Citation. 22 Ill.457 So. 2d 467 (Fla. 1984)
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In this case the Plaintiff, First American Title Insurance Company (Plaintiff), brought an action against the Defendant, First Title Service Company of the Florida Keys (Defendant) alleging that the Defendant had prepared abstracts for the sellers of two lots and that the Plaintiff relied on the abstracts to issue title insurance for owners and mortgagees for the lenders and the buyers of the two lots. The complaint alleged that the abstracts prepared by the Defendant failed to note the existence of a recorded judgment against the former owner of the two lots, that the judgment creditor had demanded from the new owners payment of the judgment and that the Plaintiff, pursuant to the title insurance policies, had to pay approximately $75,000 to satisfy the judgment and obtain releases.
Synopsis of Rule of Law.
The Court limited the abstracter’s liability to such a known third-party user owed the same duty and entitled to the same remedy as the one who ordered the abstract.
Facts.
In this case the Plaintiff brought an action against the Defendant alleging that the Defendant had prepared abstracts for the sellers of two lots and that the Plaintiff relied on the abstracts to issue title insurance for owners and mortgagees for the lenders and the buyers of the two lots. The complaint alleged that the abstracts prepared by the Defendant failed to note the existence of a recorded judgment against the former owner of the two lots, that the judgment creditor had demanded from the new owners payment of the judgment and that the Plaintiff, pursuant to the title insurance policies, had to pay approximately $75,000 to satisfy the judgment and obtain releases. The complaint did not allege privity of contract between the Plaintiff and the Defendant, but did allege that the Defendant prepared the abstracts for the sellers of the lots and knew that a person other than the person ordering the abstracts would rely on them as providing an accurate and complete summary of
all the recorded instruments affecting title to the lots in question. The Defendant moved the trial court to dismiss the action for failing to state a complaint upon which relief could be granted and the trial court dismissed. The Plaintiff appealed and the intermediate appellate court affirmed the trial court. The Plaintiff appealed to the Florida Supreme Court.
Issue.
Did the action state a complaint upon which relief could be granted?
Held.
Yes. The decision of the intermediate appellate court is quashed and the case is remanded.
The Court found that the Plaintiff argued that its complaint was not based on breach of contract, but was sounding in tort law of negligence. The Plaintiff cited cases where the old doctrine requiring privity of contract to maintain a suit against an abstracter was giving way to a newer doctrine based on foreseeability of injury to persons not in privity.
The Court noted that the old rule of requiring contractual privity was based on the system where abstracts were only used by real estate owners. The usage of abstracts gradually expanded to include buyers and insurers.
The Plaintiffs urged the court to adopt an open-ended abstracter’s liability based on a duty of care to any and all persons who might foreseeably use the abstract. This was based on the model of products liability, where privity between an injured party and manufacturer was eliminated on the basis that the end users of products were in no position to test, examine or evaluate the products, which were placed into the stream of commerce by the manufacturer.
The Court declined to make the abstracter’s liability as open-ended as products liability cases. The Court limited the abstracter’s liability to such a known third-party user owed the same duty and entitled to the same remedy as the one who ordered the abstract.
Where the abstracter knows, or should know, that his customer wants the abstract for the use of a prospective purchaser and the prospect purchases the land relying on the abstract, the abstracter’s duty of care runs not only to his customer, but to the purchaser.
Discussion.
In practice, it is ordinarily apparent to an abstracter what is the immediate intended purpose of the abstract. Obviously, the abstracter’s client purchases the abstract for their use. The liability of the abstracter become more murky the further away from privity the use of the faulty abstract gets. Does the Court announce a rule that is apparent and easily understandable as to how far away from privity the liability would reach?
