Court Opinion

ID: 2731189
Source: CourtListenerOpinion
Date Created: 2014-09-09 14:04:12.539642+00
Date Added: 2024-06-11T09:44:17.941105
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
               APPROVAL OF THE APPELLATE DIVISION

                                    SUPERIOR COURT OF NEW JERSEY
                                    APPELLATE DIVISION
                                    DOCKET NO. A-0850-12T3

PRINCETON SOUTH INVESTORS, LLC,
                                       APPROVED FOR PUBLICATION
     Plaintiff-Appellant,
                                          September 8, 2014
v.
                                         APPELLATE DIVISION
FIRST AMERICAN TITLE INSURANCE
COMPANY,

     Defendant-Respondent.
_________________________________

         Argued January 22, 2014 – Decided September 8, 2014

         Before Judges Reisner, Ostrer and Carroll.

         On appeal from the Superior Court of New
         Jersey, Law Division, Mercer County, Docket
         No. L-3122-11.

         Brian P. Flaherty of the Pennsylvania Bar,
         admitted pro hac vice, argued the cause for
         appellant (Cozen O'Connor, PC, attorneys;
         Mr. Flaherty and Diana J. Lin, on the
         brief).

         Robert L. Grundlock, Jr., argued the cause
         for respondent (Rubin, Ehrlich & Buckley,
         PC, attorneys; Mr. Grundlock, on the brief).

         The opinion of the court was delivered by

REISNER, P.J.A.D.
     In   this   insurance   coverage    dispute,   plaintiff   Princeton

South Investors (Princeton South or plaintiff) appeals from a

trial court order dated September 28, 2012, granting summary

judgment in favor of defendant First American Title Insurance

Company (First American).     The case presents two issues:        in the

context of a title insurance claim, whether a pending but as-

yet-undecided tax appeal by a municipality, asserting that a

property has been under-assessed, creates a defect in or an

encumbrance on the property owner's title, or renders the title

unmarketable; and, based on the policy language, whether the

First American policy covered plaintiff's claim.         We answer both

questions in the negative and, therefore, affirm the order on

appeal.

                                    I

     To   summarize,    plaintiff       bought   foreclosed     commercial

property at a sheriff's sale.1      The conditions of sale included a

provision that the property was being sold "subject to . . .

unpaid taxes or assessments." There were no delinquent taxes

outstanding at the time of the sale or on the effective date of

1
  Princeton South's parent company, Rubenstein Properties Fund
LP, was the successful bidder at the sheriff's sale and
negotiated the title policy. Rubenstein created Princeton South
as an entity to take title to the property.     We will refer to
Princeton South and Rubenstein, collectively, as plaintiff.

                                    2                             A-0850-12T3
the First American title policy.                    However, plaintiff contends

that municipal tax appeals covering several prior tax years,

which     were     pending     at   the      time       it    bought    the    property,

constituted a title defect covered by the policy.2                             Plaintiff

cites no cases from this State or from any other jurisdictions

that so hold.

       On the other hand, defendant cites case law from other

jurisdictions that is both on point and persuasive.                             Defendant

further relies on language in the title policy, both in terms of

what    is   covered     and    what   is    excluded,         that,   read    together,

convinces     us      that    the   policy       does    not    insure       against   the

imposition       of   taxes    assessed      after      the    date    the    policy   was

issued.

2
  There is no dispute that before plaintiff closed on the
property, its representatives knew that the tax assessment of
the property was based on an unrealistically low value. Before
closing on the property, plaintiff did not bring that
information to First American's attention, ask the current owner
or the municipal tax office about possible pending tax appeals,
or order a tax search from the municipal tax office.         See
N.J.S.A. 54:5-12.    While negotiating the terms of the title
policy, but without disclosing its concerns about the low
assessment, plaintiff asked First American to delete a policy
exclusion for omitted or added assessments.      First American
refused to do so. Plaintiff claims it had no actual knowledge
that there were pending tax appeals, until after the closing
occurred. On the record before us, there is a material dispute
of fact as to that issue. If plaintiff knew about the pending
tax appeals before the closing, its claim would probably be
barred by a policy exclusion for known risks the insured
voluntarily undertook without disclosing those risks to First
American.

                                             3                                   A-0850-12T3
                                           II

    We review an order granting summary judgment de novo, using

the same legal standard employed by the trial court.                         Henry v.

N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010).                        Likewise,

we owe no deference to the trial court's legal interpretations,

including       its   construction    of       an    insurance     policy    or     other

contract.       Ibid.

    A title insurance policy is a "'contract that protects a

landowner against loss caused by defective title to the land.'"

N.J. Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co.,

203 N.J. 208, 217 (2010) (quoting Shotmeyer v. N.J. Realty Title

Ins. Co., 195 N.J. 72, 82 (2008)).                    Title insurance protects a

buyer against the risk of defects that exist at the time the

policy is purchased, but not against the risk of defects that

may arise in the future.         Shotmeyer, supra, 195 N.J. at 82.                     "In

that sense, title insurance covers 'a state of ownership at a

specific point in time.'"            Ibid. (quoting 11 Couch on Insurance

§ 159:5 (3d ed. 1998)).

    Like other types of insurance, a title insurance policy

should be "'liberally construed in favor of the insured and

strictly    construed      against     the          insurer.'"       Ibid.    (quoting

Sandler    v.    N.J.   Realty   Title     Ins.       Co.,   36 N.J. 471,    478-79

(1962)).        However,   courts     will      enforce      the    title    insurance

                                           4                                     A-0850-12T3
policy as written and will not rewrite a more favorable policy

for the insured than the one purchased.                    See ibid.; Amidano v.

Donnelly, 260 N.J. Super. 148, 154 (App. Div. 1992), certif.

denied, 133 N.J. 435 (1993).

                                           A.

    Before focusing on the title policy at issue in this case,

it is helpful to consider the way annual property taxes are

assessed in New Jersey.             First, the municipal tax assessor must

assess    all   property       as    of    October    1    of    the   pretax     year.

N.J.S.A.    54:4-23.       After      completing      the       preparation     of   the

municipal tax assessment list, the assessor files the list with

the County Board of Taxation (Board), which may examine, revise

and correct the proposed assessments.                     N.J.S.A. 54:4-35.          The

annual taxes on a particular property are set by multiplying the

municipal   tax   rate     –   previously       set   by    the    Board   –    by   the

property's assessed value.                See East Orange v. Palmer, 47 N.J.
307, 317 (1966).         The annual tax then "becomes due in four

installments on February 1, May 1, August 1 and November 1." Id.

at 318.

    Once taxes are assessed, they give rise to a lien on the

property which continues unless they are paid.                         See N.J.S.A.

54:5-6 ("Taxes on lands shall be a continuous lien on the land

on which they are assessed . . . ." (emphasis added)).                         "A lien

                                            5                                  A-0850-12T3
arises against the real estate on which the taxes are assessed

in the event of non-payment."                    S & R Assocs. v. Lynn Realty

Corp., 338 N.J. Super. 350, 360 (App. Div. 2001).                       In Princeton

Office Park v. Plymouth Park Tax Services, LLC, ___ N.J. ___,

___ (2014), the Court recently observed that N.J.S.A. 54:5-6

"confers on a municipality . . . 'a continuous lien on the

land'" for delinquent taxes, and provides that any subsequent

delinquent taxes are added to the lien.                 Id. at ___ (slip op. at

11) (quoting Simon v. Cronecker, 189 N.J. 304, 318 (2007)).

Here, there were no delinquent taxes at the time First American

issued    the    policy,     and   any     potential    taxes    that    might    have

arisen in the future, following a successful tax appeal, had not

yet been "assessed."         N.J.S.A. 54:5-6.

       If a taxpayer wishes to challenge the assessed valuation of

the    taxpayer's      property,      or    if    a   taxing    district    "feel[s]

discriminated against by the assessed valuation of property in

the taxing district," the taxpayer or taxing district may file

an    appeal    with   the   Board.        N.J.S.A.    54:3-21(a)(1).        If   the

assessed valuation of the property is in excess of $1,000,000,

the complaint can be filed directly in the Tax Court, provided

it is filed "on or before April 1, or 45 days from the date the

bulk mailing of notification of assessment is completed in the

taxing district . . . ."                 N.J.S.A. 54:3-21(a)(1).           Here, the

                                            6                               A-0850-12T3
municipality filed its appeals for this property for tax years

2009, 2010, and 2011, directly with the Tax Court.              See N.J.S.A.

54:51A-2.      If the municipality prevails on its appeal, the Tax

Court will "enter judgment revising the taxable value of the

property."     N.J.S.A. 54:51A-6(a).        Based on that revised taxable

value, additional taxes may be assessed which, if not paid, will

give rise to a lien.       See S & R Assocs., supra, 338 N.J. Super.

at 360.

       In addition to the regular annual tax assessments, the tax

statutes make provisions for omitted or added assessments.                   The

term "omitted assessment" refers to a situation where properties

have    been   inadvertently,      or   intentionally   but     incorrectly,

omitted from an annual assessment.

                  In any year or in the next succeeding
             year, the county board of taxation may, in
             accordance with the provisions of this act,
             assess any taxable property omitted from the
             assessment for the particular year.

             [N.J.S.A. 54:4-63.12.]

       An   "added   assessment"   taxes    improvements   to   real    estate

that are substantially ready for their intended use after the

assessor has completed the annual October 1 assessment.

             [W]hen any parcel of real property contains
             any building or other structure which has
             been erected, added to or improved after
             October 1 in any year and completed before
             January 1 following, the assessor shall,
             after examination and inquiry, determine the

                                        7                              A-0850-12T3
           taxable value of such parcel of real
           property as of the first day of the month
           following completion . . . and . . . if such
           value so determined exceeds the assessment
           made   as  of   October   1  preceding,  the
           assessor, shall enter the amount of . . .
           such excess, as an assessment or an added
           assessment against such parcel of real
           property, for the subsequent tax year in a
           list to be known as the "Added Assessment
           List, 19 . . . " (inserting the name of the
           year in which the assessment is made); . . .
           . In addition, the assessor shall enter in
           such added assessment list an assessment for
           that portion of the pretax year between the
           first day of the month following completion
           . . . and December 31 to be determined by
           multiplying the amount of such assessment or
           such excess by the number of whole months
           remaining in the pretax year after the
           completion . . . of said property, and by
           dividing the result by 12.

           [N.J.S.A. 54:4-63.2.]

    The    tax   statutes     give   prospective      purchasers    of    real

property a means of protecting themselves against unanticipated

assessments or outstanding taxes at the time of purchase.                   By

statute,   ordering   a     municipal    tax   lien    search   protects     a

prospective   buyer   against    assessments     not    disclosed    in    the

search.    Within fifteen days after receiving a search request

and the required fee, the tax official must

           issue a certificate certifying the taxes,
           assessments or other municipal liens or
           charges, levied or assessed against the
           property described in the application, which
           are liens thereon at the date of the
           certificate.   He shall include therein all
           unpaid     installments    of    assessments

                                     8                              A-0850-12T3
            theretofore levied and in force, whether due
            or not . . . .

            [N.J.S.A. 54:5-12.]

The purchaser is thereafter protected against municipal liens

not disclosed on the certificate:

                 A   bona  fide  purchaser,   lessee  or
            mortgagee who shall acquire for a valuable
            consideration an interest in lands covered
            by an official tax search and in reliance on
            said search shall hold such interest free
            from any municipal lien . . . not shown on
            that search.

            [N.J.S.A. 54:5-17.]

      At least one case also holds that a municipality's failure

to disclose its pending appeal of a tax assessment, in response

to a prospective purchaser's tax search request, will preclude

the municipality from collecting additional taxes based on the

appeal.    Go-Lit Realty Co. of N.J. v. City of Jersey City, 120
N.J.L. 592, 594 (Sup. Ct. 1938).              Thus, the Legislature has

required municipalities to "turn square corners" by disclosing

in a tax search financial information that would be important to

a prospective purchaser in deciding whether to buy the property.

Ibid.; see Belles v. East Amwell Twp., 178 N.J. Super. 63, 73-

74,   2   N.J.   Tax   103,   112-13   (Tax   1981)   (municipality   must

disclose in a tax search report the "virtual certainty [] of an

omitted assessment"); F.M.C. Stores Co. v. Borough of Morris

                                       9                         A-0850-12T3
Plains,    100 N.J. 418,   427    (1985)     (discussing       square     corners

doctrine).3

                                          B.

     Against     that    background,      we    consider     the    First     American

title    policy.        The   policy    protects        plaintiff    from     "Covered

Risks"    subject   to    certain      exclusions.         The    pertinent     policy

language    provides     coverage      for     "[a]ny    defect     in   or   lien    or

encumbrance on the Title.4          This Covered Risk includes but is not

limited to insurance against loss from" a list of stated risks.

3
  In this case, rather than ordering a municipal tax search,
plaintiff's counsel simply called the municipal tax office to
inquire about any outstanding taxes.    In so noting, we are not
implying that counsel was negligent.       Due to the upcoming
sheriff's sale, at which plaintiff needed to place a bid or lose
the chance to buy the property, time was of the essence.
Plaintiff might have decided to take a calculated business risk
by having its counsel perform a telephone inquiry rather than
waiting for the results of a municipal tax search.
4
  First American's Underwriting Library, a copy of which is
included in appellant's appendix, contains a list of definitions
applicable to its policies. The Library defines "defect" as: "A
blemish, imperfection or deficiency.   A defective title is one
that is irregular and faulty."       The term "encumbrance" is
defined as: "A claim, right, or lien upon the title to real
estate, held by someone other than the real estate owner."
(Emphasis added). In turn, "claim" is defined as: "A right to
assert, or the assertion of, a demand for payment of money due,
or the surrender or delivery of possession of property or the
recognition of some right.     A demand for something as one's
rightful due."   A "lien" is defined as: "The liability of real
estate as security for payment of a debt. Such liability may be
created by contract, such as a mortgage, or by operation of law,
such as a mechanics lien."

                                         10                                   A-0850-12T3
Those   stated    risks      include    unpaid    taxes   that   were   due   and

payable, but unpaid, at the time the policy took effect:

              SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE
              EXCEPTIONS    FROM  COVERAGE   CONTAINED   IN
              SCHEDULE   B,   AND  THE  CONDITIONS,   FIRST
              AMERICAN TITLE INSURANCE COMPANY . . .
              insures, as of Date of Policy . . . against
              loss or damage, not exceeding the Amount of
              Insurance, sustained or incurred by the
              Insured by reason of:

                     . . . .

              2. Any defect in or lien or encumbrance on
              the Title.   This covered Risk includes but
              is not limited to insurance against loss
              from

                     . . . .

              (b) The lien of real estate taxes or
              assessments imposed on the Title by a
              governmental authority due or payable, but
              unpaid.

                     . . . .

              3. Unmarketable Title.

              [Emphasis added.]

      The next section of the policy is entitled "Exclusions from

Coverage" and specifically excepts from coverage: "Any lien on

the   Title    for    real     estate   taxes    or   assessments   imposed    by

governmental authority and created or attaching between Date of

Policy and the date of recording of the deed."                   Paragraph 3(d)

of the Exclusions section also excepts from coverage: "Defects,

                                         11                             A-0850-12T3
liens, encumbrances, adverse claims, or other matters . . . (d)

attaching or created subsequent to Date of Policy."

    An     additional     section    entitled   "Schedule     B"   details

Exceptions from Coverage, including:

            [T]he Company will not pay loss or damage,
            costs, attorney's fees or expenses that
            arise by reason of:

                  . . . .

            2. Lien of unpaid taxes for the year 2011.
            Taxes are paid through the 2nd quarter of
            2011.   2011 3rd quarter taxes, a lien, due
            but not delinquent.

                  . . . .

            3. Subject to added or omitted assessments
            pursuant to N.J.S.A. 54:4-63.1 et seq. not
            yet due and payable.

            [Emphasis added.]

It is clearly inferable from Exclusion 3(d), particularly read

together   with   the    other   policy   provisions   that   specifically

address taxes, that the policy does not cover tax liens created

after the policy was written.

                                    III

    We     turn   next   to   plaintiff's   central    argument    on   this

appeal.    Plaintiff claims that the municipality's pending tax

appeals, in themselves, create a defect in or encumbrance on its

                                     12                            A-0850-12T3
title, or render the title unmarketable.5                       Plaintiff contends

that the appeals cloud the title, because they have the capacity

to eventually result in a higher assessment of the property,

which in turn would result in the imposition of additional taxes

which, if unpaid, will become a lien on the property.

       Plaintiff's     argument,    however,           proves    too   much.            The

underlying    issue    in   the    tax    appeals       is     the   alleged     under-

valuation     of     plaintiff's     property          by    the     tax    assessor.

Accepting    plaintiff's     argument          would    mean    that    any      time    a

property was assigned too low a value by the tax assessor, the

property's title would be considered defective or unmarketable

due to the risk of a tax appeal and a reassessment.                              But to

intelligently insure against such a risk, a title insurer would

have to research the assessed value of every property to be

insured, and analyze its potential for a tax appeal and a higher

revaluation.       Plaintiff did not present an expert report to the

trial court – and cites no legal authority on this appeal – to

support the proposition that a title insurer has a duty to make

such an analysis.       Further, we consider it likely that imposing

such    a   new    obligation     could    drive        up   the     cost   of    title

insurance.        See Shotmeyer, supra, 195 N.J. at 83 (stating that

5
  For purposes of this opinion, we refer to the existence of any
of these title problems as a "cloud" on the title.

                                          13                                   A-0850-12T3
"because insurance premiums and coverage provisions are based on

predictable      levels       of   risk,   title    insurers      need   to     rely    on

certain    consistent         conditions    in     order     to   calculate     premium

rates reliably").6

      Pursuing         plaintiff's     argument        further    only   reveals       its

additional weakness.               Taxes do not actually become a lien on

property until they are assessed.                  See N.J.S.A. 54:5-6.            Until

then, they are only a potential expense which the owner may have

to   pay   in    the     future.      Future     assessments,        however,    cannot

logically be considered a cloud on title, because taxes are a

known, predictable, constantly-recurring phenomenon.                      Taxes will

be assessed on plaintiff's property this year, next year, and on

into the future ad infinitum.              If a property's potential for the

future assessment of taxes were considered a cloud on title, it

would be impossible to pass marketable title to any property.

       As the court explained in Keown v. West Jersey Title &

Guarantee       Co.,    161   N.J.    Super.     19,    23   (App.    Div.),    certif.

denied, 78 N.J. 405 (1978):

            A marketable title is one that is relatively
            free from doubt, such that in a suit for

6
  Moreover, if the property's condition of being under-assessed
were a title defect, this was a risk plaintiff knew about before
it bid on the property, and which it failed to disclose to First
American.    Hence, it would probably fall under the policy
exception for known risks which the prospective insured failed
to disclose to the insurer.

                                           14                                   A-0850-12T3
              specific performance a court would compel
              the prospective purchaser to accept the
              title. 4 American Law of Property § 18.7 at
              670 (1952).    If it is reasonably probable
              that the purchaser would be exposed to
              litigation   not   of  a   frivolous    nature
              concerning the title, or would have to bring
              an action to quiet title, then specific
              performance   would   be   denied    to    the
              prospective seller and the title would be
              considered unmarketable.

A municipality's tax appeal is not "litigation . . . concerning

the    title"    to     property,     such       as,    for    example,    a    suit    to

foreclose an existing lien, challenge a boundary, or enforce

"restrictive covenants on the use of the property."                           Id. at 23-

24.         Rather,   a   tax    appeal      is    litigation         challenging      the

property's      valuation       for   tax    purposes.          See    N.J.S.A.      54:3-

21(a)(1).

       In     support     of    its   appeal,          plaintiff      cites    the     Law

Division's opinion in Bel-Air Motel Corp. v. Title Insurance

Corp., 183 N.J. Super. 551 (Law Div. 1981).                     That case concerned

an omitted assessment for a local sewer improvement, a condition

that   would     be     specifically        excluded      by   the     First    American

policy.       By statute, the local improvement assessment became a

lien "upon confirmation by the governing body, or by the court."

N.J.S.A. 40:56-33.7            In other words, as soon as the governing

7
  The statute was amended in 2002. L. 2002, c. 15, § 2.                         We quote
the version in effect in 1981.

                                            15                                  A-0850-12T3
body    confirmed         the    assessment     for    the    sewer     improvement,     it

became       a     lien     "upon      the    real     estate        described    in    the

assessment."         N.J.S.A. 40:56-33.            The assessment in Bel-Air was

confirmed in 1967, three years before the plaintiff bought the

property in 1970, but the assessment was invalidated in 1968,

and    a   reassessment          was   not    completed       until    1976.      Bel-Air,

supra, 183 N.J. Super. at 552.

       The       court      observed     that      N.J.S.A.        54:5-18.1     required

municipalities to provide "official certificates of searches as

to     municipal         improvements        authorized       by     ordinance    of    the

municipality but not assessed."                    Id. at 554.8          The court also

observed that, by statute, one who acquires land in reliance on

such a certificate showing no assessment, takes the land free

from any subsequent municipal lien for improvements.                           Id. at 554

(citing          N.J.S.A.       54:5-18.5).           Based     on     those     statutory

provisions,         the     court      reasoned       that     the     Legislature      had

recognized that an enacted assessment ordinance created a defect

8
  This section applies to assessments that are certain to be
imposed, even if not presently quantified in amount: "[T]he
governing body of each municipality shall provide by resolution
for the making of official certificates of searches as to
municipal   improvements   authorized   by  ordinance   of   the
municipality, but not assessed, affecting any parcel or tract of
land in said municipality in that a future assessment will be
made thereon pursuant to such ordinance."     N.J.S.A. 54:5-18.1
(emphasis added).

                                              16                                  A-0850-12T3
in title as to the properties subject to the assessment, even if

the amount of the assessment was not yet approved.

    In reaching that conclusion the judge reasoned that "[a]

'defect'   in   a   title   is   something   different   from   a   'lien   or

encumbrance,'" and could be considered as "'the want or absence

of something necessary for completeness or perfection.'"              Id. at

555 (quoting McMinn v. Damurjian, 105 N.J. Super. 132, 139 (Ch.

Div. 1969)).        See also Stewart Title Guar. Co. v. Greenlands

Realty L.L.C., 58 F. Supp. 2d 370, 382 (D.N.J. 1999) (noting

that a defect "is something less than 'unmarketability.'").                  He

concluded that a defect existed due to the certainty of the

assessment:

           I   conclude   a   title    defect   affecting
           plaintiff's property existed in 1970 when it
           was purchased; it was created in 1967 when
           the improvement was completed and therefore
           prior to the purchase and the issuance of
           the defendant's policy.     The ordinance was
           effective whether or not the commissioners'
           report had been filed.     The fact that the
           local improvement had been completed made
           the eventual assessment of the property a
           certainty. The only question then remaining
           was the amount of the assessment.     Bel-Air,
           therefore, bought its property subject to a
           liability:   the   obligation    to  pay   the
           assessment when its amount was fixed, an
           obligation which would ripen into a lien
           when the assessment was confirmed.         The
           Legislature recognized the fact that the
           local improvement ordinance itself created a
           title defect when it adopted N.J.S.A. 54:5-
           18.1,   mandating   searches   for   municipal
           improvements   not   assessed   in  order   to

                                      17                             A-0850-12T3
               protect prospective purchasers of property.
               The ordinance contains a description of the
               areas in the municipality in which the
               improvement was to be constructed.           If
               examined,   it   would   have    revealed   the
               liability to which plaintiff's property was
               subject.   The fact that this property was
               not included in the list of assessments
               which accompanied the initial report of the
               assessment commissioners is of no moment.
               The ordinance provided appropriate notice
               that   it    was   subject    to    assessment.
               Furthermore, N.J.S.A. 40:56-33 makes the
               omission immaterial; it states that the
               assessment is a lien "notwithstanding any
               mistake in the name or names of any owner."

               [Bel-Air, supra, 183 N.J. Super. at 555-56
               (emphasis added).]

    The court also reasoned that the title was unmarketable

because the "property was subject to a definite liability.                              It

would     be    assessed     for     part       of   the     cost    of   the      local

improvement,"         and   "[t]he      assessment,        when    confirmed,      would

become a lien against the property."                 Id. at 557 (first emphasis

added, second emphasis in the original).

    Bel-Air is not binding on this court and we need not decide

whether    it     was   correctly       decided.       It     is    distinguishable,

because it addressed a local assessment that was a certainty,

based     on    the     passage    of     a     municipal     ordinance     and       the

installation of a physical improvement affecting the property.

See Strass v. District-Realty Title Ins. Corp., 358 A.2d 251,

258 (Md. Ct. Spec. App. 1976) (holding that "the assessments in

                                           18                                   A-0850-12T3
this case were not encumbrances until they were inevitable").

By contrast, the case before us concerns additional taxes that

have not been assessed and may never be assessed.                      We also find

the case inapplicable here, for the same reasons we find that

un-assessed property taxes generally are not a cloud on title.

All future taxes are a potential lien on property; the fact that

their imposition is "inevitable" does not make them clouds on

title for purposes of title insurance.

       We     also    reject    plaintiff's       invitation     to    construe      an

exception to the First American policy for added or omitted

taxes as an implied extension of coverage for other types of

future assessments.            See Weedo v. Stone-E-Brick, Inc., 81 N.J.
233,    247    (1979).         Instead     of    inferring   coverage        from   the

language of this exception, we look first to the affirmative

statement of coverage for taxes.                  That language is limited to

the "lien" of taxes which have already been assessed and are

"due and payable but unpaid."               The potential additional taxes,

which   might        be    assessed   if   the    municipality        wins   its    tax

appeals, do not fit any of the quoted criteria.

       While it may be argued that the paragraph covering taxes

due and owing but unpaid, is part of a non-exclusive list of

covered       title       defects,    policy     exclusion     3(d)    specifically

excludes from coverage liens and other title defects "attaching

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or created" after the date of the policy.           The fact that a

policy exception also specifically excepts from coverage added

or omitted assessments serves, at most, to emphasize that future

taxes are not covered.9

     Our conclusion, that the First American policy does not

cover the pending municipal tax appeals, is supported by out-of-

State authority holding that "the mere prospect of future taxes"

is insufficient to create an encumbrance or other covered title

defect under a policy of title insurance.       Rhone v. First Am.

Title Ins. Co., 928 N.E.2d 1185, 1195 (Ill. App. Ct. 2010).

"[I]n the context of a title insurance policy, we reject the

Rhones' reliance on a broad use of the term 'encumbrance' to

bring their claim regarding unassessed and unlevied [property]

taxes within the title policy."    Id. at 1194.10

9
  The record does not reflect when this provision became part of
the standard policy. It may have been added in response to the
Bel-Air decision.   Or it may have been a response to Belles,
supra, a Tax Court decision stating that, to be consistent with
the purpose of the legislation authorizing omitted assessments,
they are considered liens as of the tax year in which they
should have been assessed.    Belles, supra, 178 N.J. Super. at
68-69, 2 N.J. Tax at 107-08.
10
  In Rhone, the court recognized that "[e]ncumbrances 'include
not merely liens such as mortgages, judgment liens, [or] taxes
*** but also attachments, leases, inchoate dower rights, water
rights, easements, restrictions on use, or any right in a third
party which diminishes the value or limits the use of the land
granted.'" Id. at 1190 (citations omitted).

                                  20                        A-0850-12T3
    The Utah Supreme Court cogently addressed the issue in the

following language, which we find persuasive:

         Unlike other insurance contracts, title
         insurance does not insure against future
         events. Thus, in order for a defect, lien,
         or encumbrance to fall within the insurance
         policy's coverage, it must have been in
         existence as of the effective date of the
         policy.     At   a   minimum,   an  existing
         assessment that has been recorded would be
         considered a defect in the title and would
         be covered unless it had been otherwise
         exempted or excluded.    The more difficult
         question, and the one before us now, is
         whether   the   recorded   notice   of   the
         possibility of a future assessment also
         rises to the level of a defect, lien, or
         encumbrance. We conclude that it does not.

         [Vestin Mortg., Inc. v. First Am. Title Ins.
         Co., 139 P.3d 1055, 1057 (Utah 2006)
         (footnote omitted) (citing 43 Am. Jur. 2d
         Insurance § 529 (2003)).]

See also Edwards v. St. Paul Title Ins. Co., 563 P.2d 979, 980-

81 (Colo. App. 1977) (holding that "the prospect of taxes in the

future was not a lien, encumbrance, or defect as of the date of

issuance of the policy" and did not affect the marketability of

the title); Butcher v. Burton Abstract Title Co., 216 N.W.2d
434, 436-37 (Mich. Ct. App.), cert. denied, 419 U.S. 998, 95 S.

Ct. 314, 42 L. Ed. 2d 293 (1974).

    In   conclusion,   summary   judgment   was   properly   granted,

because (a) the pending tax appeals did not render the title

unmarketable or constitute a defect in or encumbrance on the

                                 21                          A-0850-12T3
title, and (b) the First American policy, by its terms, did not

cover the potential future lien of taxes that might be assessed

after the policy was issued.11

     Affirmed.

11
   To the extent not specifically addressed here, plaintiff's
arguments are without sufficient merit to warrant discussion in
a written opinion. R. 2:11-3(e)(1)(E).

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