Occidental Realty Co. v. Palmer

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 be encroachments upon the property. I think, therefore, that the title in its present condition may fairly be 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 question 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 we know as equity prevails. The rule 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 anv 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, he may do so by proceeding against the land' This is known as the “vendee’s lien,” and it is universally recognized in equity wherever the doctrines of equity prevail. The ground upon which the lien exists is thus stated by Lord Chancellor Westbury in' Rose v. Watson (10 H. of L. Cases 673) :

“When the owner of an estate contracts with the purchaser for the immediate sale of it, the ownership of the estate is in equity, transferred by that con-' tract. When the contract is undoubtedly 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 contract is a past performance and execution o-f the contract, and to the extent of the purchaser’s money so paid does in equity finally transfer 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, for the interest remaining in the vendor is not real, but personal, estate. Lewis v. Smith, 9 N. Y. 502 , 61 Am. Dec. 706 . In. such a case, upon the execution of the contract, the vendor becomes a trustee of the land for the purchaser, retaining a lien for the purchase price, and the vendee becomes the equitable owner of the land. Ferry v. Stephens, 66 N. Y. 331 ; Thomson v. Smith, 63 N. Y. 303 ; Potter v. Ellice, 48 N. Y. 333 ; Baldwin v. Humphrey, 44 N. Y. 626 . If this. be 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 fpr moneys .paid on account of the purchase would seem to be a- natural and necessary corollary, and so it has heretofore generally been considered to be.

In our state the vendee’s lien has frequently been recognized. Clark v. Jacobs, 56 How. Prac. 519; Parks v. Jackson, 11 Wend. 442 , 25 Am. Dec. 656 ; Tompkins v. Seely, 29 Barb. 212 ; Gibert v. Peteler, 38 N. Y. 165 , 97 Am. Dec. 785 ; Chase v. Peck, 21 N. Y. 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 , 92 N. Y. Supp. 107 , a case which has not as yet been followed in this department. Smadbeck v. Law, 106 App. Div. 552 , 94 N. Y. Supp. 797 .

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 he had contracted to convey, and seems to have considered that such 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. (U. S.) 204, 9 L. Ed. 102 , and Gilbert v. Peteler, 38 N. Y. 165 , 97 Am. Dec. 785 . 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

. In Tompkins v. Seely, supra, the court found strong equities in favor of the vendee, but these influenced the court, not in awarding him a lien, but in holding him free from any obligation to complete 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 Gilbert 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 improvements -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, 9 Sup. Ct. 594 , 32 L. Ed. 1005 . 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, frequently entered into between total strangers., Under our cumbersome and

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 '5 per cent, upon the sum sought to be 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., concur.

(dissenting). The question arising upon the appeal from the judgment in this action is presented to this court in this department directly for definite decision, for the first time; and that question is whether, simply on the default of a vendor in performing an executory contract for the sale of land, the vendee, seeking to recover a deposit made on account of the purchase money and the expenses of examining the title to the premises’ embraced in the contract, may have, not only an equitable lien imposed upon such premises, but also a decree of foreclosure and sale, with the same effect as if he were a mortgagee pro tanto of such premises.

The facts of the case are simple. The defendant agreed to sell and convey to the plaintiff certain premises in the city of New York-for the stipulated sum of $8,500, of which $500 was to be paid at the time of the execution of the contract and $8,000 on the.delivery of the deed and the closing of title. $500 were paid. On an examination of the

“No case is produced in which the particular point has been determined or even directly raised. Counsel on both sides agree that no such case can be found: and it is extraordinary, considering the number of instances in which the question might have arisen, that there is no single case in which any such claim has ever been even attempted by a purchaser. There have been a few cases in which the purchaser has applied for the return of his deposit; but in those cases there has not been even a suggestion that he was entitled to a lien.”

In that case the vendee’s lien was sustained, and it was supposed to rest upon natural justice and that it might be spelled out from general principles of equity. The case arose upon demurrer to a bill. It is only authority for the proposition that such a lien may exist. The

It is suggested by the respondent in the present case that a special equity does appear, namely, that the vendor represented that he was the owner of the premises, the subject of the contract, and that-the deposit of $500 was paid upon that representation; but there is nothing to show that Palmer made a willfully false representation. In every contract for the sale of real estate the purchaser must make it upon the belief that the person with whom he is contracting has the ability to perform the contract. There is no special equity arising upon the statement of a person contracting to sell real estate that he is the owner of the land if upon examining the title it is disclosed that such title is affected by trammels and impairments which prevent his making an absolute conveyance thereof free from all legal objection. There is no evidence of bad faith on the part of the vendor in this action.

As I look at this record, it merely presents the case of a person who is entitled to recover at law the amount of a deposit which he has made upon a contract for the purchase of land, which contract has

In what may be considered the pioneer case of Wythe v. Dee, supra, the learned vice chancellor, referring to the embarrassment which existed by reason of the want of authority upon the subject, said:

“I should feel much pressed by the absence of any such cases, if I could see that maintaining such a lien could he attended with danger or inconvenience. But I do not see any inconvenience in establishing the rule. I do not see any hardship in it.”

The inconvenience and the hardship are made manifest in this case. There is but one breach of an executory contract. By the decision about to be made the vendee is allowed to enforce a lien upon the land for the amount of its deposit and to sell the land under foreclosure of the lien; but there still remains a claim for the expenses incurred in examining the title to the property, the subject of the contract, for which it is declared no lien exists, and for satisfactory reasons. The vendee is certainly entitled to recover for such expenses. Is the vendor to be subjected to another suit, one at law, to recover them? Are two actions to be allowed for the breach of the same contract? Why should the vendor be vexed twice? If in the same action the lien may be enforced and a recovery had for the expenses of searching the title, the vendor is entitled to a trial by jury of the common-law claim. A judgment would provide for the lien and its foreclosure and also for a recovery of a sum of money for the collection of which an execution would issue, and thus for a breach of the same contract, the vendor is to have his real property sold under foreclosure and an execution against his personal property to recover the damages on the comm on-law cause of action. The inconvenience and the .hardship are apparent at once. There is no doubt that such a thing as a vendee’s lien exists, but the question is whether, in the absence of any