author: Grey, Y. 0.

text:
    Carlo Quairoli et al. v. The Italian Beneficial Society of Vineland.
    [Filed November 21st, 1902.]
    1. Where a bill prays that a resulting trust may be declared, but shows that the defendant (the holder of the legal title) had, to the knowledge of the complainants, held possession of the property for about twenty years, and had, during that time, asserted its own right and continuously refused to recognize the rights of the complainants, or to permit them to use the property, during all which time no suit was brought to declare or enforce the alleged trust, no reason being shown for the delay, the bill of complaint will, on a motion under the two hundred and thirteenth rale, be dismissed for laches.
    2. The bill prays that the alleged trust property may be conveyed to a corporation named as complainant in the bill, to hold as trustee for the purposes of the alleged trust. It is not alleged that this corporation either has or could have any interest in the property, nor is there any showing that it has any corporate power to execute the alleged trust. It cannot be held to be a proper party to such a suit.
    3. Where a bill to declare and enforce a resulting trust alleges that complainants contributed, in work and materials, the amount which resulted in the construction of a two-story brick school-house, it may be fairly inferred that the sum so contributed exceeded $50, the minimum limit of value of which this court will entertain jurisdiction.
    4. Where the title to property was conveyed to defendant to hold subject to the direction of “complainants and the Italian colony,” and to convey to such persons as they might designate, no reason being shown why the Italian colony is not made a party, the complainants alone cannot maintain a bill to enforce such a trust.
    On bill to declare, and'enforce a trust, &e. On motion to dismiss, &c.
    The defendant company, under rule 213, moves to dismiss the whole bill of complaint, because of several enumerated defects, claimed to be apparent on its face, or to strike out certain objectionable parts of it.

      The bill is filed by a number of individual complainants and by the Italian Beneficial and Educational Association of Vine-land, Hew Jersey, a corporation of this state, against the Italian Beneficial Society of Vineland, which is also- a corporation of this state, defendant.
    The bill alleges that in 1878 the complainants associated themselves with other natives of Italy residing near Vineland for the purpose of providing better instruction and educational advantages for themselves and their children by establishing schools in Vineland; that they procured subscriptions and contributions of work and material to erect a two-story brick school-house and furnish it with supplies to establish a school on a lot offered to them by Mr. Charles K. Landis.
    That at that time there existed in Vineland a society known as the Italian Beneficial Society of Vineland, incorporated in this state (the defendant company), and that the complainants, who were generally known as the Italian colony of Vineland, were not incorporated, and therefore could not take title to the land offered to them by Mr. Landis; that the beneficial society (now defendant) was selected, as trustee, to take title to the lot of land, upon terms stated in the bill to have been as follows :
    “Upon the express condition that they were to hold said lot of land as trustee for your orators, and further, that the school-house, or building thereon erected, was to be used for the education and instruction of Italian children and others in the Italian language, literature and history, and that said school-house or building was to be used for no other purpose than that of holding therein day, night and Sunday-school for the instruc-' tion of Italian children, as aforesaid; that said Italian Beneficial Society was to hold title to said lot of land and school-house subject to the direction and control of your orators, and the said Italian colony and said society was to convey, by good and sufficient conveyance in the law in said school-house and lot to whatsoever person or persons or corporation your orators and the said Italian colony might at any time name and appoint.”
    The bill further alleges that during the years of 1879, 1880, 1881 and 1882 the Italian Beneficial Society carried out the conditions upon which the legal title to the school-house and lot was conveyed to it, but that .since the year 1882 that society has refused to permit the school-house lot to be used for the purposes aforesaid, and has refused to make any conveyance thereof to the Italian Beneficial and Educational Association, and has rented the school building to the school authorities of Yineland, and has retained the rents for its own use, thereby depriving the complainants of their privilege to have instruction for their children under the terms and conditions of the donation of the land and the erection of the school-house thereon.
    The bill states that the Italian Beneficial and Educational Association of Yineland, Hew Jersey, one of the complainants, was incorporated on the 1st day of April, 1901, by the complainants and other Italian residents of Yineland.
    The prayer of the bill is—first, that the defendant, the Italian Beneficial Society, may be decreed to convey the school-house and lot of land in question to the Italian Beneficial and Educational Association of Yineland, Hew Jersey; or, second, to hold the premises in trust for the complainants,' and subject to their direction and control; or, third, to establish schools in the school building for the education of Italians; or, fourth, that it may return the complainants’ contributions, at a fair valuation of the amount of their donations of labor and material; or, fifth, that the defendant may be decreed to pay the complainants, in cash, a fair valuation for the lot of land in question.
    The grounds upon which the defendant company gives notice and moves to strike out the whole bill are—first, because the bill shows on its face gross laches on the part of the complainants in seeking relief, and sets forth no reason for their delay; second, that it nowhere appears in the bill that the Italian Beneficial and Educational Association of Yineland has any interest in the subject-matter of the suit, or is entitled to any relief in the premises, or is, for any reason, a proper party complainant; third, because the bill does not show that the complainants, or any of them, contributed to the erection of the school building a sufficient amount to entitle them to any relief in this court.
    The defendant further gives notice, and obeets to particular parts of the bill of complaint, as follows: First, that nothing in the bill shows under what act of the legislature the Italian Beneficial and Educational Association of Yineland, Hew Jersey, was incorporated, or what its rights and privileges or objects are, and for this reason the first prayer for special relief is bad; secondly, that nothing in the bill is alleged which would justify the court in granting the second special prayer, to' the effect that the premises should be held in trust'for the complainants and subject to their control; thirdly, because the bill contains no allegation that the defendant corporation has ever received any fund for the purpose of establishing schools in the school building, and for this reason the third special prayer could not be granted; fourthly, because nothing in the bill shows any facts which would warrant the court in decreeing the return to the complainants of the amount of their alleged contributions in the erection of the school building as is asked in the fourth special prayer; fifthly, because the bill contains no allegation which would authorize the court to direct a payment to' complainants, in cash, of a fair valuation of the land.

      Mr. Wheaton Berrnlt and Mr. Howard Garrow, for the complainants.

      Mr. Henry 8. Alvord, for the defendant.
   Grey, Y. 0.

Those criticisms which challenge the bill as a whole will first be considered, for if they are found to' be sufficient to dismiss it, the objections to specified portions of the bill need not be examined.

The bill shows on its face that whatever rights and privileges in the school-house and its lot the complainants allege themselves to have, they became possessed of between 1879 and 1882. These rights and privileges the bill defines with precision, and then alleges that since the year 1882 the defendant, corporation has refused to permit the complainants to enjoy them. It appears, therefore, that for about twenty years the complainants have been aware of the refusal of their rights, and nothing appears on the face of the bill showing that during all that time any step has been taken to enforce those rights, nor is any reason given for not seéking- to enforce them. It is quite evident that if this bill is to be entertained as an effort to declare and enforce" a resulting trust, parol testimony of contributions of labor and material, great in number and small in their several amounts, must be presented. The great lapse of time since the happening of these events will make it very difficult, if not impossible, to the defendant to meet testimony of this character by refuting proofs.

The period that has elapsed during which the defendant corporation has excluded the complainants from the enjoyment of the property to which they allege they are entitled may, under the allegations of the bill, have been nearly, or quite, twenty years. During all that time the bill alleges the complainants have, to their knowledge, been denied their rights. Such a situation of affairs, in which a trustee openly and expressly,. and to the knowledge of the cesiuis que irusieni, disclaims and denies a trust, and excludes' them from the trust property for so long a period, would go far to overthrow the trust if it were actually expressed in writing. It is much more unfavorable when the proceeding is one which seeks to have a resulting trust declared. Midmer v. Midmer, 11 C. E. Gr. 305.

Not a single explanatory circumstance is stated which might excuse the complainants’ failure to assert their rights, if they had any. They were o.ut of possession, and were denied their use of the property, and apparently acquiesced in this condition of affairs for about twenty years, and now ask this court to declare and impose a trust in their favor.

Laches such as this, appearing unexplained upon the face of the bill, may be taken advantage of by demurrer. Story Eq. Pl. § 503; Van Houten v. Van Winkle, 1 Dick. Ch. Rep. 384, and cases there cited.

This objection goes to the whole bill, lies at the foundation of the complainants’ case, and appears to' be irremediable. For this reason the bill cannot be entertained.

The second criticism, that complainant (the Italian Beneficial and Educational Association of Vineland) is not shown, on the face of the bill, to have any interest in the subject-matter of the suit, or io> be entitled to any relief in the premises, or to be, for “any reason, a proper party complainant, is also a just objection to the bill. It is obvious that this corporation cannot have any interest in the school-house property, because of the incidents which are alleged to have resulted in the devotion of that .property to school purposes, for these took place in the years from 1879 to 1882, and this corporation was not incorporated until 1901. If it is to be a party because, in case the complainants should be successful in establishing a trust, it might be the trustee who might be selected to c.arry the trust into effect, there still remains the objection that nothing in the bill of complaint shows that that association has any powers which would enable it to accept a conveyance such as the bill prays may 'be made to it.

• As to the criticism that the bill does not, on its face, show that the complainants, or any of them, contributed to the erection of the school building sufficient values to entitle them to any relief in this court, it may be said, taking the allegations of the bill to be true, to the effect that the complainants contributed, in work, labor and materials, the amount which resulted in the construction of the building, a fair inference would lead the court to believe that the total sum was in excess of $50, the minimum limit of value of cases in which this court will entertain jurisdiction.

In addition to the general objections made by the defendant to the whole bill, there are other apparent defects, which would undoubtedly have to be noticed if the cause should go to a hearing. The most important of these is that the bill alleges, in precise terms, that the land is charged with an express trust, which is nowhere shown to be in writing. Such a trust is within the prohibitions of the third section of the statute of frauds. There is no allegation of fraud, accident, mistake or part performance, which might prevent the application of the statute, and the circumstances narrated make it extremely improbable that any such equitable excuses can be made.

It must, also, be noticed that the express trust set out in the bill distinctly alleges that the defendant company was to hold the title to the school-house and lot, subject to the direction and control of the complainants and the Italian colony, and was to convey the school-house and lot to whatever person or corporation the complainants and the Italian colony might designate or appoint.

Assuming that there was, in fact, such an express trust, and that it was capable of being proved and enforced, it is difficult to see how the complainants can take proceedings to enforce it in their own exclusive favor. The Italian colony appears, in the particulars named, to be entitled to the benefits of the trust equally with the complainants. The Italian colony is not made a party in this cause, nor is there any explanatory' allegation, on the face of the bill, showing any reason why the Italian colony is not made a party.

The 'bill of complaint appears to be radically defective upon the grounds of objection to the whole bill which are noticed by the defendant, and should'be dismissed, with costs.


source: Caselaw Access Project

author: Obey, V. C.

license: Public Domain

text:
    John B. Adams v. Mark P. Wells, trading, &c., et al.
    [Filed November 22d, 1902.]
    ■ 1. In order to be entitled to give a stop notice, under section 3 of the Mechanics’ Lien act (P. L. of 1898 p. 538), to the owner to- retain a debt owing for labor or materials, &e., the claimant under such a notice must prove that before serving it the contractor had refused, upon demand made, to pay the debt.
    2. Under the Lien act, when a final payment comes to be due and no effectual stop notice has been served, the contractor may-either collect or assign the final payment. Any subsequently served stop notices operate only to detain what remains in the owner’s hand's, after deducting the amount of such payment to the contractor and of such assignment by him.

      3. The special preference reserved by the last clause of section 6 of the Lien act of 1898 (P. L. of 1898 p. 540), can only be allowed to claimants who prove that they did personal labor on the building or that they furnished material therefor. Subcontractors, who are not themselves laborers or furnishers of materials, are not included in the class for whom this ■special preference is intended.
    On bill of interpleader on mechanics5 lien contract. On answers and proofs.

      Mr. Lewis Starr, for the defendant Stonebaek.

      Mr. Joshua B. Borton, for the defendant Scudder.

      Mr. John G. Horner, for the defendants’ John Eckstein Beatty and William J. Robinson.

      Mr. Joseph R. B'mbery (of the Philadelphia bar), also appeared for John Eckstein Beatty.
   Obey, V. C.

(orally).

This is an interpleader suit, occasioned by the failure of a building contractor to fully perform his contract filed under the Mechanics5 Lien act, and contesting claims of the defendants upon the contract filed. The complainant has obtained a decree of interpleader, and the present phase of the cause is an inter-pleading between the respective defendants, who say that the fund is a deposit of the contract price paid in by the owner, who had duly filed his building contract, and the defendants each claim payment out of the fund, in priority to the others. The order of priority of these claims is therefore the substantial question to be determined.

The first claimant is Reuben G-. Scudder. This claim, it is not disputed, is a rightful claim for material furnished under the contract between Mr. Adams and Wells & Company, the contractor.

There is some dispute whether or not, at the time when Mr. Scudder alleges he made demand for final payment, he had actually fulfilled his contract by the delivery of the last goods. He was somewhat uncertain as to the particular hour of the final delivery on the 2d day of January, 1902. He said he had so delivered the last of the goods, that he afterwards went over to Philadelphia, to Mr. Wells’ office, and made his demand for payment some time in the morning of the 2d day of January, and he could not, with precise definiteness, state at what hour he made the demand, but I think half-past twelve was the latest hour he named. Mr. Wells, on the other hand, testifies that the final deliveries were not completed until two o’clock of the afternoon of the same day, which, if true, would make it appear that Mr. Scudder had demanded payment,before he had made final delivery of the goods.

I do not think there is enough certainty about this point, either way, to decide the claim, although the burden is upon Mr. Scudder to establish every essential incident necessary to give him the preference which he asserts.

Mr. Scudder says that at some time during the latter part of the morning he went over to Mr. Wells’ office, in one of the office buildings in Philadelphia, and there, he says, he demanded a settlement. 'When asked, on cross-examination, whether he named, in dollars and cents, the amount due him, he was unable to say what sum of money he did árame, although he testifies he did name a sum, and that he named the sum that was due to him, and that the sum was computed on a little memorandum, which was taken over there for the purpose of keeping in memory the exact sum. He said he used that memorandum, but cannot now produce it, because it has been lost. Nor can he now’ recollect what was the amount of the sum he named to Mr. Wells.

The answer to Mr. Scudder’s statement is by Mr. Wells and by his typewriter. They both testify that Mr. Scudder never made any such demand for payment as he testified he-made upon Mr. Wells.

It is- essentially necessary to Mr. Scudder’s case that he should prove that he made a demand upon Mr- Wells for payment of his claim, and was refused payment, before he filed his stop notice. That is the requirement of the statute under which the stop-noticing party acquires his right. It is a purely statutory right, in derogation of the common law, giving to the person who performs these conditions an especial privilege. The burden of proof, in order to claim this right, is necessarily imposed upon the party who asserts that he performed the conditions. Mr. Seudder, in giving his narration of the place and surroundings at which he made the demand, states that he saw Mr. Wells and his stenographer—a young woman whom he could describe in no other way than she had black hair. IIe says that he went there' on the 2d day of January, 1902. He does not say that he went there at any other time, nor does he leave the matter in any sort of doubt that he claims to have gone on that day, and on no other. His own testimony fixes the day with absolute certainty. If he did not go on that day and make the demand of Mr. Wells in the presence of his stenographer, who could probably have heard it, as he himself says, he evidently did not see them at all.

Mr. Scudder’s statement is contradicted by Mr. Wells, who says that he was not in his office at any time on tire 2d day of January, 1902. Mr. Wells’ story is supported by the stenographer, whose testimony is directly upon the point, because Mr. Seudder says that he made the demand in the presence of the stenographer, and the proof is that the young woman here brought is the only-stenographer that Mr. Wells has had in his employ for three or four months before the making of the demand and ever since. The young woman says that she was not in the office on that day. Mr. Seudder does not leave any room for believing that Mr. Wells could be mistaken as to the occasion, because Seudder himself declares that he made the demand, such as it was, of Wells in the presence of the stenographer, and that he had to pass by tire stenographer in order to converse with Wells.

I do- not see how it is possible to reconcile, in any way, these statements, and I am wholly unable to 'reconcile them. I notice that counsel, in order to test the testimony of Mr. Wells and the stenographer, cross-examined them as to why it was that they could remember events.which took place on a specifically named day. The reasons given by them why the events of the particular day could be stated in detail ¿eem to be entirely natural. The young woman had, for some little time before January 3d, 1902, been off on a holiday trip. On the night of January 1st, 1902, she had attended a masked ball. Those incidents were such as would have made a strong' impression of the period on her memory. She came back to Philadelphia on the evening of the 2d day of January, 1902. This is the day on the morning of which Mr. Scudder says he made demand upon Mr. Wells in the presence of the stenographer. The stenographer says that she came directly from her trip back to her home in the evening; that she was not at the office at all on the 2d of January. Mr. Wells also explains his testimony in fixing the events of the 2d day of January by stating the fact that on that day he had an arrangement for a settlement of an important character to be made with other people in Hew York; that he went to Hew York for that purpose on January 2d, early in the morning, and did not open his office at all on that day.

It is, however, not necessary that the testimony of these two witnesses should overweigh the testimony of Mr. Scudder on the point. It is enough if they equal it, and I am quite unable to say they do not equal Mr. Scudder’s testimony. The burden of proof is upon him. If he does not show, by a preponderance of proof, that he did perform this preliminary condition of making demand of payment, and that it -was refused, he does not show compliance with the statutory requirements necessary to> enable him to serve the statutory stop notice. He does not show himself to be within that class who have entitled themselves to the statutory preference.

I do not undertake to say that Mr. Scudder testified falsely; there is a wide opportunity for mistake. His confused statement as to the location of the office to which he went as Mr. Wells’ office on that day, suggests that, when he sought to make his demand, he might have gone into the wrong office. He does not seem to have had any extended business with Mr. Wells, nor does he testify that he had had any intimate acquaintance with him, nor dicT he describe the location of his office with precision. Although the young woman, who was unquestionably Mr. Wells’ stenographer at the time, was present in court, yet Mr. Scudder did not identify her as the stenographer win was in Mr. Wells’ office when he (Scudder) made his demand. His testimony might be consistent with his having gotten into a wrong office, and not in- Mr. Wells’ place.

Mr. Scudder must take the responsibility of having failed to establish, by a preponderance of proof, the existence of the facts which are necessary to entitle him to his preference. For this reason Mr. Scudder’s claim for a preference as a stop-noticing creditor must be rejected.

The next claim presented is that of John Eckstein Beatty. This is 'based upon an assignment made by Wells, the contractor, to Beatty, on the 20th day of January, 1902, of $1,500, part of the contract price due, or to become due, to him from Adams. It was agreed between Beatty and Wells that the $1,500 should be advanced in consideration of the giving of the assignment. The assignment was given on its date; $500 was then paid, and the residue, $1,000, within a few days after, and before any other claim was made on the contract price.

The maturing of the final payment was, under the contract, dependent upon the ceidificate of the architect that the work was completed. ■ On the 7th of April, 1902, this certificate was given, and Mr. Wells, the contractor, and Mr. Adams, the owner, came to a settlement, whereby the sum then due and payable on the contract price to Wells was ascertained to- be $2,268, and the final payment was thus matured.

On the following day, the 8th of April, 1902, Beatty served upon Adams a copy of his assignment from Wells of $1,500, part of the money due on the contract price. At this time no other stop notices than Scudder’s had previously been served.

The later decisions as to the rights of claimants upon a contract price- declare that the legislative purpose is to give to persons entitled, under the Lien act, to serve stop- notices an inchoate lien on the liability of the owner under the contract, until that liability matures according to- the terms of the contract; such lien to become perfect on service of the stop notice before the liability matures, but to- -expire on such maturity if no notice has been given. Slingerland v. Binns, 11 Dick. Ch. Rep. 415 (Court of Appeals). When the final payment matures and becomes due, it must be applied first to satisfy stop -notices previously served, in tlic order of their priority, and any money thereafter remaining is at the disposal of the contractor, who is entitled to collect and receive the same from the owner. Any stop notice thereafter served operates only upon the moneys due at the time of such service, so far as not assigned by the contractor or detained by previous stop notices. Taylor v. Reed, 52 Atl. Rep. 588 (Supreme Court, 1902, Mr. Justice Pitney).

Under these rulings, the whole final payment having become due to Wells, the contractor, on the 7th day of April, 1902, the effect of the notice given on the 8th day of April to Mr. Adams of the assignment which Beatty had from Wells for the $1,500, was, in equity, to transfer that much of the final payment to Beatty. The only previous stop notice served was Scudder’s. This failed, as is above shown, because of non-observance of the statutory requirements. The stop notices of Stoneback and others were not served until several days after full written notice had been given by Beatty to Adams of his $1,500 assignment from Wells, and are therefore subject to Beatty’s claim.

The decision in Blauvelt v. Fuller, 37 Vr. 46 (1901), as to the $500 portion of the contract price in that case, very nearly coincides with the situation presented by Beatty’s claim for the $1,500 on his assignment. In that case the final payment had matured, and after a settlement of accounts between the contractor and owner, $500 was retained by the owner to meet an order given by the contractor. Subsequently, stop notices were served, and they were held to apply only to the residue of the contract price remaining after deducting the $500.

The defendants Stoneback and Robinson, however, contend that, under the operation of section 6 of the Mechanics’ Lien act of 1898 (P. L. of 1898 p. 540), they are entitled to a preference over Beatty. The words of the last clause under which Stone-back and others claim this preference are as follows:

“Laborers or materialmen giving notices in accordance with the provisions of the third section- shall have priority and preference in the disposition of the moneys due and to grow due upon the contract over, any persons claiming said moneys or any part thereof by reason of order or orders thereon or assignments thereof.”

This clause first appears in the Lien act of 1898. It selects from the persons who, under the terms of the act, are entitled to serve stop notices a smaller class, whose notices, when given in accordance with the provisions of the statute, shall have priority over persons claiming under orders or assignments from the contractor. The class thus selected consists of laborers—that is, those who personally labor on the building, and material-men—that is, those who furnish materials used in the building.

Subcontractors, who are not themselves laborers on the building or furnishers of material for the building, but who, under their subcontracts, employ persons to labor on the building, with materials furnished by them in performance of their subcontracts, were not intended to be included within this preferred class.

When parties who have served stop notices claim the benefit of this special preference, they must prove, by evidence, that their claims are those of laborers on the building or material-men •who have furnished materials for the building. It cannot be assumed that they are within this special class. Neither Stoneback nor Robinson has made this necessary proof. Stone-back’s bill shows, on its face, that he was a subcontractor, and so does Robinson’s. Both were sworn as witnesses, each testified, in general phrase, that he did work on the building, but there was no proof that either worked personally as a laborer. Nor did either show that his claim ■was-for materials furnished. The only item in either claim separable as materials furnished ■was $320 for forty thousand bricks in Stoneback’s claim, which shows, also, that it has been satisfied and paid by an allowance.

The defendant Beatty is entitled to have the amount due on his assignment first paid out of the fund in court.

Under the decisions above referred to, the stop notices of Stoneback and Robinson affect only the portion of the fund remaining after Beatty’s assignment has been satisfied. Stone-back’s notice was served on the 12th day of April, 1902, and precedes Robinson’s, which wras served April 14th.

The fund in court is sufficient to pay Beatty in full. The residue is insufficient to1 satisfy all of Stoneback’s claim. He is entitled to the whole of the residue.

The rights of those claimants who filed stop notices after Stonebaek need not be considered, as there is no money remaining of the contract price out of which to pay them.


author: Grey, V. 0.

text:
    Richard G. Stevenson v. Joseph Willard Morgan.
    [Filed December 2d, 1902.]
    1. Allegations of facts which do not state the complainant’s claim for relief, but only forefend some answer thereto, which the defendant may possibly make, ought not to be set out in the bill of complaint.
    2. Claims for unliquidated damages are not within, the cognizance of courts of equity.
    3. In the cases in which unliquidated damages have occasionally been awarded in this court, they have not been<the primary object of the suit, but only an incidental remedy in aid of, or in substitution for, some established mode of equitable relief.
    On bill, &e. On motion to strike out parts of bill.

      Mr. Gharles V. D. Joline and Mr. David J. Pancoast, for the motion, for the defendant.

      'Mr. Henry M. Snyder, Jr., for the complainant.
   Grey, V. 0.

In this case a demurrer to the whole bill of complaint was overruled because' too .general. Stevenson v. Morgan, 52 Atl. Rep. 1122. A motion was then made to strike out .parts of the bill. This, also, was overruled, because it was in the nature of a demurrer, and a second demurrer could not be entertained unless special leave therefor were first obtained. Stevenson v. Morgan, 53 Atl. Rep. 78. Special leave has since been obtained.

The present motion is to strike out the two clauses of the bill of complaint hereinafter recited.

The general purpose of the bill is to restrain the defendant from further damming and causing the water in a creek to flow back, and to compel him to lower his dam to its original heights as it was prior to the year 1901.

Incidentally to his statement of his case the complainant’s bill contains this clause:

“And your orator is informed, and believes it to be true, that the said Charles Stevenson, forbid and prohibited the former owner of said Good Intent Mills from in any way interfering with the use and enjoyment of the said natural flow of said creek, and compelled the introduction of steam in a factory at Good Intent, when the owner or proprietor of said factory threatened to raise the height of said stream, and that at no time hereafter has the said stream raised above its natural flowage in front of the lands of your orator, until the same were raised by the said Joseph Willard Morgan.”

The bill also recites several incidents of damage, caused by the back flow of water over the complainant’s meadow lands and marl pits, and contains the following special prayer:

“And that he may pay unto your orator such reasonable sum of money for the damages suffered and sustained by your orator as may be decreed.”

The defendant, on special leave given for this purpose, has noticed the complainant of a motion to strike these two clauses from the bill of complaint.

As to the first clause.challenged, the complainant’s counsel explains that it was inserted in the bill in anticipation of some defence of adverse user which the defendant might make in support of his raising of the dam.

A bill of complaint sufficiently states the complainant’s equity when it contains allegations which, on their face, would, if true, entitle the complainant to the relief prayed. Allegations of facts which do not tend to support the complainant’s primary claim to relief, but only to' forefend some possible answer thereto which the defendant may make, ought not to be set out in the bill. Proof of such facts may be.pertinent at the hearing if the defendant should set up the anticipated defence and issue were joined thereon by the replication. The recital in the bill of complaint of facts which might be pertinent to possible defences disarranges the proper order of pleading, and leads to a prolixity which it is the purpose of all modern rules to- avoid. hTo prayer for discovery is directed to this allegation, and it is obviously inserted in the bill for the reasons suggested by complainant’s counsel—that is, to forefend an anticipated defence. It will in no' way injure the complainant’s ease to strike -it out.

The special prayer which the defendant challenges asks that this court shall make a decree that the defendant shall pay “for the damages suffered and sustained” by the complainant.

The damages referred to appear,. on the face of the bill, to have been inflicted prior to its filing. The injury suffered was then completed. A single suit at law would then, and will now, ascertain what damages, if any, should be recovered for that injury. By the present equity suit the complainant seeks an injunction against a further overflow. His special prayer asks that unliquidated damages may be awarded to him in this court for injuries caused by past overflows. The equitable relief of injunction against future overflows and the right to recover damages for past overflows are not parts of the same cause of action. Each may be prosecuted separately from the .other.

The court of appeals has several times declared that the court of chancery cannot entertain a claim for the recovery of unliquidated damages. Trotter v. Heckscher, 13 Stew. Eq. 656; Alpaugh v. Wood, 18 Stew. Eq. 157; and recently in the case of Norton v. Sinkhorn, 18 Dick. Ch. Rep. 313, Chief-Justice Depue, speaking for that court, declared this principle to be well settled.

In the cases which award such damages in this court they have not been a primary object of the suit, but only an incidental remedy in aid of, or in substitution for, some established mode of equitable relief.

In a suit for specific performance, where the defendant was found to be unable specifically to’ perform the'whole of his contract, damages were here ascertained and awarded in satisfaction of the unperformable portion. Kings v. Ruckman, 6 C. E. Gr. 606 (Court of Appeals). In the case of Sparks v. Newton, 12 Dick. Ch. Rep. 367, and, on appeal, 15 Dick. Ch. Rep. 399, damages were ascertained in substitution for an injunction restraining the'permanent diversion of flowing waters from their natural course. In Simmons v. Paterson, 13 Dick. Ch. Rep. 1, and, on appeal, 15 Dick. Ch. Rep. 385, where it appeared that the enforcement of the equitable remedy of injunction would work great injury to the defendant, it was suggested that damages might be asked for in substitution for the restraint. So, where a bill was filed for specific performance, and it appeared to be uncertain whether a contract had actually been made, and apparently values had been induced to be passed by fraud, the court of appeals, though reversing á decree for specific performance, retained the bill, and ordered an accounting, which involved the ascertaining of unliquidated damages as a recompense for the values fraudulently obtained. Anderson v. Eggers, 18 Dick. Ch. Rep. 264. It is also a common practice to retain a cause in equity until some element of it, involving the ascertainment of unliquidated damages, has been determined at law. These exceptions to the above-stated rule have not abrogated it.

The complainant in the case now under consideration asks this court to award to him unliquidated damages for a past trespass, the right to recover which was complete at the time of the filing of the bill, and might then, and may now, be enforced in a single suit at law, if the alleged wrong was actually done. Such a case is not within any of the decisions which allow the ascertaining and awarding of unliquidated damages in equity.

The special prayer, above criticised, should be stricken out.

Previous orders in' this.cause require that an order upon the defendant to plead or answer shall be made. The order striking but the objectionable parts of the bill should contain a clause that the defendant plead or answer to the corrected bill within fifteen days from the date of that order, and that the cause proceed according to' the practice in this court.


author: G-key, Y. C.

text:
    Annie E. Dobleman v. The Gately & Hurley Company.
    [Filed December 4th, 1902.]
    1. A complainant who asks a preliminary injunction must show a clear right in himself. If the complainant has no equity or the showing of it is doubtful, it is of no significance how defective the title upon which the defendant relies may be.
    2. A complainant with knowledge of a projected improvement by building over an alley, signed a writing relinquishing all claim to the alley, waited several weeks while the buildings were being erected on it, then repudiated the writing, and afterwards filed her bill without disclosing any of these facts, and moved for a preliminary injunction to restrain the erection of the building over the alley.—Held, the writ will be refused.
    On bttl and affidavits. On answer and affidavits. On order to show cause, &c.
    The complainant is the owner of a house and lot of land, Ho. 809 Broadway, Oamden, Hew Jersey. The bill alleges that in 1857 James Field, her paternal grandfather, laid out an alley, five feet wide, running from the rear end of her lot (809 Broadway) in a westerly direction, a distance of fifty feet, to the east side of Welsh street, and dedicated it to the use in common of his houses on Pine street and on Broadway, including Ho. 809, and that it has since been continuously used by the occupiers of the Pine street houses and by the complainant, owner and occupier of her house, Ho. 809 Broadway; that she has used’the alley for twenty-five years and her father before her for twenty years.
    The complainant further alleges that the fee of the alley is undivided, and resides in herself and other heirs of the said James Field. The bill further alleges that the Piné street house lots, which, run back to and bound upon the north side of the allejq have come, by various conveyances, to be owned by the defendant, the Gately & Hurley Compare, and that said company has, without right, appropriated to its own exclusive use the whole of the width and length of the said alley, and has started to’ build stone foundation walls across the east, west and south sides of it, and thereby threatens entirely to close it and destroy the complainant’s use and enjoyment of it. The complainant prays that the Gately & Hurely Company may be restrained from erecting any walls or buildings over and upon the alley in question, and thereby obstructing and preventing its use.
    On the filing of the bill and affidavits an order was allowed that the defendant company show cause why an injunction should not issue restraining it from erecting walls or buildings upon the alley at the rear of the Pine street lots, and commanding it. to- remove any walls or buildings now erected upon the alley.
    On the coming in of the order the defendant company filed its answer and supporting affidavits.
    The answer denies that the alley was dedicated by James Field for the use of 809 Broadway, in common with others, and denies that it has since been continuously used by the owners and occupiers of 809 Broadway, and further denies that the fee in the land named in said alley is in anywise in the complainant; on the contrary, the defendant company insists that it is the sole and exclusive owner thereof; and further denies that the complainant is the owner of any right to use the alley, and also denies that she has occupied it for twenty-five years and that her father before her had occupied it for twenty years; and insists that the complainant never had any right or estate in the alley in question. The defendant company admits that it is the owner of houses fronting on Pine street, and alleges that, as the alley was first laid out, it extended only along the rear of lots Hos. 524, 526 and 528 Pine street, and did not reach across the rear of Ho. 530 Pine street, and did not touch the rear of the complainant’s property, Ho. 809 Broadway; that about the year 1875 the alley was extended across the rear of lot Ho. 530; and thereupon the complainant (who was living in the premises No. 809 Broadway) cut a hole through the rear fence of the property abutting on' said alley, through which water and refuse was swept, and in that year the owner of the premises Nos. 524 and 526 Pine street gaye a door or gate to the complainant, who placed the same in the fence opposite the alley, but with a distinct promise that any dirt or refuse should be swept down and clear of the alley, and with the express agreement that the complainant should thereby obtain no right or interest in the alley, and‘that the owners of the lots fronting on Pine street might at any time stop the complainant’s use of the alley; .that after-wards the alley was closed for a year by one of the owners of the Pine street lots, and was afterwards permitted to be opened, on the complainant’s application, to be used for a water-course and sweepings, upon the express condition that at any time, on the request of the owners of the Pine street lots, the complainant Avould cease using it, and that thereafter all of the use made of the alley by the complainant was subject to such express agreement. The defendant further alleges that the complainant has expressly relinquished any estate or right she had in said premises to the defendant company, and further insists that it is the owner in fee of the whole of the alley and of an absolute estate therein, and that it has closed up and destroyed the use of the alley, and proposes to cover with buildings the ground formerly occupied by the alley, and that it has a lawful right so to do.
    Argument was heard on the bill and affidavits annexed, the answer and affidavits annexed,- copies of the wills of James Field and of George W. Field and several deeds exhibiting the preceding and present holding of title to the lots on Pine street and on Broadway.

      The following diagram, exhibited at the hearing, shows the location and relation of the alley to the lots:

      Mr. William J. Kraft and Mr. Howard Garrow, for the complainant.

      Mr. Edward Ambler Armstrong, for the defendant.
   G-key, Y. C.

The complainant claims to be the owner of the fee in the alley by descent from her grandfather, J ames Eield. She admits that owners of the Pine street lots have right of way over it, but claims that, as owner of lot Eo. 809 Broadway, she is entitled to use and enjoy the way over the alley in common with them.

The defendant claims to be the owner in fee-simple absolute of the whole of the alley, without charge thereon of any right of way in favor of the complainant. It insists, also, that it purchased a relinquishment of any possible claim that the complainant might assert, by a written memorandum, hereinafter referred to, and that it has proceeded to erect its buildings on the faith of that settlement. It admits that it proposes to build upon the whole of the alley, which will exclude any use of it by the complainant as a way, and claims the right so to do.

The question of the defendant’s title to the land on which it is building need not be considered until the complainant’s right to the relief she seeks has first been determined; for even, if the defendant company is about to do a wrong, it must appear that the wrong threatened is prejudicial to- the complainant’s rights, else she has no status to make complaint. Miller v. Craig, 3 Stock. 175.

I have not found it to be necessary to consider the defendant company’s claim that it owns the land within the alley in fee, nor to determine the effect of the alleged purchase of a release of the complainant’s possible interest, for the reason that the defendant’s answer and accompanying affidavits insist that the complainant has neither title to nor right of enjoyment in the alley in dispute. This puts upon the complainant the burden of showing affirmatively that she has such a clearly established right as entitles her to the protection of this court. If she has no equity, it is of no significance how defective the defendant’s title may be.

The complainant bases her right* to a preliminary injunction upon several grounds. She alleges that the alley^vas dedicated by James Field to the use in common of the Pine street and Broadway houses. Do deed or plan of lots made by James Field is produced. His will contains no dedication. The earliest documentary proof which refers to the alley is a deed from the executors of Frank Williams, a grantee from James Field, dated in 1868, conveying the lot Do. 528 Pine street. ^The lot conveyed bounds on the north side of the alley, and the deed passes the free use of the alley, “in common with the owners and occupiers of the other properties fronting on Pine street whose outlets are on and through said allejr,” and does not indicate that the Broadway lot-owners were to share in the use of the alley.

The only evidence tending to establish a dedication of the alleyway by Janies Field, as alleged in the bill, is in the two affidavits of the complainant herself and her sister .annexed to the bill. These affidavits state that the

“alley was dedicated' by * * * James Field for the use, in common, of the abutting properties, of which said premises, No. 809 Broadway, is one, and has been used continuously since as an alleyway.”

The affidavits state no mode whereby a dedication was effected, nor do they narrate any incident having that result. They simply swear to- the legal conclusión that there was a dedication. Other disinterested witnesses, former owners of the Pine street houses, whose affidavits are annexed to the answer, state facts which repel the idea that there ever was a dedication of the alley in favor of the lot No-.- 809 Broadway.

It is quite impossible to say that, on this point, the complainant’s right is established with the certainty that is required upon the allowance of a preliminary injunction. Hagerly v. Lee, 18 Stew. Eq. 256, and cases there cited.

The complainant also- claims that she is the owner of an undivided interest in fee-simple- in the land within the area of the alley, and that attendant thereon there is a right to use the alley. She admits that the owners of the Pine street lots have a right of way there, but she insists that it is in common with herself, as owner of No. 809 ‘Broadway, succeeding her grandfather’s ownership of that lot. This claim is inconsistent with her assertion of a dedication of the alleyway by James Field, in his lifetime, for the use- bf the owners whose lots abut upon it. The refuting affidavits annexed to the answer tend to show that, while there probably was a dedication, it was solely and exclusively for the benefit of the- Pine street lots, and that the owners of No. 809 Broadway had no share therein, but were afterwards allowed, by mere parol license from the Pine street owners, to use the alley as a drain.

Eone of the proofs on the point of dedication, on either side, is conclusive. The complainant is bound to show a clear right, and has not done it.

The complainant also claims to have used the alley as a right of way for twenty-five years and that her father before her used it for twenty years. This claim is also- met by the defendant’s refuting affidavits, to the effect that the complainant enjoyed the privileges of the alley as a mere licensee of the Pine street.lot-owners. Pier claim on this contention is open to the same objection—it is not sufficiently well established to- justify the issuing of a preliminary injunction.

Another difficulty in the way of granting a preliminary injunction in this case- arises by reason of the complainant’s own conduct after the defendant company had begun the construction of its building over the alley. The affidavits annexed to the answer show that the defendant company had made contracts and commenced the erection of the building in question in such a manner as to occupy all the lands within the area of the alley. At this stage of the affair the complainant and the general manager of the defendant company had a conference and discussed the plans for the building and the closing up of the alleyway. The complainant was told that the defendant had planned to close the alley. She claimed she had a water-course through it. The defendant’s manager proposed to fix a drain to take care of all the water; the complainant assented to this, and the defendant company proceeded with its work. Afterwards, about June 11th, the defendant’s manager called on her and the substance of the previous conversation was repeated, and a memorandum, in writing, between the parties was made, in these words and figures:

“Camden, June 11th, 1902.
“In consideration of $31.25 I hereby relinquish all claim to alley in rear of my premises. Said alley being used in common for Pine street houses, upon which I claim to have a water right. Gately & Hurley Co. hereby agree to take care of drainage and always maintain- same.
“Gately & I-Iurley Co.,
“W. L. I-Iurley, Treas.,
“Annie E. Dobleman.”

The consideration—$31.25—was a debt which the complainant owed the defendant company.

The defendant company, after making the above arrangement with the complainant, continued its building work, putting in a drain to carry off water as arranged as part of the improvement. After the work had been going on for some weeks the complainant repudiated the writing which she had signed, and returned the $31.25, saying her husband was not willing that she should sell her rights in the alky, and that he had not signed the paper. She filed her bill in this cause on October 9th, 1902. The affidavit of the defendant company’s manager shows that at the time when the complainant attempted to repudiate the above-stated arrangement the defendant company’s plans had been made for the improvement in question, contracts had been given out and that the work on the ground was in actual construction and progress, so1 that it was impossible for the defendant company at that time to change it.

This narration of an attempted settlement between the parties, whether effectual or not (and upon this it is not necessary presently to pass), was within the knowledge of the complainant when she filed her bill and her own affidavit in support thereof. It is not in any way disclosed either by the bill or her affidavit. Her present application is for a preliminary injunction to stop the defendant company from doing the thing which she knew was intended to be done, and which had actually been in progress for several weeks, with her assent, and which cannot now be stopped without material injury to the defendant company. Without determining the effect of the arrangement stated upon the complainant’s legal rights, if any she has, its existence and non-disclosure by her in her bill of complaint ought certainly to prevent the allowance of a preliminaay injunction. ■

I will advise an order refusing the writ, with costs.


author: Grey, V. C.

text:
    Peter B. Reed et al. v. The Helois Carbide Specialty Company.
    [Filed January 5th, 1903.]
    1. A corporation mortgage which is duly executed under the hands of the proper executive officers of the company and attested by its corporate seal, which was delivered to the mortgagees, and for which valuable consideration passed to the company coincidently with its delivery, will not be held to be invalid, because there is no proof that -a resolution of the board of directors was passed authorizing and directing the making of the mortgage.
    2. A mortgage may be a good security for some component parts of the mortgage money and bad as to the residue of it.
    3. The' stockholders were indebted to a corporation for the price of shares of its capital stock issued to them; by arrangement between these stockholders and the company, it was agreed that the price they owed for the shares should be by the stockholders expended in the purchase of land for the company’s factory site; the price was so: expended, one of the two shareholders taking the title to the land in his own name. He subsequently conveyed the land to the company which then gave to the two shareholders a mortgage securing payment to them of the amount of money expended as the price of the stock.—Held, the mortgage, so far as it secures to the stockholders the repayment of the price of their shares, is invalid as to creditors of the company, and also as to other stockholders. It is ultra vires that a corporation should secure to a shareholder, by mortgage, the payment of moneys paid by him as the price of stock issued to him by the company.
    4. A corporation mortgage made in good faith, securing payment of purchase-money of land then conveyed, or of money or other valuable consideration paid to or for the benefit of the company and accepted by it, coincidently with the delivery of the mortgage, is a valid security to the extent that it secures such a presently passing consideration.
    5. Such a corporation mortgage is valid to the extent above named, notwithstanding it may have been made in contemplation of the possible insolvency of the company. It is not a fraud and not within the prohibition of section 64 of the Corporation act. P. L. of 1896 p. 298.

    6. So far as such a mortgage attempts to secure pre-existing debts, owing to the mortgagees by the company, it is within the prohibition of section 64 of the Corporation act, and being given in contemplation of the insolvency of the company, is to that extent invalid.

      On bill, answer and proofs.
    The bill of complaint in this cause is filed by Peter B. Reed and Henry Boice to foreclose a bond and mortgage made to them, dated the 25th day of May, 1898, conditioned for the payment of $14,000 within five years from the date thereof, with interest thereon payable semi-annually, with a special condition that if at any time default should be made in payment of interest for the space of thirty days after any semi-annual-payment thereof should fall due, the whole principal debt should, at the option of the said mortgagees, become immediately due and payable. The mortgaged premises consists of tracts of land in the county of Atlantic, and were conveyed to the mortgagor, the Helois Carbide Specialty Company, by the complainant Peter B. Reed, by convejranee bearing even date with the mortgage, and the mortgage also purports to include the buildings, machinery or fixtures then on the mortgaged premises, or thereafter to be placed on said premises, it being agreed that all machinery, fixtures and buildings are real estate. The mortgage was acknowledged on the 27th day of May, 1898, and recorded on the 28th day of May, 1898.
    The bill of complaint makes defendants John -J. Rochford and others, holders of a mortgage made by the carbide company, to secure the payment of $23,000, dated September 16th, 1898. Also1 Prank A. Souder, in respect to a judgment recovered by him against the carbide company on mechanics’ lien for $4,002.08 on the 3d day of December, 1898. The bill of complaint further alleges that on the 25th day of November, 1898, an installment of interest to the amount of $420 came to be due and remained unpaid for more than thirty days thereafter, and that the com-plainants, holders of the mortgage, have elected that the whole principal sum of $14,000 should come to be immediately due and payable. The bill prays for pajunent of the mortgage, or in default thereof, a foreclosure sale.
    The defendant company answers the bill, and admits that its officers executed and delivered to complainants the bond and mortgage in the name of the company, but denies that the company owed the mortgage money, or any other sum, and that it authorized the execution of the bond and mortgage. It admits that it executed and delivered the mortgage for $23,000 to Bochford and others, and that Souder, on December 3d, 1898, recovered and entered the judgment for $4,002.08 set forth in the bill.
    The companj'- then, by way of cross-bill, complains that on May 24th, 1898, the complainants were both stockholders, and the complainant Eeed was director and treasurer of the company; that they procured the stockholders, at a special meeting held on that date, to pass a resolution directing the president and secretary to execute to them the complainants’ bond and mortgage; that immediately after the passage of that resolution Eeed resigned as director- and treasurer, and on the following day procured the bond and mortgage to be delivered to the complainants; that at the time of the execution and delivery of the bond and mortgage the defendant company was in embarrassed circumstances, and in view of that fact the complainants procured it to be made to- them. At the time of the passage of the resolution Eeed was the holder of two hundred and five shares of the capital stock of the company, of the par value of $100 per share, which he obtained from the company without any consideration, and for which he was indebted to the company in the sum of $20,500; that the complainant Boice was the holder of fifty shares, of like par value, which he had obtained from the company without consideration, and for which he- owed the company $5,000; that to escape the said stock liability the complainants, immediately after the passage of said resolution, assigned their said stock to Elias Wright, as trustee.
    That at the time of the making of complainants’ mortgage the complainant Eeed held title to the mortgaged premises, as trustee for the defendant company, the property having been purchased by him as its agents, with its funds, and he refused to convey this property to the company unless its officers would consent to the making of the complainants’ mortgage and to the releasing of the complainants from liability on their said stock by a formal transfer thereof to Wright; that the making of the mortgage and the transfer of the stock wore never duly authorized or sanctioned by the board of directors of the compamr, and that, at the date of the bond and mortgage, the company was not indebted to- the complainants beyond the sum of $3,100.
    The defendant company insists that the bond and mortgage are void, and prays that the complainants may be decreed to surrender the same for cancellation.
    The defendant Frank A. Souder also answers the bill of complaint. He denies the indebtedness of the defendant company to the complainants, denies that the bond and mortgage of the complainants were authorized to be made by the company, admits the execution of the mortgage of September 16th, 1898, to- Rochford and others, denies that any mortgage-money is due to the complainants, and sets up his own judgment on his mechanics’ lien, entered December 3d, 18'98, as a prior lien to the mortgage of the complainants.
    By way of cross-bill the defendant Souder alleges that the complainants subscribed for two hundred and eighteen shares of the capital stock of the company, and on that subscription were indebted to the company in the sum of $21,800; that the complainants, before the making of the mortgage,- purchased the mortgaged premises, and paid for it with part of the money due on their subscription for the capital stock, and took title thereto in the name of the complainant Reed, but the defendant Souder insists that it was, in fact, purchased with the moneys of the carbide company; and was held in trust for it by the complainant Reed; that the complainants had also advanced about $3,100 on account of the company, and when the latter demanded that the title of the mortgaged premises should be conveyed to it, Reed refused to- convey unless the company would give the complainants a mortgage for $14,000 to cover the moneys Reed had paid on account of his subscription to the capital stock of the company ; that the matter was determined at a meeting of the board of directors, held May 21st, 1898, at which Reed was present, and, through his influence and vote in the board, a resolution was passed to execute and deliver to- complainants the $14,000 mortgage held by. them and to take back the two hundred and eighteen shares of the stock of the company for which Reed had subscribed. The cross-bill further alleges that at that time the defendant Souder was a creditor of the company, for labor performed and material furnished in the construction of a building on the mortgaged premises, that the company was in an insolvent .condition, which was known to the complainant Reed; that Reed agreed with the company and with the defendant Souder that he would assume the indebtedness of the company to' the defendant Souder. The defendant Souder charges that the complainants’ bond and mortgage are void as against him, and prays the complainants may be decreed to deliver them up for cancellation, and that the complainant Reed may be decreed to pay to the defendant Souder the amount of the latter’s judgment, with interest and costs.
    The complainants in the main suit join issue on the defendants’ answers. They also answer the cross-bills, denying the facts therein advanced, and averring that the defendant company at the time of the passage of its resolution authorizing the making of the mortgage was indebted to the complainants in the sum of $12,539.90 for actual cash expended for and in behalf of the company 'at its request, and that at the time of the execution of the bond and mortgage the complainants advanced to the defendant company the further sum of $1,469.10. They admit that at the time of the making of the mortgage the title to the mortgaged premises was in the name of the complainant Reed, but they deny that he -held the same in trust for the defendant company, and that they were purchased by Reed as its agent or with'its funds, and that he refused to convey to the company unless itá officers would consent to make a mortgage and release the complainants from their liability on the stock, and they further deny that the mortgage and transfer of stock was not duly authorized by the board. They deny that the company was not indebted to the complainants at the date of the bond and mortgage beyond the sum of $3,100, and aver the fact to bo that it was indebted to the complainants at that time in the sum of $14,000 actual cash paid to or for the defendant company at its request.
    On these pleadings the cause came to a hearing.

      Mr. George A. Bourgeois, for the complainants.

      Mr. William I. Garrison and Mr. Thomas F. French, for the defendant Frank A. Souder.

      Mr. David J. Pancoast, for the defendant the Helois Carbide Specialty Company.
   Grey, V. C.

This is a foreclosure case. The complainants’ mortgage is disputed by the mortgagor company and by Frank A. Souder (a creditor of the mortgagor company), who holds a mechanics’ lien judgment against that company, entered subsequently to the making and recording of the complainants’ mortgage.

The testimony in this cause covers a much wider scope than is necessary to settle the questions raised by the pleadings. The only matters which, on this foreclosure suit, may pertinently be determined are the validity of the complainants’-mortgage, the amount due thereon, if it be found valid, and whether it is a prior lien to the judgment of the defendant Souder; «and on the cross-bill of that defendant, whether decree should be made that the complainant Reed should pay to'the defendant Souder the balance remaining due on his judgment.

All questions which have been contested and discussed on the argument touching the liability of the complainants as stockholders of the defendant company, or the ultimate adjustment of equities attending the issue of holding or surrender of the stock of the defendant company, must be considered and determined in some suit in which these matters may be properly in issue. They have no place in the present foreclosure proceedings, except the incidents attendant upon the application of the purchase-money of stock to the purchaser of land, and the subsequent inclusion of that purchase-money in the complainants’ mortgage. That point is dealt with hereinafter.

Taking up the questions disputable in this cause under the pleadings, the complainants’ mortgage, while admitted to have been actually executed with all the requisite formalties, is denied to have been made and delivered under any proper authority of the mortgagor company.

The mortgage was authorized to be made by a resolution adopted at a duly-called meeting of the stockholders, which met on the 21st day of May, 1898, pursuant to notice, and was attended by substantially all of the stockholders of the defendant company. The resolution directing the making of the mortgage was affirmatively voted for by all the stockholders there present, excepting Mr. Monroe, the holder of one hundred shares. The objection presently under consideration challenges the validity of the whole mortgage, on the ground that it was not authorized to be made and delivered by the board of directors. The single member who stood out at the stockholders’ meeting resisted the authorization of the mortgage because he opposed the securing to Reed and Boice, by mortgage, the moneys paid out by them for the stock of the company. This point will be considered hereafter. As to the non-authorization by the board of directors, it is true that no formal resolution of the board of directors directing the mortgage to be made is shown to have been passed. But it is proven that the meeting of the stockholders which authorized the mortgage was itself called by the board of directors for that purpose, and that the mortgage was, in fact, executed by the executive officers of the company, who were members of the board; that the common seal of the company was under the control of the board, was affixed to the mortgage, and that its execution was proven by the annexed oath of the secretary of the company, which declares, referring to- the mortgage,

“that said conveyance was signed, sealed and delivered as and for the voluntary act and deed of the said grantor for the uses and purposes therein expressed, pursuant to a resolution of the hoard of directors of said grantor.”

There is no dispute that the signatures attached to the mortgage are the genuine signatures of the executive officers of the company, or that the seal affixed is its corporate seal. There is no satisfactory negative proof to the effect that the board of directors did not, in fact, authorize the execution and delivery of the mortgage. It is entirely undisputed that part of the consideration of the mortgage was a substantial sum of cash, paid by the mortgagees into the treasury of the company coincidently with the delivery of the mortgage to them. This cash-money mortgage was received and apparently used for the benefit of the company.

Another consideration inducing the making of the mortgage was the securing of part of the purchase-money of the mortgaged lands conveyed to the company coincidently with the giving of the mortgage. This phase of the case is hereinafter discussed in detail. On the point now under discussion—the validity of the mortgage as a corporate act—it is pertinent, for the corporation accepted the conveyance of these lands, subsequently took possession of them, and improved them as its own. These incidents amount to a ratification of the acts of the company’s officers in purchasing the land. The giving of the mortgage was an incident in the purchase.

A corporation mortgage coming into existence under such circumstances cannot be challenged because of the mere absence of affirmative proof of the formal action of a board of directors of the company authorizing it to be made. In such cases, in- the absence of proof that it was unauthorized, it will be presumed that it was authorized. In re West Jersey Traction Co., 14 Dick. Ch. Rep. 63, and cases there cited.

The defendant Souder, who- is a creditor of the company, also attacks the mortgage as a whole, upon the ground that it is a fraud, in that it was bargained for and arranged between Captain Reed, a director and officer of the company, and the corporation itself, to secure-to him, in contemplation of insolvency, a preference in the payment of debts due to- him from the company, and lie cites section 64 of the General Corporation act (P. L. of 1896 p. 298) in support of this criticism, where it is declared that neither the directors nor any officer or agent of the corporation shall sell, convey or assign or transfer any of its estate, effects, dioses in action, goods, rights and credits, lands and tenements in contemplation of insolvenc)', and that every such sale, &c., shall be utterly void as against creditors.

This criticism, so far as it challenges the mortgage as a whole, cannot be sustained if there be any portion of the mortgage-money lawfully secured by it. A mortgage may be good for some component parts of the mortgage-money and. bad as to the residue. In Savage v. Miller, 11 Dick. Ch. Rep. 437, the court of appeals held a mortgage given to secure several distinct items of indebtedness to be valid as to some of them and invalid as to others. In the present case a part of the mortgage debt accrued for cash actually delivered by the mortgagees to the mortgagor company at the time the mortgage was given. The mortgage secures the payment of this mone3r, and to this extent at least was not given to secure the payment of a pre-existing debt, which is the sort of debt referred to by the above-recited statute.

The mortgage cannot be invalidated as a whole because of any of the attacks made upon it. It remains to consider ,the defendant’s contentions which challenge the amount of money which the mortgage secures.

The complainants insist that it is a purchase-money mortgage, securing the price of land coincidontly conveyed for a large part of its total amount; that another part secures the payment of moneys precedently advanced to enable the company’s business to be carried on, and that the residue—-$1,409.10—was cash paid by the mortgagees to the mortgagor on the delivery of the mortgage. The complainants contend that the mortgage is a valid security for the.whole amount expressed on its face. The ascertainment of the true sum due on the mortgage requires some examination into the relations of the parties which resulted in the creation of it.

The Iielois Carbide Specialty Company is a corporation organized under the laws of this state in December, 1897. Its business appears to have been the manufacture and sale of a patent lamp, which was thought to be a valuable improvement for the purposes of lighting. Its principal manufacture had been carried on at a factory in Clearfield street, Philadelphia, and it was proposed, in the early part of 1898, to purchase land at some location at or near Absecon or Pleasantville, and there to build new buildings, and remove its factory to that place. The complainants, Reed and Boice (Reed being the most active), became interested in selecting and securing a site for the location of the company’s proposed factory. It was agreed, in February, 1898, between the company and Reed and Boice that Reed should be made treasurer of the company; that one hundred shares of the company’s capital stock should be issued to Reed and Boice at $50 per share, and that the $5,000 due the company for this issue should be used in the purchase of a site upon which to locate the company’s factory. The one hundred shares of stock was issued on March 1st, 1898, to Reed under this agreement. Reed transferred fifty of them to Boice. Boice paid $2,500 (his portion of the $5,000) to Reed, and the latter proceeded to purchase lands on the site selected. Reed was after-wards, on May 2d, 1898, elected treasurer of the company. No money was paid into the company’s treasury for this issue of stock. Reed expended in the purchase of land for the company a very considerably larger sum than the $5,000 due to the company for the stock issued to him and Boice. He took all the titles in his own name, but does not appear to have claimed at any time that he held them for his own benefit; indeed, he admits he bought for the company, upon an understanding that he was to be reimbursed when he turned the land over. The company approved of his purchases, for it located its factory building on the site purchased by him, and proceeded to equip it for the manufacture of its lamps. Between February and April 18th, 1898, Reed had expended in the purchase of lands, for the benefit of the company, a total sum of over $1,000. On this last date—April 18th, 1898—two hundred and fifty additional shares of the capital stock of the company were issued to Reed, and it is contended by the defendant company and Souder that these shares were also issued upon an understanding that the purchase-money due the company for the stock should be applied or credited to the land purchased, made by Reed for the company, and for building to be paid for by him. It may be said here and now that there is no sufficient evidence to prove that there was any agreement between Reed and Boice, or either of them, and the company to the effect that the purchase-money of any stock issued to them, or either of them, by the company, other than the first one' hundred shares, should be applied in the purchase of land. Between April 18th, 1898, and May 9th of the same year disagreements arose between Mr. Eeed and the other directors of the company. On May 9th, 1898, the board of directors had' a conference with Captain Eeed, and arranged with him that a meeting of the stockholders should be called to authorize the giving of a mortgage to- him. The amount for which the mortgage was to be made was first spoken of as $16,000, which was understood to include the sum of $3,500, or thereabouts, of cash yet to be advanced by Captain Eeed. A notice was given for the stockholders’ meeting on May 21st, 1898, and, pursuant to the notice, a meeting was held and passed a resolution in these words:

“On motion- of Gen. Wright, seconded by E. A. Souder, the president and secretary of the board were authorized and instructed to execute a mortgage for $14,000 upon property of the company located in the borough of Eleasantville, town of Abseeon- and township of Egg Harbor, to Peter B. Reed et al., for money advanced and to be advanced to the company by him.”

When the mortgage came finally to be executed it was arranged between the parties that its total sum should be $14,000, a portion of which should be cash to be advanced by Captain Eeed upon the delivery of the mortgage.

Under the above resolution the mortgage of the complainants was made and delivered. It is dated the 25th day of' May, 1898; proved May 27th, 1898, by the oath of A. W. Bailey, secretary of the company, and was recorded'on May 28th, 1898, in Atlantic county clerk’s office. It is admitted that one of the objects of giving this mortgage was to enable Captain Eeed and Mr. Boiee to “go- out” of the company in every capacity in -which they were related to it, except the holding of ten shares each as stockholders. Under this arrangement Captain Eeed resigned the treasurership of the company and also from its board of directors, and surrendered to the company all of the shares pf stock held by him, except ten shares retained by him. Ten shares were also retained by Mr. Boice. These were the circumstances under which the complainants’ mortgage came into existence. Immediately thereafter the complainant Reed ceased to make any advances to carry on the corporation’s business, and it was thrown upon its own resources. The gentlemen who were then connected with it were obliged, from time to time, to make advances to the extent of over $23,000 to aid the company in carrying on its business. The straggle for life continued until November, 1898, when it appears to have bec-n abandoned. Shortly after that the defendant Souder recovered judgment, the company ceased all business and it was openly confessed that the corporation was insolvent.

■ The statutory prohibition against the transfer of assets of corporations which are insolvent, or in contemplation of their insolvency, first appears in the statute of 1829. P. L. of 1829 p. 58 § 2. It is entitled “An act to- prevent frauds by incorporated companies.” It continued to- be part of the statutory laws of this state until the revision of the year 1875. In the revision of that year this provision was omitted, but was re-enacted on the 5th of March, 1895. P. L. of 1895 p. 166. It is now part of the General Corporation act of 1896. P. L. of 1896 p. 298 § 64. A large number of cases, which are quite instructive upon the general principles of the law applicable to the erecting of preferences by officers of corporations, arose during the period between 1875 and 1895, while this prohibition was off the statute-book. A list of them may be found in the case of Savage v. Miller, 11 Dick. Ch. Rep. 438: That case itself arose upon a mortgage which was created before the act of 1895 re-enacted this prohibition. The mortgage presently under consideration is operated upon by the prohibition, and the question as to the amount, which it might rightfully secure must be determined with relation to it.

The prohibition is against transfers of the corporation’s property in contemplation of its insolvency. I do not understand ■this prohibition to- be applicable to conveyances made in good faith by the officer’s of a corporation at a time when the financial embarrassments of the company are such that its insolvency may be within contemplation, if, as incidental to* and essentially a part of, the conveyance made, a present consideration moves to the company. For instance, if a mortgage be given to secure the payment of money paid in good faith to the company coincidently with the delivery of the mortgage; or a purchase-money mortgage be given to secure the payment of the purchase-money of land conveyed to the company eoincidently with the mailing of the mortgage; or if property be in good faith transferred to the company, and its property, or money, be given in exchange therefor. In all such cases the value of the assets of the company is not. materially changed. It is as solvent after such a transaction as it was before.

In all business enterprises which are threatened with financial embarrassment, insolvency is necessarily within contemplation. It is very rarely, indeed, that the financial situation of a corporation is SO1 perfectly defined that it continues solvent up to a given instant, and is immediately thereafter insolvent. In almost all such cases there is a period of struggle, during which efforts are made to rescue the enterprise from threatened insolvency. These efforts are necessarily taken in contemplation of insolvency. The transfer of the corporation’s property, in order to convert it into money, may be the only means of averting the insolvency which is feared, and the capacity legally to make such instant conversion may be absolutely necessary to the financial salvation of the corporation. The officers of the corporation, who are most intimately acquainted with its present embarrassment and future prospects, are naturally the persons who would be most likely to furnish the money necessary to relieve the corporation from its threatened danger. Such transactions, carried out in good faith, for full consideration eoincidently passed to the corporation, seem to be a necessity. They are not “frauds by incorporated .companies,” to prevent which the statute above recited was originally passed. They are in no' way detrimental to creditors of the corporation,,for they have the same value of .assets' after such transfers of property as before. Any other construction would compel the immediate winding up of .pvery corporation whose financial affairs should become temporarily embarrassed. It would have no power to pledge assets for present loans, or even to make sales of its property for cash,, in order to meet a-present need for money, which, when met, would cease to be embarrassing, and carry the corporation over to a more favorable period, when all its obligations could readily be discharged.

It is upon this construction of the meaning of the statute that the validity of the complainants’ mortgage will be tested.

The first element composing the money secured to be paid by complainants’ mortgage is the money claimed to have been spent by the complainants in the purchase of land for the company. The moneys thus spent are divisible into two parts—one portion was expended as the payment'by Boiee and Reed for the one hundred shares of the capital stock of the company, issued to and held by them, which they had agreed with the company should be spent for the purchase of land for a site for the company’s factory; the other portion spent for the land was disbursed by Captain Reed, without express agreement that it was the purchase-money of stock issued, or to be issued, to him, and was, in fact, a voluntary purchase made by him for the benefit of the Compaq, but taking tire- title to the land purchased in his own name, thus securing himself for the moneys so by him voluntarily expended, whenever he should convey these lands to the company.

As to the first item, the money paid' for land in satisfaction of the debt which Reed and Boiee owed to the company for stock which it had issued to them, the mortgage cannot be held rightfully to have secured its repayment.' This is- true irrespective of the prohibitions of the statute against preferences. The money owing by Reed and Boiee to the company for its capital stock was the money' of the company. When they spent 'it, by the company’s direction, in the purchase of lands, it was the company’s purchase to that extent, no matter in whose name the title might have been taken. If but a single piece of land had been purchased for $5,000' with this money in Captain Reed’s name, equity would have compelled him to convey that piece to the company, without further compensation to him. What was done was that Boiee and Reed, on making this conveyance, received from the company a mortgage securing the repayment to them of the $5,000, which they had owed to the company for its stock, and which they had spent for the company in the purchase of the land. For this portion of the mortgage-money they gave no consideration whatever, except the surrender of the one. hundred shares of stock. ■ The transaction was that the complainants, being holders of one hundred shares of stock, which they had purchased from the company for $5,000, surrendered it to the company, and received security for the repayment to them of the $5,000. This course of procedure was in derogation of the rights of the creditors of the company, and also of the rights of all stockholders who had fully paid for the stock issued to them. Boney v. Williams, 10 Dick. Ch. Rep. 699. For this reason the $5,000 part of the complainants’ mortgage must be rejected.

The other portion of money expended in the purchase of lands was made by Captain Eeed out of his private funds, without specific agreement that it was an application of any money owing by him to the company. To the extent that he thus voluntarily advanced purchaseymoney, he was justified in taking the title in his own name to lands purchased, and in requiring from the company, when it accepted and received the title for those lands, that it should repay to him the purchase-money so by him advanced. Until such moneys were so repaid, or secured to his satisfaction, he might rightfully have retained and refused to convey the title. For moneys so expended by Captain Eeed for lands conveyed to the company eoincidently with the mortgage received from the company securing payment of those moneys, the mortgage must be held to- be good. To that extent the mortgage does not, in any proper sense, transfer the property of the company. It does not secure the payment of an antecedent debt, but was, and is, a purchase-money mortgage, the means by which the company acquired tire property. The estate of the company received an accession of assets by the conveyance which is equal to the obligation given in payment therefor by the mortgage. Creditors are not harmed, because the accession of assets balances the-obligation.

Another component part of the mortgage-money is the sum of $1,469.10, paid in cash by Captain Reed into the treasury of the company- as the balance to make a net sum of $14,000 at the time he took the mortgage. This was also an accession to the estate of the corporation, and was paid in upon the hope and expectation that it might relieve the company from its financial embarrassments. I do not understand that the statute prohibits a corporation which is in financial embarrassment from borrowing money or purchasing property in good faith, in the hope and expectation of relieving itself from threatened trouble, and conveying property or giving securities and pledges in consideration of such purchases or loans. Such transactions are undertaken and carried on for the very purpose of avoiding insolvency. As above stated, they do not, when conducted in good faith, lessen the assets applicable to the payment of the corporation’s debts, and they are necessary and useful aids in the restoration of its financial standing. The moneys paid in cash into the treasury of the company by Captain Reed on the delivery of the mortgage are rightfully secured by it.

Another portion of the mortgage-mone}r secured the advances which Captain Reed had, before the giving of the mortgage, made, from time to time, out of his own pocket to aid the company in the carrying on of its business. The company was indebted to- him on the day when the mortgage was made to the extent that he had theretofore made these advances. These items were totally disconnected from any of the incidents attending upon the purchase of the land. Captain Reed had no right to retain the company’s land, which stood in his name, until the prior debts owing to Mm by the company should be paid or secured. He had expended money for the general benefit of the company. For that expenditure the company owed him an unsecured debt. It was such an indebtedness as an officer of a corporation might not secure to- himself by a conveyance of its property in contemplation of its probable insolvenc}'". As to this portion of the mortgage-money, it is, therefore, a proper question whether the mortgage was taken in contemplation of the insolvency of the corporation. »

It is contended -that Captain Reed was not a director of the company when the mortgage was made. All the proofs go to show that his resignation was arranged as part of the plan for the giving of the mortgage. He was to “go out” of the company. An officer cannot lawfully arrange to have the debt due him from the company secured to be paid by a transfer of its assets, then resign a few days before the delivery of the prearranged security, and claim that when it was given he was not an officer of the company. Such a transaction is not in good faith, and will not be recognized in a court of equity.

It is also shown that at the time the complainants’ mortgage was taken there were outstanding debts owing by the company, notably that of the defendant Souder.

Did the complainants take their mortgage in contemplation of the insolvency of the defendant company?

Before Captain Reed took the mortgage he had become dissatisfied, he says; with the company, because he found it did not, in fact, own a certain patent, which he had been led to believe it did own. He also knew that the company was short of funds to carry >on its business, for he had been himself furnishing the money to pay its current expenses. He knew that a very large amount of stock had been issued from the treasury of the company at but fifty cent, of its par value, for he had himself taken a number of shares under such an arrangement. He knew that it was proposed, and at one-time agreed; that he and Boice; Doctor Roehford, the president of tire company, and Doctor Bailey, the secretary

“should take the $25,000 which remained in the treasury at fifty per cent, and sell it to their best advantage and reap the benefits and profit that they could get over and above the fifty per cent, which they paid to the company.”

This is Reed’s own testimony. Two hundred and fifty shares of the capital stock of the company was actually issued to him under this arrangement. All of these incidents go far to show that, in the latter part of May, 1898, the complainants in this suit contemplated a financial situation for the company which was extremely dangerous to its continued solvency. It was with this knowledge that’ the complainants’ mortgage was taken, securing, in part, an antecedently existing debt owing from the company to Captain Reed for previous advances made by him to aid the company in carrying on its business. It was a matter of debate as to whether Captain Reed should “go out” of the company and upon what terms, and it was quite clearly shown that his own opinion of the future prospects of the company were such that he refused to convey to the company the title to the land, which he admits he purchased for its benefit, unless upon terms that all of his expenditures of everjr character in and about its business, whether they were the proper subject of a mortgage or not, should be secured to him by mortgage. His quitting to' advance money led directly to the company’s failure, and this result was indicated when he took his mortgage.

It must be held that the complainants’ mortgage was taken in contemplation of the insolvency of the defendant company, and, so far as it secured the payment of a pre-existing debt, it was an unlawful transfer of its assets, in the nature of a fraud, and therefore invalid.

Questions touching the issue of stock to the complainants, or either of them, and their liability thereon as stockholders, I have not discussed, because they should be presented in a proper cause, which this foreclosure suit is not, save so far as these matters are above considered in their relation to the amount which might rightfully be secured by the mortgage.

The only other question remaining is the alleged priority of the judgment of the defendant Souder to the complainants’ mortgage. The judgment is a mechanics’ lien judgment. The complainants’ mortgage was on record when the suit was begun. Mr. Souder did not make Messrs. Reed and Boice defendants in his lien suit. A memorandum endorsed on the summons shows that he did not, as lien claimant, assert any priority against the complainants.

It is also claimed by Mr. Souder that the complainant Reed agreed to pay for the building for which Souder claimed his lien. This is flatly denied by Reed, and is in no way sufficiently proven. The debt was claimed by Souder himself to be a debt due him from the defendant company. No promise of Reed, in writing, to pay it is attempted to be proven. No .actual promise to Souder by Reed is proven eyen by parol. The proof is of Seed’s declaration to others. No such situation of affairs and ag-reements of parties are shown as would amount to a novation, whereby Souder exonerated the defendant company in consideration of Reed’s promise to pay. The claim of Sonder that Reed be decreed to pay his debt, set up in the 'cross-bill, must be refused.

If counsel can agree as to the totals-of the items of money which may properly he included within the complainants’ mortgage, as above indicated, a decree may be signed accordingly. If counsel are unable to agree, I will refer this matter to a master, to state an account of those items in accordance with this opinion. The testimony upon these points is somewhat detailed and obscure. The question of costs will he settled on advising final decree.