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the public is concerned, at any time while the corporation is alive, the par value of the stock is important; but upon a final dissolution, and after all debts are paid, the manner in which the surplus shall be distributed among the stockholders is of concern to them only, and may be a matter of agreement between them. Considering the fact that the common stockholders contribute a mere trifle to the business, perhaps $5 per share, while the preferred stockholders finance the corporation, the preferences are not unreasonable-clearly not so unjust as to be against public policy.

If it is urged that the provision for the redemption of the stock while the corporation is a going concern may prejudice the public, or creditors, a sufficient answer is that the Stock Corporation Law regulates the manner in which the capital stock of a corporation may be reduced, and safeguards the interests of the public and the credi

tors.

We therefore conclude that the certificate should be filed. The order appealed from should be reversed, with $10 costs and disbursements, and the writ granted, with $50 costs and disbursements. All

concur.

(111 Misc. Rep. 654)

SCHWIMMER et al. v. ROTH et al.

(Supreme Court, Special Term for Trials, Kings County. May 14, 1920.) 1. Vendor and purchaser 341 (5)-Purchaser can recover payments and cost of search, when title fails.

The purchaser can recover, in case of the vendor's inability to make title, because of the existence of unknown mortgages, the amounts paid by him on the contract, with interest, and the expenses of the search of title. 2. Vendor and purchaser 351 (8)-Innocent vendor not liable in damages for failure of title.

Where vendor was unable to make title because of the existence of mortgages of which he had no knowledge, the purchaser cannot recover damages for the breach of the contract, in addition to the payments made, with interest, and the expenses of search, though he could recover such damages if defendant refused arbitrarily to perform, or knowingly contracted beyond his power, or was guilty of fraud or bad faith.

3. Vendor and purchaser 214 (1)-On failure of title assignee of purchaser cannot recover from vendor money paid for assignment.

The assignee of a purchaser cannot recover from a vendor, who was unable to make title because of mortgages unknown to him, the amount paid the original purchaser for the assignment, since the original purchaser could not have recovered such amount from the vendor, and the assignee has no greater rights.

Action by Adolph Schwimmer and another against Rosa Roth and others, as executors under the last will and testament of Henry Roth, deceased, and another. Judgment directed for plaintiffs for the amount paid on account of the contract, with interest, and the expenses of the search of title.

Foster & Newman, of New York City (Nathan Ballin, of New York City, and Benjamin Arnest, of counsel), for plaintiffs.

Óscar A. Lewis, of Brooklyn, for defendants.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(182 N.Y.S.)

CROPSEY, J. The plaintiffs are assignees from the purchaser under a contract for the sale of real property made by the defendants. The defendants were unable to make title, for the reason that the property was incumbered by mortgages which were not known to the defendants to exist. A mortgage which the defendants had held on the property was foreclosed, and through the error of the title company its search failed to show that the mortgages in question were subject to the one being foreclosed. The attorney, relying upon the search, did not make the holders of those mortgages parties. After the defendants had made this contract to sell, and the existence of.the mortgages was revealed, the foreclosure action was reopened, the holders of the mortgages made parties and the property resold. This time, however, it brought far more than the price for which the defendants had agreed to sell it, and it was bought in by a third party. [1, 2] As the plaintiffs cannot have specific performance, the only question in the case is as to the amount for which they should have a money judgment. That the plaintiffs are entitled to recover the amount paid to the defendants on account of the contract, with interest thereon, and the expenses of the search, is undisputed. Northridge v. Moore, 118 N. Y. 419, 23 N. E. 570; Walton v. Meeks, 120 N. Y. 79, 23 N. E. 1115; Matter of Strasburger, 132 N. Y. 128, 132, 30 N. E. 379. Whether a purchaser is also entitled to damages depends upon whether the seller acted in good faith and was not guilty of fraud. If he refused arbitrarily to perform, or knowingly. contracted beyond his power, or has been guilty of fraud or bad faith, the purchaser may recover his damages in addition. Pumpelly v. Phelps, 40 N. Y. 59, 66, 67, 100 Am. Dec. 463; Cockcroft v. N. Y. & H. R. R. Co., 69 N. Y. 201, 204; Marsh v. Johnston, 125 App. Div. 597, 109 N. Y: Supp. 1106. Upon the record in this case it must be found that the defendants acted in entire good faith, and that there was no fraud, and that their failure to perform was not due to any fault on their part. Hence the plaintiffs cannot recover any damages. [3] But the plaintiffs paid to the original purchaser, as a consideration for the assignment of the contract, $500 more than the purchase price, and they claim they are entitled to recover this sum, even though damages be denied them. If the plaintiffs were entitled to damages, this sum would be a part of them, for the damages would be the difference between the contract price and the value of the property; and while this sum of $500 would not represent an actual profit to the plaintiffs, it would represent a part of the profit on the contract, if the value of the property exceeded the contract price by that or a greater sum. Had the original purchaser sued the defendants, of course, this sum could not have been recovered; and this would be true, even though he could have established that he could have sold his contract at a profit of $500. On what theory can the plaintiffs recover what their assignor could not? The defendants made no agreement with the plaintiffs. They are under no different liability to them than to the original purchaser. The contract by its terms does permit of its assignment, but it does not follow that the defendants are liable for any greater sum because of this. There

182 NEW YORK SUPPLEMENT

(Sup. Ct. is no agreement to that effect. There is nothing to show that it was within the "contemplation of the parties" that the sellers should be liable for any sum that might be paid upon a sale of the contract, and it is upon that ground that the expenses of the search are held to be recoverable. Northridge v. Moore, 118 N. Y. 419, 423, 23 N. E. 570.

The rule of damages in these cases of breach of contract to sell real property is an anomaly in the law. It differs from the general rule applicable to contracts for the sale of goods; and the rather arbitrary rule, already stated, is said in the leading case on this subject to be sustained upon the ground of an implied understanding of the parties. Flureau v. Thornhill, 2 Wm. Black. 1076. In this state the rule is the same as is the English rule. Here it is based upon the analogy between this class of cases and actions for breach of covenant of, warranty of title. Peters v. McKeon, 4 Denio, 546; Pumpelly v. Phelps, 40 N. Y. 59, 64, 100 Am. Dec. 463; Walton v. Meeks, 120 N. Y. 79, 83, 23 N. E. 1115. In an action for breach of warranty, the rule of damage is the value of the land when the warranty was made, and, since the action for mesne profits came into use, interest thereon, and the amount paid for the property conclusively established its value. Staats v. Ten Eyck, 3 Caines, 111 (f), 2 Am. Dec. 254; Jenks v. Quinn, 61 Hun, 427, 434-436, 16 N. Y. Supp. 240, affirmed 137 N. Y. 223, 33 N. E. 376; Jacobs v. Schulte, 153 App. Div. 693, 694, 138 N. Y. Supp. 768; Hunt v. Hay, 156 App. Div. 138, 141, 140 N. Y. Supp. 1070. So it has been held that a purchaser cannot recover for improvements made in reliance upon the contract being performed, nor for the fees of an architect for drawing plans for a building to be erected, in the absence of fraud or bad. faith on the part of the seller. Walton v. Meeks, 120 N. Y. 79, 83, 23 N. E. 1115; Prentice v. Townsend, 143 App. Div. 151, 154, 127 N. Y. Supp. 1006. The same rule must apply to the assignee of a purchaser as would obtain in an action brought by the purchaser. Sweet v. Bradley, 24 Barb. 549; 3 Sedgwick on Damages (9th Ed.) par. 961.

The plaintiffs are entitled to judgment for the amount paid to defendants on account of the contract, with interest, and the expenses of the search. No costs are allowed. The findings and judgment should be settled on notice.

(191 App. Div. 793)

(182 N.Y.S.)

CORNEY v. KLINE BLDG. & CONST. CO.

(Supreme Court, Appellate Division, Second Department. May 14, 1920.)

1. Specific performance 105 (1)-Vendee may sue before date for passing of title, on refusal to recognize validity of contract.

If vendor in contract for sale of land refuses to recognize its validity, vendee can sue immediately for specific performance, before contract time for passing of title; rule limiting actions at law for anticipatory breach of contract to those based on contracts to marry, for personal services, and for the manufacture and sale of goods, not applying.

2. Specific performance 6, 32 (1)—Contract not enforced, unless mutual in obligation and remedy.

A contract will not be specifically enforced, unless it is mutual, not only in its obligation, but in its remedy.

3. Specific performance

32 (3)—Contract held to possess mutuality of ob

ligation as basis for suit. Where buyer and seller signed a contract for the sale of land, which was by its terms an "agreement" between the parties, and the buyer paid $200 as part of the consideration, the contract did not lack mutuality of obligation, so as to bar specific performance.

Appeal from Special Term, Kings County.

Action by Nehemiah P. Corney against the Kline Building & Construction Company. From a judgment for plaintiff, defendant appeals. Affirmed.

Argued before JENKS, P. J., and MILLS, RICH, BLACKMAR, and JAYCOX, JJ.

Frank W. Holmes, of Brooklyn, for appellant.

Adolph Feldblum, of New York City (Henry Muller, of Brooklyn, on the brief), for respondent.

BLACKMAR, J. The contract for the sale of the real property was made on the 17th of June, 1919. The plaintiff, who was the purchaser, paid $200 on signing the contract; $1,200 was to be paid on June 20th; and the title was to be closed on July 15th. On June 20th, at the appointed place, the plaintiff attended and tendered the $1,200, but the defendant refused it and repudiated the contract, claiming that it could not be enforced against him. The plaintiff thereupon began this action, without awaiting the time fixed for closing the title. He obtained a judgment for specific performance according to the terms of the contract, and the defendant appeals, claiming that the action was prematurely brought.

[1] The rule which limits actions at law for anticipatory breach of contract to those based on contracts to marry, for personal services, and for the manufacture and sale of goods (Kelly v. Security Mutual Life Ins. Co., 186 N. Y. 16, 78 N. E. 584, 9 Ann. Cas. 661), does not apply to suits in equity for specific performance. If the vendor in a contract for the sale of land refuses to recognize the validity of the contract, no reason is perceived why the vendee should by delay take the risk of the complications which would result if the vendor should sell to another. A court of equity can always mold its relief, so that

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

the contract will be enforced as made, although the action is brought, or even tried, before the date fixed for closing. There is a difference in principle between an action for damages on the theory that the contract is ended by the breach of the defendant, and a suit in equity based on the theory that the contract continues in force. The right to resort to equity to protect and enforce the contract before the time for performance is recognized in both the cases cited by the appellant, where an action for damages for an anticipatory breach of a contract of life insurance was denied. Langan v. Supreme Council, Am. L. of H., 174 N. Y. 266, 66 N. E. 932; Kelly v. Security Mutual Life Ins. Co., supra. The authorities amply sustain the doctrine in its application to an action for specific performance of a contract for the sale of real property. Payne v. Melton, 67 S. C. 233, 45 S. E. 154; Miller v. Jones, 68 W. Va. 526, 71 S. E. 248, 36 L. R. A. (N. S.) 408; Bear v. Fletcher, 252 Ill. 206, 96 N. E. 997; Bogard v. Barhan, 56 Or. 269, 108 Pac. 214; Parks v. Monroe, 99 Kan. 368, 161 Pac. 638. [2] But the appellant claims that the contract was unilateral, in that it contained no express promise on the part of the plaintiff to purchase, and therefore, not being mutually obligatory, an action for specific performance will not lie. The rule is well settled that a contract will not be specifically enforced, unless it is mutual, not only in its obligation, but in its remedy (Wadick v. Mace, 191 N. Y. 1, 83 N. E. 571; Levin v. Dietz, 194 N. Y. 376, 87 N. E. 454, 20 L. R. A. [N. S.] 251), and the appellant invokes this rule. The question, then, is whether the contract binds, not only the seller to sell, but the buyer to buy.

[3] Both parties signed the contract. It was by its terms an "agreement" between the parties, and at the date of execution the initial payment of $200 of the consideration was made by the purchaser. Although the vendee did not in express terms promise to buy, I have no doubt that such promise is plainly implied. The signing of the contract by the vendee would be an idle act, unless he assumed some obligation by so doing. The word "agreement" itself connotes a mutual obligation. Finally, the payment by the vendee of the $200 as part of the consideration recognizes the obligation. Benedict v. Pincus, 191 N. Y. 377, 84 N. E. 284; Moran v. Standard Oil Co., 211 N. Y. 187, 105 N. E. 217.

The judgment should be affirmed, with costs. All concur.

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