Court Opinion

ID: 9752038
Source: CourtListenerOpinion
Date Created: 2023-08-28 17:30:22.608844+00
Date Added: 2024-06-11T09:51:44.087494
License: Public Domain

CLIFFORD, J.,
dissenting.
I would hold that the dishonest attorney, defendant Witkowski, was the agent of the purchaser-borrower, defendant Hart. The existence of a closing-protection letter in this case, unlike the situation in the companion case of Sears Mortgage Corporation v. Rose and Kaiser, 134 N.J. 326, 634 A.2d 74 (1993), does not alter the consequences that flow from that agency relationship. I therefore vote to reverse the judgment below.
By selecting Witkowski as his attorney, Hart put the lawyer in the position to savage the transaction and plunder the funds. The mortgage lender, Southern Mortgage Associates, Inc. (Southern Mortgage), did not pick Witkowski; it had no choice but to deal with him, however, because Hart had designated him as his legal representative for the loan transaction and the statutory scheme bars lenders from requiring the borrower to use the lender’s lawyer. See N.J.S.A. 46:10A-6. The client-protection letter does not change any of the foregoing. Its purpose is to provide certain specified indemnity to the lender for losses that result from the lender being forced to deal with an attorney with whom the lender is entirely unfamiliar. The attorney is an unknown quantity. Without the closing-protection letter Southern Mortgage, understandably, would not have made the mortgage loan. All of Wit*380kowski’s dealings with Security Title and Guaranty Company (Security Title) and Southern Mortgage were on Hart’s behalf. Witkowski had to deal with a title company because Southern Mortgage required a commitment to insure, a closing-protection letter, and a mortgage policy of title insurance. Without those documents Hart would not have obtained the loan.
At the mortgage closing Hart signed a promissory note in the amount of $91,000 and the mortgage itself. The signing of those documents constituted an acknowledgement that he had received the $91,000 from Southern Mortgage, and he gave his condominium as security for the loan. At the closing Hart received the check, made jointly payable to him and Witkowski. He endorsed it and left it with Witkowski so Witkowski could pay off the existing mortgage of Center Savings and Loan (Center). Hart never saw the mortgage-closing instructions that Southern Mortgage had sent to Witkowski, and nothing in the record suggests that Hart relied on any. such instructions. Likewise, nothing indicates that Hart ever saw the closing-protection letter or that he was led thereby to believe that Witkowski was acting for either Southern Mortgage or Security for purposes of the loan transaction. When Hart finished with the closing, nothing remained for him to do. Plenty remained for Witkowski to do, the most important of which, paying off the Center mortgage, he failed to accomplish. In short, the transaction was a perfectly routine mortgage refinancing, made different only by virtue of the fact that Witkowski is a thief.
In my view because Witkowski’s principal was Hart, the money Witkowski stole was Hart’s, not Southern Mortgage’s. Hart’s endorsement made it possible for Witkowski to walk away with the money.
Moreover, Southern Mortgage did not promise Hart that it would pay off his prior mortgage, and no failure of consideration for the promissory note in the mortgage transaction resulted from Witkowski walking away with the mortgage proceeds. As the amicus brief makes plain, the practical meaning of the instruction *381that tells the attorney not to disburse any loan proceeds without full compliance with the instructions is that the attorney must disburse some of the money to satisfy conditions of the loan that are contained in the closing instructions. What the instructions meant in this case is that to the extent necessary, the mortgage proceeds were to be used to satisfy the Center mortgage. Southern Mortgage knew nothing about the balance due on the Center mortgage. Moreover, the use of the phrase “as our closing agent” in the loan-closing instructions cannot be elevated to a controlling principle. Had Southern Mortgage considered Witkowski to be its agent, it could have made the check payable to Witkowski alone.
I disagree entirely with the Appellate Division’s suggestion that Witkowski had to obtain cancellation of the Center mortgage before disbursing any of the Southern Mortgage loan proceeds. In fact, almost all of the $91,000 loan proceeds had to be disbursed to Center before Center would endorse on the original mortgage the fact that it had been paid and before it would return the document to Witkowski so it could be cancelled of record. The Center mortgage could not be cancelled before Witkowski disbursed any of the mortgage proceeds. Failure to have the Center mortgage cancelled of record before the disbursement of any of the $91,000 could not constitute lack of consideration for the promissory note. The consideration was in the form of the $91,000 loan-proceeds check, which Hart endorsed in blank. By endorsing that check, Hart acknowledged receipt of the money.
The Center mortgage is a valid one and is in default, and Security Title is a valid holder of that mortgage. It is entitled to foreclose. Hart is free to pursue his claim against the New Jersey Lawyers’ Fund for Client Protection.
For affirmance — Chief Justice WILENTZ, and Justices HANDLER, POLLOCK, O’HERN, GARIBALDI and STEIN — 6.
For reversal — Justice CLIFFORD — 1.