Lucenti v. Cayuga Apartments, Inc.

• Decision Date: 13 December 1979
• Citation: Lucenti v. Cayuga Apartments, Inc., 423 N.Y.S.2d 886, 48 N.Y.2d 530, 399 N.E.2d 918 (N.Y. 1979)
• Parties: , 399 N.E.2d 918 Donald J. LUCENTI, Respondent, v. CAYUGA APARTMENTS, INC., Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 886

423 N.Y.S.2d 886

48 N.Y.2d 530, 399 N.E.2d 918

Donald J. LUCENTI, Respondent, v.CAYUGA APARTMENTS, INC., Appellant.

Court of Appeals of New York.

Dec. 13, 1979.

George H. Van Lengen, Syracuse, for appellant.

Connie Fern Miller and Michael J. Pichel, Ithaca, for respondent.

OPINION OF THE COURT

MEYER, Judge.

When prior to title closing a building is substantially damaged by fire may the purchaser under a real estate contract which contains no risk of loss provision obtain specific performance with an abatement of the purchase price?The answer to that question is adumbrated by our decision in Hecht v. Meller, 23 N.Y.2d 301, which noted at p. 304, 296 N.Y.S.2d 561, at p. 562, 244 N.E.2d 77, at p. 78, that section 5-1311 of the General Obligations Law"was enacted to alter the common-law rule which, absent any agreement to the contrary, cast the risk of destruction of the property between the time the contract of sale was entered into and passing of title upon the vendee", but that the section"did not render realty contracts unenforcible but, rather, simply bestowed a privilege on vendees to rescind the contract".We now answer the question, as the Hecht quotation suggests, affirmatively.

The issue arises in the context of a contract executed June 21, 1975, by which plaintiff agreed to purchase two contiguous parcels of real estate on each of which there was a freestanding building.One week after the contract was executed the older of the two buildings was substantially destroyed by a fire, which, however, did no damage to the other building.On July 9, 1975defendant sent plaintiff a proposed modification of the contract which permitted plaintiff to collect the insurance proceeds and use them either in reduction of the purchase-money mortgage or in reconstruction of the building and provided for subordination of the purchase-money mortgage to any bank loan obtained for reconstruction.Plaintiff did not accept the proposed modification but testified that he had simply gone along with the suggestion of defendant's president that they await the insurance settlement.One of defendant's other officers testified that on or about July 2, 1975plaintiff advised her he was abandoning any interest in the property.

Defendant submitted proofs of loss to its insurers on September 19, 1975 and received payments of its claims totaling more than $45,000.On October 15, 1975defendant's attorneys forwarded to plaintiff's attorney their check in refund of the $1,000 deposit paid by plaintiff on signing the contract.Plaintiff's attorney promptly returned the check, stating that plaintiff wished to proceed with the closing with an abatement of the purchase price.One month later plaintiff began the instant action for specific performance with an abatement of the purchase price.

The Trial Judge held that section 5-1311 of the General Obligations Law required the purchaser either to rescind or to obtain specific performance without abatement and that plaintiff had by his conduct terminated the contract.He, therefore, dismissed the complaint (90 Misc.2d 154, 393 N.Y.S.2d 227).The Appellate Division reversed on the law and the facts and remitted for determination of the abatement to which plaintiff was entitled (59 A.D.2d 438, 400 N.Y.S.2d 194).On remand the trial court fixed the abatement at $19,500, consisting of $7,500 to remove the remains of the old building and $12,000 as its actual value.Plaintiff again appealed and the Appellate Division modified by increasing the abatement to $27,500, holding that the trial court was correct in considering defendant's insurance claims but gave too little weight to their statements of value, and fixing the actual value of the building on consideration of the whole record at $20,000 (66 A.D.2d 928, 410 N.Y.S.2d 928).Plaintiff's appeal from the Appellate Division's order, affirming as modified, has been dismissed by us on the ground that he was not aggrieved by the modification (46 N.Y.2d 997, 416 N.Y.S.2d 242, 389 N.E.2d 837).There remains defendant's appeal which brings up for our review both the Appellate Division's final order and its earlier nonfinal order (CPLR 5501, subd. (a), par. 1).There should be an affirmance.

The fundamental issue for our determination is the effect of section 5-1311 of the General Obligations Law.That section provides in pertinent part:

"1.Any contract for the purchase and sale or exchange of realty shall be interpreted, unless the contract expressly provides otherwise, as including an agreement that the parties shall have the following rights and duties:

"a.When neither the legal title nor the possession of the subject matter of the contract has been transferred to the purchaser (1) if all or a material part thereof is destroyed without fault of the purchaser or is taken by eminent domain, the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he has paid; but nothing herein contained shall be deemed to deprive the vendor of any right to recover damages against the purchaser for any breach of contract by the purchaser prior to the destruction or taking; (2) if an immaterial part thereof is destroyed without fault of the purchaser or is taken by eminent domain, neither the vendor nor the purchaser is thereby deprived of the right to enforce the contract; but there shall be, to the extent of the destruction or taking, an abatement of the purchase price."

Paragraph b of subdivision 1 provides that when legal title or possession has been transferred to the purchaser he is not relieved by destruction of all or any part of the property from his obligation to pay the price;subdivision 2 directs that the section be interpreted and construed so as to effectuate its general purpose to make uniform the laws of the States which enact it ¹ and subdivision 3 provides that the section may be cited as the Uniform Vendor and Purchaser Risk Act.

Originally enacted in 1936 on the recommendation of the Law Revision Commission(1936 Report of N.Y.LawRev.Comm.pp. 757-780) as section 240-a of the Real Property Law, and repealed and reenacted in 1963 as section 5-1311 of the General Obligations Law, ²the section is based upon a proposed uniform law drafted by Professor Samuel Williston, presented by him to the National Conference of Commissioners on Uniform State Laws in 1934, and adopted after some revision at the 1935 meeting of the commissioners (1934 Handbook of National Conference of Commissioners on Uniform State Laws and Proceedings, pp. 202-205;1935 Handbook of National Conference of Commissioners on Uniform State Laws and Proceedings, pp. 138-139).The melange from which is to be distilled the interpretation of the quoted section is, therefore, the intention of Professor Williston and the Commissioners on Uniform State Laws as reflected in their drafts and reports, the intention of the 1936Legislature as reflected in the statute enacted and the report of the Law Revision Commission, and the intention of the 1963Legislature in the light of case law construing the section in the interim.

There is abundant evidence that in drafting the proposed uniform law Professor Williston sought only to change the rule he believed erroneously declared by Lord Eldon in Paine v. Meller (6 Vesey Jr. 349 (holding the purchaser required to pay the full price despite destruction of part of the property contracted for)) which was followed in a number of States in this country, including New York.The act as drafted by him turned on whether title or the right to possession had passed, and reversed the Paine v. Meller rule by providing that if it had not and "all or a material part" was accidentally destroyed "the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price he has paid, unless the contract expressly provides otherwise".His memorandum and the commissioners' 1934 report shows the intention to be to apply "to real estate the same rule as to risk as in the Sales Act and the Conditional Sales Act"(1934 Handbook, Supra, at p. 202).It was, thus, addressed to risk and not to remedy.The 1935 report proposed essentially the same statute, though with some drafting changes and stated in a prefatory note that "The object of the Act is to protect the purchaser of real estate where there is a binding contract of sale and the property is destroyed before the purchaser has gone into possession or has taken legal title, and to protect the vendor after transfer of possession" and that "The rule which is proposed in this Act is that the purchaser cannot be held if he has taken neither possession nor title, but can be held if he has taken possession or has taken title"(1935 Handbook, Supra, at p. 138;see, also, 9C Uniform Laws Ann., Uniform Vendor and Purchaser Risk Act, p. 313).Conspicuously absent from any of these materials is any reference to a purchaser's right to specific performance with an abatement, but since specific performance with an abatement imposes on the seller only the risk of loss contemplated by the act, that absence is wholly consistent with the stated purpose of the act(seeNote, Uniform Vendor and Purchaser Risk Act, 51 Harv.L.Rev. 1276, 1279-1280) and cannot be read as indicating any intention to affect the purchaser's optional remedy.³

In adopting the act in 1936 the New York Legislature added to paragraph (a) all of clause (2) and so much of clause (1) as follows the semicolon.Since clause (2) which permits either party to enforce the contract when only an immaterial part of the realty is destroyed concludes with the phrase "but there shall be, to the extent of the destruction or taking, an abatement of the purchase price", it can be argued that because clause (1) does not mention abatement of the price there can be none when a material part of the realty has been destroyed.However, that argument overlooks the fact that c...