Campbell v. Northwest Eckington Improvement Co.

Contracts; Accounting; References; Objections and Exceptions. 1. Northwest Eelcington Improv. Co. v. Campbell, 28 App. D. C. 483, referred to. 2. Where a contract between parties engaged in the exploitation and improvement of land superseded a former contract and provided that one of the parties, a builder and real-estate speculator, was to have credit for advances made by him under the abandoned contract, which he was unable to carry out, it was held that in a final accounting between the parties he was not entitled to credit for money advanced for organizing a company to take over the land under the first contract, where such expenditure did not enhance the value of the property or benefit the other parties in any way. 3. Where every exception filed by one of the parties to an equity suit to a report of the auditor restating an account could have been made to the first report and disposed of at the first hearing, the failure of such party then to act constitutes a waiver of his rights in the premises. 4. Where a builder and real-estate speculator under contracts with the owner of real estate was to receive a one-third interest in the land, for services performed in its improvement and sale, and he only partially performed his obligation, a decree in a suit in equity against him by the owner was affirmed which declared that (1) an absolute deed to him of a one-third interest in all of the land was intended only to secure him in his share of the profits when he should perform his agreement to build houses and make sales; (2) that as to the land upon which ten houses were built he was entitled to an absolute one-third interest; (3) that the contracts between the parties should be canceled; and (4) that the builder should reconvey to the other party the unimproved portion of the land, subject to any amount due him on a final settlement being paid or secured, and to his being indemnified against loss by reason of his assumption of any encumbrances thereon. 5. The evidence held to warrant a decree canceling certain agreements between the parties relating to building operations, and requiring defendant to reconvey to complainants an undivided one-third interest in certain lands which had previously been conveyed to him by complainants;

Hearing on an appeal by the defendant from a decree of the Supreme Court of the District of Columbia, sitting as an equity court, in a suit for the cancelation of a contract and to require defendant to reconvey to the plaintiffs an undivided interest in certain real estate and for an accounting. The Court in the opinion stated the facts as follows: This is an appeal from a decree of the supreme court of the District of Columbia upon a bill (1) to cancel agreements between the parties relating to building operations, (2) to require defendant, Charles M. Campbell, appellant here, to re-convey an undivided one-third interest in real estate described in the hill and which had previously been conveyed to.the defendant by the complainants, (3) for a general accounting, and (4) for general relief. Inasmuch as the case has already been before this court (Northwest Eckington Improv. Co. v. Campbell, 28 App. D. C. 483), and no new facts have since been developed, we will refer to our prior opinion for a detailed statement of the facts giving here a mere outline thereof. The complainant the Northwest Eckington Improvement Company was incorporated for the purpose of buying, developing, and selling real estate. Its stock was owned by T. Cushing Daniel and Samuel C. Redman. The company acquired from said Daniel lot 35 in the subdivision of a tract of land called Metropolis View in the District of Columbia, comprising about 10 acres. There was then an encumbrance of $32,000 upon the land. Owing to financial embarrassment Daniel and Redman were unable to exploit the land, and, being apprehensive of the foreclosure of the mortgage- thereon, entered into an agreement with the defendant Campbell, who was a builder and real-estate speculator, on March 13th, 1902, by which agreement Campbell was to organize or be instrumental in organizing a company for tbe purchase of the land of the improvement company, and if successful Campbell was to have a one-third interest in the property; if in part successful he was to have a one-third interest in the land actually sold to the new company. Campbell did not succeed in carrying out this contract, and on October 23 d, 1902, a new contract was entered into with him in which it was recited, inter alia, that: “3. The said Daniel, Redman, and the Northwest Eckington Improvement Company have decided to improve and market said property, as fast as may be possible, by building houses thereon. “4. To this end they desire to utilize the skill of said Campbell as a builder and his assistance generally. “5. It is agreed by said Daniel, Redman, and the Northwest Eckington Improvement Company to employ said Campbell as a skilful builder in the erection of said, houses, he to take charge of said work, with such assistance as the other parties to this contract may be able to furnish, and pursue such work industriously and with all the ability and skill he can bring to the work.” It was also provided that “account is to be taken of all moneys and interest he (Campbell) has already advanced under contracts in relation to said property already entered into between the parties hereto. And any sums advanced or to be advanced by any of said parties for the same purpose under said agreements is likewise to be accounted for.” Paragraph 7 recites that five houses are to be erected immediately upon said property, to be followed by others “as soon as such a course is warranted by the results and approved by the judgment of the parties to this agreement, said Campbell to industriously push said improvements with his best skill and ability, as provided in paragraph 5 herein, without any further compensation for his services than are provided for herein.” Paragraph 8, which has been the source of much trouble, is as follows: “In return for said undertaking on said Campbell’s part he is to become possessed of an undivided one-third interest in said property.” Five houses were begun in the fall of 1902, the land taken for the houses being conveyed to Redman, Daniel, and Campbell. A building loan was secured, part of which was paid to relieve the land from the original mortgage. Late in March, 1903, the same proceeding was followed and five other houses constructed. As stated by Mr. Chief Justice Shepard in the prior opinion of this court: “It is apparent that the scheme of developing the property by building sanitary dwellings, or small apartment houses as they might be called, was suggested by the expected railway development near to the Eckington lands, in contemplation of certain acts, and another bill pending in Congress, which finally resulted in the acts for the building of the new Union Station, and subsequent changes in the location of railway freight stations, tracks, etc. Respecting these improvements two acts of Congress relating thereto were approved February 12, 1901. The new bill improving thereon and providing for the Union Station, pending in 1902, became a law on February 28, 1903.” In May, 1902, while Campbell was operating under the first contract of March 13th, 1902, he issued a prospectus calling attention to these railroad improvements and saying: “This railroad expenditure, which has been estimated at $20,000,000, will bring a large number of families'into this region, people with steady efployment and good wages, who will want exactly this class of homes. * * * It is believed by the officers that not less than 6 per cent will be earned from the date when the first forty houses are finished, and not less than 5 per cent from the date of subscriptions.” The situation as regards railroad improvements, when the contract of October 23d, 1902, was executed, did not differ materially from that existing at the date of the issuance of this prospectus. On January 16th, 1903, Campbell induced the Eckington Improvement Company, without the payment of any further consideration, to convey to him an undivided one-third interest in all of the land of the company. Soon thereafter a change took place in the relations of the parties which finally culminated in the filing of complainants’ bill on February 8th, 1904. This court, for reasons stated in its opinion, found that said deed of January 16th, 1903, was not absolute, but conditional, and dependent upon the performance of the agreement in connection with which it was made. The case was thereupon remanded, the court saying: “The decree, in so far as this conveyance is concerned, is interlocutory in its nature, and for the guidance of the auditor in stating the account between the parties, and, instead of virtually establishing it as an absolute deed, should have declared it to be merely a conditional one, dependent upon the performance of the agreement in accordance with which it was made. The question whether it shall be canceled is a final one that can only be properly determined upon the coming in of the auditor’s report with the account that has been ordered to be taken by him.” Thereupon action was had in the court below in accordance with the mandate from this court. Upon the filing of the auditor’s report the complainant noted certain exceptions. Thereupon, according to the record, the cause came to hearing before Mr. Justice Wright upon these exceptions, and, after “having been argued by counsel for the respective parties,” the court overruled certain of the exceptions, sustained some, and reserved others. The court also directed the auditor to restate the account. No exception was taken by the defendant, either to the auditor’s report, or to the action of the court upon complainants’ exceptions. The account was accordingly restated but, as found by Mr. Justice Barnard, this second report of the auditor “amounts to nothing more than a restatement of the account in different form.” Thereupon defendant filed eleven exceptions, and the case came on for hearing before Mr. Justice Barnard, who proceeded to dispose of the complainants’ exceptions not finally disposed of by Mr. Justice Wright. We are concerned with but one of those exceptions, since the others were decided adversely to complainant and no exceptions taken. That relates to the disallowance of a claim of the defendant for $481.81 for incidental expenses in attempting to organize the Sanitary Dwelling Company under the abandoned contract of March 13th, 1902. The court allowed two items of credit under said contract, one for $500 which Campbell paid on account of the indebtedness secured by the deed of trust on the improvement company’s land, and an item of $122.91, — taxes paid by Campbell on said property. Speaking of the contract of October 23d, 1902, superseding the abandoned contract, the court said: “I am inclined to think the proper construction of this contract is, that any sums paid out by Campbell for the benefit of the enterprise, that is, for taxes, improvements, or encumbrances on the land, while he was endeavoring to dispose of the property by means of the Sanitary Dwelling Company, are to be considered in the account, and that he is to have credit therefor. This seems to me to be equitable, for it is not claimed that he did not act in good faith in his endeavor to organize the said Sanitary Dwelling Company and to dispose of the property in that manner; and whatever he paid on account of taxes or the prior encumbrance on the property, or for improvements of any kind, inured to the benefit of the owners, whoever they may be. What he paid for the experiment of organization and attempted sale to the Sanitary Dwelling Company was his own affair, and did not enhance the value of the property.” After a careful review of the case Mr. Justice Barnard stated his conclusions as follows: “First. I feel bound by the opinion of the court of appeals, as well as from my own view of the evidence, to declare that the deed of January 16, 1903, was not intended to convey a present absolute title, but was only to secure the defendant his share of the profits in the enterprise when he should perform his share of the work of building houses and making sales. To the extent that he had performed his contract obligations, the security should be kept intact. “Second. As to the ten houses and the land on which they stand, the defendant has an undivided one-third interest under the two deeds executed to him and to the complainants Daniel and Bedman. That title was, I think, intended to be absolute, subject to encumbrances. “Third. The contracts which were executed by the parties plaintiff and defendant ought to be canceled, for there is no prospect of any amicable continuation of operations under the same, even if there was any desire by either party to do so. “Fourth. The defendant should convey to the complainant the Northwest Eckington Improvement Company the title received from it, by deed of January 16, 1903, on being paid, or satisfactorily secured, what, if anything, now remains due him on settlement of accounts on the lines hereinbefore indicated. “Fifth. If the defendant has become bound to pay any portion of the encumbrance on the said unimproved land, which is held by Mrs. Franz, the complainants should either obtain his release therefrom, or indemnify him against the same.” A decree in accordance with these conclusions was subsequently granted, from which this appeal was taken.