Dare Inv., LLC v. Chicago Title Ins. Co.
| Decision Date | 29 June 2011 |
| Docket Number | Civ. No. 10-6088 (DRD) |
| Parties | DARE INVESTMENTS, LLC Plaintiff, v. CHICAGO TITLE INSURANCE COMPANY, ET AL., Defendants. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
Appearances by:
PETER STROJNIK, P.C.
by: Peter Strojnik, Esq.
RIKER DANZIG SCHERER HYLAND & PERRETTI, LLP
by: Michael O'Donnell, Esq.
Derrick R. Freijomil, Esq.
Headquarters Plaza
Morristown, New Jersey 07962
Attorneys for Defendant Chicago Title Insurance Company.
This matter arises out of a title insurance policy, issued by Defendant Chicago Title Insurance Co. ("Chicago"), and negotiated by Horizon Title Agency, Inc. ("Horizon"), Chicago's title agent, insuring the marketability and validity of a mortgage serving as collateral for a loan from Plaintiff Dare Investments, LLC ("Dare") to another investment entity. The mortgage has a rather complex history and became subject to adverse claims after issuance of thetitle policy. As a result, Dare claimed coverage under the policy, but Chicago disclaimed coverage on a number of grounds, including several exclusionary provisions in the policy.
On November 20, 2010, Dare filed a Complaint against Chicago and Horizon asserting claims for common law fraud, reformation, breach of contract, negligence, bad faith, consumer fraud under the New Jersey Consumer Fraud Act ("NJCFA"), N.J.S.A. 56:B-1 et. seq., civil conspiracy, civil aiding and abetting under, and violations of, the Racketeer Influenced and Corrupt Organizations Act ("Federal RICO"), 18 U.S.C. § 1961 et. seq., and the New Jersey Racketeering Influenced and Corrupt Organizations Act ("New Jersey RICO"), N.J.S.A. 2C:41-1, et seq.
On February 9, 2011, Chicago moved for summary judgment1 against all of Dare's claims. On March 4, 2011, Dare cross-moved for summary judgment in favor of its claims for breach of contract and bad faith. For the reasons set forth below, Chicago's motion is granted in part and denied in part, while Dare's motion is denied in its entirety.
Chicago is entitled to summary judgment against Dare's common law fraud and negligence claims because Dare cannot show that it reasonably relied on Chicago's alleged misrepresentations and omissions. Chicago is entitled to summary judgment against Dare's reformation claim because Dare cannot show that Chicago misrepresented the alleged value of the mortgage being insured by the title policy. Chicago is also entitled to summary judgment against Dare's Federal and New Jersey RICO claims because both the Complaint and the record fail to establish a RICO enterprise and the predicate acts that allegedly constitute a pattern of racketeering activity.
However, Chicago is not entitled to summary judgment against Dare's claim for breach of contract because (1) the intent of the exclusionary provisions in the title policy under whichChicago disclaims coverage are ambiguous and (2) Dare's reasonable expectation under the title policy remain unclear on the current record. As a result, Dare is not entitled to summary judgment in favor of its claim for breach of contract. However, Chicago is entitled to summary judgment against Dare's claim for bad faith because Dare has failed to establish that Chicago had no reasonable basis on which to deny coverage under the title policy.
On February 15, 2006, Dare loaned $5 million to SWJ Investments, LLC ("SWJ") so that it could purchase certain assets from a bankruptcy sale arising out of the bankruptcy proceedings of James Licata and several entities that he owns. One of the assets that SWJ intended to purchase was a $15 mortgage (the "Sayreville Mortgage") on 158 acres of land located in Sayreville, New Jersey (the "Sayreville Property"). The Sayreville Mortgage was one of several assets assigned to Dare as collateral on its $5 million loan to SWJ, pursuant to a Security and Intercreditor Agreement (the "Security Agreement"), dated March 13, 2006, between Dare and SWJ (and others who are not parties to this lawsuit). See (Compl., Ex. 1.)
Mr. Licata initially gained ownership over the Sayreville Mortgage from the bankruptcy proceedings of Peter and Lorraine Mocco. During the course of those bankruptcy proceedings, which began in 1994, the Moccos reached an agreement with their principal secured creditor, First Union Bank ("First Union"), to purchase its claims at a discounted price of $22 million.2 To do so, the Moccos reached an agreement with James Licata under which First ConnecticutConsulting Group, Inc. ("FCCG"), an entity owned by Mr. Licata, would act as the Moccos' agent in securing loans from third-party lenders.
However, First Union would not deal directly with the Moccos. Thus, FCCG came to an agreement with First Union whereby FCCG would assume the Moccos' debt to First Union and simultaneously loan the $22 million to the Moccos with which to purchase First Union's claims through a third-party lender. FCCG ultimately negotiated a short-term loan of $16 million and a second loan of $6 million from EMP Whole Loan I, Inc. ("EMP"). EMP wanted certain properties owned by the Moccos to serve as security on its loan to FCCG, including the Sayreville Property. In addition, EMP required that those properties be held by a bankruptcy-remote entity. Thus, on September 25, 1996, the Moccos transferred title to those properties to the First Connecticut Holding Group LLCs (the "Holding LLCs")—a group of entities that were specifically set up by FCCG (i.e. James Licata) to hold the Mocco properties outside the bankruptcy—as nominees. EMP then asserted liens on the properties. That same day, the parties entered into an agreement under which Mr. Licata would reconvey title to the Moccos once the Moccos secured long-term financing with which to purchase all of First Union's claims (the "Reconveyance Agreement").
As part of the arrangement under which FCCG would assume and secure the Moccos' debt to First Union, on September 26, 1996, the Moccos provided FCCG with a $15 million mortgage on the Sayreville Property—hence the Sayreville Mortgage. That same day, FCCG assigned the Sayreville Mortgage to EMP and acquired an Amended and Restated Sayreville Mortgage.3
In May 1997, the Moccos and Licatas entered into an Escrow Agreement in order to facilitate the reconveyance of title to the Mocco real estate that was serving as the collateral for the FCCG/EMP loans. According to the Escrow Agreement, "once EMP released its lien on the ownership interest in [the Holding LLCs] holding each parcel of real property, EMP was to convey ownership of that parcel to the Escrow Agent," and the Escrow Agent would then transfer ownership shares in the respective Holding LLCs to the Moccos. (Compl., Ex. 4.)
Later that year, the Moccos secured the aforementioned long-term financing and EMP released its liens on the Holding LLCs. In December 1998, Mr. Licata directed the Escrow Agent to forward the Moccos the necessary documents with which to effect reconveyance of title to their real estate. However, Mr. Licata ultimately refused to reconvey title.
In 1999, the Moccos sued Mr. Licata in the New Jersey Superior Court of Essex County to enforce the Reconveyance Agreement. On September 21, 2001, the court ordered that the Moccos turn over the Holding LLCs' ownership certificates to a receiver and issued an injunction stating that "no party or any affiliate of a party shall transfer, lien, or encumber any interest in the Holding LLCs or any properties owned in the name of the Holding LLCs." (Certification of Michael R. O'Donnell, Esq. in Support of Chicago Title Insurance Company's Motion to Dismiss, Dated February 9, 2011 ("O'Donnell Cert."), Ex. 7.)
In 2002, the Mr. Licata filed for bankruptcy in the District of Connecticut and listed a number of the Holding LLCs as assets to be placed into the bankruptcy proceedings. The Moccos filed a motion to challenge the Licata bankruptcy filings of those Holding LLCs, but not those of FCCG. That motion was heard in the District of Vermont, as opposed to the District of Connecticut, due to scheduling reasons. The Bankruptcy Court of the District of Vermont issueda decision, on July 27, 2004, specifically noting the litigation in the Superior Court of Essex County, upholding the court's injunction regarding the property owned by the Holding LLCs, and finding that "Mocco was the owner of the property at the time the state court entered its order." (Compl., Ex. 4.) That decision was affirmed by the District of Vermont, on March 28, 2006, see (Compl., Ex. 5), and the Second Circuit in 2007. See In re First Conn. Consulting Grp., Inc., 2007 WL 3498199 (2d Cir. 2007).
Through its counsel, Dare conducted extensive due diligence before issuing the loan to SWJ and entering into the Security Agreement. See (Certification of Richard McCloskey, dated February 28, 2011 ("McCloskey Cert."), ¶ 6.) E. Kenneth Williams, Jr., Esq.—an attorney who worked on behalf of Dare in issuing the loan to SWJ, investigating the validity and enforceability of the Sayreville Mortgage, and procuring the title policy to insure the Sayreville Mortgage—testified at an Examination under Oath that he had reviewed the aforementioned litigation between the Moccos and the Licatas. (O'Donnell Cert., Ex. 6, Williams Tr. at 16-17.)
In addition, Mr. Williams became aware of a letter written by James A. Scarpone, Esq., counsel to the Moccos, dated February 23, 2006, that was addressed to counsel for the Licata bankruptcy's creditor's committee following a meeting with them. The letter specifically disputes the validity of the Sayreville Mortgage. In doing so, it points to the fact that, "shortly after commencement of...
To continue reading
Request your trial