Sandler v. New Jersey Realty Title Ins. Co.

• Decision Date: 22 January 1962
• Docket Number: No. A--37,A--37
• Citation: 178 A.2d 1,36 N.J. 471
• Parties: Lewis N. SANDLER and Richard M. Sandler, individually and as executors of the Estate of Maurice Sandler, deceased, Plaintiffs-Appellants, v. NEW JERSEY REALTY TITLE INSURANCE COMPANY, an insurance corporation of the State of New Jersey, Defendant-Respondent.
• Court: New Jersey Supreme Court

Page 471

36 N.J. 471

178 A.2d 1

Lewis N. SANDLER and Richard M. Sandler, individually and as executors of the Estate of Maurice Sandler deceased, Plaintiffs-Appellants, v. NEW JERSEY REALTY TITLE INSURANCE COMPANY, an insurance corporation of the State of New Jersey Defendant-Respondent.

No. A--37.

Supreme Court of New Jersey.

Argued Nov. 8, 1961.

Decided Jan. 22, 1962.

Richard M. Sandler, Newark, for plaintiffs-appellants (Lowenstein & Spicer, Newark, attorneys; Donald G. Marshall, Newark, on the brief).

Thomas S. Murphy, Newark, for defendant-respondent (Gassert, Murphy & Gassert, Newark, attorneys; Thomas S. Murphy, Newark, of counsel and on the brief).

The opinion of the court was delivered by

HANEMAN, J.

Some time prior to July 24, 1946, Maurice Sandler (Sandler) contemplated the purchase of a parcel of land in the Township of Springfield from Wilfred Weber and his wife. Prior to acquisition of the property, Sandler, through his lawyer, made application to defendant for a title examination and a title insurance policy. The report prepared by defendant showed a fee simple title in the Webers subject to exceptions not here material.

On July 24, 1946 the Webers conveyed the said land to Sandler by warranty deed, recorded in Book 1567, page 153 of the Register of Union County. Defendant issued its policy of title insurance to Sandler on July 25, 1946, agreeing therein to:

'indemnify, keep harmless and insure (him) and the person or persons upon whom the insured estate or interest devolves * * * by descent, devise, bequest or the laws governing intestacy * * * from all loss or damage not exceeding the sum of--Ten Thousand Dollars--which (they) shall sustain by reason of defects in or unmarketability of the title * * * described in Schedule A * * * excepting the estates, defects, objections, liens and encumbrances stated in Schedule B.'

Schedule A listed the estate or interest as 'an estate in fee simple.' Schedule B contained various exceptions not here material. Sandler, as evidenced by defendant's receipt, paid defendant $125 for 'examination and reporting title' and $50 for 'title insurance premium for policy of $10,000.'

On December 20, 1946 Sandler conveyed the entire tract of land to his wholly owned corporation, Richard Sandler Realty Co., Inc. (Sandler Realty Co.), as a capital contribution. The realty thus conveyed was at all times the sole asset of said corporation. On December 29, 1950 Sandler Realty Co. reconveyed the lands to Sandler pursuant to resolutions requiring the dissolution and liquidation of said corporation. On January 2, 1951 Sandler conveyed a one-third interest in the lands to each of his sons, plaintiffs herein. All these latter conveyances were evidenced by deeds of bargain and sale containing covenants against grantor's acts. Upon the death of Sandler on January 22, 1955 the remaining one-third interest passed to the plaintiff sons, devisees under Sandler's will, as tenants in common.

Plaintiffs and their wives, on October 21, 1956, entered into an agreement to sell a portion of the lands so granted and devised to New Jersey Bell Telephone Company (Bell Telephone). Prior to the final settlement, however, it was discovered that there existed an adverse claim to the property. It is admitted that plaintiffs had, in fact, no title to the section agreed to be sold. The true owner asserted his hostile claim in such manner as to leave no doubt that he would enforce his title. The cause of this situation lay in the fact that the Webers' immediate grantor, prior to his conveyance to them, had conveyed said portion of the tract to a third party. It followed then that the Webers never obtained any title to the section in question, although it was included in their deed description to Sandler.

When Bell Telephone refused to pay the agreed purchase price and to accept a conveyance, plaintiffs conveyed an alternate parcel to the utility company. They advised defendant of the adverse claim and the rejection of title by Bell Telephone in accordance with the terms of the title policy. Liability was denied by defendant. Thereupon a complaint was filed by plaintiffs seeking damages in two counts, (1) under the terms of the policy as devisees of their father, the insured, and (2) for negligence in the examination of title.

Defendant answered, generally denying liability and asserting various affirmative defenses to the suit on the policy, all of which were bottomed upon a contention that the conveyance from Sandler to Sandler Realty Co. terminated its liability under the policy. As defense to the suit for negligent examination of title, defendant pleaded the statute of limitations.

At pretrial the parties stipulated that under either count of the complaint the limit of defendant's liability, if any, was $10,000. The pretrial order also reserved to plaintiffs the right to move for summary judgment and to defendant the right to move for a dismissal of the complaint before trial. Defendant moved for a dismissal upon the ground that the complaint failed to state a claim upon which relief could be granted or, in the alternative, for summary judgment. Plaintiffs made a cross-motion for summary judgment on the count based upon the insurance policy. The court granted defendant's motion and denied plaintiffs' motion. Sandler v. N.J. Realty Title Ins. Co., 66 N.J.Super. 597 (Law Div. 1961). Plaintiffs appealed to the Appellate Division but prior to argument this court certified the appeal on its own motion.

For the reasons hereinafter set forth, it is necessary to treat of the complaint only insofar as recovery is sought on the title insurance policy.

Defendant argues that title insurance is essentially a personal contract of indemnity given to protect only the insured against loss or damage. It reasons that under the express terms of the contract transfer of the insured estate by the insured automatically terminated liability. Thus, it contends, when Sandler conveyed to Sandler Realty Co. its liability ceased and could not be reinstated by the subsequent reconveyance to him absent its affirmative consent. In support of this position defendant refers to:

(1) Paragraphs 11 and 12 of the 'Scope and Conditions * * *' of the policy, which read:

'11. This policy may be transferred to a mortgagee of the estate or interest insured and to an assignee of said mortgagee with the consent of the Company endorsed on this policy, provided, however, that no transfer shall alter the character or extent of the original liability of the Company under this policy. All liability of the Company under this policy, except for damages accrued, shall cease by the transfer thereof without such consent so endorsed. The liability of the Company to any collateral holder of this policy shall in no case exceed the amount of the pecuniary interest of said collateral holder in the premises insured by this policy. The transfer fee for assigning a policy shall be five dollars.

12. Whenever the party insured shall sell or mortgage any or all of the estate or interest insured by this policy and application is made for title insurance for the grantee or mortgagee of the party insured, then if the risk be again accepted by the Company, premium will be charged at the reduced rate then current and in effect in the Company for reissue title insurance to the amount of this policy, and at the Company's regular premium rates then in effect on any amount in excess of the amount of this policy.'

(2) an endorsement on the back of the policy, which reads:

'Policies are not assignable to grantees (purchasers) but only to mortgagees of insured or assignees of mortgagees as hereinbefore provided. Purchasers should protect themselves by obtaining Policy of title insurance at reduced re-issue rates as provided in this Policy. Corporate assignors must execute assignments by their authorized officers with corporate seal affixed.'

and (3) Paragraph 2 of Schedule A of the policy, which reads:

'2. The deed or other means by which the estate or interest covered by this policy is vested in the party insured:

By Deed from Wilfred C. Weber and Louise M. Weber, his wife, to Maurice Sandler, dated July 24, 1946 and recorded July 25, 1946, in the Union County Register's Office, as Instrument Number 30282.'

From the foregoing flows defendant's conclusion that plaintiffs, as devisees of Sandler, derived no rights under the policy.

Plaintiffs argue contrawise, that the policy does not expressly or impliedly provide for a final termination of liability upon a conveyance by the insured, but rather that the conveyance from Sandler to Sandler Realty Co. served merely to suspend defendant's liability during the period of time Sandler was out of title. They conclude that liability was revived upon the reconveyance to him and therefore inured to them as his devisees.

We are first confronted, therefore, with a construction of the policy.

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 must be liberally construed in favor of the insured and strictly construed against the insurer. Hunt v. Hospital Service Plan of N.J., 33 N.J. 98, 162 A.2d 561 (1960); Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960).

In Kievit v. Loyal Protect. Life Ins. Co., 34 N.J. 475 (1961), the court stated, at p. 482, 170 A.2d 22 at page 26:

'When members...