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Holmes Development, LLC v. Cook

    Brief Fact Summary.

    Defendant delivered a warranty deed to two parcels of land to Plaintiff, however, the larger parcel had a defect in title. Due to the defect Plaintiff could not sell any lots on that parcel. Plaintiff sued Defendant for breach of the covenants of title. The trial court granted Defendant’s summary judgment. Plaintiff appealed.

     

    Synopsis of Rule of Law.

    The grantor of a validly executed warranty deed makes the covenant of seisin and right to convey, the covenant against encumbrances, the covenant of warranty, and the covenant of quiet enjoyment.

    Facts.

    Cook Development (Defendant) and Premier Homes formed Lake Creek Farms (Farms) and Lake Creek Associates (Associates) for a development project. Defendant had previously purchased two parcels and conveyed the 323-acre parcel to Farms and the 73-acre parcel to Associates. When Defendant and Premier ended their relationship, the companies agreed to convey both parcels to Defendant by quitclaim deed, however, the deed conveying the 323-acre lot incorrectly identified Associates as the grantor instead of Farms. Farms was still managed by Premier. In May 1998, Defendant delivered a warranty deed to both parcels to Holmes Development, LLC (Plaintiff). That November, Premier sold the 323-acre parcel to Keystone Development, LLC (Keystone). Keystone sued to quiet title and recorded a lispendens against the parcel. Keystone’s claim was defeated.Nevertheless, the lispendens prevented Plaintiff from selling any lots within the 323-acre parcel during the prime selling season while continuing to pay the bank that financed Holmes’s purchase of the land.

    Issue.

    Whether the grantor of a validly executed warranty deed makes the covenant of seisin and right to convey, the covenant against encumbrances, the covenant of warranty, and the covenant of quiet enjoyment.

    Held.

    Yes. The trial court’s ruling is reversed with respect to the covenant of seisin and right to convey and affirmed with respect to the covenant against encumbrances and the covenant of warranty and quiet enjoyment.The grantor of a validly executed warranty deed makes the covenant of seisin and right to convey, the covenant against encumbrances, the covenant of warranty, and the covenant of quiet enjoyment.

    Discussion.

    First, the covenant of seisin warrants that the grantor is seized of the estate being conveyed, and the covenant of the right to convey guarantees that the grantor has the legal right to convey that interest.These covenants are present covenants, which are breached, if at all, when the deed is delivered. Therefore, curing the defect prior to litigation is irrelevant. Due to the defect in the quitclaim deed for the 323-acre parcel, Defendant did not own the 323-acre parcel when it delivered the warranty deed to Plaintiff, and therefore breached these covenants because it. Second, the covenant against encumbrances warrants that the grantor shall remove any encumbrances. An encumbrance is any claim that a third person may make against the grantee’s fee title if such outstanding claim devalues the property or burdens or limits the rights of the grantee. This covenant is also a present covenant, and is therefore breached, if at all, when the deed is delivered and does not apply to future occurrences. Keystone’s lispendens was filed after Defendant delivered the deed to Plaintiff, therefore it does not constitute a breach of the covenant against encumbrances. Finally, the covenant of quiet enjoyment and the covenant of warranty guarantee that the grantee shall possess and quietly enjoy the land and that the grantor will defend against third-party claims to the title.These are future covenants andare breached, if at all, at the time the injury occurs. A grantee must show that a superior title has been affirmatively asserted against his title.To recover, the grantee must prove actual or constructive eviction from the premises. However, if a claim against the grantee’s title is defeated, there is no breach of the covenants of warranty guarantee or quiet enjoyment. At no time was Plaintiff actually or constructively evicted from the premises andPlaintiff defeated Keystone’s claim of ownership to the 323-acre parcel, thus the covenants were not breached.


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