author: Eeed, Y. C.

text:
    The Seacoast Railroad Company and The Atlantic City Railroad Company v. R. Francis Wood et al.
    [Filed November 28th, 1903.]
    1. Where options on property were procured by a director and promoter of a railroad prior to the date on which he resigned and became a contractor for the building of the road, the railroad corporation, on its organization, had, by virtue of its power to ratify his contracts, an equitable interest in the property, so that when he took the deeds he took title for the use of the railroad.
    2. Where a contractor, in purchasing land for building a railroad, bought certain lots for terminal purposes in the same manner that he purchased the. right of way and built the road, as projected, so as to embrace and enter the terminal, which thus became an essential part of-the road, he was precluded from asserting that the terminal properties did not become part of the road and from setting up a personal right therein.
    3. A decree in a suit involving the validity of bonds issued- as compensation to a contractor for the building of a railroad, to which such contractor was a defendant, which disallowed a number of the bonds as being in excess of what he was entitled to, and validated others oq the ground that they had come into the hands of bona fide purchasers, imposed on such contractor the burden of showing that the bonds and stock which he actually received did not entirely pay him for certain property bought by him for the railroad.
    4. The equity of a railroad to hold property which a contractor, who was building the road, and who had actually received bonds as compensation, purchased for railroad terminals, taking title in his own name, was superior to the equity of a trust whose funds the contractor used in part in making the purchase.
    5. The fact that the trustee obtained a deed voluntarily given it by the contractor, did not improve such trustee’s position, where no part of the trust debt was canceled, or any security delivered, or the trustee’s position in any way changed.
    This bill is filed to obtain a decree that B. Francis Wood holds tbe legal title to two lots of land in Cape May City, now occupied by tbe complainant for terminal use, in trust, for tbe Seacoast Bailroad Company;, and also to obtain an. injunction against tbe further prosecution of an action in ejectment brought by said Wood to dispossess the Atlantic City Bailroad Company.
    Tbe gravaman of tbe bill is that these two lots were bought by Edward B. Wood as agent of tbe Philadelphia and Seashore Bailroad Company; that Wood took the title to the lots in his own name, and that the present holders of the legal title to the lots, and mortgagee, are not purchasers for valuable consideration.
    The Atlantic City Bailroad Company are lessees of the Seacoast Bailroad Company and successors to the rights of the Philadelphia and Seashore Bailroad Company.
    The history of the transaction, of which the present litigation is the sequence, is as follows: In 1889 a project was conceived of building a railroad, which, by eonheeting with the Camden and Atlantic railroad at Winslow Junction, would connect Philadelphia with Cape May City. Mr. Edward B. Wood appears to have been tbe leading mind' in conceiving this enterprise. Before the organization of any company, but after a number of gentlemen had been persuaded to join Mr. Wood in the railroad enterprise, Mr: Wood took measures to secure options for rights of way for the projected road. Instead of having a single eorporatioai for a road running from Winslow Junction to Cape May City, two corporations were organized, at difEerent dates, obviously for the purpose of avoiding the necessity of paying the full amount of $2,000 per mile -required by the laws of this state upon filing a certificate for a railroad corporation. Both certificates for these two- roads were executed in August, 1889, the first on August 6th and the secoiid August 8th. The certificate for the first company was filed on November 18th, 1889, under the name of the Philadelphia and Seashore Railroad Company'', which ran from Winslow Junction to Sea Isle City. The second certificate of incorporation for a road, which was to run from,Sea Isle City to Cape May City, was not filed until February 4th, 1890. Whatever the purpose in filing two certificates instead of one was, it appears conclusively that those concerned in the venture regarded and treated the two certificates as designed to effect a single purpose and proceeded to build the road upoar that theory. As already remarked, before the first certificate was filed, Mr. Wood began to secure options from landowners for rights of way, not alone between Winslow Junction and Tuckahoe, but also between the latter place and Cape May City. As it was of the utmost importance that property for a terminal in Cape May City should be secured, Mr. James E. Taylor, who was afterwards secretary of the roads, at the instance of Mr. Wood, negotiated for options for the two lots now in question in Cape May City. Mr. Taylor says that he got options for these two lots in the name of the Philadelphia and Seashore Railroad Company. One of these lots belonged to a Mrs. Schellinger and the other to Doctor Mecrey. Whether these options were taken in the name of Mr. Wood or in the name of the Philadelphia and Seashore Railroad Company is not a matter of importance. The purpose of obtaining these options, and subsequently the deeds for the lots, is manifested by the correspondence between Mr. Wood and Mr. Taylor.
    Oai October 5th, 1890 — the date of the incorporation of the first road being November 18th — Mr. Wood wrote to Mr. Taydor concerning the Mecrey, Schellinger and other properties. He save:

      “I feel as if $30,000 was about the limit that the company can afford to pay for its terminal real estate at Cape May, and including the Town properties and the Wales field in the r-ear, it will take careful management to secure them at that figure. ' The Wales property, and Mrs. Schellinger are the trying points, and an option should be secured fixing the price of those two at least. Probably you may know some one who can act for you to more advantage, as you are known to be connected with the new railroad company. I will send you $100 for option money.”
    On August 9th Mr. Wood wrote to Mr. Taylor:
    “I inclose you a check for $120 so that you can draw the notes and hand a part of the amount to L. M. Hall to secure the Schellinger property on sixty days option at once. Unless you have some immediate use for the twenty dollars balance, you can put it in the New Jersey Trust and Safe Deposit Company to this company’s credit. I shall keep a small account there.”
    These letters were written on the letter-head of the Philadelphia and Seashore Railroad Company, of which company Mr. Wood was then treasurer.
    On October 12th Mr. Wood wrote to Mr. Taylor:
    “1 write to acknowledge receipt of option. papers for the Delaware House (this was the Mecrey property) covering one hundred dollars of remittance made and’what disposition shall be made of the twenty dollars remaining. * * * One or two acres and the right-of way is .all that will be needed for railroad purposes. It might be better simply to get a price upon a certain piece of it, say about two acres for some purpose. It is desirable to get these properties arranged for as soon as possible, because no one never knows how soon a thing of this sort may leak out, and in that case we had better get our business with councils started as soon as possible.”
    On November 20th, Edward R. Wood resigned as director and treasurer of the Philadelphia and Seashore Railroad Company, and on November 27th, 1889, there was an agreement entered into between that road and Mr. Wood, by the terms of which agreement Mr." Wood agreed to build the line of railroad from Winslow Junction to Sea Isle City.
    This agreement is displayed at length’in the opinion of Vice-Chancellor Bird in the case of Wood v. Boney, 21, Atl. Rep. 574, and again in the opinion of Vice-Chancellor Pitney, delivered in the case of Baker v. Guarantee Trust and Safe Deposit Co., 31 Atl. Rep. 174.

    It is sufficient, for the'present purposes, to point but that the agreement provides that the railroad company would assist in organizing a railroad from Sea Isle City to Cape May City. The railroad company agreed'that any contract it might make for building this Cape May road should be given to Mr. Wood upon the same general terms as contained in' the contract of the one then executed. The price to be paid to Wood for building the road to Sea Isle City was, $550,000 worth of first mortgage bonds and the same amount of stock, and he was to- be paid for building the road from Sea Isle City to Cape May $350,000 worth of stock of the contracting company and the same amount of first mortgage bonds.
    The eighth- item of the agreement provided that the costs of securing the rights of way should be borne by Wood; and the third section provided that Wood should erect suitable stations.
    After the execution of the, agreement Wood proceeded in the acquisition of the title to lots for rights of way, and his purpose was evidenced by letters written on November 27th, December 5th, 12th, 18th and 19th, 1889, and January 6th, 1890, and February 20th, March 1st and March 9th, 1890.
    On January 11th, 1900, Mr. Wood took a deed from James Mecrey for the Mecrey lot, and on January 17th, 1900, from William S. Schellinger for the Schellinger lot. Both deeds were made to Edward R. Wood. The articles of association for the incorporation of the Cape May and Tuckahoe Railroad Company, running from Sea Isle City to Cape May, had not yet been filed.
    Mr. Wood, on August 1st of the same year, conveyed these lots to one Burleigh, obviously to enable Burleigh to mortgage the property, which Burleigh did, by making a mortgage to Wood, trustee, conditioned for the payment of $8,500 in five years. Wood, at the same time, executed a declaration of trust in which he declared that he held the said property for the estate of Mary and Julianna Wood, of which estate he, with George and Redmond Wood, were trustees. Wood had taken the money belonging to this estate for the purpose' of paying the' cash amount of the consideration for these two properties.
    Burleigh, on August 2d, conveyed the equity of redemption in these properties to Wood, and then' Wood conveyed them to E. Francis Wood, the present defendant in this suit. The conveyance was made to E. Francis Wood for the purpose of securing the estate for the money which had' been 'used to pay, in part, -for the properties.
    Assuming that these properties were bought for the Philadelphia and Seashore Eailroad Company, the way in which- the complainants are interested in the' lots is this: The property and franchises of both roads, namely, the Philadelphia and Seashore Eailroad Company and the Cape May and Tiickahoe Eailroad Company, were judicially declared insolvent;' a receiver was appointed for each; these receivers sold the property and franchises of each campan)' to the South Jersey Eailroad Company. This company in turn became insolvent and, in the course of the proceedings taken, its receiver sold its property and franchises to the Seacoast Eailroad Company. The Seacoast Eailroad Company, on May 2d, 1898, leased all its property to the Atlantic City Eailroad Company for the term of nine hundred and ninety-nine years.

      Mr. Eugene O. Cole and Mr. Robert II. McGwrter, for the complainant.

      Mr. Joseph II. GasMll and Mr. Samuel II. Grey, for the defendants.
   Eeed, Y. C.

The testimony exhibits-Mr. Edward Wood in his relations to these railroads as promotor, director and contractor. All that he did previous to the incorporation of the first road clearly appears to have been for the use and benefit of both companies when thereafter organized. Even the scheme for executing a contract by which Mr. Wood was to build the road seems to have been conceived before the filing of the certificates of incorporation. The board of directors, in the earlier part of the transaction, appear to have been puppets whose movements were directed by Mr. Wood. No intelligent and independent board would have entered into such a contract for the construction of any road with an independent contractor. Nothing, apart from what Mr. Wood was to receive, is defined with any particularity, except the weight and size of the rails and the general grade of the road. The number, size and location of the stations and the amount of rolling stock in excess of six engines, thirty passenger and thirty freight cars, are left to the discretion of the contractor. The purport of the contract was, “you go on and build a railroad and you shall have so many bonds and so much stock.” After the execution of the agreement of November 27th, Mr. Wood began to build a roach On December 6th. the company executed a mortgage to the Guarantee and Safe Deposit Company to secure the payment of the nine hundred bonds at $1,000 each, which were to be delivered to Mr. Wood for the execution of his contract. This mortgage covered the then incorporated' road and all its branch lines then in course of construction and thereafter to be constructed. On February 4th the certificate of the Tuckahoe and Cape May road was filed. It was signed by twelve of the sixteen persons who had signed the former certificate. On December 16th Mr. Wood made a sub-contract with a Mr. Tennis to build the Tuckahoe branch. This agreement was made between Tennis, of the first part, and the Philadelphia and Seashore Railroad Company, by their contractor-in-chief, Mr. Wood, party of the second part. In August, 1890, the board of directors became dissatisfied with the delay in the work of construction and with other matters, and on September 2d passed a resolution rescinding the construction contract of November 27th.

On October 25th,. Mr. Wood filed a bill in this court to compel the directors to specifically perform the contract and to cancel the resolution of the board rescinding it. Upon final hearing this bill was-dismissed. The company itself then proceeded to complete the construction of the road.

In 1891, July 20th, the Philadelphia and Seashore Railroad Company was declared insolvent, and a receiver was appointed. In the same year, Mr. Philip P. Baker, receiver, having sold the property of the company, filed a bill attacking the trust mort-' gage made to secure the bonds, and attacking, also, the validity of the bonds issued. This suit became, in substance, one for the adjustment of the various claims against the road which had been presented to the receiver. The opinion of Vice-Chancellor Pitney in this case contains an exhaustive and lucid expo-sition of the transaction of the company, and of Wood with the company.. It exhibits the fact that four hundred and sixty-five bonds had been issued to Mr. Wood, which issue was in excess of the value of so much of the work done and materials furnisher as Mr. Wood had paid for in'money or fin bonds up to the time when' the company intervened and itself look charge of the further construction.

The consideration paid for the two tracts of land now in question was paid by Mr. Wood, in part, by the' delivery of bonds so issued to him, and in part by money belonging to a trust estate of which he was trustee. ■

The question, it is perceived, is whether the complainants, as successors in title of the Philadelphia and Seashore railroad and the Tuckahoe and Cape May railroad, have an equitable interest in these two lots, which' this court will protect against the claim of the holder of the legal title. • The defendants’deny the existence of any equitable right in the complainants.

In doing so, the defendants assume that the complainants must rest their claim on the existence of- a resulting trust raised by the payment of the property of the company in the purchase of these lots.

The presumption of a trust, however, can rest upon' other grounds than the one mentioned. That Mr. Wood, 'when the options were taken for these lots, was acting as the agent of the prospective railroad company, is too clear for serious discussion. I - am aware that the company, when it came into existence, was mot bound by aty contract theretofore made by Mr. Wood. The obligations of a corporation for the contracts' of a promoter must rest upon a ratification by the company.

But Mr. Wood’s position was such that the corporation, after it came into legal existence, donld ratify his contract and assume the benefit of its provisions, and, of course, incur the obligation incident to it. Now the company, and its successors, have always treated and used these lots as a part of its property, and so became entitled to the benefit of Wood’s contract and liable to the obligations which he incurred in its purchase. The rule is entirely' settled that an agent or 'trustee who,' in his own name, makes a purchase while in the performance of his duties as such, holds the property for the benefit of' his principal or cestui que trust. Van Hurter v. Spengeman, 2 C. E. Gr. 185.

Where the agency is contractual, the statute of frauds requires that the agency be proved by written testimony, for, as the trust springs out of the relation of principal and agent, the relation arises from the agreement between the parties. This agreement, therefore, is within the statute and must be in writing.' Perry Trusts § 135; Sugd. Vend. & P. § 912.

The letters written by Mr. Wood to Mr. Taylor contain the written evidence of his agency.

It is also settled that if a person standing in a fiduciary relation buys property so connected with a trust property that it must be used with a trust estate, and an independent ownership would seriously affect the use and value of the trust property, he cannot retain the same to his own benefit. Perry Trusts § 129.

But Mr. Wood claims that while he bought these properties intending them to be used as terminals of a prospective railroad, yet he only intended to devote them to the use of the railroad in case the railroad paid him for them. His position, in substance, is that from the beginning he expected to have the contract for building the road; that he procured all these options with a view of using the property in executing his contract to construct a railroad; that he was prevented from finishing the road; that he was not paid in full for what he had done, and this property is included in the unpaid portion of the material furnished for the road.

Whatever was in the'mind of Mr. Wood at the time he took the original options, it is quite clear that up to November 27th, when' he changed his position from agent or director' to contractor, his relations with the prospective railroad were fiduciary.

Now, it is to be observed that the option for'the Delaware House (the Mecray property) seems to have been signed previous to November 27th, for on October 12th, 1889, -when he became contractor, Mr. Wood wrote to Mr. Taylor acknowledging the receipt of the option-papers for the Delaware House. The inference, also, seems almost conclusive tliat the option for the Schellinger property was also procured before November 27th, for on October 9th Mr. Wood writes to Mr.' Taylor about securing the Schellinger property on sixty days’ option at once. On December 5th, he writes': “Instead of offering Mrs. Schellinger $500 for a renewal, I would propose to take the property just as soon as they can get the searches and show a clean title.” It follows, therefore, that when the corporation was formed an equitable title in these properties attached to it. The power to ratify these contracts invested the company with an interest in the property, and this interest existed when Wood became contractor.

This interest was never released, nor were the contracts rescinded. When Wood took the deeds this interest existed, and he took the title for the use of the railroad company. By force of the agreement he became liable to pay for this land, but the use to which the land was to be put was fixed.

But, aside from this view, it seems to me that the acts of Mr. AArood, while contractor, precluded him from successfully asserting that this land did not become a part of the railroad. It is certain that the road was to be built a completed entity. Mr. Wood expresses this idea in his testimony, when he says “it [this property] was purchased by him, [Taylor] for my account, in expectation that it was to be put in the mass of material that I was using to build the railroad with.” Before the contract was executed, he recognized that suitable terminal facilities at Cape May City was of the first importance. Indeed, the success of the enterprise depended upon such facilities at that place, and upon the success of the enterprise depended the value of the bonds and stocks which he was to receive in payment under the construction contract. That these lots were purchased for; and that they were the only property purchased for such terminal 'purposes, is apparent -from his letters to Mr. Taylor after he became contractor. ■

■ These terminal lots were therefore bought just as the rights of way along the whole route were bought. "Over -much of these rights of way-the road had been graded, tracks laid and bridges built. The railroad projected, and finally built as an entirety, ran into -and included the Cape May terminal.

In this' situation, it seems to me that even if it' be true that Mr. Wood had not been paid for all the work done, and for all the property'purchased'for the company, he would not be permitted to strip this company of. this essential-part of its-plant. Whether the court should impose conditions that the company should pay to the defendant any unpaid portion of the amount which the property cost Mr. Wood, is aside from the question whether a trust exists. It seems quite clear that either with or without conditions imposed in re'spec't to such payment, the court will prevent the attempt of the defendants to assert a personal-right to the possession of this property.

Assuming the trust to -exist, the question remains Whether R.Francis Wood should be paid the amount of trust funds which Edward R. Wood used in payment for the property. This depends upon another question, namely, whether the- latter gentleman has been already paid by the original- company for this property. If he has been so paid, then the company and its successors in title is entitled to hold the property without further compensation.

For the purpose of -exhibiting the transactions between Mr. E. R. Wood and1 the original company; the records1 of two cases are introduced into-this cause. One is-the case of E. R. Wood v. Philadelphia and Seashore Railroad Co. et al., reported in 21 Atl. Rep. 574 In this case Mr. Wood filed a bill to cancel the resolution of the board of directors of the railroad, rescinding the construction agreement of November 27th and to obtain-other relief. As appears from the opinion- delivered in that case by Vice-Chancellor Bird, Mr. Wood’s counsel - contended that Mr. Wood was entitled to more stocks and bonds than he had received, and that, in any event, he was entitled to- an accounting. The court overruled both insistences. It held that the stock and bonds had been issued to Mr. Wood upon his own estimates of -the amount of work done and materials furnished in proportion to the amount of work to be done and materials furnished to complete the road, and also held that the estimates were exceedingly liberal towards Mr. Wood. The vice-chancellor said: “If the testimony of the experts offered by the defence be regarded as of any value, it would appear that Wood had .been paid largely in excess of what he is entitled to.” The court .held, also, that Wood had himself failed to keep his accounts in ,a manner which made it possible to take an account.

In the answer filed in that suit, it appears that among the estimates for work done, upon the basis of which estimate bonds and stock were issued, there was an item as follows: “Terminals one-quarter of $120,000, thirty thousand dollars.” That this estimate was presented by Mr. Wood to the company is nowhere denied.

While the statements in the opinion do not conclude Mr. Wood, yet the dismissal of his bill shows conclusively that he had no equitable ground for the relief he asked.

In the case of Baker v. Guarantee Trust and Safe Deposit Co., reported in 31 Atl. Rep. 174, 180, the court was called to pass upon the validity of the bonds issued to Mr. Wood, and which Mr. Wood had passed away by sale or exchanged for materials used in the construction of the roads. These bonds were presented by their holders to the receiver as claims against the insolvent railroad company. Mr. Wood was an answering defendant in that suit. It was decided that all the bonds, except the first one hundred, were illegally issued to Mr. Wood. But the learned vice-chancellor considered and passed upon the contention of the counsel for certain bondholders, that bonds issued to Mr. Wood equal in par value to the value of the work actually dono and materials furnished, should be held valid. The vice-chancellor said: “All that Mr. Wood could possibly claim credit for in the way contended for was the amount actually paid out and expended in the construction of the road, the object being to ascertain the amount of actual assets to the company at any particular time desired, in order to ascertain whether or not there was at that time an excessive issue of bonds.”

It is to be observed that Mr. Wood, by the terms of the construction agreement, had power to pledge the credit of the company in making purchases until $500,000 should be realized upon stock subscriptions. The credit of the company was so pledged for a large portion of the work done and still unpaid for.

The vice-chancellor found that the amount of work done and materials furnished and paid for was $267,810, and that he had received four hundred and sixty-five $1,000 bonds and' seven thousand eight hundred and forty shares of stock. The proportion of stock and bonds received bore a much larger proportion to the amount he was entitled to receive for the completed work than the amount of work done and materials furnished and paid for bore to the cost of the completed road.

In alluding to the estimates put in by Mr. Wood, the vice-chancellor said: “For terminal lands, he allows $120,000.”

That the amounts paid for these terminals were included in the total amounts expended, is apparent from the observation of the vice-chancellor that above $100,000 had been paid out in bonds in procuring rights of way and terminal facilities for and in the construction of the Tuckahoe and Cape May Railroad Company.

The final decree disallows the claims of a large number of bondholders and validated the claims of other bondholders, upon the ground that they had been taken from Mr. Wood bona '/ido and for valuable consideration. The logical conclusion from the decree was that Mr. Wood had received more bonds than he was entitled to.

Regardless of the opinions of the court in the two cases mentioned, and regarding only the force of the decree, the duty is certainly thrown upon Mr. Wood to show that the large amount of bonds and stock which he admittedly received did not entirely pay him for this property, and that duty he has not discharged.

Nor do I think that the present legal owner of the property has any right in it. higher than that of the complaining company. It is true that of the entire consideration of $14,500 paid by Mr. Wood for these tracts, only $8,000 was paid in bonds, and that the remaining $6,500 was paid in trust funds.

It is also true that, as against Mr. E. R. Wood, Mr. E. Francis Wood would have the right to follow these trust funds into the property purchased. But as against the railroad company, Mr. E. Francis Wood encountered an equity in the property older than his own. There never was a time, from the organization •of the company and the issue of the first one hundred bonds (which occurred before Wood took title to the property and paid out the trust money), that Wood does not seem to have been overpaid. When he took title, therefore, he was only buying property for the company, for which he had already been paid. The equity of the railroad company to hold tlie property was superior to that of the trust company whose money E. R. Wood then paid out.

Nor does the fact that R. Francis Wood holds a legal title by a deed from E. E. Wood, made at Wood’s own volition, place the trustee in a better position, for it does not appear that the trustee canceled any part of the trust debt due from E. E. Wood or delivered up any security or changed his position in the least. The deed was made to him simply to secure an antecedent debt, and, therefore, E. Francis Wood was not a purchaser for a valuable, consideration.

I shall advise a decree directing E. Francis Wood to make a conveyance of the terminal lots to the Seacoast Railroad Company; canceling the mortgage held by George Wood and Richard T. Wood, trustees; declaring that a judgment obtained by Lee & Wurtz against E. E. Wood, is not a lien upon this property, and directing that the injunction against the prosecution of action of ejectment be made permanent.


source: Caselaw Access Project

author: Reed, V. C.

license: Public Domain

text:
    Myrtie L. Lake v. Robert L. Lake.
    [Filed November 28th, 1903.]
    The commission of adultery by a husband at a place other than his own dwelling is not desertion.
    On bill for divorce. Ex parte.

      Mr. Joseph U. Powell, for the complainant.
   Reed, V. C.

The bill sets out .that the parties were married in 1885; lived at Port Norris in this state until May, 1899, then went to New York, where complainant lived with her husband for two months; that defendant committed adultery and she left him and began a suit for divorce; that he then sought and obtained her forgiveness, when she abandoned her suit and returned and lived with him in New York for two months. It sets out that he deserted her in August, 1899.

The testimony, taken ex parle, proves the marriage, their cohabitation at Port Norris for about fourteen years, up to March, 1899.

It proves the adultery of the husband with one Bertie Snead; that the complainant left her husband and filed a bill for divorce; that she afterward condoned his offence; afterwards, upon discovering her husband in the company of the said Bertie Snead, she again left him, returning to the home of her sister at Port Norris, with whom she has since lived in the State of New Jersey. It appears that she has not seen her husband since she left him in New York, and that he now lives in the State of Virginia.

It appears that the husband obtained a divorce from the complainant in the circuit court in the county of Warwick, Virginia, on March 17th, 1903. No notice of the pendency of such suit was served upon the complainant, nor had she' any knowl-’ edge of it.

A decree for an absolute divorce in this case was advised by the master upon the ground that the husband had deserted his wife in August, 1899. There was no proof of an intention to desert her, except the fact that he had committed adultery.

Now, it is true that when a husband brings his mistress into his house and so makes it impossible for a wife to live there, he practically drives his wife from his home and his act may be characterized as desertion; but in the case of an adulterous act or acts by her husband with a woman .at places other than the dwelling-place of the parties such an inference does not arise. Stiles v. Stiles, 7 Dick. Ch. Rep. 446; Tracy v. Tracy, 43 Atl. Rep. 713.

While such an adulterous act might justify a wife in separating from her husband, it is not ground for inferring a constructive desertion by him.

The bill does not set out any act of adultery. It merely states that she filed a bill for a divorce for adultery and that she afterward condoned his adulterous act. If adulterous conduct can be inferred from this statement, there is no charge that he had done anything after the condonation to revive the original offence at the time when she - left him.

The desertion of the husband therefore, stated in the bill, has not even an adulterous act to support it.

The right of the wife to a divorce must rest, if it exists at all, not upon his desertion but upon his alleged adultery.

Eespecting the decree obtained in the Virginia court, it seems to be without force in this state, inasmuch as no notice of such suit was given to the defendant, nor had she any knowledge of its pendency. Felt v. Felt, 14 Dick. Ch. Rep. 606.

The divorce is refused. ■


author: Seed, Y. C.

text:
    Henry C. Baughman et al. v. Camden Manufacturing Company.
    [Filed December 5th, 1903.]
    1. Where an endorsement on fire policies by the insured is a mere appointment of a third person to receive a portion of the money in case of loss, the receiver of the insured, notwithstanding the endorsement, is entitled to recover the entire amount under the policies.
    2. Where fire policies are pledged by the insured, and bear an endorsement appointing the pledgee to receive a portion of the money in case of a loss, the pledgee is entitled to receive such moneys, notwithstanding that he has no insurable interest in the property.
    This is an appeal from a decision of a receiver overruling the claim of the Pittsburg Plate Glass Company to be paid a balance due it from the insolvent Camden Manufacturing Company out of the proceeds received on fire policies by the receiver.

      Mr. Lewis Starr, for the receiver.

      Mr. Frank T. Lloyd and Mr. John G. Horner, for the claimants.
   Seed, Y. C.

The question is, what interest has the Pittsburg Plate Glass Company in the moneys received by the receiver?

No doubt the right of action to recover the entire amount of insurance was in the receiver as it would have been in the Camden Manufacturing Company had it remained solvent. Martin v. Franklin Fire Insurance Co., 9 Vr. 140. So long as the insured retained his interest in the property he could recover the full amount. The Pittsburg Plate Glass Company, under the endorsements upon the policies, conld recover nothing. The contract was between the insurance company and the manufacturing company. The endorsements upon the policies did not constitute an assignment but a mere appointment of the plate glass company to receive a portion of the money, This doctrine is clearly set out in the Martin Case.

Now, if the right to recover from the insurance company rested with the insured alone, he alone need have an insurable interest.

The question respecting the right of a third person to receive a part of the proceeds arises solely between that third person and the insured. Such third person, as pointed out by Judge Depue in the Martin Case, can have his equitable rights secured by -having the money recovered by the insured paid into court, and then the court can, under its equitable power, see to the disposition of the money. It is true, nothing was said in the Martin Case respecting the need of an interest in the appointee, for in that ease the appointee was a mortgagee; but the whole argument contained in the opinion refutes’the notion that such an interest is essential to the existence of an equitable right in the appointee. Interest is not necessary in the appointee upon directions to pay to a third person. 13 Am. & Eng. Encycl. L. (2d ed.) 193, 211.

Again, the policies were actually delivered in pledge to the Pittsburg Plate Glass Company. Jones Pledg. § 147; Stout v. Yaeger Milling Co., 13 Fed. Rep. 802.

Again, the whole transaction constituted an equitable assignment of all or part of the money to be received from the policies, and an equitable assignee need have no interest. 13 Am. & Eng. Encycl. L. (2d ed.), supra.


text:
    Theresa Ellis et al. v. Mary Feist et al.
    [Filed December 5th, 1903.]
    1. Where defendant in partition challenges the title of complainant, the " court will not proceed with the suit until the legal title is settled by an action at law, unless the right of complainant or defendant involves some equitable question.
    2. The court cannot retain a suit for partition, as one to quiet title and partition, where the bill does not show that complainant is in possession of the land.
    3. Where, in partition, defendant in possession challenges the title of complainant, ejectment is an adequate proceeding tO' try the title.
    On bill for partition.

      Mr. Edwin R. Walleer, for the complainant.

      Mr. Hairy G. Valentine, for the defendant Margaret Eeist.

      Mr. Franh S. Katzenbach '(Mr. Hunt), for the defendant Mary Eeist,
   Reed, V. C.

The complainants are the children or grandchildren of Baptist Eeist and his wife, Theresa Rothweiler Eeist. The defendants are the widow and child of said Baptist Eeist, the widow being Mary, the second wife of Baptist Eeist, and the child being the offspring of the second marriage.

The contest concerns the title of Baptist Eeist at the time of his death, on April 26th, 1903. The question arises in this way: The property sought to be partitioned was, on September 14th, 1864, conveyed by Frederick Wenzel and wife to Theresa Rothweiler. Theresa Rottweiler was then the wife of Baptist Eeist, but the name “Feist” was omitted' in indicating the grantee in the deed.

Theresa Rottweiler died about 1869. On November 15th, 1871, Frederick Wenzel, the grantor in the former deed, made another deed for the same property to Baptist Feist. This deed recites that a previous conveyance was made to Theresa Rothweiler and observes that, as there was no person by that name and the conveyance is void, this deed (the last-named deed) is given to rectify the error.

Now, if the grantee in the first deed was sufficiently described to point out the then wife of Baptist Feist as such grantee, then, after her death, Feist had an estate by the'curtesy, which ex.pired upon his death, and thereafter the property belonged to the heirs of Theresa alone. If the grantee in the first deed could not be identified by the name “Theresa Rothweiler,” then the second deed became operative, and upon the death of Baptist Feist the property passed under the terms of his will to his widow and daughter Mary, the child of his second wife, Mary.

The answers of the widow and child challenge the title of the complainant.

This condition of affairs deprives this court of jurisdiction to proceed with this suit until the legal title is settled by an action at law (Slockbower et al. v. Kanouse, 5 Dick. Ch. Rep. 481), unless the right of the complainant or defendant rests upon or involves some equitable question. Vreeland v. Vreeland, 4 Dick. Ch. Rep. 322.

Counsel for the complainants insists that the suit may be retained as one to quiet title and partition. But the radical defect in the bill as one to quiet title in ’ complainants is that it does not show that the complainants are in possession. The facts appearing in the testimony, so far as they show anything respecting possession, seem to disclose that Mary and her child are in exclusive possession. An action of ejectment, therefore, is an adequate proceeding to try the title. Sheppard v. Nixon, 16 Stew. Eq. 627, 632.

I will hold the bill a reasonable time -for the complainants to have their title determined at law.


author: Reed, Y. C.

text:
    Arthur W. Claphan v. Mignonette E. Barber et al.
    [Filed December 5th, 1903.]
    1. The description of a house by street and number, in a town, in a memorandum for its sale, is a sufficient description of the house so designated, with its curtilage, within the statute of frauds.
    2. Where, in a suit for specific performance of a contract for the sale of a house described by street and number, the bill described the property, and defendant admitted his ownership thereof, and admitted that an agent had advised him that he had obtained a purchaser thereof, and that he signed the receipt of a certain sum in part payment in the purchase of a house described by street and number, the identity of the property is sufficiently established.
    3. Defendant, sued for the specific performance of a contract for the sale of real estate, cannot complain that he is required to specifically perform a contract less onerous than the one he intended to sign.
    This bill is filed to compel the specific performance of an alleged contract between these parties for the sale and purchase of a house in Woodbury, New Jersey.

      Mr. Norman Grey, for the complainant.

      Messrs. Watkins & Avis (Mr. Watkins), for the defendants.
   Reed, Y. C.

On March 14th* 1903, Mignonette E. Barber signed the following paper:

“Woodbury 3/14/03.
“Received of Arthur W. Olaphan fifty dollars in part payment in the purchase of house No. 35 Center St. Woodbury N. J. .
“$50.00. Mignonette F. Barber.”

Mignonette E. Barber declines to make a conveyance of the said property and now invokes the statute of fraud's as a defence to this suit. It is said that the property is insufficiently described. I am of the opinion that a number of a house on a street is a very good description of a house so designated with its curtilage. It is true that no evidence was offered to show the existence of such a house upon Center street, Woodbury, New Jersey, or the dimensions of its curtilage. But the bill sets out a description of a property known as No. 35 Center street, of which a more particular description is attached to the bill.

The defendants admit her ownership of the property described, and admit that one Allen, her agent, advised her that he had obtained a purchaser for this property,.in the person of Arthur W. Claphan, and that she signed the receipt and received a check for $50 from said Claphan.

The identity of the property, therefore, wdiieh is the subject-matter of the receipt, is sufficiently established. It is again insisted that the terms of payment are not proved with sufficient certainty by parol.

It is not denied that the same was to be $3,500, but the query is whether it was to be all in cash or $1,000 in cash and $2,500 upon a mortgage, to be given to Mrs. Barber.

I think it sufficiently appears that it was to be in cash, and that the error in stating the contract in the original bill arose from a misunderstanding of what was written in the statement given by Mr. Claphan to his solicitor, by wray of instructing the latter in bringing the suit. The allusion to a mortgage contained in the statement was respecting one that Mr. Allen was to negotiate for the purpose of raising the cash to pay Mrs. Barber. I think, also, that the time when the money was to be paid is sufficiently ascertained, and that it was to be paid when Mrs. Barber could terminate the tenancy of the person then occupying the house, and that two months was stated as the time this would require. This period of time has now expired, and I see no reason why a deed should not be delivered upon the payment of $3,500 in cash.

Tlie testimony of Mrs. Barber goes only to the points that she did not understand what she was signing and that Mr. Claphan abandoned the contract. Neither of these points is proved. It is also said that the parol contract was for the conveyance of other articles than the house itself. There is no ground laid for reformation, nor can the defendant complain that she is to specifically perform a contract less onerous than the one she intended to sign.

I will advise a decree for the complainant.


text:
    Thomas A. Stoll v. William H. Sibson et al.
    [Filed December 22d, 1903.]
    A chattel mortgage of a stock of drugs and fixtures covered the goods mentioned in a schedule thereto annexed, and also all other merchandise and personal property which the mortgagor may, while the instrument remains in force, place on the premises, by way of replenishment or addi-* tion to the stock. While the mortgage was in force, the stock changed hands several times, the several successive owners buying subject to the mortgage, and all, excepting the last, assuming payment of the mortgage debt. The last purchaser made a collateral agreement with the mortgagee by which notes which he gave for property were to be endorsed to the mortgagee, and on payment thereof the latter was to cancel the mortgage. —Held, that the mortgage not only covered the chattels which had been placed on the premises by the mortgagor in the way of addition to the stock on hand, but that it was also a lien on those so placed on the premises by all the subsequent purchasers of the stock, superior to the liens ot judgment creditors subsequently levying on the property.
    On. bill to foreclose cbattel mortgage and for injunction. On final hearing.

      Mr. Francis C. Lovj thorp, for the complainant.

      Mr. LÁnton Batterthiuait, for the' .defendant W. H. Sibson

      Mr. Edwin C. Long, for the defendant Irving Diehl.

      Mr. William B. Piper, for the defendant Benjamin Good.
   Reed, V. C.

John II. B. Howell, the owner of a drug store, on October 10th, 1895, gave a chattel mortgage to Thomas A. Stoll, to secure the payment of the sum of $3,750 on demand, with interest. The mortgage covered all the goods and chattels mentioned in a schedule thereto annexed, and then in and about the building known as No. 339 North Warren street, in the city of Trenton, and such merchandise and other property as might be hereafter placed in the said premises by way of replenishment or addition to said stock now on hand.

On October 30th, 3895, Howell sold all the property then in the store to Charles E. Sullivan, subject to the chattel mortgage, which Sullivan agreed to pay.

On January 13th, 1902, Sullivan sold the property then in the store to Frank L. Wheatland, subject to the chattel mortgage, which Wheatland assumed as his debt.

On July 11th, 1902, Wheatland sold to William H. Sibson, subject to the chattel mortgage. Sibson did not assume the mortgage debt, but a collateral agreement was entered into between him and Stoll. This agreement set out the. chattel mortgage, and set out that Wheatland was the owner of the goods and chattels mortgaged by Howell to Stoll, and that Sibson wished to purchase the said property, and that it was agreed that Sibson should give Wheatland a series of notes,, payable in successive periods.

And it was further agreed that if Sibson should deliver these notes to Wheatland, and should get Wheatland to endorse them to Stoll, then upon the payment of all the moneys specified in said notes when and as the said notes matured, Stoll was to cancel and surrender the chattel mortgage, and waive all demand on account of the debts specified 'in said chattel mortgage.

The question presented is in respect to the extent of the right of a mortgagee in the property in said store (now in the hands of a receiver appointed by this court), as, first, against Sibson, the owner; second, against a judgment creditor, with a levy made before the appointment of the receiver; and third, against a judgment creditor with a levy made after the appointment of the receiver; and fourth, as against persons who sold goods to Sibson with the condition that the title to said goods should remain iir the vendor until the goods were paid for.

The question, which is the subject of a great contrariety of opinion elsewhere, viz., whether there can be a valid mortgage upon chattels which at the time of the execution of the instrument has neither an actual nor potential existence, has been regarded as settled in this state since the decision by Chancellor Green, in the case of Smithurst v. Edmunds, 1 McCart. 408. It was held in that case that a mortgage on future-acquired property was valid in equity; that the lien attached as soon as the property was acquired by the mortgagor, and that the lien was superior to that of a judgment creditor, with a levy upon the same property, under a judgment against a mortgagor. This doctrine has been repeatedly recognized and acted upon. Gevers v. Wright, 3 C. E. Gr. 330. Williamson v. New Jersey Southern Railroad Co., 2 Stew. Eq. 311.

It is clear, therefore, that those chattels which had been put into the premises by Howell, in the way of replenishment or addition to the stock oar haaad, when he gave the naortgage, became subject to the liera of the mortgage.

It is iiasisted, however, that it is only such - goods as were acquired by Mr. Howell that is covered by the mortgage. This position is partly based upon the-words at the close of the schedule attached to the mortgage. At the erad of the schedule of specific articles are the following words:

“As well all other merchandise and personal property, which said party of the first part (Howell), may hereafter or during such time as this instrument shall remain in force, place in or about such premises by way of replenishment or addition to said stock and goods now there.”

Now, it is to be observed that by the language of the mortgage such goods as Howell might add to the property were included in the schedule, and it is. to be further observed that the mortgage itself covers, not only the goods and chattels mentioned in the schedule, but also such other personal property as may be thereafter placed in said premises, “by way of replenishment or addition to said stock now on hand." The mortgage, therefore, in terms, covered all goods that might be placed within the premises by way of replenishment or addition to the stock by anyone, as well as the goods mentioned in the schedule, which included the specific articles named, as well as those thereafter placed there by Howell.

Each purchaser of the stock and fixtures purchased subject to the chattel mortgage, so expressed in the bill of sale, and each, except Sibson, assumed the mortgage debt.

It was perfectly obvious, from the language of the mortgage, that its purpose was to perpetuate a lien upon the floating stock in the store, and the words of the instrument, as already observed, are broad enough to include all substituted property.

It is, in my judgment, entirely clear that when Mr. Sibson bought, the mortgage covered all the stock then in the store.

The position of 'Sibson towards the mortgagee differs from the preceding owners in one respect only, viz., in the amount of money which he was bound to pay to relieve himself of the encumbrance of the mortgage.

The relation between Wheatland and Stoll, as displayed by the testimony, was such that Wheatland was in possession, with legal title, for the prrrposc of disposing of the business in the interests of Mr. Stoll. When Sibson bought he in fact bought the property from Mr. Stoll.

The consideration was the notes made by Sibson to Wheat-land, and endorsed by Wheatland to Stoll. Sibson did not, like the other purchasers, assume the payment of the mortgage, but assumed to pa]r the amount of the notes, by becoming the maker of them. The mortgage thereafter became a mortgage to secure the payment o£ the consideration of these notes, but in all other respects remained the same, as respects Sibson, as it had theretofore been as respected the other owners.

The mortgage, therefore, at the time the receiver took possession, covered all property included in the schedule originally in the premises, and all property which had thereafter, by any of the owners, been placed in and upon the premises, by way of replenishment of such property or in addition thereto.

■ In regard to the two judgment creditors, it follows, from the doctrine laid down in Smithurst v. Edmunds, supra, that the liens of their levy is subordinate to the lien of the mortgage upon all chattels covered by the mortgage, whether the lien was obtained before or after the appointment of the receiver.


text:
    Henry Shipman et al. v. William C. Shipman et al.
    [Filed January 5th, 1904.]
    1. The only ground upon which a parol agreement for the conveyance of land can be enforced or recognized by a court of equity is that of part performance.
    2. A mere payment of part of the consideration of the verbal sale of real property is not part performance of the verbal agreement, so as to call for its enforcement by a court of equity.
    3. Where a tenant in common has in good faith put improvements upon the common property for the purpose of improving it, and not for the purpose of embarrassing his co-tenants, or encumbering their estates, or hindering partition, he is entitled to be compensated in an equitable partition; nor does the fact that the improvements were so placed by a tenant in common in remainder during the existence of a preceding life estate change the rule.

      4. In a suit for partition a tenant in common is not entitled to have a sum charged upon tlie property for his services as attorney for the tenants, where no contract was made for remuneration for such services, and they were rendered by him as one member for all the members of the same family.
    On bill for partition’.
    The bill is filed by three of the four children of Jesse B. Shipman to partition a farm in Warren county, owned at the time of his death by Jesse B. Shipman, and devised by him to Ellen, .his wife, for life, and after her death to his four children — Henry, George S., William C. and Mary Fox. The widow, Ellen Shipman, died January 4th, 1899.
    William C. Shipman, the defendant, filed an answer and an answer by way of cross-bill. He denies that either Henry Shipman or Mary Eox have any equitable interest in the property sought to be partitioned. He admits that the legal title is in the four children, but claims that by a verbal agreement, entered into by the children of Jesse B. Shipman in the spring, of 1892, Henry and Mary were to deed over their interests in the farm (the property sought to be partitioned) upon the death of their mother, the life tenant. He asserts that in pursuance of such an agreement bonds were executed by himself and by George to Henry Shipman and Mary Fox, in consideration of this agreement to convey.
    Apart from this defence to the suit for partition, the defendant also claims that in 1886 a barn upon this farm was destroyed by fire, and that he and his brother George erected a new barn upon the property, at a cost of about $4,000, having received as insurance money for the destruction of the old barn $1,100. He asks that if partition be made the amount of money expended for this purpose by him shall be allowed to him.
    The defendant also asks that the bill be dismissed because this property is deeded to pay the debts of the estate of Jesse B. Shipman, in Pennsylvania. The defendant also asks that in ease no agreement for the settlement of the entire estate is found to exist, then that the services of the defendant on account of the estate may be declared to be a lien upon this property. He also prays that if no equitable title passed from Henry Shipman and Mary Fox to himself and George, by force of the alleged parol agreement, then that a bond given by the defendant to Mary Fox, in consideration of her interest in the farm, may be delivered up to him, and that the amount of a similar bond paid to Henry on account of his interest in the farm may be decreed to be repaid by Henry out of his share of the proceeds of the sale of’this property.
    The answer of the complainants to -the cross-bill denies that any contract was made to sell the interest of Henry Shipman and Mary Fox in the farm to William and George Shipman, and their other material allegations in the cross-bill are denied.

      Mr. Irwin W. Schultz, for the complainants.

      Mr. W. II. Wallers, for the defendants.
   Reed, V. C.

The first point raised by the defendant William O. Shipman in opposition of the right of the complainants to a partition, is unsupported by the testimony. If it be admitted that an agreement was entered into between the four devisees that the individual interests of Henry Shipman and Mary Fox should be conveyed to William C. and George Shipman, such agreement, admittedly, rests entirely in parol. The only ground, therefore, upon which it could be enforced or recognized by a court of equity would be upon proof that there had been a part performance of the agreement. There is no evidence of performance save the giving of the two bonds, and the payment of one of them, which bonds, it is alleged, were given for the interest of the obligees in the farm. In respect to the occupation of the farm by a tenant who was thereon at the time of the death of the life tenant, and thereafter, nothing appears to show that he was the tenant of George and William, after the death of the widow, rather than the tenant of the four devisees of the remainder. No new lease was made by William and George. William dealt with tbe property after, as he had before, the death of the widow. His failure to account to the other devisees for the product of the farm after the death of the widow has no significance, inasmuch as he failed to account to George, whom he admits retained an interest in the farm. Besides, both George and Henry received from time to time small articles, the product of the farm, lifter the death of the widow. The claim of part performance, therefore, must rest entirely upon the execution of the bonds and the payment of one of them. But a mere payment of part of the consideration of the verbal sale of real property is not part performance of the verbal agreement. Clinan v. Cooke, 1 Sch. & Lef. 22; 6 Eng. Rul. Cas. 721; Cole v. Potts, 2 Stock. 67; Campbell v. Campbell, 3 Stock. 268; Nibert v. Baghurst, 2 Dick. Ch. Rep. 201, 206; Lippincott v. Bridgewater, 10 Dick. Ch. Rep. 208, 210. There is therefore nothing to show that the title, both legal and equitable, is not in the four parties to the suit, as alleged in the bill. There must therefore be a partition.

The defendant, however, insists that he has an equity in the property, which should be protected in these proceedings. This ^equitjr, he insists, arose from his expenditure of money in rebuilding the barn which was destroyed by fire during the existence of the term of the life tenant.

If it be proved that the defendant did expend his own money, in excess of what he received from the insurance company and in excess of what the other tenants expended, either in money or labor, it follows that he should be repaid in these proceedings.

The equitable rule is entirely settled that when a tenant in common has in good faith put improvements upon the common property — when the improvements were made honestly, for the purpose of improving the property, and not for the purpose of embarrassing his co-tenants or encumbering their estates, or hindering partition — he is entitled, in some way, to be compensated in an equitable partition. Hall v. Piddock, 6 C. E. Gr. 311; Atha v. Jewell, 6 Stew. Eq. 417.

Nor does it matter that the improvements were so placed by á tenant in common in remainder, during the existence of a preceding life estate. Brookfield v. Williams, 1 Gr. Ch. 341.

The testimony, however, fails to support the defendant’s claim. It is entirely clear that instead of the new barn costing $3,900 or $4,000, it did not cost one-half that sum. Indeed, it is not shown that it cost William C. Shipman any more, if as much, than the amount of insurance money that came into his hands. The entire amount of insurance irioney he received was $1,650. The carpenter’s contract for building the barn from the foundation up was $1,280, and the mason-work did not cost more than $150. The stones were mostly got from the ruins of the old barn. The paint and the painting George says he paid for, Wt what it cost does not appear. There were also some repairs made in 1893, the cost of which amounted to about $121. The carting incident to this reparation was done by the horses of George and William’s livery-stable, and no charge was made for them. So it does not appear that the moneys expended by William C. were in excess of the amount received by him.

The next insistence of the defendant is that Henry shall be decreed to repay the sum of $1,250 and interest, being the amount of the bond paid by William C. to Henry, and that Mary Eox may be decreed to deliver to William a similar bond, received by her from William.

In suits for specific performance which have failed because the contract was not in writing, it has been decreed that money paid by the complainant upon the contract should be returned. The cross-bill in this suit is, in one of its features, in substance, a bill for specific performance.

Whether the payments mentioned were given for an interest in the farm now sought to be divided is a question which stirs up transactions between the parties running for a period of twenty years.

Jesse B. Shipman, the testator, died October 18th, 1883. He died owning a livery-stable in Easton, and the horses and carriages therein, a house on Third street, Easton, and the farm in question, in New Jersey. He owed his son George about $5,000 and his son Henry about the same amount. He also owed two notes in bank of about $1,700 and $1,500, respectively, and a debt to Philip Shipman of about $1,800 and some smaller debts. There was no inventory filed and no judicial settlement of the estate. George, who had been employed in the livery business during the life of his father, continued this business after his death. lie continued it, as William C. insists, as a partner with him (William C.) up to 1892; but, as George insists, they ran the business practically for the estate. The bank account of the father was changed into the name of Helen, the widow, and so remained until 1886, when it was changed into the name of George. William, who was and is a lawyer, and George gave new notes for the notes of the testator in bank, and gradually paid off the outstanding debts against the testator. These notes were paid through the bank account, kept as "already mentioned, and William says that he paid into this account, for the purpose of paying debts, about $5,000, so that, in 1S86, the estate owed him the same amount that it had owed George and Henry. As already mentioned, William claims that he was a partner with George in the livery business. He says that they estimated the value of the livery-stable at $10,000; that by way of‘rent they made allowances to the widow, paid taxes, &c., and the livery business was conducted in the stable up to 1892. After that year, William claims that there was a settlement agreed to between the four devisees. He says that about June 1st, 1886, he had appraised the property of which his father died seized as follows: The livery-stable at $10,000, the stock in the stable at $2,500, the Third street residence at $5,000 and the farm at $10,000. He says that at a meeting in 1886 he exhibited a statement of what he and George had paid in on account of the debts of the estate, which amounted to $12,000, or $7,000 in excess of the $5,000 he had paid in. Whit the debts were that made up the excess of $7,000 does not appear.

Affairs remained thus until 1892, when William endeavored to have a settlement of the estate. The proposed settlement he claims to have been upon the following basis: That the amount of property in excess of the amount of debts paid was $10,000, making $2,500 each to be divided between the devisees, and that William and George should each give a bond of $1,250 ■each to Mary and Henry for their interests in the residue. At that time a deed was prepared conveying to Henry and George the title to the livery-stable, but this deed was not delivered. An arrangement was made, however, by which a joint note was executed to William, by Henry and George, for the sum ■of $5,000. This note, as William insists, was given for a onchalf interest in the livery business, which he sold to George and Henry; Henry at that time entering this' business with George as a partner. The proposed arrangement for the disposition of all the property of the estate was not consummated, and the deeds and bonds prepared were not delivered, but remained in the hands of William until 1896 or 1897. The bonds executed in 1892 seem to have been one by Mary Fox to Henry Shipman, another by George Shipman to Henry Shipman, and still another by William O. Shipman to Henry Shipman; but how these bonds were to serve in carrying out the settlement upon the basis mentioned is not clearly explained. No further meeting of all the devisees afterwards occurred. It appears that in March, 1896, a deed was made to William C. Shipman, by the three other devisees, of the Third street property. Although the deed appears to have been made and acknowledged upon the date mentioned, William insists that it was not signed by Mr. and Mrs. Fox until 1897. At the time the deed was delivered a bond was executed by William C. Shipman and delivered to Mary Fox, conditioned for the payment to her of the sum of $1,250, that being one-quarter of the appraised value of this property, which was $5,000. At the same time there was delivered to Henry Shipman the bond made to him by William C. Shipman in 1892, which from that time had remained in the hands of .William C. Shipman. These are the two bonds which William says were given for the interests of •Mary and Henry in the farm, which bonds — one of which he asks to be delivered up for cancellation and the money paid upon the other — he wishes Henry to return.

Mr. Lehr, a lawyer who acted for Mrs. Fox in the transaction in which these bonds were delivered, says that they were given for Mary Fox’s and Henry Shipman’s each one-quarter interest of the Third street property. He also says that as a part of the transaction William C. Shipman and Mary Fox made a deed, dated March 6th, 1896, to Henry Shipman and George Shipman, for the livery-stable property for $10,000; that George gave a bond to Mary Fox, dated May 18th, 1897, and was to give a similar bond to Henry Shipman, for each of their one-quarter interests in the 'stable, but that no bonds were passed between William and Henry, for they would have been of equal amounts, and so would have offset each other. Mr. Lehr says that the farm was not mentioned in the transaction, and George and Henry Shipman and Mary Fox also say that the farm was not considered in the arrangement.

On the other hand, William C. Shipman insists that George and Henry Shipman received the livery business in payment of what the estate owed them, viz., $5,000 each, and that he (William C. Shipman) took the Third street property for what he had paid into the estate to liquidate debts, namely, $5,000; that the farm only remained, which was valued at $10,000, and that the bonds were given by him and George to pay Mary Fox and Henry Shipman for their interests in the farm.

Now, there is not a scrap of writing to throw light upon the accuracy of these conflicting assertions, aside from the language of the bonds executed in 1897, each of which recite that this “obligation is given as payment for real estate transferred in the settlement of said testator’s estate.” The only property then transí erred were the Third street dwelling and the livery-stable property.

The bonds executed in 1892, but delivered in 1897, recite that the bond was “given in the settlement of the said testator’s estate.” But these bonds were drawn long before the final transaction, and in view of an^ arrangement which was never consented to by the complainants. If the farm was paid for by these bonds in 1897, when deeds were passed for the Third street property and the liveiy-stable property, why was not a deed for Mary Eox’s and Henry Shipman’s half interest in the farm also executed, or at least a written agreement to convey Mary Fox’s and Henry Shipman’s interest to the two other devisees ? William O. Shipman insists that the otherwise inequality of the division of the estate after these bonds were left outstanding is so glaring that it supports the accuracy of his contention. His position is, as already stated, that Henry Shipman was paid for his debt, and George for his, by the conveying to them of the livery-stable property; that now Henry has, in addition to the payment of his debts, two bonds, aggregating $2,500: that George is liable upon one of these bonds, as well as upon a bond to Henry, and so .he is out $2,500; that he (William) has only received $2,500, one-half the value of the Third street property, deducting from its value of $5,000 the bonds which he gave to Mary Fox and Henry Shipman, amounting to $2,500. He insists that if George and he have the farm, and it was worth the amount at which it was valued, namely, $10,000, then each would get one-half of the share of Mary Fox and Henry Shipman in the farm, or each would get $2,500, which would secure equality in the final division of the estate; that if they are deprived of such interest in the farm, then the only way in which equality can be secured is by the cancellation of the bonds held by Henry Shipman and Mary Fqx.

There is, however, this fact in the case to be considered: George, or George and William, as already remarked, assumed the livery business, taking into possession all the stock of horses and carriages, and so forth, and used the building to run the business from 1883 to 1892. Then William took the joint note of Iienry and George for $5,000, which was given, as William C. Shipman insists, for his interest in the business. Now, what the value of this stock was -at the time of the testator’s death does not appeal*, aside from the statement of William C. Ship-man that three years thereafter he appraised its value at $2,500, and that in 1892 its value had run up to the sum of $10,000. During all this period Helen was the life tenant, and George Shipman and William C. Shipman advised and directed the business and had taken hold and continued the business for the benefit of the widow and of the estate. In 1892, therefore, William C. Shipman took out of the business as much as he had put in for the payment of debts, and George retained, presumably, as much, so that it may be that in 1897 William C. Shipman told Mr. Lehr that the only creditor was Iienry, and that both William and George at that time so regarded the situation. If this was the situation, then' the transaction in which the bonds were given is explicable on the theory that they were given in the settlement of the sale of the Third street property and the livery-stable property.

While I concede that William C. Shipman, who is a lawyer and wdio conceived the arrangement to convey the properties, would be more likely to be accurate than any other one of the devisees, nevertheless, in view of the admitted fact that, originally, Mrs. Fox was to have had the Third street property, and the further fact that no new meeting of the devisees occurred after 1892, and the still further fact that George Shipman, who was equally interested with William C. Shipman to support his view respecting the arrangement proposed in 1892, denies that he was to have for his bond any interest in the farm, and in view of the fact of the non-existence of any writing to show that the bonds were given for such interest, I must regard it as not proven that the two bonds of Henry Shipman and Mary Fox were executed by William C. Shipman as a consideration for their one-half interest in the farm property. Nor can I perceive how any sum can be charged upon the farm for the services of William C. Shipman as attorney for the devisees. No contract was made for remuneration for such services, and they seem to have been rendered by one for all the members of the same family.

I will advise a decree that the farm be sold, as prayed for in the bill, and that the relief asked for in the cross-bill be refused.


text:
    James Stout v. Phoenix Assurance Company of London.
    [Filed January 8th, 1904.]
    1. A provision in an insurance policy that on disagreement as to the amount of loss the same shall be ascertained by appraisers, who shall estimate the loss, stating separately the sound value and damage, does not limit the appraisement to cases where the appraisers can view the property, but an appraisement is authorized where there has been a total loss.
    2. Where an insurance policy provides that on disagreement as to the amount of loss the question shall be determined by appraisers, an appraisers’ award is not void because the appraisers were not sworn.
    3. An insurance policy provided that on disagreement as to the amount of loss the same should be determined by appraisers. There was a total loss, and appraisers were appointed who had not seen the personal property, and had only casually seen the building; and the only information which they obtained respecting the personalty was derived from the list contained in the proof of loss, and concerning the realty from the description contained in the policy. No effort was made to ascertain the original cost of the property or to what extent it had depreciated by Lime and use. — Held, that under such circumstances assured was entitled to notice of the appraisement.
    4. Where insured property was totally destroyed, an appraisement stating the value of the property at the time of the award to be 8350 and the actual damage to be $140, was not in proper form.
    5. On a bill to set aside an appraisement of insured property destroyed by fire, on the grounds that no appraisement was authorized by the policy and that no notice had been given assured, the court will not retain jurisdiction to determine the extent of liability of the insurer, or whether the insurer is entitled to a new appraisement, such questions being purely legal.

      Mr. Mar Lin Wyclcoff, for flic complainant.

      Mr. William II. Morrow, for the defendant. ■
   Reed, Y. C.

The dwelling-house of the complainant was insured against fire in the Phoenix Assurance Company of London for the sum of $1,800, and the household goods and furniture therein for the sum of $250 under a policy written on March 18th, 1898.

The house and furniture were burned on December 29th, 1901, and an action was brought against the company to recover the full amount of the insurance. The company, among other defences, set up in that action an appraisement of the loss or damages by the burning of the house, amounting to $1,718 for the house and $143 for household goods and furniture.

This bill was then filed to set aside the appraisement upon several grounds, among which was the allegation that the company had fraudulently imposed an interested appraiser upon the complainant. Kiernan v. Dutchess County Mutual Insurance Co., 150 N. Y. 190.

At the trial of this suit it was not proven that the appraiser selected by the company was interested, but the attack upon the appraisement was confined to the objections that, the loss being total, the provision for an appraisement did not apply any misconduct of the appraisers in agreeing upon the amounts of the loss, and that no notice to the parties ivas given of the time and place of making the appraisement, and no testimony was taken by the appraisers, and that, therefore, their award cannot be supported as the award of arbitrators. The policy is in the standard form fixed by our legislature. It contains this provision :

“In the event of disagreement as to the amount of loss, the same shall (as above provided) be ascertained by two competent and disinterested appraisers, the insured aDd this company each selecting one and the two so chosen shall first select a competent and disinterested umpire; the appraisers together shall then estimate and appraise the loss, stating separately the sound value and damage, and failing- to agree shall submit their differences to the umpire; and the award, in writing, of any two shall determine the amount of such loss.”

It is insisted that this clause provides for an appraisement merely and that an appraisement must be made from view alone. It is therefore argued that, inasmuch as there was no property remaining to view, the loss being total, no appraisement could be made and so the award signed by the appraisers is a'nullity. In support of the argument that there can be no appraisement for non:visible damages the case of Warne v. Oberly, 21 Vr. 108, is cited. The supreme court, in that case, was dealing with a certificate of damages done by trespassing swine. The certificate was made under the provisions of an old act providing for an appraisement.

The decision can be of no importance unless it is first concluded that the appraisers to be appointed under the terms of this policy are confined within as narrow limits as the statutory appraisers, who were held to be viewers only.

In my judgment their function was not so restricted.

This appraisement clause is contained in the standard form of policy prescribed in this state as well as in New York, Pennsylvania and seven other states. In many other states the clause is also -in general use. The clause provides for an ascertainment of the loss or damage in a manner which makes the proceedings sui generis; it is not a simple appraisement, nor is it an ordinary common-law arbitration. Where property is ’damaged and not entirely destroyed and there is enough in sight to base a judgment as to the deterioration caused by the fire, a judgment based upon view alone may be sufficient. Where the property is entirely destroyed and there is nothing in view to show what was destroyed, information must be obtained in some other way than from mere view. This information may be obtained in a variety-of ways. It may be possessed by the previous knowledge of the property by the appraisers themselves, or it may be afforded by the description of the property contained in the proofs of loss.

The form of the clause seems to be broad enough to include an appraisement for all loss, for its language is “that in the event of disagreement as to the amount of loss [clearly all- the loss] the same shall be ascertained by two competent and clis- • interested appraisers.”

I am aware that there are cases which seem to hold that this language does not empower the appraisers to estimate the loss arising by reason of the total consumption of property. The case of Rosenwald v. Phœnix Insurance Co., 50 Hun 172, arose under the old form of policy, and the court put its conclusion that the clause in that policy did not intend the appraisement of property entirely destroyed upon'the words: “The amount of sound value and all damage to the property shall * * * be submitted to competent and impartial arbitrators.” It was said that the submission of the “amount of sound, value and all damage” necessarily contemplated that the sound article is in existence, but has been damaged, and that the arbitrators should decide as to the extent of the damage, and that it was quite clear that the provision could have no possible relation to a thing which had no existence, absolute destruction being distinguished from loss.

The view of the court in that case was afterwards applied to the words in the standard policy in the case of Lang v. Eagle Fire Insurance Co., 12 App. Div. 39, 43. The words being, as already stated, that the appraisers shall estimate and appraise the losses, stating separately “sound value and damage.” The grounds upon which this conclusion was reached .does not seem to me to be sound. I can perceive no reason why the sound value of an article, which has been destroyed, cannot be determined, perhaps not so readily, but yet determined as well as the sound value of an article partially destroyed. The estimate of the loss in the one case would be the entire sound value of the property and in the other the difference between the value of the property after the fire and its sound value at the time of the fire. In one instance the estimate might be made from view alone and in the other it might be necessary to acquire extrinsic information.

Nor has the view of the New York court in the two mentioned cases received the approbation of other courts. The provision for appraisement in the policy under consideration, in Adams v. New York Bowery Fire Insurance Co., 85 Iowa 6, 11, was-substantially the same as the clause in our standard policy, and it was held in that case that a submission, which provided for an appraisal and estimate of the loss and damage of only that part of the property which had been saved in a damaged condition, thereby excluding from their consideration an estimation of the amount of plaintiff’s loss of totally destroyed property, was not in accordance with the clause in the policy. It was held that the policy, by any fair construction, covered all loss or damage to all the property insured, whether total or partial.

So the clause before the court in the pase of Insurance Company v. Morton-Scott-Robertson Co., 106 Tenn. 558, 578, was similar to the one in the present policy, and it was held in that case that a demand for an exclusive appraisal of the salvage resulting from the fire was not warranted by the terms of the policy. The court said: “The object of the appraisal is to fix the loss in the aggregate, and this result cannot be reached by ascertaining the value of one or more constituent elements of the loss.”

The same conclusion was reached by the federal circuit court of appeals in the case of Williamson v. Liverpool, London and Globe Insurance Co., 122 Fed. Rep. 59, respecting a clause similar to the one in question.

In my opinion, the appraisers in the present case had authority to estimate the amount of loss for the property insured, although the personal property was an entire loss and the dwelling, excepting the cellar walls, was also a total loss.

If the award made in this case is invalid, it must rest upon the failure of the appraisers to give notice to the insured or his agent of the time and place, when and where, the appraisement was to take place. If the provision for the ascertainment of the loss is to be regarded as an ordinary arbitration, of course the parties were entitled to notice. But, as already remarked, the proceeding is not a common-law arbitration. Of this proceeding, Yice-Chancellor Pitney remarked, in American Central Insurance Co. v. Landau, 17 Dick. Ch. Rep. 73, 93: “The proceeding here is not an ordinary arbitration, where the parties heard witnesses and appeared by counsel and acted upon sworn evidence only, but it is strictly an appraisal and ascertainment in a particular manner of the amount of the loss made by two or three parties, as the case may be, in which they acted upon their own judgment, with such information as they may obtain in an informal way, and in which the appraiser chosen by each party is supposed and expected, in a restricted sense, to represent the party appointing him, and within reasonable limits to see to it that no legitimate consideration favorable to the party so appointing him would be overlooked by the appraiser.”

In Farrell v. German Insurance Co., 175 Mass. 340, 347, it was said: “It is manifest that an arbitration thus provided for is intended to afford a simple and speedy remedy for the settlement of disputes in regard to losses, and to simplify proceedings in case of a resort to the court, and is not necessarily to be governed in all respects bjr the rules which apply to trials at law.”

In that case it was held that arbitrators familiar with the business in which the insured had been engaged had the right to draw upon their own knowledge and experience in considering the matters submitted to them. The award was held good, although one of the arbitrators made experiments, which he reported to the other, in the presence of the parties, and made a visit to the scene of the fire and talked with third persons, and examined the books of one of them, to ascertain prices of certain articles. So it was held in Hall v. Norwalk Fire Insurance Co., 57 Conn. 105, that if appraisers are chosen by reason of their special knowledge respecting the matters in controversy, they may be justified in refusing to receive evidence.

In the case of Insurance Company v. Payne, 57 Kan. 291, it was said: “An appraisement of existing property is usually made upon actual view, or with the aid of other evidence, and in case of appraisers entirely familiar with the property afterwards destroyed they might malee an intelligent estimate from their former knowledge. But this is not so as to appraisers who have never seen the property. In such cases the estimate must be as to property which was, but is not, and all knowledge of it must be derived from evidence of some sort, not necessarily on oath.” In this case the appraisers had measurements, plans, photographs and a bill. So^ in Goehring v. Liverpool, London and Globe Insurance Co., 99 Pa. St. 13, knowledge was obtained by inquiry at a planing-mill and’ of a tinsmith, and from plans presented by the plaintiff.

Nor is an award void because appraisers were not sworn. Zallee v. LaClere Insurance Co., 44 Mo. 530.

In respect to the necessity of a notice to the parties of the time and place of the meeting of the appraisers, I think this depends upon the 'circumstances surrounding each case. The appellate division of the New York supreme court, in the case of Schmitt Brothers v. Boston Insurance Co., 82 App. Div. 234, said: “It is probably true that no formal notice to the assured was necessary to be given of the meeting or proceedings by the appraisers, when they acted in good faith and in the usual course. Such is the effect of our decision in Remington Company v. London Assurance Co., 12 App. Div. 218.”

The same court, in the case of Kaiser v. Hamburgh-Bremen Fire Insurance Co., 59 App. Div. 525, had said: “The rule at common law, and under the code, requiring notice to the parties of the meeting of the appraisers and an opportunity to present evidence, has not been applied with strictness in all cases of insurance appraisals. Such appraisals are regarded as still more informal, and the appraisers are not obliged to give the claimant any formal notice or to hear evidence, at least not in all cases; and yet it is quite clear that unless the insured waive it, he must either have notice or knowledge of the meeting of the appraisers and an opportunity to draw their attention to the items of his loss and make representations and explanations to them concerning the nature thereof, and thus insure a consideration of his entire claim and guard against omissions and misconduct.” It was also held in that case that the appraisers could take statements respecting property totally destroyed.

This case was affirmed by the New York court of appeals (172 N. Y. 663). It is no doubt the safer course to give notice in all cases. Especially in cases of total loss, of all or any part of the property insured, where extrinsic information must bo received, this course must be in most cases essential. But the necessity, I think, is dependent upon whether the insured has already furnished all necessary information, and whether lie has requested that he be present to make any additional explanation, or to hear what may be said by others, and perhaps upon other features, which will occur in the practical work of making an appraisement.

Now, in the present instance, neither of the appraisers had seen the personal property destroyed nor, except casually, the dwelling itself. All information respecting the personalty was derived from the list contained in the proof of loss, and all information concerning the real estate from the description contained in the policy. The appraisers had no knowledge of the age or condition of either. No effort was made to ascertain their original cost, or to what extent the property had depreciated by time or use. In this situation, I .think that it was the duty of the appraisers, or some one for them, to inform the assured or his agent of the time and place when they would meet to make an appraisement, and so afford him an opportunity to make, if he wished, any explanation, or to point out sources of information that the appraisers might have the necessary knowledge to make a determination of the amount of the loss. Eor this failure to notify him or his agent, I think the award should be set aside.

I further remark that the award which I have before me — ■ the one for the loss of the personalty — is not in proper form a§ air award for a total loss. It determined the net cash value of the property at the time of the award to be $350 and the actual damage to be $143. This would indicate that-property of the value of $350 'had been reduced in value by the occurrence of the fire to the amount of $143. It would not indicate that the property had been totally destroyed.

At the trial both parties expressed a desire that I should deal with the whole case and finally fix the liability or non-liability of the company upon the policy, and also the amount of money which it should pay. As the witnesses were all present, I finally consented to hear their testimony upon all branches of the case.

But I am satisfied that I should confine my judgment to the validity of the award. A court of equity in this state can deal with legal questions only, so far as their decision is incidental or essential to the determination of some equitable question. Merely because a court of equity has acquired jurisdiction for one purpose, it is not empowered to retain the case for complete relief. Brown v. Edsall, 1 Stock. 256; Lodor v. McGovern, 3 Dick. Ch. Rep. 275, 279; Red Jacket Tribe v. Hoff, 6 Stew. Eq. 441.

The questions whether the defendants are entitled to a new appraisement, and whether the policy was nullified by the violation of the clause concerning vacancies, and what amount of damage the company should pay in case of recovery, are purely legal questions, determinable by a court of law.

1 will advise a decree setting aside the award.