STAVROS KARPONTINIS v. MULTI-SOLUTIONS INC.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4949-11T3

STAVROS KARPONTINIS, STEFANOS

KARPONTINIS and OLGA KARPONTINIS,

his wife,

Plaintiffs-Appellants,

v.

MULTI-SOLUTIONS, INC., ROSEANN

WEXLER, a/k/a ROSE WEXLER, VICTOR

WEXLER, LARRY BLOUGH, CARL D.

GENSIB, ESQ., PROPERTY TRANSFER

SERVICES, INC., BAC HOME LOANS

SERVICING, L.P. and GATEWAY FUNDING

DIVERSIFIED MORTGAGE SERVICES,

L.P., d/b/a IVY MORTGAGE,

Defendants,

and

FIRST AMERICAN TITLE INSURANCE

COMPANY,

Defendant-Respondent.

__________________________________

March 21, 2013

Argued December 12, 2012 - Decided

Before Judges Grall, Simonelli and Accurso.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-1499-09.

Joseph M. Pinto argued the cause for appellants (Polino and Pinto, P.C., attorneys; Mr. Pinto, on the briefs).

Robert L. Grundlock, Jr. argued the cause for respondent (Rubin, Ehrlich & Buckley, P.C., attorneys; Mr. Grundlock and William McConnell, on the brief).

PER CURIAM

In this matter, plaintiff Stavros Karpontinis (Stavros) and his parents, plaintiffs Stefanos and Olga Karpontinis (collectively Karpontinis),1 alleged they were victims of a foreclosure rescue scam/equity skimming scheme involving a single-family home Stavros owned and sold to defendant Roseann Wexler (Wexler). Plaintiffs claimed that defendant First American Title Insurance Company (First American), which had issued a title insurance commitment and policy to Wexler and her mortgage lender, was liable for the fraudulent conduct of Wexler's attorney. Plaintiffs appeal from the April 15, 2011 Law Division order, which granted summary judgment to First American. We affirm.

We derive the following facts from evidence submitted by the parties in support of, and in opposition to, the summary judgment motion, viewed in the light most favorable to plaintiffs. See Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995).

Karpontinis wanted to purchase the home but because they apparently could not qualify for a mortgage, Stavros purchased it in January 2002, for $97,500. Karpontinis paid the entire down payment and closing costs and Stravos obtained a $78,000 mortgage. Stavros and Karpontinis lived in the home after the closing, and Karpontinis paid the mortgage, taxes and insurance.

Stavros moved from the home in 2005, but Karpontinis continued living there. Karpontinis was to continue paying the mortgage, taxes and insurance, but failed to pay the mortgage, resulting in the filing of a foreclosure complaint in 2003. Karpontinis did not tell Stavros about the foreclosure and resolved it. Karpontinis again failed to pay the mortgage, resulting in the filing of a second foreclosure complaint in November 2005. In June 2006, a final judgment was entered in the amount of $104,564.13.

In an effort to save the home from foreclosure, Karpontinis contacted defendants Victor Wexler (Victor)2 and Larry Blough (Blough), who were principals of defendant Multi-Solutions, Inc. (Multi-Solutions).3 Victor and Blough advised Karpontinis that for a $20,000 fee, they would pay Stavros's mortgage balance, pay Karpontinis's debts, and help repair Karpontinis's credit so that they could obtain a mortgage and repurchase the home. In the interim, Karpontinis would lease the home and pay rent.

Stavros and Karpontinis signed a document that reflected the transaction to which the parties had agreed: the home would be sold; Stravos's mortgage balance would be paid in full as well as Karpontinis's debts estimated at $47,919; Karpontinis would pay annual rent of $12,100; Multi-Solutions would receive a $20,000 fee; and Karpontinis would repurchase the home for $255,000.

Stavros executed a contract to sell the home to Wexler for $250,000. To finance part of the purchase price, Wexler applied for a $225,000 mortgage from defendant Gateway Funding Diversified Mortgage Services, L.P. (Gateway), and Stavros would contribute $5000 at closing.

Wexler's attorney, defendant Carl Gensib, Esq. (Gensib), ordered a title insurance policy through defendant Property Transfer Services, Inc. (PTS). PTS obtained a title commitment and policy from First American. The commitment and policy named Wexler as the insured buyer and Gateway as the insured lender. The commitment also contained the following notice and disclosure to the insured buyer:

THE ATTORNEY RETAINED BY YOU, OR BY YOUR LENDER, CLOSING OR SETTLING THIS TITLE IS NOT AN AGENT FOR AND DOES NOT ACT ON BEHALF OF FIRST AMERICAN TITLE INSURANCE COMPANY. THE COMPANY ASSUMES NO LIABILITY FOR ANY LOSS, COST, OR EXPENSE INCURRED BY YOU BECAUSE YOUR ATTORNEY OR YOUR LENDER'S ATTORNEY HAS MADE A MISTAKE OR MISAPPLIED YOUR FUNDS. Because the attorney is not our agent, we assume no responsibility for any information, advice or title insurance promises the attorney may give or make. Our only liability to you is under the terms of the Commitment, Policy and Closing Service Letter if you choose to obtain one.

First American also issued two closing service letters (CSLs) to Gateway, both of which identified Gensib as the closing attorney. The CSLs contained the following language: "THIS LETTER DOES NOT APPOINT THE ABOVE NAMED ATTORNEY AS AN AGENT OF FIRST AMERICAN TITLE INSURANCE COMPANY."

Prior to the closing, Gateway sent Gensib closing instructions and documents for Wexler and Stavros to sign at the closing. The closing instructions required Gensib to submit a signed final HUD-1 Uniform Settlement Statement (HUD-1) to Gateway.

Gensib prepared two HUD-1s, both of which listed the purchase price as $250,000, but differed significantly in other ways. For example, the first HUD-1, which Gensib returned to Gateway, listed deductions totaling $138,451.094 and $111,548.91 cash to Stavros. The second HUD-1 listed deductions totaling $222,070.055 and $27,929.95 cash to Stavros. In addition, although both HUD-1s indicated that Wexler paid $30,129.95 at closing, she made no payment.

On September 15, 2006, Stavros, Karpontinis, Wexler, Victor and Blough attended the closing at Gensib's office. Stavros and Wexler signed the two HUD-1s Gensib had prepared. Stavros also signed a document stating that he received no money from the sale and Gensib did not represent him. In addition, Karpontinis and Wexler executed a lease for one year, beginning August 21, 2006.6 The lease required Karpontinis to pay monthly rent, and purchase the home for $255,000 no later than September 17, 2007.

Following the closing, Gensib paid Stavros's mortgage balance and a portion of Karpontinis's debts totaling $15,181.22, plus closing costs. Plaintiffs alleged there were net proceeds of $86,207.96, and that Gensib fraudulently "pocketed" $8389 for himself and paid $77,818.96 to Wexler, Victor, Blough and Multi-Solutions.

As of November 1, 2008, Karpontinis owed $20,000 in back rent plus court costs. An eviction occurred, but Karpontinis subsequently re-entered the home after entering into an agreement with Wexler. After Karpontinis's second default, Wexler filed a landlord/tenant complaint based on non-payment of rent in the amount of $17,032. Wexler subsequently defaulted on her mortgage, resulting in the filing of a foreclosure complaint against her and "tenants/occupants."

Plaintiffs filed a complaint in the Law Division against Wexler, Victor, Blough and Multi-Solutions, asserting claims of consumer fraud, common law fraud, breach of contract, and unjust enrichment in connection with the sale of the home. In an amended complaint, plaintiffs added First American as a defendant and alleged that First American was vicariously liable for Gensib's actions, among other things.

First American filed a summary judgment motion, which the trial judge granted. The judge found that Karpontinis had no claim against First American because they never owned the home; Stavros had no claim because he was not a named insured under the title insurance policy; and Stavros could not have reasonably relied on the title insurance policy or the CSLs because those documents did not provide coverage to the seller. The judge declined to expansively read the holding in Sears Mortg. Corp. v. Rose, 134 N.J. 326 (1993), to impose liability on First American. This appeal followed.

Our review of a ruling on summary judgment is de novo, applying the same legal standard as the trial court. Coyne v. N.J. Dep't of Transp., 182 N.J.481, 491 (2005); Tymczyszyn v. Columbus Gardens, 422 N.J. Super. 253, 261 (App. Div. 2011), certif. denied, 209 N.J.98 (2012). Thus, we consider, as the trial judge did, "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill, supra, 142 N.J. at 536). Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). If there is no genuine issue of material fact, we must then "decide whether the trial court correctly interpreted the law." Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007), certif. denied, 195 N.J. 419 (2008). We review issues of law de novo and accord no deference to the trial judge's conclusions on issues of law. Zabilowicz v. Kelsey, 200 N.J. 507, 512-13 (2009). Applying these standards, we conclude that the trial judge properly granted summary judgment.

Relying primarily on Sears and Clients' Sec. Fund of the Bar of N.J. v. Sec. Title & Guar. Co., 134 N.J. 358 (1993) (Clients' Sec.),7 plaintiffs contend that First American is liable to them because Gensib was its agent in conducting the closing, First American created the appearance of apparent authority on which plaintiffs reasonably relied, and First American placed Gensib in a position to commit a fraud by placing him in control of the closing funds.

"'A title insurance policy is a contract that protects a landowner against loss caused by defective title to the land.'" N.J. Lawyers' Fund, supra, 203 N.J. at 217 (quoting Shotmeyer v. N.J. Realty Title Ins. Co., 195 N.J. 72, 82 (2008). Individuals who are not "named insureds" under the policy cannot recover. Shotmeyer, supra, 195 N.J. at 87. Plaintiffs are not named insureds under the title insurance policy, and neither the policy nor the CSLs extended coverage to them. Accordingly, plaintiffs have no claim against First American under the policy.

In addition, there is no authority that permits a seller or non-party to a real estate transaction, such as Karpontinis, to recover against a buyer's title insurer under the theories of agency or apparent authority. Neither Sears nor any of the cases plaintiffs cite extend a title insurer's liability for a closing attorney's defalcations to a seller, such as Stavros, or non-owners and non-parties to the real estate transaction, such as Karpontinis. We decline to expansively read Sears to create such liability.

1 We shall sometimes refer to Stavros and Karpontinis collectively as plaintiffs.

2 Victor is Wexler's husband.

3 Wexler and Blough advertised Multi-Solutions as a company that dealt with foreclosures, bankruptcies, late mortgage payments, liens, judgments and poor credit. It offered "a new source of funding that can finance homeowners facing the most problematic situations."

4 The deductions included $4,051.69 in settlement charges.

5 The deductions included an additional $12,100 for "rent differential," $67,918 for "other debts-Multi-Solutions," and $3600 for an "open judgment."

6 The lease was extended.

7 Plaintiffs also cite cases that do not apply here, such as Lawyer's Title Ins. Corp. v. Phillips Title Agency, 361 F. Supp. 2d 443 (D.N.J. 2005) (involving a title insurance company's involvement in a mortgage scam); N.J. Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co., 203 N.J. 208 (2010) (N.J. Lawyers' Fund) (involving the buyers' claim against their title insurance company for the closing attorney's theft of closing funds); First Am. Title Ins. Co. v. Vision Mortg. Corp., 298 N.J. Super. 138 (App. Div. 1997) (involving a closing attorney's fraud on the insured mortgage lender).