Abraham Schneider, as Sole Surviving Partner of the Firm of M. & A. Schneider, Appellant, v. Clifford L. Miller and American Mineral Wax Company, Respondents

Abraham Schneider, as Sole Surviving Partner of the Firm of M. & A. Schneider, Appellant, v. Clifford L. Miller and American Mineral Wax Company, Respondents. First Department, December 11, 1908. Equity — suit to rescind assignment of mining lease — contract — conditions subsequent — abandonment. Where the plaintiff, having a lease of mining lands, agreed to assign the same together with other property to a corporation to be organized by the defendant, and the latter agreed that after the organization of the corporation and the assignment of the lease he would contribute a specific sum as capital for the purpose of carrying on the business, the plaintiff having assigned the lease, is entitled to rescind where the defendant refuses to advance the capital as agreed. The agreement to furnish the capital is a condition subsequent and is not deprived of that character merely because it was to be fulfilled after the organization of the company and the assignment of the lease. Moreover, as the raising of money for the purpose of continuing the business was the essential consideration leading to the contract and assignment, the defendant’s failure to contribute the capital was an abandonment of the contract by him, which entitled the plaintiff to sue to rescind the assignment, as he could not sue on the defendant’s promise to pay to the corporation. Appeal by the plaintiff, Abraham Schneider,, as sole surviving partner, etc., from an interlocutory judgment"of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 8th day of July, 1908, upon the decision of the court, rendered after a trial at the New York Special Term, sustaining the defendants’ demurrers to the amended complaint upon the grdund that it does not state facts sufficient to constitute a cause of action. Henry Brill, for the appellant. Donald McLean, for the respondents. [MAJORITY — Scott, J.:] Scott, J.: The plaintiff appeals from an interlocutory judgment sustaining a demurrer to the complaint. The action is for the rescission of a contract. The complaint and the contract attached to it show that the firm of which plaintiff is the surviving partner were the owners and holders of a lease of asphalt lands in the Indian Territory (now Oklahoma) ; that on July 1, 1904, the defendant Miller and another were made selling agents for plaintiff’s firm, which proceeded to mine asphp.lt and ship it to Miller; that in the year 1906 plaintiff’s firm were in need of money to develop their property and extend their operations; that on November 16, 1906, they entered into an agreement with Miller that he should organize a corporation under the laws of the State of New York, with a capital of at least $30,000, to which the lease of the mining lands should be transferred. Miller on his part agreed to contribute to the corporation as capital $10,000 in cash within sixty days, and $20,000 in six months, which latter time might be extended to one year if he was delayed in collecting certain moneys. The plaintiff’s firm agreed on its part to contribute the lease, and to obtain the consent of the government to its assignment, and also to contribute their apparatus and machinery. It was agreed that Miller should have t'wo-thirds of the stock of the corporation, and the plaintiff Abraham Schneider one-third, Morris Schneider (now deceased) receiving for his interest certain specified royalties on the product sold. The contract provided that the corporation to be formed should run the plant continuously in the usual way, except when shut down for repairs. Miller thereupon proceeded to organize the corporation, defendant herein, providing for a capital stock of $50,000, none of which has yet been issued. It is further alleged that the plaintiff and Morris Schneider carried out all the obligations of the contract on their part, including the assignment of the lease to the corporation, but that Miller, though often requested, did not within the sixty days specified in the contract, nor has he up to the date of the commencement of this action, contributed the $10,000 which he agreed to contribute, nor any part thereof, except about $1,700. It is alleged that on March 25, 1907, the plaintiff’s firm elected to rescind the contract, and so notified Miller, at the same time offering to repay all advances made by him. It is further alleged that the plaintiff has no adequate remedy at law, and his damages cannot adequately be estimated. The relief asked is that the contract be annulled and the lease reassigned upon the payment to Miller of the amounts expended by him and that the defendant corporation be restrained from accepting the consent of the government to the assignment of the lease and from doing anything under the lease or the contract. The demurrer was sustained upon the principle, now contended for by the respondents, that the mere failure of a grantee to perform a promise which constituted the whole or a part of the consideration for an executed conveyance gives no right to a rescission. This general rule is of course well established where the promise does not amount to a condition, hut under the facts alleged in the complaint the promise of Hiller to advance the required capital should be considered to to have been a condition subsequent, the failure of which will justify a rescission, and it is not deprived of that character merely because the condition was to be fulfilled after the organization of the company and the assignment of the lease. (Underhill v. Saratoga & Washington R. R. Co., 20 Barb. 455.) There is however, another well-settled principle upon which the complaint should be sustained. It is that recognized in Graves v. White (87 N. Y. 465), wherein it is said that under certain circumstances the refusal of one party to perform his contract amounts to an abandonment on his part, which entitles the other party to assent to the abandonment and sue for such relief as may be necessary to restore the original status of the parties, and especially is this the case where damages could not be proven with adequate precision. Accepting as true the allegations of the complaint, it appears that the dominating and essential consideration leading to the contract for the organization of the company and the assignment of the lease to it, was the need of money to increase the plant and develop the property. It was contemplated, and indeed expressly provided, that the work should proceed continuously, and it was especially provided that the contribution of $10,000 should be made within sixty days. It is manifest that the refusal of Hiller to comply with this term of his contract was calculated to destroy the very object for which the contract was entered into, and his refusal to so contribute may properly be held to be an abandonment by him of the contract itself. Meanwhile the plaintiff has parted with his property for which he has received nothing. He cannot sue Miller for the $10,000, because Miller’s promise was to pay the company, not the plaintiff. Consequently all that the plaintiff could base a claim for damages on would be that his stock would have been more valuable if Miller had kept his contract. This would be purely speculative. The judgment appealed from must be reversed, with costs and disbursements, and the demurrer overruled, with costs, with leave to defendant to withdraw the demurrer and answer within twenty days upon payment of said costs. Patterson, P. J., McLaughlin, Laughlin and Houghton, JJ., concurred. Judgment reversed, with costs, and demurrer overruled, with costs, with leave to defendant to withdraw demurrer and to answer ©n payment of costs.