
    James M. Horton, Resp’t, v. Moritz Bauer, Imp’ld, App'lt.
    
    
      (Court of Appeals,
    
    
      Filed December 1, 1891.)
    
    1. Contract—Breach—Damage.
    On the foreclosure of a purchase money mortgage the defendant counterclaimed damages sustained by a breach by the vendor of an agreement to remove certain railroad tracks which were upon the premises, by reason of which he claimed to have lost a sale of the property to one B., at an advance of §36,000. He did not disclose the encroachment to B. who was his friend, and the latter on discovering it, refused to perform on that ground, waiving other defects in the title. The court held that the contract with B. was a sham, devised solely to furnish a basis for damages. Reid, That there was quite enough to justify that conclusion, and that a finding that only nominal damages were sustained by the breach of agreement was supported by the evidence.
    2. Same—Burden of proof.
    The agreement was one of indemnity merely, so far at least as loss of profits was involved, and the burden of proof was upon defendant of establishing such a loss as was the natural and legitimate consequence of the plaintiff's breach.
    3. Same.
    The fact that defendant offered to assign his contract to plaintiff to enable the latter to enforce it, who declined the offer, is no defense. No such duty devolved upon plaintiff, as defendant was bound fairly to prevent or lessen his loss before calling for his indemnity.
    Appeal from judgment of the supreme court, general term, first department, affirming judgment of foreclosure and sale.
    
      E. Winslow Paige, for app’lt; John M. Scribner, for resp’t.
    
      
       Affirming 37 St. Rep., 637.
    
   Finch, J.

The counterclaim asserted by the defendant rested upon two facts: one, the contract of indemnity executed by the plaintiff relative to the encroachment of the street railroad company upon the lands agreed to be purchased; and the other, an alleged failure of a later and more profitable contract between the defendant and Borger for the sale of the same land; which failure was traced to the presence of that encroachment. There is no doubt that at the date of each contract the tracks of the railroad were, in fact, located upon the land in controversy, and to the knowledge of both plaintiff and defendant; but the trespass was unintentional and incidental, growing out of uncertainty as to the lines of an unopened street, without any claim of right, and ended by the ultimate removal of the rails. How a damage of $36,000 was to result to the defendant from this harmless trespass which never challenged his title or right of possession is disclosed by the two contracts, in the first of which the defendant was vendee, and in the second an apparent and alleged vendor. Knowing of the encroachment at the closing of the contract of purchase, he required to be executed and delivered by the vendor the covenant upon which this action rests and which is as follows : “ I hereby covenant and agree within thirty days hereafter, either to obtain the execution by said railroad of a lease of said premises in a form satisfactory to Moritz Bauer (containing the privilege of the lessor to recover possession of the premises upon thirty days notice), or to have the tracks of said railroad company entirely removed from said lands. And I hereby expressly covenant and agree to indemnify and save harmless the said Moritz Bauer of and from all loss and damage which may arise from the encroachment of the tracks of said railroad company upon said land, including loss of profits, in any future transaction in respect to said lands.”

The original contract was dated May 4, 1887, and provided for performance by both parties on July 6th following. That performance was several times postponed, but was finally fixed for the 3d of August. On that day there were produced and delivered to the vendee a letter from the railroad company substantially acknowledging the encroachment, explaining its accidental and unintentional character and agreeing to remove the tracks upon thirty days notice, and one in reply from the vendor by which he accepted the company as a tenant liable to removal on thirty days notice. These papers were unsatisfactory to the defendant, who declined to regard them as a lease, and who required for his further protection the covenant of indemnity above recited, upon the execution of which he accepted the title. Negotiations were thereafter commenced by the vendor for a formal lease which were delayed beyond the thirty days under circumstances which quite plainly indicated a waiver of time as a material or essential element of the contract. But during the period of that delay and before the track was removed he entered into a formal contract with Borger for a sale of the premises at an advance of $36,000. The vendor testifies that the vendee was his intimate friend, and yet he never told him of the encroachment or the existing situation relative to its removal, but left him to discover it for himself. Borger did so, and although there were other and better grounds on which to object to the title tendered, he waived them all and refused to perform on the sole ground of the encroachment by the railroad company.

The general term have held, upon a view of all the circumstances attending the transaction, that the contract with Borger was a sham, devised solely to furnish a basis for damages against the original vendor, and not made in good faith. There is quite enough to justify that conclusion; and the refusal to find as a fact the actual existence of that contract and also the finding that only nominal and no real or actual damages resulted are, in our judgment, supported by the evidence.

It is obvious that the contract was one of indemnity merely, so far at least as loss of profits was involved. The covenant as to that was explicitly to indemnify and save harmless. The burden was'thus put upon the defendant of establishing such a loss as the natural and legitimate consequence of the plaintiff’s breach. But the alleged loss from the failure of the Borger contract was ineffectual for two reasons. Bauer might have enforced that contract. An accidental trespass, conceded to have been without title and without right, upon a part of the lands agreed to be conveyed, furnished no justification for Borger’s refusal and would have been no defense to an action for specific performance. If he had taken from. Bauer a full covenant deed, no one of the covenants would have been broken and no action upon them could have been maintained. The vendor'had a seizin in fee and full right to convey. The covenant of warranty and for quiet enjoyment is not broken by a bare trespass not amounting to an eviction. And that against incumbrances implies for its basis some outstanding right or claim of right Bauer’s deed to Borger, if accepted, would have given the latter everything which the contract required, and there was nothing in the accidental and admitted trespass which could have induced a court of equity to relieve him from his purchase. All this, conceded by appellant for the purposes of the argument to be a possible truth, is met by the answer that Bauer offered to assign his contract to plaintiff to enable the latter to enforce it, who declined the offer. I do not think that is a sufficient answer.

Ho such duty devolved or could be put upon the plaintiff. The transaction with Borger was one for which the plaintiff was in no manner responsible, and in which he had no interest, except that it should be an honest one and honestly conducted and enforced. The duty of enforcing it, or showing that enforcement was impossible, rested upon Bauer. He was bound fairly to prevent or lessen his loss before calling for his indemnity. If he desired to make the plaintiff responsible for the results of the litigation, he could easily have offered to let him conduct it or aid in its progress, but' an assignment of the contract the plaintiff was in no manner bound to accept. The damages, therefore, accrued from the fault and bad faith of the defendant. He permitted the breach of his contract with Borger and abandoned it without necessity and without reason. '

It is further to be remembered that if Bauer had sued Borger to compel a specific performance, the former could have removed and was perfectly able to have ended the encroachment, as it was in fact ended, long before his action could have come to trial, and a perfect and flawless title then would have commanded the relief of performance. Jenkins v. Fahey, 73 N. Y., 355. And this conduct of the defendant, who abandoned his legal and equitable right in order to make a loss, and omitted an honest effort to protect not only himself but his indemnitor, coupled with the other facts and circumstances of the case, fully authorized the courts below to determine as a fact that the Borger contract and the alleged loss of profit were alike fictitious and collusive, and not actual and honest. These conclusions, resting upon sufficient evidence, are decisive upon this appeal.

The judgment should be affirmed, with costs.

All concur.  