Daily Development for Wednesday, March 23, 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
VENDOR/PURCHASER; CONDITIONS; MULTIPLE SELLERS: Where purchase agreement states that all cotenants are defined as “Sellers” and that an escrow agent will pay the sale proceeds to “Sellers” when “all quitclaim deeds are executed and returned by the respective Sellers,” the condition benefits both buyer and sellers, and even though in fact four cotenants executed deeds and received payment, they can rescind the transaction if the fifth cotenant never provided a deed.
Young v. Pimperl, 882 So. 2d 828 (Ala. 2003)
After negotiating on a sale of the cotenancy land with all the cotenants, Buyers thought they had a deal, and sent a contract, with the wording set forth above, together with quitclaim deeds, to all the seller cotenants. The contract obviously contemplated that all the cotenants would sell, as the wordinig above indicates. But one of them, Howard, refused to sign the contract or tender the deed, indicating that he thought the land was worth more.
All the other cotenants sent in their deeds and Buyers, bypassing the escrow condition set forth in the contract, sent checks to each of them. Buyers then recorded the deeds. The next month, three of the cotenants returned the checks and demanded return of their interests in the land.
The trial court, for reasons unstated (estoppel?) concluded that Howard indeed was required to sell to Buyers, and ordered an appraisal to establish the value of his interest, which Buyers would then have to pay. We are not told much about the record that supported this holding, but Howard did not appeal. The trial court also found that the three objecting cotenants were bound by the contract.
The other three objecting cotenants appealed, and the court reversed the trial court on their appeals and ordered that the Buyers convey back the property.
The appeals court did not find that the contract was ambiguous. Rather, it determined that the condition on payment (that all Sellers have delivered their deed) and other less direct evidence in the contract indicated that the contract contemplated that there was no deal if all cotenants did not deliver their deeds.
The court remanded for further proceedings, but, since Howard didn’t appeal and another cotenant never objected, the irony is that Buyers in fact have acquired two of the five cotenancy interests. An even greater irony is that, because Howard did not appeal, the appeals court reversed on the basis that Howard hadn’t sold but necessarily left undisturbed a finding that Howard in fact was obligated to sell (albeit at a higher price.
Comment 1: Two judges dissented on the (probably correct) grounds that the condition was only for the benefit of Buyers and could be waived. Why should the cotenants who had agreed to sell care about whether the other cotenants refused to comply with the agreement? They got their money for the agreed performance all the same.
The case possibly is explained by the current fuming about the practice of buying up “heirship land” held in cotenancy on the cheap. This is happening particularly in rural areas in the South, but concern about the issue appears to have some political momentum nationwide. Often a savvy real estate pro will buy up the interests of a number of non-resident heirs of the family farm and then force a partition on the remaining heirs, often those who are remaining to work the farm. There are some nonprofit groups around the country looking for reforms to address this problem.
The facts of this case don’t indicate necessarily that the “heirship land” issue is operating here, but perhaps the court is being careful about its precedent.
Comment 2: The opinion fails to mention several common law doctrines that might have been at work here. First is the notion of estoppel by deed (or waiver of contract conditions). The three objecting cotenants sent their deeds unconditionally directly to the Buyers, not to an escrow. Could they be viewed as waiving any conditions in the contract? Certainly, by sending the money without having received the last deed, the Buyers had waived.
Another doctrine is the notion that when one delivers an unconditional deed delivered with outside conditions the delivery is deemed to be unconditional. Typically, the outside conditions are oral, and not part of a formal contract. So this doctrine might not operate here, notwithstanding the presumption of delivery arising from the recording.
Either of these doctrines might have been used by a court to find for the Buyers if the court was so inclined.
Comment 3: Except for the political dimension, which is impossible to evaluate without the full record, the editor deems the case wrong. Keep in mind that, at the end of the day, the Buyer did obtain Howard’s interest, and thus satisfied the condition, and the court knew that at the time of appeal. It seems the court bent over backwards to let the objecting cotenants out of the deal.
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