author: Emery, Y. C.

text:
    Joseph B. Johnson v. Tennessee Oil, Gas and Mineral Development Company et al.
    [Decided May 10th, 1909.]
    1. Under a resolution by directors of a corporation holding non-assessable stock, assessing each director a specified amount to be placed in the company's treasury to meet current expenses and cost of further development, the obligation of the directors is several and not joint, in the sense that each director is liable to the extent of his own assessment under the resolution, and not liable beyond that sum for the, assessment made against any other defendant under the resolution, but after a decree in a proceeding by a judgment creditor to enforce this resolution has been entered assessing a specific amount against each director for the payment of the judgment, which amount was less than the toto.l amount assessed under the resolution, and one director, a non-resident without property in the state, fails to pay his assessment under the decree, the judgment creditor under leave given in the decree may have the amount which such director failed to pay assessed against the other directors within the amount of each director’s assessment under the resolution, and this additional assessment may be made without first exhausting the remedy against the non-paying director.
    2. In an action at law for contribution, recovery against any defendant is limited to the proportionate share of such defendant, whether or not any of the other contributors were insolvent or without the state; but in equity a contributor is liable to contribute to the payment of the proportionate share of any other contributor who is insolvent or beyond the reach of process.
    3. A resolution was adopted by the directors of a corporation assessing each director a specific amount for the payment of claims against the corporation. A judgment creditor of the corporation obtained a decree against the directors assessing each a specific amount under the resolution in payment of his judgment,. and all of the directors paid the. amount assessed except one, and the judgment creditor obtained a decree against the paying directors assessing the amount upon them that the other director failed to pay.—Held, that the decree should contain a provision that, on payment by any of the directors under the decree, of his proportion of the amount assessed against the non-paying director, he should be subrogated to the rights* of the judgment creditor against such nonpaying- director, and that the judgment creditor, if required, must assign the benefit of the decree to the director making such payment.

      On application under leave reserved in decree.

      Mr. Walter J. Knight, for the complainant.

      Mr. Frank F. Bradner, Mr. Leo Stein and Mr. Abner Kalischj for the defendants.
   Emery, Y. C.

The decree in this case settled the amount of the debts or obligations incurred by the company under the resolution for assessment, and after declaring “that each defendant i$ individually responsible for his pro rata portion of the debt and interest,” fixed the amount each defendant should pay as such proportion. The amount fixed was the pro rata, portion for each defendant and was less than the amount assessed against each defendant by the resolution. Leave was reserved in the decree to apply for further directions as to the liability of any defendant for the portion of the decree unpaid by any other defendant, the question as to whether the liability of the defendants for the said debt and interest is collective as well as individual, being expressly reserved for. further hearing.

Five of the six defendants have paid their pro rata portion as fixed by the decree; the other defendant Reitlinger has not paid his portion. lie is a non-resident and although he appeared and answered in the suit, he has no property in the state which can be reached for the satisfaction of the decree, and the execution issued on the decree has been returned unsatisfied. Application is now made by complainant under the leave reserved for further direction or decree as to the liability of the other defendants to pay or contribute toward the satisfaction of the debt, up to the limit of their assessment under the resolution. The obligation of the defendants under the resolution is several and not joint, in the sense that each defendant is liable to the extent of his own assessment under the resolution, and not liable beyond this sum for the assessment made against any other defendant under the resolution. But the real question is whether in working out by a decree the full liability of each of the defendants to the complainant under the resolution, any defendant should be liable at all for the proportion of the debt which any other defendant may, in the first instance, be directed by the decree to pay. At law each defendant liable to the company under this resolution would have been separately liable for the whole amount of his subscription, so far as necessary to pay the debts or obligations covered by the resolution, and any defendant who by reason of such recovery in the suit at law, paid more than his proportion of the debt, would then have himself been put to an action for contribution against his co-directors or coobligors. In an action at law for contribution, recovery against any defendant would have been limited to the proportionate share of each, independent of the question whether any of the other contributors were insolvent or without the state. In equity the contributor or co-surety would be liable to contribute to the payment of his proportionate share of any co-surety insolvent or beyond the reach of process. This is the essential difference between the legal and equitable basis of contribution in an action for contribution by one contributor or co-obligor who has overpaid. But this question of the right or limit of contribution between themselves, which arises only after full payment to the creditor by one or more of the debtors liable, does not affect or impair the right of the complainant as creditor under the resolution, to recover from each of the defendants liable, up to the amount of his separate assessment, if necessary for the payment of his debt. By filing a bill in equity for the recovery of the debt against all of the defendants, the complainant subjects himself to the equity of submitting to such decree in the case as may be equitably made for contribution among the defendants themselves, but the enforcement or working out in the creditors’ suit of the equities between the defendants themselves, does not require, and should not permit, any limitation by decree, condition or otherwise, of complainant’s right against each defendant, up to the full amount of his assessment, if necessary for paying the debt. By the decree already made, the proportionate liabilities of the defendants were fixed as between the defendants liable, who appeared in the suit and -who were not claimed to be insolvent, on the basis of each paying his pro rata share, but it now appears by the return of execution unsatisfied, that the complainant’s right to have from the nonresident defendant his proportion of the debt or decree, cannot be worked out because he has no property subject to execution within the state. Complainant’s whole debt or claim under the resolution being, therefore, established by the decree, he is entitled under the leave reserved, to a further decree declaring and directing that the remaining defendants, up to the amount of their several assessments fixed by the resolution, are each further liable for the payment of so much of the amount directed to be paid by Reitlinger as has not been paid by him.

It was claimed by the defendant that no such decree should be made until the remedy against Reitlinger had been exhausted by suit upon the decree in the state of his residence, but this, I think, would be an unjustifiable limitation of the complainant’s right to recover in this suit or at law against each defendant severally the whole amount of his assessment so far as necessary to pay his debt. The appearance, answer and trial on the merits make the decree final against the non-resident, both as against complainant and between the parties themselves. The failure to find property within this state to satisfy the decree puts the complainant, so far as the courts of .this state are concerned, in the same condition as if Beitlinger were insolvent, or not within reach of process, and as this situation has developed in the attempt to work out the decree for complainant’s rights, which was based on Eeitlinger’s appearance and answer and the absence of any suggestion of his insolvency, the remedy is to be found in a further decree. This is the course pointed out as the one proper and equitable to be taken, where, after assessments upon stockholders to pay debts of the company, some of the stockholders assessed do not pay and have no property within the jurisdiction subject to execution. Godfrey v. Terry (1877), 97 U. S. 171, Justice Miller (at p. 177). The course directed here was -a new7 assessment against the other stockholders to pay the share of the stockholders as to whom milla lona w7as returned, and to continue until all should be paid, or the sum of the several liabilities exhausted. The expression of Vice-Chancellor Pitney in See, Receiver, v. Heppenheimer, 69 N. J. Eq. (3 Robb.) 36, 63, that in an action of this character the stockholders who are solvent and within the reach of process of the court must bear the whole burden, if it be taken to refer only to process for appearance, must not be taken as any adjudication upon the point now raised as the point was not involved or argued.

As the resolution in this case expressly fixed the amount of each assessment, my present view is that complainant cannot be further required to take another decree for the proportionate assessment of Reitlinger’s decree, but is entitled to a decree against all of the remaining defendants for Reitlinger’s assessment, the recovery against any defendant, however, not to exceed the amount of his assessment as fixed by the resolution, less tire amount already paid. The decree may contain a clause providing that if any of the defendants other than Reitlinger should pay the decree against him or any portion of it, then they shall be subrogated as against the other defendants to the rights of the complainant against Reitlinger, and complainant must, if required, assign the benefit of the decree. Such right to enforce contribution was recognized in Masters v. Rossie, &c., Co. (1845), 2 Sandf. Ch. 301, and the method of subrogation is the practice indicated in Boice v. Conover (Court of Errors and Appeals, 1901), 63 N. J. Eq. (18 Dick.) 273, 275. The decree will be settled on notice.


source: Caselaw Access Project

license: Public Domain

text:
    Laura A. Atwood et al. v. Abbie A. Carmer et al. Frederick Wiebke v. Abbie A. Carmer et al.
    [Decided May 10th, 1909.]
    1. Any defendant, as to whom proyisions for foreclosing .his right of redemption are expressly made by the final decree on foreclosure, cannot be denied the right of redemption pending sale, by application in the suit itself; and, under section 30 of the Chancery act {Rev. J90&), providing for making a person a party to a suit, either before or after an interlocutory or final decree therein, this application to be made a party to the suit itself, if the right exists, can be made by a purchaser after decree.
    2. The right of redemption on foreclosure, not being bj' the terms of the final decree cut off till sale, continues till that time.
    3. The decree itself on foreclosure does not operate as a merger of the debt, or of the estate of the mortgagee, but it does fix finally, as between the parties and those claiming under them, the time and method of foreclosing the right of redemption; and, as this is made on the application of complainant, who will have the right to enforce it by execution, it would seem to follow necessarily from the nature of the decree that every defendant, or claimant under him, whose right of redemption is for complainant’s benefit, made subject to foreclosure on the sale, must still have the right of redemption after decree.
    4. Before any decree for sale taken by the first mortgagee, or at least before the filing of the bill to foreclose, a subsequent encumbrancer, in order to redeem against the first mortgagee’s consent, must show special equities.
    5. By electing to take decree against subsequent encumbrancers and to have a sale foreclosing their equities of redemption, the first mortgagee must, pending the sale, proceed subject to their right of redemption, as the decree in such a case, at least if complainant is proceeding to sale under his execution, creates a special equity, which leaves defendants the absolute right of redemption pending the sale.
    6. The manner of redemption pending sale on foreclosure, and the persons entitled thereto, are matters which should be settled by application in the suit itself, in order to control t lie execution; and, as equities as to the right of redemption may exist between different defendants, notice of the application, if necessary, should be given to the defendants who might be affected, as well as !0 complainant, and so a decree providing for a sale only, and not for redemption, must, if complainant so insists, be so controlled or modified on application for further directions in the suit or to control the execution, and cannot be affected by a mere payment to the sheriff.

      7. The rights of a complainant, given by a decree on foreclosure, should not be varied, without his consent, unless by a subsequent order of court.
    8. A second mortgagee will be entitled to redeem pending sale, on payment of the amount of a decree on foreclosure of a first mortgage, with interest and sheriff’s costs, and also the amount paid by a purchaser of the ¿(cree for insurance on the premises since his purchase, which he is cm-'iled to add to the decree, as the original mortgage covered such insurant which had expired; but, as against subsequent encumbrancers without notice, he could not add to the decree an amount previously deducted tor payments made by the mortgagor, which inure, by operation of law, to the benefit of the subsequent encumbrancers.
    9. The payment on redemption pending sale on foreclosure must be made to complainant, or his solicitor, within a time to be fixed.
    10. On redemption by a second mortgagee pending sale on foreclosure of a first mortgage, he is entitled to the bond and first mortgage uncanceled, and his right to such redemption and delivery cannot be prejudiced by a supplemental bill to add to the decree, filed without notice to parties adversely affected.
    11. Under strict practice, a supplemental bill to add to the terms of a decree cannot be filed without notice, at least to parties adversely affected.
    On decree for sale in foreclosure and application to redeem. On bill and application for injunction.

      Mr. Frederick A. Lehlbach, for the complainant Wiebke.

      Mr. King Stickle Oram and Mr. Henry 0. Pitney, for the defendant Neighbor and others.
   Emery, Y. C.

The complainant Mrs. Atwood,’ holder of a first mortgage, obtained a final decree on foreclosure on November 23d, 1905, directing a sale of the mortgaged premises for the payment of her debt, $12,765, with interest from November 21st, 1905. The mortgagors and owners, Mr. and Mrs. Carmer, were parties defendant as were also subsequent encumbrancers, including George W. Cole, the second mortgagee. No proof of the subsequent claims was made in the foreclosure suit, and the decree for sale directed payment only of the complainant’s mortgage, the surplus, if any, to be brought into court. The final decree further directed “that the defendant stand absolutely debarred and foreclosed of and from all equity of redemption of, in and to the said mortgaged premises, when sold as aforesaid, by virtue of this decree.” The original execution contained directions as to sale of the mortgaged premises to pay complainant’s debt and pay the surplus into court. This was issued December 21st, 1905, returnable to February Term, 1906, but the premises were not sold under this execution, and by order of the court, made about two years later on complainant’s ex parte application (March 2d, 1908), a new execution was issued for the payment of $12,420 as still unpaid on the decree, with interest from August 19th, 1907. After the issue of the new execution, James Howard Wells, the son-in-law of Mr. and Mrs. Carmer, to whom they had made a voluntary conveyance of the mortgaged premises on February 16th, 1906 (shortly after the decree and first execution), filed a bill on April 18th, 1908, against Mr. and Mrs. Atwood to set aside the order for new execution and stay sale under it, to which suit the complainant’s solicitor, Mr. Hart, and the sheriff, were also parties. The sale was restrained pendente lite and by final decree made by consent in the Wells-Atwood suit, on December 23d, 1908, it was decreed that the decree and new execution in the Atwood-Carmer suit remain effective, but that the execution be amended in so far as to require the sheriff to make of. the premises the amount directed in it, less $353.20, with interest from September 24th, 1908. The deduction is the amount found by the master’s report in the case to have been paid by or on behalf of the mortgagor or owner of the equity, and not credited before the issue of the new execution. The restraint of sale under the new execution was also discharged, and the sheriff after several adjournments, under the direction of Mrs. Atwood’s solicitor, who declined to grant further delay, proposed to sell the property on February 10th, 1909. Under an arrangement made or claimed to have been made with Mr. Carmer, on behalf of his wife as the equitable owner, a Mr. Wiebke then bought the Atwood mortgage and decree, and on February 10th, 1909, the day fixed for the sale, Wiebke took an assignment of the bond, mortgage and decree. Mrs. Atwood refused to assign unless she received the full amount of the second execution, without credit for the deduction directed by the decree in the Wells-Atwood suit, and Wiebke, as part of the consideration for the assignment, and, as he claims, by agreement with Mr. Carmer, was to purchase the property at the sale for the full amount of the execution, without deduction, and if he purchased, hold the premises for six months, subject to an agreement to reconvey on repaying within that time the amount advanced, with other advances for insurance, taxes, &c. On taking the assignment the sale was adjourned until February 24th, 1909. In the meantime Mr. Carmer, who acted for Mrs. Carmer, and Wells, who held the title for Mrs. Carmer, applied to Mr. Neighbor and also to a Mr. Stickle for advances necessary to take up the Atwood mortgage, and as part of the plan for carrying out this arrangement, Wells made a voluntary conveyance of the property to a Mr. Matthews, acting on behalf of Mr. Stickle and Mr. Neighbor. The real equity of redemption in the premises apparently still remained in Mrs. Carmer at the time of the present application, but she has since died. Mr. Neighbor on February 24th, 1909, took an assignment of the mortgage from Cole, wlm was a party to the original Atwood-Carmer suit, a mortgagee, and Mr. Neighbor, who was not a party to that suit, also held later mortgages, one given to him by Mr. and Mrs. Carmer January-26th, 1906, after the decree in the suit, another by Wells on December 17th, 1907. On February 24th, 1909, at the sheriff’s office, and before the sale was opened, Mr. Oram, a solicitor, who declared he was acting on behalf of Matthews as the owner of the equity of redemption, offered to pay to Mr. Wiebke, who was present with his solicitor, Mr. Greenberg, the amount due on the decree, and asked for an assignment of the decree. They refused unless the $353.20 which had been paid to Mrs. Atwood was also paid. Mr. Oram then offered to pay the sheriff the amount due on the decree, but did not expressly offer the amount in satisfaction of the decree. The sheriff, by Mr. Greenberg’s directions, refused to receive it, and the sale was adjourned to March 3d, 1909. Wiebke on March 2d filed his bill, claiming the benefit of the decree to secure his additional claims and to enjoin the sale under the execution and for an accounting as to what is due under the decree, including, among other things, insurance on the premises not included in the decree. The defendants to this bill are Mr. and Mrs. Carmer, Wells, Cole, Neighbor and the sheriff, but none of the parties -to the original bill, except Mr. and Mrs. Carmer and Cole. On the application for preliminary injunction it appeared to me, from the answering affidavits filed, that as to the defendant Neighbor, a subsequent mortgagee, the substantial question was whether the ■arrangement with Carmer (claimed to be acting on behalf of the owner of. the equity) as to the decree standing for inore than the amount due after deducting the credit of $353.20, was valid or could be enforced to the detriment of his security and for the purpose of bringing about a final hearing on this question, with little delay and expense, I suggested that Neighbor, as subsequent mortgagee, file a petition in the original foreclosure suit for redemption of the Atwood mortgage on paying the amount due on the decree. Such petition was accordingly filed, and hearing on the same came on together with hearing on the application for injunction in the Wiebke-Matthews suit, the affidavits being used together, and the affiants cross-examined in open court on both sides so far as desired.

On the hearing it was conceded by counsel for Wiebke that, in view of the decisions of our courts, called to his attention since the filing of the bill, it could not be claimed that, as against subsequent encumbrancers, the amount claimed to have been' agreed to be paid by Carmer in addition to the face of the decree could be added, but it is now claimed that as against the Carmer and Wells and Matthews voluntary grantees, the agreement, if proved on the final hearing, may be effective to charge their interest in the premises subject to the previous encumbrances. The injunction pendente lite asked is against the sheriff receiving from any of the defendants any sum in settlement of the execution, and a temporary restraining order against the sheriff also to that effect was made. As to the defendant Neighbor, it is clear that if he 'lias the right after the decree for sale which was made on the foreclosure to redeem or satisfy the mortgage by paying the amount, either by way of redemption or satisfaction, then the restraint against the sheriff should not embrace him, if the sheriff is the proper officer or person to whom payment should be made on redemption. The real question, so far as he is concerned, is whether after a decree such as was made in this case, a subsequent encumbrancer, becoming such after the decree, can, without becoming a party to the suit, and also without an order of the court, pay to the sheriff, against complainant’s consent, the amount of the decree, and whether a tender of such payment, coupled either with a demand for an assignment or with a demand that the bond and mortgage be delivered uncanceled, is a valid tender, unless made by an order of the court in the cause after the decree and before sale, fixing the manner in which the right of redemption or satisfaction is to be exercised in case the parties do not agree.

In Cassidy v. Bigelow (1874), 25 N. J. Eq. (10 C. E. Gr.) 112, Chancellor Kunyon held that a second mortgagee had an absolute right to redeem the first mortgage at any time after it was due, and to receive an assignment, but this absolute right was denied by the court of errors and appeals, and the right of the second mortgagee to redeem against the consent of the first mortgagee was declared to exist only in case of special equities, such as endangering his security, of which the first mortgagee must • be advised, and the right to an assignment was denied. In this case the subsequent mortgagee, after decree for sale and before sale, filed a bill to redeem after a tender of amount due to the mortgagee himself on the decree demanding an assignment. The mortgagee refused to accept the tender and deliver an assignment, but offered to accept the amount due in satisfaction of the decree. The court below held that the tender was good and decreed redemption on paying the amount due without interest and with an assignment, basing its decree on a general and absolute right of the second mortgagee to redeem. The court of errors and appeals holding the tender accompanied by a demand of assignment not good, directed a redemption without assignment and on payment of principal, interest and costs, basing the right of redemption solely on the special equities of the case, and directed that on the payment the second mortgagee should be subrogated. In neither court was the question considered whether after a decree for sale providing that a defendant’s equity of redemption should be foreclosed by sale, there was, pending the sale, any right of redemption by application in the foreclosure suit itself. In several cases I have had occasion to consider specially this status as to redemption pending sale, under a decree of this character, and I am not able to reach a conclusion denying such right to any defendant as to whom provisions for foreclosing his right of redemption are expressly made by the final decree. And under section 30 of the Chancery act (Rev. 1902), this application to be made a party in the suit itself, if the right exists, can be made by a purchaser after decree.

The above decree for sale to pay complainant’s debt only, contained, it will be observed, a decree also foreclosing all rights of defendants “when sold as directed by the decree.” This decree for sale, made under section 53 of the Chancery act, is in lieu of the decree of strict foreclosure. Such decree fixed a time beyond which the right of redemption ceased, and the fixing of such time was a necessary incident to making the equitable right to redeem available. Pending this time, the right of redemption existed, and the court, in a strict foreclosure suit, often enlarged it beyond the time fixed. 2 Dan. Ch. Pr. (6th Am. ed.) *999. And the right of redemption not being by the terms of the final decree cut off until sale, it must, I think, continue to exist until that time.

In Campbell v. Macomb (Chancellor Kent, 1820), 4. Johns. Ch. 534, this right of redemption, by paying off the decree, was given to the purchaser of the equity of redemption and for the reason (at p. 536) that the whole inducement to the sale is to obtain satisfaction of the sum actually due. Under the English practice, the decree for sale in foreclosure contains the express provision that “after default in payment” the sale be made. 2 Dan. Ch. Pr. *1266. In Howard Savings Institution v. Essex Building and Loan Association (1900), 23 N. J. L. J. 42, I held that if the owner of the equity by purchase after decree, and with complainant’s consent, paid the amount of the decree to the sheriff, in satisfaction of the decree, he was entitled to a delivery by the complainant of the mortgage canceled, or for the purpose of cancellation, and might enforce delivery by petition in the suit.

The decree itself does not operate as a merger of the debt or of the estate of the mortgagee (Deshler v. Holmes (Court of Errors and Appeals, 1888), 44 N. J. Eq. (17 Stew.) 585), but it does fix, finally, as between the parties and those claiming under them, the time and method of foreclosing the right of redemption, and as this is made on the application of the complainant, who will have the right to enforce it, by the issuing of the execution directed, it would seem to follow necessarily from the nature of the decree that every defendant or claimant under him, whose right of redemption is thus for complainant’s benefit made subject to foreclosure upon the sale, under the decree, must still have the fundamental equitable right of redemption after decree.

Before any decree for sale taken by the first mortgagee, or at least before the filing of his bill to foreclose, the rule settled by the court of errors and appeals (Bigelow v. Cassidy), as generally applicable, would apply, viz., that against the first mortgagee’s consent, the subsequent encumbrancer, in order to redeem, must show special equities. A first mortgagee who has not by his own judicial proceedings called upon the subsequent encumbrancer to pay his mortgage or directly affected or'impaired the right of the subsequent encumbrancer to realize on his security, is in a position to claim the protection of this general rule against redemption, so long as he desires the security to remain. But by filing a bill, which in terms asks a decree or payment and foreclosure on default, followed by taking a decree for sale to pay his mortgage, and expressly foreclosing the equity of redemption of subsequent encumbrancers on such sale, he calls on the subsequent encumbrancers and the owner for payment. By his own act ho has affected their securities, and any suit to enforce them would, be subject to a sale under his execution at any time. It seems to me, therefore, that having elected to take decree of foreclosure against subsequent encumbrancers and to have a sale foreclosing their equities of redemption, the first mortgagee, who is proceeding to a sale under his execution, must, pending the sale, proceed subject to the right of redemption. This right of redemption is the fundamental equitable, right, the existence of which is the sole basis of the entire proceeding in equity, and it must exist, I think, until by express decree it is foreclosed. Such foreclosure is never decreed in equity without an opportunity for redemption, and the question, therefore, is whether a decree for sale to pay a prior encumbrance and foreclosing subsequent encumbrancers on sale, does not of itself, in the absence of express provision to the contrary in the decree, create a special equity, which leaves to the defendant thus to be foreclosed the absolute right of redemption pending the sale. I think this is the effect to be given to the decree, at least if the complainant is proceeding to sale under his execution. The manner of this redemption pending sale, and the persons entitled to it, are matters which should be settled by application, in the suit itself, for the purpose of controlling the execution for sale. And as equities in reference to this right of redemption may exist between different defendants, notice of the application should perhaps regularly be given to the defendants who might be affected, as well as to the complainant. Eegularly the control of the execution, so as to authorize the sheriff to execute or return the writ, otherwise than by the sale expressly directed, should be by order or decree of the court. In this respect a decree for sale in foreclosure differs from a judgment at law, which merges the original debt, and where the sheriff, without further direction, is entitled to receive payment in satisfaction of a fieri facias without sale. 1 Arch. Pr. *269.

Ill the present case Mr. Neighbor claims the right to make payment to the sheriff, as second mortgagee, and to have the delivery of the bond and mortgage nncaneeled, leaving to him the benefit of the mortgage and decree, and the tender to complainant before suit, made on behalf of the owner, was accompanied by the demand of an assignment, and the offer to pay the sheriff the amount of the decree, made on behalf of this owner, was not made in satisfaction of the decree and mortgage. These questions, as well as the rights to redeem, as between defendants, must be settled by the court, and upon notice, if necessary, by an application in the suit to control the execution for this purpose. And in the absence of any express provision in the decree itself as to redemption after decree, the express'direction for sale only, to pay the debt, must, if complainant so insists, be so controlled or modified upon application for further directions in the suit or to control the execution, and catínót be affected by a mere payment to the sheriff, nor should his rights given by the decree be varied, without his consent, unless by a subsequent order of the court.

:The defendant Neighbor, as second mortgagee, will be entitled to redeem upon payment to complainant of the amount of the decree, with interest and sheriff’s costs, and also the amount actually paid by Wiebke for insurance on the premises since purchasing the decree. As the original mortgage covered such insurance, which had expired, the purchaser had the right to protect his interest by insurance after the decree, and by supplemental bill or otherwise, if necessary, to have this amount added to the decree. Wiebke is not, however, entitled, as against subsequent encumbrancers without notice, to1 add to the decree the amount previously deducted, as being payments - made by the owner. By operation of law, such payments enure to the benefit of the subsequent encumbrancer. Traphagen v. Lyons (Court of Errors and Appeals, 1884), 38 N. J. Eq. (11 Stew.) 613, and cases cited at p. 616, &c. This payment of the amount due on the decree with interest and insurance, together with the sheriff’s costs, for which complainant is liable, must be made to the complainant or his solicitor, within a time to be fixed, and on such payments the encumbrancer redeeming (Mr. Neighbor) is entitled to a delivery of the bond and mortgage uncanceled. His right to such redemption and delivery cannot be prejudiced by a supplemental bill based on the right to add to the decree. Under strict practice, a supplemental bill to add to the terms of the decree cannot be filed without notice at least to parties adversely affected (2 Dan. Ch. Pr. *1523, &c.), and on such application, had it been made, the right of Neighbor to redeem would have been protected. As to Neighbor, therefore, upon his paying the amount due on the decree, the bill filed by Wiebke to have the amount of the decree increased will be dismissed as against him, but without prejudice to filing a bill against him to redeem his mortgages, as well as the amount paid complainant, in case Wiebke on his suit obtains a final decree establishing his additional claim as a lien on the lands. On settling the order, I will hear counsel as to any further directions.

Costs will not be allowed to either party—not to the complainant Wiebke, because the substantial and only dispute between himself and Mr. Neighbor at the time of the disputed tender was the right to add the additional amount to the decree, which dispute has been decided against complainant on the basis of decisions previously made and covering the point involved; nor will costs be allowed to the defendants applying to redeem, because an assignment was demanded or requested at the time of tender, and because the offer to pay the sheriff was not an offer of payment in satisfaction of the decree, and the present application is for a payment, with claim for a delivery of the bond and mortgage uncanceled. Such payment complainant, after his decree for sale, was not bound to' consent to, nor was the sheriff authorized to accept it, unless ordered by the court.


author: Stevens, Y. C.

text:
    Harry C. Haskins v. Thomas F. Ryan.
    [Decided May 28th, 1908.]
    1. Where an original bill was demurred to, and the demurrer was sustained upon the ground (1) because it showed nothing more than an agreement to make an agreement, and (2) because it appeared that complainant was seeking to recover profits alleged to have been realized from the embodiment in a corporation of a scheme or idea communicated by complainant to defendant, this scheme or idea not having been protected by contract or statute against appropriation, and therefore not capable of legal ownership after communication; and such bill was thereupon amended with a view by additional allegation to cure its original defects—Held, that notwithstanding the changes in phraseology the bill as amended showed nothing more than an agreement to make an agreement.
    On bill and demurrer.

      Mr. Richard 7. Lindabury, for the demurrant.

      Mr. Robert H. McCarter, for the complainant.
   Stevens, Y. C.

The original bill filed in this case was demurred to and the demurrer sustained. 71 N. J. Eq. (1 Buch.) 575. It was held to be demurrable (1) because it showed nothing more than an agreement to make an agreement; (2) because it appeared that complainant was seeking to recover profits alleged to have been realized from the embodiment in a corporation of a scheme or idea communicated by complainant to defendant, this scheme or idea not having been protected by contract or statute against appropriation and therefore not capable of legal ownership after communication.

The complainant has amended his bill, and by additional allegation sought to cure its original defects. The question is whether he now shows a case of equitable cognizance.

Notwithstanding the changes in phraseology I still think that the bill, as amended, shows nothing more than an agreement to make an agreement. The pleader has, however, endeavored to make it appear that the defendant did something more than convert complainant’s ideas to his own use. He tries to show that what was converted was property and not mere ideas. In this, I thinkvhe has failed. It is difficult to ascertain from the bill as it now stands just what the claim is. There is a studied ambiguity about it which does credit to the pleader’s ingenuity but does not elucidate the case. Haskins, it is said, had elaborated a scheme for combining the lead interests of the country. In connection with this scheme he had secured certain options to purchase plants. He presented this scheme to Ryan, a capitalist, and Ryan, so the bill alleges, became much interested in it, and referred Haskins to his attorney. The only direct allegation of what was given to the attorney is the following :

“And your orator further says that in compliance with said agreement with said Ryan he offered to submit and turn over to said Ryan, or his attorney, all his option renewals, other papers, data, estimates and other documents and information, in connection with or bearing upon his plans or scheme of combination, and did so turn over and submit a large part of the same, or their results.”

From this allegation it is utterly impossible to say what specific things or papers he did turn over. All that we know is that a plan was submitted which the attorney, after examining, endorsed as "comprehensive, feasible and attractive.” Then the bill alleges that a company called the United Lead Company, was organized under Ryan’s direction, substantially as planned, and that the complainant was left out in the cold. There is no direct allegation that Ryan agreed, for a definite price, to turn over to the company what Haskins had handed to his attorney, but the statement is that

“in tbe formation and exploitation of the said United Lead Company Ryan has made an enormous profit, both as promoter and otherwise; not as mere promoter’s profit but also in compensation for your orator’s plans, scheme of combination, options, writings, documents, information, data and other property turned over to said Byan or his agent by your orator.”

The options here alluded to were, undoubtedly, property, but the bill, in the paragraph which 1 have first quoted, does not allege that any options were turned over. On the contrary, in paragraph five it is alleged that Ryan’s agent himself procured options. If the complainant did, in fact, transfer options to Ryan he should have so charged; ap.d even then all that he could claim, in the absence of specific agreement, would be damages for their wrongful conversion.

As to the documents there is nothing in the case to show that they consisted of anything more than a plan or scheme of combination embodying Haskins’s ideas on the subject. These ideas, as I said in my former opinion, depended for their realization upon the concurring minds of many individuals, and were not Haskins’s exclusive property, after communication. Hndoubtedly ideas, if valuable or even thought to be valuable (supposing them to be such as the law approves of), may be the subject of bargain and sale. They may be the subject of contract, but they must be protected by contract. Their originator cannot give them out and then sue for an indefinite share of profits which someone else may make out of a venture in which he seeks to embody or utilize them.

It must be apparent to anyone who carefully reads the bill, as amended, that its whole scope is summed up in its only prayer for relief, and that is a prayer that Ryan may set forth how much profit he has realized from appropriating Haskins’s plan of consolidation, and that he may be compelled to sjiare his profit with complainant. The court is expected, to apportion the shares, not on the basis of any agreement made, but on what it, in the exercise of a purely arbitrary discretion, may think under the circumstances to be right.

I am of opinion that the amendments do not substantially alter the case as originally presented, ^and I therefore advise that the bill be dismissed, for the reasons contained in my former opinion.


author: Stevenson, V. 0.

text:
    Henry Post v. Sadie Hagen et al.
    [Decided March 1st, 1909.]
    1. The rules governing the liability of a party in possession of land, required to account for rents for the benefit of a successful claimant to the whole or a part of such land, vary according as such party occupies the position of trustee, mortgagee in possession, tenant in common, or tenant in possession by fraud.
    2. A suit to set aside a deed of gift on the ground that the conveyance was substantially all of the donor’s property, and that, in making it, the donor did not have proper independent advice, differs from a suit to set aside a deed of gift on the ground of the fraud of the donee, and in the former case the improvident conduct of the donor, in which the donee may not have participated and of which he may not have had notice, constitutes the fatal defect, while in the latter it is the voluntary conduct of the donee which avoids the deed.
    3. Where a deed of gift was set aside as improvident under the rule of independent advice, the only wrong of the donee, who took no part in the procurement of the deed, consisted of an inequitable retention of title after receiving notice of the facts making the title void or voidable as to the donor or his heirs.
    4. A deed of gift which may be set aside on the ground of the improvident conduct of the donor, in which the donee did not participate, may be ratified by the donor or his heirs.
    5. A donee in a deed of gift, set aside on the ground of the improvident conduct of the donor in which the donee did not participate, is not chargeable with the rental value of a'part of the premises, which she did' not occupy, from which she received no rent, and which she kept vacant for the occupancy of the donor’s heir, who obtained the decree setting aside the deed.
    C. A donee in a deed of gift, set aside at the suit of an heir of the donor on the ground of the improvident conduct of the donor, cannot, when accounting for the profits while in possession of the premises, obtain an allowance for insurance policies, which she took out in her own name and for -her own benefit and without the knowledge of the heir.
    7. A donee in a deed of gift, when accounting for the profits to the heir of the donor obtaining a decree setting aside the deed on the ground of the improvident conduct of the donor, cannot charge for services personally rendered in taking charge of the premises and collecting the rents.
    8. The money loaned by a donee in a deed of gift to an heir of the donor obtaining a decree setting aside the deed on the ground of the improvident conduct of the donor, and directing the donee to account to the heir for the rents of the premises, is not available as a set-off against the rents, especially where the order of reference merely directs the master to make both parties all just allowances, which relates only to the subject-matter of the accounting.
    9. Where the court of errors and appeals set aside a deed of gift at the suit of an heir of the donor, on the ground of the improvident conduct of the donor, and directed the donee to account to the heir for the rents of the land and pay over to him a specified part thereof, the donee making-no claim in such suit for money advanced to the heir for the support of himself and family, could not enforce a claim for such advancements, when called on to account for the rents.
    On exceptions to master’s report.

      Mr. James A. Gordon, lor the exceptant.

      Mr. William T. Hoffman, lor the delendants.
   Stevenson, V. 0.

The final decree in this cause directed the defendant Sadie Hagen to “account to the complainant lor the rents and income” ol the lands which have been the subject-matter ol this litigation, and to “pay over to him one-half of the net rents and profits.” The nature of this litigation and the character of the possession of the premises in dispute by the defendant Sadie Hagen, out of which arose her liability to account to the complainant, her brother, are fully disclosed in the report of the ease in this court and in the court of errors and appeals. Post v. Hagen, 71 N. J. Eq. (1 Buch.) 234. 242.

Where a party in possession of land is required to account for rents, issues and profits for the benefit of a successful claimant to the whole or a part of such lands, the rules which govern the accounting and control the liability of the party in possession and give effect to evidence or lack of evidence, oral or written, bearing upon any item or items of the account, vary in different cases, according as the accountant may occupy one or another of several widely different positions, such as trustee, mortgagee in possession, tenant in common, tenant in possession by fraud, &c.

The first exception to the master’s report in this case is based upon the failure of the master to charge the defendant Mrs. Hagen “with the rental value of the lower floor” of one of the houses situate upon the land in litigation. Mrs. Hagen in fact received no rent for this floor, and did not occupy it herself. Counsel for the complainant insists in his brief that Mrs. Hagen was “in possession of the property and claiming title to it under a fraudulent conveyance,” and that she was “fraudulently and wrongfully in possession of the property,” and that had it not been for this “fraud, the complainant might have collected his own rents or had possession of his own portion of the estate.”

There was certainly nothing in the decision of this court, and I can find nothing in the decision of the court of errors and appeals which can in the slightest degree sustain these charges of fraud made against the defendant Mrs. Hagen, upon this accounting. The bill of complaint charged Mrs. Hagen with the cornmissel of an exceedingly gross and scandalous fraud by which she aeopiired title to all her mother’s real estate. The exact nature of this fraud is distinctly specified in the bill and is of a common type, viz., the procurement by undue influence of a conveyance of property from an aged parent whose mind had become impaired by disease to such an extent, in the language of the bill, “as to render her incapable of performing any legal act.” This court found this charge not only proved but disproved, and the court of errors and appeals affirmed the finding of facts bj' this court (at p. 242).

The court of errors and appeals, however, reversed the decree of this court dismissing the bill, and by its decision set aside the conveyances to Mrs. Hagen from her mother, Mrs. Telfer, on the ground that those conveyances were infected by the vice of improvidence—a defect which does not necessarily include the slightest tincture of fraud. The error committed by this court seems to have consisted in declining to consider a ground for setting aside the conveyances which was not set forth in the bill of complaint, and was not made the subject of any argument but was exhibited in the evidence. The bill of complaint in this cause does not allege that the property donated comprised all or practically all Mrs. Telfer’s estate, or that there was no power of revocation reserved in the conveyances, or that the conveyances were made without independent and impartial advice. For all that appears in the bill, Mrs. Teller might have had a large fortune invested in mortgages, stocks and bonds, compared with which the lands conveyed to Mrs. Hagen were of very small value.

If the conveyances had been attacked in the argument on the ground of improvidence under “the rule of independent advice,” no doubt the court would have suggested the propriety of amending the bill of complaint, a course which has been followed in several recent cases where precisely the same situation was presented. The conclusion reached in this court (at p. 240) was that “the complainant’s ease stands on the allegations of the bill that the deeds were obtained by fraud, undue influence,” &e., and that therefore (at pp. 241, 242) the inquiry was not as to whether the eonvej'ances “were in fact wise and prudent transfers of property, * * * or whether if Mrs. Telfer had been

properly advised and aided by counsel she would have made these conveyances.” The court of errors and appeals holds that this was an erroneous view. Whether the learned judges of the court ■ of errors and appeals had their attention called to the precise issues presented by the pleadings, or whether they understood that the exclusion of the question of improvidence from consideration by this court was based upon the state of the pleadings, rather than the state of the evidence, it is not necessary to surmise. The point which is important for present purposes is that the vindication of the defen dant Mrs. Hagen from the charge of fraud by the decision of this court was not disturbed, but, on the contrary, was affirmed by the opinion of the court of errors and appeals reversing the decree of this court.

The slightest reflection will show that the action of a court of equity in setting aside a deed of gift on the ground that (1) a fiduciary relation existed between the donor and the donee, and (2) that the conveyance was of substantially all the donor’s property so as to leave the donor unprovided for in respect of the future, and (3) that the conveyance was made without any reservation of a power of revocation, and (-1) that in making it the donor did not have “the benefit of proper independent advice,” differs very widely in character from the action of a court of equity in setting aside a deed of gift on the ground of fraud in its procurement perpetrated by the donee. In the one case, the fraudulent conduct of the donee avoids the deed,; in the other case, the improvident conduct of the donor in which the donee may not have participated, and of which he may have had no notice, constitutes the fatal defect. In this ease, according to the undisturbed finding of facts in this court, the whole improvident project which Mrs. Telfer undertook to carry through was the product of her own mind—an entirely sane, competent mind. Mrs. Hagen hesitated to accept the donation which her mother desired to make.

In this case, and I think in all cases where a deed of gift is set aside as improvident under the “rule of independent advice,” where the donee has taken no part in the procurement of the deed, the only wrong of which the donee can be guilty must consist of an inequitable retention of title after he has received notice of the facts which make the title void or voidable as to the donor or his heirs. The improvident deed may be ratified by the donor or his heirs. In this case, the donee accepted the gift with reluctance, recognizing fully the moral obligations imposed upon her under the peculiar circumstances of the case. In view of ihe fact that these conveyances to the daughter effectuated the plan which the donor herself formed for the application of her little estate to the support of her daughter and her spendthrift son, it seems to me that it would be very harsh to hold that the daughter, the donee, is to be charged with fraudulently remaining in possession under the conveyances made to her because she did not at once perceive the weakness of her title which apparently was not perceived by any of the parties interested until the ease was subjected to a new analysis in the court of errors and appeals. Mrs. Hagen naturally resented the gross charge of fraud made against her in the complainant’s bill o£ complaint, and defended herself successfully against that charge. Even if her counsel had discovered, or ought to have discovered, that there was within the allegations of the bill or within the proofs a basis for an entirely different attack upon the validity of these conveyances which involved no charge of fraud whatever in their procurement, the question still remained for judicial investigation whether Judge Paxton was or wras not an independent and impartial adviser,

It seems to me that down to the time when the law of this case upon the pleadings and proofs had been finally settled by the court of errors and appeals, Mrs. Hagen’s possession of the land which she thought her mother gave her for'reasons which her mother deemed good and sufficient, ought not to be regarded as tainted wdth the slightest degree of fraud. Probably most right-minded people would consider that Mrs. Hagen was performing a perfectly plain, moral duty in respecting the wishes of her deceased mother with regard to the land in question until by the judgment of a court of competent jurisdiction the carrying out of that plan became impracticable. Is it possible that Mrs. Hagen is to be penalized or to be charged with fraud of any kind because she did not, with the advice of her counsel, take the place of the court of errors and appeals and adjudge that the conveyances which her mother made to her were void, and thereupon, in flagrant violation of her mother’s wish and will, deliver up one-half of the property to be squandered by this unfortunate spendthrift and drunkard?

The foregoing considerations, I think, dispose of the first exception to the master’s report. Mrs. Hagen’s possession of the land in question was not of such a character as to make her chargeable for the rental value of the portion of the house which she did not occupy, from which she received no rent, and which she kept vacant in the hope that her unfortunate brother would find it convenient to occupy the same.

The other exceptions to the report which are not sustained do not, I think, call for extended discussion. The complainant, with the aid of her husband, endeavored, I think, to render a fair aecount. The account set forth her receipts and disbursements in respect of the property, and the accountant swore that it was correct. In large numbers of instances where exceptions are taken no effort is made to show that the repairs and additions mentioned in the account were not in fact made, or that the amount charged for them is excessive; the exceptant contents himself with pointing out that Mrs. Hagen and her husband contradict each other as to who paid the amount of the item. Frequently the names of the parties who did the work or supplied the materials charged for are stated by Mrs. Hagen or her husband, but not one of these parties was brought forward on behalf of the exceptant to contradict the testimony which Mr. or Mrs. Hagen had given. It will be sufficient, I think, for all present purposes, to take up in detail those instances only in which the exceptions are sustained.

The eleventh exception is admitted by counsel for Mrs. Hagen to be in part well founded, that instead of $54 the item should stand at $33.

The thirteenth exception is to the allowance of premiums amounting to $148.16 paid by Mrs. Hagen for insurance policies which she took out in her own name and for her own benefit, and without the knowledge of the complainant. If the buildings insured had burned down no way has been suggested by which the complainant would have received any benefit unless other buildings had been placed upon the land by the insurance companies, or by means of the money paid by the companies to Mrs. Hagen. No authority is cited to sustain such an allowance. The authorities seem to be the other way. 17 Am. & Eng. Encycl. L. (2d ed.) 696; Pickering v. Pickering, 63 N. H. 468; 3 Atl. Rep. 744.

The fourteenth exception is sustained. It relates to fees amounting to $155.55 for collecting rents alleged to have been paid by Mrs. Hagen to her husband, her co-defendant in this case. It is unnecessary to decide that if this property had been so situated that an owner like Mrs. Telfer would naturally have required the services of an agent to take charge of her property and collect the rents, the regular percentage charged by the agent would not be a proper item for allowance in this account. Owners are not allowed to charge in an account like this for services which they have personally rendered. Switzer v. Switzer, 57 N. J. Eq. (12 Dick.) 421, 427.

The proofs fail to satisfy me that there was any bargain between Mr. and Mrs. Hagen by which he undertook to collect these rents for a percentage or for any remuneration. The indications are that Mr. Hagen collected these rents for his wife gratuitously to save her the trouble of acting for herself, and that this charge in the account for Mr. Hagen’s services based on a percentage is an afterthought suggested by the unwillingness of Mr. Hagen to do anything gratuitously for the benefit of the complainant. Mrs. Hagen does not testify in regard to the payment of these commissions to her husband, and Mr. Hagen’s testimony is exceedingly unsatisfactory. The payments which he said his wife made to him were made at different times, and the greater part of them may have been made after the decision of this case by the court of errors and appeals.

The fifteenth exception which is to the allowance of $500, the alleged amount of moneys advanced by Mrs. Hagen to her brother from time to time after her mother’s death, is sustained. There is no evidence which would warrant the finding that these moneys were paid over on account of rents collected by Mrs. Hagen. Mrs. Hagen’s testimony makes such a finding of fact impossible. There are two views which may be taken of the nature of these advances, and whichever of these views is adopted the ascertainment of the amount of the advances and the placing them within the account as stated by the master were entirely beyond the widest possible" scope of the order of reference. One view of the nature of these advances is that they were loans. Mrs. Hagen refers to them as money “loaned,” and testifies that the complainant always said that he would pay her back. The complainant admits the reception of moneys from his sister of which he kept no account, and he does not seem to indicate whether he considered the advances as loans or gifts. If the moneys in fact were loans it is very clear that the master was not authorized by the order of reference to ascertain the amount of these loans and state them as a set-off. It is true the order of reference following the usual form directs the master, in taking the account, “to make to both parties all just allowances,” but any such allowances must relate to the subject-matter of the accounting which was the “net rents and profits” in Mrs. Hagen’s hands. The ascertainment of the amount of a set-off growing out of independent loans made by Mrs. Hagen to her brother involves independent issues which the master had no jurisdiction to try.

The other view of these moneys paid out from time to time by Mrs. Hagen to her brother is that they were contributions for the support of this spendthrift and his family made by Mrs. Hagen in pursuance of the solemn injunction of her mother delivered from her dying bed. If this is the correct view of these payments of money then we have this situation; Mrs. Hagen having received the estate of her mother as a fund from which she may contribute to the support of her spendthrift brother, pays out substantial sums for such purpose, and the beneficiary receives the same. The beneficiary now procures the setting aside of the donation of the fund from which he has received these payments. There seems to be room to argue that this is a case where a voidable conveyance will only be set aside by a court of equity on equitable terms, and that it would be equitable to impose upon the complainant as a condition of granting him relief that he account for and allow to the defendant Mrs. Hagen the moneys which he has received in execution of the donor’s scheme which he now elects to have set aside. But the difficulty is that the master was not authorized by the order of reference to recognize or administer any such equity in favor of the defendant Mrs. Hagen. The insurmountable difficulty also exists that neither the master nor this court has the power to impose a condition upon the complainant which he must submit to in order to be able to obtain the relief which the decision of the court of errors and appeals grants him without condition or reservation of any kind. If the defendant Mrs. Hagen expected to be allowed the amount of her quasi gratuitous contributions to her spendthrift brother’s support in pursuance of her mother’s plan which the spendthrift elected to avoid, she should have made her claim before the court of errors and appeals, and possibly that court might have recognized and enforced it. It seems clear that there is no power in this court to enforce such a claim at this stage of the suit.

The seventeenth exception is taken to the allowance of a large number of small amounts paid by Mrs. Hagen as interest on taxes assessed upon the land in litigation. No reason is shown why Mrs. Hagen should have neglected to pay these taxes when they fell due, and her account seems to indicate that at all times she had rents in her hands sufficient to pay these taxes. The exception, therefore, will be allowed.

The result is that the eleventh exception is in part sustained as above stated, the thirteenth, fourteenth, fifteenth and seventeenth exceptions are sustained in their entirety, and all the other exceptions are overruled.


author: Stevenson, Y. C.

text:
    Christian Feigenspan, a corporation, v. Kazmira M. Popowska.
    [Decided April 21st, 1909.]
    1. The covenant in a lease giving the lessee a right of renewal is binding on the grantee of the reversion.
    2. An agreement to renew a lease implies a renewal for a life term on like conditions.
    3. A general covenant in a lease for a renewal, while calling for a lease of similar tenor to the original lease, does not require that the renewal of the lease contain a similar covenant of renewal.
    4. The provision in a lease that the lessee may “make arrangements with the lessor for renewal of another term three months before this term expires,” at a specified increased rent, gives the lessee the absolute option to renew on giving the required notice before the expiration of the term and making “arrangements” with the lessor for the execution of the new lease.

      5. A lease should be given such construction as will give it force and validity, rather than a construction which makes it meaningless and inoperative.
    6. The word '“arrangements,” as thus used, means the meeting of the parties for the execution of the necessary writing to effect such renewal.
    7. In the provision of a lease that the lessee has to make arrangements with the lessor “for the renewal of another term three months be-, fore this term expires,” at a specified increased rent, by the words “renewal of another term” was meant the creation of a new term of lease, having the same conditions and characteristics as the first lease, except that the rent would be a different sum.
    S. A mere notice in such case by the lessee at the proper time that it intends to assert its “rights under the renewal clause in the lease for a renewal of another term,” without any further action of the lessee, does not constitute a renewal of the lease, and does not entitle the lessee to enforce a renewal after the expiration of the term.
    Bill for specific performance of covenant to renew lease. On motion for an injunction to restrain dispossession proceedings at law and counter motion under rule 213 to dismiss bill.

      Mr. William B. Gilmore, for tbe complainant.

      Mr. Gilbert Collins, for tbe defendant.
   Stevenson, Y. C.

1. It has not been insisted on behalf of the defendant that the lease was not effectually assigned to the complainant. The lease is expressly made assignable upon condition that “proper and sufficient security for rent-is given to the party of the first part.” Although the bill does not set forth that rent was accepted from the complainant by the original lessor, Freund, or by the defendant, Popowska, the present owner of the reversion under deed from Freund, the inference seems almost unavoidable that either security for rent was given and accepted, or that the right to security was waived by acceptance of the rent.

The defendant, however, specifies as one ground for the dismissal of the bill that the right of the original lessor under the renewal covenant was not assignable. No authority is cited to sustain this proposition. No reason is suggested why a covenant contained in a lease giving the lessee an option to renew the same should be severed from the lease, which it is conceded is assignable. Such a covenant imparts a very important quality to the estate which the lease creates. The assignee takes a lease subject to all conditions which may defeat or cut down the estate thereby created, and he has all the benefit of conditions or provisions of any kind upon which the estate may be enlarged or extended. “Covenants of renewal run with the land and bind a grantee of the reversion.” McAd. L. & T. ch.17 § 145 p. 515; Tayl. L. & T. (9th ed.) § 332. 409.

2. The covenant, the construction of which controls this whole case, is as follows:

“And it is further agreed by and between the parties hereto that the party of the second part has to be (sic) make arrangements with the party of the first part for renewal of another term three months before this- aforesaid term expires, at yearly rent' of four hundred and twenty ($420) dollars, payable under the same conditions as above mentioned.”

In endeavoring to ascertain the meaning of this covenant, which manifestly was drawn by a layman who was not expert in English composition, it is especially important to keep in mind the ancient rule that “the construction should be favorable so that the contract may if possible be supported, nam verba debent intelligi cum efectu ut res magis valeat quam pereat.” Chit. Cont. (15th Eng. ed.) ch. 5 § 4 p. 94. Under the same general principle when a contract may bear two constructions, one of which makes it legal and the other makes it illegal, courts prefer the construction which renders the contract legal and hence enforceable.

I do not think that there is very great difficulty in perceiving the actual intention of the parties in entering into this covenant. The words disclose the intention. I am unable to adopt the view of counsel for the defendant that there is any ambiguity about this contract, or that it leaves something to- be agreed upon between the parties with reference to the renewal for which the covenant undertakes to provide. It is conceded that an agreement to renew a lease implies a renewal for a like term on like conditions. Kollock v. Scribner (1897), 98 Wis. 104; 1 Tayl. L. & T. (9th ed.) § 332.

This general covenant to renew while calling for a lease of similar tenor to the original lease does not require that the renewal lease shall contain a similar covenant to renew. The authorities all agree upon this exception and the reason for it is obvious.

There are also other covenants which accomplish their whole function during the original term and a general covenant for a renewal will not require their insertion in the renewal lease. It is not suggested that there are any such covenants in this present lease. The argument on behalf of the defendant revolves around the phrase in the covenant “has to make arrangements.” It is insisted that this phraseology indicates that terms or conditions of the new lease are to be “arranged.” I do not think that the language quoted will admit of the meaning thus imputed to it.

It has not been intimated during the argument that this covenant bound the lessee to accept a renewal of the lease. It has been conceded on both sides that the covenant gave the lessee an option. And yet the option is granted by implication. Literally the covenant obligates the lessee to “make arrangements” for a renewal of the term at an increased rate. What it really means is that if the lessee elects to have the lease renewed for another term the rent is to be increased and the lessee is obliged to “make arrangements” with the lessor for such renewal within a specified period.

If the reference to “arrangements” in the covenant means that something was left to be adjusted or arranged between the parties in regard to the terms or conditions of the new lease, then the insistment of counsel for the defendant undoubtedly is correct that the covenant amounted to nothing more than the ineffectual engagement which men sometimes make that they will enter into a contract at a future cíate upon terms then to be agreed upon. It is hardly necessaiy to cite authorities to sustain the proposition that such covenants are entirely unenforceable. 1 Tayl. L. & T. § 333; Kollock v. Scribner, supra, 109, and cases cited.

Applying the principle above stated that we must favor a constraetion of this covenant which gives it force and validity rather than a construction which makes it meaningless or inoperative, 1 do not think that we can find an intention expressed here merely that the parties will in the future arrange or agree upon the terms of a new lease. Nothing is said about arranging terms ox conditions. The subject-matter df the covenant is the renewal of the lease which means the execution of a contract which is absolutely definite in respect of all its terms. One single change or readjustment of the terms of the proposed contract making it differ from the prior contract is expressly provided for in the covenant. What then is the meaning of the clause which provided that “the party of the second part has to be make arrangements with the party of the first part for renewal of another term three months before” the original term shall expire ? It seems to me that force may be given to all the words in this covenant with the exception of the word “be,” which manifestly must be excised, if we refer the word “arrangement” to the transaction of the legal business necessarily attendant upon drawing and executing a renewal lease. The terms of the renewal provided for by the covenant are definite and call for no negotiation or agreement whatever. The “arrangements” are merely for effecting this renewal. Ordinarily, the arrangements for the renewal of a lease consist in providing for a meeting of the parties, the drafting of the instrument and the execution of the same.

The contention on behalf of the complainant that the phrase “make arrangements with the party of the first part for renewal of another term,” means merely that the lessee is obliged to give the lessor notice of his (the lessee’s) election to extend the term, seems to my mind to involve a violent wrenching of the meaning of plain English words. If giving a notice was in the mind of the parties to this instrument or the draftsman of it, it was very easy to express that idea. No one speaks of making arrangements with a man when merely giving a man a notice is intended. On the other hand, when the character of a contemplated renewal of a lease of real estate for five years is definitely settled so that in case the tenant elects to take such a renewal, there is nothing left for negotiation between the landlord and tenant, the only wav in which such a renewal term can be created is by a written lease. Arranging for such renewal therefore seems to be capable of meaning nothing but arranging for the execution of the necessary writing to effect such renewal.

it is not necessary to discuss the distinctions which have been drawn in construing covenants of renewal between the meaning of the word “renew” and the meaning of the word “extend.” Such variations of phraseology are important where there is any room for doubt as to whether the covenant calls for the execution of a lease or merely provides for an extension of the original term by notice. In this case, the covenant not only protects the lessor from all uncertainty in regard to the status of his property during the last three months of the term by limiting the time in which the lessee is to exercise his option for a renewal, but it assures to the lessor in case the option is exercised, the possession of an executed lease to which he may turn for the enforcement of all his rights against the lessee. The design of the covenant was not that the original lessee or any assignee could give notice and then hold over; the design of the covenant, I think, is to place the landlord three months before the expiration of the term in possession of a new lease which would certainly make his position more advantageous, especially where the holder of the term was an assignee, than that which he would occupy in case the original lease were extended by a mere notice.

It may be observed that the covenant provides for arrangements “for renewal of another term” and not “for renewal of the lease.” The use of the word “term” seems to- me to be natural and' proper. The parties have in mind the arrangements which are necessary for the creation of a- new term having the same conditions and characteristics as the first term except that the rent is placed at a different sum. The yearly rent reserved in the lease was $336 for the first year, $360 for the second and third years, and $400 for the fourth and fifth years. The renewal of “the term” created by this lease at a higher yearly rent, which is specified in the covenant, it seems to me, is the same thing as the renewal of the lease- at such higher rent. The only obligations of the lessee which are not expressly covered by tlie provision in the covenant for the payment of rent seem to be an obligation to keep the interior of the demised building in repair and an obligation to pay the water tax, which last-mentioned expense is described as “an additional rent.” A renewal of the term plainly must carry with it the maintenance of these obligations.

3. The difficulty about the complainant’s case as stated in his bill, to my mind, arises from the failure of the bill to disclose that the complainant performed or offered -to perform on his part this covenant providing for a renewal. This objection is amply specified in the notice to dismiss the bill. The covenant, as I have construed it, bound the complainant to “make the arrangements” with the defendant “for renewal of another term.” The bill does not show that the complainant either made these arrangements or made any effort ta make them or have them made. The bill while incorporating the entire lease by proper words of reference undertakes to set forth the legal effect of the covenant. It describes the covenant as one whereby the lessor agreed “to grant a renewal of the said term to the party of the second part or his heirs or assigns upon giving three months’ notice to the party of the first part,” &c. Acting upon this interpretation of the covenant the complainant gave the defendant written notice, dated August 14th, 1908, to the effect that under the lease the complainant was “entitled to a renewal of another term for five years. The notice concludes as follows: “We, Christian Feigenspan, a corporation, hereby give notice to you as present owner of said property that we intend to assert our right under the renewal clause in the aforesaid lease for the renewal of another term at the yearly rent of four hundred and twenty ($420) dollars per year, as provided in said clause.”

It will be observed that this notice says nothing whatever about having a renewal lease drawn or executed. The complainant manifestly acted upon the theory that all-he was obliged to do three months before the expiration of his term was to give notice of his election to have his term extended for another five years at the yearly rent specified in the covenant. The notice ignores the right of the defendant to have a new lease executed by the parties so that the landlord's rights would be based upon an original instrument directly binding the tenant under his own signature instead of an old lease made between other parties and a written notice purporting to have come from the complainant to the defendant, the authenticity and effect of which might at any time be open to doubt and dispute.

The bill is entirely silent as to any transaction between the ■parties after the service of this written notice and counter notice from the defendant through his attorneys to complainant, dated December 17th, 1908. This counter notice recites that the complainant “has failed to make arrangements" with the defendant “for another term of letting of said premises pursuant to the terms of the lease," &c., and announces that the defendant will require the complainant to surrender possession on January 1st, 1909, the date on which the term reserved in the lease would expire.

Presumably the complainant paid the monthly rent reserved in the lease and we may surmise that the defendant did not remain entirely silent after being served with the formal written notice from the complainant, dated August 14th, 1908. The bill, however, gives no information on this subject. If the defendant upon receiving the written notice from the complainant denied the right of the complainant to a renewal, or declined to execute a renewal lease, the complainant would not be obliged to persist in making abortive efforts to effectuate “arrangements” with the defendant which the defendant absolutely declined to make. Les nil frustra. We cannot, however, assume that if the complainant had followed up its notice of August 14th, 1908, with tendering itself ready and willing to enter into a new lease in accordance with the covenant, the defendant would have refused to carry out the covenant on his part. The case set forth in the bill presents this situation: The lessee has the option to have a renewal lease made and in ease he exercises his option he is required to make the arrangements, i. e., to enter into such renewal lease with the lessor three months before the expiration of the term. The lessee gives notice of the exercise of his option four and one-half months before the expiration of the term and then does nothing inore. Presumably the defendant was standing by and waiting for the complainant to come forward and enter into the definite written lease, which' under the covenant the lessor was entitled to have instead of a mere notice of renewal of an old lease between the lessor and a third party. As the complainant did not come forward so far as appears from the bill, or make any effort to perform its covenant and make the “arrangements” which it was required to make three months before the expiration of the term, a few days lie-fore the expiration of the term the defendant gave the complainant reasonable notice to surrender possession on the day when the term would expire. I cannot see that the lessor had not a right to do precisely what he did in this case. The lessor was under no legal or equitable obligation to undertake to correct the possible or probable error under which the complainant was laboring in regard'to the meaning of this covenant. The complainant asked no advice from the defendant, but served him with notice not that it would make the new lease as provided by the covenant, but that it'intended to assert its right for a renewal.

4. The result is that no case is made out by the bill, as it is now framed, for the specific performance of the covenant for a renewal lease. The bill, therefore, is without equity and if not amended must be dismissed.

The motion for an injunction will not be decided at present, but may stand over, the restraining order still remaining in force, until the complainant has had a reasonable time to amend its bill and present evidence establishing a sufficient excuse for its failure to make or attempt to make the “arrangements” above referred to within the period prescribed in the covenant.


author: Garrison, V. C.

text:
    Martin Blauvelt v. Passaic Water Company et al. Carrie May Dowell v. Passaic Water Company et al.
    [Decided April 13th, 1909.]
    1. To ascertain the intention of the parties as expressed in a deed, the court must consider the situation at the time of the execution of the deed.
    2. A deed described the land by metes and bounds and referred to it as “being the triangular piece * * * lying between the lines of the old street and the proposed improvement as laid down on said map, together with the use of such portion of land in front of said triangle as was lately included in T. avenue, as formerly laid.” At the time of the execution of the deed, the grantee owned land- on T. street, and the grantor owned land directly opposite. A proposed change in the street would leave a triangle on the side owned by the grantor between the line of the new street and the line of the old street. The land owned by the grantee was his homestead. At the time of the execution of the deed, the old street was in use.—Held, that the grantor conveyed, the fee of the triangle and the land in front of it between the triangle and the land of the grantee; the word “use” meaning entire, exclusive, complete, or any other comprehensive word expressing- all of the purposes to which land can be put.
    3. Where the intention in employing the word “use” in a deed is to indicate complete dominion, the word is sufficient to convey the fee.
    By consent of counsel these two cases were tried together. Heard on bills, answers, replications and proofs in open court.

      These are bills to quiet title, aud the sole answering defendant is the Central Trust Company of New York. The complainants each claim to own the lands in dispute by virtue of a deed made by the Passaic Water Company to William H. Blauvelt on the 21st of May, 1873. Each of the complainants traces his title back to said William H. Blauvelt.
    The deed in question, from the Passaic Water Company to William H. Blauvelt; dated May 21st, 1873, proved September 11th, 1874, and recorded December 5th, 1874, after describing a piece of land by metes and bounds, refers to it as “being the triangular piece of ground lying between the lines of the old street and the proposed improvement as laid down on said map, together with the use of such portion of land in front of said triangle as was lately included in Totowa avenue as formerly laid.” The dispute arises over the_ question of the effect to be given to the above language from the word “together” to the end of the sentence. In 1887 the Passaic Water Company executed a mortgage to the Central Trust Company, and it is conceded that if at that time the Passaic Water Company owned the lands in dispute in this suit they were included in the mortgage. The dispute in this suit arises over the question as to what lands were conveyed by the Passaic Water Company to Blauvelt by the deed above mentioned.
    Decrees pro confesso have been entered against all of the defendants except the 'Central Trust Company.
    The Passaic Water Company by a subsequent deed, which it is admitted is not effective as against the mortgagees' rights, confirmed the title of Blauvelt to the locus in quo, reciting that it was the intention of the original deed to convey the lands.

      Mr. George 8. Hilton, for the complainant.

      Messrs. Lindabury, Depue •& Faulhs, for the defendant Central Trust Company of New York.
   Garrison, V. C.

The sole question in this case, as I conceive it, is to ascertain and give effect to the intention of the parties as expressed in the deed from the Passaic Water Company to William H. Blauvelt. To ascertain this intention it is first necessary to understand the situation at the time that the deed was made. At that time, fronting on a street then called Water street, and which previously had been called Totowa avenue and Totowa road, Blauvelt had land upon one side and directly opposite, the Passaic Water Company had land upon the other.

At the time of the drawing of the deed a plan had been projected of changing the location of the street, the result of which change would be to leave a little triangle of land upon the side owned by the Passaic Water Company between the line of the new street and the line of the old street, and the effect of the change upon the title of the parties would be to leave Blauvelt, whose homestead was erected upon his land and ran down to the edge of the street, with title, of course, to the centre of the vacated street; then would come a piece of the vacated street, the title to which would revert to the water company, and then would come this little triangle between the north line of the new street and what had been the south line of the old street. Of course, there would not be any break in the continuity of the ownership of the Passaic Water Company from the centré line of the old street out to the new street, because, by the vacation of the old street, the land, from its centre line to the line of the Passaic Water Company’s other land, would revert to the water company, and it would therefore own from the centre line of the old street out to the north line of the new street. But at the time that the deed was drawn the old street was still in use and the improvement was only contemplated, and the situation which would be produced by the new street would be to leave the Passaic Water Company a peculiarity shaped piece of land intervening between the homestead and land of Blauvelt and the new street.

The draughtsman of the deed (which is badly drawn to express clearly the intention of the parties) described by metes and bounds the little triangle of land which the Passaic Water Company owned on the north side of the new street as it would be when actually laid out, and then included as part of what was granted, the use of the land between such triangle and the other land of Blauvelt.

It will greatly aid in understanding the situation to here insert, as I do, two diagrams showing, respectively—first, the situation before the change in the street lines and before the conveyance in 1873 by the water company to Blauvelt, and second, the situation after the change from the old street to the new, showing the locus vn\quo.

Beai mg in mind that at the time the deed was drawn the old street was still being used, and that the evident purpose was to bring Blauvelt out to the side of the hew street the way he had previously been situated upon the old street, it is, I think, entirely clear that what was intended was to convey to Blauvelt all of the land between the nojth side of the mew street and what, he then owned. It seems to me to be absurd to believe that Blauvelt intended to buy this utterly useless little triangle of land, if, between it and what he then owned, would intervene the locus in quo, which the draughtsman calls “the lands in front of the triangle.”

As the title stood at the time that the deed was drawn this land was in front of the triangle. From the new street, of course, it is in the rear of the triangle. But we must put ourselves in the place of the parties as of the time when the deed was drawn, and I think it, as I have above said, entirely clear that what the grantor intended to do was to convey to Blauvelt all of the land which the grantor owned from the north side of the new street up to Blauvelt’s existing line, which was the centre line of the old street. He did this by describing the triangle and granting the use of the land between that triangle and Blauvelt’s land.

As Blauvelt was using his land as a homestead, and the soil in front of his house was his lawn and ran down to the old street and would, of course, be continued down to the edge of the new street, the use that he intended to make of it was to have entire dominion over it; or else we have the absurdity of an adverse title to land lying right in the centre of his lawn.

When we recall that at the time the deed was drawn the old street still existed and was in use by the public, I think we have found the explanation of why the draughtsman worded the deed as he did.

The Passaic Water Company actually owned and was in possession and could deliver possession of the triangle. It was not in possession, and might never come into the possession (freed from the public use) of the land in front of the triangle and between the said triangle and the existing line of Blauvelt. I think it clear that the draughtsman considered that, under the circumstances, it would not be wise for the water company actually to describe this land in the same way that he did the land of which it was in possession, because it was still in the old street and in use and they could, not deliver possession and might be liable, upon the covenants in the deed, for not doing so. His purpose was to transfer to Blauvelt all the rights that the Passaic Water Company had, both in the triangle and in the land in front of the triangle and between it and Blauvelt’s line; and he thought it safer to his client to effectuate that intention by only describing and granting by express terms that portion of the land, namely, the triangle, which was in the actual possession of the grantor,- and then granting the use of the rest, which was at that time not in the possession of the grantor; his purpose undoubtedly being to grant to Blauvelt whatever use could be made of such land, and when, by vacation, entire use, that is, entire dominion, would revert, then it was the intention that Blauvelt should have that. In the deed, after the description of the triangle and the use of such portion of the land in front of such triangle as was lately in the street, there is a clause granting “all and singular the tenements, &e., with remainders, reversions, &c., and also all the estate, right, title and interest, property, possession, claim and demand whatsoever of the” (water company) “in and to the same and every part and parcel thereof.” The effect of this, it seems to me, clearly is to grant to Blauvelt the interest, right, title, property, &c., of the water company in and to the “use” above described, and as that was complete fee-simple title, it was the title granted.

Being convinced, as I am, that each of the parties intended by this conveyance to vest in Blauvelt title out to the new street, I give to the word “use,” as herein employed, the meaning of entire, exclusive, complete, -or any other comprehensive word to express all of the purposes to which land can be put; in other words, I think the intention was to grant a fee, and that by the employment of the word “use,” the grantor intended to grant and convey the entire use, that is to say, the entire dominion over the land.

Under the authorities, where the intention in employing the word “use” is to indicate complete dominion, the word is sufficient to convey a fee. Fitzgerald v. Faunce (Court of Errors and Appeals, 1884), 46 N. J. Law (17 Vr.) 536 (at p. 596); Conover v. Atlantic City Sewerage Co. (Court of Errors and Appeals, 1903), 70 N. J. Law (1 Vr.) 315 et seq.; 3 Washb. R. P. (5th ed.) 406.

I hold that such is its meaning and effect in the present ease.

I do not find it necessary to consider any 'of the other points raised, because of my finding that the intention of the parties can be effectuated by the construction placed upon the language employed in the deed, and that such construction results in confirming the title of the complainants, for whom decrees will accordingly be entered.