On appeal from Superior Court of New Jersey, Law Division, Middlesex County.
Approved for Publication February 25, 1997. As Corrected February 25, 1997.
Before Judges Long, Skillman and Cuff. The opinion of the court was delivered by Long, P.j.a.d.
The opinion of the court was delivered by: Long
The opinion of the court was delivered by
In August, 1989, James Saunders, a realtor, along with Kenneth J. Levenson, an attorney, and Sant P. Chima, the owner of property at 19 West Amherst St. in East Brunswick, masterminded a scheme to defraud the defendant, Vision Mortgage Corporation. They applied to Vision for a loan in the name of Gregory Zarifian to purchase Chima's house. Zarifian was unaware of the transaction.
As a result of the documents submitted establishing Zarifian's financial status (tax returns, bank statements, etc.) and an independent appraisal, Vision approved the loan. Title insurance was purchased from plaintiff, First American Title Insurance Company, which drafted and issued a "Closing Protection Letter" to Vision. The Closing Protection Letter named Levenson as the "Approved Attorney" and contained the following provision:
When title insurance of First American Title Insurance Company is specified for your protection in connection with closings of real estate transactions in which you are to be the lender secured by a mortgage (including any other security instrument) of an interest in land, the Company, subject to the Conditions and Exclusions set forth below, hereby agrees to reimburse you for actual loss incurred by you in connection with such closings when conducted by an Issuing Agent (an agent authorized to issue title insurance for the Company) or an Approved Attorney (an attorney upon whose certification of title the Company issues title insurance) and when such loss arises out of:
2. Fraud or dishonesty of the Issuing Agent or Approved Attorney in handling your funds or documents in connection with such closing.
On August 28, 1989, a real estate closing took place. It appears that Levenson, Saunders, and Chima were present. Chima signed a deed which conveyed the property to Gregory Zarifian in exchange for $220,000. Vision advanced $198,000 of the purchase price in exchange for a first mortgage on the property. Someone forged Zarifian's signature, and Levenson notarized the forged signature. At the closing, Vision did not have a separate attorney present in addition to Levenson, who represented First American's interests as the Approved Attorney.
On August 30, 1989, Vision assigned the mortgage to Residential Funding Corporation (RFC). Under its contract with RFC, Vision was obligated to make good on missed mortgage payments in the event of a default and to repurchase the mortgage from RFC in the event of fraud.
As might be expected, no mortgage payments were ever made, leading Vision to realize that a fraud had occurred. In a letter to First American dated November 20, 1989, Vision notified First American that the mortgage was in foreclosure, that the mortgagor was expected to raise fraud or forgery as a defense and that Vision intended to look to First American as the insurer for reimbursement. Purportedly relying on Levenson's representation that Zarifian executed the mortgage, First American took the position that the mortgage was valid and refused to reimburse Vision during the pendency of the foreclosure action. Vision sent a subsequent letter, dated March 5, 1990, informing First American that Vision had determined that the mortgage insured by First American was a forgery and that a second appraisal of the property suggested that its foreclosure sale would not garner sufficient funds to satisfy the outstanding amount due on the mortgage.
Vision notified the prosecutor that it had been swindled. On June 6, 1990, a ninety-eight count indictment was filed against Levenson, Saunders, and Chima, among others, alleging numerous fraudulent real estate transactions. Levenson eventually pled guilty to one count of conspiracy to commit commercial bribery pursuant to N.J.S.A. 2C:21-10 and N.J.S.A. 2C:5-2. That plea did not involve this transaction. All other counts against him were dismissed. Levenson was sentenced and consented to disbarment. In the Matter of Kenneth J. Levenson, an Attorney at Law, 127 N.J. 270, 604 A.2d 100(1992).
Vision again demanded reimbursement from First American by letter dated August 16, 1990. Again, First American refused, claiming that title insurance did ...