Opinion
No. 74-033
Decided October 22, 1974.
From a judgment awarding plaintiffs the amount paid by them for a ninety-day option to purchase a campground from defendant, defendant appealed.
Affirmed
1. REAL PROPERTY — Reservation — Mineral Rights — Title Unmarketable. A reservation of mineral rights on real property constitutes an encumbrance rendering the title to that property unmarketable.
2. VENDOR AND PURCHASER — Option — Exercisable at Any Time — Cannot Convey — Good Title — Optionee — Rescind — Recover Consideration Paid. When an option agreement may be exercised at any time, it is the duty of the vendor to be ready to convey good title at any time, and where the purchaser discovers that the vendor cannot do so, the contract may be rescinded and the optionee may recover the consideration paid.
Appeal from the District Court of Chaffee County, Honorable Howard E. Purdy, Judge.
Pferdesteller, Vondy, Horton Worth, P.C., Fred W. Vondy, Mack Witty, for plaintiffs-appellees.
Carl Feldhamer, P.C., I.H. Kaiser, for defendant-appellant.
Defendant Springer appeals from a judgment awarding $3,000 to plaintiffs Eychaner, which was the amount paid by them for a 90-day option to purchase the Buena Vista KOA Campground from the defendant. We affirm.
The case was tried to the court on an agreed statement of facts. The parties stipulated, among other things, that the Eychaners expected to use the campground as a commercial venture, that as part of their efforts to procure financing for the project they obtained a title report which showed the reservation of 25 percent of the mineral rights by Springer's grantor, and that the Eychaners notified Springer before the expiration of the option period of the unmarketability of title, simultaneously demanding return of the $3,000 payment.
The option agreement allowed the exercise of the option at any time within the 90-day period, and if exercised, the non-refundable $3,000 option money was to be applied on the down payment. The agreement did not contain an express warranty of marketability of title.
[1] The trial court concluded that marketability of title was an implied obligation of the option contract. Springer's challenge to this ruling presents the only issue requiring determination. Springer does not contend that his title was marketable. Clearly it was not. The reservation of mineral rights constitutes an encumbrance rendering the title unmarketable. See Rule v. Link, 84 Colo. 82, 267 P. 1005; 8A G. Thompson, Real Property § 4484 (J. Grimes 1963 Replacement). Springer's argument is that an option agreement does not require an optionor to have marketable title in the absence of an express warranty in the contract. We do not agree.
Had the Eychaners chosen to exercise their option, thereby creating a contract for sale of the real estate, they could have rescinded the contract on Springer's failure to tender marketable title. See Heaton v. Nelson, 69 Colo. 320, 194 P. 614; McCutchen v. Klaes, 26 Colo. App. 374, 143 P. 143. Having ascertained during the option period that Springer did not have marketable title, the Eychaners were not required to exercise the option, tender the balance of the down payment and demand a deed from Springer. Since Springer failed to show that he could obtain marketable title, the gesture would have been futile. See Spaulding v. Porter, 94 Colo. 496, 31 P.2d 711; Heaton v. Nelson, supra.
[2] Where an option agreement may be exercised at any time, it is the duty of the vendor to be ready to convey good title at any time, and where the purchaser discovers that the vendor cannot do so, the contract may be rescinded and the optionee may recover the consideration paid. Burks v. Davies, 85 Cal. 110, 24 P. 613; see Tatum v. Levi, 117 Cal. App. 83, 3 P.2d 963.
Judgment affirmed.
JUDGE ENOCH and JUDGE RULAND concur.