Cavalli v. . Allen

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 510 The question in this case is, how far a sub-vendee, under a contract of sale of land, has rights against his own vendor (the vendee in the original contract), and to what extent an assignee of such vendor stands in the latter's position. The most satisfactory way to consider the subject will be to inquire, in the first instance, as to the relations between Schreder, the vendee in the original contract, and the defendant, on the assumption that Schreder had not parted with his interest, and then to examine the effect of his transfer to Cavalli, husband of the plaintiff. When Jonson, owner of the land, made the contract to sell to Schreder, the latter, in view of a court of equity, became owner of thirty-five feet. He was owner of an equitable estate in fee, though under a duty to complete the transaction by making the payments to Jonson prescribed by the contract. He (Schreder) could then carve out of his own estate smaller derivative estates to sub-purchasers, which as between him and such purchasers would be sustainable under the doctrines of trusts. The consideration which he received from any such purchaser would fasten a trust upon him. For example, if Schreder had contracted to buy of Jonson a large farm, which was subdivided into lots, and had then contracted to sell to various purchasers specific lots, these persons would have had equities which they could enforce against their own contractor (Schreder). On this view, as soon as Schreder entered into the contract of 17th December, 1849, he became *Page 513 bound to act as trustee for Allen. On the same principle that an ordinary contract of sale converts the owner of the land into a trustee for the vendee, the sub-sale in the present case converted the primary vendee into a trustee for the sub-vendee. Consequently, when the new or substituted contract was made between Jonson and Schreder, of the date of September 15th, 1851, the latter, holding the position of trustee toward the defendant, could do nothing which would impair his rights. The defendant had an election as between him and Schreder, either to adhere to the original contract or to ratify and adopt the substitute. When fifteen dollars were paid, April 20th, 1852, by the defendant, he accepted the new contract with any variations from the provisions of the original agreement; and henceforward the rights of the parties are to be measured by the agreement as thus modified. If it now be assumed that Schreder had taken the title from Jonson, and had brought an action of ejectment against the defendant, he might have made a good defence by showing that he was entitled to specific performance as between him and Schreder. (Crary v.Goodman, 12 N.Y., 266.) The remaining point under this branch of the case is, whether the defendant has a right to specific performance as between him and Schreder. It is asserted that full payment has been made for the land purchased by him. The mode of payment is twenty-five dollars in cash on the purchase-price of fifty dollars, and a claim in the nature of a set-off. As to this last point, it appeared that when the action was commenced, Schreder owed the defendant $41.25 on a note, with interest from April 2d 1850. If Schreder had brought an action for specific performance to recover the amount due him, the defendant, Allen, would have had a right to set off the amount due him on the note, since it would have been one debt against another debt. This is particularly true where there is some peculiar equitable ground not available in a court of law — as that of insolvency, existing in the present case on the part of Schreder. (Smith v. Felton, *Page 514 43 N Y, 419; Brewer v. Norcross, 2 C.E. Green [N.J.], 219; LordCawdor v. Lewis, 1 Younge Collyer [Ex.], 427; 2 Story on Equity, § 1436; Sutphen v. Fowler, 9 Paige, 280.) In the case last cited the action was for specific performance of a contract for the conveyance of land, brought by a vendee against an heir at law. It appeared that the vendor had died insolvent and indebted to the vendee. It was held that the vendee was entitled to have such debt set off against a balance due by him for the purchase-money. The debt in that case, as in the one at bar, arose from a wholly independent transaction. The defendant could not be deprived of his equitable rights by Schreder though he should bring an action of ejectment. At law, the defendant would, of course, have no defence. Under the Code, he may set up his equitable defences. The true view is, that the defendant may set up as an answer to the action of ejectment the same equitable rights to which he would have been entitled had he been a party to an action for specific performance. The result is that, had Schreder brought the present action, the defendant would have had a right to have set up the facts, as entitling him to a judgment for specific performance; and such judgment should have been given in his favor. It only remains to consider the position of Cavalli, whose rights the plaintiff represents. When Cavalli became assignee of the Schreder contract, he had notice of the defendant's rights. This cannot be successfully disputed. He, accordingly, took Schreder's position, and was bound by all the equities that could have been set up against him. It is a mistake to suppose that Cavalli is to be regarded as an assignee of Jonson, the vendor, and so within the principle of Lord v. Underdunck (1 Sand. Ch., 46), which holds, in substance that a vendor of land is not bound to recognize the equities of a partial assignee of a vendee. That is not the present case. Cavalli was an assignee of the vendee, and when he acquired the title of the vendor, he obtained it solely by virtue of his claims as assignee of the vendee. At that time he held his *Page 515 equitable interest subject to the defendant's rights. No subsequent acquisition of the vendor's title could alter the relations between him and the defendant. He only acquired Jonson's title as an incident to his claims as assignee of Schreder. The case is precisely the same as though Schreder had received the conveyance from Jonson, the vendor, and was now bringing an action of ejectment against the defendant. It may be added, that Cavalli expressly took his assignment from Schreder subject to the equities between the latter and the defendant, and, consequently, subject to the rule that the equity prior in time is superior in right. A set-off is a defence in equity against an assignee as well as against an assignor. (Barber v.Spencer, 11 Paige, 517; West. Bk. v. Sherwood, 29 Barb., 383; Ainslie v. Boynton, 2 id., 258.) The judgment of the court below should be reversed.