Title Company Not Liable for Aiding and Abetting Alleged Fraud Absent Proof of Knowledge or Substantial Assistance of the Fraud

This week we wanted to bring your attention to an interesting decision out of the Appellate Division, Second Department, which, in affirming a lower Court’s decisions, held in part, that a Title Company is not liable for aiding and abetting an alleged fraudulent transaction absent conclusive proof showing that Title Company had actual knowledge of the fraud and offered substantial assistance in effectuating the fraudulent transaction. 
The relevant facts of, as well as a link to, the case are set forth below.

The decedent Christine Woodson died intestate on August 3, 1996, and allegedly was survived by five children: Carolyn Clarke, Michelle Woodson, Lloyd Woodson, Marvin Woodson, and Norval Woodson. Under the laws of intestacy (see EPTL 4-1.1), each of those five children would be entitled to 20% of the net value of the decedent's estate.  The Estate included real property located in Brooklyn, New York.  Letters of administration were issued to Carolyn Clarke (hereinafter the administrator) on December 11, 1998, which restrained her from selling, mortgaging, or otherwise encumbering the property, except upon further order of the Surrogate's Court.   On August 18, 2005, Lloyd Woodson and Michelle Woodson, as "heirs at law" of Christine Woodson, executed a bargain and sale deed purporting to transfer the property to Alfanso Gonzalez and Fidelity National Title Insurance Company (hereinafter Fidelity) issued a title insurance policy in favor of Gonzalez with respect to the subject property.  Subsequently, Marvin Woodson and Norval Woodson separately executed quitclaim deeds, both dated December 14, 2005, purporting to transfer the property to Gonzalez.  Thereafter, on December 14, 2005, another quit claim deed was executed and delivered by a Terraine Woodson, who was not otherwise disclosed as a relative of the decedent, purporting to transfer the property to Gonzalez.   It is important to note that at no time, did the administrator give a deed to Gonzalez, nor anyone else, either in her individual capacity or in her capacity as administrator of the estate. Thus, only four of the five disclosed children conveyed their share of the property to Gonzalez.

The property was subsequently conveyed by Gonzalez to a Third party in 2006 and, thereafter, the Administrator commenced an action to both set aside all of the prior deeds and to seek damages against the defendants, including Fidelity ,based, in part, on a theory that the Defendants “participated in a transaction seeking to defraud the Estate”.   Fidelity filed a Summary Judgment motion seeking to dismiss the petition in its entirety and the Supreme Court granted the motion; and this appeal ensued.  In affirming the Lower Court’s Order, the Appellate Court stated that there was no evidence in the record that Fidelity had any knowledge of the alleged fraud or substantially assisted in achievement of the fraud.  The Appellate Court went on to further state that “[t]he administrator's claim that Michelle Woodson's signature on the deed was a forgery was raised for the first time in opposition to Fidelity's motion and, in any event, is insufficient to defeat the motion. The signature was acknowledged before a notary, and the petitioner failed to present an affidavit by Michelle Woodson attesting that she did not execute the deed or an affidavit from any handwriting expert attesting that the signature on the deed did not match Michelle Woodson's signature.”

To view the case click the below link: 
https://www.nycourts.gov/reporter/3dseries/2016/2016_00698.htm