Brief Fact Summary. Plaintiff entered into a contract with the Defendant to buy land. The Defendant offered to consummate the deal by offering the title to the Plaintiff with a certified check to cover a lien. Defendant disputed the existence of the lien. Plaintiff refused to accept the title on those terms and sued Defendant.
Synopsis of Rule of Law. If the sale fails by reason of a defect in the vendor’s title and the vendor is guilty of no bad faith or fraud, the measure of the vendee’s damage is substantially the same as in the case of an executed sale; that is, the vendee may recover any consideration he has paid, with interest, and any legitimate expense incurred by him, but he can recover nothing for the loss of his bargain.
Since the decision in the case of Cox's heirs vs. Strode, II Bibb, 276, the criterion of damages upon a covenant to convey land, which has been violated, but without fraud on the part of the covenantor, is the purchase money and interest thereon, or in the language of the case of Rutledge vs. Lawrence, I Marshall, 397, it is, the value of the land at the time of the sale, to be ascertained by the consideration fixed or other evidence.View Full Point of Law
Issue. What are the rights of the purchaser of real estate under an executory contract when the sale fails by reason of a defect in title, or what is the proper measure of damages?
Held. The Plaintiff is not entitled to damages resulting from the loss of his bargain when there was no fraud on the part of the Defendant. Reversed.
If the sale fails by reason of a defect in the vendor’s title and the vendor is guilty of no bad faith or fraud, the measure of the vendee’s damage is substantially the same as in the case of an executed sale; that is, the vendee may recover any consideration he has paid, with interest, and any legitimate expense incurred by him, but he can recover nothing for the loss of his bargain.
The mere failure of a vendor of real estate to refer the vendee to his record of title, or the judicial decisions bearing upon it, is not such fraud as to deprive him of the benefit of the rule that damages for loss of bargain will not be awarded against a good faith vendor who is unable to convey good title.
If, however, the vendor has been guilty of fraud, a different rule may govern the case. Then, the vendor would be responsible for the increased value of the land, at the time his covenant should have been performed.
The Defendant vendor here was guilty of no positive or active fraud in the transaction, thus, it was error to allow Plaintiff the damages relating to the higher value of the land presently under the contract.
Discussion. In this case the absence of fraud is easily spotted. The vendor and the vendee negotiated about how to handle the lien. The lien was known to all parties to the transaction. Consider however, that instead of paying the lien, the Defendant apparently would have rather paid more money to the Plaintiff. Why could the Plaintiff not satisfy the lien by paying Gordon and retain the surplus?