Commonwealth Land Title Ins. v. KCI Technologies, Inc.
922 F.3d 459
| D.C. Cir. | 2019Background
- Commonwealth Land Title Insurance Company (Appellant) sued two surveyors, KCI Technologies, Inc. (KCI) and Wiles Mensch Corp. (WMC), alleging negligent and contractually defective surveys that failed to disclose a 12-inch encroachment on property developed by ICG 16th Street Associates (ICG).
- KCI performed a 2006 survey (certified to ICG and Appellant) that did not note any encroachment; WMC performed surveys in 2012 and 2013 showing a 2–3 inch and then a 4-inch encroachment. A KCI 2014 survey also failed to note the encroachment (not at issue on appeal).
- During demolition on March 24, 2014, ICG’s architect discovered the encroachment was actually 12 inches, prompting demolition of the party wall, substantial delay costs, and a title-insurer loss payment of about $1 million; total demolition and delay costs exceeded $2.5 million.
- Appellant filed suit in March 2017 asserting breach of contract, negligence, and negligent misrepresentation (seven counts total). The district court dismissed the complaint with prejudice as time‑barred under D.C.’s three‑year statute of limitations, holding accrual occurred on delivery of the defective surveys and rejecting the discovery rule.
- On appeal, the D.C. Circuit reversed in part, holding the district court erred by dismissing counts 1–3 on the pleadings without applying the discovery rule because factual disputes remain about whether Appellant/ICG, neither expert surveyors, reasonably could have discovered the latent 12‑inch encroachment earlier.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the discovery rule tolls accrual for counts 1–3 (breach/negligence/negligent misrepresentation) | Discovery rule applies; accrual tolled until ICG (and Appellant as assignee/direct plaintiff) learned true 12" encroachment on March 24, 2014 (or Sept. 17, 2014 for Appellant) | Claims accrued when defective surveys were delivered (2006, 2012, 2013, 2014); plaintiffs were sophisticated and on notice | Reversed dismissal as to counts 1–3; discovery rule may apply and factual issues preclude concluding claims are time‑barred on the face of the complaint |
| Standing for assigned claim against WMC (count 1) | Appellant sufficiently pleaded assignment from ICG and can sue as assignee/subrogee | WMC contends assignment allegations are insufficient | Court finds complaint adequately alleges assignment; Appellant has standing at pleading stage |
| When Appellant’s direct claims against KCI (counts 2–3) accrued | Appellant only discovered 2006 survey defect when ICG tendered its loss claim (Sept. 17, 2014); discovery rule should govern | KCI says Appellant was on notice by issuance of title policy in 2007 or by WMC surveys in 2012–13 | Discovery rule may apply to Appellant at pleading stage; cannot conclusively find claims time‑barred |
| Applicability of alternative defenses (duty, damages, economic loss doctrine, other procedural grounds) | N/A — plaintiff opposes dismissal on those defenses | KCI raises duty, damages, economic loss, and procedural arguments | Court declines to consider new arguments not raised below; economic loss doctrine not resolved on pleadings; remand for further proceedings |
Key Cases Cited
- Ehrenhaft v. Malcolm Price, Inc., 483 A.2d 1192 (D.C. 1984) (articulates discovery rule in construction/latent defect context and applies it where plaintiff was layperson and defects were latent)
- Capitol Place I Assocs. L.P. v. George Hyman Constr. Co., 673 A.2d 194 (D.C. 1996) (assumes discovery rule may apply in commercial construction but denies it where plaintiff was sophisticated and defects were obvious)
- Bregman v. Perles, 747 F.3d 873 (D.C. Cir. 2014) (statute of limitations dismissal appropriate only when complaint is conclusively time‑barred on its face)
- de Csepel v. Republic of Hungary, 714 F.3d 591 (D.C. Cir. 2013) (same principle regarding factual disputes and limitations dismissals)
- Woodruff v. McConkey, 524 A.2d 72 (D.C. 1987) (discovery rule inapplicable where plaintiffs, with reasonable diligence, could have discovered grounds for suit within limitations period)