Daily Development for Thursday, December 13, 2001

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

DEEDS; COVENANTS OF TITLE; QUIET ENJOYMENT: The grantor's covenant of title in a warranty deed is not breached by a "holdover" interest of a third party if that party's interest is not legally enforceable, even if the grantee pays the holdover to eliminate its presence on the property..

Lewis v. Jetz Service, Co., Inc., 9 P.3d 1268 (Kan. Ct. App. 2000).

The Lewises bought an apartment building in which Jetz Service, Co. maintained washers and dryers in the basement pursuant to a lease entered into with the seller's predecessor-in-interest. The Lewises requested Jetz to remove the washers and dryers. After Jetz refused, the Lewises sued for forcible detainer and against seller for breach of the covenant of title contained in a warranty deed. At trial, the Lewises bought out the term of Jetz's lease, and the trial court found that the Jetz lease was unenforceable. Nevertheless, the trial court entered judgment against seller for breach of the warranty of title and the seller appealed.

The Court of Appeals of Kansas reversed, stating that there can be no breach of the covenant of title in a warranty deed unless the third party's claim is superior to the title or possessory rights of the grantee. Neither party to the action had contested the trial court's finding that the vending company did not have a valid lease. Since the lease was invalid and a grantor's covenant of title in a warranty deed is limited to lawful claims only, there was no breach of the warranty of title.

Comment: The case is a useful reminder of the distinction between the covenant of marketability, which is implicitly in every land sale contract unless disclaimed, and deed covenants, which are part of the grantor's obligation only if the grantor agrees to put them in the deed.

Defects triggering a failure of marketability may include colorable claims that ultimately prove invalid if the presence of such claims would affect the ability of a party to market the property (let's not quibble too much about the exact definition of "marketability" - there are dozens, a number of which were recently discussed on DIRT.)

With respect to deed covenants, there are two types of covenants, and they are breached in different ways. The "present" covenants are breached if there is a defect in or unexcepted encumbrance to title that affects value, whether or not the holder of the competing interest is actually asserting it. The "future covenants" are breached if there is a defect or unexcepted encumbrance which actually results in an eviction (or payment to forestall eviction). In the case of interests that are not possessory, "eviction" means actual assertion of the right.

But with respect to both present deed covenants and future deed covenants, the interest triggering a claim must be an enforceable interest. I am not saying, by the way, that the laundry rights asserted in the instant case would have affected marketability. We don't know just how extensive they were nor how likely they were to be enforceable. But once a court found the unenforceable, the deed covenants are not implicated.

Note that the covenant of further assurances - part of the deed covenant structure, will require that the grantor cooperate in assisting the grantee in defeating the competing claim, and this obligation could accrue, the editor assumes, even prior to the judicial resolution of whether the claim was valid. It would be an interesting case if a grantor refused to cooperate in clearing a competing claim and, because of this refusal, the grantee expended considerably more than it might have expended defending against the claim before the grantee ultimately defeated it. Even though the claim in this case was found in the end to be unenforceable, would the grantor have liability for refusal to be cooperative in assisting the grantee in defending against it? The editor is puzzled here. Maybe another DIRTer can elucidate.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named "Brokerdirt." But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/