New Jersey Federal Court Dismisses Defamation Claim Against Title Insurer for Letter to Prior Property Owner Regarding Unpaid Mortgage

The United States District Court for the District of New Jersey recently dismissed a prior property owner’s defamation suit brought against a title insurance company after the company sent a letter regarding a mortgage the seller failed to disclose or discharge.  See Ezeiruaku v. Fid. Nat'l Title Ins. Co., 2020 WL 5587438 (D.N.J. Sept. 18, 2020).  In 2012, plaintiff sold a property to a third party via a bargain and sale deed with a covenant against grantor’s acts stating that there were no liens or encumbrances on the property.  In 2019, the defendant title insurance company sent plaintiff a letter seeking indemnification for a mortgage plaintiff failed to disclose, and plaintiff brought this action alleging defamation.  According to plaintiff, “the letter accuses him of having committed a crime by fraudulently and knowingly conveying an encumbered property while stating that it was free of encumbrances” and “this letter was made available not only to other employees of [defendant] who had access to the claim file for the property’s title insurance, but also to the purchasers of the property and a third-party bank.”  Defendant moved to dismiss.

The Court granted the motion and dismissed the complaint with prejudice.  First, it found that plaintiff admitted that he encumbered the property with a mortgage in 2005 and continues to pay it – “not only acknowledging the existence of the mortgage, but also making clear that Plaintiff knows that the mortgage was still outstanding almost 8 years after the 2012 conveyance.”  Thus, the allegation in the letter was true, and this alone was grounds to dismiss the defamation claim.  Second, the Court found that the letter was not defamatory.  The letter did not accuse plaintiff of committing any crime or fraudulent act, and instead simply stated that plaintiff conveyed the property with the mortgage and that plaintiff was responsible for the mortgage payments.  Finally, the Court found that plaintiff did not sufficiently allege that the letter was published, and accusations that the letter was “available” to defendant’s employees, the purchaser, or the bank are insufficient.  Accordingly, the Court dismissed the claims with prejudice, finding that “[a]s the Court finds that Defendants’ statements were true, Plaintiff's claims are not capable of being cured and further amendments would be futile.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Anthony Lombardo at alombardo@riker.com.