Lucenti v. Cayuga Apartments, Inc.
399 N.E.2d 918, 48 N.Y. 2d 530, 423 N.Y.S.2d 886 (1979)
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Rule of Law:
Under New York's Uniform Vendor and Purchaser Risk Act (General Obligations Law § 5-1311), if a material part of real property under a contract of sale is destroyed before the closing without the purchaser's fault, the purchaser may choose either to rescind the contract or to seek specific performance with an abatement of the purchase price.
Facts:
- On June 21, 1975, plaintiff agreed to purchase from defendant two contiguous parcels of real estate, each containing a building.
- The contract of sale did not contain a provision allocating the risk of loss.
- One week after the contract was executed, one of the two buildings was substantially destroyed by a fire, through no fault of the plaintiff.
- Defendant submitted insurance claims for the fire and received payments totaling more than $45,000.
- On October 15, 1975, defendant's attorneys attempted to refund plaintiff's $1,000 deposit, effectively trying to cancel the contract.
- Plaintiff's attorney immediately returned the check and demanded that the closing proceed with an abatement of the purchase price to account for the fire damage.
Procedural Posture:
- Plaintiff sued defendant in the trial court, seeking specific performance with an abatement of the purchase price.
- The trial court dismissed the complaint, holding that the statute only permitted the purchaser to either rescind the contract or seek specific performance without an abatement.
- Plaintiff, as appellant, appealed to the Appellate Division.
- The Appellate Division reversed the trial court and remitted the case for a determination of the appropriate abatement.
- On remand, the trial court fixed the abatement at $19,500.
- Plaintiff, as appellant, appealed to the Appellate Division again, arguing the abatement was insufficient.
- The Appellate Division modified the judgment by increasing the abatement to $27,500.
- Defendant, as appellant, appealed to the Court of Appeals, New York's highest court.
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Issue:
May a purchaser of real estate, under a contract with no risk of loss provision, obtain specific performance with an abatement of the purchase price when a material part of the property is destroyed by fire before the title closing?
Opinions:
Majority - Meyer, J.
Yes. A purchaser under a real estate contract may obtain specific performance with a price abatement when the property is materially damaged before closing. New York General Obligations Law § 5-1311 was enacted to alter the common-law rule that placed the risk of loss on the purchaser; it was not intended to eliminate the purchaser's common-law remedy of specific performance with abatement. The statute provides that if a material part of the property is destroyed, the vendor cannot enforce the contract and the purchaser is entitled to recover their deposit. The court interprets this as bestowing a privilege upon the purchaser to rescind the contract, not as their sole and exclusive remedy. The statute is silent as to the purchaser's option to enforce the contract, therefore the common-law right to specific performance with abatement remains intact. This interpretation is supported by a consistent line of New York case law decided under the statute's predecessor, which the legislature is presumed to have adopted when it re-enacted the law.
Analysis:
This decision clarifies that the Uniform Vendor and Purchaser Risk Act (as codified in NY GOL § 5-1311) is a shield for the purchaser, not a sword for the seller. It prevents a seller from forcing a buyer to pay full price for damaged property, but it does not allow the seller to use a fortuitous event like a fire to escape an unfavorable contract. The ruling solidifies the purchaser's position by confirming they have a choice of remedies: they can either walk away from the deal (rescission) or enforce the benefit of their bargain at a reduced price (specific performance with abatement). This precedent ensures that the economic consequences of pre-closing property damage fall on the seller, consistent with the statute's purpose.
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