Proffitt v. Isley
1985 Ark. App. LEXIS 1750, 13 Ark. App. 281, 683 S.W.2d 243 (1985)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A covenant against encumbrances is a personal covenant that does not run with the land, meaning a remote grantee cannot sue an original grantor for its breach; furthermore, a covenantee can only recover actual damages for such a breach if they have satisfied the outstanding encumbrance or have been evicted from the property.
Facts:
- In 1974, Bobby and Mary Proffitt sold one and one-half acres of real estate to Truman and Earline Atkinson.
- The land sold by the Proffitts was subject to an existing mortgage that was still outstanding.
- In 1978, Truman and Earline Atkinson sold the land to Shirley Carter.
- In 1980, Shirley Carter sold the land to Arthur and Bonnie Isley.
- About two months after Arthur and Bonnie Isley purchased the land, they discovered the outstanding mortgage from the Proffitts.
- The mortgagee had made no effort to evict Arthur and Bonnie Isley or to foreclose on the property.
- Arthur and Bonnie Isley had incurred no expense due to the outstanding mortgage on the property.
Procedural Posture:
- Arthur and Bonnie Isley sued Shirley Carter, Truman and Earline Atkinson, and Bobby and Mary Proffitt for damages based on general warranties in the warranty deeds.
- The jury in the trial court (court of first instance) held for Truman and Earline Atkinson and Shirley Carter.
- The jury held Bobby and Mary Proffitt liable to Arthur and Bonnie Isley for $4,390.78, representing the unpaid balance on the mortgage plus interest and costs.
- The Proffitts appealed the jury's decision regarding their liability.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a remote grantee have a cause of action for actual damages against an original grantor for a breach of the covenant against encumbrances when the remote grantee has not satisfied the outstanding encumbrance or been evicted from the property?
Opinions:
Majority - Melvin Mayfield
No, a remote grantee does not have a cause of action for actual damages against an original grantor for a breach of the covenant against encumbrances when the remote grantee has not satisfied the outstanding encumbrance or been evicted from the property. The court held that covenants of seisin, of the right to convey, and against incumbrances are considered "personal covenants" that do not "run with the land" and therefore do not transfer to subsequent assignees. This means the remedy for a breach of a covenant against encumbrances lies with the immediate grantor; a remote grantee must sue their direct grantor, who in turn can sue their grantor, and so forth, back up the chain of title. The court further clarified that actual damages for a breach of a covenant against encumbrances are only recoverable if the covenantee has either satisfied the outstanding encumbrance or has been evicted from the property due to it. Otherwise, only nominal damages may be recovered. Since Arthur and Bonnie Isley were remote grantees, had not been evicted, and had not paid off the mortgage, their cause of action was limited to a technical breach against their immediate grantor, Carter, for nominal damages, and not against the original grantors, the Proffitts, for actual damages. The judgment against the Proffitts was therefore reversed and dismissed.
Analysis:
This case is significant for clarifying the distinct nature of personal covenants versus real covenants in real property transactions, particularly concerning the covenant against encumbrances. It reinforces that the right to sue for a breach of a personal covenant typically flows only between immediate parties in a chain of title, limiting the ability of remote grantees to directly pursue original grantors. The decision also emphasizes the requirement that for a covenantee to recover actual damages for an encumbrance, they must demonstrate an actual loss, either through payment to clear the encumbrance or by being dispossessed of the property. This precedent helps define the scope of liability and remedies in property sales involving title defects.
