author: Dixon, J. Gummere, J. Vredenburgh, J.

text:
    David H. Slingerland, appellant, v. Henry Binns et al., respondents.
    [Filed February 28th, 1898.]
    Under the fifth section of the supplement to the Mechanics’ Lien law, approved March 14th, 1895 (Gen. Stat. p. 2073), workmen and materialmen, creditors of the builder, who serve notices upon the owner in accordance with the statute, thereby secure, with respect to any moneys thereafter growing due upon the contract according to its terms, a right to payment in preference to the right of persons to whom the contractor had assigned such moneys before the notices were served.
    On appeal from a decree advised by Vice-Chancellor Pitney, whose opinion is reported in Binns v. Slingerland, 10 Dick. Ch. Rep. 55.

      Mr. William W. Watson, for the appellant.

      Mr. John B. Humphreys, for the respondents.
   The opinion of the court was delivered by

Dixon, J.

On April 6th, 1895, the complainants entered into a written contract with Ebenezer Scott, by which Scott agreed to erect for them a building in the city of Passaic for $3,900. This contract, with the specifications, was duly filed in the Passaic county clerk’s office. Afterwards Scott bought from the defendant materials, which he used in the construction of the building, for which he owed the defendant $450; and on September 12th, 1895, the defendant, having demanded payment from Scott, served on the complainants a notice thereof in accordance with the provisions of the Mechanics’ Lien law. At that time all moneys accruing under the contract were past due and paid, except the last installment, $1,400, which was payable on the completion of the building, and had not yet matured. Scott failed to. complete the building, and the complainants, therefore, finished it at an expense of $235.25. Besides this, they paid $500.37, for which they claim credit on account of the $1,400. Conceding all these credits, there would have become due to Scott for his final payment a balance of $664.38, on the completion of the building, had he not previously given to various persons orders on the complainants amounting to $690.86, which the complainants had paid. The complainants refused to pay the defendant’s demand, and thereupon he sued them at law, and recovered judgment in spite of their contention that Scott’s orders, having been given before the defendant’s notice was served, were, as equitable assignments pro tanto of the fund, entitled to priority over the defendant’s claim.

The present bill was filed to restrain the defendant from enforcing his judgment, on the ground that, although the complainants’ defence was overruled at law, it should be sustained in equity. On this bill the complainants obtained a decree in their favor, and thereupon the defendant appeals to this court.

Conceding that the contention of the complainants would have prevailed before the passage of the supplement to the Mechanics’ Lien law, approved March 14th, 1895 (Gen. Stat. p. 2073), the question now turns on the proper construction of the fifth section of that supplement, which is as follows :

“That if the owner or owners of any building or other property, which, by the act to which this is a supplement, or the various supplements and amendments thereto, is made the subject of liens for or toward the construction, altering, repair or improvement of which labor or services have been performed, or material furnished by contract, duly filed, shall, for the purpose of avoiding the provisions of the act to which this is a supplement, or the various supplements and amendments thereto, or in advance of the terms of such contract, pay any money or other valuable thing on such contract, and the amount still due to the contractor after such payment has been made, shall be insufficient to satisfy the notices served in conformity with the provisions of the act to which this is a supplement, or the various supplements or amendments thereto, such owner or owners shall be liable in the same manner as if no such payment had been made.”

Prior to that supplement this court had held that the contractor in a building contract was free to deal with his inchoate rights under the contract as he pleased, up to the moment when they were impounded by a notice given to the owner pursuant to the statute, and if, before the notice reached the owner, the contractor had assigned his rights, the notice was ineffectual. Craig v. Smith, 8 Vr. 549; Mayer v. Mutchler, 21 Vr. 162. The basis of these decisions was that the statute gave the workmen and materialmen no claim whatever upon the moneys payable under the'contract or upon the owner, until the statutory notice was served.

But plainly this section of the law changes the situation. It expressly forbids the owner to pay any money in advance of the terms of the contract, if the effect may be that the amount unpaid will prove insufficient to satisfy notices served in conformity with the statute. The prohibition is not confined to payments made to the contractor personally; it embraces payments made to anyone. In substance it directs that the owner shall not in any way discharge his liability to pay under the contract, until, according to the terms of the contract, the time to do so has arrived, in order that until that time such liability may be preserved for the benefit of workmen and materialmen who serve the statutory notice. This enactment, we think, affords a reasonably clear indication of a legislative purpose to give to persons entitled to serve the statutory notice an inchoate lien upon the liability of the owner under the contract, until that liability matures, according to the terms of the contract, such lien to become perfect on service of the notice before the liability matures, but to expire on such maturity if no notice has been given; for a notice served after maturity derives no aid from this provision. Of course, this inchoate lien does not impair the owner’s right to protect himself against the consequences of any default upon the part of the contractor, but it does prevent the contractor from making any disposition of his rights, detrimental to the claims of those serving notice according to the act.

These views are supported by decisions on similar statutes elsewhere, although, the statutes being somewhat different, the decisions may not be exactly in point. Post v. Campbell, 83 N. Y. 279; Jorda v. Gobet, 5 La. Ann. 431; First National Bank v. Perris District, 107 Cal. 55.

On this construction of the statute, the rights of Scott’s assignees were subordinate to the rights of the defendant, and the complainants could not, by paying those assignees, lessen their liability, either at law or in equity, to the' defendant.

The suggestion made against the constitutionality of the statute, if it has any substance, should have been presented in the trial at law.

The decree should be reversed, and the bill dismissed.

Gummere, J.

(dissenting).

I am unable to concur in the view, expressed in the opinion of the majority of the court, of the effect to be given to the fifth section of the supplement to the Mechanics’ Lien law, approved March 14th, 1895. In my judgment that section was correctly construed by Vice-Chancellor Pitney, in his opinion delivered in the court of chancery in this case. 10 Dick. Ch. Rep. 55. For the reasons stated in that opinion I vote to affirm the decree appealed from.

I am authorized to state that Justices Depue and Ludlow, and Judges Adams and Krueger, also vote to affirm the decree for the reasons stated in the vice-chancellor’s opinion.

Vredenburgh, J.

(dissenting).

This controversy relates to rival equities, founded on claims for materials furnished in the erection of a building by contract, asserting precedence, as between themselves, out of the contract money owing from the owners to the contractor, such money being insufficient to satisfy all the claims against it.

The case was heard in the court of chancery upon bill and answer, and the decree appealed from restrains appellant from enforcing his judgment at law against the owners, which judgment they insist is without equitable support if they are entitled to certain credits against the last payment of $1,400 of the $3,900 of money payable by them under the contract.

The facts material for the present purpose are these: On April 6th, 1895, a written contract for the erection of a building in the city of Passaic was made between the owners (the respondents) and the contractor, and was duly filed in the clerk’s office, containing the following clause:

“Should the contractor at any time during the progress of said works refuse or neglect to supply a sufficiency of materials or workmen, the owner shall have power to provide materials and workmen, after three days’ notice in writing being given, to finish the said works, and the expenses shall be deducted from the amount of said contract.”

The contractor neglected to supply a sufficiency of materials, and the owners, having given him the three days’ notice in writing contemplated, incurred, in July, 1895, debts for lumber of $243.27, procured by them to finish the works. Debts, also, for other lumber and materials for $615.86 were incurred in the erection of the building (the bill inadvertently omits to state the circumstances and the dates when or by whom), for which written orders were drawn by the contractor and presented to the owners prior to the service upon them by the appellant of his “ stop notice.” Subsequently, on September 12th, 1895, the appellant, who had furnished tin and plumbing materials for the building at request of the contractor, served a stop ” notice upon the owners under the third (now the thirty-eighth) section of the Mechanics’ Lien law, and on May 26th, 1896, obtained judgment in the Passaic circuit court for a balance of the amount so demanded against the owners. The materials constituting the debt of $243.27 which were purchased by the owners, were delivered at the works with the knowledge and sanction of the contractor. The owners paid the debt (so previously incurred by them) on December 7th, 1895, to the American Lumber Company, and claim the right to deduct such amount as a credit or expenditure authorized by the contract. They have, also, since September 12th, 1895, paid the said orders for $615.86, previously drawn upon them as above stated, and claim a like credit for such expenditure; and have filed' their bill of complaint in the court of chancery to enforce preference for these several payments against this contract money in their hands, and to that end to restrain the appellant from prosecuting his judgment at law against them. While the bill of complaint is not technically one for the specific performance of a contract, I think that it may be so regarded, and that the respondents are entitled to the specific relief they ask against this judgment, as well as to the decree, under their general prayer for relief, declaring that the contract money has been fully paid, and that the contract should be delivered up to be canceled.

The question now to be considered, it seems to me, is, whether the respondents, having exercised their right, under the above-quoted clause of the contract “to provide materials, &c., to finish said works” after the contractor’s default therein, and having incurred debts, and also expended money upon the contractor’s orders for that purpose, have, notwithstanding the provisions of the fifth section of the supplement to the Mechanics’ Lien law (hereinafter quoted), established an equity to be credited therefor upon said contract.

While the practical effect of such credits is to exhaust the fund payable by the owners under this contract, and to discharge them from further liability thereunder, as well as from appellant’s judgment, yet I think that such result, where no fraud or collusion is charged, is their just protection under the contract, and does no violence to the intent of said fifth section.

It will be observed that the exercise by the owners of their contractual right of supplying the materials necessary to complete the building, worked a distinct benefit to the appellant, as well as to other materialmen, in this, that it secured to the owners, who were responsible for the contract money, a finished and valuable building, instead of a worthless ruin; for instance, the tin and plumbing materials placed in the works by the appellant would be valueless if the lumber put there by the respondents was wanting. So that even if we regard the question from the appellant’s standpoint alone, the ultimate- payment of his claim out of the contract money might depend upon the feature of the contract which enabled the owners to come to the rescue of an insolvent contractor, and supply the money and credit necessary to complete the building. The falling walls of an unfinished structure, exposed to the storms and winds and the elements, could easily drag down the financial credit and ability of its owners-to destruction with it.

Now it is obvious that the exercise of this measure of self-protection by the owners worked neither hardship nor surprise to the appellant. On the contrary, his own stop notice ” was grounded upon the fact of the publicly-filed contract itself, and he is therefore charged in law with not only constructive notice but also with actual knowledge of all its terms. His materials were furnished with full notice of this precaution taken by the owners to enable them to rescue their property and save themselves from the neglect of the contractor when the crisis should arise which would justify such action on their part.

The most cursory examination of the third (now the thirty-eighth) section of the Lien law cannot fail, I think, to show that the whole scope of that section is to place the unpaid material-men, who serve notices under its terms, upon the same footing as the contractor; certainly upon no higher standing. It simply authorizes the owners to “ retain ” from amounts of money either “ owing ” or “ that may thereafter, become due from them ” on the contract, such amounts as they are satisfied' are, correctly, still due from and unpaid by the contractor to the materialmen serving such notices. Their rights under this section are in all respects subordinate to those of the parties to that contract. If we need the suggestions of authority on this subject, the cases of Craig v. Smith, 8 Vr. 549, decided by this court, and of Kirtland v. Moore, 13 Stew. Eq. 110, are sufficient. In the last case the pointed language of Vice-Chancellor Van Fleet is as follows : “ Upon notice given, the workman or materialman, to the extent of his demand, takes the place of the contractor. But if, when the notice is served on the owner, there is nothing owing to the contractor, and he is without right against the owners, the notice is without legal effect.

“ The test is, whether a suit for the money demanded will lie by the contractor against the owner; if it will not, the owner is not liable to a suit by the materialmen.”

If the matter rested here it must be plain that the owners had the clear contractual right, and, of course, the superior equity, to preference for such expenditures upon their contract. But it is insisted by the appellant that the fifth section of the supplement of March 14th, 1895, to the Mechanics’ Lien law (Gen. Stat. § 2073), denies to the owners any preference for money so expended, and makes them liable in the same manner as if no-such payment had been made.”

If this be the correct interpretation of the intent of that enactment, as applicable to the present contract, it will certainly demonstrate the futility of any effort by owners in their filed contracts (which are notices to all interested) to protect themselves, and all those having valuable interests at stake, from the-disaster of an unfinished erection thrown suddenly upon their hands by insolvent contractors. . .

It seems to me that such a construction is not warranted by its terms. That section, in its material parts, reads thus:

“That if any owners for the purpose of avoiding the provisions of the [lien] act, or in advance of the terms of such contract, pay any money on such contract, and the amount still due to the contractor, after such payment has been made, shall be insufficient to satisfy the notices served in conformity with the provisions of the [lien] act, such owners shall be liable in the same manner as if no such payment had been made.”

In the first place, the purpose of the owners in their efforts to complete the building, and their action in the purchase of materials and the payment of the contractor’s orders to that end, exercised in strict conformity to the contract, should not be construed to be a purpose ” to avoid the provisions of the lien law. In a certain sense, the making of all building contracts which avoid, as they all certainly do, when made and filed, except as to the contractor alone, the provisions of the first section of the lien law, is subject to the same condemnation ; a purpose to avoid the statute will not be ascribed by any court of equity to owners endeavoring only to avoid a financial loss, and acting in compliance with the very terms of their contract. I think we are justified in assuming, in the absence of any charge of fraud or collusion, that their only purpose in making such payments was to complete the building, and thus to effectuate, not to avoid, the provisions of the Lien law. It is unnecessary to pursue this point further.

. In the next place, the act of the owners in incurring and paying said debts, and orders to provide sufficient materials to finish the works, as well as in the payment to materialmen of the orders in question, was not either literally or in effect a payment “ in advance” of the terms of the contract — i. e., a payment contrary to the terms of the contract. Nor was it a payment on the contract at all in the sense used in the fifth section. It was a disbursement, authorized by the terms of the contract in case of default of the contractor, made to third persons holding equities adverse to the contractor, not a payment to or favoring the contractor. The section in the New York law, upon this head, uses the word “ collusion,” showing the evils against which the law in that state was leveled. But there is no pretence of collusion in the present case. The contractor received nothing and was entitled to no payment, because he had broken his contract and had disentitled himself to any payment. The whole of the contract must be read together; the contractor, by his neglect to finish the works, had no legal right to demand of the owners the payment of the $1,400 (which was covenanted to be paid him only on condition that he performed the work), nor any part of it as such. There was, in fact, no payment made by the owners to the contractor of this $1,400, or any part of it, either in advance of the terms of the contract or at any time, and therefore the statute does not come into operation. If it be claimed that, in the contemplation of this statute in a court of equity, those payments by the owners to third parties — made necessary by the contractor’s breach of his contract — were payments to the contractor, such claim disregards the facts of the whole transaction and seems to me to be unwarranted. There could exist no basis for such a claim, without the charge of fraud or collusion, and no such charge has beeu made anywhere in the case.

Again, the words “pay” and “payments” are used in this section in their usual signification, and refer only to an extinguishment of a previous indebtedness owing from the debtor to-the payee. But in the case in hand, the owners owed no debt to the contractor (the payee intended by the law), by force of the contract, for the materials in question.

Unless the above reasoning is at fault, the advance payments, intended to be forbidden by this section, apply only and strictly to the payments due from owners to a contractor by reason of the performance of his contract, and not to payments of debts due from the owners to third persons for liabilities incurred by them because of the non-performance of the contract by the contractor.

The equity of respondents to apply, as a credit upon the contract price, the expenses incurred or assumed by them for materials supplied by them, by whatever methods they deemed effective, to the works neglected by the contractor, rests securely upon their contractual rights as owners against the defaulting contractor, which rights, I think, are unimpaired and unaffected by the statute in question.

The argument then becomes narrowed to this point, viz.,, after the failure of the contractor to perform his contract, the $1,400 payment, which would otherwise have become due him, or to those serving stop notices under him, never could become due except by the waiver by the owners of the performance of the contract. The juncture of a payment “in advance of the-terms of the contract,” referred to in section five, therefore never arose in this case, because the owners were absolved from such payment unless there was a waiver by them of their right to-performance by the contractor, and none is pretended. It follows that the payments by the owners of the $243.27 and of the $615.86 incurred and assumed by them to the materialmen, were-not payments “in advance of the terms of the contract,” but were simply their own expenditures to complete the building, and for which, in an accounting with the contractor on a quantum mei’uit, they would be entitled to credit against any claim by him, or of the appellant under him, for any part of said $1,400.

I have endeavored to present additional support for the equitable conclusion of the court below, and to show, from the peculiar contractual relations of the parties, reasons why the equities of these owners in this case rise beyond the reach of the enactment in question, but it is not intended in what has gone before to overlook the importance of the reasoning in the opinion below, supported by cases there cited. These clearly show that the drawing of those written orders operated as equitable assignments, according to their extent, of any payment, and that the owners by their diligence thereby acquired a priority, as being first in time and therefore prior in right,” over the claims of the appellant. The drawing and presentation of those orders placed the drawees in a position to enforce such payment in a court of equity out of any unpaid money which might become due. The rights of third persons which had become superior to those claiming under the contractor, had therefore supervened, and the owners in paying them afterwards were yielding to their equitable obligations, and their payment of them was wholly involuntary.

Notwithstanding this, the true equity of the owners in making such payment rests, in my view of the facts and the statute, entirely upon the above-quoted clause of the contract and of the action of the owners in good faith thereunder, and because of that view, this opinion has been written.

These owners are entitled to their preference, as against the defendants, to retain the contract money, by force of the terms of the same contract which, admittedly, also binds the defendants, and the only question is whether the statute (quoted) deprives the owners of this contractual preference. The statute only touches owners who violate its provisions by making payments of money, in advance of the terms of the contract, which would, but for such wrongful payments, be available for those claiming by notice under the contract, not those owners who, instead of violating, strictly perform the contract according to its terms and apply the contract money to finish the building.

This controversy, in its form at law, was submitted to the Passaic circuit court upon an agreed statement of facts, which a subsequent stipulation between the solicitors, in its present form, has enlarged, and from which and the statements of the bill, as admitted by the answer, it sufficiently appears that the respondents were denied the right to present to the law court the defence of the payment of said orders on the ground that-it was purely an equitable defence. The respondents acquiesced in that ruling, and then resorted to a court of equity to obtain relief, but if their decree be now reversed, will be denied it in both jurisdictions.

Under the submission incorporated in the bill of complaint, and the circumstances in which the jurisdiction of this court has intervened, I think the respondents should have been allowed the benefit of the feature of their contract above set forth, even though such claim could also have been made available at law, if it had been insisted upon against the ruling of the circuit court. Therefore, and at this late day, the parties should not be turned around.

I think the decree below should be affirmed.

For reversal — The Chief-Justice, Collins, Dixon, Garrison, Lippincott, Van Syckel, Bogert, Hendrickson, Nixon — 9.

For affirmance — Depue, Gummere, Ludlow, Adams, Krueger, Vredenburgh — 6.


source: Caselaw Access Project

author: Adams, J.

license: Public Domain

text:
    Eva May Hervey, appellant and respondent, v. Lee A. Hervey, respondent and appellant.
    [Filed March 14th, 1898.]
    1. To the effectual initiation of a suit brought in the court of chancery by a wife against a husband for maintenance under the twentieth section of the act concerning divorces, two things are necessary — -jurisdiction of the subject-matter of the controversy and jurisdiction of the person of the defendant.
    2. The method by which the state has authorized the court of chancery to acquire jurisdiction of the person of the defendant in a suit brought under said twentieth section is that prescribed by the act respecting the court of chancery. 3. The subpoena was served neither by delivering a copy personally to the defendant nor by leaving a copy at his dwelling-house or usual place of abode, but, after he had departed from the state without intention of returning, by leaving a copy at his former place of abode. No step was taken to serve the defendant as a non-resident by publication and notice. — Held, (1) that the service of the subpoena was void; (2) that because the service of the subpoena was void, the court did not acquire jurisdiction of the person of the defendant ; (3) that since the court did not acquire jurisdiction of the person of the defendant, orders and proceedings made and taken in the suit did not bind him, and, on his application, made under special appearance entered for that purpose, must be set aside.
    On cross-appeals from an order advised by Vice-Chancellor Emery, whose opinion is reported in Hervey v. Hervey, 11 Dick. Ch. Rep. 166:

      Mr. James E. Howell, for Eva May Hervey.

      Mr. Chandler W. Riker, for Lee A. Hervey.
   The opinion of the court was delivered by

Adams, J.

In this suit, brought by a wife against a husband for maintenance, by bill filed under the twentieth section of the act concerning divorces, the wife has appealed from so much of an order, dated November 1st, 1897, as set aside the service of the subpoena, and the husband, by virtue of special appearance and leave for that purpose, has appealed from so much of the same order as denied an application to set aside an order for alimony pendente lite and for counsel fees and other proceedings. In other words, both parties are dissatisfied with the action of the court of chancery, which annulled the service of the subpoena, but upheld orders and proceedings made and taken in the same suit.

The service of the subpoena was properly set aside. The writ, of which a copy should have,been served on the defendant in person or left at his dwelling-house or usual place of abode, was served after the defendant had departed from the state without intention of returning, by leaving a copy at his former place of abode. No step was taken to serve him as a non-resident by publication and notice. The service of the subpoena did not comply with section 136 of the act respecting the court of chancery. The facts are fully stated and the correct conclusion declared in the vice-chancellor’s opinion.

The remaining question is as to the validity of orders and proceedings in a suit in which the service of process was void, and the defendant did not appear, and was not proceeded'against as a non-resident by publication and notice. The court of chancery is not an ecclesiastical tribunal, and has no inherent jurisdiction of divorce, alimony or maintenance. Anonymous, 9 C. E. Gr. 19, 24; 2 Bish. Mar. & D. § 291. Its power is what the statute gives it. The first section of the act concerning divorces declares “that the court of chancery shall have jurisdiction of all causes of divorce and of alimony or maintenance by this, act directed and allowed.” Several sections empower the court to grant alimony or maintenance as an incident to a divorce suit. Under the twentieth section a wife, when unjustifiably abandoned by her husband, who refuses or neglects to maintain and provide for her, may have suitable support and maintenance decreed to her. The power of the court to deal with alimony and maintenance does not’ extend beyond these statutory cases. Anshutz v. Anshutz, 1 C. E. Gr. 162; Rockwell v. Morgan, 2 Beas. 119, 121. The statute that confers the jurisdiction also prescribes the procedure, by declaring, in its sixth section, that the like process and course of practice and procedure shall be had and pursued as in causes on the equity side of the court, except that the answer of defendants shall not be under oath. The process and course of practice and procedure in causes on the equity side of the court are prescribed by the act respecting the -court of chancery, and are, briefly, that a defendant may come into court by appearance, or be brought in by a subpoena to answer, or equivalent statutory publication and notice. The state has a right to say what procedure shall be necessary to give jurisdiction of the person of a defendant. Mutual Life Insurance Co. v. Pinner, 16 Stew. Eq. 52, 57. In the words of Chief-Justice Beasley, “every independent government is at liberty to prescribe its own methods of judicial process, and to declare by what forms parties shall be brought before its tribunals.” Mackay v. Gordon, 5 Vr. 291. To the effectual initiation of a chancery suit two things are necessary — -jurisdiction of the subject-matter of the controversy and jurisdiction of the person of the defendant. In the recent case of Buckley v. Perrine, 9 Dick. Ch. Rep. 285, the proposition was thus stated by Chancellor McGill: “Jurisdiction of the parties to a controversy, as well as of the subject-matter thereof, is necessary to the validity of a judgment of a court therein.” This was a habeas corpus proceeding begun, not in the court of chancery, but, under the statute, before a vice-chancellor. Gen. Stat. p. 1631 § 59. The function of this writ is to test the legality of personal restraint. Both parties filed pleadings in the court of chancery, and thereby framed a wider issue of equitable cognizance touching the permanent custody of infants, who were the subjects of the application. No process had been served on the respondents, nor had any equivalent notice been given to them. The chancellor held that the court of chancery, by reason of the want of notice or process, never acquired jurisdiction of the persons of the respondents, though it admittedly had jurisdiction of the issue between the parties. This court held, on appeal (10 Dick. Ch. Rep. 514), that both parties had consented to the transfer of the controversy to the court of chancery, which thus acquired complete jurisdiction. In the case of Karr v. Karr, 4 C. E. Gr. 427, Chancellor Zabriskie, in setting aside a defective service and publication of a notice to a non-resident defendant, said, “ the defendant is not brought as yet in the jurisdiction of the court, and no decree against him can be made, or would have validity if made.” It seems to follow from these considerations that service of process, or of substituted statutory notice, was necessary to give the court jurisdiction of the person of this-defendant; and that because such service was not made the-orders and proceedings made and taken in this suit did not bind him.

The learned vice-chancellor upheld the orders and proceedings in this case, notwithstanding the failure of process, because the court had jurisdiction of the marital status, and because the parties were domiciled and the defendant had property in New Jersey. We think that the reasons do not support the conclusion. The regulation of the institution of marriage is a matter of high public policy. The persons subject to this regulation are, naturally, and by general law, those who are domiciled within the borders of the state. Specifically, they are those who have therein such a domicile as the state may positively prescribe. The first section of our act concerning divorces harmonizes with the general law on this subject. The parties to this suit are within the provisions of this section. To declare that the court, in this case, had jurisdiction of the marital status, and that the parties were domiciled in New Jersey, is merely equivalent to saying that the court had jurisdiction of the subject-matter of the controversy. Granting that jurisdiction existed to this extent, how was void service made thereby effective?

The other circumstance relied on to support the orders and proceedings in question is the possession by the defendant of real and personal property in New Jersey. The bill, as originally drawn, contained a general allegation that the defendant possessed real and personal property worth $12,000, and that he was able, out of his income, to maintain and support his wife. On or after the return of the subpoena, and after the order for alimony had been made, the bill was amended by adding a paragraph specifying real and personal property of the defendant, alleging that he had turned it over to his father and partner without consideration, and praying that it be sequestered. Let the truth of these allegations be assumed. No lien arises thereby. A conveyance of real estate before sequestration issued, although after the decree upon which it is founded, is valid, in the absence of any proof of mala fides. Vreeland v. Jacobus, 4 C. E. Gr. 231. The legislature has not conferred jurisdiction, in a suit brought under the twentieth section, based on the seizure of property in New Jersey as the foundation of the suit. Neither the act concerning divorces nor the act respecting the court of chancery gives the remedy of a proceeding in rem. The proceeding must, therefore, be in personam, whether there is or is not property within the state, and must be governed by whatever statutory rule the legislature has prescribed for the bringing in of parties.

The learned opinion of the vice-chancellor suggests important questions that might arise as to the decree in this case, and its effect. In the case of Lynde v. Lynde, 9 Dick. Ch. Rep. 473, the defendant was a non-resident, and was brought in by the usual statutory mailing .and publication of notice. There was no appearance, and no property of the defendant under the court’s control. The decree for divorce was amended, on motion of the petitioner, by the addition of a clause reserving to the court the right to allow alimony. This decree was affirmed in this court (10 Dick. Ch. Rep. 591) for the reasons given by the chancellor, who, somewhat incidentally, said that, under the circumstances, the court could not have given judgment in personam, for alimony in favor of the petitioner. In our view, questions such as this need not now be considered.

That portion of the order of November 1st, 1897, which set aside the service of the subpoena, is affirmed, and that portion of the same order which denied the application to set aside the order for alimony pendente lite and for counsel fees, and other proceedings, is reversed. The appellant Lee A. Hervey is not entitled to costs.

For reversal — The Chief-Justice, Collins, Depue, Dixon, Garrison, Gummere, Lippincott, Ludlow, Van Syckel, Adams, Hendrickson, Krueger, Nixon, Vredenrurgh — 14.

For affirmance — None.


author: Garrison, J.

text:
    Caroline C. Pratt, appellant and respondent, v. David A. Boody et al., respondents and appellants.
    [Filed February 28th, 1898.]
    Where a court of equity upon bill and cross-bill has ordered an accounting for the purpose of ascertaining the sum due from the complainant to the defendants, a pending suit at law by the latter for the same debt under the Heirs and Devisees act, should be restrained until the coming in of the account.

      On appeal from a decree advised by Vice-Chancellor Emery, whose opinion is reported in Pratt v. Boody, 10 Dick. Ch. Rep. 175.

      Messrs. Vail & Ward, for Caroline C. Pratt.

      Mr. Willard P. Voorhees, for David A. Boody et al.
   The opinion of the court was delivered by

Garrison, J.

The parties to this suit are Caroline C. Pratt, who is the widow of Charles E. Pratt, and the sole devisee and beneficiary under his will, and Boody, McLellan & Company, a firm of stock brokers in the city of New York, with whom, in his lifetime, Mr. Pratt had had extensive dealings, out of which this - litigation arose. The original bill was filed by Mrs. Pratt, charging as its main allegation that the dealings between her husband and the defendants were gambling transactions. The vice-chancellor to whom the cause was referred found as a matter of fact that the transactions were sales and purchases made for Pratt by the defendants and not wagers between them. The conclusion thus reached is concurred in by this court with the further comment that, were the fact otherwise, there is no proof in the case that the common-law rule does not still obtain in the State of New York. Having eliminated from the controversy the questions arising from this source, the court of chancery decreed an accounting between the parties, from which decree each party has appealed. The case is this: Boody, McLellan & Company, claiming that Pratt, deceased, was indebted to them in a large sum, brought an action therefor in New Jersey under the Heirs and Devisees act. Mrs. Pratt, who, as sole devisee of her husband, was a defendant in this action, having a claim of her own against Boody, McLellan & Company for a smaller sum, filed it as a set-off. She also brought in her own name an action against Boody, McLellan & Company, in the State of New York to recover this same sum. These two actions, pending this bill in chancery, were filed by Mrs. Pratt, based in great part upon the theory of the illegality of the transactions with respect to which it sought relief, but alleging other facts that showed the necessity of an accounting in equity. A cross-bill exhibited by the defendants alleged other facts tending to a similar end; so that the parties were before the court each asking for an account and decree that should upon equitable terms include and settle all of their said differences.

This the decree made in the cause fails to accomplish in one particular, viz., that it leaves the defendants free to proceed to judgment in their action under the Heirs and Devisees act. This question was alluded to by the learned vice-chancellor in his conclusions as one upon which counsel should be heard, but the decree now before us, by discharging the injunction against the defendants, places the matter beyond the present control of the inferior court.

The anomalous situation is that the parties are compelled to ascertain in equity the sum which, as between them, shall constitute the debt for which recovery by the defendants may be had, while the defendants are free in their suit at law to establish their debt unaffected by the account taken in equity or by the terms or considerations upon which it was based. That the sum for which the lands devised are liable is not the same sum due by the sole devisee to the defendants is not thinkable in the terms of equity. Nothing in the action at law can vary the sum so found to be due as between these parties. The function of this special action at law is to fix a charge upon the lands devised; and in their pleadings in equity both parties admit that the complainant is the sole devisee of her husband. By their cross-bill, Boody, McLellan & Company brought into the suit in equity their pending action at law so far as the amount recoverable was concerned, and by sufficient statement submitted in equity to the offset Mrs. Pratt had filed therein. Every element, therefore, necessary to the complete ascertainment of the ultimate amount recoverable by the defendants was before the court of chancery, together with all the considerations deemed by the parties to be essential to the equitable adjustment of the matter.

The decree in equity based upon this account must be a finality binding upon the parties in whatever form or forum the sum thereby ascertained is sought to be secured or recovered. The injunction against the defendants from the further prosecution of their suit at law in the supreme court should be retained until a decree has been made in chancery upon the coming in of the account.

The record is remitted to the court of chancery in order that such account may be taken, and the cause proceeded with in accordance with these views.

For reversal — The Chief-Justice,Collins, Depue, Dixon, Garrison, Gummere, Lippincott, Ludlow, Van Syckel, Adams, Bogert, Hendrickson, Nixon — 13.

For affirmance — None.


text:
    Edward I. Savage, receiver of the Johnson Railway Signal Company, appellant, v. George Miller, trustee, et al., respondents.
    [Filed February 28th, 1898.]
    1. When a corporation becomes insolvent its directors become trustees for the creditors, over whose claims they can obtain no personal preference.
    2. Where the note of a creditor has been lawfully preferred, the fact that directors are endorsers thereon does not defeat his preference; the result is to subrogate the general creditors to the rights of the preferred creditor against the endorsing directors to the extent of the preference.
    On appeal from a decree advised by Vice-Chancellor Reed, who delivered the following opinion :
    The mortgage is attacked by the receiver, upon the ground that the directors of this insolvent company had such an interest in the payment of the debts secured by it that the preferences so created are voidable. The execution of the mortgage was directed by the votes of three directors of a board of five. The votes of all the three in favor of the mortgage were essential to a legal expression of the corporate will. If any one of these three directors was disqualified by reason of his adverse interest from joining in the action of the board, the execution of the mortgage was an unauthorized act. The question, therefore, as to what would have been the consequence if the mortgage had been supported by the votes of a majority of the board, apart from the votes of interested directors, is not presented for solution.
    I will take up each of the five debts in the order in which I have stated them.
    The company was, as I have already observed, insolvent at the moment when the mortgage was created. The debts secured were only part of the general debts then existing. The preferences, if valid, will exhaust the assets.
    That the directors of an insolvent company could, previous to the act of March 5th, 1895, prefer some of its creditors to the exclusion of others was decided by the court of errors in the cases of Wilkinson v. Bauerle, 14 Stew. Eq. 635, and Vail v. Jameson, 14 Stew. Eq. 648.

    In the subsequent case of Montgomery v. Phillips, 4 Dick. Ch. Rep. 203, decided in the same court, the court, while recognizing the general power of an insolvent corporation to prefer creditors, circumscribed the generality of the rule by holding that if the directors were themselves the creditors who were preferred, then their interest as creditors was inimical to their duties as trustees for all the creditors, and their act in making such preferences was voidable.
    Under the doctrine declared in the last-mentioned case the mortgage now questioned, so far as it secures the note for $2,500 given to George W. Miller, and by him passed to Georgina M. Johnson, is clearly voidable. It was made to secure an antecedent debt due to Mr. Miller, one of the directors of the company.
    The next one of the debts so secured was that of the Union County Bank. Upon the note which the bank held as evidence of this debt the three acting directors were endorsers. The mortgage was made to secure the bank, and not made directly to the endorsers to secure them against their liability as such.
    I am at a loss to perceive how this fact can create a difference in the attitude of the directors toward this debt. The principle upon which Montgomery v. Phillips was decided was that the directors were trustees for all the creditors, and that, as trustees, their conduct in the distribution of the property of the company among its creditors should not be influenced by any personal interest adverse to the interest of the general body of creditors whom they represented. It applied to the directors of an insolvent corporation, as trustees, the same restrictive doctrine that is applicable to all trustees. 1 Perry Trusts § 207.

    Now, it is transparent that the effect of the mortgage, so far as it subserves the interests of the endorsing directors, was exactly the same as if it had been made directly to them to secure them against their liability as endorsers. The fact of the corporation insolvency led, necessarily, to a certainty that these directors would be called upon to pay a part of the note; and whether the property of the corporation should be used to pay the entire debt due the bank, or whether it should be used to reimburse the endorsers, in case they became liable to pay the bank, did not matter. The relief which they received from the burden of their contract, as endorsers, was exactly the same whether the mortgage was made in the one or in the other form. Nor does the fact that the directors of the bank or otherwise interested in that institution, and so would not in that way profit by the payment of this debt, remove the act of the directors from the control of the rule mentioned. The bank had no right to a preference; it was only an act of grace on the part of the directors. The void-ability of the directors’ acts does not spring from the fact that the trustees had a common interest in the two corporations, but arises from the fact that they were serving their own interest in making the preference. It is the bias which destroyed that judicial discretion which should control them when dealing with the assets of the corporation, that invalidates their act. Upon principle, then, I am unable to perceive how it is possible to condemn a mortgage made to an endorser, and to approve of a mortgage so made as to benefit the endorser in exactly the same degree. In Lippincott v. Shaw Carriage Co., 25 Fed. Rep. 585, it was held that the votes of two directors who assisted in authorizing the making of a mortgage to secure a note upon which they were endorsers, were nullities.
    I am aware that in Montgomery v. Phillips this apparently inevitable conclusion does not seem to have been carried to a legitimate result; for in that ease the assignment to the bank of the accounts of the corporation for the purpose of paying a note discounted by the bank and endorsed by a director, would come under the ban of this rule. But the attack upon the assignment in that case was made solely upon another ground, which ground is set out in the opinion. Only the chattel mortgage in that case was attacked, upon the ground that it was made by a director to secure himself. The rule laid down by the court was, through oversight, not applied to the assignment of the bank accounts. So in Wilkinson v. Bauerle, supra, the question discussed was whether the directors of an insolvent company could secure creditors. The exception which limits this general rule was not discussed.
    The third debt secured is the $6,143 note held by Georgina M. Johnson as executrix of her husband, to whom the money had been due. George ~W. Miller, who prepared the mortgage and was one of the voting directors, as already remarked, was her father, and was in the transaction looking after her interests. His position, both as attorney and relative of Georgina M. Johnson, was entirely inconsistent with his position as trustee, representing the general creditors of the company.
    I adopt the language of the court in Adams v. Kehloy Milling Co., 25 Fed. Rep. 435, as sound and singularly pertinent: “ If the directors of an insolvent corporation in the distribution of its assets pay a certain creditor in full to the exclusion of others, the choice ought to be influenced solely by relationship existing between the directors and the creditors preferred, or by other considerations of a purely selfish nature. In the present case it is the estate of a deceased director and president of a corporation that was preferred. The majority of the board were brothers of the deceased; one of them was agent for the estate, and controlled and voted its stock in corporate meetings.” The preference was set aside.
    The fourth debt secured is the note given to pay the Hall Signal Company for advances previously made by the latter company to the insolvent corporation. This note was turned over to Georgina M. Johnson in part payment of the debt which the Hall Signal Company owed her husband’s estate. Mr. Hall, one of the directors, and acting vice president of the insolvent corporation, was a stockholder and director of the Hall Signal Company. This, as a matter of course, unfitted him for acting as trustee in this transaction. Besides this interest of Mr. Hall, which disqualified him from voting for the execution of the mortgage to secure this note, Mr. Miller stands, in the same posture in regard to this as he does in respect to the preceding note. The mortgage, so far as it preferred this note, is a nullity.
    The last of the preferred creditors is Kernochan. There is nothing in the testimony to show that any of the directors who voted for the execution of this mortgage were interested in the payment of this debt, in any way distinct from their interest in the payment of the debts of the general creditors. There is nothing, therefore, to invalidate the mortgage, so far as it secures the payment of the Kernochan debt, flowing from the relation of the directors with Kernochan.
    But it is insisted that the mortgage is void in toto because it was ordered by persons who were not legal directors of the corporation.
    It appears that the by-laws originally provided for the election of directors at the annual meeting of stockholders, and for the amendment of the by-laws at an annual or a special meeting called for that purpose.
    The board of directors themselves, without authority, amended the by-laws regulating the election of directors, so that the board could appoint to fill vacancies, and, in pursuance of such amended by-law, appointed two of the directors who ordered this mortgage. These appointees remained in office from 1890 till January 18th, 1895. In the meantime, stockholders’ meetings were held, the right of these appointees to hold their offices was not questioned, but, on the contrary, recognized. They were held out, by the assent of the stockholders, as the agents of the corporation. They were directors defacto.

    The equitable rights of the cestuis que trust under the mortgages are not affected by the irregularity in the manner of their appointment.
    The remaining feature of the cause which has presented itself is this, viz., is the mortgage so tainted by the general purpose oí the directors who ordered its execution as to avoid it in toto f

    If it had appeared in the case that the preference of the Kernochan debt was essential to a successful carrying out of the .scheme to prefer the other creditors, there would have been force in the notion that the same condition of mental bias which induced the preference of the directors, induced the preference of Kernochan.
    But nothing whatever appears in the case to show that the Kernochan debt was in any way related to the other debts, or why Kernochan was included in the list of preferred creditors.
    The mortgage should be decreed void, so far as it secures the debts other than that of Kernochan.

      Mr. George W. Miller, pro se; Messrs. Corbin & Corbin, of counsel for the appellant.

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

Garrison, J.

The question to be decided upon this appeal is, whether the claims of certain creditors of the Johnson Railway Signal Company were lawfully preferred by a mortgage given by its directors to George W. Miller, trustee, in the month of January, 1895, at which time the corporation was insolvent. The bill, which is filed by Edward I. Savage, receiver, attacks the mortgage as a preference upon the ground that George "W". Miller, to-whom it was made, was a director of the insolvent company. It may be well to note here that the statute of this state that, prior to the Revision of 1875, rendered void as against creditors the transfer of its property by any insolvent corporation, or by a corporation in contemplation of insolvency, was dropped by the legislature from the- Revision of that year (1875), but was re-enacted on the 5th day of March, 1895; which, it will be-observed, is after the giving of the present mortgage. During the twenty years this statute was off the books this court decided Wilkinson v. Bauerle, 14 Stew. Eq. 635 (1886); Vail v. Jameson, 14 Stew. Eq. 648 (1886); Bergen v. Porpoise Fishing Co., 15 Stew. Eq. 395 (1887), and Phillips v. Montgomery, 8 Dick. Ch. Rep. 203 (1895).

The necessity for these decisions may, in the future, cause perplexity, unless the fact with respect to the statutory law be borne in mind.

The mortgage in question having been given during this interval is to be tested by these authorities, especially by that last cited.

The creditors preferred are five in number, whose claims may be thus epitomized:

1. Mrs. Georgina M. Johnson, a daughter of George W. Miller, to whom he had passed a note of the company for $2,500, made to its own order, and delivered to Miller for past services.

2. The Union County Bank, which had loaned to the corporation $5,000, for which it held its note, endorsed by George W. Miller and two other directors.

3. Georgina M. Johnson, who, as executrix of her husband, held the company’s note for $6,143, loaned to it by her husband.

4. A note for $29,205.53, -held by the same executrix for money due to her husband from the Hall Signal Company, that by an agreement between it and the present company before insolvency, was assumed by the latter upon a good consideration.

5. A note for $8,600 to Frederick. Kern ochan, administrator.

Applying to these creditors the doctrine of Phillips v. Mont gomery, the learned vice-chancellor who heard the cause set aside all of the claims with the single exception of that of Frederick Kernochan. In reaching this result in the case of the Union Bank, and of the two claims of Georgina M. Johnson, executrix, a meaning and an effect were given to the prior decision of this court that go beyond what it decided, and extend the doctrine of that case beyond the ground on which it rests. For clearly the decision of the lower court is, that any application of the property of an insolvent company to the payment of its debts made by its directors from personal motives, or the desire to benefit friends or kindred at the expense of the general creditors, is void. In effect and in terms the directors are treated as powerless to make a preference in favor of creditors to whom they are related by consanguinity, affection, or even professional relationship. This is practically to re-enact the statute against preferences. For every preference is the expression of a motive or desire on the part of the directors to favor some creditors over others — to put them, as the word implies, ahead in the race for assets. This the _ legislature may forbid, but this court may not. Vail v. Jameson, 14 Stew. Eq. 648. All that Phillips v. Montgomery decided was, that upon the insolvency of a corporation its directors became trustees for the creditors, and could not use their position of trust to obtain for their own debts an inordinate share of the assets. If a court of equity go further and place those whom the directors desire to prefer in the same category with themselves, the result would be that they may lawfully prefer those only whom they do not wish to benefit— which clearly was not the doctrine announced. Beyond what was held in Phillips v. Montgomery a purely judicial rule does not seem to admit of much extension, certainly not to the application made in the present case. Upon the same line of reasoning the contention is not tenable that the mortgage as a deed is void, because it secures, inter alia, a claim which the director is upon equitable consideration disentitled to have preferred.

Applying what I conceive to be the correct rule to the several claims secured by this mortgage, the result is :

1. The note of $2,500 given to Miller for his services, and by him passed to Mrs. Johnson, is set aside, not because she was his daughter, but because she was not in this regard a creditor of the company. The holding of the note did not make her one in equity. She knew that this note was to come into existence and for what purpose, and is thereby charged with knowing that it was invalid in the hands of the person from whom she got it; she gave no new consideration for it, and gave up no old security or right of action. She stands in the position of a volunteer, who knowingly seeks to take an inequitable share of the assets of an insolvent company. To the extent that the note entitles her to share with the unpreferred creditors it is unimpeachable.

2. The note of the Union Bank for money loaned to the company is sustained. Inasmuch, however, as the directors who are endorsers cannot obtain any benefit from this preference, the amount paid to the bank over and above what it would have received as a general creditor is recoverable from the endorsers in a suit to be brought by the receiver, if necessary. That is to say, the general creditors, through the receiver, are subrogated to the right of the bank against the endorsing directors to the extent that the bank profits by the preference. In Wilkinson v. Bauerle and Phillips v. Montgomery there were preferences sustained upon which directors were endorsers. It may be that the attention of the court was not called to that feature of those cases; but there is nothing that in principle defeats an otherwise lawful preference merely because it would be inequitable to extend the preference to all parties to the transaction. The cases were properly decided upon the idea that the equities work out as above indicated.

3. The note of $6,143 of Georgina M. Johnson, executrix, being a debt of the corporation, is sustained.

4. The note of the same for $29,205.53 is sustained for the same reason.

5. The claim of Frederick Kernochan, which was sustained by the opinion of the vice-chancellor, is in this awkward situation: The mortgage secured certain notes held by Frederick Kernochan as administrator of Walter O. Kernochan; the bill alleged that Frederick Kernochan was not administrator and hence did not make him a party, but made Joseph H. Kernochan a party, as administrator, and took a decree pro confesso against him. Notwithstanding this, the final decree, after reciting that the vice-chancellor found that the Kernochan claim was good, sets aside the claims of all the defendants, which included Joseph H., and did not affect Frederick.

The question of the proper trustee is one that may be cleared up in the court of chancery before its decree is finally settled.

The record will be remitted to chancery with its present decree reversed.

For reversal — The Chief-Justice, Depue, Dixon, Garrison, Gummere, Lippincott,Van Syckel, Adams, Bogert, Hendrickson, Nixon, Vredenburgh — 12.

Far affirmance — Ludlow—1.


author: Gummere, J.

text:
    Title Guarantee and Trust Company, appellant, v. Trenton Potteries Company, respondent.
    [Filed September 20th, 1897.]
    1. In conformity with, the general rule which admits in evidence the opinions of skilled witnesses on all subjects of science, the existence and meaning of the laws, as well written as unwritten, of another state, may be proved by calling professional persons to give their opinions on the subject.
    2. The federal constitution (article 4, section 1), supplemented by the act of congress of May 26th, 1790, does not provide an exclusive method for proving the public acts of the various states of our union.
    Appeal from order of the chancellor, dissolving an injunction. (No opinion filed.)

      Messrs. Corbin & Corbin, for the appellant.

      Mr. James Buchanan and Mr. Howard R. Bayne (of the New York bar), for the respondent.
   The opinion of the court was delivered by

Gummere, J.

The appellant, the Title Guarantee and Trust Company, is a corporation organized under the laws of the State of New York, and the respondent, the Trenton Potteries Company, is a corporation organized under the laws of the State of New Jersey.

On the 27th day of September, 1895, the potteries company commenced an action against the title company in the New York supreme court upon a policy of insurance issued to it by the latter company.

On October 16th, 1895, the title company, after having been served with process and a copy of the complaint in the New York suit, filed its bill in the court of chancery of this state, alleging a mistake in said policy, and praying that the same be rectified and reformed,- and that the potteries company might be restrained from further prosecuting the suit then pending in the New York supreme court,- on the ground that if it was permitted to proceed with said suit before the policy was so reformed as to set out the true agreement of the parties, a judgment would necessarily go against the appellant.

A preliminary injunction having been ordered, pursuant to the prayer of the bill, the potteries company filed its answer, setting up, among other things, that, under the law of the State of New York, the title company was entitled to all the relief and remedies as defendant in the action brought against it in the New York court that it sought to obtain by the bill filed by it in the court of chancery. This allegation in the answer was verified by the affidavit of a New York counsel, learned in the law of that state, who testified

“that the defendant in the New York action is entitled, under the New York law, to all the relief and remedies, as defendant in that action, that it could obtain or has prayed for as complainant in its New Jersey suit. The formal distinction between law and equity having been abolished in this state [New York], the defendant in an action at law here is entitled to plead as many defences as he may have, whether they are legal or equitable, whether he pleads simply a defence or bar without asking affirmative relief, or whether he pleads new matter constituting a counterclaim or equitable set-off, or recoupment or matter in the nature of a cross-bill under the old system, and asks affirmative relief. These rights and remedies are given to defendant by express legislative enactment, and have for many years been repeatedly recognized and enforced by all the courts in this state.”

Upon the coming in of the answer and accompanying affidavits the preliminary injunction was dissolved, and from the order of dissolution this appeal is taken.

The respondent, .having selected a court of the domicile of the appellant as the forum in which to try the matters in issue between them involved in the suit brought by it, is entitled to have those matters finally determined in that, forum, provided the appellant can, in its defence in that suit, show the real agreement between the parties as fully as it would be permitted to do in its suit brought here for the reformation of the written contract. It was because of the allegation in its bill that it could not successfully defend in the New York court until there was an actual reformation of the policy of insurance, that the chancellor granted the injunction, and it was because of the denial of this allegation by the respondent, in its answer, supported by the affidavit of New York counsel, that the injunction was dissolved.

But it is said by the appellant that, admitting it to be true that the respondent is entitled to have the matters involved in the New York suit disposed of in the New York court, provided appellant can, in its defence in that suit, show the real agreement of the parties, there is nothing in the case as it stands before us to justify the conclusion that the statement of the answer in that regard is true. The argument in support of this contention is as follows: In the absence of proof to the contrary it will be presumed by the courts of this state that the common law is in force in the State of New York; that, by .the rules of the common law, the appellant could not, in an action at law brought against it for breach of a written contract, show that by mistake of the parties the writing did not set forth the real agreement between them, and that the presumption that the common law prevails in New York is not overcome by the affidavit of the New York counsel annexed to the answer, for the reason that it attempts to show that the rule in question has been abrogated by statute, and that the only legal method of proving the existence of a statute of a foreign state is not by the testimony of counsel of that state, but by the production of a duly-authenticated copy of the instrument itself.

While it is entirely true that in the absence of proof to the contrary the courts of New Jersey will presume that the common law prevails in a sister state, I cannot agree to the proposition that the only method of rebutting this presumption is the production of a copy of the statute which abrogates the common-law rule, the existence of which is challenged. Mr. Taylor, in his work on evidence (volume 2, section 1423), in dealing with this question says:

In conformity with the general rule which admits in evidence the opinions of skilled witnesses on all subjects of science, the existence and meaning of the laws, as well written as unwritten, of foreign states may be proved by calling professional persons to give their opinions on the subject.”

That this is the correct rule seems to me to be plain, both on principle and on authority. In order to know what the law of a foreign state is on a given subject we need something more than the production of the statute, for that only gives the words in which the law is written. The question to be determined is not what the language of the law is, but what the law is altogether, as shown by exposition, interpretation and adjudication ; and this, I take it, can best be ascertained by the testimony of a professional witness, whose special knowledge enables him to speak to that fact.

Lord Langdale, in the well-considered case of Nelson v. Lord Bridport, 8 Beav. 535, uses the following language in discussing this subject: The foreign law and its application, like any other results of knowledge and experience in matters of which no knowledge is imputed to the judge, must be proved, as facts are proved by appropriate evidence — i. e., by properly qualified witnesses who can state from their own knowledge and experience, gained by study and practice, not only what are the words in which the law is expressed, but also what is the proper interpretation of those words, and the legal meaning and effect of them as applied to the case in question.”

Mr. Justice Coleridge, in Baron De Bode’s Case, 8 Q. B. 265, considering the same questions, says: What in truth is it that we ask the witness? Not to tell us what the written law states, but, generally, what the law is. The question is not as to the language of the written law, for when that language is before us we have no means by which to construe it. How many errors might result if a foreign court attempted to collect the law from the language of some of our statutes which declare instruments in particular cases to be null and void to all intents and purposes/ while an English lawyer would state that they were good against the grantor, and that the courts have so expounded the statutes. It is no answer to say that other evidence by word of mouth may be added for the purpose of giving the interpretation of the written law. I am merely showing that our courts require, not the actual written words of a foreign law, but the law itself, for which purpose a professional witness is required to expound it.”

Lord Denman, in the case last cited/says: “It is objected that, this [i. e., permitting a professional witness to testify concerning the written law] is a violation of the general principle that the contents of a written instrument can be shown only by producing the instrument or accounting for its non-production. But there is another general rule: that the opinions of persons of science must be received as to the facts of their science. That rule applies to the evidence of legal men; and I think it is not confined to unwritten law, but extends also to the written laws which such men are bound to know. Properly speaking, the nature of such evidence is not to set forth the contents of the written law, but its effect, and the state of law resulting from it. The mere contents, indeed, might often mislead persons not familiar with the particular system of law. The witness is called upon to state what law does result from the instrument.”

Shortly after the decision of Baron De Bode’s Case, in the queen’s bench, the house of lords, in the Sussex Peerage Case, 11 Cl. & F. 114, adopted the rule laid down by Lord Langdale in Nelson v. Lord Bridport, and by the judges of the queen’s bench in Baron De Bode’s Case, and held that the existence and meaning of written as well as unwritten laws of a foreign state could be proved by calling professional witnesses to give their opinion on the subject.

The reasoning of the distinguished jurists from whose opinions I have quoted seems to me to be unanswerable. But we are told that' the common-law rule established in England has no place in the jurisprudence of this country, because (as it is said) the federal constitution, supplemented by the act of congress of May 26th, 1790, provides the exclusive method of proving an act of the legislature of a sister state. The constitutional provision invoked is found in article 4, section 1 of that instrument, and provides that congress may, by general laws, prescribe the manner in which the public acts of a state shall be proved; and the act of congress of 1790, passed, in pursuance of this provision, declares “that the acts of the legislature of any state or territory shall be authenticated by having the seals of such state or territory affixed thereto.” Rev. Stat. U. S. ch. 17 § 905.

Conceding that, by virtue of the constitutional provision referred to, congress has power to fix an exclusive method for proving the public acts of the various states, it does not seem to me that they have done so by the act of 1790. Prior to the passage of" that act, and notwithstanding the existence of the constitutional provision, the only method of proving the written law of another state was that pointed out by the common law. By the act of 1790 congress provided another method by which this could be done, namely, by the production of a copy of the act sought to be proved, duly authenticated by having the seal of the state affixed; but surely, if it had been intended to abolish the common-law rule and substitute another in its place, rather than to provide an additional method for proving the statutes of the several states, very different language would have been used — words which would have at least suggested the idea that such an intent existed.

That it has not been supposed, either by the bench or the bar of this state, that the act of congress of 1790 provided the only mode of proving the written law of our sister states, is shown by the inveterate practice of the past half century. On March 2d, 1847, our legislature enacted “ that the printed statute-books and pamphlet session laws of any of the United States, printed and published by the direction or authority of such state, shall be received as evidence of the public laws of such state in any court of this state” (Gen. Stat. p. 1401 § 22), and ever since the enactment of that statute the ordinary method of proving in our courts the statutes of other states has been the method provided thereby; and yet, if it be true that congress, in pursuance of the authority vested in it by the federal constitution, has prescribed the only manner in which the public acts of a state can be proved, our statute of 1847 is a nullity, and the mode of proof which has so long prevailed in our courts is altogether irregular and illegal.

Even if I had doubts on the subject, I should be unwilling, in view of the long-established practice in our courts to which I have adverted, to say that congress had, by the statute of 1790, provided the only method of proving the written law of a sister state, and had abolished the common-law rule which had theretofore existed. But, as I have already said, in my view the statute referred to merely provided an additional method of proof, and did not abrogate the common-law rule.

The conclusion reached is that the chancellor was clearly right in considering that the affidavit of the New York counsel, annexed to the answer in this case, was competent evidence to show the state of the law in New York on the right of a defendant, in an action at law, to prove that the written contract sued upon did not, by reason of mistake of the parties, show the real agreement between them, and further, to prove what the real agreement was. This being so, there was no error in his ordering the injunction to be dissolved.

The order of dissolution is affirmed, with costs to the respondents.

For affirmance — The Chief-Justice, Depue, Garrison, Gummere, Ludlow, Van Syckel, Bogert, Hendrickson, Nixon — 9.

For reversal — Lippincott—1.


author: Per Curiam.

text:
    Peter Tyrrell et al., appellants, v. Lawrence O’Connor, respondent.
    [Filed July 1st, 1897.]
    1. It is not necessary to the validity of a power of attorney authorizing an agent to agree in writing to sell lands and bind his principal to convey them, that it shall be proved or acknowledged and recorded.
    2. Mere power to sell lands, without more, will not authorize the agent to bind his principal by written contract to convey.
    3. Where, however, the design and terms of the power manifest an intent to give the agent authority to effect a sale and conveyance, and the instrument assumes to ratify the “ bargains ” he may make, it will be held to give him authority to bind his principal to convey.
    On appeal from a decree of the chancellor, who delivered the following opinion:
    This is a suit for the specific performance of a contract to convey lands. The complainant asks that the defendants be compelled to convey to him a strip of land in the city of Bayonne, which bounds on the Newark bay, which he has taken possession of, under the contract he seeks to enforce, and has improved and which now constitutes his home.
    The defendants are the heirs-at-law of Martin D. Tyrrell, deceased, and as such are tenants in common of the lands in question. With the exception of James Tyrell, who lives in New York, they are all residents in Ireland.
    By a power of attorney, signed and sealed by them respectively, on the 23d day of August, 1893, the defendants resident in Ireland constituted James Tyrrell, their attorney,
    “to [quoting the language of the instrument in material parts] ask, demand and receive all rents and arrears of rent which now are or shall hereafter grow due or owing to us [from tenants of the lands in Bayonne above mentioned], to give proper acquittances and certain discharges thereof, and in default of payment thereof, or any part thereof, * * * to proceed by a suit or suits at law for the recovery thereof, as by him, our said attorney, shall be thought, fit, and to lease said lands, tenements and hereditaments * * * to such person or persons and for such a term or number of years, or for life or lives,, and at and under such yearly or other rates as he shall think fit, taking such security therefor as he shall deem proper; or otherwise to mortgage or sell the same absolutely in fee-simple for such price or sum of money as he shall think fit or convenient, and also for us and in our name and as our act and deed, to sign, seal, execute and deliver such deeds and conveyances for the leasing or the sale or mortgage thereof, or any part thereof, with such clauses, conveyances and agreements to be therein contained as our said attorney shall think fit and proper, hereby ratifying and confirming all such leases, deeds, conveyances, bargains and sales which may at any time hereafter be made.”
    This power of attorney, though duly signed and sealed by the Irish defendants, does not appear by the certificate of the United States consul, before whom they appeared, appended to it, to have been acknowledged in accordance with the requirements of our statute.
    On the 20th of April, 1894, James Tyrrell, for himself, and as the agent of the other defendants, entered into a written contract with the complainant, in the names of all the defendants, that in consideration of $7,250, $250 of which was then paid in cash, $5,000 of which was to be paid upon delivery of the deed, and the remainder of which was to be- satisfied by assumption of the payment of a mortgage of $2,000 then a lien upon the property, that the defendants would sell the premises in question to the complainant in fee, free from encumbrances, and deliver a deed thereof to him on or before the 21st day of May then next.
    Subsequently, upon an examination of the title to the property, it was discovered that one of the certificates of acknowledgment to the power of attorney to James Tyrrell was defective, as stated, and that it did not' appear that the power of attorney, though recorded, had been duly proved or acknowledged. Because of this defect it was deemed that a deed from the agent would be without validity. Rev. p. 164 § 649; Gen. Stat. p. 876 § 117; Earle v. Earle, Spenc. 347, 361; Force v. Dutcher, 3 C. E. Gr. 401, 403. Consequently, that time might be afforded to send a deed to Ireland for execution by the defendants there, a new agreement for sale was made between the same parties on May 8th, which embodied the. terms of the agreement of April 20fch, fixed June 26th for the delivery of the deed, and provided that the complainant should have possession of the property bargained for, stipulating, in respect thereof, in this language :'
    “ Said party of the second part shall have possession of the said premises on the 14th day of May, 1894, and, in the event of the failure of said parties of the first part to deliver the deed at the time and in the manner hereinafter referred to, the parties of the first part hereby agree to repay to the said party of the second part the said sum of §250 heretofore paid as part of the consideration money, and, in addition thereto, such sum, not exceeding §1,250, as said party of the second part shall have paid upon the examination or guarantee of the title to said premises, or in the repair, improvement or furnishing the building or grounds, or the survey thereof, or shall in any way have incurred or expended in the preparation for the purchase of and taking of title to said premises not exceeding said sum of §1,150, such payment to be accepted by said party of the second part as liquidated damages for any breach of this agreement by the said parties of the first part, and in event of the failure of said parties of the first part to so deliver said deed at the time herein stated, said party of the second part hereby agrees to surrender possession of said premises within fifteen days from June 26th, 1894, to James Tyrrell, one of the said parties of the first part hereto. And the said party of the second part shall not, under any circumstances, be held to be liable for any'rental for the occupancy of said premises.”
    The Irish defendants refused to execute the deed, without assigning reason for their refusal. After due tender of performance of the agreement of May 8th upon his part, the complainant filed his bill in this suit, and thereupon motion was made under rule 213, in lieu of demurrer, to dismiss the bill, upon the contention that, by the agreement of May 8th, the parties had expressly stipulated the measure of damages which would result from the defendant’s non-performance of the agreement, and that, therefore, equity would leave the complainant to the recovery of those damages, on the ground that an appeal to equity was unnecessary, since, by agreement, the legal relief had been rendered adequate. I denied the motion for the reason that the liquidated damages were provided against “failure ” of the defendants to perform, and I could not define the word “failure,” as used, to mean their willful refusal to perform the agreement. I deemed the word to predicate action which should involve bona fide effort on their part to perform. 8 Dick. Ch. Rep. 15.

      The defendants have since answered the bill. They admit that they severally signed the power of attorney, but deny its validity because of the irregularity of the certificate of acknowledgment, which, they assert, was because of defective acknowledgment.
    It is alleged in the answer that the provision in the agreement of May 8th respecting the complainant’s surrender of possession in the event of the defendants’ failure to deliver a deed was because of the uncertainty whether some of the defendants, other than James Tyrrell, would “ sanction the sale, and execute the deed.”
    Upon this allegation, testimony was taken by both defendants and complainant. It is clear that the testimony does not substantiate the allegation in the answer; I therefore deem it unnecessary to consider whether it was admissible.
    We are thus brought to the consideration of the two propositions mainly relied upon by the defendants — first, that proper proof or acknowledgment of the power of attorney was necessary to its validity, and second, that the power of attorney did not authorize James Tyrrell to bind his principals to execute a deed.
    The language of the statute relied upon in support of the first of these propositions is this :
    “And all lands, tenements or other hereditaments that for the time to come shall be sold, conveyed or disposed of by virtue of such powers or authorities as aforesaid, such powers shall be first proved and entered upon the public records, after which all grants and conveyances made pursuant to the powers thereby granted shall be deemed, taken and esteemed as good, valid and sufficient titles,” &e
    The scope of this statute is the invalidation of a conveyance made under a power of attorney which shall not first have been proved and recorded. It is the conveyance, not the power of attorney, which is invalidated. The power of attorney remains valid, but not effective for the purpose of conveyance until it shall be proved and recorded.
    I find nothing in the opinion of Chief-Justice Hornblower, in Earle v. Earle, supra, which does not accord with this view.

      It is not necessary that the authority of an agent to bind his principal by written agreement to convey, shall be in writing, proved and recorded. Such authority may be given by parol. Long v. Hartwell, 5 Vr. 116; Milne v. Kleb, 17 Stew. Eq. 378. It is necessary, however, that the intent of the donor of the power, that the agent shall have authority to bind him to convey, shall clearly appear. Mere authority to sell, without more, does not exhibit such intent. Milne v. Kleb, supra; Marsh v. Buchan, 1 Dick. Ch. Rep. 600.

    By reference to the power of attorney in this case, it is plain that the design was to give James Tyrrell ample power to deal, with and dispose of the property in question. He was a part owner and his discretion was trusted. The design was that he should secure the leasing, mortgaging, selling and conveyance of it upon terms within his discretion, and to that end the “ leases, deeds, conveyances, bargains and sales ” which he should make would be ratified and confirmed.
    I think that under such a power the written contract that the principals should convey was authorized. 1 Am. & Eng. Ency. L. 1011. It was a bargain concerning the subject of the power, within the end designed, which was ratified and confirmed by the power.
    My conclusion is that the complainant is entitled to specific performance. It will be decreed.

      Mr. William H. Corbin, for the appellants.

      Mr. John Garrick, for the respondent.
   Per Curiam.

Decree affirmed, for the reasons given in the court of chancery.

For affirmance — Depue, Ludlow, Bogert, Hendrickson, Krueger, Nixon, Vredenburgh — 7.

For reversal — The Chief-Justice, Dixon, Garrison, Gummere, Lippincott, Van Syckel, Adams — 7.


text:
    Aaron Naumberg et al., appellants, v. William G. E. See, receiver, respondent.
    On appeal from a decree advised by Vice-Chancellor Pitney, whose opinion is reported in See v. Heppenheimer, 10 Dick. Ch. Rep. 240.

      Mr. Richard V. Lindabury, for the appellants.

      Mr. Francis J. Swayze and Mr. John De Witt Warner (of New York), for the respondent.
   Per Curiam.

Decree affirmed, for the reasons given in the court of chancery,

For affirmance — The Chief-Justice, Collins, Depue, Dixon, Garrison, Gummere, Lippincott, Ludlow, Van Syckel, Adams, Bogert, Hendrickson, Nixon, Vredenburgh — 14.

For reversal — None.


text:
    John W. Chadwick, appellant, v. John Livesey, respondent.
    On appeal from a decree advised by Vice-Chancellor Stevens, whose opinion is reported in Livesey v. Jones, 10 Dick. Ch. Rep. 204.

      Mr. Francis Taylor and Mr. Esek Cowen (of New York), for the appellant.

      Mr. Edwin A. S. Lewis and Mr. Abel I. Smith, for the respondent.
   Per Curiam.

Decree affirmed, for the reasons given in the court of chancery.

For affirmance — The Chief-Justice, Depue, Lippincott, Ludlow, Adams, Hendrickson, Nixon, Vredenburgh —8.

For reversal-Collins, Dixon, Garrison, Van Syckel —4.


text:
    William T. Meredith et al., appellants, v. New Jersey Zinc and Iron Co. et al., respondents.
    On appeal from a decree advised by Vice-Chancellor Pitney, whose opinion is reported in Meredith v. Zinc Co., 10 Dick. Ch. Rep. 211.

      Mr. Joseph Coult and Mr. James E. Howell, for the appellants.

      Mr. Richard V. Lindabury and Mr. George W. Wickersham (of New York), for the respondents.
   Per Curiam.

Decree affirmed, for the reasons given in the court of chancery.

For affirmance — The Chief-Justice, Collins, Garrison, Gummere, Ludlow, Van Syckel, Adams, Bogert, Nixon —9.

For reversal — Depue, Dixon, Lippincott, Nixon — 4.