Field v. Holbrook — 13 N.Y. Super. Ct. 597

Majority

p. 597

Cyrus W. Field v. Darius B. Holbrook.

Headnote

A court of equity has jurisdiction to order an instrument in writing to be delivered up and cancelled, upon the ground that it was either void in its origin, or has been rendered so by subsequent events.

The cases in which this jurisdiction may properly be exercised are the following:

1. When the instrument is alleged to be void upon grounds of which a court of equity alone has cognizance.

2. When the instrument, if uncancelled, would throw a cloud upon the plaintiff’s title to such estate.

3. When the instrument is negotiable in its character, as a bill of exchange or promissory note; and, lastly,

4. When the plaintiff claims to have a defence to the instrument, valid in law, but which he is in danger of losing if the adverse party is' suffered to delay the prosecution of his claim.

These cases, although differing in their circumstances, rest substantially on the same principle, namely, that if the relief sought be denied, the plaintiff will sustain a present, or be exposed to the hazard of a future, injury and loss. Hence, the relief prayed for will be denied when it is certain that the plaintiff will sustain no such loss, and be exposed to no such hazard if the instrument is suffered to remain in the hands of the adverse party.

Thus, the relief will not be granted when the instrument of which the surrender and cancellation are claimed, is on its face plainly illegal and void; nor when, it is a deed which, from its nature and contents, can throw no cloud upon the plaintiff’s title, nor when a negotiable instrument, it is merged in a judgment.

In all these cases the relief is denied upon the single ground that its denial can work no actual prejudice to the plaintiff.

If the mere possibility that a void instrument may be used for vexatious purposes was a sufficient reason for ordering it to be delivered up and cancelled, the relief ought to have been granted in every case in which it has been denied, for in all this possibility existed.

Held, in the case before the court, that as the facts upon which, as a condition precedent, the validity of the contract held by the defendant depended, had never occurred, the plaintiff was in no more danger of a recovery against him upon the contract than had it been on its face illegal and void.

Held, therefore, that the plaintiff was not entitled to demand that the contract should be given up, and that the demurrer to the complaint was well taken.

Order overruling demurrer reversed, with liberty to plaintiff to amend.

(Before all the Judges.)

March 7 ;

March 14, 1857.

Appeal by defendant Holbrook from, an order at Special Term overruling demurrer to the complaint.

The following are the pleadings:

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Cyrus W. Field, plaintiff, complains and alleges—•

“ 1st. That on the 24th day of March, 1854, he, together with Chandler White, acting on behalf of themselves and their associates, Peter Cooper, Moses Taylor, and Marshall 0. Roberts, entered into an agreement with Ambrose Shea, as agent of Darius B. Holbrook and of Holbrook & Co., a firm consisting of the said Darius B. Holbrook and of---Holbrook, as the plaintiff is informed and believes, of which agreement a copy is hereto annexed, marked A.

“2d. That the said Holbrook afterwards caused to be delivered to the plaintiff and his associates an account of the said money, alleged to have been paid by him to them, which they allege to amount, with interest up to the- 1st of August, 1854, to the sum of fifty-one thousand eight hundred and twenty dollars eighty cents.

“ 8d. That on the 29th day of August, 1854, the plaintiff and his said associates caused to be tendered on their behalf to the said Holbrook five hundred and eighteen shares of the capital stock of the Hew York, Uewfoundland, and London Telegraph Company, the par value of each share being one hundred dollars, together with twenty-three dollars and fifty cents, and demanded of him the bonds and stock aforesaid; but the said Holbrook did not receive the said shares, or money, or deliver up the said bonds and stoók.

“ 4th. That as the plaintiff is informed and believes, the said Darius B. Holbrook and-Holbrook had not, nor had either of them, during the said month of August, nor at any time since, the bonds and stock of the Uewfoundland Electric Telegraph Company.aforesaid, or the larger part thereof.

“ 5th. That, notwithstanding the said tender and refusal, and the inability of the said Darius B. Holbrook and-Holbrook to comply with the terms of the said agreement, the said Darius B. is now continually annoying the plaintiff and his associates with his pretended demands upon them, under pretence of the said agreement, and as the plaintiff is informed and believes, threatens to bring suits against them and against the said Uew York, Uewfoundland, and London Telegraph Company in this country and in Uewfoundland.

“ 6th. That the plaintiff has not been able to obtain the consent of his said associates to be joined with him as plaintiffs in this action, and for that reason they are made defendants.

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“ 7th. That the plaintiff and his said associates are all stockholders in the said New York, Newfoundland, and London Telegraph Company.

“ Wherefore the plaintiff demands judgment that the said agreement be delivered up to the plaintiff to be cancelled, and that, in the mean time, the said Darius B. Holbrook and-Holbrook, and each of them, be enjoined from commencing or prosecuting any action or actions, suit or suits against the plaintiff and his associates, or the said New York, Newfoundland, and London Telegraph Company upon the said agreement, or for any other cause of action arising out of the said agreement, or connected therewith, or related thereto, and from taking any proceedings against the plaintiff, legal or otherwise, for any matter connected with the interest of the said D. B. Holbrook and-— Holbrook, or either of them, in the said Newfoundland Electric Telegraph Company, or the claims of them, or either of them, against the said company.”

“City and County of New York:

“ Cyrus W. Field, the above-named plaintiff, being sworn, saith that the foregoing complaint is true of his own knowledge, except as to those matters which are therein stated on his information and belief, and as to those matters that he believes it to be true.

“ Cyeus W. Field.”

“Sworn, April 8th, 1856, before me,

“ P. J. Molloy, Commissioner of Deeds.”

“ St. Johns, March 24th, 1854.

“ Ambrose Shea, Esq.,

“ Dear Sir:—In compliance with the verbal understanding had with you we stated that we have agreed with you, as agent of Messrs. Holbrook & Co. and D. B. Holbrook, to give them, respectively, stock at par in the New York, Newfoundland, and London Telegraph Company, for the actual amount of money paid, by them (and interest at seven per cent.) for the Newfoundland Electric Telegraph Company, and actually received by that company, such stock to be given to them on their demanding it of us

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in New York at any time in the month of August next, and on their surrendering to us aE the bonds and stock received by them from said Newfoundland Electric Company.

“ Your-obedient servants, “Chandler White,

“Cyrus W. Field,

“ On behaE of the associates.”

“I accept the above terms on account of Messrs. Holbrook & Co., and D. B. Holbrook.

“ St. Johns, Newfoundland, March 31st, 1854.

“ (Signed,) A. Shea.”

The defendant, Darius B. Holbrook, demurs to the complaint of the plaintiff, - and states the foEowing grounds of demurrer:

“1st. That said complaint does not state facts sufficient to constitute a cause-of action.

“ 2d. That it does not state facts sufficient to entitle plaintiff to the reEef demanded in the complaint.

“ 3d. That it does not state that plaintiff, or the associates, (of whom he ‘is one,) offer, or are ready, or able, or willing, or have, since the 29th day of August, offered, or been ready, or able, or willing to-pay this defendant, or the firm of Holbrook & Co., the stock in said complaint mentioned, to the amount of fifty-one thousand doEars and more.

- “ 4th. That plaintiff does not offer to "fulfill, on the part-of himself of of his associates, the contract in said complaint mentioned.

“ 5th. That said complaint does not state to whom, (which of said defendants Holbrook,) said tender was made, and does not state that it was made to this defendant, or to the firm of Holbrook-& Co.

“ 6th. The contract appears from the complaint to have been made in Newfoundland, and the complaint states no sufficient cause for compelling defendants to come here to litigate their rights, or why they should not be aEowed to prosecute their claims there, as they must be advised.

“ 7th. The parties jointly interested with the plaintiff, namely, Cooper, Taylor, Roberts, and White, in the complaint mentioned, are not joined as plaintiffs, and there is, in this respect, a want of parties plaintiff herein."

p. 601

Hoffman, J., gave the following reasons for his decision:—

Field, the plaintiff, with Chandler White, on behalf of themselves and their associates, agree with Holbrook & Company, and D. B. Holbrook, to give them stock, at par, in a certain telegraph company, for the amount of money paid by them for another company. The condition of the contract was that the new stock should be given, on Holbrook & Company and D. B. Holbrook demanding it in New York in the month of August 'ensuing,, and upon surrendering all the bonds and stock received by them-of the other company.

This contract is dated 31st of March, 1854.

The plaintiff states a tender on the 27th of August, 1854, on behalf of himself and his said associates, to said Holbrook, of five hundred and eighteen shares of the capital stock of the company, the par value being $100 a share, together with $23.80 in cash, and that they demanded of him the bonds and stock of the other company which were to be surrendered.

An account had been rendered by Holbrook prior to this tender of the moneys paid, amounting, with interest, on the first of August, 1854, to the sum of $51,823.80.

The plaintiff, on the ground of this tender and Holbrook’s refusal to fulfill the contract, (and also upon an allegation of Holbrook’s not having the bonds and stock of the former company to surrender,) demands a cancelment of the agreement, or, at any rate, an extinguishment of it as to himself, and an injunction to stay suits threatened against him.

The other associates having declined to be made plaintiffs, are made defendants.

The chief question raised is this: The plaintiff is under a contract with the defendants Holbrook, which, he says, their default enables him to cancel and remove from embarrassing him. Is he bound to wait until these defendants think proper to sue him, and then resist, and defeat them ? May he not compel them to free him from it now, or to litigate the case with him at once?

The cases which relate to the rescission and cancellation of agreements are more applicable to the present question than bills quia timet. These authorities are collected to a considerable extent by Justice Willard. (Eq. Jurisprudence, p. 302.)

I think there is a manifest equity with the plaintiff to bring the

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question of his responsibility to a close. It may not be certain that his right to rescind the contract was absolute; some equity possibly may rest with the defendants. (Parsons on Contracts, 191, and notes M. and 1ST.) I admit that I am proceeding upon the application of a general principle, for I have not met with a case in point.

Demurrer overruled. Judgment for plaintiff, with costs, and liberty to answer in twenty days.

D. Lord, for appellant.

D. D. Field, for respondents.

It was admitted upon the argument, by the learned counsel for the defendants who have demurred, that, admitting the allegations in the complaint to be true, and the demurrer admits their truth, the written contract of which these defendants retain the possession has been rendered void in their hands, from their failure and inability to comply with its provisions, within the time limited for their performance.

The main question to be determined, therefore, is, whether, upon this admitted statement of facts, the jurisdiction of the court can be properly exercised, by ordering the contract to be delivered up and cancelled ? The question is, in a measure novel, and possesses a more than ordinary interest and importance.

It cannot be denied that, in numerous cases, the Court of Chancery has exercised the jurisdiction that is questioned, by ordering an instrument in writing to be delivered up and cancelled, upon the ground that it was either void in its origin, or had been rendered so-by subsequent events, and it is just as undeniable that, in many cases, in which the instrument in question was admitted to be absolutely void, the court has refused to compel its surrender; and although the cases there referred to seem to be opposed, it must also be confessed that they carry with them an equal weight of authority. As the decisions proceed upon distinct grounds there is, in reality, no conflict between them; and the inquiry," therefore, is, which, as most applicable to the case before us, are we now bound to follow ? and this can only be answered by ascertaining the reasons upon which they are respectively founded.

p. 603

I am convinced, by an attentive examination of the authorities, that the cases in which, alone, the jurisdiction of which the exercise is now claimed can be said to be established and undoubted, may be reduced to the following classes:

1st. When the plaintiff alleges that the instrument, which he prays may be surrendered or cancelled, is void upon grounds of which a court of equity alone can take cognizance; in fewer words, when he sets up a purely equitable defence.

2d. When the instrument is a deed, or other document, concerning real estate, which, although inoperative, if suffered to remain uncancelled would throw a cloud upon the title of the plaintiff to the lands which it embraces, or to which it refers. (Pierce v. Webb, 3 Barb. Ch. R., 16 ; Jackman v. Mitchell, 13 Vesey Rep. 581; Hayward v. Dunsdale, 17 Vesey Rep. 111; Attorney-General v. Morgan, 2 Russell Rep. 306; Petit v. Shephard, 5 Paige Rep. 493 ; Van Doren v. The Mayor of New York, 9 Paige’s Rep. 388; 2. Story’s Eq. Jur. 6th ed. § 700, n. (2), and other cases there cited.)

3d. When the instrument is negotiable in its character, as a bill of exchange, etc., and the putting- it into circulation -would be a fraudulent act. (2 Story’s Eq. Jur. ut sup. § 700, n. (1), and cases there cited.)

4th. Where the plaintiff claims to have a defence valid in law, but which rests upon evidence that he is in danger of losing, if the adverse party is suffered to delay the prosecution of his claims. (Hamilton v. Cummings, 1 John. Ch. R. 520, etc.; 2 Story’s Eq. Jur. ut sup. n. (3), and cases cited.)

Although these several classes differ widely in their special circumstances, yet, when examined, it will be found that in all the decisions rest substantially upon the same grounds, and these grounds are, that the plaintiff will either sustain a present, or be exposed to the hazard of a future, injury and loss, should the defendants be suffered to retain the possession of the instrument of which the delivery and cancellation are demanded. They are all, therefore, referable to one common and acknowledged head of equity jurisdiction, the prevention of an injury that might otherwise prove irreparable, and which a court of equity is alone competent to avert or prevent.

That such are the grounds upon which, in these cases, the relief

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prayed, for has been granted, is still more evident when we advert to the oases in which the same relief has been denied.

• Although there is some contrariety in the earlier eases, the law is now settled that the court will not order an instrument to be delivered up and cancelled which, upon its face, is plainly illegal and void. (Simpson v. Lord Howden, 3 Mylne & Craig, Rep. 97; Pierson v. Elliot, 6 Peters’ Rep. 94 ; 2 Story Eq. Jur. § 700 [a], and cases cited.)

Nor a deed of lands when it is certain that, from its nature and contents, it can throw no cloud upon the title of the plaintiff. (Cox v. Clift, 2 Comstock Rep. 118.) Nor a negotiable instrument that has been merged in a judgment. (Threlfall v. Sunt, 7 Sim. Rep. 627.) Nor a policy of insurance that had been rendered void by a deviation. (Thornton v. Knight, 16 Sim. R. 509.) And in all these cases the denial of the relief rests upon one and the same ground, namely, that the plaintiff is exposed to no hazard from any future litigation, since it is certain that in no 'action founded on the instrument can a recovery be had against him.

It appears to us that this reasoning applies, in its full extent, to the case before us, and that the decisions last cited must, therefore, govern our own. We are unable to state a distinction. The contract held by the defendants is alleged to be void, from their inability to establish the facts, which they must prove upon a trial, to enable them to maintain their action, and as this inability arises from the non-existence of the facts, it is certain that it cannot be removed, and, therefore, certain that the plaintiff and his associates are exposed to no hazard from any future litigation. They are in no more danger of a recovery being had against them than if the contract were illegal and void upon its face.

It may, indeed, be said that if the defendants shall be suffered to retain the possession of the contract, they may use it for the sinister purpose of harassing the plaintiff and his partners by vexatious suits, but the reply is obvious and conclusive. If the possibility that a void instrument may be vexatiously and maliciously used were a sufficient reason for ordering it to be delivered up and cancelled, it is plain that the relief sought ought to have been granted in every case in which it has been denied, and indeed ought to be granted in every case in which, upon sufficient grounds, the instrument is alleged to be void; for in all such cases that

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have arisen, or that can arise, the same possibility will be found to exist. We have neither the power nor the disposition, however, to enlarge our jurisdiction as a court of equity by extending it to cases that hitherto it has been held not to embrace. On the contrary, we are convinced that its exercise ought to be strictly confined within the limits that hitherto have been invariably observed. When a suit like the present is entertained, the necessary effect is to transfer a controversy, legal in its nature, from a court of law into a court of equity, and thus to deprive the party who is made the defendant of his legal rights of selecting his own tribunal and his own time for the prosecution of his claims, of having all questions of fact determined by a jury, and of controlling and managing his suit in the exercise of his own discretion; and it seems to us manifest that it is only in cases where reasons of a controlling equity are shown to exist that the exercise by a defendant of these legal rights can be justly restrained.

We cannot believe that a court of equity is bound to interfere whenever a.party liable to be sued upon a written instrument in a court of law chooses to allege that the instriment is void. Such, however, is the naked case before us.

In the early and leading case of Hamilton v. Cummings, (1 John. Ch. Rep. 517-523,) Chancellor Kent, after an elaborate review of the English decisions, arrived at the conclusion, that the power of a court of equity to order a written instrument to be delivered up and cancelled, is discretionary in its nature, and depends for its exercise upon the special circumstances in each case, showing that a resort to the court is necessary or eminently proper. We believe that this is a just view of the law as it still exists, and it necessarily follows that when an appeal is made to this discretionary power of the court, the special circumstances that can alone justify its exercise must be set forth in the complaint, since these are emphatically the facts that constitute the cause of action. Ho such facts, however, are alleged in the present complaint, and we must consequently hold that the demurrer is well taken.

The order at Special Term overruling the demurrer, is, therefore, reversed, and there must be judgment for the defendants, who have demurred, unless the plaintiff shall, within twenty days, serve an amended complaint, pay the costs of the demurrer, and ten dollars as the cost of this appeal. Order accordingly.