A Minnesota seller, Victor, entered into a purchase agreement with buyer Nadia. The agreement required the seller to deliver a marketable title at closing. Victor's title search revealed an undischarged mortgage from a prior owner that had not been removed from the title chain. Victor's attorney advised him that the mortgage was likely paid off but that the discharge had never been recorded. Closing was scheduled in 10 days. Victor refused to seek a discharge or take any corrective action, claiming the mortgage was 'obviously paid' and that Nadia should proceed to closing. Nadia refused to close and demanded return of her earnest money. Victor claims Nadia is in default. Under Minnesota law, who is correct?

Question

ContractsBreach_and_remediesHARD

A Minnesota seller, Victor, entered into a purchase agreement with buyer Nadia. The agreement required the seller to deliver a marketable title at closing. Victor's title search revealed an undischarged mortgage from a prior owner that had not been removed from the title chain. Victor's attorney advised him that the mortgage was likely paid off but that the discharge had never been recorded. Closing was scheduled in 10 days. Victor refused to seek a discharge or take any corrective action, claiming the mortgage was 'obviously paid' and that Nadia should proceed to closing. Nadia refused to close and demanded return of her earnest money. Victor claims Nadia is in default. Under Minnesota law, who is correct?

Answer Options

A

Victor is correct because an unrecorded discharge does not affect the seller's ability to deliver marketable title if the underlying debt was actually paid

B

Nadia is correct because marketable title in Minnesota requires that the title be free from reasonable doubt and encumbrances of record; an undischarged mortgage of record renders title unmarketable, and Nadia is entitled to refuse to close and recover her earnest money

C

Neither party is in default because both acted reasonably; the court should order the closing to be delayed until the discharge is recorded, with neither party penalized

D

Nadia is in default because she had a duty to accept title with minor clouds if the defect was curable and the seller expressed intent to cure it before closing