author: McCunn, J.

text:
    MAXIMILIAN MORGANTHAU and Another, Plaintiffs and Appellants, v. GEORGE W. WHITE and Others, Defendants and Respondents.
    Courts of equity will not compel the specific performance of an agreement where it is manifest that, owing to the haste with which the agreement was signed (and to the surprise of both parties), it did not express the intent of the parties executing the same.
    Before Barbour, C.J., McCunn and Fithian, J.J.

      [Decided July 2, 1869.]
    This case was tried at Special Term before Mr. Justice Garvin.
    The action was brought to compel the defendants to grant a lease for five years, from the following agreement. “ In consideration of the sum of one dollar, paid to us by M. Morganthau & Co., we hereby agree to lease to them the basement and sub-cellar of store Nos. 234 and 235 Broadway, for the term of five years and three months from the 1st of'November, 1866, at the yearly rental of five thousand dollars, payable quarterly in advance, as follows : Twelve hundred and fifty dollars on the first of November, first of February, May, and August. (Signed: White, Whitman & Co.)”
    ' The defendants set up by their answer that said written agreement was part and parcel of a mutual agreement entered into by and between plaintiffs and defendants, whereby said plaintiffs agreed to accept a lease of said premises for five years, with a restriction clause inserted therein, wherein said plaintiffs were prohibited from cooking in said premises, and defendants therefore asked that plaintiffs might be required to execute a lease of said premises to said defendants for five years, containing the prohibition clause against cooking.
    The facts are sufficiently stated in the opinion of the Court. After both sides had rested the Court struck out all parol evidence taken, and rejected such as was offered to vary the written contract set forth in the complaint, to which the defendants excepted.
    The Court ordered judgment for the plaintiffs, and defendants appealed to General Term.

      Mr. Coles Morris for appellants.
    Cases of surprise mixed with a mistake of law stand upon a ground peculiar to themselves, and independent of the general doctrine. In such cases,' the agreements or acts are unadvised and without due deliberation, and they are, therefore, held invalid upon the common principle adopted by courts of equity, to protect those of whom an undue advantage is taken. And where the surprise is mutual, there is of course a still strongs groxmd to interfere, for neither party has intended what, has been done (see 1 Story’s Eq. Jur., 6th ed., sec. 134, p. 157; and particularly Matthews v. Terwilliger, 3 Barb. Sup. Ct. R., p. 50, which is a case in point).
    It is a general rule, that a mistake of law is not a ground for reforming an agreement founded on such a mistake, but there are some exceptions to it, and one of the exceptions is a ease “ where the party is taken by surprise,” where he had not sufficient time to act with caution” (Matthews v. Terwilliger, 3 Barb. S. C. R.,p. 50).
    The granting of a specific performance is not a matter of right, but is always a matter of sound and reasonable discretion, accords ing to the circumstances of each particular case. To allow the respondents to prevail in this case would be to allow an act originating in innocence to operate ultimately as a fraud, by enabling them to receive the benefit of the mistake and thus to resist the claims of justice under the shelter of a rule formed to promote it. In a practical view, there would be as much mischief done bv refusing relief in cases of mistakes such as these appellants have committed, as there would be introduced by allowing parol evidence in all cases to vary written contracts. A court of equity would be of little value if it could suppress only positive frauds, and leave mutual mistakes innocently made to work in tolerable mischiefs, contrary to the intention of the parties.

      Mr. M. L. Townsend for respondents.
    The only exception in the case is to the exclusion by the Court of the “ parol evidence taken and offered to vary the written contract set forth in the complaint.”
    This evidence was properly excluded, and the exception is not well taken.
    The Court found as matter of fact that the defendants executed and delivered to the plaintiffs the written agreement, to which finding there is no exception.
    The evidence showed that the defendants voluntarily prepared, executed, and delivered the writing, and that, too, after several conversations between the parties and their agent, in which the use of the premises for a restaurant had been the subject of talk ; plaintiffs on all occasions stating that they wanted the premises for a restaurant as well as for a wine and liquor business, and finally agreed to give $5,000 per year rent, being $1,000 per year more than the defendants first asked, in consequence of the increased risk to which plaintiffs’ nse of the premises would expose them.
    The agreement upon which the action is brought contains no ambiguity, is definite and certain, and there is no pretence of fraud or mistake in its execution.
    The agreement is in effect a lease, without restrictions as-to the use of the premises; and to allow the defendants, after the plaintiffs had gone into possession under the written agreement, and fitted up the premises as and for a restaurant, with the knowledge and assent of the defendants, and paid the rent, to alter and vary the written agreement by engrafting upon it a restriction as to the use of the premises, by which their value would be greatly impaired, would be not only manifestly unjust, but in violation of fundamental and well-established rules of evidence.
   By the Court:

McCunn, J.

The evidence on both sides goes to show that a great deal of negotiation took place between defendants and one Meeks, the agent for the plaintiffs, and the whole current of such testimony—Meeks’ included—goes to show, and there is no other proof to the contrary, that from the beginning of the negotiation to the end thereof the defendants always guarded against allowing the plaintiffs the right to cook in said premises. Indeed, the negotiation was nearly all about this single question of cooking, and such negotiation extended for over a period of two weeks.

That from the beginning to the end 'of these negotiations the most persistent efforts were made by Meeks, on behalf of the plaintiffs, and under the stimulus of a bonus offered by them, to obtain from the defendants the right to use the premises in question for the purposes of a restaurant, and to do cooking therein, but that they were met throughout the whole negotiation by the unqualified refusal of the defendants to allow any cooking to be done in the premises, even at any rent, and the object of this refusal is plain to the commonest mind.

Cooking in the basement would have mined the usefulness oi the whole premises, and perhaps would have been the means oí destroying the entire rental of the property. That these terms— the refusal to allow cooking—were communicated by Meeks to the respondents, and finally agreed to by them.

That thereupon the plaintiffs wanted their lease “right off,” and when informed that they could not get it for some days, for the reason that defendants had not secured the principal lease to themselves, plaintiffs were dissatisfied and said they must have something to secure the place so that it could not be let to any other party. That, thereupon, Meeks called upon the defendant White and told him that the plaintiffs wanted some sort of paper to secure the place. That White answered, “ Well, I can’t give them a lease, but my word is as good as my bond.” That he did not object to giving them some paper, but at that time he was not willing to do so.

That Heeks then went back to the plaintiffs, and they insisted upon having a writing.

That he called a second time upon White and told him the plaintiffs were not satisfied with his word, and the result was that White hastily drew the paper in question and made a mistake in not inserting the prohibitory clause, and delivered it to Heeks on condition that the place should be used by the plaintiffs for a wholesale and retail wine and liquor business, saying he did not object to cold lunch or billiard-tables, but would allow-no cooking ; and added, that this paper was simply to let the plaintiffs take possession of the premises.

2sTow this is the evidence upon the subject. It is uncontradicted by the plaintiffs; nay, it is even corroborated by them in many respects. Heeks, their agent, and the person who made the agreement and did all the business, testifies that a mistake was made in not inserting the prohibitory clause about cooking. White testifies to the same thing. It was clearly understood that it should be inserted; and the question now presented to this Court is : Can we relieve the parties hereto from this mistake ? I am clearly of opinion we can, and, therefore, the justice erred in striking out all the testimony showing the mistake.

It is quite clear from the evidence that it is a case of surprise, and that the surprise was mutual, and that it was clearly contrary to the intentions of both parties that the right to cook in these premises should be granted, and that the mistake was not discovered by either of them until after the plaintiffs had taken legal advice upon the subject.

The writing was not made until days after the verbal contract between the parties had been settled, and it was not made for the purpose of reducing such verbal contract to writing.

It was simply drawn by White, at the urgent request of the plaintiffs’ agent, Heeks, and the omission was made in drawing it up. White was reluctant to give any writing, saying his word was as good as his bond, and at first refused; but, upon a second application to him, after having been assured that the plaintiffs would not be satisfied without it, he sat down and wrote this paper, and delivered it to Meeks, saying: “ This will enable them to take possession of the premises, and when the lease comes to be drawn up I will insert a clause giving them the privilege of a cold lunch, but I will allow no cooking, giving as a reason for not inserting these words in the paper, that doing so would be egual to making a lease! It is impossible to resist the conviction that in executing this written agreement White acted without due deliberation, and under confused a,nd erroneous impressions with rega/rd to the effect of the instrument; and it is also clear that the plaintiffs, from the conversations and negotiations in the premises, believed they had no right to carry on cooking in the premises, until after they had consulted with their lawyer, and until he informed them that no prohibitory clause was in their agreement.

The rule is that where the surprise is mutual, as in this case, the Court can always interfere; and cases of surprise mixed with mistakes in law stand upon ground peculiar to themselves, and are quite independent of the general rule.

In such cases the acts of the parties are without due deliberation, and are held invalid upon the principle in equity to protect those of whom undue advantage is taken. This is the broad doc. trine laid down by Story in his Equity Jurisprudence, 6th ed., sec-134, and is the doctrine held in the case of Matthews v. Terwilliger, 3 Barbour, S. C. R, p. 50.

I know the rule has been pretty generally held (not always) that mistakes in law are not a ground for reforming agreements, but I never could see the justice of such a rule; that a plain and acknowledged mistake in law is beyond the reach of equity is an ancient and unsound rule, and I for one have frequently departed from it, and I am happy to say that the dispositions of our courts at the present time as a general thing are inclined to abolish the distinction, and -have now made great inroads upon that ancient principle, and hold that where a party is taken'by surprise, either of law or fact, or where he has not sufficient time to act with caution tliis will relieve him from his mistake.

This principle was recognized in Matthews v. Terwilliger, cited above. Courts of equity would be of little value if they could suppress only positive frauds and leave such material mistakes as the one under consideration—mistakes innocently made—to work intolerable mischief, contrary to the intentions of the party. I know that the compelling of specific performances by the courts is always a matter of sound discretion according to the circumstances of the case; but in a case of this kind, where the error is mutual, there would be as much mischief done by refusing relief to the defendants, errors such as they have committed, as there would be in allowing parol evidence in all cases to vary written contracts; and to allow the‘plaintiffs in this case to take advantage of a mistake made in the most innocent manner, and by both parties, would be to allow that act, originating in innocence, to operate ultimately as a fraud, and would be enabling the plaintiffs to receive the benefit of such mistake under the sheltering of a rule found to promote it.

Under the circumstances of the case, we do not think the Court should exercise its power to enforce the plaintiffs’ construction of a writing which was not intended to express the views of the parties interested, and where it is manifest that, owing to the quickness- and haste with which the agreement was signed, and to the surprise and inadvertence of both parties, it does not express the intent of the parties.

There is no doubt in our minds but that Meeks enticed the defendant'White to sign this paper, although at the time of signing it was intended by both that the restraining clause should be inserted. Indeed, Meeks, testifying in the interest of the plain, tiffs, says positively a mistake was made; and to allow such a state of facts to enure to the benefit of either party would be tantamount to sanctioning a fraudulent proceeding.

The contrary has been the rule, and courts of equity have always been vigilant to seize hold of such circumstances to enable them to relieve a party from unjust loss, and to deprive the other party of taking unconscionable advantage. Beyond a doubt, at the time this instrument was drawn, both White, on the part of himself and the other defendants, and Meeks, who was the sole agent of the plaintiffs, through forgetfulness or inadvertence, left this restricting clause out, or thought it was not necessary to put it in, as the agreement was a temporary one, and the courts of. equity have always relieved from such forgetfulness.

This was the rule held in the case of Kelly v. Salior, 9 M. & W., 54, and in the case of Bell v. Gardiner, 4 Mann & Granger, 10.

The judgment should be reversed and a new trial ordered, costs to abide the event.

Barbour, C. J., dissented.


source: Caselaw Access Project

author: Barbour, C.J.

license: Public Domain

text:
    THE NATIONAL MECHANICS’ BANKING ASSOCIATION OF NEW YORK, Plaintiff and Respondent, v. ROBERT USHER, Jr., Defendant and Appellant.
    Where leave is granted to the successors of a corporation to bring an action upon a judgment obtained by that corporation, the Code does not require that the action should be brought in the same court in which the judgment was originally obtained
    Before Barbour, C.J., McCunn and Fithian, JJ.

      [Decided July 2, 1869.]
    Appeal from an order of Mr. Justice Jones, at Special Term, allowing the respondents, as the successors of “ The Mechanics’ Banking Association,” to bring an action against the appellant, upon a judgment recovered in 1854, to test the validity of an insolvent’s discharge.

      Mr. John Graham for appellant.

      “ The Mechanics’ Banking Association ” (the original plaintiff in the judgment in question) claim to have become “ The National Mechanics’ Banking Association of New York,” under and in pursuance of the act of Congress of June 3,1864 (on that subject), and the enabling act of the legislature of this State, passed March 9, 1865 (Laws of 1865, chap. 97). By section 2 of the latter act, banks becoming national associations under the act of Congress were deemed to have surrendered their charters, and were authorized (by being continued as bodies corporate, with that view) to use their names for the term of three years after the term of such surrender, to prosecute and defend suits, to close their concerns, and to dispose of and convey their property, but not to carry on the business of banking.
    Section 6 provided that the certificate of the “ Comptroller of the Currency,” authorizing such banks to commence business under the act of Congress, should instantly vest all their assets, real and personal, in the national banking associations into » which they were transformed.
    It is evident that any legal rights of the banks thus transformed, in reference to .existing choses in action, were to be asserted in the original names of those banks, and a term of three years was allowed under that idea. It is meant to insist, that any legal proceedings not commenced, upon existing causes of action, within the three years, were cut off. by that term as a kind of statute of limitations, and that, after the expiration of that limitation, neither the original nor the changed name of the bank could be used to enforce causes of action which could and ought to have been enforced before the limitation expired.
    If the order of the Special Term was correctly granted, it should have required the action to be brought in this Court, if not as a matter of strict right, at least of sound discretion. Section 71 of the Code is a part of a system introduced by the Code, intended to supersede the proceeding by soire facias, when resorted to either as a public or private remedy (Alden v. Carle, 11 How. P. R., 209 ; Thurston v. King, 1 Abb. P. R., 126). Scire facias was a judicial writ, and could only issue from the court in which the judgment sought to inforce was rendered (Graham’s Practice, 2d ed., 819).

      Mr. P. J. Gage for respondent.
    The plaintiff was entitled to leave to sue, by showing that the judgment named in the moving papers was still unpaid, and the whole amount thereof due to the plaintiff when these facts were shown; good cause was shown within the meaning of the statute (Code, sec. 71).
    The interposition of the pretended discharge of the defend- ■ ant under the insolvent act was no objection to granting such leave, as it was clearly shown to the Court that such discharge was granted without jurisdiction. .
   By the Court:

Barbour, C.J.

This is an appeal from an order of the Special Term, permitting the plaintiffs to bring an action upon a judgment recovered in 1854, by “ The Mechanics’ Banking Association of ISTew York,” then organized under the laws of this State, against the defendant; the principal object of such contemplated suit being to test the validity of an insolvent’s discharge, which was granted to the defendant subsequently to the recovery of the judgment.

Without pausing to inquire, in this case, whether an insolvent’s discharge from his debts can properly be inquired into in a collateral proceeding, such, for instance, as a motion to set aside an execution, Or otherwise than in an action to which such discharge may be pleaded in bar of a recovery (see 2 R. S., sec. 87), it is sufficient to say that an action upon the judgment in this case will afford the easiest, simplest, and most certain means of obtaining a full and complete "adjudication of the question as to whether the defendant is released therefrom by the alleged discharge.

The point of the defendant, that the order ought to have directed the action to be brought in the Superior Court, does not appear to be well taken. The Code (see. 71) does not require such a condition to be inserted in the order; and we may, therefore, assume that the legislature designed to leave to plaintiffs, in actions upon judgments, the same common-law right to select the forum in which to bring their suits that other plaintiffs possess.

The question raised by the defendant’s counsel, that the proposed plaintiffs cannot sustain an action upon the judgment, as the mere successors of a defunct corporation, may become an important one upon the trial, or on demurrer; but it is a question that cannot, properly, be determined upon a motion like this.

The order should be affirmed, with costs.

McCunn, J., dissented.


author: Fithian, J.

text:
    MARY A. MASTERTON and Another, Plaintiffs and Appellants, v. CHARLES BEERS and Another, Defendants and Respondents.
    A contract, duly executed by competent parties, will not be modified or rescinded by a court of equity on the ground of mistake in some of its provisions, unless such mistake be clearly and satisfactorily established. If the matter be left in doubt, the contract will be left to stand as executed.
    A party seeking the aid of a court of equity to rescind a contract on the ground that he was induced to execute it by the false representations of the other party, must establish—1st. The representation and its falsity; 2d. That he relied upon such representations, and was deceived thereby; and* 3d. That the false representation was of some matter or thing material to the contract or matter in and about which it was made. It must relate to, and materially affect, the subject-matter of the contract. Material representations defined.
    When a party brings suit in equity, to modify or rescind a contract, for mistake or fraud, and fails to establish either cause of action, it is competent for the court, in its discretion, to decree a specific performance of the contract in favor of the other party, if he has demanded such decree in his pleadings.
    Before Barbour, C.J., McCunn and Fithian, JJ.

      [Decided July 2, 1869.]
    This was an action in equity to rescind and have declared void a certain contract in writing, executed by the plaintiffs and the defendant Beers, for the sale to the latter of certain lands on the corner of Elm and Worth streets, in the City of New Y ork, on the ground of fraud and mistake; the contract to purchase having been made by defendant Beers, as agent of and for the benefit of defendant Faulkner, and duly assigned to him. The complaint alleged, in substance, that the defendant Beers applied to plaintiffs to purchase the lot or property above stated; and that, the plaintiffs then informed him that if one “Nicholas S. Ludlam,” who owned property in the same block with theirs, had sold his property, then the price for their property was thirty thousand dollars. But if “Ludlam” had not sold his, then they would sell theirs for twenty-two thousand dollars. That thereupon defendant Beers represented and stated falsely, and with intent to deceive plaintiffs, that “Ludlam” had not sold his property. That thereupon, relying upon the truth of such statement, plaintiffs’ agreed, in consideration of §300, then paid in hand by Beers, to give him an agreement of refusal or option for the sale and purchase of such property, at the price of $22,000, with other stipulations; such refusal or option to be absolute, provided his principal in New York telegraphed his acceptance of such option or refusal by six o’clock p.m. of the same day. That thereupon the said plaintiffs, believing and relying upon the truth of the statement as to “Ludlam’s ” not having sold, and supposing the paper to contain and be the contract of refusal only as above stated, the plaintiffs executed and delivered to Beers the contract in suit, in the records and figures following:
    “Articles of agreement made the 30th day of October, one thousand eight hundred and sixty-six, between Mary A. Master-ton and Caroline Masterton of the first part, and Charles Beers of the second part, witnesseth: That the said parties of the first part, for in consideration of the sum of three hundred dollars, to them in hand paid, have contracted and agreed to sell to the said party of the second part, all that certain piece or parcel of land,'situate in the City of New York, in New York County, and State of New York, known and distinguished on a map made by-, as Lot Number Forty-eight Elm street, commencing on the corner of Worth street, running southerly on Elm street twenty feet, thence westerly fifty-nine feet three inches, thence northerly twenty feet, thence easterly along Worth street fifty-nine feet three inches to place of beginning. (Parties of first part do not guarantee exact number of feet and inches.) And the said parties of the first part agree to execute and deliver’ to the said party of the second part a warranty deed for the said land. Provided, and upon condition, nevertheless, that the said party of the second part, his heirs or assigns, pay to the said parties of the first part, their heirs or assigns, for the same land the sum of twenty-two thousand dollars, lawful money of the United States of America, payable as follows: the sum of eight thousand dollars, less the three hundred already paid, to be paid within sixty days; the balance to be paid in two instalments at two and four years, secured by bond and mortgage; together with lawful interest on the same,'from the date hereof. And the said party of the second part, for his heirs, executors, and administrators, does covenant and agree to and with the said parties of tire first part, their heirs and assigns, that the said party of the second part will pay the said several sums as they severally become due, with the interest thereof, without deduction of any taxes whatever. (Parties of first part agree to pay assessment of Belgian pavement, but no other.) And it is further agreed between the parties to these presents that if default be made in fulfilling this agreement, or any part thereof, on the part of the said party of the second part, then, and in such case, the said parties of the first part, their heirs and assigns, shall be at liberty to consider this contract as forfeited and annulled, and to dispose of the said land to any other-person in the same nanner as if this contract had never been made.
    The contract was executed by plaintiffs and defendant Beers, and properly stamped, acknowledged, and afterward recorded.
    The complaint further alleged, in substance, that in so far as the contract differed from the agreement above stated, it was executed by them through mistake of fact, and did not truly set forth, the real agreement, That the contract was for the benefit of defendant Faulkner, and duly assigned, accepted, and delivered to him. That when plaintiffs discovered the falsity of the statements above set forth, they at once gave notice to defendants that they repudiated the contract and would not execute it, and that ever since they had been and were willing, and thereby (in the complaint) offered to return the $300 received upon it. And that the property, at the time of the execution of the contract, was worth in market $35,000, or thereabouts. Plaintiffs demanded judgment, declaring the contract void.
    The defendant Faulkner answered, denying all knowledge of the alleged matters of fraud and mistake, and insisting upon the validity of the contract, and alleging tender of performance on his part; that the property was not worth §35,000, and demanding affirmative relief that the plaintiffs be adjudged by the court specifically to perform the contract on their part. The answer of defendant Beers was substantially to the same effect.
    The case was tried before Mr. Justice Jones, at Special Term, who, after hearing the allegations and proofs of the parties, found the following facts and conclusions of law:
    First—That the plaintiffs, on October 30, 1866, were, and for a long time prior thereto had been, the owners of all that certain messuage or dwelling-house and lot of ground, situate, lying, and being in the Sixth Ward of the City of New York, on the south- • westerly corner of Elm and Worth streets, containing on Worth street sixty feet, and on Elm street twenty feet.
    Second—That on the thirtieth day of October, 1866, the plaintiffs entered into an agreement, in writing, with defendant Charles Beers, bearing date that day, whereby they agreed and contracted to sell to said Beers the premises mentioned in above finding, and to execute and deliver to Mm a warranty deed for said land, provided and on condition that said Beers should pay to them the sum of twenty-two thousand dollars, in manner following : eight thousand dollars (less three hundred dollars paid at the time of the execution of the said agreement) to be paid within sixty days, the balance in two instalments, of two and four years, secured by bond and mortgage, with lawful interest on the same from the date of the agreement; and whereby said Beers agreed to pay to plaintiffs the said several sums as they severally become due, with the interest thereon, without any deduction of any taxes whatever; parties of the first-part (tire plaintiffs) agree to pay assessment of Belgian pavement, but no others. The agreement is correctly set forth in folios 12,13, and 14 of the answers of defendant Faulkner in this action.
    Third—That the said Mary A. Masterton and Caroline Masterton duly executed and delivered said contract and agreement to the defendant Charles Beers, ayd the said Charles Beers thereupon at the same time paid to said Mary A. Masterton and Caroline Masterton the sum of three hundred dollars mentioned in said agreement, which was received and accepted by said Mary A. Masterton and Caroline Masterton as part of the purchase-money, and consideration for the sale pf the premises described in said agreement.
    Fourth—That at the time of the making and delivering of said agreement there was and still is a mortgage upon the premises described in said agreement, for the sum of three thousand dollars, made by the plaintiffs and one William H. Masterton, to and now held by the Emigrant Industrial Savings Bank of the City of New York, on which there is now due the whole of the principal sum of three thousand dollars.
    Fifth—That on the eighth day of November, eighteen hundred and sixty-six, the defendant Beers executed and delivered to the defendant Eaulkner an assignment of the said agreement between said Mastertons and Beers, and of all his said Beers’ right, title, and interest, claim and demand of, in, and to the said agreement, and the premises therein described, of which assignment the plaintiffs had due notice prior to the commencement of action; and said Eaulkner has caused said agreement to be proved and recorded in the Begister’s office of the City and County of New York, on the 12th day of November, 18G6.
    Sixth—That within sixty days after the making of said agreement between said Beers and said Mastertons, and after the assignment above mentioned by said Beers to said Eaulkner, the said Faulkner, to wit, on December 11, 1866, duly tendered to said Mary A. and Caroline Masterton the sum of seven thousand seven hundred and sixty dollars, and otherwise fully offered and was ready to perform the terms and conditions of said agreement of October thirtieth, eighteen hundred and sixty-six, on his part and on the part of said Beers, and demanded from said Mastertons such a deed of the premises before mentioned as was mentioned and described in said agreement of October thirtieth, eighteen hundred and sixty-six.
    Seventh—That the plaintiffs then and ever since have refused
      to, and still do refuse, to execute or deliver to the defendants, or either of them, such deed or any deed of the premises aforesaid, although the said defendant Faulkner always has been, and still is, ready and willing to comply with the terms and conditions of said agreement of October thirtieth, eighteen hundred and sixty-six, and the plaintiffs have, ever since the thirtieth day of October, eighteen hundred and sixty-six, been and still are in possession of the said land and premises, and in receipt of the rents and profits thereof.
    Eighth—That on the said thirtieth day of October, eighteen hundred and sixty-six, and prior to the execution of the contract mentioned in above second finding, defendant Beers applied to the plaintiffs to purchase said real estate mentioned in above first finding, for a third person, who was in fact the defendant, Edward H. Faulkner.
    Ninth—That the plaintiffs then informed said defendant Beers, that if Nicholas S. Ludlam (who owned property on the south side of Worth street, distant twenty feet west from the said property of the plaintiffs) had not sold his property, the price for their lot would be twenty-two thousand dollars; but if he had sold his said property, then the price of their said property was thirty thousand dollars.
    Tenth—That said Beers, in reply, represented to the plaintiffs, in order to induce them to close a contract for the sale and purchase of their said lot at the price of $22,000, that said Nicholas S. Ludlam had not sold his said property.
    Eleventh—That, relying upon such representations made as above tenthly found, the plaintiffs agreed to sell their said lot for $22,000, or upon the terms and conditions contained and set forth in the contract mentioned in above second finding, and thereupon executed said contract.
    Twelfth—That the said representation so made by said Beers, as above found, was, at the time of the making thereof, untrue, the said Ludlam having previously to the making thereof entered into a valid contract for the sale of his said lot.
    Thwteenth—That said representation as made by said Beers, ás above tenthly found, was not of a material fact or of a matter of substance. .
    ■ Fourteenth—That said defendant Beers drew up the written, contracts, but the plaintiffs, before executing them, were well aware of the contents thereof.
    • Fifteenth—That in the aforesaid negotiation for the purchase of plaintiffs’ lot, and ■ in the procurement of the aforesaid con-, tract for the sale thereof, said Beers acted as and-was the agent of the defendant Faulkner.
    : Sixteenth—That when the plaintiffs discovered that the said representation made, as above tenthly found, was false, they notified defendants of their denial and repudiation of any obligation under said contract; but at ho time prior to the trial of tins action did they return, offer to return, or tender to the defendants or either of them the three hundred dollars paid by said Beers to them on the.execution of said contract.
    . And as conclusions of law, I find and decide:
    First—That the said agreement of October thirtieth, eighteen hundred and sixty-six, was not and is not fraudulent or- void, but the same is valid and binding upon the parties thereto and their assigns.
    Second—That the plaintiffs are not entitled to the relief demanded in the complaint, nor to any judgment or relief in this action against the defendants, or either of them.
    ThvrcL—That defendant Beers is entitled to judgment against plaintiffs, dismissing this action as to him, but without costs.
    Fourth—That defendant Faulkner is entitled to judgment against the plaintiffs for a specific performance of the agreement of the thirtieth day of October, eighteen hundred and sixty-six,■ with costs of this action.
    Fifth—That by the tender and offer made by the defendant Faulkner on the tenth day of December, eighteen hundred and sixty-six, and the refusal of the same by the plaintiffs, and their refusal to perform the said.agreement, the defendant Faulkney having elected to waive all claim to the rents and profits of said land and buildings, and. to be exempt from payment of interest from the time of said tender, the plaintiffs’ right to interest on the unpaid balance of the purchase-money ceased, and they are entitled to the rents and profits of said land and premises from the thirtieth day of October, eighteen hundred and sixty-six.
    Plaintiffs’ counsel excepted to most of the findings of fact, and to each of the conclusions of law. There were various requests for other and additional findings on matters of fact in respect to which there was conflicting evidence.

      Mr. John A. Weeks for appellants.
    It was conceded as the law of this case, that “ one owning real estate has a right to estimate what its value will become upon the happening of a certain event, and to set the price at which, on the happening of that event, he will hold his property. If another, knowing that one has thus set a certain price at which he holds his property upon a particular event happening, assert that the event has not happened, when in fact it has, and thus obtain the property at less than such certain sum, he must be deemed to have made the assertion either with full knowledge that the event has happened, and therefore with a deliberate intent to deceive, or to have made it without knowing how the fact really was, either from fear that the owner would decline to sell until he had made inquiries, which might result in ascertain-' ing that the event had happened and a refusal to sell, except at the estimated value, or from a willingness, with a view to obtain some expected benefit by closing the contract at once, to take the chance of the facts turning out to be as represented, and, in case it does not, to abide by the consequences of the misrepresentation. In either aspect, the owner has been beguiled into parting with his property at a sum less than that which, under the circumstances as actually existing, he asked for it, as the purchasing party well knew. As a matter of strict natural justice, such a contract should not be allowed to stand as against the owner” (opinion, Jones, J., at Special Term).
    It would seem to follow, from this concession as to the law, and from the representation found, that the contract thus negotiated by Beers could not stand. ■
    The object of the representation was to discourage plaintiffs from seeking other purchasers for their property at the higher price, to induce them to sell it, as property not in demand, for the lower price, and to create the impression on their minds that he, who had then come from New York, and knew all about the property, knew there was no demand for property in that neighborhood.
    Beers made the representation in order to induce plaintiffs to close this contract, and they, relying upon such, representation, agreed to make the sale at the lower price, and executed the contract. The principle of the authorities is, that such inducement, and such reliance, and the success of the representation, establish its materiality (Bench v. Sheldon, 14 Barb., 66, 74; Monell v. Golden, 13 John., 402; Bradley v. Bosley, 1 Barb., Ch., 125,148; Livingston v. Peru Iron Co., 2 Paige, 390; Phillips v. Duke of Bucks, 1 Vern., 227; Harding v. Cox, note to last case; Canham v. Barry, 29 Eng. Law and Eq., 290; Atwood v. Small, 6 Clarke & Pin., 395; Dobell v. Stevens, 3 Barn. & Cres., 621;.Laidlaw v. Organ, 2 Wheat., 178; Pilmore v. Hood, 5 Bing. N. C., 97; 6 Scott, 827; Waters v. Mettingly, 1 Bibb, 244; Broderick v. Broderick, 1 Pr. Wms., 240; Fulton’s Ex’rs v. Roosevelt, 5 John. Ch., 174; affirmed Ct. Errors, 2 Cow., 129; Taylor v. Fleet, 1 Barb., 471; 1 Story Eq. Jur., secs. 193-205; Turney v. Harvey, Jacobs’ R., 169, 178; Pidcock v. Bishop, 3 B. & C., 605 ; Taylor v. Green, 8 Car. & P., 316; Bennett v. Judson, 21 N. Y, 238; Craig v. Ward, 36 Barb., 378; Brown v. Montgomery, 20 N. Y., 287; Hichols v. Pinner, 18 N. Y., 295; Cassard v. Hinman, 6 Bosw., 8; Sharp v. The Mayor, &c., 40 Barb., 256; 25 How., 389; Mead v. Bunn, 32 N. Y., 275 ; Botsford v. McLean, 45 Barb., 479).
    The representations found must prevent the enforcement of the specific performance of this contract. The rule is even stronger against the party seeking such remedy—it goes so far, that the Court will not even enforce the specific performance of a contract obtained by the intentional concealment of a fact from the adverse party, the disclosure of which would have prevented his making the agreement, but the contractee will be left to his remedy at law even though the suppressio veri was not sufficient to set aside the sale on the ground of fraud (Livingston v. Peru Iron Co., 2 Paige Ch., 391; Seymour v. Delaney, 3 Cow., 445; Best v. Stow, 2 Sand. Ch., 298; Phillips v. Duke of Bucks, 1 Vern., 227); and other cases cited above. Clearly the defendant was not entitled to a specific performance.

      Mr. H. C. Van Vorst for respondents.
    There was no fraud in the making of'the contract. It was drawn in the presence of the parties, was read over carefully to them in the presence of a third party of their own selection, and it was compared and well considered before signature. It was read for the purpose of having all understand what the agreement was; and, after the minds of the parties had fully met in regard to price, the time and manner of payment, assumption of incumbrances, and all things had been fully considered, the contract as made and read was understood.
    There is no ground for the claim that the contract should be reformed. The evidence shows, and the justice has found, that the contract, as executed, correctly contains the bargain concluded between the parties.
    It is not pretended there was any fraud in drawing up the contract, and' the evidence shows there was no mutual mistake. One or other of those facts is essential to the claim for reformation.
    The representation by Beers, that Ludlam’s property had not been sold, is free from any charge of intentional fraud or misrepresentation.
    All the elementary writers concur in the doctrine that to justify an interposition of the court either to avoid a contract or to refuse its specific performance, on the ground of misrepresentation, it is not only necessary to establish the fact of the misrepresentation, but also that it is a matter of substance, something material to the interest of the other party, and that he was actually misled by it to his injury; that it must work some substantial injury; that, if it was of some trilling or immaterial thing, or something vague and inconclusive in its own nature, it will not be regarded by the court (1 Story’s Eq. Jur., secs. 191, 194, 141, &c.; Winne v. Reynolds, 6. Paige, 407; King v. Bardeau, 6 John. Ch. R., 38; Morris Canal Co. v. Emmett, 9 Paige, 168; Johnson v. Taber, 10 N. Y. R., 329).
    Material representations are such as directly relate to the land itself, or to something connected with of appurtenant to it, and affecting its actual value; such as quantity, location, quality, or condition of the land, rents or profits derived from it, growing crops, incmúbrances, or the like (Johnson v. Taber, 10 N. Y. R., 329; Whitney v. Allaire, 1 N. Y. R., 305 ; Haight v. Haight, 19 N. Y. R., 464; Clark v. Baird, 9 ib., 183; Bennett v. Judson, 21 ib., 238; Johnson v. Hutcheon, 33 Barb., 392),
    The statement that Ludlam’s lots were not sold did not and could not affect the value of plaintiffs’ lots. They were worth no more the day after than they were the day before the sale of Ludlam’s. The price ($22,000) in the contract was adequate, and the fair and full value of the plaintiffs’ lots.
   By the Court:

Fithian, J.

In this case the justice at Special Term found as a fact that the real agreement entered into by and between the plaintiffs and the defendant Beers on the 30th of October, 1866, was correctly set forth in the written contract then executed. And he refused to find, as requested by plaintiffs’ counsel, that the real agreement was an offer of sale merely, to be binding on plaintiffs only in case such offer was accepted by Beers’ principal that day, and such acceptance signified by a telegraph to plaintiffs by six o’clock p.m. of that day. In so finding, and refusing to find as requested, I think the justice at the trial was correct. Though the plaintiffs and one other witness swore the actual agreement was as stated in the request to find, yet a careful examination of the evidence on that point and the surrounding circumstances satisfies me that such was not the fact. But, on the contrary, the plaintiffs understood and intended that the contract on their part was not a conditional offer, but an absolute, unconditional agreement of sale in accordance with the stipulations ‘contained in the contract executed by them; and that the talk about “ telegraphing ” was entirely for the benefit and protection of the defendant Beers. It was known to plaintiffs that Beers was not acting for himself, but as agent for another. Five days before, on the 25th day of October, Beers had obtained from the plaintiffs a written refusal or permit to purchase the property at any time within twenty days thereafter, for one “Duliain,” at the price of $21,500. Ón the 30th of October Beers came and notified plaintiffs of his acceptance of the refusal or offer, and proposed to enter into binding contracts of sale and purchase at that price. The plaintiffs refused to abide by their previous agreement, and demanded an additional $500. In this demand Beers acquiesced, and entered into a written contract, binding himself to give $500 more for the property than his principal had authorized him to offer. It was quite important to Beers, therefore, that he should be permitted to withdraw from this contract in case his principal should refuse to pay the advanced price. This permission, he says, he obtained from plaintiffs, provided he telegraphed the «.¿m-acceptance of his client by six .o’clock p.m. of that day; otherwise, the contract to be binding upon both parties. I am satisfied this was the true version of the matter; and that the plaintiffs so understood it is clear from the facts, stated by themselves, that although they received no telegram of acceptance of the contract from Beers, yet the next day, or the day after, they took their contract and title papers to their counsel to have a conveyance prepared; and three days after, they appropriated the money paid to them by Beers, on the execution of the contract, to their own use. Certainly they did not then suppose the contract was at an end. But, even if the truth of the matter be as stated by the plaintiffs, the evidence on that point is so conflicting, the court would not be justified in adjudging the contract void on that ground. The rule is well settled that where a contract is sought to be avoided on the ground of “ surprise” or “ mistalce,” the fact of such surprise or mistake must be either conceded, or so clearly established as to be substantially without dispute. If it be left in doubt whether there was any surprise or mistake, the court will not grant the relief sought (Lyman v. United States Ins. Co., 17 Johns. R., 375; Gillespie v. Moore, 2 Johns. Chy. R., 585).

The only remaining questions in the case are whether it was error in the justice at Special Term in refusing to adjudge the contract void, by reason of the false representation on the part of the defendant Beers in reference to the sale by “ Ludlam ” of his property; and if not, then whether, under all the circumstances of the case, it was a proper exercise of the judicial discretion of the court at Special Term to decree a specific performance in favor of defendant Faulkner.

The justice at Special Term found, as matter of fact, that at the time, and in and about the negotiation and execution of the contract of October, 30, 1866, the defendant Beers was acting as agent for defendant Faulkner. That at and before the ex-ecution of the contract plaintiff stated to Beers that if “¡Nicholas S. Ludlam,” owner of property on Worth street, twenty feet west of plaintiffs, had not sold his property, the price of then-lot was $22,000; but if “ Ludlam ” had sold, then the price of their property was $30,000. That Beers thereupon represented, in order to induce the plaintiffs to contract for the said sum of $22,000, that “ Ludlam ” had not sold. That, relying upon said representation of Beers, plaintiffs agreed to sell for $22,000, upon the terms in the contract stated. That such representation, so made by Beers, was untrue, said “ Ludlam ” having previously entered into a binding contract of sale for his lots. The justice further found that such representation of Beers was not of a material fact or matter of substance; and upon this fact of conclusion the justice based his first conclusion of law, viz., that the contract was not fraudulent and void, but valid and binding upon the parties.

The general principle recognized by the authorities on this subject is, that to avoid a contract on the ground of false representations by one contracting party, it is not enough for the party seeking to avoid to show merely that he relied upon the truth of the representation, and was influenced thereby, in whole or in part, to contract; but he must go further, and show the false representation to be of a character which, if the contract was enforced, would work a fraud upon the party to whom the •representation was made, to his pecuniary injury and damage (2 Parsons on Contracts, 226). While the courts have never attempted to give a technical definition of fraud, or establish any general rule on the subject, they have not left us without certain rules and precedents whereby to determine with tolerable certainty the existence or non-existence of fraud in any given case, or in respect to any specified false representation. And in that respect the authorities are uniform in holding that, to sustain an allegation of fraud by false representation, the representation must be of some matter or thing material to the contract or transaction sought to be avoided because of it. It must relate distinctly and directly to the contract, and affect its very essence and substance (2 Parsons on Contracts, 266, 267, and authorities cited, 1 Story’s Equity, sec. 195); and so affect it that the complaining party, then and there, irrespective of any change of circumstances or subsequent events, would be injured by the falsehood, if the contract be enforced (1 Story’s Equity, sec. 195; Hutchinson v. Johnson, 33 Barb., 392; 2 Parsons on Contracts, 268, 269; 2 Mass., 112; 25 Maine, 243). In Hutchinson v. Johnson, supra, Brown, Justice, held the false representations in that case material, because “ they related to the qualities and conditions of the subject sold, which, if they existed as represented, materially enhanced its value ” (and see Bacon v. Bronson, 7 Johns. Chy. Rep., 194; Bradly v. Basly, 1 Barb. Chy., 125 ; People v. Cook, 8 N. Y. R., 67).

In the case last cited Willard, J., said (p. 79): “ Fraud can never, in judicial proceedings, be predicated of a mere emotion of the mind, disconnected from an act occasioning an injury to some one. A fraudulent transaction implies a wrong done, as well as a person wronged.”

And as to whethei’ the fraud or false representation be mar teridl or otherwise, seems, upon authority, to be a question of fact for the jury or court trying the cause, and not a question of law (2 Parsons on Contracts, 267). Of course this rule can only apply to cases where the facts which would render the representation material or otherwise are in dispute. For, the facts being conceded or found by the court or jury, whether those facts make the representation collateral or material, must of necessity be determined by the court as matter of law.

In applying these principles to this case, the first, and indeed the sole, inquiry is whether, upon the facts found by the justice at Special Term, or from uncontradicted testimony in the case, there is any evidence tending to show that the false representation of Beers in any .manner affected, or could affect, "the value of plaintiff’s property; whether’ the statement that “Midiólas S. Ludlam ” had not sold his property would, if true, in any manner so relate to the “ qualities ” or “ conditions ” of plaintiffs’ property as to “enhance its value”? After a careful examination of the evidence, I am unable to discover any thing tending to establish any such relation between the representation and the subject-matter of the contract, In its terms the state inent was wholly collateral, and unconnected with plaintiffs’ property. It had no allusion,, directly or indirectly, to .the “ qualities ” or “ conditions ” of plaintiffs’ property. It is impossible to see how the fact of “ Ludlam’s ” selling or retaining his property could, in and of itself, aside from any extrinsic circumstances, in any manner affect the condition, quality, or market value of plaintiffs’ property, or the plaintiffs’ power of disposition over theirs.

It is easy to surmise a variety of extrinsic facts, which, if proved to exist, would have made this representation very material ; if, for instance, it had been shown that “ Ludlam ” was keeping and maintaining upon his property a “nuisance,” or carrying on a business of a character calculated to render property in liis neighborhood unsalable, so that the sale by him of his property, and the probable change of business consequent thereon, would .have a tendency to enhance the value of surrounding property; or if it had been shown that Ludlarn himself was a person of such character and conduct' as to make him a dangerous or unsafe adjoining neighbor. And in this case I should be prepared to go so far as to hold the representation material, if it had been shown by clear proof that the plaintiffs were induced thereby to sell their property at a price less than its fair market value on the day of the execution of the contract of sale. But I do not find any such evidence in the case. It is not sufficient to show that plaintiffs suffered loss in not getting as large a price for their land as they might have done some weeks or days thereafter, if they had not then sold, by reason of the subsequent advance in the price of real estate. Such loss is too remote, and not directly or immediately consequent upon the false representation. For, non constat, the advance in price may have been caused by the fact of plaintiffs’ sale to Faulkner, thereby enabling him to carry out his purpose of erecting valuable buildings upon the property.

There is no evidence of the value of plaintiffs’ property on the day the contract of sale was executed other than the price agreed to be paid in and by the contract; and in the absence of other proof to the contrary, that is presumptively the true value. The fact that a few days after plaintiffs were offered an enhanced price is no measure or" criterion of the previous value, for the reason before stated, that the fact of the sale by the plaintiffs to Faulkner might of itself, and probably did, cause an advance in price. It appears that the defendant Faulkner had been and was negotiating to purchase property on Elm street, adjoining plaintiffs’ property, for the purpose of erecting buildings and making improvements; but that he was not willing so to purchase the adjoining property, or undertake such improvements, unless he could also purchase plaintiffs’ property, and thereby connect with Worth street. Having accomplished both these purchases, the improvements were certain to progress. And these facts would of themselves have a tendency to advance the price. It would not, therefore, do to permit the plaintiffs to avail themselves of this enhanced value, caused, probably, by the act of sale itself, and which might not have occurred had plaintiffs not sold, in order to make representations material which otherwise would be immaterial, and thus avoid their contract and take to themselves this advance, produced by the capital and enterprise of the defendant. The false representation, then, stands entirely unsupported by any t extrinsic fact showing, or tending to show, its materiality. And it not having in its 'terms any connection whatever with the subject-matter of the contract, tlie justice at Special Term was correct in finding and deciding, as he has, that the representation in question “was not of a material fad or matter of substance” It falls rather within that class of immaterial and collateral false statements and assertions which tend to quoduce an “emotion of the mind,” and which may, and often do, largely influence and actuate human conduct; but which are So remote and disconnected from the subject-matter of the contract or transaction wherein they occur, that the courts cannot deal with or treat them as material, actual frauds, affecting the rights and interests of the parties.

It is claimed by the counsel for the plaintiffs, that if the plaintiffs so relied upon and put confidence in the false representation of Beers as to be deceived thereby, that' of itself made the representation “ material.” This is not alone sufficient. True, it is oné of the essential requisites of fraud, but only one. To constitute a fraud by false representation, such as will entitle the complaining party to relief in the court, three things must concur: 1st. There must be a false representation; 2d, that the complaining party must have believed it to be true and relied upon it. and under the circumstances had a right to rely upon it, and was deceived thereby; and, 3d, it must appear that the representation was of some matter or thing relating to the contract or transaction in and about which the representation was made, so that, if true, it was to' the benefit and advantage of the party to whom it was made, and, being false, caused him damage and injury. The two former of these elements are shown to exist in this case. But there is no proof whatever to establish the latter

The remaining question in the case is whether the Court at Special Term erred in decreeing specific performance of the contract in favor of the defendant Faulkner. The power of the court to grant this affirmative relief in favor of a defendant in the action is not questioned. The justice at Special Term found as facts, that defendant Faulkner, as assignee of the contract, in due time tendered and offered to plaintiffs performance of all tire covenants and stipulations in the contract contained on the part of the defendant Beers to be observed and kept; and therexrpon demanded a conveyance of the property,which was refused; and that "defendant Faulkner has at all times since been willing and ready thus to perform his part. The plaintiffs assail this contract, on the ground that they were induced by fraud to contract ; and, in respect to the terms and stipulations of the contract, that there was surprise and mistaJee, on their part, in the omission of certain important provisions in their favor, which was a part of the bargain. If the plaintiffs had sustained either of these allegations, the contract should have been rescinded or modified in respect to the matters complained of, which, in this case, would have amounted to a total rescission. But the plaintiffs have failed to establish either of their allegations. The Court at Special Term has found and decided—and we think correctly—that the contract was free from fraud, surprise, or mistake. There would seem to be no good reason, therefore, why the plaintiffs should not be required to perform on their part. It is not claimed that there is any fact in the case, the existence of which were unknown to the parties at the time of the contract, and the discovery of which rendered the contract so hard and unconscionable, that it ought not to be enforced by a court of equity. On the contrary, the plaintiffs seek to use the same facts with and by reason of which they sought to avoid the contract altogether, to so taint it that a court of equity will refuse specifically to enforce it. This, I think, plaintiffs should not be permitted to do. Ordinarily, when a party comes into a court of equity to assail his own contract, on the ground of fraud, accident, or mistake, the litigation should result either in destroying or modifying the contract, or else in enforcing it altogether; and especially so in this case, as from the facts it is very doubtful, to say the least, whether the defendant Faulkner could have adequate relief in an action at law.

The authorities cited by plaintiffs’ counsel on this point are all cases of the suppression or false stating of material facts directly affecting the value of the subject-matter of the contract, as in Livingston v. The Penn. Iron Co. (2 Paige, 391), where one party purchased of the other, for $2 per acre, a tract of land, with knowledge on his part, which he concealed from the other, of the fact, of which the other was ignorant, that there was a valuable bed of ore on the property worth $70,000 and upward. The court held that, while the mere concealment by one party to a contract of a material fact ” affecting the value of property sold, known to him, and of which the other party was ignorant, was not such a fraud as would avoid the contract, yet it was sufficient to induce a court of equity to withhold its aid in the specific enforcement of a contract thus obtained ; and this, however, while fraud could not be predicated on the more concealment of a fact, so as to destroy the contract wholly. Yet where the fact concealed did so materially affect the value of the property sold as to make it inequitable to enforce it, the court will refuse its aid. But no case has been cited, and, I think, none can be, where the concealment or false statement of a fact or matter wholly irrelevant and immaterial, and in no way affecting the value of the subject-matter of the contract, has been held to influence a court in any manner.

There is still another reason in support of the decree of the court below. The defendant Faulkner is shown to be wholly clear from even moral offence in the premises. It is shown affirmatively that at the time the contract was assigned to him, he was wholly ignorant of the false statement made by Beers, as to the sale of the “Ludlam” lot; that he never authorized such statement, neither did he know Ludlam, or that he was the owner of any property in the block. This of course would not shield him from responsibility for legal or equitable consequences flowing from Beers’ acts or representations. But when there are no such consequences, his standing in equity should not be affected by an immaterial falsehood told by his agent, of which he had no cognizance.

I do not see any errors in the ruling of the court on the questions of evidence. .As to the interest on the first payment of purchase-money, the justice correctly held that, the plaintiffs having refused to receive the principal when tendered to them, they were precluded from claiming interest thereafter, especially as they retained possession of the ..property and its rents and profits.

The judgment should be affirmed, with costs as to defendant Faulkner, but without costs as to defendant Beers.


text:
    THE MANHATTAN BRASS MANUFACTURING COMPANY, Plaintiffs and Appellants, v. HERMAN B. SEARS, impleaded, &c., Defendant and Respondent.
    Persons may be joint owners of a patent right and not be partners in the business of selling interests in the same.
    Whether persons interested in a business are partners or not, as between themselves, depends upon the terms of the agreement under which the business is being carried on.
    Where a person has not in any manner been held out to the community as a partner in business, and a plaintiff, seeking nevertheless to charge him as such a partner, produces a written agreement between the parties to prove such partnership, the whole of the agreement must be read together. The plaintiff cannot be permitted to use such parts of the agreement as tend to establish a partnership, and reject such parts as tend to show the contrary.
    Before Barbour, C.J., McCunn and Fithian, JJ.

      [Decided May 2, 1869.]
    This case was tried before Chief-Justice Barbour and a jury.
    The action was to recover rent reserved in a lease of land and premises in the City of New York, executed by the plaintiff, as lessor, to The Judson Horseshoe Company, lessee. The action was brought against the defendant Sears, and also Frederick Judson, and John Doe and Richard Roe (names unknown). The complaint alleged that the defendants were co-partners in trade, doing business under the name and style of “ The Judson Horseshoe Company and that on or about the first day of November,.one thousand eight hundred and sixty-six, the plaintiff, by an indenture made between it and the defendants, demised and leased to the defendants certain premises therein mentioned, at the yearly rent or sum of thirteen hundred and fifty dollars, from said first day of November Until the first day of January thereafter, and from the said first day of January until the first day of January, one thousand eight hundred and sixty-eight, at the yearly rent or sum of fifteen hundred dollars, payable monthly in advance.
    Complaint also alleged default in the payment of the rent to the amount of $733.13, and prayed judgment for that amount. The defendant Sears alone answered, by a general denial of all the allegations in the complaint. On the trial the plaintiff proved the execution and delivery of the lease and premises in the complaint referred to by plaintiff, in its corporate name, signed by “ J. H. Crane, President,” to “ The Judson Horseshoe Company,” lessee, executed on the part of the latter by “ F. Judson, President,” demising certain premises on the First avenue, in the City of New York, from November, 1866, to the first of January, 1868, at a stipulated rent; and that the amount of rent claimed by the plaintiff was in arrears and unpaid. It was proved that the defendant Judson alone negotiated with plaintiff for the lease, and on its execution and delivery Judson entered into possession of the demised premises, and used them for the exhibition and selling of patent rights or interests in a patent “ calk ” for horseshoes; that he, Judson, had upon the premises a blacksmith’s forge and tools for making these patent “ calks,” and putting them upon horseshoes for purposes of exhibition ; that a horse was kept travelling through the city with a sign of horseshoes on each side; and that there was a sign on the premises with the words “ The Judson Horseshoe Patent ” thereon, and facsimiles of horseshoes and calks.
    To establish the alleged partnership between the defendants Judson and Sears, so as to charge the latter as a partner, the plaintiff then caused to be produced and read in evidence a written agreement between the defendants Judson & Sears, in the words and figures following:
    “ This agreement, made at the City of New York, this twenty-second day of June, 1866, between Frederick Judson, of Jersey City, in the State of New Jersey, and Herman B. Sears, of the City of New York, witnesseth, that the said Frederick Judson, being the sole owner in his own right of the patent right for the improvement in horseshoe calks, for which a patent was granted by the United States May 22, 1866, and the same being free and clear from all liens and encumbrances, hereby agrees to sell, and does sell and convey, to Herman B. Sears, a one undivided quarter interest in said patent right, for the loan of $4,000 in cash, for the purposes of the patent, and at the risk of its success, and the sum of $15,000 purchase-money.

      “ The said $4,000 loan to be paid at any time within one year, to be used for the benefit of the patent, and returned out of the first profits of the business, after paying the salary of the agent and other necessary expenses.
    “ The said $15,000 purchase-money is tobe paid as follows, viz.: to be realized and retained by the said Frederick Judson out of Herman B. Sears’ share in the profits arising from the sale of rights under the patent, and one half of all dividends payable to the said Herman B. Sears, are to be retained by said Frederick Judson until they amount to said $15,000.

      “ The said Frederick Judson is to continue to be the solé agent of the whole of said patent right at a salary of $1,500 a year, payable only from the profits of the whole of said patent right, subject to an increase hereafter to be agreed upon, whenever the said $15,000 shall be realized, and the profits of the business shall authorize it.

      “ The obj ect of this agreement is not for any purpose of business, or manufacture, or partnership, but only to make the parties joint owners of said patent right.

      “ The said Frederick Judson is to transact all business, and make all grants in his own name, and to keep books of account showing all moneys received and expended in said matters, which are to be always open to the inspection of either of the parties to this contract.
    “ FREDERICK JUDSOH, “ HERMAR B. SEARS.”

    Other evidence was given, showing manner of conducting business, &c. The proofs being closed, the justice at the Circuit, on the application of defendant’s counsel, dismissed the complaint as to the defendant Sears, on the ground that there was no evidence to charge him either as a partner or joint contractor. From this decision the plaintiffs appeal.

      Mr. S. B. Brownell for appellants.
    By the agreement entered into between the parties, a partnership was formed between the defendants for the purpose of introducing and selling a patent right.

      “ Partnership is a contract of two or more competent persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, and to divide the profit and bear the loss in certain proportions” (3 Kent; 5th ed., 24; Story on Part., sec. 2).
    Even if this agreement did not constitute Judson and Sears partners in the Judson Horseshoe Company, inter se, still, as to third parties, they were partners.
    A party who participates in the profits and losses, i. e., in the net profits, is a partner (Story on Part., sec. 34).
    Sharing the losses and profits constitutes such a communion and mutuality of interest therein as creates a clear partnership as to third persons (ib., secs. 59, 60).

    If the Court below was right in holding that the defendants, by the agreement, were not partners, either inter se or as to third parties, still there was evidence that the defendant Sears had held himself out to the plaintiffs as a partner, and therefore liable as such.
    There was evidence that he stated to the plaintiffs, in answer to an application as to this lease, that he owned a quarter of the interest in that patent, in the concern of The Judson Horseshoe Company.
    He was many times at the shop leased.
    He received'part of the sales of the patent.
    He had agreed to buy a* quarter interest in the patent, and had agreed to advance four thousand dollars.
    Here was evidence from which the jury were entitled to find that Scars had held himself out as a partner. That ought to have been submitted to the jury, and,the Justice erred in withholding the case from them.

      Mr. Charles E. Whitehead, for respondent.
    There was no dispute as to facts, and the construction of the written agreement was the province of the Court, and not of the jury (Schuchardt v. Allen, 1 Wallace, 370).
    The defendant Sears was not made a partner by lending $4,000 at the risk of the success of the patent, as such a loan did not make him. interested in any profits.
    Even the usual profits of a loan, viz., the interest, was not dependent upon the business, as the loan was without interest; neither was the defendant Sears' made a partner by the purchase bf a one-quarter interest in the patent owned by Judson.
    The joint ownership of a patent right creates no partnership (Parkhurst v. Kinsman, 1 Blatchford, 488; Pitts v. Hall, 3 Blatchford, 201).
    ■ It cannot be urged that the defendant is estopped from/denying a partnership, as the plaintiffs proved that the defendant Sears was not interested in the horseshoeing business; and the" plaintiffs also proved the written agreement of the defendant, by which all partnership was repudiated.
   By the Court:

Fithian, J.

The tenor and effect of the contract above set' forth between the defendants Sears and Judson, giving effect to all its provisions, is that, in consideration of the defendant Sears’ loaning to defendant Judson four thousand dollars, to be used hr the business of selling rights in the patent, and put at the risk of the business, and to be paid out of proceeds of whole patent sales, defendant Judson agrees to and does sell- to Sears one ' quarter interest in the patent for fifteen thousand dollars, to be paid only out of the net proceeds of such quarter interest; and' that the .defendant Judson should proceed, as agent of the whole patent, to transact business of selling rights and interests in the patent in his own name, and upon a salary payable out of the profits alone; and, further, expressly stipulating that the agreement should not operate to authorize a joint “ business, or manufacture, or partnership,” but solely to constitute the parties “joint owners of the patent right.” I regard it as immaterial to speculate whether this agreement did or not, in some respects, make the parties thereto partners in the business. For, however that may be, if I am right in my construction of the agreement, the defendant Sears is to bear no losses or expenses on account of the business, other or in addition to the four thousand dollars which he put at the risk of the business; while all other loss, if any, is to be borne by the defendant Judson. It is clearly competent for partners even, as between themselves, to enter into any stipulations they please as to how and in whose name the business shall be conducted, and what shall be the proportion of loss or profit to be borne or received by either respectively; and the courts will uphold and enforce such agreements as against the parties thereto, and all other persons dealing with either partner, with full knowledge of all the facts in respect to the rights and responsibilities of others with whom he does not deal.

The plaintiff cannot, therefore, rely upon this contract alone to charge Sears; because, if he use it at all, he must take it as a whole. He cannot avail himself of such provisions in the agreement as, standing by themselves, would tend to establish a partnership between Sears and Judson, for the purpose of charging Sears, while he rejects other clauses that discharge him. The agreement is evidence as well for Sears as against him, and by it he is exempt from liability.

The only remaining question is whether Sears has in any manner held himself out to plaintiff, or other persons, or knowingly permitted Judson, so to hold him out as an ostensible partner in this business % I do not find any evidence in the case of any such fact. The agreement, and the lease itself, were made (on the part of the lessee) by Judson alone. By no agreement, verbal or written, not even by tacit consent, did the defendant Sears "ever authorize Judson to use the name of the Horseshoe Co.,” or connect him (Seal’s) with any such company, or any company. Judson was “to transact all business” and make all grants in his own name ; and defendant Sears swears positively (and there is no evidence to the contrary) that he never was consulted about the making the lease; and “ never heard or dreamed of any company,” until demand made on him for rent. This is not like a case of a dormant ” or secret partner, having an interest in the capital and profits of a business authorized to be carried on by his co-partners in a certain firm name. For in such case the firm name would be his name. Here there was no firm or company whatever created or authorized to exist. In no way, directly or indirectly, either as principal or by any authorized agent, was there any privity of contract, between plaintiff and tiie defendant Sears.

The judgment should be affirmed, with costs.