This case presents for decision several questions arising under the jurisdiction for the specific performance of contracts, which is invoked on behalf of both vendor and vendee, some of the questions being new in our courts. And as one of the questions in the case relates to the effect of the bill and cross-bill filed by the parties upon their respective status and claims prior to the suit, the material facts as they existed prior to the filing of the bill should be first stated. On June 30th, 1897, a writteñ agreement was executed between the defendant, Cross, and John E. Melick, the complainant’s husband, for the sale by Cross to Melick of á tract of land containing about thirteen acres on Speedwell lake, near Morristown, for the sum of $15,000. The tract adjoins lands belonging to the estate of A. W. Cutler. Two of Meliek’s notes, one for $500, paj^able August 1st, 1897, and one
“In case any default in the payment of either of the notes, the collateral security held with them shall be forever forfeited and become the property of A. L. Gross, his heirs or assigns, absolutely. * * * It is also hereby further agreed that in case there shall not be a sufficient number of lots or plots sold to reduce the said balance to $9,000 within two years from the date hereof, then and in that event said Melick shall procure said needed funds elsewhere, as that shall be the limit of time for closing up said sale and purchase. * * * Upon the failure to perform this agreement the said J. E. Melick shall forfeit all payments he may have made prior to the delivery of the deed and the -property shall belong to said A. L. Gross, his heirs and assigns, as fully as if this agreement had never been made. And said Melick shall remove any and all improvements he may have made for railroad purposes thereon.”
The agreement contained no other provision by way of penalty or liquidated damages for the breach of the contract by either part}', and it was declared by them to he binding on their respective heirs or assigns. The securities deposited as collateral for the notes belonged to complainant, for whom, as is admitted
“6-22-99.
“Mr. A. L. Gross:
“Dear Sir—I am just advised that the people I have been working with all winter to get the railroad built from end of Bockaway through Morristown to Little Falls on the Erie have just sold one B. B. that recently finished and expect to close out another property this week and that my project is the next will take up as is best railroad project for distance is on foot now that they know of so hope soon to be in shape to close out the rest of the 13 ac. lot. ’ I have advertised a sale for July 4th and hope to make sale of several lots. Mrs. Evans is ready to pay her $385 for the 50 x 100 in hollow at corner of Burnham rest she worked out with team making streets, also another lot 35 x 90 about behind it for $175, so if you can sell few more can raise up a payment. I had about sold the site on the back low lots along Cutler’s for a woolen mill when in making search find Cutlers have reserved all the springs and water rights on the lot with right to come pipe it out. This knocked over the sale and lost a chance to get about $5,000, there besides believe would -been chance to sell lots to folks who would worked in mill, was to employ 200 hands and then the corner out by Lake road bridge had about sold to a Steam Laundry but that spring'is out too so I went to Mr. Pitney to get right to take water from lake and would not sell or give away a bit of water. And Cutlers ask $10,000 for the springs, so only thing I can see is to get B. B. to help out with it and sell if can in lots now as Cutler and Burnham are cutting a new street through and hold there lots high. I will see you soon as know when B. B. is ready to start.
“Tours truly,
“J. E. Melick.
“The lots will sell with promise that sell at least 10 at 400 or over.”
‘•July 12, 1899.
“I have been expecting to hear from you for some days, but no word has come. Our agreement has expired by its express terms, and as I am anxious to dispose of the property, shall now see what I can do elsewhere.”
“Melick then asked me what I was going to do about the water right, to which I replied I was not going to do anything; that I did not consider he had any claim there whatever, and that his contract had expired by limitation.”
Melick says -the interview took place before the 1st of July, and gives an entirely different account of it. He says that, not receiving an answer to his letter of June 22d, he went to see Cross about a week before the expiration of the contract, and asked him what he was going to do about the reservation, and Cross gave him to understand that he would see about it, and they arranged to leave open the delivery of the deed until after the season was over, and that, during the season, Melick should continue to run the property as a pleasure-ground. The account given by these two witnesses as to the next and only other interview, which took place early in September, is of service, in connection with other circumstances, in deciding which one gives the true account of the time or substance of the first interview. At this second interview two other persons were present, Mr. Mills, Melick’s attorney,, and a Mrs. Evans (referred to in the letter of June 22d), who had bought one of the lots from Melick previous to July 1st, 1899, and desired to complete the purchase and get her deed. Mrs. Evans was not called as a witness. Cross’ statement is that Melick then called his attention to an outstanding encumbrance, by way of mortgage 'to Stephen IT. Condit, a former owner of the property, and to the water-right reservation, and asked what he proposed to do about it. Cross said that he had never heard of the mortgage, and that it seemed to have merged in the title which Condit afterwards took, and as to the water right, he did hot propose to do anything, as he did not consider that Melick had any rights in the property; that he had forfeited it by the terms of his agreement. As to a conveyance to Mrs. Evans, Cross, as he says, declined to do anything, so far as Melick was concerned, on account of the old contract, but, in order that Mrs. Evans might not lose her money, he would make an independent agreement with her and convey the two lots pur
“I told Meliek that if he could make any disposition of the property before I did, I was ready to carry out the contract, but X should not hold myself liable under it any longer. I told him I was going to sell it, but if he was ready to buy it before I sold others, I was willing to make the conveyance,”
and that Meliek, at that interview, said he was ready if the encumbrances, as he called them, were cleared up, but didn’t show any money. On cross-examination, Cross again reiterates that, at that interview, he refused to have anything to do under the old agreement, and that he considered that it had become null and void, by its express terms, and adds, “I intended it so when I drew it.”
Melick’s account of this interview in September is that he then proposed to Cross to give the deed to Mrs. Evans and that he (Meliek) would pay him the balance of the money if Cross would straighten this matter out, and that Cross absolutely refused to do anything—
“he said I had lost all my rights but he would fix Mrs. Evans up. I said I was ready to pay the balance the agreement called for, to which he said he would not entertain anything from me at all.”
Mr. Mills, a young man who was present with Meliek as his attorney, gives an indistinct account of the interview, but says in substance that Mrs. Evans wanted a deed for a lot which Mr. Cross would not give for awhile, and that finally the question arose as to the title to the property, Meliek contending that there was some encumbrance on the property, which he would like taken off, and Cross said there was none, that there was a merger, and witness thought there was not. Cross finally agreed to give Mrs. Evans a deed, and then there was more talk about the encumbrance on the whole lot, and Cross suggested that Meliek try to buy it himself from the Cutler estate; that he could get it cheaper than Cross, who didn’t want to have his name mentioned. He further says that Meliek was to have a
As to the reservation of water 'rights, it appears that on the property, near the Cutler line and about fifty feet distant therefrom, is located a spring, the rights to the waters of which are reserved to the owner of the Cutler property, with a right of entry to keep open the drains and pipes conveying the waters of this spring to ponds located on the adjoining property. The reservation was made in a deed from Mr. A. W. Cutler in 1866, when he conveyed the thirteen-acre tract to defendant’s predecessor in title, and, until Melick’s letter of June 22d, was'never known to defendant, who had received a warranty deed from his
The principal disputed matter of fact, as to the conduct of the parties in reference to the contract previous to the filing of the bill, is as to the time and character of the first interview between Melick and Cross after Melick’s letter of June 22d. Melick’s present statement is that he sought the interview, because Crosi did not answer his letter bringing the reservation to his attention, and that he went down to ask him what he was going to do about it. Cross, on the other hand, says that the meeting was accidental—at a public office—and that it was after his letter of July 12th declaring the contract terminated. They agree in the statement that the interview, whenever it occurred and however it occurred, was the first interview after Melick’s letter of June 22d, and inasmuch as Melick, so far as can be judged from that letter, evidently did not then have in mind that the reservation was any basis of inquiry or demand upon Cross or that it created any obstacle to proceeding with the contract, I think that the importance he attached to it, in the first interview, did not result from changing his own view of it, after he wrote the letter, but that it was the probable, and, in his case, the natural, result of a notification, by Cross’ letter of Juty 12th, that the contract was terminated. This notification, not being accompanied with an offer -to return the deposit, necessarily implied a claim on Cross’ part to retain the deposit forfeited, and such notice on Cross’ part would naturally and probably have resulted in the counter-claim of defective title made by Melick. As to the time of the interview my conclusion is that Cross’ statement is the moré reliable. I reach the conclusion also that, as to the substance of the interview, Cross’ statement is to be taken in preference to Melick’s. The substantial point of difference as to the first interview is whether Cross then promised to get rid of the water right, and requested Melick to continue possession, or whether he refused to do anything about it, and denied Melick any rights under the agreement. Cross’ pres
Upon the whole case I conclude therefore, as to this disputed matter of fact, that Meliek did not continue in possession on Cross’ promise to remedy the defect in the title; that, as early as the latter part of July, Meliek hád notice that Cross claimed that the contract was terminated by limitation of time. It is admitted by Meliek that he had this notice at the second interview early in September. There had not been, up to this latter date, nor was there then, any demand of possession by Cross, neither on Melick’s part had there been any demand for a return of the deposit or any offer to deliver possession on repayment. Melick’s continuance in possession, without srich demand or offer, taking the view most favorable to the vendee, indicates that the vendee, on his part, was still continuing in possession, for the purpose of carrying out the contract and not of abandoning it, and with full notice that Cross, in carrying out the contract, did not expect or intend to free the property from the water reservation. Meliek had notice also that subject to Cross’ sale of the property to others, he (Meliek) might, at any time, have the property under the terms of the contract. The fact that nothing was said at the second interview, upon either side, in reference to the delivery of possession, and that Melick’s possession then continued for more than two months, indicates, I think, that Cross, on his part, permitted the continuance in possession in order that Meliek might, if able to do so, carry out the contract, without regard to the water right, pending his own efforts to sell to other parties. Cross’ notice to Meliek in July, or at least in September, that the reservation would not be removed, also put Meliek to his election either to treat the contract as abandoned, because of the defective title, and to offer to rettirn posr session, on payment of the deposit, or to continue in possession,
As to a purchaser’s waiver of the defect in title, the authorities settle the rule that a vendee may, on being informed of a defect in title, and either expressly or by his acts, waive the defect as a reason for abandoning the contract without, however, giving up his right to abatement or compensation for the defect, or he may, in like manner, waive the defect, both as an objection to the contract and as a matter of compensation. Taking possession after a notice of defect has been considered a waiver, both of the defect and of the right to compensation. 1 Sugd. Vend. & P. *398, *402; Burrell v. Brown, 1 Jac. & W. *169 (1820). Where the vendee takes possession under the contract, he may object to the title for a defect subsequently ascertained, provided he abandons, or offers to abandon, possession, on account of the de-' feet, as soon as he learned of it. 22 Am. & Eng. Encycl. L. 961. But a continuance in possession, after such notice, for the purpose of completing the contract, may waive the right to object to the defect, although it may not destroy the right to compensation (Calcraft v. Roebuck, 1 Ves. *226; Hughes v. Jones, 3 De G. F. & J. *307, *317 (1861); 1 Sugd. Vend. & P. *405, 406; 1 Dart Vend. (2d ed.) 402); and going on with the negotiation and dealing after discovery of the true nature of the vendor’s interest, is conduct inconsistent with an intention of abandoning the contract, and waives the defect as ground of
Melick’s conduct after discovery of the defect, in relation to the contract and the continuance of his rights under it, including the right to possession, must, as it seems to me, be taken to have dearly waived the objection to the vendor’s title as a ground for abandoning the contract. But it cannot be considered as waiving his right to compensation. As to compensation, the evidence of waiver should be entirely clear, for this is a right which the court can adjust if the parties disagreé, while it is otherwise as to the defective title. Melick’s request, admittedly made in both interviews, for information as to Cross’ intention in regard to the reservation was an insistment on the. objection, and while his continued possession, pending adjustment of the matter, may, with the circumstances of the case, be taken to waive the defect as ground of abandonment, it did not destroy the effect which the objection was entitled to have on his equities in finally carrying out the contract. As to the vendee’s rights on his bill, I conclude therefore that she is not entitled in equity either to a conveyance free of the easement or to a return of the purchase-money, but that she is entitled to a decree for. specific performance, with compensation. If the vendee declines to complete, with compensation, her bill must be dismissed. This brings me to the second question, which is as to the vendor’s rights, on his cross-bill, to affirmative relief by decree against the vendee for specific performance, with compensation.
If the vendor’s standing in this case as an applicant for the special equitable relief of a specific performance were to be determined solely by his verbal and written claims and notices in reference to the contract, he could not be considered as entitled to the relief, because, on Iris part, he did not, before the filing of his answer and cross-bill, show himself ready, on his part, to perform the contract, as far as he could, or to do equity. On the contrary, by his written notices and verbal declarations, he insisted on the termination of the agreement by the time limit, which carried with it a forfeiture of the deposit, and he made no offer either to return the deposit or to make compensation for the defective title. But it appears that these notices and declara
At the-hearing I was inclined to the view that the matter of
The question was not argued at the hearing.