Doble v. Lincoln County Title Co.

No. 54-215
IN THE SUPREME COURT OF THE STATE OF MONTANA

1984

JOHN W. DOBLE and JOYCE L.
DOBLE, husband and wife,

Plaintiffs and Respondents,

LINCOLN COUNTY TITLE COMPANY,
a Montana corpl,
Defendant and Appellant,
and
SAFECO TITLE INSUFANCE COMPANY OF
IDAHO, an Idaho corp.,
Defendant.

APPEAL FROM: District Court of the Nineteenth Judicial District,
In and for the County of Lincoln,
The Honorable Robert PI. 13olter, Judge presiding.

COUNSEL OF RECORD:
For Appe lla~i-_t
:

Boone, Karlberg & Haddon; Sam E. Haddon argued for
Lincoln County Title, Missoula, Montana
Oleson & DeJana; Richard DeJana, Safeco Title Ins.
Co., Kalispell, Montana
For Respondent :

JonXel & Remmi,~;
Daniel 0. Kemmis argued, Missoula,
Montana

Submitted: September 25, 1984
Decided: January 4, 1985

V:g:\; '-, 's85
.v
Filed:

-- - --. -
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This appeal arises from a negligence action against
Lincoln County Title Company. Judgment was entered in the
District Court of Lincoln County against Lincoln County Title
Company alone following a trial by jury. Lincoln County
Title Company appeals. We reverse and remand for a new
trial.

Issues

(1) Whether plaintiff failed to establish a prima facie
case of negligence in the absence of expert testimony on the
standard of care required of a title insurance company?

(2) Whether the verdict and judgment against Lincoln
County Title Company was contrary to law and the evidence?
(3) Whether it was error for the District Court to
refuse Lincoln County Title's proposed instructions no. 37
and no. 39?

Facts

John W. Doble and his wife, Joyce L. Doble, plaintiffs
below and respondents herein, jointly owned substantial
tracts of real estate in Lincoln County, Montana. Doble's
father, John H. Doble, owned other tracts in the same vicini-
ty. In 1966 all of the Dobles brought a quiet title action
in the Eleventh Judicial District in Lincoln County, the
results of which can be found in Doble v. Talbott (1979), 180
Mont. 166, 589 P.2d 994. In that action, evidence of sepa-
rate ownership was presented by the parties, i.e. father's
ownership separate from son's ownership. The District Court
granted judgment for the Dobles in their quiet title action
on J a n u a r y 6 , 1 9 6 7 , b u t f a i l e d t o i n d i c a t e s e p a r a t e o w n e r s h i p

of t h e t r a c t s i n t h e decree.

I n 1975 a l l t h e Dobles n e g o t i a t e d t o s e l l t h e i r p r o p e r -

t i e s t o a g r o u p from Ohio known a s t h e Amish and a commitment

for title i n s u r a n c e was o r d e r e d from L i n c o l n County T i t l e

Company, a local agent f o r S a f e c o T i t l e I n s u r a n c e Company.

The t i t l e commitment was i s s u e d A p r i l 3 0 , 1 9 7 5 , c o n t a i n -

i n g no r e f e r e n c e t o t h e 1966 q u i e t t i t l e a c t i o n o r d e c r e e of

1967.

I n 1977 a f e d e r a l c o u r t judgment was e n t e r e d i n a wrong-

f u l d e a t h c a s e a g a i n s t t h e e l d e r Doble and a. w r i t o f e x e c u -

t i o n was l e v i e d on a l l t h e Doble p r o p e r t y . The young D o b l e s

became u n d e r s t a n d a b l y e x c i t e d and f i l e d a m o t i o n t o amend t h e

1967 judgment nunc p r o t u n c t o r e f l e c t t h e s e p a r a t e owner-

ship. The N i n e t e e n t h J u d i c i a l District Court granted t h a t

m o t i o n t h e same d a y .

T h i s a p p e a l stems from a c a s e b r o u g h t a g a i n s t L i n c o l n

County T i t l e and S a f e c o T i t l e I n s u r a n c e Company of I d a h o t o

recover, inter alia, attorney's f e e s i n c u r r e d by Dobles i n

t h e nunc p r o t u n c a c t i o n . The t h e o r y o f r e c o v e r y was t h a t

t h e d e f e n d a n t s were n e g l i g e n t i n 1975 when t h e t i t l e commit-

ment f o r s a l e o f t h e p r o p e r t y t o t h e Amish was i s s u e d w i t h o u t

s e t t i n g up t h e 1967 q u i e t t i t l e d e c r e e a s a n e x c e p t i o n .

A t t h e t r i a l below, p l a i n t i f f s p r o d u c e d e x t e n s i v e t e s t i -

mony a s t o t h e work done i n t h e nunc p r o t u n c a c t i o n b u t no

expert testimony as t o t h e standard of care required of a

t i t l e i n s u r a n c e company. D e f e n d a n t s , however, p r o d u c e d two

witnesses, both attorneys, who testified as experts that

t i t l e s t a n d a r d s w e r e n o t v i o l a t e d i n 1975 by i s s u a n c e o f t h e

t i t l e commitment w i t h o u t r e f e r e n c e t o t h e 1967 t i t l e q u i e t

decree.
 E x ~ e r tTestimonv
Whether plaintiff failed to establish a prima facie case
of negligence in the absence of expert testimony on the
standard of care required of a title insurance company?
While expert testimony has been required in Montana in
various medical, dental and drug manufacturing cases, no rule
has been established in Montana with regard to title
insurers.
In his treatise on torts, Prosser described the standard
of care on the part of various professional people:
"Professional men in general, and those who under-
take any work calling for special skill, are re-
quired not only to exercise reasonable care in what
they do, but also to possess a standard minimum of
special knowledge and ability. Most of the decided
cases have dealt with physicians and surgeons but
the same is undoubtedly true of dentists, pharma-
cists, attorneys, architects and engineers, ab-
stracters of title, and many other professions and
even skilled trades." (Emphasis added.) William L.
Prosser, - - Torts, 4th Ed. 9 7 1 ) , pp. 161-2.
Law of
In Montana we have applied similar reasoning in Hill v.
Squibb and Sons (1979), 181 Mont. 199, 592 P.2d 1383. his

Court required expert testimony on the question of the ade-
quacy of warning on a drug product and stated:
"There are no Montana cases specifically holding
that a plaintiff must produce expert testimony to
sustain an action against a drug company for fail-
ure to warn adequa.tely of side effects of its
products. There are, however, numerous Montana
decisions to the effect that, in a malpractice suit
against a doctor or dentist, expert evidence is the
only proper guide and without it a plaintiff cannot
recover. (cases cited) We hold that the reasoning
of these decisions extends to the situation in-
volved here.
"In matters 'with respect to which a layman can
have no knowledge at all, the court and jury must
be dependent on expert evidence.' Callahan, 157
Mont. at 520, (181 Mont. at 207.)"
So far as the title insurance company is concerned, the duty
in passing on title to real property is similar to a lawyer's
duty in the examination of title from a review of the
abstract. That duty is summarized in Clinton v. Miller
(1951), 124 Mont. 463, 483-84, 226 P.2d 487, as follows:
"It is the function of an attorney at law retained
to pass upon a title to determine from the ab-
stract, or from the original records and instru-
ments, if his employment extends to them, where the
title rests, and what liens or encumbrances, if
any, exist against the property involved. An
attorney so employed must be held to have undertak-
en to use a reasonable degree of care or skill and
to possess to a reasonable extent the knowledge
requisite to a proper performance of his duties and
he will be held liable to his client for injury
resulting as a proximate consequence from the want
of such knowledge and skill or from the failure to
exercise such care. Such title examiner should be
familiar with the statutes and decisions of his own
state and he must apply the settled rules of law
that should be known to all conveyancers."
The plaintiffs failed to present expert testimony with
regard to the title standard which they contended the title
insurance company must meet; or evidence that their expert
witnesses qualified by training and experience to know what
the standard was; and that the defendant title insurance
company violated the applicable standard.
We hold that the reasoning of the foregoing authorities
is applicable here and that the plaintiffs must prod-uce
expert testimony to establish the standard of care required
of a title insurance company. Title examination is complex
and intricate and beyond the common understanding of lay per-
sons. In the absence of such expert testimony, we further
hold that the plaintiff failed to establish a prima facie
case of negligence in the violation of a standard of care
required of a title company.

The Agency Relationship
Whether the verdi.ct and judgment against Liricoln County
Title Company was contrary to law and the evidence?
Here, the agreed facts as between the parties were
contained in a pre-trial order which in part stated:
 " 3 . L i n c o l n County T i t l e Company i s a Montana
c o r p o r a t i o n which was, a t t h e t i m e o f t h e i s s u a n c e
o f t h e t i t l e i n s u r a n c e commitment a n d t h e t i t l e
insurance p o l i c y r e f e r r e d t o i n t h e Complaint, an
agent f o r t h e purposes o f s e l l i n g t i t l e insurance
o f The T i t l e I n s u r a n c e Company, a n I d a h o c o r p o r a -
t i o n , and o f S a f e c o T i t l e I n s u r a n c e Company o f
Idaho. "

In addition, t h e t r a n s c r i p t shows t h a t L i n c o l n County T i t l e

Company a t a l l t i m e s was a c t i n g a s t h e a g e n t o f d e f e n d a n t

S a f e c o T i t l e I n s u r a n c e Company o f I d a h o .

I n substance, i n s t r u c t i o n no. 16 t o l d the jury that a

p r i n c i p a l i s bound by t h e a c t s o f h i s a g e n t .

We h o l d t h a t t h e v e r d i c t and judgment a g a i n s t Lincoln

County T i t l e Company o n l y i s n o t s u p p o r t e d by t h e e v i d e n c e .

A new t r i a l i s r e q u i r e d .

Refused I n s t r u c t i o n s

Whether i t was e r r o r f o r t h e D i s t r i c t C o u r t t o r e f u s e

L i n c o l n County T i t l e ' s p r o p o s e d i n s t r u c t i o n s no. 37 and no.

39?

These o f f e r e d i n s t r u c t i o n a r e a s follows:

"No. 37: An a b s t r a c t e r h a s t h e d u t y t o p r o p e r l y
s e a r c h t h e p u b l i c r e c o r d and f i n d a l l documents
t h a t may a f f e c t t h e t i t l e t o t h e p r o p e r t y .

"No. 39: P l a i n t i f f s must p r o v e e a c h o f t h e f o l l o w -
i n g a l l e g a t i o n s by a. p r e p o n d e r a n c e o f e v i d e n c e i n
o r d e r t o r e c o v e r from D e f e n d a n t s :

"1. T h a t P l a i n t i f f s o r d e r e d a preliminary title
commitment from D e f e n d a n t s .

" 2 . T h a t P l a i n t i f f s r e l i e d on t h e p r e l i m i n a r y t i t l e
commitment f o r p u r p o s e s o t h e r t h a n c l o s i n g t h e s a l e
between P l a i n t i f f s and t h e Amish.

" 3 . T h a t D e f e n d a n t s knew o r s h o u l d have known t h a t
P l a i n t i f f s would s o r e l y o n t h e p r e l i m i n a r y t i t l e
commitment.

" 4 . T h a t D e f e n d a n t s had a d u t y t o P l a i n t i f f s t o
p r o p e r l y s e a r c h t h e p u b l i c r e c o r d and l i s t a l l
i t e m s t h a t h a v e a n e f f e c t on t h e r e c o r d t i t l e .

"5. That Defendants f a i l e d to list quiet title
a c t i o n c a u s e no. 4447.
 "6. That the failure to list quiet title action
cause no. 4447 was negligence.
"7. That Plaintiffs suffered damages.
"8. That the damages were proximately caused by
Defendants' negligence."
Because this case is being sent back for new trial, it
is important to rule upon these instructions. The defenda.nt
Lincoln County Title Company is entitled to adequate instruc-
tions on its theory of the case. As stated by this Court in
Wollan v. Lord (1963), 142 Mont. 498, 504, 385 P.2d 102:
"A trial judge will not be held in error for refus-
ing to give instructions where the subject has been
adequately covered by other instructions, ... or
where it is not applicable to the pleadings and the
evi6ence ... However, a party has a right to
have instructions given which are adaptable to his
theory of the case ... especially where, as here,
the refusal of the instructions deprived the appel-
lant of a possible defense. This was prejudicial
error. .. ."
The proposed instructions correctly set forth the theory of
the Lincoln County Title Company and should be given upon
request at retrial.
We reverse the District Court and order a new trial.

Justices
,xe' \ $

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EX?tXeh',
Ho2nra-b-k--Chan
District Judge, sitting in
place of Mr. Justice Frank
B. Morrison, Jr.
Honorable Joseph B. Gary,
District Judqe, sitting in
place of Mr. Justice John C.
Sheehy

rable John S. Henson,
District Judqe, sitting in
place of Mr. Chief Justice
Frank I. Haswell

Mr. Justice L. C. Gulbrandson specially concurring.

I concur generally with the majority opinion but L do not
agree with the order for new trial.
Counsel for defendant Lincoln County Title Company moved

for dismissal at the close of plaintiff's case-in-chief and
the motion was denied by the trial judge.
The majority opinion holds: "In the absence of such expert
testimony, we further hold that the plaintiff failed to establish
a prima facie case of negligence in the violation of a standard

of care required of a title company."
In my view, the appropriate remedy, based on that holding
would be to remand to the District Court for entry of an order
dismissing the action and granting judgment f o the defendants.
R
The Honorable Joseph B. Gary, District Judge, sitting in place
of Mr. Justice John C. Sheehy, dissenting.

I dissent from the above-opinion and would affirm the
trial court, with certain modifications. In the majority
opinion the facts are very well stated but I would take issue
with the majority opinion requiring expert testimony and the
question of refused instruction no. 37 and 39 offered by
Lincoln County Title Company.
On the question of expert testimony, the facts show the
Plaintiffs obtained a title commitment from the Defendant
Lincoln County Title which commitment was issued by Lincoln
County Title as agent of Safeco Title Insurance Company of
Idaho. The commitment failed clearly to state the exception
in the 1966 quiet title action decree. The Plaintiffs entered
into an agreement to sell the subject real estate, and after
the agreement to sell was executed the defects were discovered
and the Plaintiffs were required to expend $34,580.66 to
correct the defects in the title.
- -
This Court, in a 1983 case of Malinak v. Safeco Title
Insurance Company of Idaho, 661 P.2d 12, made an exhaustive
study of the law applicable to the issuance of a title commit-
ment. The Court said on page 15, of this opinion, the following:
"A title commitment naturally contemplates a search
by the title insurer of the chain of title, an
opinion by an expert of what the search reveals, a
guaranty that the search was accurate and that the
title commitment expresses the quality of the title
of the seller as shown by the record. The person
who seeks a title insurance commitment expects to
obtain a professional title search, as well as a
professional legal opinion as to the condition of
the title and a guaranty that the title expressed
in the commitment will be insured to the extent of
the policy coverage. A title commitment does not
propose that the title company will insure the
property; rather that the title company will insure
the title. The title insurer, of course, does not
agree to clear the title; rather by its commitment,
the title company agrees to afford coverage in a
title policy later to be issued insuring the title
 according to its commitment." Malinak, supra at 15.
The Court adopted the basic premises from Jarchow v.
Transamerica Title Insurance, 48 Cal.App.3d 917, and stated:
"It is within the expectations of the parties,
the seller ordering the title commitment and the
title insurer inspecting the public records, that
the title commitment will accurately reflect the
insurability of the title, or the condition of the
public record, as the case may be, with respect to
that title. We find a duty on the part of the
title insurer when it issues a title commitment
which later forms the basis for a title insurance
policy, particularly where the seller relies on
the title commitment, to base its title commit-
ment and report upon a reasonably diligent title
search of the public records. A breach of that
duty would constitute negligence. Malinak, supra at 15-16.
This was the latest case by the Supreme Court on the
question of title commitments and the trial court,
instruction no. 11, encompassed within that instruction the
Supreme Court's holding from Malinak, supra and clearly set
forth the duty as required by this Court. The jury having been
properly instructed found in favor of the Plaintiff and against
the Defendant Lincoln Title Company and it is my opinion that
the Defendant's instruction no. 37 and 39 amount to a comment
upon the evidence and the pertinent points elicited therein were
completely covered by the Court's instruction no. 11. The juries
verdict should be affirmed in that respect.
On the question of an expert witness, it is granted that
the majority opinion and the appellant cited Prosser on Torts
concerning the law applicable to physicians, surgeons, attorneys,
etc. On the question of the necessity of expert testimony,
however, it is important to note, in determining whether there
was error that requires a reversal, that the Appellant-Defendant
offered testimony by experts that the title company had exercised
diligence and care and this testimony was not persuasive upon the
jury for they found against Lincoln. It is my opinion that this
is not a case requiring expert testimony such as a surgeon,
physician, architect, attorneys, or the pharmacist or one of
the learned arts. An application was made for a title insurance
commitment and the eventual issuance of a title insurance policy.
As the Court said in Malinak, supra, care must be exercised in
a search of the records and failure to exercise care constitutes
negligence per se. If there were defects not disclosed, then
a violation of the duty is found and does not require an attorney
or an abstracter to say the duty was not performed. In
Shahrokhfar v. State Farm Mutual Auto Insurance Company, 634 P.2d
653, it was held on page 656 that expert testimony is required
only regarding matters "with respect to which a layman can have
no knowledge at all." The commitment was made as a basis for an
-
insurance policy and this Court said in the recent case,\General

Pump, Inc., Supreme Court Cause No. 84-108, as follows:
"Protection against liability for negligence is the
principal purpose of liability policies like the one
we are reviewing here. It is well established that
mere negligence on the part of an insured will not
defeat recovery on a policy. The insurer assumes
the risk of negligence and recovery is permitted
even though the negligence of the insured contri-
buted to the loss. 18 Couch on Insurance 2d
(Revised), g 74:639, 961-962 (1983).
In essence, the Court held that if you have an insurance
policy and in the absence of a clause exonerating the insurance
company, the company is responsible for the matters for which
the policy was purchased. In this case, a commitment from
Lincoln was purchased to protect the seller from an undisclosed
defects and if there were defects, it was the duty of the
company to disclose them which it did not do and under the
applicable law both Lincoln and Safeco Title Insurance Company
should be responsible. Again, if defects are not disclosed it
does not take an expert to tell the jury that. The jury with
its own common knowledge can tell if defects were missed.
Therefore, the requirement of having an expert testify not only
adds to the time and expense of the trial as unnecessary and in
addition, in this case, expert testimony was offered which did
not convince the jury.
On the question of agency, the Court indicates that if
Lincoln Title Company is liable that Title Insurance Company of
Idaho should likewise be liable. I would agree with this and
believe that this could be corrected by granting the Plaintiff's
Motion for A Judgment Notwithstanding the Verdict that was made
and refused by the trial court. An examination of the exhibits
clearly shows that Lincoln Title was acting as agent for Safeco
and under the doctrine of respondeat superior the Title Insurance
Company should be held jointly liable with the Lincoln Title
Company. This could be done by merely directing the trial court
to grant the Motion for A Judgment Notwithstanding the Verdict.
It appears to me to be unfair to Lincoln County to have to
retry this case when the issues of law have been properly sub-
mitted to a jury as enunciated in Malinak,-supra. It is this
%

Judge's opinion that the trial court committed no error other
than the failure to grant the Motion for the Judgment Notwith-

/'
standing-tke- Verdict.
/

*iPtrict Mr. Justice John C.
blace of
2 /
Judge, sitting in
Sheehy

I join in the dissent of the Honorable Joseph B. Gary.

&jCS/
d&
Justice