Daily Development for Wednesday, September 22, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

 VENDOR PURCHASER; QUIETING TITLE; EQUITABLE CONVERSION: A vendor of property cannot sustain a quiet title action even after a ten year delay in closing on the sale of the property so long as the purchaser can prove a real interest in the property, such as equitable title that is conveyed by the parties' entering into a purchase agreement.

Krotz v. Sattler, 586 N.W.2d 336 (Iowa 1998).

 Seller and buyer entered into a purchase agreement to convey three parcels of property. The parties closed on the larger parcels, but did not close on the last, an abandoned railroad right of way, due to title problems.  Although seller's counsel proposed amendments to the title opinion that she thought would satisfy buyer's counsel, buyer's counsel never responded. Ten years passed, during which nothing happened and no one cancelled the agreement. Then the sellers observed buyers building a sewer line in the third parcel and brought a quiet title action with respect to the third parcel.

The trial court quieted title in the buyer. On appeal: Held: Reversed.

An action to quiet title assumes that the plaintiff possesses complete title to the property in question. The plaintiff's action will fail if the defendant proves some real interest, as opposed to an apparent or asserted right, in the property. The buyer in this case was able to establish equitable title to the property, thus defeating the seller's quiet title action.

When the parties entered into the purchase agreement, equitable title passed to the buyer, while legal title remained in the seller pending the payment of the purchase price. This doctrine of equitable conversion treats the purchaser as the owner of the property and views the seller as holding legal title to the property as trustee for the buyer. Because the seller had a bona fide interest in the property, the mere passage of time without a closing was insufficient to defeat the buyer's title, and the seller's quiet title action failed.

Comment: Apparently the buyers thought that they had already paid for the right of way parcel when they delivered consideration for the balance of the property (the size of the property priced on a per acre basis was estimated, not surveyed.) Further, perhaps because of a potential dispute over that issue, they argued that the right of way was conveyed to them as part of the transfer of the adjacent parcels (which well might be the case if the record was otherwise silent). But here the evidence convinced the court that the parties treated the third parcel as separate and as not conveyed, although the court was not certain about whether the price had been paid.

In short, there were lots of issues to work out concerning the contract, and a quiet title action, which only determined whether title was in the seller, did not accomplish this, at least in the eyes of the court.

Comment 2: The editor doubts that we're back to the rigid "forms of action" practice in Iowa. Although a trial court, on its own motion, or by "steering" the parties, probably could have brought the contract issues into the dispute, apparently this trial court did not due so. Consequently, the appeals court had no choice but to send the matter back.

Comment 3:  The court notes that the statute of limitations had no impact here. The seller had not repudiated the contract, so there was no cause of action by the buyer to be barred. Apparently neither side possessed the property, so adverse possession was not an issue.

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 16, 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

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. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA .

DIRT has a WebPage at: http://cctr.umkc.edu/dept/dirt>http://www.umkc.edu/dirt/