Opinion
No. C5-01-1448.
Filed February 26, 2002.
Appeal from the District Court, Fillmore County, File No. C3-00-65.
Paul M. Ohly, (for appellants)
Roger E. Petersen, (for respondents)
Considered and decided by Harten, Presiding Judge, Randall, Judge, and Amundson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
In this property dispute where two legal descriptions overlap, appellants allege (a) the district court erred in failing to rule that the conflict in the parties' deed was the result of a scrivener's error and (b) appellants are entitled to protection of Minnesota's Recording Act, Minn. Stat. § 507.34 (2000), because they recorded their deed before respondents recorded theirs. Based on Minnesota's Recording Act and equity considerations, we conclude that appellants' interest in the disputed parcel is superior to respondents' interests, and we reverse and remand.
FACTS
In March 1972, appellants David and Eleanor Dunn entered into a contract for deed with Carl and Dorothy Grell to purchase 23 acres of wooded land in Fillmore County. The Dunns claim that the initial legal description discussed was crossed out at Mr. Grell's request and changed to the following legal description:
All that portion of the Northeast Quarter of Section 23, Township 104 North of Range 11 West lying and being South and West of County Road No. 6.
The Grells' attorney, David Joerg, who drafted the legal description, testified that he could not remember under what circumstances the description was changed or who requested the change. It is clear that the above legal description is the one from the Grells to the Dunns that was eventually recorded in a warranty deed in 1982. The contract for deed itself was never recorded.
In September 1978, respondents Leo and Jodi Miller entered into a contract for deed with the Grells to purchase 80 acres of farmland located adjacent to the land previously purchased by the Dunns. Joerg drafted the legal description, which is:
The North one-half of the Northeast quarter of Section 23, Township 104 North of Range 11 West, containing 80 acres more or less, subject to road and highway easements and also subject to other easements and restrictions of record, if any.
The legal descriptions of the two adjacent parcels overlap, resulting in both parties claiming ownership of a small parcel of land (the district court found the size to be between 4.96 and 6 acres). In September 1979, Joerg recorded an attorney's lien against the Grells for unpaid services rendered to the Grells for their sale to the Millers. In 1982, the Dunns received a warranty deed from another attorney for the Grells that included an abstract for the Dunns' property. The Dunns recorded their warranty deed that same year. Because of the overlap between the two legal descriptions, the abstract indicated that Joerg's attorney's lien already had been filed against part of the Dunns' property. The abstract does not reference the Millers' unrecorded contract for deed. The Dunns neither reviewed nor had an attorney review the abstract to determine if they had marketable title before recording their warranty deed.
The Millers never recorded their contract for deed with the county recorder's office. In 1998 the Millers received a personal representative's deed, which they recorded that same year. Oddly, the Dunns' warranty deed, although validly recorded in 1982, did not appear in the Millers' abstract.
In 1999, the Dunns decided to sell their property and discovered the conflict over the disputed parcel. In February 2000, the Dunns initiated a suit against the Millers, alleging that the Dunns were the true owners of the disputed parcel. At that time, both of the Grells were deceased. Joerg testified that he was not aware of any error in the legal descriptions that he or his staff had prepared on behalf of the Grells.
The district court determined that Joerg's attorney's lien provided notice to the Dunns of the Millers' interest in the disputed parcel because the lien referenced the contract for deed between the Grells and the Millers and the legal description of the Millers' property. The court concluded that neither description contained a scrivener's error, neither party had acquired title to the disputed parcel by adverse possession, and the Millers were good-faith purchasers entitled to protection under Minnesota's Recording Act. Based on the court's determinations, the court reformed the Dunns' legal description as follows:
All that portion of the South One-half of the Northeast Quarter (S1/ 2 N.E. 1/4) of Section 23, Township 104 North, Range 11 West, lying and being West of County Road No. 6. Subject to reservations, covenants, rights of way and uses of record or established by use, if any.
The Dunns moved the court to amend its findings, which the court denied, but the Dunns did not move for a new trial. The Dunns now appeal from the court's original judgment.
DECISION
In an appeal from a judgment where appellant failed to move the district court for a new trial, review is limited to deciding "whether the evidence sustains the findings of fact and whether [the] findings sustain the conclusions of law and the judgment." Gruenhagen v. Larson, 310 Minn. 454, 458, 246 N.W.2d 565, 569 (1943). Because appellants failed to provide a transcript of the district court proceedings, however, review is limited to deciding whether the district court's conclusions of law are supported by the its findings. Mesenbourg v. Mesenbourg, 538 N.W.2d 489, 492 (Minn.App. 1995).
I. Scrivener's Error
The Dunns argue that the Millers' legal description is erroneous due to a scrivener's error that failed to except land previously conveyed to them by the Grells. The Dunns argue that the Millers' legal description should be reformed to reflect the Dunns' ownership of the disputed parcel.
A written instrument may be reformed if it is shown that (1) there was a valid agreement between the parties expressing their real intentions; (2) the written instrument failed to express the real intentions of the parties; and (3) this failure was due to a mutual mistake of the parties, or a unilateral mistake accompanied by fraud or inequitable conduct by the other party.
Nichols v. Shelard Nat'l Bank, 294 N.W.2d 730, 734 (Minn. 1980) (citations omitted).
In this case, the Dunns are requesting reformation of the Millers' legal description to except the disputed parcel. It is clear from the record that the Grells sold the disputed five-acre (approximate) parcel to the Dunns in a 1972 contract for deed and then sold that same five acres to the Millers in a contract for deed in 1978.
The Dunns must demonstrate that there was a valid agreement between the Grells and the Millers and the written instrument failed to express the parties' real intentions. The Millers adamantly argue that the Grells intended to convey the disputed parcel to them (meaning the Grells would have conveyed the disputed parcel, not once, but twice). The district court found that the Dunns failed to produce any evidence to the contrary, other than the fact that their prior legal description includes the disputed parcel. This fact is strong but not enough, alone, to overcome the other prongs of the reformation analysis. Based on the record before us, we cannot conclude that the written instrument between the Grells and the Millers failed to express their real intention. It is not our issue, so we do not decide, other than to point out that the question of malpractice by Joerg's law firm, which drafted overlapping legal descriptions enabling the Grells to sell the land in question first to the Dunns in 1972, and later to the Millers in 1978, is an unresolved issue.
We conclude the district court properly found that the Dunns are not entitled to reformation due to a scrivener's error or a mechanical clerical error.
II. Recording Act
Minnesota's Recording Act provides:
Every conveyance of real estate shall be recorded in the office of the county recorder of the county where such real estate is situated; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same real estate, or any part thereof, whose conveyance is first duly recorded, and as against any attachment levied thereon or any judgment lawfully obtained at the suit of any party against the person in whose name the title to such land appears of record prior to the recording of such conveyance. The fact that such first recorded conveyance is in the form, or contains the terms of a deed of quitclaim and release shall not affect the question of good faith of such subsequent purchaser or be of itself notice to the subsequent purchaser of any unrecorded conveyance of the same real estate or any part thereof.
Minn. Stat. § 507.34 (2000) (emphasis added).
The Dunns argue that they are entitled to protection by the Recording Act because they recorded their warranty deed (1982) before the Millers recorded their personal representative's deed (1998). The Millers argue that Joerg's attorney's lien recorded in 1979 gives them priority.
The Millers purchased the property by contract for deed in May 1978. At that time, the Dunns had not recorded their contract-for-deed interest in the disputed parcel. The district court found that any use of the disputed parcel by the Dunns did not put the Millers on notice of the Dunns' interest in the property. We do not disturb this finding.
The district court then found that Joerg's attorney's lien, which was recorded before the Dunns' warranty deed, provided the Dunns with constructive notice of the Millers' interest because the lien referenced the Millers' contract for deed and the legal description from the Grells to the Millers. Based on these findings, the court determined that the Millers are good-faith purchasers who are entitled to protection under Minnesota's Recording Act.
There are three general types of recording statutes in the United States. Under a pure notice statute, "priority is given to a subsequent purchaser who acquires an interest without notice of the prior interest." 6A Richard R. Powell et al., The Law of Real Property ¶ 905, at 82-16 (1989). Under a pure race statute, priority is given to a subsequent purchaser who records before a prior interest and "notice or knowledge of prior unrecorded claims is irrelevant." 11 Thompson on Real Property § 92.13(a), at 148 (David A. Thomas ed., 1994). Under a race-notice statute, such as Minnesota's priority is given to a subsequent purchaser who acquires an interest without notice of the prior interest, but only if the subsequent purchaser records his or her interest before the owner of the prior interest records.
Powell at 82-16. All the statutes, whether they are classified as notice, race, or race-notice, compel the subsequent purchaser to meet certain requirements before it can be ascertained who has priority interest in given parcel of land. Did the subsequent purchaser have notice of a prior interest? Did the subsequent purchaser record first? Did the subsequent purchaser record first without notice of a prior interest? The goal of the statutes is to determine who has a priority interest, and, impliedly, the first purchaser has priority until it can be demonstrated that a subsequent purchaser (1) did not have notice of the prior interest, (2) recorded first, or (3) recorded first without notice, depending on which recording statute is in effect.
In Minnesota, a subsequent purchaser is considered a good-faith purchaser if he paid valuable consideration without notice of another's outstanding interest in the same property. Miller v. Hennen, 438 N.W.2d 366, 370 (Minn. 1989). But, to be afforded protection under the Recording Act, the subsequent purchaser must also record title to the property first. Id. Here, Millers paid valuable consideration for their contract for deed in 1978 without notice of the Dunns' 1972 contract-for-deed interest in the disputed parcel. However, the record unequivocally demonstrates that the Millers did not record their personal representative's deed before the Dunns recorded their warranty deed. Thus, while the district court did not err in concluding that the Millers are good-faith purchasers, it did err in determining that they were entitled to protection by the Recording Act.
The district court's decision to reform the Dunns' legal description rests on its finding that the Dunns had constructive notice of the Millers' interest in the property based on Joerg's recorded attorney's lien. At first glance, Minn. Stat. § 507.32 (2000) could support the court's decision, although the court did not rely on this provision specifically. Minn. Stat. § 507.32 provides, in pertinent part, "The record, as herein provided, of any instrument properly recorded shall be taken and deemed notice to the parties." Caselaw referencing this provision has applied it to determine what constitutes constructive notice to a subsequent purchaser. See Anderson v. Graham Inv. Co., 263 N.W.2d 382, 384 (Minn. 1978) (stating under Minn. Stat. § 507.32, subsequent purchaser is charged with constructive notice of any properly recorded instrument); Howard, McRoberts Murray v. Starry, 382 N.W.2d 293, 296 (Minn.App. 1986) (stating the same).
If we conclude that Minn. Stat. § 507.32 imputes constructive notice to a party with a prior interest, such that if the first purchaser, before recording, has notice of a subsequent purchaser's unrecorded interest, then the subsequent purchaser's interest takes priority, we still cannot conclude that Joerg's attorney's lien provided sufficient notice to the Dunns of the Millers' interest in the disputed parcel. The Millers' suggest that the attorney's lien provides the same notice as if the Millers' had recorded the contract for deed itself. The fact is, the Millers did not record their contract for deed. The Millers did not record any interest until their personal representative's deed in 1998, which was approximately 16 years after the Dunns had recorded their warranty deed. A recorded interest is only constructive notice of the facts appearing on the face of the record. Miller, 438 N.W.2d at 370. An attorney's lien asserting a lien on a third party's interest in a parcel of land, does not necessarily, via its reference to the underlying action giving rise to the attorney fees, provide notice of third party's (the Millers') ownership of that property. We cannot conclude that bootstrapping was envisioned by the Recording Act. The only intention of the attorney's lien here was to provide interested parties with notice of Joerg's interest for unpaid legal services, not the Millers' ownership interest in the property. It was the Millers' responsibility to assert (record) their own interest. They failed to do so before the Dunns recorded their warranty deed.
We are mindful of the purpose of Minnesota's Recording Act, which, in part, is "to give notice to subsequent purchasers of the inconsistent outstanding rights of others." Minn. Cent. R.R. Co. v. MCI Telecomms. Corp, 595 N.W.2d 533, 538 (Minn.App. 1999) (citation omitted). But, we are also mindful that equitable relief may be granted in an action to determine adverse claims to real property, upon such terms and conditions as may be necessary to do justice.
Miller, 438 N.W.2d at 371 (citation omitted). However, we conclude that it would be inequitable to allow the Millers to prevail simply by bootstrapping themselves to Joerg's recorded attorney's lien that claimed unpaid legal services from a seller who sold the same land twice. Had the Millers recorded their contract for deed interest in the disputed parcel before the Dunns recorded their warranty deed in 1982, we would reach a different conclusion.
In sum, we have the following chronology. Joerg drafted contracts for deed that allowed the Grells to sell the same parcel of land to the Dunns in 1972 and then to the Millers in 1978. The Millers did nothing themselves to protect their "second ownership interest." They did not record their contract for deed. By the time they recorded their personal representative's deed, it was approximately 16 years after the Dunns had recorded their warranty deed.
Joerg did not record the attorney's lien on behalf of the Millers. His law firm recorded it simply because the Grells did not pay for the firm's legal services when the Grells sold the disputed parcel a second time to the Millers. The firm's services included drafting the legal description for the conveyance from the Grells to the Millers. It would be inequitable, and the ultimate irony, if Joerg's law firm's complaint that the Grells had not paid their fee for selling the same land a second time, was the type of notice contemplated by Minnesota's Recording Act to deprive the first buyer of his land for which he paid.
The equities lie with the Dunns, and they recorded their interest before the Millers. We remand to the district court to reform the Millers' legal description to demonstrate that the Dunns are the true owners of the disputed parcel.
III. Adverse Possession
The elements required to establish adverse possession are "that the property has been used in an actual, open, continuous, exclusive, and hostile manner for 15 years." Rogers v. Moore, 603 N.W.2d 650, 657 (Minn. 1999). The party seeking to establish adverse possession must do so by clear and convincing evidence. Id. The district court determined that neither party acquired the disputed parcel by adverse possession.
At oral argument, both parties conceded that their respective adverse-possession claims are weak. After reviewing the record, we affirm the district court's decision on this issue. Neither party demonstrated the requisite elements for adverse possession.
Reversed and remanded.
However inviting the majority's equitable opinion, I must respectfully dissent based on statutory law. The critical issue is whether the recording of an attorney's lien in September 1979 was sufficient to give notice of respondents' interest in the parcel at issue, i.e., whether it was a "conveyance" within the meaning of Minn. Stat. § 507.01 (1978), providing that:
The word "conveyance" * * * includes every instrument in writing whereby any interest in real estate is created, aliened, mortgaged, or assigned or by which the title thereto may be affected in law or in equity, except wills, leases for a term not exceeding three years, and powers of attorney.
The statute is unchanged and is dispositive here; the district court was correct. Because the attorney's lien was a document under which the title to the land "may be affected in law or equity," the attorney's lien qualifies as a "conveyance." Accordingly, appellants had notice of respondents' presence in the chain of title before they recorded their warranty deed in 1982.