Opinion
Argued May 24th, 1943.
Decided September 17th, 1943.
1. Upon an executory agreement for the sale of lands, the purchaser becomes the equitable owner of the lands and he holds the purchase money in trust for the vendor.
2. If land, while the subject of a contract of sale, is taken in condemnation, so much of the award as will satisfy the purchase money belongs to the vendor and the balance to the purchaser. Conversely, the purchaser has no interest in the award when, because of his breach of the contract or his laches, equity has ceased to regard him as the owner of the lands — when the vendor no longer ought to convey.
3. Under our Eminent Domain Act, title to land, as between the owner and parties other than the condemnor, remains in the owner and does not vest in the condemnor until tender of the award or payment thereof into court and notice of such payment is given. R.S. 20:1-15.
4. In the present case, petitioner was competent to pass title to the respondent on the day the award in condemnation was paid into court. The interest of the parties in the fund in court must be governed by their rights in the land as of that day.
5. A party seeking specific performance of a contract must show that he has performed, or been willing to perform, all the essential terms of his contract. The time specified in the contract is not usually considered an essential term, but even so, gross laches are a bar.
6. Where the time fixed in a contract is regarded as a formality only, that time may nevertheless be made an essential element by formal notice. The time fixed must be reasonable under the circumstances. In this case the day set by the petitioner for closing was only six days after the giving of notice. This was, perhaps, too short a time, but petitioner extended and re-extended the time at respondent's request, to more than a month after the original demand. Held, time remained essential; more time respondent could not and did not ask.
7. Respondent's failure or unwillingness to perform on the day finally set by petitioner for closing constituted a material breach of the contract and divested respondent of any equitable estate in the land. The situation was no longer such that petitioner was under an obligation to convey. The fund in court belongs to the petitioner.
8. It was fairly within the legislative expression that the proceeding to distribute the fund paid into court ( R.S. 20:1-15) might be instituted by petition under the general coverage of the proceeding by which the deposit was effected. Even so, appellant would have been entitled to have its issue tried out if it had presented one. There was, however, no factual controversy to litigate. Lazarus v. Home Building and Loan Association, 133 N.J. Eq. 367, distinguished.
On appeal from a decree in Chancery advised by Vice-Chancellor Bigelow, who filed an opinion which, as to the matters now at issue, was as follows:
"This matter grows out of the condemnation by the State Highway Commissioner of land of the petitioner, Reliable Improvement Company. Commissioners were appointed and made an award of the value of the land, and the Highway Commissioner paid the amount of the award into court. The petitioner prays that the money be paid over to it. The respondent, Delancey Stockton Corporation, which claims an interest in the tract and in the award representing its value, resists payment to the petitioner.
"The next objection goes to procedure. The Reliable Improvement Company, on filing its petition, verified in much detail, obtained an order, returnable December 29th, 1942, directing the respondent to show cause why the moneys should not be paid to petitioner. On the return day, respondent asked for and got a continuance to January 6th and was informed by me, `If counsel for respondent then show some colorable defense on the merits, which they have not been able to prepare, a motion for another week will then be sympathetically heard.' On the adjourned day respondent presented a lengthy affidavit setting forth the facts upon which it relies and asked no further time.
"Counsel urge that a day should be designated and the facts established by testimony taken in open court, or else there be a reference to a master. I would be in complete accord were there dispute over the material facts, but I find none. Indeed if the position of the respondent on the merits were not clear, I would order a formal answer to be filed to the petition. The statute directs merely that the award paid into court `shall there be distributed according to law, on the application of any person interested therein.' R.S. 20:1-15. Long established procedure is petition and order to show cause and, if a factual controversy appears, then a reference to a master, or in rare cases, proofs presented in open court. The objection to the procedure is overruled.
"Now to the merits. The petitioner was the owner of a large tract of vacant land in the Newark meadows. On November 4th, 1940, it contracted to sell four acres of the tract to respondent for $25,000. The fund in court, $32,000, is the award for the land respondent had contracted to buy. Its claim to the fund is based on the contract. The petitioner rejoins that respondent by its default and laches forfeited any rights under the contract.
"The contract called for the closing of title `on a day to be mutually agreed upon, in no event more than 90 days from the date hereof.' The nintieth day was February 2d 1941. The parties also agreed that `taxes are to be apportioned as of the time of delivery of deed.' Now the whole of petitioner's tract, of which the land described in the contract was part, was taxed as a single lot, so it was necessary to have the Board of Assessment distribute the tax between the parcel sold respondent and the parcel retained, in order that the tax on the former could be apportioned to the day of closing. This was done early in April, 1941, and on the 7th, Mr. Lehlbach, counsel for petitioner, sent to Mr. McCarter, president and counsel of respondent, the apportionment figures calculated to April 10th and suggested closing on that day. Mr. McCarter immediately replied that he could not promise that his clients would be ready to close on that day.
"I here interpolate that shortly before, namely, April 4th, the state highway engineer had written respondent opening negotiations for the purchase of the land which it eventually condemned.
"On April 18th, petitioner delivered to respondent formal written notice that petitioner would expect to close title on Thursday, April 24th, 1941, at 10 A.M., at Mr. McCarter's office, `and that said time is made of the essence of the contract.'
"Mr. Lehlbach two days later wrote Mr. McCarter about a small encumbrance, a sewer assessment of $180, and suggested that the respondent bear this burden. Mr. McCarter promptly declined and Mr. Lehlbach did not press his suggestion further. In the same letter, dated April 22d, Mr. McCarter explained his inability to close on the day which petitioner had fixed:
"`I cannot possibly close on the 24th, because I have to argue a case specially set for oral argument before the Court of Errors and Appeals on that day, and on the following day I have to go to Philadelphia before the United States Circuit Court of Appeals for the Third Circuit; so I do not see how there is any possible opportunity of closing before next week * * *.'
"Then follows a series of letters in which Mr. Lehlbach extends the day for passage of title successively to May 8th, May 12th, May 15th or 16th (whichever may suit Mr. McCarter) and finally to May 21st. And McCarter replies that other business prevents — `I have to be in Washington.' `A case specially set in the Circuit.' `All I can say now is by sometime next week I firmly expect to know and say just when.'
"Mr. Lehlbach's last letter in this series, dated May 14th, stated:
"`In view of your inability to close either on May 15 or 16, as mentioned in my letter of May 5, the Reliable Improvement Company will further extend the time set in the notice of April 18, 1941, from the time of closing therein set, namely April 24, 1941, to Wednesday, May 21, 1941, at 10 A.M., at your office.'
"This letter remained unanswered.
"On the morning of the day set, the two gentlemen conferred over the telephone. Mr. Lehlbach stated he was ready to close. Mr. McCarter was not ready and was unable to say when his company would be ready. Then Mr. Lehlbach informed him that `we would have to rest on our rights under the contract as extended, and would have to leave you to your rights, if any.'
"Thus, more than six months after the date of the contract, petitioner abandoned its attempts to get respondent to fulfill. Another year and a half has now passed during which respondent has never tendered the purchase price, or in any way indicated a desire to go ahead with the sale.
"Upon an executory agreement for the sale of lands, the purchaser becomes the equitable owner of the lands and he holds the purchase-money in trust for the vendor. This doctrine is an application of the maxim that equity regards as done what ought to be done, Pom. Eq. Jur., § 368, and on it specific performance mainly depends. Haughwout v. Murphy, 22 N.J. Eq. 531, 546. And from the same principle follows that if the land, while subject to the contract of sale, is taken in condemnation, so much of the award as will satisfy the purchase-money belongs to the vendor and the balance to the purchaser, Rappoport v. Crawford, 99 N.J. Eq. 669. Conversely the purchaser has no interest in the award when, because of his breach of the contract or his laches, equity has ceased to regard him as the owner of the lands; when no longer the vendor ought to convey.
"Under our Eminent Domain Act, title to the land as between owner and parties other than the condemnor remains in the owner and does not vest in the condemnor until tender of the award or payment thereof into court and notice of such payment is given, R.S. 20:1-15; In Re Essex County Park Commission, 80 N.J. Eq. 1; 81 N.J. Eq. 163. In the present case that date was December 7th, 1942. Until then petitioner was competent to pass title to respondent. It seems to me that the interest of the parties in the fund must be governed by their rights in the land as of that day. Could respondent have then demanded specific performance?
"`A party seeking specific performance of a contract must show that he has performed, or been willing to perform all the essential terms of his contract.' Crane v. DeCamp, 21 N.J. Eq. 414.
"He must show that he has been prompt and eager to perform. Of course, the time specified in the contract is not usually considered an essential term, but even so, gross laches are a bar. Merritt v. Brown, 21 N.J. Eq. 401. The contract between the parties called for performance on a day to be mutually set, but `in no event' later than February 2d 1941. For one year and ten months thereafter respondent showed no eagerness to perform. True neither of the parties for two months after the date mentioned was able to procure from the taxing authorities an apportionment of taxes which would permit an exact determination of the purchase price. Even so, respondent's laches have been great.
"Furthermore petitioner on Friday, April 18th, 1941, gave respondent notice fixing the following Thursday as the time for performance, and making time of the essence of the contract. It is the law, where the time fixed in a contract is regarded as a formality only, that time may nevertheless be made an essential element by formal notice. Orange Society v. Konski, 94 N.J. Eq. 632; 95 N.J. Eq. 254. But the time fixed must be reasonable under the circumstances of the case. Caldwell Building and Loan Association v. Henry, 120 N.J. Eq. 425. The day set by petitioner was only six days after the giving of notice, too short a time, perhaps. But at the request of respondent, petitioner extended the time and re-extended it, unto a day over a month after the original demand. Time remained essential, Wachung, c., Co. v. Llewellyn, c., Corp., 96 N.J. Eq. 498. More time respondent could not and did not ask. Its failure or unwillingness to perform on May 21st constituted a material breach of the contract and divested respondent of any equitable estate in the land. No longer was the situation such that petitioner was under an obligation to convey.
"Respondent seems to have taken the position that the pending negotiations with the Highway Commissioner, or the prospect of condemnation, absolved it from the duty of present execution of the contract. The practical aspect of the matter is plain. If the land should be condemned, and the award be less than the purchase price, respondent would be out of pocket. Better wait and see, and let petitioner stand the loss if the award be low. But such practical view does not reflect the legal or equitable duties and rights of the parties.
"The fund belongs to petitioner."
Mr. George W.C. McCarter, for the appellant. Messrs. Lum, Fairlie Wachenfeld ( Mr. Ralph E. Lum), for the respondent.
The facts appear sufficiently in the Chancery opinion. The points presented here by the appellant are that Chancery should not have adjudicated the issues summarily, and that even on that method of hearing the appellant should have prevailed. Our consideration of the case leads us to the conclusion that the Vice-Chancellor was correct in his appraisal of the facts and in the application of the law to the meritorious issue. We affirm for the reasons stated by him. The petition by the Reliable Improvement Company was filed in, and was entitled in, an existing cause, namely, "In the Matter of the Application of the State Highway Commissioner of the State of New Jersey for the payment of certain moneys into the Court of Chancery for the taking for public use of lands of Reliable Improvement Company, a corporation of New Jersey." The reply affidavit and exhibits were so entitled. So was the opinion and the order of distribution. Likewise, the notice of appeal to this court and a stipulation here between counsel. There seems to have been a complete recognition, and acceptance, of the proceedings to get distribution as an incident to the existing statutory proceeding, R.S. 27:7-22; R.S. 20:1-15, whereby the funds had been deposited in Chancery. The statute, R.S. 20:1-15, directs that the money, when paid into Chancery by order of the Chancellor, shall there be distributed according to law on the "application" of any person interested therein. Appellant does not take its stand against the procedure by petition. What it complains of is that the matter was decided without plenary hearing, and its difficulty in that respect is that it presented no grounded dispute upon which an issue could be framed for factual controversy. Its own letters and indeed its own exhibits serve only to emphasize that, with knowledge of the purposes and impending acts of the Highway Commissioner with regard to the lands, it had parried with evasions and excuses, none of which assumed the knowledge just stated, the efforts of the vendor to close title; efforts that included the making of time an essential element, Orange Society v. Konski, 94 N.J. Eq. 632; 95 N.J. Eq. 254, cited in the opinion below. The law was correctly applied to the facts, and the controlling facts were not controverted either by proof or contention.
It was, we think, fairly within the legislative expression that the proceeding to distribute might be instituted by petition under the general coverage of the proceeding by which the deposit was effected. Even so, appellant would have been entitled to have its issue tried out if it had presented one. But there seems to have been no factual controversy to litigate. The case is sharply distinguishable from Lazarus v. Home Building and Loan Association, 133 N.J. Eq. 367. Where there is no factual controversy, long established practice in such cases runs against appellant's contention.
The order under appeal will be affirmed.
For affirmance — PARKER, CASE, BODINE, PORTER, COLIE, DEAR, WELLS, HAGUE, JJ. 8.
For reversal — THE CHIEF-JUSTICE, DONGES, HEHER, PERSKIE, RAFFERTY, JJ. 5.