Williams v. Polgar

• Decision Date: 14 February 1974
• Docket Number: No. 14,14
• Citation: 391 Mich. 6,215 N.W.2d 149
• Parties: Walter E. WILLIAMS et al., Plaintiffs-Appellees, v. Julia POLGAR, Survivor of herself and Zigmund Polgar, her deceased husband, Defendants, and American Title Insurance Company, a foreign corporation, Jointly and Severally, Defendant-Appellant. 391 Mich. 6, 215 N.W.2d 149
• Court: Michigan Supreme Court

Page 149

215 N.W.2d 149

Walter E. WILLIAMS et al., Plaintiffs-Appellees, v. Julia POLGAR, Survivor of herself and Zigmund Polgar, her deceased husband, Defendants and American Title Insurance Company, a foreign corporation Jointly and Severally, Defendant-Appellant.

No. 14.

391 Mich. 6, 215 N.W.2d 149

Supreme Court of Michigan.

Feb. 14, 1974.

Perica, Breithart & Carmody, Warren, for plaintiffs-appellees

Rowe, Talon & Jones, P.C., Detroit, for defendant-appellant, American Title Ins. Co.

Before the Entire Bench (except LEVIN, J.)

WILLIAMS, Justice (To Affirm).

While important, the issue in this case is a relatively narrow one.

Michican already permits a buyer of property who has relied on a faulty abstract to his detriment to recover from the abstracter, even though there is no clear contractual privity between them, if the abstracter in fact knew the buyer would rely on the abstract. ¹

This case presents the issue whether a faulty abstracter should likewise be liable to a buyer He should have foreseen would rely on the abstract as well as to the buyer He knew would rely on it. The question boils down to whether there should be liability for Foreseeable as well as Known reliance.

This Court has answered that question affirmatively in a related fact situation, and in categorical terms relieved Michigan jurisprudence of the restrictions of 'privity.' ² In this opinion, we reaffirm our general decision eliminating privity and specifically apply it to abstracters.

There is a second issue in this case. When does liability accrue and what statute of limitations applies.

I--FACTS

Plaintiffs Williams purchased certain property situated in the City of Warren, Macomb County, from defendants Polgar on a land contract dated August 1, 1959. At the time of purchase, as provided in the land contract, defendants furnished to plaintiffs an abstract of title certified to July 15, 1959 by Abstract and Title Guaranty Company. This abstract was originally issued on February 4, 1926 by the Macomb County Abstract Company and was extended by said company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951, and 1952. Defendant American Title Insurance The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926 in Liber 242 of Deeds at page 174 of Macomb County records. This deed conveyed the southerly 60 feet of the property in question to the Macomb County Board of Road Commissioners.

Company is the successor in interest to Macomb County Abstract Company.

After execution of the land contract on August 1, 1959, plaintiffs learned, allegedly for the first time, of the existence of this omitted deed. As the result thereof, plaintiffs claim they were required to completely remove a building and that certain other damages were incurred.

Plaintiffs filed this action on April 21, 1971. All defendants filed motions for accelerated judgment based on the statute of limitations. The trial court held that plaintiffs' cause of action accured no later than the execution of the land contract on August 1, 1959. Thus accelerated judgment was granted defendants. Plaintiffs were non-suited. The Court of Appeals reversed and remanded. 43 Mich.App. 95, 204 N.W.2d 57 (1972). Defendant American Title Insurance Company requested leave to appeal to this Court which was granted on December 12, 1972. 388 Mich. 812 (1972).

II--EFFECT OF ACCELERATED JUDGMENT

Under a motion for accelerated judgment by defendants the facts well pleaded by plaintiffs and the reasonable inferences therefrom must be considered most favorably towards plaintiffs. As the complaint adequately alleges the title company's negligent misrepresentation in the abstract, plaintiffs' reliance thereon and the damage caused thereby as well as the other matters appearing in the above statement of facts, this case presents at this point no dispute as to facts.

Where there is a person negligently injured by another, normally there is recovery therefor. Ubi injuria, ibi remedium.

Defendant title company here, however, seeks immunity from liability for the injury it caused plaintiff buyers, pleading two defenses. First, defendant pleads it is immune from suit because it is not in contractual privity with plaintiffs. Second, defendant pleads it is immune from suit because of the statute of limitations. We disagree.

III--DEFENSE OF PRIVITY

A. Cessante Ratione Legis, Cessat et Ipsa Lex ³

The early common law rule restricting liability to those in contractual privity with an abstracter was based on a system where abstracts would only be used by real estate owners. 1 Fitch, Abstracts and Titles to Real Property, § 9, p. 9; and see § 3. As time went on the actual usage of abstracts and the class of people relying on them expanded. This historical change in circumstance and the corresponding change in law is noted in numerous cases of which the following two quotations will serve as examples. The first, Brown v. Sims, 22 Ind.App. 317, 325, 53 N.E. 779, 781, 72 Am.St.Rep. 308 (1899) illustrates a judicial 'It is very well known that the owner of real estate seldom incurs the expense of procuring an abstract of the title from an abstracter, except for the purpose of thereby furnishing information to some third person or persons who are to be influenced by the information thus provided. If the abstracter in all cases be responsible only to the person under whose employment he performs the service, it is manifest that the loss occasioned thereby must in many cases, if not in most cases, be remediless.'

expansion of liability to a known third party beneficiary:

The second, Gate City Abstract Co. v. Post, 55 Neb. 742, 746, 76 N.W. 471, 472 (1898), represents judicial support of legislation that purports to create liability 'for the payment by such abstracters of any or all damages that may accrue to any party or parties, by reason of any error, deficiency or mistake in any abstract': ⁴

'By the common law, as we interpret it, the owner of real estate could only utilize an abstract as an argument to reinforce his own assertions concerning the state of his title. It might be persuasive, but was without legal efficacy. He may now use it as evidence in an action to enforce the specific performance of a contract of sale, and in every other form of action in which the validity of his title or the existence or non-existence of liens or incumbrances are questions directly or collaterally involved. The right to use an abstract as evidence is not even limited to the person to whom it is issued. Any one may use it, and any one against whom it is employed may be injured in consequence of the certificate being false. Having thus widened the abstract's sphere of action, it was quite natural that the legislature should also widen the abstracter's liability.' ⁵

Responding to the actual change in use of abstracts and the additional classes of persons relying on them, at least six general court-created exceptions have been grafted onto the supposed comon law requirement of strict contractual privity. These exceptions include:

(1) abstracter's fraud or collusion,

(2) theory of third-party beneficiary contracts,

(3) theory of foreseeability of use by a third-party (4) actual knowledge or notice of third-party.

(5) agent for disclosed or undisclosed principal contracting with an abstracter, and

(6) re-issuance or recertification of an abstract.

See 'Liability of Abstracter-Privity,' 34 A.L.R.3d 1122, 1131, for cases supportive of each of these exceptions. See also 12 Vand.L.R. 783 (1959).

Whereas the common law rule limiting abstracter liability provided immunity from all who were injured by a faulty abstract except those in actual contractual privity, of the 35 jurisdictions (outside of Michigan) addressing themselves to this matter only seven retain a rule of strict contractual privity: Arizona, California, Florida, Illinois, Ohio, Texas and Wisconsin. ⁶ On the other hand, 11 extend liability to known third-parties relying thereon: Alabama, District of Columbia, Hawaii, Idaho, Indiana, Maryland, Missouri, New Jersey, New York, Pennsylvania and Tennessee. ⁷ Two jurisdictions have allowed recovery by undiscovered principals: Iowa and Washington. ^7.5 Fourteen purport to extend liability by statute to 'any person' relying on the abstract: Arkansas, Colorado, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah and Wyoming. ⁸ And one jurisdiction extends liability to foreseeable relying third-parties by court decision: Louisiana. ⁹

B. Michigan Has Abolished Privity Requirement

Michigan ended the last century and began this one firmly wed to the rule of contractual privity immunizing abstracters. Smith v. Holmes, 54 Mich. 104, 19 N.W. 767 (1884); Kenyon v. Charlevoix Improvement Co., 135 Mich. 103, 97 N.W. 407 (1903). By the end of the second decade it reluctantly broke away from strict privity in favor of a known third-party beneficiary. Beckovsky v. Burton Abstract & Title Co., 208 Mich. 224, 175 N.W. 235 (1919). Michigan thereby joined a category of 11 other jurisdictions just noted who had opened recovery to parties the abstracter knew would rely on the abstract. In Beckovsky, the plaintiff buyer actually accompanied the seller to the office of defendant title company and said he wanted an abstract but the contract in all truth was between the seller and the title company with the seller paying the title company for its work, although in order to avoid the title company's defense of privity, the trial court graciously put that question to the jury.

So Beckovsky extends liability to the faulty abstracter who knows a third-party beneficiary will rely on its abstract. The question remains, will liability likewise apply to the faulty abstracter who can reasonably foresee reliance by a third-party.

Michigan answered this question affirmatively in 1958 and categorically eliminated the requirement of privity....