The premises to which this controversy relates consist of two parcels; one, the westerly portion, designated in the report of the referees the Hotel ’ *511plat; the other, or easterly part, designated the Bartlett plat. There is no question of the ■ ability of the plaintiff to convey a good title to the former of these. The two parcels were contracted to be sold together, however, and as one piece of land. They are not distinguished in the contract, but Gibert agrees to sell and convey to Peteler, lands in New Brighton lying between certain streets, and including all these premises. The plaintiff’s title to the whole property is derived from one Fox. Fox obtained his title by two conveyances. One was from a person named Davis, dated October 14th, 1846, of the Hotel plat. This was an absolute deed, and conveyed a perfect and unqualified title. This Davis was originally the owner of the whole, and his title was absolute in fee. But on the 14th of September, 1846, before his deed to Fox, Davis had conveyed what was afterwards known as the Bartlett plat to Edwin Bartlett. The deed from Davis to Bartlett was absolute, like the other, and contained no restriction. But it appears that Bartlett took this title at the request of one John 0. "Green, who was the owner of certain-adjoining premises which he desired to protect. Green advanced the purchase money, and Bartlett held the title for him, and subject to his direction, although there was no written evidence of the arrangement. On the 30th of October, 1846, Bartlett, at Green’s request and by his direction, conveyed the strip of which he thus held the title to Fox, who was already, by Davis’ deed, the owner of the residue. This deed of Bartlett contained a provision in the form of a covenant by the party of the second part, (Fox,) his heirs, executors, administrators and assigns, to and with Bartlett, his heirs and assigns, not to erect or permit to be erected at any time thereafter, on "any part of the premises, any building whereby the view or prospect of the bay from the dwelling house of John C. Green could be obstructed or impaired, unless Green should first destroy his own prospect by building on his own lot. The deed added a clause of forfeiture in favor of Green in the event of a breach of this covenant. It *512was not signed or executed by Fox. Fox afterwards conveyed to Theodosius 0. Fowler, subject to this covenant and to an express stipulation by Fowler to observe it. Fowler conveyed to Victor Forgeaud, subject to the same covenant and stipulation. Forgeaud obtained also a release and quitclaim of title from Green, but with a clause preserving the restriction as to building, &c. ‘ At or about this time there was erected a stone cottage upon the Bartlett "lot, and Green afterwards by a deed, reciting that he was the person for whose benefit the restriction was imposed, released Forgeaud from the restriction as to the land occupied by this cottage, but with a proviso that this should not remove the restriction or impair his rights as to the residue of the premises. After this,"Forgeaud conveyed to August Belmont by a deed containing an express covenant on the part of Belmont to abide by the restrictions in the deed to Forgeaud; this latter deed, however, like the others, not being signed by the grantee. Belmont conveyed to Vanderbilt by a deed in similar terms. From Vanderbilt the title passed to the plaintiff by various mesne conveyances, none of which contained any express covenant or restriction, but all of which referred to the deed from Vanderbilt to his next grantee; which latter deed referred to the deed from Belmont to Vanderbilt which contained the restriction.
Although the plaintiff is not shown to have had express notice of this restriction, yet as the conveyances under which he holds refer to deeds in which it is contained, and these deeds are recorded, he must be taken to have had notice of the existence of such a restriction in the original deeds, and of its consequences.
John 0. Grefen, in whose favor this, covenant was made, may be admitted to be a stranger to the legal title, and probably not able to bring an action at law upon the covenant, against the plaintiff, or to enfore it as a condition divesting the legal estate, upon a breach. But the remedy in equity for the enforcement of such a restriction imposed upon land *513by the owner, does not depend upon the existence of a concurrent remedy at law. The observations of Lord Brougham in Keppel v. Bailey, (2 M. & K. 54,) if intended to express such an opinion, are distinctly disapproved by Lord Cottenham in Tusk v. Moxay, (2 Phil. 774.) In this latter case Lord Cottenham granted an injunction in favor of a vendor, against a subsequent purchaser from his grantee, to enforce a covenant of that grantee as to the use of his own premises, which did not run with the land, and was not contained in the deed to the last purchaser. The case was placed distinctly upon the equity, whieh it was conceded might have been created as well by an agreement, as by a covenant, provided the subsequent purchaser had notice of it. In Cole v. Sims (23 Eng. L. & E. 384) the lords justices of appeal affirmed an injunction of the vice chancellor, in a case very similar to the present, upon the question of notice, and where also there was no remedy at law. So in Whatman v. Gibson, (9 Sim. 196,) Schrieber v. Creed, (10 id. 35,) and Mann v. Stephens, (15 id. 377,) similar agreements as to the use of property were enforced by injunction, in cases where there was no privity between the present parties, and no remedy at law. The principal cases in our own courts are referred to in Brouwer v. Jones, (23 Barb. 153, 160,) in which a covenant not to use certain premises in a particular way was enforced against a purchaser, in favor of a previous purchaser of lands in the same tract from the same grantor. This was upon the ground that the covenant was intended for the benefit of the owners of the whole tract, and created an easement or servitude in the lands conveyed as a servient tenement, which would be enforced at the instance of any owner of any part of the tract for whose benefit it was created. In the case of Barrow v. Richard (8 Paige, 351) the plaintiff and defendants were alike purchasers of lots in a particular tract from one Mercein. The plaintiff first purchased lot No. 11 in this block, and the defendants afterwards received conveyances of lots 12, 13. All the deeds contained covenants against cer*514tain uses of the lots. But the covenant or agreement, in the plaintiff’s deed would neither have created any legal liability against subsequent purchasers of the lots, nor any privity between them and the first grantor. Yet the chancellor fastened upon the language of the covenants in the subsequent deeds, which were expressed to be for the benefit of the “ neighboring inhabitants,” and held that every such deed created an equity in favor of all the owners of adjoining lots in the block. This case, as well as Brouwer v. Jones which followed it—and both I think are correctly decided—is important to show that the action of courts of equity in such cases is not limited by rules of legal liability, and does not depend upon legal privity of estate, or require that the party invoking the aid of the court should come in under and after the covenant. A covenant or agreement restricting the use of any lands or tenements in favor or on account of other lands, creates an easement and makes one tenement, in the language of the civil law, servient and the other dominant; and this without regard to any privity or connection of title or estate in the two parcels, or their owners. All that is necessary is a clear manifestation of the intention of the person who is the source of title, to subject one parcel of land to a restriction in its use for the benefit of another; whether that other belong at the time to himself or to third persons, and sufficient language to make that restriction perpetual.
The referees were correct in their conclusion in this case that the Bartlett lot was subject to an easement or servitude in favor of the lands of John G. Green, which was a defect or incumbrance upon the title, so that as to that part of the premises contracted to be sold, the plaintiff was disabled from giving the title which he had contracted for. The question now arises, what are the respective rights and obligations of these parties, under this state of facts. The present is an action of ejectment by the vendor against the vendee or his assigns who were in possession. The defendants having refused the plaintiff’s title, cannot of course retain the posses*515sion of the premises as vendees. But they set up the facts of the contract and the title, and the plaintiff's inability to perform. They also aver that having taken possession under the contract, they expended in good faith a very large sum in permanent improvements, relying upon the plaintiff's ability to perform the contract and to make a good title. They ask a judgment for damages, or that the plaintiff be directed to convey such title as he may have, with a deduction from the contract price for the imperfection of his title. The answer does not indicate an election by the defendants between abandoning the contract altogether, and receiving a partial performance with compensation. The vendee in such a case has such an election, which he may indicate by the form of his action, or where, as in the present case, no objection is taken to the time or the mode of the. election, he may be allowed by the judgment an opportunity to exercise it. The defense to the present action has the same scope and effect as a cross action, or suit in equity for performance of the contract, or for the appropriate remedies of the vendee under it, and should result in a similar judgment, upon a sufficient state of facts. The claim for compensation for the expenditures of the vendee is made in this answer in the form of a demand or counter-claim of mere damages at law for the non-performance of the contract. It is not, however, my intention to consider what would be the measure of damages in an action at law, for the failure of the plaintiff to comply with this contract, or to what extent such a counter-claim could be interposed in a suit like the present. The defense may properly be disposed of here in its equitable aspect. The answer asks, as I have already stated, for such a title as the plaintiff can make, with compensation for the defects, or for such other relief as the facts may justify. There is no dispute that expenditures were made by the defendants, as stated in the answer, in permanent improvements, in good faith and relying upon the performance of the agreement, to an amount of about $>20,000. Whether such expenditures could be recov*516ered hack of a vendor who had failed or heen unahle to make a perfect .title, or whether they could he made a lien upon the premises, in a case where the expenditures were not specified or demanded hy the contract, is probably an open question in this state. In Putnam v. Ritchie (4 Paige, 390,404) the chancellor declined to make such an allowance for improvements in favor of a purchaser who had made his expenditures for the improvements in good faith, and supposing that he was the owner under a conveyance which" turned out to he void. The chancellor refused to stay the enforcement of the legal title until compensation was made for these expenditures, intimating that his opinion would he different in a case where the legal title was in the person who had made the improvements in good faith, and the equitable title in another, who was thus compelled to resort to equity for relief, and would then he required to do equity himself. This case was disapproved by Judge Story in Bright v. Boyd, (1 Story’s Rep. 478.)
There the owner of an estate was subjected to a deduction in favor of a hona fide possessor, in an action against the latter for rents and profits after a recovery upon a legal title, to the extent of the amount expended in good faith for permanent improvements. The case perhaps does not quite come up to the opinion upon the present point, since the suit was a hill in equity for an account of the rents and profits, and the maxim that he who seeks equity must do equity, might he directly applied, although the foundation of the suit was a legal title. In the case of King v. Thomson, (9 Pet. 204,) in the supreme court of the United States, the plaintiffs were the vendees, who filed a hill for specific performance, the legal title being in the defendants. The contract was proved, hut it was indeterminate as to the person in whom the title was to he vested, or the conditions of the conveyance. The specific performance was therefore denied, hut the vendees were allowed the benefit of their expenditures, and the premises were directed to he sold to repay them. *517This case goes farther than the case before Judge Story, and can hardly be reconciled with the opinion of Chancellor Walworth.
There is however a feature in the present case which will distinguish it from those which have been referred to. The contract here called for and required the expenditures which the defendants have made. They have made expenditures not only in good faith, and relying upon the execution of the agreement by their vendors, but in actual and direct compliance with their own covenants in that agreement. Under such circumstances I cannot hesitate to hold, that the vendor who has been unable to perform the contract, cannot recover the possession of the lands, without repaying expenditures which were made under the stipulations of the agreement itself, by which possession was given, and for his security, if not for his benefit.
I am therefore of opinion that if the defendants elect to rescind this agreement in toto, they are entitled to be repaid the amount which they have expended in compliance with its terms in permanent improvements; and that such amount should be made a lien upon the premises, or its payment a condition to the surrender or recovery of their possession by the legal owners.
If, however, the defendants elect to receive such a title as the plaintiff can make, with compensation for the deficiency, they have the right to ask for a judgment to that effect. The referees, by their judgment, directed that the portion of the premises which has been described as the Hotel plat, and as to the title to which no difficulty arises, should be conveyed to the defendants, and not the residue, and that a deduction of $17,760 with interest should be made from the contract price of the whole property, for the failure to convey the Bartlett strip. This however is not the performance or the compensation to which the defendants are entitled. The lands contracted to be sold to them were sold and to be conveyed as one parcel. However susceptible of division they *518may be, and although they had been divided in the former history of the title, yet the purchase was entire, and the defendants are not to be compelled to take a part only of what they agreed to buy as an entirety. The compensation for the deficiency, in cases where performance is decreed in part, consists in an abatement from the price, for the diminution in value of the whole property in consequence of defects or incumbrances, and not in a deduction of what may be supposed to be a proportionate part of the whole price for a part not conveyed at all, with a conveyance only of the residue. There are indeed some cases to be found in the books of a partial performance decreed, by a conveyance of a portion only of the property and a consequent abatement of price, but they will be found to be cases where the premises sold consisted of distinct parcels, purchased separately, and having distinct prices. ( 2 Sandf. 298. 6 John. Ch. 38.)
[Kings General Term, December 8, 1862.The conclusions of the referees in this case as to the remedies to which these parties were entitled, were erroneous. The defendants are entitled to elect whether they will rescind the contract in toto, and receive back their expenditures under it, or will receive such a conveyance of the whole property as the plaintiff can give, paying him- the price stipulated, less such deduction as may be just for the defect occasioned by the covenant in favor of J ohn C. Green. The plaintiff cannot recover the possession of the premises until the defendants have had the opportunity to make their election, and have it complied with, either by the repayment to them of their expenditures, or by the payment of the sum which shall be fixed as the proper purchase money; upon a tender of a conveyance of the plaintiff’s title.
The judgment is reversed and a new trial ordered at the circuit. The costs will abide the final direction of the court.
Emott, Lott and Brown, Justices.]