913 Market, LLC v. Bathla ( 2017 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
913 MARKET, LLC, )
)
Plaintiff, )
)
v. ) C.A. No. N16C-11-149 JAP
)
KAMAL BATHLA, )
)
Defendant. )
MEMORANDUM OPINION
This is a dispute over which party to a failed real estate
transaction is entitled to the purchaser’s deposit. Defendant Bathla
agreed to purchase 913 Market Street in Wilmington, Delaware
from Plaintiff and made a $118,000 deposit. Closing on the
transaction never took place, and the seller, 913 Market LLC, filed a
breach of contract claim seeking the deposit as liquidated damages
because of Bathla’s failure to settle. Bathla claims he was not
obligated to close on the property because the title insurance
offered to him contained an exception for a potential lis pendens
lien. Bathla has filed a motion to dismiss or, in the alternative, a
motion for judgment on the pleadings. The issue presented is
whether the exception in Bathla’s title insurance excused his failure
to close on the property.
Background
This story begins with a June, 2016 auction sale of 913
Market Street. The high bidder at the auction was InvestUSA,
which bid $1,200,000. 913 Market and InvestUSA agreed to a July
15, 2016 closing, but for reasons not apparent here, InvestUSA
failed to close on the property. Bathla was the second highest
bidder, and a few days after InvestUSA failed to close, Bathla and
913 Market entered into the sale agreement which gives rise to this
lawsuit. The 913 Market-Bathla agreement called for a closing on
September 19, 2016.
The dispute arises from an exception in the title insurance
commitment issued to Bathla by First American Title Insurance
Company.1 In the title insurance policy delivered to Bathla by First
American, the insurer excepted any claim InvestUSA may have
against the property:
1 In his motion Bathla asserted that transactional counsel for the seller delivered the policy to
him. (Motion, ¶8). The attachments to Bathla’s motion show, however, that the policy was
issued directly to Bathla by First American and that the Seller played no role in delivering the
policy to Bathla. Bathla’s counsel conceded at oral argument that the assertion in the motion
that counsel for the Seller delivered the policy to Bathla is incorrect.
2
This Policy does not insure against loss or damage,
and the Company will not pay costs, attorneys fees, or
expenses that arise by reason of any rights, title and
interest in the subject property by InvestUSA Holding
Enterprises LLC . . . under the Ten-X Contract dated
June 15, 2016 . . . and any claims related in any way
to it as well.
Because the closing did not take place between 913 Market and
Bathla on September 19, 2016, as noted in the 913 Market-Bathla
agreement, 913 Market now seeks the deposit paid by Bathla as
liquidated damages.
Analysis
Bathla’s obligation to close on the agreement must be
determined solely on the basis of the terms of that agreement. The
Purchase and Sale Agreement contains a strongly worded
integration clause which provides:
This Agreement and the items incorporated herein
contain all the agreements of the parties hereto with
respect to the matters contained herein; and no prior
agreement or understanding pertaining to any such
matter shall be effective for any purpose. No provisions
of this Agreement may be amended or modified in any
manner whatsoever except by an agreement in writing
signed by duly authorized officers or representatives of
each of the parties hereto.2
2 Purchase and Sale Agreement, ¶8.
3
Bathla does not contend there is any “agreement in writing” beyond
the Purchase and Sale Agreement, and, accordingly, the court’s
inquiry is limited to that agreement.
The conditions precedent to Bathla’s obligation to purchase
the property are set out in paragraph 4.1 of the agreement.3 There
are two conditions precedent. The key one here is:
Title to the Property shall be subject only to the same
exceptions as shown on Seller’s title policy with the
exception that the mortgage lien thereon shall be
satisfied at Closing from the proceeds of sale.
Nowhere in the agreement is there any condition precedent relating
to Bathla’s title insurance. Thus, the fact that Bathla’s title insurer,
First American, excepted any lis pendens claim from coverage is of
no significance when determining whether Bathla was obligated to
close. What is significant is whether 913 Market was able to deliver
title clear of all liens saved for exceptions in 913 Market’s own title
policy.
There was no lis pendens lien on the property as of the date of
the closing. In 1989 the Delaware general Assembly repealed the
common law doctrine of lis pendens and substituted a statutory
3 Paragraph 4.1 begins “Buyer’s obligation to purchase the property shall be conditioned upon
the fulfillment of the following conditions precedent.”
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scheme in its place. This scheme is the exclusive way to obtain a lis
pendens lien. Section 1614 of title 25 provides “no action instituted
after June 29, 1989, shall constitute constructive notice to any
person unless notice of such action complies with the requirements
of this chapter.” In order to obtain a lien, the claimant must file a
notice containing certain specified information in the office of the
Recorder of Deeds.4 That office is obligated to file and index the
notice and must indicate on it the date and time of filing.5
Critically, the statute provides that “[u]nless and until a notice of
pendency is filed as provided by this chapter, no action shall, before
final judgment is entered therein, be deemed to be constructive
notice to a person acquiring or having acquired a lien on or any
other interest in the affected real estate.”
Bathla does not contend that, as of the date of the closing,
InvestUSA had filed the notice required for a lis pendens lien with
the Recorder of Deeds, and insofar as the court is aware, no such
notice had been recorded. In other words, on the date of closing
913 Market was able to deliver clear title (as defined in agreement)
to Bathla. The possibility that InvestUSA might file a lis pendens
4 25 Del. C. § 1601. The information required in the notice must be supplied under oath.
5 Id. § 1602.
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notice after closing is inconsequential. Had such a notice been filed
after the closing it would have been ineffective against Bathla.
Finally, Bathla directs the court’s attention to a September 16,
2016, action that 913 Market filed against InvestUSA. Bathla
claims that allegations made by 913 Market in that action
constitute a “judicial admission” that InvestUSA had a lien the
property. Under these circumstances, allegations made by 913
Market against InvestUSA cannot, as a matter of law, bind it in this
matter.6 But even assuming the allegations in the InvestUSA matter
could have some sort of preclusive effect, nothing in the complaint
in that case amounts to an admission against 913 Market’s
interests in this matter. Rather than concede that InvestUSA had a
lien or interest in the property at 913 Market Street, 913 Market
alleged that InvestUSA had no such interest. Further, in this
instance, the existence of a lien on the property is a question of law,
6 Bathla cites Merritt v. United Parcel Service, 956 A.2d 1196 (Del. 2008) to support his
contention that “judicial admissions” are binding upon the party making them. But Merritt
involved admissions made by a party in the same action, whereas the ostensible admissions
here were made in an entirely different action. Merritt therefore does not help Bathla. Though
not mentioned in Bathla’s motion, there are limited instances in which assertions made by a
party in one action may constitute “judicial estoppel” against the same party in another suit.
The doctrine applies “operates only where the litigant's [assertion] contradicts another position
that the litigant previously took and that the Court was successfully induced to adopt in a
judicial ruling.” Motorola, Inc. v. Amkor Tech., Inc. 958 A.2d 852, 859–60 (Del. 2008) (emphasis
in original). There is no suggestion that this court was persuaded to rely upon 913 Market’s
“admissions” in InvestUSA and therefore the doctrine of judicial estoppel does not apply here.
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not fact. Thus, whatever admissions of fact 913 Market ostensibly
made in its complaint against InvestUSA are of no significance to
the issue now before the court.
Wherefore, Defendant’s motion to dismiss or, alternatively
judgment on the pleadings, is DENIED.
Dated: April 26, 2017
John A. Parkins, Jr.
Superior Court Judge
oc: Prothonotary
pc: Charles J. Brown, III, Gellert Scali Busenkell & Brown, LLC,
Wilmington, Delaware
Jeffrey M. Weiner, Esquire, Law Offices of Jeffrey M. Weiner, PA,
Wilmington, Delaware
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