Princeton South Investors, LLC v. First American Title Insurance Insurance Company

NOT FOR PUBLICATION WITHOUT THE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

19 A-0850-12T3

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).

22 A-0850-12T3