McManus v. Rosewood Realty Trust

Memorandum Opinion BROCK, C.J. The defendant, Rosewood Realty Trust, appeals the decision of the Superior Court (Coffey, J.) awarding the plaintiff, Lawrence R McManus, an auctioneer’s commission for his services in the auction of the defendant’s property. We reverse and remand. On September 23, 1987, the plaintiff conducted an auction of a piece of commercial property that the defendant owned in Rye. The buyer never closed on the property, however, because he discovered that the soil and ground water were contaminated with toxic substances. The plaintiff sued the defendant to recover his auctioneer’s commission, relying on section eight of the auction contract: The seller has good and clear title to all property to be sold .... The property will be sold free and clear of all liens (recorded, unrecorded) and encumbrances at closing. If the Seller cannot clear property by and before closing, the full commission will be due and owing. The plaintiff maintained that because the property was contaminated with toxic waste, the defendant did not have “good and clear” title. The trial court agreed and awarded the plaintiff a $47,900 commission. This appeal followed. On appeal, we uphold “the findings and rulings of the trial court unless they are lacking in evidential support or tainted by error of law.” Public Serv. Co. of N.H. v. Town of Bow, 139 N.H. 105, 107, 649 A.2d 65, 66 (1994) (quotation omitted). The issue before us is whether the presence of contaminants on the defendant’s property destroyed “good and clear” title. “Good” title is synonymous with “marketable” title — one that is “free from any reasonable objection of a reasonable purchaser.” North Bay Council, Inc. v. Bruckner, 131 N.H. 538, 544, 563 A.2d 428, 431 (1989) (quotation omitted). Even if property is contaminated with toxic substances, the title to that property may be “free from any reasonable objection of a reasonable purchaser.” Id.; see also 14 R. [80] Powell & P. Rohan, Powell on Real Property ¶ 881[6][e][v], at 81-179 to -180 (1996). Here, the trial court failed to perceive the distinction between the condition of the title to the property and the condition of the property itself. There is a difference between economic lack of marketability, which relates to physical conditions affecting the use of the 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. Chicago Title Ins. Co. v. Kumar, 506 N.E.2d 154, 157 (Mass. App. Ct. 1987) (quotation omitted); accord HM Holdings, Inc. v. Rankin, 70 F.3d 933, 936 (7th Cir. 1995) (contaminated condition of property not breach of seller’s warranty of merchantable title); United States v. Allied Chemical Corp., 587 F. Supp. 1205, 1206 (N.D. Cal. 1984) (“term ‘encumbrance’ does not extend to the presence of hazardous substances” at the time of conveyance); see also Harbeson, Comment, Toxic Clouds on Titles: Hazardous Waste and the Doctrine of Marketable Title, 19 B.C. Envtl. Aff. L. Rev. 355, 356 (1991) (acknowledging refusal of courts to expand the marketable title doctrine to make the presence of hazardous waste an encumbrance on title). But see Jones v. Melrose Park Nat. Bank, 592 N.E.2d 562, 568 (Ill. App. Ct. 1992) (presence of hazardous waste renders title unmarketable). That the State was authorized by statute to recover the cost of any cleanup of the contaminants that it might undertake does not alter our conclusion. See RSA 147-A:9, II (1996). A civil engineer with the State Department of Environmental Services testified that the State had no such plans. “The mere possibility or suspicion of a defect, which according to ordinary experience has no probable basis, does not demonstrate an unmarketable title.” Powell & Rohan, supra ¶ 881[6][a], at 81-147 (quotation omitted); see Chicago Title Ins. Co. v. Kumar, 506 N.E.2d at 156-57. The trial court erred in ruling that the defendant did not have “good and clear” title to the property. Because it awarded the commission to the plaintiff on this ground, it did not reach the plaintiff’s alternative claim for damages for breach of the implied covenant of good faith and fair dealing. Consequently, we reverse and remand to the trial court for evaluation of this claim. Additionally, we offer guidance to the trial court regarding an issue that may arise on remand. If the court is persuaded by the [81] plaintiff’s remaining argument, it must award damages “to put the injured party as nearly as possible in the same position he would have been had the injury not occurred.” Phillips v. Verax Corp., 138 N.H. 240, 248, 637 A.2d 906, 912 (1994) (quotation omitted). If the lost commission is a proper measure of the plaintiff’s damages, the trial court must determine “the actual understanding and intent of the parties” concerning the amount of that commission. Tsiatsios v. Tsiatsios, 140 N.H. 173, 178, 663 A.2d 1335, 1339 (1995). Reversed and remanded. BRODERICK, J., did not sit; BATCHELDER, J., sat by special assignment under RSA 490:3; HORTON, J., with whom THAYER, J., joined, dissented; the others concurred.