Opinion
12-09-1901
FRED v. FRED et al.
John Whitehead, for complainant. Samuel Kalisch, for defendants.
Suit for specific performance by Sarah R. Fred against Abraham Fred and others. Conditional decree for complainant.
John Whitehead, for complainant.
Samuel Kalisch, for defendants.
EMERY, V. C. The substantial object of the amended bill, which is filed by the wife as a judgment creditor, is to compel the specific performance of an agreement made with her by her husband, as a judgment debtor, for the compromise of the judgment debt, by the delivery of notes for a less amount than the debt, secured by the indorsement of a third person. Complainant, who is the wife of the defendant Abraham Fred, recovered a judgment against her husband in a court of North Dakota, on December 7, 1896, for $5,000 for alimony and support of their child and for her costs and disbursements in the suit, together with the sum of $500 as attorney's fees as part of the taxed costs. On or about June 13, 1898, an agreement for the compromise and settlement of this judgment was made at Newark, where the husband then resided. The agreement for compromise was verbal, and the statements of the bill and answer disagree as to some of the terms of the agreement. They agree, however, that in carrying out the compromise three notes of her husband, aggregating $1,000, indorsed by the defendant Lewis, were to be delivered to the defendant Rev. Joseph Leucht, and that he was to deliver them to complainant upon the presentation of a written consent, signed by the defendants Jacob L. Newman and Leonard Kalisch. These two defendants were the respective attorneys of the wife and husband. A receipt for the notes to be so delivered was signed by Mr. Leucht, but by no other person; nor did this receipt purport to contain any statement of the agreement made between the complainant and the parties to the notes as to their consideration or the conditions upon which the written consent to delivery was to be given by the attorneys for the parties. The three notes were dated on June 13, 1898, one for $250, payable three months after date; one for $250, payable four months after date; and one for $500, payable fourteen months after date, with interest.
The amended bill alleges that complainant agreed to accept $1,000 in full payment and satisfaction of the sum of $5,000 ordered to be paid to her by the decree, to be secured by three notes, and that the notes were to be deposited with Mr. Leucht until Mr. Kalisch, for the defendant Fred, could ascertain from Dakota the proper method of satisfying the decree for $5,000, and when he learned this the notes should be delivered up to complainant. The bill then alleges that Mr. Kalisch has never advised complainant what was necessary to secure a cancellation of the decree. Complainant tenders herself ready to execute all documents or writings necessary under the laws of North Dakota to satisfy the decree for $5,000. The defendants answer jointly, and as to the terms of compromise and the conditions upon which the notes were delivered to Mr. Leucht defendant Fred says that he made an agreement with complainant to pay her $1,000 in full payment and satisfaction of the decree, the complainant agreeing to satisfy the decree of record if he would agree to pay her the $1,000 by the three notes, except that the first note of $250 was to be paid whether the decree was satisfied or not, but that the $750 remaining was not to be paid until the decree was first satisfied and canceled of record; that Fred's attorney, Mr. Leonard Kalisch, upon receiving a copy of the decree which complainant was to furnish, was to advise as to the method of obtaining cancellation of the decree, and that in the meantime the notes were to be deposited with defendant Leucht, not to be delivered to complainant until the copy of the decree was first produced, to ascertain complainant's right to cancel, and not until complainant caused the decree to be legally satisfied and canceled of record. The execution of the notes is then, by Fred's answer, stated to have been on the distinct understanding that, with the exception of the first note, they were not to be delivered to complainant until the decree was satisfied and canceled of record. The terms of a deposit in escrow may be in writing or in parol, or partly in writing and partly in parol; and the rule that a contract made in writing inter partes must be deemed to contain the entire agreement, does not apply. Stanton v. Miller (1874) 58 N. Y. 192, 203. Upon the evidence in this case (taking the admissions of the answer as evidence against defendants) I conclude that the terms upon which the notes in question were to be delivered to complainant by the depositary, Leucht, were that the decree in the Dakota court was to be satisfied and canceled of record before the delivery of the notes. The receipt signed by Leucht, the depositary, by which he declared that he was to deliver the notes to complainant upon the written consent of Kalisch and Newman, was not intended to express the entire contract between the parties as to the terms and conditions upon which complainant was entitled to the notes, but was intended to relieve the depositary from the responsibility of deciding whether the terms and conditions had been performed. So far as he was concerned, the decision upon this point was to be the joint decision of the two attorneys. These attorneys were both bound, upon the conditions being performed, to give the written consent. The agreement for satisfaction of the judgment by the payment of a smaller sum than the amount due, for which smaller sum the debtor was to give notes with the security of a third person, was a contract made on a valid consideration, and when made was binding both upon the judgment creditor and debtor. Had the agreement for settlement been executed by the actual delivery of the notes to the complainant herself, it would have been an accord executed, and a bar to an action upon the foreign judgment, even if the same had not been canceled. As to debts other than those evidenced by judgments, this effect of an accord executed is undoubted. Day v. Gardner (Van Fleet, V. C, 1886) 42 N. J. Eq. 199, 202, 7 Atl. 305. And according to the great weight of authority, especially of the later cases, accord and satisfaction is a good defense to an action on a judgment 2 Black, Judgm. par. 976, and cases cited; Bofinger v. Tuyes, 120 U. S. 198, 205, 7 Sup. Ct 529, 30 L. Ed. 649; Witherby v. Mann, 11 Johns. *518. The decision in Riley v. Riley (1843) 20 N. J. Law, 114, where a plea of this kind was stricken out, is referred to as establishing a different rule in this state; but, as it seems to me, it does not bear such construction. The only point there involved was the regularity of the plea of accord and satisfaction, and at that time payment was the only special plea authorized by statute to an action on a judgment. "Obligations," Gen. St p. 2336, § 4. Under similar statutes in other states authorizing pleas of payment, satisfaction of the judgment by accord or payment otherwise than in money may be shown under a plea of payment Howe v. Mackay, (1827) 5 Pick. 44, 46.
I conclude that upon authority and upon principle, if the notes in question had been actually delivered to the complainant herself, and received by her in satisfaction of the judgment, the judgment would have been barred. The question then arises as to the effect of the delivery in escrow, and whether such delivery is, or can become, a satisfaction of the judgment. The general rules applicable to such deposits are well settled. Upon the deposit in escrow a contract between the parties as to the delivery of the notes by the depositary is created, which neither party can alone rescind (11 Am. & Eng. Enc. Law [2d Ed.] 344), and the depositary, as the agent of both parties, is bound to deliver on the performance of the conditions (Id. 345). The delivery of the instrument by the depositary in such case takes effectas made from the time of the original deposit, and relates back to that time. Bank v. Evans (1835) 15 N. J. Law, 155, 28 Am. Dec. 400, approved in Black v. Shreve (Err. & App., 1800) 13 N. J. Eq. 455, 459, 11 Am. & Eng. Enc. Law (2d Ed.) 346. The deposit in escrow in this case was one which specially gave, and was intended to give, each party vested rights in reference to the settlement, of which they could not be deprived solely by the act or at the will of the other. The object of the whole agreement between the parties was the satisfaction of the judgment The notes receivable in satisfaction were actually executed, ready for delivery on the satisfaction; and the final execution of the agreement for settlement was taken out of the control of both parties, and finally committed to the depositary, under directions of the counsel of the parties. The deposit in escrow was, as it seems to me, a delivery in trust for both parties to carry out the settlement, and neither party could, after this deposit, withdraw or cancel the agreement without the consent of the other. Complainant, on satisfying the judgment, had the right to the notes, and defendant had the right to require the judgment to be canceled. It is a case where, as it seems to me, specific performance of the agreement to compromise would be directed on the application of either party. Actions at law are maintainable for the breach of contracts for compromise of claims made upon a valid consideration. Crowther v. Farrer, 15 Adol. & El. (N. S.) 677; Schneider v. Lang (1882) 29 Minn. 254, 13 N. Vv. 33, 43 Am. Rep. 202, citing Billings v. Vanderbeck, 23 Barb. 546; Scott v. Frink, 53 Barb. 533. And, the contract being binding, a court of equity could, in a proper case, compel specific performance of the contract to compromise or cancel a judgment or other claim, and this remedy is mutual. Phillips v. Berger, 2 Barb. 608, affirmed on appeal (1850) 8 Barb. 527; Deen v. Milne (1889) 113 N. Y. 303, 310, 20 N. E. 801; Pom. Spec. Perf. Cont. (2d Ed.) par. 16, and 11 Am. & Eng. Enc. Law (2d Ed.) 345. The wife could not, in this case, sue the husband at law, and her only remedy against him, either on the original debt or on the agreement for compromise, is in a court of equity. If the agreement for compromise is still a binding agreement, and if the complainant is entitled to the delivery of the notes to her upon performance of the conditions of the deposit, it would seem to be entirely clear that her only adequate remedy on the contract is the specific performance of the contract in equity by a decree for the delivery of the notes. The jurisdiction in equity to decree the transfer of notes of third persons to which complainant is entitled is clear, and it is the only adequate remedy. Bindseil v. Smith (Err. & App., Nov., 1900) 47 Atl. 456. The written consent of the attorneys to the delivery by Leucht must be given if the conditions upon which the notes were deposited is fulfilled, and their failure or refusal to give the consent when complainant is entitled to it by fulfilling the conditions of the deposit cannot be allowed to prevent the delivery.
Assuming, then, that the contract for settlement is one which can be specifically enforced, and that upon complying on her part with the conditions or terms to be performed by her the complainant is entitled to a decree for the delivery of the notes, the next question is whether the complainant has complied or can comply with the conditions as to the satisfaction of the decree. The decree contained not only a decree for $5,000 alimony, but $500 attorney's fees; and under the laws of North Dakota the attorney had a lien on the decree for this amount, and the decree could not be satisfied without his consent. Neither at the filing of the original bill (in February, 1899), nor of the amended bill (in March, 1900), had this consent been obtained. On or before May, 1900, complainant settled with her attorney in Dakota, and procured an assignment or release of his interest in the decree; but this was not certainly known to the defendants at the time of their answer, nor until shortly before the hearing. Complainant, at the hearing, offered to satisfy the decree. Unless, by the express terms of the original deposit, or by necessary implication, the time of the cancellation was made of the essence of the contract, I am of the opinion that the offer at the hearing is sufficient The case in this respect is similar to those in which a vendor has agreed to sell lands with clear title, and is not able to do so at the time of filing the bill, but is able to remedy the defect before decree. In such cases the rule is that specific performance can be decreed if title can be made at the decree. Pom. Spec. Perf. Cont. 5221. But as the complainant, at the filing of the bill, could not convey as agreed, he must pay all defendants' costs up to the time of clearing the title. 2 Daniell, Ch. Prac. *1408, 2 Seton, Decrees, 1303, and cases cited. The question of greatest difficulty in reference to compliance with the conditions is whether the settlement was to be effected before the maturity of the notes. Ordinarily, time is not an essential element on the question of specific performance, but it may be essential either by express agreement of the parties, or, in some instances, by implication arising from the nature of the transaction itself. And even where time is not essential, a delay during which a change in the situation has occurred to the prejudice of the party resisting specific performance may be sufficient ground for refusing it. The defendants Kalisch and Newman say in their evidence that the arrangement was to be carried out by the 1st of January following the agreement, but from the fact that subsequent to this date Mr. Kalisch corresponded with the complainant's attorney in Nebraska in reference to the cancellationof the decree I conclude that, although this date may have been mentioned as the time within which the satisfaction could be obtained, it was not, by any agreement at the time of the settlement, fixed as the time within which the settlement must be carried out in order to be binding. The conduct of the parties subsequent to the agreement prevents this inference. On September 13, 1898, the first note for $250 became due, and on or about August 24, 1898, this was delivered to complainant's agent by the written direction of both attorneys, and has been paid. On October 13, 1898, the second note for $250 came due, and on October 13, 1898, Messrs. Newman and Kalisch wrote to Mr. Leucht a letter, inclosing a new note for $250, payable on demand, stating that the note coming due was to be returned to them, and further stating, "We have to do this because the matter is not adjusted yet, and therefore we cannot deliver to the parties the notes." The note sent in exchange was, like the old note, signed by defendant Fred, as maker, to the order of defendant Lewis, and by him indorsed payable to the order of the complainant. The payment by defendant of the first note for $250, and the deposit of the new note, in which no time of payment was mentioned, are strong indications that the substantial matter in the minds of the parties was the cancellation of the decree, and not its cancellation before any of the notes originally given came due. Time not being of the essence of the contract by the agreement itself, the defendant Fred or Lewis had it in their power to notify complainant to complete the contract within a reasonable time, and thus make the time essential; but no such notice was given. The last note, due August 14, 1899, was protested, pending the suit, by direction of the court, and the indorsees liability fixed; and the defendant Lewis, the indorser, does not make any claim in his answer that by reason of the delay in procuring the satisfaction of the judgment the situation as between him and Fred has been changed. It is claimed at the hearing in Fred's behalf that his situation has been changed, but, inasmuch as he would be liable, on the failure of the compromise, to a decree in this suit for the entire amount of the decree under the prayer for alternative relief, he cannot be considered as suffering loss if the enforcement of the contract for compromise be decreed. As to the indorser Lewis, whose sole liability is on the notes, the case is different, and if he had claimed in his answer, and shown by satisfactory evidence, that, as between him and defendant Fred, his situation had been so changed by the delay that it would be inequitable to enforce the contract as against him, performance ought to be refused. But he was not examined as a witness, nor was the defendant Fred examined, as to the arrangement between Lewis and himself in reference to the indorsements of the notes. Any conclusion, therefore, that Lewis, as the indorser, has been or will be prejudiced by the delay, must rest solely on the fact of his being an indorser of the notes, from which fact it must be held that it necessarily resulted that the limit of time fixed by the parties for completion of the agreement was the maturity of the notes. It is admitted by the defendants that the first note was to be paid even if the decree was not then satisfied; and when the note payable on demand was substituted for the second note, and given to the depositary in escrow, it could not have been intended that this note should be protested at once. The terms of the letter inclosing the demand note and stating that the notes could not yet be delivered negative this inference. I do not think, therefore, that the indorsement of the notes alone is sufficient to warrant the conclusion that the cancellation of the decree was to be made before maturity of the notes. Non constat, that Fred, upon his indorsing, did not in some manner secure Lewis against liability upon his indorsement, or that this security has been in any wise affected. The burden was upon Lewis to show that the delay in the settlement has injuriously affected him, and, failing to do so, the mere delay, either beyond the time of maturity of the notes or until the suit, cannot be considered sufficient reason to refuse performance of the contract.
I will advise a decree that upon the satisfaction of the decree the notes be delivered to complainant. The form of the decree will be settled upon notice.