Walker Rogge, Inc. v. Chelsea Title & Guar. Co.

• Decision Date: 09 March 1992
• Citation: 603 A.2d 557,254 N.J.Super. 380
• Parties: WALKER ROGGE, INC., A New Jersey Corporation, Plaintiff-Respondent, Cross-Appellant, v. CHELSEA TITLE & GUARANTY COMPANY, Defendant-Appellant, Cross-Respondent, and Arthur W. Hood and Ronald J. Price, Defendants, Cross-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 380

254 N.J.Super. 380

603 A.2d 557

WALKER ROGGE, INC., A New Jersey Corporation Plaintiff-Respondent, Cross-Appellant, v. CHELSEA TITLE & GUARANTY COMPANY, Defendant-Appellant Cross-Respondent and Arthur W. Hood and Ronald J. Price, Defendants, Cross-Respondents.

Superior Court of New Jersey Appellate Division.

Argued Jan. 28, 1992.

Decided March 9, 1992.

Richard A. Grossman, Brick, for defendant-appellant, cross-respondent Chelsea Title & Guar. Co. (Grossman & Kruttschnitt, attorneys; Richard A. Grossman, of counsel; Thomas J. Heavey, on the brief).

Salvatore Perillo, Atlantic City, for plaintiff-respondent, cross-appellant (Perillo & Rosenberger, attorneys; Salvatore Perillo, on the brief and reply brief).

Mairone, Biel, Zlotnick, Feinberg & Griffith, Atlantic City, filed a brief on behalf of defendant, cross-respondent Ronald J. Price (Edwin A. Paone, on the brief).

Defendant, cross-respondent Arthur W. Hood did not file a brief.

Before Judges SHEBELL, SKILLMAN and D'ANNUNZIO.

The opinion of the court was delivered by

SHEBELL, J.A.D.

This matter returns to us following its remand to the Law Division pursuant to the direction of our Supreme Court in its opinion of August 9, 1989. Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 562 A.2d 208 (1989), aff'g in part and rev'g in part, 222 N.J.Super. 363, 536 A.2d 1309 (App.Div.1988). The Supreme Court reversed the judgment against Chelsea Title & Guaranty Company (Chelsea), modified the judgment in favor of the surveyors, Arthur W. Hood and Ronald J. Price, and remanded the entire matter to the trial court to determine whether Chelsea assumed an independent duty to Walker Rogge, Inc. (Rogge) to insure the quantity of acreage, whether it breached that duty, and whether plaintiff was damaged by the breach. Id. at 520, 541-42, 562 A.2d 208. The Supreme Court, while affirming the lower courts' dismissal of the negligence claims against Hood and Price, left open the issue of whether Hood and Price were liable under the certification Hood had signed on the updated 1975 survey. Id. at 542, 562 A.2d 208. The Court left to the trial judge's discretion whether the matter could be decided on the existing record or whether additional testimony was required. Id.

On remand the trial judge resolved the matter on the existing record. He concluded in a letter opinion dated September 6, 1990, that because there was no proof of negligence and because plaintiff did not pay for the oral update of an earlier survey known as the Price-Walker survey, plaintiff was not entitled to recover from the surveyors under the certification. Finding an implied covenant of good faith and fair dealing in every contract, the judge determined that Chelsea should have known about the discrepancy in acreage and should have revealed this information to plaintiff. Judgment for plaintiff in the amount of $94,336, plus interest from the date of the filing of the complaint was entered on September 17, 1990. Thereafter it was brought to the judge's attention that he had not considered the issue of plaintiff's comparative negligence. Following submission of supplemental memoranda, the judge, by letter dated November 26, 1990, determined that plaintiff had not been negligent.

I.

We refer the reader to the opinion of the Supreme Court for a detailed recitation of the pertinent facts. Id. at 521-28, 562 A.2d 208. Although the Supreme Court reversed the holding that Chelsea was liable to plaintiff under the title insurance policy, it recognized that negligence was an alternative basis on which Chelsea could be liable. Id. at 541, 562 A.2d 208.

The Supreme Court held that Chelsea could be liable in negligence if the "act complained of was the direct result of duties voluntarily assumed by the insurer in addition to the mere contract to insure title." Id. (quoting Brown's Tie & Lumber Co. v. Chicago Title Co. of Idaho, 115 Idaho 56, 764 P.2d 423, 426 (1988)). The Supreme Court pointed out that, because the trial court limited plaintiff's claim to the insurance policy, the trial court had not determined whether Chelsea knew or should have known of the difference in the acreage or its materiality to the transaction. Id. Thus, the Court remanded to the trial court for determination of whether Chelsea assumed an independent duty to assure the quantity of acreage, whether it breached that duty and whether its breach damaged plaintiff. Id. 116 N.J. at 541-42, 562 A.2d 208.

On remand, the judge found that Chelsea should have known of the discrepancy in acreage between plaintiff's transaction and prior deeds and that, therefore, Chelsea was obligated to disclose the discrepancy to plaintiff under the implied covenant of good faith and fair dealing that is part of every contract. The judge found that, because "Chelsea knew by virtue of the agreement of sale" that the purchase price would be calculated based on the parcel's acreage, it had a duty to reveal to plaintiff the contradictory information set forth in earlier deeds.

Chelsea now appeals the trial court's decision. Further, Rogge cross-appeals claiming that the trial court should have found the surveyors, defendants Price and Hood, liable to it based on the surveyors' certification.

We are unable to discern from the trial judge's opinion that he considered or determined the paramount question presented on remand: Whether Chelsea voluntarily assumed any duties in addition to issuing the title policy. We agree with the trial judge that based on Chelsea's extensive files on the property, there can be no question that Chelsea knew or should have known of the acreage discrepancy. Although the trial judge concluded that Chelsea had a duty to disclose the disparity of acreage between the earlier deeds and surveys and the Price survey, he appears to have premised his conclusion on erroneous factual findings. The judge relied on an implied covenant of good faith and fair dealing that is implicit in every contract, asserting that "Chelsea knew by virtue of the agreement of sale" that the acreage was material to the sale price.

We are unable to find substantial support in the record for the conclusion that Chelsea had access to the agreement of sale prior to issuing a title binder. Nor did the judge explain from what contract the implied duty arose. The Supreme Court clearly concluded that the title policy did not provide coverage and that the trial court had properly determined that Chelsea did not assume the duties of a title abstractor. Id. at 532-34, 536, 562 A.2d 208. We therefore assume that Chelsea's independent duty to plaintiff would have to arise from some other contract or obligation. Chelsea could have assumed an additional independent duty in its capacity as title closing agent; however, the parties and the trial judge do not appear to have explored this basis for liability in any detail.

Nothing in the record establishes the "settlement clerk's" ¹ duties or the reasonable expectations of a buyer contracting for the services of a title closing agent in the locale in question. Rogge testified that he expected a settlement clerk to adjust the figures, make settlement between the parties and "[t]o make sure that ... the deed was in order and the description in the deed was correct...." Mr. Rogge's expectations and a settlement clerk's or closing agent's duties may be quite different things. Indeed, the title company may have undertaken greater professional and legal responsibility than permitted by law and may have thereby assumed the duty to provide the same protection as would have been provided by competent counsel. See Rocco Cammarere, Property Closings Without Lawyers Cause A Stir, N.J. Lawyer, Feb. 3, 1992, at 1, 12. Plaintiff, however, provided no proof, in the form of expert opinion or otherwise, establishing these matters.

Plaintiff urges the importance of the settlement clerk's role in a "South Jersey closing," pointing out that South Jersey title companies are not only aware of their customers' expectations but market their services in such a way as to lead its customers to expect that a title company can fully represent them at closing. Plaintiff should have sought leave to offer testimony or other evidence establishing the existence and extent of such custom and usage. These are not matters of common knowledge outside of southern New Jersey and must be proved. We, therefore, reverse and remand for findings as to the liability of Chelsea in compliance with the Supreme Court's directive, as set forth in 116 N.J. at 541-42, 562 A.2d 208. The parties shall be afforded reasonable opportunity to reopen the proofs on this issue.

II.

We choose to consider at this time Chelsea's contention that the trial court erred in not finding that plaintiff was contributorily negligent by failing to obtain an attorney's services and an actual survey prior to title closing. We direct the trial judge to reconsider the issue of plaintiff's comparative negligence in the event he finds that Chelsea was negligent.

Plaintiff maintains that Chelsea waived the defense of comparative negligence because it failed to affirmatively plead it. We disagree. If an issue not raised in the pleadings is tried by consent or without objection, it will be treated as if it had been properly raised in the pleadings. R. 4:9-2. Here, Chelsea raised the defense at the end of plaintiff's case and in its summation. Plaintiff did not object to Chelsea's advancing this issue. Rather, plaintiff responded to it on its merits. Where an issue not raised in the pleadings emerges at trial, the issue will generally be permitted unless it would prejudice the other party. Rivera v. Gerner, 89 N.J. 526, 537, 446 A.2d 508 (1982); Heimbach v. Mueller, 229 N.J.Super. 17,...