Palisade Gardens, Incorporated, A Corp. v. Grosch

• Decision Date: 20 May 1936
• Citation: Palisade Gardens, Inc. v. Grosch, 120 N.J.Eq. 294, 185 A. 27 (N.J. Ch. 1936)
• Court: New Jersey Court of Chancery
• Parties: PALISADE GARDENS, INCORPORATED, a corporation, complainant, v. GRACE V. GROSCH, defendant

185 A. 27

PALISADE GARDENS, Inc.,

v. GROSCH.

Court of Chancery of New Jersey.

May 20, 1936.

Suit by the Palisade Gardens, Inc., against Grace V. Grosch.

Decree for complainant in accordance with opinion.

Wall, Haight, Carey & Hartpence, of Jersey City, for complainant.

Lichtenstein, Schwartz & Friedenberg, of Hoboken, for defendant.

EGAN, Vice Chancellor.

On September 3, 1929, Francis X. Connors entered into a contract with the complainant to purchase lands and premises described in the bill. The purchase price was $2,400 payable as follows: $480 on the execution of the contract of purchase; the balance in monthly installments of $48 and interest on unpaid balances; the final installment to be made on or before February 1, 1933. The premises in question were included in a blanket mortgage from which the complainant vendor covenanted to have the premises released. The deed of conveyance was to be a full covenant and warranty deed, free and clear of all encumbrances, excepting restrictions expressed in the contract. The contract further provided that Connors was to pay any and all taxes and assessments due against the premises after the date of the contract within 30 days from the due date, and all assessments for public improvements, wholly or partly completed, at the date of the contract not then a lien upon the premises. The deed was to be delivered within 30 days after the receipt of the full purchase price.

Connors paid the monthly installments up to and including February 1, 1933. The last payment prior to the date last mentioned was made January 10, 1933. On January 18, 1933, Emanuel Weitz, trustee in bankruptcy of Agnes K. Murphy Mulligan, initiated a suit in the United States District Court for the District of New Jersey against the complainant herein and others, through which he sought to obtain a decree which would vest the title in the premises in question, with other real estate, in him as trustee in bankruptcy of Mrs. Mulligan. A lis pendens stating the object of the suit was filed January 18, 1933, in the office of the clerk of the county of Bergen. Connors' attorneys received from the said Agnes K. Mulligan a letter dated October 21, 1933, which reads as follows: "I will fix sixty days from the date, Saturday, October 21st, 1933, which will be December 20th, 1933, at 10 A. M. here, for closing; when it will be necessary for Francis X. Connors to be present to cancel both his contract and that of Palisade Gardens, Inc., on receipt of a Warrantee Deed which will be subject to all taxes and assessments since 1929." In response to this letter Connors appeared at the complainant's office at 10 a. m. on December 20, 1933. At that time the complainant's representative tendered to him a deed to said premises in which, among other things, there was a clause that the conveyance was made subject to all taxes and assessments since 1929. Because of the pendency of the suit in the United States District Court and the filing of the lis pendens giving notice thereof, Connors refused to accept the deed. He contended that the title was not marketable. He then demanded a return of the moneys paid on account of the purchase price. The complainant refused to make any return.

Subsequently, on February 13, 1934, Connors assigned his interest in the contract to the defendant herein, and she, as assignee, instituted suit in the New Jersey Supreme Court against the complainant to recover the moneys paid it by Connors. The action was tried in the Hudson circuit, and, on May 6, 1935, judgment was entered by the court's direction for $3,255.77 damages, and $73.31 costs, against the complainant herein (the defendant in the law action).

The complainant now seeks to restrain the enforcement of the judgment.

Prior to December 20, 1933, the time finally fixed for the delivery of the deed, the complainant had procured, and recorded, a release of the premises from the lien of the mortgage.

During the course of the trial of the law action, this complainant endeavored to introduce testimony to show that Agnes K. Murphy Mulligan never at any time had any title or interest in or to the premises. The court would not receive that evidence, declaring it was not a legal defence to the action. This complainant further endeavored to have the recovery of the plaintiff in that action limited to the sum of $48.77, being the amount paid by Connors after the filing of the lis pendens. The court, in denying that motion, stated that the limitation of the amount could be allowed only in the chancery court, saying: "* * * This court is not a Court of Chancery. It is a Court of Law and I am not privileged to administer equity."

The contention of the complainant is that Connors was an innocent purchaser, in good faith, of the premises, and was without notice, knowledge, or information of any alleged interest of the bankrupt Agnes K. Murphy Mulligan.

Payments on account of the purchase price of the premises, with the exception of the last payment of $4877, were made by Connors before the lis pendens was filed in the Weitz suit in the United States District Court.

On July 5, 1935, an order was entered in the United States District Court decreeing that Weitz had failed to establish any right, title, or interest in or to the premises, and the lis pendens was discharged of record.

Connors had not been made a party to the Weitz action in the United States District Court.

The complainant, inter alia, contends: "1. That by the contract of purchase, Connors acquired an equitable title in fee to the premises in question which antedated and, therefore, was superior to, any rights which Weitz, as Trustee in Bankruptcy of Mrs. Mulligan, would have acquired, had he prevailed in his suit in the United States District Court.

"2. That Connors, having by valid contract purchased the premises in question more than 3 years prior to the bankruptcy of Mrs. Mulligan, and nearly three and a half years before Weitz, her Trustee, brought his suit, he was not a purchaser pendente lite; and had Weitz been successful in his suit, the rights thus acquired by him would have been subject to the equitable estate vested in Connors by the contract of sale and by the payment of all but $48 of the principal of the contract.

"3. Connors was an innocent purchaser for full value without notice of any alleged outstanding interest of Mrs. Mulligan, and as such he had a good equitable title to said premises, which was superior, both in law and in equity, to any rights which Weitz, as Trustee, would have acquired even if he had prevailed in his action in the United States District Court.

"4. Had Weitz prevailed in his suit in the United States District Court, the decree in his favor would not have bound Connors, who was not a party to that suit.

"5. Had Connors accepted the deed tendered to him December 20, 1933, any suit brought by Weitz, Trustee, or anyone claiming under him, would necessarily have been brought in equity to set aside the deed to Connors. In any such suit Connors' equitable title would have been a complete defence.

"6. That defences interposed by complainant in said action at law were overruled and held to be equitable in nature and not available in a court of law.

"7. That it is unjust, unconscionable, inequitable and oppressive that complainant should be compelled to repay to Connors, or his assignee, the amount of said judgment, when the deed tendered to Connors would have conveyed to him a perfect title in equity against Weitz, Trustee, and anyone claiming under him, which title equity would always support and defend.

"8. That it is unjust, unconscionable, inequitable and oppressive to permit the enforcement of the judgment at law against it for the entire purchase price of the premises, when Connors, in violation of his contract, has defaulted in the payment of taxes and assessments amounting to substantially more than $4,000, and which are now a lien on said premises.

"9. Neither Connors, nor his assignee, has ever tendered a return of the contract, and neither in equity can justly be permitted to enforce said judgment."

Under the contract of purchase Connors unquestionably became an equitable owner of the fee, while the complainant vendor held the legal title as trustee for the benefit of the purchaser. Justice Depue, in Haughwout and Pomeroy v. Murphy, 22 N.J.Eq. 531, at page 546, said: "In equity, upon an agreement for the sale of lands, the contract is regarded, for most purposes, as if specifically executed. The purchaser becomes the equitable owner of the lands, and the vendor of the purchase money. After the contract, the vendor is the trustee of the legal estate for the vendee. Crawford v. Bertholf, Saxt. ch. [(1 N.J. Eq.) 458] 460; Hoagland v. Latourette, 1 H.W.Green [2 N.J.Eq.] 254; Huffman v. Hummer, 2 C.E.Green [(17 N.J.Eq.) 263] 264; King v. Ruckman, 6 C.E.Green [21 N.J.Eq.] 599. Before the contract is executed by conveyance, the lands are devisable by the vendee, and descendible to his heirs as real estate; and the personal representatives of the vendor are entitled to the purchase money. 1 Story's Eq., § 789; 2 Ibid. § 1213. If the vendor should again sell the estate of which, by' reason of the first contract, he is only seized in trust, he will be considered as selling it for the benefit of the person for whom, by the first contract, he became trustee, and therefore liable to account. 2 Spence's Eq.Jur. 310. Or the second purchaser, if he have notice at the time of the purchase of the previous contract, will be compelled to convey the property to the first purchaser. Hoagland v. Latourette, 1 H.W.Green [2 N.J.Eq.] 254; Downing v. Risley, 2 McCart. [(15 N.J.Eq.) 93] 94. A purchaser from a trustee, with notice of the trust, stands in the place of his vendor, and is as much a trustee as he was."

Martin v. State Insurance Company, 44 N.J.Law, 485, 486, 43 Am.Rep. 397; Grunauer v. Westchester Fire Insurance Co., 72 N.J.Law,...