Someone in Grand Prairie, Weatherford, Dallas, Fort Worth, or anywhere else in the metroplex area who has a title insurance policy may be interested in the following case.
The Texas Fourteenth Court of Appeals, Houston, issued an opinion on March 17, 2011, where a lawsuit was filed concerning issues that dealt with title policies.
The style of the case is, Windsor Village, Ltd. and Jackob Elbaz v. Stewart Title Insurance Company. This is an appeal from the 113th District Court, Harris County, Texas.
Here is some background:
A fire broke out on November 20, 2002, in a condominium in the Villages of Fondren Southwest Condominium project, damaging common areas and several units. Ritchmond Construction, Inc. contracted with the it’s homeowners Association to repair the damage. When Ritchmond was not paid for its work, it filed, on October 29, 2004, a mechanic’s and materialmen’s lien on the Villages of Fondren and a lawsuit against the Association, seeking to enforce a statutory and constitutional lien (the “Richmond” lien). Windsor purchased a majority of the units at the Villages of Fondren from Fatima Investments, Inc.
In April 2006, Windsor sold the units it had purchased from Fatima and additional units it had acquired in foreclosure proceedings to Antonio Vallado. Stewart Title handled the closing and issued a policy of title insurance to Vallado. As part of the closing, Elbaz signed an Affidavit of Debts and Liens (the “Affidavit’) in February 2006. The affidavit did not disclose Ritchmond’s lien on the Villages of Fondron.
Richmond’s attorney later notified Stewart Title that a lien had been filed on the Villages of Fondren, and the lien obligation on the units Vallado purchased had not been satisfied prior to the closing. Stewart Title paid Richmond $55,000, obtained a release of all claims against the units purchased by Vallado, and entered a subrogation and joint representation agreement with Richmond.
On January 22, 2007, Stewart Title filed a petition in intervention in the case pending between Ritchmond and the Association, seeking damages in the amount of $55,000 on claims against appellants for fraud for failing to disclose the Richmond lien and indemnity. Stewart Title subsequently supplemented its petition with claims for statutory fraud, negligent misrepresentation, and conspiracy. Ritchmond and the Association settled the portion of the lien claim not covered by the release as to the units purchased by Vallado.
At the trial on this matter, the court awarded Stewart Title demages for fraud and indemnity in the amount of $55,000 and attorney’s fees against appellants jointly and severally. They appealed on four points.
In their first issue, Windsor contended that Richmond’s statutory lien is not valid because it does not meet the requirements of the Texas Property Code and thus was not a valid lien. The court pointed out that the validity of the lien was not relevant to these proceedings. Instead the issue was whether they failed to disclose the existence of the Ritchmond lien to Stewart Title. Thus, this court overruled the alleged first point of error.
In their second issue, they argued that the Affidavit is not relevant to the Ritchmond lien because the lien was not created during the time Windsor owned any of the units of Villages of Fondren. The Court disagreed saying, “A review of the Affidavit reveals that its scope is not limited to the existence of liens created during Windsor’s ownership of its units at the Villages of Fondren.” Rather, they represented that “there are … to the best of Seller’s knowledge, no loans or liens (including federal or state liens and judgments liens) of any kind on such property during Seller’s ownership.” This was the common law fraud allegation and fraud by ommission.
The court said that by providing a sworn affidavit, Windsor and Elbaz had a duty to disclose the existence of the Richmond lien. That they knew of the existence of the lien. That they knew Stewart Title did not know of the lien. That due to their failure to disclose the lien, Stewart Title paid $55,000 to have the lien released as to the units purchased by Vallado. This court thus overruled this second issue.
In the third issue, they asserted that Stewart Title did not present proof of the $55,000 in damages sought. The court pointed out the case evidence and overruled this third issue.
The fourth issue was the contention that Stewart Title was not entitled to recover attorney’s fees. The Court stated, “Attorney’s fees are not recoverable in Texas, unless allowed by statute or by contract. Attorney’s fees are not recoverable on tort claims.” Stewart Title pleaded for attorney’s fees in connection with its claim for statutory fraud under Section 27.01, Texas Business and Commerce Code which allows recovery of reasonable and necessary attorney’s fees. The Court pointed out that Section 27.01, speaks to a contract for real estate, but that here there was no contract between Stewart Title and Windsor. Thus this appeals court upheld the fourth point of appeal and reversed the part of the judgment that awarded attorney’s fees in this case.
This case is unique but does show some of the issues that can come up when dealing with a title insurance policy.
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