Title Insurance Underwriting
& "Fraudulent Joinder"
In an action to quiet title, Plaintiff asserted “no title company … will issue a policy of title insurance based upon
a foreclosure deed arising from a foreclosure [of] a homeowners association
lien, without a court order of quiet title against the former owner” and joined
the former owner as a defendant.
Including the former owner destroyed diversity, seeming to preclude
removal to Federal District Court.
The Court disagreed.
In Daisy Trust v. JPMorgan Chase Bank,
NA, et al., (Civ. No. 2:13-cv-00966, U.S.D.C., D. Nevada,
Dec. 11, 2013), the Court held that the earlier foreclosure of the HOA lien
extinguished all of the former owner’s rights or interests in the
Property. That “private companies
may choose, as a business decision, not to issue title insurance under such
circumstances is irrelevant. The
critical question is whether [Plaintiff] has a quiet title claim against
[Former Owner]. .… It does not. A quiet title claim is not forced into existence
merely because a private enterprise refuses to issue title insurance in the
absence of a court order on a hypothetical claim.”
Comment:
The plaintiff has filed a Notice of
Appeal. The Constructive Notice
Newsletter will continue to monitor and report any substantive developments.