Answers ? Did You Catch That?
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2010, Volume 9, Number 1
Answers — Did You Catch That?
by Gary F. Casaly, Esq., Special Counsel
#1. “This Land is Your Land – or is it Mine?”
Q1: Is the acknowledgement good?
A1: It’s true that the statute requires only one grantor to acknowledge the deed. Note, however, that in this case each grantor owns a different parcel and that only the owner of Whiteacre (Barry) gave the acknowledgment. Putting aside questions of forgery or impersonation (take it for granted that Harry is who he claims to be) the sole purpose of an acknowledgement is to entitle the instrument to be recorded, which thereby provides constructive notice to the world. So, the only question is whether the acknowledgment was good where the owner of one of the parcels (Harry) did not participate in the acknowledgement.
The answer is found in Shaw v. Poor 23 Mass. 86, 6 Pick. 86 (1827), where the facts are just as they are here and the court said, “The [constructive] notice [that acknowledgment provides] is the same, whether [the grantors] are seised as tenant in common of the whole land conveyed, or are separately seised of distinct parcels.”
Q2: If the acknowledgement is not good is it made good due to the fact that the register of deeds accepted it for recording?
A2: As noted, the acknowledgement here is good, so Question 2 is moot, but let’s answer it anyway. If an instrument is defectively acknowledge its recording is a nullity. Although it binds the parties themselves, their heirs and devisees and persons having actual notice of it, it will not bind the world at large. Pidge v. Tyler, 4 Mass. 541 (1808). This is crucial where, for example, an attachment is recorded against the grantor, as attaching creditors are unlikely to look for and therefore see and find the deed. Worse yet is where the grantor goes into bankruptcy: the trustee in bankruptcy is a “hypothetical bona fide purchaser,” so even if the trustee knows about or sees the deed he will not be bound by it if improperly acknowledged (and therefore defectively recorded).
After ten years a defective acknowledgment or no acknowledgment at all does not pose a problem. See G.L.c. 184, §24.
#2. “I Promise, It’s True!”
Q1: When Mary called John the first time did she have any rights against him?
A1: This question has a very interesting answer but the next answer will even be more so. A quitclaim deed contains Quitclaim Covenants, also known under the statute as “Limited Covenants” (I’ve seen it only once in a deed), which is really two separate covenants. One of those covenants — the one we’re discussing now — is that the grantor covenants that the “granted premises are free from all encumbrances made by the grantor.” This is the “modern” (post-1913) version of the covenant. Before then, this covenant by the grantor was that the premises are free of all encumbrances “made or suffered” by the grantor. The significance of this change in language was before the Supreme Judicial Court twice in a three-year period. In Engel v. Thompson, 336 Mass. 529 (1957) an order for sewer construction was recorded against the title. The court acknowledged that this was not an encumbrance “made” by the grantor, but inasmuch as the grantor could have eliminated it by paying the amounts due it was nevertheless an encumbrance “suffered” by the grantor. When this case was decided, the words “or suffered” had already been removed from the statute. The court, nevertheless, said that the omission of these words was “without significance” and that, although no longer appearing in the text, ought to be implied. As its reasoning the court cited, among other things, the caption of the enabling legislation that was “[f]or the purpose of avoiding the unnecessary use of words in deeds” and (apparently) concluded that “missing words” would be consistent with this purpose and therefore no change was intended in the covenants even though the words “or suffered” had been removed.
Three years later in Silverblatt v. Livadas, 340 Mass. 474 (1960) the court reversed itself, holding that the omission of the words “or suffered” was with significance and that the words are not to be implied in the covenants. In Silverblatt a lien had been placed on property by the town because the homeowner did not have an acceptable fire escape installed. Clearly the lien was not “made” by the grantor and although it may in some way have been suffered by her it was not something that would subject her to liability under the “modern” covenants.
So, when Mary called John to tell him to remove the attachment from record he was well within his rights to ignore her demand: He did not create the attachment; it was something that another party caused to attach to his title — something that he suffered — and therefore not covered by his covenants.
Q2: When Mary called John the second time, did she have any rights against him?
A2: When Mary called John the second time more than just an attachment on the title was the issue; by then the sheriff was making a move to actually go against Mary’s title. This is where the second covenant in Quitclaim Covenants kicked in. The second covenant states that the grantor will “warrant the [granted premises] to the grantee and his heirs, successors and assigns forever against the lawful claims and demands of all persons claiming by, through or under the grantor, but against none other.” This covenant is different than the first. The first covenant is concerned with how the encumbrance came to be — whether made (as opposed to suffered) by the grantor — while the second covenant is focused on a category of persons against whom the grantor will defend the title. So, by the time the title is actually being attacked by the creditor — a person whose lien depends upon the title of and therefore claims under the grantor — we have an assault by someone whom the grantor promised he would defend against.
#3. “Anybody Seen Today’s Paper?”
Q1: Does Mary Jane have a good title?
A1: Everyone sees the Ibanez issue — here we have Dead Beat Mortgage Company “jumping the gun” and beginning to advertise the foreclosure before it was actually the holder of the mortgage. But did you catch the other error in the foreclosure process? There were three publications in three successive weeks, as required by the statute, but the first one, on May 1, 2007, was “less that twenty-one days before the day of sale,” as also required by the statute. So, Ibanez notwithstanding, the foreclosure is defective. Fortunately (for Mary Jane) the entry saves the day. The entry is a separate and distinct way of foreclosing a mortgage and is routinely used primarily to “cure” a defect in the foreclosure by sale. When this entry was made (May 18) Dead Beat Mortgage Company in fact did hold the mortgage (albeit it by an unrecorded assignment) and now that three years have expired the foreclosure (by entry) is good, although the foreclosure by sale is (according to the Ibanez court) defective.
#4. “I’ll Be There Right Away”
Q1: Do you need to order a municipal lien certificate on Mary’s property?
A1: G.L.c. 60, §45 says “the premises conveyed [by a tax deed], both before and after either redemption or foreclosure, shall also be subject to . . . all easements . . . lawfully existing . . . when so conveyed.” Essentially this statute tells us that easements are not affected by a tax title. Even though the tax lien is a supreme lien on Mary’s property it will not extinguish the easement. A careful conveyancer, however, will run Mary’s title for the statutory period (three years and six months from the end of the fiscal year for which such taxes were assessed against Mary) during which time the municipality may file a tax taking, but not thereafter because of the alienation of the interest (easement). The point here is that taxes are generally not a concern with repect to the continued validity of the easement that the dominant estate enjoys over the servient estate.
Q2: After the easement is created is it necessary to keep running Mary as to Whiteacre to see if she has done anything to affect the easement?
A2: Obviously, after John acquired the appurtenant easement you would keep running him to see if he did anything to affect either Blackacre or the easement itself, but it would seem unnecessary to run Mary any longer (with the possible exception for taxes). Keep in mind, however, that after John acquired the easement he might have decided to approach Mary and actually buy the property from her over which the easement existed. That would result in a merger of the easement. If thereafter he sold that property to someone else and did not reserve an easement then when he conveyed Blackacre to your client “together with an easement . . .,” your client would not acquire any easement. Rarely would anyone care what happened to the servient estate after the easement was created, but maybe we should be! Something to think about!
#5. “Home Sweet Home”
Q1: What mistake might the bank lawyer have made here?
A1: The separate release of the homestead compromised John’s protection under the homestead. Under G.L.c. 188, §7 the release of the homestead by John by a separate document had the effect of wholly terminating any existing protection that John had acquired by reason of the homestead in the first place. Moreover, the effect of re-declaring the homestead, although it put a homestead back in place, did not undo the damage that the release had accomplished — it simply reinstated rights as of the time of the re-declaration — and it allowed creditors who had been “held at bay” to flood in, because the new homestead only provides protection against debts contracted after the new homestead was declared. Obviously, the bank lawyer’s intention here was to assure that the homestead would not “trump” the mortgage and would be subordinate to it. Having John sign a separate release of the homestead and then declare a new one accomplished this but at the expense of John’s protection against creditors other than the lender in the refinance. What the bank attorney should have done was to utilize a companion statute, G.L.c. 188, §6. That law says that if an owner of property which is subject to a homestead signs a mortgage which contains a release of the homestead the property shall still have the benefit of the homestead, except as against the mortgage. In other words John’s rights with reference to other creditors would not be compromised, but with respect to the mortgage his homestead would be effectively “subordinated.” It’s possible that the bank attorney may hear from John when Macy’s tries to take his home for a credit card debt that he incurred before the refinance.
Q2: Were any other mistakes made?
A2: The other mistake that the bank attorney may have made was to forget to ask John if he was married. There’s nothing on the record to indicate that he was married — the record is silent on this point — but we all know that if he had a spouse, the spouse would have to join in the mortgage in order to make any release of the homestead effective. So what should the bank attorney have done where the record was “quiet”? Make it “speak” by doing one of two things: ask the question as to John’s marital status and then (i) have the spouse, if there is one, join in the mortgage or (ii) if there is no spouse, have the mortgage identify John as a “single person.” Once the homestead hits the record, even where title is in just one person, the homestead needs to be dealt with in this way. This is no different than what was required years ago when dower and curtesy were in force: if an individual was conveying property a recitation as to the grantor’s marital status would be included if no person identified as a spouse joined in the conveyance in that capacity. In fact, even if the deed into John stated that he was a single man, the same approach would be necessary because he could have married after he took title.
#6. “Time to Pay the Piper”
Q1: Does John’s spouse have title to the property?
A1: G.L.c. 208, §34A provides that if a party in a divorce proceeding is directed to give a deed or make a conveyance in connection with a judgment for alimony and the party fails to do so, the recording of the decree, after it becomes final, “shall operate to vest title to the real estate or interest therein in the party entitled thereto by the judgment as fully and completely as if such deed, conveyance or release had been duly executed by the party directed to make it.” Under this statute (the provisions of which are similar to those in a set of companion statutes, G.L.c. 183, §§43, 44) John’s spouse has title.
Q2: What liens affect the title to the property?
A2: This question has a two-part answer. First, what liens caught the title in the first instance and, second, which of those liens, if any, still affect the title?
Under the statutes mentioned the vesting of title in the party entitled to the deed is not complete until the decree is actually recorded. In True v. Wisniowski, 13 Mass.App.Ct. 501 (1982), the probate court ordered the husband to convey to the wife. A creditor attached the property in the name of the husband before the decree was recorded. The court noted that the attaching creditor “did not have actual knowledge of the terms of the plaintiff’s divorce decree at the time of the attachment,” and held that the equitable rights created under the statute (G.L.c. 208, §34A) are expressly made subject to the provisions for recording of notice and that the attaching creditor would have a valid lien against the property notwithstanding the order.
Whether the lack of “actual notice” is pivotal in the case is not entirely clear, but it is safe to say that the IRS likely had no notice (as it does not run out to do titles before throwing on tax liens) and although the court, the obligee (John’s spouse) and the IV-D agency are no doubt aware of the order they are beneficiaries of the child support lien and ought not be harmed by such knowledge, which is obviously designed to protect third parties dealing with the title in the name of the obligor. In any event, federal tax liens have a life of ten years from the date of assessment. (Note that the ten years runs from the date of assessment and not the date of recording.) That means that federal tax lien, although it initially caught the title, is no longer an encumbrance against it (although such liens can be extended by refilling within the one–year period ending ten years and thirty days after the original assessment).
The child support lien is still good against the title because it exists for ten years after its “perfection.” In this case perfection occurred when the lien was recorded, because at that time John owned the property. That is, once the lien catches property owned by the obligor the ten-year period begins to run, and here the ten-year period has not yet expired.
Something should be said about this concept of the “perfection” of the lien where, when the lien is recorded, the obligor does not own property but subsequently acquires property. In the case of after-acquired property the statute says:
If the obligor subsequently acquires an interest in real property the lien shall be perfected upon the recording or registering of the instrument by which such interest is obtained in the registry of deeds or registry district in the county or registry district where the notice of the lien was filed within 10 years prior thereto.
Note an important aspect about this provision. If property is acquired after the lien has been recorded the lien will “catch” the property interest if the lien “was filed within 10 years prior thereto.” Once this event occurs — the existence on record of a property interest acquired within 10 years of the fling of the lien — “perfection” arises. It is from the moment of this perfection that we begin to measure the duration of the lien as to this after-acquired property — we then begin to count again up to 10 to find out when the lien expires. That is, the first 10-year calculation is to determine if the property interest was timely acquired within 10 years of the filing of the lien (and, if so “perfection” has occurred) and the second 10-year calculation is to determine if the lien, once perfected, remains viable or has expired. Note carefully that under this calculation a lien once recorded could potentially remain in effect for as much as 20 years (and longer if extended).