Illegal Title Deal Benefits No One; Or, When Friends Fall Out
New Jersey Appellate Court knocks out unpaid invoices for title search services
APPELLATE DIVISION, DOCKET NO. A-1669-07T2
R.C. SEARCH CO., INC., Appellant,
v.
WILLIAM J. TORRE, ESQ, Respondent.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket
No. L-5761-06.
R.C. Search Co., Inc., a NJ title insurance agency sued long time client William J. Torre, Esq., a Bergen County attorney for unpaid invoices. Losing at the trial level, R.C. appealed that decision.
From 1994 to 2006 R.C. Search provided Torre with title searches and commitments for title insurance. In 2006 that came to and end and R.C. filed a complaint against Torre demanding payment on an open book account for services rendered at Torre's request. On September 6, 2007, the court rendered an oral decision dismissing R.C.'s complaint, determining that R.C. "failed to prove by a preponderance of the evidence that any money is due and owing from the Torre."
The Appellate Court reviewed the testimony regarding unpaid bills. One of the unpaid bills was for a commitment for title insurance, together with its concomitant title search and examination that Torre requested in relation to the purchase of his home.
The parties’ course of conduct was that of many title agents in New Jersey. Invoices would be issued to Torre at the time it delivered its commitments for title insurance and title searches. R.C. would not issue a title insurance policy until the title insurance premium part of the invoice was paid.
When title did not close, R.C. did not seek payment of the title insurance premium; however, it did expect payment on its title search and examination fees including any out-of-pocket expenses.
Torre testified at trial that from 1994 through March 2006, he developed “a close business relationship” with Richard Cecere, Jr., the licensee. “During that time, Torre and Cecere, Jr., acknowledged between themselves that they were subject to losses when Torre's clients failed to close title on transactions after R.C. performed title searches and issued commitments for title insurance. Accordingly, the two agreed that, if Torre ordered either a title search without a commitment for title insurance or a commitment for title insurance that included a title search, and the transaction did not close, Torre would forgo a legal fee for his services, and R.C. would forgo its fee for the title searches and out-of-pocket expenses.”
Pursuant to this agreement, from 1994 through November 2005, R.C. never charged Torre for its search fees or expenses when Torre's clients failed to close title; nor did Torre charge his clients for his services or for the services performed by R.C.
“As to his personal real estate transaction, Torre acknowledged that he did not pay a title search fee or a title insurance premium. However, he stated that he did not do so on the advice of Cecere, Jr., who advised him that the invoice was marked "POC" (paid outside of closing), on the title closing statement, "because of the courtesies and relationship with the company for over a ten year period."
As to the closing, Torre stated that he did not close the title himself, but rather, title was closed by his brother, also an attorney. Lastly, Torre is unaware of R.C. issuing a title insurance policy after closing of title to either him or his mortgagee. [
How could an attorney close out his file without a title insurance policy?-Ed]
At the conclusion of the trial, the court dismissed the complaint, determining that R.C. failed to prove any monies were owed on Torre's account.
With respect to the invoice for Torre's personal real estate transaction, the court determined that nothing was owed on that invoice because R.C. failed to prove it had issued a title insurance policy to Torre or his mortgagee. [
I would suggest that a title policy is not issued in the absence of payment of the premium as the agent is required to remit the policy premium to its underwriter when the policy is issued. Ed.]
On appeal, R.C. argued that the waiver of search fees and title insurance premiums was illegal.
The Appellate Division disagreed with the trial judge's blanket determination that N.J.S.A. 17:46B-35 does not prohibit a title insurance agency from waiving title search fees and out-of-pocket expenses. “We conclude that it does when those fees are incurred in furtherance of the agency issuing a commitment for title insurance. Nevertheless, we determine the error is harmless.”
As for R.C.’s argument that the "comping" of title insurance premiums and waiver of search fees are prohibited by N.J.S.A. 17:46B-35a and b., the Appellate Court found that R.C. was right but that the doctrine of in pari delicto barred R.C. from enforcing invoices for transactions where commitments were issued but title did not close.
As to the Torre invoice, since a policy was not issued, the invoice was not owed.
[
The Court did not examine why the parties would forgo their fees if a deal did not close. Was there another arrangement between them, e.g. was one feeding business to the other? What would the title agent gain by the attorney not charging fees to his clients? Ed.]
Full opinion may be found here:
R.C. SEARCH CO., INC., Plaintiff-Appellant, v. WILLIAM J. TORRE, ESQ., Defendant-Respondent.
Vested Title Inc., 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 Fax 201-656-4506
E-mail vti@vested.com - www.vested.com
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