Rothholz v. Schwartz

Full title: ROTHHOLZ v. SCHWARTZ.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Feb 8, 1890

46 N.J. Eq. 477 (Ch. Div. 1890)

46 N.J. Eq. 477

Opinion

02-08-1890

ROTHHOLZ v. SCHWARTZ.

A. Stephany, for complainant. J. J. Crandall, for defendant.

PITNEY, V. C.

(Syllabus by the Court.)

Heard on bill, answer, and proofs.

A. Stephany, for complainant. J. J. Crandall, for defendant.

PITNEY, V. C. The bill is for the specific performance of a contract for the sale of chattels. It is by the vendor against thevendee. The subject matter is a stock of dry goods and store fixtures in a store at Egg Harbor City, Atlantic county, together with the good-will of the business, and the unexpired lease of the premises. The sale was so far consummated as that the price was fixed, and a portion of the purchase money paid, and the defendant, the purchaser, put in possession. In arranging for the balance of the purchase money, a dispute arose between the parties as to the precise nature of the security which the contract provided for. The contract was made on the 28th of October, 1889. Possession was delivered the next day. The bill was filed November 15th, and the answer, November 25th. Upon filing the bill, an order was made restraining the defendant from removing, incumbering, or selling any of the goods except by way of retail, and that he show cause why a receiver should not be appointed. On the day fixed for hearing that order, the parties agreed to bring the cause at once to final hearing; the complainant waiving his motion for a receiver, and the defendant submitting to the continuance of the restraining order. The price agreed upon for the stock of goods and fixtures was $4,750, of which $2,000, was to be paid in cash, or its equivalent, and the balance, in payments of about $400 each, at periods of from three to five months, until all was paid. The parties are agreed as to the details of these deferred payments. The dispute is as to the security which was to be given for their payment. Complainant asserts that for these deferred payments he was to have a chattel mortgage upon the goods sold, and also a bond with a warrant of attorney to confess judgment, payable one day after date, which securities he was to hold without recording the one or entering up judgment on the other, unless it became necessary for him so to do in order to protect himself; and the prayer of the bill is that the defendant be decreed to specifically perform his contract by executing and delivering these securities. The defendant denies that he agreed to give a bond and warrant of attorney to confess judgment, and alleges that the chattel mortgage was not to be recorded until 30 days after default should be made in the payment of one of the installments. By his answer he states that prior to the filing of the bill he was ready and willing to complete the contract in accordance with his understanding of it, and, in fact, formally tendered such performance before bill filed, which complainant declined to accept. As a further defense, he sets up that after such tender, and after bill filed, he discovered that the stock of goods was not worth $4,750, or more than $3,500; and he insists that it will be inequitable and unjust to compel him to perform so hard a bargain, and offers to rescind on such equitable terms as the court may impose, or to perform by giving a chattel mortgage for the unpaid balance found due upon a re-appraisement of the goods under direction of the court. At the hearing, the defendant's counsel took the further ground, not set up in the answer, that the bill could not be maintained for two reasons: First, because the complainant had adequate relief at law; and, secondly, because the terms of the contract were not shown to have been agreed upon by either party,—that the mind of the parties had not met,—and hence the court could not enforce it.

The consideration of the questions so raised compels a careful examination and consideration of the facts as shown in the testimony. Complainant had lived and kept a dry goods store at Egg Harbor City for about 15 years, and latterly had also been president of a national bank located there. For several months prior to the transactions in question he had also been engaged in business in Philadelphia, where he spent most of his time during business hours, leaving the store at Egg Harbor City in the care of his wife; their residence being over the store. Defendant had been engaged in the same or similar business in Cincinnati, and was possessed of $1,000 in cash, and a bond and mortgage for $1,000 on property in Atlantic City, and the remains of his Cincinnati stock of goods. He had a brother-in-law, one Powdermaker, who kept a dry goods store in Egg Harbor City of the same character as complainant's. Defendant was seeking an opportunity to re-engage in business, and, with that view, called on complainant at his house and store in Egg Harbor City on Sunday, October 20th, and perhaps once or twice before, and asked if his store and business was for sale, and at what price. Complainant replied that it was, and that his price was $5,000. Defendant made little or no examination of the stock at that time, other than such as could be made by looking about him as he stood in the store, and perhaps handling a few of the goods; but upon that examination, and complainant's statement of its amount and value, he offered $4,500, if they could agree upon the terms and mode of payment, and disclosed to complainant his pecuniary situation and ability, and his willingness to pay $2,000 down, and his desire for time in which to pay the balance. Complainant was willing to give liberal terms as to time, but required security, and inquired as to defendant's ability to give an indorser. Upon defendant's statement that he was unable to give an indorser the negotiations were dropped. Defendant was a stranger to the complainant. On the next Thursday, October 24th, the defendant called at complainant's place of business in Philadelphia, and negotiations were renewed upon the basis of $4,750, and upon the suggestion of complainant that perhaps he might be sufficiently secured by a chattel mortgage, or in some other mode which might be devised and approved by his counsel, Mr. Stephany, of Egg Harbor City. On that or the next evening both parties went to Egg Harbor City, and on Friday evening called on Mr. Stephany at his house there, his principaloffice being at Atlantic City. Up to this point there is no material difference in the statements of the parties; but as to what occurred at that interview at Mr. Stephany's, and those which followed, they do not agree. The complainant and Mr. Stephany agree in their statements, which are, in substance that complainant asked Mr. Stephany, in defendant's presence, whether he could be made safe by a chattel mortgage on the stock to secure deferred payments spread over a period of two years, and that Mr. Stephany replied that be could not, because the chattel mortgage would not cover after-acquired stock; and, being asked by complainant to suggest some method by which he could be made reasonably safe, Mr. Stephany suggested that, in addition to a chattel mortgage, the defendant should give a bond and warrant to confess judgment, payable one day after date. The conversation was carried on in German, which is the native language of all three; and Mr. Stephany swears that he fully explained to the defendant the nature and effect of the bond and warrant, and that he is satisfied that the defendant understood it. The defendant objected to a judgment bond on the ground that it would affect his credit; and it was then or subsequently suggested that the same objection might be made to a chattel mortgage, but that it was not necessary to make use of either at once, and perhaps not at all, if defendant was prosperous, and that complainant might hold the securities in his desk, to be used as occasion might require, and if it became necessary in order to protect himself. Such a mode of securing payment would, of course, result in defendant's putting himself in complainant's power; and it was suggested that the defendant might make inquiry, and ascertain whether complainant was the sort of man that it would be reasonably safe for the defendant to so put himself in the power of. The complainant declined to sell except upon the terms suggested by Mr. Stephany, and the defendant declined to purchase on those terms, and the parties separated.

Defendant, as to this Friday evening interview, denies that any mention was made of a bond and warrant of attorney to confess judgment, or, in fact, that it was ever mentioned until after he had taken possession. Complainant's statement of the events which followed is that on Sunday, the 28th, defendant called upon him, at his house and store, and renewed negotiations, and finally stated that he had inquired about complainant, and was satisfied that he was an honest man, and one whom he could trust; that he had concluded to comply with his terms, and made an appointment to meet him at Stephany's office early on Monday morning to complete the transaction. The parties met, accordingly, at Stephany's office; and both complainant and Mr. Stephany swear that defendant said he had inquired as to complainant, and was satisfied that he was an honest man, and could be trusted, and that he had concluded to execute the securities required by complainant under Stephany's advice, and they say that the bond and warrant was expressly mentioned as one of them. Here, again, defendant denies that any mention was made of that security. Some discussion then arose as to whether the stock of goods was actually worth $4,750, and Mr. Stephany suggested an inventory. Complainant assented; and it was agreed that it should be taken, and the completion of the transaction postponed until such inventory was taken. With that understanding the defendant paid $100 to bind the bargain, which was left in Mr. Stephany's hands. The parties spent that day and evening in taking the inventory, without completing it; and the next morning, Tuesday, the 29th of October, defendant expressed himself as satisfied, and proposed to close up the affair on the basis of $4,750, and for that purpose both again called on Mr. Stephany. The $2,000 payment was made up of cash, $985, and a bond and mortgage, held upon real estate in Atlantic City, for $1,015, which complainant agreed to accept as cash. It was left with Mr. Stephany, with directions to prepare an assignment to be executed by defendant. Mr. Stephany also took a memorandum of the amount and dates of the deferred payments, and undertook to have the chattel mortgage, bond, and warrant, and assignment of the real-estate mortgage, ready for execution at 5 o'clock that evening, on his return from Atlantic City; and defendant agreed to call then at that hour, and execute them. Complainant at once put the defendant in possession, and himself went to his business in Philadelphia, and did not return to Egg Harbor City till the next Saturday evening. Mr. Stephany prepared the three papers, and had them ready for execution at the hour and place appointed; but defendant did not call for them then, and, so far as Mr. Stephany knows, not until near the end of the week. Defendant says he called each evening without finding Mr. Stephany. When they did meet, defendant stated that he desired to show the bond and warrant and chattel mortgage to his wife before executing them. Mr. Stephany handed all three papers to him, but he said he did not care for the assignment, but only for the chattel mortgage and bond and warrant, and took two of the papers, leaving the third on the desk. The next morning, Mr. Stephany discovered that defendant had left the chattel mortgage, and taken in its place the assignment, with the bond and warrant, and, on complainant's calling on him, on Saturday evening, November 2d, on his return from Philadelphia, handed it to complainant, who at once forwarded it to defendant. Shortly afterwards, defendant notified complainant that he declined to sign the bond and warrant, and would only execute a chattel mortgage on condition that complainant would give a written stipulation not to put it on record until thirty days after default in the payment of one of the deferred payments.In the mean time the complainant had procured the owner of the house and store to accept the defendant as his tenant; and, by arrangement between them, he (complainant) was to continue to occupy the dwelling part of the building for a few months, and until defendant should desire it for his own use. Policies of insurance were also transferred to the defendant, and the defendant continued in the occupation of the store and possession of the goods, and to sell goods out of the stock, over the counter, from day to day. Negotiations between the parties for a settlement of the dispute between them continued until about the time of the filing of the bill; complainant insisting upon the defendant executing the required securities, and the defendant declining so to do.

As bearing upon the question of fact whether or not defendant understood, at the interviews of Friday evening, October 25th, and Monday and Tuesday mornings, October 28th and 29th, that a part of the complainant's terms was that he should execute a bond and warrant of attorney to confess judgment, we have the statement, sworn to by Mr. Ballbach, to the effect that Mr. Schwartz stated to him that if Mr. Stephany had prepared the papers in time, so that he could have executed them at once, he would have done so, and there would have been no trouble, intimating that he was prevented from doing so by the advice of his wife, and those whom he had consulted, and not pretending to Mr. Ballbach that he did not understand the agreement to be that he was to execute such papers.

Upon a consideration of all the evidence, and the manner of the witnesses in giving their testimony, I am entirely satisfied that the contract was made as alleged, and sworn to by the complainant and Mr. Stephany, and that the defendant agreed to execute a bond and warrant of attorney, and to deliver it with the chattel mortgage, without any written stipulation as to their use, trusting to the complainant's honor not to make use of it unless it became, in his judgment, necessary to do so in order to protect himself. But, if I were in doubt upon this question, there is another consideration which it seems to me ought to have weight in this connection. As soon as the defendant procured from Mr. Stephany the bond and warrant of attorney, he became aware that complainant expected that he would execute that as one of the securities for the deferred payments. He immediately took legal advice upon the subject. Mr. Baake states that he was consulted by defendant on or about the 1st of November, which was Friday. Defendant had interviews with complainant on Sunday, November 3d, which made complainant's position entirely clear. It seems to me that the duty of the defendant was then very plain. If there was a misunderstanding as to the terms of the contract, the extent of that misunderstanding was then apparent to him and his counsel; and, if he was unwilling to carry out the sale on complainant's terms, he should have promptly tendered a redelivery of the possession, with an account of the goods sold in the mean time, and offered to rescind the contract and restore the complainant. Instead of that, he demanded the final execution of the contract upon his own understanding of it, and retained the possession and continued to sell goods, and never, until after bill filed, offered to restore the possession. Of course, every day that he retained possession and sold goods rendered it more difficult to restore the complainant to his former position, and it seems to me that the defendant is well-nigh estopped in equity from setting up that he did not understand the contract to be as complainant understood it. In other words, he has, so to speak, waived the defense that there was no meeting of minds, or, at least, that the terms of the contract are not proven with sufficient certainty, and has chosen to stand or fall by the weight of the evidence as to what the contract was. Besides, if defendant should succeed in satisfying the court that he did not consciously agree to give the judgment bond, and should not, therefore, be decreed to give it, he is still in the situation of not proving that the complainant agreed to part with his goods on credit with any less security, and the plain result is that he has purchased and taken possession of the goods, at a stipulation price, without any agreement whatever as to credit, and so the purchase money is, by implication, payable in cash, with the result that, since the complainant parted with the possession upon a misunderstanding as to the terms of the credit, he has now a clear right to come into this court and ask that his vendor's lien be restored, and the goods sold to pay the balance due upon the purchase money. So that, in any view that may be taken, the defense of want of agreement as to the terms of the credit cannot, under the circumstances, avail the defendant.

With regard to the defense of fraud and concealment in the sale, leading to a gross overestimate of the goods, and rendering the bargain a hard one, the facts are as follows: Either on Sunday, October 27th, at the interview at complainant's house, or early on Monday morning, at Mr. Stephany's, when the terms of the bargain were finally agreed upon, defendant expressed a desire to be better assured of the value of the stock; and it was proposed that an inventory should be taken. To this, complainant assented; and it was agreed that it should be taken on the basis of cost price, less 25 per cent. off, and that, whether the inventory so taken amounted to more or less than $4,750, the defendant should pay for just the amount so found. It will be observed that the arrangement did not provide for the actual appraisement on a basis of real value, but for an ascertainment of the amount which the goods would come to upon the basis of their cost, less 25 per cent. Upon that basis the work commenced earlyon Monday morning. Complainant disclosed to defendant his cost-mark cipher, and called in a Mr. Ballbach, a merchant of Egg Harbor City, to assist in making the inventory. The complainant took down each article,— the bulk of the goods was clothing,—examined and read the cost-mark in defendant's presence, and Mr. Ballbach wrote it on the inventory. Defendant had ample opportunity to see each article, and the cost-mark upon it. This work was continued, with intermission for meals only, until nearly or quite 11 o'clock at night. Mr. Ballbach was relieved in the evening by Mr. Dietz, the cashier of the bank, who did the work that Ballbach had been doing in the day-time. Late in the evening the work of the day and evening was footed up, and found to amount to over $3,900; and a large quantity of goods still remained to be inventoried. The next morning the complainant was ready to proceed and finish the job, but defendant expressed himself as satisfied that if the inventory was completed it would amount to much more than $4,750, and that he was quite satisfied to complete the purchase at that price, if complainant was. To this complainant assented, and, without completing the inventory, the two proceeded at once, early on Tuesday morning, to Mr. Stephany's office, as before stated. During the taking of the inventory, many articles were found to be shelf-worn, faded, stained, and otherwise damaged to a greater or less extent; and objections were from time to time made by the defendant to such articles. Both complainant and his witnesses Ballbach and Dietz swear, and defendant does not deny, that, as often as defendant made such objections, complainant laid the article aside, and it was not put on the inventory, and was not counted in dollars and cents. At the end of the day's work a large pile of rejected goods had accumulated, and were allowed by complainant, and thrown in, so to speak, to the defendant in the sale. At the hearing a large quantity of damaged goods were produced and exhibited to the court, to show the quality of the goods sold. But both complainant and Ballbach recognized them as a portion of the very goods so rejected from the inventory, and defendant did not attempt to dispute their testimony to that effect.

Between the filing of the bill and the answer, to-wit, on the 23d of November, the defendant procured his brother-in-law, Powdermaker, and a Mr. Rosenbaum, of Atlantic City, an experienced auctioneer and general dealer, to make an appraisement of the stock of goods; and they commenced about half past 4 o'clock p. M., and finished between 10 and 11 at night, with an intermission for supper. The result footed up at a little over $3,300. Messrs. Rosenbaum and Powdermaker were sworn; and from their evidence, and an examination of the inventory and appraisement itself, I am satisfied that it is of little value. In the first place, it was manifestly made in great haste, and without sufficient time to examine, measure, and count the goods. In the second place, much of it was made on a mere estimate of quantity, as about so many yards of cloth, and the like. Many instances of this occur in the inventory, and I do not think a single instance of actual measurement is given. Then, in the third place, articles of different values were bunched together, and an average price put on them, as "106 men's suits, as follows,— corkscrews, cassimeres, and satinettes, odd sizes, at $6.—, about twenty-five different styles,—$530.00." All the clothing was appraised in that manner, and it comprises a large part of the stock. This inventory and appraisement was produced at the hearing, and, with the original partial inventory of October 28th, was submitted to the examination of complainant, and he, during a recess of several days of the court, made a careful abstract of the two, by which a comparison could be made, and he found, and showed by his evidence, that the quantity of goods in the inventory and appraisement made by Rosenbaum on November 23d was much less than was inventoried of the same goods by complainant and defendant on October 28th. From this it is inferable, either that Rosenbaum, in estimating, as he did, number and quantity, was greatly mistaken, or that all the goods were not shown to him. The difference in the prices put on the goods in the two inventories is not so great as in the quantities. In some instances, Rosenbaum's prices are as large as the complainant's. It further appears that the inventory of October 28th was left in defendant's possession, and was produced by him at the hearing, and that complainant also left in the store all his old bills of goods previously purchased,—he so swore, and defendant did not deny it,—so that defendant had an opportunity to test the accuracy of the inventory of October 28th; and it is fair to presume that, if any false prices of cost-price had been made, they would have been discovered, and pointed out. Not a particle of evidence was offered tending to prove that complainant was guilty of any misrepresentation as to the quantity or quality of his stock of goods, or that he concealed any facts from defendant, or prevented him from making such examination of the stock as he desired. The parties were strangers, and were dealing at arms-length. The defendant had had more or less experience, and had a brother-in-law at hand to consult with. It seems to me that the negotiations were carried on in a perfectly fair manner, and without trick or artifice on complainant's part; and, in considering the question of value, it must be borne in mind that the defendant was desirous to buy, and did buy, an established business, with its good-will, and that he made the purchase largely on time, with deferred payments averaging more than a year, without interest, and that the security he was to give was not the best, and that complainant was obliged to take a considerable risk. Defendant could not, under suchcircumstances, expect to buy at the same prices that he would for cash in hand.

Upon a careful examination of the whole case, I do not think this defense of fraud on the part of the complainant, and of hard bargain, is at all sustained. On the contrary, I think the bargain was a fair one, in all its parts. Defendant claims that his just expectations as to the amount of trade and daily sales have not been realized, but he offers no proof that complainant's representations as to the amount of his trade were untrue; and defendant's appearance and manner were not such as to lead one to expect that he would prove to be a very successful salesman. Mention is made in the answer of the fact that a small portion of the stock of goods was not in the store, but in an upper room of the dwelling, and that possession of those goods was not delivered to the defendant, nor of the dwelling itself. But both of these matters were fully explained at the hearing. The retention of possession of the dwelling was by arrangement with the defendant; and the goods which were in one of the rooms of the dwelling were summer goods, stored away there for the winter, and were particularly mentioned to the defendant, and he assented to their remaining there. And this was reasonable, as the complainant's possession of the dwelling was only temporary. It was also alleged that during the taking of the inventory complainant's wife took some of the goods out of the stock. These were shown to be of very small value, and to have been taken by the express assent of the defendant, and were not put upon the inventory.

The jurisdiction of this court to decree specific performance of contracts for sale of chattels is as well settled as it is for those of the sale of realty, and is based upon the same grounds, namely, the inability of the courts of law to give such remedy; and so the question whether the court will, in a particular case, exercise its jurisdiction, is to be determined upon the same considerations in both cases, the most important being the question whether there is a full, complete, and adequate remedy at law. And the reason why the jurisdiction is seldom exercised over sales of chattels is that the remedy at law, in such cases, is usually adequate and satisfactory. Cutting v. Dana, 25 N. J. Eq. 265, and cases there cited. Pom. Spec. Perf. §§ 9-20. Wat. Spec. Perf. §§ 16, 17. The cases cited by Chancellor RUNYON in Cutting v. Dana, and Prof. Pomeroy and Judge Waterman, are mostly, if not all, cases of vendee against vendor; and the language used in the text of the treatises is mainly applicable to such cases. But the principle upon which they go includes the case of vendor against vendee. Wat. Spec. Perf. § 15; Pom. Spec. Perf. § 6. In our state, McKnight v. Bobbins, 5 N. J. Eq. 229, and, on appeal, Id. 642, was a case of specific performance of a contract for sale of chattels by vendor against vendee, and has the support of the judgment of Chief Justice GREEN. The object of that suit was the same as that of the one now in hand, viz., to recover the price of the chattels in specie. The only question then, is, had the complainant in this case such a complete and adequate remedy at law as that this court should decline to exercise its jurisdiction, and give him expressly what he bargained for? It is proper here to remark that, when the defendant intends to ask the court not to exercise its jurisdiction for the reason that the remedy at law is sufficiently adequate, he should take the objection in his answer. Ordinarily, unless so taken, it will be deemed to have been waived. The objection to the exercise of the admitted jurisdiction of the court on the ground that there is an adequate remedy at law differs from an objection for want of jurisdiction, which may be taken at any time. Here the jurisdiction is indisputable, the only question being whether the court ought to exercise it. But, looking at the case as if the objection had been taken in time, it is manifest that the usual remedy at law, viz., a suit to recover the balance of the unpaid purchase money, or its equivalent,—damages for not executing the securities stipulated for,—would not be an adequate remedy, for the reason that the defendant has no property outside of the goods sold; and during the pendency of that suit the complainant would be destitute of any control over, or lien upon, the stock of goods, and defendant might, before judgment, move them beyond the jurisdiction of the court.

It was suggested, rather than argued, by counsel that complainant might bring replevin, and recover possession of the goods themselves. Conceding that, by voluntarily putting the defendant in possession, and trusting to his promise to execute the securities at a future hour, complainant did not lose the right to reclaim, (which I think more than doubtful,) still it seems to me that it is more than probable that a reclamation of possession by means of a replevin would be treated at law as a rescission of the contract, and must be preceded by a repayment, or tender of return, of the part payment, and an abandonment of all benefit from the contract. Among the numerous cases on this subject, most of which are cited in Corbin's edition of Benjamin on Sales, I have not found any in which, after a part payment, and delivery of possession, the vendor was held entitled to reclaim possession, except on the basis of rescission, and except, of course, those cases where, by the express terms of the sale, title was to remain in the vendor, as in Cole v. Berry, 42 N. J. Law, 308. The ground of reclamation, in such cases, is either that the sale was conditional upon complete payment, or that the goods were obtained by fraud. Here the vendor put the defendant in possession in the morning and relied upon his promise to execute the securities in the evening, thus placing himself in the position of being liable to have it alleged against him that he had waived his vendor's lien by putting defendant in possession before payment, andthus bringing himself within the language of DEPUE, J., in Cole v. Berry, Id. 310: "Payment of the contract price is one of the most usual conditions on which the transfer of title depends. It is generally a condition to be performed simultaneously with delivery. If such be the contract, a waiver of the condition may be presumed from an unconditional delivery, without exacting payment; and, in the absence of explanatory proof, the property will vest in the purchaser." See Benj. Sales, (Corbin's Ed.) §§ 335. 346, 352, 1125, 1126; Neil v. Cheves, 1 Bailey, 537. Further, with regard to the supposed remedy by way of regaining possession of the goods, it is to be remarked that, conceding that complainant could have accomplished that at law, without a rescission of the contract, and could have retained the part payment, and held the goods as security for the balance, it is plain that the only mode of completing that remedy would have been by selling the goods, in default of the execution by defendant of the required security to pay the balance due; and it is equally plain that, by so doing, complainant would have taken the law into his own hands, and done just what he has asked this court to do. Now it seems to me that it does not lie in defendant's mouth to complain that complainant has brought him into this court, to administer this right under its direction and protection. There should be a decree that defendant specifically perform, by executing and delivering the specified securities.