Horre v. Title Guarantee & Trust Co., 272 N.Y. 487 (1936)
In a real estate contract requiring title approval by a specific title company, the vendor isn’t obligated to proactively obtain that approval; rather, the clause sets a standard for title quality, and the vendee typically bears the responsibility to engage the title company.
Summary
Horre, the vendor, sued to compel Horre, the vendee, to specifically perform a real estate contract that stipulated the title had to be approved and insured by Title Guarantee & Trust Co. The trial court ordered specific performance, but the record didn’t show if the title company had ever been asked to examine the title. The vendee argued that obtaining the title company’s approval was a condition precedent. The New York Court of Appeals affirmed, holding that the contract language established a standard for the title’s quality, but didn’t obligate the vendor to proactively seek the title company’s approval; instead, it was the vendee’s responsibility to engage the title company for examination and insurance.
Facts
William Horre (vendee) and the Title Guarantee & Trust Co. (vendor) entered a contract for the sale of real estate.
The contract stipulated that the vendor had to provide a title that the Title Guarantee & Trust Co. would approve and insure.
The deed tendered by the vendor was proper in form and conveyed absolute fee, free of encumbrances except a specified mortgage.
There was no evidence that the title had ever been submitted to Title Guarantee & Trust Co. for approval or insurance. The contract included an addendum authorizing a specific entity to have the Title Guarantee & Trust Co. examine the title.
Procedural History
The trial court ruled in favor of the vendor, ordering specific performance of the real estate contract.
The appellate division affirmed the trial court’s judgment.
The Court of Appeals reviewed the appellate division’s decision.
Issue(s)
Whether, under a real estate contract stipulating that the vendor provide a title that a specific title company would approve and insure, the vendor is obligated to actively obtain the title company’s approval as a condition precedent to enforcing the contract against the vendee.
Holding
No, because the contract’s stipulation regarding title company approval sets a standard for the title’s quality rather than creating an obligation for the vendor to proactively seek approval; the prevailing practice dictates that the purchaser incurs the expense of title examination and insurance.
Court’s Reasoning
The court emphasized the prevailing custom in real estate transactions where the vendee typically bears the responsibility for examining the title for their own security.
The court distinguished between the title company acting as an arbitrator on the marketability of the title (which the contract intended) and creating an affirmative obligation for the vendor to obtain approval and insurance.
The court noted that obtaining approval and insurance by the vendor wouldn’t automatically benefit the vendee or allow them to maintain an action against the title company if the title proved defective. The court interpreted the contract as requiring the vendor to convey a title that the title company would approve and insure at the vendee’s instance, necessitating the vendee to engage the title company for title search and insurance.
The court referenced the contract addendum, which authorized a specific entity to engage the title company, as evidence that the vendee was responsible for initiating the title examination process.
The court acknowledged the appellant’s reliance on Flanagan v. Fox, but distinguished it by pointing out that in Flanagan, the title company had actually refused to approve the title, whereas in the present case, there was no evidence the title company had been engaged at all.
The court stated: “We think the intent of this contract was to make the title company the final judge whether the title was good or bad and thus save the parties from the possibility of long and expensive litigation, but that it was not intended to change the prevailing practice that the purchaser incurs the expense of an examination and insurance of his title”. The court concluded that absent submission to the title company, a good title, as found by the court, would be presumed to be approved and insured by the company if its services were requested.