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Taxman v. McMahan

Supreme Court of Wisconsin
Oct 29, 1963
124 N.W.2d 68 (Wis. 1963)


In Taxman v. McMahan (1963), 21 Wis.2d 215, 124 N.W.2d 68, the sole issue was whether three existing "right-of-way type" easements and a party wall known to the purchaser were title defects within the meaning of a covenant against encumbrances.

Summary of this case from Lease v. Zarndt


October 2, 1963 —

October 29, 1963.

APPEAL from an order of the circuit court for Milwaukee county: MICHAEL T. SULLIVAN, Circuit Judge. Affirmed.

For the appellant there was a brief by M. J. Levin, attorney, and James S. Levin of counsel, both of Milwaukee, and oral argument by James S. Levin.

For the respondent there was a brief by Shea Hoyt, attorneys, and Ralph M. Hoyt of counsel, all of Milwaukee, and oral argument by Ralph M. Hoyt.

Action by plaintiff Royal Taxman against defendants A. J. McMahan and wife and Richard J. Harrigan to recover $3,500 earnest money deposited by plaintiff under a contract to purchase real estate.

On July 16, 1962, plaintiff (hereinafter the "purchaser") signed an offer to purchase certain premises in the city of Oconomowoc together with certain described personal property owned by defendants McMahan (hereinafter the "sellers") for the total sum of $72,500. The offer was submitted to Harrigan, a real-estate broker employed by the sellers. The sellers accepted the offer on July 20, 1962. The purchaser paid Harrigan $3,500 as an earnest-money deposit to be held in trust by him pursuant to the terms of the contract. The premises, which are the subject matter of the contract, are occupied by a hotel located at a principal business corner in Oconomowoc, with frontage on two intersecting streets, East Wisconsin avenue and North Main street. At the rear of the hotel building the real estate constituting the hotel property runs across the rear of other buildings which front on East Wisconsin avenue. Admittedly the property in question is subject to the following easements:

Easement One. A 20' easement granted to the city of Oconomowoc in 1947, consisting of a right-of-way across a portion of the hotel premises lying at the rear of the hotel and other buildings, for the passage of vehicles and pedestrians.

Easement Two. A 12' easement for an "ordinary wagon and team" running at right angles from East Wisconsin avenue to a depth of 148', and running easterly at the rear of the buildings which front on East Wisconsin avenue.

Easement Three. A thirty-year easement granted in 1949 for the purpose of loading and unloading, but not for parking, on a strip 25' wide and 13' deep, at the rear of one of the buildings fronting on East Wisconsin avenue.

In addition to the foregoing the property in question is subject to a party wall which forms a portion of the hotel's north wall, and which commences six feet, 10 1/2 inches east of the street line of North Main street and runs east for 60 feet, seven inches. The wall exists pursuant to an agreement made in 1883 between adjoining owners, which required each owner to contribute one half of the expenses in constructing and maintaining the wall.

The offer to purchase required the sellers to transfer title to the premises by warranty deed "free and clear of all incumbrances," and further provided that the closing date was to be on September 1, 1962. The sellers submitted a preliminary report of title which reflected the existence of the three easements and the party-wall agreement. Subsequent to the specified closing date the purchaser demanded the return of the $3,500 earnest money because of the seller's failure to take steps to remove the easements and party-wall agreement as clouds on title. When defendants failed to comply with this demand the instant action was commenced for the recovery of the $3,500 earnest money.

After issue was joined the purchaser moved for summary judgment. The affidavits in opposition to this motion set forth these undisputed facts: Several days before the offer to purchase was submitted the purchaser and the broker, Harrigan, visited the hotel property, and examined the hotel and surrounding real estate. During this examination the purchaser observed and was advised that the 20' strip behind the hotel was an easement for public use, granted to the city of Oconomowoc (Easement One). The purchaser further observed and was advised of the 13' x 25' easement for loading, etc. (Easement Two), and the existence of the party wall, which the purchaser discovered himself. The 12' easement (Easement Three) was in constant use as an alley at the time of plaintiff's visit. On July 12th and 13th the purchaser and Harrigan met at the office of the former's counsel to discuss the offer to purchase. During the ensuing conversations the subject of the city of Oconomowoc easement came up upon inquiry by the purchaser's counsel, who was then advised of its status. Purchaser was further advised by his counsel that the easement should be deeded to the city to avoid unnecessary taxes.

By order entered March 20, 1963, the motion for summary judgment was denied. Plaintiff's appeal is from this order.

The sole issue on this appeal is whether existing easements and a party wall known to the purchaser are title defects within the meaning of a covenant against incumbrances contained in an executory contract for the sale of real estate.

We consider that the instant party wall stands in the same category as the three easements with respect to the issue before us. The rights created by a party-wall agreement are merely a particular form of easement. Duncan v. Rodecker (1895), 90 Wis. 1, 4, 62 N.W. 533; Christensen v. Mann (1925), 187 Wis. 567, 204 N.W. 499, 41 A.L.R. 1192; S. S. Kresge Co. v. Garrick Realty Co. (1932), 209 Wis. 305, 311, 245 N.W. 118, 85 A.L.R. 283; 69 C. J. S., Party Walls, p. 2, sec. 1; 2 Thompson, Real Property (1961 Replacement), p. 591 et seq., sec. 396.

The purchaser stresses the fact that, while he knew of the existence of the party wall prior to submitting his offer to purchase, he did not then know of the affirmative covenants of the party-wall agreement with respect to construction and repair. However, such covenants in party-wall agreements are very common and are usually to the mutual advantage of both owners. Some courts have held, in the absence of such a covenant, that there is a duty to contribute to cost of necessary repair and maintenance. 3 Tiffany, Real Property (3d ed.), p. 350, sec. 810, footnote 77. It seems inconceivable, therefore, that the instant purchaser, knowing of the existence of the party wall before submitting his offer to purchase, could assume there was no liability on the part of the sellers, or their assigns, to share in the cost of construction and maintenance. We hold that knowledge of the existence of a party wall carries with it constructive knowledge of any affirmative covenants of the party-wall agreement by which it was created, and which are the customary and ordinary provisions of such an agreement. See Party Walls, 15 Missouri Law Review (1950), 259, 270. There is nothing of an unusual or extraordinary nature about the affirmative covenants of the instant party-wall agreement.

Easements generally constitute incumbrances within the meaning of a covenant against incumbrances. 4 Tiffany, Real Property (3d ed.), p. 135, sec. 1004. A party wall, where there is a covenant to maintain and rebuild the wall between the adjoining owners, constitutes an incumbrance which will render title to real estate defective. Bennett v. Sheinwald (1925), 252 Mass. 23, 147 N.E. 28; Feder v. Solomon (1925), 3 N. J. Misc. 1189, 131 A. 290, affirmed (1926), 103 N.J.L. 183, 134 A. 917; 3 American Law of Property, p. 137, sec. 11.49; 4 Tiffany, Real Property (3d ed.), p. 141, sec. 1005.

However, a party wall may not be considered a defect in title where there is no covenant to repair or rebuild, since the detriment sustained by each estate in becoming servient to the other is compensated by the benefit it derives from having the other made equally servient to it. Mohr v. Parmelee (N. Y. 1878), 11 Jones Spencer 320; Anno. 64 A.L.R. 1479, 1502; 3 American Law of Property, p. 137, sec. 11.49.

Wisconsin early recognized an exception to the foregoing rule, namely, that an easement which is fully known to a purchaser before he makes his contract of purchase, or which is so open, obvious, and notorious that he must have known of it, is not an incumbrance within the meaning of such a covenant. This exception was first announced in Kutz v. McCune (1868), 22 Wis. 598 (*628). In that case plaintiff purchased a tract of land, a portion of which was overflowed by a millpond, the milldam owners having acquired a prescriptive right to flow the land. Plaintiff brought suit for breach of the warranty deed's covenant against incumbrances. The court held that there had been no breach of this covenant and stated (p. 599 (*628, *629)):

"It [the flowage easement] may have been an incumbrance. But there is a principle recognized by adjudged cases, and resting upon sound reason and policy, which holds that purchasers of property obviously and notoriously subjected at the time to some right of easement or servitude affecting its physical condition, take it subject to such right, without any express exceptions in the conveyance; and that the vendors are not liable on their covenants by reason of its existence."

In Chandler v. Gault (1923), 181 Wis. 5, 194 N.W. 33, this principle was reaffirmed and made applicable to a provision in a land contract which required the seller to deliver to the purchasers an abstract showing "clear title." The land was subject to easements for the maintenance of a transformer, telephone poles, and wires. The easement in favor of the telephone utility also authorized the trimming of trees. The purchasers at the time they entered into the land contract knew of the presence of the transformer and the telephone line, but apparently had no actual knowledge of the tree-trimming rights which went with the telephone easement. The purchasers refused to accept title and the seller brought an action for specific performance. The court in its opinion pointed out that it was common knowledge that the right to maintain telephone lines is usually and customarily accompanied by the right to trim trees in order to prevent contact with the wires, and that the presence of the line was sufficient to charge the purchasers with full knowledge of the character and nature of the easement. The rationale of the decision on the issue of whether the easements constituted incumbrances which would prevent clear title passing to the purchasers was thus stated (p. 11):

"So it is considered in this case that the presence of the transformer and of the telephone line constituted no incumbrance, in the legal sense, within the meaning of the term as used in the contract. That an easement is an incumbrance, of course cannot be denied; but where it is open, obvious, and notorious, it is not such an incumbrance as constitutes a defect upon the vendor's title; nor can the purchaser under a warranty deed with full covenants maintain an action for breach of the covenants of seizin and against incumbrances by reason of the existence of such an easement."

The last sentence of the above-quoted extract from Chandler v. Gault, supra, was recently quoted with approval by this court in Merchandising Corp. v. Marine Nat. Exchange Bank (1960), 12 Wis.2d 79, 84, 106 N.W.2d 317, in which this court held that where property at time of purchase is subject to an easement which is open, continuous, and notorious, the purchaser cannot ground an action for breach of a covenant against incumbrances upon such easement. For other applications of this principle by this court, see Smith v. Hughes (1880), 50 Wis. 620, 7 N.W. 653; and Wisconsin Central R. Co. v. Schug (1914), 155 Wis. 563, 145 N.W. 177, which involved easements in the form of railroad rights-of-way.

Counsel for the plaintiff contends that all of the foregoing Wisconsin cases should be distinguished from the instant appeal on the ground that the court in each was dealing with an executed contract, and because the purchasers had taken possession prior to the institution of court action. Reliance is placed upon the following statement which appears in May v. Lathers (1950), 257 Wis. 191, 195, 43 N.W.2d 15:

"Defendant asserts that he was entitled to a reasonable time to correct the abstracts and relies on Chandler v. Gault (1923), 181 Wis. 5, 194 N.W. 33, but the facts in that case are different from the instant case in that it deals with a transformer, poles, and wires which had been on the land for six or seven years and were open to view. The complaining party had notice of these and made no objection but took possession of the property without protesting. This was held to constitute a waiver, if it be considered the poles, etc., constituted an incumbrance."

The decision in Chandler v. Gault, supra, rested upon two grounds: (1) That there had been a waiver of the right to rescind the contract for defects in title by the purchaser's only requesting an abatement of purchase price when voicing an objection to the easements; and (2) an easement obviously and notoriously affecting the physical condition of land at the time of its sale is not embraced in a general covenant against incumbrances, whether it is a private or public easement. The above quotation from May v. Lathers, supra, had to do with the first and not the second of these two grounds. Even then a careful reading of Chandler v. Gault, supra, will disclose that even with respect to the first ground of decision the element of change of possession is not mentioned as a determinative factor.

The rule enunciated in Kutz v. McCune, and reaffirmed in the later cited cases, does not rest upon waiver based on the conduct of the purchaser occurring after the making of the covenant against incumbrances. Instead it is based on an interpretation of the covenant itself which in turn is grounded on an assumed reasonable intention of the parties, that the parties could not have contemplated that an easement fully known to the purchaser, or which is so open, obvious, and notorious that he should have known of it, is an incumbrance within the meaning of the covenant.

Counsel for the plaintiff purchaser further points out that this rule was criticized in Huyck v. Andrews (1889), 113 N.Y. 81, 20 N.E. 581, and that 4 Tiffany, Real Property (3d ed.), p. 144, sec. 1008, states such rule to express a minority view. We do not consider that the wisdom of the rule is an issue to be passed on. The members of the legal profession of this state, who are conversant with this court's decisions in the field of real-property law, have long been familiar with the rule. They have drafted contracts for sale of real estate and warranty deeds in reliance that this rule was the law. If it is the intention of the purchaser and seller that the seller is to assume the duty of securing the termination of an easement, of a kind which is embraced within the rule, the contract of purchase must affirmatively state such duty.

One of the guidelines to be observed by an appellate court in considering whether to depart from stare decisis is that a principle of law, in the nature of a rule of property, once well established, should be adhered to. Bullis v. Schmidt (1958), 5 Wis.2d 457, 463, 93 N.W.2d 476; Wisconsin Power Light Co. v. Beloit (1934), 215 Wis. 439, 445, 254 N.W. 119; Thorndike v. Milwaukee Auditorium Co. (1910), 143 Wis. 1, 15, 126 N.W. 881. See also Chamberlain, Stare Decisis (1885), p. 20. The reason for this is that people in their business transactions should be entitled to justifiably rely on such rules of property.

By the Court. — The order appealed from is affirmed.

Summaries of

Taxman v. McMahan

Supreme Court of Wisconsin
Oct 29, 1963
124 N.W.2d 68 (Wis. 1963)

In Taxman v. McMahan (1963), 21 Wis.2d 215, 124 N.W.2d 68, the sole issue was whether three existing "right-of-way type" easements and a party wall known to the purchaser were title defects within the meaning of a covenant against encumbrances.

Summary of this case from Lease v. Zarndt
Case details for

Taxman v. McMahan

Case Details

Full title:TAXMAN, Plaintiff and Appellant, v. McMAHAN and wife, Defendants…

Court:Supreme Court of Wisconsin

Date published: Oct 29, 1963


124 N.W.2d 68 (Wis. 1963)
124 N.W.2d 68

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