Coster v. Griswold

The Vice-Chancellor : There is no difficulty about the facts of the case as presented by the bill and answer. Much of the bill stands uncontradicted by the answer and is, therefore, to be taken as true for the purposes of this motion ; and upon the statements of the bill which are either admitted or not denied (because there are many things alleged which took place anterior to March one thousand eight hundred and forty-one of which the defendants were ignorant and can neither admit nor deny) the question arises— what are the equitable rights of the complainant? 1st. As between the complainant and Cowles the obligee of the bonds ? 2d. As between the complainants and the assignees or present holders of the fourteen bonds in controversy ? These bonds, with fourteen others, having been given for the purchase money of lands bought of Cowles and their — 373 — payment having been guaranteed by the complainant Mr. Coster in a manner to bind him in Iaxv as a surety, he cannot be relieved from his liability on the mere ground of hardship or of inadequacy of consideration or of the extravagance of the price agreed to be paid for the lands. No fraud is alleged in the contract of sale, nor any failure of title to the lands conveyed, so as to work a failure of consideration for the bonds. But, simultaneously with the conveyance and the giving of them and as a part of the same transaction, though varying a few days from the date of the other papers, the vendor, Cowles, executed, under his hand and seal, an instrument of covenant and agreement on his part (dated the ninth day of May one thousand eight hundred and thirty-eight) which had the effect to modify, very materially, the rights of the parties to that transaction as between themselves in relation to the benefit the purchasers were to derive from it. Whether the purchasers have taken the steps which were necessary with regard to the disposal of the lands, in order to bring themselves within the true meaning and interpretation of Cowles’s covenant to remunerate and indemnify them against any loss or deficiency upon a resale, is a point upon which counsel have widely differed. According to my understanding of Cowles’s covenant, however, and from what I believe to be its fair construction, the allegations of the bill, as to the utter impracticability of selling the lands during the five years or five years and six months within which he stipulated the lands should be sold or be capable of being sold at remunerating prices, show that a breach of his covenant has been incurred. And from this failure to sell the lands, taken in connection with the fact of Cowles’s bankruptcy and the inadequacy of the security pledged by him to make good the loss or deficiency as averred in the bill, an equity arises in favor of the purchasers and of the obligor and guarantor of the bonds as against Cowles, to be relieved from the payment to him—at least, to the extent of such loss or deficiency. While, therefore, the bonds or any of them remained in Cowles’s hands and even before the expiration of the five years allowed for the sales, upon well founded apprehension of ultimate loss satisfactorily made to appear, arising as well from Cowles’s — 374 — insolvency as from the impossibility of effecting sales “except at an enormous sacrifice upon the cost,” this court would have entertained a bill, quia timet, for an injunction to restrain him from parting with the bonds or enforcing payment thereof to the full extent. This could have been done on the principle established in Lindsay v. Jackson, 2 Paige’s C. R. 581. It would be otherwise, however, if the right of a third person had intervened under an assignment or transfer for valuable consideration before cause for filing such a bill arose or a right of set-off attached or other equitable claim could be asserted to prevent a transfer; and where an assignee takes in good faith, his right to hold will not be disturbed or divested by any subsequent event or after-accruing right or equity of the debtor: Chance v. Isaacs, 5 Paige’s Rep. 592. All that the court of law or equity can do in such eases, since they recognize and protect the rights of assignees of choses in action, is, to allow them to take, subject always to any defence, legal or equitable, which existed in favor of the debtor against the original holder or creditor at the time of the transfer or assignment. Now, the question arises : what existing equity or defence was there against these bonds or the right of Cowles to part with them in November one thousand eight hundred and thirty-eight, when he pledged and deposited the same with the United States Bank as collateral security for th'e payment of his note of seventy thousand dollars ? At that time (only six months after the giving of the bonds) Cowles had not become insolvent and no apprehension of a loss or deficiency from the sales of the lands was felt. Nothing had occurred to change the aspect of their affairs or to give rise to any restriction or claim upon him not to use the bonds in any way he might think proper. The bonds had, evidently, been made to be sold or transferred as his convenience or necessities might require: else, why so many bonds with a guaranty on each and in sums adopted to a convenient use by assignment and calculated to give them a sort of currency, instead of one bond for the whole debt of one hundred and fifty thousand dollars, payable by instalments or why was not Cowles put under a — 375 — stipulation, in his agreement of the ninth day of May one thousand eight hundred and thirty-eight, not to part with them or with that portion of them having the longest time to run, until, from experience, with regard to the disposal of the lands, some opinion could be formed of the probable results of their sales ? . No restriction was imposed upon the transfer, so that Cowles was at liberty, at any time, to sell and assign the bonds absolutely or to pledge and hypothecate them, as he did, to the bank ; and it was competent for the bank to take and hold them as security. The only equity they were subject to, in the hands of the bank, was the equity of redemption or right to redeem by paying off the note. That right to redeem still exists and has followed the fourteen bonds in question into the hands of the present defendants, who, by their answer, admit that they took them from the bank—not by absolute purchase, but as collateral security for the payment of the shares or interests which they respectively bought in the seventy thousand dollar note in the months of March and August one thousand eight hundred and forty-one; and they admit, also, that the amount due on tire note, when they bought it, was several thousand dollars less than its face. Whatever that amount is, as between the bank and Cowles, the defendants are entitled to receive and no more; and payment of the bonds should not be required beyond the amount that will be necessary to satisfy the note. All over and above the balance due on the note, with interest, the obligor of the bond and Mr. Coster, as surety and his representatives should be excused from paying: inasmuch as the surplus would belong to Cowles or his assignees in bankruptcy and, as to Cowles and volunteers claiming in his right, the obligor and surety are entitled to be protected ; unless, indeed, the allegations of the bill, in relation to the unfortunate result of the speculation in the lands bought of Cowles, can be disproved. Some reliance has been placed upon the tender in bank bills made by Cowles to the bank on the second day of October one thousand eight hundred and forty-one and which was sufficient in point of amount to cover the balance then due on his note. But, this tender was made after the bank had ceased to have any interest in the note, as is shown in — 376 — the answer; and I do not perceive how it can affect the rights which the defendants had then acquired. Feb. 24. 1846. Sept. 26. 1845. The injunction, in my opinion, must be modified or so far dissolved as to allow the suits at law on the fourteen bonds in question to proceed to trial and judgment: but with a stay of execution on the judgments until the amount due upon the note, for principal and interest, is ascertained or can be determined either at law or by this court. And with leave, then, to apply to remove the injunction entirely. Order accordingly. Costs to abide the further order of this court. This case came again before the court. The complainant, John G. Coster, had died on the eighth day of August in the year one thousand eight hundred and forty-four; and the suit was revived in the names of George Washington Coster and Henry Arnold Coster, as his executors. An appeal was pending from the above decision of the vice-chancellor. By the death of the said John G. Coster, the actions at law in the supreme court had abated ; and since the modification of the injunction, two other suits had been instituted in the name of the defendant Jerry Cowles against the executors of the said John G. Coster in the circuit court of the United States for the southern district of New York. The present complainants had filed a supplemental bill, praying for an injunction, to restrain these actions in the United States Court. And, now, came up, not only a motion for such an injunction, but one to amend the original bill and a third to reinstate the original injunction pending the appeal. The defendants, by affidavit, denied the truth of the matter contained in the proposed amendments ; and also insisted, on the argument, that such matter could have been inserted in the original bill during the life time of the original complainant, John G. Coster. The Vice-Chancellor : Three several motions are made: 1. To allow the complainants to amend the bill. — 377 — 2. For an injunction on the supplemental bill to restrain the suits commenced in the circuit court of the United States. 3. If such injunction cannot be granted, then, to reinstate the injunction heretofore granted, pending the appeal from the order by which that injunction was so far modified as to allow the defendants (plaintiffs in the action at law) to proceed to trial and judgment in that suit. I can perceive no substantial objection to the granting of the motion to amend. The allegations proposed to be introduced into the bill may be of importance in determining the case, provided they are supported by evidence; and the denial of them at this time, by affidavits, furnishes no sufficient reason why the complainants should not have an opportunity of putting the matter in issue and proving it, if they can. The new matter is not inconsistent with, but merely in addition to what is already set out in the bill. And the objection that executors cannot be allowed to add to a bill, by way of amendment, because their testator is thereby made to say what he never did say in his lifetime and that the executors cannot render a sufficient excuse for the testator for not bringing forward these allegations in the bill when first filed, seems to me not of sufficient weight to prevent the order being granted. It is not asked to make this amendment without prejudice to an injunction, because the injunction has been virtually dissolved and, perhaps, less strictness should be required in allowing amendments where the upholding of a preliminary injunction is not the object. The motion to amend is granted, on payment to the defendants of their costs of the motion. Then, with regard to the granting of an injunction on the supplemental bill, to restrain the suits commenced in the federal court in the place of the suits in the state court which abated by the death of the testator John G. Coster. The objection rests upon that rule of comity, which this court has prescribed to itself, not to interfere with the proceedings of the Courts of the United States : Schuyler v. Pelissier, 3 Edwards’s V. C. Rep. 191. Instead of awarding an injunction, the present complainants must be left to pursue the course pointed out in Schuyler v. Pelissier, by an application to the court in which the suits are instituted, to — 378 — stay the proceedings therein until the matter of equitable relief can be heard and finally determined in the court of chancery. The motion for an injunction on the supplemental bill must be denied. The complainants, then, ask, that the injunction, as originally granted, may be reinstated pending the appeal from the order virtually dissolving it. There are several palpable objections to this motion. In the first place, the injunction, if restored, would be ineffectual: the suits which it enjoined having abated and being no longer in existence. And to restore the injunction, with express reference to and operation upon the new suits in the circuit court of the United States would be the same, in effect, as granting an injunction on the supplemental bill—which, the court has shown, cannot be granted. Besides, if it is proper to reinstate an injunction pending an appeal from the order dissolving it, special facts and circumstances should be shown to render such a step necessary, in order to preserve the property in the meantime or to prevent irreparable injury : Hart v. The Corporation of Albany, 3 Paige’s Rep. 381. Nothing of the kind appears in this case; and even if it could be shown, I am inclined to think that the application should be made to the chancellor, who, alone, has control of the appellate proceedings. This last motion is, also, denied, with costs to be taxed.