Opinion ID: 1133807
Heading Depth: 1
Heading Rank: 6

Heading: Claims Against the Title Companies

Text: The Boyces allege that the title companies negligently or wantonly failed to inform them of the existence of the recorded license agreement and negligently or wantonly performed their contractual duties in searching the records of the probate court. The Boyces also allege that the title companies suppressed from the Boyces the existence of the recorded license agreement and that the title companies breached the title insurance policy issued to the Boyces. Without explaining its rationale, the trial court granted the title companies' motions for summary judgment. We address each of these claims in turn. We readily dispose of the Boyces' negligence and wantonness claims against both Stewart Title Guaranty Company and Birmingham Title Services Corporation, because those claims are barred by the two-year statute of limitations established in § 6-2-38, Ala.Code 1975. Because the license agreement and the amendment were recorded when title to the property was conveyed to the Boyces, the Boyces were charged with constructive notice of those recordings as of the date they purchased the propertyJanuary 28, 1997. Therefore, they had two years from that date to bring their negligence and wantonness claims. Because the Boyces did not assert those claims until April 2002, those claims are time-barred. [2] The Boyces' suppression claim against the title companies is also governed by a two-year statute of limitations. As discussed above, because the license agreement and the amendment had been recorded before the date the Boyces obtained title to the property, they are charged with constructive notice of that recording. The two-year limitations period applicable to the suppression claim began to run on that date. The Boyces did not assert their suppression claim against the title companies until some five years after that claim accrued; that claim is time-barred, and the summary judgment for the title companies on that claim is affirmed. Next, the Boyces assert a breach-of-contract claim against both title companies. They allege that the title companies breached the title insurance policy issued to the Boyces because that policy did not reveal the existence of the recorded license agreement or the recorded amendment to the license agreement. We briefly review the facts relevant to this claim. On January 8, 1997, Birmingham Title Services Corporation issued a title commitment in preparation for the closing on the property. This title commitment named the Boyces as the proposed insureds and stated that an ALTA Owners Policy was to be issued in the amount of the purchase price. The title commitment identified certain requirements to be complied with before the policy would be issued and identified certain exceptions that would or could be contained in Schedule B of the policy. Under the heading of Exceptions, the title commitment provided: Schedule `B' of the policy or policies to be issued will contain exceptions to the following matters unless the same are disposed of to the satisfaction of the Company: Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof, but prior to the date the proposed insured acquires for value or record the estate or interest or mortgage thereon covered by this Commitment. The title commitment then outlined the Standard Exceptions that would be included in the title policy. On March 14, 1997, Birmingham Title Services Corporation issued a title policy in the name of Stewart Title Guaranty Company. The policy was issued with an effective date of March 14, 1997, and named the Boyces as the insureds. The title policy provided, in pertinent part: SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, STEWART TITLE GUARANTY COMPANY, . . . insures, as of Date of Policy shown in Schedule A, against loss or damage . . . : 1. Title to the estate or interest described in Schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title; 3. Unmarketability of the title; 4. Lack of a right of access to and from the land. . . . . EXCLUSIONS FROM COVERAGE The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of: . . . . 3. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed or agreed to by the insured claimant; (b) not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company, by the insured claimant prior to the date the insured claimant became an insured under this policy; (c) resulting in no loss or damage to the insured claimant; (d) attaching or created subsequent to Date of Policy; or (e) resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy. Schedule B of the title policy provides, in pertinent part: This policy does not insure against loss or damage . . . which arises by reason of: 1. Easements or claims of easements, not shown by the public records. Additionally, the title policy provided that it was a contract of indemnity against actual monetary loss or damage sustained or incurred by the insured claimant who has suffered loss or damage by reason of matters insured against by this policy and only to the extent herein described. The Boyces rely on Ex parte Steadman, 812 So.2d 290 (Ala.2001), and Parker v. Ward, 614 So.2d 975 (Ala.1993), in alleging that title companies have a contractual duty to search [the title] records and to disclose to its insured a defect in the title that those records contained. Parker, 614 So.2d at 978. They allege that on the date the title policy was issued, the license agreement and the amendment had been recorded but that the existence of that agreement and amendment is not disclosed in the title policy or excepted or excluded from the coverage of the policy. Therefore, the Boyces argue, the title companies failed to do what they contracted to do, and they are in breach of their title policy. In Parker v. Ward , this Court stated: `[a] defect in title exists when the aggregate of rights, privileges, powers and immunities known as ownership [fee simple title] is subject to the claims of others.' 614 So.2d at 977 (quoting Title Insurance: The Duty to Search, 71 Yale L.J. 1161, at 1161 (1962)). The Parker Court also stated: A title insurance company has an obligation to answer for any loss due to a defect in a title if it has not excepted that defect from its coverage. It cannot escape liability when it does not except a defect that is a matter of public record. It is generally assumed that a title defect that appears in the public records but that is not noted is covered by a title policy. Commentators have urged, and some courts have held, that a title company, in the absence of an express promise to search title, has an implied duty to search the title and disclose any defect found upon the public record. Because the policy itself insures against loss or damage from defects in the title, subject to certain exceptions set out in the policy, it necessarily follows that it insures against any defect that it is a matter of public record if that defect is not excepted from the coverage. 614 So.2d at 977 (footnotes citing Q. Johnstone, Title Insurance, 66 Yale L.J., 492 at 492 (1957), and Title Insurance: The Duty to Search, 71 Yale L.J. at 1166 n. 32, omitted). After reviewing the language of the title policy and construing the evidence presented to the trial court in a light favorable to the Boyces, see Hollingsworth v. City of Rainbow City, 826 So.2d 787 (Ala. 2001), we conclude that the summary judgment in favor of Stewart Title Guaranty Company on the Boyces' breach-of-title-policy claim was improper. The Boyces have presented substantial evidence indicating that a valid and binding contract of title insurance was issued in the name of Stewart Title Guaranty Company; that this contract of title insurance named the Boyces as the insureds; that the Boyces paid a consideration for that policy; and that the policy issued to the Boyces failed to disclose a recorded encumbrance against the property. If the Boyces establish that they have been damaged as a result of this undisclosed recorded encumbrance, they are entitled to indemnity by the title insurer. Therefore, we reverse the summary judgment entered in favor of Stewart Title Guaranty Company on the breach-of-contract claim, and we remand this cause to the trial court for further proceedings against Stewart Title consistent with this opinion. However, we affirm the summary judgment entered in favor of Birmingham Title Services Corporation on the breach-of-contract claim. The Boyces have not alleged or established that Birmingham Title issued the title policy in its own name or that Birmingham Title intended to bind itself to the contract of title insurance. `The general rule in Alabama concerning liability of an agent for the breach of contract entered on behalf of a disclosed principal is that the agent binds either the principal or himself to the contract, but not both.' Ricwil, Inc. v. S.L. Pappas & Co., 599 So.2d 1126, 1129 (Ala. 1992) (quoting Shirley v. Lin, 548 So.2d 1329, 1333 (Ala.1989)). Because it has not been established that Birmingham Title acted as anything other than an agent for Stewart Title, the Boyces have not established that Birmingham Title could be liable for breach of that policy. We affirm the summary judgment entered in favor of Birmingham Title.