204 N.W.2d 57 | Mich. Ct. App. | 1972
WILLIAMS
v.
POLGAR.
Michigan Court of Appeals.
Perica, Breithart & Carmody, P.C., for plaintiffs.
Steve Polgar, for defendant Polgar.
Atlas, Rowe & Talon, P.C., for defendant American Title Insurance Company.
Before: DANHOF, P.J., and LEVIN and BORRADAILE,[*] JJ.
Leave to appeal granted, 388 Mich 812.
*97 DANHOF, P.J.
This is a case of first impression in this state. The questions presented are: at what point does the statute of limitations begin to run in the case of a defective abstract of title, and whether the lack of privity with the abstractor bars recovery by a subsequent purchaser of the land.
Plaintiffs Williams purchased certain property from defendants Polgar under a land contract dated August 1, 1959. At the time of purchase defendants Polgar furnished to plaintiffs Williams an abstract of title certified to July 15, 1959 by a predecessor of defendant American Title Insurance Company. This abstract was originally issued by the Macomb County Abstract & Title Company and was extended by that company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951 and 1952. For purposes of this appeal we will accept the plaintiffs' contention that the American Title Insurance Company is the successor in interest of the Macomb County Abstract & Title Company.
The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926, in Liber 242, p 174 of the Macomb County Records. This deed by Henry J. Brehm and Mary Brehm, Polgars' predecessors in title, conveyed the southerly 60 feet of the property described in the land contract to the Macomb County Board of Road Commissioners. The plaintiffs contend that they first learned of this deed on December 12, 1969. This action was commenced on April 21, 1971. The plaintiffs claim damages arising out of the road commission's exercising its rights over the land by widening the road adjacent to the plaintiffs' land which caused the destruction of the building located on the property. All of the defendants moved for accelerated judgment under GCR 1963, 116. The trial court held that the plaintiffs' *98 cause of action accrued no later than the execution of the land contract on August 1, 1959 and granted accelerated judgment to all defendants. We reverse and remand.
We deal first with the statute-of-limitations problem. It appears that the majority rule is that the statute runs from the time the abstract is delivered. See 1 Am Jur 2d, Abstracts of Title, § 24, p 245, 1 CJS, Abstracts of Title, § 13, p 399. We decline to follow the cases so holding and will adhere to the minority rule which we find to be better reasoned. Cases which we find highly persuasive are Chicago R I & G R Co v Duncan, 273 SW 908 (Tex Civ App, 1925) and Hillock v Idaho Title & Trust Co, 22 Idaho 440; 126 P 612 (1912). In the Hillock case the Court examined numerous authorities and concluded that the better rule was that the statute began to run when the defect was discovered. The Court reasoned that the omission of a conveyance from an abstract would be considered fraud, and that, so considered, the statute would not begin to run until the fraud was discovered. We agree with this conclusion. We do not hesitate to find that the certification of an abstract that makes no mention of a properly recorded conveyance is constructive fraud. As the Court said in Hillock v Idaho Title & Trust Co, 22 Idaho 440, 449; 126 P 612, 615 (1912):
"If the statute runs in favor of the abstractor from the delivery of the abstract, the company would be released long before the falsity of the abstract could reasonably be discovered by the purchaser. This would not be justice, and ought not to be the law."
At all times relevant to this action we have had a statute that was substantially the same as the *99 present MCLA 600.5855; MSA 27A.5855 which reads:
"If a person who is or may be liable for any claim fraudulently conceals the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the action may be commenced at any time within 2 years after the person who is entitled to bring the action discovers, or should have discovered, the existence of the claim or the identity of the person who is liable for the claim, although the action would otherwise be barred by the period of limitations."
An action commenced on April 21, 1971 would be timely if the defect was not discovered until December 12, 1969.[1]
With regard to defendants Polgar the statute has not run. There can be no breach of contract until there is a failure to convey pursuant to the terms of the land contract. The statute has not begun to run. This action is for an anticipatory breach.
While the trial court did not base its ruling on a lack of privity we find it necessary to discuss the issue. Lack of privity was one of the grounds argued in support of the motion for accelerated judgment, and the issue is certain to arise on remand. In addition, the question is of substantial importance to the jurisprudence of the state.
It is generally said that there can be no recovery against an abstractor by one who is not in privity of contract with him. The cases are collected in the Annotation: Liability of Abstractor Privity, 34 ALR3d 1122. Since we write on a clean slate we *100 are free to reject traditional rule and hold that a person who is not in privity may maintain an action against an abstractor.
One of the reasons given for the privity requirement is that one who is not in privity of contract should not be allowed to maintain an action on this contract. The answer to this argument is simple. This is not an action in contract, it is an action in tort. It is certainly established that a breach of contract can also be a tort and this is true of the faulty preparation of an abstract. Dorr v Massachusetts Title Insurance Co, 238 Mass 490; 131 NE 191 (1921), Ehmer v Title Guarantee & Trust Co, 156 NY 10; 50 NE 420 (1898), Prosser, Torts, § 93, p 638, 2 Harper & James, Torts, § 18.6, p 1049 et seq.
Keeping in mind that this is a tort action the question is not whether or not we can find privity, but rather, it is a question of whether a subsequent purchaser or mortgagee is a member of the class to which the abstractor owes a duty. We believe that they are members of such a class. The difference between one who is in privity of contract and a subsequent purchaser or mortgagee is that the former may elect to proceed in either contract or tort while the latter is limited to a tort action.
The strongest argument for a privity requirement is that if there were no such requirement the abstractor would be open to virtually unlimited liability. Whatever the situation is with regard to other professional certificates we do not believe that this is true of abstracts.[2] Abstracts are prepared for a limited class, among them purchasers *101 and mortgagees. The abstractor knows this and certainly is aware that future purchasers and mortgagees will rely on his abstract. Thus, the class to whom the duty is owed is clearly defined. Moreover, there is a limit on the amount for which the abstractor may be held liable. For example, in a case where the abstractor has failed to note a deed conveying the property in fee simple absolute and the subsequent purchaser loses the property, that limit is the total value of the property. Contrast this with a case involving an accountant's certificate. Here an unlimited number of people may rely on the certificate in extending credit and the liability is truly unlimited. We are aware that real property often appreciates in value and that subsequent purchasers and mortgagees may suffer damages through the loss of improvements made to the land after the date of the abstract; however, this is not sufficient reason to defeat liability. We agree with the following statement from Prosser, Torts, § 102, p 723:
"Certificates of expert examination and approval are intended to be exhibited, not hidden under a bushel; and a rule which denies recovery because the defendant who has provided one for such a purpose does not know the plaintiff's name or the particulars of the transaction has an artificial aspect."
The rule with regard to the liability of abstractors for defective abstracts is correctly stated in the Restatement of Torts, § 552, p 122, which reads:
"One who in the course of his business or profession supplies information for the guidance of others in their business transactions is subject to liability for harm caused to them by their reliance upon the information if
*102 "(a) he fails to exercise that care and competence in obtaining and communicating the information which its recipient is justified in expecting, and
"(b) the harm is suffered
"(i) by the person or one of the class of persons for whose guidance the information was supplied, and
"(ii) because of his justifiable reliance upon it in a transaction in which it was intended to influence his conduct or in a transaction substantially identical therewith."
We are aware, of course, that arguments based on § 552 of the Restatement have been rejected by many courts. We can only echo the words of the Idaho Supreme Court in Hillock v Idaho Title & Trust Co, 22 Idaho 440, 450-451; 126 P 612, 616 (1912):
"In the face of the authorities above cited stating a somewhat different view, we have had some hesitancy in reaching the conclusion herein announced, not because we have any doubt whatever as to the soundness of the course of reasoning we have adopted, but rather out of respect for the opinions of courts of distinction and high standing. The question, however, confronting us is a new one in this state, and we feel that we would rather announce a rule and place a construction on a statute which to us seems reasonable and at the same time is in consonance with the plainest dictates of justice, even though in doing so we may subject ourselves to the charge of holding against the weight of the adjudicated cases."
Reversed and remanded for further proceedings not inconsistent with this opinion. Costs to the plaintiffs.
BORRADAILE, J., concurred.
*103 LEVIN, J. (dissenting).
I cannot agree with the majority's disposition of this case.
We do not write on a clean slate. In Beckovsky v Burton Abstract & Title Co, 208 Mich 224, 227 (1919), the Michigan Supreme Court indicated its acceptance of the universal rule that an abstractor of title is liable only to persons with whom he contracts.[1] There does not appear to be any contrary authority. See Anno: Liability of One Preparing Abstract of Title, for Deficiencies Therein, to One Other Than Person Directly Contracting for Abstract, 34 ALR3d 1122; 1 Harper & James, The Law of Torts, § 7.6, p 548; Prosser, Law of Torts, § 102, pp 721-723.
The Restatement does not state a contrary rule. In a note to the American Law Institute accompanying Tentative Draft No 12 of the Restatement of the Law, Second, Torts, § 552,[2] p 15, the then reporter, Dean Prosser, stated:
*104 "Where the defendant merely supplies information for the recipient to use as he sees fit, without any purpose of his own to reach third persons, a narrower rule is required. It is not enough that it is `foreseeable' that the information will reach third persons. In one sense it is always `foreseeable' that any information will be communicated to others. Something more is required. This is made very clear by a long list of cases holding that one who negligently gives a certificate, or other information, to A is not liable when it reaches B and causes pecuniary loss to him, in the absence of some information as to A's intent to reach B."
A large number of cases are cited by Dean Prosser in support, including cases concerning the liability of abstractors of title.[3]
*105 "The announcement in opposition to a large generally accepted body of precedent of new rules of law, without precedent (other than analogies) in any common-law jurisdiction * * * must be left to final courts of review." Hollerud v Malamis, 20 Mich App 748, 758-759 (1969).
I agree that the statute of limitations could not have run against the plaintiffs' action against defendant Polgar since the deed of conveyance Mr. and Mrs. Polgar agreed to deliver to the plaintiffs upon performance of their obligations as the purchasers under the land contract had not yet been executed.
I do not reach the other questions raised by defendant Polgar since the majority does not advert to them.
NOTES
[*] Probate judge, sitting on the Court of Appeals by assignment.
[1] We do not mean to imply that MCLA 600.5855; MSA 27A.5855 is the only statute that could apply. If a suit is timely under the contract statute MCLA 600.5807(8); MSA 27A.5807(8) it may be maintained even if commenced more than two years after the fraud is discovered.
[2] We are dealing here solely with abstracts of title. We mean to imply no opinion on what the situation is with regard to other professional certificates. Those questions must be settled on a case-by-case basis.
[1] In the cited case the plaintiff vendee asked the defendant abstractor to certify the abstract and to bill the vendor. The abstractor was held to be subject to liability to the vendee. Cases decided in other jurisdictions also recognize that an abstractor can be liable to a third person if he knows of the third person's interest when he contracts. See 1 Harper & James, The Law of Torts, § 7.6, p 548; Prosser, Law of Torts, § 102, p 722; Anno: Liability of One Preparing Abstract of Title, for Deficiencies Therein, to One Other Than Person Directly Contracting for Abstract, 34 ALR3d 1122, 1134.
[2] Section 552, as stated in the first Restatement, p 122, reads:
"One who in the course of his business or profession supplies information for the guidance of others in their business transactions is subject to liability for harm caused to them by their reliance upon the information if
"(a) he fails to exercise that care and competence in obtaining and communicating the information which its recipient is justified in expecting, and
"(b) the harm is suffered
"(i) by the person or one of the class of persons for whose guidance the information was supplied, and
"(ii) because of his justifiable reliance upon it in a transaction in which it was intended to influence his conduct or in a transaction substantially identical therewith."
It is proposed to revise § 552 to read as follows:
"(1) One who, in the course of his business, profession or employment, or in a 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 the 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 which 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."
Illustration 8 reads:
"8. A, a title insurance company, negligently prepares an abstract of the title to B's land, which shows that B has good title, although his title is in fact defective. A knows that B intends to exhibit the abstract to C Bank, as a basis for applying for a loan secured by a mortgage on the land. In reliance upon the abstract, C Bank buys the land from B for use as a parking lot, and as a result suffers pecuniary loss. A is not liable to C Bank." Restatement of the Law Second, Torts, Tentative Draft No 12, § 552, pp 14, 27.
[3] Among the cases cited by Dean Prosser holding that abstractors are not liable are Savings Bank v Ward, 100 US 195; 25 L Ed 621 (1879); Phoenix Title & Trust Co v Continental Oil Co, 43 Ariz 219; 29 P2d 1065 (1934); Peterson v Gales, 191 Wis 137; 210 NW 407 (1926); Sickler v Indian River Abstract & Guaranty Co, 142 Fla 528; 195 So 195 (1940).
