Posted By USFN,
Tuesday, December 15, 2020
Updated: Thursday, December 17, 2020
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by Reggie Corley, Esq. and Jordan Beumer, Esq.
Scott & Corley, P.A.
USFN Member (SC)
In the recent South Carolina Court of Appeals case, Jericho State v. Chicago Title Insurance, the Court reversed and remanded the Master in Equity’s (lower court) summary judgment finding in favor of Chicago Title. In this case, the Court was presented with the question of whether both reservation of a right of way on an official county map and the county ordinance authorizing such reservation constituted defects in or encumbrances upon title, and if so, whether they would render the title unmarketable so as to come within the coverage of two title insurance policies. Based on the specific circumstances of this case, the Court held it did. The Court further concluded none of the title insurance policies’ coverage exclusions applied.
Under the authority of South Carolina law, the Horry County Council established an official map to “reserve future locations of any street, highway, or public utility rights-of-way, public building site or public space open for future public acquisition and to regulate structures or changes in land use in such rights-of-way, building sites or open spaces" by passing Ordinance 107-98, or the Official Map Ordinance (“Ordinance”). Pursuant to this authority, the subject real property was placed on the map with a roadway plan crossing the property being denoted. In the subsequent litigation, the Court of Appeals examined the questions of (1) whether the subject real property was covered by the title insurance policy under an encumbrance or defect in title; and (2) whether the ordinance itself made the title unmarketable.
The Court stated that, “Title insurance is designed to protect a real estate purchaser or mortgagee against defects in or encumbrances on the title; the purpose of title insurance is to ‘place the insured in the position he thought he occupied when the policy was issued.’” The Court noted in this case that “[o]rdinances may regulate land use without encumbering title, but the Ordinance here went beyond regulating use and created a third-party interest in the property in favor of the County.” In this case, the title insurance policy coverage was dependent on whether the Ordinance created a defect or encumbrance. Furthermore, the coverage the title insurance policy promised was not limited to what the title examination revealed. The title insurance policy did not define a covered defect, lien, or encumbrance as something that can only exist if it resided in the chain of title.
Regarding the marketability of title, the Court concluded that the Ordinance interfered with the insured's title because it limited the rights and incidents of ownership: “Because the Ordinance created an interest in the land by reserving a right-of-way and restricting use of the reserved land, we conclude it diminished the owner's bundle of rights and, consequently, affected title. And the diminishment was enough to cause a reasonable buyer to decline or discount a sale for a price less than what an unclouded title would demand on the market.”
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December 2020 e-Update
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