Moll v. US Life Title Ins. Co. of New York

Decision Date17 February 1987
Docket NumberNo. 85 CIV. 6866 (PKL),86 CIV. 4271 (PKL).,85 CIV. 6866 (PKL)
Citation654 F. Supp. 1012
PartiesJeryl MOLL, on behalf of herself and all others similarly situated, Plaintiff, v. US LIFE TITLE INSURANCE COMPANY OF NEW YORK, Defendant. Albert ELSER, Robin Harlow, Jolene Harlow and Brian McGuire, on behalf of themselves and all others similarly situated, Plaintiffs, v. TITLE USA, INC. f/k/a US Life Title Insurance Company of New York, Defendant.
CourtU.S. District Court — Southern District of New York



Paul K. Rooney, P.C., New York City, for plaintiffs.

Rogers & Wells, New York City, for defendant; James N. Benedict, Bruce Braverman, Joshua A. Leuchtenburg, Margaret M. Vande Wiele, of counsel.

LEISURE, District Judge:

The above-captioned matter is a consolidation of two separately filed actions: Moll v. US Life Title Insurance Company of New York (hereinafter referred to as the "Moll action"), 85 Civ. 6866 (PKL) and Albert Elser et al. v. Title USA, Inc., f/k/a US Life Title Insurance Company of New York (hereinafter referred to as the "Elser action"), 86 Civ. 4271 (PKL). In these suits, plaintiffs on behalf of themselves and a proposed class to be over several thousand persons, allege violations committed by defendant of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., the New York Insurance Law § 6409, and the common law. Jurisdiction over this action is allegedly conferred upon the Court by 12 U.S.C. § 2614, 18 U.S.C. § 1964, 28 U.S.C. § 1331, and the principles of pendent jurisdiction.

The consolidated matter is now before the Court upon defendant's motion seeking dismissal of the actions pursuant to Fed.R.Civ.P. 12(b) and 9(b). The Court, in considering defendant's motion to dismiss, is bound by the general rule that for defendant to succeed it must demonstrate "`beyond doubt that the plaintiff can prove no set of facts in support of his claim, which would entitle him to relief.'" Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir.1985) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)). The factual allegations contained in the complaints are accepted as true for the purposes of deciding the instant motion. Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir.1985). For the reasons set forth below defendant's motion is granted. However, plaintiffs are granted leave to replead their complaint to the extent consistent with this opinion infra.1


The Moll Action

The Parties

Plaintiff Jeryl Y. Moll is a resident of West Haverstraw, Rockland County, New York. Defendant US Life Title Insurance Company of New York ("US Life") is an institution, as defined in 12 U.S.C. § 2602(4), which issues title insurance policies on residential and commercial real estate in Rockland County in New York State, having its principal office and place of business at 120 Broadway in the City of New York.

The Moll Transaction

In June 1982, plaintiff and her husband ("the Molls"), then residing in Palisades Park, New Jersey, retained James M. Feeney, Esq. ("Feeney"), an attorney in New City, New York, to represent them in the purchase of a home, located at 36 Kennedy Drive, West Haverstraw, Rockland County, New York. The Molls obtained a federally-insured mortgage loan from Midlantic Home Mortgage Corporation ("Midlantic") to finance this purchase. In order to secure this financing, the Molls needed title insurance. Feeney stated that he would acquire the insurance for the Molls. Feeney ordered this title insurance from US Life. Moll Second Amended Complaint ("Moll Complaint"), ¶¶ 35-36.

On August 30, 1982, at the real estate closing on their new home, the Molls paid $578.00 for title insurance to US Life. This was the amount of the premium charged by US Life. At the closing, Feeney provided the Molls with a copy of HUD-1 Uniform Settlement Statement. See Moll Complaint, Exhibit A. On line 1108 of this form, under the words "Title Charges", there appears the words: "Title insurance to". Feeney inserted there, or caused to be inserted, "US Life Title Insurance Company $578.00". Moll Complaint, ¶ 39.

US Life was represented at the closing by Mr. Timothy Miller ("Miller") of the Heritage Abstract Corporation ("Heritage"). See Moll Complaint, Exhibit B. At the closing, the Molls were not given a bill for $578.00 by US Life. Instead, Miller presented them with a bill for $950.50 on Heritage stationery. This bill was for various expenses, including the $578.00 premium for title insurance. See Moll Complaint, Exhibit C. Feeney paid this bill to Heritage out of monies deposited with him by the Molls. See Moll Complaint, Exhibit D.

Moll claims that at a time unknown to her, US Life, through Miller or Heritage, rebated2 a portion of the $578.00 to Feeney or another person. This rebate was paid without the knowledge or consent of the Molls. Furthermore, Moll claims that this rebate was paid pursuant to an agreement among Feeney, Miller and US Life to the effect that title insurance business would be referred to US Life by Feeney; and that they allegedly agreed that this payment was not for services actually rendered or performed by Feeney in the issuance of the title insurance policy. Furthermore, Moll conclusorily alleges that:

She never had any opportunity to discover the fraud practiced upon her and her husband until after September 1984. It was then that a foreclosure action was instituted by Midlantic and she obtained independent counsel. That counsel later discovered the fraud which had been practiced upon plaintiff by defendant US Life.

Moll Complaint, ¶ 47.

The Elser Action

Plaintiffs Albert Elser, Robin Harlow and Jolene Harlow (the "Harlows"), and Brian McGuire are all residents of Orange County New York. Defendant is US Life. The transactions which form the basis of the complaint in the Elser action are almost identical to those described in the Moll action. The only differences material to the resolution of the instant motions is that Elser's real estate closing occurred on February 10, 1983, the Harlow's real estate closing occured on December 1, 1983, and McGuire's real estate closing occurred on October 12, 1982. The Elser action was filed in 1986.

The Fraudulent Scheme

Plaintiffs — in both the Moll and Elser actions — further claim that numerous home purchasers retained attorneys admitted to practice in New York to assist them in buying their homes and in obtaining federally related mortgage loans. These attorneys informed the purchasers that in order to obtain federally related mortgage loans, the buyers needed to secure title insurance. These attorneys allegedly then ordered their title insurance from US Life. US Life purportedly agreed with these attorneys to rebate a portion of the premiums for title insurance paid by the purchasers in return for the referral of title insurance business. US Life allegedly failed to disclose to the purchasers that this rebate was built into the premium rate for title insurance.

At these real estate closings, various persons, including Miller of Heritage, represented US Life. Similarly, at the closings, the purchasers were furnished with copies of HUD-1 Uniform Settlement Statements showing the amounts of the premiums which they paid to US Life. The purchasers were not informed of the alleged rebates. Representatives of US Life, for example, Miller of Heritage, collected the payments of premiums from the purchasers at the closings. Then these representatives allegedly paid rebates to the attorneys. Allegedly in an attempt to conceal the payment of the rebate to the attorneys, these representatives remitted a "net" check to US Life in an amount excluding the alleged rebate. The rebates were allegedly not paid for services actually rendered or performed by the attorneys in the issuance of the title insurance policies.

The purchasers were not informed that part of the premiums which they paid for title insurance were allegedly rebated to their attorneys. The purchasers did not consent to the payment of these rebates. The attorneys did not credit the rebate to the accounts of their clients-purchasers. Again plaintiffs summarily charge that:

Plaintiffs and the members of the putative class, could not, in the exercise of reasonable diligence, have discovered the alleged fraud practiced and the rebate scheme heretofore described, ... because of the acts of defendant US Life in concealing the payment of the kickbacks.

Moll Complaint, ¶ 67.

US Life charged and received title insurance premiums based on a rate approved by the New York State Superintendent of Insurance. Plaintiffs charge that included in that rate was the cost of the rebates allegedly paid by US Life.

The RICO Claims

Plaintiffs also claim that between on or about August 30, 1979, and on or about August 28, 1986, US Life, for the purposes of executing the aforesaid allegedly fraudulent scheme, did place and cause to be placed, in a post office and other authorized depositories for mail matter, letters, United States Department of Housing and Urban Development Forms # 1, transmittal letters to lenders approved by the United States Federal Housing Administration, title insurance forms, title insurance policies, and checks addressed to members of the alleged RICO enterprise or to plaintiff or to members of the putative plaintiff class. See, e.g., Moll Complaint at ¶ 80(a). Furthermore, plaintiffs allege that US Life also used interstate telephone facilities, writings, signs, sounds, messages and signals to members of the alleged RICO enterprise or to plaintiffs or to the putative plaintiff class in furtherance of its allegedly fraudulent scheme.

Plaintiffs claim that a group of attorneys, who represented purchasers of residential real estate, and other individuals and corporate entities, all "associated in fact and engaged...

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