Pioneer Nat. Title Ins. Co. v. Lucas

• Decision Date: 12 January 1978
• Citation: 382 A.2d 933,155 N.J.Super. 332
• Parties: PIONEER NATIONAL TITLE INSURANCE COMPANY, Plaintiff-Appellant, v. Phyllis LUCAS and Lawrence E. Goldschmidt, Defendants-Respondents.
• Court: New Jersey Superior Court — Appellate Division

Page 332

155 N.J.Super. 332

382 A.2d 933

PIONEER NATIONAL TITLE INSURANCE COMPANY, Plaintiff-Appellant, v. Phyllis LUCAS and Lawrence E. Goldschmidt, Defendants-Respondents.

Superior Court of New Jersey, Appellate Division.

Argued Nov. 29, 1977.

Decided Jan. 12, 1978.

Richard E. Brennan, Newark, for plaintiff-appellant (Shanley & Fisher, Newark, attorneys).

James J. Higgins, Morristown, for respondent, Phyllis Lucas (Porzio & Bromberg, Morristown, attorneys).

Charles W. Hutchinson, Jersey City, for respondent, Lawrence E. Goldschmidt (Lamb, Hutchinson, Chappell, Ryan & Hartung, Jersey City, attorneys).

Before Judges LYNCH, BISCHOFF and KOLE.

The opinion of the court was delivered by

KOLE, J. A. D.

Plaintiff (Pioneer) brought this action to rescind a policy of title insurance issued to defendant Lucas on the ground that the policy had been procured by fraud. Goldschmidt, Lucas' attorney, was joined as an "interested party." The trial judge, sitting without a jury, entered judgment in favor of defendants. He denied rescission and directed Pioneer to defend the quiet title action instituted by one Baker, an adjoining landowner. Baker claimed title to land covered by the policy. Pioneer appeals. We reverse.

Lucas learned by two letters from her Morris County attorney (not Goldschmidt) of the existence of an adverse claim against a portion of her property located in Denville Township. The township's tax map showed that Lucas owned the property, and she had been paying taxes on it for many years. However, an exhaustive title search performed for the adjoining landowner, Baker, revealed that approximately 13 acres of the property, described in the tax map as belonging to Lucas, actually belonged to Baker. The problem, as Lucas' Morris County attorney described it to her in the letters, stemmed from the fact that some time in the 19th Century, Lucas' predecessors in title twice conveyed the subject property. In the second conveyance (to Lucas' predecessor) they were attempting to pass title to land they did not own.

In the letters the Morris County attorney also informed Lucas that the search which revealed the defect was comprehensive and appeared to be accurate; that it was "unbelievably voluminous" and required "sophisticated analysis," and that the title searcher "was so confident of (his search) that he would be prepared to testify as to its accuracy in court." He added that the only way to check its accuracy would be to have another search performed, which would be quite expensive, costing $1,200 to $1,500 or more. He stated further that if Lucas wanted a third person to examine the matter, it should be done "by an experienced real estate attorney (or) it might be well to have it done through a New Jersey title company. * * * It appears that a search was never obtained when the property was bought, and this may be the basis of the whole problem."

Armed with this knowledge, instead of consulting with her Morris County attorney or other New Jersey counsel, Lucas retained Goldschmidt, a New York attorney with considerable experience in real estate matters. Having been apprised of the nature of the problem by the letters, Goldschmidt requested Pioneer to perform a title search. He telephoned John Kitchen, manager of Pioneer's branch office in Morristown, and that same day Goldschmidt wrote a letter confirming the substance of the telephone call. The letter advised Pioneer that the most recent deed (a copy of which was enclosed) did not conform to the description in the tax map, and that Goldschmidt wanted to know if Lucas had marketable title to the property described in the deed, whether the property in the deed was that described in the tax map, and if it was not, the manner in which the deed description varied from the tax map. The letter further indicated that Kitchen had advised him that the "fee for an examination of title including tracing the chain of title for 60 years and advising us of our options in the event that record title and/or tax title do not agree with the piece of property (described in the deed) which we (Lucas) believe we own, will not be in excess of $100.00."

It should be noted that the letter did not state that Goldschmidt was aware of the fact that a serious question existed as to Lucas' ownership of a portion of the property. Additionally, rather than ordering the exhaustive, expensive search of the type suggested by Lucas' New Jersey attorney as necessary to check the accuracy of the search made for Baker, in the letter Goldschmidt requested a 60-year search at a cost not in excess of $100. ¹ Goldschmidt testified that in their conversation he told Kitchen that there was an adverse claim on the property stemming from the 19th Century, but that portion of the telephone conversation was not included in the letter because "the letter was a summary." Goldschmidt admitted that he never told Kitchen specifically about the Baker claim or the nature, origin and extent thereof, because it had been his experience that "if a title company gets a whiff of gun powder it runs very scared."

Not surprisingly, the 60-year search performed by Pioneer did not uncover the defect in Lucas' title, which, as indicated, went back to the 19th Century. Upon Goldschmidt's advice, Lucas, through Goldschmidt, then secured a $550,000 title insurance policy from Pioneer insuring the subject property. The policy was issued on December 23, 1974. Thereafter, Baker, the adjoining landowner brought a quiet title action. Plaintiff tendered a return of the premium, which was refused. This action to rescind the policy followed.

The trial judge, although at one point noting that Goldschmidt's conduct, after learning the state of Lucas' title, "hinted at fraud," found no fraud and denied rescission. He viewed Goldschmidt's letter to Kitchen confirming their telephone conversation as the manner in which "the attorney saw fit to call to the attention of the title company the problem which he had in mind," and stated that the purpose of the requested title search was to find out what Lucas owned. He determined that Pioneer had not relied upon any representations or omissions by Goldschmidt in making its search and issuing the policy; rather, it had relied upon the report of its title examiner, particularly since after the policy had been ordered, it directed its examiner to "check back title of search * * * since this is such a big job." He found that Pioneer was negligent in limiting itself to a 60-year search and in its examiner's failure to plot out the deed description. Such plotting, he said, would have made the examiner aware of the problem here involved and indicated the need for a search beyond 60 years. He also found Pioneer negligent in not being alerted to the possibility of an adverse claim when Goldschmidt insisted on omitting from Lucas' affidavit of title the provisions as to her lack of knowledge of adverse claims.

The scope of our review in a nonjury case is set forth in State v. Johnson, 42 N.J. 146, 159-162, 199 A.2d 809 (1964). See also, Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-484, 323 A.2d 495 (1974); State Farm Mut. Auto Ins. Co. v. Wall, 92 N.J.Super. 92, 98, 222 A.2d 282 (App.Div.1966).

If we are satisfied that the trial judge's findings and result could reasonably have been reached on sufficient credible evidence in the record as a whole, his determination should not be disturbed. However, if we are thoroughly satisfied that the findings and the ultimate conclusions are clearly mistaken and so plainly unwarranted that the interests of justice demand intervention and correction, we should appraise the record as if we were deciding the matter at inception and make our own findings and conclusions. This feeling of "wrongness" arises where our review of the proofs leaves us with the definite conviction that the judge went so wide of the mark that a mistake must have been made. It can arise in many ways from manifest lack of inherently credible evidence to support significant findings, obvious overlooking or underevaluation of crucial evidence, or a clearly unjust result.

Using the foregoing standard of review, we are convinced that the determination of the trial judge was so wide of the mark that a clear mistake was made and a plainly unjust result was reached.

An insurance contract, including one of title insurance, requires the highest degree of good faith and fair dealing between the parties. It requires the insured to advise the insurer of such matters that he knows might influence the insurer in entering into or declining the risk, at least where such facts are not of record and are not discoverable therefrom by the insurer. See Gallagher v. New England Mut. Life Ins. Co. of Boston, 19 N.J. 14, 114 A.2d 857 (1955); Weir v. City Title Ins. Co., 125 N.J.Super. 23, 308 A.2d 357 (App.Div.1973). To avoid the policy the insurer may show a concealment constituting a designed and intentional withholding of a fact material to the risk, which the insured in honesty and good faith should have communicated to the insurer. See Metropolitan Life Ins. Co. v. Lodzinski, 122 N.J.Eq. 404, 194 A. 79 (E. & A. 1937); Kozlowski v. Pavonia Fire Ins. Co., 116 N.J.L. 194, 196-198, 183 A. 154 (E. & A. 1936); cf. Johnson v. Metropolitan Life Ins. Co., 53 N.J. 423, 251 A.2d 257 (1969). See also, Weintraub v. Krobatsch, 64 N.J. 445, 317 A.2d 68 (1974); Foont-Freedonfeld v. Electro-Protective, 126 N.J.Super. 254, 314 A.2d 69 (App.Div.1973), aff'd 64 N.J. 197, 314 A.2d 68 (1974).

We have concluded that the judge did not properly evaluate significant evidence that involving Goldschmidt's role in the transaction and, as a consequence, made inferences as to reliance by Pioneer that are manifestly...