Deeds: Topics to be Covered What a deed is (and is not) Types of deeds Contents of deeds Mandatory contents Optional contents Special/idiosyncratic requirements Impact of errors in the preparation/execution of deeds Under statute of frauds, a transfer of an interest in land can occur ONLY by a sufficient written instrument, typically by a deed A deed is NOT itself title ; it is only documentary evidence of a transaction by which a grantor s title (if any) is transferred to the grantee Thus: There is no one deed for any particular parcel of land Holding a deed to land is no assurance of title I would convey my title to a grantee not by giving them the deed that I received, but by executing a new deed Valid Deed MUST Include: Names of the grantor and grantee Required both to satisfy the statute of frauds ( parties ), and for indexing that is necessary for the public land records to be searchable by prospective purchasers Words demonstrating the grantor s intent to convey (typically, a granting clause ) [ conveys and warrants, p. 149] Sufficient description of land being conveyed Signature of the grantor (but not the grantee) Deeds MAY (but Need Not) Include: Marital status of individual grantor and/or grantee (can you explain why?) Recital of consideration (no consideration required; Bale v. Allison) Date of execution Warranties regarding quality of title conveyed (i.e., deed covenants or deed warranties), and any exclusions ( exceptions ) from those warranties 1
Problem 1: Types of Deeds Suppose Wells deeds a parcel of land to Litton The deed is just labeled DEED and does not make any express statements about the quality of the title the deed purports to convey What sort of deed is it, and why does it matter? Types of Deeds Quitclaim deed: grantor makes no warranty of title General warranty deed: grantor warrants title against defects existing at time of deed takes effect, even if created by a predecessor owner (i.e., even as against defects that arose before the grantor acquired title) Special warranty deed: grantor warrants only against any title defects caused by grantor or arising during period of grantor s ownership Types of Deeds Deed only warrants title to grantee if it contains specific language sufficient to create such a warranty Thus, Wells s deed would be a quitclaim deed, unless its granting language is sufficient to create a statutory warranty E.g., RSMo. 442.420: if deed s granting language uses the words grant, bargain, and sell, grantor is deemed to have made all common law deed warranties (general warranty deed) Title Defects and Type of Deed Prior deed in Grantor s chain of title forged (invalid) Quitclaim deed: Not covered General warranty deed: Covered Special warranty deed: Not covered Creditor has a judgment against Grantor Quitclaim deed: Not covered General warranty deed: Covered Special warranty deed: Covered 2
A deed delivers the same quality of title to the grantee, whether it is a quitclaim or a warranty deed Some courts have held that having a quitclaim deed in your chain of title is a cause for suspicion, but this is incorrect (having a quitclaim deed in your chain of title should NOT call into question the marketability of your title) Questions: When is a quitclaim deed appropriate? Why aren t quitclaim deeds more commonly used? Why wouldn t a grantor always use a quitclaim deed? Quitclaims are most commonly used in Gift transactions (where grantor is receiving no consideration, such as Allison) Transactions involving settlements, releases, etc. (grantor wants to wash her hands of issues relating to title and have no residual liability vis-a-vis grantee) By contrast, a buyer paying FMV may expect Seller to stand behind Seller s title, so a warranty is customary in ordinary sale transactions If you have an owner s policy of title insurance, it indemnifies you against possible liability for breach of deed warranty due to an unknown title defect Bale v. Allison Was Deed Valid? Bob Fletcher, who had made a will that left a cabin to his stepsons, made and delivered a deed to the cabin to his nephews while he was still alive Trial court found: Deed failed to state what consideration was given for it There were blanks left as to whom the property was conveyed. [e.g. hereby quitclaims to: ] Nephews later filled their names in the blank and rerecorded the deed a second time, but this happened after Bob s death and was thus invalid Given these findings, why did the appellate court uphold the deed as valid? Deed was valid even if there was no legal consideration Deed is an instrument of conveyance and not a contract; consideration is not required for a deed to be valid In sale transaction, the underlying contract for sale would have to be supported by consideration, but no separate consideration required for deed itself To blanks in deed were not filled in, but the deed did otherwise identify nephews as Grantees (handwritten names at top next to Grantees ) Modification/re-recording of deed was of no effect (deed already effected transfer at time of 1 st delivery) 3
Sale Price on the Deed? Need not be disclosed on a deed for deed to be valid In many states, however, there is a real estate transfer or excise tax (although not in Missouri) E.g., suppose Uphoff sold a house in Evanston, IL to Lidsky for $800,000 Transfer would incur total transfer tax of $4,000 State of IL: $0.50/$500 = $800 City of Evanston: $4.00/$1,000 = $3,200 Recorder of deeds may refuse to accept deed for recording unless tax is paid or transaction is exempt Nonpayment can result in tax lien Problem 5 Litton is selling home to Mitchell The day before closing, Litton stops by bank to sign the deed, and signs it while bank officer was away from his desk 30 mins. later, bank officer had her administrative assistant (a notary public) acknowledge the deed The next day, the deed was delivered and recorded Is the deed valid? Recording: Quasi -Requirement Acknowledgment (notarization) is not required for a deed to be valid and thus effect a transfer from grantor to grantee, if executed and delivered by grantor BUT, an unacknowledged deed cannot be accepted for recording (recorder can reject deed bearing no acknowledgment or improper acknowledgment) AND, a delivered but unrecorded deed is invalid as against a subsequent BFP claiming through grantor of that deed In Problem 5, deed was not properly acknowledged Notary must certify that Litton (as grantor) appeared in the notary s presence and acknowledged his execution of the deed as his voluntary act Contents of notarial acknowledgement are dictated by statutes in each state What s the consequence of this error? Mitchell is still the owner (transfer took place anyway when deed was delivered), but Is his deed recorded? Can a subsequent purchaser from Litton argue Mitchell s deed isn t recorded? 4
Deed need not be supported by consideration (gift of land can be made by deed) Some states have special rules applicable to gift deeds E.g., Problem 4: N.C. Gen. Stat. 47-26: Deeds of gift. All deeds of gift of any estate of any nature shall within two years after the making thereof be proved in due form and registered, or otherwise shall be void. Ordinarily, a deed is valid (at least between grantor and grantee) even it is not recorded What rationale might justify an absolute requirement to record a gift deed for it to be valid? Concern: a secret gift deed could enable the grantor and grantee to work a fraud Recall the secret severance case from Property H and W owned land as joint tenants W gave a deed to the land to her daughter, but in secret; their plan: If H died first, daughter could tear up deed; W would claim full ownership as surviving joint tenant and would, at death, leave it to her daughter If W died first, daughter could produce deed, argue joint tenancy had been severed, and claim ½ of land Problem 3: Idiosyncratic Requirements In some states, the recorder does not have to accept a deed for recording unless the deed shows the name and/or address of the person who drafted it [e.g., N.C. Gen. Stat. 47-17.1, Problem 3] What purposes would this requirement serve? (1) Convenience (after recording, this identifies where recorder should return the recorded original) [p. 149] (2) Turf protection (e.g., in SC, drafting of a deed is considered the practice of law) Problem 3 If Litton didn t include in the deed that he was the drafter of the deed, but the county recorder accepted the deed for recording anyway, does the deed s failure to identify the drafter affect its validity? 5
Problem 6 Litton deeds home to Mitchell by deed that states Grantor does hereby grant, bargain and sell to Grantee and Grantee s heirs, successors, and assigns, the following described property: [description] Two years later, Litton died Mitchell was sued by Davis, who claimed (a) Litton had only a life estate, (b) Davis held the remainder, and (c) Davis was now entitled to possession in FSA Is Davis correct? If so, does Mitchell have a claim against Litton s estate? Granting Language/Title Warranties In many states, use of statutorily prescribed language in the granting clause gives rise to all title warranties E.g., R.S. Mo. 442.420 (if deed uses words grant, bargain, and sell, grantor deemed to have made all common law deed warranties) Thus, Problem 6: Litton implicitly warranted that he was seized of title in fee simple, but he had only a life estate Mitchell would thus have a claim vs. Litton s estate for breach of deed warranty Problem 8 Litton executes and delivers to Trachtenberg a deed that did not identify the grantee One week later, Trachtenberg filled in his own name in the Grantee blank, recorded the deed, and took possession of the land Is the deed valid? Blank Grantee Some courts would treat the deed as invalid Others conclude that Litton s execution and delivery of blank deed to Trachtenberg gave Trachtenberg a power (e.g., authority) to enter a name in the blank, including his own [Bd. of Education v. Hughes, 136 N.W. 1095 (Minn. 1912)] Deed wasn t effective when executed, but became operative when Trachtenberg fills in the name (or, if he enters name of 3d party, when he completes delivery) 6
Problem 7 Litton executed and delivered a deed of 5-acre parcel to Bowman, subject to easement rights hereby granted to Trachtenberg to use the land for parking up to 20 cars during ordinary weekday business hours Does Trachtenberg have a valid easement? Why or why not? Nonexistent Grantee E.g. Litton executes and delivers to Mitchell a deed conveying land to Mitchell Companies, LLC However, Mitchell Companies, LLC was never properly formed (or, if properly formed, has been statutorily dissolved for failure to maintain good standing) Deed is invalid, no transfer of title results Suppose Bank was financing the purchase by Mitchell Companies, LLC and taking a mortgage loan. Due diligence implications? 7