George Diemer ("Diemer") and Robert Pacilli ("Pacilli") were
commercial real estate developers and the general and limited
partners in Mount Laurel Associates ("MLA"), a Pennsylvania
limited partnership. See Plaintiff's Rule 56.1 Statement of
Undisputed Fact (filed Dec. 14, 1998), ¶ 6, 8 (hereinafter "Pl.
R. 56.1 (Cts.IV-V)"). "Starting in or about 1985, . . . Nigro[,
an attorney of the bars of New Jersey, Pennsylvania, and Florida,
see Letter to the Court from Rocco M. Nigro (dated Jan. 7,
1999),] . . . was the principal attorney for Diemer, Pacilli and
MLA with regard to the acquisition, financing and sale of land in
Mount Laurel Township, Burlington County, consisting of
approximately 350 acres, which came to be known as the Horizon
Corporate Center." See Pl. R. 56.1 (Cts.IV-V); see also
Certification of Robert A. Berns, Esq. (filed Dec. 14, 1998),
Exh. B (Deposition of Rocco M. Nigro, Esq. (dated March 9, 1998)
at 39-42). On one of the parcels of land within the Horizon
Corporate Center, a 6.94 acre parcel, Lot 1, Block 1300.02 on the
Tax Map of Mount Laurel Township, Burlington County, also known
as Parcel 2 (the "Property"), was constructed an office building
called Atrium II. See Pl. R. 56.1 (Cts.IV-V), ¶ 7; see also
Certification of John A. Adler, Esq., in Support of Partial
Summary Judgment against Nigro and Caine, DiPasqua (filed Dec.
14, 1998), Exh. K (Deed to the Property (dated Aug. 29, 1988)),
and Exh. O (Mortgage Covering the Property (dated Aug. 29,
1988)). The Property and the mortgages covering the Property form
the subject-matter of this litigation. See RTC II, 16 F. Supp.2d
"Prior to August of 1988, Nigro, acting as attorney for Diemer
and Pacilli and as title agent through Eastern[, in which Nigro
was the sole shareholder,] participated in numerous transactions
. . . regard[ing] . . . the Horizon Corporate Center, including
transactions involving [the Property]." See Pl. R. 56.1
(Cts.IV-V), ¶ 9 (citing Nigro Dep. at 40-42, 47, 50). "Many of
th[e] transactions involved Fidelity Bank, N.A. (`Fidelity') . .
. which provided construction and other financing for Diemer and
Pacilli with regard to properties owned by them . . . in the
Horizon Corporate Center[,]" including the Property. Id.
Two such transactions are of particular relevance to this case.
First, on March 7, 1986, Nigro, as title agent for Eastern and as
counsel for MLA, participated in a real estate closing of a
commercial loan for $11,800,000 from Fidelity to MLA for the
purpose of refinancing MLA's previous indebtedness and to finance
the construction of an office building in the Horizon Corporate
Center ("the construction loan"). See Nigro Dep. at 50-51. "As
security for the construction loan, Fidelity obtained a first
mortgage on [the Property] in the amount of $11,800,000." See
P.R. 56.1 (Cts.IV-V), ¶ 10.
Second, on June 13, 1986, Nigro, again acting as title agent
and counsel for MLA, participated in a real estate closing in
which Fidelity loaned MLA $9,700,000 to purchase a parcel of raw
land located within the Horizon Corporate Center. See id., ¶
11; see also Nigro Dep. at 53-55. As security for this loan,
Fidelity obtained a first mortgage on the raw land and a second
mortgage on the Property ("the second mortgage"). See Nigro
Dep. at 53-54. Nigro recorded the second mortgage on behalf of
MLA and Fidelity.*fn6 See id.
Subsequently, Diemer and Pacilli organized another limited
partnership, called Atrium II Limited Partnership ("Atrium II"),
to seek additional financing from lenders other than Fidelity.
See Adler Cert., Exh. H (Loan Commitment Letter (dated June 8,
1988)). On June 8, 1988, Nationwide Capital, a wholly owned
subsidiary of Home Federal Savings and Loan ("Home Federal"),
extended a mortgage
loan commitment to Diemer, on behalf of Atrium II, in the amount
of $13,500,000. See id. As security for the loan, Home Federal
sought a first lien priority on the Property. See id. In
addition, the loan commitment letter stated the terms and
conditions under which Home Federal would proceed with the
transaction. See id.
In particular, the loan commitment letter set forth Home
Federal's title insurance requirements. See Adler Cert., Exh.
H. Specifically, the letter provided:
(1) Title insurance requirements — A title commitment
from a title insurer and title agent approved by
title insurer, acceptable to Home Federal, in form as
(a) The insured amount must be the full loan amount
plus maximum deferred interest. . . .
(d) The standard exceptions indicated on the
commitment must be deleted from the final title
policy. Home Federal must be provided with the
recorded copies of all title exceptions and other
instruments referenced in the title commitment.
(f) If you are using a title agent, an insured
closing letter. . . .
The loan commitment letter further required "[a] letter from an
attorney licensed to practice law in New Jersey, retained by the
borrower and acceptable to Home Federal, opining as to those
matters set forth in the form of opinion letter attached." Id.
The attached form opinion letter sought a legal opinion that
"[Atrium II] owns good and marketable fee simple title to [the
Property] . . . [and that the mortgage] constitutes a first lien
security interest valid against all third parties, subject only
to the matters and exceptions referred to in [the] Title
Commitment. . . ." Id.
As counsel for Diemer, Nigro was retained to represent Diemer,
Pacilli, MLA and Atrium II in the Home Federal mortgage
transaction. See Nigro Dep. at 75, 107-108. Thus, under the
terms of the loan commitment letter, Nigro, as Atrium II's
counsel, was required to prepare an opinion letter on the first
lien priority position of the Home Federal mortgage. See Adler
Cert., Exh. H, and Exh. Q (Letter to Nigro from Nationwide
Capital (dated June 23, 1988)).
With regard to title services, Nigro's practice was to refer
his real estate clients, like Diemer and Atrium II, to Eastern,
in which Nigro was the president, sole director, and sole
shareholder. See Nigro Dep. at 11-14. Eastern would then act as
the title agent for Nigro's real estate closings with Title USA
Corporation of New York ("Title USA"), predecessor in interest to
NTI, see NTI's Rule 56.1 Statement of Undisputed Facts (filed
Dec. 14, 1998), ¶ 1 (hereinafter "NTI R. 56.1"), serving as the
underwriting title insurance company. See Adler Cert., Exh P
(Loan Agreement, ¶ 1.31); see also Nigro Dep. at 13-15. This
same practice was followed by Nigro in connection with the Home
Federal mortgage closing: Nigro served as counsel for Atrium II
and, through Eastern, as the title agent, with Title USA
underwriting the title insurance policy. See Adler Cert., Exhs.
H, P, Q.
Eastern had a total of three employees, namely, Nigro, its
president; Linda Winfree, its secretary and treasurer; and Jane
Ervin, who is listed as the "manager" on Eastern's letterhead.
See Nigro Dep. at 78-79; see also Adler Cert., Exh. X (Letter
from Eastern to Title USA (dated July 8, 1998)). Ms. Winfree was
also employed as Nigro's legal secretary and paralegal. See
Nigro Dep. at 18-19.
Under the terms of the loan commitment letter, the loan
agreement, and Eastern's agency agreement with Title USA, Eastern
was responsible for searching the Property's title and preparing
the Title Commitment. See Nigro Dep. at 13-17; Adler Cert.,
Exhs. H, P; see also Certification
of Josiah A. Knapp, Esq. (filed Dec. 14, 1998), Exh. C (Agency
Agreement between Eastern and Title USA). On the issue of
Eastern's operations, Nigro testified:
Q. [By Mr. Adler] At the time we're talking about,
which is August of 1988, [where was Eastern
A. [By Nigro] . . . I had a law office, and Linda
Winfree who worked for me had another office where
the title company was — our files were there and our
equipment was there, and we did our [title] work out
of there. . . .
Q. Did Eastern have a separate office with its own
rooms at Caine[,] DiPasqua?
A. Yes, that one room. . . . [Eastern] was a title
agency not in the true sense of the word. It didn't
do title for a number of people and do a lot of
transactions. It was relatively limited to my clients
that I had, and the legal business I did some title
work for them.
Q. Tell me how the actual searches were done; who did
them and what was the procedure?
A. . . . On a typical [New Jersey] property I would
be informed that we're going to write a policy for a
given transaction. I would usually contact . . . Jane
Ervin. . . . I would tell her that I needed to do a
transaction, and she would order what we call a
search commitment. She would order it from some
independent contractor in the county where we were
going to insure the property.
She would contact — I presume she would. She told me
she would. She would contact, did search work and did
commitment work. She would get all of the information
needed to formulate and prepare a [title] commitment
and then prepare one.
Q. She would prepare a commitment?
Q. And then what?
A. Then it would come to me and I would take a look
at it and decide who we had to contact, what we had
to do to clear up some of the items on the commitment
such as judgments, liens or whatever.
See Nigro Dep. at 13-17.