Daily Development for
Monday, November 10, 1997
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
DEEDS; MERGER: Where divorce separation agreement expressed agreement to transfer property to defendants' sons, subject to defendant's reservation of a life estate in the economic benefits of the property, and provided that the sale, lease, transfer, encumbrance or conveyance of those economic benefits would require the consent of the sons, the consent requirement is destroyed by merger when the defendant and wife execute and defendant delivers a deed to the sons that does not state the requirement.
Boser v. Boser, 654 N.Y.S.2d 509 (App. Div. 1997).
The critical language in the contract read as follows: "That all other property owned by the parties shall be deeded to the parties' three (3) sons LEONARD, STEVEN and CHARLES BOSER. * * * All transfers of the properties to the parties' sons shall be subject to * * * a reservation by the Husband of a life estate in all oil, gas, mineral and gravel rights in all properties herein described and all properties set forth in paragraph '1'. The Husband shall not, however, remove, transfer, convey, sell or in any way encumber of or use such rights without the written consent of all three aforementioned sons."
The court held that the consent requirement in the separation agreement merged into the deed. It emphasized that the wife executed the deed and that the sons accepted it as third party beneficiaries: "he consent requirement thus merged into the deed and was extinguished by it, inasmuch as plaintiffs, third-party beneficiaries under the agreement, had not acted *512 upon the agreement and did accept the deed."
Moreover, at the time the economic benefits were conveyed pursuant to the lease in question, the defendant still owned the property free and clear and had not transferred the property to the sons. Accordingly, even if the consent requirement was upheld in the separation agreement, the court ruled, the rights giving rise to the consent requirement had not yet been conveyed.
Comment 1: By indicating that the sons had not "acted upon" the consent agreement prior to the transfer, the court may be alluding to the issue as to whether their rights had "vested" as beneficiaries. It does not develop this theory at all, and the editor is not sufficiently versed in third party beneficiary lore in New York state to comment. The question of vesting of third party beneficiary contracts varies dramatically from state to state. Many states do not require that a donee beneficiary rely upon a third party beneficiary contract to have its rights vest.
Comment 2: The separation agreement had been signed two years prior to the lease. The lease was only a few months prior to the deed. The court might have concluded that the parties had agreed, expressly or implicitly, that the father could not lease the property without the sons' consent even prior to transfer of the deed. To read the contract otherwise would appear to be to condone a fraud.
The court doesn't reach that issue because it reads the consent requirement into oblivion due to the merger argument. There is no indication given by the court that the wife or sons were aware of the outstanding lease at the time of the deed. Apparently it did not deem this to be relevant information. To the editor it is critical.
Comment 3: The editor has criticized the blind application of the merger doctrine before. In fact, he's proposed that it be given a different name than merger, because when it operates properly it operates not because of any mechanistic notion of one interest "swallowing" or "merging with" a "lesser interest," but because the conduct of the parties indicates that they have revised their original agreement and the delivery of a written instruments constitutes satisfactory evidence of the revised agreement. Since people seem to place more credence in doctrines that have names, and since the concept of "merger" is already laden with confusing associations, the editor has proposed that we call the new doctrine "Bubba." The idea hasn't caught on.
Comment 4: This case does not satisfy the requirements of the only justifiable application of merger in modern times - in other words, it is inconsistent with the doctrine of Bubba. The agreement concerning the sons' right to consent to transfers of interests during the life estate was not central to the father's reservation of the life estate. It was not something that one necessarily would conclude had to be included in a deed in order to fully state the interest conveyed. Further, it seems inappropriate to view the wife's execution of the deed under the circumstances, without any further evidence or her knowledge of the preexisting lease or the significance of the omission of the consent restriction, as indicating an intention on the part of the wife that the restriction no longer applied. The Bubba doctrine is best applied to situations in which parties conform the deed to the actual circumstances of the title, which may be different from those which they anticipated would be the case at the time of contracting. Courts should be cautious in venturing beyond that classic application.
Drafting Tip: Notwithstanding the arguments of the editor and other commentators, merger doctrine, obviously, is alive and well, and Bubba has not received its proper recognition. Consequently (and absurdly), lawyers ought to load their real estate contracts with "survival" or "no merger" clauses to be sure that the ultimate delivery of the deed does not lead to an inadvertant destruction of important rights.
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 Stacy Walter at the ABA. (312) 988 5260 or email@example.com
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.