GRANELLI et al v. CHICAGO TITLE INSURANCE COMPANY et al
Filing
41
OPINION. Signed by Judge Jose L. Linares on 6/8/12. (dc, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
BRYAN AND JACQUELINE GRANELLI
(f/k/a JACQUELINE HOEY),
Civil Action No.: 10-2582 (JLL)
Plaintiffs,
OPINION
v.
CHICAGO TITLE INSURANCE
COMPANY aka/dba CHICAGO TITLE
INSURANCE OF NEW JERSEY, INC. and
FIDELITY NATIONAL TITLE
INSURANCE
Defendants.
This matter comes before the Court on Defendants’ Motion for Partial Summary
Judgment. The Court has considered the submissions of the parties and decides this matter
without oral argument pursuant to Rule 78 of the Federal Rules of Civil Procedure. For the
reasons set forth below, Defendants’ Motion is granted in part and denied in part.
I.
BACKGROUND
Plaintiffs in this proceeding, Bryan and Jacqueline Granelli (“Plaintiffs”), own the
property that is the subject of the current dispute, 221 Summit Drive, Boonton, New Jersey (the
“Boonton Property”). Mrs. Granelli purchased the home in March 1998, prior to marrying her
husband, Bryan (J. Granelli Dep. 12:3, January 19, 2011.) Mrs. Granelli, formerly Ms. Hoey,
purchased Residential Title Insurance Policy (the “Policy”) from Chicago Title Insurance
Company in the amount of $137,000. The Policy was issued to Jacqueline Hoey and John
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Thompson, Mrs. Granelli’s former boyfriend with whom she purchased the home. Defendants in
this proceeding, Chicago Title Insurance Company and Fidelity Title Insurance (“Defendants”),
admit selling Mrs. Granelli the Policy bearing the number 3181976488. (Def. Answer 3:18.)
Defendants, however, deny they “failed to guarantee good title,” as alleged by Plaintiffs. (Id. at
3:13.)
Subsequently, Mr. Thompson left the residence and Mr. Granelli moved into the home in
2001. (B. Granelli Dep. 10:25.) Mr. Granelli was not a beneficiary listed on the Policy.
Plaintiffs, however, allege that Mr. Granelli, as Mrs. Granelli’s spouse, is entitled to all the same
rights and privileges as Mrs. Granelli under the contract. (Pl. State. of Facts 2:6.) Defendants
dispute Mr. Granelli’s rights under the Policy. The couple lived together in the Boonton
Property from 2001 to January 2008. (See B. Granelli Dep. 77:11-13.) Plaintiffs listed the
Boonton Property for sale in 2005. Despite having one or more buyers contract to purchase the
home, Plaintiffs have not yet sold the home. (Pl. State. of Facts 5:21.)
Border disputes began to pose a problem for the homeowners beginning in 2007; the
problem remains to this day. (B. Granelli Dep. 25:8-9.) Several boundary discrepancies existed
relating to the Boonton Property: the “Brown Dispute,” the “Van Driel Dispute,” the “Driveway
Dispute,” and the “Boonton Township Dispute.” (Pl.’s Resp. to Def. Interrog. 10:8.) The Brown
Dispute was the first to come to Plaintiffs’ attention, although there is some disagreement as to
what and when exactly Plaintiffs first knew about the boundary problem. (B. Granelli Dep. 15:518:4.) It is undisputed that Plaintiffs were aware of the Brown Dispute in January 2007. (Id.)
At that time, Plaintiffs needed to construct a French drain on their neighbor Mr. Brown’s
property, to facilitate water drainage. (Id.) Plaintiffs planned to construct the drain running
parallel with a rock wall that separated Plaintiffs’ property from Mr. Brown’s property. (Id.)
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Plaintiffs frequently had confrontations with Mr. Brown regarding the property’s border. (Id.)
Plaintiffs, hoping to avoid another confrontation with their neighbor, sought a property survey.
(Id.) The survey discovered that Plaintiffs’ property actually extended sixteen feet onto Mr.
Brown’s property. (Id.)
After discovering the boundary disparity in the Brown Dispute, Plaintiffs purchased a
second home (the “Kearney Property”) during the fourth quarter of 2007. They moved into the
home in January 2008. (B. Granelli Dep. 77:11-13.) At the time, the Boonton Property was for
sale, and Plaintiffs testified that they believed this was their only opportunity to own “their
dream home” – the Kearny Property. (Id. at 77:5-10.) The purchase made them responsible for
two mortgages—a situation they anticipated would only last a short time, perhaps a number of
months. (Id. at 77:1-2.)
It is a matter of factual dispute whether Plaintiffs were aware of the second boundary
dispute, the Driveway Dispute, prior to purchasing the Kearney Property. This dispute relates to
an overlap of Plaintiffs’ driveway and walkway. (Def. Interrog. 10:8). Again, the date Plaintiffs
became aware of the boundary problem is the subject of some debate in this proceeding. (B.
Granelli Dep. 24-25.) Mr. Granelli received a letter from Richard Smith in October 2007 that
outlined the Driveway Dispute as it existed according to Mr. Smith’s research. Id. Mr. Granelli,
however, alleges he did not read the letter detailing the Driveway Dispute in full until October
2008. (Id.) According to Mr. Granelli, this section of Plaintiffs’ land is located on what is
deemed to be the adjoining property. (Id.) Despite this fact, Defendants allege that the driveway
encroachment and part of the walkway were specifically excluded from coverage in the Policy.
(Id. at 22-23.)
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Finally, the Boonton Township Dispute involves the property line constructed from old
tax maps. (La Plante Dep. 22:23-23:25.) The property line derived from the tax maps showed the
border of Plaintiffs’ property running directly through the center of their home. (Def. Interrog.
10:8.) It is undisputed that Plaintiffs were unaware of such a disparity until August 2008. (Pl.
State. of Facts 4:14)
In 2008, June Van Driel contracted to purchase Plaintiffs’ home. (B. Granelli Dep. 40:13.) She went so far as to move her personal effects into the home. (Id.) Ms. Van Driel, however,
later cancelled the purchase of the home in August 2008—an action that resulted in litigation
between the Granellis and her. (J. Granelli Dep. 28-29: 19-6.) The reason for Ms. Van Driel’s
cancellation is a matter of dispute between the Defendants and Plaintiffs in this case. Plaintiffs
believe the inability to perfect title was the primary cause for the cancellation. (B. Granelli Dep.
39:22-40:25.) In his deposition, Mr. Granelli’s stated, “August 2008, June Van Driel did not
close on the house due to defective title exposing the boundaries in question.” (Id. at 18: 6-9.)
Defendants allege that certain other problems with the home might have motivated Van Driel to
back out of the deal.
Plaintiffs filed their initial claim with Defendants in August 2008, after the Van Driel sale
did not close. (Pl. Resp. to Def. Interrog. 12:13.) Significant confusion followed in the
subsequent months. Restructuring within the insurance company caused the complaint to be
transferred to several different claims agents within Defendants’ entities. The initial claim was
assigned to Jason Bergman, who worked on the complaint between August 2008 and February
2009. (Pl. Brief, Ex. J. at 1-8.) Mr. Bergman worked on the claim until it was passed to Mr.
Shawn Grimsley. (Id.) Mr. Grimsley worked on the claim between February 2009 and October
2009. (Id.)
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According to Defendants, the claim submitted by Plaintiffs was a complex and difficult
matter to resolve. (See Le Plante Dep. 23:6-25.) The Boonton Township Dispute in particular
required a significant amount of work and research due to the tax map discrepancies. (Id.) Mr.
Grimsley worked most closely on this claim; his efforts included hiring an appraiser to value the
land to be forfeited in the quit claim action associated with Mr. Brown. (Id. at 29.) He also
pulled maps and surveys, consulted with surveyors and appraisers, and spoke with the city over a
period of months. (Id. at 30-31.) Defendants assert that it made every effort to resolve the issue
without having to pursue litigation, including efforts to resolve the problem with neighbors. A
claim determination was issued in May 2009, which stated a quiet title action would be required
to resolve this claim. After making this determination, Mr. Grimsley reached out to Defendants’
in-house counsel, Mr. Romanowsky. (Id. at 31-32.) Prior to pursuing the quiet title action, Mr.
Romanowsky attempted to reach out to the neighbors by sending a letter to all of those that
would potentially be involved in the quiet title claim. (Id. at 34.) These efforts proved fruitless,
and the quiet title litigation was commenced in April 2010. (Id.) Throughout the order, the
insurance company made a number of offers to issue a letter of indemnification to potential
purchasers. (Id.) Ultimately, the quiet title litigation achieved a resolution to the boundary
issues associated with the property, leaving it free of any encumbrances. (Pl. State. of Facts 2:4.)
The quiet title litigation, however, did not reach a resolution until August 2011, three years after
Plaintiffs filed their initial complaint with Defendants’. (Id.)
During the claim dispute, Plaintiffs experienced a number of misbegotten sales of the
Boonton Property. Approximately five individuals attempted to purchase the home, albeit
unsuccessfully, two of which occurred after the claim was filed with Defendants. (B. Grenelli
Dep. 82-91.) According to Plaintiffs, every lost purchase after the Van Driel Dispute in August
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2008 was attributable to the title defects. (Id.) After the Van Driel sale was terminated, Mr.
Granelli claims he kept track of all expenses associated with the Boonton Property. (Pl. Brief,
Ex. I.) These expenses include utilities, mortgage payments, property taxes, and maintenance
costs. Id.
Plaintiffs claim $83,032.34 in direct damages associated with the maintenance, repair,
and costs associated with ownership of the Boonton Property since August 2008. (Pl. Brief, Ex.
I.) Plaintiffs also include damages for the value difference between the 2008 sale price,
$308,000, and the current sale price, $228,150, a difference of $79,850. Id. Plaintiffs also allege
that they are entitled to the taxes they would owe for the sale of the property, $28,482.00. Id.
Plaintiffs claim had they sold the home in 2008 they would have been entitled to the federal tax
rule that allows the exclusion of gains on a principle residence up to $500,000 for a married
couple. To this date, however, the Boonton Property has not been sold. The alleged sale price
and tax values are based solely on Plaintiffs’ estimates. Plaintiffs also claim $27,350 dollars in
legal fees.
Additionally, both Mr. and Mrs. Granelli allege severe emotional distress as a direct
result of the title issues. (See J. Granelli Dep. 57-58.) Despite these claims, Plaintiffs never
sought the assistance of a physician or a licensed therapist. (Id.) Plaintiffs submit no medical
records to justify their emotional distress claims. (Id.) Lastly, Plaintiffs seek punitive damages
and equitable relief.
II.
LEGAL STANDARD
A court shall grant summary judgment under Rule 56(c) of the Federal Rules of Civil
Procedure “if the pleadings, the discovery and disclosure materials on file, and any affidavits
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show that there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c). The moving party first must show that no
genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the
moving party shows this, then the burden shifts to the non-moving party to present evidence that
a genuine issue of material fact compels a trial. Id. at 324. The non-moving party must offer
specific facts that establish a genuine issue of material fact and may not simply rely on
unsupported assertions, bare allegations, or speculation. See Ridgewood Bd. of Educ. v. N.E. ex.
rel. M.E., 172 F.3d 238, 252 (3d Cir. 1999). Also, the Court must consider all facts presented,
and the reasonable inference drawn from them, in the light most favorable to the non-moving
party. See Pa. Coal Ass'n v. Babbit, 63 F.3d 231, 236 (3d Cir.1995).
III.
DISCUSSION
A. Punitive Damages
A claim made by the plaintiff may be deemed abandoned if the “party fails to offer any
argument or evidence . . . in opposition to defendant’s motion for summary judgment.”
Desyatnik v. Atl. Casting & Eng’g Corp., No. 03-5441, 2006 WL 120163, at *1 (D.N.J. Jan. 17,
2006) (citing Curtis v. Treloar, No. 96-1239 1998 WL 1110448, at *9 (D.N.J. Aug. 27, 1998)).
(The court held the plaintiff did not abandon his claim for punitive damages if the arguments in
the reply brief directly supported the claim for punitive damages; so long as the argument was
presented in response to the motion for summary judgment, the claim could stand. Id.)
In the present case, Plaintiffs, in response to Defendants’ motion for summary judgment,
ardently support their previous assertions praying for a finding of punitive damages. Pl. Br. in
Resp. to Def. Motion Summ. J. p. 4. Plaintiffs set forth facts and law reiterating their
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justification for the punitive damage claim set forth in their initial complaint. Id. Following the
decision in Desyatnik, such an effort is adequate to sustain a previous claim for punitive
damages. As such, Plaintiffs cannot be held to have abandoned their claim for punitive damages
merely because they did not include them in their response interrogatory or itemized damage list,
as Defendants argue. Def. Mot. Summ. J. 7, CMECF No. 31.
The New Jersey Punitive Damages Act requires the plaintiff to prove by “clear and
convincing evidence” that the defendant acted with “actual malice,” or with “wanton and willful
disregard for persons to be foreseeably harmed” by their actions. N.J. Stat. Ann. tit. 2A § 15-5.9
(West 1995). “Actual malice” is defined as an “evil minded act.” Id. “Wanton and willful
disregard” is defined as “a deliberate act or omission with knowledge of a high degree of
probability of harm to another and reckless indifference to the consequences of such act or
omission.” Id. The key to the right of punitive damages is the wrongfulness of the intentional
act. Rendine v. Pantzer, 661 A.2d 1202, 1215 (N.J. 1995). The legislative purpose of the
Punitive Damages Act was to establish more restrictive standards with regard to awarding
punitive damages. Tarr v. Bob Ciasulli's Mack Auto Mall, Inc., 916 A.2d 484 (N.J. Super. Ct.
App. Div. 2007); Pavlova v. Mint Mgmt. Corp., 868 A.2d 322 (N.J. Super. Ct. App. Div. 2005).
If the plaintiff seeks punitive damages under a claim that the defendant acted with
“wanton and willful disregard,” the plaintiff must establish that the defendant “knew or had
reason to know of circumstances which would bring home to the ordinary reasonable person the
highly dangerous character of his or her conduct.” Pavlova, 868 A.2d at 326; see also Hatala v.
Morey’s Pier Inc., No. 04-4679, 2007 WL 2159615 (D.N.J. June 25, 2007); McLaughlin v. Rosa
Farms, Inc., 266 A.2d 284, 293 (N.J. 1970) (citing Krauth v. Israel Geller and Buckingham
Homes, Inc., 157 A.2d 129, 133 (N.J. 1960). (Punitive damages may be awarded where a
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defendant “[c]onsciously and intentionally does some wrongful act or omits to discharge some
duty which produces the injurious result”). Plaintiffs seeking punitive damages cannot succeed
if the evidence presented merely speaks to a finding of negligence or gross negligence.
DiGiovanni v. Pessel, 260 A.2d 510 (N.J. 1970). Conduct deemed negligent, or even grossly
negligent, falls short of satisfying the requisite level of indifference required for punitive
damages claims. Id.
To determine whether punitive damages should be awarded to a plaintiff, the fact finder
must consider, but not limit itself to, the following: (1) the likelihood at the relevant time, that
serious harm would arise from the defendant’s conduct; (2) the defendant’s awareness of
reckless disregard of the likelihood that the serious harm at issue would arise from the
defendant’s conduct; (3) the conduct of the defendant upon learning that its initial conduct would
likely cause harm; and (4) the duration of the conduct or any concealment of it by the defendant.
N.J. Stat. Ann. tit. 2A § 15-5.12(b) (West 1995).
The Appellate Division of the Superior Court of New Jersey held that in order to satisfy
the requirement of willfulness or wantonness, there must be a finding of a “positive element of
conscious wrongdoing.” Enright v. Lubow, 493 A.2d 1288, 1298 (N.J. Super. Ct. App. Div.
1985). Neither negligence nor gross negligence will validate such a judgment. Id. In Enright,
the title insurance company negligently located an easement on the property that significantly
reduced the value of the property. Id. at 1302. Plaintiffs attempted to sell the home, despite
becoming aware of the misplaced easement. Id. The sale of the home did not proceed as
contracted when the buyers discovered the state of the title; instead, the purchase price was
reduced by $22,000. Id. at 1297. Upon learning of this trouble, the insurance company offered to
settle with the plaintiff for the value difference in the property. Id. at 1291. Plaintiffs rejected the
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offer and instead sued for compensatory damages plus punitive damages and attorney’s fees. Id.
The court dismissed claims for punitive damages, as the actions of the insurance company, while
negligent, did not illustrate deliberate or intentional harm. Plaintiffs were left only with their
direct compensatory damages. Id. at 1292-93.
This case is distinguishable from Willow Inn, wherein the Third Circuit Court of Appeals
upheld an award for punitive damages based upon the defendant’s repeated delays in making
claim determinations, appointing an appropriate appraiser, and withdrawing cooperation during
settlement negotiations. Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224 (3d Cir.
2005). The insurance company, PSM, repeatedly failed to respond to several of Willow Inn’s
reasonable requests within a timely manner. Id. at 229. In one instance, PSM failed to appoint
an appraiser until almost eight months after Willow Inn’s initial request. Id. On another
occasion, PSM blatantly ignored correspondence regarding indemnification for a period of three
months. Id. Based upon the severity and number of instances where the defendant showed
“reckless indifference” to the foreseeable harm suffered by Plaintiffs, the Court of Appeals
upheld the lower court’s issuance of punitive damages. Id.
In the present case, Defendants are entitled to summary judgment on Plaintiffs’ claim for
punitive damages. Plaintiffs have not proffered sufficient evidence such that a reasonable jury
could find punitive damages are warranted. Rather, Plaintiffs set forth only conclusory
accusations about the nature and intent of the Defendants’ actions. To permit a finding of
punitive damages, the conduct must be “wanton or willful,” carrying reckless indifference to
foreseeable harm that would result from their actions. N.J. Stat. Ann. tit. 2A § 15-5.9 (West
1995). Plaintiffs’ primary argument is that the Defendants took too long to respond to their
initial complaint. They assert that a period of eight months to make a determination on
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Plaintiffs’ complaint is “too long”; so long in fact, that it should be deemed recklessly
indifferent. Plaintiffs, however, fail to provide any additional evidence to show the delay was
motivated by a conscious objective to harm Plaintiffs.
In fact, the record reveals quite the opposite. Defendants maintained constant discourse
with Plaintiffs through e-mail correspondence. Regular updates were reported, and the status of
the claim was consistently discussed with Mr. Granelli. Unlike Willow Inn, there were no
significant or deliberate lapses in communication. In Willow Inn, the court found the insurance
company’s intentional failure to acknowledge or respond to the plaintiff’s request for appraisal
was evidence of reckless indifference. In the present case, Plaintiffs provide no such examples
of Defendants’ willful efforts to act in a manner that would cause foreseeable harm to Plaintiffs.
Furthermore, as the Defendants point out, Mr. Granelli was not in fact named on the title
insurance policy, and the company’s willingness to communicate with him regularly illustrates
its good faith efforts to assist Plaintiffs.
The facts of this case are strikingly similar to Enright, where homeowners became aware
of a title defect, and then appealed to the insurance company for resolution of the issue. There,
as here, the insurance company conceded their mistake and took affirmative efforts to provide
relief for Plaintiffs. As noted by the court in Enright, while the failure to cure within reasonable
time may constitute negligence, there is not enough evidence to suggest a finding of reckless
indifference. In both cases, the insurance company offered to settle for an amount deemed to
represent the diminution in value of the property. Currently, Defendants issued two settlement
offers to Plaintiffs, both of which were rejected.
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Defendants’ actions were not recklessly indifferent, but rather reasonable, throughout the
claim investigation. It hired all necessary parties, exhausted all non-legal outlets for resolution
of the issue, and when it became clear the issue would have to be resolved in court, it went
forward at its own expense. Despite Plaintiffs’ desire for an immediate remedy, the title
insurance company is not required under contract to proceed immediately into litigation. It is
within its right to assess the situation and pursue alternative resolutions to the dispute that do not
involve legal proceedings. As the record shows, part of Defendants’ delay was due to contacting
neighbors in the hopes of achieving a peaceful resolution to the dispute. Once it became apparent
that this would not be feasible, Defendants appointed counsel and proceeded to court. Even in
the event that this procedure did not comply with the guidelines of the title insurance contract,
Plaintiffs do not offer evidence of actions rising above a breach of contract. No documentation,
statements, or circumstances point to the company being motivated by a conscious awareness to
harm Plaintiffs. All of the evidence set forth in the record indicates Defendants did not
deliberately act with reckless indifference to the foreseeable harm to Plaintiffs. No reasonable
jury would find that Defendants’ actions rose to a level of reckless disregard for the welfare of
Plaintiffs. The Court finds Defendants lacked the necessary indifference required to permit a
finding that their conduct was sufficiently egregious to warrant punitive damages.
B. Emotional Distress Damages
Emotional distress damages for stress, anxiety, and nervousness are awarded as nonpecuniary damages following a showing of extreme emotional harm “such that no man (or
woman) could be expected to endure.” Restatement (Second) of Torts §46 cmt. d, (1965).
Emotional distress damages are not routinely awarded in breach of contract actions; however,
they can be available “if the breach involves conduct that is both intentional and outrageous and
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proximately causes severe, foreseeable emotional distress.” Picogna v. Bd. Of Educ. Of Cherry
Hill, 671 A.2d 1035, 1037 (N.J. 1996). See also, Fiore v. Sears, Roebuck & Co., 364 A.2d 572
(N.J. Super. Ct. Ch. Div. 1976). (“[B]reach provides a basis for recovery when it ‘is wanton or
reckless and the harm was foreseeable when the contract was made.’”) Whether emotional
distress can be found is a matter of law to be determined by the court. Id. Despite this narrow
rule, emotional distress damages are exceedingly rare in contract actions. See e.g., Noye v.
Hoffmann-La Roche, Inc, 570 A.2d 12, 15 (N.J. Super. Ct. App. Div. 1990) (“tort damages do
not lie for breach of an implied covenant of good faith and fair dealing.”); Cleveland Plaza
Assocs., LLC v. Conte Entm’t of Cranford, LLC, No. A-3832-06T1, 2007 WL 4372797 (N.J.
Super. Ct. App. Div. Dec. 17, 2007) (“[o]n a promissory estoppels claim, the prevailing party is
only entitled to recover ‘damages resulting from its detrimental reliance upon promises made
during contract negotiations.”) (quoting Pop’s Cones, Inc. v. Resorts Int’l. Hotel, Inc., 704 A.2d
1321, 1325 (N.J. Super. Ct. App. Div. 1998).
Additionally, in limited circumstances, emotional distress damages are permissible under
certain statutory constructions. Neither the New Jersey Insurance Trade Practices Act nor the
New Jersey Consumer Fraud Act, however, provide for recovery of emotional distress damages.
Gennari v. Weichert Co. Realators, 691 A.2d 359, 369 (N.J. 1997) (“non-economic losses are not
recoverable under the Consumer Fraud Act”); Cole v Laughrey Funeral Home, 869 A.2d 457,
463 (N.J. Super. Ct. App. Div. 2005) (emotional distress damages are not recoverable under the
Consumer Fraud Act).
In the present case, Defendants’ Motion for Summary Judgment on the claim of
emotional distress damages is granted. As a matter of law, Plaintiffs failed to set forth a claim
that would permit a reasonable jury to find in their favor. Plaintiffs did not proffer sufficient
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evidence to permit a reasonable jury to find the Defendants’ conduct was intentional or
outrageous. Additionally, Plaintiffs’ emotional distress did not reach the requisite severity to
sustain a cause of action.
Plaintiffs failed to make a showing of severe emotional distress. Their description of the
distress never reaches past conclusory assertions of discomfort. While Plaintiffs contend they
suffered a level of stress or anxiety, they failed to demonstrate that the level rose above common
inconvenience. In order to recover, Plaintiffs would have to demonstrate the level of distress
was “such that no reasonable man [or woman] could have been expected to endure.” Plaintiffs’
depositions, interrogatories, and complaint all fall short of providing anything more than
conclusory assertions of anxiety and restlessness. Neither Mr. nor Mrs. Granelli ever sought
assistance for their distress from a licensed healthcare professional. Though this is not a
requirement, it is indicative of the level of discomfort Plaintiffs experienced. As such,
Defendants’ motion for summary judgment as to emotional distress should be granted.
C. Failure to Mitigate
Defendant argues damages related to Plaintiffs’ ownership of multiple homes should be
dismissed on summary judgment because Plaintiffs’ failed to properly mitigate their damages;
however, sufficient dispute of material fact exists to bar summary judgment on this issue. A duty
to mitigate arises when the Plaintiff becomes aware of a breach. Restatement (Second) of
Contracts § 46 cmt. f, (1981). In the present case, the threshold question is whether Plaintiffs
were aware they would need to seek recourse with Defendants to resolve the Brown Dispute at
the time it arose in January 2007. Despite Defendants’ allegations, the record, when considered
in light most favorable to Plaintiffs, indicates that factual questions remain regarding the nature
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and extent of Plaintiffs’ familiarity with the boundary issues at the time they purchased the
Kearney Property.
A plaintiff has a duty to mitigate damages when “the defendant has already committed an
actionable wrong, whether tort or breach of contract, then this doctrine limits the plaintiff’s
recovery by disallowing only those items of damages which could reasonably have been
averted…” Ostrowshi v. Azzara, 545 A.2d 148, 151 (N.J. 1988). It is well settled that the duty
to mitigate begins upon the plaintiff’s knowledge of the defendant’s breach. Restatement
(Second) of Contracts cmt. f (1981) (The injured party is expected to arrange a substitute
transaction within a reasonable time after he learns of the breach.) There is no duty to mitigate
until the plaintiff s aware that the defendant’s actions have constituted a breach. Koppers Co.
Inc. v. Aetna Cas. & Sur. Co. 98 F.3d. 1440, 1448 (3d Cir. 1996) (“[D]uty to mitigate its
damages arises upon defendant’s breach of contract. . . [I]n the context of an insurance contract. .
. upon insurer’s breach by failing to indemnify the insured, the insured has a duty to mitigate its
damages”. Plaintiffs, however, are not entitled to wait for a judicial finding of breach; rather,
plaintiffs merely need to become aware of an actionable wrong. Health Prof’l and Allied Emps.
v. Bergen Reg. Med. Ctr, No. 08-CV-1041, 2010 WL 147938 at *3 (D.N.J. Jan. 8, 2010). (“The
court disagrees. . . that a duty to mitigate is conditioned upon an adjudication ascertaining the
existence of such a breach.”) Furthermore, “the duty to mitigate damages in not applicable
where the party whose duty it is primarily to perform the contract has equal opportunity for
performance and equal knowledge of the consequences of performance.” Ingraham v.
Trowbridge, 687 A.2d. 785, 791 (N.J. Super. Ct. App. Div. 1997).
Defendants’ motion for summary judgment regarding Plaintiffs’ failure to mitigate must
be denied. Plaintiffs set forth sufficient issues of material fact to preclude summary judgment.
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Whether Plaintiffs’ knowledge of the Brown Dispute constituted awareness of a breach will be
determined by whether there was a duty to mitigate damages. Plaintiffs admit they were aware
of the boundary disparity associated with Mr. Brown’s property as early as January 2007. They
claim, however, that they were not aware such a dispute constituted a breach of contract by the
Defendants. Rather, Plaintiffs allege they believed the discrepancy would not require any legal or
insurance remedy. They subsequently purchased the Kearney Property in January 2008.
Following the purchase, the Van Driel sale of the Boonton Property fell through in August 2008.
It was at this time Plaintiffs became aware of the significant title problem on their hands.
Plaintiffs immediately submitted a complaint claim to Defendants upon learning of the
need to perfect title in August 2008. This point is particularly salient, as it gives credence to
Plaintiffs’ claim that they did not believe the Brown Dispute would affect the marketability of
the property title. Plaintiffs, not having recognized an “actionable wrong” or “breach” on the
part of Defendants could not be compelled to mitigate their damages in January 2007, as they
were not yet aware they would incur any damages from forthcoming lost sales of the Boonton
Property. The Granellis, ignorant of the knowledge their home’s title was not marketable,
purchased their dream home with the expectation they would carry a second mortgage for a
period of months. They do not claim damages relating to the carrying cost of the Boonton
Property until September 2008. This represents the earliest date after which Plaintiffs failed to
sell the home due to title defects.
Defendants contend that Plaintiffs’ familiarity with the Brown Dispute constitutes
knowledge of a breach of the title insurance contract. The court does not reach this conclusion.
Plaintiffs point out they did not believe the Brown Dispute would affect the sale of the home in
any way. In fact, Plaintiffs disclosed the nature of the dispute to Van Driel, and both parties
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moved forward toward the closing amicably. The record paints Plaintiffs as motivated and
proactive sellers. Plaintiffs’ failure to file a claim with Defendants upon becoming aware of the
Brown Dispute indicates one of two things to the court: (1) Plaintiffs in good faith did not
believe the boundary dispute would have any impact on the property’s title, or (2) they were
keeping their fingers crossed and hoping to pass the headache on to the next buyer. In any event,
the nature of what Plaintiffs knew, and their motivation after uncovering the dispute, is a
question for the fact finder.
In addition to the implication of the Brown Dispute, there are also questions of material
fact relating to when Plaintiffs read and became aware of the contents of Mr. Richard Smith’s
letter detailing the nature of Plaintiffs’ severe boundary problems. Plaintiffs allege they did not
actually read the contents of the letter until October 2008, despite receiving the letter in October
2007. If in fact Plaintiffs read the letter upon receiving it in 2007, the nature of the Brown
Dispute becomes less relevant, as the letter admittedly details Plaintiffs’ significant boundary
problems. Knowledge of the letter and its contents could potentially serve as notice of an
actionable wrong on behalf of the Defendants. Plaintiffs, however, contend they did not read the
letter, and were unfamiliar with any of Mr. Smith’s assertions until Fall 2008. This significant
discrepancy is a serious dispute of material fact that must be left for the jury. Due to the
important nature of this material dispute, Defendants’ motion for summary judgment must be
denied.
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D. Miscellaneous Damages
1.
Damages for the Taxes on the Boonton Home
Defendants’ motion for summary judgment on Plaintiffs’ claim for relief relating to the
income tax exclusion for the sale of a principal residence is denied at this time. Plaintiffs argue,
“as long as certainty exists as to the fact that damage has occurred, uncertainty regarding the
amount of damages will not bar recovery.” Pl. Brief at 13. “Anticipated profits that are too
remote, uncertain, or speculative are not recoverable.” Desai v. Bd. Of Adjustment of
Phillipsburg, 824 A.2d 166, 172 (N.J. Super. Ct. App. Div. 2003) (citing V.A.L. Floors Inc. v.
Westminster Comm. Inc., 810 A.2d 625, 631 (N.J. Super. Ct. App. Div. 2002)).
Section 121 of the Federal Tax code states, “[g]ross income shall not include gain from
the sale or exchange of property if, during the five year period ending on the date of sale or
exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal
residence for periods aggregating two years or more.” 26 U.S.C. § 121(a) (2010). In the event
that taxpayers qualify for this section, they are permitted to exclude up to $250,000 as an
individual or $500,000 as a married couple. § 121(b). If, however, the use of the home
constitutes a ‘nonqualified use,’ that is, a use other than as the principal residence, then the
homeowners are not entitled to exclude any gain on the sale of the home from income.
In the instant case there is no guarantee that Plaintiffs will suffer the alleged damages of
losing the tax benefit. The home still has not been sold. Whether there will even be a gain
realized on the home, which would entitle Plaintiffs to the tax benefits, is uncertain. The
conjectural nature of the future sale is precisely the type of factual speculation the standard is
designed to prohibit. Too much uncertainty exists relating to the sale, including the
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circumstances, price, and timing, to permit a finding of damages at this time resulting from the
Defendants’ alleged breach of contract.
Most importantly, Plaintiffs are still fully capable of moving back into the Boonton
Property. In the event that Plaintiffs moved back into the home for a period of two or more
years, they would qualify for the tax benefits under IRC Section 121. Allowing them to recover
presently, despite the uncertainty as to the occurrence and amount of damages, would risk a
potentially duplicative windfall for Plaintiffs. Defendants set forth a number of other arguments
prohibiting recovery of the tax benefits, but presently the factual uncertainty surrounding the
issue is sufficient to deny summary judgment at this time.
2.
“Lost Income” From the Potential Sale of the Boonton Home
In order to recover lost profits, “the party must show the profits were lost as a result of
the actionable conduct complained of.” Cromartie v. Carteret Sav. & Loan, 649 A.2d 76 (N.J.
Super. Ct. App. Div. 1994); Sullivan v. Transamerica Title Ins. Co., 532 P.2d 356, 357 (Colo. Ct.
App. 1975) (“Where insured lost prospective sale of property due to discovery of easement that
title insurer failed to exclude in title insurance commitment, he was not entitled to profit lost
because of lost sale.”); Southern Title Guaranty co. Inc., v Prendergast, 494 S.W.2d 154, 158
(Tex. 1973) (“Title Insurance is a contract of indemnity and the insured is limited to recovery for
actual damages sustained.”)
“Anticipatory profits that are too remote, uncertain, or speculative are not recoverable.”
Desai, 824 A.2d at 172. The uncertainty of damages relates to factual uncertainty, and not to
uncertainty as to amount; the court must be aware damages have occurred. Id. New Jersey courts,
however, typically require a fair basis for the calculation of lost profits. V.A.L Floors, Inc., 810
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A.2d at 632; J.L. Davis & Assocs. v. Heidler, 622 A.2d 923 (N.J. Super. Ct. App. Div. 1993)
(quoting Borbonus v. Daoud, 111 A.2d 443 (N.J. Super. Ct. Ch. Div. 1955)). Speculative damage
calculations are typically only permissible when previous business experience allow the court to
make a reasonable estimate for the damage amount. Sufficient evidence must be present to allow
at least an estimate with a reasonable degree of certainty. Id.
The specific issue of whether homeowners that failed to close on a sale of their home due
to a title defect, and subsequently experienced a decrease in the appraisal value of their home,
has not been considered in detail by the Third Circuit. The difficulty of the current issue is that
Plaintiffs have not yet successfully sold the Boonton Property. Although the value of the home
has almost certainly declined since the housing bubble burst in 2008, the same year the sale of
their home fell through, the court is not able to estimate with any precision the amount of their
loss. While Plaintiffs urge the court to assess damages in the amount of the difference between
the lost sale and the current value of the home, little authority would support such a method.
Further, such a method would entitle Plaintiffs to a potential windfall verdict, as it is possible
they receive these damages, and the value of their home subsequently recovers to the pre-bubble
estimation. Furthermore, until Plaintiffs sell the home, issues of fact will persist, and any
motions for summary judgment on this issue will remain premature. Accordingly, Defendants’
motion for summary judgment as to this issue is denied at this time.
3.
Equitable Relief Damages
Defendants’ Motion for Summary Judgment as to equitable relief claims is granted. As
noted above, speculative damages that give rise to potentially duplicative damage awards are not
recoverable. Additionally, the New Jersey Consumer Fraud Act does not permit duplicative
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damage awards. The language of the statute, “any other appropriate legal and equitable relief,”
was not intended to permit duplicative awards for the same economic injury. 49 Prospect St.
Tenants Ass’n. v. Sheva Gardens, Inc., 547 A.2d 1134, 1149 (N.J. Super. Ct. App. Div. 1988).
In the present case, Plaintiffs seek equitable relief related to the economic injury suffered
as a result of the breach of contract claim and the resultant inability to sell their home. The
equitable relief that Plaintiffs believe would be appropriate is the purchase of the Boonton
Property by the Defendants. No provisions in the title insurance contract require Defendants to
purchase Plaintiffs’ home in the event of a breach.
Such a judgment would be unduly duplicative and lead to a windfall judgment in favor of
Plaintiffs. Sufficient direct damage provisions exist to compensate Plaintiffs in whole.
Equitable relief is necessary only to avoid inevitable injustice that would result. No
circumstances exist in this case that would require equitable relief. There is no evidence the
home will not be marketable once the title defects are resolved, which by all indications will
happen as a result of the Defendants’ legal efforts to perfect title. Contrary to Plaintiffs’
assertions justice would not be served by permitting a finding of equitable relief.
4.
Interest on Credit Cards and Loans
Plaintiffs’ request for interest paid on their credit card debt, and other loan debt, is
frivolous and speculative. Defendants are correct in asserting that no reasonable determination
could possibly be made by Plaintiffs that shows they would have paid the debt if they sold the
Boonton Property in 2008. The only support for this assertion is Plaintiffs’ own testimony
during depositions. No other objective evidence lends to the argument that these debts would in
fact have been paid. Defendants’ Motion for Summary Judgment on this claim is granted.
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5.
Attorneys’ Fees
Defendants’ Motion for Summary Judgment on the issue of attorneys’ fees must be
denied. Attorneys’ fees may be awarded to a prevailing party when authorized by statute, court
rule, or contract. In the absence of bad faith actions on the part of the opposing party, litigants
must pay their own attorney’s fees. Glass, Molders, Pottery, & Allied Workers Int’l Union v.
Owens-Illinois, 941 F.2d 1201 (3d Cir. 1991).
The New Jersey Consumer Fraud Act provides that attorney’s fees are available to a
plaintiff who proves both an unlawful practice and establishes a prima facie case of loss. N.J.
Stat. Ann. tit. 56 § 8-19 (West 1995). To show a loss, a plaintiff must merely provide an
estimate of damages, calculated with a reasonable degree of certainty. Cox v. Sears Roebuck &
Co., 647 A.2d 454, 464 (N.J. 1994). An unlawful practice includes the following: affirmative
acts, knowing omissions, and regulation violations. Id. at 461.
Defendants’ motion for summary judgment as to attorneys’ fees must be denied. The
New Jersey Consumer Fraud Act provides for issuance of attorneys’ fees if plaintiff can show an
unlawful practice and a loss. Sufficient issues of material fact exist to permit a fact finder to
determine whether any unlawful activities occurred. Plaintiffs’ significant expenditure following
the alleged breach of contract is sufficient under the law to satisfy a potential finding of loss.
Accordingly, Defendants’ motion as to attorneys’ fees must be denied.
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IV.
CONCLUSION
For the reasons set forth above, Defendants’ motion for summary judgment is granted in
part and denied in part. An appropriate Order accompanies this Opinion
DATED: June 8, 2012
s/ Jose L. Linares______
JOSE L. LINARES
U.S. DISTRICT JUDGE
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