The opinion of the court was delivered by: BECKER
This is a suit on a policy of title insurance, which is now ripe for disposition on cross-motions for summary judgment. The parties have agreed to the essential facts and, after submission of exceptionally able briefs and oral argument, have left for our determination a most difficult case which turns on application of somewhat obscure principles of Pennsylvania real estate tax law.
The case is founded upon our diversity jurisdiction. Plaintiff, Clifford I. Bragman, a resident and citizen of Wisconsin, purchased real estate in Philadelphia, Pennsylvania, at sheriff's sale in December, 1972. Defendant, Commonwealth Land Title Insurance Company, a Pennsylvania corporation with its principal place of business in Philadelphia, issued a policy insuring plaintiff's title to the property in March, 1973, when plaintiff received the deed to the property from the sheriff. Plaintiff later paid $22,137.53 to remove a lien for 1973 real estate taxes which had attached to the property on January 1, 1973, and was thus a lien at the time the deed was delivered and recorded and the title policy issued. Plaintiff brought this action to recover that sum plus interest, costs, and attorneys' fees from defendant, asserting that, there being no exception in the policy, he was insured against the lien for 1973 taxes by defendant's title policy.
Defendant contends that plaintiff is not entitled to summary judgment because the plaintiff suffered no insurable loss by paying taxes which are, in defendant's view, a normal incident of ownership of property. Defendant asserts that because plaintiff is a sophisticated real estate investor he is charged with cognizance of such matters; and that because plaintiff was bound to anticipate payment of the taxes, any recovery by him would be a windfall. Defendant also maintains that we should grant its motion for summary judgment because plaintiff was the equitable owner of the property on January 1, 1973, the time the real estate taxes in question were assessed and became a lien on the property and as such was liable for the taxes. If so, defendant submits that the lien is not covered by (or is automatically excepted, as it were) from the policy. Defendant also claims that a line of cases holding both the straw party title holder and the real party in interest liable for the payment of real estate taxes requires judgment in its favor.
Undoubtedly, had the defendant excepted the taxes from the title report and policy, it would be freed of liability as a matter of contract. Nor is there any doubt that plaintiff became the real owner of the property on March 3, 1973, and that the bulk of the taxes for which he asserts a claim under the policy cover portions of the year when he was owner in every sense of the word. Because of this fact, a verdict for the plaintiff in the full amount claimed would create an inequitable result. Moreover, it is extremely likely that had the transaction at issue been a conventional purchase and sale (instead of a sheriff's sale) the usual Philadelphia custom of tax apportionment would have prevailed and plaintiff would have at least had to bear the burden of that portion of the taxes represented by the period of his 1973 real ownership. Such apportionment would be the most equitable result. However, cases at law do not always conclude equitably, as this one regrettably does not. For, as will appear from our discussion: (1) under Pennsylvania law the purchaser at a sheriff's sale is not the owner until he receives the deed; (2) it is the owner of the property on the date the taxes are assessed who is liable for payment of the taxes for the entire year; and (3) the inexorable application of these principles of Pennsylvania real estate law and the corollaries which flow therefrom require us to deny defendant's motion for summary judgment and to grant plaintiff's.
II. The Uncontested Facts
The following are the relevant undisputed facts.
On December 4, 1972, plaintiff came to Philadelphia to attend the sheriff's sale (pursuant to mortgage foreclosure) of a parcel known as 1742-48 Market Street, Philadelphia, Pennsylvania. Plaintiff was the successful bidder. After purchasing the property at the sale, plaintiff obtained local counsel to represent him. On December 28, 1972, through counsel, plaintiff paid to defendant, as the agent for the sheriff, the balance of the bid price. At the same time he also paid defendant for a policy of title insurance on the property, which defendant agreed to issue upon recordation of the sheriff's deed.
However, because of certain litigation in state court, involving the validity of the sheriff's sale, the sheriff did not deliver the deed to plaintiff until March 9, 1973. The deed was recorded on that day. About 20 days later, defendant delivered a title insurance policy, dated March 9, 1973, to plaintiff.
The relevant portions of the policy (the insuring agreements and exclusions from coverage) read as follows:
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS CONTAINED IN SCHEDULE B AND THE PROVISIONS, THE CONDITIONS AND STIPULATIONS HEREOF, COMMONWEALTH LAND TITLE INSURANCE COMPANY, . . . herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the amount of insurance stated in Schedule A, and costs, attorneys' fees and expenses which the company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:
2. Any defect in or lien or encumbrance on ...