There were two important typos in the last version, which an alert DIRTer spotted instantly. Thanks - and here's the corrected version.

Daily Development for Thursday, September 30, 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

ADVERSE POSSESSION; CONSTRUCTIVE ADVERSE POSSESSION; REQUIREMENT OF COLOR OF TITLE: Color of title sufficient to establish constructive adverse possession is established when claimants have possessed pursuant to their claim that owners had an obligation under a pre-existing contract to deliver deeds to the property, even though no deeds had ever been delivered and even though plaintiffs were aware that owners were refusing to deliver such deeds.

Thomas v. B.K.S. Development Co., 77 S.W. 3d 53 (Mo. App. 2002)

Thomas contracted to acquire three rural woodland lots from B.K.S. The contract provided that Thomas would make three $1500 payments - one at time of contract, one in August of 1985, and one in January of 1986.

At the time of each payment, B.K.S. was to deliver to Thomas a deed to one of the lots. Thomas made the payment at time of contract, apparently, and made another payment in November of 1985. She never received deeds to either of the two properties designated in the contract in exchange for those payments - lots 24 and 23, and consequently did not make the third required payment for lot 22.

The contract required Thomas to pay the taxes on the properties for periods after 1984 and stated that if she did not pay the taxes, the B.K.S. could rescind the contract. Thomas never paid the taxes. B.K.S. did pay the taxes each year.

If the contracts expressly gave Thomas the right to possession prior to receipt of the deed, the court does not tell us.

From 1985 forward, however, Thomas did make use of lots 23 and 24 through various acts consistent with occupancy of rural property - building roads, storing hay, keeping horses, laying down fill and gravel for a road, putting in lights and (apparently temporary) fences, storing construction equipment and using the land for "various recreational activities."

In 1999, Thomas brought suit to establish adverse possession of lots 23 and 24. She alleged that she had actually, openly and notoriously occupied at least portions of both lots continuously for the statutory period, and that she had been in constructive possession of the balance of the lots as a consequence of the "color of title" conferred by the contracts.

The Missouri Court of Appeals agreed. Thomas' title fulfilled all the requirements for an actual adverse possession for those areas that she actually occupied, and in addition any areas of the lots that she had never actually occupied were hers through constructive adverse possession, based upon the legal description of the property she was claiming in the contract.

The court acknowledged that there is some dispute as to whether possession under a contract of sale constitutes possession under color of title. But it concluded that it did not have to reach that question here, since Thomas' possessory claim was not based upon the contract, but rather on the claim that the contract had been fulfilled and that she was entitled to deeds to the two parcels.

Comment: What you see above is pretty much the entire discussion that the court undertook with respect to the "color of title" issue. The court does not state that the concept of "color of title" normally involves an element of good faith. The grantee must believe that the document under which one is claiming the right to possession in fact confers that right.

Certainly if a party does deliver a paper conferring possessory rights on another, and later disputes those rights, the party claiming them can base its claims on a good faith belief in the validity of the paper transferred.

But was that the case here?

It does not appear that the contract itself conferred possessory rights on Thomas. The court does not indicate whether her possession of both lots in 1985 began before she had paid for both, but for purposes of analysis, let us assume that it did not. In any event, she could not possibly have had a "good faith belief" that she had a right of ownership in the second lot until she paid the money.

At the time that Thomas paid the money, she believed that she was entitled to a deed. That deed gave her the right of ownership and related right to possession. The contract, apparently did not. Thomas never got the deed. How could she have believed in good faith that the contract vested her with the right to possession when she never received the deed?

It may be that the grantors told her that she was the owner of the property after she paid for it, and that the delivery of deeds were a "mere formality." Leaving aside the issue that formality is everything in talking about color of title, Thomas might have a better claim if these were the facts. More likely, however, the failure of the grantors to deliver the deed upon payment would have (or should have) triggered in Thomas the recognition that the grantors did not believe themselves obligated to deliver deeds to the parcels at that time. (Indeed, in this case, they argued that they did not view themselves as bound to deliver any deeds until all three payment installments had been made - something that never happened. Remember that they paid taxes for fourteen years after Thomas' first two payments, suggesting that they never viewed themselves as having divested themselves of title.)

If Thomas knew or should have known that the grantors never were of the view that they had vested her with the right of ownership through the contract, how could Thomas have formed a good faith belief that she had good color of title?

Further, if Thomas did view herself in good faith to be the owner of the property, why exactly didn't she pay the taxes.

Finally, if she didn't pay the taxes, this gave the other side the right to rescind the contract entirely. In light of this fact, how could Thomas have believed in good faith that she was the owner of the properties after a few years of not paying taxes, even if she did believe that earlier?

Tough question, to the editors. Maybe that's why the Missouri Court of Appeal judges earn the big bucks.

Comment 2: After writing substantially the above, the editor shared his views with noted property law professor Dale Whitman, who, in his usual kind manner, trashed the editor's opinion. In a nutshell, Dale concluded that the test of "good faith color of title" should be whether there is a good faith belief, based upon a written document, that the claimant has ownership, even if the document is not a title document. I really think that adverse possession is all about definite lines - it's not a question of fairness. Fairly speaking - the owner should always win, in my view. Further, it's not a question of the rightness of the possessor's cause. If she's right, then she can enforce the contract and doesn't have to worry about adverse possession. Therefore, I tend to favor the position that an adverse possessor ought to have a title document in which she believes. She didn't have that in this case.

Furthermore, as stated above, I think there is substantial doubt, at least measured objectively, about the good faith of a person who possesses under the circumstances of this case. But that's just me, I guess . . .

Comment 3: Note that "good faith color of title" is not just useful for constructive adverse possession. In a few states, I believe, it is a prerequiesite for adverse possession at all, and in a few others it results in a substantially shorter time for adverse possession to run.

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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