Daily Development for Thursday, April 11, 2002
By: Patrick A.
Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu
DEEDS; COVENANTS; SPECIAL WARRANTY DEEDS; TAX DEEDS: Purchasers of subdivision lots who took
ownership either by special warranty deed or by tax deed took subject to
pre-existing boundary claims from neighbor and neither developer nor title
company were required to indemnify the lot owners.
Mason v. Loveless, 24 P.3d 997 (Utah App. 2001).
Mason was the owner of a property which had had a fence
since 1929 separating two ranches. The
adjacent ranch was subdivided and the deed of the purchasers showed that their
boundary included a substantial portion of land inside Mason's fence. Certain purchasers of the subdivided lots
took ownership under a special warranty deed, others took ownership under a tax
deed.
The court determined that Mason had established a boundary
of acquiescence which reduced the area of the subdivided lots.
The lot owners had cross-claimed seeking indemnification
from the developer and the title company.
The Utah Court of Appeals noted that with regard to the lot owners
holding under special warranty deeds, granting relief would cause the special
warranty deeds to transform into general warranty deeds. Thus, the court saw no reason to make this
change "given the claim arose under or due to the actions of a prior owner
of the land." Therefore, those
parties only had the rights of special deed holders.
The owners also argued that the purchase agreement entitled
them to the property free and clear of all encumbrances. Here, however, the court found that the
purchase agreement provision was eliminated by merger with the deeds. As for the tax deed appellants, the court
noted that there are conflicting authorities as to whether a sale of real
property by tax deed extinguishes an adverse claim such as easement or
covenant.
The Utah Appeals Court, however, held that in this case,
given that the boundary by acquiescence claim ripened substantially before the
tax deed defendants' deeds, to remove the property from the owner by
acquiescence would constitute a taking without due process of law.
Comment 1: The court never says why the title company
defendants were not liable. Clearly the
title policies insured the description in the deeds, and the buyers got
less. Probably the buyers didn't get
surveys and the title policies (since the land was undeveloped) did not take
out the survey exceptions.
Comment 2: As usual, the editor winces at the merger
analysis. Merger should arise from
knowing acceptance of revised circumstances at closing. Although one can argue that the buyers should
have read the deeds and understood that they departed from the contract obligation,
this certainly is unlikely to have been actually the case. The court acknowledges that "mutual
mistake" could overcome merger, and it is quite possible that neither the
borrowers nor sellers understood the significance of the deed language.
If the sellers did "switch" to nonconforming deeds
in order to avoid the problem, and the buyers knew nothing about it, then the
editor would look a lot harder for a remedy here before concluding that the
merger bar descended.
What about the escrow agents and the brokers? Does the escrow agent have a duty to disclose that a document provided by the seller does not comply with the agreement? Seems to the editor that there's an argument there. Do the brokers agree to "assist" with the closing? Should the brokers have picked up the discrepancy?
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
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