text:
    William C. Renwick v. Julia Booth Hay.
    [Decided March 6th, 1919.]
    1. Where a complainant and defendant claim rights created by numerous conveyances made as a part of a common scheme, in or over lands of each other, and there is no adequate remedy at law, and no method by which the legal rights of the parties may be settled at law, a bill may be maintained in a court of equity to settle and determine the conflicting- rights, in analogy to a bill of peace.
    . 2. Hart v. Leonard, 42 N. J. Eq. 416, and the cases following it, cannot be considered as authority for the proposition that there are no cases in which a court of equity would have jurisdiction, involving the protection of legal rights in real estate other than those which fall precisely within the nine classes mentioned in Hart v. Leonard.

    3. It is impossible to lay down a rule that a court of equity has no jurisdiction in cases other than those particularly enumerated unless the test applied is that the court has ho jurisdiction, ordinarily, where there is an adequate remedy at law.
    4. The want of a precedent will not prevent a court of equity from entertaining jurisdiction. Earle v. American Sugar Refining Co., 74 N. J. Eq. 756; Palmer v. Palmer, 95 Atl. Rep. 241; Allen v. Distilling Co., 87 N. J. Eq. 531, followed. .

      5. In a ease in which the court of chancery has jurisdiction to grant relief such as a case to enjoin interference with a right of way over private lands, although the court may not proceed to final decree until the legal right is settled at law, jurisdiction may be entertained under the provisions of the Chancery act of 1915, section 7, and the issue sent to law for trial.
    6. Under the provisions of section 7 of such act, considered in conjunction with section 9, the rights cognizable in equity, referred to in section 7, include not only substantive but remedial rights.
    On motion to strike out bill.

      Mr. Harrison P. Linddbury, for tlie motion.

      Mr. Dougal Ilerr, opposed.
   Lane, V. C.

The bill prays for a determination of the rights of the parties in certain private ways or roads. It is impossible to comprehend the exact situation without reference to a sketch annexed to this opinion, viz.:

By deed dated October 22d, 1881, George TV". Allen, who was at the time the owner of all of the property marked on the sketch as plots 1, 2, 3, 4, 5 and 6, conveyed to John P. Allen the property marked plot 1. The deed contained the following provision:

“The above described premises are conveyed expressly subject to a perpetual right of way over so much of the same as is included in the alley or driveway of twelve feet in width surrounding the said premises on all sides save the front on New England avenue, the boundary lines of which said premises as above set forth constitute the middle line of said alley or driveway, said alley or driveway to be common to all and every the owners and occupants of the premises lying adjacent to and abutting on said alley or driveway. And the party of the first part (Allen) hereby conveys to the party of the second part his heirs and assigns a perpetual right of way from and to said New England avenue through and over the said alley or driveway in common with the said' owners and occupants.”

Jolm P. Allen, on April 17th, 1883, conveyed the last-mentioned premises, referred to as plot 1, to Julia Booth Hay, subject to the same conditions. On June 30th, 1885, George W. Allen conveyed plots marked 3 and 4 on the sketch to Ophelia G. Riley; the deed containing the following clause:

“The above described premises are conveyed expressly subject to a perpetual right of way over so much of the same as is included in the said carriage roads, the same being twelve feet in width surrounding the said premises on all sides save the front on New England avenue, the boundary line of which said premises as above set forth, except on New England avenue, constitute the middle lines of said carriage roads; said carriage road to be common to all and every the owners and occupants of the premises lying adjacent to and abutting on said carriage roads respectively, and the parties of the first part hereby grant and convey to the party of the second part, her heirs and assigns a perpetual right of way from and to said New England avenue through and over the said carriage roads in common with .said respective owners or occupants.”

Ophelia G. Riley, on April 10th, 1890, conveyed the property marked plot-4 to John Elliott Sergeant, who died, leaving his property to his widow, Caroline II. Sergeant, who, on March 26th, 1910, conveyed to complainant. This deed contains the following provision:

“It being intended hereby to convey a lot ninety feet in width of the southerly part of the premises which were conveyed to Ophelia G. Riley by George W. Allen and wife by deed dated June 30th, 1885, * * * together with the right of way mentioned in and granted by the aforesaid deed to Ophelia G. Riley.”

The ninety feet took the land to the middle of the way between plots 4 on one side and 5 and 6 on the other. By deed dated February 15th,- 1896, Ophelia G. Bilev conveyed to Julia Booth Hay the plot marked 3. The deed contains the following provision:

“The above described premises are conveyed expressly subject to a perpetual right of way, over so much of the same as is included in the said carriage roads, the same being twelve feet in width, on two sides of said premises, the boundary lines of which said premises as above set forth, except on New England avenue, constitute the middle lines of said carriage roads, said carriage roads to be common to 'all and every the owners and occupants' of the premises lying adjacent to and abutting on said carriage road respectively; and the party of the first part hereby grants and conveys to the said party of the second part, her heirs and assigns, a perpetual right of way from and to said New England avenue, through and over the said carriage roads in common with the said respective owners or occupants.”

By deed dated March 31stj 1884, George W. Allen conveyed to John S. Porter in trust the property marked plot 6. The deed contains the following provision:

“And the said parties of the first part and second part hereto for themselves, their heirs, executors and assigns hereby covenant and agree that a carriage road of the width of ten feet and extending five feet on each side of the westerly boundary line of the lot hereby conveyed and of the width of twelve feet and extending six feet on each side of the northerly boundary line of said lot shall 'be kept open and used in common as a private carriage way for the owner or owners for the time being of the lot hereby conveyed and of the owner or owners of the lots of land adjoining on the westerly and northerly sides thereof, and this covenant shall run with the land and be a perpetual easement in favor of such respective owners.”

Title to this plot finally became vested in 1911 in complainant, Renwick, the deed by which he acquired title containing the following:

“Together with the right to use both of said carriage roads, one of which is ten feet in width and the other twelve feet in width, and both of which are established by covenants creating perpetual easements in common with the other owners of land abutting on the same and subject to the rights of such other owners to the common use of the whole of said roads, and also togther with the right, title and interest of the party of the first part in the northerly half of Springfield avenue to the middle thereof where it' bounds the lands described.”

By deed dated February 17th, 1886, Allen conveyed to-the New York Wall Paper Company the lands marked plot 2, together also with other lands. Title to this plot marked 2 finally, became vested, by deed from the New York Wall Paper Company in 1886, in Julia Booth Hay. It therefore appears that Julia Booth Hay owns plots 1, 2 and 3; complainant, Renwick, plots 4 and 6.

It is the contention of complainant that he and the abutting-property owners have the right to use the carriage way between plot 4 on one side and 5 and 6 on the other, and the carriage way extending from Springfield avenue to a point in the middle line of the carriage way between plot 4 on one side and plots 5 and 6 on the other, to the exclusion of defendant, Julia Booth Haj, and that defendant, Julia Booth Ha), has the right to irse the carriage way surrounding plot 1 and between plots 2 and 3 to the exclusion of complainant, and that the carriage way between plots 2 and 4 should he closed, the owner of plot 4, complainant, being entitled to possession of that porti.on of the carriage way adjoining plot 4 to the middle line, and the owner of plot 2, defendant, being entitled to that portion of the carriage way adjoining plot 2 to the middle of the line'. It is set forth in the bill that defendant, Hay, insists that complainant has no right to use the carriage way surrounding plot 1 and that between plots 2 and 3, yet that she has the right to use the carriage way between plot 4 on the one side and plots 5 and 6 on the other, as well as the carriage way between plots 2 and 4, although her line does not abut upon the carriage way between plot 4 on the one side and plots 5 and 6 on the other. By an amendment to the bill complainant sets up that tire parties have by their acts put a practical construction upon the conveyances' creating the easements and have fixed their rights as contended for by him; that defendant, Hay, did in fact on one occasion erect a fence along the middle of the carriage way between plots 2 and 4, which fence, however, has now been removed. The bill charges that there is a community of interest in the parties in the use of these respective easements and prays for a decree settling the rights of the parties.

It is well settled that a substantial legal dispute over a private right of way in land is not ordinarily cognizable in a court of equity and that the rights of parties in private ways both as to the existence of the right and its extent, must be settled at law before a court of equity can intervene. Hart v. Leonard, 42 N. J. Eq. 416; Todd v. Staats, 60 N. J. Eq. 507; Mason v. Ross, 77 N. J. Eq. 527; Imperial Realty Co. v. West Jersey and Seashore Railroad Co., 79 N. J. Eq. 168, all cases in the court of errors and appeals and all reversing this court. In Hart v. Leonard, Mr. Justice Dixon, writing the opinion for the court of errors and appeals; said: “Ho doubt many cases arise in which courts of equity may, by decree and injunction, protect and enforce legal rights in real estate. So.far as they are exemplified in our chancery practice, these cases can, I think, be classified under the following heads/’ and he then classifies nine distinct heads. I do not 'conceive that there may not be cases, cognizable in equity, which do not fall strictly within any one of'the nine classes mentioned by Mr. Justice Dixon. The reason given by Mr. Justice Dixon for the lack of jurisdiction in equity, in other than the classes referred to hy him, is that the appropriate remedy is by suit at law. A well-recognized form of equitable remedy is„a bill of peace. 2 Story Eq. Jur. (11th ed.) §§ 852, &c.; Pom. Eq. Jur. § 1394; 2 Eq. Rem. §§ 723, &c.; Pom.Eq. Jur. §§ 245, 255, 260. While bills of peace are ordinarily brought to establish and settle a right which complainant claims and which from its nature may be controverted by different persons, at different times and at different occasions, or where separate attempts-have all'been unsuccessfully made to overthrow the same rights and justice requires that the parties should be quieted in the right if it is already sufficiently established or if it should be sufficiently established under the direction of the court (Story § 853, and see examples of such bills, sections 855, 856), yet it would seem that a bill analogous to a bill of peace may lie even where there may not be many defendants. Sharon v. Tucker, 144 U. S. 533; 36 L. Ed. 533. In that case the supreme court of the United States sustained a bill brought by persons, claiming ownership of property by adverse possession, to enjoin the assertion of title by defendants to the same property deriving title from former owners. The court based the jurisdiction upon tire power of the court to perfect and complete the means by which the right, estate or interest of the party — that is, their title, may be proved or secured or to remove obstacles which hinder its enjoyment, citing 1 Pom. Eq. Jur. § 171. It distinguished the case before it from the ordinary bill quia timet or a bill of peace. It based the jurisdiction primarily upon the absence of a remedy at law available in the particular case. Neither ejectment nor trespass would lie, and if complainants had no relief in equity there would always be doubt as to their title. The jurisdiction did not rest upon statute. In a note to 2 Story Eq. Jur. (11th ed.) § 855, Lord Redesdale is re-_ ported to have said, in referring to the jurisdiction of eqqity to prevent multiplicity of suits, that if the possession of complainant had not been actually interrupted or dispossessed so that he has had no opportunity of trying his right, he may bring a bill to establish it, though he has not previously recovered in affirm-. anee of it at law. In Van Horne v. Clark, 56 N. J. Eq. 473, the chancellor (McGill), citing cases, said that the regulation of the enjoyment of mutual lights in a common easement is within the cognizance of a court of equity. And see Public Service Railroad Co. v. Frazer, 87 N. J. Eq. 679. In the case sub judice the rights of the parties spring from a number of conveyances. There is a common interest of both parties in the lands of the other. The easements are to be enjoyed in common. There is no remedy at law. Ejectment cannot be maintained, for there is no dispossession, nor can trespass. Defendant is not now using, and has not for a long period of time, if at all, used, the ways that complainant insists, she is not entitled to use, nor has complainant used the ways defendant insists he is not. entitled to use. The rights of the parties may depend upon the testimony of witnesses as to the conduct of the parties. This testimony may be lost. Unless a suit such as that now brought can be maintained, complainant is as remediless as were complainants in the case of Sharon v. Tucker, supra. It seems to me that the bill may be maintained upon general principles of equity.

The point actually decided by the court of errors and appeals in Hart v. Leonard, supra, was that this court would not interfere by injunction to restrain a defendant from obstructing an alleged private way over land, prior to the legal right being settled at law, it appearing that there was no difficulty in having the legal light determined at law. Mr. Justice Dixon, then, after recognizing that there are many cases in which courts of .equity may, by decree and injunction, protect and enforce legal rights in real estate, classified such cases as “are exemplified in our chancery practice” under nine heads. This remark then follows : “Outside of these classes there is no jurisdiction in a court of equity over the invasion of mere private legal rights in lands. The appropriate remedy is by suit at law.” That case may be considered as authority for the proposition actually decided that this court cannot, where there appeal’s to be no difficulty in settling the legal right at law, proceed to enjoin a defendant from obstructing an alleged' private way over his lands, and that cases coming within the nine classes referred to by Mr. Justice Dixon, where the protection of private rights in lands are involved, are within the jurisdiction of the court. It cannot, as I conceive it, be considered as authority that there are no cases, involving the protection of private rights in land, in which this court would have jurisdiction unless they fall within the nine classes referred to. He merely classified those cases in which jurisdiction has been sustained theretofore exemplified in our chancery practice. The remark following the classification that in other cases the appropriate remedy is by suit at law, indicated, quite clearly it seems to me, that Mr. Justice Dixon did not intend to hold that there might not be eases in which a court of equity would have jurisdiction, involving the protection of legal rights in real estate, other than those which might fall within the nine classes. It is, of course, possible to determine that a court of equity has jurisdiction in particular classes of cases and to determine that it has no jurisdiction in particular cases, but I think it impossible to lay down a rule that a court of equity has no jurisdiction in other cases than those particularly enumerated, unless, of course, the test applied is that the court has no jurisdiction ordinarily where there is an “adequate remedy at law, for, after all, that is the test of equitable jurisdiction.' Thropp v. Public Service Electric Co., 84 N. J. Eq. 144 (at p. 146) Allen v. Distilling Co. of America, 87 N. J. Eq. 531 (at p. 543). I have examined every case subsequent to Hart v. Leonard, in which that case is cited, and can find none involving the protection of legal rights in land, where relief has been denied, where it has not appeared that there was an adequate remedy at law or that, while the ultimate remedy at law may not have been adequate, yet there was no difficulty in having the question of legal right determined at law, in which latter class of cases the court retains the bill until the legal right is settled. As I have pointed out elsewhere in this opinion, I can conceive in the case at bar of no adequate remedy at‘law, nor does it appear that there is any method by which the legal title can be settled at law. The instant suit is not brought for the protection of legal rights in lands as ordinarily understood. Its purpose is to determine and settle rights in land. The wrong against which complainant, complains is the unsettled state of his rights in lands and in common ways due to conflicting claims on the part of defendant, growing out of a number of conveyances, and there is no method known to the law by which these conflicting rights may be settled. The case, as I have elsewhere’stated, is, I think, analogous to Sharon v. Tucker, supra.

The want of 'a precedent will not prevent this court from entertáining jurisdiction. Earle v. American Sugar Refining Co., 74 N. J. Eq. 756 (at p. 761); Palmer v. Palmer, 95 Atl. Rep. 241 (at p. 243); Allen v. Distilling Co. of America, supra.

I think the bill also may be maintained under the provisions of the Chancery act of 1915. Section 7 of that act provides:

“Subject to rules, any person claiming a right cognizable in a court of equity, under a deed, will, or other written instrument, may apply for the determination of any question of construction thereof, in so far as the same effects such right, and for a declaration of the rights of the persons interested.”

This section of the-statute was considered by the chancellor in Re Ungaro, 88 N. J. Eq. 25. The chancellor drew attention to the fact that the statute provides that it should be liberally construed, and that what the legislature meant by “a right cognizable in a court of equity,” in his judgment, was a right over which, in and of itself, the court had jurisdiction and that it was intended that the jurisdiction should be exercisable where the right was present, although an accompanying circumstance, the presence of .which theretofore alone permitted the right to be declared, was absent. The section was also considered by Vice-Chancellor Backes in Trenton Trust and Safe Deposit Co. v. Cook, 88 N. J. Eq. 516. The right asserted by complainant is, I think, one cognizable in equitjr within the meaning of the statute. Equity has jurisdiction to settle conflicting rights in common easements. Public Service Railroad Co. v. Frazer, supra; Van Horn v. Clark, supra. It likewise has jurisdiction to settle title, and to ascertain the extent of a legal right and enforce or protect it, in a manner not obtainable by legal procedure. In Todd v. Staats, 60 N. J. Eq. 507, the court of errors and appeals reversed the decree of the chancellor dismissing the bill, and held that the proper course for the chancellor to pursue was to retain the bill until the complainants had reasonable opportunity to establish their title at law. If defendant, Hay, had prevented the use by complainant of the ways, the right to use which is claimed by her to be exclusive in her, a bill might have been filed for relief. If defendant, Hay, used the ways, the right to use which is claimed by complainant to be exclusive in him, a bill might have been filed to enjoin continuous trespass. In neither event, however, would the court have proceeded to final decree until the right was settled at law, because, in each instance, the-right might easily be settled at law. The circumstances may not be present which, before the passage of the act of 1915, would have permitted a court of equity to proceed, but the right in each instance is, I think, existent and cognizable in equity. It seems to me that sections 7, 8 and 9 of the Chancery act of 1915 must be read together. It is provided in section 8 that if any question ordinarily determinable at law and requiring a jury trial arise in a suit of which the court of chancery has jurisdiction, a jury trial, if required, may be ordered, but shall be deemed to bo waived unless demanded in the pleadings. In case of such demand, if the issue be one requiring a jury trial, the court shall send such issue of fact .to a court of law for trial according to the existing practice. And the section further provides that the court of chancery shall retain the case until the legal question shall have been determined. ' Section 9:

“Any question ordinarily determinable at law, arising in a suit of which the court of chancery has jurisdiction, other than a question requiring a jury trial, * * * shall be determined" by the court of chancery in that suit.”

The ultimate relief asked for by complainant in this suit can be obtained only in this court. If, before this court can act, there must be a jury trial, then adequate provision is made therefor in section 8. In the instant case, although, proceedings cannot be brought 'at law to settle the title because the facts which" would warrant such an action are not present, yet, under the provisions of section 8, notwithstanding the absence of the facts which would give a court of law original jurisdiction, an issue may be made up and sent to law for determination, and upon the coming in of the judgment at law, upon the issue made up in this court, this court may proceed to give the equitable relief appropriate.- I am not determining that this case is one requiring a jury trial. If this court may act under its ordinary jurisdiction, then it seems to me that, there being no method by which the rights of the parties can be settled at law under the ordinary practice, the court may proceed without a jury trial.

In any event, I think there is equity in the bill and the motion to dismiss will be denied.


source: Caselaw Access Project

author: Lane, V. C.

license: Public Domain

text:
    Rose M. Ullman Davis, petitioner, v. Jacob S. Davis, defendant.
    [Decided March 12th, 1919.]
    1. A court of equity has inherent jurisdiction, independent of statute, to annul a marriage on the ground of fraud. Carris v. Carris, 24 N. J. Eq. 516, followed.

      2. Power in some established court will be found to secure any civil right or redress any civil wrong.
    3. The fraud for which a court‘of equity will annul a marriage must be extraordinary, of an extreme kind and with respect to an essential of the contract, and the court will not grant relief where, even if the fraud be present, to vitiate the marriage, would be against good policy, sound morality and the peculiar nature of the marriage relation.
    4. If a party to a marriage is imposed upon by false representations of the other party, a court of equity will annul the marriage unless it appears that to annul it would be against good policy, sound morality and the peculiar nature of the marriage relation, and every case must bo determined according to its own facts. '
    5. Tile suppression by one party of the fact that he is suffering from a disease which renders the close intimacy of the marriage relation dangerous to the other, and which may result in a transmittal of the disease to offspring, is such fraud as will warrant a court of equity in annulling a marriage.
    C. Where, at the time of marriage, defendant husband was suffering from hereditary chronic tuberculosis and did not inform petitioner of the fact, for the reason that he feared, if he did, she would not marry him, and it appears that if she - had been so informed she would not have, in fact, married him, there was such fraud as will warrant the court in annulling the marriage, notwithstanding the fact that the parties lived together as husband and wife for a period of six months, until the discovery by the wife of the existence of the disease, and notwithstanding the fact that there was a child born, which only lived for four days, where it appeared that, immediately upon the discovery of the existence of the disease, petitioner ceased cohabitation.
    On petition for annulment of marriage. On -exceptions to master’s report.

      Mr. William Harris, for the petitioner-exceptant.
   Lane, V. C.

I find the fact as follows: Petitioner and defendant were married May 2d, 1916; petitioner is now twenty-five years of age; the parties, lived togthor as husband and wife until November, 1916; from November, 1916, to about April or May, 1917, they resided together in Caldwell; there was, during the latter period, no sexual relations; in April or May, 1917, a child Avas born Avhicli lived only for four days; defendant immediately after the birth of the child Avent west for his health; there have been no sexual relations since November, 1916; defendant, at the time of 'the marriage Avas, to his knowledge, suffering from chronic tuberculosis; his father had died of tuberculosis prior to the marriage; defendant did not inform his AAdfe of his condition; he concealed it because of a fear on his part that if he told her she Avould not marry him; the death of the father was falsely represented to the Avife, prior to the marriage, as due to pneumonia; petitioner did not discover that defendant Avas suffering from tuberculosis until November, 1916, and immediately upon tire discovery ceased cohabitation; the medical testimony is to the effect that tuberculosis is an infectious, contagious disease transmissible to offspring; if the disease itself is not transmitted there is grave danger that offspring Avill be predisposed to the .disease. The learned special master found the facts substantially as I have found them, but declined to recommend a decree (and very properly, I think) because of the Avant of a precedent in this state. The power of this court, independent of any statutory grant, to dissolve a marriage on the ground of fraud, is unquestioned. Carris v. Carris, 24 N. J. Eq. 516; Vanderbilt v. Mitchell, 72 N. J. Eq. 910 (at p. 918). The court, in the first case, intimated that power in some established, court would be found to secure any civil right or redress any civil wrong. In referring to the nature, of "the fraud which would be sufficient to warrant the court in avoiding a contract of marriage, the court of errors and appeals, held that it must be extraordinary, of an extreme kind, and with respect to an essential 'of the contract. That the general principle that fraud in a material part vitiates, a contract, does not apply with full force to the marriage contract, after consummation and the establishment of a status at least, for the reason (and solely for the reason) that the contract of marriage is sui generis in many respects and. should not be vitiated even if fraudulent, when to vitiate it would be against good policy, sound morality, and the peculiar nature of the relation. The court further said that false representations in regard to family, fortune or external conditions are not sufficient. In Crane v. Crane, 62 N. J. Eq. 21, Chancellor Magie held that a false representation with respect to freedom from syphilis was such fraud, as would warrant the intervention of the. court. In this opinion he stated, obiter: “Misrepresentation ■ as to freedom from disease in general or concealment of the existence of a disease, although one in common apprehension communicable and transmissible to offspring, cannot, in my judgment, be so regarded” — that is, be regarded as fraud which effects the essential of the marriage contract. He stated that in his judgment such representations fall within the line of, false representations as to famity, fortune or external condition, declared by Mr. Justice Bedle to be insufficient in Carris v. Carris to justify the annulment of marriage. The chancellor referred to diseases which were communicable and transmissible “in common apprehension.” His remarks, I think, cannot be said to apply to diseases not only communicable and transmissible “in common apprehension,” but which have been demonstrated to be communicable and transmissible by science. In Allen v. Allen, 85 N. J. Eq. 55, Vice-Chancellor Learning, basing his judgment on Crane v. Crane, supra, said that suppression by a defendant husband at the time of the marriage, he being sane at the time, of the fact, that he was afflicted with hereditary insanity, is no ground for annulment. He held that there was not sufficient evidence of the fact that defendant at the time of marriage was afflicted with a taint of insanity which would have been inherited by offspring. The court of errors and appeals affirmed (86 N. J. Eq. 441), but solely upon the ground that the evidence did not convince that court that defendant was in fact afflicted with hereditary insanity and the court said: “Reaching this conclusion, for the reasons stated, we find it unnecessary to consider the interesting question discussed by the learned vice-chancellor in his opinion, viz., whether the fact that one of the parties to a marriage is insane at the time when the marriage takes place, and intentionally conceals that fact from the other party to the marriage, affords just ground for its- annulment.” If the vice-chancellor meant to express an opinion that the existence of the condition indicated by the court of errors and appeals would not be sufficient ground for relief, I think he is opposed by the weight of authority. See note to Ridgely v. Ridgely, 25 L. R. A. 800.

The conduct of the defendant, in the case at bar, in concealing the fact that he was at the time of the marriage suffering from hereditary chronic tuberculosis was undoubtedly fraudulent. The question, then, is whether, under Carris v. Carris, to relieve against such fraud would be against good policy, sound morality and the peculiar nature of the marriage relation. I am convinced to the contrary. Vice-Chancellor Learning, in Allen v. Allen, supra, said that the requirements, as stated by the court in Carris v. Carris, were not sufficiently inflexible or definite to be easily applied to a concrete case other than the one then before the court. It seems'to me that such a false representation as we have in this ease does not fall within that class referred to by Mr. Justice Bedle in Carris v. Carris as having regard to family, fortune or external condition; that the representations with respect to health, which may be considered to fall within that class are representations with respect to general health. See Bish. Mar., D. & S. §§ 459, 460. Procreation, if not the sole, is at least an important reason for the -existence of the marriage relation. Raymond v. Raymond, 79 Atl. Rep. 430; Rector v. Rector, 78 N. J. Eq. 386. It is well known, aside now from the medical testimony in this case, that close contact with one suffering from tuberculosis involves great danger of transmission both through infection and contagion. It is -almost impossible to conceive the ordinary relationship of husband and wife existing without that danger ever present. There is always also great danger of transmittal of the disease to offspring, and, as I have stated before, if the disease itself is not transmitted there are likely to be transmitted characteristics which predispose toward the development of the disease. False representations with 'respect to its existence go then, I think, to an essential of the marriage relation. They are very different from representations with respect to health in general. They are more akin to representations of freedom from leprosy or diseases of similar nature.

I cannot agree that the only diseases which effect an essential of the marriage relation are those of a venereal nature. I can see nothing whatever in good policy, sound morality or the peculiar nature of the marriage relation which would warrant the court, after having found the fraud, denying relief. Neither good morals nor public policy are subserved by compelling parties to live together as man and wife, with the ever present danger of infection, and beget offspring liable to be tuberculously inclined, nor are they subserved by compelling .a woman who has married under' a misrepresentation with, respect to the fact, to continue to be bound to a man affected with tuberculosis, without having the close intimacy to which she is entitled. The only case that I have found in which the precise disease has been dealt with is Sobol v. Sobol, 150 N. Y. Supp. 248, in which ease the supreme court of New York at special term (Mr. Justice Blanchard) held that a court of equity would annul a marriage where there was a suppression of the existence of tuberculosis in one party. It is true that in that case the court, held, in effect, that the status of marriage had not been created, but I am unable to conclude that there is any essential difference, so far as the matter now under consideration is 'concerned,, between tuberculosis and syphilis. Sobol v. Sobol was cited by Vice-Chancellor Learning in Allen v. Allen without disapproval. The vice-chancellor, after referring to Sobol v. Sobol, says that no satisfactory authority exists to support the view that a marriage contract, voidable only, can be annulled by a court of equity for fraudulent concealment by a party touching his or her physical condition except in the extreme instances already referred to of disease of either party of a nature to render contact seriously dangerous * * *. In Sobol v. Sobol, tuberculosis was held to be such a disease. In the instant case there are no children, so that the effect of the action of the court upon children is not involved. Where the question of morality and policy must be considered, as in this class of cases, then it seems to me to be •clear that each case must stand upon its own facts, and no general role can be laid down. I am unable to agree that the rule of caveat emptor, apparently referred to by Bishop, sections 459, 460, has any application to a case such as I am now dealing with. While due caution may require a party to a marriage contract to make his own investigation with respect to fortune, family and other external conditions, it. seems to me to he going too far to say that due caution requires a party to a marriage contract to require the production of a medical certificate, and in the case at bar a medical examination would have been required to advise petitioner of the condition of defendant. Such a rule is not applied in the case of syphilis, nor do I think it should be in the case of tuberculosis. The suppression by defendant of the fact that he was suffering from tuberculosis of the nature that he was, for the reason that he did suppress it, is equivalent in law to an express representation on his part that he was free from it.

The exceptions will be sustained and a decree advised.


text:
    Hoover Steel Ball Company, a corporation. v. Schaefer Ball Bearings Company, a corporation.
    [Decided April 5th, 1919.]
    1. A contract made by a corporation to repurchase its stock at the option of the purchaser, as a condition for the purchase of stock, is unenforceable as against the corporation if the effect of such enforcement would be to prevent the payment of creditors in full.
    2. The purchaser from a corporation of its stock under a contract that the corporation will, at the option of the purchaser, exercised within a certain time, repurchase or resell, is bound by his contract and is subject to the liabilities of a stockholder, notwithstanding that the contract, so far as the corporation is concerned, cannot be enforced against it after insolvency.
    3. Under such circumstances a stockholder cannot recover upon the theory that there is a failure of consideration and that it would be inequitable and unfair to permit the corporation to retain the purchase price of the stock.
    4. The mere fact that the corporation was insolvent at the time the contract was made does not alter the result.
    5. The law, as above indicated, is the law of New York as well as the law of this state.
    (5. Whether such a contract is valid under any circumstances, query.

    On appeal of Rosie Soos from determination of receiver rejecting claim.

      Messrs. Weller &■ Lichtenstein, for the appellant.

      Messrs. Bilder cS B'ilder {Mr. Kaufman), for the receiver.
   Lane, V. C.

On May 18th, 1917, Schaefer Ball Bearings Company, Inc., a corporation of New York (the insolvent), and appellant Soos, in the State of New York, entered into a contract containing the following:

“In consideration of the fact that Rosie Soos buys forty shares of preferred stock at $100 per share, amounting to ($4,000) four thousand dollars, the Schaefer Ball Bearings Company, Inc., agrees to give as security three (3) Van Norman machines, which aggregates the sum of $3,285, and also one Cleveland automatic machine costing $2,280. The entire amount of security being approximately $5,000.
“If after one year said Rosie Soos wishes to withdraw her money from the company, the Schaefer Ball Bearings, Inc., will buy back or resell for her her forty shares for the same sum, namely, $100 per share, $4,000 as she invested, and pay the guaranteed dividend. This will be done after the company is given one month’s notice, in order to look around for a new buyer, or get the amount from the earnings of the company

on or about May 1st, 1918, Soos demanded from the corporation the $-1,000; the corporation did not pay; a receiver having been appointed by this court, upon the ground of insolvency, Soos filed her claim for $4,000, which claim the receiver rejected, and from the action of the receiver this appeal was taken. The case is submitted upon stipulated facts. It is stipulated that at the time the contract was made the corporation was insolvent and has ever since continued to be insolvent; it never had a surplus over and above its liabilities from May 18th, 1917; the agreement was made and entered into in the State of New York and is controlled by the laws of that state; this court may take judicial notice of the statutes and law of the State of New York. The receiver was appointed on the 24th clay of May, 1918: no action was taken by Soos to enforce her claim between the date of the giving of her notice and the appointment of the receiver.

The stipulation is silent, as to the nature of the stock sold. It is also silent as to what was done with respect to investing Soos with the rights of a stockholder. I shall assume, in determining the case, that the stock issued was an original issue— that is, that it had not been previously issued and returned to the treasury, and I shall further assume that Soos was invested with all the rights of a stockholder and either did exercise, or might have exercised, those rights after the date of the making of the contract.

Although tire stipulation is silent as to whether the security referred to in the agreement was in fact given, it is conceded in the briefs of counsel that no steps 'were taken to effectuate this provision of the contract.

' While it is stipulated that when the contract was made the corporation was insolvent, the claim is not based, upon any theory of fraud practiced by the corporation or its officers upon appellant.

The question to be determined, therefore, is whether a contract made by a corporation at the time of the purchase of its stock to repurchase such stock, at the option of the stockholder, may be enforced at a time when the corporation is insolvent and the rights of creditors will be injuriously affected. I find it unnecessary to determine whether such an.engagement on the part of the corporation is absolutely void as intimated by the supreme ■court of Washington in Kom v. Cody Detective Agency, 50 L. R. A. (N. S.) 1073, and by the circuit court of appeals for the sixth circuit in Allen v. Commercial National Bank of Detroit, 191 Fed. Rep. 97. Nor do I think it is necessary to determine whether the contract should he' denominated a contract of sale and return for, whatever it may be called, I have concluded that that portion of it requiring the'' corporation to repurchase or resell its stock is unenforceable, at least unless it appears that its enforcement will not occasion injury to creditors, and that, notwithstanding this, the other party to the contract, the purchaser of the stock, is bound thereby.

I have reached this conclusion upon the law of this state, and I find nothing in the New York statute law or in the New York decisions which would indicate that the law of New York is otherwise.

It must be conceded that under the law of this státo a corporation may purchase its own stock for legitimate purposes (now provided for by statute). Chapman v. Ironclad Rheostat Co., 62 N. J. Law 497; approved by the court of errors and appeals, Berger v. United States Steel Corporation, 63 N. J. Eq. 809; Beach v. Palisade Realty and Amusement Co., 86 N. J. Law 238. In considering this power, Yice-Chancellor Stevens, in Oliver v. Rahway Ice Co., 64 N. J. Eq. 596, said, referring to Chapman v. Ironclad Rheostat Co.: “I do not suppose that this decision goes the length of authorizing a corporation to purchase and pay for its own stock if sncli purchase and payment will disable it from paying its debt in full, or of authorizing a corporation to contract with one or more of its stockholders to buy shares and so convert them into creditor's entitled to come in on an equality with other creditors, if the assets be at the time insufficient to pay all the creditors in full.” This limitation upon the power of a corporation to purchase its own stock has been approved by the court of errors and appeals in Knickerbocker Importation Co. v. Board of Assessors, 74 N. J. Law 583, and in Beach v. Palisade Realty and Amusement Co., supra. Vice-Chancellor Foster', in the unreported ease of Bayne v. Coming Egg Farm, decided May. 18th, 1918, on an appeal from determination of a receiver, disallowing a claim filed by an employe who, as a condition of his employment, had agreed to buy stock of the company under a contract with the corporation that it would, upon his severing his relations with the company, repurchase his stock, where the employe had severed relations on July 3d, 1916, at which date he served notice that he desired the corporation to repurchase his stock, but thereafter took no proceedings to compel the company to act until after the company was adjudged insolvent on March 26th, 1917, after referring .to the cases that I have heretofore adverted to, held that the action of the receiver should be sustained, inasmuch as the allowance of the claim wotdd result in preventing the property of the corporation being used to pay its legitimate debts in full, and would convert such a stockholder into a creditor of the company and thus enable him to participate equally with other creditors in the distribution of its assets and would increase the amount of the company’s liability over its assets to such an extent as that the claims of actual creditors would not be paid fully.

That a contract such as I am now dealing with is unenforceable as against the corporation, if at the time it is sought to enforce it the corporation is insolvent, is, I think, the holding of the best reasoned authorities in other jurisdictions. Allen v. Commercial National Bank of Detroit (Circuit Court of Appeals for the Sixth Circuit), supra; McIntyre v. E. Bement’s Sons et al (Supreme Court of Michigan), 109 N. W. Rep. 45; Kom v. Cody Detective Agency (Supreme Court of Washing ton), supra, and the rule is recognized in Schulte v. Boulevard Gardens Land Co. (Supreme Court of California), 44 L. R. A. (N. S.) 156. The ease of Ophir Consol. Mines Co. v. Brynteson (Circuit Court of Appeals for the Seventh Circuit), 143 Fed. Rep. 829, is distinguished by the circuit court of appeals for the sixth circuit in Allen v. Commercial National Bank of Detroit, supra. If the Ophir Case can be considered as authority for the proposition that such a contract is to be considered as a contract for sale and return, and that the engagement of the corporation may be enforced after insolvency, then it is opposed to the great weight of authority and to sound reáson.

The reasoning underlying the determination of the courts is that the capital stock of a corporation constitutes a trust fund for the payment of debts and that creditors are presumed to contract with the corporation upon the faith that its stock, so far as appears by its records, has been paid in, and that those who appear to be stockholders are, in fact, stockholders; this •entirely aside from statute. If a purchaser of, or subscriber to, stock may contract with the corporation that it shall repurchase the stock, then every purchaser or subscriber may do likewise, and if these contracts may be enforced against the corporation after insolvency, then not only will creditors be deprived of recourse to the capital stock as a trust fund, but the apparent purchasers and subscribers will be converted into creditors to share with other creditors whatever assets there may be left. Such a situation is, of course, opposed to public policy and cannot be permitted to exist.

The claim on the part of appellant that if such contract is unenforceable as against, the corporation, the consideration has failed, and that the purchaser is entitled to be repaid the amount-paid for the stock because it is unfair that the corporation should retain it, is answered by the supreme court of Michigan in McIntyre v. E. Bement's Sons et al., 109 N. W. Rep. 47, in the following language: “But the promise of such a corporation to buy its own stock, if under any circumstances valid, must be considered as made and accepted with the understanding that the shareholder may not, in face of insolvency of the company, change his relation from that of shareholder to that of creditor, escaping the responsibilities of the one and receiving the benefits of the other;” and by the circuit court of appeals for the sixth circuit, in Allen v. Commercial National Bank of Michigan, supra, in the following language: “To hold that the contract with the corporation to repay is invalid, but that Allen may demand repayment, because of. the failure of the expected consideration, is to accomplish by indirection the forbidden result. IVe think this contract is of the class where the valid provisions may stand unaffected by the invalidity of another provision, and where the law leaves the parties pro tanto where it finds them.”

Considering, now, the law of New York, it seems to me to be clear that there is nothing in the New York decisions which indicates that the New York courts would hold other than I have held. In Richards v. Ernst Wiener Co., 207 N. Y. 59; 100 N. E. Rep. 592, the court of appeals had under consideration a contract of subscription in which contract the corporation had agreed, under certain circumstances, to repurchase. The statute of New York (section 661 of the Penal law, Con. L. 1919 ch. 40) forbids the officers and directors of a corporation to apply any portion of the funds of the corporation except surplus profits, directly or indirectly, to the purchase of shares of its own stock, and makes the officers and directors guilty of a misdemeanor if they do so. The court of appeals decided the case upon the ground that it was not shown that there were no surplus profits out óf which the stock could be purchased. It approved the language of Judge Scott, in the appellate division, as follows: “The law will not presume, unless forced to do so, that a person intends to do an illegal act. It will not, therefore, presume that the parties intended to make an illegal contract. The contract itself was perfectly legal, subject to a certain limitation upon its enforceability. If, when the time came, defendant had a sufficient surplus the contract would be enforced. If it had not the contract could not be enforced.” The circuit court of appeals for the second circuit (In re Fechheimer Fishel Co., 212 Fed. Rep. 357, New York) approved the determination of the supreme court of Michigan in McIntyre v. E. Bement's Sons et al., 146 Mich, 74; 109 N. W. Rep. 45, and the general rule as I have expressed it. The court said: “As the illegality of a purchase by a corporation of its stock rests upon the fact that it withdraws assets upon which the creditors have a superior right or lien, it seems to us that even though the company may have been solvent when the contract to purchase was made, if it becomes insolvent later or is made insolvent by the transaction, and is in that condition at the time when payment is to be made, the vendor, cannot as against creditors be permitted to take the assets for that purpose in a state in which the statutes make it a criminal offence to apply directly or indirectly anything but surplus profits to' the purchase by a corporation of its own stock. If the stockholder postpones the time of payment, he runs the ask of the corporation becoming insolvent in the meantime and must be held to a knowledge of the fact that he cannot enforce payment if in doing so he deprives the creditors of assets upon which they have a lien superior to any claim of his.” Judge Hand, in the United States district court (In re Tichenor-Grand Co., Ex parte Hartigan, 203 Fed. Rep. 720), reached the same result after considering^ the Ophir and. Richards Oases and he said: “However, the creditor asserts that, even though the contract was illegal, he may recover in g-iiasl-contract. This, I must say, seems to me quite impossible. The very purpose of making the contract illegal is to prevent the shareholder from taking money out of the corporate treasury. It would be an absurd result to allow him to do it in another way. All cases which allow a recovery by contract implied in law do so for reasons of equity, to prevent the defendant from unjustly retaining what should go to the plaintiff. It would be quite paradoxical to declare illegal a contract because the corporation should in justice retain its capital for its creditors and not distribute it among shareholders, when in the next breath one directed the corporation to pay over the same capital to shareholders because it was unjust for the corporation longer to retain it.”

As I have before indicated, it is stipulated that the corporation was insolvent at the time the contract was made, but this fact cannot, standing alone, at least, in anywise, affect the determination of the case. My conclusion is that the action of the receiver should be sustained and the appeal dismissed, and I will advise an order to that effect.

It must not be considered that I have intimated an opinion that a contract such as I have been dealing with is, so far as the engagement of the corporation is concerned, valid at any time. I can readily conceive that the contract here involved may be distinguishable’ from the contracts considered in the Chapman and Coming'Egg Farm Cases. In both of these cases the purchaser of the stock became such only because to become such was a condition of his employment. It may well be argued that where a corporation compels a person to become a purchaser o£ stock as a condition of employment that it may contract to repurchase the stock upon the cessation of the employment and that such a contract will be enforced subject to the limitations hereinbefore adverted to; that such a contract is the exercise by the corporation of its powers to purchase its stock for legitimate purposes, but that this reasoning does not apply to a case where the purchaser or subscriber stands to the corporation in no other relation, and it is sought as a condition to the purchaser becoming such to give him the power at his option to convert himself into a creditor. I express no opinion whatever upon this subject.


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    Frederick Michel et al. v. William Necker, Inc.
    [Decided April 12th, 1919.]
    1. In a case in which it appeared that in October, 1916, the federal district court of this district had taken over the administration of the affairs of a corporation (engaged in the business of undertaking) in a general administration suit instituted by a non-resident creditor and stockholder with the consent of the corporation, and that the business had been conducted from the time of the appointment of the receiver down to the present time, and that none of the assets of the corporation had been liquidated except such as were liquidated incidentally in the running of the business, upon the application of a creditor upon a bill filed under the statute, in the court of chancery it was held — (a) that the proceedings in the federal court did not preclude proceedings under the statute in the court of chancery; (Z>) that the court of chancery would take jurisdiction, the statutory requisites being present; (e) that notwithstanding the fact that the assets were within the control of the federal receivers a receiver would be appointed, the statute and public policy requiring that, the corporation having been enjoined from exercising its privileges and franchises there should be in existence a statutory agent known as a receiver and the creditors and stockholders being entitled to the appointment of a receiver to represent their interest as well as the interests of the corporation; (d) that the receiver would be instructed to apply to the federal court to set up the proceedings in the court of chancery, urge that the proceedings in that court supersede the proceedings in the district court and ask the district court to direct the delivery to him of the assets for administration in the court of chancery; to ask the district court to, in any event, turn over to him the funds derived through the administration in the federal court before any distribution to creditors, to the end that the funds may be dealt with in accordance with the statute; to appear, if he is so advised, in the federal court, to urge upon that court such considerations as he may be advised is proper and in the interest of his cestui que trustent, and authorized to perform such acts, including, if he is so advised, consents in the federal court as he may consider in the interests of his trust, provided that he is not to subject himself to the jurisdiction of the federal court, as that court may have power to direct him in the performance of his duties as receiver, or to enjoin him from the performance of his duties, or any act directed' by the court of chancery, or to direct him to perform any act which may be forbidden by the court of chancery.
    2. The nature of proceedings under the statute concerning insolvency, &c„ considered and likened to probate proceedings.
    3. The court of chancery will, and will direct its receiver to, co-operate with the federal court so that there may be no loss to creditors or stockholders.
    On bill. On petition of receiver.

      Mr. Dougal Herr, for the receiver.
   Lane, V. C.

This is an application by a receiver, appointed under the statute, of defendant corporation for instructions as to his course of procedure. In October, 1916,- the United. States district court for this district, on a bill filed by a creditor and stockholders against the defendant corporation, alleging that its affairs were in such condition as that unless their administration were taken over by the court there would be loss to creditors, appointed a receiver, who has been continuing the business (that of an undertaker) until the present time. On April 1st, 1919, upon a bill filed by a creditor setting forth the statutory requisites, this court appointed a receiver under the statute. There are in the possession, or under the control, of the federal receiver, considerable personal assets and it is represented that this receiver is about to apply to the federal court for permission to dispose of some or all of them. Hp to the present time, as represented to me, none of the assets of defendant have been liquidated through the federal receivership except such as were incidentally liquidated in the running of the business. The receiver appointed by this court represents that he has not yet had sufficient opportunity to fully familiarize himself with the affairs of the corporation (he qualified April 2d) but that, from such investigation as he has beep able to make, he believes that it is his duty to intervene in the federal proceedings and urge upon the federal court, in the. right of general creditors and stockholders, that the assets should not be disposed of until, at least, he has had sufficiént time to thoroughly go into the situation. He also insists that the statutory procedure put in- motion by this court supersedes the proceedings pending in the federal court, and that there is nothing left for that court to do but to compensate its receiver and turn over the administration of the estate to this court, and (orally) that in any event as representing creditors, he alone is entitled to any proceeds which may be realized through the federal administration, and that creditors must now seek their rights and their payments through him. There is an application to be made in the federal court on Monday, April 7th, so that the receiver must have his instructions at once. There is no- time for notice to creditors and stockholders. An order to show cause will go,- however, requiring all creditors and stockholders to show cause why the instructions now given to the receiver should not be continued or other instructions given.'

On awarding the statutory injunction and appointing the receiver I held that where it appeared that the administration of the affairs of a corporation of this state is, and has been for a considerable space of time, in the hands of a receiver appointed, by a federal court in an ordinary equity administration suit instituted by creditors and stockholders with the consent of the corporation, and a creditor or stockholder 'applies to this court to set in motion the statutory machinery for winding up, it is the duty of this court to act and act at once. I followed my own decision in Hitchcock v. American Pipe and Construction Co., 105 Atl. Pep. 655, and Vice-Chancellor Stevenson in Elm v. International Steam Pump Co., therein referred to. In urging against the appointment of a receiver counsel represented that my criticism of the practice of the federal courts in making orders affecting the rights of creditors and stockholders without notice to them did not apply to this district and that this was a distinguishing feature. Counsel overlooked the fundamental ground upon which the court acts. The legislature of this state has provided by statute that whenever a corporation, incorporated under the laws of this state, gets into a condition such as the defendant corporation here is in, it should be wound up in a certain manner and by a certain procedure; that directors and officers should be under certain disabilities; that stockholders should be under certain• obligations; that the assets should be dealt with and distributed in a certain manner and that creditors and stockholders should have certain rights, among which is to have in existence a statutory officer known as a receiver, who, by virtue of the statute, represents not only the court, but the corporation, its 'stockholders and its creditors, and who has and may exercise the rights of all. This receiver has certain statutory rights and' duties. He is, to a great extent, an independent ego, a new creature. There is nothing akin to him known to the federal practice, except in the administration of the statute. It almost seems a waste of time 'to more fully describe our procedure. Vice-Chancellor Stevenson in a series of cases, among which is Gallagher v. Asphalt Co., 67 N. J. Eq. 441, covered the situation and I considered it in the Hitchcock Case. ■ The statutory procedure is in the nature of an equitable quo> warranto. It is in the nature of a probate proceeding. It is a winding up of tlie affairs of a deceased corporation through a statutory agent, just as a probate proceeding is a winding up of the affairs of a deceased individual through an agent authorized by statute. A decree of dissolution actually killing the corporation, may be entered at any time after the appointment of a receiver. The corporation indeed may be considered dead after the award of the statutory injunction although it may be revived by proceedings under the sixty-ninth section. As a result of the proceedings the corporation and its liabilities are extinguished. As I pointed out in the Hilclinch Case this is not at all the result of the' proceedings in the federal court. Its receiver is a mere custodian with such powers over the • assets as may be vested in him by order. He represents no one but the court. The corporation is still assumed to represent creditors and stockholders. No decree of dissolution can be entered. The liabilities of the corporation are not extinguished except pro tanto. The statute of this state is a part of the charter of every corporation organized under it and every stockholder and creditor becomes such charged with notice of its provisions and subjects his rights to the effect of its operation, and this irrespective of whether he be resident or non-resident. If, prior to the award of the injunction and appointment of the receiver in this suit, there had been pending in this court a general equity administration suit, such as is now pending in the district court, there is no doubt but that this suit would supersede that. There have been several cases in which this situation was presented which have come under my observation. Morse v. Metropolitan Steamship Co., 100 Atl. Rep. 219, was one. There a general equity administration suit was instituted and a general equity receiver appointed, subsequently a statutory receiver was appointed and there was no question but that the statutory proceedings superseded the general equity suit. So it would seem-to me to be a logical conclusion that, the statutory method having been put in motion by this court, it should take precedence of the general equity administration suit instituted in the federal court. It is hard to conceive that the mere fact that the general equity suit is pending in a federal court can malee any difference. The complainants in that suit went into the federal courts to enforce their rights because they were non-residents, but I do not understand that they can enforce any alleged rights which they do not have under the state law. Non-residents they may be but their rights are measured by the law of the state. If a suit were pending in the federal court against an individual and that individual died before judgment there is no doubt but that the adverse suitor would be bound by the state law with respect to the administration of the estate of deceased, and so it would'seem that, a court of competent jurisdiction having taken over the administration of the affairs of this defendant corporation under the statute in a proceeding akin to probate proceedings,, having, in effect, killed the defendant, deprived it of the power to exercise any of its rights, of its power to appear in the federal proceedings, the proceedings in the federal court, it may well be urged are superseded, and that court holds custody o £ the assets (to which the receiver appointed under the statute as representing the corporation, its stockholders and creditors, is entitled), only for the purpose of securing compensation to its receiver and officers, just as in caso bankruptcy proceedings are instituted after the appointment of a statutory receiver by this court, it has been held, this court holds custody of the assets (to which the trustee is entitled), only for the purpose of securing compensation to the receiver and the payment of administration expenses. The moment the statutory receiver is appointed he represents, as I have above stated, creditors and stockholders, and all creditors and stockholders, resident or non-resident, including the complainants in the suit pending in the federal court. In his capacity as representing the corporation he is entitled to assert the rights of the defendant in that suit, in his capacity representing creditors and stockholders he is entitled to assert any rights of the complainant. If a decree of dissolution should go it would seem that, unless the receiver appeared in the federal court, the suit would abate. The reasoning which has-induced the federal courts to hold that dissolution does not bar bankruptcy does not apply here. The nature of the proceedings under the statute and the position of the receiver is well illustratecl by the fact that the complainant in a suit under the statute has no control over the litigation. It may subsequently turn out there he is neither a creditor nor a stockholder; his claims may be wholly disallowed, yet the proceedings do not fall; the court proceeds, notwithstanding, to administer the statute.

1 was of counsel in the case of Elm v. International Steam Pump Co., and I refer counsel to my argument before Vice-Chancellor Stevenson in that case and to the cases which I cited in support of my conclusion.

It was rrrged against the appointment of a receiver in this case that such appointment would or might embarrass the administration of the assets in the federal court and result in loss to creditors; that, after' all, creditors are interested only in getting as much out of assets as possible and not at all interested in what court tire proceedings are taken. In appointing the receiver I said: “This court will not appoint a receiver for the sole purpose of endeavoring to take out of the jurisdiction of another court the administration of assets within its control. But so long as the statute remains in effect, as long as the public policy of this state is that the administration of assets of a corporation which, is in the situation that this one is in, should be in a statutory manner, and so long as it is the public policy that a statutory officer appointed by the court should represent all interests, then it seems to me that this court should not withhold its hand either with respect to the adjudication or the appointment of a receiver. It seems to me that the creditors and stockholders and the public generally are entitled under the statute to have an officer appointed who will be charged with the duties imposed upon him by statute and who will, in all senses, represent creditors and stockholders, and who may, in their right and in the right of the corporation, as he may be advised or directed, appear in the proceedings in the federal court.” And see Hitchcock v. American Pipe and Construction Co. Vice-Chancellor Stevenson in the Gallagher Cam refused to appoint a receiver, although awarding a statutory injunction because, under the facts in that case, he held that such an appointment might tend to interfere with the proper administration of assets within the control and jurisdiction of tlie federal court. In the Elm Case he appointed a receiver but refused to permit him to question the jurisdiction of the federal court in New York. The considerations which are now pressed upon me were not pressed upon him. The object in that suit was to question the jurisdiction of the federal court from the beginning. Here, assuming that the federal court had jurisdiction, it is argued that, the statutory procedure having been put in motion, it supersedes the proceedings in the federal court, just as if, had the statutory procedure been instituted in the federal court, it would have superseded the general equity proceedings there pending, and it is further argued that creditors and stockholders must seek their rights and get their payments through the statutory receiver, that if the federal receiver be permitted to liquidate the assets, the fund must be turned over to the statutory receiver to be by him distributed according to the statutory scheme; •that if it be a fact, which is denied, that general creditors secured any rights through the institution of proceedings in the federal court, those rights must be asserted ir£ these proceedings, just as if the general equity proceeding had been instituted in this court. The question is whether this court ought, because of a fear that there may be some’ loss to creditors, in defiance of the public policy of this state, forbid its receiver taking the position toward the federal administration which he urges here. I have concluded that this court ought not to so'act, at least at this time. The statute and public policy, as I understand the situation, requires the administration of the affairs of the corporation in the statutory manner and by the statutory procedure; the creditors appearing in this suit are entitled to their rights as well as the creditors appearing in the federal court; all creditors and stockholders are entitled -to the full benefit of the statute, which can only be obtained through this procedure. I do not apprehend that there is any real danger of loss. The receiver at this time will not be directed to do anything more than call for the judgment of the district court upon the questions raised. If he did less I think he would be derelict in his duty. It must not be overlooked that the statute imposes his duties upon him not the order of this court. This court is disposed to co-operate, if necessary, with the federal court, in getting as much for the assets of the corporation and in winding up its affairs as speedily as possible. The questions raised may be speedily submitted to the federal court, and the matter is then, for the time being, at least, with that court. The receiver will be directed to appear in the district court, set up the-proceedings in this court, urge that the proceedings here supersede the proceedings there and ask that court to direct the delivery to him of the assets for administration here, after, however, the federal receiver shall have been compensated and the administration expenses paid or provided for; to ask the district court to, in any event, turn over to him the funds derived through the administration in the federal court, before any distribution to creditors, to the end that the funds may be dealt with in accordance with the statute, to appear, if he be so advised, in the federal court representing the corporation and its creditors and stockholders, to urge upon the federal court such considerations as he may be advised is proper and in the interest of his ceslui que trustent, and he is authorized to perform such acts, including, if ho is so advised, consents in the federal court, as he may consider in the interest of his trust. Creditors and stockholders will be required to show cause on April 22d why these instructions should not be continued, or other instructions given, and at the same time why the present receiver should not be,, continued or another appointed in his ’ place and stead.

The receiver will not be permitted to so subject himself to the jurisdiction of the federal court, as that that court may have power to direct him in the performance of his duties as receiver, or to enjoin him from the performance of his duties or any act directed by this court, or to direct him to perform any act which may be forbidden by this court.

The federal receiver, upon the return of the order to show cause heretofore referred to, will be heard, if he so desires, without his submitting himself in anywise to the jurisdiction.

Since writing the above, it has occurred to my mind that in • the Gallagher Case, 67 N. J. Eq. 441, in which the vice-chancellor declined to appoint a receiver, for the purpose of interfering with the administration in the federal court it appeared that the federal court was proceeding under our statute, and in Elm v. International Steam Pump Co., in which the vice-chancellor appointed a receiver hut declined to instruct him to question the jurisdiction of the federal court in New York, it appeared that the New York cause was a consolidated cause. A foreclosure proceeding had been instituted, of which proceeding the federal court had jurisdiction (aside from charges of collusion, &e.). The foreclosure case had been consolidated with the administration suit and the same receivers had been appointed in the foreclosure case as in the administration case so that, irrespective of whether the court had jurisdiction in the administration suit, its receivers were entitled to the property in the foreclosure suit. I might say in passing that the vice-chancellor permitted certain stockholders in the name of the receiver to raise in the federal court the question of collusion. Epon the issue of fact the federal court found against the stockholders.

I have also examined the cases of People v. New York City Railway Co., 107 N. Y. Supp. 247; People v. Hasbrouck, 107 N. Y. Supp. 257, in which cases the supreme court of New York appointed receivers, in proceedings instituted under the statute, of corporations, the administration of whose affairs had been taken over by the federal court in equity administration suits. I notice that the instructions given to the receivers in those cases are similar to the instructions which I have given to the receiver in this case. Mr. Justice Seabury cites many cases in support of the position that he took, and also reached the conclusion, upon authorities cited by him that the federal court would release its control. My impression is that no subsequent proceedings were taken by the receivers, appointed by the state court, in the federal court, at least I have no knowledge of any authoritative decision of the federal court. My impression also is that in the Metropolitan railway litigation there was the foreclosure of a mortgage and the case would he similar to that of the International Steam Pump Company — that is, the federal receivers would have the right to control the assets in the foreclosure proceedings.


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    Frederick M. Carsten, petitioner, v. Caroline Carsten, defendant.
    [Decided April 17th, 1919.]
    1. Upon exceptions to an adverse master’s report in a divorce case, where the hearing is brought on before .a vice-chancellor, under rule 113, he may direct the taking of additional testimony,, either in open court or before a master, and upon the return of the testimony deal with the subject-matter of the exceptions upon the entire record.
    2. In this case exceptions having been filed to an adverse report, the hearing brought on under rule 113, an order having been made permitting petitioner to take additional testimony before the master and permitting the master to return a supplemental report, and the additional testimony having been returned with a supplemental report of the master, to the effect that he considered that a case had been made out, the entire record was considered and a decree nisi advised.
    3. The rule is as well settled that corroboration may be by circumstances, as that relief will not be granted upon uncorroborated testimony of petitioner or defendant, or both.
    On petition, &e. On exceptions to master’s report.

      Messrs. Pomerehne £; Laiblc, for tlie petitioner.
   Lane, V. C.

Tlie master having reported adversely exceptions were filed which came on before me for hearing. An order was then made giving the petitioner leave to take additional testimony before the master, and the master was permitted to return with such depositions as he might take, such supplemental report as he might desire. Further depositions have been taken and the master now, in a supplemental report, advises the court that he is convinced that a decree should go. I concur in that conclusion. The matter is before me on the original report and clepositions, the exceptions and the further depositions taken before the master. Under rule 113 the hearing on the exceptions was brought on before me'. Under that rule it is provided that no special reference to a vice-chancellor is necessary to confer power on him to deal with the exceptions and the subject-matter thereof. This necessarily includes power to direct the taking of additional testimony either before him or a master and dealing with the subject-matter of the exceptions upon the entire record. The difficulty the master originally had was lack of corroborated proof as to the willfulness and obstinacy of the desértion. The only witnesses originally produced were petitioner and a sister-in-law of defendant. It clearly appeared from petitioner’s testimony that the difficulty between 'his wife and himself arose out of a difference of religion. She was 'a Catholic and he a Protestant, and she insisted that they should be remarried by a Catholic priest, to which request he refused to accede. She left him on January 6th, 1914, apparently without other reason than her dissatisfaction with him on religious grounds. She left a note reading as follows:

“Fred, please don’t blame my people for this because they don’t know anything about it. Good bye. I will leave this bill here for you to pay. You can afford to pay it. You have money in the bank and all the furniture. I have nothing but a few cents. Good bye.” ,

Petitioner was corroborated by the testimony of the sister-in-law of defendant as to the fact of desertion and its continuance; also with respect to there being difficulty between the parties caused by their difference in religion. There was no direct cor- ^ roboration of any attempt on the part of the husband to induce his wife to return. He testified that some weeks after her leaving he met her on the street and asked her to return and that she refused and that he then took her at her word. He also testified as to having sent her a letter in January, 1914 (neither the letter nor a copy thereof was produced), and that he received no reply. The only witness produced before the master on the supplemental proceedings was the wife, who was forced to appear by. subprana. She testified that she left her husband on January 7th, 1914; that she had definitely made up her mind to leave and never return; that about two months after leaving she met her husband on the street; that he talked to her and asked her to come back, and that her answer was, “No, she would not live with him;” that she was dissatisfied with him; she also testified as to the receipt of the letter of January 35th, 1911, and that she never replied to it, and that the reason was that he asked her to see him and she did not want to have anything more to do with him; that no matter what course of procedure her husband might have taken she would, under no circumstances, have gone back to him; that she did not and does not care to live with him. She was examined to a considerable extent by the master, and denied that she had had any communication whatever with her husband or any one representing him, or that she had been asked to testify or that she knew of the effect her testimony would have upon her husband's case, and she said that she would testify in any event just as she did because it was the truth and that she did not care what effect it had upon the case. She declined to say what the difficulty between her husband and herself was except that—

“A. My husband drank and there are other things that I don’t feel like mentioning, which caused me to make up my mind to leave him, and never return. a My mind was firmly fixed on going away, but X don’t care to bring up these things,"

and, further,

“I do not care to state what they are [referring to her reasons for leaving]. They are of a private nature, and I don’t feel that I-ought to be compelled to say anything about them if I don’t care to. I came to this place because I was subpoenaed, and not because I wanted to come, and I don’t think that I ought to be made to talk about things that are private to me and that I have tried to forget.”

The letter was produced in which the husband asked his wife to return and indicated that he believed that she was not to blame for the separation but that she had been influenced by others.

.It is the rule that a divorce will not be granted upon the uncorroborated testimony of the husband and the wife. Garrett v. Garrett, 86 N. J. Eq. 293. This rule was last recognized by the chancellor in Boswell v. Edsoll (Boswell), not yet reported. The chancellor, however, in that case recognizes that corroboration of cadi essential fact need no.t necessarily be by the testimony of other witnesses, and I have recently dealt with the question in Parmley v. Parmley, not yet reported. Although the English courts have generally the same rale with respect to granting relief in divorce cases on uncorroborated evidence, the trend of opinion with respect to the application of the rule in England is illustrated by the following qases: Curtis v. Curtis, 21 L. T. 676; Getty v. Getty (1917), 98 L. T. 60 (at p. 334) Weinberg v. Weinberg, 27 L. T. 9; Riches v. Riches (Mr. Justice Coleridge), not yet reported. It may now, I think, be considered as well settled that corroboration may be by circumstances, as illustrated in the cases referred to in Parmley v. Parmley, as that relief will not be granted upon uncorroborated testimony. Considering the present case, the master may have been justified in holding that the testimony of the husband, corroborated only to the extent that it is by the testimony of the sister-in-law of the wife, was not sufficient, and it may well be that the testimony of the wife, corroborated only to the extent that it is by the testimony of her sister-in-law, may not be sufficient, but when the testimony of'the husband and wife are both considered corroborated to the extent that they are by the testimony of the sister-in-law, then I think a case has been made out sufficiently corroborated. The testimony of the ¡sister-in-law indicates quite ■clearly that it is probable that the testimony of the wife and husband correctly represents the facts. The manner in which the wife’s testimony was secured, and the manner in which she gave it, is entitled to consideration. We have also the letter written by the husband unanswered by the wife.

I will advise a decree nisi.