Also known as: collateral security · collateral · security
Written by attorneys · grounded in primary & secondary sources — see below
An agreement or promise independent of the primary conveyance of property. Such collateral securities survive merger into the deed when the parties intend them to remain separate from the transfer of title.
Charles Cunningham sold land to Colin Chambers under a contract requiring Cunningham to repair the barn within sixty days after closing. The deed contained no mention of the repair duty. After closing Chambers discovered the barn remained unrepaired and sued on the contract. The court held the repair promise constituted a collateral security that the parties intended to keep separate from the conveyance, so the claim survived merger.
Catherine Carter retained Curtis Cannon as counsel in a contract dispute. Cannon proposed taking a mortgage on Carter's commercial building as payment for fees. The arrangement required full written disclosure of terms, advice that Carter consult independent counsel, and Carter's informed written consent. Because those steps were completed the collateral security satisfied the applicable professional conduct standards.
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Caitlin Crowley walked onto Cedar Creek Farms' fenced pasture to photograph wildlife despite posted no-trespassing signs. The owner sued for trespass. The court imposed liability even though Crowley caused no physical damage because intentional entry onto land in the possession of another supports a trespass claim regardless of harm.
Christine Castro executed an irrevocable deed transferring her vacation cabin to her niece. At the time Castro understood the gift would leave her without that asset for future medical expenses. The court upheld the transfer after finding Castro possessed both the capacity required for a will and the additional understanding of the gift's effect on her financial security.
Crown Pharmaceuticals employee Cobalt Energy received notice that her Social Security disability benefits would end. She submitted a written response with medical records but received no pre-termination hearing. The court held that written notice and an opportunity to respond in writing, followed by a later evidentiary hearing with retroactive relief if successful, satisfied due process under the balancing test.
Citadel Security sought a preliminary injunction to stop a former employee from using trade secrets. The court required the company to post a bond in an amount sufficient to cover any costs and damages the employee would sustain if later found to have been wrongfully enjoined. The injunction issued only after the bond was approved.
A promise survives merger when it is independent of the conveyance and the parties did not intend it to merge. Courts examine the nature of the promise and the parties' intent to decide whether it constitutes a collateral security that remains enforceable after closing.
Merger discharges contractual promises not embodied in the deed, making the deed the sole measure of the grantor's obligations. Collateral securities that are independent of the transfer are an exception and may still be enforced.
Courts look to the parties' intent and the nature of the promise. Promises to build a fence or restrict use of adjacent land are typically treated as collateral securities because they are separate from the conveyance itself.
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