SAL INSALACO and JOHN WOLFE vs. JOSEPH ROSSELLI and ROBERT ROSSELLE, as Trustees of Rosev Realty Trust.

The defendants, Joseph A. Rosselli and Robert F. Rosselle, as Trustees of Rosev Realty Trust, on July 13, 1982 entered into a lease and an option to purchase for the land and building at 530-532 Medford Street, Charlestown, section of the City of Boston ("locus"), with the plaintiffs, Sal Insalaco and John Wolfe. The option was drawn by adding language to a Greater Boston Real Estate Board Standard Form Purchase and Sale Agreement ("option"). Although this document is sometimes referred to as a purchase and sale agreement, I find that the parties intended it to be, and I find it is, an option. A dispute has subsequently arisen as to certain terms of the option. The plaintiffs brought the complaint herein asking that the defendants be restrained from disposing of the property and that they be ordered to convey the property in accordance with the terms of the option. The defendants counterclaimed asking for a declaratory judgment that the lease and option to purchase have expired and that the plaintiffs' status is one of tenants at will.

These claims were heard by a Land Court Justice designated to sit as a Superior Court Justice. A trial was held at the Land Court on July 15, 1987. Two witnesses testified and three exhibits were introduced into evidence. Exhibit 1 is a stipulation of facts entered into by the parties. All exhibits are incorporated herein for the purpose of any appeal.

The Stipulation of Facts provides as follows:

1. At all times relevant, Joseph A. Rosselli and Robert F. Rosselle, as Trustees of Rosev Realty Trust ("defendants") have been the owners of the property at 530-532 Medford Street, Charlestown, Massachusetts 02129 ("Medford Street").

2. Sal Insalaco and Joseph Wolfe ("plaintiffs") have occupied the premises at 530 Medford Street continuously since August 1, 1982.

3. On July 13, 1982, the plaintiffs and the defendants entered into a Lease ("lease") and a "Purchase and Sale Agreement" ("option").

4. On July 13, 1982, the plaintiffs paid to the defendants $1,000 deposit as specified in the option.

5. At all times since August 1982, the plaintiffs have paid the defendants $400 per month.

In addition to the foregoing, I find as follows:

1. The lease includes the following handwritten provisions:

A. One Year Lease; Option of Lessee to extend for a second year at $5700 or $475/month for a third year at $6000 or $500/month. The rent shall remain at $400/month so long as the lessor is unable to offer clear title.

B. Lessee has the option to purchase the property for $52,500 within sixty days of the lessor offering clear title with $150 per month of rent credited toward the purchase price but in no event must they purchase before February 1, 1983 in accordance with the terms of the attached purchase and sale agreement, attached hereto and incorporated herein by reference.

2. The terms of the option provide for the conveyance of "a good and clear record and marketable title thereto free from encumbrances."

3. The option contains the following handwritten provision:

Both parties acknowledge that there is not presently clear title to the property. The buyers have sixty days from notice that this title is clear to purchase the property or they forfeit the $1000 option to purchase deposit....

4. The defendants, by their agent and attorney, William J. Galvin, Jr., prepared and signed both the lease and the option to purchase.

5. The lease provides it will extend one year from August 1, 1982 and continue in full force from year to year until either party on or before the first day of July gives written notice of intention to terminate this lease on the last day of July next after the date of said notice.

6. Prior to the execution of the lease and the option to purchase, the defendants had attempted to sell the property to a third party; however, this party would not accept title as it was not "clear record and marketable" because of a break in the chain of title between a conveyance to a Simon Cullinane in 1863 and a conveyance by a James P. Cullinane in 1935.

7. On March 6, 1984, Attorney Galvin, as agent for the defendants, wrote to the plaintiffs concerning the purchase of the locus. This letter (Exhibit 2) purported to notify the plaintiffs that they had sixty days to purchase and of an increase in rent to $475 per month pending the sale.

8. On March 28, 1984, the plaintiffs responded by sending a certified letter (Exhibit 3) to William Galvin stating that the March 6th communication was "inappropriate and inapplicable" in light of the lease with the option to purchase of July 13, 1982. The plaintiffs also enclosed a $400 check for April rent.

9. On April 1, 1985, the defendants filed a petition to register and confirm title to the locus. This registration petition is presently pending in the Land Court as Registration Case No. 41740. Although a favorable report was filed by the Land Court Examiner, the abstract, in fact, reports the gap in the chain of title discussed in finding #6. Moreover, there is no evidence before the Court to bridge this gap. In addition thereto, an objection has been filed by the Bricklayers and Masons Union No. 3 Education Corporation claiming that the defendants' building encroaches on their land.

10. Title to the locus was not "good and clear record" on March 6, 1984 and is not "good and clear record" as of the date hereof.

At issue is the meaning of the handwritten documents calling for "clear title" and the typewritten provisions of the option calling for the conveyance of "a good and clear record and marketable title thereto, free from encumbrances ... except for those specifically noted." The decision in Coons v. Cartensen, 15 Mass. App. Ct. 431 , 433 (1983) noted that:

Good and clear record title "rests on the record alone, which must show an indefeasible unencumbered estate." O'Meara v. Gleason, 246 Mass. 136 , 138 (1923). If extrinsic evidence, i.e., beyond the record, is required to support the title, it may be marketable, but it is not good and clear record title. (cites omitted) It is the word record which gives the phrase "good and clear record title" distinct meaning in conveyancing. A "clear title," unmodified by the word "record" has the same connotation as "marketable title," i.e., it "may be shown by oral or other evidence outside the record to be marketable beyond any reasonable doubt." Cleval v. Sullivan, 258 Mass. 348 , 351 (1927), quoting Morse v. Stober, 233 Mass. 223 , 226 (1919).

Based upon certain conveyancing standards, the defendants argue that the defect in title was cured in 1985, by the expiration of fifty years from the 1935 conveyance referred to in finding #6 above. I find this reasoning misplaced, as the mere passage of time with nothing more does not cure a known title defect.

When parties use a phrase which has acquired as much decisional gloss as "good and clear record," and undertake to deliver such a title, they assume an obligation to do just that. It does not lie in the mouth of the seller who has agreed to give clear record title to argue that the defect which clouds it is of little practical consequence.

Coons v. Cartensen, 15 Mass. App. Ct. 431 , 436 (1983).

The defendants have counterclaimed asking for a declaratory judgment that the option to purchase expired upon termination of the lease. I find and rule that the lease has never been terminated and is still in force as a self-extending lease and further find and rule that the validity of the option is not dependent upon the continuation of the lease.

Finally, the defendants have requested that if a judgment enters for the plaintiffs, that equity intervene to increase the purchase price to present market value and not to apply $150 per month of the rent against the purchase price as specified in the lease. It is well established that "a contract should be construed to give it effect as a rational business instrument and in a manner which will carry out the intent of the parties." Lewis v. Chase, 23 Mass. App. Ct. 673 , 677 (1987). While this Court acknowledges the discretion of the judge in granting specific performance, it is undeniable that the defendants were represented by an attorney and were knowledgeable parties familiar with real estate transactions.

It may be unfortunate that the defendants have bound themselves to a market price in 1982 based upon their belief that title would be clear within a year or two; however, this is an enforceable obligation in spite of the inflation in the real estate market in recent years. It would also appear that the defendants have been less than diligent in their attempts to clear title. In any event, it is evident from the language of the lease and option that the defendants wished to convey locus and that the plaintiffs wished to purchase locus with a clear record and marketable title. It is implicit from the documents that the defendants have the obligation and agreed to clear title or to make a good faith effort to do so. Lewis v. Chase, 23 Mass. App. Ct. 673 , 677 (1987). Should the defendants be unable to deliver such title, paragraph 12 [Note 1] of the option gives the plaintiffs the recourse of either purchasing the property "as is" or calling off the entire transaction. While the defendants made an effort to clear title by filing the registration petition in 1985, I do not find that due diligence has been exercised by the defendants in this regard.

The defendants argue that the option is invalid due to a violation of the Rule against Perpetuities. I find that the defendants by their actions and conduct are estopped from asserting such a defense. The plaintiffs, unrepresented by counsel, relied upon the representations of the defendants' counsel's assertion that title would become clear within a year or two, and thus the plaintiffs entered into the lease and option, prepared by the defendants, and proceeded to occupy, maintain and make extensive repairs on the premises. Based upon the aforementioned representations, the defendants' lack of due diligence in attempting to clear title, and the ensuing reliance by the plaintiffs, the defendants are now estopped from asserting this defense. See Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722 (1974). In any event, should the plaintiffs' proceed as suggested below, the second-look doctrine would apply and the option would be valid under the Rule.

Accordingly, I find and rule that the plaintiffs have a valid option to purchase the property which may be exercised at the present time as specified in paragraph 12 should the plaintiffs so choose. [Note 2] In so holding, I take into account the possibility that through no fault of the defendants, it may not be practical to register title. Should this be the situation, I rule that within a reasonable time after such determination, the plaintiffs must choose whether to exercise the option by taking title as it stands or cancelling the entire transaction. Furthermore, should the plaintiffs exercise the option, $150 per month of the rent from the date beginning February 1, 1983 shall accrue against the purchase price as set forth in the lease of July 13, 1982. Should the plaintiffs choose to wait to purchase until the defendants are able to offer good and clear record and marketable title, it will be necessary for this Court to retain jurisdiction until all issues are ultimately resolved. The plaintiffs have thirty days in which to file a response with this Court setting forth a determination as to how they wish to proceed concerning this option.

Judgment accordingly.