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Wachovia Bank, N.A. v. Akdemir

BER-F-382-08 (N.J. Super. Ch. Div. 2008) (Unpublished)

TITLE INSURANCE — The seller of property is not a party to the title insurance commitment issued to its buyer and therefore cannot sustain a breach of contract claim or a breach of any implied covenant of good faith and fair dealing against the issuing title insurer for failure to list a lien or encumbrance.

An owner of real property defaulted on two mortgage loans such that the first mortgage holder initiated a foreclosure action. A final judgment was entered. It included the second mortgage holder as a party defendant. The second mortgage holder was the successful bidder for the property at the sheriff’s sale. Before the deed was delivered, the owner filed for emergent relief and temporary restraints, suggesting he submit a contract of sale to an attorney but the parties were still negotiating. The Court granted a delay for the sale to be completed. The HUD-1 form at closing did not list the second mortgage and no one asserted that the second mortgage holder received any monies from the sale. The second mortgage holder then sued the original owner of the property. That owner, in turn, filed a third party complaint against the parent company of a title company retained by its contract purchaser based on its alleged failure to discover the second mortgage lien upon the sale of property to the attorney.

The Court dismissed the third party complaint, finding no claim upon which relief could be granted, as no contractual relationship existed between the parties. It held that the original owner was not a party to the title insurance commitment and therefore there could be no breach of contract claim, or a breach of any implied covenant of good faith and fair dealing. The Court also stated that the owner was neither an interested party nor a third-party beneficiary to that contract. It also suggested that the motion could have been dismissed under the doctrine of unclean hands, based upon evidence that the original owner had knowledge of the second mortgage lien at the time the property was sold to the attorney, and that the owner deliberately concealed the second mortgage from the title company. The Court viewed the matter as one in which the owner sought indemnification from a party who owed him no duty, for the very loan he had knowledge of and failed to repay.

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