Garner v. Union Trust Co.

Delaplaine, J., delivered the opinion of the Court. This suit was brought by Union Trust Company of Maryland to obtain specific performance of a contract for the sale of land situated on Massachusetts Avenue in the City of Baltimore. On February 2,1945, complainant agreed to sell the land to Ralph A. Garner and his wife, defendants, for $4,200 and to give a “good and merchantable title.” Defendants made a partial payment of $500, but subsequently refused to accept the title. The record in this case shows: (1) that a deed exe cuted by Daniel A. Leonard on December 22, 1919, purported to convey the land to Linthicum Realty Company in fee simple, but* actually the land was subject to an annual ground rent of $75.15, and the deed recited that the ground rent would be extinguished by a deed from Charles J. Bonaparte to Linthicum Realty Company “to be recorded” among the land records; (2) that on the same day Linthicum Realty Company executed a mortgage on the land to West Baltimore Bank; (3) that on August 15, 1920, Charles J. Bonaparte and others conveyed the fee to Linthicum Realty Company so that “the ³⁸⁹ leasehold estate may be merged in the fee”; (4) that on July 13, 1933, the Circuit Court of Baltimore City appointed a trustee to sell the property in accordance with the mortgagor’s assent in the mortgage and the statute regulating sales under decrees pursuant to mortgagor’s assent (Baltimore City Charter, 1938 Ed., Secs. 840-855); and (5) that on November 10, 1933, the trustee sold the property at foreclosure sale to complainant.

Upon this state of facts the chancellor ordered defendants to accept the title and pay the balance of $3,700 due on the purchase price. From that decree defendants appeal to this Court. It is a well established principle that a vendor of real estate, in order to maintain a suit for specific performance of the contract of sale, must show that the title tendered by him is marketable. A marketable title may be defined as a title without encumbrancés and free from reasonable doubt as to any question of law or fact that may call it in question in the future and subject the purchaser to the hazard of litigation.

It Is recognized that the term “merchantable” title is synonymous with “marketable title.” Genske v. Jensen, 188 Wis. 17 , 205 N. W. 548 ; Reeves v. Roberts, 294 Mo. 593 , 242 S. W. 956 ; Hess v. Bowen, 237 F, 510; 26 Words and Phrases, Perm. Ed., pp. 542, 543. As the decree in a suit for specific performance is in personam and not in rem, it binds only those who are parties to the suit and those claiming under them, and does not decide the issue in any way as against the rest of the world. If, therefore, there is any reasonable chance that some third person might question the title after the consummation of the contract, the Court considers this a circumstance which renders the bargain a hard one for the purchaser, and will not compel him to execute it.

Gill v. Wells, 59 Md. 492 ; Levy v. Iroquois Building Co., 80 Md. 300 , 30 A. 707 ; Sharp Street Station of Methodist Episcopal Church v. Rother, 83 Md. 289, 296 , 34 A. 843 ; Arey v. Baer, 112 Md. 541, 543 , 76 A. 843 ; Hunting v. Damon, 160 Mass. ³⁹⁰ 441, 35 N. E. 1064 ; Wesley v. Eells, 177 U. S. 370 , 20 S. Ct. 661 , 44 L. Ed. 810 . However, a title, to be marketable, need not be free from every conceivable technical criticism, but only from those possibilities of defect which are sufficient to raise a reasonable doubt. It is not every possibility of defect or even threat of contest that will be sufficient to make a title unmarketable, for it may be practically impossible for a vendor to anticipate all imaginable objections which, if they existed, would defeat his title. Levy v. Iroquois Building Co., 80 Md. 300, 305 , 30 A. 707 ; Morse v. Stober, 233 Mass. 223 , 123 N. E. 780 , 9 A. L. R. 78.

For instance, equity will decree specific performance of a contract for the sale of land even where the title is based upon adverse possession, if the title is so clearly proved and so free from doubt that it may serve as a proper foundation for a decree against the purchaser. Arey v. Baer, 112 Md. 541 , 76 A. 843 ; Potomac Lodge v. Miller, 118 Md. 405 , 84 A. 554 ; Taussig v. Van Deusen, 183 Md. 436 , 37 A. 2d 915 . In other words, a title, to be marketable, must be one which a reasonably intelligent purchaser, who is well informed as to the facts, would be willing to accept in the exercise of ordinary business prudence. Hewitt v. Parsley, 101 Md. 206 , 60 A. 619 ; Todd v. Union Dime Savings Institution, 128 N. Y. 636 , 28 N. E. 504, 506 ; Moore v. Elliott, 76 Wash. 520 , 136 P. 849 .

Since a purchaser is not bound to accept any title less than an unencumbered legal title to the fee (Gill v. Wells, 59 Md. 492 ; Shea v. Evans, 109 Md. 229 , 72 A. 600 ), it is clear that an equitable title is not marketable, for in reality it is not a title at all, but merely a right to the legal title. By its very nature an equitable title exposes the holder to the hazard