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Brocha Equities, LLC v. Cabigas

A-4605-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

TITLE — The law will imply that title must be marketable, even where the real estate contract of sale is silent.

A contract buyer sought return of its deposit based on an alleged defect in title. The contract promised good title which was defined “as that which can be insured by any of the title companies licensed by the State of New Jersey, at normal and usual rates and without exception other than those that are standard in all policies and those mentioned in this Agreement.” The title commitment had several exceptions including one for inheritance or estate taxes owed by the estate of the predecessor owner. It also noted the existence of open judgments and a bankruptcy proceeding against that same preceding owner or someone of similar name. In response, the seller obtained a commitment from another title insurance company. It offered to insure title without the exceptions noted on the commitment obtained by the contract buyer. That commitment procured by the seller, however, required the seller to notify the title company of any defects or claims by others against the land that the seller may have known of and provided that coverage would not extend “to those matters which had been disclosed to the insured prior to closing, or of which the insured had actual knowledge by the closing.” Eventually, when the closing did not take place, the seller disposed of the property at a much lower price to another buyer. In the damages suit that followed, the lower court ordered that the deposit be returned and also awarded damages in favor of the buyer to cover its attorney’s fees and other expenses incurred in connection with the failed transaction. The seller appealed.

In the appeal, the Appellate Division rejected the seller’s argument so far as it rested “upon a distinction between marketable title and insurable title and its assertion that it only contracted to provide insurable title, not marketable title. ‘[T]he law will imply that title must be marketable, even where the contract is silent.’”

The Appellate Division agreed with the seller that the contract buyer was not entitled to insist on its own title company, but quickly pointed out that the title commitment obtained by the buyer was not unequivocal and might very well have resulted in a policy that took exception to the very same liens, taxes, and bankruptcy filing of the predecessor owner. Consequently, the Court upheld the lower court’s decision which had ordered the deposit to be returned to the contract buyer and awarded damages to the buyer as well.

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