On appeal from Superior Court of New Jersey, Law Division, Middlesex County.
Approved for Publication May 5, 1995
Before Judges Dreier, Villanueva and Braithwaite. The opinion of the court was delivered by VILLANUEVA, J.A.D.
The opinion of the court was delivered by: VILLANUEVA
Defendant Penn Title Insurance Company appeals from a judgment of $115,976.42, together with interest, entered against it. The judgment was based upon a mortgagee title insurance policy it issued to plaintiff Trico Mortgage Company, Inc. We affirm the liability but remand for modification of interest.
Ante Kojic, a Yugoslavian immigrant, worked as a painter until 1969 when he sustained a serious injury which caused him to be permanently disabled and unable to work. His wife, Marija Kojic, was a seamstress who earned a maximum $12,000 per year. The Kojics owned a home at 502 Brinkerhoff Avenue in Fort Lee.
On October 3, 1986, the Kojics' daughter, Mirjana, admittedly forged her parents' names without their knowledge and consent on a mortgage to Carteret Savings Bank and purportedly mortgaged her parents' property for $175,000. Mirjana also testified that she forged a power of attorney from her parents and later arranged for the fraudulent signatures of her parents on two other mortgages encumbering the property.
On July 27, 1987, Mr. and Mrs. Kojic's house was fraudulently mortgaged to two different mortgage companies. Mirjana either forged her parents' signatures on mortgage closing papers, or forged her mother's name while obtaining her father's signature without his knowledge of the contents of the documents. One mortgage of $308,700 was made to Eastern American Mortgage Corp. (Eastern American), which was subsequently assigned to Landmark Savings Association (Landmark).
The other mortgage of $134,400, executed earlier that day, was made to Federal Mortgage and Investment Corp. (Federal), which acted as a mortgage broker. Although Mirjana testified that she brought her father to this closing and that he himself might have signed the mortgage, he was not proficient in the English language and did not understand the proceedings. In fact, neither parent knew that their daughter was mortgaging their property. Within four days of closing on July 27, 1981, Trico purchased the mortgage and received a mortgage assignment from Federal.
Federal failed to verify Mr. and Mrs. Kojics' employment and never questioned the income figures as represented. Prior to the closing, Federal had supplied Trico with what appeared to be Mr. and Mrs. Kojics' mortgage application which falsely indicated that they were employed by Mirjana's Fine Jewelry and Gifts, and earned annual incomes of $108,000 and $100,000, respectively. Trico failed to determine if the information was correct. In reality, Mirjana, the only employee of the gift shop, had falsified pay stubs, tax returns and statements relating to her parents' income.
No "bring down" search was ordered for the property by Trico, Federal or the attorney who represented Federal at the closing. The bring down search, had it been performed, would have shown the status of the property from the time of the previous title search obtained by Federal to the time of closing, and in this case would have demonstrated that a notice of settlement on the Eastern American mortgage had been filed as of July 20, 1987 and that Eastern American would also be claiming an interest in the property.
William Corrigan, executive vice-president of Penn Title, testified that if a bring down search had been conducted, Penn Title's agent, Assured Search and Abstract Company, Inc. (Assured), who would have performed it. All Federal's closing attorney would have been expected to do was to call Assured and request the bring down.
Trico also neglected to secure itself by following through with a bring down search prior to the actual closing. Instead, Trico relied on a property search and an Attorney's Certificate of Title signed by Federal's closing attorney on July 27, 1987.
After the closing of both the Eastern American and the Federal loans on July 27, 1987, Eastern American was the first to record its mortgage on July 30, 1987. Four days later the Federal mortgage purchased by Trico was recorded.
However, it was the responsibility of Penn Title's agent, Assured to make sure that everything was in order before issuing the title policy but Assured failed to do so. On August 3, 1987, Penn Title through Assured issued a title insurance policy to Trico on the Kojics' property which failed to disclose the Eastern American mortgage. The policy states, in part, in Paragraph 3(b) that
the insured shall notify [Penn Title] promptly in writing ... (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest or the lien of the insured mortgage, as insured, and which might cause loss ...