Facts
- Wallach (purchaser) contracted to buy real property from Riverside Bank (seller) for $22,000 under an executory land-sale contract.
- The contract provided that title would be conveyed by quitclaim deed and that the conveyance would be “subject to” existing leases and any restrictions of record.
- Before closing, Wallach had a title examination performed.
- The title examination disclosed a defect in the chain of title: an earlier conveyance in the chain had been executed without the grantor’s wife joining in the deed, creating a potential outstanding marital interest and a reasonable risk of future litigation over title.
- On the closing date, Riverside tendered a quitclaim deed consistent with the contract’s specified form.
- Wallach refused to accept the deed because the defect made the title unmarketable, but stated he would complete the purchase if Riverside could convey marketable title.
- Riverside refused to cure the defect and insisted that Wallach accept the quitclaim deed as tendered.
- Wallach demanded return of his down payment and reimbursement of the title-examination expense; Riverside refused.
- Wallach sued to recover the down payment and related expenses. The trial court ruled for Wallach, the intermediate appellate court affirmed, and Riverside appealed to the New York Court of Appeals.
Issues
- In an executory contract for the sale of land, does the law imply a promise by the seller to convey marketable title unless the buyer clearly agrees to accept less?
- Does a contract term requiring conveyance by quitclaim deed, “subject to” existing leases and recorded restrictions, relieve the seller from providing marketable title where a defect in the chain of title creates reasonable doubt?
- If the seller cannot (or will not) provide marketable title, may the buyer refuse the deed and recover the down payment and reasonable title-examination costs?
Decision
- The New York Court of Appeals affirmed the judgment for Wallach.
- The court held that Riverside did not satisfy its obligations by tendering a quitclaim deed when the title was subject to a defect that made it unmarketable.
- The court ruled that the executory contract carried an implied promise that the seller would convey marketable title, and the quitclaim-deed provision did not amount to a buyer’s agreement to take a doubtful title.
- Wallach was entitled to recover the down payment and the reasonable expense of the title examination.
Legal Principles
- In an executory contract for the sale of land, the seller is treated as promising to convey marketable (merchantable) title unless the contract plainly provides that the buyer will accept a lesser title.
- The seller’s implied promise of marketable title continues until it is merged into the deed upon an actual conveyance.
- A requirement that the seller deliver a quitclaim deed generally speaks to the form of the deed and the scope of deed covenants; it does not, standing alone, show that the buyer accepted the risk of a defective or doubtful title.
- Contract language taking the property “subject to” existing leases and restrictions of record is read to cover those specific burdens, not to excuse defects in ownership or breaks in the chain of title.
- When the seller cannot convey marketable title and refuses to cure the problem, the buyer may treat the contract as at an end, refuse the tendered deed, and obtain restitution of the down payment plus reasonable title-search or examination expenses.
Conclusion
Wallach v. Riverside Bank holds that a land-sale contract ordinarily requires the seller to deliver marketable title, and a quitclaim-deed requirement—along with “subject to” language for leases and recorded restrictions—does not shift the risk of a serious chain-of-title defect to the buyer; the buyer may reject the deed and recover the deposit and reasonable title-examination costs when the seller will not provide marketable title.