District Court must address whether contract merged into deed

In general, a contract to convey land merges into the deed that is executed in order to convey the land, and the deed then controls over the contract for any matter on which the deed and contract conflict.  Thus, where a purchase agreement merges with the deed, the remedies of the purchase agreement do not survive the merger.  There are some exceptions to this rule, such as if the deed is ambiguous, if a party alleges a mistake in the deed and seeks reformation, or if the contract contains collateral agreements that are not incorporated into the deed, but are consistent with the deed.

If a party claims that the contract has not merged into the deed, that party has the burden to prove that merger was not intended.  And, according to a recent opinion by the Iowa Court of Appeals, once the issue of merger has been raised, the trial court must specifically address whether merger occurred; it is not enough to simply apply the terms of the real estate contract.

In Krummen v. Winger, No. 15-1044 (Iowa Ct. App. Sep. 28, 2016), purchasers under a real estate purchase agreement filed suit for a breach of the purchase agreement, requesting termination of the contract.  Under the terms of the contract, the remedy for breach was termination.  The purchasers filed a motion for summary judgment, which the district court granted, concluding that termination of the contract was an appropriate remedy.

The district court ruling, however, did not address how the termination and remedy provisions of the contract had survived the issuance of the deed.  Thus, the Court of Appeals held that the district court improperly granted summary judgment to the purchasers, because the purchasers had not carried their burden of demonstrating how the contract terms survived the issuance of the warranty deed.  The Court of Appeals reversed and remanded to the trial court for further proceedings.

Krummen is instructive to real estate purchasers relying upon real estate contracts after issuance of a deed:  make sure that both your arguments and the district court opinion clearly address merger, in order to avoid prolonged proceedings after an appeal.

For further information regarding real estate litigation, contact Mollie Pawlosky.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Mollie Pawlosky