Opinion ID: 449245
Heading Depth: 2
Heading Rank: 4

Heading: Breach of Warranty Claims Against Friendswood

Text: 50 The Perrys assert that the district court improperly granted Friendswood's motion for a directed verdict on their breach of warranty claims against Friendswood. The Perrys argue that Friendswood breached two warranties: a warranty of title and an express warranty. Friendswood was the original developer of the property upon which the Perrys' home was constructed. In 1977, Friendswood conveyed the subject lot to Greiner, and the deed was placed in escrow with Stewart until Greiner paid the outstanding balance of the loan for the lot. Greiner poured the concrete slab for the home after it purchased the lot from Friendswood but before it paid the balance of the note to Stewart. 51 In their warranty of title claim, the Perrys do not argue that Friendswood breached any warranty by conveying the easement to HL & P in the first instance. Indeed, no such attack could be made, since Friendswood (1) diligently recorded the easement on a comprehensive subdivision plat, (2) filed that plat with the recorder of deeds, (3) provided copies of that plat to Greiner, and (4) indicated in its deed to Greiner that Greiner accepted the property subject to all recorded easements. Rather, the Perrys claim that Friendswood breached a warranty of title because Friendswood allegedly was the owner of the property at the time Greiner created the encroachment by pouring the foundation over part of HL & P's easement. The Perrys' claim lacks serious merit. 52 Any claim for a breach of warranty of title arises from Friendswood's conveyance of the property to Greiner. As Greiner's assignees, the Perrys' rights are derivative of whatever rights Greiner possessed at the time Greiner acquired the property. Houchins v. Scheltz, 590 S.W.2d 745, 751 (Tex.Civ.App.--Houston, no writ). When the grantor and grantee execute a deed and place the deed in escrow, equitable title immediately passes to the grantee. Cowden v. Broderick & Calvert, 131 Tex. 434, 114 S.W.2d 1166, 1169 (1938); Hudgins v. Krawetz, 558 S.W.2d 131, 134, (Tex.Civ.App.--San Antonio 1977, no writ). Legal title passes to the grantee when the loan is paid and the deed is taken out of escrow. Cowden, 114 S.W.2d at 1169. The legal title a grantee receives relates back to the date the grantee received equitable title. Id. 53 At the time Friendswood conveyed the property to Greiner, no encroachment existed. It arose only after Greiner poured the concrete slab. Shortly thereafter, when the loan was paid and the deed taken out of escrow, legal title passed to Greiner. Greiner had legal title to the property, as a result of the relation-back doctrine, before the encroachment was created. An action for a breach of warranty of title therefore does not lie against Friendswood, since Friendswood was not the legal title holder at the time Greiner constructed the encroachment. This result is consistent with the common-sense recognition that the Perrys, who stand in the shoes of Greiner, the original grantee, should not be allowed to enforce against Friendswood, the grantor, a covenant against encumbrances where the encumbrance was created by the original grantee. 54 In their remaining warranty claim, the Perrys argue that Friendswood's advertising literature warranted that Friendswood would conduct a construction inspection ... prior to [the] pouring of the slab and foundation ... for the purpose of verifying adherence to the established minimum construction standards. The Perrys argue that this statement by Friendswood warranted that Friendswood would physically inspect the property to ensure that, among other things, the slab would be poured in the correct location. The uncontradicted evidence at trial demonstrated conclusively that this statement in the advertising literature merely meant that Friendswood would inspect the premises to ensure that a builder was complying with certain subdivision requirements, such as minimum set-back restrictions, minimum square footage restrictions, and home design restrictions. The quoted statement warranted to potential lot purchasers only that Friendswood monitored the aesthetic consistency and integrity of the homes in the subdivision and in no way warranted to purchasers that Friendswood guaranteed that a builder did not encroach upon existing and properly recorded underground utility easements on his, the builder's, own property. The district court correctly granted Friendswood's motion for a directed verdict on this claim.