Blown Title Work Leaves Missouri Couple Facing Possible Foreclosure On Purchase Of Lot Subsequently Improved With New Home

In Boone County, Missouri, the Columbia Daily Tribune reports:

• Darrel and Mellony Melson bought the lot in the Brookfield Estates where they would build their home in May 2003. They built a house in the higher-end Southern Boone County subdivision that Boone County Assessor records value at $275,000. Four years later, they found out someone else had a right to it.



• A decision handed down Tuesday in the Missouri Court of Appeals Western District ruled that an owner of the property who sold it in 2000 had the right to foreclose on it. The decision overturns a local court’s decision and marks the next step in a complicated suit over an unusual circumstance.



• Before the Melsons built their home, Keith and Chastity Samuel owned it as part of a 94-acre tract. They bought it in 2000 from Carl and Martha Traxler. As part of the transaction, the Traxlers provided $388,180 in seller financing to cover the remaining purchase price of the land, putting a lien on it in their favor.



• The Samuels then set about developing it, taking out a loan from Boone County National Bank. That gave the bank a lien against the land, too. From December 2001 to September 2004, the Samuels sold at least 14 residential lots to various buyers, court documents state. All the while, they were making loan payments to their two creditors — the bank and the Traxlers. As the lots were sold, the bank and the Traxlers issued partial deeds of release to the people who bought the lots.



• When the Melsons bought their lot in 2003, they hired Boone-Central Title Company to locate existing liens against the property. Boone-Central obtained a partial release from the bank. For some reason, it didn’t get one from the Traxlers.

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• “Unfortunately we’re human and sometimes mistakes are made,” said Karen Brown, president of Boone-Central Title Company, who added that title insurance will cover damages to the Melsons.(1)

For more, see Title firm error leaves family in limbo.

For the court ruling, see Melson v. Traxler, No. WD72795 (Mo. App. W.D. November 1, 2011).

(1) Title insurance will only indemnify for damages limited to the face amount of the title policy. It may be that, while obtaining an owner's title policy for the purchase price of the lot, the Melsons failed to subsequently update the policy to reflect the value of the improved premises, which would include the value of their new home after it was built. In that case, the title insurer will only be on the hook for the lesser value of the unimproved lot, leaving the Melsons in deep $#!t.