DD 5/16/03 Easement Merger Fails As Against Mortgagee of Dominant Parcel

Daily Development for Friday, May 15, 2003
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

EASEMENTS; TERMINATION; MERGER:    Mortgage exception
to the merger doctrine protects mortgagee's interest in easement
notwithstanding extinguishment of the easement by the merger doctrine.

Cowan v. Carnevale, 752 N.Y.S.2d 737 (A.D. 3 Dept. 2002).

Defendants, as tenants in common together with a third party, had been
owners of a certain property subject to an easement held by the adjacent
property owner to maintain and repair electric meters located on the
premises.  Defendants purchased the adjacent property and financed that
purchase with a purchase money mortgage to a mortgagee.  Later, the
third party who was a tenant in common with the defendants conveyed
his interest in the property to the defendants, causing unity of title in the
2 properties, which would ordinarily extinguish the existing easement.

The court ruled, however, that under the mortgage exception to the
merger doctrine, the mortgagee was entitled to the benefits of the
easement upon purchase of the second property at auction following
foreclosure proceedings.

Comment 1: Normally we say that merger tracks the interest of the party
in whom the interests are merged.  But here there are at least two reasons
why the mortgagor's interest should not be merged to destroy the
easement, even if the mortgagor so desires.

First, at the time that the adjacent property passed under the lien of the
mortgage, the easement was appurtenant to it, and consequently the
mortgage lien attached to the appurtenance.  Thus, when the mortgagor
later acquired the servient parcel, there was not a complete merger of
interests.  The mortgagor still held and interest in the dominant parcel
and in the easement benefitting it.

Second, if someone was to argue that New York is a lien theory state,
and that the interest of the mortgagee pre-foreclosure does not rise to
such a stature as to be characterized as an interest in land sufficient to
survive the merger of the fee estates, and if that someone was lucky
enough to be right (the editor guesses the argument is wrong), there's
still an argument based upon warranties.  The mortgagor made a title
warranty to the mortgagee that included a covenant of further assurances.
As a consequence of this warranty, the "best interests of the party in
whom the interests are joined" rationale should be subordinated to the
interests of the mortgagor.

Comment 2: The mortgage exception  is particularly apt here because the
mortgagor had deliberately altered the tenancy in common of the servient
property specifically to merge away the easement, and for no other
apparent purpose.

Two cotenants had owned the servient parcel as cotenants with a third
party.  Thereafter, these two cotenants, now married,  acquired the
adjacent dominant parcel as tenants by the entirety.  After that, the third
cotenant in the servient parcel conveyed to his other two cotenants.  At
that time, the cotenants owned the servient parcel as tenants in common
and the dominant parcel as tenants by the entirety.  Then they defaulted
on the purchase money mortgage on the dominant parcel.  The
mortgagee, father of one of the cotenants, foreclosed.  During
foreclosure, the cotenants transferred the dominant parcel to themselves
as tenants in common, stating in the deed that the purpose of the
conveyance was to merge away the easement.  The trial court bought
their argument that the merger worked, and it was necessary here for the
appeals court to get involved to protect the mortgage.

Note that the court stated that no merger occurred when the same parties
owned one parcel as tenants in common and the other as tenants by the
entireties.  Everyone assumed that a second transfer, placing both titles in
the identical form of ownership, was necessary in any event to trigger
merger.  Hmmmmm.  Is that right?

Readers are encouraged to respond to or criticize this posting.

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