Kelly v. Chinich

The attorney or agent of the grantor or obligor in a deed or written contract may act as depositary of an escrow if his relation to his principal is such that his acting as an escrow is not antagonistic to his principal’s interests, and if the paper was put in his hands for delivery on the performance of a condition not dependent on the volition of his principal.

On appeal from a decree advised by Yiee-Chancellor Foster, reported in 9.0 N. J. Eq. 602, whose opinion is as follows: “The bill in this cause is filed to compel the specific performance of a contract for the purchase of real estate in the village of South Orange. It is entirely a fact case, and the question to be determined is whether the parties ever entered into the contract in question. “It appears that some time prior to October 23d, 1917, complainants, through Stern & Cohn, real estate agents, had offered to sell the premises in question to defendants, and' that defendants visited the property with Mr. Cohn and learned from him that the lands were located in South Orange. “On October 23d, 1917, the parties and the agents met at the office of Charles F. Herr, counsel for defendants, and had drafts of the contract of sale prepared. When the description of the property was read, one of the defendants raised the question whether there were any building restrictions in force in the village of South Orange that would prevent defendants from building a four-story apartment-house on the lands. They were to pay $9,000 for the land and had told complainants they intended to build thereon an apartment-house that would cost about $90,-000. When the question about the building restrictions was raised one, or both, complainants assured defendants that there were no restrictions in the village that would interfere with the height of their building, and it is at this ¡joint that the controversy between the parties arises. “According to complainants’ version, defendants were satisfied with the assurances that complainants gave them that there were no restrictions in the village to interfere with the height of their contemplated building; and the suggestion was made that the parties sign the copies of the contract, and the check for $300 to cover the first payment called for by the contract, and that the copies of the contract and the check should be- left with. Mr. Herr for a day or two in order that defendants could call on the proper authority in South Orange and learn that there were no laws or ordinances limiting the height of buildings that could be erected in the village; that this was accordingly done, and a few days later, when Mr. McLaughlin, the other complainant, called at Mr. Herr’s office and asked for complainants’ copy of the contract and the check, he was informed by Mr. Herr’s clerk that the matter was all ended, and was refused the check, but was given one copy of the contract from which the signatures of the defendants had been torn. The other copy of the contract which all the parties had signed was never returned to complainants, and, so far as the record discloses, it is still in the possession of defendants with the signatures of all the parties thereon intact. Complainants in due time demanded the performance of the contract which defendants refused and then this action was brought. “Defendants’ version of what happened when the copies of the contract, arid the cheek were signed differs very materially from that of complainants. “They state that when they raised the question of the building restriction they were unwilling to sign the contract until all doubts on the subject were removed but that they were induced to. sign the papers when Judge Herr remarked: 'What’s the use of losing trine, * * * you can sign and leave your check for the first payment with me and I will hold the papers till you tell me to turn them over.’ That Densky, one of the defendants, still hesitated, and finally he said to Judge Herr: ‘All right, 3'ou are my lawyer, and if you keep it till we find out, we will do as you sa3r/ and that Judge Herr then said to defendants: ‘You are to be the sole judges as to whether the papers will be delivered ;’ and defendants claim it was upon this assurance that they signed the papers and check. “While Judge Herr corroborates defendants regarding the above particulars, his memory about many other details of the transactions is very poor, and he pleads that he is a very busy man, as the reason for his failure to recall other details of the transaction. Complainants deny that any such statements were made by defendants or Judge Herr in-their hearing. “Defendants further claim that the papers were not to be delivered until they were satisfied that there would be no trouble in erecting the building. This complainants also deny. “A day or two later defendants called on Mr. Schwarze, the inspector of buildings for the village of South Orange, and informed him of their proposed building plans and asked if there were any restriction that would interfere with the height of their building. They say Mr. Schwarze told them, ‘You can’t build such a building in South Orange;’ that there was not a four-story building in the village; that even if he were to grant them a permit, the trustees of the village could hold a meeting and stop the construction of the building, and he told them when he learned of the estimated cost that they were taking a big chance. “Defendants on leaving Schwarze walked through the village as he had suggested and did not see a four-story building. They then returned to Newark and went to Judge Herr’s office and told him they were satisfied they would have trouble in South Orange, and asked for the return of the check, which was given them, and their signatures were torn from the copies of the contract. They did not communicate with complainants or tell them the result of their investigations. “Mr. Schwarze was called as a witness by complainants and he positively contradicts the defendants in every essential particular. He testifies that defendants called on him and informed him of their building project and inquired about restrictions limiting its height; that he took the trouble to look up the matter and made inquiries of other officials and assured them that there was nothing to prevent them from erecting their contemplated building; that there were'no restrictions affecting the height and that they could build it as high as they pleased, provided they conformed with the requirements of the building ordinance relating to the character of the materials used in the building. He denies telling defendants the trustees might or could interfere with or stop their building operations. “Mr. Schwarze was an exceptionally competent, disinterested witness; he did not know any of the parties; had met defendants only when they called on him in October, ÍSH1?, and had never met either of complainants until the day before the hearing. He impressed me as telling the truth and as being wholly uninformed and indifferent about what any other witness had stated at the hearing. “There is another significant circumstance in connection with what occurred in Judge Herr’s office when the papers were signed. Stern & Cohn, the real estate agents, were present, and their version of the matter agrees with complainants’. Stern understood, however, that the papers were not to be delivered until defendants learned that there was no restriction against the height of their contemplated building; while Cohn understood the papers and cheek were to be delivered as soon as defendants learned there was no regulation of the village that would prevent the erection of a four-story building. “Cohn was the active man in effecting the sale of the property, and he states that after the check and contracts were signed, complainants took him into one of Judge Herr’s rooms and gave him a written agreement to pay the agents a commission of two and one-half per cent, for effecting the sale. Stern thinks this agreement was given them just before the contract was signed, while Cohn is positive it was given afterwards. “If Cohn’s version is correct, it may have been that while he and complainants were in one room and Judge Herr and defendants in another room, some of the remarks it is claimed Judge Herr and defendants made to each other about the papers were actually exchanged, but there is nothing in the proofs to show that such remarks were ever brought to complainants’ attention. “In view of all the circumstances, the improbability of complainants, without consideration, tying up property worth $9,- 000 for months under what, according to defendants’ statements, amounted to a mere option to purchase or not as defendants saw fit, and in view of the fact that complainants must have considered the contract closed when they gave the agents a written agreement to pay them a commission for having effected the sale, and particularly in view of defendants’ deliberate false testimony about the result of their interview with the inspector of buildings, coupled with the fact that defendants have made no effort to show that there is any law or ordinance that would prevent or interfere with the building they claim they intended to erect, I have reached the conclusion that complainants’ version of the matter is the correct and truthful one, and that defendants have merely used the question of a building restriction as a subterfuge, to escape the performance of the contract, possibly because they could not obtain the building loan they desired, or, possibly, because they realized, as Mr. Schwarze told them, they were taking a big chance in erecting such an expensive apartment-house in South Orange. Whatever their reason, 1 am satisfied defendants have not told the truth and have not acted in good faith towards complainants; they permitted complainants to become liable for the payment of the agents’ commission ; they held complainants’ property for several days under contract, after they had decided not to buy it, and never informed complainants that they had decided not to purchase the property. If they held it under any such conditions as they claim, they do not explain why they did not have this condition written in the contract, together with the other conditions written therein. “The proofs convince me that the defendants have deliberately testified falsely about the transaction, and that complainants have told nothing but the truth, and a decree will be advised in accordance with the prayer of the bill.”