[97] Danhof, P. J.
This is a case of first impression in this state. The questions presented are: at what point does the statute of limitations begin to run in the case of a defective abstract of title, and whether the lack of privity with the abstractor bars recovery by a subsequent purchaser of the land.
Plaintiffs Williams purchased certain property from defendants Polgar under a land contract dated August 1, 1959. At the time of purchase defendants Polgar furnished to plaintiffs Williams an abstract of title certified to July 15, 1959 by a predecessor of defendant American Title Insurance Company. This abstract was originally issued by the Macomb County Abstract & Title Company and was extended by that company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951 and 1952. For purposes of this appeal we will accept the plaintiffs’ contention that the American Title Insurance Company is the successor in interest of the Ma-comb County Abstract & Title Company.
The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926, in Liber 242, p 174 of the Macomb County Records. This deed by Henry J. Brehm and Mary Brehm, Polgars’ predecessors in title, conveyed the southerly 60 feet of the property described in the land contract to the Macomb County Board of Road Commissioners. The plaintiffs contend that they first learned of this deed on December 12, 1969. This action was commenced on April 21, 1971. The plaintiffs claim damages arising out of the road commission’s exercising its rights over the land by widening the road adjacent to the plaintiffs’ land which caused the destruction of the building located on the property. All of the defendants moved for accelerated judgment under GCR 1963, 116. The trial court held that the plaintiffs’ [98] cause of action accrued no later than the execution of the land contract on August 1, 1959 and granted accelerated judgment to all defendants. We reverse and remand.
We deal first with the statute-of-limitations problem. It appears that the majority rule is that the statute runs from the time the abstract is delivered. See 1 Am Jur 2d, Abstracts of Title, § 24, p 245, 1 CJS, Abstracts of Title, § 13, p 399. We decline to follow the cases so holding and will adhere to the minority rule which we find to be better reasoned. Cases which we find highly persuasive are Chicago RI & GR Co v Duncan, 273 SW 908 (Tex Civ App, 1925) and Hillock v Idaho Title & Trust Co, 22 Idaho 440; 126 P 612 (1912). In the Hillock case the Court examined numerous authorities and concluded that the better rule was that the statute began to run when the defect was discovered. The Court reasoned that the omission of a conveyance from an abstract would be considered fraud, and that, so considered, the statute would not begin to run until the fraud was discovered. We agree with this conclusion. We do not hesitate to find that the certification of an abstract that makes no mention of a properly recorded conveyance is constructive fraud. As the Court said in Hillock v Idaho Title & Trust Co, 22 Idaho 440, 449; 126 P 612, 615 (1912):
"If the statute runs in favor of the abstractor from the delivery of the abstract, the company would be released long before the falsity of the abstract could reasonably be discovered by the purchaser. This would not be justice, and ought not to be the law.”
At all times relevant to this action we have had a statute that was substantially the same as the [99] present MCLA 600.5855; MSA 27A.5855 which reads:
"If a person who is or may be liable for any claim fraudulently conceals the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the action may be commenced at any time within 2 years after the person who is entitled to bring the action discovers, or should have discovered, the existence of the claim or the identity of the person who is liable for the claim, although the action would otherwise be barred by the period of limitations.”
An action commenced on April 21, 1971 would be timely if the defect was not discovered until December 12,1969.1
With regard to defendants Polgar the statute has not run. There can be no breach of contract until there is a failure to convey pursuant to the terms of the land contract. The statute has not begun to run. This action is for an anticipatory breach.
While the trial court did not base its ruling on a lack of privity we find it necessary to discuss the issue. Lack of privity was one of the grounds argued in support of the motion for accelerated judgment, and the issue is certain to arise on remand. In addition, the question is of substantial importance to the jurisprudence of the state.
It is generally said that there can be no recovery against an abstractor by one who is not in privity of contract with him. The cases are collected in the Annotation: Liability of Abstractor — Privity, 34 ALR3d 1122. Since we write on a clean slate we [100] are free to reject traditional rule and hold that a person who is not in privity may maintain an action against an abstractor.
One of the reasons given for the privity requirement is that one who is not in privity of contract should not be allowed to maintain an action on this contract. The answer to this argument is simple. This is not an action in contract, it is an action in tort. It is certainly established that a breach of contract can also be a tort and this is true of the faulty preparation of an abstract. Dorr v Massachusetts Title Insurance Co, 238 Mass 490; 131 NE 191 (1921), Ehmer v Title Guarantee & Trust Co, 156 NY 10; 50 NE 420 (1898), Prosser, Torts, § 93, p 638, 2 Harper & James, Torts, § 18.6, p 1049 et seq.
Keeping in mind that this is a tort action the question is not whether or not we can find privity, but rather, it is a question of whether a subsequent purchaser or mortgagee is a member of the class to which the abstractor owes a duty. We believe that they are members of such a class. The difference between one who is in privity of contract and a subsequent purchaser or mortgagee is that the former may elect to proceed in either contract or tort while the latter is limited to a tort action.
Free access — add to your briefcase to read the full text and ask questions with AI
[97] Danhof, P. J.
This is a case of first impression in this state. The questions presented are: at what point does the statute of limitations begin to run in the case of a defective abstract of title, and whether the lack of privity with the abstractor bars recovery by a subsequent purchaser of the land.
Plaintiffs Williams purchased certain property from defendants Polgar under a land contract dated August 1, 1959. At the time of purchase defendants Polgar furnished to plaintiffs Williams an abstract of title certified to July 15, 1959 by a predecessor of defendant American Title Insurance Company. This abstract was originally issued by the Macomb County Abstract & Title Company and was extended by that company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951 and 1952. For purposes of this appeal we will accept the plaintiffs’ contention that the American Title Insurance Company is the successor in interest of the Ma-comb County Abstract & Title Company.
The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926, in Liber 242, p 174 of the Macomb County Records. This deed by Henry J. Brehm and Mary Brehm, Polgars’ predecessors in title, conveyed the southerly 60 feet of the property described in the land contract to the Macomb County Board of Road Commissioners. The plaintiffs contend that they first learned of this deed on December 12, 1969. This action was commenced on April 21, 1971. The plaintiffs claim damages arising out of the road commission’s exercising its rights over the land by widening the road adjacent to the plaintiffs’ land which caused the destruction of the building located on the property. All of the defendants moved for accelerated judgment under GCR 1963, 116. The trial court held that the plaintiffs’ [98] cause of action accrued no later than the execution of the land contract on August 1, 1959 and granted accelerated judgment to all defendants. We reverse and remand.
We deal first with the statute-of-limitations problem. It appears that the majority rule is that the statute runs from the time the abstract is delivered. See 1 Am Jur 2d, Abstracts of Title, § 24, p 245, 1 CJS, Abstracts of Title, § 13, p 399. We decline to follow the cases so holding and will adhere to the minority rule which we find to be better reasoned. Cases which we find highly persuasive are Chicago RI & GR Co v Duncan, 273 SW 908 (Tex Civ App, 1925) and Hillock v Idaho Title & Trust Co, 22 Idaho 440; 126 P 612 (1912). In the Hillock case the Court examined numerous authorities and concluded that the better rule was that the statute began to run when the defect was discovered. The Court reasoned that the omission of a conveyance from an abstract would be considered fraud, and that, so considered, the statute would not begin to run until the fraud was discovered. We agree with this conclusion. We do not hesitate to find that the certification of an abstract that makes no mention of a properly recorded conveyance is constructive fraud. As the Court said in Hillock v Idaho Title & Trust Co, 22 Idaho 440, 449; 126 P 612, 615 (1912):
"If the statute runs in favor of the abstractor from the delivery of the abstract, the company would be released long before the falsity of the abstract could reasonably be discovered by the purchaser. This would not be justice, and ought not to be the law.”
At all times relevant to this action we have had a statute that was substantially the same as the [99] present MCLA 600.5855; MSA 27A.5855 which reads:
"If a person who is or may be liable for any claim fraudulently conceals the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the action may be commenced at any time within 2 years after the person who is entitled to bring the action discovers, or should have discovered, the existence of the claim or the identity of the person who is liable for the claim, although the action would otherwise be barred by the period of limitations.”
An action commenced on April 21, 1971 would be timely if the defect was not discovered until December 12,1969.1
With regard to defendants Polgar the statute has not run. There can be no breach of contract until there is a failure to convey pursuant to the terms of the land contract. The statute has not begun to run. This action is for an anticipatory breach.
While the trial court did not base its ruling on a lack of privity we find it necessary to discuss the issue. Lack of privity was one of the grounds argued in support of the motion for accelerated judgment, and the issue is certain to arise on remand. In addition, the question is of substantial importance to the jurisprudence of the state.
It is generally said that there can be no recovery against an abstractor by one who is not in privity of contract with him. The cases are collected in the Annotation: Liability of Abstractor — Privity, 34 ALR3d 1122. Since we write on a clean slate we [100] are free to reject traditional rule and hold that a person who is not in privity may maintain an action against an abstractor.
One of the reasons given for the privity requirement is that one who is not in privity of contract should not be allowed to maintain an action on this contract. The answer to this argument is simple. This is not an action in contract, it is an action in tort. It is certainly established that a breach of contract can also be a tort and this is true of the faulty preparation of an abstract. Dorr v Massachusetts Title Insurance Co, 238 Mass 490; 131 NE 191 (1921), Ehmer v Title Guarantee & Trust Co, 156 NY 10; 50 NE 420 (1898), Prosser, Torts, § 93, p 638, 2 Harper & James, Torts, § 18.6, p 1049 et seq.
Keeping in mind that this is a tort action the question is not whether or not we can find privity, but rather, it is a question of whether a subsequent purchaser or mortgagee is a member of the class to which the abstractor owes a duty. We believe that they are members of such a class. The difference between one who is in privity of contract and a subsequent purchaser or mortgagee is that the former may elect to proceed in either contract or tort while the latter is limited to a tort action.
The strongest argument for a privity requirement is that if there were no such requirement the abstractor would be open to virtually unlimited liability. Whatever the situation is with regard to other professional certificates we do not believe that this is true of abstracts.2 Abstracts are prepared for a limited class, among them purchasers [101] and mortgagees. The abstractor knows this and certainly is aware that future purchasers and mortgagees will rely on his abstract. Thus, the class to whom the duty is owed is clearly defined. Moreover, there is a limit on the amount for which the abstractor may be held liable. For example, in a case where the abstractor has failed to note a deed conveying the property in fee simple absolute and the subsequent purchaser loses the property, that limit is the total value of the property. Contrast this with a case involving an accountant’s certificate. Here an unlimited number of people may rely on the certificate in extending credit and the liability is truly unlimited. We are aware that real property often appreciates in value and that subsequent purchasers and mortgagees may suffer damages through the loss of improvements made to the land after the date of the abstract; however, this is not sufficient reason to defeat liability. We agree with the following statement from Prosser, Torts, § 102, p 723:
"Certificates of expert examination and approval are intended to be exhibited, not hidden under a bushel; and a rule which denies recovery because the defendant who has provided one for such a purpose does not know the plaintiff’s name or the particulars of the transaction has an artificial aspect.”
The rule with regard to the liability of abstractors for defective abstracts is correctly stated in the Restatement of Torts, § 552, p 122, which reads:
"One who in the course of his business or profession supplies information for the guidance of others in their business transactions is subject to liability for harm caused to them by their reliance upon the information if
[102] "(a) he fails to exercise that care and competence in obtaining and communicating the information which its recipient is justified in expecting, and
"(b) the harm is suffered
"(i) by the person or one of the class of persons for whose guidance the information was supplied, and
"(ii) because of his justifiable reliance upon it in a transaction in which it was intended to influence his conduct or in a transaction substantially identical therewith.”
We are aware, of course, that arguments based on §552 of the Restatement have been rejected by many courts. We can only echo the words of the Idaho Supreme Court in Hillock v Idaho Title & Trust Co, 22 Idaho 440, 450-451; 126 P 612, 616 (1912):
"In the face of the authorities above cited stating a somewhat different view, we have had some hesitancy in reaching the conclusion herein announced, not because we have any doubt whatever as to the soundness of the course of reasoning we have adopted, but rather out of respect for the opinions of courts of distinction and high standing. The question, however, confronting us is a new one in this state, and we feel that we would rather announce a rule and place a construction on a statute which to us seems reasonable and at the same time is in consonance with the plainest dictates of justice, even though in doing so we may subject ourselves to the charge of holding against the weight of the adjudicated cases.”
Reversed and remanded for further proceedings not inconsistent with this opinion. Costs to the plaintiffs.
Borradaile, J., concurred.