Caselli v. Messina - 148 Misc. 2d 671, 567 N.Y.S.2d 972 (App. Term 1990)

Rule:

A marketable title has been defined as one that may be freely made the subject of resale. It is one which can be readily sold or mortgaged to a person of reasonable prudence, the test of the marketability of a title being whether there is an objection thereto such as would interfere with a sale or with the market value of the property. The law assures to a buyer a title free from reasonable doubt, but not from every doubt and the mere possibility or suspicion of a defect, which according to ordinary experience has no probable basis, does not demonstrate an unmarketable title. To be sure, a purchaser is entitled to a marketable title unless the parties stipulate otherwise in the contract. Except for extraordinary instances in which it is very clear that the purchaser can suffer no harm from a defect or encumbrance, he will not be compelled to take title when there is a defect in the record title which can be cured only by a resort to parol evidence or when there is an apparent encumbrance which can be removed or defeated only by such evidence.

Facts:

Plaintiffs entered into a contract to purchase the house of the defendants Messina and pursuant to the contract, a down payment was deposited with the defendant Ajello. The contract provided that it was to be sold subject to "Covenants, restrictions, reservations * * * of record * * * provided same are not violated by present structure or the present use of premises" and the parties added to said clause the phrase "or render title unmarketable." Another clause of the contract provided that "Sellers shall give and purchasers shall accept such title as any New York City title company will be willing to approve and insure in accordance with their standard form of title policy, subject only to the matters provided for in this contract." Neither the existing easements nor the restrictive covenants were violated by the present use and the contract was silent as to any special use intended by the purchasers for the property. After receipt of the title report, plaintiffs notified the defendants that the title was unmarketable due to the restrictions and covenants of record and demanded the return of their down payment. When the demand was refused, this suit was commenced.

Issue:

Did the mere existence of covenants and restrictions of record render the title unmarketable?

Answer:

No.

Conclusion:

The court found that mere existence of covenants and restrictions of record which did not affect the present use of the property as set forth in the contract between the parties provided the purchasers with what they had contracted for. The purchasers' failure to fulfil the sales contract because of the presence of the restrictions, therefore, resulted in their default under the terms of the contract of sale and they were not entitled to the return of their down payment. The sellers, therefore, were entitled to summary judgment and the denial to them was reversed.