Rtc Mortg. Trust 1994 v. Fidelity Nat. Title Ins., Civil Action No. 96-5874.

• Decision Date: 14 August 1998
• Docket Number: Civil Action No. 96-5874.
• Citation: 16 F.Supp.2d 557
• Parties: RTC MORTGAGE TRUST 1994 N-1, a limited liability Delaware business trust, Plaintiff, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, Nations Title Insurance Company, Eastern Developers Abstract, Inc., Caine, DiPasqua, Sloane & Raffaele f/k/a Caine, DiPasqua, Sloane, Raffaele & Nigro, Lawyers Title Insurance Corporation, and Rocco M. Nigro, Defendants.
• Court: U.S. District Court — District of New Jersey

16 F.Supp.2d 557

RTC MORTGAGE TRUST 1994 N-1, a limited liability Delaware business trust, Plaintiff, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, Nations Title Insurance Company, Eastern Developers Abstract, Inc., Caine, DiPasqua, Sloane & Raffaele f/k/a Caine, DiPasqua, Sloane, Raffaele & Nigro, Lawyers Title Insurance Corporation, and Rocco M. Nigro, Defendants.

Civil Action No. 96-5874.

United States District Court, D. New Jersey.

August 14, 1998.

John A. Adler, Hellring, Lindeman, Goldstein & Siegal, Newark, NJ, for Plaintiff RTC Mortg. Trust 1994 N-1.

Michael S. Miller, Christopher J. Carey, Tompkins, McGuire & Wachenfeld, Newark, NJ, for Defendant, Caine, DiPasqua, Sloane & Raffaele.

Charles J. Vinicombe, Drinker, Biddle & Reath, Princeton, NJ, for Defendant, Lawyers Title Ins. Corp.

Josiah A. Knapp, Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby & Graziano, P.C., Cherry Hill, NJ, for Defendants, Fidelity Nat. Title Ins. Co. and Nations Title Ins. Co.

Rocco Nigro, Media, PA, pro se.

OPINION

ORLOFSKY, District Judge:

Presently before the Court is the motion of Defendant, Caine, DiPasqua, Sloane & Raffaele, for summary judgment. Caine, DiPasqua essentially challenges the ability of Plaintiff, RTC Mortgage Trust 1994 N-1, to prosecute its claim for negligent misrepresentation or legal malpractice. This appears to present an issue of first impression in this district, namely whether provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") preempt the well-settled principle of New Jersey law that tort claims are not assignable prior to judgment. For the reasons set forth below, I find that federal law preempts New Jersey law on this issue. Accordingly, I will deny the motion for summary judgment.

I. Facts and Procedural History

The circumstances giving rise to this litigation have already been summarized to some extent in RTC Mortgage Trust 1994 N-1 v. Fidelity Nat'l Title Ins. Co., 981 F.Supp. 334, 336-38 (D.N.J.1997) (RTC I). The following facts are not generally in dispute. In August, 1988, Home Federal Savings & Loan Association ("Home Federal Savings & Loan") loaned approximately $13.5 million to Atrium II Limited Partnership ("Atrium II"). See Plaintiff's Statement of Material Facts as to Which there is No Genuine Issue ¶ 1 (dated Dec. 23, 1997) (hereinafter Plaintiff's Statement of Facts); Defendant, Caine, DiPasqua, Sloane & Raffaele's Statement of Material Facts as to Which there is No Genuine Issue ¶ 1 (dated Nov. 12, 1997) (hereinafter Defendant's Statement of Facts). The loan was secured by an office building on a 7-acre piece of property located in Mount Laurel, New Jersey. See Plaintiff's Statement of Facts at ¶ 1.

For purposes of the loan from Home Federal Savings & Loan, Atrium II was represented by Caine, DiPasqua, Sloane, Raffaele, and Nigro, a Pennsylvania law firm.¹ In connection with its representation of Atrium II, Caine, DiPasqua, Sloane, Raffaele & Nigro issued a legal opinion, signed by Nigro, with respect to the Atrium II mortgage and loan. See Plaintiff's Statement of Facts at ¶¶ 2, 7; Defendant's Statement of Facts at ¶ 2; see also RTC I, 981 F.Supp. at 337. Among other things, the legal opinion stated that "the mortgage, security agreement, and financing statements are effective to create a first lien security interest in the ... property." Id.; see also Certification of John A. Adler ¶ 4 & Exh. C at 3 (dated Dec. 22, 1997) (hereinafter Adler Certif.); see also id., Exh. B at § 10.2.

Late in 1990, Home Federal Savings & Loan began foreclosure proceedings against Atrium II in New Jersey state court. These proceedings were stayed when Atrium II filed a petition in the United States Bankruptcy Court for the District of New Jersey. Fidelity Bank, N.A. ("Fidelity Bank") filed an adversary complaint in the Bankruptcy Court claiming that it had liens on the property which were superior to those held by Home Federal Savings & Loan. In March, 1993, the District Court reversed the Bankruptcy Court's determination, rendered in May, 1992, that Fidelity Bank's liens had priority. The Third Circuit affirmed this decision in August, 1995. See Plaintiff's Statement of Facts at ¶ 12; Defendant's Statement of Facts at ¶ 8; see also In re Atrium II Ltd. Partnership, 60 F.3d 816 (3d Cir.1995) (mem.); see also Certification of Michael S. Miller ¶ 16 & Exh. 14 (dated Nov. 11, 1997) (hereinafter Miller Certif.) (summarizing entire history of litigation in state court and bankruptcy court).

Atrium II was not the only entity with financial problems. On July 6, 1992, during the pendency of the bankruptcy proceedings, Home Federal Savings & Loan was placed into receivership by the Resolution Trust Corporation (the "RTC"). See Plaintiff's Statement of Facts at ¶ 13; Defendant's Statement of Facts at ¶ 9; see, e.g., Miller Certif. at ¶ 9 & Exh. 7. At that point, pursuant to 12 U.S.C. § 1821(d)(2)(F), Home Federal Savings & Loan became known as HomeFed Bank, F.A. with the RTC as its conservator. See Plaintiff's Statement of Facts at ¶ 13; Defendant's Statement of Facts at ¶ 9; Miller Certif. at ¶ 9 & Exh. 7. On December 3, 1993, the RTC was appointed receiver for HomeFed Bank, F.A. See Plaintiff's Statement of Facts at ¶ 14; Defendant's Statement of Facts at ¶ 14.

On January 31, 1994, various assets, including the Atrium II mortgage and loan, were sold by the RTC to Plaintiff, RTC Mortgage Trust 1994 N-1 ("RTC Mortgage Trust"). In connection with that sale, the RTC assigned to RTC Mortgage Trust:

all of [RTC's] right, title, and interest in and to (1) the Assets and all interests and principal received with respect to the Assets ... (2) all insurance policies of any nature pertaining to the Assets, (3) all documents related to the Assets (including, without limitation, with respect to Assets other than Mortgage Loans, all pledge agreements, security agreements and other documents of the type listed in Section 2 which, if executed or delivered in connection with a Mortgage Loan, would be Mortgage Documents), and (4) all proceeds derived in any way from any of the foregoing, all on the terms set forth herein

See Certification of Allyn S. Patrick ¶ 3 & Exh. A at p. 1 (dated Dec. 10, 1997) (hereinafter Patrick Certif.).² This agreement between the RTC and RTC Mortgage Trust (the "Assignment") defined Assets as:

The Mortgage Loans and other assets identified in the Assets Schedules that are assigned by the [RTC] to [RTC Mortgage Trust] by this Assignment including any liens and security interests securing payment of the related Note and, to the extent permitted by law, the right to assert, on a non-exclusive basis, to the same extent as the [RTC] could have asserted, the defenses commonly known as the "D'Oench Duhme" doctrine and the "federal holder in due course" doctrine and any statute of limitations that would be applicable to an action by the [RTC] based on a claim involving any of the Assets.

Id., Exh. A at § 1.

RTC reserved certain rights. In particular, the Assignment provided that:

The [RTC] and [RTC Mortgage Trust] agree that, notwithstanding anything to the contrary set forth in this Assignment (or any other transfer document delivered in connection with this Assignment), the purchase and sale of the Assets pursuant to this Agreement shall not include and the [RTC] specifically reserves for its benefit any claims and/or causes of action of any nature whatsoever that may now exist or hereafter arise, whether known or unknown, against any Person, including, without limitation, any officers, directors, employees, insiders, accountants, attorneys, other persons employed by the [RTC] or any predecessor thereof, underwriters or any other Person who has caused a loss to the [RTC] or any predecessor thereof. The foregoing is not intended as a limitation on [RTC Mortgage Trust's] rights to enforce such Assets in accordance with their terms and to realize the benefits of the Notes and the security therefor.

Id., Exh. A at § 6. Finally, the Assignment provided that it would be governed by the laws of the State of New York. Id., Exh. A at § 9.

The purchase by RTC Mortgage Trust of the Atrium II mortgage and loan, among other assets, was funded in part by the issuance of bonds by RTC Mortgage Trust. The mortgages and loans purchased by RTC Mortgage Trust were collateral for the bonds and Bank of America National Trust & Savings Association ("Bank of America") acted as bond trustee. See id. at ¶¶ 5-6; see also id., Exh. C; Miller Certif., Exh. 11. Thus, simultaneously with the execution of the Assignment from the RTC to RTC Mortgage Trust, the RTC, as a matter of convenience and on behalf of RTC Mortgage Trust, assigned the relevant mortgages and loans to Bank of America. See Patrick Certif. at ¶¶ 5-6 & Exh. A at 1 ("Simultaneously herewith, [RTC Mortgage Trust] is entering into a certain Indenture and Series 1994-N1A Supplement thereto of even date herewith pursuant to which certain of the Assets are pledged to the Bond Trustee. To evidence such pledge, [RTC] with the consent of [RTC Mortgage Trust] intends on the date hereof to assign such Assets directly to the Bond Trustee by a separate document.").

On January 29, 1996, following the pay-off of the bonds which partially funded RTC Mortgage Trust's purchase of the mortgages and loans from the RTC, Bank of America and RTC Mortgage Trust assigned the collateral which had been pledged in connection with the issuance of the bonds. This was accomplished by Bank of America's assignment of all of its interest in the Atrium II mortgage and loan, among other things, to RTC Mortgage Trust. See Patrick Certif. at ¶ 6 & Exh. B-C. In particular, Bank of America assigned to RTC Mortgage Trust:

(i) the Mortgage Loans and instruments listed in Schedule A to this Assignment, all payments made thereon, all insurance policies of any nature pertaining thereto and all accounts and documents related...