Cohen v. Kranz

Brief Fact Summary. An individual signed a contract and agreed to buy another individual's home.  The purchasing party put down a deposit and the remaining balance was to be paid at closing.  The purchasing party refused to go ahead with the transaction alleging title defects.

Synopsis of Rule of Law. "While a vendee can recover his money paid on the contract from a vendor who defaults on law day without a showing of tender or even of willingness and ability to perform where the vendor's title is incurably defective, a tender and demand are required to put the vendor in default where his title could be cleared without difficulty in a reasonable time."

Facts. On September 22, 1959, the Plaintiff, Cohen (the "Plaintiff"), contracted to purchase the Defendants', Kranz and others (the "Defendants"), home.  The Plaintiff agreed to pay $40,000.  Upon signing the contract, the Plaintiff paid $4000.  The rest of the money was due at the closing, which was scheduled for November 15, 1959.  The closing was delayed by the Plaintiff until December 15, 1959.  In the meantime, on November 30, 1959, the Plaintiff's attorney sent the Defendant's attorney a letter demanding a refund of the $4,000 because title was found to be unmarketable.  The Defendant's attorney refused to return the money, and this proceeding was commenced by the Plaintiff for return of the $4,000 plus monies for the title search.  The Plaintiff was victorious before the trial court because the Defendant never obtained a certificate of occupancy for a swimming pool and a fence on the property stretched over the property line.  The trial court found that both of these things affected the marketability of the Plaintiff's title.  The Appellate Division reversed and found the contents of the Plaintiff's November 30, 1959 letter insufficient because it did not claim specific instances of illegality.

Issue. Were the Plaintiff's objections concerning title to the Defendants' property curable?
•    Is the Plaintiff entitled to recover their deposit from a defendant whose title flaws were readily curable?
•    Did the Plaintiff demonstrate an entitlement to damages?

Held. Yes.  The court agreed with the Appellate Division and found that "the objections to title were curable upon proper and timely notice and demand."  Specifically, the Defendants had a permit to construct the swimming pool, but did not have a certificate of occupancy.  This certificate was obtained prior to the Defendants selling the home to a third party.  Additionally, the fence that encroached over they property line was also readily curable. 
•    No.  The court first laid out the following rule:  "While a vendee can recover his money paid on the contract from a vendor who defaults on law day without a showing of tender or even of willingness and ability to perform where the vendor's title is incurably defective, a tender and demand are required to put the vendor in default where his title could be cleared without difficulty in a reasonable time."  The court concluded the Plaintiff's "advance rejection of title and demand for immediate return of the deposit was unjustified and an anticipatory breach of contract."  As such, Plaintiff's position "prevented defendants' title defects from ever amounting to a default."  Therefore, "plaintiff is barred from recovering the deposit from a vendor whose title defects were curable and whose performance was never demanded on law day."
•    No.  In order to recover damages in a real estate transaction a plaintiff must demonstrate they "performed all conditions precedent and concurrent, unless excused."  Specifically as to real estate transactions, this "would be a showing of tender and demand or, if that be unnecessary, an idle gesture, because of the incurable nature of the title defect, then at least a showing at the trial that the plaintiff vendee was in a position to perform had the vendor been willing and able to perform his part."  Here, "[t]he finding of the Appellate Division, supported by the weight of the evidence, that the defects were curable, means that defendants were basically able to perform and whatever technical inability existed in this regard on the law date was caused by plaintiff and is excused fully as much as the lack of formal tender."

Discussion. This case offers an interesting discussion about the different prerequisites necessary to recover a deposit and to recover damages based on one parties failure to go through with a real estate transaction.