Bulletin: OR000015

Dear Associates:

The Oregon Court of Appeals has ruled that an "Assignment for Security Purposes" of a purchaser's interest in a land sale contract survives a deed given in fulfillment of the contract and becomes a lien on the fee title. Crane v. Mitchell, 106 Or. App. 52, 806 P.2d 698 (1991).

In this case a purchaser of a land sale contract secured indebtedness to a third party with a recorded Assignment for Security Purposes. The contract was later paid off with the proceeds of a DVA loan with a deed recorded to the purchaser and a mortgage to DVA. The DVA took the position that the Assignment became unenforceable when the contract was fulfilled.

The Court of Appeals disagreed and decided that the Assignment attached not only to the contract but also to the purchaser's interest in the land. That interest had now become fee title.

The moral here is to not eliminate security assignments by purchasers or real estate contracts when those contracts are fulfilled. Conversely, you should not eliminate security assignments by sellers when their contracts are extinguished through foreclosures or deed in lieu.