Hiss v. Friedberg, 5029

• Citation: 112 S.E.2d 871,201 Va. 572
• Decision Date: 07 March 1960
• Docket Number: No. 5029,5029
• Court: Supreme Court of Virginia
• Parties: , 4 A.L.R.3d 261 ALFRED L. HISS AND JOHN F. RUTLEDGE, TRADING AS HISS AND RUTLEDGE v. SIDNEY M. FRIEDBERG, HERBERT L. FRIEDBERG AND SYLVIA FRIEDBERG NACHLAS. Record

Page 871

112 S.E.2d 871

201 Va. 572, 4 A.L.R.3d 261

ALFRED L. HISS AND JOHN F. RUTLEDGE, TRADING AS HISS AND RUTLEDGE v. SIDNEY M. FRIEDBERG, HERBERT L. FRIEDBERG AND SYLVIA FRIEDBERG NACHLAS.

Record No. 5029.

Supreme Court of Appeals of Virginia

March 7, 1960.

Armistead L. Boothe and William W. Koontz (Boothe, Dudley, Koontz & Boothe, on brief), for the appellants.

R. J. Lillard and Henry M. deButts (McCandlish, Lillard, Marsh & Van Dyck; Gordon, Feinblatt & Rothman, on brief), for the appellees.

JUDGE: EGGLESTON

EGGLESTON, C.J., delivered the opinion of the court.

This litigation arises out of the purchase of real estate in Fairfax county by Sidney M. Friedberg and others, hereinafter referred to as the Friedbergs, from Howard P. Horton and wife, in which transaction Alfred L. Hiss and John Rutledge, law partners practicing under the name of Hiss and Rutledge in Arlington county, were the settlement attorneys acting primarily for the Friedbergs.

The Friedbergs filed a bill in the court below against the Hortons claiming damages for the sellers' breaches of warranty and covenants of title. An injunction was prayed for and granted restraining the Hortons from negotiating the purchase-money notes pending the outcome of the suit. Hiss and Rutledge were joined as defendants and damages were sought against them for the alleged breach of their contract of employment and the violation of an escrow agreement which they had entered into with the parties with respect to the disbursement of the cash and the delivery of the purchase-money notes. Some months after the filing of the suit the Friedbergs reached a settlement with the Hortons and the suit was dismissed as to the latter. The suit was continued against Hiss and Rutledge and damages were sought against them for the expenses, including counsel fees, which the Friedbergs had incurred in their litigation against the Hortons.

After an ore tenus hearing the lower court entered a decree awarding the Friedbergs a judgment against Hiss and Rutledge for counsel fees of $4,165.70 paid to their local counsel, plus $1,137 which they had paid to Hiss and Rutledge for searching the title to the property, settling the transaction, and procuring title insurance. From this decree Hiss and Rutledge have appealed challenging the propriety of the allowance of these items as damages properly recoverable of them.

The Friedbergs have assigned cross-error to the refusal of the lower court to award them, as additional damages against Hiss and Rutledge, counsel fees paid to their Baltimore counsel for services rendered in the litigation with the Hortons and reimbursement for the value of the time lost by them, the Friedbergs, in the preparation and conduct of that litigation.

The underlying facts are not in dispute and may be summarized thus: On April 5, 1957, the Friedbergs entered into a written contract with the Hortons whereby the Friedbergs agreed to buy and the Hortons agreed to sell approximately three and one-half acres of land located near Bailey's Cross Roads in Fairfax county, Virginia. The consideration called for by the contract was $181,000, of which $105,000 was to be paid in cash at the time of settlement and the balance represented by promissory notes totalling $76,000, payable in ten years with interest at the rate of six per cent. per annum, payable monthly. The sellers agreed that the property would be conveyed by general warranty deed, that the title would be good of record, and that possession would be given at the time of settlement which was to be within five days from the date of the contract.

The Friedbergs, through their counsel in Baltimore, their principal place of business, employed Hiss and Rutledge to search the title to the property, procure title insurance, and settle the transaction. Prior to and at the time of settlement there was a discussion that a man named Endy claimed an interest in the property by virtue of an unrecorded lease. While the Hortons knew the terms of the lease they did not disclose them to the purchasers. Hiss and Rutledge had likewise heard that such a lease was outstanding, but they as well as the Hortons assured the Friedbergs that the outstanding lease was of no serious consequence and that immediate possession of the property could be delivered.

However, the Friedbergs insisted that they be protected against any claim under the outstanding lease. Accordingly, the parties entered into a written agreement whereby the Friedbergs placed in escrow with Hiss and Rutledge the sum of $105,000 in cash and the purchase-money notes totalling $76,000. Under the terms of the agreement the deeds were to be recorded, the cash paid, and the notes delivered to the Hortons upon the receipt by Hiss and Rutledge of an insurance policy issued by an accredited title company guaranteeing to the Friedbergs a fee simple title in the property 'free and clear of any liens and encumbrances whatsoever.'

Pursuant to this agreement Hiss and Rutledge examined, or had examined, the title to the property and filed a written application with the Kansas City Title Insurance Company, which had been authorized to do business in this State, for a title policy. One of the questions presented in this application was the 'rights of parties in possession other than owner,' to which the applicants replied, 'None.'

On April 15, 1957, Hiss and Rutledge were notified by counsel for David B. Endy and K. E. Moore that they held an unrecorded written lease from the Hortons on the property for a term of five years beginning April 1, 1956, and that under it they intended to hold possession of the property. Notwithstanding this information, Hiss and Rutledge, who had previously recorded the deed of bargain and sale and deed of trust, paid the purchase money and delivered the notes to the Hortons.

The title policy was issued on April 19 and contained a provision that it did not insure or indemnify against 'Rights of parties in actual possession of all or any part of the premises other than the insured.' When this policy was brought to the attention of Baltimore counsel for the Friedbergs they refused to accept it on the ground that because of the exception it did not meet the terms of the escrow agreement.

Efforts by the Hortons to remove the leasehold interest of Endy and Moore were unsuccessful and at the time of the trial of the present case they were still in possession of the property.

The present suit was instituted in June, 1957. Before it came to trial the Friedbergs reached a settlement of their claim against the Hortons for damages for breaches of warranty and covenants by reason of the outstanding leasehold held by Endy and Moore. In this settlement the Hortons agreed to reduce the principal amount of the purchase-money notes from $76,000 to $36,000, and in consideration thereof the Friedbergs executed a written release of their claims against the Hortons and a decree was entered dismissing the latter as parties defendant. In this release the Friedbergs expressly reserved their right to proceed against Hiss and Rutledge for recovery of damages attributable to their breach of contract.

On this appeal Hiss and Rutledge do not contest the lower court's finding that they were liable to the Friedbergs for breach of their contract and escrow agreement. In their assignments of error they make these contentions:

(1) The Friedbergs were fully compensated for their damages by the Hortons and are not entitled to additional monetary damages from Hiss and Rutledge.

(2) The release of the Hortons and the dismissal of the suit against them by the Friedbergs barred the recovery of actual or compensatory damages from Hiss and Rutledge.

(3) Under the Virginia decisions the Friedbergs cannot recover as damages the counsel fees paid by them in the prosecution of their suit against the Hortons.

In support of their first contention the appellants argue that since the record shows that the Friedbergs could have purchased the outstanding leasehold interest of Endy and Moore for $25,000, they should have done so and this would have been the measure of their damages against the Hortons. Adams v. Seymour, 191 Va. 372, 379, 61 S.E.2d 23, 26. Hence, the appellants say that when the Friedbergs secured a reduction of $40,000 in the principal amount of the purchase-money notes they bettered themselves by $15,000 and have already been overpaid.

There are ready answers to this argument. In the first place, since Hiss and Rutledge, the parties guilty of breaching their contract, had the same opportunity to purchase the outstanding leasehold as the Friedbergs, the innocent parties, it was the primary duty of Hiss and Rutledge to do so and they cannot be heard to say that the Friedbergs should have performed for them. 15 Am. Jur., Damages, § 30, p. 427;...