author: Magie, C. J.

text:
    The Trenton Potteries Company, complainant and appellant, v. Richard C. Oliphant et al., defendants and respondents.
    [Filed July 7th, 1899.]
    1. A letter giving an option for a certain period to purchase a business and its good will, described the vendors thus: “We, the undersigned, do business under the firm name of Oliphant & Co.” It contained a clause: “ We also agree that we will not directly or indirectly engage in ” a competitive business within certain limits of space and time. It was only signed by the firm name. The option expired, and afterwards all the members of the firm signed a writing, addressed to the same buyer, extending the option to purchase for ninety days, which was to be attached to and made part of the original option. —Held, that the undertaking not to engage in competitive business is both ioint and several and hinds the firm and each of its members.

      2. A contract that the vendor of a business and its good will will not engage in a competitive business, although a contract in restraint of trade, is not opposed to public policy, but is valid and enforceable when the restraint contracted for is partial and is reasonably required for the protection of the purchaser in the use and enjoyment of the business purchased, and is not otherwise injurious to the public interest. 'Whether, considering the changed conditions of trade and business, such a contract should now be pronounced against public policy if the restraint contracted for is general, but so broad a restraint is reasonably necessary for the protection of the purchaser, quaere.

    3. A contract of the vendors of a business and its good will bound them not to engage in the same business “ within any state in the United States of America or within the District of Columbia, except in the State of Nevada and the Territory of Arizona, for the period of fifty years.” — Held, that the description of the places within which the contract restrained the vendors is a divisible description, embracing not one whole area but several areas disjunctively described. The business which was the subject of the sale had never been carried on by the vendors in some of the areas covered by the description. — Held, further, that while the restraint contracted for in respect to such areas may be opposed to public policy and the contract to that extent may be unenforceable, the restraint contracted for in respect to areas within which the business had been carried on was reasonably required for the protection of the purchaser, and the contract to that extent is not in opposition to public policy and may be enforced.
    4. When the purchaser of a business and its good will is a corporation empowered by legislative grant to engage in carrying on such a business for the period of its corporate life, a contract by the vendor not to engage in competitive business for a period substantially coincident with, the purchaser’s corporate life is not unreasonable.
    5. Eight manufacturers of sanitary pottery ware, who produced nearly all of that ware manufactured in this country, formed an association and agreed to regulate the price of such ware according to the vote of a majority of its members. — Held, that, assuming that such ware has become a commodity of so great importance to public health and comfort that the public has an interest in its manufacture and sale, such a combination is opposed to public policy as creating or tending to create a monopoly; contracts among independent and unconnected manufacturers looking to the control of the prices of their manufacture by limitation of production, by restriction on distribution or by express agreement, are opposed to public interest and unenforceable.
    6. Simultaneously with the purchase of the business in question, the purchaser also acquired by purchase four other potteries. The five vendors had been engaged in the manufacture of sanitary pottery ware and were members of the association. The purchaser thus acquired a majority of the members.— Held, that, although the simultaneous purchases gave the purchaser the opportunity to control the action of the association and such may have been its purpose, the contracts of sale and purchase and the incidental contracts conneeted therewith are not rendered invalid thereby but may be enforced ; the public interest will be protected by invalidating the agreement for the control of prices.
    7. Each of the five vendors contracted with the purchaser not to engage in competitive business in terms substantially like those contained in respondents’ contract, and thereby five of the principal plants for producing sanitary pottery ware became the property of one owner, and the previous owners were excluded from using their capital and business experience and knowledge in competition with the new owner. — Held, that, although contracts to restrain and limit competition in the production of some commodity in the manufacture and sale of which the public have an interest are repugnant to public policy, a restraint or limit upon competition may result from contracts which the courts are bound to enforce. Thus, in the absence of legislative prohibition (if such could be imposed), courts would be obliged to recognize and enforce contracts for the purchase by an individual manufacturer of the business of his competitors, even to the last one, although such purchases tend to eliminate competition, and the last purchase would completely exclude it, at least for a time.
    8. Under our liberal corporation laws, corporations may be formed to engage in and carry on almost every conceivable manufacture or trade. They are empowered to acquire property and the control of other corporations. Acts which corporations do under these broad legislative grants cannot be pronounced by the courts to be repugnant to public policy. The legislative grants of power fix the character and limit of public policy in that regard. A corporation thus empowered to engage in and carry on a certain manufacture may buy the business of its competitors, and courts cannot pronounce contracts for such permitted purchases invalid, although they tend to produce, and may temporarily produce, a monopoly of such manufacture.
    9. Contracts incidental to such permitted purchases, and reasonably required to protect the purchaser in the enjoyment of the business purchased,, cannot be pronounced by the courts to be against public policy for the same reason.
    On appeal from a decree advised by Vice-Chancellor Grey, whose opinion is reported in Trenton Potteries Co. v. Oliphant, 11 Dick. Ch. Rep. 680.

      Mr. William M. Panning, Mr. Garret D.- W. Vroom, and Mr. Lewis Cass Ledyard (of the New York bar), for the appellant.

      Mr. Samuel D. Oliphant, Jr., Mr. Riehai'd V. Lindabury, and Mr. Joseph H. Choate (of the-New York bar), for the respondents.
   The opinion of the court was delivered by

Magie, C. J.

The appeal in this cause is from a decree of the court of chancery, made upon the advice of Vice-Chancellor Grey, dismissing appellant’s bill of complaint and denying the relief sought thereby.

The pleadings in the cause, the issues presented and the facts established by the proofs are set out with such completeness in the opinion of the learned vice-chancellor and the statement preceding it that it is unnecessary to repeat them here.

The bill was filed by appellant against the seven defendants and respondents to restrain the breach of contracts alleged to have been made by them with it. It was dismissed as to all the respondents upon the ground' that the contracts in question were in illegal restraint of trade and against the public policy of the state. As to three of respondents, the dismissal was also put on other 'grounds. As to James V. Oliphant, one of respondents, one additional ground was that he had not become bound to appellant by any such contract. As to him and also as to Richard C. and Henry D. Oliphant, also respondents, the additional ground for dismissal was that the proofs disclosed no breach of the contracts on their part.

The appeal is from the whole decree, but counsel for appellant* conceded in the argument that although Richard C. and Henry D. Oliphant were proved to have been bound to appellant by the contracts which the bill sought to enforce, yet that no sufficient evidence of any breach of those contracts by them appeared. It results that so much of the decree as dismisses the bill as to them must be affirmed.

But appellant contends that the dismissal of the bill as to James V. Oliphant cannot be supported upon the additional grounds assigned therefor. This contention requires a review of the proofs touching the relation of James V. Oliphant to the contracts in question, which were contracts to abstain from the manufacture of pottery ware. The first contract claimed was contained in a letter addressed to one Tapscott, dated January 23d, 1891, and signed “ Oliphant & Co.,” which is set out in the prefatory statement of the vice-chancellor. The other contract relied on was contained in a sealed instrument, dated July 8th, 1892, purporting to be made between the seven respondents and Tapscott, also to be found in that statement. This writing was executed by all the respondents except James V. Oliphant.

The proofs show that, at the date of the letter in question, James V. Oliphant was not a member of the firm of Oliphant & Company. He became a member about January 1st, 1892. The letter gave Tapscott an option to purchase at a stated price the pottery business carried on by Oliphant & Company, including the real estate, plant and good will, which option was to be exercised within a limited period. That period had expired when James V. Oliphant became a member of the firm. On February 1st, 1892, all the members of the firm, including James V. Oliphant, signed a writing addressed to Tapscott, extending the option originally given for a period of ninety days. The option was accepted by him on May 20th, 1892. On May 21st, 1892, an agreement of sale was signed by all the members of the firm except James "V. Oliphant. But on May 23d, 1892, he executed under seal a memorandum of agreement to the terms and conditions mentioned in the agreement of the other owners of the property which was the subject of the sale. The sale was consummated on June 6th, 1892. Tapscott was acting in the •transaction for those who formed the corporation which is the appellant, and for that corporation after its formation on May 27th, 1892. Appellant acquired all Tapscott’s rights in the contracts with respondents.

The vice-chancellor reached the conclusion that the bill should be dismissed as to James V. Oliphant, because not having executed the sealed instrument of July 6th, 1892, he had not become bound by its covenants, and because the contract of the letter of January 23d, 1891, adopted and ratified by him by his joining in the extension of the option by the writing of February ■1st, 1892, was a joint and not a several contract, and merely bound the firm of Oliphant & Company not to engage in a competitive business.

The omission of James V. Oliphant to execute the instrument of July 6th, 1892, unquestionably deprives appellant of any right to enforce its provisions against him in this cause.

If necessary to construe the contract contained in the letter of January 23d, 1891, I think it would be difficult if not impossible to hold it to be a mere partnership undertaking. No doubt an obligation entered into by more than one person is presumed to be joint, and a several responsibility will not arise except by words of' severance. Alpaugh v. Wood, 24 Vr. 688. But the purpose of this letter was to give an option to purchase a business carried on by individuals who were partners. It recites that “we, the undersigned,” do business under a firm name and- own and control the Delaware pottery, which was the subject of the offer to sell. It contains an agreement that, in case of sale, “ we will not, directly or indirectly,” engage in a competitive business. In my judgment, it would not be an unnatural or strained construction to attribute to these words a several force, aud to find that the firm signature thereto bound the members of the firm not merely jointly but also severally. Upon any other construction it is obvious that the protection of the business and good will proposed to be sold would only be partially secured.

But we are not required to construe the terms of the letter by themselves. By the extension of the option by the writing executed by all the firm members, including James V. Oliphant, on February 1st, 1892, a several quality in the contract contained in that letter, either was recognized as originally in it or was imparted to it. By that instrument each partner agreed to an option of purchase for a fixed period, and that such agreement should be part of the original option given by that letter. When they all executed that instrument and declared that it was to be attached to and become part of the original option, the then owners made a new contract, in the terms of the former contract, which bound those signing as if they had signed the original option with the extended term. The contracts thus amalgamated stipulated that in the event of sale “ we will not directly or indirectly” engage in a competitive business. These words, over individual signatures respecting a business previously averred to be a partnership business, indicate several as well as joint undertakings. It is as if they undertook that they would not directly, by their joint act as a firm, or indirectly, by any several act of any member, engage in a competitive business. This construction is greatly aided by the exception from the undertaking, whereby the proposing vendors are permitted to engage in the business of manufacturing pottery ware as agent or employe of the proposing purchaser. These words indicate a relation which might be formed between vendors and purchaser in case of sale effected. While the firm could become the purchaser’s agent, it could not in any other sense become his employe. Individual members of the firm might become either agents or employes. The exception therefore indicates that the contract it limited was one affecting individual members of the firm.

As James "V. Oliphant, upon this construction, became bound by this contract, and as the proofs show that he has broken it, the decree dismissing the bill as to him cannot be supported on this ground.

It is next to be considered whether the decree can rest upon the ground that the contracts sought to be enforced are in illegal restraint of trade.

The contract contained in the letter of January 23d, 1891, and the covenant of June 6th, 1892, are the obligations which the bill was filed to enforce. They are identical in terms and purport to bind respondents to absolutely refrain from engaging in the business of manufacturing pottery ware “ within any state in the United States of America or within the District of Columbia, except in the State of Nevada and the Territory of Arizona, for the period of fifty years.” They are contracts in restraint of trade.

This court, speaking by Chief-Justice Beasley, more than thirty years ago, declared that contracts in general restraint of trade are illegal. Brewer v. Marshall, 4. C. E. Gr. 537. The learned chief-justice found that to hatfe been the undisputed rule of the English and of our own courts since the decision in 1711 of Mitchell v. Reynolds, 1 P. Wins. 181. In that celebrated case Lord Macclesfield placed the illegality of such contracts upon the sole ground of their being inimical to the public interest or public policy. To the same origin the rule denying validity to such contracts was áttributed by the chief-justice in our leading case above cited. Our court of chancery has announced and applied the rule, and upon the same ground. Mandeville v. Harman, 15 Stew. Eq. 185; Sternberg v. O’Brien, 3 Dick. Ch. Rep. 370 ; Althen v. Vreeland, 36 Atl. Rep. 479.

In determining what is the public policy in this regard we have, however, to take into account certain contracts which restrain trade. It is of public interest that every one may freely acquire and sell and transfer property and property rights. A tradesman, for example, who has engaged in a manufacturing business and has purchased land, installed a plant and acquired a trade connection and good will thereby, may sell his property and business \yith its good will. It is of public interest that he shall be able to make such a sale at a fair price and that his purchaser shall be able to obtain by his purchase that which he desired to buy. Obviously, the only practical mode of accomplishing that purpose is by the vendor’s contracting for some restraint upon his acts, preventing him from engaging in the same business in competition with that which he has sold. His contract to abstain from engaging in such competitive business is a contract in restraint of trade, but one which, from the time’ of Mitchell v. Reynolds to this time, has been recognized as not inimical to, but permitted by, public policy. Therefore, while the public interest may be that trade in general shall not be restrained, yet it also permits and favors a restraint of trade in certain cases.

Contracts of this sort which have been sustained and enforced by courts have been generally declared to be such as restrain trade, not generally, but only partially, and no more extensively than is reasonably required to protect the purchaser in the use and enjoyment of the business purchased, and are not otherwise injurious to the public interest. This is the doctrine declared and applied in the court of chancery and recognized in this court by our affirmance of its decrees. Richardson v. Peacock, 11 C. E. Gr. 40; S. C., 1 Stew. Eq. 151; S. C., 6 Stew. Eq. 597; Mandeville v. Harman, supra; Finger v. Hahn, 15 Stew. Eq. 606 ; S. C., 17 Stew. Eq. 604; Sternberg v. O’Brien, supra.

It is observable that of late and elsewhere it has been questioned whether the rule as thus stated is not too broad to be applicable to present conditions. In 1711 trade was subject to limitations which have largely diminished or ceased to exist. Where orders and responses had to be transmitted by mail or messenger, and the mail and travelers were carried by coaches drawn by horses, and goods were transported by pack or wagon, the area of the trade of a manufacturer or tradesman was necessarily limited by those conditions. How that orders and responses may be transmitted for long distances by telephone and over the world by telegraph, and goods and travelers may have •quick transit over land and sea, the area of such trade may be immensely greater. Thereupon, it is contended with great force that the true test of the validity of such contracts in restraint of trade is to be found alone in their being reasonably essential to the protection of the purchaser, and that, considering the vast extent of the area of some trades, there are cases in which a general restraint cannot be held to be unreasonable. Diamond Match Co. v. Roeber, 106 N. Y. 473; Nordenfelt v. Maxim, &c., Co., App. Cas. 535 (1894); Rousillon v. Rousillon, 14 Ch. Div. 351; Leather, &c., Co. v. Lorsont, L. R. 9 Eq. 345; Morse Trust Drill Co. v. Morse, 103 Mass. 73; Gibbs v. Consolidated Gas Co., 130 U. S. 396; E. Underwood & Son v. Barker, 1 L. R. Ch. 300 (1899).

The question thus suggested does not arise in this case unless the contracts before us are found to be contracts in general restraint of trade. This leads us to inquire whether they are general or only partial in their restraint, and, if the latter, whether they extend beyond what is reasonable for a fair protection of the business and good will which appellant purchased from respondents.

The contention on the part of respondents is that the contracts in question restrain them from engaging in the business of manufacturing pottery ware in an area comprising the whole United States, and that the exception of one state and one territory was illusory and colorable because they claim the proofs show that such manufacture cannot be carried on in those localities with profit. It is insisted that a restraint extending over the whole nation is a general and not a partial restraint.

It was well said by Judge Andrews, in his opinion in Diamond Match Co. v. Roeber, ubi supra, that the boundaries of the states are not those of trade or commerce.” It may also be said that in these days the business of many concerns extends not only beyond the boundaries of the state in which it has a local habitation, but even beyond the limits of the nation. Yet the public policy of that state may be involved in favor of or against the restraint of such trade however widely extended. It is possible to conceive of a business so widely extended that a restraint of it within the limit of one country might be in fact but a partial restraint.

In the case last cited an exception of one state or territory similar to that contained in the contracts in question was pronounced not colorable, but the case does not indicate that the exception was shown by the proofs to be of territory in which the restrained manufacture could not be carried on with practical results. In this case the proofs establish that to be the fact as to the area included in the exception. It is contended for appellant, however, that the fact so established is immaterial because the rule against general restraint of trade is an arbitrary one, and an exception from the restraint, however unsubstantial or illusory, will make the restraint partial. It is not easy to perceive how a rule of this character, founded on considerations of public policy and applied in the public interest, can be rightly deemed arbitrary in the sense intended in this contention. Nor is it obvious that the courts would permit the evasion of the rule by illusive contrivances.

But the question presented need not be decided unless the contracts, properly construed, extend the restraint of respondents over the whole area of the United States except the excepted parts. If, by the true construction, the contracts are divisible and bind respondents to a restraint in one or another of separately described areas, and, as applied to one or more of such areas, the restraint is not unreasonable, the suggested question need not be solved.

The, area or areas within which the restraint upon respondents is engaged for in these contracts is described as being, not (as stated in the opinion below) within any state o/the United States of America, but “ within any state in the United States of America.”

In seeking the meaning of this description we are to be guided by the ordinary rules of construction. We may presume that the contracting parties intended to make a valid contract and, in this case, under the doctrine enunciated in Brewer v. Marshall, that they designed to contract for a restraint which would be partial and not general, and reasonable, in their judgment, for the protection of the purchaser in the enjoyment of the subject of the purchase. The contracts are to be construed so as to give them validity, if such construction does no violence to their language, and the subject-matter of the contracts is to be considered and their terms are to be construed in reference thereto. Here the transaction was the sale and purchase of an established business, with its good will, and the contracts in question were plainly intended to furnish protection to the purchaser in the enjoyment of the things purchased. Respondents received a large sum of money for what they sold appellant, which they yet retain, and it is clear that the consideration thus received and retained must have been enhanced in' amount by the obligation of- the contracts now in question, and that so much could not have been obtained by the respondents if no obligation to restrict competition had been made.

Examining thus the description of the area within which the restraint agreed to by respondents is to operate, I have reached the conclusion that, without doing any violence to the language or straining its import, it may be and ought to be held to be a divisible description, embracing not one whole area but several areas disjunctively described. The exception of the Territory of Arizona is urged as inconsistent with this construction. But the express inclusion of the District of Columbia equally militates against the contrary construction, for if the description covers the whole area of the United States of America, the District of Columbia was already included. Looking at the subject of the contracts, their presumed intent and the purpose of any agreement to restrain respondents from engaging in a competitive business, the description can be read as applicable disjunctively to different areas, as within the State of Maine, within the State of New Hampshire or within the State of New Jersey, &c., or within the District of Columbia, excepting, &c., and such should be its construction.

Thus read, the contracts in question are applicable to all the described areas and are enforceable in those of them within which the restraint contracted for is reasonably required for the protection of appellant in' the use and enjoyment of the business and good will acquired from respondents.

An instructive case on this point has lately been decided in England. The question arose upon a covenant by an employe with his employer, that within twelve months after leaving his employment he would not engage in a similar business “in the United Kingdom, or in France, or in the Kingdom of Belgium, or Holland, or in the Dominion of Canada.” The employe voluntarily left the service of his employer and entered into the employment of a merchant in the same trade in England. Upon a bill by the first employer, Mr. Justice Kekewich allowed an injunction against the breach of the covenant. Upon appeal the cause was heard in the chancery division before Lindley, master of the rolls, and Lord-Justices Rigby and Vaughan "Williams. The master of the rolls and Lord-Justice Rigby held that the covenant was a separable on.e and was not unreasonable as to the restraint imposed on the covenantor within the United Kingdom, and they sustained the injunction. Vaughan Williams dissented, but upon the ground that the restraint within the whole of the United Kingdom was unreasonable. E. Underwood & Son v. Barker, ubi supra.

It is next to be considered whether the contracts in question, thus construed, were reasonably required for. the protection of appellant,'and to what extent, if any, they should be enforced under the proofs in the cause.

It appears by the proofs that the business which appellant purchased of respondents had been carried on by them within an area, roughly speaking, covering the states east of the Mississippi river and north of a line drawn through Richmond and Louisville, including the District of Columbia.

Appellant contends that such contracts were reasonably required to. protect it, not only in the areas in which the business it purchased of respondents had been carried on, but also in other states to which it might extend that business. But this contention I deem to be inadmissible. The validity, in this respect, of such contracts is to be tested by the effect upon the' business and good will sold and purchased. What is reasonably required to protect that may be upheld. But the vendor can no more contract to restrict his use of his trade or calling beyond' such protection than he could do if he had made no sale at all.' Such a contract would be opposed to public policy.

But while it results from this view that the contracts in question, so far as they restrain respondents from engaging in the same business in localities in which the business purchased by appellant of them had never been carried on may be opposed to public policy, it does not follow that they are wholly unenforceable. Contracts including distinct and separable oblitions, some of which are legal and some prohibited, are enforceable as to such obligations as are legal. Erie Railway Co. v. Union Locomotive, &c., Co., 6 Vr. 240; Stewart v. Lehigh Valley Railroad Co., 9 Vr. 505. These contracts, as to areas described therein in which the acquired business had been carried on, may be enforced upon proper proofs.

Upon the proofs, how far may these contracts be enforced? The prayer of the bill is for an injunction in the terms of the contracts. But this would be too broad a restraint on respondents, because it would include localitiés in which the purchased business had never been carried on and where no protection of it was required. Upon the proofs I conclude that no restriction can be imposed upon respondents as to any area beyond the State of New Jersey. In this state all the respondents except Richard C. and Henry D. Oliphant are actively engaged in the very business they contracted not to engage in. There is some proof of sales and solicitation of trade in other prohibited areas, but it lacks the requisite certainty to justify a broader injunction.

It remains to consider other objections to the reasonableness of these contracts. It is contended that they are unreasonable because they restrain respondents from the manufacture of any pottery ware while the business sold is claimed to have been that of manufacturing sanitary pottery ware. But the plant respondents sold was adapted to the manufacture of other kinds of ware, and they had in fact manufactured other ware. The business purchased was not the mere manufacture of sanitary pottery ware, and the contracts were not too broad in furnishing appellant protection in respect to the manufacture of all pottery ware.

It is further objected that the contracts in question extend the restraint upon respondents over too great a period of time. The ages of respondents, it is said, show that, at the expiration of the limit of fifty years, probably some of them will have died and all of those surviving will have passed the age of business activity. The contracts are not unlimited in time, but the insistment is that they are unreasonable because of the long limit of restraint. But whether they are reasonable is not to be determined by their disadvantageous effect upon respondents, but by considering whether the restraint to which, for what they received as a sufficient consideration, they bound themselves was reasonably required to protect the purchaser in the enjoyment of his purchase. As they were dealing with a corporation which had acquired a corporate life of fifty years for the purpose ■of carrying on this business, the limit of time fixed by the contracts is not unreasonable. The fact that the limit exceeds the corporate life of appellant by a few days does not, in my judgment, require a different conclusion.

It remains to consider whether the contracts in question are otherwise against the public policy of our state. The learned vice-chancellor held them to be opposed to the public interest, because he conceived that they tended to create a monopoly in the business of manufacturing sanitary pottery ware. This effect he deemed established by the proofs that appellant, simultaneously with its purchase from respondents, also purchased four other plants used in the manufacture of such ware in Trenton, and the property, business and good will of their owners, and took from each of those vendors contracts restraining them from engaging in the business of manufacturing pottery ware, substantially identical with the contracts taken by it from respondents. The contracts procured from respondents he deemed to be part of a scheme to control the production, distribution and sale of sanitary pottery ware and to exclude competition therein. Such ware he declared, on the authority of the promoters of appellant, to be a necessity of life.

The scheme held to be reprehensible was found in the situation disclosed in the proofs. Respondents, as owners of the business sold to appellant, had, several years before the sale, united with the owners of seven other potteries in Trenton, which made, among other things, sanitary pottery ware, in an association called the “American Sanitary Potters’ Association.” That association had in some way controlled the prices at which such ware produced by its eight members (counting the owners of each pottery as one member) should be put upon the market. The action of the association in that regard was determined by a majority of its eight members. By its purchases appellant acquired the interest of five of the members, and seems to have been permitted to cast a vote for each in controlling the action of the association. After appellant’s purchases prices were so controlled for some time and until the association fell to pieces.

Contracts by independent and unconnected manufacturers or traders looking to 'the control of the prices of their commodities, either by limitation of production or by restriction on distribution, or by express argument to maintain specified prices-, are without doubt opposed to public policy. The contract of the sanitary potters’ association in this regard was inimical to public interest when respondents were members of it, and none the less so when appellant acquired the property of five of its members. However solemnly the members of that association may have obligated themselves to. obey the behests of the majority in respect of the control of prices of their ware, no court would have enforced their agreements or awarded damages for any breach of them. '

Rut the contracts by which appellant acquired the property and business of respondents and of four other members of the association contained no term stipulating for the continuance of the association or for the enforcement of any objectionable agreements it had entered into. At the most, so far as appears, the contemporaneous purchases by appellant gave it an opportunity to use the majority vote in the association for such control of prices as its agreements provided for. Although the control of the voting majority of the association may have been one of appellant’s motives for making its simultaneous purchases, it is inconceivable that any one of the five vendors could have repudiated his contract to sell to appellant on the ground that such sale, if consummated, would enable appellant to obtain such control. The public interest would be amply protected by invalidating the agreement of the association for the control of prices and the disconnected agreement of sale would be enforced as other contracts.

It is further urged that the simultaneous contracts procured by appellant create, or tend to create, a monopoly, because they stipulate for the removal of many competitors in the business of manufacturing sanitary pottery ware. The owners of five of the eight potteries in Trenton manufacturing that kind of ware (and there were but few, if more than one, elsewhere) thereby agreed not to engage in that business for a long period of time and over a great extent of country. The engagement of respondents in that respect has been found not to be an improper restraint of trade nor inimical to public policy on that ground, but a contract partially enforceable upon respondents, if not otherwise objectionable. The engagements of the other vendors who sold their properties and business to appellant are similar in terms to that entered into by respondents, and furnish a- reasonable protecfcion to appellant of the business and good will purchased by it of each of them. Each sale and each incidental contract against competition are, for reasons before given, unobjectionable. Are they rendered objectionable by the fact that, being simultaneously made, they excluded from engaging in the business of manufacturing sanitary pottery ware so large a proportion of those previously engaged in that manufacture?

It is to be observed that the contracts of respondents and the other vendors to appellant restricted them from engaging in the business of manufacturing, not sanitary pottery ware alone but all pottery ware. The proofs show that a large number of persons are engaged in manufacturing pottery ware in various parts of the country, and that the contracts in question would exclude from competition a very small proportion of them. But as the proofs also show that the main purpose of appellant was to engage in the manufacture of sanitary pottery ware, I have stated the proposition in a more restricted form.

Whether sanitary pottery ware has become a necessity of life is open to question. It is certain that many persons manage to exist without using it. But if its use is of importance to health and comfort, and a considerable and, increasing number of persons desire to'acquire and use it, the public may have such an interest in its manufacture and sale that public policy will justify judicial interference and refusal to enforce illegal combinations to enhance its price. The elimination of competition may produce that result. The contracts in question were not intended to withdraw, and do not appear to have withdrawn, from work a single workman in that industry. They restrain a comparatively small number of capitalists who had previously employed their capital in such manufacture from continuing so to do. The entire capital of the country, except theirs, is free to be employed in the manufacture. There seems no ground for the claim that we should refuse to enforce respondents’ contracts by injunction when the proofs furnish no reason for the belief that the public will suffer if they are held to their bargains.

The contemporaneous contracts were all made as incidental to the sale and purchase of competing concerns engaged in the manufacture of sanitary pottery ware. They were, as we have seen, reasonably appropriate to the protection of the purchaser in each case. While contracts to restrain or limit competition in the production of that ware may be repugnant to the public interest, such a restraint or limit may result from contracts which the courts are bound to enforce. A person engaged in any manufacture or trade, having the right to acquire and possess property and to do with it what he chooses, may lawfully buy the business of any of his competitors. His first purchase would at once diminish competition. If he continued to purchase, each succeeding transaction would remove another competitor. If his capital was large enough to enable him to buy the business of all competitors, the last purchase would completely exclude competition, at least for a time. But in the absence of legislative restrictions (if such could be imposed) upon the acquisition of such property and its use when so acquired courts could impose no limitation. They would be obliged to enforce such contracts, notwithstanding the effect was to diminish or even to exclude competition.

But appellant is a corporation and not an individual. Corporations, however, may lawfully do any acts within the corporate powers conferred on them by legislative grant. Under our liberal corporation laws, corporate authority may be acquired by aggregations of individuals, organized as prescribed to engage in and carry on almost every conceivable manufacture or trade. Such corporations are empowered to purchase, hold and use property appropriate to their business. They may also purchase and hold the stock of other corporations. Under such powers it is obvious that a corporation may purchase the plant and business of competing individuals and concerns. The legislature might have withheld such powers or imposed limitations upon their use. In the absence of prohibition or limitation on their powers in this respect, it is impossible for the courts to pronounce acts done under legislative grant to be inimical to public policy. The grant of the legislature authorizing and permitting such acts must fix for the courts the character and limit of public policy in that regard. It follows that a corporation empowered to carry on a particular business may lawfully purchase the plant and business- of competitors, although such purchases may diminish or, for a time at least, destroy competition. Contracts for such purchases cannot be refused enforcement.

Since contracts by individuals and by corporations having legislative authority, for the purchase of competing plants and business, may be made and are enforceable, although as a result thereof competition is diminished or temporarily destroyed, it further follows that contracts reasonably required to make such purchases effective by protecting the purchaser in the use and enjoyment of the thing purchased, cannot be declared by the courts to be repugnant to public policy. The interference with competition resulting from such purchases under legislative permission, being found not to invalidate contracts for such purchases, the like interference by contracts reasonably required for the protection of the purchaser cannot be held to invalidate them.

The result is that the decree appealed from must be affirmed as to Richard C. and Henry D. Oliphant, but as to the other respondents it must be reversed and a decree be made enjoining them according to the prayer of the bill within the State of New Jersey.

For reversal (in part) — The Chief-Justice, Yan Syckel, Dixon, Garrison, Gummere, Ludlow, Bogert, Nixon, Adams, Yredbnburgh — 10.

For affirmance — Lippincott, Hendrickson — 2.


source: Caselaw Access Project

author: Mague, C. J.

license: Public Domain

text:
    American Surety Company et al., appellants, v. The Great White Spirit Company et al., respondents.
    [Filed June 19th, 1899.]
    1. The object of the act of April 21st, 1896 (P. L. of 1896p. 319), is to supplement the act of April 18th, 1884 (Gen. Stat. p. 3335), and that object is sufficiently and properly expressed in its title, notwithstanding that title erroneously recites that the last-named act was approved April 18th, 1894.
    2. A corporation which has defaulted in the payment of state taxes and has been proclaimed by the governor under the provisions of said act of April 21st, 1896, is within the provisions for winding up corporations, contained in sections 53 to 60 of the Corporation act of 1896. P. L. of 1896 p. 277.

    3. Upon application by a creditor or a stockholder of such a corporation under section 56 of the Corporation act of 1896, the discretionary power of the chancellor is invoked and should be exercised either to continue the directors as trustees to settle the corporate affairs under said sections or to appoint a receiver for that purpose ; discretion to appoint a receiver should not be disclaimed because of failure of proof of breaches of trust by the directoi’s since the governor’s proclamation, but should be exercised upon proof of such breaches of trust, or of previous breaches of trust or misconduct or incapacity evincing the unfitness of the directors to properly discharge the duties of such trust.
    4. Whether the provisions of section 66 of the Corporation act are applicable to defaulted and proclaimed corporations during the period within which they may apply for a revival of their corporate life and powers under the provisions of the supplement to the act of April 21st, 1896, which was approved March 25th, 1898 (P. L. of 1898 p. 182), queere.

      Mr. Charles L. Corbin, for the appellants.

      Mr. Francis C. Lowthorp, for the respondents.
   The opinion of the court was delivered by

Mague, C. J.

Upon a bill filed by appellants as creditors of the Great White Spirit Company, a corporation of this state, an order to show cause why a receiver for that company should not be appointed was allowed. On the return of the order the matter was heard by "Vice-Chancellor Stevens upon the bill and accompanying affidavits and affidavits presented by respondents. Upon his advice the application for a receiver was refused and the order to show cause was discharged. This appeal is from the last-men'tioned order.

The bill of appellants prayed for the appointment of a receiver upon two grounds — -first, because of the insolvency of the company entitling creditors to such relief under the provisions of section 66 of the “Act concerning corporations” (Revision of 1896), approved April 21st, 1896 (P. L. of 1896 p. 277); and second, because of the dissolution of the company entitling its creditors to like relief under- the provisions of section 56 of the same act.

The dissolution of the company appeared by the bill and affidavits to have been thus effected. It had defaulted' for more than two consecutive years in the payment of state taxes imposed upon it. On May 31st, 1898, the governor issued a proclamation declaring that the charters of this and other corporations were void, and that all powers conferred by law upon such corporations were inoperative and void. This proclamation was issued, not under the provisions of the act of March 20th, 1891 (Gen. Stat. p. 956), as supposed by the court below, but under the provisions of an act entitled “A further supplement to an act entitled ‘An act to provide for the imposition of state taxes upon certain corporations and for the collection thereof/ approved April eighteenth, one thousand eight hundred and ninety-four,” which supplement was approved April 21st, 1896. P. L. of 1896 p. 319. Vo act having the recited title was approved on April 18th, 1894, but an act with that title was approved April 18th, 1884 (Gen. Stat. p. 3335), and the plain legislative intent was that the act of 1896 should supplement the act of 1884.

Such being the legislative purpose appearing in the act of 1896, it is obvious that we are confronted with the question whether that purpose has failed of effect by reason of the error in reciting in the title that the act which it was intended to supplement was approved in 1894 instead of 1884, as was the fact.

Among the provisions of article 4, section 7, placitum 4, of our constitution is one which requires the object of every law to be expressed in the title. This provision has been uniformly held by our courts to be mandatory upon the legislature, and to invalidate all legislative acts the titles of which express the legislative object deceptively or illusively. Rader v. Union, 10 Vr. 509; Jersey City v. Elmendorf, 18 Vr. 283; Lane v. State, 20 Vr. 673; Falkner v. Dorland, 25 Vr. 409; Beverly v. Waln, 28 Vr. 143, as explained in Johnson v. Asbury Park, 31 Vr. 427; Kennedy v. Belmar, 32 Vr. 20; Ryno v. State, 29 Vr. 238; New York, &c., Railroad Co. v. Montclair, 2 Dick. Ch. Rep. 591.

It is to be observed that the title in question accurately recites the title of the act which was intended to be supplemented by this legislation. No other act of that title is discoverable upon our statute books. The error in the title consists in the misstatement of the date of approval of the act intended to be supplemented. Is the title rendered deceptive or illusive by such an error?

If an act having the recited title, or perhaps a title of similar import, had been approved on April 18th, 1894, a different question would be presented, and one which would probably require to be solved by the application of the doctrines laid down in New York, &c., Railroad Co. v. Montclair, ubi supra. But an examination of the acts of the legislature of 1894 discloses no act of the same or similar title, and the title in question could not therefore have been either deceptive or misleading.

It remains to consider whether the title expresses the legislative object exhibited in the body of the act. This is to be determined by applying to this title the rules of construction applicable to the description of persons and things, and settling what object, within those rules, is described therein. Had the description of the act intended to be supplemented been limited to the recital of its title, I apprehend no possible question would arise in respect to the title before us being in accord with the constitutional requirement. It would evince that the object of the act was supplementary legislation to an act correctly and properly described, and capable of being identified because the only act of that title. The customary addition of the date of the approval of the act intended to be amended, in such titles, may be useful for reference and sometimes even necessary to distinguish between acts of like titles. But if the description is otherwise complete, such added description cannot be necessary.

Does the addition of words purporting to further describe the object, but which are wholly and absolutely false and inapplicable, invalidate an otherwise complete description ? When to a complete description words are added which are partially true or may be deemed to qualify or limit in particulars the general description, a question of intent arises. But where there is a wholly inapplicable and false description it cannot be deemed to have been intended to limit the general description and ought to have been rejected under the maxim, “Falsa demonstratio non nooet.” Griscom v. Evens, 11 Vr. 402; S. C., 13 Vr. 579. This conclusion is in harmony with the view lately expressed in this court upon a similar question. Schmalz v. Wooley, 12. Dick. Ch. Rep. 303.

The result is that the act in question is not lacking in validity.

The act of March 20th, 1891, the provisions of which were deemed to be applicable to corporations in default in the payment of state taxes, was a supplement to the Corporation act then in force. It was therefore repealed by. the general repealer contained in section 118 of the “Act concerning corporations” (Revision of 1896), approved April 21st, 1896. But on the same day its provisions were substantially re-enacted in the act the title of which has been under discussion. It was thereby-enacted that if any corporation shall for two consecutive years neglect or refuse to pay the state tax assessed against it, its charter shall be void, and all powers conferred by law upon it are declared inoperative and void unless the governor shall for good cause give further time for such payment. It further provided that the comptroller shall report to the governor annually a list of corporations thus defaulting, and that the governor shall forthwith issue his proclamation, declaring under this act that the charters of such corporations are repealed. The exercise, or attempt to exercise, any power under the charter of any such corporation after proclamation, was made a misdemeanor punishable by fine' or imprisonment. The proclamation of the governor, heretofore stated, conformed to the requirements of this act.

This act and the Corporation act of 1896 are plainly parts of a legislative scheme respecting corporations, and, being in pari materia, are to be construed together. So construed, I think it obvious that the prohibition against the use of corporate powers of proclaimed defaulted corporations did not extend to-their use in winding up and settling the affairs of such corporations under the provisions contained in sections 53 to 60, inclusive, of the Corporation act of 1896. This was the view taken by the learned vice-chancellor in this case, and he properly held the respondent company, after default and proclamation, to be within the provisions of those sections. By those provisions the directors of a corporation dissolved in any manner are made trustees thereof, with full powers to settle up its affairs. By section 56 the court of chancery, on application of any creditor or stockholder of such a corporation, is empowered either to continue the directors as such trustees or to appoint one or more persons receivers, to whom are given like powers. Upon such application affirmative action is required within the discretion of the chancellor either to continue the trust of the directors or to displace them by the substitution of a receiver to perform the trust.

While thus construing the act the vice-chancellor held that the discretion of the chancellor should not be exercised to remove statutory trustees unless it appeared that they had been guilty of breaches of trust after the time it was cast upon them. He therefore declined to advise the appointment of a receiver, 'because he thought the bill and affidavits showed no such breaches of trust after the proclamation of the governor on May 31st, 1898.

In this respect the construction of the vice-chancellor was too narrow. The discretion conferred upon the chancellor by this -section, to displace directors by a receiver to carry out this sort of trust, is not dependent upon the misconduct of the directors, since the trust was cast upon them by the statute.. Creditors .and stockholders interested in the fund to be raised in the winding up of such a corporation may require the chancellor, under .this section, to consider whether the directors are fit persons to ■exercise the trust. If they make out by sufficient proof the unfitness of the directors, a ease for the exercise of the discretionary power of the chancellor is presented. Suclr unfitness may be shown doubtless by proof of breaches of trust after the •dissolution of the company, but also by proof of misconduct or breaches of trust previous thereto, or of incapacity to perform -the duties of the trust, or of conduct indicating unwillingness ■to properly perform such duties.

This view is in no respect in conflict with the determination •of this court in Newfoundland Railroad Construction Co. v. Schack, 13 Stew. Eq. 222. In that case a bill filed by a stockholder in a corporation showed that steps were being" taken for its dissolution; that its directors had passed the requisite resolution for that purpose, and had called a meeting of stockholders to take action thereon in the manner permitted by law. Upon ■charges of the insolvency of the corporation and of misconduct of the directors in misappropriating the property of the company and taking steps for its dissolution, it prayed for a receiver and .an injunction. A rule to show cause was allowed thereon containing a restraining order requiring the stockholders to refrain from taking any steps to dissolve the company. Upon the return of the rule, the appointment of a receiver was refused, 'but the restraining order was continued to final hearing. The appeal questioned the propriety of the restraining order, and that was the only question before us. What was said in the opinion of the learned justice who spoke for the court, in respect to the statutory provisions as to the duty cast upon directors and the duty of the chancellor when applied to for the appointment of a receiver after dissolution of a corporation under the then existing law, was only illustrative of the matter under consideration. It was not intended to limit and did not limit the discretionary power of the chancellor in such cases to those in which breaches of trust after the dissolution of the corporation-were shown.

Looking at the facts appearing in the bill and affidavits (excluding from consideration all affidavits which are claimed in the briefs of counsel for respondent not to have been presented to the vice-chancellor), we conclude that a proper discretion-required the removal of the directors from the trust and the appointment of a receiver to settle the corporate affairs. It clearly appears that under the management of these directors the corporation had become insolvent at its very first business-transaction; that it had never engaged in the business which it was formed to carry on; that its capital had been placed largely in unproductive property; that the income from its only productive property had not been used in the payment of our state-taxes, and by reason of such failure the corporation had become defunct, and that such income had been assigned to a trustee whose duty was to use a part thereof so as to give a preference-to a corporate debt due to one of the directors. We think that the unfitness of the directors to properly discharge the trust was-thus demonstrated.

The vice-chancellor further held that upon the .dissolution of the respondent company in the manner above described, the provisions of section 66 of the Corporation act of 1896, for the-appointment of a receiver in cases of insolvency, were inapplicable.

By an act entitled “An act to amend an act entitled ‘A further supplement to an act entitled “An act to provide for the-imposition of state taxes upon certain corporations and for the-collection thereof,” ’ approved April 21st, 1896,” which act was-approved March 25th, 1898 (P. L. of 1898 p. 182), it is provided that if the charter of any corporation shall become inoperative and. void by proclamation of the governor for the-non-payment of taxes, upon payment within two years thereafter of such sum as to them shall seem reasonable, the governor, by and with the advice of the attorney-general, may permit such defaulted corporation to be reinstated and entitled to all its fran— chises and privileges, and upon such payment the secretary of .state shall issue a certificate entitling such corporation to continue its business and its said franchises.

The legislative purpose disclosed by this act is to permit for .a limited period the revival and renewal of corporate functions and powers which have become, under previous legislation, inoperative and void, by the mere permission of the governor, advised by the attorney-general. Whether that purpose has been effected by this act is a question not argued and not necessary to decide.

If there is a possibility of such revival of a dissolved corporation, it is open to question whether the provisions of section 66 are not applicable to it. Manifestly the interest of creditors and stockholders of such a corporation, if it is insolvent, may require the interference of the court and the appointment of a •receiver on that ground.

But as a receiver is to be appointed under the provisions of .•section 56, the question suggested need not be determined.

The order appealed from is reversed, and the cause is remitted •with instructions to appoint a receiver.

For reversal — The Chief-Justice, Van Syckel, Dixon, Garrison, Lippincott, Collins, Bogert, Hendrickson, Nixon, Adams, Yredenburgh — 11.

For affirmance — None.


author: Van Syckel, J.

text:
    In the matter of the application of the Trenton Street Railway Company to regulate the mode of crossing the track operated by the Pennsylvania Railroad Company, in the township of Hamilton, in the county of Mercer.
    [Filed October 9th, 1899.]
    1. On an application, under the act of March 22d, 1895 (Gen. Stat. p. 2717), ■to regulate the mode of crossing a steam railroad by a street railway, author-' ity being given to the chancellor under specified conditions to direct the mode of crossing, the petitioner must show by due proof that his application is-within the terms of the statute.
    2. The petition, verified by affidavit and served under Chancery rule 138, is not sufficient proof to establish jurisdictional facts, as to which the oath of theaffiant is not competent evidence.
    On appeal from an order advised by Vice-Chancellor Reed. (No opinion.)

      Mr. Charles JE. Gummere and Mr. Alan H. Strong, for the-appellant.

      Mr. Robert S. Woodruff and Mr. John H. Baolces, for the-respondent.
   The opinion of the court was delivered by

Van Syckel, J.

The Trenton Street Railway Company, a corporation opeiv ating an electric street railroad in the city of Trenton, on the-8th day of December, a. d. 1898, as is alleged, obtained the consent of the township committee of the township of Hamilton to further extend its line of street railway from White Horse toYardville, on and across what was then the Crosswicks and Trenton turnpike. In the construction of this latter extension it is necessary to cross the tracks of the Pennsylvania Railroad Company near Yardville.

On the 8th of April, 1899, the street railway company applied to the chaucellor to define the mode in which such crossing-should be made, under the provisions of the act of March 22d, 1895 (Gen. Stat. p. 2717), which reads as follows:

“Sec. 1. That whenever the route of any steam'or electric railroad hereafter to be constructed shall cross at points outside of the limits of cities the-line of any steam railroad in this state, such crossing shall be made in such way as will inflict the least injury upon the rights of the company owning or operating the railroad intended to be crossed, and as will afford proper protection to the public; and no company shall hereafter construct any steam or electric railroad across the line of any steam railroad, except within the limits-of a city, until it shall have first made application to the chancellor of this state to define the mode in which such crossing shall be made, and it shall thereupon be the duty of the chancellor, after causing reasonable notice of such application to be given to the municipal authorities, and also to the corporation owning or operating the railroad intended to be crossed, to define by his decree the mode in which such crossing shall be made, and if, in his judgment, it is reasonably practicable, and public safety so requires, to avoid a grade-crossing, he may, in his discretion, by his decree, define and regulate the mode and manner of such crossing, and thereupon such crossing shall be made in the mode defined by such decree, and in no other way.
“Sec. 2. That crossings of steam railroads by steam or electric railroads, within the limits of cities, shall be made subject to the present existing laws in regard to the same.”

The vice-chancellor to whom the cause was referred ordered the crossing to be at grade of the said road of the steam railroad company. From this decree the appeal is taken.

The validity of the decree is challenged by the appellant on the ground that the statement of facts recited in the petition of the street railway company was not established before the vice-chancellor by proofs aliunde, and that therefore the chancellor was without jurisdiction to make the decree.

The petition, verified by affidavits, was served upon the steam railroad company by direction of the chancellor, and was permitted to be used on the hearing by the vice-chancellor, notwithstanding the objection of the appellant. The petitioner claimed that the verified petition was competent and sufficient evidence under rule 138 of the court of chancery, which provides that

“Affidavits aud petitions duly sworn to, on which orders to show cause may he granted, if served as affidavits, may be used on the hearing of the order to show cause.”

The jurisdictional facts set forth in the petition are, viz.:

Corporate existence of the Trenton Street Railway Company, by the consolidation of four electric street railway companies.

The grant by the Crosswicks and Trenton Turnpike Company to the Trenton Street Railway Company of the right and privilege to construct a street railway upon its said turnpike, pursuant to the act of March 16th, 1893. Gen. Stat. p. 3246.

The power of the chancellor to intervene is granted by the legislative act only in cases where the jurisdictional facts are made to appear, and they must be established by competent evidence.

The petitioner relied upon the Chancery rule to give the quality of legal evidence to the affidavits annexed to the petition in support of the alleged jurisdictional acts, and submitted no other testimony, but that rule is not applicable to proceedings under the act of March 22d, 1895, to establish facts not peculiarly within the knowledge of the affiants. Such affidavits cannot-be accepted as competent proof of the corporate existence of the street railway or of the .grant by the turnpike company to the street railway. Those are basic facts, and until they are made to appear the chancellor is without authority to act. Legal proof cannot be dispensed with under this statute by the rule of the court.

The appellant did not file an answer to the petition, but denied the right of the chancellor to make the decree without other proof than the verified petition.

In Cox v. Halsted, 1 Gr. Ch. 311, it was held that on an application by petitioner, verified by affidavit of the party, to set aside a sale, the material facts alleged in the petition must be proven, and that the affidavit of the party, except as to facts peculiarly within his knowledge, must be supported by other evidence. In that case the court held that the petitioners were actors and were bound to make out their case as stated, and could not call upon the adversary until their case was established.

The application was refused for want of evidence, but time was given to the petitioners to supply the requisite proofs to be used on final hearing.

In Crane v. Brigham, 3 Stock. 29, the court said: “The petition itself is no evidence of the facts stated in it. They must all be proved aliunde. No answer to the petition is required.”

In Carpenter v. Muchmore, 2 McCart. 123, which was an application to open a decree, the same rule was applied, the two cases before cited being referred to in support of the practice.

In the later case of Dinsmore v. Westcott, 10 C. E. Gr. 302, Chancellor Runyon cited Carpenter v. Muchmore, and held that the petition was not evidence of the facts therein set forth.

Philadelphia and Reading Railroad Co. v. Little, 14 Stew. Eq. 525, is not to the contrary.

There the petition, verified by affidavit, set up facts which the records of the previous orders and decree in the original cause which were also part of the record in the case on petition, showed to be true. There was no objection made to the sufficiency of the proof so far, but the question was whether the answer of the receivers of the Philadelphia and Reading railroad, verified by affidavit, was entitled to be read if served as affidavits.

The record showed that no objection was taken before the chancellor to the verified answer, and this court held that it was too late to make the objection in the appellate court.

The authority to proceed under the act of 1895 is given to •the chancellor under the conditions therein specified. The petitioner having failed to show by due proof that his application is within the terms of the statute, the decree below must be reversed.

For reversal — The Chief-Justice, Depue, Van Syckel, Dixon, Garrison, Lippincott, Gummere, Ludlow, Hen-,'D rick son, Adams, Nixon, Yeedenburgh — 12.

For affirmance — None.


author: Dixon, J.

text:
    David J. Pancoast et al., appellants, v. Adelaide E. Geishaker et al., respondents.
    [Filed June 19th, 1899.]
    1. Thornton W. Fay held the legal title to land in trust for the complain•'ants, and then mortgaged the land for his own benefit to one who had no -.•notice of the trust. — Reid, that on a bill to foreclose the mortgage, to which Fay was a party, but the eestuis que trust were not, the decree did not bar the latter, nor did a sale under the decree made to purchasers who had notice of the trust.
    2. Besides the circumstances above mentioned, Fay owned a share of the ■ land in his own right, and the price paid for his share by the purchasers at the foreclosure sale was more than sufficient to satisfy the mortgage —Semble, ■ that as against the purchasers the estate of the eestuis que trust was discharged from the mortgage.
    On appeal from a decree advised by Vice-Chancellor Pitney, whose opinion is reported in Geishaker v. Pancoast, 12 Dick. Ch. Rep. 60.

      Mr. David J. Pancoast, for the appellants.

      Mr. John J. Grandall, for the respondents.
   The opinion of the court was delivered by

Dixon, J.

In 1880 Cyrus J. Fay died intestate, seized of the land now' in controversy, and leaving nine children his heirs, two of whom are the present complainants. In 1885 one of his sons-filed a bill for partition, in pursuance of which the land was sold, and another of the sons, Thornton W. Fay, acting for himself, the complainants and four other brothers and sisters, bought the land, paying therefor by the acquittances of the beneficiaries and cash advanced by them. Thus a trust resulted, and Thornton became trustee for the complainants as to two-sevenths of the land. This trust the complainants now seek to have established and enforced, but the defendants insist that it has been-extinguished.

In December, 1893, Thornton borrowed $500 from Daniel M. Stout, and to secure repayment thereof gave him a mortgage ■ oh this land. Stout is not shown to have had notice of -the • trust, and therefore, to the extent of his rights as mortgagee, lie-stands as a bona fide purchaser for value without notice, a position which in general precludes the hostile interference of a-court of equity. 2 Pom. Eq. Jur. § 591. This, however, did-not extinguish the trust estate, for there remained in the cestuis que trust an equity of redemption.

In February, 1896, Stout tiled a bill in chancery to foreclose his mortgage, but did not make these complainants parties. On that bill the chancellor decreed that the property should be sold,, and that the defendants in the suit should be debarred and foreclosed of and from all equity of redemption of, in and to so-much of the mortgaged premises as should be sold by virtue of the decree. Under this decree David J. Pancoast purchased! the property, in August, 1896, for $1,115.

The defendants contend that by these proceedings the complainants5 equity of redemption was foreclosed.

The effect of these proceedings must be considered in two aspects — -fast, their effect because of the decree; second, their effect because of the sale.

Evidently the language of the decree did not reach the complainants, for it embraced only the defendants in the suit, and these persons were not defendants. But Thornton, their trustee, was a defendant, and hence the question arises whether he did not so represent the cestuis que trust that by barring him they also were barred.

On this subject the equitable rule is thus stated in 1 Dan. Ch. Pr.:

“All persons materially interested in the-subject [of the suit] ought generally, either as plaintiffs or defendants, to be made parties to the suit” (p. J8S). “ In every suit all the persons who have legal rights in the subject in dispute, as well as the persons having the equitable right, should be made parties to-the proceedings” (p. 18Jf). “Where an individual is in the actual enjoyment of the subject-matter, or has an interest in it either in possession or expectancy, which is likely either to be defeated or diminished by the plaintiff’s-claims, in such cases he has an immediate interest in resisting the demand, and all persons who have such immediate interests are necessary parties to the-suit” (p. SSS).

Subject to certain exceptions not here pertinent,

the rule is that all cestuis que trust are necessary parties to suits against their trustees, by which their rights are likely to be affected” (p. SSO). “The rule which requires that all cestuis que trust should be before the court in suits relating to trust property, applies to resulting tnjsts as well as others” (p. S56).

To the same effect are Story Eq. Pl. §§ 193, 197, 207, and Calv. Part. 208. In Haines v. Beach, 3 Johns. Oh. 459, Chancellor Kent reviewed with approval many of the preceding cases, which supported the doctrine that all persons who, at the time of filing a bill to foreclose, have a right to redeem must be made parties to the bill or else they will not be bound by the decree. See, also, Williamson v. Field, 2 Sandf. Ch. 533, 618. Nor does the fact that Stout, the complainant in the foreclosure now under consideration, did not know of the right existing in the cestuis ■que trust, prevent the enforcement of this rule. Godfrey v. Chadwell, 2 Vern. 601, and Morret v. Westerne, 2 Vern. 663, were cases in which want of notice was adjudged to be unimportant, .and the same view was expressed by Chancellor Kent in Haines v. Beach, ubi supra, and was assumed by Chief-Justice Beasley in Wood v. Stover’s Administrator, 1 Stew. Eq. 248.

This general equitable rule has been in great measure abrogated in New Jersey by section 78 of the Chancery act (Gen. Stat. p. 387), but that statute does not reach parties who possess rights not evidenced by any instrument legally capable of being recorded, registered, entered or filed in any public office in the •state, and therefore is inapplicable to the present case.

It thus appearing, then, that in order to foreclose the equity ■of the present complainants, not only their trustee, but also they themselves, should have been brought into court, it follows that they were not barred by any force inherent in the decree which :Stout obtained.

It remains to consider the effect of the sale to Pancoast.

As above stated, a court of equity will not in general assail the title of one who is a bona fide purchaser for value without notice. But Pancoast does not occupy that position. He was the master in chancery by whom the sale in partition above mentioned was made in 1885, and received the acquittances of these complainants for two-sevenths of the purchase-money, in consideration of which he conveyed the property to Thornton. He also was solicitor of the complainants in a suit brought in 1892 by the representatives of one of the cestuis que trust claiming under the same transaction, and doubtless in that suit learned, if lie di.d not already know, all the circumstances of the case. Therefore, when in 1896 he purchased the propérty at Stout’s foreclosure sale, he had abundant notice that there was still outstanding the equity of redemption of the present complainants, and that equity remained, notwithstanding Ilia purchase.

In making this purchase Pancoast acted in behalf of Louise Pay, Roy Alton Pay and Gladys Pay Pillebrown, and on January 16th, 1897, he transferred the title to them, receiving back from them a mortgage for a debt which they owed him. These persons also had full notice of the complainants’ equity; for they are the widow and children of one of the cestuis que trust, and were the complainants in the suit (to which reference has just been made) instituted in 1892 for the enforcement of their equitable rights against Thornton, as trustee.

This suit gave rise to another conveyance, on which these defendants stand. It resulted in a decree for costs against Thornton in favor of the then complainants, and on that decree a writ of fieri facias issued out of chancery February 10th, 1896, under which, on April 3d, 1896, the sheriff of Atlantic county conveyed the premises now in question to David J. Pancoast; ancf this title also passed to Louise, Roy and Gladys by the deed of January 16th, 1897. But as Thornton was the only defendant in that suit, and Pancoast, the purchaser, and his grantees the then complainants, all had notice of the rights of the present complainants, this title is bound by the trust as fully as if it had remained in Thornton; for, as Lord Redesdale said in Adair v. Shaw, 1 Sch. & Lef. 243, “ trusts are enforced not only against those persons who rightfully are possessed of the trust property as trustees, but also against all persons who come into possession of the property bound by the trust, with notice of the trust.”

It thus becomes manifest that the presént holders of the title— Louise, Roy and Gladys — the owners of the legal fee, and Pan-coast, the mortgagee, are in no better condition, with respect to the complainants’ equity, than .Thornton himself would be if he held their title, except so far as under the Stout foreclosure they became quasi-assignees of the Stout mortgage, which as to' the ■complainants is still an unforeclosed mortgage. These holders, ■together with Thornton and the husband of Gladys, are the present defendants, and consequently their rights and obligations, in their twofold character, as assignees of Thornton with full knowledge of his obligations to the complainants, and as .assignees of Stout, who was entitled to be protected as mortgagee against those obligations, are now before us for adjudication.

Thornton having received all the money for which the mortgage was given, his equitable estate in the land, whether possessed by him at the time he gave the mortgage or subsequently acquired, was primarily chargeable with the mortgage debt, and the estate of the complainants was only secondarily liable. When he bought at the partition sale in 1885 he was entitled to only one-seventh of the property, but when he executed the mortgage, or at any rate when the foreclosure took place, he seems to have become entitled to five-sevenths, through settlement with four of his brothers and sisters. In equity, therefore, if the present complainants had been made parties to the foreclosure, they might have had the decree so framed that five-sevenths of the property would be first sold, and if the amount ■due on the mortgage, with costs, was thereby raised, their share would be freed from the charge. According to the decree the .amount then due for principal, interest and costs was $628.49. ■At the sale Pancoast bid $1,115. Assuming that his bid represented the value of the whole property (although, strictly speaking, he must be deemed to have known that he was not buying the complainants’ equity), still five-sevenths of it would be worth $795, more than enough to satisfy the mortgage.

These considerations indicate that Stout’s mortgage really and in substance imposed no injurious lien on the complainant’s ■equitable estate, and none of these defendants has under it any just claim to interfere with their rights. As to them the mortgage should be regarded as satisfied, and their equitable estate ■should be established and enforced.

The relief afforded to them by the decree below is less than that to which in our opinion they are entitled, but as they have ■ not appealed, no modification of the decree in their favor can :regularly be made.

The defendants, who are now the appellants; have no cause for complaint, and as against them the decree below should be .affirmed.

For affirmance — The Chief-Justice, Yan Syckel, Dixon, 'Garrison, Lippincott, Gummere, Ludlow, Collins, Bogert, Hendrickson, Adams, Nixon, Yredenjburgh — 13.

For reversal — None.


text:
    The Franklin Electric Light Company, defendant and appellant, v. The Fort Wayne Electric Corporation, complainant and respondent.
    [Filed June 19th, 1899.]
    A bill was filed by the complainant praying that the defendant company be . declared insolvent, and that a receiver be appointed. After the receiver was appointed the defendant filed a petition, setting up new facts and praying that -the appointment of receiver be vacated. — Held, that it was not necessary to file a bill in the nature of a bill of review to obtain the relief asked for in the petition. A bill of review is necessary after final decree only.
    On appeal from a decree of the chancellor, reported in Fort Wayne Electric Corporation v. Franklin Electric Light Co., 12 Dick. Ch. Rep. 16.

      Mr. Robert H. McCarter, for the appellant.

      Mr. David J. Pancoast, for the respondent.
   The opinion of the court was delivered by

Van Syckel, J.

A bill was filed by the complainant in the above cause, pray-ing that the defendant corporation be declared insolvent and that a receiver be appointed.

After the corporation was declared to be insolvent and a receiver was appointed, the defendant filed a petition, setting up new facts and praying that the appointment of receiver be-vacated.

The chancellor held that, upon the facts set forth, the petitioner was not entitled to relief, and in this respect we concur' with the chancellor, for the reasons set forth in his opinion.

He also held that the relief prayed for could not be granted except upon a bill in the nature of a bill of review.

In our opinion this was not a case for a bill of review. The-order entered was not a final decree, but a mere interlocutory order in the progress of the case.

The authorities are that a bill of review is necessary after' final decree only. 2 Dan. Ch. Pr. 1724; Story Eq. Pl. §§ 21, 403.

In Quick v. Lilly, 2 Gr. Ch. 255, and in Traphagen v. Voorhees, 18 Stew. Eq. 44, there had been a final decree.

The order of the court of chancery should be affirmed.

For affirmance — The Chief-Justice, Van Syckel, Dixon,. Garrison, Gummere, Collins, Bogert, Hendrickson,, Adams, Nixon, Vredenburgh — 11.

For reversal — None.


text:
    John N. Van Orden, appellant, v. Margaret J. Van Orden, respondent.
    [Filed June 19th, 1899.]
    In a suit brought in the court of chancery by a married woman against her husband, to compel the payment of alimony which had been awarded to her by the court of a sister state on a decree of divorce a mensa et thoro, the wife ■ may sue alone, without a prochein ami.

    On appeal from an order advised by Yice-Chancellor Reed.

      Mr. Edwin G. Adams, for the appellant.

      Messrs. Skinner & Ten Eyck, for the respondent.
   The opinion of the court was delivered by

Dixon, J.

The bill in this case alleges that on August 31st, 1897, the supreme court of the State of New York, in a suit brought by the complainant against the defendant, her husband, for divorce a mensa et thoro and alimony, decreed that the parties should be separated and that the defendant should pay to the complainant the sum of $150 a month from May 1st, 1897, during her natural life, for her support and maintenance, and also the sum of $950 for surgical and other expenses in connection with her illness, and $163.87, costs of suit. The bill further shows that the grounds of this decree were the cruelty of the defendant and his abandonment of and neglect to provide for his wife, the complainant.

Oo these facts the bill prays that the defendant who, since the institution of the New York suit has removed to this state,may be compelled to pay to the complainant the money thus awarded to her.

The bill was filed by the wife alone, and the only objection presented on this appeal is that she did not sue by her next friend.

We think this objection is not well taken.

The bill is, in substance, one for alimony, the New York decree being merely the evidence (whether conclusive or not we need not now decide) of her right thereto. As such the suit belongs to the class of causes cognizable, under the ancient judicial system of England, in the ecclesiastical courts. 2 Burn Eccl. L. 450 ; Stones v. Cooke, 8 Sim. 321 note q.

According to the practice of those courts, a wife, if of age, sued or defended in matrimonial causes without a next friend. Coote Eccl. Pr. 320; 2 Bish. Mar., D. & S. § 513; 2 Nels. Div. & S. § 728.

In Smith v. Smith, 4 Paige 92, Chancellor Walworth indicates that in suits for separation and alimony the same procedure prevailed in New York.

In New Jersey this practice has been adopted in all matrimonial causes. Thus, in Amos v. Amos, 3 Gr. Ch. 171 (1842), which was a suit for separation and alimony, Chancellor Pennington said: In this state the practice is settled that a feme covert may apply for a divorce for any cause in her own name,without a prochein ami.” So, in Ballantine v. Ballantine, 1 Halst. Ch. 519 (1846), where a wife, suing for alimony without divorce, had sued by a next friend, Chancellor Halsted said: “ The bill, I think, might be filed by the wife in her own name, without a next friend.”

An examination of the files in the court of chancery shows that the practice thus sanctioned has been uniformly followed from that day to this.

The matter is not affected by our Married Woman’s act, section 14 of which declares that nothing in the act shall enable husband or'wife to sue each other except as theretofore.

The order appealed from, which maintains the bill against this objection, should be affirmed.

For affirmance — The Chief-Justice,'Yah Syckel, Dixon, Garrison, Lippincott, Gummere, Ludlow, Collins, Hendrickson, Adams, Nixon, Yredenburgh — 12.

For reversal — None.


text:
    The Pennsylvania Railroad Company, defendant and appellant, v. The Mayor, &c., of the City of Burlington, complainant and respondent.
    [Filed June 19th, 1899.]
    1. In 1833 the municipal authorities of Burlington had no power to grant to the Camden and Amboy Railroad Company the right to construct and operate a steam railroad longitudinally through a street in the city.
    2. An act of the legislature passed in 1896, to ratify and confirm such a grant, would be, if operative for the laying of additional tracks, a special law “granting to the corporation the right to lay down railroad tracks,” and therefore a violation of the constitutional interdict against such special laws.
    On appeal from a decree advised by Vice-Chancellor Reed, whose opinion is reported in Burlington v. Pennsylvania Railroad Co., 11 Dick. Ch. Rep. 259.

      Mr. Joseph IP. Gaslcill and Mr. Samuel IP. Gbey, attorney-general, for the appellant.

      Mr. Hoioard Flanders and Mr. Samuel W. Beldon, for the respondent.
   The opinion of the court was delivered by

Dixon, J.

The object of the bill in this case is to restrain the defendant from laying a steam railroad track longitudinally through Broad street, in the city of Burlington, and to compel the removal of such portion of said track as was in process of construction when the bill was filed.

The defendant claims the right to lay this track by virtue of an agreement made in 1833 between the city of Burlington and the Camden and Amboy Railroad and Transportation Company, the lessor of the defendant. For the reasons given by Vice-Chancellor Reed in advising the order now under review, we think that agreement was, when made, beyond the powers delegated by the legislature to the municipality, and was therefore void so far as it purported to impair the public easement in the highway.

The defendant further insists that the legislature ratified this agreement by a statute passed April 9th, 1896 (P. L. of 1896 p. 228), and that consequently it is now as effective as if originally authorized. The clause of this statute thus invoked enacts tiiat any contract theretofore made by any city not of the first class, with any railroad company whose road then entered or lay within the city or whose route had been located therein, which contract granted to the company the right to lay its road and construct its tracks in, through, along and upon any of the roads or streets of the city, was by said statute fully authorized, ratified and confirmed.

The terras of the statute, if operative, would have the force for which the defendant contends, but we think that to allow them such force would be in violation of the constitutional provision which forbids the passing of local or special laws “grantr ing to any corporation, association or individual the right to lay down railroad tracks.”

As we are of opinion that before the passage of this statute ■the defendant had not the right to lay the track now in controversy, and the right could only be derived from the legislature, evidently, if by force of the statute such a right was obtained, the statute, within the meaning of the constitution, granted the right to lay the track, and the question then arises whether, in that feature, the statute is local or special.

In considering this question it should be noted that this provision of the statute is distinguishable from enactments which merely remedy the defective or irregular execution of existing powers. The legislature had never even attempted to authorize the city of Burlington to burden the public highways with steam railroads running thereon longitudinally. Hence, the statute cannot be regarded as the mere waiver of formal objections, which a principal might, but need not, interpose against the act of an agent. It is itself the sole source of legislati ve authority.

The railroad companies which, at the passage of this statute, had void “ contracts with any city of the state not of the first class were certainly few in number. So far as appears in this case, that before us is the only one. But if there be others we do not see how the possession of such writings could form a rational basis on which those companies might be deemed a distinct class, for the purpose of receiving from the legislature an absolute grant of the right to lay tracks within municipalities which, at any time in the past, had assented to the writings. Necessarily, the statute can operate only in particular and exceptional instances, whether the companies or the municipalities be regarded, and neither the companies nor the municipalities differ from others of similar character in any point relevant to the object of this law, save that they have mutually executed writings which intrinsically are without legal force. Such a circumstance is too insignificant and unimportant to justify and support the classification suggested.

We therefore think'this provision of the act is special and unconstitutional.

The defendant further urges that, as it has paid to the city $100 annually since the agreement was made, in accordance with the contract, and as the consideration for the rights which it purported to confer, the city is estopped from denying the validity of the grant. But these payments have been received by the city iu its proprietary capacity only, and cannot be made a ground for absolving the municipality from its governmental duty of preserving the public highway from illegal obstruction.

As to the allowance of a preliminary injunction, when the infraction of the public right is clear, the case of Easton and Amboy Railroad Co. ads. Greenwich, 10 C. E. Gr. 565, affords a satisfactory precedent.

The order appealed from should be affirmed.

For affirmance — The Chief-Justice, Van Syokel, Dixon, Garrison, Lippincott, Ludlow, Collins, Bogert, Hendrickson, Adams, Nixon, Vredenburgh — 12.

For reversal — None.


text:
    Emeline Weatherby, Ebenezer Sparks et al., executors, defendants and appellants, v. Maria J. Slape, complainant and respondent.
    [Filed July 5th, 1899.]
    A sheriff having duly advertised a sale of real estate under execution, struck off the property to the highest bidder at the time and place so advertised. Then the purchaser, the parties concerned in the execution and the sheriff went away and the persons assembled at the sale dispersed. About an hour afterwards, the purchaser having refused to comply with the conditions of sale, the sheriff, under instructions from the complainant’s solicitor, returned to the place of sale and, shortly before the expiration of the advertised.hours of sale, publicly announced that the sale was adjourned for two weeks. — Heldt that a legal adjournment was not thereby effected.
    On appeal from an order advised by Vice-Chancellor Reed.

      Mr. Normcm Grey and Mr. Samuel H. Richards, for the appellants.

      Mr. Jonathan W. Acton, for the respondent.
   The opinion of the court was delivered by

Dixon, J.

The object of the bill in this case is to foreclose a mortgage of real estate which secures a bond for $6,315. The obligor, being dead, his executors were made defendants. After decree an execution was issued to the sheriff of Salem county for the sale of the mortgaged premises, and thereupon he advertised that the sale would take place at the county court-house on December 24th, 1898, between the hours of two and five o’clock p. M., to wit, at three o’clock. On the day named, shortly before four o’clock, the sheriff put up the property for sale, and after several other bids the complainant bid $6,800 (her claim amounting to $7,100), and then one of the defendants, the son of the mortgagor, bid $6,850. On that bid the property was struck off* to him. According to the conditions of sale, the purchaser should at once have paid or secured ten per cent, of the price, but this the purchaser refused to do, saying he had an agreement with the complainant that she should take a new mortgage for the whole of the bid. On this refusal the sheriff might, no doubt, have immediately put up the property for sale again or have adjourned the sale, but he did neither. On the contrary, he proceeded to sell other property under another execution, and that being finished, he went away about other business,, and the crowd of persons attending the sale dispersed, among them one of the executors, who had been present to protect the estate of the obligor as far as possible from a claim for deficiency. In the meantime the solicitor of the complainant and the purchaser went to the house of the complainant to confer with her as to the alleged agreement. She denied it, and the interview, lasting about half an hour, ended without any satisfactory arrangement being made. At the close of this interview the complainant’s solicitor went to find the sheriff, and on meeting him instructed him to adjourn the sale. Accordingly the sheriff', at five minutes before five o’clock, at the court-house, called around him the casual bystanders and publicly announced that he adjourned the sale for two weeks. This announcement was duly advertised in the newspapers, and on January 7th, 1899, the sheriff' struck off the property to the complainant for $3,000.

On motion to confirm this sale the executors objected, among other things, that the sheriff had no legal right to make an adjournment when he attempted to do so on December 24th, and that, therefore, the second sale was unlawful, but an order confirming the sale was, notwithstanding this objection, entered. From this the executors appeal.

The power of officers having charge of the sale of land under judicial proceedings to adjourn such sales from time to time is established in this state by statute (Gen. Stat. p. 2979), which also prescribes when and how an adjournment, after it takes place, shall be published, but the mode in which such adjournments may legally be effected, is left to be determined on general considerations.

The length of an adjournment rests largely in the discretion of the officer, and unless it be for more than one week no notice of the adjournment, beyond that given by the act of adjourning, need be published; and even for longer adjournments subsequent publication in the newspapers of a statement of the parties to the cause and of the time and place of the adjournment, without any description of the property, is all that the statute requires. It thus appears that the directions of the statute on this point are of themselves quite inadequate to secure reasonable notice of the adjourned sale. The reason for this obviously is because the legislature assumed that the act of adjourning would be performed in such a manner as would preserve and prolong the force of the original advertisement of sale, in which the property to be sold is accurately described. This assumption is justified by the general rule governing the subject.

Mr. Freeman, in his.work on “Executions,” thus'states the rules prevailing in different jurisdictions:

While the power of officers-to adjourn sales is undisputed, the courts have not agreed on the character of the notice which must be given of the time to which the adjournment is made. On the one side, it is insisted that a new notice must be given for the time and in the manner required in the first instance. On the other side, the rule is maintained that the officer may give notice by proclamation, made in the presence and hearing of the persons assembled at the time first fixed for the sale.”

New Jersey has adopted the latter doctrine. Allen v. Cole, 1 Stock. 286.

Manifestly this rule was not complied with in the present case. No proclamation of an adjournment was made in the presence and hearing of the persons assembled at the time fixed for the sale. When proclamation was made those persons had all departed, and they had done so not because they could not be induced to bid upon the property at any price, but because it was evident to them that the sheriff’s purpose to sell had been executed. He had struck off the property to a bidder, and the parties directly interested in the sale — the purchaser, the defendants in the suit, the solicitor of the complainant, and the sheriff— had all left the place, as if everything intended to be done had been accomplished. When, in view of these circumstances, the persons who had been brought together by the original advertisement of sale, had gone away, we think it became clear that the force of that advertisement was utterly spent, and therefore the power of the sheriff to effect a legal adjournment by his proclamation was ended. If the property was to be sold again, a re-advertisement de novo was necessary. Givan v. Doe, 5 Blackf. 260.

The order confirming the second sale should be reversed and the sale set aside.

For reversal — The Chief-Justice, Depue, Van Syckel, Dixon, Gaeeison, Gummeee, Collins, Bogeet, Hendeickson, Nixon — 10.

For affirmance — Ludlow—1.