Wolff v. Commercial Standard Ins. Co.

• Decision Date: 13 April 1961
• Docket Number: No. 13696,13696
• Citation: 345 S.W.2d 565
• Parties: Phillip D. WOLFF, Jr., Appellant, v. COMMERCIAL STANDARD INSURANCE COMPANY et al., Appellees.
• Court: Texas Court of Appeals

Page 565

345 S.W.2d 565

Phillip D. WOLFF, Jr., Appellant, v. COMMERCIAL STANDARD INSURANCE COMPANY et al., Appellees.

No. 13696.

Court of Civil Appeals of Texas, Houston.

April 13, 1961.

Rehearing Denied May 4, 1961.

Phil Crane, K. D. Keenan, Houston, for appellant.

Carl & Lee, Emory T. Carl, Houston, for appellees.

WERLEIN, Justice.

This is an appeal by appellant from a judgment rendered against him upon appellees' motions for instructed verdict, after the court withdrew the case from the jury at the conclusion of the evidence. It is appellant's contention that the court erred in overruling his motion for instructed verdict and in granting appellees' motions, for the reason that as a matter of law neither appellee had any interest in the land their respective policies of title insurance covered which would permit them to recover against appellant on the general warranties in the deeds appellant had given appellees' insureds. A short resume of the undisputed evidence in the case is essential to a proper understanding of appellant's Points of Error.

Appellant acquired Lot 6 in Block 3 and Lot 11 in Block 2, Memorial Terrace Addition, Harris County, Texas, from one Preston B. Dumas, the consideration being the Cancellation of a debt of $6,500. Appellant testified that Dumas told him the lots were clear. Appellant sold Lot 6 to Frank Dill by general warranty deed for a consideration of more than $4,000 represented by Dill's services to appellant. In connection with such sale appellant procured and furnished Dill with a guaranty title policy issued by appellee, American Title Guaranty Company, in the amount of $5,000. Appellant constructed improvements on Lot 11 and then sold the same to Wayne A. Johnson and wife, furnishing them an owner's policy of title insurance in the amount of $31,500 issued by appellee, Commercial Standard Insurance Company.

At the time of the execution and delivery of said deeds there was on record in the office of the County Clerk of Harris County, Texas, a deed of trust executed by Preston B. Dumas and wife covering several pieces of property, including said two lots, to secure the payment of one certain promissory note in the amount of $27,000, payable to Joseph Thomas Childers and wife, which deed of trust provided that each of the above described lots could be released upon payment of $2,700 on the indebtedness. At the time appellant executed and delivered said deeds, there was also of record what purported to be a release of said lots executed by Joseph T. Childers and wife, acknowledged by Childers but not properly acknowledged by his wife. The evidence shows that such release had never been executed by either Childers or his wife and the same was a forgery.

Thereafter, in February, 1957, the substitute trustee appointed under said deed of trust gave notice that the properties described therein would be sold under the terms thereof on the first Tuesday in March, 1957. Also, in February, 1957 Childers and wife filed suit to remove the cloud created by the forged release.

Thereupon the owner of Lot 6 made demand upon appellee American Title for protection against said lien on Lot 6, and in like manner the owners of Lot 11 made demand upon Commercial Standard for protection against the lien on their lot. Thereafter, appellees through their attorneys made demand upon appellant Wolff to secure a release of said liens on said lots in question and advised him that if he did not do so they would pay the sums necessary to release the liens and look to him for reimbursement. Upon appellant's refusal to do so, appellee American Title paid $2,700 to the attorney for Childers and appellee Commercial Standard paid $2,700 to said attorney, and the two lots in question were then released from said liens. Appellees then sued appellant to recover the amounts they had paid to keep said lots from being sold under said deed of trust, as threatened.

It is appellant's contention that although appellees in paying said amounts to secure the release of said liens, may have become subrogated to the rights of Childers against Dumas, they did not have the right to sue appellant to recover under the warranties in the deeds executed and delivered by appellant to Dill and Johnson. On the other hand, appellees assert that a grantee in a general warranty deed who discharges an outstanding lien for not more than the price paid for the property can recover from his warrantor the amount paid to discharge such lien, and that if such lien is discharged, not by the grantee himself but by his title insurer at his request under a contract expressly providing for the right of subrogation, the title insurer may recover on the warranty.

Each of the owner's policies in question issued respectively by appellees contained the following standard provisions: 'Upon payment of any loss hereunder, the company shall be entitled to be subrogated to all rights of insured against all other parties.'

The law is well settled that a covenant against encumbrances is embraced within the general warranty clause, and it is the legal duty of the grantor to pay off and discharge all liens and encumbrances incurred prior to the conveyance which are not assumed by the warrantee. City of Beaumont v. Moore, 146 Tex. 46, 202 S.W.2d 448. The covenants against encumbrances embraced in the warranties in the deeds executed by appellant to Dill and Johnson were broken immediately upon execution of such deeds because of the existence of the...