February 2014 ("KCI 2014 Survey") and identified no encroachment. See id. ¶ 21; Compl. ¶¶ 77-79. The survey included a certification similar to the one made in the KCI 2006 survey. See id. ¶ 22; see also id. Ex. H. Commonwealth alleges that it relied upon the KCI 2014 Survey to issue a title insurance policy to ICG ("2014 Title Policy"). Id. ¶ 24.
On March 24, 2014, the architectural and construction company hired by ICG reported to ICG that the encroachment was actually 12 inches. Id. ¶ 27. In order to construct the building as intended, ICG decided to demolish the encroachment, incurring $2,666,379 in demolition costs and payment of a partial delay penalty to the building's main tenant. Id. ¶¶ 28, 36. On September 17, 2014 and November 17, 2014, ICG tendered claims on the 2007 and 2014 title policies, respectively, to Commonwealth, which accepted coverage and *109made a loss payment to ICG under the 2007 policy. Id. ¶¶ 31, 33-35; Mem. of P. & A. in Opp. to WMC's Mot. to Dismiss ("Opp. to WMC Mot. to Dismiss") 2 n.1, ECF No. 13. Commonwealth claims that it incurred $1,042,025.31 due to the loss payment made to ICG and expenses. Id. ¶ 35.
On March 23, 2017, Commonwealth brought suit against KCI and WMC, alleging seven causes of action. Certified Copy of Transfer Order and Docket Sheet ("Superior Court Docket Sheet"), ECF No. 10. Of the seven counts, one count is against WMC and six counts are against KCI. Compl. 7-12. As against WMC, Commonwealth alleges that, as the assignee of ICG's rights and claims, it is subrogated to all claims that ICG had against WMC (Count One). Id. ¶ 38. Commonwealth seeks to recover ICG's costs of $2,666,379 for WMC's breach of contract for failing to take notice of a 12 inch encroachment. Id. ¶ 41.
As against KCI, Commonwealth alleges that KCI's 2006 survey, in failing to notice a 12 inch encroachment on the property, was conducted negligently (Count Two) and negligently represented the true state of the property (Count Three). Id. ¶¶ 43-55. Commonwealth seeks judgment against KCI for $1,042,025.31, the amount incurred by Commonwealth as a result of its insuring and paying out a title claim to ICG. Id. Commonwealth also alleges these same claims as pertaining to KCI's 2014 survey (Counts Five and Six) and seeks the same judgment. Id. ¶¶ 60-74. Last, Commonwealth alleges that it is subrogated to all claims that ICG has against KCI by virtue of ICG's assignment of its rights and claims to Commonwealth. Id. ¶¶ 57, 76. It makes breach of contract claims against KCI with respect to the 2006 and 2014 surveys (Counts Four and Seven, respectively). Id. ¶¶ 56-59, 75-80.
KCI timely removed this matter to this Court; Not. of Removal, ECF No. 1; and both KCI and WMC have filed motions to dismiss for failure to state a claim upon which relief can be granted. Def. KCI Technologies, Inc.'s Mot. to Dismiss ("KCI Mot. to Dismiss"), ECF No. 7; Def. Wiles Mensch Corp.'s Mot. to Dismiss ("WMC Mot. to Dismiss"), ECF No. 5; see also Def. KCI Technologies, Inc.'s Supp./Revised Mot. to Dismiss ("KCI Supp. Mot. to Dismiss"), ECF No. 19.
II. LEGAL STANDARD
A party may move to dismiss a complaint on the ground that it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A complaint must contain sufficient factual allegations that, if true, "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly ,
III. ANALYSIS
KCI and WMC each argue that Commonwealth's causes of action are time-barred under D.C. law by the three-year statute of limitations, and the Plaintiff does not dispute that this is the applicable statute of limitations. WMC Mot. to Dismiss. 8; Opp. to WMC Mot. to Dismiss 5; KCI's Reply to Pl.'s Opp. to Mot. to Dismiss 2, ECF No. 18; KCI Supp. Mot. to Dismiss ¶ 6; Opp. to KCI Supp. Mot. to Dismiss 4; see also
A. The Statute of Limitations Has Run
The statute of limitations begins to run "from the time the right to maintain the action accrues."
B. The Discovery Rule Does Not Apply In This Case
The Plaintiff, however, urges application of the "discovery rule," which the D.C. Court of Appeals has applied in certain instances where an injury "was not readily apparent and indeed might not become apparent for several years after the incident causing injury had occurred." Ehrenhaft v. Malcolm Price, Inc. ,
Application of the discovery rule, however, is not universal. Though the rule *111applies in actions involving medical malpractice and legal malpractice, where sophisticated professionals may take advantage of lay clients without the clients ever being aware of the wrong; see
In Ehrenhaft , the D.C. Court of Appeals looked to "the policy judgments that gave rise to the discovery rule in the first place" and concluded that because the plaintiff was a lay person, the deficiency in design or construction was latent, the equities favored protecting the plaintiff as weighed against the potential prejudice to the defendant, and judicial economy would be served, the rule should apply. Capitol Place ,
The facts at bar are more akin to Capitol Place than Ehrenhaft . As to the first factor, the "justifiable reliance by consumers on the professional skills of those hired to perform the work," Woodruff ,
The second factor, the latency of the deficiency, does not save the Plaintiff's claims. See Woodruff,
The third factor, the balance of the Plaintiff's interests against the prejudice to the Defendants, also weighs in favor of the Defendants. See Woodruff ,
The last factor, judicial economy, does not much favor either party, but may lean towards the Defendants. See Woodruff ,
*113C. Even If the Discovery Rule Applied, Commonwealth's Claims Regarding the KCI 2006 Survey are Time-Barred
Even if the discovery rule applied, Commonwealth would not be able to recover against KCI as its claims regarding the KCI 2006 Survey are time-barred. As previously stated, the discovery rule tolls the ticking of the statute of limitations to "when the plaintiff knows or through the exercise of due diligence should have known of the injury." Burns v. Bell ,
Although Commonwealth argues that it was the specific revelation of a 12 inch encroachment in March and September 2014 that led to the damages in this case, Opp. to KCI Supp. Mot. to Dismiss 2, this argument is unpersuasive. The facts pled show that ICG knew, via the WMC 2012 and 2013 surveys, that there was indeed an encroachment on the property that the KCI 2006 survey failed to identify. Compl. ¶¶ 15, 19. The WMC 2013 survey in particular, which increased the size of the encroachment from two or three inches to four inches, indicated that prior surveys were unreliable in identifying and measuring the magnitude of the encroachment. This is sufficient to provide inquiry notice of the injury alleged in this case. See Drake v. McNair ,
*114D. In the Absence of the Discovery Rule, Commonwealth's Claims are Time-Barred or Fail to State a Claim
All of Commonwealth's claims brought as ICG under subrogation (Counts One, Four, Seven) must be dismissed because, in the absence of the discovery rule's tolling function, the statute of limitations for these counts began running on July 12, 2006; December 2, 2012; and May 2, 2013, respectively. These periods had all expired by the time Commonwealth filed its complaint in the D.C. Superior Court on March 23, 2017.
Further, Commonwealth's claims with respect to the KCI 2006 Survey (Counts Two and Three) must be dismissed as the statute of limitations expired for those claims on July 12, 2009. See supra Section III.A.
Last, Commonwealth's claims with respect to the KCI 2014 Survey (Counts Five and Six) must be dismissed as the statute of limitations expired as pertaining to the KCI 2014 Survey on February 20, 2017. See id. Commonwealth further fails to state a claim upon which relief can be granted as it has not pled that it suffered any harm in connection with the KCI 2014 Survey, since it admits that the loss payment it made to ICG was under the 2007 Title Policy, which was issued in reliance on the KCI 2006 Survey. See Compl. ¶ 35 ("Plaintiff, in turn, satisfied the Title Claim by making a loss payment ... and incurred expenses ... for a total sum of $l,042,025.31."); id. 10-11 (seeking $1,042,025.31 each for Counts Five and Six as the damages incurred relating to the KCI 2014 Survey); Opp. to WMC Mot. to Dismiss 2 n.1 ("Plaintiff informs the parties that the loss payments were made pursuant to the 2007 policy and not the 2014 policy.").
IV. CONCLUSION
For the foregoing reasons, the Defendants' motions to dismiss will be granted and the Complaint is hereby dismissed with prejudice. A separate order will issue.
See
KCI challenges the Plaintiff's standing based on the fact that its original contract was with Infrastructure Capital Group, LLC, an entity not named in this matter. The Plaintiff has declared that Infrastructure Capital Group, LLC and ICG 16th Street Associates, LLC are related entities, and that the former assigned all rights and claims arising from its agreement with KCI to the Plaintiff. See Mem. of P. & A. in Opp. to KCI's Mot. to Dismiss ("Opp. to KCI Mot. to Dismiss") 4, ECF No. 14;
While KCI's supplemental motion to dismiss was filed without leave of Court, I find that the Plaintiff was not prejudiced by its filing and accordingly will consider KCI's arguments. In its supplemental motion, KCI raises a statute of limitations defense which applies across all of Commonwealth's claims, i.e. , as against both WMC and KCI. See KCI Supp. Mot. to Dismiss ¶¶ 6-7. Commonwealth previously responded to this argument in its opposition to WMC's motion to dismiss and did so again in its opposition to KCI's supplemental motion to dismiss. See Opp. to WMC Mot. to Dismiss 5-9; Mem. of P. & A. in Opp. to KCI's Supp./Revised Mot. to Dismiss ("Opp. to KCI Supp. Mot. to Dismiss"), ECF No. 20.
Because this case is before me based on the Court's diversity jurisdiction, I must apply D.C. law as authoritatively construed by the D.C. Court of Appeals. Novak v. Capital Mgmt. and Dev. Corp. ,
See also Developments in the Law Statute of Limitations ,
Cf. Capitol Place ,
As it pertains to Commonwealth's subrogation claims (as ICG) against WMC, tolling the statute of limitations until the discovery of the 12 inch encroachment would mean that the complaint was filed with one day to spare within the statute of limitations period. Compare Superior Court Docket Sheet (complaint filed March 23, 2017) with Compl. ¶ 46 (discovery of the 12 inch encroachment by ICG on March 24, 2014). However, in light of my determination that the discovery rule does not apply to Commonwealth, either in its own right or as subrogee to ICG, Commonwealth's claims against WMC cannot proceed. See supra Section III.A.
Reference
- Full Case Name
- COMMONWEALTH LAND TITLE INSURANCE COMPANY v. KCI TECHNOLOGIES, INC.
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- 3 cases
- Status
- Published