Daily Development for Friday, March 30, 1995

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

TITLE INSURANCE; ABSTRACTOR'S LIABILITY; DAMAGES: Damages for negligence in reporting on size of easement are limited to costs suffered in reliance on representation, not the lost value of property because the easement was not as described. Barthels v. Santa Barbara Title Co., 33 Cal. Rptr. 579 (Cal. App. 1994). In Barthels, a dentist bought the "last beachfront lot" in Santa Barbara and later discovered a title error in the description of the size of a driveway easement. The difference between the actual and insured easement rendered the lot undevelopable. The dentist was able to recover for negligence as well as on the policy. The damages were equal to the cost of the lot (adjusted for inflation) plus expenses in attempting to develop the lot until the error was discovered. These expenses included the value of the dentist's own time working on development. But court held that compensation for the dentist's own time should be $66 per hour, rather than $200 per hour - the latter being the dentist's hourly rate as a dentist. Dentist was unable to recover $800,000 value of the lot if the easement were as represented, since title company did not shrink the easement - only misreported it.

Comment: How many real estate lawyers would feel that the typical dentist's time spent on real estate matters would even have a value of $66 per hour? The editor, however, will offer dental services at that rate - no warranties on painlessness.

Dirt Readers: I put this one up because it was short (it's a Friday) and kind of cute. But the issue of abstractor liability is one that is in considerable disagreement in the courts. Some jurisdictions permit the company to rely entirely on its policy. Others see liability for negligence, but only to the insured. Others are permitting negligence claims by forseeable plaintiffs.

I'm interested in knowing what you think the law is and where it's going in your jurisdiction. Also, I'd be interested in knowing why you think we have these differences in judicial attitude.

There also have been some interesting recent title company cases not necessarily involving abstractor's liability. For those who like to see title insurers get slugged, check out Sears Mortgage Corp. v. Rose, 634 A.2d 74 (N.J. 1993) (Title company has duty of good faith and fair dealing to warn customers that its contract liability might not be broad enough to protect their expectations - otherwise they are responsible for insuring expectations [I know it sounds crazy - but read it - ed]. For those who think title companies are just honest joes trying to get along, and are entitled to judicial protection, see Lombardo v. Pierson, 852 P.2d 308 (Wash. 1993) (title company has no duty to disclose record information that affects value, but not title, of property).

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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