Freidus v. Eisenberg

• Decision Date: 31 December 1986
• Citation: 123 A.D.2d 174,510 N.Y.S.2d 139
• Parties: Ella FREIDUS, Plaintiff-Appellant-Respondent, v. Dorothy EISENBERG, etc., Defendant-Respondent; Gerald Resnick, Proposed Intervenor-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 139

510 N.Y.S.2d 139

123 A.D.2d 174

Ella FREIDUS, Plaintiff-Appellant-Respondent, v. Dorothy EISENBERG, etc., Defendant-Respondent Gerald Resnick, Proposed Intervenor-Appellant.

Supreme Court, Appellate Division Second Department.

Dec. 31, 1986.

Summit Rovins & Feldesman, New York City (Stuart A. Summit, Glenn S. Goldstein, Thomas J. Troiano and Ira G. Greenberg, of counsel), for plaintiff-appellant-respondent.

Michael M. Perlman, Garden City, for proposed intervenor-appellant.

Miller & Seeger, New York City (Israel G. Seeger, of counsel), for defendant-respondent.

Before LAZER, J.P., and THOMPSON, RUBIN, LAWRENCE and EIBER, JJ.

LAZER, Justice Presiding.

At primary issue is the amount of damages to which the defendant is entitled as a result of the plaintiff's wrongful failure to convey real property. On June 10, 1969, the plaintiff entered into two contracts of sale with Todem Homes, Inc. (hereinafter Todem Homes). Under the first of those contracts, the plaintiff purchased a 20-acre parcel in the Village of Lloyd Harbor for $200,000. The parcel was improved with a single-family residence, but was, for the most part, heavily-wooded terrain, with hills and ravine. The second contract gave Todem Homes the right to repurchase 17 of the unimproved acres, within a period of 30 months, for $40,000.

After the sale of the 20-acre parcel had been consummated, disputes arose concerning the rights and obligations of Todem Homes under the option contract, and the resulting litigation has been going on for 15 years. The case illustrative of the susceptability of our legal system is susceptible to dilatory tactics designed to avoid a result. In any event, the plaintiff's liability was finally established on March 23, 1982, by the Court of Appeals' affirmance of our order granting specific performance to Todem Homes on its counterclaim in this action (see, Freidus v. Todem Homes, 80 A.D.2d 575, 435 N.Y.S.2d 786, affd. 56 N.Y.2d 526, 449 N.Y.S.2d 963, 434 N.E.2d 1341). During the lengthy pendency of this litigation, however, Todem Homes was adjudicated a bankrupt and its interest in the option was assumed by the present defendant as bankruptcy trustee. Among the corollary issues is the postjudgment right of the person who purchased the option from the bankruptcy trustee to intervene in the action, and the validity of the judgment in favor of the trustee as a result of the sale of the option during the period damages were allegedly accruing. The matter was remitted for trial of the damages suffered by the defendant for the delay in conveying title, and the present appeals are from the judgment entered on the jury verdict in that trial, and from two postjudgment orders.

The principal question is whether the judgment in the total amount of $478,514.15 has a sufficient basis to permit it to stand. The plaintiff challenges the two principal components of that award: $408,000 for the use and occupancy of the property during the period of the delay, and $65,096 for the increase in road construction costs resulting from the plaintiff's failure to convey. The remainder of the judgment amount consisted of the costs and disbursements of the action and the stipulated liability of the plaintiff for commitment and bond fees and interest. The plaintiff argues that the damages sought by the defendant are not cognizable under law; that the defendant failed to prove that the damages she sought were within the contemplation of the parties; that the defendant's proof of damages for loss of use of the property was uncertain, contingent and speculative; that the defendant failed to mitigate damages; that the period for which damages were calculated should have ended in 1981, since Todem Homes could have sought a closing at that time; that the plaintiff was entitled to an offset in the judgment for interest on the unpaid purchase money; and that the rulings and conduct of the court were prejudicial to the plaintiff. The plaintiff also claims that the award for increased road construction costs was not based on admissible evidence. We conclude that the judgment must be reversed to the extent it awards damages for use and occupancy of the property and increased road construction costs, since the defendant failed to establish either.

At the outset of our analysis, it is important to note that the underlying action is in equity for specific performance of a contract to convey real property, and the issue at the jury trial was the amount of damages flowing from the delay in complying with the contract. The action is not one at law to recover damages for breach of contract. In a breach of contract action, the purchaser is compensated for loss of bargain by recovering the difference between the value of the property and the contract price, together with such incidental damages as flow from the breach (see, Bailey v. Morgan, 95 A.D.2d 883, 463 N.Y.S.2d 882, affd. 62 N.Y.2d 844, 477 N.Y.S.2d 624, 466 N.E.2d 164; Colonial Diversified v. Assured Holding Corp., 71 A.D.2d 1011, 420 N.Y.S.2d 419; Levy v. 315 West 79th Street Corporation, 222 App.Div. 9, 225 N.Y.S. 218; 62 N.Y.Jur., Vendor and Purchaser § 166, p. 447). Here, with specific performance granted, the contract is being performed, and the purchaser has not lost the value of the bargain. Although legal damages are therefore inappropriate, equity "will, so far as possible, place the parties in the same situation as they would have been in if the contract had been performed according to its terms" (Worrall v. Munn, 38 N.Y. 137, 142; see, Smith Corp. v. Kraushaar, 249 App.Div. 789, 292 N.Y.S. 410). To achieve that end, the court will award to the purchaser, in addition to specific performance of the contract, such items of damage as naturally flow from the breach, are within the contemplation of the parties, and can be proven to a reasonable degree of certainty (see, Regan v. Lanze, 47 A.D.2d 378, 366 N.Y.S.2d 512, revd. on other grounds 40 N.Y.2d 475, 387 N.Y.S.2d 79, 354 N.E.2d 818; Ann., Special or Consequential Damages Recoverable, on Account of Delay in Delivering Possession, by Purchaser of Real Property Awarded Specific Performance, 11 ALR 4th 891; Ann., Specific Performance: Compensation or Damages Awarded Purchaser for Delay in Conveyance of Land, 7 ALR 2d 1204; 81A CJS, Specific Performance § 197, pp. 159-161; 62 NY Jur, Vendor and Purchaser § 190, pp. 492-493). Here, the defendant claims compensation under this rule for the two items at issue on this appeal, the value of the use and occupancy of the property and the increase in road construction costs resulting from the delay in performing. Additional items totaling $5,053.55 were stipulated by the parties and are not challenged.

Since the plaintiff remained in possession of the property throughout the period of her wrongful failure to convey, the defendant is entitled to the value of the use and occupancy of the property, i.e., its rental value, for that period (see, Haffey v. Lynch, 193 N.Y. 67, 85 N.E. 817; Bostwick v. Beach, 103 N.Y. 414, 9 N.E. 41; Worrall v. Munn, 38 N.Y. 137, supra; Matter of 50-05 43rd Ave. [Canfield Properties Corp.--Harris], 271 App.Div. 44, 62 N.Y.S.2d 685; see, also, Dillingham Commercial Co. v. Spears, 641 P.2d 1 [Alaska]; Ellis v. Mihelis, 60 Cal.2d 206, 32 Cal.Rptr. 415, 384 P.2d 7; Fleming v. O'Donohue, 306 Ill. 595, 138 N.E. 183; Calbreath v. Borchert, 248 Iowa 491, 81 N.W.2d 433; Sanders v. Bryer, 152 Mass. 141, 25 N.E. 86; Russell v. Western Nebraska Rest Home, 180 Neb. 728, 144 N.W.2d 728; Ann., Specific Performance: Compensation or Damages Awarded Purchaser for Delay in Conveyance of Land, 7 ALR2d 1204). The measure of the value of the use and occupancy is the rental value of the property, and not any profits which might be derived from its development (see, Worrall v. Munn, 38 N.Y. 137, supra ). In Worrall, the value of the property was predicated primarily, if not solely, upon its clay deposits, which the purchaser intended to use to make bricks for a profit. Despite this prospective value, the Court of Appeals denied the purchaser damages for such lost profits and limited his recovery to the value of using the land as it was, which was minimal. Similarly here, while the primary value of the land in question may be for development, the profits which might be derived from such a future use do not constitute the present measure of damages. The question is the value of the rent that could have been obtained during the period of delay. The evidence submitted by the defendant, however, did not establish that rental value.

Rather than relying upon values derived from the rental of comparable parcels or for that matter on any other cognizable method of arriving at what a tenant or other occupant would have paid to rent the 17 acres of hills and ravine, the defendant's appraiser arrived at his figure for the value of the use and occupancy by calculating the fair market value of the land separately for each year of delay and applying to that amount the interest rate payable on treasury bonds for that year. On this basis--the creation of fictional annual leases--the expert concluded that the rental value of the property was $37,000 for 1977, the first year of the damages period, $43,000 for 1978, with the annual amount increasing each year until it reached the sum of $98,000 for 1984. While this approach might establish what a fair return on the cash value of the property might have been had it been sold each successive year in question--a conversion theory--it was not evidence at all of the reasonable rent that a tenant or occupant of the property might pay. The prospect that any person would pay even $37,000, much less $98,000, for a one year rental of a vacant, 17-acre property consisting of hills and ravine zoned residential, in Lloyd Harbor makes the testimony seem ludicrous. The defendant's expert thus did not establish the value of the plaintiff's use and occupancy of the...