$6 million judgment for Lake of the Ozarks condo developer vacated

By Sam Knef | Mar 8, 2018

ST. LOUIS - A federal appeals court has vacated a $6 million judgment in favor of a condominium developer at the Lake of the Ozarks in its dispute with a title insurance company over a predecessor's mechanics' license.

ST. LOUIS - A federal appeals court has vacated a $6 million judgment in favor of a condominium developer at the Lake of the Ozarks in its dispute with a title insurance company over a predecessor's mechanics' license. 

The controversy involved Captiva Lake Investments, which bought interest in a condo development at Sunrise Beach from National City Bank of the Midwest. Another developer, Majestic Pointe, had defaulted on the development in 2006 in the amount of $21.2 million. In its original dealings with Majestic Pointe, National City purchased a title insurance policy from Fidelity National Title Insurance to protect its security interest.

Majestic Pointe defaulted on its construction loan agreement midway through development and went bankrupt, the ruling states.

After Captiva became the successor in interest under National City's title insurance policy, it filed a claim with Fidelity in 2009 seeking coverage for mechanics’ liens that had been filed against the property.

According to the ruling, Fidelity agreed to defend Captiva subject to a reservation of rights that stipulated that it could deny coverage based on "Exclusion 3(a)," which would involve liens that were created, suffered, assumed or agreed to by the insured claimant.

A panel of judges at the Eighth Circuit Court of Appeals concluded that the district court failed to apply the correct legal standard in deciding that Exclusion 3a did not apply to the mechanics' liens at issue in the case.

"Under the appropriate standard, Fidelity was entitled to present to the jury its defense that National City had 'created, suffered, assumed or agreed to' the mechanics’ liens," the ruling states. "We further conclude that Captiva failed to show that the title was unmarketable on or before the effective date of the policy and thus failed to prove its claim that Fidelity breached the policy’s unmarketability-of-title provision."

The panel, consisting of Judges Roger Wollman, James Loken and Robert Rossiter, affirmed the trial court's dismissal of Captiva's tortious interference claims. And in addition to vacating the judgment for Captiva and remanding it to the Eastern District of Missouri, it also vacated the award of attorneys' fees and costs.

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