Hemlani v Nelson [2000] GUSC 20; 2000 Guam 20 (9 June 2000)

IN THE SUPREME COURT OF GUAM

KISHORE HEMLANI and GURVINDER SINGH SOBTI
Plaintiffs-Appellants

vs.

THEODORE S. NELSON, GLORIA B.L. NELSON,
GLENN R. NELSON, RHONDA T. NELSON, GWENDOLYN M. TAIMANGLO and THEODORE D. NELSON
Defendants-Appellees

OPINION

Filed: June 9, 2000

Supreme Court Case No. CVA99-032
Superior Court Case No. CV1721-94

Cite as: 2000 Guam 20

Appeal from the Superior Court of Guam
Argued and submitted on March 8, 2000
Hagåtña, Guam

Appearing for the Plaintiffs-Appellants: Wilfred R. Mann, Esq. Berman, O'Connor & Mann 111 Chalan Santo Papa Hagåtña, Guam 96910

Appearing for the Defendants-Appellees: Cesar C. Cabot, Esq. Law Offices of Cesar C. Cabot, P.C. BankPacific Bldg., 2nd Flr. 825 S. Marine Drive Tamuning, Guam 96911

BEFORE: BENJAMIN J.F. CRUZ, Chief Justice, PETER C. SIGUENZA, JR., Associate Justice, and JUNE S. MAIR, Justice Pro Tempore

MAIR, J.:

[1] Plaintiffs-Appellants Kishore Hemlani and Gurvinder Singh Sobti appeal the trial court's judgment in favor of Defendants-Appellees Theodore S. Nelson, Gloria B.L. Nelson, Glenn R. Nelson, Rhonda T. Nelson, Gwendolyn M. Taimanglo and Theodore D. Nelson. For reasons which follow, the trial court's judgment is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND

[2] In this case we decide whether lessors of real property breach the covenant of seisin when, prior to signing the lease, one of the lessors acquires the undivided fee simple interest of a party who did not join in the lease.

[3] Plaintiffs-Appellants (collectively AHemlani@) desired to incorporate a certain parcel in Hagåtña, Guam into a development they had been contemplating. Hemlani approached Defendants-Appellees (hereinafter ANelsons@), and on or about August 31, 1992, the parties signed a ninety-nine year lease, which Hemlani drafted, for Lot 1419, Hagåtña. The Nelsons were to receive $1,200 per month, with the first sixty months, or $72,000, paid in advance. Paragraph 4 of the lease provided:

Title. Lessor warrants that it is lawfully seized of the above described real property in fee simple; that the same is free and clear of all encumbrances excepting those of record; and that it has good right to lease said property.

Hemlani included a reference to Certificate of Title No. 90588 in the lease's description of the property. This Certificate of Title indicated that both Defendants-Appellees and Margaret Nelson Hill held undivided interests in the property.

[4] Ms. Hill was not a signatory on the lease. She had passed away in Louisiana on May 30, 1991. She died intestate, leaving four heirs, James D. Hill, Sr., William Peter Hill, Betty H. McNeely, and Elena Florence Thomley. The heirs quitclaimed their interests to Theodore S. (ATed@) Nelson, who recorded the quitclaim deeds. To clear title to Lot 1419, Ted petitioned for probate of Ms. Hill's interest at the Superior Court on October 19, 1994. On July 6, 1996, over four years after Hemlani and the Nelsons signed the lease for Lot 1419, Ms. Hill's interest was probated solely to Ted. Hemlani did not include the heirs in the lease of Lot 1419 when he drafted the lease agreement, and they were not party to it.

[5] Hemlani was unable to develop the property, allegedly because banks had refused financing when they discovered Ms. Hill's interest on the Certificate of Title. The alleged defect in title caused Hemlani to file a complaint for breach of contract and breach of warranty of title on or about November 23, 1994. Bench trial yielded judgment for the Nelsons on both causes of action. Hemlani v. Nelson, CV1721-94 (Super. Ct. Guam Feb. 22, 1999).

[6] Hemlani appeals the judgment, asserting that it was error for the trial court to find that there was no breach of the lease agreement's warranty provisions. Hemlani argues that Ms. Hill's undivided interest was a not a mere encumbrance of record, which under the lease agreement, is an exception to the lessor's warranty against encumbrances. Instead, Hemlani contends that Ms. Hill's interest was a defect in record title causing a breach of covenant of seisin. We agree with Hemlani that Ms. Hill's undivided interest in Lot 1419 is not a mere encumbrance of record. However, we do not agree that Ms. Hill's interest constituted a breach of the covenant of seisin. Accordingly, the judgment of the trial court is affirmed.

II. ANALYSIS

[7] We have jurisdiction over the appeal of a final judgment of the Superior Court under Title 7 GCA, '' 3107 and 3108.

[8] A trial court's application of law is reviewed de novo. Coffey v. Gov't of Guam, 1997 Guam 14, & 6. A trial court's findings of fact shall not be set aside unless such findings are clearly erroneous. Yang v. Hong, 1998 Guam 9, & 4.

A. Ms. Hill's undivided interest in Lot 1419 was not an encumbrance of record

[9] Under its application of law, the trial court concluded that Ms. Hill's undivided interest, as designated on the Certificate of Title, was an encumbrance of record on Lot 1419. This conclusion led to the court's finding that Ms. Hill's interest did not constitute a breach of the lease agreement. We disagree.

[10] The parties failed to provide the court with a copy of the Certificate of Title for Lot 1419.[1] Nevertheless, it is undisputed that Ms. Hill had an interest designated on the Certificate of Title, and we begin our analysis by analyzing that interest.

[11] Under Guam law, ownership of real property by several persons is as joint tenant, tenant in common, partnership interest, or community property interest. Title 21 GCA ' 1214, (1993). Under Guam's Land Title Registration Law, A[i]n all cases where two (2) or more persons are entitled as tenants in common to an estate in registered land, such persons may receive one certificate for the entirety, or each may receive a separate certificate for his undivided share.@ Title 21 GCA ' 29126, (1994). As Ms. Hill's interest was designated with the other owners of Lot 1419 on the Certificate of Title, we can conclude that her interest was an undivided interest as a tenant in common in Lot 1419.

[12] Having concluded that Ms. Hill held an undivided interest as tenant in common, we must next determine the estate she possessed. The Land Title Registration Law provides: