Opinion ID: 317105
Heading Depth: 1
Heading Rank: 2

Heading: 'good and merchantable fee simple title'

Text: 17 The district court determined that U.S. Steel's mineral reservation coupled with the damage release destroyed the merchantability of the land in question and that this encumbrance prevented Shel-Al from conveying 'good and merchantable fee simple title,' as required by the purchase commitment. Shel-Al argues that in determining whether title is marketable the controlling question is whether or not the market value of the estate is affected. Appellant's contention is that the reservation of mineral rights will not affect the use and enjoyment of the real estate because there is no right to use the surface of the land. Because U.S. Steel abandoned all mineral operations in Jefferson County in 1962, because any minerals of value under the property are of the depth greater than 450 feet, and because all the surrounding area has been developed commercially, appellant asserts that the mineral reservations here would not have the slightest effect on the use and enjoyment of the land and thus on its merchantability. 18 Both parties agreed that Albama law applied. Although there was no authority directly on point, several Alabama decisions clearly indicate that such an encumbrance is sufficient to destroy merchantability. See Brooks v. Shepard, 157 F.Supp. 379 (S.D.Ala. 1957); Blaxton v. J. L. Tood Auction Co., 281 Ala. 621, 622, 206 So.2d 867, 878 (1968); Johnson v. Malone, 252 Ala. 609, 42 So.2d 505, 509 (1949). Also decisions in other jurisdictions support the conclusion that title is not merchantable when mineral rights to property are reserved to a third party. See Winter v. Mackie, 376 Mich. 11, 135 N.W.2d 364 (1965); Snaman v. Barardino, 136 Pa.Super. 177, 7 A.2d 140 (1939). Finally, the encumbrance here was more than merely the reservation to extract minerals, but also included a plenary release of all claims for injury which might be suffered by the landowner as a result of either past or future mining operations. A similar release has been held by the Alabama Supreme Court to constitute an encumbrance of property and to be enforceable. Republic Steel Corp. v. Payne, 272 Ala. 483, 132 So.2d 581 (1961). We concur with the district court that the mineral reservation coupled with the damage release clause was a sufficient impediment to title to prevent there being a 'good and merchantable fee simple title.' 19 We find no merit in the argument that American National had previously dealt in property containing mineral reservations. This contract stands on its own terms. What was tendered was simply not a 'good and merchantable fee simple title' to the land. Moreover, American National responds that its prior mortgage venture in Jefferson County did not involve a six-story structure with an existing mine shaft underneath which still contains ore and a refusal to release mineral reservations as U.S. Steel initially did. Also, American National points out that when Shel-Al approached Liberty National, Birmingham's largest life insurance company which was totally familiar with the local situation, that they specifically had the same concern over the mineral reservation and damage release provisions in the deed. 6 20 We also agree with the trial court that American National was not dilatory with respect to notifying Shel-Al of its position regarding the defective title, that it demanded a cure which was not furnished by Shel-Al and that it could not be charged with an anticipatory breach of the contract. 21