Daily Development for
Tuesday, September 9, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

TITLE INSURANCE; ENDORSEMENTS; DIMENSIONS: Endorsement providing that map attached to lender's policy shows correct location and dimensions of insured parcel is not an assurance of the accuracy of a statement on the map indicating the size of the parcel.

Golden Security Thrift & Loan Assoc. v. First American Title Ins. Co., 61 Cal. Rptr. 2d 442 (Cal. App. 1997).

The endorsement was a California Land Title Association form attached to an ALTA policy. The parcel was an irregularly shaped one, and the map accurately indicated the location and dimensions of the various boundaries. Unfortunately, the map also indicated that these dimensions outlined an area of 2.03 acres, when in fact the parcel contained only 1.6 acres.

The court stated that it was bound to construe the words of the contract in accordance with the "ordinary and popular sense." It scoffed at the notion that the lender was entitled to any interpretation other than one limiting the concept of "dimensions" to the boundary descriptions themselves.

The lender argued that the attachment of the map to the policy constituted a negligent misrepresentation, and the court scoffed even more, pointing to California authority to the effect that title insurers in California have liability only for the indemnity undertaken in the policy, and for no more. Lawrence v. Chicago Title Ins. Co., 237 Cal. Rptr. 264 (Cal. App. 1987).

Comment: As to the last point, California has a statute barring liability for misrepresentation in title policies. Dicta in Alliance Mortgage Co. v. Rothwell, 34 Cal. Rptr. 2d 700 (Cal. App. 1994), provided that misrepresentations contained in endorsements or other statements are actionable if they forseeably mislead a plaintiff. (In this case, other facts cited by the court support the notion that the plaintiff lender would have had difficulty showing such that it reasonably was misled.)

The Alliance case, reported as the DD for April 25, 1995, is a controversial decision involving the question of whether a lender can recover for pre-foreclosure fraud when it forecloses and bids full value with knowledge of the fraud. It was affirmed as to result but superseded as to reasoning in a lengthy California Supreme Court decision reported at 44 Cal.Rptr.2d 352 (Cal. 1995). The real gist of the liability claims in that case was deliberate fraud. The editor has not studied the 87 page California Supreme Court opinion to see whether it discusses somewhere the negligent misrepresentation question.

Comment 2: When your client is relying upon survey information, the only real protection is a current survey from a solvent and reputable surveyor certified to your client, preferably meeting ALTA standards (although these can be tough to meet in some areas). As they say in the trade, accept no substitutes!!

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