Daily Development for Monday, July 31, 2000

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

DEEDS; DESCRIPTION: Where a grantor conveys property by warranty deed containing language "excepting that portion" of a right-of-way, the grantor retains that portion of the property over which a right-of-way runs.

Tri-County Metropolitan Trans. Dist. of Oregon v. Portland General Elec. Co., 985 P.2d 222 (Or. Ct. App. 1999).

Rachel Hawthorn owned a farm, and granted to Oregon Electric Railway ("OER") an easement over the farm to permit OER to run rail service. Hawthorn subsequently conveyed her property to Harold Ray, and Ray then sold his property to Hawthorn Farm Company by a warranty deed which contained language "excepting that portion" of a right-of-way referring to the OER easement. Hawthorn Farm Company eventually sold the property to Quadrant Corporation.

The Tri-County Metropolitan Transportation District of Oregon initiated condemnation proceedings to acquire the OER easement and named Ray's heirs and Quadrant as defendants. The heirs and Quadrant moved for summary judgment as to the competing ownership claims. The trial court concluded that Ray never intended to retain title to the narrow strip underlying the OER easement notwithstanding the excepting clause, and entered judgment in favor of Quadrant. The Court of Appeals of Oregon reversed the trial court. The Court determined that Ray intended to grant title to everything except the land on which the OER easement lay from the excepting clause in the conveyancing deed from Ray to Quadrant because excepting clauses generally have the effect of taking something out of the thing granted that would have otherwise passed by the deed.

Comment 1: It is often useful to refer to existing easements when drafting deeds, since the grantor usually wants to avoid warranting title free of them. But the questions frequently arises whether such an exception is an exception to the warranty or an exception to the conveyance entirely. Probably, in virtually every case, the true intent of the parties is to transfer the potential future reversion of the easement along with the rest of the property. But, as this case indicates, it is not uncommon to read the language of the deed more narrowly.

In this case, it was doubly difficult to read the exception language as applying only to the warranty because there was other language in the deed following the warranty that expressly identified this easement, among others, and excepted them from the warranty. It may be, then, that in this case the grantor indeed intended to reserve the reversion. But was the grantee really aware of that?

This case involves a condemnation proceeding involving a railroad right of way. More often, the question is ownership after the right of way is abandoned. In either case, many railroad rights of way are substantial in size and potentially quite valuable. Here the easement was as much as 60 feet wide. Further, it may yet prove that there will be gold in those reversionary interests when telecommunications operators lay cable along them (the editor has expressed his doubts on this point, but has been wrong before.)

Comment 2: Here are prior cases reported in the Quarterly Reports dealing with this same issue:

DEEDS; CONSTRUCTION; EXCEPTIONS: Concepts "excepting and reserving" are inconsistent, and grantor wishing to retain some rights in the property should use one term or the other, but not both. Campbell v. Johnson, 622 N.E. 2d 717 (Ohio Ct. App. 1993). In the case of a reservation, the whole title to the property conveyed passes to the grantee, but the grantee reserves to itself some benefit of the real estate; by contrast, in the case of an exception, the grantor retains title to the excepted part, and the grantee takes title to the real estate less the exception. Here, in construing deed language that conveyed land "excepting and reserving" a roadway leading to a landlocked parcel, the court relied upon the intention of the parties in the light of the circumstances of the case. The court noted that where the intention of the parties cannot be clearly established, the exception or reservation in a conveyance is to be construed in favor of the grantee rather than of the grantor. For another interesting case involving language of reservation, see Cantley v. Hubbard, 623 So.2d 1079 (Ala. 1993),(Deed language stating the grantor reserved "all mineral reserved to the United States" was a reservation of all mineral rights, and not solely the coal rights that the United States had reserved in a prior grant.)

DEEDS; DESCRIPTIONS; RIGHT OF WAY: A warranty deed reserving or excepting a "right of way" reserves fee interest and not an easement in the right of way. Harris v. Ski Park Farms, Inc., 844 P.2d 1006 (Wash. 1993). Comment: Although this case is simple to state, as a state supreme court holding it is an important precedent on an issue that is often problematic in deed interpretation. Also see: Grill v. West Virginia Railroad Maintenance Authority, 423 S.E.2d 893 (W. Va. 1992). (Deed purporting to convey "a strip of land for a right-of-way" created a fee simple grant, not merely an easement. The language regarding use is merely descriptive.)

DEEDS; CONSTRUCTION: In construing a conveyance, a court ascertains the intent of the parties from the four corners of the instrument, giving consideration to each part and viewed in light of the circumstances leading up to its execution, and the presence of language in proximity to the warranty clause as opposed to elsewhere in the deed does not determine intent conclusively. Boswell Energy Corp. v. Arrowhead Homes, Inc., 976 P.2d 1113 (Okla. Ct. App. 1999).

The McCalebs conveyed two parcels of property by warranty deed to Arrowhead Homes, Inc., a corporation they formed for the purpose of developing a subdivision of residential homes. In both deeds, there was language inserted between the warranty clause and before the habendum clause language excepting from the conveyance all mineral interests.

Boswell Energy Corp. ("Boswell") acquired an oil and gas lease of the two parcels, and PetroCorp acquired an oil and gas lease on the same parcels from Arrowhead's successors in interest. Boswell brought a quiet title action to determine who has title to the minerals and the leasehold. The trial court entered judgment in favor of the McCalebs and Boswell.

On appeal, PetroCorp argued that the insertion of the language below the warranty clause merely excepted the mineral rights from the warranty and did not reserve the mineral interests in the McCalebs. Applying the rule that a court must discern the intent of the parties from the four corners of the instrument, the Court of Civil Appeals of Oklahoma found that there was an ambiguity in the deed. Therefore, the Court reversed and remanded the case to the trial court for extrinsic evidence as to the McCalebs' intent.

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

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