Cohen v. Kranz
238 N.Y.S.2d 928, 12 N.Y.2d 242, 189 N.E.2d 473 (1963)
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Rule of Law:
Where a contract is for the sale of real property, a buyer must tender performance and make a demand for good title to place a seller in default if the title defects are curable. A buyer's anticipatory repudiation of the contract for such curable defects, without affording the seller a reasonable opportunity to cure, constitutes a breach by the buyer and bars recovery of their deposit.
Facts:
- On September 22, 1959, plaintiff Sarah Cohen contracted to purchase defendants' one-family house for $40,000 and paid a $4,000 deposit.
- The closing was originally set for November 15 but was adjourned to December 15 at Cohen's request.
- On November 30, 1959, Cohen's attorney sent a letter to the defendants' attorney claiming the property's structure was 'not legal' and title was 'unmarketable,' demanding the return of the deposit within five days without specifying the exact defects.
- The alleged defects, which were not specifically communicated until later, consisted of a swimming pool lacking a certificate of occupancy and a fence projecting beyond the property line.
- On the adjourned closing date of December 15, Cohen's attorney appeared only to demand the return of the deposit.
- Neither party tendered performance on the closing date; Cohen did not offer the purchase money, and the defendants did not offer the deed.
Procedural Posture:
- Plaintiff Cohen sued the defendants in the New York Supreme Court, Trial Term, Nassau County, seeking the return of her $4,000 deposit.
- Defendants counterclaimed for damages for breach of contract.
- The Trial Term entered a judgment for the plaintiff, finding the defendants' title was defective and excusing plaintiff from the need to tender payment.
- Defendants, as appellants, appealed to the Appellate Division, Second Department.
- The Appellate Division reversed the trial court's judgment, found for the defendants on their counterclaim, and awarded them $1,500 in damages.
- Plaintiff, as appellant, appealed this decision to the Court of Appeals of New York.
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Issue:
Does a real estate buyer's anticipatory repudiation of a contract, based on unspecified but curable title defects and without a tender of performance, constitute a breach that prevents the buyer from recovering their deposit?
Opinions:
Majority - Burke, J.
No. A buyer's anticipatory repudiation of a real estate contract for curable title defects without tendering performance constitutes a breach by the buyer, precluding recovery of the deposit. The court distinguished between incurable and curable title defects. For an incurable defect, the seller is automatically in default, and the buyer may recover their deposit without tendering performance. However, for a curable defect, the buyer must tender performance and demand a good title to place the seller in default, as the seller is entitled to a reasonable time to cure. In this case, the swimming pool and fence issues were minor and readily curable. The plaintiff's letter of November 30, which rejected title in advance without specifying the defects and demanded an immediate return of the deposit, was an unjustified anticipatory breach. This breach excused the defendants from their duty to cure the defects or tender performance. Because the plaintiff never properly put the defendants in default, she is barred from recovering her deposit and is liable for damages resulting from her breach.
Analysis:
This decision solidifies the distinction between curable and incurable title defects in real estate law and clarifies the procedural requirements for a buyer to declare a seller in default. It places the onus on the buyer to act in good faith by specifically identifying curable defects and tendering performance, thereby preventing buyers from using minor, correctable issues as a pretext to exit a contract. The ruling reinforces the principle that a party in breach cannot recover on the contract and protects sellers from premature and unspecified claims of unmarketable title, promoting stability in real estate transactions.
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