What Is In A Texas Title Warranty and When Is it Breached?

From Chicago Title Ins. Co. v. Cochran Investments, Inc., 602 S.W.3d 895, 902 (Tex. 2020).

Before examining the effect of the deed’s language, we review the obligations imposed by a warranty clause. “A warranty clause in a conveyance, either general or limited, is no part of the conveyance proper; it neither strengthens, enlarges, nor limits the title conveyed, but is a separate contract on the part of the grantor to pay damages in the event of failure of title.” Bond v. Bumpass, 100 S.W.2d 1047, 1049 (Tex. App.—Dallas 1936) (citing Richardson v. Levi, 67 Tex. 359, 3 S.W. 444, 448 (1887)), aff’d, 131 Tex. 266, 114 S.W.2d 1172 (1938). A warranty of title does not warrant the title of the grantor but instead warrants the title of the grantee. See Gibson v. Turner, 156 Tex. 289, 294 S.W.2d 781, 787 (1956) (addressing warranty in an oil-and-gas lease). Further, a warranty of title runs with the land and is not breached “unless and until there has been an actual or constructive eviction” of the grantee by an individual with superior title. Id.; Rancho Bonito Land & Live-Stock Co. v. North, 92 Tex. 72, 45 S.W. 994, 996 (1898); Jones’ Heirs, 59 Tex. at 46; Shannon v. Childers, 202 S.W. 1030, 1031 (Tex. App.—El Paso 1918, writ ref’d) (“The mere existence of a superior title in another, which has never been enforced, does not amount to a breach of the covenant of warranty.”). The measure of damages in a suit for breach of warranty of title, like those for breach of the covenant of seisin, is the consideration paid “for whatever portion of the conveyance that was subject to a failure of title” with interest. Stumhoffer v. Perales, 459 S.W.3d 158, 165 (Tex. App.—Houston [1st Dist.] 2015, pet. denied) (citing Sun Expl. & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987)); see also City of Beaumont v. Moore, 146 Tex. 46, 202 S.W.2d 448, 453 (1947).

A warranty of title may take the form of either a general or a special warranty. A general warranty applies to any failure or defect in the grantee’s title, whatever the source. See Gibson, 294 S.W.2d at 787–88 (“The obligation [under a general warranty] is … that [the covenantor] will defend and protect the covenantee against the rightful claims of all persons.” (citation omitted)); Moore, 202 S.W.2d at 453. By contrast, under a special warranty, the grantor “warrants the title only against those claiming ‘by, through or under’ *903 the grantor.” Paul, 211 S.W.2d at 356. To be sure, a special warranty deed still “conveys the land itself,” and “the limited warranty does not, of itself, carry notice of defects of title.” Id.; see also Crow v. Van Ness, 232 S.W. 539, 542 (Tex. App.—Amarillo 1921, no writ) (“The limited warranty does not destroy its effect as a conveyance of the land.”). Nevertheless, “when a vendee accepts … a deed with special warranty, the presumption of law is that he acts upon his own judgment and knowledge of the title, and he will not be heard to complain that he has not acquired a perfect title.” McIntyre v. De Long, 71 Tex. 86, 8 S.W. 622, 623 (1888) (quoting Rhode v. Alley, 27 Tex. 443, 445 (1864))….

The fact that the covenant of seisin and a warranty of title are distinct does not prevent a warranty clause from affecting the grantor’s liability for breach of seisin. Again, when construing obligations in a deed, we look to its plain language. See Stribling, 458 S.W.3d at 20. According to the special warranty clause at issue here, Cochran assumed the risk for a failure or defect of title that resulted from an individual claiming the property by, through, and under Cochran, but not otherwise. So while we recognize that the covenant of seisin and a warranty of title are conceptually distinct obligations, at bottom the deed’s language expressly limits liability for a failure of title, regardless of whether that failure of title falls within the scope of the covenant of seisin. Thus, reading the deed as a whole, we hold that it contains a qualifying expression that limits the scope of Cochran’s liability for a failure of title—including in the form of a breach of the covenant of seisin.8 See Childress, 272 S.W.2d at 420; Garrett v. Hous. Land & Tr. Co., 33 S.W.2d 775, 777 (Tex. App.—Galveston 1930, writ ref’d)…

In sum, we hold that the special warranty deed here limits Cochran’s liability for title defects to those arising from claims “by, through and under” Cochran. Chicago Title alleges no such defect.

See also

Sec. 5.023. IMPLIED COVENANTS. (a) Unless the conveyance expressly provides otherwise, the use of “grant” or “convey” in a conveyance of an estate of inheritance or fee simple implies only that the grantor and the grantor’s heirs covenant to the grantee and the grantee’s heirs or assigns:

(1) that prior to the execution of the conveyance the grantor has not conveyed the estate or any interest in the estate to a person other than the grantee; and

(2) that at the time of the execution of the conveyance the estate is free from encumbrances.

(b) An implied covenant under this section may be the basis for a lawsuit as if it had been expressed in the conveyance.
Sec. 5.024. ENCUMBRANCES. “Encumbrance” includes a tax, an assessment, and a lien on real property.

However, not everything is an encumbrance. “Where another than grantor had title to a tract in fee, free from any easement or servitude in favor of any one else, his claim was an adverse claim of title, but was not an incumbrance upon estate granted so as to be a breach of a covenant against incumbrances contained in deed;  a grantor would not be estopped from claiming that facts did not show a breach of covenant against incumbrances.”  Texas & P. Ry. Co. v. El Paso & N.E.R. Co. (Civ.App. 1913) 156 S.W. 561, error refused

But some cases imply that prior ownership interests may be an encumbrance. “The dedication instrument neither involves nor creates a tax, assessment, or lien. Although a few cases have noted that it is possible for a covenant to cloud title, the covenant must pertain to the ownership interest. See First Am. Title Co. of El Paso v. Prata, 783 S.W.2d 697, 702–03 (Tex.App.-El Paso 1989, writ denied). The McGonagles fail to show how any of the requirements set forth in the dedication instrument impact their fee simple ownership interest in the property.”

McGonagle v. Stewart Title Guar. Co., 432 S.W.3d 535, 540 (Tex. App.—Dallas 2014, pet. denied).

“In a legal sense, the word ‘incumbrance’ means an estate, interest, or right in lands, diminishing their value to the general owner; a paramount right in, or weight upon, land which may lessen its value.'”

Thomson v. Locke, 66 Tex. 383, 387, 1 S.W. 112, 114 (1886)