author: Tiie Chancellor.

text:
    John Baldwin v. Henry H. Richman et al.
    1. H., under the will of his father, became seized of an estate which, under the statute of 1784, became a fee simple in his eldest son J., who, being under a misapprehension of his rights, and supposing that under the will of his grandfather he was tenant in common with his brother and his two sisters, applied to the Orphans’ Court for a division .of the land. Each of the children took possession of the shares severally allotted to them, and the brother afterwards conveyed his share by deed to the complainant, having previously expended money upon it, improved and fenced it, cut off the wood and paid the taxes upon it from the time of its allotment to him until his sale of it. J. died intestate. His children, the defendants in this case, had brought an ejectment against the complainant, and were in possession under that judgment.
    2. Held, that the complainant, under the circumstances of the case, was not entitled to an account against the defendants for the improvements he has put upon the property, or the consideration money he had paid for the land.
    3. Thai the grantor of the complainant could not in equity recover of his brother the value of the improvements he had put upon the premises, unless it appeared that the expenditures made had been induced by the conduct of J., and that that conduct was such as to make it against good conscience that he should reap an advantage from it at his brother’s expense. The mere fact of a mistake on the part of J. could give the grantor of the complainant no equitable claim for relief.

      4. That this could not be likened to a case where a man having title to land, stands by and encourages the sale without forbidding' it. For J. was wholly ignorant of his legal rights, and they were rights of which his brother had the same knowledge as he had.

    6. The maxim that where one of two innocent persons must suffer, he shall suffer who by his own acts occasioned the confidence and loss, is not applicable, for both aated with fall knowledge of all the facts.

    6. That the complainant stands in a very different position from his grantor. If his grantor had an equitable claim to be paid for the improvements, he has no equity, unless he is a bona fide purchaser without notice.

    7. That the bill should have been demurred to, for want of the allegation.
    Henry Richman, deceased, by his last will, dated 6th Janaary, 1779, proved 15th September, 1787, devised as follows, viz., “I give unto my son, Henry Richman, the plantation 1 now live on,” &c. “ I give it to my son Henry during his
    natural life, and then to the heirs of his body, lawfully begotten, forever.”
    Henry Richman, the devisee, entered into possession, and then by deed, 5th January, 1796, conveyed the premises so devised to him, to one Thomas Parvin.
    Henry Riehman, (2d,) died about 1825, leaving four children ; Jeremiah, (the eldest son,) Benjamin, Charlotte and Constantia, who, upon bis death, brought suit to recover the premises so conveyed to Parvin. The heirs of Parvin relinquished the premises, and on the 14th of January, 1826, before the day to which the ejectment was returnable, made and executed to Jeremiah Richman, (the eldest son, and father of the complainants,) an absolute release and quit-claim of the land so conveyed to their father, Thomas Parvin.
    At September Term, 1826, the said Jeremiah Richman applied to the Orphans’ Court of the county of Salem, for a division of the land devised by bis grandfather, Henry Riehman, among the heirs-at-law of his father, Henry Rich-man, (2d). The petition presented by him to the Orphans’ Court recited that the “ petitioner, together with Benjamin, Constantia and Charlotte Richman, are heirs of Henry Rich-man, late of the county of Salem, deceased, who devised certain real estate, of the township of Pittsgroye, to the said heirs, (after the decease of their father, Henry Riehman, Jr.,) by his last will and testament, which they now hold undivided and as tenants in common,” &c. He therefore prayed the court to appoint commissioners “ to assign and set off to each one of said heirs, their shares by metes and bounds, agreeably to the will of said deceased.” The court upon this petition appointed commissioners to make such partition, who divided the premises accordingly, and made their report thereof, which was confirmed at December Term, 1826. The said children of Henry C. Richman took possession of the shares so severally allotted to them, and Benjamin Richman, on the 5th of January, 1836, conveyed his share, by deed, to John Baldwin, who is in possession of the same, for the sum of two hundred and fifty dollars.
    Jeremiah Richman died May, 1845, intestate, not having sold, or otherwise made any disposition of the premises devised by the will of his grandfather, leaving the complainants his children and heirs-at-law.
    These facts are undisputed.
    The bill alleges that Benjamin Richman used and occupied the land as his own, from the time of its allotment to him until his sale of it to Baldwin; that he expended money on it, improved and fenced it; cut off the wood, and paid the taxes from year to year; all of which was done with the knowledge of Jeremiah, and without his interference. That the defendants have commenced an action of ejectment against the complainants, and have obtained judgment in their favor, and have issued a writ of habere facias possessionem to turn the complainant but of possession.
    The prayer of the bill is, that the defendants may be perpetually barred from further proceedings at law; or, if the court should be of opinion that the defendants are entitled to recover the possession, then that they may be decreed to come to an account with the complainant for the money expended by him on the land in improvements, and for taxes, &c., &c.
    All the defendants answer the bill. They allege that the application to the Orphans’ Court, made by Jeremiah Rich-man, was under a misapprehension of his rights; and that if possession was held of the land by his brother, the taxes paid and improvements made, it was under like misapprehension, and they deny the right of the complainants to call upon them for remuneration.
    Proofs were taken on both sides.

      W. Halsted, for complainant.
    P. D. Vroom, for defendants.
   Tiie Chancellor.

It is admitted that Henry Richman, under the will of his father, became seized of an estate in the land in controversy, which, under the statute of 1784, became a fee simple in his eldest son, Jeremiah.

Jeremiah died intestate. His children, as his heirs-at-law, brought an ejectment to recover possession of the land. The defendant in the ejectment, who is the complainant in this suit, set up, in defence, the proceedings in the Orphans’ Court, and Jeremiah’s subsequent acquiescence in his brother’s, and in his brother’s grantee’s possession, as owners, as an estoppel, as well against himself as those claiming under him. The Supreme Court gave judgment against the defendant in ejectment. The defendants in this suit are now in possession under that judgment.

The only question for this court now to decide is, whether the complainant, under the circumstances of the case, is entitled to an account against the defendants for the improvements he has put upon the property, and to recover their value, as well as the consideration money he paid for the land.

It is manifest that the complainant cannot mainiain his claim, except under the equities which existed between his grantor and Jeremiah Baldwin. If Benjamin Richman could not, in equity, recover of his brother Jeremiah the value of the improvements which Benjamin put upon the premises, then this complainant has no right of action for his improvements. The bill is correctly framed in this view of the complainant’s rights, and this is made the foundation of this suit.

Let us see, then, what equitable claim Benjamin Richman had against Jeremiah Richman. It must be shown that the-expenditures made on the land by Benjamin, were induced by the conduct of Jeremiah, and that that conduct was such as to make it against good conscience that he should reap an advantage from it at his brother’s expense.

The application of Jeremiah Richman to the Orphans’ Court was made under a misapprehension of his rights. He supposed that under the will of his grandfather, he was tenant in common with his brother and his two sisters. This is apparent from his petition to the court, in which he represents himself, his brother and two sisters, as tenants in common under the will of their grandfather. In fact, they were all laboring under the same misapprehension, for they had previously commenced, in the name of all of them, as tenants-in common, an ejectment suit against a tenant in possession, who claimed under a deed from their father.

The proceedings in the Orphans’ Court conferred no title. Their consequences upon the rights of Jeremiah were no-more than if he himself had selected three men to divide the land into four equal parts, and under such division had suffered Benjamin to take possession of one of them.

The bill charges no fraud upon Jeremiah. We can hardly conceive of any fraud he could have meditated.

Under this division, Benjamin took possession of the land, and now all the consequences that have resulted are attributed to the mistake of his brother. But we ought not to-forget that Benjamin did not claim title to this land under the proceedings of the Orphans’ Court, nor under his brother, nor under any act of his. He claimed title under his-grandfather’s will. He took possession claiming under that will, adverse to his brother. He gave no consideration and the responsibility of the mistake rests as much upon, himself as upon any one else. In presenting this part of the case, the bill is altogether defective in making out any case which can possibly entitle the complainant to relief. It does not allege that Benjamin took possession of the land and improved it, under the impression that the land was his own; nor is there any allegation that it was the conduct of Jeremiah that induced him to take possession, and make the improvements. From anything that appears in the bill to the contrary, he knew that Jeremiah was acting under a mistake, and took advantage of it. The mere fact of a mistake on the part of Jeremiah could give Benjamin no equitable claim for relief. It should appear that he was the victim of such mistake; and without any fault of his own, had sustained injury. The bill does not allege this in terms, nor do I think' it is fairly to be inferred from its statements.

Again, the bill alleges that Jeremiah stood by and saw Benjamin make improvements on the land, and permitted him to pay the taxes. The improvements consisted in some fencing. The value of the fence, or the amount of the taxes are not stated. The answer makes no admission as to these matters, as they were not within the knowledge of the defendants ; and the complainants have offered no proof in regard to them. It does, however, appear in proof, that Benjamin cut wood to the amount of eighty dollars in value. There is nothing to show that the use of the land, and the wood cut, were not more in value than the taxes paid, and the value of the fencing. Thus in the whole case, the complainant does not show any injury that calls for redress as between the two brothers. Unless Benjamin received some injury, there could be no equities to adjust as between him and his brother, and nothing to call for the interference of the court. It was insisted by counsel that the conduct of Jeremiah in putting his brother in possession, and permitting him to make improvements, amounted to a constructive fraud. Admitting this to be so, Benjamin could have no claim in equity, unless he could show that he had sustained some injury from the fraud. But this could not be likened to a case where a man having title to land, stands by and encourages the sale without forbidding it. Jeremiah was wholly ignorant of his legal rights, and they were rights of which Benjamin had the same knowledge upon what they depended that he had. Nor could the maxim be applicable, that where one of two innocent persons must suffer, he shall

suffer, who, by his own acts, occasioned the confidence and loss; because both acted with full knowledge of all the facts.

But admitting that under the circumstances of the case Benjamin Richman had an equitable claim to be paid for the improvements, he put upon the land, the complainant stands in a very different position from Benjamin Richman.

The complainant has no equitable claim for relief, unless he is a bona fide purchaser without notice. If he purchased this property with notice that his grantor had no title, what claim can he set up in equity against the- rightful owners, to be paid for his improvements ? He must show his equity by his bill. He does not allege that he was such purchaser; the bill should have been demurred to for this defect. It is proved that he had notice that his grantor had no title; and that he was informed of Jeremiah Rich man’s title, and of the character of that title. He procured a copy of the will of Henry Richman, and had it examined. He was informed, that by the will the title was in Jeremiah Richman. It is proved that on account of the defect of title in his grantor, he purchased the property for about half its value; that after he purchased, he procured a strip of land from his neighbor to erect his buildings upon, and gave as a reason, that his title to the land purchased of Benjamin Richman was defective.

The counsél of the complainant insisted that this was not put in issue by the pleadings, and therefore the defendants should not be permitted to have the benefit of this testimony. But it was not necessary for the defendants to put the question in issue. The complainant should have made the issue. He has no case without it. He must recover upon the case made by his bill, and if that is not such as entitles him to relief, he cannot have a decree in his favor. To sustain the character of a bona fide purchaser without notice, the party must aver and prove, not only that he had no notice of his adversary’s rights before his purchase, but that he had actually paid the purchase money before such notice. B. & S. Jewett v. Palmer and May, 7 J. C. R. 65.

The bill must be dismissed, with costs.


source: Caselaw Access Project

author: The Master.

license: Public Domain

text:
    Between John Kean, complainant, and John T. Johnson and others, and the Central Railroad Company, defendants.
    1. When a board of directors, or a majority of stockholders, deviate from the originally contemplated undertaking, the “ rights ” of other and dissenting stockholders are “ affectedas against them they cannot legally do it.
    2. A majority of stockholders in a prosperous corporation cannot, at their own mere caprice, sell out the whole source of their emoluments and invest their capital in other enterprises, where the minority desire the prosecution of the business in which they had engaged. The contract is that their joint funds shall, tinder the care of specified persons, generally called directors, be employed, and that for certain specified purposes.
    3. Where the duration of such employment is limited in the charter, until that time it must continue so employed, unless, perhaps, in case of clear loss. If no time is fixed by the charter, at which the proposed use of the capital shall cease, the contract is that so long as the aflairs of the company are prosperous it shall go on, unless all consent to the contrary.
    4. “How far, under what circumstances, and upon what application a court of equity would restrain a corporation from an improper alienation of its property, must depend upon the general principles which guide it in the exercise of its powers; but, in a proper ease made, it would interfere to prevent a disposition of its property for other than corporate purposes.

      5. “It is the right of a partner to hold his associates to the specified purposes, whilst the partnership contintfes.”
    6. In the enacting section of the charter of a railroad, the words “ And they and their successors, by the said name and style, shall be capable of purchasing, holding and conveying any lands, tenements, goods and chatties whatever, necessary and expedient to the objects of this incorporation,” only authorize property to be sold and conveyed away when it is necessary or expedient to the objects of the incorporation. The objects of the incorporation cannot require that the necessary source of its profitable existence should be sold and conveyed away.
    7. A supplement to the act of incorporation of a railroad company, authorizing the company to purchase the road constructed by another company, and declaring that the purchased road should become a part of the road authorized to be constructed by the charter, contained a proviso, “ That nothing in this act contained shall in anywise affect any right whatever, either at law or in equity, of any stockholder or other person in, or any claim or demand against, the,company whose road it was contemplated to purchase. Held, that the purchase authorized by the supplement did affect the rights of the stockholders in the company whose road was to bo purchn led ; and that the legislature intended, when they provided that nothing in ’ ■- et contained should in anywise affect any right whatever, that such purchase should not occur without that which alone could prevent its affecting such rights, viz., the consent of every stockholder.
    8. Quere. Whether a supplement authorizing any deviation from the original charter, and not requiring the consent of all the stockholders, is unconstitutional ?
    9. Where, the company whose road was purchased under the above supplement, and who were not a necessary party to any of the different kinds of relief prayed, had not been made a party to a bill filed by one who was a protesting stockholder, against the directors of both roads, and the company in possession of the road, and all its property but the franchise ; and the objection was not taken until the hearing of a general demurrer to the equity of the bill. The court disposed of the case on its merits, without requiring such formal parties to be joined.
    John Kean files his bill in this court against John T. Johnson and others, individuals, and the Somerville and Easton Railroad Company, otherwise called the Central Railroad Company of New Jersey, of which they are directors, praying an injunction and other relief, to which bill the defendants have filed a general demurrer.
    The bill states that, under an act of the legislature, passed February 9th, 1831, a corporation was organized, called the Elizabethtown and Somerville Railroad Company, which soon after went into full operation ° that in 1839 — 40, being in want of funds to pay for the making of the road, the company borrowed large sums of money, for which they mortgaged not only its property but its franchises or chartered rights, which mortgages, by .a supplemental act, were validated by the legislature and consent of two-thirds of the stockholders, which consent was by said act required ; that afterwards these mortgages were foreclosed, a sale had, and a deed, conveying all the property and chartered rights of said company, duly made to Stearns & Colket, purchasers at the mortgage sale; that these purchasers divided the ownership and propriety of their purchase into eight thousand shares of capital stock, one thousand five hundred shares of which the complainant bought, and part of which he still holds; that under this creation of new stock a new company was organized, a new rail laid over the road, and the business of transporting freight and passengers was begun and carried on with renovated and much increased power and success.

      The Mil further states that, in 1817, another company was chartered by the legislature to construct a railroad from Somerville to Easton, and called the Somerville and Easton Railroad Company, in which the individual defendants named in the bill (with two exceptions) owned a large majority of the capital stock, and have always been the directors ; that, about the latter part of 1848, they combined together for the purpose of amalgamating the two companies under a different organization, and of compelling the other stockholders of the Elizabethtown and Somerville Railroad Company to surrender their stock, and procured the passage of a supplement to the act to incorporate the Somerville and Easton Railroad Company, which is set forth at length in the bill.
    The act provides as follows :
    1. That it shall be lawful for the Somerville and Easton Railroad Company to purchase the road constructed by the Elizabethtown and Somerville company.
    2. That, if payment of said purchase can be made in stock, the Somerville and Easton Railroad Company can issue so much as shall be required for that purpose.
    3. That the purchased road shall be and become a part of the road authorized to be constructed by the Somerville and Easton company, and regulated by its charter, and that that company shall thereafter be known as the Central Railroad Company of New Jersey.
    Provided, that nothing in this act contained shall in any wise affect any right whatever, either at law or in equity, of any stockholder or other person in, or any claim or demand against the Elizabethtown and Somerville Railroad Company, or any lien whatever upon said railroad or upon any property which, by virtue of this act shall be transferred or conveyed; and provided further, that, upon such purchase as aforesaid being completed, the said- The Central Railroad Company of New Jersey shall thereby become responsible for all debts contracted by the Elizabethtown and Somerville Railroad Company, since the foreclosure of the mortgage or mortgages under which the present stockholders of said last-named company claim to hold the said railroad, and shall be liable therefor in law and equity, in like manner as if the said debts had been contracted by the Somerville and Easton Railroad Company; provided also, that the said purchase shall be made with the consent of the last-mentioned stockholders.
    The bill then further avers that, after the passage of this act, and about April 1st, 1849, the individual defendants in the bill, holding a large majority of the stock of both companies, and being directors of each, and constituting almost the entire boards, did proceed, using and proceeding in the names of said companies respectively, and assuming to act as said companies, to continue and carry out a bargain and agreement between the said two companies for the sale of the railroad and other property and appendages of the Elizabethtown and Somerville Railroad Company, and procured of Stearns & Colket, the purchasers at the master’s sale, a deed conveying to the latter company all the property and appurtenances of said road as the same were conveyed by the master to them.
    The two roads thus united, the name was changed to “ The Central Railroad Company of New Jersey,” and under that name the corporation has since carried on operations over the road and with the property of the Elizabethtown and Somerville Railroad Company.
    The complainant further avers that he was and is owner of two hundred and seventy-five shares of stock in the Elizabethtown and Somerville Railroad Company, as issued anew by Stearns & Colket; that Thomas A. Hartwell and William Thompson also were and are owners of a large number of said shares, but that they neither of them gave any consent to this proceeding, but protested against the sale of their road, and still continue to protest against and resist iu
    For this reason, the complainant insists that the purchase and sale made were not valid, and that all subsequent proceedings of said Central Railroad Company, in taking possession of said Elizabethtown and Somerville Railroad, with its appendages appurtenances, and in exercising control and dominion over them, are altogether fraudulent against the complainant and the other dissenting stockholders, and void.
    Complainant then avers the existence of a large and profitable business on the road between Somerville and Elizabethtown, from the year 1846, and that a considerable surplus had been gathered at the time of the sale complained of, and that the new corporation has mortgaged all its property heavily — to the amount of one million five hundred thousand dollars — to raise money for the purpose of extending the road to Easton, an additional fraud, in the view of complainant, upon all stockholders not consenting to the sale of the Elizabethtown road.
    The bill then prays — -
    That the defendants, viz., the directors, individually, of the two roads, the mortgage trustees, and the corporation, by whatever name rightly called, may discover and disclose the full amount of the earnings of said Elizabethtown road, from the commencement of its operations under the Stearns & Colket purchase, to the present time.
    That defendants may account for these earnings. That the purchase complained oij and the bonds and mortgages, may be declared void, and of no validity whatever, and for an injunction against any further issue of any bonds or mortgages upon said road by the Central Road Company.
    The Chancellor having been concerned as counsel for defendants, the matter was referred to Cortlandt Parker, Esq., one of the masters of the court, before whom it was argued.

      J. P. Bradley and W. L. Dayton, for complainants.

      Frelinghuysen and Zabriskie, for defendants
   The Master.

The questions raised by the demurrer, in this cause, are two-fold—

I. What is the proper construction and meaning of the proviso to section three of the act recited in the bill, passed February 22d, 1849? Does that proviso require the consent of all the stockholders of the Elizabethtown and Somerville Railroad Company, before the purchase of the road by the Somerville and Easton road becomes valid, or only the consent of a majority of said stockholders?

II. If the proviso does require the consent of all such stockholders, to constitute a valid transfer of the road, can the remedy sought be given in the present suit ?

Notwithstanding the extremely able and ingenious arguments of the counsel for the demurrants, it seems to the master that the plain language of the statute in question requires the consent of all the stockholders of the Elizabethtown and Somerville Railroad Company, before the road in which they, as stockholders, have a joint ownership, under the purchase by them, and the acts of the legislature in reference thereto, can be sold and conveyed away from them.

The act, by its first section, empowers the Somerville and Easton company to buy the other road. The second section empowers the purchase, if the terms can be arranged, to pay the purchase money in their own stock, and to issue sufficient therefor. The third section makes the road, when so purchased, part of the road authorized to be constructed by the Somerville and Easton company, and extends the charter of the latter over it. It also changes the name of the consolidated company, on completion of the purchase, to that of the Central Railroad of New Jersey, and directs that all suits pending against the Somerville and Easton company shall proceed to judgment against the Central Railroad of New Jersey, and then comes the proviso which is the subject of dispute, and'which has already been at length recited.

The language of this proviso is very general and comprehensive. “Nothing in this act contained,” is its first branch, “ shall in anywise affect any right whatever, either at law or in equity, of any stockholder or other person in, or any claim or demand against the Elizabethtown and Somerville Railroad Company, or any lien whatever upon the said railroad, or upon any property which, by virtue of this act, shall be transferred or conveyed.” Again, says the proviso in its second branch, “ upo:i such purchase as aforesaid being completed, the Central. Railroad of New Jersey shall thereby become responsible for all debts contracted by the Elizabethtown and Somerville Railroad Company since the foreclosure of the mortgages under which its present stockholders claim to hold the said road.” And lastly, this branch provides the said purchase shall he made with the consent of the last-mentioned stockholders.”

What rights, then, had the stockholders of the Elizabeth-town and Somerville Company at law or in equity in that corporation ? Does a sale of the road, which was the source of all their emolument, actual or prospective, whose possession was the very condition of their actual, if not technical being, and the diversion of tlieir capital to other employment, affect in anywise their rights? If so, by the clear meaning, almost the express words of the proviso, they had a right to dissent, and that dissent prevented the transfer permitted by the act, at any rate so far as regarded them. If a transfer, it did not affect the rights of the dissentient, whatever other effect it might have. I cannot divert my mind from the conelusion that a sale of their road, and the employment of the capital they invested in it to other uses, does affect the right of every stockholder in a railroad company. As stockholders, they own the road in common, to be employed in specified uses. Each owns a share in the whole, and is to have a proportionate share in its profits. They have invested a portion of their capital in it, and in it alone. They have a right in the road and in every dollar it earns. The directors are their trustees to employ the joint capital in the management of the road, and the road only, to the end that from the investment the stockholders have chosen they may reap the contemplated profits. And this is the agreement of the stockholders among themselves. They each contract with the other that their money shall be so employed. What the majority determine within the scope of this mutual contract, they each agree to abide by, but there their mutual contract ends, and no majority, however large, has a right to divert one cent of the joint capital to any purpose not consistent with, and growing out 'of this original fundamental joint intention.

To sell the road, to abandon the contemplated investment and embark in another scheme, whether entirely different, or only more extensive than the original contemplation as apparent on the face of the charter, is, it seems to me, clearly contrary to the rights of the individual stockholders. If they had any right as partners or beneficiaries, it would seem to be this, that their money should be devoted to that use, and never employed in any other, nor returned to them before they desire it. The mere statement of the proposition seemed to me to prove it. No argument, however lengthened, can add to the force of the naked position.

The general principle here asserted has frequently received the sanction of the courts both of England and this country. It is the same, whether applied in the case of private associations or incorporations. “ It is not, I apprehend,” says.Lord Eldon, “competent to any number of persons in a partnership, (unless they show a contract rendering it competent to them,) formed for specified purposes, if they propose to form a partnership for different purposes, to effect that formation by calling upon some of the partners to receive the subscribed capital and interest and quit the concern.” “ And again,” he says in the same case, “ those who seek to embark a partner in a business not originally part of the partnership concern, must make out clearly that he did expressly or tacitly acquiesce.” Natusch v. Irving, Appendix to Gow on Part. 576, Am. Ed., 1830. And see also the opinion of Kent, C., in Livingston v. Lynch, 4 Johns. Ch. R. 573. So in incorporations. Nothing is more certainly settled than that any fundamental alteration of' a charter, or material deviation from or extension of a road, in the case of road companies, interferes with the rights of the corpora-tors, and that no majority, however large, can compel any individual stockholders to submit. Thus, in such cases, if the stockholder has not paid his subscription, he is freed by such deviation from liability on his contract to do so. New Haven and Connecticut Railroad Company v. Croswell, 5 Hill, 383 ; Union Lock, and Canal Company v. Towne, N. H. Rep. 44; Middx. T. Corp. v. Locke, 8 Mass. Rep. 268; Same v. Swan, 10 Mass. R. 385. The opinions of the able judges who decided these cases, present the principle with remarkable clearness and force. The late distinguished Judge "Woodbury, in Union Lock v. Towne, states the ground of his judgment thus: “ Every individual owner of shares, whether a petitioner or associate or purchaser, expects, and indeed stipulates with the other body owners, as a corporator, to pay them his proportion of the expense which a majority may please to incur in the promotion of the particular objects of the corporation. "By acquiring an interest in the corporation, therefore, ho enters into an obligation with it in the nature of a special contract, the terms of which contract are limited by the specific provisions, rights and liabilities detailed in the act of incorporation. To make a valid chango in this private contract, as in every other, the assent of both parties is indespensable. The corporation on the one part can assent by a vote of the majority; the individual on the other by his own personal act. However, the corporation then may be bound by the assent to the additional ads, the defendant in his individual capacity, having never assented to either of them, is under no obligation to the plaintiff, except what he had incurred by becoming a member under the first act. Consequently, the assessment sued for, if raised to advance objects essentially different from those originally contemplated, are not made in conformity to the defendants special contract with the corporation.”

It has been said that these cases do not decide the present, because they were actions brought to recover the amount, of assessments or subscriptions against parties who had not paid them, and disputed their liability. But they are cited as authority, and are authority of great weight in favor of the principle that when a board of directors or a majority of stockholders deviate from the originally contemplated undertaking, the “rights” of other and dissenting stockholders are “ affected,” as against them they cannot legally do it. Each of them may truly say, “non hceo in federa vevi.” It is to this end only that they are at present adduced. They could never have been decided thus, if the courts had not been of opinion that the rights of stockholders were affected by any use of their invested money in a different way from that which in the beginning they intended and expected.

But the cases already cited are not the only decisions upon the point under examination. In Natusch v. Irving, decided by Lord Eldon, whose opinion therein has been already referred to, an injunction was granted on the application of an individual member of a company organized for the purpose of carrying on a fire and life insurance business, restraining the company from also embarking, as they intended, in marine insurance. And that was a case of great apparent hardship since the complainant was alone, and had only paid one hundred and fifty pounds to the funds, the whole capital being five hundred thousand pounds, divided among more than six hundred stockholders. In Livingston v. Lynch, 4 Johns. Ch. Reports 573, where a certain method of doing the business of the company was defined by the fundamental articles, and the officers, or some of them, had assumed powers not conferred upon them by these articles, though authorized by subsequent resolutions of .the stockholders, Chancellor Kent, in an elaborate opinion, discusses this subject of the rights of the individual stockholders, and granted the injunction prayed for against the objectionable conduct of the officers as a material deviation from the fundamental agreement under which the stockholders had associated. In Ware v. The Grand Junction Water Company, 2 Russ. & Mylne 461, Lord Brougham, on the application of a single shareholder, restrained the corporation from embarking their funds and credit in getting water by aqueduct from the river Colver, instead of the Thames, as originally contemplated. In Cunlif v. The Manchester and Bolton Canal Company, 13 Cond. Eq. R. 131 n., a corporation, on the application of a stockholder, was restrained from applying to parliament for a change in their charter, to enable them to convert a portion of their canal into a railway, and from applying any of their corporate funds to the proposed object. And in Stevens v. The Rutland and Burlington Railroad Company, in Vermont, reported in 1 Am. L. Register 154, the owner of five shares out of ten thousand, obtained an injunction against the corporation’s proceeding to build an extension to the originally-chartered road, against his consent, although the extension was authorized by a supplement to the charter passed by the legislature. I cite this case not to argue therefrom that such a law as was therein complained of would, unless it required the consent of all the stockholders, be unconstitutional and invalid. Whether that proposition be true or false, is not pertinent to my present purpose, and the case is simply adduced to show, additionally to the others, that a material fundamental deviation from the original idea and intention of the incorporation, affeela and contravenes the rights of the stockholders.

To the same effect are, also, the following authorities: Bagshaw v. E. Counties Railway Company, 7 Hare Ch. R. 114; Colman v. the Same, 10 Ch. R. 1; Solomons v. Laing, 14 Jurist for Dec., 1840, 2 Hore Ch. R. 461; Preston v. Grand Coll. Dock Company, 14 Sim. Ch. R. 327; Solomon v. Randall, 3 M. & Craig Ch. R. 444; Ward v. Society of Attorneys, 1 Collyer Ch. R. 370; Angell & Ames on Corp., §§ 391, 392, 393. There is a class of cases, to some of which reference wax made in the argument, apparently conflicting with thorn fUjxsady cited, which seems to me really additional aulliufhy ha support of the position already mainiaincd. In these cases, the question was whether the alterations in, or deviations from the charter, of which complaint was made, were or were not material or fundamental. Such a ease is Gray v. Monongahela Nav. Company, 2 Watts & Serg. 150. But it will be found that these- cases admit that if the alteration or deviation, which was the subject of the suit, extended to “a change in the structure of the company,” to use the forcible, but peculiar language of G. J. Gibson, in the case last cited, it would have been fatal to the position taken by the company.”

There was another case cited by counsel for defendants, as conflicting with the views here expressed: Ware v. The Grand Junction Water Company, 13 Cond. Ch. R. 126. The facts in that case were these: The plaintiff, a shareholder in the company sued, prayed and obtained from the Vice-Chancellor of England, an injunction against the company’s devoting their capital to obtaining a supply of water from the river Colne, when their charter only contemplated the getting it from the Thames, and also against their applying to parliament for an act authorizing them to use the Colne for such a supply. On appeal, Lord Brougham, then Chancellor, sustained the injunction against the company pursuing their course before procuring such act, but dissolved it so far as regards the contemplated application to parliament. In answer to the argument based upon this case, it may be said, first, that the opinion of Sir L. Shad well, V. C., might be well regarded as not inferior in weight, on any purely legal matter, to that of the Lord Chancellor; and, second, that the ruling on the appeal admitted that, without a new act, the contemplated change in the original idea of the company, did affect the rights of the stockholders, and thus the case corroborates those already alluded- to. Until it was seen what act parliament would pass, and 'what conditions it imposed upon the company, the Chancellor .might properly think it wrong to interfere. If the new act,'like the one in question in this cause, provided for the saying of the rights of all the stockholders, no objection to it could possibly be taken; and, besides, after the actual passage of the projected act, itiuight be that the stockholders would all consent, which would aitón ce do away with all question.

But it is contended on the part of the defendants, that by the sale of their road, no rights of any stockholder in the Elizabethtown and Somerville Railroad Company are affected; that the majority of stockholders have the power and the right, at any moment, to sell all the property of the corporation and quit business.. And that if they pay over to him the profits of the business while it is carried on, and his proportionate share of the proceeds of sale, the “ rights ” of every stockholder are satisfied, and he can claim no farther at law or in equity.

I answer, first, if this be so, the proviso in question was singularly useless and uncalled for. No act on the part of the legislature was necessary to protect their rights. They might most safely have been entrusted to the care of this or the other courts. But, without dwelling on this observation, is the doctrine contended for true ? Is it the law that a majority of stockholders in any corporation, however prosperous its business affairs may be, can, at their own more -caprice, sell out the whole source of their emoluments, invest their capital in other enterprises, and that, however the minority may desire the prosecution of the business in which they had engaged, they have no injury to complain of, at law or in equity, so long as they obtain their proportion of the proceeds of the sale ?

On principle, this position seems to me unsound. If it be true, a minority is entirely in the power of a majority, and the moment a rich man or a few rich men see what they deem a bel ter investment for their money than the corporation in which they are already stockholders, they may compel the poorer members of the company to abandon profits satisfactory to them, and either risk the little they have, according to views from which they differ, or take back their money to lie profitless on their hands, until they find another investment. Or, more nearly io approach the case in hand, as asserted by the complainants, if a rich man, or a number of rich men possess a controlling interest in two roads whose termini meet — one already successful, the other not built, or needing nursing care — they may compel the poorer stockholders either to abandon or postpone the profitable nse of their share of the capital, or take back their money and give up an investment which perhaps their own enterprise suggested, and their own perseverance recommended to the attention of others, and hazard the finding of a new investment, and a repetition of the same destruction of it. If such were the law, corporations would soon be few, for seldom would capitalists, whatever their comparative wealth, invest in enterprises so readily rendered profitless at the caprice, or in obedience to the interest of any man or set of men rich enough to control the majority of stock.

That the majority should have the power claimed for them, does not seem to me to be the contract between the stockholders, for there is a contract, as already shown in the case of every corporation, between them. That contract is, that their joint funds shall-, under the care of specified persons, generally called directors, be employed, and that for certain specified purposes. Sometimes the duration of such employment is limited in the charter’, and then, until that time, it must continue so employed, unless, perhaps, in case of clear loss. Sometimes no time is fixed by the charter at which the proposed use of the capital shall cease, and. then the contract between the parties is that, so long as the affairs of the company ai’e’ prospei'ous, it shall go on, unless all consent to the contrary. The charter of the Elizabeth-town company defines no period for its expiration; it is, however, such a coi’poi'ation as naturally must, at its origin, have been expected to continue permanently, and by one section of its charter’, it is provided that at the end of fifty years from its completion, the state has the right to take the road at an appraisement, a provision which may have been one reason for the privileges conferred. The charter bears date February 9th, 1831, and thei’e was, of course, at the date of the act of 1849, a long period to elapse before the half century expires. True, the present stockholders are not the originators of the road, nor do they claim by transfer of stock from the Original holders; but, nevertheless, by the act legalizing the mortgage of the fx-anchise and property, the purchasers at the mortgage sale were substituted to all the chartered rights of the first owners of the stock, and the charter is still the only evidence of the character of their contract. £It must be inferred, then, that they, like the first stockholders, expected and embarked their means in the enterprise, on the faith that it wa ' continue, if prosperous, at least till the fifty years elapse

It can hardly, therefore, I xk, be argued with justice. that a majority of the stockholders had a right, upon princi- i pie, to sell out all the property of the company from which; its profits were to be realized and abandon the business, and ! that the minority’s rights are satisfied by a division to them'! of the value of their stock.

Nor does the only ease cited on the argument- — Revere v. The Boston Copper Co., 15 Pick. 351 — substantiate any such position as that contended for by the counsel for defendant. The defendants in that case were a manufacturing corporation. Their business had become unprofitable, and a majority of the stockholders had voted to wind up its affairs.

The plaintiff, who was a corporator, had also been an agent for them, under a contract for his employment indefinitely, without any limit except his death; and he sued for damages accruing by reason of their refusal longer to employ him. The question in the cause was, whether the proceedings taken were a dissolution of the corporation, and whether, after them, the plaintiff could sue on his contract. These questions were decided for the plaintiff, but in their opinion, the court, arguendo, replied to a suggestion by defendant’s counsel to the effect that the plaintiff being himself a member of the corporation, was bound by its acts, and that since a majority had voted to dissolve and wind up, he was bound by it, though he individually dissented. The court said that this argument could not be sustained. “ So far as his rights, duties and obligations as a corporator were concerned, no doubt he is bound, but no farther.”

Giving the strongest right to this dictum of the court, as applied to the case before them, it is not, I think, in point here. That was a case of a manufacturing corporation, and, therefore, not originally to be expected to be of so long duration as a corporation for the establishment of a public road, which was clearly expected to be in operation at least fifty years. And what, perhaps, is more to the present purpose, the scheme of the Boston company had proved a failure. Here the bill asserts and the demurrer admits that the Elizabethtown Road Company was, at the date of the purchase complained of, eminently prosperous, which is the very gist of the injury alleged to be done to the complainant. For can this general language of the court just cited, be of importance, since the question still remains, what are the “rights, duties and of obligations of a corporator?” The complainant in this cause claims not as a corporator, but as an individual contracting with other individuals, all together forming the corporation. The contract is, we will jointly carry on the enterprise projected, and no other; and in carrying it on, the majority shall rule within the terms of our fundamental agreement. But there is no contract that the majority shall have the power to stop carrying it on, and that while it is profitable. And the case in Pickering is expressly to the effect (p. 363,) that the votes.and acts of a corporation cannot deprive the plaintiff of rights belonging to him as a contractor with the corporation. On this point see also the opinion of Judge Woodbury, already cited.

It may, indeed, be true, as urged in the argument, that corporations have a right to sell their property not limited by quantity ; and where they sell, as they buy, for corporate purposes, a court of equity would not, without other circumstances, restrain them. But on the other hand, to cite the language of a learned author, “ how far, under what circumstances, and upon what application a court of equity would restrain a corporation from an improper alienation of its property, must depend upon the general principles which guide it in the exercise of its powers; but there is little doubt that in a proper case made, it would interfere to prevent a disposition of its property for other than corporate purposes. Angell & Ames, p. 190, referring to Binney’s case, 3 Bland. (Md.) Ch. R. 142. And the opinion of Lord Eldon in Natusch v. Irving, is expressly in point, unless there be a difference in the rights of partners in a joint stock association and in a corporation. In that case, the defendants had offered to pay back all that the orator had paid into the company, with interest, and also fully to indemnify him against all loss by the transactions of the company in the business which was beyond the original articles. Lord Eldon to this part of the case replies in substance, as already stated, that it is not competent for any number of persons in a partnership (unless so provided for) formed for specified purposes, to affect that formation by calling upon some of the partners so receive back their capital stock and interest, and quit the concern, which, in effect, would be merely compelling them to retire upon such terms as should be dictated to them, so as to form a new company; and he further says that “ it is the right of a partner to hold his associates to the specified purposes whilst the partnership continues, and not to rest upon indemnities with respect to what he had not contracted to engage in ; and that a partner cannot be compelled to part with his shares, though for double what he originally gave for them; and that it may be his principal reason for keeping them, to have the partnership carried on according to the original contract.” If a majority of partners, corporate or unincorporate, can sell out all their property and satisfy the rights of a dissenting partner, by a simple payment to him of his share, they “ can compel him to retire,” and “ form a new company,” and utterly evade and set at nought his “ right to hold his associates to the specified purposes,” and can “ compel him to part with his shares ” at any sum they choose.

It is again urged, on the part of the defendants, that the very enacting section of the charter of the Elizabethtown company gives to the corporation the power of selling and conveying all their property, and that, as this charter is the fundamental contract between the stockholders, the complainant has himself agreed to give to the corporation, and, of course, to the majority, the power of selling this road and all their property whenever they choose. The words in section first relied upon are these : And they ” (the original corporators) “ and their successors, by the said name and style,” (moaning the corporate name just before mentioned,) “shall be capable of purchasing, holding and conveying any lauds, tenements, goods and chattels whatever, necessary and expedient to the objects of this incorporation.” How, it is argued, the company have, by this language, the power to convey away all they have the power to purchase and uO hold.

The argument seems to me more plausible than sound. Admitting that the words used have any greater force or wider meaning than that the corporation should buy, hold and convey hy that name, the whole argument falls by simply restating, in terms, the propositions contained in the words cited. They are these: that the corporators and their successors should, by their corporate name, be capable of purchasing any lands or goods necessary or expedient to the objects of this incorporation; that is, when it is necessary to the objects of the incorporation that it should purchase or hold any particular property, .it can do so; when it is necessary or expedient to the objects of the incorporation that it should convey any particular property, it can do so. So that it.is only when the objects of the incorporation require it that any lawful conveyance can be made. Can it be pretended that the objects of the incorporation require that the necessary source of its profitable existence should be sold and conveyed away ?

There is nothing, I think, therefore, in principle or authority, to shake the conclusion already arrived at, that the sale of this road by the Elizabethtown and Somerville Railroad Company, at a time when its affairs were eminently prosperous, did affect the rights of its stockholders; that they had the right to retain their investment where it was, and as it was, and that their rights are not satisfied by a payment to them of their proportion in the proceeds of such sale.

But the real character of this purchase was such as to bring it precisely within the decisions already quoted. In form, it jyas,a sale of the road j in fact, it was an extension of it — an addition to the originally proposed scheme. The franchises of the company have not in form been destroyed. They may be said to be in a state of suspended animation, and the road is governed by a newly created corporation, composed by the union of two previously existing ones; and this consolidated company carries on two enterprises as one, which before were the several tasks and privileges of the originally created corporations. The case is, therefore, almost precisely that adjudicated in Stevens v. The Rutland and Bennington R. R. Co., The Hartford and 3ST. H. R. R. Co. v. Cresswell, and The Union Lock and Canal Company v. Towne, already cited to show that a deviation from the charter or fundamental articles of association affected the rights of the stockholders. Indeed, in the last-mentioned case, the supplementary act placed one company under the charter of the other, just as, in this case, the road sold becomes a part of the Somerville and Easton Railroad Company, and its further maintenance, use, and enjoyment is regulated and governed by the provisions of the last-named company’s charter.

If, then, the purchase authorized by the act of 1849, supplementary to the charter of the Somerville and Easton company, did affect the rights of the stockholders in the Elizabethtown and Somerville company, it seems to me to follow, necessarily, that the legislature intended, when they provided that nothing in that act contained should in anywise affect any right whatever, either at law or in equity, of any stockholder in the Elizabethtown and Somerville Railroad Company, that such purchase should not occur without that which alone could prevent its affecting such rights, viz., the consent of every stockholder. Their language is, buy, but see that you buy in such a manner as not to affect the right of any stockholder. And as buying will affect those rights, unless the stockholder consents to the sale, that consent is required. And such a conclusion seems entirely clear from the subsequent language of the same section almost immediately following. It proceeds to provide that the Central Railroad Company shall, on the completion of the purchase, become responsible thereby for all debts contracted by the Elizabethtown and Somerville company since the foreclosure of the mortgages under which its present stockholders claim to hold the said road, and closes with these words: “ Provided, also, that the said purchase shall be made with the consent of the last-mentioned stockholders.” Now, the “last-mentioned” stockholders are the present stockholders, since the foreclosure of the mortgages, of the Elizabethtown and Somerville Railroad Company. And the plain meaning of the legislature seems to me to be expressed by putting the two clauses together, thus, “ nothing in this act contained, shall in anywise affect any right whatever, in law or in equity, of any stockholder in the Elizabethtown and Somerville Railroad Company; and such purchase shall be made with the consent of such stockholders, that is to say, the present stockholders of said company.” The first clause of the proviso had, in effect, required the consent of all the stockholders of the company selling, to the sale, but it had not, it was thought, clearly designated what stockholders. It seems as if the insertion of the intermediate proviso brought this to mind, and thereupon were added the words which defined that the consent already impliedly required of all the stockholders, should be given by all the present stockholders, in contradistinction to those who owned the road prior to its sale under the foreclosure.

I cannot agree with the position taken by the counsel for defendants, that this proviso only refers to the enactments contained in the section in which it is used, and not to the act in general. Its first clause refers, in terms, to the whole act. “ Nothing in this act contained,” &e., and it would, to my mind, be an overstrained conclusion from any rule for the construction of statutes, to make the last clause apply only to the section in which it is found, because it did not repeat an express reference to the whole act. Nor is there any reason for so doing. There have been many rules laid down by great lawyers, for construeing statutes, but they are reducible to one — find out the intention of the legislature. The two succeeding provisos follow, and hang upon the first, and there is not a reason for applying the third proviso to the enactments contained in that section, which does not apply as strongly in favor of extending it to the whole act.

In the view I have taken of this act, it is entirely unnecessary for me to enter upon the interesting question so ably discussed by counsel on either side, whether the act would not be unconstitutional because impairing the obligation of contracts, unless it provided for the consent of all the stockholders. It is a question of too much importance needlessly to be approached. The intention of the legislature, in the law under examination, seems clear, and it is not for me to volunteer an opinion indirectly bearing upon tlie rights of many parties not litigant here.

JSíor, for the same reason, will it be necessary for me to discuss or decide another point raised on the argument, to wit, that, if an act authorizing any deviation from the original charter, and not requiring the consent of all the stockholders, be unconstitutional, then the supplement under which the complainant and all the stockholders hold who claim under the mortgage sale, is unconstitutional and invalid, because that act legalized the mortgage of the franchises of the corporation on the consent of only two-thirds of the stockholders; and therefore the complainant has no right in this court. It is enough to say this act does require the consent of all; and it does not lie in the mouth of the defendants to impugn the title under which both they as well as the complainant hold. They were joint owners with him, and they have no right to take all, and then contend that neither ho or they had any right. They were trustees for him, and they cannot dispute their contract to deal with him as a beneficiary, and keep everything to themselves.

Another point was made by counsel for defendant, to which it is proper that I should allude. It is that this act of 184Í' is «me instance of tiie exertion by the legislature of the right, of eminent domain, the taking private property for public use, on making just compensation therefor.

If I have rightly viewed the subject, the doctrine of eminent domain has no application to the case. The act of 1849 has nothing in common with the statutes under which property is taken for public use. It does not authorize the Easton Road company to take, but only to buy the road belonging to the Elizabethtown company. It does not provide for any compensation, or any means of estimating what shall be just. No commissioners are provided for — no appeal given to a court or a jury. The law simply confers new powers upon the 'Easton company — that is, to buy out the other; and if they cannot bargain to páy in stock, issue enough to do so, and without in terms conferring any-power on the Elizabethtown company to sell, provides, as' I read it, that if they sell, it shall be in such a way as not to affect any right of any stockholder, but with their consent. I cannot see in all this any ground for mooting the doctrine of eminent domain.

Again, it was urged on the argument that there are various acts on the statute book, supplementary to charters of other companies, in which material deviations from their original enterprises were authorized, without requiring the assent of all their stockholders respectively, and hence it was argued that the legislature did not intend to require by this act that assent. One of the acts to which reference was made, required only the assent of the company under the corporate seal; another of seven-eighths of the stockholders ; another two-thirds of three-fourths; and still another of a majority of the stockholders, while other acts cited required no assent at all.

To examine and decide upon the intention of the legislature in each of the acts, would be entirely beyond my duty at the present time. It is enough to say that each of these acts had its peculiar object, and that the intent of the law-makers was different in each. No argument can therefore be rightly drawn from them to bear upon the present case. No such language as that in the act under review is contained in either of them. And if the legislature, when intending to require the consent of a majority of the stockholders only, did, as in one of the acts referred to, expressly say so, perhaps the fair inference would be, that if, by the act under review, they had intended to require no more, they would have said so in terms again. '

I have thus disposed of the first and main topic of discussion in this cause — the proper construction and meaning of the proviso in the act of 1849. I am satisfied, and do so with great respect, report to and advise the Chancellor that the proviso requires the consent of all the stockholders of the Elizabethtown and Somerville Railroad Company before the purchases authorized by that act becomes valid.

Another topic still remains.

IT. Admitting this consent of all the stockholders to be necessary, can the remedy sought to be given in the present suit?

The objection is, that the Elizabethtown and Somerville Railroad Company has not been made a party to this bill, and that until they are parties, the complainant is not entitled to the relief prayed.

The parties defendant are the directors of both roads, the same individuals to whose action is ascribed the injury complained of, and the Somerville and Easton Railroad Company who, with full knowledge of the illegality of their proceedings, are now in possession of the road, the personal property, every thing belonging to the complainant’s company, except the naked franchise.

And he prays—

1. A discovery of what they have done in regard of this purchase.

2. The amount of the property and net earnings of the Elizabethtown company since the foreclosure sale.

3. An account by said defendants with the complainant, his company, and all the stockholders, respecting said property and earnings.

4. A discovery as to the bonds and mortgages.

5. A decree that the purchase, sale and mortgages are invalid and void.

6. And an injunction against any further issue of bonds and mortgages, pledging the road of the Elizabethtown company.

I cannot see that the Elizabethtown company is a necessary party in order to any one of the different kinds of relief here prayed. A proper party they might be, and companies sustaining their position are in fact made defendants to every case at all resembling the present, to which I have referred. But the bill is directed against the directors, as individuals, for breach of trust, and against the Easton company as recipients of the trust property, with knowledge of the alleged wrong. The Elizabethtown company may be interested as a corporation in sustaining the validity of the alleged sale, but the complainant properly seeks his discovery and account from those who, he alleges, have taken his property and applied it to other purposes than those to which, according to the charter, it was to be applied. All the real parties are already defendants; formally, it might have been better that the Elizabethtown company should have also been brought in. The case of Solomons v. Laing, 14 Jurist, is much in point here. There the question was, whether the company who had reaped the benefit of a similar transaction was a proper party. And the court held they were the proper party, jointly with the individual directors. In that case the complainant’s company were the defendants, but no relief was prayed against them except costs.

There is no demurrer here for want of parties. The objection was not taken till the hearing of a general demurrer to the equity of the bill. In such a case the rule is, that where the omitted parties are merely formal, the oourt will be indisposed to listen to the objection at the hearing, and if it can properly do so, will dispose of the cause upon its merits, without requiring such formal parties to be joined. Story’s Eq. Pl., p. 542.

It seems to me that this is a case within the rule, and that there is no reason why the cause should not be disposed of upon its merits, though the Elizabethtown company has not been brought in as a defendant.

Upon the whole case, I respectfully report to and advise his Honor, the Chancellor, that the demurrer of the defendants be overruled, with costs.

Cortlandt Parker,

Master in Chancery.

Cited in Zabriskie v. Hackensack & N. Y. R. R. Co., 4 C. E. Gr. 184; Black v. Del. & Rar. Can. Co., 7 C. E. Gr. 192, 196, 215, 404.


author: The Chancellor.

text:
    John Dean and Aaron Dean v. Thomas Dean and others.
    1. In oases for specific performance of agreements it is now well settled that if the defendant, by his answer, admits the parol agreement, and insists on the benefit of the statute of frauds, he will be fully entitled to it, notwithstanding such admission. But if he admits the parol agreement, without insisting on the statute, the court will decree a specific performance, upon the ground that the defendant has thereby renounced the benefit of the statute.
    2. The same rule of pleading is applicable to cases where a bill is filed to enforce a parol trust.
    J. If the court can execute the trust from the admissions made by the answer, so that the complainants are not under the necessity of resorting to parol proof of the trust, to entitle them to relief, such admissions will exclude the defendants from the benefit of the statute, if not insisted upon by the answer.
    4. A court of equity acts in analogy to the law, in applying the statute of limitations. “ As long as there is a continuing and subsisting trust acknowledged or acted on by the parties, tbe statute does not apply ; but if the trustee denies the right of his cestui que trust, and the possession of the property becomes adverse, lapse of time from that period may constitute a bar in equity.” What lapse of time will constitute a bar must depend, in a measure, upon the nature of the trust, the relative situation of the parties to the subject matter of the trust, and other attending circumstances.
    5. Where a party has slept over his rights for more than twenty years, and has been grossly negligent in not asserting them, when fitting opportunities have presented; where he has recognized or acquiesced in acts inconsistent with the existence of any trust; and where his conduct has been such as to involve innocent parties, as against them the court will never execute the trust.
    This was a bill to enforce a trust. The cause was heard upon the pleadings and proofs. All the material facts disclosed, appear in the opinion of the Chancellor.

      W. H. Luepp and P. D. Vroom, for complainants.

      R. S. Field and W. L. Dayton, for defendants.
   The Chancellor.

On the 13th day of October, 1812, the real estate of John Dean, situate in the township of South Brunswick, in the county of Middlesex, was sold by the sheriff, by virtue of an execution at law in his hands. It was struck off to Abram Deau, the brother of John, for the sum of three thousand two hundred and seventeen dollars and two cents, to whom the sheriff executed a deed.

The bill alleges that the purchase was made under the following agreement, entered into previous to the sale, between Abram and John, that a re-sale of such real estate, or so much thereof as might be needful, and for that purpose sufficient, to pay and satisfy the debts of said John Dean, and after that, re-convey the residue, if any remained unsold of such real estate, or account for such balance of the proceeds of the sale of the whole, as should remain over and above the payment of the debts of said John Dean.” I have stated the alleged agreement, in the language of the bill.

John Deán and Abram Dean are dead. The bill is filed by the two sons of John, his only surviving heirs, and who claim the benéfit of the trust also, as devisees of their father. The only defendant who has any knowledge of the transaction, is Thomas Dean, the only surviving son of Abram. He and his sister Mary hold, as devisees of their father, a portion of the land, the subject of this controversy. Of the other defendants, three of them are minors, and all of the defendants have an interest, or have had an interest which they have disposed of, in the said land, through Thomas Dean, a deceased son of Abram. All of the defendants have united in an answer to the bill. The statements in the answer, of importance, are made by Thomas; the others affirming their belief that such statements are true.

The defendants admit that the purchase was made by Abram Dean, under the following circumstances and agreement : The property being advertised for sale by the sheriff, John applied to his brother Abram, and proposed that Abram should become the purchaser at the sheriff’s sale, and that Mary Dean, the wife of John, should join in a conveyance, by which her right of dower should be barred and extinguished; and that Abram, thus having a clear title, free from all encumbrance of dower, might be able to sell the said real estate for much more than he would be obliged to pay for it, subject to such encumbrance, and that out of this surplus he might, make some provision for the support and assistance of his brother Thomas.

Before looking at other facts of the case, we have enough before us to dispose of an objection, which the defendants interpose, in limine, to any right of the complainants to relief. It is insisted, on behalf of the defendants, that it is a trust or confidence of lands, not manifested and proved by any writings, which the complainants are seeking to enforce. Against the relief sought, the defendants claim the benefit of the statute for the prevention of frauds and perjuries.

Are the defendants entitled to the benefit of the statute ? They have not pleaded the statute, and it was not necessary they should do so. But, not having pleaded it, are they entitled to its benefit, unless they claim it by their answer ?

In cases for specific performance of agreements, “ it is now well settled that if the defendant should, by his answer, admit the parol agreement, and should insist upon the benefit of the statute, he will be fully entitled to it, notwithstanding such admission. But if he admits the parol agreement, without insisting on the statute, the court will decree a specific performance, upon the ground that the defendant has thereby renounced the benefit of the statute.” Story’s Eq. P., § 763. There is no good reason why the same rules of pleading should not be applicable to cases where a bill is filed to enforce a parol trust. In either ease, a naked plea may not be sufficient. If any special matters are set up in the bill, which, if true, would avoid the statute, the plea must contain averments negativing such special matter, and the answer, in support of the plea, must contain a full discovery of the matters set up in avoidance of the bar. If the answer denies the agreement of which specific performance is sought, or denies the trust, it is not necessary to claim in the answer, the benefit of the statute, and for this reason : when the complainant comes to prove his case, he is obliged to resort to parol evidence for the purpose, and such evidence is inadmissible. The reason why the court will execute a parol trust admitted by the answer, is because it takes the answer as the writing by which the trust, in the language of the statute, “ is manifested and proved.”

But it is said, for the defendants, that the answer denies the trust, and that they are, therefore, entitled to the benefit of the statute. Is there such a denial of the trust by the answer ? The true test is this: if the court can execute the trust from the admissions made by the answer, so that the complainants are not under the necessity of resorting to parol proof of the trust, to entitle them to relief, such admissions will exclude the defendants from the benefit of the statute, if not insisted upon by the answer. For how can the answer be said to deny the trust, if, upon its admissions, the court can execute the trust ? The point is, not whether the answer denies the trust, modo et forma, as alleged in the answer, but is there such a substantial denial of it as to prevent the court granting the relief upon the principle that the complainant can recover only allegata et probata f

The trust, as alleged in the answer, is substantially this, that Abram Dean should buy the property; that he should hold it as a security for the purchase money, and that John Dean should have the benefit of its value over that amount. The defendants admit that this was the trust upon which the purchase was made, but then they allege that it was part of the agreement between Abram and John, upon which Abram agreed to assume the trust; that John Dean’s wife should release her dower-right in the property, which she afterwards refused to do. But did this refusal deprive John of all interest in the purchase? Both of the brothers relied upon the wife’s releasing. Both were disappointed in this expectation. But should John alone suffer from her refusal, and Abram reap the benefit of it ? It appears sufficiently in evidence, that in consequence of this arrangement, the property sold for much less than its value. It would be unjust if Abram could have held the property, discharged of the trust, in consequence of John’s wife’s refusal to release her dower. Suppose that on the day after the sheriff’s sale, and after the wife’s refusal to release her dower, Abram had sold the property for six thousand dollars; could it be. that a Court of Chancery would not compel him to account for the. profits ? It appears to me that the answer contains such an admission of the trust alleged in the bill., that the court can execute it without the assistance of parol testimony; and that, therefore, the defendants not having insisted on the statute for their protection, they must be considered as having renounced the benefit of it.

The question remains, are the complainants entitled to any relief upon the case as it stands, by the pleadings and proofs before the court ?

This trust was created in 1812, thirty-nine years before the bill was filed. The youngest of the complainants became of age more than twenty-eight years prior to the filing the bill. The defendants interpose the lapse of time to the complainants’ claim for relief. The complainants insist that in cases of trust, lapse of time is no bar.

“ As long as there is a continuing and subsisting trust acknowledged or acted on by the parties, the statute does not apply ; but if the trustee denies the right of his oestui que trust, and the possession of the property becomes adverse, lapse of time from that period may constitute a bar iu equity.” O. and J. Kane v. Bloodgood et al., 17 J. C. R. 90. “Even in cases of express trust, if the parties have long ceased to act upon or recognize them, courts of equity will not interfere to enforce them ; and a fortiori, not in cases of more constructive trusts, (S. Eq. P., § 756,) courts of equity fully recognize the maxim, vigilantibus, non dormientibus, jura subvenuant as well in matters of trust as in other cases. What lapse of time will constitute a bar must depend, in a ¡measure, upon the nature of the trust — the relative situation of the parties to the subject matter of the trust — and other attending circumstances. Where a party has slept over his rights for more than twenty years, and has been grossly negligent, in not asserting them when fitting opportunities have presented ; where he has recognized or acquiesced in acts inconsistent with the existence of any trust, and where his conduct has been such as to involve innocent parties, as against them the court will never execute the trust.

Let us examine the character of this trust, and the conduct of the complainants in regard to it.

All the right or equity which John Dean had in the land after it was conveyed by the sheriff to Abram, was a right to redeem it at the price for which it was purchased. Abram Dean was under no obligations to sell the property in any particular manner, or to hunt up a purchaser. When John Dean could find a purchaser who was willing to make good to Abram his advances, he had a right to call upon Abram for a conveyance. The situation of Abram Dean was like that of a mortgagee in possession. He held the land to reimburse himself for the money he had advanced upon it-The statute declares that if a mortgagee and those under him be in possession of the lands, tenements, and hereditaments contained in the mortgage, or any part thereof, for twenty years after default of payment by the mortgagor, then the right or equity of redemption therein shall be forever barred.” As a court of equity acts in analogy to the law in applying the statute of limitations, (S. Eq. P., § 756; Dexter et al. v. Arnold et al., 3 Sumner’s Rep. 152,) and as the trust created, by the original parties was similar to that which exists between mortgagor and mortgagee, the defendants have some ground for insisting that the mere lapse of twenty years is a bar to a trust similar to that which is now sought to be enforced against them.

But the defendants do not rest their defence here. They insist that John and Abram Dean, during their lifetime, ceased to act upon or recognize the trust; and that, since their death, the complainants have acquiesced in its abandonment.

The bill admits that, soon after the delivery of the sheriff’s deed, Abram entered upon the possession of the property, that he cut down a valuable portion of the wood, and treated the property as his own. It is true the bill alleges that John Dean remonstrated with his brother against these acts, and accused him of not intending to recognize the trust. But there is no proof of this; and even if there was, it would establish the fact that Abram was using and occupying the property in a manner adverse to the recognition of any trust. John died in 1815, and in the following year his brother died. There is no evidence that John ever called upon Abram to execute the trust, or charged him with the abuse of it. These are, indeed, very slight circumstances to show that the trust was abandoned by their common consent but they amount to some evidence. The subsequent conduct of the complainants is wholly inconsistent with the existence of a trust in which they were interested. Let us examine it.

On the 5th day of September, 1816, an agreement in writing was entered into between the executors of Abram Dean and Mary Dean, the mother of the complainants, respecting her dower. In this agreement, the land, the subject of this controversy, is recognized as the absolute property of the estate of the late Abram Dean, and as formerly belonging to John Dean, deceased; and Aaron, one of the complainants, signed this agreement as a subscribing witness. On the 27th of March, 1817, the widow’s dower in this property was assigned to her. She entered into the possession of the part assigned her, and Aaron occupied the property with her, except a very short interval of time, up to the year 18 — . In 1821 a partition of this property was made between the three children of Abraham, his devisees. Mary Man Pelt, one of these children, held her portion by a trustee, for many years, and then it was sold. Aaron, another of these children, died in 1849, after devising his portion for the benefit of his wife and his children, some of whom are minors, and are defendants in this suit. The greater part of this portion has been sold, and has passed into other hands. These various dispositions of the property have not been made without the knowledge of the complainants. They are all stated in the bill, and without any pretence by the complainants that during all these transactions, they, or either of them, have ever asserted any right in the property, or given any notice of the claim which they now set up. Since their father’s death, Aaron, one of the complainants, has always lived in the immediate vicinity of the land, and for a large portion of that period upon it, and the other, at not a greater distance from it than the city of New York. What excuse do they give for sleeping over their rights; for not giving notice of their claim; for acquiescing in acts inconsistent with it; and for thus involving these defendants, who are innocent parties in this transaction ? Their only excuse is their poverty. If that prevented their asserting their rights in a legal tribunal, it was no obstacle to their giving a friendly notice to innocent parties, who were entirely ignorant of any such claim as these complainants are now endeavoring to enforce against them. Where a bill in equity is brought after a great lapse of time, it is incumbent on the plaintiff to state the reasons why it is not brought before, in order to repel the presumption of laches or improper delay.” Stearn’s Adm., &c., v. Page, 1 Story’s Rep. 204. That was the. case of a bill brought by an administrator de bonis non, for an account of the 'intestate’s estate, after the lapse of from twenty to twenty-five years, and the defendant pleaded the statute of limitations, and filed a general answer to the whole bill; and the court said, “ after such a lapse of time, it being between twenty and twenty-five- years after the alleged transactions took place, and ten years after the death of the administratrix, the court have a right to require, before the bill is entertained, that a clear case should be made out upon the very face of the bill, calling for its interposition, and showing that the parties in interest have been guilty of no negligence or undue delay in not applying for relief at an earlier period.”

Here is not mere length of time unaccounted for, which is, of itself, evidence of gross negligence and laches in the complainants, (S. Eq. P., § 756, a); but the complainants’ own acts, and their acquiescence in the acts of others, bear strong testimony to their having ceased to act upon or recognize the trust. The defendants have made a complete defence to the complainants’ case, under the general rule as laid down in Baker et ux. v. Whiting et al., 3 Sumner’s Rep. 476. In equity, length of time is no bar to a trust clearly established; provided, no circumstances exist to raise a presumption from lapse of time, of an extinguishment of the trust, and no open denial or repudiation of the trust, is brought home to the knowledge of the parties in interest, which requires them to act as upon an adverse title.”

I am satisfied that this case is one, both upon the pleadings and proofs, in which no relief can be afforded the complainants without doing the defendants great injustice, and that the court ought not, under the circumstances, to interfere in the complainants’ behalf.

I have not noticed that part of the case about which much was said on the argument, as to how and how much of the consideration money was paid. I think the sheriff’s receipt and statement ought to be considered at least prima facie evidence that the consideration money was all paid. After an expiration of more than thirty years from the death of the original parties, to require of these defendants any further evidence on this point would, I conceive, be a great hardship.

The bill must be dismissed, with costs.

Cited in Marsh v. Oliver, 1 McCar. 262; Cowart v. Perrine, 3 C. R. Gr. 457.


text:
    Between The Paterson and Hudson River Railroad Company, complainants, and The Mayor and Common Council of Jersey City, defendants.
    1. Certainty to a common intent is sufficient in bill or answer.
    2. If a fact is stated anywhere in tbe stating part of tbe bill, with legal certainty, and is material, it is well pleaded, and therefore admitted by the demurrer.
    3. “ Inasmuch as ” is sufficiently direct and positive; more direct than any statement under a whereas in a declaration, than which a bill in equity need not be more certain.
    4. The rule, as to the jurisdiction of this court to prevent, by its interposition, the further litigation of a matter at law, is that “ courts of equity will not interfere before a trial at law, nor until the right has been satisfactorily established at law. But if so established, it is not material what number of trials have taken place.”
    This cause was referred by the Chancellor to George H. Brown, one of the masters of the court. The material facts disclosed by the bill, and the causes assigned as grounds of demurrer, appear in the opinion of the master.
   The Master.

This cause was referred by the Chancellor to the subscriber, one of the masters of the court, to hear and report upon the question presented.

The object of the bill is to prevent further litigation of a question which the complainants allege has been fully settled by repeated decisions. It is properly called a'bill of peace.

The defendants have demurred, and, by the demurrer, admit all the facts in. the bill which are well pleaded. In order to the consideration of the question, it is necessary to inquire what these facts are.

The bill states (among other things) that complainants were incorporated under the name of “ The President and Direccors of the Paterson and Hudson River Railroad Com-' pany,” by an act of the legislature of this state, passed in 1831, with power to hold lands necessary or expedient to the object of the Incorporation, that by the said act, after the expiration of ten years, the company were to pay yearly a tax of one-half of one per cent, upon the capital stock paid in, and that no further or other tax or impost should be levied or assessed upon the company.

That soon after the passage of the act, the company was organized according to its provisions and constructed a railroad, and have since paid large sums of money to the state, on account of tax.

That the company purchased a number of lots at Jersey City for the purpose of a depot, that they were used only for that purpose, and were necessary and expedient to the objects of said incorporation.

That the defendants were.incorporated by act of the legislature, February 22d, 1838, by the name of “The Mayor and Common Council of Jersey City.”

That in the year 1839, the defendants assessed the said lots at Jersey City for taxes, for state, city, and county tax, John R. Goodman being assessor — that to try the question whether the city had the right to make such assessment, the complainants brought a certiorari to the Supreme Court — that in each of the years, 1840 (Henry Southmayd being assessor) and 1841 (Charles Gardner being assessor), the city again assessed the said lots, and the complainants brought their certiorari to the Supreme Court from each assessment.

That while the three suits upon certiorari were pending, undetermined, viz., 9th May, 1842, the attorneys of the complainants and defendants agreed, in writing, that the trial of the suit against Gardner’s assessment should be conclusive of all the three suits, and judgments be entered in them all, in conformity with the decision of the Supreme Court in that ease, and of the Court of Errors, if a writ of error should be taken.

That in November Term, 1842, the Supreme Court set aside the Gardner assessment, and defendants took a writ of error to the Court of Errors, and in Jiily, 1845, that court affirmed the judgment of the Supreme Court — that, thereupon judgments were entered in all the three suits, according to the agreement.

That in the years 1845 and 1846, the defendants again assessed the same lots for taxes, and that they were advertised for sale.

Prayer for perpetual injunction.- To this bill the defendants demur, and assign several causes, which, it is understood, embrace all the grounds upon which the defendants rely to sustain their demurrer. First — cause of demurrer

is, in substance, that the bill does not set forth whether the assessments by the defendants, and which was adjudged by the Supreme Court to have been illegally made, was for stat.e, county, or city purposes, nor whether the assessment of 1845 and 1846 were for state, county, or city purposes, so that the bill does not show whether the assessments of 1845 and 1846 are of the same character as those adjudged to be illegal.

If this were true, in fact, the demurrer should be sustained, but, upon examination, the bill shows that the decision of the Supreme Court in the Gardner ease covered, so far as respects these defendants, every kind of tax known to the laws qf this state.

The bill states expressly, that the assessment by Goodman was for state, city, and county tax.

The Gardner case was taken, by agreement of the parties, to represent the others in the whole question involved. The agreement, in effect, is that the Gardner case should be taken as a state of facts by which the other cases were to be determined, and that the argument, deliberation, and judgment in that case should be conclusive in them all. Under this agreement, the assessment of Goodman was, by the judgment of the Supreme Court, set aside, and it is not for the defendants to say that the judgment so rendered, with their consent, is not decisive of the question involved in that case, especially when it is not shown, affirmatively, that the facts in it and that of Gardner, differ.

But again it is averred, with sufficient certainty, that the same question arose in all the cases. The rules of this court require certainty in pleading, but certainty to a common intent is sufficient in bill or answer. The bill, after stating the assessment by Goodman particularly, and the subsequent assessments generally, introduces the agreement referred to as follows: “ That ” (the parties, &c.,) “ in order to save the expense of all these suits, and inasmuch as the same question would arise in all the said suits entered into, &c., setting forth the agreement.” If, after the statement, particularly of the first assessment, the bill had alleged that the subsequent assessments were like it, it would, besides being sufficiently certain, have had the merit of certainty without prolixity, but saying that the same question arose or would arise, is equivalent to saying that the same state of facts existed, or that the same kind of taxes had been laid in each case.

Some question was made upon the argument as to the form and connection of this averment. It was said not to be such a statement of facts as should be held to be admitted by the demurrer. The form of the allegation is direct and positive. “Inasmuch as,” is equivalent to saying,.seeing that or the fact being that the same question would arise, &c. This is more direct than any statement under a whereas in a declaration, than which, to say the least, a bill in equity need not be more certain.

It is true that the allegation is not found in connection with the statements of the bill, as to the form and effect of the assessments, and that it is found in connection with the statement of the agreement and is introductory to it. But if the fact is stated anywhere in the stating part of the bill, with legal certainty, and is material, it is well pleaded, and therefore admitted by the demurrer.

The demurrer then admits the judgment of the Supreme Court in all the cases to have been that taxes for state, county or city purposes, against the complainants for these depot lots, were illegal.

It was not, therefore, material to state in the bill for what kind of taxes the asssessments of 1845 and 1846 were made. If for taxes at all, they must have been for one of the three kinds adjudged to be illegal. If either had been legal in the opinion of the court, the assessment for it would have been sustained. State v. Falkenbridge, 3 Green’s Rep. 320.

When the bill speaks of taxes it cannot be construed to mean assessments against the complainants, as owners of the depot lots, for improvements by which these lots would be especially benefited, such as grading the streets or paving the walks in front of them. Such assessments I do not regard as taxes within the legal meaning of that term. A tax is laid upon all persons and their property alike, but such assessments as are here referred to, are made against certain property, because it will, more than other property, be increased in value by the expenditure of the money so assessed. They are called assessments to distinguish them from ordinary taxes. The second cause of demurrer is, that the bill does not show whether the complainants seek to enjoin the defendants against making assessments for city purposes or county purposes.

The bill prays that the defendants may be enjoined against assessing any tax upon the lots in question. According to the view taken above, this is sufficiently definite. It embraces all the three kinds of tax assessed by Goodman — state, county and city tax.

The third cause of demurrer is, that the bill does not show any sufficient matter of equity to entitle the complainants to the relief sought.

This presents the question whether the adjudication of this matter at law has been such as to satisfy this court that further litigation of it should be prevented by its interposition.

The rule as to this jurisdiction of the Court of Chancery, is thus stated by Judge Story: “ Courts of equity will not interfere in such cases before a trial at law, nor until the right has been satisfactorily established at law. But if so established, it is not material what number of trials have taken place, whether two only, or more.” 2 Story’s Eq. Com., § 859.

This is not a technical rule by which the jurisdiction of this court is made to depend upon the number of trials. If it were so, it might be contended that three cases were tried, though the parties agreed to have them tried at one time. But I do not so regard the rule. In some cases one trial would not be considered as conclusive or satisfactory, as when facts are in dispute, depending on the testimony of witnesses, and the trial necessarily by jury. But in these cases the facts were admitted; a question of law only to be considered, and that deliberately done in the Supreme Court and Court of Errors, with the same result in each court. Nothing appears or is suggested to create a doubt, but that this decision is satisfactory and would be sustained.

Indeed, when it is considered that this same question has been decided at law in several cases between other parties in the same way, it is hardly to be expected that the law courts would again hear it argued, unless something to justify a re-argument was shown there, which does not appear here. The exemption of the railroad companies of this state from taxes under the same charter provision, has been so fully and frequently argued and decided, that no change in the rule can be anticipated, unless some new fact bearing upon the question, or some new view of the question itself is presented. If any such exists, it ought to appear by answer to the bill.

It is, therefore, respectfully submitted to the Chancellor, that the demurrer ought to be overruled.

Cited in Mor. Can. & Bkg. Co. v. Jersey City, 1 Beas. 227; Hoagland v. Township of Del., 2 C. R. Gr. 115.