Biggs v. Steinway & Sons

Laughlin, J.:

Mr. Justice Gavegan, before whom the issues were tried, wrote a well-considered opinion, properly disposing of the principal points; but in view of the importance of the litigation and the novelty of the questions presented, we deem it necessary to add some further observations in support of the judgment.

The contract between the plaintiffs and the defendant was made on the 29th of June, 1916, and thereby the plaintiffs agreed on the first day of August thereafter to convey to the defendant by deeds in the proper statutory short form containing the usual full covenants and warranties and free from all incumbrances, except as therein stated, the premises known as Nos. 109, 111, 113 West Fifty-seventh street, in the borough of Manhattan, New York, in fee simple. It was expressly understood and agreed that simultaneously with the execution of the contract the defendant was entering into a contract for the purchase of the premises known as 114 West Fifty-eighth street, and that the performance of the contract with the plaintiffs was dependent upon the simultaneous delivery of a deed to the defendant of said premises according to its contract with the owner thereof and that if the title to any part of the premises agreed to be conveyed by the plaintiffs or to the premises 114 West Fifty-eighth street, should be found to be unmarketable, then the purchaser should not be obligated to take title and the money paid on the execution of the contract should be. returned to the defendant and the contract canceled, and in the event of a defect in the plaintiffs’ title making it unmarketable they agreed to pay to the defendant the reasonable expenses of the examination of. the title and they also agreed that the purchaser should have a lien on the premises for the repayment of the down payment. It was further provided that if, at the time for consummating the contract, the purchaser should not have obtained title to the premises 114 West Fifty-eighth street, a reasonable adjournment would be granted by the plaintiffs to enable him to obtain title to said premises. Provision was also made for a reasonable adjournment, if necessary, to enable the plaintiffs to remove tenants from any of the parcels and to satisfy mortgages thereon, it being expressly understood that possession was to be given free from occupancy at the time of the delivery of the deeds; and it was agreed that at the time of the delivery of the deeds the purchaser should execute to the plaintiffs a lease of the premises 113 West Fifty-seventh street, then occupied as a home by one of the plaintiffs, for a term not exceeding two weeks at a specific rental. At the time the contract was executed the plaintiffs were aware of the fact that the defendant was also negotiating for the purchase of the premises known as 112 West Fifty-eighth street, owned by one Anderson, and that the defendant intended at once to demolish the buildings on the five parcels and to erect thereon a single business building, ten stories in height on Fifty-seventh street and six stories in height on Fifty-eighth street and to use the building as its piano warerooms and lofts. Upon the execution of the contract the defendant immediately employed architects to make plans for the new building; and the plans were completed and filed with the superintendent of buildings on the 3d day of August, 1916. In the meantime, and on the 25th of July, 1916, the board of estimate and apportionment, .on the recommendation of a commission appointed by it on the 26th of June, 1914, adopted a building zone resolution which took effect immediately, dividing the city into three classes of districts, viz., (1) residence districts, (2) business districts, (3) unrestricted districts. By that resolution the premises known as 112 and 114 West Fifty-eighth street were embraced in a residence district and their use for business purposes, as contemplated by the defendant, was prohibited. On the submission of the plans filed by the defendant the superintendent of buildings, owing to the zoning resolution, refused to issue a building permit. When the parties met on August first, the time specified for consummating the contract, the plaintiffs tendered title but the defendant interposed the adoption of the building zone resolution as an objection and declined to take title on that ground. At the request of the respondent the closing was then postponed, by mutual consent, until the thirty-first of August. In the meantime the respondent endeavored, as already stated, to obtain authority to build on the premises as contemplated and made further efforts to the same end but to no avail; and on the thirty-first of August the respective parties maintained the same attitude as on August first and negotiations terminated. This action was commenced on the 13th of September, 1916, by service of the summons and complaint. On the 13th day of July, 1916, the defendant contracted for the purchase of the Anderson parcel and before the time for consummating that contract arrived the zoning resolution had been adopted and the defendant likewise refused to take title to that parcel, whereupon Anderson brought an action for specific performance. The defendant answered setting forth the material facts; to which reference has been made, and the purposes for which the premises were to be purchased, and the adoption of the zoning resolution before the time for the consummation of the contract, and counterclaim for the down payment. The plaintiff demurred to the defense and counterclaim, and moved for judgment on the pleadings, and the motion was granted at Special Term, but on appeal this court reversed (Anderson v. Steinway & Sons, 178 App. Div. 507) and held that the defendant was not obliged to take the title, and that its obligation in that regard did not depend upon the validity of the zoning resolution, for it was not obliged to take the risk of the validity thereof, and our decision was affirmed by the Court of Appeals. (221 N. Y. 639.) That decision is applicable and .controlling here and it necessarily follows that the defendant was not obliged to take the title tendered either on the 1st or the 31st of August, 1916. There is no basis, in my opinion, for attempting to distinguish the Anderson case on the theory that this court and the Court of Appeals failed .to appreciate the fact that the contract, as in the case at bar, did not specify the purpose for which the purchaser intended to use the premises, and that this court, in reversing the Special Term, and the Court of Appeals, in affirming our order, erroneously supposed that the act of the Legislature conferring authority on the board of estimate and apportionment to adopt the building zoning resolution, was enacted after the contract was made. (See Laws of 1914, chap. 470, adding to Greater N. Y. Charter [Laws of 1901, chap. 466], §§ 242a, 242b, as amd. by Laws of 1916, chap. 497. Since amd. by Laws of 1917, chap. 601.) The contract, in that case, was made on the thirteenth of July and the zoning resolution was adopted on the twenty-fifth of the same month. Of course, this court and the Court of Appeals realized and understood that the Legislature was not in session at that time and did not confer the power to adopt the zoning resolution after the contract was made. The failure of this court and of the Court of Appeals to allude to the fact that the authority to adopt the zoning resolution had been conferred by the Legislature before the contract was made does not warrant the inference that such fact was overlooked, particularly since it appeared by the record that the defense in the Anderson case, to which the demurrer was interposed, expressly pleaded the statute conferring authority upon the board of estimate and apportionment to adopt the zoning resolution and the date of the enactment thereof, and the point was made and fully argued that the authority to adopt the zoning resolution having been conferred before the contract was made the parties were chargeable with notice that it might be exercised. The point,. therefore, could not have been overlooked by either court. Moreover, in the Anderson case the facts with respect to which the defendant intended to use the premises were pleaded precisely as they were pleaded and proved here, not that the use to which the premises were to be put by the purchaser was expressly stipulated in the contract but merely that both parties so understood. In such circumstances to refuse to accord full authority to the decision in the Anderson case as a controlling precedent here would, in my judgment, be a serious departure from our method of administering justice and render precedents of but little value. The present appeal, however, is after a trial, and other points not fully considered in the decision in the Anderson case are presented.

It is alleged in the complaint that the plaintiffs and the owner of the premises 114 West Fifty-eighth street had good and marketable titles and duly tendered deeds in accordance with their contracts on the 1st day of August, 1916, and demanded payment of the balance of the purchase price and renewed the tenders and demands on the adjourned day and that-the plaintiffs had been put to great expense, in vacating possession of the premises, in satisfying mortgages thereon before their due date and in obtaining another place of residence, to enable them to perform the contract and cannot be restored to their former position and specific performance of the contract was demanded. The defendant interposed an answer on the 27th of September, 1916, putting in issue some of the material allegations of the complaint and alleging for a defense and counterclaim that it was desirous of purchasing the said five parcels for the purpose of demolishing the buildings on the premises and erecting on the entire plot a factory building as already stated, which facts were known to the plaintiffs, and alleging the other material facts with respect to the adoption of the zoning resolution forbidding the erection of the structure contemplated on two of the parcels, and that the then owner of the premises 114 West Fifty-eighth street, with whom defendant contracted for the purchase thereof, was unable to perform the contract on account of the zoning resolution, and that the defendant was ready on August first and was still ready when the answer was interposed to perform the contract on its part, and it prayed for judgment dismissing the complaint and for a sale of the property under its lien for the down payment and for the repayment thereof. On the 11th of November, 1916, the defendant served an amended answer in substance to the same general effect but alleging the facts more fully. The plaintiffs by a reply and an amended reply put in issue the material facts alleged in the defense and counterclaim and alleged that the zone resolution was void and if specific performance was not decreed they demanded judgment for' their damages. The issues were not brought on for trial until the 24th of October, 1918.

The learned counsel for the appellants contends that even though the Anderson case precludes a judgment in favor of his clients for specific performance, the defendant should, in any event, be compelled to reimburse his clients for their loss sustained in preparing to perform the contract consisting of bonuses paid to tenants for moving, bonuses paid to mortgagees for accepting payment before the debts secured thereby were due and the liability incurred by one of the plaintiffs in renting a house to occupy on removing from one of the parcels. Although no facts analogous to these were presented for adjudication in the Anderson case, that decision necessarily precludes a recovery by the plaintiffs of any of these items. If, as held in the Anderson case, the title tendered was not marketable and the defendant was not obliged to accept it, I know of no legal or equitable rule or principle under which the defendant should be obliged to reimburse the plaintiffs for any loss they sustained by the preparations they made to perform the contract which they finally were unable to perform.

It appears, however, that on the 12th day of July, 1918, and before the trial, the zoning resolution was so amended as to exclude therefrom the parcels on Fifty-eighth street, so that thereafter there was no prohibition against the erection on the five parcels of a building such as the defendant contemplated erecting thereon at the time the contract was made and intended to erect thereon immediately after taking title. The plaintiffs also proved the adoption of a prior resolution by the board of estimate and apportionment on the 23d of March, 1917, amending section 7, subdivision c, of the zoning resolution as follows: “(c) Permit the extension of an existing or proposed building into a more restricted district under such conditions as will safeguard the character of the more restricted district.”

On the 13th day of September, 1918, the plaintiffs served a supplemental reply in which they pleaded the amendment of the zoning resolution adopted on the 23d of March, 1917, partly removing the restriction, and the amendment of July 12, 1918, wholly removing it. It was, however, neither pleaded nor proved that after the adoption of either of these resolutions amending the zoning resolution, the plaintiffs made a further tender of performance of their contract based thereon, and there is no evidence that either amendment was drawn to the attention of the defendant until the service of the supplemental reply. The first amendment of the zoning resolution adopted on the 23d of March, 1917, did not, I think, materially change the status of the parties, for it did not follow therefrom that the building the defendant contemplated erecting would have been permitted thereunder and conditions might have been exacted for safeguarding the character of the restricted district which would have materially affected the defendant’s plans and purposes. The real point presented by the supplemental reply and the evidence received thereunder is as to whether, in view of the fact that the restriction had been wholly removed at the time of the trial, which occurred over two years after the time defendant was to receive title, the court should have awarded specific performance, or should have required that the defendant, as a condition of not having a decree of specific performance rendered against it, reimburse the plaintiffs for the losses they incurred in the particulars specified. The plaintiffs showed that acting pursuant to the contract, which required them to deliver the premises unoccupied, they expended prior to the 1st of August, 1916, the day on. which the contract was to be- consummated, $7,533.32 in securing the surrender of leases and in moving and storing the goods of one of the plaintiffs, and that one of the plaintiffs rented a house known as 39 West Fifty-sixth street for his residence for the term of five years at an annual rental of $7,000, and that they were obligated to pay the sum of $1,005.42 to obtain discharges of mortgages, in addition to the payment of the principal and interest, and that they became obligated to pay as brokers’ commissions on the sale the sum of $2,800; and on account of thesé items the plaintiffs claimed a loss of $18,338.64. The plaintiffs also claim that the defendant agreed to pay them considerably more than the market value of their property at the time the contract was made. The contract price was $280,000. One expert called by the plaintiffs testified that the market value at that time was only $200,000 and another testified that it was $208,000 or $210,000. An expert called by the defendant testified that, the market value when the contract was made was $325,033.22 and that its value at the time of the trial was less. On this evidence the plaintiffs claim that the favorable contract they entered into with the defendant was worth upwards of $80,000 more than the market value of the premises they agreed to convey. On the other hand, the defendant showed that it was not purchasing for investment or speculative purposes but solely for the purpose of erecting said building and conducting its business therein; that after making the contracts for the purchase of the parcels and before it was to take title it entered into a contract with the Farmers Loan and Trust Company for a loan of $350,000 to be secured by a mortgage on the five parcels and to run for five years with interest at five per cent during the course of the construction of the building, and thereafter with interest at four and one-half per cent, and that the loan was accepted subject to the approval of the Farmers Loan and Trust Company of the plans; that in the meantime and before the trial building enterprises were seriously restricted by lawful regulations incident to the war and the cost of, building construction had greatly increased and that the average increase thereof was approximately sixty per cent above the cost at the time the defendant was to take title, and that it could no longer obtain the loan from the Farmers Loan and Trust Company, and that the additional cost of obtaining such a loan at the time of the trial would have been approximately $20,000.

No claim was made on the trial that this evidence presented by the defendant in answer to the evidence offered by plaintiffs under the supplemental reply was not admissible because not pleaded. If, therefore, it should have been pleaded it is too late now to raise the point. A reply is the last pleading contemplated by the Code of Civil Procedure and any new matter therein is necessarily deemed denied and subject to any available defense, on the part of the defendant. (See Code Civ. Proc. § 514 et seq.; Id. § 522.) Of course, if the plaintiffs, instead of serving a supplemental reply, had obtained leave and filed a supplemental complaint showing that pending the action the premises had been excepted from the zoning resolution, then it would have been necessary for the defendant, if it wished to claim that circumstances had so changed that it would be inequitable to require it to take title, to plead the material facts by an amended answer; but since the plaintiffs saw fit to present this issue with respect to their ability to perform, arising by virtue of the rescission of the zoning resolution in so far as it affected the premises in question, by a supplemental reply only, the facts proved by the defendant showing that it would have been inequitable to require it to take title at the time of the trial were clearly admissible. In fact the record shows that the plaintiffs stipulated that they interposed no objection to this evidence on the ground that it was not admissible under the pleadings.

I am of the opinion that this evidence neither required nor would it warrant a decree for specific performance. The defendant having been justified in rejecting title at the time title was tendered the question is whether the court could or should make it take title upwards of two years thereafter when the restriction had been removed. The learned counsel for the appellants rely on the general rule that if the title is good at the time of the trial compensation may be made to the purchaser for any injury resulting to him from the delay and specific performance may be decreed. (Clute v. Robison, 2 Johns. 595, 614; Jenkins v. Fahey, 73 N. Y. 355; Haberman v. Baker, 128 id. 253; Haffey v. Lynch, 143 id. 241.) But that general rule is subject to an exception recognized in Haffey v. Lynch (supra) and in Schmidt v. Reed (132 N. Y. 108) and by Chief Justice Marshall in Garnett v. Macon (2 Brock. [U. S. C. C.] 185) that it does not apply where there has been a material change in the condition of the parties or of the premises and it would be inequitable to grant the decree. If the action had been brought to trial prior to the removal of the restriction the plaintiffs would not have been entitled to the decree and when the restriction had been removed the circumstances had materially changed, both with respect to the availability of money and the cost of material and construction in consequence of our having entered into the World War. This is not like a case of a défect in title which it is within the power of the owner to remove upon attention being drawn thereto and which may be removed in a comparatively short time. (See Higgins v. Eagleton, 155 N. Y. 466.) Here it was not within the power of the owners to remove the obstacle. They had no cause of action for specific performance when the action was begun, and I think they acquired none by the amendment of the zoning resolution nearly two years thereafter. The pivotal point, as it seems to me, is, would the defendant have made the contract at the time the restriction was removed or at the time of the trial? If conditions had remained the same the court might, perhaps, properly say that there is no good reason why it should not have made it at the time the title became marketable as well as before, but the changed conditions so materially affected the defendant’s plans and purpose that it cannot, or at least should not, be held that it should have been compelled to take title at the time of the trial. The contract did not expressly declare that time was of its essence and the plaintiffs objected to having it so provided therein but -they agreed to convey a marketable title on August 1, 1916, and that if they should be unable so to do the contract should be canceled and that they would, in that event, repay to the defendant the down payment made by it. It might be within the province of the court to enforce specific performance of the contract if the restriction had been removed within a reasonable time after August first, and before conditions had materially changed to the prejudice of the purchaser; but here the provisions of the contract with respect to delivery of possession free from occupancy show that time was substantially of the essence of the contract and I think it would be most inequitable to hold the defendant indefinitely bound by the contract, which expressly provided for its cancellation in the event that a marketable title was not tendered at a specified time more than two years before the trial. (See Wells v. Smith, 7 Paige, 22; West v. Guaranty Trust Co., 162 App. Div. 301; Toole v. Toole, 112 N. Y. 333; Lloyd v. Collett, 4 Brown Ch. 469; Gale v. Archer, 42 Barb. 320; Rice v. Barrett, 99 N. Y. 404; Goldsmith v. Guild, 10 Allen [Mass.], 239; Schmitt v. Reed, 132 N. Y. 108; Jackson v. Edwards, 22 Wend. 498; Willard v. Tayloe, 8 Wall. 557.)

There is no force in the contention that the provisions of the defendant’s answer and amended answer by which it then manifested readiness and willingness to perform the contract, but only asked for the return of the down payment and not for specific performance, should be construed as a manifestation of willingness to perform and to accept performance at the time of the trial. When it interposed its answer and amended answer we had not entered the war and the conditions existing at the time the contract was made had not materially changed, but it proved that they had so changed long before the trial. The fact that the purpose for which the defendant desired the parcels was not recited in the contract is no answer to these views, for it sufficiently appeared by the contract that the purchaser had a particular plan and purpose in mind for which it desired more land than the plaintiffs had to sell and did not desire the plaintiffs’ land unless it could obtain the other land, and, moreover, the plaintiffs were fully aware of the purpose for which the defendant was acquiring the property. Consequently a change in circumstances affecting such purpose was even more material to the purchaser thaii a material depreciation in the market value of the premises in the meantime which was recognized in Garnett v. Macon (supra), as a sufficient answer to a demand for specific performance.

The case is one of great hardship to both parties, but I fail to see any principle upon which the defendant should be compelled to make good the plaintiffs’ loss.

It follows that the judgment should be affirmed, with costs.

Clarke, P. J., and Merrell, J., concur; Page and Smith, JJ., dissent.