Case Name: Empire Development Company and Edward C. Gainsborg, Respondents, v. Title Guarantee and Trust Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1916-01-21
Citations: 171 A.D. 116
Docket Number: 
Parties: Empire Development Company and Edward C. Gainsborg, Respondents, v. Title Guarantee and Trust Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 171
Pages: 116–120

Head Matter:
Empire Development Company and Edward C. Gainsborg, Respondents, v. Title Guarantee and Trust Company, Appellant.
First Department,
January 21, 1916.
Real property—policy insuring title — obligation of insurer one of indemnity only — payment by insured of liens assumed by him in contract of sale — when insurer not liable.
A policy which insures title to real estate is, under the laws of this State, essentially and solely a contract of indemnity, and a plaintiff declaring upon such policy can recover only his actual loss and cannot make the policy a subject of profit to him.
Where a contract for the sale of lands required the vendee to accept the premises subject to any liens for assessments which should accrue subsequent to a specified day, and a title guarantee company which insured the title for the vendee did not include in the enumeration of liens for which it would not be liable the lien of an assessment which accrued after the day set by the contract of sale for the assumption of liens by the vendee, the insurer is not liable for the moneys paid by the vendee to satisfy said lien, for, under the circumstances, the vendee suffered no loss but only met. the obligations which he assumed under the contract of sale.
Appeal by the defendant, Title Guarantee and Trust Company, from' a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 3d day of March, 1915, upon the verdict of a jury rendered by direction of the court, both sides having moved for the direction of the verdict at the close of the case, and also from an order entered in said clerk’s office.on the same day denying defendant’s motion for a new trial made upon the minutes.
Harold Swain, for the appellant.
Joab H. Banton, for the respondents.

Opinion:
Scott, J.:
The defendant is a corporation organized, among other things, to examine and insure titles to real property. The action is brought upon a policy of title insurance, dated April 4, 1907, issued by defendant to the plaintiff Edward 0. Gains borg, and by him assigned (with consent of defendant) to the plaintiff Empire Development Company. The essential facts are not in dispute.
In the winter of 1906-1907 one Samuel G-ainsborg, now deceased, the father of plaintiff Edward C. G-ainsborg, entered upon negotiations to purchase from the executors of Catharine M. Andrews, deceased, a large tract of land, undeveloped or only partially developed, which lay in the borough, now county of Bronx, in the city of New York. The city had adopted maps laying out streets and avenues across this tract, and the work of opening these streets and otherwise improving the property was in active progress. This involved the laying of assessments. After some negotiations as to price between Mr. John H. Judge, one of the executors of Mrs. Andrews' estate, and Samuel Gainsborg, a price was agreed upon and a sale arranged. A real estate broker named Davies was active in bringing the negotiations to a conclusion. At Gainsborg's instigation the contract was executed by one Claudio Capo, as purchaser, but the real party in interest was Gainsborg, who had already formulated plans for the incorporation of the Empire Development Company, in which he intended ultimately to have the title vest. When the purchase was completed and the title closed the deed was executed to plaintiff Edward 0. Gainsborg, whose interest in the property appears to have been very slight, the real party in interest being his father, Samuel Gainsborg. The policy of title insurance to which this action relates was issued to Edward 0. G-ainsborg, as the owner of the record title. Subsequently he transferred the property to the Empire Development Company and assigned the policy of the title insurance to it.
At the time the contract of sale was executed by Mrs. Andrews'" executors and Capo, certain assessments for local improvements had already become liens upon the property, and proceedings were pending which, in the natural course of events, would result in other liens of like nature. The executors were content to assume and pay the assessments which had become liens at the time of signing the contract, but were not willing to pay any assessments which might thereafter become liens. Accordingly the contract provided that the purchaser should take title: " Subject to all assessments upon said premises becoming a lien after the assessment for Tiffany Street opening from Longwood Avenue to Intervale Avenue, which became a lien December 6th, 1906, and the assessment for acquiring title to East 149th Street from the Southern Boulevard to the easterly bulkhead line of the Harlem River, which became a lien December 14th, 1906, which assessment the vendors agree to pay and no others."
There was pending at that time a proceeding for opening Randall avenue, which ran through the property, and before the title was closed, and on or about February 20, 1907, assessments for this improvement, aggregating $6,094.05 were confirmed and became a lien on the property. The title was closed on April 4, 1907, and thereafter, on April 20, 1907, the elder Gainsborg, or the Empire Development Company, paid the said assessment for the Randall avenue opening, and it is for the sum so paid, with interest, that the plaintiffs sue and have recovered judgment. The title insurance policy was in the usual form and contained a schedule which enumerated the "estates, interests, defects, objections to title, liens, charges and incumbrances affecting said premises " against which the policy did not insure. In this schedule no mention is made of the Randall avenue assessment which had become a lien before the policy was issued. Under these circumstances the defendant would ordinarily be liable to repay the amount of the assessment, but it claims that under the peculiar circumstances of this case it is not so .liable.
In addition to the cause of action based upon the policy itself, the complaint embraces a cause of action for damages on the ground that defendant had been employed by the elder Gainsborg, and had agreed to act for him in making the contract for the purchase of the property, and had been negligent in permitting the " subject " clause, as it is called in the case, and which has already been quoted, to remain in the contract. This cause of action requires but scant consideration since it is unsupported by the proof, and was evidently not considered or acted on by the court at trial term. The defendant's contention that it is not liable under the peculiar circumstances of this case is based upon the terms of the policy itself, and the
nature of the contract evidenced by the policy. What the defendant undertook to insure against is " all loss or damage," not exceeding a specified amount, ' ' which the insured shall sustain" by reason of any defect or defects, or "by reason of liens or incumbrances charging the same at the date of this policy" and not excepted by the schedule hereinbefore referred to. That the plaintiffs suffered no loss or damage in the case is argued from the fact that by the terms of the contract of sale the purchaser had assumed the Randall avenue assessment, it having become a lien subsequent to those mentioned in the " subject " clause in the contract, and, hence, it cannot be said to have been damaged by paying that which it had expressly agreed to pay in any event. The argument may be stated in another way, to wit, that what defendant undertook to do was to insure the title which the purchaser was to receive from the Andrews executors; that that title was to be, by the terms of the contract of sale, taken subject to the Randall avenue assessment, and all other assessments becoming a lien after those expressly specified in the contract, and consequently that defendant's policy was not intended to, and did not cover such assessments. We find much force in this contention. It is perhaps surprising, in view of the large business done by title insurance companies, that so few cases are to be found in the books bearing upon their obligations to and relations with those to whom they have issued policies. It is very well settled in this State, however, that a policy of title insurance is essentially and solely a contract of indemnity, and not a wagering policy, or even an expression of opinion backed by a forfeit. (Trenton Potteries Company v. Title Guarantee & Trust Company, 116 N. Y. 65; Palliser v. Title Insurance Company, 61 Misc. Rep. 490.) Hence, a plaintiff declaring upon such a policy may recover only his actual loss, and cannot make the policy a subject of profit to the insured. This is a rule generally applicable to all contracts for indemnity. Under the somewhat unusual and peculiar facts of the present case we are unable to see that the plaintiffs have sustained any loss or damage. By the terms of the contract of sale they or their predecessors in interest would have heen obliged to take title no matter how many assessments were found to "be liens upon the property of later date than those expressly referred to in the contract and which the vendors agreed to pay. Hence the failure of defendant to discover the existence of the Eandall avenue assessment (if it did fail to discover it), or to include it among the hens and incumbrances not insured against, imposed no burden upon the vendee that he had not already agreed to assume. We have preferred to place our disposition of this appeal on the wholly undisputed questions of fact in the case, because we consider that they point inevitably to a reversal of the judgment. We may say, however, that the evidence is very persuasive to the effect that the existence of the lien of the Eandall avenue assessment was well known to the elder G-ainsborg when the title was closed, and that the omission to refer to it in the policy was due to his suggestion. Apart from this, however, and upon the undisputed facts, we are of opinion that defendant's motion for the direction of a verdict in its favor should have been granted.
The judgment and order appealed from are, therefore, reversed, and judgment directed for defendant dismissing the complaint upon the merits, with costs and disbursements to defendant in this court and the court below.
Clarke, P. J., McLaughlik, Laughlik and Page, JJ., concurred.
Judgment reversed, with costs, and complaint dismissed, with costs.