EQUITY II Notes & Cases

Should Equitable Relief Be Granted; Ask Yourself:

1)     is there adequate remedy at law – is monetary relief adequate

2)     is equitable relief practicable or feasible

3)     are there any equitable defenses – Unclean Hands, Laches, Estoppel

Under What Circumstances Is The Remedy At Law Inadequate:

1)     when the subject matter is unique

2)     land is unique

3)     trespasses, not vandalism

4)     if damages are speculative

5)     need to bring multiple suits to vindicate your rights

6)     insolvency of a party makes judgment uncollectalbe

7)     irreparable harm resulting from party’s conduct that cannot be compensated

Approach to Equity Questions

·        equity questions can best be resolved by remembering a three-tier scheme that is easy to commit to memory, & apply to the facts of any equity question

(1) is there an adequate remedy at law, that is, is equitable relief appropriate?

(2) is an equitable remedy practicable? can a ct carryout effective enforcement of its decree & would performance be difficult to supervise?

(3) are there any effective defenses to the equity relief?

* the common sense approach to equity questions can best be utilized by 1^st determining what the equity ct is attempting to do, & then considering the questions listed above while always bearing in mind that equity JD is invoked where there is no adequate remedy at law.

CHAPTER 4 – THE INJUNCTION

The injunction is perhaps the most powerful form of equitable relief.

• it is the basic relief to prevent a D from continuance of wrongful acts or to enforce certain contracts
• it is not exclusive in that it may be combined w/ other relief
• ct must have personal JD to issue an injunction
• injunctions are enforced via contempt – punishment can be either fine or imprisonment or both
• contempt may be either criminal seeking to punish (fine/jail) or civil seeking to coerce (jail until compliances)
• injunctions are often classified as either mandatory, negative, interlocutory, or permanent
• Mandatory – requiring performance of a particular act which is remedial in nature
• Negative – cease & desist order that is preventative in nature
• Interlocutory – temporary to preserve the status quo between the parties prior to trial on the merits
• Permanent – issued after full hearing on the merits
• Also Temporary Restraining Order or Preliminary Injunction

Cts Must Consider The Following Elements In Determining Whether Injunctive Relief Is Appropriate:

(1) whether personal JD exists over the parties;

(2) whether the legal remedy is adequate;

(3) whether a property right exists;

(4) whether enforcement is feasible;

(5) whether the hardship to the respondent outweighs the benefit to the P (balancing the equities); &

(6) whether the D has an defenses

Stages of Injunctive Relief

1^st – Temporary Restraining Order

• used to preserve the status quo
• for a short period of time
• ex parte

2^nd – Preliminary Injunction

• preserves the status quo
• balances the hardships
• likely outcome on the merits

3^rd – Permanent Injunction

Temporary Restraining Order (TRO)

• requested to secure immediate equitable relief until there is a final determination on the merits
• TRO may be granted by an equity ct w/o notice to the adverse party if:

-                 a verified pleading or affidavit shows that immediate & irreparable harem will result before the adverse party is properly notified; &

-                  the petitioner’s attorney certifies his/her efforts to notify the other side; &

-                 the reasons why notice should be required

• petitioner must also post a bond
• TRO’s have a duration of 10 days except in domestic relations cases
• adverse parties affected by a TRO may move for dissolution or alternatively, modification of the order upon 2 days’ notice to the petitioner

Preliminary Injunction:

• cab be obtained by a party if he can prove the following:

(1)   a substantial likelihood that he will prevail on the merits;

(2)   a substantial threat he will suffer irreparable injury if the injunction is not granted

(3)   the threatened injury to the petitioner outweighs the harm the injunction may do to the adverse party; &

(4)   the granting of the injunction will not disserve the public interest

(5)   no adequate remedy at law

Permanent Injunction: 5 elements

Are the Legal Remedies Inadequate:

• dollar damages too small or too speculative
• possibility of multiplicity of suits
• threatened irreparable injury
• land – land is unique

Is There a Property Right Involved – old rule, but generally not used now

• protect right of privacy

Is the Injunctive Decree Feasible

• is it negative or affirmative
• negative is easier
• mandatory – may be a problem for ct

Do We Balance the Hardships

• for permanent injunction – balance only for encroachment & nuisance

What are the Defenses

• Laches

-                 the effect of the passage of time

-                 compare to statute of limitations

§         if limitations have run, you have lost your cause of action

§         if limitations have not run, you may nevertheless have lost you cause of action through laches

-                 has the P’s inaction allowed the D to act to her detriment

§         can still get legal damages, but not injunction

-                 Unclean hands

§         P must have acted honorably w/ respect to this transaction

§         guilty of sharp practice, not necessarily illegal

-                 Freedom of Speech – 1^st Amd. prevents prior restraint

-                 Criminal Act – equity will not enjoin a crime

§         have to use police & criminal process

§         exceptions: nuisance & public nuisance

·        domestic relations is not an exception – the order is do not come w/in a certain amount of feet of wife, NOT “do not murder your wife”

INTERLOCUTORY INJUNCTIONS

Interlocutory – temporary; not final in the determination of the action

Hughes v. Cristofane

• P, the owner of a seafood restaurant that featured topless dancers…P sought a TRO enjoining Cristofane & others from enforcing a town ordinance that prohibited such entertainment in est. serving alcohol…P argued unless the restraining order was issued they would suffer irreparable harm both to their financial interests & their interest in exercising their constitutional rights
• held the loss of revenue constitutes irreparable harm w/in the context of the granting of injunctive relief
• here, P’s have no adequate remedy at law, b/c the passage of time necessary to litigate their claim will result in the irreparable harm they have demonstrated
• P’s demonstrated enforcement may infringe on their 1^st & 14^th rights & this demonstrates an irreparable harm & a likelihood of success on the merits
• D’s only hardship from a TRO would be a return to the status quo before the ordinance became effective, w/ an injury to D’s moral sensibilities only
• case demonstrates five elements necessary to receive TRO:

1)     unless order is issued, they will suffer irreparable harm

2)     the hardship until they will suffer w/o order outweighing any of D’s hardship

3)     they are likely to succeed on the merits of their claims

4)     the issuance of the order will cause no substantial harm to the public

5)     they have no adequate remedy at law

Abbott Laboratories v. Mead Johnson & Co.

• Abbot made an oral electrolyte solution to prevent dehydration in babies…P enjoyed a market monopoly…D then began to make a competitive product virtually identical to Abbot’s…D started promotional campaign to convince doctors to recommend their product over P’s…P sought preliminary injunction against D…
• held that in deciding whether to grant a preliminary injunction, a ct must consider intermediate forms of relief
• a party seeking a preliminary injunction must demonstrate:

-                 some likelihood of succeeding on the merits; &

-                 that it has no adequate remedy at law & will suffer irreparable harm if preliminary relief is denied

• once the P meets its threshold burden, the court must consider:

-                 the irreparable harm the nonmoving party will suffer if preliminary relief is granted, balancing that harm against the irreparable harm to the moving party if relief is denied;

-                 the effect on the public interest (nonparties) of granting or denying the injunction; &

-                 the relative weight of these factors, applying a “sliding scale” approach w/ the objective of minimizing the costs of being mistaken

• here, although the ct found P had shown a likelihood of prevailing on the merits, the other factors favored D
• Sliding Scale Approach – more likely the P will succeed on the merits, the less balance of irreparable harms nee d weight toward the slide

Coyne-Delonay Co. v. Capital Development Board

• D (Capital) let contracts to replace plumbing fixtures at a state prison…P won a subcontract for flush valves…P’s valves malfunctioned, as well as their replacements…d then designated another subcontractor…P, claimed a civil rights violation & obtained a TRO against D opening new bids…after P’s claims were reversed…new bids were solicited…D lost money & moved for damages for the wrongfully issued preliminary injunction…ct refused, stating P’s suit was filed in good faith…
• held a district ct may not grant damages for wrongful issuance of a preliminary injunction in excess of the amount of the bond posted by the party requesting the injunction
• rules of civil procedure do not require the applicant to pay the wrongfully enjoined party’s damages, but the applicant must provide security to make sure the applicant can pay the D’s damages if a preliminary injunction is wrongfully issued
• under the majority’s rule, a judge must have a good reason not to award damages

MANDATORY INJUNCTIONS:

Mandatory injunctions require a party to do something vs. a prohibition

• if an appeal is filed, everything will remain the same while under appeal
• seeks beyond the status quo
• orders a party to perform an affirmative act rather than restrain from certain conduct

Vane v. Lord Barnard

• case concerned tearing down a castle
• mandatory injunction phase – D had to restore the castle back to original condition

Cooling v. Security Trust Co

• D (Security) was trustee of an estate of which the children of P & Cooling were beneficiaries…D was also the guardian of the minor children by appointment of the orphan’s ct & coexecutor of the estate of Cooling…P was appointed guardian as litem by the ct of chancery & sought to have D file exceptions to the account which it was required to file as executor of her husband’s estate…P alleged she had no way of knowing whether or not D had received from the executors the written notice….P contended D refused to file the exceptions & sought a mandatory preliminary injunction ordering D to file exceptions to its final account in the orphan’s ct…the preliminary injunction was granted & D moved to dissolve it on the ground the ct. had no power to grant a mandatory preliminary injunction
• held an equity ct may order a mandatory preliminary injunction
• there is no constitutional or statutory limitation to granting such relief
• the purpose of a mandatory preliminary injunction is to preserve the status quo
• here, only by the issuance of a mandatory preliminary injunction could it be assured a trust asset would not be lost

US v. Price

• D (Price) & others had operated a landfill that was contaminating the local water supply…P sought an injunction requiring D to fund a study of the threat & to provide an alternate water supply to those contaminated…D objected it would be improper to require them to spend significant funds under a preliminary injunction…
• held a ct may grant a mandatory injunction that requires the D to expend funds prior to the final resolution of the case
• equity JD is characterized by flexibility & practicality
• Congress invoked broad & flexible equity powers in adopting the governing Acts in this case, giving ct authority to issue an injunction when there is a risk of harm
• while a P may not resort to equitable relief for compensation…equitable relief may create an expense if it is preventative, instead of compensatory, in nature
• in a situation calling for a mandatory injunction, the D may often be required to spend money to comply
• it is not the payment of money that is determinative…the issuance of a mandatory injunction depends on application of the basic four-part injunction test…here, P’s relief was not inappropriate
• cts look at injunctions in two ways – traditional & statutory
• mandatory preliminary injunctions – must show likelihood of succeeding on merits
• Determining If Relief is Equitable or At Law

-                 are you preventing further harm from occurring

§         if yes, equitable relief

§         if it’s compensation, relief at law

• Balancing test –

-                 harm if refuses to grant vs. harm by D if relief is granted

Friends for All Children v. Lockheed Aircraft Corp

• P (Friends) brought tort action on behalf of Vietnamese orphans injured in plane accident…ct granted summary judgment against D…the extent of the liability depended on separate trials for each child…ct granted a mandatory injunction requiring D to pay into a fund from which reasonable expenses of diagnostic examinations would be paid
• held a ct may grant a mandatory injunction for payment of money when the D’s liability, but not the exact amount, has been determined
• D argued a ct can never provide interim equitable relief in a suit for money damages
• here, D’s liability has been adjudicated…only the amount of the liability remains to be determined
• the funds D is ordered to pay are not compensation for past injury, but are remedial in nature, a form of equity
• the ct is granting the mandatory injunction must:

-                 be guided by the traditional standards for equitable relief

-                 minimize the risk that D will be ordered to pay more than P will ultimately be awarded

• ct said D must pay money to preserve the status quo – to prevent a further harm
• issue was not that money was paid out, but what the money was used for

SPECIFICITY

Collins v. Wayne Iron Works

• P (Collins) complained the noise by the operation of the D rendered his dwelling unfit for use as a residence…ct granted an injunction restraining D from the operation of its works “by at any time making noises” w/ its machinery which would thereby render P’s premises unfit for use as a residence by a reasonable & normal person
• held a ct may not order an injunction, the practical effect of which is to shut down operations of an industrial plant, if it is possible o draft an order which will still give the P the relief he seeks w/o resulting in such a severe effect upon the D’s operational business
• an injunction should never restrict more than is absolutely necessary to give P relief
• in this case, a more specific order directing D not to operate the machinery outdoors & restricting the hours of operation
• injunction must be specific in order for D to understand what he can or can not do, so as not to be in contempt

Schmidt v. Lessard

• P (Lessard), while involuntarily confined pursuant to a state involuntary commitment statute, brought suit on behalf of herself & others similarly situated, challenging the constitutionality of the statutory scheme…both injunctive & declaratory relief were sought…ct declared the statutory scheme unconstitutional & granted injunctive relief against further enforcement of the statute…ct entered a judgment that merely stated it was to be entered in accordance w/ its opinion…D argued the order was too vague
• held a ct may not order injunctive relief w/o specifying the details of the terms of the order or describing in detail the acts prohibited
• Rules 65(d)/Civil Procedure requires the terms of the injunction be specifically outlined
• purpose is to provide a D w. sufficient specific informations so that it does not risk a contempt citation for violation of the injunction b/c the order is too vague to be understood

Modification

Ladner v. Siegal

• ct granted P an injunction restraining D from operating their garage as a public garage…a year later, same ct modified its decree to state the injunction did not prevent D from using the garage as a private facility for tenants of certain nearby apartment buildings…P was given leave to apply to the ct for an order restraining any operation of the garage which might be shown to be improper
• held a ct may modify its final decree granting injunctive relief
• the power to modify in a preventive injunction is inherent in the ct which granted it
• a change in the law or a change of circumstances will justify modification
• Modification is inherent in the ct which granted it & may be made if:

-                 ct believes the ends of justice would be saved by a modification

-                 where the law has changed, been modified or extended

-                 where there is a change in the controlling facts on which the injunction rested

• injunctive relief does not create a right; it protects the right of the owner

Bd. of Education of Ok. Public City Schools v. Dowell

• P’s sued D for sponsoring de jure segregation in city schools…later, after several years & changes, ct of appeals held that once issued, an injunction in a segregation case remains in effect until a school district can show “grievous wrong evoked by new & unforeseen conditions & dramatic changes in conditions unforeseen at the time of the decree that impose extreme & unexpectedly oppressive hardships on the obligor
• held d school desegregation injunction does not remain in effect until the school district can make a clear showing of grievous wrong evoked by new & unforeseen conditions
• in some cases, a ct decree may be effective in perpetuity, & such a decree may not be changed if the purposes of the litigation as incorporated in the decree have not been fully achieved
• in this case, the ct’s finding the schools were being operated in a constitutional manner…
• desegregation decrees are intended as temporary measures to remedy past discrimination; the legal justification for displacing local authority in such cases is a constitutional violation by such authorities
• have to balance the equity
• injunction should only extend to the problems that need to be fixed

Emergency Hospital of Easton v. Stevens

• P (Stevens) filed a complaint against D for refusing to allow him to perform surgical operations…P sought an injunction…D answered complaint stating bylaws had been amended to require a physician to receive permission from the directors & staff to operate…ct ruled this amendment was ineffective b/c hospital had not given notice as required by state law…ct then reversed & enjoined D from excluding P from using its facilities…D complied & passed a valid amendment to its bylaws requiring permission of staff & directors in order to perform surgery at its facilities…D claims that in light of the amendment, it was not violating the injunction…ct continued injunction
• held a change in circumstances does not excuse a party’s violation of an injunctive order
• even though conditions upon which such an order are predicated change, the restrained party does not have the right to determine for itself whether it must obey that order
• the proper course of conduct in this case would be for D to seek modification of the order on the basis of the changed circumstances
• ct says D is not w/o a remedy – if you have a situation that warrants a change, make your argument, don’t just break the rule

Appeals

In re O’Connell

• D (O’Connell) had obtained an interlocutory judgment of divorce from P (Mrs. O’Connell) by which he was awarded the home previously occupied by the couple…in a subsequent action, a ct of equity annulled that judgment on the ground it had been obtained through fraud…P applied & was granted an injunction restraining D from entering the home, etc…D appealed from the order granting the injunction & filed a stay bond, but was later found guilty of contempt for continuing to occupy the premises in violation of the injunction…D was sentenced to a fine & imprisonment…D filed a writ claiming he had not violated the injunction b/c his appeal had stayed effectiveness of the ct’s order
• held the operation of a mandatory injunction is stayed by an appeal
• unlike a prohibitory injunction, a mandatory’s operation is stayed on appeal
• here, D was ordered to turn over control of the house to D, & it thus operated to do more than maintain the status quo
• a prohibitory injunction is not stayed by appeal & its enforcement is always w/in the JD of the ct

Super Tire Engineering Co. v. McCorkle

• P’s employees were striking…while on strike, they received welfare benefits from D…P sought an injunction against the payment of these benefits & a declaration the welfare regulations were null & void on the ground they violated the federal labor policy of free collective bargaining…the employees ended the strike before a hearing was held on the merits…ct denied on action was now moot…
• held a suit that seeks both declaratory & injunctive relief rendered is not rendered moot when the conduct against which the injunction is sought ceases
• when a suit seeks both declaratory relief & an injunction, the ct must still determine the merits of the declaratory request irrespective of the conclusion reached as to injunctive relief
• even though the aspect of the suit seeking an injunction is rendered mot by the cessation of the strike, the ct should have reached the issue of the impact of the state welfare benefits program upon collective bargaining agreements

Noncoercive Ancillary Remedies: Masters, Recievers, & Accounting

Hurst v. Papierz

• D (Papierz) appealed a decree which imposed a constructive trust upon the operations of an apartment complex…ct found where D’s had been found to be joint venturers w/ P & had defrauded him, the appointment of a receiver was proper, but the ct erred in appointing an accounting firm to determine sums payable from D’s w/o setting forth a procedure by which evidentiary questions could be adjudicated
• held a trial ct may not order an accounting that does not set forth a procedure by which evidentiary questions may be adjudicated
• each party has a right to be heard & must have an opportunity to introduce evd. & cross-examine witnesses
• since there are no masters in chancery in the Illinois judicial system, the trial ct. must conduct the accounting & try all the issues

CHAPTER 5 – THE DECLARATORY JUDGMENT & RELATED REMEDIES

Declaratory Relief

·        to declare someone’s rights, no action to stop or do;

·        no executory process to follow, only to declare one’s rights

·        when seeking declaratory relief:

-                 there may no be a case or controversy, but

-                 must be some adversary proceeding or deprivation of rights

·        example: to declare a law unlawful, once you get a provision declared unlawful, that is good ground for injunction

·        other forms of relief: rescission, reformation, specific performance, declaratory judgment

·        it is an action brought for determining the parties’ rights to any contract or other transaction

·        a Declaratory Action allows settlement & relief from uncertainty & insecurity w/ respect to rights, status, & other legal relations

Quia Timet Relief – “because he/she fears

·        a legal doctrine that allows a person to seek equitable relief from future probable harm to a specific right or interest

·        P invokes equity JD b/c they fear immediate, irreparable harm or injury

·        gives relief before actual harm occurs

Fletcher v. Bealey

·        P (Fletcher) made pure white paper using water from the River Irwell…D had a plant up river & had land close to P where he planned to deposit waste from his plant…the waste would, after long storage, give off a green chemical which would be harmful to P’s paper…P sought a bill Quia Timet to restrain D from depositing waste on that site…although no harm had occurred yet, P argued the result was inevitable…D argued they could conduct business so that no appreciable quantity or waste would make its way to the river

·        held a ct will not issue a bill quia timet to prevent a future injury when, in the absence of proof of actual damage, there is:

§         no proof the feared damage is imminent; or

§         no proof the damage will be either ver substantial or even irreparable

·        this is the criteria for a bill quia timet:

(1) no proof the feared damage is imminent; or

(2) no proof the damage will be either ver substantial or even    

              irreparable

·        in this case, ct found there was insufficient evd. of imminent harm to justify ct’s interference

·        since it would be some time before enough of the chemicals entered the water to be a detriment to P, P could obtain an injunction immediately to prevent damage in necessary

Bills of Peace

·        it is a bill in equity seeking relief from multiple suits

·        bill of peace protects: claimants, company

·        its purpose is to make sure all claimants have rights

·        includes joinder, consolidation, interpleader

·        joinder – bring in people into case before the filing

·        consolidation – re cases that have already been filed, then consolidate – if have 1 or 2 parties, suits that involve similar parties, ct will usually consolidate them

·        15 or less – joinder

·        more than 15, generally 20 & over – class action

·        Class Action:

§         1) numerosity - # of people so much impractical to joinder

§         2) commonality - ?’s of law or fact concern class

§         3) typicality - look at claims of representative parties 

§         4) adequate representation

·        historically, it was w/in power of ct of equity to hear a multiplicity of cases w/ a common bond

·        now, must show to combine claims into one / must have privity

·        bills of peace are sanctioned…..codified in Fed. Rules of Civil Pro…as joinder, interpleader, class action suit

Yuba Consolidated Gold Fields v. Kilkeary

·        P (Yuba) had been dredging the Yuba River for years…45 years later, a series of storms caused unprecedented amount of water to flood the river & break through a wall P had built …the flooding caused tremendous damage…resulted in six actions involving more than 100 claimants bringing suit against P…P filed for a bill of peace seeking to avoid multiplicity of legal actions by determing its liability in one equity suit…bill was dismissed for failure to state a cause of action…

·        held a ct. can issue a bill of peace to join multiple D’s among whom there is a common bond or interest as to the P, even though there is no privity between the individual members of the group such that no legal relation exists between those members

·        a bill of peace can be issued to join group w/ common interest, even though there is no privity between the group members

·        when common questions of law & act exist, it is not necessary there be a community right or interest in the subject matter among the D’s

Bills to Quiet or Remove a Cloud on Title

·        to decide w/o question who has title over the property

·        cloud goes to legal right to property

·        ejectment is a legal remedy

·        have to bring action at law to get person off property w/o permission

·        if person living on your land questions your ownership, this becomes an equity issue to remove the cloud

·        to bring action in equity:

§         person must be in actual possession

§         person must have constructive possession

·        here, P should have sought a legal remedy

·        P failed to prove actual or constructive possession

Wathen v. Brown

·        P (Brown) held record title to land…D claimed ownership by adverse possession…P filed for quiet title…P based claim on her deed, but failed to allege or prove actual or constructive possession…ct found for P

·        held a record title holder must prove actual or constructive possession in order to quiet title as against a claimant under adverse possession

·        a bill of quiet title is intended to protect the owner of legal title from being disturbed in his possession

·        the statute governing quiet title actions requires proof of possession

·        constructive possession arises when one has legal title to lands that are uncultivated or unoccupied, but does not apply to lands that are actually occupied by the person claiming adverse possession

·        in a quiet title allegation…the P must either allege actual possession or that the lands are vacant & unoccupied

·        b/c P failed to allege either actual or constructive possession, the ct did not have JD in equity

Interpleader

·        the purpose is to prevent a multiplicity of lawsuits where a holder of a res or sum of money is unsure of the ownership claims associated therewith

·        object: protects stakeholder, insurance co. protects funds in a case/company

·        statutory interpleader:

-                 minimum diversity, at least 2

-                 money, $500

-                 has nationwide process of service

State Farm Fire & Casualty v. Tashire

·        Greyhound hit a truck, killing 2 passengers & injuring truck driver & 32 others…P (State Farm), insurer of truck driver, brought an interpleader action in federal ct, paying the policy limit into ct & asking the ct to require all claimants to est. their claims against the truck driver in this single proceeding & in no other…Joined as D’s were truck driver, his passenger, Greyhound, bus driver, & all other prospective claimants who had been bus passengers…ct issued injunction requiring all parties to prosecute suits in the sole interpleader action…appeals held that federal interpleader was not available under these circumstances in states such as Oregon, which does not permit direct action suits against the insurance company until judgments are obtained against the insured & the insured may not invoke federal interpleader in such states until claims against the insured are reduced to judgement

·        held a federal district ct, through interpleader JD invoked by insured’s insurance company, may not compel all of the tort P’s in an accident, even those whose claims are not against the insured & could not be satisfied out of the insurance proceeds, to litigate the case in a single forum of the insurance company’s choosing

·        the modern federal interpleader device is not a “bill of peace” capable of sweeping dozens of lawsuits out of the various state & fed. ct. in which they were brought & into a single interpleader proceeding

The Declaratory Judgment

Nashville, Chattanooga, & St. Louis Railway v. Wallace

·        P (Nashville) brought suit in st. chancery ct seeking a declaratory judgment against D & other state officials that the state excise tax on the storage of gas was an unconstitutional violation of the Commerce Clause…P appealed

·        held the Supreme Ct may consider an appeal of a case brought under a state declaratory judgment statute

·        Art. III judicial power extends only to cases & controversies…the ct. may not consider a case in which a judgment, if rendered, would not terminate the uncertainty or controversy that gave rise to the proceeding

·        here, P claims D’s tax is unconstitutional

·        P’s suit clearly constitutes a case or controversy had it been raised & decided in a suit to enjoin collection of the tax

·        there is no reason to find the controversy is not justiciable merely b/c P sought a declaratory judgment instead of an injunction

CHAPTER 6 – SPECIFIC PERFORMANCE OF CONTRACTS

Specific Performance – a remedy by which one party to an agreement is ordered

          to perform according to the provisions of the contract

In order to obtain specific performance of a contract, P must show:

          (1) a contract exists

          (2) all contractual conditions have been fulfilled

          (3) the legal remedy is inadequate

          (4) enforcement is feasible

          (5) mutuality of remedies exists; &

          (6) there are no defenses available to the D

I

Equity provides extraordinary remedies for actions, ex contractu (arising from a

          contract).

·        the most well known contract remedy is specific performance

·        awards no punitive damages or special damages

·        if unique, SP will be granted

·        Ct will ask:

§         is there adequate remedy at law

§         are damages sufficient

§         are damages speculative, too uncertain

§         dollar amount too speculative, ct will grant SP

·        money damages are a substitute, you can’t substitute land, it is unique

·        P must be ready, willing, & able to perform his part of K in order for ct. to grant SP

·        Executroy K – has not been performed yet

·        Bilateral Executory – neither party has performed, to be performed at a later date

·        Unilateral – only one party has performed

·        in some SP construction cases, the ct may be hesitant to grant b/c ct does not want to supervise every act or detail of mandating the construction

Contracts for the Sale or Lease of Property

Adequacy of Legal Remedies

Kitchen v. Herring

·        D (Herring) contracted to sell P some land…P gave D a personal note payable w/in three months & Pridgen guaranteed it…Pridgen then contracted w/ P to remove timber off the land…D later issued a deed to Pridgen by which P was dispossessed of the property…p sought to enjoin the removal of the timber as well as specific performance of the sales contract…D argued SP can only be ordered to enforce contracts for the sale of land & since the principal value of this property was the timber upon it, SP was not appropriate

·        held a purchaser may obtain SP of a contract for the sale of land when its principal value consists of the natural resources located upon it

·        b/c of the uniqueness of land, cts will order SP of contracts of sale irrespective of the fact the natural resources upon it may constitute its principal value

·        cts will recognize the inherent value of the land itself

·        b/c land is unique, legal remedies for breach of contract of sale are inadequate

·        SP may also be ordered if it is the buyer who has breached the sales contract

Van Wagner Advertising v. S&M Enterprises

·        P (Van Wagner) entered into a 3 year lease for space on the ext. wall of a building on which P was to erect a billboard…P erected a sign & leased it for 3 years…the building owner sold it to D, which then terminated P’s lease…P abandoned the space & sued for SP & damages…ct found P’s lease termination was wrongful, granted damages, but refused SP…

·        held in this case, the decision to grant SP on the uniqueness of the property was not involved

·        a ct has the discretion in deciding whether to grant SP

·        the remedy is often used for breach of contract to sell real property & is available for breach of a lease, but the fact that leased property is unique is not determinative

·        the real test for SP is not uniqueness, but the uncertainty of valuation

·        valuation is a function of the availability of relevant information; when there is insufficient information about substitute property to permit the ct to calculate a money award, then the uniqueness of the property supports a SP

·        here, the ct determined the value of the unique qualities of he space P leased could be determined w/ reasonable certainty & w/o an unacceptably high risk of undercompensation to P

·        Issue – is a party that shows property at issue is physically unique – do they deserve SP – ct held no, just b/c physically unique, does not mean deserves SP

·        it would prove too much, then everything would be considered unique & everything unique would have to go to equity ct

·        whether or not to award SP is a decision that rests in the sound discretion of the trial cts., & here, that decision was not abused

Rubinstein v. Rubinstein

·        P & D (cousins) were equal shareholders in two NY corporations; a grocery & a deli…they decided to dissolve their business relationship…they agreed that P would choose which of the businesses he wanted & D would get the other…each deposited $5000 w/ their lawyer to be held in escrow & be forfeited to the other as liquidated damages in case of default…disputes arose & D changed his mind…P sued for SP…lower ct held the liquidated damages was P’s sole remedy

·        held that absent a specific contract clause stating a liquidated damages provision is to be the sole remedy, a liquidated damages clause will not automatically bar SP

·        w/o more, a liquidated damages provision will not preclude a decree of SP

·        In order for SP to be barred, the contract must specifically state the liquidated damages are sole remedy

·        since D was willing to let P have 1^st choice, it was clear the parties’ intent was to terminate the business relationship & SP is the appropriate remedy

The Restatement of Contracts

·        in determing whether the remedy in damages would be adequate, the following circumstances are significant:

-                 the difficulty of proving damages w/ reasonable certainty

-                 the difficulty of procuring a suitable substitute performance by means of money awarded as damages, &

-                 the likelihood that an award of damages could not be collected

Relief For & Against 3^rd Persons

·        One or both of the original contracting parties may seek to transfer to a third party some right arising from the contract and/or some duty of performance under the contract

·        Assignment of rights.  An assignment is a transfer of a contractual right or benefit which operates to extinguish the right in the transferor (assignor) and to set it up exclusively in the tranferee (assignee).  The effective assignment of a contract right operates to give the assignee a direct tight against the promisor under the contract.  The assignee becomes the real owner of the right transferred.

·        Delegation of duties.  A delegation of contractual duties is really not a transfer of such duties because the delegating party remains liable for the performance thereof if the party to who the duties are delegated fails to perform.

·        Independent.  Rights can be assigned without any delegation of duties, and duties can be delegated with rights retained.  However, the more common procedure is to assign rights and delegate duties at the same time.

·        assignee is seeking SP / vendee assigns rights

·        unless you are in NY, generally, a person who makes or assumes an assignment / that assignee would be held to the terms of the contract

·        the assignee resumes responsibility & benefits of rights under contract

1) Liabilities of Purchaser’s Assignee

Langel v. Betz

·        P (Langel) contracted to sell Hurwitz property…Hurwitz assigned the contract to Benedict, who in turn assigned it to D…the assignment did not include a delegation of the performance of the assignor’s duties…after obtaining from P an extension of the closing date, D ultimately refuse to perform…P sued for SP…D appealed

·        held a vendor/seller of real estate may not obtain SP of the contract against the assignee of the vendee/buyer, where the assignee obtained an extension of time to close but did not expressly assume the assignor’s duties

·        the mere assignment of a bilateral executory contract does not constitute a promise by the assignee to assume the performance of the assignor’s duties

·        the vedee’s assignee is under no personal duty to the vendor where there is no privity between them, unless the assignee expressly or impliedly binds himself to perform the assignor’s duties

·        here, D was not bound

·        if an assignee sues for SP, he thereby impliedly binds himself to perform on the principle that he who seeks equity must do equity

·        a suit against the assignee who is not otherwise bound to perform cannot create a duty on the part of the assignee

·        this case is in the minority

2) Rights & Liabilities of Vendor’s Assignee & Transferee

Walker & Trenholm v. Kee

·        D (Kee) bought land by conveying a house & executing 4 promissory notes…D would receive a warranty deed when all the notes were paid, but if D failed to pay any note, the contract would be voided & D would forfeit possession & all previous payments…seller conveyed 2^nd & 3^rd notes to P & 4^th to a bank…then seller made an assignment for the benefit of creditors, including the lands subject to the contract w/ D…D defaulted on the notes & P sued…P won a judgment against D & over seller’s objections…P then sued to compel SP of the land agreement & to force the sale of the land…D paid rent into ct, which ct held pending future orders…the ct found for P & ordered the land sold

·        held the seller/ vendee does not have the right to require SP of a land contract after transferring the notes which were the consideration for the sale of the land

·        in executory contracts for the sale of land when no title deed is executed, the equity doctrine of SP constitutes the equivalent of a vendor’s lien

·        the sellers had the right to require SP, but the notes seller received were not merely promissory notes; they arouse out of the agreement to sell land & are part of an executory contract for the sale of land

·        when seller transferred these notes w/ knowledge of the agreement, they also transferred all the rights which attached to those agreements in the hands of the seller

·        the basic rule is that in a contract for the sale of land, the seller becomes a trustee for the vendee w/ regard to the land, & the vendee becomes a trustee for the vendor w/ regard to the purchase money…any subsequent purchaser from either, w/ notice, becomes subject to the same equities as the selling party…the assignees of the seller may have the legal title to the land, but they hold it as trustees for the payment of the notes still due

·        P is entitled to collect Ds rent; P’s rights are terminated only when the debts are paid

Devolution on Death – Equitable Conversion

1) Rights Between Vendor & Purchaser

Taylor v. Kelly

·        P (Taylor) contracted to buy land from D…instead of performing, D sold the land to others…P sought SP…when D explained SP was impossible due to his sale to others, P demanded from D the proceeds of D’s sale to the others, less the amount she was to have paid for the property

·        held if a seller breached his contract by selling the property to someone else, the seller must pay to the original buyer the proceeds of the sale

·        under a contract for sale of land, the buyer is considered the owner in equity & the seller retains the title as security for the purchase money

·        equitable conversion b/c title had not been exchanged

Equitable Conversion

·        doctrine of equitable conversion provides that after a land sale contract has been effectuated, the buyer is considered the owner of the land & the seller is holder of the legal title only as security for the proceeds of the purchase price

·        effectively, the interests the parties had prior to the contract reverse themselves by virtue of contract formation

·        the buyer after contract formation has the real property interest & the seller has a personal property interest

·        equitable conversion is predicated on the maxim that “equity regards that as done which ought to be done”

Risk of Loss, Compensation, & Abatement

·        majority rule – risk is one purchaser even though vendor/seller retained possession

·        question arises if vendee is entitled to abatement when vendor collects before physical transfer of property

·        have to determine who bears the risk of loss

·        most cts hold the risk of loss is on the buyer b/c of equitable ownership

·        if the sale of land includes building & you loose the building & that building does not constitute a major portion of land, ct may grant SP

Shelly Oil Co. v. Ashmore

·        P (Shelly) contracted to purchase land from D…prior to closing date, improvements to land were destroyed by fire…D received $10,000 from insurance company for the loss…P sued to compel SP & abatement in the purchase price of $10,000…D appealed

·        held the party in possession of real property does bear the risk of loss (unless otherwise specified) in an executory land sale contract

·        determined old rule was illogical

·        here the vendee had the option of disclaiming the contract or accepting the property w/ abatement for the damage

·        if there is a material alteration, vendor is not required to specifically perform & buyer is entitled to any funds expected into contract

Dixon v. Salvation Army (Cite this case for abatement questions)

·        P (Dixon) contracted to purchase real estate from D…before escrow closed & before either title or possession passed from D to P, one of the buildings burned…the building was significantly underinsured…D could no longer deliver property as it had been prior to escrow, minus normal wear & tear, as required by contract…parties were unable to agree on a new price for property…P sought & obtained a ct declaration that the total purchase price should be abated to reflect the loss of value of the building…the order permitted P to seek SP at an abated price…D sought declaration the contract should be rescinded or enforced w/o abatement

·        held SP of a real estate contract at an abated purchase price is not a proper remedy where a material part of the subject property has been destroyed

·        it would be unfair to require either party to accept consideration less than what was bargained for

·        it is better to place the parties in their original position & allow them to make a new bargain

·        where a material part of the subject property is destroyed w/o the fault of either party & neither title nor possession has passed to the purchaser, the seller’s performance is excused & the purchaser is entitled to the return of any consideration paid

·        b/c neither title nor possession had passed, the risk of loss was on D

·        D may not enforce the contract & P may rescind & recover any consideration paid

·        ROL – material difference to property @ no fault of anyone & no conveyance of title, will not force any SP & will require vendor to return any money to vendee

Billy Williams Builders & Developers v. Hillerich (Know)

·        P (Hillerich) sued D seeking SP of a contract to sell certain real property & damages arising out of the allegedly defective construction of the house on the property & damages for delay in performance…the equity ct ordered SP & transferred the case to the ct of law for decision on damages…P was awarded damages…D appealed, arguing P had been awarded tow inconsistent remedies, SP & money damages

·        held a buyer of real property may be awarded both SP as to such title as seller can furnish & the remedy of an abatement of the purchase price for the deficiency of title or quantity or quality of the estate

·        here, D agreed to convey the house & lot, as well as build the house to specifications…therefore the remedies which P sought were not inconsistent & he was not required to elect between them

·        ct can use special masters to oversee the process in order to ensure process completed

·        why is the ct reluctant to force further construction?…due to the complexity of the specific performance…the ct would have to monitor the procedure

Contracts to Build or Repair

Lane v. Newdigate

·        P (Lane) was an assignee of a lease granted by D for the purpose of erecting mills…the lease included covenants for the supply of water from canals & reservoirs on D’s estate…D was to have the right to use sufficient water for the operation of his collieries, but he was not to interfere w/ P’s supply…when P’s water supply became inadequate, he brought suit seeking to enjoin D from interfering  w/ P’s water supply & also sought an order requiring D to repair certain areas & remove certain locks…

·        held a ct of equity may not order a person to perform repairs

·        while a ct may not directly order a party to perform repairs, it may issue an injunction which will have the effect of ensuring the repairs are made

·        here, the ct may order D not to allow the floodgates & canals, etc, to remain in a state of disrepair

·        D will be restrained from further impeding or obstructing the flow of water so as to interfere w/ P’s manufacturing

·        ct can use powers of contempt to not allow disrepair to occur

City Stores Co. v. Ammerman

·        in order to get the necessary zoning for a shopping center, D (Ammerman) offered P a place in the center on a favorable rental basis in return for P’s favorable letter to the zoning board…D got the zoning, but refused to accept P as a tenant when he got a better offer from Sears…P sued for specific performance & D defended on the basis that the terms of the option were too indefinite to enforce & that specific performance was an inappropriate remedy

·        held SP is available to enforce an option contract that has many uncertain terms

·        an option contract is enforceable even when important terms are undecided, at least where it is possible to infer these material terms from the surrounding circumstances, such as D’s relationship w/ other tenants regarding the amount of space, renal fees, etc

·        the essence of SP is not the nature of the contract but the inadequacy of legal remedies

·        here, even if it were possible to calculate a precise measure of damages for the breach of a long-term lease contract, money damages could not compensate P for the loss of the advantage s of participating in the shopping center & extending its geographic coverage

·        argument is there is no adequate remedy at law

Contracts for Personal Services

De Rivafinoli v. Corsetti

·        D (DeRivafinoli), an opera singer, agreed to perform on tour for P…D further agreed not to perform in any other production w/o P’s permission…P invested considerable time & expense in planning D’s dates…P then learned D had agreed to sing for another party in Cuba on same date…P sought SP of the contract w/ D & an injunction to prevent D from leaving the state…P also sought a writ authorizing the imprisonment of D unless D posted a bond…D was unable to post the bond & was jailed…

·        held a ct of equity will not order specific performance of a contract for personal service before the time specified for the performance to occur

·        a breach of a contract to perform has not occurred until the date scheduled for the performance has arrived

·        SP of a contract will not be ordered if the conditions precedent to performance have not been met

·        here, not only has the time for the performance not yet arrived, but also P has not yet made the initial payment to D…b/c there is no present duty, the ct finds the writ to be premature & thus orders the writ discharged

·        For exclusive service contracts – can’t force to perform exclusively, perform like you want…involuntary servitude

·        alleging P would have sufficient irreparable harm…however, granting SP would be impracticable or not feasible…to do so, would simply not make good sense

Negative Contracts

Negative Contract – prevents someone form doing an act based on an agreement of the contract

·        if you don’t do for me, you won’t do for others

Covenant Not to Compete:

·        they are enforceable…but ct’s take into consideration geographical area

·        consider how easy it is to find other employment

·        consider voluntary vs. termination

Lumley v. Wagner

·        D (Wagner) agreed to sing exclusively at P’s theater…D then made another agreement to sing elsewhere & abandoned P’s contract…D repudiated, claiming P failed to fulfill his pecuniary obligations under the contracts…P sought & was granted an injunction restraining D from performing anywhere else…D appeals, arguing P’s contract was affirmative & that injunctions are only proper as to negative contracts

·        held that where a contract calls for a party to perform exclusively for the other party, a ct can enjoin the party’s performance for any other party

·        although SP of the affirmative portion of the contract could not be ordered, the negative stipulation that D would not perform for anyone else could be specifically enforced

Rogers v. Runfola & Associates, Inc

·        P (Rogers) signed a convenant not to compete w/ their employer, D, whereby P’s agreed not to (i) engage in ct reporting in Franklin Co. for 2 years, (ii) solicit D’s clients for a lifetime…P’s sought a declaratory judgment that the covenants not to compete were enforceable…D counterclaim for SP & damages…ct found for P, who promptly started a ct. reporting business

·        held if a covenant not to compete imposes unreasonable restrictions, the ct may enforce it by modifying it to make it less restrictive

·        a covenant not to complete which imposes unreasonable restrictions on an employee is enforceable to the extent necessary to protect the employer’s  legitimate interests

·        a restraint is reasonable if it is no greater than is required to protect the employer, does not impose undue hardship on the employee, & is not injurious to the public

·        cts may fashion a reasonable covenant between parties, considering factors such as whether the employee has:

§         confidential information or trade secrets belonging to the employer, whether

§         the employer seeks to eliminate ordinary competition, whether

§         the restraints bar the employee’s sole means of support

·        here, the covenants are excessively restrictive b/c of the large geographical area involved & b/c of the duration of the lifetime restriction

·        has to be a legitimate interest by employer to protect for contract / convenant to be valid

Contracts for Arbitration

Grayson-Robinson Stores, Inc. v. Iris Construction Corp

·        P (Iris) had entered a contract w/ D in which P agreed to erect a commercial building as part of a shopping center that would be rented by P to D…the agreement provided for arbitration of nay disputes & empowered the arbitrator to award such relief as he found equitable, including specific performance…P couldn’t obtain mortgage money & argued impossibility before the arbitrators…finding no proof of actual impossibility, P was ordered to proceed w/ the construction…P appeals, arguing that ordering SP of a construction contract was against public policy

·        held a ct of equity can confirm an arbitration award that orders SP of a construction contract

·        there is no universal rule that an equity ct will never enforce a contract that requires building to be done

·        here, the ct is merely confirming an award made pursuant to authority expressly granted to the arbitrators by the contract

·        financial difficulties do not necessarily amount to impossibility

·        P had argued impossibility

Sprinzen v. Nomberg

·        P (Nomberg) was employed by D…P signed contract not to disclose certain info about union members & not to engage in organizing workers w/in a certain geographic area for 5 years after termination…the contract also contained an arbitration clause…P left, went to other Local & D demanded arbitration to compel compliance w/ the terms of the restrictive convenant…arbitrator issued award enjoining P’s employment…D moved to vacate, claiming award was unjust & the arbitrator was partial

·        held a ct may affirm an arbitration award involving restrictive covenants of employment when the parties expressly agree to submit disputes regarding such matters to arbitration

·        a ct may affirm an arbitration award involving restrictive covenants of employment when such disputes are submitted to the arbitrator by mutual consent of the parties

·        the law has adopted a policy of noninterference when parties have consented to arbitration

·        the utility of the arbitration process derives from its autonomy & cts must honor the decision of the parties to have their dispute settled in this manner

·        public policy is issue b/c ct will overturn if this is an issue

·        bottom line – even if arbitrator gets it wrong / too bad

·        P signed the org. agreement

·        still has to be a sense of equity & fairness in the process

 CHAPTER 7- EQUITABLE RELIEF AGAISNT TORTIOUS INTERFERENCE W/ LAND & CHATTELS

Waste

Waste occurs when an occupier of land commits acts harmful to the interest of

          some holder of title, who is entitled to preservation of the property

·        most waste cases, then, involve future interest remainder men suing life tenants for destruction & neglect

·        only waste is committed when it is done on others property, remainder/reversion

3 Types of Waste:

          1) Destructive – affirmative acts of destruction / allows it to fall

                   into disrepair

          2) Permissive – neglecting the property / purposely destroy property

3)     Ameliorative – changing character of land where value actually

increases / actually improve property

Earl Bathrust v. Burden

·        fish pond case

·        held a ct of equity can compel a lessee to maintain property properly & enjoin him from erecting buildings which interfere w/ another’s enjoyment of his property

·        a ct of equity may compel a lessee to properly maintain leased property & also restrain him from erecting buildings on it if they impair the lessor’s view

Doherty v. Allman

·        D (Allman) was the long-term lessee of certain property used as corn storage buildings…the reversionary interest in these leases was vested in P…b/c of changes in the neighborhood in which the buildings were located, D wanted to convert the storage buildings into dwellings…P objected to this act as constituting waste & an injunction permanently restraining D from converting the buildings was granted…

·        held may a ct of equity enjoin a long-term lessee from altering the existing buildings

·        a ct of equity will not enjoin a long-term lessee from modifying existing structures as long as such structures do not result in more than negligible damage to the interest of the reversioner

·        although the changes proposed by D might technically constitute ameliorative waste, the property would, no doubt, be worth more after conversion of the grain storage buildings into dwellings

·        ct can refuse to enjoin waste if such waste improves property, esp. where face of neighborhood is changing dramatically

Trespass

·        interference w/ one’s property unwanted interference, exclusive possession

·        whereas nuisance actions safeguard the use & enjoyment of property, trespass actions protect the possesory interest in property

·        it is important to understand the distinction between interests protected when considering equity questions addressing these torts

·        uninvited invasion of another’s property

·        metaphysical intrusion of your property

Wheelock v. Noonan

·        D (Noonan) had obtained P’s permission to place a few rocks on P’s vacant lot…this was a license, not a contract, which was to expire in the spring, the time at which D agreed to remove the rocks…during the winter, w/o P’s permission, D placed a huge quantity of rocks on property in violation of the terms of the license…P made repeated demands that D remove them…D promised to do so, but never removed the rocks…P sued & D appeals

·        held an equity ct can order relief when a P can bring an action at law for trespass

·        an equity ct may order relief even though a party may bring an action at law for trespass

·        although equity will not ordinarily interfere to redress a trespass, in a case of continuing trespass for which the remedy at law will be inadequate & will involve repeated actions by the injured party, a ct of equity may order relief

·        remedy at law is inadequate

Hirschberg v. Flusser

·        D (Flusser) in excavating his land for the purpose of building an addition, excavated a portion of P’s adjoining property…when D built his foundation & sidewall on P’s property, causing encroachment…P obtained a judgment entitling him to regain possession of that portion of his property…D did not remove the foundation & wall, &, upon execution of the judgment, the sheriff was unable to remove the encroachment b/c to do so would constitute a trespass & injury to D’s building

·        held equity may issue a mandatory injunction to remove an encroachment when legal title to the property is settled & the remedy at law is inadequate

·        equity may issue an injunction compelling the removal & possible injury to D’s property on the party who built the encroachment, rather than placing the burden of removal on the sheriff

·        can make an order even though would cause damage to building

·        multiple suits in action at law would be inadequate for trespass

Lucy Webb Hayes National Training School v. Geoghegan

·        D (Geoghegan) was a patient at a hospital maintained by P…P determined that D no longer needed hospital care & needed to go to a nursing home…P sought an injunction requiring D to remove his wife from the hospital on grounds D had become a trespasser…D argued that equity should not intervene b/c P had an adequate remedy at law for ejectment

·        held a ct of equity may issue an injunction restraining a continuing trespass despite the availability of the remedy of ejectment

·        a ct of equity may enjoin a continuing trespass b/c an action for ejectment is so cumbersome as to be rarely used

·        here, damages in this case would clearly be inadequate

·        there was a public interest here, preventing person from unnecessarily taking up space at hospital

Peters v. Archambualt

·        D’s (Archambualt) predecessor in title erected a house partly on D’s property & partly on the adjoining property belonging to P…the building extended several feet onto P’s property…ct ordered removal of the encroaching part of the building & D appeals

·        held a ct of equity may compel the removal of a structure that substantially encroaches upon the land of another even though the cost of removal is significantly greater than the extent of the injury suffered by the landowner upon whose property the building encroaches

·        in the proper circumstances, ct of equity will compel the removal of a substantial encroachment even though the cost is significantly greater than the extent of the injury suffered by landowner

Nuisance

·        interference w/ use & enjoyment of the property of another

·        can be public or private

·        individuals generally can secure relief for private nuisances, but not public nuisances, which must be abated through an action by the State or an arm thereof

·        however, a private individual may bring a public nuisance action when he has sustained a special damage different from that suffered by the public

Boomer v. Atlantic Cement Co.

·        D (Atlantic) operated a large cement plant…P troubled by the dirt, smoke, & vibration from D’s plant, sought an injunction & damages on the basis of nuisance…the trial ct allowed damages for those injuries that had already occurred but refused to grant an injunction

·        held a ct may not refuse to order an injunction where the economic consequence of that order far outweighs the consequence of the nuisance

·        a ct may order an injunction where the economic consequence of injunction could outweigh the economic consequence of the nuisance, if the injunction is conditional on the payment of permanent damages to P’s compensating them for the harm done

·        the prospect of permanent damages will serve as an incentive for D to find means to abate the nuisance

·        the injunction in this case merely serves the purpose of assuring payment of any damages

·        judgment was reversed

·        ct has to deal w/ closing a business…party must show substantial damage

Spur Industries, Inc. v. Del E. Webb Development Co.

·        D (Spur) est. a cattle feedlot in a remote area…P began a residential development three years later  & this development expanded toward D’s feedlot…eventually the odor & flies around the feedlot rendered the residential properties very difficult to sell & P brought an action to enjoin the feedlot operation…ct found the nuisance was public as well as private & issued a permanent injunction…ct also required P to indemnify D for its losses

·        where a developer brings purchasers to a preexisting nuisance, the developer will be required to compensate the nuisance owner for damages resulting from an injunction

·        where a developer brings purchasers to a nuisance, he must compensate the nuisance owner for damages resulting from an injunction

·        injunction was proper b/c portions of the development were damaged by the nuisance of the feedlot

·        but b/c the feedlot was originally lawful & only became a nuisance as the development expanded toward it, it would be inequitable to require D to bear the entire loss

·        two questions – where operation is lawful 1^st, becomes nuisance 2^nd will ct enforce injunction / could enjoin as a public nuisance, since affects such a large area

Conversion

·        equitable replevin – unauthorized possession of chattels

·        replevin is an action to recover personal property that was unlawfully taken

·        replevin may be used when you can’t replace/give back w/ an amount of money

·        doctrine of equitable conversion provides that after a land sale contract has been effectuated, the buyer is considered the owner of the land 7 the seller is holder of the legal title only as security for the proceeds of the purchase price

·        equitable conversion is predicated on the maxim that “equity regards that as done which ought to be done”

·        w/ respect to option contracts, the majority rule is that equitable conversion occurs when the option is exercised

Burr v. Bloomsburg

·        P (Burr) sued D for recovery of a diamond ring that P’s mother had given P…P had loaned the ring to her brother, D’s husband, who gave P a written receipt stating that on his death he would return the ring to their father’s family…D’s husband later asked P to return the paper, but she refused…16 years later, D’s husband bequeathed the ring to D…P sued seeking equitable replevin to recover the ring from D

·        a ct may enforce the delivery of a specific chattel that has peculiar subjective value to the party seeking delivery…judgment for P

·        this is a case where the market value of an object of a suit does not reflect the emotional or imaginary value of the object to the person seeking recovery – the cts may permit specific performance of a contract involving the chattel

·        in such cases, where the pecuniary value is not readily ascertained & has not been fixed by the parties, pecuniary compensation is an inadequate remedy

·        equity is not limited to specific performance of contract involving special chattels; it can also enforce the surrender of chattels in specie which have been tortiously obtained or wrongfully detained

·        Replevin is a legal remedy for the tortuous taking or retention of personal property, it enables the P to obtain a writ that authorizes the sheriff to seize the property & give it to the P

CHAPTER 8 – EQUITABLE DEFENSES

The “Unclean Hands” Doctrine

·        he who come to equity, must do equity

·        unclean hands applies if the unclean hand act relates to same matter that you are trying to stop, etc

·        if a P is chargeable w/ inequitable conduct w/ respect to the same transaction in which he/she is involved, the D of unclean hands is available

·        where the P’s conduct has been unconscionable, inequitable, or characterized by bad faith, a ct of equity will refuse him/her relief

Carmen v. Fox Film Corp.

·        P (Carmen), a movie actress, signed a contract w/ D while she was a minor…while the contract still had several years to run & before P reached majority, she signed another contract, which called for P’s exclusive services for more money…P represented to the second company she was free to accept this employment…when P reached her majority, she repudiated on D on grounds it was made when she was an infant…D insisted P continue w/ them & threatened the other company if they employed P…they agreed not to employee P & D agreed to indemnify them against any suit P might bring…P brought an action in equity against D (i) to have the contract w/ D declared void; (ii) for an injunction restraining D from interfering w/ her contract rights w/ any person or company; & (iii) for damages

·        held a P who has been guilty of misconduct or wrongdoing toward a D in the transaction for which P brings suit may not be granted relief by a ct of equity

·        P’s conduct was such she was not entitled to relief

·        P mislead the other company as to she was free to negotiate

·        if the contract w/ D was valid, she was under both a legal & moral obligation not to contact w/ the other company

·        P’s action in repudiating her word was misconduct / P’s hands were unclean

·        misconduct will bar relief in a ct of equity need not necessarily be of such a nature as to be punishable as a crime or constitute the basis of a legal action

·        if P had sought to enforce contract at law, she could have enforced them…this is an instance where law & equity diverge

·        example where equity ct will make their decisions w/o regard to ct at law

Claire v. Rue de Paris, Inc

·        P (Claire) brought a shareholder action alleging waste of corporate assets against D…P charged the other officers & directors of D were allowing D’s places of business to sell alcohol on Sundays & to sell watered down drinks…& they were taking money out of the business each week w/o a proper accounting…however, P also took money, food, & beverages from the business….

·        held a ct of equity may not grant relief to a shareholder of a corporation for acts complained of when the shareholder has participated in that act

·        when a person participates in the performance of an act, they are estopped to complain thereof in equity

·        P hands were unclean

·        Unclean hands is about the same transaction

·        the unclean hands principle does not repel all sinners, nor does it disqualify any complainant from obtaining relief

Laches & the Statute of Limitations

Laches – unreasonable delay or negligence in pursuing a right or claim, esp. an

              equt. one; laches can be asserted as a defense in order to prevent

              the claimant from obtaining relief; the equitable doctrine by which cts

              deny relief to a claimant who has unreasonably delayed or been

              negligent in asserting a claim

·        an equitable d doctrine which prevents enforcement of a claim or right which, b/c of neglect, lapse of time, & other circumstances, has resulted in some change in the relationship of the property or parties that is prejudicial to the adverse party

·        the equitable time bar

·        it is neglect to assert a right or claim that, taken together w/ a lapse of time & other circumstances, causes disadvantage or prejudice to the adverse party

·        laches is an equitable doctrine designed to prevent unfairness to a D due to a P’s delay in filing suit, in the absence of an appropriate statute of limitations

·        statute of limitations apply to cases at law

·        laches apply in equity

·        laches are at the discretion of the ct

·        some cts will run both, rarely will laches extend beyond statute of limitations

·        laches may be shorter, depends on circumstances, like unreasonable delay, prejudice

·        Elements to be met before laches can be invoked to bar litigation:

-                 a delay in asserting the claim

-                 delay was inexcusable

-                 undue prejudice to the party vs. whom the claim is asserted

Environmental Defense Fund, Inc. v. Alexander

·        concerns Tennessee-Tombigbee Waterway…it took thirty years to get underway…an environmental group filed to enjoin the construction…the suit was file in 1976…an amended complaint was filed …by this time D had expended millions, but P did not seek immediate injunctive relief to halt further expenditures…district ct concluded not to reach the issue b/c it was barred by laches…P (Environmental) appeals

·        held that in order to invoke the equitable defense of laches, a D must show that those whom it seeks to bar by invoking laches were or should have been aware of the questionable nature of the action

·        the D must show that those whom it seeks to bar by invoking laches were or should have been aware of the questionable nature of the action

·        in this case, the opponents of the waterway had an adequate indication that D had expanded the width of the channel beyond its statutorily authorized width

Estoppel

·        a legally imposed bar resulting from one’s own conduct & precluding any denial or assertion regarding a fact

·        a doctrine that prevents a person from adopting an inconsistent position, attitude, or action if it will result in injury to another

·        the aggrieved party reasonably relied on words & conduct of the person to be estopped in allowing the limitation period to expire

·        fraud not necessary: only that person to be estopped has mislead another to its prejudice

·        Elements: (1) reliance (2) detriment

Barry v. Donnelly

·        P received a painting from famous painter, Murphy…P claimed the painting was a gift at various times…D, Murphy’s daughter, later claimed the painting was merely loaned to P & would ultimately to be returned to the family…evd. supported both views…in 1984, P sought a declaratory judgment the painting was hers either as a gift or by the running of the 5 year statute of limitations on actions to recover property…P then moved for summary judgment, conceding D’s claims that the transaction was a bailment & that P had promised to return the painting even after she claimed ownership…ct granted summary judgment on P’s letter was an act inconsistent w/ the asserted bailment & thus triggered the statute of limitations…D appeals

·        held equitable estoppel does not require actual fraud by the person sought to be estopped

·        the ct granted P summary judgment despite her representations that she would return the painting to D b/c the ct considered these representations to fall short of fraud sufficient to toll the statute of limitations

·        however, conduct short of actual fraud may estop a person from pleading the bar of a statute of limitations

·        equitable estoppel may apply where the aggrieved party reasonably relies on the words & conduct of the other

·        the basic premise for this rule is to prevent someone from lulling another person into a false sense of security to delay that person’s claim beyond the bar of the statute of limitations, & then plead the delay as a defense

·        actual fraud or deceit is not required

·        to est. equitable estoppel, it is not necessary to show actual fraud, but only the person to be estopped has mislead another to his prejudice

CHAPTER 9 – EQUITABLE DEFENSES PECULIAR TO SPECIFIC PERFORMANCE ;

RESCISSION & REFORMATION

Fraud, Misrepresentation, Concealment, & Nondisclosure

Fraud

·        fraud – to cheat another, undue advantage, violation of good faith

·        it is not necessary that injury results only to vendor, sufficient to a 3^rd party

·        damage is not necessary

·        reliance upon it, deceived by fraud

Kelly v. Central Pacific Railroad Co.

·        D (RR) offered certain tracts of land for sale to actual occupants of the land…based on P’s false representation that he was a bona fide occupant, D agreed to convey certain land to P…when D learned of deception, it notified P it would not convey the land & returned P’s first payment…P refused to accept & sued for SP, alleging there had been no actual injury since D would have received the same amount of money for the land…P appeals

·        held that in order to defeat a suit for SP of a land sale contract on the ground of fraud, the fraud does not have to produce actual injury

·        although ct of equity will not set aside a contract obtained through fraud unless it actually produces injury, this is not the case of suits for SP

·        a ct may refuse SP of a contract which it would not set aside

·        in order to defeat a suit for SP of a contract to sell land upon the ground of fraud, it is not necessary that the fraud be productive of damage either to the vendor or the 3^rd persons

·        it is sufficient for a ct to refuse enforcement if the misrepresentation was intentional & made for the purpose of deceiving the vendor & the vendor relies upon it, was deceived by it, & would not have entered the contract but for the deception

Innocent Misrepresentation & Concealment

·        ct can deny SP even if the mistake was innocent if:

-                 if false & material

-                 relied upon

Standard Steel Car Co. v. Stamm

·        P was assigned the option to purchase D’s (Stamm) land from Anderson…Anderson had negotiated for the option w/o disclosing his knowledge of the likelihood that a manufacturing plant would be coming to this area…when P tendered payment to D, D refused to convey the land…P’s sued for SP & the lower ct denied relief on basis of Anderson’s concealment…

·        held a ct. of equity may not refuse to order SP of an option contract on the ground of nondisclosure when the information not disclosed was not a present fact but merely a future possibility

·        in order for concealment to be material, the thing concealed must be something which the concealing party was under some legal or equitable duty to disclose

Nondisclosure as a Breach of the Duty of Good Faith

Market St. Associates Ltd. v. Frey

·        P (Market) was a lessee for property from D, the trustee for the trust that owned the property…the lease allowed the lessee to ask the lessor to finance improvements on the premises…if the lessor declined, the lessee could give notice it would purchase property pursuant to a valuation formula contained in the contract…P asked D if it could buy the property…D responded it would sell at market value…P then started discussions regarding financing improvements…D declined to provide the financing …later P notified D it was exercising its option to purchase under the lease option…the contract formula generated a lower price than what D offered to sell for…this was the first time D became aware of the lease option…D offered to negotiate financing for improvements, but P refused…D refused to convey the property…P sued for SP…P appeals

·        held a party may not sue for SP when during the negotiations it failed to inform the other party of its intentions under a clause in the contract that was clearly in its favor

·        there is a duty of good faith in contract performance that prohibits one party from taking deliberate advantage of an oversight by the contract partner concerning rights under the contract

·        by not notifying D of the lease option, it is implied P tried to trick D in violation of the duty of good faith

·        it is not Ps failure to refer to a specific part of the contract that is the problem, but P’s failure to mention what it clearly preferred to do, i.e., purchase the property at the discounted price per the option

Mistake

Rescission

·        this is the process via which a contract is disaffirmed at the outset, made void ab initio (from the beginning), & rescinded

·        the effect of rescission is that the original agreement is considered violable & rescinded

·        grounds for rescission include:

-                 mutual mistake of a material fact

-                 duress

-                 undue influence

-                 misrepresentation

-                 illegality

-                 lack of capacity

-                 failure of consideration

·        to invoke the remedy of rescission, it is required that the basis therefor occur either before or at the time the contract is made

·        defenses to rescission are generally laches, unclean hands, etc

Costello v. Sykes

·        sale of stock where bank employee’s altered worth to hide embezzlement…the parties to the sale were mutually mistaken as to the financial condition of the bank…upon learning the truth, P tendered the stock to D & demanded repayment of purchase price…D (Sykes) refused…P appeals

·        held a ct may not grant rescission of a contract for the sale of the stock b/c of mutual mistake as to the value of the stock

·        as long as the means of information are open to all parties, rescission of a contract for the sale of stocks will not be granted b/c of mutual mistake as to the value of the stock

·        to grant relief on the basis a that the thing contracted for was worth less than both parties had believed would strip contracts of their stability

Panco v. Rogers

·        P (Panco), an elderly deaf man w/ little education & wife, entered into an oral agreement to sell their home to D…P & D disagree on amount of consideration…P signed a written agreement prepared by D’s attorney setting consideration at price D contends…when P’s daughter tried to explain to P amount lesser amount, P argued it was a partial payment…P’s asked D to cancel transaction, offered to return his deposit, & pay his attorney’s expenses…D declined & P sought rescission

·        held a ct may not grant rescission of a contract on the basis of unilateral mistake

·        held a ct can refuse to order SP of a contract in which there has been a unilateral mistake if to do so would result in undue hardship to the mistaken party

·        generally, rescission can’t be enforced on account of unilateral mistake where the other party neither shared the mistake nor was guilty of fraud, undue influence, concealment, or bad faith

·        where SP is sought, the ct will consider all to the circumstances surrounding the contract

·        a ct must be satisfied the claim is fair, reasonable, & just; & in judging its fairness, the ct will also consider the relationship of the parties

·        where the enforcement of a contract for the sale of land would be harsh, oppressive, or manifestly unjust to one party, SP will not be ordered & the parties will be left to their remedy at law

Volpe v. Schlobohm

·        P (Schlobohm) & D 7 3^rd party formed a partnership for the purpose of carrying on a food distributing business…at time of formation P & 3^rd were franchisees of Pepperidge Farms & D was franchisee of Stella D’Oro…P & 3^rd allege their franchisees was contributed as a partnership asset…however, their revenues were deposited in the partnership account & distributed to the partners…D alleged that it was his understanding the Pepperidge franchises were assets, as was his own…the partnership broke down after 3^rd w/drew & took his franchise w/ him…P purchased 3^rd’s interest & D objected he was not given an opportunity to purchase a proportionate share of 3^rd’s interest…P brought suit for rescission from partnership…P was awarded rescission & D was awarded nothing but 30% interest in the property…D appeals

·        held a ct may order rescission upon mutual mistake even though the mistakes of the parties w/ regard to a certain matter are not the same as long as the mistakes relate to the same matter & it is possible to restore the contracting parties to their original positions & the rights of 3^rd parties are unaffected

Reformation

·        reformation is granted by cts when a written contract or document embodying the parties’ agreement contains a mistake & the document is changed to conform to the actual intent of the parties

·        reformation may be based on the grounds of:

-                 mutual mistake of the parties

-                 unilateral mistake coupled w/ fraud or other inequitable conduct; &

-                 misrepresentation

·        equitable defenses are available

Mutual of Omaha Insurance Co. v. Russell

·        P (Russell) mistakenly bought a different type of flight insurance policy for what she intended…P was killed on her return flight, 12 days after the policy expired…P’s husband sought reformation…D appeals

·        held reformation may not be granted in a case of unilateral mistake, absent fraud on the part of the other party

Nash v. Kornblum

·        P (Nash) gave a sales est. for fencing tennis cts owned by D…D excepted the proposal…during performance, D asked P to enclose a handball ct…when billed for more, D paid the org. est.…P sued to have the contract reformed…P appeals

·        held a party can may obtain equitable reformation of a written contract that contains an essential term that does not represent the term as originally agreed upon in the oral negotiations…reversed

·        equitable reformation is available only when P est. his right to such relief by clear, positive, & convincing evd.

·        there must be a certainty of error

·        unilateral mistake is insufficient in the absence of fraud; both parties must have made the mistake so that neuter’s intentions are expressed in the contract

·        reformation is intended solely to state correctly the parties’ mutual intent, such as to correct a mistake by the party who wrote the contract

Mistake as a Defense to Specific Performance

Mansfield v. Sherman

·        D (Sherman) agreed to sell 2 lots to P…D believed the lots did not contain building sites…by mistake, D agreed to sell one lot which did have a valuable building site…P knew the price was very low for the lot…P brought suit to compel D to convey the lot…D had refused to perform on grounds he had made a mistake as to a material fact & not merely an error in judgment

·        held a ct may refuse to order SP of a land sale contract where there has been a unilateral mistake & enforcement of the contract would cause a harsh & inequitable result

·        a ct of equity will not aid one party to take advantage of the mistake of another party

Hardship or Unfairness

Patel v. Ali

·        D (Ali) contracted to sell P a house they owned jointly…the transaction was delayed…over three years, D’s suffered numerous hardships…P sought SP of the contract & D objected that due to the hardship she would suffer if she were forced to move & P should only receive monetary damages

·        held a ct may decline to grant SP solely b/c the D will suffer undue hardship as a result of a change in circumstances that occurred after the contract was entered

·        D’s hardship clearly exceeds P’s

·        SP is a discretionary remedy, even though it is normally granted for breach of a contract to sell land or buildings…an exception is when hardship would result

·        the normal hardship that justifies ct’s not granting SP is either:

-                 a hardship existing at the time the contract was entered; or

-                 a hardship due in some way to the P

·        in exceptional cases, cts have refuse SP

·        mere pecuniary difficulties cannot excuse performance

The Statute of Frauds

Mentz v. Newwitter

·        P (Mentz) authorized an auctioneer to sell a certain piece of his land…D bought the land on a bid…the only written record of the sale was a memo made by the auctioneer which did not name the vendor nor give any description by which P could be ID…D refused to go through w/ the sale & P sought to recover the difference between the bid price & what the property resold for…D appeals finding for P

·        held the failure of a writing to show the name of the vendor will render it insufficient as a memo of sale under Statute of Frauds

·        a memo must contain substantially the whole agreement & all of its material terms & conditions in order to satisfy the Statute of Frauds

·        the essentials can not be parol evd. & it must include the subject matter of the sale, the terms, & the names or descriptions of the parties

Laythoarp v. Bryant

·        P did not sign a memorandum of sale, which included the property description, the price, & Id the parties…D refused to complete the sale, alleging the memo was insufficient under Statute of Frauds due to the lack of P’s signature

·        held it is not a requirement that both parities signature appear on a memo in order to comply w/ the Statute of Frauds

·        the Statute of Frauds only requires the signature of the party to be charged

·        it does not operate to impose a burden on the vendor of producing proof of some other paper in the hands of the opposite party

All participants in the study group must always follow the BSL Honor Code.