p. 372James R. O'Beirne, App'lts. v. Spencer S. Bullis et al., Resp'ts.(Supreme Court, Appellate Division, First Dept.,Headnote
1. Specific performence—Damages.In case a plaintiff, in an equitable action, shows that he is entitled to equitable relief, which, if granted, would be unavailable because of the defendant’s inability to perform, the damages sustained by the plaintiff may be recovered in the same action.
Where the relief, demanded by the plaintiff in an action for specific performance, is purely equitable, the defendant is not entitled to a jury trial, before his inability to perform is disclosed.
If the defendant, in such action, wishes for a trial by jury after it appears that he is unable specifically to perform, he should then make a specific demand.
An assignee of a contract for the purchase of lands has the same rights to enforce the contract as his assignor.
Where, in pursuance of a sealed contract to mortgag-e certain lands, in order to secure bonds, a deed of trust is made which, by fraud, is substituted for other lands which were valueless, a bondholder, on behalf of himself and of other bondholders can, on refusal of the trustee to sue for this specific performance of the contract, sue therefor.
Appeal from a judgment in favor of plaintiff, entered upon a decision after trial.
William W. Cook and Adelbert Moot, for app’lt Barse; Joseph Koch and Frank Rumsey, for app’lt Bullis; Frank Sullivan Smith, for resp’t O’Beirne; Adrain H. Joline, for resp’t Central Trust Company.
When this case was before the general term on a former appeal, ( 80 Hun, 570 ; 62 St. Rep. 583 ), one question •seems to have been presented and decided, and that was whether or not the plaintiff could maintain this action as an action in -equity for specific performance, when it appeared on the trial Shat the defendants would be unable to perform the contracts, -on the ground that they had no title to the property .which they had agreed to mortgage to the trust company, to secure the payment of the bonds. That question was decided in favor of the plaintiff on that appeal, and it is unnecessary to say more upon that question than that we adopt the opinion of the court delivered upon that appeal as a correct exposition of the law upon that question, and agree in that opinion. It was therein said:
“We take it to be too well settled to require the citation of any authorities that in case the plaintiff in an equitable action shows -that he is entitled to equitable relief, which, if granted, would be unavailable, because of the defendant’s inability to perform, the ’damages sustained by the plaintiff may be recovered in the same action. It has been held in many cases brought to compel the specific performance of contracts that damages may be awarded the plaintiff, though specific performance be refused.
And we think this rule is expressly recognized by the late case of Haffey v. Lynch, 143 N. Y. 247 ; 62 St. Rep. 171 , where it is said?
“It is a general rule in equity that the specific performance of 'a contract to convey real estate will not be granted when the vendor, in consequence of a defect in his title, is unable to perform. In such cases specific performance is denied because the court cannot enforce its judgment, and because, also, it would be oppressive to the vendor. But if the defence in the title existed lat the date of the contract, or was due to some fault, or to some act of the vendor subsequent to the contract, the court will generally entertain an action for specific performance, and retain ¡jurisdiction for the pnipose of awarding damages for breach of the contract. But where, as in this case, the defect in the title 'arises after the making of the contract, without any fault of the vendor, the vendee knew of the defect in the title when he commenced his action, it was formerly the rule that the court would not retain the action for the purpose of awarding damages. Wiswall v. McGowan, Hoff. Ch. 125; Morss v. Elmendorf, 11 Paige, 277. This rule was adopted because the vendee should not commence a fruitless action in equity simply to recover there his damages for a breach of contract. The rule has been modified since the code practice, which authorizes the joinder of legal and equitable causes of action; and while the equitable relief will be denied in such a case, now the action will be retained, and the issue as to the breach of contract and damages will be sent to a jury for trial. Sternberger v. McGovern, 56 N. Y. 12 .”
After the case was called, and before any witnesses were examined, counsed for defendants said: “We should make a formal
p. 374demand for trial by jury.” This motion was denied, and defendants excepted. It is claimed that this was error, the insistence being that as the general term had sent the case hack to be tried as an action for damages, defendants were entitled to a trial by jury. To determine whether the motion should then have been granted, the trial judge had before him the pleadings, and his ruling was necessarily based thereon. If therefrom it had appeared that the action was one for damages only, which would be triable by a jury, there might he some ground for the motion. If the pleadings presented questions of equitable cognizance, then the court was right in proceeding with the trial, and taking the evidence, with a view to determining whether or not the plaintiff was entitled to equitable relief. In effect, the complaint alleged —¡First, that the defendants Bulbs and Barse agreed to convey to the trust company a certain number of acres of unincumbered timber land, to be included in a mortgage as security for the issue of bonds, but instead thereof, and fraudulently, and as a compliance with these contracts, they assumed to mortgage land which which was not unincumbered, hut the greater part of which was subject to mortgages or other liens or incumbrances, for a large amount of which they had.no title at all; and, second, that the said defendants were interfering with the construction com.pany engaged in constructing the railroad under the agreements, and that said defendants are making certain unauthorized construction of lines of railroad; and, third, that the defendant trust company is threatening and is about to execute a release of lands to the defendants Barse and Bullís, and that the plaintiff is without an adequate remedy at law to prevent the same. The relief demanded is a judgment for the immediate specific performance, of the agreement to convey, or that the defendants Bulbs and. Barse be required to pay to the trustee, for the security of the bondholders, such a sum of money as the court shall ascertain’ to be equivalent to the value of the lands which they had agreed to convey; and, second, an injunction against the trust company and the other defendants to prevent the other acts complained ojff The answer denied the fraud, and claimed that the defendants] Bulbs and Barse were not required to convey the lands until such] time as a certain number of miles of railroad were built and con.x] structed. It will thus he seen that the answer does not allege^ inability to comply with the contract, nor does it allege that thei, plaintiff has an adequate remedy at law; hut it puts in issue thei| plaintiff’s charge of fraud, and disputes the construction of theti contract as contended for by the plaintiff; and the whole defenses in effect, is that the defendants Bulbs and Barse have fully com-] plied with the agreements which they entered into. Upon these^ pleadings, it would have been entirely competent for the plaintiff! to show, if he could, that Bulbs and Barse had the land which the: court could compel them to convey; and the alternative relief prayed for, which is the usual one in an action for specific per-, ■formance, is not a demand for damages in the ordinary sense»
p. 375namely, damages which the plaintiff has suffered, and which Should be ascertained. bTor did the plaintiff demand a sum in liquidation to be paid over to him by the defendants. What he ¡asked was that Bullís and Barse should mortgage the lands; and, inability to perform not having been set up by way of defense, \ it would have been entirely competent for the defendants Bullís and .Barse, upon the judgment going against them, to have complied with their contract, by mortgaging the lands which the court ¡adjudged they had contracted to mortgage, by acquiring the title to the lands, and mortgaging them to the trust company, and thus have relieved themselves from a judgment for the alternative relief asked for. We think, therefore, regard being had to the ¡pleadings, that the relief demanded by the plaintiff was purely equitable, and that the refusal to comply at that stage of the case kvith the formal demand for a jury trial was right; and, if defendants wished for a trial by jury after it appeared that they were unable specifically to perform, they should have then made a specific demand.
The right of either the plaintiff or the trust company, as trustee for the bondholders, to maintain this action to enforce specifically a contract made between Newcombe & Co. and the defendants Bullís and Barse is questioned by the appellants. The contracts were under seal. Newcombe & Co. had been asked to furnish capital to complete the railroad contemplated by the parties. With this end in view, and to obtain the money necessary for the completion of the railroad by the agreements of October 8, 1889, and December 9, 1889, the defendants agreed that they would cause to be created a mortgage or a deed of trust upon the railways, properties, and franchises of several railroad companies that the parties contemplated consolidating into one corporation, and also upon 30,000 acres of land, to be duly executed to the Central Trust Company of New York, as trustee, for the purpose of securing "mortgage bonds to an amount specified. Upon the mortgage being executed, thus becoming a lien upon the said railroad, property, and franchises, and upon the said 30,000 acres of land, Newcombe & Co. undertook to sell at par a certain number of the said bonds, and to use the proceeds thereof, for the purpose of completing the railroad which was to be built. As a compliance with this contract, the defendants Bullís and Barse executed a mortgage to the Central Trust Company, which purported to comply with the contract by creating a lien upon the railroad, properties, and franchises, and upon the said 30,000 acres of land. It subsequently appeared that, of the 30,000 acres of land which the mortgage purported to convey to the trust company to secure the payment of the bonds, the defendants had no title to a large portion thereof, and another part was valueless, and did not comply with the contracts, as all the timber upon it had been removed, and the balance, or substantially all the balance, was covered by other liens and incumbrances. When this conveyance was made to the trust company, if Newcombe & Co. had themselves purchased and
p. 376held the bonds, and adanced the money required by the contract» to be advanced by them from the proceeds of the bonds, the trust company would have been trustee for Newcombe & Co.; and it is clear that Newcombe & Co., or the trust company, as trustee of' the express trust, could have maintained an action for tire specific performance of the contract made by the defendants to convey this land to the trust company, to secure the payment of the bonds. Newcombe & Co. having transferred the bonds to bona fide holders for value, such bona fide holders would have been subrogated to the rights of Newcombe & Co. to enforce this contract, and the trust company, as trustee for such bondholders, would have been entitled to commence an action to compel the specific performance of the contract made by the defendants with Newcombe
& Co. for the benefit of the bondholders. Whther that cause of action would have vested exclusively in th trust company, or whether the bondholders would have been entitled to maintain such an action as those who had become subrogated to Newcombe
& Co.’» right of action to have the contracts specifically enforced, is not important, as the plaintiff sues on behalf of himself and all other*' bondholders; and he could enforce any rights existing in the bondholder’s or in the trust company as trustee for them. It is settled that an assignee of a contract for the purchase of lands-has the same rights to enforce the contract as his assignor. See-22 Am.
& Eng. Enc. Law, p. 936, and cases cited. And the purchaser of these bonds would be considered in equity as the assignee of Newcombe
& Co.’s interest in their contract with the-defendants, whereby the defendants agreed to convey to the trust company the said 30,000 acres of land, as security for the payment of the bonds. It is also clear that the -execution of the mortgage-by the defendants, as a compliance with this contract, whereby they purported to convey to the trust company 30,000 acres of land, to secure the payment of the bonds, was a distinct representation both to the trust- company and to Newcombe & Co. that they had such a title to the land that the lien provided for by the agreements attached to such land to secure the payment of' the bonds. Thus, a contract between the trust company and the defendants was created, which the trust company was entitled to enforce.
We think it clear, therefore, that the plaintiff, suing’ on behalf' of himself and all other holders of the bonds issued under the mortgage given in pursuance of the contracts between Newcombe & Co. and the defendants, and having alleged a request to the trust company to enforce this contract, which was refused, was entitled to maintain whatever action either Newcombe & Co. had to enforce the contracts, or the trust companv, as trustee for him and the other bondholders, had to enforce the covenants of the-defendants contained in the mortgage which ourported to complv with the contracts to convey the lands, so that the same should be held subject to a lien to secure the payment of .the bonds. A careful examination of the testimony1 has satisfied us that the find
p. 377ings of fact by the court below were amply sustained by the evidence, and we are clearly of the opinion that, upon those findings, the plaintiff was entitled to the relief granted to him by the judgment.
The judgment should, therefore, be affirmed, with costs.
All concur.