Daily Development for Monday, November 28, 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 dirt@umkc.edu

DEEDS; RIPARIAN RIGHTS:  Absent express language to the contrary, a deed conveying property automatically transfers all of the grantor’s appurtenant property rights, including riparian rights, even when the grantor is unaware of the existence of such rights and therefore had no specific intent to convey them. 

Panetta v. Equity One, Inc., 378 N.J. Super. 298, 875 A.2d 991 (App. Div. 2005); June 15, 2005.

A mother, along with her son and daughter-in-law, owned a piece of property.  The property consisted of two separate lots and a riparian grant for one of the lots.  The son applied to a bank for a loan in order to raise capital for his business.  To help her son, the mother transferred her interest in the property to her son and daughter-in-law in order for the son to use the property as security.  At the time of the transfer, the mother was unaware that her property contained a riparian grant.  The deed conveying the mother's interest did not include the riparian grant in the property description. 

The son defaulted on the loan and the bank foreclosed on the property.  A sheriff's sale took place and the bank was the successful bidder.  It then commenced a sealed bidding process for the property.  After notifying one party that it was the highest bidder, the bank changed its mind and reopened the bidding process.  Three bidders filed actions against the bank.  Each bidder contended that it was the highest bidder and therefore should have been awarded the property.  The lower court awarded the property to one of the bidders on the basis that the other two bids did not conform to the bank's offer because their offers included the riparian grant in the property description.  It held that the riparian grant was not part of the property because the bank was unaware of the grant and therefore did not expressly include the grant in its offer for bids.  One of the bidders appealed, and the Appellate Division reversed, remanding the matter to the lower court to determine the owner of  the riparian grant. 

On remand, the lower court evaluated the intent of the mother when she transferred her interest in the property to her son.  It noted that the mother had no actual intent to transfer any right to the riparian grant because she unaware of its existence.  It also found that the bank was equally unaware of the grant when entering into the loan agreement and when soliciting bids for the property.  It further held that N.J.S.A. 46:3-16 does not require that a riparian grant be included in the property if it is not expressly included in the deed.  Accordingly, the lower court concluded that the property was properly granted to the bidder who did not include the riparian grant in its bid.  The unsuccessful bidders appealed again.

The Appellate Division reversed the lower court's ruling.  It held that the lower court erred in: 1) interpreting the express language of N.J.S.A. 46:3-16; 2) placing the burden of persuasion on one of the unsuccessful bidders; and 3) assuming that the Appellate Division's prior unpublished opinion precluded the application of N.J.S.A. 46:3-16.  The Court reviewed the language of the statute and held that it mandates that all deeds be construed to include all appurtenant property rights, such as riparian rights, unless such rights are expressly excluded.  The Court noted that the property at issue consisted of two lots, one of which contained the riparian grant.  It held that permitting the bank to convey only one of the lots would have allowed the bank to illegally subdivide the property.

Comment 1:   This is probably the majority rule with regard to all appurtenant interests, including easements and other servitudes as well as riparian rights.  We’ve seen a number of prior DD’s involving easements that have expressed this views.

Comment 2: The rule facilitates clarity of ownership by putting the burden on those wishing to detract from a transfer of title to specifically reserve their rights.  It does create an anomaly when a party isn’t even aware that he or she owns certain appurtenant rights, but on the other hand, if there is no awareness, then there is little lost by permitting the rights to pass forward to the next owner.

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