Opinion
C.A. No. 03C-04-270.
Submitted: September 19, 2007.
Decided: November 16, 2007, Corrected: December 10, 2007.
Corrected Cover Page to correct counsel representation of Plaintiff and Defendant.
Francis J. Trzuskowski, Esquire, Elzufon Austin Reardon Tarlov Mondell, Attorney for Plaintiff.
Richard D. Levin, Esquire, Connolly, Bove, Lodge Hutz, Attorney for Defendant.
Edward M. McNally, Esquire, Morris James LLP, Attorney for Third-Party Defendant.
OPINION AND ORDER
INTRODUCTION
This is a legal malpractice action filed by Northern Delaware Aquatic Facilities, Inc. ("NDAF") on April 25, 2003. The complaint alleges that defendant Cooch Taylor, through its employees/co-defendants Michael A. Friedberg and W. Jeffrey Whittle (collectively "CT") negligently rendered legal services in their representation of NDAF in a property conveyance between NDAF and Capano Holdings, Inc. ("Capano"). NDAF claims damages of $350,000 for the loss of value to the property or, alternatively, $500,000 for the costs associated with clearing title.
On June 11, 2003 CT filed a third-party complaint against Capano, alleging negligent misrepresentation. CT claimed that Capano is liable for any and all sums that may be adjudged against CT.
NDAF filed a Motion in Limine on August 13, 2007. CT and Capano filed individual Motions for Summary Judgment on August 17, 2007. This Court held a hearing on all three motions on September 19, 2007. For the reasons that follow, CT's Motion for Summary Judgment and Capano's Motion for Summary Judgment are GRANTED. As a result, NDAF's Motion in Limine is rendered moot.
FACTUAL BACKGROUND
The record before the Court reflects the following undisputed facts. NDAF owns an approximately 1.75-acre parcel of land in Newark, DE. The property, which once contained a swimming pool, a parking lot, a bathhouse and an open grassy area, is adjacent to a housing development known as The Woods. NDAF previously maintained and operated a community swimming pool on the property, but it ceased operations in 2001. Since that time, the pool has been filled and the bathhouse has been razed.NDAF acquired the property, previously known as the Sunnyside Swim Club, from Capano in 1983. Working in conjunction with the Suburban Wilmington Aquatic Team, NDAF hired CT to negotiate the terms of the sale, prepare the deed, and conduct a title search. After performing the title search, CT reported that it discovered no significant encumbrances or other impediments to the conveyance of good, marketable title. The deed, prepared by CT, describes the property as follows:
The Suburban Wilmington Aquatic Team (SWAT) was a predecessor to NDAF. Members of SWAT were interested in purchasing a pool and eventually formed NDAF to purchase the property at issue in this case. Members of both SWAT and NDAF contributed to the decision to retain CT for the transaction.
All those certain lots, pieces or parcels of land . . . known as lots 1 and 2A as shown on Microfilm Record 1323, as amended by Microfilm Record 2184, as the same appears of record in the Office of the Recorder of Deeds in and for New Castle County.
Def.'s App. at 1.
The language in the deed coincides with that in the property's last deed of record dated December 1, 1975. The deed also provides a metes and bounds description of the property. Capano and NDAF closed the transaction on February 14, 1983.
Sometime in 1997, NDAF President Tom Welch ("Welch") discovered a possible error in the deed prepared by CT. Welch was investigating the possibility of constructing a fence on the property when he noticed that the deed's metes-and-bounds description did not match a lines-and-grade drawing that was prepared for a variance application in 1982. Consequently, Welch contacted Carmen Casper ("Casper") a professional surveyor who prepared the 1982 lines-and-grades drawing. Initially, Welch asked Casper to mark the property's boundaries as they appeared on the deed. Before he did so, however, NDAF abandoned its plans to construct the fence, and the request was withdrawn.
The variance application was prepared on behalf of NDAF before it received title to the property. The contract of sale for the property was contingent upon the variance being granted. The variance was granted by the New Castle County Board of Adjustment on June 17, 1982. The terms of the variance are not relevant to the issue sub judice.
NDAF again addressed the issue of a possible problem with the deed sometime in 1998, when NDAF considered the possibility of selling the property and dissolving the corporation. NDAF assumed that the contradiction between the deed and the lines-and-grade drawing might hinder NDAF's ability to sell the property, so Welch contacted CT regarding the possibility of preparing a new deed that accurately reflected the property's dimensions. CT attorney Bonnie Sheer ("Sheer") suggested that NDAF have the property surveyed and then meet with CT in order to discuss any discrepancies revealed in the survey. However, NDAF decided to continue to operate the pool and did not pursue the survey.
Sometime later, NDAF began to investigate the possibility of subdividing and selling a portion of the property. Welch contacted Casper to survey the property and prepare an accurate lines-and-grades drawing and legal description. After his review, Casper notified Welch that there were recorded development plans that affected the NDAF property in addition to those that were included in the deed's description of the property.
Welch contacted CT regarding the additional subdivision plans on or about January 26, 2000. According to an internal CT memo prepared by Sheer, she determined that CT should investigate the problem and, if necessary, prepare a new deed upon completion of Casper's survey.
Def. App. at 46-47.
Casper met with Welch on March 1, 2000 to discuss the problem in greater detail. During this conversation, Casper told Welch that a Record Major Subdivision plan for The Woods development and two subsequent amendments affected the NDAF property. The plan established dimensions of the NDAF property which differed from those recorded in the deed prepared by CT and the two records recited therein. Further, the plan designated the property as "Private Open Space" ("POS"). The plans were approved by the New Castle County Department of Planning and recorded in 1976 and 1977 and pre-date the NDAF deed by several years.
Before a major residential development can be approved by The New Castle County Department of Land Use Planning, the developer must designate a portion of the development as open space. New Castle Cty. C. § 40.20.225. Prior versions of the County Code distinguished between Private Open Space and Public Open Space. New Castle Cty. C. § 20-3 (Supp. No. 6 1977). The Code's current version utilizes different terms such as community area open space, usable open space and natural resource area open space. New Castle Cty. C. § 40.20.225. Despite the changes in terminology over the years, the general permitted uses of open areas have remained somewhat consistent. In essence, open spaces must be used for certain designated purposes such as natural resource conservation, recreation, and historic/cultural preservation. Id. Open spaces are precluded from being developed unless the development furthers the open space's designated purpose. Id.
Welch was concerned about the practical implication of the POS designation, and how the POS designation affected NDAF's property rights. According to his written notes of the March 1, 2000 meeting with Casper, Welch questioned whether or not NDAF actually owned the property, had to pay property taxes on it, or could build on it. Welch also questioned how the POS designation would affect the property's value and whether or not it was possible to remove the POS designation.
Def. App. at 49-50.
On or about April 11, 2000, Welch spoke with CT attorney Whittle who had done some further research regarding the POS issue. Whittle informed Welch that, in 1976, Capano and Capano Development Corporation ("CDC") executed and recorded a written Declaration. At the time, Capano was the record title holder of the Sunnyside Swim Club, and CDC owned the property that was being developed into The Woods. The Declaration, along with a 1977 amendment that CT had also discovered, dedicated the Sunnyside Swim Club property as POS and created certain deed restrictions and encumbrances for the benefit of property owners in The Woods. Since the agreement bound Capano as well as its assigns and successors, NDAF was bound by the restrictions upon receiving title to the Sunnyside Swim Club property.
After disclosing these details to Welch, Whittle told him that he would investigate NDAF's rights and options and then discuss the matter further. During this discussion Welch was clearly aware that the NDAF deed was defective. He was still hopeful that the defect could be cured, however, and that subdividing or selling the property remained a viable option. CT initially indicated they would work with Welch to fix the problem. However, Whittle cautioned Welch that CT might have a conflict of interest and encouraged Welch to discuss the matter with independent counsel.
On May 2, 2000 Whittle informed Welch that CT would no longer be able to assist NDAF until Welch obtained independent counsel, because CT had a conflict of interest. Whittle hoped that CT could still assist NDAF with resolving the situation, but he first wanted NDAF to retain other counsel.
Eventually, NDAF retained other counsel. They filed the instant action on April 25, 2003. The complaint alleges that CT negligently conducted the title search by failing to discover and disclose the Record Subdivision Plans for the Woods, the Declaration between Capano and CDC and, most significantly, the POS designation.
STANDARD OF REVIEW
The standard for granting summary judgment is high. Summary judgment may be granted where the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. "In determining whether there is a genuine issue of material fact, the evidence must be viewed in a light most favorable to the non-moving party." "When taking all of the facts in a light most favorable to the non-moving party, if there remains a genuine issue of material fact requiring trial, summary judgment may not be granted." "Nor will summary judgment be granted if, upon an examination of all the facts, it seems desirable to inquire thoroughly into them in order to clarify the application of the law to the circumstance."
Mumford Miller Concrete, Inc. v. Burns, 682 A.2d 627 (Del. 1996).
Super. Ct. Civ. R. 56(c).
Muggleworth v. Fierro, 877 A.2d 81, 83-84 (Del.Super.Ct. 2005).
Gutridge v. Iffland, 889 A.2d 283 (Del. 2005).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
APPLICABLE LAW
An action for legal malpractice is subject to Delaware's three-year statute of limitation.10 Del. C. § 8106 provides in pertinent part:
No action . . . to recover damages caused by an injury unaccompanied with force or resulting indirectly from the act of the defendant shall be brought after the expiration of three years from the accruing of the cause of such action.
Under Delaware case law, a cause of action accrues upon the commission of the act or omission giving rise to the cause of action. As a general rule of law, the statute of limitations period begins to run even when the aggrieved party is unaware of the injury. In other words, the plaintiff's ignorance does not ordinarily toll the statute of limitations.
Isaacson, Stopler Co. v. Artisan's Savings Bank, 330 A.2d 130, 132 (Del. 1974) citing Mastellone v. Argo Oil Corp., 82 A.2d 379 (Del. 1950).
Id.
However, in Layton v. Allen, Delaware's Supreme Court announced an exception to the general rule. The Layton Court recognized that in certain limited circumstances, a strict application of the statute of limitations can create illogical and unjust results. Therefore, when a "blamelessly ignorant" plaintiff is unaware of an "inherently unknowable" injury, the statute is tolled until the injury's "harmful effect first manifests itself and becomes physically ascertainable."
Layton v. Allen, 246 A.2d 794, 798 (Del. 1968).
Id. at 797. "To say that the plaintiff has two years after the `claimed' injury within which to maintain an action, and, at the same time, to say that the injury must be `claimed' before she has, or can reasonably be expected to have, knowledge of any wrong inflicted upon her, is contrary to reason and justice."
Id. at 798.
CONTENTIONS OF THE PARTIES
CT contends that NDAF's claims are barred by the statute of limitations. At the summary judgment hearing, CT stipulated to the fact that NDAF was blamelessly ignorant of an inherently unknowable problem when it first received title to the property in 1983. However, CT submits that this period of blameless ignorance ended more than three years prior to the date NDAF filed the complaint. Specifically, CT argues that NDAF had inquiry notice of the problems associated with the Deed as early as 1997. Despite having knowledge of a defect with the deed, NDAF did not investigate the problem further. CT submits that NDAF knowingly ignored the problem and unjustifiably delayed filing suit against CT.CT further submits that if the facts fail to show that NDAF knew of a problem with the deed in 1997, other events subsequent to 1997 indicate that NDAF knew of a problem but failed to pursue a claim. CT argues that the conversations that took place among Welch, Casper, and Whittle, show that NDAF knew of the POS declaration and the additional restrictions more than three years before it chose to file the complaint.
NDAF argues that the statute of limitations was tolled until May 2, 2000, when attorney Whittle advised Welch that CT could no longer assist NDAF with its efforts to clear its title. NDAF claims that Welch was aware of minor deed deficiencies, but he did not appreciate the magnitude of the problem. Rather, Welch contends he thought that the problems could be easily resolved and that NDAF could still subdivide and sell the property once an accurate deed was prepared. It was not until May 2, 2000 — when Welch received the letter from Whittle — that Welch says he realized that he could not subdivide and sell the property. Up until that point, he contends, he was confident that CT would work with NDAF to prepare a new deed capable of conveying good, marketable title.
In his deposition, Welch testified that he thought the discrepancy between his the NDAF deed and the NDAF property resulted in a difference of only a few feet.
ANALYSIS
When the Supreme Court first announced a time-of-discovery exception to a strict application of the statute of limitations, it did so in the context of a medical malpractice claim. In Layton, the defendant surgeon left a piece of medical equipment inside of the plaintiff's body after operating on her. The plaintiff did not discover the mistake until six years later, when she began to experience abdominal pains. The statute at issue in the case was the two-year statute of limitation in 10 Del. C. § 8118 (now § 8119) which deals exclusively with personal injury actions. The statute required the complaint to be filed within two years of when the injury was sustained. Since the patient initially had no reason to know or suspect that the device was inside of her body, the Court held that she "sustained" the injury when she first experienced abdominal pains.In Isaacson, Stolper Co. v. Artisan's Savings Bank, the Court extended the exception to actions subject to the three-year statute of limitations in 10 Del. C. § 8106 and clarified the determination of when the statute began to run. Isaacson involved a negligent accounting claim. The defendant accounting firm rendered services to the plaintiff bank from 1952 until 1966. In 1967, the bank received a letter from the IRS regarding possible deficiencies with the bank's prior tax returns. Initially, the bank attempted to work with the defendant, the IRS, and others to try to resolve the dispute. On September 30, 1968 the bank received a final determination of tax deficiencies in excess of $150,000. Artisan's filed suit against the accounting firm on September 28, 1971.
Isaacson, Stopler Co. v. Artisan's Savings Bank, 330 A.2d 130 (Del. 1974).
Id. at 131.
Id.
Id.
At trial, the Superior Court applied the rationale of Layton and refused to dismiss the claim on the grounds of the statute of limitations. On appeal, the Supreme Court agreed that Layton controlled. The Supreme Court reversed the decision below, however, and held that Artisan's claims were barred by the statute of limitations. The Court held that the statutory period began to run when Artisan received notice of its potential deficiencies in 1967, not when it received a final determination of its tax liability in 1968. Plaintiff's injury was inherently unknowable "until such time as it was put on notice of a deficiency by the IRS letter of November 14, 1967."
Id. at 133.
Id.
Id.
The time of discovery exception has also been applied in the context of a negligent title search. In Child Inc. v. Rodgers, the defendant attorney represented the plaintiffs in a property conveyance. When the plaintiffs attempted to sell the property years later, the buyer discovered a restrictive covenant on the property and refused to complete the transaction. The Court recognized the time of discovery exception and held that the statute of limitations was tolled until the plaintiffs discovered the restrictive covenant. The Court reasoned that, until the plaintiffs actually discovered the restrictive covenant, "[t]here were no observable or objective factors which, as laymen, put them on notice of a defect."
Child Inc. v. Rodgers, 377 A.2d 314 (Del.Super. 1977), aff'd in pertinent part, 401 A.2d 68 (Del. 1979).
Id. at 376.
Id.
Id. at 377.
The time of discovery exception, and the responsibilities of a party to act when put on notice, was further clarified in Ruger v. Funk. A purchaser of a tract of land hired an attorney to complete a title search. On the day of closing, a third party came forward and claimed title to a portion of the tract. Initially, the purchaser filed a negligence action against the attorney. When, the plaintiffs settled the property claim with the third-party, the negligence claim against the attorney was dismissed. However, several years later, the property owner discovered another defect with the title and brought a second negligence action against the same attorney. The attorney moved for summary judgment based upon the statute of limitations.
Ruger v. Funk, 1996 WL 110072 (Del.Super. Jan. 22, 1996).
Id..
Id. at *2.
Id.
Id.
In granting summary judgment, this Court reasoned that title defects are, generally, inherently unknowable to the layperson and a "purchaser may reasonably rely on the trust which he naturally places in professionals such as lawyers hired to check the status of a title." However, such reliance on the work of an attorney is not reasonable in circumstances that place the purchaser on notice that a title defect may exist. In those circumstances, the defect is no longer "inherently unknowable" and the injured party is no longer "blamelessly ignorant."
Id. at *3.
Id. at *4
The Court held that even though the property owner had no knowledge of the facts giving rise to the second claim, he was not blamelessly ignorant, because the first dispute over the property placed the property owner on notice of problems with the title in general. "Failure to investigate the quality of the title at this point was no longer "'blameless ignorance.'" Thus, the statute of limitations period began to run upon the discovery of the first alleged title defect, not upon the discovery of the facts that comprised the second negligence claim.
Id.
Id.
Similarly, this Court must determine the time at which NDAF was no longer blamelessly ignorant of an inherently unknowable problem. After careful consideration of the facts, arguments, and applicable legal standards, the Court finds that NDAF was no longer blamelessly ignorant at least as of March 1, 2000. Therefore, its claims are barred by the statute of limitations.
The undisputed facts presented show that in the conversation with Casper on March 1, 2000, Welch was already aware of the additional subdivision records that CT failed to discover when it conducted its title search. Welch was also aware that these records contained the POS designation.
While at the time, Welch may not have known the exact legal significance of the POS designation and how it affected NDAF's ownership interest in the property, what is clear is that Welch was aware that there was some kind of problem with NDAF's deed. He did not know what the POS designation meant, but he knew that it meant something. He knew that the POS designation was not included in the deed and that something had to be done in order to make the deed consistent with the other official records. Although he still hoped that he could subdivide or sell the property, he knew that he would first have to resolve the numerous ambiguities surrounding NDAF's property interest.
In short, he was placed on notice that he could no longer reasonably rely on the work that was performed by CT during its 1983 title search. As such, the problem was not inherently unknowable. To the contrary, the problem was readily ascertainable upon further investigation into NDAF's title, as is indicated by the fact that over the weeks and months subsequent to March 1, 2000, Welch learned the full extent of the problem.
The Court is satisfied that NDAF was aware of circumstances placing it on notice of a potential title defect as of March 1, 2000. Having failed to timely file its complaint, NDAF's action in barred by the statute of limitations.
The Court notes that NDAF may have been sufficiently aware of circumstances surrounding its defective title as early as 1997, and again in 1998. The extent of NDAF's knowledge at that point is still unclear, and based upon the standard of review in a summary judgment motion, the Court cannot conclude with certainty that NDAF was blamelessly ignorant at that time. However, given the uncontradicted facts that support this decision, the Court need not make further inquiry into those circumstances.
CONCLUSION
For the reasons set forth herein, the Court finds that NDAF's claims are barred by 10 Del. C. § 8106. Accordingly, Defendant's Motion for Summary Judgment is hereby GRANTED.
As the Third-Party Defendant's Motion for Summary Judgment is also based upon the Statute of Limitations, it is similarly GRANTED for the reasons stated herein.
As a result of this decision, the Court need not consider NDAF's Motion in Limine.
IT IS SO ORDERED.