July Term, 1896.
Charles Roe, for the appellant.
James G. Greene, for the respondent.
Newton v. Bronson ( 13 N.Y. 587) holds that the Supreme Court may compel the specific performance by a resident of this State of a contract for the conveyance of land lying out of its jurisdiction, and numerous cases are cited in support of the proposition by DENIO, J., at page 591 in the opinion. That case was cited and approved in Gardner v. Ogden ( 22 N.Y. 327).
The power to enforce the specific performance of a contract was asserted and exercised in Rochester Kettle Falls Land Co. v. Davis (79 Hun, 69).
In Tucker v. Manhattan Railway Company (78 Hun, 442) it was held: "A defendant in an equitable action cannot avail himself of the defense that the plaintiff has an adequate remedy at law, unless it is pleaded in the answer," and numerous cases are cited in support of the proposition.
In Metropolitan R. Co. v. Johnston (84 Hun, 90) the rule was reasserted, and it was said, viz.: "This rule simply prevents the defendant from availing himself as a matter of right of the existence of the defense that the plaintiff has an adequate remedy at law. When the defendant has failed to interpose this defense, and the trial court refuses to dismiss the equitable action on that ground, the refusal cannot be urged by the defendant as error on appeal. But the trial court may, in its discretion, dismiss an equitable action on the ground that the plaintiff has an adequate remedy at law though the defendant failed to interpose that defense, but since legal and equitable remedies have been administered in the same court, this discretion has seldom been exercised."
The answer in the case in hand does not contain a defense that the plaintiff has an adequate remedy at law. And, therefore, according to the doctrine laid down in Metropolitan Elevated R. Co. v. Johnston ( supra), if the trial court refused to dismiss the action on that ground, "the refusal cannot be urged by the defendant as error on appeal."
Upon the hearing before the referee a question for the exercise of judicial discretion as to whether there should be a specific performance of the contracts alleged in the complaint, was presented for determination.
In Margraf v. Muir ( 57 N.Y. 158) it was said: "When a contract for the sale of lands is fair and just and free from legal objection, it is a matter, of course, for courts of equity to specifically enforce it. But they will not decree specific performance in cases of fraud or mistake, or of hard and unconscionable bargains, or when the decree would produce injustice, or when such a decree would be inequitable under all the circumstances." (Citing 1 Story's Eq. Juris. § 769; Willard Eq. Juris. 262; Osgood v. Franklin, 2 Johns. Ch. 1; S.C., 14 Johns. 527; Seymour v. Delancey, 6 Johns. Ch. 222; S.C., 3 Cow. 445.)
In Sherman v. Wright ( 49 N.Y. 231) it was said: "The specific execution of a contract, in any case, is a matter not of absolute right, but of sound discretion in the court. * * *"
In Miles v. D.F.I. Co. ( 125 N.Y. 294) it was held: "The right to a specific performance of a contract by the decree of a court of equity rests in judicial discretion, and may be granted or withheld upon a consideration of all the circumstances."
It is said in section 233 of Fry on Specific Performance, viz.: "There are many instances in which, though there is nothing that actually amounts to fraud, there is nevertheless a want of that equality and fairness in the contract which, as we have seen, are essential in order that the court may exercise its extraordinary jurisdiction in specific performance." The same learned author says (§ 255), viz.: "It cannot, however, be denied that there are cases in which the court has refused its interference, by reason of events subsequent to the contract." And again the same author says (§ 256): "Where the subsequent events alleged for this purpose are acts of the plaintiff himself, or events in some sense within his power, the court may have regard to them in exercising its discretionary jurisdiction in specific performance."
When the defendant entered into the contracts with Wait for the purchase of the lots, it is quite evident that the plaintiff was the beneficiary of the title. ( Rochester Kettle Falls Land Company v. Davis, 79 Hun, 69; S.C., 61 N.Y. St. Repr. 661.)
In the fourth and fifth subdivisions of the contracts is inserted the following language, giving options to the vendor, viz.: "* * * IV. It is expressly agreed that time is the essence of this contract, and in case default shall be made by the party of the second part, his heirs or assigns, in any of the conditions above stipulated to be performed by him, then and in that case this contract shall become void, and the party of the second part have forfeited his rights hereunder, and any payments that shall have been made shall become forfeited to the party of the first part, as well as all buildings or other improvements upon said premises, which said payments and improvements and buildings, it is hereby especially agreed, shall in that case be deemed as damages hereby liquidated for the non-performance of this contract by said second party.
"V. Nothing herein shall be construed to entitle said second party to possession of said premises until the delivery of a deed therefor as herein provided."
The evidence does not indicate that the defendant ever had possession of the lots in question, or that he ever derived any benefits from or under the contracts. The land was forest land covered with timber which was expressly reserved to the vendor by the insertion in the contract of the following language: "The party of the first part reserves all of the merchantable timber now standing upon said premises, with the right to enter upon said premises and cut and remove the same." The language is so broad that it does not seem to limit the time within which the removal shall be made.
According to the testimony of the defendant his negotiation for the lots was with Aris and Ranger, who were connected with the corporation, and they represented to him that the "company owned this tract of land;" and the defendant did not learn that the title was in Wait until the contracts were made out and presented to him to sign, and then the officers of the company "explained that it was done in order to comply with the law, which prevented a corporation from owning lands there, and the title had to be vested in one person's name." He further testified: "There was a great deal said about the value of the property. They described the property to me as having been laid out into streets and cleared off, and a great many stores going up there already, and that it was quite a large town at that time and growing very rapidly, and the property was increasing in value. That there was a water power which was a valuable adjunct to the town, and that there were valuable mineral deposits near the town. They said that one of the main trunk line railroads run near Kettle Falls, and that arrangements had already been made with the road to run a branch into Kettle Falls. They said that a ferry was to be constructed across the river and that they were going to have a court house right away and a large school building was to be built, and that it would be a city in a very short time. All the public improvements, laying out the streets, putting in the ferry across the river and utilizing the water power there. They said they proposed to have electric lights in a short time, and that the streets would be paved. * * * They said the schedule prices of the lots would not be any cheaper than they were at that time. Mr. Aris stated to me that the schedule prices would be increased."
Harvey Hoag was called as a witness for the defendant, and he testified to the organization of what was known as the Northwestern Investment Company, composed of several of the directors of the plaintiff, and the referee refused to allow him to state how lots were selling prior to the organization of the investment company, and an exception was taken to the ruling. The witness stated that he had knowledge that lots were sold prior to the formation of the investment company, and he adds: "It was understood by the directors that the prices should be maintained." And he states that no lots were sold after the organization of the investment company. The witness stated further: "I think they were sold at all prices, without regard to schedule or anything." Upon motion of the plaintiff's counsel that was stricken out, however, and an exception was taken by the defendant.
It appeared by the evidence that Aris occupied the position of general manager and treasurer of the plaintiff, and was one of its directors and trustees; and that he was a member of the first board of directors, and that he continued so throughout the year. It was shown by the evidence that Robinson, Aris and Morley belonged to the Northwestern Investment Company. That company purchased a large number of the lots "at a price far below the schedule prices." The evidence of the witness Roe on that subject, however, was, on motion of the plaintiff, stricken out, and an exception was taken by the defendant. It seems that all but two of the directors were members of the Northwestern Investment Company; that Wait became secretary of that company, and that it purchased from the plaintiff 350 lots at $150 per lot, and payment therefor was made by crediting it on the $105,000 mortgage. It was not an incorporated company. It was a partnership or "syndicate." All of its members were stockholders of the plaintiff, except one. Some evidence was given tending to show that there was an arrangement among the board of directors, prior to the organization of the investment company, by which special discounts were allowed to the directors. According to an entry made in the journal of the plaintiff, under date January 23, 1891, the sale of the 350 lots was authorized by a resolution adopted December 11, 1890, for $35,000. There appears an entry also in the journal of that date, viz.: "Mr. Morley represents a syndicate of buyers for which he acts as secretary. All the papers are only just being sent for record; the sale was consummated and lots selected Dec. 15th, 1890." On the following pages of the journal "are the numbers and designation of the lots sold to the syndicate." It appears in the evidence that the plaintiff brought an action against the investment company, claiming some $100,000 for fraud in the sale to the investment company. That suit, however, was subsequently discontinued, and the appeal book does not indicate very clearly how it was disposed of. In the complaint in the action brought by this plaintiff against the syndicate is found an allegation: "That when it became generally known that such a syndicate existed the public faith in this plaintiff and its said enterprise was greatly impaired, and the value of said real estate depreciated, and this plaintiff was greatly damaged in consequence."
From the facts and circumstances which we have already quoted, as well as others appearing in the case, we are of the opinion that the learned referee fell into an error when he reached the conclusion that, according to the principles of equity, a proper case was made out for the enforcement of the contracts. ( Stokes v. Stokes, 148 N.Y. 708.)
It is contended, however, by the learned counsel for the respondent that "the propriety of specific performance is a matter for the discretion of the trial court, unreviewable on appeal," and he calls our attention to Kelso v. Lorillard ( 85 N.Y. 184), where the remark was made, in the course of the opinion by MILLER, J., viz.: "It may also be remarked that this was a matter within the province of the court below to determine, and the exercise of its discretion in this respect should not be disturbed unless clearly wrong." We think that that does not militate against the discretionary right of this court to review the discretion of the trial court.
Attention is also called to Dunckel v. Dunckel ( 141 N.Y. 434). In the course of the opinion there delivered it was said: "There is a further rule that the specific performance of contracts rests largely in the discretion of the equity courts — not wholly, but in a discretion to be governed by rules which have become established for the guidance of such courts. That, again, is a rule to be generally administered in the equity courts. So far as they exercise their discretion, violating no fixed rules of equity, such discretion is not reviewable here." That case falls far short of the position claimed by the respondent in the case in hand.
We think some of the rulings made by the learned referee, which have been incidentally referred to, were somewhat doubtful. However, as the views which we have already expressed lead to a reversal, we need not protract this opinion to discuss them.
Judgment reversed and a new trial ordered, with costs to abide the event.