Morello v. Land Reutilization Commission
659 N.W.2d 310, 265 Neb. 735 (2003)
Rule of Law:
A special warranty deed covenants only that the grantor has not created any defects in the title during their period of ownership and does not warrant against title defects created by prior owners.
Facts:
- Father Flanagan's Boys' Home owned tracts of land (24A and 24B) on which taxes were delinquent.
- The Boys' Home executed and delivered a quitclaim deed for the tracts to Douglas County.
- Despite now owning the property, Douglas County failed to remove the tracts from a previously initiated tax foreclosure proceeding.
- The tracts were erroneously sold at a court-ordered sheriff's sale, where they were purchased by the Land Reutilization Commission of the County of Douglas (LRC).
- The LRC subsequently sold the property to Bernard J. Morello and conveyed title via a special warranty deed.
- Later, in a separate condemnation action initiated by the City of Omaha, it was determined that Douglas County, not Morello, was the legal owner of the property because the foreclosure sale to the LRC was void.
Procedural Posture:
- The City of Omaha filed a condemnation action in district court against both Bernard J. Morello and Douglas County.
- In that action, the district court granted partial summary judgment in favor of the County, ruling it was the true titleholder.
- The Nebraska Supreme Court affirmed that judgment, holding the foreclosure sale to the LRC was void.
- Morello then filed a new lawsuit in district court against the LRC, seeking damages for the failure of title based on the special warranty deed.
- The district court granted summary judgment in favor of the LRC.
- Morello, as appellant, appealed the summary judgment ruling to the Nebraska Supreme Court; the LRC is the appellee.
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Issue:
Does a special warranty deed obligate the grantor to defend the grantee against a title defect that existed prior to the grantor acquiring the property?
Opinions:
Majority - Per Curiam
No. A special warranty deed does not obligate the grantor to defend against title defects that arose before the grantor's ownership. The court distinguished between three types of deeds. A general warranty deed warrants against all defects, regardless of when they arose. A quitclaim deed makes no warranties at all, transferring only whatever interest the grantor may have. A special warranty deed occupies a middle ground, where the grantor covenants only that it has not created or suffered any defects in the title during its own period of ownership. Here, the title defect—the County's failure to remove its own property from the foreclosure sale—occurred prior to the LRC obtaining title. The special warranty deed provided by the LRC to Morello explicitly stated it would defend against claims 'by, through, or under it, and against no other claims or demand.' Because the defect was created by a prior owner (the County), the LRC had no obligation under its special warranty deed to defend Morello.
Analysis:
This decision provides a clear definition and application of the special warranty deed in Nebraska jurisprudence, distinguishing it from general warranty and quitclaim deeds. It solidifies the principle that liability under a special warranty deed is strictly limited to defects created by the immediate grantor. This ruling clarifies the allocation of risk in real estate transactions, emphasizing that a grantee under a special warranty deed assumes the risk of pre-existing title defects and must look to prior grantors, if any, for recourse. The case serves as a crucial guide for transactional attorneys and title insurers in assessing the level of protection offered by different types of deeds.
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