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GE Capital Morgage Services, Inc. v. New Jersey Title Insurance Co.

July 10, 2000

GE CAPITAL MORTGAGE SERVICES, INC., SUCCESSOR IN INTEREST TO STATE STREET BANK & TRUST COMPANY, PLAINTIFF-APPELLANT,
v.
NEW JERSEY TITLE INSURANCE COMPANY, ROBERT NILS HERDELIN, NEW JERSEY MORTGAGE & INVESTMENT CORP. AND NEW JERSEY LAWYERS FUND FOR CLIENT PROTECTION, DEFENDANTS-RESPONDENTS, AND JOSEPH PRIVETERA AND FIRST AMERICAN TITLE INSURANCE COMPANY DEFENDANTS.



Before Judges King and Muir.

The opinion of the court was delivered by: King, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: June 14, 2000

On appeal from the Superior Court of New Jersey, Chancery Division, Cape May County.

I.

This case involves a claim against the New Jersey Lawyers' Fund for Client Protection (Fund). R. 1:28. We conclude that the Fund may not be sued in Superior Court by a disappointed claimant and we grant summary disposition in favor of the Fund, affirming Judge Callinan. See R. 2:8-3(b).

II.

On August 1, 1994 James and Nancy Hudanich defaulted on a note in the principal amount of $650,000 which was held by plaintiff GE Capital Mortgage Services Inc. (GE Capital), and secured by a first mortgage on real property known as 4198 Bayberry Road, Avalon, Cape May County. The Hudaniches subsequently filed a Chapter 11 bankruptcy petition and then secured an order from the bankruptcy court approving the private sale of the property to Robert Herdelin, free and clear of all liens, and directing that any existing liens would thereafter attach to the proceeds of the sale. The order further provided that the sales proceeds were to be placed in escrow pending the resolution of all priority disputes.

At the closing on June 19, 1996 Herdelin was represented by Joseph Privetera, an attorney admitted to the New Jersey bar since 1966. No one appeared on behalf of plaintiff, apparently due to the failure of the other parties involved to give notice of the closing date. The proceeds of the sale, $694,146.75, were collected by Privetera for placement in his escrow account.

On November 13, 1996, following the resolution of the outstanding priority dispute, the bankruptcy court entered a consent order authorizing the disbursement of the sale proceeds, which was forwarded by plaintiff's counsel to Privetera on November 26, 1996. On December 3, 1996 Privetera appeared at plaintiff's counsel's office and confessed that he had misappropriated all of the proceeds from the closing. Plaintiff then moved before the bankruptcy court for the reimposition of its lien against the property. Plaintiff's motion was denied. Privetera later was criminally convicted, imprisoned and disbarred.

On February 6, 1997 plaintiff filed a claim with the Fund seeking reimbursement of some of the monies misappropriated by Privetera. Plaintiff was advised by a Fund representative that the Fund might not be able to consider its claim because of the apparent lack of an attorney-client relationship between plaintiff and Privetera, and the strong possibility that plaintiff could recover its loss in full from collateral sources. To date, plaintiff's claim apparently remains unresolved.

On July 7, 1997 plaintiff filed an amended verified complaint with the Superior Court of New Jersey, Chancery Division, against the parties involved in the subject transaction, as well as the Fund. As to the Fund, plaintiff alleged that it had suffered a loss as a result of Privetera's dishonest conduct and demanded that it be declared a proper claimant against the Fund and that the Fund be ordered to recognize and pay its claim.

On August 7, 1997 the Fund filed a motion to dismiss plaintiff's complaint against it for lack of subject matter jurisdiction. Judge Callinan ruled that the Supreme Court, and not the Law Division, had jurisdiction over this matter. The judge dismissed plaintiff's complaint against the Fund without prejudice.

On October 22, 1999 plaintiff GE Capital filed a notice of appeal with this court with regard to the entirety of its suit, the remainder of which had been dismissed by summary judgment. The Fund now moves for summary affirmance of Judge ...


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