Gildersleeve v. Stratton

59 N.J. Eq. 1, 14 Dickinson 1

• Court: New Jersey Court of Chancery
• Decided: January 11, 1897
• Status: Published

Opinion

The Chancellor.

It is urged in support of the motion, first, that the interest of McNamee, under the writing of August 25th, 1890, was not assignable so as to give the complainants a right to invoke the aid of the court in its enforcement, because the agreement involved the performance of personal services by McNamee; and second, because specific performance of an agreement will not be enforced where, as in this case, no mutuality of right or obligation and of remedy exist between the complainants and defendant.

These objections are based upon the assumption that the writing of August, 1890, is an executory agreement upon the performance of which the rights of the parties depend. I do not regard it as a mere covenant for rights and interests to arise in the future. It is professedly a declaration and affirmation of existing rights and interests, added to which are executory agreements touching the repayment of loans and the future realization of the value of those rights.

Six parties had become interested in a scheme to divide “ the old Paulison farm ” into lots and blocks and sell it at profit. They had secured its conveyance to Jones, one of their number. Another of their number, William D. Stratton, agreed to advance or lend the purchase-money which they were to pay for the farm. At this point the writing in question was made with the purpose, as expressly defined, to declare and affirm the several rights of interests of the six parties to it. Then it proceeded, first, to provide for the repayment of Stratton’s advances with interest, to accomplish which it assented that he should be clothed with the title to the land in fee, ostensibly free from auy trusts, so that he would with the greatest freedom be enabled to make sale of the lots and repay himself, but, notwithstanding he thus took the fee, all the parties to the writing were to participate in the adoption of a scheme, according to which the land should be plotted and streets and avenues upon it should be opened, a matter vital to the success of the undertaking, and likewise all six were to be consulted as to the general policy to be adopted in conducting the contemplated sales, with the restriction, however, that until Stratton should be repaid he should have the power to decide, in case there should be a division of opinion as to the method of selling. He was not to account until he should be repaid, but yet he was to keep books of account which should be open to inspection by the parties. Thus, he was afforded as effectual a security for the return of the money he should advance as the land would afford, and at the same time means of satisfactory supervision of his acts were served for the protection of the rights of those who were ultimately to take. It is perceived that the five parties, other than Stratton, did not renounce their rights, except so far as was necessary to give effect to the scheme of. security which the writing prescribed for the repayment of Stratton’s advances. Subject to the encumbrance created by that scheme, they, with Stratton, in equal shares, were the holders of the equitable title to the land.

The paper further provided that when the repayment should be accomplished Stratton was to convey so as to openly put the title in himself, in a trust which would admit of the continuance of sales and afford each of the six parties his proper share of the property. With the consent of all, when Stratton should be repaid, partition of the remaining land might be made among the six.

I cannot but regard this document as an executed declaration of trust. It purports to be made for valuable consideration, and its recitals and the event of the repayment of Stratton and a surplus of land remaining show that it is founded in valuable pre-existing interests. It is true that the instrument is couched in language which contemplates that no trust was to exist until Stratton should be repaid, and at the same time, and that when he should be repaid a well-defined trust should be made, yet it at the same time recognizes and exactly defines existing rights in all the parties to the instrument. There exists an underlying trust given between those parties.

I have not overlooked the fact that five of the parties agreed with Stratton that they would work to facilitate the sale of the property, and that Stratton in turn agreed that when he was paid he would become vested with the title openly in trust.

The argument in favor of the motion rests upon the supposed effect of such agreements.

I do not understand that the continuance of the lights of McNamee were made dependent upon his services. They were not subjected to forfeiture for his non-performance of them. I think that his agreement to render personal services was a personal undertaking with Stratton merely for the security of Stratton’s .repayment. That such was the contemplation of the parties to the agreement is made conspicuous by the provisions that the agreement for personal service was between Stratton alone and the other five together, that when Stratton should be repaid he should openly declare the trust, and that then there might be a partition and Stratton might be deposed from the supreme control of subsequent sale.

It appears to me, also, that the same construction of the agreement is applicable in answer to the argument as to lack of mutuality in remedy. The agreement for personal services was with Stratton alone, having for its object the security of his repayment. He did not stipulate for a forfeiture of rights as a penalty for the non-performance of that service. Irrespective of the services, he holds as trustee, and though he may not be able to compel the performance of the services he cannot set such inability up to defeat the execution of his duty as trustee.

But this question of mutuality does not arise, for the bill alleges that Stratton has been repaid, and the amendment of the bill shows that when the bill was filed and enforcement of the trust was asked, McNamee had personally performed the services which the agreement required.-

I will deny the motion.

Afterwards the bill of complaint-was amended and answers thereto were filed, and the cause came on to be heard on the pleadings and proofs, whereupon a decree was made on the advice of Vice-Chancellor Stevens, dated January 13th, 1898, who filed his conclusions as follows:

I am so clear about this case that I do not think any benefit will arise from delaying my decision of it. The main question has already been decided. - The chancellor has construed the agreement, and I must take his construction of it to be the law of .this case. I may be permitted to say, however, that I ray-self entirely agree with the opinion that the stipulations contained in the paragraph at the end of the fourth clause of the agreement, if unperformed by any of the parties mentioned in it, causes no forfeiture of their interests. If there is a breach of this clause of the contract it may give rise to an action for damages, and possibly such damages as might be assessed in consequence of any breach would have to be deducted from the share of Mr. McNamee, but that is the utmost extent to which, as it seems to me, it is possible to go so far as the construction of the agreement is concerned. Equity leans against forfeiture — gives compensation in lieu of forfeiture, if it can. In this case there is absolutely no clause declaring that a forfeiture shall result from the non-performance of any term of this agreement. It might as well be contended that Mr. Stratton would forfeit his interest — all his interest in the property — if he had failed to perform any term of this agreement, and this would be absurd. I have no' doubt, therefore, about the propriety of the view taken by the chancellor, and if I had I would be bound by his opinion.

Assuming this opinion to be correct, the-case is entirely free from doubt.

[Here follows a discussion of the evidence.]