On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-2349-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lisa and Baxter.
Defendant Michael York appeals from an October 19, 2007 Law Division order that granted the motion of defendant Commonwealth Land Title Insurance Company of New Jersey (Commonwealth) to dismiss York's cross-claim. York also appeals from a May 7, 2008 order that denied his motion for reconsideration. In his cross-claim, York asserted claims against Commonwealth for negligence, breach of contract, consumer fraud and bad faith in denying coverage under a policy of title insurance he purchased from Commonwealth in December 2003. With the exception of the Consumer Fraud Act claim, we agree with York's contention that because there were genuine issues of material fact, the motion judge erred when he granted Commonwealth's motion for summary judgment and dismissed York's cross-claim with prejudice. We reverse.
This litigation arises out of the sale of the Bayside Marina (marina) in Brigantine. We begin our review of the record with an analysis of contracts formed by other parties as those contracts have a bearing on the claims York has advanced. On February 3, 2001, defendant C.G. Kosta*fn1, as seller-lessor, and plaintiff Thomas J. Cocco, Jr., as buyer-lessee, entered into a lease-purchase agreement entitling Cocco to lease and potentially purchase the land and equipment that comprised the marina property. The February 3, 2001 agreement established a three-year lease that was to begin on March 1, 2001 and end on February 28, 2004. The agreement also afforded Cocco the "unconditional right" to purchase the marina at any time prior to February 28, 2004 at a price of $1,500,000.
A few months after the lease-purchase agreement was executed, Cocco discovered three underground gasoline tanks buried on the property and ceased making the monthly lease payments. Cocco's non-payment caused Kosta to file an action in the Law Division under docket number L-2403-01, which was resolved by an order of settlement on May 7, 2002. The terms of that settlement were complex and we need not set them forth in great detail. Suffice it to say, the settlement altered Cocco's purchasing rights by extending his purchase option deadline by a period of one year and reducing the purchase price to $1,150,000. The settlement also required Kosta to indemnify Cocco for costs he had incurred in connection with the continued presence of the second tank. That indemnification was accomplished on June 23, 2003.
Meanwhile, on October 5, 2002, Cocco entered into an agreement to sell the marina to defendant Ronald Hamilton for the sum of $1,950,000. The Cocco-Hamilton agreement had two significant contingency clauses: the marina being appraised at $1,950,000 and Hamilton being able to obtain a first mortgage of eighty percent of the appraised value. The purchase price was to be paid in installments. Although Hamilton made the first two payments in a timely manner, a dispute arose between Hamilton and Cocco when Hamilton learned that Cocco was not the fee simple owner of the marina. Hamilton then filed a complaint against Cocco, docketed as L-921-03, seeking reformation of their October 5, 2002 agreement. Hamilton also filed a lis pendens against the marina property on May 6, 2003.
In response to Hamilton's filing, Cocco moved for enforcement of litigant's rights. In relevant part, the resulting September 24, 2003 order*fn2 afforded Hamilton until November 14, 2003 to decide whether he wished to proceed with his purchase of the marina from Cocco. If so, he was obliged to close no later than December 14, 2003. In accordance with the September 24, 2003 order, Hamilton notified Cocco of his intention to purchase the marina and assured him that he was attempting to secure financing.
Hamilton experienced difficulty in obtaining a mortgage because the marina was appraised at a value significantly lower than the agreed upon purchase price. Therefore, on November 30, 2003, Hamilton entered into a contract with York to sell one of the four lots that comprised the marina property for a purchase price of $400,000. The lot in question was known as Lot 6. According to York, during his purchase negotiations with Hamilton, Hamilton informed him of the "litigation involving the tank removal," but nothing else.
Hamilton told York, without further elaboration, that he "had to settle before the end of the year." Hamilton did not inform York of the pending eviction proceedings filed against him by Cocco. Although the closing was scheduled for December 14, 2003, Hamilton called York asking to extend the closing date until December 29 because he was having difficulty securing a mortgage. York's understanding of what would occur at the closing was as follows: "Mr. Hamilton was going to purchase the property from Mr. Cocco, who was going to purchase the property from Mr. Kosta, and I was going to purchase the building lot from Mr. Hamilton." Hamilton provided him with copies of both the Kosta-Cocco and Cocco-Hamilton agreements of sale.
Meanwhile, on December 12, 2003, two days before the court-ordered deadline for Hamilton to go to closing with Cocco to purchase the marina, Hamilton and Kosta, along with their attorneys, met to discuss the financing arrangements for Hamilton's purchase of the marina, not from Cocco, but instead from Kosta. They did not invite Cocco or his attorney to attend. At the meeting, Kosta agreed to take back a mortgage in the amount of $1,050,000, which, in combination with the $400,000 proceeds from Hamilton's pending sale of Lot 6 to York, would enable Hamilton to complete the purchase of the marina.
However, because Hamilton had not attempted to close on the purchase of the marina on or before the December 14, 2003 date established by the judge's September 24, 2003 order, and had not made any effort to obtain an extension of that date from Cocco, on December 19, 2003, Cocco filed a motion for a warrant of removal and order of possession against Hamilton. Cocco's motion was returnable in early January 2004. Hamilton did not notify York of the pending eviction motion.
York testified that he had expected Kosta, Cocco and Hamilton to be at the closing. However, when he arrived, Cocco was missing. The only parties present were Kosta and his lawyer, Katherine Morris; Hamilton and his attorney, Jeffrey Light; and Marie Micheel, who was the branch manager of Commonwealth's Brigantine office and was the title clerk who would be conducting closing. York was not represented by counsel. According to York, Morris explained that the Coccos*fn3 "don't have to be here" because "at the end of the settlement they are going to get their money." York maintained that Micheel asked Morris and Light whether the Coccos were "going to be in title" after the closing was completed. When Morris and Light answered in the negative, Micheel turned to York and said "well, if they are not going to be in title, they don't have to be here."
Shortly after the closing began, Hamilton produced an Affidavit of Title, certifying that he was, as of December 29, 2003, "the owner" of Lot 6, of which he was in "sole possession." He further certified that no pending lawsuits or other legal obligations enforceable against Lot 6 existed. Although Commonwealth asserts that Kosta executed a similar Affidavit of Title, it is not part of the record on appeal; however, the parties do not appear to dispute its existence.
According to York, once he, the lawyers and Micheel "got past... where the Coccos are, it was disclosed that there was a lis pendens filed on the property." York "had no knowledge" of that encumbrance before arriving at the closing. Upon being presented with the lis pendens, York asked "a series of questions" to find out why the lis pendens had been filed and what it was "in regard to." According to York, "then it was disclosed for the first time to me that Mr. Hamilton was having legal proceedings against Mr. Cocco." When asked to describe what he was told about that litigation, York answered, "I was told that Mr. Hamilton was bringing suit against the Coccos for imprietaries [sic] in the contract." When York asked Light and Morris how they intended to proceed in light of the lis pendens, Light responded, according to York, "that they were going to release the lis pendens at the conclusion of the settlement, that this is going to go away." York was also told that as part of the distribution of the proceeds of the closing, the Coccos would receive a check for $150,000.
York explained that in the midst of that discussion, Morris "chimed in that she had a conversation with the judge [presiding over the Cocco-Hamilton litigation] in the elevator prior to coming to the closing, and that she [Morris] had 100% approval from [the] [j]udge... to conduct the settlement and he had given his blessing for it."
York continued to express concern about the absence of the Coccos and the existence of the lis pendens. At that point, Light suddenly offered to indemnify York should there be any litigation after the settlement. According to York, Light stated, "because we are so confident that there won't be any litigation after the settlement, we'll indemnify you." Due to his longstanding business relationship with Commonwealth, York asked Light to include Commonwealth in the indemnification, and Light, with Hamilton's approval, agreed to do so.
Micheel was present during the discussion of the lis pendens and stepped away from the settlement table, but only for five to ten minutes, to telephone Commonwealth's underwriters to discuss the impact of the lis pendens. When she returned, according to York, Micheel said that "the underwriter had cleared it and that they were going to file a release of the lis pendens with the settlement." Although Micheel had been away from the settlement table for as much as ten minutes while consulting with the underwriters, York was emphatic that she had been present when Morris and Light assured him that the closing of title at the settlement table would serve to conclude and resolve all of the litigation.
The indemnification agreement, which was prepared at the Commonwealth office, was a "turning point." As York later explained, the indemnification agreement allowed him to "bec[o]me comfortable with proceeding with the closing because... th[e] indemnification provided... protection." York was quick to add that other "factors played into [his] decision." He explained:
I became comfortable based on the title company, two lawyers making statements to me that all of the litigation -- the lawyer who instituted the litigation was releasing the lis pendens and telling me that the litigation would stop, and getting an indemnification agreement. [Emphasis added.]
He explained how he had also relied upon Commonwealth's issuance of the title policy:
Q: And you also testified earlier that you knew you were going to get a title insurance policy, right?
Q: And you relied upon that fact in your decision to proceed at the closing, correct?
A: As one of the factors, yes, sir.
Q: You told us 99.93 percent, or whatever percentage of the time it was, you always got title ...