Appeal from Trial Term, New York County.
Action by Louis Ettlinger against Jonas Weil and another. From a judgment for plaintiff, and from an order refusing a new trial, defendants appeal. Reversed, and new trial granted.
E. M. Shepard, for appellants.
Samuel Untermyer, for respondent.
Argued before INGRAHAM, McLAUGHLIN, LAUGHLIN, CLARKE, and SCOTT, JJ.
[116 N.Y.S. 329]
On a former appeal ( 94 A.D. 291, 87 N.Y.Supp. 1049), upon evidence which does not substantially differ from the evidence on the second trial, this court sustained a verdict for the plaintiff. It was also held that the proper measure of damage was the difference between the value of the property as it was in fact when the conveyance was made and the value as it would have been if the representations as to rental were true. Upon an appeal to the Court of Appeals ( 184 N.Y. 179, 77 N.E. 31), that judgment was reversed. No fault seems to have been found with any ruling of the trial court, except in relation to the measure of damages. Discussing that question, the Court of Appeals said:
" As the plaintiff lost no rent under the Carroll lease through the representation of the defendants, the damages are confined to the effect of that representation upon the fee value of the property. The measure of damages is the difference between the market value of the premises if they had been as represented and their actual market value. Both parties assent to this proposition, but they differ as to the proper method of applying it to the case in hand."
The court then discussed two rulings upon evidence. One is allowing a question asked an expert as to what was the value of the premises with a lease upon the store, basement, and subcellar at $13,000 a year, and held that that was competent. The second question that was considered was:
" What, in your opinion, was the fair market value of the property at that time, June, 1897, with a lease of the store, basement, and subcellar for two years from February 1, 1897, at $10,500 per year?"
And the court held that that question was not competent, because it depended upon the accident of two minds meeting upon a certain sum in making a lease of a new building with a desirable tenant for a short term. It was said that rental value tends to prove fee value, because, other things being equal, the income of property is a measure of its market value; that rental is capable of exact determination, and does not depend on a collateral agreement in the form of a lease of part of the property. In other words, as I understand that decision, the opinion of the expert must be based upon the actual rental value of the property, and not upon the value of the property based upon the fact that the owner had agreed to a lease for two years at $10,500 a year. The representation was that there was an actual lease for two years at $13,000 a year, when, as a fact, the actual rent that was paid for the two years was $10,500 a year; and the question to be determined was, What damage was sustained by the plaintiff in consequence of that false representation?
A real estate expert called for the plaintiff was allowed to testify that the fee value of the property, if the store and basement had been actually leased for two years at $13,000 a year, was $600,000. The witness was then asked what, in his opinion, was the actual value of this property in June and July, 1907. That was objected to as incompetent, irrelevant, and immaterial. The objection was overruled, and the witness answered, " $750,000." He was then asked what was the rental value of the store, basement, and subcellar at that time. That was objected to by the defendants, and the objection was sustained; [116 N.Y.S. 330] the court holding that the defendant could introduce proof as to that. Upon cross-examination the witness testified that the value fixed by him was the value of the property if it had been vacant; that the value of the property and the basis of rental enter into the making of this estimate; but he subsequently appears to have changed his testimony, so as to say that, entirely vacant, the property would be worth $725,000, but with a lease realizing a rental of $10,500 per year it was worth $750,000. The witness further said, upon cross-examination, that the fact upon which he based his opinion as to $750,000 was that the store, basement, and subcellar was leased for $10,500 a year.
Considering the testimony of the witness upon cross-examination, it appears that the testimony upon which the jury based its verdict was substantially the same as the evidence on the former trial, which was condemned by the Court of Appeals. As I understand the decision of the Court of Appeals, it was improper to base a verdict upon the difference between the actual value of the property with an existing lease of $13,000 and the value of the property with a lease for $10,500; that the true measure of damage was the difference between the value of the property with a lease of $13,000 a year and the value of the property based upon its actual rental value, and not based upon the fact that the property was leased for $10,500 a year. Yet the court excluded the testimony that was offered by the plaintiff to show what the actual rental value of the property was at the time, but allowed the witness to testify to his opinion as to what the property was actually worth based upon the fact that there was a lease in existence for $10,500 a year. Upon rebuttal, however, this same expert was recalled, and testified that the rental value of the store, basement, and subbasement, on December 3, 1896, was $10,000. The defendants offered evidence tending to show that the actual rental value of this store, basement, and subbasement at the time of the same was from $13,000 to $13,500, and in rebuttal the plaintiff offered testimony to show that the rental was from $10,000 to $10,500. It followed, as matter of course, that, if the rental value was actually $13,000 or more, the plaintiff sustained no damage by reason of the representation that the property was rented for $13,000. It was said by the Court of Appeals on the former appeal:
" False representations do not warrant the recovery of damages unless they cause pecuniary injury. A misrepresentation that the premises were leased at a certain rate could result in no damage, provided the rental value equaled or exceeded that rate. As the rent was paid plaintiff at the rate represented, he suffered no harm unless there was a contraction in fee value, caused wholly by the fact that the actual rental value of the part affected by the representation was less than it would have been if the representation had been true. The effort was not to establish the rental value of the entire building, but to directly answer the claim of the plaintiff that the representation caused him pecuniary loss."
Thus it would seem that the real question for the jury was, first, to determine what the actual rental value of the premises was at the time of the sale. If they found that the rental value was less than $13,000, then they were to determine what effect a representation that [116 N.Y.S. 331] the premises were rented for $13,000 for one year and eight months from the time of the sale would have upon the fee value of the property, and for that effect upon the fee value of the property the plaintiff would be entitled to judgment. It seems to me that the market value of the property at the time of the sale had nothing to do with the proposition. Whether the plaintiff made a good or bad bargain on the purchase of the property is not material. The question is, Was the fee value any less because of the fact that the store and basement was rented for $10,500 for one year and eight months than if it had been rented for $13,000 for the year and eight months? And testimony as to the actual fee ...