216 A.D. 665 | N.Y. App. Div. | 1926
The action was brought to compel the delivery of certain contracts, moneys and documents alleged to have been deposited in escrow with the defendant Equitable Trust Company, and to compel the carrying out of a certain written agreement
The answer of the defendant Murdoch denies any knowledge or information sufficient to form a belief as to the allegations with reference to the transactions between the plaintiff and Carlton; admits the execution of the documents alleged to have been executed and deposited with the trust company; admits that the plaintiff demanded he appear at the office of the Equitable Trust Company and demand delivery of the papers held by the trust company and that he refused to complete the performance of the alleged agreement and to consent to the delivery of the documents by the trust company. The answer puts in issue the other allegations of the complaint. As a defense and counterclaim, said answer of the defendant Murdoch sets up that on the 30th day of September, 1920, the defendant Murdoch entered into a contract with Carlton for the sale of the property mentioned in the complaint and executed certain documents in connection therewith; that this was done upon the inducement of certain warranties made by the plaintiff in reference to said property and that at the request of Murdoch all the documents were deposited with the Equitable Trust Company for the purpose of "safekeeping and delivery should Murdoch consummate the transaction, in the event-he found the title and property as warranted by the plaintiff; and that pursuant to such understanding Murdoch signed an agreement providing that the documents should be delivered to the Equitable Trust Company for delivery as aforesaid to the party respectively entitled thereto in the event of consummation, or for cancellation and the money and notes returned to Murdoch in the evant that the property should not be transferred to him. It is further alleged that it was the intention of all the parties that none of said documents should be binding upon Murdoch unless the title of the property was as warranted, and the transaction was consummated. It is further alleged in said defense that there was a breach of certain of the warranties made by the plaintiff; that Carlton duly canceled all agreements between him and the defendant Murdoch, released the latter from all obligations thereunder and assigned to the
The Equitable Trust Company submitted itself to the decree of the court. The defendant Sledge Oil Development Company put in a notice of appearance but defaulted in pleading, was not represented at the trial and asked for no relief of any kind. The defendant Carlton was served, but defaulted in appearance and pleading.
From the record it appears, by the plaintiff’s own testimony, that although the parties contemplated depositing the aforesaid money, notes and documents under an escrow agreement and attempted to draw up such an agreement at the time, the escrow agreement never was drawn up; that the deposit was made instead in an informal manner because the trust company would not sign the escrow agreement which had not first been approved by its counsel. The plaintiff’s witness McCorkle testified that thereupon “ Mr. Silberstein [the plaintiff] objected to any further delay, whereupon Mr. Murdoch suggested that we might just leave these papers in an envelope and indorse them without any agreement, leaving them simply with the Trust Company as depositors.” It appears that this was done, the papers being left with the trust company in a sealed envelope, which envelope the trust company was to deliver only upon demand of all the parties. It was indorsed as follows:
« 0ctoler lf im.
“ To the Equitable Trust Company:
“ The sealed envelope herewith delivered to you is to be held by you and delivered only to the undersigned when all are present either in person or by duly constituted attorney-in-fact.
“ (sgd) EDWARD A. SILBERSTEIN,
“ JAMES L. CARLTON,
“ WILLIAM MURDOCH.”
That this does not constitute an escrow is plain, since “ An escrow is a written instrument, which by its terms imports a legal obligation, deposited by the grantor, promisor, or obligor, or his agent with a stranger or third person, who is not a party to the instrument, to be kept by the depositary until the performance of a condition or the happening of a certain event and then to be
What took place speaks more of an unconsummated than of a conáummated transaction. It is unnecessary, however, to determine this since there are clearer reasons leading to a reversal of the judgment appealed from and a dismissal of the complaint. It is obvious that the intention could not have been to close completely the transaction at the time the documents were deposited, leaving open only an opportunity to Murdoch to investigate the representation and warranties as to the property, since at that time the plaintiff concededly was not in a position to convey the property. Said property was owned by some thirty-two individuals, from whom the plaintiff had powers of attorney to assign. These powers, however, permitted an assignment only on certain specified conditions, which were not in accordance with the conditions of the contracts between the various parties to the transaction. It further appears that at the time when the plaintiff demanded that the parties appear at the office of the Equitable Trust Company for the purpose of receiving the papers, he had not obtained the consents necessary to a transfer of title to Murdoch. Since the plaintiff was not at that time himself in a position to perform the agreement on his part, it is obvious that he was not in a position to demand performance on the part of Murdoch, and hence was not in a position to declare the latter in default.
As was said by Allen, J., in Nelson v. Plimpton Fire-Proof E. Co. (55 N. Y. 480): “ The contract between the parties to the action was mutual, and neither could recover against the other for a breach of its terms, or put the other in default, without a tender of performance, or at least proof of a readiness and willingness to perform.” Also, in Bigler v. Morgan (77 N. Y. 312) it was said by Rapallo, J.: “ However positively a vendee may have refused to perform his contract, and however insufficient the reason assigned for his refusal, he cannot be subjected to damages without showing that he would have received what he contracted for, had he performed.”
The words of Mr. Justice Scott, writing for this court in Booth v. Milliken (127 App. Div. 522; affd., 194 N. Y. 553), are peculiarly applicable to the facts in the case at bar. He said: “ Defendant’s refusal to go on with the purchase doubtless rendered it unnecessary for Doremus to make an actual tender, but it did not obviate the necessity to allege and prove his readiness to perform, or to allege and prove that by reason of some act of defendant he was unable to perform, which but for that act he would have been aole to do. He has not brought himself, in any sense, within the rule. It is
Moreover, it appears without contradiction, and was found as matters of fact by the trial court, that the following express warranties and representations made by the plaintiff to the defend-, ant Murdoch were untrue: First, that the Sledge Oil lease was for a specific term of ninety-nine years; second, that the rent under the said lease was a royalty of one-eighth of all oil produced on the property as, when and if produced, and was not subject to any further substantial burden; third, that the bills of sale executed at the time transferred and conveyed to Murdoch all the personal property which was on the premises when inspected by Murdoch, with the exception of two drilling rigs; fourth, that the plaintiff had full power and authority to execute an assignment of lease.
With reference to the warranty that the Sledge Oil lease was for a term of ninety-nine years, it appears instead that the term provided by the said lease is as follows: “It is agreed that this lease shall remain in force for a term of three years from this date, and as long thereafter as oil or gas, or either of them, is produced therefrom by the party of the second part, his successors or assigns.” This provision is far different from an absolute term for ninety-nine years, during which the lessee might prospect for oil and gas or abstain from so doing, and also suspend the production of gas and oil when it might be unprofitable to produce and market the same. Instead of a term of ninety-nine years, the plaintiff was tendered a lease for three years only, of which more than a year had already expired, with an indefinite period thereafter limited by the actual continued production of oil or gas. That the words “ and as long thereafter as oil or gas, or either of them, is produced,” are words of limitation and fix the term and duration of the lease, is well settled. In 27 Cyc. 722, it is said: “ A lease to operate on lands for natural gas and oil for a specified term of years, and for as much longer a period as oil or gas is produced or found in paying quantities, expires at the end of the stipulated term, unless within that time oil or gas is produced in paying quantities, and at the expiration of the fixed period, the tenancy becomes one at will, not from year to year, and may be ended at any time by either party, provided oil is not afterward discovered in paying quantities.” Also in Eaton v. Allegany Gas Co. (122 N. Y. 416), Chief Judge Follett said: “ Construing all of the provisions of the instrument together and keeping in mind the evident purpose of the parties, we think the term created by the lease was limited, to the time during which oil should be found in the quantities mentioned,
With reference to the warranty that the rent was a royalty of one-eighth of all oil produced, it appears that in addition the lessee was required to pay $100 a year in advance for the gas from each well where gas only is found, and also to furnish gas free of cost to heat and light one dwelling house on the premises. The lessee was also prohibited from drilling any well nearer than 200 feet to the house or barn on the premises and required to pay for damages caused by injury to growing crops on the land.
In so far as the warranty that the bills of sale transferred to Murdoch all the personal property is concerned, it appears that out of five drilling rigs which were on the property when inspected by Murdoch, one only was owned by the Sledge Oil .Development Company, so that there were conveyed to the defendant Murdoch by the assignment two rigs less than was represented. The trial court held that compensation might be given to Murdoch, represented by the pecuniary value of these rigs, which the court fixed at $10,000. The plaintiff, however, needed these rigs in order to operate the property leased, and hence it is apparent that the representation was a material one, a breach of which would warrant the plaintiff in rescinding the contract.
In so far as concerns the warranty that plaintiff had full power and authority to execute the assignment of lease, it appears that the plaintiff was .without authority to make such assignment in accordance with the terms of the agreement at the date of the alleged consummation of the sale, namely, September 30, 1920, but on the contrary, in many instances such authority was not obtained until as late as March, 1924, while the trial of the action was in progress.
It requires no argument to show the materiality of the aforesaid representations and that the breach thereof entitled the appellant to decline to complete the transaction. The respondent urges that there was a waiver of these objections by the sending by Murdoch of the following telegram to the plaintiff from Bowling Green, Ky., under date of October 24, 1920; “ My return here confirms observation regarding settled production Sledge lease which has not equalled an average of twenty-five barrels daily. Being so far below production represented and not being in formal possession of property am requesting instructions what do you want done.” By said telegram the appellant merely complained of the production being below representations, but said telegram did not purport to be a rejection of the proposition and cannot reasonably be construed as being a rejection upon a specific ground,
It thus appears that the only agreement between the parties to the sale of the aforesaid lease and personal property to which Murdoch was also a party, is the so-called warranty agreement heretofore referred to. By the aforesaid warranty agreement it is provided that the documents shall be canceled and destroyed and the money and notes returned to Murdoch “ if after reasonable time the said title to said oil lands and all personal property intended to be conveyed in accordance with said- documents cannot be and is not vested and transferred to the said William Murdoch within a reasonable time after the date hereof.” (Italics not in original.)
It, therefore, affirmatively appears that all the personal property was not and could not be transferred to Murdoch and that the plaintiff was not able within a reasonable .time to transfer the lease and that there was a breach of material representations and warranties. Under these circumstances Murdoch became entitled under the express provisions of the contract to the cancellation of the agreements and the surrender up of the .notes and money deposited by him.
There are various other valid objections to the granting of the relief afforded by the judgment appealed from, but since the plaintiff, for the reasons above stated, has failed to show a cause of action against the appellant, it is unnecessary to consider such additional objections, except to say that in the opinion of this court the finding that the defendant Carlton was acting as the intermediary of the appellant is not sustained by the evidence. On the contrary, it seems clear that there was a sale to Carlton and a separate sale by the latter to the appellant, with a profit of $200,000 to Carlton.
It follows that the judgment should be reversed, with costs, and the complaint dismissed, and judgment directed for the appellant on his counterclaim, with costs.
Clarke, P. J., Merrell and Martin, JJ., concur.
Judgment reversed, with costs,- complaint dismissed and judgment directed for the appellant on his counterclaim, with costs. Settle order on notice.