
    Pauline Caselli et al., Appellants-Respondents, v Joseph J. Messina et al., Respondents-Appellants.
    Supreme Court, Appellate Term, Second Department,
    November 19, 1990
    APPEARANCES OF COUNSEL
    
      Michael A. Forzano for appellants-respondents. Russ & Weyl (Kenneth J. Lauri of counsel), for respondents-appellants.
   OPINION OF THE COURT

Memorandum.

Order modified with $10 costs to defendants, motion for summary judgment in favor of the defendants granted and complaint dismissed and, as so modified, order affirmed.

Plaintiffs entered into a contract to purchase the house of the defendants Messina and pursuant to the contract, a down payment was deposited with the defendant Ajello. The contract provided that it was to be sold subject to "Covenants, restrictions, reservations * * * of record * * * provided same are not violated by present structure or the present use of premises” and the parties added to said clause the phrase "or render title unmarketable.” Another clause of the contract provided that "Sellers shall give and purchasers shall accept such title as any New York City title company will be willing to approve and insure in accordance with their standard form of title policy, subject only to the matters provided for in this contract.” After receipt of the title report, plaintiffs notified the defendants that the title was unmarketable due to the restrictions and covenants of record and demanded the return of their down payment. When the demand was refused, this suit was commenced.

The language of this contract does not call for an unqualified or unlimited title policy. It calls for a standard policy, "subject only to the matters provided for in this contract.” This would include that first clause mentioned above in which the property was sold subject to these covenants and restrictions of record provided that the present structure did not violate them and provided that title was not rendered unmarketable.

In Laba v Carey (29 NY2d 302, 307-309, rearg denied 30 NY2d 694) the contract of sale contained somewhat similar provisions, covenants and restrictions but did not have the additional phrase "or render title unmarketable.” The Court of Appeals noted that the policy issued by the title company would only have to comply with the provisions of the contract of sale and that "The contract before us addressed itself to the existence of easements and [restrictions] * * * of record. The title company, disclosing the existence of a telephone easement and 'Waiver of Legal Grades’ restrictive covenant, excluded these items from coverage, except insofar as to say that they had not been violated. In so insuring, it was assuming responsibility for no less than that which respondents had expressly agreed to accept. The exceptions were matters specifically contemplated by the contract”. (Supra, at 308.) The court went on to state: "Accordingly, where a purchaser agrees to take title subject to easements and restrictive covenants of record which are not violated, this is the precise kind of title that the seller is obligated to tender and we are not persuaded that, absent an expression of a contrary intent in the contract, that obligation is broadened by the existence of the usual 'insurance’ clause in a form contract. * * * A conclusion that the seller would nevertheless be required to furnish title, insurable without exception, would not only render nugatory the 'subject to’ clause, but would give every purchaser dissatisfied with his bargain a way of avoiding his contractual responsibilities. Surely, this was not contemplated in the contract before us.” (Supra, at 308-309; emphasis added.)

In Laba (supra), as in the case at bar, neither the easements nor the restrictive covenants were violated by the present use and the contract was silent as to any special use intended by the plaintiffs for the property.

The essential issue in this case is whether the mere existence of covenants and restrictions of record renders the title unmarketable. An understanding of what renders title unmarketable can be found in the case of Regan v Lanze (40 NY2d 475, 481-482) wherein the court stated:

"The disposition of this case turns on the marketability of defendants’ title. A marketable title has been defined as one that may be freely made the subject of resale (Trimboli v Kinkel, 226 NY 147, 152; see 62 NY Jur, Vendor and Purchaser, §48; 3 Warren’s Weed New York Real Property, Marketability of Title, § 2.01). It is one which can be readily sold or mortgaged to a person of reasonable prudence, the test of the marketability of a title being whether there is an objection thereto such as would interfere with a sale or with the market value of the property (Brokaw v Duffy, 165 NY 391, 399; Heller v Cohen, 154 NY 299, 306; Vought v Williams, 120 NY 253, 257; Scwartz, Real Estate Manual, p 581). The law assures to a buyer a title free from reasonable doubt, but not from every doubt * * * and the mere possibility or suspicion of a defect, which according to ordinary experience has no probable basis, does not demonstrate an unmarketable title * * *

"To be sure, a purchaser is entitled to a marketable title unless the parties stipulate otherwise in the contract (Laba v Carey, 29 NY2d 302, 311). Except for extraordinary instances in which it is very clear that the purchaser can suffer no harm from a defect or encumbrance, he will not be compelled to take title when there is a defect in the record title which can be cured only by a resort to parol evidence or when there is an apparent encumbrance which can be removed or defeated only by such evidence”. (See also, Voorheesville Rod & Gun Club v Tompkins Co., 158 AD2d 789; DeJong v Mandelbaum, 122 AD2d 772, 774; Weiss v Cord Helmer Realty Corp., 140 NYS2d 95, 98-99; 62 NY Jur, Vendor and Purchaser, § 48.)

In applying these rules to the facts of the case at bar, it is readily apparent that the contract was silent as to any special use that plaintiffs may have had in mind for the property. It is also conceded that the present use of the property did not violate said covenants and restrictions of record. It is therefore concluded that no reasonable person, in the absence of contractual provision calling for a special use of the property, would be denied reasonable enjoyment of the property for his "intended and announced purposes” (DeJong v Mandelbaum, supra, at 774). The mere existence of covenants and restrictions of record which did not affect the present use of the property as set forth in the contract between the parties herein provided purchasers with what they had contracted for. Since they were in default under the terms of the contract of sale, they were not entitled to the return of their down payment.

Pizzuto, J.,

dissents and votes to modify the order of the court below by granting plaintiffs’ motion for summary judgment in the following memorandum. The majority did not give proper weight to the significance of the fact that added to and made a part of the typed paragraph (1) of the rider, which provided that the premises was sold subject to: "(b) covenants, restrictions, reservations, utilities, easements and agreements, of record, insofar as the same may now be in force or effect, provided same are not violated by the present structure or the present use of premises”, there was an inked insertion, "or render title unmarketable” (emphasis supplied).

Both the NYBTU standard form of contract and the two-page typed rider contained handwritten modifications made at the contract signing, obviously due to the negotiations of the attorneys as to the terms of the contract prior to the execution thereof by the parties.

The issue then becomes whether or not exceptions listed in the report of the Chicago Title Insurance Company concerning a declaration contained in liber 6150 at page 569 and liber 6150 at page 573, as well as an easement in liber 6131 at page 276 and liber 6104 at page 65 render title unmarketable. Clearly, the purchasers’ attorney modified the aforementioned quoted subject clause by the addition of the words in the disjunctive "or render title unmarketable” (emphasis supplied). Those words must be given some meaning in determining under what circumstances the purchasers were obligated to take title.

The declaration contained in liber 6150 at page 573 was a covenant restricting the use of the land, not mentioned anywhere in the contract. The restrictive covenant provided that no building may be erected other than private dwellings, limited the use to two families, limited the carrying-on of a trade or business at the premises, prescribed minimum setbacks and portions of the land on which no building was to be erected, prohibited the carrying-on of noxious or offensive trades, and prohibited anything being done thereon which may become an annoyance to the neighborhood.

The covenant and restrictions further provided that they shall run with the land and provided that in the event an owner violates or attempts to violate any of the covenants, any other person owning any real estate described in said restrictions may bring an action against the violator seeking an injunction or damages.

These covenants (although not violated by the existing structure or use thereof) prescribed minimum setbacks, restricted the type of building and structure that could be placed on the land and the type of activities that could be carried out on the land. Such restrictions render title unmarketable. (See, Golden Dev. Corp. v Weyant, 269 App Div 1039 [setback restriction]; Rosenberg v Centre Davis Corp., 15 AD2d 506 [restrictive covenants permitting construction or maintenance of one-family house only].) In Antin v O’Shea (270 App Div 1046), cited in Rosenberg v Centre Davis Corp. (supra), the contract provided in part that the property was sold " '[s]ubject to covenants and restrictions contained in former recorded deeds affecting said premises, provid[ed] they do not render title unmarketable.’ ’’ (Emphasis supplied.) A former deed contained a covenant " 'that there shall not be erected upon any portion of said premises any building for the sale of intoxicating drinks or garden for the sale of ale or beer’ (Supra, at 1046.) The appellate court held that title was unmarketable and granted the purchaser’s motion for summary judgment for foreclosure of its lien and recovery of the down payments and expenses.

In Laba v Carey (29 NY2d 302) cited and relied upon by the majority, although it contained similar provisions as to title insurance, did not contain similar provisions as to marketability of title.

The pertinent provisions contained in the NYBTU form of contract in the Laba case were as follows. It provided that the seller shall give and the purchaser shall accept a title such as any reputable title company would accept and insure. The contract also expressly provided that the sale and conveyance was subject to:

"4. Covenants, restrictions, utility agreement and easement of record, if any, now in force, provided same are not now violated.

”5. Any set of facts an accurate survey may show, provided same does not render title unmarketable.” (Laba v Carey, 29 NY2d 302, 305, supra.)

The court there held that the purchaser received exactly what he had bargained for in the contract. The purchaser was not entitled to an unconditional title policy without exception since he agreed to take title subject to the covenants, restrictions, utility agreements and easements of record provided that they were not violated, which they were not. There was no additional proviso in the Laba case, as there is in this case, to wit: "or render title unmarketable.” The only proviso made with reference to marketable title had to do with facts that might be shown on a survey.

The instant case is obviously distinguishable. The purchaser in this case has not been offered that which he had bargained and negotiated for.

In conclusion, to adopt the construction suggested by the majority would do violence to the specific intent of the parties at the time that contract was executed. The majority proposal, that a provision added to the contract is superfluous, is contrary to the basic principles of contract law (see, 22 NY Jur 2d, Contracts, § 221).

Monteleone, J. P., and Santucci, J., concur; Pizzuto, J., dissents in a separate memorandum.  