Endruschat v. American Title Ins. Co., s. 78-955

Decision Date21 November 1979
Docket NumberNos. 78-955,78-1357,s. 78-955
Citation377 So.2d 738
PartiesAlbert J. ENDRUSCHAT and Mary Elizabeth Endruschat, his wife, and William Roy Trevarthen and Patricia F. Trevarthen, his wife, Appellants, v. AMERICAN TITLE INSURANCE COMPANY et al., Appellees. AMERICAN TITLE INSURANCE COMPANY, Appellant, v. Albert J. ENDRUSCHAT and Mary Elizabeth Endruschat, his wife; William Roy Trevarthen and Patricia F. Trevarthen, his wife, and Flagship First National Bank of Boynton Beach, a Florida banking corporation, Appellees.
CourtFlorida District Court of Appeals

Donald L. Brooks, of L. M. Taylor, Lawyers, North Palm Beach, attorneys for appellants-appellees Endruschat and Trevarthen.

Osborne Walker O'Quinn, Fort Pierce, attorney for appellant-appellee American Title Insurance Company.

Sam D. Phillips, Jr. of Phillips, Babbitt & Cook, West Palm Beach, attorneys for appellee, Flagship First National Bank of Boynton Beach.

LETTS, Judge.

This consolidated appeal stems from: (1) the trial judge's ruling denying coverage under an owner's policy of title insurance, which omitted a restriction duly recorded in the public records limiting use of the real property in question to residential purposes only, thus allegedly preventing its desired use as a dental clinic; and (2) the award of attorneys fees and costs to the mortgage lender which was the recipient of a simultaneous mortgagee title policy, said fees and costs incurred during its defense of a suit filed by the purchasers against both the lender Bank and the Title Company. We reverse the former and affirm the latter.

Two dentists entered into a contract to purchase certain improved real estate with the avowed purpose of converting same for use as a dental clinic. They saw no necessity for legal counsel, instead taking advantage of the services of the Title Company engaged by the seller to complete the closing of the sale. To facilitate the project, the dentists arranged for a construction loan from the lender Bank which agreed, at the request of the dentists, to accept a simultaneous mortgagee policy from the same Title Company. The dentists paid this extra premium.

Pursuant to this arrangement, appropriate binders were delivered by the Title Company, which binders, by mistake, did not contain the recorded restriction preventing the use of the property for other than single family residential purposes. The closing was a bifurcated affair, the mortgage papers being signed under the auspices of the Bank and the actual sale being concluded at the office of the Title Company. Thereafter, after partial disbursement, the Bank's attorney by accident discovered the existence of the omitted restriction and suspended any further loan disbursements. All parties were advised, contemplated construction was postponed, the Title Company denied exposure and the dentists engaged their own attorneys to quiet title which was successfully concluded some nine months later. Thereafter, disbursements were resumed and the project satisfactorily completed.

The dentists wanted reimbursement for the fees and costs incurred in the quiet title suit, plus damages for increased building costs occasioned by the delay. Accordingly, they sued the Title Company under the theory of negligence and the Bank for breach of contract. Without unnecessary recitation of all the many pleading maneuvers involved, the Bank cross-claimed against the Title Company demanding indemnity, attorneys' fees and costs.

The question of the dentists' damages was never resolved, the trial judge reluctantly concluding, as a matter of law, that the Title Company had no liability based on the holding in Blessing v. American Title and Insurance Co., 121 So.2d 455 (Fla. 1st DCA 1960). As to the Bank, the trial judge later ruled that the suit which it was perforce involved in, was one contemplated by the contract provision of the mortgagee policy obligating the Title Company "at its own costs and without delay (to) provide for the defense of an insured in all litigation . . . to the extent that such litigation is founded upon an alleged defect, lien, encumbrance or any other matter insured against by this policy."

We affirm this latter ruling as to the Bank without further comment.

As to coverage under the owners' policy, the Title Company initially contends that the omission of the residential restriction covering this particular parcel was harmless because another exception which Was listed contained the very same restriction. Thus the purchasers were on notice of the fact that the property could not be used as a dental clinic. We would agree with this contention except that the restriction which Was listed was considered to be ineffective as to the property in question by the Bank's attorney who caused the dentists to be so advised at closing. This listed restriction which did appear on the binder (and later the policy) was placed on the entire subdivision by the developer as a "Declaration of Restrictions," without reference to any particular lot, After the lot now before us had been originally conveyed out by the developer without any such encumbrance and After the developer had sold the majority of all the lots originally subdivided by him. There is a paucity of Florida law on this particular point but authority throughout the country, with which we agree, would indicate that a developer cannot seek to encumber property with restrictions After he has sold it. Anderson v. Courtney, 190 So.2d 493 (La.App. 1st Cir. 1966); Sullens v. Finney, 123 Md. 653, 91 A. 700 (1914); Latchis v. John, 117 Vt. 110, 85 A.2d 575 (1952); 26 C.J.S. Deeds § 167(2) p. 1146; 20 Am.Jur.2d Covenants & Conditions, §§ 176-177; and 8 Fla.Jur. Covenants and Restrictions, § 38, pp. 42-43. By analogy, he likewise cannot release any restrictions after the property encompassed by any such restrictions has been sold by him. Batman v. Creighton, 101 So.2d 587 (Fla. 2d DCA 1958). As a consequence, we conclude that the Bank's attorney was correct in ignoring the declaration of restrictions recorded after the property in question had been sold by the developer, even though it was listed on the binder.

However, a totally different result pertains to the subsequent individual deed in the chain of title which specifically saddled the dentists' lot with a restriction for a single family residence and which was not listed by the Title Company. As we mentioned earlier, this latter properly recorded restriction was discovered by the Bank's attorney when he later searched the title to an adjacent lot. Upon realizing that the root of this title also covered the lot purchased by the dentists, the Bank's attorney notified all concerned, and ordered cessation of disbursements on the construction loan, even though this newly discovered restriction did not appear on the Title Company's binders or policies. One might ask why the Bank's attorney ever informed the Title Company of his discovery instead of keeping quiet, knowing he had a policy which did not contain the offending restriction. Quite apart from ethics, the answer to that question is contained in the policy itself which provides that encumbrances not known to the Title Company but which became known to the insured must be promptly...

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10 cases
  • Stewart Title Guar. Co. v. West
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    ...to the title" in order to recover from appellant. We find persuasive the reasoning of the court in Endruschat v. American Title Insurance Co., 377 So.2d 738 (Fla.Dist.Ct.App.1979). There, the court said that title insurance policy language is "but sophistry" if Paragraph 7(b) is interpreted......
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    ...Village Carver Phase 1 LLC v. Fidelity Nat. Title Ins. Co., 128 So. 3d 107, 111 (Fla. 3d DCA 2013); cf. Enduschat v. American Title Ins. Co., 377 So. 2d 738, 741 (Fla. 4th DCA 1979). Similarly, a title insurer will not be held liable for loss resulting merely from the invalidity of the debt......
  • Jefferson Federal S & L v. Berks Title
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    ...Riggs, the trustee. Therefore, section (c) was not a bar to appellant's claim under the policy. Cf. Endruschat v. American Title Insurance Co., 377 So.2d 738, 742 (Fla.Dist.Ct.App. 1979). This leaves section (a) as Berks' only possible defense to liability. Under this section, Jefferson cou......
  • First Citizens Bank & Trust Co. v. Stewart Title Guar. Co.
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    ...moment it was recorded." Consequently, we conclude that Limitation 8(b) is inapplicable. Id.; see also Endruschat v. Am. Title Ins. Co., 377 So.2d 738, 743 (Fla. Dist. Ct. App. 1979) (reasoning that language from a similar policy provision "is but sophistry" if it is interpreted to mean tha......
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