Conklin v. Davi
388 A.2d 598 (1978)
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Rule of Law:
A seller can satisfy a contractual obligation to provide a marketable title with a title based on adverse possession, and the marketability of such title is determined at the time of the court's final judgment, not at the time of the original closing date.
Facts:
- Plaintiffs (sellers) and defendants (purchasers) entered into a contract for the sale of a residential property.
- The contract required the sellers to convey a title that was 'marketable and insurable, at regular rates'.
- The purchasers discovered that the sellers did not have record title to a portion of the property parcel.
- The sellers' claim to this portion of the property was based on adverse possession, which had not been legally perfected through a quiet title action prior to the contract's closing date.
- Citing the alleged title defect, the purchasers refused to consummate the sale.
Procedural Posture:
- Plaintiffs (sellers) filed an action for specific performance against defendants (purchasers) in the Superior Court, Chancery Division (trial court).
- Defendants counterclaimed for rescission of the contract and the return of their down payment.
- Before trial, plaintiffs abandoned their claim for specific performance, and the case proceeded on the defendants' counterclaim.
- At the conclusion of the purchasers' case, the trial court granted the sellers' motion for judgment.
- The purchasers, as appellants, appealed to the Appellate Division.
- The Appellate Division reversed the trial court and entered judgment in favor of the purchasers.
- The sellers' motion for a rehearing before the Appellate Division was denied.
- The sellers, as appellants, then sought review from the Supreme Court of New Jersey.
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Issue:
Does a seller's title, which relies on unproven adverse possession at the time of closing but is proven during subsequent litigation, satisfy a contractual requirement for 'marketable and insurable' title?
Opinions:
Majority - Mountain, J.
Yes. A title that is proven to be marketable during litigation satisfies a contractual requirement for marketable title, even if it rests on adverse possession and was imperfect of record at the time of closing. The contract here required a 'marketable and insurable' title, not a perfect record title, and New Jersey law recognizes that a title clearly established by adverse possession is marketable. The determinative issue is the state of the title at the time of final judgment, not at the commencement of the suit or the closing date. Therefore, a seller has the right to prove marketability during the course of litigation. The court found that once the purchaser shows a defect in the record title, the burden shifts to the seller to prove their title by adverse possession. To do so, the court must conclude that any outstanding claimants could not succeed and that there is no real likelihood they will ever assert a claim.
Analysis:
This decision clarifies that a lawsuit over a real estate contract can itself serve as the forum for establishing marketable title through adverse possession. It solidifies the principle that marketability is assessed at the time of final judgment, giving sellers an opportunity to cure title defects or prove their title during litigation. This approach provides flexibility for sellers with imperfect record titles but may create uncertainty for buyers, who might not know the final status of the title until a lawsuit concludes. The case establishes a clear burden-shifting framework for such disputes, placing the onus on the seller to prove their adverse possession claim once the buyer identifies a record defect.
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