Case ID: ny-super-ct_42/html/0531-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.—Speir, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

EMIL PONVERT, Plaintiff and Respondent, also Appellant, v. AUGUST BELMONT, Defendant and Appellant, also Respondent.
    I. Joint Defense at Joint Expense under an agreement therefor for the purpose of establishing, title to the subject of the litigation for the benefit of parties mentioned in the agreement.
    1. Expenses, what items included in.
    
    
      (a) Rents and profits of the subject of litigation, procuring THEM.
    1. Although the expense in procuring them is not an expense incurred in establishing the title, yet it is so connected with its establishment by increasing the benefit to be derived therefrom, in which increase the parties are interested under the agreement, that it falls within the items of expenses to be jointly borne.
    1. Belmont held two judgments against one Tylee, which were claimed to be liens on certain premises claimed to belong to Tylee in fee; Ponvert (of the firm of Chastelain & Ponvert), and one Shelton, held by assignment a mortgage on said premises, made by Tylee to Lovett, upon which a decree of foreclosure had been made; and also a certificate of a sale of the premises by the sheriff, under an execution issued on another judgment against Tylee. One Dempsey claimed the premises, and, before the recovery of the above judgments and assignment of the mortgage, liad commenced a suit against Tylee and Lovett for the recovery thereof. Pending this suit, and after the recovery of the above judgments and making of the mortgage, but before the sale under execution and the assignment of the mortgage, Tylee made an assignment to Chastelain (one of the firm of- Chastelain & Ponvert), and one Turner, for the benefit of his creditors. The asv signees had no funds with which to contest the Dempsey suit, and the creditors at large refused to contribute. Thereupon, shortly after the assignment, Ponvert and Shelton assumed the defense of the Dempsey suit, and defended it in Tylee’s name until he became inimical, and suffered the -bill to be taken as confessed against him, when under an order of the court, made July 24, 1848, Chastelain and Turner, the assignees of Tylee, made themselves parties to the suit, and thereafter the defense was conducted in their names. On December 12, 1849, Belmont and Ponvert and Shelton entered into an agreement, whereby it was agreed, among other things, that said judgments and decree should be paid, in a certain order named, out of the future proceeds of the property involved in the Dempsey litigation, and the balance of said proceeds, if any, should be paid to Chastelain & Ponvert and Shelton. The agreement then contained a mutual covenant between the parties that the Dempsey suit “should be litigated at the joint and equal expense of Shelton and Ponvert and Belmont, and that each should bear and pay one-half of all costs and counsel fees that had been incurred and paid by Shelton and Ponvert and Chastelain & Ponvert since the defense thereof was assumed by said Chastelain & Ponvert, and also all counsel fees and expenses thereafter to accrue until the final termination of the litigation.”
    Pending the Dempsey litigation, and also after its final termination, various suits were brought, on judgments recovered against Tylee subsequent to those mentioned in above agreements, and subsequent to the assignment by Tylee, to set aside that assignment as fraudulent and void, and to subject to the payment of those judgments the rents collected by the receiver appointed in the Dempsey suit. These suits were brought against Tylee’s assignees, the said receiver and Tylee. Tylee’s assignees defended them. There was also a proceeding in the Dempsey suit after its termination based on the petition of Ponvert to obtain from said receiver the proportion of the rents, collected by him, which said Ponvert claimed through the Tylee title.
    Held,
    that Belmont was bound under the agreement to contribute to the expenses of the litigation and proceedings had in and about the procuring of the rents.
    3. Expense of litigation.
    
    
      (a) Upon whom changeable in above put case.
    1. Ponvert having paid the whole of the expenses, he is entitled to reimbursement for one-half thereof from Belmont.
    1. Although ordinarily the expense incurred by an assignee for creditors in protecting and collecting the assigned assets, are first payable out of the proceeds before distribution, yet, where the protection and collection is carried on and undertaken for the benefit of certain creditors, under an agreement whereby they were to share in the fruits in a certain specified manner and bear the expenses, such parties are bound by their agreement, and cannot, although the litigation and proceedings were carried on in the assignee’s name, claim that the expenses should be paid out of the proceeds before maldng the disti'ibution called for by the agreement.
    
    Before Curtis, Ch. J., and Speir, J.
    
      Decided March 5, 1877.
    This action is a part of the litigation growing out of the agreement, in substance set forth in Belmont v. Ponvert (35 N. Y. Super. Ct. 208). It is based on the mutual covenant contained in that agreement, that the Dempsey suit “ should be litigated at the joint and equal expense of Shelton & Ponvert and Belmont, and that each should pay and bear one-half of all costs and counsel fees that had been incurred, and paid by Shelton and Ponvert and Chastelain and Ponvert since the defense thereof was assumed by said Chastelain and Ponvert, and also all counsel fees and expenses thereafter to accrue until the final termination of the litigation.”
    The action was commenced in 1860, and it is alleged in the complaint, that under the above covenant the defendant became liable to pay to the plaintiff a certain sum of money in respect of certain legal expenses incurred in the litigation therein mentioned.
    The answer admits the execution of the agreement alleged in the complaint, and the payment of $1,000 by the defendant, and denies each and every other allegation of the complaint. A further and distinct defense is set up, that the amount alleged in the complaint to have been laid out and expended by the several parties therein stated, and at the times stated, for costs, counsel fees, and expenses, was without the knowledge of, or notice to the defendant, and without his consent, and grossly in excess of and beyond a reasonable and proper compensation for the services rendered.
    On the trial it appeared that Daniel E. Tylee in 1843 claimed to be the owner of the undivided half of certain premises on Vesey, Greenwich, and Washington streets in this city. In the month of July of that year Jane Dempsey commenced an action against him, claiming title as against him to said undivided half of the premises, as heir at law of her sister Mrs Tylee.
    On June 30, 1843, Tylee executed a mortgage on the premises to George Lovett, to secure the payment of $13,000, upon which mortgage a decree of foreclosure and sale was entered in June, 1846, but was not executed, which mortgage and decree constituted the first lien on Tylee’s interest in.the premises. Shelton and Chastelain & Ponvert were creditors at large of Tylee. Ponvert and Shelton had purchased the Lovett mortgage, the first lien on the premises, and the decree thereon amounting to the sum of $13,000 and interest. Belmont’s judgment of $5,550.08, was the second lien. Brown and Neils on’s judgment for about $18,500, was the third lien, which was also purchased by Ponvert and Shelton, and another judgment of Belmont for $7,871.84, constituted the fourth lien on the premises.
    Other facts are stated in the head note.
    The case comes up on the report of the referee, who found in favor of the plaintiff on August 11, 1875, for $12,022.37, on which judgment was entered.
    Both parties appeal.
    
      Messrs. Bowdoin, Larocque & Barlow, attorneys for defendant; W. W. McFarland, of counsel.
    
      Messrs. J. S. Lawrence and C. W. Sandford, of counsel for plaintiff.
   By the Court.—Speir, J.

There was no property out of which this large indebtedness could be obtained, except the premises which were claimed by Mrs. Dempsey in the suit brought against Tylee. It was important, therefore, to sustain the title as the only source from which payment could be had. Ponvert and Shelton, and Chastelain & Ponvert were, at the time the agreement was executed, actually engaged in defending the Dempsey suit for the purpose of establishing Tylee’s title. The several parties holding these claims made common cause for the sake of preserving their several liens in their respective orders and seeming their payment. What inducements led the parties to enter into the agreement, other than as collected from its expressed terms, must, I think, be speculative. Whatever advantage, therefore, the parties may be supposed to have gained by entering into this arrangement other than is set down, need not be considered.

On the part of the defendant, the covenant is to the effect that his forbearance to redeem under his judgments, should in no way prejudice the lien of either of his judgments, or his right to their payment out of the future proceeds of the property, and that the future proceeds thereof, if sufficient for the purpose, should be applied in the order of priority of all the liens, and the balance, if any, to Ohastelain & Ponvert and Shelton.

The first mutual covenant is in effect that the said suit of said Jane Dempsey should be litigated for the purpose of establishing the title of the said Daniel E. Tylee in the said premises, at the joint and equal expense of the said Shelton and Ponvert and the defendant ; and that each should bear and pay one-half of aU costs and counsel fees that had been incurred and paid by the said Shelton and Ponvert, and Ohastelain & Ponvert in defense of the suit of Jane Dempsey, after the defense was assumed by Ohastelain & Ponvert, and all costs and counsel fees and expenses thereafter to accrue, until the final determination of the litigation.

The second mutual covenant is that neither of said judgments, nor the said mortgage decree, nor the sheriff’ s certificate should be used by either of the parties to the prejudice of the other, but for the purpose of perfecting the title to the premises, carrying out the agreement, and cutting off liens and incumbrances thereon.

Without the litigation of the Dempsey suit, and a decision sustaining Tylee’s title, there would be no property upon which these liens would attach. This covenant was therefore of equal importance to all the parties. All the covenants in the agreement are harmonious, expressing the whole intention of the parties, and, I think, are singularly clear and unambiguous, disclosing a common intent and purpose. It is to be observed that the legal status of all the parties interested at the time they entered into the arrangement is carefully preserved in their covenants, the terms and conditions of which are entirely prospective, binding the parties thereto, and all of them, to refrain from performing all acts which should lead to the prejudice of each other in attaining the common end of perfecting the title to the premises, in carrying out the agreement.

The defense of the Dempsey suit was necessarily made in the names of Tylee’s assignees holding the legal title. But the assignees had no funds with which to carry on the snit. Chastelain & Ponvert could not be made parties to the action, holding no title to the premises involved in the litigation, and had they not intervened, the defense would have fallen through for want of means to present it. They were, at the time the agreement was made, conducting the defense. With these facts before the parties, they make provision for the expenses of the litigation in establishing the title by the joint and equal expense of Shelton and Ponvert and the defendant. The referee, npon the evidence before him, finds that the defense of the Dempsey suit was, in fact, assumed by Chastelain & Ponvert, and continued until the end of the litigation, and that they were the only parties who were defending the suit, for the purpose of establishing the title of Tylee to the premises. Although the assignees were not parties to the record, it is enough that Chastelain & Ponvert assumed the defense of the suit, and that fact being well known when the mutual covenant was made for paying the expenses, it cannot be said that the defense was to be conducted at the expense of the assignees.

Before the decision of the court of appeals, in the case of Belmont v. Ponvert, it had been decided in this court (3 Jones & Spencer, 208), that Mr. Belmont under the agreement, acquired no right or interest in the rents, and that he must look exclusively for the payment of his judgments to a sale of the premises.

The decision in the court of appeals is in conflict with this decision in respect to such rents, and is to the effect that such rents were applicable to the payment of the judgments held by the defendant in addition to the proceeds of sale—that the rent of the premises received stands on the same footing under the agreement as proceeds of sale. The court say: “ These rents were the fruits of the litigation with Jane Dempsey, as clearly as would be the proceeds of a sale of land. It is not disputed that the title which Ponvert obtained to the land, was held by him for the benefit of the parties to the agreement, at whose expense the,, litigation had been carried on ; and it is difficult to see any ground on which those rents, obtained as an incident to that title, should take any different course from the proceeds of sale.” Opinion of the court of appeals by Rapallo, J., reported 63 N. Y. 547.

By the express terms of the agreement, the proceeds .of the property are to be applied to the payment of the mortgage decree, the judgments and the balance to Chastelain & Ponvert and Shelton, and no portion of the proceeds of the property are to be devoted to the payment of expenses. The logical result of the decision of the court of last resort is, that the plaintiff is to recover the value of the services of attorney and counsel in procuring those rents, as well as for the services in the Dempsey euit. It is difficult to see how the defendant, after receiving full payment of his judgments, can avoid contribution to the expenses of the litigation which by his covenant he agreed to make. The referee is fully sustained by the facts in evidence, and by the law of the case in allowing the claims of the plaintiff.

The decision of this court (3 Jones & Spencer),'that Mr. Belmont, under the agreement, acquired no right or interest in the rents, and that he was to look exclusively for the payment of his judgment to a sale of the premises, possibly misled the learned referee. He therefore, I think, improperly deducted one-half the amount paid by plaintiff for the services of General Sandford in procuring those rents. I also think he erred in disallowing the sums paid to certain other parties, whose services stand upon the same footing as General Sandford’s.

If these views be sound, it follows that the referee was not authorised in making the foregoing deductions, and it must be held, that the services in obtaining those rents, were to be compensated at the joint costs of all the parties to the agreement.

The judgment must therefore be reversed, and a new trial ordered with costs to abide the event.

Curtis, Ch. J., concurred.