
    MUTUAL LIFE INSURANCE COMPANY OF NEW YORK v. BALCH.
    
      N. Y. Supreme Court, First Department; Special Term,
    
    
      July, 1877.
    Foreclosure Sale.—Liability of Owner for Loss by Fire.— Mortgage. —Furchaser’s Title.—Compelling Contract of Sale.
    Upon judicial sales the property is at the risk óf the purchaser only when, by the terms of the sale, he becomes entitled to possession with the corresponding right to the rents and profits.
    Where the property purchased at a foreclosure sale, between the sale and the time for the delivery of the deed, is so materially injured as to be greatly diminished in value, the purchaser is not obliged to accept it.
    Hence, where the premises, in consequence of fire, between the sale and time for the delivery of the deed, became untenable and unfit for occupancy, and could not be let or used, and the former tenants had vacated because of the fire, and the season for renting had passed, and no oñer had been made to restore the premises to their original condition, with reasonable compensation for the loss of rental and the delay ;—Held, that the purchaser should not be compelled to complete the purchase, and was entitled to repayment of the ten per cent, paid at the time of the sale.
    
      Motion by plaintiff to compel purchaser at a foreclosure sale to complete his purchase.
    The action was brought by the Mutual Life Insurance Company of New York, against Ebenezer H. Balch and others, to foreclosure a mortgage on premises in the city of New York.
    This motion was made to compel the purchaser at a foreclosure sale or his assignee to complete his purchase, or in default thereof that the referee might resell at the loss and expense of the purchaser after applying the amount of his deposit towards such loss and expense, and for further relief.
    This sale was made by a referee under the usual printed “terms of sale” on March 7, 1877, to A. A. Thurber, for the sum of $53,500, who signed the usual contracts of sale, and the sum of $5,375 was deposited by him or his assignee at the time with the referee.
    By these “ terms of sale,” the remainder of the purchase money was' to be paid to the referee on April 7, 1877, when his deed was to be delivered to the purchaser.
    These mortgaged premises consisted of a brick store and dwelling, known as No. 930 Broadway, in this city, adjoining those mentioned in the preceding case of Aspinwall v. Balch (see p. 193). The purchaser assigned his bid in this case also to Lewis Johnston, Esq. On March 11, 1877, the same fire referred to in the preceding case, damaged these mortgaged premises to the extent of about $2,000.
    The premises in question were a valuable and substantial brick building fit for immediate use. If they had not been impaired by the fire, the contract would have been completed, and they might have been leased by the purchaser before May 1, 1877, and a rental produced. The purchaser verbally notified the plaintiff and referee of the refusal to take by reason of the injury by fire, before the day fixed for completing the contract. The premises were injured to a large amount, but the plaintiff offered neither indemnity, nor to make repairs, to restore the buildings, or to compensate the purchaser for loss of rents, and the purchaser claimed that he would suffer damage of a serious character without his fault if compelled to take the property.
    The assignee of the purchaser notified the referee of the damage caused by the fire, and objected to taking the deed or paying the residue of the purchase money by reason thereof. Thereupon the plaintiff made this motion. The assignee of the purchaser, besides opposing the motion, also prayed that the referee might be directed to refund to him the sum of $5,375, deposited by him.
    
      Julien T. Davies, for the motion.
    
      Albert Mathews, opposed.
   Barrett, J.

It was undoubtedly laid down in McLaren v. Hartford Fire Ins. Co. (5 N. Y. 151), that from the time of a referee’s sale in foreclosure, the property is at the risk of the purchaser.

This decision has been much. criticised. The cases cited by Gardiner, J., do not establish the proposition for which he contends (see the remarks of Peckham, J., in Cheney v. Woodruff, 45 N. Y. 100), while Fuller v. Van Geesen (4 Hill, 173), on which Foot, J., relies, simply holds that the deed executed by a master passes the title at the moment of delivery. Cheney v. Woodruff, ubi sup., is direct authority for the contrary rule, viz.: that a purchaser is not entitled to the rents accruing between the time of the purchase and the time of the delivery of the deed.

The claim of relation back to the bidding was there repudiated, and the doctrine of relation was limited to the date when the deed is deliverable by the terms of the contract.

It is true that Mr. Justice Peckham, while criticising McLaren v. Hartford Fire Ins. Co., concedes that “the case was well decided upon another ground, viz.: the violation of a provision in the policy.” But that very provision was, that “in case of any transfer or change of title in the property insured, such insurance shall be void and cease,” the court holding that such transfer and change were immediately effected by the referee’s sale. Now as the latter proposition is what was denied by Mr. Justice Peckham, it is difficult to perceive how the case, from his stand-point, can be said to have been well decided.

The doctrine of Cheney v. Woodruff was fully restated in Mitchell v. Bartlett (51 N. Y. 447), affirming the same case as reported in 52 Barb. 319, where Ingraham, J., passed the McLaren case with the single remark that it involved the right “ to insurance made by the mortgagee after the sale.” This does not convey an entirely accurate idea of the case.

The purchaser’s new insurance, taken out by him as owner, was but an incident in the discussion. McLaren was no party to it. The direct question before the court was with respect to the old insurance effected by McLaren as owner of the fee, and the conclusion arrived at was that the formal legal title did not constitute an insurable interest. Even this latter conclusion is in conflict with Wood v. North Western Ins. Co. (46 N. Y. 421), where Folger, J., observed, that the plaintiff “held also the legal title, and this made it competent for him to cover, not only his special interest in the property, but the property itself (And see also Cone v. Niagara Fire Ins. Co., 60 N. Y. 622).

It would seem, therefore, that the various suggestions put forward to distinguish the McLaren case are scarcely adequate. That case must, in fact, be treated as squarely covering the proposition contended for, but as substantially overruled by the principles laid down in the later cases.

The rule that the premises are at the risk of the purchaser undoubtedly applies when, as in McKechnie v. Sterling (48 Barb. 330), the contract is absolute, and the vendee is authorized to take immediate possession of the land. There, from the date of the contract, he is entitled to the rents and profits, and is bound to pay interest on the purchase price.

The just rule upon judicial sales, is that which places the property at the risk of the purchaser only when the deed has been or should, and but for his failure would have been delivered; in other words, when, by the terms of sale, he becomes entitled to possession, with the corresponding right to the rents and profits.

This is substantially the conclusion arrived at in a careful and elaborate opinion by Mr. Chief Justice Daly, of the court of common pleas, the manuscript of •which has been furnished to me (Aspinwall v. Balch).

The motion to compel the purchaser to complete must therefore be denied. There was no offer to restore the premises to their original condition, nor even to reimburse the purchaser for the loss occasioned by the fire.

True, there is an affidavit of a gentleman in the employ of the plaintiff’s attorneys to the effect that he is informed by the officers of the plaintiff, that they will allow whatever sum may be collected on certain policies of insurance, held by the company on the property in question, “in reduction of the claim of the plaintiff under the decree.”

It is needless to say that this is not what the law required. Indeed, considering the extent of the damage, the delay which has ensued in consequence of the plaintiff’s neglect to offer compensation, and the loss of rental which must result from the condition of the premises, there is force in the suggestion that the purchaser ought to be entirely relieved. The rule is that where the property is so materially injured as to be greatly diminished in value, the purchaser is not obliged to accept it (Aspinwall v. Balch, ubi sup., and cases there cited).

Mr. Johnston’s affidavit shows, and it is not denied, that the premises, in whole or in part, are now untenantable and unfit for occupancy, that they cannot be let or used in their present condition, that the former tenants have vacated because of the fire, and that the season for renting has now passed.

If an offer had been made to restore the premises to their original condition, with reasonable compensation for the loss of rental occasioned by the fire and the delay, it would have been considered and weighed.

But as the case stands upon the papers now before' the court, there would seem to be no escape from the conclusion that the plaintiff’s motion should be denied with $10 costs, and that the prayer of Mr. Johnston’s affidavit, asking repayment of the ten per cent, should be granted., 
      
      See p. 193 of this vol.
     