Cowdrey v. Carpenter — 24 N.Y. Super. Ct. 429

Majority

p. 429

Nathaniel A. Cowdrey, plaintiff and respondent, vs. Jacob Carpenter, defendant and appellant.

Headnote

1. An agreement to pay a sum as liquidated damages in case a court in which an action was then pending should fail to make an order containing a specified provision affecting substantial interests, is void. If the contemplated order would be inequitable, or contrary to settled practice, such agreement would be against public policy; if the same as it may be usual to make in like cases, it is in the nature of a wager, and prohibited by the statute of betting and gaming.

2. Thus where a party to an action for the foreclosure of a mortgage of real estate on assigning a junior mortgage of only a part of the premises, stipulated with his assignee that the order of sale in such action should direct the property not covered by the junior mortgage to be first sold for payment of the prior mortgage; hM that the stipulation being void, the assignee could not recover he liquidated damages specified in it, upon its breach by the making of an order without the designated provision, and the sale of the whole premises under it, without producing enough to pay the junior mortgage.

(Before Bosworth, Ch. J. and White and Monell, JJ.)

Heard November 7, 1863;

decided December 5, 1863.

This was an appeal from a judgment entered upon a verdict recovered by the plaintiff on a trial before Justice Moncrief and a jury, on the 12th of May, 1863.

The action was brought by the plaintiff (Cowdrey) against the defendant (Carpenter) upon an agreement whereby the latter covenanted to pay the former the amount due on a certain mortgage of real estate, ($2000,) then assigned by the defendant to the plaintiff, as liquidated damages, in case an order of sale in an action then pending, in which the present defendant was a defendant, for the foreclosure of a prior mortgage, (for $5000,) on the same and other premises, should not require the prior sale of that part of such premises not covered by such assigned mortgage, and prior application of the proceeds of such sale in satisfaction of the mortgage then being foreclosed, before any sale of the residue.

The order of sale made in such pending action did not contain any provision or direction for selling any part of such mortgaged premises before the other, and the whole premises

p. 430

were sold together. The plaintiff took out of court a surplus of the proceeds of such sale remaining after satisfying the first mortgage, ($783.25.)

On the trial the judge charged the jury, that the plaintiff was entitled to recover the difference between the sum which the defendant had agreed to pay as liquidated damages, in case there was no such direction in such order of sale, and the surplus moneys withdrawn by him from court.

The defendant excepted to such decision, and brought this appeal.

A. R. Dyett, for the defendant, appellant.

F. S. Bangs, for the plaintiff, respondent.

If the contract is valid, the plaintiff is entitled to recover the $2000, as damages liquidated and agreed upon, by the parties. The damages relate to a single breach or default; they were entirely uncertain, and were the proper subject of liquidation by the parties; they were so liquidated, and hence are not a penalty. (Clement v. Cash, 21 N. Y. Rep. 253 .)

If the defendant’s contract is to be deemed a promise that he would procure an order of sale containing the stipulated provision, it is a contract which he had not the power to perform, and this must have been known to both parties. If it is to be regarded as a contract to induce the court to make an order which was inequitable or contrary to its settled practice, it is illegal and void.

It is to be inferred, probably, that Mr. Binney, when he gave the $5000 mortgage to Eoe, owned all the lots covered by it. But it does not appear whether he first aliened the two lots mortgaged to Hawke, or the other lots. There is nothing to show affirmatively, that he ever conveyed any of them. It may be. inferred that Coit could not have mortgaged the two lots without having the title. If the two lots were first

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aliened, then the other lots might have been ordered to be first sold. (Rathbon v. Clark, 9 Paige, 648.)

We must presume the court made the order of sale, according to its established practice in such cases. There is nothing in the case from which we can arrive at a different conclusion ; and as the facts do not leave it open for the suggestion that the established practice of the court, was not followed, the defendant has presumptively contracted that the court would make an order contrary to its established practice ; or an inequitable order. Such a contract would be void.

A promise to pay $2000, or any other sum, as liquidated damages, in the event that in a suit then pending the court shall fail to make an order with a specified provision, affecting substantial interests, we think is contrary to public policy, and therefore void. If the order stipulated for be such as it has been usual to make in like cases, then the contract is a wager, that, in the case covered by the contract, the court will decide in a particular manner. Such contract is void.

Whether such a contract would have been void at the common law, is perhaps not clear; but under our statute (1 R. S. 666, § 8,) all wagers, bets or stakes made to depend upon any lot, chance, casualty, or unknown or contingent event whatever, is declared to be unlawful. Independently, therefore, of its being a contract opposed to public policy, I think it is also in the nature of a wager, and prohibited by statute. (Hall v. Bergen, 19 Barb. 122 .)

We think the learned judge erred in his direction to the jury, and that he should have dismissed the complaint.

The judgment must be reversed, and a new trial granted, with costs to abide the event.

Cases cited

Hall v. Bergen 19 Barb. 122 N.Y. Sup. Ct. 1854-12-04 p. 431