Webster v. Kings County Trust Co.

This is an appeal from a judgment in favor of the plaintiffs entered on a decision of the court at Special Term. The action is to compel the specific performance of a contract for the sale of land. The substantial question litigated on the trial was the validity of plaintiffs’ title to the land agreed to be sold. On this appeal the appellant raises further questions as to the form of the judgment entered, and as to the effect of the death of Agar, one of the original plaintiffs and vendors.

Before we deal with the main objection to the plaintiffs’ title it will be convenient to dispose of some minor objections to it. First, it is objected that there are two outstanding mortgages on the property. Such was the fact. But both mortgages were past due and payable at the contract time for passing the title. Before that time defendant had notified plaintiffs that it objected to the title on other grounds, and would not complete the purchase. It was not necessary for the plaintiffs to pay off these mortgages in advance, knowing the sale was not to be consummated. On a sale of real estate it is only necessary that at the time of passing title the property shall be free from incumbrances. The delivery of the deed and the payment of the purchase money are simultaneous acts. The vendor whose property is subject to incumbrance is not bound to raise money and pay the incumbrance in advance. If he produces the holder of the lien ready to satisfy it on payment, he can rely on the purchase money as the fund for such payment. Both mortgages being due, we must assume that the plaintiffs could have produced the mortgagees ready to satisfy the mortgages, had the defendant been willing to pay the purchase money.

A .second objection is a consent given by the plaintiffs that a street railroad in front of the premises might be operated by electricity. The premises described in the contract do not include the adjacent half of the street. Apart from this, the railroad was in operation at the time of the execution of the contract. We think that in case- of street or elevated railroads in actual operation in front of property, it must be assumed that so far as the consent of the property holder is necessary, it has been given, and that the contract of sale is made subject to the open easement of the railroad as is the rule in the case of a highway.

The premises agreed to be sold were formerly the banking house of the Long Island Savings Bank of Brooklyn, and its property. I u the year 1877 the bank became embarrassed. The Attorney-General brought an action on behalf of the People to dissolve the bank and appoint a receiver. To avoid a receivership the trustees of the bank proposed to the depositors that they would pay to such of them as wished their money immediately, eighty per cent in cash, and to' the others the full amount of their deposits in six, twelve, eighteen and twenty-four months, the trustees personally guaranteeing such payment, and agreeing to pay any surplus that might arise from the assets of the bank to the depositors, pro rata. On proof of the acceptance of this proposal by ninety-four per cent of the depositors, and the filing of the personal undertaking of the trustees to carry out its terms, the court denied the motion to appoint a receiver, and directed the trustees to make the payments provided for. The bank thus went into liquidation under the management of its trustees. By October, 1879, substantially all of the eighty per cent class had been paid in full, and seventy-five per cent paid to the one hundred per cent class. The principal remaining asset of the bank was its banking house, which, in the state of the market, appeared unsalable, though money had been raised on it by mortgage. On an application stating these facts, an order was made by the court extending the time of payment of the final twenty-five per cent. Parts of the last dividend were paid from time to time, and, extensions obtained from the court as to the remainder, the three original plaintiffs and one Delano advancing the balance, §20,000, to make payment. Finally, in October, 1881, the court directed a sale of the banking house at public auction, by Ogdon, vice-president of the bank. The order gave leave to any of the trustees of tlie Long Island Savings Bank to purchase the property, and directed that out

The general rule that trustees cannot purchase the trust property or deal with it for their own advantage, is unquestionable. But to this rule there is a well-recognized exception, that where a trustee has a personal interest to protect, he may, by the order of the court, .purchase at its sale and acquire a valid title. (Scholle v. Scholle, 101 N. Y. 167 .)

It is clear that the sale here had was a judicial sale and that there was a proceeding in court in which the plaintiffs could apply -for leave to purchase. The action brought by the People was in effect to liquidate the bank. The agreement between the trustees and depositors was not an agreement made out of court and that could only be enforced in an independent action by depositors. While the motion for a receiver was denied, the action was not discontinued nor did the defendant recover judgment. The order of the court was that the bank be liquidated. It is true the liquidation was to be made in an exceptional manner, the court considering that the depositors would fare better by the manner proposed then by'a receiver, and the depositors being of the same opinion. Nevertheless, the liquidation was a liquidation under the order of the court to the same extent as if made by a receiver, for the court had power to make such an order. (People v. Ulster Co. Savings Bank, 64 Hun, 434 ; affd., 133 N. Y. 689 .)

There was, therefore, at the time the order of sale was made a judicial proceeding pending in full integrity, in which both a sale could be ordered and the plaintiffs be given leave to purchase thereat. In such sale all the trustees had an interest to protect the contingent liability on their undertaking, and the plaintiffs had a further special interest, their advances to the bank then being about $33,000.

It is claimed that the order granting the plaintiffs leave to purchase ' was - ineffectual and irregular in that’ it was made without

The order of confirmation was made on notice to the Attorney-General. Thereafter a creditor named Hannah intervened on petition, stating the facts relative to the purchase by the plaintiffs and applied to vacate the order of confirmation and to declare the purchase voidable or void. This application was denied, except so far as it permitted the depositor to intervene. The order denying the application was affirmed by the Court of Appeals, and the order of confirmation stands in full force. If we are right-in our position that the sale was a judicial sale, and that it was had in a jirdicial proceeding to which all the cestui que trusts were parties, we cannot see how the title acquired by the purchasers on such sale can now be impeached.

Alexander Agar, originally a plaintiff, and one of the vendors, died after trial and before decision. Therefore, no decision could be made as to him. But we think it was not necessary to revive the action as to his heirs and personal representatives. The contract on the part of-the vendors was joint, not several; to convey or cause to be conveyed to the vendee the'entire title, not each to convey'his several shares therein, and a single payment of the purchase money was to be made. The rights and obligations of the contract devolved on the survivors. If the survivors could give a full title, we do not see why they could not proceed with the action. On the trial the plaintiffs produced a deed- properly executed and acknowledged by the three vendors and tendered it to the defendant. Upon , the

If the decision below is correct on the question of title, then the form of judgment is proper. As already said, all the defendant was entitled to was to have the mortgages satisfied when it paid the purchase money. As it will not pay the purchase money except on compulsion, and even that to be delayed by appeal, there is no justice in compelling the plaintiffs to discharge these mortgages and lie out of the money, it may be., for years. It is as easy for the defendant to pay the money to the mortgagees in satisfaction of the mortgages as to the plaintiffs in satisfaction of the purchase price. If it contends that such was not its contract the answer is that the vai’iance is caused by its own fault.

The judgment appealed from should be affirmed, with costs.

Brown, P. J., and Dykman, J., concurred.

Judgment affirmed, with costs.