This month’s edition of  Dirt Tales looks at an issue that commonly arises when an attorney tacks on to an existing title policy that has insured against a risk.  The facts in the cases presented in each series are true occurrences, except for the names of the parties involved.  

Attorney Dolittle is hired to represent Homebuyer in the purchase of a home and is engaged to perform a title search.  The title search revealed that the seller had acquired title to the house by virtue of an out-of-state divorce decree that had awarded the wife the residence as a part of the settlement. Dolittle examined the copy of the court decree, which was an exemplified copy of a divorce decree from Virginia .  He thought the signatures on the exemplification looked odd as they looked like they were signed by the same person.  But, the order was on a proper exemplification cover from the Commonwealth of Virginia , and it had all the necessary seals from the Clerk of Court there.  Additionally, National Dirt Title Company had issued an owner’s policy to the seller, so he could just tack to that policy, which he subsequently did.

Several  months later Dolittle received a phone call from Homebuyer complaining that realtors were scheduling appointments to show his home and that he had been told he didn’t have good title to the home.  When he spoke to the realtor, Dolittle was given a copy of an Equitable Distribution settlement from a North Carolina court in which the house Homebuyer had purchased was ordered to be sold as a part of the settlement.  Dolittle contacted the Clerk of Court in Virginia where the divorce decree was filed and discovered there was no divorce decree on record in the name of the parties or under the case number that was referenced  on the decree.

But all was not lost, he had gotten title insurance for his client, and he would advise him to file a claim, except that when Dolittle checked his records, he discovered that he had not gotten the final title policy and that Homebuyer’s file was still sitting on his post-closing paralegal’s desk.

What could Dolittle have done differently to have prevented the problems he later encountered, and what can be done to help his client?

First, whenever an out-of-state order is filed in your chain of title, you should verify the authenticity of the document in the state in which it is filed if that document affects your title.  In this case, it turned out that the wife was living in Virginia, and her best friend worked in the Clerk of Court’s office.  They forged a decree of divorce, and then the friend co-opted the court’s seals and exemplification cover and forged the necessary signatures.  Forgeries of all kinds of documents is very commonplace now, and additional care needs to be taken to protect your client.

Second, if you are not comfortable with a defect or if a document looks suspicious, don’t just rely upon a prior title policy that insures over the defect.  Title insurance gives coverage against indemnifiable losses, but title coverage cannot make defects and problems go away.

Third, it is a good practice to file applications for final title policies as soon as possible after the closing.  In this case, although Homebuyer did not have title coverage, he might be able to sue the seller on the warranties given in his deed and invoke the seller’s title coverage, but that is an extra step and expense that could have been avoided had his attorney obtained his title policy in a timely fashion.