Feit v. Donahue
16 Brief Times Rptr. 93, 826 P.2d 407, 1992 Colo. App. LEXIS 6 (1992)
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Rule of Law:
An existing violation of a zoning ordinance at the time of conveyance constitutes a breach of the covenant against encumbrances in a warranty deed if the violation is substantial, impairs the property's use and value, and renders the title unmarketable.
Facts:
- In 1982, David and Linda Donahue obtained a building permit to convert their home's attached garage into a family room.
- The permit and subsequent certificate of occupancy were issued by the City of Thornton on the condition that the Donahues build a new, detached two-car garage to comply with zoning laws requiring two enclosed parking spaces per residence.
- The Donahues converted the garage into a family room but never built the required new detached garage.
- In October 1984, the Donahues sold the home to Glenn and Penelope Feit, conveying the property via a warranty deed.
- Three years later, in 1987, the Feits attempted to sell the property.
- Upon learning the required garage was never built, the City of Thornton notified the Feits that it was revoking the house's certificate of occupancy.
- The Feits asked the Donahues to either build the garage or rescind the sale, but they refused.
- The Feits were unable to obtain a zoning variance, could not list or sell the house without a certificate of occupancy, and the property was ultimately foreclosed upon.
Procedural Posture:
- Glenn Richard and Penelope Larae Feit (buyers) filed an action against David J. and Linda L. Donahue (sellers) in a Colorado trial court.
- The buyers' complaint alleged breaches of the deed covenants of warranty, quiet enjoyment, and against encumbrances, as well as fraudulent concealment.
- After a bench trial, the trial court dismissed the claims for breach of the covenants of warranty and quiet enjoyment.
- The trial court found in favor of the buyers on the claim for breach of the covenant against encumbrances (against both sellers) and on the fraudulent concealment claim (against David Donahue only), awarding damages.
- The sellers appealed the trial court's judgment to the Colorado Court of Appeals.
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Issue:
Does a property's violation of a zoning ordinance at the time of conveyance, which requires the construction of a major structure to achieve compliance, constitute a breach of the deed's covenant against encumbrances?
Opinions:
Majority - Judge Davidson
Yes. A property's violation of a zoning ordinance at the time of conveyance constitutes a breach of the covenant against encumbrances when the violation is substantial and renders the title unmarketable. An encumbrance is any right or interest in land that diminishes its value or interferes with its free enjoyment, not merely an adverse claim to title. Here, the city ordinance empowered officials to enter the property and compel the construction of a garage at the owner's expense, which is a significant burden that lessens the property's value. This violation was not minor; it made the title unmarketable, as evidenced by the buyers' inability to sell the home and the ultimate revocation of the certificate of occupancy. While the original sales contract stated the property was sold 'subject to...zoning regulations,' the doctrine of merger dictates that the covenants in the final deed supersede the contract's terms. The warranty deed promised the property was free from encumbrances, and this substantial, existing zoning violation breached that promise.
Analysis:
This decision establishes that in Colorado, a substantial, pre-existing zoning violation that renders a property's title unmarketable qualifies as an encumbrance under a warranty deed. The court creates a practical distinction between major zoning violations that require significant structural changes and minor, technical building code violations, which generally do not constitute encumbrances. This holding reinforces the doctrine of merger, clarifying that the deed's covenants control over prior contractual agreements after closing. The case expands protection for buyers by ensuring that a warranty deed protects not only against claims to title but also against significant, latent regulatory non-compliance that could force litigation or expensive remedies upon the new owner.
