Opinion
January Term, 1901.
Sidney V. Lowell, for the claimant, appellant.
Hugo Hirsh, for the respondent.
This is an appeal by Mrs. Heinemann from an order of the Special Term sustaining the exceptions to a report of a referee in surplus proceedings and directing payment of the surplus to Mrs. Salomon. On July 6, 1900, Mrs. Salomon and Mrs. Heinemann made a written contract, whereby the former person agreed to exchange the premises in suit for certain premises of the latter person and $1,000. The date set for performance was July 16, 1900. At the time of signing the contract Mrs. Salomon's realty was advertised for sale on July 12, 1900, pursuant to a decree of foreclosure and sale under the mortgage of the plaintiff. This fact was known to Mrs. Heinemann, who acted throughout by her husband. The contract did not provide for this mortgage, but made the premises subject to a mortgage for $5,000 at five per centum, "to run for two years." It was probably the purpose of Mrs. Salomon to substitute such an incumbrance, if possible, for the outstanding liens. When Mrs. Heinemann signed the contract, she knew (for her husband, who says that he acted as her agent, knew) of the foreclosure sale set for July 12th, six days thereafter. The sale took place on that day. Mrs. Salomon attempted to purchase at the sale, but failed, and the premises were sold to an outsider. The attempt, the failure, and the sale to an outsider were known to Mrs. Heinemann on the day thereof. Four days thereafter, and upon the day named in the contract, Mrs. Heinemann tendered her deed and the $1,000, and demanded performance by Mrs. Salomon, who defaulted. The foreclosure sale produced a surplus, and the usual order of reference was made. Several persons, including Mrs. Salomon and Mrs. Heinemann, appeared before the referee and claimed the surplus. The attorneys of these two claimants stipulated that "the suits now pending between them be discontinued without costs to either party; also, that the referee may determine who is entitled to the surplus money herein as between them as fully as could be done for ( sic) a suit brought for that purpose." No further mention of "the suits" is made in the record. The referee reported that after application to several prior liens, the balance of the surplus should be paid to Mrs. Heinemann. The Special Term sustained the exceptions taken to the report, and ordered that such payment should be made to Mrs. Salomon.
The surplus money stands in the place of the land, and the right of the appellant must be founded upon some lien. ( Albro v. Blume, 5 App. Div. 309; Fliess v. Buckley, 90 N.Y. 286; People ex rel. Short v. Bacon, 99 id. 275, 278.) In Nutt v. Cuming ( 155 N.Y. 309) the court, per HAIGHT, J., say: "It is the lien existing at the time of the sale that is transferred to the surplus moneys arising therefrom. If, at that time, no lien exists, there is nothing which can be transferred to the fund." The claim of the appellant necessarily is based upon the doctrine of specific performance. I assume that the referee had jurisdiction to pass upon her claim. ( Bergen v. Carman, 79 N.Y. 146; Thomas Mort. 685.) The theory of the appellant must be, that from the time of the execution of the contract, equity regards her as the owner of the land and Mrs. Salomon as the owner of the consideration. It is true that a vendee may have partial specific performance by the vendor, with compensation. ( Harsha v. Reid, 45 N.Y. 415; Bostwick v. Beach, 103 id. 414.) But the appellant well knew when she began "suits," and when he filed her claim and sought to substantiate it in the surplus proceedings, that specific performance by Mrs. Salomon was impossible. Formerly a court of equity would not entertain a suit for specific performance if, at the time of the commencement thereof, specific performance was impossible, and this fact was then known to the plaintiff. ( Hatch v. Cobb, 4 Johns. Ch. 559; Kempshall v. Stone, 5 id. 193; Morss v. Elmendorf, 11 Paige, 277; Sternberger v. McGovern, 56 N.Y. 12.) In Haffey v. Lynch ( 143 N.Y. 241) the court, per EARL, J., say: "It is a general rule in equity that the specific performance of a contract to convey real estate will not be granted when the vendor, in consequence of a defect in his title, is unable to perform. In such cases specific performance is denied because the court cannot enforce its judgment, and because also it would be oppressive to the vendor. But if the defect in the title existed at the date of the contract, or was due to some fault or to some act of the vendor subsequent to the contract, the court will generally entertain an action for specific performance and retain jurisdiction for the purpose of awarding damages for the breach of the contract."
I think that the doctrine of a specific performance cannot avail the appellant, and the only question presented is whether jurisdiction should be retained for the purpose of awarding damages, if any can be shown. This reference did not proceed on the theory that any claim that the appellant might have upon this surplus was by way of damages. There is authority that only when the vendor is, for some reason, chargeable with bad faith can any recovery beyond nominal damages be had. ( Northridge v. Moore, 118 N.Y. 419; Walton v. Meeks, 120 id. 79.) The husband of Mrs. Heinemann, who testified that he acted throughout as her agent, was asked: "Q. Is there any claim on your part or your wife's that Mrs. Salomon acted in bad faith in failing to carry out this contract? A. I simply desire to say that she permitted an outsider to outbid her, because she was not prepared to put up the ten per cent which the auctioneer demanded. * * * Mr. Newman, her attorney, bid on the property up to a certain amount, and then stated he could go no further." In such a case, however, it is settled that "if the vendee has paid any of the purchase money he may recover that back, and he may also recover such expenses as he has reasonably incurred in examination of the title to the property." ( Northridge v. Moore, supra.) In this last-mentioned case, both parties knew that the title was not in the vendor when the contract was made. We do not intend absolutely to foreclose the learned referee, but we deem it proper to call some of the authorities to his attention. It may be that, previous to the time when the foreclosure sale was made, the appellant in good faith incurred reasonable expenses incident to the examination of the title. Inasmuch as the reference was conducted on an entirely different theory than that which seems proper to us, I think that it should be continued within the lines suggested by this opinion rather than that we should attempt to determine the question on testimony offered upon the theory in question. The order of the Special Term should be reversed and the proceedings remitted to the referee to pass solely upon the question of what damage, if any, the appellant has suffered in consequence of the breach of contract. I think that the learned Special Term was entirely correct in holding that there could be no specific performance, and no rights asserted by the appellant that rest upon that doctrine can be recognized in this proceeding.
The order of the Special Term should be reversed and the proceeding remitted to the same referee, as indicated.
All concurred, except SEWELL, J., taking no part.
Order reversed, with ten dollars costs and disbursements, and proceedings remitted to the same referee to examine and report to the Special Term in accordance with opinion of JENKS, J.