Lewis v. McMillen , 41 Barb. 420 ( 1863 )

Johnson, J.

The learned justice before whom this cause was last tried, and whose rulings we are now called upon to review, felt constrained to adopt the same ruling substantially, which was made on the first trial of the cause in April, 1859, in order to prevent a complete failure of justice between the parties. That ruling was held to be erroneous, and a new trial was granted for that reason, by this court, at the March term, 1860. (See 31 Barb. 395.) The history of this case, since the first trial, seems to me to furnish a most forcible and convincing illustration-of the soundness of the ruling at the circuit, and of the fallacy of the decision of the general term in granting a new trial. In the fruitless search of some other principle upon which even tolerable justice could be meted out to the parties, it has since that time been under repeated investigation both at the circuit and at the general term; and finally comes back to rest on the same ground on which it was then placed. In the mean time the defendant McMillen has been in the full and complete possession and enjoyment of all the benefits and advantages secured to him by the contract which formed the consideration of the note in question, uninjured and undisturbed by any adverse title, or claim of title whatever. He has retained the entire possession and enjoyment of the plaintiff's property under that contract, for a period of nearly seven years, and still retains the same, while refusing to fulfill his obligations under the same contract. If this can be done for this period, it may upon the same principle, for aught I can see, be indefinitely continued, and result in securing to McMillen the entire property for all time, without making any compensation therefor. It remains to be seen whether a principle which produces such results can be sound in law. I am confident, notwithstanding our former decision, that the principle can be shown to be unsound and untenable, not only upon the clearest dictates of reason, but upon well settled authority. If the action were directly upon the contract, and between the parties to it only, it being an executory contract on both sides, the law would not allow the purchaser to repudiate his obligation to make payment while retaining and enjoying the consideration of his promise. He could not thus both affirm and disaffirm the contract. He would not be allowed to affirm so much of the contract as was advantageous to himself, and enjoy all its benefits, and dis-affirm and reject that which was burdensome. He would be compelled either to affirm, or to disaffirm and rescind, in toto. This must be so, especially in a case like this, where the plaintiffs have offered to perform fully on their part, according to the terms of the contract; and all the purchaser is able to say in respect to this offer is, that although the plaintiffs have a perfect title to four-fifths of the premises contracted to be sold, they have not a perfect title evidenced by a written conveyance for one-fifth. This, it must be conceded, if true, might furnish ground for rescinding the contract by the purchaser, but it could furnish no ground for refusing all payment, without rescinding. Unless this is so, there is no such thing as mutuality in contracts. It is idle to pretend that the purchaser here has rescinded the contract, when it is undisputed that he has held the plaintiff’s property under it for six or seven years and still holds and enjoys the same. He must rescind by acts as well as words, or it is no rescission. Our decision at general term was to the effect that in such a case and under such circumstances, no payments whatever could be enforced. Thus the purchaser is enabled to keep the whole by virtue of the contract, without incurring any obligation to pay any thing. His refusal to pay, according to our decision, is no breach of the contract on his part, for the contract did not bind him to pay, unless the plaintiffs were seised of a perfect title in law to each and every acre of the land they contracted to sell and convey. And all this without requiring him to rescind and restore what he had received. This cannot be good law.

But this action is not upon the contract, nor between the parties to it. The action is upon a separate and independent promise by the purchaser and other parties, to pay the plaintiffs the sum specified at a particular day. The consideration of this promise, it is true, is the agreement of the plaintiffs with McMillen. But before the defendants can defeat the action entirely, they must show either fraud in the transaction in which the note has its inception, or an entire want, or failure, of consideration. A partial want, or failure, of consideration cannot be alleged in bar; and no fraud is shown.

It is quite manifest that here is no entire failure of consideration. The plaintiffs have not refused to- convey, but offer to convey the entire premises, and insist upon their right to the whole, and this right to the largest portion by far is conceded. But, even if the plaintiffs had refused to convey, the contract being still executory on their part, the cases are abundant to show that such a refusal is no bar to an action upon a separate note, given to secure one or more of the payments. The party must pay his note, and take his remedy upon the contract, to recover his damages for the breach. In such case the payment of the note, and the conveyance, are not concurrent, but independent acts. The note is in the nature of a condition precedent, and must be paid. This was expressly ruled in Spiller v. Westlake, (2 B. & Ad. 155; 22 Eng. C. Law, 49.) In that case Lord Tenterden, O. J. says : “ I can see no reason why he should have executed a distinct instrument, whereby he promised to pay a part of the purchase money on a particular day, unless it was intended that he should pay the money on that day at all events.” Parke, J. was inclined to the opinion that the defense might have been maintainable, if the circumstances had been such that had the defendant paid the money he would have been entitled to recover it back in an action brought by him, which he held could not be done as long as the contract remained open. Here the contract remains still open, neither party having rescinded or attempted to rescind. To the same effect precisely are the cases of Freeligh v. Platt, (5 Cowen, 494;) Moggridge v. Jones, (14 East, 486; 3 Camp. 38, S. C.) and Chapman v. Eddy, (13 Vt. R. 205. 1 Pars. on Bills, 203, note z.) These are all cases arising between the parties to the contract. But here two of the parties to the note have no interest in the contract, and the case is still stronger in favor of the plaintiffs. As between the defendants, Hannan and Van Hess, and the plaintiffs, there is no privity of contract except in respect to this note. Those defendants have no interest whatever in the contract, and could maintain no action for any breach of it. They are mere sureties of McMillen, and their remedy is upon their principal, for any sum they may be compelled to pay on the note. Being mere sureties of McMillen, and having no interest in the contract, they cannot set up the breach of such contract as a defense against their promise. (Gillespie v. Torrance, 25 N. Y. Rep. 306. 2 Parsons on Notes and Bills, 536, 537. Webb v. Spicer, 13 Q. B. 886. Salmon v. Webb, 16 Eng. Law and Eg. 37.) But as between McMillen and the plaintiff, the contract in express terms makes the ¡Dayment a condition precedent to the right of the former to a conveyance. That, I think, would be sufficient even if the action was directly upon the contract. In addition to that, however, the purchaser gave his note for the payment, and procured other persons to sign it jointly with him; and this puts the intention to make the note in the nature of an independent promise, or a condition precedent, beyond all doubt.

The contract being, as we have seen, still open and unrescinded, and the defendant McMillen being in the full enjoyment of the benefit of the consideration of the note, is in no situation to resist payment. Paréons, in his book on Bills and Notes, at page 203, notices a distinction between the failure of the consideration of a note, and the failure of a benefit resulting from it. As where one party promises another to do a certain thing, and the other gives his note to the promissor, in consideration of such promise, the latter cannot defend against the note, on the ground of a failure of the consideration, so long as he retains the promise made to him, or if it be of such a nature that the other party is permanently held upon it. Before he can defeat the note he must cancel the promise. And in Wright v. Delafield, (23 Barb. 498,) it was held that a purchaser of land could not keep the land and refuse to pay for it, whether the title was good or bad. That if it was bad he must elect to take it as it was, or as the vendor could make it, and pay for it, or else give it up. And that, as the purchaser did not elect to give up the land, he must pay for it according to his agreement.

This is only stating in another form a very familiar and elementary rule of law, that where one obtains a right to the possession of land, and to the use and profits thereof, by virtue of an agreement, he cannot while thus holding the land dispute the title of him from whom he obtained it, and refuse to perform his agreement under which he entered and continues to hold. Before he can do this he must surrender the possession and place the party in statu quo. In other words he must rescind in toto, by restoring what he received.

The learned justice who delivered the opinion in this case on a former occasion upon granting a new trial, as reported 31 Barbour, 395, admits that had the defendants paid the note in question, voluntarily, it could not, upon the evidence in the case, have been recovered back. This conclusion is of itself fatal, not only to the defense but to the authority of the point then decided. For it is most manifest, in a case like this, that the principle upon which payment may be lawfully refused, and that upon which the money if paid voluntarily might be recovered back, are identical, to wit, fraud or the failure of the consideration. The difficulty in the way of the defendants, in either case, is enhanced by the fact thg,t they are not all parties to the contract.-

This case is not affected in any respect by the decision in Fletcher v. Button, (4 Comst. 396.) That was an action to recover back the purchase money paid, where it was conceded that the vendor was wholly without title to any portion of the premises. Mo question was raised by the pleadings as to the purchaser having obtained any rights under the contract, or as to its having been rescinded or otherwise. On the contrary, it was conceded by the answer that the plaintiff was entitled to recover back the money paid, and the only claim made by the defendant was a right of set off for use and occupation, against the amount of payments made. That case is wholly unlike this, not only in its facts but in respect to the questions raised by the pleadings and litigated upon the trial. Mor is this case to be confounded with that class of cases where a note is given in consideration of a conveyance made, and the title has failed; nor with those cases where'"the action is directly upon the contract which the purchaser has rescinded on the ground that the vendor has no title.

[Monroe General Term, December 7, 1863.

The action here is upon a separate promise, executed in part by persons who are not parties to the contract, and which contract is still open, neither party having put an end to it, on account of the default of the other, but each retaining every thing acquired under it. How can the court say that the plaintiffs shall not have the benefit of the contract, on their side, .to recover according to its terms the value of the property which the defendant McMillen obtained from them by means of it, and which he still keeps and enjoys, and holds from them only. It was in consideration of his promise that he obtained the possession of these premises, and has so long enjoyed their use, and as long as he elects to keep the consideration and the benefits resulting from it, the law must hold him to his promise, and allow the other party to enforce it. Before the court can have any right to absolve him from his promise he must do works meet for such absolution, which he has not yet done. It would be monstrous injustice, as it seems to me, in the court to drive the plaintiffs to rescind the contract and seek some other remedy outside of it, in order to wrest the property from the tenacious grasp of the purchaser. They do not wish to rescind, and indeed under the authority of our former decision might find great difficulty in doing so should they attempt it. They prefer to enforce this joint and several promise of the defendants, and to respond to McMillen alone, if he shall prefer any claim for any breach of the contract, between themselves and him. This I think they should be allowed to do. I am of opinion, therefore, that our former decision in this case was clearly erroneous and should be reversed, and that the ruling at the circuit should be sustained and a new trial denied.

Welles, J. concurred. E. Darwin Smith, J. dissented.

Hew trial denied.

Welles, E. Darwin Smith and Johnson, Justices.]