author: Stevens, V. C.

text:
    Fidelity Trust Company v. Lillie H. Bolles et al.
    [Decided March 6th, 1912.]
    Evidence held to show that a debt for which defendant’s interest in an estate had been .assigned had been paid, and that the assignments, except so far as they secured the debt while it existed, were fraudulent and void as to the assignor’s subsequent creditors.

      Mr. Francis KnotvleSj for Lillie H. Bolles and her children.

      Mr. John H. Baches, for estate of E. H. Murphy.
   Stevens, V. C.

This is an interpleader. The complainant has -paid into court the sum of $5,513.47. Of this sum it is said by Lillie H. Bolles and her husband, Charles, that Phoebe T. Bolles is entitled to $1,500. All the residue they now claim for their children. I say they now claim, for they originally claimed only $2,000. The balance was said to belong to John O. Bolles.

The estate of Edward H. Murphy asserts, on the other hand, that it has a first lien upon the fund to the amount of $2,000., with interest; as to $1,500 from May 29th, 1899,- and as to $500 from September 11th, 1899. The indebtedness is admitted; the dispute is as to its priority.

The demand of the Bolles family is based upon a number of assignments prior in date to the assigmnents to Murphy. The Murphy estate contends that the Bolles assignments are fraudulent. The situation is somewhat complicated and in order to make it intelligible, I shall have to discuss it in some detail; more particularly as the claims made by the Bolleses were changed during the progress of the hearings.

In the answers of Lillie and Charles, as well as in those of their children, it was averred that $1,000 of the fund was payable to each of the children and that the balance belonged to John O. Bolles. John O. Bolles took the same position. In his answer he admits that the claims of the children “have precedence over and are entitled to be paid before the amount that shall be paid upon the claim of this defendant.” On the witness-stand he swore repeatedly and explicitly that $4,000 was due to him. Nothing to the contrary was intimated by anyone, up to the close of the evidence. When, on the application of Mr. and Mrs. Bolles, the case was reopened to enable them to put in further documentary evidence, it, for the first time, appeared that, on two occasions, John O. Bolles had assigned all his interest for the benefit of the children. The significance of this change of front will be apparent as we proceed.

The first assignment, made to John O. Bolles, is the earliest in point of time. It will, therefore, be first considered. On the first hearing a' demand note of $4,000 was put in evidence. It was dated June 1st, 1892, and was made by Lillie O. Bolles to the order of John O. Bolles, with interest. It was payable at the office of the Crescent Drug Compaq, 620 Broad street (Newark). There was also produced au assignment, dated June 20th, 1895, made by Lillie O. Bolles to John 0 Bolles, in full settlement and discharge of her indebtedness on the above-note. It transferred

“all my present right, title and interest m and to the estate of my grandfather, John Cummings Crane * * * conditional that if there shall be remaining any surplus in said estate, more than enough to liquidate in full my said indebtedness then said surplus shall come and be delivered to me.”

On these two documents John 0. Bolles rested his case, and swore that the monejr was due him. He was cross-examined as to the consideration and he, or his counsel, produced a check for $4,500. It bore date May 14th, 1888, and was made by Phoebe Bolles, to the order of John O. Bolles. It bears the following endorsements, which I give in their order: "John O. Bolles, Lillie H. Bolles, Crescent Drug Co., Charles J. Bolles, treasurer.” John first testified that the check which he had thus endorsed to Lillie constituted the consideration for the note. He afterwards admitted that it was used to buy stock of the Crescent Drug Company and that it formed no part of the consideration, but he said that he had lent Mrs. Bolles other moneys, the particulars of which he was unable to specify. Lillie testified that Phoebe Bolles had given checks to John and that John had endorsed them over to her, and that this was the consideration. She says:

“When the adjustment was made in 1892, in June, with Mr. John Bolles, that was the sum fixed upon between Miss Phoebe and Mr. John as my owing John that amount. He was willing- to accept it at that amount.”

John Bolles testified, further, that he did not get the note until three years after its date when he received the assignment of June 20th, 1895. Lillie Bolles testified that it was delivered immediately.

This was the substance of the evidence, on this part of,the case, as first made. Shortly after its close Mrs. Bolles, for some reason, quarreled with her then counsel, Mr. Boggs, and retained her present counsel. This counsel presented a petition to reopen the hearing and, under leave of the court, put in documents which showed quite a different situation. He first produced, in addition to the $4,000 note of June 1st, 1892, a receipt therefor which stated that the note adjusted and settled in full all the indebtedness of Lillie H. Bolles to John 0. Bolles, and, in addition, an assignment of even date which transferred to Charles H. Bolles, as agent of John O. Bolles, her right, title and interest in and to the estate of her grandfather, as far as necessary to satisfy the debt.

Appended to the bill is a copy of another assignment, made by Lillie H. Bolles, by Charles J. Bolles, attorney (under a power, of attorney from her), dated May 16th, 1895, assigning the same interest as security for the same debt. It is admitted that this assignment was made. There are, therefore, three assignments, the first dated June 1st, 1892; the second, May 16th, 1895, and the third, June 20th, 1895, all apparently for the same purpose; anyone of which would have sufficed. The two earlier are in the handwriting of Charles Bolles; the last, in that of Lillie Bolles.

There were then offered two other documents—one an assignment by John O. Bolles to Charles J. Bolles, as trustee for his two daughters, dated June 6th, 1895, transferring all the interest in the Crane estate that had been assigned to him by the assignment of June 1st, 1892, and a further assignment of the same interest by John, directly to the two daughters, bearing date May 1st, 1906.

The two assignments to the children appear to have been drawn by Charles J. Bolles. Notwithstanding tire singularities of these various papers, I am inclined to think that the original note, the receipt and the first assignment, all dated on June 1st, 1892, were intended to subserve an honest purpose, viz., to secure a debt which Lillie really owed John. The other papers have no other object, apparently, than to obscure the situation and to hinder and delay Mrs. Bolles’ creditors. It appears that she was a large stockholder in the Crescent Drug Company, or its successor, the Crescent Drug and Chemical Company, which became insolvent in November or December, 1893.

It may he assumed from her testimony that she herself had many creditors with whom she was, as she says, engaged in making “adjustments.” She, no doubt, feared that they would seize her interest in her grandfather’s estate—an undivided residuary interest that would not vest in possession until the death of her mother, Elizabeth Newman—and she wanted to place this interest in the name of her children, taking care, however, to reserve to herself and her husband full dominion over it.

The husband was to hold with practically unrestrained power of disposition. I say “unrestrained” because the papers were all, with the exception of the last, to he held by Charles and not by an independent trustee, and no notice of their existence was given to tlie Crane estate. They were unrecorded, and they could have been, at any time, destroyed by Charles, with liis wife’s concurrence, and all proof of any interest in the children, then of tender years, obliterated. As to John, lie evidently had committed the care and disposition of his interest to Charles, as is apparent from a perusal of another paper—an unlimited power of attorney—in the handwriting of Charles, signed by John, made in March, 1893.

After the assignments of June 1st, 1892, and May 16th, 1895, had been made to John, he, as I have said, on June 16th, 1895, assigned his interest to Charles, as trustee, to hold in trust for Constance and Mildred, the two daughters of Charles and Lillie. The consideration is one dollar and, to quote, “other valuable and adequate consideration performed in my behalf by said Charles J. Bolles as well as bjr Anna C. Bolles before the ensealing and delivery of these presents.” This last-mentioned assignment was one of the papers offered after the parties to this controversy liad first rested. Charles was cross-examined about them and a letter accompanying the final assignment of May 1st, 1906, was produced, composed, it may lie conjectured, by Charles himself, but signed by John and addressed to Charles, on which cross-examining counsel put the following questions:

“Q. In this letter lie (John) stated ‘You know' the entire consideration paid me in 1895 by Anna and yourself amounted only to $2,800 when I assigned to you as trustee for your children all my rights to John C. Crane’s estate which were represented by Lillie’s note of $4,000 with interest additional;’ what reference had that $2,800 to the $4,000, if yon know?
‘'A. I know my sister paid him $2,200.
“(By the court.) It says $2,S00 there.
“A. I paid Mm some money.
“Q. Do you know what the $2,800 was; that is the question?
"A. It was a consideration for the assignment executed by John in May to me as trustee for my two children.
“Q. Do I understand that at that time you paid him $2,800.
“A. I did not; no, sir.
“Q. Who did? •
“A. My sister paid Mm $2,200 to my knowledge.
“Q. Well, your sister.
“A. Anna. I paid Mm some money and performed some services for him that were very profitable.
“Q. What was the $2,800 made up of?
“A. It consisted of cash paid by Anna C. Bolles and fyy myself.
“Q. It was all cash?
“A. I am pretty positive the money paid by my sister was all cash— possibly some of mine was in small checks.
“Q. On what account was that paid. Do you know?
“A. On what bank account?
“Q. No, why was it paid to your brother—the $2,200 by your sister?
“A. It was in connection with the Kraemer Drug Co.
“Q. Well, the $2,800 was paid in connection with the $4,000, as John refers to it here in this letter?
“A. It was paid to him as a consideration by my sister and myself, in connection with other considerations, to execute to me as trustee for my two children all John’s right in that note and in the Crane estate— that note of $4,000-
“Q. You mean to say that for the $2,800 he sold to you as trustee for your children-
“A. No, I mean to say for more than $4,000—I mean to say that he received $2,800 in money—some of it by check—and he received also some other things by me as consideration.
“Q. (By the court.) These moneys paid and these services rendered, was that a satisfaction of the $4,000 note?
“A. I bought the note as I supposed and the collateral security following it of the Crane estate—that was my understanding at the time that I took that over as' the rights of my children—the majority of the consideration being- paid by my sister Anna.
“Q. (By the court.) Now were these payments that you speak of and these services that you speak of considered to be in satisfaction of that amount ($4,000)—in liquidation of that amount if you like. I want to-know what the situation was. Cannot you answer that?
“A. Liquidating Mrs. Bolles’ debt to John Bolles.
“Q. She owed the $4,000?
“A. Yes.
* * i'fi * * * :.>• *■ 4*
“Q. I asked whether the $2,800 was paid to John O. Bolles because John O. Bolles was your wife’s creditor to the amount of $4,000?
“A. Yes, sir.”

From this examination it is perfectly apparent that on June 6th, 1895, John Bolles’s claim of $4,000 was completely satisfied. And yet we find that on June 20th, 1895—that is, two weeks afterwards—Lillie Bolles, by an instrument under seal, in her own handwriting, made another assignment of her interest in the Crane estate (the one first put in evidence), reciting that she was indebted to John in the sum of $4,000, “as is evidenced by my promise to pay upon demand to said John O. Bolles as of the date June 1st, 1892,” J ohn, Lillie and Charles were all asked why this assignment was made, and they said they could not tell. On May 2d, 1906, John again assigned his interest, this time directly to Constance and Mildred. When the claims of the Bolleses were attacked as fraudulent, J ohn, in his answer, set up the assignment to him as his own and as entitling him to precedence, concealing altogether the fact that he had surrendered all interest in it to his two nieces. When the ease was reopened Charles Bolles attempted to hold Mr. Boggs, his former counsel, responsible for this. But Mr. Boggs says, positively, that his attention was not called to these papers, and it is quite inconceivable that a lawyer of his experience would, in the pleading, allege title in John when the documents before him showed title exclusively in Mildred and Constance. The only explanation for the change of front that suggests itself is that the Bolleses were not satisfied with the case as made, and thought it would be desirable to bolster it up by a further production of papers.

But this is not all. Murphy had given notice of his assignments to the trustees of the Crane estate at the time when he advanced money on the faith of them in 1899. John O. Bolles did not give any notice until after the death of the life tenant, Mrs. Newman, who died on May 10th, 1909. The notices then served, in June and July, 1909, were the assignment to John O. Bolles of May 16th, 1895, made just before he was paid in full, and the assignment to him of June 20th, 1895, made just after. The notice was not to pay the children (the two assignments to them not being mentioned), but to pay John O. Bolles. The significant fact in connection with all this matter is that whenever it was necessary to make a public disclosure, it was the assignment of June 20th, 1895, that was put forward and not the assignments to them.

There is another fact which I must here mention: Murphy was, during the year 1899, acting as Mrs. Bolles’s counsel. She was in need of money and applied to him -for a loan. He agreed to lend, on the security of her interest in the Crane estate, first, $1,500, and shortly afterwards, $500. She made two affidavits, one accompanying each loan, in which she swore that she had made no prior assignment. Mr. and Mrs. Bolles now say that Murphy was informed of the prior assignments, and Mrs. Bolles says -that she had no recollection of making the affidavits. She admits that she signed the papers, but says that she did not know their contents. They were taken, one before 'Win. 6. Romaine, and the other before Thos. L. MeConchie. Mrs, Bolles is a very intelligent and alert witness. It appears to me to be simply incredible that she swore, or would have been permitted to swear, to the contents of such papers without knowing what she was swearing to; or that her own counsel, after having been told of the prior assignments, would have advised or permitted her to swear to a falsehood, and would then himself have lent money on the faith of it. Concealment here -quite accords with concealment elsewhere.

There is still another assignment to which 1 have not as yet alluded. It is dated November 20th, 1893, and purports to be a transfer by Mrs. Bolles to her husband, in consideration of $3,500, of her interest in the Crane estate, in trust, to have and to hold, without giving bond or indemnity, until her children, Constance and Mildred, should each attain the age of twenty-five years, when she empowers her trustee to pay to Phoebe T. Bolles the sum of $1,500 and to Mildred and Constance the sum of $1,000 each, and in the event of the death of one or more of the three beneficiaries, to pay the share of such beneficiary to her (Lillie’s) legal heirs.

This document was, like most'of the others, signed when Mrs. Bolles was “adjusting” her liabilities with her creditors. Her testimony is that she owed her husband’s sister, Phoebe, $3,500, an amount ascertained at the same time that she ascertained the amount of her indebtedness to John. She did not give her sister-in-law a note at that time, such as she gave John, or any paper definitely stating the amount due. She says she handed Crescent stock as collateral. She produces no receipt for the stock and no voucher of any sort that would evidence the indebtedness, and her statement as to how it arose is vague in the extreme. She says the loans were not made to her by Phoebe herself, but through John; that Phoebe preferred not to deal directly with her. Phoebe is not called to corroborate her, although alive and accessible. She further says that she took the money received through John and bought stock of the Crescent Drug Company and became the “virtual” owner of it. She was then asked how, if she owed Phoebe $3,500, she came to make a trust deed that only gave Phoebe $1,500 and her daughters $2,000, and her answer was that it was a suggestion of her' father-in-law.

Her testimony is as follows:

“At that time-I had practically refused to do anything more in regard to giving any security for any debt that I owed and Miss Phoebe—the Crescent Drug Company was going into the hands of a receiver—and she was very anxious to have some security besides the stock that she held, and there was a meeting of the Crescent Drug Company on that day and1 some spirited words and that was all 1-would do. After considerable discussion it was my father-in-law who suggested—Bliss Phoebe had intended to leave my two girls some money and it was his suggestion that it was done this way and naturally I -acquiesced. I was very glad to have the girls remembered to that extent.”

It does not appear whether the assignment, as made, was acceptable to or ever seen by Phoebe, or that Phoebe ever did any act by which she released or donated a part of her claim. If it was an attempt to secure Phoebe to the 'extent of $1,500 onty, it was not a happy one. It begins by stating tliat Mrs. Bolles was of full age and solvent, a statement not usual in such a' paper and not entirely consistent with her evidence. Then it assigns the interest in the Crane estate to Charles, as Phoebe’s trustee. It does not appear that lie was so constituted in any other way than by the paper. It is expressly provided that the •trustee is not to give bond or indemnity and that he is to hold this interest, not, as we would have supposed, during the life of the beneficiary for life, Mrs. Bolles’s aged mother, but until the youngest of the daughters should attain the age of twenty-five years. He is to disburse the income or receipts to his three beneficiaries “within the sole discretion and judgment of said trustee,” and what is still more singular, he is to pay not Phoebe’s heirs, in case of her death, but Lillie’s heirs. John Bolles is seventy-eight years old, Charles is considerably younger, Phoebe’s age is not given, but she could not have been very young when this paper was executed. It was doubtful, under such a trust, whether she would ever receive any part- of this money and it was certain that if she died before Constance had reached the age of twenty-five, her heirs would not. It is not pietended that any written acknowledgment of a debt of $1,500 was ever delivered to Phoebe or that during the last nineteen years one cent of interest has ever been paid to her. Taking this paper in connection with the papers given contemporaneously and subsequently'to John to secure him; considering the utter lack of vouchers to support Lillie’s story; the failure of Phoebe or her self-constituted trustee to notify the Crane estate of the interest transferred and the failure of Phoebe herself to appear and testify, it cannot be doubted that the transfer was an effort to shield Mrs. Bolles’s interest in her go andfather’s estate from the claims‘of her creditors. .

My conclusion, therefore, is that the debt to John O. Bolles was paid and that the assignments, except in so far as they secured that debt while it existed, were, under the adjudged cases, fraudulent and void as to the subsequent creditors of Mrs. Bolles. Washington National Bank v. Beatty, 77 N. J. Eq. (7 Buch.) 252; McNulty v. McCarthy, 78 N. J. Eq. (8 Buch.) 366. The assignment, alleged to have been made on Phoebe’s behalf, is included in this category.

Had l come to the conclusion that the assignment was valid, another question would have arisen, suggested by Vice-Chancellor Bmeiy’s very recent decision in Jenkinson, Executor, v. New York Finance Co., 79 N. J. Eq. (9 Buck.) 247. He there holds that a subsequent assignment of a legacy, made for value, without notice of a prior assignment, and after inquiry of the trustee, followed by notice to the trustee, has priority over the claim of a prior assignee who has given no notice. This question had been referred to but was left undecided by the court of errors and appeals in Cogan v. Conover Manufacturing Co., 69 N. J. Eq. (3 Robb.) 814. The ease in hand differs from the case decided by Vice-Chancellor Emery in the circumstance that there is no proof, Murphy being dead, that he first made inquiry of the trustee. Had he made it, he would have learned nothing. It does appear that he took the extraordinary precaution of obtaining an affidavit from the assignor. The priority of the second assignee, in this class of cases, is rested upon two principal grounds, first, the negligence of the prior assignee in failing to give notice; second, the more complete title of the assignee who gives the notice. Slot being able to take physical possession of the res he does that which, as far as the nature of the case will admit, is the equivalent of such talcing. By giving the notice he makes the trustee or holder of the fund his own trustee. On this theory, it was held by the house of lords, in a case in which the subsequent assignee had given notice but had not made inquiry, that he had acquired priority over a prior assignee who had given no notice. Foster v. Cockerell, 3 Cl. &. F. 457. To so hold would be in harmony with the registry acts and with the various acts, like, the mechanics and municipal lien acts that give priority in the order of notice. I do not, however, think it necessary to decide the question, inasmuch as I have cume to the conclusion that the Murphy assignments are prior, on the ground stated.

I ought to add that Mr. Bolles put in evidence two letters said to have been sent by Mr. Murphy in which assignments are referred to. The signatures are admitted, but the theory of counsel for the Murphy estate is that Charles Bolles, being a chemist, was able to efface the original matter and substitute, in typewriting, that which we now find. He proves that they were not written by the typewriting machines ordinarily used by Mr. Murphy, and he points to their physical condition as indicating that papers placed in a drawer, or box, in the Point Pleasant house could hardly have been burned in the fire which destroyed it, in the way indicated by their present appearance. He seeks,.further, to discredit the letters by the evidence of Mr. McConehie and Mr. Allen. The evidence tends to cast suspicion upon them. Whether it does more may be open to question. It is at least strange that Mr. Murphy should, after having asked for and obtained the papers, which he must have known would impair if not destroy his security, lend .his money upon them and require Mrs. Bolles to swear, in effect, that they were nonexistent.

I think the case can, without deciding these troublesome questions of law and fact, be satisfactorily disposed of according to the doctrine of the case of Washington Bank v. Beatty, to which I have already referred.


source: Caselaw Access Project

author: Stevenson, V. C. (orally).

license: Public Domain

text:
    Albert Baerenklau et al. v. Peerless Realty Company et al.
    [Submitted February 19th, 1912.
    Decided February 21st, 1912.]
    1. A penalty, stipulated in a contract for a breach thereof, is oftentimes construed as a liquidation of damages agreed by the parties to be paid in the event of a breach, in lieu of the ascertainment and award of damages.
    2. Where it is difficult to ascertain the damages for a breach of contract, the parties thereto may stipulate for the payment of a specified sum as liquidated damages.
    3. The measure of damages for a purchaser’s breach of contract by refusal to take the land is the difference between the contract price and the value of the land, and in case the land has increased in value there may be really no damages, and only in case of a decline in value may there be any substantial recovery.
    4. A contract for the sale and purchase of real estate stipulated for the payment of the price in instalments, and declared that on default in payment of any instalment for sixty days all instalments previously-paid should, at the option of the vendor, become forfeited. The purchaser paid instalments irregularly, iu some instances in advance and in some instances after a default for sixty clays. The vendor accepted the past-due instalments without objection.—Jield, that the vendor waived its right to claim a forfeiture, and the purchaser on paying the balance of the price, with interest, could compel specific performance.
    Suit for fhe specific performance of a written contract to convey real estate. Heard on bill, answer, replication and proofs taken in open court.

      Mr. Francis V. Dobbins, for the complainants.

      Mr. Jacob L. Newman, for the defendants.
   Stevenson, V. C. (orally).

I shall first dispose of the case of Albert Baerenklau and August Faust against the Peerless Realty Company, which was tried and argued day before yesterday.

The suit is brought by these complainants to compel the specific performance of a contract to convey real estate in the town of Woodbridge, Middlesex county, in this state. The owner of the properly who entered into,the contract with the complainants, which contract is now before me, at that time was the Rahway Park Realty Company. The contract was made between the Rah-way Park Realty Company of the first part, and these complainants, Baerenklau and Faust of the second part. It bears date February 16th, 1909, and provides for the sale of thirty lots in a large tract, which the company had laid out, to the complainants for the price of $1,200, which was to be paid as follows: One hundred dollars at or before the signing of the agreement, and at least $40 on or before the sixteenth day of every month thereafter, béginning April 16th, 1909. After a number of instalments had been paid, including the first instalment of $100, all the interest of the Rahway Park Realty Company was transferred to the Peerless Realty Company, the present defendant, no new equity having been in any way introduced into the case by this assignment. The Peerless company took the place of the Rahway Park Realty Company and assumed its obligations.

The complainants paid their $100, and then, from month to month, made, I think, twenty-two payments—was it, Mr. Dobbins?

Mr. Dobbins—“I think it was.”

■—making, in all, $980, and then they tendered a. payment of $40 to the company and the company declined to accept it. A little later, I think a month or two later, the complainants tendered the entire balance of the purchase price, with interest, amounting to $260 or $270 to the company and demanded their deed, and this tender was refused. The complainants now file this bill to compel the specific performance of this contract to get their deed upon their paying the remainder of the purchase price.

•The only defence set up in the answer, apart from mere formal denials which were not sustained by the evidence, is based upon the following covenant in this contract of February 16th, 1909:

“The party of the second part agrees that should any default be made in the payment of any installments as herein provided, and such default continues for sixty days, all installments previously paid shall, at the option of the party of the first part, without any notice or demand, be and become forfeited irrevocably and beyond demand and be retained by the party of the first part as liquidated damages, and thereupon this agreement shall determine and be of no further effect. The party of the first part, however, in the event of default as aforesaid, has the right to enforce' specific performance of this agreement.”

Although it is not perhaps a very important feature of the case, it is worth while to point out at the start the hardship of this contract—the one-sidedness of it. The realty company at all times, in case of a default for sixty days in the payment of any one of these instalments, has the option, if we take this contract just as it reads, either to compel the purchasers, these complainants, to pay the rest of the price and take their deed—which, no doubt, they would do if the land declined in value, or if the price was a large price compared with the value of the land and the default had been made at an early stage of this business when only perhaps one instalment had been paid—or to keep all that had been paid and declare the contract ended and all rights of the purchasers extinguished, which, of course, they would have a powerful, selfish motive to do in this ease, as $980 of the $1,200 had been paid.

The defendants stand before this court with $980 of the complainants’ money in its treasury, the land not having declined in value, and they say: “We will keep the land; we won’t accept your $270, the remainder of the principal and interest; we will keep your money and we will keep your land.” It is a case of very, very great hardship. It would, perhaps, be singular if nowhere in law or equity any escape could be found for these unfortunate complainants.

I want, at the beginning, to advert to the legal character of this contract and its legal construction, a matter which was suggestea to counsel during the argument, but which they did not consider. I should not at present discuss the matter at all if the decision of this case turned upon it—turned upon the legal construction of this contract or the extent of its enforceability in the courts of law. It would be my duty, I think, to order a reargument. But the decision in this court is controlled by another point, and inasmuch as the case may go to the áppellate court for final determination, it may be worth while, and I think it is proper to suggest to counsel some of the strictly legal questions which appear upon the face of this covenant for a forfeiture.

Of course, it is now familiar law that, in both courts of law and equity, a penalty, so called, in a contract is oftentimes construed as a liquidation of damages—as an alternative amount which the parties agree shall be paid in lieu of the ascertainment and award of damages, and, on the other hand, courts are very courageous in construing an agreement which expressly provides for liquidated damages as an agreement providing for a penalty only.

A great deal of the law on this subject, illustrating how the phrase “liquidated damages” has been construed as equivalent to “penalty,” has arisen in cases where an agreement has contained a great many different covenants relating to different things, the breach of which involved different amounts of damage, and then there is, in conclusion, a sweeping provision that if there is any default in any of the covenants in the agreement contained, the party of the one part shall pay to the party of the other part a certain specified sum of money which shall be deemed liquidated damages and not , a penalty. The courts have refused in very many eases.to enforce that sort of a contract. They have treated the sum specified as a penalty.

The leading case in this state is Whitfield v. Levy, 35 N. J. Law (6 Vr.) 139, a decision of the court of errors and appeals, in which Mr. Justice Depue, with his characteristic industry and learning, examines a long series of authorities. In that case Mr. Justice Depue points out that oftentimes the courts will find, in a contract which provides for the payment of a sum as liquidated damages, an intent otherwise in the minds of the contracting parties—an intent to secure performance—an intent, perhaps, generalfy to provide for compensation for a breach, and that there really is not an intention, as the parties seem to say, that a large sum of money shall be paid, in the event of the breach of a condition of one covenant among a number where the damages, in fact, must be very-small.

Well, perhaps, that is as far as we have gone in New Jersey in dealing with this subject, but there is a-line of cases, I think, in England, and I think in many of the states in this country, which are more courageous and take a different view. .'These cases'are cited, to some extent, in the article on liquidated damages in the nineteenth volume of the American and English Encyclopedia of Law, pages 410 and 411. I will read the section—one of the sections—on that page. It is entitled, “Where Sum Named Disproportionate to Actual Damages.”

“General rule.—The general rule, as stated, where the sum named in a contract to be paid on a breach is wholly disproportionate to the actual damages sustained is that the courts will deem the parties to have intended to stipulate for a mere penalty to secure performance, and not for a liquidation of the damages. But the view is believed to be not so much that such circumstance is indicative of the intent of the parties to stipulate for a’penalty as that the courts refuse to depart from the rule of actual compensation, where, this can be ascertained.”

I doubt if any contract could be found in a reported case which is exposed to more obvious criticism than the one here before this court at present. The damages never could be difficult of ascertainment under this contract. One of the main reasons for permitting the parties to liquidate their damages, or to stipulate for. the payment of a sum in lieu of having an award and ascertainment of damages—one of the main reasons is because of the difficulty of exactly measuring the damages. The courts say that the parties are competent to say what shall be the measure of compensation for a breach; it is difficult for a court and jury to ascertain it.

There is no such difficulty here; the rule defining the measure of damages is well settled. At whatever stage there might be a violation of this contract, the measure of recovery is well ascertained—what the realty company could recover, in case of a violation of this contract on the part of these complainants to take the land and pay the price. They are entitled to the difference between the contract price and the value of the property. In the event of the property rising in value there really is no damage at all. Only in case of a decline in value is there any substantial recovery possible on the part of the realty company, the -vendor under this contract.

And then, in this case, we have not a definite sum—five hundred dollars, a thousand dollars, fifty dollars—which the parties deliberately select and say, “that shall be the measure of damages that shall be paid in lieu of having the actual damages ascertained”—nothing of the kind. The contract provides that the whole amount' paid, which might be forty dollars, one instalment, or might be ten hundred and sixty dollars—the whole amount paid, in ease of a default for more than sixty days shall be forfeited and the forfeit is then to be taken as the amount which the parties agree upon as a liquidation of the damages.

A more grotesque transaction than that, from a legal standpoint, could hardly be imagined. The parties have not fixed upon any certain sum as the measure of, or substitute for, the defendants'’ damages. If the covenant is to be literally enforced, it is somewhat in the nature of a wagering contract, in view of the various and uncertain causes which might produce the fatal default and the widely different amounts of money ranging from one hundred dollars to eleven hundred and sixty dollars, which the defendant might receive for its so-called damages, according as the default might occur after a few or after many instalments had been paid. We have here not a case of indefinite damages, difficult of exact ascertainment, “liquidated” at a definite sum agreed upon by the parties, but very definite damages, easily ascertained, liquidated at an amount which the parties do not fix and .could not have contemplated—the amount of a widely varying forfeit, which might be one hundred dollars or might be eleven hundred and sixty dollars, or any intermediate sum.

It may be that the courts of law of this state would feel obliged to enforce this covenant according to what seems to me to be its perfectly plain meaning, unless by some subtle process of artificial reasoning a fictitious “intention” otherwise could be extracted from the verbiage of the covenant and be equitably imputed to the parties.

But whether the courts of law of New Jersey, or the court of chancery of New Jersey, would hold that this covenant is legally enforceable so as to permit the defendant, first, to declare a forfeiture and then appropriate the entire amount forfeited as a liquidation of his damages—whether any court would so decide, I do not say. I merely indicate to counsel interested that there are strong grounds for holding that the whole legal fabric of the defendants’ defense might be swept away.

But, in the absence of argument and in the absence of mature consideration of this matter, I deem it my duty not to pass upon this question of penalty or liquidated damages, which I certainly would have to do if, in my judgment, the case did not turn upon another point.

Whatever the legal effect of this covenant may be, whatever its legal construction, whatever the extent of its legal enforce- ' ability, when it comes to equity the case is very different. The question is whether this forfeiture and agreement for the liquidation of the damages by the appropriation of the forfeited money can be made a bar to the relief of the complainants in equity—the relief of specific performance which they pray for. The leading case in this state bearing on this branch of the case is Griggs v. Landis, 21 N. J. Eq. (6 C. E. Gr.) 494, a case in the court of errors and appeals, decided in 1870, in which the opinion was written by Mr. Justice Scudder. I read from page 501:

“Penalties, forfeitures and re-entries- for conditions broken are not favored in equity, and constitute a large branch of equitable relief. Usually, they are held to be securities for the payment of money and the performance of conditions, and where compensation can be made for non-payment and non-performance equity will relieve against the rigid enforcement of the contract. This is upon the general principle that a court of equity is a court of conscience, and will permit nothing to be done within its jurisdiction which is unconscionable.”

Prof. Pomeroy, in his work on Specific Performance, in sections 334 and 335, in dealing with the distinction between conditions. precedent and conditions subsequent in contracts, points out:

“That equity can and does grant relief in case of the breach of such a condition, provided that adequate compensation can be made.”

And he proceeds as follows:

“No relief, however, will be granted in case of a subsequent condition if the breach of it was intentional, willful, nor where it will not admit of compensation. When, however, the' only default of the plaintiff is delay, and the position of the defendant has not been materially changed thereby, a performance after the stipulated time may entitle the plaintiff to a decree for a specific execution since mere lapse of time is not, in genera], a sufficient ground in equity for the refusal of relief. A forfeiture caused by the non-payment of money, however express may be the language of the contract, will, as a general rule, be relieved from, on the theory that interest is a sufficient compensation.”

It would seem -that the complainants’ case is clearly within these principles, and yet I do not had that it is necessary for me to stand the case on those principles because of another important feature of the case which, to my mind, makes the true determination of this controversy absolutely clear.

The complainants paid their money irregularly. In some instances, perhaps more than two, they paid two instalments within one month. I think in one or two instances they paid in advance. Am I right about that, Mr. Dobbins?

Mr. Dobbins—“In six instances.”

The Court—A larger number than I supposed. They paid their instalments in advance, and then they fell behind and were in axfeaxs for perhaps two weeks, three weeks, four weeks, ■ and finally, in December, 1910, after they had paid about, seven hundred and forty dollars—more than half the consideration, the price—they made a monthly payment of $40 three or four days after they had been in default for sixty clays. They went to the office of the company and tendered their money, and the money was received without objection. Nor does it appear that the company in any way pointed out to the complainants that thejr were in arrears or warned them that a repetition of the offense would bring about a forfeiture. They accepted the money. And then, in January—on January 24th, 1911—the complainants, being I think nine or ten clays in arrears, made another payment and that was accepted. In February they made another payment which was, I think, three weeks—twenty days—in arrears: and then in March they made another payment and a still longer period had elapsed during which they were in arrears, and all these four payments in succession were received by the land company without protest and without warning after the complainants had been in default for more than sixty clays.

Now, 1 think it is very clear that this conduct on the part of the realty company amounted to a waiver of their right to claim a forfeiture without notice, without warning, so that the complainants could again be put upon their guard. They established an order of business between themselves and the complainants which is inconsistent with the terms of this covenant. They lured the complainants along to make these payments—to pay $160—and kept still and said nothing about any forfeiture at all, and after the $160 had been added to the $700 or $800 previously paid, so that the aggregate amoimt of money which the complainants had paid had reached $980, then they shut down and said, "You are too late; we now elect'to declare a forfeiture and appropriate this money as the measure of damages agreed upon in the contract.”

Equity will not allow transactions like that.

Tf courts of equity could tolerate a performance of that character they might as well close. The idea still prevails that in courts of equity the human conscience has some function—that the a-igidity and the hardship of the law are mitigated.

I think it is very plain that this is the sort of a case in which the defendants have sought to set up an unconscionable defence and that their defence rests essentially upon their own conduct— is the product of their own conduct. They have by their conduct largely created the conditions out of which this defence arises and upon which the defence is based.

My conclusion is that the complainants are entitled to a decree for specific performance in the usual form in a case like this, providing for the payment of the balance of the price, with interest, bjr the complainants, and the delivery of the deed by the defendants. Whether it is necessary to have the decree carried out under the direction of a master may be determined on the settlement of the decree.


text:
    Annie D. Roe v. The Mayor and Aldermen of Jersey City.
    [Decided May 3d, 1911.]
    1. In a very large class of cases invoking tlie jurisdiction of this court, and where there is a complete remedy at law, if the defendant joins issue upon the allegations of the bill, and the case thus goes to final hearing-upon the pleadings, and then is argued and submitted to the court for decision, the court will decide the case, although, if objection had been made in limine by demurrer, or even by an answer, the court might turn the parties away, on the ground that they had mistaken their forum and that the matter was one purely of legal cognizance.
    2. But if a determination and a decree will be in accordance with the forms and methods of courts of equity, then at the end of the trial the court will not ordinarily, of its own motion, turn the parties away and render all their litigation abortive; but the court can always for its own protection, for the maintenance of our dual system whenever necessary to keep sharply distinguished the functions of the law courts and equity courts, of its own motion, decline to determine a purely legal controversy, simply because the parties have seen fit to endeavor to impose that du-ty upon the court.
    3. Courts of equity intervene with great reluctance with the collection of public revenues, and on a hill seeking to have this court interfere with the collection of taxes, the complainant does not occupy a position which commends her to a court o'f conscience, where it appears that she has been in possession of the lands in question for years, has paid no taxes, for twenty-five or thirty years, and asks the court to intervene and remove as a cloud, or declare void, the tax titles held by the defendant municipality that are many years old, and where since those tax titles were made she. has gone on in possession, collecting the rents, issues and profits of .this land and paying nothing, making no tender in her bill of any of the accumulations of taxes due and unpaid for a generation nearly. Such a case, if any, presented by the bill is purely one of legal cognizance.
    ■ 4. A court of equity will not intervene and declare void the adjusted amount of taxes under the Martin act and deeds made thereunder, because of strictly legal defects in the proceedings, even though the parties seek to impose that duty upon it.
    5. There is a very wide distinction between any possible exercise of jurisdiction by this court under the act to quiet titles, or under the original jurisdiction of the court to remove clouds, where the object of the attack is an ordinary conveyance, a colorable conveyance of any kind, on the one hand; and on the other hand the exercise of such jurisdiction to adjudicate upon the lien of the public authorities for taxes and assessments.
    6. The bill in this suit is not filed under the act of 1870, the act to quiet titles, but prays the court, in the exercise of its general jurisdiction to enjoin the collection of these taxes, assessments and liens, to examine all the legal points in regard to them, go through all the proceedings and adjudge that the tax and assessment liens are void, and this the court will not do.
    On bill, answer and proofs taken in open court.

      Mr. Peter Bentley, for the complainant.

      Mr'. James J. Murphy, for the defendants.
   Stevenson, V. C. (orally).

Before hearing any motions I shall dispose of the case of Roe v. Mayor and Aldermen of Jersey City. My conclusion in that case is that the hill should be dismissed, with costs.

At the opening of the hearing I called the attention of counsel to the question whether any case was presented by the bill of equitable cognizance. The counsel for the defendant took the ground that no snch case was presented. The hearing was proceeded with, and after all the testimony was in, upon the argument, counsel for the complainant made an application—perhaps somewhat tentatiye—to haye the bill amended—radically amended—which application was denied. I deal with the case as it is presented by the pleadings and supported by the proofs.

The answer does not object to the jurisdiction of the court. The answer, as I recall it—and I am quite sure that I am substantially correct in my recollection of it—joins issue upon the allegations of the bill. As counsel are aware, in a very large class of eases where the jurisdiction of this court—a court of equity— is invoked, where there is a complete remedy at law, if the defendant joins issue upon the allegations of the bill and the case thus goes to final hearing upon the pleadings, and then is argued and submitted to the court for decision, the court will decide the ease, although, if objection had been made in limine by demurrer, or even by an answer, the court might turn the parties away, on the ground that they had mistaken their forum and that the matter was one purely of legal cognizance.

Where the court can make a decree in accordance with its usual methods, where the thing to be ascertained is something that the court is competent to ascertain, rvhere some little additional evidence would fully sustain the jurisdiction of the court and make the case cognizable in equity, the tendency is to treat the conduct of the parties, particularly of the defendant, in filing an answer and making no objection to the exercise of jurisdiction by a court of equity, and the conduct of the parties in litigating in good faith the case before the court, as, in effect, a stipulation that facts do exist which properly found the jurisdiction of a court of equity, and, as I said, if a determination and a decree in form will be in accordance with the methods pursued by courts of equity, then at the end of the trial the court'will not ordinarily, of its own motion, turn the parties away and render all their litigation abortive, but the court can always, for its own protection, for the maintenance of our dual system, whenever necessary to keep sharply distinguished the functions of the law courts and equity courts, of its own motion, decline to determine a purely legal controversy, simply because the parties have seen fit to endeavor to impose that duty upon the court.

This is the sort of a case, in my judgment, where a court of equity should be very slow to intervene—very slow to .exercise jurisdiction which belongs to a court of law, merely because the parties have not made objection. This bill seeks to have the court of chancery interfere with the collection of taxes in the city of Jersey City. Courts of equity intervene with great reluctance— all courts do, in fact—with the collection of public revenues. The complainant does not occupy a position which commends her to a court of conscience; she has been in possession for years; - she has paid no taxes for twenty-five or thirty years. She asks a court of'equity to intervene and remove a cloud, or declare void the tax titles heLd by the city that are many years old; and since those tax .titles were made she has gone on in possession, collecting the rents, issues and profits of this land, and paying nothing. She makes no tender in this bill of any money whatever of all this accumulated mass, representing hundreds or thousands of dollars of taxes due and unpaid for a generation nearly. She does not stand in a position which would make a court of equity favor her in any degree.

Now, when you come to the case that is presented by the bill, if there is any case, it is purely one of legal cognizance. The industrious and astute counsel for complainant had his attention called particularly to the point, “What feature of this case gives equitable cognizance?5’ and no. answer is presented to the question. All the defences pointed out are legal defences. A court of equity is asked to intervene and declare void the adjusted amount of taxes under the Martin act and deeds made thereunder, because of strictly legal defects in the proceedings. A court of equity will not do that sort of work, and will not do it even though the parties seek to impose that duty upon it.

In the case of Jersey City v. Lembeck, 31 N. J. Eq. (4 Slew.) 255, the limitations are set forth in the opinion of Chief-Justice Beasley for the court of errors and appeals, upon the jurisdiction of tire court of chancery under the act of 1870, commonly called “An act to quiet titles.55 Of course, counsel are entirely familiar with the very great effect that decision has had upon the practice under that statute in this court.

The recent case of Goodwin v. Millville, 75 N. J. Eq. (5 Buch.) 270, is a very important one indeed. That case also is in the court of errors and appeals and follows up Jersey City v. Lembeck, and holds that where the landowner has, by laches, lost his remedy to have the validity of an assessment challenged by certiorari he has no standing in equity. That is laid down by the court of errors and appeals without even giving any force to the consideration that the issuing of a writ of certiorari by the supreme court is discretionary.

And there is a very wide distinction between any possible exercise of jurisdiction by the court of chancery in New Jersey under the act to quiet titles, or under the original jurisdiction of the court to remove clouds, where the object of the attack is an ordinary conveyance, a colorable conveyance or encumbrance of any kind and the exercise of such jurisdiction to adjudicate upon the lien of the public authorities for taxes and assessments. I should certainly he unwilling to create a precedent which would lead to applications to the court of chancery to investigate the validity of taxes and assessments in our municipalities.

It is worth while, perhaps, to note that this is not a bill filed under the 'act of 1870, the act to quiet titles, which largely extended the jurisdiction of this court. In Jersey City v. Lembeck, Chief-Justice Beasley says—I cannot give his language, but he points out that .the only possible justification for the exercise of jurisdiction in that case by a court of equity lay in the provisions of this act of 1870.

This court, no doubt, may have jurisdiction under that statute in a great many cases to quiet title, where it never would have had any jurisdiction as the law stood—as our system stood— prior to ’the enactment of that statute by the legislature. The original jurisdiction of the court to remove a cloud is extremely limited—very meagre indeed. Chief-Justice Beasley -points out that if the act of 1870 should be construed literally it would enormously extend the jurisdiction of the court, and he takes pains to undertake to cut down any wide extension of the functions of the court of chancery in this class of cases under the sweeping provisions of that act.

But this bill is not filed under that act at all. This bill invokes the general jurisdiction of the court and asks this court, in the exercise of its general jurisdiction, to enjoin the collection of these taxes, assessments and liens, to examine all the legal points in regard to them, go through all the proceedings, follow up the pioeeedings. pick out the defects, and adjudge that the tax and assessment liens arc void.

The court of chancery will do no such work. The bill, therefore, must be dismissed.


author: Garrison, V. C.

text:
    Edwin W. Goater v. Willet C. Ely et al.
    [Decided February 11th, 1912.]
    1. Where a grantor retains a part of land out of which a grant is made and expressly restricts the enjoyment of the land conveyed in order to benefit that retained, and the restriction is reasonable and consonant with public policy, it will be enforced in equity against the grantee at the instance of the grantor.

    2. Where defendant, in an action to enjoin his use of premises in alleged violation of a restriction in his deed, asserts that the complainant will not be damaged thereby, he must prove the assertion beyond the possibility of a doubt.
    3. Restrictive covenants against the use of property are strictly construed against the person claiming the right to enforce them, and where the right to relief is doubtful it will be denied.
    4. An owner of land conveyed a part by deed, retaining the rest; the deed providing that no dwelling-house should be erected upon the premises. The grantee built a structure thereon, on the first floor of which was a garage and a boiler' house, and on the second floor bedrooms and a bathroom, occupied by the servants of a lessee.—Held, in an action to enjoin the use of the building as a dwelling-house or habitation, and to compel it to be torn down and removed, that the four walls and the roof of the structure constituted a “house,” and that the interior arrangement determined that a portion of it was a “dwelling-house,” and that complainant was entitled to enjoin the use of any part of the house as a dwelling-house, although not to compel its removal.
    5. -Where the grantee of land under a deed providing- that no dwelling-house should be erected thereon violated such restriction by the erection of a building in the early summer of 1909, but the grantor did not know that any part of it was used for dwelling purposes until October, long after completion, when he at once consulted counsel, the fact that .the bill was not filed until March, 1910, -was not such laches as to preclude relief.
    Final hearing on pleadings and proofs.

      Messrs. Doremus & Lecour, for the complainant.

      Mr. David D. Zabriskie, for the defendants.
   Garrison, V. C.

The complainant was the owner of a tract of land at Eidgewood, Yew Jersey. On the 34th of December, 1908, he conveyed a portion of this tract (retaining the balance thereof in his own ownership) to the defendant, Willet C. Ely, by a deed containing a restriction in the following words:

“There shall not be erected on said premises any blacksmith shop, carpenter shop, shop for the carrying on of any kind of trade or business, factory, slaughter-house, store, tenement-house, hotel or liquor saloon, and.no trade or business shall be carried on or permitted on said premises, and nothing which shall be ordinarily classed as a nuisance shall be maintained thereon. No barn shall be erected upon said premises except within forty feet of the rear line thereof, and no dwelling-house shall be erected upon the premises above described.”

Each party then, or shortly after, began the erection of a structure apon their contiguous lands. Goater began the erection of a dwelling-house, Ely began the erection of the building in dispute. The building in dispute, which was begun some time in the early spring of 1909 or late winter of 1908, was finished some timé in the late spring or early summer of 1909, and, on the 1st ciar oí 1909, was leased, together with a dwelling-house erected upon a lot belonging to Ely and still further north of the lot conye3rod by Goater to Ely, to one Sanborn. The disputed building is situated more than forty feet from the rear line of the lot combed by Goater to Ely, and consists of a structure on the first floor of which is a place for automobiles, next to which is a boiler and equipment for t'he radiation of heat, and on the second floor there are three bedrooms and .a bathroom: and it is in evidence that for a considerable time while Mr. Sanborn was occupying the residence contiguous thereto he had his servants sleep (or some of them) in these bedrooms in this disputed building.

The complainant testifies, and it is not disputed, that he did not observe or know until October of 1909 the interior construction of the disputed building, or the use to which it was being put, and that he thereupon consulted counsel in the person of Cornelius Doremus, who, fór personal reasons, turned the ease over to Harlan Besson, who, on the 29th of March, 1910, filed the bill in this suit.

The prayer is that the defendant Ely may be compelled to tear down, remove and carry away the dwelling-house erected on the said premises, and be compelled to discontinue the use of the said building and the dwelling-house, pursuant to the covenants contained in the déed, and that the said Ely may be decreed to use and maintain the said premises subject to the restrictions and covenants contained in the said deed, and may be restrained and enjoined from using the building on the said premises as a dwelling-house or habitation, and for further and other relief.

There is practically no fact depending upon the credibility of witnesses, that, as I now recall it, is in dispute.

There does not appear to be any doubt, under the decisions, that this ■ complainant is entitled to the aid of this court if he proves a violation of the restriction. I have had occasion to state the result of the examination of the cases, and can see no necessity of adding anything to what I said in the case of Lignot v. Jaekle (1906), 72 N. J. Eq. (2 Buch.) 233 (at p. 241), as follows:

“It is the settled law of this state that where "a grantor retaining a portion of the land out of which the grant is made, enters into an express understanding with dais grantee, which restricts the enjoyment of the portion of the land conveyed, in order to benefit the portion retained, and the restriction is reasonable and consonant with public policy, such restriction will be enforced in equity against the grantee at the instance of the grantor. Hayes v. Waverly & P. R. Co., 51 N. J. Eq. 345 (at p. 348); Cornish v. Weissman, 56 N. J. Eq. 610 (at p. 613); Roberts v. Scull, 58 N. J. Eq. 390. And, if the defendant relies upon an allegation that the complainants will not lie damaged by the defendant’s deliberate disregard of the restriction, they must make it clear beyond the possibility of doubt that the complainants cannot be damaged. Cornish v. Weissman, supra; Morrow v. Hasselman, 69 N. J. Eq. (3 Robb.) 612.”

I understand, from the latest decisions of the court of appeals upon this subject-matter, that courts of equity do .not aid one to'restrict another in the uses to which the latter may lawfully put his property unless the right of the former to such aid is clear; that restrictive covenants are strictly construed against the person claiming the right to enforce them, and that such covenants must not be vague or uncertain. It is also settled that where the right of a complainant to relief by the enforcement of a restrictive covenant is doubtful, bis right to such relief must be denied. A late case plainly stating the above doctrines is Fortescue v. Carroll (Court of Errors and Appeals, 1910), 76 N. J. Eq. (6 Buch.) 583.

Applying, therefore, the above well-settled principles to the case at bar, there are, as E see- it, but two questions to be considered: First, was there a violation of the covenant? Second, was there laches attributable to the complainant because of which he will be denied relief ?

Taking up the first question, we find that tire only language of the covenant with which we are herein called to deal is as follows: “No dwelling-house shall be erected upon the premises.”

Counsel upon each side have been most industrious, and in their full and satisfactory briefs have furnished a very great number of examples of the use of the word “dwelling” or “dwelling-hoicse” by judges in their opinions, and by lexicographers and others in their writings. I do not find it useful to deal with- these precedents or authorities in detail, because so much depends upon the.connection in which the word was used. I think it indisputable that, running through any proper use of the word, there is always one controlling idea intended to be conveyed by it, and that is that a dwelling-house is a house intended for human habitation.

I am not embarrassed by a question which was mooted at the hearing because the facts in this case do not make the discussion of it relevant or its consideration material. That question was, What would be the effect if the defendant in this suit had “erected” a structure obviously not a dwelling and subsequently had used it as a dwelling? In my view it would be improper for me to express any views upon this question, as I cannot conceive that any facts in this ease make that, question relevant or material to the decision of this case.

It is undisputed in this case that what the defendant erected upon the restricted premises was a house, one part of which was a garage and boiler house and the other part of which was a dwelling-house. The four walls and the roof of any structure (properly called -a house) undoubtedly constitute what it is proper to define as a “house.” The interior arrangement within .the four walls and under the roof determine whether the same is a “dwelling-house” or what kind of a “house” it is.

In tire case at bar the defendant Ely erected a house, and by its interior arrangement constituted part of that house not a dwelling-house, and constituted part of it a dwelling-house. The restriction is that “no dwelling-house shall be erected on the premises.” To the extent, therefore, that he erected a house to be dwelt in he violated the covenant, and to that extent the complainant is entitled to relief.

I need not cite authorities for-the principle that apartment or flat houses are dwelling-houses, and perhaps it will aid to illustrate my meaning, if I should suggest that a covenant in this language would be clearly violated if a man should erect a house the first and second floors of which were fitted up for stores or offices, and the floors above the second were fitted up for fiats. The four walls and the roof, as above suggested, would constitute the house, and that part of it which was fitted up for dwelling purposes at the time of the erection of tlie house would constitute the erection of a house to be dwelt in, or, in other words, a dwelling-house. That is exactly the situation that I have to deal with in this suit, and my finding of fact is that in the erection of this house he constituted a portion of it a dwelling-house, and to that extent violated the covenant against erecting a dwelling-hoirse on the premises; and to that extent must be required to conform to the restriction.

My present view is that the relief to which the complainant is entitled is to have that which makes this erection a dwelling-house removed, and, as above pointed out, that which makes it such is the interior arrangement thereof. But while its interior arrangement is the determining factor as to whether the house is or is not a dwelling-house, it is the fact that if the present arrangement of rooms, kc.., should remain, and thejr be devoted to some other purposes than dwelling, the complainant will have received all of the relief to which he is entitled, and the defendant will not have suffered any more detriment than the proper interpretation of the covenant, binding him, requires.

I therefore think that an injunction which shall prohibit the defendant from using or permitting the use of any part of this house as a dwelling-house will meet the ends of justice. This is exactly within one of the prayers of the complainant’s bill, and certainly is the least detriment to which the defendant can be subjected if I have properly apprehended his responsibility under the covenant.

Without searching to see whether there are any other precedents for similar action, two immediately occur to my mind so nearly in point that they are useful to be cited. One is the case of French v. Robb (Court of Errors and Appeals, 1901), 67 N. J. Law (38 Vr.) 260, in which, in an action of ejectment, the court of errors and appeals held that an electric light pole erected on the plaintiff’s property was properly there so far as the municipality was using the same for its purposes, but to the-extent that the electric light company used it to carry wires for private lighting it was unwarranted, and the verdict was so moulded as to require the removal from the pole of the wires carrying the electricity for private lighting. And in the case of Taylor v. Public Service Co. (Vice-Chancellor Garrison, 1909), 75 N. J. Eq. (5 Buch.) 371; affirmed (Court of Errors and Appeals, 1910), 78 N. J. Eq. (8 Buch.) 300, somewhat similar relief was granted by injunction.

Applying these principles, as I have above attempted to do, I reach the result herein announced. I do not find the right or necessity, in giving the aid. to the complainant to which I find him entitled, to order the house to be taken down. I do find that, to the extent to which it violates the covenant, the defendant must be enjoined and required to conform to the covenant, and to cease the violation, and that such result can be attained by an injunction of the character I have suggested.

The decree will be settled on notice, and will carry costs in favor of the complainant.

The only other question as initially stated is whether or not the fact that this building was completed in the late spring or early summer of 1909, and this suit was not brought until March of 1910, is, under the circumstances of the case, such laches as will be held to bar the complainant from his rights. I do not think that any such finding would be proper.

T find, as a fact, that until October of 1909, long after the ' building was completed and inferiority fitted up, the complainant did not know and was not affected with knowledge that anjr portion of the erection was for dwelling purposes, or that any portion of the building thus erected was to be devoted to dwelling purposes. It seems that he almost immediately consulted counsel, and the fact that the bill was not filed until March of 1910 does not, in my view, under the circumstances, constitute his conduct such laches as disentitles him to relief.

In this class of cases, in addition to whatever else may determine the court’s action, a very large, if not controlling,-factor is the standing by with knowledge, or the ascription of knowledge, that the defendant is violating the covenant, and after money has been expended by the defendant, then complaining that what he has done shall be undone. Trout v. Lucas (Vice-Chancellor Emery, 1896), 54 N. J. Eq. (9 Dick.) 361, is an instance of the •character just adverted to, and the following cases deal with the general subject of laches: Tynan v. Warren (Vice-Chancellor Green, 1895), 53 N. J. Eq. (8 Dick.) 313; Daggers v. Van Dyck (Vice-Chancellor Van Fleet, 1883), 37 N. J. Eq. (10 Stew.) 130; Le Gendre v. Byrnes (Vice-Chancellor Van Fleet, 1888), 44 N. J. Eq. (17 Stew.) 372; Holzer v. Thomas (Chancellor Magie, 1905), 69 N. J. Eq. (3 Robb.) 515.


text:
    Mary Ellen Miller, administratrix, &c., v. Gordon D. Miller et al.
    [Decided February 16th, 1912.]
    Tlie widow of a deceased partner, who was left a small money legacy, refusecl to accept it, and on the will being declared invalid took out administration on the decedent’s estate. The surviving partner, who was a brother of the deceased, had, during- the two years after his death, carried on the business, which earned about one-third of its estimated valuation. As soon as the wife attempted to take out administration, the brother sold the entire partnership property for much less than its estimated valuation to a newly formed corporation, which was composed of himself and members of bis family.—Held, that the surviving partner having made thé sale and refused the wife access to the partnership books, claiming that her husband’s share amounted to very little, a receiver should be appointed to preserve the property pending litigation.
    On application for a receiver pending suit.

      Mr. Randolph Perkins, for the complainant.

      Mews. Roe & Runyon, for Gordon D. Miller.
   Garrison, V. C.

This is a bill filed by the administratrix of Alexander Miller, deceased, against Gordon D. Miller and Alexander Miller & Brother, Incorporated, to procure an accounting of the partnership of Alexander Miller & Brother, of which Gordon D. Miller is the surviving partner and of which the complainant is the administratrix of the deceased partner. Incidentally, the bill asked for a receiver. The present application is for a receiver pendente lite, and was heard npon the bill of complaint and proofs on behalf of the complainant, and proofs on behalf of the defendant Gordon D. Miller.

Whether or not the situation is bne which calls for the appointment of a receiver at this time depends upon the proper inferences to be drawn from the facts in proof before me.

Prior to September, 1902, Alexander Miller was engaged with one Brown,, in the business of building and repairing ships, machinery and other like operations, under the firm name of Brown & Miller, carrying on their business at the foot of Morris • street, Jersey City, Few Jersey. That partnership was dissolved on or about the 12th of September, 1902, upon the following basis: The inventory showed that the gross value of the assets of the firm was about one hundred and fifty thousand dollars; and Alexander Miller, assuming that, as between the partners, its actual value was about one hundred and twenty thousand dollars, made a buy-or-sell proposition to Brown upon that basis, and Brown, electing to sell, was bought out by Miller, who thereupon became the owner of the entire business.

Alexander Miller then took his younger brother, Gordon D. Miller, one of the defendants, into partnership with him under the firm name of Alexander Miller & Brother. Alexander Miller, was married in 1898 to the complainant, and died in the city of Few York on the 6th of May, 1909. Prom the formation of the partnership of Alexander Miller & Brother in 1902 down to the time of Alexander Miller’s death at the time, above stated, the brothers, under the partnership name aforesaid, carried on the business at the old stand with great success. According to Gordon Miller, the original understanding was that the partners were to share equally in the assets and profits. He avers that it is untrue, as asserted by the complainant, that he did not bring any capital into the. business, but that, on the contrary, he did bring some in; he does not, however, specify when or how much.

He further avers that subsequently it was agreed that his interest in the assets and profits was changed to fifty-five per cent, and the interest of Alexander in the same to forty-five per cent. He further avers that it was provided by the articles of copartnership (which, however, are not attached by him to his proofs) that once in each year, or oftener, the copartners should make an inventory and account of all profits and all losses, and of all payments, receipts and disbursements, and should thereupon clear and adjust the same; and that the inventory and account immediately before the death of Alexander Miller,, which account was as of the date of January 31st, 1909, disclosed the interests of the partners as follows:

Alexander Miller........................... $70,660 58
Gordon D. Miller........................... 84,876 75
$155,537 33

The interest of Alexander Miller was, he avers, however, subject to a personal charge against him for excess drawings over profits of $30,672.11, which he avers was included in the assets of the firm as a debt owing by Alexander Miller to the firm. He also avers that there was another deduction of $3,151 to be made from Alexander Miller’s interest because of an individual note of $3,000 which had been made by Alexander Miller in his lifetime and discounted at a bank,- with certain collateral belonging to the firm pledged therewith; and that he, as surviving partner, took up the said note at the expense just mentioned.

He avers that at the time aforesaid, January 31st, 1909, the account was stated and settled.upon the following valuations in inventory:

Tools and machinery....................... $46,420 83
Merchandise on hand...................-..... 13,611 21
Motor power equipment...................... 2,711 59
Machinery (not in use)..................... 672 85
Patterns .................................... 7,894 46
Total ............................... $71,310 94

and, in respect thereto, in an account in the surrogate’s court for Hew York county, rendered by him as executor of his brother’s will, and sworn to on the 16th of March, 1911, he states that with respect to the tools, machinery and motor power equipment above referred to, if sold separate from the plant as a going concern, they might not bring more than fifty per cent, of the values as above fixed.

He also, in the same account, states that, in Ms view, the good will of the firm is of nominal value, and that the good will of this firm was largely dependent upon the personality of Alexander Miller, and the acquaintances which the said Alexander Miller had gained during many years in the business.

At the death of Alexander Miller his will was probated. By it, he gave his wife $12,500, and all the residue was to go to Gordon D. Miller and the other brothers and sisters of Alexander.

Gordon Miller continued the operation of the firm under the firm name, under the following circumstances, as clearty appear from his own proofs: He conceived that the only obligation that was owed to the widow of his brother was the $12,500 willed her by her husband, and he upon many occasions, he stales, endeavored to get her to accept this bequest. Other than this, he conceived that he and his brothers and sisters were the entire owners of everything that-his brother had left, and he thereupon proceeded to run the business as the partners had theretofore done. Instead, however, of accepting the bequest, the widow ■ (the complainant herein) instituted some proceeding in Few York, the result of which was that, on the 31st of May, 1.911, a judgment was entered in a court in Few York, based upon a verdict of a jury previously rendered, declaring that the said alleged last will and testament of Alexander Miller, deceased, was not in truth and in fact such, and that the probate thereof was invalid, and the decree of probate was set aside and annulled, and subsequently, and on the 7th of June, 1911, the letters testamentary issued .upon the said will to Gordon D. Miller as executor were revoked, and the probate of the will was, by the same order, vacated and annulled.

On the 26th of June, 1911, letters of administration were issued to the complainant by the surrogate’s court of the county of Few York, under which she took upon herself the burden of administering the said estate. On the 1st of December, 1911, letters of administration upon the estate of- Alexander Miller, deceased, were granted to the complainant in Hudson county, Few Jersey.

It appears from the proofs submitted by Gordon D. Miller that, operating the business -as he did from the death of his brother on the 6th day of May, 1909, up to the middle of June, Í911, he made profits approximately if not exceeding $40,000.

He avers in his affidavits that he was shocked, surprised and stunned by the decision in Kcw York that the will of his brother was invalid, and immediately upon being advised of the verdict of the jury to that effect, and before the actual judgment had been entered, it appears that he set about selling and disposing of all of the assets, except the accounts receivable, of the firm of Alexander Miller & Brother, which he had been operating up to that time. It is extremely significant that although the widow and Gordon Miller were in constant litigation and their attorneys were frequently meeting, no notice of any sort was ever conveyed to her or to any of her attorneys by Gordon Miller, or by anj'body on his behalf, of his intention to sell and dispose of the assets of the firm of Alexander Miller & Brother; and there is not the slightest suggestion that he ever thought of disposing of the same in the manner in which he did until after the verdict of the jury had been rendered.

Almost immediately after being advised of the verdict of the jury aforesaid, Gordon Miller, without having given any notice, as 1 have just related, to the widow of the deceased partner, set about a sale of the property of the late partnership. lie finally determined to sell the same in lots at public auction, and in bulk if a larger price could be obtained than by selling them in lots. He caused four or five days advertisement to be inserted in the newspapers, and held a sale, at which the property was struck off to a corporation called the Tidewater Shipbuilding Company. It appears that this company was formed some few days before the sale by the brothers of Gordon Miller, and, he states, by other persons, hut he does not name them. He admits that he is now interested in the said company, hut does not say when he so became, and contents himself with a denial that he' was an incorporator or stockholder at the time of the above mentioned sale. The price paid by this company was $17,800 for practically everything that belonged to the firm of Alexander Miller & Brother, excepting its accounts receivable. A few days after this the above-named corporation changed its name to Alexander Miller & Brother, Incorporated, and continued in business at the old place with the old equipment, and with Gordon Miller associated with it as one having financial interest therein, the amount of which interest, however, he does not disclose.

It will be perceived by the briefest scrutiny of the proofs that at this juncture the situation was as follows: A business which at the inception of the partnership was bought by-Alexander Miller upon the basis of $120,000, and which, by the figures brought forward by Gordon D. Miller himself, was worth in its tangible assets in the January before Alexander Miller’s death in 1909, something over $70,000, was sold by the surviving partner to his own brothers and himself (for the facts make it inescapable that he was either interested then or contemplated being interested) for $17,800. By his own statements, in March of 1911, the tangible property, not including good will, &c., should have brought at least fifty per cent, of its-inventoried value, even if broken up and sold in lots away from the business. Furthermore; it will be observed that this long-established, highly successful business, which had just made $40,000 in a period of two j^ears, brought net about $17,800, and now is owned by a corporation using the name of the old concern, and in which this surviving partner is an owner to an undisclosed amount.

One cannot escape the conviction that notice of what he was about to do was purposely withheld from the administratrix of' his brother’s estate—for such she was at the time of this sale. One cannot escape the conviction that this hurried sale, determined upon immediately upon being advised that he and his brothers and sisters were not the sole owners of the business (burdened only with the necessity of paying $12,500 to the widow), was not the proper conduct of a surviving partner having at heart the interests of the trust; but was the conduct of a man who was bitterly antagonistic to the representative of his deceased brother, and was not, therefore, in a frame of mind to do what an impartial and properly acting trustee should do. No serious attempt seems to have been made to ascertain what this business would bring if sold as a- going concern at this long-established place—the only effort in this direction being a three-line advertisement offering for sale a machine shop as a going concern, without details or any method to attract attention or to suggest the identity of the business in question. He himself discloses in his proofs that the name of Alexander Miller had been long and favorably known; that their business was mostly at a distance from the home plant, so that the use of the name would for a long time be presumably of great value; that the plant was well equipped to do its work; that when operated by him for the twenty months succeeding his brother’s death he had made large profits, and yet, immediatefy upon the event of the verdict of the jury changing his mind with respect to the desirability of continuing the business, or of winding it up under the most advantageous circumstances, he disposes of the tangible property at an auction sale, and allows the name to be used by the purchaser, with the result that the purchaser (in which lie is financially interested) now has the name, the business, the stand, the good will and everything which contributed to the success of the previously-existing business.

Alexander Miller & Brother, the corporation, either purchased the name and good will, and the facts concerning that have been suppressed by the surviving partner, or did not purchase them and is being permitted to use them and get full worth and value out of them without paying anything therefor.

Since all the records of the business are necessarily within his control, it follows that the complainant is handicapped in an endeavor to specifically point out details or to obtain the benefit of whatever she might learn if given access to the books; but surely enough has been pointed out to show that under these conditions the protection of the estate of Alexander Miller requires that some impartial person should now be appointed to take charge of the assets of 'this late partnership and pursue those who axe using its name, its good will, and perhaps, bring suit to set aside the sale, if it be found that it was. collusive and improper. It does not follow that this course should not be pursued merely because the proofs show that the individual pieces of iron and steel as sold brought about what su.ch things usually bring at auction sales. As ■ I view it, that is an almost immaterial factor; and the' factors which must be considered are those to which I have briefly alluded above—the success of the business, its long continuance at this stand, the value of its name, the worth of its good will, its earning capacity as shown right up to the time of the sale, and then the fact of the sale (of which no notice was given to the complainant, who was the widow of the deceased partner), hurried through after brief advertisement, and resulting in the transfer of the name, the good will, the stand and the property into a corporation formed by insiders and now participated in as an owner by the surviving partner himself, who refuses to disclose any of the facts concerning his connection therewith; either as to the time when it began or the amount or interest of his holdings therein.

I am confirmed in my conclusion that the facts of this case imperatively demand protection of the estate by the appointment of a receiver by other considerations to which I shall make only brief reference. It appears that there is some real estate held in the name of Gordon D. Miller, which is alleged to be partnership property, but for which he charges rent to the partnership; there is other real property in the name of Alexander Miller, which is alleged to be partnership property. It also appears that the complainant here has made a large claim against the partnership, which is bitterly contested by the surviving partner, who denies that she has any claim, and alleges fraud upon .her part in- the strongest terms; and the whole case is redolent of the bitterness existing between the complainant and the defendant Gordon D. Miller.

Under these circumstances, it seems to me that an inevitable wasting of the assets of this partnership will take pla,ce if litigation is indulged in either against the late firm, or by it, dictated by bitter, hostile feeling rather than by just and reasonable views concerning the necessity or propriety thereof. An impartial receiver will, I am sure, be able to save many thousands of dollars of actual expenditure, as well as much time, in the consideration of just such matters as I have pointed out (and there are many others that I have not alluded to); whereas, if a receiver is not appointed, and the parties are left as they are, the hostility existing on each side will result in prolonged, expensive, harassing and unnecessary litigation, wasteful in each instance to the estate, which otherwise will be saved.

A further circumstance of great significance is this: A public accountant, who was called in, they say, for fourteen years during the existence of this firm and its predecessor, to make up their annual or semi-annual statements, testifies that about tire middle of March, 1909 (a very few months, it will be observed, before Alexander Miller’s death), the said Alexander Miller figured that his then interest in the firm was $39,988.4?, and inquired of this accountant whether that was not . so, to which this accountant replied that it was. Since that time it appears from the uncontested proofs that at least $40,000 profits have been made, and yet, in the account furnished by the defendant Gordon Miller and attached to one of his affidavits, the amount now due Alexander Miller’s interest is stated to be $1,203.28. To determine whether or not this is so the books, of course, would have to be carefully examined, and many questions would have to be decided, and I shall not stop to go through the various proofs that have been proffered in this respect. But the disparity between the amount coneededly. due on account of Alexander Miller’s estate at the time of his death and the present amount conceded to be due is so great, and the method by which the shrinkage -is accounted for is so without impartial consideration, and is based so 'entirely upon deciding everything against the estate- and in favor of Gordon Miller, that another cogent if not controlling reason for putting these assets, books and other things into the hands of an impartial receiver is manifest.

Tinder all the circumstances, and after carefully considering the proofs, I am convinced .that the interests of those entitled to the estate of Alexander Miller require that a receiver should be appointed for the late partnership of Alexander Miller & Brother, so that action, if necessary, ma3r be taken against those who are now in possession of the assets, name, good will and previous business of that firm, its collectible assets may be collected and conserved, and the innumerable questions which are present may receive impartial consideration, and fruitless and unnecessary litigation ma.y be avoided.