## Facts

- Paul Cook acquired two parcels in Heber City, Utah, of approximately 323 acres and 73 acres, and later conveyed them to his company, Cook Development, LC.
- Cook Development and Premier Homes formed two LLCs: Lake Creek Farms, LC and Lake Creek Associates, LC; the 323-acre parcel was conveyed to Lake Creek Farms and the 73-acre parcel to Lake Creek Associates.
- When Cook Development and Premier Homes separated, First American prepared quitclaim deeds intended to reconvey both parcels to Cook Development.
- The quitclaim deed for the 323-acre parcel mistakenly named Lake Creek Associates as grantor (instead of Lake Creek Farms), leaving record title to the 323-acre parcel in Lake Creek Farms.
- In May 1998, Holmes Development, LLC purchased both parcels from Cook Development by warranty deed; First American prepared closing documents, acted as escrow agent, and issued a title policy.
- In November 1998, Premier (as manager of Lake Creek Farms) conveyed the 323-acre parcel to Keystone Development, LLC; Keystone filed a quiet title action and recorded a lis pendens.
- Keystone’s quiet title claim was defeated, but during the litigation the lis pendens prevented Holmes from selling lots while it continued to service its acquisition loan.
- Holmes sued Cook, Cook Development, and First American for, among other claims, breach of deed covenants and negligence; the district court granted summary judgment to defendants and denied leave to amend.

## Issues

1. Whether delivery of a warranty deed breached the present covenants of seisin and right to convey when the grantor lacked title to part of the conveyed property at delivery.
2. Whether a later quiet title suit and lis pendens, ultimately resolved in the grantee’s favor, breached the covenant against encumbrances and the future covenants of warranty and quiet enjoyment.
3. Whether First American was liable to Holmes in negligence (and related theories) for the erroneous quitclaim deed and for failing to detect the resulting title defect.
4. Whether the district court abused its discretion in denying Holmes leave to amend its complaint.

## Decision

- Reversed the summary judgment for Cook and Cook Development on breach of the covenants of seisin and right to convey as to the 323-acre parcel.
- Affirmed the summary judgment for Cook and Cook Development on breach of the covenant against encumbrances and the covenants of warranty and quiet enjoyment.
- Affirmed the summary judgment for First American on Holmes’s negligence and related claims.
- Affirmed denial of Holmes’s motion for leave to amend.

## Legal Principles

- A validly executed warranty deed includes covenants of seisin, right to convey, against encumbrances, general warranty, and quiet enjoyment.
- Seisin and right to convey are present covenants, breached (if at all) upon delivery of the deed if the grantor lacks the estate or legal power the deed purports to transfer.
- Subsequent cure or later vindication of title does not eliminate a breach of present covenants; it may affect damages but not breach.
- The covenant against encumbrances and the covenants of warranty and quiet enjoyment are generally future covenants, requiring a later disturbance such as eviction or successful assertion of superior title.
- A temporary cloud on title from an unsuccessful adverse claim and lis pendens, without loss of the estate to a paramount title, does not establish breach of the future covenants.

## Conclusion

The Utah Supreme Court held that Cook Development breached the present covenants of seisin and right to convey because it lacked title to the 323-acre parcel when it delivered the warranty deed, but it did not breach the future covenants where the adverse claim failed and Holmes ultimately retained title and possession; the court also upheld summary judgment for the title company and the denial of leave to amend.


Holmes Dev., LLC v. Cook, 48 P.3d 895 (Utah 2002)