Clark v. Flint

Wilde J. delivered the opinion of the Court. This suit was commenced in 1834. The defendants filed their answer, and the plaintiffs filed a general replication. Evidence was then taken and at the hearing of the cause the defendants, for the first time, raised an objection to the jurisdiction of the Court, on the ground that the plaintiff has an adequate remedy at law, and because the Court ought not to entertain jurisdiction m equity for a specific performance of an agreement respecting personal property. It was contended that this objection came too late, as the subject matter of the bill is clearly within the" jurisdiction of the Court, and they have a right to judge on the whole matter, as it may appear on the pleadings and evidence, whether the case is such as to justify the interposition of a court of equity, or ought to be left to be determined in a suit at law. This seems to be a reasonable rule, for after the defendants had answered to the merits of the bill, and conse quently great expenses had been incurred, it would seem to be unreasonable to allow them to interpose with an objection which ought to have been made on demurrer to the bill, and before answering to the merits. Under such circumstances a court of equity ought to retain the cause, provided it be competent to grant relief, and have jurisdiction of the subject matter. Ludlow v. Simond, 2 Caines’s Cas. in Err. 40, 56 ; Underhill v. Van Cortlandt, 2 Johns. Ch. R. 369 ; M‘Donald v. Crockett, 2 M‘Cord’s Ch. R. 135. That the Court have jurisdiction of the subject matter in the present case cannot, as we think, be doubted. The only doubt, if there be any, is whether the Court be competent, ae — 238 — cording to the rules and principles of equity, to gram relief. We have considered one of the defendants’ objections in this point of view, and we have also considered the other objection, as we have heard it argued, notwithstanding the rule already noticed. In deciding these objections we have taken no notice of the facts alleged in the answer. Those are denied by the plaintiff, so far as they are contradictory to the allegations in the bill. The question now is, whether if the plaintiff should substantiate these allegations, he would be entitled to relief. And we are all of opinion that he would be. As to the plaintiff’s remedy at law, he has none except against P. & C. Flint & Co. and they are insolvent, and the remedy is of no value. He might recover judgment against them for damages, but unless he could obtain satisfaction of the judgment he would receive no compensation, but would be subjected to the payment of costs. It has been held that a bill will lie for the specific performance of a contract, upon the ground that a court of law could only give a remedy in damages, the beneficial effect of which must depend upon the personal responsibility of the party. And there seems, as Judge Story remarks in his Commentaries on Equity Jurisprudence, to have been, in the Supreme Court of the United States, an inclination to sustain such an extensive doctrine. 2 Story on Equity, 31 ; Doloret v. Rothschild, 1 Sim. & Stu. 590 ; Mechanics Bank &c. v. Seton, 1 Peters’s Supr. C. R. 305. It appears to me that this doctrine ought to be laid down with some limitation. If it is confined to actual insolvency, it is certainly very reasonable and just, for on what plausible ground can it be contended that a judgment against an insolvent contractor is an adequate remedy ? It would be manifestly against equity and justice for a court to decline jurisdiction in such a case. If the party injured by a breach of a contract cannot avail himself of his remedy at law for any beneficial purpose, or if it be doubtful whether he can or not, a court of equity, if it can relieve him, ought certainly to interpose, and compel the other party to perform his contract. Whether according to the rules and principles of equity the Court can grant the relief prayed for, may be a question of greater doubt and difficulty ; but this will depend upon the — 239 — evidence ; for we have no doubt that if the plaintiff shall make out his case as stated in the bill, he will be entitled to relief. It is objected that the Court ought not to exercise jurisdiction in equity for a specific performance of agreements relating to personal property. And generally that rule has been observed in the English courts, but has been subject to numerous exceptions, and has been uniformly limited to cases where a compensation in damages furnishes a clear and adequate remedy. If the party complaining has no such remedy, it is quite immaterial whether the contract relates to real or personal estate. 2 Story on Eq. 24. The exercise of equity jurisdiction does not proceed upon any distinction between real estate and personal estate ; but because damages at law may not in the particular case afford a complete remedy. This doctrine is thus laid down by Judge Story in his Commentaries, and is fully sustained by the cases cited in support of it. The reasons given for a distinction between real estate and personal estate are not very satisfactory. All, as it seems to me, that can be fairly inferred from the cases on this point is, that in contracts respecting personal estate a compensation in damages is much oftener a complete and satisfactory remedy than it is in those which relate to real estate. But in all cases, if the party has not such a remedy, a court of equity will entertain jurisdiction, and grant relief as justice may require. I have already shown that the plaintiff has no adequate remedy against P. & C. Flint & Co., and he has no remedy at law against Cartwright and Train, the only solvent defendants. Then it was objected, that they, not being parties to the contract, ought not to have been parties in this suit, and that this Court have no authority to compel them to convey the premises. If this objection were well founded, the bill should be dismissed as to them ; but still the other defendants might be compelled to convey, in order to enable the plaintiff to contest at law the validity of the assignment to Cartwright and Train. It is however the opinion of the Court, that the objection is unfounded. In the case of Champion v. Brown, 6 Johns. Ch. R. 402, Chancellor Kent lays it down as a well settled principle, that if A. enters into a contract to sell land to B., and afterwards — 240 — refuses to perform his contract and sells the land to C. for a valuable consideration, B. may, by bill, compel the purchaser to convey to him, provided he be chargeable with notice at the time of his purchase. This doctrine is fully maintained by several cases therein cited. In Taylor v. Stibbert, 2 Ves. jun. 439, it was decided, that a purchaser with notice is bound in all respects as the vendor. “ He is liable to the same equity, stands in his vendor’s place, and is bound to do that which the person he represents would be bound to do by the decree.” The case of Dawson v. Ellis, 1 Jac. & Walk. 524, was decided on the same principle. The bill was filed to compel the performance of an agreement in writing, made by the defendant Ellis, who admitted the agreement, but averred that he had made a similar previous agreement with the Duke of Norfolk, in pursuance of which he had, subsequently to the filing of the bill, executed a conveyance to him. The Duke of Norfolk was thereupon made a party, and a reconveyance prayed from him to the plaintiff. It was agreed that if there was a previous contract made with the Duke, he could not be compelled to reconvey ; and it was submitted to the Master of the Rolls, on the question whether the treaty between Ellis and the Duke of Norfolk bad ripened into a contract or not. The Master of the Rolls, being of opinion on the evidence that it had not, decreed a specific performance and a conveyance to the plaintiff. June 12th, 1839. The principle on which these cases were decided is directly in point, and we consider it settled upon well known principles of equity in analogous cases. It is similar to the case of a purchaser from a trustee with notice of the trust. In this case P. & C. Flint & Co. held the one half of the vessel in trust for the plaintiff, and if we had had jurisdiction of such a trust when the bill was filed, as we have now, the present question probably would not have been raised. But this same equity applies to the plaintiff’s bill in its present form, as would have applied to a bill to enforce a trust. The defendant’s objections, for these reasons, are overruled, and the case is to stand over for a further hearing. Washburn now urged that the allegation in the answers, that the written acceptance of the order did not contain all the terms of the acceptance was not responsive to the bill, and that paro — 241 — evidence of the allegation was inadmissible. 2 Story on Equity, 80, 745 ; Omerod v. Hardman, 5 Ves. 730 ; Sugden on Vend. (9th edit.) 142 ; Dwight v. Pomeroy, 17 Mass. R. 324 ; Green v. Hart, 1 Johns. R. 580 ; Hart v. Ten Eyck, 2 Johns. Ch. R. 89. June 29th, 1839. Rand and Fiske, for the defendants. Wilde J. delivered the opinion of a majority of the Court Several questions have already been considered and decided, to which it is not now necessary to advert, in stating the opinion of the Court as to the other questions which were raised and discussed at the last hearing of the cause. The defendants, in their answer, aver that on the 8th day of February, when the brig was assigned to Cartwright and Train, there was due to P. & C. Flint & Co. from Isaac Clark a large balance, of over $ 8,000, and they deny that the plaintiff is in equity entitled to the conveyance prayed for until the account between him and P. & C. Flint shall be ascertained and paid. If this were a suit between Isaac Clark and the Flints, we are of opinion that this objection would be valid, although there was no express agreement that the property should be held in trust by the latter, as security for any balance of accounts or other claim due to them for advances made after the trust estate vested in them ; it being an established rule in equity, that a party who seeks equity must do equity : for a court of equity will never interfere to enforce a contract, unless the plaintiff will consent to do that which the justice of the case requires to be done. But the question in the present case does not depend on the equitable claim which the Flints have upon Isaac Clark, unless the plaintiff purchased with the knowledge of that claim. The rule is well established, that where goods are pledged or mortgaged and advances are subsequently made by the mortgagee or pledgee to the mortgager or pledger, such advances are not binding as an equitable lien against the assignee of the mortgager, and he may redeem without payment of the subsequent advances. So where the vendor has an equitable lien for tne purchase money, although the lien is binding on the vendee and his heirs, it will not bind a purchaser from the vendee for a val — 242 — uable c onsideration, and without notice of the lien. 4 Kent’s Comm. 152, 153. So if a trust for the benefit of creditors be raised by the mortgager, the lien for subsequent advances will not be binding on the trustee. Heams v. Bance, 3 Atk. 630. In Vanderzee v. Willis, 3 Bro. Ch. R. 21, Lord Thur-low so lays down the rule as settled by all the cases, as it undoubtedly is. The question then is, whether the plaintiff purchased the one half of the vessel of Isaac Clark without any notice of the advances made by the Flints to him after they held his half of the brig in trust. The defendants, in their answer, admit that P. & C. Flint & Co. accepted the order in writing as alleged in the bill ; but they aver, that at the time of the acceptance, the plaintiff was informed by them that no balance was due to Isaac Clark, but on the contrary, a large balance was due from him, and that the vessel was held for such balance, and that there would be nothing coming to Isaac. If this were so, it seems difficult to imagine any reason that could induce them to accept the bill This however is not the question now to be decided. The question is, whether this evidence is admissible, and we think it very clear that it is not. It is not responsiye to the bill, except that part of the answer which admits the acceptance of the bill in writing. The additional averment of the parol agreement, is not responsive to any averment in the bill; and it cannot be proved by oral testimony, it being directly to contradict the written contract. The case therefore depends on the true construction of the written contract. And we are of opinion, that that cannot be so construed as to render the plaintiff liable, either in law or equity, for any balance due from Isaac Clark to P. & C. Flint. By the acceptance of the order, P. & C. Flint promised, in express terms, first, to pay to the plaintiff all balances then due in account to Isaac Clark, and secondly, that they would hold the one half of the brig Charles subject to the order of the plaintiff. If the order had been confined to the transfer of the one half of the vessel, it would be clear that the plaintiff would not be liable for any balance of accounts due from Isaac Clark, and the Flints could have no equitable lien against him — 243 — for any such balance. For if the Flints had an equitable lien on the vessel, it was relinquished by their unconditional acceptance. If the order had been only for the payment of the balances due to Isaac Clark, it would be equally clear that the plaintiff would not be liable for any balance due from Isaac Clark. In no form, therefore, is the plaintiff liable for any balance due from Isaac Clark, and the plaintiff could compel the Flints, by the terms of their contract, to convey the property to him, unless they had a right to credit Isaac Clark with the value of the vessel. No such right has been claimed, and no such credit has been given in the accounts rendered ; and no such right exists. It would be inconsistent, not only with P. & C. Flint & Co.’s contract with the plaintiff, but also with their agreement with Isaac Clark. They were to hold the property in trust for him and to account to him for the earnings. All the right they had to the trust property was a lien for the balance of their accounts, which cannot be enforced against the plaintiff. But it has been argued by the counsel for the defendants, that whatever equitable claim the plaintiff has upon P. St C. Flint St Co., he is entitled to no relief against Cartwright and Train. The rule of equity is, that where there is a purchase of real or personal estate from the legal owner, to which a third party has an equitable title, and the purchase is made in the usual course of business, without notice of the equitable title, for a valuable consideration paid therefor, or if the purchaser incurs any new responsibilities upon the credit thereof, he is to be considered a bond fide purchaser, against whom the owner in equity can have no relief. But if no consideration is paid, and the property be assigned and received in payment of or as security for a preexisting debt, the assignee must take it subject to all the equity to which the assignor was subject. Root v. French, 13 Wendell, 571 ; Buffington v. Gerrish, 15 Mass. R. 156. This was laid down as a well settled principle in Hunt v, Glidden, Middlesex, October term 1836, and in several subsequent cases, and it applies in the present case. The brig was conveyed by P. & C. Flint & Co. to Cartwright and Train, with their other property, in trust for their creditors, — 244 — Cartwright and Train being of the number. The conve) anee was of all the right and title of the assignors, and we dci not think that the clause in the assignment whereby the claims of the creditors were released, is to be distinguished from assignments in payment of preexisting debts. If the consideration for which the release was given should fail, perhaps the release would be void, especially if the debtors had fraudulently procured it by a misrepresentation of the property assigned. But however this may be, we are of opinion, that the plaintiff’s equitable title must prevail, considering all the circumstances of the case ; for it does not appear that the defendants incurred any new responsibility on the credit of the property in question ; or that they would have declined becoming parties to the assignment if they had known that their debtors owned the property in question in trust. Whether Cartwright and Train had such knowledge, or the means of acquiring such knowledge, we do not think it necessary to determine. For these reasons it is the opinion of the Court, that the plaintiff is entitled to the conveyance prayed for and to one half the earnings of the brig, after the time when the plaintiff demanded a conveyance of Cartwright and Train ; but for no earnings before that time, unless it can be proved that at the time of the assignment there was no balance due to P. & C. Flint & Co. ; for Cartwright and Train have a right to avail themselves of all the equitable rights of the Flints, and they would clearly have the right to credit the earnings in reduction of their balance against Isaac Clark. If the plaintiff then should insist upon his claim to any of the earnings before the demand, the accounts between P. & C. Flint & Co., and Isaac Clark must be opened, and Isaac Clark should be made a party. But if no such claim should be made, the plaintiff will be entitled to the conveyance prayed for, and one half of the earnings after the demand of the conveyance.