Goldmann, Freund and Kilkenny. The opinion of the court was delivered by Freund, J.A.D.
[63 NJSuper Page 359] Defendants, Joseph A. O'Brien, Irene C. O'Brien, his wife, and Fidelity Mutual Savings and Loan
Association, appeal from a judgment entered in the Chancery Division, impressing an equitable lien upon certain lands located in Medford, N.J., to secure the payment of $3,341.14 awarded to the plaintiffs. The judgment is based on plaintiffs' claim that defendants had notice of a prior trust agreement between the plaintiffs and Clifton Builders, the latter having conveyed the premises, through a nominee, to the defendants Joseph A. O'Brien and his wife.
The plaintiffs, Jack E. Colegrove and Carolyn H. Colegrove, his wife, originally owned the lands in suit. They contracted with Ashton Builders for the construction of a dwelling on the land, but prior to the completion of the building, Ashton defaulted. Clifton Builders Supply Co. (Clifton), a subcontractor and creditor of Ashton for materials furnished, agreed to complete the building in accordance with the Colegrove-Ashton contract, if the Colegroves would convey the premises to Clifton. The parties agreed that Clifton would complete the building and offer the property for sale, and the proceeds would be disbursed as follows: (1) Clifton would be reimbursed for the cost of completing the building in accordance with the Colegrove-Ashton contract; (2) the Colegroves would be returned their investment in the property, namely, the original purchase price of $2,000 for the land, and $1,000 they had paid to Ashton; and (3) Clifton would receive the balance due to it for materials previously supplied to Ashton.
In accordance with the arrangement, the Colegroves, on April 8, 1958, conveyed the property to defendant Eleanor Behrle, the nominee acting for Clifton. The deed was forwarded by the attorney for the Colegroves to the attorneys for Clifton with an accompanying letter of April 9, 1958 which incorporated the trust arrangement. The deed from the plaintiffs was recorded, but it contained no mention of the agreement upon which the conveyance was made.
In early December 1958, defendants Joseph O'Brien and his wife agreed to purchase the property from Eleanor Behrle. The Fidelity Mutual Savings and Loan Association (Fidelity)
consented to lend the O'Briens $5,000 on a purchase money mortgage. The entire transaction was placed in the hands of the Lawyers Title Insurance Corporation (Lawyers Title), in Camden, which was to examine the title, record the documents, receive the mortgage money and the balance of the purchase price, make distribution of the proceeds, and issue a title insurance policy to the mortgagee. The closing took place on December 11, 1958 at the office of Lawyers Title, at which time the mortgage money and the balance of the purchase price were placed in the hands of Lawyers Title by the O'Briens and Fidelity.
On the following morning, December 12 -- prior to the recording of the deed and mortgage and disbursement of the funds -- Henry Ross, the attorney for the Colegroves, had occasion to be at the Lawyers Title offices on another matter. A settlement clerk employed there, Miss Cooney, inquired of him about the failure of the Colegroves to obtain a return of their money in the Medford property. She was aware of the Colegroves' interest because of her personal friendship with them. Miss Cooney stated that a settlement had been made of the property, but the documents had not been recorded nor had the money been disbursed. Immediately, Mr. Ross approached Mr. Woodward, the manager of Lawyers Title, and showed him the letter of April 9, 1958, addressed to the attorneys for Clifton and Behrle and incorporating the Colegrove-Clifton trust agreement. The manager refused to disclose the names of the purchasers and mortgagee of the property. He made no effort to delay the disbursement of the proceeds or to inquire into the validity of the asserted claim. He did not notify the O'Briens or Fidelity of the information which had come to him relative to the trust agreement. Instead, the deed and mortgage were recorded at the county clerk's office three days later, on December 15, 1958, and the settlement funds were disbursed. The trust agreement was first brought to the attention of the O'Briens and Fidelity when they were served with the summons and complaint in this action.
The trial court found that a valid trust existed, and that although a written memorandum of the trust was not recorded, the O'Briens and Fidelity were charged with notice of the trust prior to the recording of the deed and mortgage and the distribution of the moneys, by reason of the notice to the manager of Lawyers Title, which was held to be an agent of the O'Briens and Fidelity.
Defendants contend that Lawyers Title was acting in the capacity of an independent contractor, that it merely undertook to insure the mortgagee, and that notice of the unrecorded alleged trust agreement cannot be imputed to the O'Briens and Fidelity; and that the alleged trust agreement, being unrecorded, is unenforceable because the writing was not signed by either the settlor or the trustee in conformity with the statute of frauds, R.S. 25:1-3. It is also urged that since Clifton was not served personally with process, its obligations could not be adjudicated. In defendants' reply brief, they also claim that the failure of plaintiffs to introduce the alleged trust agreement and the reply letter formally into evidence resulted in failure to prove and establish a valid claim.
The initial question is whether Lawyers Title was, as defendants claim, an independent contractor whose function was limited to examination of the public records and issuance of a title insurance policy, and whose awareness of plaintiffs' claim was not imputable to the O'Briens and Fidelity. Plaintiffs contend that Lawyers Title was more than a mere insurer of the title and was, in fact, an agent who received notice, imputable to ...