The owners of a subdivision, a large tract of land earmarked for
development purposes, were approached by the Army Corps of Engineers
and ordered to delay work on the land pending obtaining a permit
to fill various parts of the subdivision. The Corps had identified
such areas as wetlands.
A permit, valid for three years, was obtained but not recorded
with any governmental office or agency. Meanwhile, the entire
subdivision was purchased under a contract by a land development
company, which was provided with a title insurance policy. The
purchaser learned of the wetlands permit, which had expired, several
years later while in the process of selling lots in the subdivision.
It stopped making payments under the contract and was sued by
the original owners.
The purchaser brought legal action against the title company for
failure to disclose the wetlands permit in the title policy that
was issued and on which it had relied. It demanded compensation
for diminution in the value of the property. The title company
filed a motion for summary judgment, stressing that its policy
insured the purchaser against loss or damage resulting from:
"Title to the estate, lien or interest....being vested, at
the date hereof, otherwise than as stated....
"Any defect in, or lien or encumbrance on, said title existing
at the date hereof, not shown in Schedule B." Schedule B
included uninsured matters such as regulations governing zoning
and limitations on use of land.
The purchaser appealed a trial court grant of the title company's
motion. It argued that the insuring provisions of the title policy
were "vague and ambiguous," not understood by the average
person.
The appeal court did not agree. It supported the statement by
the title company that a title policy "....identifies the
party in whom title vests, and insures against defects in that
vested party's title. It does not insure that the new owner will
be able to develop the property without restriction." The
court distinguished between "....defects or encumbrances
affecting the marketability of title and defects affecting only
the market value of the property."
The judgment of the trial court was affirmed in favor of the title
company and against the purchaser.
(BEAR FRITZ LAND COMPANY, Appellant v. KACHEMAK BAY TITLE AGENCY,
INCORPORATED ET AL., Appellees. Alaska Supreme Court. No. S-6992.
July 5, 1996. CCH 1996 Fire and Casualty Cases, Paragraph 5749.)