Court Opinion

ID: 6314129
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:21:03.626321+00
Date Added: 2024-06-11T08:59:11.456768
License: Public Domain

The opinion of the Court was delivered by
Sergeant, J.
The plaintiff being the owner of one hundred shares of the stock of the Pennsylvania and Ohio Canal Company, on which he had paid five dollars a share, the defendant agreed to purchase them from him, at the price of eleven hundred dollars, which amount he paid to the plaintiff, and received an equitable transfer of the shares. The plaintiff afterwards, in consequence of his original personal responsibility to the company as a subscriber, and the omissions of the holders subsequent to him, paid to the company the sum of five hundred dollars on account of an instalment called for and payable after his sale to the defendant. If the *253plaintiff cannot recover this sum from the defendant, (for there is no one else liable to the plaintiff,) the plaintiff must lose it; and if he does lose it, it is manifest that he does not receive the price which the defendant, agreed to pay him for the shares, but only six hundred dollars. There is, therefore, a clear equity in the plaintiff’s claim to be indemnified for this loss, as otherwise he does not receive the price which the defendant agreed to pay him, and the contract is violated in one of its most essential features.
This equity, that a purchaser is bound to indemnify the vendor against known outstanding incumbrances, which enter into the consideration or price stipulated, has been recognized and enforced in many instances. A purchaser of a leasehold estate must covenant with the vendor to indemnify him against the rents and covenants in the lease, although he is not expressly required to do so by the conditions of sale. Pember v. Mathers, (1 Bro. C. C. 52.) And it will not vary the case that he is not entitled to any covenants for title ; for example, where the sale is by an executor of an assignee. Stainer v. Morris, (1 Ves. & Beam. 8;) and see Wilkins v. Fry, (1 Mer. 244.) And although a purchaser is not required by the conditions of sale, to give an indemnity against the rents and covenants, and an assignment is actually executed without an indemnity being given; yet even a verbal agreement by the purchaser, before the sale, to secure such indemnity, will be carried into a specific execution, if it be distinctly proved. Pember v. Mathers, (1 Bro. C. C. 52, cited Sugd. Vend. 27, 185, c. iii. sec. 3, c. iv. sec. 3.) So, although a purchaser of an equity of redemption, enter into no obligation with the party from whom he purchases, to indemnify him from the mortgage money, yet equity, if he receives the possession, and has the profits, would, independently of contract, raise upon his conscience an obligation to indemnify the vendor against the personal obligation to pay the mortgage money ; for having become owner of the estate, he must be supposed to intend to indemnify the vendor against the mortgage. 7 Ves. Jr. 337, per Lord Eldon. Sudg. Vend. 185. The same principles were recognized by this Court, in Kearney v. Tanner, (17 Serg. & Rawle, 94,) where Tanner having a house which he had encumbered by bond and mortgage, sold it to Kearney. Afterwards, being obliged to pay the bond, the house having been sold under a proceeding on the mortgage, for less than the mortgage money, it was held that he might recover the balance against Kearney, upon evidence of a verbal agreement by Kearney to buy subject to the mortgage. So in Shrum v. Campbell, (3 Watts, 70,) Shrum had bought land, by articles of agreement, from Mr. Astley, and part of the purchase-money remaining unpaid, Shrum, by articles of agreement under seal, sold to Campbell, the defendant, subject to the incumbrance. This was held a covenant-by Campbell to indemnify Shrum against the outstanding purchase-money, which he had originally contracted to pay Astley. These are all *254cases of contracts of purchase and sale, in which the purchaser agrees to assume the known incumbrance, and is compelled to do no more than it is consonant to plain equity and justice he should do, and without which the vendor must certainly sustain a loss, directly in opposition to the agreement of the vendee. And such is the present case. Trevor sold to Perkins at a certain sum: they stood as vendor and vendee : Trevor by the charter continued personally responsible to the company for the remaining instalments, if not paid by the holders or others, as was decided by this Court in Union Canal v. Sansom, (1 Binn. 75.) When he paid the second instalment, he did what he was obliged to do, and having done it, if there W'as any agreement or understanding by Perkins, either in writing or otherwise, at the time of the sale, to indemnify Trevor, he is liable to an action for his reimbursement. I am even inclined to think, that such agreement would, in equity, be implied as intended by the parties, from the nature of the transaction; and that in the case of an assignee selling as well as a lessee. See Stainer v. Morris, (1 Ves. & Beam. 8.) But it is unnecessary to go so far here, because the case shows there was evidence of an express contract, not only in the circumstances that occurred, but in the language of the power of attorney to transfer the stock which is a material part of the contract. This power must be considered as it existed when delivered by the plaintiff to the defendant: no subsequent alteration of names inserted, made without consent of the plaintiff can affect him.
Considerable difference of opinion, it appears, has prevailed as to the effect which is to be given in an indenture of assignment of a lease by a lessee, to the words “ subject to the rent reserved in the lease.” The Court of Common Pleas in England, in 1832, in the case of Steward v. Wolveridge, (9 Bing. 60; 23 Eng. Com. Law Rep. 262,) held that they constituted an express covenant by the the assignee with the lessee, to pay rents which the lessee was subsequently called on to pay. In 1833, this decision was reversed in the Exchequer Chamber, the judges holding that they constituted words of qualification not of contract. 3 Moore & Scott, 561; S. C. 30 Eng. Com. Law Rep. 313. The latter decision seems to have turned on the strict legal meaning of these words used in an indenture of assignment, under which the party was held not to have intended a contract of indemnity. However that may be in a Court of law, in formal conveyances, in which the parties have selected certain terms, and omitted others, from which and from the subject-matter it is inferred, that there was no agreement intended, it does not apply to those cases where there is a contract, whether verbal or written, amounting to an agreement to indemnify, which a Court of equity is called on to enforce, by ordering an express covenant to be inserted in the deed when drawn, in favour of a purchaser for a valuable consideration. And if there was in this case evidence to *255satisfy a jury theré was such a contract, or such agreement was to be inferred from the transaction, the plaintiff is entitled to recover.
I have considered the case as that of a sale of real estate, because the seventeenth section of the charter declares, that the stock of the corporation shall be deemed and considered real estate, and any share or shares of any stockholder may be transferred by deed duly acknowledged and recorded by the clerk of said corporation in a book to be kept for that purpose, &c. This clause, (which has since been repealed,) was an anomalous provision, originally inserted in the act passed by the state of Ohio, and afterwards confirmed by the legislature of Pennsylvania. The shares of stock in the canals and rail-roads of this state have been treated as personal estate, like those of banks, insurance companies and others: on the principle that though real estate to a large amount rests in the corporation, yet the rights of the stockholders, so far as respects the receipt of the profits are only to a dividend out of the net proceeds, after charges and expenses deducted. And this has been found the most convenient mode of considering property continually passing from hand to hand by transfer of certificates not acknowledged and recorded as deeds, nor treated as vesting an interest in real estate. In the present case there was no deed executed, the transaction being of an executory character, constituting only an equitable transfer, which a court of equity would enforce between the parties according to justice and equity. It would, if there was such an understanding as required it, compel the purchaser to insert in a formal conveyance all covenants which the vendor had a right to for his security against outstanding claims on which he remained personally responsible. And in our Courts, the vendor on paying the money, may have redress in assumpsit for money paid.
Judgment reversed and venire facias de novo awarded.