Summary
In Mutual Life Ins. Co. v. Stephens (214 N.Y. 488, 493) the court said: "If the agreement were wholly executory the answer to that question would not be doubtful [citing cases].
Summary of this case from Pink v. Title Guarantee & Trust Co.Opinion
Argued February 23, 1915
Decided April 13, 1915
Eugene D. Boyer and Charles Strauss for appellants. Murray Downs and Frederick L. Allen for respondent.
We shall assume for the purposes of this appeal that the statute (Insurance Law, section 20) does not authorize the plaintiff to acquire and hold the said real property. It now has an estate for years in the property and the question arises whether a court of equity will aid it to acquire the fee. If the agreement were wholly executory the answer to that question would not be doubtful. ( Chamberlain v. Chamberlain, 43 N.Y. 424; Matter of McGraw, 111 N.Y. 66; Case v. Kelly, 133 U.S. 21.) But it has been so far executed that it is impossible to restore the parties to their original situation. Improvements have been made on the faith of the agreement and presumably the plaintiff will lose the value of its investment in whole or in part unless the agreement is carried out. The defendants have recognized the plaintiff as their tenant and have accepted performance of the contract from it. They should not now be permitted to plead its ultra vires act to avoid performing their part of the agreement, certainly not without first paying or offering to pay the value of the improvements. ( Appleton v. Citizens' Central National Bank, 190 N.Y. 417.)
The record does not disclose under what circumstances or for what purpose the plaintiff acquired the lease. We assume that it exceeded its corporate powers. But the act was not malum in se, nor does the statute expressly prohibit the acquisition of real property by insurance corporations for any purpose. On the contrary, it authorizes such corporations to purchase, hold and convey real property, but only for certain enumerated purposes. The acquisition of the lease by the plaintiff, assuming that it was not acquired for one of the enumerated purposes, was unlawful only in the sense that it was ultra vires. As the Insurance Law stood when the plaintiff acquired the lease, it could hold such real property indefinitely "as shall have been acquired for the accommodation of its business." (Laws of 1892, chapter 690, section 20.) But as the act was amended by chapter 326 of the Laws of 1906 it is required to sell and dispose of such property within five years after acquiring title unless it shall be necessary for its accommodation in the convenient transaction of its business, or unless it shall procure a certificate from the superintendent of insurance extending the time during which it may hold the same. If the property is not necessary for the plaintiff's accommodation in the convenient transaction of its business, it will be for the superintendent of insurance to see that the statute is complied with precisely as would be the case if, instead of acquiring a lease, it had taken a mortgage which it had to foreclose. The option to purchase must be exercised now, if at all. Neither public policy nor good morals require that the plaintiff shall be burdened with a lease without having the privilege to exercise the right thereby given to acquire the fee, and it is of no concern to the defendants who exercises that right. It is not for them to enrich themselves because the plaintiff may have exceeded its corporate powers, but it is solely for the state to challenge the plaintiff's ultra vires act. ( Bath Gas Light Co. v. Claffy, 151 N.Y. 24; Washington Life Ins. Co. v. Clason, 162 N.Y. 305; Appleton v. Citizens' Central National Bank, supra; National Bank v. Matthews, 98 U.S. 621; Seymour v. Slide Spur Gold Mines, 153 U.S. 523.)
However, the plaintiff has not yet determined whether to exercise its option to purchase, and the suit is really one to compel the specific performance of a merely incidental provision of the contract for the appraisal of the property, which will be useless if the plaintiff decides not to purchase. True, an appraisal may aid the plaintiff to decide the question, and the parties stipulated that the lessee was to have six months after the appraisal to make its decision; but, aside from other objections, if the provision for an appraisal is of such substance that a court of equity will entertain jurisdiction of a suit merely to compel its enforcement, it is so substantial a part of the contract as that it must be enforced in the manner agreed upon, namely, by the appointment of an appraiser by each party, with power to choose a third if they disagree; and yet courts will not compel parties to name appraisers who may nullify the decree by refusing to serve. ( Greason v. Keteltas, 17 N.Y. 491.) There have been numerous cases in which the courts have decreed specific performance of agreements in leases to renew at a rental value to be fixed by appraisers chosen by the parties or to convey the premises at its value to be fixed in like manner. But in such cases the provision for an appraisal has been regarded as incidental and subsidiary to the substantive part of the agreement; and so the party refusing to name an appraisal has not been heard to complain of not having the appraisal made in the way agreed upon; but, treating the method as a matter of form rather than substance, the courts have by a reference or otherwise determined the value for the purpose of enforcing the contract according to its real spirit and purpose. (See Kelso v. Kelly, 1 Daly, 419; Van Beuren v. Wotherspoon, 12 App. Div. 421; Weir v. Barker, 104 id. 112; Grosvenor v. Flint, 20 R.I. 21; Kaufmann v. Liggett, 209 Penn. St. 87, Castle Creek Water Co. v. City of Aspen, 146 Fed. Rep. 8.) In such cases the appraisal has been made as a mere incident to the main relief granted, i.e., the enforcement of the agreement to sell or renew.
There is a further objection to the maintenance of this suit. The general rule is now thoroughly established in this state that a contract must be mutual in its remedy to warrant a decree for its specific performance. ( Wadick v. Mace, 191 N.Y. 1; Levin v. Dietz, 194 N.Y. 376.) We do not say that there may not be exceptions to that rule, but a very cogent reason should exist to justify an exception. Unlike the contracts involved in those cases, the lease in suit was not a unilateral contract, and it has been so far performed that the parties cannot be restored to their original positions. The defendants, however, could not have the remedy of specific performance either to compel an appraisal or to compel the plaintiff after an appraisal to exercise its option to purchase. The only reason that occurs to me for requiring an appraisal in advance of the determination by the plaintiff to purchase is that one is necessary to enable the plaintiff to make its decision. But if that be so, the provision for an appraisal must be such an essential part of the contract that it can be enforced if at all only in the manner agreed upon. If it is a mere matter of form, the plaintiff can decide as well before as after an appraisal whether it desires to purchase the property.
However, it is not essential that the mutuality of remedy shall exist at the inception of the contract. Owing to the defendants' refusal to name an appraiser, the plaintiff's time to exercise its option has not expired. It may still elect to purchase and thus supply the missing quality of mutuality of remedy, which will entitle it to a specific performance. (See Smith v. Rector, etc., St. P. Church, 107 N.Y. 610; Van Beuren v. Wotherspoon, 164 N.Y. 368, 378; Wurster v. Armfield, 175 N.Y. 256; Woodruff v. Woodruff, 44 N.J. Eq. 349.) It cannot resort to equity for the specific performance of an agreement and remain free to refuse performance on its part.
The orders of the Appellate Division and Special Term should be reversed, with costs in Appellate Division and in this court, and the motion denied, with ten dollars costs, and both questions certified should be answered in the negative.
HISCOCK, CHASE, COLLIN, CARDOZO and SEABURY, JJ., concur; WILLARD BARTLETT, Ch. J., absent.
Orders reversed, etc.