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Edelman v. Belco Title & Escrow, L.L.C.

United States District Court, Seventh Circuit

May 16, 2013

STEVEN EDELMAN, C. BRADFORD JEFFRIES, Trustee of the C. Bradford Jeffries Living Trust dated September 18, 1994, and WILL FURMAN, Trustee of the Furman-Doane Family Revocable Trust, Plaintiffs,
v.
BELCO TITLE & ESCROW, L.L.C., Defendant.

ORDER

DONALD G. WILKERSON, Magistrate Judge.

Now pending before the Court is the Motion for Summary Judgment filed by Defendant, Belco Title & Escrow, L.L.C., on March 21, 2013 (Doc. 80). For the reasons set forth below, the Motion is GRANTED.

INTRODUCTION

Plaintiffs' Fourth Amended Complaint, which was filed on June 15, 2012 (Doc. 52), makes various allegations related to a losing commercial venture wherein Plaintiffs lost a collective $2, 500, 000.00. To recoup their lost funds, Plaintiffs originally sued a law firm, a title company, and an underwriter related to the transaction under theories of negligent misrepresentation and breach of fiduciary duties. The underwriter (Attorneys' Title Guaranty Fund, Inc. ("ATG")) was dismissed by order on May 21, 2012 (Doc. 46) and the law firm (Belsheim & Bruckert, L.L.C.) was dismissed by stipulation on April 23, 2013 (Doc. 83) - only the title company (Belco Title & Escrow, LLC) and the related claims of breach of fiduciary duty remain (Counts 4-6 of the Fourth Amended Complaint).[1]

BACKGROUND

Forest Lakes was, as we shall see, a failed multi-use development project developed by Caseyville Sport Choice, LLC and promoted by John and Craig Nicholson. On June 15, 2005, Caseyville executed a duly recorded $20 million mortgage that was secured by a lien, in favor of Meridian Bank, on the residential portion of Forest Lakes. In 2007, Caseyville solicited Plaintiffs and another investor, Nam Yung Suh, who collectively invested $3, 000, 000 for Phase II of the project (which appears to involve only the residential portion of Forest Lakes).[2] Plaintiffs understood, through representations made by Caseyville and a written Loan Agreement (Doc. 81-1, pp. 32-45), [3] that their loans would be secured by a first lien on the Phase II property. Unfortunately for Plaintiffs, the residential portion of Forest Lakes was foreclosed upon by Meridian Bank, which in fact had the first lien, at some point after September, 2009. Plaintiffs lost all their money: this lawsuit was filed thereafter on December 21, 2011.

Defendant Belco Title & Escrow relationship to the transactions, Plaintiffs, other third party actors, and dismissed Defendants all appears to be in a tangled web that need not be unraveled by this Court. Suffice it to say, Belco Title was created by the firm Belsheim & Bruckert in furtherance of the firm's work with Caseyville Sport Choice. The two persons who performed work for Belco were Doug Gruneke and Angela Kalous, an attorney and paralegal, respectively, formally employed by Belsheim & Bruckert. Belsheim & Bruckert represented Caseyville in its agreement with Meridian Bank and Belco was the closing agent on that mortgage. Belco used ATG in previous transactions, and in the transaction involving Plaintiffs, to do title search work and prepare title commitment documents to be used in closings.

With respect to the transaction involving the Plaintiffs, Belco issued a "Commitment for Title Insurance" (hereinafter "Title Commitment" (Doc. 81-10)) in relation to the loan agreement entered into by Plaintiffs and Caseyville prior to closing and acted as the closing agent/escrow agent on the mortgage at issue. There is no question that the documents related to the mortgage, including the Title Commitment, were accurate in that they indicated that Meridian Bank held the first lien on the property. There is also no question that Belco performed its nominal duties as an escrow agent in that it made disbursements of funds in accordance with an Agency/Escrow Disbursement Agreement (Doc. 81-1, pp. 46-47).[4]

Plaintiffs' gripe with Belco is that it failed to inform them of anything related to the transaction notwithstanding its knowledge of Plaintiffs' expectations and the terms of the Loan Agreement. Namely, Plaintiffs state that Belco failed to:

1. Seek instruction from them with respect to closing;
2. Notify them as to the closing date;
3. Seek Plaintiffs' opinion as to the accuracy of the closing documents; and
4. Provide Plaintiffs with the documents related to closing (either before or shortly after closing) including the Mortgage, Title Commitment, or HUD statements.

Plaintiffs' main issue with Belco is that it failed to inform them prior to closing that they would not have first lien priority on the property (Phase II) used to secure the mortgage and/or that it failed to provide them with a copy of the Title Commitment that indicated Meridian's superior mortgage. Plaintiffs state that they did not ...


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