Case ID: ny-super-ct_51/html/0460-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GEORGE N. MANCHESTER, et al., v. SUSAN R. KENDALL, et al., as Ex’rs, &c.
    
      Equitable assignment—sale of land with building loan—unaccepted order by purchaser on seller in fmor of third party—effect of provision for non-assignment—removal of liens—condition precedent, waiver of—effect of equitable assignment.
    
    In case of a sale of land with building loan, where an order is given by the purchaser on the seller in favor of a third person, payable out of the last
    • installment of the loan, the order (though unaccepted) with notice to the seller, operates as an equitable assignment, to the extent of its amount, of the purchaser’s right under the provisions of the contract which refer to the last installment. Therefore, if upon the other conditions of the contract being performed, the seller, for the money to be loaned, is to take a mortgage on the land which at that time is to become the property of the purchaser, and the conditions arc performed and the mortgage given before the money agreed to be loaned is actually advanced, the seller becomes indebted to the purchaser in the amount not advanced; and the order with notice operates as an equitable assignment of such indebtedness to the extent of its amount.
    The contract contained this clause: “ This contract not to be assigned or any part thereof, or any installment to grow due under the same.” Held, that if enforceable, a breach thereof would not make the assignment void; but only subject the assignor to a claim for damages.
    Clause making the removal of liens a condition precedent to payment of installments, may be waived by the seller. By reserving the amount of a lien and its interest out of the money to be advanced, he takes upon himself the office of removing it, and waives its removal as a condition precedent.
    Where the contract contains a clause for forfeiture, at option of seller, of claim to a deed or for work or materials, in case of failure to keep free from liens, or of allowing any lien to remain after installments become due, the seller, by giving a conveyance, exercises the only right given by this clause for its breach, viz.: his option to or not to, claim a forfeiture —and exercises it in favor of not so claiming.
    Where such an order with notice operates as an equitable assignment, the party on whom the order is drawn becomes a trustee for the party in whose favor it is drawn, with definite obligations to him, and is bound to pay to him on demand, and to no other person.
    
      Decided March 5, 1885.
    Where, then, there is no evidence that the party on w'hom the order is drawn did not know the character of the order and the rights of the drawee under it, but it appeared that he made part payments, and refused to pay the remainder on the ground that he had paid it to the drawer, and although the evidence show'ed that the drawee believed that the order and notice did not create a legal obligation, yet it further appearing that he never told the party on w'hom it W'as drawn what his belief was, and thereby led him to pay to the drawer, —Held, that a request to charge the jury that if they “ believed the plaintiffs and Mr, Kendall both treated the order as requiring an acceptance, and as creating no liability without an acceptance, and no claim having been made by plaintiffs for payment of the whole amount, or that Kendall should not pay Haas until the order was paid, the plaintiffs cannot recover,” was properly refused.
    Before Sedgwick, Ch. J., Truax and O’Gorman, JJ.
    Defendants’ exceptions ordered to be heard in the first instance at general term, after a verdict for plaintiffs.
    On the trial it appeared that the defendant’s testator, Kendall, made a contract with one Haas, whereby he agreed to sell to Haas five lots of land in this city, for $35,000, and also agreed to lend to Haas $6,000, for each house, in installments, to be expended by Haas in building the houses on the lots. The plaintiffs sold to Haas certain building materials, which were used in building the houses. For the sum due upon this sale and for a future indebtedness to be incurred by Haas to plaintiffs for further materials to be used in the houses, Haas, drew and delivered to the plaintiffs the following order :
    “New York, Dec. 9, 1873.
    “ Isaac 0. Kendall, Esq. :
    “ Pay to the order of Arnold & Go., twenty-eight hundred and twenty dollars, out of payment due me. when houses, Lexington avenue and Eighty-fifth are finished.
    “Nice. Haas.”
    The plaintiffs afterwards gave notice to the testator that this order had been made. When the houses were finished, the plaintiffs demanded of the testator payment of the order; $1,000 only was paid, the remainder being withheld under the circumstances that are given in the opinion. Other facts are given in the opinion.
    Plaintiffs recovered; and the court ordered defendants’ exceptions to be heard, in the first instance, at general term.
    
      David Thurston, for plaintiffs.
    
      W. McDermot, for defendants.
   Per Curiam.

The first objection taken by the learned counsel for defendants is, that the order did not operate as if there were a sum to become due by defendants’ testator, but only upon Haas’ rights in respect of the last installment such as it was under the contract. The principle implied seems to be correct. The thing assigned equitably was Haas’ right, to the extent of $2,820, under that provision of the contract that referred to the last installment. If there were money due, the right of Haas or his equitable assignees, the plaintiffs, would be to recover the money. If Haas’ right were confined to an action for damages, for the failure to loan money, the plaintiffs would be entitled to such damages only. Counsel for defendants agrees that defendants’ testator agreed to lend the money and not to pay it. The words of the contract refer only to a loan. They are : ‘ ‘ the party of the first part hereby agrees to advance the party of the second part $6,000, on each house, as a loan,” etc. If this were to be taken by itself, there would be admissible only those considerations that are pertinent to an agreement to lend. In fact, however, it is to be considered in connection with other provisions of the contract. The decisive provision, although others have significance on this point, is that for the money to be loaned as provided, and upon other conditions being performed, the decedent was to take a mortgage upon the land, which at that time was to become the property of Haas. Manifestly, if this mortgage were taken before the money agreed to be loaned was actually advanced, the mortgagee would become indebted in the amount not advanced. It was the fact in this case, that such mortgage was taken or an equivalent for it given. This is an inference from the facts as to the performance of the contract. The rights under the agreement to advance, were not such only as grew out of the actual existence of facts at the time the agreement was made, but out of such further facts as afterwards occurred, and indeed as were contemplated by the parties as about to occur. On this point it must be said that the plaintiffs, as assignees of Haas, were entitled to recover to the extent of the order as for money agreed to be paid.

The next position taken was, that by the terms of the contract it was provided that any installment to grow due under the same was not to be assigned. The words were, “This contract not to be assigned, or any part thereof, or any installments to grow due under the same.” These words do not, on their face, attempt to prevent there coming into existence those things and rights, which when they exist, show there is something to which the law attributes the quality of assignability. There would be performance and a corresponding obligation to pay, in which Haas or his assignee would have aright of property. The words must be construed to mean, if they can be enforced, that Haas agrees not to assign, etc., and if he do, the appropriate consequence would be a claim for damages for a breach of the agreement. They would not make the assignment void.

The next position is, that the installment in question had not become payable by the defendants’ testator, because at the time it would otherwise have become payable there was a lien upon the land. The contract provided that the loan was to be made in installments, “provided all hens are first removed.” The lien referred to remained upon the land at the time the plaintiffs demanded payment of their order. After that, and before the action was begun, three other liens were filed. All these hens were filed under the statute in reference to mechanics’ liens. The contract also provided that should Haas “fail to keep the houses free from liens under the mechanics’ law, or allow any hens to remain on record after either of said installments become due, then the said party of the second part at the option of the said party of the first part, hereby forfeits all claim under this contract for a conveyance of said lots, or either of them, or for any work or materials placed thereon.’’ Both of the provisions referred to, as they were for the benefit of the testator, could be waived by him. He did waive them. When one of the plaintiffs presented the order as due, the testator paid him a certain sum of $1,000, not paying the remainder pi the amount on the ground that he had paid to Haas the remainder. It appeared that as a fact, besides these two sums, the testator had reserved the amount of the lien and interest. By doing this, he waived the removal of the lien as a condition precedent of payment. He took upon himself the office of removing the lien with the money he reserved. If the plaintiffs rely upon this, they of course, should yield to the deduction from their claim of the amount of the lien, if there were a valid hen. The defendant, however, on the trial, made no claim for a deduction, using the evidence as to the Hen only for the purpose of their position that the installment was not payable provided there was a Hen. As to the subsequent Hens, the contract did not declare that the obligation to pay should depend upon their removal, but that the testator might, at his option, consider that Haas forfeited his claim to a conveyance or the reverse. That option was exercised by giving the conveyance.

The defendant’s counsel asked, and the court refused to charge the jury, ‘ ‘ That if they beHeve that the plaintiffs and Mr. Kendall both treated the order as requiring an acceptance, and as creating no Hability without an acceptance, and no claim having been made by plaintiffs for payment of the whole amount, or that Kendall should not pay Haas until the order was paid, the plaintiffs cannot recover.” There was no testimony that Mr. Kendall, the testator, did not himself know the character of the order and the rights of the plaintiffs under it, after they had given him notice of its existence. Upon that notice to him he became a trustee, equitably,- for plaintiffs, with definite obligations to them. The jury found against one version of an interview with the testator that referred in a certain way to the subject intended by the request. The other version did not comprise any testimony, either that Mr. Kendall did know what the character of the order was, or that the plaintiffs ever told him what their belief as to his legal obligation under the order was. When he made part payment to the plaintiffs, his excuse for not. paying the remainder was that Haas had told him that the plaintiffs had agreed to take Haas’ note, for the sum Haas then required, and he had therefore paid the sum to Haas. The plaintiffs had not so agreed. It is true that the plaintiffs believed that the order and notice of it to-Mr. Kendall did not create an obligation to pay of a legal land, and only of a moral kind. In this they were mistaken. The order was an equitable assignment, and mere-notice of it to Mr. Kendall, without acceptance by him, bound him to pay to no other person than the assignee,, and to him on demand (Field v. Mayor, 6 N. Y. 179 ; People v. Comptroller, &c., 77 Ib. 45, and many other cases). The plaintiffs possessed the right described, and whether-they knew or did not know this, their right to an action was the legal consequences of the legal obligation. They never told Mr. Kendall what their belief was, and thereby led him to pay to Haas.

The order was based upon a consideration. That was. partly it being a security for an indebtedness by the maker to them for materials used in the houses afterwards mortgaged to Mr. Kendall, and partly as security for the payment of an indebtedness of a like kind thereafter to-be received.

What has now been said, has referred to all the objections made for the appellant on the argument.

The defendants’ exceptions are overruled, and judgment with costs for plaintiffs is directed to be entered on the verdict.