Title Insurance and the Merger Doctrine

In Morton v. Attorneys' Title Ins. Fund, Inc. (2D08-1313), the Second District reversed the grant of summary judgment in favor of the title insurer.

"The man on the street buys a title insurance policy to insure against defects in the record title...Because the policy functions as a guaranty, the buyer who purchases title insurance reasonably expects to be protected against title defects which appear of record."

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Florida law requires a title insurer to competently search the record title before issuing a policy...Here, as in McDaniel, the Fund "totally overlooked the recorded easement." McDaniel, 327 So. 2d at 855. Because the Buyers were entitled to rely on the policy’s guarantee that there were no recorded easements on the property, we find that placing the burden of loss on the Buyers is error.

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We also find that summary judgment for the Sellers was improper, and we reject the Sellers’ argument that the sales contract merged into the Sellers’ warranty deed, which made an exception for recorded easements. Here, the sales contract provided that the Sellers would convey marketable title by statutory warranty deed. The deed here stated "that said land is free of all encumbrances, except taxes accruing subsequent to December 31, 2004." However, six lines above this language, a clause in the deed stated the conveyance was "[s]ubject to taxes for 2005 and subsequent years; covenants, conditions, restrictions, easements, reservations and limitations of record, if any." (Emphasis added.) Therefore, we find inherent conflict within the deed, which converted the bargained-for statutory warranty deed described in the sales contract into a nullity. Here, the Sellers cannot hide behind the merger doctrine to avoid liability for breach of the sales contract.3

[Footnote 3: Under the merger doctrine, "'[i]t is a general rule that preliminary agreements and understandings relative to the sale of property usually merge in the deed executed pursuant thereto.'" Engle Homes, Inc. v. Jones, 870 So. 2d 908, 910 (Fla. 4th DCA 2004) (quoting Milu, Inc. v. Duke, 204 So. 2d 31, 33 (Fla. 3d DCA 1967)). The purpose of the merger doctrine is not applicable under the circumstances here because the deed language conflicts with the bargained-for sales contract.]

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For the reasons stated above, summary judgment for the Fund and the Sellers was improper where the Fund failed to discover an easement of record and the Sellers conveyed less than what was bargained for in the sales contract. Accordingly, we reverse the trial court’s final summary judgment in favor of the Fund and the Sellers.