Albright v. Fish
| Decision Date | 08 September 1980 |
| Docket Number | No. 408-79,408-79 |
| Court | Vermont Supreme Court |
| Parties | James D. ALBRIGHT and Edna I. Albright v. John A. FISH, Cheryl Fish, William Miller, Marion C. Miller, Ernest Paul Sachs, Marlene Sachs, Peter R. Teachout and Mary M. Teachout. |
Norris H. Hoyt, Jr., and Peter R. Teachout, Norwich, for plaintiffs Sachs and Teachout.
Garfield H. Miller of Black & Plante, Inc., White River Junction, for defendants Miller.
Before BARNEY, C. J., and DALEY, LARROW, BILLINGS and HILL, JJ.
This appeal and cross-appeal represent another chapter in a dispute we heard but one year ago. The facts of the case are set out at length in Albright v. Fish, 136 Vt. 387, 394 A.2d 1117 (1978), and it would serve no useful purpose to dwell on them here. Suffice it to say for the purposes of this opinion that cross-defendants, Millers, were held liable for breath of a restrictive land covenant running in favor of cross-plaintiffs, Sachs and Teachouts. By its terms, the covenant prohibited all subsequent grantees in the chain of title from a common grantor from subdividing their respective holdings into parcels of less than ten acres. The issue with which we are confronted today is the proper measure of damages for the breach of that covenant.
Cross-plaintiffs claim that the lower court "erred in holding that the proper measure of compensatory damages for breach of a real property covenant is the decrease in the fair market value of the covenantees' property proximately caused by the breach." Since they ultimately purchased the parcel that was illegally subdivided (the offending parcel), cross-plaintiffs claim that the proper measure of damages is their "actual losses." They include in these "actual losses" the following: (1) all costs and expenses incurred in removing and extinguishing the "encumbrance" placed on their property rights by the violation of the covenant; (2) all costs and expenses incurred in defending and maintaining their rights under the restrictive covenant, including litigation costs and attorney's fees; and (3) all damages and costs suffered in consequence of the breach, including compensation for hardships and dislocations. In addition, cross-plaintiffs claim that they are entitled to exemplary damages because the breach was intentional and in bad faith, and that they are entitled to an amount equal to the property taxes that they will have to pay on the offending parcel over the term of the fifty-year covenant.
We have been unable to find any Vermont case that discusses the measure of damages for breach of a restrictive covenant, and, not surprisingly, there is little case law from other jurisdictions regarding the issue. This is due no doubt to the fact that covenants containing building or subdivision restrictions "are purely negative in character; and since they are for the protection of property values in the community, the normal remedy sought for enforcement is an injunction in equity." 2 American Law of Property § 9.13, at 376 (A.J Casner ed. 1952). Nevertheless, as with any promise, a breach of a restrictive covenant entitles "the aggrieved person to recover at law a judgment for damages," 5 R. Powell, The Law of Real Property P 671, at 145 (P. Rohan rev. ed. 1979), regardless of whether that party would have been entitled to injunctive relief had he chosen that course, Borssuck v. Pantaleo, 183 Md. 148, 154, 36 A.2d 527, 530 (1944).
The courts of New York and Oregon appear to be the only tribunals that have given the subject a considered analysis, and they invariably have held that the proper measure of damages for breach of a restrictive covenant is the difference between the fair market value of the benefited parcel before the breach and the fair market value of the benefited parcel after the breach. See Flynn v. New York, W. & B. Ry., 218 N.Y. 140, 112 N.E. 913 (1916); Ackerman v. True, 175 N.Y. 353, 67 N.E. 629 (1903); Binghamton Plaza, Inc. v. Gilinsky, 32 App.Div.2d 994, 301 N.Y.S.2d 921 (1969); Wicks v. Pat Pallone Co., 48 Misc.2d 734, 265 N.Y.S.2d 732 (Sup.Ct.1965); Drulard v. LeTourneau, 286 Or. 159, 593 P.2d 1118 (1979); Alloway v. Moyer, 275 Or. 397, 550 P.2d 1379 (1976); cf. Thompson v. Smith, 119 Vt. 488, 129 A.2d 638 (1957) (). But see Stauber v. Granger, 495 P.2d 67 (Alaska 1972) (). Despite this authority, however, cross-plaintiffs ask us to hold that the decrease in the fair market value caused by the breach is not the proper measure. Cross-plaintiffs claim that because they negotiated a settlement with the grantees of cross-defendants, whereby cross-plaintiffs purchased the offending parcel, any diminution in fair market value as a result of the breach was avoided. Therefore, they seek damages for all their costs and expenses in pursuing that course. We do not believe that cross-plaintiffs in pursuing a remedy which was not the normal or ordinary remedy have fixed their measure of damages as actual out-of-pocket expenses that are related in any manner to this dispute.
We are not led to a contrary conclusion by the long line of cases cited to us by cross-plaintiffs which hold that a party may recover for the damage he has sustained as a direct result of the breach and "for the damage he has sustained in consequence of the breach of the covenant, (including) such costs and expenses as he has fairly and in good faith incurred in attempting to maintain and defend his title." Smith v. Sprague, 40 Vt. 43, 46 (1867). See also Keeler v. Wood, 30 Vt. 242 (1858); Turner v. Goodrich, 26 Vt. 707 (1854); Pitkin v. Leavitt, 13 Vt. 379 (1841); Park v. Bates, 12 Vt. 381 (1840); Richardson v. Dorr, 5 Vt. 9 (1833). All of those cases involved a breach of one of the covenants for title, i.e., covenant of seisin, covenant against encumbrances, or covenant of warranty, as opposed to a breach of a restrictive covenant. Covenants for title are very different in nature, purpose and effect from restrictive covenants, although they share the same general designation. See 6A R. Powell, supra, at PP 904-911. The measure of damages for a breach of a covenant for title is that to which plaintiff has called our attention, and generally includes consequential damages for attorney's fees, costs, interests, and money spent to avoid damage from a breach. See id. But the mere fact that two very different legal concepts share the same generic name does not inexorably lead us to the conclusion that the measure of damages for a breach of either is the same.
As applied to the facts of this case, we believe that the proper measure for the damages which flowed directly from the breach is the difference in fair market value of cross-plaintiffs' parcels before the breach of the restrictive covenant and the fair market value of their parcels after the breach had they chosen not to purchase the offending parcel. This measure, in our opinion, fairly compensates cross-plaintiffs for the damage to their expectancy interest, to the extent money can do so. This is not to say, of course, that cross-plaintiffs could not have obtained equitable relief had they pursued that avenue. See McDonough v. W. W. Snow Construction Co., 131 Vt. 436, 306 A.2d 119 (1973); Welch v. Barrows, 125 Vt. 500, 218 A.2d 698 (1966); Queen City Park Association v. Gale, 110 Vt. 110, 3 A.2d 529 (1938).
The lower court found, and our review of the record confirms, that there was no evidence introduced regarding the diminution in fair market value, if any, of cross-plaintiffs Sachs' or Teachouts' land. Therefore, as to this element, cross-plaintiffs have failed to prove their damages. Nevertheless, where, as here, an invasion of a property right is established, the law "requires some recognition, even if only by way of nominal damages." Clark v. Aqua Terra Corp., 133 Vt. 54, 58, 329 A.2d 666, 668 (1974). It remains to be determined, however, whether cross-plaintiffs are entitled to recover the other elements of damages they seek.
It is the accepted rule in Vermont that when a contract is breached the aggrieved can recover not only direct or general damages for the losses that naturally and usually flow from the breach itself, Norton & Lamphere Construction Co. v. Blow & Cote, Inc., 123 Vt. 130, 136, 183 A.2d 230, 236 (1962), but he may also recover special or consequential damages. Recovery of consequential damages is, of course, subject to the limitations of causation, certainty and foreseeability. Id. See also Berlin Development Corp. v. Vermont Structural Steel Corp., 127 Vt. 367, 250 A.2d 189 (1968); see generally D. Dobbs, Handbook on the Law of Remedies § 12.3 (1973). Moreover, these rules are equally applicable where, as here, an aggrieved party seeks consequential damages for breach of a promise to use certain land in a particular way. See Restatement of Property § 528 (1944).
Cross-plaintiffs claim that the interest they will have to pay on the money borrowed to purchase the offending parcel and the future property...
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