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Titan Management, L.P. v. First American Title Insurance Co.

December 20, 2006

TITAN MANAGEMENT, L.P., PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
v.
FIRST AMERICAN TITLE INSURANCE COMPANY; HERITAGE ABSTRACT COMPANY AND HERITAGE ABSTRACT COMPANY, L.L.C., DEFENDANTS-RESPONDENTS/CROSS-APPELLANTS.



On appeal from Superior Court of New Jersey, Law Division, Burlington County, L-2320-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 27, 2006

Before Judges Lintner and S.L. Reisner.

Plaintiff, Titan Management, L.P., appeals from a trial court order dismissing on summary judgment its complaint against defendants, First American Title Insurance Company, Heritage Abstract Company, and Heritage Abstract Company, L.L.C. We affirm.

I We begin by reviewing the most pertinent facts and procedural history. In 1997, First Connecticut Holding Group-1 (FCHG-1)*fn1, a corporation controlled by James Licata, owned a building in Newark known as 555 Elizabeth Avenue (the premises). In December 1997, Titan loaned FCHG-1 $2 million. Because the premises was already encumbered with an existing mortgage from Transatlantic Capital Company, L.L.C. (Transco), the terms of which prohibited junior encumbrances, Titan could not secure its loan with a mortgage on the premises. Instead, Titan required FCHG-1 and Licata to sign a negative pledge agreement, which precluded FCHG-1 from selling or transferring its assets or from incurring any additional indebtedness beyond the Transco mortgage. The first page of the negative pledge agreement stated in large underlined letters that "THIS INSTRUMENT IS NOT A MORTGAGE AND DOES NOT CREATE A MORTGAGE LIEN ON THE SUBJECT PREMISES IDENTIFIED BELOW." Titan also obtained a deed to the premises to be held in escrow against the event of default. Titan recorded the negative pledge agreement.

On October 20, 1998, after FCHG-1 defaulted on the note, Titan filed a complaint against Licata, FCHG-1 and others, to collect the note and enforce the negative pledge. At the same time, by order to show cause, Titan obtained temporary possession of the building. After FCHG-1 filed a motion to recover possession, Judge Fuentes ruled, on January 28, 1999, that the escrow deed provisions of the negative pledge agreement were unenforceable. He entered an order dated February 17, 1999, in which he returned title to FCHG-1, but appointed a rent receiver, and prohibited Licata and FCHG-1 from "selling or otherwise further encumbering the Premises."

On April 14, 1999, Judge Fuentes entered an order reciting his conclusions that "the 'Negative Pledge Agreement' attached to Plaintiffs' Verified Complaint . . . is not a mortgage and created no security interest in the Premises," and "plaintiffs have no title or current lien interest in or to the Premises." He also declared that "those provisions of the Negative Pledge Agreement that in any way operate to divest defendant FCHG-1 of its title to the Premises are VOID as being in contravention of the statutes and public policy of this state."

In June 1999, FCHG-1 filed a motion seeking to discharge the receiver and seeking court approval to refinance the premises. On June 24, 1999, Judge Fuentes approved the re-financing of the mortgage. In connection with that approval, he declined to order that FCHG-1 pay off the Titan loan as part of the refinancing. Addressing Titan through its attorney, he stated:

[Y]ou're in an insecure position . . . .

You have a loan with the defendants . . . and you have a claim.

You have a verified complaint and you're proceeding like any other debt creditor . . . . And if you do get a judgment in your favor, then that constitutes or may constitute a lien on the property.

Right now you don't have that.

The closing of the re-financing of the property took place on August 19, 1999. In connection with the re-financing, FCHG-1 transferred the property to Bel Air Holdings, L.L.C. (Bel Air), another corporation controlled by Licata. According to FCHG-1, the mortagee, ...


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