text:
    Fred B. R. Unger, complainant, v. Newlin Haines Company, defendant.
    [Decided September 12th, 1923.]
    Out of the funds in his hands a receiver will be compensated for his services in such sum as they are fairly and reasonably worth, somewhat apportioned to the amount which he has received and administered; and allowance will be made to the counsel retained by him, for his services to the receiver in relation to the, trust; but no allowance can be made to counsel for creditors, or bidders at the receiver’s sale, even though the services of such counsel have directly inured to the benefit1 of the estate; they must look to their clients for their compensation.
    On Bill, &e. On application to confirm receiver’s account and for allowances to receiver and counsel.

      Mr. Norman Grey, receiver, pro se.

      Mr. Martin V. Bergen, for the receiver.

      Mr. Edward C. Waddington, for the complainant.

      Mr. Carlton Godfrey, for the sundry stockholders.

      Mr. Edward W. Hunt (of Katzenbach & Hunt), for the sundry stockholders.

      Mr. J. Hector McNeal, pro se, and for sundry other stockholders.
   Walker, Chancellor.

The receiver of the Newlin Haines Company has presented his second and final account, and it having been audited by expert accountants, and there being no exceptions thereto, it is allowed and will be confirmed.

The only question for decision is as to who are entitled to fees, and how much. Mr. Waddington, who filed the bill, claims compensation out of the estate for services in representing the complainants, his clients, both before • and at sundry hearings after the appointment of the receiver during the prosecution of the cause. Mr. Godfrey claims an allowance out of the fund in the hands of the receiver, because his efforts were instrumental in raising the bids for the hotel property from $1,000,000 to $1,463,000, the price at which the hotel property was sold. The financial result of the operation of the St. Charles Hotel, which was conducted by the receiver, shows that he handled a gross income from all sources of $1,010,520.90; that the total disbursements from operation were $917,614.43, leaving a net income of $92,906.47; that the value of the property in his possession and control, and for which he was responsible, was $1,463,000, the price at which the property was sold at the receiver’s sale. He now has a balance on hand of $158.-678.24, out of which should be reserved such an amount as will be sufficient to protect the receiver against certain claims amounting in all to $21,539.13. He will be directed to retain $23,500, to satisfy so much of the amount as may be art-judged against him. The balance, $135,178.24, after payment of costs and expenses, being available for present distribution. The defendant owned the St. Charles Hotel, a very valuable property, which at all times has been a going concern.

There was considerable litigation in this cause from start to finish. The parties in interest were before tire court many times, and several opinions have been filed by me on important questions arising in the cause.

There is a paucity of decisions on the subject of the fees of counsel in receivership proceedings in this state, but I take it that the principle upon which these fees are allowed is settled. I have the advantage of numerous adjudications in the federal courts under the Bankruptcy law, which are analogous and pertinent.

In the first place, it is held that in determining the amount of compensation the value of the estate must be taken into consideration. In re Ellett, &c., Co., 196 Fed,. Rep. 100. There the doctrine was invoked to keep down the allowance because the estate was small; but the principle works both ways. In re Hahn, 84 N. J. Eq. 523, I held that lawyers’ services' are not based upon, nor restricted to, mere time service; that-they are entitled to fees which will adequately compensate them for their services, especially when those services are valuable to their clients; that when recoveries are made their fees may be, and properly are, somewhat apportioned to the avails gotten for their clients. It has also been held in the federal courts, that attorneys for mere claimants are not entitled to allowances out of the estate.

In re Smith, 108 Fed. Rep. 39, the court said that an examination of the record disclosed the fact that the gentlemen (counsel) at every hearing in the bankruptcy and state courts represented creditors; that there is no provision in the Bankruptcy act authorizing allowance of attorney’s fees such as asked out' of the bankrupt’s estate; that it is said the attorneys have increased the assets of the estate by their professional services; that that appears to be true; but under the act the necessary and actual expenses of the officers only can be paid out of the estate; nor was there anything in the record showing those services were actually and necessarily rendered the estate and trustee; but if increased assets resulted, such an increase was only incidental to a vigorous contention in behalf of creditors, apparently, at least, adverse to the trustee, at considerable increase of cost to all concerned.

It must be a general principle, and the holding (In re Smith, supra) is, I take it, declaratory of the law, that there can be no allowance out of the estate except for counsel representing the receiver, who has the possession and is charged with the administration of the estate.

In re Coventry Evans Furniture Co., 171 Fed. Rep. 673, the court said (at p. 675), that it has been uniform practice to refuse allowances of costs to successful claimants, even in cases of contest; and the judge did not think it was intended that costs should be awarded, or allowances made, from the estate in such cases; that to once enter on the practice it must be uniform, and in many cases a reasonable allowance would exceed the claim, and in some eases small estates would be eaten up by such allowances.

In re Munford, 255 Fed. Rep. 108, the court observed (at p. 118) that it is uniformly held, and is in accordance with the plan provided by the act for dealing with such cases, that the allowance is to be confined to services actually rendered in filing the petition and prosecuting it to the adjudication of the bankrupt; that when this is accomplished the estate passes under the jurisdiction and control of the court and its officers; that the interest of the petitioning creditors is merged into that of all of the creditors; and there is neither necessity nor opportunity for the attorney of the petitioning creditor to render actual services to the estate; that the suggestion that the attorneys had been diligent and faithful for nearly two years and largely through their efforts the amount in the hands of the trustees was as large as it was, while true, cannot be taken into consideration in fixing the allowance; that in rendering services after the adjudication and the election of the trustee, counsel were serving their clients, whose claims'they held for collection, other creditors employing .other counsel.

An exception exists where the attorney for a creditor successfully resists a claim which the trustee refuses to contest. In re Little River Lumber Co., 101 Fed. Rep. 558. This is merely mentioned to show the character of exceptions to the rule. There is no such situation here.

In re Harrison, &c., Co., 95 Fed. Rep. 123 (at p. 126), the court found no warrant in any provision of the act for compensating attorneys of petitioning creditors for their services in attending meetings of creditors, and resisting the allowance -thereat of other claims aga-inst the estate; that they were supposed in such actions to be subserving the interests of their clients, whose dividends in the estate would be augmented in the proportion of the disallowance of other claims; that each creditor of the estate is interested in seeing meritless claims defeated and preferential claims rejected. And the judge asked: Is the court to allow a fee to the attorney of each objecting and contesting creditor, when the statute expressly provides that one reasonable attorney’s fee . for professional services actually rendered irrespective of the number of attorne3rs employed, may be allowed by the court? And the judge also said: It is further claimed by these attorneys, as a basis for their compensation, that they induced several bidders to attend the sale of the property of the bankrupt; that presumptively and naturally enough, interested creditors in the estate would either attend in person, or be represented at such sale, to see that the property be not sacrificed, as they were the especial beneficiaries in the product of the sale; that no provision of the Bankrupt act even hints at an allowance against the estate for such service.

Now, where counsel represents a bidder, not a creditor, and induces his client to bid, he may thereby enhance the price for which the property may be sold, and thereby perform services which will indirectly increase the estate; but his work would be for his client, who hoped to obtain the' property at the sale. The principle is the same as that where counsel for creditors induce a bidder to participate in the sale in the expectation that the fund will be increased and their clients incidentally benefited by the enhanced price: But these efforts, not made upon the retainer of the receiver, and not made by counsel acting for him, have no claim upon him for compensation, and they must look to their client for their compensation. No allowance can be made for services rendered to stockholders. Goodyear T. & R. Co. v. United M. C. & S. Co., 89 N. J. Eq. 108.

Sometimes a receiver has more than one counsel, but there is only one allowance of fee and that is ascertained with reference to the value of the services to the estate, and divided between the counsel represnting the receiver. And this division is only made among counsel actually retained by the receiver and whose services are rendered directly to him and for the benefit of the estate in his hands. If I were to allow Mr. Godfrey a counsel fee here it could only be by way of participation in the amount adjudged to be reasonable compensation for the receiver’s counsel, and the fee would have to come out of Mr. Bergen’s allowance. So far as the receiver is concerned, Mr. Godfrey is a mere volunteer. Upon what theory could I toll Mr. Bergen’s fee and allow Mr. Godfrey to participate in it, when these counsel were not associated together for the receiver; but Mr. Bergen alone acted for him, and Mr. Godfred was, as I said, so far as the receiver is concerned, a mere volunteer. In this situation, if I were to make an allowance to Mr. Godfrey, it would encourage every lawyer who had a client interested in an estate in the hands of a receiver to apply for an allowance out of the fund upon the theory that his services for his client had benefited the estate. Impossible.

The fact that the federal statute controls the bankruptcy courts in the allowance of fees to counsel is, so far as I can find, a mere embodiment of established principles of law governing such allowances. And the same principles obtain in this state as matter of right and justice, irrespective of statute; and this must be so in the nature of things.

By analogy to the law evolved by the federal courts, Mr. Waddington, representing the complainants, can be compensated only for his services to them in advising that a bill for the appointment of a receiver would lie, and in preparing and filing the bill and securing the appointment of the receiver. Mr. Godfrey, for his services rendered to individual clients, whether creditors or bidders, or both, must look to his clients for his compensation, and can have no award out of the fund in the hands of the receiver, whom he did not represent.

Now, as to the allowances to be made: Mr. Waddington will be awarded a counsel fee of $500 and his taxed costs to and including the appointment of the receiver. The receiver will be awarded the sum of $30,000 as compensation for his services, trouble and risk in operating the hotel, handling approximately $1,000,000, and caring for property worth approximately $1,500,000. Mr. Bergen, his counsel, will be awarded the sum of $15,000 for his advice and services in representing the receiver in his management of the trust and in the litigation in which he was necessarily-involved.

Decree accordingly.


source: Caselaw Access Project

author: Walker, Chancellor.

license: Public Domain

text:
    Thomas F. McCran, attorney-general, for and in behalf of the State of New Jersey, informant, v. Public Service Railway Company, defendant.
    [Decided September 17th, 1923.]
    1. A preliminary mandatory injunction will issue to compel the restoration of a status quo ante in aid of a suit at law where irreparable damage would result from its being withheld.
    2. Where a mandamus is sought in a court of raw to compel a public utility corporation to perform its duly to the public, the court of chancery will enjoin the performance of that duty pending the suit at law.
    3. It is not a defence that the company cannot operate at a profit; that is not the test; the duty resting upon a quasi-public corporation must be performed or its pxüvileg'es and franchises must be surrendered ; it cannot discharge its duty on and off, as it may find it iwofitable to do so.
    4. It appears that a receiver may be appointed for a public utility corporation to discharge its duty to the public in the event of its not obeying the mandate of the court.
    On information. On application for mandatory injunction in aid of suits at law.

      Mr. Thomas F. McCran, attorney-general, and Mr. William Newcorn, assistant attorney-general, for the state.

      Mr. Robert II. McCarter, Mr. Franh Bergen, Mr. Merritt Lane, Mr. F¡. Ambler Armstrong and Mr. William II. Speer, for the defendant.
   Walker, Chancellor.

The attorney-general has filed an information on behalf of the state, in which he shows that the defendant company was organized and created under a consolidation agreement dated August 20th, 1907, between sundry street railway companies, and shortly thereafter it entered into an agreement' of consolidation with certain other street railway companies operating in the northern part of the state, and thereby became possessed of all rights, privileges and franchises, subject to all restrictions, disabilities and duties of the corporations so consolidated. Under the act of consolidation and merger it was provided that all rights, privileges and franchises, and property of each of such corporations, wias transferred to and vested in such new corporation; and that it has also acquired other street railways by long term leases, thus forming a united and complete system of about eight hundred and fifty miles of street railway tracks in one hundred and forty-two municipalities, and took possession of such railways and operated such system from the dates of such leases and entry upon the properties respectively, until August 1st, 1923, carrying in recent years about one million passengers per day; that prior to August 1st, 1923, employes of the defendant company voted that a strike should go into effect on said date unless the terms and demands of the employes were met or conceded by the corporation, which it refused; such strike went into effect, and the company has failed to operate its cars from that date up to the present time, notwithstanding the duty imposed upon it, a common carrier, having franchises from the state to provide proper service for the citizens thereof, and more particularly for the inhabitants in the communities served by such corporation. The information also charges that the failure of the defendant to operate its cars deprives the state and its municipalities of revenue to which it is lawfully entitled by way of taxes on its gross income, and jeopardizes the investments of its bondholders and stockholders, and those of its subsidiaries; that it deprives the citizens, and more particularly the inhabitants of the municipalities, of the service to which they are entitled by the company; and that the corporation has obligations which it cannot meet unless its road is operating, thereby working irreparable injury upon the state, its subdivisions and citizens. Further, that the board of public utility commissioners of this state on August 9th, 1923, served a notice upon the defendant of a hearing in the matter of its refusal to operate its road, and, after hearing, and on August 14th, 1923, made an order directing the defendant forthwith to furnish adequate and proper service and keep and maintain its property and equipment in such condition as to enable it to do so; that the defendant failed to comply with the terms of said order, and on August 17th, 1923, the board made application to the New Jersey supreme court for a writ of mandamus to compel the company to obey the said order, and on the date last aforesaid an alternative writ of mandamus was allowed, and served upon the defendant company on August 28th, to which the company filed an answer wherein it set forth that by reason of the increased cost of operation it was impossible for it to comply with the order of the board, which proceedings are pending and undetermined; that by reason of the company possessing exclusive grants to operate its railway system, it is bound to perform that duty until it has lawfully surrendered, suspended or abandoned its franchises and privileges by the legally expressed consent of the state. .This information further shows that on September 4th, 1923, the attorney-general filed an information for a quo warranto, inquiring by what right the defendant company exercises the franchises and privileges acquired by it at the time of the consolidation and merger agreements aforesaid, and by what right it refuses to operate its cars and perform the duty required of it under and by virtue of the privileges and franchises acquired by it as aforesaid.

The information before me prays that in aid of the mandamus and quo warranto proceedings mentioned, and in order to preserve the rights of the public, that a mandatory injunction be issued requiring the defendant company forthwith and pending the determination of said suits at law, to resume the operation of its railways and render service to the citizens of New Jersey; or, in the alternative, upon the continued refusal of the defendant company to operate its railways and discharge its public duty as aforesaid, that a receiver be appointed to take charge of the property of said company and operate the same until the final determination of the actions at law now pending. This succinctly states the issue tendered by the attorney-general on behalf of the state.

The defendant company has answered, and while this is not a final hearing, the case has been fully submitted on pleadings and affidavits on both sides. The gravamen of the answer is that the company cannot operate without loss, and it claims that therefore it should not be compelled to operate at all. That present operation—that is, operation pending a settlement of its dispute with its employes, would be at a loss, may be conceded for the purpose of the decision of the matter before me.

In arriving at a determination in this matter, I deem it unnecessary to consider the question of the prospective loss of taxes to the state or municipalities, or of interest of the bondholders or dividends of stockholders of the company. The question transcends any such considerations and, to my mind, turns upon the single question of the power of this court to grant the injunction prayed for because of the public duty owed by defendant company to the citizens of this state, and that irrespective of whether such operation can be carried on with profit or with loss.

Mandamus is the appropriate remedy to compel a street railway company to operate its road for the benefit of the public. Hamilton Township v. Mercer County Traction Co., 88 N. J. Law 485. In this case in the court of errors and appeals (90 N. J. Law 581), Mr. Justice Swayze said (at ¶. 584), that the writ of mandamus is used to enforce a public duty which may sometimes grow out of a contract as well as out of a statute, citing Wilbur v. Trenton Passenger Railway Co., 57 N. J. Law 212; Bridgeton v. Traction Co., 62 N. J. Law 592; Rutherford v. Hudson River Traction Co., 78 N. J. Law 227; Pleasantville v. Atlantic City Traction Co., 75 N. J. Law 279; Camden v. Public Service Railway Co., 82 N. J. Law 246. Here the duty arises out of statutory and charter obligation.

It is true that in McCran, Attorney General v. Western Union Telegraph Co., 94 N. J. Eq. 281, I held that mandamus and not mandatory injunction is the proper remedy to compel the performance of a public duty enjoined upon a i/msi-public corporation; and so it is. But in the same ease I also held that an injunction would issue to preserve the status pending the quo warranto suit at law, for, if it were not for the injunction, the public duty owed by the defendant to the state would not be performed during the litigation over it. And that is this ease; unless a distinction is to be made between an injunction to preserve an existing status and one to restore a status quo ante. As a fact, the injunction in the Western Union Case amounted to a mandatory one, because the company had refused to perform the duty of receiving and transmitting messages of public officers free of charge under the statute. And while the writ was couched in negative terms and restrained the company from refusing to accept and transmit the messages, because that was the prayer of the information in that case, nevertheless, the injunction compelled the corporation to receive and transmit them, and was, consequently, in effect, a command to- do an affirmative act.

Chancellor McGill in National Docks Railway Co. v. Pennsylvania Railroad Co., 54 N. J. Eq. 10 (at p. 16), said that his understanding was that our courts have always recognized the right of a court of equity in a proper case to grant a mandatory injunction after preliminary hearing, even though that be the whole relief sought, citing numerous cases.

In granting temporary injunctions to protect easements, as in other cases, the court does not take jurisdiction for the purpose of settling the rights of the parties permanently, but simply to preserve the property until the legal title to it is established. The title which the plaintiff must show in such a case is not, of course, an incontestable one; lie makes out a sufficient case when he satisfies the court that his claim is a substantial one and that there is reasonable ground for doubting the validity of the title of his adversary. The injury against which protection is sought is that which is likely to occur before the question of title between the parties can be settled—that is, in the limited time before a decision of the pending suit can be had. Pom. Eq. Jur. (2d eel.) § 1070, citing Fulton v. Greacen, 36 N. J. Eq. 216; Todd v. Staats, 60 N. J. Eq. 507. In the latter case an injunction was denied because irreparable injury was not shown. See p. 513. The instant case is not one of easement, but the principle applies.

"Where a gas company, having a franchise and virtual monopoly, demands of a city an unreasonable price for gas, the city may offer a reasonable price; and if the gas company refuses to furnish at that price the city may maintain mandamus if the supply has not been commenced and may sue in equity to enjoin the stoppage of a supply then being furnished. Public Service Corporation v. American Lighting Co., 67 N. J. Eq. 122. See also Public Service Gas Co. v. Newark, 86 N. J. Eq. 384, 388.

Jacquelin v. Erie Railroad Co., 69 N. J. Eq. 432, is relied upon- by defendant because there Vice-Chancellor Garrison refused an injunction compelling the railroad company to maintain a station, holding that the remedy was by mandamus, and said that the authority of courts to compel a railroad company to maintain a station where not required to do so by charter or statute was not so clear as to justify the granting of a preliminary injunction restraining the discontinuance of such a station; but (at p. 444) he also said that courts will compel the completion of a road if the charter clearly imposes that duty, upon it, and they will also compel the operation of the road and other clear duty enjoined upon the corporation. This case would appear to be an authority for the contention of the state.

' That a preliminary mandatory injunction may be issued in a proper case has the sanction of the court of errors and appeals. See Bailey v. Schniiizius, 45 N. J. Eq. 178, where it was held that a mandatory injunction was rarely granted before final hearing, and wall only be ordered to prevent extreme or very serious damage. In other wmrds, that it will be ordered in such circumstances.

That a preliminary mandatory injunction will lie in a proper case has been decided over and over again in this court. See Whitecar v. Michenor, 37 N. J. Eq. 6; Pennsylvania Railroad Co. v. Kelley, 77 N. J. Eq. 129; Barna v. Kirczow, 71 N J. Eq. 196, 201; Savage v. Port Reading Railroad Co., 73 N. J. Eq. 308; National Docks Railway Co. v. Pennsylvania Railroad Co., 54 N. J. Eq. 10, 16.

In Hodge v. Giese, 48 N. J. Eq. 342, Vice-Chancellor Van Fleet held that a court of equity may protect legal rights in real estate wdrere the right, though formally denied, is yet clear on facts, wdiich are not denied, and, according to legal rules wdiich are wrell settled, and the injury against which protection is asked is irreparable; that an injury is irreparable which is material, and wdiich cannot adequately be redressed by pecuniary damages; that contrary to the general rule, a mandatory injunction may issue at the- inception of a suit for the protection of an easement and other rights of like nature.

The important question is, May this court lay a public utility corporation under a mandatory injunction to operate its works for the benefit of the public where to do so would appear to entail a loss upon the company ? The only cases in this state wdiich I have found that bear upon the question are Public Service Corporation v. American Lighting Co. and Public Service Gas Co. v. Newark, supra; and there the question was as to a reasonable price for gas, and it was held that injunctions would issue to compel the companies to serve the public with gas for lighting at a reasonable price where the companies demanded more. But in Georgia and New York it has been held that a utility corporation could be compelled to serve the public even if that service would be unprofitable.

In Savannah, &c., Co. v. Shuman, 91 Ga. 400, the court held that so long as the corporation retains its franchise it will not be allowed to urge as an excuse for failing to perform any duty required of it by its charter that service would be unprofitable. It cannot consistently keep the franchise and reason that such performance would be unremunerative. And in People v. New York Central and Hudson River Railroad Co., 28 Hun (N. Y.) 543, the court said that the question was, could a railroad corporation refuse or neglect to perform its public duties upon a controversy with its employes over the cost and expense of doing them; that the question admitted of but one answer; that the excuse had no validity in law; that the duties imposed must be discharged at whatever cost; that they could not be laid down or abandoned or suspended without the legally expressed consent of the state; that the trusts were active, potential and imperative and must be executed until lawfully surrendered.

After all, that is the test. The duty resting upon a quasipublie corporation must be performed or its privileges and franchises must be surrendered. It cannot assume to discharge its duty to the public on and off, as it may find it profitable to do so. And this apparently has the sanction of the supreme court of the United States, for in Brooks-Scanlon Co. v. Railroad Commission of Louisiana, 251 U. S. 396, 64 L. Ed. 323 (at p. 326). that court, while holding that a carrier cannot be compelled to carry on business at a loss (a question of fact which doubtless concerns the public utility commission and the supreme court on mandamus), nevertheless observed that “it is true that if a railroad continued to exercise the power conferred upon it by a charter from the state, the state may require it to fulfill an obligation imposed by the charter, even though fulfillment in that particular may cause a loss.” And that is the point I make, for, it seems to me, on an application for injunction to restore the status, it is not for me to make an exhaustive investigation of facts, and to adjudicate whether or not the company could be operated at a profit, but that it is enough if it appears that it is obliged to operate under a charter which it has not surrendered. See also Atlantic C. L. R. Co. v. North Carolina Corporation Com., 206 U. S. 1 (at p. 26); 51 L. Ed. 933 (at p. 945), where the court said that the primal duty of a carrier is to furnish adequate facilities to tire public, and that duty may well be compelled, although by doing so, as an incident, some pecuniary loss from rendering service may result. To the same effect is Wolf Packing Co. v. Court of Industrial Relations (U. S. Sup. Ct. Adv. Op. 756), 762. In my judgment this is the view that I should adopt on the application before me, leaving to the supreme court the ultimate decision as to the reasonableness or unreasonableness of rates on final hearing on mandamus.

The condition with which the court is dealing is appalling. I have never known anything like it to exist in this state. To sav that in its presence there is no court competent to give needed prompt relief is to assert that there is a defect in the law itself. If the defendant can cease to operate its lines for the benefit of the public under a charter which requires it to do so (which charter is sought and received), then the great steam railroads, even the transcontinental roads, can do so, and thus paralyze transportation business over a wide territory, to the untold loss and inconvenience of a suffering public.

Now, in order to grant relief, admittedly, the damage must be extreme and serious; it must be material and irreparable. It is all these and more. It is not an answer to say that the company cannot operate at a profit, and therefore it should not be obliged to run at all. The answer to that answer is: It stands still at a loss, and if it stands still long enough it will be absolutely ruined. This would ultimately result in an insolvency receiver, who -would be directed to operate the road under order of the court. Such, an ending- would be disastrous to those owning the bonds and stock of the company and to its other creditors, unless the property at receiver’s sale brought sufficient to discharge all its obligations in full, which is not likely. No one hopes more’than I do that that calamity wall never befall this great corporation, until its numerous security holders. Nor do I think that ordering operation wall have that effect. I think, 011 the contrary, that the effect will be to stimulate negotiations to-settle the many difficulties with which the company is confronted. But, be that as it may, I think it my duty to order the injunction prayed for to restore the status quo ante in aid of the suits at law.

If the injunction were not obeyed then it appears the informant would be entitled to the appointment of a receiver, under the general equity powers of the court, to carry out its mandate by operating the road. See Stockton v. Central Railroad Co., 50 N. J. Eq. 489. And the attorney-general could make an application to that end.

It should be stated in closing that the defendant objects that the informant is not entitled to relief in this court respecting the matters set forth in the information, and prays the same benefit and advantage as though it had moved to strike out the information in confia-mity with the present practice substituted for demurrer. The views which I have above expressed lead to k denial of this application.

Mandatory injunction accordingly.


text:
    In the matter of the application for a receiver for Public Service Railroad Company, by A. Henry Kollmar, petitioner.
    [Decided September 17th, 1923.]
    1. An application for the appointment of a receiver under the General Railroad act (Comp. 8iat. p. 4%19 § 86) is not a proceeding before the chancellor as a statutory magistrate or legislative agent, but is a proceeding in the court of chancery itself.
    2. Under a prayer for further or other relief, or without it according to the present rule of court, petitioner majr have such relief as he shows himself to be entitled, without a specific prayer therefor.
    3. On application for a receiver under the statute, to operate a railroad for the benefit of the public, where the railroad has ceased to run any car for a period of ten days, and the facts and circumstances warrant it, the court may, under its general jurisdiction, issue a mandatory injunction compelling the company to operate, with leave to petitioner to apply for a receiver under the general equity powers of the court in case the injunction is disobeyed.

      On petition, &e. On application for appointment of a Receiver for Public Service Eailroad Company.

      Mr. Thomas F. McCran, attorney-general, and Mr. William Newcorn, assistant attorney-general, for the petition.

      Mr. Robert II. McCarter, Mr. Frank Bergen, Mr. Merritt Lane, Mr. F. Ambler Armstrong and Mr. William II. Speer, contra.

   Walker, Chancellor.

This is an application for the appointment of a receiver for a trolley line organized under the General Eailroad act. Comp. Slat. p. 4-219. The power invoked is that residing in section 86 of the act, which provides that if any railroad company has failed or neglected to run daily trains on any part of its road for ten days, the chancellor, on petition of any citizen of this state, and on due proof of the facts, may appoint a receiver who shall take possession of all the property of the company and operate its road and transact the ordinary business thereof in the transportation of freight and passengers for such time as the chancellor may direct.

The case is before me on petition and affidavits and answer and affidavits. It is conceded that the road has not operated since August 1st, 1923; and defendant asserts that it has always been operated at a loss, which is not denied.

It appears that the roadway of the company commences in Elizabeth and runs to a point north of New Brunswick, and commences again at a point south of New Brunswick and runs to Trenton. There is, however, a continuous line of railroad tracks from Elizabeth to Trenton, running through New Brunswick between the termini at the points last mentioned, over the tracks of the Public Service Eail'w'ay Company, which operates the road here in question under a traffic agreement. The petition prays for the appointment of a receiver and for further and other relief. The court is therefore not obliged to grant or deny the relief specifically pra3recl, but can give any measure of relief to which in its judgment the petitioner is entitled. Moreover, by rule 47 annexed to the Chancery act (1915), now rule 60 of this court, it is provided that relief, other than that prayed for, may be given (without a prayer for general relief) to the same extent as if general or other relief had been prayed. It was conceded on the argument that an information might have been filed in this matter as well as in that of McCran, Attorney-General, v. Public Service Co., heard and decided with this case. And this application is not before me as a statutory magistrate or legislative agent, but is a proceeding in the court of chancery itself. So the court of last resort declared in Delaware B. & C. M. R. R. Co. v. Markley, 45 N. J. Eq. 139.

I do not feel willing to appoint a receiver in this matter in the facts and circumstances before me, and have concluded under the prayer for further and other relief to grant a mandatory injunction compelling the defendant company to operate its road, the same as in McGran, Attorney-General, v. Public Service Railway Co., and for the reasons stated in that case, with the alternative that if the mandate to operate is not obeyed, a receiver may be applied for, as in that case, under the general equity powers of the court. This course I deem much fairer to the defendant company, and it will also avoid any doubt as to the validity of section 86, which has been questioned by the defendant, and concerning which the corirt of errors and appeals suggested difficulty in Long Branch v. Southern Railroad Co., 26 N. J. Eq. 539 (at p. 540).

As the Public Service Railroad Company has always been operated bvT the Public Service Railway Company, since the latter acquired the former, operation of its own road by the Public Service Railway Company will facilitate operation of the Priblic Service Railroad Company.

Mandatory injunction accordingly.


text:
    Ida May Hauenstein, petitioner, v. Henry C. Hauenstein, defendant.
    [Decided September 25th, 1923.]
    If a husband drives his wife from his house, and if she is allowed to stay aivay for two years without solicitation to return and proper assurances of better treatment on his part, it is a constructive desertion by the husband for which the wife is entitled to a divorce.
    On petition for divorce. On final hearing on master’s report and depositions ex parte.

      Messrs. Homan & Buchanan, for the petitioner.
   Walker, Chancellor.

This is a suit for divorce for constructive desertion. The parties were married December 6th, 1917, and lived together as husband and wife until May 28th, 1920, on which date the petitioner left the defendant in the following circumstances: The petitioner was preparing to visit a friend and invited her husband to accompany her. He refused and accused her of associating with other men. She denied it. The result was a quarrel in which he told her to get out of the house and stay out, and if she did not get out he would throw her out. She left. He did not thereafter send for her and ask her to return to him or make any advances to her whatever.

His assertion that she associated with other men appears to be a cruel and unfounded imputation. The defendant has not answered or endeavored in any way to substantiate the accusation. It is not in and of itself an accusation of adultery. Bradbury v. Bradbury, 74 Atl. Rep. 150. This case is approvingly cited by the court of errors and appeals in Carileer v. Carileer, 94 N. J. Eq. 160. A false charge of adultery doubtless would be extreme cruelty. So thought Vice-Chancellor Van Fleet in Black v. Black, 30 N. J. Eq. 215 (at p. 221); and I concur.

While the petitioner’s leaving her husband is an actual desertion on her part, yet she may turn it into a constructive desertion against him. Constructive desertion is where an existing cohabitation is put an end to by the misconduct of one of the parties, provided such misconduct is itself a ground for divorce a vinculo or a mensa. Danielly v. Danielly, 93 N. J. Eq. 556.

In Palmer v. Palmer, 22 N. J. Eq. 88, Chancellor Zabrislde held that if a husband drives his wife from his house, if she be allowed to stay away for three years (now two) without solicitation to return and proper assurances of better treatment, it would be a desertion by him sufficient to warrant a divorce.


text:
    Carmela Capossa, otherwise known as Carmela Collona, petitioner, v. Nicola Colonna, defendant.
    1. The validity of a marriage is determined by the lene loci contrackts; but it it dissolved or annulled by lea) domicilii.

    2. A marriage may not be annulled by virtue of the statute of a-foreign state, but only under the statute of this state.
    3. A threat by a man that if a certain woman did not marry him the next day he would kill her brother, is not, in the circumstances of the case, such duress as entities her to have the marriage annulled for that cause.
    On petition for nullity of marriage. On final hearing on master’s report and depositions ex parte.

      Mr. Richard Stockton, for the petitioner.
   Walker, Chancellor.

The petition is one for nullity of marriage. It alleges that the petitioner and defendant were married in the city, county and State of New York, on August 2d, 1922, and that at the time the petitioner was of the age of seventeen years, two months and twenty-two days, having been born in Newark on May 11th, 1905; that at the time of the marriage petitioner was under the age of legal consent, which in the State of New York is eighteen years; that at the time petitioner had not attained the age under which the consent of parents or guardians is required by the laws of New York, which is eighteen A^ears; that neither of the parents of petitioner, who are living, gave their consent to'the marriage; that the consent of petitioner was obtained by force, duress and fraud executed and perpetuated upon her by the defendant; that the marriage has never been consummated, and that petitioner has not in anywise confirmed the marriage, and has never cohabited with defendant or had any sexual relations with him; that petitioner and defendant were bona fide residents of Neiv Jersey at the time of the commencement of this action. The petitioner pleaded a statute of New York, which provides inter alia that a marriage is void from the time its nullity is declared by a court of competent jurisdiction if either of the parties thereto (1) is under the age of legal consent, which is eighteen years, or (2) consents to such marriage by reason of force, duress or fraud. The prayer is that the marriage may be declared by the decree of this court to be null and void for the cause aforesaid pursuant to the statute in such case made and provided. Our statute provides that decrees of nullity of marriage may be rendered in all cases (V) at the suit of the wife when she was under the age of sixteen years at the time of the marriage, unless such marriage be confirmed by her after arriving at such age. P. L. 1907 p. 476.

The defendant did not ansAver, but defaulted in pleading, and the cause Avas referred to a special master, who reported in favor of nullity because the statute of NeAv York, which Avas proved as well as pleaded, provides that a marriage may be annulled because the. petitioner was under the age o.F eighteen years at the time, had not the consent of her parents, and because the marriage was never consummated. He is silent of the question of duress.

The facts of marriage, age of petitioner and residence, and non-consent of parents, were proved and are sufficiently corroborated. There seems to be no proper corroboratiou of the fact that petitioner is still a virgin. An inspection probably would disclose the truth on this subject. See Bolmer v. Edsall, 90 N. J. Eq. 299 (at p. 304); also, Bissell v. Bissell, 93 N. J. Eq. 537. This would seem to be required to satisfy the rule of the best evidence. See Lasker v. Lasker, 91 N. J. Eq. 352. Only the girl herself testifies in this case that she has not had sexual intercourse. However, it may be assumed for the purpose of decision that the marriage has never been consummated.

The validity of a marriage is determined by the lex loci contractus, and it is dissolvable by the lex domicilii. Bolmer v. Edsall, 90 N. J. Eq. 299, 306. And the nullity of a voidable marriage is also governed by the lex domicilii. Jimenez v. Jimenez, 93 N. J. Eq. 257.

No statute, whether relating to marriage or anything else, if in the ordinary, general form of words, will be given any effect outside of the local jurisdiction of the government enacting it. To bind even citizens abroad it must either specifically in terms, or by necessary interpretation, include them. 1 Bish. M., D. <& 8. § 866.

In Jimenez v. Jimenez, supra, I said (at p. 259i : “We do not grant divorces or nullity of marriage under the statutes of New York, but those of our own state only. The petitioner has evidently mistaken the provision of our Divorce act that divorce (not nullity) may be granted where the cause of action alleged was recognized in the jurisdiction in which the party resided at the time the cause arose, as ground for similar relief asked for in an action in this state. P. L. 1907 p. 474, § 6 (&). Therefore, if nullity is to be decreed, it must because our statute, not that of New York, provides the remedy, and it does not.” The marriage itself is valid, even in New York, where it is only voidable under its statute. It is valid here and our statute does not authorize its annulment. The statute of New York differs from our law in two particulars—(1) as to age and (2) as to time when annulment takes effect. In that state the act provides that a marriage is void from the time when it is so declared. In our state the effect of a decree of nullity is to render the marriage void from the beginning. Steerman v. Snow, 94 N. J. Eq. 9. This difference is an added reason why the statute of New York cannot be enforced here. Surely, we cannot permit the New York legislature to alter our law. This view leads to a denial of nullity by the application of the statute of New York to the case in this state.

Now, as to to the charge of duress: The petitioner’s uncorroborated testimony on this subject is as follows: “Q. How did you happen to marry Nicola Colonna? A. He threatened me at the factory one day, he said if I did not go to New York and marry him he would kill my brother. I was scared and went in the morning to New York; was married in the morning.”

Duress is defined to be that degree of constraint or danger either actually inflicted or threatened and impending, which is sufficient in severity or in apprehension to overcome the mind of a person or ordinary firmness. IS Gorp. Jur. 296, § 110. This definition was approvingly cited by the court of errors aard appeals in Byron v. Byron, Heffernan & Co., 119 Atl. Rep. 12. And the agreement must have been entered into because of the fear of the threatened injury, otherwise there is no duress, which will not ordinarily invalidate a contract entered into after opportunity for deliberate action. IS Gorp. Jur., supra. Surely, this young woman had time for reflection. She had time over night, and instead of going to New York in the morning to marry the defendant she should have informed her brother so that he might have had the defendant arrested and bound over to keep the peace. Besides, duress is a question of fact; and I find as a fact that there was no duress. Assuming that sufficient corroboration of petitioner’s story about the threat to kill her brother may be spelled out of the circumstances of the case because the testimony of another witness is not obtainable (Meek v. Meek, 92 N. J. Eq. 23), still the threat of itself, all things considered, does not constitute duress of the petitioner.

On the whole case I am clearly of opinion that the relief prayed for should be denied and the petition dismissed.


text:
    Mary Mikecz, petitioner, v. John Mikecz, defendant.
    [Decided November 27th, 1923.]
    The Divorce act (P. L. 1907 p. 1/1’h), as construed by this court and the court of errors and appeals, overrides the provision of the unwritten law of condonation in desertion cases, and prevents the tacking together of two periods, one before and one after condonation. to make the two years of willful, continued and obstinate desertion necessary to entitle the deserted party to divorce, and requires that that period shall immediately precede the commencement of the action, notwithstanding the doctrine that a subsequent offense revives former ones which have been condoned.
    On petition for divorce. On application for order of reference ex parte.

      Mr. J. 3 f ilion Preger, for the petitioner.
   Walker, Chancellor.

The petitioner, Mary Mikecz, alleges that she and the defendant were lawfully joined in the bonds of matrimony May 7th, 1914; that defendant deserted her in the month of May, 1918, since which time and until April, 1921, and for more than two years, the defendant willfully, continuedlv and obstinately deserted the petitioner; that thereafter and in the month of April, 1921, the petitioner, at the request of the defendant, forgave and condoned the aforesaid offense and again resided and cohabited with defendant until the month of February, 1922, when defendant again deserted her; that by virtue of the desertion in May, 1918, continuing uninterruptedly until 1921, and by reason of the desertion on the part of the defendant during the aforesaid period (1918 to 1921) being willful, continued and obstinate, and continuing for more than two years, the condonation in April, 1921, of said offense of desertion was conditional by law, whereby the defendant was required to treat the petitioner with conjugal kindness and not commit any matrimonial offense cognizable before this court; that in the month of Februarjq 1922, when defendant again deserted petitioner, the aforesaid cause of action existing in favor of the petitioner against the defendant for divorce on the ground of desertion and condoned as aforesaid, was thereupon revived, and bjr virtue thereof, and the defendant’s failure and refusal at any time thereafter to request or desire the petitioner to cohabit or again reside with him, the defendant has willfully, co.ntinuedly and obstinately deserted the petitioner for more than two jrears. Here follows allegations of the residence of petitioner and defendant and birth of children. The prayer is for divorce and further relief. The defendant has not answered, and petitioner moves for an order of reference to a special master to take proofs ex parte.

From the above allegations it appears that the first desertion of defendant lasted for a period of about two years and eleven months. There was then a reunition and cohabitation of the parties from April, 1921, to February, 1922, when defendant again deserted. The petition herein was filed June 14th, 1923, which makes a period of a year and four months covered by the second desertion, which, by the way, is not alleged to have been continuous, unless that is tp be spelled out of the last allegation that the first desertion was revived and that the defendant has willfully, continuedly and obstinately deserted the petitioner for more than two years. In the view I take of this case it is not necessary to decide whether the last-mentioned allegation is sufficient, because no order of reference can be made for the reason that there has not been two years of desertion prior to the filing of the petition within the meaning of the statute; and the petitioner therefore does not state a cause of action.

The Divorce act (P. L. 1907 p. 484) provides in section 2, subdivision 2, that divorce from the bonds of matrimony rnay be decreed for willful, continued and obstinate desertion for a term of two years. It therefore becomes necessary to ascertain the time during which this period must run in order to entitle a petitioner to relief.

In Orens v. Orens, 88 N. J. Eq. 29, it was decided that in causes for divorce for desertion there are two periods of two years each during which the desertion must have been willful, continued and obstinate; the first, that immediately succeeding the desertion, at the expiration of which the cause of action arises and accrues, and which vests jurisdiction in the court to entertain the suit; and the second, that immediately prior to the filing of the petition, which vests jurisdiction in the court to decree a divorce. These periods may run concurrently and overlap each other in whole or in part; but, if they do not, legal proof must, nevertheless, be made of the desertioir for the whole period between its commencement and the filing of the petition, including the interval between the two periods mentioned, because, if there were a reconciliation and resumption of cohabitation by the parties during such interval, it would operate to destroy the cause of action alleged to have accrued, and necessitate another and different suit, one counting upon a cause of action accruing after the reunion had been terminated by another and subsequent desertion. And the court of errors and appeals in Myles v. Myles, 77 N. J. Eq. 265, held that the two years contemplated by the statute are those immediately preceding the filing of the petition; that if the petition left a hiatus between such period and the date of filing the petition, such hiatus might represent a complete reconciliation and reuni - tion of the parties that would entirely destroy any right to divorce arising out of a previous desertion. In Gordon v. Gordon, 89 N. J. Eq. 535, the court of errors and appeals, in explaining Myles v. Myles, supra, held that when the two-year period fixed by the statute lias once elapsed, the desertion becomes permanently established; the benefit given by the statute to the spouse offended against has become vested, and he or she can never thereafter be deprived of that benefit •—of his or her right to a divorce—except by his or her own act. Now, the act which would destroy the vested right of action, would be reunition and resumption of cohabitation'—• the very thing mentioned in the Myles Case. On the question of the time of desertion, see, also, Getz v. Getz, 81 N. J. Eq. 465. and Gordon v. Gordon, supra.

In Byrne v. Byrne, 93 N. J. Eq. 5, I had before me the question as to whether or not a. suit for divorce between spouses was pending bona fide after condonation evidenced by reunition and cohabitation. I held that after such con-donation the pending suit was destroyed through it. Applying the doctrine of Myles v. Myles, Gordon v. Gordon and Bryne v. Bryne, supra, to the facts of this case, the cause of action accruing to the petitioner from the desertion from 1918 to 1921, was destroyed by the condonation set up in the petition itself, which also shows that the subsequent desertion has not existed for the required two years before the filing of the petition herein.

There was a time when the legislature permitted the tacking together of two periods of desertion, one before defendant’s imprisonment and the other after his discharge, so as to afford ground for divorce. But that act has been repealed, and section 31 of our present act provides that willful and obstinate desertion shall be regarded and held to be continued, notwithstanding that after such desertion is begun the deserting party shall be imprisoned. Casnyi v. Casnyi, 93 N. J. Eq. 11, 16. But the legislature has never yet provided that the time during which a desertion does not in fact continue by reason of reunition and cohabitation, shall be counted as such period, because of revival of the offense by a subsequent desertion.

I am aware of the doctrine that condonation is upon condition, implied if not expressed, that the offense shall not be repeated, and that continuously thereafter the party forgiven shall treat the other with conjugal kindness, and that a breach of the condition revives the original right of divorce. 2 Bish. Mar., D. & S. 308. See, also, Bravo v. Bravo, 93 N. J. Eq. 56; Kirschbaum v. Kirschbaum, 94 N. J. Eq. 87. Mr. Bishop also says that the statutes in most of our states mention the defense of condonation, but generally in a way nowise modifying the unwritten law. Ibid. § 338. Now, our Divorce act does not mention condonation, and it is plain that the statutory provision that desertion must be willful, continued and obstinate for two years to entitle the injured spouse to a divorce for that cause, coupled with our decisions to the effect that the two years must be those immediately preceding the filing of the petition, necessarily modifies the unwritten law of condonation so far forth as to prevent a prior desertion, terminated by condonation, from being revived by, and tacked upon, a subsequent desertion to afford a sufficient length of time for the granting of a divorce. Our Divorce act overrides the provision of the unwritten law of condonation in desertion cases and prevents the tacking together of two periods, one before and one after condo-nation, to make the two years of willful, continued and obstinate desertion necessary to entitle the deserted party to a divorce, and requires that that period shall immediately precede the commencement of the • action, notwithstanding the doctrine that a subsequent offense revives former ones which have been condoned.

As the petition in this case does not state a cause for action, the application for an order of reference to a master will be denied, and the petition must be dismissed; but the dismissal may be without prejudice.


author: Teaming, V. C.

text:
    Daniel Sutter, Jr., complainant, v. Security Trust Company, defendant.
    [Decided October 11th, 1923.]
    1. Where a check drawn upon a bank was certified by the bank at the request of the drawer, and delivered to the payee, and on the next business day the drawer of the check requested the bank to stop payment, and the payee, after having- been refused payment, endorsed the check and delivered it to another (her brother-in-law) who deposited the check in his bank to his credit, and when the cheek was presented in due course at the bank on which it was drawn, and payment being refused, was duly protested and afterwards was paid to the person to whom it had been endorsed upon his signing a written statement to the effect that the check had been accepted by him for full value and without notice, and that he was an innocent purchaser thereof, and would so testify if called upon to do so, under the Negotiable Instrument act of New Jersey the effort to stop payment of the check by the drawer could be properly disregarded if the written statement above mentioned was true.
    2. Where the holder of the check is not an innocent holder for value without notice, such holder enjoys no rights against the bank not enjoyed by the payee of the check.
    3. In order to recover, in a suit by the drawer of the check against the bank—the bank having paid the endorsee with notice—the drawer must establish by adequate evidence that the check was procured by the payee by fraud, or that the payee had no right to enforce it, as against the drawer, and on failure to to this he will be denied relief in this court.
    On bill, &e. On final hearing.
    This suit is an action at law brought in the supreme court by plaintiff against defendant and by the supreme court transferred to this court because of equitable defenses asserted by the answer.
    On Saturday, March 25th, 1922, a check was drawn on the Security Trust Company, a corporation of this state maintaining a banking denartment, by Daniel Sutter, Jr., for $1,000, and on that clay, at the instance of the drawer, the check was certified by the trust company, plaintiff at that time having an adequate checking account with that company. Thereafter, and on that day, the check was delivered by the drawer to the payee. On the following Monday morning, March 27th, the drawer of the cheek requested the trust company to stop payment. On that day the payee named in the check, after being refused payment by the trust company, endorsed the check and delivered it to Edwin R. Mack, a brother-in-law, and Mr. Mack then deposited the check to his credit in his bank in Philadelphia. The check reached the Security Trust Company March 30th, and payment being refused and the check was duly protested—the protest certificate stating that the answer to the demand for payment was “payment stopped.” On April 6th the check was paid by the trust company to Mr. Mack upon his signing a written statement to the effect that the check had been accepted by him for full value and without notice and that he was an innocent purchaser of it and that he would so testify if called upon to do so.
    This suit was then brought by the drawer of the check against the trust company to recover from it the amount for which the check was drawn.

      Mr. Herbert S. Kille, with whom was associated Mr. William J. Kraft, for the complainant.

      Mr. Thomas E. French, with whom was associated Mr. Samuel Ii. Richa/rds, for the defendant.
   Teaming, V. C.

By our Uniform Negotiable Instruments act a check is defined as a bill of exchange drawn on a bank, payable on demand, and it is there declared that, except as therein otherwise provided, the provisions of the act applicable to a bill of exchange payable on demand shall apply to a check. 8 Comp. Stal. 8755 § 185. By section 187 of that act the certification of a check by a bank on which it is drawn is made equivalent to an acceptance, and by the following section it is provided that where the holder of a check procures it to be certified the drawer and all endorsers are discharged from liability thereon. A holder “in due course” is defined by section 52 of the act and by section 57 his rights are declared to be free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and that he may enforce payment of the instrument for the full amount thereof against all parties liable thereon.

From these provisions of our act, as well as by the accepted law iDi'ior to their enactment, it is clear that had Mr. Mack been a holder of this certified check in “due course” no defenses to his demand for .its payment would have been available to the trust compan3r or to the drawer, and any demand of the drawer upon the trust company for payment to be stopped could properly have been disregarded.

But the evidence in this case satisfies me that Mr. Mack was not a holder in due course and enjoyed no rights as against the trust company not enjoyed by the payee of the check. The truth touching the transaction between the payee and Mr. Mack is too obvious to be hidden by mere words. White cannot be made black even by testimony. I fully believe the truth to be that Mr. Mack did not take the check from the payee in good faith or for value or for his own use, but that he in fact took the check merely to collect it for the payee, and did so not only well ¡mowing that the trust company had refused to pay her, but also knowing why; and that when he got the money on the check by representing himself to be a holder in due course he paid it to her, or to her father for her, pursuant to his original plan. I refuse to- do Mr. Mack the injustice to believe that during the period when he was generously contributing to the aid of his sister-in-law he seized upon her misfortune to collect for himself his former contributions to her needs, and that when their relations were wholly unchanged and at the very hour when her needs were necessarily the most pressing.

This view necessitates the inquiry whether the trust company was privileged to pay the check to the payee, as against the drawer of the check—the plaintiff herein.

As already stated the check was certified by the trust company at the request of the drawer and before its delivery to the payee. Plaintiff further now claims that the check was procured from him by the payee by means of fraudulent conduct on her part. With these two elements concurring the case clearly falls squarely within the principles stated -in Times Square Auto Co. v. Rutherford National Bank, 77 N. J. Law 649. There the check was given to the automobile company for the purchase price of an automobile and was certified by the bank at the request of the automobile company. The bank subsequently refused payment at the request of the drawer of the check and suit was thereafter brought against the bank on its contract of certification. The bank sought to defend on the ground that the purchase of the car had been induced by false representations of the manager of plaintiff. That defense was allowed by the trial court. On appeal it was held that where the certification of the check is at the instance of the payee or holder of a check the certification is operative to discharge the drawer from further liability on the check and to substitute a new contract between the holder of the check and the bank, and no defense of the nature stated is available. But it is there further set forth that when the certification of the check is for the drawer before delivery of the check such certification “does not operate to discharge the drawer, and so long as the drawer remains undischarged, such a defense as that set up in the present case is open both to him and to the bank.-” While this latter statement may be said to have been unnecessary to the judgment of reversal there entered, it is yet a well-considered and specific statement of the views of the members of our court of last resort and cannot be properly disregarded here.

It is thus apparent that the payment of this check by the trust company denied to plaintiff the privilege of asserting his defense to its payment. Upon that theory, if any, the present suit must be sustained.

It is urged by defendant that State v. Scarlett, 91 N. J. Law 200, is inconsistent with the Rutherford Bank Case already referred to. On the contrary, the opinion of the court in State v. Scarlett gives specific recognition to the statement in the earlier case that the discharge of liability of the drawer of a check to the holder may depend on whether the certification has been made by the bank at the request of the drawer of the check before it is issued, or at the request of the holder after the check is issued. But it was held that where the inquiry is simply one of overdraft by the drawer of the check the certification by the bank at his request may be deemed the equivalent of payment. Nor is First National Bank v. Whitman, 94 U. S. 843, cited by defendant, in point. The question there was merely one of privity between a bank and the payee of a check; it was held that a certification of the check created such a privity whether the certification was at the instance of the drawer or the payee.

But notwithstanding the views already stated to the effect that defendant has rendered it impossible for plaintiff to assert any defense against the payment of the check, it is yet clear that any recovery herein against the trust company for so doing must be based upon losses in fact sustained by plaintiff by reason thereof. The suit is in form and effect for the recovery of such damages. It is accordingly essential to plaintiff’s recovery that he establish by adequate evidence his claim that the check was procured by the payee by fraudulent means or that it was held by the payee without right to enforce its collection from plaintiff. In that plaintiff has failed. Just what the check was given for does not clearly appear by the evidence. The utmost that appears is that the conduct of the payee after the check was delivered to her was reprehensible and injurious to plaintiff. No counterclaim against her for damages could have been assessed or sustained on the evidence given, and fraudulent procurement of the check has not been established by the evidence. Indeed, the engagements of the parties at the time the check was given or for which the check was given are not fully disclosed by the evidence. Whether the misconduct of the payee which has been referred to was touching or in any way connected with any matters for which the check was given does not specifically appear. If fraud is relied on to vitiate the vitality of the check, that fraud must be shown to have been fraudulent procurement of the check as distinguished from a breach of contract after the check was given. It is accordingly impossible for this court to determine at this time upon the evidence before it that any damages were suffered by plaintiff by a denial of. his right to defend against the check in the hands of the payee. It seems clear that in a suit to recover damages from the trust company for paying the check the burden rests -upon plaintiff not only to establish facts adequate to disclose that a successful defense in whole or in part could have been made by him to a suit on the check, but also facts affording a basis upon which the amount of loss so suffered, if any, could be ascertained.

This view renders it unnecessary to consider the claim of the trust company that plaintiff’s request was for merely a deferment of payment for a few days to enable him to adjust matters with the holder of the check, or the further claim that the written request to stop payment of the check expressly gave the trust company an option not to do so.

A decree will be advised denying relief to plaintiff.


author: Lewis, V. C.

text:
    Frederic Beggs, complainant, v. William Wishnack et al., defendants.
    [Decided July 2d, 1923.]
    The failure of a seller of machinéis to deliver machinery at the times specified in the contract because of labor troubles, and the refusal of the assignee of the buyer to accept subsequent deliveries because of depression in the market of goods to be manufactured, does not deprive the assignor of the right to receive the moneys to which he would have become entitled upon the full performance of the sales contract.
    On bill of interpleader. On pleadings and proofs.

      Mr. William B. Gourley and Mr. Albert Gomstoch, for the defendant Walter R. Miller.

      Mr. Merrill Lane and Messrs. Eichmann cC- Seide.n, for tbe defendant William Wishnack.
   Lewis, V. C.

The defendant Walter R. Miller made a contract with the Atwood Machine Company, by which certain machinery was to be sold to Miller, one-third to be delivered in December, 1919, one-third in February, 1920, and one-third in April, 1920. Miller assigned the contract to the defendant William Wishnack, and under the terms of the arrangement between Miller and Wishnack, Miller was to be paid a sum varying between $40,000 and $41,600; the sum of $8,000 was paid on account; the balance of this amount was deposited with the complainant, Frederic Beggs, to be paid to Miller from time to time as deliveries were made to Wishnack under the Atwood company contract. When the Atwood company learned that Miller had assigned the contract to Wishnack, they canceled it, claiming that the contract was not transferable, and that the assignment by Miller gave them the right to cancel the contract. Thereupon Miller and Wishnack formed a co-partnership, which appears to have been immediately dissolved. The articles of agreement and the dissolution papers were prepared by the complainant, who represented Miller. Thereupon Miller notified the Atwood company that he had assigned the contract to Wishnack, but that he had taken Wishnack into partnership with him, and that they desired to have1 it reinstated. The Atwood company then executed a new contract with the partnership, which seems to have corresponded with the original contract in its terms, except that the dates for the delivery of the machinery were extended. Now, owing to labor troubles the Atwood company were unable to make deliveries to Wishnack at the times provided in the contract, and later on the Wishnacks refused to accept delivery. Meantime, the silk market had suffered a great depression, and the desirability of this machinery, at the prices fixed in the contract, was gone. Wishnack, shortly after the transaction had been completed between him and Miller, felt that Miller had not dealt with him squarely, and went to the complainant and demanded the return of the money which had been paid. He was informed that Miller had already taken the money to the extent of the $8,000 paid in the first instance, and Miller then told Wishnack that he would have to stand by him in the statement be had made to the Atwood company regarding the formation of the partnership, or that Wishnack would lose the $8,000 that he had already advanced. When it became apparent that the deliveries were not to be made and received under the contract, Miller, who claimed that he had carried out his part of the contract with Wishnack, demanded of the complainant the payment to him of the moneys that still remained in his hands under the arrangement already referred to; and Wishnack, in turn, notified complainant that the • money should not be paid to Miller but should be returned to him (Wishnackl. Complainant thereupon filed the present bill of interpleader, making Miller and Wishnack defendants therein, and the defendants have filed their claims setting up their respective rights to the fund, in accordance with the practice.

The rights of Wishnack and the Atwood Machine Company under the contract are not in issue in the present bill, and the sole issue to be determined between the respective clannants is in respect to the disposition of the funds which had. been deposited with the complainant, and which Miller elanns he is entitled to, and to which Wishnack also makes claim.

Wishnack, who, by the assignment, was to receive the machinery, was eager to have the benefit of the contract. After-wards, because of the depression in the silk trade, the machinery became a drug on the market, and the price declined, and Wishnack wanted to get out of his agreement. For this reason Wishnack held off deliveries under the contract, and then refused to take, claiming that the Atwood company had not performed according to the terms of the agreement. This, in my opinion, could not operate to defeat the right of Miller to receive the moneys to which he would have become entitled upon the full performance of the contract. Hinds v. Henry, 36 N. J. Law 328.

I will therefore advise a decree directing that the fund interpleaded be paid to the defendant Miller.


author: Lewis, Y. C.

text:
    Ella Stagg, complainant, v. Kathryn F. McCann, individually and as administratrix ad prosequendum of L. Lloyd McCann, and New York, Susquehanna and Western Railroad Company, a corporation, defendants.
    [Decided October 3d, 1923.]
    In a suit brought under the Death act by an adm-inhiratrix ad prosequendAim for damages for the deatli'of her intestate, the damages, when recovered, should be distributed according to the statute of distributions of New Jersey, and one not entitled to share in such distribution of damages if recovered has no standing in- equity to force the administratrix to amend her complaint in her action at law to show that such person is one of the next of kin of the decedent.
    On motion to dismiss bill.

      Messrs. Kent & Kent, for the complainant.

      Mr. Edward F. Merrey, for Kathryn E. McCann, the defendant.

      Messrs. Collins & Corbin, for the New York, Susquehanna and Western Eailroad Company, defendant.
   Lewis, Y. C.

On January 1st, 1922, L. Lloyd McCann was killed while riding in an automobile which was struck at the Fiver street crossing, in Paterson, by a train of the New York, Susquehanna and Western Eailroad Company. His wife, Kathryn E. McCann, who was riding with him at the time, was injured, but survived. She was appointed administratrix ad prosequendum- of her deceased husband, pursuant to the statute (P. L. 1917 p. 531), and brought suit, as such against the railroad company to recover damages under the “Death act.” In that suit she claimed that, as the widow, she alone is entitled to damages under the statute. The complainant in this bill, however, who is the mother of L. Lloyd McCann, the decedent, claims that she is also entitled to recover damages for his death, under the statute, and prays that the administratrix be decreed to amend the complaint in the suit at law, which was brought in the New Jersejr supreme court, so as to show that she is one of the next of kin of the decedent; and restrain the parties to that suit from compromising or settling the controversy in disregard of the complainant’s rights.

It appears that the administratrix refused to make the necessary amendment so as to include the mother of the decedent as a party plaintiff in the suit at law; and the mother, Ella Stagg, the present complainant, thereupon applied to Mr. Justice Minturn for an order directing such amendment. Mr. Justice Minturn, however, refused to grant; the order, holding that the statute had been complied with by bringing the suit in the name of the personal representative; and that the respective rights of claimants on the estate must be settled upon the administration of the 'estate or upon a bill in equity, and not in that proceeding.

Thereupon the complainant filed the present bill. The defendant, the administratrix, moves to dismiss the bill for want of equity, and the defendant railroad company has answered, setting up that the widow alone is entitled to take the decedent’s estate, upon which complainant has joined issue by appropriate replication.

At common law the maxim was actio personalis moritur cum persona, that is, a personal action died with the person.

In New Jersey the original Death act was passed in 1848. P. L. 181fS p. 151. This was practically a replica of Lord Campbell’s act, which was enacted sometime previously' in England. The “Death act” sought to remedy the common law situation by providing a right of recovery in the case of death by wrongful act; and gave a right of action through the personal representative of the deceased to the surviving widow and next of kin for the pecuniary loss sustained by them through the death of their decedent. It has been amended from time to time since, but in substance remains as originally enacted, with but slight change in detail.

Among other things, the act provides (P. L. 1917 p. 581) that “the amount recovered in every such action shall be for the exclusive benefit of the widow, surviving husband, and next of kin of such deceased person, and shall be distributed io such widow, surviving husband, and next of kin, in proportion provided by law in relation to the distribution of personal property left by persons dying intestate * * * provided, that where such deceased person has left or shall leave him or her surviving a widow or husband, but no children, or descendant of any children, and no parents, the widow or surviving husband, as the case may be, shall be entitled to the whole of the damages "which she or he shall sustain, and which shall be hereinafter recovered in any such action, and the same shall be paid to her or to him.”

By the statute of distribution, in effect at the time of the death of the decedent, L. Lloyd McCann (P. L. 1908 p. 6kk), where a man died intestate leaving a widow and no children, the widow took all his personal property to the exclusion of his parents and next of ldn.

Complainant in the present suit contends that because of. the language of the “Death act” referred to, particularly the phrase “provided that where such deceased person has left or shall leave him or her surviving a widow or husband, but no children or descendant of any children, and no parents,” it was the intention of the legislature, even though it had in the same act provided that the fund resulting from an action under the statute should be divided in the manner prescribed by the statute .of distribution, nevertheless intended that if there were parents and a widow left surviving by the death of the husband the parents should share in the distribution of that fund with the widow, notwithstanding the fact that, under those circumstances the parents would not receive any part of the decedent’s estate under the statute of distribution.

Based upon this construction of the act, the complainant, the mother of the decedent, L. Lloyd McCann, who, it appears was the chief beneficiary of his pecuniary favor at the time of his death, claims the right to share in any fund that may be recovered in the action instituted by the administratrix under the “Heath act.” While I do not find that the question has been passed upon specifically in our state, nevertheless, the intimation of Chief-Justice Beasley in Paulmier v. Erie Railroad Co., 34 N. J. Law 151 (at ¶¶. 156, 157), is clear that the statute of distribution alone directs the method of distributing the fund resulting from the action brought: by the administrator or executor under the “Death act.”

There is no ambiguity in that statute. It provides that upon the death of a man leaving him surviving a widow and no children, the widow shall take the whole of his personal property. The parents do not share in his ‘personal estate except when there is no widow or children.

I cannot think that the legislature meant anything different in the phraseology of the proviso of the “Death act” above quoted than is indicated clearly in the body of the act; and I think it is clear that it intended that the parents should share in the proceeds of such an action only when and to such extent as they would otherwise share in the decedent’s estate direotly under the provisions of the statute of distribution. '

Under these circumstances my conclusion is that the ipother of L. Lloyd McCann, the complainant in the present suit, is not entitled to share in the fund which may result from the action instituted in the New Jersey supreme court by the administratrix against the railroad company, and that if'a fund results from such suit the widow, there being no children, would take the whole amount. I am not unmindful of the force of counsel’s contention in favor of the'natural equity of the parents—whose pecuniary support from the decedent is cut off by his death—to participate in the distribution of any fund recovered from the party held to be responsible therefor; but, however unsatisfactory in that respect the method of distribution provided by the statute may be, the remedy for such a situation, which is in clear derogation of the common law rule, should be provided by the legislature and not by any unwarranted interpretation or construction of the existing legislative enactment.

But, however this may be, in the present posture of the case the bill, in my judgment, discloses no equity; and this defendant’s motion to dismiss should prevail.

I will therefore advise a decree in accordance with these views.


text:
    Joseph Ziembinski, complainant, v. Joseph Wasniewski and Helen Wasniewski, his wife, defendants.
    [Decided October 3d, 1923.]
    1. One who takes title to real property, even with notice actual or constructive of an encumbrance, from one who had no notice thereof and was a bona fide purchaser when his deed was placed on record, takes title free and clear of'the encumbrance.
    2. Wlhere actual knowledge of the encumbrance by the original grantees can be proved, an opportunity for such proof will be given, even if the pleadings in the case do not so aver.
    On bill and answer.

      Messrs. Weinberger & Weinberger, for the complainant.

      Mr. Herman G. Bust, for the defendants, and Mr. Andrew Foulds, Jr., of counsel with the defendants.
   Lewis, Y. C.

The question involved in this case has been submitted for decision on the pleadings. The bill is to foreclose a mortgage given by Stephen Adamski to- the complainant, Joseph Ziembinsld. for $600, dated March 30th, 1915, recorded May 5th,. 1915. There is no question hut that the consideration named passed between the parties. On May 1st, 1915, Stephen Adam-ski conveyed the mortgaged premises to Albin E. Rowinski and Cora Rowinski, his wife. That deed was recorded May 4th, 1915. On the same date, as this conveyance, viz., May 1st, 1915, Rowinski and.wife conveyed the premises back to Kazimiera Adamski, the mother of Stephen Adamski, the original owner and mortgagor. The Rowinski deed was not recorded by Mazimiera Adamski until June 22d, 1915. The mortgage in question, dated March 30th, 1915, was- not recorded by complainant until May 5th, 1915, which is one day after the recording of the deed to Rowinski and wife, but seventeen days prior to the recording of the deed back to Kazimiera Adamski. On October 27th, 1922, Kazimiera Adamski conveyed tire mortgaged premises to the present defendants, Joseph Wasniewski and Helen Wasniewski. Their deed was recorded November 2d, 1922. The present bill filed to foreclose this mortgage against the present owners of the property contains no allegation of fraud nor does it ’set up actual notice of the existence of the mortgage in Rowinski and wife or Kazimiera Adamski at the time of the conveyances to them, respectively, on May 1st, 1915, nor at the time of the recording of the Rowinski deed on May 4th, 1915. The mortgage, which was recorded May 4th, 1915, did not become constructive notice of the lien until the date when it was so recorded.

Upon these facts the solicitors for the complainant have submitted their right to foreclose, contending that the present defendants, who purchased the premises in question in 1922, were bound b3r constructive notice of the mortgage which had been recorded more than seven years previous to their purchase, and that a proper title search would have disclosed the existence of the recorded mortgage; stating in their brief, however, that if it. is deemed necessa^ to produce proof of actual notice of the existence of the mortgage b3r the purchasers of the property on May 1st, 1915, such proof is available and can be readily submitted to the court.

The defendants, in their answer, deny complainant’s right to foreclose the mortgage as against them and their property on the ground that Rowinski and wife, who recorded their deed May 4th, 1915, one day before the complainant recorded his mortgage, were bona fide purchasers of the mortgaged premises for value, without notice of the unrecorded mortgage ; and that even though these defendants had constructive notice of the mortgage at the time they purchased the premises in 1922, they are not bound by it, nor is their property encumbered by it, because they succeeded to tire title of the premises free from the lien of the mortgage.

The decisions in this state are clear that one who takes title to real property, even with notice, actual or constrictive, of an encumbrance, from one who had no notice thereof, and was a bona f\de purchaser when his deed was placed on record, takes the title free and clear of the encumbrance. Rutgers v. Kingsland, 7 N. J. Eq. 178; affirmed, Ibid. 658; Holmes v. Stout, 10 N. J. Eq. 419; Capital Circle, &c., v. Schmitt, 84 N. J. Eq. 95.

Applying this rule to the present situation, Rowinski and wife took title to the premises free and clear of the Adamski mortgage, which was unrecorded at the time of the recording of their deed, and of the existence of which mortgage it is not alleged they had actual notice. By their deed they conveyed to their grantee a like unencumbered title, and that grantee in turn conveyed a like unencumbered title, free and clear of the mortgage in suit to the present defendants.

If the case were to rest in its present posture, therefore, I would be obliged to dismiss the bill. The answer, in my opinion, setting up a complete defense to the complainant’s alleged right to foreclosure as set forth in lids bill.

In view of the complainant’s statement, however, of his ability and desire to submit prof of the knowledge of the original grantees of Stephen Adamski of the existence of the mortgage in question, which would destroy the bona fide position under which the present defendants claim immunity from foreclosure, I am constrained to reopen the case and afford the complainant the opportunity to present such proof in support of his right to foreclose.

Appropriate opportunity will also be afforded the defendant to meet complainant’s proofs. A date for the hearing may be designated upon application for that purpose.