Opinion
No. CV–012529–11/KI.
2012-07-18
Patricia SAUL, Plaintiff, v. FIDELITY NATIONAL TITLE INSURANCE CO., Defendant.
The Law Division of Fidelity National, Title Group, Inc., Ethan Steward, Esq., New York, NY, for Defendant. Patricia Saul, Brooklyn, NY, pro se.
The Law Division of Fidelity National, Title Group, Inc., Ethan Steward, Esq., New York, NY, for Defendant. Patricia Saul, Brooklyn, NY, pro se.
KATHERINE A. LEVINE, J.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion:
+--------------------------------------------------------+ ¦Papers ¦Numbered ¦ +---------------------------------------------+----------¦ ¦Notice of Motion and Affidavits Annexed ¦1 ¦ +---------------------------------------------+----------¦ ¦Notice of Cross–Motion and Affidavits Annexed¦2 ¦ +---------------------------------------------+----------¦ ¦Answering Affidavits ¦3 ¦ +---------------------------------------------+----------¦ ¦Replying Affidavit of defendant ¦ ¦ +--------------------------------------------------------+
Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:
Plaintiff Patricia Saul (“plaintiff” or “Saul”) commenced this action to recover $25,000 for breach of a title insurance policy (“policy”) issued by defendant Fidelity National Title Ins. Co. (“Fidelity” or “defendant”), when Fidelity failed to indemnify or defend her in a case brought by Home Heating Oil Corp. (“Home Heating”). Home Heating had previously obtained a UCC–1 Fixture Filing (“fixture filing”) against the prior owner of the premises located at 42 Eldert Street, Brooklyn (“premises” or “house”). Fidelity moves to dismiss pursuant to CPLR 3211(a)(7) and argues that the Home Heating claim is not covered by the title policy because fixtures are personal property and not real property, which is the subject of a contract of title insurance.
In July 2004, Saul entered into a contract to purchase the premises from Wayne Sept (“Sept” or “prior owner”) and obtained a title insurance policy from American Home Abstract (“American”) as agent of Fidelity. Unbeknownst to Saul, and prior to her purchase of the house, Home Heating Oil Corp. (“Home Heating”) had obtained and recorded a UCC–1 fixture filing against the premises on October 9, 2002 in the amount of $21,143.21. After Saul bought the house, Home Heating obtained a default judgement against her in September 2007 as a successor in interest to Sept's debt; Saul claims she was never served. Saul claims she did not learn about the default judgment until she attempted to refinance her home three years later at which point she notified Fidelity.
On a motion to dismiss pursuant to CPLR 3211(a)(7), the pleading is to be afforded a liberal construction. Leon v. Martinez, 84 N.Y.2d 83 (1994). The court must accept the facts as alleged in the complaint, accord the plaintiff the benefit of every possible favorable inference, and determine whether the facts fit within any cognizable legal theory. Leon, supra 84 N.Y.2d at 83 citing Morone v. Morone, 50 N.Y.2d 481, 484 (1980); Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 634 (1976). The court must ascertain whether the proponent of the pleading has a cause of action, not whether he has stated one. Leon, supra, 84 N.Y.2d at 88 citing Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 (1977). It may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint. CPLR 3211(a)(7); Rovello, supra 40 N.Y.2d at 634.
Article 9 of the Uniform Commercial Code (“UCC”) governs security interests in fixtures. UCC x 9–101(1) specifically provides that “this article applies to ... a transaction ... that creates a security interest in ... fixtures.” Pursuant to UCC x 9–102(40), a fixture filing is a “filing of a financing statement covering goods that are or are ... fixtures ...”. UCC § 9–102(41) defines fixtures as goods an interest in which arises under real property law. Fidelity cites UCC § 9–109(d)(11) for the proposition that fixtures are not real property because Article 9 does not apply to the creation or transfer of an interest or lien in real property. Fidelity neglects to refer, however, to the second half of this section which expressly excepts security interests in fixtures and real property from the exclusion. Accordingly, this Court rules that fixtures are a part of real property.
Pursuant to Insurance Law § 6401(b), a “title insurance policy means any policy or contract insuring or guaranteeing the owners of real property and chattels real, and other persons interested therein, or having liens thereon, against loss by reason of encumbrances thereon and defective titles.” By definition, title insurance insures the owners of real property against loss by reason of defective titles and encumbrances thereon, and also insures the correctness of searches for all instruments, liens or charges affecting the title to such property. L. Smirlock Realty Corp. v. Title Guarantee Co., 52 N.Y.2d 179, 187 (1981). See Bracha Mortg. Bankers Corp. v. Nations Title Ins., 275 A.D.2d 337 (2nd Dept.2000).
A title insurance policy is separate and distinct from the contract for a title search. Upon the issuance of a title insurance policy, a contract for a title search merges into the policy, foreclosing any actions for damages arising out of the search, whether sounding in tort or contract. L. Smirlock Realty Corp v. Title Guar. Co., 70 A.D.2d 455, 465 (2nd Dept.1979). Accordingly, the primary obligation of a title insurance company is to provide a financial guarantee backing its certificate of title rather than simply the preparation of the abstract. Id. at 466, citing Flick, Abstract and Title Practice § 864. Such guarantee is a promise to either defend an insured in litigation against third party claims adverse to the title or indemnify the insured for loss occasioned by a defect in title. Brucha Mortgage Bankers Corp v. Nations Title Ins. Of New York, 275 A.D.2d 337, 338 (2nd Dept.2000).
“A title insurer's obligation to indemnify is defined by the policy itself”. Darbonne v. Goldberger, 31 AD3d 693, 695 (2nd Dept.2006); Brucha Mortgage Bankers Corp supra, 275 A.D.2d at 338. General rules of contract construction apply to title insurance policies: an ambiguity in the policy is to be construed in favor of the insured, exceptions to coverage are to be narrowly read and the burden of proof in establishing an exclusion fall upon the insurer. Applyby v. Chicago Title Ins. Co., 80 AD3d 546, 549 (2nd Dept.2011); Uzi ben—Avraham, v. Lawyers Title Ins. Corp., 5 Misc.3d 791, 794 (Sup.Ct., N.Y. Co.2004). A contract is unambiguous if its language is definite and precise, unattended by danger of misconception. Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002). If the terms of a policy are ambiguous, however, any ambiguity must be construed in favor of the insured and against the insurer. White v. Continental Cas. Co., 9 NY3d 264, 267 (2007) citing United States Fid. & Guar. Co. v. Annunziata, 67 N.Y.2d 229, 232 (1986).
Here, the title insurance policy at issue provided Saul coverage for loss occasioned by a defect, lien or encumbrance on the title or unmarketability of the title of real estate fee simple interest. Since, as set forth above, a fixture is part of real property, a fixture lien constitutes a lien or encumbrance on a real property's title. Defendant has failed to meet its burden of showing that the title policy expressly excludes fixture liens. Therefore, the title insurance issued by Fidelity encompasses the UCC–1 fixture filing at issue. The Court also rejects other defendant's arguments. Accordingly, defendant's motion is denied.
The foregoing constitutes the decision and order of the court.