Court Opinion

ID: 9791917
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:20:27.847774+00
Date Added: 2024-06-11T07:37:39.365893
License: Public Domain

ORME, Judge
(concurring in the result in part, dissenting in part, and concurring in part):
B-H apparently lacked actual notice at least of the extent of the waterline easement until well after the purchase agreement was entered into. Nonetheless, the easement appeared of record and thus B-H “is properly charged with constructive notice” of the easement. Callister v. Millstream Assocs., Inc., 738 P.2d 662, 663 n. 3 (Utah Ct.App.1987); Utah Code Ann. § 57-3-2(1) (1990).
In Callister, which concerned a similar contractual provision to the effect that title would be conveyed free of all liens and encumbrances, with no provision made to exempt easements of record or particular classes of easements, we held that the buyer’s constructive knowledge of the encumbrance was essentially irrelevant since it nonetheless “had a contractual right to conveyance of title free and clear of all liens_” 738 P.2d at 663. Come closing, the seller was unable to clear a 60-unit restrictive covenant although it succeeded in substituting for it a more advantageous 75-unit restriction. Id. at 664. This was not enough. “A 75-unit encumbrance failed to meet the requirements of the contract and provided grounds for rescission, just as the 60-unit encumbrance would have done.” Id. We accordingly affirmed the judgment granting rescission.
In Callister, we were urged to reverse in view of the doctrine “that if the purchaser has notice of encumbrances upon the property, and the encumbrance is of such a nature that it could not be removed by the vendor ... then the purchaser takes possession subject to the encumbrances.” Id. at 664 n. 6. We held that the authorities relied on by the vendor in Callister were distinguishable and did not consider the doctrine further. See id. It is noteworthy, however, that the restrictive covenant in Callister was not actually “of such a nature that it could not be removed by the vendor.” On the contrary, it was removed, albeit only on the condition that a different restriction be substituted. But there is nothing to suggest that it could not have been removed altogether, given more successful negotiations with adjacent property owners or others who had to consent to the change.
The Combes raise a similar argument here and it is undisputed — apparently in view of the gross unfeasibility financially and otherwise of rerouting a water district’s deeply buried water line and accompanying easement around the subject property — that the easement in question cannot be removed by the Combes. Although somewhat lukewarm to the general notion when I authored Callister, see 738 P.2d at 664 n. 6, I am now persuaded it makes good sense. If a purchaser has knowledge of an encumbrance that cannot be removed, and enters into a contract calling for conveyance free and clear, the entire contract is an exercise in futility unless the operative provision be taken to exclude such an encumbrance. Otherwise, the purchaser *733has entered into a contract requiring the vendor to do the impossible, which would be nonsensical.
As a matter of vendor-vendee law, the general principle seems to be settled. See 77 Am.Jur.2d Vendor & Purchaser § 120 (1975). However, the rule is otherwise in Utah where a warranty deed has actually been given and the question about an irremediable encumbrance arises in the context of whether the warranty provided in Utah Code Ann. § 57-3-2 (1990) has been breached. See Bergstrom v. Moore, 677 P.2d 1123, 1125 (Utah 1984). For the narrow reason that the contract in this case called for delivery of an unrestricted warranty deed, and it is appropriate to read the statutory warranty into the key contractual provision,11 concur that the Combes cannot prevail under their irremediable encumbrance argument.
Nonetheless, I would reverse the summary judgment in favor of B-H. I believe the five-year delay in asserting a rescission right, during which time payments were made and the contract was twice amended, necessarily poses a material question of fact: Even if some time to assess the situation and explore possibilities of mitigation was available to B-H after “discovery” of the easement, was five years more than the “reasonable time” the law would permit in which to do so? On the record before us, I cannot conclude that five years was not an unreasonable delay.
I concur in the court’s disposition of who is insured under the title policy, but base my conclusion not so much on the characterization of the term “owner” as on the fact that the purchase agreement anticipated the Combes procuring insurance for B-H and the further fact that when both vendor and purchaser under a real estate contract are intended to be insured under a “title” policy, both are clearly identified as insureds, typically with the phrase “as their interests may appear.”
I concur in the court’s opinion insofar as it treats the “abstractor’s negligence” claims, the attorney malpractice claim, the bifurcation issue, and the interest issue.
Finally, even assuming the judgment of rescission should otherwise be affirmed, I disagree with the court’s view of how to calculate the offset against payments made for B-H’s possession of the property for the years between execution of the contract and assertion of a right to rescind, which in my mind leaves B-H with a substantial windfall. I agree with Professor Dobbs, who suggests that in the usual real estate restitution case the buyer’s claim to interest on the payments it gets back, and the seller’s claim to the fair rental value of the property while it was detained, should be considered a “wash.” See D. Dobbs, Remedies § 12.9 at 846 (1973). This approach would work a much fairer result in this case than valuing B-H’s use of the property at agricultural rental rates, not only because the parties’ contract fixes a reliable measure of its total value (and thus of an imputed rental value) at a much higher rate, but also because B-H kept the property tied up for so many years during which the Combes were precluded from marketing the property to other buyers. The restitution decreed in this case does not merely make B-H whole; it gives it a hefty profit.

. Stated another way, the Combes would have breached their agreement to deliver an unrestricted warranty deed upon conveying title subject to the easement and it follows they were in anticipatory breach of the contract’s requirement for a warranty deed by reason of the easement’s existence.