Amethyst Land Co. v. Terhune

• Decision Date: 12 May 2014
• Docket Number: No. 34,083.,34,083.
• Citation: 326 P.3d 12
• Parties: AMETHYST LAND CO., INC., a New Mexico Corporation, Plaintiff–Respondent, v. James F. TERHUNE and Elizabeth R. Terhune, Defendants–Petitioners.
• Court: New Mexico Supreme Court

326 P.3d 12

AMETHYST LAND CO., INC., a New Mexico Corporation, Plaintiff–Respondent,

v.James F. TERHUNE and Elizabeth R. Terhune, Defendants–Petitioners.

No. 34,083.

Supreme Court of New Mexico.

May 12, 2014.

Clifford C. Gramer, Jr., Albuquerque, NM, for Petitioners.

O'Friel and Levy, P.C., Aimee S. Bevan, Law Office of Jane B. Yohalem, Jane B. Yohalem, Santa Fe, NM, for Respondent.

OPINION

CHÁVEZ, Justice.

{1} This case involves a dispute between two adjoining landowners over an easement. In 2003, Respondent Amethyst Land Company (Amethyst) acquired a quitclaim deed to an undeveloped twenty-two-acre parcel (the 22–acre parcel) in the Santa Fe foothills. Amethyst promptly searched the county property record and incorporated all of the documents concerning the property into corrected deeds. One of the documents it found and incorporated in the corrected deeds was an Extinguishment Agreement purporting to terminate an easement on Tract 3 of adjoining property that benefitted the 22–acre parcel. Amethyst's neighbors, Petitioners James and Elizabeth Terhune (the Terhunes), recorded the Extinguishment Agreement two years earlier, but five days after Amethyst's predecessor-in-interest recorded its deed to the 22–acre parcel. The Terhunes denied Amethyst use of the easement, and Amethyst sued to quiet title. The district court found for the Terhunes. The Court of Appeals reversed, holding that the Extinguishment Agreement was invalid because it was filed late and the corrected deeds did not revive the agreement. Amethyst Land Co. v. Terhune, 2013–NMCA–059, ¶ 32, 304 P.3d 434. We hold that the Extinguishment Agreement was valid and that by correcting its deeds, Amethyst incorporated the Extinguishment Agreement in full. Therefore, we reverse the Court of Appeals.

BACKGROUND

{2} The easement in question has benefitted the 22–acre parcel since 1979, when it was reserved in a deed for sixty acres of land as a “non-exclusive easement retained by [the] Grantors ... for utilities and right-of-way.” The purchasers of the sixty acres then subdivided the land, creating parcels including the five-acre parcel now owned by the Terhunes, which is known as Tract 3. Tract 3 lies directly to the north of the 22–acre parcel, and was historically burdened by the final stretch of the easement in favor of the 22–acre parcel.

{3} In 1983, Keith MacDuffee (MacDuffee) purchased the 22–acre parcel and the appurtenant easement across Tract 3 from the original grantors. That same year, MacDuffee also purchased Tract 3, which was burdened by the easement in favor of the 22–acre parcel.¹

{4} In 2001, MacDuffee started selling his properties in the Santa Fe foothills, apparently in a lead up to bankruptcy. On February 16, 2001, MacDuffee signed the deed for Tract 3 to the Terhunes, an Aurora, Colorado couple who wanted to relocate to Santa Fe and build a home. A survey of Tract 3 made for the Terhunes indicated the property was burdened by two easements. ² The Terhunes refused to purchase the land unless MacDuffee extinguished the easement benefitting the 22–acre parcel because their lawyer advised them that the still-undeveloped 22–acre parcel could be subdivided and developed, and traffic over the easement could significantly increase.

{5} On March 5, 2001,³ MacDuffee signed and notarized an Extinguishment Agreement terminating the easement. The Extinguishment Agreement stated “the parties hereby extinguish [the] easement ... [burdening] the Terhune Plat,” and the agreement “shall run with the land.” The agreement also stated it would be effective “upon recordation in the records of Santa Fe County, New Mexico.” Two days later, on March 7, the Terhunes recorded the deed to Tract 3, which still described the land as burdened by the easement. They did not record the Extinguishment Agreement. On March 12, the Terhunes' attorney sent a letter and a copy of the Extinguishment Agreement to the Terhunes at their home in Aurora, asking them to return the agreement with their notarized signatures. They did so, and their attorney recorded it in Santa Fe County on April 30.

{6} Unbeknownst to the Terhunes, MacDuffee was in dire financial straits and was also looking for a buyer for the 22–acre parcel while he was negotiating with them over the sale of Tract 3. The problem for the Terhunes was that five days before they recorded the Extinguishment Agreement, a development corporation, Desert Sunrise, recorded its purchase of MacDuffee's 22–acre parcel. Just as the Terhunes did not know about MacDuffee's plan to sell the 22–acre parcel, Desert Sunrise did not know that MacDuffee had signed an Extinguishment Agreement with the Terhunes. MacDuffee gave the general partner of Desert Sunrise the impression that the easement across Tract 3 granted access to the 22–acre parcel because MacDuffee “told [him] where to go up the road,” but never specifically told him that the easement provided legal ingress and egress. On April 25, 2001, Desert Sunrise recorded the deed to the 22–acre parcel, which made no mention of the easement. Two years later, Desert Sunrise conveyed the 22–acre parcel to Amethyst by a quitclaim deed that was recorded on April 30, 2003. At the insistence of Amethyst, corrected deeds between MacDuffee and Desert Sunrise and Desert Sunrise and Amethyst incorporated by reference the Extinguishment Agreement.

{7} Three years after Amethyst bought the property it sued the Terhunes, alleging that the Terhunes had placed a chain across the easement, effectively preventing Amethyst from accessing the 22–acre parcel. Amethyst sought a declaration that the Extinguishment Agreement was of no force and effect. After a hearing on the merits, the district court entered judgment for the Terhunes, finding that the Extinguishment Agreement was valid and effective, and Amethyst was equitably estopped from denying the extinguishment because it had incorporated the agreement into its deeds.

{8} The Court of Appeals reversed, holding that the Extinguishment Agreement was invalid and ineffective. Amethyst, 2013–NMCA–059, ¶ 23, 304 P.3d 434. The Court of Appeals determined that Amethyst was not equitably estopped from denying the extinguishment of the easement by correcting the deeds. Id. ¶ 25. We granted certiorari.

STANDARD OF REVIEW

{9} This case presents no factual dispute. We review legal conclusions de novo. State ex rel. King v. UU Bar Ranch Ltd. P'ship, 2009–NMSC–010, ¶ 20, 145 N.M. 769, 205 P.3d 816.

DISCUSSIONA. The Extinguishment Agreement was valid when recorded

{10} All writings affecting the title to real estate must be recorded. NMSA 1978, § 14–9–1 (1991) (“All deeds, mortgages, ... and other writings affecting the title to real estate shall be recorded in the office of the county clerk of the county ... in which the real estate affected thereby is situated.”). As instruments affecting the title to real estate, extinguishment agreements are also subject to the recording statutes, NMSA 1978, §§ 14–9–1 to –9 (1886–87, as amended through 1991). “In order to be effectual, [an extinguishment agreement] must be executed with the same formalities as are generally required in making transfers of interest in land.” Sedillo Title Guar., Inc. v. Wagner, 1969–NMSC–087, ¶ 18, 80 N.M. 429, 457 P.2d 361. Here the Extinguishment Agreement was executed with the same formalities as other instruments transferring an interest in land: it was written, signed by both parties, notarized, and described with particularity the land and the interest it intended to affect. SeeNMSA 1978, § 14–8–4(A) (2013) (“Any instrument of writing duly acknowledged may be filed and recorded.”); 14 Richard R. Powell, Powell on Real Property § 81A.02[2], at 17–18 (Michael Allan Wolf, ed., 2014) (listing requirements of the Statute of Frauds).

{11} The Court of Appeals held that the Extinguishment Agreement was not valid because it “was extinguished under Section 14–9–3 by Desert Sunrise's good faith purchaser status.” Amethyst, 2013–NMCA–059, ¶ 19, 304 P.3d 434. Section 14–9–3 deals with the effect of unrecorded instruments, providing, “[n]o deed, mortgage or other instrument in writing not recorded in accordance with Section 14–9–1 ... shall affect the title or rights to, in any real estate, of any purchaser ... in good faith ... without knowledge of the existence of such unrecorded instruments.” Section 14–9–3. Generally, noncompliance with the recording statutes does not affect the validity of the instrument itself, but makes it ineffectual as constructive notice. See § 14–9–2 (stating records serve “notice to all the world of the existence and contents of the instruments so recorded from the time of recording.”); Baker v. Baker, 1977–NMSC–006, ¶ 4 n. 1, 90 N.M. 38, 559 P.2d 415 (holding that noncompliance with statutory requirement that deeds be notarized does not make the deed void, but merely makes it ineligible to be recorded; “[t]he general rule is that an unacknowledged deed is binding between the parties thereto, their heirs and representatives, and persons having actual notice of the instrument.”); Ames v. Robert, 1913–NMSC–021, ¶ 6, 17 N.M. 609, 131 P. 994 (“A deed of land, though not recorded, is good as between grantor and grantee.” (internal quotation marks and citation omitted)).

{12} Section 14–9–3 did not extinguish or otherwise invalidate the Extinguishment Agreement between MacDuffee and the Terhunes. On the contrary, our “statutes ... are clear. There is no requirement that an instrument be recorded within a particular period of time. The order in which deeds appear on the record is not important in a notice jurisdiction.” Angle v. Slayton, 1985–NMSC–032, ¶ 10, 102 N.M. 521, 697 P.2d 940. The effect of Section 14–9–3 was to protect the property interests of Desert Sunrise as a good faith purchaser because Desert Sunrise purchased the 22–acre parcel and recorded its deed before the Extinguishment Agreement was recorded. Although the Extinguishment Agreement...