Lohmeyer v. Bower

PARKER, J. This action originated in the district court of Lyon county when plaintiff filed a petition seeking to rescind a contract in which he had agreed to purchase certain real estate on the ground title tendered by the defendants was unmerchantable. The defendants Bower and Bower, husband and wife, answered contesting plaintiff's right to rescind and by cross-petition asked specific performance of the contract. The defendant Newcomer answered, stating he was an escrow agent under terms of the agreement, that he had no interest in the action except in that capacity and that he would abide and be governed by whatever decision was rendered by the court. The case was tried upon the pleadings and stipulated facts by the trial court which rendered judgment for the defendants generally and decreed specific performance of the contract.The plaintiff appeals from that judgment.

The pleadings are of little consequence and can be summarized by brief reference to salient features thereof.

Plaintiff's petition alleges execution of the contract whereby he agreed to purchase Lot 37 in Berkley Hills Addition in the city of Emporia and makes such contract a part of that pleading. It avers that after execution of the agreement it came to his attention that the house on the real estate therein described had been placed there in violation of Section 5-224 of the Ordinances of the city of Emporia in that the house was located within approximately 18 inches of the north line of such lot in violation of the ordinance providing that no frame building should be erected within 3 feet of a side or rear lot line. It further avers that after execution of the agreement it came to plaintiff's knowledge the dedication of the Berkeley Hills Addition requires that only a two story house should be erected on the lot described in the contract whereas the house located thereon is a one story house. It then states the violations of the city ordinance and the dedication restrictions were unknown to the plaintiff when he entered into the contract and that he would not have entered into such agreement if he had known thereof. It next alleges that after becoming aware of such violations plaintiff notified the defendants in writing thereof, demanded that he be released from his contract and that defendants refused such demand. Finally it charges that such violations made the title unmerchantable and asks that the agreement be canceled and set aside and that all moneys paid by plaintiff under its terms be refunded. . . .

From what has been heretofore related, since resort to the contract makes it clear appellees agreed to convey the involved property with an abstract of title showing good merchantable title, free and clear of all encumbrances, it becomes apparent the all decisive issue presented by the pleadings and the stipulation is whether such property is subject to encumbrances or other burdens making the title unmerchantable and if so whether they are such as are excepted by the provision of the contract which reads "subject however, to all restrictions and easements of record applying to this property."

Decision of the foregoing issue can be simplified by directing attention early to the appellant's position. Conceding he purchased the property subject to all restrictions of record he makes no complaint of the restrictions contained in the declaration forming a part of the dedication of Berkley Hills Addition nor of the ordinance restricting the building location on the lot but bases his right to rescission of the contract solely upon presently existing violations thereof. This, we may add, limited to restrictions imposed by terms of the ordinance relating to the use of land or the location and character of buildings that may be located thereon, even in the absence of provisions in the contract excepting them, must necessarily be his position for we are convinced, although it must be conceded there are some decisions to the contrary, the rule supported by the better reasoned decisions, indeed if not by the great weight of authority, is that municipal restrictions of such character, existing at the time of the execution of a contract for the sale of real estate, are not such encumbrances or burdens on title as may be availed of by a vendee to avoid his agreement to purchase on the ground they render his title unmerchantable.

On the other hand there can be no question the rule respecting restrictions upon the use of land or the location and type of buildings that may be erected thereon fixed by covenants or other private restrictive agreements, including those contained in the declaration forming a part of the dedication of Berkley Hills Addition, is directly contrary to the one to which we have just referred. Such restrictions, under all the authorities, constitute encumbrances rendering the title to land unmerchantable.

In the instant case assuming the mere existence of the restrictions imposed by the provisions of section 5-224 of the ordinances of the city of Emporia do not constitute an encumbrance or burden and that the dedication restrictions fall within the exception clause of the contract providing Lot 37 was to be conveyed subject to all restrictions and easements of record applying thereto there still remains the question whether, under the stipulated facts, the restrictions imposed by such ordinance and/or the dedication declaration have been violated and if so whether those violations make the title to such property unmerchantable.

As we turn to the stipulation of facts upon which our decision as to whether the record discloses violations of the dedication declaration or the ordinance must depend we shall first dispose of contentions advanced by appellees regarding the construction to be given that instrument.

[Court reviews appellees’s arguments]

With contentions advanced by appellees with respect to the force and effect to be given certain portions of the stipulation disposed of it can now be stated we are convinced a fair construction of its terms compels the conclusion that on the date of the execution of the contract the house on the real estate in controversy was a one story frame dwelling which had been moved there in violation of section 2 of the dedication restrictions providing that any residence erected on Lot 37 should be of the height of a two story residence and that it had been placed within 18 inches of the side or rear lot line of such lot in violation of section 5-224, supra, prohibiting the erection of such building within three feet of such line.

There can be no doubt regarding what constitutes a marketable or merchantable title in this jurisdiction. This court has been called on to pass upon that question on numerous occasions. See our recent decision in Peatling v. Baird and cases there cited, wherein we held:

"A marketable title to real estate is one which is free from reasonable doubt, and a title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation.

"To render the title to real estate unmarketable, the defect of which the purchaser complains must be of a substantial character and one from which he may suffer injury. Mere immaterial defects which do not diminish in quantity, quality or value the property contracted for, constitute no ground upon which the purchaser may reject the title. Facts must be known at the time which fairly raise a reasonable doubt as to the title; a mere possibility or conjecture that such a state of facts may be developed at some future time is not sufficient."

Under the rule just stated, and in the face of facts such as are here involved, we have little difficulty in concluding that the violation of section 5-224 of the ordinances of the city of Emporia as well as the violation of the restrictions imposed by the dedication declaration so encumber the title to Lot 37 as to expose the party holding it to the hazard of litigation and make such title doubtful and unmarketable. It follows, since, as we have indicated, the appellees had contracted to convey such real estate to appellant by warranty deed with an abstract of title showing good merchantable title, free and clear of all encumbrances, that they cannot convey the title contracted for and that the trial court should have rendered judgment rescinding the contract. This, we may add is so, notwithstanding the contract provides the conveyance was to be made subject to all restrictions and easements of record for, as we have seen, it is the violation of the restrictions imposed by both the ordinance and the dedication declaration, not the existence of those restrictions, that renders the title unmarketable. The decision just announced is not without precedent or unsupported by sound authority.

In Moyer v. DeVincentis, involving facts, circumstances, and issues almost identical to those here involved, so far as violation of the ordinance is concerned, the plaintiff (vendee) sued to recover money advanced on the purchase price pursuant to the agreement on the ground that violation of a zoning ordinance had made title to the property involved under its terms unmarketable. The court upheld the plaintiff's position and in the opinion said:

"We are of the opinion that a proper construction of the agreement of sale supports the position of appellant, the vendee in the agreement. The vendor agreed to furnish a good and marketable title free from liens and incumbrances, excepting existing restrictions and easements, if any. As applied to the facts of the case in hand, vendee agreed to purchase the premises subject to the zoning ordinance, but not to purchase the premises, when the house was built in violation of the terms of that ordinance.

"The facts lend weight to the force of this construction. It appears from the pleadings that the premises to be conveyed embraced not only the bare land, but an entire parcel of real estate which included a semidetached dwelling. The description is not by metes and bounds but by house number. The vendee could not take possession without immediately becoming a violator of the law and subject to suit, with a penalty of $ 25 for every day the building remained in position overlapping the protected area.

"The title was not marketable, not because of an existing zoning ordinance, but because a building had been constructed upon the lot in violation of that ordinance. . . ."

With respect to covenants and restrictions similar to those involved in the dedication declaration, notwithstanding the agreement -- as here -- excepted restrictions of record, see Chesebro v. Moers, holding that the violation by a property owner of covenants restricting the distance from front and rear lines within which buildings may be placed renders the title to such property unmarketable.

See, also, Hebb v. Severson, which holds, that where a contract provided that building and use restrictions general to the district should not be deemed restrictions, the purchaser's knowledge of such restriction did not estop him from rescinding the contract of purchase on subsequent discovery that the position of the house on the lot involved violated such restrictions. At page 172 of the opinion in that case it is said:

"Finally, the fact that the contract contains a provision that protective restrictions shall not be deemed encumbrances cannot aid the respondents. It is not the existence of protective restrictions, as shown by the record, that constitutes the encumbrances alleged by the appellants; but, rather, it is the presently existing violation of one of these restrictions that constitutes such encumbrances, in and of itself. The authorities so hold, on the rationale, to which we subscribe, that to force a vendee to accept property which in its present state violates a building restriction without a showing that the restriction is unenforcible, would in effect compel the vendee to buy a lawsuit.

Finally appellees point to the contract which, it must be conceded, provides they shall have time to correct imperfections in the title and contend that even if it be held the restrictions and the ordinance have been violated they are entitled to time in which to correct those imperfections. Assuming, without deciding, they might remedy the violation of the ordinance by buying additional ground the short and simple answer to their contention with respect to the violation of the restrictions imposed by the dedication declaration is that any changes in the house would compel the purchaser to take something that he did not contract to buy.

Conclusions heretofore announced require reversal of the judgment with directions to the trial court to cancel and set aside the contract and render such judgment as may be equitable and proper under the issues raised by the pleadings.

It is so ordered.