Taxman v. McMahan

• Citation: 124 N.W.2d 68,21 Wis.2d 215
• Parties: Royal TAXMAN, Appellant, v. A. J. McMAHAN et al., Respondents.
• Decision Date: 29 October 1963
• Court: Wisconsin Supreme Court

Page 68

124 N.W.2d 68

21 Wis.2d 215

Royal TAXMAN, Appellant, v. A. J. McMAHAN et al., Respondents.

Supreme Court of Wisconsin.

Oct. 29, 1963.

Action by plaintiff Royal Taxman against defendants A. J. McMahan and wife and Richard J. Harrigan to recover $3,500 earnest money deposited by plaintiff under a contract to purchase real estate.

On July 16, 1962 plaintiff (hereinafter the 'purchaser') signed an offer to purchase certain premises in the city of Oconomowoc together with certain described personal property owned by defendants McMahan (hereinafter the 'sellers') for the total sum of $72,500. The offer was submitted to Harrigan, a real estate broker employed by the sellers. The sellers accepted the offer on July 20, 1962. The purchaser paid Harrigan $3,500 as an earnest money deposit to be held in trust by him pursuant to the terms of the contract. The premises, which are the subject matter of the contract, are occupied by a hotel located at a principal business corner in Oconomowoc, with frontage on two intersecting streets, East Wisconsin avenue and North Main street. At the rear of the hotel building the real estate constituting the hotel property runs across the rear of other buildings which front on East Wisconsin avenue. Admittedly the property in question is subject to the following easements:

Easement One. A 20' easement granted to the city of Oconomowoc in 1947, consisting of a right of way across a portion of the hotel premises lying at the rear of the hotel and other buildings, for the passage of vehicles and pedestrians.

Easement Two. A 12' easement for an 'ordinary wagon and team' running at right angles from East Wisconsin avenue to a depth of 148', and running easterly at the rear of the buildings which front on East Wisconsin avenue.

Easement Three. A thirty-year easement granted in 1949 for the purpose of loading and unloading, but not for parking, on a strip 25' wide and 13' deep, at the rear of one of the buildings fronting on East Wisconsin avenue.

In addition to the foregoing the property in question is subject to a party wall which forms a portion of the hotel's north wall, and which commences 6 feet 10 1/2 inches east of the street line of North Main street and runs east for 60 feet 7 inches. The wall exists pursuant to an agreement made in 1883 between adjoining owners, which required each owner to contribute one-half of the expenses in constructing and maintaining the wall.

The offer to purchase required the sellers to transfer title to the premises by warranty deed 'free and clear of all incumbrances,' and further provided that the closing date was to be on September 1, 1962. The sellers submitted a preliminary report of title which reflected the existence of the three easements and the party wall agreement. Subsequent to the specified closing date the purchaser demanded the return of the $3,500 earnest money because of the seller's failure to take steps to remove the easements and party wall agreement as clouds on title. When defendants failed to comply with this demand the instant action was commenced for the recovery of the $3,500 earnest money.

After issue was joined the purchaser moved for summary judgment. The affidavits in opposition to this motion set forth these undisputed facts: Several days before the offer to purchase was submitted the purchaser and the broker Harrigan visited the hotel property, and examined the hotel and surrounding real estate. During this examination the purchaser observed and was advised that the 20' strip behind the hotel was an easement for public use, granted to the city of Oconomowoc (Easement One). The purchaser further observed and was advised of the 13' X 25' easement for loading, etc. (Easement Two), and the existence of the party wall, which the purchaser discovered himself. The 12' easement (Easement Three) was in constant use as an alley at the time of plaintiff's visit. On July 12th and 13th the purchaser and Harrigan met at the office of the former's counsel to discuss the offer to purchase. During the ensuing conversations the subject of the city of Oconomowoc easement came up upon inquiry by the purchaser's counsel, who was then advised of its status. Purchaser was further advised by his counsel that the easement should be deeded to the city to avoid unnecessary taxes.

By order entered March 20, 1963, the motion for summary judgment was denied. Plaintiff's appeal is from this order.

M. J. Levin, Milwaukee, James S. Levin, Milwaukee, of counsel, for appellant.

Shea & Hoyt, Milwaukee, Ralph M. Hoyt, Milwaukee, of counsel, for respondent Harrigan.

CURRIE, Justice.

The sole issue on this appeal is whether existing easements and a party wall known to the purchaser are title defects within the meaning of a covenant against incumbrances contained in an executory contract for the sale of real estate.

We consider that the instant party wall stands in the same category as the three easements with respect to the issue before us. The rights created by a party wall agreement are merely a particular form of easement. Duncan v. Rodecker (1895), 90 Wis. 1, 4, 62 N.W. 533; Christenson v. Mann (1925), 187 Wis. 567, 204 N.W. 499, 41 A.L.R. 1192; S. S. Kresge Co. v. Garrick Realty Co. (1932), 209 Wis. 305, 311, 245 N.W. 118, 85 A.L.R. 283; 69 C.J.S. Party Walls § 1, p. 2; 2 Thompson on Real Property (1961 Replacement), pp. 591, et seq., § 396.

The purchaser stresses the fact that, while he knew of the existence of the party wall prior to submitting his offer to purchase, he did not then know of the affirmative covenants of the party wall agreement with respect to construction and repair. However, such covenants in party wall agreements are very common and are usually to the mutual advantage of both owners. Some courts have held, in the absence of such a covenant, that there is a duty to contribute to cost of necessary repair and maintenance. 3 Tiffany, Real Property (3d ed.), p. 350, § 810, footnote 77. It seems inconceivable, therefore, that the instant purchaser, knowing of the existence of the party wall before submitting his offer to purchase, could assume there was no liability on the part of the sellers, or their assigns, to share in the cost of construction and maintenance. We hold that knowledge of the existence of a party wall carries with it constructive knowledge of any affirmative covenants of the party wall agreement by which it was created, and which are the customary and ordinary provisions of such an agreement. See 15 Missouri Law Review (1950), Party Walls, 259, 270. There is nothing of an unusual or extraordinary nature about the affirmative covenants of the instant party wall agreement.

Easements generally constitute incumbrances within the meaning of a covenant against incumbrances. 4 Tiffany, Real Property (3d ed.), p. 135, § 1004. A party wall, where there is a covenant to maintain and rebuild the wall between the adjoining owners, constitutes an incumbrance which will render title to real estate defective. Bennett v. Sheinwald (1925), 252 Mass. 23, 147 N.E. 28; Feder v. Solmon (1925), 3 N.J.Misc. 1189, 131 A. 290, affirmed (1926), 103 N.J.L. 183, 134 A. 917; 3 American Law of Property, p. 137, § 11.49; 4 Tiffany, Real Property (3d ed.), p. 141, § 1005. ¹

Wisconsin early recognized an exception to the foregoing rule, namely, that an easement which is fully known to a purchaser before he makes his contract of purchase, or which is so open, obvious and notorious that he must have known of it, is not an incumbrance within the meaning of such a covenant. This exception was first announced in Kutz v. McCune (1868), 22 Wis.

Page 628

In that case plaintiff purchased a tract of land, a portion of which was overflowed by a mill pond, the mill dam owners having acquired a prescriptive right to flow the land. Plaintiff brought suit for breach of the warranty deed's covenant against incumbrances. The court held that there had been no breach of this covenant and stated (22 Wis. at pages *628-*629):

'It [the flowage easement] may have been an incumbrance. But there is a principle recognized by adjudged cases, and resting upon sound reason and policy, which holds that purchasers of property obviously and notoriously subjected at the time to some right of easement or servitude affecting its physical condition, take it subject to such right, without any express exceptions in...