Roberts v. New York Life Insurance

Page, J.:

On January 2, 1917, William C. Roberts entered into a contract with the New York Life Insurance Company for the purchase of the land and premises known as Madison Square Garden for the sum of $2,400,000, payable, $100,000 in cash upon signing the contract, $300,000 at the time and place of the delivery of the deed, and $2,000,000 by executing and delivering a bond and mortgage to secure payment of that sum on the 1st day of January, 1922. The New York Life Insurance Company agreed on its part to execute, acknowledge and deliver a proper deed, with covenants only against grantor’s acts, for the conveying to Roberts or assigns the fee simple of the said premises, free from all incumbrances^except taxes, assessments and water rates which were payable after the date of the contract, and also subject to certain leases and bookings, a schedule of which was attached to the contract, and which deed was to be delivered on March 1, 1917, at twelve o’clock noon. The contract further provided: "And it is hereby expressly understood and agreed between the parties hereto that unless title shall be taken at the said time and place, or unless said time of closing shall be duly extended, then this contract, at the option of said party of the first part [the New York Life Insurance Company], shall become void and the said payment of One hundred thousand ($100,000) dollars made to it shall be retained by it as liquidated damages. In case any valid defect to the title is found, and the same is rejected therefor by the purchaser, then this contract shall become void and the said sum of One hundred thousand ($100,000) dollars shall be returned with interest.”

The contract provided that the purchaser was to be Roberts or a corporation to be thereafter formed. Such a corporation was . med and on February 3, 1917, Roberts assigned all his interes'', in the contract to the Garden Tower Corporation, in. which one Paris E. Singer was interested. In order to provide for the payment of the $300,000, Singer purposed to secure a loan upon the collateral security of Singer Sewing Machine Company stock. ' Owing to the condition of the money market, he experienced difficulty in obtaining the loan upon satisfactory terms. Thereupon, through the influence of certain officers of the defendant, a loan for $300,000 was arranged with the New York Trust Company, but upon terms that Singer considered unduly onerous.' An application was made for an extension of the time of closing title until May first, and later, if that was impossible, until April first. One of the vice-presidents of the defendant, on declining to grant this extension, said that the purchasers would either take title at twelve o’clock noon on March first, " or off go their heads,” and “ furthermore, when we cut off their heads we will cut it off close up to the shoulders.” Between the date of the contract and the date for closing, mechanics’ liens were filed against the premises, one on January 25, 1917, for $1,337.80, and one on February 27, 1917, for $1,199.29, which were unsatisfied on March first. When the parties met to close title, these outstanding liens were called to the attention of the attorney for the defendant, and it was suggested that a few days’ adjournment be taken to enable the defendant to clear, the title. The defendant’s attorney said that he had no authority to grant any adjournment, that he could bond those liens in an hour, and insisted on the Garden Tower Corporation then and there taking title. He tendered the deed duly executed and the bond and mortgage prepared for execution, and demanded performance on the part of the corporation. Thereupon the attorney for the corporation refused the tender on the ground that the property was not free and clear of all incumbrances except those specified in the contract, and demanded the return of the $100,000.

The Garden Tower Corporation assigned its claim under said contract to plaintiff, and this action was commenced to recover the $100,000 with interest. The defendant rested upon plaintiff’s case, and the court directed a verdict for the defendant. The grounds for this decision were stated to be: (1) That the mechanics’ liens were# incumbrances which it was in the power of the vendor to remove, and did not operate as a breach of defendant’s contract; (2) that there could be no recovery of damages for defendant’s alleged breach without an allegation in the complaint and proof on the trial of the vendee’s readiness and willingness to perform.

(1) It cannot be controverted that, these mechanics’ liens were,incumbrances which were not provided for in the contract, and furthermore, that the defendant had the ability to remove them, but did not do so. It stood on its right to tender a deed of the property thus incumbered. The attorney for the defendant stated he.would give his word that he would bond them. He, however, refused to grant an adjournment for the purpose of allowing the title to be cleared. Time was by its terms made of the essence of the contract unless an adjournment should be granted, and the defendant had, by its insistence on. an. immediate closing and its repeated refusal of requests for an adjournment, made the very hour of the day essential to its performance. There was not even the suggestion that the purchaser could retain a sufficient sum from the purchase money as a protection against these liens. It is to be borne in mind that there was to be no covenant against incumbrances in the deed. The defendant insisted on the vendee giving up its contract right, for the contract would be merged in the deed (Murdock v. Gilchrist, 52 N. Y. 242, 246; Schoonmaker v. Hoyt, 148 id. 425, 429), and accepting the mere oral promise of the attorney that he would bond the liens. In Higgins v. Eagleton (155 N. Y. 466), relied upon by the respondent, the objections raised at the time of closing were unfounded, but the trial court held that by reason of the existence of a mortgage upon the adjoining property, which had an easement because the beams rested in the wall of the premises to be conveyed, the vendor was unable to give a valid release. The Court of Appeals held that this objection was not made upon the law day; had it been, the vendor could have procured a proper release; and said (p. 472): “ In this contract there was no express stipulation making prompt performance, or performance upon the day named, any part of the substance of the agreement. So that, manifestly, time was not of the essence of the contract.”

In the instant case the objection was raised upon the law day, and demand made that the incumbrances be removed, and an offer made to adjourn the closing to permit the defendant to clear the title, all of which it refused to do.

(2) It is a well-settled rule, as stated by the learned trial justice, that the obligations of the parties to an executory contract of purchase and sale are concurrent and dependent, and there can be no recovery of damages for the vendor’s alleged breach without an allegation in the complaint and proof upon the trial of the vendee’s readiness and willingness to perform. The exception to the rule is equally well settled and is stated in the cases relied upon by the court and by respondent’s counsel, that a formal tender and demand by the vendee is unnecessary where the vendor in advance refuses to comply with the terms of the contract, or where he has placed himself in a position where performance is impossible. (Ziehen v. Smith, 148 N. Y. 558, 561, and cases cited 562; Vandegrift v. Cowles Engineering Co., 161 id. 435, 443.) In Morange v. Morris (3 Keyes, 48), cited with approval in Hartley v. James (50 N. Y. 38, 44), the property was incumbered by the hen of certain taxes and assessments. The court said: “ By his agreement he was not only to convey a title in fee simple, but he was to convey and assure it free from all encumbrances except as therein specified, and the encumbrances referred to were not within the exception. The existence of the encumbrances, at the time fixed in the agreement for the execution and delivery of a deed, was a breach of the agreement on his part, which put it out of his power to perform, and excused the plaintiff from tendering payment. * * * The act of conveying the premises free from all encumbrances, was to be concurrent with that of the payment of the purchase money. The plaintiff was under no obligation to pay his money to the vendor, and trust to a remedy by action for damages in case the vendor failed to remove the encumbrances.” The general language of this case has been somewhat limited and the case has been distinguished from others, but there is nothing either in the limitation or distinction that impairs the application of the principle on which the case was decided to the instant case, in which the vendor refused to remove the incumbrances and insisted on tendering a deed of the property incumbered, which if accepted with knowledge of the liens would leave the vendee no right to damages because the deed did not contain a warranty against incumbrances. The instant action was not brought to recover damages for the breach of the contract, but to recover back a payment made on account of the purchase price, on the ground that, as the vendor was not ready at the time appointed to convey a title to the premises free from incumbrances, and refused on demand to clear the title, the vendee had exercised his right to rescind and reclaim what he had paid. (Bigler v. Morgan, 77 N. Y. 312, 318.) There is no allegation of damage by way of legal expenses incurred. All that is demanded in the complaint is the $100,000, paid on account of the purchase price at the time the contract was signed.

The judgment and order should be reversed, with costs, and judgment ordered for the plaintiff for $100,000, with interest from the 2d day of January, 1917, with costs.

Clarke, P. J., Laughlin and Smith, JJ., concur; Merrell, J., dissents.