Occidental Realty Co. v. Palmer

Scott, J.:

Many, and perhaps most, of the objections to the title urged by plaintiff are insufficient to justify its refusal to perform, but I think there is a practical impossibility of accurately fixing the lines of the land proposed to be conveyed, and the difficulty arising therefrom is accentuated by the fact that there appear to he encroachments upon the property. I .think,.therefore, that the title, in its present condition may fairly he said to be so. far .unmarketable, that the. vendee is not bound to accept it-. The serious question in the case is as to the relief to which plaintiff is- entitled* and upon this ques-. tion the appellant, contends for a. proposition which is- contrary to the rule., which has heretofore- prevailed in every jurisdiction in -which that branch of the- law, which wé know as equity, prevails. The rulé which has. obtained for many years, in this country and in England is that the purchaser of land by an executory contract has an equitable lien thereon for any money paid by him under the contract, so-that, in case'he is -entitled to recover such money back by means of the inability or refusal of the vendor to perform, lie may do so by proceeding against the land. This is - known as the-vendee’s- lien a-ndii-t is. universally recognized) in equity, wherever the doctrines of equity prevail. • . . ' .

The ground upon which the lien exists is thus stated by Lord Chancellor Westbuby in Rose v. Watson (10 H. L. Cas. 672): When -the owner of- an. estate contracts- with- a purchaser for, the immediate sale of it, the ownership of- the- estate is* in equity, transferred by that contract. Where the contract undoubtedly is an executory contract in this, sense, namely, that the ownership of the estate is, transferred subject, to the payment, of the, purchase money, every portion of the purchase, money paid in pursuance of that con-. tract is. a part performance and execution of the. contract, and to the extent of the purchase money so paid* does, in equity finally t-rans^ fer to the-purchaser- the ownership of the corresponding portion of the estate.” This principle is so firmly established in- this State that when lands have been sold by contract by a testator* the purchase price not having been paid, and the title remaining in him at his decease, the premises contracted to be sold' are not to .be considered as embraced in his real- estate, fqr the interest remaining in the vendor is not real but personal estate. (Lewis v. Smith, 9 N. Y. 502.)

. In such- a case,, upon- the execution of' the- contract, the vendor becomes a -trustee of- the land for the pul-chaser, retaining a lien for the purchase- price, and the vendee becomes the" equitable owner of the land. (Ferry v. Stephens, 66 N. Y. 321; Thomson v. Smith, 63 id. 303 ; Potter v. Ellice, 48 id. 323 ; Baldwin v. Humphrey, 44 id. 609.) If this he the true relation which equity recognizes between the parties to an executory contract of sale toward each other and toward the land which is the subject of the contract (and that it is the true relation I take it cannot be questioned), a vendee’s lien for moneys paid on account of the purchase would seem to be a natural and necessary corollary, and so it has heretofore gem eralTy been considered to be. In England it was recognized in Wythes v. Lee (3 Drew. 396) in 1855,-reiterated in Rose v. Watson (supra) in 1864, and again reiterated and enforced in Whitebread & Co., Ltd., v. Watt (L. R. 1902, 1 Ch. Div. 835).

Thus it was firmly established m England more than half a century ago, and has been repeatedly reiterated since, that a vendee had a lien for the consideration paidf and that equity will enforce it, and neither before 1855 nor since has there been any authority in that jurisdiction which has held to the contrary. That such a lien exists and that' equity will enforce it, has been uniformly held in every State in this country in which the question has ari'sen. It would be wearisome to cite all the authorities to this effect. A few will suffice to indicate the universality of the rule. (Alabama, Hickson v. Lingold, 47 Ala. 449; Illinois, Swetitisch v. Waskow, 37 Ill. App. 155; Wisconsin, Taft v. Kessel, 16 Wis. 273; Mississippi, Davis v. Heard, 44 Miss. 50; North Carolina, Costen v. McDowell, 107 N. C. 546 ; Tennessee, Jones v. Galbraith, 59 S. W. Rep. 350 ; Kentucky, Bullitt v. Eastern Kentucky Land Co., 99 Ky. 324; Indiana, Coleman v. Floyd, 131 Ind. 330; Shirley v. Shirley, 7 Blackf. 452.) In California and North Dakota the Civil Codes specifically provide for a vendee’s lien (Cal. Civ. Code, § 3050 ; N. D. Rev. Codes [1899], § 4834 [Civ. Code, § 1805]), and that such a lien exists and will be enforced in equity is stated by the text writers- of the highest fame and authority and questioned by none. (Pom. Eq. Juris. [3d ed.] § 1263; Washb. Real Prop. [6th ed.] § 1039 ; 2 Story Eq. Juris. [13th ed.] § 1217 ; Jones Lien [2d ed.], §§ 1105, 1106; Fry Spec. Perf. [3d Am. ed.] § 1452.)

In our State the vendee’s lien has frequently been recognized. (Clark v. Jacobs, 56 How. Pr. 519; Parks v. Jackson, 11 Wend. 442; Tompkins v. Seeley, 29 Barb. 212; Gibert v. Peteler, 38 N. Y. 165 ; Chase v. Peck, 21 id. 581.) The whole weight of authority is thus to be seen to be in favor not only of the existence of a vendee’s lien, but of the vendee’s right to enforce it in equity, provided always, of course, that the 'failure to carry out the contract of sale has not been the result of any default on his part. Not only is the lien and its enforcibility in equity supported by. this great weight of .authority, but. there is absolutely no authority to the contrary save the case of Klim v. Sachs (102 App. Div. 44), a case which has-not, as yet, been followed in this department, (Smadbeck v. Law, 106 App. Div. 552.)

In Klim v. Sachs (supra) the learned court held that no lien existed in behalf of a purchaser when nothing more appeared than that the vendor was unable to convey the title which lie had contracted to convey and -seems -to. have considered that süch a lien attached-only when the purchaser'had gone into possession under the contract of sale and had made improvements on the land upon the faith thereof. In -support of this view the court cited King's Heirs v. Thompson (9 Pet. 204) and Gibert v. Peteler (38 N. Y. 165). An examination of these cases shows that while they support the proposition that a purchaser going into possession under a contract of sale and making improvements upon the faith thereof-may-have a lien for the money thus expended, they contain nothing limiting a vendee’s lien to such a case. On the contrary, in both cases the lien was allowed specifically upon the ground that the moneys paid out for improvements constituted part payment of the consideration which the vendee was to pay for the- land. It is .said' that in all the eases (at least in the appellate courts) in which" a vendee’s lien has been sustained in this State, there have been found other equities in favor of the vendee besides the mere fact of the vendor’s inability or refusal to completely perform his contract. It is quite true that in many of the cases there have been other matters which have been much discussed, but I have been able to find none in which the right to a lien and to enforce it has been made to depend in the slightest degree' upon any equities in favor of the vendee apart ftom the fact that he has paid a' part of the consideration and that the vendor lias failed to perform.

In Tompkins v. Seeley (supra) the court found strong equities in favor of the vendee, but these influenced the court, not in awards ing him a lien, but in holding him free from any obligation to compíete the purchase, which was the real matter in dispute. In Parks v. Jackson (supra) the vendee’s right to a lien seems to have been recognized on all hands, the only question discussed or determined being as to the sufficiency of notice to the vendee in possession of the pendency of a suit to set aside a deed to one of his predecessors in title. In Gibert v. Peteler (supra) the recognition of the vendee’s lien was not made to depend upon any special equities. The only question was whether the lien should be extended to certain moneys laid out in improvements on the property by the vendee, and the lien was-thus extended because the moneys so laid out constituted, in effect, a part of the consideration, it having been stipulated in the contract that the purchaser should make the improve, ments before becoming entitled to a conveyance. I affirm, therefore, with confidence that no case can be found in this State, or in any other, save only Klim v. Sachs, wherein the existence of special equities has been made the ground for enforcing a vendee’s lien, which otherwise would have been disallowed. That there have been few adjudications upon the subject, and fewer still where no other question was involved, is no argument against the existence of the lien or its enforcement in equity, but rather a tribute to the learning and conservatism of our conveyancing, bar who have forborne to present to the courts for decision a question already thoroughly decided on reason and authority.

, The right of a vendee to a lien, and to invoke the aid of equity to enforce it cannot be defeated upon the ground that he has an adequate remedy at law for damages. As well refuse a decree for the foreclosure of a mortgage because the mortgagee can collect his debt at law. To oust equity of its jurisdiction the legal remedy must be as efficient as the remedy both in respect to the final relief and the means of obtaining it. (Kilbourn v. Sunderland, 130 U. S. 505, 514.) It certainly cannot be contended for an instant that an action for damages, with the more or less doubtful chance of collecting the judgment by execution, is equal in efficiency or certainty to the remedy of foreclosing the lien in equity. It certainly would be far from equal in a city like this, where the transactions in real estate are of great number and are, no doubt, fre quently entered into between total strangers. Under our cumbersome and complicated system of transmitting title to lands, and establishing liens thereon,-it is absolutely necessary that some time shall elapse between the making of a contract for sale, and actually consummating the transfer. It would be unreasonable in most cases to expect to find a seller content to tie up his property by a contract to convey unless he received some payment on account, or other security, to protect him from loss if the purchaser refuses to" complete the contract, and yet it would be equally unreasonable to expect a purchaser to be willing to pay 'part of the consideration upon signing the contract, if lie had no better prospect of protection in case of a defective title, or the vendor’s, default, than an action at law for damages, with no recourse against the land. Any practical objection to the existence of a vendee’s lien, based upon the supposed inconvenience to the vendor of having a lis ¡pendens filed against his property, has been removed by the amendment to section 1671 of the Code of Civil Procedure by chapter 60 of the Laws of 1905, which permits such & Us ¡pendens to be canceled upon the giving of a proper security. The rule that a vendee, without fault himself, shall have a lien, enforcible in equity, for so much of the consideration as he lias .paid is reasonable and fair; makes for safety and fair dealing in real estate "transactions, and is supported by an overwhelming weight of authority. In my opinion we -should not lend our aid to breaking it down.

We find no satisfactory authority, however, for extending the lien so as to cover the cost of examining'the title. This is undoubtedly an item of .plaintiff’s damage, but it is neither money paid as part of the consideration nor money expended in improvements upon the property, and the principle of law upon which the doctrine of a vendee’s lien rests does not warrant such an extension of the lien.

We also think that the extra allowance should have been limited to five per cent upon the sum sought to no recovered by the plaintiff. In one sense, the whole consideration was involved, but practically the controversy turned upon the plaintiff’s right to recover its deposits.

With these modifications the judgment should be affirmed, with costs.

Ingraham, McLaughlin and Houghton, JJ., concurred \ Patterson, P. J"., dissented, j