AFFIRM; Opinion Filed May 1, 2014.




                                       S    In The
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                     No. 05-13-00036-CV

     MARTIN E. McGONAGLE, M.D. AND MARY E. McGONAGLE, Appellants
                                 V.
   STEWART TITLE GUARANTY COMPANY AND STEWART TITLE COMPANY
                 D/B/A CENTRAL TEXAS TITLE, Appellees

                      On Appeal from the 191st Judicial District Court
                                   Dallas County, Texas
                           Trial Court Cause No. Dc-11-06872

                                        OPINION
                           Before Justices Bridges, Lang, and Evans
                                   Opinion by Justice Evans
       Martin E. McGonagle, M.D. and his wife, Mary E. McGonagle appeal the trial court’s

summary judgment on their claims against Stewart Title Guaranty Company and Stewart Title

Company d/b/a Central Texas Title for breach of contract, negligence, gross negligence, and

violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act. Bringing three

issues, the McGonagles generally contend the trial court erred in dismissing their claims.

Finding no merit in the McGonagles’ arguments, we affirm the trial court’s judgment.

                                    FACTUAL BACKGROUND

       The McGonagles’ claims arise out of their purchase of a piece of property in downtown

Granbury, Texas. The property was subject to a dedication instrument stating that (1) “the

property owner shall move at their sole expense, the bungalow currently on-site to a location
within the Historic Overlay, upon approval and acceptance of the relocation by the Historic

Commission;” and (2) “the owner will obtain all necessary approvals through the City of

Granbury, including a Certification of Appropriateness (C. of A.) from the Historic Commission

prior to beginning any new construction.” The dedication instrument further stated that the

agreement “shall be tied to the property and bind the current property owner, its successors and

assigns.”

         Martin McGonagle testified that he was aware of the dedication instrument before

purchasing the property and that he tried to have it removed before closing on the purchase.

McGonagle also stated he told the seller that he would not close on the purchase unless the

dedication instrument was removed. According to McGonagle, the seller told him that he would

“take care of” the dedication instrument and, shortly before the closing, the seller stated that the

instrument had been “taken care of.” Despite these alleged representations by the seller, the

sales contract signed by the McGonagles specifically stated that the “Granbury Historical Society

Agreement” 1 was included in the purchase and would belong to the buyer. A copy of the

dedication instrument was attached to the sales contract.

         At the closing, the McGonagles also purchased a title insurance policy issued by Stewart

Title Guaranty Company. The policy contained several exclusions from coverage including

“[d]efects, liens, encumbrances, adverse claims or other matters . . . created, suffered, assumed or

agreed to by the Insured Claimant.” Also excluded was “[t]he refusal of any person to purchase,

lease or lend money on the estate or interest covered hereby . . . because of Unmarketable Title.”

         Schedule B of the policy contained exceptions from coverage. The first exception stated

that the policy did not insure against loss or damage arising by reason of itemized “restrictive

covenants of record.” The exception further stated that Stewart Title Guaranty “must either

   1
       The McGonagles do not dispute that the Granbury Historical Society Agreement is the dedication instrument.


                                                       –2–
insert specific recording data or delete this exception.” The exception was struck through in its

entirety and the word “Deleted” was typed in the space beneath.

         At the closing, Martin McGonagle reviewed the Commitment for Title Insurance

prepared by Stewart Title Company d/b/a Central Texas Title. The title commitment included

Schedule B. According to McGonagle, he interpreted the deletion of the first exception from

coverage in Schedule B to mean that the dedication instrument had been removed and no longer

applied to the property. McGonagle stated that he believed the deleted provision confirmed the

seller’s statement to him that the instrument had been “taken care of.”

         Sometime after purchasing the property, the McGonagles attempted to resell it. They

allege they were unable to do so because the property was still subject to the dedication

instrument. The McGonagles brought suit against the seller for misrepresentation. They then

brought this separate suit against Stewart Title Guaranty and Stewart Title for breach of contract,

negligence, gross negligence, and violations of the Texas Insurance Code and Texas Deceptive

Trade Practices Act. 2 Both Stewart Title Guaranty and Stewart Title filed motions for traditional

summary judgment contending the McGonagles’ claims failed as a matter of law because there

was no coverage under the title policy for losses allegedly caused by the dedication instrument

and neither company made any misrepresentations about the property or the title policy. The

trial court granted the motions and the McGonagles brought this appeal.

                                                   ANALYSIS

         We review a trial court's summary judgment de novo. See Frost Nat'l Bank v. Fernandez,

315 S.W.3d 494, 508 (Tex. 2010). The party moving for a traditional summary judgment has the

burden of establishing there are no genuine issues of material fact and that it is entitled to

    2
      The McGonagles also alleged claims for violations of the Unfair Claims Settlement Practices Act and breach
of the duty of good faith and fair dealing. These claims were severed from this action and are not the subject of this
appeal.


                                                        –3–
judgment as a matter of law. See TEX. R. CIV. P. 166a(c). In conducting our summary judgment

review, we consider all the evidence in the light most favorable to the non-movant, indulging all

reasonable inferences in its favor. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49

(Tex. 1985).


          In this case, all of the McGonagles’ claims are based on two allegedly wrongful acts by

Stewart Title Guaranty and/or Stewart Title: (1) denying coverage for losses caused by the

dedication instrument and (2) misrepresenting the state of the title to the property and the extent

of coverage provided by the title insurance policy. We address each in turn.


          A. Denial of Coverage

          The McGonagles argue that the losses they suffered as a result of the dedication

instrument fall within the specifically enumerated list of covered risks in the policy. In the

alternative, they argue their losses are covered because a risk such as the dedication instrument is

not specifically excluded. Under the “COVERED RISKS” section of the policy, the contract

states that, subject to the exclusions from coverage, exceptions from coverage contained in

Schedule B, and the conditions set forth in the policy, Stewart Title Guaranty insured the

McGonagles against loss or damage incurred by reason of “[a]ny defect in or lien or

encumbrance on the Title.” The policy further covered “[l]ack of good and indefeasible Title.” 3

“Title” was defined in the policy to mean “the estate or interest described in Schedule A.”

Schedule A set forth the estate as a fee simple.

          In an insurance contract dispute, the initial burden falls on the insured to establish

coverage under the terms of the policy. See Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins.

Co., 130 S.W.3d 181, 188 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). As the movant

   3
       The policy contained ten enumerated risks. The remainder are not at issue in this case.


                                                         –4–
for summary judgment on this issue, however, Stuart Title Guaranty had the burden to show that

no material fact issue existed and that it was entitled to judgment as a matter of law. Id. In its

motion for summary judgment, Stewart Title Guaranty contended there was no coverage for the

claims at issue because the dedication instrument had no effect on the McGonagles’ ownership

rights in the property. It argued the evidence showed the McGonagles purchased and received a

fee simple interest in the property and nothing in the dedication instrument affected that

ownership interest or the ability of the McGonagles to pass that interest on to a subsequent

purchaser.

        A title insurance policy is a contract of indemnity that imposes a duty on the insurance

company to indemnify the insured against losses caused by defects in title. See Hanson Bus.

Park, L.P. v. First Nat’l Title Ins. Co., 209 S.W.3d 867, 869 (Tex. App.—Dallas 2006, pet.

denied). The alleged defect must involve a flaw in the ownership rights of the property to trigger

coverage. Id. at 870. An irregularity that merely affects the value of the land, but not the

ownership rights, is not a defect in title. Id.

         The McGonagles contend the dedication instrument falls within the scope of coverage

because it is “a covenant, creating an encumbrance, which affects title.” This argument is not

well taken. An “encumbrance” is a tax, assessment, or lien on real property. See TEX. PROP.

CODE ANN. § 5.024 (West 2004). 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.




                                                  –5–
       The McGonagles argue at length that the dedication instrument affects their ability to sell

the property and, therefore, amounts to a defect in title. We addressed this same argument in

Hanson Bus. Park, L.P. v. First Nat’l Title Ins. Co., 209 S.W.3d at 869–70. As stated in Hanson,

“the concept of ‘title’ speaks to ownership of rights in property, not the condition or value of the

property.” Id. at 870. The term “marketable title” goes to whether the property interest can be

sold at all, not whether it will fetch a lesser price because of some condition limiting its use. See

id. at 869. In this case, although the dedication instrument imposes certain burdens on the land

owners that may lessen the market value of the property, it does not vest any ownership interests

in the property in any other party that would affect the McGonagles’ title. Accordingly, the

dedication instrument does not fall within the title policy’s covered risks.

       Even if the dedication instrument could be considered a defect in title, it is a defect that

the McGonagles assumed when they signed the purchase contract and is, therefore, excluded

from coverage under the terms of the title policy. The purchase contract specifically stated that

the dedication instrument was included in the sale and would belong to the buyer.               The

instrument was attached to the purchase contract and stated that it “shall be tied to the property

and bind the current property owner, its successors and assigns.” The title policy excludes all

defects or other matters “. . . assumed or agreed to by the Insured Claimant.”

       The McGonagles assert that they did not assume or agree to the dedication instrument

because they believed it had been removed when they signed the purchase contract. However,

one who signs an agreement, even without knowledge of its contents, is presumed to have

consented to its terms and is charged with knowledge of the agreement’s legal effect. See First

City Mortg. Co. v. Gillis, 694 S.W.2d 144, 147 (Tex. App.—Houston [14th Dist.] 1985, writ

ref’d n.r.e.). Because the purchase contract specifically incorporated and attached the dedication

instrument, the fact that the seller told the McGonagles the instrument had been “taken care of”

                                                –6–
does not negate this presumption. A party cannot justifiably rely on oral representations in an

arms-length transaction that are directly contradicted by the contract he signs. See Miller Global

Props., LLC v. Marriott Int’l, Inc., 418 S.W.3d 342, 347–48 (Tex. App.—Dallas 2013, pet.

filed).

          The McGonagles argue that the “assumed or agreed to” exclusion requires a showing

that the insured intended to acquire the title defect at issue. Such intent is shown if the insured

acquires the property with knowledge of the existence and extent of the title defect being

assumed. See Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 868 (5th Cir.

2014). As stated above, when the McGonagles signed the purchase contract, they consented to

its terms and were charged with knowledge of the contract’s legal effect. The legal effect in this

case was the assumption of the dedication instrument. The McGonagles point to no evidence

that the purchase contract they signed failed to accurately inform them of the existence and

extent of the dedication instrument or the fact that it was still attached to the property.

Accordingly, to the extent the dedication instrument could be considered a defect in title, it was

expressly assumed by the McGonagles under the purchase contract and is, therefore, excluded

from coverage. We resolve the McGonagles’ first issue against them.

          B. Alleged Misrepresentation

          The McGonagles contend that the deletion of the first exception to coverage under

Schedule B constituted a misrepresentation of both the state of the title to the property and the

extent of coverage provided by the policy. The exception allowed Stewart Title Guaranty to

except from coverage any restrictive covenant of record that it itemized in the space provided.

The exception states that the insurer “must either insert specific recording data or delete [the]

exception.” The exception was struck through and the word “deleted” was typed in the space

provided.     According to the McGonagles, the deletion of the exception constituted a

                                               –7–
representation that either the dedication instrument was no longer attached to the property or that

it was not excepted from coverage.

       In arguing that the deletion amounted to an affirmative representation that the dedication

instrument was no longer attached to the property, the McGonagles rely heavily on the Texas

Supreme Court opinion of First Title Co. of Waco v. Garrett, 860 S.W.2d 74 (Tex. 1993). In

Garrett, the supreme court held that a title company made an actionable, affirmative

representation to its insured when it inserted the phrase “none of record” in the space provided

for itemizing restrictive covenants of record rather than deleting the provision. See id. at 76–77.

The court concluded that the phrase “none of record” was clearly a representation “that there

were no restrictive covenants in the county deed records.” Id. at 76. The McGonagles attempt to

equate the word “deleted” used in their policy with the phrase “none of record” used in the

Garrett policy.   The word “deleted,” however, refers solely to the fact that the exception was

deleted pursuant to the instructions in the standard form document and cannot be construed to

mean anything else. It conveys no information about the existence or non-existence of restrictive

covenants. Although the McGonagles may have assumed the provision was deleted because the

dedication instrument had been removed, they point to no statements by appellees that the

exception was deleted for this reason. The deletion represents only that restrictive covenants of

record affecting the title, if any, were not excepted from coverage.

       The McGonagles next argue that the removal of the exception for restrictive covenants

constituted an affirmative representation that the dedication instrument would be a covered risk.

But the deleted provision makes no reference to any specific covenant and the exception only

impacts restrictive covenants that otherwise fall within the scope of coverage. As discussed

above, the dedication instrument at issue does not fall within the scope of coverage because it

does not affect the McGonagle’s fee simple interest or, alternatively, because the “defect” was

                                                –8–
assumed. See Hanson, 209 S.W.3d at 870. The removal of the exception cannot create coverage

that is not otherwise provided by the policy. Neither can the removal of an exception from

coverage mislead the insured that coverage exists when the remainder of the policy indicates

otherwise.

       The McGonagles suggest that appellees were required to inform them that the dedication

instrument was still attached to the property. The only duty of a title insurer is to indemnify the

insured against losses caused by a defect in title. See Chicago Title Ins. Co. v. McDaniel, 875

S.W.2d 310, 311 (Tex. 1994). Although an insurer cannot misrepresent the state of the title or

mislead the insured, it has no duty to point out any outstanding encumbrances. See Martinka v.

Commonwealth Land Title Ins. Co., 836 S.W.2d 773, 777 (Tex. App.—Houston [1st Dist.] 1992,

writ denied). We have already concluded that nothing in the deletion of the exception for

restrictive covenants could be construed as being misleading or a misrepresentation regarding the

existence of either the dedication instrument or coverage for the damages it allegedly caused.

Accordingly, appellees were under no duty to inform the McGonagles that the instrument was

still attached to the property.   Id.   Because the McGonagles’ claims for negligence, gross

negligence, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act

were all based on the deleted provision allegedly constituting a misrepresentation, we conclude

the trial court correctly granted summary judgment in appellees’ favor on those claims.

       We resolve the McGonagles’ second and third issues against them. We affirm the trial

court’s judgment.



130036F.P05

                                                     /David Evans/
                                                     DAVID EVANS
                                                     JUSTICE

                                               –9–
                                         S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

MARTIN E.McGONAGLE, M.D. AND                         On Appeal from the 191st Judicial District
MARY E. McGONAGLE, Appellants                        Court, Dallas County, Texas
                                                     Trial Court Cause No. Dc-11-06872.
No. 05-13-00036-CV          V.                       Opinion delivered by Justice Evans.
                                                     Justices Bridges and Lang participating.
STEWART TITLE GUARANTY
COMPANY AND STEWART TITLE
COMPANY D/B/A CENTRAL TEXAS
TITLE, Appellees

       In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
       It is ORDERED that appellees STEWART TITLE GUARANTY COMPANY AND
STEWART TITLE COMPANY D/B/A CENTRAL TEXAS TITLE recover their costs of this
appeal from appellants MARTIN E. McGONAGLE, M.D. AND MARY E. McGONAGLE.


Judgment entered this 1st day of May, 2014.




                                                   /David Evans/
                                                   DAVID EVANS
                                                   JUSTICE




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