WILLIAMS v POLGAR
Docket No. 54,422
Supreme Court of Michigan
Decided February 14, 1974
391 Mich 6
Submitted May 10, 1973. (No. 14 May Term 1973.)
Under a motion for accelerated judgment by defendants the facts well pleaded by plaintiffs and the reasonable inferences therefrom must be considered most favorably towards plaintiffs.
2. NEGLIGENCE.
Where there is a person negligently injured by another, normally there is recovery therefor.
3. ABSTRACTS OF TITLE—LIABILITY—THIRD PARTY—PRIVITY.
The requirement of privity has been categorically eliminated; therefore, liability will apply to a negligent abstracter who can reasonably foresee reliance by a third party on its abstract.
4. NEGLIGENCE—DUTY OF CARE—CONTRACTS—COMMON LAW—TORTS—BREACH OF CONTRACT.
While a duty of care, as an essential element of actionable negligence, arises by operation of law, it may and frequently does arise out of a contractual relationship, the theory being that accompanying every contract is a common-law duty to perform with ordinary care the thing agreed to be done, and that a negligent performance constitutes a tort as well as a breach of contract.
REFERENCES FOR POINTS IN HEADNOTES
[1] 47 Am Jur 2d, Judgments § 971.
61 Am Jur 2d, Pleading §§ 55, 56.
[2] 57 Am Jur 2d, Negligence § 384.
[3] 1 Am Jur 2d, Abstracts of Title §§ 15-18.
[4] 57 Am Jur 2d, Negligence § 47 et seq.
[5, 9, 11] 1 Am Jur 2d, Abstracts of Title §§ 12-27.
[6] 1 Am Jur 2d, Abstracts of Title § 23.
[7] 1 Am Jur 2d, Abstracts of Title §§ 3, 14.
[8, 12] 1 Am Jur 2d, Abstracts of Title § 24.
[10] 1 Am Jur 2d, Abstracts of Title §§ 19, 24.
[13] 1 Am Jur 2d, Abstracts of Title § 14.
The particular type of tort action arising from breach of an abstracter‘s contractual duty is an action in negligent misrepresentation.
6. ABSTRACTS OF TITLE—TORTS—CONTRACTS.
The tort cause of action created by an abstracter‘s nonfeasance or misfeasance stems from the contractual duty originally imposed and does not render an abstracter liable for action beyond such contractually-imposed duty, i. e., to perform in a diligent and reasonably skillful workmanlike manner.
7. ABSTRACTS OF TITLE—CONTRACTS—NON-CONTRACTING PARTIES.
Every contract of employment includes an obligation, whether express or implied, to perform in a diligent and reasonably skillful workmanlike manner; this standard governs an abstracter‘s legal obligation to non-contracting parties.
8. ABSTRACTS OF TITLE—BREACH OF CONTRACT—ACTION—GRANTEES.
The cause of action arising from breach of the abstracter‘s contractual duty runs to those persons an abstracter could reasonably foresee as relying on the accuracy of the abstract put into motion; the particular expert-client relationship accruing to a professional contract to certify the condition of the record of title reposes a peculiar trust in an abstracter which runs not only to the original contracting party; there is a clearly foreseeable class of potential injured persons which would obviously include grantees where his or her grantor or any predecessor in title of the grantor has initiated the contract for abstracting services with the abstracter.
9. LIMITATION OF ACTIONS—CONTRACTS—TORTS.
A breach of duty creating a cause of action in a contract action would date from the actual act of omission or misrepresentation; the cause of action in a tort action runs from the date the tort was committed not the date the actor put his or her force wrongfully into motion.
10. LIMITATION OF ACTIONS—ABSTRACTS OF TITLE—MISREPRESENTATION—BREACH OF DUTY—PROXIMATE CAUSE—DAMAGES.
The statute of limitations in an abstracter liability action does not begin running until the point where plaintiff knows or should have known of a negligent misrepresentation; at that point, four elements are satisfied: a legal duty exists, such duty is breached, a proximate causal relаtion is established (if plain-
11. ABSTRACTS OF TITLE—TORTS—MISREPRESENTATION—CONTRACTS—LIMITATION OF ACTIONS.
There is a valid tort cause of action in the nature of negligent misrepresentation arising from a contract for an abstracter‘s services in favor of a non-contracting damaged third party whose reliance on the abstract could be foreseen; in a tort action of this nature, the statute of limitations begins running from the date the injured party knew or should have known of the existence of the negligent misrepresentation.
DISSENTING OPINION
M. S. COLEMAN, J.
12. LIMITATION OF ACTIONS—ABSTRACTS OF TITLE—CONTRACTS—BREACH OF CONTRACT—STATUTES.
Plaintiffs’ action against an abstracter for damages for not including a deed in an abstract of title is premised on a breach of contractual duty; a statute provides that no person may bring or maintain any action to recover damages for breach of contract unless he commences the action within six years and plaintiffs’ action accrued, as provided by another statute, at the time the wrong upon which the claim is based was done regardless of the time when damage results; therefore plaintiffs’ claim accrued, at the very latest, more than six years prior to institution of suit and accelerated judgment for defendant was properly granted (
13. LIMITATION OF ACTIONS—LEGISLATION—JURISDICTIONAL LIMITATIONS—STATUTES—SUPREME COURT.
The Legislature is entitled to place limitations upon the bringing of actions in the courts of the state of Michigan; indeed, it is the duty of the Legislature to impose jurisdictional limitations in such matters and although individuals may differ as to the wisdom of legislation, it is not the function of the Michigan Supreme Court to rewrite it.
Appeal from Court of Appeals, Division 2, Danhof, P. J., and Levin and Borradaile, JJ., reversing and remanding Macomb, Howard R. Carroll, J. Submitted May 10, 1973. (No. 14 May Term 1973, Docket No. 54,422.) Decided February 14, 1974.
Complaint by Walter E. Williams, Violet V. Williams, and Whiteway, Inc., against Julia Polgar for damages for breach of contract and American Title Insurance Company, for damages for not including a deed in an abstract of title. Accelerated judgment for defendants. Plaintiffs appеaled to the Court of Appeals. Reversed and remanded. Defendant American Title Insurance Company appeals. Affirmed and remanded to circuit court for further proceedings.
Perica, Breithart & Carmody, for plaintiffs.
Rowe, Talon & Jones, P. C., for defendant American Title Insurance Company.
WILLIAMS, J. While important, the issue in this case is a relatively narrow one.
Michigan already permits a buyer of property who has relied on a faulty abstract to his detriment to recover from the abstracter, even though there is no clear contractual privity between them, if the abstracter in fact knew the buyer would rely on the abstract.1
This case presents the issue whether a faulty abstracter should likewise be liable to a buyer he should have foreseen would rely on the abstract as well as to the buyer he knew would rely on it. The question boils down to whether there should be liability for foreseeable as well as known reliance.
This Court has answered that question affirmatively in a related fact situation, and in categorical terms relieved Michigan jurisprudence of the re-
There is a second issue in this case. When doеs liability accrue and what statute of limitations applies?
I—FACTS
Plaintiffs Williams purchased certain property situated in the City of Warren, Macomb County, from defendant Polgar on a land contract dated August 1, 1959. At the time of purchase, as provided in the land contract, defendants furnished to plaintiffs an abstract of title certified to July 15, 1959 by Abstract and Title Guaranty Company. This abstract was originally issued on February 4, 1926 by the Macomb County Abstract Company and was extended by said company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951, and 1952. Defendant American Title Insurance Company is the successor in interest to Macomb County Abstract Company.
The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926 in Liber 242 of Deeds at page 174 of Macomb County records. This deed conveyed the southerly 60 feet of the property in question to the Macomb County Board of Road Commissioners.
After execution of the land contract on August 1, 1959, plaintiffs learned, allegedly for the first time, of the existence of this omitted deed. As the result thereof, plaintiffs claim they were required to completely remove a building and that certain other damages were incurred.
Plaintiffs filed this action on April 21, 1971. All
II—EFFECT OF ACCELERATED JUDGMENT
Under a motion for accelerated judgment by defendants the facts well pleaded by plaintiffs and the reasonable inferences therefrom must be considered most favorably towards plaintiffs. As the complaint adequately alleges the title company‘s negligent misrepresentation in the abstract, plaintiffs’ reliance thereon and the damage caused therеby as well as the other matters appearing in the above statement of facts, this case presents at this point no dispute as to facts.
Where there is a person negligently injured by another, normally there is recovery therefor. Ubi injuria, ibi remedium.
Defendant title company here, however, seeks immunity from liability for the injury it caused plaintiff buyers, pleading two defenses. First, defendant pleads it is immune from suit because it is not in contractual privity with plaintiffs. Second, defendant pleads it is immune from suit because of the statute of limitations. We disagree.
III—DEFENSE OF PRIVITY
A. Cessante Ratione Legis, Cessat et Ipsa Lex3
The early common-law rule restricting liability
“It is very well known that the owner of real estate seldom incurs the expense of procuring an abstract of the title from an abstracter, except for the purpose of thereby furnishing information to some third person or persons who are to be influenced by the information thus provided. If the abstracter in all cases be responsible only to the person under whose employment he performs the service, it is manifest that the loss occasioned thereby must in many cases, if not in most cases, be remediless.”
The second, Gate City Abstract Co v Post, 55 Neb 742, 746; 76 NW 471 (1898), represents judi-
“By the common law, as we interpret it, the owner of real estate could only utilize an abstrаct as an argument to reinforce his own assertions concerning the state of his title. It might be persuasive, but was without legal efficacy. He may now use it as evidence in an action to enforce the specific performance of a contract of sale, and in every other form of action in which the validity of his title or the existence or non-existence of liens or incumbrances are questions directly or collaterally involved. The right to use an abstract as evidence is not even limited to the person to whom it is issued. Any one may use it, and any one against whom it is employed may be injured in consequence of the certificate being false. Having thus widened the abstract‘s sphere of action, it was quite natural that the legislature should also widen the abstracter‘s liability.”5
(1) abstracter‘s fraud or collusion,
(2) theory of third-party beneficiary contracts,
(3) theory of foreseeability of use by a third-party,
(4) actual knowledge or notice of third-party,
(5) agent for disclosed or undisclosed principal contracting with an abstracter, and
(6) reissuance or recertification of an abstract.
See Liability of Abstracter-Privity, 34 ALR3d 1122, 1131, for cases supportive of each of these exceptions. See also 12 Vand LR 783 (1959).
Whereas the common-law rule limiting abstracter liability provided immunity from all who were injured by a faulty abstract except those in actual contractual privity, of the 35 jurisdictions (outside of Michigan) addressing themselves to this matter only seven retain a rule of strict contractual privity: Arizona, California, Florida, Illinois, Ohio, Texas and Wisconsin.6 On the other hand, 11 extend liability to known third-parties relying thereon: Alabama, District of Columbia, Hawaii, Idaho, Indiana, Maryland, Missouri, New Jersey,
transactions in recent years. The legislature took the increased use of abstracts into consideration and expanded their value in that an abstract could be used as evidence in any case in which validity of title was questionеd either directly or collaterally, by anyone directly interested, whether the person to whom the abstract was issued or not. Having thus widened the abstract‘s sphere of use it was quite natural that the legislature should include within the protection of this statute any person who might suffer from fraud or mistake of the abstractor.”
B. Michigan Has Abolished Privity Requirement
Michigan ended the last century and began this one firmly wed to the rule of contractual privity immunizing abstracters. Smith v Holmes, 54 Mich 104; 19 NW 767 (1884); Kenyon v Charlevoix Improvement Co, 135 Mich 103; 97 NW 407 (1903). By the end of the second decade it reluctantly broke away from strict privity in favor of a known third-party beneficiary. Beckovsky v Burton Abstract & Title Co, 208 Mich 224; 175 NW 235 (1919). Michigan thereby joined a category of 11 other jurisdictions just noted who had opened recovery to parties the abstracter knew would rely on the abstract. In Beckovsky, the plaintiff buyer actually accompanied the seller to the office of defendant title company and said he wanted an abstract but the contract in all truth was between the seller and the title company with the seller paying the title company for its work, although in order to avoid the title company‘s defense of privity, the trial court graciously put that question to the jury.
So Beckovsky extends liability to the faulty
Michigan answered this question affirmatively in 1958 and categorically eliminated the requirement of privity. Spence v Three Rivers Builders & Masonry Supply, Inc, 353 Mich 120; 90 NW2d 873 (1958). This was done in a products liability case where a plaintiff not in privity with a defendant building supply company purchased cinder-block building matеrials through a third-party building contractor. The supplies subsequently proved faulty to plaintiff‘s damage, just as the abstract did in the instant case. Defendant in that case, like the defendant in the instant case, relied on privity to bar plaintiff‘s action.
Justice Voelker, speaking for this Court, recognized that privity was more honored by exceptions than by the rule. However, this Court decried continued evasion of the rule and faced the issue squarely, holding that privity was an unnecessary bar to recovery. Justice Voelker spoke forthrightly to the point as follows:
“We now proceed to face up to the big issue in this case: Should lack of privity bar this action as a matter of law?
“As the court below correctly observed, there is little doubt that in the past our court has for the most part devotedly followed the ‘general rule’ and been reluctant to permit a third person ‘not in privity’ to recover from a manufacturer on a theory of negligence or implied warranty.
* * *
“Saddled with such a doсtrine and its hair-splitting exceptions, it is not surprising that while a few of our
decisions have afforded passing illusory comfort to all, certainty has been afforded to none. The reason is simple: A court lacking a clear and understandable rule of its own can scarcely be expected to impart it to others. Legal confusion has inevitably resulted. Aggrieved plaintiffs have scarcely known whether to sue in deceit or fraud or for negligence or for breach of warranty—or indeed whether it was worthwhile to sue at all.
“Our court perhaps uttered the towering legal understatement of the year (1924) when in Hertzler v Manshum, 228 Mich 416 [200 NW 155] (a poison flour case), we observed that cases in this category ‘appear hopelessly at variance.’ We there reverently discussed the accepted theory of claimed nonliability (our old friend, lack of privity) and then proceeded to hold that food cases were an exception (pp 421, 422) ‘and there only by reason of a want of a high degreе of care.’ While that case is not alone, it is typical of the curious things courts can bring themselves to do and say when they try vainly to wed the outmoded thinking and legal cliches of the past to the pressing realities of modern life.
“Consider what was just said in Hertzler. ‘Higher care’ was there our way around privity. This is a beguiling notion, but we find ourselves unable to discover why the imposition by judicial fiat of a mystical higher degree of care should magically dissolve the need for privity, as just asserted in Hertzler. Why should this be so? Either lack of privity should always be a defense in these cases or it never should be.
* * *
“In this case it appears that there was a lack of due care. Merely to describe what happened to the blocks should be showing enough on that score—but here the defendant admitted that he had inspected or tested neither the raw materials nor the finished blocks. Granting the learned trial court‘s understandable bewilderment under our past decisions, we think it should have permitted recovery either on a theory of negligence or implied warranty and should also have proceeded to take such further proofs on plaintiff‘s dam-
ages as may have been necessary.” 353 Mich 121, 126, 128-129, 135.
C. Privity Conclusion
Michigan‘s own jurisprudence records the categorical elimination of privity. This Court had previously extended abstracter liability consonant with the historical growth in reliance and use of abstracts and the corresponding changes in the law to known relying third-parties. Confronted now as of first impression with the question of abstracter liability to foreseeable relying third-parties, we have but to apply our own persuasive precedent of categorical elimination of privity to an analogous situation, and we do so.
IV—ABSTRACTER LIABILITY IN TORT FOR NEGLIGENT MISREPRESENTATION
On the basis of Three Rivers and a plethora of jurisdictions in the United States a good case is made for abolishing contractual privity and permitting suit in “negligence or implied warranty” by any foreseeable third-party who would and does rely on the abstract. We consider now the matter of suit in “negligence“.
In Clark v Dalman, 379 Mich 251; 150 NW2d 755 (1967), for example, it was held that breach of a contract to repair, clean, and paint a water storage tank, also gave rise to an action in tort in favor of a non-contracting third-party. Chief Justice (then Justice) T. M. KAVANAGH explained this relationship of a tort action to the underlying contract:
“Actionable negligence presupposes the existence of a legal relationship between parties by which the injured party is owed a duty by the other, and such duty must be imposed by law. * * * Such duty of care may be a
specific duty owing to the plaintiff by the defendant, or it may be a general one owed by the defendant to the public, of which the plaintiff is a part. Moreover, while this duty of care, as an essential element of actionable negligence, arises by operation of law, it may and frequently does arise out of a contractual relationship, the theory being that accompanying every contract is a common-law duty to perform with ordinary care the thing agreed to be done, and that a negligent performance constitutes a tort as well as a breach of contract. But it must be kept in mind that the contract creates only the relation out of which arises the common-law duty to exercise ordinary care. Thus in legal contemplation the contract merely creates the state of things which furnishes the occasion of the tort. This being so, the existence of a contract is ordinarily a relevant factor, competent to be alleged and proved in a negligence action to the extent of showing the relationship of the parties and the nature and extent of the common-law duty on which the tort is based.” (Emphasis added.) 379 Mich 251, 260-261.
This Court recently reaffirmed these principles, citing Clark, in Nash v Sears, Roebuck & Co, 383 Mich 136, 143; 174 NW2d 818 (1970). See also Nicholson v Han, 12 Mich App 35, 43; 162 NW2d 313 (1968), and Talucci v Archambault, 20 Mich App 153, 161; 173 NW2d 740 (1969).10
The obvious difficulty with a fraud or deceit action is the requisite element of scienter. The issue we are dealing with in the instant case does not, on the pleadings, involve intentional misrepresentation.12 To supply the element of intent constructively is to do great violence to existing law
include in the abstract made by him the omitted deed which caused appellant to sustain damage, as alleged, was a tort as well as a breach of the contract.”
And see Hawkins v Oakland Title Insurance & Guaranty Co, 165 Cal App 2d 116; 331 P2d 742 (1958); Viotti v Giomi, 230 Cal App 2d 730; 41 Cal Rptr 345 (1964); Chun v Park, 51 Hawaii 462; 462 P2d 905 (1969); Hillock v Idaho Title & Trust Co, 22 Idaho 440; 126 P 612 (1912). Also see Arizona Title Insurance & Trust Co v O‘Malley Lumber Co, 14 Ariz App 486; 484 P2d 639 (1971); Mulroy v Wright, 185 Minn 84; 240 NW 116 (1931), non-abstracter cases but relying on abstracter cases.
“In all other fields of tort law the linе is sharply drawn between intentional and unintentional injury. The persistence of this distinction can only be explained by recognizing the fact that it is in accord with the normal reactions of the mass of mankind. If negligent misrepresentation is called fraud, and, therefore, comes to be regarded by courts as tantamount thereto, there is danger that the unintentional character of the one and the intentional character of the other will be overlooked. There is danger that that liability, which is regarded both by lawyers and laymen as just where there is conscious dishonesty, will be imposed although there is no purpose to deceive. Call any two essentially different things by the same name and the two are likely to be treated as identical for all purposes.”
Further, to treat this cause of action as sounding in warranty or strict liability might serve to extend an abstracter‘s duty beyond the duty anticipated by the original contract. It is important to repeat that the tort cause of action crеated by an abstracter‘s nonfeasance or misfeasance stems from the contractual duty originally imposed and does not render an abstracter liable for action beyond such contractually-imposed duty, i.e., to perform in a diligent and reasonably skillful workmanlike manner.
Thus, we adopt the tort action of negligent misrepresentation in this context. See 1 Harper & James, The Law of Torts, § 7.6; 17 CJS, Contracts, § 154(c). It should be noted that this action is premised on negligence in title search; an abstracter is not converted into a title insurer by
As to the measure of the duty required to be exercised by the abstracter, Chief Justice T. M. KAVANAGH noted in Nash v Sears, Roebuck & Co, supra, at page 142:
“Every contract of employment includes an obligation, whether express or implied, to perform in a diligent and reasonably skillful workmanlike manner.”
This is clearly a form of the traditional negligence standard. Since the legal duty which, when breached, gives rise to a tort cause of action, springs from the contractual duty imposed, this Nash standard governs an abstracter‘s legal obligation to non-contracting parties. Because an abstracter is hired to determine what is in the public record, misstatements of, or failure to include, relevant items contained in that record are obviously examples of acts constituting failure to perform abstracting services in a diligent and reasonably skillful workmanlike manner.
This cause of action arising from breach of the abstracter‘s contractual duty runs to those persons an abstracter could reasonably foresee as relying on the accuracy of the abstract put into motion. The particular expert-client relationship accruing to a professional contract to certify the condition of the record of title reposes a peculiar trust in an abstracter which runs not only to the original
V—DEFENSE OF STATUTE OF LIMITATIONS
Defendants below were granted accelerated judgments on the basis of a plea of statute of limitations bar to this action. There is some textbook authority to the effect that the statute of limitations in an abstracter liability action begins to run from the date the abstract was furnished rather than from the time of the discovery of the error.15
But the textbook authority referred to is predicated upon an action in contract, not an action in tort. Consider for example, part of the applicable section in American Jurisprudence:
“[T]he statute of limitations begins to run from the time of the occurrence of the breach of duty * * * .” 1 Am Jur 2d 245.
While such a breach of duty creating a cause of action in a contract action would date from the actual act of omission or misrepresentation, the cause of action in a tort action runs from the date the tort was committed, not the date the actor put his or her force wrongfully into motion. 20 Michigan Law & Practice, Statute of Limitations, § 43; 51 Am Jur 2d, Limitations of Actions, §§ 107, 109.
More relevant to the issues presented in this case is Coury v General Motors Corp, 376 Mich 248; 137 NW2d 134 (1965). The question presented in that case was when a cause of action accrued under the wrongful death act so as to start the running of the statute of limitations. In holding that the statute began to run only upon death and not when the death-dealing force was put into motion, Justice DETHMERS stated for a unanimous court:
“How could a right of action under the death act accrue at all if death never occurred in consequence of the injury or accrue before the occurrence of death?” 376 Mich 248, 250.
Similarly, how can a tort cause of action accrue prior to the occurrence of the tort?16 To bar such suits prior to the date of injury, would negative, in most cases, any value of having a separate tort cause of action at all. Justice T. E. BRENNAN made this same point for a unanimous court in Connelly v Paul Ruddy‘s Equipment Repair & Service Co, 388 Mich 146, 150; 200 NW2d 70 (1972), noting
“In the case of an action for damages arising out of tortious injury to a person, the cause of action accrues when all of the elements of the cause of action have occurred and can be alleged in a proper complaint.
“Those elements are four in number:
“(1) The existence of a legal duty by defendant toward plaintiff.
“(2) The breach of such duty.
“(3) A proximate causal relation between the breach of such duty and an injury to the plaintiff.
“(4) The plaintiff must have suffered damages.”
Under these standards, is there a tort cause of action accruing before plaintiff has knowledge, or should have knowledge, of the negligent misrepresentation? We think not.
General tort law principles in Michigan as discussed supra, support our determinatiоn that the statute of limitations does not begin running until the point where plaintiff knows or should have known of this negligent misrepresentation. At that point, the four elements in Connelly, supra, are satisfied: a legal duty exists, such duty is breached, a proximate causal relation is established (if plaintiff can show reliance on the abstract),17 and the plaintiff then is, or should be, aware of any resultant damages.18
For the reasons outlined above, we hold that there is a valid tort cause of action in the nature of negligent misrepresentation arising from a contract for an abstracter‘s services in favor of a non-contracting damaged third-party whose reliance on the abstract could be foreseen. In a tort action of this nature, the statute of limitations begins running from the date the injured party knew or should have known of the existence of the negligent misrepresentation, a date not clearly in evidence in this case. The accelerated judgment granted by the trial court was thus improper.
The judgment of the Court of Appeals is affirmed. This case is remanded to Macomb County Circuit Court for further proceedings not inconsistent with this opinion. Costs to the appellees.
T. M. KAVANAGH, C. J., and T. G. KAVANAGH and SWAINSON, JJ., concurred with WILLIAMS, J.
APPENDIX A
CURRENT STATUS OF ABSTRACTER‘S LIABILITY IN JURISDICTIONS OTHER THAN MICHIGAN
c = case law
s = statute
“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.” 43 Mich App 95, 98.
The Hillock language was also cited with approval by the Texas Appellate Court in Chicago R I & G R Co v Duncan, supra, n 10.
| I—NO CASES OR STATUTES ON POINT |
Alaska Connecticut Delaware Georgia Kentucky Maine Massachusetts Mississippi New Hampshire North Carolina Rhode Island South Carolina Vermont Virginia West Virginia (15 Jurisdictions) |
| II—STRICT CONTRACTUAL PRIVITY REQUIRED |
Arizona (c)*** California (c)** Florida (c) Illinois (s, c)* Ohio (c)***** Texas (c)** Wisconsin (c) (7 Jurisdictions) |
| III—RECOVERY BY KNOWN THIRD-PARTIES |
Alabama (c) District of Columbia (c) Hawaii (c)** Idaho (s, c)** Indiana (c) Maryland (c) Missouri (c)* New Jersey (c)* New York (c)**** Pennsylvania (c) Tennessee (c)* (11 Jurisdictions) |
| IV—RECOVERY BY UNDISCLOSED PRINCIPALS |
Iowa (c) Washington (c) (2 Jurisdictions) |
| V—LIABILITY EXTENDED BEYOND PRIVITY TO “ANY PERSON” RELYING ON THE ABSTRACT (NOT EXPLICITLY IN TORT) |
Arkansas (s) Colorado (s) Kansas (s, c) Minnesota (s)* Montana (s) Nebraska (s, c) Nevada (s) New Mexico (s, c) North Dakota (s, c) Oklahoma (s, c) Oregon (s) South Dakota (s, c) Utah (s) Wyoming (s) (14 Jurisdictions) |
| VI—TORT LIABILITY |
Louisiana (c) (1 Jurisdiction) |
* In these jurisdictions, cases in analogous contexts (generally accountant‘s or surveyor‘s liability) have adopted a foreseeability standard (columns V or VI). See Appendix B.
** In these jurisdictions, Courts have adopted a tort rationale, but with respect to this analysis, only in dicta, as the prevailing plaintiffs either contracted for the abstract or were known third-party beneficiaries. See Appendix B.
*** This jurisdiction does contain a non-abstractеr case recognizing the tort of negligent misrepresentation relying on abstracter cases. See Appendix B.
**** See Appendix B for details.
***** A later Ohio Court of Appeals case granted recovery to an undisclosed principal; the earlier Ohio Supreme Court case has been treated as controlling. See Appendix B.
APPENDIX B
Following is a jurisdictional analysis of abstracter‘s liability in each of the 50 states and the District of Columbia.
ALABAMA
While both Abstract & Title Guaranty Co v Kigin, 21 Ala App 397; 108 So 626 (1926), and Shine v Nash Abstract & Investment Co, 217 Ala 498; 117 So 47 (1928), stand for the requirement of strict privity in their express language, there is reference in Shine to the exception created when the abstracter has notice that the abstract purchaser is acting for a third-party (217 Ala 498, 501; 117 So 47, 49).
ALASKA
Alaska appears to have no statutory or case law on this point.
ARIZONA
Arizona recognized in dicta a number of exceptions to the requisite of strict privity but decided the case on privity in Phoenix Title & Trust Co v Continental Oil Co, 43 Ariz 219; 29 P2d 1065 (1934). In Arizona Title Insurance & Trust Co v O‘Malley Lumber Co, 14 Ariz App 486; 484 P2d 639 (1971), Arizona recognized the tort action of negligent misrepresentation in a business situation not involving an abstracter, but citing Restatement Torts (2d) § 552 and abstracter cases from other jurisdictions.
ARKANSAS
In Talpey v Wright, 61 Ark 275; 32 SW 1072 (1895), direct privity was required as a basis for suit against an abstracter though there was language supportive of extension of this cause of action to known third-parties (61 Ark 275, 282;
CALIFORNIA
In Hawkins v Oakland Title Insurance & Guaranty Co, 165 Cal App 2d 116; 331 P2d 742 (1958), the tort theory of Restatement Torts (2d) § 552 was adopted but plaintiff was the abstract purchaser not a third-party. Viotti v Giomi, 230 Cal App 2d 730; 41 Cal Rptr 345 (1964), stands for the proposition that recovery is now available in contract or tort (citing Hawkins) but again, no unknown third-party was involved. Colonial Savings & Loan Association v Redwood Empire Title Co, 236 Cal App 2d 186; 46 Cal Rptr 16 (1965) unencouragingly raised the possibility of suit by a known third-party grantee.
COLORADO
CONNECTICUT
Connecticut appears to have no statutory or case law on this point.
DELAWARE
Delaware appears to have no statutory or case law on this point.
DISTRICT OF COLUMBIA
While Long v American Savings & Loan Association, 151 A2d 770 (DC Mun Ct App, 1959) held that an abstracter‘s liability action was clearly in contract not tort, Doonis v Mutual Title Co, 196 A2d 480 (DC App, 1964) went further than strict privity on its facts, extending liability to third-party grantee plaintiffs, saying that a grantee who had paid a $100 settlement charge was a co-employer, although seller had actually employed the abstracter.
FLORIDA
Florida requires strict privity to maintain an abstracter‘s liability action. An unknown third-party was denied recovery in Sickler v Indian River Abstract & Guaranty Co, 142 Fla 528; 195 So 195 (1940).
GEORGIA
Georgia appears to have no statutory or case law on this point.
HAWAII
In the first and only case on point, Hawaii moved in Chun v Park, 51 Hawaii 462; 462 P2d 905 (1969) to a tort liability following the rationale of Restatement 2d Torts § 552 in favor of a known third-party.
IDAHO
In the leading case of Hillock v Idaho Title & Trust Co, 22 Idaho 440; 126 P 612 (1912) involving the purchaser of an abstract against the abstracter, Idaho moved to a tort cause of action in abstracter liability cases. The Court held the statute of limitations began to run when the fault in the abstract was discovered.
ILLINOIS
In Chase v Heaney, 70 Ill 268 (1873), the language refers to any injured party while the facts of the case showed recovery by a plaintiff-purchaser of the abstract.
INDIANA
In Brown v Sims, 22 Ind App 317; 53 NE 779 (1899), the strict privity rule was held inapplicable where the abstracter has knowledge of a third-party relying on the abstract.
IOWA
Iowa has ruled a cause of action against an abstracter to be in contract since before the turn of the century. Russell & Co v Polk County Abstract Co, 87 Iowa 233; 54 NW 212; 43 Am St Rep 381 (1893). But in an interesting case the Court found the abstracter liable in contract to the undisclosed рrincipal of an agent who purchased the abstract. Young v Lohr, 118 Iowa 624; 92 NW 684 (1902). And a recent case, Ryan v Kanne, 170 NW2d 395 (Iowa, 1969), an accountant‘s liability case portends a move to some sort of foreseeability standard under Restatement Torts 2d § 552, although the case required only a finding that it was a known third-party.
KANSAS
On the basis of the old Kansas abstracter legislation, the requirement of strict privity was closely followed. Mallory v Ferguson, 50 Kan 685; 32 P 410; 22 LRA 99 (1893); Symns v Cutter, 9 Kan A 210; 59 P 671 (1900); Allen v Hopkins, 62 Kan 175; 61 P 750 (1900). But in Arnold & Co v Barner, 91 Kan 768; 139 P 404 (1914), the new Kansas abstracter bond statute (now
KENTUCKY
Kentucky appears to have no statutory or case law on this point.
LOUISIANA
In Louisiana, the Register of Conveyances has the responsibility of issuing certificates of title showing the existence of all encumbrances.
MAINE
Maine apрears to have no statutory or case law on this point.
MARYLAND
In Watson v Calvert Building & Loan Association, 91 Md 25; 45 A 879 (1900); Wlodarek v Thrift, 178 Md 453; 13A2d 774 (1940); and Corcoran v Abstract & Title Co of Maryland, 217 Md 633; 143 A2d 808 (1958), an abstracter action was held to be limited to strict contractual privity though in Watson plaintiff recovered though his agent was the abstract purchaser.
MASSACHUSETTS
There appears to be no statutory or case law with respect to abstracter liability.
MICHIGAN
In Smith v Holmes, 54 Mich 104; 19 NW 767 (1884), it was stated that an abstracter‘s liability action was an action based on negligent performance of a contract. Kenyon v Charlevoix Improvement Co, 135 Mich 103; 97 NW 407 (1903) noted, in dicta, the requisite of strict privity. But Beckovsky v Burton Abstract & Title Co, 208 Mich 224; 175 NW 235 (1919) found privity where plaintiff was probably a third-party grantee. See discussion in body of opinion, supra.
MINNESOTA
In Mulroy v Wright, 185 Minn 84; 240 NW 116 (1931), Minnesota moved to note the irrelevance of the privity concept following the reasoning of Glanzer, supra, and moving to a tort analysis. There the actual defendant was not an abstracter but a city official who furnished the abstracter erroneous information. Plaintiff was the buyer of property from owner who ordered abstract.
MISSISSIPPI
Mississippi appears to have no statutory or case law on this point.
MISSOURI
In Zweigardt v Birdseye, 57 Mo App 462 (1894), and Schade v Gehner, 133 Mo 252; 34 SW 576 (1896), Missouri Courts stuck by the absolute privity requirement even where the abstracter had knowledge of affected third-parties. Anderson v Boone County Abstract Co, 418 SW2d 123; 34 ALR3d 1111 (Mo, 1967), reaffirmed these holdings. But Slate v Boone County Abstract Co, 432 SW2d 305 (Mo, 1968) created an exception with respect to known third-party “beneficiaries“, and, most recently, Aluma Kraft Manufacturing Co v Elmer Fox & Co, 493 SW2d 378 (Mo App, 1973), an accountant‘s liability case, cited Anderson and Slate in moving to a balancing test involving foreseeability. See also Thorne v Johnson, 483 SW2d 658 (Mo App, 1972), which involved suit by owner and his grantees and their grantees against a negligent abstracter. An unfavorable judgment on the pleadings against liability was reversed.
MONTANA
In Western Loan & Savings Co v Silver Bow Abstract Co, 31 Mont 448; 78 P 774 (1904), it was held that privity was required but the exception was noted where the abstracter has knowledge of plaintiff. Since the decision in that case, Montana adopted
NEBRASKA
The early Nebraska rule with respect to abstracter‘s liability was on the order of strict priv-
NEVADA
Nevada, since 1927, has had a statute equivalent to the current
NEW HAMPSHIRE
There appears to be no statutory or case law on this specific point in New Hampshire.
NEW JERSEY
The early case of Economy Building & Loan Association v West Jersey Title & Guarantee Co, 64 NJL 27; 44 A 854 (1899) relaxed the strict privity requirement with respect to agents and third-party beneficiaries.
NEW MEXICO
NEW YORK
Glawatz v People‘s Guaranty Search Co, 49 App Div 465; 63 NYS 691 (1900) denied recovery to a subsequent grantee for lack of privity. In Glanzer v Shepard, 233 NY 236; 135 NE 275; 23 ALR 1425 (1922) then Judge Cardozo in a weigher‘s case allowing recovery by an unknown third-party beneficiary applied the same liability in dicta to abstracters. In Cole v Vincent, 229 App Div 520; 242 NYS 644 (1930), the Appellate Division said recovery by a third-party beneficiary would depend upon a jury decision as to whether or not the abstracter could be charged with knowledge his abstract would be relied on by someone in addition to the purchaser thereof. Next came Ultramares v Touche, 255 NY 170; 174 NE 441; 74 ALR 1139 (1931) where then Judge Cardozo limited the rule of foreseeability he set forth in Glanzer in an accountant‘s case. In Goodman v Title Guarantee & Trust Co, 206 NYS2d 32; 11 App Div 2d 1003 (1960), in a case where a potential buyer of plaintiff‘s property ordered an abstract from defendant abstracter and was deterred from buying because the abstract falsely showed weakness and where the abstracter “had knowledge of the terms of the contract and knew the purpose to which the report would be put“, the Court allowed an action in fraud. It used fraud because unless “negligence so reckless as to justify a finding that the defendant had no knowledge of or genuine belief in [the] accuracy” of the abstract, there could be no recovery under Ultramares unless privity. Subsequently, the New York Supreme Court in Cecala v Title Guarantee Co, 45 Misc 2d 986; 258 NYS2d 464 (1965) relied on Goodman to allоw suit in fraud for “gross errors” in a title search in a case involving plaintiff owner of property suing the
NORTH CAROLINA
North Carolina appears to have no statutory or case law on this point.
NORTH DAKOTA
Though
OHIO
In Thomas v Guarantee Title & Trust Co, 81 Ohio St 432; 91 NE 183 (1910), Ohio stuck by the requirement of strict contractual privity. But a later Court of Appeals decision extended privity to an apparent undisclosed principal on an agency theory. Bowden v Meade, 1 Ohio L Abs 596 (1923).
OKLAHOMA
Under
OREGON
Since 1923,
PENNSYLVANIA
Pennsylvania has a long line of cases supportive of the retention of the privity requirement. M‘Caraher v Commonwealth, 5 Watts & S 21; 39 Am Dec 106 (1842); Commonwealth ex rel Kellogg v Harmer, 6 Phila 90; 22 Phila Leg Int 76 (1865); Houseman v Girard Mutual Building & Loan Association, 81 Pa 256; 2 WNC 573; 33 LI 108 (1876); Siewers v Commonwealth, 87 Pa 15 (1878); Henkels v Philadelphia Title Insurance Co, 177 Pa Super 110; 110 A2d 878 (1955). But there is authority noting an exception where the abstracter knew of a third-party relying on the abstract. Peabody Building & Loan Association v Houseman, 89 Pa 261; 11 WNC 193; 34LI 5; 33 Am Rep 757 (1879).
RHODE ISLAND
Rhode Island appears to have no statutory or case law on this point.
SOUTH CAROLINA
South Carolina appears to have no statutory or case law on this point.
SOUTH DAKOTA
TENNESSEE
In a series of noted cases, Dickle v Abstract Co, 89 Tenn 431; 14 SW 896 (1890); Denton v Nashville Title Co, 112 Tenn 320; 79 SW 799 (1903); Equitable Building & Loan Association v Bank of Commerce & Trust Co, 118 Tenn 678; 102 SW 901 (1907), Tennessee stuck to the theory of strict privity with the exception of third-party grantees the abstracter knew about. In Tartera v Palumbo, 224 Tenn 262; 453 SW2d 780 (1970), a surveyor case, a tort theory of liability was adopted citing Glanzer, supra, and Restatement Torts (2d) § 552.
TEXAS
Originally an abstracter‘s liability was in contract in Texas. Decatur Land, Loan & Abstract Co v Rutland, 185 SW 1064 (Tex Civ App, 1916). The leading case of Chicago R I & G R Co v Duncan, 273 SW 908 (Tex Civ App, 1925) moved to a tort cause of action though plaintiff was the purchaser of the misrepresented abstract.
UTAH
VERMONT
Vermont appears to have no statutory or case law on this point.
VIRGINIA
Virginia appears to have no statutory or case law on this point.
WASHINGTON
Washington has, in this context, reaffirmed the contractual nature of this cause of action and limited liability to those in privity in Bremerton Development Co v Title Trust Co, 67 Wash 268; 121 P 69 (1912) and Douglas v Title Trust Co, 80 Wash 71; 141 P 177 (1914). An exception has been noted with respect to relying third-parties. Anderson v Spriestersbach, 69 Wash 393; 125 P 166 (1912) (abstracter both knew and delivered the abstract to third-party beneficiary). While purporting to adhere to Anderson, a later case allowed recovery in contract against an abstracter who prepared an abstract for plaintiffs’ attorneys without any knowledge of the agency whatsoever. Murphy v Fidelity Abstract & Title Co, 114 Wash 77; 194 P 591 (1921).
WEST VIRGINIA
West Virginia appears to have no statutory or case law on this point.
WISCONSIN
In Peterson v Gales, 191 Wis 137; 210 NW 407; 47 ALR 956 (1926), the requirement of strict privity was established in Wisconsin in strong dicta.
WYOMING
M. S. COLEMAN, J. (dissenting). Although it characterizes plaintiff‘s cause of action as “arising from breach of an abstracter‘s contractual duty“, the majority opinion adopts a “tort action of negligent misrepresentation in this context“. The effect and purpose of this adoption is to delay the running of the statute of limitations.
I cannot agree with the theory or the result.
I agree with the majority that plaintiffs’ action is premised on a breach of contractual duty.
“No person may bring or maintain any action to recover damages or sums due for breach of contract * * * unless, after the claim first accrued to himself or to someone through whom he claims, he commences the action within the periods of time prescribed by this section.
* * *
“(8) The period of limitations is 6 years for all other actions to recover damages or sums due for breach of contract.”
When did plaintiffs’ claim accrue? The answer is found in
“[T]he claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.”
Plaintiff‘s claim thus accrued, at the very latest, in 1959, although no specific date was alleged. Suit was not filed until 1971.
To avoid application of this unambiguous legislative directive, the Court today adopts a theory which razes the structure of contract law. Prompting this destruction is a desire to afford plaintiffs an opportunity to recover damages after the applicable statute of limitations has foreclosed suit. I repeat a concern expressed in Rizzo v Kretschmer, 389 Mich 363; 207 NW2d 316 (1972). By so altering the law “to fit a single desired result this Court would force Michigan courts to apply the distortion here wrought to all future cases.” (p 381.)
The Legislature is entitled to place limitations upon the bringing of actions in the courts of this state. Indeed, it is the duty of the Legislature to impose jurisdictional limitations in such matters. There is such a limitation applicable to the facts of this case.
The majority cites examples of a number of states which have legislation purporting to do what would be done here by judicial fiat. I thoroughly agree that we should give “judicial support of legislation” when possible. In fact, that is the point of this dissent. Michigan has no such statute and we should not attempt to provide such by judicial action.
I repeat what was written in dissent in Dyke v Richard, 390 Mich 739; 213 NW2d 185 (1973):
“Although individuals may differ as to the wisdom of the legislation, it is not our function to rewrite it.”
I would reverse the Court of Appeals and affirm the circuit court‘s grant of accelerated judgment.
LEVIN and J. W. FITZGERALD, JJ., did not sit in this case.
Notes
“Constantly the bounds of duty are enlarged by knowledge of a prospective use.”
In making this statement he relied upon, as we shall, a products liability case, his famous case of MacPherson v Buick Motor Co, 217 NY 382; 111 NE 1050; 1916F LRA 696 (1916). Glanzer v Shepard, 233 NY 236, 240; 135 NE 275; 23 ALR 1425 (1922). In dicta, Judge Cardozo found this same lack of immunity specifically applicable to abstracters:
“No such immunity, it has been held, protects the searcher of a title, who, preparing an abstract at the order of a client, delivers it to another to induce action on the faith of it.” (Citations omitted.) 233 NY 240.
“54-101. Abstracters to give bond.—It shall be a misdemeanor for any person or persons to engage in the business of compiling abstracts of title to real estate in the state of Idaho, and demand and receive pay for the same, without first filing in the office of the county recorder of the county in which such business is conducted, a surety bond to the state of Idaho, in the penal sum of $10,000, with a surety company authorized to do such business in Idaho as security conditioned for the payment by such abstracters of any or all damages thаt may accrue to any party or parties, by reason of any error, deficiency or mistake in any abstract or certificate of title, made and issued by such person or persons.”
“The use of abstracts of title has expanded greatly in conveyancing
“The duty allegedly owing is that which accompanies every contract, a common-law duty to perform with ordinary care the thing agreed to be done. * * * Those foreseeably injured by the negligent performance of a contractual undertaking are owed, as in this case, a duty of care.” 20 Mich App 153, 161.
For suit in tort, see also Chicago RI & GR Co v Duncan, 273 SW 908, 910 (Tex Civ App 1925), where a Texas appellate court succinctly held:
“The making of the contract involved was accompanied with a common-law duty to perform the work agreed to be done, to wit, the making of the abstract with skill, reasonable expedience, and faithfulness, and the negligent failure on the part of appellee‘s testator to
Of course, this interpretation is unnecessary in products liability cases based on breach of warranty. In those cases,