BRMED Capital, LLC v. Lexington Insurance Co. (U.S. Dist. Court, N.Y., March 2022)
BACKGROUND: "water lines." This case involves a dispute between Insurer and building Owner over whether casualty insurance covered $1.4M in flood damages from a frozen and ruptured fire protection sprinkler pipe. The building was vacant. The insurance policy required Owner to drain all "water lines" and to keep the building heated to at least 55 degrees.
EVIDENCE: The fire sprinkler system was a wet system. Owner kept the building heated with sporadic methods. Owner turned off the water and drained all lines except the fire sprinkler system. The insurance policy did not define "water lines" but did also reference plumbing lines and fire sprinkler systems in the policy.
COURT RULING: Court focused on the definition of "water lines" in the policy. The policy was written by the Insurer company and thus ambiguity would be weighed against them as the drafter. Water lines was not a defined term, so Court reviewed plain and ordinary meanings in multiple dictionaries, finding that water lines would be "a pipe, hose, tube, or other line for conveying water." But Court also considered the ambiguity that the policy would be unreasonable and counter to its purpose to require draining the fire suppression lines and leaving the building unprotected from a fire casualty. Based on contract policy ambiguity and testimony of a licensed plumber that "water lines" would not typically refer to fire sprinkler lines, Owner wins.
Tlatelpa, v. Torres (Superior Court of Appeals, New Jersey, February 2022)
BACKGROUND: Seller sold a single-family home to Buyer after owning it for only one year as an investor flipping houses. Contract was an "as-is" sale. Buyer sued for fraud claiming she had to spend $28,000 on undisclosed plumbing defects and removing an abandoned underground oil tank.
EVIDENCE: Contract included an "as-is" clause and an acknowledgment that Buyer was not relying on any representations of Seller in buying the property. Buyer had the right to inspect and did so, using a home inspector that found termites, beam failure, and plumbing issues - and suggested the Buyer hire a licensed plumber to inspect further. The inspection also noted evidence of a possible abandoned underground tank. Seller made some repairs and Buyer closed, and later found the much more substantial defects. Buyer alleged that a neighbor seemed to indicate that Seller knew of the more extensive defects.
COURT RULING: Court considered the elements of common law fraud: "(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Court could not find fraud due to Buyer initialing paragraph in Contract to "expressly affirm that she did not rely on any representations" of Seller. Seller wins.
Kalway v. Calabria Ranch HOA, LLC, (Ariz. Supreme Court, March 2022)
BACKGROUND: Plaintiff Kalway sued Homeowner's Association (HOA) and other property owners in a neighborhood of five total lots, contesting the validity of amendments to HOA's covenants, conditions, and restrictions (CCRs). Kalway owned the largest lot at 23 acres. The other four lot owners owned much smaller lots of 3 to 6 acres each. The other lot owners amended the CCRs without Kalway's knowledge or consent. Kalway sued to void the amendments.
EVIDENCE: The CCRs included a clause that said the CCRs could be amended "at any time by an instrument executed and acknowledged by the majority vote of the owners." The four other owners made sweeping amendments substantially altering the rights of owners, such as limiting owners' ability to convey or subdivide lots, restricting the size and number of buildings on each lot, limiting locations of all types of improvements such as even concrete, and reducing the maximum number of livestock permitted on each lot. The provisions mostly targeted Kalway's significantly large lot.
COURT RULING: The Court recognized that CCRs form a contract between individual landowners and all the landowners bound by restrictions, as a whole. But the Court also noted that common law may prohibit some amendments even if passed by a majority vote, finding that the original CCR must give sufficient notice of the possibility of a future amendment and that amendments must be reasonable and foreseeable. In holding that the original CCR must give fair notice of any amendments, and then through a detailed analysis of each specific amendment clause in that light, the Court struck down the amendments in large part and reduced them in effect. Kalway wins.
