Pumpelly v. . Phelps

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] There has never seemed to me to have been any very good foundation for the rule, which excused a party from the performance of his contract, to sell and convey lands, because he had not the title, which he had agreed to convey. There seems to have been considerable diversity of opinion in the courts, as to the grounds, upon which the rule itself is based.

In England, the rule seems to have been sustained upon the ground of an implied understanding of the parties, that the parties must have contemplated the difficulties attendant upon the conveyance. In the leading case on this subject of Flureau v. Thornhill (2 W. Black., 1078), BLACKSTONE, J., said: "Thesecontracts are merely upon condition, frequently expressed, butalways implied, that the vendor has a good title."

While, in this country, the rule is based upon the analogy between this class of cases and actions for breach of covenant of warranty of title, Baldwin v. Munn (2 W.R., 399); Peters v.McKeon (4 Den. R., 546). The rule of damages, in an action for a breach of covenant of warranty of title is settled to be the consideration paid, and the interest; and yet this is an arbitrary rule, and works great injustice many times; and the courts met with the greatest embarrassment in settling it. These difficulties were considered, and well expressed, in the leading case in this State of Staats v. The Ex'rs of Ten Eyck (3 Caines' R., 115), in which the court said: "To find a rule of damages, in a case like this, is a work of difficulty; none will be entirely free from objection, or will not, at times, work injustice.

To refund the consideration, even with the interest, may be a very inadequate compensation, when the property is greatly enhanced in value, and when the money might have been laid out to equal advantage elsewhere. Yet to make this increased value, the criterion, where there has been no fraud, may also be attended with injustice, if not ruin.

A piece of land is bought, solely for the purpose of agriculture, and, by some unforeseen turn of fortune, it becomes the site of a populous city; after which an eviction takes place. Every one must perceive the injustice of calling on a bona fide vendor to refund its value, and that few fortunes could bear the demand. Who, for the sake of one hundred pounds, would assume the hazard of repaying as many thousands, to which value the property might rise, by causes unforeseen by either party, and which increase in worth would confer no right on the grantor to demand a further sum of the grantee?" There is still another class of cases, where the rule of simply refunding the purchase money and the interest operates with great hardship and injustice upon the purchaser. A purchases of B a city lot, for the purpose of building himself a dwelling or buildings upon it, and takes from B a full covenant deed of the premises, covenanting to assure, warrant and defend the title. The buildings are constructed at the cost of thousands of dollars, and then B is evicted by a paramount title, ascertained to be in some one else. The recovery of the money and six years interest is not a very just or reasonable return in damages, for the law to give to one, who holds a covenant, to make good and defend the title.

The reasons assigned for this rule, in actions for a breach of covenant of warranty of title, can scarcely apply to these preliminary contracts to sell and convey title at a future time. In the latter case, the vendee knows he has not got the title, and that perhaps he may never get it; and if he will go on and make expenditures under such circumstances, it is his own fault; and, besides, these preliminary contracts to convey generally have but a short time to run, and there is seldom any such opportunity for the growth of towns, or a large increase in the value of the property, as there is in these covenants in deeds, which run with the land, through all time.

The Supreme Court of the United States have refused to yield its sanction to this rule, when applied to contracts for the sale of lands, and affirm the doctrine that the reason of the rule, as to contracts for the sale of goods and chattels, applies with equal force to these executory contracts for the sale of lands. (Hopkins v. Lee, 6 Wheat. R., 109.) That rule is, where a party sustains a loss, by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. (Robinson v. Harman, 1 Exch. R., 850.) This case of Hopkins v. Lee (6 Wheat. R.), is cited with approbation in some of the American cases, and the rule there laid down, affirmed.

These views are not presented to induce the court to overrule or repudiate the adjudged cases in our own courts, upon this subject. They reach back over a period of more than forty years, and have been too long sanctioned to be now repudiated.

I have referred to this matter, simply as furnishing an argument against, in any degree, extending the rule, and as a reason for limiting it strictly, where the already adjudged cases, in our own courts, have placed it. It becomes important, in this connection, to inquire what that limit is. The general rule certainly is, that where the vendor has the title, and for any reason refuses to convey it, as required by his contract, he shall respond in law for the damages, in which he shall make good to the plaintiff, what he has lost by his bargain not being lived up to. This gives the vendee the difference between the contract price and the value at the time of the breach, as profits or advantages, which are the direct and immediate fruits of the contract. (Griffin v. Colver, 16 N.Y.R., 489; Durkee v.Mott, 8 Barb. R., 423; Underhill v. Gas Light Co., 31 How. Pr. R., 37; Masterton v. Mayor, c., of Brooklyn, 7 Hill R., 61, 69.) Where, however, the vendor contracts to sell and convey, in good faith, believing he has a good title, and afterwards discovers his title is defective, and for that reason, without any fraud on his part, refuses to fulfill his contract, he is only liable to nominal damages for a breach of his contract. (Baldwin v. Munn, 2 Wend. R., 399; Peters v. McKeon, 4 Denio R., 546; Conger v. Weaver, 20 N.Y.R., 140.) The rule is otherwise, however, where a party contracts to sell lands, which he knows, at the time, he has not the power to sell and convey; and, if he violates his contract in the latter case, he should be held to make good to the vendee the loss of his bargain, and it does not excuse the vendor, that he may have acted in good faith and believed, when he entered into the contract that he should be able to procure a good title for his purchaser. (2 Parsons on Contracts, 503, 504, 505; Hopkins v. Grazebrook, 6 Barn. C., 31; Driggs v. Dwight, 17 W.R., 74; Bush v. Cole, 28 N YR., 261; Lock v. Furze, Exch. Ch. Law Rep. Com. Pleas, 1 vol., 441; Robinson v. Harman, 1 Exch. Rep., [Wels., Hurlst. Gordon] 849; Hill v. Hobart, 16 Maine R., 164; Fletcher v. Button, 6 Barb. R., 650; Trull v. Granger, 4 Seld. R., 115; Hopkins v. Lee, 6 Wheat. R., 109; Burwell v.Jackson, 5 Seld. R., 535; White v. Madison, 26 N.Y.R., 124;Lewis v. Lee, 15 Ind. R., 499; Dean v. Raseler, 1 Hilt. R., 420; Bitner v. Brough, 11 Penn. St. R., 127; McNair v.Crompton, 35 Penn. St. R., 23; Wilson v. Spencer, 11 Leigh. R., 261; Graham v. Hackwith, 1 A.K. Marsh R., 429; Dart on Vendors, 447.) This rule, applied to the case at law, sustains the judgment of the Supreme Court.

The defendant must be held personally liable on this contract. It is essentially his contract. In order to exempt the contracting party from personal liability, he must so contract as to bind those he claims to represent. (Moss v. Livingston, 4 Comst. R., 208; Dewitt v. Walton, 5 Seld. R., 570; Bay v.Gunn, 1 Den. R., 108; Bush v. Cole, 28 N.Y.R., 261.)

The fact that the party describes himself as trustee, without stating for whom, does not relieve him from personal liability, or change the effect of his engagement. (Taft v. Brewster, 9 J.R., 334; White v. Skinner, 13 J.R., 307; Dewitt v.Walton, 5 Seld. R., 570; Bush v. Cole, 28 N.Y.R., 261.) These views lead to the affirmance of the judgment.

GROVER, WOODRUFF, JAMES, and MURRAY, JJ., concurred with MASON, J., and were for affirmance.