Stone v. Lawyers Title Ins. Corp.

Decision Date31 March 1976
Docket NumberNo. 998,998
PartiesCharles C. STONE, Jr., Appellant, v. LAWYERS TITLE INSURANCE CORPORATION et al., Appellees.
CourtTexas Court of Appeals

C. Edwin Prichard, Jr., Corpus Christi, for appellant.

James P. Ryan, Wood, Burney, Nesbitt & Ryan, John A. Waller, Lev Hunt, Kleberg, Mobley, Lockett & Weil, Corpus Christi, for appellee.


BISSETT, Justice.

The opinion rendered by this Court on December 31, 1975, is withdrawn and this opinion reaching the same result is substituted therefor.

This appeal involves actions in contract and in tort. The suit, as originally instituted, involved actions in contract, in tort, and in trespass to try title. Charles C. Stone, Jr. (Stone) sued: 1) Lawyers Title Insurance Corporation (Lawyers Title) on an owner's title policy covering an 18.639 acre tract of land which it had theretofore issued to him to recover damages which he allegedly sustained because of the failure to show certain pipeline easements as an exception in the title policy that was issued to him by it and to recover attorneys' fees incurred by him as a result of his bringing suit; 2) Isabel B. Weil (Goodstein), the seller of the subject land to him, for breach of warranty; 3) Lawyers Title Agency of Corpus Christi, Inc. (the Agency) and Eli Lipner (Lipner) its president, who countersigned the title policy, because of fraud and negligence in failing to show the pipeline easements as an exception in the owner's title policy, and in a mortgagee's title binder; 4) Joe B. Weil, Jr., (Weil), the real estate agent who negotiated the sale of the land to him, for fraud; and 5) Lo-Vaca Gathering Company (Lo-Vaca) in trespass to try title, to settle the issue as to the validity of the easements.

On January 12, 1973, Lo-Vaca was granted an interlocutory judgment that the plaintiff take nothing in his suit against it, which became final when final judgment was rendered. Trial before a jury as to the remaining defendants began on January 7, 1975. The plaintiff took a non-suit as to Goodstein after trial commenced, but before final judgment was rendered. After the plaintiff rested, the defendants declined to put on any evidence. The Agency, Lipner and Weil filed motions for instructed verdict, which were granted by the trial court. Judgment was rendered that the plaintiff take nothing on his tort actions against the Agency, Lipner and Weil, and that he recover $2,879.00 of and from Lawyers Title as damages under the terms of the title policy. The court costs were assessed 2/3rds to plaintiff and 1/3rd to Lawyers Title. Stone has appealed.

In early 1970, Stone contracted Weil about the purchase of part of a 70 acre tract in Nueces County, Texas, owned by Goodstein. Stone, who desired to construct a mobile home park thereon hired an engineering firm to plat an 18.639 acre tract out of the southeast corner of the 70 acre tract. A strip of land 25 feet wide out of the 70 acre tract, adjacent to and south of the south line of the 18.639 acre tract, was deliberately excluded from the land desired by Stone because of the known several oil and gas pipelines in the strip.

The 18.639 acre tract was conveyed to Stone by general warranty deed, dated March 11, 1971, for a cash consideration of $55,917.00. No exceptions or reservations appear in the deed. Also, on March 12, 1971, Lawyers Title issued an owner's title policy to Stone which insured the title to the land so purchased in the amount of $55,917.00. The premium was paid by Goodstein. The policy made no mention of any outstanding pipeline easements.

In order to obtain the money ($370,000.00) necessary to finance the project, it was necessary for Stone to first secure a $397,000.00 commitment from the Federal Housing Administration (FHA) that it would insure a loan upon completion of the project. The commitment, which was duly issued, was based upon the construction of a mobile home park containing 147 spaces. In June of 1971, when the mobile home park was approximately 80% Complete, a live, high pressure gas pipeline was discovered approximately 4 feet inside the southern boundary of the 18.639 acre tract. Later, several other such pipelines were discovered inside the southern boundary of the tract. It was then learned that the pipelines were in easements in a strip of land approximately 25 feet in width north of the south line of the 18.639 acre tract. The strip constituted something less than an acre in area, and comprised about 5 1/2% Of the total area of the entire tract.

Due to certain regulations of the FHA concerning the proximity of residential structures to live pipelines, the discovery of the pipelines within the boundary of the 18.639 acre tract forced Stone to redesign the layout of the park. The new configuration of the park contained only 129 spaces. This reduction in the number of spaces caused the FHA to scale its commitment downward to $318,500.00.

Shortly after the pipelines were discovered, Stone notified Mr. Charles Bonniwell, his attorney, who, he said, 'started legal proceedings rolling on contacting Lipner and Lawyers Title, Inc. (Lawyers Title Agency)'. Suit was instituted on January 12, 1972.

The effect of the interlocutory judgment in favor of Lo-Vaca was to judicially establish that the pipeline easements, on which were located the pipelines in question, were valid easements which were in full force and effect at and prior to the date of Stone's deed to the 18.639 acre tract. There is no appeal from the judgment in favor of Lo-Vaca.


The trial court, prior to the commencement of trial, granted Lawyers Title's motion in limine which prevented Stone from producing any evidence, or asking any questions concerning the cost of removal of the pipelines. The court also sustained Lawyers Title's special exceptions to Stone's pleadings, which resulted in the elimination of Stone's cause of action against Lawyers Title recovery of attorney's fees. During the trial, the court granted Lawyers Title's motion to strike Stone's testimony concerning the value of the 18.639 acre tract as burdened with the pipeline easements; refused to admit testimony offered by Stone's appraiser concerning the value of the land as burdened with the easement and its value without the easement; would not permit the introduction of any evidence concerning the amount of reduction of the FHA commitment; and refused to admit any evidence relating to attorney's fees incurred by Stone in this litigation.

Title insurance is a contract of indemnity. Its purpose is to indemnify the insured for the failure of the title so guaranteed. The title policy which was sued on by Stone, in the event of an outstanding interest that was adverse to the indefeasible title guaranteed thereby, provided:

'. . . then the liability of the Company shall be only such part of the whole liability limited above as shall bear the same ratio to the whole liability that the adverse interest, claim, or right established may bear to the whole estate or interest in the land, such ratio to be based on respective values determinable as of the date of this policy. . . .'

The Texas Supreme Court, in Southern Title Guaranty Co., Inc. v. Prendergast, 494 S.W.2d 154 (Tex.Sup.1973), speaking through Mr. Justice Reavely, in clarifying the meaning of the above-quoted provision of an owner's policy of title insurance, said:

'If the amount of the policy is the same as the value of what is insured, . . . the recoverable loss is the value of the outstanding interest. . . .'

That announcement controls the disposition of Stone's suit against Lawyers Title for recovery of damages under the policy. Here, the amount of the policy, and the value of the entire 18.639 acre tract at all times pertinent to this appeal is the same, $55,917.00.

In his fifth amended petition, his trial petition, Stone alleged that on March 12, 1971, the market value of the $18.639 acre tract was $55,917.00; that on that same date the value of the outstanding interests (the Lo-Vaca pipeline easements) was $23,000.00; and that he has been damaged by and is entitled to recover from Lawyers Title the sum of $23,000.00 under the terms of his owner's title policy.

Lawyers Title's original answer, filed on February 11, 1972, consisted of a general denial. Its fourth amended original answer, filed with the trial judge on January 6, 1975, in addition to certain admissions and defensive allegations that do not concern the issue now under consideration, specially denied that the value of the outstanding interest was $23,000.00, but admitted that its value was $2,879.00.

Stone testified that in his opinion the value of the entire tract was diminished by the sum of $23,000.00 upon discovery of the Lo-Vaca pipeline easements thereon, and that the tract as burdened by those easements had a value of $32,917.00. His basis for those figures was: 1) the reduction of the original FHA commitment in the amount of $51,400.00; 2) the loss of income from the redesigned mobile home park; and 3) the cost of redesign of the park. The policy does not insure against loss or damage caused by any of those factors. Stone did not testify as to the value of the outstanding interests. There was no error in striking Stone's testimony since his testimony concerning the value of the 18.639 acre tract 'as burdened with the pipeline easements in question' is immaterial to the issue of the value of the outstanding interest.

Mr. John Ericson, an appraiser, was called as an expert witness by Stone. He stated that he had made an appraisal of the 18.639 acre tract as of March 12, 1971, the date the subject property was purchased by Stone. He further stated that an appraiser generally uses one of three approaches in arriving at an opinion as to the value of a tract of land, which are: 1) the market value approach, where comparable sales are considered; 2) the cost approach,...

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