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R.C. Search Co., Inc. v. Torre

A-1669-07T2 (N.J. Super. App. Div. 2009) (Unpublished)

TITLE INSURANCE — The Title Insurance Act and public policy prohibit a title agency from waiving title insurance premiums and search fees when done so as an inducement for the placing and procuring of any order for title insurance or when a search is conducted in anticipation of issuing a commitment for title insurance or a policy, but this statutory provision does not permit a title insurance agent, once having agreed to provide such a waiver when the transaction does not close, to recover its charges because of the title agent’s status as a party to that very agreement.

For twelve years, a real estate attorney placed orders with a licensed title insurance agency for title searches and for title insurance commitments. During the last four years of that relationship, the agency’s statements showed an outstanding balance due. One disputed item was related to title search and insurance services requested by the attorney for the purchase of his home. Another was for services for which the agency was compensated only in part. The remainder of the open invoices were for failed real estate transactions.

The agency eventually sued, demanding payment on an open book account for services rendered at the attorney’s request. The case was tried without a jury. The only testifying witnesses were the agency’s accounts receivable manager and the attorney. The manager conceded that she was unaware whether the agency issued a title insurance policy for the attorney’s personal residential closing. The attorney testified that he had developed a close business relationship with the agency’s insurance producer and, generally, if a real estate transaction did not close, both would forgo their respective fees for services. As to his personal real estate transaction, the attorney acknowledged that he paid nothing, but said he did so at the advice of the producer, who advised him that the invoice was marked “POC” (paid outside of closing).

At the conclusion of trial, the lower court dismissed the complaint, holding that the agency failed to prove by a preponderance of the evidence that any money was due and owing. As to the invoice that was partially paid, the lower court accepted the attorney’s testimony that his client purchased the property without financing and did not want to insure the property for a full purchase price amount, thereby only a reduced amount was due. The lower court concluded that the agency’s acceptance of the reduced amount constituted an accord and satisfaction. As to title expenses related to the attorney’s personal real estate transaction, the lower court held that nothing was owed because the agency failed to prove that it had issued a title insurance policy. Lastly, as to the balance of the claimed invoice amounts, the lower court held that nothing was owed, finding the agency had waived the charges pursuant to the agreement between the producer and attorney when closings did not result. The agency appealed.

The Appellate Division affirmed the lower court’s judgment, opining that a judgment in a non-jury case can only be overturned where not to do so would result in a manifest denial of justice. It also pointed out that a lower court’s credibility determinations are entitled to particular deference because a lower court has the superior perspective when evaluating the truthfulness of witnesses. As such, the Court held the lower court’s factual and credibility findings were sufficiently supported by the record.

The agency argued on appeal that the “comping” of title insurance premiums and the waiver of search fees are prohibited under the Title Insurance Act and by public policy, and that the lower court erred in enforcing the agreement between the producer and the attorney. The Court pointed out that the Act prohibited such agency activity only when presented as an inducement for the placing or procuring of any order for title insurance, or when a search is conducted in anticipation of issuing a commitment for title insurance or policy.

The Court found this statutory provision to be inapplicable to the attorney’s personal real estate transaction, as the account receivables manager testified that the agency never issues a title insurance policy until a premium is paid, and the lower court found that the agency never proved that it issued a title insurance policy. Although the Court held that an agreement to waive fees and services between an agency and an attorney violated the Act when made in contemplation of issuing title insurance for a real estate transaction that ultimately fails to close, the Court held the agency could not recover in this instance because of its status as a party to that contract. It also held that it would be unjust to allow the agency to recover charges under an illegal contract when the attorney similarly had waived his fees under those conditions.


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