International Paper Co. v. Hudson River Water Power Co.

Chase, J.: In an action for specific performance all persons having or claiming an interest in the'land derived from the vendor after the contract and with notice thereof are necessary defendants in a suit brought by. the vendee or his representatives. (Pom. Spec. Perf. Cont. [2d ed.] § 493.) This is an action in equity. The equitable doctrines with respect to parties and judgments are wholly unlike those which prevailed at the common law, different in their fundamental conceptions, in their — 66 — practical operation, in their adaptability to circumstances and in their results upon the rights and duties of litigants. “ The governing motive of equity in the administration of its remedial system is to grant full relief and to adjust in the one suitthe rights and duties of all the parties, which really grow out of or are connected with the subject-matter of that suit. Its fundamental principle concerning parties is, that all persons in whose favor or against whom there might be a recovery, however partial, and also all persons who are so interested, although indirectly, in the subject-matter and the relief granted, that their rights or duties might be affected by the decree, although no substantial recovery can be obtained either for or against them, shall be made parties to the suit. * * * The primary object is, that all persons sufficiently interested may be before the court, so that the relief may be properly adjusted among those entitled, the liabilities properly apportioned and the incidental or consequential claims or interests of all may be fixed, and all may be bound in respect thereto by the single decree.” - (Pom. Eq. Juris. [2d ed.] § 114.) It has always been held as a general rule in equity .that all persons' materially interested, either legally or beneficially, in the subject-matter of a suit are to be made parties to it, so that there may be a complete decree which shall bind them all. (Townsend v. Bogert, 126 N. Y. 370.) It is not essential in a suit in equity that all the parties should be interested in the same way or affected alike by the judgment demanded. It is proper to unite all the parties interested to avoid a multiplicity of suits and have an adjudication that will determine ' the question as to all parties interested in the subject-matter. . This has been and is the practice in equity actions. (Hall v. Gilman, No. 1, 77 App. Div. 458.) A party demurring to a pleading admits the facts alleged in such pleading, and in considering the pleading it should be held to allege all facts that can be implied from the allegations by reasonable and fair intendment. (Sage v. Culver, 147 N. Y. 241.) By the demurrers herein "the demurring defendants have admitted, among other things, that the plaintiff in purchasing the properties and river rights which it purchased prior to February, 1898, between the points named on the Hudson river, did so for the purpose of — 67 — developing a water power for use in connection with its mills and other property; that the defendant Kanes Falls Electric Company acquired various properties between the said points on the Hudson river in hostility to the plaintiff and that such antagonistic holdings of property and water rights so affected their respective schemes for the development of water power that it caused tíie plaintiff and said Kanes Falls Electric Company to enter into a contract to co-operate in dividing the said properties and in obtaining such other properties as were deemed necessary in the interest of each, and that each might obtain and hold severally the properties and water rights necessary to a complete water power, each independent of the other; that the properties to complete the upper power which by the terms of the contract were to be conveyed to the Kanes Falls Electric Company were first obtained and on request they were conveyed to it without waiting to obtain all the properties to complete the lower power which were to be conveyed to the plaintiff, and a further agreement was entered into on the part of the Kanes Falls Electric Company upon which the plaintiff relied, that said Kanes Falls Electric Company would continue to co-operate in obtaining the title to the properties not then conveyed to the plaintiff in accordance with the terms of said contracts ; that the defendants, the Hudson River Water Power Company and the Hudson River Electric Company, knew of said agreements and the terms thereof, and the reason why the same were executed and in part performed; that the president of the Kanes Falls Electric Company is the president of the Hudson River Water Power Company and said companies, acting through said president, either directly or indirectly, obtained titles to the properties specifically described in the complaint, and transferred or caused the same to be transferred to the Hudson River Electric Company, which company received the same with full knowledge of the said agreements and all the circumstances connected with the execution thereof and of the consideration therefor, and that such company refuses to convey the same to. the plaintiff; that the properties so conveyed to the Hudson River Electric Company are essential to the development of power for the benefit of the plaintiff and for carrying out the purpose for which the contracts were executed; that the failure to obtain such title prevents the carrying out of the purpose of the execution of — 68 — the contracts and destroys the principal consideration therefor. From the situation of the pieces of property specifically described in the complaint, the consideration and reason for executing said contracts and in partially performing the same and the essential character of said pieces of property in carrying out the "purposes of the plaintiff, it is apparent that money damages would not be as complete and beneficial to the plaintiff as relief in equity, and that there would be serious if not insurmountable obstacles in attempting to estimate in- money the plaintiff’s damage if it fails to obtain title to pieces of property which are essential to it in completing the water power designated as the lower power. The properties mentioned in the complaint are essential links in a chain, the value of which as a chain depends entirely upon those particular links being included and used therewith. The Kanes Falls Electric Company obtained every benefit secured to it under said contracts while the plaintiff seems to have been deprived of the' only real consideration for their execution. A general statement in a complaint in an action of this character that there is no adequate remedy at law is not essential where it is manifest from the facts alleged that an action at law would give but an inadequate and imperfect remedy to the party aggi’ieved. ' The properties which the plaintiff desires should be decreed to be conveyed to it are specifically and definitely described in the complaint, and other allegations in the complaint admitted by the demurrers show that such properties are necessary for the full ownership!, development and protection of the lower power as stated in the contracts made by and between the Kanes Falls Electric Company and the plaintiff. The complaint, including said contracts, shows an agreement sufficiently definite to enable the court to grant equitable relief. The time for performing the contracts is not of the essence thereof. "We are of the opinion that the complaint contains sufficient on the face thereof to set a court of equity in motion. The defendant the Morton Trust Company holds as trustee a mortgage given by the Hudson River Electric Company upon properties described in the complaint among other properties to secure the payment of bonds to an amount not exceeding $3,000,000, and while it is alleged that none of said bonds have been issued for value, the fact remains that the mortgage is outstanding of record — 69 — and that bonds may have been issued, although not for value. Such mortgage is an incumbrance affecting the marketableness of the title to said properties and such mortgagee is a proper party that the court may determine and protect its rights as well as the rights of the other parties to the action. The defendant the Trust Company of America is the corporation to which the deed to the Kanes Falls Electric Company was delivered and which held such deed in escrow pursuant to the terms of the contract under which it was delivered and subsequently delivered the same to the Hudson River Electric Company. It received the $125,000 from the Kanes Falls Electric Company, pursuant to the agreement and has paid out $120,000 thereof, and stills holds $5,000 subject to the direction of the plaintiff and said Kanes Falls Electric Company. No specific relief is asked as against said defendant, but its presence as a defendant will bind it as well as the other parties to the action in any relief that may be granted, and in any direction that the court may make, in regard to the $5,000 still remaining in its possession. If the only purpose of this action was to obtain specific performance of the contracts, the Hudson River Water Power Company would not be a necessary or proper party defendant. While the action is for specific performance, it is also brought for a rescission of the contracts and a reconveyance of the property which' has been transferred pursuant to the contracts, if for any reason specific performance thereof cannot be decreed. In an action for the rescission of the contracts the Hudson River Water Power Company is vitally interested. An action either for specific performance or for the rescission of contracts is distinctly an equitable one. The very foundation of the jurisdiction of equity in either case is the inadequacy of the remedy at law. The evidence in this case will not be changed in any particular by reason of the prayer for alternative relief, except so far as it relates to circumstances affecting the power of the court to decree. specific performance. It is said in the Encyclopaedia-of Pleading and Practice (Vol. 20, p.499): “ Generally, when the specific. performance of a written contract to convey land is denied, a rescission of the contract will be decreed; ” and the same authority (Id. pp. 461, 462) states that — 70 — a bill may pray for specific performance or in the alternative for a rescission. We can see no reason why such-alternative relief should not be demanded in the same action, and why the persons affected by either relief should not be made parties thereto where the same transactions are to be considered, and the principal part of the proof for the purpose of obtaining either relief is the same. So far as appears by the record before us the properties conveyed to the Kanes Falls Electric Company and by the Kanes Falls Electric Company to the Hudson River Water Power Company, as well as all other properties' referred to in the complaint, remain* in the same situation, and the legal and equitable rights of the parties are the same now as they were at the time the contracts were made, except so far as they have been changed by the conveyance mentioned. Where in an action in equity relief is sought to be obtained and the amounts to be paid by. either party to the other are uncertain and subject to an accounting between the parties, it is enough to offer in the complaint to pay or to perform whatever obligations rest upon the party bringing the action. (Zebley v. F. L. & T. Co., 139 N. Y. 461.) The right to specific performance of a contract or its rescission rests in judicial discretion, and may be granted or withheld upon a consideration of all the circumstances and in the exercise of sound discretion i ( Winne v. Winne, 166 N. Y. 263.) -We cannot say as a matter of law that the complaint in this case should be dismissed for insufficiency as against either of the defendants. The court,, after a trial of the issues that may be framed and a consideration of any contemporaneous equities or equities arising by reason of subsequent, events, can grant such relief as, >may be dictated by a sound discretion or dismiss the complaint as to all or any of the parties defendants. The interlocutory judgments should be affirmed, with one bill of costs to the respondents. All concurred, except Parker, P. J., dissenting; Smith, J., con* . curring in result. Interlocutory judgments affirmed, with one bill of costs to the respondents.