Southern Title Guaranty Co., Inc. v. Prendergast
| Decision Date | 18 April 1973 |
| Docket Number | No. B--3379,B--3379 |
| Parties | SOUTHERN TITLE GUARANTY COMPANY, INC., Petitioner, v. Vincent PRENDERGAST et ux., Respondents. |
| Court | Texas Supreme Court |
Schlanger, Cook & Cohn, Joel W. Cook, Houston, for petitioner.
Baker & Botts, Larry F. York, Houston, for respondent.
This is a suit on a title insurance policy by the insured, Vincent Prendergast and wife, against the insurer, Southern Title Guaranty Company. Prendergast bought 22 acres of Harris County land for $10,233 in 1964. His owner's policy in that amount was issued by Southern Title Guaranty Company on February 17, 1964. In July of 1965 Prendergast entered into a contract to sell the 22 acres for $25,000. The prospective purchaser objected to the title on the ground that an undivided one-tenth outstanding interest was owned by Theresa Krug Matlage. Prendergast called upon Southern Title Guaranty Company to purchase the Matlage interest for him, but this was not done and the sale of 22 acres for $25,000 was lost. Prendergast then sued to recover the damages to which he was entitled under his title policy.
There have been two trials and appeals in the case. The first trial was terminated by a directed verdict in favor of the insurance company, the ground therefor being Prendergast's failure to prove a title defect. However, on appeal the judgment was reversed and a new trial ordered. Prendergast v. Southern Title Guaranty Company, 454 S.W.2d 803 (Tex.Civ.App.1970, writ ref'd n.r.e.). The Court of Civil Appeals held that Prendergast had made his proof of the prior ownership of a one-tenth interest by Theresa Matlage and that he would be entitled to recover in the event the company could not prove divestment of the Matlage interest to the benefit of the title acquired by Prendergast. It was also held that the assertion of the claim adverse to Prendergast warranted his suit for breach of the insurance contract even though the adverse claimant had not obtained a judgment validating the claim and was not interfering with Prendergast's possession of the land.
The second trial resulted in a verdict and judgment in favor of Prendergast and then an appeal which has again turned the case back for new trial. That appeal now reaches us with questions of the computation of damages, but first we deal with those questions treated by the first opinion of the Court of Civil Appeals. 454 S.W.2d 803. We agree with that holding and find no evidence in the second trial that would preclude Prendergast's recovery.
There is the question of whether the insured may sue on the policy merely because of the failure of his title. The insurance company insists that eviction should be a prerequisite to this suit, as it is to a suit for breach of a covenant of warranty. See, Rancho Bonito Land & Live-Stock Co. v. North, 92 Tex. 72, 45 S.W. 994 (1898). It bases this argument upon the following language of the policy:
(Said Company) shall, at its own cost, defend said assured in every suit or proceeding on any claim against or right to said land, or any part thereof, adverse to the title hereby guaranteed, provided the party or parties entitled to such defense shall, within a reasonable time after the commencement of such suit or proceeding and in ample time for defense therein, give said Company written notice of the pendency of the suit or proceeding, and authority to defend, and said Company shall not be liable until such adverse interest, claim, or right shall have been held valid by a court of last resort to which either litigant may apply. . . .
It follows that the insurance company is allowed the opportunity to complete its defense of a suit brought by an adverse claimant before being forced to pay the insured, but it does not follow that the company's covenant is limited to protection against an adverse claimant who moves to evict the insured. By the terms of the policy the company does more than agree to warrant and defend the insured against anyone claiming adverse title. The policy contract begins by saying in emphatic type: This is the basic assurance of the contract, and a failure of that guarantee gives rise to a cause of action for damages. It would be a substantial reduction of that assurance to make the insured bear his detriment until the owner of the superior title is found and sued to judgment; the policy will not be given that effect in the absence of language more explicit than the provision advanced by the company and quoted above.
The insurance company also insists that Prendergast has not proved the existence of an outstanding one-tenth interest in the property. If Theodore and Emilie Krug owned this property in community, when Emilie Krug died her daughter Theresa Krug Matlage inherited a one-tenth interest therein. Prendergast acquired the interests of the other children of Theodore and Emilie Krug, but not that of Theresa Krug Matlage. It is established that Theodore Krug acquired the property in 1904 while he was married to Emilie. It is the presumption that the property was acquired as community. Wilson v. Wilson, 145 Tex. 607, 201 S.W.2d 226 (1947). There are suggestions that Theodore Krug may have acquired the land as his separate property and that the brother of Theresa Krug Matlage may have perfected a limitation title by adverse use and occupancy, but there is no evidence to warrant finding the suggestions to be fact. It follows that Prendergast has made his case of the outstanding interest.
In the second trial a jury verdict was obtained, the findings being that--in July of 1965 when the resale was lost--the value of full fee title to the 22 acres was $25,000 while the value of the land with an outstanding one-tenth interest was only $10,200. The difference between these two figures being thought to be Prendergast's damages, the trial court rendered judgment for the amount of the policy limit, $10,233. This...
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