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Issue  142  Article  236
Published:  5/1/2007

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Dirt Tales From the Deed Vault - Episode 3
John Dillard, Vice President and Legal Counsel

In the continuation of claims prevention, Statewide Title looks at another situation this month that raises the question of whether a title claim might have been prevented.

Attorney "A" was contacted by a real estate developer "D" to handle a closing for a prospective purchaser to whom D was selling.  The developer stated that he was looking for an attorney to represent him for what would amount to a large number of transactions over the upcoming two years.  He even hinted that he would be able to steer the closings on the buyer's side to A since he was paying for a part of the closing costs as a part of an incentive to buy in his development, Verde Acre.

A agrees to do the closing.  A examines the title to the development in order to build a base file since he anticipates doing a number of closings.  A notices from her title examination there is a deed of trust that covers all of Verde Acre, but that there are also a number of releases on record.  A informs D that she has found the existing deed of trust and will contact the bank to see how much the bank will need to release the proposed buyer's tract from their mortgage.  D tells A not to bother that he has a standing agreement with the bank and that the releases are taken care of outside the closing and filed by the bank.  A goes ahead and schedules the closing, prepares all the other necessary documentation and obtains a title insurance commitment for the buyer.  The closing is held on the date scheduled and everything goes very smoothly.  A is sure she has convinced D and the buyer that she has done a great job and she is looking forward to doing more closings that D sends her way.

A month or so passes without A hearing anything from D.  A has gotten busy with other matters and has forgotten about D for the time being.  It's not until she is doing a bring down for recording that she notices a number of deeds from D that have been recorded since her closing with him.  And she also notices that each of these deeds was prepared by a different attorney.  It seems on each transaction D has sought and obtained a new lawyer.  "He must be extremely hard to please" was all A thought. 

A few months later the client that A did the closing for at developer D's request shows up in her office one day, visibly upset because her property has just been served with a notice of foreclosure.  Thinking this must be a mistake A goes to the courthouse to look in the foreclosure file.  What she discovers is that developer D has fled to parts unknown and service was being obtained by posting the property.  Still A feels her client will be fine because they obtained a release for their property.  As it turns out all the releases that had been placed on record by D had been forged.  Luckily, the buyer had title insurance.

Was there any way A could have prevented this claim from occurring?  There were some warning signs to which she should have paid closer attention.  First, any time a client does not want the closing attorney to be involved in the payoff or release of an existing mortgage of record should throw up a red flag.  In this instance, a simple phone call to the bank to verify that the release was being prepared and would be ready for the day of closing would have been very helpful in this matter.

Second, the fact that each deed from the developer had been drafted by a different attorney should have raised suspicions on A's part.  In conducting her title examination, A should have paid closer attention to the previous deeds in the chain of title conveyed by the developer.  This in conjunction with the fact that the developer insisted on taking care of the release deed should have been enough to raise a red flag.  Too often matters look crystal clear in hindsight, but all too often clues are right in front of us that would prevent a claim from happening if only we had slowed down and paid a bit more attention to what was before us. 

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