Fort Dodge, D. M. & S. Ry. v. American Community Stores Corp.

• Decision Date: 17 November 1964
• Docket Number: No. 51480,51480
• Parties: FORT DODGE, DES MOINES & SOUTHERN RAILWAY, Appellant, v. AMERICAN COMMUNITY STORES CORPORATION, Tyler B. Gaines, Trustee, Appellee and Cross-Petitioner, v. STATE of Iowa, Third-Party Defendant and Appellee.
• Court: Iowa Supreme Court

Page 515

131 N.W.2d 515

256 Iowa 1344

FORT DODGE, DES MOINES & SOUTHERN RAILWAY, Appellant, v. AMERICAN COMMUNITY STORES CORPORATION, Tyler B. Gaines, Trustee, Appellee and Cross-Petitioner, v. STATE of Iowa, Third-Party Defendant and Appellee.

No. 51480.

Supreme Court of Iowa.

Nov. 17, 1964.

Whitfield, Musgrave, Selvy & Kelly, Des Moines, for appellant.

Connolly, O'Malley & Conley, Des Moines, for appellee and cross-petitioner.

Evan Hultman, Atty. Gen., C. J. Lyman, Sp. Asst. Atty. Gen., James E. Thomson and Henry M. Keyes, State Counsel, for third-party defendant and appellee.

SNELL, Justice.

Plaintiff, vendor, sought specific performance of a contract for sale of real estate. Defendant, American Community Stores Corporation, Tyler B. Gaines, Trustee, vendee, denied merchantability of the title as tendered, brought in the State of Iowa as a third-party defendant and then cross-petitioned against the State seeking a declaratory judgment adjudicating the rights of all parties.

The trial court found that plaintiff's title was not merchantable and denied relief. Plaintiff has appealed.

The property involved is in the business district of Ames. It consists of several lots or parts of lots in Block 2, College Park Addition to City of Ames.

It is north of Lincoln Way, also known as Highway Number 30, south of Second Street, and west of Grand Avenue also known as Highway Number 69.

Plaintiff's title to the several lots was not acquired from a common source. Only part is subject to the objections raised by defendant, but that fact has not been treated by the parties as of any importance. Under the issues defendant is entitled to merchantable title to the entire tract covered by the contract of purchase or denial of specific performance.

The following tracing from a part of a plat introduced into evidence shows the tract proposed to be sold and its location at the intersection of Lincoln Way and Highway Number 69.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

On February 5, 1962 by written contract plaintiff agreed to sell and defendant agreed to buy for the sum of $66,000 the several lots and parts of lots within the heavy outline in the foregoing plat. The lots were specifically described.

The pertinent, part of paragraph 1 of the contract is as follows:

'The party of the first part hereby sells to the party of the second part, and the party of the second part hereby purchases from the party of the first part, free and clear of any and all liens and encumbrances except building restrictions and easements, the following described real estate:'

The legal description of the property sold followed.

Paragraph 3 of the contract provided:

'The Vendor will deliver to the Purchaser an abstract of title to said premises within thirty (30) days after the date of this contract for preliminary examination by the Purchaser, which abstract will show a good and merchantable title to said premises and the Vendor. In the event the Purchaser shall find an imperfection in the title, the Vendor will have a reasonable time to act to correct same.'

The pertinent part of paragraph 8 of the contract provided:

'On obtaining possession of premises, the Purchaser will pay the Vendor $60,000, that amount being the balance of the purchase price and the Vendor will, simultaneously with the payment of $60,000 purchase price, deliver to the Purchaser a duly executed warranty deed, with revenue stamps attached, to the above described real estate, which warranty deed shall convey a good and merchantable title in said premises to the purchaser, free and clear of any and all liens and encumbrances.'

Plaintiff tendered an abstract of title for examination. Defendant objected to the title as unmerchantable. Being unable to satisfy defendant's objections plaintiff sued for specific performance.

Prior to 1937 plaintiff owned a tract of land in Ames bounded by Highway 69 on the east and Highway 30 (Lincoln Way) on the south. The property then owned by plaintiff appears as Lots 11 and 12 on the plat, supra. The small area numbered 13 between Lots 11 and 12 is an alley. The State needed additional land for highway purposes. By negotiation the State purchased the tract west of plaintiff's then owned property and within the heavy outline on the plat. The State then traded this land to plaintiff for land then owned by plaintiff that did adjoin Highways 30 and 69. The land transferred by plaintiff to the State was for improvement of Highways 30 and 69 and to permit the construction of the underpass on Highway Number 69.

The transfer from the State to plaintiff was by two separate deeds, one dated September 29, 1937 and one dated January 31, 1938. The deeds contained no warranty of title but did incorporate the restrictions of section 4755-f3, Code of 1935 now appearing as section 306.18, Code of 1962, I.C.A.

Section 306.18, Code of Iowa, I.C.A. provides:

'Conditions. Any sale of land as herein authorized shall be upon the conditions that the tract, parcel, or piece of land so sold shall not be used in any manner so as to interfere with the use of the highway by the public, or to endanger public safety in the use of the highway, or to the material damage of the adjacent owner.'

Each deed from the State to plaintiff provided:

'Upon condition that neither said premises, nor any part thereof shall be used in any manner as well interfere with the use of the public highways of the State of Iowa by the public, or endanger public safety in the use thereof, or to the material damage of adjacent property.'

Because of these provisions in the deeds defendant rejected the tendered title as not merchantable.

By stipulation it appears the property involved had never been used in connection with or for the improvement, maintenance or use of a highway.

Plaintiff tried to obtain from the State through the highway commission the removal of the restriction or an interpretation to allow construction of a supermarket but without success.

Defendant purchased the real estate for the purpose of building and operating a supermarket thereon consisting of between 15,000 and 19,250 square feet of floor space and a car parking area of about 190 stalls with access to Lincoln Way. It was anticipated that there would be a 6,000 customer car count at the store weekly.

The traffic now in the area of plaintiff's property exceeds the design capacity of the highways. The traffic count is the second highest in the state. It had at time of trial increased from an average of 16,730 vehicles per day in 1955 to 17,095 in 1958, to 19,825 in 1960 and to 22,184 in 1962. In 1955 approximately 4,000 to 4,500 vehicles were considered to be through traffic, not originating in Ames. A sizeable increase in traffic was expected. Much of the great traffic generation in the area was attributed by witnesses to Iowa State University, the Iowa Highway Commission offices nearby, and the general layout of the City of Ames.

The evidence indicated that the use contemplated by defendant would create traffic problems, reduce the capacity of the intersection, increase congestion, add to the traffic accident potential and interfere with the use of the highway and the safety of the traveling public.

I. The trial court found plaintiff's title unmerchantable. Defendant on appeal supports this finding but by bringing in the State as third party defendant apparently hopes that the objectionable restriction will be found invalid or inapplicable to defendant's proposed use of the property Our consideration of the problems in the case is not limited to the order in which they were presented by the separate litigants. The case is in equity and our review do novo.

II. As one of the questions on appeal plaintiff says that section 306.18, Code of Iowa, I.C.A. is unconstitutional. There is no constitutional question before us. No such question was raised in the trial court. Constitutional questions cannot be raised for the first time on appeal. Jacobs v. City of Chariton, 245 Iowa 1378, 1394, 65 N.W.2d 561 and cases cited therein.

III. 'A merchantable title, is recognized and accepted in this state, is one which a reasonably prudent man would accept in the ordinary course of business after being fully apprised of the facts and the law applicable thereto. (Citations) When called upon to determine whether an abstract of title shows a merchantable title, unless the specific objections urged to the title have been definitely determined by the courts, or are so clear as to not generate a doubt, the court need not pass upon the merits thereof. It is sufficient if the court finds the objections urged, present a doubtful question which may submit the objector to good faith litigation regarding same. If so found, then under our acceptable standard of title, the same is not merchantable.' Holliday v. Arthur, 241 Iowa 1193, 1196, 44 N.W.2d 717, 719, 24 A.L.R.2d 1302. See also Tesdell v. Hanes, 248 Iowa 742, 746, 82 N.W.2d 119.

The provisions in the deeds by which plaintiff acquired title constitute restrictions or limitations on the use of the property as distinguished from an affirmative easement. A restriction such as we have here is defined in 57 A.L.R. page 1426 as a limitation upon the manner in which one may use his own land and may or may not involve a grant. Here the restriction was contained in the grant. Plaintiff accepted title subject to the restriction. That it may be a limitation on the use of the property contemplated by defendant is obvious from the issues and evidence in this action.

In 55 Am.Jur., Vendor and Purchaser, section 246 it is said:

'The obligation of the vendor in a contract for the sale of land to make a good or marketable title free and clear of encumbrances entitles the vendee to a title free from any restrictions upon the use of the land which either at law or in equity would bind the land in his hands and affect his full enjoyment thereof. In the...