Property II

Prof. Ortiz

Warranty Problems

1. O owns Blackacre. By general warranty deed, A conveys Blackacre* to B for $20,000. B conveys to
C for $15,000. O, the true owner, ousts C. The jurisdiction holds that present covenants are
breached, if at all, when made and the chose in action (i.e., cause of action) is not assigned. Assume
that any cause of action against A falls within the statute of limitations for suit.

a. The deed from B to C is a quitclaim deed.

GWD QD O ousts C. chose in action (i.e., cause of action) is not assigned {relates to remote grantor}

A B C
$20K $15K

(1) Can C sue B for breach of any covenants {present or future}?

No, B gave a quitclaim deed. Rule: A quitclaim deed gives no warranties.

(2) Can C sue A for breach of any future covenants?

Yes. A gave a general warranty deed. Rule: Future covenants always run with the land.
Therefore:
Covenant of quiet enjoyment - yes, because C was disturbed in possession.**
Covenant of general warranty - yes, A must defend C against Os lawful claim.

(3) Can C sue A for breach of any present covenants?

No. C cannot sue A for breach of the present covenants (here, seisin or right to convey) because
the chose in action is not assigned (i.e., the cause of action for these breaches lies in B and
cannot be assigned to C).

(4) Can B sue A for breach of any future covenants?

No. B cannot sue A for breach of any future covenants because B was not disturbed in
possession (C was ousted, not B).

(5) Can B sue A for breach of any present covenants?

It depends. B might be able to sue A for breach of the present covenants of seisin and right to
convey, but only if B can show actual damages.
Rule: [insert: An intermediate grantee cannot recover again his grantor unless he can show actual damages.]
Actual damages may be shown by either a (1) decrease in market value due to the breach in
title or (2) to recover costs when the remote grantee (buyer) sues for a remote grantors (seller) breach of
covenant.
Therefore, in this case, C cannot sue B to recover any costs because B gave a quitclaim deed (no
warranties). To sue A, B must show that the sale price of $15,000 (down from $5000) was due
to the breach in title and not due to general market conditions.

* For purposes of these problems, it does not matter why A sold Blackacre when it was owned by O. It is possible that A was
committing fraud, in which case A would be liable for fraud as well as for whatever warranties A might be liable under. It might also
be an honest mistake (e.g., a Howard v. Kunto type of error where A thought he owned the property, but it turns out that A did not
actually own the property).

** According to Brown v. Lober, in order to constitute a breach of quiet enjoyment, there must be a disturbance in possession either by
actual eviction or constructive eviction. In each of these problems, O actually evicts C (or D in problem 3 on page 5).

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b. Deed from B to C is a general warranty deed.

GWD GWD O ousts C. chose in action (i.e., cause of action) is not assigned {relates to remote grantor}

A B C Relisten [41:00] word form exam A,B,C. something new.
$20K $15K

(1) Can C sue B for breach of any covenants {present and/or future}?
Yes, B gave C a general warranty deed. Rule: GWDs contain all six warranties.
It does not matter whether the covenants are future or present because B is not a remote grantor
to C. Therefore:
Covenant of seisin - yes, because B did not have title to pass to C.
Covenant of right to convey - yes, because B did not have the right to convey to C.
General warranty {lawful claim} - yes, because B must defend C against Os lawful claim.
Quiet enjoyment {disturbed in possession} - yes, because C was disturbed in possession by O (evicted by O).

(2) Can C sue A for breach of any future covenants?

Yes. A gave a general warranty deed to B. Rule: Future covenants always run with the land,
therefore As covenants to B run to C.
Therefore:
Covenant of quiet enjoyment - yes, because C was disturbed in possession.
Covenant of general warranty - yes, because A must defend C against Os lawful claim.

(3) Can C sue A for breach of any present covenants?

No. C cannot sue A for breach of the present covenants (here, seisin or right to convey) because
the chose in action is not assigned (i.e., the cause of action for these breaches lies in B and
cannot be assigned to C).

(4) Can B sue A for breach of any future covenants?

No. B cannot sue A for breach of any future covenants because B was not disturbed in
possession (C was ousted, not B).

(5) Can B sue A for breach of any present covenants?

It depends on whether B can show actual damages. Rule: Actual damages may be shown by
either a decrease in market value due to the breach in title or when the remote grantee sues for
a remote grantors breach of covenant.
(a) Decrease in market value - Seisin/Right to convey - B must show that the sale price of
$15,000 (down from $5000) was due to the breach in title and not due to general market
conditions.
(b) Suit for costs -
(1) If C has not sued or settled with B, then a court may allow B to win against A (for
breach of seisin and right to convey) and put the money in escrow (or paid to the court)
to be held until either C sues B and wins or the statute of limitations runs on Cs claim
against B.
(2) If C has sued B and won, B can sue and win against A (for breach of seisin and right to
convey).
(c) If B wins against A, should B recover $15,000 (Cs purchase price) or $20,000 (Bs
purchase price)?
The answer depends on the damage theory that the jurisdiction follows:
(1) Purpose of damages is to cover Bs actual loss - award only $15,000.
(2) Purpose of damages is to put B in same position he was in before A sold the
property - award $20,000.

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2. O owns Blackacre. By general warranty deed, A conveys Blackacre to B for $20,000. B conveys to
C for $15,000. O, the true owner, ousts C. The jurisdiction holds that present covenants are
breached, if at all, when made and the chose in action (i.e., cause of action) is assigned. Assume that
any causes of action against A are still within the statute of limitations for suit.

a. The deed from B to C is a quitclaim deed.

GWD QD O ousts C. chose in action (i.e., cause of action) is assigned

A B C
$20K $15K

(1) Can C sue B for breach of any covenants?

No, B gave a quitclaim deed. Rule: A quitclaim deed gives no warranties.

(2) Can C sue A for breach of any future covenants?

Yes. A gave a general warranty deed. Rule: Future covenants always run with the land.
Therefore:
Covenant of quiet enjoyment - yes, because C was disturbed in possession.
Covenant of general warranty - yes, because A must defend C against Os lawful claim.

(3) Can C sue A for breach of any present covenants? {repeat} class note: 1 coa for present covenants.
Yes. Bs causes of action for present covenants are assigned to C. Therefore, C can sue for
whatever present covenants were breached when A passed the deed to B.
Therefore:
Breach of seisin - yes, because A did not have seisin when A conveyed to B.
Breach of right to convey - yes, because A did not have the right to convey to B.

(4) Can B sue A for breach of any future covenants?

No. B cannot sue A for breach of any future covenants because B was not disturbed in
possession (C was ousted, not B).

(5) Can B sue A for breach of any present covenants?

No. Bs causes of action have been assigned to C. Because C cannot sue B, Cs only option is
to sue A. When C sues A, the causes of action will be extinguished (since A is the reason the
causes of action arose). Therefore, they will never be reassigned to B. B is stuck and cannot sue
A for present covenants.

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b. Deed from B to C is a general warranty deed. chose in action (i.e., cause of action) is assigned.

GWD GWD O ousts C.

A B C
$20K $15K

(1) Can C sue B for breach of any covenants?

Yes, B gave C a general warranty deed. Rule: GWDs contain all six warranties.
It does not matter whether the covenants are future or present because B is not a remote grantor
to C. Therefore:
Covenant of seisin - yes, because B did not have title to pass to C.
Covenant of right to convey - yes, because B did not have the right to convey to C.
General warranty - yes, because B must defend C against Os lawful claim.
Quiet enjoyment - yes, because C was disturbed in possession by O (evicted by O).

(2) Can C sue A for breach of any future covenants?

Yes. A gave a general warranty deed to B. Rule: Future covenants always run with the land,
therefore As covenants to B run to C.
Therefore:
Covenant of quiet enjoyment - yes, because C was disturbed in possession.
Covenant of general warranty - yes, because A must defend C against Os lawful claim.

(3) Can C sue A for breach of any present covenants? {repeat}

Yes. Bs causes of action for present covenants are assigned to C. Therefore, C can sue for
whatever present covenants were breached when A passed the deed to B.
Therefore:
Breach of seisin - yes, because A did not have seisin when A conveyed to B.
Breach of right to convey - yes, because A did not have the right to convey to B.

(4) Can B sue A for breach of any future covenants?

No. B cannot sue A for breach of any future covenants because B was not disturbed in
possession (C was ousted, not B).

(5) Can B sue A for breach of any present covenants?

No. Bs {present} causes of action have been assigned to C. Rule: Remote grantee has choice of
whom to sue, either B (since B gave a GWD) or A (since the causes of action run).
Therefore:
(a) If C chooses to sue A, the causes of action will be extinguished (since A is the reason the
causes of action arose). Therefore, the causes of action will never be reassigned to B, and B
will never be able to sue A for breach of present covenants.
(b) If C chooses to sue B, the causes of action for As breach of present covenant are
reassigned back to B. At this point, B can sue A and recover the costs that B had to pay C
(and also possibly the $5000 difference, depending on the damages theory (see 2(b)(5)(c)
above).
[How much B gets if sue A depends on jurisdiction (in notes)].

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3. O owns Blackacre. By general warranty deed, A conveys Blackacre to B for $15,000. By quitclaim deed,
B conveys to C for $12,000. By general warranty deed, C conveys to D for $20,000. O ousts D when the
land is worth $24,000. Assume that any cause of action against A is still within the statute of limitations
for suit.

GWD QD GWD O ousts D. Land worth $24K.

A B C D
$15K $12K $20K

a. Advise D as to how much she can recover on her warranties.

(1) If the chose is not assigned:

(a) D can choose to sue C for $20,000 (the amount C received) for:
Breach of seisin (because C did not have title when C conveyed to D);
Breach of right to convey (because C did not have the right to convey when C conveyed to D);
Breach of general warranty (because C must defend D against Os lawful claim); and
Breach of quiet enjoyment (because Ds possession was disturbed by O).

(b) D can choose to sue A for $15,000 (the amount A received from sale to B) on future covenants
only (because causes of action for present covenants is not assigned to D). Thus:
Breach of general warranty (because A must defend D against Os lawful claim); and
Breach of quiet enjoyment (because Ds possession was disturbed by O).

(c) D cannot sue B on any covenants whatsoever because B conveyed a quitclaim deed to C.
Insert Can C sue A for present covenants? No. Chose in action not assigned. Cause of action against A held by B.

(2) If the chose is assigned:

(a) D can choose to sue C for $20,000 (the amount C received) for:
Breach of seisin (because C did not have title when C conveyed to D);
Breach of right to convey (because C did not have the right to convey when C conveyed to D);
Breach of general warranty (because C must defend D against Os lawful claim); and
Breach of quiet enjoyment (because Ds possession was disturbed by O).

(b) D can choose to sue A for $15,000 (the amount A received from sale to B) on present and future
covenants because Bs causes of action for As breaches of present covenants have been assigned
to D. (The causes of action passed to C when B sold the property to C. The causes of action
then passed to D when C sold the property to D.)
Thus:
Breach of seisin (because A did not have title when A conveyed to B);
Breach of right to convey (because A did not have the right to convey when A conveyed to B);
Breach of general warranty (because A must defend D against Os lawful claim); and
Breach of quiet enjoyment (because Ds possession was disturbed by O).

(c) D cannot sue B on any covenants whatsoever because B conveyed a quitclaim deed to C.

Note: It is likely that D would choose to sue C in this situation because a suit against C is the only way D will be able to
recover her full purchase price (but not the market value of $24,000). Any damages won against A will be limited by the
rule on damages, which is that damages are always limited to the amount the warrantor received. Because A only
received $15,000, A will only have to pay anyone who sues on the warranties $15,000. However, if D cannot find C to
sue (e.g., C has skipped the country), then D might choose to sue A in order to cut her losses.

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 GWD QD GWD O ousts D. Land worth $24K.

A B C D
$15K $12K $20K

b. Advise C as to how much he can recover on her warranties.

(1) If the chose is not assigned:

(a) C cannot sue B because B conveyed a quitclaim deed.

(b) C cannot sue A:
(1) For breach of present covenants because the causes of action have not been assigned
(therefore, they remain with B).
(2) For breach of future covenants because C was not disturbed in possession by O (D was
ousted, not C).

Result: C is out of luck, even if D sues C and recovers. Is this fair? Yes. Why? Because C
received a quitclaim deed and took the risk that B would not have superior title. If C was worried
about title problems, C should have (a) demanded a general warranty deed from B or (b) passed
a quitclaim deed or special warranty deed to D.

(2) If the chose is assigned:

(a) C cannot sue B because B conveyed a quitclaim deed.

(b) C can never sue A on future covenants because C was not disturbed in possession. Therefore, no
future covenants have been breached with regard to C.

(c) C cannot sue A on present covenants until D sues C because the causes of action for breach of
present covenants have been assigned to D:

(1) If D sues C and recovers $20,000, C can sue A for $15,000 (the amount A received from B)
because the causes of action have been reassigned to C. C can only sue on present
covenants {note b above}:
Breach of seisin (because A did not have title when A conveyed to B);
Breach of right to convey (because A did not have the right to convey when A conveyed to
B).

(2) If D sues A and recovers $15,000, C cannot sue A at all because the causes of action for
breach of present covenants have been extinguished by Ds suit against C. Therefore, no
causes of action remain to be reassigned back to C.

[class insert second rule] Jurisdiction cause of action is assigned:

1. When COA is assigned, an intermediate seller cannot sue her grantor unless the cause of action is reassigned back to the
intermediate seller.
2. Remote grantee has choice of whom to sue.