a. Facts-
Π entered into an agreement to sell a house to Δ. Agreement said that the title
will be “free and clear of all encumbrances”. Upon reviewing the contract, Δ’s
lawyer finds that the house is in violation of a town ordinance and violates a
covenant which states that the house must be at least 2 stories; Π’s house was
only one story. Π sued Δ for specific enforcement of the contract and won. Δ
appealed.
b. Procedural
History- Π was granted specific enforcement of contract, Δ appealed, Kansas Sup
Ct reversed and contract was NOT enforced
c. Issue-
Whether violations of ordinances and covenants constitute “encumbrances” such
that the title can be considered “unmarketable”
d. Holding-
Yes, violations of city ordinances and violations of covenants are encumbrances
which make the title “unmarketable”
e. Rule-
a “marketable” title is one which is free from reasonable doubt…a title is “doubtful” if it exposes the party
holding it to the hazard of litigation
i.
The “risk” of litigation MUST be
“reasonable”…something that would make the purchaser think, “I have a
non-trivial reason to think I will be sued, IF I purchase the land”
f. Rationale-
i.
Public ordinances and zoning are not
restrictions that make a title unmarketable. They only do so when the property
in question is already in violation of them
g. Notes-
i.
Zoning problem: Adding an extra foot to
the property…doesn’t give a hardship to the buyer
ii.
Covenant problem: Even if the seller
said, “I’ll build an extra floor”…the buyer still has the right to exit the
contract
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