## Facts

- Buyers contracted to purchase sellers’ residence in Sheridan, Wyoming using a printed offer-and-acceptance form calling for installment payments after a cash down payment.
- The contract required the sellers to convey “merchantable” title and to deliver a statutory warranty deed “free and clear of all liens and encumbrances,” except for specified categories (e.g., taxes, certain liens, utility easements, zoning/subdivision regulations, and recorded restrictions/easements).
- The contract also required an abstract or title insurance commitment showing “good merchantable title” in the sellers, free of encumbrances.
- After closing and the buyers’ taking possession, surveys obtained by the parties showed that portions of the residence, garage, and a cemented-in fence encroached into a dedicated city street.
- Buyers sought rescission and related relief, alleging the encroachment rendered title unmerchantable and breached the contract’s title warranties; they also alleged nondisclosure/misrepresentation.

## Issues

1. Whether an encroachment into a dedicated city street is an encumbrance or title defect that makes title unmerchantable under a contract requiring “merchantable” title “free and clear of all encumbrances” except those specifically listed.
2. Whether extrinsic understandings or circumstances could defeat or vary the written contractual guarantees regarding marketable title and permitted encumbrances.
3. Whether the trial court erred by denying buyers relief notwithstanding the contract’s express title and encumbrance provisions and the established encroachments.

## Decision

- The Wyoming Supreme Court reversed the judgment for the sellers.
- The court held that the encroachments into the dedicated street constituted an encumbrance and defect of title inconsistent with the contract’s promise of merchantable title free of unlisted encumbrances.
- Because the contract’s exceptions clause did not include this type of encroachment, the sellers failed to provide the quality of title required by the agreement.
- The court rejected reliance on extrinsic understandings to dilute or contradict the contract’s clear title warranties.

## Legal Principles

- A contract provision requiring “merchantable” or “good merchantable” title, coupled with a deed “free and clear of all liens and encumbrances” except enumerated items, is enforced according to its express allocation of risk.
- Physical encroachments into a public right-of-way can constitute an encumbrance and a defect of title that renders title unmerchantable by exposing the owner to potential claims and litigation risk.
- When a contract specifies the encumbrances a buyer must accept, an unlisted encumbrance is outside those permitted exceptions and remains the seller’s responsibility.
- Where the written agreement’s title and warranty terms are clear, parol evidence cannot be used to vary or contradict those terms.

## Conclusion

The court held that an unexcepted encroachment into a dedicated street breached the contract’s express requirement of merchantable title free of encumbrances, and it reversed the trial court’s judgment that had denied the buyers relief.


Bethurem v. Hammett, 736 P.2d 1128 (Wyo. 1987)