Young v. Stevens
209 So. 2d 25, 252 La. 69 (1967)
Rule of Law:
A title to real property is unmerchantable if it is burdened by encroachments that reasonably suggest the likelihood of future litigation, regardless of the physical size of the encroachments.
Facts:
- On March 9, 1965, Mrs. Helen W. Stevens entered into a written agreement to sell her property at 1228 Arabella Street to Norman L. Young for $24,750.
- The agreement described the property as being on grounds 'measuring about 40' x 120' or as per title' and obligated Stevens to deliver a 'merchantable title.'
- Young accepted the offer and deposited $2,475, which was 10% of the purchase price, with the real estate agent.
- A survey procured by Young revealed several encroachments, including a concrete driveway and a fence belonging to the adjoining neighbor, Mrs. James Van Burén Gresham, that extended onto the property.
- The property's own fences also encroached onto two other neighboring lots.
- Mrs. Gresham, the adjoining property owner, steadfastly refused to remove her encroaching driveway and fence from the property being sold.
- Unable to clear the encroachments, Mrs. Stevens was unwilling to declare the contract void or return Young's deposit.
Procedural Posture:
- Norman L. Young (purchaser) sued Mrs. Helen W. Stevens (seller) and Latter & Blum, Inc. (agent) in a Louisiana trial court for the return of his deposit.
- Stevens filed a third-party demand against her neighbor, Mrs. James Van Burén Gresham, seeking indemnification.
- The trial court granted summary judgment in favor of Stevens, dismissing Young's suit and allowing Stevens to keep the deposit.
- Young, as appellant, appealed the trial court's decision to the Louisiana Court of Appeal.
- The Court of Appeal reversed the trial court, ruling in favor of Young and remanding the case for the third-party demand to proceed.
- Stevens, as appellant, sought and was granted certiorari by the Supreme Court of Louisiana to review the appellate court's decision.
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Issue:
Does the existence of encroachments on a property by an adjoining landowner, who refuses to remove them, render the title to the property unmerchantable and thus void a purchase agreement conditioned on the delivery of a merchantable title?
Opinions:
Majority - Summers, Justice
Yes, the existence of encroachments that suggest litigation renders a title unmerchantable. A merchantable title is one that can be readily sold or mortgaged and is not one that may reasonably suggest litigation. In this case, the adjoining owner's refusal to remove the encroaching driveway and fence creates a near certainty of a lawsuit for the purchaser, who would either have to sue to gain possession of the full property or accept less land than described. The law does not force a buyer to purchase a lawsuit. The court rejected the seller's argument that the encroachments were de minimis (insignificant), noting that what makes a title unmerchantable is not necessarily the extent of the encroachment, but the fact that it suggests litigation.
Dissenting - Hamiter, Justice
No, the title is not unmerchantable because the purchaser visually inspected the property and intended to buy it as he saw it. The seller is able to convey title to the property that the buyer actually examined, and the contract language 'about 40' x 120' or as per title' accounts for such minor discrepancies. The encroachments only result in a very minute shortage in area and would not compel the purchaser to litigate to obtain the premises he intended to buy. The buyer was getting exactly what he saw and wanted to purchase, and the encroachments were insignificant.
Concurring - McCaleb, Justice
Yes, the title is unmerchantable not only because it is suggestive of litigation, but also because the seller cannot deliver the property as described in her own title. The agreement to sell a lot 'as per title' meant a lot measuring exactly 40 x 120 feet, as stated in the seller's title documents. Because the encroachments prevent the seller from delivering the full, unencumbered 40-foot width, she cannot fulfill the terms of the contract. The seller is unable to comply with her agreement because the frontage stated in her title cannot be delivered unencumbered.
Analysis:
This decision solidifies the 'threat of litigation' standard for determining title merchantability in real estate transactions. It clarifies that the focus is less on the monetary value or physical size of a title defect and more on its potential to draw the purchaser into a legal dispute. This precedent provides strong protection for buyers, allowing them to rescind a purchase agreement if a seller cannot deliver a title that promises peaceful possession. Consequently, sellers bear a heightened responsibility to resolve boundary disputes and remove encroachments before attempting to transfer property.
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