
    WILLIAM BAYLISS, Appellant, v. FREDERICK J. STIMSON, Respondent.
    
      Contract for assignment of lease—action at law on—equity doctrine as to title—implied covenant.
    
    In an action at law by the vendee, to recover back earnest money paid, and for damages, by reason of the breach of a contract for the assignment of a lease, in that the title offered was not such as he was bound to accept, the doctrine that obtains in equity as to unmarketable title has no application. The plaintiff in such action is bound to show affirmatively that the title offered is not good. Proof that if certain facts exist, or that for other reasons the title is doubtful, is insufficient. This rule has not been changed by the Code.
    In a contract for the sale of a lease there is no implied covenant that the vendor will convey a marketable title; the covenant that is implied is that he will convey a good title.
    
    Before Sedgwick, Ch. J., Freedman and Ingraham, JJ.
    
      Decided May 3, 1886.
    
      Appeal from judgment entered on report of referee.
    This action is brought to recover the sum of $3,000, paid on the execution of a contract whereby the defendant agreed to sell to the plaintiff the unexpired term of a certain lease of premises known as No. 7 West Forty-seventh street in the city of New York.
    The issues were tried before a referee who directed judgment for the defendant dismissing the complaint ón the merits, writing the following opinion :
    Edward Patterson, Referee :■—“The plaintiff sues to recover back a deposit of money paid by him to the defendant, at the time of the execution and delivery of a contract, by which the defendant agreed to sell and convey certain leasehold premises in the complaint mentioned ; and also to recover damages said to have been sustained by him in consequence of the defendant’s default in making a good title within the meaning of the contract. The plaintiff claims to have rescinded the contract for reasonable and proper objections to the title.
    “ The evidence discloses that the defendant, who was the assignee of the term of one Weston, held the premises subject to a mortgage to Gillespie, and contracted with the plaintiff to convey the leasehold free of incuipbrances, except that mortgage. The contract by which the defendant agreed to sell to the plaintiff the leasehold estate and a small quantity of furniture, is dated November 24, 1882, and the transaction was to be completed on December 10, 1882, but the performance was postponed by consent from time to time until January, 1883. The plaintiff employed counsel to examine the title ; and in the course of the investigation it was ascertained that another and junior incumbrance, virtually a mortgage, had been put upon the property by Weston in favor of Nevins for advances of money made and to be made, and the amount actually due on the Nevins mortgage was not a matter apparent and ascertainable from the records. It further appears that Weston’s assignment to Stimson was for a nominal consideration ; that after the contract between Stimson and plaintiff was made, Weston made a general assignment for the benefit of creditors to one Davison ; that judgments were entered up against Weston by certain of his creditors ; that Stimson and Weston were brothers-in-law, and the circumstances and surroundings of the transaction between them as to the transfer of the leasehold were of a character to give rise to a suspicion that such transfer was intended as a mere cover, and was a device to preserve the substantial interest in the property for Weston. These circumstances were considered by the counsel examining the title for the plaintiff serious objections to completing the purchase, and they were in substance brought to the attention of the defendant. Efforts were made to obviate them to some extent. The amount due on the Kevins mortgage was ascertained, and it seems' clear that provision for its payment was made by Stimson with the attorneys for Kevins ; and that was sufficient to dispose of any objection as to the Kevins mortgage being an incumbrance (Pangburn v. Miles, 10 Abb. N. C. 42).
    
      “ The other objections were considered insuperable ones to taking the title, and in January, 1883, the plaintiff’s counsel notified the defendant that the title would not be accepted, and the plaintiff elected to rescind the contract. Upon this state of facts the question arises, can the plaintiff recover back his deposit and the several items of damage he has sustained ? There is no doubt that equity will not require a purchaser to accept a really doubtful title, and this has often been decided. Specific performance will not be decreed in such a case ; but it is not every title, obscure or incomplete of record, or in regard to which suspicion is excited by extrinsic facts, that may be said to be doubtful within the meaning of the rule even in equity.
    “ Parol evidence is often admitted to supply the defect, as is illustrated in the recent case of Hellreigel v. Manning (97 N. Y. 56).
    
      “ But the present action is one on the law side of the court to recover back money paid, &c., on the contract of sale by the purchaser, and there is a very clear distinction between a suit in equity to enforce a contract specifically, where the court exercises a discretion and determines in each particular case, as it arises, whether a purchaser shall take title, and an action at law to recover back money paid on a rescinded contract. In the former case, a court of equity will not declare a title bad, but only that it is subject to so much doubt that a purchaser ought not to be compelled, in conscience, to accept it. But this was peculiarly a doctrine of the courts of equity ; at law the rule was different.
    “ In Sir Samuel Romilly v. James (6 Taunt. 274), Gibbs, Chief Justice, says; ‘It is said the plaintiff will have made out his claim to recover back his deposit if a cloud is cast upon the title. That is not so in a court of law. He must stand by the judgment of the court as they find the title to be, whether good or bad, and if it be good in the judgment of a court of law, he cannot recover back his deposit. I know a court of equity often says, this is a title, which though we think it available, is not one which we will compel an unwilling purchaser to take ; but that distinction is not known in a court of law.’ In 1831, in Boyman v. Gutch (7 Bing. 379), the court held to the same rule, although it was strongly urged by counsel that the purchaser seeking to recover his deposit should not be compelled to take a questionable title, and thus incur the hazard of purchasing a law suit.
    “ Since the adoption of the Code, and notwithstanding the supposed blending of legal and equitable rules, the same distinction has been maintained and applied in this state, and in the court in which this action is pending. In 1864, at the general term, in O’Reilly v. King (2 Robt. 587), in an action to recover back the deposit on a contract of sale, claimed to have been rescinded for doubtfulness of the vendor’s title, the court held that the plaintiff must hold the title to be actually bad, and not merely doubtful. The same distinction has been recognized by the court of appeals. In Murray v. Harway (56 N. Y. 337), the action was to recover back a deposit made on an executory contract for the sale of leasehold premises. In the opinion of the court the rule in equity is considered and cases cited. The court then proceeds to say : ‘ The citation of these authorities is not absolutely necessary in the case in hand, for it is brought on the law side of the court. The plaintiff proceeds on strictly legal rights. He refuses to perform his contract, and sues to recover back the amount of a payment made thereon.’ And the case is disposed of on the ground that the defendant established by parol proof on the trial that he had a good title.
    “ The defendant here has undertaken to show that his title was good, and he has shown that the purchase of the leasehold interest by him of Weston was a bona fide purchase for a consideration, adequate in view of the. liens and incumbrances upon the property; that there was'no ulterior purpose of benefit, or resulting use or trust, for Weston, and that the creditors of Weston could not, upon the facts, impeach the transfer.
    “ There is nothing decided in Schriver v. Schriver (86 N. Y. 575), at variance with the views above expressed. That was a motion to compel a purchaser at a partition sale to complete his purchase, and the court held that the title to one of the lots was unmarketable, because of the uncertainty as to a matter of fact which was not cleared up in that case by proof.
    “In the present case all the circumstances of suspicion are satisfactorily explained, and upon the whole evidence the court would hold that a creditor of Weston, seeking to attack Stimson’s title, must fail on the proof which Stimson has produced.
    “In Schriver v. Schriver the court says: ‘What we hold is that the vendee has brought such facts and circumstances as called upon the vendors to show how they may be met and nullified before they can compel him to complete his purchase.’.
    
      “Ill the case at bar, even if the equitable view were to apply, the vendor has fully furnished the proof nullifying the suspicious circumstances, and it would appear that such proof was made known to the vendee before the property was rejected, as an offer was made to perpetuate evidence of the consideration of the transfer from Weston to Stimson.
    “ But upon the rule of law as laid down by the general term of this court in O’Reilly v. King (supra), wliich I feel compelled to follow, the plaintiff cannot recover at all on the proof in this case.”
    
      Adrian Van Sinderen, attorney, and S. P. Nash, of counsel for appellant,
    in the questions considered in the opinion, argued :—I. The circumstances attending the transfer of the lease by Weston to the defendant Stimson rendered the title offered to the plaintiff so doubtful as to be unmarketable, and such as a court of equity would not compel a purchaser to accept. A purchaser is not obliged to take such risks ; not obliged to take a title that may be put at hazard (Shriver v. Shriver, 86 N. Y. 575). In Hellreigel v. Manning (97 N. Y. 56) there was no person claiming the title, nor, so far as appears, could there be. The objection was simply based on a misnomer. In Murray v. Harway (56 N. Y. 337), there was no person to avoid the title except the landlord, and the proof of waiver of the possible forfeiture was complete.
    II. That this action is brought, according to the antiquated phrase, “upon the law side of the court,” does not preclude the plaintiff from relief on equitable grounds (§ 3339 Code; Dobson v. Pearce, 12 N. Y. 157; Crary v. Goodman, 12 Ib. 266 ; Phillips v. Gorham, 17 Ib. 270; Ib. 284, &c. ; Sheehan v. Hamilton, 2 Keyes, 304; Hoppough v. Struble, 60 N. Y. 430). The clearest illustration of the point we are considering is found in the case of Pangburn v. Miles (10 Abb. N. C. 42, 50), cited by the referee in support of his Opinion herein. That action, like the present, was commenced—of course “on the law side of the court ”—to recover moneys paid on account of a contract for the purchase of land; and the court not only denied the plaintiff’s prayer, but rendered an affirmative judgment in defendant’s favor, decreeing a specific performance of the contract—a remedy within the special and exclusive province of a court of equity alone.
    III. On strictly legal grounds, the case at bar is clearly distinguishable from those which have been cited in support of the judgment below.-—Counsel here commented on and sought to distinguish the cases of Pangburn v. Miles (10 Abb. N. C. 42); Romilly v. James (6 Taunt. 262); Boyman v. Gutch (7 Bing. 379); O’Reilly v. King (2 Rob. 587); Hellreigel v. Manning (9Y N. Y. 56); Murray v. Harway (56 Ib. 337), and then proceeded.—In England it seems to have been settled that, even in a court of law, a purchaser may insist on such a title as a court of equity would compel him to accept (Jeakes v. White, 6 Exch. 873; Stevens v. Austen, 107 E. C. L. R. 685), and the question has by statute been put upon the same footing as under the Code (Sugd. on Vend. 332-3 [13th Lond. ed.]). See also McCarty’s Appeal (2 Eastern Rep. 562).
    
      William PierrepontWilliams, attorney, and of counsel for the respondent,
    on the questions considered in the opinion, argued I. This action is clearly brought on the theory that the plaintiff was entitled to rescind the contract of purchase because of the defendant’s alleged inability to perform, and that, on the rescission being made, there arose an implied- contract on the part of the defendant to return the $3,000 that he had received. Such being the theory of the action, the whole subject of doubtful titles must be excluded from the case. The only question that can be considered is whether the title was good or bad (Murray v. Harway, 56 N. Y. 337). The other leading authorities on this question are briefly and clearly stated in the opinion of the referee.
    II. Even if the principle above contended for were not invoked, yet the title was so clearly free from all reasonable doubt that the plaintiff was not justified in refusing to complete the contract (Hellreigel v. Manning, 91 N. Y. 56 ; Fryer v. Rockfeller, 63 Ib. 268),
   By the Court.

Ingraham, J.

The referee held that io entitle the plaintiff to recover in such an action, the burden of proof was on him to show that the defendant had failed to perform the contract on his part, or in other words, to prove that the defendant failed to convey or offer to convey to the plaintiff a good title to the property purchased.

The authorities in this state that are controlling on this court abundantly sustain the decision of the referee. The exhaustive examination of the question in the opinion of the referee, renders a review of the cases unnecessary except to say that we concur in his opinion (See also Methodist Episcopal Church Home v. Thompson, 52 Super. Ct. 321).

The finding of the referee, that the title of the defendant to the leasehold premises described in the contract of sale was good, was abundantly sustained by the evidence.

There is a plain distinction between an action in equity for a specific performance, and an action at law for the recovery of money paid on the execution of a contract of sale of land. In an action for a specific performance, the rule is stated that equity will not interfere and decree a specific performance unless the plaintiff establishes to the satisfaction of the court that his title is a marketable title ; and it is said in Shriver v. Shriver (86 N. Y. 584), that, as a general rule, a ■ title which is open to judicial doubt is not a marketable title, and that if after the vendor has produced all the proofs he can, a rational doubt still remains, the title is not marketable; that a„ rational doubt may be said to exist when a court of law would not feel called upon to instruct a jury to find that a fact existed, on the existence of which the vendor’s title depends.

In a case where the vendor has failed to show that he had a marketable title, or where other grounds appear which in equity and good conscience require that the contract should not be specifically performed, equity will not interfere, but will leave the parties to their remedy at law (Peters v. Delaplaine, 49 N. Y. 362).

In an action at law, however, the plaintiff seeking to recover either damages for the failure to perform the contract, or the amount paid on the contract, is bound to show that the defendant has broken the contract and that he (the plaintiff), had tendered performance, or was able to perform the contract on his part. That burden is on the plaintiff, the party seeking to recover. He is bound to show that in some way the defendant has failed to perform his contract, and if he fail to sustain this burden, he cannot recover. On strictly legal principles he has failed to prove his cause of action.

The contract on the part of the defendant was, that he (the defendant), “will well and sufficiently convey to the party of the second part (plaintiff), by deed or assignment free of all incumbrances except as hereinafter stated, the indenture of lease described,” and it is settled in this state that in an agreement for the sale of a leasehold, there is an implied undertaking on the part of the vendor that he has and will convey a good title to the lease (Burwell v. Jackson, 9 N. Y. 635).

In no case to which our attention has been called or that we have been able to discover, has it been held that this implied covenant is, that the vendor will convey a marketable title ; but in all the cases that have followed Burwell v. Jackson, it is stated that the vendor has a good title and that he will convey that good title to the purchaser.

A breach of this agreement is not proved by showing that if certain facts exist, the title is doubtful. Plaintiff must show a breach, and to show such breach he must affirmatively prove that the plaintiff had failed to convey or offered to convey a good title.

In this case the referee having found that the defendant had, and offered to convey a good title, plaintiff failed to sustain his cause of action, judgment is affirmed, with costs.

Sedgwick, Ch. J. and Freedman, J. concurred.  