48 N.Y.2d 530 (1979)
When a building is substantially damaged by fire prior to the closing of title, and the real estate contract contains no risk of loss provision, the purchaser may obtain specific performance with an abatement of the purchase price.
Summary
This case concerns the right of a purchaser to seek specific performance with an abatement of the purchase price when a building on the property is substantially damaged by fire before the title closing. The New York Court of Appeals held that General Obligations Law § 5-1311, also known as the Uniform Vendor and Purchaser Risk Act, does not prevent a purchaser from seeking specific performance with an abatement, even when a material part of the property is destroyed. The statute provides the purchaser the *option* to rescind the contract. The court reasoned that the statute was intended to protect purchasers, not to limit their remedies beyond rescission.
Facts
Plaintiff entered into a contract to purchase two adjacent parcels of land, each with a building. One week after the contract was signed, one of the buildings was substantially damaged by fire. The defendant (seller) proposed modifying the contract to allow the plaintiff to collect insurance proceeds for reconstruction. Plaintiff did not formally accept this modification but waited for the insurance settlement. The seller later attempted to refund the plaintiff’s deposit, which the plaintiff refused, seeking to proceed with the purchase at an abated price.
Procedural History
The trial court dismissed the plaintiff’s complaint, holding that the statute required either rescission or specific performance without abatement. The Appellate Division reversed and remitted for a determination of the abatement amount. On remand, the trial court fixed an abatement, which the Appellate Division later modified, increasing the abatement amount. The Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
Whether General Obligations Law § 5-1311 precludes a purchaser from seeking specific performance with an abatement of the purchase price when a material part of the property is destroyed by fire prior to the transfer of title or possession, and the contract contains no specific risk of loss provision.
Holding
No, because General Obligations Law § 5-1311 provides the vendee with a privilege to rescind, it does not eliminate the common-law option of specific performance with abatement.
Court’s Reasoning
The Court of Appeals examined the legislative history and purpose of General Obligations Law § 5-1311, noting its origins in the Uniform Vendor and Purchaser Risk Act. The court found that the statute was primarily intended to allocate the risk of loss between the vendor and purchaser, particularly in response to the common-law rule established in Paine v. Meller, which placed the risk on the purchaser. The court emphasized that the statute specifically allows the *purchaser* to rescind the contract if a material part of the property is destroyed, but it does not explicitly address or prohibit the remedy of specific performance with abatement. The Court noted that the Law Revision Commission’s report contained a gratuitous assessment that the deal should be called off upon destruction of a substantial part of the property, but this was incorrect. The court also relied on precedents such as World Exhibit Corp. v. City Bank Farmers Trust Co., which affirmed a purchaser’s right to seek specific performance with abatement under similar circumstances. The court reasoned that, because the legislature is presumed to know the existing judicial construction of a statute when reenacting it, the reenactment of § 5-1311 without changes impliedly adopted the interpretation that allowed for specific performance with abatement. The court quoted Matter of Scheftel, stating, “the Legislature is presumed to have had knowledge of the construction which had been placed on the provision * * * and in adopting in these re-enactments the language used in the earlier act, must be deemed to have adopted also the interpretation of the legislative intent decided by this court, and to have made that construction a part of the re-enactment”. Therefore, the Court concluded that the statute did not eliminate the purchaser’s common-law right to seek specific performance with a corresponding reduction in the purchase price to account for the damage. The seller argued that the purchaser abandoned the contract, but the Court found that the weight of the evidence supported the Appellate Division’s factual conclusions that the purchaser did not abandon the contract. The court noted the continuing negotiations between the parties and the seller’s agreement to await the insurance settlement before resolving the matter. Finally, the court approved of the Appellate Division’s revised abatement figure, which was based on the seller’s own valuation statements submitted in the insurance claim.