Opinion
No. 37/394.
04-19-1915
MATTHEWS v. EMDIN et al.
Henry T. Stetson, of Orange, for complainant. Thomas P. McKenna, of New York City, for defendants.
Suit by Francis E. Matthews against Lionel Emdin and another. Decree for complainant advised.
Henry T. Stetson, of Orange, for complainant. Thomas P. McKenna, of New York City, for defendants.
BACKES, V. C. The mortgage under foreclosure in this case was given by the defendants, Peale and Emdin, to the Continental Investment Company, on' November 15, 1910, to secure their bond of $27,000, payment of which was to be made in installments of $500 each, payable on the 1st days of February, May, August, and November in each year, with interest, and upon the principal being reduced to $19,000 on November 1, 1914, the payment of the balance was to be extended for a term of five years, payable in equal semiannual payments during said period, with interest. The mortgage contained a proviso that, if default should be made in the payment of any of the installments of principal or interest, and the same should remain unpaid for a period of 30 days, the principal sum, with interest, should become immediately due at the option of the mortgagee. Defaults were made in May, August, and November, 1913, in the payment of both installments of principal and interest, and thereupon this suit was brought by the complainant, to whom the mortgage had been previously assigned. The amount due for principal is $22,500, with interest from May 23, 1913, unless the defense of part payment set up is well founded. The defendants claim a credit of $4,000, and contend that, if it is allowed, it will save the forfeiture of the mortgage and reduce the principal debt to a sum of less than $19,000. The defense arises out of these circumstances:
The Continental Investment Company owned the mortgaged premises, which consist of a block of ten lots at Deal, and on September 25, 1909, entered into a contract with the defendants, Peale and Emdin, to sell them the laud for $33,000, $2,000 of which was paid down, $2,000 on December 15th then next, $10,000 in 20 installments of $500 each, on the 1st days of February, May, August, and November in each year, and the balance of $19,000 on November 1, 1914, when the deed was to be delivered. By agreement between the parties the deed was delivered on November 15, 1910, and a bond and the mortgage now being enforced were given for the amount of the then unpaid purchase price. Before this transaction took place the Continental Investment Company agreed to purchase of the defendant Peale some of his stockholdings in the Americana Company, the terms of which are embodied in a letter dated March 11, 1910, written by the president of the company to the defendant Peale, as follows:
"We beg to acknowledge receipt of certificate No. 500 for 400 shares of the preferred stock of the Americana Company and certificate No. 500 for 100 shares of the common stock of the Americana Company. Our understanding is that credit shall be given to you as a payment on account of contract between R. S. Peale and Dora E. Emdin and the Continental Investment Co., dated September 25th, 1909, on the basis of four thousand dollars ($4,000), being the price at which this stock is taken by the Continental Investment Co., such credit to be made, however, on November 1st, 1914, and provided that all the terms and conditions of said contract are fully performed by Mrs. Emdin and you on said date and no forfeiture has previously taken place. In the meantime the dividends on the abovementioned preferred stock are to be received by the Continental Investment Company and applied to the payment under said contract of interest on four thousand dollars of the principal account unpaid."
The certificates which were made out in the name of the Continental Investment Company were subsequently exchanged for other certificates in the name of the president of the company, who held them for the company's use. The Americana Company was later absorbed by a company known as the Scientific American Compiling Department; the business of the former being merged into that of the latter through exchange of capital stock. The defendant Peale was an officer and heavy stockholder in both companies, and upon his solicitation and request the Continental Investment Company joined in the exchange. After the mortgage was assigned to the complainant, the certificates were transferred to one MacDonald, a clerk in the office of the complainant, for his use, and were brought into court and tendered to the defendants, who refuse to accept them. While the stock was thus held, all dividends were applied by the defendants towards the payment of installments of principal and interest on the mortgage.
Upon this state of facts, the defendants contend that, notwithstanding their defaults, they are entitled to be credited with the $4,000, the purchase price of the Americana stock, and that this should be applied primarily to the payment of overdue installments of principal and interest on the mortgage, so as to prevent a default, because, as they urge, the contract for the purchase of the lands was merged in the deed and bond and mortgage, and was thereby fully performed, or its performance waived, and that it followed that the conditions of the executory contract of sale of the stock to the Continental Investment Company were fulfilled, the contract executed, and the purchase price due. To these propositions I cannot assent. It could never, in any sense, have been within the contemplation of the parties that the purchase price of the stock sale was to be applied to the payment of the installments of the purchase price of the land. The express terms of the contract forbid such an understanding. Nor was there a merger of the contract for the sale of the land into the deed and mortgage so as to operate as a performance, or a waiver of performance, of the agreement for the sale of the stock. The defendants surely never so regarded it; for, when the deed and mortgage were made, the mortgage was given for the full amount of the purchase price then unpaid, and thereafter, for more than two years, the defendants, with regularity, paid the installments on the mortgage, without an intimation that the price of the stock deal should be then taken into consideration. The acceptance by the defendants of the dividends on the stock during this period also refutes their present claim in this respect. The contract for the sale of the stock was to be absolute only upon condition that the defendants perform the agreement for the sale of the land, and the title to the stock was not to pass, nor was the purchase price to be paid, until and unless the defendants performed the condition. Kerr v. Henderson, 02 N. J. Law, 724, 42 Atl. 1073. The substitution of the defendants' bond for their promise under the contract for the sale of land did not alter their obligation to their vendor in respect to the payment of the installments of principal and interest to November 1, 1914. The legal effect of it was merely to reduce a simple debt to one of more solemnity in form. The debt itself has not been paid, and hence the defendants have not performed the condition necessary to effectuate the sale. The execution of the mortgage to secure the bond gave to the vendor in legal form only that which he already possessed in equity, and argues nothing in favor of the defense.
The defendants further insist that the complainant is estopped from setting up that the contract for the sale of the capital stock is not now complete, because of the manner in which the complainant and his assignor, the Continental Investment Company, dealt with the stock while it was In their possession. There is no evidence of dealings which at any time changed the ownership. It was always held by the complainant or the company, under the terms of the contract, awaiting its performance by the defendants. Whenever it was held in the name of others than these two it was only for their convenience. The inability of the complainant to return the Americana stock is due entirely to the conduct of the defendant Peale, who, while beneficial owner, procured it to be exchanged for the stock now held by the complainant. Of this the defendants cannot be permitted to complain.
I will advise a decree for the complainant, with costs.