Full opinion text
THOMAS, District Judge. This matter is now before the court on the rule nisi issued June 27, 1933, directing the executors’ testator, Robert E. Farley, to show cause why he should not specifically perform his contract to purchase real estate in custodia legis herein, pay damages accrued to the estate in receivership by reason of his alleged anticipatory breach; or, in the alterna-' tive, why the property should not be ordered resold at his risk, he to respond to any loss resulting from resale and from prior accrued damage. The rule further directed him to show cause why, if he proved recusant, he should not he punished for contempt and why, pendente lite, he should not be enjoined from transferring any of his assets. On August 29,1933, Farley appeared generally with respect to all portions of the rule whieh required him to show cause why he should not specifically perform his contract and/or pay money damages, but, on the ground that he had been served without the District of Connecticut at his home in White Plains, N. Y., where he had been for some time confined by illness, he appeared specially with respect to that portion of the rule whieh required him to show cause why ho should not respond to the additional incidental relief prayed for and be amenable to contempt proceedings, if he proved recusant. In opposition to the rule ho served answering affidavits asserting that title to the property was unmarketable, and he prayed that the rule be discharged and that he be relieved of paying the balance of the purchase price, about <$150,000, and that his $10,000 deposited under the contract be returned with interest. Thereafter, the receivers served reply affidavits. On September 28,1933, and shortly before the matter was to have been argued, Farley suddenly died. This proceeding was accordingly continued until the appointment of an exeeutor of the Farley estate. On October 14, 1933, letters testamentary issued out of the Surrogate’s Court, Westchester county, N. Y., to his executors, and there was then served on them a writ of scire facias issued by this court pursuant to Revised Statutes, § 955 (28 USCA § 778) to appear and be substituted herein for their testator, the deceased respondent. In response to the writ, the executors appeared here specially and moved to quash the writ. In the opinion filed February 17, 1934, and reported in (D. C.) 6 F.Supp. 72, I concluded that, both on the authority of decided cases and likewise on principle, the executors’ motion must be denied, and, in accordance with the order entered thereon, the executors filed their general appearance in this proceeding, reserving, however, the rights and objections theretofore raised; and the pending issue was argued on its merits on April 2, 1934. Accordingly, I am now deciding the controversy on its merits and the question presented is this, Was Farley’s attempted rescission justified because of the unmarkotabilily of title as he contended, or did he, as the receivers contend, commit an anticipatory breach 9 If he did, then I am also to determine what remedy under all the circumstances shall be applied against his executors and the testamentary estate. The general rule respecting a vendor’s title is stated in vol. 3, § 1405, of Pomeroy’s Equity Jurisprudence. The author says: “The vendor’s title must be free from rea- • sonable doubt. In suits by a vendor the purchaser will not be compelled to complete the contract, unless the title is free from any reasonable doubt.” The authorities sustain the rule that while the title need not be fatally defective to relieve a vendee of specific performance, on the other hand it need not be perfect to entitle the vendor to that relief; a fortiori, in respect of relief in the form of money damages. In view of this rule, I am not called upon to decide whether the title was perfect. In the absence of perfection or an instrument of precision to determine the marketability of title, eourts apply the tests developed by the market place where reasonableness must prevail. In this suit involving a contract made and to be performed in Connecticut with respect to land in this state, the matter is governed by the law of this state except as to all questions of the power of federal eourts and of procedure therein. In a recent decision of the Supreme Court of Errors of Connecticut, defining marketability of title — Perkins v. August, 109 Conn. 452, on page 456, 146 A. 831, 832 — Judge Maltbie, writing for that court, said: “Even though wo assume that in all such agreements, unless a contrary intent appears, the law implies a promise by the vendor that the title whieh he conveys shall be a good marketable title, the rule at its broadest would not mean that a mere suspicion cast upon the title will be regarded as sufficient to make it unmarketable, Conley v. Finn, 171 Mass. 70, 72, 50 N. E. 460, 68 Am. St. Rep. 399; 27 R. C. L. 490; but the defect must have at least sueb substantial weight that the land cannot again be sold at a fair price to a reasonable purchaser or mortgaged to a person of reasonable prudence as a security for the loan of money. Moore v. Williams, 115 N. Y. 586, 592, 22 N. E. 233, 5 L. R. A. 654, 12 Am. St. Rep. 844; Maupin, Op. Cit. p. 769; 27 R. C. L. 490.” And further at page 457 of 109 Conn., 146 A. 831, 833: “While it is frequently said that, if parol evidence will be necessary to remove a doubt as to the validity and sufficiency of the vendor’s title, the purchaser cannot be compelled to complete the contract, an examination of the cases will show that this is far from an invariable rule, where the agreement is one merely to give a good marketable title. Even in states where the vendor is held to as strict a rule in this regard as anywhere, title by adverse possession has been held sufficient. Conley v. Finn, 171 Mass. 70, 73, 50 N. E. 460, 68 Am. St. Rep. 399; Freedman v. Oppenheim, 187 N. Y. 101, 105, 79 N. E. 841, 116 Am. St. Rep. 595.” The respondents cannot be said to dispute the above'test of marketability for they, too, rely upon and quote from Moore v. Williams, the New York case cited by Judge Maltbie in the Perkins Case, supra. In that case, page 592 of 115 N. Y., 22 N. E. 233, 234, Judge Earl said: “A purchaser will not generally be compelled to take a title when there is a defect in the record title which can be cured only by a resort to phrol evidence, or when there is an apparent incumbrance which can be removed or defeated only by such evidence; and, so far as there arc any exceptions to this rule, they are extraordinary eases, in which it is very clear that the purchaser can suffer no harm from the defect or incumbrance.” The receivers’ counsel further rely upon and quote from Todd v. Union Dime Savings Institution, 118 N. Y. 337, 23 N. E. 299; also in Id., 128 N. Y. 636, 28 N. E. 504. On page 638 of 128 N. Y., 28 N. E. 504, 506, the Court of Appeals stated the rule as follows: “A purchaser (of real estate) is not entitled to demand a title absolutely free from all suspicion or possible defect. He may claim a marketable title, and that means a title which a reasonable purchaser, well informed as to the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear upon such transactions, be willing to accept and ought to accept.” Thus, it will be observed that even in New York, where a heavier burden is placed upon the vendor than in Connecticut, a title is none the less marketable though it be not absolutely free from all suspicion or possible defect. It will also be observed that the New York Court of Appeals holds the buyer to a standard of good faith. He must be “willing and anxious to perform his contract,” an element of special significance here, in an equity cause, and where a judicial contract is involved, and where, as contended by the buyer’s executors, the plea for specific performance against them is addressed to the court’s discretion. The Connecticut courts, when called upon to determine whether there existed any reasonable doubt of marketability of title, and whether specific performance will be decreed, apply flexible principles and adopt that rule which, on the facts of the particular ease, will work a substantially equitable disposition of the problem. The decisions also indicate that the court, besides giving due weight to general principles of equity jurisprudence, consider particularly: (1) Whether the alleged incumbrance is of a substantial nature; (2) whether the. buyer contracted with knowledge of the state of the title or with knowledge of the particular alleged incumbrances; (3) whether a reasonable opportunity was afforded the seller to clear title; and (4) if there occurred an anticipatory repudiation by the buyer, the seller is excused from any further attempt to clear the title. See as illustrations Perkins v. August, supra; Romanoff v. De Santo, 101 Conn. 504, 126 A. 694; Stavnezer et al. v. Cooley, 115 Conn. 452, 161 A. 863; Clowes v. Miller, 74 Conn. 287, 50 A. 728. Thus, in the Clowes Case, the rule is expressed by Judge Hall at page 295 of 74 Conn., 50 A. 728, 731: “When the specific performance of a contract is sought to be enforced, courts of equity will look to the substance of the transaction, to the purpose of the agreement, and the real understanding of the parties, whether expressed in the written contract or not, and will never decree the specific performance of a contract when its enforcement will defeat the primary object of the agreement and the real understanding of the parties.” Citing cases. In the Romanoff Case, supra, the court found that there was outstanding a lease to a greenhouse on the land; that the record title had not yet been transferred to the contract .seller; that provision had not yet been made for financing mortgages; and that the proposed deed had been incorrectly drawn, yet the court decided that the parties contracted with knowledge of the greenhouse lease though it was not expressly mentioned as an incumbrance, and that it did not appear that the other objections would not have been removed but for the buyer’s direct refusal to perform, and that in a suit to recover money damages, the anticipatory breach relieved the plaintiff of the duty to continue to perfect his title. On the other hand, in the Stavnezer Case, supra, the court held the buyer was relieved because the seller, long after the contract, voluntarily encumbered the property by a sewage right of way grant to the city whereby the future owner became bound to pay city assessments of an unknown amount. With these general rules as a guide, I reach the conclusion in the case at bar that there was no reasonable doubt as to the marketability of the title and that Farley, the vendee, committed an anticipatory breach when on November 25,1931, he gave notice that he would not accept title. Before considering the specific objections urged in behalf of the vendee to cast reasonable doubt upon the title’s marketability, I reach the conclusion that there is no escape for the vendee on the theory later suggested by his executors that even if the title was free from reasonable doubt, he was relieved of his bargain by reason of the vendors’ alleged delay in perfecting title. On the contrary, the vendors, at the inception of this suit, complained that while they at all times were free of fault in that respect, the vendee himself, by his own conduct and in the face of protest by the vendors, delayed and impeded in bad faith the perfecting of title. Against the considerable and convincing evidence to that effect, the vendee, in his answer, contented himself with a brief general denial, which is refuted in the reply affidavits. Disregarding .delays, avoidable or otherwise, on the part of the persons not subject to the control of either party, e. g., the surveyor and the title company’s examiners, the record leaves no doubt but that as between vendors and vendee, the former acted with reasonable dispatch under the circumstances, while the latter was not free of fault in that direction and, under the pressure of economic conditions, desired postponement of a title closing. My reasons for reaching these conclusions will appear more fully in my discussion of other questions. On the record, I do not think the element of time became an issue; the contract itself did not make time of the essence; the closing date was by clear implication movable; and I am considering the question at this point only because counsel for the executors have- raised this issue. At any rate, whether or not it be material, I find that if either party was at fault, it was the vendee and he may not justly be relieved of- his contract on the ground of mere delay on the part of the vendor in perfecting title. If, as I conclude, there had not expired the time within which, expressly or impliedly, the receivers were bound to tender title, then Farley’s direct repudiation was an anticipatory breach which, if the alternative remedy of money damages is to be applied, then under the authorities the breach relieved the receivers from perfecting the title if we assume at that time it was not yet marketable. Romanoff v. De Santo, supra. If the remedy of specific performance is to be applied, then under the authority of Batchelar v. Batchelar, 244 N. Y. 274, 155 N. E. 123, the receivers had a reasonable time within which to perfect title. Farley’s executors have now suggested that a different rule applies in the ease of a judicial sales contract, and they refer to Batchelar v. Batchelar, 244 N. Y. 274, 155 N. E. 123. But I find therein nothing to sustain their view. The case is really, if anything, authority against them. The Court of Appeals decided that a motion by the purchaser at judicial sale to be relieved of his contract because of vendor’s delay in perfecting title is addressed to the discretion of the court and the rule to be applied is that of fairness under all the circumstances of the particular ease. Judge Pound’s opinion at page 277 of 244 N. Y., 155 N. E. 123, 124, reads: “When a reasonable time has elapsed after closing day, and the title remains defective, the purchaser may move the court to be relieved from his purchase. The court may, „as the facts permit, in its discretion, deny the application absolutely or conditionally or may grant it, and its determination may not be reviewed in this court. • * * The whole matter is before the Special Term, which applies the rule of fairness. If the defect in title is curable, it may give the referee time to remove the cloud. It is no abuse of discretion to refuse further time, when it does not appear that the title may be perfected with reasonable diligence. More especially may it exercise such discretion in behalf of the purchaser in a ease like this, where the referee has resigned or attempted to resign, and notice to him would be a barren formality.” An examination of all the facts and of the court’s opinion in that case will disclose that the case sustains the proposition that in the case of a judicial sale the vendee may not toll the vendor’s time to complete title without first issuing a caveat addressed to' the court, who must then decide whether it is fair that a further period be allowed for perfecting title. A vendee’s arbitrary notice that he will wait no longer is a nullity. And in Connecticut, as we have seen supra in the ease of a nonjudicial sale, such a direct repudiation, in a plea for money damages, relieves the vendee of the duty to complete title. In the instant case, Farley’s repudiation occurred November 25, 1931. This suit was commenced June 27,1933. The long interval was consumed in protracted but abortive negotiations for a compromise settlement to avoid this litigation. As will hereinafter appear, Farley indicated a willingness to complete his bargain provided the purchase price and cash requirements were drastically reduced, to reflect the changed economic conditions. The principal creditors were willing to make a sacrifice of their own interests to grant the concessions, but it was found impossible to obtain an unconditional commitment from Farley, and so this proceeding was commenced. In answer thereto, there was presented in Farley’s behalf in August, 1933, twelve specific alleged objections to the title, contained in the affidavits respectively of Farley, Tracy, and Flanagan. Farley contented himself with a general denial of the charges of delay and bad faith made against him in the voluminous moving papers and he referred to the affidavit of Tracy, a lawyer, for a statement of specific objections to title. Farley admitted, however, that his .main and practically the only essential objection involves the question whether the various and numerous proceedings had herein were effective in transferring from the land to the proceeds of sale any rights, if they still existed, in favor of stockholder-lessees of the Cabin Colony under instruments purporting to be leases of building lots and which had been issued by the Colony to some of its stockholders. And it will be found that of the twelve specific objections, seven relate to this lease question and of the seven, three are directed toward the proceedings of April, 1930, and January -February, 1931, embracing the sale of the property to Farley. Against these two proceedings is directed the spearhead of attack. Of the four other objections directed to the lease question, two attack proceedings herein prior to April, 1930, one the proceeding of September, 1931, and one a condition alleged to exist in August, 1933. The remaining objections do not relate to the allegedly all-important lease question. It is necessary, at some length to discuss them and I purpose dealing first with the lease objections and then those unrelated thereto, and that they may be understood, I must recite the facts in the light of which they must be weighed. Accordingly, I shall now state what I consider to be the material facts disclosed by the voluminous record. On the present issue there is before me not only the moving, answering, and reply papers on which the rule issued, papers with their attached exhibits totalling several hundred pages, but the litigants, by express reference therein and by the briefs of their counsel, have made part of those papers, all the numerous proceedings had herein since February, 1928, 'comprising a mass of documents aggregating many additional hundred of pages. The defendant corporation in receivership, and hereinafter called the Colony, was founded in 1920 by one Mallett who controlled it by majority stock ownership and continued himself in office as its president and completely dominated its affairs. It purported to be a quasi co-operative venture. The company’s avowed object was to acquire large tracts of country property and to lease it in small building lots to its stockholders who alone were eligible to become leaseholders. The stock, by its express terms, was transferable only with the consent of the board of directors, and the so-called leases were likewise not freely assignable. Mallett directed his activities toward the artist, writer, musician, school-teacher type who were quite ignorant of commerce and business and were attracted by the prospect of remodeling a farm house or building a modest cabin as a summer refuge among like-minded congenial people of equally modest means, with whom they could foregather in a community clubhouse. To such folk, the legal and commercial effect of a corporate charter, by-laws, stock certificates, leases, mortgages, attachments, foreclosures, etc., were terra incognita. Yet it is significant of Mallett’s skill in salesmanship that he succeeded in “selling” even a few business men who ought to have known better. We are here concerned with the Colony’s so-called Heartfields property situated about twelve miles from Danbury, Conn. In February, 1928, when the receivers were appointed, Mallett informed them the property comprised several thousand acres unsurveyed; the three appraisers appointed soon afterward reported that based on Mallett’s designation of boundaries and the only other meager available data, they estimated the acreage at 2,000; but the aetual survey and title examination, completed in 1931, disclosed a mere 1,171.54 acres. There were scattered over the property, pockmarking it, thirty7one dwellings and a community clubhouse or inn. The property was encumbered by a blanket $100,000 mortgage, some small additional mortgages, attachments, one for $10,000, tax liens, ete. The Colony also owned a 600-acre unimproved tract at Lyme, Conn., subject to a $15,000 first mortgage and a second purchase-money mortgage, proceedings to foreclose which for a balance of upwards of $65,000 due had been commenced prior to this receivership and in connection with which foreclosure an attachment for an almost inevitable deficiency judgment had been levied on the Heartfields property. The company had other creditors, no cash, and nominal income. By the date set by court order, unsecured creditors filed claims for over $70,000. When, therefore, this receivership was instituted by an unsecured creditor in February, 1928, the receivers were immediately confronted with the overshadowing threat of mortgage and similar foreclosures, which, though temporarily, could not be permanently stayed under the conditions as they developed. And it became obvious from the appraisals of the property made by order of the court and from subsequent developments, that unless the business could he profitably operated, rehabilitated, or reorganized with the active co-operation and financial help of the Colony members, the properties would have to be sold and that forced sales would not only jeopardize the interests of secured creditors, but would wipe out general creditors and, a fortiori, the stockholders and lessees whose so-called leases, with two exceptions, were recorded subsequent to mortgages and other senior liens. The receivers at once caused the books to be posted with the help of Mallett, on whom alone they had to depend for information. The picture thus, painted as to the number of stockholders, the number of lessees, the amount of accounts receivable, the amount of indebtedness, the attitude of most of the large creditors, all seemed to justify the conclusion that the Colony could be saved with the help of its members, and that that help would be forthcoming if there were removed the threat of the mortgage and similar foreclosures. That threat was averted by the generous action in the emergency by one of the receivers, Mr. Spellaey, who personally advanced his own funds and eredit to the extent of over $60,000, and, as a result of that rescue party, while the situation was saved for those interested in the estate, Mr. Spellaey ultimately suffered the irreparable loss of about $30,-000. The receivership was made permanent. The receivers endeavored, but without success, to collect accounts receivable which were found to be owing almost entirely from Colony members. The receivers proposed as a plan of operation that lessees liquidate or adjust on an equitable basis, to be approved by the court, their indebtedness and surrender their at best dubious leases in exchange for new valid ones. The receivers had arranged with the senior lienholders to release the land to be embraced by the new leases from the senior liens in consideration of payment to the seniors of a portion of the funds obtained on the proposed adjustment and exchange. Similarly, upon the sale of any new leases to new prospects. Reductions of some senior liens had also been negotiated. Later, the plan was modified to provide for deeds instead of leases. These plans had been ap-, proved by orders of the court upon notice to all concerned. By various other orders, the time had been fixed for creditors to file claims or he barred and there had likewise, by various orders on notice, been fixed the time within which stockholders and lessees must cure their defaults or be barred, and after various extensions the time expired February 18,1929. And though a group of lessees took an appeal therefrom, they discontinued it about a year later. The efforts of the receivers, however, proved unsuccessful, the lessees being in most of the eases unable to meet their debts and yet hoping that by some miracle tbeir cottages, representing often their life’s savings, might be saved to them. In due course the receivers discovered the true situation, namely, that the policy had been to sell stock and leases at what the traffic would hear, naturally very little, considering the financial position of the members. Yet, even so, stock and leases had frequently been delivered without any payment and in many instances on mere promissory notes which for the most part had promptly been pledged to creditors. Lessees were in arrears for even the nominal annual rent reserved, a constant which would be insufficient over a period of years to meet even the taxes, a variable which naturally would tend to increase. The receivers discovered that the long list of stockholders was mainly sham and that of the lessees there were few who retained any active interest except those thirty-one who had built or remodelled dwellings, and even these, with few exceptions, were unable to pay their rent and/or other debts. The financial condition from time to time is set forth in the various audits filed herein. To relieve the situation somewhat, the receivers, in December 1929, by order of the court, after notice, and with the approval of the interested parties, sold the Lyme property which was far less valuable, actually and potentially; but while this reduced carrying charges and administrative expense, it brought no cash, the buyer assuming the indebtedness on the land and surrendering for cancellation to the receivers for the balance of the purchase price about $35,-000 of the outstanding receivers’ certificates whieh he had previously acquired. There had been issued in all, $85,000 face value of such certificates, about $65,000 of which had been used in connection with mortgage discharge. There is at present outstanding about $50,000 of certificates. By the spring of 1930, after the receivers had struggled two years to continue, reorganize, or rehabilitate the business, it became patent that without income, and with taxes on the sole remaining Heartfields property and administrative costs continuing, there remained as the only possibility of protecting the creditors and salvaging something for the lessees, an advantageous sale of the property. A forced sdle would be disastrous. Market conditions had certainly become less favorable than in 1928 when the property had been appraised. It could not be advantageously converted into a private estate, for it was bisected by a recently completed state highway. To a prospective estate buyer, the clubhouse and various cottages, scattered over and pockmarking the property, so far from adding to _ its value, would detract therefrom. Moreover, such a salé would involve the eviction of those of the thirty-one families who more or less had continued to occupy the cottages; for regardless of their defaults in rent, they had not been evicted by the receivers as such action would have made impossible the attempts during two years to continue or rehabilitate the venture and would have given the property an appearance of abandonment and necessitated added expense of earetaking and preservation. Moreover, such a step, whatever its legal justification, would have worked cruel hardship upon these people who in reliance upon so-called leases had invested their savings in the construction or remodeling of these summer dwellings. On the other hand, the prospects were slight that the receivers would be able, during the year which followed the legal foreclosure of these tenants, to rent their homes to new tenants. If by nothing else, this was proved by the fact that the receivers, even with the help of Mallett’s admitted skill in salesmanship, had been unable to consummate a single lease to a new prospect. Obviously, the kind of person most likely to pay the best price for the kind of tract being administered here was some experienced real estate developer. To him the very condition which made this property of less value to a private buyer made it of especial value for development purposes; for instead of having to build up his development from the beginning, he would here start with a nucleus of a clubhouse and thirty-one dwellings with' at least that number of interested families. Such a person was Farley. He was a man of long and wide experience in the development of suburban and country properties. He was of unquestioned financial responsibility. At the time of the making the contract he wrote the receivers that he owned outright, free of mortgage, real estate to the value of $2,000,000; and inquiry by the receivers corroborated his statement. He had recently acquired a neighboring tract at Candlewood Lake, whieh he was then engaged in developing. He had a long established and widely active real estate organization. He was personally familiar with this property. Moreover, he was an experienced lawyer. All in all he seemed the ideal purchaser for this property. After negotiations during whieh, as is reflected in the instrument itself, the conditions affecting this property were fully considered, the contradi dated April 9, 1930, was signed by Farley and the receivers, subject to this court’s approval thereof to be obtained by May 1st, failing which, the $10,000 deposited by Farley was to be returned to him. Before discussing the proceedings taken thereon and whieh are now attacked, I shall first briefly digest the material provisions of this unusual contract and then of the old “leases”: 1. The third preamble says the property has not been surveyed, its exact acreage is unknown, acreage recited in deeds is 1,206,, “but the Buyer and the Sellers agree the actual acreage may be between fifteen hundred and two thousand, or more.” 2. The fourth preamble recites that among other incumbrances of record, there is a $100,-000 trust mortgage “and eighteen leases, the main particulars of which may be described as follows: A majority are for four and one-half acres each, total acreage about seventy-eight; only two, each of whieh is for four and one-half acres, are recorded prior to said trust mortgage; thirteen are defective as to witnesses and/or acknowledgment; with possibly a few exceptions all the leases contain no descriptions other than a lot number without reference to any recorded plan or map, and similarly are silent as to the term of the leasehold, and contain a clause whereby they are subject to cancellation on thirty days notice, a pro forma copy of said leases being attached hereto marked Schedule ‘B’.” 3. The fifth preamble recites that “various alleged lessees and stockholders of the Colony have, in the opinion of the Sellers, been foreclosed by order of the Court of any right, title and interest they may have had as stockholders or lessees by reason of default in the payment of arrears of rent reserved in such leases, and/or other arrears.” 4. Covenant 3 provides that the price is based upon exact acreage when determined hy survey and shall be “$164,000' for 1200 acres; in the event there be less than said acreage, said price shall be reduced pro rata, to wit: $136.66 for each acre less than 1200; if more than said acreage, the Bujmr will pay $125 per acre for each additional acre up to 300; if more than 1500 acres, the Buyer will pay $100 per acre for each additional acre up to 85; so that if there be a total of 1585 acres, the total price is $210,000. If there be more than 1585 acres, the Buyer shall have an option on such excess as hereinafter provided.” 5. Covenant 5 provides that the purchase price shall be paid $10,000 on signing contract (same to he returned if the court does not approve contract before May 1, 1930); $90,000 upon closing of title, and the balance by five-year purchase-money mortgage with interest at 6 per cent, and amortization at the rate of $5,000 every six months. 6. Covenant 6 provides for selection of a surveyor and the cost of survey “to be borne one-half by the Sellers and one-half by the Buyer, unless the Sellers shall be unable to convey title to the property as hereinafter provided, in which event total cost of the survey shall be for the Seller’s account. * * * Should the Buyer desire a complete traverse of the property by transit and steel tape with a closing error of not more than one in ten thousand, the extra cost shall be solely for Buyer’s account.” 7. Covenant 7 provides: “Title shall he closed 4 months from the time the contract has received the approvál of the Court, unless an earlier or later date be mutually agreed upon; in any event, the place and hour of closing shall be fixed by the Sellers.” 8. Covenant 8 says: “The conveyance shall bo by customary right, title and interest deed, but-it is mutually agreed that the title shall be good and marketable and free and clear of all encumbrances except,” and then makes various special provisions for satisfying the $100,000 trust mortgage and similar items.. 9. Covenant 9 recites: “In the event the Sellers be unable to close title as hereinbefore provided, no liability shall attach to them hereunder except for one-half of the aforesaid survey cost and except for the return of the $10,000 deposited by the buyer hereunder as aforesaid.” 10. Covenant 10, which bears indorsement of approval by the broker, provides as to brokers’ commissions that “no brokerage shall be payable if the Sellers be unable to convey title as hereinbefore specified.” 11. The eleventh covenant is: “In addition to the purchase price hereinbefore specified, it is mutually agreed that with respect to leases, the Sellers will upon the approval of this contract, give notice of cancellation of all leases, but that the Buyer at the closing of title, or immediately thereafter, will do the following with respect to those lessees who have built dwellings and/or such other lessees who in the judgment of the Court should for equitable reasons fee recognized, namely; he will give to such lessees a new lease of either a quarter of an acre or half an acre, at the option of the lessees, the term of which leases shall be for five years from the said date of closing title, and at a rental of $50 per annum if the lease be for quarter of an acre, and $75 per annum if it be for half an acre, rent payable semi-annually in advance, and with the privilege to the lessees of a further extension of said leases for an additional five year period at a 30% increase in the rental figure, provided ninety days written notice be given to the Buyer by the lessee prior to the expiration of the initial five year term. The lines of such property so to be leased shall be determined by the Buyer after an actual survey shall have been had for the purpose of locating any dwellings, the óost of such survey to be for the account of the Buyer. The Buyer covenants that he will also pay the taxes on the land lease, the tenant to pay taxes on the building and if the tenant fail to pay taxes on the building within six months from the time they become due, the Buyer, as landlord, to have the privilege of paying such taxes and adding the same to the rental. The Buyer covenants that all parcels so leased shall, during the period of the lease, have access to the public highway. In other words, it is the intention, and the Buyer covenants, to assure to all such lessees possession of their houses for a period of ten years, aside from the privilege to purchase, as hereinafter provided.” 12. The twelfth covenant is: “The Buyer further covenants that within one year after said closing of title and promptly after the necessary surveying and subdividing has been done, he will prepare a schedule of selling prices, copies whereof will be sent by registered mail to all tenants under leases mentioned in the last preceding paragraph; and each such tenant shall have the option to purchase,'within ninety days of such mailing, the plot so leased, but at 15% less than the bona fide schedule price; and if the option be exercised, one half the purchase price shall be payable in cash and the balance by purchase money mortgage for three years, with interest at 6%; and in the event the house of any such tenant be worth at least twice the purchase price of the land, the entire purchase price, at the tenant’s option, may be by purchase money mortgage for three years at 6%. The Buyer further covenants that in the event any such tenant desires to purchase land contiguous to the parcel leased as aforesaid, the Buyer will give such tenant a preference over others at the bona fide schedule price.” 13. The thirteenth .covenant provides that for the protection of the buyer and other tenants, the buyer need not grant the new leases called for under the eleventh covenant “to any tenant whose building is clearly offensive and unsightly; but if there be any dispute ás to whether a building is or is not offensive, the matter shall be left for decision to two disinterested arbitrators to be appointed by the Court. * * *” 14. The fourteenth covenant is: “The Buyer declares that as he has recently purchased a large tract of land on Candlewood Lake, it is his intention, though it shall not be deemed a covenant, to grant to all tenants under the new leases hereinbefore mentioned, water and boating privileges on Candlewood Lake; and that the Buyer intends to expend very substantial sums in developing said property, and the property purchased hereunder, and in that connection to provide a club-house, docks and boat houses, and to grant to such tenants privileges in connection with such improvements.” I need hardly refer to the undisputed additional evidence in the record confirming the fact,' patent on the face of the instrument itself, that the parties recognized they were making not a simple contract for the purchase and sale of real estate, but rather an unusual one and calling for patience and cooperation on- both sides in disposing of problems whereof they were both aware. The record also shows that it was Farley 'himself, a lawyer and experienced operator,;.who worked out the plan in the contract whereby lessees were assured of a preferential right to purchase and in any event, ten years occupancy under the new leases to be granted by him. Now, to make a digest of the “leases” (a pro forma copy of which was attached to the contract) and of the undisputed part of the record in reference thereto: 1. A lessee became a lessee in consideration of his purchase of shares of stock of the Cabin Colony. The record shows in many instances that lessees frequently never paid the purchase price of the stock. 2. The lease reserved a fixed sum of annual rent payable in advance, probably insufficient to meet even taxes over a period of years. Moreover, lessees, with few exceptions, continued in default after the grace period of over a year under court orders had expired in February, 1929. 3. The lease by its express terms could not be assigned nor transferred to any other person without the written consent of the lessor. 4. No term of tenure is mentioned in the lease, merely “during-such period of time only as the lessee, his heirs or assigns shall personally own the certain shares of stock herewith purchased and for no longer,” yet 5. The shares of stock were by their express terms not transferable except with the written consent of the company’s board of directors. 6. For a description of the premises leased, the lease states (covenant “first”): “That the said party of the first part, for the consideration above related, and in consideration of the rents and covenants hereinafter specified and contained, have granted, demised and to farm let, and by these presents do grant, demise and to farm let, unto the said party of the second part a building lot of one-half acre, and four acres of landscape grounds surrounding or contiguous to said half acre building lot, in all four and one-half acres of land and no more, situate, lying and being in, and being a part of the lands and property of the party of the first part called ‘Heartfields’ in the Townships of Sherman and New Fairfield in the County of Fairfield, State of Connecticut, and distinguished and described as follows: Lot No. _99 The record shows that except in a few instances the leases contain no further description than the insertion of some number after the final words “Lot'No.-,”'but without reference to any recorded -map or to any map existing except apparently in the imagination of the Colony’s founder and president. 7. Except in the instances mentioned supra in the Earley contract, leases were not recorded; in only two instances were they recorded prior to the $100,000 mortgage and other liens. The practice of the town clerk’s office was to accept for recordation any instrument tendered regardless of its obvious defects. 8. The lease by its express terms, clause 8, contained a cancellation clause: “In order to insure to its many tenants and leaseholders quiet and peaceful enjoyment of their tenancy, and to safeguard and protect its interests and property, the party of the first part hereby expressly reserves to itself the right to caneel and terminate the lease of any of its tenants, or leaseholders, including this indenture, upon thirty days’ written notice of its intention so to do.” 9. The tenth clause says: “It is further expressly understood and agreed upon by the parties hereto that upon the termination of this indenture for any of the causes hereinafter related, or for any other cause, including death, the lessor shall have the option of acquiring by purchase or otherwise full title, ownership and possession of any and all buildings of whatsoever character and use, tíren and at such time being and existing upon the land herein leased * * * at ‘the fair and reasonable value of such buildings at such time’ as may be agreed upon or as may ‘be fixed and determined by an arbitration committee.’ ” (It will be observed that under this clause, death was an event terminating the lease.) The one thing at once clear about this remarkable instrument is that it must have taken no little ingenuity to concoct a document which by its terms at once meant apparently so much and at the same time actually so little. Viewed in the light reflected in the record — the circumstances under which leases were delivered, the absence or uncertainty of • description, the defaults in payment of rent, the seniority of recorded mortgages and other liens, it would seem clear that precarious and tenuous enough were the rights of lessees under the most favorable conditions, and that under the conditions of a creditor’s suit in a court of equity, there could hardly arise any serious problem as to the efficacy of the orders of that court in transferring those tenuous-rights, if any, from the land to proceeds of sale, especially when, in the course thereof, the lessees were receiving, in addition, indisputably beneficial tenure under new leases from the new owner. There can be no doubt but that whilst Earley rightly desired and insisted upon the cancellation of the old leases, he was equally desirous of retaining, as the nucleus for his development of the property, the lessees as tenants under the new leases prepared by and to be granted by him. I shall now recite the proceedings taken to confirm the Earley contract, proceedings now attacked as having been ineffective to terminate the old leases and transfer their rights to proceeds of sale. On April 10, 1930, this court issued a rule nisi requiring all persons interested in the Colony and its assets to show cause, if any, on April 22d, why the property should not be sold and the Earley contract approved. The rule was issued on the lengthy petitions of the receivers, wherein they recited the over two years’ history of the receivership, the then condition of the estate, the necessity of a sale, the disastrous alternative of rejecting the Farley proposal which they recommended be approved in lieu of any more favorable offer. Attached to their petitions was the Earley contract and its schedules. Pursuant to the rule, at least ten days’ notice of the hearing was immediately given by mail to the defendant and all persons claiming an interest in its assets, not only to creditors, lienors, litigants, lessees, and stockholders with acknowledged rights, but also to those of them — but without prejudice — who had been foreclosed of interest by prior orders of this court. The notice refers to the petitions and contract filed herein, with copies available at counsel’s office; the notice summarizes the salient features of the proposed contract; and what is of paramount importance, it expressly invites other offers for the property; “Said contract was made expressly subject to the approval of the Court; and whilst the Receivers and their counsel strongly believe that it is to the best interests of all parties in interest that said contract shall be approved, they desire to point out that the signing thereof has not precluded any party in interest or stranger from submitting at or before the hearing an offer for the whole or a substantial portion of said property.” On the return of the rule to approve the Earley contract and consider any other bids, there were present in court on April 22,1930, in response to the notice, a large number of parties and counsel. The order of sale later entered discloses that among those present,, besides creditors and their- attorneys, all of whom vigorously argued for the sale, were a large number of lessees in person, together with an array of counsel acting for them; and among the appearances noted, we find, for example, one attorney representing “at least two-thirds of all the lessees who had built dwellings,” and again, counsel for the so-called protective committee of stockholder-lessees, and again; the counsel who had instituted and after a year had recently discontinued the appeal taken from the order of December 28,1928, fixing February 18, 1929, as the final extension of time for defaulters to make good or be barred. The hearing occupied the entire day. Farley and the receivers were present. No one disputed the adequacy of the sales price: Indeed, it was conceded equal to, if not more favorable than, the appraised value fixed by appraisers in 1928. The only objection to confirmation was from a group of lessees who,' as I then remarked, were like persons trapped in a burning building and refused to save their lives and jump into the net spread for them merely because the receivers could not also save their personal effects for them. This group requested a week’s continuance on the assertion that there then would be presented an offer for the property, more favorable to the lessees than that contained in the Farley contract. After the whole day devoted to an examination of the facts, including an audit, and to argument, it should have been apparent to every one, and was, except to a portion of the lessees, that the alternative to the Farley offer .or a better one was the certain disaster of a forced sale. ' No one objected to the requested continuance and so, a week later, the matter was further argued for half a day, but with a much smaller- number present; and inasmuch as there was submitted not only no better offer but no other offer whatsoever, the court approved the .Farley contract and confirmed the sale to him, signing an order to that effect dated April 29, 1930. By the terms of the contract, it lapsed, if not.confirmed, by May 1st. The order further provided: “That any valid liens on any of the property' thus sold be and the same hereby are vacated' and extinguished with respect to the property sold but said liens attach to the same extent and -with the same relative rank and priority to and upon proceeds of same upon receipt thereof-by.-the Receivers; and specifically any and all leases and/or instruments purporting to create- a leasehold upon or affecting any -of the -property sold be and the same hereby are canceled and terminated under the general equity power of the Court; and-in addition the Receivers be and they hereby are authorized and directed, in accordance with the provisions of said instruments and without prejudice to the validity thereof and/or the rights if any heretofore created thereby and whether or not said rights have by prior orders of this Court been foreclosed and the owners thereof barred, to give the thirty days’ written notice of cancellation specified in such instruments to - all persons known to the Receivers to claim or to have claimed such leasehold rights, such notice to be given by mailing a copy of this order in prepaid envelopes addressed to such parties at the address last known to the Receivers.” On the same date this court passed a further order appointing a master, to examine and receive proof of claims, including ownership or proof of any and all claims of any sort against the Colony and directing all persons asserting any claim of any nature (unless the receivers concede the claim) to prove same before the master; and a copy of the order was mailed to all persons known to the receivers to have asserted any claim of any sort. (By prior order on notice, creditors’ time to file claims or be barred expired on August 20,1928.) On or before May 2, 1930, copies in full of both orders were served by mail “upon all stockholders, creditors, mortgagees, other lienors, bondholders, attaching creditors, lessees, litigants or other claimants, all persons known to the Receivers to claim or to have claimed leasehold rights, and all other persons interested in the property and assets of the Mattakeunk Cabin Colony, Inc.,” and on or before May 13, 1930, there was served by registered mail “upon all tenants and/or other persons known to the Receivers to elairn or to have claimed leasehold rights under any and all leases and/or instruments purporting to create a leasehold upon or affecting any of the property of the defendant” an additional notice that the property had been ordered sold and thirty days’ notice of cancellation and termination of lease was being given without prejudice, and that certain classes of lessees, as provided in the sales contract filed in court and at the office of the receivers’ solicitors, were entitled to new leases and options to purchase as therein provided. Thus, it will be.observed that extensive notice was given not only to the relatively few persons who might still be said to have some stake in the property or lien thereon, and to all persons who so far as the receivers could tell, had ever asserted any such claim (and regardless of the fact that many of them had been barred under prior court orders for failure to cure defaults during the two years past), but also even to those persons whose names had been carried on the Colony’s books at the inception of the receivership, although they had long ceased to have any interest and in many instances never had had any interest in the Colony or its affairs, much less any lien upon land. Despite the ample opportunity thus afforded to strangers and to any persons interested in the Colony to submit any bid, written or oral, more favorable than the Farley offer, which was manifestly and generally conceded as adequate and indeed with respect to lessees, liberal, a group of lessees, still discontented or fatuously advised, proceeded immediately to take an appeal from the order ■of sale. On motion, the Circuit Court of Appeals dismissed the appeal as frivolous. Hereinafter I shall comment on the effect thereof. It is now objected in behalf of Farley that disregarding the other notices of termination of the leases under the general equity power of the court, the additional aforesaid notice given by registered mail and purporting to terminate the leases pursuant to the express terms thereof was ineffective because it is not warranted by the terms of the lease. It seems to me that if, under the provisions of covenant 8, the lessor reserved the right to terminate a lease in order to protect itself and any other tenant, a fortiori it could exercise that power to protect itself and all the tenants from sheer disaster to all concerned. But the short and decisive answer is this, the question is not how or on what theory the notice was given, but merely whether notice was given, and there can be no doubt that adequate notice was given by various usual methods. The other objection now made to the April, 1930, sale to Farley was that the ten days’ notice by mail of the rule nisi of April 10th was insufficient and that no sufficient ioundation was laid for the rule nor for the April 29th order of sale, despite the hearings that preceded it. It is not suggested what .alternative or additional notice or procedure would have laid a sufficient foundation except, by inference, four weeks’ publication, the alleged necessity of whieh I shall later •discuss. I should say here that the position of the vendee and his executors on the whole •question of what procedure is sufficient to transfer lease rights to proceeds of sale is an inconsistent one. They do not dispute the •court’s inherent power in this kind of a creditor’s action to sell property free of claims and transfer them to proceeds of sale, but on the one hand they argue that constructive notice under a statute is sufficient if it be strictly complied with (see post), and, on the other hand, that proof of actual receipt of personal service of notice is a sine qua non. In my view, neither is requisite as an absolute condition precedent. And inasmuch as the same basic contention, though variously expressed, appears in most, if not all, of the objections directed toward the lease question, I may as well state here what seems to me the underlying vice in the argument. A court’s power to deal with property rights, especially property in custodia legis, is governed by a single fundamental consideration; has it acted with due process of law? The number of cases defining and interpreting this phrase is legion. Its essential meaning is not open to question. In Blackmer v. U. S., 284 U. S. at page 440, 52 S. Ct. 252, 256, 76 L. Ed. 375, Chief Justice Hughes said: “The requirement of due process * * * is satisfied by suitable notice and adequate opportunity to appear and to be heard.” What notice is suitable and what opportunity is adequate must depend upon the circumstances of the particular ease. And as Judge Cooley says in his standard work on Constitutional Limitations (6th Ed.), p. 424: “Due process of law in each particular case means such an assertion of the powers of government as the settled maxims of law permit and sanction and under such safeguards for the protection of individual rights as those maxims prescribe for the class of cases to which the one in question belongs.” An illuminating case on the question as affecting rights to real estate is that of Ballard v. Hunter, 204 U. S. 241, 27 S. Ct. 261, 51 L. Ed. 461, where the Supreme Court held that due process had not been violated where, under a Louisiana statute, notice of taxes was given nonresidents by publication. Said Justice McKenna, page 262 of 204 U. S., 27 S. Ct. 261, 269: “It should be kept in mind that the laws of a state come under the prohibition of the 14th Amendment only when they infringe fundamental rights. A láw must be framed and judged of in consideration of the practical affairs of man. The íaw cannot give personal notice of its provisions or proceedings to everyone. It charges everyone with knowledge of its provisions; of its proceedings it must, at times, adopt some form of indirect notice, and indirect notice is usually efficient notice when the proceedings affect real estate. Of what concerns or may concern their real estate men usually keep informed, and on that probability the law may frame its proceedings; indeed, must frame them, and assume the care of property to be universal, if it would give efficiency to many of its exercises. This was pointed out in Huling v. Kaw Valley Railway & Improvement Company, 130 U. S. 559, 9 S. Ct. 603, 32 L. Ed. 1045, where it was declared to be the 'duty of the owner of real estate, who is a nonresident, to take measures that in some way he shall be represented when his property is called into requisition; and, if he fails to get notice by the ordinary publications which have been usually required in such cases, it is his misfortune, and he must abide the consequences.’ It makes no difference, therefore, that plaintiffs in error did not have personal notice of the suit to collect the taxes on their lands or that taxes had been levied, or knowledge of the law under which the taxes had been levied.” At any rate, whatever my view as to whether the sale to Earley in April, 1930, constituted due process of law and was therefore effective in transferring from the land to proceeds of sale any existing leasehold rights so that the title must be said to be free from any reasonable doubt of marketability in that respect, there can be no doubt as to the opinion of the Circuit Court of Appeals. I mentioned that a group of lessees took ah appeal from the April 29, 1930, order of sale. The receivers thereupon moved to dismiss it as frivolous. That motion, rarely made .and more rarely granted, was argued by counsel. The record before the Circuit Court of Appeals included, besides affidavits pro and con, the decree of sale appealed from, the rule nisi of April 10th, with the notice of hearing annexed, the petitions of the receivers on which the rule issued, the annexed Earley contract and schedules including form of lease, the auditor’s statement filed at the hearing and showing the condition of the estate as of April 15th. On June 12, 1930, the Circuit Court of Appeals unanimously granted the motion. Its opinion follows: “Motion to dismiss appeal granted. The appeal is frivolous. See Steele v. Culver, 211 U. S. 26 [29 S. Ct. 9, 53 L. Ed. 74]; Offield v. N. Y., N. H. & H. R. R. Co., 203 U. S. 372, 377 [27 S. Ct. 72, 51 L. Ed. 231].” An application for a writ of certiorari to the Supreme Court was threatened by the appellants but never taken. It is hard to imagine a more clear and authoritative finding-that the sale was valid and binding upon all parties.in interest; most certainly-upon the lessee cláss from whose, number appellants were recruited, and that the proceedings in this court had been adequate and effective to transfer from the land to proceeds of sale all' liens and rights including those of íessees; nor can one imagine a clearer decision that the District Court’s order of sale constituted due process of law and was not an abuse of discretion than the circuit court’s dismissal of the appeal as frivolous. In any event, that decision is binding upon me and Farley and his executors have honored that decision with silence. In my view, that decision is in itself sufficient to dispose of the present suit so far as is concerned the lease question which Farley himself states was his main, if not sole, objection to title. Yet, inasmuch as he later, in 1933 in answer to this suit, has argued and his executors strenuously contend that the April, 1930, sale was a mere “private” sale and therefore a nullity and that the later “auction” sale of December, 1930, January — February, 1931, was the effective one, if any was, but that it, too, was a nullity because of failure strictly to comply with the statute, I must examine that later proceeding. The objection made is that although publication of the notice of sale was had once a week during fo