## Facts

- Clayton L. Miller owned residential property and in 1953 executed a restrictive covenant granting a neighbor a recorded “view easement” over the property.
- Miller later agreed to convey the property to his daughter and son-in-law (the Gazzos) and told them he had granted the view easement, but uncertainty existed about its recordation.
- In 1986, escrow opened and the Gazzos obtained title insurance from Fidelity National Title Insurance Company (Fidelity).
- Fidelity’s preliminary title report did not disclose the recorded covenant; after the Gazzos requested an investigation of possible undisclosed encumbrances, Fidelity still failed to find the recorded covenant.
- Miller conveyed by an unrestricted grant deed that did not except the view easement.
- After closing, the Gazzos discovered the recorded covenant and made a claim; Fidelity paid $125,000 for alleged diminution in value and received a release and assignment of the Gazzos’ rights.

## Issues

1. Whether an unrestricted California grant deed impliedly warrants under Civil Code § 1113 that the estate is free of encumbrances “made, done, or suffered” by the grantor, where the grantor previously created the encumbrance.
2. Whether the grantees’ knowledge or suspicion of the encumbrance defeats a claim for breach of the statutory covenant against encumbrances.
3. Whether a title insurer that pays the insured and takes an assignment and/or is subrogated may sue the grantor on the insured’s breach-of-warranty claim.
4. Whether disputed facts regarding intent, reliance, and the effect of the parties’ knowledge made summary judgment improper.

## Decision

- The Court of Appeal reversed the summary judgment entered for Miller.
- The court held the record showed numerous triable issues of material fact, making summary judgment inappropriate.
- The matter was remanded for further proceedings.

## Legal Principles

- Under California Civil Code § 1113, a grant deed includes implied covenants that the grantor has not previously conveyed the same estate and that the estate is free from encumbrances created or permitted by the grantor, unless excepted.
- On review of summary judgment, courts view evidence and reasonable inferences in the light most favorable to the party opposing the motion and determine only whether triable issues exist.
- A grantee’s awareness of an encumbrance does not, as a matter of law, eliminate the statutory covenant against grantor-created encumbrances; whether knowledge amounts to waiver or otherwise bars recovery may depend on factual determinations.
- A title insurer that pays a covered loss and obtains an assignment and/or subrogation may assert the insured’s claims against third parties, subject to defenses that would be available against the insured.

## Conclusion

The court ruled that Fidelity’s attempt, as assignee/subrogee, to recover from the grantor for breach of the Civil Code § 1113 grant deed covenant could not be defeated on summary judgment because disputed facts remained about the parties’ knowledge, intent, and reliance, and about the legal effect of a grantor-created recorded encumbrance omitted from an unrestricted grant deed.


Fidelity Nat’l Title Ins. Co. v. Miller, 215 Cal. App. 3d 1163 (Ct. App. 1989)