New York Supreme Court Holds Title Insurance Company Not Liable for Fraud Claim Made by Former Owner of Property

The Supreme Court of New York, Suffolk County, recently granted Fidelity National Title Company’s (“Fidelity”) motion to dismiss and held that Fidelity could not be liable to the former owner of a property for fraud.  See DeMaio v. Fidelity Nat. Title Co., Docket No. 31159/2012 (N.Y. Sup. Ct. 2018).  In the case, plaintiff was the owner of the property at issue.  Plaintiff purportedly sold the property to a couple, the Capozellos, and the Capozellos sold it again to defendant Stephen Zangre.  Zangre encumbered the property with a mortgage to defendant Wells Fargo’s assignor.  Plaintiff later reobtained title to the property via a separate action based on allegations of fraud and deceit against the Capozellos, and then brought this action against Wells Fargo seeking to void the mortgage on the property.  During the course of discovery, plaintiff served a subpoena on Fidelity, who had issued the title insurance policies to Zangre and Wells Fargo’s assignor.  Plaintiff eventually served Fidelity with a third-party complaint asserting claims of fraud and falsification of records regarding the sale from the Capozellos to Zangre.  The claim was based on the allegation that Fidelity knew of plaintiff’s claim against Capozellos at the time of the sale to Zangre but nonetheless closed the sale.  Fidelity moved to dismiss.

The Court granted Fidelity’s motion.  First, it found that plaintiff’s fraud claim failed because there was no allegation of any representation made by Fidelity to plaintiff.  “Plaintiff was not in privity with Fidelity; he is not the beneficiary of the title insurance policies; and Fidelity’s issuance of the title insurance policies to Zangre and Wells Fargo did not in itself result in any injury to plaintiff.”  Second, because there could be no fraud claim, the falsification of records claim that was based on an alleged concealment of documents evidencing the fraud also failed.  Finally, the Court found that the fraud claim was barred by the statute of limitations because plaintiff had known about the title insurance policies since 2006.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Dylan Goetsch at dgoetsch@riker.com.