Equitable Building & Loan Ass'n v. Bank of Commerce & Trust Co.
118 Tenn. 678
Tenn.
1907
Check Treatment
Mr. Justice Neil,

after making the foregoing statement of facts, delivered the opinion of the Court.

We shall consider the first and second assignments in the reverse order.

1. Although the certificate refers only to the register’s office of Shelby county, and wills are not recorded there, but in the county court clerk’s office, yet, since the body of the abstract refers, for No. 19, to the will book, and purports to state its substance, and this No. 19 was required to make the complement of twenty-three instruments mentioned in the aggregate in the certificate, the contract of the parties must be held to apply to that instrument, and there can be no doubt in fact that it was so intended and understood by the parties. Thomas v. Carson, 46 Neb., 765, 65 N. W., 899 (cited by the appellants’ counsel), does not cover such a state of facts. In that case the certificate covered instruments only in “the county court clerk’s office, office of the district court clerk and treasurer’s office.” The two *685mortgages, the knowledge of which would have prevented the plaintiff from investing and losing his money, were in the register’s office, which had been in existence only about one year. The court said that the entries upon the abstract were in all respects true; hence there was no breach of contract. There was not in that case, as in the present one, a reference upon the face of the abstract to an instrument, and a report, not mentioned in terms in the certificate, but embraced by necessary construction therein.

2. We think the abstract company was guilty of negligence in the report which it made on the will of Mrs. Elizabeth Oltmann. An abstracter may content himself with presenting a mere index to the records, and if such a paper be accepted by his customer the latter cannot complain. Such a paper could be delivered and accepted only under a mutual expectation that the customer would examine the records referred to for himself. Compare Moot v. Business Men’s Investment Ass’n, 157 N. Y., 201, 52 N. E., 1, 45 L. R. A., 666. But where the abstract purports to state the contents or substance of a deed, will, or other instrument, and there is nothing upon the face of the abstract to indicate a mistake or error, the customer is justified in relying upon it, without making an original investigation, and is not guilty of negligence in so doing. If there is in fact an error in the abstract, and through reliance upon it the customer has sustained injury, he may hold the abstracter liable therefor to the extent of the injury sustained, *686provided the error complained of is such as could have been avoided by the exercise of ordinary care and skill on the part of one possessing qualifications adapted to the business of abstracting. National Savings Bank v. Ward, 100 U. S., 195, 25 L. Ed., 621; Banker v. Caldwell, 3 Minn., 94 (Gil., 46); Kane v. Rippey, 22 Or., 296, 23 Pac., 180; Heinsen v. Lamb, 117 Ill., 549, 7 N. E., 75; Wacek v. Frink, 51 Minn., 282, 53 N. W., 633, 38 Am. St. Rep., 502; Young v. Lohr, 118 Iowa, 624, 92 N. W., 684; Rankin v. Schaefer, 4 Mo. App., 108; Keuthan v. St, Louis Trust Co., 73 S. W., 334, 338, 339, 101 Mo. App., 1; Dickle v. Abstract Co., 89 Tenn., 432, 14 S. W., 896, 24 Am. St. Rep,, 616; 1 Cvc., 213, 214, 218; 1 Am. & Eng. Encvc. of Law, 210, 218, 221.

Applying the foregoing principles to the case in hand, we are of opinion that an abstracter, exercising a proper degree of care and skill, would have seen the importance of noting the fact that Mrs. Oltmann’s will gave to Mrs. Lizzie Pox, the daughter of the testatrix, only a life estate in the property.

8. We are of opinion, however, that the third assignment must be sustained. There was no privity between the abstract company and the Equitable Building & Loan Association. The ground of the action against the abstracter is in contract, and not in tort, and the weight of authority is to the effect that the abstracter is liable only to the person to whom he furnishes> the abstract, and that he is not liable to a third person, to whom his customer presents and with whom his customer *687uses the abstract in the procurement of money or property, .unless there is a republication of the abstract to such, third person. Nat. Savings Bank v. Ward, supra; Talpey v. Wright, 61 Ark., 275, 32 S. W., 1072, 54 Am. St. Rep., 206; Dundee Mortgage Co. v. Hughes (C. C.), 20 Fed., 39; Mallory v. Ferguson, 50 Kan., 685, 32 Pac., 410, 22 L. R. A., 99; Symns v. Cutter, 59 Pac., 671, 9 Kan. App., 210; Schade v. Gehner, 34 S. W., 576, 133 Mo., 252; Glawatz v. People’s Guaranty Search Co., 63 N. Y. Supp., 691, 49 App. Div., 465; Zweigardt v. Birdseye, 57 Mo. App., 462; Siewers v. Commonwealth, 87 Pa., 15.

There are some cases which we should note as holding that privity existed under the special circumstances appearing therein. In Young v. Lohr, supra, it was held that the abstracter was liable to the owner, though the contract was by the owner’s agent, who did not disclose his principal. In Western Loan & Savings Co. v. Silver Bow Abstract Co., 78 Pac., 774, 31 Mont., 448, 107 Am. St. Rep., 435, it was held that where, though 'defendant abstract company had arrangements with plaintiff loan association by which abstracts were furnished at the cost of borrowers from the association to be used by plaintiff, defendant agreed to furnish the abstract in question in that case for plaintiff, and delivered it, knowing that it was made for the plaintiff’s exclusive benefit and use, and that plaintiff would rely thereon, there was sufficient privity of contract to enable plaintiff to recover the damages sustained by reason of a failure of the ab*688stract to disclose an unsatisfied judgment against the land referred to therein.

In Economy Building Loan Association v. West Jersey Title & Guaranty Co., 44 Atl., 854, 64 N. J. Law, 27, it was held that a count disclosing that plaintiff agreed to lend money to an applicant upon condition that he should secure the loan by mortgage on real estate certified to be a first lien thereon by a title company having corporate capacity so to do; that the borrower applied to the company and made known to it his agreement with plaintiff; that he requested the company to make the required search and certificate; that it agreed to do so, and to deliver the certificate to the borrower to be delivered to the plaintiff, to be used for the purpose of procuring the loan; and that the company did make the certificate and deliver it to the borrower, who paid for it, and by its use obtained the loan— showed a contract on the part of the company, including an undertaking to use care in certifying truly as to previous incumbrances, upon which, in case the company carelessly and untruthfully certified that a certain mortgage was a first lien, when in fact there was a previous recorded mortgage on the land, the plaintiff had a good cause of action if injured thereby.

In Dickle v. Abstract Co., 89 Tenn., 481, 14 S. W., 896, 24 Am. St. Rep., 616, it appeared that Dickie was negotiating with Bowman for the purchase of land, but declined to complete the purchase until they were furnished with an abstract of title; that Bowman there*689upon applied to the company to make the abstract, which was done, and Bowman paid for it, and the abstract was delivered to him, and was shown to fickle, and in reliance upon it he completed the purchase — the deed from Bowman to Dickie being prepared by the abstract company. There were two conveyances omitted from the abstract, by reason of which Dickie was injured. These were the allegations of a bill in equity brought against the abstract company for relief. The court held that these allegations showed a privity of contract between Dickie and the abstract company.

In Denton v. Title Company, 112 Tenn., 320, 79 S. W., 799, the preceding case was followed, and applied to a case where the vendor and vendee together paid for the abstract;'each paying one-half. The vendor, however, alone applied in person to the company for the abstract, and it was furnished to him; but it was known to the officers of the company that he was procuring it for the purpose of making a sale of his property, and for the purpose of satisfying prospective purchasers. On these facts the court held that Denton, being the immediate purchaser of the land from the person to whom the abstract was issued, and the defendant knowing that it was procured to be used in making a sale of property, the complainant, Denton, was entitled to the benefit of it, and could sue for material defects therein, causing injury-

In the case before the court, as shown by the state*690ment, the abstract company issued the abstract to T. F. Fox, without any knowledge on the part of the company of the purpose for which it was intended to he used. It was presented by Mrs. Fox to the complainant, and money was lent by the latter to her. There was no privity whatever between the complainant and the abstract company.

It results that the judgment of the court below must be reversed, and the bill dismissed.