Opinion ID: 2452458
Heading Depth: 1
Heading Rank: 3

Heading: damages recoverable under the title policy

Text: Northland's proof of damages was as follows: there was $45,801.14 owing on the Dal-Rich note as of August 1, 1972; the price paid upon the foreclosure of the Citizens State Bank lien and deed of trust on August 1, 1972 was $250,874.12; all of that purchase money paid at the foreclosure sale went to Citizens State Bank because of its secured debt at that time of $253,416.70. The trial court rendered judgment against Southwest Title for $45,801.14 with 18% per annum interest from August 1, 1972 until the date of the judgment on August 1, 1975. That means that the amount of the judgment was $75,252.73. Southwest Title committed itself under the terms of the policy to reimburse Northland for any loss suffered due to an impairment of its security title not listed as an exception in the policy. Northland could have sued for the difference in the market value of the insured equity less the market value of the actual equity securing the mortgagethe difference being the effect upon the market value of the security title due to the undisclosed lien or secured indebtedness. See Goode v. Federal Title and Ins. Corp., 162 So.2d 269 (Fla.App.1964); In Re Gordon, 317 Pa. 161, 176 A. 494 (1935); Anno: Measure, Extent, or Amount of Recovery on Policy of Title Insurance, 60 A.L. R.2d 972 (1958). Northland is not restricted to that measure of damages, for it may recover its actual loss as subsequent events prove. And it is entitled to the interest provided in the note secured by its mortgage up to the date of the trial court judgment. Fidelity Union Casualty Co. v. Wilkinson, 94 S.W.2d 763 (Tex.Civ.App.1936) aff'd 131 Tex. 302, 114 S.W.2d 530 (1938). But in no event is the insured entitled to recover in excess of its unpaid indebtedness, or the market value of the land or equity insured, or the policy amount. Furthermore, the payment of the note is not insured. The insurer underwrites only against loss due to a defect in the security. Northland's position seems to be that proof of a defect in the security makes Southwest Title an insurer of the payment of Dal-Rich's note. When Southwest Title urges that Northland has failed to prove that its security was not otherwise adequate, Northland counters that Southwest Title cannot raise the point because it did not plead payment as required by Rules 94 and 95 of Texas Rules of Civil Procedure. Northland is incorrect; its suit is upon the title policy and not upon Dal-Rich's note. The judgment in favor of Northland is erroneous in two respects. In the first place, a suit upon the policy may not obtain judgment in excess of the policy amount in this case $55,000. Secondly, Northland has failed to prove its loss due to the undisclosed secured indebtedness. It did prove that it obtained no funds from the foreclosure on Lots 6, 7, 8, 9 and 10 in Block 2. It did not prove the circumstances of the foreclosure, if any, on Lot 1, in Block 3 and Lots 7, 8, 9 and 10 in Block 5, all of which were covered by its deed of trust. These lots in Blocks 3 and 5 were appraised by Northland's witness at an amount which is $47,285 in excess of the original note amounts reflected in the deed of trust. Until further proof has been made, its loss because of the undisclosed defect in its security interest has not been established. The claim by Northland Building Corporation against Southwest Title Insurance Company on the title insurance policy is severed from the remainder of the cause, and the judgments below are reversed as to this severed claim; the severed cause is remanded to the trial court for further proceedings in accordance with this opinion. The judgments below as to the remainder of the cause are affirmed.