Title defects scuppered part of a deal for a $5.6 million resort development that had been planned for Governor's Harbour, Eleuthera in 2005, and Florida jurors have slapped First American Title Insurance Co. with a $4.45 million judgment in favor of the developer - Governor's Harbour Resort and Marina Ltd. - on Tuesday.
The state jury found that California-based First American Title Insurance Co. failed to catch title defects that blocked plans by Governor's Harbour Resort and Marina Ltd., an entity formed by Pennsylvania businessmen Eddie Lauth and Bob Poole, to sell parcels of its Eleuthera holdings after the financial crisis of 2008 dried up funding for the resort development. It seems the developer brought the instant claims as a cross-claim against co-defendant First American, in a 2010 lawsuit filed by its would-be investors, including Lauth and Poole in their capacity as individuals.
During the course of the proceedings, Governor's Harbour entered into settlements with all of the investors, which the jury validated as part of its verdict. The jury found that California-based First American caused Governor's Harbour injury as a result of its failure to act diligently to cure the title defects in the company's properties. It is reported that in 2003, Lauth and Poole formed Governor's Harbour Resort to acquire land in Eleuthera for the purpose of building a world-class resort, according to case documents. Case documents show that among their acquisitions were 34 acres from the owner of a Club Med resort for $5.25 million and an additional 240 acres spread across 13 separate parcels, for which they paid $10 million plus in 2005.
Governor's Harbour Resort purchased title insurance policies from First American as part of both land deals, relying on assurances from the company and its agents that there were no defects in the titles. When Governor's tried to sell some of its parcels to make up for expected project financing drying up, it was discovered that during the liquidation of the previous owner, some of the land had vested, under Bahamian law, into the government treasury.
Having been advised by First American that there were no title defects - despite its concerns - Governor's then entered into sales agreements with several investors, including Lauth and Poole acting as individuals, to sell several parcels to investors and friends who committed to building detached villas that would be part of the overall hotel project.
Governor's Harbour Resort used these deals to renegotiate the terms of a Hotel Encouragement Act agreement it had made with the Bahamian government that was to provide exemptions from taxes and import duties in exchange for the development and creation of jobs.
As part of that agreement, Governor's Harbour was required to spend nearly $5.6 million to construct a collection of resort facilities on its properties, including hotel cottages, restaurants and bars, pools, recreational facilities and a marina with a fuel station.
The absence of clear title led to difficulties for the developer, which ultimately resulted in the lawsuit against First American. The jury's award included more than $1.5 million in out-of-pocket damages caused by First American's breach of its title insurance policy, just under $1.5 million Governor's Harbour Resort suffered from the loss of its planned sales and just under $1 million in total damages incurred through its settlement with the plaintiffs, according to court documents.
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