Attorney Liability for Examination and Certification of Title to Real Estate
| Publication year | 1983 |
| Pages | 1091 |
1983, July, Pg. 1091. Attorney Liability for Examination and Certification of Title to Real Estate
The real estate attorney is often called upon to render an opinion of title to his client. In the simplest case, the client asks that the attorney examine and certify title to the property he wishes to purchase. The client then relies on the attorney's certificate of title as a substitute for title insurance. Frequently in Colorado, the seller has already obtained title insurance. This requires a transfer of the policy and obviates the need for the attorney to examine or certify title. However, when a title policy is refused by the insurance company, the client may request the attorney to review the abstract of title to determine the necessary parties and the legal arguments for a quiet title suit.
This article examines the duties and liabilities of the attorney who examines and certifies title to real estate. Pertinent issues concern the standard of care, the use of expert witnesses in a malpractice action, liability for survey errors and damages. The various situations in which an attorney has been found liable for legal malpractice due to negligent certification of title are discussed in the context of reported decisions. Since the use of abstract companies is prevalent throughout Colorado, the emphasis lies on liability for title certification, with only some mention of the liability of an abstracter.
An action for legal malpractice against an attorney for negligence in the examination and certification of title to real estate contains three elements: the client must be able to show (1) unmarketable title; (2) that the defect in title was one which the attorney should have discovered in the exercise of ordinary knowledge and skill required under the circumstances; and (3) that the client suffered damage in reliance on the attorney's certificate of title.(fn1)
The duty of the attorney who examines and certifies title to real estate is usually defined in terms of the exercise of reasonable skill and care. The attorney will not be held liable for an error in judgment, absent the failure to exercise ordinary skill and knowledge.(fn2) In Eadon v. Reuler,(fn3) the Colorado Supreme Court added that an attorney does not guarantee results. However, the attorney certifying title must exercise judgment more carefully and cautiously than he might when engaged in litigation.
The attorney does not certify that a title is perfect, but that it is marketable.(fn4) The distinction is made that while an attorney might find a title sufficient for his client to bring suit to recover it, he must often reject the same title should his client wish to purchase it. In these circumstances, the attorney must inform his client of the nature of the risk, making full disclosure of the defects in title and their legal effect. The client alone must decide whether or not to accept a defective title.(fn5)
Frequently, the attorney must interpret the legal consequences of a document in the abstract of title. As part of his interpretation, the attorney is charged with knowledge of the common law of property and any necessary statutory revisions.(fn6) Thus, the Colorado attorney should be familiar with the real estate title standards of the Colorado Bar Association.(fn7) In Colorado, when an attorney certifies a title as marketable, it must be one free of reasonable doubt and one that a prudent buyer, fully informed of the facts and their legal meaning, would accept. Moreover, the title must not subject the purchaser to the hazards of future litigation.(fn8)
This month's column is written by Eric L. Peters, who graduated from the University of Denver College of Law in March 1983. He will take the Massachusetts bar this summer and will practice in Edgartown, MA.
Two New York cases discuss the duty of the attorney to interpret the meaning of documents in the chain of title to the client. Trimboli v. Kinkel held that the attorney has a duty to know, as a matter of law, that a power to sell granted to the executor of a will in the chain of title did not give the executor the power to exchange the property.(fn9) The court declared: "It is negligence to fail to apply the settled rules of law that should be known to all conveyancers. . . . Knowing the facts, [the attorney] was chargeable with knowledge of their significance."(fn10)
Another New York decision, Byrnes v. Palmer,(fn11) found an attorney liable for negligence for his improper interpretation of a release of a mortgage. The court felt that the area of law regarding the release was settled when title had passed. However, even if that area of law was unsettled, the document raised sufficient doubt that the attorney should have objected to it.
To continue reading
Request your trial