Gerbert v. Trustees of the Congregation of the Sons of Abraham

The opinion of the court was delivered by Van Syckel, J. On the 1st of March, 1884, the plaintiff’s testator, John Snyder, entered into a lease with the •defendant in error for premises known as No. 226 Washington street, in the city of Newark, New Jersey, for the term of five years from April 1st, 1884. The lease contained a stipulation for a further term of five years, provided notice should be given by the lessee three months before the expiration of the term of the election of the lessee to take a further — 179 — term. On the 12th of October, 1888, notice was given by •the lessee that a further term was desired. • No new lease was actually executed, but the lessee continued in possession of the premises after the expiration of the first term. The ■plaintiff’s testator died in April, 1892, during the running ■of the second term of five years. The lease of March 1st, 1884, contained the following clause: “And further, that if the said party of the second part shall desire to purchase the demised premises, that he ["the lessor] will at any time during the tenancy hereby created or agreed upon, for the consideration of seven thousand dollars, sell and convey by warranty deed, with the usual covenants, free and clear of all encumbrances, the demised premises to the said party of the second part, or such person or persons as they shall desire, upon their giving to him, his heirs, executors or administrators, notice that they desire such conveyance; such conveyance to be made within thirty days after giving of such notice, and the payment of rent to cease at the delivery of such deed, and if not delivered within the said thirty days, then said rent to cease at the end of that time.” After the death of Snyder, the lessor, to wit, on the 1st day ■of June, 1892, a demand was made upon the executor of Snyder for a conveyance pursuant to the aforesaid provision. He was unable to make a conveyance because the testator had a. life estate only in the premises as tenant by the curtesy, the title to the property having been in the wife at the time ■of her decease, which was before the lease was made. This suit was instituted for a breach of the covenant to convey pursuant to the demand made upon the lessor’s executor. The sole question to be decided is the measure of damages in this'action on contract. Immediately after entering into possession under the lease, in 1884, the defendant in error built a synagogue upon the premises and expended thereon over $2,600. This money was expended before a demand for a renewal of the lease and several years before a conveyance was demanded. — 180 — On the trial below the defendant in error recovered damages for the loss of his bargain arising out of the increased value of the land, and also damages for the loss of the building which had been erected upon the premises. Upon the'question as to damages arising from an appreciation in the value of the land, the trial judge was bound by the decision of the Supreme Court of this state in Drake v. Baker, 5 Vroom 358, aud he properly followed that case. The first question to be determined is whether the rule adopted by our Supreme Court in Drake v. Baker shall bead hered to. Under the long-settled law of this state if Snyder had conveyed in his lifetime to his lessee with a covenant of warranty,, and if thereafter the grantee had been evicted by the remaindermen, in an action on contract for damages flowing from a breach of the covenant of warranty, the only damages recoverable would have been the consideration money paid and the interest thereon; and if the purchase-money was wholly unpaid, nominal damages only could have been recovered, Stewart v. Drake, 4 Halst. 139; Holmes v. Sinnickson, 3 Gr. 313; Morris v. Rowan, 2 Harr. 304. This rule has been so long recognized in our jurisprudence that it cannot now be subverted. That there is no substantial difference in the injury resulting, where there is an ouster after conveyance with warranty,, and where there is a refusal of conveyance in pursuance of the contract to convey, when the vendor is unable to make title, which cau reasonably support a rule for damages in the former case wholly different from that which prevails in the latter case, is too obvious to require discussion. The injury in both eases is the same—the loss of the property, the loss of such profit as would have been incident to increased value. The loss in both cases arises from the breach of the vendor’s covenant on account of the defect in his title. There can, therefore, be no solid basis for diversity in the181 rule of damages applicable to the two conditions, and the rule should be unified if there is no serious obstacle in the way. The rule in Drake v. Baker was adopted upon the authority of the English cases, which at the time of the decision of that case had limited the application of the rule laid down in Flureau v. Thornhill, 2 Bl. R. 1078, that on breach of contract to convey, where the vendor’s title proved defective, nominal damages only could be recovered. The exceptions engrafted upon Flureau v. Thornhill in Pounsett v. Fuller, 17 C. B. 660; Robinson v. Harman, 1 Wels., H. & G. 849; Engel v. Fitch, L. R., 3 Q. B. 314, and Hopkins v. Grazebrook, 6 Barn. & C. 31, all cited in Drake v. Baker and there relied upon, greatly narrowed the sphere in which Flureau v. Thornhill would be a controlling authority. Since Drake v. Baker was decided this rule has been most elaborately and exhaustively discussed and reviewed.in the House of Lords in England, in the case of Bain v. Fothergill, reported in L. R., 7 H. L. (Eng. & Ir. App. Cas.) 158, and the rule in England finally settled by discarding the distinctions which had been previously engrafted upon the case of Flureau v. Thornhill, in the cases relied upon in our court in Drake v. Baker. In Bain v. Fothergill the defendants were in possession of a mining royalty, under a written agreement for a lease, of which they had taken an assignment from one H. In H.’s agreement for a lease with the owners, it was stipulated that he should not assign without their permission. The defendants contracted with the plaintiff to sell their interest in the royalty, and this action was for the breach of that contract, in consequence of the inability of the defendants to make title for want of the owners’ assent to the assignment to them. The owners were Avilliug to consent to the assignment to the plaintiff, if he Avould stipulate not to assign without their permission. One of the defendants knew that this consent Avas necessary, the other did not. The Court of Exchequer held the case to be within the — 182 — rule in Flureau v. Thornhill, and gave judgment for nominal damages only. The case was carried to the House of Lords and there-affirmed. Three questions were propounded by the Lord Chancellor to the judges: First. Whether upon a contract for the sale of real property, where the vendor, without his default, is unable to make-a good title, the purchaser is by law entitled to recover damages for the loss of his bargain. To this the answer was, he is not entitled. Second. Whether the actual possession of the property, the-subject of the contract, is essential to bring the case within the rule laid down in Flureau v. Thornhill. To this the answer was in the negative. Third. Whether, if the rule of law is correctly laid down-in Flureau v. Thornhill, the circumstances of the present case distinguish it and take it out of that rule. To this the reply was also in the negative. The discussion in Bain v. Fothergill is most able and interesting, and after a thorough review of all the previous English cases the House of Lords expressed the opinion that Flureau v. Thornhill was established law, and that Hopkins v. Grazebrook was no longer the rule; that Flureau v. Thorn-hill applied to every case where the vendor failed to convey through inability to make title; that the rule was the same whether the vendor had been guilty of fraud or not, for the motive of the defendant was immaterial in measuring damages for breach of contract, and that, therefore, even if there had been fraud, the vendee could not have recovered substantial damages in contract, but must have proceeded in an action for deceit. The cases upon which the doctrine approved in Drake «, Baker was rested having been so completely overruled by the-English court, that case should, in our judgment, be now disregarded, and the law in this state be made harmonious in the two instances, where there is in all material respects pre — 183 — cise similarity of circumstances, and no difference of substance, upon which to support a difference in the rule of damages. Where fraud or deceit enters into the transaction the vendee should be left to his action for deceit to recover for the loss he may sustain thereby. On this branch of the case nominal damages only should have been recovered. The only question submitted to this court in the case reported in 28 Vroom 395 was whether the covenant to convey applied to the renewal period of five years. The rule of damages applicable to the case was not discussed, nor did the court intend to make any deliverance on that subject. The question remains, whether the lessee was entitled to recover for the cost of the improvements put upon the premises as before stated. The first term under the lease ran from April 1st, 1884, to-April 1st, 1889. The improvements included in the damages recovered below were all made soon after the lessee entered into possession, in 1884, and the demand for a conveyance was not made until after the lessor’s death in 1892. The lease contained the following covenant: “And the said) party of the second part [the lessee] hereby agree that all improvements of any kind made on or about the said premises shall be and become the property of said party of the first part at the expiration of this lease or any renewal thereof.” The covenant in the lease is simply to convey land • there is no agreement to convey land and buildings erected thereon by the lessee after entry. Under the common law rule, buildings erected on the premises by the tenant become part of the freehold, and are the property of the lessor without any allowance to the tenant. An exception has been engrafted on this rule that, under certain circumstances, gives the tenant the right of removal before the expiration of his term. But the common law rule is still so rigidly adhered to that if a tenant, at the end of his — 184 — term, renews his lease, and thereby acquires a new interest in the premises, his right to remove improvements is forfeited, unless he takes the precaution to reserve such right in the renewal lease. This is the established English rule, and it has also received the sanction of the New York Court of Appeals, in Loughran v. Ross, 45 N. Y. 792, where the English cases are cited and relied upon. In Smith v. Administrators of Smith, 4 Dutcher 208, Chief Justice Green distinguishes between a vendee in possession under a parol agreement to purchase, who makes improvements expecting them to be for his own benefit and not at the instance of his vendor, and a tenant who makes improvements under the assurance of his landlord that he shall have a conveyance of the premises with the improvements. In the former case he denies the right of the vendee to compensation on failure to obtain a conveyance. This accords with the doctrine of the English court as pronounced in Worthington v. Warrington, 8 Man., G. & S. 133. There the party entered into possession under an agreement for a two years’ term, with leave to make improvements at his own expense, with the option of purchasing at any time during the two years. The lessor, it afterwards appeared, had no title to the premises, and the action was brought to recover damages for breach of the contract and for the cost of the improvements. The court said : “If the purchaser thinks proper to enter into possession and to incur expenses in alterations before the title is ascertained, he does so at his own risk. I see nothing in this case to distinguish it from the ordinary one. The plaintiff should have taken care to ascertain that the title was good before he proceeded to lay out money upon the premises.” The reason which lies at the foundation of the rule in Flureau v. Thornhill pertains here, and is clearly expressed by Lord Hatherly in Bain v. Fothergill. In distinguishing Engel v. Fitch he said : “ The vendor in that case was bound by his contract to do all that he could to — 185 — complete the conveyance. Whenever it is a matter of conveyancing and not a matter of title, it is the duty of the vendor to do everything that he is enabled to do by force of his own interest and also by force of the interest of others whom he can compel to concur in the conveyance. The foundation of the rule in Flureau v. Thornhill has been already more clearly expressed by my noble and learned friend who has preceded me in saying that having regard to the very nature of this transaction in the dealings of mankind in the purchase and sale of real estate, it is recognized on all hands that the purchaser knows on his part that there must be some degree of uncertainty as to whether, with all the complications of our law, a good title can be effectively made by his vendor, and taking the property with that knowledge he is not to be held entitled to recover any loss on the bargain he may have made if, in effect, it should turn out that the vendor is incapable of completing his contract in consequence of his defective title.” In this case it must be held that the lessee made the improvements at his own risk and not under an assurance that a title would be given including such improvements, inasmuch as they were made long before the lessee announced his election to purchase. The rights of the parties must be adjudged according to the status at the time the improvements were made, and that was the relation of landlord and tenant. The question now under discussion does not, in fact, differ from the question previously disposed of. By the renewal of the lease without any provision as to the buildings put upon the premises by the tenant, such buildings as before stated became incorporated with the real estate and were the property of the lessor and the remainder-men. The subsequent election of the tenant to take a conveyance gave him a right to a conveyance of the real estate of which the buildings were part, and from which they were no longer, in legal contemplation, separate. The buildings could no longer be considered as improvements made by the — 186 — lessee. The recovery of nominal damages for failure to convey will satisfy the legal claim for damages for failure to-convey both land and buildings, the two being now one and inseparable. "Where there is a contract to convey unimproved land, and the vendee before conveyance erects buildings upon it without the request of the vendor, it would be a rule of exceeding' hardship which compels the vendor, when his title proves defective, to pay the cost of such improvements to any extent which the vendee might choose to put upon it. Such a result could not reasonably be supposed to have been within the-contemplation of the parties when the contract Avas executed,. The vendor would be compelled to pay for improvements which he did not authorize to be made, and from which he would derive no benefit Avhatever if the vendee failed to-perform on his part. In my opinion, the judgment below Avas also in this respect erroneous, and it should, therefore, be reversed. For affirmance—None. For reversal—The Chancellor, Dixon, Garrison,. Gummere, Lippincott, Ludloav, Magie, Van Syokel,. Bark alow, Bogert, Dayton, Hendrickson, Nixon. 13,