Court Opinion

ID: 9753568
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:18:43.164813+00
Date Added: 2024-06-11T07:27:38.190353
License: Public Domain

*104MEREDITH, J.,
dissenting.
Although I agree with the majority’s conclusion that the title insurer is not vicariously liable on a respondent superior basis for the negligence of the title companies in failing to note that the property that was the subject of this transaction had been previously conveyed to another purchaser, I do not agree that the appellees had no cause of action in tort against the title companies for their negligent title services. I would affirm the judgments entered against Cambridge Title and Columbia Title.
When a contract purchaser of real property engages a title company to conduct settlement on the contract, the most fundamental aspect of that engagement is, in the typical case, the need for a real estate professional to confirm that the seller has good and marketable title to the property that is to be conveyed. Although most contract purchasers do not know the intricate details of what a proper title search and proper conveyancing require, the typical purchaser of real estate expects, at a minimum, that the title company will (1) confirm that the seller holds good and marketable title, and (2) prepare a deed that transfers good and marketable title to the purchaser. The typical purchaser also expects that the purchase price would not be paid if the title search discloses that the seller does not even own the subject property because the seller has previously conveyed to another grantee all of the seller’s title in the subject property. Although it is possible to vary the terms of a title company’s engagement by contract, the evidence in the present case did not persuade the trial judge that the purchasers of the subject property expressly contracted for limited services from either Cambridge Title or Columbia Title.
Despite the undisputed fact that the sellers’ prior conveyance of the subject property was properly recorded and indexed in the land records, and despite the undisputed fact that a competent title search would have discovered the sellers’ prior conveyance, the majority opinion holds that the appellees had no cause of action in negligence against the title *105companies to recover the pecuniary damages caused by the negligence of Cambridge Title and Columbia Title in conducting the closings. In my view, the judgments entered against the title companies by the circuit court were proper and should be affirmed.
The majority opinion acknowledges that the Court of Appeals has noted on several occasions that a claim asserting negligence on the part of a title company is “ ‘ordinarily enforced by an action of case for negligence.’ ” Corcoran v. Abstract & Title Company, 217 Md. 633, 637, 143 A.2d 808 (1958) (quoting Watson v. Calvert Bldg. & Loan Ass'n, 91 Md. 25, 33, 45 A. 879 (1900)). Accord Stone v. Chicago Title Insurance Co., 330 Md. 329, 336, 624 A.2d 496 (1993). The majority opinion nevertheless concludes that a victim’s recovery for the negligence of a title company is limited to an action in contract because the cases just cited also point out that, although the claims are “ordinarily” asserted as causes of action for negligence in Maryland, the liability is analytically contractual in nature. Id. But the same analysis would apply to claims of professional negligence asserted against doctors and lawyers, and we clearly would not hold that there can be no recovery in tort for damages caused by the incompetence of those professionals.
Professors Dobbs, Hayden, and Bublick explain in their treatise that even states which limit tort actions for negligent performance of a contract generally permit recovery in tort for economic losses caused by the negligent services of a professional. In 3 Dan B. Dobbs, Paul T. Hayden & Ellen M. Bublick, The Law of Torts (2d ed. 2011), § 615 at 494-95, the authors state:
Actions for certain negligent services permitted; attorneys and “professionals. ” Application of the economic loss rule to services seems consistent with the policy behind the rule, but it opens up a new problem. Courts continue to permit negligence actions by clients against such service providers as attorneys, accountants, insurance brokers, notaries and and [sic] sometimes even title insurers who perform a negligent title search. On the other hand, the *106economic loss rule often protects other providers of services, such as building contractors, against liability for their negligence. Some courts have sought to explain the uneven treatment of service providers by saying that the economic loss rules does not apply to bar negligence actions against defendants who are professionals, or defendants who are in a special relationship with the plaintiff, or those whose contract obligation does not include production or delivery of a tangible object. It may be that all of these efforts to describe the exception are heuristics—pragmatic short-cuts that might usually but not always coincide with a principled exception. Perhaps the overriding principle is that defendants who, like attorneys, are in a special relationship with the plaintiff, or who contract to foster the plaintiffs interests and who are not contracting as adversarial bargainers or competitors, should be subject to the duties of care imposed by negligence law. That would explain the cases and offer a realistic basis for judicial decision-making.
(Footnotes omitted.)
Such liability in tort for malpractice is not limited to doctors and lawyers, but extends to professionals providing paralegal information services, such as the title companies did in this case. Because the services that were negligently provided by the title companies in this case—viz., examining title and preparing a deed of conveyance—were services that have historically been performed by attorneys, the title companies should be held to the same duty of care that would have applied if the appellees had hired a licensed attorney to provide those services.
Moreover, a cause of action in negligence against the title companies is supported by Restatement (Second) of Torts, § 552 (1977), which recognizes liability for a business person who negligently provides false information for the guidance of others, which is what both of the title companies did in this case. Section 552 reads as follows:
§ 552 Information Negligently Supplied for the Guidance of Others
*107(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.
In my view, the trial judge analyzed this case properly. At the conclusion of the bench trial, the judge summarized her findings and conclusions as to the title companies as follows:
It is clear that if someone undertakes the examination of a title for compensation, a reasonable degree of skill and diligence in doing so is required. Corcoran v. Abstract and Title Company of Maryland, Inc., 217 Md. 633, 637, 143 A.2d 808 (1958); see Canatella v. Davis, 264 Md. 190, 286 A.2d 122 (1972). The testimony and evidence presented at the trial was sufficient to establish that Cambridge and Columbia Title were engaged by the Partnership to perform all the duties expected of a title company in connection with the purchase of land in a commercial real estate transaction.
The defense argues that although the Plaintiff based its claims on a negligence theory, the claims are—in reality— *108an action for breach of contract. The defense further argues that, in that case, there can be no liability on the part of Chicago Title.
In the case of Myerberg, Sawyer & Rue, P.A. [v. Agee ], [51 Md.App. 711, 446 A.2d 69 (1982),] a law firm was hired to search title for the purchasers of real estate and, in doing so, failed to detect in its title search that there was no right of ingress and egress to the parcel to be purchased. The purchasers cured the defect themselves and then filed suit against the law firm. Though the case was technically a breach of contract action, the central issue was the foreseeability of the purchaser’s damages. Maryland case law has made clear that the foreseeability of damages test is the same for contract actions and negligence actions. See Stone v. Chicago Title Insurance Company of Maryland, 330 Md. 329, 624 A.2d 496 (1993); and Reamer v. Kessler, 233 Md. 311, 196 A.2d 896 (1964).
The first issue the court needs to address is whether the Title Companies could reasonably foresee that the Partnership would certify to Howard County that it owned the Disputed Tract and that Howard County would permit the sale of subdivided lots based upon that certification. The Court finds that such a result would have been foreseeable in that the Title Companies could reasonably foresee that the Partnership would certify to Howard County that it owned the Disputed Tract, as there was nothing in the title work that was done to indicate otherwise. It further follows that it was foreseeable that the Partnership would convey the subdivided lots based on the certification.
The second question becomes whether the Title Companies could foresee the consequences that would flow from that false certification. Analysis of foreseeability in the proximate cause context turns on whether the actual harm falls within a “general field of danger.” Stone, 330 Md. at 337, 624 A.2d 496.
It was certainly foreseeable that the Title Companies would have known that the Partnership would rely on their title search. Although the Partnership conveyed the lots in *109the Disputed Tract prior to the double conveyance being discovered, it is also foreseeable that as a result of the negligence in failing to discover the ti[t]le defect, damages would be incurred to correct the title defect before future conveyances of the Disputed Tract could be made.
It is also foreseeable that, in reliance on the title search, the Partnership would be granting utility easements and, if the information in the title search was incorrect, the certification of ownership would be false and the public utility easement would be invalid.
The Partnership’s response when it learned of the defective title issue should also have been foreseeable as the Partnership’s response was predictable. Faced with the possibility of costly litigation, it makes sense—and it was foreseeable—that the Partnership would repurchase the Disputed Tract to resolve the problem. The price paid was precisely the per acre price being paid by Timbers for the rest of the tract. It is foreseeable that this would be the price tag for resolving the problem. It is further foreseeable that the Partnership would incur closing costs and attorney’s fees to consummate this transaction. All of these costs and expenses were in the “general field of danger,” as defined by the Stone case.
If the Partnership did not proceed in this manner and elected to simply do nothing, it is entirely foreseeable that the damages would have been far greater in defending the litigation that would have certainly been—and was, to some degree—instituted. It is also foreseeable that the Partnership would have faced administrative and civil penalties assessed by the County as a result of the false certification. See, e.g., Howard County Code, §§ 16.106, 24.102, 24.103, 24.106 and 24.107.
There is no dispute that the Disputed Tract was conveyed twice and this fact went undiscovered for approximately 15 years. It is also undisputed that the Partnership suffered an economic injury. Specifically, the Partnership repurchased the Disputed Tract (for $175,348.56) and incurred closing costs and attorney’s fees in addition thereto. The *110Court finds that the economic injury was proximately caused by the Title Companies’ breach of the duty of care they owed to the Partnership.
Because the trial judge’s findings of fact were not clearly erroneous, I would affirm the judgments that were entered against Columbia Title and Cambridge Title.
Alternatively, I note that the appellees included in their amended complaint a breach of contract count against Columbia Title. Even if the appellees’ claims were limited to claims for breach of contract, they should have been permitted to recover against Columbia Title on the contract count.