Overholtzer v. Northern Counties Title Ins. Co.
| Decision Date | 17 February 1953 |
| Citation | 116 Cal.App.2d 113,253 P.2d 116 |
| Court | California Court of Appeals Court of Appeals |
| Parties | OVERHOLTZER et al. v. NORTHERN COUNTIES TITLE INS. CO. Civ. 15247. |
DeMeo & DeMeo and J. N. DeMeo, Santa Rosa, for appellant.
Howard B. Crittenden, Jr., San Francisco, for respondents.
The Northern Counties Title Insurance Company issued a policy in the amount of $3,000 to A. E. and Orpha Overholtzer. The company failed to discover a certain recorded easement constituting a cloud on the title. The Overholtzers later discovered the easement, engaged in litigation with the holder of the easement, and then brought this action against the insurance company for damages caused by the existence of the easement. The prayer is for $3,000, the full amount of the policy, and for $488.49, on the covenant to defend contained in the policy, that being the amount expended by the Overholtzers in the defense of the easement litigation, the insurance company not having participated therein. The trial court found in favor of the Overholtzers for the full amount of the litigation expenses, and found the general damages to be $1,000. From the judgment for $1,488.49 both sides appeal.
The title policy is dated October 6, 1947, and insures the Overholtzers against 'all loss or damage not exceeding the sum of Three Thousand & no/100ths * * * dollars which any Insured shall sustain by reason of * * * any defect in, or lien or encumbrance on said title' except those listed. The property involved consists of 2.88 acres in Sonoma County purchase by the Overholtzers from one Osmon. At about the same time the Overholtzers purchased an adjoining parcel of 2.31 acres adjacent to the state highway from one Merrifield, it being contemplated by the Overholtzers that they would develop the two parcels as a unit for an industrial use. At the time of purchase the Osmon property was agricultural land. The title company had no knowledge of the proposed industrial use.
The title company failed to list in its policy an easement properly recorded January 19, 1946, whereby Osmon had granted to one Musso the right to construct and maintain a water pipe across the northerly boundary of the Osmon property for a distance of about 450 feet. This pipe line was constructed before the Overholtzers purchased the property, and, although it was supposed to be underground, it was, in fact, exposed in several places. Mr. Overholtzer could not recall seeing the pipe before the purchase, but admitted that Osmon had told him there was a pipe line across the property leading to the Mussos' property. Overholtzer did not then know, however, that this pipe line existed by reason of the grant of an easement.
The two parcels are so located that there is a sharp rise from the Osmon to the Merrifield property up to the highway, forming an embankment. Immediately after the purchases, the Overholtzers started preparations for the construction of a lumber mill. They first levelled the two lots and a fill was made at the base of the embankment. It is here that the 2-inch Musso pipe is located so that such pipe instead of being 6 to 18 inches deep, is now 6 to 8 feet deep in this area. A 60-foot wide improved road was constructed from the highway over the fill and hence over the water pipe. Thus, access was secured to the Osmon parcel, and to the lumber mill. There is another alternative ungraded road that branches off from the main road and crosses, in part, adjoining property. Overholtzer testified that this road was occasionally flooded in winter, was too narrow to permit proper use, and, if used as the sole means of access, would deprive the two parcels of the benefits of direct highway access.
A fully equipped lumber mill was constructed on the Osmon parcel, and a house on the Merrifield parcel. The mill went into operation in late January of 1948. The total cost of the venture was about $53,000, but this included $2,200 as the purchase price of the Merrifield parcel, $4,000 for the construction of the house on that parcel, and $2,000 for levelling and filling, which benefited both parcels. The two parcels were used as a unit in the operation, the Merrifield parcel for drying the lumber and the Osmon parcel for the mill operation.
At a time when the mill was almost completed, Overholtzer got into a dispute with the Mussos over the use of one of the Mussos' power poles. Mrs. Musso told Overholtzer that she did not like the mill located below her, and for that reason would not grant the requested permission to use the pole. Thereupon Overholtzer threatened to compel the removal of the pipe line. Mrs. Musso claimed a right of way, but Overholtzer denied the existence of such right. He read and reread the policy, noted its omission to mention any such right of way, and then, without legal advice or notification to the title company, cut the Mussos' pipe. As a result, on January 9, 1948, the Mussos brought suit against the Overholtzers, claiming an easement for their pipe line and requesting damages and an injunction to prevent interference with the pipe line. The Overholtzers consulted their then lawyer and under date of January 20, 1948, he notified the title company of the Musso litigation, of the issuance by it of the title policy, that he, the attorney, believed 'that no such easement existed' and concluded as follows: 'I am taking steps necessary to protect Mr. and Mrs. Overholtzer in this action, but I am giving you notice as there may be necessary a later settlement between you and Mr. and Mrs. Overholtzer.' Shortly after this letter was written the attorney called upon Daw, the president of the title company. According to Daw, he told the attorney that he had checked the records, found that the easement did exist, and that 'there was no defense to this action, so far as the easement was concerned, it was a matter of record.' Daw also testified that he told the attorney that the title company was not ready to make a settlement 'but in the event it was found that a loss accrued to Mr. Overholtzer, why, of course, we would have to pay up to the extent of our policy, that that was the procedure we would follow.'
Without further communication with the title company the Overholtzers defended the Mussos' action. They filed an answer and affidavit. The title company on this appeal, in an attempt to deny to the Overholtzers the litigation costs of the Musso litigation, claims that by these pleadings the Overholtzers admitted the existence of the easement, and that the Overholtzers' defense in that action was not relevant to any dispute over the title of the easement. Thus, so the title company claims, there was nothing that it was required to defend in that litigation. The contention that the Overholtzers' answer admitted the validity and existence of the easement is clearly without merit. While the overholtzers there admitted that there had been an agreement between Osmon and the Mussos, they denied all of the rest of the allegations in the relevant paragraph of the complaint, and thus denied that such agreement was for the challenged easement. The affidavit filed by the Overholtzers in the Musso litigation is more equivocal. In one paragraph it avers that the Osmon parcel when purchased by them was subject to a right of way, and then avers that in locating and constructing the easement the Mussos did not follow the agreement but constructed the pipe line on property not included within the easement. Thus, whether or not the existence of the easement was placed into issue in the Musso litigation, clearly its validity, at least as to location, was there challenged.
It should be mentioned that the Musso litigation also involved the Cavallos, neighbors adjoining the Merrifield parcel, who were brought into the action by the Overholtzers because of a boundary dispute.
In the Musso action, after trial, the judge's order for findings contains a two-page discussion as to the existence of the easement, and then holds that the location of the easement was acquiesced in by Osmon. The final judgment was entered in the Musso action on August 25, 1949. It denied damages against the Overholtzers, decreed the Mussos' ownership of the easement with the right to enter to repair, and permanently enjoined the Overholtzers from interfering with the rights thus fixed.
In the present action Overholtzer testified that in the Musso action he was required to pay a surveyor $87.50 for checking the location of the pipe line. Plaintiff also testified that on June 2, 1949, he received a bill from his attorney for legal services rendered in the Mussos' action of $350, and for $50.99 expended for costs. All of these items, totalling $488.49, together with interest from September 13, 1949, were allowed against the title company.
In the present action the Overholtzers tried to show the general damages incurred by reason of the easement in several ways. They first testified that in March, 1949, they had leased the mill and properties to a tenant and given him an option to purchase for $45,000. Thus, argue the Overholtzers, presuming a total investment of $52,000 or $53,000 the difference of $7,000 or $8,000 was caused by the easement. The title company correctly calls attention to the fact that the total investment includes $2,200 for the Merrifield property and $4,000 for the house constructed thereon, and contends that the damages must be limited to the Osmon property. The Overholtzers contend that the two parcels were purchased together, are operated as a unit, and should be considered together for purposes of damages.
The title company also contended at the trial that if the value of the improvements were to be considered, which it denied, then the depreciation in the value of the machinery must be deducted from the investment, that machinery having been in use for over two...
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