View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by UND Scholarly Commons (University of North Dakota) North Dakota Law Review Volume 46 Number 2 Article 1 1969 Examining the Abstract of Title J. Philip Johnson Follow this and additional works at: https://commons.und.edu/ndlr Part of the Law Commons Recommended Citation Johnson, J. Philip (1969) "Examining the Abstract of Title," North Dakota Law Review: Vol. 46 : No. 2 , Article 1. Available at: https://commons.und.edu/ndlr/vol46/iss2/1 This Article is brought to you for free and open access by the School of Law at UND Scholarly Commons. It has been accepted for inclusion in North Dakota Law Review by an authorized editor of UND Scholarly Commons. For more information, please contact [email protected]. EXAMINING THE ABSTRACT OF TITLE J. PHILIP JOHNSON* Introduction Many otherwise experienced lawyers express dismay when a client appears with an abstract of title in hand. Even within the generalized practice of North Dakota, there are relatively few attorneys that handle the great majority of title examinations, usually in connection with the mortgaging of the property. There is no deep secret to the examination process but there is a certain amount of background and a few rules of practice that can be extremely helpful. The following is offered as an explanation and aid for title examination within this region and particularly this state. 1. HISTORY OF THE ABSTRACT-OPINION SYSTEM The system of real estate title examination common to the upper midwest region of the United States is based upon the opinion of a lawyer gained from examination of an abstract of the real estate records. As with most law, and most particularly real estate law, the practice is best explained by examining its history. Transfer of title in England, aside from the traditional enfeoff- ment method, involved a conveyance accompanied by transfer of the original documents of title.' For convenience, a summary or abstract of these documents was later furnished by the seller. In the colonies of North America, there developed a new system of public registration for conveyances of land.2 Plymouth Colony adopted such a requirement in 1636 to prevent fraud and confusion in regard to land titles.2 Similar acts followed in Massachusetts Bay, Virginia and other colonies. In 1795, based on the experience of the colonies and young states, the Northwest Territory of Ohio passed an act requiring that deeds not acknowledged or proved and recorded within twelve months of execution ". shall be adjudged fradulent and void against any subsequent purchaser, or * Ph.B. University of North Dakota, 1960; J.D. University of North Dakota, 1962; Georgetown University Graduate School of Law, 1964-65; Member of the firm of Pan- cratz, Wold and Johnson, Fargo, North Dakota. 1. See P. BASYE, CLEARING LAND TITLES § 3, at 4 (1953). 2. See 4 AMERICAN LAW OF PROPERTY § 17.4, at 527-30 (A.J. Casner ed. 1952). 3. Id. at 528. NORTH DAKOTA LAW REVIEW ' mortgagee, for valuable consideration 1 unless recorded before the deed of the purchaser. This Act served as a model for laws in many states to follow. 5 The State of North Dakota was formed out of the Louisiana Purchase and, along with other plains states, was occupied almost exclusively by Indian tribes until past the mid 19th century. The most prominent of these were the tribes of prairie cavalry known as Sioux, and in their own tongue, Dakota. Various territorial dis- tricts purported to include this area but the first effective adminis- tration was the territory of Dakota, established in 1861. Statehood came to North Dakota and South Dakota in 1889,6 and with it the growth of title records. A professional class of abstracters developed and in 1925 North Dakota adopted a comprehensive law regulating them, setting forth duties, rights, fees and a bond requirement for the benefit of those relying upon the abstract. 2. THE RECORDING ACTS One of the major authorities in the field of real estate law has concluded that ". the distinctive features of the American system of recording deeds are . indigenous. ' 7 The purpose of the system developed was to force all title documents onto a public record, replacing the earlier system of conveyance by one in possession and by the ceremony of public enfeoffment. Louisiana is apparently the only state varying from the basic concept of the recording acts and their system of deposit or registry arises from the earlier French statutes and Code Napoleon.8 The common law rule on successive conveyances by the same party of the same interest in land was quite simple, "first in time, first in right." 9 The recording acts of the various states fall into three basic categories: race type, notice type, and notice-race type. Under the "race" statute the first conveyance recorded has priority over any subsequently recorded conveyance. The "notice" statute would hold any unrecorded interest invalid against a sub- sequent bona fide purchaser or encumbrancer without notice. A combination of the two, the "notice-race" statute is used in a ma- jority of the states,10 including North Dakota." Priority here is given to the purchaser or encumbrancer who has taken his interest without notice and recorded it ahead of other instruments.12 4. Id. at 533. 5. Id. 6. 1 R. POWELL, REAL PROPERTY § 92, at 347 (1969). 7. 4 A RICAN LAW or PROPERTY § 17.5, at 535 (A.J. Casner ed. 1952). 8. Id. § 17.4, at 534. 9. See e.g., 6 R. POWELL, REAL PROPERTY § 912, at 269 (1969). 10. Id. § 913, at 277-78. 11. N.D. CENT. CODE §§ 47-19-41 and -45 (1960). - 12. " . [I]f the prospective buyer finds in the record evidence of a valid title in his EXAMINING THE ABSTRACT OF TITLE In connection with the basic provisions of the recording acts, there are ordinarily requirements to be met before an instrument may properly be recorded. Customarily this includes provisions for acknowledgment or attestation and, in North Dakota, the post office address of the grantee. 13 It has been generally held that instruments not entitled to be recorded or instruments out of the "chain of title" will not give "notice" under the recording acts. 14 This construction creates difficult problems in determining what is the "record" and some states, such as North Dakota, have resolved it by including all instruments that, in fact, are recorded against a tract. 15 3. THE ABSTRACT OF TITLE In various areas of the country, the use and significance of the abstract of title differs. In this region, its coverage and usage are perhaps most extensive. It must be remembered that the vendor of realty is generally under no obligation to prove his title, except as may be required by contract. 16 Custom and the requirements of mortgage financing have dictated the furnishing of abstracts. A few areas of this country may be considered in a pre-abstract stage, where community knowledge as to possession and previous ownership are the major factors relied upon. In other metropolitan and problem title areas there is what might be called a post-abstract stage where purchasers rely upon private certificates of title, Torrens title certificates or title insurance. 17 The greater part of the country still places primary reliance in the abstract of title and attorney's opinion. The abstract should show, in abbreviated form, the source of title and any transfers, claims, liens, encumbrances or other items of record that affect the title.18 Starting with an accurate caption of the real estate to be conveyed or mortgaged, the abstract should conclude with a certificate as to the period and the records covered. vendor, pays value for this title to his vendor in good faith reliance on the record and records his document of title before any other instrument showing an interest in a third party is placed of record, he will in most cases take precisely the interest the record in- dicatesd his vendor possesses whether the record is accurate or not." Crum, F#ve Steps To- wc.r Sounder Record Title, 32 N.D. L. REv. 223 (1956) ; see generally 4 AMERICAN LAW OF PROPERTY § 17.5, at 541 (A.J. Casner ed. 1952) ; 6 R. POWELL, REAL PROPERTY § 913, at 277 (1969). 13. N.D. CENT. CODE § 47-19-05 (1960) ; see generally 6 R. POwE-L, REAL PROPERTY § 914 (1969). 14. Messersmith v. Smith, 60 N.W.2d 276 (N.D. 1953) ; see also J.. Case Co. v. Sax Motor Co., 64 N.D. 757, 256 N.W. 219 (1934) ; R. Patton, The Mechanics of Title Exami- nation, MINN. ST. B. ASS'N, MINN. TITLE STANDARDs Pt. II, at 4 (1964) ; 6 R. POWELL, REAL PROPERTY § 914, at 278 (1969). 15. N.D. CENT. CODE § 47-19-41 (1960) ; N.D. ST. B. Ass'N, TITLE STANDARDS 1.021 (1962). 16. 1 R. PATTON, Trr s § 41, at 129 (2d ed. 1957). 17. Id. at 132. 18. See Exhibit A for example sheet of a North Dakota abstract of title. NORTH DAKOTA LAW REVIEW In North Dakota, the complete abstract would cover records from the following sources: 1. The instruments recorded with the register of deeds, primarily deeds and mortgages, but also miscellaneous items such as the new security interests in fixtures under the Uniform Commercial Code, and federal tax liens.19 2. Records from the offices of the county auditor and 2 0 treasurer relating to taxes attaching to the premises. 3. The Clerk of the District Court's record of judgments 21 and mechanic's liens.