Outcalt v. Wardlaw

• Decision Date: 22 June 2001
• Docket Number: No. 60A01-0007-CV-224.,60A01-0007-CV-224.
• Citation: 750 N.E.2d 859
• Parties: Bruce OUTCALT and Deborah Outcalt, Appellants, Original Defendants and Third Party Plaintiffs below, v. John C. WARDLAW and Janet B. Wardlaw, Appellees, Third Party Defendants Below and Third Party Plaintiffs, v. Frances Harris, Appellee, Third Party Defendant Below, and Beulah Harris and Gary Harris, Nominal Appellees, Original Plaintiffs Below.
• Court: Indiana Appellate Court

750 N.E.2d 859

Bruce OUTCALT and Deborah Outcalt, Appellants, Original Defendants and Third Party Plaintiffs below, v. John C. WARDLAW and Janet B. Wardlaw, Appellees, Third Party Defendants Below and Third Party Plaintiffs, v. Frances Harris, Appellee, Third Party Defendant Below, and Beulah Harris and Gary Harris, Nominal Appellees, Original Plaintiffs Below.

No. 60A01-0007-CV-224.

Court of Appeals of Indiana.

June 22, 2001.

Philip A. Sallee, Bloomington, Indiana, Attorney for Appellants Bruce and Deborah Outcalt.

John B. Wilson, Jr., Nashville, Indiana, Attorney for Appellees John C. and Janet B. Wardlaw.

William J. Beggs, Bunger & Robertson, Bloomington, Indiana, Attorney for Appellee Frances Harris.

OPINION

SULLIVAN, Judge

Appellants, Bruce and Deborah Outcalt, challenge the trial court's entry of summary judgment in favor of Appellees, John and Janet Wardlaw and Frances Harris. The Outcalts present one issue for our review, which we restate as whether the trial court erred in determining that the grantor of a warranty deed cannot be liable for expenses the grantee incurred in successfully defending the warranted title.

The relevant facts are not in dispute. Beulah Harris owned a farm in Owen County (the Harris property), which is now owned by her son Gary. Bruce and Deborah Outcalt are the current owners of a tract of land (the Outcalt property) adjacent to and immediately west of the Harris property. The Outcalts purchased their property from John and Janet Wardlaw by warranty deed on June 4, 1990. The Wardlaws had purchased the property from Fred and Frances Harris¹ by warranty deed on January 25, 1989.

The eastern portion of the Outcalt property adjacent to the Harris property contained an old fence. At the direction of Gary Harris, Mike Mundy surveyed the Harris property. Mundy's survey revealed that, according to the deed, the boundary line between the Harris property and the Outcalt property varied from thirty to forty feet east of the fence. In 1992, Beulah and Gary Harris filed suit to quiet title to this disputed strip of land, claiming paramount title by adverse possession. The Outcalts subsequently joined the Wardlaws as third party defendants, claiming that the Wardlaws were required to appear and defend the Outcalts' title. The Wardlaws, on the same grounds, joined Frances Harris as a third party defendant.

The trial court, reserving the issue of allocating the Outcalts' defense costs, quieted title to the disputed strip of land to the Outcalts. This judgment was upheld by this court in the memorandum decision Harris v. Outcalt, No. 60A01-9902-CV-62, 718 N.E.2d 1243 (October 20, 1999). Thereafter, on March 9, 2000, the trial court granted the Wardlaws' motion for summary judgment on the issue of the Outcalts' expenses in favor of the Wardlaws and Frances Harris.

Summary judgment is appropriate only where the designated evidentiary material demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ind.Trial Rule 56(C); Jones v. Western Reserve Group/Lightning Rod Mut. Ins. Co., 699 N.E.2d 711, 713 (Ind.Ct.App.1998),reh'g denied, trans. denied. Upon appeal, we apply the same standard as the trial court, resolving disputed facts or inferences in favor of the non-moving party. Id. at 713. It is the moving party's burden to establish, prima facie, that no genuine issues of material fact exist and that he or she is entitled to judgment as a matter of law. Chance v. State Auto Ins. Cos., 684 N.E.2d 569, 570 (Ind.Ct.App.1997),trans. denied. Only then does the burden fall upon the non-moving party to set forth specific facts demonstrating a genuine issue for trial. Id.

Here, the Outcalts do not claim that there was a genuine issue as to any material fact. Instead, the Outcalts claim that the trial court erred in determining as a matter of law that they were not entitled to recover any expenses incurred in defending their title.

In support of their claim that the Wardlaws were required to reimburse them for the costs of defending their title, the Outcalts rely upon Ind.Code § 32-1-2-12 (Burns Code Ed. Repl. 1995). Section 12 provides, among other things, that the grantor of a warranty deed "will warrant and defend the title to the same against all lawful claims." Id. This is known as the covenant of warranty. See JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 735-36 (1981).

In Worley v. Hineman, 6 Ind.App. 240, 33 N.E. 260, 264 (1893), this court held that the "necessary expenses for defending one's title are properly allowed when it is shown that the covenantor had notice of the suit, or, which is the same thing, himself defended the action in the name of the grantee defendant." In Worley, the grantee/plaintiffs had paid approximately $2400 to subsequent grantees to cover the costs of redeeming a mortgage on the property which the grantor/defendant had failed to pay. Id. at 260-61. The court allowed the grantee/plaintiffs to recover expenses incurred in defending the title in addition to the amount they paid to the subsequent grantees. Id. at 264.

In Rieddle v. Buckner, 629 N.E.2d 860, 864 (Ind.Ct.App.1994), the grantees unsuccessfully defended their title against a claim of adverse possession. The Rieddle court determined that, because the adverse claimants were successful, and the grantors had refused to defend the title on behalf of their grantees, the grantors had breached their warranty. Id. Citing Worley, supra, and Rauscher v. Albert, 145 Ill.App.3d 40, 99 Ill.Dec. 84, 495 N.E.2d 149 (1986), the Rieddle court held that both "reasonable attorney's fees and expenses the grantee expended in defending title are recoverable from the covenantor for breach of warranty of title." Id.

The Outcalts contend that Worley and Rieddle support their claim that a grantor is liable for the expenses the grantee incurred in defense of the warranted title. However, in Keilbach v. McCullough, 669 N.E.2d 1052, 1054 (Ind.Ct.App.1996), this court held that when a grantee successfully defends title in the conveyed land, the grantor cannot be held liable for expenses incurred in defending the title. The trial court in the present case relied upon Keilbach in determining that the Outcalts could not recover expenses from the Wardlaws or Frances Harris. (Supp. R-4).

The Outcalts ask us to reject, modify, or distinguish Keilbach, claiming that it is inconsistent with the holdings of Worley and Rieddle, and I.C. § 32-1-2-12.² However, as noted above, the Rieddle court based its holding upon the fact that the grantors had breached their covenant of warranty as evidenced by the grantees' unsuccessful defense of their title. 629 N.E.2d at 864. Likewise, the grantor in Worley had breached the covenant of warranty by failing to redeem the outstanding mortgage on the property, forcing the subsequent grantees to do so. Worley, 33 N.E. at 260-61. The Keilbach decision is therefore not inconsistent with Worley and Rieddle.³

Nevertheless, the Outcalts insist that I.C. § 32-1-2-12 requires the grantor to defend the title "against all lawful claims," and that Gary Harris's claim was a lawful, albeit unsuccessful, claim which the Wardlaws were statutorily required to defend. This seems to be a reasonable interpretation of I.C. § 32-1-2-12. However, it has long been held that the covenant of warranty is a future covenant which is not breached until the grantee is evicted from the property, buys up the paramount claim, or is otherwise damaged. DUKEMINIER & KRIER, supra at 736. "Nothing is more generally or more truly said than that `An eviction is necessary to a breach of the covenants for quiet enjoyment and of warranty.'" WILLIAM HENRY RAWLE, COVENANTS FOR TITLE § 131 (5th ed. 1887). Because the covenant of warranty does not protect against every adverse claim, "the covenantee is not entitled to demand of his covenantor expenses incurred in the defense of a suit which sustains the conveyed title as valid." 20 AM. JUR. 2D Covenants § 139 (1995) (footnotes omitted); see also 21 C.J.S. Covenants § 60 (1990).

As noted by the New Hampshire Supreme Court in Eaton v. Clarke, 80 N.H. 577, 120 A. 433, 434 (1923), "Expenses incurred in defending against an unfounded claim cannot be recovered from those bound by the warranty. The fact that there is an apparent cloud upon the title is not enough. Its validity must be shown to establish a liability of the warrantor."⁴

Still, a grantee is not completely without recourse. "[W]here a covenantee is sued by one claiming under a paramount title, the covenantee may relieve himself of the burden of defending the suit by giving notice to his covenantor of the pendency thereof, and may thus cast upon the covenantor the duty of defending the title, and render him bound by the judgment." Morgan v. Muldoon, 82 Ind. 347, 352, 1882 WL 6187 (1882); accord Eaton, 120 A. at 434. This places the risk of a default judgment upon the grantor.

This may be of dubious comfort to the grantee. The risk of a default judgment might be upon the grantor in the sense that the grantor may be liable to the grantee for damages. However, the grantee in such a situation risks being evicted from land for which he or she purchased a warranty deed. Thus, a grantee who wishes to remain in possession of the land would be well advised to defend his title when the grantor elects not to do so. Conversely, a grantor given notice of a claim against the warranted property has little incentive to defend the warranted title. Should the grantor choose to defend his or her title, he or she will necessarily incur the expenses of this defense whether the claim is successful or not. Yet if the grantor chooses not to defend the title, he or she will be liable for the expenses only if the claim is successful.⁵ We recognize that the current state of the law gives little real choice to a grantee faced with an adverse claim and a grantor who refuses to...