Title to Property
May be Marketable Even Though the Property is Not
by David W. Paugh
In Humphries v Ables, 789
N.E.2d 1025 (Ct. App. 2003), the Indiana Court of Appeals
held that title to real estate may be marketable even
though the property is not .
Humphries entered into a contract
to sell real estate used as a liquor store to Ables.
Prior to being used as a liquor store, the property
had been the site of a gasoline station. The underground
storage tanks had never been removed; rather they had
been filled with water and remained on site. Ables
attempted to sell the real estate to a third party
who required a Phase I environmental study as a condition
of its purchase. Humphries never provided such a study,
the third party sale fell through and Ables vacated
the property. Humphries brought suit and was awarded
a judgment against the Ables for the balance of the
purchase price and attorney’s fees by the trial court.
On appeal, Ables argued that they could not receive
marketable title to the real estate as required by
the contract because the presence of the tanks and
possible contamination made the property unsellable.
Indiana law defines “marketable title” as “(T)itle’
which has no defects of a serious nature, and none
which affect the possessory title of the owner….” Staley
v. Stephens, 404 N.E.2d 633, 635 (Ind. Ct.App.
1980) as found at Humphries, 279 N.E.2d at p1032.
With respect to a marketable title there is a distinction
between the condition of title to the property and
the condition of the property itself: “(t)here is a
difference between economic lack of marketability,
which relates to physical conditions affecting the
use of property, (and) title marketability, which relates
to defects affecting legally recognized rights and
incidents of ownership. One can hold perfect title
to land that is valueless; one can have marketable
title to land while the land itself is unmarketable.” McManus
v. Rosewood Realty Trust, 143 N. H. 78, 719 A.2d
600, 601 (1998) as quoted by the Humphries Court
at 789 N.E.2d at 1032. The court found that environmental
contamination related to the physical condition of
the property and not to the rights and incident of
ownership. Accordingly, the Court held that marketable
title may be transferred even if there is contamination
upon the property and affirmed the judgement in favor
of the Sellers.
What is the moral of Humphries?
As noted by the Court, to protect themselves, a buyer
of real estate “should utilize all resources available,
including inspections, legal representation, and contingency
clauses in contracts, in order to prevent harm to themselves
from a property later being discovered to have a problem
of contamination.” Humphries, 789 N.E2d at p.
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