Certificate: Some Thoughts about What's Not Covered
Why obtain title insurance on registered land?
Let's start our little discussion with G.L.c. 185, §46. That's a "laundry list" of the things that are not even covered by the land court's certificate of title. This list includes such mundane things as federal tax liens, bankruptcies and leases, and such exotic things as Indian land claims.
Let's continue our little journey: there have been some recent cases that have stated, in modern vernacular, "you don't get what you see." These cases have given great weight to certain provisions of the registration statute, and particularly those sections that provide that "if it's on record, even though it may not be on the certificate, you're bound by it." See G.L.c. 185, §58, which essentially incorporates the rules of unregistered land into the registration system. Remember, that under Goldstein v. Beal, 317 Mass. 750, 59 N.E.2d 712 (1945) it was said that the same rules that govern unregistered land apply to registered land.
Then we come to what is called the guaranty fund. Now, here's something that's universally misunderstood. Some people think that if in fact there is a problem with the title to registered land and if it impacts adversely on the owner's title held under a certificate of title that the land court is going to dip into the guaranty fund and "make it right" by paying off the mortgage or other lien that offends the title. But the guaranty fund is not for the benefit of holders of certificates of title. The guaranty fund is to make whole those persons whose interests have been registered out from under them. For example, if you register your land and extinguish my right of way — like you fail to send me notice!! — the guaranty fund will protect me (the owner of unregistered land) because my rights were taken away. But if the owner of the registered land has a problem with the title to that land that person is not covered by the guaranty fund. He or she is on his or her own!
The registered land system is a well-structured and helpful title-keeping program. However, as can be seen, it has limitations — engrafted both by statute and case law.
The case of Paquin v. Anschutz, Land Court Registration Case No. 15857-S (1979), adds another twist to the question of reliance upon what's shown on the certificate of title. (The case was decided by the Land Court and does not appear to have been appealed.) In 1949 Certificate of Title No. 10549 was issued to Lambert covering lots A, B, and C. In 1950 Lambert conveyed Lot A to Anschutz by deed containing language granting appurtenant rights over Lot B for purposes of bathing and boating. The certificate of title issued to Anschutz for Lot A contained the language as to the appurtenant rights. However, the only notation made on the encumbrance sheet of Lambert's certificate of title was: " Lot [A] on plan filed with Certificate No. 11994 and this Certificate canceled as to such lot see ctf 11994, B 82 P 94." No specific notation was made on Lambert's certificate as to the easement encumbering the retained property.
Later in the same year Lambert conveyed Lot C to Anschutz by deed which contained the same language as to rights over Lot B. A certificate of title was issued to Anschutz which contained the language regarding appurtenant rights, and another notation was made on the encumbrance sheet of Lambert s certificate, but again only with respect to the partial cancellation of the certificate and not to the easement encumbering the retained Lot B.
In 1953, Lambert conveyed Lot B to Strickland. The deed did not contain any language indicating the rights of Anschutz to use Lot B for bathing and boating purposes. Through various mesne conveyances, none of which referred to Anschutz's rights, title to Lot B became vested in Paquin. Neither Paquin's certificate of title, nor any of the previous certificates of title issued in connection with Lot B, contained references to Anschutz's rights.
In a controversy between Paquin and Anschutz the court noted that it had before it two innocent parties: Anschutz had purchased Lots A and C and had been specifically ranted easement rights, which were also noted on the certificates of title which had issued from the land court, while Paquin had taken a deed for Lot B with no mention of any rights burdening the same, and had received from the land court a "clean" certificate of title.
Paquin argued that Lot B should not be held subject to Anschutz's easement since Paquin's certificate makes no reference to it and, under G.L.c. 185 § 46, "Every . . . purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on the certificate."
The court noted, however, that if it were incumbent upon Paquin to look beyond the certificate of the person from whom she purchased, she might be bound by Anschutz's easement on the basis of constructive notice. On this point the court stated: "Though the court has found no case involving registered land where it has been held that constructive notice will bind a purchaser even though the interest is not noted upon his certificate, the court sees no reason for treating this differently than unregistered land and therefore will hold that such notice will bind a purchaser . . . . Whether or not [Paquin] had constructive notice here depends upon whether or not she had a duty to examine the Lambert Transfer Certificate of Title . . . ."
Acknowledging that Paquin had a duty to examine the certificate of her immediate predecessor in title (which made no reference to the disputed easement) the court reasoned, however, that Paquin was not required to examine Lambert's certificate of title because (1) that certificate was removed in the chain of title and, (2) under G.L.c. 185 S 46 Paquin took her title free from encumbrances "except those noted on the certificate." Moreover, even an examination of Lambert's certificate would not specifically disclose the existence of the easements.
The Anschutzes argued, however, that Paquin had constructive notice for another reason. They noted that G.L.c. 185 § 58 provides: "Every conveyance . . . [or] instrument . . . affecting registered land . . . .shall, if registered, filed or entered in the office of the assistant recorder . . . be notice to all persons from the time of such registering, filing or entering."
They argued, therefore, that Paquin was bound by their easement. The court, although not in clear language, seems to have rejected this reasoning, noting that G.L.c. 185 § 59 requires that "[A]ll interests in registered land less than an estate in fee simple shall be registered by filing . . . the instrument which creates . . . such interest and . . . by a brief memorandum thereof made by an assistant reporter upon the certificate of title, signed by him. A similar memorandum shall also be made on the owner's duplicate."
The court seems to have felt that the notations on Lambert's certificate with respect to Lots A and C indicating that "this certificate canceled as to such" lots were not sufficient to satisfy the provisions of Section 59 and provides constructive notice to Paquin.
After disposing of the question of constructive notice, the court indicated that "[o]rdinarily, it would seem that the court should respect the certificate that is first in time, which of course is that of Anschutz, unless some reason can be found not to do so . . . . Thus all things being equal the Anschutzes should prevail". But the court found that all things weren't equal: "When the respondents Anschutz took the second deed to [Lot C] from Lambert . . . they then had a duty to check Lambert's certificate of title. Had they done so then, they would have discovered that the certificate and the encumbrance sheet contained no notation of an easement over Lot B but merely a notation of the conveyance of [Lot A] itself. This should have warned them that this easement was not properly protected. That was the time they should have acted and insisted that their adverse claim be noted under the provisions Section 59 . . . . Instead they waited twenty-six years to file their claim . . . . The court rules that the Anschutzes are now estopped from asserting their claim to the easement."
The result apparently would have been otherwise if the Anschutzes had not purchased Lot C, even though all of the facts were the same. However, it is wondered whether the reasoning of the case could be extended so as to require even a one-time purchaser to return to the registry district where a particular easement instrument had been filed to see that a proper notation of the same had been made on the certificate of the grantor to that instrument. In any event, the decision seems to put an obligation - whether burdensome or otherwise - on a purchaser of an easement over registered land to bring to the attention of the assistant recorder errors or oversights in the filing and registering of documents, at least where that purchaser has previously dealt with other land covered by the grantors certificate of title.