I Never Thought of That
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Fall 2008, Volume 7, Number 4
I Never Thought of That
by Gary F. Casaly, Special Counsel
Conveyancing is like a mine field: if you don’t watch carefully you might make a tragic mistake. Continuing on with Margaret’s points regarding avoiding claims, here are two scenarios that might cause the conveyancer to say, “Gee, I never thought about that!”
The Evaporating Easement
So there you are, looking at the title to property on Smith Street, Anywhere, Massachusetts. It’s a nice little piece of property, nestled in among the trees and down near a lake. It’s remote — the kind of property that everyone wants to own. It even has a long driveway that goes over the neighbor’s property that’s on Jones Street and provides direct access to the garage. Direct access to the garage? Neighbor’s property? Let’s take a closer look here — do we have an easement?
You shuffle through the pages of the abstract and find the deed into the present owner. “Ah-ha,” you exclaim, “there is it — right in the deed — a reference to the benefit of an easement for access and egress.” Of course, that’s not enough — you have to make sure that the easement over the neighbor’s property was properly created. More shuffling. Eventually, a deed is discovered in the abstract where a prior owner of the servient (neighbor’s) property granted an easement to a prior owner of the dominant (our) property. The easement is not a road or way on a plan, but was created in a deed by describing a strip of land that provided the necessary access to the garage. (Remember, our property is on Smith Street, but the easement is for convenience in getting to the garage more directly.) The examiner was astute enough to examine the title to the servient estate to establish that the prior owner could grant the easement and to determine the quality of the title when the grant was made. Shuffle, shuffle, shuffle. Yes, it looks like the easement was indeed created properly and became an appurtenant right to our property at that time. Lookin’ good!
Once the easement was created there was no need for the examiner to keep running the servient estate’s title — any more that he or she would run the title (except for taxes) of any grantor after a conveyance had been made — so the abstract stops with regard to the servient estate’s title after the easement was granted. Of course, however, the title to the dominant (our) property on Smith Street is run out and it appears from the abstract that nothing happened that would adversely affect its title or the continued existence of the easement servicing our property once the easement had been “forged” and made appurtenant to it. Or, was there?
The examiner’s stopping of the examination of the servient estate after the easement was granted is not uncommon procedure. After all, once the neighbor’s predecessor in title granted the easement there was nothing that the grantor or any subsequent owner of the servient estate could do to affect it — the concept of “giveth and taketh away” is limited to the Supreme Being. In other words, if the grantor or any subsequent owner of the servient estate mortgaged it, went into bankruptcy or even failed to pay the real estate taxes that would not affect the easement. (G.L.c. 60, §45 provides that the premises conveyed by a tax title deed in connection with the enforcement of the real estate tax lien “shall also be subject to . . . all easements . . . lawfully existing . . . .”)
But something curious could happen that could affect the easement without our knowing it — or at least noticing it. It would be possible hypothetically that the owner of the dominant (our) property could have acquired the servient estate after the easement had been created and thereby have caused a “merger” of the easement (one cannot have an easement over his or her own property). This acquisition could have been by the present (our) owner or a prior owner of our property after the easement was granted. People routinely acquire adjacent properties, especially those that might enhance the value of their own property, or provide even more privacy. Having an easement over adjoining property is a valuable right, but owning the property outright is more valuable, because then it can be used for many purposes.
Okay, so someone who owns (or owned) the dominant estate bought the servient estate. So what? The easement may be gone but the adjacent property over which it ran is now under the control of the owner of the dominant property. There’s only one thing: you don’t know o f this acquisition (the examiner didn’t run the servient estate after the easement was granted), or perhaps you didn’t notice it. This small fact is going to cause some problems, as we shall see. Remember, the deed (easement) from the owner of the servient property to the owner of the dominant property is not part of the examination in the abstract — the examiner stopped running the servient property after the easement was granted. The only way the acquisition would be picked up is if the examiner was running the present owner — and every prior owner — of the dominant estate in the grantee index. Highly unlikely.
In our hypothetical story it just so happened that after the servient estate had been acquired it was just as quickly sold to someone else by way of a deed that neither mentioned nor reserved the easement that had previously benefited the dominant estate. (People who acquire adjacent properties don’t always do it to enhance the value of their own property, or provide more privacy; some do it for profit.)
So, the easement merged upon the acquisition of both properties by a common owner and was not “revived” when the common owner parted with the title to what was once the servient estate. The purchaser of this parcel would not be subject to the easement because the (common) owner could not derogate from his own grant. And the exception to this rule announced in Scagel v. Jones, 355 Mass. 208, 243 N.E.2d 908 (1969) — that when retained property would otherwise be landlocked upon the conveyance of part of the common land the grantor will be entitled to a right of passage over the conveyed property — does not apply because our property on Smith Street would not be landlocked even without the easement: the easement was for the convenience of direct access to the garage, and was not the only access to the property. So, after this acquisition of the servient estate and its subsequent sale out our property on Smith Street is back in its original condition before the easement was granted — it is easementless.
Back to the abstract. Each deed in the chain of title to our property mimicked the one before it — each contained a reference to an easement being appurtenant to the property even though at some point these references were incorrect — including the deed into the present owner. We saw that the examiner had checked out the creation of the easement but then no longer paid attention to what happened to the title of the servient estate. All standard conveyancing practice. Even running the owner of our property might not have discovered the deed out of what was once the servient estate — even though the entry would be in the grantor index — because it would have referenced property on “ Jones Street” as the land affected, and our property is on Smith Street.
But maybe we should have picked up — and looked at — that deed to property on Jones Street. True, it has a different street address than our property, but Houghton v. Rizzo, 361 Mass. 635, 281 N.E.2d 577 (1972) cautions us to look at all deeds out by any particular grantor, if for no reason other than to determine whether by reciprocal provisions the grantor has or has agreed to impose limitations or servitudes on his retained land.
Where’s Your Better Half?
John purchased property in his own name. The deed to John stated that he held the property as a homestead. When John showed up a few years thereafter at the bank attorney’s office to refinance his home the bank lawyer required John to sign a separate release of homestead, which was recorded along with the mortgage. A new homestead was recorded immediately thereafter. What mistakes might the bank lawyer have made here?
The separate release of the homestead is a “red herring” — it compromises John’s protection under the homestead but it is only one of the mistakes that the bank lawyer made. We’ll get to the other one later. 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, re-declaring the homestead, although it put a homestead back in place, it 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.
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 as mentioned above. 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.
Where’s the Mortgage Now?
You probably think I’m going to write about missing assignments that plague titles just as much as missing discharges do. But I’m going to focus on a different issue concerning mortgages where it may appear that the mortgages are gone when they are not.
The issue is that which concerns the possible revival of a subordinate mortgage that was “foreclosed out” by the enforcement of a superior one. This rule of revival is based upon the theory of estoppel by deed, which operates where warranty covenants are present in an instrument. Mortgage covenants are warranty covenants which happen to have a defeasance clause.
The revival of a mortgage can catch you off guard if you’re not paying attention to how the title has developed. Essentially revival occurs, for example, where John gives a first mortgage to Bank 1 and then gives a second mortgage to Bank 2. Bank1 forecloses its mortgage and necessarily wipes out the mortgage held by Bank 2. However, if John reacquires the title the mortgage to Bank 2 will be revived. The problem here is not simply that the mortgage to Bank 2 gets revived, but that it can “trump” an intervening mortgage to a subsequent lender. For example, if after Bank 1 forecloses John is able to convince his brother-in-law to give him the down payment money so that he can get his house back by mortgaging the repurchase, the new lender involved in John’s reacquisition will find itself subject and subordinate to Bank 2’s mortgage, because that mortgage will be revived the instant John takes title.
The theory of revival is simple, but the trick is to keep an eagle-eye focused on the progression of the title after the foreclosure. It’s more than just watching the title as it passes from person to person, but now it becomes important to keep track of which persons come into title.
There is an exception to the operation of a revival of a subordinate mortgage upon reacquisition by the borrower. If the second mortgage stated that it was subject to the first then upon a reacquisition of title there will be no revival. Huzzey v. Heffernan, 143 Mass. 232, 9 N.E. 570 (1887).
1 This is a valid way of creating a homestead. Most homesteads are created by a separate declaration of the owner, but the statute (G.L.c. 188, §2) provides also that a homestead may be acquired by a grantee in a deed where the property “is designated to be held as such . . . in the deed of conveyance by which the property is acquired.” [Back to text]
2 The mere signature on the instrument is an effective release, and actual words of release are unnecessary. Atlantic Savings Bank v. Metropolitan Bank and Trust Company, 9 Mass.App.Ct. 286, 400 N.E. 2d 1290 (1980). [Back to text]