Opinion
Submitted October 25th, 1935.
Decided January 31st, 1936.
1. Complainant and her husband, then living separate and apart, entered into a written agreement whereby they sought to settle their property rights and claims against each other, the husband agreeing to pay $100,000 in certain installments. The agreement recited that it was in full compliance with the husband's liability for "the support of the wife and issue of the marriage;" that the payments should provide for the maintenance of the wife "and also for the education, maintenance and complete provision of the child;" that certain payments to be made should be "to cover expenses for food and clothing for the wife and the child, and the schooling and education of the said child." A later agreement refers specifically to this agreement and was entered into as a modification thereof. It expressly provided that the conveyance of real estate to be made thereunder should be in full satisfaction, discharge and substitution of all obligations existing under the prior agreement for the provision by the husband for the wife "and the infant child of the parties hereto, covering both the present and the future." Both agreements were made binding on the parties, their personal representatives "and assigns." Complainant seeks specific performance of a contract to sell a parcel of land conveyed to her by her husband under their subsequent agreement. Held, specific performance will not be ordered under the circumstances.
2. Where there is a grave and reasonable doubt as to the existence of an encumbrance — here, the existence of a trust in the land in favor of the infant child of complainant's marriage — and a consequent effect upon the marketability of the title, this court will decline to decree specific performance.
On appeal from a decree of the court of chancery, advised by Vice-Chancellor Buchanan, who filed the following opinion:
"The bill in this case is filed by complainant as vendor, under a contract of sale with defendant as vendee, and seeks decree for the specific enforcement of that contract.
"The defendant answers admitting the execution of the contract and defendant's refusal to consummate the same, and sets up in justification of its refusal, and in defense of the present action, the allegation that complainant's title is not marketable. Defendant also counter-claims seeking rescission of the contract for that reason, and for decree for the return of the down payment of $800 made by defendant, together with interest and costs, and the establishment of such sum as a lien upon complainant's lands.
"There are no facts in dispute. The single issue is as to whether complainant's title is marketable in view of the provisions of two certain agreements, one dated June 6th, 1930, and the other dated February 18th, 1932, entered into between complainant and her then husband, Elmer L. Walker — by which agreement complainant and her said husband, who were living separate and apart, sought to settle their property rights and their claims against each other.
"The first agreement provided for the payment by the husband to the wife of $100,000 in certain installments — such payments to be made in cash or (at the option of the husband) partly in cash and partly by way of bonds and mortgages.
"The subsequent agreement of 1932 recites that the agreement of 1930 has been partially performed, but that the husband is unable to complete the performance in the manner originally agreed upon, and therefore the parties enter into this subsequent modifying agreement. Briefly the purpose of this second agreement was to provide for the conveyance of certain parcels of real estate from the husband to the wife in the place and stead of the unpaid portion of the moneys provided for by the first agreement.
"This subsequent agreement was carried out, and one of the parcels of real estate therein mentioned, and subsequently conveyed to the wife in accordance with that agreement, is the same parcel of real estate involved in the contract of sale between the parties to this suit. It is the contention of the defendant that by reason of these agreements, the title of the complainant to the lands in question is charged with a trust or a condition in favor of the child of the said husband and wife, and would remain so charged after conveyance by complainant to defendant. The contract is for sale and conveyance free from all encumbrance except certain specified encumbrances — which specification does not include the agreements here in question.
"The agreement of 1930 recites inter alia that it is made by the husband `as and for a full compliance with his liability for the support of the wife and the issue of the marriage.' It further provides that the payments agreed to be made by the husband shall provide for the separate maintenance of the wife `and also for the education, maintenance and complete provision of the child.' Another paragraph of this agreement provides that certain payments to be made by the husband thereunder shall be `to cover expenses for food and clothing for the wife and the child, and the schooling and education of the said child.'
"This agreement by its terms binds the parties, their personal representatives `and assigns.'
"The subsequent agreement of 1932 specifically refers to the prior agreement and is expressly entered into as a modification of said prior agreement, — and consequently carries over into itself the pertinent and material provisions of that prior agreement. It expressly provides that the conveyances of real estate to be made under this second agreement shall be in full satisfaction and discharge and in substitution of any and all obligations existing under the agreement of 1930 for the provision by the husband for the wife `and the infant child of the parties hereto, covering both the present and the future.'
"This agreement also by its terms expressly binds the parties their personal representatives `and assigns.'
"It is the contention of the defendant that the effect of these agreements is to charge the real estate with a trust or condition in favor of the infant child of the parties to that agreement. In support thereof defendant submits numerous authorities, both of text writers and of adjudicated cases, — including Pomeroy's Equity Jurisprudence, vol. 3, page 2244 and page 2237; Bogert on Trusts, pages 27 and 51; Mills v. Davison, 54 N.J. Eq. 659; Coffin v. Watson, 78 N.J. Eq. 307, affirmed, 79 N.J. Eq. 643; Adrain v. Koch, 83 N.J. Eq. 484; McKnight's Ex'rs v. Walsh, 24 N.J. Eq. 498; Babbitt v. Babbitt, 26 N.J. Eq. 44; Landon v. Hutton, 50 N.J. Eq. 500: Conover v. Fisher, 36 Atl. Rep. 948.
"Defendant further cites as authority for its contention that defendant would take title subject to this trust, Shibla v. Ely, 6 N.J. Eq. 181; Bock v. Koch, 99 N.J. Eq. 359; and Mitchell v. D'Olier, 68 N.J. Law 375.
"Complainant relies strongly on Austin v. Young, 90 N.J. Eq. 47, — a case which is quite different from that now before the court.
"It is not however necessary for this court in this cause to make an actual determination that the property in question is subject to the trust as alleged. This court is satisfied that there is at least grave and reasonable doubt upon the point; that there is reasonable ground for believing that the existence of such trust might well be adjudicated if and when a proper proceeding should be brought for that purpose.
"There is at least such reasonable doubt as to the existence of the encumbrance in question, and the consequent effect upon the marketability of the title as to require this court to decline to decree specific performance of the contract of sale. Van Riper v. Wickersham, 77 N.J. Eq. 232; Smith v. Reidy, 92 N.J. Eq. 586; Saracino v. Kosower Construction Co., 102 N.J. Eq. 230; Smith v. Neill, 104 N.J. Eq. 339; Pound v. Pleister, 106 N.J. Eq. 101, affirmed 107 N.J. Eq. 577.
"Defendant is entitled to decree on the bill, and on its counter-claim."
Messrs. Lum, Tamblyn Fairlie and Mr. John S. Foster, for the appellant.
Mr. William Phillipson and Mr. Harry Phillipson, for the respondent.
The decree appealed from will be affirmed, for the reasons expressed in the opinion of Vice-Chancellor Buchanan.
For affirmance — THE CHIEF-JUSTICE LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, JJ. 12.
For reversal — None.