Bethurem v. Hammett

• Decision Date: 15 May 1987
• Docket Number: No. 86-200,86-200
• Citation: 736 P.2d 1128
• Parties: Donald E. BETHUREM and Colleen Bethurem, Appellants (Plaintiffs), v. Edward L. HAMMETT and Elsie Mae K. Hammett, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 1128

736 P.2d 1128

Donald E. BETHUREM and Colleen Bethurem, Appellants (Plaintiffs), v. Edward L. HAMMETT and Elsie Mae K. Hammett, Appellees (Defendants).

No. 86-200.

Supreme Court of Wyoming.

May 15, 1987.

Robert W. Brown of Lonabaugh and Riggs, Sheridan, for appellants.

Robert E. Holstedt of Holstedt Law Offices, P.C., Sheridan, for appellees.

Before THOMAS, CARDINE, URBIGKIT and MACY, JJ., and GRANT, District Judge.

URBIGKIT, Justice.

Buyers sued, raising breach-of-warranty issues, to rescind the purchase of a residence because the lot and structures encroached into the dedicated street. Sellers won in trial-court decision, and Buyers appeal by presented issues of contractual warranties of title merchantability and parol-evidence admissibility.

FACTS

In 1983, appellants, the Bethurems (Buyers), contracted to purchase a residence in Sheridan, Wyoming from appellees, the Hammetts (Sellers). In exchange for the realty, Buyers made a cash down payment and agreed to monthly installment payments for the purchase-price balance. In 1985, a dispute arose from encroachment of the residence structure, the garage and the cemented-in fence into the dedicated city street, as then confirmed by surveys by both parties.

After unsatisfactory negotiations, Buyers sued to rescind the sales agreement, claiming that Sellers had materially misrepresented "8. Title shall be merchantable in the Seller, except as stated in this paragraph. Subject to payment or tender as above provided and compliance with the other terms and conditions hereunder by Purchaser, the Seller shall execute and deliver a good and sufficient statutory warranty deed in favor of those persons named in Paragraph 7 above, including the release and waiver of all homestead rights, if any, and a good and sufficient bill of sale, and deliver the same to said Purchaser at closing, which shall occur on or before April 29, 1983, conveying said real and personal properties free and clear of all liens and encumbrances, except:

the property in failing to apprise Buyers of known encroachments. At trial, Buyers relied on provisions of the executed Offer, Acceptance & Receipt (Specific Performance Contract), a pre-printed document which stated:

"(a) The general taxes for 1983;

"(b) Liens for special improvements, if any;

"(c) Easements for utilities;

"(d) Subject to building and zoning regulations;

"(e) City, state and county subdivision laws;

"(f) Reservations, restrictions and easements of record, if any; and

"(g)

"9. Any encumbrance required to be paid shall be paid by closing agent at the time of closing from the proceeds of this transaction.

"10. The Seller covenants that upon execution of this Contract:

"(a) The above-described property is in substantial compliance with applicable city, county and state subdivision laws, requirements and regulations in force and effect as of that date,

"(b) There are no known defects, EXCEPT:

"(1) Those which are readily visible upon inspection;

""

Executed documentation in the case includes the standard Offer, Acceptance & Receipt form (a 1979 Wyoming Association of Realtors model instrument), a typed sales agreement, and an executed warranty deed. The warranty deed is not in evidence, so that possible exceptions to its general warranty provisions cannot be determined. The typed sales agreement, which also included a nonpayment provision, in part provided:

"IV

"Sellers shall, at their expense, furnish Buyers with an Abstract or Title or Commitment for Title Insurance covering the above described premises. Said Abstract of Title or Commitment for Title Insurance shall be of recent date and shall show good merchantable title in Edward L. Hammett and Elsie Mae K. Hammett, husband and wife, free and clear of all encumbrances. Buyers shall have ten (10) days within which to cause said Abstract or Commitment to be examined by an Attorney of their choice. Any defects in title shall be forthwith corrected by Sellers."

Contrary to the covenant in Paragraph 10(a) of the standard Offer, Acceptance & Receipt that the property was in substantial compliance with all applicable city, county, and state subdivision laws, requirements and regulations, those street line encroachments also violated Section 23-22 of the Sheridan City Code, which provides that

"[n]o person shall erect, build, set up or maintain in whole or in part any fence, sign, shop, post, building or obstruction whatsoever in or upon any street, avenue, alley, sidewalk or public ground within the city."

The property was repossessed by Sellers, and is presently in their possession. The trial court judgment gave Buyers a ten-day option to bring the installment payments current in order to regain purchase possession. Apparently that election was not exercised.

CONTENTIONS OF THE PARTIES

Buyers contended that the breach of the sales agreement covenants was a misrepresentation The trial court found generally in favor of the defendants, Sellers, and denied the claim for rescission. The following arguments are now presented:

entitling them to rescission, also asserting that encroachment onto the public street was a defect which renders title unmarketable in violation of Sellers' covenants in Paragraphs 8 and 10 of the standard offer document and Section IV of the typed sales agreement. At trial, the parties took opposite positions regarding Buyers' knowledge of the encroachment. Buyers claimed that Sellers led them to believe that there were no defects, that the transferred realty included all the land and improvements enclosed by the fence, and that the enclosed property was marketable. Sellers contended that they had orally discussed the encroachments and that Buyers assured them that the defect would not pose a problem since they planned to build a house farther back on the property. Appellants objected to the introduction of this oral evidence of preagreement communicated title defect, but the objection was overruled and direct conflict testimony was consequently introduced.

I. Misrepresentation of the boundaries of real property entitles the purchaser to rescind.

II. Encroachment onto the city street is a defect in the premises rendering title unmarketable.

III. Encroachment as contrary to the city ordinance justifies rescission.

IV. Hammetts' alleged oral disclosures of the encroachment problem violate the parol-evidence rule and are inadmissible.

V. Sufficient admissible evidence was produced at trial to entitle Bethurems to be granted rescission.

We reverse.

ENCROACHMENT AS WARRANTY VIOLATION

This court set forth the general rule regarding a seller's misrepresentation of boundaries in Meeker v. Lanham, Wyo., 604 P.2d 556, 559 (1979), stating:

"With regard to the boundary lines, the rule regarding misrepresentations concerning the boundaries of property, is correctly pointed out to us by the appellant:

" 'A purchaser has the right to rely upon the representations of the seller as to the boundaries of the land, and if the seller misrepresents the true boundary of the land, whether innocently or intentionally, it is ground for rescission by the purchaser.' "

From Buyers' contentions we discern their three claims of false representations to have been made by Sellers as covenants in the contractual documents: first, that title was merchantable (marketable); ¹ second, that property was in compliance with the relevant city ordinance; and third, that there were no known defects in title or condition. The representation that there were no defects overlaps with the representation that title was marketable, and consequently our discussion of the two representation claims is combined in first addressing the question whether the encroachments (defects) rendered the title unmarketable.

The Montana Supreme Court has stated:

" 'The term "marketable title" is difficult of definition ... The most practical test is as to whether the title is such that a third person may reasonably raise a question after the time the contract would have been completed. If the conditions of the title warrants such an attack, the purchaser may reject the title as unmarketable.' " McCarthy v. Timberland Resources, Inc., Mont., 712 P.2d 1292, 1294 (1985), quoting from Silfvast Similarly, the uniform rule regarding marketability has been explained in an Oregon decision:

v. Asplund, 93 Mont. 584, 20 P.2d 631, 637 (1933).

"A purchaser is not required to accept title which might reasonably be expected to involve litigation. '[I]f there is doubt and uncertainty about the title sufficient to form the basis for litigation, * * * it cannot be thrown upon the purchaser to contest that doubt * * *.' " Cameron v. Benson, 57 Or.App. 169, 643 P.2d 1360, 1363 (1982), rev'd on other grounds, 295 Or. 98, 664 P.2d 412 (1983), quoting from Wollenberg v. Rose, 45 Or. 615, 78 P. 751 (1904).

See also Medallion Homes, Inc., v. Thermar Investments, Inc., Texas App., 698 S.W.2d 400, (1985); and Glaser v. Minnesota Federal Savings and Loan Association, Minn.App., 389 N.W.2d 763 (1986).

There is also overwhelming authority for the proposition that title is unmarketable where it cannot be readily sold to a reasonably prudent person, familiar with the facts. Wilson v. Fenton, Iowa, 312 N.W.2d 524 (1981); Vazquez v. Davis, La.App., 466 So.2d 671, writ denied 468 So.2d 574 (1985); Madhavan v. Sucher, 105 Mich.App. 284, 306 N.W.2d 481 (1981); Glaser v. Minnesota Federal Savings and Loan Association, supra; Tedco Development Corp. v. Overland Hills, Inc., 200 Neb. 748, 266 N.W.2d 56 (1978); Belrose v. Baker, 121 N.H. 48, 426 A.2d 454 (1981); Brown v. Herman, 75 Wash.2d 816, 454 P.2d 212 (1969).

Whether title to real estate is marketable is a question of law for the court. Wilfong v. W.A. Schickedanz Agency, Inc., 85 Ill.App.3d 333, 40 Ill.Dec. 625, 406 N.E.2d 828, (1980); Myerberg, Sawyer & Rue, P.A. v. Agee, 51 Md.App. 711, 446 A.2d 69 (1982).

In this case, the fence encroached approximately 17 feet into the city...