Menzel v. List, 24 N.Y.2d 91 (1969)

In cases of breach of warranty of title for personal property, the buyer is entitled to recover the fair market value of the property at the time of dispossession, not merely the original purchase price.

Summary

This case concerns the proper measure of damages for breach of an implied warranty of title when a painting, later discovered to be stolen, was sold and subsequently recovered by its rightful owner. The New York Court of Appeals held that the buyer was entitled to recover the present market value of the painting at the time of dispossession, reflecting the buyer’s actual loss and putting them in the position they would have occupied had the title been good, rather than simply refunding the original purchase price.

Facts

Erna Menzel purchased a Marc Chagall painting in Belgium in 1932. In 1940, fleeing the German invasion, the Menzel’s left the painting behind. German authorities seized it. In 1955, Klaus and Erna Peris, operating an art gallery in New York, purchased the painting in Paris for $2,800, unaware of its history. They sold it to Albert List in October 1955 for $4,000. In 1962, Mrs. Menzel discovered the painting in List’s possession and demanded its return.

Procedural History

Mrs. Menzel sued List in replevin to recover the painting. List, in turn, filed a third-party complaint against the Peris for breach of implied warranty of title. The trial court ruled in favor of Mrs. Menzel, ordering List to return the painting or pay $22,500, its then-current value. The court also found for List against the Peris for $22,500 plus List’s costs in the Menzel action. The Appellate Division modified the judgment, reducing List’s recovery against the Peris to $4,000 (the original purchase price) plus interest. List appealed to the New York Court of Appeals regarding the damage calculation. The Peris cross-appealed concerning the date interest began accruing.

Issue(s)

1. What is the proper measure of damages for breach of an implied warranty of title in the sale of personal property?

2. From what date should interest run on the judgment in favor of List against the Peris?

Holding

1. No, the proper measure of damages is the value of the painting at the time of trial of the original action, not merely the original purchase price, because that represents the buyer’s actual loss resulting from the breach of warranty.

2. No, interest should be included from the date on which Mrs. Menzel’s judgment was entered, because List was not damaged until he was required to surrender the painting or pay its present value.

Court’s Reasoning

The court reasoned that the measure of damages for breach of warranty should place the injured buyer in as good a position as they would have occupied had the contract been kept. Awarding only the purchase price would merely restore the buyer to the status quo ante, effectively denying any damages for the breach. The court found existing New York case law on the issue to be sparse and inconsistent, treating the issue as one of first impression. It relied on Section 150(6) of the New York Personal Property Law (counterpart to Section 13 of the Uniform Sales Act), stating that damages for breach of warranty should be the loss directly and naturally resulting from the breach. Quoting Williston on Contracts, the court emphasized that the injured buyer should receive “such damages as will put him in as good a position as he would have occupied had the contract been kept.” The court dismissed concerns about potentially ruinous liability for sellers, noting that sellers could protect themselves by investigating title or excluding warranties under Section 94 of the Personal Property Law. Regarding interest, the court held that List was not damaged until the judgment in favor of Mrs. Menzel, and therefore interest should run from that date. As the court stated, “Manifestly, the present-value measure of damages has no necessary connection with the date of purchase and is, in fact, inconsistent with the running of interest from the date of purchase since List’s possession was not disturbed until the judgment directing delivery of the painting to Mrs. Menzel, or, in the alternative, paying her the present value of the painting.”