Summary
In Stockman v. Yanesh (1981), 68 Ohio St.2d 63, 428 N.E.2d 417, defendants executed a warranty deed stating that there were no liens or encumbrances on the property plaintiffs purchased.
Summary of this case from Regency Centre Dev. v. Constr. DimensionsOpinion
No. 80-1537
Decided November 18, 1981.
Real property — Sale — Covenant against encumbrances — Breached, when — Damages recoverable.
A covenant against encumbrances is breached as soon as made if an encumbrance in fact exists. In an action based on such a breach, only nominal damages can be recovered unless the covenantee has removed the encumbrance, had his possession disturbed, or had his use or enjoyment of the land interfered with by reason of the encumbrance. ( Stambaugh v. Smith, 23 Ohio St. 584, approved and followed.)
APPEAL from the Court of Appeals for Lake County.
On August 23, 1978, appellants, Mr. and Mrs. Herbert E. Stockman, entered into an oral agreement to purchase a house from appellees, Mr. and Mrs. John Yanesh. According to the agreement, appellants were to assume a $75,000 mortgage held by the St. Clair Savings Loan Company, pay $30,000 in cash, give a $30,000 promissory note which was payable in 90 days, and give $15,000 worth of sportswear. The warranty deed, executed the same day and recorded on August 31, 1978, provided that there were no liens and encumbrances on the property.
In October 1978, appellants learned there were encumbrances on the property, consisting of approximately $75,000 outstanding on a mortgage held by the Lake County National Bank, a judgment lien in favor of a paint company and two tax liens. Appellants' attorney sent a letter to the appellees, who were now residing in Florida, requesting them to make arrangements to remove the liens and encumbrance. Appellees failed to reply. At approximately this time, appellants' job required them to move to California. Soon thereafter, appellants initiated this action, seeking damages and to rescind the sale. Appellees answered and counterclaimed on the promissory note and for other relief. Prior to trial, appellees asserted they had planned to pay off the liens and encumbrance, using the proceeds from the $30,000 promissory note that appellants had agreed, but failed, to pay as partial payment for the house. Meanwhile, by mutual agreement the house was sold to a third party.
This matter came to trial on October 29, 1979. At the end of appellants' opening statement, the court took a recess and the judge and counsel retired to chambers. In chambers, appellees moved for a directed verdict on the ground that appellants had failed to allege fraud concerning the encumbrances, and in the absence of fraud, appellants were entitled to only nominal damages since they failed to allege they suffered actual damages as a result of the breach of the covenant against encumbrances. The trial judge stated that appellants were entitled to only nominal damages. The remainder of the discussion in chambers was off the record. When the court reconvened, appellees renewed their motion for a directed verdict. Both parties at that point agreed to waive the jury trial and to allow the court to direct a verdict in appellants' favor for nominal damages. The court also entered judgment in appellees' favor on their counterclaim based on the $30,000 promissory note. Appellants agreed to this disposition, citing their agreement in chambers. Appellees then dismissed with prejudice their remaining two counterclaims. Subsequently, the trial court overruled appellants' motions for a judgment notwithstanding the verdict and a new trial.
The Court of Appeals affirmed the trial court stating the trial court had correctly applied the law as to unenforced encumbrances and appellants had apparently agreed to the trial court's disposition of the cause.
Appellants have paid appellees the $30,000 due on the note and appellees have removed all liens and encumbrances.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Mr. Aaron Ruben, for appellants.
Mr. William C. Gargiulo, for appellees.
For the reasons expressed below, we affirm the judgment of the Court of Appeals.
The law is well settled in Ohio that a covenant against encumbrances is breached as soon as made if an encumbrance in fact exists. However, in an action based on such a breach, only nominal damages can be recovered unless the covenantee has removed the encumbrance, had his possession disturbed, or had his use or enjoyment of the land, in some way, interfered with by reason of the encumbrance. Stambaugh v. Smith (1873), 23 Ohio St. 584, 588-589. See, also, Tuite v. Miller (1841), 10 Ohio 382.
In their opening statement at trial, appellants failed to allege fraud, and under the facts of this case it appears that fraud could not have been alleged or proved. Moreover, appellants failed to allege evidence which would show they suffered actual damages as a result of the liens and encumbrances. Appellants did not allege that they removed any of the encumbrances, that they were threatened with eviction, or that their enjoyment of the property was in any way interfered with by reason of the encumbrances. Therefore, the trial court was correct in granting a directed verdict. The trial court correctly concluded that on the basis of appellants' opening statement, construing the evidence most strongly in favor of appellants, they were entitled to only nominal damages. Appellants then agreed to waive a jury trial on the issue of nominal damages and consented to the trial court's entering a directed verdict in their favor for the nominal damages.
Civ. R. 50(A)(4) provides a directed verdict is proper when, after construing the evidence most strongly in favor of the party against whom the motion is directed, the trial court finds that reasonable minds could come to but one conclusion upon the evidence submitted and that conclusion is adverse to such party.
Appellants contend that the trial court erred in granting a directed verdict for breach of the covenant against encumbrances because appellants had also sought rescission as well as damages. Appellants' argument is without merit. Clearly, a breach of a covenant against encumbrances, in the absence of attempted enforcement of the covenant, entitles the injured party to only nominal damages; actual rescission for such a technical breach is denied. See Reid v. Burns (1861), 13 Ohio St. 49, 60, in which the court stated that when a party seeks rescission he "will be expected, in a court of equity * * * to show himself entitled to relief beyond a mere technical breach of duty."
Accordingly, the judgment of the Court of Appeals is affirmed.
Judgment affirmed.
CELEBREZZE, C.J., W. BROWN, SWEENEY, LOCHER, HOLMES and C. BROWN, JJ., concur.