Hawthorne Trust v. Maine Sav. Bank

• Decision Date: 29 December 1992
• Docket Number: No. 91-378,91-378
• Citation: 136 N.H. 533,618 A.2d 828
• Parties: HAWTHORNE TRUST v. MAINE SAVINGS BANK and another.
• Court: New Hampshire Supreme Court

Page 828

618 A.2d 828

136 N.H. 533

HAWTHORNE TRUST v. MAINE SAVINGS BANK and another.

No. 91-378.

Supreme Court of New Hampshire.

Dec. 29, 1992.

McKittrick Law Offices, North Hampton (J. Joseph McKittrick on the brief and orally), for plaintiff.

Eldredge, Chubrich & Harrigan, P.A., Portsmouth (Michael E. Chubrich on the brief and orally), for defendant Joseph G. Sawtelle, Trustee of Cricklewood on the Bellamy Trust.

Defendant Maine Sav. Bank filed no brief.

HORTON, Justice.

The plaintiff, Hawthorne Trust, brought suit to enjoin a foreclosure sale and to determine the validity and nature of its interests in an easement. Joseph G. Sawtelle, Trustee, (Sawtelle) intervened and brought a motion to dismiss. The plaintiff appeals an order of the Superior Court (Dickson, J.) dismissing its request for a declaration of the validity and extent of its rights in the easement. We reverse and remand.

The parties stipulated to the facts in the proceedings below. On November 10, 1986, the plaintiff's predecessor in title, Hampstead Outlook, Inc. (Hampstead), and Sawtelle's predecessor in title, Joseph H. Johnson, Jr., entered into a purchase and sale agreement (agreement) for real property located in Dover. The agreement covered three parcels of property. Hampstead agreed to sell, and Johnson agreed to purchase, the parcels in a three-step transaction. The agreement to purchase Parcel 1 was absolute on satisfaction of the conditions of municipal approval, satisfactory title, and absence of hazardous waste. Hampstead's obligation to sell Parcel 2 was contingent on Johnson's prior purchase of Parcel 1, and Johnson's obligation to purchase was conditional on municipal approval having been obtained for Parcel 1. The purchase and sale of Parcel 3 is immaterial to this appeal. Section 10 of the agreement delineated the penalties Johnson would face if he defaulted on his conditional obligation to purchase Parcel 2:

"In the event [Johnson] defaults in the performance of his obligation under this Agreement, the deposit shall become the property of [Hampstead] ... The parties further agree that in the event [Johnson] defaults in his obligation to purchase Parcel 2 as provided herein, [Johnson] shall provide legal access to [Hampstead] or its Nominee over Parcel 1 to a public way for Parcel 2."

The parties made the agreement binding on all successors in interest and expressly stated that it contained all terms and conditions of the sale. The parties never recorded the agreement in the Strafford County Registry of Deeds. Johnson, acting through his nominee corporation, Bay Forest Development Corporation, purchased Parcel 1 on February 6, 1987, and shortly afterward gave a mortgage on the parcel to Maine Savings Bank. Sawtelle concedes that Maine Savings Bank took the mortgage with actual knowledge of the agreement. Johnson defaulted on his option to buy Parcel 2 and on his debt to Maine Savings. Hampstead conveyed title to Parcel 2 to the plaintiff. On June 23, 1989, Johnson granted the plaintiff three easements across Parcel 1 pursuant to section 10 of the agreement. Although section 10 gave the plaintiff only the right to legal access to a public way, Johnson granted it a transportation easement, a utility easement, and a sewer easement.

The following month, the plaintiff discovered that Maine Savings was planning a foreclosure sale on Parcel 1. It filed a petition for a temporary restraining order on July 24, 1989, asking the court to enjoin Maine Savings from holding the sale, and asking the court to declare its interests in Parcel 1, created by section 10 of the agreement and defined by the June 23, 1989 easement conveyances, to be superior to Maine Savings' mortgage. If the plaintiff's interests were superior to Maine Savings' mortgage, the purchaser at the foreclosure sale would take the property subject to the plaintiff's equitable rights to an easement of some sort in favor of the Hawthorne Trust. The trial court denied the temporary restraining order on July 25, 1989, and two days later Maine Savings sold Parcel 1 at foreclosure to its wholly owned subsidiary, CRE I Real Estate Corporation (CRE). CRE, in turn, sold the property to Sawtelle on March 23, 1990. Sawtelle intervened in this suit and moved to dismiss. The trial court granted the motion to dismiss. Citing RSA 477:3-a, the court found that Maine Savings Bank was a bona fide purchaser for value despite its knowledge of the agreement, and, therefore, its recorded mortgage was superior to any interest created by the unrecorded agreement. The trial court held in the alternative that the plaintiff's claims were barred by the application of the doctrine of equitable estoppel.

In reviewing the findings and rulings of the trial court, we will uphold them "unless they are unsupported by the evidence or are erroneous as a matter of law." Zimmerman v. Suissevale, Inc., 121 N.H. 1051, 1054, 438 A.2d 290, 292 (1981). Our standard is not whether we would rule differently, but rather, could a reasonable person "have reached the same decision as the trial court based on the evidence before it." Id. In a case such as this, however, in which the facts were stipulated and the trial court had no opportunity to observe the demeanor and credibility of the witnesses, our standard of review is broadened. See Hillside Assocs. of Hollis v. Maine Bonding & Cas. Co., 135 N.H. 325, 330-31, 605 A.2d 1026, 1029 (1992).

Assuming that the plaintiff's contractual right to an easement is "an interest in real estate," the priority of the parties' interests in Parcel 1 is controlled by statute. RSA 477:3-a states:

"Every deed or other conveyance of real estate and every court order or other instrument which affects title to any interest in real estate, except probate records and tax liens which are by law exempt from recording, shall be recorded at length in the registry of deeds for the county or counties in which the real estate lies and such deed, conveyance, court order or instrument shall not be effective as against bona fide purchasers for value until so recorded."

In order to determine the parties' interests we must answer two questions. First, is the assumption correct that the agreement created "any interest in real estate" under RSA 477:3-a? Second, was Maine Savings a bona fide purchaser for value, thereby cutting off any interests created by the agreement?

In answer to the first question, we hold that a contractual provision in a purchase and sale agreement may create an equitable interest in real estate, and, therefore, such a purchase and sale agreement will be an "instrument which affects title to [interests] in real estate" as defined in RSA 477:3-a. Our prior decisions support this proposition. See Swanson v. Priest, 95 N.H. 64, 66-67, 58 A.2d 207, 209 (1948); Smith v. Wedgewood Builders Corp., 134 N.H. 125, 131, 590 A.2d 186, 189 (1991). The equitable interest in the right of way created by the agreement in this case is an "interest in real estate" subject to the burdens and benefits of RSA 477:3-a.

Pursuant to RSA 477:3-a, absent a recording, any interests created in real estate will be cut off by a conveyance to a bona fide purchaser for value. Smith, supra at 131, 590 A.2d at 189. Was the mortgage conveyance to Maine Savings Bank a conveyance to a bona fide purchaser for value? We find that it was not, and therefore the plaintiff's interests were not cut off.

A bona fide purchaser for value is one who acquires title to property for value, in good faith, and without notice of competing claims or interests in the property. See Continental Cablevision of N.H. v. Osgood Lodge, 123 N.H. 215, 219, 459 A.2d 263, 266 (1983). Such competing interests may include equitable interests. Raub v. General Income...