On appeal from a judgment of the Fifth Judicial District Court of Bergen county.
For the plaintiffs-appellants, Wall, Haight, Carey & Hartpence, Walter J. Freund and George J. Tennant, Jr.
For the defendant-respondent, Herbert W. Britt.
Before Justices Case and Donges.
The opinion of the court was delivered by
DONGES, J. This is an appeal from a judgment of the District Court of the Fifth Judicial District of Bergen county in favor of the defendant. Plaintiffs, as vendees, and defendant, as vendor, entered into a contract for the purchase and sale of real property in Fort Lee, under date of December 30th, 1935. Plaintiffs declined to perform the contract on the ground that defendant did not have marketable title and brought the present action to recover the deposit of $400 they made on the signing of the contract, interest and costs, and the reasonable cost of making a search.
Defendant acquired the property through purchase at a sheriff's sale in the foreclosure of a mortgage made by Adelaide N. Kling to the North Jersey Title Insurance Company in 1912. The mortgage became the property of plaintiff who instituted the foreclosure in 1935. In 1920 Mrs. Kling died and by her will devised and bequeathed "everything I possess to my nephew, Leighton Haring Smith, and his children." Smith was not personally served in the foreclosure, and service by publication was made against "Leighton Haring Smith, his heirs, devisees or personal representatives; Mrs. Leighton Haring Smith, his wife." Smith has lived in New
York City for the past twenty-two years, is married, his wife is living, and one child, Peter K. Smith, was born in 1915 and is still living. The claim of appellants was and is that the interest of Peter K. Smith was not effectually cut off by the foreclosure and that defendant's title is not therefore marketable. The argument is that the affidavits of inquiry filed in the foreclosure suit do not disclose that the proper inquiry was made for the whereabouts of the Smiths. Leighton Haring Smith testified that neither he nor any member of his family had been served with notice of the foreclosure nor had they any knowledge of such proceeding.
In this situation the trial court did not deal with the factual question sought to be raised, namely, whether there was such doubt about defendant's title as would entitle plaintiffs to rescind the contract and demand return of the deposit, but held that the decree in foreclosure was all conclusive upon the question of defendant's title and precluded the plaintiff from raising such question in this action.
Defendant's obligation was to convey good title and if his title was, in fact, defective an action for the return of the deposit would lie. Meyer v. Madreperla, 68 N.J.L. 258. In actions in equity for specific performance, the Court of Chancery in the exercise of its discretion considers, not merely the question whether the title is good or bad, but also whether it is free from reasonable doubt, and if there is reasonable doubt declines to decree specific performance. To sustain an action at law for the return of a deposit or for damages for breach of contract, however, more must be shown. In Meyer v. Madreperla, supra, the Court of Errors and Appeals said:
"Whether specific performance would have been decreed upon the facts disclosed in the bill of exceptions need not be decided. In actions at law the implied agreement for title in such a contract will be satisfied by a title good at law, upon the proofs under the rules of evidence. To recover at law for a breach of such a contract it must be shown that the title tendered was not a title good at law. The discretionary power of a court of equity with ...