## Facts

- Buyers contracted to purchase sellers’ residential property and paid a $3,000 deposit.
- The purchase agreement (drafted by the sellers) stated the sale was subject to existing building and use restrictions, easements, and zoning ordinances.
- The agreement also required the sellers to deliver a warranty deed conveying marketable title.
- A mortgage survey revealed a drainage easement crossing the property and encroaching on part of the residence’s concrete patio.
- The title insurer was willing to issue a policy but excluded the drainage easement from coverage.
- Buyers refused to close, claimed the easement rendered title unmarketable, and demanded return of the deposit.
- Sellers treated the buyers’ refusal as a default and retained the deposit as forfeited.
- The trial court granted summary judgment for the buyers; the sellers appealed.

## Issues

1. Whether a drainage easement encroaching on a significant portion of the property (part of a patio) is an encumbrance that renders title unmarketable.
2. Whether contract language making the sale “subject to” existing easements prevents the buyers from rescinding based on an easement that materially burdens use and enjoyment.
3. Whether buyers who justifiably refuse to close for lack of marketable title may recover their deposit.

## Decision

- The appellate court affirmed summary judgment for the buyers.
- The drainage easement, as situated and affecting the patio, was a substantial encumbrance that prevented conveyance of marketable title.
- The “subject to easements” clause did not excuse the sellers’ obligation to provide marketable title where the easement materially impaired ordinary residential use.
- Buyers were entitled to rescind and recover the $3,000 deposit; the sellers could not retain it as forfeited.

## Legal Principles

- Title is unmarketable if a reasonably prudent purchaser, informed of the facts, would refuse to accept it in the ordinary course of business; title need not be technically “bad” to be unmarketable.
- A substantial easement that materially interferes with use and enjoyment of the premises can constitute an encumbrance defeating marketable title.
- When a contract drafted by one party contains conflicting or ambiguous provisions (e.g., “subject to easements” and a promise of marketable title), the ambiguity is construed against the drafter.
- Failure to tender marketable title permits the purchaser to rescind and recover any deposit paid under the agreement.

## Conclusion

Because the drainage easement encroached on the patio and materially burdened the property, the sellers could not tender marketable title; the buyers were justified in refusing to close and were entitled to rescind and recover their $3,000 deposit despite general “subject to easements” language.


Madhavan v. Sucher, 306 N.W.2d 481 (Mich. Ct. App. 1981)