Mercantile Trust Co. v. Hensey , 21 App. D.C. 38 ( 1903 )

Mr. Chief Justice Alvey

delivered the opinion of the Court:

It is conceded that the 15 houses, including the four that were advertised for sale under the deed of trust made by Hensey to the trustees, Russell and Johnson, were finished, and accepted by Warner and Rheem, and, of course, all liability on the bond and contract to them ceased. The only ground for liability of Hensey to the Mercantile Trust Company, under and by virtue of the deed of trust, would be for any and all loss, cost, damage or expense incurred by the trust company, by reason of its having become hound as surety for Hensey in the bond given to Warner and Rheem. The. deed of trust was not intended as indemnity, and does not furnish security, for any default of Hensey, under the contract with Jones, the original contractor, in failing to complete the 21 houses. That was an independent contract, and for the faithful performance of which the Mercantile Trust Company became surety for Jones. Hpon the failure of Jones to proceed with the work to completion, the Mercantile Trust Company, as surety for the contractor, undertook and proceeded with the work to completion, and by so doing placed itself in the shoes of Jones, the original contractor, and thereby became entitled to all the rights and remedies to receive and recover the price of the work done by it, according to the contract made with Jones. And if there had been no other contract made with respect to any portion of these 21 houses, the matter would be plain enough; but the contract made by Hensey with Warner and Rheem has introduced the apparent perplexity. By that contract Hensey undertook to construct, or rather to complete, and sell or mortgage for an advanced price, 15 of the. 21 houses, and for the execution of this latter contract the Mercantile Trust Company became surety. The Mercantile Trust Company, in its character of surety, therefore, became doubly bound with respect to 15 of the houses, but on separate and distinct contracts, and for different contract prices.

Hpon the default, or failure of Jones to proceed with the work on the 21 houses, the Mercantile Trust Company, as surety, assumed control and proceeded with the work on all the 21 houses, and did not in any manner attempt to designate under what contract it was proceeding with the work. It was, however, bound for the completion of all the 21 houses, by the contract between Hensey and Jones, and this Hensey was entitled to insist upon, and that the work should be done for the aggregate sum agreed upon in the contract with Jones, and not at the advanced rate or price agreed upon in the contract for the completion and sale or mortgage of the 15 houses to Warner and Bheem.

It is argued, however, that as Hensey has not paid all of the contract price agreed to be paid to Jones for the building of the 21 houses for Hensey, the Mercantile Trust Company, who, as surety, completed the houses, has a claim for the balance; and that such claim entitles the company to have the four lots in question sold, under and by virtue of the deed of trust given as indemnity against loss under the contract with Warner and Bheem. This contention is based upon the maxim, that he who seeks equity must do equity, as a condition upon which he can obtain relief. The maxim is certainly a sound one, and is well established upon authority ; but it can be applied only under certain restrictions and limitations which would seem to exclude its application under the facts of this case.

Pomeroy, in his work on Equity Jurisprudence, Vbl. 1, Sec. 386, has analyzed this maxim, and shows with great clearness under what conditions it can be applied. He says: “ If we analyze this general formula, we shall obtain a more accurate notion of the real scope and effect of the principle. (1) In the first place the rule only applies where a party is applying as actor to a court of equity in order to obtain some equitable relief, that is, some relief equitable in its essential nature, as an injunction or a cancelation * * * and it is necessarily assumed that the party would, but for the operation of the rule, be entitled to all the relief which he demands. Hnless the party were otherwise so entitled there would plainly be no occasion for invoking the rule. * * * (2) The court obtains no authority from the principle to impose any arbitrary condition not warranted by the settled doctrines of equity jurisprudence; the court cannot deprive a plaintiff of his full equitable rights under the pretense of awarding to the defendant something to which he has no equitable right, something which equity jurisprudence does not recognize. * * * (3) Finally, the principle will not apply so as to compel the plaintiff to do equity when the relief sought by the plaintiff and the equitable right or relief secured or awarded to the defendant belong to or grew out of two entirely separate and distinct matters.”

Many authorities are cited by the author, and some of them by the counsel for the appellants; and while the rule is variously stated in the several decisions referred to, they all maintain substantially the same general principle. Among the cases cited is that of Malone v. Bostwick, 96 Cal. 53; and without stating the facts of that case, the principle that was applied is thus briefly but clearly stated in the opinion of the court:

“ It is argued, however, that as the plaintiff is here seeking the aid of a court of equity, he should be compelled to do equity, but the maxim of equity jurisprudence only applies where the relief sought by the plaintiff and the right demanded by the defendant belong to or grow out of the same transaction. It has no application where the demand of the defendant is based upon a contract separate and distinct from that which forms the subject of the plaintiff’s action.” And this is the principle maintained by all the well-considered cases. There is nothing in the case of Comstock v. Johnson, 46 N. Y. 615, at all inconsistent with the general principle as stated by Pomeroy and the other authorities cited.

The contract of Hensey with Jones for the work and materials to be supplied for the construction and completion of the 21 houses on lots belonging to Hensey, and that of Hensey with Warner and Eheem for the construction and sale or mortgage of the 15 houses, were separate and distinct contracts, and based on separate and distinct considerations. And though the contracts bear the same date, and the Mercantóle Trust Company is surety on the bonds given for the performance of both contracts, those facts do not malee the contracts dependent the one upon the other. Each contract imposed its own separate liability; and whatever liability may still subsist under the contract between Hensey and Jones in respect to the 21 houses, may be the subject-matter of other litigation, and would appear to be peculiarly within the cognizance of a court of law.

We are of opinion that the decree of the court below was correct, and should therefore be affirmed; and it is so -ordered. Decree affirmed.

A writ of error to the Supreme Court of the United States was prayed by the appellants and allowed January 21, 1903.