Haik v. Sandy City
2011 WL 1758773, 254 P.3d 171, 2011 UT 26 (2011)
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Rule of Law:
In a race-notice jurisdiction, a subsequent purchaser may still acquire title in good faith even with record notice of a prior equitable interest if circumstances, such as an extreme passage of time and the prior claimant's failure to assert ownership, make it reasonable for the subsequent purchaser to believe the prior interest was abandoned or never perfected.
Facts:
- In 1976, Harold Bentley and Saunders-Sweeney, Inc. signed quitclaim deeds granting a specific water right to Sandy City.
- On January 13, 1977, Bentley, Saunders-Sweeney, and Sandy City signed an 'Agreement of Sale' for the water right, which was recorded the next day.
- Sandy City received the actual quitclaim deed for the water right shortly after the agreement but did not record it, instead keeping it in a municipal office file for 27 years.
- In 1978, Saunders-Sweeney conveyed the land to which the water right was appurtenant to Judith Saunders without reserving the water right; the property was subsequently conveyed to Lynn Biddulph in 1983, also without reservation of the water right.
- In 1999, Saunders-Sweeney executed a new quitclaim deed, conveying the same water right to Lynn Biddulph, who recorded it.
- Following the 1999 conveyance, Biddulph filed a change application with the state. Sandy City wrote a letter to the state expressing concern about future changes but did not claim ownership or contest Biddulph's title.
- In 2003, the water right was conveyed through intermediaries to the Haik Parties.
- Before purchasing, Mark Haik, a title examiner for the Haik Parties, conducted a title search but only went back to 1984, thus missing the 1977 Agreement of Sale.
- The Haik Parties recorded their deed to the water right on December 10, 2003.
Procedural Posture:
- The Haik Parties filed an action to quiet title to the water right in the district court.
- Both the Haik Parties and Sandy City filed cross-motions for summary judgment in the district court.
- The district court granted summary judgment in favor of the Haik Parties, concluding they recorded first and were good faith purchasers because the recorded Agreement of Sale did not constitute sufficient notice of Sandy City's unrecorded deed.
- Sandy City (appellant) appealed the district court's summary judgment ruling to the Utah Supreme Court.
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Issue:
Does a recorded 'Agreement of Sale' for a water right provide sufficient record notice to a subsequent purchaser of a prior, unrecorded deed, thereby defeating the subsequent purchaser's claim to have taken title in good faith under Utah's race-notice statute?
Opinions:
Majority - Justice Nehring
No. The recorded Agreement of Sale did not defeat the Haik Parties' good faith status as subsequent purchasers. Although the recorded agreement provided record notice of Sandy City's equitable interest in the water right, this notice does not automatically negate the good faith of a subsequent purchaser under these specific circumstances. The court's reasoning is threefold: 1) Sandy City's failure to record its deed for nearly 27 years, in violation of statutory requirements, heavily suggested the agreement was never fully executed or was abandoned. 2) The Haik Parties had a clear and inviolate chain of title according to the official county records, as the water right passed as an appurtenance to the land to their predecessors-in-interest. 3) Sandy City failed to assert its ownership in 1999 when the Haik Parties' predecessor, Ms. Biddulph, filed a change application for the water right, reinforcing the reasonableness of the Haik Parties' belief that Sandy City had no valid claim. Therefore, the combination of Sandy City's extreme delay and inaction, coupled with the Haik Parties' otherwise clear chain of title, allowed the Haik Parties to purchase the water right in good faith.
Analysis:
This decision refines the 'good faith' requirement within Utah's race-notice recording statute, establishing that record notice of an old, unperfected equitable interest does not create a per se bar to a subsequent purchaser's good faith status. The court introduces a fact-intensive, equitable analysis that considers the totality of the circumstances, including the diligence of both the prior and subsequent purchasers and the passage of time. The ruling places a significant burden on the initial grantee to promptly record their legal title (the deed), not just an executory contract, to fully protect their interest against subsequent bona fide purchasers. This creates a more flexible standard that can prevent a stale, ambiguous record from indefinitely clouding a property's title.
