Diel v. Security Title Insurance

VAN DYKE, P. J.

This is an appeal from an order granting a new trial on the ground of the insufficiency of the evidence to support the judgment.

Respondents brought action to recover damages for a breach of contract of title insurance. Frances Polkenhorn received a patent to the subject property, issued in 1923, and the record title remained in her until it passed to her three daughters, as shown by a decree of distribution which was recorded on July 5, 1950. Prior to the making and recordation of that decree, two of the daughters of Frances Polkenhorn executed a 10-year lease of the property dated December' 1, 1948, and recorded on December 20, 1948. Since the lessors had no title of record to the property they purported to lease, the lease appeared when recorded to be a mere fugitive conveyance unconnected with the chain of title. After the recordation of the decree of distribution and in 1952, respondents purchased the subject property from the three daughters and applied to appellant for a policy of title insurance, vesting the title in them as of the close of the purchase escrow. The policy, when issued, insured respondents against loss or damage by reason of “Title to the land described . . . being vested, at the date hereof [July 1, 1952], otherwise than as herein stated.” The vesting statements declared the title to be vested in respondents subject to certain exceptions not material here and made no mention of the lease. On discovering that the lessees were claiming a right to hold and use the property under their lease, respondents brought this action to recover damages.

Appellant pointed out that under the policy provisions, its liability was limited to damages incurred by reason of the “Rights or claims of persons in possession of said land which are not shown by the public records” and contended that when it issued its policy, the rights or claims of the lessees were not so shown. The trial court, sitting without a jury, rendered judgment in appellant’s favor, whereupon respondents moved for and were granted a new trial.

Supplementary to the limitation of liability to claims shown by the public records the policy defined the words “public records” as being “those public records which, under the recording laws, impart constructive notice of matters relating

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