Case ID: misc_76/html/0473-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Bijub, J. Lehman,' J. (dissenting.)", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Irene Pierce, Respondent, v. Hellenic American Realty Company, Appellant.
    (Supreme Court, Appellate Term, First Department,
    May, 1912.)
    Contracts — parties and persons by whom or against whom enforceable— validity of contracts — actions on contract.
    Damages — measure for breach of contract in general — consequence of fraud in making contract.
    Where a person is induced by fraud to enter into a contract for the purchase of land she may rescind the contract and may proceed either ■ in equity or at law to recover the consideration paid, or she may, upon affirming the contract, sue to recover the difference between the value of the land as represented and its actual market value.
    Where a contract between defendant and one K. for the sale of two lots for $620, payable in instalments, was. surrendered to defendant after $460 had been paid thereon, and plaintiff who had bought K.’s contract under a new contract with defendant for the purchase of the same lots agreed to pay the balance of $160 by a cash .payment of $20 and the remainder in monthly instalments of $5 each, and after paying $90 on account brings an action for false representations made by defendant as to the improvements upon the tract on which two lots were situated, a judgment of $500 damages will be affirmed, as instead of a contract wliereunder on payment of $620 she would receive lots of that value she, in fact, received a contract under which on payment of $620 she would receive lots worth only $120.
    The fraud was consummated, the damages incurred and the cause of action accrued the, moment plaintiff signed her contract, and she was entitled to recover as damages the amount of the judgment in her favor.
    Lehman, J., dissents.
    Appeal by defendant from a judgment of the Municipal Court of the city of Hew York, borough of Manhattan, fifth district, in favor of plaintiff, after trial by a judge without a jury.
    Boudin & Liebman (L. B. Boudin, of counsel), for appellant.
    Jacob Friedman, for respondent.
   Bijub, J.

The defendant having made an agreement with one Koch, whereunder defendant agreed to sell to Koch two lots in Hew Jersey for $620, payable in instalments, after Koch had paid $460, plaintiff undertook to purchase this agreement from him, and, at an interview with defendant’s president, Koch’s contract was surrendered to the defendant and a new contract for the lots made with plaintiff, whereunder plaintiff agreed to pay the balance of $160, by paying $20 in cash at the time and the remaining $140 in monthly instalments of $5 each. Thereafter, plaintiff paid $70 in instalments, making a total of $90 on account of the $160. Plaintiff alleged that, at the interview at which her contract with defendant was negotiated, defendant’s president made representations as to the improvements upon the tract upon which said two lots were situated which were knowingly false, and that she had thereby sustained damage for which she asked judgment.

Five hundred dollars damages were awarded to her.

Plaintiff’s 'remedy, on ascertaining the fraud, was substantially two-fold. She might rescind and "proceed either in equity or in law to recover what she had paid in reliance upon the defendant’s representations, or she might, as it is called, affirm the contract and sue to recover her damages, which in this case would be the difference between the value of the lots as represented and their value as they actually were — in other words, as it is put in some cases, she "might recover the" true “value of her bargain.”

The opinion of my learned colleague proceeds on the theory that in a case like the present, where the contract provided for payment for the property in instalments, the latter form of relief was not open to the plaintiff at least until she should have paid up all the instalments and become entitled to a conveyance of the land. For this doctrine I find no authority. On the contrary, the theory of the action is that plaintiff proceeds to recover for the tort practiced upon her, namely, the fraud. This fraud was consummated, the damage incurred and the cause of action born the moment plaintiff signed her contract, for she then had agreed to pay $620 for lots represented to her to he of a character entitling them to that valuation, whereas, in point of fact (as we must assume from the finding of the learned trial judge), they were worth only $120. She was entitled to a contract whereunder on payment of $620 she would receive lots of that value — she received a contract whereunder, upon payment of $620, she would ‘receive lots worth only $120. Her damage at that moment then was $500, and for that difference she was entitled to recover forthwith. It is true that she must proceed as upon affirmance of her contract, hut not upon performance of her contract. She has not disaffirmed the contract, the claim is merely that she has not fully performed it. If that be because the time for performance has not yet arrived, it is entirely indifferent. If the failure to perform in whole or in part is the result of her default, that may he a circumstance to be taken into consideration in determining whether she has affirmed or repudiated the contract; but it is by no means determinative of that issue. If she has affirmed the contract and is, nevertheless, in default in payment of instalments, defendant has its ordinary remedy on contract by way of action or counterclaim, without prejudice to plaintiff’s right to recover for the tort,practiced upon her.

While these precise points have not been determined in this state, the doctrine has, at least, been recognized in People v. Stephens, 71 N. Y. 527; hut the question has been adjudicated in Fames v. Morgan, 37 Ill. 260, 275; Grady v. Jeffries, 25 Fla. 743, 747; Weaver v. Shriver, 79 Md. 530, 533 (where it is fully discussed). See also 20 Cyc. 92. It may he that, if hv the terms of the contract the plaintiff was entitled upon defendant’s default to rescind or cancel the contract and had done so, the plaintiff’s cause of action would thereby he destroyed; hut as there is neither allegation nor proof of such fact in the case, it need not he considered. I think, therefore, that the rule of damages applied by the learned court below was correct.

I think also that the proof of the respective values was sufficient, though perhaps not as complete and exact as it might he.

Defendant makes the further point that the representations of defendant’s president were without the scope of his authority.

First. Because they were made beyond and in addition to specific representations made in the pamphlet or circular published by the defendant describing this tract of land.

Second. That the transaction was beyond the reasonable scope of the president’s authority inasmuch as it was not a sale of land but the acceptance by the defendant of a different purchaser upon a contract previously entered into by it with another. It seems to me, however, that the business of selling land naturally and necessarily involves the selection of the purchaser; and, if the seller elected to release one person from the obligation and accept another in his place, such a transaction appears to me to be entirely within the normal business of the seller, particularly when, as here, a payment on account of instalments, apparently then already due, was made by the new purchaser.

Judgment affirmed with' costs.,

Guy, J. concurs.

Lehman,' J. (dissenting.)

The plaintiff has recovered a judgment for the sum of five hundred dollars as damages sustained by her for alleged fraud and misrepresentation on the part of the defendant in inducing her to enter into a contract for the purchase of two lots of land owned by the defendant. It seems to me that the plaintiff has sufficiently shown that she has a cause of action as alleged, but she is not entitled to the damages which have been allowed. It appears that the contract was' entered into on the 15th day of January, 1910. It provided for the payment of the purchase price of $620 by the receipt of $480 upon the making of the contract and the balance in monthly instalments of five dollars each, and provided further for the forfeiture of the contract in case of default for ninety days in the payment of any instalment of the contract. The plaintiff claims that sho has paid instalments amounting to seventy dollars, but she has not paid any instalment due under the terms of the written contract on or after April fifteenth., more-than five months before the beginning of the action.

It is well established that a person induced to enter into a contract for the purchase of land by fraud has two remedies at law. He may disaffirm the contract and sue for the consideration paid or he may affirm the contract and retain what he has received, suing for the difference in value between the premises if they had been as represented and their actual market value. Ettlinger v. Weil, 184 N. Y. 179. Where, however, damages representing the difference of market value are claimed it is obvious that at the time the action ■is brought the plaintiff must still be entitled to enforce his contract. He cannot himself abandon the contract and fail to pay the instalments entitling him to the conveyance and yet claim that he has been damaged to the extent of the difference in the value, of the land as represented and as existing. Until he shows that he has a right to enforce the contract this difference is not the measure of his damages. If he is no longer entitled to his bargain, then the value of his bargain is immaterial and his damages are limited to the consideration paid.

In this case the consideration paid is concededly less than $500. The complaint itself shows that the sum of $480 was not paid at the time of the making of the contract but that the plaintiff paid only $20 and surrendered to the defendant for cancellation a prior contract for the same lots made to one Koch on which it was represented that Koch had paid $460. The contract was bought by the plaintiff from Koch not for cash but in exchange for a dog of unknown pedigree and unproven value though the complaint alleges its value at $100. Upon the theory of a disaffirmance or rescission of the contract the plaintiff could not recover, therefore, more than the sum of $90 plus, perhaps, the value of the dog, and it is not disputed that the case was not tried and the judgment can not be sustained on this theory of the measure of damages.

The trial justice undoubtedly adopted as the measure of damages the difference between the market value of the lots and their value if they had been as represented. The plaintiff is, however, not entitled to any conveyance of the lots; she has not paid the agreed amount upon the contract and has failed to pay any sum since the discovery of the alleged misrepresentation. The difference in value is, therefore, not the measure of her’ damages.

The judgment should he reversed and a new trial granted with costs to appellant tó abide the event.

Judgment affirmed.