Conestoga Title Insurance Company v. Premier Title Agency, Inc., et als.

SYLLABUS
 

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Conestoga Title Insurance Company v. Premier Title Agency, Inc., et als. (A-111-99)


(NOTE: The Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Coburn's opinion below.)
 
Argued November 27, 2000 -- Decided December 13, 2000

PER CURIAM

This appeal deals with a title insurance company's right to recover against a bond issuer for theft of funds by a sole shareholder of the insured corporation.

Conestoga, a title insurance company, authorized Premier Title Agency, Inc. (Premier) to issue title insurance policy commitments on its behalf. In connection therewith, Conestoga required Premier to obtain fidelity insurance. Premier obtained that insurance from Old Republic. The fidelity bond issued by Old Republic insured Premier against dishonest acts of its employees, which was defined as any natural person . . . in your service . . . [w]hom you compensate directly by salary . . . ; and [w]hom you have the right to direct and control while performing services for you[.]. The bond further provided that this insurance is for your benefit only. It provides no rights or benefits to any other person or organization.

Robert M. Wurster was the sole director, president, and shareholder of Premier, which had two other employees. In that capacity, he supervised numerous title closings during which he issued Conestoga title commitments and received checks payable to Premier from home purchasers. Those funds were to be held in trust and used by Premier to satisfy existing mortgages on the purchased properties. Instead of paying off the existing mortgages on the properties, Wurster stole the funds. Conestoga reimbursed Premier's clients, obtained judgment against Premier, and obtained an assignment of whatever rights Premier might have against Old Republic under the fidelity bond.

The trial judge found as fact that Wurster, the thief, was the alter ego of Premier. While recognizing that coverage should not be afforded in 'alter ego' situations unless such coverage was part of the bargain, the trial judge concluded that based on the application for coverage and on testimony that applications were used to set premiums, Old Republic had agreed to provide coverage for embezzlements committed by Wurster in respect of funds held in trust by Premier. The trial judge further sustained Conestoga's right to proceed against Old Republic based solely on its status of assignee of Premier's rights. The court entered judgment in favor of Conestoga. Old Republic appealed.

On appeal, the Appellate Division recognized that as a general rule, in determining whether particular acts of a true employee are covered, fidelity bonds indemnifying employers against dishonest acts of their employees should be broadly construed. However, the Appellate Division more narrowly identified the issue in this matter to be whether Wurster was an employee of Premier as defined in the fidelity bond. The panel noted that although New Jersey courts have not yet addressed the issue, numerous other courts have held that this common definition of employee in corporate fidelity bonds (persons whom you have the right to direct and control while performing services for you) is unambiguous and means that thefts by corporate alter egos are not covered. The panel noted that to allow the corporation to recover for the owner's fraudulent or dishonest conduct would essentially allow the corporation to recover for its own fraudulent or dishonest acts. Thus, the Appellate Division concluded that the fidelity bond issued by Old Republic did not cover the acts of Wurster, who essentially owned Premier. Since Conestoga's only rights were as assignee, the panel held that it was not entitled to judgment on the bond. The panel further determined that the application for the policy did not fortify Conestoga's position in any respect. It reversed the judgment of the trial court and remanded the matter for entry of judgment in favor of Old Republic dismissing the complaint with prejudice.

The Supreme Court granted Conestoga's petition for certification.

HELD: Judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed by the Appellate Division in its written opinion. The language in Old Republic's fidelity bond covering Premier for dishonest acts of its employees did not cover the thefts committed by Wurster, the sole shareholder of the corporation. Thus, because Conestoga's rights were as assignee, it is not entitled to judgment on the bond.

CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, VERNIERO, and LAVECCHIA join in this PER CURIAM opinion. JUSTICES LONG and ZAZZALI did not participate.

 

 
 

SUPREME COURT OF NEW JERSEY
A- 111 September Term 1999

CONESTOGA TITLE INSURANCE CO.,

Plaintiff and Third Party Plaintiff- Appellant,

v.

PREMIER TITLE AGENCY, INC., f/k/a STEWART TITLE AGENCY OF SALEM COUNTY, ROBERT M. WURSTER, PATRICIA J. WURSTER, GEORGE HAMPTON, BEVERLY HAMPTON, KEVIN MARK MARINI, WILLIAM McINTYRE, JANET M. McINTYRE, PATRICIA J. McMAHON, MARGARET M. McMAHON, RICHARD K. HUMPHREYS, SHERRY J. HUMPHREYS, JOHN T. SEGICH, LAURA M. SEGICH, FREDERICE HUMPHREYS, WILLIAM T. SMITH, SUSAN P. SMITH, BANK UNITED OF TEXAS, FSB, d/b/a COMMONWEALTH UNITED MORTGAGE,

Defendants,

and

OLD REPUBLIC INSURANCE COMPANY a/k/a OLD REPUBLIC SURETY COMPANY,

Third Party Defendant-
Respondent.

 
Argued November 27, 2000 -- Decided December 13, 2000

On certification to the Superior Court, Appellate Division, whose opinion is reported at 328 N.J. Super. 460 (2000).

R. James Kravitz argued the cause for appellant (Fox, Rothschild, O'Brien & Frankel, attorneys; Jonathan D. Weiner, of counsel).

Roger P. Sauer argued the cause for respondents (Lindabury McCormick & Estabrook, attorneys; Mr. Sauer and Eric B. Levine, on the brief).

Andrew S. Kent submitted a letter in lieu of brief on behalf of amici curiae, The Surety Association of America and American Insurance Association (Wolff & Samson, attorneys).

PER CURIAM
The judgment is affirmed, substantially for the reasons expressed in Judge Coburn's opinion of the Appellate Division, which is reported at 328 N.J. Super 460 (2000).

CHIEF JUSTICE PORITZ and JUSTICES STEIN, COLEMAN, VERNIERO, and LaVECCHIA join in this opinion. JUSTICES LONG and ZAZZALI did not participate.

SUPREME COURT OF NEW JERSEY
 

NO. A-111

SEPTEMBER TERM 1999
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court

CONESTOGA TITLE INSURANCE
CO.,
Plaintiff and Third
Party Plaintiff-
Appellant,

v.

PREMIER TITLE AGENCY, INC.,
etc., et al.,
Defendants,

and

OLD REPUBLIC INSURANCE
COMPANY a/k/a OLD REPUBLIC
SURETY COMPANY,
Third Party Defendant-
Respondent.

DECIDED December 13, 2000 Chief Justice Poritz

PRESIDING
OPINION BY PER CURIAM
CONCURRING OPINION BY DISSENTING OPINION BY
CHECKLIST
AFFIRM CHIEF JUSTICE PORITZ X JUSTICE STEIN X JUSTICE COLEMAN X JUSTICE LONG ----------------- ---------- -------- JUSTICE VERNIERO X JUSTICE LaVECCHIA X JUSTICE ZAZZALI ------------------ --------- -------- TOTALS
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