Access is becoming an increasingly contentious issue in this State. In past decades property owners acknowledged the right of their neighbors to cross their property on existing paths in order to gain access to their adjoining lands as a matter of course. Today, we are seeing disputes over access as a weapon when the proposed new use of the dominant tract is what is really at issue. Caldwell v. Crawford, COA06-94, filed on January 2, 2007, is an opinion on an appeal by the defendant resulting from a Superior Court order in a bench trial determining that a prescriptive easement exists. This decision evidences a cultural predisposition that leads people to believe that all property should have access as a right. It also reinforces the judicial predisposition that one should raise objections and affirmatively act to preserve rights early on rather than after a long course of conduct has given rise to different expectations. 

Legal access to an Insured’s property is one of the fundamental coverage provisions of a title insurance policy. We are regularly requested to insure that legal access exists based upon facts supporting the existence of a prescriptive easement. While it may be possible to comply with these requests, it is not always in the client’s best interest given the limitations of the protection afforded by a title policy for consequential damages.  With the increased claims losses resulting from the increased litigation concerning these matters, insurers are also becoming more reluctant to insure without remedial work. This case may illustrate some of the difficulties encountered when there is a dispute over such access. As the resolutions of most prescriptive easement cases are fact driven, it may be best to include the pertinent facts as set out by the Court of Appeals verbatim in order to avoid coloring the Court’s view inadvertently through editing.

“The instant dispute arose over a right-of-way across a parcel of land in Bessemer City , North Carolina, and all parties in the case are related by blood or marriage. The servient tract (“Tract C”) is a 0.42-acre parcel fronting Inman Avenue, and the dominant tract (“the Caldwell Property”) is located to the west of and adjacent to Tract C. A 0.27-acre lot (“Tract B”) sits directly to the north of and contiguous to Tract C. Another 0.27-acre lot (“Tract A”) sits directly to the north of and contiguous to Tract B. The lot directly to the south of Tract C (“the Branch Property”) is owned by defendant's parents.”

“In 1958, plaintiff's grandparents built a house on the Caldwell Property. At the time, defendant's mother and father lived on the Branch Property; an Episcopal Church building sat on Tract A; and the Episcopal rectory was located on Tract B. During the construction of the Caldwell home, workers and vendors used Tract C for access to the Caldwell Property. By the time the house was completed, a de facto driveway spanning approximately 149 feet had been created that bisected Tract C and ran east to west from Inman Avenue to the Caldwell Property. The Caldwells and Branches, as well as their predecessors in interest, have referred at all times to the driveway as the “Caldwell driveway,” and a mailbox for the Caldwell Property was placed at the end of the driveway where it intersects with Inman Avenue.”

“From 1958 to 1990, the Episcopal Church used Tract C for parking. During this period of time, the Caldwells and any visitors to the Caldwell Property used the driveway to access the Caldwell Property. Also during this time, the Branches occasionally parked their cars on Tract C and used the driveway to access their property. Neither the Caldwells nor the Branches ever requested permission from the church to use the driveway. Additionally, although neither the Caldwells nor the Branches asked permission to maintain the driveway, both contributed to its maintenance. At various times over the thirty-two-year period, members of the Caldwell family scraped the driveway with a tractor, spread additional gravel on the driveway, and sufficiently preserved the driveway's condition so that cars could traverse it. Dewitt Branch, defendant's father, also scraped the driveway with a tractor and spread cinders from his mill when the driveway became muddy. At some point prior to 1990, plaintiff Chad Caldwell, without having asked or received permission from the church, paved a portion of the driveway with concrete to prevent rain runoff from causing the driveway to become rutted. Through such maintenance, the path of the driveway has remained the same over the years.”

“With the exception of a few months following his marriage in 1990, Chad Caldwell has lived in the Caldwell house since he was born on 7 August 1971. In 1994, Chad Caldwell purchased the house and property from his grandfather, and the Caldwell Property formally was conveyed to plaintiffs by deed recorded 4 December 2002.”

“In 1990, Dewitt Branch purchased Tracts A, B, and C from the Episcopal Church, which was in the process of relocating. Without asking permission from the Branches, plaintiffs and visitors to the Caldwell Property continued to use the driveway for ingress and egress, and the Branches, aware of such use, did not object.”

“In 1996, DeWitt Branch told defendant that he would give defendant Tract C, and in 2002, the property was deeded to defendant. Chad Caldwell then asked defendant if he could continue to use the driveway to access his property. Defendant, who was planning to build a house on Tract C, refused to allow plaintiffs continued access over the right-of-way in dispute, but stated that he would find another point of access for plaintiffs. Nevertheless, plaintiffs and visitors to the Caldwell Property continued to use the driveway until defendant blocked the driveway in January 2003. Consequently, on 17 January 2003, plaintiffs filed suit claiming they had acquired an easement across Tract C and that defendant was interfering with the use of that easement.”

The Court of Appeals set out four required elements of proof necessary to establish the existence of a prescriptive easement:
(1) that the use is adverse, hostile or under a claim of right;

(2) that the use has been open and notorious such that the true owner had notice of the claim;

(3) that the use has been continuous and uninterrupted for a period of at least twenty years; and (4) that there is substantial identity of the easement claimed throughout the twenty-year period.

In weighing the sufficiency of the facts to support the trial court’s judgment the Court of Appeals observed that the “failure of the owner of the servient tenement to object, even if he was aware of the use, is insufficient, as the party seeking to claim the easement must overcome the presumption that a party's use is permissive and not adverse.”  The court further clarifies that ‘hostility’ is not required to be proved by any sort of enmity but rather that the “use is simply a use of such nature and exercised under such circumstances as to manifest and give notice that the use is being made under claim of right. Dulin v. Faires, 266 N.C. 257, 260.61, 145 S.E.2d 873, 875 (1966)”

The Court of Appeals determined that the plaintiffs in this case had satisfied their burden of proving each of the elements required for a prescriptive easement. Most of the illustrative facts are typical of the sort of use that one would expect for a drive that was the sole access used for a property. There was ample testimony of continued use and maintenance exclusive to the plaintiffs and their predecessors. The Court noted that the plaintiff  “testified that prior to filing the lawsuit, he never had any conversations or negotiations regarding purchasing the right-of-way.”

This Court concludes by quoting Cannon v. Day,
“[w]here, as here, the evidence shows that permission to use the lane had been neither given nor sought, that the plaintiffs performed maintenance required to keep the road passable, and that the plaintiffs used the road for over 20 years as if they had a right to it, the evidence is sufficient to rebut the presumption of permissive use and establish that the use was hostile and under a claim of right. Cannon, 165 N.C. App. at 308, 598 S.E.2d at 212.”

It is important for practitioners to note that the most significant issue of this appeal was whether the evidence supported the trial court judge’s findings of fact. At the risk of an oversimplification of the issues, it can still be fairly said that these cases are essentially “swearing contests”. Thus, while your clients’ view of the facts may be compelling, that may not result in agreement by the trier of facts if litigation results. Therefore, it is also not unfair to say that no prescriptive easement can be conclusively said to exist until so adjudicated. It should be considered prudent to discuss these issues with your client and with your title insurance company’s counsel well in advance of closing.

Virtually every day title company underwriters see situations where problems could be prevented from turning into claims if a bit more diligence were exercised.   Statewide Title will begin highlighting true stories from an underwriting or claims perspective in order to illustrate how easily the problem or claim might have been avoided as a part of its continuing education series and claims prevention.   No actual names will be used.  The first illustration this month involves a very common conveyance of property into a trust and some of the issues that derive from what is otherwise an ordinary transfer by deed.

Husband and Wife purchase their home in 2000 and take title as tenants by the entireties.  Their closing attorney obtains an owner’s policy of title insurance insuring their purchase.  In 2004, they consult an estate attorney and begin a series of consultations for estate planning.  The attorney advises them they would benefit from certain tax advantages if they would transfer title to their home into a living trust.  Subsequently, Husband and Wife make a deed for their home and transfer title to the trustee of the HW Living Trust by Quitclaim Deed.  In 2005 a title defect surfaces and Husband and Wife are advised by the attorney who closed their purchase to file a claim on their policy of title insurance.  The claim is submitted, processed and denied by the title company because the named insured on the title policy, Husband and Wife, no longer own the property.   The trust is the current owner of the property according to the Quitclaim Deed filed in the public records.

Is there anything that Husband and Wife could have done to have prevented this problem and continued coverage under their title insurance policy?  Under the terms of the 1992 standard ALTA title policy, coverage only extends to the insured named under Schedule A.  Item 2 of the Conditions and Stipulations provides “The coverage of this policy shall continue in force as of Date of Policy in favor of an insured so long as the insured retains an estate or interest in the land, or holds an indebtedness secured by a purchase money mortgage given by the purchaser from the insured, or only so long as the insured shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest”.   In other words, the owner has to continue to own an interest in the property and not convey it outright in order to keep coverage under their policy.

Another point that should be noted here is that title into the trust was transferred by a Quitclaim Deed, which seems to be the preferred instrument of choice, when transferring title into trusts.  Had the instrument been a General or Special Warranty Deed then coverage under the title insurance policy might have been invoked by having the trust sue the grantors on the warranties in the deed, thus invoking coverage for Husband and Wife against the title defect.

The attorney preparing the Quitclaim Deed should have called the title company that issued the policy and asked whether the client’s coverage would be affected by transferring title into the trust.  Some title companies will continue coverage based on the fact that the trust is merely the “alter ego” of the named parties.  However, most companies will not continue coverage on that basis, but will endorse the policy to change the named insured to the trust on the “alter ego” theory. 

Continuation of coverage for transfers into trusts is not a problem under the current ALTA Expanded Coverage Policy as that policy specifically provides that title coverage continues when title to the insured property is transferred into a trust for the benefit of the named insureds.  The new standard ALTA policies that are due out later this year will provide the same coverage as well.  Those new polices provide “ The term ‘Insured’ also includes (a) successors to the title of the insured by operation of law as distinguished from purchase, including heirs, devisees, survivors, personal representatives or next of kin; …. A grantee of an Insured under a deed delivered without payment of actual valuable consideration conveying the title … (4) if the grantee is a trustee or beneficiary of a trust created be written instrument established by the Insured named in Schedule A for estate planning purposes”.  Clearly conveyances into family trusts used for estate planning purposes will no longer cause coverage problems under the new policies.  In the meantime and until those policies become available it is suggested that either the Enhanced Coverage Policies be used or endorsement obtained changing the named insured under Schedule A to the name of the trust along with a deed that at least contains some warranties, such as a Special Warranty Deed.

So often, real property issues are co-mingled with other areas of the law, such as trust and estate planning.  When title insurance is involved it is a good practice to always call your title company and run the fact situation by their attorney underwriters.