Chesebro v. . Moers
233 N.Y. 75, 134 N.E. 842, 21 A.L.R. 1270 (1922)
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Rule of Law:
A title is unmarketable if it is subject to a violation of a restrictive covenant that exposes the purchaser to a reasonable probability of litigation to defend their title or possession.
Facts:
- The Great Neck Shores Corporation divided a tract of land into 34 lots and filed a map and a 'Declaration of Restrictions' on October 10, 1913.
- The restrictions required that no building be erected or permitted within 50 feet of any front street, or within five feet of any rear lot line, and were enforceable by any lot owner.
- A dwelling was constructed on lot twelve that stood only 44.83 feet from the front street, violating the 50-foot setback.
- A garage was also built on lot twelve that was within five feet of the rear lot line and touched the adjoining property line, without the required written agreement from the adjoining owner.
- On September 27, 1920, a seller and a buyer entered into a contract for the purchase and sale of lot twelve.
- At the closing on October 27, 1920, the buyer refused to accept the deed, asserting that the violations of the restrictive covenants made the title unmarketable.
Procedural Posture:
- The plaintiff-seller sued the defendant-buyer in a trial court for specific performance of a real estate contract.
- The defendant-buyer counterclaimed for the return of his down payment, alleging the title was unmarketable.
- The trial court ruled in favor of the plaintiff-seller, finding the title marketable and ordering specific performance.
- The defendant-buyer, as appellant, appealed to the Appellate Division.
- The Appellate Division unanimously affirmed the trial court's judgment in favor of the plaintiff-seller-appellee.
- The defendant-buyer, as appellant, was granted permission to appeal to the Court of Appeals of New York, the state's highest court.
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Issue:
Does the existence of structures on a property that violate recorded restrictive covenants render the title to that property unmarketable?
Opinions:
Majority - McLaughlin, J.
Yes. A title subject to restrictive covenant violations that could lead to litigation is not a marketable title. The location of both the dwelling and the garage are clear violations of the restrictive covenants. Under the terms of the declaration, any other lot owner in the development has the right to sue to enforce the covenants and compel the new owner to move the non-compliant structures. A purchaser is not compelled to take property the possession of which they may be obliged to defend by litigation. The covenant against 'permitting' a building in the restricted area means it applies to maintaining existing structures, not just erecting new ones. Therefore, the seller cannot tender a marketable title, and the buyer is not required to complete the purchase.
Dissenting - Pound, J.
No. The title is marketable because the risk of litigation over these minor violations is negligible. The violations are slight technical deviations from the covenants, such as the house being only 5.17 feet over the setback line. It is inconceivable that a court of equity would grant a mandatory injunction to force the owner to move the house for such a trivial issue that causes no actual harm to other lot owners. While a purchaser should not be forced to 'buy a lawsuit,' the contingency of a successful legal attack here is so remote that it does not create a reasonable doubt as to the marketability of the title. The trial court's discretion to grant specific performance should be upheld.
Analysis:
This decision solidifies the principle that a marketable title must be free from the reasonable probability of litigation. It establishes that a clear violation of a restrictive covenant, regardless of its perceived magnitude, can render a title unmarketable if any third party has a colorable right to enforce the covenant. The ruling favors the buyer's security and right to a 'clean' title over a seller's interest in enforcing a contract for property with known defects, reinforcing a strict standard for specific performance in real estate transactions.
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