The Doctrine of After Acquired Title

The Doctrine of After Acquired Title
Patrick W. Fitzgerald, Ph.D., Ed.D., J.D.
After‐Acquired Title: Overview
• “After‐acquired Title” is a legal doctrine recognized in many jurisdictions which provides that, when a grantor purports to convey or mortgage property to which he is not vested, any title subsequently obtained by that grantor automatically passes to his grantee by operation of law. • The purpose of this doctrine is to give effect to the intent of the parties to a conveyance, or security instrument as evidenced by the documents they execute. After‐Acquired Title: Overview
• After‐acquired title applies when Joe, who has not interest in the land, conveys title to the land to Mary and then subsequently acquires title to the land from Fred, who originally held legal title to the land. At the time Joe acquires title, such title automatically passes to Mary. After‐Acquired Title: Overview
• This doctrine has been codified into a statutory provision in some states but originally it was an equitable doctrine to prevent unjust enrichment. • As a general principle, warranty deeds and grant deeds are deemed to transfer after acquired title, but quitclaim deeds do not. After‐Acquired Title: Overview
• After acquired title refers to a title held by a person who bought property from a seller who acquired title only after purporting to sell the property to the buyer. • When a seller conveys land to another on the belief that s/he had good title to the land, and later s/he acquires title to that land, then buyer automatically acquires title to the transferred land. After‐Acquired Title: Overview
• As soon as the seller actually acquires title, title passes to the person to whom it was sold.
• However, this doctrine of after‐acquired title generally does not apply when the seller receives title by quitclaim deed. The deed conveying the land must include words expressing an intention to vest title in the grantee.
Express Covenants
• Generally, the grantor’s warranty extends to all cases involving a failure of title to land purportedly conveyed by the deed. The covenant of warranty in a deed is an express covenant, and a Texas statute provides that no person shall be obligated to insert a covenant of warranty in any conveyance.
Implied Covenants
• The seller, by the use of the word "grant" or "convey" in any conveyance of land, will give rise to two implied covenants. • The first such covenant is that the grantor warrants to the grantee that he has not previously conveyed the same estate, or any right, title, or interest, to any person other than the grantee. Second, the grantor warrants that the estate conveyed is at the time of the execution of such conveyance free from encumbrances. The term "encumbrances" includes taxes, assessments, and all liens upon real property. Implied Covenants
• Although these implied covenants arise by operation of law when the words "grant" or "convey" are used in the conveyance, the grantor nonetheless may negate or restrain the covenants by express terms contained in the conveyance. Power of Warranty
• Thus, a grantor intending to negate any warranty in his conveyance may use language similar to the following: "Grantor herein makes no warranty as to the title to the property herein conveyed either express or implied.
Title companies favor the warranty deed because it gives them subrogation rights against the seller and allows the buyer benefits of the after‐
acquired title doctrine.
After‐Acquired Title
Definition
• Doctrine by which the title of real estate, previously unsuccessfully transferred because of lack of possession by grantor, automatically passes to the buyer upon acquisition by the grantor and is based on the acquisition of title by estoppel. After‐Acquired Title
Definition
• Title that vests automatically in a grantee when acquired by a grantor who purported to sell the property before acquiring title; also: a doctrine that requires such vesting (compare estoppel by deed)
• NOTE: The doctrine of after‐acquired title generally does not apply when the grantor receives title by quitclaim deed; to vest title in the grantee the deed must include words expressing such an intention. After‐Acquired Title
Definition
• The so‐called "doctrine of after‐acquired title" deals with the rights of a grantee (and his successors) who accepts a deed or other conveyance from a grantor then without title, but who thereafter acquires it. After‐Acquired Title
Definition
• Legal doctrine by which property automatically vests in a grantee when the grantor acquires title to the property after the deed has been executed and delivered. After‐Acquired Title
Definition and Example 1
• After‐Acquired Title to property acquired by someone after that person has purportedly transferred the property to someone else. As soon as the seller actually acquires title, it passes to the person to whom it was sold. • For example, John signs, acknowledges, and records a deed of his late father's ranch to Sam, even though John has not yet received title from his father's estate. When John gets the title from his father's estate and records it, the after‐
acquired title goes automatically to Sam. After‐Acquired Title
Definition and Example 2
• The After Acquired Title Doctrine is a legal doctrine under which, if a grantor conveys what is mistakenly believed to be good title to land that he or she did not own, and the grantor later acquires that title, it vests automatically in the grantee. • A practical example is Husband and Wife own Blackacre. After‐Acquired Title
Definition and Example 2
• Wife is awarded the property through a divorce decree. Wife sells the property to a bonafide
purchaser for value. Wife executes a Warranty Deed to the purchaser and the deed is properly recorded. • Subsequently, a deed from the Husband to the Wife is recorded. Under the After Acquired Title Doctrine, the interest received by the wife automatically transfers to the new purchaser.
After‐Acquired Title
Definition and Example 3
• After‐acquired property is real property or personal party to which party A obtains title only after falsely selling it to party B for value when party A did so without proper title. • An example would be Colonel Sanders pretends to sell "My Old Kentucky Home" to Boone for $1000 (US) but does not own the property at the time and then uses the money to actually buy that same property from the true owner. • The apparent outcome would be Col. Sanders owns the property and Boone has lost $1000.
After‐Acquired Title
Definition and Example 3
• Because the result of the set of transactions would be an injustice, a legal concept called the "After‐acquired‐title doctrine" vests the legal title in the property in party B even though buying it before party A had legal title to the property and therefore had no right to transfer the title. • This is an application of the principle of equity to property law. Historically, equity was applied in England in special chancery courts, but in the US, remedies at both law and equity are given in a single court.
After‐Acquired Title
Definition and Example 4
• After‐acquired title: title to property acquired after the owner attempts to sell or transfer the title to another person before he/she actually got legal title. • When the title is acquired by the seller in this paper shuffle, title automatically goes to the person to whom it was sold, passing through the person who acquired title "like a dose of salts" on its way to the new purchaser. After‐Acquired Title
Definition and Example 4
• Example: John signs, acknowledges, and records a deed of the ranch to Sam, but John has not yet received title from the estate of his late father. • When John gets title from his father's estate and records it, the after‐acquired title goes automatically to Sam.
After‐Acquired Title
Example 5
• Consider the following: 0 conveys Blackacre to A by warranty deed at a time when 0 has no title. • Subsequent to the conveyance, 0 acquires title. Although the Texas courts generally have held that A can acquire O's after‐required title and is not limited to damages in a suit for breach of warranty, a study of the cases will demonstrate a wide variation by the courts in their definition and consistency of application of the rationale used to determine the rights of competing parties to an after‐acquired title:
After‐Acquired Title
Example 5
• 1. A is given title on the basis of a covenant of warranty contained in the deed (express or implied) to prevent a circuitry of action on the covenant (hereinafter referred to as the "warranty cases") . After‐Acquired Title
Example 5
• 2. A is given title on the basis that 0 is estopped to deny the title he purported to convey to A (hereinafter referred to as the "estoppel cases").'
After‐Acquired Title
Example 5
• 3. A is given title on the basis of an estoppel against 0 created by the presence of a covenant of warranty (express or implied) contained in the deed (hereinafter referred to as the "warranty‐estoppel" cases) ."
After‐Acquired Title
Example 5
• 4. A is given title where it is difficult, if not impossible, to determine the underlying theory of the case. • Unfortunately, this category includes several of the most extensively cited cases in this field. Seemingly the Texas courts have felt free to apply a "grab‐bag" rationale, i.e., a theoretical basis suited to the achievement of a just result in a particular case.'
After‐Acquired Title
Example 5
• However, this variation as to the basis of decision is also due, in part, to the paucity of source law available to the courts during the Republic and early years of statehood, and misconceptions concerning the historical basis for acquisition of after‐ acquired title as it existed in England prior to the colonization of the United States.
After‐Acquired Title
Example 5
• Consider for example the effect of the following recital which might be contained in a deed as part of the description of the land conveyed: "to the place of beginning, the land herein conveyed being all of the interest of the grantors, in and to said above described tract of land and which was inherited by them from their mother, and also from their father." After‐Acquired Title
Example 5
• At the time of conveyance an undivided interest in the property is owned by grantor's brother, which thereafter passes to grantors by descent and distribution upon his death. Common Law Source for Texas
• The doctrine of after acquired title in Texas is a doctrine established in common law and evolved into its present form as a result of numerous cases that have expanded, limited and clarified the general rule. • The doctrine touches many areas of law, among others, conveyances, recording acts, mortgages and other real property liens, adverse possession, real property and oil and gas, among others.
Common Law Source for Texas
• The after acquired title doctrine deals with a grantor who owns a lesser interest in the property than the grantor purports to convey by virtue of a warranty in a deed or other conveyance document and who thereafter acquires all or part of the interest he intended to convey. • The general rule estops the grantor from claiming ownership of the after acquired interest as against his grantee. Common Law Source for Texas
• Under the rule, title to the after acquired interest passes "eoinstante" to the grantee and the grantee's heirs and successors upon the grantor's acquisition of such interest. Current Rule for Texas
• The Texas Supreme Court clearly articulated the current rule in the well known Duhig v. Peavy‐Moore Lumber Co. case:
• "It is the general rule, supported by many authorities, that a deed purporting to convey a fee simple or a less definite estate in land and containing covenants of general warranty will estop the grantor from asserting an after‐acquired title or interest in land, or the estate which the deed purports to convey, as against the grantee and those claiming under him." Duhig, 135 Tex. 503, 144 S.W.2d 878, 880 (1940). Current Rule for Texas
• As a simple example, Grantor A represents in his deed to Grantee B that he is conveying all of Tract A; however, he only owns an undivided seventy‐five percent (75%) interest in the tract. Grantee B conveys the property to Grantee C. Grantor A subsequently acquires the other twenty‐five percent (25%) interest. Current Rule for Texas
• As against Grantee B and Grantee C, Grantor A will be estopped from claiming title to the twenty‐five percent (25%) interest, because of his representations in his deed that he was conveying all of the tract. • The twenty‐five percent (25%) interest will vest in Grantee C immediately upon Grantor A's acquisition of such interest.
Current Rule for Texas
• The effect of the rule is binding not only on the original grantor and his heirs and successors, but, after recording, it also binds subsequent purchasers from the original grantor who acquired the interest with actual or constructive notice of the prior conveyance. The Duhig Rule – Doctrine of After Acquired Title
• What happens if a Grantor assumes that he owns 100% of the minerals, then sells that land, specifically granting 50% of all the minerals and specifically reserving 50% of all the minerals for himself (in effect, including 100% of the minerals in the conveyance), and later finds that he only owned 50% of the minerals?
The Duhig Rule – Doctrine of After Acquired Title
• The Duhig Rule should be applied in this instance. • The Duhig Rule is a rule of interpretation that basically gives more weight to the granted interests than the interests that the Grantor attempted to reserve. The Duhig Rule – Doctrine of After Acquired Title
• This rule would generally only come into effect where there was a warranty, special warranty or similar clause included in the grant, as this warranty would in effect make it so the Grantor would convey all they own, or ever would own, in the property. It would not apply in the case of a quitclaim deed. (Duhig v. Peavy‐Moore Lumber Co., Inc., 135 Tex. 503, 144 S.W.2d 878, 880 (1940))
The Duhig Rule – Doctrine of After Acquired Title
• In the case above, the Grantor would have conveyed his entire 50% interest into the property with nothing left to himself to reserve. If the Grantor, in the instance cited above, had conveyed all of his right, title and interest into the property, but reserved to himself an interest into the minerals in the amount of 50%, then he would have effectively reserved all of his minerals. The Duhig Rule – Doctrine of After Acquired Title
• But, since the Grantor both reserved 50% to himself and granted 50% to the Grantee, this would have been an overconveyance, therefore the Duhig Rule should be applied.
• In the event that the Grantor only owned 25% of the minerals at the time of the grant, but later inherited an additional 50%, then the moment that the Grantor inherits the 50%, an additional 25% would pass directly to the Grantee to satisfy the prior 50% grant in the conveyance.
The Duhig Rule – Doctrine of After Acquired Title
• The Doctrine of After Acquired Title can be taken further in that if the Grantee under the original conveyance grants ‘all of his interest’ in the tract to a third party, and after that, the 50% inheritance in the preceding paragraph were to occur, then the 25% would pass from the original Grantor to the third party, bypassing the Grantee under the original conveyance altogether.
The Duhig Rule – Doctrine of After Acquired Title
• The doctrine of after‐acquired title applies only to a vendee holding by a warranty deed. This is the reasoning behind the doctrine: • "It is easy to see why one, who sells with warranty, becomes estopped from thereafter acquiring a title to the prejudice of his grantee. To hold that the title he acquires inures to his grantee is really nothing more than an enforcement of the grantor's obligation to deliver a good title. The Duhig Rule – Doctrine of After Acquired Title
• On the other hand, it is quite manifest that the doctrine of after‐acquired title should not be expanded to include a quit‐claim deed, primarily for the reason that a conveyance of that character transfers only the present interest of the vendor in the land and does not convey the property. • This being so, there is no reason why the vendor should not thereafter acquire title even though it be adverse to the vendee holding under the deed."
What Would Texas Do?
• In Germany v. Turner, 132 Tex. 491, 123 S.W.2d 874 (Tex. Comm. App. 1939), the surviving wife and purported sole heirs of decedent granted, sold, and conveyed all of a certain tract of land described by metes and bounds, by general warranty deed. What Would Texas Do?
• It was subsequently discovered that the deed bore forged signatures of some of the heirs. • In a suit in trespass to try title it was held that where there was no limitation or exception on the general warranty that the co‐grantors were joint and severally liable on the warranty to the extent of the whole interest conveyed. What Would Texas Do?
• The court further held that the recitation that grantors were the surviving wife and heirs of the former owner was a mere indication of the source of title and not a limitation upon the granting clause and rejected the contention of surviving wife that she was only conveying her individual interest in the tract described. What Would Texas Do?
• The Texas cases state a simple test from which to determine if after‐acquired title will pass: Does the deed, looking at it as a whole, convey the land, or merely indicate an intention to convey only the presently owned interest, or property acquired from a specific source. • Clauses construed as indicating only the source of title have been interpreted as not restricting the granting clause. Texas Case Law
• In Germany v. Turner, 132 Tex. 491, 123 S.W.2d 874 (Tex. Comm. App. 1939), the surviving wife and purported sole heirs of decedent granted, sold, and conveyed all of a certain tract of land described by metes and bounds, by general warranty deed. • It was subsequently discovered that the deed bore forged signatures of some of the heirs. In a suit in trespass to try title it was held that where there was no limitation or exception on the general warranty that the co‐grantors were joint and severally liable on the warranty to the extent of the whole interest conveyed. Texas Case Law
• The court further held that the recitation that grantors were the surviving wife and heirs of the former owner was a mere indication of the source of title and not a limitation upon the granting clause and rejected the contention of surviving wife that she was only conveying her individual interest in the tract described.
Texas Case Law
• The court stated: If in this instance the recitals in the premises be given the effect of limiting the estate conveyed to only the individual undivided interest of the grantors, then the premises are unquestionably in direct conflict with the granting, habendum and warranty clauses. • This conflict can be avoided or resolved by giving to the recitals a construction that they are merely descriptio personae, or were intended to refer to the source or history of title, and were not intended to create
Texas Case Law
• In Spangler v. Spangler, 42 S.W.2d 826 (Tex. Civ. App. 1931), a child inherited a 1/24 interest in certain lands upon his father's death, but prior to the death of his mother conveyed an undivided 1/12 interest by a deed containing the following clause: "It being my intention to convey all my interest in and to said tracts of land by reason of being a child and legal heir of my father."
Texas Case Law
• Subsequent to this deed grantor's mother died and he inherited an additional 1/24 interest. • It was held that the above clause limited the grant to the interest inherited from the father, i.e., a 1/24 interest, and that the interest subsequently acquired from the mother did not pass to the grantee.
What Would Louisiana Do?
• Application of after‐acquired title doctrine
• §77. Application of after‐acquired title doctrine • If a party purports to acquire a mineral servitude from a landowner when the right purportedly acquired is outstanding in another and the landowner either subsequently acquires the outstanding right or is the owner of the land at the time it is extinguished, the after‐acquired title doctrine operates to vest the right in the party who purported to acquire it to the full extent of his title. • Acts 1974, No. 50, §77, eff. Jan. 1, 1975.
What Would Louisiana Do?
• 2006 Louisiana Laws ‐ RS 31:77 —STANDARD 2.4A • AFTER‐ACQUIRED PROPERTY
• If a warranty deed or another instrument containing covenants of warranty similar to a warranty deed is a wild instrument and the grantor of such wild instrument subsequently acquires title to the property purported to be conveyed by the wild instrument, then the wild instrument shall be effective to convey the title described in the wild instrument to the grantee named in the wild instrument.
What Would Louisiana Do?
• Under this rule, the title would inure to the benefit of the parties by application of the Doctrine of Estoppel ‐‐ preventing A from denying that A owned the interest A purported to convey to B. This doctrine applies regardless of how or when the subsequent title is acquired by A, and regardless of whether or not there is a mere ignorance or fraud on A’s part. What Would Louisiana Do?
• For example, assume a chain of title that runs from A to B, B to C, C to D, an instrument recorded during C’s possession of the property from E to Z purporting to convey the land owned of record by C is a wild instrument and does not render C’s title unmarketable. • If, however, after the date of the deed from E to Z, D conveys to E the property described in the deed of E to Z the deed from E to Z is effective to convey the property to Z.
What Would Vermont Do?
• For Vermont cases related to after acquired title, see Cross v. Martin, 46 Vt, 14 (1873) and President and Fellows of Middlebury College v. Cheney, 1 Vt. 336 (1828). • The cases on “after acquired title” hold as well settled law that a deed with warranty covenants passes a title later acquired by the grantor, as long as the grantor acquires the title before the party holding the land by the wild deed is ousted or removed from the property. What Would Vermont Do?
• The legal principle on which the cases are based is the absurdity of having the grantor of the wild instrument recover the lands from the grantee after the grantor actually acquires the property, and the recovery by the grantee of the wild instrument of damages from the grantor. • The vesting of the title in the grantee of the formerly wild instrument is in discharge of the covenants of warranty in the wild instrument.
What Would Illinois Do?
• The doctrine of after‐acquired title or estoppel by deed stems from the common law rule of implied warranties. • Although the common law rule of implied warranties is not in existence in Illinois unless all of the words of the statute are used (Wheeler v. County of Wayne, 132 Ill. 599, 24 N.E. 625) express warranties are given the same effect as implied warranties at common law. See Biwer v. Martin, 294 Ill. 488, 500, 128 N.E. 518, in which the doctrine of after‐acquired title was recognized as applicable in Illinois where an express warranty is made by the grantor. What Would Illinois Do?
• The court stated (294 Ill. at page 496, 128 N.E. at page 522):
• 'It is likewise the rule in this state that where one who has no interest, or but a part thereof, in the land he undertakes to convey, and afterwards acquires title, the interest he acquires passes to the grantee by way of estoppel, and, if there be a warranty, it not only estops the grantor but a subsequent purchaser from him. Frisby v. Ballance, 2 Gilm. 141; 4 Kent's Com. What Would Missouri Do?
• Missouri Revised Statutes
• Title acquired by grantor after conveyance inures to grantee. 442.430. Where a grantor, by the terms of his deed, undertakes to convey to the grantee an indefeasible estate in fee simple absolute, and shall not, at the time of such conveyance, have the legal title to the estate sought to be conveyed, but shall afterward acquire it, the legal estate subsequently acquired by him shall immediately pass to the grantee; and such conveyance shall be as effective as though such legal estate had been in the grantor at the time of the conveyance. What Would Missouri Do?
• (RSMo 1939 § 3497) Prior revisions: 1929 § 3107; 1919 § 2266; 1909 § 2871 • (1959) When person executes two or more mortgages or deeds of trust on the same land, a foreclosure of the senior mortgage will only temporarily extinguish or cut out a junior mortgage, if the mortgagor subsequently acquires title to the land, and the junior mortgage will be revived and reinstated against the land. Sabine v. Leonard (Mo.), 322 S.W.2d 831. What Would Montana Do?
• Montana Code Annotated 2011
•
70‐20‐302. After‐acquired title to pass by operation of law. When a person purports by proper instrument to grant real property in fee simple and subsequently acquires any title or claim of title to the real property, the real property passes by operation of law to the grantee or the grantee's successors. What Would South Dakota Do?
• South Dakota Codified Laws • 7‐04. Quit claim‐‐after acquired title. A quit claim deed does not pass after‐acquired interest in property, unless words expressing such intent are added.
What Would South Dakota Do?
• South Dakota Definition of After‐Acquired Title
• A legal doctrine under which, if a grantor conveys what is mistakenly believed to be good title to land that he or she did not own, and the grantor later acquires that title, it vests automatically in the grantee.
What About Quitclaim Deeds?
• Generally, however, a quitclaim deed conveys only the grantor's interest or title, if any, in property, rather than the property itself. See Bilby v. Wire, 77 N.W.2d 882, 888 (N.D. 1956); Frandson v.Casey, 73 N.W.2d 436, 437 (N.D. 1955)). What About Quitclaim Deeds?
• "If a deed purports and is intended to convey only the right, title, and interest in the land, as distinguished from the land itself, it is a quitclaim deed; if it appears that the intention was to convey the land itself, then it is not a quitclaim deed, although it may possess characteristics peculiar to such deeds." 23 Am. Jur. 2d Deeds § 223 (2002).
What About Quitclaim Deeds?
• In Schuman v. McLain, 61 P.2d 226, 227‐28 (Okla. 1936), the court explained:
• At common law a quitclaim deed did not rise to the dignity of a conveyance, but was merely a release. Under American jurisprudence, whether pursuant to statutory enactment or not, quitclaim deeds have become generally recognized as instruments of conveyance, but conveying only such interest as the grantor may have, if any. What About Quitclaim Deeds?
• Such instruments have a definite legal meaning in American jurisprudence as distinguished from deeds of warranty. The language of such deeds, and particularly the deed in question, is simple and explicit to the effect that grantor conveys only his right, title, and interest, whatever that may be. • The specific words are: "Does hereby quitclaim, grant, bargain, sell and convey unto said party of the second part, and to his heirs, executors, and assigns, forever all his right, title, interest and estate. "
What About Quitclaim Deeds?
• "'The use of a quitclaim deed can be regarded as notice to the purchaser that there may be outstanding equities against the grantor's title.'“ General In. Corp., at paragraph 12 (quoting 14 Powell on Real Property § 81A.03(1)(c) (2000)).[¶11] In Bibly, 77 N.W.2d at 888, this Court also explained: After‐acquired title by the grantor will not, as a general rule, inure to the benefit of the grantee under a quitclaim deed. 26 C.J.S., Deeds, § 118, p. 416; State v. Kemmerer, 14 S.D. 169, 84 N.W.2d 771, 773. What About Quitclaim Deeds?
• In that case the court said:
• "It [referring to the quitclaim deed] does not purport to convey the property, but only the grantor's right, title, and interest therein. Such a deed, therefore, does not have annexed to it, under the statute, implied covenants, and an after‐acquired title does not pass by operation of law to the grantee or his successors."
What About Quitclaim Deeds?
• In a long line of decisions it has been held that a quitclaim deed of all the right, title and interest of the grantor, purports to convey, and does convey, no more than the present interest of the grantor, and does not operate to pass an interest after‐acquired. • The grantor under such deed will not be estopped from asserting an after‐acquired title. 44 A.L.R. 1276; 162 A.L.R. 556, 566
What About Leases?
• The common law doctrine of after‐acquired title or estoppel by deed applies to leases. In Poultney v. Emerson, 117 Md. 655, 658, 84 A. 53, 54, it was said in this connection:
• 12 'It is a well‐recognized rule that if a lease is made by one who has no present interest in the demised property, but acquires an interest during the term, the lease will operate upon his estate as if vested at the time of its execution. What About Leases?
• In Summers Oil & Gas, Vol. 3, Sec. 552, p. 577 (1958 Ed.) it is stated:
• 15 'The principle that the after‐acquired title passes to the grantee where grantor warrants the title or represents that he conveys the land, operates in assignment of oil and gas leases as in other conveyances.'
• 16 We see no reason why an oil and gas lease in which the lessor warrants title should be excluded from the scope of the doctrine of after‐
acquired title.
CONCLUSION
• THANKS!