Fidelity National Title Insurance Co. v. Miller

Clayton Miller (defendant) owned property in Coronado, California. Miller granted a view easement to his neighbor Whitby over Miller’s property through a restrictive covenant. Whitby recorded the easement, unbeknownst to Miller. When Miller later wanted to convey his property to his daughter and son-in-law, the Gazzos, Miller told them about the view easement but that he did not know whether Whitby had ever recorded the easement. When the Gazzos opened escrow to proceed with the conveyance, they worked with Fidelity National Title Insurance Co. (Fidelity) (plaintiff) to obtain title insurance. Fidelity’s preliminary title report did not uncover the view easement. The Gazzos asked Fidelity if there were any encumbrances on the property not listed in the report and had Fidelity investigate the possibility that the view easement might have been recorded. Fidelity issued title insurance without finding the view easement. Miller conveyed the property to the Gazzos by unrestricted grant deed, without excepting the view-easement restrictive covenant. After closing, the Gazzos discovered that the view easement had in fact been recorded. The Gazzos filed a claim against Fidelity under their title insurance policy and obtained a $125,000 settlement for the reduction in the property’s value due to the easement. The Gazzos executed a release that assigned their rights regarding the easement issue to Fidelity. Fidelity sued Miller for breach of warranty, alleging that Miller, by delivering a grant deed conveying a fee simple interest in the property, had made and breached an implied warranty that the property was free of any encumbrances made by Miller. Miller sought summary judgment, claiming that Fidelity had no claim, because the Gazzos had known that the encumbrance had been granted and might have been recorded and because the parties had relied on Fidelity’s negligently prepared abstract of title. The lower court granted summary judgment to Miller.