Iowa Supreme Court Rules on Recovery of Damages from Real Estate Sale
In an opinion released by the Iowa Supreme Court today, the Court found that a suit for breach on a covenant of title requires that the coventor be giving notice of the underlying claim before they are obligated to pay. In this case, Gaede's purchased land from Stansberry. After the sale was completed and the Gaede's took possession, the city approached the new owners, Gaede, and claimed that part of the property they purchased was actually a city street and they needed to "get off" the city property. A "quiet title" action ensued (quiet title is where a party attempts to establish the true owner of the land) and the Gaedes lost the battle. Unfortuantely, the Gaedes spent nearly $24,000 for a property valued at about one-half that figure.
After their loss, the Gaedes went to the seller, Stansberry, and asserted that as Stansberry had given them a warranty deed, they should stand behind their warranty and make the Gaedes whole and compensate them for their damages. Stansberry was not given notice of the proceedings by the city. As a result of that failure to be given notice of those prior proceedings and to defend title in that trial, the Iowa Supreme Court ruled that before a party is liable for the cost, they must be given notice of the challenge and have the opportunity to defend the title.
