Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

FIDELITY NATIONAL TITLE COMPANY v. LAW TITLE INSURANCE CO.

May 3, 2005.

FIDELITY NATIONAL TITLE COMPANY, A CALIFORNIA CORPORATION, SUCCESSOR BY MERGER TO FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK, Plaintiff,
v.
LAW TITLE INSURANCE COMPANY, INC., LAW TITLE INSURANCE COMPANY, INC. NAPERVILLE, and JOHN F. GINOCCHIO, individually, Defendants.



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Fidelity National Title Insurance Company, a California corporation, successor by merger to Fidelity National Title Insurance Company of New York ("Fidelity"), filed suit against Defendants Law Title Insurance Company, Inc. ("Law Title"), Law Title Insurance Company, Inc. — Naperville ("Law Title — Naperville"), and the President of both companies, John F. Ginocchio, seeking to recover approximately $2,000,000 paid by Fidelity on some 32 title insurance policies that were issued by Defendants and underwritten by Fidelity. Defendants have filed several motions challenging Fidelity's Complaint, including a motion to strike, two motions to dismiss, a motion for partial summary judgment, and a motion for a more definite statement. For the reasons set forth below, the motions are granted in part and denied in part.

BACKGROUND

  Fidelity, a California corporation with its principal place of business in California, has issued and underwritten title insurance for real estate in Illinois. (Cmplt. ¶ 1.) Law Title and Law Title — Naperville are Illinois corporations engaged in the sale of title insurance as agents for various title insurance underwriters, including Fidelity. Both companies have offices throughout Illinois, including in Kane, Kendall, DuPage, DeKalb, Lake, and Cook Counties. (Id. ¶¶ 2, 3.) Ginocchio is the President of Law Title and Law Title — Naperville and resides in Princeton, Illinois. (Id. ¶ 4.)

  A. The Agency Agreements

  On May 16, 1995, Fidelity and Law Title entered into an agency agreement (the "Agreement") in which Fidelity appointed Law Title to act as its agent for purposes of "countersign[ing] and issu[ing] title insurance commitments, binders, guarantees, endorsements, title insurance policies of [Fidelity], or any other form whereby [Fidelity] assumes liability. . . ." (Id. ¶¶ 7, 9; Ex. A1 ¶ 1.) Fidelity and Law Title — Naperville entered into a similar agreement (the "Naperville Agreement") on February 1, 1997. (Id. ¶¶ 8, 9; Ex. A2 ¶ 1.)

  The Agreement and the Naperville Agreement both provide for the allocation of "Losses" — defined as "sums paid or to be paid by [Fidelity], in cash or otherwise, to settle or compromise claims under any of [Fidelity's] Title Assurances issued by [Law Title or Law Title — Naperville]" (Id. ¶ 12; Exs. A1 and A2 ¶ 12(A)) — between Fidelity and both Law Title companies (referred to in the agreements as "Agent"). These provisions generally require the Law Title companies to indemnify Fidelity for losses caused by the Law Title companies' own negligence or wrongdoing:
B. In the event that a Loss sustained or incurred for a matter arising under this Agreement resulted or arose from the negligent, willful or reckless conduct of Agent, Agent's employees or any independent contractor relied upon by Agent, then Agent shall reimburse [Fidelity] for the Loss. The instances where Agent shall be liable to [Fidelity] under this subparagraph shall include, without limitation, the following:
1. Failure of the Agent to comply with the terms and conditions of this Agreement or with the manuals, underwriting bulletins and/or instructions given to Agent by [Fidelity].
2. Issuance of Title Assurances which contain errors or omissions which could reasonably have been detected by Agent from the commitment, examiner's report, title search or abstract.
3. Loss arising from escrow or Non-Title Assurance operations of Agent including, but not limited to, preparation of documents, providing abstracting services, providing accommodation services and the handling and disbursement of funds.
* * * * 5. Commission of fraud, conspiracy, dishonesty, misrepresentation or defalcation by Agent or Agent's aiding and abetting therein.
* * * *
C. Agent shall be liable to [Fidelity] for any Loss resulting to [Fidelity] by reason of Agent's failure to comply with the terms and conditions of this Agreement.
(Id. ¶ 13; Exs. A1 and A2 ¶ 6.)

  B. Ginocchio's Personal Guarantees

  On February 1, 1997, Ginocchio signed a single-page document attached to the Naperville Agreement setting forth four "Schedules" identified as A through D. Schedule D is entitled "Personal Guarantee" and states that "each of the undersigned jointly and severally does hereby personally and unconditionally undertake, guarantee and assure the full, prompt and complete performance of all the terms, agreements, covenants, conditions and undertakings of Agent as set forth in said Agency Agreement." (Id. ¶ 17; Ex. A2, Schedule D.) Ginocchio signed a similar document in connection with the Agreement on June 2, 1997. (Id. ¶ 16; Ex. A1, Schedule D.)

  C. Fidelity's Claims

  Fidelity asserts four claims against Defendants relating to certain inappropriate underwriting practices that resulted in "Losses" to Fidelity under the Agreement and Naperville Agreement. The court's jurisdiction over these claims is based on diversity of citizenship pursuant to 28 U.S.C. § 1332.

  1. The Ron Cook Closings

  In Count I of the Complaint, Fidelity alleges that between February and November 2000, Ron Cook, a Title Officer and Salesman for Law Title, closed at least six fraudulent mortgage refinances underwritten by Fidelity (the "Ron Cook Closings"). Fidelity claims that Cook engaged in a scheme to "submit to Law Title forged and fictitious deeds and other false information in order to induce Fidelity, through Law Title, to issue and underwrite title insurance for the Ron Cook Closings." (Id. ¶ 21.) Specifically, Cook paid large sums of money from his personal checking account to three individuals: Donna Davis (Loan Officer), Jim Baiocchi (Appraiser/investor), and Carmondel Muhammad (Investor),*fn1 who then acted as the purported borrowers at the fraudulent closings. Cook's payments to these "co-conspirators" totaled at least $96,300. (Id. ¶¶ 19, 22.) On February 8, 2001, Ginocchio sent a letter to Mike Fonder, Vice-President of Fidelity, disclosing that "[w]e have come across 7 files to date that may involve inappropriate underwriting on the part of our employee, Ron Cook. . . ." (Id. ¶ 20; Letter from J. Ginocchio to M. Fonder of 2/8/01, Ex. B to Cmplt.) The letter identified eleven individuals, including Cook, Davis, Baiocchi, and Muhammad, whose names "ke[pt] appearing in" the questioned files, and whom Fidelity believes participated in the fraudulent scheme. (Id. ¶ 21; Letter from J. Ginocchio to M. Fonder of 2/8/01, Ex. B.)

  Fidelity's insureds from the Ron Cook Closings filed six title insurance claims with Fidelity, resulting in settlement payments totaling $475,631.50. (Id. ¶ 24.) Fidelity alleges that Law Title is required to reimburse these amounts pursuant to paragraphs 6(B)(5) and 6(C) of the Agreement "by virtue of Ron Cook's participation in the fraud." (Id. ¶ 26.) Fidelity also claims that Ginocchio is personally liable for the losses under his personal guarantee contained in Schedule D of the Agreement. (Id. ¶ 29.)

  2. The Ken Steward Closings

  In Count II of the Complaint, Fidelity alleges that between February and November 2001, Ken Steward of either Law Title or Law Title — Naperville*fn2 conducted at least seven fraudulent closings underwritten by Fidelity (the "Ken Steward Closings"). (Id. ¶ 33.) Fidelity learned about the fraudulent scheme from certain unidentified insureds. That scheme allegedly involved "deceptive acts, including but not limited to, the fabrication of mortgage payoff statements at closing and/or forged endorsements on checks generated at the Ken Steward Closings," which "enabled Ken Steward to fraudulently divert funds to himself and away from Fidelity's insureds." (Id. ¶ 34.) Fidelity claims that Law Title and/or Law Title — Naperville were negligent with respect to the Ken Steward Closings by "(a) failing to verify that the payoff statements relating to existing mortgage liens on the subject properties were genuine; and/or (b) in tendering payoff checks to Ken Steward for delivery to third parties even though the checks were not made payable to Ken Steward." (Id. ¶ 39.)*fn3

  Fidelity's insureds from the Ken Steward Closings submitted title insurance claims to Fidelity, and Fidelity paid a total of $718,955.65 to clear related title defects. (Id. ¶¶ 35-37.) Fidelity alleges that Law Title and/or Law Title — Naperville must reimburse these amounts pursuant to various provisions of the Agreement and/or the Naperville Agreement, including paragraphs 6(B)(1), 6(B)(2), 6(B)(3), and 6(C). (Id. ¶ 40.) Fidelity asserts that Law Title and Law Title — Naperville have "admitted that they are liable to Fidelity" for losses relating to the Ken Steward Closings, citing an April 12, 2004 letter from Ginocchio to Paul Cozzi, Fidelity's Vice President/Regional Counsel. (Id. ¶ 41.) In that letter, Ginocchio stated:
The Ken Steward Claims:
The demand for $535,073.00 for Law Title files number 124858E, 116403E, 128798E, 127620E and 129726E has also been referred to our E & O [errors and omissions] carrier. Law Title has also filed a law suit against Fifth Third Bank on the fraudulent endorsements contained in each of these files.
It is my opinion that between Fifth Third Bank and our E & O carrier, Fidelity will get its money back on those files. I would ask you to please be patient.
(Id.; Letter from J. Ginocchio to P. Cozzi of 4/12/04, Ex. E to Cmplt.) Fidelity also claims that Law Title and/or Law Title — Naperville have become parties to several lawsuits relating to the Ken Steward Closings, and that by "attempt[ing] unsuccessfully to collect [from third parties such as their errors and omissions insurance carrier] the Losses sustained by Fidelity for the Ken Steward Closings," they have "admitt[ed] Law Title's and/or Law Title — Naperville's liability to Fidelity for these Losses." (Id. ¶ 42.) As with Count 1, Fidelity seeks to hold Ginocchio personally liable for the Losses under his personal guarantee contained in Schedule D of the Agreement and the Naperville Agreement. (Id. ¶ 44.)

  3. Miscellaneous ¶ 6(B) Files

  Count III of the Complaint alleges that between the summer of 1997 and October 2002, Law Title and/or Law Title — Naperville*fn4 negligently conducted at least 12 additional closings on behalf of Fidelity (the "Miscellaneous ¶ 6(B) Files"), and that Fidelity is entitled to be reimbursed for its related losses pursuant in part to paragraph 6(B) of the Agreement and/or Naperville Agreement. (Id. ¶ 48.) Fidelity learned about the title problems relating to the Miscellaneous ¶ 6(B) Files from certain unidentified insureds. (Id. ¶ 49.) The specific problems included: (1) failing to payoff a mortgage lien at closing (Claim Number 73578); (2) failing to note that the borrower had conveyed title to another grantee prior to closing (Claim Number 77981); (3) missing a life estate encumbering the property (Claim Number 82144); (4) failing to promptly record a deed and mortgage, which allowed a subsequently filed judgment lien creditor to take priority over the insured mortgage (Claim Number 110385); and (5) missing a prior tax sale of one of the parcels encumbering the property at the subject closing (Claim Number 117101). (Id.)

  Fidelity has settled title claims filed by its insureds relating to the Miscellaneous ¶ 6(B) Files, paying a total of $700,177.33. (Id. ¶¶ 50-52.) Fidelity alleges that Law Title and/or Law Title — Naperville must reimburse these amounts pursuant to various provisions of the Agreement and/or the Naperville Agreement, including paragraphs 6(B)(1), 6(B)(2), 6(B)(3), and 6(C). (Id. ¶ 54.) Fidelity also claims that Ginocchio is personally liable for the Losses under his personal guarantee contained in Schedule D of the Agreement and the Naperville Agreement. (Id. ¶ 56.) 4. Miscellaneous ¶ 6(A) General Liability Files

  In Count IV of the Complaint, Fidelity alleges that Law Title and/or Law Title — Naperville*fn5 conducted at least six closings on behalf of Fidelity which involved title defects (the "Miscellaneous ¶ 6(A) General Liability Files"). (Id. ¶¶ 60-62.) Fidelity claims that Law Title and/or Law Title — Naperville must reimburse its expenses incurred in clearing the title defects, totaling a minimum of $30,000 (or $5,000 per Loss). (Id. ¶ 64; Exs. A1 and A2, Schedule A ("Agent shall be liable for the first $5,000 of any Loss sustained or incurred by [Fidelity] as a result of the issuance of the Title Assurances by Agent.")) Fidelity also seeks to hold Ginocchio personally liable for the Losses under his personal guarantee contained in Schedule D of the Agreement and the Naperville Agreement. (Id. ¶ 66.)

  DISCUSSION

  Defendants have filed five motions challenging the Complaint: (1) a motion to strike Exhibit E pursuant to FED. R. EVID. 408; (2) a motion to dismiss the claims against Ginocchio; (3) a motion to dismiss Count I pursuant to FED. R. CIV. P. 9(b) and 19(a); (4) a motion for partial summary judgment; and (5) a motion for a more ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.