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    Miriam Berger, complainant and respondent, v. The United States Steel Corporation, defendant and appellant.
    [Filed October 11th, 1902.]
    1. The act concerning corporations, as revised in 1896, authorizes corporations formed under it to retire shares of its preferred stock, purchased with bonds or the proceeds of bonds issued for that purpose, the provisions of sections 27 and 29 being complied with.
    2. The offer to purchase pro rata must be made to all stockholders.
    3. Such corporations have power to purchase and hold their own shares. s

    4..Such purchase and retirement of preferred shares does not deprive the stockholder who does not elect to sell of any vested right, y

      5. The provision in the twenty-ninth section that “certain shares” may bo retired by purchase means that in proceeding under it the directors must declaro how many shares they propose to retire, and failure to acquire that full number by purchase will not render the scheme abortive. It will be available to the extent that it can be carried out.
    G. The supplement approved March 28th, 1902, is a restraining, and not an enlarging act, and its provisions must be observed to render the retirement of shares by purchase legal.
    7. It is a general act applying to all corporations, excepting none. It changes the mere form of accomplishing what the act of 1896 authorizes to be done, and affects no vested right of a dissentient stockholder.
    8. The manner in which a duly-authorized plan is to be carried through is part of the business of the corporation, and, in the absence of fraud or bad faith, is not the subject of judicial control to any g'reater extent than other business of the corporation. The court cannot substitute its judgment for that of the directors and majority stockholders and say that a less expensive plan could be successfully adopted.
    9. Quwre. In what respect and to what extent does the fifth section of the Corporation act of 1896 amplify the power of the legislature to alter or amend said act?
    On appeal from an order advised by Vice-Chancellor Emery, whose opinion is reported in 18 Dich. Gh. Rep. 506.

      Mr. Richard V. Lindabury and Mr. Charles L. Corbin, for the appellant.

      Mr. Robert H. McCarter, for the respondent.
   The opinion of the court was delivered by

Van Syckel, J.

The United States Steel Corporation was organized in February, 1901, under the General Corporation act of this state, and, by its origin'al certificate of that date and its amended certificate filed April 1st, 1901, had an authorized capital stock of $1,000,000,000, divided into ten millions of shares of $100 each, equally divided as to number and amount between preferred and common stock.

The holders of preferred stock are entitled to be paid out of the net profits of the corporation yearly dividends at the rate of seven per cent, per annum, and no more, such dividends to be cumulative and payable before any dividend can be paid on the common stock.

On the 1st day of April, 1902, the board of directors passed a resolution providing, among other things, that

“to the extent that holders thereof shall consent thereto^ two million shares of the preferred stock of the corporation now outstanding shall be redeemed and be retired out of bonds or out of the proceeds of bonds of said corporation, which bonds shall bear interest at the rate of five per cent., payable semi-annually the principal payable in sixty years and redeemable at one hundred and ten after ten years, out of a sinking fund to be provided, or any other funds of the corporation,”

The bonds to be issued to be secured by mortgage on all the present and future property of the corporation and shares held by it in other corporations.

Reasonable opportunity was to be given to the preferred stockholders of record on a date to be fixed in the offer to subscribe for their ratable share of $200,000,000 of the bonds, payable in preferred stock at par, and being forty per cent, of their several holdings.

Notice of a special meeting of stockholders was duly given, as required by law, to take action upon the resolution of the directors relating to the issue of said bonds and the retirement of stock, at which meeting, held in May, 1902, the stockholders, by a vote of three million seven hundred and forty-five thousand seven hundred and thirty-one.of preferred stock and three million nine hundred and fifty-eight thousand five hundred and fifty-seven of common stock in favor of the resolution, and four thousand eight hundred and sixty-five shares of preferred and seven thousand six hundred and seventy-five of common stock against the resolution, adopted the said resolution and approved and ratified the said action of the directors. A certificate of the adoption and ratification of the said resolution, signed by the president and secretary of the corporation, under its corporate seal, acknowledged or proved as in the case of deeds of real estate, together with the written assent, in person or by proxy, of two-thirds in interest of each class of such stockholders, was duly filed in the office of the secretary of state, as required by the twenty-seventh section of the “Act concerning corporations.”

Thereupon, the complainant, who is a holder of preferred stock of the corporation, filed her bill to enjoin the issue of these bonds to retire the preferred stock.

At her instance an order was obtained in the court of chancery that an injunction should issue, which order is the subject of appeal to this court.

In presence of the fact that over ninety-nine per cent, of all the stockholders in attendance at the meeting, personally or by proxy, voted in favor of the resolution, it cannot reasonably be expected that the court is impressed with the belief that the complainant will suffer any substantial injury by the consummation of the scheme. Nevertheless, if it appears that the proposed action is without legal authority, the complainant cannot be denied the relief which she seeks, but, in passing upon this controversy, the greatest care must be observed that this overwhelming majority of the shareholders are not deprived of their rights by the very few dissentients.

The adjudicated cases in other states and in England, which have been cited and ably discussed on the argument before us, turn upon statutes so essentially differing from our own that they furnish very slight, if any, aid to the proper disposition of this case.

Not only does the English Companies’ act differ from our Corporation act, but the English parliament is under no such constitutional restraint as is here the paramount law.

It is deemed to be unnecessary, therefore, to refer to such cases on this branch of the controversy.

The rights of the parties to this suit must rest upon the just interpretation of the language of our “Act concerning corporations” and of the terms of the certificate of incorporation and its amendment.

Some reliance is placed by the appellant upon the fact that at the time when the complainant became a stockholder a section of the by-laws was in force which provided that where any contract should be approved by the vote of a majority of the stockholders, at a meeting called for the purpose of considering such contract, it should be “as binding upon the corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the corporation.”

In my judgment this by-law has no significance in the present case as to the question of power, and cannot be invoked to validate, as to non-assenting shareholders, any act for the doing of which there is a want of legal authority in the legislative grant. Carried to its logical result, it would enable the majority to deprive the minority of their shares.

The question to be solved is whether the “Act concerning corporations,” in connection with the certificate of incorporation filed under it, contains a grant of power to retire shares of stock in the manner adopted by the board of directors and ratified by the vote of the stockholders.

The twenty-seventh and twenty-ninth sections of the Corporation act of 1896 expressly provide for the retirement of both classes of stock.

The fifth section of the act provides

“that this act and all its amendments shall be a part of the charter of every corporation heretofore or hereafter formed under it, except so far as the same are inapplicable and inappropriate to the objects of such corporation.”

The complainant, therefore, has no vested right to retain her shares in opposition to any lawful method provided for retiring them. Nor, under the provisions of our Corporation act, can any just basis be found for the assertion that her vested rights as a stockholder are impaired by the purchase by the corporation of its own shares of stock.

In Chapman v. Ironclad Rheostat Co., 33 Vr. 497, Mr. Justice Dixon, in an opinion delivered in our supreme court, very clearly demonstrates that, under the Corporation act of 1896, there is an implied grant of power to corporations to purchase shares of their own capital stock whenever such purchase is required for legitimate corporate purposes. Section 20 makes such shares personal property; section 1, subdivision 4, gives power to purchase such personal property as the purposes of the corporation shall require, except what is excepted in section 3, which exception does not include shares of its own stock. Therefore, in connection with sections 29 and 38, the right of a corporation to purchase its own shares is necessarily implied.

This right is, also, so fully recognized by the twenty-ninth section, that it seems to be removed from debatable questions. That section provides that capital stock may be decreased by retiring shares owned by the corporation, which unquestionably implies the power to acquire and hold its own shares.

The first question to be considered is whether the appellant has power, under the act of -1896, to retire its shares in the proposed method which is now challenged by the respondent.

That act provides several ways in which stock may be retired by a vote of two-thirds in interest of each class of stockholders:

(1) By retiring or reducing any class of stoek. This is compulsory, and must operate equally upon all holders.

(2) By lot, and this is also compulsory.

(3) By surrender of shares and the issue of a less number of shares pro rata.

(4) By the purchase, at not above par, of certain shares for retirement.

(5) By retiring shares owned by the corporation.

(6) By reducing the par value of shares.

It is important to notice that this legislation favors the capacity of corporations to retire their shares, by a two-thirds vote of the holders thereof, as it has-provided every available way in which it can, with any degree of facility, be exercised, and, also, that this court adopted the opinion of Vice-Chancellor Pitney, in Meredith v. New Jersey Zinc Co., 14 Dick. Ch. Rep. 257, which held that, under the thirty-third section of the act of 1875, which authorized a corporation “to change the nature of its business,” the corporation might purchase a reducing plant outside of this state and engage in business where it was located.

The vice-chancellor said: “It is fairly inferable that the thirty-third section was intended to. prevent a few dissentient stockholders, as here, from setting up their wills against the will of a large majority, and the statute should be so construed as to further that object.”

N liberal, and not a narrow, construction must therefore be given to the language of the twenty-seventh and twenty-ninth sections of the act of 1896, in order to give effect to the intent of the legislature manifested in this broad and comprehensive grant of authority to retire shares of stock.

The directors claim to have taken action under the fourth ■method of retirement—“by the purchase, at not above par, of certain shares for retirement”—as well as under the act of 1902, hereafter referred to.

In the notice of the meeting, as well as in the proceedings and certifícate filed, the mere formalities required by sections 27 and 29 of the act of 1896, as well as those prescribed by the act of 1902, were strictly complied with.

Under this mode of retirement it is optional with the shareholder to sell or retain his stock.

As has been shown, the company may, without the sanction of this provision, purchase its own stock.

The company may purchase in open market or of shareholders,' and hold the stock; but, if the purpose- is to retire the stock, the provisions of the twenty-seventh and twenty-ninth sections must be complied with, one of which is that the purchase must be for a price not above par.

If purchases are made under this clause it implies, of necessity, a contract between the company and the seller, between one who desires to buy and one who is willing to' sell. The word “purchase” is entirely inapplicable to any other condition.

The first two methods are compulsory; the fourth method is not compulsory, else it would not be a purchase.

It cannot, therefore, be held that, in order to give effect to this fourth method, shares must, in fact, be purchased ratably from each stockholder, and that one dissentient, although all others accept, may deprive the company of the benefit of this method, and render the legislative act to that extent abortive.

Equality and the equitable right of shareholders to uniform treatment is preserved by giving the like option to all.

It is insisted, on behalf of the complainant, that the resolution of the directors does not, within the meaning of the twenty-ninth section, provide for the purchase of certain shares for retirement. The alleged infirmity is that the transaction under review is not substantially “the purchase of certain shares;” that the amount of the decrease and the number of shares which may be purchased, if the scheme is permitted to be acted upon, will be uncertain.

The resolution declares that the directors desire to retire two million preferred shares, and that to the extent that holders thereof shall consent thereto, that number of shares will be retired out of bonds or the proceeds of bonds.

The words “certain shares” cannot be construed to mean that particular shares shall be designated, or that the names of the holders thereof shall be specified; that would give the majority power to make an unjust discrimination, by selection against the minority who might desire to accept the bonds, and cannot reasonably be deemed to have been the legislative intent.

The resolution could do no more than declare what number of shares the company desired to retire, and if the failure to acquire by purchase the whole number rendered the undertaking futile, the two-thirds of assenting stockholders could be deprived of the right given them by the statute to retire by purchase, by the act of a single dissentient. It would manifestly be in contravention of the purpose of the statute to construe it in that way, and would practically strike out of the twenty-ninth section one of the modes prescribed for retiring the stock.

The Corporation act gives express power to retire shares by purchase, and that provision must be read into the certificate of incorporation, under and subject to which the complainant holds her stock. It cannot, therefore, be even plausibly maintained that shares cannot be purchased for retirement by cash.

But it is contended that the appellant is without authority to issue bonds with which, or with the proceeds thereof, it purposes to effect the purchase.

There is no provision in the Corporation act, or in the charter of the company, to support the proposition that purchases of its stock cannot be made by it on credit.

On the contrary, as has been shown, the company has power to buy its own shares and that power is given to it in the same terms and as broadly as the granted authority to purchase other personal property. No limitation is, in this respect, placed upon it which does not apply equally to the purchase of all other property.

The right to purchase carries with it the right to make such terms as to payment as can be agreed upon with the vendor. The company could say to the seller that it would take the stock at the offered price, payable in one week or one month, and it would be a valid transaction; and if a credit of one week or one month could be given, it could be extended at the will of the vendor.

There is a technical meaning given in the law to the word “purchase,” as applied to real estate, wider than its general signification; it is the- acquisition of lands by other means than descent or inheritance.

As applied to personalty, it is the acquisition o.f anything for a price, by the payment of money or its equivalent.

Sale and exchange are used interchangeably in the law, and is a transmutation of property from one party to another in consideration of some price or recompense in value.

By the settled rule of interpretation, in the absence of any expression to narrow its significance, the word “purchase” must be given its ordinary well-understood meaning as accepted in the daily transactions of the business world, and that carries the right to buy for cash, for any equivalent agreed upon, or on the credit of the buyer. The right to buy on credit must necessarily include the right of the purchaser to give the vendor evidence of the credit, by note, or bond, or other way agreed! upon, as well as the right of the purchaser to pledge his credit,, by note or bond, to a third person, and thereby secure the cask to pay the vendor.

The right to create a debt also carries with it the right insecure it, by mortgage or otherwise, in the absence of any statutory restraint upon the corporation.

Such right was maintained by Chancellor Green in Magie v. Evangelical Dutch Church, 2 Beas. 77, and affirmed in this court, 2 McCart. 500.

, The amended certificate of incorporation, after specifying the various branches of business in which it may engage, has the following provision:

“Without in any particular limiting any of the objects and powers of the corporation, it is hereby expressly declared and provided that the corporation shall have power to issue bonds aud other obligations in payment for property purchased or acquired by it or for any other object in or about its business; to mortgage or pledge any stocks, bonds or other obligations or any property which may be acquired by it to secure any bonds or other obligations by it issued or incurred; to guarantee any dividends or bonds or contracts or other obligations; to make and perform contracts of any kind and description; and in carrying on its business, or for the purpose of attaining or furthering any of its objects, to do any and all other acts and things, and to exercise any and all other powers which a copartnership or natural person could do aud exercise, and which now or heretofore may be authorized bj' law.”

Here is expressly provided tlie right to mortgage all property tiren held, or thereafter acqriired, not only for debts contracted in carrying on its various branches of business, but also for the purpose of attaining or furthering any of its objects.

One of the purposes and objects of the corporation, which was contemplated in its inception and provided for by the act of 1896, and which is now entered upon and which, in the estimation of the requisite number of shareholders, will be productive of beneficial results, is the retirement of the proposed number of shares by purchase. The object is a lawful one, being -expressly recognized by the Corporation act.

The first section of the Corporation act gives corporations organized under it power to mortgage their real and personal estate and franchises.

This provision must be regarded as part of the charter of the company, and thereby, with the added provisions of the certificate of incorporation,' the directors are invested with the most comprehensive authority to issue bonds secured by mortgage for any and all legitimate purposes and objects of the company, good faith being exercised.

That being so, it logically follows that these bonds may be sold on tbe market and stock purchased, according to the resolution, with the proceeds, or the company may offer the bonds to all stockholders, on same terms, who are willing to accept them. \

That would be a purchase of shares by something of equal value in the estimation of those who elect to sell.

) The fact that those who do not accept will have an additional mortgage debt underlying their stock, impairs no vested right./

They acquired their shares subject.to the provisions of the act of 1896 and the certificates of incorporation, which authorize the retirement of stock in the manner adopted. It is immaterial to stockholders who do not assent whether bonds are secured by ■mortgage. All pecuniary obligations of the company underlie the shares of preferred stock. It concerns only the unsecured creditors and those who accept the bonds.

In the opinion of the court below the proposed plan is condemned on the ground "that it is a preferential distribution of capital among some of the shareholders to the exclusion of others, and not a plan for an equal ratable distribution among all the preferred stockholders; that the capital represented by preferred stock, up to a limit of $200,000,000, is to be reduced to the extent the. holders agree to take bonds, and the distribution of the amount released is made solely among those who ■consent to take bonds. The stock of all those who decline to take bonds is thus made subject to the prior claim and lien of those who take bonds.”

That this plan involves a reduction of capital stock is conceded; it is the very purpose of the plan to reduce it and retire it; but to the assertion that it is preferential I am unable to assent.

The same opportunity is given to all to accept the offer— none are excluded—and the complainant, who has declined the offer, cannot say to the ninetjr and nine who have elected to accept it that they have been preferred. There has been no act of preference on the part of the corporation; the position ■occupied by the complainant is of her own option..

A like charge could be made if the purchase for retirement was to be for cash. •

In that case, if the complainant 'refused to sell, the cash assets of the company would be distributed among others who elected .to sell, and conld, with equal propriety, be termed a preferential distribution. If, for this reason, the execution of the plan can be arrested, then, although the statute confers express power to retire by purchase, two-thirds of the- shareholders assenting, still the retirement by purchase cannot be made if there is a single dissentient.

The first two methods provided for retiring the stock are compulsory, and, if the company had cash assets to retire in those methods, the further provision for retirement by purchase would be unnecessary, if it could be by the payment of cash only. The inference is that the draftsman of the twenty-ninth section in-, tended to bestow the power to purchase on credit, cash assets not being in hand.

Whether the purchase is for cash or through mortgage bonds, it is obvious that the shares of dissentients will be subject to-proportionately greater burdens than would fall upon them if no shares were retired.

When cash is paid to those who sell forty per cent, of their holdings, the assets of the company are reduced to that extent— forty per cent.—but the -indebtedness of the company remains as before.

The result is that the indebtedness of the company, with forty per cent, of cash withdrawn, in effect, would be relatively greater as to the dissentient stockholder than it would be as to those-who retained only sixty per cent, of their'stock, with cash in hand for the forty per cent, surrendered; in the language of the dissentients, it would be a readjustment of the relation between the shareholders, to the disadvantage of those who did not elect to sell. The same condition would arise in the case of purchase on credit, and it may be to a greater extent, but the principle is the same, and if illegal in the latter case, it could not be defended in the former.

The sufficient answer to all these objections is that the scheme adopted is within the purview of the Corporation act of 1896 and of the certificate of incorporation, of which the act, in contemplation of law, is part, and the complainant holds her shares subject thereto, and to all the consequences which flow from it.

If, on this branch of the case, it had been concluded that, in some material respect, the provision of the act of 1896 had not been pursued, the act of 1902, which has been strictly followed, is valid and constitutional.

It is assailed upon two grounds, either of which, if well taken, would render it obnoxious to the organic law.

The act of 1902 provides that, with the consent of two-thirds in interest of each class of the stockholders present, in person or by proxy, at a meeting called in the manner provided in section 27, every corporation organized under this act which shall have issued preferred stock—

(1) Entitling the holders thereof to receive dividends at a rate exceeding five per centum per annum.

(2) Shall have continuously declared and paid dividends at such rate on such preferred stock for the period of at least one j^ear next preceding the meeting.

(3) Whose floating.or unfunded debt at the time of the stockholders’ meeting shall, in the certificate thereof filed with the secretary of state, be certified not to exceed ten per centum of the par amount of the preferred stock then outstanding.

(4) Whose assets at such time, after deducting the amount of its indebtedness, shall be certified, in the judgment of the officers making such certificate, to be at least equal to the amount of preferred stock issued and outstanding, may, with the consent of the holder of an3r such preferred stock, redeem and retire the preferred stock of such holder, out of the bonds, or out of the proceeds of bonds, of the corporation, bearing interest at a rate not exceeding five per centum per annum, the principal of such bonds being made payable at a date not less than ten years from the date thereof; every corporation organized under this act may, from time to time, in the manner above provided, issue bonds, which, if thereon so declared, shall be convertible at par, at the option of the holder, into fully-paid common stock of the corporation at par, within any period therein prescribed, not less than two years from the issue thereof; and, in such case, the board of directors may authorize the issue of common- stock, into which such bonds, by their terms, shall be convertible.

First. Is this act special?

In considering this question it must be observed—

(1) That every corporation, under the act of 1896, has power to issue preferred stock at a rate of dividend exceeding five per cent.

(2) That every corporation may, if successfully operated, be ■able to declare and pay dividends at such rate on the preferred stock continuously for one year next before the provisions of this act are availed of.

(3) Every corporation may be able to keep its floating or unfunded debt within the prescribed limit.

(4) Every corporation not only may, but should be required to be in such sound financial condition as to be able, through the designated officers, truthfully to certify that its assets, after deducting the amount of its indebtedness, are at least equal to the amount of preferred stock issued and outstanding.

Each and every of these conditions, upon which the existence of the right to act under this statute depends, applies to all corporations; no discrimination is made in respect to the amount of capital stock or otherwise.

Whether its aid can be invoked is left, by the legislature, to depend wholly, upon its solvency and upon the skill, good management and success with which the business of the corporation is conducted. Equal opportunity is guaranteed to all; no right is accorded to one which is denied to another.

It is a misconception to suppose that it creates a class; it applies alike, to all corporations; it is general in its operation and effect, requiring the existence of conditions which all corporations have equal opportunity, under the law, to conform to, and to1 which all may attain.

Whether these several provisions, or any of them, are wise or unwise, or whether the method provided for certifying to the existence of these conditions is a satisfactory and judicious one, is not a legitimate subject for judicial inquiry.

•It is within the discretion of the legislature alone to prescribe the conditions upon which privileges and powers shall be exercised by corporations, and what shall constitute sufficient evidence of their right to do so, so long as no. provision of the fundamental law is violated.

The assertion that this law is unwise and that these conditions do not constitute, within legislative discretion, a reasonable basis for the enactment, will not be assented to when it is considered—

(1) That the officers who make the certificate are in a position to have full knowledge of the financial status of .their company; that their certificate is not conclusive evidence, but may be shown to be false and action in pursuance of it arrested.

(2) That the other conditions prescribed in the act of 1902 will prevent a corporation which may be in an unsound condition from converting its preferred stock into mortgage bonds, and thereby give the holders of such shares a priority over the floating or unsecured debts.

(3) That while, under the Corporation act of 1896, every corporation which had issued preferred stock might, by purchase of shares, convert fts preferred stock into bonds, without regard to whether or not it was in the sound financial condition contemplated by the act of 1902, the act of 1902 is a restraining and not an enlarging act. It provides the conditions upon which preferred stock may be purchased and retired by mortgage bonds, and thereby excludes the adoption of any other method; ex-pressio unius exclusio alterius. The prescribed conditions must exist to render the retirement by purchase of shares lawful.

(4) That a due observance of the provisions of the act of 1092 will'be an assurance to those who may be induced to purchase the bonds that they have a substantial basis as an investment.

The case of Grey, Attorney-General, v. Newark Plank Road Co., 36 Vr. 51 (affirmed by this coiirt, 36 Vr. 603, so far as the question now involved is concerned), is relied upon by the complainant to specialize the act of 1902.

It needs no discussion to show that it is without pertinence.

The Plank Eoad act expressly limited its provisions to the following corporations:

(1) Those theretofore organized under any special act of the legislature.

(2) And which have been empowered, by any supplement, to lay railroad tracks and operate a horse railroad.

(3) Whose time limited for commencing and completing the building of such railroad has expired.

It, in terms, excluded all corporations which, at the time the act was passed—in 1889—were without these three characteristics, and could not apply to any future corporation.

Second. Does the act of 19Ü2 impair any vested right of the complainant?

Section 6 of the “Act concerning corporations,” passed in 1846 (P. L. of 18^6 p. 17), provided

“that the charter of every corporation which shall hereafter be granted by the legislature, shall be subject to alteration, suspension and repeal, in the discretion of the legislature.”

y It must be conceded that it is firmly settled in our jurisprudence that the right reserved in this sixth section to amend, alter or repeal charters extends only to the modification or destruction of rights as between the state and the corporation, but that the rights of the stockholders inter sese can in no respect be impaired, except in so' far as impairment may result from an alteration required by the public interest. Kean v. Johnson, 1 Stock. 401; Zabriskie v. Hackensack, 3 C. E. Gr. 178, and Mills v. Central Railroad Co., 14 Stew. Eq. 1, are cases under the act of 1846, and the Newark Library Case, 85 Vr. 217, 265, dealt with the right of amendment and repeal under the act of 1846.

The act of 1896, under which the appellant is incorporated, by its fourth section, re-enacted the sixth section of the act of 1846, and also provides, in its fifth section, as follows:

“This act may be amended or repealed, at the pleasure of the legislature, and every corporation created under this act shall be bound by such amendment; but such amendment or repeal shall not take away or impair any remedy against any such corporation or its officers for any liability which shall have 'been previously incurred; this act and all amendments thereof shall be a part of the charter of every corporation heretofore or hereafter formed hereunder, except so far as the same are inapplicable and inappropriate to the objects of such corporation.”

This section was first enacted in the revision of the Corporation act of 1896, and it must have been designed to amplify and ■enlarge the power of the legislature over corporations organized under it.

Under the provision contained in the sixth section of the act •of 1846, retained in the revision of 1896, it had been repeatedly held that the power was fully reserved to alter or repeal charters for the benefit of the public.

The language of the fifth section of the act of 1896 is very broad: “This act and all amendments thereof shall be a part of the charter of every corporation heretofore or hereafter formed under it.”

It is difficult to perceive how any substantial force can be accorded to it, unless some amendment may be made which may affect the rights of stockholders inter sese to some extent.

In Andrews v. Gas Meter Co., L. R. 1 Ch. 361 (1897), the defendant company was formed and registered as a limited company under the English Companies’ act of 1856, but in October, 1862, it was registered under the Companies’ act of 1862.

On appeal, the English court held that the case was to bee determined by the act of 1862, and that a limited company, having no authority, under its memorandum or articles, to create any preference between different classes of shares, may, by special resolution passed under powers conferred by the Companies’ act of 1862, sections 50 and 51, alter its articles so as to authorize directors to issue preference shares by way of increase of capital.

In Allen v. Gold Reefs of West Africa (Limited), L. R. 1 Ch. 656 (1900), a limited compan}1, by one of its articles, provided that it should have a lien for all debts and liabilities of any member to the company “upon all shares (not being fully paid) held by such member.”

The company, by way of purchase-money for the property acquired by it, allotted fully-paid shares to Z., a nominee of the vendor to the company; Z. also applied for and had allotted to him shares not paid up. He was the only holder of fully-paid-up shares.

At his death he was indebted to the company in arrears of calls on the unpaid shares, but his assets were insufficient to pay the arrears. Thereupon the company, by special resolution, under section 50 of the Companies’ act of 1862, altered the above article by omitting therefrom the words “not being fully paid,” thus creating a 1 Len on Z.’s fully-paid shares. ■

The English court of appeals, also, in this case ruled that the company had power to alter its articles by extending its lien to fully-paid shares, since he took them subject to the original articles, and the power of altering them given to the, company by section 50.

The judgment of the appellate court in these very recent cases was delivered after an exhaustive review of the previous decisions.

While these cases are not controlling in this forum, they are instructive, as the declarations of veiy learned judges, exercising broad equity power, that the original articles of the company do not constitute such a fast-bound contract, between the shareholders inter sese, as to create vested rights which could not be unfavorably affected by an alteration of the articles in pursuance of the power given by section 50 of the Companies’ act of 1862.

The case of Schwarzwaelder v. German Mutual Fire Insurance Co., 14 Dick. Ch. Rep. 589, decided in this court in 1899, has a more important bearing.

The defendant was a mutual insurance company organized, in 1893, under our general act concerning insurance companies. The complainant became a member of the company in 1898. An act was passed March 6th, 1899 (P. L. of.1889 p. 17), authorizing mutual insurance companies to be changed into joint stock companies.

This court held that, under this act of 1899, a mutual insurance company organized in 1893 cannot transform itself into a joint stock company against the will of a member who acquired membership by contract with the company made before the passage of the act of. 1899. The rule adopted in Kean v. Johnson, supra, was properly adhered to. In reading the opinion of Mr. Justice Dixon it cannot escape attention that it was not even suggested that if the company had been organized after the passage of the act of 1899 the transformation could have been successfully assailed for illegality.

The only substantial difference between this case and the one sub judice is that the Insurance act of 1899 expressly declares what alteration the company shall have competency to make, while, under the General Corporation act of 1896, there is a general grant of power to make alterations, without words of limitation, and the provision is declared to he part of the charter of every corporation organized under it.

It is unnecessary, however, to determine, in this case, what the true limitation upon the legislative power is; where the boundary line is which cannot be overstepped.

Such a declaration in this case would be obiter and unwise. The law upon this subject, which is of great moment, is, as yet, in a formative state; a general rule upon a subject of so wide a range can bo implanted in our jurisprudence only by gradual development, as questions arise for adjudication.

Vice in a legislative act cannot safely be predicated upon tire mere fact that it may not.be unreasonable to apprehend that some depreciation in the value of shares may flow from it. The legislature may impose additional burdens; it may withdraw the right to engage in some remunerative branch of business, and may repeal the entire charter.

Undoubtedly there may be changes so radical that underlying and fundamental principles will not permit the legislature to reserve to itself a right to make them.

It is not intended to express an opinion as to the effect of the fifth section of the act of 1896 upon this question of vested rights, and it will be dealt with as if there was no authority for the act of 1902, other than that contained in section 4 of the act of 1896, and the case of Kean v. Johnson, supra, will be accepted as a proper exposition of the law.

The act of 1896 gave the appellant the right, by a two-thirds vote of its shareholders, to retire preferred stock by purchase; the act of 1902 preserves that right, merely regulating the manner in which it should be exercised. As before stated, the complainant held her stock subject to the right of the company to retire, by purchase, the shares of such stockholders as might desire to sell, and the act of 1902 in no respect alters or changes her position, except to make it more secure when the given option' is refused by her. No right which vested under the Corporation act of 1896 is impaired or taken away by the later statute.

•But if it clid, in some appreciable degree, injuriously affect the value of complainant’s shares, still this act must be upheld, under the authority of Kean v. Johnson, supra.

That case holds that where the public interest is concerned, where public policy will be promoted, legislative interference, by an alteration of the law, is within the reserved power in section 4.

The fact that the act of 1902 excludes all other methods for retiring shares by purchase, and the provision that it cannot be applied unless it is made to appear that the assets, after deducting the amount of its indebtedness, at least equals the amount of preferred stock outstanding, is in the public interest, for the protection of creditors and those who might be induced to purchase the bonds issued to retire the preferred stock.

It is obvious that if the assets, after deducting debts, did not equal the preferred shares, immediately upon the conversion the debts of the company would exceed its assets and the shareholders would not only be made creditors, but would be preferred to the creditors at large. The other provisions in this respect are some assurance that the required financial soundness, existing at the time of the purchase for retirement, will be maintained.

If, previous to the passage of the act of 1902, the company had undertaken in retire its shares by purchase,' being in a financial condition which would imperil the claims of unsecured creditors, equity, which is ever solicitous for the rights of creditors, would have intervened to' prevent such conversion.

The act of 1902, if observed, is a barrier to a like attempt.

I It is not necessary to discuss the validity of the provision of the act of 1902, “that two-thirds in interest of each class of the stockholders, present in person or by proxy, may authorize the retirement of shares,” which is a departure from the act of 1896.

If that provision is inimical to the supreme law, it is well settled, in this court, that it does not taint the entire act; it may be rejected, and the remainder of the act will stand, subject to be availed of when the proposed retirement receives the vote of shareholders required by section 27 of the act of 1896, which it did receive in this case.

Lastly, it is urged that the manner in which the conversion plan is to be carried through and consummated is illegal, and furnishes sufficient ground for retaining the injunction.

“Individual stockholders cannot question, in judicial proceedings, corporate acts of directors if the same are within the powers of the corporation and in furtherance of- its purposes, are not unlawful or against good morals and are done in good faith and in the exercise of an honest judgment.” Ellerman v. Chicago Junction Co., 4 Dick. Ch. Rep. 217.

To the same effect are the cases of Benedict v. Columbus Construction Co., 4 Dick. Ch. Rep. 23; Edison v. Edison, 7 Dick. Ch. Rep. 620.

The action challenged in the case sub judice is that of the directors, fortified and upheld by the approving vote of more than two-thirds of the shareholders.

The plan was adopted by the requisite vote, with full knowledge of its purport, communicated in the circular-letter accompanying the call of'the stockholders’ meeting, and therefore, in the absence of fraud, it is not the province of this court to substitute its judgment for that of the directors and shareholders, and declare that a less expensive or more beneficial plan could have been resorted to successfully. Nor can any feature of the plan, expressly authorized by the by-laws, adopted before the complainant became a shareholder, be the subject of judicial control, so long as it is not inimical to any constitutional mandate, the end to be attained being, as in this case, duly authorized by law.

The means adopted to acquire the benefit of the authorized retirement became part of the business of the company, with which this court can interfere to no greater extent than it can with other lawful corporate transactions.

The decree of the court of chancery should be reversed and the injunction dissolved, with costs in this court and in the court below.

For reversal—The Chief-Justice, Yan Syckee, Collins, Fort, Garretson, Hendrickson, Bogert, Yroom—8.

For affirmance—Garrison, Pitney, Yoorhees—3.


source: Caselaw Access Project

author: Emery, V. C. Per Curiam.

license: Public Domain

text:
    Charles L. Raymond, complainant and appellant, v. The United States Steel Corporation et al., defendants and respondents.
    [Filed October 11th, 1902.]
    A holder of common stock of tlie corporation cannot question the plan of the company for the conversion of its preferred stock into bonds.
    On appeal from an order of Vice-Chancellor Emery, who delivered the following conclusions:
   Emery, V. C.

This is an application on behalf of a holder of common stock to enjoin the conversion referred to in the Berger Case, and was argued with the application in that case by Mr. Edward A. Day for Rajonond.

In the view which I take of this case ait present, the common stockholder occupies a position entirely different from that of a preferred stockholder.

The reason upon which I base my conclusions as to the illegality of the plan, in reference to a preferred stockholder, is that the plan is a preferential distribution among the holders of preferred stock of assets made available on a reduction of the. preferred stock. So- far as the common stockholder is concerned, if all the preferred stockholders are satisfied with this distribution, I see no reason for the common stockholder to complain, because at the time of the organization of this company and the issuing of the common stock all companies had the right to reduce any class of their stock. So far as the common stockholder is concerned, this is a reduction of the preferred stock, and a distribution of assets arising from the reduction, and, so far as I now look at it, it is of no concern to any holders of the common stock whether, as between themselves, the preferred stockholders get their equal shares or not. Standing merely as a common stockholder, I do> not see that he has any right to question the plan. The difference in the status was not suggested at the argument, and if counsel desires to be heard further upon that point of view, I will delay the decision of this case, otherwise I will advise an order that the application for preliminary injunction, be denied.

Per Curiam.

Eor the reasons given in the opinion of Justice Van Syckel, in the case of Berger v. United States Steel Corporation, ante p. 809, the order of the court of chancery is affirmed, with costs in this court and the court below.

For affirmance—The Chief-Justice, Van Syckel, Collins, Fort, Ga'rretson, Hendrickson, Bogert, Vroom—8.

For reversal—Garrison, Pitney, Voorhees—3.


author: "Van Syckel, J.

text:
    Atlantic City, complainant and respondent, v. The Young & McShea Amusement Company, defendants and appellants.
    [Filed October 20th, 1902.]
    It is provided in a conveyance of a strip of sixty feet of land by defendants to the complainant that the defendants shall not be prohibited from building a pier in front of their property and connecting the same to the new walk about to be erected by the complainant on said strip of land, and upon the further condition that the said pier shall be at least one thousand feet in length, extending into the ocean beyond the present sixty-feet-wide strip, and constructed of iron or steel, and that the defendants shall not permit the sale of any commodity upon the same, and be confined to charging only an entrance fee.—Held, that this proviso in all its parts applies only to a pier erected in the future, and has no relation to a pier existing at the time of the said conveyance.
    Ou appeal from a decree advised by Vice-Chancellor Eeed, whose opinion is reported in 17 Dick. Ch. Rep. llfl.

      Mr. Clarence L. Cole, for the appellants.

      Messrs. Godfrey & Godfrey, for the respondent.
   The opinion of the court was delivered by

"Van Syckel, J.

By an agreement executed in April, 1896, between the parties hereto, the defendants conveyed to Atlantic City a strip of land sixty feet in width for the purposes of a boardwalk to be constructed along the ocean front by the city.

At the time this agreement was entered into the defendants, had erected a pier, of wood, upon their lands between the ocean and the said sixty-feet-wide strip of land.

The provision in the agreement, so far as it relates to the present controversy, is as follows:

“It is hereby covenanted and agreed that the said sixty-feet strip shall be used for no other purpose than that of a street and a public board or steel walk; and that the grantors hereto shall have at all times the right to connect their and each of their buildings with the said boardwalk on the land or northwest side thereof; and that Atlantic City shall not remove or cause to be removed, nor permit its servants and agents, or any other person or persons to remove any sand from said sixty-feet-wide street; and that the boardwalk to be built on said sixty-feet-wide strip shall be elevated where it crosses the streets and avenues of Atlantic City to such height as will allow the grantors hereto free and unobstructed passage under the same with horses and wagons for the purpose of carting-sand or driving with covered wagons. * * * Provided, however, that the within grantors shall not be prohibited from building a pier in front of their property and connecting the same to the new walk about to be erected, and upon the further condition that the said pier shall be at least one thousand feet in length, extending into the ocean beyond the present sixty-feet-wide strip, and constructed of iron or steel, and shall not permit the sale of any commodity upon the same and be confined to charging only an entrance fee.”

The bill is filed to restrain tbe defendants from selling or permitting any commodity to be sold upon said previously-existing pier, and from selling the right or charging an additional fee for admission to the privileges of any particular part or place on said pier, in addition to an entrance fee, or after entrance on said pier.

The defendants appealed from the decree of the court of chancery granting the injunction prayed for.

The case of the complainant rests upon the proviso above set forth.

It is clear that the proviso relates exclusively to a pier to be erected in the future, and that, so long as no other pier than the one then existing should be built, the proviso could not impair or affect the rights of the defendants in the old pier. ■

The agreement “that the defendants shall not be prohibited from building a pier” is equivalent to saying that they may build; in the absence of prohibition in the terms of the contract, there is nothing to deprive them of that right.

It is not until the right to build a new pier is exercised by the defendants that the proviso has any effect. Then the restraint laid upon the defendants is that such new pier shall be at least one thousand feet in length, to be constructed of iron or steel, and that the defendants shall not permit the sale of any commodity upon the same, and shall be confined to charging only an entrance fee.

Obviously all these conditions apply to the pier which may thereafter be constructed, and cannot be extended beyond the clear meaning of the language used in the contract.

That the defendants shall not be prohibited from building a pier cannot be construed to inhibit them from using and maintaining one already built. In that they had a right of property which they have not in any respect surrendered to the city.

The complainant has shown no right to interfere with the defendants in the use of the old pier as fully as they enjoyed it before the execution of the agreement of 1896.

The decree appealed from should be reversed, with costs in this court and in the court below.

For reversal—The Chief-Justice, Van Syckel, Dixon, Garrison, Collins, Fort, Garretson, Hendrickson, Pitney, Bogert, Adams, Voori-iees—12.

For affirmance—None.


author: Collins, J.

text:
    Eleanor C. Gifford et al., complainants, v. Thomas McGuinness et al., defendants.
    [Argued June 26th, 1902.
    Decided July 7th, 1902.
    Filed September 26th, 1902.]
    On appeal of Thomas F. McLaughlin, a defendant.
    1. The court out of which an execution issues may at its discretion order paid into court money which by the terms of the writ is payable to a person named.
    2. No substantial grievance is inflicted by permitting, without previous prima facie proof, a judicial inquiry into the truth of allegations on which it is sought to correct an adjudication.
    On appeal from an order of the chancellor, dated April 15th, 1902, who filed no opinion.
    The decree, taken pro confesso, of the court oí chancery, on foreclosure of mortgage' on lands of Thomas McGuinness, adjudged, upon an ex parte report of a master, that there was due (1) to the complainants, the holders of the mortgage, $7,933.33, and (2) to the defendant Thomas F. McLaughlin, as a judgment creditor of McGuinness, $6,169.40, and ordered a sale, by fieri facias, of the mortgaged lands, to satisfy costs and said debts—■ the surplus prbcecds, if any, to be brought into court, unless otherwise previously disposed of by order of the court. .The writ issued on this decree, on May 28th, 1901, commanded sale and payment of costs and the sums adjudged to the respective parties entitled thereto, in the order named, and directed the sheriff to have those moneys in court at the October Term to render to said parties and also the surplus money, if any. At a sale advertised under such writ the property was struck off for $17,500 to McLaughlin, on conditions requiring the payment of ten per centum of the purchase-money down and the residue thereof on a day named. Pending the passing of title the defenclant Mary Ellen McGuinness, wife of Thomas McGuinness, presented, to the chancellor a petition setting forth that she had inchoate dower in the land sold, and also that, after the decree in foreclosure, she had procured, in the same court, a decree against her husband for weekly alimony and for counsel fee, and, for the enforcement thereof, a writ of sequestration of his personal estate and the rents of his real estate; that the judgment of McLaughlin was collusive, being contrived by her husband on a fictitious debt, in order to defeat her rights in the premises, and that her husband was the real purchaser at the sale. Under the prayer of this petition, verified on information and belief, the chancellor, ex parte, made an order referring to a master the ascertainment of the truth of its allegations and directing the sheriff to pay into court all the proceeds of his sale above the amount due the complainants; and, afterwards, denied an application by McLaughlin to discharge or modify such order. Whereupon McLaughlin appealed to this court.

      Mr. John J. JJubbell, for the appellant.

      Mr. Marshall W. Van Winkle, for the respondent.
   The opinion of the court was delivered by

Collins, J.

So far as payment into court is concerned, the order appealed from was entirely discretionary with the chancellor, and is not subject to review. Originally, under an execution of the tenor of that under which the sale was made, framed, as it was, on the common law fieri facias, payment could only be made publicly in court by the sheriff or other officer executing the writ. A relaxation of this strictness, permitting payment out of court and the acceptance, in lieu of cash, of the receipt of the party entitled to payment under the judgment or decree—which became almost a matter of course where such party was the purchaser—led to the contention that neither the officer nor the court could adopt any other course. This contention was effectually disposed of by Chief-Justice Hornblower, in the supreme court, in 1833. Stebbins v. Walker, 2 Gr. 90. The chief-justice, after a historical review of the subject, said: “I cannot doubt that we have the right, whenever application is made to us for that purpose and a proper case stated, to compel the sheriff to bring the money into court. Neither have I any doubt but that the sheriff, whenever he chooses for his own convenience, instead of paying the money to the party out of court, may, in obedience to the command of the writ, bring it here and pay it in court.” This ease, also, is authority for the right of the sheriff to discharge himself by taking the receipt of the clerk; a fortiori this is his only permissible course where payment into court is ordered.

The practice thus declared has never since been questioned. It was reasserted as proper in Cox v. Marlatt, 7 Vr. 390, and in Wandling v. Thompson, 12 Vr. 142, the supreme court held in contempt a sheriff who, after an order to pay into court the proceeds of an execution, gave a deed for land sold by him to a plaintiff in execution and accepted his receipt in lieu of cash. We entirely assent to the view that any court may. compel money raised by its process to be brought into court for distribution, and that from an order made -for that purpose no one suffers an appealable grievance. To obtain an order merely for such payment neither written pleading nor proof is essential. The court is merely enforcing a regulation customarily dispensed with. Presumably the money will be paid as previously adjudged. The only burden will be that of notice to interested parties.

Chancellor Green well held, in Lithauer v. Royle, 2 C. E. Gr. 40, that no change can be made in the mode of appropriating a fund ordered raised by decree, except by' opening and correcting the decree and altering the execution. The same thing is, of course, true of a common law judgment.

The proceeding to correct the adjudication may, of course, be instituted before the money is ordered paid into court, and a very proper course is-.that which was taken in the present case, namely, to include prayer for that relief in the application for the order for such payment.

The only debatable question on this appeal is whether Mrs. McGuinness made a case sufficient to warrant the inquiry ordered. She certainly was not estopped from asking it, for, at the time she presented her petition, she had a larger right than at the time she suffered the decree. The issue she now tenders has never been litigated, and she has a right to be heard on it. The records of the court afforded sufficient proof of her status. It may be that the chancellor might well have required a disclosure of the information forming the ground of her belief that McLaughlin’s judgment was collusive and fraudulent; but there was no substantial grievance inflicted in permitting the inquiry ordered without first requiring prima facie proof of the allegations made.

The order appealed from is, in all things, affirmed.

For affirmance—Garrison, Collins, Eort, Garretson, Pitney, Bogert, Adams, Vredenburgh, Yoorhees, Yroom—10.

For reversal—None.


author: Magie, Chancellor.

text:
    Theresa G. Seeley, petitioner, v. Charles G. Seeley.
    [Filed November 26th, 1902.]
    1. In actions for divorce which are undefended, the master to whom the matter is referred acts as a judicial officer of the court and should require the examination of witnesses to be conducted in- accord with the ordinary rules for the production of evidence in judicial proceedings; if he discovers an inclination to evade disclosure of the truth, he may, because of the interest of the public in proceedings for the dissolution of marriage, search the memory and conscience of the witness by leading questions, but an examination, by counsel of the party seeking divorce, respecting the very ground relied on for relief by questions of a suggestive and leading character, should be restrained by the master and evidence thus elicited should be accorded but little, if any, weight in making up his conclusion.
    2. The ground on which relief was sought in this case was that of constructive desertion of petitioner by her husband. Her claim was that she had left home because prior to the birth of her first child he had attempted, by violence, to produce an abortion upon her, which brought about a premature delivery of the child who lived, and because he had, previous to the time of her leaving him, threatened to again attempt abortion if she became pregnant. There was no corroboration either as to the criminal act charged or as to the alleged threats.—Held, that a case for divorce had not been made out.

      On application for decree on master’s report.

      Mr. Enoch A. TIigbee, for the petitioner.
   Magie, Chancellor.

The petition in this case bases the right of petitioner to a decree of divorce upon a constructive desertion of her by her husband, the defendant. The charge in the petition is that by reason of his failure to provide her a suitable, home in accordance with his means, and because of his extreme cruelty, whereby the health and life of the petitioner were in danger, she was obliged to leave him.

No defence having been presented, the usual order of reference was made. The master’s report was in favor of a decree of divorce. An examination of the proofs taken by the master and returned with his report has required the conclusion that the report cannot be confirmed.

It is elementary law with us that a decree of divorce will not be made on the uncorroborated evidence of a petitioner.

If the law were otherwise, and if this court could dissolve a marriage upon the uncorroborated testimony of one who seeks such relief, it would be doubtful if a case for relief would be made out on petitioner’s testimony.

To sustain her charge of cruelty petitioner testified that, having been married on February 17th, 1897, her husband, on July 22d, following (she being then pregnant), attempted to produce an abortion upon her, by violence and against her consent, with the result that on the next day she was prematurely delivered of a child, which is yet living. The act of defendant was not only a gross violation of his duty to petitioner, but was also a detestable crime. Yet petitioner did not complain of his criminal conduct, nor did she then leave the defendant. She further testified that, after the birth of that child, defendant attempted to kill it, and threatened to do so. Nor did she then leave the defendant. On the contrary, she continued to live with him as his wife until January 25th, 1898. She then left him, and has continued since to live apart from him.

When the master asked the petitioner to state the cause of her leaving him at that time, this was the answer made:

“Things had been unbearable so long I couldn’t stand it any longer, so I left at that time because just along at that time he bad been going out at night, and if I would ask him where he was going he would tell me none of my business. If I would ask him when be would be home he would say, ‘Maybe he would go to hell, he didn’t know where he would go,’ and I asked him for a morning paper on the day I. left—I didn’t expect to leave just then, and I went in and asked for a morning paper, and he said, ‘he had nothing to give me,’ and I asked him to sell me one, and he said, ‘he didn’t have anything to give or sell me,’ and then I was broken down in health and at that time I thought I was pregnant—for this other child I had—and he said if you ever have another child that he would perform an abortion, the same as he did once, and I was afraid to tell him. I was afraid of my life. He told me that he would kill me or kill the child, and so, altogether, I had to come home.”

If the examination had terminated at that point, it is obvious that the testimony would not have justified the conclusion that petitioner had left her husband because of any then attempted violence endangering her life or health or that she had grounds for apprehension of immediate violence. In the list of causes stated, most of which were of trivial character and insufficient to make her leaving him a desertion by him, was one relating to threats by him that, if she became pregnant, he would perform an abortion upon her. There is nothing to indicate that the threats were then made, for she did not then tell him of her belief that she was then pregnant, because she feared to do so. But on January 25th, 1898, she could have had no assured ground for believing that she was then pregnant, because her second child was not born until October 19th, 1898. On January 25th the present or apprehended danger was no other or greater than had existed from the time of the alleged attempt at abortion or murder.

But the examination was continued and conducted in a manner which deserves criticism. After the master had properly asked petitioner to testify to the cause of her leaving her husband, and she had responded by enumerating a number of causes, mingling together those which were trivial and that which was substantial, if proved, he permitted her counsel to elicit evidence from her by prolonged and repeated questionings of a leading and suggestive character, which culminated in this extraordinary question, “Then do I understand that this cruelty and abuse of you was so great that you were obliged to take your child and leave him, in order to save your life and the child’s life?” to which question the petitioner naturally answered, “Yes.”

In actions for divorce which are undefended a peculiar responsibility is imposed on the court. Such a proceeding deals with a personal relation of vast importance, not only to the parties, but to the public. A decree dissolving the marriage tie will not be made by the consent or acquiescence of the parties. If no defence is interposed, there is no decree pro confesso, but the matter is referred to a master, as a judicial officer of the court, with direction to ascertain and report as to the truth of the charges made in the bill or petition, with his opinion thereon. To enable .him to perform that duty, the party seeking divorce is ordered to take depositions and other evidence before the master to prove such charges.

Before the master, sitting for the court, the solicitor should produce his witnesses and examine them in accordance with the ordinary rules. If the master discovers that a witness is inclined to evade disclosure of truth, I have no doubt that it would be his duty to search the memory and conscience of the witness by questions of a leading character, and this because of the interest of the public in such a cause.

But where a petitioner or a complainant is a witness it is an abuse of the solicitor’s privilege to elicit from his client'evidence touching the very crux of the case by suggestion. Such a course may well be rebuked by the master, and evidence so elicited should be accorded but little, if any, weight.

In no case could the rule requiring corroborating evidence in support of petitioner’s, testimony be more properly applied than in one of this character. Petitioner’s charges are based upon an alleged criminal act of her husband in attempting abortion, the result of which was a premature birth due to his act. Some corroboration might be derived from the doctor who attended ■petitioner or those about her at the time of her delivery. Ho ■person was called or examined upon that matter. An examination of the testimony discloses absolutely no corroborative evidence. The testimony of petitioner’s mother, that the petitioner’s first-born child, seen by her some four or five days after birth, was small and apparently of premature birth, is not corroborative of the acts which underlie the petitioner’s claim, the criminal conduct of defendant in connection with the birth of that child. Petitioner’s evidence of the horrible crime charged against defendant stands wholly without support from other evidence, and the ease clearly showed that other evidence was available.

The result is that the report of the master should not be confirmed and the petition should be dismissed.


text:
    Charles Hyde’s Executors v. Elizabeth Hyde et al.
    [Submitted October 10th, 1902.
    Filed December 8th, 1902.]
    Testator devised and bequeathed to his executors the residue of his estate in trust, among other things, “to give and distribute one hundred thousand dollars thereof, within five years from the date of my death, for such religious, charitable or educational or other purposes as they may deem advisable, provided, nevertheless, that no portion thereof shall be given to or distributed among his wife or children, individually or collectively.” —Held, (1) that by the true construction of the language used by testator to express his intent, the trustees were permitted to devote the sum named to purposes other than those which are religious, charitable or educational, and therefore to other than chaz-i table uses; and (2) that although by such construction the testamentary disposition of the $100,000 fails and that sum will thereby go to testator’s widow and children, an intent to limit the trustees in disposing of that sum to uses which are charitable but other than religious or educational, is not discoverable in the proviso that no part of the sum should be given or distributed to his widow or children, or any of them.

      Mr. Charles A. Reed, for the complainants.

      The Attorney-General, fro se.

   Magie, Chancellor.

The bill in this cause was filed by Elizabeth Hyde, Charles L. Hyde, Louis K. Hyde, Erancis de L. Hyde and Edith L. Hyde, executors of the last will and testament of Charles Hyde. The defendants to the bill as filed were the same persons in their individual capacities.

The purpose of the bill was to obtain a construction of the fourth paragraph of the will of said deceased, which, so far as necessary for the present purpose, is expressed in the following language:

“Fourth. All the rest, residue and remainder of my estate, real, personal and mixed, and wheresoever situate, I give, devise and bequeath to my executors hereinafter named, and to the survivors and survivor of them, in trust, nevertheless for the following uses and purposes:
“1. To give and distribute one hundred thousand dollars thereof, within five years from the date of my death, for such religious, charitable or educational or other purposes as they may deem advisable, provided, nevertheless, that no portion thereof shall be given to or distributed among my wife or children, individually or collectively.
“2. To apportion, divide and distribute all the balance of said rest, residue and remainder among my widow and my heirs-at-law and next of kin in the same manner and proportions as said widow and next of kin would be entitled to and would take the same under the laws of descent and distribution in vogue and force in the State of New Jersey, at the time of my death in case I had died intestate.”

The claim made by the bill is that the disposition of the sum of $100,000 directed in the first subdivision of the fourth section of said will is void for uncertainty, and that said sum therefore falls into the residue of the estate and should be distributed according to the provisions of the same section respecting the distribution of the “balance” of the residue. The prayer of the bill is that it should be determined whether the disposition of the $100,000 is void, and if void, what should be done with'said sum by the executors.

The defendants, in their individual capacity, entered an appearance in the cause, and filed an answer admitting 'the facts charged and joining in the application for a judicial determina^ tion of the question presented by the bill.

The cause was set down for hearing and admitted upon a brief filed by counsel for complainants.

Dpon examination of the case thus presented, it was apparent that it radically differed from the ordinary cases in which executors or trustees had sought a construction of a will in order to protect them against the claims of devisees or legatees under the will or heirs-at-law or next of kin of the testator, for it appears that the children of testator, who are executors with his widow, and who have joined with her in this bill, are the sole heirs-at-law and next of kin of testator. There is no pretence that any of them entertain or have expressed any discordant or antagonistic views as to the proper construction of the first subdivision of the clause in question. If the claim they make in their bill is correct, and the disposition of the $100,000 made thereby is ineffective and void, that sum must be distributed among them, either under the provisions of the second subdivision of the same clause or as property undisposed of by the will. Upon the face of the case it seemed that the executors and trustees were seeking a judicial interpretation of the will to protect them against themselves, for if they chose to obey the literal directions of the clause in question, no person other than themselves could complain.

But upon further consideration, and in view of the fact that the clause, the interpretation of which is sought, seems to indicate that the testator intended to devote the $100,000 to charitable uses in which the public would have an interest, and that the question presented is whether he has expressed that intent in an effective manner, it was deemed best to retain the bill, and to direct that the attorney-general, as representing the public, should be brought into the case.

Proper amendments to the bill were thereupon made, and the former attorney-general appeared and filed a formal answer. The cause was again placed on the list, and has been brought to hearing on briefs submitted by complainants’ counsel and by the present attorney-general.

It is the undoubted law of this state that such a testamentary disposition of property as that now under consideration cannot be sustained except upon the theory that it constitutes a gift to a charitable use. Whether it is a gift of that character or not is to be determined by the language used by testator to express his intention in the particular clause in question, read with any other portions of the will tending to throw light upon and indicate the meaning of the words used. Thompson’s Executors v. Norris, 4 C. E. Gr. 308; S. C., 5 C. E. Gr. 489; De Camp v. Dobbins, 2 Stew. Eq. 56; S. C., 4 Stew. Eq. 672. It is equally well settled that a gift to a charitable use will not fail of effect because the donor has not pointed out the particular beneficiaries to whom he designs his bounty to go, provided that he has endowed some person with express or implied power to select such beneficiaries. The power to dispense the fund carries with it by implication the power to select. Hesketh v. Murphy, 8 Stew. Eq. 23; S. C., 9 Stew. Eq. 304; Norcross v. Murphy, 17 Stew. Eq. 522; N. Y., &c., Society v. Clarkson, 4 Halst. Ch. 541; McBride v. Elmer's Executors, 2 Halst. Ch. 107; Jones v. Watford, 17 Dick. Ch. Rep. 339.

It is apparently conceded in the argument that if testator by this clause had directed the executors to devote the $100,000 to charitable or religious purposes, the gift would be good as a charitable use, and the power to select the particular charities or the particular churches or societies organized for the spread of religion would have been, by implication, conferred upon the executors.

But the contention is twofold—(1) that by .the inclusion of “educational” purposes as those to which the trustees might devote the fund, they are permitted to dispose of it for -other than charitable uses, and (2) that by the like inclusion of “other” purposes the executors may dispose of it for purposes not charitable.

With respect to the first contention, it seems to me to be lacking in force. While the act of parliament of 43 Eliz. c. 4, commonly called the statute of charitable uses, has been held never to have been in force in this state, yet it seems admitted that the extensive jurisdiction of the English court of chancery over charities—a jurisdiction which this court possesses in its full extent (Hesketh v. Murphy, ubi supra)—is over the classes of objects enumerated in the preamble of that act. Among those objects education is included. 2 Story Eq. Jur. § 1160; 5 Am. & Eng. Encycl. L. (2d ed.) 929. Gifts for educational purposes have been upheld in this state as to valid charitable uses. McBride v. Elmer’s Executors, 2 Halst. Ch. 107; Stevens v. Shippen, 1 Stew. Eq. 487; Mason’s Executors v. Trustees, &c., 12 C. E. Gr. 47; George v. Braddock, 18 Stew. Eq. 757.

But the serious difficulty in this case arises from the other contention on the part of complainants, viz., that the clause in question confers a power upon the executors unlimited to charitable uses, by making use of the words “or other” to express some of the purposes permitted.

These words cannot be construed as intended to be read “other such” or “other like” or “other of the same kind,” for'such a construction would make them mere surplusage and deprive the clause of meaning. If so construed, the words simply repeat the idea “charitable” previously expressed, for there are other charitable purposes than those which are educational or 'religious, such as the care of the poor, the sick, &c. But those purposes are naturally included in the expression “charitable purposes.” Therefore, when the testator adds the words “or other,” the clause, looked at by itself, clearly expresses the intent to permit the trustees to devote the fund, if they choose to do so, to purposes other than those which are educational or religious or charitable. This view requires a declaration that the gift is void.

That the words “or other” came into the will by interlineation after the will was drafted and before its execution can have no bearing on the case. Testator’s will is that which he executed, and is to be read and construed in the state in which it was executed.

It was declared by Chief-Justice Beasley, speaking for the court of errors in Hesketh v. Murphy, supra, that it was an acknowledged doctrine that on all matters of construction, courts are bound to lean in favor of charity rather than against it. Where the language of the testator, standing alone, requires a construction which would make void and ineffective the gift, it may, when read with other language of the will, be found to be restricted from its natural meaning,- and confined within limits which effectuate the gift. A comparison of.the meaning attributed by the court of errors to the word “benevolent,” as used in the will considered in Thompson’s Executors v. Norris, and the same words as used in the will considered in De Camp v. Dobbins, afford a striking example.

An examination of the whole will seems to give some countenance to the contention of the attorney-general that the word “other” was used by the testator in a restricted sense and was limited to charitable purposes other than educational or religious. The subdivision of the clause in question contains an express proviso that no part of the $100,000 should he “given to or distributed among his wife and children, individually or collectively.” But if the contention of the • parties prevails, the whole sum must go to and be distributed among them. It is not the case of a mere inference drawn from a testamentary provision that testator did not intend to die intestate, but a positive prohibition against the parties being benefited by his gift, and the contention is that the language used by testator to indicate his intended benefaction must be limited to that which is effective, viz., a charitable use.

But, upon reflection, I am unable to yield to this contention. If testator’s purpose may be considered to have been to devote the $100,000 to charitable uses he has not used apt language to express such purpose. On the contrary, he has permitted it to be devoted to “other” purposes. The express direction that the trustees should devote no part of it to themselves or any of themselves seems rather to indicate that he consciously placed this limit upon them in their performance of his directions for its distribution for other purposes than those which were charitable, for it is unreasonable to suppose that he contemplated that, within the period of five years, his widow and children, to whom the whole residue of his estate was given, would be in need of charity, or that he proposed to prevent their relief from his bounty if they became necessitous.

The result is that the first subdivision of the clause in question must be declared to be inoperative, and the sum therein mentioned will go to the widow and children of deceased. As the second subdivision of the clause provides for the disposition of the residue in the manner' in which .testator’s estate would have been distributed if he had died intestate, it is unnecessary to determine whether the sum thus ineffectively dealt with becomes part of the residue, or should be distributed as property undisposed of by the will.


author: Mag-ie, Chancellor.

text:
    Augusta Jordon Hopkins and James F. Minturn, executors and trustees, v. Clara Remy.
    [Submitted October 20th, 1902.
    Filed December 8th, 1902.]
    Testatrix devised lands to her executors in trust to collect the rents, issues and profits during the life of her sister; to pay over to her sister during her life, out of said rents, issues and profits, $500 semi-annually, and, after paying municipal charges on the lands, to deposit the surplus of the rents to their credit in bank at interest, until her sister’s death. She empowered and directed them, after such death, to sell said lands and to distribute the proceeds of the sale, together with the rents in bank, to other persons named. It appeared that the rents of said lands, after paying expenses of collection, repairs necessary to preserve the buildings thereon, insurance of the buildings and taxes and water rents imposed by municipal authority, were insufficient to enable the trustees to pay $500 semi-annually. Upon bill for construction of the will and direction of the trustees—Held, that the question submitted must be determined from the intent of the testatrix disclosed by the language of her will; that the plain intent indicated thereby was to devote to the payment of her sister, semi-annually, so much of the rents as remained, after necessary expenditures to preserve the trust fund, not exceeding $500, and if the remainder was insufficient for that purpose, they could not make up the deficiency by a resort to other portions of the estate, or by a mortgage or sale of said lands.
    On bill for the construction of the following clause of the will of Charlotte Jordon, deceased:
    “I give, devise and bequeath unto my executrix, Augusta Jordon Hopkins aforesaid, and my executor, James F. Minturn, eounselor-at-Iaw, of Hoboken, all the real estate of which I may die seized and particularly the premises known as numbers C09 and 611 Washington street, in the said city of Hoboken, being fifty feet in width, by one hundred feet in depth, in trust to collect the rents, issues and profits thereof during the lifetime of my sister Clara Remy, of Dudley, Illinois, and to pay over to her during her lifetime out of said rents, issues and profits the sum of five hundred dollars semi-annually, and after paying all taxes and other municipal charges against the same, to deposit the surplus of such rents to their credit in bank at interest, until the decease of my said sister, and as soon as convenient after the decease of my said sister, I order, empower and direct my said trustees to sell the said real estate at public or private sale, as they may deem best, and then to divide the proceeds of said sale together with the rents in bank as aforesaid, in three equal parts and pay the same over in equal parts after the payment of all necessary expenses, to my said brothers, Jeremiah Moreau and Francis Moreau, and to my husband’s said niece, Augusta Jordon Hopkins, and in the event of their death, then to their children or the survivors of them; and I hereby order, direct and empower my said trustees to make, execute and deliver to the purchaser or purchasers of said real estate good and sufficient deed or deeds to convey the same; and the said purchaser or purchasers shall not be obliged to see to the application of the purchase-moneys as aforesaid.”

      Mr. James F. Minium, for the complainants.
   Mag-ie, Chancellor.

The complainants, as executors and trustees under the will of Charlotte Jordon, deceased, who died September 12th, 1899,_seek a construction of the clause of said will set forth in the statement prefacing this opinion.

They charge and prove that the rents which were collectible out of the lands devised to them in trust by said clause have not produced, and are not likely in future to produce, the sum of $1,000 annually beyond the expenses of collecting, the repairs necessary to preserve the buildings on said lands, insurance of said buildings against fire and the taxes and water rents imposed by municipal authority. They further charge that Mrs. Eemy, to whom the clause directs them to pay $500 semi-annually, insists that she is entitled to such payment every six months, and that if the rents, issues and profits of the lands are insufficient to produce that sum, she is entitled to have any deficiency made up from other portions of the estate or from a sale of the lands devised by said clause.

It is to be regretted that the defendant who makes the claims ■ which occasion this appeal to the court has not appeared or supported her claim by counsel. The claim presented is, so far as the research of complainants’ counsel or my own research is concerned, novel in Hew Jersey.

In England, when portions were to he raised for daughters or for younger children, or debts or legacies were to be paid out of rents, issues and profits, there is a line of cases in the courts establishing the doctrine that sums thus required to be raised may be raised by a mortgage or sale of the lands. This doctrine seems to be put upon the ground that when there is an express requirement, or an implication, arising from the circumstances that such sums were to be raised or such debts or legacies were to be paid at a time before the rents, issues and profits would have sufficed for that purpose, the intent to raise them by seasonable mortgage or sale must be attributed to the donor or testator. But when a testamentary provision required a fund to be raised out of the annual profits, or by particular kinds of leases, or other special modes, it was held that neither mortgage nor sale of lands could be resorted to. Trafford v. Ashton, 1 P. Wms. 415; Mills v. Banks, 3 P. Wms. 1; Ivey v. Gilbert, 2 P. Wms. 13; Evelyn v. Evelyn, 2 P. Wms. 659; Anonymous, 1 Vern. 104; Warburton v. Warburton, 2 Vern. 420. In attempting to discover the intent of a testator in respect to such provisions the limitation to annual rents, in express terms, was held not to be essential to prohibit a resort to mortgage or sale, but it would be sufficient if an intent is discoverable from the whole will to so limit the gifts. Baker v. Baker, 6 H. L. Cas. 616; Foster v. Smith, 1 Phil. 629.

A like view is expressed in many American cases. Nudd v. Powers, 136 Mass. 273; Dehaven v. Sherman, 131 Ill. 115; Irwin v. Wollpert, 128 Ill. 527; Delaney v. Aulen, 84 N. Y. 16.

An examination of the will of the testatrix indicates that the claim of Mrs. Remy is destitute of support from any permissible construction of its terms. It thereby plainly appears that the testatrix felt assured that the income from the lands in question would always be sufficient to provide for the semi-annual payments of $500 to Mrs. Remy, for she provided that the surplus of the rents, issues and profits, not employed in making such payments, should be invested and held in 'trust until Mrs. Remy’s death, and then be paid by the trustees to other persons. But neither in the clause itself nor in any other part of the will was Mrs. Remy given any interest in the lands in case of the insufficiency of the rents, issues and profits to provide for the semiannual payments. The power conferred by the testatrix upon the trustees during the life of Mrs. Eemy was confined to the collection of the rents, issues and profits, and there was no express provision permitting them to sell the lands during Mrs. Eemy’s life. No provision for such sale can be implied, because tlie testatrix expressly conferred power upon them and directed them to sell the lands after the death of Mrs. Eemy, and then to divide the proceeds of such sale, together with the accumulated surplus of the rents, issues and profits, after payments to Mrs. Eemy, among other persons.

It does-not admit of doubt that the expression'“rents, issues and profits of land collected by trustees” means that sum of receipts from the land which remains—first, after maintaining the property by needed repairs and by protective insurance, and second, after payment of public charges.

Eeading the whole will I find the., plain intent to be to pay $1,000 annually out of the annual rents, issues and profits, and therefore out of what the trustees had of such rents, issues and profits wherewith to make payment. If they have not had, and shall not have, enough to make a full payment in any one year, no more can be exacted from them, or from the corpus of the estate, or from the residuary legatees.

If, in any subsequent year, a surplus should be produced, there may arise a question whether it can be used to make up past deficiencies, but the question is not now presented and need not be decided.

Complainants are entitled to a decree construing the will on the lines of the above opinion.