Haik v. Sandy City

The Utah Supreme Court recently issued its opinion in the case of Haik v. Sandy City. The case centered on a title dispute to a water right. As the court noted in the first line of the opinion, the case illustrates the importance of promptly recording a deed for a water right.

In 1977, Saunders-Sweeney Inc. and Sandy City entered into an "Agreement of Sale," under which Saunders-Sweeney agreed to sell a water right to the City. The City recorded the Agreement of Sale with the Salt Lake County Recorder. Shortly thereafter, the City received a quitclaim deed for the water right from Saunders-Sweeney, but the City did not record the deed.

In 1978, Saunders-Sweeney conveyed the property to which the water right was appurtenant to Judith Saunders. Several years later, the property was conveyed to Lynn Biddulph. In 1999, Saunders-Sweeney also quitclaimed the water right to Ms. Biddulph. Shortly thereafter, Ms. Biddulph filed a change application on the water right. The City protested the change application, but did not claim ownership of the water right. In 2003, Ms. Biddulph conveyed the water right to LWC LLC. Later that same year, LWC LLC conveyed the water right to Kevin Tolton, who then conveyed the water right to the Haik parties. All of the deeds in this chain of title were properly recorded with the Salt Lake County Recorder.

In 2004, the Haik parties filed a change application. In preparing a protest of the change application, the City conducted research and discovered the unrecorded deed from 1977. The deed was finally recorded in April 2004. The City then sought to update title with the Division of Water Rights, but the City's request was denied.

The Haik parties filed an action to quiet title to the water right. The district court ruled that the Haik parties were the legal owners of the water right. The City filed an appeal with the Utah Supreme Court.

The Supreme Court began its analysis by noting that Utah is a race-notice jurisdiction, meaning that a subsequent purchaser for value prevails over a previous purchaser if the subsequent purchaser (1) takes title in good faith and (2) records before the previous purchaser. There was no question that the Haik parties recorded their deed before the City, so Court's analysis focused on whether the Haik parties took title in good faith, i.e., whether the Haik parties had actual or constructive notice of the City's prior, unrecorded interest.

The City contended that the 1977 Agreement of Sale imparted constructive record notice of a conveyance of the water right to the City. The Haik parties, on the other hand, argued that the Agreement of Sale did not provide record notice because it was impossible to know whether the sale was actually finalized and whether a deed was delivered to the City.

In the end, the Court sided with the Haik parties. The Court concluded that the Agreement of Sale did not subvert the Haik parties' claim of having purchased the water right in good faith because (1) the Haik parties reasonably believed they had a clear chain of title to the water right; (2) the City failed to record its deed for nearly 27 years after receiving the deed; (3) the Haik parties' predecessors-in-interest had maintained the water right and filed a change application on the water right in 1999; and (4) the City failed to contest ownership when it protested the 1999 change application. Thus, the Supreme Court upheld the district court's judgment that the Haik parties are the legal owners of the water right.

To read the full text of the opinion, click here.