As assignee for a mortgagee, a title insurer sought to enforce a settlement it had entered with a borrower who had sold his home and used the proceeds for personal purposes instead of repaying the loan and failing to inform the mortgagee he sold the home. The parties had disagreed on terms of the confession of judgment that was part of the agreement and argued whether those terms were material to the settlement.
The case is First American Title Insurance Co. v. David Sadek, Etty Sadek, et al. (U.S. District Court for the District of New Jersey, No. 11-1302).
First American Title Insurance Co.’s predecessor and assigner, PNC Bank National Association, filed suit on March 8, 2011. First American has amended its pleading twice. The second amended complaint alleges David Sadek, who filed for bankruptcy, refinanced his home mortgage with a loan from First Financial Equities (FFE), a banking firm for which he was president, primary shareholder and CEO. FFE sold the loan to National City Mortgage Co. PNC took possession of the loan through a chain of ownership. First American alleged Sadek sold his home and used the sales proceeds for personal purposes and not repaying the loan. He also failed to inform PNC he sold the home, as the loan agreement required.
The second amended complaint alleges five counts against Sadek: break of contract; fraud; civil conspiracy; unjust enrichment; and conversion. Sadek resolved the breach of contract count by entering a consent judgment for the amount of the loan and interest. U.S. District Judge Kevin McNulty granted summary judgment for First American on the conversion count. McNulty determined the issue of whether the judgment against Sadek was dischargeable in Sadek’s bankruptcy action should be resolved at trial.
The parties engaged in several settlement efforts and eventually conceptually agreed that Sadek would make payments to First American over the course of several years, and that a non-dischargeable confession of judgment would secure the outstanding balance. The negotiations continued in December 2020 when specific terms were presented to Sadek’s counsel, William Dimin, via email. The parties reported to the court that First American and Sadek reached a settlement agreement in principle subject to documentation. The court then entered an order dismissing the suit without prejudice to the right of either party to re-open the matter within 60 days if the settlement is not consummated.
A draft settlement agreement was provided to Sadek’s attorney on Jan. 5, 2021. It tracked the terms set forth in the December email and included specific language for the confession of judgment. Paragraph 6 of the confession of judgment called for Sadek to admit the allegations and claims of the second amended complaint.
Discussions continued into February 2021. Dimin expressed Sadek’s reservations about the part of Paragraph 6 of the confession of judgment in which Sadek would admit to the allegations and claims in the second amended complaint. A revised copy was provided, which reflected the parties’ agreement on confidentiality. This revised draft called for March 1, 2021, as the due date for the first payment Sadek would make to First American.
In early March 2021, Dimin acknowledged receipt of the documents First American had sent and expressed home that the parties could finalize the settlement. However, on March 16, 2021, Dimin forwarded to First American an email sent by Sadek indicating that Sadek was no longer interested in a settlement.
First American alleged it was prepared to sign the agreement. On June 7, 2021, it filed a motion to reopen the case and enter all appropriate relief. It asked the court to reopen the case and find that the parties entered into an enforceable settlement agreement. First American also asked the court to concluded Sadek defaulted on the payment schedule embodied in that agreement and enter final judgment in the amount of $1 million, plus reasonable attorneys’ fees incurred related to the enforcement and effectuation of the settlement agreement.
U.S. Magistrate Judge Michael Hammer recommended the district court grant First American’s motion.
“The court is persuaded that the parties reached agreement on the material terms of settlement,” Hammer stated. “Sadek admits, through his counsel, that he agrees to pay First American a total of $470,000 in monthly installments over a term of 15 years, with a balloon payment at the end of the 15-year term. Sadek also acknowledges that he agreed the debt would be non-dischargeable. In fact, Sadek does not even deny that he had agreed to the confession of judgment as a means to secure the outstanding debt. Instead, he claims only that the parties were at an impasse over the requirement in Paragraph 6 of the confession of judgment that Sadek admit to the facts and claims in the second amended complaint. But there is no indication from the record that Sadek objected to submission of a confession of judgment itself. To the contrary, a fair reading of the email exchange between counsel suggests that Sadek negotiated the amounts at issue in the confession of judgment.
“The court agrees with First American that the admissions provision in Paragraph 6 of the confession of judgment is not material,” Hammer continued. “The essential terms of the agreement are the payment amount, schedule, and non-dischargeability of the debt, and the confession of judgment itself, all terms on which the parties agreed. The purpose of the confession of judgment was as a means of recourse for First American in the event Sadek subsequently defaulted. In turn, the admissions provision within Paragraph 6 was simply part of the execution of the confession of judgment, should its execution be necessary. There is no suggestion that the admissions provision within Paragraph 6 was necessary to execute the confession of judgment. In fact, in its reply and at oral argument, First American has posited that the admissions provision of Paragraph 6 is not material. Indeed, Sadek’s own counsel concedes that Paragraph 6 of the confession of judgment was drafted ‘in order to effectuate the terms that counsel for both parties agreed to and to enter into a binding settlement agreement.’ Courts have held that a court may enforce a settlement agreement even where there is a disagreement over a provision meant to aid implementation of the essential terms. Sadek, on the other hand, provides no caselaw supporting the proposition that agreement on the admission provision in paragraph 6 was a prerequisite to a binding agreement.”
While Hammer recommended the court conclude that First American and Sadek entered into a binding settlement agreement, he could not agree that Sadek is in breach for failure to make the first payment by March 1, 2021.
“While the parties agree on the amount and a monthly payment schedule, the record does not support that there was a meeting of the minds that the first payment would take place by or before March 1, 2021,” Hammer stated. “There is nothing in the settlement agreement itself that specifies the payment commencement date. However, it is clear from the parties’ course of dealings that they had agreed that payment would begin within 30 days of the parties’ execution of the settlement agreement and, thereafter, on the first of the month. For example, on Dec. 10, 2020, when the parties notified the court that they had settled, they had tentatively scheduled the first payment for Jan. 1, 2021. However, it became necessary in January 2021 for the parties to continue to negotiate the settlement, as reflected in the Jan. 5, 2021, email that Schoenfield sent Dimin with the updated terms of the agreement. Therefore, the first payment was pushed to Feb. 1, 2021. On Feb. 6, 2021, the parties continued to negotiate the final terms, particularly as to confidentiality, and Schoenfield again emailed Dimin to push the deadline for the first payment to March 1, 2021.”