Lance R. Pomerantz
Attorney at Law

Land     Title     Law

“Constructive Notice”  The  Newsletter

Excerpted from the December 19, 2014 mailing of "Constructive Notice":

Sometimes, Ransom is Cheaper

In a decision with far-reaching implications for the title insurance industry, the Missouri Court of Appeals recently upheld a million-dollar damage award, despite the fact the defect only affected .24% of the insured parcel! That’s not a typo – 99.76% of the title was not defective, yet the court awarded the Insured nearly $1.3 million. Spalding v. Stewart Title Guaranty Company, WD76369 (Missouri Court of Appeals, Western Dist., September 23, 2014, application for transfer to Sup. Ct. denied Oct. 28, 2014).

The Insured had purchased 419 acres and attempted to develop a waterfront community. The biggest challenge was that there was no body of water on the parcel. The Insured procured permission to open the dam of an adjoining lake and flood a portion of the property. The plan was to then build 300-400 waterfront homes. Just before the flooding was to commence, a third party asserted title to one acre of the flood plain.

The Insurer determined the third party indeed owned the one-acre parcel and tendered $10,000 for the diminution in value. The third party insisted on a payment of $387,000 to relinquish his claim, but the Insurer didn’t budge.

At trial, the Insured offered an appraiser’s opinion that the “highest and best use” of the property was a waterfront residential development. Because that use was now unavailable due to the title defect, the appraiser calculated damages of $4,000,000.  For reasons not stated in the opinion, the trial court award came in just under the policy limit of $1,700,000.


The Missouri Supreme Court established the concept of condemnation-style damages in title insurance cases in 1975, but there have been no significant cases on the issue since. The concept that damages are to be computed as of the date of discovery (which is not accepted everywhere) does not automatically imply that damages be based on a planned, yet unrealized, use of the property.