227 P.2d 102
In May 1949, Dr. L. K. Lohmeyer entered into a contract with Carl A. Bower and Anne S. Bower to purchase Lot 37 on Berkley Road in Berkley Hills Addition to the City of Emporia, Kansas.1 The agreement required the Bowers to convey the property by warranty deed accompanied by an abstract showing good merchantable title.2 The title was to be free and clear of all encumbrances except special taxes and subject to all restrictions and easements of record.3
The lot had been acquired by the Bowers in August 1946 from Alonzo and Lucy Walls.4 Alonzo Walls obtained it through a sheriff's deed following a 1942 tax foreclosure.5 In August 1946, the Bowers obtained a permit and moved a one-story frame house onto the lot.6 The house was positioned with its north wall eighteen inches from the north lot line.7 The dedication of Berkley Hills Addition in 1926 included restrictions requiring two-story residences costing at least seven thousand dollars on Lot 37.8 The city ordinance prohibited frame buildings within three feet of side or rear lot lines.9
After the contract was signed, an attorney examined the abstract and notified Lohmeyer in a June 13, 1949 letter that the house violated both the ordinance and the dedication restrictions.10 Lohmeyer then wrote to the escrow agent on June 16, 1949, declaring the title non-merchantable and demanding return of his thirty-eight hundred dollars in payments. The Bowers offered to convey an additional two-foot strip along the north side without charge, but Lohmeyer refused.11
Lohmeyer filed suit in the district court of Lyon County seeking rescission of the contract.12 The Bowers answered and cross-petitioned for specific performance.13 The escrow agent Newcomer indicated he would abide by the court's decision.14 The case was tried on the pleadings and a detailed stipulation of facts.15 The trial court entered judgment for the defendants and ordered specific performance.16 Lohmeyer appealed to the Supreme Court of Kansas.17
Whether the existing violations of the city ordinance and the dedication restrictions render the title to Lot 37 unmerchantable under the parties' contract?18
A marketable title to real estate is one which is free from reasonable doubt, and a title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation.19 To render the title to real estate unmarketable, the defect of which the purchaser complains must be of a substantial character and one from which he may suffer injury.20
Yes. The stipulation establishes that the one-story frame house was moved onto Lot 37 with its north wall only eighteen inches from the north lot line.21 This placement violated the city ordinance that prohibits frame buildings within three feet of a side or rear lot line.22 The same stipulation shows the house violates the 1926 dedication restrictions that require any residence on Lot 37 to be two stories in height.23
These violations create a substantial defect.24 They expose a purchaser to the hazard of litigation from the city or adjoining owners seeking enforcement.25 The contract required an abstract showing good merchantable title free and clear of encumbrances.26
The existing violations render the title to Lot 37 unmerchantable under the parties' contract.27
Whether the dedication restrictions on Lot 37 were extinguished by the 1942 tax foreclosure proceeding?28
The right to enforce the dedication restrictions, which are conceded to have been of record, was vested in all persons owning property in the area covered by the declaration and the common grantor.29 Before their rights to enforce such restrictions could be extinguished by the judgment affecting Lot 37 it must be established they were parties defendant to the action in which such judgment was rendered.30
No. The stipulation recites that the Bowers acquired the lot through a sheriff's deed issued after the 1942 tax foreclosure.31 Yet the same stipulation contains no indication that other lot owners in Berkley Hills Addition or the common grantor were made parties to that foreclosure action.32 Without such parties before the court, the enforcement rights of those owners remain intact and the restrictions were not extinguished.33
The dedication restrictions on Lot 37 were not extinguished by the 1942 tax foreclosure proceeding.34
Whether the contract clause excepting restrictions and easements of record allows conveyance of property that presently violates those restrictions?35
It is the violation of the restrictions imposed by both the ordinance and the dedication declaration, not the existence of those restrictions, that renders the title unmarketable.36 The contract provides the conveyance was to be made subject to all restrictions and easements of record, but this does not permit conveyance of property in violation of those restrictions.37
No. Lohmeyer concedes he took the property subject to recorded restrictions, but the violations themselves constitute the encumbrance.38 The contract exception covers the existence of the restrictions.39 Yet the current placement and height of the house on Lot 37 create the very hazard of litigation that renders title unmerchantable.40
The contract clause excepting restrictions and easements of record does not allow conveyance of property that presently violates those restrictions.41
Whether the defendants are entitled to additional time under the contract to correct the violations before rescission is permitted?42
The contract provides that the first party shall have sufficient time to bring said abstract to date or obtain Report for Title Insurance and to correct any imperfections in the title if there be such imperfections.43 However, any changes in the house would compel the purchaser to take something that he did not contract to buy.44
No. Although the contract grants time to correct imperfections, remedying the dedication violation would require structural alterations to the house.45 Such alterations would deliver a different property than the one-story dwelling Lohmeyer agreed to purchase.46 The Bowers' offer to convey an extra two-foot strip addresses only the ordinance violation and does not cure the height restriction breach.47
The defendants are not entitled to additional time under the contract to correct the violations before rescission is permitted.48