On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2548-06.
The opinion of the court was delivered by: Fuentes, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Fuentes and Chambers.
In this appeal, we are required to determine whether a title insurance company is liable to its insureds for the defalcation of the closing attorney, because the carrier's written notice disclaiming any agency relationship between the attorney and the carrier was sent only to the attorney, and not to the insureds. Independent of the efficacy of the disclaimer notice, the trial court found that the title insurer could not be held liable because the attorney misappropriated his clients' funds before he had any contacts with the title insurance carrier.
We disagree with the trial court and reverse. We also reject the argument advanced by the carrier that a disclaimer notice, included here as part of the commitment packet sent to the closing attorney, can be imputed to the clients who are the victims of his theft.
We examine these legal issues in the following factual context.
On July 22, 2003, Stuart and Susan Goodman entered into a contract to purchase a new home in Somerset, New Jersey. They retained their neighbor, then attorney Richard Pizzi,*fn1 to represent them in the sale of their home and the purchase of a new property. On January 20, 2004, the Goodmans sold their home in Bedminster and received proceeds in the amount of $325,058.47. They instructed Pizzi to deposit $293,308.47 into his attorney trust account in anticipation of the closing on their new home.
On May 19, 2004, Pizzi sent a written request to Atlantic Title Insurance Agency, Inc. (Atlantic Title), an agent of Stewart Title Guaranty Company (Stewart Title), to provide title insurance for the Goodmans. The letter from Pizzi to Atlantic Title stated, in pertinent part: "THIS IS A CASH DEAL . . . THIS IS A SUPER RUSH! THEY WOULD LIKE TO CLOSE ON MONDAY MAY 24, 2004."
The following day, May 20, 2004, the Goodmans deposited an additional $20,000 with Pizzi, believing these funds were necessary to close title on the property they were buying.*fn2 By letter dated May 25, 2004, William McLaughlin, the president and founder of Atlantic Title, sent Pizzi a "Commitment for Title Insurance," listing Pizzi as the applicant, and the Goodmans as the purchasers. The transmittal letter reflected a four-point check list of documents Pizzi was entrusted to deliver to the title insurer after the closing of title.
a) Seller(s) and/or Mortgagor(s) Affidavit of Title, as applicable;
b) Your check in payment of our Final Invoice;
c) Complete Attorney(s) Closing Report Form;
d) Any other document required by our ...