By Catrina C. Waltz, James L. Windsor, Real Estate Claims & Title Insurance Solutions

Yesterday, the Court of Appeals of Virginia held where a plaintiff alleges its property is merely in the possession of a third party under a paramount title, it is insufficient to plead actual or constructive eviction, an element necessary for the plaintiff’s breach of general warranty claim, without an allegation that the third party actually asserted its paramount title. In Watan Holdings, LLC v Violet Blankenship, et al., Record No. 0136-23-3 (Ct. App. Va. Nov. 8, 2023), the Court affirmed a ruling from the Circuit Court of the City of Lynchburg sustaining a demurrer for failure to state facts showing an assertion of paramount title by a third party.

In 2016, Watan was conveyed commercial property from the Blankenships by a general warranty deed. Following the purchase, Watan became aware of certain title defects in that the deed purported to convey parts of the property the Blankenships did not own. Watan alleged that parts of the building, its appurtenances, and parking spaces of the property were owned by the Norfolk and Southern Railway Company and a retaining wall on the property appeared to be owned by Virginia Eagle. Watan also alleged it could not repair its building and parking lot due to the title defects, and because of its inability to repair the property, tenants withheld rent and Watan could not secure new tenants. Based on these circumstances and the City’s rezoning denial of Watan’s property because of the title defects, Watan asserted it was constructively and actually evicted from the property based on the Blankenships’ actions.

The Blankenships demurred to Watan’s breach of warranty claim, arguing Watan did not plead sufficient facts to constitute actual or constructive eviction because Watan did not allege a third party asserted paramount title over any part of the property and that such an assertion resulted in an ouster. The circuit court sustained the Blankenships’ demurrer, dismissing the case with prejudice. On appeal, the Court of Appeals affirmed the holding.

After finding Watan properly preserved its arguments for appeal, the Court noted a claimant must plead that an actual or constructive eviction has occurred to allege an action for breach of a covenant of warranty. With respect to actual eviction, Watan’s complaint only alleged that “[a]n actual eviction occurred” because “the property was in the actual possession of a third party under a paramount title at the date of the conveyance.” The Court held this bare allegation was a conclusion of law and not sufficient to allege actual eviction because Watan did not claim that any “adversary dispossession” or “compulsory yielding” of possession occurred. The Court found, at most, Watan alleged that it abstained from entering the disputed portions of the property on its own volition due to concerns that the entry would be a trespass. 

The Court also held Watan did not sufficiently plead constructive eviction. Watan conceded that Norfolk Southern and Virginia Eagle had never asserted a paramount title over any part of the property and failed to allege that the third parties are even aware of the title defect. The Court found that Watan’s mere allegation that the third parties had paramount title, without ever having asserted the paramount title, cannot amount to constructive eviction.

Lastly, the Court distinguished a case on which Watan relied by finding that Watan did not allege that Norfolk Southern and Virginia Eagle ever kept Watan from possessing the property. “It is fundamental that an eviction of any kind requires some disturbance of possession.” The Court found the only exception to this principle is when a plaintiff is compelled to purchase the paramount title in order to avoid an ouster or disturbance, which Watan also did not allege. Therefore, because Watan did not allege that it was hindered from entering and enjoying its property because of the title defect, the Court held Watan did not sufficiently plead facts to constitute either an actual or constructive eviction and, accordingly, could not maintain an action for breach of warranty.

This opinion provides clarity that assertion of a paramount title by a third party is required to plead eviction sufficient to allege a claim of breach of a covenant of warranty. If you have any questions regarding this opinion, or title and real property questions in general, please contact Jim Windsor at (757) 873.6308 or jlwindsor@kaufcan.com, or Catrina Waltz at (804) 771.5744 or ccwaltz​@​kaufcan.com.

The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.