Facts
- Around 1976, Harold Bentley and Saunders‑Sweeney, Inc. conveyed a water right to Sandy City through a deed and a separate Agreement of Sale executed with the city’s mayor.
- Sandy City recorded the Agreement of Sale (recorded January 14, 1977), but did not record the deed for decades.
- In 1978, Saunders‑Sweeney conveyed Lot 31 (property treated as appurtenant to the water right) to Judith Saunders; in 1983, Lot 31 was conveyed to Lynn Biddulph. The deeds for these lot conveyances did not expressly reserve the water right.
- In 1999, Saunders‑Sweeney conveyed all of its claimed interest in the water right to Biddulph, and Biddulph recorded that deed.
- Biddulph applied to the Utah State Engineer for a permanent change application relating to the water right. Sandy City learned of the application and voiced concerns, but did not file a formal ownership claim to the water right or otherwise challenge Biddulph’s asserted interest at that time.
- In 2003, Biddulph conveyed the water right to LWC, L.L.C.; LWC conveyed it to Tolton; and in October 2003 Tolton conveyed it to the Haiks (the “Haik Parties”).
- Before the October 2003 conveyance, Mark Haik researched the chain of title for the water right back to about 1983 or 1984 and did not discover the earlier recorded Agreement of Sale.
- The Haik Parties recorded their deed on December 10, 2003.
- In 2004, the Haik Parties filed with the Utah Division of Water Rights to change the diversion point for the water right. Sandy City opposed the application and, after investigating, located its historic documents and recorded its deed in April 2004.
- Tolton and the Haik Parties sued to quiet title to the water right. The district court granted summary judgment to the Haik Parties, concluding they recorded first and purchased in good faith because they lacked notice of Sandy City’s unrecorded deed.
Issues
- Whether Sandy City’s recorded Agreement of Sale gave later purchasers record (constructive) notice that Sandy City held an interest in the water right.
- Whether record notice of an equitable interest (shown by a recorded sale agreement rather than a recorded deed) can defeat a later purchaser’s claim to good‑faith purchaser status and priority under Utah’s recording laws for water rights.
- Whether, on these facts, the Haik Parties’ recorded deed to the water right had priority over Sandy City’s later‑recorded deed and earlier recorded Agreement of Sale.
Decision
- The Utah Supreme Court held the recorded Agreement of Sale placed subsequent purchasers on record notice that Sandy City had an equitable interest in the water right.
- The court rejected the district court’s reasoning that an executory sale agreement cannot provide notice because the record may not show whether the agreement was fully performed or whether the deed was delivered.
- The court held, as a matter of law, that record notice of an equitable interest can in some cases defeat a later purchaser’s claim to have bought in good faith.
- The court concluded that such a result was not warranted on these facts and left in place the judgment quieting title in the Haik Parties.
- Disposition: the quiet‑title judgment in favor of the Haik Parties was affirmed, with the court clarifying the legal effect of a recorded agreement evidencing an equitable interest.
Legal Principles
- A recorded instrument reflecting an agreement to convey a property interest, including a water right, can give record (constructive) notice that the grantee holds an equitable interest, even if the deed itself was not recorded.
- An “executory” label does not, by itself, prevent a recorded sale agreement from giving record notice; later purchasers are charged with notice of what the record shows and what reasonable inquiry would reveal.
- Record notice of an equitable interest may, in some situations, defeat a later purchaser’s claim of good‑faith purchaser protection, even where the later purchaser records a deed first.
- Whether equitable‑interest record notice defeats a later deed holder depends on the statutory recording framework and the case’s facts, including the parties’ conduct and delay in recording.
- Long delay in recording a deed to a water right can leave the earlier claimant vulnerable when competing deeds exist and a later purchaser records first.
Conclusion
In Haik v. Sandy City, the Utah Supreme Court ruled that Sandy City’s recorded Agreement of Sale gave constructive notice of the city’s equitable interest in the water right, but still affirmed quiet title for the Haik Parties because, on these facts and under Utah’s recording scheme, the city’s decades‑late recording of its deed did not displace the Haik Parties’ later‑acquired, first‑recorded deed.