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Schwalm v. Deanhardt

Kansas Court of Appeals
906 P.2d 167 (1995)


Facts

Maurice and Ann Schwalm (plaintiffs) sold a rental home they owned to Michael Eddins in the name of a trust. The Schwalms conveyed a quitclaim deed for the property, subject to a mortgage. Eddins recorded the deed but not the mortgage. Eddins then contacted Gary Deanhardt (defendant) about investing in the property. Eddins told Deanhardt that he owned the property and that Deanhardt’s would be the first mortgage. Eddins offered a 20-percent rate of return on Deanhardt’s investment. Deanhardt agreed to invest without conducting any sort of investigation into Eddins or the property. Deanhardt did not conduct a title search and did not enter the property to see who was in possession. Further, at Eddins’s request, Deanhardt paid via a personal check, despite the property being in the name of a trust. Eddins gave Deanhardt a mortgage and then recorded both the Schwalm mortgage and the Deanhardt mortgage. The Deanhardt mortgage was recorded less than one second before the Schwalm mortgage. The Schwalms sued Eddins and won, with the court granting the Schwalms a conveyance of the property. The Schwalms then brought this quiet-title action against Deanhardt. The trial court granted Deanhardt’s motion to dismiss, finding that a reasonable search by Deanhardt would not have uncovered the Schwalms’ interest. The Schwalms appealed.

Rule of Law

Issue

Holding and Reasoning (Elliott, J.)

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