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~ TITLE INSURER HELD NOT LIABLE TO DEFRAUDED FORMER OWNER ~
In a recently decided case, Zelber v. Lewoc et al (Appellate Division, Third Department, decided April 29, 2004) the appellate court reversed a lower court decision and dismissed a law suit against a title insurer brought by a defrauded former owner of property who claimed he was a third party beneficiary of a title insurance policy issued to a mortgage lender. The court determined that the title insurer had no obligation to the defrauded former owner with the following decision:
"Plaintiff owned real property in Ulster County. According to him, he had an agreement with defendant Anthony Lewoc to improve and market this property and thereafter divide all profits from its sale equally. Prior to any such sale, however, plaintiff transferred all title to Lewoc without retaining any incidents of ownership to himself. This permitted Lewoc to mortgage the property for $140,000 without plaintiff's knowledge or consent and abscond with the proceeds. Plaintiff then commenced this action against Lewoc, the mortgage lender and its assignee, as well as the lender's title insurance company and the title company's agent. At issue on appeal is an order of Supreme Court which, among other things, denied a motion for summary judgment by the title insurance company and its agent.
The complaint contains three causes of action against these two defendants, namely, negligent misrepresentation, . . . breach of express warranty and breach of contract. Because the underlying basis of this whole dispute is plaintiff's assertion that he was totally unaware of the entire mortgage transaction, each of these causes of action must fail against these particular defendants. Simply stated, since he was not in any way a party to the loan closing, plaintiff could not have been the recipient of any representation, negligent or otherwise.
'A claim for negligent misrepresentation can only stand where there is a special relationship of trust or confidence, which creates a duty for one party to impart correct information to another, the information given was false, and there was reasonable reliance upon the information given' . . . The requisite special relationship has been described as 'either actual privity of contract between the parties or a relationship so close as to approach that of privity' . . . Here, plaintiff not only lacked a special relationship with the moving defendants, he had no relationship with them of any kind. By plaintiff's own version of events, there was no 'direct written, oral and in-person communications' between him and these defendants . . . For the very same reason, these defendants could not have communicated any express warranty to plaintiff, who did not attend and was otherwise a complete stranger to the loan closing. Thus, the negligent misrepresentation and breach of warranty causes of action as against these two defendants should have been dismissed.
Finally, it is clear that plaintiff could not have been a third-party beneficiary of the title insurance policy issued to the lender insuring the mortgage. To assert any rights as a third-party beneficiary of this contract, plaintiff had to establish that he was an intended beneficiary of the agreement. It is insufficient for him to argue that the title insurance policy, if enforced, may have inured to hisbenefit by satisfying certain judgments which had been entered against him and which were liens on the property. 'A non-party may sue for breach of contract only if he is an intended, and not a mere incidental, beneficiary, and even then, even if not mentioned as a party to the contract, the parties' intent to benefit the third party must be apparent from the face of the contract' . . . [citations omitted]. Since neither the title insurance company nor the lender had any record notice of plaintiff's alleged continuing interest in the property, they could not have intended to benefit him in any respect. Therefore, the breach of contract action against the title insurance company and its agent should also have been dismissed.
Cardona, P.J., Mercure, Mugglin and Rose, JJ., concur.
ORDERED that the order is modified, on the law, with costs, by reversing so much thereof as denied the motion of defendants Advantage, Equity Services, Inc. and First American Title Insurance Company of New York; motion granted, summary judgment awarded to said defendants and complaint dismissed against them; and, as so modified, affirmed."
~ TITLE INSURER NOT LIABLE TO DEFRAUDED LENDER ~
In a recent decision, Bankers Trust Company of California v. Stewart Title Insurance Company (Appellate Division, 1st Department, decided April 1, 2004), the Appellate Court upheld the dismissal of an action brought against a title insurer by the defrauded assignee of an assigned mortgage with the following decision:
"Plaintiff bank is the assignee of a note and related mortgage in the amount of $127,500, evidencing a loan by FHB Funding Corp. to one Wendy Lovelace, secured by premises located in Jamaica, New York. However, the entire loan transaction was part of a criminal conspiracy involving the repeated sale of the same premises, and, once the mortgage proceeds were disbursed, the conspirators disappeared. Although plaintiff has commenced this action to recover its losses from the title insurer, it has not produced a copy of the purported insurance policy. Indeed, the record reveals that plaintiff purchased a mortgage replete with facial defects and irregularities. Moreover, there is no evidence that the abstract company which the conspirators had asked to undertake a title search was at all aware that the preliminary certificate would, upon being forwarded to the conspirators, be fraudulently altered to show Lovelace as the title holder, or that a purported closing had occurred on April 29, 1998. Thus, when the mortgage instrument and related documents were not submitted to the abstract company for filing, the Lovelace mortgage was not recorded, and no final mortgage title insurance policy was ever issued. Accordingly, the motion court properly found plaintiff's action devoid of merit."
~ RECORDING FORM RP-5217 FILING FEE TO INCREASE ~
We have been informed by our lobbyist that the Governor's Budget Bill contains a provision which will increase the filing fee for Form RP-5217 for residential and agricultural properties from the current $50.00 to $75.00 and will increase the filing fee for Form 5217 for commercial properties from $50.00 to $165.00. As everyone knows, due to the recent activity (or inactivity) in Albany, the budget bill has not yet been passed by the New York Senate or Assembly and may be delayed well into the month of July (or August or September or . . .). All parties involved in real estate closings may be well advised to escrow additional funds for closings recorded on or after July 1st so that this increase in filing fees can be accommodated.
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