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Docket Number

No. 48/695.

Attorney(S)

W. Howard Demarest, of Newark, for complainant. Abner Kalisch and Harry Kalisch, botb of Newark, for defendants.

Judges

FOSTER, V. C.

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Smart Summary

Summary of Opinion — Porter v. Williams et al. (07-22-1921)

Factual and Procedural Background

This is a bill by Benjamin A. Porter against Violet A. Williams (formerly Mrs. Butterworth) and others seeking specific performance of a contract dated June 28, 1919, for the sale of real property in Bloomfield, Essex County. Title to the premises vested in Joseph Butterworth and his wife as tenants by the entirety in January 1913. In July 1917 Butterworth's interest was sold by the sheriff and purchased by Mrs. Butterworth, who stated she took title as trustee for her infant child. In June 1919, while a divorce action by Mrs. Butterworth against Butterworth was pending, Mrs. Butterworth individually and as trustee (without Butterworth joining) contracted to convey the premises to complainant, with possession to be given July 1, 1919, and the date for passing title April 1, 1920. The contract included a $960 liquidated damages clause. Payments were made by complainant (including $600 at execution and monthly payments aggregating to sums discussed in the opinion). Mrs. Butterworth obtained a final decree of divorce about August 3, 1920, married John Williams, and on October 8, 1920, conveyed the premises (individually and as trustee) with her husband to Le Roy Zubler and Augusta H. Zubler for $10,500, which included $960 to settle the liquidated damages mentioned in the contract. Complainant later obtained a conveyance from Joseph Butterworth and filed a supplemental bill and lis pendens. By consent the hearing was limited to the question of specific performance. The court entered a decree for the defendants.

Legal Issues Presented

Whether specific performance of the June 28, 1919 contract should be ordered by the court.
Whether the contract was an "alternative" contract because of its liquidated damages clause and, if so, what effect that had on the availability of specific performance.
Whether Mrs. Butterworth, as trustee, had authority to convey the infant's interest in the property and whether the infant's interests were adequately safeguarded.
Whether complainant was ever ready, willing, and able to perform the contract as required for specific performance—including whether his refusal to accept title absent Butterworth's joinder affected his claim.
Questions raised by counsel (procedural and dispositive defenses): effectiveness of the sheriff's sale; notice to subsequent purchasers (the Zublers); limitations and notice requirements under section 116 of the Conveyance Act; and the effect of the liquidated damages provision.

Arguments of the Parties

Complainant's Arguments

Complainant sought specific performance of the contract and later sought partition based in part on a conveyance he obtained from Joseph Butterworth.
Complainant contended that Mrs. Butterworth (as trustee) did not have a valid title to her husband's interest and asserted rights inconsistent with treating her ownership as complete.
Complainant asserted some monthly payments after execution of the contract were payments on account of the purchase price (not rent).
Complainant refused to accept title unless Butterworth joined in the conveyance and maintained that position when the time for passing title approached.

Defendants' Arguments and Positions

Mrs. Butterworth (later Mrs. Williams) acted individually and as trustee in executing the contract and later conveyed the premises with her husband to the Zublers for $10,500, which included $960 to settle the contract's liquidated damages clause.
Counsel for the defendants raised several defenses and questions: the effectiveness of the sheriff's sale of Butterworth's interest; Mrs. Butterworth's authority (as trustee) to convey the infant's interest; whether complainant's refusal to accept title absent Butterworth affected his remedy; notice to the Zublers of the contract; whether the action was barred by the period of limitation under section 116 of the Conveyance Act; and whether the notice required by that section was filed.
Defendants (owners since the October 8 conveyance) paid taxes and interest on mortgages while complainant remained in occupancy without paying rent.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
St. Mary's Church v. Stockton, 8 N. J. Eq. 520	The view (expressed by Chancellor Halsted) that the mere presence of a liquidated damages clause makes a contract an alternative one, giving the parties the option to perform or pay damages.	The court noted that later cases in the court have not adopted Chancellor Halsted's view as an absolute rule.
Crane v. Peer, 43 N. J. Eq. 553, 4 Atl. 72	One of the later cases cited for the principle that the terms of the contract, the subject-matter, and the circumstances determine whether a contract is alternative.	The court relied on the line of cases, including this one, to assess whether the June 28, 1919 contract was alternative under the circumstances.
Brown v. Norcross, 59 N. J. Eq. 427, 45 Atl. 605	Cited as part of the authority holding that the contractual terms and circumstances, not merely a liquidated damages clause, determine whether a contract is alternative.	Used as part of the authority supporting the court's inquiry into the character of the contract and its ultimate conclusion that the contract was alternative.
Avon Land Co. v. Thompson, 60 N. J. Eq. 207, 46 Atl. 946	Another case cited for the principle that the nature of the contract must be determined from its terms, subject-matter, and circumstances.	Included among the authorities the court considered in concluding the contract before it was alternative in character.
American Ice Co. v. Lynch, 74 N. J. Eq. 298, 70 Atl. 138	Cited with the other cases as establishing that the surrounding circumstances and contractual terms determine whether a contract is alternative despite a liquidated damages clause.	The court cited this case as supporting its view of how to evaluate the significance of the liquidated damages provision here.

Court's Reasoning and Analysis

The Vice-Chancellor limited the hearing by consent to the question of specific performance. He summarized the relevant facts: title history, the sheriff's sale, Mrs. Butterworth's purchase as trustee for her child, the divorce proceedings, the June 28, 1919 contract (possession and date for passing title), and the contract's $960 liquidated damages clause. The court described the payment history: $600 at execution, monthly payments aggregating to $960 by January 1920, and additional monthly payments through July 1920, which were disputed as to whether they were rent or payments on the purchase price.

The court observed multiple legal questions were raised but elected to dispose of the case without addressing all of them. Key analytical steps and conclusions were:

The court expressed doubt about Mrs. Butterworth's authority, as trustee, to obligate and convey the infant's interest in the property and noted the infant's interests did not appear to be adequately safeguarded by the contract.
The court considered the significance of the $960 liquidated damages clause and the timing of payments. It identified evidence indicating the clause was inserted because of uncertainty arising from the pending divorce and the delayed ability to convey title, and that the payments made by complainant would not equal the liquidated damages amount until about the time complainant refused to accept title absent Butterworth's joinder.
The court reviewed relevant precedents and applied the governing principle that whether a contract is alternative depends on the terms, subject-matter, and circumstances, not merely the presence of a liquidated damages clause. On the facts here, the court concluded the parties intended the contract to be alternative.
The court found complainant's conduct inconsistent in that he sought specific performance (treating Mrs. Williams as having complete title) and also sought partition (asserting Mrs. Williams did not hold full title). The court also found complainant had not materially changed his position in reliance on the contract: only small repairs and landscaping, and continued occupancy without paying rent while defendants paid taxes and mortgage interest.
Because the contract was alternative in character, the infant's rights were not affirmatively protected, and because complainant was not shown to have been ready and willing to perform the contract except on the extracontractual condition that Butterworth join in the conveyance, the court concluded specific performance was inappropriate.

Holding and Implications

Holding: Decree for defendants; specific performance denied and complainant left to his remedy at law.

Implications: The immediate effect is that complainant's request for specific performance is denied and he must pursue legal (monetary) remedies rather than equitable relief. The court's decision was based on the particular facts—the alternative character of the contract as evidenced by the liquidated damages clause and payment timing, the unresolved rights of the infant beneficiary, and complainant's lack of demonstrated readiness to perform except on an extraneous condition. The opinion does not announce or claim to establish a new broad precedent beyond applying existing principles about alternative contracts and the circumstances in which equitable relief for specific performance will be refused.

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PORTER v. WILLIAMS et al.

FOSTER, V. C.

Bill by Benjamin A. Porter against Violet A. Williams and others for specific performance. Decree for defendants.

W. Howard Demarest, of Newark, for complainant.

Abner Kalisch and Harry Kalisch, botb of Newark, for defendants.

FOSTER, V. C. The original bill in this cause sought the specific performance of a contract dated June 28, 1919, made between complainant and the defendant Violet A. Williams (who was then the wife of Joseph Butterworth), for the sale of property in Bloomfield, in Essex county. Because of changes in the title, a supplemental bill was filed for the specific performance of the contract, and also for a partition of the property.

On the hearing the contest was, by consent of the parties, limited to the question of specific performance.

The facts established are that in January, 1913, title to the premises in question was vested in Joseph Butterworth and his wife, as tenants by the entirety. In October, 1916, Butterworth abandoned his wife and 18 months old child. Butterworth's interest in the property was sold to satisfy a judgment, by the sheriff, to Mrs. Butterworth, as trustee, on July 15, 1917; and Mrs. Butterworth states she took title thereto as trustee for her child.

Some time in 1919 Mrs. Butterworth began proceedings in this court for a divorce on the ground of desertion; and while this suit was pending, in June, 1919, she individually, and as trustee entered into the contract in question (in which Butterworth did not join) by which she agreed to convey the premises to complainant on April 1, 1920. Possession was to be given on July 1, 1919, and by an addendum to the existing lease for the property between the parties, then made, the rent accruing under this lease was released in consideration of the contract, and the term of the occupancy was extended until November 1, 1920, under the terms of the contract. Complainant had been in possession under this lease from May. 1919.

The contract contains a provision for the payment of $960 as liquidated damages for failure to either party to perform any or all of its stipulations.

At the execution of the contract $600 was paid on account of the purchase price and it was agreed that complainant from August. 1919. to January, 1920, should make payment at the rate of $60 per month, or a total of $360. so that by the latter date Mrs. Butterworth would and did receive $960, the amount fixed as liquidated damages. These payments were made her and also additional payments of $60 per month from February to July, 1920, aggregating $360. She claims these additional monthly payments were made to her as rent, and complainant claims they were made on account of the purchase price.

About August 3, 1920, Mrs. Butterworth obtained her final decree of divorce, and shortly thereafter married her present husband, John Williams. On August 18, 1920, the contract was recorded. On September 20, 1920, the original bill in this cause was filed against Mr. and Mrs. Williams. On October 8, 1920, Mrs. Williams, individually and as trustee, and her present husband, conveyed the premises to the defendants Le Roy Zubler and Augusta H. Zubler, her brother and mother, for an actual consideration of $10,500. Included therein was $960 to settle the liquidated damages mentioned in the contract with complainant. Thereupon complainant, about October 22, 1920, obtained from Joseph Butterworth a conveyance of his undivided interest in the property; and, basing his claim upon this conveyance, on October 27, 1920, he filed his supplemental bill, adding the Zublers as parties, and asking for specific performance and partition, and on the same date filed notice of lis pendens.

At the hearing and on their briefs counsel have raised and discussed a number of interesting questions, including the effectiveness of the sheriff's sale of Butterworth's interest as a tenant by the entirety; the authority, or rather the absence of authority, in Mrs. Butterworth-Williams, as trustee, to convey to complainant the interest of her infant child in the property; the effect of complainant's refusal to accept title unless Butterworth joined in the conveyance; the question of notice of the contract to the defendants Zubler; because this action was not commenced within the period of limitation fixed by section 116 of the Conveyance Act (2 Comp. St. 1910, p. 1573); because the notice prescribed by that section was not duly filed; and, lastly, the effect of the provision of the contract relating to liquidated damages.

From my consideration of the established and disputed facts and the impression made upon me by the parties and their witnesses at the hearing, I have concluded to dispose of the controversy without particular consideration of all of the questions thus raised.

Admittedly Mrs. Butterworth-Williams bought her husband's interest in the property at sheriff's sale, as trustee. She states she constituted herself trustee for her daughter, now about six years old. It does not appear whether she used funds belonging to the infant with which to make this purchase; but it does affirmatively appear that without any authority, and apparently without due consideration for the infant's interest, or, as is now claimed, for a consideration wholly inadequate, she obligated herself, as trustee, to convey the infant's interests in this property. If she were such a trustee as she claims, she could not legally do what she attempted by this contract, andcomplainant was apparently aware of this fact; and under the proofs there is considerable force in the contention now made that the interests of the infant were not safeguarded therein and would be seriously affected by a decree for specific performance.

This latter contention is particularly pertinent, because it does not appear that the amount of liquidated damages fixed by the contract will not adequately compensate complainant for any loss he has or may suffer if he does not obtain title to the property.

While the later cases in this court have not adopted the view expressed by Chancellor Halsted in the case of St. Mary's Church v. Stockton, 8 N. J. Eq. 520, that the mere presence of the liquidated damages clause in the contract made the contract an alternative one, which the parties could at their option perform, or pay damages for its n performance. These cases do hold that the terms of the contract, the subject-matter, and the circumstances are to determine if the contract is or is not an alternative one. See Crane v. Peer, 43 N. J. Eq. 553, 4 Atl. 72; Brown v. Norcross, 59 N. J. Eq. 427, 45 Atl. 605; Avon Land Co. v. Thompson, 60 N. J. Eq. 207, 46 Atl. 946; American Ice Co. v. Lynch, 74 N. J. Eq. 298, 70 Atl. 138.

From the proofs I think it is apparent that the parties intended when the contract was executed that it should be an alternative one, because it was then known to complainant that Mrs. Butterworth had purchased as "trustee," her husband's interest in the property; that two months before, as owner, she had leased the property to him; that, because of her pending suit for divorce, the date for passing title was fixed for nearly a year after the date of the contract, in order that she might obtain her final decree; when this was delayed complainant in January, 1920, and on later occasions, demanded that she should have her husband join in the execution of the deed, and, when this was refused, offered to obtain her husband's signature to the deed if she would waive her claim for alimony; and, when this also was refused, he announced he would not accept title from her alone. Mrs. Butterworth accepted his statement as a fact and thereafter treated him as a tenant, and served notice upon him to quit the premises, and as a result of this notice they have had considerable litigation.

Complainant insists that Mrs. Butterworth, as trustee, has not a valid title to her husband's interest in the property, and claims to be the owner of this interest, and as such asks for the partition of the property. His position in his suit for specific performance is wholly inconsistent with his demand for partition. In one part of his case he insists Mrs. Williams has a complete and valid title to the property, which she in violation of her contract refuses to convey to him, and in the other branch of the case he insists she owns only all undivided interest in the property.

Since the execution of the contract complainant has in no material way changed his position with respect to the property. He has made but few and inconsequential repairs to it, and some slight additions to the shrubbery, and he has had continued occupancy of the property since July, 1920. without the payment of rent, while defendants have paid the taxes and the interest on the mortgages thereon.

The amount of $960 settled and agreed on as liquidated damages has special significance on the question of an alternative contract, in view of the fact that the payments made by complainant did not equal, and were not expected to equal, that sum until January, 1920, the time when complainant refused to accept the deed unless Butterworth joined in its execution. Under his lease complainant was paying $61 monthly. Under his contract his monthly payment was reduced to $00, and his term, which, under the lease, expired on May 1, 1920, was extended under the contract until November 1, 1920, although the date for passing title, under the contract, was April 1, 1920.

From all the evidence it is reasonable to infer that the provision for liquidated damages was inserted in the contract because of uncertainty over the outcome of Mrs. Butterworth's divorce proceedings, and over the date when she might obtain a final decree of divorce. The odd and unusual amount settled upon as liquidated damages, and the fact, which cannot be regarded as a mere coincidence, that the payments made by complainant would not and did not equal this sum until about the time he refused to accept title from her, justify the conclusion that the liquidated damages clause was made part of the contract with the view and expectation that, if Mrs. Butterworth could not perform the contract by giving complainant the title to the property he expected by April 1, 1920, the date fixed in the contract, and which proved to be five months before she obtained her final decree of divorce, then the parties had the privilege of setting then respective claims for damages and rent under the liquidated damages clause of the contract.

Because of this alternative character of the contract, and the undetermined rights of the infant in the property, and also because it does not affirmatively appear that complainant was ever ready and willing to perform the contract, or to take title to the property, except upon the condition, not part of the contract, that Mr. Butterworth should join in the conveyance, my conclusion is that on this branch of the case complainant should be left to his remedy at law, and a decree will be advised accordingly.

Porter v. Williams