Worrall v. . Munn ( 1868 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] It is not claimed on this appeal, that, when a court of equity sustains a bill filed to compel the specific performance of a contract for the conveyance of lands, and decrees such conveyance, it is not within the proper exercise of its jurisdiction, and according to its settled modern practice, to give full and complete relief by awarding to the plaintiff not only the conveyance to which he is entitled, but also the damages which the defendant has caused by his culpable refusal and delay in the performance of his contract. These may be ascertained by the court in any mode which its discretion approves. The court might proceed directly with the inquiry, or refer it to a master, or order an issue quantum damnificatus, as seemed most suitable (Story's Eq. Jur. §§ 793-799), and will even prohibit the plaintiff from proceeding in another court to collect his damages. (Prothero v. Phelps, 25 Law J. Chy. 105; Reynolds v. Nelson, 6 Mad. 290; Frank v. Basnett, 2 Mylne K. 618.)

The questions raised on this appeal are:

1. What is the rule of damages for the delay, the vendor being in the possession of the lands?

2. Is the vendor liable for deterioration arising from willful waste committed by himself?

3. To what time shall the damages be allowed?

4. Shall the vendor be charged with interest on the damages as they arise until final judgment?

1. What is the rule of damages for the delay in the conveyance of the premises to the plaintiff, which damages the decree in this case awards to him, or, in the language of such decree, the damages sustained by reason of being kept out of the possession?

The general rule on this subject, as laid down by the elementary writers, and in the adjudged cases, is, that the court of equity will, so far as possible, place the parties in the same situation as they would have been if the contract had been performed according to its terms; and, to that end, the vendor will be regarded as trustee of the land for the benefit of the purchaser, and liable to account to him for the rents and profits; and the purchaser will be treated as trustee of the purchase-money, if not paid, and will be charged with interest thereon. (2 Story's Eq. Jur. § 789; Fry on Spec. Performance, § 889, and cases cited.)

And where the vendor is himself in the actual occupation of the premises, he is charged with the value of the use and occupation. (Robertson v. Skelton, 12 Beav. 360; Dyer v. Hargrave, 10 Ves. 506.)

But, while this is the general rule, it is not inflexible; a court of equity moulds its relief, and gives redress, according to the circumstances of each case. Where the purchaser has always been ready to pay, and has kept his money unappropriated, he is excused from the payment of interest. (De Visme v. De Visme, 1 McN. Gordon, 352; Regents' Canal Co. v. Ware, 23 Beav. 575.) Where part of the purchase-money had been paid, the court sought to effect an equitable result by charging the vendor not only with the rents, but with interest from year to year upon a corresponding portion of such rents. (Burton v. Todd, 1 Sw. 255.) So, where the subject of the purchase was a mill, and the delay of performance arose from the failure of the vendor to show good title, he was charged with the expenses of repairs, and of keeping up the mill and machinery until the purchaser could properly be required to take possession. (Carrodus v. Sharp, 20 Beav. 56.)

Some other qualifications, apt to this case, will be presently noticed; it is, however, clear, that, in the endeavor to do equity between the parties, regard must be had to the special circumstances, wherever there are any peculiarities, which render the rigid application of any general rule unsatisfactory.

It is clear, in my judgment, that it is the endeavor to apply this rule to the present case without any qualification, and to treat the rule of damages as if it were a question at law, and, on an assessment in trespass for mesne profits, that has involved the question in apparent doubt, and wrought to the plaintiff apparent hardship.

Thus, he has purchased and paid (as required by the decree to pay) $4,500 for the land, and, while the use of the money has been presumptively worth $315 per annum, he has been kept out of possession for more than twenty years, and has been permitted to recover as damages, for the loss of possession, fifty dollars a year for two years, and interest thereon, — less in all than one year's interest on the purchase-money.

It should be a matter of regret, if the rules applicable to the subject are such, that a court of equity cannot render more equal justice.

The present case is peculiar in two respects, viz., first, the purchase-money with the interest thereon was payable, and was properly decreed to be paid to the defendant Prall, the original owner and vendor of the premises, who acquiesced in the decree, and executed a deed in obedience to its requirements, while the possession was held by the defendant Munn; and, second, the principal value of the lands consisted in the deposits of clay, adapted by the consumption thereof to the manufacture of brick on the premises.

The inapplicability of the general rule above stated, to land of this description, may be rendered quite apparent, by an illustration closely analogous to the present. E.g.: Suppose a sale of land of no value for ordinary use, because incapable of cultivation, and entirely unsuited to pasture, and yet, by reason of a bed of valuable ore of very large value, and for that sole reason, sold at a large price. On a decree for specific performance, shall the purchaser be charged with interest on the purchase-money, for the period during which he is kept out of possession, and the vendor pay nothing (because the rents and profits are nothing), for depriving the purchaser of the opportunity of working the mine or ore bed during the period of delay? Or, if the purchase-money has been paid, shall the vendor, who has enjoyed the use of the purchase-money, have the advantage of his own wrong, and make no compensation to the purchaser for his loss of opportunity? The answer must be not so, unless the rules of equity are so imperfect, that such injustice cannot be prevented.

Does it follow, that the damages are to be ascertained by inquiring what profits the purchaser could have made by working the mine? That question is in substance this, was the referee right on the first reference in the present case, in inquiring how much the plaintiff might have received for the privilege of making brick on the land, thereby exhausting the bed of clay, which in fact now remains to him to be worked presumptively with equal benefit, and thereupon allowing to the plaintiff interest on such possible receipts from year to year as damages for the delay? This mode of estimating his damages proceeded upon the ground, not that the plaintiff lost the clay beds (which constituted the chief value of the land), but that he lost the opportunity of converting them into money, so soon as he might perhaps have done, if he had obtained the possession when he was entitled thereto.

I find no warrant for any such speculative rule or measure of damages; no case is cited to us, and I think it may be safely averred, that no case can be found, in which such a rule was adopted. No analogy can be found in any rule of assessment of damages at law. The rule, there, is the value of the use, not the profits of the consumption of the property detained, when in fact the entire property is restored to the plaintiff's possession.

True, witnesses may testify, that the premises would have supplied a given number of brick kilns; that they would have annually made a stated number of brick; and that the privilege of making so many brick would be worth a sum mentioned, and may add an opinion, that persons could have been found to pay an annual sum named for the privilege. But it is quite obvious, that such evidence is, in its very nature, conjectural, and lacks that element of certainty, which ought to determine the extent of liability. Neither does any rule suggested by cases in equity, or by writers of authority, authorize this mode of measuring damages. Invariably, so far as I have been able to discover, when loss of the use of the land itself has been made the criterion or test of the plaintiff's damages, it is the value of the use, and not the profits of its exhaustion of whatever it contains of value, that furnishes the rule.

But, on the other hand (as in part already suggested), is the value of the use the only rule or measure of damages? In the case above supposed, and in the case now before us, the value of the use of the land, in any mode not involving its consumption, is nothing, or at most very trifling. If it were a ledge of sterile rocks, of no value but for its mine, and yet, of very large value for the privilege of exhausting the mine of all that made it valuable, such use, apart from the privilege of mining, would be literally nothing. If, then, the plaintiff is not entitled to recover damages computed upon the basis of profits anticipated from consuming the clay and sand upon the premises, or letting to others that privilege, and, on the other hand, the use of the land for any other purpose would furnish no real indemnity, — is there any recognized equitable rule or measure by which injustice can be prevented?

To this, I answer, although he may not be compensated for the profits or gains, which possibly he might have realized by converting the land, or its deposits, into money at an earlier day, he may be protected against actual loss. If this be done, the result ought to be satisfactory, and more than this would be to impose a penalty upon the defendant (who has certainly not realized profits by the detention), which a court of equity will not do, beyond what indemnity to the plaintiff requires.

The subject of the sale was peculiar. It has little value for any annual use that does not involve the consumption of that which gives it value. The plaintiff offered to prove that he purchased for the express purpose of devoting it to the making of brick, and to converting its contents into money. Now, suppose the plaintiff, although he had contracted to pay therefor a large sum, had in fact paid no part of the purchase-money, and he was now to be put in possession, and permitted to carry into effect the purpose for which he bought the property.

He would be completely indemnified against loss by relieving him from the payment of interest. True, he would fail to realize, at so early a day as he anticipated, the profits of his bargain, but he has now that chance of profits, and meantime he has had the use of the purchase-money. In short, the general rule which allows to the vendor the interest, and the purchaser the rents and profits, failing to apply, because, from the character of the land, there are no rents and profits, or an amount grossly inadequate to a just indemnity, the purchaser is equitably entitled to be indemnified, if any definite and certain mode can be found by which to ascertain it.

Relief from the payment of the interest is, in such case, palpably the most obvious, as it is the most equitable, mode of doing so. For, otherwise, the vendor is permitted to profit by his own wrong, and the purchaser compelled to submit to a certain loss.

This is no novel suggestion, nor a new mode of doing equity in such case, but is one of the recognized exceptions to the general rule on the subject.

Thus, in Esdaille v. Stevenson (1 Sim. Stu. 122), it is said by Sir JOHN LEACH, vice-chancellor: "If the interest is much more than the rents and profits, and it is clearly made out that the delay in completing the contract was occasioned by the vendor, then to give effect to the general rule would be to enable the vendor to profit by his own wrong, and the court therefore gives the vendor no interest, but leaves him in possession of the interim rents and profits.

This principle was acted upon by him in Morick v. Henderson (repeated in a note, 4 Russ. 121), and in Jones v. Mudd (4 Russ. 118), the question came distinctly before the lord chancellor, and he affirmed the views of the vice-chancellor in the cases above referred to. To the like effect is Paton v.Rogers (6 Med. 256), before the same vice-chancellor. And inBurton v. Todd, above cited, Lord ELDON, in a case in which the ordinary rents and profits could alone be regarded as in the contemplation of the purchaser as an inducement to the purchase, showed the inapplicability of the general rule when the purchaser had paid a portion of the purchase-money and provided indemnity to him by charging the vendor with the interest upon a corresponding portion of the rents and profits.

The principle of these cases furnishes a clear and precise guide to the true equity between the present parties. If the money was in the hands of the plaintiff to be paid over to the defendant, he would not be chargeable with interest. The use of the money during the time that he has been kept out of possession by the defendant would have been enjoyed by him, and the defendant would have left to him, the rents and profits, or the use and occupation while thus wrongfully retaining the possession. But it is one of the peculiarities of this case that the purchase-money and interest was due to the defendant Prall, and has been paid while the defendant Munn is in possession, and, during the period of the litigation down to 1859, at least, has kept the plaintiff out of possession.

The plaintiff has lost the interest on the purchase-money, and the nature of the property is such, that there can be no measure of damages founded on the rents and profits, or the value of the use of the premises, which furnishes any indemnity. Within the principle of the cases referred to, and, as I think, in most just conformity to reason and equity, the defendant should be charged with the amount of that interest as damages down to the time when the plaintiff was let into possession.

2. That, in order to avoid multiplicity of suits, it was proper to decree compensation for waste committed by the appellant, does not appear to be questioned. No exception to the report of the referee, nor to the interlocutory decree directing the allowance, appears. To proceed with the cause to the rendering of full and complete justice between the parties, and, if possible, put an end to the litigation, is the familiar practice of the court. (Story's Eq. Jur. §§ 794, 799, and cases above referred to.)

3. To what time ought the damages to be computed and allowed? First, as to the damages for keeping the plaintiff out of possession — I have no hesitation on this point. They should be allowed down to the time when the defendant surrenders possession, or, if he be in possession at the time of the assessment, then to the time of making the allowance.

In this case, the Supreme Court have deemed it proper to allow the computation by the referee down to the date of the interlocutory decree only. I do not perceive any just reason for this; it was certainly not intended to furnish the defendant a premium for protracting the litigation concerning the damages through many years.

If it was proper to allow the damages accruing after the commencement of the suit, it was proper to allow them down to the time when they were assessed. This is true, even at law; in those cases in which damages arising after suit brought may be taken into view, the time of the assessment will be the time to which they are allowed.

No reason can be assigned for not allowing to the purchaser his damages, by reason of being kept out of possession, when, according to the general rule above stated, he is bound to pay interest on the purchase-money down to the final decree and its actual execution.

Second, as to damages for waste committed pendente lite, that also has been allowed down to the interlocutory decree. Why not, then, down to the time of the assessment? The suggestion that they are not within any issue between the parties begs the question, and assumes that such damages are not within the exercise of the jurisdiction of the court in such cases, which is the very question. If it is according to the practice of a court of equity, and is reasonable and just, that a defendant so unlawfully withholding possession and committing waste shall be compelled not only to convey, but pay all damages down to the time he surrenders the possession, then those damages are within the proper range of inquiry, and he is for that reason perfectly apprised from the moment a bill is filed that for those damages he can be required to respond in that suit.

The commission of waste does not, in respect to this particular question, differ from any bad management and deterioration thence ensuing, of which an example is found in Ferguson v. Tallman and Ruck v. Tallman (1 Simons, 530), where the purchaser, by agreement of purchase made in May, 1818, was entitled to possession at Michaelmas following, and, being refused, filed his bill immediately (November, 1818) to enforce performance of the contract, which was decreed, and, in September, 1823, the purchaser obtained the possession, and it was shown that the estate had become much deteriorated by mismanagement and neglect by the default of the vendors. The amount was ascertained down to the time when the purchaser was let into possession, and was allowed to him. This period was very nearly the precise period during which the suit was pending.

So, also, in Foster v. Deacon (3 Med. 394), by the agreement made in October, 1815, the purchaser was to have the rents and profits from Michaelmas following; the vendor, however, remained in possession, and, in 1818, a decree was obtained for a specific purpose, and on motion it was referred to a master to inquire what allowance should be made for deterioration. The vice-chancellor says: "If there had been willful waste by the vendor, I should have had no hesitation in making him answer for the same; * * * but it is waste occasioned by negligence." He then shows the liability of the vendor, as the delay was by his fault, and his liability for the negligence of his tenant, and referred it to a master to inquire into the amount of deterioration by unhusbandlike conduct and mismanagement, to be allowed to the purchaser.

The case of Nelson v. Bridges (2 Beavan, 239) is also entirely in point to the rule that the court will, in the same suit, give compensation when the vendor has pendente lite ab stracted stone or minerals, which formed a prominent part of the value of the lands sold. There it is true the court deemed a supplemental bill necessary in order to bring, the matter under adjudication, but it was not deemed doubtful that it was a proper subject of decree for compensation or allowance in the suit, and it was in express terms declared that if it had been known to the court at the first hearing, the court would have put in a due course of investigation, the question of the amount of compensation to be made to the plaintiff. In the other two cases above referred to, the motion being made in due season, a reference was ordered, in the last case a supplemental bill being filed an issue quantum damnificatus was ordered. In the present case the subject was before the court at the first hearing. The decree awarded compensation in damages for the waste. There was no ground, whatever, for stopping the inquiry at that date; the cases above referred to show that the plaintiff is entitled to be allowed for all damages down to the time when he is let into possession. And the interlocutory decree contemplated an inquiry not exclusively into the past, but directed an inquiry which, to the referee, was to be a present inquiry how much, at the date of his report, have the premises been damaged by the defendant's waste.

4. The remaining question is, Shall the vendor be charged with interest upon the damages?

This question must also be considered in reference to the nature and ground of the damage awarded.

First, as to the damages caused by the mere fact that the plaintiff has been kept out of possession.

These damages are a substitute for the rents and profits which the purchaser was entitled to receive and enjoy. Now, if this case had not been peculiar in the particulars above adverted to, and the decree was therefore that the defendant account for and pay over the rents and profits received by him, it would, I think, hardly be doubted that the vendor should be charged with interest. Surely a court of equity should not be less just in this respect than a court of law. And in Jackson v. Wand (4 Wend. 453) it was held, that, in ascertaining the mesne profits to be allowed to a plaintiff in ejectment, the plaintiff was not only entitled to interest, but, the premises being situated in the city of New York, where rents are payable at quarter-days, it was proper to compute the interest upon the rents from each usual quarter-day to the time of the assessment.

Now, it is not material to this question, that the measure of damages in this case is not rents, but a compensation in lieu of rents, viz., a sum annually equal to the interest on the purchase-money paid. This is allowed as damages. It is just what the plaintiff paid out from year to year. It is allowed not asinterest, but as annually lost by being kept out of possession. Allowed, because, from the peculiar circumstances of this case, there is no other equitable and yet safe rule of indemnity. Interest should, therefore, be allowed from the end of each year; not compound interest, but simple interest, to the date of the report.

Second, the damages caused by waste are not within any such rule; the actual amount of depreciation caused by the waste is to be allowed. But, that being allowed, the purchaser obtains the full value of the premises purchased, and all just indemnity. Thus, first, he obtains possession of the premises; second, he obtains an amount equal to the deterioration.

These place him in the same situation in which he would be if the premises had not deteriorated when he obtained possession.

Then, finally, he has, as further damages, what he is decreed to have lost by being kept out of such possession.

The result is, that he would be more than indemnified if he was permitted to add interest on the deterioration.

He is, however, entitled to interest as damages on that deterioration from the time when he was let into possession, because at that time all allowance for damages arising from being kept out of possession ceases, and, because, as to the amount of deterioration caused by waste, he can never be let into possession.

The result is, that for the time the plaintiff was kept out of possession he should be allowed as damages, his loss, to wit, an annual sum equal to the interest on the purchase-money.

He should be allowed the damages sustained by the waste committed by the defendant.

These amounts should be allowed down to the time when the plaintiff was let into the possession.

Interest should be allowed in ascertaining the damages caused by the delay in admitting the plaintiff into possession, computed on each annual amount, from the end of each year down to the time of the assessment or report.

Interest should only be allowed in estimating the damages caused by depreciation from waste, from the time when the plaintiff was let into possession, and, on the aggregate amount of such depreciation, interest may properly be allowed down to the time of such assessment or report of a referee.

The judgment must, therefore, be reversed. And, as this reversal in part sustains the plaintiff's appeal, and in part that of the defendant, it is proper that the reversal should be without costs to either party.

The case should be, therefore, remitted, to have the damages ascertained in conformity with these views.

Judgment reversed.