author: Leaming, Y. C.

text:
    David W. Doan v. Winfield C. Jones et al.
    [Submitted May 14th, 1916.
    Determined July 11th, 1916.]
    1. A fraternal order, organized as a voluntary association and after-wards incorporated, and the incorporation later dissolved, is not after the dissolution revived as a voluntary association.
    2. Under the facts in this case—Held, the call issued for the organization of a new grand body was sufficient and such grand body was properly organized.
    3. Under the facts in this case—Held, that whether the state organization was a corporation or. not, the organization of the new grand body was authorized as essential to the purpose of the order.
    On final hearing on bill for injunction and relief.

      Mr. John F. Earned, for the complainant.

      Mr. Oscar B. Bedrow, for the defendants.
   Leaming, Y. C.

The present controversy is to determine which of two organizations is entitled to enjoy the rights, privileges and property heretofore in the undisputed enjoyment of one body. Each of the two contending organizations claims to be presently entitled to exclusively enjoy the rights which prior to October 30th, 1914, were enjoyed by a beneficial society known as the Grand Circle of New Jersey, Brotherhood of America. On that date certain proceedings were taken at a special meeting of that body under and by virtue of which defendants claim that the organization which they then perfected and now maintain of the same name and general purpose as the old organization is entitled to exercise and enjoy the rights, privileges and property theretofore enjoyed and exercised by the old organization, and that the old body then ceased to exist as a distinct organization. Complainants contend that the proceedings then taken were irregular and ineffectual to accomplish that result and that the old organization still survives with its rights unimpaired; in that view the present bill has been filed in behalf of the old organization for tire procurement of a decree confirming its status and restoring its rights.

No adequate consideration can be had of the effect of the action taken at the special meeting of October 30th, 1914, without reference to the conditions existing prior to and at that time.

The Brotherhood of America consisted of three separate classes of interdependent organizations, namely, a supreme body, known as the Supreme Circle; state organizations, known as Grand Circles, and various subordinate circles or lodges in the several states. An examination of the official literature of these several organizations discloses a complete interdependence of these three classes of bodies. The Supreme Circle is defined in its by-laws as “the fountain head of the order,” with exclusive jurisdiction over the ritual, regalia, emblems and forms of ceremonies, and with power to alter or amend them; with power to grant what in lodge nomenclature is known as “charters” for grand bodies and suspend such charters for cause, and to suspend subordinate circles for violation of laws of the Supreme Circle; also to hear appeals from actions of grand bodies. The membership of the Supreme Circle was composed of its elective officers and representatives sent from the several grand circles in numbers based on 'membership, and persons who had become the chief officers of grand circle's:' The general revenues of the Supreme Circle have been, from charter fees, copies of' ritual, paraphernalia and supplies and from a per capita tax paid by grand circles. Two treasury funds have been maintained by it—• a general fund and death benefit fund—and some of the officers 'of the Supreme Circle have been paid in part from each of these funds. The latter fund was in the nature of insurance of lives of members of subordinate circles. A member of a subordinate lodge became a member of this fund anc| paid dues to the Supreme Circle for the benefit of the insurance. The several grand circles have had jurisdiction oyer their various subordinate circles, with power to grant charters to subordinate circles and revoke, arrest or suspend them for cause, and hear and determine all grievances, subject to appeal. Its membership has been composed of members of the subordinate circles who have attained a certain degree and of representatives ■ elected by the several subordinate circles within its jurisdiction. Its revenues have been derived from fees charged for charters to subordinate circles and a per capita tax from each subordinate circle and charges for paraphernalia and supplies furnished. The grand circles also have had a membership-at-large fund for sick benefits, which fund has been supported by dues from members of subordinate circles whose lodge charters have been surrendered. Subordinate circles are individual lodges supported by dues of members; sick and disability benefits are paid to members from the funds of the circle to which they belong. ■

This brief outline of the principal governmental and monetary features of the order, without any consideration of its social aims and purposes, sufficiently discloses the extent of the interdependence of the three classes of bodies. In general, the grand bodies have been govemmentally subordinate to th.e supreme body and the subordinate lodges to the grand bodies, but in some instances the supreme body has been privileged to exercise direct control of tire subordinate lodges. Pecuniarily, each body has had its obligations to individual members of subordinate circles. Subordinate lodges supply sick and disability benefits to their members; grand bodies supplied like benefits to certain members of the order; the supreme bodjr has heretofore supplied death benefits to members of individual subordinate lodges. Without allegiance of subordinate lodges there could be neither grand nor supreme bodies, because there could be no complete membership; without grand bodies there could be no supreme body in harmony with the'general plan of work; without a supreme body the “fountain head,”- as it is called, would be lost. That body, though essentially representative, has been in practical operation the source of-all power-and authority in the order. With its exclusive jurisdiction over the ritual, and its power to create and dissolve grand bodies, its existence is obviously a necessity to the pursuance of the general scheme of society organization along the established lines.

In the year 1896 the Supreme Circle became incorporated in this- state under the name of the Supreme Circle, Brotherhood of the Union, pursuant to the provisions of the act of April 9th, 1875, for the incorporation of benevolent and charitable associations. The act of 1875 was repealed by the act of April 21st, 1898, -entitled “An act to incorporate associations not for pecuniary profit,” so far as the-provisions of the former act were repugnant to the latter, but rights of corporations under the former act were preserved, and provision was made for corporations under the former act to adopt the latter act. 1 Comp. Stat. p. 125. In 1905, the Supreme Circle adopted the provisions of the act of 1898, and at the sáme time changed its name to “The Supreme Circle, Brotherhood of America.”

In September, 1914, proceedings for dissolution were instituted by the Supreme Circle under section 11 of the act of 1898 (1 -Comp. Stat p. 128), and on September 14th, 1914, a certificate of dissolution was- issued by the secretary of state. Thereafter a receiver in insolvency was appointed by this court, who is now administering the Supreme Circle assets for the benefit of its creditors. This dissolution of the Supreme Circle corporation was admittedly occasioned by the circumstance that it had found it impossible to longer successfully administer its life benefit fund without certain amendments to its by-laws, which proposed amendments the courts of this state had held to bo violative of the contractual rights of certain dissenting members who held insurance payable from that' fund. When the Supreme Circle was dissolved the officers and some of the members of the Grand Circle were advised that the dissolution, in its practical force, was operative as a dissolution of the grand and subordinate circles, and that for the preservation of the subordinate bodies forming the Grand Circle, it was necessary for the Grand Circle to take appropriate action to meet the new conditions brought about by the dissolution of the supreme bod}'. The committee of ways and means of the Grand Circle then met and formulated plans for the purpose stated, to be presented to a special meeting- of the Grand Circle to- be called for that purpose. The plans recommended by that committee were for the officers and some of the members of the Grand Circle to form a corporation under the act of 1898, heretofore referred to, under the name of “Brotherhood of America,” and then have the Grand Circle, at a special meeting to be called for that purpose, adopt or declare allegiance -to the new corporation, and then adopt new temporary by-laws for the guidance of the Grand Circle until such time as new permanent by-laws should be adopted. These new by-laws recommended by the committee for the future guidance of the Grand Circle were in general in harmony with its previous by-laws and included a provision that except as therein noted the laws and usages governing the former Grand Circle should remain in force with the words “Supreme Circle” and all. references thereto eliminated. In general, the plan proposed was to reorganize with like officers and rules and aims as'theretofore, but wholly independent of the old Supreme Circle, and in that manner continue its existence as the representative body of the several subordinate lodges, to the end that the work of the brotherhood could be perpetuated in this state and the subordinate lodges be thus saved from unnecessary injury by the loss of the supreme body. Pursuant to the recommendation of the ways and means committee, a special meeting of the Grand Circle was called for October 30th, 1914. At that meeting thirty-one circles were represented and six were not represented. _ The testimony, as I now recall it,- is to the effect that these six circles which were not represented have since approved of the proceedings which were adopted at the meeting. At this special meeting the recommendations of the committee, as already set forth, were followed. The first proceeding, was the adoption of a resolution which had been prepared by the committee. That resolution was as follows:

"Whereas, The Supreme Circle, B. of A., at its special session held at Camden, September 26th, 1914, by a vote of 98 yeas and 14 nays, dissolved itself and all grand and subordinate circles; and whereas, the board of officers and others, members of Grand Circle, B. of A. of New Jersey, learning from counsel of the legality of the dissolution of the late Grand Circle, and for the purpose of perpetuating the brotherhood which for over sixty-five years had been in active operation in our state, and also to conserve the best interests of those who desired to still carry on the work of brotherhood, did, on the 1st of October, 1914, apply for incorporation as the Grand Circle, Brotherhood of America, with all the rights and privileges appertaining thereto, which act of incorporation has been granted by the state; now, therefore, be it resolved, That this meeting ratify and endorse the action of the board of officers and others, and accept the act of incorporation as a charter, and form now by thus accepting the said act of incorporation a new Grand Circle, Brotherhood of America of New Jersey, by the election of a board of officers as the legal and duly authorized officers of the now organization.”

This resolution was adopted by a vote of seventy-one to forty-one. The dissenting members then withdrew and officers of the new body were then elected and the new by-laws as recommended by the ways and means committee were adopted. This organization has since been maintained and is exercising jurisdiction as the Grand Circle of this state over most of the subordinate circles in this state and is recognized by those circles as such. At its annual meeting, on September 6th, 1915, thirty-four subordinate circles were represented.

Claiming the proceedings taken at the' special meeting to be irregular, representatives of eight circles met on the date on which the annual meeting would have been held but for the proceedings taken at tlie special meeting and elected officers for the succeeding year. In consequence, these two organized bodies each now claim to be entitled to exercise the privileges and functions of the Grand Circle in this state.

The claim is made by complainant in behalf of what may be styled for convenience the old Grand Circle that the proceedings at the special session of that circle were irregular and inoperative to accomplish either the result intended or effect any change in that body.

It is claimed that the statutory dissolution of the Supreme Circle in no way impaired its status as the supreme body of the order; that the effect of the dissolution was merely a surrender of its statutory charter and a return to its former status as a voluntary unincorporated association; that its dissolution and insolvency and receivership in no way severed the allegiance due to its authority from the grand and subordinate bodies of this state, and in no way necessitated or justified a reorganization of those bodies or any readjustment of plans for their future work. Acting upon that assumption the Supreme Circle, after its dissolution, became incorporated in the State of Pennsylvania and now claims allegiance from all New Jersey bodies. What has been styled the old Grand Circle, with its few constituent bodies, recognizes that present allegiance; the new, or reorganized Grand Circle, with its constituent bodies, denies allegiance to this Pennsylvania Supreme Circle. That condition is the underlying spirit and moving cause of the present controversy; in form, the controversy involves only the respective rights of the two contending grand circle organizations as against each other.

I am unable to reach the conclusion that the statutory dissolution of the Supreme Circle was in its effect and consequences a mere “surrender of its charter” and without vital effect upon the relation theretofore existing between it and the Grand Circle and subordinate bodies in this state. The Supreme Circle, by the terms of our statute (1 Comp. Stat. p. 126 § 3), was “a body politic and corporate” with the several powers ^specifically enumerated in the act. The proceedings of dissolution were taken under section 11 of the act. 1 Comp. Stat. p. 128. That section specifically sets forth the proceedings to be taken to dissolve the corporation and declares that when such proceedings have been taken and a certificate of dissolution shall have been issued from the office of the secretary of state, the corporation shall be dissolved, but that no distribution of assets of the corporation shall be made until its debts have been fully satisfied, and that no property shall be diverted Irom any trust created by the donor or'grantor. I think it impossible to contemplate this section as meaning less than its language specifically declares, namely, a dissolution of the corporation, or to regard such dissolution in its effects and consequences differently from a dissolution of any other corporation. At dissolution the organization necessarily ceases to exist lor all purposes except that of winding up its affairs for the purpose of paying its debts and distributing its assets, and the dissolution section specifically forbids such distribution until the debts are fully satisfied. The idea that at dissolution the former voluntary unincorporated association automatically ’ comes.-into being with its former rights, powers and privileges as such reinstated and unimpaired except as to its assets seems to me to be wholly inconsistent, not only with the terms of our statute, but with any adequate conception of the effect of incorporation and the force of dissolution.

My attention has been called to an opinion filed by the supreme court of Pennsylvania in the 'case of Shrtner v. Sachs, not yet officially reported. It appears by that opinion that a Pennsylvania subordinate circle of the same order by a majority vote transferred, its allegiance to this reorganized New Jersey Grand Circle and based its action upon the dissolution of the Supreme Circle. The opinion recognizes that right of the subordinate circle provided the Supreme Circle were dissolved and not revived by its reincorporation in Pennsylvania, but holds that the dissolution of the Supreme Circle was a mefe “surrender of its charter,” and that its subsequent incorporation in Pennsylvania re-established its position as the supreme body of the order. The high jespect in which the decisions of that court arc justlv lield almost impels the adoption of the views there expressed; but as the .very foundation of the decision is a New Jersey statute which is neither referred to nor in any way considered. it would seem that the terms of the statute may not have been brought to the attention of the court.' "Whether the New Jersey statute was' in fact offered in evidence in that case does not appear.

I am unable to escape the conclusion that the statutory dissolution of the Supreme Circle was operative to leave the Grand Circle without an authoritative head and that the dissolution so far impaired the general'plan, of organized operation as to call for and fully justify some plan of reorganization of the Grand Circle looking to a preservation and continuance of the work of the order.

It is further claimed by complainant that the call of the special meeting of the Grand Circle inadequately expressed the purpose of the meeting.

The by-laws of the Grand Circle provide that calls of special sessions of that, body shall specifically state the reasons for the call and that no business shall bo transacted at a special session other than that for which the session was called. The call was as follows:

“Having received a petition signed by the constitutional number of Exalted Washingtons requesting me to call a special session of the Grand Circle for the purpose of taking action toward the protection of the subordinate bodies comprising the Grand Circle brought about by the dissolution of the Supreme Circle, Brotherhood of America, I hereby grant the petition and call upon all officers, Exalted Washingtons and representatives to convene in special sessions in Morgan’s Hall, corner 4th and Market, 3d floor, Camden, N. J., on Friday, October 30, 1014, at 10 a. m.”

I think the call adequate to support the action taken. The members were reasonably apprised that- the purpose of the meeting was to take whatever action they should determine upon as necessary for the protection of the subordinate bodies so far as that necessity arose from the ■ dissolution of the Supreme Circle. It was for these members, when assembled, to determine upon the necessary and appropriate measures to be taken.

Nor am I able to conclude that the measures which were taken were not necessary and appropriate to protect and perpetuate the subordinate bodies in view of the dissolution of the supremo body. The measures taken were, in effect, a declaration of independence from the dissolved Supreme Circle and allegiance to the new corporation which had been formed prior to the meeting. A reorganization was then effected by the election of new officers and the adoption of by-laws similar to the old, but eliminating' all references to the Supreme Circle. The resolutions which were adopted in terms make reference to the “old” and “new” grand circles. It seems immaterial whether the proceedings bo regarded as effecting a reorganization or a new succeeding organization. A reorganization or readjustment of the plan of work had become necessary by a destruction of one of the three interdependent branches of the order, and the aim and purpose of the proceedings which were taken were the adoption of measures to enable the order to continue its activity in this state without the necessity of supervision or control of the old Supreme Circle.

Objection is also made that some of the ritualistic ceremonies •were not observed at this .special meeting. It is alleged that the charter from the Supreme Circle to the G-rand Circle was not spread upon the altar of the lodge room and that the pass word was not taken up. The former allegation appears to be established. The reason suggested is that the supreme body had dissolved. The evidence - is in conflict as to whether customary practices were observed touching the pass word. The fact appears to be that the pass word was ordered to be taken up, but that the officers performing that duty did not require it to be given by certain members whom they well knew to be entitled to be present. That practice appears by the evidence to conform to the customary usage of that body.

The hill alleges that the Grand Circle at the time of the special meeting was a voluntary association and the answer admits that averment. The amended bill alleges that the Grand Circle had prior to that time become incorporated, and the amended answer admits that averment. The proofs establish that in 1877 the Grand Circle became incorporated under the act of April 9th, 1875, b3r the name of “the Grand Circle, B. H. H. E. of New Jersey.” Subsequently, the Supreme Circle changed its name from Supreme Circle, Brotherhood of the Union, to Supreme Circle, Brotherhood of Amercia, and the Grand Circle lias since been uniformly recognized under a like modified name, but no change of name has ever been fornrally adopted. It thus appears that the Grand Circle was an incorporated body at the time of the special meeting in question. This is referred to here by reason of the claim now made by complainant that as a corporate body the Grand Circle could not adopt a new corporate charter in the manner set forth in the resolution which was adopted at the special meeting. In response to this claim it is pointed out that the act of 1898 (1 Comp. Stat. p. 127 § 5) authorizes corporations under the act of 1875 to become incorporated under the act of 1898 in the same manner as though unincorporated. I think it unnecessary to consider here whether the proceedings which were taken at the special session were operative to constitute the Grand Circle a corporation under the act of 1898 or whether its corporate existence continued under the act of 1875. The proceedings which were taken were 'made necessary by the new conditions which had arisen and were intended to accomplish, and, in my judgment, were adequate to accomplish, a reorganization of the Grand Circle in such manner that the mutual relation between it and its subordinate bodies could continue unimpaired and the work of the order could be preserved and fostered without the existence of the former Supreme Circle as the fountain head and supreme governing body. In practical operation that result appears to have been accomplished, and, in my judgment, the means adopted were lawful and appropriate to that end and fully justified by the conditions which had arisen. The general plan or scheme of the order had been interrupted or disrupted in such manner as to render the readjustment a necessity.

My conclusion is that the rights asserted by complainant have not been established with that certainty which would justify this court in denying to the reorganized Grand Circle the right to continue its work along the lines now pursued.

I will, accordingly, advise a decree dismissing the bill.


source: Caselaw Access Project

author: Beaming, Y. C.

license: Public Domain

text:
    Camden Safe Deposit and Trust Company v. Eliza Guerin et al.
    [Submitted October 6th, 1916.
    Determined October 25th, 1916.]
    1. Under the facts in this case, the corpus of the residuary estate was intended to vest at the death of persons not necessarily in being at the testator’s death, and hence was within the rule against perpetuities, and the bequest wholly failed, and the residuary estate at the death of the testator passed to his heirs-at-law and next of kin, subject to the lawful operation of the trust created.
    2. Certain bequests in this will as to division of income are valid, excepting in the case of surviving husbands who were not identified and might be persons not in being at the testator’s death.
    Certain specified distribution of income, not vesting until the death of a person who might not be in being at the testator’s death are also within the rule against perpetuities, and must fall into the corpus of the estate.
    4. The trustee’s legal title to the residuary estate is superior to the reversionary equitable title of ’the beneficiaries.
    5. The period of a trust may lawfully extend to the decease of any designated person in being at the death of the testator and twenty-one years thereafter.
    6. Where a naked power of sale involves only the conversion of real estate into personal property, the entire interest therein belonging to one person, equity will not compel such conversion against the will of the cestui que trust but will permit him to take the land; but this will not be done where other cestuis que trust, in equal right, dissent.
    On final hearing on bill for 'construction of will of Joseph Ogden Cuthbert and cross-bill for partial distribution of trust estate.

      Mr. George J. Bergen, for the complainant.

      Mr. John G. ITorner and Mr. Lewis for the defendants T. Sherman Borden and Rebecca Borden.

      Messrs. Wilson <£ Carr, for tlie defendants James Blair Cufilbert, Edgar G. Cuthbert and the Broadway Trust Company.

      Mr. Adam U. Sloan, for the defendants Hannali Ebert and others.
   Beaming, Y. C.

Tlie bill of complaint in tliis suit lias been filed by trustees under the will of Joseph Ogden Cuthbert, deceased, and seeks directions from this court touching the administration of the trust. All persons interested in the estate have been made defendants.

Testator died November 30th, 1887. After certain specific bequests testator devised and bequeathed the residue of his estate to certain designated persons and to their heirs and assigns and successors in office in trust, and specifically defined the nature and extent of the trust.

• The trust which is declared by the will first has- reference to the disposition which the trustees are directed to make of the net income of the residuary estate during the continuance of the trust and deals with various contingencies which are to determine the persons to whom' the net income shall be payable from time to time. It is then provided that upon the happening of certain contingencies the trustees shall distribute the corpus of the residuary estate in manner therein specifically set forth.

At the date of the will, as well as at testator’s death, he had three sons, a daughter and a granddaughter—the daughter of a deceased son—who, in absence of a will, would have been his heirs-at-law as well as his next of kin.

The provisions of the will for the termination of the trust and distribution of the corpus of the residuary estate are as follows:

“Upon tlie dentil of all my sons and daughter and granddaughter Mary Rue above named and their surviving husbands and wives; also after the death of all tlie children of tlie first generation of my said sons,( daughter and granddaughter Mary Rue, the trusts hereby created shall-cease, and the Trustees of this my will, or their successors in office,shall part, divide and distribute all' the residue of the capital of my. estate to and among the lawful grandchildren of my said sons, daughter and granddaughter Mary Rue, absolutely in. the shares and ■ proportions above directed respecting the income, ■ clear of further trusts, per stirpes and not per capita."

The corpus of the residuary estate is thus given to vest at the death of persons who are not necessarily in being at the decease of testator. The well-defined rule of law against the creation of perpetuities forbids a gift which is to vest on a contingency of that nature. Husbands and wives of the children and grandchild of testator, and also children of testator’s children and grandchild, could come into being after the death of testator, and no gift could be lawfully made to vest at their death. It results that the gift of the corpus of the residuary estate wholly failed and that estate at the death of testator passed to his heirs-at-law and next of kin under our intestacy laws, subject to the operation of all lawful provisions of the trust relating to the management of the' estate and distribution of the income during such period as the trust could continue. The circumstance that the residuary estate was part personal property and part real estate is here immaterial, as tire heirs-at-law and next of bin of testator were identical at his decease. At the death of testator the equitable title to the corpus of his residuary estate accordingly passed to his four children and grandchild in equal shares, subject to the operation of all lawful provisions of the will relating to the trust for the management of the estate and distribution of the net income therefrom. Gray Per. § 414.

Joseph O. Cuthbert, Jr., one of the sons of testator, has since died without issue. His equitable title to the one-fifth share of the corpus of the residuary estate then vested in the three remaining children and the granddaughter" of testator, thus constituting each the equitable owner of one-fourth of the corpus, subject to the trust relating to the management of the corpus and distribution of the income. Each of these three remaining children of testator have since died leaving issue who have inherited their parents’ respective shares of the corpus, subject to the operation of the trust; the granddaughter of testator is still alive. The legal title to the corpus of the residuary estate "is still in the trustees for the purposes of the trust.

The trust created by the will for .the management of the residuary estate, and the distribution of the net income therefrom, is also in conflict with the rule against perpetuities in some of the provisions of the trust; in other respects its provisions axe valid and will be enforced.

One-fifth of the net income is directed to be paid by the trustees to each of the four children of testator during their respective lives; one-half of the remaining one-fiftli to be paid to the granddaughter of testator for life and the other half to her mother for life. These are valid provisions of the trust and conferred upon each of these six beneficiaries a right to the shares of the income' named during their respective lives. As alfcady stated, the granddaughter of testator is still alive; all the children of testator are now deceased.

The trust next provided that upon the decease of the mother of the granddaughter her one-tenth share of the income should be paid to the granddaughter for life; the mother of the granddaughter is now deceased, and the granddaughter has thus become entitled to one-fifth of the net income. .

The trust then provides as follows:

“Upon the death of any of my sons or daughter or granddaughter Mary Rue leaving a wife or husband surviving them, one-third of the income so as aforesaid made payable to said decedent shall thereafter be paid to such surviving wife or husband for life, the remainder of said income shall be paid to the child or children of such decedent, if any, during the life of such children’s surviving parent. In case such son or daughter or granddaughter Mary Rue so dying should leave no wife or husband to survive them; also after the death of’any such surviving wife or husband; I give, devise and bequeath that fifth part of the share of the income of my estate so as aforesaid held in trust for such son, daughter or granddaughter Mary Rue for life, to all and every the child or children of such deceased son, daughter or granddaughter Mary Rue who may he living at the time of the death of such parent in equal parts and shares, during their respective lives to be paid to them by my said Trustees upon their own receipts only and so that the said capital and income shall not be subject to the debts, control or engagement of my grandchildren.” ■ ■

These provisions of the trust may be best considered in their application to the beneficiaries severally. As the granddaughter, Mary A. Bue, is still alive and has a husband and children living at this time, the several contingencies may be advantageously applied to her share of the income for purposes of illustration.

It will be observed that in the event oí her decease leaving children and no husband surviving her, her one-fifth share of the income is made payable to her surviving children during their respective lives: This is a valid provision of the trust, as the rights of the surviving children are made to vest at the decease of a granddaughter specifically named in the will. It, is also provided that in the event of her leaving a surviving bus-band and child or children, one-third of her share of the income is to lie paid to the surviving husband during his life, and the remaining two-thirds to her surviving child or children during the life of her surviving husband. These are also valid provisions of the trust for the reasons above staled. It is next provided that at the death of such surviving husband her entire one-fifth share of the income shall be paid to her children who survive at that time. This attempted gift over is void, for the reason that it is made to vest at the death of a surviving husband of Mrs. Rue who.is not identified. At the death of testator it was possible that Mrs. Rue’s surviving husband might be a person not in being at that time. It is immaterial that Mrs. Rue may have had a husband living at the decease of testator, for he is not specified in the will as the husband to which the contingency solely relates. The possibility of his death, and of Mrs. Rue's remarriage, renders the vesting of the bequest dependent upon the death of a person who is not necessarily in being at the time of testator’s decease, and violates the rule requiring it to vest within twenty-one years after the death of a person in being at the decease of testator. It follows, in the event of Mrs. Rue leaving a surviving husband, her share of the income at the decease of such husband is undisposed of and will necessarily fall into and become a part of the corpus of the residuary estate. The gift over to the children of Mrs. Rue, in the event that she leaves no surviving husband, is not impaired by the circumstance that alternative contingencies are contemplated by testator at her decease; an estate is made to vest at her decease in either event.

As already stated, the four children of testator are now deceased. The trust provisions above applied to the granddaughter, Mary A. Rue, will apply iu like manner to the three children of testator who left children surviving them.

The son Henry C. Cuthbert left him surviving a widow, who is still alive, and also left surviving children. At his death two-thirds of the one-fifth of the income became payable to his children during the life of the surviving parent and the remaining one-third to his widow during the same period. At her death this one-fifth of the income will fall into the corpus of the estate, for the reasons already stated.

The soar Allen Cuthbert died leaving children and no widow. His one-fifth share of the incoane then became payable to his children for their respective lives.

The daughter, Mary C. Gillespie, died'leaving children and no husband surviving her. Her one-fifth share of the incoane then became payable to her children during their respective lives.

As already stated, the son Joseph 0. Cuthbert, Jr., died without leaving a child or children, but left a widow, who is still alive. One-third of the one-fifth share of the income then lacéame payable to his widow for life.

The only provision of the trust touching the paymeaat. of the share of iaacome payable to the soars or the daughter or the granddaughter of testator at the death of such son, daughter or granddaughter childless, is found in the concluding part of the ninth item of the will. That provision is as follows:

“Provided, however, that in case any of my said children or granddaughter Mary Rue should die without leaving any child to survive them, then upon the death of the surviving husband or wife, if any, that share or fifth part of the income of my estate which was so held in trust for the life of such decedent shall be paid by my trustees to my surviving children, and the issue of any of my children who may be then dead leaving issue,'in such parts and shares and for such , estates that the number of surviving children shall be added to the number of those then dead leaving issue, and those living shall each take one fractional share of income corresponding to the whole number thus formed and the issue of my deceased children shall together take the fractibnal share of income that would have appertained to their deceased parent if then living, for and during their respective lives. My intention being to give an equitable life estate of one-fifth part of the income of all my residuary estate to each of my sons Joseph O. Cuthbert, Jr., Allen Cuthbert and Henry C. Cuthbert and to my daughter Mary C. Gillespie and my granddaughter Mary A. Rue subject to the trust and conditions above set forth with remainders over after their death as above limited to my grandchildren for life, Mary Rue’s share of income to be divided equally with her mother so long as the latter may live.”

Touching the above-quoted provision, it will be observed that the gift over of the income to surviving children of testator, or their issue in the event of the death of a child, or the granddaughter of testator without leaving issue, would be a valid gift if made to vest at the time of the decease of such child or the granddaughter. But, by the language above quoted, no interest is declared to vest in the surviving children or their issue until the decease of a surviving husband or wife of the child or the granddaughter dying without issue. This postpones the vesting until the death of a jDerson who may not be in being at the death oE testator. The evidence also discloses that all the children of testator are now deceased and that all left issue except the son Joseph, last above referred to, who left a widow him surviving, who is still alive, and who has become entitled for her life to one-third of the one-fifth share of income which was payable to her husband. It follows that no lawful provision of the trust exists to authorize the payment to anyone of the remaining two-thirds of the income which was payable to Joseph during his-lifetime. That part of the income necessarily falls into the corpus so long as the trust continues, and the same will be true as to the one-third of the one-fifth at the decease of the widow of Joseph.

By the sixteenth paragraph of the will provision is made for distribution of parts of the corpus of the residuary estate to great grandchildren of testator -in certain events; but those provisions are clearly invalid as contemplating an estate vesting after the decease of persons not necessarily in being at the death of testator.

The foregoing sufficiently defines the scope and operation of the lawful provisions of the trust.

A 'cross-bill has been filed in behalf of certain children of deceased children of testator demanding that the trustees be required to make partial distribution to them at this time of the corpus of the estate. Partial distribution is resisted by other beneficiaries.

It is pointed out in behalf of the beneficiaries seeking partial distribution of the corpus that they enjoy a reversionary equitable title to undivided shares of the corpus, and are also entitléd. to receive under the trust the net income for their respective lives of shares less in proportionate extent than their reversionary rights in the corpus; it is accordingly urged that these life rights to the income necessarily merge in the larger equitable reversionary rights in the corpus and entitle them to present complete enjoyment of those proportionate parts of the corpus on which they respectively receive the income.

I am unable to adopt that view. The legal title of the corpus is vested in the trustees for all lawful purposes of the trust. That intervening legal estate is operative to prevent the merger which is here suggested so long as the lawful purposes of the trust sustain its operation. That legal title of the entire corpus has been vested in the trustees by testator for purposes of active management of the entire corpus and the distribution of the proceeds therefrom in manner specifically directed by testator. In order to effectuate these lawful purposes of testator to their fullest possible extent-that management must continue at this time, and the reversionary equitable estate in the corpus must remain in subservience to the legal title.

The suggestion has also been made that the rule against perpetuities will be violated because the trust will be continued as to some of the beneficiaries of the income for a period exceeding twenty-one years after the termination of the lives of the persons at whose decease and because of whose decease they became entitled to shares of the income is untenable. The period of a trust may lawfully extend to the decease of any designated 'person, or survivor of any number of designated persons, in being at the death of a testator, and, if so directed, twenty-one years thereafter. Gray Per. §§ 189, 190, 216. The life of Mary A. Eue, accordingly, supports the continuance of this trust for the management of the entire corpus and the distribution of the income therefrom.

Where trust duties under a naked power of sale involve solely the conversion of real estate into personal property and the distribution of the proceeds, and the whole beneficial interest in the land thus directed to be converted belongs to the person for whose use it is given, equity will not compel the trustee to execute the trust against the wishes of the cestui que trust, but will permit him to fake the land, if he' elect to do so before the conversion has actually been made. But, even in such case, where there are several cestuis que trust, while one may make an election tyhich will be operative to effect a legal conversion of his interest he cannot, against the will of the others, exercise an election which will be effective to entitle him to receive his undivided share in specie. Condict v. Condict, 73 N. J. Eq. 301, 307; Cronan v. Coll, 69 N. J. Eq. 694. The reason appears to be that the remaining undivided shares may not sell so beneficially in proportion as if the estate were entire. 3 Lew. Trusts 957. It is in like manner impossible to say that with a considerable portion of the corpus of this estate removed from the management of the trustees, the net income of the remaining portion will be as beneficial to the remaining beneficiaries as is the lesser but proportionate fractional part of the net income of the whole.

I will advise a decree in accordance with the views herein expressed.


author: Leaking, Y. C.

text:
    Irene F. Chew v. Lillie V. Eagan et al.
    [Submitted October 9th, 1916.
    Determined December 2d, 1916.]
    1. In equity pleading “impertinence” means that which is irrelevant, “scandalous” that which offends the senses and it may also mean irrelevant if not stated in language unnecessarily offensive.
    2. The averments of unchastity in the bill in this case are relevant to the primniy issue, and should not be stricken out as impertinent or scandalous.
    3. The peculiar office of a bill in equity defined.

      On bill for relief. On bearing on motion to strike out.

      Messrs. Ott & Carr, for the motion.

      Messrs. Stackhouse & Kramer, contra.

   Leaking, Y. C.

Pursuant to rule 213 a motion has been made in behalf of defendant Lillie V. Eagan to strike out paragraphs 4. and 5 of complainant’s bill of complaint upon the ground that the two paragraphs named are “scandalous and impertinent.”

. The bill has been filed by Irene E. Chew against her husband, William E. Chew, and his alleged illicit paramour, Lillie Y. Eagan, for the purpose of establishing by decree of this court that certain real estate, the legal title to which stands in the name of Lillie Y. Eagan, is in fact owned by complainant’s husband. The object of the suit is to establish in complainant an inchoate right of dower as a charge against the land, and 'the bill is also in aid of a suit now pending in this court in which complainant seeks to compel her husband to contribute to her support, in which suit defendant Lillie Y. Eagan is not a party.

The averments of the two paragraphs of the bill against which' the motion is directed are to the effect that defendant Lillie Y. Eagan and complainant’s husband live together in open adultery and are known in the neighborhood where they live as husband and wife, and that Lillie V% Eagan holds herself out to the world as the wife of complainant’s husband and at times assumes his name.

Exceptions ■ and motions of this nature, based on a claim of scandal and impertinence, have become so infrequent in our equity practice that a brief review of the principles controlling the subject may be appropriate.

Impertinence, in equity pleading, signifies that Avhich is irreleArant and which does not, in consequence, belong to the pleading. The Avord does not include the idea of offending propriety. The full significance of the word is found in the expression not pertinent. The element of offending the senses is found in the Avord “scandalous.” But, as i? pointed out in 1 Dan. Ch. Pl. & Pr. 347, 348)- matter in an equity pleading may be prima facie scandalous in the sense that standing alone it may be said to be an allegation which is “unbecoming the dignity of the court to hear,” yet, if it is not stated in language unnecessarily offensive, it ij; hot to be regarded by the court as scandalous if it can be said to be material to the primary issue of the suit. It follows that except as to language unnecessarily offensive the words “scandalous and impertinent,” as used in equity pleading, may be alike said to mean irrelevant. As the matter here objected to is not stated in-an unnecessarily offensive manner, a consideration of its relevancy will fully exhaust the force of both branches of the motion.

. In determining the relevancy of an averment in a bill in equity an element peculiar alone to equity pleading must be borne in mind. A bill in equity has a twofold purpose. The first is to “bring before the court and to put in issue the facts upon which the complainant’s right to relief rests;” the second puipose, and the one peculiar to equity pleading, is “an examination of the defendant for the purpose of obtaining evidence to establish.the complainant’s case, or to counter-prove the defence which it is supposed may be .set up in the answer.” From this , latter office the general rule is deduced that a complainant is permitted to set forth any fact, the admission of which by the defendant would go to establish the complainant’s own case, or overturn that of his adversary. This is specifically stated and made the basis of decision in Camden and Amboy Railroad Co. v. Stewart, 21 N. J. Eq. 484, and again in Dodd v. Wilkinson, 42 N. J. Eq. 647. In the latter case, after referring to the effect of the peculiar office of a bill in equity to obtain evidence to establish complainant’s case, our court of appeals -clearly expresses approval of the' rule laid down in Howley v. Wolverton, 5 Paige 522, as follows: “The complainant may therefore state any matter of evidence in the- bill, or any collateral fact, the admission of which, by the defendant, may be material in establishing the general allegations of the bill, as a pleading, or in ascertaining or determining the nature and extent, or the kind of relief to which complainant may be entitled, consistently .with the case made by the bill; or which may legally influence the court in determining the question of costs. And where any allegation ox statement contained may thus affect the decision of the cause, if admitted by the defendant or established by proof, it is relevant and cannot be excepted to as impertinent.” It is there also pointed out that matter should not be expunged unless its irrelevancy should be especially clear. And in Kirkpatrick v. Corning, 40 N. J. Eq. 241, the same court summarizes the rule touching impertinence as follows: “It is necessary to consider whether the alleged objectionable parts of the bill have a tendency, or would be admissible in evidence to show the truth of any allegation in the bill that is material with reference to the relief sought. If so, they should stand; if not, they may be stricken out.”

An application of the principles above reviewed to the present moti'on discloses with clearness that the motion must be denied.

The primary issue- presented by the bill is whether the real estate in question belongs to complainant’s husband or to defendant Lillie V. Eagan. Paragraphs 2, 3, 8 and 9 of the bill allege that complainant’s husband has deserted her and neglects and refuses to support her except as required by orders of court, and that defendant Lillie Y. Eagan is without means and has no source of income except that received from complainant’s husband, and that the real estate in question was purchased and paid for by complainant’s husband and the title taken by him in the name of defendant Lillie V. Eagan to defraud complainant of her rjghts as a wife, and that the- two defendants have thus conspired together to defraud complainant in the manner stated. It must, accordingly, be ascertained in this suit whether a secret trust for the unlawful purpose stated in the bill exists between these two defendants touching the land in question. A solution of this primary issue tendered by the bill necessarily involves an exhaustive inquiry touching the existing relations between these two defendants. If it be true that complainant’s husband, while deserting complainant and resisting hex claims to his support, has maintained the criminal relations with defendant Lillie Y. Eagan stated in the two paragraphs of the bill against which the present motion is made, that latter circumstance will obviously aid in a material degree the inquiry whether real estate the title to which has been taken in the name of this impecunious and illicit paramour of complainant's husband during the period of their illicit relations belongs to hel- or to him. This necessarily renders the averments relevant.

I will advise an order overruling the motion to strike out, with costs.


author: Leaking, V. G.

text:
    Trustees of Sea Isle City Realty Company, dissolved, et al. v. The First National Bank of Ocean City, New Jersey.
    [Submitted January 22d, 1917.
    Determined February 2d, 1917.]
    1. Injunction will lie to prevent entry of judgment at law on an undisputed claim against a corporation, which has been dissolved, whose assets are a trust fund for distribution to its creditors.
    2. This court has jurisdiction over the trust created by the voluntary dissolution of a corporation, because of its inherent jurisdiction over trusts.
    3. Where a creditor of the corporation will not be injured by restraining the entry of judgment, nor obtain any advantage by such entry, but the administration of the trust will be interfered with by the entry of the judgment, the injunctive relief sought will he granted.
    4. The endorsers on a note given by. a dissolved corporation were not entitled to a preliminary injunction restraining entry of judgment against them where it appeared that such action would be a substantial detriment to the creditor’s legal rights; their equitable rights cannot be invoked to substantially prejudice the legal rights of others.
    5. Section 94 of the Corporation act does not prevent entry of judgment against directors of a dissolved corporation as endorsers on a note of the corporation though the affairs of the corporation have not been wound up.
    On hearing on motion for preliminary injunction to restrain the further prosecution of an action at law.

      Mr. Gharles K. Loméis, Jr., for the complainants.

      Mr. J. Fithian Tatem, for the defendant.
   Leaking, V. G.

This suit is brought to restrain further proceedings by defendant bank in a pending action at law.

At the hearing of a motion for preliminary restraint it was disclosed that the Sea Isle City Realty Company, a corporation of this state, was dissolved by certificate of dissolution filed in the office of the secretary of state on September 8th, 1916, purT suant to the provisions of our Corporation act authorizing voluntary dissolution of corporations of this state, since which time the persons who were its directors at the time of -its dissolution have been engaged in winding up the affairs of the dissolved corporation as statutory trustees under the act. On january 8th, of this year, an order was duly made by this court on the application of these statutory trustees directing the creditors of the dissolved corporation to present to the statutory trustees within a specified period verified claims against the corporation.

Among the liabilities of the dissolved corporation is a certain promissory note which was made by it prior to the proceedings for dissolution; the note was signed by the corporation as maker and was payable to the order of the corporation as payee and endorsed by it and also endorsed by four of the five directors of the corporation for the accommodation of the corporation, and discounted, while so endorsed, for the benefit of the corporation by the First National Bank of Ocean City, the defendant herein. That note is. now due and pajrable and an action at law for the recovery of the amount due has been brought by the bank against the maker corporation, go nomine, and also against the statutory 'trustees of the dissolved corporation and also against the several endorsers. It is the further prosecution of that action at law which the present bill seeks to restrain. The bill is filed by the statutory trustees and the endorsers of the note.

There is no dispute touching any of the matters above stated. The liability of the corporation and of the directors for the amount of the note is admitted and is in no way a subject of dispute.

The bill demands as equitable relief in behalf of the dissolved corporation and its creditors that no judgment shall be entered against it for a debt which is not in dispute, and that defendant bank be required to file its claim against the .dissolved corporation pursuant to the general order of this court heretofore made for that purpose and permit the statutory trustees to allow tire claim; and demands as equitable relief in behalf of the endorsers that the action at law against them be stayed until the assets of the dissolved corporation may be fully administered by the statutory trustees and applied in payment of the debt which is primarily due from the dissolved corporation to defendant bank.

I entertain the view that the,relief which is sought to prevent the entry of a judgment at law against the dissolved corporation must be granted. But while at the argument it was practically conceded that relief to that extent should be awarded, I think the question cannot be. said to be one wholly free from doubt.

Sections 53' to 60, inclusive, of our Corporation act (2 Comp. Stat. pp. 1634-1637) constitute tire directors of a corporation which has been dissolved in the manner in .which this corporation has been dissolved trustees-of the dissolved corporation for the purpose of winding up its affairs by converting its assets into money and paying "ratably, so far as its moneys and property shall enable them, all the creditors of the corporation who prove their debts in the manner directed by the court,” and distributing any balance remaining after payment of the debts and necessary expenses to the stockholders. The court of chancery is also given the power on application of any creditor or stockholder to exercise its discretion whether to continue the directors as trustees or supersede them by the appointment of a receiver or receivers.

It seems to me that the general scope of these several sections of the statute, as well as the detailed provisions of some of the sections, disclose a legislative intent, which is manifest with almost as much .clearness as could be expressed by any specific provision, that at dissolution the assets of the corporation become a trust fund for the equal benefit of all creditors as the rights of such creditor may be found to have existed at dissolution, and for the benefit of the stockholders after the payment of all -debts of the corporation, and that this trust fund shall be preserved for and applied to the payment of such debts “rat-ably;” and that the effect of the provisions is to fasten the debts of the corporation upon its property at the moment of dissolution to exactly the same extent as though by express terms of the statute the legal title of the assets as distinguished from the equitable title, had at- that moment been made to pass to the trustees for the purposes of a trust for equal distribution. Such a trust is necessarily subservient to the burden of liens existing prior to its creation; but it seems manifest that the preservation of the right of general creditors to procure preferment after the creation of the statutory trust would be so clearly destructive of the statutory requirement for creditors to prove their debts before the trustees and for the trustees to make ratable distribution among the creditors as to render the provisions of section 58 wholly nugatory and purposeless. I should reach this conclusion without hesitancy but for the views adopted in Squire v. Princeton Lighting Co., 72 N. J. Eq. 883, in which case the right of creditors of an insolvent corporation to procure preferment by judgment and levy prior to the actual adjudication of insolvency is sustained; but I find nothing in the views there expressed inconsistent with the view that when in the proceedings for either an insolvency receivership or a dissolution trusteeship a trust for equal distribution has become consummated preferments can no longer be created.

In the absence of legislation conferring upon any court other than this court jurisdiction over this statutory trust, it is obvious that this court possesses such jurisdiction in all matters necessary to its proper enforcement and protection by reason of the inherent jurisdiction of this court over trusts; but the several sections of the statute referred to also clearly disclose a legislative intent that this court should exercise that jurisdiction in all necessary matters relating to the execution of the specific trust. If, therefore, it is reasonably apparent at this time that the proper and efficient performance of the duties of these trastees will be materially impaired by tire entry of a judgment at law against the dissolved corporation on this undisputed claim of a general creditor, it seems obvious that this court should intervene in the manner now sought, unless the' rights of the creditor who is seeking the judgment will be thereby injured.

■ If the views already expressed are sound, it is entirely clear that the only effect of the judgment, if entered, will be the ascertainment of the amount due, for such judgment could only rank as a general claim against the assets. But the amount due is not a matter of dispute, and the trustees are willing to allow the claim when it shall be filed pursuant to the order -of this court heretofore made for that purpose. It is accordingly obvious that no injury can be done to the creditor bjr restraining the entry of the judgment and no benefit can be gained by the creditor by such entry.

On the other hand, trouble and inconvenience in the administration of the trust will necessarily flow from the entry of the judgment. The legal title of a great amount of real estate is in the name of the dissolved corporation at this time, and that real estate is its principal asset, and from its sale in small parcels the trustees must realize the funds to pay the creditors of the corporation. While, as stated, the judgment, if entered, cannot be enforced as a specific lien against that real estate, its entry will necessarily afford a cloud of such nature that the trustees will be constantly hindered in conferring upon purchasers marketable titles.

In these circumstances this court should exercise its equitable powers to protect the efficient administration of the trust.

But I am unable to reach the conclusion that the endorsers of the'note held by defendant are entitled to the relief which is here sought by them.

As heretofore pointed out, with reference to the origin of the note on which an action at law has been brought, the, dissolved corporation was the party primarily liable on the instrument and the endorsers were only secondarily liable. While the provisions of section 81 of our Negotiable Instruments act (8 Comp, fítat. p. 8748) is to the effect that when the note was dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrued to the holder of the note, that section cannot be properly understood to deny to the endorsers any well-recognized equitable rights that they may possess touching the application of assets in discharge of the note. Among those equitable rights is the right of a surety, in certain circumstances, to have the debt paid by or out of the property of the person primarily liable. At law that right can only be enjoyed after judgment by virtue of the provisions of section 35 of our Practice act (3 Comp. Stat. p. 4061), which section is preserved by the Practice act of 1912 (P. L. 1912 p. 385); while in equity the right may be asserted at any time. But, like other equitable rights, such right cannot be enjoyed to the substantial prejudice of present rights of others. This limitation of the right is expressly recognized in Irick v. Black, 17 N. J. Eq. 189, and again in Philadelphia and Reading Railroad Co. v. Letter, 41 N. J. Eq. 519 (at p. 529). In the,former case it is said: “He (the surety) may, in special cases, compel the creditor to resort to securities in his hands before coming upon the surety. And, although the creditor will not, as a matter of course, be restrained from enforcing his rights against the surety till his remedies against the principal are exhausted, yet, when the creditor is fully indemnified, where he is subjected to 'no delay and exposed to no risk of loss, he will be compelled to resort first to the property of the principal in satisfaction of his claim. If the court is asked to interfere on behalf of the surety before judgment is recovered against him, he' must present some special ground of equitable relief.” In the latter case substantially the same view is expressed as follows: “Under special circumstances, when his equitable right to have the debt paid by the principal, or out of the latter’s property, can be enforced without injury or prejudice to the creditor’s rights, he may compel the creditor to resort to securities in his hands, or under his control, the property of the principal, in satisfaction of the. debt, before coming upon the surety; as, for instance, where the creditor is fully indemnified and will be subjected to no delay and •exposed to no risk of loss if he is compelled to resort first to the property of the principal.”

In the present ease the creditor, defendant herein, will be denied the enforcement of his claim against the property of his principal by reason of the pending administration of the statutory trust, and, admittedly, the administration of that trust must continue for a long time before the assets -can be converted into cash and creditors paid. In' these circumstances, the creditor cannot be equitably denied the right to look to the endorsers of the note for the discharge of their contractual obligations with reasonable promptness. Any denial to the creditor of that right at this time in the circumstances here existing would be clearly operative as an enforcement of the equitable right of the endorser to the substantial detriment of the legal, rights of the creditor.

Complainants also invoke in their behalf the provisions of section 94 of the Corporation act. 2 Comp. Stat. p. 1655. That section relates only to eases where officers, directors and stockholders of a corporation are made liable by the provisions of the act, specifically, for the payment of the debts’of the company. Witherbee v. Baker, 35 N. J. Eq. 501.

I will advise a preliminary injunction in accordance with- the views herein expressed.


text:
    Charles J. Koch v. Commonwealth Insurance Company of New York.
    [Submitted January 15th, 1917.
    Determined January 26th, 1917.]
    1. Reformation of a contract of insurance can be decreed, in the absence of fraud, only where a mutual mistake has been made in writing-out the agreement of the parties; such reformation must be such as to make the instrument correspond with the agreement on which the minds of the parties have met.

      2. Where a renewal policy is issued in the same terms as the' one it renews, a mistake as to the uses to which the premises are put is not mutual, under circumstances stated.
    S. The knowledge of an insurance broker as to such uses cannot be imputed to the insurer, under circumstances stated.
    On final hearing on bill to reform a policy of fire insurance.

      Mr. Joseph B. Tyler, for the complainant.

      Mr. Howard L. Miller, for the defendant.
   Leaking, Y. C.

The bill of complaint in this suit has been filed by complainant to. reform a policy of fire insurance which was issued to him by defendant fire insurance company December 22d, 1915, for a period of five years.

In the policy the insured building is accurately described except in that the words “occupied as a store and dwelling” form a part of the description. , ■ ■

When the insurance was written the building was not in fact occupied as a store and dwelling but. was occupied as a printing establishment. The bill seeks a reformation of the policy by causing it to set forth that the building was occupied as a .printing establishment instead of as a store and dwelling. Complainant also tenders the additional amount of premium that would have been charged by defendant company had it beep, known by that company that the building was occupied as a printing office and not as a store and dwelling. The proofs adequately disclose that at the time the policy was issued no person in any way connected with or interested in the transaction knew that the building had been inaccurately described in the policy..

The circumstances which occasioned the error in description were as follows:

Five years prior to the issuance of the policy which it is now sought to reform a policy was issued by defendant company to complainant on the same building and for the same amount, which policy contained a description of the building identical with that contained in the present policy. At that time the insured property was occupied as a store.and dwelling and the description contained in the policy was accordingly accurate. That policy, however, was issued to be used as collateral security for a building and loan association, as mortgagee, and was delivered to the mortgagee and was probably at no time in the possession of or read by complainant. Complainant was accordingly unacquainted with the fact that the policy described the use to which the building was devoted.

About six months later complainant installed the printing plant in the building, which is now the occasion of this litigation. Complainant was comparatively unfamiliar with insurance matters and apparently did not know that the installation of the printing plant in the building was operative to increase the hazard or to affect his then existing insurance in any way; accordingty, no notice had been given by complainant to the insurance company of the change in the use of the insured building.

In the meantime, and before the expiration of the old policy, the local agent of defendant company who liad issued the old policy was succeeded in business by a new agent who took over the business of the old agent. A few days before the old policy expired, the new agent of defendant company observed from the records, which had been acquired from the prior agent, that the policy was soon to expire, and determined that he would endeavor to secure in behalf of his company a new policy on the building when the old policy should expire. Noting that the policy was held by a building and loan association, as mortgagee, in which association a certain insurance broker of his acquaintance was an active member, the agent of defendant company telephoned to the insurance broker that the old policy on the building of complainant was about to expire and asked the broker to endeavor to secure a new policy for him. The'insurance broker accordingly saw complainant—the owner of the building—and explained to him that his old policy was about expiring and asked him to take out a new policy in the same company at its expiration. Upon complainant’s inquiring .of the. broker what it would cost, the broker telephoned to the agent of defendant company and inquired the amount of the premium, and received a reply stating the amount the premium would be. That amount was the same amount that had been paid for the old policy, and it is obvious from the evidence that the amount was communicated by the insurance agent to the broker without any knowledge upon the part of the insurance agent that there had been any change in the use to which the building'was devoted. The broker then apprised complainant of the amount of the premium and complainant authorized the issuance of the new policy at the expiration of the old one. The policy was accordingly issued by the agent of defendant company on the date above named and was obviously copied from the old policy.

The proofs adequately disclose that at the time this latter policy was issued, and at the time the loss under it occurred, neither complainant nor the building and loan association who held the policy as collateral knew that the property was described in the policy as occupied as a store and dwelling. The new policy was sent by the agent to the broker and by him delivered to the mortgagee and was at no time in the possession of complainant or seen by him.

The evidence has also clearly established the fact that the existence of an error in description was unknown to any person who was in any way connected with or interested in the transaction and was wholly unintentional upon the part of all parties concerned, and that the error was not discovered by anyone until after the loss had occurred by fire, and that this bill for reformation was then promptly filed by complainant.

The agent of defendant company who issued the policy here in question, and at whose request the insurance broker already referred to solicited the poliejq was a general agent of defendant company in the sense of an agent who was clothed with power within a limited territory to assume risks and execute policies by his countersignature.

There can be no doubt touching the fundamental doctrihe that a reformation of a contract of insurance or other written contract can only be decreed, in the absence of fraud on the part of defendant, where the minds of the parties have met contractually and á mistake mutual to the contracting parties has been made in writing out the contract so as to make the parties appear to have entered into a contract which they have not entered into; and the reformation must be such as to make the written contract correspond with that upon which the minds of the contracting parties have met. Ordway v. Chase, 57 N. J. Eq. 478.

In the present case, it was the mutual intention and purpose of all parties connected with the transaction that any description of the insured property which might be contained in the policy of insurance should be accurate, and it was their mutual belief that the written policy, which was intended to faithfully express their mutual purpose, was in all things accurate.

It cannot be said that any specific formula of description entered the mind of complainant at any time, for he wholly relied upon those who should prepare the policy to prepare it correctly in all respects; but his real contract, as intended by him, was not for that reason any less.a contract for insurance on his printing establishment. .

It is, however, obvious, even in these circumstances, that unless defendant company can be said to be chargeable with knowledge of the fact that the insured property was used as a printing establishment no reformation can be decreed, because in such case the general intent on the part of the insurer that the property should be accurately described could not be properly said to include the specific intent to insure a printing establishment; but with knowledge of the use to which the insured property was devoted imputed to the insurer the authorities appear to be consistent with the view that the policy could be reformed and made to describe the insured property correctly.

This view appears to have been recognized in Franklin Fire Insurance Co. v. Martin, 40 N. J. Law 568. At p. 574 of the report of that case it is said: "If the proposal for insurance be prepared by the agent of the company, and he misdescribes the premises, with full knowledge of their actual condition,- and there be no fraud or collusion between the agent and the insured, the contract of insurance may be reformed in equity, and made to conform to the condition of the premises as they were known to the agent.” The authorities there collected are to the effect stated (the citation of L. R. 19 Eq. should be at p. 485, and the citation of 45 Conn, should be 45 Conn.), and Hill v. Millville Insurance Co., 39 N. J. Eq. 66, decided in this court, appears to be based on a similar view. See, also, Dewees v. Manhattan Insurance Co., 35 N. J. Law 366 (at p. 371).

The agent of defendant company who issued the policy here involved did not have actual knowledge that the insured property was used as a printing office. But, as already stated, the insurance broker, who was procured by the agent of defendant company to secure this insurance for him, did in fact know that the lower floor of the insured building was used as a printing establishment. No written proposal or application for insurance was signed or made by complainant; he merely assented to the request of the broker for insurance and wholly relied upon the insurance company, or those representing it, in all things. He wanted his printing establishment insured, and the broker knew that it was, in part, at least, a printing establishment that was to be insured. If the knowledge of that broker is to be imputed to defendant company, it would seem that reformation of the policy must be decreed, for in such case the mistake must be deemed a mistake of the insurer resulting in a written policy which expresses material matters which the insurer could not be said to have properly intended to express.

But I find myself unable to reach the conclusion that the knowledge of the broker that a printing plant was in the insured building can be imputed to defendant company in such manner as to afford a sound basis for a decree-of reformation. It has already been suggested that if the general agent of the insurer, clothed by the insurer with powers to determine the terms of and to issue the policy for the insurer by his countersignature, had in fact known that the building was in use as a printing establishment, authorities appear to support the view that it could be appropriately said that the minds of the necessary parties met on a contract to insure a printing establishment, and that the error of description in such case would be either a mistake or act of-fraud on the part of the agent of the insurer while acting for the insurer in a matter within the scope of the agent’s authority to act. But although the remedy of reformation appears to have been at times awarded in such circumstances, it must be conceded that some difficulty is encountered even in such cases in reaching a wholly satisfactory conclusion that the insurer can be said to have in fact made or to have intended to make a contract other or different from the one written, or that rescission rather than reformation may not in such circumstances be the appropriate and only remedy.

But, in the present ease, the court is asked to go further and charge the insurer with the knowledge of the insurance broker touching the use of the insured building, and by reason of that undisclosed knowledge of the broker formulate a contract upon the part of the insured embodying matter that was within the knowledge of neither the insurer nor the general agent of the insurer, the latter of whom represented the insurer in all matters of contractual negotiation and engagement. I do not entertain the view that this broker can be said! to have been, as insurance brokers sometimes are, the agent of complainant; the broker was selected and requested by the agent of the insurer to induce complainant to renew his insurance which was then about to expire; pursuant to that request the broker solicited the policy in behalf of the agent of the insurer and received from that agent for hi's service the customary proportion of the agent’s commissions. It thus appears that to whatever extent the broker was an agent of anyone in this transaction he was the agent of the agent of the insurer, and as such it may be that he can be said to have been an agent of the insurer, although the evidence does not disclose whether the agent of the insurer was empowered to employ or engage the services of soliciting agents. But it is apparent that any agency of this broker was within extremely narrow lines, and his participation in tire transaction was in fact within equally narrow lines. He was merely asked by the insurer’s agent to induce complainant to take out a new policy at the expiration of his old one; the broker did that, as requested, and nothing more. When he was asked by complainant the amount of the premium he telephoned to the insurer’s agent in the presence of complainant and asked the amount and at once received a reply over the telephone and stated that amount to complainant. Complainant then consented to taire a new policy and that consent was telephoned to the insurer’s agent and the policy was then prepared by the insurer’s agent and sent to the broker and by the broker delivered to complainant’s mortgagee. The broker was neither expressly nor impliedly requested to make a survey or examination of the premises or in any way to supply information touching the property, or to utilize his own information touching the property, and he did not do so. He did exactly what he was asked to do, and no more, and he was asked to do no. more than secure complainant’s consent to renew his insurance when the then current insurance expired. In this specific and limited employment I find no justification for the conclusion that the broker became an agent of the insurer in such manner that knowledge which the broker may have fortuitously possessed concerning ■ the use of the insured building and which was not acquired by him through, by reason of or under his employment became the knowledge of the insurer or the knowledge of the agent of the insurer who issued the policy in behalf of the insurer. Whatever powers or duties were imposed upon this broker by the agent of the insurer would necessarily carry with them the implied power or duty to do whatever might be reasonably necessary to discharge those powers or duties; but no power or duty to obtain or utilize or supply information touching the insured property was either expressly or impliedly conferred by the broker’s appointment for the purpose already stated. It appears to me that any conclusion to the contrary of that here stated would be utterly subversive of the established principles controlling agencies.

There are authorities to be found in which it is held that when a soliciting agent has been appointed by an insurance company and supplied by the company with blank applications for insurance, and such an application for insurance has been filled’ in by the soliciting agent at the request of and in behalf, of the' insured and by mistake of the agent contains matter different: from that which the insured has correctly stated to the agent, the insurer will be charged with knowledge of the matter actually-supplied bjr the insured to the soliciting agent, and that the policy, issued in conformity to such written application, may be reformed at the instance of the insured; and in Mohr & Mohr Distilling Co. v. Ohio Insurance Co., 13 Fed. Rep. 74, it was said at nisi prius that an insurance company could be chargeable with knowledge of a broker who is acting at the instance of an agent of the company in soliciting insurance. These cases must be understood to refer to certain soliciting agents with broader powers and duties than those conferred upon the broker in the present case, for if relief is to extend beyond the field of rescission and recovery of the premium paid, the basis for relief must be the fact that the minds of the contracting parties met contractually on the specific matter touching which reformation is sought, and not, like rescission, in which the ground of relief may be that there was no meeting of minds. Many cases may be found in support of the view herein expressed. The reasoning of Mr. Justice Hoke to that effect, in Floars v. Aetna Life Insurance Co., 144 N. C. 232, appears to me to be unassailable.

The primary cause for complainant’s building being insured as a building occupied as a.store and residence was the neglect of complainant to notify the insurer of the installation of the printing -plant in the building during the period of the life of the old policy; by reason of that neglect the present policy was issued at the expiration of the old policy to insure the same building, similarly used, against loss by fire. The policy which was issued was exactly as the insurer intended to issue it. On no sound theory can it be said that the defendant company ever contracted to insure complainant’s building while in use as a printing establishment. There was not only the absence of an intent upon the part of the company to insure a printing office, but there was an honest and defined and fixed affirmative intent and purpose upon the part of that company to insure the building as a store and residence; that was the risk which the insurer designed to assume, and for that risk the insurer accepted the premium suitable for that risk, a premium in amount greatly less than the premium fixed for risks of the other nature. There was accordingly at no time a mutual intent of the contracting parties to insure a printing office.

I am obliged to advise a decree dismissing the bill.


author: Lewis, V. C.

text:
    Clara L. Sands, a lunatic, by Elizabeth R. Sands, hex next friend, v. Frank Ruddick et al.
    [Decided October 25th, 1916.]
    Under the facts in this case—Held, that the purchaser of land at sheriff’s sale under execution should reconvey the land to the judgment debtor on terms, as the debtor was ins'ane when the transaction on which the judgment, execution and sale were founded was consummated.
    On bill, answer, replication and proofs taken in open court.

      Messrs. Humilcer & Randall, for the complainant.

      Mr. William J. Morrison, Jr., for the defendants. ’
   Lewis, V. C.

The complainant, by Elizabeth E. Sands, her daughter, as guardian of her mother, an adjudged lunatic, files a bill to compel the defendant Euddick to reconvey certain real estate in Ridgewood. Euddick, a neighbor of the .Sands, purchased the property at sheriff's sale in Hackensack, in July, 1914. It was sold upon a judgment recovered against the lunatic by Phillips and others for a sum less than $500. Euddick bid it in at the sale for $500. The evidence indicates the property to be worth in the neighborhood of .$10,000, subject, however, to a mortgage of $3,500. It was the home of Clara L. Sands, and the next door was the abode of Euddick. The sale was attacked by the former upon an order to show cause why it should not be set aside for irregularities in levy, inadequacy of price, fraud and collusion on the part of the purchaser and mistake on the part of the complainant. The rule was dismissed by Judge Seufert of the Bergen common pleas, and on a. review by certiorari Mr. Justice Parker dismissed tbe writ. 'Tire sheriff’s deed was then delivered, and the purchaser brought ejectment proceedings to obtain possession of tire premises. Judgment was secured, by default, and a writ for possession was issued. Clara L. Sands then filed a bilb in this court praying that the deed be set aside, and an ex parie order to show cause with restraint was allowed. ' The defendant, on the return of the order, asked that the complainant’s, bill be dismissed. When this stage had been reached, the daughter of (fiara L. Sands filed a bill in the present action asking that the deed be set aside for the reasons stated in tire bill filed by her mother, and on the further ground that her mother had been a lunatic for a long time and was incompetent to protect her property at the time of the sale. It was agreed at the trial of the cause before me that the complainant is ready and willing to reimburse the defendant for his outlay up to the time of the filing of the bill herein, and that a tender had been made before the institution of the suit, but that the defendant is not willing to accept the same. ■

All questions suggested by the complainant’s bill, other than the one of lunacy, appear to have been litigated in the law courts, and little, if any, testimony was offered on these points before me. Mrs. Sands is now confined in an institution for the insane at Middletown, New York, where she was' committed, after this suit was started, in’ September, 1915, a commission having been appointed which declared her insane.

It is true that Frank N. Stevens, a well-known real estate dealer of Ridgewood, .was permitted to testify without objection that the value of the property was $10,000. His evidence was uncontradicted, and on cross-examination of the defendant Ruddick, it-was- shown that he had knowledge of the peculiar conduct of Mrs. Sands. I may say, however, in passing, that I am inclined to the view that the judgment of the court of common pleas and the supreme court operated as .an estoppel on all these' matters which were at issue and disputed, and upon which a finding was rendered in these tribunals; and that the sole question before this court was the one of the incompctency of the complainant. On this question considerable evidence' was taken before me, and there are many exhibits. Several of the neighbors and acquaintances of Mrs. Sands told of her unusual conduct and delusions that people were conspiring to take her property; ’ it was not merely of eccentric conduct that they testified; they appear to be convinced that she had been of unsound mind for some years. There was, of course, no evidence of Mrs. Sands’ condition in this regard offered in the law courts. ' ,The testimony before me discloses the fact that Mrs. Sands, as early as 190-1, was confined in the New York State Asylum at Blushing, •by an order of the courts of New York, and, .subsequently, she was in another institution. She was sent to both places at the instance of her daughter, who was her guardian in tire present action. She was released from these institutions because of the burden of expense, and also in the hope that she might be improved. (See testimony of Miss Elizabeth Sands.) She soon became unmanageable again after her release; and the testimony is that she would bite herself, tear her hair, run around the house unclad and exhibit the greatest violence without cause towards her daughter and others. During the last few years of her residence at Eidgewood her family and neighbors testified that at one time she had ideas of losing everything; at another, her mental 'condition would change, and she imagined she had vast wealth. At one time she was in fear of becoming a public charge, and at another she thought she was very wealthy; and this delusiop was manifested by purchasing expensive articles in New York City, staying at the leading hotels with no means to pay the bills. The witnesses and her letters further unfold her delusion as to her influence with high public officials, from the president, of'the United States down; and of her ability, through these sources, to combat her enemies. These delusions as to her poverty, riches and far-reaching influence with public officials, were noticed prior to, .during and after the recovery of the Phillips’ judgment, and the sale of the property; as well as the inboherent talk, biting of hands, tearing of hair and improper dressing.

Last year, in June, and subsequent, of course, to the proceedings in the law court, a petition was filed by her guardian in this court to have her adjudged a lunatic. Under this application Cornelius A. Demund, a physician of Eidgewood, Clarence Mabie, of the Bergen county bar, and Eobert Vanderbeck were appointed commissioners. Hpon the findings of these commissioners a decree was entered in this court on August 2d, 1915, that the said Clara L. Sands was of unsound mind and incapable of conducting her .affairs or transacting business, and that she had been in that condition for eleven years past.

The findings of the inquisition, which are presumptive evidence of the fact of lunacy, were admitted without objection in the case here before me in this court. The prima fade case established by them may be overcome by evidence, but there is practically no testimony before me which would lead to the belief that they were incorrect. The testimony of Mrs. Frederick W. Schwartz and Sheriff Eohert M. Heath, witnesses for the defendant^ rather strengthens my opinion as to the unsoundness of Mrs. Sands’ mind. The evidence of the defendant, while denying knowledge of the lunacy of Mrs. Sands, is to the effect that he knew of her extraordinary actions; and one of the witnesses of the complainant testifies to a eonvérsation with him in which he suggested that steps be taken to have her committed because of her conduct.

Insanity does not, per se, vitiate any transaction. I think, however, in the case under consideration that there was such an impairment of Mrs. Sands’ mind as to make her incapable of'understanding in a reasonable manner the nature and effect of her acts, or the affair in which she was participating. The transaction was affected by her intellectual incompetency. This brings her case within the rule laid down in Lozear v. Shields, 23 N. J. Eq. 510, and subsequent cases.

In accordance with these views a decree is advised, directing the defendant, upon the payment to him of the money expended for the purchase of the property, with lawful interest up to the time of the institution of this suit, to reconvey the lands to the complainant.