Opinion ID: 2602159
Heading Depth: 2
Heading Rank: 2

Heading: claims against cook and cook development

Text: ¶ 32 The next issue on appeal is whether the trial court erred by granting summary judgment to Cook and Cook Development on the breach of covenants of title [3] claims. The trial court granted summary judgment on Holmes's breach of covenants of title claim because any breach was cured before Keystone filed its quiet title action against Holmes. ¶ 33 Even if covenants of title are not expressly set forth in a deed conveying real property, the covenants of title still inhere in a warranty deed as long as the deed is properly executed. The Utah Code provides in pertinent part: A warranty deed when executed as required by law shall have the effect of a conveyance in fee simple to the grantee, his heirs and assigns, of the premises therein named, together with all the appurtenances, rights, and privileges thereunto belonging, with covenants from the grantor, his heirs, and personal representatives, that he is lawfully seised of the premises; that he has good right to convey the same; that he guarantees the grantee, his heirs, and assigns in the quiet possession thereof; that the premises are free from all encumbrances; and that the grantor, his heirs, and personal representatives will forever warrant and defend the title thereof in the grantee, his heirs, and assigns against all lawful claims whatsoever. Utah Code Ann. § 57-1-12 (2000) (emphasis added). According to the plain language of the statute, if a warranty deed comports with Utah law, then the five covenants of title articulated therein implicitly apply to the real property conveyance: (1) the covenant of seisin, (2) the covenant of right to convey, (3) the covenant against encumbrances, (4) the covenant of warranty, and (5) the covenant of quiet enjoyment. [4] Id. Because the parties do not dispute the viability of the warranty deed or the validity of its execution, the five covenants of title are included in the warranty deed by operation of law. To determine if Cook Development breached these five covenants of title, we must review each of the covenants in turn.

¶ 34 Initially, we address whether the trial court properly granted summary judgment to Cook Development [5] regarding Holmes's claim that Cook Development breached the covenants of seisin and right to convey. In making the covenant of seisin, a grantor warrants that the grantor is seized of the estate the deed purports to convey, both in quantity and quality. Utah Code Ann. § 57-1-12 (2000) (providing that grantor covenants he is lawfully seised of the premises); see also Bosnick v. Hill, 292 Ark. 505, 731 S.W.2d 204, 206 (1987); Brown v. Lober, 75 Ill.2d 547, 27 Ill.Dec. 780, 389 N.E.2d 1188, 1190-91 (1979); Maxwell v. Redd, 209 Kan. 264, 496 P.2d 1320, 1324 (1972); Seymour v. Evans, 608 So.2d 1141, 1144 (Miss. 1992); Ives v. Real Venture, Inc., 97 N.C.App. 391, 388 S.E.2d 573, 578 (1990); Double L. Props., Inc. v. Crandall, 51 Wash. App. 149, 751 P.2d 1208, 1210-11 (1988). Similarly, in making the covenant of the right to convey, a grantor guarantees that the grantor has the legal right to convey the estate the deed purports to convey. Utah Code Ann. § 57-1-12 (providing that grantor covenants he has good right to convey premises); see also Brown, 27 Ill.Dec. 780, 389 N.E.2d at 1190-91; Seymour, 608 So.2d at 1144. Essentially, the covenants of seisin and the right to convey are synonymous, and the analysis of whether a grantor breached one of these covenants is the same for either covenant. Creason v. Peterson, 24 Utah 2d 305, 307, 470 P.2d 403, 404 (1970). ¶ 35 Hence, the covenants of seisin and right to convey, if found in a warranty deed, attest that the grantor covenants that it has good title to the estate purportedly conveyed. See id. Consequently, the grantor breaches these covenants when it is shown that the grantor did not own the land that he purported to convey by the warranty deed description. Id.; see also Butler, Crockett & Walsh Dev. Corp. v. Pinecrest Pipeline Operating Co., 909 P.2d 225, 233 (Utah 1995). Once evidence is adduced showing the grantor does not own what the grantor purports to convey, in violation of these covenants of title, there is no need to show an actual eviction or threat thereof. Creason, 24 Utah 2d at 307, 470 P.2d at 404. ¶ 36 These covenants speak only to the circumstances at the moment a grantor delivers a deed and are thus defined as present covenants. 20 Am.Jur.2d Covenants, Conditions and Restrictions § 71 (1995) [hereinafter 20 Am.Jur.2d Covenants ]; see also Creason, 24 Utah 2d at 307, 470 P.2d at 404 (stating that no need to await actual eviction or threat thereof to sue for breach of covenants of seisin and right to convey). Thus, a grantor breaches these covenants, if at all, when the deed is delivered. See Soderberg v. Holt, 86 Utah 485, 493, 46 P.2d 428, 431 (1935); see also Bernklau v. Stevens, 150 Colo. 187, 371 P.2d 765, 769 (1962); Brown, 27 Ill.Dec. 780, 389 N.E.2d at 1191; Double L. Props., 751 P.2d at 1210-11; 20 Am.Jur.2d Covenants § 71. ¶ 37 In this case, Cook Development breached the covenants of seisin and right to convey because it did not own the 323-acre parcel when Cook Development delivered the warranty deed to Holmes. The quitclaim deed conveying the property to Cook Development from LC Farms failed because it erroneously identified LC Associates as the grantor. Cook Development breached these two covenants regardless of whether that breach was subsequently cured by First American's defense of Holmes in the Keystone litigation because the breach occurred when the deed was delivered.
¶ 38 Although Cook Development breached the covenants of seisin and right to convey, summary judgment was nevertheless appropriate in the instant case because the damages were nominal. The usual measure of damages for breach of covenant ... is compensation for actual loss suffered by reason of the breach. 20 Am.Jur.2d Covenants § 45 (1995). Generally, the measure of damages for breach of the covenants of seisin and right to convey, predicated upon a complete failure of title, is the consideration paid to purchase the property, plus applicable interest and any attorney fees incurred to establish title in the grantee pursuant to the deed. See, e.g., Koelker v. Turnbull, 127 Idaho 262, 899 P.2d 972, 976 (1995); Ralston v. Thacker, 932 S.W.2d 384, 388 (Ky.Ct.App.1996); Reese v. Smith, 12 Mo. 344, 347-48 (1849); Meyer v. Thompson, 183 N.C. 543, 112 S.E. 328, 329 (1922); Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex.1987); Schorsch v. Blader, 209 Wis.2d 401, 563 N.W.2d 538, 540 (Ct.App.1997); see also 20 Am.Jur.2d Covenants § 123. The consideration paid is the proper measure of damages at the moment of delivery because the grantee has paid his money, yet did not receive the property. Reese, 12 Mo. at 347-48. ¶ 39 However, a covenantee can recover only damages that are occasioned by the breach of these covenants. See Creason, 24 Utah 2d at 307, 470 P.2d at 404; Pac. Bond & Mortgage Co. v. Rohn, 101 Utah 335, 341, 121 P.2d 635, 637 (1942). For example, in Creason, we held that the damages recoverable for breach of the covenants of seisin and the right to convey were limited in that case. 24 Utah 2d at 307, 470 P.2d at 404. Specifically, we held that the plaintiff could recover only damages actually resulting from the breach, which included reasonable and necessary costs incurred to clear up any difficulty [that] would represent a substantial flaw in his title, such as reasonable attorney fees. Id. at 307-09, 470 P.2d at 404-05. ¶ 40 In the event that the grantor cures the breach by ensuring that title vests in the grantee in fee simple absolute before an action is initiated, then the grantee has not suffered actual damages as a result of the breach. In such a case, any recovery for breach of these covenants is limited to nominal damages for a mere technical breach. Bair v. Axiom Design, L.L.C., 2001 UT 20, ¶ 18, 20 P.3d 388; Thompson v. Anderson, 107 Utah 331, 336, 153 P.2d 665, 667 (1944); Pac. Bond & Mortgage Co., 101 Utah at 341, 121 P.2d at 637; see also, e.g., Perkins v. August, 109 Conn. 452, 146 A. 831, 833-34 (1929); 20 Am.Jur.2d Covenants § 148. ¶ 41 In Perkins, the defendant breached the covenants of seisin and good right to convey because another owned an interest in the land purportedly conveyed when the defendant deeded the property to the plaintiffs. 146 A. at 833. Nevertheless, the court determined that the most [the plaintiffs] could claim would be nominal damages because the breach was cured when the unowned interest was conveyed to the plaintiffs at their request and without cost to them before the action was brought. Id. The court reasoned that in effect all technical difficulties [were] healed and the plaintiffs have received in fact just what they purchased. Id. ¶ 42 Similarly, in this case, Holmes's recovery is limited to nominal damages. Although Cook Development technically breached the covenants of seisin and right to convey, Cook Development cured the breach by having LC Farms convey the property directly to Holmes by the special warranty deed on September 3, 1998. Additionally, First American defended Holmes in the Keystone litigation pursuant to the title insurance policy Cook Development purchased for Holmes. In the Keystone litigation, First American established that the title to the 323-acre parcel vested in Holmes under the special warranty deed. ¶ 43 Thus, at most, Cook Development technically breached the two covenants. Holmes never incurred actual damages, however, because the breach of the covenants was cured. Indeed, Holmes conceded at oral argument that there were no damages before September 3, 1998, when LC Farms delivered the special warranty deed to Holmes. Further, Holmes can still sell the lots, which may have appreciated in value, and profit therefrom although Holmes claims that it was damaged in lost profits. Therefore, Holmes's recovery is limited to nominal damages. However, we will not remand because we generally do not remand if the damages are only nominal. Globe Leasing Corp. v. Bank of Salt Lake, 586 P.2d 420, 422 (Utah 1978); see also Perkins, 146 A. at 833-34; Castor v. Dufur, 133 Iowa 535, 11 N.W. 43, 46 (Iowa 1907). Thus, we affirm the trial court's order granting Cook and Cook Development summary judgment.
¶ 44 Next, we address whether the trial court properly granted summary judgment to Cook Development on Holmes's claim that Cook Development breached the covenant against encumbrances. A grantor in a warranty deed in Utah warrants to the grantee, among other things, `that the premises are free from all encumbrances.' Webb v. Interstate Land Corp., 920 P.2d 1187, 1190 (Utah 1996) (quoting Utah Code Ann. § 57-1-12); accord Brewer v. Peatross, 595 P.2d 866, 868 (Utah 1979). Pursuant to [the] covenant [against encumbrances], a grantor obligates himself either to clear up any encumbrances that may be discovered or to indemnify the grantee. Upland Indus. Corp. v. Pac. Gamble Robinson Co., 684 P.2d 638, 643 (Utah 1984) (last alteration in original). This court has defined an encumbrance as any interest in a third person consistent with a title in fee in the grantee, if such outstanding interest injuriously affects the value of the property, Hancock v. Planned Dev. Corp., 791 P.2d 183, 186 (Utah 1990) (emphasis omitted), or constitutes a burden or limitation upon the rights of the fee title holder, Bergstrom v. Moore, 677 P.2d 1123, 1124 (Utah 1984). The question as to whether there is an encumbrance on [the] property must depend upon the facts as they exist at the time the warranty deed is delivered, and not upon subsequent occurrences. Brewer, 595 P.2d at 868. ¶ 45 Holmes never specifically identifies a particular encumbrance that clouded Holmes's title when Cook Development delivered the warranty deed, which would have given rise to a breach of the covenant against encumbrances. Holmes infers that the lis pendens and the concomitant litigation encumbered the property, thereby breaching the warranty. We have never directly determined whether a lis pendens would constitute an encumbrance that breaches the covenant against encumbrances, see Utah Sav. & Trust Co. v. Stoutt, 36 Utah 206, 212, 102 P. 865, 868 (1909); see also Tolotti v. Equitable Real Estate & Inv. Co., 70 Utah 385, 387-95, 260 P. 415, 415-19 (1927), and we need not do so in this case. The lis pendens could not cloud the title when the warranty deed was delivered. Cook Development delivered the warranty deed to Holmes on May 19, 1998, when the sale of the 323-acre parcel closed. Keystone filed the lis pendens after Premier attempted to transfer the 323-acre parcel to Keystone in November 1998. Further, Holmes failed to identify any other encumbrance that existed on the record at the time Cook Development executed and delivered the warranty deed. Accordingly, Cook Development did not breach the covenant against encumbrances.
¶ 46 Finally, we address whether the trial court properly granted summary judgment on Holmes's claim that Cook Development breached the covenants of warranty and quiet enjoyment. According to the covenant of quiet enjoyment, a grantor warrants that the grantee may possess and quietly enjoy the land. Utah Code Ann. § 57-1-12 (2000) (providing that grantor guarantees the grantee, his heirs, and assigns in the quiet possession of premises conveyed); see also Spiegle v. Seaman, 160 N.J.Super. 471, 390 A.2d 639, 645 (App.Div. 1978). The covenant of warranty is that the grantor will warrant and defend the title of the grantee against rightful claims regarding the title conveyed. Utah Code Ann. § 57-1-12 (providing that grantor covenants that grantor, his heirs, and personal representatives will forever warrant and defend the title... in the grantee ... against all lawful claims); see also Spiegle, 390 A.2d at 645; Morgan v. Reese, 99 Ohio App. 473, 134 N.E.2d 581, 585 (1954); City of Beaumont v. Moore, 146 Tex. 46, 202 S.W.2d 448, 453 (1947). In Utah, both the covenant of warranty and the covenant of quiet possession are synonymous `since the same occurrence of circumstances is necessary to their breach,' they both run with the land, and `the rule of damages is the same in [each].' Van Cott v. Jacklin, 63 Utah 412, 415, 226 P. 460, 461 (1924) (citation omitted). Thus, for purposes of analysis, we consider these covenants simultaneously. ¶ 47 To establish a breach of the covenants of warranty and quiet enjoyment, ordinarily a grantee must show that the grantee was evicted from the property purportedly conveyed via the warranty deed by one with paramount or better title. Christiansen v. Utah-Idaho Sugar Co., 590 P.2d 1251, 1253 (Utah 1979); E. Canyon Land & Stock Co. v. Davis & Weber Counties Canal Co., 65 Utah 560, 564, 238 P. 280, 281 (1925); see also Van Cott, 63 Utah at 416, 226 P.2d at 461. Eviction can be either actual or constructive. Christiansen, 590 P.2d at 1253; Soderberg v. Holt, 86 Utah 485, 500, 46 P.2d 428, 434 (1935); E. Canyon Land & Stock Co., 65 Utah at 565-66, 238 P. at 281-82. ¶ 48 Before the grantee can recover for breach of these covenants, based upon either an actual or a constructive eviction, the grantee must establish that title has been affirmatively asserted against the grantee's title and possession, and that the title thus asserted is paramount or superior to the grantee's title. Christiansen, 590 P.2d at 1253; see also Lewis v. Jetz Serv. Co., 27 Kan.App.2d 937, 9 P.3d 1268, 1270 (2000); Stevenson v. Ecklund, 263 Mont. 61, 865 P.2d 296, 298-99 (1993); Omega Chem. Co. v. Rogers, 246 Neb. 935, 524 N.W.2d 330, 335 (1994); Schneider v. Lipscomb County Nat'l Farm Loan Ass'n, 146 Tex. 66, 202 S.W.2d 832, 834 (1947). Paramount title is one that would prevail over another title in an action or one that would be otherwise successfully asserted against another's title. Omega Chem. Co., 524 N.W.2d at 335; see also Family Fin. Fund v. Abraham, 657 P.2d 1319, 1324-25 (Utah 1982); E. Canyon Land & Stock Co., 65 Utah at 564-68, 238 P. at 281-83. ¶ 49 Consistent with these general rules, when a claim of paramount title to property has been defeated, the grantee cannot show eviction and the grantor has not breached the covenants of warranty or quiet enjoyment. Bloom v. Hendricks, 111 N.M. 250, 804 P.2d 1069, 1074 (1991); cf. St. Paul Title Ins. Corp. v. Owen, 452 So.2d 482, 485 (Ala.1984) ([A] final judgment or decree adverse to the covenantee's title or right of possession constitutes a sufficient constructive eviction to entitle the covenantee to sue for breach of the covenant of warranty. (emphasis added)). ¶ 50 In this case, Holmes failed to establish that paramount or superior title has been affirmatively asserted against Holmes's title and possession. Aside from Holmes's title, the only other claim to the property that has been asserted was Keystone's claim of ownership for which Keystone instigated the Keystone litigation to quiet title to the 323-acre parcel. In that suit, the trial court quieted title to the parcel in Holmes, which conclusively established that Holmes's title to the 323-acre parcel is paramount to any claim Keystone has to the property. ¶ 51 Accordingly, Holmes cannot show that it was ever evicted, either actually or constructively, because Holmes remains in possession of the 323-acre parcel and Holmes's title is not subject to a paramount title. Therefore, inasmuch as Holmes cannot show that it has been evicted from the 323-acre parcel, Holmes cannot show that Cook Development breached the covenants of warranty and quiet enjoyment.
¶ 52 Holmes also contends that Cook and Cook Development are liable to Holmes under both an indemnity agreement and a modification and extension agreement. However, Holmes lacks standing to sue Cook and Cook Development under these contractual provisions. ¶ 53 Generally, unless a plaintiff can recover on a contract as a third-party beneficiary or an assignee, only parties to a contract can bring suit under the contract. See SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs., Inc., 2001 UT 54, ¶ 10, 28 P.3d 669; Harper v. Great Salt Lake Council, Inc., 1999 UT 34, ¶ 20, 976 P.2d 1213; M.H. Walker Realty Co. v. Am. Sur. Co., 60 Utah 435, 450, 211 P. 998, 1004 (1922). Holmes was not specifically a party to either the indemnity agreement or the modification and extension agreement. Holmes Ventures, LC, not Holmes Development, LLC, [6] was the party to both of these agreements. Assuming Cook and Cook Development were liable under the indemnity agreement and the modification and extension agreement, Holmes would not be able to sue to recover. See Utah Code Ann. § 48-2c-110(1) (Supp.2001) (providing that limited liability company can institute . . . any action . . . in its own name (emphasis added)). Therefore, Holmes cannot pursue these claims against Cook or Cook Development.