
    Vinal v. Continental Const. & Imp. Co. et al.
    
    
      (Supreme Court, General Term, Third Department.
    
    July 6, 1889.)
    1. Pleading—Demurrer—Facts Admitted.
    Since a demurrer admits every fact well pleaded, a complaint, based partly on an oral contract of which proof could not be made under the rules of evidence, is not demurrable therefor.
    
      2. Contract—Action to Recover Consideration.
    The fact that an action for breach of contract is decided in favor of defendant, on the ground that the contract cannot be performed, is no defense to an action to recover the consideration paid for the contract.
    8. Mistake of Fact—Laws of Foreign State.
    Money paid under a mutual mistake as to the law of a foreign state may be recovered back, such mistake being one of fact.
    Appeal from special term, Saratoga county.
    
      Action by Quincy A. Yinal, as administrator of William L. Burt, deceased, against the Continental Construction & Improvement Company, the Boston, Hoosac Tunnel & Western Railway Company, and the Fitchburg Railroad Company, to recover the consideration paid by plaintiff’s intestate to the Continental Construction & Improvement Company for a contract which said company had failed to fulfill. Defendants appeal from an order overruling their demurrer to the complaint. The opinion of the lower court was as follows:
    “Putnam, J. My engagements are such that I am unable to devote to this case the time its importance seems to demand, or to do more than to very briefly and hastily state my views after examining the complaint, and the very able points presented. Of course, in the examination of the case, I am only to consider the facts as stated in the complaint. There are certain facts stated in the opinion of Judge Coxb (32 Fed. Rep. 344, 349) not set out or appearing in the complaint. Such facts I cannot consider here. I can only regard this case as an authority, so far as applicable to the facts as set out in the complaint. The plaintiff, as the administrator of William L. Burt, deceased, brings this action in equity, and claims that on May 26, 1881, deceased was the owner of a contract with one Ames & Dexter, on which he had paid $400,000, and which gave him on payment of the balance of the purchase price, over two-thirds of the stock of the Boston, Hoosac Tunnel & Western Railroad Company, and thus the control of that road. This road at that time had formed a consolidation with three other roads under the same name, the object being to construct and run a railroad, through Hew York to Lake Ontario. The complaint alleges that the interest of deceased in the contract was $2,000,000, besides the $400,000 paid. That on the 26th day of May, 1881, said Burt assigned said contract to the Continental Construction <& Improvement Company, (hereafter called ‘ Construction Company,’) who agreed on the 25th and 26th days of May, 1881, in consideration thereof, to build for the Consolidated Railroad Company a railway from the Massachusetts line to Buffalo, with branches; to pay the amount Burt had paid, and agreed to pay, amounting to $2,553,070.76; and to advance the other consideration mentioned in the Contract A. The construction company did pay the $2,553,070.76, and received two-thirds of the stock of and the control of the Boston, Hoosac Tunnel & Western Railway Company, and it or its grantees still hold the same. But it has not built the railroad as agreed, or advanced the consideration provided for in the Contract A, or in any manner carried out the covenants of said contract on its part to be performed, except to make the payment aforesaid. After the assignment an action was commenced by the attorney general to set aside the consolidation aforesaid, as illegal and unauthorized, which resulted in a judgment so declaring; hence the contract could not be carried out by defendant. It could not build a road for a corporation that did not exist, or deliver to deceased bonds of such corporation. The parties had contracted on a mistaken assumption of a fact that did not exist, and hence the construction company Was legally unable to carry out its contract. It was upon that ground that the action for damages commenced by plaintiff was not sustained. 32 Fed. Rep. 343. How, it appears from the complaint that the construction company has received from plaintiff’s intestate property worth $2,000,000, for which it was to pay in certain bonds, stock, and services connected with a certain so-called ‘ corporation.’ Owing to the corporation (so-called) being unincorporated, illegal, and hence not in fact a corporation, defendant cannot carry out its contract. Yet it holds the $2,000,000 wmrth of property without paying for it. Both Burt and the construction company undoubtedly believed the consolidated company legal. Under the circumstances the claim of plaintiff, as stated in the complaint, seems equitable. It seems fair that the construction company should be credited with the amount paid and expended, and charged with the amount received from the Boston, Hoosac Tunnel & Western Bailway Company by the sale of its bonds, dividends, or otherwise, and that the property so transferred to it by the deceased on the mistaken assumption that the consolidated company was a legal corporation should be transí erred back to the plaintiff on the payment by the plaintiff to the construction company of such sum, if any, as it has expended over the amount received.
    “In the opinion of Judge Coxe in the Vinal Case, 32 Fed. Rep. 349, he says: ‘If A. should agree with B. to build a manufactory for the C. & D. Company on its premises, at the corner of two designated streets, it would probably be a defense to an action upon the contract if A. should show that there was no C. & D. Company, and that the premises in question were owned by another party; and such defense would hardly be met by the suggestion that A. might have organized another company, purchased another lot and built a factory thereon under a new contract which might have been made with the new corporation.’ But suppose B. had paid A. on such contract $10,000, could A., being unable to perform the contract, keep the $10,000,— it appearing that it (the contract) was entered into by both parties under a mistake as to the existence of the corporation and the ownership of the lot? It is alleged in the complaint that Burt and the construction company were at the time they entered into the alleged contract, May 25 and 26,1881, not residents or inhabitants of the state of Hew York, and that they entered into it in the belief that said companies were legally consolidated, and formed a legal corporation, and that its bonds and acknowledgments were valid. There can be no possible doubt that Burt and the construction company did enter into the contract on the mistaken belief that the consolidation was legal and the consolidated company was a legal corporation.. Was it a mistake of law or of fact? The question is not free from doubt. I think, however, that the mistake was one of fact, it being conceded that the parties were not residents of the state. In Haven v. Foster, 9 Pick. 112, 130, it is held that ignorance of the law of another state is ignorance of fact. In that case a Massachusetts party released her interest in land in Hew. York, in ignorance of her rights under the laws of the latter state, for an insufficient consideration. She was bound to know that the distribution of the estate would be governed by the laws of Hew York, but her ignorance of law was held to be the ignorance of fact, and she was allowed to recover. See, also, Bank v. Dodge, 8 Barb. 233; Curtis v. Leavitt, 15 N. Y. 193; Stedman v. Davis, 93 N. Y. 36; Story, Eq. Jur. 140.
    “It must be remembered that the mistake made by the parties was as to an existing fact; that is, a mistake made on May 26, 1881, as to the legality of a consolidation made April 11, 1881. It does not appear from the complaint that Burt, although desirous to have the consolidation made, was an actor in effecting it. The consolidation was necessarily made by the corporation concerned. A legal consolidation might have been made by an act of the legislature. A special charter might have authorized a consolidation. I am not clear that a mistake of a party residing in this state, and dealing with a so-called corporation therein in good faith, on the mistaken assumption that it is a corporation, would not be deemed a mistake of fact. In other words, the corporations could have been legally consolidated by taking the proper steps, and the mistake of parties might be deemed a mistake as to the fact that the corporation had taken the proper steps. However, it is not necessary to pass on this point, as both parties to the contract, being non-residents of the state when the contract was made, are not deemed to know the statute laws of the state, and their mistake was one of fact.
    “I therefore conclude that the contract in question should be deemed rescinded, and that under well-settled principles plaintiff should recover the property he turned over to the construction company on paying to said company what they have advanced under the contract, less the amount they have re-
    
      eeived. The contract has not been performed by the defendant, and could not be. Defendant, under it, has $2,000,000 of plaintiff’s property for which it has paid nothing. If the facts are as alleged in the complaint, plaintiff should be allowed to recover the property on making the proper payments to defendant. I think the allegation in clause 4 of the complaint sufficiently shows performance by deceased of all the covenants of the contract he was to perform, including the subscription, if any allegation of performance is in fact necessary when the contract was at law incapable of performance. I do not perceive that the action at law between the parties in the circuit court of the United States (32 Fed. Rep. 343) estops plaintiff from maintaining this action: Judge Coxe in his opinion states: ‘ It is well not to lose sight of the fact that this is an action at law to recover damages for the breach of an alleged contract. In such an action the court is not permitted, in the adjustment of the rights of litigants, to exercise the comprehensive powers which appertain to a court of equity.’ And Judge Coxe passes on the case as an action at law, and holds that the defendant was not bound to perform its com tract, for the reason that the contract, under the decisions of the supreme court of this state, could not be performed. The decision of this case finds no fact or facts inconsistent with the claim stated in the complaint. In fact it holds and decides what is necessary to be determined to give plaintiff a cause of action herein. And see Belden v. State, 103 N. Y. 7, 8, 8 N. E. Rep. 363.
    “I have examined the Steinbaeh Case, 77 N. Y. 498. That was an action on a policy of insurance, and the plaintiff, being defeated on the ground of a breach of a condition in the policy, brought another action to reform the policy by leaving out the condition; and the court, held that, having sued on the policy with the condition in it and been defeated, he could not maintain the action to reform the contract. Having elected to sue on one contract, he could not ask the court to make another contract for him. That case, it will be seen, differs from the one before us. Here the contract set out in both actions is the same. In the first action, however, plaintiff claimed, as matter of law, that he was entitled to damages for breach of contract by the defendant. Here he claims that as tlie contract is unperformed and incapable of performance, and hence no legal remedy, he is entitled to an equitable remedy. As stated in the Belden Case, 103 N. Y. 7, 8 N. E. Rep. 363, plaintiff failed because his action was misconceived, and for a cause not warranted by the facts.proved. The judgment is no bar to his claim, therefore, for a sufficient cause, or where the evidence to sustain the second would not have entitled the plaintiff to recover on the first; where, in other words, there is no identity of the question that they had before decided. It is suggested by the defendant that relief should not be granted herein, even conceding there is a mistake of fact, on the ground of the delay of plaintiff to rescind the contract, and his attempt to enforce it by an action; and he claims that a party asking for relief, on the ground of mistake, must show that he has exercised due diligence. See Thomas v. Bartow, 48 N. Y. 193.
    “There is no inflexible rule governing courts of equity in this regard, notwithstanding the delay, if the other party has not been injured, relief may be granted. In the case last cited it is said a party < cannot obtain relief when his delay and omission of duty have caused irreparable mischief to the other party.’ But where no such mischief has occurred there seems to be no reason why relief should not be granted. On the trial of this case it might appear that the delay of plaintiff in bringing this action injured defendants, and hence that the prayer of the complaint should not be granted. But on the facts stated in the complaint it does not appear that defendant has been injured by plaintiff’s delay in commencing this action. It has simply been allowed to retain property that should be returned to the plaintiff, and which it ought not in justice to retain. The court will not imagine that injury has occurred on account of this delay, in the absence of evidence to show that such delay has in fact injured the defendants. It is claimed by defendants that where a valid contract has been in part executed, and one party fails to perform such of its obligations as were subsequently to be performed, that the remedy, if any, is an action for damages; citing Lohman v. Railway Co., 2 Sandf. 39, 54. I do not think that this principle should, be deemed applicable to the case before us. The contract here is one incapable of performance, and one where an action for damages on the ground of the failure of defendants to perform could not be maintained; hence the only remedy of the plaintiff is in equity.
    “I have thus hastily considered most of the questions involved. I am unable to devote more time to the case. I presume, however, that it will be submitted to an appellate court, and hence it is not important that my views should be expressed at any greater length. On the whole, I conclude that plaintiff should have judgment on the demurrer.”
    Argued before Learned, P. J., and Landon and Ingalls, ,TJ.
    
      Adrian H. Joline, for appellants. Matthew Hale, for respondent.
   Learned, P. J.

We think that the opinion of the learned justice who decided the case is sound and able, and that it is really of little use to add anything to what he has said so well.

Tiie complaint speaks of a written and verbal agreement between Burt and the construction company. The appellant urges that no verbal agreement could be proved, for the reason that the written paper must be understood to embrace the whole agreement between the parties. That is a matter to be determined on the offer of proof at the trial. If testimony of a verbal agreement is offered and objected to, and if it "ought not to be received, then it will be excluded, and hence no such agreement will be proved. But the demurrer admits the agreement alleged in the complaint, just as if it had been proved without objection by the defendant at the trial; and if the defendant admits that it made an agreement there is no reason why it should not be required to perform it. It is not illegal or immoral that a person should make at the same time a verbal agreement and a written agreement. The rules of evidence may sometimes prevent the proving of conversations which led up to a written agreement, or which may seem to modify the writing which has finally been taken as the expression of the minds of the parties. What, under the rules of evidence, the plaintiff will be allowed to prove in the present case, is not a matter now before us.

The next question presented by the defendants is on the effect of the previous decision. Vinal v. Construction & Imp. Co., 32 Fed. Rep. 343. That action, as admitted by the demurrer, was one to recover damages against the company for a failure to perform the contract made between it and Burt. The decision, as so admitted, was upon the ground that it had been established in the suit by the attorney general that there was no consolidated railroad company, and therefore the construction company was excused from performing its contract with Burt; that is, it could not construct a railroad for a railroad company which had no existence, and which could therefore acquire no title to land, etc. Of course this decision, between these same parties, is conclusive here. It is settled, then, on this demurrer, that the construction company cannot carry out and perform the contract into which it entered with Burt.

Now, the question is presented in this case, as Burt paid the construction company a large amount of property as a consideration for the building of this new Boston, Hoosac Tunnel & Western Railroad Company, and as it cannot build such road, ought it to keep what Burt paid it? It would be unjust that it should do so, and some very strung reasons must be shown to maintain so unreasonable a position.

The defendant says that the parties contracted under a mutual mistake of law, not of fact; that is, the defendant says that they contracted upon the belief that the (consolidated) Boston, Hoosac Tunnel & Western Railroad Company was an existing corporation, and that this belief was not a belief of the existence of a fact, but of the existence of a rule of law; because the existence of the corporation depended on the validity of the proceedings taken by the former corporations to consolidate, and that such proceedings were legally invalid. How, it does not appear by the complaint upon what ground that attempted consolidation was adjudged to be illegal and void; whether the papers were not properly executed; whether the proper action was not taken by the old companies; or whether some other defect existed. If the decision in the attorney general’s suit was on any of these grounds, it would seem to have been based on a question of fact. If parties had made a contract on the belief that a deeeased'person had executed a will, and the fact proved to be that he bad never signed any paper purporting to be a will, we should hardly think that this was a mistake of law. Hor do we feel by any means confident that, even if the decision in the attorney general’s suit was based on some ground other than imperfection in the consolidation proceedings,—if it were based, for instance, on the inability under the statute of these companies to consolidate,—that even then a mistake as to the existence of the consolidated company would be a mistake of law. But we need not pass on that. These parties were not residents of Hew York, and their contract, so far as appears, was not executed in Hew York. Foreign laws (including laws of other states) ■are facts. The presumption that every one knows the laws of his own state is hard enough. He never is presumed to know the laws of all the other states in this country, and the laws of all the nations of the world. The cases cited by defendant are no exception. Carpentier v. Minturn, 6 Lans. 56, was an action on a note made in California, under a contract made in California in regard to business in California, and the question was as to the knowledge of the law of California. So, in Holdredge v. Webb, 64 Barb. 9, the contract was in Hew York, and the question was as to the laws of Hew York. Heither of these decisions, therefore, disturb the doctrine that to parties residing and ■contracting in one country the laws of another country are matters of fact, not of law.

There is still a further consideration. A statute exists in this state authorizing consolidation of railroad companies in certain cases. Suppose that these parties were bound to take knowledge of that statute. Were they bound to know whether, in this particular case, these railroad companies could consolidate? That question might depend, and probably did, on certain facts, and as to these facts the parties might make a mistake. Or, even if they knew all the facts, are they bound to know how the courts will apply the statute to the facts; that is, are they bound to know this in such a way that the ignorance of what the result of such application will be is ignorance or mistake of law? The defendant insists that the belief of Burt and the defendant that the (consolidated) Boston, Hoosac Tunnel & Western Railroad Company was a corporation in existence was a mistake of law, because subsequently the court decided that that company was' not a corporation. We should be unwilling to take that view, in our present judgment, upon the arguments of counsel.

The defendant’s counsel urges on our consideration (as was urged below) the case of Steinbaeh v. Insurance Co., 77 N. Y. 498. The plaintiff had brought an action on a policy of insurance, and had been defeated on the ground of his violation of one of the clauses. He then brought that action to reform the policy by making a modification of that clause, and the relief was denied. That is not like the present case. Here the plaintiff sued for damages for breach of the contract. He was defeated on the ground that, although the defendant had broken the contract, yet it was excused from performance because performance was impossible. How that plaintiff claims that, since performance has become impossible, he should recover back that which he gave as a consideration for tlie promised performance. The actions are not inconsistent, one with the other. We are of the opinion that the judgment of the special term was correct, and that it should be affirmed, with costs, with the usual leave to withdraw demurrer, and answer over on payment of costs. All concur.  