Daily Development for Wednesday, January 26, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
DEEDS; DELIVERY; INTENT: The delivery of a deed for real property creates a rebuttable presumption that the grantor intended to convey a present interest to the grantee. However, the grantor may rebut this presumption by introducing extrinsic evidence to determine the grantor's requisite intent. Blancett v. Blancett, 102 P.3d 640 (N.M. 2004).
Richard M. Blancett ( "Grantor") executed two deeds. The first deed purported to convey to Linn Richard Blancett ("Grantee") certain ranch property, reserving in the Grantor a life estate. The other deed purported to convey the mineral estate in the same property to the Grantee and his brother, subject also to a life estate in the Grantor. In 1993, the Grantor delivered both deeds to the Grantee's wife.
According to the Grantor, the delivery of the deeds was conditional and was made merely as "stop-gap estate planning tool" until the Grantor could prepare more formal estate documents. The Grantor testified that, at the time the Grantor delivered the deeds, he told the Grantee not to record the deeds unless the Grantor died or did something "crazy." Although the Grantee disputed the Grantor's assertions regarding the conditional nature of the delivery of the deeds, the trial court deemed the Grantor's testimony to be credible and found that it constituted an oral condition that precluded legal delivery of the deeds. The Court of Appeals affirmed.
The New Mexico Supreme Court affirmed, holding that (i) without the intent to make a present transfer, there can be no legal delivery of a deed and (ii) although the physical handing over of a deed to a grantee creates a presumption of legal delivery, a grantor can rebut the presumption with evidence that grantor had no intent to make a present transfer. Acknowledging the important policy concerns noted by the defendant (protecting third-party purchasers and creditors in lending certainty and stability to land titles), the Supreme Court reasoned that the burden shifting approach, rather than a per se rule against conditional delivery of deeds, accommodates New Mexico's strong interest in honoring parties' intent in land transactions, a policy that finds support in modern property jurisprudence.
The court then addressed the issue of whether extrinsic evidence could be introduced by the Grantor to support his position that he did not intend to make a present conveyance when delivering the deeds. The New Mexico Supreme Court relied on a long standing principle of New Mexico law that "whether the grantor had such intent may be established by the parties' communications and behavior at, prior to, or subsequent to the time of delivery." In support of its conclusion that substantial evidence was available to support the lower courts' determination that the Grantor lacked the intent to make a present conveyance, the Court noted that the Grantor told the Grantee not to record the deeds until the Grantor died without a will or did something "crazy" and that the Grantee did not in fact record the deeds for a period of eight years, after he learned that he stood to receive less property than the deeds had provided.
Reporter’s Comment: The Blancett case appears to stand for the proposition that a grantor, even many years after delivering a deed, may introduce extrinsic evidence to show that the grantor did not possess the requisite intent at the time the deed was delivered to cause a valid conveyance. While this case may have little impact on commercial and other transactions, where deeds commonly are recorded at closing and the grantee's fee title is insured by a title company, in familial and other transactions that do not involve immediate recording and title insurance, the potential impact of this case is especially importnt.
Editor’s Comment: 1 Keep in mind that we’re talking about a failure of delivery. That means that the deed is void, not just voidable, and, as the court acknowledges, innocent third parties, including mortgagees, who rely upon the record and the fact of the deed get nothing. Although the late recording was relevant to the court’s determination here, the court is not saying that only late recorded deeds can be set aside. It would be possible for the same process to be applied to a contemporaneously recorded deed.
Editor’s Comment 2: The other side of the question is that there has to be some minimum requirement of intent, and some way to test it. The property casebooks generally include a case in which parents gave a deed to a son and his wife to have a lawyer look at it. On the way to the lawyer’s office, the son and his wife recorded the deed. Later, when the son and his wife divorced, the wife claimed that the property was part of their estate. Held: for the parents - same rationale as this case.
Note, however, that there is also a line of cases that says that a grantor’s stated conditions on the effectiveness of an otherwise valid presently effective deed that is given to the grantee are void, at least in “family wealth transfer” deals, apparently because the courts are loathe to try to get to the bottom of all the uncertainties of communication in such contexts. The New Mexico court acknowledges this contrary line of authority, citing Ritchie v. Davis, 133 N.W. 2d 312 (Wis. 1965).
So we do have two schools of thought here
The New Mexico court, perhaps with some foundation, argues that many of the cases refusing to uphold a verbal condition in fact do analyze the evidence running contrary to intent and simply find it wanting. As indicated above, the court boils this authority down to the principle that there is a burden of proof on the party denying the deed’s validity to demonstrate the lack of intent. Keep in mind, also, that New Mexico is a state that is very free to admit extrinsic evidence to establish intent in any legal document. Thus, although it might be said that New Mexico’s rule is likely going to be interpreted there more favorably to the attacking grantor’s position than might be the case elsewhere.
Editor’s Comment 3: In a recent DIRT exchange, there was a discussion of whether a power of attorney executed by a mother but never shown to anyone would later be effective when the daughter (the appointee under the power) found the document in her mother’s papers after he mother had become incompetent. There was a strong sentiment in favor of validity. Those “in the trenches” argued that it was common in estate planning to have powers of attorney executed but not delivered. Is it also common in modern estate planning to have deeds with reserved life estates conditionally handed over to the grantees? If so, then that might weigh in favor of setting aside any evidence of verbal conditions here.
The Reporter for this case was William Steadman of the Rodey et al law firm in Albuquerque.
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