Land allegedly conveyed to two buyers

Where a company that allegedly conveyed the same land to two different buyers argued that one buyer had an independent duty to search the title records and report any title defects prior to accepting the deed, its argument was rejected. The Supreme Court of Virginia has made clear that the doctrine of constructive notice does not apply in this circumstance.

Background

First American Title Insurance Company alleges that Chesapeake Holdings CSG LLC twice conveyed overlapping plots of land in Stafford County, Virginia to two different grantees (RD Group/3 LLC and Parkway Storage Groupe LLC). Plaintiff alleges that Parkway suffered $114,527 in damages attributable to the necessity for Parkway to pay for the preparation and filing of a corrective deed. Plaintiff now seeks to recover that amount based on a breach of the covenant of special warranty contained in the Parkway deed. Defendant has filed a motion to dismiss or for summary judgment.

Summary judgment

Defendant contends there is no genuine dispute that the RD Group deed and the Parkway deed conveyed wholly separate plots of land because the RD Group deed conveyed “Tax Map Parcel 38-14H,” while the Parkway deed conveyed “Tax Map Parcel 38-14F.” Defendant also contends that there is no genuine dispute that RD Group never asserted an interest in the Parkway property.

There are at least two material factual disputes that preclude summary judgment at this stage. First, a full factual record is necessary to ascertain whether the Parkway deed conveyed land already conveyed by defendant in the RD Group deed. Second, there is a factual dispute over whether RD Group demanded payment in connection with a dispute over a sewer easement or because RD Group asserted an ownership interest in the Parkway property.

Knowledge

Defendant next argues that Parkway, and hence plaintiff as Parkway’s subrogee, is barred from recovering in this action because Parkway is charged with full knowledge of the status of the record title to the property that Parkway acquired from defendant. This argument fails. The Supreme Court of Virginia has made clear that the doctrine of constructive notice “does not apply against a grantee in an action against his immediate grantor for a breach of covenant” because as between the grantor and the grantee of real property, “the grantee is not required to examine the records, but may rely solely on the covenants in his deed for protection even though he ha[s] actual notice of encumbrances.”

Seeking to avoid this conclusion, defendant argues that a purchaser of property is put on constructive notice of all claims against the property disclosed in the chain of record title, and in any event, Parkway was contractually obligated to search the title records and report any title defects to defendant prior to Parkway accepting the Parkway deed. This argument is unpersuasive.

Claim

Defendant also argues that the amended complaint fails to allege, as required by Virginia Code § 55.1-355, that any party claiming by, through or under defendant, including RD Group, has asserted a claim of ownership against the Parkway property. The court finds that the amended complaint states facts constituting a constructive eviction, which is sufficient to support the claim for a breach of the covenant of special warranty.

Defendant argues that RD Group’s demand of payment to execute the corrective deed cannot constitute an eviction because RD Group refused to cooperate “out of pique” due to an unrelated dispute with defendant over a sewer easement. This factual assertion is not properly assessed at the motion to dismiss stage without the benefit of an evidentiary record.

Defenses

Defendant finally argues that plaintiff’s amended complaint must be dismissed because plaintiff, as Parkway’s subrogee, is subject to all defenses that defendant could assert against Parkway. However, defendant has failed to raise any valid defense against Parkway that may be appropriately addressed at the motion to dismiss stage. For that reason, each of defendant’s subrogation arguments must be rejected at this stage of the litigation.

Defendant’s motion to dismiss or for summary judgment denied.

First American Title Insurance Company v. Chesapeake Holdings CSG LLC, Case No. 1:21-cv-1103, Oct. 3, 2022. EDVA at Alexandria (Ellis). VLW 022-3-457. 18 pp.