Court Opinion

ID: 3582968
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:33:43.877428+00
Date Added: 2024-06-11T09:19:33.564257
License: Public Domain

The plaintiff in this action seeks to have rescinded an agreement made with the defendant company, whereby he agreed to purchase certain real estate in the city of New York, upon the ground that the contract was induced by false and fraudulent representations of a material nature as to the character of the soil. As incidental relief he demanded that the defendant pay to him the sum of $5,000, which he had paid on account of the purchase price, together with his expenses and costs, and that he have a lien upon the premises for the same. He recovered a judgment for the relief prayed for, except as to the lien for his expenses and costs, and the judgment has been unanimously affirmed by the justices of the Appellate Division.
The only question of law for our consideration, now, is whether the vendee in an agreement for the purchase of real *Page 136 
estate, which fails through no fault on his part, but by reason of the refusal, inability, or, as in this case, the fraud, of the vendor, is entitled to an equitable lien on the land for any sums advanced on account of the purchase money. The question of the right of the vendee to such a lien, where the vendor is unable to convey according to the contract, has been determined affirmatively in Elterman v. Hyman, decided herewith. The present case does not, as I view it, differ in principle from that case; although it differs in the respect that this action is for a rescission. I do not need to discuss, at any length, the main question, which Judge VANN, in the case referred to, has so elaborately treated upon the authorities, as upon principle. What I shall, briefly, say is in support of the conclusion, which he reached as to the general right to the lien; although I differ as to the basis for the doctrine. I am quite unable to agree with him in the views expressed in this case. As I view the question, the vendee's lien, like that of the vendor, is, purely, the creation of equity and is quite independent of the contract; otherwise than as the contract is the cause for such an exercise of the power of a court of equity. Like a vendor's lien, it exists in equity upon the basis of certain necessary and natural presumptions, or of natural equities. The vendor is presumed not to intend to convey away his land without payment of the price agreed to be paid and, therefore, the land, where the vendee has gone into possession, will be impressed with a lien to the extent that the consideration remains unpaid. With a corresponding regard for the vendee, the court will presume that he made the partial payment on account of the price agreed to be paid, intending to rely, in the event of the failure of the contract through the fault of the vendor, and as security for a repayment, upon the land, in which he is deemed to have a beneficial interest through the partial performance of the contract. If the doctrine of a vendor's lien upon the land for the unpaid purchase money merits acceptance in the administration of justice by a court of equity, as I assume, we may accept it as within the province of equity to treat both parties with equal justice and to *Page 137 
give to each the same remedy. This doctrine, which is asserted in decisions by the English courts and by many text writers, finds its strongest support, in my opinion, in the view which is taken in equity of the relations of the parties to a contract for the sale and conveyance of land. In that view, the vendor becomes a trustee of the legal title for the vendee, where the vendee has paid, or is prepared to pay, the purchase price, and it is a logical application of the principle, where the vendee has paid a part of the price, and the contract comes to naught through the vendor's fault, to hold the latter as a trustee to the extent of the payment made. The vendee advances a part of the price of the land in the faith that the conveyance will, ultimately, be made to him upon the terms and in the manner agreed upon and that no fraud has been practiced by the vendor to vitiate the transaction. The vendor is chargeable with knowledge of this and, in receiving a portion of the price of the land, should, and will, be presumed to hold the legal title in trust, pro tanto,
for the vendee; that, in the event of the contract failing through his fault, repayment of the money advanced may be secured.
If the theory is correct, it is immaterial whether the party agreeing to sell is, at the time, seized of the premises; for, if he thereafter acquires them, the trust will then arise in the vendee's favor.
I think that it follows, fairly, from what is held as to the general doctrine that whether the transaction of purchase fall through by reason of the inability of the vendor to convey as agreed, or whether, as in this case, the contract be rescinded before completion by reason of the vendor's misrepresentation of a material fact, in either event, the vendor's right to a lien cannot be affected. That view has been taken by the English courts, as will appear from the opinions in Mycock v. Beaston
(L.R. [13 Ch. Div.] 384); Rose v. Watson (10 H.L. Cas. 672), and Whitbread  Co., Limited, v. Watt (L.R. [1 Ch. Div. 1902] 835), and it seems to me, always granting the right in equity to decree a lien, that it is a proper view. (And see 29 Am.  Eng. Ency. of Law [2d ed.], 730.) The objection is urged *Page 138 
that, assuming the right of a vendee to a lien, it is abandoned where the contract is rescinded. The argument is that "by the election to rescind for fraud, a vendee dissolves the contractual tie and renounces all the benefits resulting from the contract, at the same time that he disclaims its burdens." It is sought, by the argument, to make a distinction between an election to treat the contract as broken and an election to avoid it. This argument is based upon the premise that the vendee's lien is a deduction from the contract and cannot stand without it. It is true that the contract establishes the relations of the parties and is the evidence of their agreements; but its rescission for the fraud of, or for a breach by, the vendor should not affect the right of the vendee to his equitable lien upon the land. Why should it, if its creation by equity is to secure to the vendee repayment of his advances? The contract, in such case, is not void, but voidable, at the option of the purchaser. If the option is exercised, how is the right to invoke the equitable power of the court to decree a lien lost? I think that the argument disregards the principle, upon which, as I conceive it, equity creates the lien. The lien is decreed independently of the contract; which does not give it, but furnishes the reason for the decree. (SeeWhitbread  Co., Limited, v. Watt, supra.) The complainant, demanding relief in equity from his agreement, whether rescission is demanded because of an intentional, or of an innocent, misrepresentation, is relieved, in either case, and the parties are restored to their original status. But, if the vendor in the contract has received a part of the purchase price of the land, is there any insuperable reason why he should not be held as a trustee in respect thereof for the vendee and why should the power of the court be less, in such case, to decree a lien upon the land to secure the discharge of the trust duty? The procedure effects an equitable result and it does not contravene any rule of law. Is it correct to assert that the plaintiff, in asking a court of equity to relieve him from the obligation of an agreement induced by the defendant's misrepresentations, necessarily abandons his equitable remedy of a *Page 139 
lien upon the land to secure the repayment of the money advanced towards its purchase? I am disposed to think it is not. The court having equitable jurisdiction of the parties, when determining the vendor to be in fault and that the parties shall be placed instatu quo, proceeds to do full justice between them by determining that the vendee shall have a lien upon the land to secure him against the loss of the moneys paid towards its purchase. In order to ascertain the real nature of this exercise of equitable power, it may be considered in relation to its basis and to the result of its operation. The basis is the promise of the vendor to convey the land, as and when agreed, and that, meanwhile, he is a trustee of the legal title for the vendee to the extent of the purchase moneys paid. The extent of its operation is to subject the land to the execution of a trust, either to convey, where there has been full performance by the purchaser, or to return him his moneys, where the contract has failed and ceases to be binding through no fault of the latter. It supplies a remedy where the law falls short of accomplishing full justice. If equity lays hold of a pretext, or adopts a fiction, in such a case, it is no more than it does in many other cases, in order to enforce a natural right and to effect a just result.
For these reasons, I advise the affirmance of the judgment.
CULLEN, Ch. J., WERNER and WILLARD BARTLETT, JJ., concur with VANN, J.; GRAY, J., dissents from modification in opinion, and HISCOCK and CHASE, JJ., concur with him.
Judgment accordingly.