Title Covenants (Warranty Deeds)
• Present covenants
– Seisin (grantor owns whatever estate grantor
is purporting to convey)
– Right to convey (grantor has legal right to
convey)
– Vs. encumbrances (estate not subject to
easements, liens held by 3d parties)
• Future covenants
– Quiet enjoyment (grantor warrants against
eviction by paramount titleholder)
– Warranty (overlaps w/quiet enjoyment)
– Further assurances (grantor agrees to act to
“clear up” title defects)
Covenantee’s Recovery
• You could recover from Smith your $190,000
actual loss due to complete failure of title, plus:
– Interest on the $190,000, from the date of the
eviction (breach) [note 7, p. 200], and
– Costs (including attorney fees) of having to defend
the eviction action by Jones [note 7, p. 200]
• Where defect is an encumbrance rather than a
complete failure of title, actual damages = cost
of removal (if possible) or reduced value of
land (if not)
Problem 2
• 2006: You buy a home from Smith for
$200,000, receiving a general warranty deed
• 2014: Jones successfully sues to eject you (it
turns out that Smith forged a deed from Jones
to himself before selling you the land)
– At time, home is worth $190,000
• Assuming you can find Smith, you can recover
$190,000 (the amount of your loss), because
your eviction breaches the covenant of quiet
enjoyment in Smith’s warranty deed
• Now assume that at the time you bought
the land from Smith in 2006, you paid a
total price of $20,000
• In 2014, when Jones evicts you, the land is
worth $200,000 (due to appreciation in
market value)
• You suffer an actual economic loss of
$200,000, but Smith’s liability is capped at
$20,000 (i.e., the price Smith received),
plus interest and costs [note 2, p. 198]
• Why should the law limit your recovery in
this way?
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Limitation of Damages?
• Rationale 1: Smith’s title was defective at
time deed was delivered, so liability should
be based on the value of land at that time
(as reflected by price received by Smith)
• Rationale 2: Smith can’t meaningfully
protect himself against the risk of economic
loss due to future market appreciation of
the land (or appreciation b/c you made
improvements to the land)
Brown v. Lober
• 1957: Plaintiffs received general warranty deed
from Defendant
• 1974: Plaintiffs contracted to sell mineral rights
to Coal Company for $6,000
– Prior to closing, a title search revealed that a
predecessor had reserved a 2/3 interest in the
coal rights
– Sale only closed after price reduced to $2,000
• Plaintiffs sued Defendant for $4,000 damages
for breach of deed warranty, but lose. Why?
Limitation of Damages
• Grantor/warrantor can’t effectively
protect/manage risk posed by appreciation
• By contrast, grantee can:
– (1) conduct a careful title search;
– (2) get owner’s policy of title insurance; and
– (3) make sure the title insurance coverage is
increased if the land is improved or
appreciates in value due to market conditions
• Held: Plaintiffs couldn’t recover for breach
of covenant of seisin (statute of limitations)
– 10 year statute of limitations began to run
in 1957, upon delivery of deed, when
breach occurred
• Held: Plaintiffs couldn’t recover for breach
of covenant of quiet enjoyment
– Problem: no breach had yet occurred, b/c the
owner of coal rights hadn’t yet asserted those
rights and interfered w/ Plaintiff’s possession
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Brown v. Lober — Lessons
• Title defects are often latent
– By time defect is discovered/arises, much
time may have passed
– This can implicate the statute of limitations
(for breach of present covenants); also,
– With passage of time, grantor/covenantor
may be dead, bankrupt, or not found
(judgment-proof)
Gifts by Deed
• Note: cap on damages means that
where grantee receives land by GWD
as a gift, grantee cannot recover
damages from donor/grantor!
– Smith citation (note 3, p. 199) is
misleading; that case allowed a donee to
recover from a remote seller/grantor, but
not from the donor/grantor
Implications for
Grantor/Warrantor
Implications for
Grantor/Warrantor
• First: if your title was defective at time you
deeded the property, you can be held
liable to a “remote” grantee
• Second: if your title is subject to
encumbrances that cannot be removed,
you must “except” those matter from
any title covenants you make
– Future covenants “run with the land”
– An owner’s policy of title insurance will
indemnify you for this risk, even after you’ve
deeded away the land and no longer own it
– E.g., “subject, however, to easements,
restrictions, and covenants of record”
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