author: Pitney, V. C.

text:
    Austin L. Haggerty, administrator, &c., v. John H. Badkin.
    [Decided March 8th, 1907.]
    1. Pursuant to the formation of a contemplated partnership between defendant and intestate, the latter paid to defendant $500 for the benefit of the firm. Almost immediately thereafter intestate died, and pending his sickness defendant deposited such funds in a bank in his own name, and after intestate’s death converted the money to his personal use.-— Held, that intestate’s death dissolved the partnership, after which defendant became a trustee of such fund for the benefit of intestate’s estate, holding the same in a fiduciary capacity within the Bankruptcy act of July 1st, 1898 (SO Stat. 551 § 11 mid. 4 eh. 51,1; V. S. Comp. St. 1901 p. 31,28), exempting from a discharge debts created by misappropriation while the bankrupt is acting in a fiduciary capacity.
    2. Where a surviving partner wrongfully misappropriated funds which he held in trust for the estate of his deceased partner, the latter’s administrator, in a proceeding in equity to compel the enforcement of a decree for the payment of the money, was entitled to process against defendant’s body, which would be executed in the absence of proof that defendant was unable to obey the order.
    In proceedings lor contempt.

      Mr. James Steen and Mr. William D. Tyndall, lor the complainant.

      Mr. Archibald G. I-Iari, lor the delendant.
   Pitney, V. C.

This is a proceeding to compel the delendant to pay to the complainant the amount ol a decree recovered by the latter against the former in this cause on the 5th day ol January, 1905, lor upwards ol $500, besides costs.

The motion is resisted on two grounds.

The first and principal ground is a discharge in bankruptcy, granted a .year later by the district court of the United States, for the district of New Jersey, which purports to discharge defendant from all debts and claims which existed on the 10th day of May, 1905, “excepting such debts as are by law excepted from the operation of a discharge in bankruptcy.”

The complainant replies to this defence that the debt for which the decree was granted is within that exception, and he relies on the fourth subdivision of sect: oar 17 of the Bankruptcy act, where are enumerated the several exceptions; the fourth of which is: “Such debts as were created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity.”

The coarrplainant contends that the debt herein arose by a misappropriation to his owoa use of aaroaaey which had been confided to him by complainant’s intestate in a fiduciary capacity.

To sustain this conteaition resort is had to the original bill in the cause, the answer thereto and the proofs and facts appearing at the trial, and the findings of the court thereon.

The bill charges that the intestate, in his lifetime, about the 20th of May, 1902, being in negotiations with the defendant in reference to a proposed partnership between them, deposited with the defendant the sum of $500 as and for his share of the partnership capital. The bill farther shows that immediately after such deposit complainaaat’s intestate was taken violently ill, and died of the illness on May 26th, and alleges that the actual formation of the partnership ivas interrupted by such illness aaad was never consummated.

The answer of the defendant dearies these allegatioaas, and sets up that there were in fact negotiations between the parties as to the formation of such partnership, but that the plan for such partnership did not include the use of any capital; that the defendant was employed as a salesman for a furniture house, and complainant’s iaatestate desired to join him ira the business of selling furniture, aaad that in order to carry out that piara it was necessary for defendant to abandon his present business connection, which was valuable, aaad that intestate paid him the $500 as a personal compensation to him for giving up his then present lucrative job.

The cause came on for hearing before me as vice-chancellor and I found the issue in favor of the complainant, and as a matter of fact, that the $500 was paid to the defendant as a contribution to partnership assets and funds.

I have since read over the stenographer’s minutes of the evidence and my oral reasons for the decree and am entirely satisfied with the result above stated.

It appeared at the hearing that the complainant’s intestate, at the date of the transaction, May, 1902, was twenty-four years old and single, and resided with his mother in Hackensack, New Jersey, and worked as a clerk on a small salary for his uncle, a New York business man.

The defendant was a married man, about fourteen years older than intestate, and lived with his wife in Hackensack.

He was a salesman on a salary of $30 per week for a New York furniture house.

Neither of the parties had any capital nor were either engaged in any business of any sort for themselves.

The defendant kept no bank account, but brought his weekly wage home to his wife every Saturday night, and handed it to her after the fashion of an ordinary mechanic.

In this state of affairs, about the 1st of May, 1902, the parties entered into negotiations to enter into the business of selling furniture as partners, and it was supposed that they would need a little capital in the business, presumably to pay traveling expenses and the like, which, under the arrangement between defendant and his employers, were paid by his employers in addition to his weekly wage. For the purpose of supplying this capital it was arranged that complainant’s intestate should contribute to the business $500, and the defendant contribute his knowledge and familiarity of the business to stand as an equivalent for the contribution in cash by the intestate.

Complainant’s intestate borrowed that sum from his uncle in a check dated May 17th, 1902, drawn by his uncle to his order. On the evening of May 19th (as near as the date can be determined) deceased took the check to the house of the defendant in Hackensack and there endorsed it over specially to him as his contribution to the capital.

Either at the moment of the endorsement or immediately after deceased was taken violently ill with malignant diphtheria.

Defendant took the check to New York and opened an account in his own name in a bank and deposited the check to his own credit. The date of the entry in the book is May 20th.

He called to see the deceased the same evening and found him very ill. They had some conversation on business matters heard in part by the deceased’s mother, who heard the deceased say to the defendant, “Let that remain for a few days.”

It appeared that no written contract had as yet been entered into between them, but typewritten sheets embodying a contract, with corrections, were found in the possession of the deceased. He died on the 26th of May.

Defendant called at once upon the uncle who had advanced the money, and the uncle recited to him the terms of the contract as hereinbefore stated, and he admitted it to be correct. He speedily used the $500 for his personal use.

The evidence satisfied me that the terms of the contract of partnership were substantially agreed upon, but that the intestate desired to have them reduced to writing.

Under these circumstances the question is whether the debt is excepted from the effect of the discharge in bankruptcy, and that question depends on whether it was received in the first place or afterwards detained by the defendant in a "fiduciary capacity.” That it was so received or detained I think there can be no doubt, if we give to these words their ordinary meaning.

Money is received or detained by one from another in a fiduciary capacity, when, in the mind of the person handing the money to the other, as such mind is known to that other, it does not become the absolute money and property of that other to do with as he chooses as his own money, but is received by him for a particular purpose in which a person or .persons other than the person receiving it is or are interested.

If two persons are in partnership and one is acting as cashier or financial manager and the other pays money to his partner to be used in partnership business, the money so paid is received in a fiduciary capacity. The receiver holds it in trust for the partnership and for the benefit of the partners in proportion to their several interests, and neither partner has the right to appropriate one dollar of it to his individual use without the consent, express or implied, of the other party.

Each partner for all the purposes within the scope of the partnership becomes the agent of each other partner and of the partnership entity, and when a present partnership is dissolved by death of one of the partners the survivor at once becomes a trustee for the representatives of the deceased.

Now, it seems to me, this sort of fiduciary capacity is clearly within the language of the act.

The words “fiduciary capacity” do not, in my judgment, refer to a technical trust such as forms the ordinary basis of treatises on that subject.

Mr. Iiill, in his introduction to his work on Trustees (at p. 1), defines a trustee as, in the widest meaning of the term, “A person in whom some estate, interest or power in or affecting property of any description is vested for the benefit of another.” And he says that that definition also extends to bailees, factors and agents whose duties in their fiduciary character are recognized and enforced at common law.

And Mr. Willis, in his treatise, published in Lord Eldon’s time (at p. 1), gives the same definition. The same effect is Mr. Perry in his book, section 1.

The original Bankrupt law of 1841 provided in its first section that

“all persons whatsoever residing, &c., owing debts which shall not have been created in consequence of a defalcation as a public officer, or as executor, administrator, guardian or trustee, or while acting in a/ny other fiduciary capacity”

might apply to be discharged in bankruptcy.

The fourth section, provided that no person who, after the passage of this act, should apply trust funds to his own use should be discharged.

Under that legislation the supreme court of the United States, in Chapman v. Forsyth, 2 How. 202, held that a balance due from a. mercantile factor to his principal arising out of the ordinary dealings between factor and principal is not a fiduciary debt in the meaning of that act. Justice McLean, in delivering the opinion of the court, held that the cases enumerated in the first section, namely, defalcation by public officer, executor, administrator, guarclian and trustee, were special trusts, the “other fiduciary capacity” mentioned must mean the same class of trusts, and says “the act speaks of technical trusts and not those which the law implies from the contract.” He then refers to the fourth section of the act which provided that the discharging certificate, when duly granted, shall in all courts of justice be deemed a full and complete discharge of all debts, contracts and other engagements of said bankrupt as are provable under the act, and may be pleaded as a complete bar. And the court further held that the creditor entitled to the exception must appear and show in the bankrupt court that he was entitled to the exception and that the court for that reason had no jurisdiction as to his claim.

Notwithstanding this decision the supreme court of New York four years later, in White v. Platt, 5 Den. 269 (1848), under the same act, held that a debt was not barred by an act of bankruptcy which arose under the following circumstances: Defendants were indebted to plaintiff in a sum certain. They transferred to him certain promissory notes as collateral to secure the indebtedness. Before the maturity of these notes the plaintiff" returned them to the defendants to collect them on plaintiff’s account as his agent. Defendants collected the notes and did not account to plaintiff therefor. The court held that they received them in such a fiduciary capacity that they were not discharged by a discharge in bankruptcy. This case has never been doubted, but was cited with approval by Judge Strong, speaking for the supreme court of the Hnited States, in Clark v. Iselin, 21 Wall. 360 (at p. 368). Here a transaction in all respects similar to that involved in While v. Platt, supra, is thus characterized in the headnote:

“When a person, borrowing money of another, pledges with that other a large number of bills receivable as collateral security for the loan (many of them overdue), the pledgee may properly hand them back to the debtor pledging them, for the purpose of being collected, or to be replaced by others. All money so collected is money collected by the debtor in a fiduciary capacity for the pledgee.”

I stop here to say that the distinction between the New York case and the one in Chapman v. Forsyth, supra, is one which runs through all the cases and is noticed by the judges, namely, that a factor who sells goods for a principal naturally and in the ordinary course of business mingles the proceeds of the sales with his own money and the amount at once becomes a simple debt, and that the principal or consignor of the goods is presumed to have notice- of the ordinary course of business. In fact it is a pure mercantile transaction resulting in an implied contract and the natural remedy is by action of assumpsit at common law. In the case in New York and others I shall have occasion to cite there could be no such usual course of business, and it was the duty of the debtor defendants, as soon as one of the collateral notes entrusted to them for collection was paid, to transmit the proceeds instanter to their creditor.

The act of 1867 varied in its language from that of 1841. It provided, not in the first section, as in that act, but in the thirty-third section, that “no debt created by the fraud or embezzlement of the bankrupt or his defalcation as a public officer or while acting in any fiduciary character” shall be discharged under the act. The contrast between this section of the act and the corresponding section of the prior act is manifest. By dropping out the word “other,” found in the first section of the old act, the legislature divorced the words “fiduciary capacity” from the list of specific trust positions enumerated in the older act. Moreover its position in the statute is significant. And this was the view taken by many federal and state courts when that act first came under judicial consideration. Judge Blatchford, then district judge, so held in Ex parte Seymour, 6 Int. Rev. Rec. 80; 1 Ben. 348, and his view was approved by Justice Nelson of the supreme court of the United States in In re Kimball, 6 Blatchf. 292, and by many other judges.

As late as 1883 Judge Pardee followed those judges in Fulton v. Hammond, 11 Fed. Rep. 291. In that ease Hammond had received from the clerk and master in the chancery court of Lincoln county, Tennessee, a sealed bill made to him in his official capacity for a large sum of money for collection, signing therefor a receipt (containing a copy of the note) in these words: “I receive said note to collect -without suit, if practicable. If not, I am to employ counsel and collect by suit if necessary.” In a suit by the successor in office of the original payee to recover the amount collected by Hammond the latter pleaded a discharge in bankruptcy. Judge Pardee declined to allow the plea, referring to White v. Platt, supra, and the cases decided by Judge Blatchford and Justice Nelson above cited, and held that the distinction is clear between the case of a commission merchant or cotton factor selling goods in the ordinary course of business and a man employed to collect money. He shows distinctly and clearly that the case of Chapman v. Forsyth, supra, does not apply to the act of 1867. So far as I can find Fulton v. Hammond has never been questioned.

But notwithstanding the line of cases of which In re Kimball is one, a somewhat different construction was finally put upon the act of 1867, and a different line of decisions was adopted which culminated in Hennequin v. Clews, 111 U. S. 676 (1884).

Hennequin was a French merchant doing business under a letter of credit on London issued by Clews & Company, New York bankers. Hennequin’s practice was to draw upon the strength of his letter of credit on Clews & Company on time and before the draft matured to put Clews & Company in money to meet it. The transaction amounted to an acceptance in advance by Clews & Company of Hennequin’s bills of exchange, but no debt arose from Hennequin to Clews & Company until the latter was obliged to pay the draft. In point of fact no debt ever did arise, because Hennequin always provided funds in advance. But in order to secure Clews & Company according to mercantile custom, Hennequin deposited with Clews & Company certain collateral securities in the shape of negotiable bonds. In that state of things Clews, being pressed for money, pledged or disposed of the collateral deposited with him and then failed, and got a discharge in bankruptcy. The court of appeals of .New York (77 N. Y. 427) indirectly, and the supreme court of the United States (111 U. S. 676) directly, held that his discharge in bankruptcy released that particular debt.

Justice Bradley, speaking for the latter court, held that the question was covered by the previous ease of Neal v. Clark, 95 U. S. 704. In dealing with the question, however, the learned justice (at p. 680) gives a long list of cases in which the federal and state courts had taken a contrary view, including therein the cases decided by Judge Blatchford and Justice Nelson, supra, and a case in Missouri and several others, citing only two cases in accord with the decision which the court was pronouncing.

But (at p. 683 et seq.) he shows that the English authorities dealing with nearly or quite similar language were decidedly the other way. He does not cite the ease of Fulton v. Hammond, supra, decided by Judge Pardee.

The case of Neal v. Clark, supra, referred to by Justice Bradley in Hennequin v. Clews, was this: The executor of an estate sold some of its assets to Neal at somewhat of a sacrifice. The executor was then a man of large property and undoubted solvency. Neal made no inquiry as to the condition of the estate, and the executor gave him as a reason for selling the securities that the estate was in debt to him for moneys advanced. Ten years after Neal purchased the bonds and seven years after the executor had become insolvent and left the state, after having previously given a new bond as executor, Clark and Holland as sureties on that bond, brought an equity suit against Neal and others and charged the executor with a devastavit in selling the bonds to Neal, and that Neal, in view of the circumstances under which lie received the bonds, became a participant in that devastavit. Neal had been discharged in bankruptcy in the meantime and pleaded his discharge in the suit. The Yirginia court held him liable on the devastavit, and refused him the benefit of his discharge in bankruptcy, which discharge contained the same exception as that found in the one dealt with here. He was held liable in the Yirginia courts on the ground that he had been guilty of fraud or embezzlement under the act of 1867. The force of the words “acting in a fiduciary capacity” were not at all involved. The supreme court of the United States held him entitled to the benefit of the discharge on the distinct ground that the debt was not “created by the fraud or embezzlement” of the bankrupt.

With great respect I am unable to see how that decision can be said to directly support the decision in Hennequin v. Clews, to except Clews from the charge of fraud or embezzlement.

Hennequin v. Clews was followed by Palmer v. Hussey, 119 U. S. 96 (1886). There the plaintiff had loaned to Hussey a large quantity of United States bonds under a written contract by which Hussey agreed to hold the bonds subject to the plaintiff’s order, collect and pay him the coupons free of charge, and “allow him two joer cent, per annum interest on the par value of the bonds.” The acceptance of that contract by the plaintiff from Hussey amounted to an implied permission to Hussey to make use of the bonds in his business, presumably by borrowing money on them, for how otherwise was he able to pay interest for their use ? And if he was permitted to use them by borrowing money on them, they were, of course, at the ordinary risk of mercantile transactions. The case cannot be distinguished from any ordinary loan of money.

Another case was Noble v. Hammond, 129 U. S. 65 (1888). There Hammond had a claim against a railroad company, and, for his own convenience, drew an order on the company in favor of Noble, who was engaged in business, for the amount, and handed it to him for the purposes of collection. Noble asked Hammond what he was to do with the money when collected, and was told by Hammond to keep the money until called for. That was Hammond’s account of it. Noble’s account was that he was to keep and use the money until called for. In any point of view it was plain that Noble expected Hammond to keep the money as an ordinary deposit as a bank would keep it. Hammond was a business man using considerable sums of money, in perfectly good standing and having no reason to suppose that he was liable to financial trouble, and while in that condition collected $1,000 from the railroad and mixed it with his own funds. Shortly afterwards, through an unanticipated business loss, he was compelled to go through bankruptcy. It was found as a fact that there was no evidence tending to show actual fraud or any fraudulent intent in defendant’s mingling the money with his own. The supreme court held that he was discharged by those proceedings. There it was plain that the transaction amounted to a loan by Hammond to Noble.

A still later case is Upshur v. Briscoe, 138 U. S. 365 (1890). In that ease one Andrews made a present to his daughter Annie of $10,000 and placed the money in the hands of’Briscoe, accompanied with a written contract which amounted to a special settlement of the money upon his daughter and her heirs, and at the same time to an absolute covenant on the part of Briscoe sooner or later to pay the whole sum of money with interest. Briscoe thereby became an absolute debtor and at liberty to treat the money as his own. It was not contemplated or provided for that he should hold the money as trustee and invest it for the benefit of the cestui que trust. The transaction amounted to an absolute obligation on Briscoe’s part. Under those circumstances the court held that the discharge in bankruptcy barred a claim against him personally, but the court enforced it against an estate which he had transferred to his wife fraudulently in anticipation of bankruptcy. This was, on its face, a “technical trust,” and hence was within some of the definitions given by the judges in construing the language here in question. They said the words “fiduciary capacity” referred to a “technical trust.” But the court, in Briscoe v. Upshur, did not rely on the form of the afiair, but on the actual substance, and distinctly relied on the fact that an absolute debt by Briscoe was created by the instrument.

We come now to the act of 1898. The language of that portion of the act here in question is variant from the act of 1867 above cited, and is as follows: “Except such as were created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity.” The act of 1867 speaks of a debt created by the fraud or embezzlement of the bankrupt or by his defalcation as a public officer or while acting in any fiduciary capacity. Here the word “misappropriation” is added. The meaning of that word as given in the dictionaries is “wrong appropriation” (Webster), and according to the Encyclopedic Dictionary “to appropriate wrongly or wrongfully; to turn or put to a wrong purpose; the act of misappropriating or turning to a wrong purpose.”

I can well perceive that, as used in this statute, the misappropriation must have been consciously done. The party must have known and felt at the time that he was misappropriating the money.

The only case in the supreme court of the United States to which my attention has been called, construing this part of the act of 1898, is Crawford v. Burke, 195 U. S. 176 (1904). That was a suit much like Hennequin v. Clews. The bankrupt was a broker who, as a part of his business, bought, held and carried stocks on a margin for his clients, and in the ordinary course of his business bought and carried stocks for Burke. The transactions between them were the ordinary gambling transactions in stocks carried on a margin. While so doing the bankrupt sold out his principal’s stock without his knowledge. Pending a suit in trover to recover damages for converting the stocks so sold the broker obtained his discharge in bankruptcy and pleaded it puis darrein continuance. It was held by the supreme court of Illinois that the discharge was no bar. On error to the supreme court of the United States that court held that the fiduciary capacity did not exist. The distinction between that case and the present is clear.

It remains to consider some cases in our own state. Among them are Gibson v. Gorman, 44 N. J. Law (15 Vr.) 325. There the question arose as to the effect of a discharge in bankruptcy under the act of 1867 upon a judgment recovered in assumpsit. The debt arose out of two payments by the plaintiff in the judgment to the defendant in the judgment of the advance money or deposit on a purchase of lands which the defendant had-for sale as an agent. The money was paid to him in the ordinary course of business. The sale in one instance was never completed on account of some supposed defect in the title, but the deposit was held by the agent for a long time in hopes that the title would be completed. In the other ease the advance payment was withheld under a claim of commissions. Both sales fell through. It was held that neither of the sums was received in a fiduciary capacity, but were paid in the ordinary course of business in which the parties were engaged, and it was only by reason of what was claimed to be the defect in the title in the one case and a misunderstanding as to price in the other that the plaintiff was entitled to recover at all.

Another case is The Smith & Wallace Co. v. Lambert, 69 N. J. Law (40 Vr.) 487. That case was on demurrer to a replication to a plea of discharge in bankruptcy which set up simply that the cause of action was excepted from the operation of a discharge in bankruptcy because it was created by fraud. It wa» held that the replication was bad. The question here involved was not there involved or discussed.

The latest case is Reeves v. McCracken, 69 N. J. Eq. (3 Robb.) 203. The bill in that case was filed for an account of moneys received by McCracken to the use of the complainant in the sale of lands conveyed by the complainant to the defendant in trust for complainant. The fact was that it had been so conveyed by complainant to defendant in fraud of complainant’s creditors, and that no written declaration of trust had been made. It was held that the money could not be held to have been received in a fiduciary capacity, because there could be no trust in the case—first, because no trust was declared in writing, and second, because the fact that the conveyance as between the parties was valid and binding, and.the complainant could never have recovered back the land from the defendant on the ground of a lack of consideration for the conveyance, but was absolutely bound by it because made to defraud creditors.

The learned vice-chancellor does indeed cite and comment upon many of the cases I have already cited, and relies upon them to show that only a technical trust, so called, is within the meaning of the words “fiduciary capacity” as used in the seventeenth section of the Bankruptcy act. But, with great respect, I do not think that that question was involved in the case before him; and further, I am of the opinion that the case is clearly distinguishable from the present.

The complainant herein appeared before the judge in bankruptcy and objected to the discharge of the defendant on the ground of fraud in the creation of the debt, and the learned judge was unable to find any fraud in the case as presented to him, which was simply the pleadings in the suit in equity which resulted in the decree. I do not find from his opinion that he discussed the question of fiduciary capacity.

The question whether the claim is expected from the discharge is one for the forum where it is pleaded to determine, and hence is entirety within the jurisdiction of this court, as held in Marshall Paper Co. v. Train, 102 Fed. Rep. 872; 43 Cir. Ct. Ap. 36.

1 have already referred to the reasoning by which the courts have held that the ordinary relation between factor and principal was not fiduciary within the meaning of that word here involved. It is that those transactions are mercantile transactions in which the principal must have known that his factor would, in the ordinary course of business, mingle the money received from the sale of his goods with his own, and that the ordinary relation of debtor and creditor arose out of those transactions, and that it was not the duty of the factor to earmark or segregate the proceeds of the sale of his principal’s goods and remit at once. In fact, the ordinary course of business in such cases renders such restrictive dealing impracticable. The principal often obtains from the factor money in advance upon his goods, and the goods are not sold ordinarily in a lump, nor is the payment received in a single lump. The principal relies upon the personal responsibility of his factor. The courts held that it was and is contrary to public policy, as manifested in the Bankrupt law, to except such a large class of unfortunate creditors from its benefits. This consideration covers the case in -2 How. cited hereinbefore, and all cases of that character.

The same consideration applies in a less striking degree to the case of Hennequin v. Clews. There, as we all know, Mr. Clews, like all bankers engaged in the business of issuing letters of credit, had numerous letters of credit outstanding in various parts of this country and Europe. He could not at any moment know how many drafts had been drawn against him upon which he was liable. He could only know the extent of his possible liability at any moment. He did know that his failure to meet one of those drafts would create great disturbance in mercantile circles, and he was justified by mercantile custom in going to extreme lengths in saving himself from a default in accepting and paying any such draft, and that it was to the interest of the holders of his letters of credit, especially of those who had drawn against him, that his insolvency should be averted. Among those who may have drawn upon him was Hennequin. Under these circumstances it is by no means a stretch to say that mercantile usage justified him in devoting all these collaterals which he held as security from the holders of his letters of credit to protect himself and his customers, if practicable, from the consequences of failure to protect the drafts drawn by the holders of the letters. The situation brings him without the policy of the law.

Coming now to the case in hand, I find the present case not within the principle upon which those cases were founded, nor within the facts involved in those cases. It had nothing of a mercantile character. The defendant was not engaged in any business which required the use of money. He had no bank account, and opened one in his own individual name with the very money handed to him by complainant’s intestate, and immediately after the intestate’s death drew it out of bank for his personal use. I think the case is clearly within the case of White v. Plait, supra, and is within the definition of the words “fiduciary capacity” found in the headnote to Clark v. Islin, supra, and it is also within the case of Fulton v. Hammond, decided by Judge Pardee in the federal court, and cited above. It is also within the ruling of the supreme court of South Dakota in Shipley v. Platts, 97 N. W. Rep. 1 (1903). There the plaintiif, the proprietor of a laundry, employed the defendant as a distributor and collector of laundry material, and to collect from the patrons of the laundry their current dues and return the same to the plaintiff, less the defendant’s commissions. In an action to recover the moneys so collected and not paid over, defendant set up his discharge in bankruptcy, and the court, relying mainly on White v. Platt, In re Kimball, Fulton v. Hammond, and other cases in the same line, held the discharge no bar. It is true the court did not refer to the cases I have reviewed, decided by the supreme court of the United States.

As applicable to the whole position here, I refer to the case of Burdick v. Garrick, decided in the. vice-chancellor’s coart by Vice-Chancellor Stuart, and affirmed on appeal by Lord-Chancellor Hatherly and Sir G. M. Giffard, lord-justices. L. R. 5 Ch. Ap. 233 (1870). There the contest was over a sum of money held by an agent acting under a power of attorney to sell lands, with power to invest the proceeds for the benefit of the principal, in the agent’s own or anyone else’s name. The agent never did invest the money, but deposited it in a bank to the credit of a firm of which he was a member, and it wras held that the agent could not set up the statute of limitations, and that the bill in equity was a proper remedy. The judges distinguished Foley v. Hill, 2 H. L. Cas. 28, where it was held that the relation between an ordinary depositor in a bank was not that of trustee and cesiui que trust, but of debtor and creditor. That case has the same characteristic as that of White v. Platt, Fulton v. Hammond and Shipley v. Platts, above cited, namely, that the money or property wras placed in the hands of the defendant for a specific purpose which made him a trustee and his situation that of a fiduciary.

But whatever may have been the character in which the defendant herein received the money in the first instance, there can be no doubt as to the character in which he held it at and after the death of the intestate; that death dissolved the partnership at once, and the defendant’s legal title to the money became absolute. But he held that legal title strictly in trust for the complainant’s intestate. No business had ever been done under the partnership, so that he had no title, on a settlement of the partnership affairs, to any part of it. Feeling the force of this, he set up in his answer to this action an absolute title in the whole sum under what he alleged to be the contract between the parties, namely, that he was to have that money, not as a contribution to the partnership funds, but as compensation to himself personally for giving up his present position as salesman. I found that issue against him expressly, and I found impliedly that, as the partnership business had been arrested and the partnership dissolved by the death of intestate before anything had been done under it, the complainant was entitled to the whole fund.

I have said that on the death of the intestate the partnership was at once dissolved and the absolute legal title to the money became vested in the defendant, and that he held it in trust for the partnership, which in this case amounted to holding it in trust for the complainant’s intestate. It was on this ground that the action was brought and maintained in this court. That this is the true statement of the relations between the parties cannot be doubted. In Lew. Trusts (8th ed., reprint by Flint) 277 (1888) this relation of partners to each other is distinctly recognized, and while it has been held that that relation does not go so far as to prevent the application of the statute of limitations, it seems quite clear that the relation between the personal representatives of the deceased partner and the surviving partner is quite distinct from that between a principal and his factor or agent in the ordinary mercantile relation out of which an action of assumpsit at law will arise, and the universal rule is thar resort must be had to a court of equity.

It is true that the doctrine that the surviving partner holds the property of the partnership in trust for the personal representatives of the deceased partner has been repudiated and the contrary held in cases where the rights of third parties or the statute of limitations was involved. The leading case on that subject is Knox v. Gye, 5 Eng. & Ir. Ap. Cas. 656 (1872). There the sole question was the operation of the statute of limitations. Lord Westbury uses the following language: “Another source of error in this matter is the looseness with whicn the word Trustee’ is frequently used. The surviving partner is often called a Trustee,’ but the term is used inaccurately. He is not a trustee, either expressly or by implication. On the death of a partner the law confers on his representatives certain rights as against the surviving partner, and imposes upon the latter correspondent obligations. The surviving partner may be called, so far as these obligations extend, a trustee for the deceased partner, but when these obligations have been fulfilled, or are discharged, or terminate by law, the supposed trust is at an end.”

Against this mere dictum, Lord Hatherly (at p. 678) vigorously protests. The other law lords, Lord Chelmsford and Lord Colonsay, agreed that the statute of limitations applied without discussing the question of the fiduciary relations between the parties or relying on it. All agreed that the bill in chancery was the proper remedy. Lord Westbury did indeed hint that the old action at law for an account would lie.

Mr. Clement Bates (2 Bates L. Part. §§ 718, 719) reviews the language in Knox v. Gye with ability, and cites cases in support of his criticism.

Whatever may be the proper language to apply to and describe the relation existing between the complainant’s intestate and the defendant, it is quite clear that the obligations arising out of the circumstances under which the defendant became indebted to the complainant’s intestate were not in the ordinary course of mercantile business, and did not give rise to the right to sue and recover in an ordinary action at law, because it was within the province of the defendant to set up and prove that the fund had become involved and depleted by legitimate use in the partnership venture to which it was contributed as capital before that partnership was dissolved by death. lienee the complainant’s proper remedy was a bill in this court for an accounting, precisely as if such a state of facts as I have indicated had existed.

Now, if we go back and review the opinions in the eases I have cited we will find that this distinction in the proper remedies is adverted to, and in a measure relied upon, in determining whether the debt is or not barred by the discharge. It is hardly necessary to advance arguments to show that, the trust relation being established, the use of the fund for his individual benefit was a misappropriation within the meaning of that word in the act.

Por these reasons I am of the opinion that the defendant’s debt, manifested by the decree, is not discharged by the decree of the bankrupt court.

The next defence set up by the defendant is his inability to paje Por this he relies upon his ex parle affidavit read at the hearing, in which he says he has a wife and one child, and rerecives $30 per week, or $1,560 per year, salary, and therefore he cannot pay anything. The same excuse was set up in answer to proceedings similar to these instituted after decree and before bankruptcy proceedings were taken. Then, as now, the defendant relied upon his ex parte affidavit. Of course, the complainant is entitled to have the defendant subjected to examination. In the former case the proceedings were dropped or suspended on a verbal undertaking, at my suggestion, that the defendant should pay $5 per week, which he did for two weeks, and then took bankruptcy' proceedings. In the present case I think it will be no hardship on the defendant to contract his living expenses to the extent of $5 per week. This is a mere suggestion to save expense, and need not be accepted by either party, but each may fall back on the regular practice of an oral examination.

The case is clearly one justifying the extraordinary process of the court.

The obligation which is the foundation of this suit arose as soon as the intestate died. It was then the duty of the defendant to preserve the fund so that he could account for and pay it over to the personal representatives of the deceased when appointed and duly accredited. The equitable wrong committed by the defendant was the misappropriation of that fund by treating ic as his own and applying it to his personal use.

, If the complainant’s right had been a legal one, enforceable in a court of law, it would have warranted process against the body. As, however, his right was an equitable one, and enforceable in this court, he is entitled to the corresponding remedy of this court, subject, however, to this exception, that while in a court of law the process against the body would be issued without regard to the defendant’s personal ability to pay, and he be remitted to his remedy by insolvent proceedings, in this court he will not be deprived of his liberty if it appears in advance thax he is unable to respond and obey the order of the court.

This view is entirely in accord with that of the court of errors and appeals in Grand Lodge Knights of Pythias v. Jansen, 62 N. J. Eq. (17 Dick.) 737. The foundation of the decree in that case, as shown by the opinion in the original cause (56 N. J. Eq. (11 Dick.) 63), was briefly as follows: Jansen and others were members of Germania Lodge, No. 50, of the Knights of Pythias, and became dissatisfied with some of the conduct of the grand lodge, and, being aware that any failure to obey and observe the laws of the grand lodge would result in a forfeiture to the grand lodge of all the funds of the inferior lodge, amounting to hundreds of dollars, deliberately set to work and, in defiance of an interlocutory order of this court, distributed the money among themselves. The result was that later on a final remedial decree was made against all of them who actively engaged in the scheme, and they were directed to pay the money to the grand lodge.

Failing so to do, proceedings in attachment were taken against them on two grounds—first, for punitive purposes, in disobeying the interim restraining order of the court; second, remedial to the grand lodge for not paying over the money in obedience to the final decree. The real basis of the final decree was the wrong appropriation of the money in their hands after they had been enjoined by this court. On those contempt proceedings Jansen and others were adjudged guilty of contempt and committed tc the custody of the sheriff. An appeal was taken from that order. The matter was argued both above and below by able counsel. Neither in the court below nor on appeal was the point taken that proceedings against the body were not proper or lawful, but the order below was reversed on the single ground that it appeared by the affidavits already in the case that the defendants were unable to pay the money, and therefore the imprisonment should not be imposed.

I will advise an order in accordance with these views.


source: Caselaw Access Project

author: Pitney, Advisory Master.

license: Public Domain

text:
    The Standard Oil Company v. Robert Buchi et ux.
    [Submitted April 4th, 1907.
    Decided April 17th, 1907.]
    1. A deed whereby, for a cash consideration named and the payment of damages to be ascertained by disinterested persons on oath, one grants the right to lay pipes for the transportation of petroleum, together with all the rights and privileges necessary to the enjoyment of the grant and the removal of the pipes, the pipes to be laid within ten feet of the line of the grantor’s property, does not convey a mere easement in gross, nor a license which may be revoked at the will of the grantor, and it is not revoked by its assignment to a third person.

      2. Under a grant of right to lay pipes in land to convey petroleum, the exercise of the right by the laying of a single pipe and later of a second pipe does not define the extent of the easement so as to prevent the laying of a third pipe.
    3. Under a grant of right to lay pipes in land to convey petroleum, the mere lapse of time does not affect the right of the grantee to lay additional pipes.
    On order to show cause why an injunction should not issue. Heard on bill and affidavits.

      2Ir. Gilbert Collins, for the complainant.

      Mr. J. Emil Walscheicl, for the defendants.
   Pitney, Advisory Master.

The object of the bill is to obtain judicial restraint preventing the defendants from interfering, by strong hand and serious threats of violence, with the complainant’s work in laying across the lands of the defendant in Bergen county a line of pipe for the transportation of oil.

At and just before the filing of the bill the complainant had placed on the premises of the defendant a number of joints of pipe, and had leaded them together,, ready to be buried beneath the earth, and its workmen were about to excavate a trench for that purpose when they were driven from the premises by threats of the defendant’s daughter to shoot them, accompanied with the actual presentation of a pistol.

The complainant claims the right in question by virtue of a deed dated the 30th day of October, 1882, and duly recorded on the 6th day of December, 1882, in the clerk’s office of Bergen county, where the lands lie, between James H. Kingsland, predecessor in title of the defendant and then the owner of the lands in question, and one John B. Barbour, under whom the complainant claims.

That deed, or so much of it as is necessary for present purposes, is as follows:

“Witnesseth, That for and in consideration of five dollars, in hand paid, the receipt of which is hereby acknowledged, and the further sum of twenty dollars, to be paid before any pipe is laid, the party of the first part, liis heirs and assigns, hereby grants to the party of the second part, his heirs and assigns, the right of way to lay pipes for the transportation of petroleum, and operate the same on, over and through his lands, in said county of Bergen, in said State of New Jersey, described in a certain deed dated September 13th, 1881, and recorded in the county clerk’s office of Bergen county, in Book Z-10, page 542, of Deeds, together with all the rights and privileges incident and necessary to the enjoyment of this grant and the removal of said pipes.
“In further consideration of said grant and demise, the party of the second part hereby agrees to bury the said pipes a sufficient depth so as not to interfere with the cultivation of the soil, at least three feet, and to pay any and all damages which may arise from the laying, maintaining or operating of said pipe lines, said damages, if not mutually agreed upon, to be ascertained and determined by three disinterested persons, on oath, one thereof to be appointed by the party of the first part, his heirs and assigns, one by the party of the second part, his heirs and assigns, and the third by the two so appointed as aforesaid, and the award of such three persons shall be final and conclusive.
“It is understood and agreed between the parties hereto that said pipe lines are to be laid within ten feet of the southerly lines of the above-described property, excepting where there are angles in said property lines, at which points such deflections shall ■ be made therefrom as the surveyor of the party of the second part may decide to be necessary.
“Witness our hands and seals the day and year first above written.
“(Signed) Jas. H. Kxeíqsland. [t. s.]
“(Signed) J. B. Barbour.” [l. s.]

The bill alleges, and in this respect is supported by the affidavits, or at least is not -disputed on this motion, that the grantee, Barbour, was a mere agent or trustee for procuring the right of way (and land for pumping stations) for a continuous underground series of pipes conducting petroleum from Pennsylvania and other oil-bearing regions to tidewater; that in 1880 he purchased certain land in Bergen county from a Mrs. Zabriskie, and an adjoining tract from one Knowles, for the purpose of a pumping station, which he immediately conveyed to the Standard Oil Company, and that the deed above mentioned from Kingsland was also taken by said Barbour as a pan, of the right of way for a great pipe-line system for conducting oil from the oil regions to tidewater, and shortly afterwards was assigned and conveyed to the complainant, and a continuous line of oil-bearing pipe was laid over it, including the Kingsland strip, and pumping stations erected, and the pipe line put in use for the purpose of conveying oil, and has been in use ever since.

That later on, in 1894, a second pipe line was laid alongside the first along the entire length of the ICingslancl property and put in immediate use, and that the object of the present proposed interference with the soil of the defendant is to lay a third pipe line over the whole right of way, close beside the first.

The justification set up by the defendant amounts to a demurrer to the bill, and the argument in its support may bo briefly stated as follows: That the grant contained in the Kings-land deed amounted to no more than the grant of an easement without the naming of any dominant tenement, and therefore amounted to no more than an easement in gross, which was not assignable, and hence amounted to a mere license, and was determinable at the will of the licensor; that the license was in law immediately abandoned by the assignment thereof, and that it was also formally determined by a notice of revocation given by the defendant Buchi to the complainant, dated March 5th, 1907, and annexed to the bill of complaint.

The first inquiry naturally is, what is the true character of the grant in question ?

Is it properly classified either as a true and simple easement or as a mere revocable license, or is it something more than either ?

It is to. be observed, in the first place, that it is an instrument under seal and expresses to be for a valuable consideration presently paid, with the provision for the ascertainment of a further consideration in a mode, the reasonableness of which seems to me to be quite apparent and which has not been attacked in the argument.

In the next place, it is not a mere promise to do something in the future, nor is it a mere permission, but it is a grant in pnesenii, and it is not a mere privilege given to the grantee which can be considered as merely personal to him, such as a privilege to wander over ground with or without the privilege of hunting or fishing, but it is made to the grantee, his heirs and assigns.

Then it is not the mere privilege to walk or pass over land without the right to disturb the soil, as is a right of way, but it is a “right to lay down pipes for the transportation of petroleum and to operate the same over” the lands, “together with all the right and privileges incident and necessary to the enjoyment of the grant and the removal of the pipes.” This grants rights in the soil in perpetuo.

Now, just here the defendant attempts to meet this aspect of the case by setting np that he does not propose to dispute or disturb what has already been done under the so-called license, or to interfere with the complainant in the enjoyment of its works already on his land, but he claims the right to prevent any further exercise of the rights mentioned in the grant. Nor does he contend that the right to lay the third line of pipes is not included in the terms of the grant. Nor does he contend that there is anything inequitable in the complainant’s standing before the court. On the contrary, he puts himself on the bold, bare ground that because there was no dominant tenement mentioned in the grant to which what would have been an easement was appurtenant or appendant, the easement, so called, became one in gross and not assignable, and by its attempted assignment ceased to exist in law, or at least degenerated into a mere license, revocable so far as not acted upon.

■ Now, is it possible to treat the document in question as having no greater force than that ? The doctrine contended for, if logically applied, leads to this result: If Mr. Barbour had paid Mr. Ningsland $1,000 in cash for this grant, and had the next day assigned it to the complainant, it would have been possible for Ivingsland to have immediately destroyed the value in the law of his grant by a formal revocation of it, and the complainant would have had no relief in equity by showing that Barbour was acting merely as its agent, for it is not contended by the defendant that the Standard Oil Company has not the capacity in law of holding the title to and operating a pipe line such as that described and in actual use. And it is to be observed that the question is not whether, in the then present condition of the law, the Standard Oil Company had the right to acquire by condemnation proceedings the lands and rights of way for its pipe line and pumping stations from the western oil fields to tidewater, but the question is whether, having first purchased the lands and rights of way through agents, by means of divers conveyances which did not disclose, so far as relates to mere rights of way, any termini or dominant tenement, it could have been prevented by any one of the grantors from proceeding to lay its pipe across the grantor’s land. Or rather, whether, having acquired title in that manner, by grants which provided in effect the right to add to its pipe line from time to time, and having acted upon those grants so obtained, and having built a great trunk line and being in possession and use thereof, it may be prevented from adding thereto on the ground here taken.

The question is a serious one and has received my careful consideration, aided by elaborate arguments by counsel.

It is serious because it is quite notorious that it has been a common practice in starting great enterprises of this character, to acquire necessary rights in the manner here adopted.

Now, to return again to the grant itself. In addition to the characteristics already noticed it is to be remarked that the object of the grant is mentioned, namely, the transportation of petroleum. Now, it was then common knowledge that petroleum was produced mainly, if not entirely, in Western Pennsylvania and regions to the west of that locality, hundreds of miles from the locus in quo. and that its principal place of preparation, by refinement for market and distribution, was in or near the city of New York. Now, it seems to me that under these conditions the grantor and his assigns are chargeable with notice, from the very language of the grant, that this line of pipes was to extend from the various sources of the crude petroleum to tidewater, and that, from the very nature of the case, it was not' a mere easement which granted to a dominant tenement a right or privilege in a servient tenement. And I think, further, that the grantor could not have supposed that the grantee, Barbour, expected himself, personally, to exercise the right granted, but that it would be transferred to some corporation for exercise in connection with many other like -grants, the whole creating a long through route from the oil regions to tidewater.

Now, with these preliminary remarks, is it possible to conceive that the idea of an easement requiring a dominant tenement could have been in the minds of the parties, and further, is it possible that the grant could be construed to be one involving a dominant tenement to which it was appurtenant ?

The idea underlying the ordinary easement is that it is at the expense' o'f one tenement, called the servient tenement, and for the benefit especially of another tenement, called the dominant tenement. Clearly the right granted by the deed in this case was not of that character, and hence it must be construed by rules not applicable to those of ordinary easements. There was in this case and could in the nature of things be no dominant tenement.

Nor is it, in its essential nature, a license, nor can it be reduced in its nature in that respect. It by its terms granted a permanent right to lay the pipe, to maintain the same and to remove the same. It gave an interest in the land quite as positive and as permanent as that in which a deed is given granting the right to lay a line of water pipes or to erect a line of telephone poles across the grantor’s land, where the circumstances indicate that the work done thereunder was to be permanent.

From these considerations, based on general and familiar principles, I come to the conclusion that the defendant’s position is untenable, especially when urged in a court of equity.

Let us now consider some of the authorities cited by the learned counsel for the defendants.

Among the first of those is the famous case of Ackroyd v. Smith, 10 C. B. (1 Scott) 164 That was the case of the conveyance of a piece of land with a right of way over other lands of the grantor to the land conveyed, with the addition of the words “for all purposes,” and it was held that an assignee or grantee of the land so conveyed could not justify under the grant unless he showed that the act done under it would be justifiable without the words “for all purposes.” That was in effect holding that a right of way in gross was not assignable. It was a case of pure easement of way, which gave no interest in the' soil itself.

It is proper to remark here that the doctrine so established has been. confined generally to cases of pure easements. See Goodrich v. Burbank, 12 Allen 459, and see, per Justice Earl, in Mayor, &c., of New York v. Law, 125 N. Y. 380 (at p. 392), where he says: “It is quite true that easements must generally be appurtenant to some land or estate, and that there must be a dominant estate to which the easement appertains and a servient estate upon which it is imposed. But that is not true of all easements. There may be easements in gross which are not appurtenant to any land, and which the owner may enjoy, although he does not own or possess a dominant estate, or any land whatever. Here the intention was to create an interest in this wharf by this grant which the grantee could enjoy himself or convey to any other persons.”

The next case cited by counsel is East Jersey Iron Co. v. Wright, 32 N. J. Eq. (5 Stew.) 248. That was the case of a license or privilege, under seal, given by the owner of certain lands’ to one Rude, whereby the owner agreed with Rude, his executors, administrators and assigns, that he and they should have the exclusive right and privilege of raising and removing ore from certain lands belonging to the owner, with the privilege of entering upon them for the purpose of raising and removing ore and erecting buildings, &e. Rude, as the only consideration, agreed to pay the owner twenty-five cents per ton for all ore removed. This paper was executed in 1857, and all that was done under it was to dig a hole deep enough to show the existence of the vein of ore. It was then abandoned by Rude and his assigns. The original owner, who gave the instrument, passed the title to his son, who made a new grant or license to a new party, who entered and worked the mine. It was held by Vice-Chancellor Van Fleet that it was a mere license, and not a grant, and that it was not a lease, citing numerous well-considered authorities. Moreover (and this is the principal ground of his decision), he held that the instrument plainly showed that the licensee was bound to enter within a reasonable time and prosecute the work, so that the owner would receive the consideration; that he could not stand by, like a dog in a manger, and do nothing, and thereby disappoint the owner of the land in what was his reasonable expectation, namely, to receive the royalty of twenty-five cents per ton of ore, as provided for in the instrument, and that his conduct in that respect amounted to an abandonment of his rights, whatever they were, under the instrument.

The next case cited by counsel is Eckert v. Peters, 55 N. J. Eq. (10 Dick.) 379. In that case one Green, being the owner of a sea-front tract of land of considerable extent, lying on the easterly side of Ocean avenue in Monmouth county, and reaching from that avenue to the sea, and another separate tract on the west side of Ocean avenue, granted the tract on the west side, which was capable of being divided into several tracts, to a grantee,

“together with the free use and full rights of sufficient land on my sea front for bathing purposes, with the right to erect thereon bath-houses, and use the same free of charge, undisturbed, at any time.”

It was held that while that grant gave the right to future owners of the lands on the west side a right of way from the avenue over the land on the east side to the sea, yet that so much of the grant as gave the right to erect bath-houses and use the same free of charge was revoked by the death of the grantor and subsequent conveyance.

The learned vice-chancellor held that a strip forty feet wide, which had been set apart as a right of way to the shore, was ample for that purpose. He then comments upon the vagueness and uncertainty of the language referring to bath-houses and their use, the non-limitation in number and the failure to locate their place on the large tract fronting the sea, and then holds that the right to place and use the bath-houses was, under the authorities, a mere license, and sustains his judgment by abundant authority and sound reasoning. The ease has no application here, where the location of the pipes and their object are clearly defined, and the permanent estate in the soil is given by clear and proper language. The difference between an oil-bearing pipe, laid in the ground, and a portable bath-house is quite manifest.

Another case relied upon by counsel is Mitchell v. D’Olier, 68 N. J. Law (39 Vr.) 375. The only effect of that decision is to hold that a conveyance of land bordering on a small lake, together with a right of boating on the lake for pleasure and amusement, and to fish therein for pleasure, and to cut ice therefrom for their own private domestic use, was, under the circumstances, a clear-appurtenant to the land granted, although no words so expressly declaring were found in the deed, and that these rights passed without being mentioned as an appurtenant to the land so conveyed in a subsequent conveyance to a third party.

The court does, indeed, express its opinion that a private easement, accompanied with a profit a, prendre, could not be held in gross, thus expressing a preference for the English rule rather than the rule held by some of the American states. Such expression was simply for the purpose of showing that the grant of the rights in the lake passed as an appurtenant to the land conveyed without any express declaration to that effect, and did not pass to the grantee as a personal right or in gross. At the same time the right of certain entities to hold the rights properly exercised by them without any dominant tenement is clearly recognized on p. 380. The court also points out that, according to the old English doctrine, a profit a prendre may be held in gross, and shows an error in that respect in the language used in the opinion in Cobb v. Davenport, 32 N. J. Law (3 Vr.) 369.

Another ease cited by the defendant is Wilkins v. Irvine, 33 Ohio St. 138. That was a writ of error in an action at law to recover a balance due for the purchase-money of a tract of land agreed to be sold and conveyed by Irvine, the plaintiff, to Wilkins, the defendant below. The defence set up by Wilkins, by answer and cross-petition in equity, was that the land contracted to be conveyed was subject to an easement or encumbrance arising out of a grant in writing, but unsealed, and not recorded, given by certain previous owners of the land to the Cleveland Bolling Mill Company of a right to lay down across the land and permanently maintain a water pipe from the Cuyahoga river to the rolling mill’s works for the purpose of carrying water to the works, and that the grant had been executed and the pipe laid and the defendant prayed a rescission of the contract. The answer to this defence was that the defendant, Wilkins, had no knowledge or notice of either the existence of the pipe or of the grant and therefore was able to hold the property free and clear of the easement. The defendant, by his counsel in argument, urged that he, Wilkins, should not be compelled to assist Irvine in practicing a fraud upon the rolling mill company. On the other hand, it was urged by counsel for Irvine that under the peculiar statutes of Ohio the license in that case, not being under seal and recorded, created no encumbrance, and the extreme ground was taken that although the former owners of the land had, in the grant, used this plain language, “We hereby grant to said company the right to come upon said lands and so lay said pipes at a depth of not less than two feet and there permanently to maintain the same, with like privilege at any time for repairs, relaying or removing,” yet that, althought fully executed, for want of a seal it was a mere license and revocable.

The court held that under the statute, which it cites at length, an unsealed, unacknowledged paper like the one in question could create no encumbrance. It further held, under another section of the statute, that if unrecorded it must be deemed fraudulent as against any subsequent Iona fide purchaser without notice. The court intimated no opinion on the question of an executed or non-executed license being revocable, but put their decision distinctly on the ground that the defendant had no right in equity to a rescission, because he was a bona fide purchaser without notice. The decision was by a majority of three against two of a court of five judges.

The result of the decision is simply to hold that a bona fide purchaser without notice of an encumbrance cannot set up that encumbrance in any court as a defence to a suit for- purchase-money.

The defendant also cites the famous case of Wood v. Leadbitter, 13 Mees. & W. 845 (1844). This is the famous racecourse ticket case, in which the plaintiff, after having purchased a ticket issued by the stewards of the Doncaster races, was ejected from the grounds, and the ticket was held to be a mere revocable license. The opinion of Baron Alderson is a carefully-prepared and luminous exposition of the law on the subject, so much so that it is quoted in extenso by Mr. Gale in the fourth edition (London, 1868) of his treatise on Easements, where will also be found many cases decided in England on the subject after Wood v. Leadbitter. It is cited by the defendant here to sustain the proposition that the fact that the license here in question is created by deed does not alter the situation. But an examination of the opinion in question shows that its character for revocability depends upon the construction of the instrument itself, and the whole of what the learned baron says on pp. 844, 845 is most instructive, and by no means supports the contention of tbe defendant’s counsel.

Wood v. Manley, 11 Ad. & E. 34, another case cited by defendant, not only has' no bearing on the present question, but is against his general proposition. The headnote is this:

“Goods which were upon plaintiff’s land were sold to the defendant. By the conditions of the sale, to which plaintiff was a party, the buyer was to be allowed to enter and take the goods.—Held, that after the sale plaintiff could not countermand-the license.”

Another case cited by defendant’s counsel is Berry v. Potter, 52 N. J. Eq. (7 Dick.) 664. There a father said to his daughter and her husband that they might pick out, among several tracts of land, a certain tract as their share in his property and take present possession of it, and that he would make his will giving it to his daughter. The daughter and husband took possession, and the father afterwards became insane, and a guardian was appointed, who demanded possession of the premises. In the meantime the daughter and her husband had taken possession and worked certain clay banks. Vice-Chancellor Bird held that it was a mere parol license, and could not be set up in defence' to the demand of the guardian for possession of the premises. There was there no written grant, and the case has no application here.

Finally, the defendant makes the point that the complainant,having once exercised its right of laying a single pipe, and again later a second pipe, all before the title became vested in the defendant, cannot now enlarge the burden of the easement by now adding a third pipe, and he relies upon the very recent decision of Vice-Chancellor Bergen in Sked v. Pennington Spring Water Co., 65 Atl. Rep. 713, and he relies also upon the well-known cases of Johnson v. Jaqui and Jaqui v. Johnson, both in the court of errors and appeals, and reported in 27 N. J. Eq. (12 C. E. Gr.) at pp. 526 and 552, respectively.

The case of Sked v. Pennington, &c., Co. was this: Sked conveyed to the company the right to build a reservoir, not exceeding n half acre in extent, at what is called the “middle spring,” and to convey the water away, but not designating by metes and bounds, or in any other manner, the precise shape or location of said reservoir. The defendant entered and constructed the reservoir and abducted water, but did not include in the boundaries of the reservoir quite a half acre of land. Ten years later, having occasion to increase its supply, it entered on the premises and commenced to sink what is known as a driven well outside the limits of the reservoir, but so near it that, by a new line of circumference which should include the original reservoir and the locus of the driven well, no more than one-half an acre would be included, and the learned vice-chancellor enjoined such work. He did this upon the principle that, having once located their half acre, the defendant could not go outside of such location.

The distinction between that case and this is manifest. Here the limits of the original grant is clearly defined as being within ten feet of the southern boundary of the land.

That the mere lapse of time does not affect the complainant’s right was held in the case of Wheeler v. Wilder, 61 N. H. 2.

That a grant may be made in advance to individuals in favor of a corporation afterwards to be organized seems to have been held in Salem Capital Flour Mills Co. v. Stayton Water-ditch and Canal Co., 33 Fed. Rep. 146. The case is very lengthy but the part from which I draw my inference is found on p. 153.

I have examined a large number of eases bearing upon this question and agree with what Vice Chancellor Van Fleet said in East Jersey Iron Co. v. Wright, 32 N. J. Eq. (5 Stew.) 248 (at p. 254), viz., that the adjudications upon this subject cannot be reconciled, and “if an attempt should be made to arrange them in harmonious groups I think some of them would be found to be so eccentric in their application to legal principes as well as in their logical deductions as to be impossible of classification.”

Mr. Gale, in the edition of his work on Easements, previously cited (at p. 20 et seq.), attempts a list of those recognized up to the date of that edition. Among them I find none like the present.

I think the present grant is something more than an easement, although undoubtedly it includes easements, and I think that it is a great deal more than a license, in that it gives an irrevocable interest in the land and creates, by apt words, an estate; is expressed to be upon a consideration and is sealed by the seal oE the grantor.

I can find no authority in any of the treatises or in any of the adjudged cases for holding that it is revocable.

As in my judgment the right of the complainant is entirely clear and not subject to revocation I think it is entitled to relief by way of immediate injunction.

But I think that such relief must be upon conditions contained in the grant which requires that the complainant enter into bonds to the defendant, to be approved by a special master, to pay such damages as may be ascertained in the manner expressed in the deed above recited.


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    Jane Elizabeth Gillen v. Mary Eliza Hadley et al.
    [Decided May 15th, 1905.]
    1. A complaint in a court of chancery by cestui que trust under a will alleged that defendants, as trustees under the will, had received money and property belonging to the estate and had never accounted therefor, and asked that they make a discovery of all property which had come into their possession as trustees, and that they be required to file an account showing all their transactions and a schedule of all property in their possession. Subsequently to filing of the bill, but prior to the service of subpoena on defendant trustees, they filed with the prerogative court an account purporting to show all their transactions as such trustees to several items of which exceptions were then pending, and these facts were pleaded to the action in chancery. It did not appear that any of the parties knew of the proceedings of the others prior to the service of the subpoena on defendants.—Held, that the jurisdiction of the chancery court had been properly invoked, and that the court would maintain jurisdiction, since it had first taken it.
    2. In a suit in chancery, if a question arises as to the validity of a devise in a will, and the reading of the clause in question does not settle the matter, the court may hold the bill until an action at law is brought to establish the title, or it may refer the question to a court of law for an opinion thereon as provided by Chancery act of 1902, section 79. P. L. 1902 p. 581.

    3. A bill in chancery by a eestui que trust under the will-of a testator alleged that temporary annuities given by the will had ceased by the death and the attaining of majority of the beneficiaries thereof, and that all of the temporary purposes for which the trustees were directed by will to hold certain real estate had ceased and been determined, and that a certain devise in trust was void, because the ultimate disposition of the residue violated the rule against perpetuities, and that complainant was entitled to the same as an heir of testator, and, in addition to a general prayer, the bill asked that the executors give a full account of the estate and make discovery of their transactions as such, and as to what sums of money had been realized from the sale of real estate, and asked that the portion of the will attempting to create a perpetuity be declared null and void, and that the oratrix receive her share of the estate of the decedent.—Meld, that the bill made a case within the jurisdiction of the court independent of the title to the real estate.
    Heard on bill and combined plea and demurrer.
    This is the second suit in this court between these parties.
    It was commenced by bill filed on the 7th day of September, 1906.
    The complainant is one of the children of Henry P. Simmons, late of the city of Passaic, and one of the ceslui que trusts under his will.
    The defendant Mary Eliza Pladley and her husband, Jacob E. Hadley, William Nelson and Colin R. Wise are the executorb named in said will. Mrs. Hadley is one of the children of said testator, and she and her husband are named as the trustees under said will. Their duties and powers as such are distinct from their duties as executors.
    The will of Mr. Simmons was dealt with by the court of errors and appeals in Simmons v. Hadley, 68 N. J. Law (84 Yr.) 227. Subsequently Mr. Nelson, the active executor, prepared and procured to be passed -by the prerogative court an elaborate joint account of the dealings of the executors, which account was subsequently repudiated by Mrs. Hadley, as executrix, in a bill filed by her against Nelson, which resulted in this court adversely to Nelson, and to a setting aside and readjustment of the account, as between the executors, up to that date.

      The complainant herein was a party to that suit, and co-operated with her sister, Mrs. Hadley, in attacking the accounting in the prerogative court.
    Henrietta Simmons, the plaintiff in Simmons v. Hadley, supra, is one of the defendants herein.
    Mrs. Howe, the fourth daughter of the testator, and one of the beneficiaries under his will, died before the filing of the present bill, leaving no children, and testate of a will in favor of her'husband, who, however, had predeceased her.

      Mr. Sherrerd Depue, for the complainant.

      Mr. Edwin G. Adams, for the defendants.
   Pitney, Advisory Master.

This is a suit by a cestui que trust against a trustee. The trust was created by a will, and the trustees had been in possession of the estate, real and personal, eight or more years before the bill was filed. The subject of the trust is at present both real and personal estate. The will gave and devised all of the testator’s property, with Gertain exceptions, to the trustees in trust for the purposes of his will, with power of sale. That gift in trust, and the objects and purposes of the trust, are set forth in the tenth paragraph of his will and thirteen subdivisions of it. They are stated sufficiently for present purposes in Simmons v. Hadley, supra. The fifth paragraph of the bill alleges that Mrs. Hadley and her husband have, as trustees, from time to time collected and received moneys and other property belonging to the estate, the exact amount of which is unknown to the complainant, and have never, accounted to the complainant or to any court respecting the same. The third paragraph of the prayer is that Mrs. Hadley and her husband may make discovery of all money, property, books and papers of every description which have come into their possession, or the possession of either of them, as trustees under the will, &c., and that said trustees may be required to file an account in this court showing all their transactions as such trustees, and what sum or sums of money have been received by them belonging to said estate, together with a list or schedule of all the real estate or personal property now in their possession or claimed by them as trustees under-said will.

After demurring to all the bill, except the fifth paragraph of the statement of the bill and the third paragraph of the prayer, above recited, the defendants, Mrs. Hadley and her husband, plead to the statement and prayer last mentioned

“that on the 13th day of September, 1906, they filed with the prerogative court an account showing a.ll their transactions as such trustees, what sum or sums of money had been received by them belonging to the said estate and what payments from such moneys had been made by them in fulfilling their trust as trustees under the said will; that the register of said prerogative court duly audited and stated the said account, and that legal notice of the proposed settlement of said account was given, as appears by affidavits filed in said prerogative court; that one Henrietta Simmons, one of the defendants in this suit, filed exceptions to four items in said account, and that the ordinary, by an order made on the 16th day of October, 1906, referred said exceptions to a master of this court to take proofs thereon and report his conclusions to said prerogative court, and said exceptions have not yet been finally disposed of.”

By comparing the plea with the prayer it will be observed that the plea is not so broad as is the prayer, which is based on other allegations in the bill besides that in the fifth clause.

It is further to be observed that the bill was filed in this court seven days before the account was filed in the prerogative court, and that the proceedings set up in the plea as being taken in the prerogative court upon the exceptions were taken on the 16th day of October, while the service of the subpoena upon Mrs. Hadley and her husband was acknowledged by their solicitor as of the 28th day of September previous thereto. There is nothing-in the papers to show that the complainant had notice, at the time of the filing of her bill, that the defendánts were preparing th.eir account for the prerogative court; nor, on the other hand, to show that the defendants, when they filed their account, knew of the filing of the bill. It thus appears that the complainant had invoked, in a proper manner, the jurisdiction of this court to take cognizance of this accounting before the defendants had actually filed their account in the prerogative court.

The jurisdiction of this court is undoubted, and the genera? rule is that if it first takes jurisdiction it will maintain it to the exclusion of the regular probate courts. On the other hand this court will not withdraw an accounting already pending and thereby interfere with the jurisdiction of either of the other courts after they have once entertained it, except for special reasons. But for special and sufficient reasons this court will arrest a proceeding in the prerogative court or the orphans court in a given case and assume exclusive jurisdiction.

In the present case I find reasons in the circumstances set forth in the bill for the conclusion that it is altogether better that the whole subject should be dealt with in this court, and I will therefore advise that the plea be overruled without prejudice to the defendants to set up the same matter by their answer.

The complainant is clearly entitled to that part of the prayer for discovery which is not covered by the plea.

There is no prayer in the bill for an injunction restraining proceedings in the prerogative court and no restraint of that character has been applied for.

We come now to the demurrer. For present purposes the statement of the contents of the will, found in the report of Simmons v. Hadley, supra, is sufficient.

The bill alleges that the temporary annuities given by the will to the daughter, Mrs. Howe, and to the granddaughter, Miss Gillen, mentioned in the opinion in Simmons v. Hadley, supra, have ceased by the death of Mrs. Howe and the arrival at the age of twenty-one years by Miss Gillen, and that all the temporary purposes for which the trustees were directed by the will to hold real estate has ceased and been determined. It was upon the continued existence of these temporary purposes that the case of Simmons v. Hadley, supra, was decided in favor of the defendant by the court of errors and appeals and the bill alleges that the original defect in the devise revives, and that the devise is void because the ultimate disposition of the residue violates the rule against perpetuities in that it extends the ultimate division of the property to a period more than twenty-one years beyond the life of a person in being, and that the complainant, as an heir-at-law of her father and of her sister, Mrs. Howe, is entitled to the same; and it prays, in addition to the general prayer for answer without oath, that the four executors may give a full account of the estate and make discovery of all their transactions as executors and what sums of money have been realized from the proceeds of the estate or'from the proceeds of the sale of any of the real estate. This prayer is not covered by the plea.

The fourth prayer is:

“that so much of the will as creates or attempts to create a trust under the tenth paragraph of the will (in which the offensive provision is contained) may be declared to be null and void and as of no effect as a testamentary gift, bequest or devise of the property therein referred to, and that your oratrix may receive her share of said real and personal estate of decedent.”

The fifth prayer is that the defendants Hadley may be restrained from1 making any farther sales of real estate under the power given to them or from giving any deed for the purpose of confirming such sales and for other relief.

To this part of the bill the defendants demur generally for want of equity.

The ground of demurrer is thus stated in the written argument of the defendants. “An heir-at-law who claims a mere legal estate in real property, when there is no trust, is not allowed to come into a court of equity for the mere purpose of obtaining a mere construction of the provisions of the will.”

And in anticipation of the claim on the part of the complainant that the trustees have already converted a part of the real estate into money the brief contains this further point: “Upon the principles of equitable conversion the proceeds of the sale of real estate by the trustees are to be regarded as real and not personal property for the purposes of this bill.”

The theory of the counsel for the defendants seems to be that complainant must first establish at law their title to the property and cannot use this court directly or indirectly for that purpose.

But the leading case which they cite (Bowers v. Smith, 10 Paige 193) contains this clear statement by Chancellor Walworth on the part of the court: “So also, if the real estate of the testator is devised to a trustee upon distinct and independent trusts, some of which trusts are valid and others invalid, there is a resulting trust in favor of the heir-at-law as to so much of the property as is not legally and effectually disposed of by the will, where the interest of each is not turned into a legal estate by the provisions of the revised statutes. The cestui que trust in such cases, also, may file a bill in this court to have his rights as cestui que trust settled and ascertained, and to have the trusts of the will carried into effect so far as they are valid and effectual. And where there is a mixed trust of real and personal estate it frequently becomes necessary for the court to settle questions as to the validity and effect of contingent limitations, in a will, to persons who are not in esse, in order to make a final decree in the suit, and to give ■the proper instructions and directions to the executors and trustees in relation to the execution of their trust. (Citing authorities.) But I am not aware of any case in which an heir-at-law of a testator, or a devisee, who claims a mere legal estate in the real property, where there was no trust, has been allowed to come into a court of equity for the mere purpose of obtaining a judicial construction of the provisions of the will.”

And that definition or delineation of the jurisdiction of the court covers this very case.

The question is whether the complainant has an adequate remedy at law.

The bill is not filed avowedly for the construction of the will. Its object is to prevent further dealing, by these trustees, with the real estate in question, and a recovery from them of the estate now in their hands.

The necessity for preventing further sales and recovering what had already been sold is the ground of the action so far as demurred to.

The case of Torrey v. Torrey, 55 N. J. Eq. (10 Dick.) 410, was the case of a woman who filed a bill against her own children, claiming that by the true construction of her husband’s will she was the absolute owner in fee-simple of all his property, including certain lands, and asking the court to make a decree to that effect against her own children, infants, and the court refused. Fahy v. Fahy, 58 N. J. Eq. (13 Dick.) 210, is precisely the same ease as Torrey v. Torrey, supra. Palmer v. Sinnickson, 59 N. J. Eq. 14 Dick.) 530, was a bill in form to quiet title, but lacked all the elements of jurisdiction for that purpose. The complainants desired the opinion of the court in the construction of a will for the purpose of establishing their title to a sum of money lying in a bank. The demurrer was naturally and necessarily sustained.

In Hoagland v. Cooper, 65 N. J. Eq. (20 Dick.) 407, the chancellor, in an elaborate opinion, goes over the whole ground. There were in that case several specific questions submitted involving the construction of several parts of the will. He says: “The court of chancery, when called upon to exercise its judicial functions in determining whether the relief sought by a suitor should be granted, and when the question whether such relief should be granted involves the construction of a will, has undoubted power and its duty is to construe the will. The peculiar jurisdiction of this court over trusts and over those charged with trusts frequently requires it, upon the instance of such trustees or those interested, to give directions for the conduct of such trustees in the administration of the trust, aird when the trust is created by will, incidentally, the exercise of this jurisdiction to direct involves the construction of the will. Mr. Pomeroy, indeed, declares that the doctrine in harmony with principle and sustained by the weight of authority in this country is that the special equitable jurisdiction to construe wills is a mere incident of the general jurisdiction over trusts, and that a court of equity will never entertain a suit brought solely for the purpose of interpreting the provisions of a will without any further relief.”

The learned chancellor then cites all the New Jersey authorities. As examples of the proper exercise of the power, he cites Benham v. Hendrickson, 32 N. J. Eq. (5 Stew.) 441, and Dusenberry v. Johnson, 59 E. J. Eq. (14 Dick.) 336. The chancellor then sought, in the case before him, for ground for the exercise of jurisdiction by the court, and found one such matter, and examined carefully and construed the will as to it, and finally decided against the complainant, who was a substituted administrator, and hgld that the relief ought not to be granted because it would be inequitable to do so. He then proceeds, in the latter part of his opinion, to deal with a request made of the court in that cause to declare its opinion as to the effect of the will upon the real estate of the testator, of which the testator died seized. This he declined to do and added: “In the absence of some

specific equitable relief which this court can give, it would be impertinent for it to express an opinion which would not be binding upon a court of law in an action of ejectment and which could not be enforced by any decree of the court.”

There was in that case no relief asked for as to the real estate as to the title to which under the will the bill asked the opinion of the court.

A still more recent case, decided in 1906, is Goetz v. Sickel, 71 N. J. Eq. (1 Buch.) 317, decided by Chancellor Magie. There the bill was filed by the executors, who took the real estate in trust, and under the directions of the will they were collecting rents of a house , and paying them to the widow and two daughters, and the bill stated that those daughters were claiming that the executors had no right to hold the property and collect the rents, contending that the devise in question was wholly void because in contravention of the rule against perpetuities. The prayer was for a decree that the trusts may be performed and carried into execution and that all necessary directions may be given for that purpose, and. a prayer for further relief. The children and all persons living and having an interest under the will were made parties. The jurisdiction was put upon the ground that the trustees were entitled to the direction of the court. The chancellor held, with reluctance, that he had no authority to grant such a decree, saying that it was plain that what complainants seeked is not a direction as to the performance of their duties as trustees, but to discover whether they are in fact trustees and therefore charged with any duties as such, from which it follows that they were seeking to induce the court to decide the question of the title to land, and dismissed the bill.

The difference between that case and this is that here a devisee, who is also an heir-at-law, is seeking not only the proceeds of sale of the land .already made by the trustees, to which she is not entitled if there was a valid devise of the land to the trustees, but also to prevent a further execution of the power of sale. And if the complainant’s contention that the devise is void for the reason stated, then it is eminently proper that the bill should be retained and the relief granted.

Turning to the bill itself we find that it states and charges distinctly that the devise is void, and gives the language in the will which it alleges creates the perpetuity. Now, it is possible that the bare reading of that clause in connection with the well-settled rules of law would leave the matter not open to doubt, and the court may find itself unembarrassed by any question in that respect. In short there may be no question to solve. But if the court finds itself embarrassed there remains two modes for the relief thereof.

In the first place, tlie court may do as it does in cases where the title to land is questioned in a suit for partition. It may hold the bill until an action at law is brought to establish the title, or, in the second place, it may refer the question to a court of law for an opinion thereon under the seventy-ninth section of the Chancery act of 1902.

Upon the whole case, then, considering that the bill makes a case clearly within the jurisdiction of the court, quite independent of the title of the real estate, and that it is possible that the court will not be embarrassed with any doubt as to title when it comes to the- hearing of the cause, and further, that this is an action by the ca-stui qua trust against the trustee, and that if, in the course of it, any embarrassment does arise out of a doubt as to the title to land set up by the complainant, the court will find no difficulty in procuring that doubt to be settled by a court of law, I am of the opinion that the demurrer should be overruled, and will so advise.