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Casenotes

Wisconsin

Vendor and Purchaser

Stewart Title Guaranty Co v RE Title Services, LLC, 2008 AP 2185 (Wis Ct App 2009).

Facts:In 1999, Katie Butler gave CTX Mortgage Company a mortgage on her property. The mortgage was incorrectly recorded under a land description in "Bradley Estates." In 2002, Kendra Terry contracted with Butler to purchase the property. Terry obtained a loan from U.S. Bank; title insurance was provided by Stewart Title Guaranty Co. and written by R.E. Title Service, LLC. The title policy correctly described the land as in "Rainbow Ridge" and did not list any outstanding mortgages.

CTX's successor to the mortgage, Chase Manhattan, subsequently foreclosed on the 1999 mortgage, citing Butler, Terry, and U.S. Bank as defendants. Stewart paid out its policy to U.S. Bank and then sued R.E. Title. The only unresolved issue before the trial court was whether R.E. Title breached its Title Insurance Underwriting Agreement with Stewart.

The agreement required R.E. Title to conduct "a complete search and examination of those public records, surveys, and inspections relevant to the insurance afforded by such policies." Elsewhere, the agreement spelled out five circumstances in which R.E. Title would be liable to Stewart. Both parties contended that the contractual language was unambiguous, but they disagreed on its meaning. Stewart argued that a "complete search" required R.E. Title to search the grantor/grantee index which might have revealed the CTX mortgage. R.E. Title argued that it justifiably only searched the tract index because only that record was "relevant." Disagreeing with both parties, the trial court found the contract ambiguous. Using industry standards to interpret the contract, the court found R.E. Title's conduct reasonable and granted its motion for summary judgment.

Holding:Affirmed. In itsde novoreview, the court of appeals agreed that the contract was ambiguous. Although the contract's individual words were clear, the language nevertheless allowed for the parties to reach two different conclusions based on the same factual circumstances. Therefore, the court interpreted the contract using parol evidence.

The only relevant evidence was an expert witness called by R.E. Title who testified that R.E. Title's search of only the tract index was a reasonable practice under industry standards. The court held that R.E. Title's interpretation reflected the intent of the parties, while Stewart's would unreasonably hold R.E. Title to a standard of "absolute liability." Furthermore, if Stewart genuinely intended to hold R.E. Title to strict liability, the section enumerating five circumstances whereby R.E. Title would be liable to Stewart would be mere surplusage. The court was bound by methods of contract interpretation to read meaning into every section of the contract.

EDITOR'S NOTE: ATG members - ATG's search standards require a search of the grantor-grantee index in conducting title searches.

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[Last update: 10-21-09]