Lawyers Title Ins. Corp. v. Edmar Constr. Corp., 61 N.Y.2d 635 (1984)
A title insurer who pays taxes on a property due to its contractual obligation with a mortgagee is subrogated to the rights of the mortgagee and the taxing authority against the property owner, and is not considered a volunteer.
Summary
Lawyers Title Insurance Corp. (Lawyers Title) sued Edmar Construction Corp. (Edmar) to recover taxes Lawyers Title paid on Edmar’s property. Lawyers Title had a contract with the bank (mortgagee) to pay these taxes. Edmar claimed it was also covered by Lawyer’s Title insurance policy, thus barring Lawyer’s Title from recovering from him. The court held that Lawyers Title was not a volunteer in paying the taxes, as it was subrogated to the rights of the bank, who was subrogated to the rights of the taxing authority. Therefore, Lawyers Title was entitled to judgment unless Edmar could prove he was also insured under the policy.
Facts
Lawyers Title had a contract with a bank to provide title insurance. This contract required Lawyers Title to pay any outstanding taxes on properties with mortgages held by the bank.
Edmar owned property subject to a mortgage held by the bank.
Edmar failed to pay property taxes, creating a lien on the property.
Lawyers Title, pursuant to its contract with the bank, paid Edmar’s outstanding taxes.
Procedural History
Lawyers Title sued Edmar to recover the amount of taxes paid.
Edmar claimed he was also covered by the title insurance policy, which would prevent Lawyers Title from recovering from him.
The lower court granted summary judgment to Lawyers Title.
The Appellate Division affirmed.
Edmar appealed to the New York Court of Appeals.
Issue(s)
Whether a title insurance company that pays taxes on a property pursuant to a contract with the mortgagee is considered a volunteer, thereby precluding it from being subrogated to the mortgagee’s rights against the property owner.
Holding
No, because the title insurance company is subrogated to the rights of the bank, which was in turn subrogated to the rights of the taxing authorities against the property owner. Therefore the bank’s interest in the premises which secured its mortgage gave it an interest sufficient to take it out of the classification of a volunteer.
Court’s Reasoning
The court reasoned that Lawyers Title was not a volunteer because it was contractually obligated to pay the taxes under its agreement with the bank.
This contractual obligation created a right of subrogation, allowing Lawyers Title to step into the shoes of the bank. The bank, as the mortgagee, had a legitimate interest in protecting its security interest by ensuring the property taxes were paid. The bank itself was subrogated to the rights of the taxing authority.
The court referenced Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175, noting that if Edmar was an insured party under the Lawyers Title policy, then Lawyers Title could not recover from him. The court emphasized that the key question remaining was whether Edmar was in fact an insured under the policy.