author: Griffin, V. C.

text:
    Alexander M. Smith v. Theodor H. Schopper et al.
    [Submitted December 9th, 1915.
    Decided February 9th, 1916.]
    1. Where complainant, who was of advanced age and whose hearing and vision were impaired, assigned a large portion of his property to de-' fendant, who occupied towards him a confidential relation, being his trustee, business adviser, and closest intimate, and complainant at that time had no independent advice, defendant has the burden of showing that the transaction was understood by complainant and that it was free and voluntary.

      2. In a suit to set aside a gift inter vivos, evidence Held insufficient to show that complainant understood the nature of the transaction or that it was voluntary.
    3. Where defendant, who was complainant’s trustee and adviser, coerced him into assigning a large portion of his property, that portion of the property given to defendant’s wife and children pursuant to complainant’s alleged desire may be recovered; such parties standing in no better position than defendant, to whom the assignment was made.
    4. Complainant agreed to make a will in defendant’s favor if he would act as his business adviser and personal intimate. Defendant faithfully discharged those duties, but, desiring security,. coerced complainant into assigning to him a portion of his property before death, and the defendant having discharged his obligations after the assignment, and the assignment not appearing oppressive, Quwre: Should not the complainant be required to do equity by compensating 'the defendant, Theodor, for the services rendered, before a re-delivery is ordered?

      Messrs. Hudspeth, Bysdyh & Garrison, for the complainant.

      Mr. Jerome T. Congleton and Mr. Franh H. Bradner, for the defendants.
   Griffin, V. C.

The bill in this cause is filed to obtain a decree setting aside an assignment operating as a gift inter vivos, on the ground that it was obtained by undue influence.

The assignment was made by the complainant to the defendant Theodor H. Schopper on the 21st day of February, 1910, when the complainant was sixty-eight years of age and Theodor forty-one years.

On the date of the assignment the complainant was possessed of $41,000- in stocks, bonds and cash, $21,000 of which were held by Theodor as trustee for the complainant, and the assignment operated to transfer all the stocks, bonds and cash so held in trust.

The complainant was, on the date of the assignment, and for some years before, somewhat feeble, mentally, with hearing and vision impaired. He lacked self-dependence and was accustomed to rely upon others.

The relations between them were those of trust and confidence. The complainant relied implicitly on Theodor and was dominated by him.

The instrument was executed by the complainant at the request of Theodor on the morning of February 21st, prior to which time the idea of disposing of any. of his property by gift had not been considered by him, nor had such thought been suggested to him.

When the assignment was executed, he was surrounded by Theodor and his wife, Helen B. Smith and Ann Young, sisters of the defendant Mrs. Schopper. 'There was present no one interested in the complainant with whom he might advise.

•All of the property he was then possessed of (excepting accumulations) was derived from his father, who died in 1888, at which time the complainant was employed as a cashier in a large mercantile house in New York City. Almost immediately after his father’s death he resigned his position, and has continued out of employment since.

In 1895, complainant’s wife died, after which he took up his residence at the home of his older brother, George (whose wife was Helen B. Smith, sister of Mrs. Schopper), in Arlington. On October 4th, 1904, George died, but complainant continued to reside in the house of the widow of George until April 1st, 1912. From the year 1888 until George’s death the complainant depended solely upon his brother for companionship and the management and conduct of his business affairs. After the death of his brother, complainant was anxious to secure some person to do for him what his brother had done. He had no relatives by blood, nearer than a cousin, for whom he had little regard.

The complainant and his brother George had known Mr. Schopper for some years. He had favorably impressed George, who, in his lifetime, had spoken well of him to the complainant.

The relations between the complainant and the defendant Theodor had been those of ordinary neighborly friendship, not in any manner approaching intimacy; they had lived in adjoining houses for a number of years; the complainant had no- close friends or companions, and did not seek them, depending almost exclusively upon his brother for companionship.

In this situation the complainant sought someone to take the place of his deceased brother, and, within a few days after his brother’s death, turned to Theodor. Theodor’s statement of what occurred is as follows:

“Well, he came to me and told me that he felt the death of his brother very much and if I would take the place of his brother — his brother was helping him along, as I knew, with what little writing there was to be done, and he wanted me to take the place of his brother like a companion and take an interest in him and advise him and do for him whatever he would need me to do, and if X would do that he would make a will in my favor leaving all his property to me; and I said I would and appreciated the regard he held for me, and I was surprised that he made such an offer, but at the same time I was willing to accept it. I told him my wife and children would also do all in their power-to make it agreeable for him and help him wherever they could.”

To cany out the understanding thus expressed, the complainant, on October 10th, 1904, six days after his brother’s death, made his will, giving all his property to Theodor. This will was substituted by another dated November 2d, 1906, the reason therefor being to conform to the cemetery rules respecting a burial plot, and to strengthen the will, as they understood it, by leaving one dollar to J. E., his cousin; and also one dollar to any other cousin or blood relative he might have upon his decease. Otherwise, the wills were alike. Both these wills were delivered to Theodor and were produced bjr him at the hearing.

Theodor, his wife and children, faithfully observed and kept the agreement made by Theodor down to August 11th, 1911, when the complainant wrote Theodor demanding a return of his securities. Notwithstanding such.demand, he continued to live with Mrs. Smith until April 1st, 1912, when he changed his residence to that of Mrs. Sharp, who is also a sister of Mrs. Schopper, and with whom he resided at the time of the hearing. Prior to this change of residence, Mrs. Sharp, whose relations with her sisters were quite unfriendfy, saw the complainant so infrequently that her testimony as to the complainant’s condition may he disregarded. During the period prior to the break between the parties the complainant visited the Schoppers three or four times a day; the children served him; the son, Everard Schopper, who was seventeen years old at the time of the execution of tire assignment, says he ran errands for him; that the complainant was corpulent, and that he performed tasks for the complainant that were odious, such as “manicuring his toenails.”

Theodor attended to complainant’s business and investments and collected the income; and while his employment during the day was rather arduous, he devoted many nights to discussing with the complainant his affairs, and in his entertainment. He also, on Sundays, frequently, with his family, went to Greenwood cemetery, where complainant’s parents were buried, and from there they generally visited Coney Island on pleasure, at the request of the complainant, on which, trips the complainant paid his own personal expenses and permitted Theodor to pay those of himself and family. Thus, for a period of about seven years, Theodor, a young, vigorous man, with his wife and family, largely gave up the pleasures and comforts of evenings and holidays to the care and entertainment of this unattractive, uninteresting old gentleman.

That Mr. Schopper and his family endured all this discomfort from pure affection is unlikely. In the absence of the agreement they owed him no duty. It is, therefore, apparent that what they did was in the performance of the obligation imposed upon them by the agreement.

In 1905, Theodor discussed the situation with a legal friend and was made aware of his rights and risks under the agreement as to the will.

About the year 1907, 'Sweetser, Pembroke & Company, a large business house in New York City, became involved, and Mr. Schopper, knowing that practically all of the complainant’s wealth was invested with a prominent company at six per cent., suggested the wisdom of investing a part of his funds elsewhere so that he would not be “risking all his eggs in the same basket.” Accordingly, in 1907, the complainant drew $15,000 from this account, which Mr. Schopper invested in stocks and bonds, and delivered the same to Mr. Smith, who, for a while, at least, kept them in a small safe in his home. Afterwards, the home being considered an unsafe depository, Mr. Schopper, with the consent of the complainant, placed the securities in Schopper’s safe deposit box in New York City, where they remained until February 31st, 1910, when the assignment attacked was made. During these three years the relations of the complainant and defendants seem to have been pleasant and satisfactory.

In January, 1910, on examining his account with the company above referred to, it was found that there was on deposit twenty-one thousand six hundred and sixty odd dollars. Mr. Schopper thereupon suggested that Smith, reduce the amount of this deposit to $20,000, which would yield him a flat income of $1,200 a year on the investment. This was done, and the surplus, amounting to sixteen hundred and sixty odd dollars, was withdrawn. Prior to this date tire complainant had also sold some real estate and other property, which, with the above surplus (all of which was deposited with Mr. Schopper and invested by him in stocks and-bonds), so increased the investment that on February 21st, 1910, Mr. ^chopper held stocks, bonds and cash of complainant amounting to $21,000.

Shortly prior to February 21st, 1910, Mr. Smith, several times, expressed to Mrs. Schopper, whom he had known from childhood, a desire to change his will by leaving something to her and her children. She said he should not do this, because of his agreement with her husband, that it would look underhanded and would not be right. A few days prior to February 21st, 1910, Mr. Koch, a member of the bar, called at the house of Mrs. Smith, while Mrs. Schopper was present, for the purpose of drawing such a will; but Mrs. Schopper so strongly protested against it that the complainant abandoned the idea at that time. Mrs. Schopper informed her husband of these facts. Afterwards, on the 21st of February, 1910, about nine o’clock in the morning, Mr. and Mrs. Schopper repaired to the house of the complainant and met Mr. Smith. At this meeting, besides Mr. Smith, were Miss Ann Young, since deceased, Mrs. Smith and Mr. and Mrs. Schopper. Miss Young and Mrs. Smith were both naturally deeply interested in the welfare and success of Mr. and Mrs. Schopper and their children, and Mrs. Smith so testified. Thus, at this meeting, it cannot be said that there was anyone present interested in protecting the complainant in the matter then about to be transacted. Mr. Schopper opened the conversation by upbraiding Mr. Smith for attempting to change his will, calling his attention to the agreement between them. A discussion then ensued between Mr. Smith and Mr. Schopper, which, with the drawing of the assignment attacked and the agreement to pay Smith $600 a year (which were evidently written in less than an hour), consximed practically the entire morning. It is, therefore, quite evident that they conversed for upwards of an • hour, during which a great deal must have been said, and yet the entire conversation testified to by Mr. Schopper is contained in a statement, reiterated several times, of which the following is a sample:

“Q. What did you say to him?
“A. I said, ‘Alec, I hear you want to change that will or make a new will and I don’t think it is fair that you should treat me that way behind my back.’
“Q. Well, go ahead and tell us all?
'‘A. He said he didn’t want to treat us badly, in fact he wanted to make sure that my wife and children got something under the will he was leaving and that none of his relations would get any. I says, if he desired anything like that why he could instruct me to give my wife some bonds that I held for him and also to giv§ some to the children and the rest of the securities which I held he could transfer to me and I would give him four or five hundred dollars a year. Well, he said to give my wife five bonds of a $1,000 each and each of the children one bond of a $1,000, but he thought he ought to have more income than four or five hundred dollars a year, and I suggested, ‘Well, would $600 a year be fair?’ and he says, ‘Yes, that is all right; go ahead and do that — draw up a paper.’ ”

and thereupon Mr. Schopper wrote the assignment, which did not give any stock and bonds whatsoever to his wife or children, but gave him the entire $21,000 of securities; but he says that he afterwards delivered $7,000 of these to his wife — $5,000 for her and $1,000 each for the children. The assignment was signed by the complainant and witnessed by Helen B. Smith and Ann Young. At the time of the signing Mrs. Smith said to the complainant, “Well, I think you sold yourself cheap.” Mr. Smith frowned at her, and said to Theodor, “Is there anything else you want me to sign?” and he said, “Ho, Alec, I am perfectly satisfied with what you have done.” At the same time there was an independent agreement written by Mr. Schopper, and signed by him, wherein he guaranteed to pay to Smith, during the remainder of his life, $150 quarterly, on the 1st days of April, July, October and January of each year. The witnesses to this agreement are Mrs. Helen B. Smith and the defendant Mrs. Schopper.

The assignment (omitting the list of stocks and bonds, the attestation clause, signatures of Theodor and the witnesses) reads as follows:

“In consideration of one dollar U. S. C’y to me in hand paid, the receipt of which is hereby acknowledged, for services rendered and for other valuable considerations, I hereby give outright, to have, own, possess for himself forever, to my friend Theodor Heinrich Schopper, his heirs or assigns, all bonds, stocks, cash and other securities, which he now holds in trust for me and enumerated as follows

(Here follows the list of stocks and bonds, after which appears the words, “and cash, $94.11.”)

The complainant says he thought he was executing a power of attorney to enable Theodor to deal with the stocks and bonds, and that he did not know he was giving away his property. In this I think he is mistaken, at least to the extent of the bonds given to Mrs. Schopper and her children.

The testimony of Mrs. Smith seems to make it clear that complainant understood he was giving $7,000 to tire wife and children. She says she understood the paper was intended to give bonds and stocks to Mrs. Schopper and her children, but her understanding as to any gift of bonds to Theodor being contained in the assignment is, to say the least, very uncertain, and suggests the idea that her knowledge On this subject may have been subsequently acquired. She said, however, quite positively, that she saw complainant read the assignment and heard Theodor read it to him, but she did not remember hearing read the names of the bonds or stocks; she did not think Mr. Schopper read them. This may be a mere lapse of memory on the part of the witness, but it tends to support the theory of the complainant that he did not comprehend the transaction.

Afterwards it may have occurred to Theodor that the assignment and gift might be construed to cancel the agreement to make a will in his favor; he, accordingly, advised with a friend in New York, as a result of which, when'he paid the first installment of $150, which fell due under the guarantjq he wrote a receipt as follows:

“Received from Theodor H. Schopper $150 U. S. currency, being first payment under his agreement of February 21st, 1910, to pay me $600 yearly in equal quarterly payments on April, July, October and January 1st: And in consideration of which agreement, and other good and valuable considerations, I gave, sold and transferred to him all my securities valued at twenty-one thousand dollars and agreed to let my will stand in his favour.
“This receipt is amplified in order to show that in addition to valuable considerations for my transfer of securities and action aforesaid, there were also good considerations.”

This receipt was signed by the complainant, and his signature attested by Helen B. Smith and Ann Young, as witnesses.

The statement in the last clause of this receipt that it was amplified, &c., to show that “there were also good considerations,” is plainly untrue. The so-called amplification consists in the insertion of the words “and agreed to let my will stand in his favor” — its purpose being to have, in writing, signed by the complainant, evidence of a promise to allow the will then made and in possession of Theodor to stand. There is nothing in this receipt that expresses the consideration moving from Theodor to the complainant for the assignment more fully, if as full, as that expressed in the assignment. It might be further said that the very full recital that the assignment gave Theodor $21,000 was written for the purpose of making evidence that the complainant knew the contents of the assignment.

That greater pressure was exerted by Theodor upon the complainant to execute the assignment than that appearing in the meagre testimony of Theodor is readily deducible from (1) his failure to state more of the conversations between them prior to its execution; (2) the fact that before the meeting on February 21st the complainant never entertained the idea of making an immediate gift of any of his property; (3) that before this meeting his purpose was to retain all his property till death and dispose of it only by will; (4) that the first suggestion as to a gift came from Theodor, which gift, as to his wife and children, was as much, if not more, in violation of the agreement to let the will stand. And even assuming that the complainant might willingly change the form of his desired bounty to Theodor’s wife and children from a gift by will to a present one, there is nothing to indicate that prior to this meeting he ever considered the idea of giving immediately to Theodor $14,000, or other part of his assets, and lastly, the complainant’s conduct the day following, which shows that he was in fear that, in expressing a desire to change his will, he had, notwithstanding the gifts, lost or weakened the friendship and confidence of Theodor, caused him to visit Theodor and attempt to recover his former position. That he may have entertained these views is not unlikely. Their status had been changed from that of Theodor serving the complainant during life in consideration of the will to that of Theodor being in possession of the $21,000 given for the expressed consideration of services rendered. In such a situation he had reason to believe that Theodor might not continue to render him services which were so disagreeable. The complainant gave no testimony on this subject, apparently, because he had forgotten the transaction; but this may be inferred from the testimony of Theodor, who, on direct examination, said:

“Q. What were your relations with Mr. Smith after February 21, 1910?
“A. Quite friendly, the same as before. He came over to the house and he made a remark, I know, the next day, that he hoped I wouldn’t feel bad about his intention of changing the will. I says, ‘That’s all right, Alec; I guess I misjudged you,’ and he offered to do anything he could to protect me. He asked me if I wanted to get a lawyer to draw up any paper, and I says, ‘No, I guess' not, I will trust you,’ and we agreed to go on and continue in the same way as we had done before, because he promised to let the will stand in my favor.”

On February 25th, 1910, Mrs. Schopper rented a box in the Fidelity Trust Company, where she attended with her children and deposited therein seven bonds of $1,000 each, which her husband gave her, pursuant to his unwritten agreement with the complainant and at his request. The Schopper children, however, did not know of the gifts to them until after the death of their aunt Miss Young, which occurred in December, 1910, after which date both the children were informed of the fact, and, by direction of their parents, thanked the complainant for them, and they say he spoke very nicely to- them concerning it. No reasonable explanation is given why the parents should withhold the thanks of the children for these gifts for a period of ten months and then direct their expression. The motive is left to conjecture. It may be that the purpose was to recall the fact to the complainant who, if he did not deny, might be considered as acknowledging the fact long after the gifts -had been made, thus making evidence in their favor if the validity of the gifts was thereafter questioned.

In June, 1912, the complainant commenced suit in the Hudson circuit court agaipst Theodor to recover the $16,660 given him to invest. The defendant answered, setting up the assignment aforesaid.

It appears that no copy of the assignment had ever been furnished the complainant by the defendant Theodor. Its existence, when pleaded, surprised the complainant’s attorneys, who thereupon filed this bill.

While the complainant had sufficient mental strength to determine the wisdom of tire gift under consideration, if surrounded by friends to whom he might go in case Theodor abandoned him, yet, in the situation presented, surrounded as he was by the defendants and the sisters of Mrs. Schopper, who were in no manner interested in his protection, and considering his mental condition, which was somewhat weak, and his age, with vision and hearing quite impaired, he was subject to the domination of Theodor, upon whom he relied and in whom he reposed the greatest trust and confidence. The burden was therefore cast upon the defendants to show that the complainant understood the nature of the act, and that it was not done through the influence of the donees. This they have failed to do. On the contrary, it is perfectly plain that the disposition was not voluntary on his part, but was brought about by the pressure exerted by Theodor upon him. Haydock v. Haydock, 34 N. J. Eq. 570; Huguenin v. Baseley, 14 Ves. 273; 6 Eng. Rul. Cas. 834; 2 L. C. Eq. (4th Am. ed.) 1183, 1185.

As to Theodor, therefore, the assignment should be set aside.

The next question to be considered is: Do Mrs. Schopper and her children stand in a better position to sustain the gifts to them than Theodor? The evidence indicates that the thought of a present gift of part of his property to Mrs. Schopper and her children did not enter the mind of the complainant until February 21st, 1910, when it was suggested to him by -Theodor. Before that time his expressed desire was to leave to the wife' and children a portion of his estate by will; but nowhere is there any evidence that before the above date he ever expressed a desire to make an immediate gift to them. It, therefore, is difficult to see where the influence exerted on the complainant to make the gifts aggregating $7,000 to the wife and children differs from that which procured the gift of the $14,-000 to Theodor. This situation was presented in Huguenin v. Baseley, supra, and in Bridgman v. Green, Wilm. 58, 64.

In Huguenin v. Baseley, supra, Lord-Chancellor Eldon said: “With regard to the interests of the wife and children of the defendant there ivas no personal interference on their part in the transactions that have produced this suit. If, therefore, their estates are to be taken from them, that relief must be given with reference to the conduct of other persons; and I should regret that any doubt could be entertained whether it is not competent to a court of equity to take away from third persons the benefits which they derived from the fraud, imposition or undue influence of others;” and in dealing with the same subject, in Bridgman v. Green, supra, Lord Chief-Justice Wilmot said: “Whoever receives' it must take it tainted and infected with the undue influence and imposition of the person procuring the gift. His partitioning it and cantoning it out amongst his relatives and friends will not purify the gift and protect it against the equity of the person imposed upon. Let the hand receiving it be ever so chaste, yet, if it comes through a polluted channel, the obligation of restitution will follow it.”

I will advise a decree setting aside the assignment, and directing that the defendants make restitution.

Having reached this conclusion, a question arises which has not been argued, namely, the defendants gave almost seven years to the companjonship and care of this complainant and his property. He has now made a will, which, I assume, leaves nothing to the defendants. And I take it, from the manner in which tire case was presented on the part of the complainant, that it is not his purpose to malm any compensation to the defendant Theodor. While Theodor erred in the course he pursued, it appears to have been dictated by a desire to have some protection against the instability of the complainant, and not for the purpose of abandoning his former service and companionship; in fact, it appears that he did serve the complainant as faithfully after as before the gift was made. The payment of $'600 a year, reserved in the receipt, with tire $1,200 which complainant derived from his other investment, gave the complainant ample funds for his maintenance. No attempt was made on the part of Theodor to reduce the income of the complainant to a point which would work a hardship upon him; so, that it might not be said that Theodor wickedly committed such a breach of his trust to the detriment of the complainant that he should forfeit his right to any compensation. The question, therefore, arises whether, before a redelivery is made to the complainant, he should not be required to do equity by compensating the defendant Theodor for liis services rendered. Reeves v. White, 84 N. J. Eq. 661. Upon this I express no opinion, as the point has not been argued. If, however, counsel desire to argue the question, I will hear them on Monday, February 21st, at tire chancery chambers in Jersey City.


source: Caselaw Access Project

author: Foster, V. C.

license: Public Domain

text:
    Jessie Orr Buffum v. Edgar Buffum, Jr.
    [Submitted February 1st, 1916.
    Decided February 17th, 1916.]
    In a suit to annul a marriage under the Divorce act of 1907 (P. L. 1907 p. 1ft 1). § 1 siibseetion J/), authorizing annulment when either of the parties was, at the time of marriage, incapable of consenting and the marriage has not subsequently been ratified, evidence that defendant was of unsound mind at the time of marriage Held sufficient to warrant the annulment.

      Heard on petition, answer and proofs.

      Mr. George D. Mulligan, of Mulligan & Koenig, for the petitioner.

      Mr. J. II. Thayer Martin, solicitor assigned actively to defend.
   Foster, V. C.

This petition by Jessie Orr BufEum to have her marriage to the defendant, Edgar BufEum, Jr., annulled on the ground of the defendant’s incapacity to enter into the marriage contract, arising from his lunacy at the time of the marriage, is filed under the Divorce act of 1907, paragraph 1, subsection 4 (P. L. 1907 p. 474), which authorizes decrees of nullity of marriage when “the parties or either of them was, at the time of the marriage, incapable of consenting thereto and the marriage has not been subsequently ratified,” and also under the supplement to the Crimes act, 2 Comp. Stat. p. 1778 § 105a (P. L. 1904 p. 270), which forbids one who has been mentally deficient from marrying unless he procure the certificate of two physicians showing that he has been restored to mental vigor and that he will not transmit defects or disabilities to offspring.

The parties were married at the city hall in Newark, by Mayor Haussling, on June 7th, 1910, and after the marriage ceremony they returned to the home of defendant’s parents in Newark, where they continued to reside until October 2d, 1910, when defendant was recommitted to the State Hospital for the Insane at Morris Plains, where he is now confined. An answer was filed and a defence made in defendant’s behalf bjr a guardian ad litem appointed for that purpose.

The evidence discloses that in May, 1908, defendant having shown delusions was, on the advice of his physician, sent to Dr. Millspaugh’s Sanitarium, in Paterson, for treatment. He remained in this sanitarium until March 16th, 1909, when his mental derangement having progressed to such a stage that adequate treatment could not be given him there, he was duly committed to the asylum at Morris Plains.

He remained at the asylum until October 2d, 1909, when he showed signs of improvement, and was removed by his sister, under an agreement with the hospital authorities that she was to be responsible for his custody and was to remove him from the state. He was taken to his uncle’s home, on a farm, in East Weymouth, Massachusetts, accompanied by an attendant named Madden, who had been employed in tire asylum.

At this time he was without property or income, except such as his family allowed him. He remained at his uncle’s home until June, 1910, under the care of Mr. Madden, or his sister, or of some member of his uncle’s family. He occupied himself by doing whatever interested him about his uncle’s farm and was permitted to go about the town unattended, and made a number of acquaintances, among them being the petitioner. He first met the petitioner, who was then about twenty-two years old, in December, 1909.

After this defendant began paying 'attention to petitioner and at Christmas time he sent her a diamond pin worth about $100, which she returned to him. Notwithstanding this, he continued to meet her frequently and occasionally called on her. He was always very courteous, respectful and generous, and very free in spending what money he had. She did not take his attentions seriously and did not consider the possibility of marrying him, because he had no income and no means of supporting himself or a wife. On one of his visits he told her he had been very ill and had become tired out and gone away for a rest. No one ever told her he had been insane, or that he had been committed- in an asylum. At this time he appeared in good health, was about twenty-eight years old, a tall, strong, athletic, powerful looking man, and acted at times like a spoiled child; he would became jealous, and when he could not have his own way, he would become very angry.

In April, 1910, he gave petitioner a box of candy. When she opened it she found a small velvet box in the centre of the candy, and this contained a diamond ring. She tried to return the ring to him but he refused to accept it, and told her if she sent it back lie would throw it away. She believed he would do as he said, because on another occasion he. wanted her to break an engagement and go somewhere with him, and because she refused to do so, he threw away a ring his mother had given him. On other occasions she had seen him bréale up his hat or tear up a chain simply because he could not have his own way.

During his stay at the farm he made elaborate plans for turning the farm into a great institution and was going to raise crops that would bring him vast wealth. He wanted to raise turkeys, sheep and goats and do farming on an extensive scale, for which the place was not suitable and for which he had no money. He gave orders for expensive sheep and dogs which his family had to countermand.

' On June 5th, 1910, he compelled petitioner to leave her home and go with him to Boston and Newark under the following circumstances: After church services that day he had lunch at her home and she told him she had a rehearsal engagement for the afternoon. After the rehearsal, she and her friend,- Miss Bates, walked toward her home accompanied by defendant. In their walk they were obliged to pass the railroad station, which is located in an isolated part of the town. Defendant turned and said, “I am going to Newark and Jessie is going with me.” She told him she could not go with him. Then he said, “We will go as far as Boston anyway and get something to eat.” They could not get him to abandon the trip and then petitioner sent Miss Bates to notify defendant’s sister where they had gone. Defendant' had hold of petitioner at the time and as they were alone at the station, and she found she could not run away from him, and did not care to make a scene, she concluded to take the short trip to Boston, thinking she would be able to induqe him to abandon the trip to Newark. On their arrival in Boston about five-thirty p. m. he made inquiries about a train for New York or Newark, and bought two tickets for the nine p. m. train.

They then went to the Adams House, where he registered as man and wife and engaged a room; then they had dinner, and when they-came out of the dining room they met his sister and talked the situation over with her. Defendant said, “If you have anything to sajq come upstairs and say it.” When they reached the door of the room, defendant-was very angry and pushed petitioner into the room and shut the door and locked it. His sister tried to pull petitioner out of the room while he was pushing her in, and finding she could not do anything, she told petitioner to go in and she would get her out. Petitioner then begged and pleaded with him to let her out of the room, but he refused. Later his uncle, Mr. Trench, and Miss Bates came and talked to him through the transom and pleaded with him to open 'the door and allow the petitioner to leave the room. When told if he did not open the door they would bring the police, he became very angry and put a chair under the knob of the door. Then he took a wedding ring from his pocket and told the petitioner to put it on in case there was any trouble. She did not want to put it on, but as he became very angry she thought there was nothing else to do. Some one of the party outside came to the door at intervals, until twelve or one .o’clock. When they ceased coming, defendant told her she better rest and directed her to take off her dress, which she refused to do, and then in her struggle with him, part of her garments were removed by him.

Later in the night, against her pleading and struggles, he had sexual intercourse with her. The next morning, before seven o’clock, they met Miss Bates and his uncle and sister in the hotel, and they tried to have him abandon his trip, which he refused to do. They then sought the assistance of policemen along the street to prevent him ‘from taking petitioner to the railroad station, but without success. It was raining very hard at the time and neither of them had umbrellas or baggage. He provided no breakfast for her until after ten o’clock on the train. They reached Newark about five o’clock. On their arrival in Newark he took her to his parents’ home and introduced her to his mother as his wife. Later in the evening, after his father came home, the parents talked matters over and they asked her if she had any certificate and defendant said, “Yes, they were up home, that he had been married before that.” His father did not believe him and told him he must produce the certificate. The next morning defendant said to her, “I guess we better go downtown.” He said he would have to> get a license or certificate of some kind, because his father was objecting.

When they reached the city hall some paper was made out and the mayor came in and married them, and she was given the certificate. ■ They returned home and he showed the certificate to his parents. From the date of their marriage until his recommitment to the asylum on October 2d, 1910, they continued to live with his parents and he would not allow her to go out of the house alone, or to talk with his parents or sister unless he was present. During this period he did no work and had no income, and during his entire acquaintance with her he never gave her any money or clothing. He insisted on opening and reading any letters she received. She was not allowed to write any letters and he kept her continually under his observation and locked her in their room every night. He became very angry if she did not obey his orders about dressing and other personal matters, and if she attempted to leave the room he would prevent her doing so. In his fury over some trifling act of hers he took her diamond pin and broke it by stamping upon it. He also broke her comb and other things in their room and his demands upon her for sexual intercourse every day, and frequently oftener, were so excessive that her health became seriously impaired. In October, when he was being removed by the doctor and attendants for recommitment to the asylum, he told her he was all tired out and was going away for a rest. She had first learned of his insanity from his sister a short time before, in the month of September.

At no time did he ever mention marriage or speak about marriage to her. She married him, not knowing he had ever been insane, because she felt it was the only thing she could do after what had taken place between them at the Adams House.

Defendant was brought for treatment to Dr. W. H. Hicks of Newark by his sister in March, 1909, and he found him suffering from a form of insanity which he diagnosed as dementia precox, which, he states, is one of the most common forms of mental diseases, occurring usually in early life, in the teens or in the twenties. It is more or less progressive and is not curable. The symptoms are subject to remissions, during which the patient gets much better, but at no time are the symptoms entirely absent. On Ms recommendation and certificate, and that of Dr. Morrison, defendant was originally committed to Morris Plains. In October, 1910, he was again called with Dr. Morrison to examine the defendant and found him in such a dangerous and excitable state that he advised that he be sent to the asylum without delay, as he did not think it safe to have him around the house. Defendant’s sister had told him the history of the case, between the date of the first commitment and the date of his recommitment, and he and Dr. Morrison signed the papers to have defendant recommitted to the asylum. He does not think defendant will ever get well. His opinion is that the incidents sworn to by the petitioner and defendant’s sister, if substantially true, taken in connection with his personal knowledge and observations of the defendant’s condition, and also taken in connection with events subsequent to the marriage, show that on the day of the marriage defendant was insane and was in no mental condition to understand the gravity and consequences of the marriage contract; that he did not understand the duties and responsibilities that marriage created. Prom the two examinations he made of the defendant, nearly a year apart, the mental condition which he found absolutely convinced him that defendant was in no mental condition to judge rationally upon any subject, and from his knowledge thus acquired he “could not conceive of a time when the defendant would be normal and could grasp the relationship of ethical responsibility and social responsibility involved in the marriage contract,” and that no remission of Ms disease would be strong enough to restore him to a normal understanding of the marriage contract. He. has considered defendant incurably insane since he first examined him in March, 1909.

Dr. Evans, the medical director of the hospital at Morris Plains, states that when defendant was admitted to the hospital on March 14th, 1909, he was suffering from a serious form of mental disease known as dementia precox, which was characterized by delusions of persecution and suspicion, some mental confusion, abnormal excitability and a tendency to be violent, combative, abusive and profane. He was discharged on October 9th, 1909, because there was an abatement of his symptoms and he was improved and his relatives wanted to take him away. When he was recommitted in October, 1910, he was excited, confused, abusive and profane. He shortly got into difficulties with other patients and he became violent and destructive without any apparent cause. At the time of the hearing of this cause in May, 1915, his condition was much worse and he was then confined “in muffs” to prevent him from doing injury to persons and property, and the outlook is that he will never be cured.

Dr. Evans’ opinion is that the incidents sworn to by the petitioner’s witnesses, if substantially true, show that defendant on the day of his marriage did not possess that state of mind or reason which would enable him to understand the nature, force, character and responsibility of the marriage contract as a sane person does or should understand it,- and that a person suffering from dementia precox, during a period of remission would be capable of misleading or deceiving a person not conversant with mental disorders, as to the real mental state existing. In his opinion, at the time of the marriage defendant was' mentally unsound and did not have a proper comprehension of the responsibilities- — legal, moral or social, which were entailed upon him and the woman he was about to marry, and that there is nothing in the case to indicate that circumstances subsequent to the marriage, or arising out of the marriage relation itself, brought about the recurrence of the disease.

. The present inquiry is confined to the question whether at the time of the marriage the defendant’s mind was so impaired by disease that he was not capable of entering into the contract. Kern v. Kern, 51 N. J. Eq. 574—586; Brainen v. Brainen, 79 N. J. Eq. 270-273. The evidence produced by the petitioner in support of her allegations, consist of the testimony of persons as to defendant’s conduct and of the medical testimony. This evidence shows an entire absence of intent on the defendant’s part to marry petitioner. At no time, until the day of the marriage, did he mention the subject of marriage. He did not show her the consideration due to the woman about to become his wife and possibly the mother of his children; he forcibly compelled her to leave her home and family without notice to them, and to travel with him to Boston and Yewark without a change of clothing, and without preparation for probably the most important act in her life; publicly he compelled her, in the presence of his sister and uncle and her friend, to occupy a room with him in the Adams House, and forcibly and against her will compelled her to have intercourse with him. He manifested no affection for her and showed no desire to shield or protect her, but on the contrary, flagrantly exposed her to disgrace and injury to her reputation; he made her wear' a wedding ring before they were married and registered her as his wife at the hotel; he falsely introduced her to his parents as his wife, and only married her when his father insisted upon seeing the marriage certificate. When he went for the certificate he apparently had no clearly defined idea what he had to do to obtain it. He asked her to go down town with him without informing her of the purpose of his trip. When they reached the city hall he told her he would have to obtain a license or certificate to satisfy his father, and they thereupon went through the marriage ceremony — he, in order to obtain the certificate, and she, because she did not know what else to do after what had occurred between them in the hotel in Boston.

His failure to ask petitioner if she would marry him; the fact that he did not ask any member of his family to witness the marriage ceremony; his inability to support himself or his wife, or to provide a home for them; his purpose in going through a marriage ceremony merely to obtain a certificate to show his father; his failure to furnish his wife any money or clothing during the four months they lived together after the marriage; his insane and causeless jealousy of her; his purpose in having her continually near him to satisfy his sexual desires, and his constant watch upon her, locking her in' her room, reading her mail, refusing to permit her to converse with the members of his family and becoming furiously angry over trifling matters, all indicate a total absence of understanding of the conditions of the marriage state and of its rights and responsibilities.

While the question in the case is, as stated, a very narrow one, and is confined to the period when the marriage contract was entered into, it includes not only the question whether defendant at the time was aware that he was going through the ceremony of marriage, but also whether he was capable of understanding the nature of the contract he was entering. Kern v. Kern, 51 N. J. Eq. (at p. 581).

“Marriage is a legal bond around affections assumed to be already united and the blending in law of two lives into one. * * * Hence, in reason, the test question should be whether or not the parties have the capacity or mind required for duly comprehending this union. * * * The question in a marriage case is whether the alleged insane person acted rationally regarding the marriage and the particular one in dispute.” 1 Bish. Mar. & D. 599-601.

The circumstances previous to and in connection with the marriage ceremony, the subsequent conduct of defendant towards his wife and his treatment of her, taken in connection with the history of defendant’s diseased mental condition and the positive testimony of the medical experts, show that he was not capable of understanding the nature of the contract he was entering into, and establishes the existence of defendant’s mental disease at the time of the marriage ceremony, to the extent of incapacitating defendant from entering into the marriage contract.

Having reached the conclusion that defendant was of unsound mind at the time of the marriage ceremony, I have not .considered it necessary to determine if the act of 1904, page 210, is applicable to the circumstances of the case.


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    George J. Newton v. Cecilia A. Newton.
    [Decided March 2d, 1916.]
    1. A petition for divorce on the ground of the wife’s adultery on a certain date, alleging the birth of a child, an issue of the marriage, fourteen months thereafter, but not showing petitioner’s knowledge of the wife’s offence at the time of the continuation of their marital relations, or anything to suggest that with such knowledge he became reconciled to her, was not demurrable as showing a condonation.
    2. Proof of sexual intercourse after knowledge of and means of proving the wife’s adultery constituted condonation.
    3. Under Divorce act (2 Gomp. Stat. 1910 p. 2033 § 10), requiring the petition to state the cause of the application for divorce, and section 15, requiring the answer to state the cause of defence, a petition for divorce on the ground of the wife’s adultery, not negativing a condonation by subsequent marital relations, was not in that .respect defective, as condonation is a matter of defence, which must be pleaded.
    4. Upon demurrer the facts in a petition are taken as true.
    On petition for divorce. Demurrer to petition overruled.

      Mr. Robert J. Bain, for the petitioner (Collins &, Corbin, solicitors).

      Mr. Conover English, for the defendant (McCarter & English, solicitors).
   Foster, V. C.

This petition is filed for a divorce on the ground of adultery. The demurrer is based upon the idea that the petition shows condonation of the offence, because it alleges that defendant since her marriage to petitioner and on Rebruary 21st and 22d, 1914, committed adultery with one Joseph Noonan * * * and that it further alleges that subsequently, on May 1st, 1915, a child was born of the marriage.

The assumption of the demurrer is that as the petition admits the birth of a child, an issue of the marriage, on May 1st, 1915, fourteen months after the alleged acts of adulteiy, petitioner thereby admits the continuation of his marital relations witn defendant after the dates of the offences charged, and that by reason of such relations he has condoned the acts of which he now complains.

This assumption ignores the essential element of knowledge on the part of the petitioner of the acts of adultery alleged in his petition at the time of such cohabitation. '

There is nothing in the petition to indicate when petitioner acquired knowledge of, or had reason to suspect defendant’s guilt, nor is there anything to suggest that having such knowledge, he became reconciled to his wife, or that he knowingly retained her thereafter.

In Shackelton v. Shackelton, 48 N. J. Eq. 366, Vice-Chancellor Van Fleet quoted with approval from 2 Bish. Mar. & Div. § 38, that, “Alike in reason and in law forgiveness cannot take place without a knowledge of the existence of the thing to be forgiven, so that such knowledge is one of the elements of every presumed condonation.”

In Rogers v. Rogers, 67 N. J. Eq. 539, Vice-Chancellor Garrison said, “It has always been the law that proof of sexual intercourse after knowledge of and means of proving the offence constituted condonation.”

To the like effect are the cases of Marsh v. Marsh, 13 N. J. Eq. 281; Cook v. Cook, 13 N. J. Eq. 263; Stevens v. Stevens, 14 N. J. Eq. 374; Chapman v. Chapman, 25 N. J. Eq. 394; Todd v. Todd, 37 Atl. Rep. 766; Graham v. Graham, 50 N. J. Eq. 701; Hann v. Hann, 58 N. J. Eq. 211; Taber v. Taber, 66 Atl. Rep. 1082; Johnson v. Johnson, 78 N. J. Eq. 507; Suydam v. Suydam, 79 N. J. Eq. 144; Bridge v. Bridge, 93 Atl. Rep. 690.

The insistment is, however, that by reason of the admitted sexual intercourse of the parties after the commission of the alleged adultery, the petition is defective because it does not contain an averment to negative the presumption of condonation arising from such intercourse. Such an averment is not necessary. • The Divorce act (2 Comp. Stat. p. 2032 § 10) requires that the petition shall plainly and fully state the cause or causes Of the application for divorce. And section 15 requires that the answer shall plainly and fully set forth the cause or carxses of defence.

Condonation is a matter of defence, and in order to be available, it must be pleaded. Delaney v. Delaney, 69 N. J. Eq. 602.

The rule as stated in 14 Cyc. 670 is that,

“the complaint need not allege that plaintiff has not condoned or connived at the misconduct complained of. Condonation and connivance are matters of defence to be set forth by the defendant unless they affirmatively appear from the complaint.” '

In Jones v. Jones, 18 N. J. Eq. 33, it was said the ordinary rules of pleading require this defence to be set up in the answer; the only exception seems to be when the complainant, in putting in his case, shows his own guilt. And in Greims v. Greims, 80 N. J. Eq. 233, it was held that condonation, is a conclusion of fact and not of law and must be proved by the defendant.

Judge Vroom, speaking for the court of errors and appeals in Watkinson v. Watkinson, 68 N. J. Eq. 638, said, if condonation was intended to be interposed as a defence (it) should have been pleaded and proved.

In Stevens v. Stevens, 14 N. J. Eq. 374, which defendant’s counsel insists is directly in point, the chancellor said, “It is true that) there is no rule of this court similar to that of the court of chancery of New York which requires that the bill shall aver that the complainant has not cohabited with the defendant since the discovery of the adultery, but where it appears upon the face of the bill, that cohabitation between the parties continued long after the adultery is proved to have been committed, there should be an express denial on the part of the complainant of voluntary cohabitation since the discovery of defendant’s infidelity, or such facts and circumstances should be shown as to preclude a condonation of the offence.”

There was no express denial of condonation in the pleadings in the Stevens Case, and as the master’s report was silent oh the subject, the chancellor permitted complainant to'make further proof to rebut.the defendant’s evidence of condonation, but did not require her to amend her bill by an averment denying con-donation. ;

In Graham v. Graham, supra, the court, in commenting on the Stevens Gase said, the difficulty in that case was “not that she did not make out a case, but that she went further and suggested facts which presumed a defence and then did not rebut it.” This comment is directed to the evidence in the case and not to the allegations of the bill.

Hpon demurrer the facts in the petition -are taken as true, and while they show a possibility of the defence' of condonation, they do not go so far as to suggest its probability, at least to the extent of requiring from petitioner an averment that he has not condon'ed the offences of which he now complains.

The allegations of the petition are wholly consistent with the assumption that petitioner cohabited with defendant until after the child was bom. in total ignorance of her misconduct, and it was not necessary for him to allege the absence of condonation in anticipation of such defence being interposed to his suit.

The demurrer is overruled, with costs.


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    Mae N. Kaufman v. Samuel R. Kaufman.
    [Submitted February 23d, 1916.
    Decided April 1st, 1916.]
    In suit to annul a marriage on the ground that defendant fraudulently suppressed the fact that he had syphilis, evidence Eeld insufficient to show defendant fraudulently concealed the fact from complainant when it was his duty to disclose it.

      On exceptions to master’s report.

      Mr. Wilbur A. Eeisley, for the complainant.
   Foster, V. C.

This bill is filed to have the marriage between complainant and defendant annulled upon the ground that at the time of the marriage defendant fraudulently suppressed the fact that he was then afflicted by the disease called syphilis.

The special master to whom the cause was referred reported adversely to complainant’s claim, and the matter comes before the court on exceptions to the master’s report.

The evidence shows the parties met in Atlantic City in August, 1906, and in a few weeks became engaged. Complainant was then a resident of Newark and defendant lived in Jacksonville, Elorida..

In the fall of -1906 defendant came to Newark and the parties were married on November 1st of that year.

A few days before the wedding defendant consulted Dr. Max Eeldman, a physician practicing in Newark, a stranger to him, but an old friend of complainant and her family, in regard to a sore on his lip. Erom his examination the physician found a sore which he says might have been'a usual sore or syphilitic, and he suspected it to be a syphilitic sore. He told defendant of his suspicion and he denied that he had been exposed to syphilis. The doctor accused him of kissing some girls he should not have kissed and defendant denied doing so. Although he knew defendant was about to marry complainant, he did not tell her or her family of his suspicions regarding the nature of the sore, because he states he did not know enough of the facts and did not have sufficient grounds to justify anything, and he might have done defendant a very grave injustice.

Erom the evidence of the two physicians who testified for complainant, it appears this disease can be contracted in many ways by a person innocent of wrong doing, e. g., by kissing a person afflicted, or by using a drinking cup, and in other ways mentioned in their testimony, and that it was possible at .the time Dr. Eeldman examined defendant for him to have had syphilis and be honest in his belief and denial that he did not have it.

It further appears from the progress of the disease in defendant’s case, that he was undoubtedly syphilitic when he consulted Dr. Feldman, and it also appears that some years after this consultation a blood test was made and defendant was pronounced by a specialist as positively afflicted with the disease, although he strongly denied it.

The parties lived together, no children being born of the marriage until September, '1914, when complainant convinced, notwithstanding defendant’s repeated denials, that he was suffering from this disease, left him and returned to her parents’ home in Newark; and they have not lived together or communicated with each other since.

The jurisdiction of this court to annul a marriage for fraud was determined by the court of errors and appeals in Carris v. Carris, 24 N. J. Eq. 516, and on this authority Chancellor Magie, in Crane v. Crane, 62 N. J. Eq. 21, granted a decree of annulment, because of the husband’s concealment of his syphilitic condition at the time of his marriage, and 'of his knowingly false denial of his condition prior to the marriage when asked about it.

As stated, the evidence is convincing that defendant was affected with syphilis at and before the time of the marriage, but it was held by the learned chancellor, at page 27 in the Grane Case, that, “The mere existence of that foul disease (syphilis) in one of the parties to a marriage contract, although it tendered to render, and upon discovery would render impracticable the purpose of marriage, would not, in my judgment, justify a decree annulling the marriage,” and he added, “It must therefore, in my judgment, appear by appropriate and sufficient proof that the defendant either represented to complainant that he was free from syphilis or thht he concealed the fact that he had syphilis when he was in duty bound to disclose it.”

Complainant’s case rests upon the assumption, that as it after-wards developed by the progress of the disease, that defendant was syphilitic, and that the disease in 1914 had reached a stage that clearly indicated that it had been contracted prior to the marriage, defendant must have known when he consulted Dr. Feldman the nature and cause of the sore upon his lip, and that having- such knowledge he fraudulently concealed the fact from the complainant when it was his duty to disclose it.

The evidence does not support this assumption. On the contrarjr, defendant denied to the physician that he had the disease, or that he had been exposed to it. The physician from Ids examination was suspicious that the sore was syphilitic, but was not certaip about it and did not feel he had sufficient facts on which to base an opinion or to justify him in communicating his suspicion to complainant or her family. It is established that the disease can be contracted innocently of wrong doing, and one not a physician might be affected with syphilis in its earlier stages, at least, and not know it. .Because of the possibility that defendant may have contracted the disease innocently, and the further possibility that he could have the disease in its initial stage and not know it, I am unable to find anything to warrant me in determining that the only and the correct assumption arising from the evidence is that at the time of the marriage and prior thereto defendant knew, or must have known, that he had syphilis, and that having such knowledge he concealed the fact from the complainant.

For the reasons stated, my conclusion is that the exceptions to the master’s report should be overruled.


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    Florence E. Palmer v. John A. McFadden, guardian, et al.
    [Decided April 1st, 1916.]
    Motion tot vacate an order restraining the sale of property on writ of fieri facias to satisfy the claim of an insurance company, which may prove to have no existence, the issues presented requiring a construction of the contract of insurance, &c., will be denied.

      Mr. William F. Beibel, for the complainant.

      Messrs. Undabwry, Depue & Faulks, for the defendants.
   Foster, V. C.

From the bill, answer, replication and affidavits the present position of this controversy seems to be that the defendant the Niagara Fire Insurance Company is the holder by assignment from the defendant McFadden of a bond and mortgage and a decree of foreclosure for $3,225, and interest, against complainant’s premises, which it is'seeking to secure the payment of by a sale of the property under a writ of fi. fa., now in the hands of the sheriff of Union county.

The order restraining this sale it is now sought to have vacated on the grounds that the insurance company which, with two other companies, issued insurance aggregating $14,500 on the premises in question, had paid to the defendant McFadden, on account of its policy of $3,500, at the time the insured premises were destroyed by fire, $3,416.67 for his decree and interest, which were then assigned to it; that by reason of the terms of the policy and of the assignment, the insurance company is entitled to be subrogated to McFadden’s rights and position in the foreclosure proceedings, and that it is especially entitled to such subrogation because, in settling with McFadden as mortgagee, under the policy, it paid him $1,968.40 more than it was liable for under the contribution clause of its policy.

Complainant’s loss from the fire was appraised at $5,205.82 and the sound value of the property at $6,002.62. Complainant dissented from this appraisal and claims she is not bound by it.

Of this loss of $5,205.82 the Scottish Union and National Insurance Company, on its policy for $6,000, was compelled by suit to pay its proportion of the loss under the contribution clause, amounting to $2,460, and costs, and the Northern Insurance Company was likewise compelled by suit to pay on its policy for $5,000 its contribution of $2,150, and costs.

The Niagara company claims the amount it should contribute on its policy for $3,500, for its proportionate share of the loss, under the 'appraisal, is $1,255.60, being the balance of the appraised loss.

Erom the amount recovered from the two other companies $1,785 has been deposited with Newton P. Kinsey, to be held until complainant and the Niagara company adjust their differences. No adjustment has been reached.

Complainant does not admit the Niagara company’s liability to be limited to $1,355.60, but claims the entire amount of the policy, and demands the difference between this amount of $3,-500 and the amount paid by the insurance company to McEadden, and requests the surrender of her bond and mortgage fos cancellation.

The issues thus presented require a construction of the contract of insurance between the parties, and a determination of the insurance company’s right to have its liability reduced by the contributions from the other companies; and it is farther necessary to determine, if such limited liability is established, whether by the terms of the policy the insurance company is entitled to be subrogated to the rights of McEadden in the foreclosure proceedings. Until these matters are determined, the sale of' complainant’s property now to satisfy the claim of the insurance company, a claim which may prove to have no existence, should not be permitted, and this sale must wait until final hearing.

The motion to remove the restraint is denied, with costs.


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    Alexander B. Shaw v. Standard Piano Company.
    [Submitted March 13th, 1916.
    Decided April 1st, 1916.]
    1. Evidence Held to show that defendant corporation was insolvent so as to require appointment of a receiver for the safety of the stockholders and the public.

      2. The mere fact that the same person was an officer of the assignor of notes and the assignee, would not impute notice to the assignee, in the absence of a showing that such notice came to the officer when acting as a member or officer of the assignee in his official capacity, or that, while acting as an agent of the assignee and within the scope of his authority, he received the information at the time he was actually acting as agent.
    3. Under act April 1st, 1912 (P. L. 191% p. 585), stating what acts shall be construed to be those of insolvency on the part of a corporation, it is not necessary that all acts therein mentioned be concurrent, but it is sufficient to warrant the appointment of a receiver that the business of the corporation was conducted at great loss prejudicial to the creditors &nd stockholders.
    4. Under act April 1st, 1912 (P. L. 191% p. 585), providing that the court may proceed in a summary way to hear affidavits as to corporation’s insolvency on such notice, if any, as the court directs to be given, it is not necessary that any notice be given the corporation.
    On bill for receiver, &c.

      Messrs. Pitney, Hardin & Sicinner and Mr. J. Weissenbach (of the Illinois bar), for the complainant.

      Mr. Frank B. Bradner, for the defendant.
   Foster, V. C.

’The bill and affidavit in this canse were filed with Vice-Chancellor Howell on January 26th, 1916, who determined that the defendant corporation was insolvent and advised an order granting the restraint asked for and appointed a receiver.

On January 27th, 1916, Vice-Chancellor Howell, on application of the defendant, advised an order directing notice of a motion to be given to open the order: appointing a receiver in this cause, and permitting defendant to serve its answer and affidavits in support of the motion.

The matter-came on for hearing on bill and affidavits, and answer and affidavits, and the oral examination of witnesses on the part of both parties, before Vice-Chancellor Howell, on February 4th and 5th, 1916, and by consent of the parties the hearing was continued before me on February 16th and 17th.

The complainant, Alexander B. Shaw, a resident of Chicago, alleges that defendant, Standard Piano Company, a corporation of this state, is indebted to him on its unsecured promissory notes for more than $67,857.35, of which, approximately, $16,000 are past due and unpaid. Part of these notes were negotiated to him by the Port Dearborn Rational Bank of Chicago, and the remainder by tire Hamilton Investment Company, a corporation of the State of Illinois, and, so far as complainant has knowledge, the bank and investment company were bona fide holders for value of said notes.

Defendant began business in Eewark about April, 1913, with a capital stock of $100,000, of which $60,000 was preferred, and the balance, common stock. The entire preferred stock appears to have been issued to one H. P. Eelson, without consideration, and of the four hundred shares of common stock, one hundred and fifty shares were issued to Eelson for cash and property amounting, as he states, to about $15,000; two hundred and forty-nine shares were issued to Walter L. Hardien and one share to P. W. Bonar,.for what consideration, if any, does not appear.

The company’s business was the sale of pianos and piano-players on the installment plan, and for the purpose of obtaining money to carry on its business it sold and assigned, from time to time, leases, mortgages or conditional bills of sale, as they have been termed, together with the installment notes secured by the same, which had been obtained from its customers in connection with the purchase of pianos or piano-players.

Prom the sale of these installment notes and leases the company realized seventy-two per cent, of the face value thereof, the remaining twenty-eight per cent, being held by the purchaser, under the terms of the assignment, as a “General” or “Special Reserve,” which was to be paid by the defendant when the amount, with interest, advanced by the purchaser of the notes had been repaid. Provision was also made, in the assignment, for the substitution, from time to time, of other notes and leases to take the place of notes and leases on which the purchasers of the pianos had made default; upon such default the defendant retook possession of the piano and resold it, and used the notes and lease of the new customer to make the substitution mentioned.

Until the past few months none of the customer’s notes carried interest, while all the notes issued by the defendant not only carried interest but were also subject to a brokerage charge of eight or ten per cent, additional.

From the books of the company, the testimony and the receiver’s report, it appears that the Commercial Security Company had purchased from the defendant such notes and leases aggregating $100,193.45, and that the Federal Commercial Company had also purchased notes and leases to the amount of $130,-111.62, making a total of $230,305.07; that there is due on such notes and leases to the Commercial Security Company and the Federal Commercial Company for money advanced in this way to the defendant the sum of $139,545.71.

The receiver’s report shows defendant to have actual assets of $4,950.73, which includes cash in bank, stock on hand, furniture, accounts and other tangible items, the value of which could be definitely determined. This statement of assets does not include the equity in the notes and leases sold and which is called the “General” or “Special Reserve,” because the value of this item, if any, is unknown, and, until these notes are paid, the value of this “Reserve” or equity cannot be ascertained; nor does the receiver’s report show the value of pianos shipped by defendant in May, 1915, for sale, or repair, to Everhard & Seabold, at St. Johnsville, New York. This concern is now in bankruptcy, and a claim1 for the pianos, or their value, has been filed on behalf of the defendant, but has not yet been allowed, and, when allowed, it may be subject to a charge for repairs made to these' instruments.

The receiver reports liabilities of at least $116,817.42; while defendant admits liabilities of $153,765.94, and claims assets of $263,925.07, complainant contends it has been shown that defendant has assets (crediting it with an estimate value for the possible equity or “Reserve” in the assigned notes and leases) of $178,950.73 and liabilities amounting to $256,351.25, showing á deficit of about $76,000.

Since defendant has been in business it has never realized a dollar „from the so-called “Reserve” or equity in the notes and leases assigned by it, but, in the statement prepared for this hearing, it treats and values this so-called “Beserve” or equity as being worth $104,407.63. In its list of assets, under “Accounts Beceivable,” it includes the sum of $7,000 that it hopes to receive from 'the bankrupt estate of Everhard & Seabold for the pianos shipped them for sale or repair.

During the entire period it has been in business defendant has not collected any interest from its customers.

In its statement of assets it includes “Accrued Interests Estimated” of $12,000, without showing on what this estimate is based, and it values its merchandise on hand at $4,000, while the receiver values this merchandise at $2,225. In the statement showing its' liabilities, defendant charges itself with “Notes Payable” of $44,300. Its books show, however, that this item amounts to at least $97,000, and, possibly, $102,000.

It further appears from the testimony of the treasurer of the company, Mr. Hardien, that he claims the company has always done a profitable business, and that it made a profit of over $5,1,000 in the past year; but he is unable to tell what was done with it, or where it is shown in the company’s books. On October 5th, 1915, Mr. Hardien wrote the collector of internal revenue, at Newark, explaining why the company had failed to file a statement- showing its net annual income for the year- 1914. In this letter he states that the company

“became involved in financial difficulties in the fall of 1914; and in the early part of January, 1915, it was deemed advisable to trustee the stock and the affairs of the company'to better secure the holders of note obligations of the corporation.”

In another paragraph of the letter he adds:

“The corporation did business for the year 1914 at a considerable loss and the affairs of the company have been in the process of liqui-' dating its liabilities since the first of the year.”

And it further affirmatively appears that from April, 1915, to January 1st, 1916, the company suffered a loss of many thousands of dollars through defaults, repossessions, returned and exchanged pianos and the expenses of the resale of the same.

Erom the investigation of defendant’s affairs that has been made in these hearings, I think it clearly appear^ that defendant is insolvent and cannot, within a short time, resume its business with safety to the public and advantage to its stockholders as contemplated by the statute.

But it is insisted that if this be so, .complainant cannot maintain his action as a creditor because of a partial or total failure of consideration for the notes held by him. There is no evidence in the case to justify this contention, except the statement that one Mr. Patterson, an officer of the Federal Commercial Company, was also a director of the Fort Dearborn National Bank, and that by reason thereof the bank was chargeable with any notice or knowledge he acquired in relation to defendant’s notes.

While it does not appear that Mr. Patterson ever had knowledge of any infirmity in complainant’s notes, if he did, it would not be sufficient to charge the bank, and, therefore, complainant, who acquired from it some of the notes he now holds, with knowledge of the alleged infirmity, unless it further appeared that Mr. Patterson acquired this knowledge while acting as a member of the board of directors of the bank convened in its official capacity (First National Bank v. Christopher, 40 N. J. Law 435), or that while acting as the agent of the bank, and within the scope of his authority, he received the information at the time he was actually acting as ageut in behalf of his principal. Hanford v. Duchastel, 87 N. J. Law 205.

It is further insisted that the receiver should not have been appointed without notice to the defendant; and because it must be made to appear, not only that the company has become insolvent, but that since the amendment to the Corporation act in 1912 (P. L. 1912 p. 585 ch. 300), it must also appear that the corporation is not about to resume its business in a short time thereafter, and that its business has been, and'is, being conducted at a great loss and greatly prejudicial to the interest of its creditors and stockholders.

If it were necessary to hold that all the elements mentioned in the amendment of 1912 must be established to give the court jurisdiction, it would be sufficient to say that the evidence shows all of them present in the ease at bar. The cases hold, however, that no such combination of circumstances as is contended for is required. Empire Trust Co. v. Fisher, 67 N. J. Eq. 602; Catlin v. Mining Company, 73 N. J. Eq. 286. In Bull v. International Power Co., 84 N. J. Eq. 209, Chancellor Walker held that by virtue of the amendment of 1912, a receiver could now be appointed, not only when the corporation had become insolvent, or had suspended its ordinary business for want of funds to carry on the same as authorized by section 65 of the act concerning corporations (Revision of 1896), but, also, if its business has been, or is being, conducted at a great loss and greatly prejudicial to the interest of the creditors and stockholders.

On the question of notice, it is expressly provided by the amendment of 1912 that the court may proceed in a summary way to hear affidavits, &c., upon such notice, if any, as the court may direct to be given.

The evidence is convincing that the defendant corporation is insolvent; that its business has been, and is being, conducted at a great loss and greatly prejudicial to the interest of its creditors and stockholders, and that its business in its present condition cannot be conducted with safety to the public and advantage to the stockholders; and the motion'to open the order and discharge the receiver is therefore denied.


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    Hackensack Brick Company v. Mayor and Council of the Borough of Bogota et al.
    [Submitted March 29th, 1916.
    Decided May 4th, 1916.]
    1. Where a contractor defaults, and his sureties complete the contract, they are entitled to be subrogated to the rights of the owner against the contractor, and against persons furnishing materials to the original contractor, to the extent necessary to reimburse them for their necessary outlay.

      2. The right of subrogation does not depend on any privity of contract, but is independent of any agreement, and rests upon principles of iiatural justice and equity. ' t

    3. Where the indemnitor of a surety on a contractor’s bond completed the contract after a breach by the contractor, either or both surety companies were subrogated to the rights of the borough against the contractor, with a right paramount to that of a materialman under a lien, in money retained on the contract price, since a surety who has paid or fulfilled the obligation has the same equity of subrogation as the surety to whom he was bound, and it is immaterial what instrumentalities a surety makes use of to fulfill its obligation.
    Heard on bill, answers, cross-bill and proofs.

      Messrs. Maclcay & Maclcay, for the complainant.

      Messrs. Wilson & Smoclc, for Asbury Park Trust Company.

      Messrs. James & Malcolm G. Buchanan, for Sessions Foundry Company.

      Messrs. Enright & McDermott, for Hnited States Fidelity and Guaranty Company, and Massachusetts Bonding ahd Insurance Company.
   Foster, V. C.

On March 20th, 1914, Thomas G. McGovern entered into a contract with the borough of Bogota for the construction of sewers and sewer disposal works for the borough. This action is brought to enforce a municipal lien for materials furnished by complainant to .the contractor and used in the work.

McGovern, to secure the performance of this contract, gave a bond to the borough in the sum of $22,000, with the Massachusetts Bonding and Insurance Company (hereinafter referred to as the Massachusetts company) as surety, and about the same time, at the request of this company and McGovern, the United States Fidelity and Guaranty Company (hereinafter referred to as the United States 'company) became the indemnitor of the Massachusetts company.

Some time prior to September 24th, 1914, McGovern abancloned the work, and the borough council thereupon took action, by resolution, directing its sewer committee to have the contract completed. The Massachusetts company was duly notified of this action and it in turn notified the United States company, and this company sent notice to McGovern of the borough’s action. McGovern paid no attention to this notification, and the borough through its engineer, at the request of the Massachusetts company, then made arrangements with the United States company to complete the contract. Bids were requested by the United States company from contractors recommended by the borough engineer, and the contract to complete the work was awarded to the lowest bidder. The total cost to the United States company to complete the contract was over $22,000. It received from the borough, on account thereof, $12,444.20, being the balance due on the McGovern contract, and this company lost in completing its work and in fulfilling the condition of the bond given to the borough by McGovern and the Massachusetts company over $10,000.

Under the contract with McGovern the borough retained fifteen per cent, of the amount of each estimate of its engineer, and the borough admits having in its control $622.95 from the percentages thus retained. By the terms of the contract the borough had the right in the event of the abandonment of the work by the contractor to complete the same and to use and apply, as far as necessary, the amount of the retained percentage for that purpose.

Yotices of lien claims aggregating over $1,500 have been filed by the complainant and some of the defendants with the borough officials, and the contention is made that the lien claimants are .entitled to have the $622.95 retained by the borough paid to them on account of their claims, in preference to the claim to this fund made by one or both of the surety companies. This contention is based on the ground that there is no privity of contract between the -United States company and McGovern, or between this company and the borough, and that in the absence of such privity, the United States company is not entitled to be subrogated to the rights of either McGovern, the borough or the Massachusetts company to the moneys retained. It is conceded that the borough, by the terms of the contract and also the Massachusetts company, as surety on McGovern’s bond, each had the right to resort to this fund so far as necessary for the purpose of reimbursement for completing the contract after McGovern had abandoned it, and it is not disputed that the amount of money retained, and many thousands of dollars in excess of it, were required to complete the work contracted for, and that such excess was paid by the United States company, and it is also undisputed that both McGovern and the Massachusetts company assigned to the United States company all their respective rights in all deferred payments and retained percentages, and all money that might be due either of them on the contract at the time of any default therein. And it further appears that during the progress of completing the contract, the borough paid the United States company, at its request, and at the request of the Massachusetts companjq the samq payments on monthly estimates that McGovern would have been entitled to receive had he continued the work.

The question to be determined is whether the Massachusetts company performed its contract of suretyship with the borough by completing the contract when the contractor abandoned the work, and thereby became entitled to be subrogated to the rights of the borough, as owner, to the funds retained by it. Under the established facts, I think this question must be answered affirmatively. When a contractor defaults and his sureties complete the contract they are entitled to be subrogated to the rights of the owner against the contractor, and against persons furnishing materials to the original contractor, to the extent necessary to reimburse them for their necessary outlay and no further. Union Stone Co. v. Freeholders of Hudson County, 71 N. J. Eq. 657. The contention is made, however, that the work was actually completed by the United States company, and not by the Massachusetts company, and that as there was no privity between the borough and the United States company, the relation of suretyship did not exist between them, and that therefore the principle of subrogation does not apply.

The right of subrogation does not depend on any privity of contract; it is independent of any agreement and rests upon principles of natural justice and equity. Sheld. Subr. (2d ed.) 4; Stearns Sure. (2d ed.) 427; 27 Am. & Eng. Encycl. L. 203.

The right i©f one or both surety companies to the funds in the borougFs control must be regarded as paramount to that of the lien claimants, whether the United States company is considered to have acted as agent for the Massachusetts company or independently of such agency. A surety who has paid or fulfilled the obligation has the same equity of subrogation as the surety to whom he was bound. Pin. S. & G. § 165; Rittenhouse v. Levering, 6 Watts & S. (Pa.) 190; Pom. Eq. Jur. 1474. The situation is not altered by the fact that in performing its obligation and completing the contract the Massachusetts company made use of the agency of the United.States company for the purpose. It is immaterial what instrumentalities the surety made use of to fulfill its obligation. The condition of the obligation of the Massachusetts company to the borough was that if the contractor did not complete the work, and if the surety did not complete it in the event of his default, that then the surety would pay such damages to the borough as it might suffer by reason of such default.

When the contractor abandoned the work the borough called on the Massachusetts company to complete it, and this company in turn called on its indemnitor, the United States eompanjq to complete the contract. The United States company did so, as the representative of the Massachusetts company, and the Massachusetts company thereby fulfilled its obligation to the borough and was entitled to be subrogated to the rights of the borough in the money retained on the contract, to reimburse it afe" far as it would go for the expense it incurred through its agent in completing the contract. The borough has no further claim' against the surety, the Massachusetts company, this company having done through the agency of the United States company all it had agreed to do.

If there were a conflict between the surety companies over this fund and it became necessary so to do, there is ample authority to justify the finding that the United States company on completing the work as the indemnitor, or surety of the Massachusetts company, the immediate surety is entitled to the same equity of subrogation to the funds in question as the Massachusetts company. Sheld. Subr. § 106, &c. There is no controversy, however, between the surety companies. They have made themselves parties to this action, and by their joint cross-bill they ask that the moneys retained by the borough be paid to them or either, of them.

And as no sufficient reason has been suggested why. this should not be done, a decree will be advised that the funds retained under the contract and in the control of the defendant, the borough of Bogota, should be paid to the Massachusetts company.