Gilbert v. Trustees of the East Newark Co.

12 N.J. Eq. 180

• Court: New Jersey Court of Chancery
• Decided: October 15, 1858
• Status: Published

Opinion

The Chancellor.

The complainant is not entitled to a specific performance of the agreement of the 30th of August, 1853. The agreement was not executed by the parties. Even admitting the allegations of the bill to be true, that the parties who did not sign it were prevented by the fraudulent interference of Anthony Dey, and that he alone is interested in the subject matter of the agreement, the court would not be justified, upon such considerations, in decreeing the specific performance of an agreement which had never been executed. But these considerations might have a bearing upon another ground taken — that the complainant is entitled to the specific performance of the agreement as a parol agreement which has been part performed. I do not think, however, that there has been such a part performance as entitles the complainant to a decree in his favor.

In the first place, Dey was not authorized, as the agent of the other defendants, to make the agreement. He had very full powers given him to act as agent for the board of trustees, as appears by the minutes of the board, but certainly nothing to authorize him to make a disposition of the chartered rights by a substitution of new trustees for the old ones. Hor is there any evidence that the parties named in the agreement, and who did not sign it, gave their sanction to it. They certainly did not do it directly. They refused to do so, as appears by the minutes of the 11th of Hovember, 1853, and by other evidence in the cause.

But what are the acts of part performance which are relied upon ? By the agreement, as it appears in writing, there was nothing for the complainant to do but to give Gerrit Smith as a guarantor for the faithful performance, by Smith and the complainant, of the agreements of the 4th of August, 1851, and of the 12th of October, 1852, and to give the promissory notes agreed upon in payment of the balance of the consideration money. The guarantee has not been given. It is true Gerrit Smith signed the agreement of the 80th of August, but as the agreement was not perfected by its execution, the signature of Smith is a mere nullity. The promissory notes were given, but the complainant cannot claim this as part performance. He has applied to this court, and has obtained its injunction to prevent Anthony Dey’s negotiating the notes or enforcing the payment. The complainant has not been prejudiced by giving the notes, and a party can rely upon nothing as a part performance which is not prejudicial to him. The court ought not to consider anything such a part performance as will take a case out of the statute, which does not put a party into a situation which is a fraud upon him, unless the agreement is fully performed. At all events, this is the governing rule in cases of this sort. 2 Story’s Eq. J. § 761. I think it is clear enough that the complainant gave the notes, and that Hey received them, with a view to the agreement being performed. I do not think there is evidence of an acquiescence of the other parties that Hey should retain them for that purpose. The money was coming to Hey, and the other parties had no other control of the matter than that which they exercised, which was a refusal to complete the agreement which Hey had made with the complainant.

The bill has an alternate prayer, that in case the court should decide that the complainant is not entitled to the specific performance of the last agreement, that the defendants may be decreed to convey to the complainant all the residue of the East Newark lands embraced in the original contract of the parties. This involves the true construction of the two first agreements already referred to, and, in a measure, the rights of the respective parties under them.

Under the agreement of the 4th of August, 1851, when could the vendees call upon the vendors for a conveyance of the land ? They were to pay a consideration of one hundred and twenty-seven thousand dollars for the land, within five years from the date of the agreement, with interest on the sum of sixty-five thousand dollars from and after the fourth of August, 1852, less interest on any part of the principal sum of $65,000, which they might have paid prior to the said fourth of August, 1852. They had a right to commence selling lots immediately, provided they paid to the vendors one hundred dollars per lot; and for such lots the vendors, on the receipt of the money, were obliged to give the deed. I cannot see how there can be any doubt but that under the agreement the vendees were entitled to a conveyance of the land when they paid the purchase money. Upon the face of the agreement, the object of the covenants for improvements was for no other purpose than to secure the payment of the purchase money. The idea suggested in the answer, that the defendants had in view the philanthropic purpose of benefiting the health of the surrounding country, may be all true. It is very clear that this consideration was not sufficiently prominent in their minds to suggest the propriety of embodying it in the agreement. Judging by the agreement itself, and the court has not the right to look any further, it is evident that these covenants were intended to secure the payment of the purchase money, and for no other purpose. None can read the agreement, and doubt for a moment that the true legal and equitable construction of it is, that if, on the next day after its execution, the vendees had paid the full consideration money, they would have been entitled to a deed for the land. What propriety could there possibly be in the vendors retaining the title to compel the other party to make the improvements ? If the improvements were not made, I doubt very much whether the vendors could maintain an action, and recover even nominal damages, after they had received the purchase money. While any part of the purchase money remained unpaid, they might insist upon the performance of the covenants, for this was the very purpose the covenants were intended to answer; but the case would be very different after tbe purchase money was paid, and their interest in the land had entirely ceased. But if they could maintain an action upon the covenants, they had no lien upon the land for the faithful performance of them. They were personal covenants, and there was nothing pledged for their fulfilment but the personal responsibility of the parties. There is no time fixed, nor event mentioned in the agreement, when the deed is to be delivered. It seems to have been taken for granted that the vendees were to have their deed when they paid the purchase money. The improvements of the property would enable them to sell lots, to which both parties evidently looked to furnish the means by which the purchase money was to be paid. Until the money was paid, the vendors retained the power of compelling the other party to go on with the improvements, whether they sold any lots or not. If they refused after notice, the power was retained of forfeiting the contract. Everything in the agreement looked to securing the payment of the purchase money as the prominent purpose. I think it is manifest that this is the sole object of the covenants for improvements. They answered this end. The parties were enabled, at a much earlier period than any of them anticipated, to sell lots enough to pay off" the purchase money. And I think this is the best evidence of the faithfulness with which the complainant and his associates performed these covenants.

The agreement of the 12th of October, 1852, which is a modification of the agreement we have been considering, does not in any way alter the legal rights of the parties, in the particulars referred to, from what they stood in the first agreement. It was not the intention of the parties to make any alteration as to those particulars. There were some very important alterations, which I shall not mention, as they are not at all material to this controversy.

The last agreement contains the covenant on the part of the vendors, the trustees of the East Newark Company, that when the complainant and Smith should have well and truly, according to the spirit, true intent, and meaning of the original agreement and of this agreement, paid, done, performed, and kept all the covenants and agreements therein contained, then and in that case the trustees of the East Newark Company would convey all the rest, remainder, and residue of the estate at East Newark that had not been sold and conveyed, but which remained unsold, to the complainant and said Smith.

The defendants place their refusal to convey upon the following grounds: that they are not bound to convey until the complainant has fulfilled all the covenants for improvements; that the consideration money has not been paid; that the mortgages which they have taken as security for the purchase money are liens upon the land, their value, as such security, depending upon the parties faithfully fulfilling their covenants for improvements, and that they were taken as such payment upon the understanding that the covenants were to be fulfilled; that, therefore, if even by the agreement the covenants to improve are mere personal covenants, whose fulfilment is not to be executed before a deed can be legally demanded, the defendants ought not to be compelled to execute a deed, and part with the land which they now hold as a pledge for the faithful fulfilment of the covenants. Lastly, the defendants contend, that if the complainant had a right to the conveyance, he has waived it by accepting the conveyance of the 500 lots.

By the agreement of 1852, the time for the payment of the consideration money was extended to the year 1860. The vendees were at liberty to pay it sooner. It was contemplated that they should proceed and sell the lots as fast as they could, and in this way, from time to time, with the proceeds, make payments on account of the consideration, and also carry on the improvements. Notwithstanding the phraseology employed, it is evident that the vendees were entitled to their deed as soon as they paid the consideration. As to the improvements to be made, they were left very much to the discretion of the vendees. There was no specific amount of work to be done. They were to drain the land in the most advisable manner in their judgment. They were to dig down the high land and fill up the low land to the extent they might deem reasonable and advisable. They were to fill up the streets, to amend and repair the outside bank, build wharves, and to do any and every other act, matter, or thing needful or necessary to be done that might improve the said premises in the most advisable manner in their judgment. The evidence shows that they went on in good faith to make the improvements, and expended a large sum of money in doing so. Instead of taking eight years to sell lots enough to pay the purchase money, they sold enough in two years to pay it nearly twice over. The improvements added to the value of the property, and enabled them to sell the lots. Their success is an evidence of their good management, as well as of their good judgment in the improvements they made. Judging of the the expectations of the parties from the terms and tenor of the contract, their success very far exceeded those expectations. That the vendees, up to the term when they paid the purchase money and demanded their deed, had proceeded in good faith to fulfil all the covenants on their part, and to the full satisfaction of the defendants, is manifest from the following fact, — on the day that the last agreement was executed, and after it was reported to the board of trustees by Mr. Dey, the board entered upon their minutes a resolution declaring it to be the duty of Mr. Dey, as president of the board and as executive committee, whenever he should consider the contractors for the purchase of East Uewark should fail or neglect to perform their several contracts, or any part of them, to take immediate measures to notify them of such neglect, and require from them a strict performance of the same, according to the said several agreements; and if they should continue to neglect, and fail in the due and faithful performance thereof, according to the spirit, intent, and meaning of the said agreements, to call a meeting of the board to adopt such measures as they might deem expedient and necessary.

Notwithstanding this resolution, there is no intimation of any complaint on the part of Mr. Dey, or his associates, that the vendees had not faithfully performed all the covenants of the agreement on their part, until after the consideration had been paid, and until after the pretence had been set up, that the vendees were not entitled to their deed. Mr. Dey had negotiated with them for the payment of the balance of the purchase money, and had received it. He had reported to the board that the purchase money had been paid; and although in his report to the board, on the 11th of November, 1853, he stated that some difficulties had arisen in the construction of some of the covenants of the agreement, he did not intimate that up to that period there was any default on the part of the vendees in the performance of their covenants. It was not until February 15th, 1854, that he addressed them a letter of formal complaint that they had not fulfilled their covenants. The evidence clearly shows that up to the time when they paid the balance of the purchase money, and required a deed for the residue of the property, the vendees had faithfully fulfilled all their covenants. It was after difficulties had arisen in reference to their respective rights under the agreement that the vendees ceased their improvements, and determined to have their rights determined by a judicial tribunal. I think, when they demanded their deed, the defendants had no right to refuse upon the ground that the covenants respecting the improvements had not been fulfilled.

Another ground taken by the defendants is, that the consideration has not been paid. On or about the 1st of August, 1853, it was ascertained, by a statement of accounts made by Anthony Dey himself, that there was a balance due on account of the purchase money of $6921.61, and he agreed to receive nine promissory notes of Gilbert and Smith, amounting in the aggregate to this sum, in payment. On the 15th of August following, the notes were given, and Dey gave a receipt stating the respective amounts and dates of the notes, and that he had received them on settlement of the account between himself and Gilbert and Smith for the consideration of East Newark. In the agreement of the 30th of August, 1853, which was signed by Anthony Dey, it was recited that Gilbert and Smith had paid the company the whole of the consideration money agreed to be paid for the estate called East Newark, or otherwise secured the same to be paid in a satisfactory manner, so that nothing remained to be paid, done, or performed in the said original agreements, except as relates to draining the land, &e. On the 11th of November, 1853, Mr. Dey reported to the board that the consideration had been paid and satisfied. It is satisfactorily proved that the consideration was paid, part in money, part in bonds and mortgages, which were accepted as payment, and the balance by the nine promissory notes, as stated. These bonds and mortgages, to the amount of about $89,000, were passed off by the company to pay its creditors, and thirty-eight thousand dollars were transferred to Dey for a debt due him. The answer admits that it was arranged between Anthony Dey and the complainant and Smith that sales of lots on certain terms might be made, Dey being first advised before the completion of each particular sale, and bonds and mortgages be taken in the name of the trustees, and that if the said trustees could assign them in payment of the claims held by parties entitled to be paid out of the estate of East Newark, they could do so, and they should be regarded as so much on account of the consideration money of the first agreement. Notwithstanding the answer avoids telling us whether this agreement was carried out, it is proved that it was, and that the sales were made., that the bonds and mortgages were taken in the name of the trustees, and were transferred and used by them in payment of claims against the company.

In the face of this accumulation of evidence as to the fact of the payment of the consideration, is the following denial in the answer: they deny that the consideration money originally agreed to be paid for said land has been paid or satisfied to the said company; that in truth and fact the greater part of the sum found by said accountant to be due still remains unpaid; and that, besides that, among the bonds and mortgages reckoned by said accountant as so much paid are the bonds and mortgages of said Gilbert and Smith for many thousand dollars, which cannot and ought not, being merely the covenant of the same parties to pay in another form, to be taken as payment of the amount due by them. This is technically true. The money has not been paid. The consideration has not all been paid in money, but mostly in bonds and mortgages, which have been received in lieu of money, and in satisfaction of the consideration which the vendees agreed to give for the property. The vendors have no further legal or equitable claim upon the vendees for the purchase money, nor have they any equitable lien or claim upon the land for it.

But it is said, on behalf of the defendants, they ought not to be compelled to convey the land, because the value of these mortgages which have been taken as payment depends upon the faithful fulfilment of the covenants to improve the property, and that it is right and equitable they should retain the title to the residue of the property as a security for the faithful fulfilment of the covenants. I cannot see that they have any such right. If the covenants are not fulfilled, they must look to the personal responsibility of the parties. As I have before said, the vendees have thus far performed all their covenants. Having paid the consideration, the vendors have no right to hold the land as a security for any future default. Suppose, the day after the agreement had been made, the purchase money had been paid, it cannot be pretended that the vendors could have retained the title to the land as a security for the fulfilment of the covenants, or that they might have conveyed just so much of the land as they pleased, and have retained the residue as security. Having received bonds and mortgages as payment does not alter the rights of the parties in this respect. That they accepted the mortgages with the expectation that they were not bound to convey the land until the covenants were fully performed, cannot raise any equity in their behalf, unless they can show that this expectation was excited by the assurances or conduct of the vendees. This they have not done. If they have misunderstood their rights under the contract, such a mistake on their part cannot alter the rights of the other parties to it. It is very clear that the bonds and mortgages were given in payment by the vendees with the expectation that when the consideration was paid they were to receive a deed for the property, and that the vendors accepted them knowing that such was the vendees’ expectation. It is a fraud upon the vendees to have accepted the mortgages knowing such to have been their expectation, and then to retain the mortgages, and refuse to comply with the terms upon which they were delivered.

The last ground taken by the defendants is, that by the complainant’s accepting the conveyance of the 500 lots, he waived his right to a deed, if he had any, for the residue of the property until the covenants in dispute were fully performed. Anthony Hey, on the part of himself and his co-trustees, on the one side, and the complainant and Smith, on the other, made a settlement, and then entered into the agreement which we first considered, by which the complainant,’ among other things, was to have a conveyance of the residue of the land. He settled his accounts with Hey upon the basis of this agreement. The complainant waived a demand of $12,000, which seems to have been well founded, and settled for the balance of the purchase, which was $6921.61, by promissory notes. Mr. Hey reported to the board the agreement, and they refused to confirm what he had done. lie then reported that Gilbert and Smith “ desired to have a portion of the property conveyed to them, leaving in the hands of the company a sufficient quantity as security for the due and faithful performance of the covenants and agreements contained in their agreement with the company.” There is not a particle of evidence that Mr. Hey had any authority whatever, from the complainant or Smith, to make such a report. The whole tenor of the evidence and the negotiations and correspondence between the parties tend to show that he had no such authority. The conveyance of the 500 lots was accepted without any knowledge of the proceedings of the board, as far as the proof goes. At the same meeting, the board passed a resolution that the president of the board should convey absolutely and unconditionally 500 of the lots remaining unsold to Gilbert and Smith. It is true the complainant and Smith knew that the trustees claimed the right to hold the balance of the property, and they accepted the deed knowing this claim. But on the other hand, the trustees gave the deed, knowing that the complainant insisted upon their right to a conveyance of the whole without requiring them to relinquish such claim. The minutes of the 11th of November, 1853, must be laid out of view. They were the proceedings of the trustees, of which the complainant and Smith had no notice. Their rights cannot be affected by them. They are nothing more than the declarations of one party made in the absence of the other party. I do not think any rights were waived by either party by the giving or accepting the deed.

My opinion is, that upon the complainant’s paying the notes mentioned in the receipt of the 12th of September, 1853, he is entitled to a conveyance of the residue of the land.