Extinguishing an Easement by Correcting the Record

The Amethyst Land Company, Inc. (“Amethyst”) purchased a 22-acre parcel of land in the Santa Fe foothills via quitclaim deed from a development corporation, Desert Sunrise, which had itself two years earlier bought the parcel from Keith McDuffee.  McDuffee was selling parcels of land in the area before he filed bankruptcy. About 2 years earlier he was selling a smaller, adjacent plot of land to the Terhune family. They refused to go forward with the sale unless an easement, which burdened the property which they were buying, was terminated. McDuffee agreed to terminate the easement and executed an Extinguishment Agreement to effectuate that termination.

But the Extinguishment Agreement, signed on March 5, 2001, was not recorded until April 30, 2001. Five days earlier Desert Sunrise bought the 22-acre parcel from McDuffee. Desert Sunrise had no constructive notice of the Extinguishment Agreement because it had not been recorded as required by NMSA 1978, §§ 14-9-1 to -9. Accordingly the easement was still valid as to Desert Sunrise. The easement in question – a right of way for utilities- however, did benefit the adjacent 22-acre parcel. But by the time Amethyst bought the parcel from Desert Sunrise, Amethyst did have notice of the fact the easement was extinguished. In fact, the lawyer who owns Amethyst filed a corrected deed which incorporated the Extinguished Agreement in to the transaction evidenced by the quitclaim deed.

Three years later Amethyst brought a quiet title action against the Terhunes because they had placed a chain-link fence across the easement prohibiting Amethyst from accessing its land. The District Court which heard the case agreed with the Terhunes that the Extinguishment Agreement was effective in terminating the easement which would have benefitted the land now owned by Amethyst. Upon review, the Court of Appeals reversed that decision but the Terhunes appealed that ruling to New Mexico’s Supreme Court. The state’s highest court in Amethyst Land, Inc. v. Terhune, No. 34,083. (S. Ct. NM 2014) then found that the fact that the unrecorded Extinguishment Agreement could not be used against Desert Sunrise – because the Agreement had not been recorded before Desert Sunrise bought the property from McDuffee – does not mean the Agreement was void or invalid. It only meant Desert Sunrise could not be bound by it. But, as it was recorded prior to the date of purchase by Amethyst, that subsequent purchaser was subject to the agreement and therefore, could not benefit from the former easement on its parcel.

Mr. Giddens and the other attorneys at Giddens & Gatton Law, PC have experience advising New Mexico businesses and property owners regarding local, state and federal real estate  matters. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information.