Posting for

Friday, September 11, 1998

by: Bert Rush

brush@firstam.com

THE VALUE OF TITLE INSURANCE/ESCROW AND CLOSING/REAL ESTATE BROKERS

The story of Squire Boone's calamitous land dealings (posting for 8/21/98) has its modern counterpart in the saga of Harold and June Cole.

In 1990 Harold Cole was to retire from teaching in Hawaii and move with his wife, June, to Bowling Green, Kentucky, where Harold grew up.

The Coles' daughter, Kyra, sent them a videotape of a new home in an upscale subdivision called "Hartland." They liked what they saw, so Harold traveled to Bowling Green to look at the property.

Harold inspected the home with Dot Altermatt, a family friend who was also the real estate agent for the builder. Afterward, they went to the builder's sales office nearby--where Harold bought the property by handing over his check payable to "S.R. Blanton Development, Inc." for $199,694.98. He got a deed which he recorded five days later.

So Harold moved in and made ready for June's arrival--in time to help plan their daughter's imminent wedding. But little more than a month after moving in, Harold got a call from a shaken and distraught Dot Altermatt. "Get a lawyer," she said, S.R. Blanton had gone bankrupt and "there's an outstanding mortgage on your property."

The Coles soon learned their home was subject to a construction mortgage for $165,000 in favor of The Cumberland Federal Savings Bank of Louisville. Harold remembered being told a construction mortgage would be paid off, and he'd been shown the payoff check, but the check was later voided.

Cumberland filed suit for judicial foreclosure, and the Coles hired an attorney. In time they filed a countersuit to prevent the foreclosure, and to recover damages from Cumberland. They also sued an attorney whom they believed had prepared the deed produced in the builder's sales office.

As against Cumberland, the Coles claimed it knew Blanton was financially shaky--since the bank had begun to require that Blanton deposits be made in cash--but it failed to monitor Blanton's activities so as to protect the Coles' interests.

Well, that was their first argument. Unfortunately, they never came up with anything better.

In his deposition, Harold testified that he hadn't realized the need to check on title before handing over his check. He had bought three other houses, getting a mortgage loan each time, and could only guess that his previous lenders had made sure titles were clear. But this time there was no lender.

The Coles' case went from bad to worse. It turned out their deed bore the name of "Hartland Planned Community" as grantor. This was a predecessor in title which had conveyed the land to S.R. Blanton Development, Inc. And, the lawyer whose name appeared on the deed claimed to have had nothing to do with its preparation--nor had she ever meet Harold Cole. In desperation the Coles filed an amended countersuit adding the realtor, Dot Altermatt, as a defendant.

Legal expenses soon exhausted what little was left of the Coles' savings. June returned to work in Hawaii. Harold stayed on in Bowling Green, selling their furniture piece by piece to pay bills. A September 1992 article in the Louisville Courier-Journal ("Unclear Title--Couple Who Paid Cash May Lose Home") pictured him sitting forlornly on one of his last chairs, in an otherwise empty living room.

The court reformed their deed, confirming fee title in the Coles, but ultimately the judge had no choice but to order foreclosure. An auction was held in June 1994, and Cumberland was the successful bidder at $215,000.

The claim against realtor Dot Altermatt was apparently dropped.

Comment: Another story illustrating the value of title insurance--as well as escrow and closing services.

This might be used in tandem with the Boone story--both from Kentucky. But no rap on KY--that's where Col. Sanders came from.

From the court file, it looks like the realtor got off easy. She was a family friend--and they didn't file against her until the case was two years old, after they'd gone to the newspapers and when all (I'm sure) seemed lost. She may have made some settlement (off record), or she may have had a good argument that she represented the seller/builder only (with no duty to advise buyers), or she may have been judgment-proof.

Questions, comment, argument? Just press "reply"....