This matter concerns itself with an order to show cause why certain funds held by the Tri-County Search and Abstract Company, hereafter referred to as Tri-County, should not be (1) declared to be held in trust for the benefit of the petitioners, and (2) immediately paid to the said several petitioners. The facts in connection herewith are as follows:
The defendant Maple Shade Development Co., Inc., a New Jersey corporation, hereafter referred to as Maple Shade, developed a tract of land and constructed homes thereon in Maple Shade, New Jersey.
On July 21, 1952 Maple Shade executed a construction mortgage in the sum of $196,333 to the South Jersey Mortgage Co., hereafter referred to as South Jersey, which mortgage was recorded on July 28, 1952. On November 21, 1952 Maple Shade executed a mortgage to Augustino Peraino in the sum of $10,000 covering a portion of the parcels of real estate here involved, which said mortgage was recorded on November 25, 1952. On May 1, 1953 Maple Shade executed a mortgage to Stanley Frankel in the sum of $36,780 covering all or a part of the premises here involved, which said mortgage was recorded on June 3, 1953.
On 21 of these homes, located on Buttonwood Avenue, possession was granted to purchasers by virtue of agreements of sale. Each of said agreements was on a specially printed form and provided, in part, as follows:
"The Seller agrees to deliver a Special Warranty Deed covering said premises. Title shall be good and marketable, such as will be insured at regular rates by a reputable title company, designated by Seller, free and clear of all liens and encumbrances, except restrictions, easements or encumbrances of record and such state of facts as an accurate survey would disclose, restrictions required to be placed by the Federal Housing Administration and/or Veterans Administration, if any, and ordinances affecting the use of and improvement to said premises."
Over a period of approximately five weeks, from July 20, 1953 to on or about August 31, 1953, the 21 purchasers made settlement at the office of Tri-County, at which time they executed individual mortgages to the South Jersey, the proceeds from which were to be used, in part, to obtain a discharge of the South Jersey construction mortgage. These latter mortgages were recorded and most of them have now been assigned to the Bowery Savings Bank of New York. Deeds were delivered to the respective purchasers for their particular properties.
At these settlements, reports of title, made by the Chelsea Title & Guaranty Co., designated "Settlement Certificate," were issued to South Jersey or its nominee. These certificates exhibited the title to be free and clear of all encumbrances, and that the individual mortgages constituted a first lien on the premises. The above referred to report of title exhibited that there were on record a number of mechanics' notices of intention, as well as the three above referred to mortgages which affected the individual premises here involved. All of these were, as above noted, marked "Removed," including the mortgage from Maple Shade to Augustino Peraino and the mortgage from Maple Shade to Stanley Frankel.
The monies deposited by the individual purchasers came, in a large part, from the funds each one of them received
from South Jersey, and in a lesser part from additional funds deposited by the purchasers themselves.
At the time of settlement there were made up individual settlement statements, all of which were, to all intents and purposes, identical. These settlement statements were in the customary and normal form, exhibiting the purchase price for each property and the charges as against the purchaser, as well as a statement of the balance due the seller. There appeared various items listing persons to whom all or a part of the sums due the seller were to be paid.
At the bottom of the settlement sheet appears the following legend:
"The Lawyers Title Insurance Corporation is hereby authorized to record all papers prior to distribution of ...