An Express Article from the California Land Title Association
Bulletin 13/14-51 - December 9, 2013
In Swartz v. Coldwell Banker, the California Court of Appeal ruled that a real estate broker was not liable for failing to disclose a recorded covenant. The covenant did not appear in the preliminary report issued by the title company. The court held that the broker was entitled to “rely” on the fact that the preliminary report did not list the covenant.
In reaching that conclusion, the court quoted from a real estate treatise, which states that title companies’ “fundamental purpose” is to search title and “report their findings as to the status of title.” The court also stated, “[A] real estate agent is entitled to rely on the work of the title insurance company ….”
The CLTA became involved when several parties asked the court to publish its decision in the court’s official reports. Given that unpublished decisions may not be cited as valid authority by members of the public, attorneys, and judges, it was important that CLTA intervene and ask the court to not publish this case.
The CLTA opposed the publication requests because the court’s statements are contrary to the well-settled law holding that (1) title searches are performed solely to allow title companies/title insurers to evaluate their underwriting risk, (2) title companies do not “report” “findings,” (3) preliminary reports are not representations of the condition of title, and (4) buyers, sellers, and others (such as brokers) are not entitled to “rely” on title companies’ title searches. Publication might have upset this law, and caused confusion among the public, lawyers, and judges as to the function and purpose of preliminary reports and title policies.
Following receipt of the CLTA’s opposition, the court of appeal denied the publication requests.
Under Court Rules, the California Supreme Court will now review whether the decision should be published. The CLTA will make its opposition known to the Supreme Court.
The CLTA is contacting the authors of the real estate treatise to advise them that their statements are inaccurate and should be changed.The CLTA was represented in this matter by Garrett & Tully, P.C. and Ryan Squire.