Pioneer Nat. Title Ins. Co. v. Child, Inc.

• Decision Date: 09 March 1979
• Citation: 401 A.2d 68
• Parties: PIONEER NATIONAL TITLE INSURANCE COMPANY, a California Corporation, Defendant Below, Appellant, v. CHILD, INC., a Delaware Corporation, Plaintiff Below, Appellee. Jan RODGERS, as Executrix of the Estate of William E. Taylor, Jr., and the Estate of William E. Taylor, Jr., Defendants Below, Appellants, v. CHILD, INC., a Delaware Corporation, Henry E. I. du Pont and Martha Verge du Pont, Plaintiffs Below, Appellees.
• Court: Supreme Court of Delaware

Page 68

401 A.2d 68

PIONEER NATIONAL TITLE INSURANCE COMPANY, a California

Corporation, Defendant Below, Appellant, v. CHILD, INC., a Delaware Corporation, Plaintiff Below, Appellee.

Jan RODGERS, as Executrix of the Estate of William E.

Taylor, Jr., and the Estate of William E. Taylor, Jr., Defendants Below, Appellants, v. CHILD, INC., a Delaware Corporation, Henry E. I. du Pont and Martha Verge du Pont, Plaintiffs Below, Appellees.

Supreme Court of Delaware.

Submitted Nov. 27, 1978.

Decided March 9, 1979.

Upon appeal from Superior Court. Affirmed in part; reversed in part.

George F. Gardner, III, of Biondi and Babiarz, P.A., Dover, and William A. Denman, of Schmittinger & Rodriguez, P. A., Dover, for Pioneer National Title Insurance Co.

Richard S. Gebelein, of Wilson & Whittington, Wilmington, and Richard Allen Paul, of Paul, Lukoff & Hurley, Wilmington, for Child, Inc. and Henry E. I. du Pont and Martha Verge du Pont.

Wayne N. Elliott, of Prickett, Ward, Burt & Sanders, Wilmington, for Estate of William E. Taylor, Jr.

Before DUFFY, McNEILLY and QUILLEN, JJ.

DUFFY, Justice:

In this complex case based on alleged malpractice by an attorney and on breach of a title insurance contract, the Superior Court granted summary judgment to certain parties and denied it to others. Child, Inc. v. Rodgers, et al., Del.Super., 377 A.2d 374 (1977). However, only part of the Court's order is before us on appeal and we focus entirely on it.

A full statement of the facts appears in the Superior Court opinion beginning at 377 A.2d 375, and we will not repeat them here. For present purposes, it is sufficient to say that Child, Inc., a Delaware corporation, holds legal and beneficial title to certain real property as to which Pioneer National Title Insurance Company, a California corporation, had issued a policy of title insurance in the principal amount of $85,000. Child, Inc. seeks to recover from Pioneer certain expenses which it incurred in removing a defect in the title. The policy had been issued to Child Foundation, a different corporation, and Pioneer argues that Child, Inc. is not its insured.

The Superior Court denied Pioneer's motion for summary judgment against Child, Inc. after concluding that the latter had "succeeded by operation of law to Child Foundation's interest in the land by adopting the corporate charter of Child Foundation and taking its name." Pioneer then docketed this appeal. The Court also denied a motion for summary judgment made by the Estate of the attorney against all plaintiffs. ¹ The Estate has appealed that ruling.

We first consider the Pioneer appeal.

I

In a controversy involving a title insurance policy, the Supreme Court of New Jersey said this:

"A title insurance policy is a contract of indemnity under which the insurer for a valuable consideration agrees to indemnify the insured in a specified amount against loss through defects of title to, or liens or encumbrances upon realty in which the insured has an interest. See Ocean View Land Co. v. West Jersey Title Co., 71 N.J.L. 600, 605, 61 A. 83 (E. & A.1905). As such, it is subject to the same rules of construction as are other insurance policies. 9 Appleman, Insurance Law and Practice, § 5201 (1943), 29 Am.Jur., Insurance, § 245.

Basic to this problem of construction is a recognition of the principle that in such policies the pharseology (sic) must be liberally construed in favor of the insured and strictly construed against the insurer."

Sandler v. N. J. Realty Title Ins. Co., N.J.Supr., 36 N.J. 471, 178 A.2d 1, 5 (1962). We adopt the definition of a title insurance policy and the rules of construction applied to it by the New Jersey Court.

Here, the title policy issued by Pioneer to Child Foundation defines the "insured" as:

"The insured named in Schedule 'A' and subject to any rights or defenses the company may have had against the named insured, those who succeed to the interest of such insured, by operation of law, as distinguished from purchase, including, but not limited to, heirs, distributees, devisees, survivors, personal representatives, next of kin or corporate or fiduciary successors."

The insured named in Schedule A is "Child Foundation." On the face of the policy, and under Sandler, Pioneer is thus obligated to indemnify Child Foundation against any loss caused by a defect of title. But that corporation does not assert the claim in this litigation. ² It is, rather, Child, Inc. which makes the claim in its own right and as a successor to the named insured.

Under the policy, the "insured" includes "those who succeed" to the insured's interest "by operation of law" and, in interpreting that phrase, the Superior Court construed it against Pioneer as the insurer (and the drafting party). See Novellino v. Life Insurance Co. of North America, Del.Supr., 216 A.2d 420 (1966); Lamberton v. Travelers Indemnity Company, Del.Super., 325 A.2d 104 (1974); Aff'd 346 A.2d 167 (1975). Upon so doing, the Court held that Child, Inc. was Pioneer's insured because it was a corporate successor to Child Foundation.

We agree that the key phrase in the controversy is "operation of law" and that construction thereof is required. And we agree that in the search for meaning, ambiguities and any uncertainty of meaning or language should be resolved against Pioneer. This presupposes, of course, that two or more meanings may be given to the language under scrutiny. It does not mean that because we do not know for certain what is intended that the ruling goes against Pioneer.

The Superior Court did not cite a case or any statutory law for its conclusion that Child, Inc. had succeeded by operation of law to Child Foundation's interest in the land by adopting the latter's corporate charter and taking its name. We recognize that for certain corporate or charitable purposes, Child, Inc. may be the legal successor to Child Foundation. But our inquiry is not that general. We must focus on Child, Inc.'s status as successor "by operation of law" within the meaning of the title policy. And, as to that, in our judgment, the Trial Court gave the voluntary acts of the title holders, and those who controlled them, a legal significance unwarranted by the facts, the contract or by general law.

II

" Operation of law" is a generic term or phrase commonly used to express the manner in which rights (and/or liabilities) attach to a person by the "mere application to the particular transaction of the established rules of law, without the act or cooperation" of that person. Black's Law Dictionary (4 ed).

A somewhat more practical statement of its meaning appears in 67 C.J.S. at page 877:

"Operation of law. The obligation of law, its practical working and effect. It is a term applied to indicate the manner in which a party acquires rights without any act of his own. In its usual signification, 'operation of law' is generally applicable to matters involving title and refers to situations in which rights, and sometimes liabilities, are created without action by the parties."

In "practical working and effect," the term indicates the manner in which a person acquires rights without any act of his own. Merdzinski v. Modderman, Mich.Sup.Ct., 263 Mich. 173, 248 N.W. 586 (1933). And the "operation" or impact of the law upon the particular transaction, ³ without more, is to be contrasted with events caused by the voluntary action of the parties. In the latter case, the result is not caused by operation of law. Cf. Emporium Capwell Co. v. Anglim, D.Ct., N.D.Cal., 48 F.Supp. 292, 294 (1943). Apart from statute or other special circumstance, one's voluntary act cannot create or enlarge one's rights by imposing liability on or enlarging the liability of another. Compare the discussion in American Bitumuls & Asphalt Co. v. United States, U.S.Cust.Ct., 146 F.Supp. 703, 713. ⁴

III

Turning now to the facts in this case, Pioneer issued its title policy to Child Foundation...