Case Name: TRENTON POTTERIES CO. v. TITLE GUARANTEE & TRUST CO.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1900-04-14
Citations: 64 N.Y.S. 116
Docket Number: 
Parties: TRENTON POTTERIES CO. v. TITLE GUARANTEE & TRUST CO.
Judges: 
Reporter: West's New York Supplement
Volume: 64
Pages: 116–122

Head Matter:
(50 App. Div. 490.)
TRENTON POTTERIES CO. v. TITLE GUARANTEE & TRUST CO.
(Supreme Court, Appellate Division, Second Department.
April 14, 1900.)
Title Insurance—Exceptions—Construction.
A policy insured plaintiff corporation against loss or damage by reason of defects of title affecting certain premises purchased by it, or by reason of liens or incumbrances charging the premises at the date of the policy, except that defects or incumbrances arising after date of the policy, or created or suffered by the insured, and assessments not confirmed at the date of the policy, were not covered by it. Held, that an assessment confirmed at, the date of the policy was covered by it, since the policy was to be construed as covering incumbrances existing at its date, and not as a covenant of warranty broken before its date, when plaintiff took deeds and possession of the premises.
Goodrich, P. J., dissenting.
Appeal from special term, New York county.
Action by the Trenton Potteries Company against the Title Guarantee & Trust Company. From a judgment dismissing plaintiff’s complaint on the merits, it appeals.
Reversed.
Argued before GOODRICH, P. J., and BARTLETT, HATCH, and WOODWARD, JJ.
Howard R. Bayne, for appellant!
John L. Cadwalader, for respondent.

Opinion:
HATCH, J.
This action, is brought to recover upon a policy of insurance issued by the defendant to the plaintiff, insuring the latter against "all loss or damage, not exceeding four hundred thousand dollars, which the insured shall sustain by reason of any defect or defects of title affecting the premises described in Schedule A, hereto annexed, or affecting the interest of the insured therein as described in said schedule, or by reason of unmarketability of the title of the insured to or in said premises, or by reason of liens or incumbrances charging the same at the date of this policy, saving all loss and damage by reason of the estates, interests, defects, objections, liens, and incumbrances excepted in Schedule B, or by the conditions of this policy, hereto annexed, and hereby incorporated into this contract." Hie exceptions contained in Schedule B are found in subdivision 9, in the following words: "Defects and incumbrances arising after the date of this policy, or created or suffered by the insured, and assessments not confirmed at the date of this policy, are not to be deemed covered by it;" and they are the only exceptions which in any wise limit the liability of the defendant for any matter or thing which arises upon the facts appearing in this case. For all purposés of practical certainty there is no dispute of fact. It appears that the defendant was engaged to search the title of five pieces of property for the plaintiff, and also to insure the title to the property against incumbrances and otherwise. Upon the date of the execution of the policy of insurance, and as early as October, 1892, there existed as a lien and incumbrance upon one of the pieces of property a confirmed assessment levied by the municipal authorities of the city of Trenton, N. J., amounting to $1,900 and upwards. The defendant was requested to pay and discharge this incumbrance, but declined so to do; and the plaintiff, having paid the same, brings this action to recover such sum, claiming that it falls within the terms and conditions of the policy. It is probably true that the relation of the defendant, so far as its employment involved a search of the title to the premises and an examination of the same, would not be other or different than that of a lawyer engaged to perform the same service, the obligation in such case being the exercise of ordinary reasonable skill and knowledge of the profession; and liability could only be predicated of negligence and misconduct in the examination. Byrnes v. Palmer, 18 App. Div. 1, 45 N. Y. Supp. 479; Ehmer v. Trust Co., 156 N. Y. 10, 50 N. E. 420. The contract of insurance, however, is an entirely different contract, wherein the doctrine of skill or negligence has no application. The contract issued by this defendant is one of insurance pure and simple, issued by a corporation, for which provision is made in the insurance law of the state. Article 5, Ins. Law; 2 Rev. St. (Banks & Bros.' 9th Ed.) p. 1202, § 170 et seq. Therein these corporations are placed upon substan tially the same footing, and are made subject to the same rules as apply to other insurance companies, excepting so far only as the character of the business transacted by the corporation is different from that transacted by other insurance companies recognized and provided for in the same law. These contracts are subject to the same rules of construction as are applicable to other insurance policies, and all doubts and ambiguities, if any, contained in the contract, are to be resolved in favor of the insured. Trust Co. v. Drexel, 36 U. S. App. 50, 17 C. C. A. 56, 70 Fed. 194. This is a familiar rule of law, applicable to the construction of such contracts. Allen v. Insurance Co., 85 N. Y. 473. That such is the character of these contracts is recognized by decisions in other states. Gauler v. Trust Co., 9 Pa. Co. Ct. R. 634; Wheeler v. Trust Co., 160 Pa. St. 408, 28 Atl. 849; Richards, Ins. p. 14, § 10. Their interpretation and construction have become well settled. 2 Whart. Cont. § 670. It is clear, therefore, that it was competent for these parties to make any contract to insure the title to the specific pieces of property, or any one of them, upon such terms as were agreeable to both parties, whether the insurance operated upon defects which should come into existence after the delivery of the deeds and the entry into possession or before. It was clearly the right of the defendant to insure the title to these properties against incumbrances existing before the date of the deed or thereafter. It possessed the ability at all times to inform itself of the state and condition of the title, and to issue its policy of insurance insuring such title on any date that it chose; and when it issued the present policy, insuring this property against the incumbrance existing at its date, it was clearly competent for it so to do, and it became bound according to its tenor and effect. It was also competent for it to limit liability under the policy thus issued, and except from its liability such matters as it chose, which were agreeable to the party accepting the same; and1 this is precisely what it did in the present case. The exception therein, as we have already observed, exonerated it from liability for defects and incumbrances arising after the date of the policy, which were created or suffered by the insured. Then follows the exception, "and assessments not confirmed at the date of the policy." It is clear that the court would have been authorized to find, from the testimony given upon the trial, that upon the date of the execution and delivery of this policy the assessment of which complaint was made in this action had been in all respects confirmed, and constituted a lien and incumbrance upon the property. We do not think that the true interpretation of this policy embraced such assessment, within the language exonerating from liability incumbrances "created or suffered" by the insured. The context of the whole exception excludes such an interpretation. It formed a separate exemption, and was evidently not intended to be covered by such incumbrances as would be voluntarily created by the insured,— as the giving of a mortgage,—or suffered to be created, as permitting the recovery of a judgment. It is not within the fair purport of the langnage to hold that an assessment which the insured was or might be powerless to prevent could, be said to be suffered or vol untarily created by him. If, however, there was ambiguity in this respect,—which is the most that can be claimed by the defendant,— the rule of law to which reference has already been made would require us to construe this clause most favorably to the insured. Under such construction we think it quite clear that it was not within the meaning and intent of the policy to except from liability the incumbrance of a confirmed assessment existing upon the date of the execution and delivery of the policy.
The court below dismissed the complaint upon the ground, substantially, that the guaranty against incumbrances ran only to the time the purchaser took its deed and entered into possession of the premises. Such, undoubtedly, would be the law as applied to the breach of a covenant contained in a deed, the rule being that breach of covenant is coexistent with the delivery of the executed deed. For an incumbrance thereafter created the covenant of warranty would not be broken. Such contracts are broken immediately, or not at all. It is evident, however, from what has preceded, that such doctrine can have no application to the contract of insurance issued in this case. Even if it could, there would be no breach of the contract until the execution and delivery of the policy of insurance; and as that, by its terms, insured against this specific incumbrance, there was an immediate breach of its condition upon the delivery. It may be true that the real contract between these parties contemplated that the guaranty and insurance of the title should take effect on the date of the delivery of the deed and the entry into possession, and should not be operative thereafter. Such was the theory of the defense set up in the answer to this action. That asks for a reformation of the contract of insurance, and such, evidently, was the theory of the attorney for the defendant when the cause came to trial. If such was not his theory, he came dangerously near to admitting the plaintiff's cause of action, and standing upon his defense for a reformation of the contract to make it conform to what was in fact the terms of the agreement. But, however this may be, the case finally went off on the other theory, and a construction placed upon the terms of the contract of insurance, which, as we have seen, it will not bear. Nor can we now consider the testimony bearing upon the question as to whether the contract should be reformed. The plaintiff has not been heard upon that question, as the complaint was dismissed upon an erroneous theory. Upon the testimony and the contract as it stood unreformed, the court would have been authorized to render a judgment in favor of the plaintiff. It follows from these views that the judgment should be reversed, and a new trial granted.
BARTLETT and WOODWARD, JJ., concur.