United Gen. Tit. Ins. Co. v Meridian Abstract, Corp.
Annotate this CaseDecided on December 17, 2010
Supreme Court, Nassau County
United General Title Insurance Company, Plaintiff,
against
Meridian Abstract, Corp. and Anthony M. Bellini, Defendants.
017502/08
Ira B. Warshawsky, J.
PRELIMINARY STATEMENT
United General Title Insurance Company ("UGTIC") has moved for summary judgment in
its action against Meridian Abstract, Corp. and Anthony M. Bellini.
The action arises because a property that defendant Meridian caused to be insured by
plaintiff with a guaranty of "free and clear title" was still encumbered by a mortgage for which payoff
funds had not been secured at closing by defendant Meridian. The error resulted because a
representative of Meridian relied on a "payoff letter" that contained false payoff figures to secure payoff
funds that were insufficient to pay the full amount of the mortgage that encumbered the property. When
payoff was attempted, the shortfall was $105,170.49. Although the defendants' [*2]Answer denies most allegations in the Complaint, the submissions on this
motion, including affidavits and depositions of Meridian's representatives, admit to these facts.
The terms of the contract between Meridian and plaintiff UGTIC are not disputed. UGTIC
agreed to "appoint[] Agent [Meridian] as its representative or agent for the limited purpose of
originating and soliciting applications for and to sign, counter-sign, collect premiums for and issue, on
behalf of Company title insurance products of the Company... according to the rules, regulations,
procedures, instructions and directives of the Company..." (Robinson Aff. Ex. C, ¶ 2.1). In
exchange for such appointment and provision of title insurance, Meridian promised to undertake certain
duties and responsibilities, including to "[m]aintain and operate a business office devoted to the conduct
of a title insurance agency business, according to sound and ethical business principles...," (id.
at ¶ 3.1[1]) to "[c]omply with all instructions, bulletins, manuals, requirements, directives,
guidelines, rules and regulations established and promulgated, from time to time by the Company,"
(id. at ¶ 3.1[2]) and to "[d]etermine insurability of title to each and every parcel of land to
be insured" based on a thorough examination and investigation of abstract of title, public records, and
title reports and opinions. (Id. at ¶¶ 3.1[3][a]-[c]).
Meridian also agreed to indemnify plaintiff UGTIC for losses which UGTIC sustains as a
result of "[f]ailure of Agent to comply with the terms of this Agreement including but not limited to... the
rules, regulations, directives, policies, procedures, or instructions given to Agent by Company"
(id. at ¶ 5.1) and "[e]rrors or omissions which are disclosed by the application for title
insurance, examiner's report, searcher's report or other defects, liens encumbrances or matters affecting
title to real property which were known to the Agent or, in the exercise of ordinary care and due
diligence, should have been known to Agent" (id. at ¶ 5.2).
PROCEDURAL
STANDARD
Summary judgment terminates a case before a trial, and it is
therefore a drastic remedy that will not be granted if there is any doubt with regard to a genuine issue of
material fact, since it is normally the jury's function to determine the facts. (Sillman v. Twentieth
Century-Fox Film Cor., 3 NY2d 395 [1957]). When summary judgment is determined on the
proof, it is equivalent to a directed verdict: if contrary inferences can reasonably be drawn from the
evidence, then genuine issues of material fact preclude summary judgment. (Gerard v. Inglese,
11 AD2d 381 [2d Dep't 1960].
It is not the court's function to weigh the credibility of contradictory proof on a motion for
summary judgment. (Ferrante v. American Lung Assoc., 90 NY2d 623 [1997]). Thus the
evidence will be considered in the light most favorable to the opposing party. (Tortorello v. Carlin,
260 AD2d 201, 206 [1st Dept. 2003]). However, where a party is otherwise entitled to a
judgment as a matter of law, an opposing party may not simply manufacture a feigned issue of fact to
defeat summary judgment. A material issue of fact "must be genuine, bona fide and substantial to
require a trial." (Leumi financial Corp. v. Richter, 24 AD2d 855 [1st Dep't 1965] quoting
Richard v. Credit Suisse, 242 NY 346 [1926]).
If a party has presented a prima facie case of entitlement to summary judgment, because
no triable issues of material fact exist, the opposing party is obligated to come forward and bare his
proof by affidavit of an individual with personal knowledge, or with an attorney's affirmation to which
appended material in admissible form, and the failure to do so may lead the court to [*3]believe that there is no triable issue of fact. (Zuckerman v. City of
New York, 49 NY2d 557, 562 [1980]).
Summary judgment is therefore appropriate only if a party is entitled to judgment as a
matter of law, either, because any dispute involves only issues of law (see Alvarez v. Prospect
Hospital, 68 NY2d 320 [1986], because the record objectively establishes that a party will not be
support its allegations or otherwise meet its burden of proof (Ferluckaj v. Goldman Sacks &
Co., 12 NY3d 316 [2009]), or because any unresolved factual dispute is immaterial to the ultimate
judgment or it arises from patently incredible evidence (Bank of New York v. 125-127 Allen Street
Assoc., 59 AD3d 220 [1st Dep't 2009]; see Glick v. Dolleck, Inc. v. Tri-Pac Export
Corp., 22 NY2d 439, 441 [1968]).
DISCUSSION
In support of
summary judgment, the plaintiff has submitted the affidavit of a representative of NovaStar, which held
the mortgage on the premises at issue, which avers that the company's computers log all incoming calls
for each account and there is no record of a call to verify the payoff figures for the mortgage. (Robinson
Aff. Ex. H, "Connely Aff."). The plaintiff has also submitted telephone records which indicate that no
call from Meridian's representative was placed to NovaStar's toll free number as reflected on the payoff
letters (including the letter with false figures). (Robinson Aff. Ex. I). The plaintiff has also submitted
expert testimony to establish that verification of inconsistent mortgage and payoff amounts was
customary and necessary in the exercise of due diligence at real estate closings, as well as some
company literature and bulletins which indicated that plaintiff's agents should always verify the payoff
amounts. (Robinson Aff. Exs. N & O). Finally, plaintiff has submitted the inconsistent testimony of
Meridian's representative, Kaplan, to indicate that Meridian had knowledge of the inconsistent figures
but did not verify the payoff amount. (Robinson Aff. Ex. J).
In response, the defendants submit that Meridian was entitled to rely on the payoff letter,
and that in any case, its representative Kaplan did verify the payoff figures by speaking with NovaStar.
In proof, defendant Meridian submits the affidavit of Aleksey Kaplan, averring that he was the title
closer at the transaction at issue, and that "[i]n every real estate closing in which I have acted as the title
closer, I have always verified the amount of the payoff letter on the date of the closing. Thus, on May 1,
I telephoned NovaStar to verify the payoff amount set forth in the payout letter..." (Bellini Aff. Ex. B,
"Kaplan Aff."). Defendants also submit the deposition testimony of Mr. Kaplan (Bellini Aff. Ex. C,
"Kaplan Dep.") and an affidavit by the sellers, averring that the payoff figures were correct as
represented to the title closer. (Bellini Aff. Ex. J, "Alejo Aff.").
The sole issue that could remotely demand a trial in this case is whether the representative
of Meridian, Mr. Kaplan, verified with NovaStar the payoff figures for the mortgage that was still
encumbering the premises to be sold. Though the issue is simple and easily supportable, the defendants
have utterly failed to come forward with their proof, available only to them, to verify the inconsistent
and incredible allegations by Meridian's representative that he in fact verified the mortgage amounts
(Kaplan Aff. ¶ 4) or that he tried calling to verify the payoff amounts but his call was re-routed.
(Kaplan Dep. 44 — 45). The defendants have not produced any documentation or business
records (as might be kept in the exercise of due diligence) which would indicate whom Kaplan spoke
to in order to verify the payoff figures; nor have they produced any [*4]telephone records which might indicate that Kaplan did attempt to reach
a representative of NovaStar. Indeed, the Agreement with the plaintiff required Meridian to maintain
accurate and complete records of any title that was insured as free and clear through Meridian's closing
agents. (Robinson Aff. Ex. C ¶ 3.1[4]).
The plaintiffs have presented a prima facie case of entitlement to summary judgment. The
contract required Meridian to follow particular procedures in the exercise of due diligence, and
Meridian agreed to indemnify UGTIC for failure to follow such procedures or for causing UGTIC to
insure title despite "[e]rrors or omissions which are disclosed by the application for title insurance... or,
in the exercise of ordinary care and due diligence, should have been known to the Agent." (Robinson
Aff. Ex. C ¶ 5.2). Meridian in fact caused UGTIC to insure title in this case despite knowledge of
a prior mortgage in the amount of $309,724.94, dated only two months before this closing was to
occur.
But for Mr. Kaplan's inconsistent testimony regarding verification of the payoff figures, all
issues are admitted to or matters of law. Though defendants argue in their memorandum of law that no
verification call was required under contract, they fail to appreciate clause 5.2 of the contract. In this
case, it is undisputed that the title report and other documents had revealed a prior mortgage
encumbering the property for $309,724.94 as of March 10, 2006, and yet Meridian caused UGTIC to
insure title with only $203,724.94 secured as payoff funds for the prior mortgage.
As a term of art in real estate transactions, this court may interpret the ambiguous term
"due diligence" in light of trade practice and usage. (See 22 NY Jur. 2d Contracts § 230,
and citations therein). The plaintiffs have presented expert testimony establishing that verification of the
pay off figures was part of the standard "due diligence" that a closing agent must perform. (Robinson
Aff. Ex. N). Moreover, the literature that UGTIC submits establishes that bulletins and directives which
Meridian was required by its contract to follow, required it to verify payoff figures. (Robinson Aff. Ex.
O)
A representative of NovaStar, Julia Connely, avers that NovaStar's computer records
logged all incoming calls, including those for payoff verification. Connely avers that the payoff figures
provided to the defendants were those for $309,724.94 and that no representative from Meridian ever
called NovaStar to verify the payoff figures. (Connely Aff. paras. 3-4).
Kaplan's statements alleging that he called NovaStar, or that he attempted to call
NovaStar but his call was surreptitiously re-routed fails to raise a genuine triable issue of fact. The
reasoning that applies to these facts is analogous to the doctrine of res ipsa loquitur in negligence: the
false figures could have been so easily discovered, that such figures would not have been relied upon,
but for either Meridian's or NovaStar's failure to exercise due diligence in checking the payoff figures.
In other words, either NovaStar provided incorrect confirmation of payoff figures (for which there is no
evidence in the record), or Kaplan failed to perform due diligence to verify the payoff figures. The court
notes that the third option, suggested for the first time by Kaplan at his deposition, that the call was
surreptitiously re-routed from the toll-free number, is incredible on its face without further support.
Kaplan admits that he learned four weeks after the closing that the property that he helped
guaranty with free and clear title was still encumbered by a shortfall in the payoff amount. (Kaplan Dep.
20: 21-23). Yet at that time he did not raise the issue that NovaStar had negligently [*5]provided and verified incorrect payoff figures.
Under well established case-law, a feigned issue of fact cannot defeat summary judgment.
Kaplan's Affidavit and Deposition are inconsistent and at times patently incredible. Though Kaplan's
allegation was easily supportable, defendants failed to bare their proof on this issue. Moreover, even if
Kaplan's testimony was believed, it still fails to explain why oral verification of the payoff figures was
sufficient due diligence in the industry where there is $100,000 discrepancy in the amount of the
mortgage as of March 10, 2006 and May 1, 2006.
CONCLUSION
Plaintiffs proffer of
proof and law creates a prima facie case for judgment as a matter of law, as no genuine and triable
issues of fact arise from the evidence. Defendants' proof fails to rebut the plaintiffs' entitlement to
judgment as a matter of law and to raise any issues of fact which demand the resources of a trial.
Plaintiff's motion is granted.
Submit Judgment.
This constitutes the Decision and Order of the Court.
Dated: December 17, 2010
J.S.C.
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