Empire Realty Corp. v. Sayre

O’Brien, J.: 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 sot 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 fifty feet on University place and eighty-two and one-half feet on Twelfth street, upon which let is standing -a .tem&tory building erected in the year 1899—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 ad jacent streets, the nature of -the encroachment being described in the 3d and 4th findings of fact, which are ■as follows: " III. 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 about two inches in depth. The outer sur — 417 — face of this stone work projects both on University Place and Twelfth Street two inches over the street line, the inner surface of the channels being on the line. “ IV. 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 stone work 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 stone work, 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 this 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 these streets. It is also to be observed that the encroachment- is within the stoop and area line, or, in other words, within that part of the sidewalk which in a proper case and by the exercise of proper authority may be withdrawn from the use of the general public. (Broadbelt v. Loew, 15 App. Div. 343 ; affd., 162 N. Y. 642.) Under these circumstances the only party that has the legal authority to question the right of the owner to maintain the building as it now stands is the city of New Yorb. , 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 com — 418 — plaint lias 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 ? W ould this not be a case Where 'the principle de minimis non ourat 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; Greenblatt v. Hermann, 144 id. 13 ; McPherson v. Schade, 149 id. 16 ; Blanck v. Sadlier, 153 id. 551; Heller v. Cohen, 154 id. 299; Moot v. Business Men’s Investment Assn., 157 id. 201; Brokaw v. Duffy, 165 id. 391; Salisbury v. Ryon, 105 App. Div. 445.) 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): "If the existence of the alleged fact, which is claimed or supposed to constitute a defect in or cloud upon the title, is a mere 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.” (Ferry v. Sampson, 112 N. Y. 415.) It has been well said that this discretionary power is to be carefully and guardedly exercised, and applied only in cases free from all reasonable doubt (Ferry v. Sampson, supra; Moore v. Williams, 115 N. Y. 586; Mutual Life Ins. Co. v. Woods, 121 id. 302); but when such a cgse arises, then the court will not refuse to exercise it. In the present case the encroachment is slight, and the rights of abutting property owners, as already indicated, are not affected by it,. It was not caused, so far as the record shows, either through bad faith or willfulness on the part of the owner who erected the building, and the city has acquiesced in the situation for five years. In view of all these facts it seems to us that the possibility of an attack is so remote as to take the case out of the operation of the general rule — 419 — and place it within the exception where the ■ court should exercise its discretion* and direct that the contract be enforced. 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 of the Laws of 1896 (amdg. Consol. Act [Laws of 1882, chap. 410], § 471) 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 he removable unless an action or proceeding shall he 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 (Laws of 1899, chap. 646) legalizing walls theretofore erected which projected not more than ten inches upon the street unless an action or proceeding 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; Volz v. Steiner, 67 id. 504; Webster v. Kings Co. T. Co. 145 N. Y. 275.) 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 contracted to be conveyed. A careful reading of the record satisfies us that the evidence fails to establish such an easement. In — 420 — relation, to this it appears that in one corner of the building and running from the top to the bottom, there is a triangular space, one side being formed by the party wall between this building and the adjoining one, and the other two sides being formed by interior walls of this' building; that the triangular spacé is occupied by á stairway with a door opening upon it from each floor of this' building, and also one opening upon it from each floor of the adjoining building; that the stairway is, to an extent, used as a storage place for pails, brooms, etc., by the tenants of the adjoining building, and that at the time .the leases with these tenants were made there was a common owner of the two buildings. Further- than this nothing appears tending to support the claim that these tenants have an easement in the stairwell. It is not shown, that, by. their respective lease's, they acquired any right to use it, and so far as anything in the record discloses their use of it may be under a mere license, revocable at any time. As to the plaintiff itself, it denied that any such easement existed in favor of the tenants, and as it was the owner of the adjoining property as well as the premises in suit at the time the contract of sale was made, it' would be estopped by reason of its covenant against incumbrances from asserting an easement in its own favor in the stairwell. Furthermore,, the existence of this alleged easement was a question of fact to be- determined by the court at Special Term, and not , only, as we have already shown, does the evidence fail to warrant any finding that such an easement existed, but mo question as to it is properly before this court. ’ Apparently no request was made to the court at Special Term to find, as a matter of fact, that such easement existed, and no exception appears in the record by which the failure to so find can be reviewed by us. 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 au 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 — 421 — 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 enforcible. In view of the possibility of such a situation arising, it may be proper for us at this time to consider the appeal now taken by. the defendant from that portion of the judgment which excludes from the damages awarded him the amount paid his brokers as commissions in securing the contract. The measure of damages in this class of cases, where a vendor, although acting in good faith, is not able to convey a marketable title to the land which he has contracted to sell, differs from that which is applicable upon a breach of contract for the sale of personalty. As said by Mr. Justice Woodward in Hertzog v. Hertzog's Administrator (34 Penn. St. 418, 428): " The man who contracts for a horse and pays the price may recover his value; ” but “ the man who contracts for land'and pays the price, but loses it without fraud in the vendor, can at most only recover back his money and interest, or the value of his services rendered, if this was the form in which the consideration was paid.” And to this recovery must be added, under the decisions of our State, the expenses which he has reasonably incurred in examining the title to the property. (Northbridge v. Moore, 118 N. Y. 419.) 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 non-delivery 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 — 422 — 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 Judge Cookburn 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 his title,-he were held 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 com-, pensatory damages, but to damages arising from the loss of the bargain,, or the money he might have, derived from its completion.(Northbridge v. Moore, supra ; Cockcroft v. N. Y. & H. R. R. Co., 69 N, Y. 201; Leggett v. Mutual Life Ins. Co. of N. Y, 53 id. 394; Pumpelly v. Phelps, 40 id. 59; Conger v. Weaver, 20 id. 140; Bitner v. Brough, 11 Penn. St. 127; Morgan v. Bell, 3 Wash. 554, 578; 16 L. R. A. 614, 623.) As stated by the Court of Appeals in the Northbridge Case (supra): “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 — 423 — 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, how-ever, in 1893, specifically refused to follow the Hening case in the later case of Steers v. Laird (3 Misc. Rep. 408). 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 plaintiffs 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 plaintiffs’ disbursements in their business, which they use to be successful. They spent the money to secure a profitable contract. * * * The plaintiffs claim that the com- mission 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 do 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 — 424 — for their own benefit in. the shape of a commission, which had nothing to do with tire 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.” It is to be observed., that the broker’s commissions which the present defendant seeks to recover had nothing to do with the obligations of either party under the contract itself. The commissions were not incurred in performing-that contract, but in procuring it. The recoverable damages aré such as flow from the breach, and they include, in addition to the amount paid upon the purchase price, only the expenses incurred in the attempt to carry out the contract, and which were caused or assumed by its obligations. To this class of damages belong those recovered in Cogswell v. Boehm (5 N. Y. Supp. 61). In that case the vendee' had unreasonably refused to accept title, and the plaintiff had thereby been compelled to borrow money to pay a mortgage upon the premises, and it was held- that he could recover as his damages the amount of legal commission paid for securing the new loan, and the attorney’s fees and disbursements connected therewith. But those expenses, it will be observed, were incurred subsequent to the execution of' the contract, and resulted directly from its obligations. They, therefore, stand upon a basis different from the broker’s commissions in the present case, which were paid, not to carry out, but to procure the contract. That payment was purely personal to the plaintiff, and not within or touching the contractual relations of the parties. The return of the commissions could not have been claimed if the contract had been performed, and the non-performance of it does not give a right to the defendant to recover them, in the absence at least of any provision to that effect in the contract, or any proof tending to show, knowledge and assent on the part of the plaintiff which would bind it to the repayment of such commissions. We see no reason upon the facts in this case for enlarging the measure of damages as fixed by the courts in this class of cases extending through a long course of judicial decisions, •- ■ — 425 — 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 reason 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. Patterson, Hatch and Laughlin, JJ., concurred. Judgment reversed, new trial ordered, costs to plaintiff appellant to abide event.