Opinion ID: 2452458
Heading Depth: 1
Heading Rank: 2

Heading: the title insurance policy

Text: The mortgagee's policy of title insurance issued by Southwest Title provided that it would pay to Northland ... all loss or damage not exceeding the amount stated in Schedule A which the Insured ... may sustain or suffer by reason of failure of, defects in, encumbrances upon, or liens or charges against the title of mortgagors or grantors at or prior to the date of this policy, including mechanics' and materialmen's liens now having priority, or now existing but incomplete, which may hereafter be completed so as to gain priority over the lien of the Insured, ..., and not excepted to in Schedule B hereof .. Schedule B provided, in part: This policy is subject to the conditions and stipulations hereof, the terms and conditions of the leases and easements, if any, shown in Schedule A, and to the following matters which are additional exceptions from the coverage of this policy: Following that language, two of the eighteen exceptions are in the following language: 8. Vendor's lien retained in deed from John Tingle, Wyndal H. Tingle and Gary L. Lawhorn, Trustees of Tingle Construction Company Employees Profit Sharing Plan, to Bob Kirsten, dated 2/24/71, filed 3/3/71, recorded in Volume 71043, page 206, Dr DCT, securing a note for $18,900.00 payable to Citizens State Bank further secured by a deed of trust to Charles R. Cravens, Jr., Trustee, filed 3/3/71, recorded in Volume 71043, page 0940, DTR, DCT (Page 86 at A-51125), Lot 6, Block 2; 15. Deed of Trust executed by Bob Kirsten to Charles R. Cravens, Jr., Trustee, dated 2/17/71, recorded in Volume 71036, page 1243, DTR, DCT, securing a note for $175,685.00, payable to Citizens State Bank, Lots 7, 8, 9 and 10, Block 2. The question is whether the subsequent indebtednesses, exceeding the amounts of the original notes recited by these exceptions and which are secured by the liens because of the dragnet clauses in the deeds of trust, are excepted from the coverage of the policy by virtue of the above quoted language. Southwest Title argues that Northland knew of the dragnet clauses and that this was the purpose of its requiring the estoppel letters. We do not regard actual knowledge, or the notice to which the insured could be put by the reference in the policy to the deeds of trust, as relevant to the controlling question of what Southwest insured by the words of the policy. Southwest Title contends that the provisions of the deeds of trust, including the dragnet clauses, are excepted from its coverage by the recitation to them and their place of recordthus incorporating by reference all of those provisions within the policy exceptions. There is no question but that a title insurance company may provide for an exception from its coverage by reference to the provisions of an instrument without setting forth in detail the content of those provisions. Again, the question is the effect of the particular language of this policy. When the language of these exceptions is studied, it will be seen that there is no statement to the effect that the coverage of the policy is subject to these certain deeds of trust and to whatever indebtedness may be thereby secured. Instead, the exceptions specify the indebtedness, to-wit certain notes, secured by the liens. Since the exception was limited to the prior liens securing that indebtedness, there was no exception for a prior lien securing additional future indebtedness to Citizens State Bank. Northland has proved that there was a defect in its security interest against which Southwest Title insured.