Greenpoint Mtge. Funding Inc. v Stewart Tit. Ins. Co.
Annotate this CaseDecided on August 11, 2006
Supreme Court, Nassau County
Greenpoint Mortgage Funding Inc., Plaintiff,
against
Stewart Title Insurance Company, Defendant.
6208-04
COUNSEL FOR PLAINTIFF
Cullen and Dykman,LLP
100 Quentin Roosevelt Boulevard
Garden City, New York 11530-4850
COUNSEL FOR DEFENDANT
Salamon, Gruber, Newman, Blaymore & Strenger, P.C.
97 Powerhouse Road - Suite 102
Roslyn Heights, New York 11577-2016
Leonard B. Austin, J.
Plaintiff GreenPoint Mortgage Funding Inc. ("GreenPoint") moves for summary judgment on its complaint and dismissal of Defendant's counterclaim. On granting summary judgment, Greenpoint seeks judgment in the sum of $402,500.
Defendant Stewart Title Insurance Company ("Stewart") cross-moves for summary judgment dismissing the complaint, and a money judgment of $71,914.71 on its counterclaim.
BACKGROUND
This is a simple action for breach of contract. Plaintiff alleges that it is an insured under a title insurance policy issued by Stewart on June 23, 1999, in connection with a refinanced mortgage loan originated by Royal Mortgage Bankers, Inc. ("Royal") and assigned to and funded by Plaintiff at closing.
After the trial court in the underlying action ("Crispino action") set aside a forged deed and the mortgage that was assigned to Plaintiff, Plaintiff commenced this action to recover the value of the mortgage under its title insurance policy.
The borrower on the loan was Louis Crispino ("Crispino"), a principal of Royal. At the closing on the loan, Crispino submitted a deed purportedly signed by his wife, conveying to himself his wife's interest in the mortgaged property. The deed was notarized by a Royal employee. Mrs. Crispino did not attend the closing.
Stewart's title closer, Barry Rosen, accepted the deed for recording. Mr. Rosen testified that he did not attempt to personally contact Mrs. Crispino, but rather chose to verify the authenticity of the deed by asking Mr. Crispino if his wife was alive and well (Moving papers, Ex. E).
The loan proceeds were not disbursed at closing because the borrower had a three-day right of recission. The loan proceeds were actually disbursed five days after the closing.
Rather than funding the loan by payment to Royal, GreenPoint instead "table funded" the loan; that is, it disbursed the funds to or on behalf of Crispino. In its papers, [*2]GreenPoint notes that table funding is a common method of funding loans whereby the loans are "processed, originated and closed in the name of a mortgage banker but underwritten and funded by a wholesaler such as GreenPoint. The loan is assigned by the mortgage banker to the wholesaler simultaneously with the closing" (Richter aff., ¶ 6). The benefit to the mortgage banker is that it can offer more varied types of mortgage packages to its customers. The benefit to the wholesaler is that most of the loan processing is completed by the mortgage banker, thereby limiting overhead.
On his deathbed in January, 2001, Crispino revealed to his wife that he had forged her name on a deed. After Crispino died, his wife commenced the Crispino action in Suffolk Supreme Court entitled Linda Crispino v GreenPoint Mortgage Corp., et al., Index No. 01-3244, seeking inter alia, a declaration that the forged deed was a nullity, and setting aside the mortgage assigned to GreenPoint. By order dated September 6, 2001 (Moving papers, Ex. J), this relief was granted. By order dated January 7, 2002, GreenPoint's counterclaim for equitable subrogation was dismissed. These decisions were affirmed at 304 AD2d 608 (2nd Dept. 2003).
GreenPoint then sought indemnification for its loss from Stewart based on the title insurance policy issued at the closing. After Stewart denied indemnification, GreenPoint commenced this action for its loss of $402,500.00. Stewart counterclaimed for payment of the costs it incurred in the defense of GreenPoint in the Crispino action in the amount of $71, 914. 71. Both sides now move for summary judgment.
DISCUSSION
Summary judgment is a drastic remedy which will be granted only when it is clear that there are no triable issues of fact. Andre v. Pomeroy, 35 NY2d 361, 364 (1974); and Stewart Title Ins. Co., Inc., v. Equitable Land Services, Inc., 207 AD2d 880 (2nd Dept. 1994). The party seeking summary judgment must establish a prima facie entitlement to judgment as a matter of law. Alvarez v Prospect Hosp., 68 NY2d 320, 324 (1986); and Zuckerman v. City of New York, 49 NY2d 557, 562 (1980).
Once the party seeking summary judgment has made a prima facie showing of entitlement to judgment as a matter of law, the party opposing the motion must come forward with proof in evidentiary form establishing the existence of triable issues of fact, or demonstrate an acceptable excuse for its failure to do so. Alvarez v. Prospect Hosp., supra; and Zuckerman v. City of New York, supra. Mere conclusions, expressions of hope or unsubstantiated allegations are insufficient Id. at 562.
A title company's obligation is determined by reference to the provisions of the policy of title insurance (Cummins v. US Life Title Ins. Co. of New York, 40 NY2d 639, 640 [1976]), and is based on contract law (Logan v. Barretto, 251 AD2d 552 [2nd Dept.], lv. app. den. 92 NY2d 815 [1998]; Ben-Avraham v. Lawyers Title Ins. Corp., 5 Misc 3d 791 [Sup. Ct., NY Co, 2004]). The title insurance contract must be construed most strongly against the party which drafted it. Herbil Holding Co v Commonwealth Land Title Ins. Co., 183 AD2d 219, 227 (2nd Dept. 1992). In the absence of an ambiguity, it is the court's obligation to determine the rights or obligations of parties under title insurance contracts based upon the specific language of the policies. Wolf v. Commonwealth Land Title Ins. Co., 180 Misc 2d 307, 308 (App. Term, 1st Dept. 1999).
In this case, two provisions of the Stewart Title Policy (Moving papers, Ex. C) are at issue. GreenPoint must establish that it is an insured under Stewart's title policy, and [*3]that it is not subject to any exclusion under the policy. The relevant provisions of the Stewart title policy, are as follows. The term "insured" is defined to include:
the owner of the indebtedness secured by the insured mortgage and each successor in ownership of the indebtedness except a successor who is an obligor under the provisions of Section 12(c) of these Conditions and Stipulations (reserving, however, all rights and defenses as to any successor that the Company would have had against any predecessor insured, unless the successor acquired the indebtedness as a purchaser for value without knowledge of the asserted defect, lien, encumbrance, adverse claim or other matter insured against by this policy as affecting title to the estate or interest in the land) (emphasis added); Policy, Conditions and Stipulations, par. 1(a)(1).
The Stewart title policy expressly excludes from coverage:
Defects, liens, encumbrances, adverse claims or other matter(s) created, suffered, assumed or agreed to by the insured claimant; . . .(emphasis added) Policy, Exclusions from Coverage, par. 3(a).
I. Is Greenpoint an Insured under the Stewart Title Policy?
In order to be found to be an insured under the Stewart title policy, GreenPoint must establish that it was a purchaser for value without knowledge of the forged deed. The documentary evidence establishes that GreenPoint is the assignee of Royal. Royal is identified as the "Lender" on both the mortgage and the note (Moving papers, Ex. W ), and Royal executed an assignment to GreenPoint (Moving papers, Ex. D ).
GreenPoint was held to be the assignee of Royal in the Crispino action by both the trial court and the Appellate Division. In consideration for the assignment of the Crispino note and mortgage, GreenPoint table funded the loan and, in addition, paid the funds needed to pay the New York State mortgage recording tax and a recording fee to Royal. (Richter aff., ¶ 35). Under these circumstances, GreenPoint was a purchaser for value.
The senior underwriter of the Crispino mortgage, Raymond Ludwig, avers that the loan "was underwritten in the ordinary course of business and nothing contained in the file was indicative that anything was out of the ordinary or inappropriate. (Ludwig aff., ¶ 9; see also, Richter aff.,¶ 36). GreenPoint has also explained that the information that Mrs. Crispino would not execute the note and mortgage and would instead have her name taken off the deed, was of no consequence because Mrs. Crispino's credit was not a consideration and the verification of the conveyance removing her from title was the responsibility of the title company (Richter aff., ¶ 29).
GreenPoint has thus established a prima facie case that it is a "purchaser for value without knowledge of the defect." Therefore, it is an insured under the Stewart Title Policy.
In opposition, Stewart first argues that GreenPoint is not a purchaser for value of the Crispino mortgage because Royal gave up nothing of value and received no value. This argument fails because $402,500.00 was disbursed to, or on behalf of, Crispino and Royal. That the monies remained in escrow after the closing date, because of Crispino's three-day right of rescission, does not alter the indisputable fact that [*4]$402,500.00. changed hands.
Stewart next argues that Royal was GreenPoint's alter ego, and therefore not a successor-in-interest to Royal. This argument is equally unpersuasive. "Alter ego" has a clearly defined meaning in law; namely, where one entity exercises complete domination and control over the day-to-day operations of another entity. See, Matter of Morris v. New York State Dept. Of Taxation & Fin., 82 NY2d 135, 141 (1993); and Almonte v. Western Beef, Inc., 21 AD3d 514 (2nd Dept. 2005). Closely associated corporations, even ones that share directors and officers, will not be considered alter egos of each other if they were formed for different purposes, neither is a subsidiary of the other, their finances are not integrated, assets are not commingled and the principals treat the two entities as separate and distinct. Longshore v. Paul Davis Systems of the Capital Dist., 304 AD2d 964, 965 (3rd Dept. 2003)]. The record contains no evidence that GreenPoint is the alter ego of Royal.
Stewart further asserts that GreenPoint should have known that there was a problem at closing for various reasons. However, none of the reasons alleged by Stewart rendered the transaction out of the ordinary. For example, the fact that Jack Beige, Royal's attorney and a principal of Royal, did not attend the closing is of no moment, as Beige testified that he authorized an employee, Flora Inselaco, to execute documents with his name at the Crispino closing (Cross-motion, Ex. T).. Similarly, a pre-closing document from April, 1999, (Cross-motion, Ex. J), which required "Linda Crispino to sign the mortgage and right to recission (sic) at closing" is not evidence of a problem, as it is not disputed that changes were made during the months that intervened between the application and the closing (Cross-motion Ex. M), and later documents indicated that Mrs. Crispino was "coming off completely" (Cross-motion, Ex. O).
Nor has Stewart established a basis for its conclusory claims that GreenPoint must be charged with the knowledge of Royal and Jack Beige because Royal, in general, and Beige, in particular, acted as GreenPoint's agents. The record is clear that Beige represented Royal at the closing. Accordingly, Stewart has failed to raise a triable issue of fact as to why GreenPoint is not a "purchaser for value and without knowledge" such as to fall within the definition of an insured in Stewart's title policy.
II. Is an Exclusion from the Stewart Title Policy Applicable?
The next inquiry is whether the exclusion to policy coverage for a defect "created, suffered, assumed or agreed to by the insured claimant" is applicable. GreenPoint argues that throughout the three-day hearing in the Crispino action, no evidence was presented that GreenPoint agreed to the forgery, took part in the forgery or had any knowledge whatsoever of the forgery.
GreenPoint notes that it was denied equitable relief in the Crispino action solely on the basis that Royal, GreenPoint's assignor, perpetrated the fraud involved. As between GreenPoint and Mrs. Crispino, GreenPoint was denied equitable relief. However, in this action for damages for breach of contract, the equitable defense of unclean hands is not available. See, Manshion Joho Center Co., Ltd v. Manshion Joho Center, Inc., 24 AD3d 189 (1st Dept. 2005). Even if that were not the case, the equities between GreenPoint and Stewart favor GreenPoint.
In opposition, Stewart insists that GreenPoint falls within the policy exclusion [*5]because of Royal's fraud. However, there is no evidence of an agency or alter ego relationship to serve as a basis for imputing Royal's fraud to GreenPoint. Furthermore, Stewart's attempt to label GreenPoint as the party who "enabled the fraud to be committed" is completely inaccurate. On this record, there can be no doubt that it was the conduct of title closer, Barry Rosen, in failing to verify the authenticity of the signature of Linda Crispino at the closing, that enabled the fraud to be committed.
Finally, Stewart argues that it was not the forged deed that resulted in a loss to GreenPoint; rather, the loss was caused by the subsequent death of Louis Crispino which extinguished the mortgage. This argument fails to take into account that even if Crispino had not died, GreenPoint's lien on the property would not have been as insured; namely, fee simple title to the property was vested in Louis Crispino and GreenPoint had a valid lien on Crispino's entire fee simple interest.The Court finds that GreenPoint has made a prima facie showing that it does not fall within the exclusion for defects "created, suffered, assumed or agreed to by the insured claimant. "In opposition, Stewart has failed to raise a triable issue of fact, instead relying upon unsubstantiated or conclusory allegations.
Overall, the Court finds that Stewart was paid to insure against any defect in title, not to second guess the wisdom of making the loan (see, Lawyers Title Ins. Corp. v. First Federal Sav. Bank & Trust, 744 F. Supp. 778 [E.D. Mich. 1990]), as it has on this record. Stewart's title policy insured against the possibility of defects in the title held by Louis Crispino, and now it must make good on its promise. GreenPoint's motion for summary judgment on its complaint in the amount of $402,500.00 must be granted, and Stewart's cross-motion for dismissal of the complaint must be denied.
Based upon the findings that GreenPoint is an insured under Stewart's title policy, and no exclusion applies, Stewart was required to defend GreenPoint in the Crispino action. As a result, Stewart's counterclaim to recover the legal fees it incurred in its defense of GreenPoint in the Crispino action must be dismissed.
Accordingly, it is,
ORDERED, that Plaintiff's motion for summary judgment on the complaint in the sum of $402,500.00, and dismissal of Defendant's counterclaim, is granted, and it is further,
ORDERED, that Plaintiff is hereby granted leave to enter a Clerk's judgment in its favor and against Defendant in the sum of $402,500 together with interest from July 2, 2003 and costs and disbursements as taxed by the Clerk; and it is further,
ORDERED, that Defendant's cross-motion for summary judgment dismissing the complaint, and awarding it $71,914.71 on its counterclaim, is denied.
This constitutes the decision and Order of the Court.
Settle judgment.
Dated: Mineola, NY
August 11, 2006______________________________
HON. LEONARD B. AUSTIN, J.S.C.
[*6]
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