Rehearing Granted May 19, 1953.
[75 Ariz. 277] V. L. Hash and Virginia Hash, Phoenix, for appellant.
Clarence O. Fehling, Phoenix, for appellees.
Action by appellees, hereinafter referred to as plaintiffs, against appellant, hereinafter referred to as defendant, wherein plaintiffs seek specific performance of a contract between plaintiffs and defendant concerning the sale and transfer of real estate, which action was consolidated for trial by stipulation with an action by defendant against the plaintiffs for forcible entry and detainer of the same property. Judgment was rendered in favor of plaintiffs directing specific performance of the contract and dismissing defendant's action for forcible entry and detainer.
The fact situation which gives rise to this litigation is that on March 2, 1951, plaintiffs and defendant signed and delivered to the Phoenix Title and Trust Company, a corporation, as escrow agent, instructions wherein plaintiffs were to sell to the defendant certain real property for the consideration of $20,000, the same to be paid by the defendant in the following manner: $14,158.64 thereof by trading to the plaintiffs certain real property then owned by the defendant, and the balance by assuming the payment of $5,841.36, represented to be the approximate unpaid balance due under two certain contracts of sale as evidenced by escrows numbered 58951 and 65693. One of these escrows represented a contract whereby one Stone and wife had sold to one Hill and wife the property defendant agreed to purchase. This contract will be referred to as the Stone contract. The other represented a contract whereby Hill and wife sold their interest therein to one Wray and wife, hereinafter referred to as the Hill contract. These two contracts were duly recorded prior to the transaction involved in this conflict.
Under the escrow instructions between plaintiffs and defendant, plaintiffs, the sellers,[75 Ariz. 278] agreed to deliver to the escrow agent a deed conveying the property to the defendant. Such a deed conveying the property to the defendant subject to the Stone and Hill contracts was so delivered. On the same day, March 2, 1951, the plaintiffs and defendant signed separate escrow instructions to the Phoenix Title and Trust Company as escrow agent, wherein the defendant as seller and the plaintiff as purchaser agreed to sell and purchase the property of the defendant, which defendant had agreed to trade to the plaintiffs in part payment of the property defendant was purchasing, as aforementioned. The foregoing is rather complicated, but the effect thereof is that the parties executed simultaneous agreements, whereby defendant was to purchase from the plaintiffs property for $20,000 and pay therefor by deeding to the plaintiffs her property and assuming the obligations under the Stone and Hill contracts with a purported balance due thereon of approximately $5,841.36. Possession of the respective properties was exchanged immediately.
Defendant refused to execute the deed for delivery to the escrow agent as agreed, for the asserted reason that the plaintiffs did not and could not convey good and marketable title. The court after trial before a jury ordered defendant to specifically perform by delivering to the Phoenix Title and Trust Company, pursuant to the escrow instructions, a deed conveying to the plaintiffs the property she had agreed to convey. Defendant appeals and makes several assignments to the effect that the court erred in decreeing specific performance for the following reasons: (1) that the plaintiffs could not convey good title to the property they agreed to sell to the defendant; (2) that plaintiffs had an adequate remedy at law for damages; and (3) that defendant discovered new evidence subsequent to the trial upon which the court should have granted the defendant a new trial.
The factual basis of defendant's contention that the plaintiffs could not perform their part of the agreement and convey good title is that plaintiffs' source of title is a deed dated March 18, 1948, from the aforementioned Wray and wife, which deed was subject to the Stone and Hill contracts, the obligations of which plaintiffs assumed. Subsequently and in November, 1948, Hill and wife executed and delivered to one
Glick a joint tenancy deed conveying the property to Glick and wife subject to the terms of the Stone and Hill contracts. Thereafter and in December, 1950, Stone and wife executed and delivered a joint tenancy deed conveying the property to one Raney and wife subject to the terms of the Stone contract.
On the date of the execution of the aforementioned escrow instructions by the plaintiffs and defendant, plaintiffs also executed and delivered to the escrow agent assignments of their interest in the Stone and Hill contracts, such assignments providing that defendant was to assume the balances due [75 Ariz. 279] thereon, mentioned in the assignments as aggregating $5,841.36. It will be noted this is the sum defendant agreed in the escrow instructions to pay the plaintiffs as part of the purchase price for the property plaintiffs agreed to convey to the defendant.
Plaintiffs have a warranty deed from Wray and wife conveying the property to them subject to the provisions of the Stone and Hill contracts. It appears from the Stone and Hill contracts that the Phoenix Title and Trust Company is the escrow agent in both of these transactions; that the balances due thereunder are to be paid to it, and that deeds from Stone and Hill have been delivered to the escrow agent for delivery to the purchasers therein when such balances are paid. If the defendant pays the balance due under the Stone and Hill contracts as she agreed, she would receive the deed from the plaintiffs, and she would thereby complete her chain of title from Stone through the intervening purchasers Hill and Wray. Defendant claims that even then the title she would receive would be clouded by the subsequent issuance of the aforementioned joint tenancy deeds to Glick and Raney.
The troublesome question then remaining is whether, when defendant has thus performed and secured this chain of title, she would then have a marketable title. The general rule is that, in the absence of express provision in the contract to the contrary, it is implied that the seller, when the purchaser meets his obligations under the contract, will convey a marketable title; and if it appears that he will be unable to meet this obligation, specific performance will be denied. 49 Am.Jur. 111, Specific Performance, section 95. A marketable title must be free from any reasonable possibility of future litigation which may be necessary to remove apparent or real defects, free from reasonable doubt, and not clouded by any outstanding covenant or conveyance. Hubachek v. Maxbass Security Bank, 117 Minn. 163, 134 N.W. 640. Such a title must appear of record to be marketable. Winslow v. Gilstrap, 147 Or. 374, 32 P.2d 767.
In the fact situation here presented, when the defendant has complied with the decree of the lower court she would have title meeting the test of marketability if the two recorded joint tenancy deeds to Raney and Glick created no cloud thereon or would reflect no possible or apparent interest remaining in the grantees thereunder. The question for the court to decide is not whether the title is good and the purchaser could successfully defend the same in the event it were attacked. The question is whether there is a reasonable doubt that defendant would be hampered in marketing the property she purchased.
A condition precedent to granting specific performance is that there exists no reasonable doubt that the defendant will not be hindered nor obstructed in marketing her property. We think that when the defendant has complied with the present [75 Ariz. 280] decree her title will be clouded, unless it is adjudged therein that Raney and Glick will have no further interest or unless in some way she is assured that when the contracts are paid she shall receive from them a release of any further interest. Defendant is obligated to make her payments to the escrow agent for the benefit of Stone and Hill respectively. Raney and Glick by virtue of their joint tenancy deeds are no doubt entitled to receive these payments, and if they receive them it would appear they would ...