Laabs v. Chicago Title Ins. Co.

• Decision Date: 04 May 1976
• Docket Number: No. 568,568
• Citation: 241 N.W.2d 434,72 Wis.2d 503
• Parties: Theodore F. LAABS and Selma Laabs, Respondents, v. CHICAGO TITLE INSURANCE COMPANY, a Foreign Insurance Corporation, Appellant. (1974).
• Court: Wisconsin Supreme Court

Page 434

241 N.W.2d 434

72 Wis.2d 503

Theodore F. LAABS and Selma Laabs, Respondents, v. CHICAGO TITLE INSURANCE COMPANY, a Foreign Insurance

Corporation, Appellant.

No. 568 (1974).

Supreme Court of Wisconsin.

Argued April 12, 1976.

Decided May 4, 1976.

Chicago Title Insurance Company, defendant-appellant, appeals from a portion of the judgment with imposes liability upon the company in accordance with the terms of a policy of title insurance issued to Theodore F. and Selma Laabs, plaintiffs-respondents.

David J. Smith, Rhinelander (argued), for appellant; O'Melia, Melby, Simon & Smith, S.C., Rhinelander, on the brief.

James P. Lonsdorf, Wausau (argued), for respondent; Timken, Lonsdorf & Mallery, Wausau, on the brief.

CONNOR T. HANSEN, Justice.

This litigation arises from a dispute as to the scope of coverage provided by a policy of title insurance issued by Chicago Title Insurance Company (hereinafter company) to Theodore F. and Selma Laabs (hereinafter insured). Laabs and McKenzies owned adjoining parcels of real estate. The company had issued a policy of title insurance to both property owners. The two properties are described by metes and bounds and it appears the descriptions overlap. The property described in Laabs' deed is located partially in Government Lots four and five. It also appears that the scrivener who prepared the description to the Laabs real estate made no reference to Government Lot five in the description. The result was that the Laabs' deed was not indexed in the tract index under Government Lot five.

The insured commenced a quiet title action against McKenzies and others claiming ownership of the disputed portion. The defendants in that action answered and counterclaimed against the insured. The insured notified the company of the counterclaim, requesting representation in accordance with the terms of the insurance policy. However, the company refused to defend on the ground that the dispose fell within certain exceptions to coverage contained in the policy.

The insured then instituted this action against the company. Trial on this action was held; however, pursuant to stipulation, the trial court postponed determination on the issue of policy coverage until after trial of the quiet title action.

At the conclusion of the quiet title action, the trial court determined that the disputed parcel belonged to the defendants in that action and not the Laabs. Because of this determination, the status of the other defendants is not pertinent to this appeal. It was also determined that the dispute was of such nature as to be within the scope of coverage of the title insurance policy issued by the company. Therefore, judgment was entered agent the company for the reasonable value of the disputed property, and for reasonable attorney fees and costs incurred by the insured in the trial of the counterclaim in the quiet title action. The amount of the damages is not an issue on this appeal.

The findings of fact and conclusions of law and the judgment are captioned as in the instant action. The opinion of the trial judge is captioned as in the action to quiet title. All three of these documents are included in the record and address the issue raised in this action.

The company appeals from that portion of the judgment finding it liable to the insured for the value of the disputed parcel of land and for trial-related costs. Following transmittal of the appeal record, the insured moved this court to strike certain portions of the record. Those portions had to do with an action on a policy of title insurance issued by the company to the McKenzies. The insured herein was not a party to that action. The company was not a oppose the motion. This court granted the motion, ordering that the trial court's findings of fact and conclusions of law and opinion in that action, as well as the adverse examination of McKenzie in relation to that action, be stricken from the record.

Determination of a single issue will be dispositive of this appeal:

Was the trial court in error in determining that the policy of title insurance issued by the company included within its coverage the loss sustained by the insured? We are of the opinion that the trial court was correct in its determination.

The company contends that several exceptions and conditions contained in the policy should relieve it of liability for payments to the insured.

The policy of title insurance contains the following language in its EXCLUSIONS FROM COVERAGE:

'The following matters are expressly excluded from the coverage of this policy:

'. . .

'3. Defects, liens, encumbrances, adverse claims, or other matters . . . (b) not known to the Company and not shown by the public records but known to the insured claimant either at Date of Policy or at the date such claimant acquired an estate or interest insured by this policy and not disclosed in writing by the insured claimant to the Company prior to the date such insured claimant became an insured hereunder; . . .' (Emphasis added.)

The company argues that the dispute and defect were known to the insured prior to the policy date and, therefore, the company is not liable for the loss or for defense costs. The company bases this argument on the decision of the trial court in the action between the McKenzies and the company. There it was apparently found that the company was not liable to the McKenzies in any way because the McKenzies were aware of the dispute with the insured when they applied for their policy. By order of this court, that opinion and the accompanying transcript of McKenzies' adverse examination are no longer part of the record herein and cannot be considered in reaching a determination on this issue. However, as the company observes, other testimony in support of its claim is preserved in the transcript of the quiet title action.

During that trial, the McKenzies' predecessor in title, Mrs. Yunk, testified that she had disputes in 1962 and 1966 with the insured over the parcel of land in question, that a fence had been placed along the disputed boundary line, and that she had torn it down. A neighbor of the parties testified that in 1965 or 1966, he had observed the insured placing a fence along a portion of the disputed parcel and called the Yunks to inform them of the matter. Finally, Mr. McKenzie, who was not called to testify at the trial on policy coverage, testified that approximately two weeks after he purchased his property, he encountered the insured on the disputed parcel at which time he was informed by Mrs. Laabs that he was trespassing, that he had purchased something that belonged to insured and that the amount of land purchased had been misrepresented to him. This was approximately one week prior to the date insured's policy was issued.

With respect to these matters, the insured testified at the trial on policy coverage that she had no knowledge of any dispute with the Yunks, that she had not spoken with the McKenzies prior to the time they began clearing the disputed parcel, and that she applied for the title insurance with a view toward selling the property. She confirmed this testimony at the trial on the quiet title action. She testified further that she and her husband continued to build a fence along the disputed parcel, a portion of which had been begun as far back as 1947 and 1948, and that it had been removed, although she did not know who had removed it. Her brother-in-law, a real estate broker, testified that he had advised her that if she wished to sell the property, she should obtain title insurance. This advice was not given, however, in connection with knowledge of any dispute, but rather because he felt that any prospective purchaser would impose such a requirement.

The company, in its policy, excluded from coverage defects and adverse claims not shown by the public record and not known by the company but known to the insured and not disclosed to the company. If knowledge of such adverse claim or defect could be charged to the insured, this could have provided grounds for avoiding the policy, since the company was not informed thereof. 9 Appleman's, Insurance Law & Practice, p. 6, sec. 5205; 45 C.J.S. Insurance § 665, p. 596; First Nat. Bank & Trust Co. v. New York Title Ins. Co. (1939), 171 Misc. 854, 12 N.Y.S.2d 703, 715, 716; Lesamiz v. Lawyers Title Insurance Corporation (1958), 51 Wash.2d 835, 322 P.2d 351, 353. See also: Lawyers Title Ins. Corp. v. Research Loan & Invest. Corp. (8th Cir. 1966), 361 F.2d 764.

However, the trial court found as fact that the insured had complied with all the requirements of the policy. During the trial of this issue, the court stated:

'It is my feeling that as to the getting of the policy of title insurance, knowing that there was a dispute there has not been established . . .

'. . .

'I find that at the time this policy was issued, that the plaintiffs, Selma Laabs and Theodore Laabs did not know of any dispute and did not secure this policy of insurance against a known dispute.'

The testimony presented is set forth in unusual detail because there was a great deal of evidence, from various sources, tending to support the company's claim that the insured had knowledge of the existence of a dispute or adverse claim prior to the date of the policy. In addition, the court's statements in connection with its finding, cited supra, were made at the close of the trial on the scope of coverage, prior to the trial at which much of the relevant testimony was given. However, on appeal, review of a trial court's finding of fact is strictly limited. This court has stated on many occasions that the weight of testimony and the credibility of witnesses are matters to be determined by the trial court, and that where more than...