Daily Development for Friday, September 7, 2001

Daily Development for Monday, September 10, 2001

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; SURVEY EXCEPTION: A title insurer had no duty to pay for land conveyed away of record for highway but arguably included in the Schedule A legal description, because Schedule B included a general survey exception.

Hofmann v. Chicago Title Ins. Co., 2001 WL 803756 (Wash.App.Div.1) (unpublished)

When Hofmanns bought their house in King County, Washington in 1978, the seller told them that the property boundary was 60 feet from the centerline of a state highway. In 1953, however, the former owner had given a deed to the state increasing the highway's width to 100 feet from the centerline.

The Hofmanns got a title insurance policy from a predecessor to Chicago Title. The policy legal description was "[t]he north 136 feet of the south 336 feet of [a certain quarterquarter] lying easterly of state highway no. 305 " The 1953 highway deed was not an exception to the Schedule A legal description.

The restrictions on access, light and view contained in the deed were excepted in Schedule B. There were also exceptions for "[e]ncroachments or questions of location, boundary and area, which an accurate survey may disclose" and "public streets, roads, alleys or highways unless disclosed of record "

The Hofmanns put the property up for sale in 1994, and somehow learned at that time that the highway rightofway was 40 feet closer than they had thought. They sued Chicago Title for loss of value. The trial court first gave the Hofmanns summary judgment, then reconsidered and gave summary judgment to Chicago Title. The appeals court affirmed.

The appeals court found that the survey exception removed coverage. It relied on two prior Washington cases enforcing the survey exception, one involving adverse possession and the other a shift in boundary on a river.

The Hofmanns argued that this was not a boundary question but the title insurer's failure to "list a highway disclosed by public record." The court acknowledged that the general road exception included the phrase "unless disclosed of record." Therefore, "[b]y negative implication, this clause provides coverage for roads and highways disclosed by the public records." The court based this conclusion on Shotwell v. Transamerica Title Ins. Co., 91 Wn.2d 161, 588 P.2d 208 (1978) and Santos v.

Sinclair, 76 Wn.App. 320, 32324, 884 P.2d 941 (1994), both of which found that a general road exception applied only to the improved portion of the roadway and not the balance of the land conveyed by a deed in the public records.

However, in Shotwell the insurer staked its position on the road exception. Here, Chicago Title argued the survey exception instead. The court considered the facts to be more like the prior survey exception cases than Shotwell.

"Here, an accurate survey would have taken into account the 1953 Deed that conveyed a portion of the land to the state for future highway expansion. [citing Clark on Surveying and Boundaries] Such a survey may have disclosed a question of location, boundary and area regarding the Hofmann's property.

Because the claim against Chicago Title presents a boundary question that an accurate survey may have disclosed, we find that the Schedule B survey exception excludes coverage. . . .

[T]he Hofmann's situation , , , involves a redefined boundary line, not just an easement or rightofway. More importantly, Shotwell and Santos did not deal with a survey exception that excluded boundary questions from coverage. Because the situation here involves a conveyance of land that redefined a boundary line, it is a question of boundary that an accurate survey may disclose."

Comment 1: There are two ways of looking at this case. First, it is possible, even likely, that the highway expansion that was not reported was an expansion of the highway forming the western boundary of this parcel, according to the property description. If that is the case, then the title company justifiably would not have reported the second deed, expanding the right of way, because the parcel that was the insured parcel began at the highway's edge, whatever that was. Hence, the insured's error indeed was failure to obtain a title policy. This resolution of the case, suggested by Chuck Calvin of Faegre & Benson in Denver, is the probable explanation of the result.

Comment 2: If, instead, the shortfall resulted from a highway expansion that did indeed cut into the described boundaries of the parcel, we have another case, and a very close one. The balance of this comment and the next two assume that state of facts. Let us assume, as appears to have been the situation, that there was no physical evidence on the property of the highway's boundary. In order for the court to conclude that the surveyor would have found the correct boundary, the court must surmise that the surveyor would have checked the land records and identified the deed to the State that the title company had overlooked. Could one argue that the surveyor most likely would accept information as to the right of way description from the title company itself, and that the surveyor would have received the same incorrect information that the title company had given to the owner?

Comment 3: Perhaps this is just the editor's usual crankiness overcoming good judgment, but could one argue that this is a claim that the title company should have paid even if the technical language of the policy gave it an out? The title company missed a recorded deed. Instead of stepping up to the plate and paying off, the title company is arguing that someone else - a hypothetical surveyor, would have duplicated it's work but have done a better job at checking title than the title company did. Isn't the real purpose of the survey exception to deal with matters that a physical inspection of the property would reveal, not to transfer to the surveyor the duty of checking the record?

Comment 4: In the editor's experience, title companies in the past have paid off when their error leads to losses, even when they might have a technical excuse, except in cases in which the title company suspects that there's some funny business. This doesn't appear to be the kind of case in which there would have been any such funny business - rather good faith reliance by the buyers on the title company's title search.

(Much of the text of this report, but not the commentary, is reprinted with permission from the Title Insurance Law Newsletter published by J.

Bushnell Nielson, www.woodridgelegal.com.)

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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