## Facts

- The sellers owned a larger tract in Albemarle County, Virginia, and previously conveyed a portion to neighboring owners subject to a recorded “line-of-sight” (view) easement protecting the neighbors’ view from their residence.
- The view easement restricted construction of “any structure” on portions of the retained land if visible from the neighboring residence, with limited exceptions.
- The buyers contracted to purchase approximately 99 acres, with a $50,000 earnest money deposit held in escrow.
- The contract required delivery of a general warranty deed “free of all encumbrances,” except recorded restrictive covenants and utility easements that do not materially and adversely affect residential use or render title unmarketable.
- The contract included a liquidated-damages clause allowing the sellers to retain the $50,000 deposit if the purchaser defaulted or breached.
- One day before the scheduled closing, the buyers asserted the recorded view easement rendered title unmarketable, provided notice of a claimed title defect, and demanded cure within 60 days.
- The sale did not close; the sellers treated the refusal to close as a buyer default and sued to retain the deposit as liquidated damages, while the buyers counterclaimed for return of the deposit.
- After a bench trial, the trial court found the easement did not materially and adversely affect residential use and did not render title unmarketable; it awarded the sellers $50,000 plus interest but denied attorneys’ fees.

## Issues

1. Whether the recorded line-of-sight easement rendered title unmarketable under the contract and Virginia law, permitting the buyers to refuse to close and recover the deposit.
2. Whether the sellers could recover attorneys’ fees under the contract in addition to (or in connection with) the earnest-money liquidated damages.

## Decision

- The Supreme Court of Virginia reversed the judgment awarding the sellers the $50,000 deposit and entered final judgment for the buyers.
- The Court held the view easement rendered title unmarketable under the contract’s title condition and the common-law standard for marketable title.
- Because the buyers were justified in refusing to close, they were not in default or breach, and the liquidated-damages provision did not allow forfeiture of the deposit.
- The Court affirmed the denial of attorneys’ fees to the sellers.

## Legal Principles

- Contract terms are given their ordinary meaning, and courts interpret agreements to give effect to all words and clauses without treating any as surplusage.
- A “subject to” clause for recorded covenants and easements does not waive objections to restrictions that (as the contract provides) materially and adversely affect residential use or render title unmarketable.
- Marketable title is title free from serious defects or encumbrances, not dependent on doubtful questions of law or fact, and not exposing a purchaser to a meaningful risk of litigation or impaired enjoyment.
- A restrictive covenant or easement that substantially limits permissible building locations or structures, and creates a realistic prospect of disputes with the beneficiary, may constitute an encumbrance that makes title unmarketable.
- A liquidated-damages forfeiture for buyer default does not apply when the seller fails to deliver the contractually required title condition and the buyer’s refusal to close is justified.

## Conclusion

The Court held that a broad, recorded view easement was a significant encumbrance that made the seller’s title unmarketable under the parties’ agreement, so the buyer could refuse to close and recover the earnest-money deposit; the sellers also were not entitled to attorneys’ fees.


Haisfield v. Lape, 264 Va. 632, 570 S.E.2d 794 (Va. 2002)