On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7324-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Nugent and Kestin.
Plaintiff, Millennium bcpbank, N.A. (Millennium), appeals from two Law Division orders: the July 23, 2010 order that denied Millennium's motion to have the court declare the entire controversy doctrine inapplicable to this action; and the September 22, 2010 order that granted summary judgment to First American Title Insurance Company (First American) based on the entire controversy doctrine. We reverse and remand.
We discern the following facts and procedural history from the trial court motion record. Millennium is a mortgage lender. The genesis of this action is a $400,000 loan (the Loan) Millennium made to Antonio and Ana Pinto on December 30, 2005. Antonio Pinto was a principal in Vouga Builders, LLC, which guaranteed the Loan. The Pintos and Vouga secured the Loan by mortgaging two parcels of real estate in Newark, one located on 18th Street, the other on 19th Street. Vouga owned the 18th Street property and Antonio Pinto owned the 19th Street property. In addition to the Loan, the mortgages secured all other indebtedness of the Pintos to Millennium.
When Millennium drafted the mortgages, it switched the owners' names, so that the mortgage on the 18th Street property owned by Vouga incorrectly identified Pinto as the owner, and the mortgage on the 19th Street property owned by Pinto incorrectly identified Vouga as the owner. As a result, when Millennium recorded the mortgages they were indexed under the wrong mortgagor names. First American issued a title policy insuring the mortgages.
On September 15, 2006, Vouga conveyed title to the 18th Street property to Ana Pinto, who re-sold the property on November 1, 2006, to Adebayo and Adesola Fakorede. The Fakoredes' title search did not disclose the Millennium mortgage. Later, after learning of the mortgage, the Fakoredes commenced a quiet title action on June 16, 2008, against the Pintos, Vouga Builders, and Millennium (the Fakorede action). The Fakoredes served their complaint on Millennium on June 24, 2008.
In response to the Fakorede action, Millennium's counsel wrote to First American on July 1, 2008, enclosed a copy of the Fakorede complaint, and submitted a proof of claim. On August 22, 2008, First American responded and denied coverage. In its denial letter, First American stated, among other things:
Please note the following EXCLUSIONS which appear in the policy: "The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of:
3. Defects, liens, encumbrances, adverse claims or other matters:
(a) Created, suffered, assumed or agreed to by the insured claimant . . . " bcpbank, N.A., created/prepared the mortgage document to be executed by Antonio Pinto and evidently attached the incorrect metes and bounds description of the property. It is alleged the mortgage is defective because Antonio Pinto did not own the property described therein. Thus, the alleged defect was created by bcpbank, N.A. The policy excludes from coverage defects created by the insured (See EXCLUSION cited above). Where matters giving rise to a claim are excluded from coverage, the Company has no duty to defend.
Your claim that the mortgage executed by Vouga Builders, LLC is invalid and unenforceable is also excluded from coverage. bcpbank, N.A. created the mortgage to be executed by Vouga Builders, LLC and described therein property not owned by Vouga Builders, LLC. As the defect in the mortgage was created by bcpbank, N.A., the Company is not obligated to pay loss or damage, costs, attorneys' fees or expenses which arise by reason of defects created by the insured.
Meanwhile, the Pintos had defaulted on the Loan and Millennium had filed a Law Division complaint on June 16, 2008, against the Pintos, Vouga, and New Alvarinho Realty, LLC,*fn1 to recover the balance due on the Loan and other indebtedness of the Pintos (the Pinto action). On July 30, 2008, after First American had disclaimed coverage with respect to the Fakorede action, Millennium amended its complaint in the Pinto action to include four additional counts. The additional counts recited the drafting errors in the mortgages on the Newark properties, the Pintos' failure to disclose the drafting errors, Vouga's conveyance of the 18th Street Newark property to Ana Pinto, and Ana Pinto's subsequent conveyance of the 18th Street property to the Fakoredes. Based upon those facts, Millennium's amended complaint ...