MGD PARTNERS, LIMITED LIABILITY CORPORATION v. FIRST AMERICAN TITLE INSURANCE COMPANY
MGD PARTNERS, LIMITED LIABILITY CORPORATION; COVES OF THE HIGHLAND COMMUNITY DEVELOPMENT DISTRICT, Plaintiffs-Appellants,
FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant-Appellee.
United States Court of Appeals, Fifth Circuit.
Filed: September 8, 2011.
Before: KING, DAVIS and GARZA, Circuit Judges.
This is an appeal from a summary judgment concluding that the plaintiff landowner's claim was not covered under the defendant title insurance company's policy.
The landowner (MGD Partners or MGD) purchased a policy of title insurance from the defendant, First American Title Company. The policy generally insured against defects in title to property MGD owned in Tangipahoa Parish, Louisiana that might affect the marketability of the title.
After plaintiffs purchased the property, they learned that it had been under lease to the United States government during World War II for use as a bombing range. Although the lease had expired years before plaintiff purchased the property, plaintiffs discovered that remnants of bombs were still on the property. More to the point, because of the potential hazards from the bombs, officials in Tangipahoa Parish, Louisiana refused to issue permits to plaintiffs to develop a residential subdivision on the property.
The plaintiff argues that a servitude was created on the property under a Louisiana statute codifying the judicially created St. Julien doctrine. La. R.S. 19:14. Under this statute, a servitude is created when: (1) a public body, believing it has authority to do so, takes possession of property; and (2) contructs a facility; (3) under circumstances where the owner of the property consents or acquiesces in the government takeover. Id. Plaintiffs argue that the property is not marketable because the prior use of the property and because the residue of explosive material left on the property creates a servitude under the St. Julien doctrine in favor of the United States government, and that this was a risk insured against in defendant's policy.
We agree with the district court that the marketability problem plaintiff faces is not due to a defect in title; rather, it was because of the condition of the property. We need not determine whether a St. Julien servitude exists or might exist in reference to the subject property, because this risk is not covered by the defendant's title policy. Unmarketable title under the policy is defined as
an alleged or apparent matter affecting title to the land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A to be released from the obligations to purchase by virtue of a contractual condition requiring delivery of marketable title.