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Gannaways v. Torres

Supreme Court of North Dakota

December 7, 2017

Robert and Teryl Gannaway, Plaintiffs and Appellees
v.
Nadir Torres and Terra Nova Developments, LLC, an involuntarily dissolved North Dakota Limited Liability company, LND 10, LLC, a Minnesota Limited Liability Company, and all other persons unknown claiming any interest in, or lien or encumbrance upon, the property described in the complaint, Defendants and William and Karen Schneider, Defendants and Appellants

         Appeal from the District Court of Williams County, Northwest Judicial District, the Honorable Joshua B. Rustad, Judge. AFFIRMED.

          Michael L. Forman, Southlake, TX, for plaintiffs and appellees.

          Randall J. Bakke (argued), Shawn A. Grinolds (on brief), and Wade A. Davison (on brief), Bismarck, ND, for defendants and appellants William and Karen Schneider.

          OPINION

          Jensen, Justice.

         [¶ 1] William and Karen Schneider appeal from a judgment entered by the district court, determining Robert and Teryl Gannaway were entitled to quiet title, free and clear of the Schneiders' mortgage. We affirm the district court's judgment quieting title in the Gannaways and determining the Schneiders were not good-faith purchasers for value without notice.

         I

         [¶ 2] Robert and Teryl Gannaway filed a complaint on June 3, 2015 against Nadir Torres, Terra Nova Developments, LLC ("Terra Nova"), William and Karen Schneider, and any other encumbrancers of their property. The Gannaways sought to quiet title to the property after it was fraudulently conveyed, and the Schneiders secured a mortgage on the property.

         [¶ 3] In May 2014, the Gannaways signed a real estate purchase and sale contract, which provided for a conveyance of their property to Terra Nova for a purchase price of $15, 360, 000. The Gannaways also signed a document Torres represented to be a "notary page to the purchase agreement" at the Farm Credit Services office. Nadir Torres told the Gannaways "he needed it notarized for whoever the people were that he was working with, to show them that--you know, that [Robert Gannaway] had actually signed it." After the Gannaways had the additional page notarized, Torres and the Gannaways went to the courthouse to record the sale contract. Torres went into the recorder's office alone, told Robert Gannaway the filing was completed, and they left the courthouse.

         [¶ 4] Robert Gannaway noted that after they had the separate document notarized, Torres was looking at the documents and said he believed he could make them work. Robert Gannaway thought it was an odd statement to make about the sale contract, but did not inquire further. When Robert Gannaway requested a copy of the signed documents, Torres sent the signed page to the sale contract in a text message to Robert Gannaway and the notarized page to a third party. At trial, an additional signed two-page land agreement providing for the conveyance of a portion of the Gannaways' property to Nadir Torres was admitted as evidence. However, Robert Gannaway testified he never signed that document and believed the signatures were cut and pasted onto the two-page land agreement.

         [¶ 5] On August 18, 2014, Torres recorded the quitclaim deed conveying the property to himself from the Gannaways. On October 23, 2014, Torres recorded a separate quitclaim deed conveying the property from himself individually to Terra Nova. In connection with the quitclaim deed to Terra Nova, Torres also signed and recorded an affidavit of the Gannaways' marital status.

         [¶ 6] Robert Gannaway testified he believed Torres removed a portion of a signature page from a different document and pasted it onto the quitclaim deed. When the Gannaways signed the sale contract on May 22, 2014, Torres did not mention anything about a quitclaim deed to the Gannaways. Robert Gannaway said the front page to the quitclaim deed was not attached to the notarized page when he signed it. He also testified that he never signed a deed in connection with the transaction. Teryl Gannaway, Robert Gannaway's wife, testified that when she signed the notarized signature page, it was not attached to a quitclaim deed. Additionally, the sale contract provided for a conveyance from the Gannaways to Terra Nova, not to Torres. The Gannaways became aware of this quitclaim deed only after their son discovered the deed by chance while doing other title work at the end of 2014 or early 2015.

         [¶ 7] After signing the sale contract, Robert Gannaway met with Torres and gave him the abstracts for the property so they would be updated for closing, but the closing date was never set and the Gannaways were never contacted by a title company. Additionally, the Gannaways never received the $250, 000 earnest money from Terra Nova or Torres specified in the sale contract. The Gannaways believed the deal with Terra Nova and Torres was no longer moving forward.

         [¶ 8] Paul Heinle, of Bismarck Title Company, testified Torres wanted him to handle the title work and closing on the disputed property in the summer of 2014. Heinle noted the following details of the transaction with Torres seemed peculiar: (1) Terra Nova was the named purchaser in the sale contract, but the quitclaim deed showed the grant was to Torres personally; (2) the quitclaim deed included a notation that it was prepared by Bismarck Title Company, but no one in that office prepared the deed; (3) the lender was to be determined; (4) the affidavit of marital status was self-serving on Torres' part; (5) the transaction was abnormal because this was a fifteen million dollar deal with a pre-signed quitclaim deed; and (6) Torres represented the transaction was exempt from filing a consideration statement under N.D.C.C. § 11-18-02.2(6)(c), now codified at N.D.C.C.§ 11-18-02.2(7)(c), which is for transferring property between family or corporate affiliates. Heinle noted that a deal of this size would normally be handled through a warranty deed executed at the time of closing.

         [¶ 9] When Heinle asked Torres about the quitclaim deed, Torres said he ...


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