Hastings Land Improvement Company, Appellant, v. Frederick G. Zinsser, Respondent

Hastings Land Improvement Company, Appellant, v. Frederick G. Zinsser, Respondent. First Department, March 14, 1913. Beal property—deed — action to enforce covenant to pay pro rata share of cost of improvements — consent in writing — resolution entered upon minutes of corporation. The plaintiff corporation, organized for the purpose of purchasing and developing a tract of land, entered into an agreement with the persons interested therein whereby each agreed to take a specified number of lots and also to take and pay for in cash the entire capital stock of the plaintiff ratably in proportion to the number of lots agreed to be taken by them respectively. They also agreed that, if the capital stock should not be sufficient to pay the cost of improving said property, they would take and pay for in cash pro rata increased capital stock sufficient to meet such cost or would otherwise advance the money necessary for such purpose. The defendant subsequently acquired stock and certain lots from an original incorporator and stockholder of the plaintiff, but thereafter disposed of his stock. His deed contained the following covenant, “That the owner of the premises hereby conveyed will pro rata with all the owners of lots of the tract on said map, pay assessments for improvements on any part of said tract shown on said map, owned by the grantor, its successors or assigns. Provided however that any such improvements be authorized in writing by the owners of a majority of the lots shown on said map.” Subsequently preferred stock was issued and purchased by the stockholders, but was insufficient to pay for all of the improvements made and the plaintiff was obliged to obtain the balance by cash payments from lot owners. In an action against the defendant upon his covenant, held, that upon the undisputed facts the plaintiff was entitled to judgment and its motion to that effect should have been granted. The fact that the defendant had disposed of his stock before the preferred stock was issued and only remained a lot owner did not reheve him from liability under his covenant to pay his pro rata share of improvements. In procuring the consent of a majority of the lot owners to improvements the plaintiff was entitled to count lots which had not been sold and were still owned by it. A resolution entered upon the minutes of the plaintiff consenting to an improvement constitutes a consent in writing within the meaning of the1 covenant in defendant’s deed. Appeal by the plaintiff, the Hastings Land Improvement Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 16th day of July, 1912, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 18th day of June, 1912, denying the plaintiff’s motion for a ■ new trial made upon the minutes. The parties subsequently stipulated that the judgment appealed from should be considered on appeal as one entered upon the decision of the court directing a judgment for the defendant. William R. Bayes, for the appellant. Theodore Hansen, for the respondent. [MAJORITY — Scott, J.:] Scott, J.: The action is upon a covenant in a deed to pay pro rata defendant’s share of the cost of certain improvements. The facts are not in dispute. In June, 1905, a number of persons organized the plaintiff corporation for the purpose of purchasing a tract of land at Hastings, which was subdivided into fifty-one lots. The parties interested in the project entered into an agreement between themselves and with plaintiff whereby each agreed to take a specified number of lots, and also agreed to take and pay for in cash the entire capital stock of the company, amounting to .$5,000, ratably in proportion to the number of lots agreed to be taken by them respectively. They also agreed that if the said sum of $5,000 should not be sufficient to pay the cost of improving said property they would authorize an increase of capital stock of the company to an amount sufficient to meet such cost, and take and pay for in cash, at par, pro rata, such increased capital stock, or otherwise advance the money necessary for such purpose. The defendant was not an original incorporator, nor was he a party to the foregoing agreement. He later acquired stock, and the right to acquire certain of the lots from one Schultze, who had been an original incorporator and stockholder. He subsequently parted with the stock, and remained only a lot owner, having taken title from plaintiff in March, 1906. The deed to defendant contained this covenant on his part: “That the owner of the premises hereby conveyed will pro rata with all the owners of lots of the tract on said map, pay assessments for improvements on any part of said tract shown on said map, owned by the grantor, its successors or assigns. Provided however that any such improvements be authorized in Avriting by the oivners of a majority of the lots shown on said map.” The complaint alleges that thereafter certain improvements were put upon the property, after having been preAÚously authorized in writing by the owners of a majority of the lots, and that defendant’s jiro rata share of the cost of such improvements amounted to $1,935, for which sum, with- interest, this action was brought. The defendant by his answer after certain denials designed to put plaintiff to its proof, sets up as an affirmative defense* that the plaintiff increased its capital stock by the issue of preferred stock and with the proceeds thereof paid for the said improvements, and thereby waived any and all right it might have against the defendant to recover for the costs of said improvements, and further, that plaintiff when it made the improvements did not intend to charge the defendant with any share of the cost thereof. On the issues raised by the denials the defendant’s principal contention was that some of the improvements were not “authorized in writing by the owners of a majority of the lots shown on said map.” To sustain this contention he insists that the plaintiff was not entitled to count its own authorization on account of lots which it had not conveyed. This is clearly untenable. The covenant contemplates a consent by a majority of the owners of all the lots shown on the map, and it is of no consequence who OAvned them. If plaintiff had retained title to a majority of the lots it could have authorized an improvement without the consent of any other owner. The defendant also takes exception to the proof of plaintiff’s consent as the owner of lots. The covenant does not prescribe any particular form in which authorization shall be given, only that it must be in writing, and in the case of a corporation a resolution entered upon the minutes consenting to an improvement is 'a consent in writing. Nor is it necessary to use any particular form of words. A resolution inviting all lot owners to authorize an improvement necessarily implies a consent to such improvement on the part of the body adopting the resolution. The other objections to plaintiff’s proof are technical and without merit. We have much doubt as to the sufficiency on its face of the separate affirmative defense. It appears to rest upon the theory that although defendant agreed to pay his pro rata share of the cost of the improvements, he was released from that obligation because the plaintiff had been able to raise money elsewhere. The logic of this proposition is not apparent, nor have we found it easy to follow the reasoning upon which it is attempted to sustain the judgment. Although the learned trial justice directed a verdict subject to his opinion, he omitted to formulate his opinion in writing and we are, therefore, not advised upon what particular ground he finally concluded that the defendant was entitled to judgment. If we may judge of the reasons actuating him in directing a verdict from his statement at the time he was then of the opinion that in some way defendant being a lot owner and not a stockholder was relieved from his obligation under bis covenant because other lot owners who were also stockholders were permitted to subscribe for and take preferred stock, the proceeds of which went, in part, to pay for the assessments. If this was the basis of the judgment we think it was erroneous. The original agreement between the incorporators contemplated a future increase of capital, and it was increased by the issue of preferred stock. Those who remained stockholders, and were such when the preferred stock was issued, had a preferential right to subscribe for and take the new stock. That defendant was not allotted any, for which, however, he never applied, was due to his own act in disposing of his stock. He still remained, however, an owner of lots, bound under his covenant to pay his pro rata share of improvements made for the common good of all the lot owners, and from which he presumaably benefited in common with his neighbors. It appeared in evidence that the issue of preferred stock fell far short of providing sufficient funds to pay for all the improvements, and that plaintiff was obliged to obtain the balance by cash payments from lot owners and by borrowing. It was conceded by all the parties that there was no question of fact for the jury, as there evidently was not. Upon the undisputed facts the plaintiff was entitled to judgment, and his motion to that effect should have been granted. By their stipulation that the judgment be considered as one entered upon the decision of the court, the parties have left it open to us to direct such judgment as the facts require and thus make an end of the case. The judgment and order should be reversed and judgment directed for plaintiff for the amount sued for, with interest, with all costs of action, including those on appeal to this court. Ingraham, P. J., Laughlin, Clarke and Dowling, JJ., concurred. Judgment and order reversed and judgment directed for plaintiff for the amount sued for, with interest, with all costs of action, including those on appeal to this court. Order to be settled on notice.