Why Buy Title Insurance

Examples of title errors that became known after settlement.
WHY owner’s title insurance?

The excerpts below are events occurring in Jefferson and Berkeley Counties in the last ten years that we can remember. Some of the facts have been omitted/added to clarify the title issue or protect the guilty. Owners Title insurance did, or would have, provided coverage for the events set forth below.

1. Purchaser purchased a lot which the right of way crossed an adjoining lot to get to the public highway.  After the purchase, the adjoining land owner unilaterally decided to “gate” the right of way for security purposes, but as a concession to the owner, offered the owner a key for entry purposes.

2. A deed in the chain of title, some seven years ago, recited that the Grantor was executing the deed as the guardian for an infant child.  In all other respects, the deed appeared to be normal.  However, a check of the courthouse records indicated that no suit had ever been filed for the Circuit Court Judge’s approval for the guardian to execute the deed.  Therefore, no title passed to the purchaser. The attorney who did the deed said “oops”, but declined responsibility to fix the problem.

3. When Seller purchased the property, the Seller financed the acquisition with a bank loan.  This occurred in early January of 1996.  The Seller subsequently flipped the property several months later and the Purchaser, who had a title exam, was assured by the title examiner that there were no liens against property.  The Seller and Purchaser completed the transaction, and the Seller took the net proceeds from the table.

It was subsequently determined that the Courthouse had indexed the deed of trust as January of 1995 (using last year’s date is a common problem for most everybody initially after the New Year).  The title exam did not reveal this deed of trust since the title examiner began his search with the acquisition of the property by the Seller in 1996.

4. A seller told the realtor that she could not be present at settlement because of a conflict with another appointment. However, she said that if the attorney can let her sign before the settlement that she would arrange to show up and sign the deed and other documents. The realtor set up the alternate signing meeting, but did not attend. The woman appeared at the appointed time and signed the documents, and when asked for some ID, declined saying she did not have her license with her. The person doing the closing took the position “No ID, no money”. As the facts later developed, the seller had decided she was to busy with the move and sent her sister in to sign the documents.

5. A builder signed an affidavit and advised the attorney that all bills were paid. The builder’s realtor heard this statement, but failed at settlement to mention to the attorney that the carpet guy had called just before she left her office looking for his money. Three weeks later the carpet guy, HVAC man and the Lumber Yard filed their liens seeking payment for bills unpaid totaling over $20,000.00. The builder relocated to another state shortly after the closing.

6. An attorney’s title examiner missed a $45,000.00 deed of trust properly indexed. The closing attorney had not bothered to send a preliminary HUD to the seller or the seller’s agent. The seller’s real estate agent was hospitalized at the time of settlement and a substitute agent attended the settlement. The substitute agent was unaware of the existence of the deed of trust, but felt that the standard charges on the HUD were appropriate and gave approval on behalf of the seller. The seller, who did not attend settlement himself, received a full check without deduction for the loan payoff.

7. Husband and wife owned the marital residence as joint tenants with rights of survivorship. By a separation agreement adopted by the Court and sealed with the divorce papers, the Court directed the wife convey to husband her one half interest in the marital property. However, after the divorce the wife, apparently with the consent of her ex-spouse, did not sign a deed and continued to live in the premises. Four years later, the ex-husband died and left children as his heirs. A few years after the husband’s death, the closing attorney, none the wiser, relied on the survivorship provisions of the deed and accepted the ex-wife’s signature on a deed conveying the property. At a later date, the divorce attorney, knowing the contents of the sealed agreement, turned the title down and opined that the ex-husbands children owned at least a one half interest in the property on the theory that the Judge’s order had the legal effect of destroying the survivorship relation between the parties and upon the husband’s death his children inherited an interest in the property and not the ex-wife.

8. Robert Q. Smith recently sold his property in Jefferson County.  The title examiners searched the real estate records under the name of Smith, Robert Q. in the indices of the Clerk’s office and found two deeds of trust and several West Virginia State tax liens.  These deeds of trust as well as the state tax liens were placed on the settlement statement and they were paid at the time of sale.  A month after the State Tax Department received payment of the state tax liens, the Tax Department contacted the closing attorney and asked why he had failed to collect $21,000.00 worth of additional monies owed to the State pursuant to tax liens. They attached copies of these liens.  All of the tax liens showed liens in the name of Robert Smith & Sons.  A check of the courthouse records indicated that these liens were indexed by the Clerk under the “R” indices (correctly) as opposed to the “S” indices.  Consequently, these liens were not discovered during the title search.  An examiner of title was not liable for liens that are not indexed under the owner’s name or are improperly indexed.

9. (Related at a closing by an employee of RGS Title Co) Mom died and left her three properties to her son in her will. The will provided that if he was deceased or unable to inherit the estate, all would go to her Church. Sonny was a bit strung out on drugs and made a quick sale of his inheritance to three separate buyers to facilitate his life style. Two bought owner’s title insurance and one party did not. Unknown to all, the local police were suspicious of the circumstances under which mom had died. Nine months after her death and after sale of the properties, they arrested Sonny for murder. Sonny was convicted and sentenced to jail for life. West Virginia, like a majority of states, prohibits an individual from inheriting as a result of their criminal involvement in the death of the deceased. Therefore, upon his conviction, the three properties by operation of the law belonged to the Church. The title company and the one individual who failed to buy title insurance made a substantial contribution to the mission and needs of the Church to receive a quitclaim deed from the Church.

10. We were recently embarrassed. On a transfer of a house owned by a Limited Liability Company, the honest members of the LLC looked at the HUD -1 Statement; they commented that we had missed the Company’s deed of trust securing a local bank for $120,000.00. However, a quick and panicked check of the Court House revealed NO deed of trust. On a whim, we checked under the names of the members of the LLC. Bingo, a deed of trust securing the local bank on the property we were transferring. Apparently, the Bank’s attorney did not realize the property was in the LLC’s name and he did the deed of trust in the member’s names. Therefore, the Clerk did not index the deed of trust under the LLC’s name. Attorneys are liable if they are negligent in doing their title exam. If the seller had been dishonest, we would have not been liable to the purchaser since no negligence occurred on our part. Owners Tile Insurance would have protected the purchaser in this situation.