Mezzaluna v. Jersey Mortgage & Title Guar. Co., 71.

• Citation: 162 A. 743
• Decision Date: 17 October 1932
• Docket Number: No. 71.,71.
• Parties: MEZZALUNA v. JERSEY MORTGAGE & TITLE GUARANTY CO.
• Court: United States State Supreme Court (New Jersey)

162 A. 743

MEZZALUNA

v. JERSEY MORTGAGE & TITLE GUARANTY CO.

No. 71.

Court of Errors and Appeals of New Jersey.

Oct. 17, 1932.

Syllabus by the Court.

Defendant, a title guaranty company engaged also in making mortgage loans, was applied to by plaintiff for a construction loan. A loan was granted and a fund to that amount set apart to be disbursed in making the proper payments on the building. For the title search and other services in the matter, plaintiff agreed to pay a fee of 4 1/2%, which was deducted from the loan. Defendant negligently overlooked a defect in the filing of the building contract, whereby plaintiff was obliged to pay out a large amount of money to satisfy certain mechanics' liens after the mortgage money had been exhausted by payments to the contractor.

Held, that defendant owed plaintiff a duty of due care in disbursing the mortgage money, and was properly held liable in damages.

Appeal from Circuit Court, Essex County.

Action by Alfred Mezzaluna against the Jersey Mortgage & Title Guaranty Company. Judgment in favor of the plaintiff, and defendant appeals.

Affirmed.

The case was tried without a jury betore Judge Mountain, who filed the following findings of facts and law:

On or about February 10, 1928, the plaintiff was the holder of the legal title of a certain parcel of land located at the northeast corner of Chancellor avenue and Cornell street, in the town of Irvington, Essex county, N. J., upon which premises a four-story apartment house was then being erected.

At that time the defendant, a New Jersey corporation, was carrying on its business pursuant to the provisions of an act of the New Jersey Legislature entitled "An Act to provide for the regulation and incorporation of insurance companies and to regulate the transaction of insurance business in this state," approved April 3, 1902 (P. L. p. 407), and the various acts amendatory thereof and supplemental thereto (Comp. St. Supp. § 99— 1 et seq.) and that the powers granted to it by said statute and by its certificate of incorporation were to carry on the kind of insurance permitted to be transacted by subdivision 8 of section 1 of the aforesaid act of the Legislature of the state of New Jersey, as amended (Comp. St. Supp. § 99—1) to wit: "Against loss or damage on account of incumbrances upon or defects in title to real property and against loss by reason of the nonpayment of principal and interest of bonds and mortgages, and, in addition thereto, with its capital and surplus, to take, buy, sell, and deal in first mortgages in real estate and to issue bonds, debentures and certificates against said mortgages."

On or about the date aforesaid, the plaintiff, through a broker, applied to the defendant for a mortgage loan of $165,000. He signed one of the defendant's application blanks applying "for a guaranteed mortgage loan, * * * secured by first mortgage upon the premises." He further agreed "to pay all fees and expenses incurred in the examination or insurance of the title and in connection with the appraisal of the property, and, if a construction loan, the fees of the inspectors employed by the company." It was a construction loan.

On March 14, 1928, the broker of the plaintiff was informed by letter from the defendant corporation that its executive committee had approved a loan upon the aforesaid premises for $132,000, to be amortized at the rate of 3 per cent. a year. This letter informed the broker that, if this amount was acceptable to his client, then the latter should forward to the defendant his deed, abstract of title, and such other papers as he had in his possession in order that the defendant might proceed with the examination of the title. The plaintiff accepted this offer.

On March 29, 1928, the plaintiff signed an affidavit of title in which he deposed, among other things, that he was the owner in fee simple of the aforesaid property, and that the property at that time was unincumbered by any contract for the sale thereof, lease, or agreement, easement, encroachment, unrecorded mechanic's lien, or any tax or assessment, mortgage, judgment, or limitation, except a $12,000 mortgage held by the General Building & Loan Association, second half of 1927 taxes, Cornell street paving and curbing assessment, and building contract with Corrado & Maturi, Inc., dated December 29, 1927. Postponements of any lien were obtained from the general contractor. A bond, secured by a mortgage, was executed by the plaintiff and his wife to the defendant on April 2, 1928. The mortgage contained a warranty of title.

The defendant charged the plaintiff $5,940 for examination of the title, in addition to charges for a survey, recording mortgage, recording deed, canceling mortgage, etc., and $100 for inspection fees. As the building progressed, payments were made to the general contractor by checks drawn to the plaintiff which he indorsed to the contractor. These payments were made after the defendant had inspected the property, and except in one or two instances, upon the production of architect's certificates. Between the time that the plaintiff signed the mortgage and the last payment was made upon it by the defendant, the plaintiff saw no one connected with the mortgage company.

The building contract between the plaintiff and Corrado & Maturi, which had been filed prior to the execution of the mortgage, did not have attached to it at the time of its filing the specifications referred to in that agreement. The general contractor was paid in full, but neglected to settle with the following subcontractors for the following amounts of money: George Snyder, $6,682.88; Albert & Kernahan, Inc., $3,434.22; Branch Iron Works, Inc., $7, 195.22; Pierce, Butler A Pierce, $1,882.84.

The three first materialmen above named brought suit...