Empire Realty Corp. v. Sayre

This action is brought to compel the specific performance of a contract for the exchange of real estate, which the defendant refused to carry out on the ground that the plaintiff could not give a marketable title to the premises which it agreed to convey. These premises consist of a corner lot in the city of New York having a frontage of about 50 feet, on University Place and 82^ feet on Twelfth street, upon which lot is standing a 10-story building erected in the year 1899 or 1900, and valued in the contract of sale at $387,500. The title to this property was held to be unmarketable by the learned court at Special Term, for the reason that the building encroached upon the two adjacent streets, the. nature of the encroachment being described in the third and fourth findings of fact, which are as follows:

“(3) The lower portion of the building on plaintiff’s premises is constructed of stone, except the doors and windows, and for two stories the Stone piers are channeled longitudinally at regular intervals; the channels being two inches in depth. The outer surface of this stonework projects both on University Place and Twelfth street two inches over the street line; the inner surface of the two channels being on the line.

“(4) As to the two lower stories of the building in question, the superficial area of the portion of the wall which encroaches on the street is much larger than the superficial area of the inner surface of the channels. It does not appear that so much of the stonework which thus encroaches bears any part of the weight of the building, nor does it appear what the cost would be of cutting off the projecting stonework, or what effect such cutting would have on the appearance of the building.”

No exception was taken to these findings, and the court must therefore- adopt the facts there stated as the basis upon which to rest its determination as to the marketability of the title. In approaching the consideration of his question it must be borne in mind that there is no claim made that the encroachment affects any property rights in and to the easements of light, air, and access which may be possessed by owners of other property abutting upon

As to the'city it may be assumed, although there is no evidence upon the subject, that in contemplation of the erection of the building the then owner observed the preliminary requirements of filing with the proper city department, the department of buildings, the necessary plans, and that the building was erected with the consent of the city after it had approved of these plans. Any contrary assumption would be based upon the conclusion that the city officials had failed to perform their duties by permitting an owner to erect a building without complying with the legal requirements, and such an assumption will not be indulged in, in the absence of proof to sustain it. So far as the record shows no complaint has been made by the municipality concerning the encroachment, and no steps have been taken looking toward its removal, although the building has now been standing for about five years. Under these circumstances is not the possibility of hostile action by the city so remote that it should not be regarded as affecting the marketability of the title? Would this not be.a case where the principle “de minimus non curat lex” would apply?

It is undoubtedly the rule of law that a purchaser will not be compelled to take property the possession of which he may be obliged to defend by litigation. He should have a title that will enable him to hold his land free from probable claim by another, and one that, if he wishes to sell, would be free from any reasonable doubt that would interfere with its market value. Fleming v. Burnham, 100 N. Y. 1 , 2 N. E. 905 ; Greenblatt v. Hermann, 144 N. Y. 13 , 38 N. E. 966 ; McPherson v. Schade, 149 N. Y. 16 , 43 N. E. 527 ; Blanck v. Sadlier, 153 N. Y. 551 , 47 N. E. 920 . 40 L. R. A. 666 ; Heller v. Cohen, 154 N. Y. 299 , 48 N. E. 527 ; Moot v. Bus. Men’s Ins. Co., 157 N. Y. 201 , 53 N. E. 1 , 45 L. R. A. 666 ; Brokaw v. Duffy, 165 N. Y. 391 , 59 N. E. 196 ; Salisbury v. Ryan (recently decided by this court and not yet officially reported) 94 N. Y. Supp. 353 . But this rule will not operate in every case to bar the enforcement of a contract of sale. As said in Cambrelleng v. Purton, 125 N. Y. 610 , 616, 36 N. E. 907 :

“If the existence of the alleged fact which is claimed or supposed to constitute a defect in or cloud upon the title is a more possibility, or the alleged outstanding right is but a very improbable or remote contingency, which, according to ordinary experience, has no probable basis, the court may, In the exercise of a sound discretion, compel the purchaser to complete his purchase.”

See, also, Ferry v. Sampson, 112 N. Y. 415 , 30 N.

Our conclusion in this respect is strengthened by the fact, of which we can take judicial notice, that twice within recent years the state Legislature has sanctioned the continuance of greater encroachments upon public streets. By chapter 610, p. 730, of the Laws of 1896 it was provided that:

“If the front or other exterior wall of any building now standing in said city shall extend not more than four inches upon any street, avenue or public place, such wall shall not be removable, unless an action or proceeding shall be instituted by or in behalf of * * * the city of New York within the period of one year from the passage of this act, for the removal of said wall.”

And in 1899 a similar act was passed (chapter 646, p. 1429, of the Laws of 1899) legalizing walls theretofore erected which projected not more than 10 inches upon the street, unless an action for their removal should be commenced within a year from the passage of that act. This legislation is of some importance as indicating, to an extent at least, the attitude which the city and the state may be expected to take in the future in relation to buildings erected subsequent to 1899 in good faith and upon plans which the city has approved, but which buildings may to a slight extent encroach upon a public thoroughfare.

We think that the contingency of an attack upon this title is so remote that a reasonably prudent man would not refuse to accept it, and that the court at Special Term was wrong in its conclusion that the title was unmarketable by reason of the encroachment. . See Klim v. Sachs, 102 App. Div. 44 , 92 N. Y. Supp. 107 ; Volz v. Steiner, 67 App. Div. 504 , 73 N. Y. Supp. 1006 ; Webster v. Kings Co., T. Co., 145 N. Y. 275 , 39 N. E. 964 .

Upon the trial the further claim was made by the defendant that the plaintiff was not entitled to a specific performance of the contract, because it contained the covenant that the property should be free from incumbrance, except one mortgage therein mentioned, and it was urged that the evidence established the existence of another incumbrance, to wit, an easement in favor of the tenants of the adjoining building in a covered stairwell located in the premises

Other objections were raised to the marketability of the title, on the ground that certain cornices, window shutters, fire escapes, etc., encroached upon adjoining property, and also that there was an encroachment by a cornice of an adjoining building upon the property contracted to be conveyed. We have examined the record in relation to all these alleged defects of title, but we do not consider any of them of sufficient materiality or importance to warrant specific consideration. It is sufficient to say that in our opinion they do not render it unmarketable. It follows, therefore, that the court at Special Term, upon the evidence presented to it, was not justified in holding that the title was unmarketable, and the judgment dismissing the complaint and rescinding the contract must be reversed. If upon a new trial it shall then be made to appear that such an easement exists and constitutes a' material incumbrance upon the property, then it would be a violation of the covenant in the contract of sale against incumbrances, and might present a valid ground for holding that such contract was not enforceable. ■

Referring to the difference in the measure of damages in the two classes of cases, Chief Justice Beasley, in Drake v. Baker, 34 N. J. Law, 358 , said:

“The usual rule on breach of contract is that the party injured, shall be indemnified for the loss which he has sustained. If chattels are agreed for to be delivered at a future day, the measure of damage for their nondelivery is the difference between the contract price and market value at the stipulated time of delivery. * * * But with respect to contracts for the purchase of real estate the case of Flureau v. Thornhill, 2 Wm. Bl. 1078, introduced an exception. That exception was that where' a vendor discovers after the contract of sale that his title is defective, and is on that account unable to complete his bargain, he shall not be held liable to the vendee for the loss of such bargain.”

Referring to this rule, Chief Justice Cockburn, in Sikes v. Wild, 1 Best & Smith, 596, said:

“It probably had its origin in the difficulty in which, in the complicated and highly artificial state of our law relating to real property, an owner of real estate, having contracted to sell, is too frequently placed, from not being able to make out a title such as a purchaser would be bound or willing to take. The hardship which would be imposed on a bona fide vendor, if, upon-some legal flaw appearing in the title, he would be liable in all the consequences which would attach upon a breach of contract relating to personalty, and the difficulty which might be thrown in the way of bringing real property into the market if the full liability attached in such a case have, probably by an understanding and usage among those engaged in the transfer of estates, led to this exception to the general law.”

But, whatever the origin of the rule may be, we regard the law as settled that where the vendor, without fraud on his part, is unable to convey a marketable title, the vendee is not entitled to damages for the loss of his bargain, beyond the money paid, with interest and expenses resulting from the obligations of the contract itself, although the completion of the bargain might have been profitable to him. But where the vendor is guilty of collusion, tort, artifice or fraud, the vendee is then entitled, not only to compensa-

“The vendee in a contract for the sale of land is not ordinarily entitled, upon breach on failure to convey, to recover of the vendor damages measured by the goodness of his bargain or the financial benefit which would result from performance, and it is only when the vendor is for some reason chargeable with bad faith in the matter that recovery beyond nominal damages on that account can be had. If the vendee has paid any of the purchase money, he may recover that back, and he may also recover such expenses as he has reasonably incurred in examination of the title to the property. This is the general rule.”

Only one case has been called to our attention where the court has enlarged the measure of damages as above set forth, so as to permit a recovery which would include the commissions paid to a broker. That is the case of Hening v. Punnett, 4 Daly, 545 , decided at Special Term in 1873, where an action was brought by a vendor to recover from the vendee the damages caused by the latter’s failure to complete the purchase, and the court, without discussion or citation of authority, held that he was entitled to recover as damages the commissions which he had paid his broker. The General Term of the Superior Court of New York, however, in 1893, specifically refused to follow the Hening Case in the later case of Steers v. Laird, 3 Misc. Rep. 408 , 23 N. Y. Supp. 158 . In that case the plaintiffs had engaged a broker to sell their house, and an informal agreement was executed by which the defendant agreed to purchase it, but afterward refused to carry out the contract, and the plaintiff sued him for its breach, and claimed as damages the commission which they had paid'to their broker upon the execution of the agreement. The court held that they could not recover the commission, and the language of Chief Judge Sedgwick in his opinion commends itself to us. He said:

“I do not see in this commission any matter which is attached to the contract or anything more than the plaintiff’s disbursements in their business which they use to be successful. They spent the money to secure a profitable contract. * * * The plaintiffs claim that the commission became a part of the damages from the defendant not performing the contract. In general, I do not see a connection between the paying of the commission and the breach of the contract, of any other kind than would exist between the latter and the expenditure of any other money or effort to procure the contract. As soon as the contract is made the plaintiffs become possessed of the thing out of which they expect to reimburse themselves for their expenditures and to make their profits. They dd not expect, in fact, to be losers, and, if it occurs, they cannot expect to have their losses made good that came from voluntarily paying money for their own benefit in the shape of a commission, which had nothing to do with the obligations of the contract, and from which the defendant received nothing. It is not correct to consider that the plaintiffs in a legal sense have lost the value of the contract as it was. Their contract has the value of an action for damages and for specific performance. It is not to be said that they thought they would get the land without difficulty. They knew that all they got was a contract.”

We are of the opinion, therefore, that the trial court properly excluded the broker’s commissions from the damages which the defendant could recover; but, for the reasons stated in the discussion of the marketability of the title, the judgment must be reversed, and a new trial ordered, with costs to the plaintiff appellant to abide the event. All concur.