Mohamed v. Reinhart Boerner Van Deuren SC et al

Filing 176

ORDER signed by Judge Rudolph T. Randa on 6/26/2013. 116 Freer's MOTION for Summary Judgment DENIED; 120 Chicago Title's MOTION for Summary Judgment DISMISSED with respect to assigned claims of Mohamed and Reinhart cross-claims and DENI ED with respect to cross-claims against Freer; 122 Reinhart's MOTION for Partial Summary Judgment DISMISSED with respect to Chicago Title's cross-claims and DENIED with respect to third-party claims against Freer. Telephonic Final Pretrial Conference set for 6/28/2013 at 9:30 AM (changed from 10:00) before Judge Rudolph T. Randa. The Court will initiate the call. Motions in limine due 7/3/2013; responses to those motions due 7/10/2013; replies due 7/15/2013. (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
REINHART BOERNER VAN DUREN S.C.,
Third-Party Plaintiff,
and
CHICAGO TITLE INSURANCE COMPANY,

Case No. 10-C-753

Cross-Claimant.
v.
CARL JOHAN FREER,
Third-Party Defendant-Cross-Claim Defendant.

DECISION AND ORDER

This Decision and Order addresses the motions for summary judgment filed by
Chicago Title Insurance Company (―Chicago Title‖), and Carl Johan Freer (―Freer‖),
and the partial summary judgment motion filed by Reinhart Boerner Van Duren S.C.
(―Reinhart‖).
Factual and Procedural Background
The factual and procedural background provides context for analysis of the
pending motions. In January 2007, Plaintiff Timor Mohamed (―Mohamed‖) loaned
$1 million to Blowfish Works (―Blowfish‖), Freer‘s company. Freer provided a
personal guarantee for the loan to Blowfish.
A Short Form Deed of Trust (―Deed of Trust‖) for the residence located at
1744 Stone Canyon Road, Los Angeles, California (the ―California home‖ or the

―California residence‖) owned by Freer and his then-wife Anneli Freer (―Anneli‖)
(collectively the ―Freers‖),1 was to have secured the promissory note (―Blowfish
Note‖) for the loan. Reinhart, counsel for Mohamed, requested that Chicago Title
record a deed of trust. The deed of trust was not recorded. In August 2007, the Freers
sold their California home. Mohamed had no secured interest in the home. Neither
Blowfish nor Freer (as guarantor of the Blowfish Note) has repaid the principal or
interest on the $1 million loan.
On September 1, 2010, Mohamed filed this action. Mohamed‘s Amended
Complaint alleged claims for breach of fiduciary duty, negligence, and breach of
contract against Chicago Title. (ECF No. 66.) Mohamed also made claims against
Reinhart for legal malpractice, breach of fiduciary duty, equitable estoppel,
intentional misrepresentation, and principal and agent liability.
Reinhart and Chicago Title filed cross-claims against each other. (ECF Nos.
69 & 78.) Reinhart cross-claimed for contribution and indemnification (first crossclaim), and that Chicago Title breached its duty to Reinhart (second cross-claim).
Chicago Title cross-claimed for indemnification and contribution from Reinhart.
Reinhart filed a third-party Complaint against Freer for indemnification and
subrogation. (ECF No. 104.) Chicago Title filed cross-claims against Freer for
contribution and indemnification and for subrogation. (ECF No. 106.)

1

The Court departs from its usual practice of referring to individuals by their surnames to distinguish
between the Freers. No disrespect is intended.

-2-

On March 27, 2013, the Court approved a stipulation dismissing Mohamed‘s
claims against Reinhart. (ECF No. 129.) Mohamed assigned his claims against
Chicago Title in this action to Reinhart. However, for the purposes of this Decision
and Order, the Court will continue to refer to the assigned claims as Mohamed‘s
claims.
Thereafter, pursuant to a May 14, 2013, Order, Chicago Title filed a sur-reply
and Reinhart filed a short response to that sur-reply brief. (ECF Nos. 165, 166, 169.)
Those additional briefs address the impact of the settlement between Reinhart and
Mohamed on the claims in this action.
On June 20, 2013, Reinhart and Chicago Title advised the Court that they
settled all claims and cross-claims between them, including those claims that Reinhart
held as assignee of Mohamed. Thus, Chicago Title‘s motion for summary judgment
with respect to Reinhart and its assigned claims of Mohamed is moot, as is Reinhart‘s
motion for partial summary judgment with respect to Chicago Title‘s claims. Those
portions of their motions are dismissed as moot.
Chicago Title‘s cross-claims against Freer remain pending, as does Reinhart‘s
third-party Complaint. Thus the portions of the pending summary judgment motions
and partial summary judgment motions will be addressed. However, the Court needs
to clarify the basis for its exercise of subject matter jurisdiction over the remaining
claims in this action.
SUBJECT MATTER JURISDICTION
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Subject matter jurisdiction over Mohamed‘s action was based on 28 U.S.C.
§ 1332(a)(2), which affords jurisdiction over actions between citizens of different
states and citizens of foreign states where the amount in controversy exceeds $75,000,
exclusive of interest and costs. Venue over the action was afforded by 28 U.S.C.
§ 1361.
Jurisdiction over the third-party Complaint is predicated on 28 U.S.C. §
1332(a)(2) and § 1332(a)(3) and 28 U.S.C.§ 1367(a). (See Am. third-party Compl. &
Ans. Am. third-party Compl. ¶¶ 1& 2, 10-11.) (ECF Nos. 104 & 105.) Reinhart, a
citizen of Wisconsin, alleges that Freer is citizen of Sweden and a permanent resident
of the United States who was domiciled in California when the third-party Complaint
was filed. (Id. at ¶ 2.) Freer agrees that he is a citizen of Sweden but denies that he is
a permanent resident of the United States and that he was domiciled in California.
(Id.)
Although Freer agrees that the Court has subject matter jurisdiction, parties
cannot vest a federal court with subject matter jurisdiction by agreement. See Ins.
Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702
(1982). As the third-party Plaintiff Reinhart has the burden of establishing subject
matter jurisdiction over the third-party Complaint, and at this time its allegations are
controverted. Travelers Prop. Cas. v. Good, 689 F.3d 714, 722 (7th Cir. 2012). If
Freer is a citizen of Sweden, and not a permanent resident, alienage jurisdiction would
be afforded by § 1332(a)(2). Even if Freer is a permanent resident of California and a
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citizen of Sweden, the Court would have jurisdiction under § 1332(a)(2), because
there is no indication that Freer is citizen of Wisconsin.
In addition, Reinhart alleges that the Court has supplemental jurisdiction over
the claims as afforded by 28 U.S.C. § 1367 because Reinhart‘s claim against Freer
form part of the same case or controversy as Mohamed‘s action against Reinhart in
that they derive from the same nucleus of operative facts. Even if the third-party
Complaint were not supported by an independent jurisdictional basis, the Court may
exercise supplemental jurisdiction over the third-party Complaint and cross-claims.
Furthermore, although the general rule is that, when all federal claims are
dismissed before trial, the district court should relinquish jurisdiction over pendant
state-law claims rather than resolving them on the merits, Wright v. Associated Ins.
Cos., 29 F.3d 1244, 1251 (7th Cir.1994), the remaining claims fall into one of the
three generally recognized exceptions to the general rule. Wright recognized the
exception where ―substantial judicial resources have already been committed, so that
sending the case to another court will cause a substantial duplication of effort.‖ 29
F.3d at 1251 (quoting Graf v. Elgin, Joliet & E. Ry. Co., 790 F.2d 1341, 1347-48 (7th
Cir. 1986)).
That is the case here.

The Court has devoted substantial resources to

consideration of the parties‘ claims on summary judgment and to the resolution of
numerous motions that preceded those motions. The action has a firm July 29, 2013,
trial date for claims relating to events of 2007. ―[S]ending the case to another court
-5-

will cause a substantial duplication of effort‖ and not be an efficient use of judicial
resources. See Miller Aviation v. Milwaukee Cnty. Bd. of Supervisors, 273 F.3d 722,
731-32 (7th Cir. 2001).
STANDARD FOR SUMMARY JUDGMENT
In resolving the pending motions, the Court applies the following standards.
Summary judgment is appropriate ―if the movant shows that there is no genuine
dispute as to any material fact and that the movant is entitled to judgment as a matter
of law.‖ Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
Summary judgment should be granted when a party that has had ample time for
discovery fails to ―make a showing sufficient to establish the existence of an element
essential to that party‘s case, and on which that party will bear the burden of proof at
trial.‖ Celotex, 477 U.S. at 322. If the moving party establishes the absence of a
genuine issue of material fact, the non-moving party must demonstrate that there is a
genuine dispute over the material facts of the case. Id. at 323-24. ―In determining
whether a genuine issue of material fact exists, all facts are construed in favor of the
nonmoving party.‖ Springer v. Durflinger, 518 F.3d 479, 483-84 (7th Cir. 2008).

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Relevant Facts2
At all times relevant to this motion, Mohamed has been and is a citizen and
resident of Barbados. Mohamed attended college in Florida and received a degree in
engineering. He then obtained a masters‘ degree in finance from Florida International
University.

After a career as a professional cricket player, Mohamed became a

successful businessman in the shrimping industry.

In 2000, Mohamed sold his

shrimping business for $40 million.
In 2004, Reinhart, a Milwaukee, Wisconsin-based law firm, began representing
Mohamed in connection with Mohamed‘s acquisition of Palmer Johnson, a Wisconsin
yacht manufacturer that was in bankruptcy. Reinhart represented Mohamed during
the time relevant to this litigation.
In performing services for Palmer Johnson and for Mohamed individually,
Anthony J. Handzlik (―Handzlik‖), a Reinhart attorney, worked almost exclusively

2

The relevant facts are based upon the following, to the extent that they are undisputed: Chicago
Title‘s proposed findings of fact (―PFOF‖) in support of its summary judgment motions and Reinhart‘s
statement of additional facts (―SAF‖) (ECF Nos. 125 & 149); Reinhart‘s PFOF in support of its partial
summary judgment motion and Chicago Title‘s additional statements of undisputed facts, (ECF Nos. 127 &
144); and factual statements proposed in conjunction with Freer‘s summary judgment motion. (ECF Nos. 139,
146, 154 & 155). Neither legal conclusions nor arguments are facts for the purposes of summary judgment and
have been excluded from the relevant facts. Citations to all quoted excerpts are provided, regardless of whether
they are undisputed.
Freer raises a ―general objection‖ to all proposed factual findings asserting that he had ―just recently‖
been made a party to the action and he did not take part in any depositions other than his own. (See e.g., Freer‘s
Resp. Reinhart‘s SMF, 1-2.) (ECF No. 132.) Freer became a party on July 24, 2012, when he was served with
a copy of Reinhart‘s third-party Complaint. The summary judgment motions were filed March 4, 2013.
Between the date Freer was made a party and the deadline for filing dispositive motions, he did not request
permission to conduct discovery, nor did he file a motion for relief under Rule 56(d) of the Federal Rules of
Civil Procedure after the summary judgment and partial summary judgment motions were filed by Chicago
Title and Reinhart. Freer has not raised a proper objection to the proposed factual findings.

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through Michael Fleming (―Fleming‖), an English businessman who was Mohamed‘s
business representative and agent during the time relevant to this litigation. Reinhart
was authorized to communicate and take instruction from Fleming on Mohamed‘s
behalf.
After Mohamed acquired Palmer Johnson, Freer, whose current residence is
disputed,3 approached Palmer Johnson and Mohamed regarding the purchase of Cover
Drive, a yacht owned by Mohamed. In 2005, Mohamed agreed to transfer Cover
Drive to Freer in exchange for 600,000 shares in a company, Tiger Telematics, and a
personal guarantee from Freer for $10.5 million. However, the shares and Freer‘s
guarantee were worthless.

In the fall of 2006, the $10.5 million debt remained

outstanding. In December 2006, Freer refused to sign a note memorializing the debt.
In December 2006, upon learning that Mohamed was considering loaning
additional funds to Freer or a Freer business, Handzlik began investigating Freer‘s
background and obtained information that placed him on heightened alert. Handzlik
ascertained that Freer was in the process of divorcing Anneli, suspected Freer of
forgery, and thought Freer was a crook.
In a December 1, 2006, email, Fleming asked Handzlik to search for liens on
the Freers‘ California residence. On December 4, 2006, Merlene DeZur (―DeZur‖), a
paralegal in Reinhart‘s real estate department, sent an email to Robert Morell

3

Freer disputes the location of his current residence. (See Freer‘s Resp. to Chicago Title‘ PFOF ¶ 4.)
(ECF No. 134.)

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(―Morrell‖), a sales representative at the Waukesha, Wisconsin office of Chicago
Title, a title insurance underwriter. De Zur requested a ―letter report‖ on the Freers‘
residence to identify all monetary encumbrances on the property. Morrell forwarded
the request to Sharon Buscher-Tuttle, (―Buscher-Tuttle‖) who worked in the national
business unit of Chicago Title‘s office in Waukesha.
Chicago Title had national business units located across the country. Those
units handled requests for assistance between Chicago Title offices in other cities and
states.

The Waukesha National Business Unit was tasked with coordinating

commercial transactions for customers that involved property located outside of
Milwaukee and Waukesha Counties.

For many years before DeZur‘s December

2006, request Chicago Title had performed services for Reinhart‘s clients, including
title searches on real property and recording mortgages and other documents.
Buscher-Tuttle sent Reinhart‘s request for a letter report to Rodney Huddleston
(―Huddleston‖), a vice president and operations manager in Chicago Title‘s Los
Angeles, California office, who ran the office‘s national business unit. BuscherTuttle‘s request ultimately reached the unit of Clark McKinnon (―McKinnon‖), a
senior title officer in the Los Angeles office. Buscher-Tuttle‘s request for assistance
from Chicago Title‘s Los Angeles office was a routine inter-office transaction. At the
time, McKinnon‘s team of three or four employees was receiving hundreds, and
sometimes thousands, of requests for assistance with property each month.
On December 6, 2006, McKinnon‘s secretary emailed Buscher-Tuttle
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informing her that an order number for the letter report had been assigned for tracking
and billing purposes, and that there would be a $500 charge for the letter report.
Chicago Title opened a file for the assignment and generated several standard
documents for the purposes of tracking the status of the order and billing for its
services, including a title worksheet, a billing memo and a sub-escrow worksheet.
On December 11, 2006, the Los Angeles office prepared the letter report and
sent it to Buscher-Tuttle. On December 11, Buscher-Tuttle forwarded the letter report
via email to DeZur and informed DeZur that she would prepare an invoice and send it
over shortly. Subsequently, Chicago Title sent a $25 invoice to Reinhart for the letter
report. Reinhart paid the invoice by a check dated December 15, 2006.
On December 12, 2006, Handzlik informed Fleming that the letter report from
Chicago Title disclosed the existence of two mortgages on the Freer residence, a
$3.43 million deed of trust to Northern Trust Bank (the ―Northern Trust mortgage‖)
and a $501,000 deed of trust to a law firm (the ―Law Firm mortgage‖). Reinhart
advised Mohamed, through Fleming, against having any further dealings with Freer
because of the prior $10.5 million debt and other negative information about Freer‘s
reputation.
Despite this advice, Mohamed agreed to loan funds to Freer‘s new company,
Blowfish, in the hope that it would become profitable and enable Freer to repay the
outstanding $10.5 million debt. To minimize the risk of nonpayment, Mohamed and
Freer agreed to secure the Blowfish loan with an encumbrance on the Freers‘
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California home, owned by Freer and Anneli as joint tenants.
On January 10, 2007, Fleming sent an email to Handzlik stating that Freer was
offering a ―charge,‖ or mortgage, on ―his US property‖ in connection with his efforts
to secure a loan from Mohamed.

(Kennedy Aff. Opp‘n Chicago Title‘s Mot.

Summary J. (―Kennedy Opp‘n Aff.‖)), Ex. G (email chain between Fleming &
Handzlik); Ex. A (Fleming Dep.) 107:4-19.) (ECF No. 150, 150-7, 150-1.) Fleming
inquired about the impact, under certain circumstances, ―[i]f there are two parties
ahead of us which make up the $3.9m[illion] charged so far and Freer gives us a
$2m[illion] ‗charge,‘ and whether Anneli would have to consent to the charge ―and is
[sic] so do you have a simple form I could have.‖ (Id., Ex. G.) The next day, January
11, 2007, Handzlik emailed Fleming that Anneli would have to ―sign off‖ on the
charge. (Id., Ex. H.) (ECF No. 150-8.)
At 9:39 a.m. on January 12, 2007, Fleming sent an email to Handzlik stating
that he had attached ―a scan of the executed charge document,‖ that would secure the
loan to Blowfish. (Id., Ex. I.) (ECF No. 150-9.) Fleming noted that Anneli had not
signed the document, and again asked if her signature would be required. Fleming
also stated that he intended to use a ―secured Pro Note template‖ Handzlik had
previously provided to prepare a promissory note that would reference ―this charge‖ –
i.e., the document securing the loan to Blowfish. (Id.) Fleming identified three of the
documents that would memorialize the loan to Blowfish: ―The basis of the charge will
be a loan to Blowfish . . . [1] (Pro Note) with [2] a personal/directors guarantee from
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Freer evidenced by the Pro Note and secured by way of the [3] charge.‖

(Id.)

Fourteen minutes after Fleming‘s email, Handzlik replied informing Fleming that no
documents had been attached to his email. Two minutes later, at 9:55 a.m., Fleming
sent Handzlik an email with scanned images of (1) a $2 million note signed only by
Freer and (2) a Short Form Deed of Trust for Freers‘ California home, referencing a
$2 million debt and also signed only by Freer. (Id., Ex. B.) (ECF No. 150-2.) About
40 minutes later, Handzlik sent an email to Fleming advising him for the second time
that Anneli‘s signature on the charge would probably be required.
On January 12, 2007, the Freers executed a ―Note Secured by Deed of Trust‖
in the amount of $1 million to Mohamed. They also executed a Deed of Trust on their
California home as security for their promissory note of the same date.

The

signatures of the Freers on the Deed of Trust were notarized on January 12, 2007, by
Sarah Denise Daniels (―Daniels‖), a notary public in Los Angeles County, California.
The Deed of Trust specified the obligations that it secured:
For the Purpose of Securing: 1. Performance of each
agreement of Trustor incorporated by reference or
contained herein. 2. Payment of the Indebtedness
evidenced by one promissory note of even date herewith,
and any extension or renewal thereof, in the principal sum
of $1,000,000.00 executed by Trustor in favor of
Beneficiary or order. 3. Payment of such further sums as
the then record owner of said property hereafter may
borrow from Beneficiary, when evidenced by another note
(or notes) reciting it is so secured.
(Horne Decl., Ex. K.) (ECF No. 124-11.) The Deed of Trust states that the Freers are

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the Trustor.4
On January 15, 2007, Mohamed, Blowfish, and Freer entered into a Short
Term Loan Agreement (the ―Agreement‖).5 The Agreement states that Mohamed is
the lender, Blowfish is the borrower, and Freer in his personal capacity is the
guarantor. Freer, in his capacity as an officer of Blowfish, authorized Blowfish‘s
borrowing of funds from Mohamed.
Under the Agreement, Mohamed agreed to loan Blowfish up to $1 million for
business expenses. The Agreement stated that the funds loaned to Blowfish were to
pay ―valid business and loan repayments to the Guarantor.‖ (Horne Decl., Ex. L, ¶
3.2.) (ECF No. 124-12.) Specifically, the Agreement provided that $500,000 of the
loaned funds were to be used to repay loans made by Freer to Blowfish.
Blowfish agreed to repay ―all monies advanced by [Mohamed] together with
any interest due‖ under the Agreement. (Id., Ex. L, ¶ 4.1.) Section 6.1 of the
Agreement, stated that Blowfish agreed to provide three documents in exchange for
the funds loaned by Mohamed:
Execute the Promissory Note [appendix 1]
Provide a Directors [sic] Personal Guarantee from [Freer]
[appendix 2]

4

Freer agrees that Mohamed, or one of his agents, created that Deed of Trust that the Freers signed.
(Freer‘s Resp. Chicago Title‘s PFOF ¶ 13.) (ECF No. 134.)
5

Freer disputes paragraphs 33, and 37 through -41 of Reinhart‘s SMF, relating to the terms of the
Agreement, Personal Guarantee, and Blowfish Note. (ECF No. 132.) The relevant facts reflect the Court‘s
revisions of the proposed SMF to the extent that Freer‘s disputes are supported by the contents of the subject
documents.

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Provide a duly executed Security Document in the form of
a valid perfected 4th Charge on [the California residence].
(Id., Ex. L, ¶ 6.1.)
Freer executed a ―Personal Guarantee‖ in connection with the loan under
which he agreed that the obligation to repay the funds loaned by Mohamed under the
Agreement would become equally binding upon Blowfish and Freer upon maturity or
default. (Id., Ex. M.) The Personal Guarantee states that it is ―supported by a valid
secured charge‖ on the California home. (Id.)6
On January 15, 2007,7 Blowfish executed the Blowfish Note payable to
Mohamed.8 The Blowfish Note required Freer to provide a ―charge‖ in his capacity
as the Guarantor and that the charge would ―be registered in the sum of $2m (two
million US dollars).‖ (Id., Ex. N, ¶ 3.) (ECF No. 124-14.) The Agreement and the
Blowfish Note refer only to Blowfish as the ―borrower‖ of the money from Mohamed.
Anneli did not sign any of the documents executed on January 15, 2007, related to the
loan to Blowfish.
Reinhart was engaged to ―coordinate the preparation of a mortgage‖ that would
6

Chicago Title and Reinhart disputed whether the Deed of Trust dated January 12, 2007, signed by
Freer and Anneli, secured the Blowfish loan. (See Chicago Title Resp. Reinhart SMF ¶ 42.) (ECF No. 143.)
However, construction of the Deed of Trust is a question of law for the Court.
7

The upper right corner of the note is dated January 15, 2006. Apparently the date is a typographical

error.
8

There was a dispute between Chicago Title and Reinhart regarding who drafted the note. (Reinhart
Resp. Chicago Title PFOF and Reinhart‘s SAF ¶22.) (ECF No. 149.) The dispute is not material to the
resolution of the issues presented by the pending motions. Freer admits that Reinhart drafted the note. (Freer‘s
Resp. Chicago Title‘s PFOF ¶ 22.) (ECF No. 134.) Reinhart and Chicago Title also disagreed regarding on
whose behalf Freer executed the Note. (Reinhart Resp. Chicago Title PFOF and Reinhart‘s SAF ¶18.)
However, that determination is a question of law for the Court.

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serve as security for the Blowfish Note. However, Reinhart did not prepare any such
document. Reinhart reviewed a January 12, 2007, Deed of Trust. 9 On January 16,
2007, DeZur sent an email to Buscher-Tuttle requesting an updated letter report in
light of the recent recording of a third mortgage on the California residence.
On January 18, 2007, Fleming sent an email to Handzlik attaching a copy of an
executed Deed of Trust on the California home in favor of Mohamed. (Kennedy Aff.
Supp. Reinhart Mot. Partial Summary J. (―Kennedy Aff.‖), Ex. B (―Handzlik Dep.‖)
163:15-164:2, Ex II, REINHART0009556 Ex. DD (a more legible copy of the Deed
of Trust).) (ECF Nos. 126, 126-35, 126-30.) The Deed of Trust was a new version
that addressed the concern Handzlik had raised regarding Anneli‘s signature. Fleming
informed Handzlik that he had arranged for the original of the Deed of Trust to be
sent to Handzlik and asked him to ―put this in place‖ when he received it. (Id., Ex.
II.)

Fleming wrote that they would need to ―continue to examine the issues‖

surrounding the Deed of Trust. (Id., Ex. II.) The Deed of Trust was accompanied by
the Note Secured by Deed of Trust, both of which were signed by Freer and Anneli.
The debt amount referenced in these documents had changed from $2 million to $1
million.
On January 19, 2007, Handzlik sent an email to Fleming stating that he had

9

There was a factual dispute between Chicago Title and Reinhart regarding the Deed of Trust that
Reinhart reviewed. (Reinhart Resp. Chicago Title PFOF and Reinhart‘s SAF, ¶ 24.) They also disputed
whether or not the Deed of Trust secured the Blowfish loan. (Chicago Title Resp. Reinhart SMF ¶ 42.) As
previously noted, construction of the Deed of Trust is a question of law for the Court.

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reviewed the Note Secured by Deed of Trust and the Deed of Trust that Fleming had
sent him the previous day. Handzlik stated that the two documents were based on
standard forms of First American Title Insurance Company.
Between January 17, 2007, and February 22, 2007, Mohamed transferred $1
million via six wire transfers to a Blowfish bank account.
Amount of Wire Transfer
(Excluding Commission)
$200,000
$150,000
$150,000
$55,000
$245,000
$200,000

Date of Wire Transfer
January 17, 2007
January 25, 2007
January 30, 2007
February 5, 2007
February 9, 2007
February 22, 2007

Mohamed did not transfer or pay any money directly to Freer or Anneli at any time,
and he never funded a personal loan to the Freers evidenced by the Deed of Trust.
On January 22, 2007, Reinhart hand delivered a Deed of Trust to Chicago Title
and requested that Chicago Title record it with the appropriate authorities in
California.10 Reinhart included a cover letter requesting that Chicago Title have the
document recorded as soon as possible and pay the recording fee, which Reinhart
would later reimburse, and have the recording done by the agent who prepared the
title commitment so it could be added to the updated commitment. (De Zur‘s letter
transmitting the Deed of Trust to Buscher-Tuttle is dated January 22, 2006, but the

10

Chicago Title and Reinhart disputed whether there was a written contract between them to record the
Deed of Trust. (Reinhart Resp. Chicago Title PFOF and Reinhart‘s SAF, ¶ 30.) They also disputed whether
Reinhart followed up with Chicago Title to confirm the recording. (Id. at ¶ 33.)

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year is a typographical error and should have been ―2007.‖
Three previous encumbrances securing debts had been recorded against the
Freers‘ California residence: (1) the $3.43 million Northern Trust Bank mortgage; (2)
the $501,000 law firm mortgage and (3) a third deed of trust securing a debt of
$192,000 (the ―Bryan mortgage‖).
On January 22, 2007, Buscher-Tuttle sent an email to DeZur attaching a
document entitled ―Commitment for Title Insurance,‖ regarding the Freers‘ California
home. This is a document showing liens and other encumbrances that is prepared
before a title company issues a policy of title insurance on the piece of property.
The next day, January 23, 2007, DeZur followed up with Buscher-Tuttle by
email asking her to confirm that she had received a Deed of Trust and that she had
ordered an updated commitment in light of the recent recording of a third mortgage on
the Freer property. Buscher-Tuttle responded by email six minutes later confirming
that she had received the Deed of Trust, would have an update prepared, and would
forward confirmation of the recording to Reinhart after it was accomplished.
Later on January 23, Buscher-Tuttle sent another email to DeZur attaching a
copy of the Bryan mortgage which had been recorded on January 5, 2007, and asking
DeZur if Chicago Title could still record the Deed of Trust. DeZur responded to
Buscher-Tuttle‘s email approximately 30 minutes later as follows: ―Yes, please record
the Deed of Trust I sent to you.‖ (Kennedy Aff., Ex. J, 162:11-163:5; Ex. OO.) (ECF
No. 126-41.)
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Buscher-Tuttle sent the Deed of Trust to McKinnon at Chicago Title‘s Los
Angeles office on January 23, 2007, via Federal Express Priority Overnight. The
notarial acknowledgement in the lower left corner of the Deed of Trust was not
completely filled out — it was missing the names of Freer and Anneli.
On January 25, 2007, Buscher-Tuttle sent an email to DeZur informing her that
the Los Angeles office would be returning the Deed of Trust to Buscher-Tuttle
because of missing information in the notarial acknowledgement. However, this did
not happen.

Instead, on January 29, 2007, Buscher-Tuttle and DeZur had an

exchange of emails in which Buscher-Tuttle informed DeZur that the Los Angeles
office would be fixing the defect, that she had instructed Chicago Title‘s Los Angeles
office to record the Short Form Deed of Trust, and that Buscher-Tuttle would inform
DeZur of any problems. DeZur endorsed this solution. Aside from Buscher-Tuttle‘s
January 29 email, DeZur has no recollection of being contacted by Buscher-Tuttle
about any problem with the Deed of Trust.
In June 2007, the Freers entered into a contract to sell their California home,
and the sale closed on August 10, 2007. The home was sold for $5.46 million. The
sale proceeds were used to pay off, among other things, the three mortgages that were
recorded against the property as of January 5, 2007 — the Northern Trust mortgage,
the Law Firm mortgage, and the Bryan mortgage. Proceeds from the sale were
deducted as part of the closing to pay off preexisting debts.
In addition $258,351.46 from the sale of the home went to Freer. Goldrush,
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Ltd., a limited liability company organized by Freer, received $500,000 of the sale
proceeds to secure an indebtedness arising after the Freers entered into a contract to
sell their residence. Blue Chip Movers was paid $24,000 of the sale proceeds, and
Beverly Loan Company was paid $100,306.
On August 23, 2007, Reinhart informed Mohamed, through Fleming, that no
security instrument securing the Blowfish loan had been recorded on the Freers‘
California home. By letter dated August 29, 2007, Reinhart, on behalf of Mohamed,
referred to Chicago Title‘s failure to record the Deed of Trust and requested that
Chicago Title ―make [Mohamed] whole with regard to the transaction.‖ (Horne
Decl., Ex. Z.) (ECF No. 124-26.)
Chicago Title had not fixed or recorded the Deed of Trust. Instead, it remained
in Chicago Title‘s Los Angeles office until either March or April 2007, when the file
containing it was sent to a storage location for closed files. When later found in
Chicago Title‘s storage, the Deed of Trust had a note attached from Buscher-Tuttle to
McKinnon that referenced a January 23, 2007, email between her and Chuck
Hoffman, a senior title officer in the Los Angeles office.
Huddleston, McKinnon, and Huddleston‘s administrative assistant agree that
having an original, unrecorded deed of trust in closed files storage was not
appropriate. Despite a discovery request from Reinhart for emails received or sent by
Buscher-Tuttle, McKinnon and any other person at Chicago Title involved in any
efforts to fix the notarial acknowledgement or record the Deed of Trust, Chicago Title
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did not produce the email referenced in Buscher-Tuttle‘s note. However, as a matter
of policy, Chicago Title does not retain copies of electronic correspondence dating
back to 2007 and Chicago Title‘s paper file for the assignment did not contain any
printed e-mail communications from January 2007.
On September 1, 2010, Mohamed commenced this action against Reinhart and
Chicago Title to recover damages in connection with the Blowfish loan. Mohamed
did not sue Freer. Freer admits he owes Mohamed $1 million based upon his personal
guarantee of the business loan to Blowfish. Freer has not repaid any of the principal
or interest due under the loan.
According to multiple employees in Chicago Title‘s Los Angeles office, the
absence of the Freers‘ names in the notarial acknowledgment meant that the Deed of
Trust would not be accepted for recording by the Los Angeles County Recorder.

11

It

would have been ―very easy‖ for Chicago Title‘s Los Angeles office to locate
Daniels‘ contact information through its computer database of notaries, but in 2007
Chicago Title did not contact her regarding the Deed of Trust. If Chicago Title had
contacted her, Daniels would have been willing to assist Chicago Title to ensure that
the document was recordable.
Chicago Title had no involvement in negotiating or drafting the Note Secured

11

There was a factual dispute between Reinhart and Chicago Title regarding whether options to correct
such defect in the Deed of Trust were available to Chicago Title. (See Chicago Title Resp. Reinhart SMF ¶ 63.)
To the extent options for fixing the defect in the Short Form Deed of Trust were available, Chicago Title
asserted that its policies prevented its personnel from fixing the defect.

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by Deed of Trust, the Deed of Trust, the Blowfish Note, or any other loan documents
related to this lawsuit. Mohamed did not purchase a policy of title insurance from
Chicago Title with respect to the Blowfish loan.
In March 2013, Reinhart and Mohamed entered into a Covenant Not to Sue
and Assignment (―Covenant and Assignment‖), pursuant to which Mohamed assigned
to Reinhart his claims against Chicago Title, Freer and others, including but not
limited to claims arising out of any losses he sustained in connection with the loan
that is the subject of this lawsuit. In conjunction with that assignment Reinhart paid
$800,000 to Mohamed.
The Covenant and Assignment states:
This document is not a release of Reinhart with respect to
the claims asserted against the Reinhart Parties in the
Lawsuit, but rather is a covenant not to sue the Reinhart
Parties with respect to the claims described above.
Mohamed further does not release Chicago Title, Freer or
any other person with respect to any claim related to or
arising out of the allegations set forth in the Lawsuit,
except that Mohamed acknowledges that his receipt of the
Settlement Payment discharges Freer‘s obligations with
respect to the Loan to the extent of the amount of the
Settlement Payment.
...
Mohamed, for and on behalf of himself and his heirs,
successors and assigns, hereby agrees to assign and
transfer to Reinhart any and all claims, causes of action,
rights, and interests of whatsoever kind or nature that he
has or may have against Chicago Title, Freer, and any
other person or entity arising out of any loss, injury, or
damage sustained by him in connection with the
allegations set forth in the Lawsuit or in connection with
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any and all documents referenced in or attached to the
Complaint filed in the Lawsuit (the ―Assigned Claims‖)
Mohamed reserves any and all claims against Freer other
than the Assigned Claims.
...
The parties to the Agreement acknowledge and agree that
the Agreement is a compromise and resolution of disputed
claims, and neither the execution of the Agreement nor the
exchange of consideration required by the Agreement
shall be construed as an admission of any liability,
wrongdoing, or impropriety whatsoever by the parties.
(Kennedy Aff. Opp‘n Freer Mot. Summary Judgment, Ex. A.) (ECF Nos. 147, 147-1.)
The Agreement states that ―[t]his Agreement shall be construed, interpreted, and
governed by the law of the State of Wisconsin, without regard to the conflict of law
provisions of Wisconsin or any other jurisdiction.‖
Analysis
The Court begins by addressing Freer‘s motion for summary judgment
dismissing Reinhart‘s third-party Complaint for indemnification and subrogation and
Chicago Title‘s cross-claims for indemnification, subrogation and contribution. (ECF
No. 116.)
Freer’s Motion
Freer maintains that the claims for indemnification, subrogation, and
contribution must be dismissed because Reinhart and Chicago Title cannot meet the
elements necessary to establish them. He maintains that Reinhart and Chicago Title
have conceded they are at fault, so they are not blameless tortfeasors who can shift

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their entire burden. Further, he contends that they were not joint tortfeasors who
acted with him.
The elements of a contribution claim are (1) joint causally negligent
wrongdoers, (2) common liability because of such negligence to the same person, and
(3) one bears more than his or her fair share of the burden. Brown v. LaChance, 165
Wis. 2d 52, 64, 477 N.W.2d 296, 303 (Wis. 1991) (citing Giese v. Montgomery Ward,
111 Wis.2d 392, 404, 331 N.W.2d 585, 591 (Wis. 1983)). At this juncture of the
proceedings, Mohamed‘s negligence claim against Chicago Title has been settled.
However, there has been no determination regarding Chicago Title‘s liability or nonliability for negligence as to the Deed of Trust. Construing the facts in the light most
favorable to the non-movant (Chicago Title), Freer has not established any basis to
dismiss Chicago Title‘s contribution claims against him.
Unlike contribution which involves jointly negligent wrongdoers, indemnity
―shift[s] the loss from one person who has been compelled to pay to another who on
the basis of equitable principles should bear the loss.‖ See Id. (quoting Kutner v.
Moore, 159 Wis.2d 120, 126, 464 N.W.2d 18, 20 (Wis. Ct. App. 1990)). ―[A] right of
indemnity has been said to exist whenever the relation between the parties is such that
either in law or in equity there is an obligation on one party to indemnify the other, as
where one person is exposed to liability by the wrongful act of another in which he
does not join.‖ Kjellsen v. Stonecrest, Inc., 47 Wis.2d 8, 11-12, 176 N.W.2d 321, 323
(Wis. 1970). Equitable indemnification ―shifts the entire loss from one person who
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has been compelled to pay it to another who, on the basis of equitable principles,
should bear the loss.‖ Estate of Kriefall v. Sizzler USA Franchise, Inc., 342 Wis. 2d
29, 54, 816 N.W.2d 853, 865 (Wis. 2012) (quoting Swanigan v. State Farm Ins. Co.,
99 Wis.2d 179, 196, 299 N.W.2d 234 (Wis. 1980)).
In opposing Freer‘s motion, Chicago Title maintains that its indemnification
cross-claim against Freer is proper because Freer is contractually obligated to pay
Mohamed $1 million. It further contends that Freer intentionally diverted money
away from the sale of his home rather than paying Mohamed. (Chicago Title‘s Mem.
Opp‘n Freer Summ. J., 5-6.) (ECF No. 137.) With respect to its indemnification
claim, Reinhart argues that Freer‘s failure to account for Mohamed‘s encumbrance at
closing and his admitted failure to repay any portion of the principal and interest
under the loan set this lawsuit in motion. (Reinhart Mem. Opp‘n Freer Summ. J. ,
3.)(ECF No. 145.)
Chicago Title‘s indemnification theory relies in part on a contractual right of
indemnification.

That theory is adequately plead in its cross-claim, which

incorporates the allegation that the documents he signed obligated Freer to pay
Mohamed. Additionally, both Chicago Title and Reinhart claim an equitable right to
indemnification. The two basic elements of equitable indemnity are the payment of
damages and lack of liability.
At this juncture, although Reinhart settled with Mohamed, there has been no
determination as to Reinhart‘s liability to Mohamed. The Covenant and Assignment
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explicitly states that it shall not be construed as an admission of any liability,
wrongdoing, or impropriety whatsoever by the parties. Contrary to Freer‘s argument,
Reinhart‘s argument is not indicative of any negligence on its part. (Freer‘s Reply Br.
3-4.) (ECF No. 153.)
The settlement between Reinhart and Chicago Title includes Mohamed‘s
assigned claims against Chicago Title.

However, there has not been any

determination as to Chicago Title‘s liability to Mohamed on his breach of contract
and negligence claims against them. Furthermore, although Reinhart and Chicago
Title settled their claims against each other, there has been no determination regarding
their respective liability for their claims against each other.

Therefore, neither

Reinhart nor Chicago Title are precluded from pursuing their claims for
indemnification against Freer.
Subrogation is akin to indemnification in that it seeks to recoup the total
payment that the party seeking subrogation has made. Estate of Kriefal, 816 N.W.2d
at 865. ―Subrogation rights may arise in three ways: (1) contractual subrogation,
Millers National Insurance Co. v. City of Milwaukee, 184 Wis.2d 155, 167, 516
N.W.2d 376 (Wis. 1994); (2) statutory subrogation, Ellsworth v. Schelbrock, 235
Wis.2d 678, 611 N.W.2d 764 (Wis. 2000); and (3) equitable subrogation, Berna-Mork
v. Jones, 174 Wis.2d 645, 652–53, 498 N.W.2d 221 (Wis. 1993).‖ Estate of Kriefal,
816 N.W.2d at 865. ―Upon payment, the person who made the payment stands in the
shoes of the person for whom payment was made.‖ Id. at 871 (citing Orlowski v.
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State Farm Mut. Auto. Ins. Co., 339 Wis.2d 1, 810 N.W.2d 775 (Wis. 2012)). Both
indemnification and subrogation require that a person seeking to recover has made
payment. Id.
At this juncture, Reinhart has paid money through its settlement with
Mohamed. However, the $800,000 Reinhart paid Mohamed represented a significant
portion of the money that he loaned to Blowfish. Under the terms of the Agreement
Freer was to receive $500,000 to repay the loan he had made to Blowfish. Freer also
defaulted on his personal guarantee of the $1 million loan. Freer has not established a
basis for summary judgment dismissing Reinhart‘s third-party claim for subrogation.
With respect to Chicago Title‘s subrogation claim, although Mohamed‘s
claims against it for negligence and breach of contract have been settled, there has
been no finding as to Chicago Title‘s liability for those claims. There has also been
no determination of liability with respect to Reinhart and Chicago Title‘s cross-claims
against each other. Therefore, Freer‘s motion for summary judgment dismissing
Reinhart‘s third-party claims and Chicago Title‘s cross-claims against him is denied.
Chicago Title’s Motion
By its motion for summary judgment, Chicago Title seeks partial summary
judgment finding that it is entitled to indemnity from Freer for any amounts that it
may be found liable for in this action. (ECF No 120.) Chicago Title requests partial
summary judgment against Freer holding that he would be liable for any damages for
which Chicago Title is found liable. Freer counters that the personal guarantee he
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provided to Mohamed does not obligate him to pay because Chicago Title is not a
party to that guarantee and it has not made a claim against Freer based on it. Freer
also argues that Chicago Title is not blameless and, therefore, may not obtain
indemnification. Chicago Title responds that its indemnification cross-claim is proper
because Freer is contractually obligated to pay Mohamed $1 million, and if he had
paid his debt the events giving rise to Mohamed‘s claims against Chicago Title and
Reinhart would be immaterial.
Of the proceeds from the sale of the California residence, Freer received
$258,351.46; Goldrush, Ltd., a limited liability company organized by Freer, received
$500,000; $24,000 was paid to Blue Chip Movers; and $100,306 went to Beverly
Loan Company. Thus, directly or indirectly, Freer received over $882,000 from the
sale of the residence, which Chicago Title states should have gone to Mohamed.
Chicago Title asserts that as the allegedly negligent party, it is entitled to indemnity
from the intentional wrongdoer.
At this juncture of the proceedings, Mohamed‘s claims for negligence and
breach of contract have been settled. Chicago Title‘s assertion that Freer is liable to
indemnify depends on factual issues that have not been resolved.
Based on the foregoing, Chicago Title‘s motion for summary judgment is
moot, and its alternative partial summary judgment against Freer is denied.

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Reinhart’s Partial Summary Judgment Motion
Reinhart‘s motion for partial summary judgment with respect to its third-party
claims for equitable indemnification and equitable subrogation against Freer, remains
viable. (ECF No. 122.) With respect to Freer, Reinhart contends that the admitted
failure of Freer, a former officer of Blowfish and guarantor of the Blowfish loan, to
repay the principal and interest due under that loan is the root cause of this lawsuit.
Regardless, the issues remaining for resolution in this action preclude a summary
judgment ruling on liability in favor of Reinhart on its third-party claims for equitable
indemnification and equitable subrogation against Freer.
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY
ORDERED THAT:
Freer‘s motion for summary judgment (ECF No. 116) is DENIED;
Chicago Title‘s motion for summary judgment (ECF No. 120) with respect to
the assigned claims of Mohamed and Reinhart cross-claims is DISMISSED and with
respect to its cross-claims against Freer is DENIED;
Reinhart‘s motion for partial summary judgment (ECF No. 122) with respect to
Chicago Title‘s cross-claims is DISMISSED and with respect to its third-party claims
against Freer is DENIED;
The telephonic final pretrial conference will be initiated by the Court at 9:30
a.m. (changed from 10:00 a.m.) on June 28, 2013;
Any motions in limine must be filed by July 3, 2013;
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Any responses to those motions must be filed by July 10, 2013;
Any replies must be filed by July 15, 2013;
Dated at Milwaukee, Wisconsin, this 26th day of June, 2013.

BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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