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Brocha Equities, LLC v. Cabigas


April 1, 2008


On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Middlesex County, No. MID-DC-13694-06.

Per curiam.


Submitted January 24, 2008

Before Judges Wefing and Parker.

Plaintiff appeals from a trial court order entered following a bench trial dismissing its complaint and entering judgment for defendants on their counterclaim for two thousand five hundred dollars. After reviewing the record in light of the contentions advanced on appeal, we affirm.

The litigation and this subsequent appeal arise out of a failed real estate transaction. On July 13, 2005, defendant Sawit Cabigas Properties, LLC, contracted to buy from plaintiff Brocha Equities, LLC, property located at 11 Chambers Street in Trenton, New Jersey. The purchaser gave a deposit of five thousand dollars toward the total purchase price of forty thousand dollars, the balance to be paid at closing by either cash, bank check, certified check, or a check drawn on an attorney's trust account. The contract contained the following paragraph:

TITLE: THE SELLER represents that the buildings on the property are located within the lot boundary lines; that there are no encroachments or easements, or survey or other defects not mentioned in this agreement that would result in a bad title.

Good title is defined for the purposes of this agreement as that which can be insured by any of the title companies licensed by the State of New Jersey, at normal and usual rates and without exception other than those that are standard in all policies and those mentioned in this Agreement.

The contract called for a closing on or before August 22, 2005. That, however, did not occur. The record does not provide an explanation for the delay between the July contract and October 19, 2005, when defendant's attorney wrote to plaintiff, forwarding a copy of a title binder issued by Title Agency, Inc., and asking for proofs to clear the exceptions noted. The binder had several exceptions, including the following:

(g) Subject to any federal, New Jersey inheritance and/or New Jersey estate tax being owed for the estate of Mohamed Ahmad Mahgoub [plaintiff's predecessor in title].

The binder also noted that a search had come upon open judgments against persons "in the chain of title of the same or similar name." It also noted the existence of a bankruptcy proceeding under Docket No. BK-011943-1990 involving an individual either in the chain of title or having a similar name.

The record is not entirely clear as to plaintiff's acquisition of title. There are statements in the record that Mahgoub was the victim of a homicide and that plaintiff purchased this property from the individual appointed as administrator of the estate. There is a further indication that Mahgoub owned a number of parcels at the time of his death, but the record is silent as to their location or value. Nor is there any indication in the record as to Mahgoub's income or whether he filed timely and accurate income tax returns during his lifetime.

Plaintiff did not respond by providing proofs to remove the exceptions noted by Title Agency, Inc., and shortly thereafter defendant's attorney sent a letter to plaintiff declaring the contract "null and void for failure to close per the contract date" and asking for return of the deposit.

Plaintiff's attorney responded by letter dated November 18, 2005, noting that the contract could not be voided for failure to close by the contract date because time had never been declared to be of the essence. The letter also noted that the contract defined good title as that which could be insured by any title company licensed by the State of New Jersey and that his client had arranged for a title binder issued by Successful Title Agency, LLC offering to insure title without the exceptions noted by Title Agency's binder.

The Successful binder, however, contained the following provision:

You must tell us in writing of any defects or claims by others against the land that you know about and which do not appear in Schedule A or B Section 11. We may then make additional Requirements of Exceptions.

In addition, it also stated:

Policy will insure against loss arising from liens or encumbrances first appearing of record subsequent to the date of this commitment, but prior to the effective date of the policy. This coverage shall not extend to those matters which have been disclosed to the insured prior to closing, or of which the insured had actual knowledge prior to closing.

Successful Title was never notified that another title company had issued a binder containing exceptions.

The attorneys thereafter engaged in sporadic correspondence; defendants did not adhere to their earlier position that the contract was void for failure to close in August and agreed to a closing in mid-January. Plaintiff's attorney sent a letter dated December 16, 2005, setting a closing date of January 17, 2006, at 2:00 p.m. at the office of defendant's attorney and declared time to be of the essence. Defendant's updated title binder from Title Agency, Inc. showed the same exceptions outstanding as it had noted several months earlier.

On appeal, the parties do not contest the trial court's factual determination that the closing date was subsequently adjourned to January 26, 2006. According to the record, defendants appeared, but plaintiff did not, and the transaction did not close on that date. There is no explanation in the record for plaintiff's failure to appear on January 26, and there is no evidence in the record that the exceptions noted by defendants' title company had been cleared by that date.

Despite plaintiff having made a January closing of the essence, plaintiff's attorney wrote in March 2006 to defendant's attorney with information purporting to remove one of the exceptions noted by defendant's title company and seeking to arrange a closing.

Plaintiff later sold the property to another purchaser for twenty-nine thousand dollars; that purchaser accepted a title policy through Successful Title. Plaintiff then sued defendants for the difference. Defendants counterclaimed for the expenses they incurred in preparing for a closing which did not occur due, they contended, to plaintiff's failure to remove the exceptions to the title. As we noted initially, the trial court dismissed plaintiff's complaint and entered judgment for defendants on the counterclaim in the amount of two thousand five hundred dollars.

We note at the outset that we reject so much of plaintiff's argument as rests upon a distinction between marketable title and insurable title and its assertion that it only contracted to provide insurable title, not marketable title. "[T]he law will imply that title must be marketable, even where the contract is silent." Conklin v. Davi, 76 N.J. 468, 473 (1978).

And while we agree with so much of plaintiff's argument as contends that defendants were not entitled under the terms of the contract to insist upon a title company of their own choosing, that does not end the inquiry. While plaintiff may have satisfied itself and Successful Title that the exceptions noted by Title Agency, Inc. were without substance, it did not convey that information either to defendants or to Title Agency, Inc. Successful's binder, forwarded by plaintiff, moreover, would have obligated defendants to notify Successful of exceptions that defendants knew of but that were not included in Successful's binder. If defendants had failed to do so, they would run the risk of Successful later declining coverage in the eventuality of a problem developing. Plaintiff provided no assurance to defendants prior to any scheduled closing date that once Successful knew of the position taken by Title, that Successful would not also list these same exceptions.

Plaintiff having been in breach for failure to appear at the closing and for failure to provide adequate title, the trial court's determination was correct. The order under review is affirmed.


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