Hocking v. Title Insurance & Trust Co.

CARTER, J.

— I dissent.

The issue here presented is whether a title insurance company is liable for a defective title which it has insured. The majority opinion holds that it is not, proceeding upon the premise that plaintiff obtained a merchantable title, and losing *653 only, it is said, substantially the entire value of the property. That is to say, the basic theory of the majority is, that the defect ran to the value of the property rather than the title. This is a misconception of the legal problem involved herein.

The facts are clear: Plaintiff purchased the property and received a grant deed therefor, describing it as two numbered lots in a certain block according to a subdivision map purportedly on record. The subdivider had failed, however, to comply with the city ordinances dealing with subdividing land and the state Subdivision Map Act. (Bus. & Prof. Code, § 11500 et seq.)

I believe the majority opinion is erroneous from any angle of approach. The defect goes to the merchantability of the title whether we look at its effect on the value of the property, or technically, at the title. It is conceded that the title insurance policy guarantees the title to be merchantable.

From the technical standpoint of title, the Subdivision Map Act must be examined. Thereunder, title to easements in streets do not pass until the map of the subdivision is “duly recorded.” (Bus. & Prof. Code, §11615.) No map may be recorded until compliance has been had with all the provisions of the act and local ordinances. (Id., § 11626.) It may be said, therefore, that there is at least a grave doubt that the streets were ever dedicated to the public or that plaintiff, as an abutting owner, obtained a private easement therein. But the conveyance of the property to plaintiff was made according to a map which showed streets, and hence her title on its face, would seem to embrace them as an appurtenance. (See Owsley v. Hamner, 36 Cal.2d 710 [ 227 P.2d 263 ].) And defendant by insuring the marketability of his title thereby guaranteed also the title to at least a private easement in the streets. Moreover, it was of importance to his title that the title to an easement for the streets be dedicated to and accepted by the city, for without it he could not compel a dedication or acceptance. Certainly, if title is conveyed which shows frontage on a public street, it is defective if there is no public street, or the existence thereof is gravely doubtful, and it has been so held. (Cleveland v. Bergen Bldg. & Imp. Co. (N.J.), 55 A. 117 ; Morris v. Avondale Heights Co., 218 Ky. 356 , [ 291 S.W. 752 ].) It has been held that deprivation of an easement that was supposed to be appurtenant to the property conveyed is a defect in the title to the property making it nonmerehantable. (Monogram Dev. Co. v. Natben Const. Co., 253 N.Y. 320 [ 171 N.E. 390 ].)

*654 Mention has been made in the foregoing discussion of the existence of at least grave doubt as to the quality of the title with respect to the easements public and private. That is all that is required to render a title unmarketable. The rule is stated in Mertens v. Berendsen, 213 Cal. 111, 113 [ 1 P.2d 440 ]: “ . . . a marketable title has been defined generally as one free from reasonable doubt. . . . ‘Such a title must be free from reasonable doubt, and such that a reasonably prudent person, with full knowledge of the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear upon such transactions, be willing to accept and ought to accept. It must be so far free from defects as to enable the holder, not only to retain the land, but possess it in peace, and, if he wishes to sell it, to be reasonably sure that no flaiv or doubt will arise to disturb its market value . . ” (Italics added.) The holdings of the case are thus summarized : ‘ ‘ Title to land has been defined as the means whereby an owner has the just possession of his property. A good or perfect title, within the meaning of contracts for the sale of real property, is one which is free from litigation, palpable defects and grave doubts, which consists of both legal and equitable titles and is fairly deducible from the record. Such a title is one which is not only good in point of fact but which, when exhibited, is free from any reasonable objection. One contracting for such a title may demand a conveyance with such proof of title as will arm him with the recorded means of vindicating its validity in after times — a good or perfect record title. He is not required to accept a title depending upon matters which rest in parol, such as one which can be shown to be good as the result of an action instituted for the purpose of reforming defects existing in any deed which is necessary to make the chain of title complete, or one which rests upon the statute of limitations. Nor is he required to rely upon an oral statement of the vendor as to the state of his title. If there should appear to be such an uncertainty about the title arising from the record as to affect its market value, a court of equity will not compel its acceptance, and the vendee may recover the purchase money paid by him.

“Marketable title. — A marketable title to real property is one in which there is no doubt involved, either as a matter of law or of fact — in other words, a good and perfect "title, one free from reasonable doubt or pending litigation.” (25 Cal.Jur. 628.) Here there is more than a reasonable doubt *655 whether plaintiff has any easement in the street and whether the city has any interest or obligation in the street. Indeed the doubt has become a certainty because the city has refused permission to use the property at all for building, all of which springs from the defect in the title, consisting of the subdivider failing to comply with the law, a prerequisite to a clear chain of title where land is subdivided. It was the defendant’s business and responsibility to ascertain whether there had been obedience to the law in perfecting the subdivision.

In addition to the foregoing, in connection with the refusal of the city to issue a permit for the erection of a building on the property, such refusal plainly renders the property practically worthless. Obviously that is a defect in the title. It is something of record which renders the property valueless. It is of more serious consequence than a restrictive covenant which prohibits certain uses of the property.

It is suggested in opposition to the foregoing discussion that the policy of insurance excepts from the coverage any governmental regulation restricting the use of the land. Clearly, that has no application to the title to the easement as affected by subdivision map laws, for the title to the property is involved, and it is a regulation as to how titles might be acquired. If the law required a witness’ signature to a deed to validate it, noncompliance therewith would not permit the insurer to invoke the exception. Its business is to insure against imperfections in instruments in the chain of title. Here the map must meet certain requirements, as does a deed, and is, in effect, an instrument in the chain of title, a defect in which must be found by the insurer as a part of the risk assumed by it. Here it was not anything that was done or not done by the city that caused the imperfection in the title. The sub-divider, by failing to follow the law caused the title to be in doubt, the same as if a grantor had given a void deed. The action of the city in denying the permit is merely one of the incidents flowing from the faulty title. Strictly construing the policy against the insurer, as we must, the exception can only embrace things, such as zoning regulations, which are no part of the chain of title and have no effect upon it. As above seen, the map requirements are, on the other hand, the same as deed requirements, that is, for land to be conveyed in parcels, certain procedure must be followed and certain documents must be executed and recorded. Moreover, it should be noted that the exception in the policy concerns itself solely with the use or occupancy of the property. The map regula *656 tions, however, deal with the right to convey and it is obvious that plaintiff did not get a clear title to the property by the conveyance in question.

I would therefore reverse the judgment.

Appellant’s petition for a rehearing was denied September 7, 1951. Carter, J., voted for a rehearing.