Erwin v. Myers

— 104 — The opinion of the court was delivered, November 5 th 1863, by Strong, J. This was an action of ejectment brought by Peter Erwin against Andrew Myers, to recover the possession of a lot of ground which the plaintiff by articles of agreement had covenanted to sell and convey to the defendant for the sum of $3700. The legal effect of the articles was to bind the plaintiff to give to the defendant a good title to the whole of the premises. From the evidence given on the trial, it appears that neither when the articles of agreement were made, nor when this ejectment was brought, nor at any time since, was the plaintiff seised of more than an undivided moiety of the premises, and consequently he could not make title to more than one-half of what he had agreed to convey. The defendant having paid a portion of the stipulated purchase-money, and having entered under the contract, this ejectment was brought to enforce its consummation or its rescission. On the first trial, it appearing that the plaintiff was the owner of but an undivided half of the property, and that the defendant had paid one full half of the stipulated purchase-money, a verdict and judgment were, under the instructions of the court, rendered for the defendant. The judgment was reversed in this court, and the case was remitted for a new trial. The instructions sent down were in substance, that the defendant having entered under the plaintiff, could not retain his possession for the reason that his vendor’s title is defective, and that he could not hold the half of the land which the plaintiff was able to assure to him, without paying the entire $3700 which he had agreed to pay for the whole property. The language of this court was that he had two courses open before him: “ In the first place, he had a right to insist upon a strict performance of the contract by the plaintiff, after strictly performing on his part. If he was prepared to prove that he had paid one-half of the purchase-money, he should have brought the other half into court for the use of the plaintiff, whenever the plaintiff should file such a deed as in the opinion of the judge would have been a compliance with his part of the agreement. Or, on the other hand, he might have taken advantage of the plaintiff’s inability to make a full title, and rescinded the contract, and suffered a verdict to pass in favour of the plaintiff, on condition the plaintiff should repay what purchase-money he had received, and compensate for any improvements the defendant had made.” When the case went back to the Common Pleas for the new trial, the second of the above-mentioned suggestions was adopted, and a verdict was rendered for the plaintiff on condition that he pay to the defendant the sum of $1635.29 on or before the 1st day of April 1863, with interest from the 20th day of December 1862. Upon this verdict judgment was entered, and the case has been a second time brought here. Several errors have been — 105 — assigned, most of which it is not necessary to consider at length. The first, second, third, and sixth cannot be sustained. The plaintiff himself gave in evidence the articles of agreement. Of course, in any aspect of the case, it was competent for the defendant to show that the plaintiff could not comply with his contract, and that the deed which he offered was not such as he was bound to give. This will be made manifest by what we shall say of the fifth assignment of error. Equally certain is it that the evidence by which it was proposed to prove the property had not been held by Imhoff & Myers as tenants in common, but that it was partnership property, was incompetent for any such purpose. This was ruled in Hale v. Henrie, 2 Watts 143, and the same'principle has been affirmed in several subsequent cases. Nor do we find anything in the testimony of Emanuel Myers that opened a door for inquiry into claims the plaintiff may have had against the defendant, other than such as arose out of the sale and occupation of the property. Of the sixth assignment it need only be said it is too general, it specifies no error. But we think, in trying the case upon the principles upon which it was tried, the plaintiff should have been permitted to prove that after the defendant entered into possession of the property he tore down the smoke-stack, removed and sold fixtures, and damaged the property by bad usage. If, in the settlement of the equities between the parties, the plaintiff was responsible for betterments, as was said when the case was here before, the defendant must be for waste. If the contract is to be rescinded, both parties must be reinstated to their original position, and this cannot be done if the plaintiff must take back the property denuded of its improvements, yet without compensation. It is the fifth assignment of error, however, which raises the most important question in the case, and which has led us to review the decision made when the first writ of error was in this court. The suggestions then made of the means which the defendant had to protect himself, were dictated by a desire to secure to both parties full and proper justice. It is so obviously unjust that a vendor who had covenanted to make a perfect title, but who is unable to do so, after having obtained most of the purchase-money, should be permitted to eject the vendee from the property sold, and turn him over to an action at law to recover the money paid, an action which the insolvency of the vendor might render fruitless in results, that an effort was made to give to the vendee a better security. In such a case the vendor has no equity. His rights, whatever they are, are all at law. And even at law, in a different form of action, he cannot recover the unpaid portion of the stipulated purchase-money. His own covenant has been broken, and he is in default, whether he sues — 106 — in covenant or in ejectment. Meanwhile his vendee is entirely innocent. He has broken no covenant, for he was not bound to pay except upon condition that a good title be given to him. It was no part of his duty to inquire what title the vendor had to give when the articles of agreement were made. He took the engagement of the vendor to make him a full assurance, and until the contract came to be executed, by a delivery of the deed, he was not called upon to investigate the extent of the vendor’s rights. If the vendor’s covenant be broken, the vendee has several remedies. He may rescind the -contract, or at his election may bring an action at law to recover damages, or institute a proceeding in equity to enforce specific performance. These are rights of the vendee. Clearly the vendor has no right'to rescind the contract for his own breach of its covenants. When he brings an ejectment against his vendee in possession, and the articles of agreement are brought before the court, the vendee’s equity may be, and generally is asserted. Then the vendee becomes in effect a suitor for a specific performance of the contract, and for an injunction against the vendor, and if he do what equity requires of him, he may hold possession of the land even against the vendor’s legal title. Nor can it be said that, in all cases, equity requires nothing less than payment of the whole agreed price of the sale, and that, unless the vendee pay all that, he must surrender the possession. His position is not to be confounded with that of a vendor praying in equity for a specific performance. There is a settled distinction between the two cases. If a vendor cannot make out title to the whole of the subject-matter of the contract, equity will not compel the vendee to perform pro tanto. But says Mr. Sugden (Sugden on Vendors 193), “when a vendee seeks a specific execution of an agreement, there is much greater reason for affording the aid of the court to a purchaser when he is desirous of taking the part to which title can be made.” “ And,” he adds, “ a purchaser may, in some cases, insist upon having the part of an estate to which a title is produced, although the vendor could not compel him to purchase it.” So in Mortlock v. Buller, 10 Vesey 315, Lord Eldon said, “ If a man having partial interests in an estate, chooses to enter into a contract respecting it, and agrees to sell it as his own, it is not competent for him afterwards to say, though he has valuable interests, he has not the entirety, and therefore a purchaser shall not have the benefit of his contract. For the purposes of this jurisdiction, the person contracting under those' circumstances is bound by the assertion in his contract, and if the vendee chooses to take as much as he can have, he has a right to that, and to an abatement.” In Attorney-General v. Gower, 1 Vesey, Sen. 218, where tenants in common had contracted for the sale of their estate, and one of them died, — 107 — it was held the survivors could not compel the purchasers to take their shares. But the converse of the proposition was denied, and it was held the purchaser might compel the survivors to convey their shares, although the contract could not be executed against the heirs of the deceased. The same doctrine was laid down in Wood v. Griffith, 1 Swanston 54; and in Milligan v. Cook, 16 Yes. 1, specific performance was decreed upon the bill of a purchaser -with compensation for defect of title by reduction of the purchase-money. In Hill v. Buckley, 17 Yes. 394, Sir William Grant, M. B., stated the general rule to be, “ where a. misrepresentation is made as to quantity, though innocently, the purchaser is entitled to have what the vendor can give, with air abatement out of the purchase-money, for so much as the quantity falls short of the representation.” The same rule of specific performance, pro tanto, at the suit of the purchaser, with compensation for deficiency, by abatement of the purchase-money, was acted upon in Graham v. Oliver, 3 Beavan 124, in Wheatley v. Slade, 4 Linn. 126, and in Nelthorpe v. Holgate, 1 Coll. 203. It was also asserted unanimously, by the New York Court of Errors and Appeals, in Waters v. Travis, 9 Johns. 464. It is too strongly fortified by authority, as Avell as founded in reason, to be successfully denied. Hence, it has found its way into the best text-books as established doctrine. Adams, in his Treatise on Equity,' page 90, lays it down that, in favour of the purchaser the rule in equity is, though he cannot have a partial interest forced upon him, yet if he entered into the contract in ignorance of the vendor’s incapacity to give him the whole, and chooses aftenvards to take as much as he can get, he has generally, though not universally, a right to insist on that, with compensation-for the defect. He adds, the defect must be one admitting of compensation, and not a mere matter of arbitrary damages. In Story’s Equity, § 779, the general rule is also said to be that the purchaser, if he chooses, is entitled to have the contract specifically performed as far as the vendor can perform it, and to have an abatement out of the purchase-money, or compensation for any deficiency in the title, quantity, quality, description, or other matters touching the estate; and in Morse v. Elmendorff, 11 Paige 288, the chancellor went so far as to say that in a case where the vendor never had it in his power to perform at all, if the purchaser had filed his bill in good faith, supposing at the time he instituted his suit specific performance could be decreed, he was not prepared to deny that the court Avould retain his suit, and award the complainant a compensation in damages. However this may be, there is nothing in the general rule of which a vendor can complain. It is his own fault if he has assumed obligations which he cannot fulfil. It cannot be inequitable to require him to perform, as far as is in his'poAA-er, — 108 — and being in a court of equity, a decree that lie make compensation for all that he fails to perform is but completing what the court has begun, and preventing a multiplicity of suits. In no just sense can it be said that thus a new contract is made for the parties. The vendor is not compelled to convey anything which he did not agree to convey, and the vendee pays for what he gets, according to the rate established by the agreement. If then Myers, the defendant, chose to set up an equity growing out of the articles of agreement, if on the trial of the ejectment he elected to occupy the position of a vendee praying for specific performance of the agreement, so far as the plaintiff could perform, and for compensation for the deficiency, and if the defect of title of the plaintiff was an undivided half, why was not the defendant’s equity complete on his payment of one-half the stipulated price for the whole ? Why was he not entitled to a verdict enforcing his equity ? Surely, the defect was capable of accurate measurement. The plaintiff could not assert that an undivided half was worth more than one-half of what the whole property was worth. If the defendant must turn out of possession or pay the price which he agreed to pay for a good title to the whole property, he is denied the equity, undoubtedly his, to enforce the performance of the vendor’s contract pro tanto, i. e., so far as it is within the vendor’s power to perform. And this without any default of his. Then a vendor, through the breach of his own covenant, extinguishes an equitable right of his vendee, or compels the payment of a sum of money to which, not even at law, much less in equity, is he entitled. Surely this cannot be. Even if a tenant enter under an agreement with his landlord for a lease, equity will restrain the latter from proceeding by ejectment against him : 1 Eden on Injunctions 49. If the equitable rights of a vendee are such as have been described, if he may insist upon the specific execution of the contract, so far as the vendor can perform, and is entitled to abatement out of the purchase-money for deficiency, it is impossible to sec why he must surrender the possession or pay the whole purchase-money. The reasons which forbid a tenant to deny the title of his landlord are not applicable to his case. The vendee has an equitable right to the possession of the land; a right which a chancellor will secure to him. It would be passing strange, if a vendor, able to convey only one-half of the subject-matter of his contract, who would bo compelled to convey that and also give possession on payment of half the purchase-money of the whole, should be permitted to refuse doing either and allowed to recover possession on default of the payment of the entire price, because he had accorded to his vendee a part of the rights which equity would compel him to give in solido. In no sense would such a ruling secure the equity of the purchaser. This is well illustrated by — 109 — the case in hand. The plaintiff insists that the defendant shall pay into court what he agreed to pay for a perfect title, while he himself offers and can offer a title to but one-half. He seeks to enforce the whole contract against his vendee, while he is breaking his part of it. And the money paid into court is to remain there, until he shall offer a deed that, in the opinion of the court, will convey a good title to the whole property. This he may never be able to do. Thus the defendant is denied his right to have the contract executed pro tanto, and is compelled to pay the whole purchase-money, while he is left exposed to being turned out of possession by the owner of the other half of the property, and to being made accountable for mesne profits. It is said the right of the outstanding owner may never be asserted, and that the plaintiff is entitled to the benefit of such a contingency. Why is he entitled to such a benefit ? By his contract, he has engaged to assure to his vendee all the rights and benefits which he can give, and he has yielded up the possession of the property. He was not bound to yield it, except by his contract. It would seem, that in such a case, he who has the rightful possession should be entitled to the chances of a non-assertion of an outstanding title. It is further said to be the settled law of this state, that a vendee in possession under articles of agreement for the purchase of land, against whom an ejectment is brought to compel the payment of purchase-money, is not permitted to set up a defective title in his vendor, or an outstanding title in a third person, to defeat the plaintiff’s recovery, and for this doctrine we are referred to Congregation v. Miles, 4 Watts 146. I do not understand that case to have decided this as an universal principle, or that it goes any further than to rule that a party cannot rescind the contract and still retain the possession taken under it. If it does, then it is in conflict with the rule and practice of every bill for a specific performance, for in every such case the title of the vendor is subject to inquiry, and is usually referred to a master for investigation. True, where a vendee in possession asserts no equity, offers to pay for no part of the property, and avers the contract to be null, because not complied with by the vendor, he may not set up defective titles or outstanding titles to protect his possession. That would be using the contract, while denying it. It is a very different thing from seeking to enforce the contract, so far as the vendor can perform it. In Hersey v. Turbut, 3 Casey 424, it was said that wherever the defendant enters into a possession of land under a contract with the plaintiff for the purchase of it, he will not be permitted to set up an independent title to protect a hostile possession. That may be when he repudiates the contract of purchase. In . that case the contract had been executed, and the suit was a — 110 — scire facias on a mortgage given for the purchase-money. Tn Treaster v. Eleisher, 7 W. & S. 137, there is a dictum to the same effect, having no necessary hearing on the case. In Smith v. Webster, 2 Watts 278, it was ruled that a vendee will not be permitted to withhold both the payment of the purchase-money and the possession of the land from the vendor, because he happens to be unable to make such a title as the vendee is bound to accept. This is nothing more than ruling that he cannot rescind the contract, and still reap a benefit from it. Nor is anything more to be found in Jackson v. McGinnis, 2 Harris 331. None of these cases can be understood as holding that where an ejectment becomes a real attempt, either by the vendor or vendee, to enforce the agreement in whole or in part, the vendor’s title does not come into consideration. It may not, indeed, when tho vendee elects to rescind, though in some cases it may even then, but certainly it must when the vendee elects to take what the vendor can assure to him. Such I understand to be the settled doctrine of the law, and there is direct authority for the course pursued on the last trial of this case, and suggested by Judge Woodward when the case was first in this court. I mean for compelling a vendor, whose title is defective, to repay purchase-money received, before he can recover possession of the' land from the vendee, even when the latter chooses to rescind tho contract. This was squarely decided in Richardson v. Kuhn, 6 Watts 299. That was an ejectment brought by vendors against their vendee, in possession, under articles of agreement for a sale, and the- latter was permitted to show- an outstanding title. The language of this court then was, “ the action is to enforce the payment of purchase-money, and the plaintiffs insist the defendant is bound to pay or surrender the possession obtained under the articles. He may be bound to do neither, &c., &c. It is to be presumed he bargained for a title, and should it appear that it is' not in the plaintiff’s power to make it, they may not call on him to turn out, without rescinding the bargain, restoring the purchase-money paid, and tendering compensation for intermediate improvements.” See also Creigh v. Shatto, 9 W. & S. 82. No rule can be more just than the one thus laid down in Richardson v. Kuhn, and it is consonant with the principles upon which a chancellor acts. A vendor knows, or ought to know, what his title is. If, with such knowledge, he undertakes to sell a bad title as a good one, and thereby induces his vendee to take possession of the land agreed to be sold, and pay a part of the purchase-money, it is a fraud to reclaim the possession without paying back the purchase-money received, and it presents a fit case for an injunction. It is the province of a court of equity to take care that legal rights shall not be used to perpetrate a fraud. What was said in the case of Richardson v. — 111 — Kuhn was reasserted in Gans v. Renshaw, 2 Barr 34, in which, though it was an action of covenant for purchase-money, Gibson, C. J., discussed the right of a vendor against the vendee in possession. His language was, “if the vendor found the defect in his title to be irreparable, what was he to do ? Certainly not to bring an action for the purchase-money, in order to force a rotten title on to the purchaser of a good one, and this on the basis of his own default. It would be his duty to apprise the vendee of his inability, restore whatever had been paid, and demand the possession. In that case equity would not enjoin him from proceeding on his legal title to get back the property, but not to compel the vendee to pay for what he did not get.” The same doctrine was asserted by Woodward, J., in Nicoll v. Carr, 11 Casey 381, and in Jackson v. McGinnis, 2 Harris 331, which was ejectment by a vendor against a purchaser from the vendee, the obligation of the defendant to yield possession or pay the purchase-money was confined to a case where no purchase-money Had been paid or no improvement made. But without prosecuting this subject further, we will add only that, in our opinion, there was no error in refusing to affirm the plaintiff’s second point. In thus reviewing the case we are brought to the following conclusions:— 1. The equities of the parties cannot be worked out by allowing a verdict for the plaintiff, to be released on payment by the defendant of the purchase-money agreed to be paid for a good title to the whole property, or.such part of it as remains unpaid. 2. If the plaintiff can make title to no more than an undivided half, as appears to be the case, the defendant may elect to take that half, and if he has paid one-half the purchase-money with interest on that half, he is entitled to a general verdict and judgment. If he has paid less than half, the plaintiff is entitled to a verdict, to be released on the payment of the unpaid part of the one-half. A deed from the plaintiff for what he is able to convey is already on file. 3. If the defendant elects to rescind the contract, as is his right, the verdict should be for the plaintiff, on condition that he repay by a stipulated time whatever purchase-money has been paid to him, and make compensation for the defendant’s improvements. From this, however, the plaintiff is entitled to recoup the damages caused to the property, by any waste the defendant may have committed. If the defendant elects to seek specific execution pro tanto, no question will arise respecting improvements or waste. The judgment is reversed, and a venire de novo awarded. Thompson, J., dissented.