Failure to include consideration clause in deed: SMITH V. VEST (COA 11/30/2007)

SMITH V. VEST
PROPERTY:  Real estate deed flaws and title 
2006-CA-000864
TO BE PUBLISHED: REVERSING AND REMANDING
PANEL: ACCREE PRESIDING; KELLER, LAMBERT CONCUR
COUNTY: SHELBY
DATE RENDERED: 11/30/2007

The COA reversed summary judgment in favor of the appellee finding that the deed was not void ab initio for failing to satisfy the statutory requirements of KRS 382.135.

James transferred his property by deed to his daughter and her husband.  Several years later he filed suit alleging the property transfer was void ab initio since the deed does not cite any consideration and therefore is void or voidable pursuant to KRS 382.135 and common law principles. The referenced statute requires parties to a deed to include within its body what is commonly referred to as a consideration certificate.  Circuit court granted James’ motion holding that the deed in question did not meet the requirements of KRS 382.135 and was so flawed on its face as to render it void ab initio.

Although failure to conform to KRS. 382.135(1) makes a deed unrecordable, this flaw does not make the document void or legally insufficient so as to divest Lee of title to the property and the deed in question substantially complies with the statute.

In general, recording a deed is ¡necessary only to secure the title against subsequent creditors and purchasers;  deeds are valid between the parties claiming under them, even though they may not be recordable instruments under our statutes.

The statute did not contravene the common law regarding the validity of any deed. As between the grantor and grantee, and third parties with notice, even a complete failure to include the consideration certificate called for in KRS 382.135 will not affect the validity of a deed if that deed contains the fundamental elements necessary to a valid and enforceable deed. The deed will remain unrecordable, however, until it substantially complies with KRS 382.135.

The deed in question is a valid deed since it contains the fundamental elements necessary to a valid and enforceable deed, which are: (1) a grantor and grantee; (2) delivery and acceptance; (3) a divesting of title by grantor and a vesting of title in the grantee. Haynes v. Barker, 239 S.W.2d 996, 997 (Ky. 1951). If each of these elements is present, the deed’s recordability in this case is irrelevant.  The parties would be wise to prepare a deed of correction, consistent with this opinion, indicating that the original grantees were Sandra, Lee and James.

Michael Stevens