author: Grey, Y. C.

text:
    The Knickerbocker Trust Company v. The Penn Cordage Company, et al.
    [Filed June 13th, 1903.]
    1. In cases where personal property is mortgaged without change of possession, the chattel, mortgage is void as to creditors of the mortgagor., unless it be recorded in the book directed by the chattel mortgage statute to be provided.
    2. The record of a chattel mortgage in the real estate mortgage bool? does not relieve the chattel mortgage of its invalidity as to the creditors of the mortgagor.
    3. Whether the failure to record a chattel mortgage according,to the statute is the fault of the mortgagee or of the clerk is not material. The statute declares a chattel mortgage to be void as to creditors of the mortgagee unless certain things be done; one of these is that it-be recorded according' to the statute. The chattel mortgage is, in law, void as to such creditors, unless it is, in fact, recorded as required by the statute.
    On bill, answer and proofs, upon reopening of testimony.
    This cause was heretofore argued in eoctenso, and an opinion given on the whole case. See 17 Diclc. Gh. Rep. 62 On hearing that argument the vice-chancellor understood from counsel then present, that the complainant admitted that its mortgage had not been recorded as a chattel mortgage, and that it was ineffectual as a chattel mortgage against the claim of the creditors of the defendant Penn Cordage Company, mortgagor.
    When that opinion was pronounced the counsel for the complainant insisted that it was not intended by him to admit the invalidity of the complainant’s mortgage as a chattel mortgage; that he had supposed that he had submitted that point to the vice-chancellor for consideration and determination. The counsel for'the defendants were consulted as to this misunderstanding, and, by agreement, the testimony in the cause has been reopened on the single point: “Is the complainant’s mortgage valid, under the Chattel Mortgage act, against the claim of the creditors of the mortgagor ?” This question has been argued by counsel upon the following stipulation and admission of facts:
    “It is stipulated and agreed by and between the parties hereto as follows:
    “(1) That on or about April 7th, 1896, the original mortgage from the Penn Cordage Company to the Knickerbocker Trust Company, as trustee, dated February 1st, 1896, which has heretofore been put in evidence and marked Bmliibit 0 5 herein, was sent to the clerk of Burlington county, Mount Holly, New Jersey, enclosed in a letter, which was in the following terms:
    “April 7th, 1896.
    “Dear Sir — At the request of the Knickerbocker Trust Company of this city we enclose a discharge of mortgage recorded in your office, executed by William,Keen to Adolph Segal, the discharge being executed by Howard Lippineott, Segal’s assignee.
    “Kindly satisfy this mortgage of record in your office, and simultaneously record in your office the enclosed mortgage covering the same property, executed by the Penn Cordage Company to the Knickerbocker Trust Company as trustee.
    “On receipt of a memorandum of your fees for satisfying the old mortgage and recording the new one, we will promptly remit.
    “So soon as the old mortgage is discharged of record and the new one recorded, kindly wire the Knickerbocker Trust Company, No. 66 Broadway, this city, to that effect,' at the expense of the trust company.
    “Yours very truly,
    “Davies, Stone & Auerbach.
    “To the Clerk of Burlington County,
    Mount Holly, N. J.
    “(2) That the mortgage executed by William Keen to Adolph Segal, referred to in said letter, had theretofore been duly recorded as a mortgage of real property in a book set apart for the recording of real estate mortgages, and also as a chattel mortgage, in a book set apart for the recording of chattel mortgages, by the clerk of Burlington county, and that the discharge of said mortgage, referred to in said letter was likewise duly recorded and entered in both of said books. That said new mortgage, to wit, said mortgage from tho Penn Cordage Company to the Knickerbocker Trust Company, as trustee, was thereafter, to wit, on'the tenth day of April, eighteen hundred and ninety-six, recorded by the clerk of Burlington county, New Jersey, in a book kept by him, and designated Book A 4 of Mortgages, at page 458, etc., which book" was one of the books provided by the clerk of the county for registering or recording mortgages of lands, tenements and hereditaments lying and being within his county.
    “(3) That the original was returned to the Knickerbocker Trust Company by the clerk of Burlington county, New Jersey, bearing the following endorsement, .subscribed by said county clerk:

      “Received April 10th, 189G, recorded in the clerk’s office of Burlington county, at Mount Holly, in Book A 4 of Mortgages, folio 458, etc.
    “William W. Worrell,

      “Cleric.

    “ (4) That the said mortgage- or conveyance heretofore marked Exhibit G 5, intended to operate as a chattel mortgage, was not, in fact, accompanied by an immediate delivery nor followed by an actual or continued change of possession of the things mortgaged.
    “15) That the clerk of Burlington county, from the time chattel mortgages were required to be recorded, and prior to and upon April 10th, 1S9G, kept two sets of books in his office, one set of which was provided for registering or recording all mortgages of lands, tenements and hereditaments lying and being within his county, and the other of which was provided for the purpose of recording therein the instruments by the acts concerning chattel mortgages directed to be recorded; that the mortgage in question was recorded in said Book A 4, which was a book of the former set, and was not recorded in a book'of the latter set.
    “Counsel being present it is agreed that Mr. Humphreys, counsel for complainant, will serve copies of his brief on all counsel in the case, with the exception of Mr. Archer, who has notified Mr. Humphreys that his client is not interested in this particular dispute, and that said counsel will reply to said brief within seven days thereafter, and serve a copy of their briefs upon Mr. Humphreys, who will reply thereto within seven days.”
    The truth of the facts contained in stipulations 1, 2, 3, 4 and 5 is admitted. Counsel for defendants object to the admission of the facts set forth in stipulations 1 and 2 as being irrelevant. Counsel'for the complainant object to the admission of the facts set forth in stipulation 5 as being irrelevant.

      Mr. 'John B. Humphreys. (with Messrs. Davies, Stone & Auerbach, of the New York bar), for the complainant.

      Mr. Charles V. D. Joline, for the defendant Claud S. Fries.

      Mr. Joseph H. Gaskill, for the defendant the Pennsylvania Eailroad Company, a judgment creditor.
   Grey, Y. C.

Two objections are made against the validity of the complainant’s mortgage as a chattel mortgage.

First. It is contended that the affidavit of consideration does not sufficiently. state the consideration of the mortgage. The whole case shows that the true consideration of the-mortgage was the securing the payment of the bonds described in the mortgage. The affidavit declares it to be “to secure the payment of $100,000 of the bonds described in said mortgage!” The inquirer is. thus referred to the mortgage itself, to which the affidavit is appended, for further information as-to the details of the consideration. He there finds a full statement of the scheme for the.raising of money by the issue of bonds to be secured by this mortgage. It. differs in no essential particular • from the usual methods followed in effecting the issue of bonds upon the security, of corporate property. The affidavit of consideration, taken with the statements in the mortgage'itself, to which it refers, sufficiently meets the requirements of the statute (Gen. Stat. p. 2113 § 52), as interpreted in the case oí. Fletcher v. Bonnet, 6 Dick. Ch. Rep. 615, by the court of appeals, where it was held that an express reference in .'the affidavit of consideration to the matters contained in the mortgage, made the recitals thus referred to a part of the affidavit.

The complainant’s mortgage is not invalid as a chattel mortgage for want of a proper affidavit of consideration.

Secondly. The defendants insist that the complainant’s mortgage was not recorded as a chattel mortgage in the manner required by the Chattel Mortgage act. This is the substantial ground on which the complainant’s mortgage is challenged.

It is undisputed that this mortgage was not recorded as a' chattel mortgage in the book provided by the county clerk for that purpose.

It was, however, recorded in the book provided by the clerk for the record of real estate mortgages, and this record preceded the claims of the defendant creditors, who now challenge its validity as a chattel mortgage.

The complainant insists that a chattel mortgage becomes recorded, within the meaning of the Chattel Mortgage act, from the moment it is lodged with the clerk for record, and is ostensibly received by him for that purpose; that although it may be recorded in the wrong book, or may never be recorded in fact, yet it is,, from and-after its deposit with the clerk, forever recorded in,law, and that creditors (who, if they examined the chattel mortgage books, would, as a matter of fact, find no record of any such mortgage) must be held, as a matter of law, to have had constructive notice of the deposited, though misrecorded or non-reeorded, mortgage.

The system of constructive notice, based on the various recording acts, is purely statutory. To ascertain whether an instrument has. been so recorded as to give constructive,notice of its existence, the requirements of the statute, which, makes, the record of that particular instrument notice, must, be, observed.

At the common law, the fact that the possession of .chattels remained with the chattel mortgagor was, as between creditors of the mortgagor and the mortgagee, of itself prima facie.evidence that the mortgage was fraudulent. Miller v. Pancoast, 5 Dutch. 250, 254; Fletcher v. Bonnet, 6 Dick. Ch. Rep. 619 (Court of Appeals).

While this presumption attended the chattel mortgage, it was held that the chattel mortgagee might relieve himself of the presumption that his mortgage was fraudulent, by proof that the leaving of the goods in the possession of the chattel mortgagor was not, in fact, fraudulent. Runyon v. Groshon, 1 Beas. 86; Miller v. Pancoast, 5 Dutch. 254; Roe v. Meding, 8 Dick. Ch. Rep. 355; affirmed on appeal, 8 Dick. Ch. Rep. 365.

The state of the law in 1858 (when Runyon v. Groshon was decided, declaring chattel mortgages to be, prima facie, fraudulent, when unaccompanied by change of possession of the mortgaged goods) tended to prevent the use of personal property as a basis of credit, unless by way of pledge and actual delivery of possession. It placed the holder of a chattel mortgage at the disadvantage that his security was, prima facie, deemed to be fraudulent, and put upon him the burden of affirmatively proving that it was taken without fraudulent purpose.

In order to enable the owner of personalty, while retaining its possession, to mortgage its value, and to relieve the holder of such a mortgage from the imputation of fraud, and, at the same time, to warn all who might give credit to the owner, because of his possession of the goods, that there was an outstanding claim upon them, the first chattel mortgage statute was passed.

That act declared that ever}'' conveyance intended to operate as a mortgage of goods and chattels which should not be accompanied by an immediate • delivery, and followed by an actual and continued change of possession of the things mortgaged, should be absolutely void, as against the creditors of the mortgagor, unless the mortgage, or a true copy thereof, should be filed as • directed in the succeeding section of that act. P. L. of 1861,■ p. 498 § 1.

- The succeeding section directed that the chattel mortgage should be filed in the clerk’s (or register of deeds) office, and that that officer should endorse thereon the time of receiving the same.

The other provisions of the act of 1864 direct the filing a copy of the chattel mortgage and statement exhibiting the interest of the mortgagee, under penalty that the mortgage should cease to be valid, as against creditors, if that were not done as prescribed by that statute.

■ If the mortgagee obtained his mortgage to be filed as directed by the act, he was relieved from the presumption that it was fraudulent. The burden of seeing that the statutory requisites were.actually performed was cast upon him. If they were not observed, his mortgage was void as to creditors of the mortn gagor.

While that statute was in force, if a chattel mortgage had been sent to a clerk’s office by a mortgagee, and had been received by the clerk, but had not, in fact, been filed by him, as directed by the second section, it would, as against creditors of the chattel mortgagor, have been void by the express words of the statute. Nothing in the act declared that depositing it with the clerk relieved it of the statutory invalidity which attached if it was not filed- Nor did the act declare that sending or delivering it to the clerk was a filing of it. It was void, as to creditors, if not filed as directed by the act, no matter how that incident was occasioned.

In 1885 the Chattel Mortgage act was revised, and so changed, that, instead of filing the chattel mortgage in order to make it valid against the creditors of the mortgagor,' it was required that it should be recorded. P. L. of 1885 p. 819.

It is the provisions of this act which affect the chattel mortgage presently in controversy.

The fourth section of the act of 1885 declares:

“That every mortgage or conveyance intended to operate as a mortgage of goods and chattels hereafter made, which shall not be accompanied by an immediate delivery, and followed by an actual and continued change of possession of the.things mortgaged, shall be absolutely void as against the creditors of the mortgagor and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, having annexed thereto an affidavit or affirmation made and subscribed by the holder or holders of said mortgage, his, her or their agent or attorney, stating the consideration of said mortgage, and as nearly as possible the amount due and to grow due thereon, be recorded as directed in the succeeding section of this act; provided, that nothing contained in this act shall be taken, construed or held to apply to any mortgage of personal property included in a mortgage of franchises and real estate heretofore or hereafter made by any railroad company, and which hath been or shall be recorded or registered as a mortgage of real estate in every county in which such railroad, or any part of it, is or shall'be located, and it shall not be necessary to record as a chattel mortgage any such mortgage as is in this proviso described.”

The court' of errors and appeals has declared that the same legislative purpose which inspired the previous act requiring the filing of a chattel mortgage, attends upon the new act requiring that it be recorded. Roe v. Meding, 8 Dick. Ch. Rep. 367. Both statutes are intended to protect the creditors of the mortgagor. Ib. 366.

The phrasing of this act indicates a clear legislative intent that chattel mortgages shall be void, as against 'the creditors of the mortgagee, in cases in which possession is not taken of the chattels mortgaged, unless certain named incidents prescribed in the act are performed. The fourth section, as above shown, requires that an affidavit of the holder be annexed stating the consideration of the chattel mortgage and the amount due and to grow due thereon, and that the mortgage be recorded as directed by the succeeding section of the act. The fifth indicates in what county its record shall be made. The sixth prescribes that no mortgage shall be recorded rinless it be acknowledged or proved, and the acknowledgment or proof be certified thereon.

The seventh section provides that the clerk shall record the chattel mortgages in accordance with the provisions of the act, and that he shall enter at the foot of the record of each instrument so recorded, the time when it was received by him to be recorded, and shall endorse on each instrument when recorded as aforesaid, the time when the same was delivered to him to be recorded, with the book and page in which the same has been recorded. These are all prescriptions of the duties of 'the clerk, and do not deal with the effect of the record as notice to creditors of the mortgagor. Nothing either in this section or any other part of the statute prescribes that the clerk’s entry at the foot of the record, or endorsement on the mortgage, of the time when it was received, shall; as against a preditor, be evidence that the mortgage was from that time to be deemed to have been recorded. Nothing in the act provides that the clerk shall, when he receives the chattel mortgage, mark on it the time when he receives it, and record it as of that date. The statute directs these things to be done after the chattel mortgage has been recorded.

The observance of these requirements of the seventh section may oblige the clerk to record a chattel mortgage as soon as it is received. This is somewhat inconvenient, but is in no essential particular different from the necessity to enter a judgment and record an execution as soon as received, in. order that their lien may at once be effectual.

In every section in which the statute deals with the time when the chattel mortgage shall become valid against creditors, that time is declared to be when it is recorded, and in direct terms it further prescribes that if not recorded according to the requirement of the statute, the chattel mortgage shall be void.

In order that a chattel mortgage shall be valid, it is imperatively necessary that the statutory prerequisites shall be per-' formed. Graham Button Co. v. Spielman, 5 Dick. Ch. Rep. 123; affirmed on appeal, 5 Dick. Ch. Rep. 796. A failure to perform any one of them leaves the chattel mortgage absolutely void as to the creditors of the mortgagor. The same principle runs through the discussion of the Chattel lifortgage act in the case of Roe v. Meding, 8 Dick. Ch. Rep. 350, in che court of appeals.

By far the most important of these statutory requirements for-the protection of creditors is that which prescribes that the chattel mortgage must be recorded as directed by the succeeding section of the act. Although every 'other statutory essential may have been performed, all are of no value, as notice to the creditors of the mortgagor, unless the chattel mortgage be recorded as required by the statute. It is this final act which, in law, notifies the creditors of the mortgagor. The latter, knowing that constructive notice is given them by the statutory record, may protect themselves by examining the record which the statute directs to be made.

The complainant's contention that its chattel mortgage was, in contemplation of law, recorded from the moment it was lodged with the clerk is opposed by the express words of the act itself, which, in terms, declares that a chattel mortgage is void unless it be recorded.

At the time the act respecting chattel mortgages was passed, in 1885, the recording act concerning deeds provided that, if a deed were either recorded or “lodged for that purpose with the clerk,” it should operate as notice. Sup. Rev. 1886 (tit. “Conveyances”) p. 133 §§ 8, 9. The statute which provided for the recording of real estate mortgages also declared that, if a mortgage be recorded or “lodged for that purpose with the clerk,” it should be notice. Rev. 1877 (tit. “Mortgages'”) p. 706 § 22.

This course of legislation upon a kindred subject, existing when the act was passed 'which provided for recording of chattel mortgages, shows, that when the legislature intended to make the lodging for record as effective as the record itself, it definitely expressed that purpose. Deeds and real estate mortgages had theretofore been declared recorded when lodged for that purpose. Chattel mortgages were required to be actually recorded. Lodging for record was not declared to be effectual as to them.

The ninth section of the Chattel Mortgage act is also explicit in its declaration that

“every chattel mortgage hereafter recorded pursuant to the provisions of this act, shall be valid against the creditors of the mortgagor and against subsequent purchasers and mortgagees from the time of the recording thereof,”

not from the time it shall be lodged with the clerk for record.

This prescription of the terms upon which chattel mortgages theretofore presumptively 'fraudulent, should be held to be valid, was entirely with the legislative power. It is not for the courts to extend to them greater privileges to the disadvantage of creditors, which the legislature has seen fit to withhold. The words of the statute, requiring chattel mortgages to be recorded in order to be valid, have a clear and intelligent meaning. No construction by the courts should change the plainly-expressed will of the legislature.

It must be held that a chattel mortgage is void as against the creditors of the mortgagor, unless it be actually recorded as required by the chattel mortgage statute.

The next question is whether the complainant’s chattel mortgage was in fact recorded as required by the statute.

It appears by the stipulation that the complainant’s chattel mortgage was recorded in the real estate mortgage book, but not in the chattel mortgage book. The complainant contends that if a chattel mortgage is recorded in the clerk’s office, it is a sufficient compliance with the requirements of the fourth section.

Any examination of the chattel mortgage statute makes it entirely clear that it was the legislative purpose in passing that act to prescribe 'a method whereby chattel mortgages (which theretofore could not be recorded) might thereafter be recorded, and thus be relieved from the imputation of fraud and from the inconvenience which attended upon the preservation and examination of a file. The things which the statute requires to be done in order to relieve the chattel mortgage from the declaration that it is absolutely void are, as above stated, in the nature of conditions. The statute directs (section 7) that the clerk shall provide books in which to record chattel mortgages.

The stipulation in this case admits that the clerk of Burlington county, in compliance with the provisions of the Chattel Mortgage, act, had provided and kept books for the recording of chattel mortgages. These books were separate and distinct from the books in which real estate mortgages were recorded. This practice accords with the provisions of the Chattel Mortgage act, and is, I believe, invariable in every county in the- state.

It is not contended that the statute directs that chattel mortgages should be recorded in the real estate mortgage books, but the defendant insists that the provisions of the fifth section are fully observed when the chattel mortgage is recorded in the clerk’s office, no matter in what book.

If such be the meaning of the statute, then chattel mortgages may be recorded in deed books or judgment books, or in the minutes of the courts, or, indeed, in any book, so that it be in the clerk’s office. Such a construction would defeat the whole design of the statute, which clearly arranges for and contemplates the recording of chattel mortgages in a book to be specifically provided for that purpose by the clerk, which creditors may examine in order to ascertain whether a party-in possession of chattels has mortgaged them.

It is a recording in this chattel mortgage book, provided for by the chattel mortgage statute, which the law recognizes as a recording. It is this book which the intending creditor of the mortgagor examines to see whether his possible debtor has given a chattel mortgage upon the goods, the possession of which by him might lead the intending creditor to give, him credit. A recording in the real estate mortgage book is no more a compliance with the provisions of the Chattel Mortgage act than would be a recording in a deed book or any other book not recognized by the chattel mortgage statute.

To hold that such a recording of a chattel mortgage is effectual would be to make the statute and the record not a protection to creditors of the chattel mortgagee, but a trap to mislead and deceive them.

The complainant insists that its mortgage, as a charge upon the personalty, ought not to be held invalid because of the omission of the clerk to record it in the proper book; that it ought not to be held responsible for the mistake or omission of a public officer.

The chattel mortgage statute declares that certain things must be done in order to prevent a chattel mortgage from being held invalid. Several of these things must be done by public officers. The affidavit showing the consideration of the chattel-mortgage must be taken before some officer authorized to take affidavits. ILe may omit to annex or sign the jurat. This would invalidate the record. The execution of the chattel mortgage is required by the act to be acknowledged, and the acknowledgment to be certified on the mortgage. This must be done by a public officer. If he insufficiently does it, or omits to do it, the record of the chattel mortgage is insufficient. Both these fatal defects might arise by the omission of public officers. The reason they destroy the efficiency of the chattel mortgage as against creditors of the mortgagor is, that they show that the statutory requirements have not been performed. The provision of the statute requiring the recording of the chattel mortgage by the clerk, is as essential as the requirement that the affidavit of consideration be made, or that the acknowledgment be certified. The failure to perform any of these essentials for any reason, no matter by whose fault, invalidates the mortgage as to creditors of the mortgagor. The statutory conditions are not fulfilled.

Under this construction of the statute the actual record of a chattel mortgage, in the chattel mortgage book provided by the statute, is a necessity to its validity as against creditors of the chattel mortgagor. From this point of view it is of no significance whether the omission efficiently to record the complainant’s mortgage as a chattel mortgage, was occasioned by the fault of the complainant or of the clerk.

The transaction regarding the recording of this mortgage took place wholly by correspondence between the complainant company and the clerk, so that it is possible to know with certainty just what the clerk was instructed to do. The stipulation sets forth a' copy of the letter of instructions which the complainant sent to'the clerk with the mortgage when it was forwarded to-him for recording.

If the omission of the clerk to record this paper as a chattel mortgage has any relevancy in this case, all his responsibility was cast upon him by this letter. An examination of the complainant’s letter will show that the circumstances under which the paper was sent for record, leave it in some doubt whether the-failure to record it as a chattel mortgage was the fault of the-complainant or of the -clerk.

It-may, I think, he forcefully argued that the duties of the clerk in recording instruments are ministerial, not judicial; that it is his business to record any paper sent to him in that book, in which, by law, such a paper should be recorded, if the paper itself, or the instructions sent him indicate to a layman’s comprehension in what book the paper should be recorded; but that if the paper does not itself plainly indicate its character, and the letter of instructions does not direct the clerk'in which book it should be recorded, it is not the clerk’s duty to decide in a judicial wajr, the legal effect of the instrument and to record it accordingly.

The instrument in this case is endorsed “Mortgage,” not "Chattel Mortgage.” Nothing in the way of endorsement indicated that it was a chattel mortgage. Its contents, if read by one who knew the requisites of a chattel mortgage, showed that it had those characteristics. Whether it is the duty of the clerk to pass such a judgment upon instruments sent for record, and to record them accordingly, is, I think, somewhat doubtful. The complainant’s letter did not inform the clerk that the paper sent was a chattel mortgage, nor did it instruct the clerk to record the paper as a chattel mortgage. Whether, under such circumstances, the clerk was bound to have recorded the paper in question as a chattel mortgage also appears to me to be doubtful. He did not endorse upon the paper any certificate that he had recorded it as a chattel mortgage.

If the clerk received explicit orders to record a chattel mortgage in the chattel mortgage book, and for any reason failed to do so, that mortgage would be invalid as to creditors. If the clerk’s omission to perform his duty to the mortgagee works an injury to the mortgagee, he has his remedy against the clerk for damages, and cannot maintain that the clerk’s failure makes as effectual a record as against the creditors of the mortgagor, as if the instrument had actualty been recorded.

It seems to me, however, that it is not necessary to decide these questions as to whose fault it was that the mortgage was not recorded in the chattel mortgage book. The statute, in my opinion, requires that the chattel mortgage, in cases where no possession is taken of the goods mortgaged,, must, in order to be valid against the creditors of the mortgagor, be actually recorded in the book directed by the statute to be provided. If it be not ■so recorded, the chattel mortgage is void as to such creditors, no matter what may have occasioned the omission to record it as required by the statute.

A decree will be advised in accordance with the views above expressed.


source: Caselaw Access Project

author: Grey, V. C.

license: Public Domain

text:
    Samuel Moore v. Joseph Galupo.
    [Filed July 18th, 1903.]
    An agreement, in writing, for the sale of lands for a total price of $54,000 provided that $250 should be paid on the date of the agreement, $250 on the 3d day of June, and $9,500 on the delivery of the deed on or before the 1st day of the next April; “the remaining sum of $44,000 to be secured by mortgage or mortgages on said premises bearing six per cent, per annum interest.” The proposed vendee paid the first two cash installments of the contract price, and refused to go further with the transaction. The proposed vendor filed a bill to compel the specific performance of the agreement. — Held, the written contract shows that the parties intended $10,000, part of the contract price, should be paid in cash on or before the delivery of the deed, and that the remaining $44,000 should be secured, upon some unexpressed term of credit, by mortgage or mortgages upon the premises, bearing interest at six per cent, per annum. It does not show that the parties had come to any agreement as to how many mortgages should be given; nor what should be the time or times of payment of the mortgage-money; nor to whom the mortgage or mortgages should be made; nor (if more than one mortgage should be made) whether they should be concurrent or successive liens, or, if successive, in what order of precedence. — Held, further, the written .agreement is so uncertain and inconclusive, as to essential incidents of the contract, that no decree for specific performance! can be made.
    On bill for specific performance of contract. Answer and proofs.

      This bill is filed by tlie complainant vendor to compel the specific performance by the defendant vendee of an agreement for the purchase of a tract of land lying at the southwest corner of Atlantic and Presbyterian avenues, in Atlantic City.
    The hill is based upon a written contract in the words and figures following:
    “Articles of xlgreement, made this twenty-ninth day of May, in the year of our Lord nineteen hundred and one, between Samuel W. Moore, and C. May Moore, his wife, Enoch H. Moore, and Harry S. Moore, of Atlantic City, N. J. and Joseph Galupo of the same place,
    Witnesseth, that the said parties of the first part, for and in consideration of the sum of fifty-four thousand dollars, to be paid and satisfied as hereinafter mentioned, and also in consideration of the covenants and agreements hereinafter mentioned, made and entered into by the said party of the second part, do agree to and with the said party of the second part, that they the said parties of the first part, will well and sufficiently convey to the said party'of the second part, his heirs and assigns, by deed of general warranty, free from all encumbrance except as hereinafter stated, on or before the first day of April, a. d. 1902, all that lot, tract or parcel of land and premises hereinafter particularly described,' situate, lying and being in the city of Atlantic City, in the County of Atlantic and State of New Jersey:
    “Beginning at a point in the Southwest corner of Atlantic and Presbyterian Avenue, and runs thence along Atlantic Avenue in its Southerly line, sixty feet; thence (2) Southerly parallel with Presbyterian Avenue one hundred feet; thence (3) Easterly parallel with Atlantic Avenue sixty feet; thence (4) Northerly along the Westerly line of Presbyterian Avenue one hundred feet to the place of beginning.
    “And the said Joseph Galupo, for himself, his heirs, executors and administrators, does covenant, promise and agree to and with the said parties of the first part, their heirs, executors, administrators and assigns, that he the said party of the second part, will pay and satisfy, or cause to be paid and satisfied unto the said parties of the first part, the said sum of fifty-four thousand dollars, as and for, the purchase money of the foregoing described land and premises, in the following' manner, that is to say, two hundred and fifty dollars on the date hereof; two hundred and fifty dollars on June third, next; nine thousand and five hundred dollars on delivery of deed to party of second part, on or before the first day of April next, and the remaining sum of forty-four thousand dollars to be secured by mortgage or mortgages on said premises bearing six per cent, per annum interest. Title to the said premises is to be insured by the West Jersey Title and Guaranty Co., the expenses of which is to be paid by party of the second part. Expenses of the said premises are to be adjusted as of the date of settlement.
    “And it is further agreed by the parties to these presents, that the said party of the second part, his heirs, and assigns, may enter into and upon the said land and premises on the delivery of deed, and from thence take the rents, issues ancl profits to his and their us?. And for the performance of all and singular the covenants and agreements aforesaid, the said parties do bind themselves and their respective heirs, executors and administrators, and they hereby agree to pay, upon failure to perform the same, the sum of five hundred dollars, which they hereby fix and settle as liquidated damages therefor.
    “In Witness whereof, the said parties have hereunto interchangeably set their hands and seals the day and year first above written.
    “Samuel W. Moore, [seal.]
    “G. May Moore. [seal.]
    “Enoch H. Moore, [seal.]
    “Harry S. Moore, [seal.]
    “Joseph Galupo. [seal.]
    “Signed, sealed and delivered in the presence of
    “H. W. Lewis.”
    The bill alleges that upon the making of the agreement, Galupo, the defendant, paid, to the complainant $250 as an installment of the contract price, and that on June 3d, 1901, the defendant paid a second installment of $250 on account of that price; that on the 1st day of April, 1902, the complainant presented to the defendant a deed for the premises, invited him to take possession of the land and demanded of him that he should pay the sum of $9,500, adjust the expenses of the premises up to the last-named date and secure the remaining sum of $-1-4,000 by mortgage or mortgages upon the premises agreed to be conveyed, bearing six per cent, per annum interest, which invitations the bill alleges the defendant refused to accept.
    The prayer of the bill is that the defendant be decreed specifically to perform his agreement, and to pay to the complainant the said sum of $9,500,. with interest from April 1st, 1902, and to secure, by mortgage or mortgages upon the premises, bearing interest at six per cent., the remaining sum of $44,000, and to adjust and settle with the complainant to the last-named date the expenses of the complainant.
    The defendant, answering the bill, denies that at the time the contract was made, or since, the complainant was well entitled in fee-simple to the lands described in the bill. He admits the making of the agreement, a copy of which is set forth in the bill, and the payment of the two installments of the contract price; denies the comjdainant’s fender of the deed and invitation to the defendant specifically to perforin the contract, averring that by the terms of the contract the complainant'agreed to convey the premises clear of all encumbrances except as stated in the agreement, and that at the time of the alleged tender of the deed, the premises had been encumbered by an additional mortgage for $30,000, placed thereon without the knowledge or consent of the defendant.
    The answer of the defendant expressly avers that the agreement is so indefinite and uncertain in its prescription of the manner in which the defendant should pay and satisfy the purchase-price of the land as to be entirely incapable of performance. The answer recites that clause of the agreement which provides that $44,000 of the purchase-price should “be secured by mortgage or mortgages on the premises, bearing six per cent, per annum interest,” and insists that the agreement “wholly fails to provide for how long such mortgage or mortgages are to be drawn, what are to be the terms and conditions thereof, or when and how payable,” or in fact anything to disclose with certainty what is required to be done on the part of the defendant, to constitute a compliance with the terms of said agreement. The defendant prays that he may have the same benefit as if he had demurred to the complainant's bill.
    At the hearing the bill was amended by inserting an allegation that on March 20th, 1901, the defendant informed the complainant that he Avould not carry out the agreement at the time named, giving as his reason for the refusal that he had not the money to do so.
    The defendant amended his answer denying this allegation. The cause came to hearing on these pleadings.

      Mr. TJlysses G. Styron, Mr. William I. Garrison and Mr. ' Joseph II. Gaskill, for the complainants.

      Mr. Charles C. Babcock and Mr. Clarence L. Cole, for the defendant.
   Grey, V. C.

The argument of this cause presents but two points. The first is whether the placing of the $30,000 mortgage upon the premises by the complainant, the proposed vendor, after the agreement for sale had been made, but before the time had come for its performance, should deprive the complainant of the right to a decree for specific performance, in view of the fact that the agreement calls for a conveyance of a title free from all encumbrance, except as stated in the agreement.

The practice in cases seeking specific performance seems to have established the rule that it is sufficient if the party contracting to sell, has a good title at the time the decree is to be carried into effect, the direction being to ascertain whether the vendor can make a title under the decree, not whether he could make a title at the time of executing the agreement. Langford v. Pitt, 2 P. Wms. 630; affirmed on appeal. In that case the decree directed a master to inquire whether the plaintiff (vendor) can make a title, and, if he can, the purchase-money to be paid by defendants. The same course of procedure was observed in Braybroke v. Inskip, 8 Ves. *417, in which the litigation turned upon exceptions taken to the master’s report upon such a reference. In Coffin v. Cooper, 14 Ves. *205, this method was recognized. It was claimed by the party resisting performance, that the rule was that if the vendor could not make title at the date of the master’s report the purchaser had a right to be discharged. Lord Eldon declared there was no such rule, saying if it appeared that the vendor upon getting in a term or procuring an administration would have a title, the court would put him upon terms to do speedily the tiling required to perfect the title. This practice has received the approval of the court of appeals of this state in Oakey v. Cook, 14 Stew. Eq. 350, where it declared that the existence of mortgages on the vendor’s property was not a violation of the covenant to convey a good title, so as to deprive him of the right to specific performance. That he was only required to remove the encumbrances when the deeds should be delivered.

The whole case shows that the defendant’s refusal to perform was in no degree based upon the existence of the mortgage lien placed upon the premises by the complainants. If those mortgages were presently tendered to .the defendant canceled, his hostility to performance upon other grounds would remain, and from every indication in the cause, would be just as strenuously maintained.

It is therefore of no significance that when a deed was tendered the defendant, this mortgage was a lien on the title. He was invited to perform the contract. If he had told the complainant that he was willing to accept the deed upon the cancellation of the mortgage, and the complainant had refused to obtain it to be canceled, the circumstances would have presented a different aspect. It clearly appears that the defendant was at all events determined not to perform the contract, an'd that he made known this determination to the complainant. Under such circumstances there was no need of formal tender of a deed. Maxwell, Administrator of Pittenger, v. Pittenger, 2 Gr. Ch. 165; Oakey v. Cook, 14 Stew. Eq. 363 (Court of Appeals).

The second contention of the defendant, resisting specific performance of this contract, is that the agreement itself is so uncertain and indefinite in its terms that this court cannot be assured of what the parties intended and agreed to do, and is therefore unable to make a decree for specific performance.

This objection is based on the clause which declares the manner in which payment of the purchase-price shall be made. The agreement is dated May 29th, 1901. By it the whole purchase-money is declared to be $54,000, which, it is provided, shall be paid by the defendant in the following manner: $250 on the day of the date of the agreement — May 29th, 1901; $250 on June 3d (then) next;- $9,500 on the delivery of the deed to the defendant, on or before April 1st (then) next; and “the remaining sum of $44,000 to be secured by mortgage or mortgages on said premises bearing six per cent, per annum interest.”

The defendant insists that this contract is lacking in certainty and definiteness in respect to the terms of the purchase-price, which is one of the essential features of the contract; that the terms of the contract make it plainly manifest that the parties intended only part of the purchase-money to be paid in cash, and do not show in what mode the residue should be paid.

In the case of McKibbin v. Brown, 1 McCart. 17, Chancellor Green said that no specific performance of a contract can be decreed in equity unless it be actually concluded and be certain in all its parts. If the matter still rests in treaty, or if the agreement in any particular be uncertain or undefined, equity will not interfere! The' learned chancellor declared that this doctrine is uniformly recognized in all the cases, English and American. On appeal' to the court of errors and appeals the decree of the chancellor' in that case was affirmed. S. C., 2 McCart. 498. In Brown v. Brown, 6 Stew. Eq. 651, the court of appeals declared that specific performance would not be decreed unless the existence and terms of the contract be clearly proved. If it be reasonably doubtful whether the alleged contract was finally closed equity will not interfere.

The principle stated appears to be elementary. No decisions question it. The cases submitted to judicial determination present only questions whether the particular agreement sought to be enforced is in its terms so definite and conclusive that the rule does not apply. An examination of the decisions in this state which have applied or distinguished the application of the rule, will aid in the solution of the present dispute. In the McKibbin Case the contract in terms declared that the complainant should have the privilege of re-leasing the premises for a named sum, “'and that the times or credits to be given by the defendant (the lessor) to the complainant (the lessee) should be the subject of arrangement between the parties.” Chancellor Green held that the credits to be given were of the essence of the contract; that this term was not certain or defined by the agreement, and that this court had no power to decree that the defendant should release the property for such credits of payment as this court should deem reasonable and just; that in such case this court would both make the contract and compel its performance, and he refused to aid the complainant, because of the uncertainty as to this phase of the transaction. His ruling was affirmed on appeal. In that case the contract by actual expression declared that credits were to be given, and that they were to be the subject of future negotiations between the parties. But the rule under discussion is not limited to contracts which in express terms declare that credit to be given shall be settled by further bargaining. It has been applied in all cases where by either expression or fair inference from the words used it appears the parties have not settled the question of credit given by fixing upon a definite time for payment.

In Potts v. Whitehead, 5 C. E. Gr. 55, the alleged contract was a written agreement that the complainant should for thirty days have the refusal of certain lands, which the defendant agreed to convey to him for $20 per acre. The terms to be $500 on execution of the deed and the balance on mortgage upon the land, with interest at six per cent. The complainant claimed that he had sent the defendant a letter (copy of which was produced) saying he had twice attempted the tender of the first payment upon the agreement made between them, and would meet the defendant (at named hours and places) “when I shall be ready to make tender of the money and execute the proper agreement thereupon.” Chancellor Zabriskie held (at p. 58) that if this referred to executing an agreement yet necessary to be made as to the time of pa3'ment of the bond and mortgage for the balance of the purchase-money, it showed that an important part of the essence of the agreement — the time for payment of that balance — was not yet agreed upon; that although this question, arising from the want of designation of any time when the great bulk of the consideration was to be paid, was not raised on the argument, it was too prominent to be passed without notice; that the situation left a substantial and material part of the contract yet open for negotiation; that it was a settled principle that equity will not enforce a contract, any material part of which has to be settled by negotiations between the parties. On appeal this judgment was affirm'ed by the court of appeals without, however, expressing any opinion on this point. S. C., 8 C. E. Gr. 515.

In the case of Nichols v. Williams, 7 C. E. Gr. 63, the alleged contract was in writing, and the complainant thereby agreed with the defendant to convey certain lands for the price of $150,-000. The defendant agreeing to pay that sum by conveying certain specified tracts of land, valued at $90,500, and “by executing two mortgages upon the property conveyed to him, one for $50,000 and one for $9,500.” It was not stated when these mortgages were to be pa3rable, or whether with or without interest, or at what rate of interest, nor to whom they were to be made. Chancellor Zabriskie held that it was evident that some time was to be given for the payment of the mortgages; that it was a material incident of the contract, left to be ascertained by subsequent negotiations; that a mortgage for $50,000, payable on demand, or one day after date, or a mortgage conditioned to pay that sum ten years after date would each comply with the terms of the credit stated in the bill, and he sustained a demurrer to the bill which sought to enforce the contract. In each of the last two cases the lack of certainty in the alleged contract in fixing the time when a credit to be given should terminate by payment of the purchase-price, was held to be fatal to the claim for its enforcement' by specific performance.

In Green v. Richards, 8 C. E. Gr. 32, the agreement was to sell a house and lot for $2,500, and “when there is $500 paid, and the back rent, I will give the deed and take a mortgage for $2,000.” Chancellor Zabriskie recognized the force of the general rule that when credit is to be given and the contract omits to fix a time of payment, the contract is too uncertain to be specifically enforced. He differentiated this case from the preceding cases of McKibbin v. Brown, Potts v. Whitehead and Nichols v. Williams, ubi supra, declaring that in those cases it appeared to be the intention of the parties that the time of payment should be postponed; that in the case before, him there was no agreement that the purchaser should have any credit; that in such case the mortgage should be made payable on demand.

Counsel for the complainant contends that the rule refusing' specific performance where the contract gives a credit without fixing a definite time for payment, is only applicable to agreements which contain a clause expressly declaring that the terms of the credit to be given-shall be the subject of future dealings between the parties, as in the McKibbin Case. He claims that in all other cases this court should follow the declaration of Chancellor Zabriskie, in Green v. Richards, 8 C. E. Gr. 35, and prevent the defeat of a fair contract by a technical objection, by presuming that it was the intention of the parties to give no credit. In that case the learned chancellor considered the effect of the words of the contract before him, and declared that there was no agreement for time, and that the purchaser was not entitled to credit. Having thus ascertained that the agreement, as framed by the parties, gave no credit, there was no occasion for any presumption ascribing to them an intention not to give credit. The learned chancellor had himself decided that to be the legal effect of the face of the contract. This dictum of Chancellor Zabriskie does not seem to accord with the view expressed by the court of appeals in affirming Green v. Richards, 8 C. E. Gr. 540, where, on the point in question, that court declared that “where nothing is said about the credit to be given, and there are no circumstances from which an inference can be made that it vjos the intention of the parties that the time of payment should be postponed, the money is payable immediately.”

Here is a clear declaration, by the unanimous voice of the court of appeals, upon a point directly in issue, that the circumstances of each case are to be considered to ascertain (if necessary, by inference) whether it was the intention of the parties that the time of payment should be postponed.

In the case now under consideration, the clause in the contract which deals with the purchase-money is divided into different portions. It is, I think, quite evident that the parties had in mind one thing to be done with reference to the several installments (amounting to $10,000) that came due prior to or on the day of the delivering the deed, which were to be paid; and quite another thing regarding the residue ($-44,000), which was “to be 'secured by mortgage or mortgages.” The portion of the purchase-money which it was provided should be paid was 'obviously intended to be paid in cash; the residue was just as obviously not intended to be paid in cash, but to be secured by mortgage for some unsettled, unagreed term of credit. This view is supported by the provision that the mortgage or mortgages should bear six per cent, per annum interest. If it had been intended that the mortgage or mortgages should be instantly payable, why provide that they should bear interest ? A mortgage instantly payable would draw interest by operation of law, but a mortgage payable at a future time would draw interest only from the time the money came to be due, unless express provision therefor be made in the mortgage. The insertion of such an interest clause supports the inference that a credit was intended, and -that this provision was necessary to entitle the complainant to interest on that part of , the purchase-money which was to be secured by mortgage.

This inference- is also supported by the fact that, if it was intended that all the purchase-money should be instantly payable on the delivery of the deed, there was no occasion for any provision for a mortgage. In such case there would have been no "remaining sum to be secured.55

But the omissions of the complainants5 contract to fix a time of payment is not the only element of uncertainty which prevents its specific performance. That contract provides that the sum of $44,000 should be secured by a mortgage or mortgages. This phrasing leaves it uncertain whether one mortgage should be made, or what number of mortgages more than one. It does not prescribe whether, if more than one mortgage should be given, they were to be concurrent or successive liens, nor whether or not they should precede all other mortgages, nor what should be their precedence between themselves.

It is plainly to be seen that these omitted matters were intended to be arranged between the parties when the mortgage or mortgages were to be given.

These elements of uncertainty affect incidents of the contract which are of the essence of its obligation. This appears at once that it is attempted to formulate a decree for its specific performance. Counsel for complainant, in his argument, proffers himself ready to accept a decree

“made in the terms of the agreement for a mortgage at the rate of interest provided, and for the sum stipulated, without saying on the face of the mortgage whether it is on demand, or for a year, or for any other stated period,” &c.

Counsel for the defendant at once replies that this proposition assumes that there is no difference between an agreement to pay money at a named time, and an agreement to secure it by mortgage. For such a mortgage as the complainant propose would, in legal effect, be payable at once, precisely as were the cash installments of the purchase-price, thus making the agreement an undertaking by the defendant to pay at once the whole purchase-price — $54,000—which the terms of their contract show was not intended by the parties.

It may, I think, be well asked why, as the contract was to secure the remaining $44,000 by a mortgage or mortgages, the defendant should be obliged to give a single mortgage for the whole of the residue? The contract, in express terms, declares that the remaining purchase-money shall be secured by one or more mortgages, but it fails to reserve to either party the right to decide which it shall be — one mortgage or two, ten or forty-four. Both parties must come to one mind as to this incident before the contract can be enforced. As they have not done so, it is apparent that the court cannot settle this incident by its decree for specific performance. To do this would impose upon one party or the other the acceptance of a term which was not finally agreed upon in their dealings and not expressed in their agreement. In short, the complainant asks the court both to. make a contract and decree its enforcement.

The agreement is, in the essential particulars named, so uncertain and inconclusive that no decree for its specific performance can be made.

This determination has been arrived at irrespective of the verbal testimony which was admitted as to the meaning of the parties in using the phrase in the contract “the remaining sum of $44,000 to be secured by mortgage or mortgages on said premises bearing six per cent, per annum interest.” That testimony was admitted over objection on the ground that the phrase used in the written contract was a latent ambiguity, such as might be explained by parol proof. The explanations given in the testimony of the complainant Moore, if they are to be considered, do not aid the complainants’ cause as to the certainty of the agreement, for he declares that the defendant, the other party to the written contract, knew that he was to give a mortgage, not for $44,000, as stated in the written contract which they signed, but for some uncertain sum, to be afterwards ascertained, being such portion of the $44,000 as the complainant might be unable to place on the premises on first mortgage. In one place he testified that the mortgages were to run for as short a period as he could get them; in another, that the second mortgage to.be taken from the defendant was to run for one year. In one place he says this was not put in the agreement because he did not know how much the second mortgage would be. In another place he says he does not know why. it was not put there. The written contract shows no such agreement.

The defendant, in his parol testimony, testifies that the complainant, when they were discussing the time at which the balance of the purchase-price over the $10,000 should be paid, said, “We will let this stay open — we will agree upon it later, on that question' — so that the contract was made without time being mentioned whatever;” that no time was fixed; that the complainant said, “Might give a first mortgage, and might have to take a second mortgage.”

The certainty of those terms of the agreement which are here in question, is in no way established by the oral proofs.

I have much doubt whether the written contract shows, in the clause under consideration, such an ambiguity in its meaning that parol proof ought to have been admitted. The testimony offered does not explain or make clear the supposed ambiguous phrase, but goes to show that, upon that particular term of the contract, the parties never did come to a final understanding, and left it open for subsequent conference and adjustment.

Whether the parol proof be considered or ignored, the whole effect of the-testimony goes to show that the parties have not concluded their agreement regarding either the number of the mortgage or mortgages to be given for the $44,000 residue of the purchase-money, or the time when it or they were to be payable, or the party to whom they were to be made, or, indeed, upon any of the several other matters above discussed which would have to be determined definitely before the specific performance of the agreement could be decreed. The complainants must seek their remedy at law.

I will advise a decree that the complainants’ bill be dismissed, with costs.


text:
    Josiah S. Du Bois v. Hermann Bormann et al., executors of Annie Malsch.
    [Filed July 22d, 1903.]
    An alleged contract was made under the belief of the proposers that they owned and had power to sell the subject-matter of the contract. The acceptor of the proposal received and accepted it under that belief. In actual fact the proposers had neither title to the subject-matter of the sale, nor power to sell it. — Held, the parties were incapable of making an agreement for sale. No decree can be made to enforce the specific performance of such an attempted agreement.
    On bill, answer and proofs.

      Mr. Spencer Simpson, for the complainant.

      Mr. G. Dore Gogswell, for the defendant the Industrial Manufacturing Company.

      Mr. Matthew Jefferson and Mr. John W. Wescott, for the defendants Hermann Bormann and Philip C. Adams, executors.
   Grey, Y. C.

(orally).

I can dispose of this matter now. The case has been elaborately tried, and the principles which must control in the disposition of it, I think, are quite apparent. The bill is filed by Josiah S. Du Bois against Hermann Bormann and Philip C. Adams, executors of the last will of Annie Malsch, and also against the Industrial Manufacturing Company, a defendant who makes no substantial defence, and appears to be a defendant solely for the purpose of preventing the transfer of some of its own stock.

The purpose of the bill is to compel the defendants to transfer to the complainant two certificates, Nos. .1 and 30, of the capital stock of the Industrial Manufacturing Company (one certificate is for one hundred and ten shares and the other for forty shares) and also all the right and interest of Frank Malsch, deceased, in and to certain royalties for the use of patents. There is a restraint out maintaining the status quo until the disposition of the case by the court.

The shares of stock in question are claimed by the bill of complaint to be the subject-matter of the contract sought to be enforced in this suit. This contract is evidenced by two letters, set out in words and figures on the face of the bill. The first letter is dated April 22d, 1902, addressed “Mr. J. S. Du Bois,” and tenders to Mr. Du Bois the interest, shares and royalties belonging to the Malsch estate, to be conveyed to him for $1,000 within one year.

“We, as executors, are willing to give you this option, and you can .secure the shares, &c., by paying cash.
“We are very truly,
“Hermann Bormann,
“Philip C. Adams,
“Executors."

This letter was received and replied to by another, dated April 28th, 1902, signed by the complainant, Mr. Du Bois, addressed “Messrs. Hermann Bormann and Philip C. Adams, Exrs. of the estate of Frank Malsch, deceased.” This letter of Mr. Du Bois acknowledges the receipt of the above letter of April 22d, and, without suggesting any variance from the terms of - the sale offered by that letter, accepts them.

Judge Wescott — Your honor reads the letters as addressed to the executors of Frank Malsch.

■The Vice-Chancellor — That is correct. I have examined the original letter. It is addressed “Messrs. Hermann Bormann and Philip C. Adams, Exrs. of the estate of Frank Malsch, deceased.” The copy set out on the face of the bill is a correct copy.

The defendants are stated in the bill to be executors of the last will of Annie Malsch, deceased. The bill prays that specific performance of the agreement set forth in the two letters may be decreed against the defendants Hermann Bormann and Philip C. Adams, executors as aforesaid, directing the defendants to convey the stock and the right to the royalties to the complainant, and prays that the defendants, in the meanwhile, be enjoined from disposing of these shares of stock, &c.

The defendants Bormann and Adams answer the bill; admit they are the executors of the last will of Annie Malsch, and that part of the assets claimed by the executors as belonging to the estate of Annie Malsch were the one hundred and fifty shares of stock. They also admit the .writing of the letters quoted above in the complainant’s bill, but they deny that the effect of those letters was to make a contract, and assert that they simply gave an option to the complainant. They say no consideration was paid, and that the two letters imposed no contractual obligations upon the defendants. They also admit that the complainant tendered the money referred to in the letters as the purchase-price. Their answer then alleges that false representations were made by complainant as to the financial condition of the Industrial Manufacturing Company, whose stock was the subject-matter of the sale, and the intimation is that the option was secured by these false representations. This portion of the answer is a very meagre presentation of facts upon which to base a defence on the ground of fraud.

On this case so made, the parties have come to'a hearing, and the first question is whether or not the two letters amount to a contract.

There is proof that, after1 the two letters were written — that is, after the proposition had been made by Messrs. Bormann and Adams to Mr. Du Bois, by their letter of April 22d, and after Mr. Du Bois, by his letter of April 28th, had accepted it — the defendants, at a somewdiat later period, made an effort to rescind the option, as they claimed it to be.

The point the defendants make as to the legal effect of the two letters^ is a question of law as to the construction of the two waiting's, wdiich clearly shovr their meaning on the face of the papers. For this reason I refused to hear any parol evidence, upon this point of the case, to define the meaning of these letters.It is admitted by the pleadings that they were written, sent and received. There is no ambiguity about their meaning. No parol proof as to contemporaneous dealings regarding this contract can be received, to explain their legal effect.

On this phase of the ease I am of opinion that the writing of the letter of proposition, and the accepting it exaetty in the terms in which it was addressed, constituted, after the acceptance, a contract.

It then remained only for the party accepting to pay or tender the purchase-money at any time within a year from April 10th, 1903, the period named for its payment. It did not lie at the choice of the defendants to rescind their contract at their mere choice by giving notice. The agreement did not impose upon the complainant an obligation to pay any money at the time of entering into the contract. By the two letters which made the contract the complainant was allowed one year to make the payment of the purchase-price. A tender of that price was made within the year. This is admitted by the defendants’ answer. The contract, so far as tender of the price was concerned, thus became finally obligatory upon the defendants.

The other defence is put upon the ground that the contract and letters were obtained from the defendants by fraudulent representations. The defendants claim that the complainant misled the defendants at the time they wrote their letter of April 33d, 1903, offering to sell the stock, &c., by false statements to the effect that the financial capacity of the Industrial Manufacturing Company, whose stock was the subject-matter of the sale, was so greatly impaired that it was on the verge of insolvency. The representations shown to have been made were, to a very considerable extent, matters of opinion and judgment as to the future prospects of the company. It has been shown that the company was, in and about April, 1903, in actual fact threatened with such serious losses, and was, by pending suits, attacked in such a way, that it was in a very doubtful financial situation. The weight of the testimony goes to show that the consideration of the contract evidenced by-the two letters was a general settlement of outstanding claims, which the parties had, as they thought, against each other, and which they sought to adjust, by entering into the general settlement indicated by the two letters. Fraud is neither sufficiently alleged nor proved. -

This disposes of the issues which were raised by the pleadings, and all that were raised by the evidence, except one. That one, however, is absolutely vital and controlling. The original contract or proposition was plainly made under a mistake — a mistake as to the legal status of the parties. It was also accepted under a mistake. This cause is not being tried for the correction of any mistake. The present question is limited to the claim to enforce specifically a contract. But the mistake made is irremediable, because of lack of power in the parties to correct it.

The mistake happened in this way: The contract in this case is based upon the two letters above recited. The first letter is addressed to “Mr. J. S. Du Bois.”' The writers, in the body, say “we as executors,” but they do not say of what they were executors. They sign themselves “Hermann Bormann, Philip C. Adams, Executors.” In point of fact, the proof is undisputed that they were the executors of the last will and testament of Annie Malsch. There is no pretence of proof that they were the executors of anything else.

The acceptance letter is addressed “Messrs. Hermann Bormann and Philip C. Adams, Executors of the estate of Frank Malsch, deceased,” and is signed “Josiah' S. Du Bois.” There is nothing to show that there was any fraud or misrepresentation as to the capacity in which the defendants acted. The testimony is clear that these parties, each of them, supposed that, at the time of the writing of these letters; the defendants Bormann and Adams had authority to dispose of the property with which they dealt. But it plainly appears, on the face of the letters themselves, that the defendants Bormann and Adams were executors of the will of Annie Malsch. The proof is also undisputed that the stock and royalties belonged to the yet unadministered estate of Frank Malsch, deceased.

Mr. Du Bois addressed Messrs. Bormann and Adams, in his letter of acceptance, as “executors of the estate of Frank Malsch.” In actual fact the defendants were not executors of Frank Malscbfs estate, and had no estate in or control over its assets. Du Bois believed they could and did act for that estate. The result was that the minds of the-parties to the supposed contract never, in fact, met in any agreement. The two letters entirely failed to make any contract at all. The ownership of these two certificates of stock, which is the substantial subject-matter in litigation, was in the nn administered estate of Frank Malsch. The certificates, on their face, show that they were issued to him. There is no endorsement or other disposition of those certificates which indicates that they were, in any manner, transferred, or held capable of transfer, from Frank Malsch or from his representatives. lie died possessed of these certificates, and the ownership of them, as part of personal property-of his estate.

The- law is entirely clear that title to the goods and chattels of a decedent who dies intestate go, first, to the administrator, or, if the decedent dies testate, to the executor, for the payment of his debts. They remain in the custody and ownership of the administrator (although the distributees may be entitled to them ultimately), but they cannot go to the distributees (unless, possibly, through specific gift by will) until the decedent’s debts-are. paid and distribution is made.

The property of Frank Malsch in these certificates, and in the roj'alties, came to Mrs. Annie Malsch when she took out letters of administration on the estate of Frank Malsch. She was, as administratrix, entitled to .have and to take and dispose of those shares, but that function had to be exercised during her life. . She died about six months after she had undertaken the administration, and before she had done any act which affected the title or ownership of these shares or royalties, &c., now the subject-matter of litigation. When she died the whole administra-tion of the estate of Frank Malsch appears to have been entirely - unsettled. There was an undertaking to. administer it, but no performance. On her death the unadministered assets of Frank Malsch’s estate should have gone to an administrator de bonis non of his estate, who should have been- appointed to succeed Mrs. Malsch. This was not done. There is nothing to show whether Frank Malsch’s estate is solvent or insolvent. There is no sufficient proof showing whether he died either with kindred or without kindred. Some testimony has been offered by the com-pl'ainant to show that he died without kin, and on this to -predicate a claim that his widow became, under the act of May 11th, 1897 (P. L. of 1897 p. 868), entitled to all his estate. The proof upon that point is quite insufficient. Mr.- Bormann was the only witness who testified on the point. He is not proven to have been so related to Frank Malsch that his testimony is conclusive. As given, it does not negative the probability that Frank Malsch did leave some next of kin. Mr. Bormann affirmatively proved that Frank Malsch had a brother. He says the brother disappeared many years ago. But no proof is given of the brother’s death or that he left no issue. There has been no attempt to exhaust the situation as to possible next of. kin of Frank Malsch. The statute of 1897, which gives the property of a decedent, who dies without kindred, to his surviving widow, only operates when it appears that ‘there are no next of kin, no matter how remote, of the decedent. So, also, the portion given to the widow by that statute is what remains after the payment of the decedent’s debts — that is, the surplusage of his estate.

It has never yet been ascertained that there was any surplus-age of Frank Malsch’s estate. He may have owed debts which would take the whole of this property. Nothing, in such case, would come to the surviving wife.

There is no claim that the complainant accepted any proposition of the executors of Mrs. Malsch to sell the interest which, as Frank Malsch’s widow, she might have in the surplusage of his estate. What the complainant accepted was, as he thought, a proposition from the representatives of Frank Malsch’s estate to sell the stock, &c., of which he died seized.

The complainant asks that this court shall assume that Frank Malsch’s estate has been settled, his debts paid and the surplus-age of his estate 'distributed, and that in that distribution the stock here in question and the right to the royalties were, given to the surviving wife, becoming part of her estate, and that her executors dealt with that stock, &c., the letters here claimed to make a contract for sale.

This is impossible. The parties themselves did not at the time they acted, so deal with each other.' The complainant, 'as stated, mistakenly supposed he was 'dealing with' executors of Frank Malsch’s estate. The executors of Annie Malseh’s will mistakenly believed they could dispose of the stock, &c., 'when they had, in fact, no power to deal with it. Each acted under a fatal mistake. Nothing can be done in this suit to aid the parties.

The bill must be dismissed, and, inasmuch as the defendants, by objections in the nature of a demurrer ore tenus, challenged the complainant’s right, it should be with costs.


text:
    Lovina S. Zane v. William Weintz.
    [Filed July 29th, 1903.]
    . 1. On a bill filed by the vendor to compel specific performance by a vendee of a contract to buy land, if tlie vendor’s title or power to convey be so doubtful that the court is of opinion that her capacity to convey a fee-simple is fairly debatable, the Vendee will not be compelled to accept the title and perform the contract of'sale.
    2. Where the doubt arises touching the legal effect of some inartificial and ill-expressed instrument, the contract will not be specifically enforced.
    On bill, answer and proofs.
    The bill in this case is filed by Lovina S. Zane, the widow of Horatio G. Zane, who claims that "under the last will of her mother, Rachel Ward, she either has title in fee to a lot of land situate at the northeast corner of William and Line streets, Camden, New Jersey, or has. a power to sell and convey an estate in fee-simple in that lot. The bill seeks to compel the defendant, William Weintz, who has contracted to‘purchase the lot, specifically to perform his agreement, accept the complainant’s deed, pay the purchase-money, &c.‘

      The will of Eachel Ward, under which the complainant claims power to convey the lot, is dated the 21st day of June, 1881, and was proven in the year 1885. The three clauses which are claimed to confer a fee-simple estate in the lot upon the complainant, or to authorize her to sell it, are as follows:

      “Item: I give and bequeath to my daughter Lovina Zane the wife of Horatio Zane, my house and lot situate in Camden, New Jersey on the North East corner of William and Line Streets, for and during her natural life: and after her decease, to such person or persons as would by law inherit the same, if she had an estate therein in fee simple, with the understanding that my said daughter and her said husband shall keep the said property in good repair and pay all lawful taxes, that are assessed against said house and lot.

      “Item: I give to my relative and friend John V. Beckett in trust a certain mortgage given to me by Horatio G. Zane for Three Thousand Dollars, and any other money in my possession, or papers calling for money at my decease, and all moneys due on said mortgage or other papers calling for money and the said John V. Beckett, is .to collect the interest due and to grow due on said mortgage, or other papers that I may have, and out of the first interest so received shall pay for a set of tombstones to Le erected at my grave to be selected by my daughter and to be similar, to those now standing at my husbands grave and after paying for said tombstones, and all taxes against said mortgage, or other papers, and other expenses attending the settling of my estate, shall pay 'over the balance to my daughter, Lovina Zane each and every year during her natural life, and at her death the said Beckett .shall pay over all monies in his hands to the heirs of my said daughter, share and share alike. In case my daughter should leave no heir or heirs then to my niece Rachel Beckett and to her heirs.

      “Item: If my daughter Lovina Zane should survive her husband Horatio G. Zane, then the said Lovina Zane can have control of all monies, property in her own keeping, to sell or dispose if she see fit, but subject to the above devisement and bequeathment.”
    The defendant, Weintz, admits the making of the agreement to purchase the lot, and substantially all the facts stated in the bill, but denies that the complainant has any title to the lot in question or any power to convey the same in fee-simple: He declares that he is ready to carry out and perform his agreement, and would do so if the complainant were able to make him an efficient deed conveying an estate in fee-simple. It was admitted at the hearing that Lovina Zane has a child.

      Mr. George J. Bergen, for the comiDlainant.

      Mr. William Early, for the defendant.
   Grey, Y. C.

There is but a single question in this case — has the complainant such title to or power over the lot in question that she is able to convey an estate in fee-simple in it? If she has, the defendant admits his obligation to accept a deed and pay the purchase-money.- If she has title, it is admitted she acquired it only by the effect of the above clauses of the will of her mother, Rachel Ward.

At the common law a very interesting question might have arisen under the phrasing of this will. The estate devised to Lovina gives to her in express words a freehold life estate. In the same instrument is a gift over after her death “to such perron or persons as would by law inherit the same, if she had an estate therein in fee-simple.” The devise in remainder is not in express terms to the “heirs” of the first taker, the phrasing which jnost usually occur's in devises, which called for the application of the rule in Shelley’s Case, but the words used are substantially of the same import.'

In Adams v. Ross, 1 Vr. 512, Chief-Justice Whelpley declared, speaking as to the construction of deeds, that the use of the word “heirs” was required to bring the rule into operation, and held that no matter what appeared to be the intent of the grantor, a deed to A and her children conveyed only a life estate to A.

The learned chief-justice conceded that in construing wills a different rule prevails. In Goodtitle v. Herring, 1 East 265, a testator used the 'words “heirs male of the body of A,” which had a perfectly ascertained technical meaning in the law as words of limitation and not of purchase. Subsequent words in the will indicated that the testator intended the words “'heirs mqle,” &c., to be words of purchase, and not of limitation. The judges of the king’s bench enforced the intent of the testator as expressed by the qualifying words, holding ‘dieirs male of the body,” &c., as used in that will to be words of purchase. The ■cases on the point may be found collated in a note appended to the report of Shelley’s Case, 1 Co. *93 (106) (London ed. of 1826).

The words used by the testatrix, Mrs. Ward, in the present ■case, in defining the persons who are to take in remainder, are precisely equivalent to the word “heirs.” The devise is to all those persons who would inherit from the first taker if she were seized in fee. Not children or issue of the first taker, but her inheritors general, whether lineal descendants or’-collateral relatives.

If the words of the will indicated that the testatrix intended the remaindermen to take as descendants from Lovina, then the rule in Shelley’s Case would, at common law, have applied, and the devise would be held to have vested a fee-simple estate in Lovina. If in defining the qualifications of the remaindermen the testatrix intended to describe and point out the persons who were to take by direct gift from herself, then the rule would not apply, and Lovina would at common law be held to take only .a life estate. Martling v. Martling, 10 Dick. Ch. Rep. 787, citing from the opinion of Mr. Justice Blackstone in Perrin v. Blake, as reported in Harg. Law Tr. 587.

The question is, however, of little qmactical importance in the present condition of our law, for the tenth section of our statute ■of descents (Gen. Stat. p. 1195) has abolished the rule in Shelley’s Case in devises where the first taker has lineal descendants. Lippincott v. Davis, 30 Vr. 241 (Court of Errors and Appeals).

Under the operation of 'this devise, as controlled by that section, the highest estate that Lovina took was a life estate. That is tire estate expressed to be given her by the words of the will, irrespective of the common law application of the rule in Shelley’s Case as to the limitation over. So far as she claims to be entitled to hold a fee-simple estate under the unaided devise to her, the effect of the devise is adverse to her contention. There is no occasion in this cause to consider the nature of the estate limited over to succeed Lovina’s life estate,

It is also said that the gift to Lovina, in the last clause, of a power “to sell and dispose if she see fit,” &c., enlarges her life estate into a ijee-simple. This claim is refuted by the decisions In Downey v. Borden, 7 Vr. 460; Wooster v. Cooper, 8 Dick. Ch. Rep. 685 (both in the court of errors and appeals), to the effect that a gift in express words for life only, although annexed to it, there may be an absolute power of disposal, passes to the devisee only a life estate.

It seems to be clear that the complainant cannot rely upon her holding of a title in fee-simple to the lands in question, to put her in a position to demand specific performance of her contract to convey.

She contends also that under the last clause of her mother’s will, granting her the power to sell, she is enabled to convey to the defendant a fee-simple estate.

This power provides that if the complainant survive Her husband she “can have control of all moneys, property in her own keeping to sell and dispose if she see fit, but subject to the above devisement and bequeathment.”

Does this clause so 'dearly give to the complainant a power to convey a fee-simple estate that a person to whom she has contracted to convey such an estate should be - compelled to accept her deed and pay for the lands conveyed solely by virtue of this power ?

The phrasing of the clause is clumsy and imperfect, but it may fairly be held to express the intention of the testatrix that in case Lovina survived Horatio she should have the keeping and control of the moneys and property theretofore dealt with, in the will, and power to sell and dispose of that property if she saw fit. But the testatrix'does not stop here. She declares that Lovina’s disposition shall be “subject to the above devisement and bequeathment.” The counsel for complainant insists that it is a necessary inference that the testatrix intended by this power to enable her daughter, Lovina, to do something-more than that which she wns enabled to do under the preceding-clauses of this will; that Lovina, as owner of her own life estate, had authority to sell the property (i. e., the lot of land in question) without the power given in this last clause, but her sale of it would only- have been of an estate during her own life; that this added power must be construed to authorize Lovina to' convey a fee-simple estate; that the words “subject-to above devisement and bequeathment,” if they have any meaning, must refer to the preceding requirement that Lovina and her husband keep the property in repair and pay the taxes, and must mean that if Lovina sold under tlie power, she-must still continue to keep the property in repair and pay the taxes; that the performance of this obligation by Lovina is beneficial and not injurious to the title sold under the powér, and no ground of objection on the part of the proposed vendee, who would, by accepting the conveyance of a title'which obliged the vendor after sale to keep the property in repair and pay the taxes, be greatly advantaged.'

The clause “subject,” &c., was certainly intended to put some limi+ation upon the estate which Lovina might convey under it. The words used in defining the limitation áre the' “above'devisement and bequeathment.” 'It is almost an absurdity to attempt to find the intention of this testatrix from the' meaning of the words of the will, for its whole expression indicates that its words are used with very little knowledge-'of their real meaning. Yet these words are our only guide in 'seeking to find out what the testatrix intended.

It seems to me impossible to hold -that the words “devisement and bequeathment” refer to the preceding obligation put upon Lovina and her husband to repair the property and pay the taxes. The will puts this obligation upon both- husband and wife without mentioning that the wife should continue to perform it after his death. The power to sell was only to be exercised after the husband’s death. Where is there anything which indicates that the testatrix intended that the wife should alone repair and pay taxes, and continue to do so after her life estate had been determined by her death? If such a duty is imposed by this will, when does it end ? Who is to perform it for Lovina after she is dead?

The obligation to repair, &c., could not have been referred to by the testatrix when she used the words “devisement and bequeathment.” That obligation was neither a devise nor a bequest. Moreover, the will does contain a preceding devise of the lot in question to the persons who may be the heirs of Lovina, and a preceding bequest in case Lovina leaves no heir or heirs of the trust money to the -testatrix’s niece, Rachel Beckett, and her heirs. If any meaning is to be ascribed to the testatrix’s use of these words they might much more plausibly be held to refer to that preceding devise and bequest. If they do, they limit the estate which Lovina may pass in the lot in question by the exercise of the power, so that it will be subject to the devise over, and therefore it coiild not be a fee-simpfe.

This will is so ■inartistically drawn that it is difficult to put any construction upon it which will not leave the-vendee, if ho is decreed to perform his agreement-and take title -under it, in danger of losing the property conveyed, at the1 suit of some future claimant. The decree in this suit, even if favorable to the complainant, would, of course, afford no protection to the defendant against the attack of any claimant of the lands in dispute, who is not a party to this suit.

..The doubt as to the complainant’s power to convey the lands, if it is not resolved against her, must at least be admitted to be so forceful that her right is fairly debatable. This is sufficient to defeat her attempt to compel specific performance. Vreeland v. Blauvell, 8 C. E. Gr. 483; Lippincott v. Wikoff, 9 Dick. Ch. Rep. 120.

The declaration of Lord-Justice James in Alexander v. Mills, 6 Ch. App. 131, to the effect that specific performance will not be decreed where the doubt of the vendor’s power to convey a good title arises in ascertaining the true construction of some ill-expressed instrument, is also applicable in this case. Richards v. Knight, 19 Dick. Ch. Rep. 196.

The complainant’s bill should be dismissed, with costs.