Caseflicks

Supreme Court of Minnesota • 1999

Hersh Properties, LLC v. McDonald's Corp.

588 N.W.2d 728 | 1999 Minn. LEXIS 46 | 1999 WL 64573

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Takeaway

In short, the MTA applies to Torrens land, but a Torrens owner may use it only when that owner’s own certificate of title has been of record for at least 40 years; an older deed in the chain cannot displace an easement expressly shown on a newer certificate.

Background

In 1950, Arthur and Doris Robinson conveyed what is now Hersh Properties’ Dinkytown parcel while reserving the adjoining parcel, now owned by McDonald’s. The 1950 deed granted the conveyed parcel an appurtenant easement over a 15-foot strip of the retained parcel for ingress, egress, and a sign near Fifteenth Avenue Southeast. Both parcels were registered Torrens property, and their certificates of title expressly recited the easement.

McDonald’s acquired its parcel in 1984 and received a certificate of title stating that the property was subject to the easement. Hersh acquired the benefited parcel in 1995. Although the easement area had been paved and used as McDonald’s parking lot, Hersh announced that it planned to erect a liquor-advertising sign there. McDonald’s and its franchisee, Choate, challenged the easement’s validity.

Hersh sought a declaratory judgment. McDonald’s asserted that the Minnesota Marketable Title Act (MTA) extinguished the easement because neither Hersh nor its predecessors had filed the sworn preservation notice required within 40 years of the 1950 grant; it also alleged common-law abandonment. On cross-motions for summary judgment, the district court held that the MTA applied to Torrens land and extinguished the easement. The court of appeals affirmed. The Minnesota Supreme Court agreed that the MTA applies to Torrens property, but held that McDonald’s could not invoke the Act because its own Torrens certificate of title was issued in 1984, fewer than 40 years before the litigation.

Issues

Issue #1

Whether the Minnesota Marketable Title Act applies to real property registered under the Minnesota Torrens Act.

Holding

Yes. The MTA applies to Torrens property as well as abstract property.

Reasoning

The MTA’s text applies broadly to “any real estate,” and none of its stated exceptions excludes land registered under the Torrens system. The court treated that unqualified language as decisive absent an applicable exception.

The statute also directs a claimant seeking to preserve an interest to record notice with either the county recorder or the registrar of titles. Because the registrar of titles administers Torrens property, this provision specifically contemplates application of the MTA to Torrens land.

The Torrens Act and the MTA pursue related, though distinct, goals. Torrens registration makes title ascertainable through a conclusive certificate of title, while the MTA clears away unpreserved ancient interests that burden marketability. Applying the MTA to Torrens land is therefore consistent with the statutes’ shared interest in efficient and reliable land transfers.

Issue #2

Whether McDonald’s had a qualifying “claim of title based upon a source of title” that had been of record for at least 40 years, allowing it to invoke the MTA against Hersh’s easement.

Holding

No. For a Torrens owner, the relevant source of title is the certificate of title issued when that owner acquired fee simple title; McDonald’s 1984 certificate was less than 40 years old, so McDonald’s could not invoke the MTA.

Reasoning

Under the MTA, the party invoking the Act must have a claim of title based on a source of title that has been of record for at least 40 years. Because McDonald’s invoked the statute as an affirmative defense to eliminate Hersh’s easement, the relevant source of title was McDonald’s source of title—not the 1950 instrument creating Hersh’s easement.

The statutory definition of “source of title” is broad enough to support competing readings, making the provision ambiguous in the Torrens context. The court therefore considered legislative purpose, including the MTA’s aim of removing ancient claims and the Torrens Act’s command that a certificate of title is conclusive as to matters stated in it.

Treating the 1950 deed as McDonald’s source of title would undermine the central function of the Torrens system. A purchaser, lender, or title examiner ordinarily relies on the current certificate of title; requiring an examination beyond that certificate whenever it is less than 40 years old would add cost and uncertainty and would substantially defeat Torrens registration’s purpose.

Nothing in the MTA showed a legislative intent to strip Torrens certificates of their conclusive effect. The court therefore construed the statutes together and held that McDonald’s source of title was the certificate issued to it upon its 1984 acquisition, not the earlier Robinson conveyance.

Because McDonald’s 1984 certificate had not been of record for 40 years when Hersh brought suit, McDonald’s lacked the statutory predicate for asserting the MTA. The easement was consequently not presumed abandoned or extinguished under the Act, notwithstanding Hersh’s failure to file an MTA preservation notice. The case was remanded for further proceedings, including matters not resolved by the MTA ruling.