Beecher v. Baldwin

55 Conn. 419 | Conn. | 1887

•Carpenter, J.

The facts of this case, stripped of immaterial matters, may be briefly stated. The defendants were the owners of some real estate which was heavily mortgaged to Yale College. They sold a portion of it, subject to the mortgage, to the plaintiff, for $12,500. It was understood that the mortgage was to be removed from that portion sold to the plaintiff, so that she was to have a clean title. The transaction however took another form. In March, 1873, the plaintiff paid $2,500 of the purchase money, received a warranty deed of the premises containing the usual covenants, and mortgaged the same premises to the defendants to secure the balance of the purchase monej'. It was arranged between the college and the defendants that the purchase money, when paid, was to be applied in part payment of the incumbrance, and that the college was to quit-claim its .interest in the premises to the plaintiff. The plaintiff knew of the incumbrance at the time, and of the arrangement by which it was to be extinguished. She failed to pay the balance of the purchase money; consequently the incumbrance was not removed, and she did not acquire a complete title.

Yale College, at the instance of one of the defendants, foreclosed its mortgage, the foreclosure taking effect early in May, 1878, and evicted the plaintiff. The property at that time was worth but $6,500, being several thousand dollars less than the unpaid portion of the purchase money. The plaintiff declined to pay her notes, stating that she “ should be obliged to give up the land and lose what she had paid.”

In February, 1885, this suit was brought. The complaint is in four counts. A demurrer was filed, which was sustained as to the first and second counts, and overruled as to the third and fourth. The answer to the third and fourth counts denied the material allegations of the complaint. The defendants also pleaded a set-off, and filed a cross-complaint.

The third count is on the covenant against incumbrances, and the fourth is on the covenant of warranty. The plaintiff claims that she is entitled to a judgment on either count at her election; the defendants claim that she is entitled to recover on neither.

In actions on the covenant against incumbrances the court will endeavor to give to the plaintiff the actual damage sustained by the breach of the covenant. If the plaintiff is evicted, and there is thereby a total failure of consideration, he will recover the value of the land at the time of the eviction, provided he has paid the purchase money. If the purchase money has been partially paid he will recover the amount paid with interest, not exceeding however the value of the land. The consideration having been paid, if the purchaser removes the incumbrance, the’ rule of damages is the amount paid for that purpose, not exceeding the value of the land. If the purchaser pays nothing towards the removal of the incumbrance and is not evicted, he will recover only nominal damages.

These are the general rules; in applying them however care will be taken in each case to do no injustice to either party. The leading principle is to give effect to the real intention of the parties. Both parties intend that the title shall vest in the purchaser. If the value increases he has the benefit of it; if it decreases he bears the loss. To secure to him the one and subject him to the other the rule has been adopted to limit the damages by the value of the land at the time of the eviction. Thus it will sometimes happen that he will recover more than the consideration paid and sometimes less. To give the seller the benefit of an increased value, or to require him to bear the loss of a depreciation, would be a perversion of the fundamental principle on which the rule rests.

In the present case, if the plaintiff recovers on the third count the consideration paid by her, she loses nothing by the transaction. Although the premises depreciated in value nearly one half, yet the whole loss falls upon the defendants. • That cannot be as the parties intended it. On the other hand, suppose the property had increased in value fifty per cent, or more. The plaintiff then could have paid her notes and had the benefit of the enhanced value. We know of no method by which the defendants could legally have deprived her of that privilege. If now it is so that she can with the aid of the court compel the defendants to bear the loss, there must be some defect either in the law or in its administration.

If the plaintiff had paid the consideration the incumbrance would have been removed and she would have had a clean title according to her contract. That is precisely what the parties intended. It was not contemplated that the incumbrance would be removed in any other manner or by any other means. If she had paid, and the defendants had removed the incumbrance, her loss doubtless would have been greater than it now is; and yet in this action she could have recovered only nominal damages. In that case it would have been very clear that her damage resulted, not from the breach of the covenant, but from the depreciation in the value of real estate.

By the original contract the plaintiff purchased and the defendant sold the premises as though they were free from incumbrance. The contract provided that the purchase money should be paid and the incumbrance removed when the deed should be given. But the plaintiff being unable to pay the purchase money, a change was made in the form of the transaction only—a change wholly for her benefit. In substance it was still a sale of the land—the whole title, and not merely an equity of redemption. The purchase money was to be used for the double purpose of extinguishing the mortgage to Yale College and the plaintiff’s mortgage to the defendants. It was wholly her fault that it was not so used. It resulted from her failure to perform her agreement. She deliberately violated her contract, and now seeks to take advantage of her own wrong to the prejudice of the defendants. Having wronged them once she now virtually insists that she has thereby acquired a right to inflict upon them a further wrong.

Suppose the transaction had been in form what it really was in substance—a sale of an unincumbered piece of land for $12,500. The purchaser paid $2,500, and gave her note for $10,000, secured by a mortgage of the same premises. After three or four years the property so far depreciated in value that it was worth much less than the mortgage on it; so much less that it was more advantageous for the purchaser to forfeit the amount already paid than to pay the balance. Now let us further suppose that the purchaser in this state of things makes a claim on the seller for the amount of the purchase money actually paid, with interest; would a court of justice seriously entertain such a preposterous claim ? And yet that is virtually the claim presented and strenuously urged in this case. The only difference is that in this case the form of the transaction gives the plaintiff a naked right of action ; but it rests on the purest technics, being entirely destitute of merit. The plaintiff therefore is entitled to recover at most but nominal damages.

But the plaintiff is not entitled to recover even nominal damages. The defendants plead a set-off of the notes given for the purchase money, amounting to about $10,000. One thing may be noticed in this connection with respect to these notes. They are either valid subsisting notes or they are not. If not they are not collectible and would not ordinarily be the subject of a set-off. If valid, or if for the purposes of this case they are to be treated as valid, they may be set off. It is unnecessary to consider to what extent they are collectible by the defendants; for the plaintiff, in claiming to recover substantial damages, proceeds upon the theory that she may require the defendants to make their deed good. If she may, she thereby becomes obligated to pay her notes. As the set-off assumes the validity of the notes, the defendants thereby impliedly admit their liability on their covenants. In discussing the matter of set-off we shall assume the liability of both parties—the defendants on their covenant and the plaintiff on her notes.

As the plaintiff in no event can recover to exceed $6,500 and interest, and the notes amount to a much larger sum than that, the set-off is an answer to the plaintiff's demand unless the notes are barred by the statute of limitations.

The statute provides for a set-off of mutual debts. Mutual debts growing out of the same subject matter have been set off, aside from the statute, especially in equity. The statute allows all such debts to be set off at law, and extends the equitable principle to independent debts, or debts growing out of different transactions. A set-off under the statute was refused by this court in Alsop v. Nichols, 9 Conn., 357, where the debt claimed to be set off was barred by the statute of limitations.

By statute the defendant may recover a balance if his claim is greater than the plaintiff’s; but no recovery can be had if the debt is barred.

In Avery v. Brown, 31 Conn., 398, the court makes a clear distinction between independent debts and debts growing out of the same transaction. The former, if mutual, are proper subjects of set-off under the statute. The latter may be applied in reduction of the plaintiff’s demand without the aid of the statute. In this case there would be difficulty in applying the statute and allowing the defendant to recover a balance; but as these claims arose in the same transaction, and are so connected that one is the consideration for the other,.there can be no difficulty in allowing the one to be used in reduction of the other. In Avery v. Brown this court said (p. 401) :—“ The policy of the law is always to prevent unnecessary litigation, and where in a pending suit entire justice can be done to both of the parties before the court by the ascertainment and set-off of their mutual claims against each other without a violation of any of the settled rules or forms of law, such set-off ought always to be made.” The court also quotes approvingly from Parsons on Contracts as follows :■—■“ A defendant may deduct from the plaintiff’s claim all just demands or claims owned by him in the very same transaction, or even, in other but closely connected transactions.”

Applying the unpaid portion of the purchase money in reduction of the plaintiff’s demand, is but an application of the principle that if the grantee fails to pay the purchase money, the real consideration for the deed, he is not entitled to recover in an action on the covenants in the deed—certainly no more than nominal damages. To such a claim, when offered in common speech as a set-off, but more accurately speaking by way of recoupment, the statute of limitations has no application.

“ Not only does the bringing of an action stop the operation of the statute as to a proper matter of set-off, but it also seems that it revives a claim which is actually barred out, which is the proper subject of recoupment in the action, as damages growing out of the same transaction.” Wood’s Limitation of Actions, 602. “ Where there are cross demands between parties, which accrued nearly at the same time, both of which would be barred by the statute, and the plaintiff has saved the statute by suing out process, but the defendant has not, the defendant may nevertheless set off his demand.” Angelí on Limitations, § 75.

It seems clear therefore that, if substantial damages are recoverable, the notes as a set-off or recoupment are a complete defense ; and they are equally a defense if only nominal damages are recoverable. Each party broke the contract, and each' party is technically liable to the other. One demand may well offset the other, so that neither can recover.

Under the covenant of warranty the plaintiff claims that she is entitled to recover the value of the land at the time' of the eviction. That would be the extent of her recovery if she had paid the purchase money. That being unpaid, it would seem that she would be entitled to recover much less. But however that may be, even if we concede her claim as made, the set-off answers it fully.

The reasons given against a recovery on the third count are equally applicable to the fourth. The difficulty with the plaintiff’s whole case is that by the real contract between the parties, in equity at least, the eviction was the necessary consequence of her failure to pay the purchase money; and that whatever loss she sustained resulted not from the breach of the covenants but from the depreciation in the value of the- estate purchased.

The Superior Court is advised to render judgment for the defendants.

In this opinion the other judges concurred.