to the contract between them. The contract is, either express or implied, that the instrument shall be recorded according to law. That is what the person who files an instrument pays the recorder to do, and that person must see to it that the work is done right, or accept the consequences, as between himself and third persons who are misled. A subsequent purchaser is not alone subject to damages from the nonrecording of an instrument, for the very object of the recording system is to give constructive notice to innocent purchasers, and to protect a grantee's or mortgagee's title against subsequent parties.

"The record is the essence of the law; the recorder is only a convenient instrument for the use of those whose duty it is to make the record. If, under the law, a public record were kept where every grantee was required to come and record his deed, he could certainly not plead his own mistakes or negligence, and the only reason why every man is not allowed to record his own instrument is simply that the record may be kept in a legible, orderly and presentable manner; and the law provides one man to do the work for the many, or, in other words, makes the one man the agent of the many, and who does the work at their instance, and under their pay and control. It is true that in another department of his work he may be said to be the agent of the purchaser, or searcher of the records, for the law also makes him the custodian of the record books. Every man has a right to see the records, and the law, for the purpose of preserving the records and assisting the searcher of the records, constitutes the recorder their keeper, who, at certain hours found by the law to be reasonable, must exhibit them to all who wish to see them, and must also certify to what the record shows, when requested so to do and paid for said services; and if, in the exercise of either of these duties, he either in misrepresenting the books by exhibiting false or blind records, or in making a false certificate, whether through fraud or negligence, the person for whom the service was rendered must suffer the damage if any flow from the negligent or fraudulent act, and his only remedy is against the recorder for damages." Ritchie v. Griffiths, 1 Wash. 429, 25 Pac. 341, 22 A. S. R. 155, 12 L. R. A. 384.

In the discussion of the minority rule (that the grantee, etc., is not responsible for the registrar's errors and omissions), it is stated that that rule is in force in jurisdictions where the statutes provide that an instrument is a record or imparts notice from the time it is delivered to or filed with the recorder. A like provision is embraced in the registration laws of states where the majority rule prevails, but it is given a construction different from that which obtains in the other jurisdictions. Such provision,it is said, is only intended to fix the time from which notice commences; that while an instrument remains on file it is notice for a reasonable time, until it may be spread upon the record, but after it is recorded, though erroneously, the record supercedes the instrument.

That conclusion is reached by some courts as a result of construing the recording statute in connection with other separate and distinct sections of the code prescribing in detail the duties of record

*

ing officers. Thus, in California, the section of the code relating to the "Mode of Recording," which provides that "an instrument is deemed to be recorded when * * it is deposited for record," is construed in connection with a section of the code relating to the "Effect of Recording," that "every conveyance of real property acknowledged * and recorded as prescribed by law, from the time it is filed with the recorder for record, is constructive notice of the contents thereof to subsequent purchasers and mortgagees." And it is there held that an instrument must not only be filed with the recorder for record, but that it must also be "recorded as prescribed by iaw," in order to be effective as constructive notice. Cady v. Purser, 131 Cal. 552, 63 Pac. 844, 82 A. S. R. 391.

Cady v. Purser, 131 Cal. 552, 63 Pac. 844; 82 A. S. R. 391; Chamberlain v. Bell, 7 Cal. 292, 68 Amer. D. 260; Shepherd v. Burkhalter, 13 Geo. 443, 58 Amer. D. 523; Ruskin v. Shields, 11 Geo. 636, 56 Amer. D. 436; Gilchrist v. Gough, 63 Ind. 576, 30 Amer. R. 250; State v. Davis, 96 Ind. 529; Miller v. Bradford, 12 Ia. 14; Barney v. McCarty, 15 Ia. 510, 83 Amer. D. 427; Brydon v. Campbell, 40 Md. 331; Hill v. McNichol, 76 Me. 314; Barnard v. Campau, 29 Mich. 162; Grand Rapids Nat. Bk. v. Ford, 143 Mich. 403, 107 N. W. 76, 114 A. S. R. 668, 8 Ann. Cas. 102; Terrell v. Andrew County, 44 Mo. 309; White v. Himmelberger-H. Lbr Co., 240 Mo. 113, 138 S. W. 553, 42 L. R. A. (N. S.) 151; Frost v. Beekman, 1 John. Ch. (N. Y.) 309, 9 Amer. D. 246; Jennings v. Wood, 20 Oh. 261; Prouty v. Marshall, 225 Pa. St. 570, 74 Atl. 550, 25 L. R. A. (N. S.) 1211; Bamberg v. Harrison, 89 S. C. 454, 71 S. E. 1086, Ann. Cas. 1913 B 68; Ritchie v. Griffiths, 1 Wash. 429, 25 Pac. 341, 22 A. S. R. 155, 12 L. R. A. 384; Pringle v. Dunn, 37 Wis. 449, 19 Amer. R. 772; Sawyer v. Adams, 8 Vt. 172, 30 Amer. D. 459; Sanger v. Craigue, 10 Vt. 555.

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TITLE AND
AND ABSTRACT

DEPARTMENT

Frank C. Hackman, Editor in Charge

TITLE GUARANTY CERTIFICATE IS AN INSURANCE CONTRACT The city of Los Angeles, California, provided by ordinance for a license tax to be paid by "every person, firm or corporation conducting, managing or carrying on the business of examining, searching or investigating titles to real estate and issuing abstracts, statements or certificates, showing or purporting to show or certify to the condition or state of the title to any particular property or properties as disclosed by an examination of the public records, but which abstract, statement or certificate does not insure or purport to insure the title to real property or any interest therein."

The Title Insurance and Trust Company of Los Angeles paid ,under protest, an amount demanded as a license fee under the provisions of the foregoing ordinance, and then brought suit against the city to recover the sum so paid. Judgment was rendered in favor of the company and the city appealed.

The title insurance company contended that their business is solely an insurance business, and, therefore, not subject to any tax under the ordinance. On the other hand, the city's contention was that a part of the company's business is not insurance, and the city had the right to impose a license tax based upon and growing out of the right to conduct that business. The issue was a question of fact concerning the nature of the business transacted by the insurance company.

It was conceded the company transacts an insurance business. But a considerable part of its business consists in the issuance of certificates of title directly limited to the condition of the record title, and wherein the certificate states that:

"After a careful examination of the official records of the county of Los Angeles, State of California, and of the records of the Federal offices located at Los Angeles, in relation to the title of that certain real property hereinafter described, the Company, a corporation having its principal place of business in the city and county of Los Angeles, State of California, hereby guarantees that the title to said property as it appears from said records, is vested in

-"

The issue was argued upon the theory that if the business of issuing certificates of that kind is insurance business, then the license tax was wrongfully imposed, and the company entitled to a recovery.

The Court, per Conrey, P. J., said:

"Title insurance had become a recognized form of insurance in California and elsewhere prior to the year 1910, although it is more modern in its origin than are many other branches of insurance business. It has been defined as an agreement whereby the insurer, for a valuable consideration, agrees to indemnify the insured in a specific amount against loss through defects of title to real estate, wherein the latter has an interest, either as purchaser or otherwise. * Generally, in other kinds of insurance, the

policy protects the assured against matters that may arise during, and only during, a stated period after the issuance of the policy; but the risks of title insurance, although they may be referable to the contingency of fu ture loss, are only designed to save the assured harmless from loss through defects, liens, and incumbrances that may effect or burden the title at the time when the certificate or policy is issued. There is no implied agreement to go beyond the conditions existing at the time the policy is issued and to assume a general liability to indemnify against future incumbrances. * But the distinction thus existing does not deprive title insurance of any of the essential elements which characterize the contract of insurance.

.

“'Insurance is a contract whereby one undertakes to indemnify another against loss, damages, or liability, arising from an unknown or contingent event.' Civ. Code, sec. 2527. 'Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against subject to the provisions of this chapter.' Civ. Code, sec. 2531. Counsel for appellant [the city], in support of their contention that the certificate here in question is not a contract of insurance, go further and assert that it is not a contract at all. They rely upon the decision of Lattin v. Gillette, 65 Cal. 317, 30 Pac. 545, 29 Amer. St. Rep. 115, which they say presented 'an exactly similar question.' In that action it appeared that, under employment for that purpose, the defendants furnished to the plaintiff a certificate which stated that from a careful examination of the records concerning the title to the described property 'we find the same vested in Jacob Birnbaum free from all incumbrances.' It was held that the certificate did not contain any obligation or contract, but was merely the evidence of an act done in purported satisfaction of the obligation assumed in accepting the employment. "But we think that the certificate now under consideration is itself a contract. The words 'hereby guarantees' are words of contract, whereas the words 'we find' in the certificate in the Lattin case, were only a statement of fact covering the contents of the record and the opinion of the parties issuing the certificate regarding the effect thereof. There was not, as there is in the present case, a contract guaranteeing that the record and its legal effect were as stated in the certificate. In the Lattin case there was merely the contract implied in the acceptance of the employment, that the records would be carefully examined, and that the defendants would in good faith state their opinion concerning the effect of the records. They would be liable for negligent or other failure to perform that contract. right of action would accrue at once upon issuance of the certificate, and it would be an action to recover damages for breach of contract. But in the case of a certificate like that now before us, the party entitled to the benefit of the guaranty has a right of action to recover upon the contract contained in the certificate itself, and the liability is one that does not accrue until discovery of the loss that may be incurred if the title is not represented in the certificate.

* *

The

"Appellant [city] contends that the guaranty certificate of the plaintiffs [insurance company] is not an insurance contract, because it does not contain the element of indemnity and because it does not comply with certain sections of the Civil Code and especially does not comply with section 2587. That section states that a policy of insurance must specify the parties between whom the contract is made; the rate of premium; the property or life insured; the interest of the insured in property insured if he is not the absolute owner thereof; the risks insured against, and the period during which the insurance is to continue.

"A contract in writing implies a consideration. Since the guaranty, as we have indicated, runs against future loss that may be incurred if the record title shall prove to be different from that certified, it is a contract of indemnity.

"Appellant contends that in the record title to property there is no