Wappler v. Woodbury Co.

| NY | Jul 20, 1927

In 1918, Robert Buggeln, for whom plaintiff is a "dummy" or an agent, sold to William A. Woodbury the entire capital stock of the Woodbury Company. The chief value of the stock was dependent upon the ownership of trade-marks then in litigation. Another corporation, the Andrew Jergens Company, made claim to them as owner. Accordingly there were provisions in the contract whereby the terms of payment for the stock were proportioned to the menace of the suit. The total price was to be $6,000, of which $500 was paid in cash. The residue, $5,500, was not to be paid at all unless the Woodbury Company prevailed in its contest for the trade-marks. In the event of a final determination in its favor, $1,000 was to be paid within ninety days and the balance, $4,500, within fifteen months thereafter. There was, however, another menace in addition to the challenge of title to the trade-marks. A judgment for $15,000 had been entered against the company. Buggeln held this judgment for his own use in the name of his brother-in-law Clinton. To enforce it would wipe out the value of the shares. An agreement was, therefore, made whereby this judgment was assigned to one Hart, a "dummy" for Woodbury. If Woodbury paid the $5,500, the judgment was to be canceled. If Woodbury defaulted in payment, the stock and the judgment were to be given back to Buggeln or Buggeln's nominee.

The United States District Court decided the trademark litigation in favor of the Woodbury Company. Payment for the stock was not yet due, for there was an appeal from the decree, and payment was not to be made until final determination. Even so, the rendition of the decree was a signal, it seems, to Buggeln to try to regain his shares by one method or another. At that time William A. Woodbury had assigned the shares to C. Palmer Woodbury, who also received from Hart an assignment of the judgment. Buggeln brought a suit in the Supreme Court to rescind and cancel his sale of the shares upon the ground that the resale was a violation of a term of the agreement. The Supreme Court decided this suit against him. On the very day that the decision was announced he turned to new devices. His brother-in-law, Clinton, had already assigned the $15,000 judgment to Hart, Woodbury's nominee, who had assigned to C. Palmer Woodbury. Without a shadow of right, Buggeln, on the very day of the adverse decision, executed and filed another assignment of this same judgment, to a second "dummy," Wappler, the present plaintiff. Upon the basis of his pretended ownership of this judgment, Wappler brought this suit to enforce the judgment against the defendant corporation, to sequester its assets, and to wind it up by a receiver.

The suit was begun June 27, 1922. Not till October 23, 1922, did the Supreme Court of the United States dismiss the writ of certiorari in the trade-mark litigation. Ninety days thereafter, January 21, 1923, the first payment for the stock, $1,000, would be due under the contract. Fifteen months thereafter, April 21, 1924, would be the time for the payment of the balance. This action was tried in March, 1924, and the decision made in June, 1925. Pending the action, Wappler assigned his judgment to the Andrew Jergens Company, which, defeated by its rival in the trade-mark litigation, was attempting by a flank movement to regain the lost ground. The Supreme Court at Special Term gave judgment for the sequestration of the assets and the appointment of a receiver as prayed for in the complaint. It conceded in its opinion that no cause of action was in existence when the action was begun. The plaintiff at that time had no title to the judgment. The owner was C. Palmer Woodbury, who has not been joined as a defendant. No default had yet been made in the payment of the purchase money for the stock, for nothing was yet due. The court held, however, that default had come about through the failure to pay the installments accruing under the contract while the sequestration suit was pending. The effect of this default, according to the holding of the court, was automatically to revest the title to the judgment in Buggeln or his nominee. The principle was then invoked that equity will adapt its relief to the facts as they exist at the date of the decree. Under cover of that principle, applied at times by courts of equity to advance the ends of justice, an action, begun without shadow of right, in a transparent attempt to evade and avoid the obligation of a contract, has been carried to a triumphant judgment. Upon appeal to the Appellate Division, there was a unanimous affirmance.

We state without elaboration the reasons for a different holding.

1. The general rule is, even in courts of equity, that a plaintiff must have a cause of action for some relief at the commencement of his suit (Sherman v. Foster, 158 N.Y. 587" court="NY" date_filed="1899-04-18" href="https://app.midpage.ai/document/sherman-v--foster-3590609?utm_source=webapp" opinion_id="3590609">158 N.Y. 587,593; Bartlett v. N.Y., N.H. H.R.R. Co., 226 Mass. 467" court="Mass." date_filed="1917-05-03" href="https://app.midpage.ai/document/bartlett-v-new-york-new-haven--hartford-railroad-6433952?utm_source=webapp" opinion_id="6433952">226 Mass. 467,471). Such a right existing, the extent of the relief will be adapted to the situation at the time of the decree. We do not now decide that the rule may not be subject to exceptions in the interests of justice. Cases of genuine misconception as to the accrual of a right or those where the discrepancy is trivial or others where the hardship is special or unusual, must be dealt with when they arise. What is certain is that there will be no departure from the rule in order to work an unrighteous forfeiture or to cause justice to miscarry. The plaintiff was not a judgment creditor at the commencement of the suit. He took the assignment of the judgment without right while an earlier assignment was outstanding in the hands of Woodbury. He did this under the orders and as the representative of Buggeln to the end that Woodbury, the buyer of the stock, might be placed in the dilemma of making default under the contract or throwing good money after bad. Not in aid of such designs does equity revise and enlarge its malleable remedies.

2. The buyer of the shares did not forfeit his right to them, nor revest in the seller the title to the judgment, by failing to make payment while the present suit was pending.

Buggeln and Woodbury had agreed that the judgment was to be canceled when the purchase money for the shares was paid, and that nothing was to be done to enforce it in the interval. To secure fulfillment of that agreement, the judgment was assigned to the buyer's nominee. Buggeln, ignoring this assignment, made a second assignment to the plaintiff, who holds for Buggeln's use. He is thus before the court enforcing the very judgment which was to belong absolutely to the buyer of the shares upon payment of the price, and yet complaining that the price was not paid to him with punctual exactness at a time when he was repudiating his agreement as to the enforcement of the judgment. The shares were without value unless the judgment was surrendered. We think the buyer was at liberty to suspend performance on his part while the seller was enforcing the judgment in defiance of the bargain (2 Williston, Sales, sec. 467-e; Anderson v. Hayes Construction Co., 243 N.Y. 140" court="NY" date_filed="1926-07-09" href="https://app.midpage.ai/document/anderson-v-john-l-hayes-construction-co-3581733?utm_source=webapp" opinion_id="3581733">243 N.Y. 140,148). The omission to make punctual payment in such circumstances was not even a technical default. Even if it was, it was certainly not one to be used in a court of equity as the basis of a forfeiture (Noyes v. Anderson, 124 N.Y. 175" court="NY" date_filed="1891-01-14" href="https://app.midpage.ai/document/noyes-v--anderson-3627712?utm_source=webapp" opinion_id="3627712">124 N.Y. 175, 179, 180;Noyes v. Clark, 7 Paige Ch., 179" court="None" date_filed="1838-05-01" href="https://app.midpage.ai/document/noyes-v-clark-5548359?utm_source=webapp" opinion_id="5548359">7 Paige, 179; 2 Williston, Contracts, sec. 769).

3. The plaintiff's interest in the judgment, if he has any, is subject to that of Woodbury under an assignment prior in time. The earlier interest did not terminate automatically without reassignment or foreclosure. The holder of that assignment is a necessary party to the determination of the controversy.

The judgment of the Appellate Division and that of the Special Term should be reversed, and the complaint dismissed, with costs in all courts.

POUND, CRANE, ANDREWS, LEHMAN, KELLOGG and O'BRIEN, JJ., concur.

Judgment accordingly.