Darrow v. Cornell — 42 N.Y.S. 1081

Majority

p. 1081

DARROW v. CORNELL et al.

(Supreme Court, Appellate Division, Third Department.

January 6, 1897.)

Headnote

Damages—Liquidated and Actual—Allowance of Both.

In an action for breach of a contract containing a provision for liquidated damages, a judgment awarding plaintiff the liquidated damages, and actual damages in addition thereto, is erroneous, though the party breaking the contract was guilty of such fraud in the making thereof as would vitiate it, since the provision for liquidated damages, if valid, measures plaintiff’s recovery, and, if void, cannot contribute thereto.

On or about the 1st day of March, 1889, the plaintiff and one Jacob N. Dotyentered into a written agreement whereby the said Doty promised and agreed to sell and deliver certain real estate, described in such agreement, “by a good and sufficient deed of conveyance, with covenants of warranty, free and clear from all liens, rights of dower, or other incumbrances, unless hereinafter specified.” The deed was to be delivered on the first day of April, 1894; §3,009 was to be paid on or before that time; interest thereon was to be paid on the 1st day of April, 1890, and on each 1st day of April thereafter, until the full amount was paid; and upon the delivery of such deed the plaintiff was to execute and deliver to Doty a' mortgage for the amount thereof remaining unpaid, conditioned to pay the sum of $100 or more on each 1st day of April thereafter, with the interest on the whole amount unpaid. The agreement contained the following covenants: “It is mutually covenanted and agreed that, in case either party fails to perform the covenants hereiá agreed to be performed by such party, the party so failing shall and will pay to the other the sum of $500, which is hereby fixed and agreed upon as the liquidated damages for such failure, and that the same shall in no event be considered a penalty.” The plaintiff appears to have gone into possession of the premises shortly after the execution of this agreement. On or about June, 1891, Jacob N. Doty died, leaving a last will and testament, wherein he appointed the defendants Cornell and Benson executors of his estate. The time for the execution of the agreement arrived, and the time for the delivery of the deed and payment of the purchase money was extended by mutual consent. Controversies arose between the parties over the

Appeal from judgment on report of referee.

Action by Stephen 0. Darrow against Stephen 0. Cornell, as executor of the will of Jacob N. Doty, deceased, and others. From a judgment in favor of plaintiff, defendants appeal.

Reversed.

p. 1082

title to the property, which finally culminated in this action, the plaintiff claiming that the defendants had failed to perform the agreement on their part, and the defendants denying such claim. The plaintiff, in his complaint, among other things, alleged that, at the time said Doty entered into the contract, he knew that the title to the real estate was not clear, and intentionally suppressed the knowledge thereof from the plaintiff, and knowingly and intentionally allowed the plaintiff to enter upon such premises, and make improvements, and enhance the value thereof, to a much greater extent than the amount named in the said contract as to stipulated damages, for the purpose of compelling the plaintiff to accept a title which was not clear, or lose the amount expended for improvements on such premises. The plaintiff claimed, and produced evidence upon the trial to show, that he had expended about the sum of $1,000 in improvements, and incurred indebtedness for the services of an attorney in trying to perfect the title. The referee found that the plaintiff was entitled to recover for the value of the improvements that he had placed upon the farm, to the amount of $1,000, less the sum of $50, the value of certain timber and wood that the plaintiff had removed from such farm, and also less the rental value of such farm for two years, which he found to lie of the value of $180 per year. He also found that he was entitled to recover the sum of $370, which he found to be the reasonable worth of the services of the plaintiff’s attorney in trying to perfect the title to the premises in question. He also found “that plaintiff is entitled' to the sum of $500, as stated in the contract, as fixed and liquidated damages for the failure to give the deed required by said contract; making, in all, the sum of $1,460.’’

Argued before PARKER, P. J., and LAND ON, HERRICK, PUTNAM, and MERWIN, JJ.

C. C. Van Kirk, for appellants.

C. H. Sturges, for respondent.

It will be observed from the foregoing statement of facts that the referee not only allowed the liquidated damages provided for in the contract, but also other damages alleged to have been suffered by the plaintiff by reason of its nonfulfillment. Ordinarily, where there is a stipulation and agreement in a contract as to the amount of damages that is to be paid by either party for a breach of such contract, no question of fact can arise except as to the breach of the contract. That being found, the stipulation for liquidated damages fixes the amount of recovery. There are cases, however, holding that, where there has been any fraud perpetrated in the making of the contract, such fraud vitiates and renders null and void the stipulation as to the amount of damages to be paid upon its breach, and that the party suing for such breach is not confined to the amount agreed upon as liquidated damages, but may recover the amount of damages actually suffered by him by reason of such breach. The plaintiff apparently proceeded upon that theory, for he alleges in his complaint that Doty had knowledge of the imperfections in his title, which he knowingly, and intentionally concealed from him, and permitted him to proceed in making improvements and expending money upon the farm to an amount in excess of the sum agreed upon as liquidated damages; and the referee has found that Doty, at the time he made the contract, knew that the said property was not free and clear from all incumbrances, and that he did not act in good faith. Assuming that Doty was guilty of such bad faith as would vitiate the contract, and that,

p. 1083

therefore, the plaintiff is not confined to the amount agreed upon as fixed and liquidated damages, it is perfectly clear, it seems to me, that the plaintiff cannot recover both the actual damages alleged to have been suffered by him by reason of the breach of contract, and the.amount fixed and agreed upon between the parties as liquidated damages for the breach thereof. The plaintiff' cannot have both. If he is entitled to one, he is not entitled to the other, and, for the error of the referee in allowing both, the judgment should be reversed.

Having arrived at that conclusion, it is unnecessary to discuss the other questions in the case. It may not be amiss, however, to say that, in determining which party is in fault in not performing a contract, if it appears that the time originally fixed for its performance has been indefinitely extended by mutual consent, neither party can at any time place the other in default by demanding an immediate performance, but must fix a reasonable, definite time in the future for such performance. Schiffer v. Dietz, 83 N. Y. 300 , and cases cited.

The testimony of the plaintiff that the defendant Cornell told him that the scrivener (Merrill) told him (Cornell) that Doty told him (Merrill) certain things in .relation to the title of the real estate in question was hearsay and incompetent.

In determining as to whether the alleged representation of Doty to the plaintiff, at the time of making the contract, that the premises were free and clear of all incumbrances, was such a false representation as to warrant a finding of bad faith, it is well to consider that, although there appear upon the records apparent liens or incumbrances, by judgment, mortgage, or otherwise, yet if the party has in fact paid them, although he has not placed the evidence thereof upon the records, his statement that there were no incumbrances would not, under such circumstances, be a false representation; the incumbrance being only an apparent, not a real, one, and the party having it in his power to clear the record. Upon the question of good faith, the fact that the deed was to be given five years after the execution of the contract, affording ample time to clear the record, and that it was to be a warranty deed, covenanting against all liens and incumbrances, should also be taken into consideration.

The questions as to who committed the first breach of the contract in question, as to whether Doty acted in bad faith, and as to whether the defendants have tendered a good and sufficient deed under the contract, are all contested questions in this case; and, not desiring to embarrass the trial court upon a new trial upon its findings of fact in relation thereto, I refrain from further consideration of them. But, for the error of the referee first discussed, the judgment should be reversed, the referee discharged, and a new trial granted, costs to abide the event. All concur.

Cases cited

Schiffer v. Dietz 83 N. Y. 300 N.Y. 1881-01-18 p. 1083