Grigg v. Landis

21 N.J. Eq. 494

• Court: Supreme Court of New Jersey
• Decided: March 15, 1870
• Status: Published

Opinions

The opinion of the court was delivered by

Scudder, J.

Upon bill filed by the appellant for the specific performance of a contract to convey lands, entered into between the respondent and Samuel K. Foster, and assigned to the appellant, the Chancellor has decreed that the bill be dismissed with costs, and an appeal has been taken to this court.

This contract, dated the 1st day of September, 1864, for a money consideration, and upon compliance with the covenants therein contained, bargains for the sale and purchase^ of a lot of land, containing ten acres, in the Vineland tract,. Cumberland county. The money consideration is the sunn of $420, payable as follows: $50 cash ; $270 on Scptomber 5th; a note for $51.50 at six months; and balance of $50, by yearly payments, within three years, with six per cent., interest, payable yearly, on the 1st day of November.

The covenants to be performed by Foster, were: (1) to> plant shade trees in front of the property, before the 1st-day of May, or November, next following; (2) to erect a habitation thereon, for purposes of occupancy, within one year from the date of the contract; (3) to cultivate at least two' and a half acres each year, from the date thereof; (4) , to keep the road or sidewalk in front of said property, clear of underbrush or rubbish.

“ And in the event of the said S. K. Foster not complying with the above stipulations within the time specified, the said Landis to have the right to take back the said land by paying to the said S. K. Foster the amount he (Landis) has received on account of said purchase.” Foster was not to . have the right to assign said land, or any part thereof, before the above improvement stipulations were complied with, or unless, in case of failure or inability to make said improvements, said Landis should decline to take the purchase back by refunding the money he had received upon the same. The object of these stipulations, as therein stated, was to secure the general improvement of the settlement, and to protect the same against the speculation of non-improving people upon .those who improve their lands.

Following the above statement, it is stipulated that the houses shall be at least seventy-five feet from the side of the road; that the side of the road in front of said land shall be plowed and seeded to a good seeding of grass, within two years; that this agreement is not assignable unless all installments fallen due are paid.

A warrantee deed, in fee simple, clear of all encumbrances, was to be given when the purchase money was paid, and the above improvement stipulations complied with, and not before; all the stipulations therein contained were to run with the land, and be of binding force; and in default of complying with said stipulations, to forfeit to the said Landis, or his assigns, $50 per annum.

I shall not stop to criticise or attempt to construe in all its parts a paper so inartificially drawn. The general intent and the more important parts are sufficiently intelligible for our present purpose.

The appellant, Thomas Grigg, on the 4th day of January, 1866, paid the balance of purchase money to Charles K. Landis, and received a receipt in full, in Foster’s name, and on his account, as Landis’ agent supposed. About the 1st day of March, 1866, and between that day and the 13th day of the same March, Mr. Grigg demanded a deed for the above tract of land in his own name, alleging that all the purchase money had been paid, all the improvement stipulations complied with, and that the contract had been assigned to him by Foster. The deed was refused. Grigg had been in actual possession of the property from the date of the contract (as the agent of Foster) until the contract was assigned to him, and afterwards, as he claims, in his own right, to the present time.

Immediately following the demand of the deed by Grigg, March 13th, 1806, Mr. Landis addressed a notice to both Foster and Grigg, stating that he had declared the agreement for the lot “forfeited for non-compliance with the covenants of agreement.”

A check was also sent by Mr. Landis’ direction to Mr. Foster, for four hundred and twenty dollars, the amount of principal of the purchase money received, which was returned not accepted. On April 23d, 1866, Mr. Landis sent his father to Monson, Massachusetts, where Foster resided, and there tendered him the same amount in United States legal tender notes. Foster made no objection to the kind of money, but refused to accept, and said he had contracted with the appellant, Grigg, for the land. Ho had actually assigned the contract, by writing, endorsed October 23d, 1865.

Ho tender was made to Grigg of the money. The issue thus made between the parties is whether the respondent has the right to declare the contract of sale forfeited for the alleged non-coinpliance with the covenants contained therein, and refuse a specific performance by executing a deed for the premises to the appellant.

Penalties, forfeitures, and re-entries for conditions broken are not favored in equity, and constitute a large branch of equitable relief. Usually, they are held to be securities for the payment of money, and the performance of conditions, and where compensation can be made for non-payment and non-performance, equity will relieve against the rigid enforcement of the contract. This is upon the general principle that a court of equity is a court of conscience, and will permit nothing to be done within its jurisdiction which is unconscionable. 2 Story’s Eq., §§ 1314, 1315, 1316, 1323; Livingston v. Tompkins, 4 Johns. Ch. 431.

But it is not therefore to be supposed that a court of equity will lightly dispense with contracts made between competent parties, and substitute other agreements more in accordance with variable rules of right and conscience. Every presumption will be made in fav«r of such contracts, and they will be enforced according to the intention of the parties expressed and implied, unless it can be shown that thereby some hardship or wrong, not within the presumed contemplation of the parties at the time, will result from such enforcement.

In this case it was competent for the parties to make just such an agreement as they have made, and it is our duty to interpret it as they have made it. The covenants for certain improvements do not violate any rule of law; such covenants contained in deeds of conveyance prescribing the mode in which the premises shall be improved, in restraint of the use that shall be made of them, have been sustained where the restriction is confined within reasonable bounds, and the party in whose favor they are made, or those in privity with them, are interested in the subject matter of the restrictionWhatman v. Gibson, 9 Sim. 196; Western v. MacDermot, Law Rep. 1 Eq. Cas. 499; S. C., 2 Ch. App. 72; Mitchell v. Steward, Law Rep. 1 Eq. Cas. 541; Brewer v. Marshall, 3 C. E. Green 337; Barrow v. Richard, 8 Paige 351.

Mr. Landis was the owner of a large tract of land, in the Vineland tract. For his own profit, and to illustrate some peculiar schemes of his own devising for the moral and social development of a colony settled upon his land, in which the methods of improvement and ornamentation seem to-have entered, he put certain stipulations in his contracts for the sale of such land, and when the purchasers signed them they became bound thereby. Ilis objects were lawful, and the result in building up a city, and bringing together a population of seven thousand persons in a short time, shows that he has planned well, and prospered in his undertaking.

In construing this agreement in the light of these circumstances, the Chancellor was undoubtedly right in holding that time is of the essence of this contract, both on account of its nature, or subject matter, and also by its express stipulations.

Time may be made of the essence of a contract by the ■express stipulations of the parties, or it may arise by implication, from the very nature of the property, or the avowed objects of the seller or the purchaser. When it thus appears, it will be considered essential in equity. 1 Sug. on Ven. and Pur. 433*; Young v. Rathbone, 1 C. E. Green 224; Longworth v. Taylor, 14 Pet. 172; Hipwell v. Knight, 1 Younge § Coll., Eq. Ex. 415; 1 Story's Eq., § 776; 3 Lead. Cas. in Eq. 75; Fry on Spec. Perf., § 710.

It was of great importance to Landis that actual settlers should buy, and that improvements should be promptly made as inducements to others to purchase and improve, and this intention is expressed in the agreement and in the times limited. The time for planting shade trees, “before-the 1st day of May or Hovember next following;” the erection of a habitation for the purpose of occupancy “ within one year from the date hereof;” at least two and a half acres, should be cultivated “each year from the date hereof;” these are all specified with particularity as to time, and the purpose is manifest.

It is further expressed, that in the event of the said S. K. Foster not complying with the above stipulations within the time specified, the said Landis shall have the right to take -back the said land by paying to the said S. K. Foster the amount he has received, on account of said purchase. This right to reclaim the property at the expiration of the time named for non-performance of these covenants, is decisive in determining the materiality of time in this case.

This construction being settled, the testimony in the case shows that there was a breach of these conditions on the part of the purchaser.

The shade trees were not planted until some time in the month of November, 1865, instead of before the first day ; the house was not built until January 1st, 1866, instead of before September 4th, 1865; and none of the other improvements appear to have been made within the time specified. But Foster was in possession of the property under the agreement, and had made his payments at or very near the times stipulated, and such payments had been received by Landis. After the breach of these improvement stipulations, to wit, on the 31st of October, 1865, a further payment vas made and received, and again on the 4th day of January, 1866, the balance of the purchase money was paid, received, and a receipt given in full. Before the last payment was made the dwelling-house had been built, costing about $1000, two and a half acres of land had been cultivated, and trees had been planted upon the road in front of the lot. Before the deed was demanded, on the 13th of March, 1866, the underbrush had been cut in front of the property, and it had been plowed and seeded. It appears that some of the trees died, others had been planted, and that neither the trees nor the clearing and seeding are satisfactory to Mr. Landis. But there is no particular description given in the contract, and it does not sufficiently appear in the testimony that there has been bad faith, or a failure to comply substantially with these improvement stipulations. These are all important considerations upon the application to give effect to this contract by a specific performance.

After a careful review of the cases, I can find none where a court of equity, under such circumstances, has refused to give relief.

In the case of Benedict v. Lynch, 1 Johns. Ch. 370, it was held that on default at the day, without any just excuse or any acquiescence or subsequent waiver by the other party, the court will not help the party in default. The purchaser had been in possession and made improvements, but made no payments and no tender of performance until two years after the appointed time. The learned annotators in 3 Lead. Cas. in Eq. 81, say, that while this case is generally admitted to be sound upon the point that time was of the essence of the contract, yet as the complainant had gone into possession of the premises, and built a house, which repelled the idea that the delay was due to an abandonment of the contract, or a design to speculate on the defendant, the decision would seem to be somewhat questionable on the latter point.

In the case of Wells v. Smith, 7 Paige 22, where it was held that the parties had made the payment at the day an essential part of the contract, and that the vendee, who had not attempted to build the house upon the lot, and who had, without a legal excuse, failed to make the payment at the time specified, was not entitled to a decree for a specific performance of the contract. Chancellor Walworth says: “If a vendee, after he had received the greater portion of the purchase money, should attempt to enforce a forfeiture of the money paid, under a stipulation that he might keep the whole amount thus received and the premises also if the last payment was not made on the day, I am not prepared to say that this court would not interfere to compel him either to accept the last payment and convey the premises, or to restore the purchase money already paid, after deducting a reasonable allowance for the use of the premises in the meantime.”

Certainly there could be no difference, except the case would bo stronger, if the result of the forfeiture were to confiscate valuable improvements made in the premises, instead of the purchase money. In a later case, Edgerton v. Peckham, 11 Paige 355, it was said by Vice Chancellor Oridley, in commenting on Wells v. Smith, “ I cannot forbear remarking in this case, however highly I respect the opinion of the Vice Chancellor of the first circuit, (S. C., 2 Edwards 78,) that I considered it as' adopting an exceedingly severe rule, and a case which upon the facts disclosed, entitled the complainant to relief.” In the same case Chancellor Walworth says: “The case of Wells v. Smith, was entirely different from this. There the performance of the condition precedent on or before the particular day specified, was essential to the vendor s security,” and “ there was in fact no forfeiture except the loss of a profitable speculation.”

Both of these cases, which show the extent to which courts ■of equity have gone in refusing relief, differ essentially in the very point of decision from this case now under consideration. Here everything had been done substantially, upon which the right to annul could be predicated, except the default as to time, and that had not been insisted upon, but the parties had proceeded after the breach. Even where time is of the essence of the contract, it may be waived by proceeding in the purchase after the time has elapsed. Story’s Eq., §§ 776, 1025 a.

In Hipwell v. Knight, 1 You. & Coll. Eq. Ex. 401, Baron Alderson, speaking in a case where time was the essence of the agreement, says: “ The result of all the cases on this subject seems to be, that slight circumstances aré sufficient in a court of equity to prevent a party from taking the benefit of such a stipulation, and that whenever a party has done any act inconsistent with the supposition that he continues to hold his opponent strictly to his part of the agreement, he is to be taken to have waived it altogether.” See also Seton v. Slade, 7 Ves. 265, and notes; 3 Lead. Cas. in Eq. 49.

There are such inconsistent acts on the part of the vendor in this case.

In tlio first place lie has accepted two payments, the last in fall of the balance of purchase money, after default in making improvements at the time fixed.

The acceptance of rent will defeat the right to proceed for a forfeiture previously committed. Arnsby v. Woodward, 6 B. & C. 519; Bowser v. Colby, 1 Hare 130.

Will not the acceptance of the purchase money after default in this case have the same effect ? I can see no difference. This is not like the case of a continuing breach of covenant, which is not waived by the acceptance of rent, but it is the case of an actual and complete breach before the implied waiver, and is therefore conclusive. Baker v. Jones, 5 Ex. 498; Camp v. Pulver, 5 Barb. S. C. 91; Clarke v. Cummings, Ibid. 340.

It is no answer to say that Mr. Landis did not know that the improvements were not made when he accepted these payments after default. From the facts and circumstances of this case, his knowledge and oversight of the business of the Vineland tract, the exact system observed by him, and the agencies employed, he must be presumed to have known where equitable rights are in question. (2 Lead. Cas. in Eq. 163). He might have known, and he was bound to know, if he intended to insist upon the forfeiture. The purchaser had the right to suppose that he did know, and waived the default.

From Mr. Landis’ testimony it appears that the purchaser might reasonably believe that he acquiesced in the delay, for he had been indulgent in other cases. He says : “ When an honest disposition was manifested to make the improvements by the purchaser, I would sometimes allow the improvements to be made, and change the penalty mentioned in the contract.” He had not, therefore, been exact in holding parties to compliance at the very day. But the trouble here was, that Foster had assigned to Girigg, without his Landis’ knowledge, and this had changed his usual course and disposition; of this I will speak hereafter.

In a case somewhat similar in facts, Harris v. Troup, 8 , it was said that it was inequitable, after the vendor had waived the forfeiture from time to time, by receiving portions of the purchase money long after the same were due and payable, to suddenly stop short and insist upon a forfeiture, without any previous intimation that he intended to do it.

Mr. Landis gave no intimation or notice that he intended to forfeit the contract because the improvements were not made at the time agreed upon. What- would have been the practical effect if he had done so promptly? He could return all the purchase money he had received, and the parties would have been in statu quo. No loss would be incurred, except to the purchaser a probable speculation in the value of the lot bought. By neglecting to give such notice promptly, the purchaser has been permitted to build a house, and make other improvements amounting to one thousand dollars. To. forfeit the property after this has been done, is to permit the vendor to take advantage of his own wrong, and add the amount of these improvements to his large wealth, and take it from the purchaser, who has acted upon the fair presumption from his silence, that he would not insist on the forfeit. This cannot be equitable. There are intervening equities which cannot be taken away under such circumstances.

It is said, however, that Grigg knew when he took the assignment of the contract, that the time for performance had passed, and therefore he took it with the risk of being ousted and losing his improvements. Suppose he did know of the default. He also knew that Mr Landis had given intimation or notice of an intention to forfeit the contract, and upon this he had the right to act.

In Hunter v. Daniel, 4 Hare 420, where it was held that time was of the essence of the contract, it was said, that “ each breach gave the defendant the right to rescind the contract, but that right should have been asserted the moment the breach occurred. The defendants were not at liberty to treat the agreement as still subsisting and to take the benefit of it at the expense of the plaintiffs. If they meant to insist it was at an end, they were at liberty to do so, but were not imperatively bound to do so. The defendants had no right to accept the money, but upon the principle that the agreement was still subsisting.” And in Monro v. Taylor, 8 Hare 51, it was held that if time is to be considered of the essence of a contract, the point must bo made promptly.

Such it appears to me is the import of the terms used in this contract: “In the event of the said S. K. Foster not complying with the above stipulations within the time specified, the said Landis to have the right to take back the said lands,” &c. He has a right, the exorcise of which is optional with him, and for his benefit. Cartwright v. Gardner, 5 Cush. 273. The time to evoke it is when the default occurs. To manifest his intention some act must be done, some notice given, because the agreement does not become void upon the happening of an event, or the expiration of a fixed time, but it is voidable upon the volition of the vendor expressed in a particular way, by the repayment of the money which ho has received before the default. He has made no expression of this determination, but has been quiet, and permitted the condition of the opposite party, and of the property, to become changed ; and has not only been quiet, but has done other acts by which he is precluded in equity from asserting his former right to annul the contract.

But it is evident that the points I have been considering are not those which have incited the respondent to the resistance of this claim for a conveyance. Neither the time that had elapsed, nor the delay or defects in the improvements, now set up, are so considerable as to induce him to refuse the deed. Had Foster remained the party to whom the conveyance was to be made, it is not probable that any default would have been insisted upon. The great point of objection is the assignment to Grigg, the appellant. He says: “Had I over been aware of the assignment made by Foster to Grigg before the house was built, I would have forfeited the bond of agreement, and tendered the money before this improvement was made.” “ I gave the direction to send the check to Foster after I had learned that the assignment had been made by Mr. Foster to Mr. Grigg, certainly within five seconds; the moment that my bookkeeper, Mr. John L. Burke, informed me of the attempted transfer.”

It would thus appear that he resented the concealment by Grigg of his interest in the property, in representing himself as the agent of Foster, or permitting others to suppose that he was such agent, when he was really the assignee and principal in the contract after October 23d, 1865. It is not necessary to justify this conduct, or to attempt to excuse it. The facts do not explain it. lie owned the adjoining property, and might wish to obtain this, but it was -wrong to resort to any artifice to obtain it. But this is not a fraud, unless some fraudulent consequences be shown. It ■is immaterial, unless it appear that the alleged deception lias in some way operated to the vendor’s prejudice. Fellowes v. Gwydyr, 1 Russ. & My. 83.

In some cases courts of equity will give effect to a collateral covenant by refusing to decree a specific performance of the principal contract in favor of the party who has obtained his interest in the contract in violation of a collateral covenant restraining an assignment. But it must be under special circumstances. Flood v. Finlay, 2 Ball & Beatty 9; Nelthorpe v. Holgate, 1 Collyer 204. In the latter case there was a secret understanding and assignment. But in a bill for specific performance the court held, that if the price was adequate, and it was not suggested that the vendor had refused, or would refuse, or could have obtained better terms of the assignee had he known the real circumstances, a decree should be made.

But I apprehend such collateral covenant will never bo thus enforced, where it appears upon the face of the contract that the prohibition to assign is not the main purpose of the covenant, but a mere incident- to and security for such purpose. It is the province of a court of equity to ascertain what is, in truth, the real intention of the parties, and to carry that into effect. What- is the objection to making an assignment of the contract to Mr. Grigg, or any other person, as it appears on the face of the agreement Rot personal, surely. It was not even subject to the approval of the vendor ; he reserved no such right. Ror wait it-merely arbitrary; that would he too unreasonable. But the object, as clearly expressed, was to protect the settlement against non-improving speculators; and it was for this purpose that no assignment could be made, until all the inr stallmenls of the purchase money should be paid, and especially before the improvement stipulations were complied with. The assignee of this contract is not a non,improving speculator. He asks -for a deed, not before, hut after the improvements are substantially made, and the purchase money is paid. When these terms are fulfilled, a warrantee deed, in fee simple, clear of all encumbrance, was to be given to the purchaser by the terms of the contract-. And why not to the assignee of such purchaser ? The contract is assignable in equity, and the assignee has all the equitable rights of his assignor, unless restrained by the terms of this covenant. It would he inequitable to make the incident the principal point in the covenant. The main object is attained, as the party has himself expressed it, and the assignment, however it may stand in time between the assignor and assignee, has no effect claimed for it against the vendor, until his terms have been met and satisfied. The only omission is in the point of time, which we have shown above has been acquiesced in by his acts.

I know a different principal has been held in cases of forfeiture for a breach of a covenant not to assign a lease without license, and other collateral covenants relating to leasehold premises, in which no relief will be given; but the reason stated, that they admit of no adequate compensation, or dear estimate of damages, does not obtain in this case, where ho more than nominal damages would be given., This stands'upon another principle, that the restriction is in the nature.of a mere security for the performance of the principal covenants, and such relief may be given by a court of equity as shall appear to be equitable under the circumstances of each particular case. 2 Story’s Eq., § 1324; Reynolds v. Pitt, 19 Ves. 134; 2 Greenl. Cruise 36, ¶ 29; Skinner v. Dayton, 2 Johns. Ch. 535; Henry v. Tupper, 29 Vt. 358; Taylor's Land. and Ten., §§ 496, 500.

Other reasons which are technical and peculiar to covenants in leases, growing out of the relations of landlords and tenants, and assignees of terms, will be found by reference to Dumpor’s case (2 Coke 119), and notes in 1 Smith’s Lead. Cas. 85.

It is evident from the immediate effort of the vendor to rescind the contract when'informed of the assignment, that he supposed it was forfeited by any transfer before the improvements were made; but there is no clause of forfeiture, or re-entry for condition broken in the agreeriient. Certainly ■ this court will not interpolate a forfeiture. Where there is no clause of avoidance or of re-entry, a breach of the covenant’ will not work a forfeiture or determination of an interest in lands. Willson v. Phillips, 2 Bing. 18; Bockover v. Post, 1 Dutcher 286; Taylor’s Land. and Ten., § 412; Adams on Eject. 157.

The usual and proper remedy for such breach is an action for damages, not an eviction. In the interpretation of words used in a contract or deed, the leaning of courts against forfeitures' always inclines them -to call them a covenant rather than a condition, where the remedy can be attained by such construction. Aiken v. Albany R. R., 26 Barb. 289. But /Eke restriction upon alienation, whether it be called a covenant or a condition, did not exist after the installments of the purchase money had been paid and the improvements essentially made’, und there is no difficulty in giving the assignment effect between all the parties at that time, and affording relief to the appellant.

Mr. Landis gets his purchase money ancl the, incidental advantages of the improvements in the lands sold, which were stipulated for in his contract; and the purchaser holds his land and the amount expended upon it, in the shape of improvements. This appears to be equitable between the parties. Any other determination would lead to serious loss and injury to the appellant. It is true that Mr. Landis has offered very fairly in his answer, to make any just compensation to the appellant for the expenditures and improvements, if the court should be of the opinion that he has any equitable claim on him for the same; but if his position be correct, he is under no legal obligation to make such payment, nor has this court the right to impose such terms upon him.

Considering all the circumstances of this case, as above' stated, my opinion is that the, appellant is entitled to the relief prayed for in his bill, and a specific performance of said contract, and that the decree of the Chancellor dismissing his bill of complaint should be reversed, with costs on appeal and costs below.