A message to NY Title Agencies - Make sure your closers call to verify payoff letters.

April 4, 2011

By: Daniel Tartaglia, Esq.

In a recent Nassau County case (United General Title Insurance Co. v. Meridian Abstract Corp., 30 Misc. 3d 1214) the defendant Meridian caused to be insured by plaintiff UGT a guaranty of "free and clear title" that was still encumbered by a mortgage for which payoff funds had not been secured at closing by defendant Meridian. The error resulted because a representative of Meridian relied on a "payoff letter" that contained false payoff figures to secure payoff funds that were insufficient to pay the full amount of the mortgage that encumbered the property. When payoff was attempted, the shortfall was $105,170.49.

In support of summary judgment, the plaintiff submitted the affidavit of a representative of the mortgagee, which avers that the company's computers log all incoming calls for each account and there is no record of a call to verify the payoff figures for the mortgage. The plaintiff also submitted telephone records which indicate that no call from Meridian's representative was placed to the mortgagee's toll free number as reflected on the payoff letters (including the letter with false figures). The plaintiff has also submitted expert testimony to establish that verification of inconsistent mortgage and payoff amounts was customary and necessary in the exercise of due diligence at real estate closings, as well as some company literature and bulletins which indicated that plaintiff's agents should always verify the payoff amounts. Finally, plaintiff submitted the inconsistent testimony of Meridian's representative, Kaplan, to indicate that Meridian had knowledge of the inconsistent figures but did not verify the payoff amount.

In response, the defendants submit that Meridian was entitled to rely on the payoff letter, and that in any case, its representative did verify the payoff figures by speaking with the mortgagee. In proof, defendant Meridian submits the affidavit of its representative, averring that he was the title closer at the transaction at issue, and that "[i]n every real estate closing in which I have acted as the title closer, I have always verified the amount of the payoff letter on the date of the closing. Thus, on May 1, I telephoned the mortgagee to verify the payoff amount set forth in the payout letter..." Defendants also submitted an affidavit by the sellers, averring that the payoff figures were correct as represented to the title closer.

The court was unconvinced by defendants and found that they utterly failed to come forward with their proof, available only to them, to verify the inconsistent and incredible allegations by Meridian's representative that he in fact verified the mortgage amounts or that he tried calling to verify the payoff amounts but his call was re-routed. The court found further that defendants did not produce any documentation or business records (as might be kept in the exercise of due diligence) which would indicate who their closer spoke to in order to verify the payoff figures; nor have they produced any telephone records which might indicate that Kaplan did attempt to reach a representative of the mortgagee.

Court's Conclusion

The plaintiffs proffer of proof and law created a prima facie case for judgment as a matter of law, as no genuine and triable issues of fact arose from the evidence. Defendants' proof failed to rebut the plaintiffs' entitlement to judgment as a matter of law and to raise any issues of fact which demand the resources of a trial. Plaintiff's motion is granted.