Prime Venturers v. Onewest Bank Group, LLC
73 A.3d 361
Md. Ct. Spec. App.2013Background
- In 2003 Prime Venturers sold 3.1477 acres to David and Cheryl Leupen by Deed and contemporaneously executed a separate recorded Agreement reserving a right to have the Leupens reconvey ~1.6848 acres for $1.00 after subdivision approval (Agreement contained an express survival clause).
- The Agreement was recorded at 9:30 a.m.; the Deed was recorded one minute later at 9:31 a.m.; the Deed made no reference to the Agreement and contained a special warranty against encumbrances.
- The Leupens initially mortgaged only the dwelling parcel, but in 2007 they refinanced with AmTrust (later OneWest), using the entire 3.1477 acres as security; the Refinance Deed of Trust stated the property was "unencumbered, except for encumbrances of record."
- Prime Venturers obtained subdivision approval in 2009 and sought reconveyance under the Agreement; OneWest refused to release the portion of the property and declared its lien enforceable on the whole parcel.
- The circuit court granted summary judgment to OneWest, ruling the Deed (unambiguous and conveying the whole property without reservation) extinguished the Agreement as to third parties; Prime Venturers appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Agreement (repurchase/reconveyance) merged into the later-recorded Deed | Agreement was a collateral reservation/equitable interest that survived the deed; recorded concurrently so OneWest had notice | Deed conveyed fee simple without reservation; unambiguous—agreement extinguished as to third parties | Agreement is collateral and did not merge; trial court erred in finding it vacated by the Deed |
| Whether the Agreement created an equitable interest enforceable against OneWest | Recording of the Agreement put subsequent lender on constructive notice, so lender cannot be bona fide purchaser for value | Even if Agreement survived, any equitable interest did not vest until subdivision/reconveyance (after refinance), so lender’s lien is superior | Court remanded for consideration of notice/priority because Agreement survives the Deed; priority not decided on appeal |
| Whether courts may consider extrinsic evidence/parties’ intent when deed is unambiguous | Parties’ intent and collateral nature permit considering documents together; explicit survival clause negates merger presumption | If deed is unambiguous, courts should not look beyond its four corners to vary it | Court held intent matters for collateral agreements; survival clause and nature of promise show intent not to merge |
| Whether the trial court should have subordinated or reformed the deed in equity to reflect parties’ intent | Prime Venturers argued equitable reformation possible to effect intent | OneWest argued reformation was not pleaded below and issue not preserved | Appellate court declined to reach reformation; issue not preserved for appeal |
Key Cases Cited
- Dorsey v. Beads, 288 Md. 161, 416 A.2d 739 (Md. 1980) (merger presumption: deed generally deemed execution of entire sale agreement but subject to exceptions)
- Levin v. Cook, 186 Md. 535, 47 A.2d 505 (Md. 1946) (collateral covenants do not merge into deed; deed may be partial execution)
- Rosenthal v. Heft, 155 Md. 410, 142 A. 598 (Md. 1928) (contract provisions not performable by delivery/acceptance of deed need not merge)
- Bruggeman v. Jerry’s Enterprises, Inc., 591 N.W.2d 705 (Minn. 1999) (repurchase option that cannot be performed before closing does not merge into deed)
- Peterson v. Peterson, 431 So.2d 672 (Fla. Dist. Ct. App. 1983) (agreement to reconvey conditioned on future event is collateral and survives deed)
- Erlewine v. Happ, 39 Md. App. 106, 383 A.2d 82 (Md. Ct. Spec. App. 1978) (express survival language in contract negates merger presumption)