Davis v. Beury , 134 Va. 322 ( 1922 )

Sims, J.,

after making the foregoing statement, delivered the following opinion of the court:

We will first consider the claim of appellants to damages for the loss of their bargain, consisting of the differenee, if any, between the contract price and the market value of the land at the time of the alleged breach by the vendors of the contract of sale involved in this suit.

Upon such consideration the first question which arises is this:

1. What title did the vendors by the contract involved in this suit undertake to convey to the vendees at the time fixed for the completion of the contract?

In the opinion of the court below involved in a former appeal of the instant case (Beury v. Davis, 111 Va. 581, 69 S. E. 1050), the lower court construed the contract to provide that the vendors would, at the time fixed for the completion of the contract, convey by a good and sufficient deed, “a good title, not a doubtful or bad one,” which the court stated meant a marketable title, saying, “evidently it was contemplated that marketable titles were to be made.” The correctness of this holding is not questioned by the assignments of error; indeed the petition of appellants for the present appeal relies upon such holding as the law of the case. That being so, in the view we take of the law applicable to the contract, when so construed, and of the facts involved in the instant case, we are relieved of the need of making any pronouncement of our own upon the question whether the terms of the contract provide for a perfect record title or merely for a marketable title, when read in the light of the authorities cited for the appellants. Such authorities are Sachs v. Owings, 121 Va. 162, 92 S. E. 997; Mullen v. Cook, 69 W. Va. 458, 71 S. E. 566; Maupin on Marketable Titles to Real Estate, pp. 210-221. (See also the last named work [3rd ed.] pp. 789-792.) We shall consider the law of this case to be that the vendors did not by the contract involved in this suit undertake to convey, at the time fixed for the completion of the contract, a perfect record title, but only a marketable title, which is a title which is in fact a good title, or one which can be made so by application of the purchase money, although it may not so appear of record. Sachs v. Owings, supra.

The next question for our consideration is this:

2. What is the doctrine in Virginia on the subject of the right of the vendee to recover damages, beyond the return of the purchase money actually paid, with interest, for the breach of such a contract by the vendor?

The answer is that for a vendee to be entitled, under the doctrine in Virginia on that subject, to recover any damages, beyond the return of the purchase money actually paid, with interest, for the breach of a contract by the vendor to convey, the title contracted to be conveyed at the time fixed for the completion of the contract, the vendee must prove that the vendor either acted in bad faith in originally undertaking to convey such title at such time, or that, since the undertaking and on or before the time fixed for the completion of the contract, he has voluntarily disabled himself from making the conveyance, or that he was able at such time to make the conveyance contracted for and willfully neglected or refused to do so.

The doctrine on the subject adopted in Virginia is set forth in the authorities as follows:

In Mullen v. Cook, supra (69 W. Va. 458, 71 S. E. 567), this is said:

“What is the correct measure of damages for the breach of contract to convey land? The rule is not uniform. The Supreme Court of the United States, and the courts of most of the States, have adopted as the rule for measuring the damages in such case the difference between the market value of the land at the time of the breach, with interest, less the purchase price unpaid, without regard to the reason for the failure to convey. 29 Am. & Eng. Ency. L. 724, 725; and 2 Southerland on Damages, 579. But it is not the rule in England, nor the rule adopted in Virginia before the formation of this State. In Virginia a purchaser is not entitled to recover for the loss of his bargain. The value of the land at the day of sale, and not its value at the time of the breach, is to be considered; and if a price has been agreed to, that is to be taken as the best evidence of value. Consequently, in Virginia, if the purchaser has paid nothing, the general rule is that his damages are only nominal. Of course, the purchaser is always entitled to recover the money paid, together with the interest.” 2 Min. 865; Stout v. Jackson, 2 Rand. (23 Va.) 132; Threlkeld’s Adm’r v. Fitzhugh’s Ex’x, 2 Leigh (29 Va.) 451; Thompson’s Ex’r v. Guthrie’s Adm’r, 9 Leigh (36 Va.) 101; Stuart v. Pennis, 100 Va. 612, 42 S. E. 667; Wilson v. Spencer, 11 Leigh (38 Va.) 261.

“The above is the general rule in Virginia, and, therefore, the law of this State, because those early Virginia decisions are binding authority on us. This general rule, however, is subject to exceptions. It does not apply, if after the sale the vendor has voluntarily put it out of his power to comply with his contract, as for instance by making sale to another; or if he has good title and wilfully refused to convey. In such case he will be held liable for the enhanced value of the land; in other words, he will then be held liable to the vendee for his loss of bargain. Wilson v. Spencer, 11 Leigh (38 Va.) 261. See also opinion of Judge Snyder in Butcher v. Peterson, 26 W. Va., at p. 454.

“Whether the plaintiff can prove a case entitling him to substantial damages depends, not alone upon the mere breach of contract, but also upon proof that the vendor has, since sale to the vendee, voluntarily disabled himself from making the conveyance, or that he is able to make good conveyance and willfully refuses to do so.

“If the defendants have acted in good faith and are unable from good cause to comply with their contract, then the plaintiff can recover only nominal damages. * * * >>

As said in Maupin on Marketable Title to Real Estate, pp. 210, 211: “The question whether the purchaser is entitled to nominal or substantial damages for breach of the contract usually arises under the one or the other of the following circumstances:

“(1). When the vendor acts in good faith, believing that his title is free from objection.

“(2). Where the vendor acts in bad faith knowing that he has no title and no prospect of acquiring it.

“(3). Where, having no title, the vendor expects to acquire it in time to complete the contract.

“(4). Where the title is defective or the estate incumbered, and the vendor has the power to cure the defect or remove the encumbrance, but neglects or refuses to do so.”

“It need hardly be said that the purchaser may always recover for the loss of his bargain whenever the vendor, having a good title, perversely and wrongly refused to convey, or puts it out of his power to contract by conveying to a stranger without notice of the purchaser’s rights. Were the rule otherwise, the vendor might in every case in which the land had enhanced in value before the time fixed for making the conveyance sell to a third person, return the purchase price to the first purchaser and put in his own pockets the difference between the two values. But if the vendor abandons the contract and the purchaser acquiesces in the vendor’s attempt to rescind, instead of demanding a deed and standing upon the contract, he can recover only the purchase money and interest.”

The author cites numerous cases in support of the text and among them is the case of Wilson v. Spencer, 11 Leigh (38 Va.) 261. This is stated in the syllabus of the latter case:

“Though in general, for the breach of an executory contract to convey land, the vendee is not entitled to more damages than the purchase money he has actually paid, and interest thereon (Thompson’s Ex’r v. Guthrie’s Adm’r, 9 Leigh [36 Va.] 101), yet the rule will not be applied where the fraudulent conduct of the vendor makes it unreasonable to limit the vendee to that measure of damages. If, for example, a vendor who has the title in him at the time of sale, shall, after his contract, disable himself to perform it by conveying the land to another, he will be liable for the value at the time of the breach; and interest may be allowed on such value from that time.”

The learned text writer, next above cited, continues as follows:

“Sec. 91. Where the Vendor Acts in Good Faith.—Flureau v. Thornhill, * * *. As a general rule a vendor of property, whether real or personal, who, from whatever cause, fails to perform his contract, is bound to place the purchaser, so far as money will do it, in the position he would have been in if the contract had been performed. Ordinarily the motives and purposes of either party in entering into the contract, or the intent of either to abandon or to perform it, are irrelevant to the question of what damages shall be awarded in case of a breach. An exception to this rule has been held to exist wherever the vendor of real property is unable to convey a good title, if he in good faith entered into the contract believing that his title was good. The leading case upon this point in England is Flureau v. Thornhill, (2 W. Bl. 1078) * * * Some dissatisfaction with this decision has been expressed in several English cases, bnt it is now regarded there as'settled law.- In the American States it is believed that the weight of authority inclines to the same rule, namely, that the purchaser can have no damages for the loss of his bargain if the vendor sold in good faith, believing that his title was good * * .”

In sections 97, 98 and 99 of the valuable work last quoted the right of the vendee to recover damages for the loss of his bargain is stated to exist under the other three of the four classes of circumstances mentioned in the first above quotation therefrom, subject to certain distinctions not material to be considered in the instant case, namely: (2) “Where the vendor acts in bad faith, knowing that he has no title and no prospect of acquiring it; (3) where, having no title', the vendor sells expecting to acquire it in time to complete the contract;” and (4), “where the title is defective or the estate incumbered, and the vendor has the power to cure the defect or remove the incumbrance, but neglects or refuses so to do.”

The exceptions to the English rule, which, as aforesaid, is the general rule in Virginia, are thus stated in 2 Sutherland on Damages (4th ed), sec. 581:

“English Rule, when not Applied, if the Person Selling is in Fault — If he knew or should have known that he could not comply with his undertaking; if he, being an agent, contracted in his own name, depending on his principal to fulfill his contract merely because he has power to negotiate a sale; if he has only a contract of the owner to convey, or a bond or deed; if his contract to sell requires the signature of his wife to bar an inchoate right of dower, or the consent of a third person to render his deed effective; if he makes his contract without title in the expectation of subsequently being able to acquire it and is unable to fulfill by reason of causes so known, as the want of concurrence of other persons; or if he has title and refuses to convey, or disables himself from doing so by conveyance to another person — in all such cases he is beyond the reach of the principle of Flureau v. Thornhill and is liable to fullcompensatory damages, including those for the loss of the bargain. This rule applies where the grantor expressly agrees to make a good title, but not in actions of law where the invalidity of the contract sued upon is made a defense. In a recent case a vendor was subjected to the severer measure of damages for delay in completing the transfer of the property, that being occasioned by his lack of reasonable diligence in performing the contract, and not because of any lack of, or defect in, title. Where there was a breach by a vendor of a covenant to furnish an abstract of title pursuant to a contract granting an option to purchase land the same measure of damages was applied; the court said it was not material that there should be either allegation or proof that the vendee would have taken and paid for the land if the abstract had been furnished.”

Further consideration of the general rule under the aforesaid doctrine, and statements of the reasons therefor, will be found in the opinion of the court delivered by Judge Burks in Matthews v. LaPrade, 130 Va. 408, 421-3, 107 S. E. 795. In that case the exceptions to the general rule were not considered because not within the pleadings.

An important distinction to be borne in mind, however, is that, where the vendee does not institute a suit for specific performance, but declares upon and seeks damages for the breach of the contract by the vendor, the rights of the parties are determined in accordance with the rules of law applicable as of the time fixed for the completion of the contract; not by the rules applied in equity, under which the time for the completion of a contract is sometimes extended. Sachs v. Owings, supra (121 Va. 162, 92 S. E. 997). When the authorities speak of the ability or inability of the vendor to convey the title contracted to be conveyed; of his disabling himself from making or his neglect or refusal to make the conveyance, they have reference to the ability, or inability, neglect or refusal to so convey at the time fixed for the completion of the contract, not to any subsequent time.

Moreover, where the vendee sues for damages for breach of the contract, thus electing not to seek to enforce its performance, he necessarily treats the con-track as broken, and the measure of the damages, in so far as affected by the motives and conduct of the vendor, is wholly determined by the vendor’s motives and conduct prior to and at the time of the breach of the contract. In such a suit, the vendee cannot rely upon the conduct of the vendor after the breach of the contract, except as evidencing the lack of good faith in his conduct prior to or at the time of the breach. The vendee cannot hold on to the contract as binding upon and fixing the duty of the vendor after its breach, if, instead of seeking specific performance of it, so as to rely upon the contract as still in force, he sues for damages for its breach. He has the right of election between the two remedies. He must choose between the two and having chosen he must abide by his choice. He cannot have the relief afforded by the remedy in equity, when he has chosen the remedy at law.

This brings us to the determination of the question of fact on which the decision of the branch of the case now under^¡consideration turns, namely:

3. Does the preponderance of the evidence prove that the vendors acted in bad faith in making the contract to convey a good, i. e., a marketable, title, or in what they did or neglected to do on or before the time fixed for the completion of the contract?

The question must be answered in the negative.

The provisions in the contract itself fixing the time for its completion were, in substance, as follows: That the vendors should furnish to the vendees abstracts of title to the lands as speedily as possible, and not later than the 1st day of October, 1905, and (might) at the same time tender an apt and proper deed conveying said lands, according to their metes and bounds as (then) known, and with covenants of general warranty, and at the expiration of fifteen days thereafter (which time was given the (vendees) to examine said abstracts and deed), the cash payment upon said lands (should) at once become and fall due, provided said deed be found satisfactory to the (vendees).

At law, the time so fixed was of the essence of the contract (Sugden on Vendors [8th Am. ed.], bottom p. 257). This time could, of course,-be extended by mutual assent of the parties, and by the conduct of the parties in the instant case it was extended until noon December 16, 1905; but, by express notice in writing from the vendors to the vendees, mutual assent to its further extension ended at the time last named and that became and was the time fixed for the completion of the contract in the particulars of the delivery of the deed and the payment of the cash payment of purchase money and the execution and delivery of the deferred purchase money notes — the only acts of completion of the contract which are material in the instant case.

The evidence is so voluminous as to make it impractical to set out here in detail the portions of it which

bear upon the question of fact now under consideration. It must, therefore, suffice for us to say that we consider that the preponderance of the evidence shows the following facts, namely: .

(a). That the vendors, at the time they entered into the contract involved in this suit, did so in good faith, believing that they had at that time a good, i.e., a marketable, title to the lands sold, and that the deed provided for in the contract would convey such title.

(b). That the incumbrances found to exist did not render the title unmarketable, because they could have been removed by the application of a definite portion of the purchase money. Sachs v. Owings, supra (121 Va. 162, 92 S. E. 997).

(c). That the defects in the title, consisting of the need of certain conveyances, which were supplied by the deeds in escrow subject to delivery upon the payment of certain sums of money, did not render the title unmarketable, because those defects could have been removed also by the application of another definite portion of the purchase money.

(d). That the evidence does not show that the title of the vendors to the portions of the land claimed to have been derived by adverse possession, was an unmarketable title.

The authorities hold that title by adverse possession is, under certain circumstances, a marketable title. Maupin on Marketable Title to Real Estate, pp. 699, et seq. The evidence before us fails to show that such requisite circumstances did not exist in the instant case. The evidence on this subject does not go beyond showing that the attorneys for the vendees were not satisfied with the abstracts of title and demanded abstracts setting out more fully the circumstances attending the acquisition of the title by adverse possession in the instances where the title depended on such possession.

(e). That there were a number of defects in title existing at the time fixed for the completion of the contract, which affected a substantial portion of the land embraced in the contract, but which need not be specifically mentioned, which rendered the title to such portion of the land unmarketable; from which situation the result followed that the vendors must be considered as having breached the contract, in that they were unable to convey a marketable title as to a substantial portion of the land at the time the contract stipulated that conveyance of a marketable title to the whole of the land should be made. But as to all of the defects in title existing at the time fixed for the completion of the contract, none of them was caused by the vendors after the sale, and none of them, other than those specifically above mentioned, was known by the vendors to exist at the time of the sale, so far as the evidence discloses; and the defects which were known by the vendors to exist at the time of the sale were equally as well known at that time by the vendees.

(f). That in so far as there may have been a failure on the part of the vendors to furnish the vendees with abstracts of title as complete as they should have been, the facts were that the vendors employed.and relied upon able and reputable attorneys to perform that undertaking', who are above the suspicion of any designed dereliction in the premises; and if we regard the evidence as showing that there was a breach of the contract on the part of the vendors in the particular of failing to furnish the abstracts of title as required by the contract, there is no evidence that such failure was due to bad faith on their part. And finally,

(g). That the vendors, at the time finally fixed for the completion of the contract, did not neglect or refuse to make the conveyance which it was in. their power to make, but, on tbe contrary, offered to make such conveyance by the tender of the deed which they made on December 16, 1905.

The circumstance that the vendors made the tender of that deed, and thus gave the vendees the option to take the lands with such title as the vendors could convey, before the vendors made any contract of sale to anyone else; and the further circumstances that the vendors made no profit by the subsequent sale to others after the vendees declined to take the property under their contract, and that the subsequent purchasers considered marketable and took the title which the aforesaid vendees declined to take, are dominant features of the case, and seem to us to be sufficient of themselves to dissipate any suspicion as to the motives of the vendors which might otherwise arise from the evidence and to stamp the conduct of the vendors as having been in good faith throughout the transaction.

We come now to the determination of the remaining question raised by the assignments of error by the appellants, namely:

4. Did the court below err in refusing to allow the appellants to recover for the value of time occupied by D. A. Langhorne in advertising and developing the property for resale?

The question must be answered in the negative.

The right to the recovery in question must rest upon the same ground as the right of a vendee to recover the value of improvements placed by him on premises pending the completion of a contract of sale, and especially so where, as in the instant case, possession of the. property has not been delivered to the vendee.

In Maupin on Marketable Title to Real Estate, sec. 96, p. 222, this is said: “If the title fail the purchaser cannot recover against a vendor acting in good faith, the value of improvements placed by him on the premises. If he expends money in improvements when he is uncertain about the title, he does so at his own risk.”

5. Did the court below err in refusing to allow the appellants to recover the sum of $3,500 expended by D. A. Langhorne in attorneys’ fees paid for examining the titles to the land?

The question must be answered in the affirmative.

In the valuable work last above cited, in section 93, p. 219, this is said: “As a general rule the purchaser, on failure of the title, may recover as damages, in addition to such part of the purchase money as has been paid, the expenses incurred by him in examining the title. If the vendor is innocently mistaken as to the goodness of his title and the contract contains no warranty of ownership, express or implied, it has been held that the purchaser cannot recover such expenses.” Citing numerous authorities.

In the case before us the contract contains an implied warranty of ownership.

In Northridgev. Moore, 118 N. Y. 422, 23 N .E. 570, 571, this is said in the opinion of the court: “The vendee is not required to take anything less than a good marketable title, and the precautionary means of ascertaining about it by examination before parting with the purchase money and accepting a conveyance, are properly made available by way of protection, and unless an understanding in some manner appear to the contrary, the examination of the title by the vendee and the reasonable expense of making it, may be regarded as in the contemplation of the parties and treated as properly incidental to the contractual situation, and, consequently, the amount of such expense may, in the event of failure of the vendor to convey, be deemed special damages resulting from the breach and recoverable as such.”

In 1 Sugden on Vendors (8th Am. ed.), section 10, dealing with the same subject, this is said: “When the plaintiff declares on the original contract, and lays the expenses incurred in investigating the title, etc., as special damages, he will be entitled to recover them as such” — citing Flureau v. Thornhill, supra, and other English and American cases. See also 3 Sedg. on Dam. (9th ed.), sec. 1017, and cases cited.

That the amount of $3,500 was expended as stated is a fact agreed by stipulation appearing in the record before us. That it was a reasonable expense^for the purpose in question is not controverted. The fact that the contract provides that the vendors were to furnish abstracts of title would not alter the principle involved, even if the abstracts had been furnished as contracted for. The abstracts furnished had to be verified, which involved examining the title. The contract indeed, as aforesaid, expressly gives a time to the vendees to “examine” the abstracts of title, which could be effectually done only by verifying them. And this makes it plain that reasonable outlay by the vendees for that purpose was within the mutual contemplation of the parties at the time of the contract.

The sole remaining question for our determination is that raised by the cross-assignment of error by appellees, namely:

6. Did the court err in decreeing interest in favor of the appellants on the $10,000 first paid by the vendees on account of the purchase money?

There are cases, where the vendee has been put in possession of the real estate, and there are other circumstances not involved in the instant case, in which the vendee is not entitled, upon breach of the contract of sale by the vendor, to any interest upon the recovery back of purchase money paid (Maupin on Marketable Title to Real Estate, secs. 94 and 95, pp. 220-221); but it is not contended for appellees that the instant case falls within that class of cases. The position of the appellees on the question now under consideration is that the tender by the vendors of the return of the payment mentioned and the refusal of the vendees to accept it stopped the running of interest on the obligation to return this payment, from the time of the tender; and a number of authorities are cited, which upon examination, however, are found to involve eases where the whole amount owing was tendered. And it is admitted in the brief for appellees that the contention may be made under the Virginia decisions that the tender in the instant case must have been “kept good” in order to defeat the interest (see 13 Enc. Dig. of Va. & W. Va. Decisions, pp. 196-7, for some of the authorities on this subject) ; but the position is taken that each ease depends upon its particular circumstances. The latter position is correct. We think, however, that in view of the circumstances, that the tender in question was only of one payment of $10,000 which the vendees had made (being therefore a tender of only a portion of the amount owing), the principle involved in the Virginia decisions on that subject requires that the tender must have been “kept good” in order to have the effect claimed for it. That not having been done we find no error in the decision complained of by appellees in the particular in question.

Because of the aforesaid error in the failure to allow the appellants to recover the above mentioned expenditure of $3,500 of attorneys’ fees, the decree under review will be amended allowing such recovery, and as so amended the decree will be affirmed, with costs to the appellees as the parties substantially prevailing.

Amended and affirmed.