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New Jersey Federal Court Dismisses Claims Against Title Insurance Company and Its Attorney After Owner Sold Property Banner Image

New Jersey Federal Court Dismisses Claims Against Title Insurance Company and Its Attorney After Owner Sold Property

Month: December 2019

New Jersey Federal Court Dismisses Claims Against Title Insurance Company and Its Attorney After Owner Sold Property

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The United States District Court for the District of New Jersey recently dismissed a breach of contract and a legal malpractice claim against a title insurance company after the insured owner sold the property.  See Westcor Land Title Ins. Co. v. Alicea, 2019 WL 6724311 (D.N.J. Dec. 10, 2019).  In 2004, a prior owner of the property at issue executed a mortgage on the property.  However, the mortgage was improperly recorded.  In 2009, the defendant purchased the property and obtained a title insurance policy from First American.  In 2014, defendant learned about the misrecorded mortgage and informed First American.  According to defendant, an attorney at First American replied that “they would handle [it].”  In 2015, the lender commenced a foreclosure action on the misrecorded mortgage and, in 2016, defendant sold the property and executed an affidavit of title without informing the new purchaser of the mortgage or the foreclosure action.  In 2019, the title insurance company who issued the policy in connection with the 2016 sale brought this action against defendant for negligent and fraudulent misrepresentations.  Defendant then brought a third-party complaint against First American and its attorney for breach of contract and legal malpractice.  The third-party defendants brought this motion to dismiss.

The Court granted the motion to dismiss.  The Court first dismissed the breach of contract claim against First American.  First, the Court found that the policy’s continuation terms states that coverage continues after the insured sells the property for warranties made in the deed.  In this case, defendant’s deed to the new owner only contained a covenant as to grantor’s acts, which other courts have found is not a warranty under this policy term.  Accordingly, defendant’s coverage under the policy terminated on sale.  Second, the Court found that the complaint made claims of negligent and fraudulent misrepresentations against defendant based on the affidavit of title defendant signed in 2016.  Because this claim arose post-policy, it was barred under Exclusion 3(d) of the policy.  Finally, the Court found that there was no attorney-client relationship between First American’s in-house attorney and the defendant, and dismissed the malpractice claim.

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

Legislative and Litigation Update

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For more information about this blog post, please contact Khaled J. Klele, Latoya Caprice Dawkins, or Ryan M. Magee.

New Jersey State Regulatory Issues

51 N.J.R. 1806(a) – Notice of Action on Petition for Rulemaking

The Department of Health received a petition to make amendments to N.J.A.C. 8:43G, the Hospital Licensing Standards, in Subchapter 14 Infection Control, at N.J.A.C. 8:43G-14.9, Sepsis protocols.  We previously reported that the Department confirmed receipt of the petition.  At this time, the Department has not decided on the petition and has referred the petition to the Division of Certificate of Need and Licensing to evaluate, and make recommendations as to the appropriateness of granting the petition.

Federal Statutory Update

H.R. 3 – Passed the House – As we previously reported, this proposed statute requires CMS to negotiate prices for certain drugs, which current law forbids CMS from doing.  Under the proposed statute, CMS must negotiate maximum prices for (1) insulin products and (2) at least 25 single source, brand-name drugs that do not have generic competition and that are among the 125 drugs that account for the greatest national spending. The negotiated prices must be offered under Medicare and Medicare Advantage, and may also be offered under private health insurance unless the insurer opts out.  The statute provides that the negotiated maximum price may not exceed (1) 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom or (2) if such information is not available, 85% of the U.S. average manufacturer price.  The proposed statute also makes a series of additional changes, among other things, reducing the annual out-of-pocket spending threshold, and eliminates beneficiary cost-sharing above this threshold.  The proposed statute will now make its way to the Senate.

Federal Litigation

Recently, in Averett, M.D. et al vs. the United States Department of Health and Human Services, et al,  the U.S. Court of Appeals for the Sixth Circuit affirmed a lower court order invalidating CMS’s Medicaid Final Payment Rule and ultimately said a state’s Medicaid program cannot reclaim approximately $2.3 million in payments it made to 21 family medicine doctors.  The Affordable Care Act (“ACA”) temporarily increased payments in 2013 and 2014 for physicians “with a primary specialty designation” in primary care areas like family medicine, internal medicine, and pediatrics.  The Final Payment Rule incorporated a requirement for Medicaid doctors that Congress omitted in the ACA.  The Court found that the rule was “flatly inconsistent” with the ACA.   Physicians qualified for increased Medicare payments if they certified that they provided primary care services and that those services were at least 60% of their Medicare billings.   The court said CMS improperly interpreted the term “primary specialty designation” and attached two different meanings in the Medicare provision and in the Medicaid provision.  The court opined that Congress intended to treat Medicaid doctors differently from Medicare doctors by omitting the 60% requirement from the Medicaid provision.

Supreme Court Resolves Circuit Split, Holds FDCPA Claim Accrues on Date of Violation, Not Date of Discovery

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The United States Supreme Court recently held that the one-year statute of limitations for an action under the Fair Debt Collection Practices Act (“FDCPA”) begins to run on the date of the alleged violation, not the date of discovery.  See Rotkiske v. Klemm, 2019 WL 6703563 (U.S. Dec. 10, 2019).  In 2008, defendant sued plaintiff over unpaid credit card debt.  Defendant attempted service at plaintiff’s former address, and the resident there accepted service.  Defendant later withdrew the action, but refiled in 2009 and again attempted service at the former address, where the resident accepted service.  Defendant obtained a default judgment against plaintiff.  In 2014, plaintiff discovered the judgment and, within one year, brought this action.  Plaintiff claimed that the limitations period for an action on his credit card debt had run before defendant brought its 2008 and 2009 actions, and that defendant’s lawsuit therefore violated the FDCPA because defendant was seeking to collect on a debt on which it had no lawful ability to collect.  The District Court dismissed the action, holding that the limitations period on the FDCPA claim had run in 2010 because 15 U.S.C. 1692k(d) requires any action to be filed “within one year from the date on which the violation occurs.”  The Third Circuit affirmed the decision, creating a circuit split with regard to when the limitations period begins to run.  See, e.g., Mangum v. Action Collection Serv., Inc., 575 F.3d 935 (9th Cir. 2009) (applying the discovery rule to an FDCPA claim).

In a decision authored by Justice Thomas, the Supreme Court affirmed the Third Circuit.  The Court held that the FDCPA’s plain language states that the one-year period begins to run when the violation occurs.  The Court further found that other federal statutes include language stating that the limitations period begins to run “from the date on which the violation occurs or the date of discovery of such violation” and that “[a]textual judicial supplementation is particularly inappropriate when, as here, Congress has shown that it knows how to adopt the omitted language or provision.”  Finally, the Court did not decide plaintiff’s claim that a fraud-specific discovery rule should apply in this case to toll the limitations period, holding that plaintiff failed to preserve this argument on appeal and stating that “[w]e do not decide whether the text of 15 U.S.C. § 1692k(d) permits the application of equitable doctrines.”  In dissent, Justice Ginsburg stated that she agreed that the limitations period generally should run from the date of the violation, but that in this case, the Court should have tolled the limitations period based on the allegation that defendant “knowingly arrang[ed] for service of the complaint against [plaintiff] at an address where [plaintiff] no longer lived, and fil[ed] a false affidavit of service.”

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

Eleventh Circuit Affirms Dismissal of RESPA and TILA Claims Regarding Escrow Account, Holding There Was No RESPA Private Right of Action and TILA Claim Was Time-Barred

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The United States Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a Real Estate Settlement Procedures Act (“RESPA”) claim and a Truth in Lending Act (“TILA”) claim against a lender, finding that the particular RESPA provision cited by plaintiff did not provide a private right of action, and that the TILA claim was time-barred.  See Greene v. Intuit Inc., 2019 WL 6321043 (11th Cir. Nov. 26, 2019).  Plaintiff purchased her home in 2015 and obtained a cash-out refinance loan that is the subject of this action in 2016.  In 2018 and after defaulting on the loan, she filed this action, making claims under RESPA, TILA, and Georgia state law.  She first alleged that the lender improperly calculated the amount plaintiff was required to deposit in her escrow account because it based the calculation on the property tax assessment of the prior owner of the property in violation of §10 of RESPA.  See 12 U.S.C. 2609.  She then alleged that the lender failed to provide her with the proper disclosures regarding her escrow deposits at the time of the closing, in violation of TILA.  See 15 U.S.C. 1639d.  The lender filed a motion to dismiss the RESPA and TILA claims, and the District Court granted the motion.

On appeal, the 11th Circuit affirmed.  First, it found that §10 of RESPA does not have a private right of action and that “it is the Secretary of Housing and Urban Development who assesses civil penalties for violations of that section.”  Second, the Court found that TILA has a one-year statute of limitations and that the alleged failure to disclose occurred at the time of the closing (i.e., 2016).  Thus, the 2018 complaint was not timely and the District Court properly dismissed the complaint.

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

NJDEP Issues New Guidance on Earning Adjustments to Direct Oversight Requirements

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The Site Remediation Reform Act (“SRRA”) authorizes responsible parties to retain Licensed Site Remediation Professionals (“LSRPs”) to oversee the remediation of contaminated sites.  However, if the person responsible for conducting remediation (“PRCR”) fails to complete the investigation and remediation within mandatory timeframes, the New Jersey Department of Environmental Protection (the “NJDEP” or “Department”) automatically places the site into “Direct Oversight.”  Direct Oversight can significantly increase the cost of the investigation and remediation because the responsible party’s LSRP no longer directs the remediation without NJDEP approval and the responsible party becomes subject to additional financial obligations and regulatory requirements. 

While the Department previously has been willing to relax the rather onerous requirements of Direct Oversight under certain circumstances (see our July 14, 2017 blog post titled “NJDEP Offers Relief from Strict Compliance with Direct Oversight Requirements for those Willing to Enter into Administrative Consent Orders”), this practice was recently codified into law through amendments to SRRA (colloquially referred to as SRRA 2.0).  SRRA now clearly provides that the Department may, in its discretion, relax the requirements of Direct Oversight for parties that demonstrate a willingness to move forward responsibly and diligently with remediation.  In furtherance of this practice, in August (coincident with the enactment of SRRA 2.0), the NJDEP issued guidance explaining how responsible parties with sites in the NJDEP’s Direct Oversight protocol can “earn” adjustments to the Direct Oversight requirements. 

According to the guidance, the NJDEP may enter into Administrative Consent Orders (“Direct Oversight ACOs”) through which the PRCR will agree to remediate under relaxed Direct Oversight requirements.  In order to be eligible to enter into a Direct Oversight ACO, the PRCR must:

  • be current on payment of its annual remediation fees;
  • retain an LSRP, if one has not already been retained for the site;
  • contact the NJDEP Compliance Assistance duty officer;
  • submit a proposed public participation plan, an initial remediation cost review and establish a remediation funding source (all within 90 days of triggering Direct Oversight), and
  • agree to settle any penalties. 

Upon entering into a Direct Oversight ACO, the PRCR may be relieved of certain requirements of Direct Oversight.  For instance, the PRCR may:

  • choose the remedial action for the site without prior NJDEP approval;
  • pay annual remediation fees in lieu of Direct Oversight costs;
  • use any of the prescribed remediation funding source mechanisms (except for a self-guarantee), rather than being obligated to establish a remediation trust fund; and
  • avoid the requirement to prepare and submit to the NJDEP a Direct Oversight remediation summary report or a remedial action feasibility study. 

However, the NJDEP’s guidance specifically notes that if a PRCR fails to comply with the Direct Oversight ACO (including further violation of any applicable regulatory or mandatory timeframes), the NJDEP may rescind the Direct Oversight ACO and the PRCR may again be subject to all of the standard Direct Oversight requirements, as well as stipulated penalties assessed for each day of noncompliance.

The adjustments being offered by the NJDEP through the Direct Oversight ACO process are not insignificant.  These adjustments could substantially reduce the costs and penalties associated with Direct Oversight and put the decision-making back into the hands of the responsible party and its LSRP.  As such, responsible parties subject to Direct Oversight should seriously consider taking a proactive approach by seeking a favorable Direct Oversight ACO with the NJDEP. 

As explained in our July 2017 blog post cited above, adjustments to Direct Oversight also are available via “Prospective Purchaser ACOs” for certain parties that purchase and agree to remediate contaminated sites that are already subject to Direct Oversight.

For more information, please contact the author Jaan M. Haus at jhaus@riker.com or any attorney in our Environmental Practice Group.

Regulatory and Litigation Update and New Model Applications

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For more information about this blog post, please contact Khaled J. Klele, Latoya Caprice Dawkins, or Ryan M. Magee.

New Jersey and Federal Regulatory Update

S3075 – Passed – This bill prohibits any person from conducting, maintaining, or operating an embryo storage facility in this state unless licensed by the Department of Health pursuant to the provisions of the bill.  Specifically, the bill requires the DOH to regulate and license embryo storage facilities.

84 FR 65718-01 – Proposed – In this proposed rule, the Department of Defense is suggesting to amend its methodology to its reimbursement of ambulatory surgery centers (ASC) and outpatient services provided in Cancer and Children's Hospitals (CCHs). Proposed revisions are in line with the TRICARE Statute that requires TRICARE's payment methods for institutional care to be determined, to the extent practicable, in the same manner that apply to payments to providers of services under Medicare. TRICARE proposes to adopt Medicare's payment methodology for ASC, and adopt Medicare's payment methodology for outpatient services provided in CCHs.

Litigation

In Adcare Hospital v. Alex  M. Azar, II, Secretary of Health and Human Services, et al., more than 600 hospitals from around the country initiated a lawsuit against the Health and Human Services Department (HHS) in an effort to force the agency to end a Medicare pay cut that they say cost them approximately $124.4 million per year in 2018 and 2019.  The hospitals accuse HHS of exceeding Congressional directives on a program to recoup Medicare overpayments caused by a change in the Inpatient Prospective Payment System (“IPPS”).  Specifically, HHS reduced inpatient hospital reimbursements by 0.7% in 2018 and 2019, but the hospitals claim Congress only approved the cuts for 2014 through 2017 to recover $11 billion of overpayments dating back to 2008.   A copy of the lawsuit can be found here.

Model Applications

Primary Care First, Direct Contracting and Kidney Care Choices model applications are now open.  The PCF and Kidney Care Choices applications are due by January 22, 2020 and the applications for Direct Contracting are due by February 25, 2020. 

Nevada Federal Court Holds Lender’s Title Claim for HOA Lien Is Barred Because the Lien Post-Dated the Policy

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The United States District Court for the District of Nevada recently dismissed an action brought by an insured lender against a title insurance company because the lender’s loss arising from an HOA lien was a post-policy defect excluded under Exclusion 3(d).  See Wells Fargo Bank, N.A. as Tr. for Option One Mortg. Loan Tr. 2007-5 Asset-Backed Certificates, Series 2007-5 v. Fid. Nat’l Ins. Co., 2019 WL 5578487 (D. Nev. Oct. 29, 2019).  In 1998, the insured lender issued a loan to a borrower that was secured by a deed of trust on the borrower’s property, and the title insurance company issued a title policy to the lender.  In 2014, the HOA recorded a notice of delinquent assessment lien against the property and sold it at a foreclosure sale.  The lender filed a claim with the title insurance company, claiming that the purchaser at the sale asserted an interest in the property superior to the lender’s deed of trust.  The title insurer denied the claim and the lender brought this action alleging breach of contract and breach of the implied duty of good faith and fair dealing.  The title insurer then filed a motion to dismiss.

The Court granted the title insurance company’s motion.  It found that Exclusion 3(d) of the title insurance policy prohibited coverage for defects or liens created subsequent to the date of the policy.  In doing so, the Court rejected the lender’s argument that the lien was created in 1996, when the HOA’s Declarations of Covenants, Conditions and Restrictions were recorded, and instead found that the lien was not created until 2014 when the HOA recorded this specific assessment.  The Court also rejected the lender’s argument that the policy provided coverage based on an endorsement that insured the lender against losses sustained as a result of the existence of covenants, conditions, or restrictions under which the deed of trust could be subordinated.  The Court found that “[a] change in controlling law—not the [covenants, conditions, or restrictions]—caused Wells Fargo to risk losing its DOT.”  (citing SFR Invs. Pool 1 v. U.S. Bank, 334 P.3d 408, 414 (2014) (in which the Nevada Supreme Court found that an HOA lien constituted a superpriority lien)).  Accordingly, the Court found that the lender was not entitled to coverage and granted the motion to dismiss.

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

New Jersey Appellate Court Blesses Municipal Court Review of Environmental Liability

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While most people think of municipal courts as resolving motor vehicle tickets and minor property disputes, the New Jersey Department of Environmental Protection (“NJDEP” or the “Department”) has been using the municipal court system for several years to enforce violations of laws and regulations relating to the investigation and remediation of contaminated sites in New Jersey pursuant to its “Municipal Ticketing Initiative.”  (See our March 9, 2017 blog post titled “NJDEP to Expand Site Remediation Municipal Ticketing Initiative.”)  However, some, including Alsol Corporation, have questioned whether a municipal court has jurisdiction to decide if an entity has violated environmental laws and, if so, to impose a penalty on the entity for such violation.  In its recent decision, the Appellate Division gives its blessing to the Municipal Ticketing Initiative and determines that municipal courts have the power to adjudicate liability and enforce penalties pursuant to the New Jersey Spill Compensation and Control Act and the Site Remediation Reform Act.  See New Jersey Department of Environmental Protection v. Alsol Corporation, __ N.J. Super __ (App. Div. 2019).

Traditionally, NJDEP has enforced laws relating to the investigation and remediation of contaminated sites through actions in the Superior Court of New Jersey or the Office of Administrative Law.  The Department still uses these more formal venues to prosecute certain enforcement matters, (See our November 19, 2019 blog post titled “NJDEP Continues Environmental Justice Enforcement Efforts with Six New Lawsuits”), but proceedings in these venues can take several years to complete.   It also is more expensive for the Department to initiate and prosecute an action in Superior Court or the Office of Administrative Law.  In contrast, the Municipal Ticketing Initiative can lead to a resolution in a matter of months, and is relatively inexpensive for NJDEP.

The process in municipal court begins with the filing of a complaint by the Department and the issuance of a summons or “ticket” by the municipal court.  Upon issuance of a ticket, the applicable municipal court will set a hearing date, and a State attorney will send a letter to the offender proposing to settle the violation upon compliance with the applicable requirements.  Through the Municipal Ticketing Initiative, NJDEP can seek to impose penalties of up to $50,000 per day for continuing violations, and may request a bench warrant if an offender fails to appear for a scheduled hearing.  However, the Department has stated on multiple occasions that it uses the Municipal Ticketing Initiative as a tool to persuade potentially responsible parties to clean up contaminated sites, and not to collect penalties from offenders.  As a result, the State often agrees to dismiss its complaint in exchange for an agreement to remediate the site at issue and a small monetary penalty.  If the offender and the State attorney cannot reach a settlement, the matter will proceed in municipal court.  From start to finish, this process generally takes between three to six months.

In Alsol Corporation, the Department filed a complaint in municipal court against Alsol for failure to remediate contaminated property located in Middlesex County.  NJDEP alleged that Alsol was the owner of the property at the time of its contamination and, therefore, is responsible for the remediation of such contamination in accordance with the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. (the “Spill Act”) and its implementing regulations, including N.J.A.C. 7:26C-2.3(a).  Upon receipt of the municipal ticket, Alsol moved to dismiss the matter for lack of subject matter jurisdiction.  Specifically, it argued that municipal courts do not have the authority to adjudicate the merits of an enforcement action brought by the NJDEP involving alleged violations of the Spill Act.  The Appellate Division soundly rejected this argument.  The Appellate Division reached this result based on its interpretation of the relevant rules and statutes, as well as prior precedent authorizing the Department to use the municipal courts to enforce violations of the New Jersey Solid Waste Management Act.  The Appellate Division also appears to have relied in part on statutory amendments enacted earlier this year to clarify that the Department can use the municipal courts for its Municipal Ticketing Initiative.

Alsol Corporation resolves doubts about the validity of the Municipal Ticketing Initiative, but will it also open the municipal courthouse door to higher stake, more complicated environmental matters?  It isn’t yet clear whether or how the municipal courts would handle more complicated environmental matters, which those courts may not be well suited to handle as the matters can involve evolving legal theories and significant expert testimony.  As a result, it is essential for defendants to respond to these cases in consultation with knowledgeable environmental counsel.

For more information, please contact any attorney in our Environmental Practice Group.

Eleventh Circuit Raises the Bar on the False Claims Act.

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For more information about this blog post, please contact Khaled J. Klele, Latoya Caprice Dawkins, or Ryan M. Magee.

The Eleventh Circuit dealt a win for providers in United States v. AseraCare, ruling that a mere difference of clinical opinion among physicians is not enough to prove “falsity” under the False Claims Act.  The Eleventh Circuit’s decision emphasizes that reasonable differences of opinion between physician reviewers of medical documentation are not sufficient to suggest that the judgments concerning a particular patient’s eligibility for Medicare’s hospice benefit, or any claims submitted based on such judgments, are false for purposes of the False Claims Act.

While the matter was before the District Court, the Government alleged based on sampling, that AseraCare incorrectly diagnosed patients as terminally ill and, therefore, improperly certified those patients as being eligible for hospice care.  The Government conducted a medical review of 223 patients out of 2,180.   The Government then relied on the opinion of a medical expert who testified that 123 of those 223 patients at issue were not terminally ill at the time of certification.  A jury eventually determined that AseraCare had submitted false claims for 104 of the 123 patients, but the verdict was vacated by the District Court.  The District Court then granted summary judgment to AseraCare finding that a mere difference of opinion between experts cannot be the basis of a claim under the False Claims Act.

On appeal, the Eleventh Circuit held that when a hospice provider submits a claim that certifies that a patient is terminally ill based on the physician’s or medical director’s clinical judgment, such a claim cannot be subject to liability under the False Claims Act simply because the Government presents testimony from an expert that disagrees with the diagnosis.  Instead, the Eleventh Circuit held that the Government has to prove that AseraCare’s judgment reflected “an objective falsehood.”  The Eleventh Circuit went on to provide examples of circumstances that could indicate an “objective falsehood,” including instances where (1) the certifying physician does not examine the patient’s medical records, (2) the certifying physician does not subjectively believe the patient is terminally ill, or (3) no reasonable physician could have concluded a patient was terminally ill based on relevant medical records.

This Eleventh Circuit holding runs against the holdings of two recent decisions, United States v. Paulus, 894 F.3d 267 (6th Cir. 2018) and United States ex rel. Polukoff v. St. Mark’s Hospital, 895 F.3d 730 (10th Cir. 2018), which otherwise lowered the Government’s burden in cases based on medical necessity.

Arizona Appellate Court Holds Title Insurance Company Entitled to Reformation of Policy When Prior Liens Were Omitted

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The Court of Appeals of Arizona recently affirmed a lower court and held that a lender’s title insurance policy should be reformed due to a mutual mistake after two senior liens on the property were unintentionally omitted from the policy.  See BAPCO LLC v. Fid. Nat’l Title Ins. Co., 2019 WL 5576863 (Ariz. Ct. App. Oct. 29, 2019).  In 2006, the original lender provided a $250,000 loan to a borrower that was secured by a deed of trust on the borrower’s home.  Although there were two senior liens on the property, the title insurance policy did not identify either.  The deed of trust, however, stated that it was “SUBORDINATE TO . . . EXISTING FIRST LIEN(S) OF RECORD.”  Ten years later, plaintiff purchased a portfolio of assets from the original lender, including the 2006 deed of trust.  Plaintiff then filed a claim with the title insurance company based on the prior liens, and the title insurance company denied coverage based on the fact that the original lender knew about the prior liens.  Plaintiff brought this action, alleging breach of the policy and bad faith, and the title insurance company counterclaimed for reformation of the policy.  The trial court granted the title insurance company’s motion for summary judgment.

On appeal, the Court affirmed.  It found that the title insurance company had proffered both a title insurance commitment and an amended title insurance commitment in which both senior liens were disclosed.  Likewise, the title insurance company produced closing instructions that named both senior liens and stated that the new deed of trust “will be in the 3rd position.”  Finally, the company submitted a 2006 letter from the original lender acknowledging that its lien would be in the third position, which was consistent with the language in the deed of trust that it was subordinate to prior liens.  The Court also held that plaintiff’s lack of actual knowledge about the prior liens was irrelevant to the mutual mistake claim because only the original lender’s knowledge mattered.  Similarly, the Court found that plaintiff was not a bona fide purchaser of the deed of trust, because the deed of trust expressly noted it was subordinate to other lien(s).  Accordingly, the Court found that the prior liens were omitted due to a mutual mistake and that the title insurance company was entitled to summary judgment reforming the policy.

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

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