Magraw v. Dillow

Decision Date01 September 1995
Docket NumberNo. 19,19
Citation671 A.2d 485,341 Md. 492
PartiesJames S. MAGRAW and Deborah L. Magraw v. Robert M. DILLOW. ,
CourtMaryland Court of Appeals

Certiorari to the Court of Special Appeals, Circuit Court, Cecil County; Edward D.E. Rollins, Jr., Judge.

Franklin T. Caudill (C. Thomas Brown, Albright & Brown, on brief), Baltimore, for petitioner.

Robert F. Kahoe, Jr. of Bel Air, for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL, and RAKER, JJ.

KARWACKI, Judge.

We are presented here with the question of the scope and application of the special covenant against encumbrances, which is described in Maryland Code (1974, 1988 Repl.Vol.), § 2-110 of the Real Property Article. Because the Court of Special Appeals properly construed the covenant under the circumstances of the instant case, we shall affirm.

I.

At issue are four adjoining properties that together comprise 5.09 acres of land located in Cecil County. Prior to 1983, James S. Magraw (James) owned an undivided 5/6 interest in those unimproved properties. The outstanding 1/6 interest was vested in the heirs of Ms. Helen Squires, who died intestate on January 12, 1947. The record does not reveal how this fractional ownership of the properties originated.

James, apparently realizing that his title to only a fractional interest was probably unmarketable, sought to acquire the remaining 1/6 interest. To do so, James allowed his 1 property tax payments to fall into arrears and eventually Cecil County was forced to institute tax sale proceedings to satisfy the taxes.

At tax sale, James and his wife, Deborah L. Magraw (the "Magraws"), purchased the property. After the statutory period prescribed in Md.Code (1957, 1980 Repl.Vol.), Art. 81, § 100, on October 31, 1983, the Magraws filed a "Bill of Complaint to Foreclose Equity of Redemption" against "James S. Magraw and ALL Persons having or claiming to have any interest in the property located in Cecil County, Maryland, described as 5.09 acres of land, more or less, with improvement thereon situated Rock-Battle Swamp Road, S/W of Woodlawn, District EQUITY NO. 7, adjoining the property of or formerly owned by John Carson." 2 As part of the foreclosure proceeding, the Magraws' attorney filed an "Affidavit of Search" required by Md.Code (1957, 1980 Repl.Vol.), Art. 81, § 105, alleging "that he had made the search of title to the subject property for the past forty years, and that the owner or owners of said property are listed in this case, and that he did make a search of all Orphans' Court, Equity Land Records, Judgment Records, etc., in order to ascertain whether or not there were any other owners, or owner to said property." This affidavit proved to be inaccurate in that the records of the Orphans' Court at the time showed that Helen Squires died intestate leaving six heirs. Since the heirs of Helen Squires were not properly notified of the foreclosure, the proceeding failed to foreclose the equity of redemption which they possessed as owners of the 1/6 undivided interest in the properties. Dillow v. Magraw, 102 Md.App. 343, 355-364, 649 A.2d 1157, 1163-67 (1994).

In 1988, the Magraws sold the still unimproved properties to Robert M. Dillow (Dillow). Dillow planned to build single family homes on each of the parcels and then to resell the individual parcels. The properties were conveyed by two deeds, one dated August 2, 1988, and the other dated November 7, 1988. The deeds contained identical covenants:

"And the parties of the first part [the Magraws] hereby covenant that they have not done or suffered to be done an act, matter or thing whatsoever, to encumber the property hereby conveyed; 3 that they will warrant specially the property hereby granted; 4 and that they will execute such further assurance of the same as may be requisite." 5

Industrial Valley Title Insurance Company examined the land records and guaranteed that the Magraws were conveying good and marketable title to the properties. Dillow began construction.

In early 1989, however, trouble arose. Dillow sought financing to complete construction of the homes he was building on the properties. His loan application was denied due to a determination by a second title insurance company that Dillow lacked good and marketable title. The Magraws' attempt after tax sale to foreclose the equity of redemption belonging to the heirs of Helen Squires was deficient and consequently Squire's heirs retained their right to redeem 1/6 of the property.

Dillow brought suit in the Circuit Court for Cecil County against Industrial Valley Title Insurance Company, its agent, Fidelity Title Company, Inc., and the Magraws. The suits against the title company and its agent were voluntarily dismissed for reasons not revealed by the record. Thereafter an amended complaint was filed alleging the facts set forth above and claiming damages for an inability to refinance or sell the properties and for expenses incurred in improving the properties, lost profits, the amount of the purchase price and other expenses. Dillow claimed that the Magraws breached the special warranty contained in the deeds; that they breached the covenant against encumbrances; that they breached express and implied covenants of merchantable title; and, finally that they were negligent in conducting the proceeding to foreclose the equity of redemption held by the heirs of Helen Squires.

The Magraws moved to dismiss the first amended complaint for failure to state a claim upon which relief could be granted. The trial court granted that motion after hearing arguments from counsel for the parties.

Dillow appealed to the Court of Special Appeals. The Court in a well-reasoned opinion affirmed the trial court except with respect to the alleged breach of the special covenant against encumbrances. The court found that Dillow's complaint alleged a sufficient breach of the special covenant against encumbrances and remanded the case to the Circuit Court for Cecil County for further proceedings. The Magraws petitioned this Court for a writ of certiorari which we issued.

II.

The relevant statute, § 2-110, as well as § 2-111 with which it should be contrasted, is found in Title 2 of the Real Property Article. Sections 2-104 through 2-112 of this title provide rules of construction for the interpretation of covenants by a grantor in a deed of realty. Judge Wilson K. Barnes, speaking for this Court in Marathon Builders, Inc. v. Polinger, 263 Md. 410, 283 A.2d 617 (1971), recognized the legislative purpose in enacting these statutes:

"By the Laws of 1864, ch. 252, the General Assembly provided a shorter form for all of these covenants of title so that thereafter conveyancers in Maryland could use the shorter form without the burden of the rather ponderous form in use by the common-law conveyancers who, quite naturally, were unwilling to eliminate a single word of the long form of covenant generally in use and theretofore construed by the courts. The provisions of the Laws of 1864, ch. 252 now appear as [Title 2 of the Real Property Article]."

"The General Assembly by providing for the abbreviated form of covenant, however, did not intend either to enlarge or to diminish the meaning and scope of the common law forms. The legislation states that the short form 'shall have the same effect' as the old long form. This is reinforced by the provisions of § 9 of ch. 252 of the Laws of 1864 (Art. 21, § 94) 6, as amended, that all deeds executed in pursuance of the prior provisions 'shall be as valid and effectual as if the covenants in said deed had been expressed therein, in full.' "

Marathon Builders, 263 Md. at 414, 283 A.2d at 620; see also 4 Herbert Tiffany, The Law of Real Property § 999 (3rd ed. 1975).

Sections 2-110 and 2-111 explain the proper construction of covenants against encumbrances:

" § 2-110. Effect of covenant that grantor has done no act to encumber.

A covenant by the grantor in a deed, "that he has done no act to encumber the land," has the same effect as if he had covenanted that he had not done, executed, or knowingly suffered any act or deed whereby the land granted, or intended to be, or any part of it, is or will be charged, affected, or encumbered in title, estate, or otherwise."

" § 2-111. Effect of general covenant against encumbrances.

A covenant by the grantor in a deed, "that the land is free and clear of all encumbrances" has the same effect as if he had covenanted that neither he nor his predecessors in his chain of title had done, executed, or knowingly suffered any act or deed whereby the land granted, or intended to be granted, or any part of it, are or will be charged, affected, or encumbered in title, estate, or otherwise."

Section 2-110 has been a part of Maryland law since the Civil War period. 7 Section 2-111 is of much more recent vintage. 8 But regardless of the age of the respective provisions, they do no more than serve as interpretive guides for covenants that have long existed under the common law. 9

Before exploring the differences between the special covenant against encumbrances defined in § 2-110 and the general covenant against encumbrances defined in § 2-111, it is first necessary to describe those features they share.

The covenants against encumbrances generally may be described as present covenants in that they are breached, if ever, upon delivery of the deed. Marathon Builders, Inc. v. Polinger, 263 Md. at 414, 283 A.2d at 620. 10 They do not usually run with the land, but serve only to benefit the covenantee. Levine v. Hull, 135 Md. 444, 447, 109 A. 141, 142 (1919). See also Eli Frank, Title to Real and Leasehold Estates and Liens (1912) 98. There is no precise definition of an encumbrance:

"An encumbrance is any right or interest held by someone other than the grantee or grantor which diminishes the value of the estate but not so much that it leaves the grantee with no title at all. 11 The...

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