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NJ: Attorney Reliance on Defective Title Report Not Malpractice

Smith v Boyd 272 N.J. Super 186 (L. Div. 1993)

NJ: Underlying foreclosure sale

Student Contributor James Quinn

Facts: Plaintiff won home at sheriff’s foreclosure sale. The sale was conducted at request of second mortgagee, represented by Defendant. However, there had been another mortgage on the property. Defendant relied on title report prepared by insurance company, who is co-defendant in manner. The title report failed to disclose one of the mortgages. Copies of mortgages were attached in material given to Co-Defendant, but was not mentioned in report given to Defendant. Co-Defendant insurance company improperly and negligently prepared report given to Defendant. Defendant relied on this report at the sale of the property, and Plaintiff relied on Defendant’s word. Further claims are discussed against co-defendant insurance company, but are not relevant to malpractice claim.

Issue: Did attorney’s reliance on negligently prepared title report amount to legal malpractice?

Ruling: No. There is no evidence that Boyd acted negligently. He simply did not know there was a second open mortgage on the property. Defendant relied on report prepared by an insurance company, and it was proper for him to rely on that report throughout the foreclosure experience. The Defendant relied on C-Defendant insurance company’s report; however, the insurance company was not an agent of the lawyer. The insurance company was an independent contractor and the Defendant cannot be held liable for their negligence.

Lesson: This case illustrates that a lawyer who relies on a third-party contractor cannot be held liable for that party’s negligence. The opinion does not mention reliability or credibility of the third party contractor, but that could be a factor that determines a lawyer’s liability. A lawyer cannot be held liable when he acts reasonably, relies on reports he has no reason to doubt, and had no reason to suspect what is missing from the report. 

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Posted in: New Jersey, Real Estate