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Frank C. Guilford v. First American Title Insurance Company

July 26, 2012


On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9629-08.

Per curiam.


Argued November 29, 2011

Before Judges Messano and Espinosa.

Defendant First American Title Insurance Company (First American) issued a title insurance policy (the Policy) to plaintiff Frank Guilford for property located on Poe Avenue in Newark (the Property) in November 2007. The mortgage and note submitted to First American in procuring the Policy represented that plaintiff loaned $200,000 to Cherrystone Bay, LLC (Cherrystone) for the purchase of this Property and disbursed the funds on November 24, 2007. However, it is undisputed that plaintiff only made a loan of $100,000; that the loan was to his life-long friend, Michael Bonner, the sole owner and shareholder of Cherrystone, rather than to Cherrystone; that the funds were disbursed over one year earlier; and that the $200,000 loan amount reflected in the mortgage and note included funds loaned by plaintiff's brother, Donald Guilford.

After First American declined a claim against the Policy, plaintiff filed a complaint,*fn1 seeking reimbursement for his loss on the mortgage loan and for the loss of the Property pledged as security for the loan. First American moved for summary judgment, seeking the dismissal of the complaint and rescission of the Policy. Plaintiff appeals from the order that granted summary judgment to defendant.*fn2 We affirm.

The record is replete with assertions, allegations and characterizations of the facts that are largely irrelevant to the question whether summary judgment was properly granted. We begin by reviewing the undisputed facts*fn3 relevant to this appeal.

Plaintiff made two loans totaling $100,000 to Bonner in 2006. The first $50,000 loan was made on January 21, 2006, and the second $50,000 loan was made on April 9, 2006. No loan documents or mortgage documents were executed at the time of either loan. Neither loan was made "in connection with any parcel of property" and neither were "secured by any property or properties at the time they were made." Indeed, it was undisputed that, at the time these loans were made, "Bonner was not aware that the Property existed." Donald Guilford also made loans to Bonner in 2006; his loans totaled $150,000.

Plymouth Park Tax Services, LLC (Plymouth) acquired the Property on November 22, 2006, through a tax foreclosure judgment against Helen Panagakos and two other defendants. On May 25, 2007, Cherrystone purchased the Property from Plymouth for $125,000. Cherrystone obtained a loan from Northern Funding, LLC for $175,000, which was secured by a mortgage on the Property. It was undisputed that Cherrystone did not use the $100,000 loaned by plaintiff in 2006 for this purchase.

On July 30, 2007, Cherrystone filed an eviction action against Panagakos and two other defendants. In its complaint, Cherrystone alleged that the three women had been in possession of the Property for over two months; that they had been tenants of the prior owner but had no lease with Cherrystone and were "holdover tenants" who had not paid any rent.

After Cherrystone obtained a judgment of possession, Panagakos refused to vacate the property. When a sheriff's officer attempted to evict Panagakos on October 22, 2007, she refused to leave and the officer was forced to drill through the lock. Because the writ of possession did not expire for an additional two weeks, Bonner agreed to reschedule the eviction and try to contact a relative of Panagakos.

On November 9, 2007, the rescheduled eviction date, an attorney retained by Panagakos's nephew requested an extension of time from the landlord-tenant judge and filed an Order to Show Cause in the Chancery Division, seeking to stay the eviction and appoint counsel to determine whether Panagakos was competent. The landlord-tenant court judge stated he would defer to the Chancery Court.

On November 21, 2007, counsel for Panagakos filed a motion to stay and vacate the judgment of foreclosure against her on the ground that she was "incompetent and/or unable to understand the import of the foreclosure action of the tax sales certificate brought against her."

While the eviction action was pending, First American issued a commitment for the Policy, dated November 13, 2007. The commitment identified the proposed insured as Frank C. Guilford and stated the amount of the Policy was $200,000, covering a mortgage Cherrystone made to him, dated November 24, 2007, three days after Panagakos's motion to vacate default judgment was filed.

The commitment listed a number of requirements that had to be met before the Policy could close, including the following:

(d) 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 the Schedule A or B -Section II. We may then make additional requirements or exceptions.

(e) You must tell us in writing the name of anyone not referred to in this commitment who will get an interest in the land or who will make a loan on the land. We may ...

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