Catlin v. Green — 31 N.Y. St. Rep. 532

Majority

p. 532

Henry G. Catlin, App’lt, v. William W. Green, Resp't.^[1]

(Court of Appeals, Second Division,

Filed June 3, 1890.)

Headnote

Contract—Option as to exchanging stock for bonds—Must be promftlv TAKEN ADVANTAGE OF—LACHES.

The B., W. & 3ST. R. R. Co. entered into an agreement with defendant and one Elwell as trustees of purchasers of the M. R. Co., by which the former company agreed to lease to the company to be organized by the trustees under the name of the ÍT. S. St. & M. Y. R. Co. its franchise, rights and privileges for the period of ninety-five years, and was to receive therefor $30,000 of the stock of the new company; and it was agreed if they should at any time during said period issue mortgage bonds, etc., that the holders of said stock might exchange it for a like amount of such-bonds. The bonds were issued in 1875, and in 1884 plaintiff demanded the exchange of $2,000 of stock, which was worthless, for a like amount of the bonds, worth ninety cents on the dollar. Held, that he could not enforce the agreement; that owners of the stock had the right, within a reasonable time after the mortgage bonds had been issued, to present their stock at the company’s office and have it exchanged for bonds, but that the holding of the stock for upwards of nine years until it had become worthless and the company insolvent amounted to gross loches, and a waiver of the right to exercise the option.

Appeal from a judgment of the general term of the city court of Brooklyn, affirming a judgment entered upon the decision of the special term.

Daniel Nerrtirs, for app’lt; K Louis Lowe, for resp't.

This action was brought to recover the value of the bonds of the North Second Street & Middle Village Railway-Company to the amount of $2,000 par value. On the 28th day of July, 1870, the Brooklyn, Winfield & Newton Railroad Company entered into an agreement with John Elwell and William W. Green, as trustees of the purchasers of the Metropolitan Railway Company, in and by the terms of which the former company agreed to lease to the company to be organized by the trustees under the name of the North Second Street and Middle Village Railway Company, its franchise, rights and privileges, for the period of ninéty-five years, and was to receive therefor $30,000 of the stock to be issued by the new company. It was further agreed on the part of the trustees that, “ in case they or the company or corporation to be formed by them as aforesaid shall hereafter at any time during the period of said ninety-five years issue -mortgage bonds covering the tracks, property, franchises, etc., of said company or corporation, then and in such case the holders of the said $30,000 of said stock, or any portion of them, shall have the right,

p. 533

to exchange the amount of said stock so held by them for a like amount of said bonds so issued.”

The other provisions of the "contract were carried out by the parties, and subsequently, and in the month of May, 1875, the new company issued mortgage bonds upon its road to the amount of $125,000. In the month of September, 1884, the plaintiff became the holder of $2,000 of the' capital stock of the new company, issued in payment for the aforesaid lease, which stock he presented at the company’s office and demanded that it should be exchanged for the bonds which it had theretofore issued, and on being refused, he made a similar presentation to the defendant and demand that he make such exchange, which was also refused.

At the time that this presentation and demand was made the bonds of the company were worth ninety cents on the dollar. The stock had depreciated so as to become of no value. An action had been commenced for the foreclosure of the mortgage covering the bonds so issued, and a receiver had been appointed and entered into the possession of the property, rights and franchises of the company. Over nine years had elapsed since the mortgage bonds had been issued, and the company had become insolvent. The company so organized by the trustees had given to the defendant a bond of indemnity, undertaking to save harmless from all liability, claims and demands, including that which might arise under the provisions of the agreement The trial court found that the plaintiff and the previous owners of the stock were chargeable with loches in the exercise of the option given under the agreement to convert the stock into bonds, and had thereby abandoned and waived all right to elect to have such stock exchanged for bonds, and that the tender and demand was not made within a reasonable time after the right to elect under the agreement to convert the stock into bonds had accrued.

This finding appears to conform to the rule that where an option to be exercised or a condition to be performed is not limited by the agreement, such option must be acted upon and the condition performed or abandoned within a re asonable time, and this is well sustained by authority. Fitzpatrick v. Woodruff, 96 N. Y., 561 -565; Wooster v. Sage, 67 id., 67; Johnston v. Trask, 40 Hun, 415 ; S. C., 116 N. Y., 136 -143; 26 N. Y. State Rep., 622; Vyse v. Wakefield, 6 Mees. & Wels., 442-451.

The appellant contends that the doctrine of estoppel lies at the foundation of the law as to waiver. That, while one party has time and opportunity to comply with1 a condition precedent, if the other party does or says anything to put him off his guard, and induce him to believe that the condition is waived, or that strict compliance will not be insisted on, he is afterwards estopped from claiming non-performance of the condition.

This we may conceda But what has the defendant done or said that has put the plaintiff or the former owners of the stock off their guard, or induced them to believe that strict compliance would not be insisted upon. Our attention is called to no such word or act of the defendant, and in our examination of the case we fail to discover any.

p. 534

It is farther contended that no-notice was given by the defendant to the plaintiff or former owners of the stock to exercise the option or that it would be deemed abandoned. Very true, but no such notice was required by the provisions- of the contract or by any rule of law to which our attention has been called. It appears tram the testimony that the stock issued to the Brooklyn, Winfield & Newton Railway Company for its lease was soon thereafter and before the mortgage bonds had been issued endorsed by its treasurer in blank and transferred to other parties. The transfer, however, was never entered upon the books of the company so that the defendant or the officers of the North Second Street & Middle Village Railway Company had no means of knowing who were the holders of the stock.

The plaintiff or the prior owners of the stock had the right within a reasonable time after the mortgage bonds had been issued to present their stock at the company’s office and have it exchanged for bonds. But this option should have been exercised within a reasonable time. The holding of the stock for upwards of nine years until it had become worthless and the company in- ' solvent and until its property and assets had passed into the hands of a receiver, thus making performance impossible, amounts to gross loches and a waiver of the right to exercise the option and demand performance.

The judgment should be affirmed, with costs.

All concur.