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Suppose the grantor sells his land reusing the exact description from the document by which he originally took title, a common occurrence. He might not worry about the road or fence line that his neighbor built across his boundary long ago; indeed he may not even know about it. He may have forgotten that he granted an easement to a utility company over the back portion that he wasn’t using. Maybe he never realized that an old sewer line ran below the land. States with active title registration systems have procedures to clear up these issues, but in the vast majority of land sales in this country the buyer must rely on record searches, on the ground investigations, and a bit of luck to know what he is buying. These investigations are imperfect, so the buyer will usually ask the seller to warrant that he has good title. If the buyer obtains a title insurance policy and uses the title company to close the transaction, the title company will often insist on warranties in the hope that it can recoup some of its losses from the grantor if it has to pay a claim on the policy.
Having the land surveyed is, of course, a typical investigation. Generally, when the surveyor knows he or she is working toward a land sale transaction, it will be fairly clear that the parties expect to know how any visible evidence of boundaries and easements square with the record. However, frequently property is sold by people using some earlier boundary survey that was made under different expectations. When that earlier survey was performed, the surveyor might have felt he had more latitude in “interpreting” the situation. I hesitate to call this attitude “fence line surveying,” but I have many times encountered surveys that dance on a fine edge of interpretation of deed calls with respect to occupation. The surveyor might decide that the visible evidence of boundaries or easements leads to an ownership line that is different from a literal retracement of a written description, and he or she might well be right. But if the surveyor then does not inform the owner of the potential for conflicts if the written record is not changed accordingly, he might leave his client in a condition where a future sale of the property under a warranty deed could cause quite a bit of harm. In order to avoid a professional lapse in this regard, the surveyor should understand how deed warranties work.
Warranty deeds are a product of common law, but in America are now regulated by statutes. For this article I will explore the warranty statute in the state of Oregon, which has a number of reported cases interpreting the statute in relation to boundary issues. The present deed warranty statute in Oregon states:
(c) It (a warranty deed) shall include the following covenants, each of which shall run in favor of the grantee and the successors of the grantee as if written in the deed:
(A) That at the time of the delivery of the deed the grantor is seized of the estate in the property which the grantor purports to convey and that the grantor has good right to convey the same.
(B) That at the time of the delivery of the deed the property is free from encumbrances except as specifically set forth on the deed.
(C) That the grantor warrants and will defend the title to the property against all persons who may lawfully claim the same.
(3) If the grantor desires to exclude any encumbrances or other interests from the scope of the covenants of the grantor, such exclusions must be expressly set forth on the deed.1
Taking the three warranties in order:
Warranty of TitleWright v. Hinnenkamp2
Wright purchased two parcels of land from Hinnenkamp. Two years later Wright learned that a neighbor was occupying a large portion of the land. Wright brought an ejectment action against the neighbor, and also sued Hinnenkamp for breach of warranty. The neighbor defended the Wrights’ action by claiming he had maintained his possession of the land for longer than the 10 years required for adverse possession, and that the period had run before Hinnenkamp sold the land to Wright. The neighbor won that issue in the trial court. The trial court further dismissed the warranty claim against Hinnenkamp, reasoning that it was based on the warranty against encumbrances. The trial court used a common law exception to the warranty against encumbrances for open, notorious and visible encumbrances. Under that theory, the parties are presumed to have known about open, notorious and visible encumbrances and to have excepted them from the conveyance by implication.
The appeals court reversed the trial court on the breach of warranty issue, holding that an adverse possession claim that had ripened before the land was sold breached the warranty of title rather than the warranty against encumbrances:
An encumbrance on a title to land is “any right to or interest in the land, subsisting in a third person, to the diminution of the value of the land, though consistent with the passing of the fee by conveyance … A successful claim of adverse possession works a complete transfer of the title; the adverse possessor owns the fee of the land, and the record title holder has no interest in it ... A claim of adverse possession, thus, does not create an “encumbrance” on the title; it is a denial of any title at all and is inconsistent with the passing of the fee by conveyance. At the time [Hinnenkamp] conveyed the land to plaintiffs, he had nothing to convey, for the [neighbors] were the fee owners of the land in question. The warranty against encumbrances of ORS 93.850(2)(c)(B), and whatever exception to it may exist, are therefore not the issue in this case. The issue is whether [Hinnenkamp] breached the covenant of ORS 93.850(2)(c)(A); on these facts, he did.3
Hammack v. Olds4
In 1954, Hammack bought a parcel, described as a subdivisional portion of a section, that lay south of and adjoining a tract of land owned by his parents. Shortly thereafter, Hammack and his father attempted to identify the common boundary between the properties but were unable to find any survey monuments. They looked for a section corner, but never found it and thus were uncertain as to the true boundary location. They agreed to treat an old rail fence as the boundary, in part because they could see that the fence line extended beyond their lands and appeared to mark the boundaries between some neighboring parcels.
In 1960, they removed the old fence. Hammack and his parents continued to farm their lands as separate units, creating a visible plough berm where the fence had stood. The parents then died, and Hammack, acting as the representative of the estate, sold the parent’s land to Barnhart, who then sold it to Olds. Both of these sales used the land’s original, sectional description.
In 1984, Olds had the land surveyed, discovering that the section subdivision line ran from 18 to 28 feet south of the berm where the old fence had been. Over objections from the Hammacks, the Olds installed an irrigation line between the surveyed boundary and the berm, leading to this lawsuit.
The court held that the facts of this case—which included an uncertainty as to the location of the boundary followed by a resolution by agreement evidenced by the parties subsequent actions—created a boundary by parol agreement. Even though the old fence was gone long before the land was transferred to Olds, and even though the description on the deeds was never changed to follow the fence, the boundary had been established by the agreement between Hammack and his father. Their continuing act of farming up to the line of the old fence, after the fence had been removed, was enough to continue the validity of the boundary as against Olds. Interestingly, this set of facts also meant that the warranty of title in the deed to Olds had not been breached:
[A]n oral agreement that meets these requirements ... interprets, rather than alters, the property deed description and, therefore, does not affect a conveyance or transfer of real property ... The agreement between [Hammack] and his father did not alter the deed description. Rather, [Hammack] and his father “located” on the ground by agreement the line that both the deed and the contract described. The deed and the contract are, therefore, not inconsistent with the parol agreement.5
Warranty Against EncumbrancesBryant v. Moritz6
The outcome of this case is a result of its procedural posture. In order to follow it, you have to keep track of each party in the lawsuit. It concerned an old plat with 50-foot wide lots. Lots 15, 16 and 17 ran, in that order, from south to north. In 1976 there were houses on lots 15 and 17, but the intervening lot 16 was vacant.
Atwood bought lot 16 in 1976, after having it surveyed. Atwood then built a house on lot 16, leaving 5’ setbacks from the surveyed boundaries. Later in 1976 Atwood sold the lot to PP & M. Bryant bought the lot from PP & M by a contract, followed by a warranty deed in 1984. In 1985 the owner of lot 17 hired a surveyor who disagreed with the 1976 survey. The 1985 survey placed the boundary of all the lots 7 feet further south, resulting in the Bryant house encroaching over the boundary between lots 16 and 17 by two feet.
During the summer of 1985 Bryant contracted to sell lot 16 to a third party, when the problem came to light. The sale fell through. Bryant then sued to determine the true boundary between lots 16 and 17 and for damages from PP & M, if the 1985 survey were found to be correct. Moritz, one of the owners of lot 17, counterclaimed against Bryant for damages for trespass. The trial court found the 1985 survey to be correct, but only awarded Moritz $100 in damages for the trespass. It also awarded Bryant $10,750 from PP & M for breach of the warranty of title. The owner of lot 15, to the south of lot 16, was never brought in to the case.
The disparity between the damage awards is interesting and not clearly explained in the case report. Most likely, the $10,750 amount represented the diminution in value to lot 16 from the trial court’s decision that the Bryant deed to lot 16 did not convey a full 50-foot wide lot. The appellate court, however, reversed that damage award. It held that, since the owner of lot 15 was not in the case, the trial court could not have concluded that lot 16 was less than 50 feet wide. At most, the trial court’s decision that the 1985 survey was correct could affect the location of lot 16, not its size. Consequently there was, in fact, no breach of the warranty of title. There was, however, a breach of the warranty against encumbrances, because the improvement on lot 16 encumbered lot 17. This breach resulted in PP & M owing whatever amount would reimburse Bryant for its loss to Moritz. Since the trial court had only awarded $100 in damages to Moritz, PP & M was only liable to Bryant for $100.
Warranty to DefendChaney v. Haeder7
Haeder purchased a lot from Dittenhofer in 1982. Two years later Chaney, a neighbor, sued Haeder claiming adverse possession of part of the lot. Haeder notified Dittenhofer that he was being sued and demanded that she reimburse him for any expenses he should incur defending against the claim, including his attorney fees. Dittenhofer did not respond to this demand. Haeder joined Dittenhofer into the lawsuit under the warranty to defend his title.
Chaney lost the adverse possession claim. Haeder then pursed the warranty claim against Dittenhofer, under the theory that she owed him his expenses for successfully fighting the Chaney lawsuit. The court held that Dittenhofer was not liable for those expenses:
Covenant (C) is an agreement by the grantor to compensate the grantee in money if title fails or, in general, to protect against adverse lawful claims and demands ... The covenant carries with it the obligation to defend and protect the grantee against the lawful claims of all persons asserted thereafter and to indemnify for costs incurred where the grantee in good faith, but unsuccessfully, undertakes to defend the title ... Like the covenant against encumbrances, this covenant does not extend to adverse claims that are without legal foundation, but only against hostile titles, superior in fact to that conveyed by the grantor. Because the covenant is prospective in nature, the underlying claim must be resolved before there can be a breach of warranty and a subsequent duty to indemnify.
Under the facts of this case, the grantee is not entitled to demand of the grantor expenses in defending a suit which sustained the title as valid. The covenant does not protect against the mere assertion of an adverse claim. The grantor did not warrant that no one would ever sue the grantees or in any way bind herself to indemnify them for expenses incurred in defending against assaults by inferior titles.8
ConclusionSurveyors often equate adverse possession claims with encumbrances, which, as explained in Wright, they are not. Adverse possession is universally treated as a new title that defeats the existing title by conveyance. The title vests from possession (and whatever other factors the particular state requires) for a specified period of time, and not from any court action that might put the claim on record. Consequently, if a party sells land using a warranty deed that describes a particular parcel of land, and if it at some later time a neighbor sues the purchaser claiming adverse possession of a portion of that parcel, and if the neighbor wins the suit, and if the specified period of time had run its course before the sale of the land, then the warranty of title has been breached and the seller owes the buyer something in damages. If the buyer had demanded the seller defend his title, and the seller refused, and if the adverse possession claim is successful, then the seller owes the buyer his costs of defending against the suit (breach of the warranty to defend). The damages for breach of the warranty of title are usually the difference between the purchase price of the property and the lesser value of the land made smaller by the adverse claim, however there may be many other measures of damages depending on the circumstances.
The damages for breach of the covenant against encumbrances is generally the cost of removing the encumbrance. In some states, the warranty to defend the title runs to all reasonable suits brought against the title of the property. Consequently, some states require the seller to reimburse the buyer for his expenses incurred in defending against an adverse possession case that is lost by the claimant (Chaney shows this is not the case in Oregon).
Hammack, concerning a boundary by parol agreement, is the most interesting. The combination of the Wright case and the Hammack case shows that a person might sell a parcel of land that turns out to be subject to an adverse possession claim and might have to pay damages because the land is smaller than described. And yet another person might sell a parcel of land that turns out to be subject to a boundary by parol agreement and probably will not have to pay damages even though the land is also smaller than described. The court’s logic is that in the adverse possession instance, the description on the deed accurately describes what the seller is warranting but the adverse possession has already taken some of that warranted land. On the other hand, in the parol agreement instance, the court treats the description as being “interpreted” by the parol agreement, thus not only is the land conveyed smaller than the deed “appears” to describe but so is the land covered by the warranty. Hammack is troubling in classic surveying terms. Surveyors in the Public Land States often hear that section subdivision lines are “unchangeable” (because of federal law and practice) and, as a result, often treat descriptions by section subdivision lines as equally “set in stone.” In Hammack however, one party was able to force the other to locate a line, still described by section subdivision lines, along a berm between two ploughed fields where a now missing fence once stood, entirely because an earlier “uncertainty” allowed one party and the other’s predecessor to “reinterpret” the described line.
The POB staff would like to thank Jerry Broadus for the wealth of advice and direction he has contributed through The Surveyor and the Law over the years. This is to be his last entry as a regular columnist for POB.