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IN RE ROSS DEV. CO.

May 22, 1952

Application of ROSS DEVELOPMENT CO., Inc.


The opinion of the court was delivered by: BYERS

These are cross motions to confirm the report of the Referee on the part of the petitioner and to disaffirm on the part of the trustee.

The subject matter of the report is a vendee's lien in the sum of $ 3,500., being the down payment by one Lewis in connection with a contract, dated January 23, 1950, for the purchase of Lot 2, Block 297 on a map of the debtor's property. The total price was $ 31,850., which included the real estate itself and the cost of a residence, which the vendor agreed to build thereon; title was to close on August 1, 1950.

 The erection of the building, however, was never even begun by the debtor. The contract (namely, a memorandum thereof executed and acknowledged by the parties in accordance with the provisions of Section 294 of the Real Property Law of the State of New York, McK. Consol. Laws, c. 50) was recorded in the Office of the Clerk of Nassau County on February 6, 1950. The vendor being completely in default on law day, Lewis instituted an action to foreclose his vendee's lien, and caused a lis pendens to be filed in the same office; seemingly no answer was interposed at any time.

 On August 3, 1950, the debtor being in default as stated, David Ross, an officer and one of the two equal stockholders of the entire capital stock of the debtor, delivered to Lewis his personal check in the sum of $ 3,500., bearing this endorsement: 'Deposit returned to Philip Lewis re Ross Development Co., Inc. Effective subject to payment.'

 That check was dishonored and was returned to the payee with the notation, 'Insufficient Funds.'

 The Referee has found, and it is undisputed, that Lewis has never received back any part of his deposit.

 Events subsequent to August 3, 1950, as found by the Referee, included an unsuccessful attempt on the part of Lewis to obtain a summons from a city magistrate in a proposed criminal proceeding presumably based upon the theory that when Ross drew the check he knew he was without funds to meet it. The issuance of such a summons was refused.

 On September 11, 1950 Lewis brought a second action by the service of a summons with demand, against the debtor and the two Rosses, David and Leonard, for $ 5,000. damages for breach of the said contract; seemingly no pleadings were filed in that suit; on that day stipulations were entered into between the respective attorneys (Trustee's Exhibit 13) and the Rosses individually and as the sole stockholders of the debtor, as follows:

 Petitioner's (Lewis') Exhibit D refers to the action to foreclose the lien, and Trustee's Exhibit 13 refers to the second action for damages.

 The substance of the former is that upon payment to the plaintiff of the sum of $ 3,500. on or before October 18, 1950, a stipulation would be delivered to the defendant 'consenting to the cancellation of the Notice of Pendancy (sic) heretofore filed' and to the 'discontinuance of this action.' Payment was to be made by certified check, and the consent and discontinuance were not to be delivered until that check should be paid.

 The effect of that stipulation was clearly to keep alive the action to foreclose the lien until the agreed sum should have been paid, and that never took place.

 The second stipulation provides for the settlement of the damage suit for the sum of $ 4,000., and upon payment thereof, the sum of $ 3,500. was to be credited 'as a payment i- the said action now pending' (referring to the action to foreclose the vendee's lien).

 Both sides cite Flickinger v. Glass, 222 N.Y. 404, 118 N.E. 792. This seems to be the latest relevant decision of the Court of Appeals, and it is quite conclusive as to the effect to be given to the events above recited. The opinion 222 N.Y. at page 408, 118 N.E. at page 793, is in part:

 'There is no inconsistency between an action to recover the payments made by a vendee and an action to declare them a lien upon the land. The two remedies are concurrent. The plaintiff, in suing through Whiting for the value of the groceries and fixtures, (roughly, the equivalent of the down payment on this contract of purchase) did not elect to treat the contract as void in its inception. * * * He concedes that a valid contract was made, and complains that the vendor is unable to perform it. * * * One may abandon lien as vendor or as vendee by the acceptance of a new security. Maroney v. Boyle, 141 N.Y. 462, 467 36 N.E. 511. Even then the question is sometimes one of intention. Cordova v. Hood, 17 Wall. 1, 21 L. Ed. 587.'

 The foregoing is thought to be consistent with the view that the delivery of the check for $ 3,500. was compatible with the retention of the lien, even if it had been a check of the debtor.

 It seems that this result must follow in view of the careful restriction embodied in the endorsement, that the return of the deposit evidenced by the check was to be 'effective subject to payment.' The giving of the check by David Ross is not to be distinguished in principle from the transaction shown in Goldinger Realty Co. v. Stehr, 120 Misc. 329, 198 N.Y.S. 301, 302, where it was held that a vendor's ...


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