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RTC MORTG. TRUST 1994 N-1 v. FIDELITY NAT. TITLE
July 29, 1999
RTC MORTGAGE TRUST 1994 N-1, A LIMITED LIABILITY DELAWARE BUSINESS TRUST, PLAINTIFF,
FIDELITY NATIONAL TITLE INSURANCE COMPANY, NATIONS TITLE INSURANCE OF NEW YORK, EASTERN DEVELOPERS ABSTRACT, INC., CAINE, DIPASQUA, SLOANE & RAFFAELE F/K/A CAINE, DIPASQUA, SLOANE, RAFFAELE & NIGRO, LAWYERS TITLE INSURANCE CORPORATION, AND ROCCO M. NIGRO, DEFENDANTS.
The opinion of the court was delivered by: Orlofsky, District Judge.
I. INTRODUCTION ........................................................... 507
II. BACKGROUND ............................................................. 509
III. LEGAL STANDARD GOVERNING MOTIONS FOR SUMMARY JUDGMENT .................. 519
IV. DISCUSSION ............................................................. 520
A. RTC Mortgage Trust's Motion for Partial Summary Judgment Against
Nigro and Caine, DiPasqua ......................................... 520
1. An Attorney's Duty to a Non-Client ............................... 521
2. Breach of Duty of Care Owed by Nigro to Home Federal ............. 522
3. Proximate Cause and Injury ....................................... 526
4. Respondeat Superior Liability .................................... 529
B. FNTIC's and NTI's Motion for Summary Judgment ....................... 530
1. FNTIC Is Not Title USA's Successor................................ 530
2. NTI's Motion for Summary Judgment ................................ 530
a. RTC Mortgage Trust's Claim Against NTI for Breach of the Title
Insurance Policy ............................................ 530
1) Legal Standard Governing Construction of Title Insurance
Policies ................................................ 531
2) Title USA Did Not Breach the Title Insurance Policy ....... 532
b. RTC Mortgage Trust's Claim for Negligent Title Search Against
NTI ......................................................... 535
c. RTC Mortgage Trust's Claim for Negligent Hiring ............... 542
d. Statute of Limitations ........................................ 542
e. NTI's Request that this Court "Re-examine" its Holding in RTC
Mortgage Trust II ............................................ 545
f. Counsel Fees .................................................. 547
C. LTIC's Motion for Summary Judgment .................................. 548
V. CONCLUSION ............................................................... 549
This case involves a failed savings and loan's claims for
breach of contract, negligence and legal malpractice, arising out
of a commercial real estate transaction in which defendant, Rocco
M. Nigro, Esq., acted as counsel for the buyer and the seller of
the property, rendered an opinion letter for the benefit of the
mortgage company, owned the title agency which negotiated the
title insurance coverage and acted as the closing agent on behalf
of the underwriting
title insurance company. In sorting out the conflicting duties of
care owed by Mr. Nigro, as well as his law firm and the title
insurance companies involved in the mortgage transaction, I must
determine the scope of an attorney's duty to a non-client third
party and whether the title insurance company voluntarily assumed
a duty of care to its insured, independent of its obligations set
forth in the title insurance policy.
On June 16, 1997, Plaintiff, RTC Mortgage Trust 1994 N-1,
successor in interest to Home Federal Savings and Loan
Association, filed a five count amended complaint in this Court
alleging claims for breach of contract, negligent title search,
negligent hiring, and legal malpractice against Defendants,
Fidelity National Title Insurance Company, Nations Title
Insurance of New York, Eastern Developers Abstract, Inc., Caine,
DiPasqua, Sloane & Raffaele f/k/a Caine, DiPasqua, Sloane,
Raffaele & Nigro, Lawyers Title Insurance Corporation, and Rocco
M. Nigro, Esq. On December 14, 1998, RTC Mortgage Trust filed a
motion for partial summary judgment on the issue of liability on
its claims for legal malpractice against Nigro and Caine,
DiPasqua, and its claims for breach of contract and negligent
title search against NTI. On December 14, 1998, NTI cross-moved
for summary judgment on all claims asserted against it by RTC
Mortgage Trust. In addition, on December 14, 1998, Lawyers Title
Insurance Company also moved for summary judgment on all claims
asserted against it by Plaintiff. This Court has jurisdiction
over this matter pursuant to 28 U.S.C. § 1332, based upon
complete diversity of citizenship between the parties and the
requisite amount in controversy.
For the reasons set forth below, I shall grant Plaintiff's
motion for partial summary judgment on the issue of liability on
its claim for legal malpractice against the Defendants, Rocco M.
Nigro, Esq., and Caine, DiPasqua, Sloane & Raffaele. I shall also
grant Plaintiff's motion for partial summary judgment on the
issue of liability on its claim for negligent title search
against Nations Title Insurance of New York. The entry of these
partial summary judgments in favor of Plaintiff is subject to a
resolution of disputed issues of material fact by a jury,*fn1
pursuant to Lopez v. Swyer, 62 N.J. 267, 300 A.2d 563 (1973);
Goodman v. Mead Johnson & Co., 534 F.2d 566 (3d Cir. 1976), to
determine whether these claims, as well as Plaintiff's claim for
negligent hiring, are barred by the statute of limitations.
I shall grant the motion of Defendant, Nations Title Insurance
of New York, for summary judgment on Plaintiff's claims for
breach of contract and the recovery of attorneys' fees. I shall,
however, deny the motion of Nations Title Insurance of New York
for summary judgment insofar as it seeks summary judgment on
Plaintiff's claim for negligent hiring, subject to the resolution
of disputed issues of material fact by a jury surrounding the
statute of limitations defense. Furthermore, I shall grant
Defendant, Fidelity National Title Insurance Company's motion for
summary judgment on all claims asserted against it by Plaintiff.
Finally, I shall grant the motion of Defendant, Lawyers Title
Insurance Company, for summary judgment on all claims asserted
against it by Plaintiff.
In addition, given the multiple representations undertaken by
Mr. Nigro in this transaction, and the myriad conflicts of
interest presented by his conduct, I conclude that Rocco M.
Nigro, Esq., violated Rule 1.7 of the New Jersey Rules of
Professional Conduct, made applicable in this
Court pursuant to Rule 103.1(a) of the Local Civil Rules of this
Court.*fn2 Accordingly, I shall refer this matter to David E.
Johnson, Jr., Esq., Director of the New Jersey Office of Attorney
Ethics, for whatever action he deems appropriate.
The facts and procedural history of this case have been
summarized to some extent in this Court's Opinions of October 20,
1997, RTC Mortgage Trust 1994 N-1 v. Fidelity National Title
Insurance Co., et al., 981 F. Supp. 334 (D.N.J. 1997) ("RTC
I"), and August 14, 1998, RTC Mortgage Trust 1994 N-1 v.
Fidelity National Title Insurance Co., et al., 16 F. Supp.2d 557
(D.N.J. 1998) ("RTC II"). What follows below are the facts and
procedural history relevant to Plaintiff's and Defendants'
respective motions and cross-motions for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure.
On June 16, 1997, Plaintiff, RTC Mortgage Trust 1994 N-1 ("RTC
Mortgage Trust"), filed a five count Amended Complaint*fn3 in
this Court alleging claims for negligence and breach of contract
against Defendants, Fidelity National Title Insurance Company
("FNTIC"), Nations Title Insurance of New York ("NTI"),*fn4
Eastern Developers Abstract, Inc. ("Eastern"), Caine, DiPasqua,
Sloane & Raffaele f/k/a Caine, DiPasqua, Sloane, Raffaele & Nigro
("Caine, DiPasqua"), Lawyers Title Insurance Corporation
("LTIC"), and Rocco M. Nigro, Esq. ("Nigro"). See Amended
Complaint (filed June 16, 1997). RTC Mortgage Trust's claims
include: (1) breach of a title insurance policy, negligent title
search and negligent hiring against FNTIC and NTI, Count I; (2)
breach of a title reinsurance policy and negligent title search
against LTIC, Count II; (3) negligent title search against
Eastern, Count III;*fn5 and (4) legal malpractice against Nigro
and Caine, DiPasqua, Counts IV and V. See Amended Compl.,
Notwithstanding the convoluted procedural history of this
matter and the forest of paper it has generated, see RTC I, 981
F. Supp. at 336-37; RTC II, 16 F. Supp.2d at 559-60, this case
involves a relatively common commercial real estate transaction,
which went sour after the borrowers/mortgagors defaulted.
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.
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?
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.
Regarding the title search and commitment prepared in the Home
Federal mortgage transaction, Nigro testified:
Q. [By Mr. Adler] . . . Now who prepared the
A. [By Nigro] In all probability, it was prepared by
Jane Ervin because [t]hat [sic] who was preparing
commitments at the time, and also on the commitment
itself it has as part of the number, EJ, so that
means Ervin, Jane. So I presume that has something to
do with it. I have no specific independent
Q. What role did you play in the preparation of this
Commitment No. EJ 123?
A. Probably minimal in preparing it, but I probably
reviewed it and met with Linda Winfree who apparently
was writing back and forth to [Home Federal] and [I]
probably approved the things that she was doing.
Q. Now, on schedule B [of the Title Commitment],
there is a number starting with number nine. In
reference to certain documents of record, where did
that information come from?
A. . . . Typically, it would come from either the
search that we did for that transaction or other
things that we had on file. In Mount Laurel, unlike
most transactions, we had insured numerous properties
in Mount Laurel, the Mount Laurel Park [i.e.,
Horizon Corporate Center,] and we had insured
numerous pieces numerous times.
At the time if you did a search on a Mount Laurel
property, [like the Property at issue,] it would
probably cost a couple thousand dollars to take
numerous months to get done because it was so
voluminous. As a matter of practicality and
expedience, we had to somehow shorten that process to
the best we could.
Q. I take it that in preparation of this commitment,
a full search of the record was not made?
A. I'm not certain. It may or may not have been. . .
. [Regarding the Property,] I'm not sure what was
done, but we had insured Atrium II. When we acquired
it, constructed the building, we added the amendment
to the construction loan when we did the land loan.
We had numerous files on this [Property]. We would do
this kind of case and look at what we have and look
at our policies and our commitments, all of those
things, and construct what we believe is a
commitment, what you believe you would find on record
if you went to the courthouse. . . .
Q. Would the records of Eastern . . . have included
[Fidelity's] second mortgage [on the Property] that
had been recorded in 1986?
A. They should have. I don't know if they did or not,
but they should have because we had insured that
second mortgage and we did the transaction which
[meant] we had a file on it. We did have one location
with all of the Mount Laurel documents, the copies of
them. It was at Jane's house. She told me it used to
consume yards of file space. So we did have
everything. Whether or not [a file on Fidelity's
second mortgage] was actually there, I can't tell
you. I know we had everything that we had done to
that date, at least a copy of it.
Q. Does the second mortgage appear [on] this
A. If it was on record at the time, yes, it should
have; and if we were going to remove it, it would
have been removed. . . . If it were on record, it
should have been there[.]
In addition, in a previous deposition in 1992, during an
adversary proceeding in the Bankruptcy Court, see RTC II, 16
F. Supp.2d at 559, Nigro testified:
Q. Because Fidelity's second mortgage on the Atrium
II premises . . . was in your files, that would have
been reflected on [your title searches]?
A. It should be. Sometimes they are not.
Q. If it weren't, why wouldn't it be?
A. Human error. Assuming it should be and weren't,
it's a mistake.
Q. And if such a mistake was made, whose mistake
would it be?
A. Either Jane Ervin's, myself, or possibly the
person who searched the records. . . . Somebody has
to make a mistake when something doesn't appear and
it should appear. But it happens. If you are doing a
lot of title work, it happens now and then. . . . And
hopefully we catch those. If we don't, that's what
the insurance is for.
See Deposition of Rocco M. Nigro, Esq. (dated Mar. 27, 1992),
at 119-20 (herinafter, "1992 Nigro Dep.").
Because the Home Federal mortgage transaction involved $13.5
million, a loan amount well in excess of Eastern's authorized
level of coverage, Eastern was required to obtain approval for
the transaction from its underwriter, Title USA. See Knapp
Cert., Exh. C. On June 23, 1988,
after the title search of the Property failed to discover
Fidelity's second mortgage of record, Linda Winfree sent a copy
of the proposed Title Commitment to Title USA for review. See
Adler Cert., Exh. G (Cover Letter from Eastern to Title USA
(dated June. 23, 1988)). The proposed Title Commitment was
reviewed by Mark S. Baillie, Esq. ("Baillie"), Assistant Vice
President and National Division Counsel for Title USA. See
Certification of John A. Adler, Esq., in Opposition to Motion for
Summary Judgment of NTI (filed Dec. 14, 1998) ("Adler Cert.
(NTI)"), Exh. F (Letter to Eastern from Mark S. Baillie, Esq.
(dated June 27, 1988)). Baillie responded to Winfree on June 27,
1988, informing her that the proposed Title Commitment could not
be approved "until such time as [Title USA was] advised in
writing upon what basis each and every exception was removed from
Schedule B and what, if any, affirmative coverages [were] being
requested [by Home Federal]." Id. (emphasis omitted).
On June 23, 1988, Winfree also sent a copy of the proposed
Title Commitment, referred to by the parties as the "marked-up"
Title Commitment, to Nationwide Capital, which was co-ordinating
the mortgage transaction for Home Federal. See Adler Cert.,
Exh. B (Cover Letter from Eastern to Nationwide Capital (dated
June 23, 1988)). The "marked-up" Title Commitment listed
Fidelity's construction loan, secured by the Property, but failed
to disclose the existence of Fidelity's second mortgage. See
Adler Cert., Exh. U ("Marked-Up" Title Commitment). Nationwide
Capital reviewed the "marked-up" Title Commitment, making
alterations to the commitment directly on the document. See id.
Consistent with the terms of the mortgage loan commitment letter,
Nationwide Capital noted on the "marked-up" Title Commitment that
it still needed copies of some instruments affecting the
Property's title, referenced in the "marked-up" Title Commitment.
On August 4, 1988, Baillie, on behalf of Title USA, approved
the proposed Title Commitment in the Home Federal mortgage
transaction. See Adler Cert. (NTI), Exh. H (Letter from Baillie
to Winfree (dated Aug. 4, 1988)). Baillie also informed Winfree
that "[i]t [was] not good underwriting practice to mark-up a
commitment or pending policy prior to closing." Id. Baillie
further informed Winfree that "[m]ark-ups should be made at the
closing pursuant to lender request. . . ." Id.
Notwithstanding Baillie's directions regarding "mark-ups," on
August 17, 1988, Winfree, on behalf of Eastern, sent Nationwide
Capital a second "marked-up" Title Commitment, reflecting Home
Federal's changes. See Adler Cert., Exh. V. The second
"marked-up" Title Commitment did not disclose the existence of
Fidelity' second mortgage on the Property. See id.
On August 17, 1988, Winfree also informed Nationwide Capital
that LTIC had contracted with Title USA to reinsure the title
policy which would be issued subsequent to the closing. See id.
Subsequently, on August 19, 1988, LTIC sent Nationwide Capital
and Eastern a letter stating:
LTIC agrees to accept $8,825,274.00 of secondary
liability behind Title USA['s] . . . $2,000,000.00 of
primary liability on the $13,825,274.00 Owner's
Policy insuring The Atrium II Limited Partnership and
a simultaneous Mortgagee Policy insuring Home Federal
. . . on [the Property]. We also understand Title USA
. . . will be taking $3,000,000.00 of secondary
See Certification of Janice D. Walton (filed Dec. 14, 1998),
Exh. 9 (Letter to Eastern and Nationwide from LTIC (dated Aug.
On June 23, 1988, in accordance with the terms of the loan
commitment letter, Nationwide Capital sent Nigro, who was acting
as counsel for the borrower, Atrium II, a series of documents
necessary to the completion of his opinion letter. See Adler
Cert., Exh. Q (Letter from Nationwide
Capital to Nigro (dated June 23, 1988)). The enclosed documents
included the loan agreement, the mortgage and security agreement,
the promissory note, the assignment of rents and leases, and the
absolute guaranty of payment and performance. See id. The cover
letter informed Nigro that if he had any questions he should
contact counsel for Nationwide Capital and Home Federal, Larry
Goodman, Esq. See id.
As the closing date for the Home Federal mortgage approached,
as required by the mortgage loan commitment letter, on August 18,
1988, Title USA issued an insured closing letter to Nationwide
Capital, on behalf of Home Federal. See Adler Cert., Exh. U.
The insured closing letter provided that Title USA:
agree[d] to reimburse [Home Federal] for actual loss
incurred by [Home Federal] in connection with [the]
closing when conducted by [Title USA's] Issuing
Agent, . . . when such loss arises out of . . .
[the][f]ailure of the Issuing Agent[, namely, Nigro,
on behalf of Eastern,] to comply with [Home
Federal's] written closing instructions to the extent
that they relate to . . . the status of the title to
said interest in land or the validity, enforceability
and priority of the lien of said mortgage on said
interest in land. . . .
Id. The insured closing letter also provided that any claim for
actual loss by an insured must be filed "within twelve months
from the date of [the] closing." Id.
On August 29, 1988, the date of closing, Nationwide Capital, on
behalf of Home Federal, issued its written closing instructions
to Eastern. See Adler Cert., Exh. L (Letter from Larry Goodman
to Linda Winfree (dated Aug. 29, 1988)). The closing instructions
letter stated, in relevant part:
Home Federal has received Title USA's marked-up title
commitment which evidences that all requirements of
Schedule B [the instruments of record affecting title
to the Property] have been satisfied and that Title
USA is prepared to issue an ALTA title policy in the
amount of $5,000,000.00 and [LTIC] will
simultaneously issue a re-insurance policy in the
amount of $8,825,274.00 as first lienholder on the
Property encumbered by the Mortgage . . . and subject
only to those exceptions [listed in Schedule B]. . .
. [Eastern, as closing agent for Title USA, shall]
record the [loan documents] . . . with the
appropriate governmental offices, WHEN AND ONLY WHEN
[the Home Federal] Mortgage constitutes, in fact, a
lien of record against the Property . . . and when .
. . Title USA can affirmatively insure Home Federal
as of the date and time of recordation of the
Mortgage that such Mortgage constitutes a valid first
lien against the Property. . . . You are authorized
to disburse the Proceeds in accordance with these
instructions WHEN AND ONLY WHEN you are able to
strictly comply with the instructions of th[is]
letter. . . .
Id. (emphasis in original).
On August 29, 1988, Nigro provided Home Federal with his
opinion letter. See Adler Cert., Exh. R (Opinion Letter (dated
Aug. 29, 1988)). The opinion letter, written on Caine, DiPasqua
letterhead, stated, in relevant part:
At your request we provide you with this opinion in
our capacity as counsel to the Borrower and its
general partner. In rendering this opinion, we have
reviewed originals of the following documents:
1. The Loan Agreement executed by Borrower and
2. The Promisory [sic] Note made by Borrower to the
order of the Lender in the principal amount of
3. The Mortgage and Security Agreement executed by
the Borrower to Lender.
4. The Assignment of Rents and Leases executed by
5. Uniform Commercial Code Financing Statements
executed by Borrower in favor of the Lender.
6. Title USA Insurance Corporation of New York Title
Commitment bearing File No. EJ — 123, including
endorsements, if any, issued through the date hereof
(the "Title Commitment").
The documents referred to in Paragraphs one through
six above are each dated of even date herewith and
collectively referred to as the "Loan Documents".
In addition, we have examined such other record
documents, certificates, instruments and materials as
in our judgment are necessary and appropriate to
enable us to render this opinion. We have, however,
assumed the validity of all such records, documents,
certificates, instruments and materials and the
genuineness of all signatures thereon. Based upon the
foregoing, we are of the opinion that: . . .
Borrower owns good and marketable fee simple title
to the real property described in the Mortgage and
Security Agreement subject to those matters noted in
the Title Commitment delivered to Lender, and the
Mortgage and Security Agreement constitutes a first
lien security interest valid against all third
parties subject only to the matters and exceptions
referred to in said Title Commitment. Borrower's
title to such real property is not subject to any
vendor's lien. . . .
To the best of our knowledge, the Borrower has made
no contact or arrangement of any kind except the
Construction Agreement with Pace Associates, Inc. and
agreements with its architect, surveyor and engineer,
the performance of which by the other party thereto
would give rise to a lien on the Property. . . .
We are members of the bar of the State of New
Jersey and do not purport to be expert on, or to
express any opinion herein concerning, any laws other
than the laws of the State of New Jersey and the
Federal laws of the United States, and this opinion
is. . . . Our opinions are rendered as of the date
hereof and are solely for the benefit of Lender in
connection with the Loan. . . . In delivering this
opinion to you, we are not undertaking to apprise you
either of any transactions, events or occurrences
taking place after the date of this letter of which
we may acquire any knowledge or of any change in
applicable laws taking place after the date of this
letter which may affect any of our opinions set forth
in this letter. The opinions expressed in this letter
are based upon the applicable laws, regulations and
ordinances in effect as of the date of this letter.
In his March 9, 1998, deposition testimony, Nigro discussed the
procedure he followed in drafting the opinion letter. See Nigro
Dep. at 113-118. He testified:
A. [By Nigro] [T]ypically a lender would give me a
proposed letter. I would look at it, and then
typically they would tell me what they wanted their
final draft as; and if I could live with it, I would
put it on my stationery and sign it. If I couldn't
live with it, I would call them and say I can't do
this and that and then I would sign it.
Q. [By Mr. Adler] Did you review the [loan] documents
. . . itemized on the first page . . . [of the
A. I presume that I did, because it says that I did.
I don't have any independent recollection.
Q. What was the basis for your opinion that [Home
Federal] was getting a first loan through its