No. 54-215 IN THE SUPREME COURT OF THE STATE OF MONTANA 1984

JOHN W. DOBLE and JOYCE L. DOBLE, husband and wife, Plaintiffs and Respondents,

LINCOLN COUNTY TITLE COMPANY, a Montana corpl, Defendant and Appellant, and SAFECO TITLE INSUFANCECOMPANY OF IDAHO, an Idaho corp., Defendant.

APPEAL FROM: District Court of the Nineteenth Judicial District, In and for the County of Lincoln, TheHonorable Robert PI. 13olter, Judge presiding.

COUNSEL OF RECORD: For Appella~i-_t : Boone, Karlberg & Haddon; Sam E. Haddon argued for Lincoln County Title,Missoula, Montana Oleson & DeJana;Richard DeJana, Safeco Title Ins. Co., Kalispell,Montana For Respondent: JonXel & Remmi,~; Daniel 0.Kemmis argued, Missoula, Montana

Submitted: September 25, 1984 Decided: January 4, 1985 

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-- - - -. - ClerkMr. Justice John Conway Harrison delivered the Opinion of the Court. This appeal arises from a negligence action against Lincoln County Title Company. Judgment was entered in the District Court of Lincoln County against Lincoln County Title Company alone following a trial by jury. Lincoln County Title Company appeals. We reverse and remand for a new trial.

Issues (1)Whether plaintiff failed to establish a prima facie

case of negligence in the absence of expert testimony on the standard of care required of a title insurance company? (2) Whether the verdict and judgment against Lincoln County Title Company was contrary to law and the evidence? (3) Whether it was error for the District Court to refuse Lincoln County Title's proposed instructions no. 37 and no. 39?

Facts John W. Doble and his wife, Joyce L. Doble, plaintiffs below and respondents herein, jointly owned substantial tracts of real estate in Lincoln County, Montana. Doble's father, John H. Doble, owned other tracts in the same vicinity. In 1966 all of the Dobles brought a quiet title action in the Eleventh Judicial District in Lincoln County, the results ofwhich can be found in Doble v. Talbott (1979), 180 Mont. 166, 589 P.2d 994. In that action, evidence of separate ownership was presented by the parties, i.e. father's ownership separate from son's ownership. The District Court granted judgment for the Dobles in their quiet title actionon January 6, 1967, but failed toindicate separate ownership of thetracts inthe decree. In 1975 allthe Dobles negotiated to sell theirproperties toa group from Ohio known astheAmish and a commitment for title insurance was ordered from Lincoln County Title Company, a local agent for Safeco Title Insurance Company. The title commitment was issuedApril 30, 1975, containing no reference tothe 1966 quiet title action ordecree of 1967.In 1977 a federal courtjudgment was entered ina wrongful death case against the elder Doble and a. writ of execution was levied on allthe Doble property. The young Dobles became understandably excited and filed a motion toamend the 1967 judgment nunc pro tunc to reflect the separate ownership. The Nineteenth Judicial District Court granted that motion the same day. This appeal stems from a case brought against Lincoln County Title and Safeco Title Insurance Company of Idaho to recover, inter alia, attorney's fees incurred by Dobles in the nunc pro tunc action. The theory of recovery was that the defendants were negligent in 1975 when the title commitment for saleof theproperty totheAmish was issuedwithout settingup the 1967 quiet titledecree asan exception. Atthetrialbelow, plaintiffsproduced extensive testimony as to the work done in the nunc pro tunc actionbut no expert testimony as to the standard of care required of a title insurance company. Defendants, however, produced two witnesses, both attorneys, who testified as experts that title standards were not violated in 1975 by issuance of the title commitment without reference to the 1967 title quiet decree.Ex~ert Testimonv Whether plaintiff failed to establish a prima facie case of negligence in the absence of expert testimony on the standard of care required of a title insurance company? While expert testimony has been required in Montana in various medical, dental and drug manufacturing cases,no rule has been established in Montana with regard to title insurers. In his treatise on torts, Prosser described the standard of care on the part of various professionalpeople: "Professional men in general, and those who undertake any work calling for special skill, are required not only to exercise reasonable care inwhat they do, but also to possess a standard minimum of special knowledge and ability. Most of the decided cases have dealt with physicians and surgeons but the same is undoubtedly true of dentists, pharmacists, attorneys, architects and engineers, abstracters 

### of title, and many other professions and even skilledtrades." (Emphasisadded.) William L. Prosser, Law of Torts, 4th Ed. 971) 

## , pp. 161-2. 

## -- In Montana we have applied similar reasoning in Hill v. Squibb and Sons (1979), 181 Mont. 199, 592 P.2d 1383. his Court required expert testimony on the question of the adequacy ofwarning on a drug product and stated: "There are no Montana cases specifically holding that a plaintiff must produce expert testimony to sustain an action against a drug company for failure to warn adequa.tely of side effects of its products. There are, however, numerous Montana decisions to the effect that, in amalpractice suit against a doctor or dentist, expert evidence is the only proper guide and without it a plaintiff cannot recover. (casescited) We hold that the reasoning of these decisions extends to the situation involved here. "In matters 'with respect to which a layman can have no knowledge at all, the court and jury must be dependent on expert evidence.' Callahan, 157 Mont. at 520, (181 Mont. at 207.)" So far as the title insurance company is concerned, the duty in passing on title to realproperty is similar to a lawyer's duty in the examination of title from a review of theabstract. That duty is summarized in Clinton v. Miller (1951), 124 Mont. 463, 483-84, 226 P.2d 487, as follows: "It is the function of an attorney at law retained to pass upon a title to determine from the abstract, or from the original records and instruments, if his employment extends to them, where the title rests, and what liens or encumbrances, if any, exist against the property involved. An attorney so employed must be held to have undertaken to use a reasonable degree of care or skill and to possess to a reasonable extent the knowledge requisite to a proper performance of his duties and he will be held liable to his client for injury resulting as a proximate consequence from the want of such knowledge and skill or from the failure to exercise such care. Such title examiner should be familiarwith the statutes and decisions of his own state and he must apply the settled rules of law that should be known to all conveyancers." The plaintiffs failed to present expert testimony with regard to the title standard which they contended the title insurance company must meet; or evidence that their expert witnesses qualified by training and experience to know what the standard was; and that the defendant title insurance company violated the applicable standard. We hold that the reasoning of the foregoing authorities is applicable here and that the plaintiffs must prod-uce expert testimony to establish the standard of care required of a title insurance company. Title examination is complex and intricateand beyond the common understanding of lay persons. In the absence of such expert testimony, we further hold that the plaintiff failed to establish a prima facie

case of negligence in the violation of a standard of care required of a title company.

The Agency Relationship Whether the verdi.ctand judgment against Liricoln County Title Company was contrary to law and the evidence? Here, the agreed facts as between the parties were contained in a pre-trial order which in part stated:"3. Lincoln County Title Company is a Montana corporation which was, atthe timeof the issuance of the title insurance commitment and the title insurance policy referred to in the Complaint, an agent for the purposes of selling title insurance of The Title Insurance Company, an Idaho corporation, and of Safeco Title Insurance Company of Idaho. " In addition, the transcript shows that Lincoln County Title Company at all times was acting as the agent of defendant Safeco Title Insurance Company of Idaho. In substance, instruction no. 16 told the jury that a principal isbound by the actsof his agent. We hold that the verdict and judgment against Lincoln County TitleCompany only is not supported by the evidence. A new trialis required.

Refused Instructions Whether it was error for the District Court to refuse Lincoln County Title's proposed instructions no. 37 and no. 39? These offered instruction areas follows: "No. 37: An abstracter has the duty to properly search the public record and find all documents thatmay affect thetitletotheproperty. "No. 39: Plaintiffs must prove each of the following allegations by a. preponderance of evidence in order torecover from Defendants: "1. That Plaintiffs ordered a preliminary title commitment from Defendants. "2. That Plaintiffs reliedon thepreliminary title commitment forpurposes other than closing the sale between Plaintiffs and theAmish. "3. That Defendants knew or should have known that Plaintiffs would so rely on the preliminary title commitment. "4. That Defendants had a duty to Plaintiffs to properly search the public record and list all items that have an effect on the record title. "5. That Defendants failed to list quiet title actioncause no. 4447."6. That the failure to list quiet title action cause no. 4447was negligence. "7. That Plaintiffs suffered damages. "8. That the damages were proximately caused by Defendants' negligence." Because this case is being sent back for new trial, it is important to rule upon these instructions. The defenda.nt Lincoln County Title Company is entitled to adequate instructions on its theory of the case. As stated by this Court in Wollan v. Lord (1963), 142 Mont. 498, 504, 385 P.2d 102: "A trial judgewill not be held in error for refusing to give instructionswhere the subject has been adequately covered by other instructions,

# . . . or where it is not applicable to the pleadings and the evi6ence 

# . .. However, a party has a right to have instructions given which are adaptable to his theory of the case

# ... especiallywhere, as here, the refusal of the instructions deprived the appellant of a possible defense. This was prejudicial error. 

# . . ." The proposed instructions correctly set forth the theory of the Lincoln County Title Company and should be given upon request at retrial. We reverse the District Court and order a new trial.

Justices

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### (:-- Ho2nra-b-k--Chan EX?tXeh', 

# - District Judge, sitting in place ofMr. Justice Frank B. Morrison, Jr.Honorable Joseph B. Gary, District Judqe, sitting in place ofMr. Justice John C. Sheehy

rable John S. Henson, District Judqe, sitting in place of Mr. Chief Justice Frank I. Haswell

Mr. Justice L. C. Gulbrandson specially concurring.

I concur generallywith the majority opinionbut L do not agree with the order for new trial. Counsel for defendant Lincoln County Title Company moved for dismissal at the close of plaintiff's case-in-chief and the motion was denied by the trial judge. Themajority opinion holds: "In the absence of such expert testimony, we furtherhold that the plaintiff failed to establish

a prima facie case of negligence in the violation of a standard of care required of a title company." Inmy view, the appropriate remedy,based on that holding would be to remand to the District Court for entry of an order dismissing the action and granting judgment fo the defendants. 

# R

### The Honorable Joseph 

### B. Gary,DistrictJudge,sitting inplace of Mr. Justice John C. Sheehy,dissenting.

I dissent from the above-opinionand would affirm the trial court,with certain modifications. In themajority opinion the facts arevery well stated but Iwould take issue with the majority opinionrequiring expert testimony and the question of refused instructionno. 37 and 39 offered by Lincoln County Title Company. On the question of expert testimony,the facts show the Plaintiffs obtained a title commitment from the Defendant Lincoln County Title which commitmentwas issued by Lincoln County Title as agent of Safeco Title Insurance Company of Idaho. The commitment failed clearly to state the exception in the 1966 quiet title action decree. The Plaintiffs entered into an agreement to sell the subject real estate,and after the agreement to sellwas executed the defectswere discovered and the Plaintiffswere required to expend $34,580.66to correct the defects in the title. This Court,in a 1983 case of Malinak v. Safeco Title 

## -- Insurance Company of Idaho, 661P.2d 12,made an exhaustive study of the lawapplicable to the issuance of a title commitment. The Court said onpage 15,of this opinion,the following: 

### "A title commitment naturally contemplates a search by the title insurer of the chain of title,an opinionby an expert ofwhat the searchreveals,a guaranty that the searchwas accurate and that the title commitment expresses the quality of the title of the seller as shownby the record. Theperson who seeks a title insurance commitment expects to obtain a professional title search,aswell as a professional legal opinion as to the condition of the title and a guaranty that the title expressed in the commitmentwill be insured to the extent of the policy coverage. 

### A title commitment does not propose that the title companywill insure the property; rather that the title companywill insure the title. The title insurer,of course,does not agree to clear the title;ratherby its commitment, the title company agrees to afford coverage in a titlepolicy later to be issued insuring the title

### according to its commitment."Malinak, supraat 15. The Court adopted the basic premises from Jarchowv. Transamerica Title Insurance,

### 48 Cal.App.3d917,and stated: "It iswithin the expectations of the parties, the seller ordering the title commitment and the title insurer inspecting the public records,that the title commitment will accurately reflect the insurability of the title, or the condition of the public record,as the case may be,with respect to that title. We find a duty on the part of the title insurerwhen it issues a title commitment which later forms the basis for a title insurance policy,particularlywhere the seller relies on the title commitment,to base its title commitment and report upon a reasonably diligent title search of the public records. 

### A breach of that dutywould constitute negligence. Malinak, supra at 15-16. This was the latest caseby the SupremeCourt on the question of title commitments and the trial court, instructionno. 11,encompassedwithin that instruction the Supreme Court's holding fromMalinak, supra and clearly set forth the duty as required by this Court. The juryhaving been properly instructed found in favor of the Plaintiffand against the Defendant Lincoln Title Company and it ismy opinion that the Defendant's instructionno. 37 and 39 amount to a comment upon the evidence and the pertinent points elicited thereinwere completely coveredby the Court's instructionno. 11. The juries verdict should be affirmed in that respect. On the question of an expert witness,it is granted that the majority opinion and the appellant cited Prosser on Torts concerning the law applicable to physicians, surgeons, attorneys, etc. On the question of the necessity of expert testimony, however, it is important to note, in determiningwhether there

was error that requires a reversal,that theAppellant-Defendant offered testimony by experts that the title companyhad exercised diligence and care and this testimonywas not persuasive upon the jury for they found against Lincoln. It ismy opinion that this is not a case requiring expert testimony suchas a surgeon,

### physician,architect,attorneys,or the pharmacist or one of the learned arts. An applicationwas made for a title insurance commitment and the eventual issuance of a title insurancepolicy. As the Court said in Malinak, supra,caremust be exercised in

a 

### search of the records and failure to exercise care constitutes negligenceper se. If therewere defects not disclosed,then

a violation of the duty is found and does not require an attorney

or an abstracter to say the dutywas not performed. In Shahrokhfarv. State FarmMutual Auto InsuranceCompany, 634P.2d 653,itwas held onpage 

### 656 that expert testimony is required only regardingmatters "with respect to which a layman canhave

no knowledge at all." The commitmentwas made as a basis for an insurancepolicy and this Court said in the recent case,\General 

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Pump, Inc.,Supreme Court Cause No. 84-108,as follows: "Protection against liability for negligence is the principal purpose of liability policies like the one we are reviewinghere. It is well established that mere negligence on the part of an insuredwill not defeat recovery on apolicy. The insurer assumes the risk of negligence and recovery is permitted even though the negligence of the insured contributed to the loss. 18Couch on Insurance 2d

(Revised), 

### g 74:639,961-962 (1983). In essence,the Court held that if you have an insurance policy and in the absence of a clause exonerating the insurance company,the company is 

### responsible for the matters for which the policywas purchased. In this case,a commitment from Lincoln was purchased to protect the seller from anundisclosed defects and if therewere defects,itwas the duty of the company to disclose themwhich it did not do and under the applicable lawboth Lincoln and Safeco Title Insurance Company should be responsible. Again, if defects are not disclosed it does not take an expert to tell the jury that. 

### The jurywith its own commonknowledge can tell if defectswere missed.

### Therefore,the requirement of having an expert testify not only adds to the time and expense of the trial as unnecessary and in addition,in this case,expert testimony was offered which did not convince the jury. On the question of agency,the Court indicates that if Lincoln Title Company is liable that Title InsuranceCompany of Idaho should likewisebe liable. 

### Iwould agreewith this and believe that this could be corrected by granting the Plaintiff's Motion for A JudgmentNotwithstanding theVerdict that wasmade and refused by the trial court. An examination of the exhibits clearly shows that Lincoln Titlewas acting as agent for Safeco and under the doctrine of respondeat superior the Title Insurance Company shouldbe held jointly liablewith the Lincoln Title Company. This could be done by merely directing the trial court to grant theMotion forA Judgment Notwithstanding the Verdict. 

### It appears tome to be unfair to Lincoln County to have to retry this casewhen the issues of law have been properly submitted to a jury as enunciated inMalinak,-supra.

% 

### It is this Judge's opinion that the trial court committedno error other than the failure to grant theMotion for the JudgmentNotwithstanding-tke-Verdict. / 

# /'

i trict Judge,sitting in 

# *P blace ofMr. Justice John C.

2/ 

### Sheehy

I 

### join in the dissent of 

### the Honorable Joseph B. 

### Gary. 

# &dj&

Justice 

## CS/