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21st Mortgage Corp. v. Chicago Title Insurance Co.

United States District Court, D. New Jersey

December 21, 2018




         This matter comes before the Court on Defendant Chicago Title Insurance Company's (“Defendant” or “Chicago Title”) Motion for judgment on the pleadings, pursuant to Federal Rule of Civil Procedure 12(c), on Plaintiff 21st Mortgage Corporation's (“Plaintiff” or “21stMortgage”) claims for declaratory relief and negligence against Defendant, on the basis that these claims are time-barred. For the reasons set forth below, Defendant's Motion is GRANTED.


         Plaintiff 21st Mortgage and Defendant Chicago Title are corporations that have principle places of business in Tennessee and Florida, respectively. Second Amended Complaint (“SAC”), ¶¶ 1-2. Defendant Closers on Call, LLC (“COC”) (COC with Chicago Title together, “Defendants”) is a limited liability company which allegedly served as an authorized agent for Chicago Title in 2008. Id. ¶ 3.

         In 2008, Wells Fargo, N.A. (“Wells Fargo”) loaned $279, 000.00 to Carlos Merchan (“Merchan”), for purchase of the real property located at 1 Longfield Road, New Brunswick, New Jersey (“Property”) from Richard Adams and Vivian Adams (“Sellers”), Id. ¶¶ 5-6. Merchan, in exchange, provided Wells Fargo with a mortgage on the Property (“Merchan Mortgage”), which transaction was recorded with the Middlesex County Clerk on November 10, 2008. Id. ¶ 6.

         Wells Fargo purportedly obtained title insurance from Chicago Title's alleged former agent, COC. Id. ¶¶ 7-8. In connection therewith, Wells Fargo provided COC with Supplemental Loan Closing Instructions, requiring the “cancellation or disposition” of two prior mortgages encumbering the Property, for the purpose of ensuring that the Wells Fargo Mortgage was a “valid first lien.” Id. ¶¶ 10, 12. Specifically, the two prior mortgages included: (1) a mortgage from the Sellers to Central Jersey Federal Credit Union (“Central Jersey”), dated October 26, 2005, recorded on November 23, 2005 (“Central Jersey Mortgage”); and (2) a Mortgage from the Sellers to Mortgage Electronic Registrations Systems, Inc. as Nominee for EquiFirst Corporation (“Equifirst”), dated April 26, 2006, which was recorded on May 24, 2006 (“Equifirst Mortgage”). Id. ¶ 10. COC ultimately prepared a Settlement Statement, dated August 14, 2008, indicating that COC complied with the Supplemental Loan Instructions by paying off the Central Jersey and Equifirst Mortgages and, additionally, issued a title insurance commitment and closing service letter on behalf of Chicago Title, with a Loan Policy in the amount of $279, 000. Id. ¶¶ 9, 12-16. However, notwithstanding COC's allegedly false representations, the Wells Fargo Mortgage did not become the first priority lien. Id. ¶ 15.

         On November 1, 2008, the Merchan Mortgage allegedly entered default. Id. ¶ 16. On February 25, 2009, Wells Fargo filed a foreclosure action in the Superior Court of New Jersey, Middlesex County, Chancery Division, following which Final Judgment was entered in favor of Wells Fargo on July 9, 2010. Id. ¶ 16. On September 9, 2016, Wells Fargo assigned the Final Judgment to 21st Mortgage. Id. ¶ 18.

         Despite COC's assurances, Central Jersey also asserted an interest in the Property and filed a foreclosure action. Id. ¶ 19. Wells Fargo, in turn, submitted a notice of claim for title insurance coverage to Chicago Title; however, in a letter, dated March 17, 2010, Chicago Title denied[1] Wells Fargo's request, on the basis that COC was not authorized to provide Wells Fargo with the 2008 title insurance policy:

Upon further investigation, the Company has discovered that the relationship between Closers on Call and the Company had been terminated on or about June 21, 2008. A final audit of all outstanding transactions of this agent was completed on or about July 25, 2008, and policies were issued on these transactions. Since the transaction closed on August 14, 2008, after the final audit, Closers on Call was not an agent of the Company at the time of closing, and therefore, lacked the authority to issue a policy. Accordingly, the Company respectfully denies liability for this matter.

Id. ¶ 20; Answer, Ex. 4. Indeed, there is no dispute that Wells Fargo was on notice that Chicago Title disclaimed coverage based on the fact that COC was not its agent.

         Likewise, on November 15, 2015, Equifirst asserted an interest in the Property and filed an action to quiet title, subsequent to which 21st Mortgage, as an assignee of Wells Fargo, submitted a second notice of claim for title insurance coverage on October 13, 2016.[2] Id. ¶¶ 22-23, 25. The notice of claim included the results of a Foreclosure Search Report, indicating that Equifirst obtained a Sheriff's Deed for the Property, dated May 13, 2009, recorded on July 24, 2009. Id. ¶¶ 23-24. However, Chicago Title denied the second notice of claim, for the same reason which Chicago Title denied Wells Fargo's first request for title insurance coverage- COC was not Chicago Title's authorized agent at the relevant time. Id. ¶ 26.

         On April 5, 2017, 21st Mortgage brought this action against Defendants, arising from Chicago Title's denial of Plaintiff's second request for title insurance coverage in connection with the Equifirst Mortgage. On September 19, 2017, 21st Mortgage filed an Amended Complaint, wherein it seeks declaratory relief in Count I, regarding its rights and Chicago Title's obligations pursuant to the disputed title policy. Id. ¶¶ 27-35. The Amended Complaint also asserts the following claims against Defendants: negligence (Count II); fraud (Count III); consumer fraud (Count IV); conversion (Count V); and an intended beneficiary claim (Count VI). Id. ¶¶ 36-74.[3]

         Currently, Chicago Title moves for judgment on the pleadings, arguing that Plaintiff's request for declaratory relief and claim of negligence are barred by their respective statute of limitations. Plaintiff opposes the motion.

         II. ...

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