source: Caselaw Access Project

author: Pitney, V. C.

license: Public Domain

text:
    Hackettstown National Bank v. Louisa K. Ming.
    1. A married woman in New Jersey is bound and estopped by all her acts done within the scope of the enabling acts, to the'Same extent and in the same manner as a single woman.
    2. A wife made her promissory note to her husband’s order and delivered it to Mm to enable Mm to procure its discount and with the proceeds pay Ms own debt. The husband applied for its discount to a bank official who had notice that the note was made without consideration and for discount, but did not have notice that the proceeds were to be applied for the husband's benefit. The bank official offered to discount it by a check to the wifeis order, which the husband accepted and afterwards procured his wife to endorse and deliver it to him, she knowing that it was the proceeds of the discount of her note.— Held, that the wife was estopped from setting up against the bank that she was a mere surety on the note.
    3. Complainant recovered judgment at law by default on a promissorymote made by a wife to the order of and endorsed by her husband. The wife applied for and obtained an order opening the judgment with unrestricted leave to plead. She pleaded, first, that she occupied the position of surety on the note and was a married woman; second, that it was a contract made with her husband, and therefore void at law. Complainant then filed its bill in this court for relief and injunction against setting up these defences at law. Upon the trial of the issues raised this court found the defence of suretyship not sustained. — Held, (1) Complainant was justified in coming to this court, and was, in effect, compelled to come here by defendant’s plea that the contract was between husband and wife. (2) Complainant having established his case here on the merits, defendant should-not he permitted to litigate it again in the law courts.
    On final hearing on bill, answer and proofs.

      Mr. Holloway W. Hu/nt and Mr. Alfred Mills, for the complainant.

      Mr. James H. Neighbour, for the defendant.
   Pitney, V. C.

This cause comes before the court under very peculiar circumstances. The complainant recovered a judgment by default in the supreme court on the 12th day of July, 1892, against the defendant, Louisa K. Ming, together with Charles H. Ming and John Swayze, for $1,143.68 in an action on contract, founded on a promissory note dated May 23d, 1892, payable fifteen days after date, for $1,100, made by John Swayze and the defendant, Louisa K. Ming, to the order of and endorsed by Charles H. Ming. Execution was issued upon it and levy made. In September, 1892, the defendant herein applied to a justice of the supreme court for a rule to show cause why the judgment should not be opened as to her and she be permitted to plead, on' the ground that, at the time of the making of the note, she was the wife of her co-defendant at law, Charles H. Ming; that she signed the note with Swayze without consideration, and so lent her name to her husband, and therefore occupied the position of surely for him, and that the note was therefore void as against her. Testimony was taken in support of' that application, and the defendant, by order of the justice before whom the application was made, was let in to defend, by an order in these words, after stating the cause:

“ It appearing to the court that judgment by default was entered in this case against all of the defendants therein, and that Louisa K. Ming, one of said defendants, has a real defence to the action, it is thereupon ordered that said judgment, as to the said Louisa K. Ming, be opened and she be let in to plead; and it is further ordered that the lien acquired by such judgment and by the execution thereon shall remain as security for the satisfaction of any judgment the said plaintiff may recover against said Louisa K. Ming in said action.”

The learned justice, in granting this order, assigned the following reasons: “First. This action could not be sustained at law against her [Mrs. Ming] under authority of National Bank v. Brewster. 80 Vr. 231. Second. If the bank could undoubtedly recover on the note in equity, I should hesitate to open the judgment simply to turn it over to another court, but to recover in equity I think the bank would have to show a transaction by Mrs. Ming, not with her husband, according to the terms of the note, but with the bank. Third. That will raise the other ■question started, namely, whether the original character of accommodation maker, which plainly was the character Mrs. Ming assumed when she made the note, was afterwards changed by what occurred between her husband and Welsh, and by her receiving and endorsing Welsh’s check. I will express no opinion on this, except to say that if that question can be litigated at law, I should think there was in it such a defence that Mrs. Ming ought to be permitted to set it up so that she might review any ruling made thereon, which she could not do if I refused to open the judgment.”

The judgment being thus opened, Mrs. Ming duly pleaded — ■ first, non-assumpsit; second, that she was at the time when &c. the wife of Charles H. Ming, and the promises set forth in the declaration were promises to secure and pay the debt of another person &c.; third, that she was at the time &o. the wife of Charles H. Ming, and the promises and undertakings in the declaration mentioned were contracts between her and her husband, and therefore void at law.

The complainant traversed these pleas, and the resultant issues were noticed for trial by Mrs. Ming at the Morris circuit.

The complainant conceiving that, under the> last plea3 the defendant must recover, whatever might be the merits of its case under the second plea, filed its bill for relief in this court. Mrs. Ming answered and the cause was brought to hearing.

As soon as the case was opened I stated to the counsel for Mrs. Ming that if he would stipulate on defendant’s behalf that, at the trial at law, she would not set up the technical defence that the plaintiff could not recover on account of the form of the contract, under the authority of Bank v. Brewster, 20 Vr. 231, and would agree to confine herself to the defence that she occupied the position of a surety on the note, I would decline to further proceed with the cause, and would let that question be litigated in the action at law. Counsel for the defendant declined to accede to the offer or in anywise to waive any of his defences in the action at law. It being thus rendered manifest that the defendant must prevail at law, without regard to the real merits of the case, and that complainant’s only remedy was in equity, I proceeded to hear the cause.

The proofs showed that, in the early part of the month of November, 1891, Charles H. Ming, the husband of the defendant, was indebted to the First National Bank at Morristown in the sum of $1,070 upon a promissory note, and was threatened with suit on it, and was desirous of raising the money to pay it; that on the 18th of November, 1891, he procured his wife and Swayze to make their promissory note, dated on that day, to his order, in the sum of $1,100, payable three months after date; that he started from home with the note with the avowed object of going to Hackettstown, eleven miles distant, to get it discounted at the complainant bank. On the way he stopped at German "Valley — about half way — and saw Mr. Matthias T. Welsh, a director of the complainant bank, showed him the note and asked him to discount it. Mr. Welsh was well acquainted with Mrs. Ming and knew that she had a fortune of her own, and he also supposed that Mr. Swayze and Mr. Ming were responsible. No .express statement was made to him that the note was an accommodation note. The expression of Mr. Ming was: “We need the money.” Mr. Welsh stated that he had not the money himself, but would telephone to the cashier of the bank. He did so, stated to the cashier the names on the note, that he knew Mrs. Ming, and knew her to be responsible and was desirous of accommodating her. The cashier replied that he might give his check for the amount of the note and send the note over to the bank, and ’the bank would discount it and place the proceeds to his credit in payment of his check, without his endorsement, but directed him to draw his check to the order of Mrs. Ming. Mr. Welsh thereupon calculated the discount and drew his check to the order of the defendant, Mrs. Ming, for $1,082.80, and handed it to her husband, who handed him the note and took the check immediately to his wife, at their residence, informed her that it was the proceeds of the discount of the note which she had just made, and requested her to endorse it, which she at once did and handed it back to her husband, who used it immediately to pay the note in the First National Bank at Morristown. This note (of November 8th, 1891) was renewed at maturity and resulted in the note upon which suit was brought.

The question is whether or not it is competent for Mrs. Ming, under the circumstances, to set up and be allowed the defence that she was a mere accommodation maker of the note.

The transaction should be considered as one, in the first place, between the bank, acting through Mr. Welsh, its director, and Mr. Ming, though I do not perceive that it would make a particle of difference if it be viewed as one between Mr. Welsh and Mr. Ming. In either case, under the circumstances, whatever was notice to Welsh was notice to the bank.

If Ming had simply presented the note to Mr. Welsh and asked for its discount in the ordinary way, and had not used the plural “ we ” or otherwise expressed himself in such a manner as to lead Welsh to believe that his wife was interested in the proceeds of the discount, I should be of the opinion that she would be estopped from setting up that she was a mere surety. Our act (Rev. ¶. 637 § 5) gives a married woman full power to contract for all purposes except suretyship. It is in these words:

“That any married woman shall, after the passing of this act, have the right to bind herself by contract, in the same manner and to the same extent as though she were unmarried, and which contracts shall be legal and obligatory and may be enforced at law or in equity, by or against such married woman, in her own name, apart from her husband; provided, that nothing herein shall enable such married woman to become an accommodation endorser, guarantor or surety; nor shall she be liable on any promise to pay the debt or answer for the default or liability of any other person.”

There is nothing in the form of the contract — promissory note — signed by her and presented to Mr. Welsh which indicated that she occupied either of the contractual positions forbidden by the statute, viz., endorser, guarantor or surety. She voluntarily placed herself in the position of joint maker of a promissory note, and thereby declared, in the language of the law-merchant that she was indebted to her husband in the sum named. This would be the force of the contract without the use of the words, “ value received,” found in this note.

Reason and justice require that a married woman who avails herself of the advantages of the statute law emancipating her from the business trammels which the common law threw around her, and enters into mercantile transactions, should be bound by her acts and representations made in respect thereto, to the same-extent as a single woman or a man. This is the view adopted by Mr. Justice "Van Syckel at the Union circuit, in Bank v. Craig, reported in 1 N. J. L. J. 153, and it is sustained by all the authorities. 2 Herm. Estop. §§ 1101, 1105; Big. Estop. (5th. ed.) 561; Bodine v. Killeen, 53 N. Y. 93; Frecking v. Rolland, 53 N. Y. 422; Noel v. Kinney, 106 N. Y. 74.

But it is manifest, from what occurred between Welsh and Ming, and between Welsh and the cashier of the bank, that neither Welsh nor the bank was misled by the form of the contract into the belief that it represented an actual indebtedness or was given for an actual consideration. On the other hand, they did not have notice that it was given as a mere accommodation for .the husband, and that he alone was to have the proceeds of the discount.

I think the fair inference from the facts is that they had notice simply that the note was given without consideration, and had no vitality until cash or something of value should be advanced upon it. In drawing this inference, I am not sure that I am not going farther in defendant’s favor than is warranted by the law-merchant applicable to the circumstances as stated in Hamilton v. Vought, 5 Vr. 187. But this inference, if justified, does not go the length of charging Welsh and the bank with notice that the proceeds of the note were to be used by the husband for his individual benefit, so that the wife did and would occupy the position of surety upon it. Uor were they obliged by the rules of mercantile law to inquire upon the subject. They had a right to presume that she signed the note as maker for an honest purpose, and that her name at its bottom was intended tornean something. To infer that she signed it as a surety merely was to charge her either with an intention to commit a fraud or to do a vain and idle act, for if it were made known to a proposed purchaser of the note, at- the time of its negotiation, that ■she signed it as an accommodation maker only, so that her contract was one of suretyship, the result would be to render her name of no value whatever; and in such case it would be possible to give her name value in no way except by concealing her -situation as surety, and so commit a fraud. Whether the wife would or would not occupy the position of surety upon the note in question after its discount, would depend upon what was the agreement between the parties to it as to the immediate disposition of the proceeds of such discount. If, by the agreement of the parties, the proceeds of the discount were to be applied to the use of the wife alone, or of all the parties in a joint enterprise, she would never occupy such position. In this situation the complainant might well say, and I think it had a right to say, “ We do not wish to run any-risk as to the liability of the wife on this note, and we do not propose to have our right against her depend upon the private understanding of the parties as to the future application of the proceeds of its discount. We will lend the money only upon condition that it is to the wife alone, and not to her jointly with others or to her husband.”

Assuming, then, that Welsh and the bank had notice that the life of the note would commence with its discount, let us consider the effect of what actually occurred. They, in effect, declined to discount it for the husband, and said, in substance, to him: “We will discount this note for your wife, and loan the money on it to her.” The husband acquiesced in this proposition, and accepted a check to his wife's order. This action, however, did not bind her in her absence, but left it optional with her either to accept or reject the position of borrower of the money. She was free to refuse to accept and use the check by endorsing it, and she was equally free to accept and use it. No pressure was brought to bear upon her in this behalf by or on behalf of the complainant, nor is there the least glimpse in the proofs or evidence that a scheme was devised by Welsh and the husband to lead the wife unawares into a trap by drawing the check to her order, as was so earnestly argued by her counsel. The bank •officers had the right to presume that the wife was acquainted with mercantile law and knew what would be the effect of her endorsement of the check. She is fairly.chargeable with such notice after signing a promissory note as maker, and her evidence shows that she understood the nature and value of the eheck and the immediate effect of her endorsement.

The drawing of the cheek to the order of the wife and handing it to the husband was a mere offer of a loan to her on the note. Until she accepted that offer and used the check by endorsing it, the contract of discounting or lending was merely •executory. If she refused to accept it, there would be no lending of money, and her husband would be entitled, upon a return of the check to the bank, to have the note returned to him. But the contract was fully completed when she accepted and endorsed the check, and was. then, in my judgment, a contract of loaning from the bank to Mrs. Ming, as clearly' so, it seems to me, as if she had herself presented the note for discount to the bank officer and had received the proceeds of the discount in money in her own hands, or had received credit for it, as in Bank v. Craig, on the books of the bank. She thereby became the borrower of the money and liable as such to the bank. And she could not, as against the bank, change her position to one of suretyship by handing the proceeds to her husband for his own personal use. To authorize her to do so would be to enable her to make use of the enabling statute to practice a fraud.

But as the form of the contract is one of a promise by the wife to the husband, by him assigned to the bank, the latter can have no remedy at law, but must come to this court for relief. Bank v. Brewster, 20 Vr. 231; Gould v. Gould, 8 Stew. Eq. 37, 562.

I think it worthy of remark that, if the defendant had so framed the rule opening the judgment as to confine her defence at law to the merits, and had refrained from pleading that the contract was between husband and wife and therefore void, the merits of the case might, as it seems to me, have been dealt with at law. It is certainly wholly the fault of the defendant that the complainant was driven into this court, and the result is that she must be bound by its finding. Complainant having bee» deprived of the opportunity to prove its case at law and compelled to prove it here, or not at all, it would be gross injustice to compel it to prove it over again in the law court in order to-obtain the fruit of its judgment there.

I will advise a decree in favor of complainant, that the defendant be enjoined from setting up any defence at the trial of the-action at law, and that complainant recover its costs.


author: Pitney, Y. C.

text:
    The Wheeler & Wilson Manufacturing Company v. Johnson H. Filer, David S. Coney et al.
    1. The fact that a bill to foreclose a mortgage alleges nothing in terms-against a defendant against whom it prays process is not ground for demurrer, if he is informed by the notice annexed to his subpcena that he is made a party because he holds a mortgage on the premises, and claims some lien thereunder.
    2. In a bill to foreclose a mortgage, a prayer for relief and discovery against-“said defendants hereinafter named” can only refer to defendants already-mentioned, and not to a defendant mentioned merely in the following prayer for process. *
    On demurrer to bill.
    This is a bill to foreclose, by mortgagee against mortgagor, based on an ordinary legal mortgage, duly signed and sealed by the defendant, conveying certain lands to secure the debt. The-bill contains no allegation that any other person besides the mortgagor claims any lien upon, or to have any interest in, the mortgaged premises. The prayer for relief is the ordinary one for sale &c., and that the defendants be foreclosed &c., and is-directed against “ said defendants hereinafter named.”

      In the list of defendants against whom process is prayed (and which follows the prayer for relief), but nowhere else in' the bill, is found the name of David S. Coney. Annexed to the subpoena is a notice or ticket addressed to Coney, under the ninth section of the Chancery act, stating that he is made a party because he holds a mortgage upon the premises described in the bill, and by virtue thereof claims to have some lien upon, or interest in, the mortgaged premises. This subpoena, with the ticket or notice, was returned duly served upon Coney. Coney now demurs, and,
    “for cause of demurrer, shows that the said bill of complaint contains no allegation of any kind whereby it appears that the said David S. Coney is a proper or necessary party defendant thereto, and that the said bill contains no allegations of any kind against the said David S. Coney, and that there is nothing therein contained that the said David S. Coney should he required to answer; wherefore and for divers other good causes of demurrer appearing in the said bill, this defendant doth demur thereto and humbly prays the judgment of this honorable court whether he should be compelled to make any further or other answer to said hill. And prays to be hence dismissed with his costs and charges in this behalf most wrongfully sustained.”

      Mr. Henry S. Alvord, for the demurrant.

      Mr. Wheaton BerauU, contra.

   Pitney, Y. C.

My first impression was — and I so expressed it — that the demurrer was well taken, but subsequent reflection and consideration lead me to a contrary conclusion. It is undoubtedly the general rule, as expressed by Lord Redesdale (Mitf. Pl. 160), that “the plaintiff must show some claim of interest in the defendant in the subject of the suit which can make him liable to the plaintiff’s demands, or the defendant may demur.” And Mr. Justice Story, following this authority, says (Story Eq. Pl. § $19) that an objection may be taken by demurrer to the substance •of the bill for want of interest of the defendant in the subject-matter of the suit. And see § 262; also, Hare Disc. § 2 p. *65; Dan. Ch. Pr. *391 et seq. An examination, however, of the context of these writers and of 'the cases cited by them shows that this rule is applied by the courts only to cases where either discovery is sought for the purpose of obtaining evidence or some specific relief is prayed against the defendant personally.

Now, a bill to foreclose differs from such a bill in that it is a proceeding in rem, and the defendants are made parties only because they claim to have an interest in the subject-matter. No personal relief is usually prayed against them, and none is prayed in this case. Nor is the bill here one for discovery; it prays none against this defendant and manifestly was not intended as an instrument for obtaining evidence.

The necessity for connecting the defendant in some way with the subject-matter of the suit when he is to be interrogated about it, is manifest, because if he knows nothing personally it is idle to interrogate him.

Any defendant who is made a party because he claims an interest in the mortgaged premises, may disclaim such interest and be discharged, with his costs, if he have not pleaded simply for the purpose of making costs. Dan. Ch. Pr. *706, *709, and cases cited.

Where a complainant in a foreclosure suit attempts to state why he makes a person claiming a lien upon or interest in the mortgaged premises a party, he may do so either by simply stating that such party claims some interest in or lien upon the mortgaged premises, without attempting to specify it (2 Jones Mort. § 1473), or he may specify it according to his information and belief. The former is quite sufficient, for the simple reason that it is no part of the complainant’s duty to undertake to set out the defendant’s case. The defendant has no right to have complainant describe it, and if he attempts to do it his statement does not bind the defendant, for he may nevertheless, and in many cases must, for his proper protection, set it out again in due form in his answer.’

But while, from the very nature of the case, there is no duty or necessity laid upon the complainant to describe in his bill the defendant’s claim, nevertheless the practice of so doing, which has prevailed so long in this state, is a good one, and tends to save the costs of an answer, and serves to notify the other defendants of the character of all the claims made against the property. It should not be discouraged.

But this consideration cannot change the real nature of the case, which is that the complainant, when he has stated his mortgage, has stated his case and made out his right to the aid of the court against the mortgaged premises and all persons interested in them, and the nature of the claims made by other parties to the premises is not a part of his case. The mere fact that they have such claims is all that is necessary in order to authorize him to bring them into court. How, the insertion of a name in the prayer for process seems to me to amount, by implication, to an allegation that such person does claim an interest in the premises, and also that it is subsequent to the complainant’s mortgage, for, unless he--have such claim, he should not be made a party.

But whether I am right or not in this notion that the mere insertion of the name in the prayer for process is, in effect, an allegation that the defendant claims an interest in the premises) it seems to me that the.defendant in this case cannot say that he is injured by the omission to state in the bill the reason for making him a party, when he has that information by the notice or ticket annexed to the subpoena and served with it. This notice is just as serviceable to him in that behalf as if the information it contained had been placed in the bill, and I am unable to see how its absence in the bill entitles him to demur. The object of a demurrer is to defend a party against a demand, protect his rights and save him costs and trouble; in short, to serve some useful purpose, and not to enable his solicitor to make complainant’s solicitor pay him a bill of costs for an oversight that cannot possibly harm him or cause him the least inconvenience or expense.

One Gould was named a defendant in the same manner as was the demurrant, and was served with a notice attached to the subpoena, stating that he was made a party because he held a lien claim upon the mortgaged premises, and he has promptly answered, setting out his claim and alleging that it is prior to complainant’s mortgage, and praying, as he has a right to, if it is prior, to be entirely dismissed from the suit, with costs. It is difficult to see how he was injured by the omission to state his claim in the bill.

There are other circumstances which seem to be equally fatal to the demurrer.

It is doubtful, to say the least, whether upon the language of the prayer for relief and discovery, which names no defendants, but says merely “said defendants hereinafter named,” either relief or discovery is prayed against demurrant. He certainly does not come within the description of “ said defendants,” for he had not been previously named in the bill, and it would seem that the words which follow — “ hereinafter named ” — ought to be construed as referring only to those previously named as indicated by the word “ said.” To construe them as including more is to deny all force to the word “ said.” If, then, by the true construction of the bill neither relief nor discovery is prayed against demurrant, there is nothing in it for him to defend and nothing to demur to, for a demurrer is a defence, and it seems clear enough that there can be no sort of relief decreed against a party against whom none is prayed.

If this view is correct, then the real error, if any, of which demurrant has a right to complain, is the award and issuance of process against him without stating in the bill any reason for so doing; and if the statutory notice or ticket annexed to the subpoena is inefficient to cure such defect, then his remedy, if he had no interest in the mortgaged premises, was to move the court to strike his name from the prayer for process, and to suppress the process itself, or to strike his name from it, if it be joined with others there. If he had an interest in the premises, which he desired to protect, he could answer and set out that interest in his own way.

From whatever direction, then, we consider the uninteresting, ■because technical and unmeritorious, question raised by this demurrer, we find it to be bad.

I will advise an order that the demurrer, be overruled, with costs, unless the complainant shall desire to amend, in which case it will be upon terms that demurrant consent that such amendment be made without costs.


text:
    Ellen G. Green, executrix &c. of Caleb S. Green, deceased, v. Paul M. Tulane et al., administrators of Paul Tulane, deceased, and Frances F. Clifton, executrix &c. of Marien Passage, deceased, and of Adelaide C. Clifton, deceased.
    1. T. deposited with G. three coupon bonds, together with a paper signed by himself, as follows: “ Having deposited in the hands of C. S. G. three §1,000 bonds of the State of New Jersey, I hereby authorize and direct him, in case of my death, to deliver said bonds to Miss M. P. and her sister, A. C., to be equally divided between them. Dated. May 15, 1873. P. T.”
    2. The bonds matured January 1st, 1893.
    3. G. collected the coupons during T.’s lifetime and paid the proceeds to T. After T.’s death (March, 1887) the bonds were claimed by T.’s personal representatives and by the ladies mentioned in the paper.
    4. ITeld, that the latter were entitled.
    Interpleader. On final hearing on pleadings and oral proofs.
    The pleadings and evidence disclosed the following facts: Paul Tulane, late of Princeton, was, in his lifetime, a friend and benefactor of two sisters, residents of the same town, Mrs. Adelaide C. Clifton and Miss Marien Passage, having, for years before his death, made them a yearly allowance in cash. On the 15th of May, 1873, he deposited with the late Honorable Caleb S. Green, of Trenton, three coupon bonds of the State of New Jersey, known as war bonds, of $1,000 each, payable to bearer and maturing on the 1st day of January, 1893, numbered, respectively, 2Q, 21 and 22, and at the same time handed to Jndge Green a paper signed by himself, in these words:
    “ Having deposited in the hands of Caleb S. Green three §1,000 bonds of the State of New Jersey, I hereby authorize and direct him, in case of my death, to deliver said bonds to Miss Marien Passage and her sister, Adelaide Clifton, to be equally divided between them. Dated May 15, 1873. Paul Tulake.’’

      There is no evidence to show that, at the date of the deposit. Mr. Tulane was sick or in any peril or fear of immediate death,
    During Mr. Tulane’s lifetime, either Judge Green or his son, who was his law partner, cut the interest coupons from these bonds and paid the proceeds to Mr. Tulane. He died March 27th, 1887. The bonds still remained in Judge Green’s hands and came into the hands of his executrix, the complainant, at his death, in 1891. Both Mrs. Adelaide Clifton and Miss Passage survived Mr. Tulane, but each died testate before Judge Green. The defendant Mrs. Frances E. Clifton was named executrix of the will of each. The administrators of Mr. Tulane, and Mrs. E. P. Clifton as executrix of Mrs. Adelaide Clifton and of Miss Passage, each claimed the bonds from Judge Green in his lifetime, and after his death, from his executrix, whereupon she filed her bill against them, praying that she might be permitted to deliver the bonds into the custody of the court and be discharged, and that the contending parties might interplead &c. The contestants answered, setting forth their respective claims, and the cause was brought to hearing at one time on all the issues. After hearing the evidence an order was made at once for the delivery into the custody of the court of these bonds, which was done, and the court took time to consider the rights of the defendants.

      Mr. William M. Fanning, for the complainant.

      Mr. John F. Hageman, Sr., by brief, and Mr. John F. Hageman, Jr., for Mrs. Clifton.

      Mr. Woodbury D. Holt, for Tulane’s administrators.
   Pitney, V. C.

The rules of law governing this case are well settled, and it seems to me that the result of their application is not open to doubt.

The case is one of gift pure and simple, and there is not a particle of consideration, either meritorious or valuable.

The simple question then is, was the gift so far completed by the unrevoked acts of the donor that it is considered in law to' be complete ?

The rule is well settled that, in order to make .a perfect gift it must be, if a chattel, so far delivered, or, if real estate, so completely conveyed that the title vests in the donee without any aid from this court as against the donor or his or her heir or personal representative. If anything remains to be done in order to vest the title, so that the donor or his or her heir or personal representative must do some further act, then the gift is not complete.

This is so whether the gift be direct or by means of a trust either in a third person or in the donor himself. 1 Perry Trusts §§ 96, 97, 98, 100. In the section last cited, Mr. Perry says:

“ If the donor or settlor propose to make a stranger the trustee of his property, and the property is a legal estate, capable of legal transfer and delivery, the trust is not perfectly created, unless the legal interest is actually transferred to or vested in the trustee. It is not enough that the settlor executed a paper purporting to pass it, if, in fact, the paper does not have that effect. The intention of the settlor to divest himself of the legal title must be consummated and executed, or the court will not enforce the trust.”

And Lord Eldon, in Ellison v. Ellison, 6 Ves. 662, says: I take the distinction to be, that if you want the assistance of the court to constitute you cestui que trust, and the instrument is voluntary, you shall, not have that assistance for the purpose of constituting you cestui que trust, as upon a covenant to transfer stock &c., but if the party has completely transferred stock &c., though it is voluntary, yet the legal conveyance being effectually made, the equitable interest will be enforced by this court.” And see Lew. Trusts *8Ip.

In this case the subject of the gift was negotiable bonds which passed by delivery. No writing or assignment on the part of the donor, or transfer on the books of the state, was necessary in order to transfer the title. When, therefore, Mr. Tulane delivered the bonds to Judge Green, he put it in his power to dispose of them and make title to them to anybody that he saw fit without any further act on the part of Mr. Tulane. The title at law became vested in Judge Green. He obtained it by the voluntary act of the former owner of the bonds. This seems clear enough. The only question is, for whom did Judge Green hold them ? He never made any claim to them on his own account, nor does his executrix, and I do not see how the administrators of Tulane can make any claim to them in the absence of some paper signed by Judge Green, or other proof that he held them in trust for Mr. Tulane. It may be suggested that the fact that he paid Mr. Tulane the interest which accrued upon them up to his death is evidence that he did hold them in trust for him. I think that is true, so far as concerns the interest accruing,up to that time, but in a matter of trust it is easy enough to separate the principal from the interest, and the mere fact that he paid the interest to Mr. Tulane goes no farther than to show prima Jaaie that he held the bonds for his benefit during his lifetime. But then Mr. Tulane has himself declared in writing who were to be the cestuis que trust of the bonds at and after his death. He has said that they were to go to Mrs. Clifton and Miss Passage, and he has directed that the holder of the legal title and the actual possessor of the bonds should deliver them to those ladies to be shared between them equally, and that paper he never revoked. It is not necessary now to determine whether he could have done so at any time after notice had been given to the beneficiaries in remainder of the gift and they had formally accepted it. ’ It is enough to say that nothing of the kind was done, and Paul Tulane died without having resumed possession of the bonds, or having revoked his direction in writing that they should be delivered to the beneficiaries named. The result is that the gift was a complete one, and Mrs. Clifton is entitled to the subject of it.

The only ground upon which I can conceive that the gift can be attacked is that it was testamentary in its nature. By the terms of the declaration of trust, if it be viewed in that light, the bonds were to be delivered to the beneficiaries “ in case of my death.” Inasmuch as death is a certain event, that was tantamount to saying “ at my death.” Admitting that the result was a reservation by implication of a life estate to the donor, I am still unable to perceive how it follows that the gift must, under the circumstances, be treated as testamentary in its character. It is quite competent for one to make a settlement on another in prcesenti, reserving a life estate to himself, without bringing the affair within the definition of a testamentary disposition or of a gift causa mortis. The authorities in support of this position are numerous.

In Moore v. Darton, 4 De G. & S. 517; 20 L. J. (N. S.) Ch. 626, a Miss Darton loaned to Moore (the plaintiff) £100, and he signed the following document:

“ Received of Miss Darton, for the use of Ann Dye, £100, to he paid to her at Miss Darton’s decease, but the interest, at four per cent., to be paid to MissDarton.”

Underneath was written, “ I approve the above. Betty Darton.” This document was given to Miss Darton. The money was not paid to her in her lifetime. After Miss Darton’s death,, it was held by "Vice-Chancellor Knight Bruce that Moore was a trustee for Ann Dye, for £100. He said: “ The consequence is-that Mr. Moore having received this money, became trustee of it for the use of Miss Darton for life, and, subject to her life interest, for the use-of Ann Dye, whom I think entitled accordingly.”

Stone v. Hackett et al., 12 Gray 227, was, like this, a bill of interpleader. The plaintiff had received from Dr. Kittredge several shares of stocks in different railroads and had signed a memorandum to the effect that the said several shares .were purchased with the money of Dr. Kittredge and (at p. 228) “ are in my hands in trust for the following purposes and uses, that is-to say, the income and dividends on said several shares are to be paid to the said Kittredge during his lifetime.” At his decease they were to be divided among various charitable institutions. And then it adds, “ said Kittredge retaining the right to modify said uses or to revoke said trust.” And it was held that the charitable beneficiaries were entitled.- After showing that the gift was complete, the learned judge who spoke for the court proceeds (at p. 232): “ Nor are we able to see any force in the suggestion that the trust which the donor created in some of its ■features looked to a disposition of the property which was the subject of the gift after his death. We know of no principle of law which renders such a transfer of property inter vivos invalid. The entire jus disponendi was in the donor. Perhaps if there were any facts to show that the transaction was intended to be testamentary in its character, and was entered into for the purpose of evading the provision of law regulating the execution of last wills and testaments, there might be some ground for impeaching the validity of the conveyance and withholding the sanction of the court from the trusts which the donor intended to establish. But it is not necessary to determine this question, because there is no evidence from which any such intent on the part of the donor in the present case can be inferred.”

In Dickerson’s Appeal, 115 Pa. St. 198, the decedent, by declarations in writing signed by himself arid placed with the securities, and by having the bonds registered on the books of the company in his name as trustee for his children, there constituted himself a trustee of certain negotiable bonds, of which he retained the possession and which were found among his papers ■after his death. It was held that the trust must be enforced, though he retained the actual use of the income during his lifetime.

Barlow v. Loomis et al., decided by Judge Wheeler in the United States circuit court for the district of Vermont (19 Fed. Rep. 677), was this: The testator, on three several occasions, delivered and transferred to the defendant Loomis certain stocks and bonds, and in each case took written declarations from Loomis, in two of them providing that Loomis should hold the stocks and bonds in trust to pay the interest and dividends to the testator during hi's lifetime, and at his decease to transfer them to the other defendants in the cause; and in the third case, that Loomis should hold the bonds for the benefit of the other defendants at the death of the testator, the testator reserving the right to demand and have the income while he should live, and to revoke the trust altogether and have the bonds returned to him if he should so elect. Loomis paid the income to testator during his life; he did not revoke the trust, but died leaving the stocks and bonds in the possession of Loomis. The bill was brought to have the stocks and bonds brought into the assets of the estate, so that the complainant, who was the residuary-legatee, might have the benefit of them. Judge Wheeler said: The sole inquiry is as to the effect of what he [the testator] did. He could control the disposition of his estate after his death only by will, executed according to the statute of wills, but he could divest himself of this property during life by mere delivery and transfer, such as he fully accomplished. Had there been no reservations there could have been no question. But these reservations were all optional and personal to himself. If he did not exercise his right to them they were gone. He died without exercising the right, and it expired with him, leaving the property absolutely gone out of his estate and wholly beyond the complainant’s rights.”

In Clough v. Clough, 117 Mass. 83, decedent handed to his brother, the defendant, $800, of which he had repaid him in his lifetime $400, and as to the balance, set up that it had been given to him by his brother, the decedent, in trust for his minor son, with instructions to invest and hold the same till the son should be twenty-one years old, and then to pay the same to him with all accumulations. The plaintiff requested the judge to instruct the jury,

“ that if they found that the deceased directed the defendant, in case he died, to keep the money and give it to the child if he lived to be twenty-one years of age, and if he did not, to divide it between the mother and sister of the deceased, that would not be,- in law, a gift to the child, mother or sister, and that such a disposition could only be made by will,”

which the judge declined to do. There was a verdict for the defendant, and that verdict was sustained.

In Davis v. Ney, 125 Mass. 590, the deceased, Mary Hey, a depositor in a savings bank, delivered her bank-books, accompanied by an assignment of her deposits, to one Emery, upon the oral agreement that he should draw for her what money she wanted during her lifetime and pay the balance, if any, left at her death to her son. In pursuance of this agreement, Emery paid Mary Ney certain sums of money before her death, and the balance remaining after her death he paid to her son, who was appointed executor of her will. The court said : “ The delivery of the bank-books to Emery, accompanied by an assignment, constituted a valid gift, and gave to him a complete title in the fund represented by the books. In form, the conveyance to Emery was absolute; but it appears from the statement of facts that it was accompanied by an oral agreement between Mrs. Ney and Emery that he should pay her during her life such sums as she wanted, and that upon her death he should pay over the balance to her son. The appellant contends that this was not a complete gift that it was an attempt to evade the statute of wills, and that the transaction was'a mere form, the nominal title being in Emery, and the real ownership and possession being in Mrs. Ney.” And, further on: It does not appear, upon the case stated, that it was the intent of Mrs. Ney to make a disposition of this property in its nature testamentary,” and held that the son was entitled to it.

This ruling was followed in Gerrish v. New Bedford Savings Institution, 128 Mass. 159. At p. 163 the judge says: “ In the case at bar the claimants offered to prove declarations of the testator made to them at different times in language which fairly implied that he intended to give to them an immediate equitable title in the principal fund, reserving only the income for life. These declarations define the nature of the trust assumed, and show that a testamentary disposition of the property was not intended.”

In Gilman v. McArdle, 99 N. Y. 451, a married woman placed in the hands of MeArdle a sum of money, with directions to hold it for the support and maintenance of herself and her husband as long as they lived, and after the death of the survivor of them to use the residue to pay their funeral- expenses, the erection of suitable monuments to their memories, and to expend the amount remaining in his hands after such payments for Roman Catholic masses to be said for the repose of the souls of herself and her husband. Both the wife and husband died, and there was a considerable balance left in the hands of McArdle, and this suit was brought by the administrator of the original donor to recover it. Judge Rapallo, in his opinion (at p. 459), uses this language : “The learned judge who rendered the judgment in the present .case expressed the opinion that the disposition in question would have created a valid trust if contained in a will, though not valid, under the circumstances of this case, as a disposition inter vivos; but it seems to us that any trust of property which would be valid if created by will, can be created by the owner of the property in his lifetime, provided it is then to go into operation,' although it is to be executed after his death; and that in the case of money or personal property, it may be created by oral agreement, accompanied by a transfer or delivery of the property, and that such delivery will pass the title to the property, and that as a trust its validity is to be tested by the same rules, whether it be created by will or by contract inter vivos.”

Other authorities in the same direction were cited in the elaborate and valuable briefs of the counsel for Mrs. Clifton, but the foregoing suffice.

I will advise a decree in favor of Mrs. Clifton, and that the administrators of Tulane pay the costs of this suit, including the amount of costs paid to the complainant, all of which have been incurred by their unwarranted demand upon the complainant for the possession of these bonds.


text:
    Frank N. White and George R Bidwell v. Thomas Inflatable Tire Company, H. W. Sheibley, Amos W. Thomas and John C. Sullivan.
    1. The holder of certain patents agreed with seven capitalists to form a stock company, whose capital should be divided into one hundred thousand shares, of which fifty-five thousand should be issued to him in payment for his patents to be assigned to the company, and twenty-eight thousand should- be issued to the seven capitalists for cash to be advanced and used in exploiting the patents, and the remaining seventeen thousand shares should be held in fhe treasury for sale.
    2. They further agreed that all of the eighty-three thousand shares so to be issued, except enough to qualify directors, should be transferred to a trustee to hold for ten years, who should issue trust certificates to the holders, which should be assignable and transferable, and that the trustee should vote at elections of directors in such manner that the patentee should nominate and elect a minority of the. directors, and the holders of the remainder of the stock should nominate and elect the majority.
    3. This being done, complainants purchased of the company the seventeen thousand shares of treasury stock, and certificates were duly issued to them therefor. They also purchased from the patentee trust certificates for over fifty thousand shares, surrendered the same and had new trust certificates issued to them. — Held, that the trust agreement was void as against the complainants.
    Bill for injunction and other relief. On final hearing on the pleadings and oral proofs.
    At the hearing the following facts appeared :
    At and prior to October 3d, 1890, the defendant Amos W. Thomas was the owner of divers letters-patent for the manufacture of inflatable tires for covering the wheels of road vehicles, and on that day entered into an agreement with seven residents of Philadelphia, two of whom were the defendants Sheibley and Sullivan, by which Thomas and his wife, who was interested with him in the patents, assigned and transferred them to Horn, one of the seven contracting parties, as trustee, to be held by him in trust for the benefit of all the parties, and subject to the directions of the other seven, including Thomas. The agreement provided that the parties should proceed to exploit the patents and attempt to make them profitable, and that all profits made ■should be divided among them in the following proportions, ■that is, fifty-five eighty-third parts to Thomas, and twenty-eight eighty-third parts to the seven subscribers. It was further provided that, if a majority of the subscribers should determine, a corporation should be formed for the purpose of carrying out fhe trust and the objects of the agreement, and the trustee should convey the patents to the corporation, and, in such case, Thomas ■should receive fifty-five per cent, of the stock of the corporation, and the other seven subscribers should receive twenty-eight per cent, of the stock, such issue of stock to be in payment to Thomas for his stock, and to the other seven subscribers for the amount of money which they by the agreement advanced or were to advance, and the remaining seventeen per cent, of the stock of the company should be retained in the treasury to be sold as and when determined by the board of directors. It was further provided that the directors and officers of the corporation for the first year should consist of all the parties to the agreement, and that John C. Sullivan should be president, Ellwood Horn, secretary and treasurer, and Amos W. Thomas, vice president,
    “ and for the mutual benefit of all concerned, all the parties hereto agree to put their stock into a voting trust for a period of ten years from the formation of said corporation. The trustee of said voting trust shall be hereafter chosen by mutual consent, and it shall be his duty to vote at all elections for directors of said company in such manner and for such persons as that a minority of one in said board of directors shall consist of such persons as said Thomas shall wish to be directors, and a majority of one in said board of directors shall consist of such persons as the remaining stockholders shall wish to be directors.”

    On the 11th of October the seven subscribers to this agreement, not including Thomas, organized themselves into a corporation of the State of New Jersey, to be known and designated as the “ Thomas Inflatable Tire Company,” with a capital stock -of $500,000, divided into one hundred thousand shares of the par value of $5 each, which, by the terms of the certificate, were divided among them equally. The object of the corporation was stated to be
    “ to make, purchase and sell, manufacture articles of any and all descriptions, especially bicycles and other vehicles; to acquire and dispose of rights to use the same; to buy and sell patents and patent-rights, and to buy, sell and hold the stocks or bonds of any corporations organized under the laws of any of the United States.”
    This certificate was duly filed with the clerk of Camden county on the 13th of October, 1890, and on the same day in the secretary of state’s office.
    On the 22d of October, 1890, the same parties entered into a further agreement by which they undertook to transfer all the' capital stock of the Thomas Inflatable Tire Company owned by each of them,
    “ except such as may be necessary to qualify the board of directors, tó H. W. Sheibley, of Philadelphia, Pennsylvania, as trustee, in trust, to pay to each of us the income, profits or dividends accruing to the shares so transferred by us, to hold said shares in his own name as trustee.”
    This transfer was made, and Sheibley issued trust certificates to each stockholder for the amount of his holding, in pursuance of the last clause of the agreement of October 22d, 1890. These certificates were negotiable and transferable in the same manner as the stock which they represented.
    Under this agreement, eighty-three thousand shares of the stock were issued, and all, except enough to qualify the directors, were transferred to Sheibley as trustee. Of the shares issued, fifty-five thousand were issued to Thomas and four thousand each to the other seven stockholders; seventeen thousand of the one hundred thousand shares remained unissued and were called “treasury stock.”
    In the month of June, 1892, the complainants applied to the company to buy the seventeen thousand shares of unissued stock, and at a meeting of the directors, who were the parties to the voting-trust agreement, it was resolved to issue the same for a price then agreed upon. The same were issued to complainant Bidwell, except five shares issued to complainant White.
    In July, 1892, Bidwell purchased of Thomas fifty-three thousand of the trust certificate shares issued to him by Sheibley. A portion of the balance of those issued to Thomas he had transferred to other parties, so that he had denuded himself of almost all the trust certificates, but retained a few shares of stock standing in his name to qualify him to act as director.
    The agreement giving the holders of the twenty-eight thousand shares the control of the company was not incorporated in any by-law, nor does it appear upon the face of the certificates of stock or of the trust certificates of stock issued.
    The negotiation for the purchase of the seventeen thousand shares of stock from the company was carried on by the complainant White, and there was evidence tending to show that before he made the purchase he had notice of the substance of the trust-voting agreement, but this was denied by him.
    The time fixed for the annual election of directors was early in October, 1892, and on the 30th of September, 1892, this bill was filed, setting out the agreements by which the stock was issued in trust to Sheibley, alleging that the same were void as against public policy, and were revoked by the sale by Thomas of his trust 'certificates and the issuing of the seventeen thousand shares of treasury stock to the complainant, and praying that the defendant Sheibley might be restrained from voting at an election of directors on any shares of stock held by him according to the directions, of the defendant Thomas, and that Thomas be restrained from nominating directors to be voted for by Sheibley, and that the trust contained in the agreements may be declared to be terminated, the. agreements canceled and set aside, and Sheibley directed to transfer to the complainants the shares of stock held by him represented by -the trust certificates, and, in the alternate, that complainants, instead of Thomas, may be held entitled to nominate a minority of the directors to be voted for by Sheibley.
    On the filing of this bill an injunction was issued accordingly. The Thomas Inflatable Tire Company, Sheibley and Sullivan answered jointly, admitting the facts set up in the bill, and alleging that the contracts were valid and should be enforced, and further setting up that the complainants desire to get control of the company for an improper and unjustifiable purpose. The defendant Thomas answered- by himself, setting up the same defence, and, by a cross-bill, setting up- that the fifty-odd thousand shares of trust certificates were obtained from him by the ' complainant by fraud, and asking that the sale be set aside. The cause was brought to hearing on these pleadings. No proof was offered in behalf of this allegation of the cross-bill, or of improper motive on the part of complainants. The cause was heard upon the question of the validity of the trust-voting contracts as against, the complainants.

      Messrs. Grey & Grey and Mr. Freedley (of Philadelphia), for the complainants.

      Mr. Christopher A. Bergen, for the defendant company.

      Mr. Howard Carrow, for Thomas.

      Mr. F. O. Mitchenor (of Philadelphia), for Sheibley and Sullivan.
   Pitney, V. C.

The complainants advance three propositions — First. That the original contract, by which a minority of stock was given the perpetual right to elect a majority of the directors, and thus control the affairs of the company, was contrary to public policy and, for that reason, void. Second. That, conceding the contract to be valid and binding between the original parties so long as only eighty-three per cent, of the stock was issued, it nevertheless became nugatory and void as against the holders of the seventeen per cent, of new stock as soon as that was issued. Third. That in any view of the case the holders of the majority of the fifty-odd thousand shares of trust certificates once issued to Thomas have the right to dictate to the trustee the names of the four directors, which, by the agreements, were to be nominated by Thomas.

The last proposition was not seriously disputed by counsel for the defendant, as, indeed, I think it could not be. The agreements provided for trust certificates to be issued by the trustees, and they were made transferable on the books of the company by the trustee, and a provision was made for the issuing of new trust certificates in place of any assigned and surrendered. Trust certificates were issued accordingly, and of these, nearly all those issued to Thomas have come to complainants’ hands, and with such possession and ownership, the right to nominate the directors. This point was directly ruled, after full discussion and consideration, in the cases of Bostwick v. Chapman and Starbuck v. The Mercantile Trust Co., known as the “Shepaug Voting Trust Cases,” reported in 60 Conn. 576; see pp. 580, 587; 84 Atl. Rep. 34 (at pp. 39, 40). There, as here, a large majority of the stock of a corporation was standing in the name of a trustee, in pursuance of an agreement entered into by the original owners of the stock, to the effect that the trustee should vote upon it as directed by three certain persons named. Trust certificates were issued, as here, which were negotiable, and a majority of them came into the hands of the complainants. Upon a bill filed in equity by them, the court enjoined the trustee from voting except as directed by the holders of the trust certificates, and also that the stock should be distributed by the trustee among the holders of the trust certificates.

In the course of its opinion the court uses this language, in which I fully concur:

It is the policy of our law that an untrammeled power to vote shall be incident to the ownership of the stock, and a contract by which the real owner’s power is hampered by a provision therein that he shall vote just as somebody else dictates, is objectionable. I think it against the policy of our law for a stockholder to contract that his stock shall be voted just as some one who has no beneficial interest or title in or to the stock, directs, saving to himself simply the title, the right to dividends, and perhaps the right to cast the vote directed, willing or unwilling, whether it be for his interest, for the interest of other stockholders, or for the interest of the corporation or otherwise. This I conceive to be against the policy of the law, whether the power so to vote be for five years or for all time. It is the policy of our law that ownership of stock shall control the property and the management of the corporation, and this cannot be accomplished — and this good policy is defeated — if stockholders are permitted to surrender all their discretion and will in the important matter of voting, and suffer themselves to be mere passive instruments in the hands of some agent who has no interest in the stock, equitable or legal, and no interest in the general prosperity of the corporation.

“And this is not entirely for the protection of the stockholder himself, but to compel a compliance with the duty which each stockholder owes his fellow-stockholder, to so use such power and means as the law and his ownership of stock give him, that the general interest of stockholders shall be protected, and the general welfare of the corporation sustained, and its business conducted by its agents, managers and officers, so far as may.be, upon prudent and honest business principles, and with just as little temptation to and opportunity for fraud, and the seeking of individual gains at the sacrifice of the general welfare, as is possible. This, I take it, is the duty that one stockholder in a corporation owes to his fellow-stockholder, and he cannot be allowed to disburden himself of it in this way. He may shirk it, perhaps, by refusing to attend stockholders’ meetings or by declining to vote when called upon, but the law will not allow him to strip himself of the power to perform his duty. To this extent, at least, a stockholder stands in a fiduciary relation to his fellow-stockholders.”

To the same effect is Griffith v. Jewett, 15 Week. L. B. 419, decided by the superior court of Cincinnati. There, as here, the holders of a majority of trust certificates, which, by the contract, were to be voted according to the directions of certain individuals, demanded of the trustee to vote as they should direct, and the court uses this language: “ If such demand be not complied with, the party holding the entire beneficial interest in the stock cannot cast the vote thereof, while it may be voted upon by one having no interest in it or in the company; and so it may come to pass that the ownership of a majority of the stock of a company may be vested in one set of persons, and the control of the company irrevocably vested in others. It seems clear that such a state of affairs would be intolerable, and is not contemplated by the law, the universal policy of which is that the control of-stock companies shall be and remain with the owners of the stock. The right to vote is an' incident of the ownership of stock and cannot exist apart from it. The owners of these trust certificates are, in our opinion, the equitable owners of the shares of stock which they represent, and, being such, the incidental right to vote upon the stock necessarily pertains to them. They may permit the trustees, as holders of the legal title, to vote in their stead if they choose, but when they elect to exercise the power themselves, the law will not permit the trustees to refuse it to them.”

The general principle is thus stated by Mr. Beach in his treatise on Corporations § 806 :

On general principles the right to vote on stock cannot be separated from the 'ownership in such sense that the elective franchise shall be in one man and the entire beneficial interest in another, nor to any extent unless the circumstances take the case out of the general rule. It matters not that the end is beneficial and the motive good, because it is not always possible to ascertain objects and motives, and if such a severance were permissible it might be abused.”

And see what was said in Cone v. Russell, 3 Dick. Ch. Rep. 208 (at pp. 212, 214).

In the case in hand, the beneficial ownership is in the holders of the trust certificates, and'the trustee must vote as they direct.

As to the two other positions above stated, the weakness of the first position lies in the fact that the voting trust was a part of the original contract between the original parties, and was made for a proper purpose and for a good consideration. The consideration for it was the advancement of the cash by the seven promoters, and the substance of the agreement was that, while the seven should have the control of the management of the enterprise, the owner of the patent should have the majority of the profits, in the proportion of fifty-five to twenty-eight. So Jong as each retained his original ^interest, and no other rights intervened, I see no difficulty in holding such contract valid and its enforcement proper and practicable. I see nothing in it contrary to public policy.

The difficulty and weakness of defendants’ position in regard to it arises out of the machinery adopted by the parties to carry through their scheme. They organized a stock company with all its inherent characteristics, some of which have been stated above, and although they put the stock issued to each in the name of the trustee to hold in trust for them, they still issued trust certificates to each and made them assignable and transa., ferable; and an inseparable incident of those certificates is that the trustee must vote as the cestui que trust, who is the real owner, shall direct.

Now to see how the scheme will work out in practice, let us suppose the seven promoters, or any of them, shall transfer their trust certificates, or any of them, to strangers, or shall disagree among themselves. • How shall the votes be cast, and for what candidates ? "Whose direction shall the trustee take ? And this suggests a still further and greater difficulty, and it is this: How shall the trustee distinguish between the different trust certificates, after they have been once surrendered, and new certificates issued? How can he know what certificates shall represent the parties of the one part to the contract in question and which the party to the other part ? How shall he choose from out of the different holders of trust certificates the proper persons to nominate the majority and those to nominate the minority of the directors? For it seems clear enough that new oertificales.._when issued, are freed in the hands of their holders from any burden in equity which attached" to"them in the hands of the former owner. If 'tRTanswer to these questions results in the destruction of the ingenious scheme of these gentlemen, such result will be owing to their desire to adopt the machinery of a stock company and thereby avoid personal liability for their contracts. They must take the burdens with the benefits of such organization.

But I do not find it necessary to answer these questions, or to determine whether the transfer of certificates in this case has gone so far as of itself to end the contest, since I have come to the conclusion that the second position taken by the complainants is sound. The contracts in question were not made a part of the certificate of organization or incorporated into the bylaws. Nor, in my judgment, did they, or could they, be fastened upon, or in anywise affect, the seventeen thousand shares of stock issued directly to the complainants. And I think this is so, whether the complainants had or had not notice of these contracts, since they did not enter into or form part of the contract between the company and the complainants as holders of the new stock. As such holders they were entitled to have the other shares of stock in the company stand upon an equal footing, and to have the affairs of the company managed by a board of directors elected according to law, by a majority of all the stockholders. Unless, as the holders of the new issue of stock, they had such right, they would be deprived of a valuable right belonging to their stock, viz., the right to combine with other stockholders to elect a majority of the directors. In fact, they would be deprived of all voice in the management of the company and of the right which each stockholder has to the benefit of the fundamental and salutary rule that the best interests of the minority are found in a rule by the majority. In my judgment, the issuing of this stock was a waiver and abandonment by the directors, who united in issuing it, of their rights under the contract in question.

The futility of the notice of these contracts alleged to have been given to complainants before they subscribed for the seventeen thousand shares of stock will appear when we consider the effect of a transfer of them to new parties. Such new parties ' would not be charged with such notice, and their rights would be undisputed. Should relief be denied the complainants in the present action it would be but a postponement of the time when this voting trust must end.

I will advise a decree fdr complainants.


author: Green, V. C.

text:
    Robert S. Clymer, receiver of Robert C. Parvin, v. Benjamin Patterson.
    The S. Wagon Company, having manufactured unsuccessfully during the summer of 1887, on money advanced by B.,who owned a half interest, B., for the company, agreed to sell all its property except some wagons to P., the other principal owner, P. to pay the debts, amounting to §3,100, and to give B. certain stocks as collateral, whatever might be realized on sale of said stock, or otherwise, in money, to be applied to said debts. P. kept on the business with some further small advances from B., but being pressed on judgments of other creditors, amounting to some §400, agreed with B. that if B. would pay these he would turn him over all his property to secure him, B., saying that it was understood that all he had advanced was to be so secured. He had then advanced §3,649.36. P. assigned him absolutely the stocks held as collateral and some patent interests. B. agreed, when all past and future advances, with interest and expenses, should be repaid, to reconvey to P. all of said property not then disposed of and all surplus proceeds of sale, and paid the judgments. P. continued in possession for two years longer, and B. made him further advances, so that, in December, 1889, his whole claim -was over §5,000. He had then realized out of the property transferred, §225, besides something on wagons sold, and later he sold the rest of the property for §1,000, which, it appeared, was the best price obtainable. P.’s receiver contended, however, that the only moneys B. was to repay himself under the agreement were the amounts of the judgments and costs, about §450. — Held, that even if the prior-advances were not secured by that agreement, subsequent ones were, and as these amounted to §1,400, and B. had only received §1,225 and something from the sale of wagons, he had not been repaid, and P.’s receiver had no-claim on him for the property transferred.
    On final hearing on pleadings and proofs.

      Mr. Joseph J. Summerill, for the complainant.

      Mr. William T. Hilliard, for the defendant.
   Green, V. C.

This bill is filed by the complainant, as receiver of Robert C. Parvin, appointed under the ninety-third section of the Chancery act, in a suit brought in this court by George S. Powell and Constant E. Jones, judgment creditors of Robert C. Parvin, against him for discovery .&c. The bill seeks to reach certain property, or the proceeds thereof, transferred by Parvin to the defendant, December 1st, 1887. The judgment of Powell and Jones was recovered in the supreme court of this state January 3d, 1891, the executions thereon being endorsed with the direction to “levy the sum of $1,826.78 debt,,$5.50 costs, with interest from January 19th, 1891.”

Robert C. Parvin, the judgment debtor, had been engaged in the business of building wagons, and had invented certain improvements in their construction, for which he had applied for . patents, some of which had been issued to him.

A corporation known as the Parvin Iron Wagon Company had been incorporated, of which company the said Robert C. Parvin was president and one William T. Garrison was treasurer. This company had a factory at Penn’s Grove, in the county of Salem, in this state, with lands adjoining. In the early part of 1887, Robert C. Parvin and Benjamin Patterson entered into an agreement, by which Patterson agreed to furnish the capital to build ten wagons, under the directions and patents of Parvin, the profits of which venture were to be equally divided ; and if it was found sufficiently profitable, a more permanent arrangement was to be entered into.

Afterwards, the Parvin Spring Wagon Company was incorporated, by certificate dated April 27th, 1887, with a capital of $20,000, divided into four hundred shares of $50 each, “the amount with which the company was to commence business was $10,000,” the company to carry on business at Penn’s Grove, and the object of its incorporation being the manufacture of wagons &c. The stockholders named were Robert C. Parvin, ninety-nine shares ; Benjamin Patterson, ninety-nine shares, and John E. Naudain, two shares. The certificate was filed and recorded April 28th, 1887. No stock of this corporation was ever issued.'

On the 2d of May, 1887, the Parvin Iron Wagon Company leased to the Parvin Spring Wagon Company a piece of land in Penn’s Grove, adjoining their factory on the west, for a term of five years, with the right to erect a building thereon, and certain privileges of power from the engine of the lessor, use of elevator &c., and the right of renewal and removal of building.

On the 8th of July, 1887, an agreement was made between Parvin and the Parvin Spring Wagon Company, by which Parvin agreed to secure patents for the construction of wagons and have the same issued directly to the company, the company to furnish the capital to manufacture the wagons, allowing one-half of the stock of the company issued from time to time to Parvin, his heirs and assigns.

By an agreement of July 28th, 1887, between Parvin and Patterson, Parvin agreed that Patterson, for the assistance rendered in the organization of the company, should have an equal division of all stock issued after the first $10,000. It does not appear that any of the capital was ever paid in, and Parvin did not have the patents issued to the company, and, as before stated, no certificates of stock were ever issued.

The business of manufacturing wagons, however, was carried on during the summer of 1887 at Penn’s Grove, under the direction of Parvin, in a frame building erected on the leased land referred to, with funds that were from time to time furnished by the defendant, Patterson. These moneys, the defendant says, he paid at Parvin’s request, under the agreement between them; that Parvin bought the goods and he paid for them, mostly by check; that he paid the wages and received something from the sale of wagons, the amount of which he did not at the time remember. But- the business was not a success and the concern seems to have ceased business as a company, for on October 3d, 1887, an agreement was made between Benjamin Patterson, C. L. Sinnickson, Robert C. Parvin and J. E. Naudain, who, it would appear, were the only persons interested, to dissolve the Parvin Spring Wagon Company and close up the business of the same, and on October 17th, 1887, an inventory of the building, fixtures, machinery and material of the Parvin Spring Wagon Company, at Penn’s Grove, was made, the building &c. being appraised at $1,522.26; the total appraisement amounting to $2,173.45.

On October 27th, 1887,

“ an agreement was made between Benjamin Paterson, for what is known as the Parvin Spring Wagon Company, of the first part, and Robert C. Parvin, by which the party of the first part agreed to sell and convey to the party of the second part, all its right, title and interest in the business, building, tools and machinery lately belonging to the Parvin Spring Wagon Company, except some wagons, in consideration of which Parvin agreed to pay two debts, amounting to §121.05 and §3,000, with interest at six per cent., payable monthly, with a yearly payment of §100 on the principal, and to transfer to the party of the first part [blank] shares of the capital stock of the Parvin Iron Wagon Company as collateral security; whatever amount might be realized on the sale of that stock or otherwise in money to be applied to the payment of the principal named in the agreement. Further, to transfer his one-sixth interest in the Riverview Cemetery Association of Salem county as collateral security; the agreement declaring that it covered all the stock in the Parvin Spring Wagon Company, including that held by C. L. Sinnickson and John E. Naudain; and, further, that the party of the first part would transfer to the party of the second part the lease of the land given by the Parvin Iron Wagon Company to the party of the first part.”

Tbe business appears to have been carried on after this by Parvin, and advances to a small amount were continued to be made by Patterson. Parvin shortly afterwards was pressed by creditors, particularly by Kennedy, Willings & Company, who had obtained a judgment against him for $193.94, and William T. Garrison, who had obtained a judgment for $200, and was urgent at this time that Patterson should assist him in his troubles, execution having been issued on these judgments and being in the hands of the officer. Patterson says that he told him that he wanted to be made safe, and that if he (Parvin) would secure him, he would pay his judgments, and Parvin then said that he would turn over to him (Patterson) all that he had, to secure him, and Patterson said that it was understood that all that he had advanced was to be secured by the property so to be assigned. According to the schedule annexed to the answer, Patterson had advanced, up to December 1st, 1887, $3,649.36.

December 2d, 1887, Parvin, by three separate instruments under that date, assigned to Patterson absolutely, by the first, the equal undivided seven-tenths interest of four letters-patent for improvements in wagons, of which he declared himself to be the sole owner; the second, ninety-nine shares of the Parvin Spring Wagon Company; by another, ten shares of the capital stock of the Riverview Cemetery Association of Salem county, New Jersey, and also assigned ten shares of the stock of the Parvin Iron Wagon Company. Patterson, by an agreement under the same date, reciting these several assignments, agreed as follows:

“When I am paid on the sale of all or part of said stock and patents, all moneys now due me from said Parvin, or which may hereafter be advanced by me to him, with interest and expenses, I will reconvey to him all of said property not then disposed of, and all surplus proceeds of sale after payment of the above-mentioned moneys.”

And, on the same day, Parvin addressed a letter to the Parvin Iron Wagon Company, informing them that he had sold his entire interest in th$tt concern to Patterson, tendering his resignation as president of the company, and requesting that he, Patterson, be elected president in his place; also, “I have also sold him my entire interest in the Parvin Spring Wagon Company and interest in the cemetery, and also my entire interest in the patents.” Patterson then paid the judgments of Garrison and Kennedy, Willings & Company, as well as certain costs that had been incurred in the chancery suit.

Parvin appears,to have continued in possession of the property and Patterson made further advances to him, the whole of such payments by the defendant amounting, inclusive of that stated before, up to December 19th, 1889, to the sum of $5,051.92.

On April 4th, 1889, by an agreement of that date, William T. Garrison agreed to sell, transfer and set over unto Benjamin Patterson all the lands and buildings then owned by the Parvin Iron Wagon Company at Penn’s Grove, with the machinery, fixtures &c., together with all claims against the Parvin Spring Wagon Company, a mortgage held by Garrison against said lands and $225 cash, the lands to be free of all other encumbrances, for which Patterson agreed to transfer to Garrison the seven-tenths interest then held by him in the Parvin Iron Wagon Company patents, four in number, and ten shares of the Parvin Iron Wagon Company held by him, the transfers to be made as soon as Garrison could legally do so, at a time to be mutually agreed upon, and in pursuance of that agreement the transfers were afterwards made and the money paid.

By this transaction, Patterson parted with the seven-tenths-interest in the four patents and the ten shares of the stock of the Parvin Iron Wagon Company which he had received from Eobert C. Parvin, December 2d, 1887; and by deed dated May 29th, 1890, Benjamin Patterson conveyed the real estate to Clarence L. Sinniekson and also assigned to him the ten shares of the capital stock of the Biverview Cemetery Association that he had received from Parvin. The consideration of these transfers by Patterson to Sinniekson, he says, was the sum of $1,000 cash, making, with amount received from Garrison, the sum of $1,225.

The evidence of Mr. Garrison is that, after the patents had been transferred by Patterson to Garrison, and in that way acquired by the Parvin Iron Wagon Company, which was the owner of the other three-tenths interest, they were sold with another patent to the Columbia Wagon Company, a Pennsylvania corporation, for $15,000, which was paid in stock, and that this stock, of the par value of $50, is now worth from $46 to $47 a share, but it does not appear what part of such purchase-price represented the four patents. The good faith of the transaction between Garrison and Patterson is attacked by the complainant. As I understand Mr. Garrison’s testimony, the value put upon the seven-tenths interest in the patents and ten shares of Parvin Iron Wagon Company’s stock was $4,000 cash, and that he has estimated the value of the property he transferred in payment thereof at $800 for the land and $3,000 for the improvements, and there is no evidence in the case which, to my mind, successfully attacks Mr. Garrison’s good faith in this transaction. It is not seriously contended that the defendant did not have the power, under the absolute assignments, to make a valid transfer to Garrison. It is also charged that the value of the property acquired by Patterson in this exchange was more than sufficient to pay him the amount contemplated by his agreement with Robert C. Parvin, and that Sinnickson, the grantee, as part of the consideration of the transfer, had conveyed to Patterson valuable property in the city of Philadelphia. This is denied by the answer, by the testimony of Patterson and Sinnickson, both of whom state that $1,000 in cash was the consideration of the conveyance and of the cemetery stock. Mr. Patterson says that the property was partly vacant, Parvin being in one building; that he had attempted to sell it at public and at private sale, and had advertised it for several weeks by posters and by newspaper advertisements; that there were no bidders, and that he finally sold it to Mr. Sinnickson, as stated.

This, it would.seem to me, leaves as the only question for settlement the contention of the complainant that the only money contemplated by the agreement of December 2d, 1887, which Patterson was entitled to repay himself, were the amounts of the two judgments paid by him and costs, amounting to about $450.

The terms of the agreement, before set out, refer in terms to moneys at that time due to Patterson from Parvin. The judgments had not then been paid, and these words, from all that appears in the case, would be meaningless unless they refer to the advances which had been made by Patterson in carrying on the business; but whether this is the case or not, there is no question as to the latter part of the agreement, that he was to be repaid moneys Avhich might thereafter be advanced by Patterson to Parvin, with interest and expenses, and these items, according to the schedules annexed to the answer, and which are not questioned as having been made after December 2d, 1887, amount to $1,402.56, without interest; and as the whole amount received by Patterson is $1,225, and some moneys, amount unknown, from the sale of wagons, he has not been repaid according to the terms of his agreement. The stock of the Parvin Spring Wagon Company is undoubtedly of no value, and I am therefore of opinion that the bill should be dismissed.


author: Gbeen, Y. C.

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    Arthur Dare v. Mabel Dare.
    1. In a suit to annul a marriage on the ground that, at the time of its celebration, defendant had a wife living, an admission of such previous marriage in the answer is sufficient to establish it when corroborated by the production of evidence of a certified copy of the record- thereof in the bureau of vital statistics and of the record of a suit commenced by defendant against the person alleged to have been the other party to the previous marriage, to annul it.
    2. Where a first marriage is void, owing to the fact that one of the parties had a spouse living at the time of its celebration, the validity of a second marriage is not impaired thereby, though there has been no decree annulling it.
    On bill, answer, replication and proofs in open court.

      Mr. Wheaton Berault, for the complainant.

      Mr. Charles K. Landis, Jr., for the defendant.
   Gbeen, Y. C.

This bill is filed by the complainant to annul a marriage solemnized between the parties on the 6th day of June, 1889, on the ground that at the time of the said marriage ceremony the defendant had already been married to one Harry M. Jefferson, in the city of Trenton, in this state, on December 8th, 1888, and that she had never been lawfully divorced from the said husband, Harry M. Jefferson.

The answer of the defendant admits her marriage with complainant, and further, that on the day named in the bill a formal ceremony of marriage was performed between herself and one Harry M. Jefferson, but she avers that the last-mentioned marriage was void from the beginning, because at the time of said marriage the said Harry M. Jefferson had a wife then living.

The admission in the answer of the previous marriage, standing alone, would not be sufficient to establish that fact. The-court would refuse to proceed upon it, on the ground-that the same might be the result of collusion. Montgomery v. Montgomery, 3 Barb. Ch. 132. It is, however, corroborated by the production of a certified copy of the record in the bureau of vital statistics, and further by the production in evidence off the record of a suit commenced in this court by the defendant against the said Harry M. Jefferson, alias Jones, for the purpose of annulling that marriage. There is really no serious contention but that the alleged marriage between the defendant and Jefferson or Jones did take place in Trenton, December 8thr 1888, and the real controversy in the cause has been whether that marriage was valid.

It appears by the testimony of Nettie Ames, one of the witnesses to the marriage, and a sister of the bride, that a marriage ceremony was performed between Harry M. Jones and one Jennie C. A. Ames, in the city of New York, on the 10th day of February, 1886, by the Rev. Dr. Baker, a minister of the-gospel, at the time connected with the Madison avenue church in that city. This is fortified by the production of a certified copy of the record of such marriage, on file in the bureau of statistics of the city of New York, and further by the testimony of Harry M. Jones and his wife, taken in New York on commission.

The identity of the said Harry M. Jones as Harry M. Jefferson, under which name the marriage ceremony was performed between himself and the defendant, is established beyond question.

Counsel of complainant insists that even if it is admitted that Jefferson or Jones had a wife living at the time the marriage ceremony was performed in Trenton between said Jefferson or Jones and defendant, that it cannot be considered as invalid until so decreed in an action brought for that purpose.

By the second section of the Divorce act (Rev. p. 315), it is-provided that—

“ Divorces from the bond of matrimony shall be decreed where either of the-parties had another wife or husband living at the time of such second or Other marriage; and that all marriages, where either of the parties shall have-a former husband or wife living at the time of such marriage, shall be invalid from the beginning and absolutely void, and the issue thereof shall be deemed to be illegitimate and subject to all the legal disabilities of such issue.”

The declaration of the.statute renders such a marriage invalid from the beginning, and absolutely void; not that it shall be void from the time offthe decree, but from the time when the ■ceremony was performed. The decree may be a protection to a party who otherwise might, from loss of evidence or some other reason, be deprived of the means of establishing the facts necessary to show the invalidity of the marriage, and may be advisable for other reasons, but the statute is explicit in its declaration that it is void, and the decree renders it no more invalid than such declaration of-the statute.

“ If a first marriage is void because either of polygamy or any ether like impediment, a second is not impaired by it, though there has been no sentence of nullity.” 1 Bish. M., D. & S. § 719; Paterson v. Gaines, 6 How. 550, 592; Gaines v. Relf, 12 How. 472, 593; Regina v. Chadwick, 11 Q. B. 173,

The complainant is not entitled to the relief prayed for, and the bill must be dismissed, with costs.