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LLC v. Bathla

Superior Court of Delaware

April 26, 2017

913 MARKET, LLC, Plaintiff,
v.
KAMAL BATHLA, Defendant.

          MEMORANDUM OPINION

          John A. Parkins, Jr. Superior Court Judge

         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:

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]

         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 ...


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