BOULWARE v. MAYFIELD

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Docket Number

No. W-34.

Attorney(S)

Anderson E. Hatfield, III, Gainesville, for appellants. John H. Haswell, of Chandler, O'Neal, Avera, Gray, Lang Stripling, Gainesville, for appellees.

Judges

BOYER, Chief Judge (concurring specially).
RAWLS, Judge.

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Smart Summary

Factual and Procedural Background

Appellants B.F. Boulware and Audrey Boulware filed a lawsuit seeking to cancel a mortgage. In Count I of their complaint, they alleged the mortgage had been fully satisfied and sought its cancellation. In Count II, they alleged that appellee Irene D. Mayfield, by executing a warranty deed to them, breached her covenant against encumbrances and sought damages including attorney's fees and costs related to prosecuting the action to cancel the outstanding mortgage. The trial court ruled in favor of appellants on Count I by canceling the mortgage of record but ruled in favor of appellee Mayfield on Count II by denying damages for breach of covenant against encumbrances. The appellants appealed, challenging whether the trial court erred in ruling that a mortgage, unsatisfied of public record but paid, is not an encumbrance under the covenant against encumbrances in a Florida statutory warranty deed.

Legal Issues Presented

Whether the trial court erred as a matter of law in ruling that a mortgage, unsatisfied of public record, even though paid, is not an encumbrance within the covenant against encumbrances in a Florida statutory warranty deed.

Arguments of the Parties

Appellants' Arguments

The common law covenant against encumbrances warrants to the purchaser a record title free of encumbrances, even if such record encumbrance is invalid and unenforceable.
They argued that the unsatisfied mortgage on public record constituted an outstanding encumbrance, breaching the covenant against encumbrances.

Appellee's Arguments

The appellee contended that the mortgage, though unsatisfied of record, was paid and therefore invalid and unenforceable as an encumbrance.
Accordingly, no breach of the covenant against encumbrances occurred because the covenant is only breached by a valid and enforceable encumbrance.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Van Ness v. Royal Phosphate Co., 60 Fla. 284, 53 So. 381 (1910)	Definition of encumbrance as a right or interest in land diminishing its value but consistent with passing the fee.	Supported the definition of encumbrance relevant to covenant against encumbrances.
Coral Gables v. Payne, 94 F.2d 593 (4th Cir. 1938)	Definition of encumbrance and common law covenant principles.	Referenced in defining encumbrance and covenant scope.
Rawle on Covenants for Title, 4th ed. (1873)	Elucidation of common law covenants including covenant against encumbrances.	Provided foundational legal definitions applied by the court.
4 Tiffany Real Property § 1018, 3rd ed. (1975)	Characterization of covenant against encumbrances as one for indemnity and when it is broken.	Used to clarify when covenant against encumbrances is breached.
R.J. Dinnebeil, Inc. v. Braun, 127 N.J.L. 455, 23 A.2d 286 (1942)	Distinction that invalid or unenforceable claims do not breach covenant of warranty or quiet enjoyment.	Supported the court’s conclusion that invalid claims do not constitute breach.
Gore v. General Properties Corp., 149 Fla. 690, 6 So.2d 837 (1942)	Definition of encumbrance within covenant against encumbrances.	Appellants cited this to argue their position; court analyzed its application.
Palmeri v. Allen, 30 Conn. Sup. 56, 299 A.2d 552 (1972)	Distinction between encumbrances and clouds on title.	Used to emphasize that invalid claims may cloud title but do not breach covenants.
Alexander v. Cleveland, 79 So.2d 852 (Fla. 1955)	Definition of good and marketable record title in breach of contract context.	Referenced in concurrence to differentiate breach of covenant from breach of contract for marketable title.
Allen v. Bowman, 152 Fla. 325, 10 So.2d 905 (1943)	Marketable title and abstract of title requirements.	Referenced in concurrence to clarify scope of covenant against encumbrances versus marketable title claims.

Court's Reasoning and Analysis

The court began by recognizing that the appellants’ cause of action was grounded solely on the statutory warranty deed executed by appellee Mayfield, which includes the common law covenant against encumbrances. The court defined an encumbrance as a right or interest in the land held by a third party that diminishes the value of the land but is consistent with the passing of fee simple title.

The court emphasized that the covenant against encumbrances is only breached when a valid and enforceable encumbrance exists. It rejected appellants’ argument that an unsatisfied mortgage of public record, which had in fact been paid and was thus invalid and unenforceable, constituted an encumbrance under the covenant. The court distinguished between an encumbrance and a mere cloud on title, noting that invalid claims may cloud title but do not breach the covenant.

The court concluded that because appellants failed to prove the existence of a valid encumbrance, their cause of action for breach of covenant against encumbrances was unfounded. The judgment of the lower court, which canceled the mortgage but denied damages for breach of covenant, was affirmed.

The concurrence by Chief Judge Boyer reinforced this reasoning, highlighting that the covenant against encumbrances is only breached by valid and enforceable encumbrances. He further clarified that this case did not involve claims for breach of contract to convey marketable title or claims regarding clouds on title, which would be analyzed under different legal standards.

Holding and Implications

The court affirmed the trial court’s judgment.

The holding establishes that a mortgage that has been paid but remains unsatisfied of record does not constitute a breach of the covenant against encumbrances in a Florida statutory warranty deed because it is an invalid and unenforceable claim rather than a valid encumbrance. The direct effect of this decision is that appellants cannot recover damages for breach of covenant against encumbrances based on a paid but unsatisfied mortgage of record. The opinion does not establish new precedent beyond clarifying that only valid and enforceable encumbrances breach the covenant; invalid claims or clouds on title do not.

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B.F. BOULWARE AND AUDREY BOULWARE, APPELLANTS, v. IRENE D. MAYFIELD ET AL., APPELLEES.

RAWLS, Judge.

Appellants, B.F. Boulware and Audrey Boulware, filed suit to cancel a mortgage alleging in Count I of their Complaint that it had been fully satisfied. By Count II of their Complaint, the Boulwares alleged that appellee, Irene D. Mayfield, by execution of a warranty deed to them, breached her covenant against encumbrances and demanded damages (attorney's fees and costs) against her for prosecution of this action to cancel the "outstanding mortgage". The trial court entered a judgment in favor of appellants as to the allegations in Count I and cancelled the mortgage of record, and in favor of appellee Mayfield denying any damages for an alleged breach of covenant against encumbrances.

The point on appeal which is dispositive of this casue is:

"Whether the trial court erred as a matter of law in ruling that a mortgage, unsatisfied of public record, even though paid, is not an encumbrance within the covenant against encumbrances in a Florida statutory warranty deed."

Appellants' cause of action arose solely out of the statutory warranty deed executed to them by Mrs. Mayfield. Florida Statute 689.03 provides, inter alia:

". . . a conveyance executed substantially in the foregoing form shall be held to be a warranty deed with full common law covenants and shall just as effectively bind the grantor, and his heirs, as if said covenants were specifically set out therein."

It is elementary that one of the common law covenants is the covenant against encumbrances. Rawle, in quoting 2 Greenleaf's Evidence, § 242, defines an encumbrance as "`every right to or interest in the land, which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance.'" Tiffany describes the covenant against encumbrances as one for indemnity only and the covenant as being broken when there is an outstanding encumbrance. Of interest is Tiffany's discussion of a breach of the common law covenant of warranty or that for quiet enjoyment where he states: "The existence of an invalid and unenforceable claim is not a breach, even though it constitutes a cloud on title."

Van Ness v. Royal Phosphate Co., 60 Fla. 284, 53 So. 381 (1910); and Coral Gables v. Payne, 94 F.2d 593 (4th Cir. 1938). Also see 7 Miami Law Quarterly 378-384 (1952).

Rawle on Covenants for Title 94-95 (4th ed. 1873).

4 Tiffany Real Property § 1018, at 303 (3rd ed. 1975).

Id. § 1013. See also R.J. Dinnebeil, Inc. v. Braun, 127 N.J.L. 455, 23 A.2d 286 (1942).

The nexus of appellants' complaint is that the common law covenant against encumbrances warrants to the purchaser a record title even though such record encumbrance is invalid and unenforceable. Although this is apparently a question of first impression in this jurisdiction, we conclude that the answer is a positive NO.

The authorities are unanimous that a breach of the common law covenant against encumbrances occurs ". . . if an encumbrance on the land then exists." Appellants cite the following statement from Gore, supra, in support of their position:

Gore v. General Properties Corp., 149 Fla. 690, 6 So.2d 837 (1942), citing 7 Thompson on Real Property 212 (Permanent ed. ____).

"An encumbrance within the covenant against encumbrances is every right to or interest in land, which may subsist in a third party, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance."

The fallacy of appellants' position is that they have not proved a "right" or "interest" in land which may subsist in a third party; but to the contrary, they have proved that a third party does not have an encumbrance against their land. Having proved that no encumbrance existed, appellants had no cause of action for breach of an encumbrance. Record titles were unknown in common law. In short, appellants' complaint is lodged because of a cloud on the record title, not that the grantor has breached her common law covenant against encumbrances. The distinction between an encumbrance and a cloud on a title for property has been delineated for many years. To be a cloud upon a record title, the claim may be invalid, while only lawful or valid claims violate the covenants as to encumbrances.

Not in issue is a claim for breach of contract to convey marketable title, nor breach of contract for the existence of "clouds on title".

Palmeri v. Allen, 30 Conn. Sup. 56, 299 A.2d 552 (1972).

The judgment appealed is affirmed.

McCORD, J., concurs.

BOYER, C.J., concurs specially.

BOYER, Chief Judge (concurring specially).

While recognizing that the law is as stated in the majority opinion, I think it important to emphasize what the decision in this case does not involve. To do so we must first consider what it does involve. The decision does involve the old common law covenant against encumbrances. As noted in the majority opinion, the common law covenant against encumbrances is only breached where the encumbrance is valid and enforceable. An invalid claim, even though it is upon the record, is not an "encumbrance" for purposes of the covenant against encumbrances. (See Thompson on Property, Sections 3183, 3187 and American Law of Property, Volume III, Section 12.128) Inasmuch as a paid mortgage that is unsatisfied of public record comes within the category of invalid and unenforceable claims, such a mortgage can not be said to constitute a breach of the covenant against encumbrances. (See 5 A.L.R. 1084 and 20 Am.Jur.2d, "Covenants, Conditions, etc.", Section 85)

However, an entirely different situation would be created should the issue be whether the seller of real property has breached an agreement to provide the buyer with an abstract of title showing good and marketable (merchantable) title. Such an agreement is breached when the abstract fails to show "a good and marketable record title as distinguished from one that might be good in point of fact but dependent in material respect upon matters in pais to support its validity." ( Alexander v. Cleveland, Sup.Ct.Fla. 1955, 79 So.2d 852, 854; see also Allen v. Bowman, Sup.Ct. Fla. 1943, 152 Fla. 325, 10 So.2d 905) Thus, had this case involved a suit for specific performance by the seller in which the buyer asserted as a defense that the buyer had failed to show good and marketable title, or had the buyer initiated a suit for breach of contract to convey marketable title, an entirely different result would have been likely. However, as this case only involved an alleged breach against the covenant against encumbrances, the decision of the lower court must be affirmed.