## Facts

- Wilma Leach and her husband owned a 20-acre parcel in Douglas County, Oregon, containing a spring.
- Around 1954, they sold an adjoining small parcel to Henry and Betty Leach and orally granted them the right to locate, construct, and maintain facilities to draw water from the spring on the 20-acre parcel.
- Henry and Betty constructed a small concrete dam, installed a 370-gallon storage tank, and laid a plastic pipe across the 20-acre parcel to their homesite.
- In May 1975, Wilma Leach and her husband conveyed the 20-acre parcel to Ove and Inga-Lill Gunnarson by warranty deed containing a covenant that the property was free and clear of all encumbrances.
- Ove Gunnarson knew the Leaches were using the spring and saw the physical installations, but testified he was told the Leaches had no right to use the spring.
- In related litigation, Henry and Betty established an irrevocable license to use and maintain the spring for domestic water.
- The Gunnarsons filed a third-party claim against Wilma Leach for breach of the covenant against encumbrances based on the spring-use right.

## Issues

1. Whether an irrevocable license allowing neighbors to use and maintain a spring on conveyed land is an “encumbrance” within a warranty deed’s covenant against encumbrances.
2. Whether the covenant against encumbrances is breached even when the encumbrance is open, visible, and known to the grantee at conveyance.
3. Whether a jury may be instructed that a visible, known encumbrance falls outside the covenant against encumbrances.

## Decision

- The Oregon Supreme Court reversed the Court of Appeals and the judgment for Wilma Leach and remanded for further proceedings.
- The court held that the irrevocable license was an encumbrance within the covenant against encumbrances.
- The court held that the covenant protects against existing encumbrances regardless of the grantee’s knowledge at conveyance.
- The court rejected an exception for open, notorious, and visible physical burdens.
- The trial court’s jury instruction misstated the law by treating openness and visibility as negating breach of the covenant.

## Legal Principles

- An encumbrance is any subsisting third-party right or interest in land that diminishes the land’s value while remaining consistent with transfer of the fee.
- An irrevocable license burdening land is an encumbrance, similar in effect to an easement, for purposes of a covenant against encumbrances.
- A general covenant against encumbrances allocates risk to the grantor for all existing encumbrances unless expressly excepted in the deed.
- A grantee’s knowledge of an encumbrance, including knowledge from visible physical conditions, does not bar recovery for breach of the covenant against encumbrances.
- Jury instructions may not exclude liability for breach of the covenant against encumbrances based on the visibility or notoriety of the encumbrance.

## Conclusion

An irrevocable license to use and maintain a spring is an encumbrance that breaches a deed’s covenant against encumbrances, and the breach is not avoided by showing the burden was visible or known to the grantee; the grantor must except such burdens in the deed to avoid warranty liability.


Leach v. Gunnarson, 290 Or. 31, 619 P.2d 263 (Or. 1980)