McGuckin v. . Milbank

Andrews, Ch. J. Unless upon the evidence the plaintiff was-in any event entitled to recover at least the sum for which the verdict was directed, the direction was erroneous and the order of the General Term must be affirmed, although a case was or might have been made for the recovery of damages to-some amount for the breach of the covenant against incumbrances contained in the deed of Canldwell. The action was brought upon the theory that the Manchester mortgage had not been cut off by the foreclosure of the mortgage under which Canldwell acquired title, although it was a subsequent lien, and Manchester was made a party defendant to those foreclosures. The defendants, while insisting that the lien of the Manchester mortgage was extinguished by the foreclosures, further contend that although it may have been an outstanding^md valid incumbrance on the property at the time of the conveyance by Canldwell to the plaintiff, and constituted a breach of the covenant against incumbrances contained in Cauldwell’s deed, no case was made for the recovery of more than nominal damages. The plaintiff was neither evicted under the Manchester mortgage, nor has he paid the mortgage or any part of it. It is the general rule that a grantee under *302 a deed containing a covenant against incumbrances, who has not been disturbed in his possession and who has not paid the mortgage or other money lien on the land, is not entitled in an action for the breach of the covenant to recover more than nominal damages. This rule ivas declared with great distinctness in the case of Delavergne v. Norris (7 Johns. 358), and has been steadily adhered to in this state. The principle of the decision is that a covenant against incumbrances is treated as a contract of indemnity, and although broken as soon as made, if broken at all, nevertheless a recovery (beyond nominal damages) is confined to the actual loss sustained by the covenantee by reason of the payment or enforcement of the incumbrance against the property. He is not permitted to recover the amount of the outstanding incumbrance, before payment or loss of the property, although its existence may be an embarrassment to his title and subject him to inconvenience. The reason for the rule is stated in Delavergne v. Norris. “If the plaintiff, when he sues on a covenant against incumbrances, has extinguished the incumbrance, he is entitled to recover the price he has paid for it. But if he has not extinguished it, but it is still an outstanding incumbrance, his damages are but nominal, for he ought not to recover the value of an incumbrance, on a contingency, where he may never be disturbed by it.” The case cited was the case of a mortgage which could be discharged as of right by a money payment, and -where the grantee was in the undisturbed possession of the land. But there is no duty resting upon a covenantee in such a case to pay the incumbrance, as. between him and liis grantor, and if the title of the covenantee is divested by proceedings in invitum based on the incumbrance, without fraud or collusion on his part, then it would seem that whatever damages can arise out of the breach of the covenant had happened and may be recovered. In the case supposed the covenantee has lost his property by reason of the incumbrance. It is no longer a contingent or speculative injury, but certain.and final to the extent of the value of the interest of which he has been divested. *303 In the present case, as has been said, the plaintiff neither paid the Manchester mortgage, nor was he evicted under it. Lots 65 and 69 were sold under the mortgage executed by the plaintiff to the Metropolitan Life Insurance Company. The title of the plaintiff to five of the six lots covered by the Manchester mortgage had been conveyed by him prior to this foreclosure. It does not appear that his deeds for the five lots contained any covenants, nor that they were sold for less than the full value. The inference from the facts proved is that neither the grantor nor the grantees in these deeds supposed at the time the conveyances were made that the Manchester mortgage was a lien on the premises. All the parties assumed that it was divested by the foreclosure of the Cauldwell mortgages. It does not appear, therefore, that the plaintiff suffered any injury as to the five lots by reason of the^existence of the Manchester mortgage, and he was not entitled to any damages as to those lots. The plaintiff, upon the proofs, was not bound to indemnify his grantees, and the benefit of the covenant did not pass to them by the conveyances from the plaintiff. In respect to the one lot, the title to which remained in the plaintiff up to the time of the foreclosure, a different question is presented. If there was evidence that the sum bid for that lot on the sale was affected by the fact of the incumbrance of the Manchester mortgage, which (if a lien) was paramount to the lien of the mortgages of the Metropolitan Life Insurance Company, under which the sale was made, and the lot on that account brought less than it otherwise would, then a reasonable basis for the award of substantial damages would have been established, provided, as we assume for the purposes of this case, the Manchester mortgage was an existing incumbrance. The covenantor could not complain that the plaintiff suffered the lot to be sold under the Metropolitan. Life Insurance Company mortgages. The plaintiff may have been unable to pay the mortgages and prevent a foreclosure, but whatever may have been the reason for his default was a matter in which the covenantor had no concern. When the plaintiff lost his title to the lot, all the *304 damages lie could sustain from the breach of Cauldwell’s covenant had been incurred, and if the property did not bring its full value by reason of the incumbrance of the Manchester mortgage, to the extent of the deficiency between the price for which it was sold and the price it would have brought except for tlie incumbrance, the plaintiff suffered an actual injury from its breach, an injury not contingent or speculative, but real and capable of ascertainment by a jury. But the infirmity of the plaintiff’s case is that the evidence fails to show that the Manchester mortgage was a factor which entered into the sale, or was in the contemplation of the purchasers on the foreclosure. The Metropolitan Life Insurance Company had accepted the title when it took its mortgages. No reference was made to the Manchester mortgage at the foreclosure sale. In fact the inference is very strong that the bids were made on the assumption that the Metropolitan Insurance Company mortgages were the first and paramount liens on the property. There is no evidence of the value of the lot owned by the plaintiff at the time of the sale or that such value exceeded the sum for which it was sold. The lot sold for a sum nearly equal to wliat the property had cost the plaintiff. The plaintiff was entitled to recover a sum equal to any actual injury lie had suffered in respect to the one lot from a breach of the covenant, but it ivas not shown that such injury was equal to the one-third part of the Manchester mortgage. His legal injury under the evidence could not exceed the loss he sustained on the one lot to which alone he had title at the time of the foreclosure, and not to two lots which the trial judge seems to have assumed he owned at that time. We think the trial court erred in directing a verdict for any specific sum, and that the order of the General Term properly granted a new trial. It is unnecessary to pass upon the other questions argued. The order should be affirmed and judgment absolute directed. All concur, except Martin, J., absent. Order affirmed and judgment absolute ordered for defend-'ah-ts. with costs.