Brief Fact Summary.
Plaintiff’s father executed a warranty deed before his death, stating that upon his death, his property should pass to Plaintiff subject to a life estate held by Defendant. When Plaintiff’s father died, Defendant remained on the property. Plaintiff sued to eject Defendant. The trial court granted Defendant’s motion for summary judgment. The court of appeals affirmed. Plaintiff appealed.
Synopsis of Rule of Law.
A grantor may reserve an interest in an estate for a third party through express language in the deed.
Shortly before his death, Russell Nelson executed a warranty deed stating his intent that, when he died, his property should pass to his son Daniel (Plaintiff). The deed also contained the express statement that Plaintiff’s interest in the property was subject to a life estate held by Irene Parker (Defendant), who had lived with Russell for thirteen years prior to his death. After Russell died, Defendant remained on the property, and Plaintiff brought an action to eject her. The trial court granted Defendant’s motion for summary judgment. Plaintiff then appealed, arguing before the court of appeals that the warranty deed improperly reserved an interest to Defendant, who was a stranger to the deed. At common law, a grantor could reserve an interest in a deed for himself, but not for any other party, who would be considered a “stranger” to the deed. Plaintiff cited the Indiana Supreme Court’s decision in Ogle v. Barker, 68 N.E.2d 550 (1946), which upheld the common law rule. The court of appeals determined that the grantor’s intent would govern in interpreting the deed, and would be determined by the deed’s language and the surrounding circumstances at the time of execution. The court of appeals also noted that the common law rule was developed in feudal times and was no longer relevant. Accordingly, the court of appeals upheld Defendant’s life estate. Plaintiff then appealed to the state supreme court.
Whether a third party has a valid interest in an estate if a grantor conveys the estate but reserves an interest for the third party by language in the deed.
Yes. The trial court’s ruling is affirmed. A grantor may reserve an interest in an estate for a third party through express language in the deed.
Inadvertent use of the word reservation, or other clumsy effort to grant an interest in land should not frustrate an otherwise clear intent based on mindless adherence to a formal and outdated rule.View Full Point of Law
The issue in this case is whether the common law rule that was upheld in Ogle should remain the law. The rule serves no purpose today, other than to frustrate the intent of the grantor. Many other courts have already overturned it. Those courts that support the common law rule argue that a grantor may easily reserve interests for a third party by first conveying an easement to the third party, and then executing the deed. But this is merely a needless additional step for a grantor to take. It is out of line with the modern preference for giving effect to the clear intent of the grantor. Nor does the common law rule protect the rights of bona fide purchasers, as other courts have claimed. Any bona fide purchaser of property has fair notice of third-party interests that are expressed within warranty deeds. Finally, the public’s interest in retaining existing laws governing property ownership does not justify retaining the common law rule at issue here. Accordingly, this court adopts the rule that grantors may reserve property interests for third parties by clearly expressing them in deeds. The evidence in this case shows that Russell intended to reserve a life estate in the property for Irene Defendant.