Hilliker v. . Rueger
126 N.E. 266, 228 N.Y. 11, 1920 N.Y. LEXIS 900 (1920)
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Rule of Law:
When a covenant of seizin is breached, a grantee may recover damages for the failure of title, but litigation expenses, including attorney's fees, are only recoverable if the underlying action constituted a direct attack on the title, not merely an action claiming the title was unmarketable.
Facts:
- On May 1, 1905, Rueger’s testator and his wife conveyed certain real property to Hilliker and his wife for $7,000, which included a covenant that the grantors were 'seized of the said premises in fee simple and have good right to convey the same.'
- Subsequent to the conveyance, Hilliker and his wife contracted to sell the premises to Schaefer for $8,500.
- Schaefer later refused to complete the contract, asserting that the title tendered by Hilliker was unmarketable, and demanded the return of his $500 down payment.
- It was ultimately determined in a separate action that Hilliker and his wife did not have a marketable title to a part of the premises conveyed.
- The defendants (Rueger’s testator) had notice of Schaefer's action and were given an opportunity to defend it, but they neglected and refused to do so.
Procedural Posture:
- Schaefer brought an action against Hilliker to recover the $500 paid for the contract due to unmarketable title.
- Schaefer recovered a judgment against Hilliker.
- Hilliker, after paying the judgment, brought this action against Rueger’s testator (defendants) in the trial court to recover damages for the breach of the covenant of seizin.
- The first trial resulted in a judgment for Hilliker for a substantial amount, which was modified and affirmed by the Appellate Division.
- On appeal to the Court of Appeals (219 N. Y. 334), the judgment was reversed, and a new trial was ordered.
- The second trial also resulted in a judgment for Hilliker, awarding $1,200 for the breach of seizin and $1,500 for counsel and attorneys’ fees from the Schaefer action, plus interest and an extra allowance.
- The Appellate Division, second department, unanimously affirmed the judgment from the second trial.
- Defendant (Rueger) appeals to the Court of Appeals (this court).
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Issue:
Does a grantee, who suffered a breach of the covenant of seizin, recover attorney's fees incurred in defending a subsequent action where a third party refused to purchase the property due to unmarketable title?
Opinions:
Majority - McLaughlin, J.
No, a grantee, upon a breach of the covenant of seizin, does not recover attorney's fees incurred in defending an action where a third party refused to purchase due to unmarketable title. The covenant of seizin is broken at the time of the conveyance if the grantor lacks title, and the grantee may recover actual damages for the proportionate value of the land for which title failed, even without an eviction. However, the recovery of costs and expenses, including counsel fees, is limited to situations where a direct attack is made upon the title. The court reasoned that an action asserting unmarketable title, such as Schaefer's, is not considered a 'direct attack' on the title. A finding of unmarketable title does not, by itself, establish that the title was bad or that there was a breach of the covenant of seizin, thus precluding the recovery of attorney's fees for defending such an action. Damages for the breach of seizin itself (the $1,200) are affirmed.
Analysis:
This case clarifies the scope of damages recoverable for a breach of the covenant of seizin, particularly regarding litigation expenses. It establishes a critical distinction between a 'direct attack' on title, which would warrant the recovery of attorney's fees, and a claim of 'unmarketable title,' which does not. This ruling limits the types of associated costs a grantee can pass on to the grantor, thereby shaping expectations for both parties in property transactions and subsequent litigation over title defects. It reinforces the principle that 'unmarketable' does not necessarily mean 'bad' when evaluating a breach of seizin.
