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Rondo Music, Inc. v. BJ & J Enterprises, LLC

A-951-98T2 (N.J. Super. App. Div. 1999) (Unpublished)

TITLE INSURANCE; AFFIDAVITS OF TITLE; EASEMENTS—Where a property owner elects to rely on an existing but undisclosed easement when applying for subsequent land use approvals, that election precludes a claim against its seller and its title company for failing to reveal the existence of the easement.

A retailer owned a lot next to a small piece of property with a shed on it. On the boundary of the two properties was a paved driveway approximately twenty two and one-half feet in width; about eighteen feet of the driveway was located on the small lot and the rest was located on the retailer’s property. The driveway had been used by both adjoining landowners throughout its existence. The current owner of the small lot acquired it pursuant to a deed that stated, in part, that the property had not been charged or encumbered in any manner or way whatsoever. Along with the deed, the property owner received an affidavit of title which stated, “[w]e have not allowed any interests (legal rights) to be created which affects our ownership or our use of this property. No other persons have legal rights in this property, except the rights of utility companies to use this property… .” The affidavit of title also acknowledged that the buyer would be relying on the truthfulness of the statements made in the affidavit. The owner of the small lot testified at trial that after he purchased his property he spoke with the retail lot owner concerning use of the driveway. The lower court, after hearing the testimony, held that the retail lot owner never sought permission to use the driveway and the owner of the small lot never conferred permission upon its neighbor. During the following years, the owner of the small lot observed the other owner making extensive use of the shared driveway. A time came when the owner of the small lot applied for site plan and variance approval, including permission to demolish the existing structure on the small lot to construct a new retail commercial structure. He received planning board approval, but one of the conditions of that approval was that he provide a “cross-access easement for abutting parking lot and access to onsite parking.” No explanation why such an easement was required was given, but the small lot owner never challenged the requirement. Following receipt of the approval, the small lot owner advised his neighbor that he would not memorialize the cross-access easement unless he received rent. The parties could not agree on payment for the easement. Consequently, the retail owner assumed that his neighbor would abandon the project because he could not comply with the cross-access easement condition. Nevertheless, construction continued. Further discussions were held and, despite the advanced stage of construction, the planning board did not revoke the approvals, but advised the small lot owner of its intention to do so if the cross-access easement agreement was not formalized. About this time, the retail property owner made plans to redevelop its own property. Part of those plans included closing a second driveway that was exclusively on the retailer’s property and to greatly increase its use of the shared driveway. Dissatisfied with the state of negotiations with the small lot owner regarding the price for the cross-access easement, the retail lot owner commenced suit seeking: “(1) a judicial declaration that a prescriptive easement existed and (2) an injunction preventing [the small lot owner] from interfering with these rights.” Counterclaims were entered and a third party action was taken against the previous owner of the small lot and the title companies that issued insurance for a small lot. The lower court held that the retail lot owner had a prescriptive easement over the driveway based on its use of the driveway for twenty years. Its view was that “[b]oth parties having acquiesced in the cross access easement or joint easement are bound by that by way of their behavior constituting a waiver of any other rights they would have before this court.” It held that “[t]he use of the driveway as evidenced by the evidence before this Court, but in no event shall exceed the joint access easement that was proposed by the defendants before the [planning board].” The complaint against each title insurance company was dismissed because “the title policies clearly and unequivocally omit unrecorded easements or prescriptive easements.” As a result, there was no coverage for the claim. The lower court also entered judgment in favor of the earlier owner. It did find that the buyer was entitled to rely on the affidavit. It further found that the existence of the driveway easement was a material breach of the representations in the affidavit. The Court then analyzed the argument that the six year statute of limitations had run by looking at whether the running of this statute would have been delayed based upon the “discovery rule.” In that regard, the buyer of the small lot may not have realized that by allowing his neighbor to go over his property he was creating an illegal right because he may have thought that his neighbor was using the property with permission. Nonetheless, the Court ultimately ruled in favor of the earlier owner of the small lot based on the seller’s argument that its buyer’s “failure to raise the issue of the misleading, albeit probably innocent, affidavit of title until ten years after [the buyer] took title ‘and then only when sued by [the neighbor], coupled with knowledge, indicates waiver.’” Ultimately, the lower court held that the buyer of the small lot had, in fact, waived a known right and stated that “I hold that [the seller] would otherwise be liable under the affidavit of title, I believe that there was a waiver, it was a waiver of a known right.” The lower court’s reasoning was that once the small lot owner gave up the right to the cross-access easement, he gave up the right to damages he would otherwise have against his seller. By way of explanation, the lower court stated: “[b]ecause [the small lot owner] was seeking rental from [his neighbor], which, in effect, means that he considered the property to be his, but he was willing to give him some kind of a concession, his rights that he believed was that he was the property owner there. And yet, knowing that he was - at least in his mind that he was the property owner, he acquiesced in a cross easement. Once he gave up the right of the cross easement, he gave up a cause of action that he would otherwise have against [his seller]. You can’t have it both ways.” Further, the lower court thought it would be inequitable to allow the small land owner to get the benefit of the cross easement in that he used it to get approval from the municipality and then wanted to make a claim against his predecessor in title ten years after he had acquired the title. On reconsideration, the lower court further held that the small land owner was not entitled to compensation for use of the easement.

The Appellate Division concluded that the lower court reached the proper equitable conclusion, though not for the right reason. It held that, in actuality, both parties required the easement and both benefitted from the easement. When the small owner acquiesced in the planning board’s condition of a cross-access easement, it constituted an election which resulted in a consent to, or adoption of, the adjacent property owner’s burden on the property. “This acquiescence to the cross-access easement constituted an election which was to [the small lot owner’s] benefit because he got his demolition and construction permits,” his variances, and his site plan approval. This election and acquiescence so altered the playing field that he had remaining neither an equitable basis for a breach of contract damage claim against his predecessor in title, nor any derivative claim for counsel fees and costs thereon. “In sum, [the small lot owner’s] problems stemmed not from the erroneous affidavit of title but from the necessities propelled by his development plans and his attempt to extract the consideration from [his neighbor] for ... concessions in entering into the mandated cross-access easement… .” According to the Court, this elective business judgment legally superceded any claim that his problems emanated from the erroneous affidavit of title.


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