Posting for

Thursday, September 3, 1998

by: Bert Rush

brush@firstam.com

SOURCE OF TITLE/JUDICIAL PROCEEDINGS/MISSING PERSONS

This is another claim story "crying to be told."

Hans and Lila Hammann were married in San Francisco in 1962. Hans was retired from the Air Force, looking for a new career--and Lila had a degree from San Francisco State with a major in history.

Hans traded jobs for about ten years before deciding to study aviation on the G.I. bill. This decision took the couple to Medford, OR, and then, over the next few years, to Fort Worth, TX; Frankfurt, KY; Savannah, GA; and Prattville, AL.

It was in Fort Worth, Lila recalled later, that Hans threatened her with a gun.

By 1974 the couple had returned to San Francisco, where they purchased two properties--a modest residence on 40th Ave. and a building housing a small movie theater on Post St. Lila worked in the theater.

But Hans continued to be abusive, and she couldn't forget the gun incident, so one day in June 1974 Lila told Hans, "I'm leaving." She left almost all her possessions behind, taking only their 1970 Mercedes--and the gun (a .38 Smith and Wesson).

She pawned the gun and set out to find her family, which she was surprised to learn had moved to Altaville, near Sacramento. After visiting her sister and grandmother, she went out to the building occupied by her brother--whom she found dead of suicide.

She re-established strong ties with her family--taking menial work around Sacramento to support herself. In 1977, after failing to make a living "flea marketing," she again followed her family to a ranch near San Luis Obispo, where she resigned to live modestly off gifts from relatives. Her address was a P.O. box--she had no telephone.

Hans didn't know Lila's whereabouts, but occasionally he'd call her sister or mother. Her aunts, in particular, urged her to get a divorce and settle the property issues--but she held off, not wanting to "rock the boat."

Lila spoke with Hans only once after the separation, by telephone in 1982, and later recalled he was intimidating and pitiful--crying because he feared she would put him out on the street. So she let things stay as they were--with Hans taking care of the properties which, she figured, would only increase in value.

In 1989 Lila had a "cancer scare." She began to worry about what she would do if faced with medical bills. Her aunts looked into her properties, and learned Hans had sold both of them in 1986, using a court order obtained in 1985 declaring Lila legally dead. Hans then remarried and moved to Germany.

In January 1990 Lila filed suit in San Francisco Superior Court, seeking to quiet title to the 40th Ave. and Post St. properties. Her complaint was based on allegations that she had not conveyed her interest in the properties to anyone, and that the "Order Establishing Fact of Death of Joint Tenant," upon which the new owners' titles were based, was null and void--having been obtained through the (allegedly) false testimony of Hans.

The new owners made claims under title policies issued by First American. The Company hired attorneys to represent its insureds and, after an investigation which included Lila's deposition, the attorneys filed a motion for summary judgment.

The motion was unopposed by Lila--who has not been heard from since. The court found that the new owners were bona fide purchasers, who paid for these properties in good faith and without notice of Lila's adverse claims. An order was entered quieting title in favor of our insureds. First American paid legal expenses of $19,966.

The moral? We're asked to insure out of court proceedings frequently, although it's rare that we're asked to rely on a judicial declaration that a party in title is missing and presumed dead.

Still, the order in this case was an insurable source of title, because it was obtained pursuant to a state statute and in compliance with court procedures designed to provide due process. Good title may pass from such an order to a bona fide purchaser--and if the purchaser should turn out to be not so "bona fide" the title underwriter can deny coverage under standard policy exclusions.

The risk in a case such as this, seems to me, would be a failure to comply with service of process requirements, if such failure is apparent from examination of the court file. Then you'd have a possible violation of due process rights which might trump an otherwise innocent purchaser.

And another story to illustrate the value of title insurance....

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