KEEPING CURRENT PROPERTY CASES ADVERSE POSSESSION: Grazing and trailing cattle on isolated parcels within perimeter fence does not establish hostile possession. A perimeter fence built last century enclosed the Burnett Ranch plus three isolated parcels of the neighboring Warbonnet Ranch, which were not contiguous to the main body of the latter ranch. The neighboring ranch owners trailed cattle across each other’s property, and the Burnetts occasionally grazed their cattle on the disputed parcels. In 2016, after the sale of both ranches, the owner of the Burnett Ranch denied the owner of the Warbonnet Ranch access to the disputed parcels. The Warbonnet Ranch owner sued for declaratory judgment and to quiet title, and the Burnett Ranch owner counterclaimed for adverse possession of the three disputed parcels. After a five-day bench trial, the trial court held for the Warbonnet Ranch owner, essentially on the ground that the Burnetts had failed to establish hostile possession of the parcels. The supreme court affirmed, explaining that the possession required for adverse possession must be calculated to put the record owner on notice of the adverse claim; it must be so incompatible with or so in defiance of the rights of the true owner as to clearly signal an intent to claim the property, such that the owner should take action to protect his title. Significantly here, the parcels were not separately fenced within the Burnett Ranch, testimony showed that the perimeter fence was not on the true boundary line because of the terrain, and the neighbors traded land use to facilitate and Keeping Current—Property Editor: Prof. Shelby D. Green, Elisabeth Haub School of Law at Pace University, White Plains, NY 10603, sgreen@law.pace.edu. Contributing Authors: Prof. Darryl C. Wilson and Jesudunsin Awoyeye.
Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
maximize the use of forage. The fence was maintained to keep the neighbors’ respective cattle in certain areas on the particular ranches, not as a claim of ownership. The failure of the claimants to make a prima facie case meant that the record owner was not required to explain or rebut the claim through a showing of permission. Little Medicine Creek Ranch v. D’Elia, 527 P.3d 856 (Wyo. 2023). EQUITABLE SUBROGATION: Replacement mortgage doctrine does not protect first mortgagee who refinances its own mortgage loan. The Baileys mortgaged their residence to Quicken Loans for $256,500, with the mortgage recorded on October 20, 2009. One week later the Baileys entered into an equity line of credit (LOC) with ArrowPointe for $99,000, secured by a mortgage recorded on November 4, 2009. On November 23, 2009, the Baileys refinanced the Quicken loan, granting a new mortgage to Quicken of $296,000. At closing on the refinanced loan, the Baileys executed an acknowledgment indicating the only outstanding lien on the property was the first Quicken loan, which was not correct. ArrowPointe was unaware of the transaction as Quicken did not inform it of the refinance or request it to execute a subordination agreement. The first Quicken mortgage was released, and the refinanced mortgage was recorded on December 15, 2009. When the Baileys defaulted on the LOC, ArrowPointe filed
suit, seeking foreclosure and a declaration that its loan had priority over the Quicken loan now held by Quicken’s assignee, US Bank. US Bank asserted priority based on the “replacement mortgage doctrine.” ArrowPointe based its claim on the recording act. The trial court held that South Carolina does not recognize the replacement mortgage doctrine and granted summary judgment to ArrowPointe. US Bank appealed, the court of appeals affirmed, and the supreme court also affirmed. The court noted that South Carolina has a race-notice statute, which gives priority based on prior recording without notice, with only the exception being equitable subrogation. This state never expressly applied the replacement mortgage doctrine, even though recognized by the Restatement (Third) of Property: Mortgages § 7.3 (1997), and the court was reluctant to adopt it now on account of the difference in consequence to junior mortgagees. Although there is an intervening mortgage, such as ArrowPointe, in both scenarios, under the equitable subrogation doctrine, a substitute mortgagee steps into the shoes of the original mortgagee, and the original mortgage remains intact in all respects relative to the race-notice statute; the mortgage remains unsatisfied, and a new mortgage is not recorded. The position of the junior mortgagee is not affected. Under the replacement mortgage doctrine, however, the original first mortgage is satisfied of record and replaced with a new mortgage that is recorded after the intervening mortgage. Although the new mortgage may have similar terms as the original first mortgage, that is not always so and the junior mortgagee may be adversely affected. The court believed that the replacement mortgage doctrine needlessly invites litigation that could be easily avoided by a thorough examination of the record or execution of a subordination agreement. Any adoption was best for the legislature. ArrowPointe Fed. Credit Union v. Bailey, 884 S.E.2d 506 (S.C. 2023).
Published in Probate & Property, Volume 37, No 5 © 2023 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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September/October 2023
