Myerberg, Sawyer & Rue, P.A. v. Agee

Lowe, J., delivered the opinion of the Court. Appellants, a lawyer and his firm, were contractually engaged to examine title to unimproved property which appellees had contracted to purchase and, if title proved marketable, to effect the requisite conveyance. Appellants were informed that the appellees, who were moving from California, intended to build a new home on the site, which was to be financed and constructed on a predetermined schedule. The conveyance was made by appellants who were apprised, and aware, of the consequences of unmarketable title, as well as the construction cost and interest increases that a delay may occasion in real estate transactions.

Appellants verified the marketability of title and, as agents of a title insurance company, even elected to provide insurance therefor. They did not, however, inform appellees that there was no record of a right of ingress and egress between the property and a public way. Based upon appellants’ assurance of marketability, appellees obtained a loan commitment from the Maryland National Bank after negotiating a construction price with a builder. On February 9, 1979, John Hanson Briscoe, the ⁷¹³ bank’s attorney, informed appellants and appellees that his title search disclosed no recorded right of access to the property, and that the bank would not honor its commitment, absent some record of right of way.

After a time, appellants attempted to negotiate the purchase of a right of way from an adjoining landowner (at appellants’ expense). Appellants also offered to purchase the property from appellees at their cost, or to sue the neighbor for an easement by necessity. Preliminary purchase negotiations for a right of way were unsuccessful because the cost of compliance with the servient property owner’s requisites were too great, and, by that time, appellees had obtained other counsel. Eventually, in September of 1979, the title company delivered a mortgagee’s title insurance policy which guaranteed title and access in the amount of the proposed loan.

In October, appellees successfully sued their neighbor to establish an easement by necessity, which was judicially declared on June 23, 1980. Suit was subsequently filed against both appellants and the title company. Although the original declaration contained counts in contract and tort, the tort count was stricken and the case was tried on the contract count only. On motion by appellees, the Honorable Perry G. Bowen, Jr., presiding in the Circuit Court for Calvert County, granted summary judgment on the issue of liability, holding "that the title to this property was unmarketable or unmerchantable from the time the Plaintiffs acquired it until the time this Decree was entered. . . .” He explained upon entering summary judgment: "That title is unmerchantable during that period of time because there isn’t a single lawyer in this room that would have allowed a client not already in that chain of title to purchase it without warning him of the existence of this defect in the title . .. .” Judge Bowen subsequently informed the jury convened to determine damages, that ⁷¹⁴ "it has been determined as a matter of law that each of the defendants in this case .. . are liable for the damages, if any, which the plaintiffs have sustained by virtue of the fact that the title to this piece of property was not good and merchantable of record.” That ruling was the basis for the first question asked by appellants on this appeal.

"Is title to real property unmerchantable as a matter of law where there is no recorded means of access?” Prefatorily, we caution that our response is limited to the facts of this case. Appellants point out, after equating an easement by necessity with adverse possession, "[i]t is essential that the marketability of title for each parcel, whether the parcel is owned by adverse possession, or whether it enjoys access by an implied easement, must be evaluated on its own merits. There can be no blanket rule because such a rule is antithetical to the tests for determining the marketability of title, which rely entirely upon a reasoned and prudent examination of the facts underlying each case.” We note, however, that appellants point to no fact or facts underlying this case relating to marketability about which they contend there was a genuine dispute. Appellants’ speculative allegation that "[circumstances are easily imagined in which the use of an unrecorded right of way is so entrenched in the life and practice of a community that the exercise of ordinary business prudence would not preclude purchase of the property which must make use of the implied unrecorded easement,” is not a matter that we will address.

While acknowledging that summary judgment may not be appropriate in every case, here as we have noted, appellants have pointed to no disputed facts despite their suggestions to the contrary. ⁷¹⁵ — marketability — The appellants conceded below that "whether the title to property is marketable is a question of law for the court,” as held in Berlin v. Caplan, 211 Md. 333, 341 (1956), "and the opinion of a conveyancer or lawyer on that inquiry is here inadmissible.” Wlodarek v. Thrift, 178 Md. 453, 469 (1940). Both parties rely upon Berlin for its definition of marketability. There the Court drew upon holdings of prior cases to provide an excellent compendium for the consideration of a trial judge faced with this determination. Each of the parties here have stressed the excerpts most favorable to their view, but the essence of the discussion in Berlin is simply that the threat of, or need for, litigation to hold or obtain good title is an essential element in determining marketability.

"Of course, a vendee, by specific performance of a contract, should not be required to take real estate, the title to which is not free from doubt and which might subject him to litigation. Where the doubt as to the validity of the title produces real bona fide hesitation in a prudent man, not based on captious, frivolous, and astute niceties, the vendee should not be compelled by specific performance to take that title. Cityco Realty Co. v. Friedenwald, 130 Md. 329, 333 , 100 A. 374 . A title to be marketable need not be free from every conceivable technical criticism.

However, if the defects are such as are sufficient to raise a reasonable doubt, such title is not marketable. Garner v. Union Trust Co., 185 Md. 386, 390 , 45 A. 2d 106 . A marketable title is one which a reasonable purchaser, who knows the facts and their legal bearing, would be willing to accept in the exercise of that prudence which business men ordinarily use in the transaction of their own affairs. Zulver Realty Co. v. Snyder, 191 Md. 374, 384 , 62 A. 2d 276 .

If there is a reasonable probability that the purchaser may be subjected to the hazard of litigation to defend his title, that title is not ⁷¹⁶ marketable. Zepp v. Darnall, 191 Md. 68, 73 , 59 A. 2d 774 . A marketable title is one which is free from encumbrances and any reasonable doubt as to its validity and such that a reasonably intelligent person, who is well informed as to the facts and their legal bearing, and who is ready and willing to perform his contract, would be willing to accept in the exercise of ordinary business prudence. To be marketable the title must be so far free from defects as to enable the purchaser to not only hold the land in peace, but also, if he wishes to sell it, for him to be reasonably sure that no flaw in the title will appear to disturb its market value.

A mere speculative possibility that a defect might appear sometime in the future will not render a title unmarketable. Sinclair v. Weber, 204 Md. 324, 334 , 104 A. 2d 561 .” Berlin, supra at 343-344 . By equating adverse possession with an easement by necessity, appellants contend that the easement decreed in favor of appellees always existed, without regard to whether there had been a judicial declaration thereof. "Enjoying an easement by necessity is similar to owning land by adverse possession, in that neither will be a matter of record until litigation has occurred.

But the fact that litigation has not occurred does not entail that one does not have marketable title in either case. Indeed, it has long been recognized by the Maryland Courts that title to property held by adverse possession may be marketable. Clarke v. Lacy, 213 Md. 482 (1957). If title by adverse possession is free from doubt and can be clearly proven, specific performance of the contract of sale will be granted.

Garner v. Union Trust Co., 185 Md. 386 (1945).” But appellants would overlook the factual qualifications of marketability vis-a-vis the facts they have recited to us in this case. Title by adverse possession is only marketable and thus specifically enforceable. ⁷¹⁷ " . 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.’ ” Clarke, supra at 490 , quoting Garner, supra at 390 . In the case before us there is neither evidence nor proffer that the access subsequently determined to be an easement by necessity was, at the time of transfer of the property, "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.” Garner, supra at 389 . Precisely to the contrary, at the time the judge ruled, the undisputed facts were that litigation had been compelled and consummated by the decree of June 23,1980.

Appellants do not contend that the property without access is marketable and we need not decide the ephemeral question of whether an easement by necessity exists where a decree has not been obtained. Marketability is not concerned with the results of litigation, only with its likelihood. The judge did not err. — damages — The next four issues raised by appellants deal with damages. In their brief, appellants summarized the items which the judge permitted the jury to consider in determining damages: "1.

Economic loss occasioned by the fact that the construction loan did not close on February 9,1979, made up of both increased costs of construction and increased costs of financing, measured by the difference between those costs in February, 1979, and March, 1981, the date of the trial. 2. Attorney’s fees expended to establish access to the property. 3. Capital gains tax paid because Appellees did not meet the time limitations for purchasing an ⁷¹⁸ other residence with the proceeds obtained from the sale of the first residence. 4. The amount of the earned hazard insurance premium for the insurance which Appellees were compelled to purchase by the lending institution.

The jury returned a verdict in the amount of $66,491.94, of which $41,009.40 was assessed against the Appellants.” Appellants contend that: "The extent of the increased costs of construction and financing were not foreseeable to the appellants, and, thus, appellants are not liable in contract for these damages.” Citing substantial authority that damages in this contract case are limited to those that are reasonably foreseeable, Sergeant Co. v. Pickett, 285 Md. 186, 193 (1979); Reamer v. Kessler, 233 Md. 311 (1964), appellants unsurprisingly do not contend that all of the aforesaid items of damage were unforeseeable so much as they complain of their magnitude. "The increases in the costs of financing and construction which actually occurred in the instant case were of such a magnitude that even if increases of that same general kind were foreseeable, the increases which actually occurred were not foreseeable. It is thoroughly unreasonable to suppose that the Appellants could have foreseen that building costs would rise 48% in two years, or that interest rates would rise from 10V2% to 15% plus two points in two years.” Appellants rely upon Restatement (Second) of Contracts, § 351, Comment (1981) for that premise. "A contracting party is generally expected to take account of those risks that are foreseeable at the time he makes the contract.

He is not, however, liable in the event of breach for loss that he did not at the time of contracting have reason to foresee as ⁷¹⁹ a probable result of such a breach. The mere circumstance that some loss was foreseeable, or even that some loss of the same general kind was foreseeable, will not suffice if the loss that actually occurred was not foreseeable.” Upon analysis, the argument lacks both reason and logic. The appellants acknowledge that they were cognizant of a fluctuating economy. In light of such instability, any competent counsel should anticipate that the slightest fault in so delicate an economic balance would cause a tremor, if not a quake, which could result in a sudden rise in the inflation rate, or even a recessionary reversal.

Considering the almost annual increases and pressures to increase allowable interest rates which may be empirically noted during the last decade, it is with some ill-grace that appellant argues that any attorney, even one of his experience and education, should not, as a matter of law, be charged with the foreseeability of the legislative interest increase permitted in 1979. Even if foreseeability were considered "through the eye of the beholder,” this appellant had extraordinary vision. In his deposition which was read to the jury, the individual appellant admitted a far more advantageous perspective in this regard than can be attributed to most lawyers. "Question — Now, as an attorney at law, have you been engaged in transactions where the