text:
    In the matter of the application of surviving trustees under deed of trust made by Joseph Battin, deceased, for appointment of trustee in place and stead of deceased trustee.
    [Decided June 14th, 1916.]
    Where a trust deed provides for succSssion by appointment by the court to any trustee who shall die, refuse or become unable to discharge his duties, the court is not bound to appoint the same number of trustees named in the original instrument, but may, when all the trustees named in the instrument refuse to accept the trust, appoint a trust company as sole trustee, especially where the application to make such appointment is made by four-sixths of those in interest in the trust fund, and there is no objection by the other parties in interest.
    On petition, &c.

      Mr. Frank Bergen, for the application.

      Mr. Clark McK. Whittemore, for certain beneficiaries.

      Mr. Philip D. Elliott, for certain beneficiaries.
   Lane, V. C.

The deed, of trust provides for three trustees and'for succession by appointment by the court to any trustee who shall die, refuse or become unable to discharge his duties. Hpon the filing of the petition, the two surviving trastees expressed a desire to resign, thus leaving, upon the acceptance of their resignations, no one to administer the trust, unless an appointment is made by the court. The application is now made by four-sixths in interest in the trust fund for the appointment of the Union County Trust Company as a single trustee. There was no objection from the other parties in interest and on the hearing their counsel consented. That this court has power to discharge a trustee and substitute another, to appoint a trustee to administer a trust where no trustee is in existence, needs no citation of authority, nor is the court obliged to appoint the same number of trustees as provided for by the trust instrument. Barker v. Barker, 73 N. H. 353; 62 Atl. Rep. 166; 1 L. R. A. (N. S.) 802; 39 Cyc. 283, 285. The number of trustees and their identity is a matter of pure judicial discretion.

The reasons which induce me to grant the prayer of the petition are as follows:

The parties in interest assent; it has been difficult to get responsible disinterested persons, satisfactory to all parties in interest, to accept the trust as individual trustees; individual trustees would be required to give large surety bonds at considerable expense to the estate; appointment of a qualified trust company will ensure succession for the life of the trust; the expense and trouble of probable further applications for appointment of successor trustees during the next twenty-one years will be obviated; the compensation allowed by the trustee agreement is inadequate when divided among three trustees, and is scarcely adequate for one; it is doubtful if three trustees of ability and responsibility could be found who would be willing to accept their meagre share of the total compensation provided, for the increasing trouble and responsibilities of administering the trusts; the number of beneficiaries concerned has already increased over those provided for originally, and there will be many more to deal with in the future; a trust company is now qualified by law to accept appointment as trustee; at the time the trust was created trust companies, in New Jersey were not legally qualified to accept appointment, and it is not unreasonable to assume that if the law of New Jersey had permitted the appointment of a trust company as trustee, the donor would have made such appointment. I do not mean to indicate by anything that I have said that I am of the opinion that the court is bound by the provisions in the trust deed as to the amount of compensation. I think the court may, where it appoints a trustee, if necessary to secure a proper trustee, award compensation as may be fairly adequate, notwithstanding the provisions of the trust instrument.


source: Caselaw Access Project

author: Lane, V. C.

license: Public Domain

text:
    Francis J. Sullivan v. Newark Lunch Room Company.
    [Decided June 17th, 1918.]
    1. Where an insolvent company in the hands of a receiver offers a settlement, approved by a majority of the creditors both in number and amount, which settlement proposes that the receiver be discharged and the assets retransferred to the corporation now in control of a committee of creditors, and that time notes shall be given to the creditors for the face amount of their claims, although there was no objection made on the return of the order to show cause why such course should not be pursued, this court will not make an order in accordance with the proposed plan because the business cannot be resumed with safety to the public, as the liabilities of the corporation will exceed its. assets, new debts will be created, and tbe new creditors may be left to bear the burden.
    2. Mere extension of time for payment by insolvent corporation may not be “providing for debts” within 2 Comp. Stat. 1910 p. 1645 § 69.

    3. If the court permits the corporation to continue business, new creditors must be assumed to consider that they are dealing with a solvent concern, when in fact they are not, and thus money of new creditors may be taken and appropriated by the old creditors.
    4. A court should carefully scrutinize any plan of readjustment and settlement, and of its own motion should refuse to approve such a plan unless it appear that business can be resumed with safety to the public.
    On bill, &c.

      Mr. Jeremiah F. Hoover, for the motion.

      Mr. Chester W. Fairlie, receiver, pro se.

   Lane, V. C.

The Newark Lunch Boom Company has been decreed insolvent by this court; a receiver has been appointed; he has operated the business under the orders of this court up until this time; a creditors’ committee has obtained control of practically all the capital stock; the liabilities amount to upwards of $12,000, tangible assets are appraised at upwards of $6,000, exclusive of good-will; the creditors’ committee, representing a substantial amount over a majority of the creditors and over one-half of the total indebtedness, now propose that the receiver be discharged, the assets transferred to the corporation now in control of the committee and that time notes be given to the creditors for the face amount of their claims. On the return of an order to show cause why such a course should not be pursued no one appeared objecting. Ought the court, notwithstanding the request of a great majority of the creditors, both in number and amount, and the acquiescence, in view of the failure to object, of all the creditors, refuse to permit the consummation of such a plan? The title of the act under which the receiver was appointed was originally “An act to prevent fraud by incorporated companies” (Bevision), approved April 15th, 1846. Rev. 1817 p. 129. The section of the act permitting the court to discharge the receiver and reinvest the corporation with its privileges and franchises, requires that before this is -done, the debts must have been paid or provided for, and that it appears to the court that there remains, or can be obtained by further contributions, sufficient capital to enable it to resume its business. Section 69 of “An act concerning corporations.” 2 Comp. Stat. p. 1615. A mere extension of time for payment may not be providing for debts. Bull v. International Power Co., 87 N. J. Eq. 1. The procedure contemplated by the statute is in the nature of an equitable quo warranto. Gallagher v. Asphalt Co., 65 N. J. Eq. 258. Not only are the stockholders and creditors to be considered but the public generally. If every stockholder and every creditor consented to a plan of reorganization, unless this court can see that the business can be resumed with safety to the public, it ought not to approve the plan. If the plan proposed in the present case be approved, the result will be that the corporation will be started afresh with liabilities exceeding its assets; new debts will be created; the old debts, the corporation through stock ownership being in control of old creditors, may be paid, and new creditors left to bear the burden; new creditors must be assumed to consider that they are dealing with a solvent concern, since this court has permitted the concern to continue, yet, in fact, they are not, and thus money of new creditors may be taken and appropriated by the old creditors.

There are two analogous cases now fresh in my mind; in one, the company was adjudicated bankrupt; a creditors’ committee was formed; the assets were bought in at sale by the creditors’ committee; a new corporation was formed; the assets were turned over to it, at a valuation in excess of the amount paid by the creditors’ committee at the sale in bankruptcy, but at a valuation claimed to be fair; notes were delivered for the purchase price; the new corporation became insolvent; a large part of the old debts had been liquidated; the money of the new creditors had been used in liquidating them; it is now claimed that the new debts share pari passu with the balance due on the old; at least two- years in two courts has now been spent in the winding up of the new corporation, and it is not j^et been determined what the relative rights of the parties are. In Horne v. Harrington there was a taking over by a corporation of the business of an individual insolvent; the creditors got together, formed a corporation, took over the assets of the insolvent individual at a valuation based not on actual value but on the amount due from the individual to creditors; stock was issued to the creditors; the company became insolvent. In the latter case I have just been obliged to order an assessment on the stock to raise sufficient money to pay new debts. These two cases illustrate the care with' which the court should scrutinize any plan such as now before it, before permitting it to become operative, and the court should, on its own motion, refuse to approve such a plan, unless it appears that the, business can be resumed with safety to the public. If the creditors desire to reduce the stock of the company to an amount which will represent the fair value of the assets and will distribute that stock among themselves in proportion to their debts and take the stock in payment of their debts, another situation will have been presented.

I am convinced that the present plan does not satisfy the requirements of the sixty-ninth section and will decline to direct an order discharging the receiver and reinvesting the corporation with its privileges and franchises.

A receiver has been appointed and has been continuing the business for a considerable time. It ought to be sold as a going concern. It should be sold at once. The receiver is directed to apply for and obtain an order directing him to sell within two weeks and to bring on a motion to confirm the sale immediately thereafter.

Settle order within one day.


text:
    Phillip Hilton v. Joseph Hilton.
    [Decided August 14th, 1917.]
    1. No one has a tight to palm off his goods as those o£ another by using another’s name so as to obtain its business and so as to deceive the purchasing public.
    2. Plaintiff was with defendant in a clothing business and m the operation of stores under the name of “The Hilton Co.,” and purchasing defendant’s interest in the business, “including all the name and good-will of said business,” knowing that defendant intended to go into the same business, and consenting to the use of the name “Hilton’s” by defendant in a certain place. Thereafter defendant opened stores known as “Hilton’s,” some of which were near those of “The Hilton Co.,” and used signs whose characteristics were similar to those used by “The Hilton Co.,” and practically identical window displays and similar show cards and labels, so that, there was nothing by which the ordinary observer could distinguish defendant’s stores from plaintiff’s. — Held, that defendant would be enjoined from the use of the name both on the grounds of unfair competition and of the breach of the provisions of the bill of sale.
    3. The fact that complainant was selling from five to ten per cent, of its goods as having been manufactured by it, which were not in fact made by it, where most of its advertisements were consistent with the idea that the goods were not manufactured, but selected by it, would not defeat its right to an injunction.

      4. The name “Hilton’s” in a certain place was not broad enough to cover defendant’s operation of other stores under that name in competition with complainant’s stores.
    5. The fact that a similar business under the name “Hilton’s” was conducted elsewhere to a small extent in a non-competitive community would not prevent relief.
    6. In a suit to enjoin the use of a name upon the ground of unfair competition, it is not necessary that an actual fraudulent intent on the part of the user be shown or that any single person was in fact 'deceived by the use of the name.
    On bill. On final hearing.

      Messrs. Pitney, Hardin & Skinner (Mr. John R. Hardin and Mr. Edward O. Stanley, Jr.), for the complainant.

      Mr. Selick J. Mindes and Mr. Robert H. McCarter, for the defendant.
   Lane, V. C.

The bill seeks an injunction to prevent defendant nsing the word “Hilton’s” to designate the places at which he carries on a clothing business. The case has taken six or seven days to try. It has been elaborately orally argued and elaborate briefs have been submitted. The testimony has not been written out, and I am retying upon my recollection in stating the facts. Some may be misstated, but not to an extent which would change the result. If either counsel observe apparent mistakes, I wish they would call my attention to them.

In 1904 there was a manufacturing clothing business carried on in the city of Newark by one I. Hilton under that name. About that time there became associated with him the defendant, Joseph Hilton. A store ivas opened in that year in Philadelphia and the name adopted was “The Hilton Co.” Subsequently, in 1907, the name “The Hilton Co.” was adopted for the store in Newark. Between 1910 and 1914 the name “The Hilton Co."’ was abandoned in Newark and the name “George Watson & Co.” substituted. This was due to the fact that the Hiltons had acquired the established business of George Watson & Co. in Newark. In 1910 a store was opened in Brooldyn under the name of “The Hilton Co.;” in Providence in 1914; in Pittsburgh in 1913; Chicago in 1913; Boston in 1909, and in New York in April, 1906. Phillip Hilton became associated in the business with Joseph Hilton, and in 1916 Phillip and Joseph were the joint owners of the business. On the 24th day of June, 1916, a sale of Joseph’s interest to Phillip was consummated and a bill of sale delivered which conveyed the interest of Joseph in the business, “including all the name and good-will of said business and all its assets.” Joseph intended to go into the same business. Phillip knew this. Prior to the consummation of the. sale a store had been leased ostensibly for the two sons of Joseph in Paterson. I conclude that it was in the mind of Joseph at that time to himself become associated with his sons, or to supplant his sons. As a matter of fact, when the store was opened Joseph was the owner. I think Phillip knew that the store was to bp opened in Paterson, and the preponderance of evidence is to the effect that he consented to the use of the name “Hilton’s” by the sons in Paterson. Goods were manufactured by “The Hilton Co.” for use in the Paterson store, and I must conclude that Phillip knew of their manufacture. In the latter part of 1916, “The Hilton Co.” had four stores in New York, located at 85 Nassau street, New York, corner of Fourteenth street and Broadway, New York, Thirty-seventh street and Broadway, New York, and 412 Fulton street, Brooklyn; Joseph conceived the idea of opening stores in New York, and proceeded to do so; he now has in New York three stores, located at Thirty-third street and Fifth avenue, 243 Broadway and Thirty-sixth street and Broadway. These stores, or some of them, axe in comparatively close proximity to some of those of “The Hilton Co.” Joseph now contemplates opening a store in Brooklyn, in comparatively close proximity to that of the “Hilton Co.,” and another in New York immediately opposite the Nassau street store of the “Hilton Co.” Each of these stores are designated by prominent signs as “Hilton’s.” The signs, while unlike in color and in material used, yet have such characteristics similar to those used by “The Hilton Co.,” as that it cannot be said that there are any distinguishing features which,would differentiate to the ordinary observer “Hilton’s” stores from “The Hilton Co.” stores. The window displays are practically identical. The evidence is that there are no marks which would be noticed by the ordinary observer distinguishing window dressings in stores of this nature. The show cards used, while not identical, are yet similar. It is so with the labels. Prior to 1916, “The Hilton Co.” had done considerable advertising in newspapers in various localities in which it had stores, although none to any extent in the city of New York. It had advertised in the city of New York by means of show cases placed in prominent places in tlie Hudson terminal and also by posters placed in the tube trains. I know of no more effective method of advertising, and I cannot shut my eyes to the fact that I have myself, before I ever heard of this case, noticed these advertisements and knew that there was such a concern as “The Hilton Co.” or “Hilton’s” which sold men’s suits. In some of the advertisements used before 1916 the words “Hilton” and “Hilton’s” were used. In others, the words “Hilton Clothes” and like phrases. The complainant’s original claim seemed to bo based upon the ground that the term “Hilton’s” had acquired a secondary meaning, and a large part of the argument was devoted to the question as to whether or not the proofs show that this secondary meaning had attached. The view that I take of the ease renders it unnecessary for me to determine whether the complainant has substantiated its claim in this respect or not. The distinction has been drawn between the right of the complainant to enjoin the use of the ñame “Hilton’s,” based upon the provisions of the bill of sale and the right based upon unfair competition. I think so far as this case is concerned, it is a distinction without a difference, because the same facts which would result in enjoining the use of the name because of the grant contained in the bill of sale would induce the court to enjoin its use because of unfair competition.

The question is one of fact. The legal rules are settled. Chancellor Walker said, in National Biscuit Co. v. Pacific Coast Biscuit Co., 83 N. J. Eq. 369 (at p. 371): “The underlying principle that no man has a right to palm off his wares as those of another, thereby cheating the purchasing public and filching the business of a rival, is so essentially an element of natural justice, and so solidly imbedded in our jurisprudence that all that is necessary to quicken a court of equity, is to show that in the particular instance the offence has been committed.”

Vice-Chancellor Backes, in Cape May Yacht Club v. Cape May Yacht and Country Club, 81 N. J. Eq. 454, 456, said: “Jurisdiction of courts of equity to prevent injury from infringement of trade names has been liberally exercised and applied in all circumstances whenever it appeared that the name was an established, distinctive and valuable adjura,ct to an undertaking, whether used to distinguish manufactured articles, a place of business, or a corporation, commercial or one formed not for pecuniary gain. All that is required to ’bring into activity the injunctive powers of the court is to inform it that the complainant’s trade is in danger of harm from the use of its name by the defendant in such a way as is calculated to deceive the public into the belief that the defendant’s affairs in the respect complained of are those of the complainant.”

Vice-Chancellor Howell said (and his opinion was approved by the court of errors and appeals in 81 N. J. Eq. 519), in R. C. & H. T. Co. v. Rubber Bound Brush Co., 81 N. J. Eq. 419 (at p. 424): * * * “it is not necessary that the complainant in order to succeed should prove misrepresentation or actual fraud by the defendant, or give any evidence that any single person was deceived. It is enough if, in the opinion of the judge the symbol or device or get-up used by the defendant is one which so closely resembles the symbol, device or get-up used by the complainant as to be likely to deceive the public. If so, then the conditions required by the rules of law are fulfilled, and the decision, of the question is one which must be committed to the eye and the sound judgment of the judge to whom the case is presented.”

The court of errors and appeals said, in Munn & Co. v. The Americana Co., 83 N. J. Eq. 309, that “fraudulent conduct on the part of the defendant is a necessary element,” citing International Silver Co. v. Rogers, 71 N. J. Eq. 560, 563.

The court does not state what constitutes fraudulent conduct or what proof is required from which fraudulent intent may be inferred.

Vice-Chancellor Emery said, in Eureka Fire Hose Co. v. Eureka Rubber Mfg. Co., 69 N. J. Eq. (at p. 167) : “This protection is granted without regard to the intent of the infringer, because a fraudulent intent to deceive the public and appropriate the benefit of the trade reputation of another is conclusively presumed, from the using of the name or mark after request to desist, although the absence of such intent may in some cases be a defence to an action for damages.”

And see also Wirlz v. Eagle Bottling Co., 50 N. J. Eq. 164; International Silver Co. v. Rogers, 66 N. J. Eq. 119 (at p. 129); National Biscuit Co. v. Pacific Coast Biscuit Co., 83 N. J. Eq. (at p. 380).

Expressed briefly, I think the rule is that “unfair competition” is “fraudulent conduct.”

Examining the facts in the light of the rules of law hereinbefore referred to, it seems to me that it cannot seriously be argued that the use by the defendant of the name “Hilton’s” in the manner it is used in connection with stores in close proximity to those of “The Hilton Co.” cannot but lead to confusion, and tend to injure the good-will of the complainant, his interest in which the defendant sold to the complainant. I must consider that I am a man of ordinary intelligence, and that I proceed with ordinary care and caution, and I know that if I walked down Hassau street, New York, having seen the sign of “The Hilton Co.” in the Hudson terminal and desired to buy a suit of clothes as advertised, if I first saw on one side of the street the store of the defendant with the sign “Hilton’s,” I would immediately reach the conclusion that it was the same establishment which had advertised in the Hudson terminal. If by chance I glanced across the street and saw another store with the words “The Hilton Company” over it, then I might wonder why the company had two stores in such close proximity, and I might be led to investigate as to which of the stores really had done the advertising. If, however, I walked into the store of the defendant at Thirty-third street and Eifth avenue, there would be nothing which would tend to raise my suspicions that that store was not that of the party advertising. The word “Hilton’s” is the popular possessive- of the words “The Hilton Co.,” just as “Macy’s” is of R. H. Macy & Co. It seems to me that if the defendant can be allowed to open a store opposite or in close proximity to the stores of the complainant under the name of “Hilton's,” then there is no objection to a store being opened opposite or in close proximity to “Macy’s,” and the use by such store of the designation “Macy’s.”

There are three affirmative defences set up by the defendant—

First. It is insisted that the complainant is perpetrating a fraud upon the public by selling goods advertised as manufactured by it which are not, in fact, so manufactured, and that the case is within Perlberg v. Smith, 70 N. J. Eq. 638.

The proofs disclose that at the present time a very large proportion of the clothing is manufactured by the “company” — I think between ninety and ninety-five per cent. The proportion of goods actually manufactured has steadily increased. While some of the advertisements may be said to leave the impression on the mind that the goods sold are actually manufactured by the “company,” yet most of them are consistent with the idea that the goods are not so manufactured but are selected by the “Compaq.” It makes no difference to the public by whom the goods are manufactured so long as the public is satisfied with the article that it gets. The reputation of the “company” has grown, not because of the fact that it manufactures the article, but because it produces to the public an article that the public wants. The good-will that has resulted is entitled to protection. I do not think that the case is within Peril erg v. Smith, but rather within the reasoning of Johnson & Johnson v. Seabury & Johnson, 71 N. J. Eq. 750; New York and New Jersey Lubricant Co. v. Young, 84 N. J. Eq. 469 (reversing Vice-Chancellor Stevens, 77 N. J. Eq. 321); Regent Shoe Mfg. Co. v. Haaker (Neb., 1906), 106 N. W. Rep. 595; 4 L. R. A. (N. S.) 447.

Second. The defendant insists that the complainant acquiesced in the use of the word “Hilton’s” by the defendant. There is no proof of any acquiescence on the part of the complainant except with respect to the use of the name by the sons of Joseph in Paterson. Assuming the testimony on the part of the defendant with respect to this to be true, there was a statement made by Phillip to the wife of Joseph and one of the sons that he did not care if they opened in Paterson, what name they used so long as they did not use the name of “The Hilton Co.” T do not believe that Phillip ever intended to permit the use by Joseph, or by the sons, of the word “Hilton’s” in any way which would result in unfair competition. It is almost inconceivable. I rather assume that he thought that the use of the term “Hilton’s” in Paterson would not result in unfair competition with .his stores. The Paterson, store has been discontinued, so that I do not have to determine whether I would enjoin the use of the word “Hilton’s” in Paterson. The consent was not broad enough to cover the stores in New York or in any other place where the result would be competition with “The Hilton Co.” stores.' I think the acquiescence presents no obstacle to relief.

Third. It is insisted that because in Perth Amboy a similar business was conducted under the name of “Hilton,” and also in Yonkers, that the complainant is not entitled to relief. There is no proof whatever that the store in Yonkers, which has now been discontinued, or the store in Perth, Amboy in anywise competed with any “Hilton Co.” store. Although the name may be used elsewhere, yet such use if in a non-competitive community or to a small extent will not prevent relief.

Upon the ground of unfair competition, and because it is an attack upon the good-will of “The Hilton Co.,” the use of the term “Hilton’s” by the defendant to designate his stores, which are in competition with those of “The Hilton Co.,” will be enjoined.

Throughout these conclusions I have used the term “it” to refer to “The Hilton Co.” for convenience.

Counsel on both sides have referred to many cases from foreign jurisdictions. I have considered it unnecessary to deal with them, as I think the rules applicable axe settled by prior decisions in this jurisdiction.

Coilnsel may present a form of decree on Monday, August 13th, or Wednesday, the 15th.


author: Walker, Ordinary.

text:
    In the matter of the appeal from the orphans court of the county of Union, appointing Robert H. McAdams guardian of Catherine Morrisey, a lunatic.
    [Decided February 15th, 1918.]
    1. It is not practicing law to consult with an attorney in court on the trial of an issue, and give him information which presumably aided in the proper development of the petitioner’s case.
    2. The clerk in chancery, by consulting with counsel conducting proceedings under a commission in the nature of a writ of de hmatieo inquirendo issued out of the court of chancery, giving him information which aided in a proper development of the petitioner’s case, did not thereby practice either as a solicitor or as counselor in this court.

      3. Taking testimony in this court on appeal is discretionary with the ordinary, and was not called for in this case.
    4. The statute of New Jersey (2 Comp. Stat. p. 2781 § 1) provides that the orphans court shall appoint a “fit and discreet” person as guardian for one found a lunatic by inquisition from the .court of chancery, and these are the only qualifications required.
    On appeal from the Union county orphans court. On final bearing.

      Mr. Herbert C. Gilson, for the appellants.

      Mr. William D. WolfsKeil, for the respondents.
   Walker, Ordinary.

This is an appeal from an order of the Union county orphans court appointing Robert H. McAdams, Esquire, guardian of Catherine Morrisey, a lunatic.

Catherine Morrisey having been adjudged a lunatic under a commission in the nature of a writ de lunático inquirendo issued out of the court of chancery, a transcript of the proceedings in that court was duly filed in the Union county orphans court, which court, by order, duty appointed Robert H. McAdams, Esquire, who is the present clerk in chancerjq guardian of the lunatic. There was a contest over the guardianship in the orphans court between relatives of the lunatic. Certain of them filed a petition praying for the appointment of a guardian other than Mr. McAdams, upon grounds set forth in the petition. The salient ones being that Mr. McAdams had been attorney for the lunatic for a number of years, and had been active in keeping the petitioners away from her and keeping them ignor- • ant as to her mental condition, and, also because, on the hearing under the commission, Mr. McAdams appeared with Mr. WolfsKeil and consulted and conferred with him during the progress of the proceedings; and they invoke rule 35 of the court of chancery,-which provides that the clerk of the court shall not practice either as a solicitor or as a counselor in the court, as a reason why Mr. McAdams’ appointment should be reversed.

Whether practicing in the court of chancery as solicitor or counsel by the clerk in chancery in a lunacy proceeding, would disqualify the clerk afterwards from being appointed guardian of the lunatic by the orphans court, it is not necessary to decide,, because what was done by Mr. McAdams in this case was not practicing in the court. Mr. McAdams had been counsel for-the subject of the inquisition. He did not file the petition for the commission nor address the commissioners nor examine witnesses upon the taking of the inquisition. This was admitted by-counsel for appellants. What he did he had.a right to do, and properly did, namely, to consult with counsel who was conducting the proceedings and give him information which he possessed, and which presumably aided in the proper development of the petitioner’s case.

Counsel for the relatives who objected to the appointment of Mr. McAdams asked leave to take depositions in this court to show that Mr. McAdams was active at the counsel table at the hearing before the commissioners and jury. This I denied, not only because the matter of taking testimony in this court on appeal is discretionary with the ordinary, but also because counsel admitted, as above stated, that Mr. McAdams had not addressed the commission or the jury or examined and witnesses, and, of course, the record discloses that he was not the solicitor of the petitioners, As I remarked before, the only thing he did was what anyone possessed of facts bearing upon the case was privileged to do, namely, assist counsel in developing the case.

The appellants placed reliance on the ease of Read v. Drake, 2 N. J. Eq. 78. It was there decided that under the act of 1820 (Rev. 1820 p. 784) the mother or next of kin were given a preference and were entitled, if they desired it, to the appointment of guardian of minors under fourteen years of age, and could not be passed by except upon some satisfactory objection made and sustained before the court. That case has no application to the one at bar. That involved the appointment of a statutory guardian for an infant. This case involves the appointment of a statutory guardian for an insane person. The provision which here governs is to be found in the act concerning idiots’ and lunatics (Comp. Stat. p. 2781 § 1), which provides that in case of lunacy found the chancellor shall cause to be transmitted to the orphans court of the county of the lunatic’s residence, a certified copy’ of .the proceedings, and the orphans court is directed and required, on application for that purpose, to "appoint some fit and discreet person guardian of such'lunatic. It will be observed at a glance’ that the only qualification here required is the appointment óf a fit and discreet person. That Mr’. McAdams is fit to be appointed guardian of a lunatic is perfectly clear, and that he is a discreet person I think is equally apparent. That he ’possessed the qualifications of fitness and discretion was decided by the orphans court, and there is nothing in the record which suggests anjr reason why the discretion exercised by the ’orphans court in making the appointment should be overturned. I am of opinion that the order appealed from should be affirmed, and that will be the order.


author: Stevens, Yice-Ordinary.

text:
    In the matter of the probate of the last will of Samuel Richter.
    [Decided September 6th, 1917.]
    In a case not free from doubt but where three witnesses of respectability testify to the legal execution .of a will, neither the draftsman or the • other two witnesses taking anything under it, and where the will is one the testator would naturally have made, the will should be sustained.
    On appeal from the Essex county orphans court.

      Mr. William Greenfield and Mr. Benjamin M. Weinberg, for the appellant.

      Mr. William H. Osborne, for the respondent.
   Stevens, Yice-Ordinary.

This case is not free from doubt, but the evidence does hot convince me that the will was forged. I cannot usefully add anything to the opinion of the judge of the orphans court, with which I concur. Three witnesses of respectability testify to the execution. Neither to the draftsman, nor to the other two witnesses, does the will give anything. It was just such a will as .the testator would naturally have made. There is not the slightest independent evidence of a conspiracy to commit forgery and perjury entered 'into between these witnesses and the widow. Under these circumstances I think the decree of the orphans court should be affirmed.


author: Backes, Vice-Ordinary.

text:
    Estate of Ferdinand W. Roebling, deceased.
    [Submitted June 4th, 1918.
    Decided June 21st, 1918.]
    The death duty imposed by the War Revenue act of 1916 is a tax upon decedent’s estates, and in assessing the state transfer inheritance tax is to be deducted from the value of the estate, in ascertaining the clear market value of the property transferred.
    On appeal from an assessment of the comptroller of the treasury.

      Mr. Scott Scammell, for the appellants.

      Mr. Herbert W. Boggs, assistant attorney-general, for the state.
   Backes, Vice-Ordinary.

The problem presented on this appeal is whether the death duty imposed by the War Bevenue act of congress, approved September 8th, 1916, chapter 463, volume 39, public laws, pages 766, 777, is to be deducted from the value of the estates of decedents, in assessing the transfer inheritance tax of 1909 (P. L. 1909 p. 825), as amended in 1914. P. L. 1914 p. 267.

Ferdinand W. Roebling, a resident of Trenton, died March 16th, 1917, testate, leaving an estate appraised, for taxing purposes, at $10,000,000 plus. The federal tax ahaounts to over $1,000,000, and the question is whether this sum should have been deducted from the appraisement and the state tax levied on the transfer of the remaining $9,000,000." The comptroller of the treasury refused to grant the allowance and this appeal is from his ruling.

The point does not involve the power of congress to levy the tax, nor is the question one of precedence as between the two governments, nor yet whether a double tax is lawful, but the decision turns upon the nature of the tax levied by the national government, and the construction to be given to the state statute in respect of it.

The power of congress to levy death duties, and the constitutionality of such legislation, was settled by the United States supreme court in the cases of Scholey v. Rew, 90 U. S. 331, and Knowlton v. Moore, 178 U. S. 41. In the elaborate opinion of Mr. Justice White, in the last-named case, the history of death duties and their fundamental basis axe interestingly and instructively discussed. There the learned, present, chief-justice declared that, although different modes of assessing such duties prevail, nevertheless, tax laws of this nature in all countries rest in their essence upon the principle that death is the generating source from which the particular taxing power takes its being and that it is the power to- transmit or the transmission from the dead to the living, on which such taxes are more immediately rested; that all courts and all governments concede that the transmission of property, occasioned by death, is a usual subject of taxation.; and that while the transmission of property by death is exclusively subject to the regulating authority of the several states, the thing forming the universal subject of taxation, upon which inheritance and legacy taxes rest, is the transmission or receipt of propert}^ occasioned by death, and not the right to regulate its devolution. • In adverting to the viewj commonly accepted, that the tax rests on the privilege enjoyed hy states to regulate succession, he indicated that the doctrine of taxation upon the privileges, as adopted by the courts, is merela qualification of the fundamental right to levy duties upon the power to transmit or the transmission or the receipt of property hy death, and is in harmony with the principle he laid down, and subordinately affords a legitimate and defensible basis of taxation.

That both state and nation have the right to levy, at the same time, the same class of death duties — double taxation is also settled by Knowlton v. Moore, supra; Blackstone v. Miller, 188 U. S. 189; Hopper v. Edwards, 88 N. J. Law 471.

This brings us, then, to inquire into the character of the tax levied under the federal statute. Section 201 of the act of congress provides:

“That a tax (hereinafter in this title referred to as the tax), equal to the following percentages of the value of the net estate, t.o he determined, as provided in section fooo hundred and three, is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this act, whether a resident or non-resident of the United States.”

Then follows a graduated increase of percentage upon increased amounts of the net estate up to "ten per centum of the amount by which such net estate exceeds $5,000,000.” The net estate is to be determined by deducting from the gross estate funeral and administration, expenses, debts, certain losses incurred during the settlement of the estate, and such other charges against the estate as are allowed by the laws of the jurisdiction under which the estate is being administered, and a flat exemption of $50,000.

The subtitle of the act “Estate Tax” is significantly descriptive, and a persuasive indication, of the class of death dirties congress was dealing with; and upon looking into the twelve sections comprising the legislation, all doubt vanishes regarding the particular transfer upon which the tax is imposed.

The value of the net estate is the unit of taxation, This includes the real estate devised or descending, as well as the personal property passing to the executor. A return, in duplicate, under oath, is to be made by the executor of the value of the gross estate, of the deductions, of the value of the net estate, and of the tax payable thereon. The tax is to be paid by him out of the personal estate before distribution, and a receipt for it entitled him to credit and allowance therefor upon the settlement of his account. There is no apportionment of it among the various transferees, nor is the real estate, devised or descending, liable to contribution. On the contrary, the collector may recover the tax by a sale of the land, and in that event the devisee or heir-at-law shall be reimbursed out of any part of the personal estate unadministered, or by an equitable contribution by those whose interest is subject to equal or prior liability for the payment of taxes, debts or other charges against the estate. The concluding words of section 208: “It being the purpose and intent of this title that so far as is practicable, and unless otherwise directed by the will of the decedent, the tax shall be paid out of the estate before its distribution,” are unmistakable in their purport that the death duty is imposed upon the estate and payable out of the residue. To be more precise, it is imposed upon the estate, transferred by death, and not upon the succession resulting from death. The distinction is well defined and recognized in countries where both kinds of tax exist. The federal tax resembles the probate duty of the act of 1862, chapter 119 (12 U. S. Stat. p. 483), which was payable by the executor out of the estate, while the legacy duty therein provided for (at p. 485) was payable by the beneficiaries. The tax occupies the same field of death duty as does the “Estate Tax” in England. By the Finance act of 1894 an estate duty is levied upon the principal value of all property, real or personal, which passes on the death of a person and is imposed upon the estate and is payable by the executor as an administration expense. In, addition to this tax, there is also a legacy tax, and a succession duty upon the realty, payable by the recipients. Speaking of the death duty, Mr. Hanson in his opening chapter — Hans. D. D. (6th ed.) — says:

“The new duty imposed by the Finance act, 1894, and called estate duty, supersedes probate duty; but the key to the construction of the . Finance act, 1894, and the amending acts lies in remembering that the new estate duty, although it is leviable on property which was left untouched by probate duty, such as real estate, yet is in substance of the same nature as the old probate duty. What it taxes is not the interest to which some person succeeds on a death, but the property in respect of which an interest ceased by reason of the death. Unless this principle is clearly kept in view, the mind is constantly tempted by the wording of the act to revert to principles of succession duty, which have no real connection with the subject.”

The specie of death duty of the federal tax determined, we come next to consider the character and scope of the Transfer Inheritance Tax act and its application to situations like the present one. The part with which we are concerned reads

“1. A tax shall he and is hereby imposed upon the transfer of any property, real or personal, of the value of five hundred dolla/rs or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations, except as hereinafter provided, in the folloicing cases:
“When the transfer is by will or by the intestate laws of this state from any person dying, seised or possessed of the property while a resident of the state.
“All taxes imposed by this act shall be at the rate of five per centum upon the clear mwket value of such property, except as hereinafter provided."

The tax, it will he observed, is not imposed upon the immediate transfer of property occasioned by death, but upon the transfer to any person, or corporation, when the transfer is the subject of a legacy or devise, of distribution or descent. In other words, it is not on the transitory succession of the executor or administrator, but upon the separate successions of the transferees, whether the succession be of the whole of the estate — a universal succession — or of the singular succession of a legatee or devisee. It'is not on the amount that goes into their pockets, but updn the clear market value of the estate transferred to them at the decedent’s death by the instrumentalities enumerated in the act. The tax is not upon the aggregate value of the estate transferred, apportioned among the transferees, but is assessed upon the value of the several interests and is levied upon kindred at varying rates, depending upon the relationship of the transferees to the decedent. Each transferee is liable for the tax upon his share of the estate which is to be deducted from the legacies or distributive shares by the executor and for the payment of which he is personally liable.

The settled construction of the act is that it imposes a tax upon the right of succession to the property of the testator or intestate which vested in the successors severally and in their respective shares or proportions, and not upon the property or estate of the decedent. Matter of Hoffman, 143 N. Y. 327; Matter of Westurn, 152 N. Y. 93; Matter of Gihon, 169 N. Y. 443; In re Sherman Estate, 166 N. Y. Supp. 19; affirmed, 222 N. Y. 540; Dixon v. Russell, 79 H. J. Law 490; Carr v. Edwards, 84 N. J. Law 667; Christie’s Estate, 87 N. J. Eq. 303.

Conceiving, then, the state of the law to be that the federal tax is imposed upon the estate and that the transfer inheritance tax is levied upon the succession, it becomes at once apparent that the clear market value of the property, transferred from the dead to the living is the value of the estate after all lawful charges against it, including taxes, are satisfied. In the case in hand, the beneficiaries succeeded to $9,000,000, and upon this sum, as apportioned by the testator, the state tax should have been assessed. While the practical result is a financial loss to the state, it is not brought about by an assumed supremacy in the United States; nor is the exercise of the taxing power by the national government an interference with state rights, as some judges have intimated. The statutes do not clash, albeit the operation of the federal act effects a reduction of the state ratable. They function in entirely different taxing zones. Relief lies in appropriate legislation. It is, undoubtedly, within the power of the legislature to impose an estate death d\ity, coextensive with the federal act, a tax on the power to transfer at death, for instance — and which may co-exist with the Transfer Inheritance Tax act which, as we have seen, levies on the power to .receive at death.

The highest courts in two of the states have recently decided the question, reaching opposite conclusions. The Minnesota supreme court held, that the federal tax should be deducted. Smith v. Probate Court of Hennepin County, 166 N. W. Rep. 125. The court of appeals of New York held to the contrary view. In re Sherman Estate, supra. The New York supreme court allows that its transfer tax is based upon the amounts passing to the respective transferees, but holds to the view that the conditions of transfer, as embodied in its Transfer Tax act, comprehend the clear market value of the property at the time of the transfer, exclusive of federal tax, and expressed the opinion that if the federal government may impose an inheritance tax, which is entitled to be deducted from the estate prior to the assessment of the estate transfer tax, it has interfered with such conditions, and that the constitutionality of a federal act entitled to such a construction and effect might well be doubted. If the court had acknowledged the federal tax as levied upon the estate transferred, doubtless a different result would have been reached.

In the earlier case (Matter of Gihon, supra), the court of appeals had before it the question whether the federal legacy tax of 1898 should be allowed as a deduction, and it held, and I quote from the Sherman Case: “Neither the amount of the state tax, nor the amount of the federal inheritance tax imposed under the War Eevenue act of 1898, was deductible, because each was a tax, not upon property, but upon succession — that is, a tax on a legatee for the privilege of succeeding to the property — and was payable out of his legacy, not out of the estatea tacit evincement that if the federal tax had been upon the estate and not upon the legacies, it would have been deductible from the assets of the estate before computing the state transfer tax. Previous to the decision in the Gihon Case, the supreme court of Massachusetts, in Hooper v. Shaw, 176 Mass. 190, decided that the legacy tax of the War Eevenue act of 1898 should be deducted in ascertaining the state’s succession tax. In view of the fact that both federal and state taxes were imposed upon the same successions, and were payable by the beneficiaries, it is difficult to reconcile the deliverance in that case to the principles of the Gihon Case.

The appraisement upon which the tax was assessed will be reduced by the sum of the federal tax.

P. S. Since writing the above, my attention has been called to the case of Corbin v. Townshend, 103 Atl. Rep. 647, in which the supreme court of Connecticut decided that the federal tax is to be deducted from the appraisement in computing the state’s succession tax.


text:
    In the matter of the appeal of Joseph Beck Tyler, administrator of the estate of Michael Allen, from the assessment of the transfer inheritance tax.
    [Submitted June 4th, 1918.
    Decided June 21st, 1918.]
    The death duty imposed by the War Revenue act of 1916 is a tax upon decedents’ estates, and in assessing the state transfer inheritance tax is to be deducted from the value of the estate in ascertaining the clear market value of the property transferred, and the fact that in intestacy the federal estate tax falls upon all of the transferees uniformly, and not upon the residuary estate, as in cases of testacy, makes no difference.
    On an appeal from an assessment of the comptroller of the treasury.

      Mr. Joseph Beck Tyler, for the appellants.

      Mr. Herbert W. Boggs, assistant attorney-general, for the state.
   Backes, Vice-Ordinary.

Michael Allen, a resident of Woodstown, Salem county, died January 14th, 1917, intestate, leaving a net estate for distribution of $300,000, in round figures, at which sum the comptroller of the treasury appraised the estate and upon which he levied a transfer inheritance tax. The appellant, the administrator of the estate, claimed a'reduction from the assessment to the amount of $5,217, paid by him to the United States government for “estate tax,” which the comptroller refused to allow, and from his ruling this appeal was taken.

The judgment is controlled by the decision in “Estate of Ferdinand W. Roebling.” The case is not distinguishable, on the ground that in intestacy the federal estate tax falls upon all of the transferees uniformly and not upon the residuary estate, as in cases of testacy. The same principles govern.


text:
    In the matter of the estate of John P. Pierce, deceased.
    [Submitted June 4th, 1918.
    Decided June 21st, 1918.]
    On appeal from an assessment of inheritance tax, testimony will not be let in to revise the appraisement. Motion for that purpose may be made to the comptroller and from his refusal an appeal lies.
    On appeal from an assessment of the comptroller of the treasury.

      Mr. Gilbert Collins and Mr. J. Stanley Griffin, for the appellants.

      Mr. Herbert W. Boggs, assistant attorney-general, for the state.
   Backes, Vice-Ordinary.

This appeal is from an assessment of an inheritance tax upon the succession of a foreign decedent’s estate and in respect of so much as attacks the refusal of reduction in the appraisal to the extent of the federal war tax of September 8th, 1916, public laws, vol. 39, p. 777, amended 1917, Ibid. 1002, is controlled by “Estate of Ferdinand W. Roebling,”' and the deduction will be allowed.

An appeal was also taken from an appraisement at $280 per share of fifteen thousand nine hundred and sixty-one shares of the common capital stock of the American Radiator Company, on the ground that it was excessive. At the hearing on the appeal, testimony was offered 'of elements of value which had not been previously submitted to the comptroller, and thereupon the assessment was remanded for further consideration by Mm. The additional factors moved the comptroller to reduce the appraisement to $260 per share and to revise the assessment accordingly, and by agreement the appeal stands'against the assessment as revised. It is not the duty .nor the privilege of this court, on appeal, to weigh the evidence or to substitute its judgment, as to values, for that of the comptroller, and assessments will be upheld if legal principles have been correctly applied and the appraisement is supported by the evidence. The presumption is in favor of the correctness of the assessment, and the burden is upon the appellant to point out and establish wherein it is wrong, and as the vaMation, fixed by the comptroller, is amply sustained by the proofs, it.is affirmed.

The practice which has grown up of introducing testimony, on appeal, on questions of values, is indefensible, and unfair to the comptroller. Jurisdiction is broadly conferred upon the court “to hear and determine all questions in relation to any tax levied under the provisions of this act,” but it certainly was not the intention of the legislature to burden the court with the labor of appraising estates de novo. That function is committed to the comptroller, and on appeal Ms judgment is to be reviewed in the light of the facts upon which it is founded. Hereafter, appeals will be heard upon the record made before that official and certified to the court. Applications to open and revise assessments, and for that purpose to let in additional testimony, will be made to the comptroller, and from his refusal an appeal may be taken.

The assessment will be corrected as indicated.


text:
    In the matter of the estate of Jesse Charles Hedenberg, deceased.
    [Submitted June 21st, 1918.
    Decided June 24th, 1918.]
    Testator bequeathed part of his estate to his sister, who predeceased him, leaving a son and daughter who survived the testator^ — Held, that the transfer inheritance tax is imposed upon the direct succession of the nephew and niece at the rate of five per centum and not upon the bequest to the deceased sister, subject to exemption and a reduced rate.
    On appeal from an assessment of an inheritance tax.

      Mr. James Gillin (of the New York bar), for the appellant.

      Mr. Herbert W. Boggs, assistant attorney-general, for the state.
   Backes, Vice-Ordinary.

The decedent by his will gave the residue of his estate to his four brothers and sisters in equal shares. One of the sisters predeceased him, leaving a son and daughter, who survived the testator and took one-quarter of the estate, appraised by the comptroller at $9,084.13. Upon the several successions of the nephew and niece of $4,542.07, an inheritance tax was levied at five per cent. (5%), $227.10. Erom these assessments the executor appeals, contending that the legacy should have been treated as a bequest to the testator’s sister and that the tax should have been levied upon the successions as though the sister had survived the testator, viz., by first allowing a sister’s exemption of $5,000, and taxing the balance of $4,084.13 at the rate of two per cent. (2%), $81.68.

The beneficiaries acquired the estate by virtue of the testator’s will, supplemented by section 22 of the “Act concerning wills” (Comp. Stat. p. 5866), which provides, amongst other things, that a devise or bequest to a brother or sister dying in the lifetime of the testator, leaving children surviving the testator, shall not lapse, but the estate so devised or bequeathed shall vest in such children “in the same manner as if such legatee or devisee had survived the testator or testatrix, and had died intestate.”

The Transfer Inheritance Tax act (Comp. Stat. p. 5301), as amended in 1914 (P. L. 267), imposes a tax of five per cent. (5%) upon the clear market value of property transferred by the will of a resident decedent. In case the transfer is to a sister, an exemption of $5,000 is allowed, and the rate is cut tp two per cent. (2%) on the excess.

The argument in support of the proposition that the legacy should be treated as a bequest to the testator’s sister is rested, mainly, upon the construction placed upon the statute in Denise v. Denise, 37 N. J. Eq. 163, where the question presented was “Whether the person whom our statute, in such an event as that which has happened in this case, puts in the place of the legatee named in the will, takes subject-to the debts of the primary legatee to the testator’s estate!’ In holding that the funds of the estate should not be impaired and that the legacy was to be treated as though the legatee named in the will had not died, Vice-Chancellor Van Eleet says: ‘The statute-made legatee is a mere substitute; he is thrust, by force of the statute, ini the place made vacant by the death of the legatee named in the will, and is given what, but for his death, would have gone to the primary legatee. He takes tire primary legatee’s place, as a beneficiary under the will, and should, according to the ordinary rule prevailing in like eases, bear his burdens, and be subject to the equities which would have existed against him. * * * Statutes must always be construed so as to give effect to the intent and object of the legislature, and this one, I think, must be so read as to cure the mischief it was intended to remedy-— that is, it should be held to- put the substituted legatee in the place of his parent, and to give him just what his parent would have been entitled to, subject to the same equities that his parent would have been subject to, and bound by the same rules of justice that his parent would have been bound by. He must take in the same manner that his parent would have taken.” In the later case of Suydam v. Voorhees, 58 N. J. Eq. 157, which involves the question whether the substituted legatee took the bequest charged with the debts of the testamentary legatee, Vice-Chancellor Reed pointed out that the rule in the Denise Case applies only as between the estate and the statutory legatee, and commenting upon the language above quoted, says: “The last sentence contains the pith of the rule as between the testator and the statutory legatee. The latter takes what the testamentary legatee would have taken. It does not. mean that the deceased legatee takes an interest in the legacy which passes through him to his child, and which, in passing, is liable to be seized upon by the creditors or the personal representatives of the father. Such a meaning would be contrary to the words of the act. Under the statute there is no vesting in the father for an instant. The legacy, which would have vested in, the father had he lived, is by the .statute vested in the first instance in the son. In respect to it there is nothing for the personal representatives of the father to administer nor for his creditors to reach.” The rules laid down in these cases are not antagonistic nor conflicting in principle and to adopt either or both leads to the same result in the present controversy. The inheritance tax is imposed upon the transfer of the estate of decedents, and it is immaterial by what particular means afforded by law the property passes from the dead to the living, or what the character or quality of the legal vehicle is by which the transmission is accomplished; provided, of course, the method employed is one upon which the taxing power operates.' As between kindred, the relationship that the deceased bore to the beneficiary fixes the exemption and measures the rate of taxation. Nephews and nieces are not within the exempt class and under the statute they rate as do strangers.

The assessment will be affirmed.


author: Gummere, Chief-Justice.

text:
    United States Industrial Alcohol Company, appellant, v. The Distilling Company of America et al., respondents.
    [Decided June 17th, 1918.]
    1. Where a power is conferred upon a corporation to be exercised under certain conditions, and it exercises that power, the presumption is that it exercises it legally, and not in violation of law.
    2. Where a contract of guarantee declares that it is made “for good and valuable consideration the receipt of which is hereby acknowledged,” even if it be conceded that this guarantee was ultra vires, the guarantor cannot take advantage of its wrongful act after it has obtained the benefit of its contract.
    3. A contract within the power of the directors of a corporation to make, need not have the approval of the stockholders.
    4. A corporation organized under the laws of New Jersey cannot bargain away any of the franchises or powers conferred upon it by the legislature for its own selfish purposes, and in derogation of the sovereign right.

      5. A company which has made a subsisting contract of guarantee cannot voluntarily dissolve without making reasonable provisions for the protection of the holders of its guarantee, so that such guarantee shall not be injuriously affected by the act of dissolution.
    On appeal from an order in chancery advised by Vice-Chancellor Lane, whose opinion is reported in 87 N. J. Eq. 531.

      Mr. Richard V. Lindabury and Mr. Levy Mayer (of the New York bar); for the appellant.

      Mr. John R. Hardin and Mr. Adrian H. Larkin (of the New York bar), for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

This is an appeal from a decree advised by Vice-Chancellor Lane denying the application of the defendants for an order dismissing the bill of complaint for want of equity, and granting a preliminary injunction restraining the defendants from completing statutory proceedings taken by them for the dissolution of the defendant the Distilling Company of America until the further order of the court.

It appears by the bill that the complainant is the owner of three hundred and fifty shares of the preferred capital stock of the Cuba Distilling Company; that in the year 1907 the Distilling Company of America entered into an agreement with the Cuba company and a corporation known as the Matanzas Railway and Warehouse Company, which, after reciting that the Cuba company had an authorized preferred capital stock of twenty-five thousand shares of the par value of $100 each, of which ten thousand shares had been actually issued, and fifteen thousand shares were about to be issued, agreed that it, the Distilling Company of America, would guarantee to the then present and all future holders of all or any part of said twenty-five thousand shares of Cuba preferred, so- long as the same should be issued and outstanding, not exceeding the period of fifty years, quarterly dividends on said Cuba stock at the rate of seven per cent, per annum; that the said guarantee should be irrevocable; and that no voluntary or involuntary dissolution, or merger or consolidation of the Cuba company, or of the Distilling Company of America should, except by and with the written consent of the holders of record of all of said preferred stock outstanding at the time, release, discharge, modify or affect the guarantee in any way; and that said guarantee should be printed or engraved on all certificates of such Cuba preferred stock on the issuance thereof. The bill further alleges that in November, 191G, the Distilling Company of America instituted statutory proceedings looking to its dissolution, without making any provision for the protection of the rights of the holders of the Cuba preferred stock.

The order appealed from is attacked upon several grounds. First, it is contended that the bill should have been dismissed for want of equity, because there appears to be no authority vested in the defendant company to guarantee the payment of dividends on Cuba preferred stock. It appeal’s in the defendant’s certificate of incorporation that there had been conferred upon it the right to guarantee and secure the payment or satisfaction of dividends on shares of stock of other corporations, providing it does so for the purposes of its own business, or any part thereof. The argument upon this point submitted on behalf of the appellants is that the hill fails to disclose that the guarantee in the present case was for the purposes of the business of the distilling company, or any part thereof. This argument seems to us to be unsound. Where a power is conferred upon a corporation to be exercised under certain conditions, and it exercises that power, the presumption is that it exercises it legally, and not in violation of law. For to hold the act illegal, in the absence of any affirmative allegation, would be to declare that the corporation had perpetrated a fraud upon the statute, as well as upon the other contracting party. Moreover, the contract of guarantee expressly declares that it is made “for good and valuable consideration the receipt of which is hereby acknowledged ;” and even if it be conceded that this guarantee was ultra vires, the distilling company cannot now take advantage of its wrongful act. It has obtained the benefit of its contract; it has received a good and valuable consideration for it, and in such a situation it will not be permitted to set up lack of power to make the contract, and thus defraud the other contracting party. Camden and Atlantic Railroad Co. v. May's Landing, &c., Railroad Co., 48 N. J. Law 530.

It is further argued that the bill should have been dismissed because it does not appear that tire stockholders of the distilling company approved the contract of guarantee. The bill itself shows, we think, by necessary inference, that this contract received the approval of at least ninety per cent, of the stockholders at the annual meeting held next after the making of the contract. But whether it did receive such approval or not seems immaterial. The contract was a valid one, so far as the bill shows, made for a good and valuable consideration, and within the power of the directors to make. It, consequently, required no ratification by the stockholders. Moreover, if such ratification was necessary, the only parties who can now raise the question are the stockholders who did not approve the contract, and they are none of them here challenging its legality.

Next, it is said that it does not appear on the face of the bill that this contract of guarantee was for a valuable consideration. This assertion, however, is contrary to the fact. The contract itself is set out at length in the bill; it expressly recites that the distilling company received a good and valuable consideration for the guarantee, and that admission on its part justified the court of chancery in so declaring.

The principal ground of attack, however, made upon, the complainant’s bill is that, by the provision in the contract that no voluntary or involuntary dissolution or merger or consolidation of the distilling company should release, discharge, modify or affect the guarantee in any way, the distilling company stripped itself of a power conferred upon it by the statute (that is, the power to voluntarily dissolve), and that the public policy of the state makes such an agreement void. It. may be conceded that a corporation organized under our laws cannot bargain away any of the franchises or powers conferred upon, it by the legislature for its own selfish purposes, and in derogation of the sovereign right. But we do not think this is the legal effect of the provision of the contract now under consideration. The power of the distilling company to voluntarily dissolve is left intact; but when it exercises this power it is under a valid obligation to make reasonable provision for the protection of the holders of its guarantee, so that such guarantee shall not be injuriously affected by the act'of dissolution. This the bill shows the appellant failed to do, and such failure is an irreparable injury which equity will protect against. What method the distilling company should adopt is a matter with which the court is not now concerned, providing that the method, when adopted, will afford full protection to the holders of the guarantee. It may be that the latter will assent to a scheme suggested by tire distilling company, and, if so, such assent will be accepted, normally, by the court as a valid performance of the distilling company’s contract. If a particular method is suggested which does not meet the approval of the holders of the guaranteed stock, it will then become a judicial question whether such method will be a complete performance of the contract of guarantee- But until some method is formulated which receives the approval either of the holders of the guarantee or of the court, the distilling company may properly be restrained from completing its act of dissolution.

We conclude, therefore, that the motion to dismiss the bill was properly denied, and that the restraining order appealed from (it being in force only until the court shall otherwise order) should be affirmed.

For affirmance — The Chief-Justice, Swayze, Trenchard, Parker, Bergen, Minturn, Kalisch, Black, White, Heppenheimer, Williams, Taylor, Gardner — 13.

For reversal — Hone.


author: Swayze, J.

text:
    Philip Hilton, complainant-respondent, v. Joseph Hilton, defendant-appellant.
    [Decided June 17th, 1918.]
    1. The right of a man to use his own name in his own business is part of the natural and inalienable rights guaranteed by our constitution without which the right to acquire, possess and protect property would be of little worth. Even in a case of unfair competition, the courts go no further than to restrain the use of a name except when so marked as to distinguish it from a competitor, and this exception amounts to allowing the wrongdoer to continue the use of his own name when it is so marked.
    2. The remedy by injunction in a case of unfair competition is a protective remedy intended to protect the complainant in his property rights, not punitive to punish wrong doing.
    3. When partners dissolve and put their agreement in writing, that writing measures their rights and obligations.
    4. In an agreement of dissolution between partners, there was a sale of the good will of the business, but no agreement by the retiring partner not to engage in business. — Held, that the retiring partner might carry on a rival business wherever he chose, and might push his business as any stranger or outsider might, even though this interferes with the business he has sold. Newark Goal Co. v. Spangler, 51¡ N. J. Eq. 354, approved.
    5. The vendor of the good will of a business who has not covenanted or agreed not to compete, may seek for trade by any honest method, including public advertisement or private advertisement, among those who were not customers of the old business, but may not specially solicit the trade of those who were customers of the old business, and he may serve all who come of their own motion.
    On appeal from a decree advised by Vice-Chancellor Lane, reported ante p. 149.

      Mr. John R. Hardin, for the complainant-respondent.

      Mr. Robert H. McCarter (Selick J. Mindes on the brief), for the defendant-appellant.
   The opinion of the court was delivered by

Swayze, J.

The bill prays that the defendant be

“restrained from using the name ‘Hilton’s’ or ‘Hilton’ alone or in such manner as to lead or induce the public to believe that the goods manufactured or sold by him are manufactured or sold by complainant and that the business conducted by defendant is the same as or a part of the business conducted by complainant, from using any emblem or device resembling the trade emblem of complainant in any way in his business and from conducting his business so as to deceive the public and induce it to believe that the goods manufactured or sold by defendant were manufactured or sold by complainant and that the business conducted by defendant is the same as or a part of the business conducted by complainant.”

The evidence entitled the complainant to the relief prayed for. The learned vice-chancellor, however, went further and enjoined the defendant from using the name Hilton either alone or in association with other word or words for any purpose whatsoever in any clothing business operated or conducted directly or indirectly by the defendant, competitive with the clothing business operated or conducted by the complainant trading under the name and style of The Hilton Company, and particularly from using the word Hilton’s or Hilton either alone or in association with other word or words to describe or designate any retail clothing store or stores or the clothing therein sold or the business therein operated or conducted, now or hereafter operated or conducted, dircc-tly or indirectly, by the defendant in any city or cities in which the complainant, trading under the name and style of The Hilton Company now operates or conducts a retail clothing business.

The effect of this injunction is to preclude the defendant from using his own name in the clothing business in any city where the complainant conducts a. retail clothing business. That this was meant to -be its scope is shown by the respondent’s defence to the decree, both orally and in his brief.

The right of a man to use his own name in his own business is part of the natural and inalienable rights guaranteed by the very first clause of our constitution, without which the right to acquire, possess and protect property would' be of little worth. Although the right is not safeguarded in England by' any constitutional guarantee, it has found careful protection in the courts of justice. Of the numerous cases of unfair competition and fraud to be found in the reports, we doubt if a single case can be found where as broad an injunction as the present has been granted in a case of unfair or fraudulent trade where, as here, there has been no contract or covenant restraining a man’s business activities. Even in the Rogers Case the injunction only went so far as to restrain the defendant from using his own name unless he stamped upon the goods the words, “not the original Rogers” or “not connected with the original Rogers.” This exception, of course, amounted to allowing the defendant in that case, notwithstanding liis previous fraudulent conduct, to continue the use of. his own name if he would brand the goods as stated.

At least three reasons have moved the courts to this limitation of the restraint upon a man’s use of his own name — first, the constitutional rights already stated; second, the public interest in having all citizens free to labor in the vocation to which they have been trained, with which they are familiar, or to which they are adapted — a consideration which has led the courts so often to declare even contracts void as in restraint .of trade; third, tlie fact that the remedy by injunction: -is a protective remedy intended to protect the complainant in his property rights, not a punitive remedy intended to punish the defendant for his wrongdoing. In this present case there is a fourth reason. The parties when they dissolved partnership, put their agreement in writing and that writing measures their rights and obligations. At that time, under such an agreement as they made, the defendant had the right, as had been recently decided by this court in Snyder Pasteurized Milk Co. v. Burton, 80 N. J. Eq. 185, to engage in a competing business. The complainant must be assumed to know the law and to have known that such was the effect of the agreement. • He was, moreover, advised by competent counsel. In this situation .we cannot do otherwise than hold that the parties contemplated that the defendant might use his own name in the clothing business. He must, of course, refrain from representing his business to be that of the complainant and from palming off his goods as the goods of the complainant. The present injunction in its full scope cannot be sustained because of defendant’s unfair trading. Apparently an injunction exactly in accord with the prayer of this bill would suffice for the complainant’s protection.

There we might leave the case, but for the fact that in the dissolution of the partnership the defendant transferred to the complainant, along with the other assets, “all the name and good will of said business.” The only name mentioned in the transfer is The Hilton Company, and the transfer of this name would not enlarge the complainant’s right to the name “Hilton”' or “Hilton’s.” If the name only had been transferred the argument would be irresistible that the names “Hilton” and “Hilton’s” were omitted advisedly. The name, however, is not all that is transferred; the “good will” is included. We must, therefore, determine, whether the complainant’s rights are thereby enlarged. The fact that the bill does not contain any prayer for the protection of the good will, or prayer for general relief, does not shut us off from the inquiry. The bill was filed in 1917. By the new chancery rules (P. L. 1915 p. 194 rule 47) relief other than that prayed for may be given without a prayer for general relief. The bill sets up the transfer and the answer admits it so far as material to the present question. What rights then has the complainant by virtue of the transfer to him of the good will of the business? This depends on how good will is defined, and how much the words connote. Probably no one at this day would adopt the narrow definition of Lord Eldon. Business methods change with changing years and with the expansion of business the meaning of business terms expands. The definition of Vice-Chancellor Wood, afterward Lord Hatherley, in Churton v. Douglas, 28 L. J. Ch. 841, is broad enough for our present purpose and has in effect been adopted in later eases, which have been approved and followed by us. Snyder Pasteurized Milk Co. v. Burton, 80 N. J. Eq. 185. “Good will must mean every advantage — affirmative advantage, if I may so express it, as contrasted with the negative advantage of the vendor not carrying on the business himself — that has been acquired by the old firm by carrying on its business, everything connected with the premises, or the name of the firm, and everything connected with or carrying with it the benefit of the business.” The distinction drawn by the vice-chancellor between affirmative and negative advantage, as he calls it, is important. It was then, and apparently always has been, recognized that the sale of good will without more did not prevent the vendor from engaging in business in competition with the vendee. If the vendee desired to avoid that, he must require a contract not to engage in competition. This rule was so plain that it was taken for granted in this court (Richardson v. Peacock, 33 N. J. Eq. 597) and stated by Vice-Chancellor Emery with his well-known cafe and accuracy in Newark Goal Co. v. Spangler, 54 N. J. Eq. 354, as follows: “The vendor of a good will who has not expressly restricted himself against carrying on the business, being permitted by law to carry on a rival business wherever he chooses, may push, his business as any stranger or outsider might, even though this does interfere with the business he has sold, and the real question, therefore, is narrowed down to this: In thus pushing his rival business, what acts, if any, must the vendor be restrained from?” It was always conceded that the vendor in conducting the rival business might make his business known by the usual general appeals by public advertisement to the public generally. Johnson v. Helleley, 2 De G. J. & S. 446; 34 L. J. Ch. 179; Hall v. Barrows, 33 L. J. Ch. 204; Labouchere v. Dawson, 41 L. J. Ch. 427. It was at one time contended that the vendor might go farther and solicit personally or by mail, by traveling men, or any other way. It was finally settled that such special solicitation would be restrained. The English cases are set forth by Vice-Chancellor Emery in Newark Coal Co. v. Spangler, above cited, and the matter has been put at rest by the decision of this court in Snyder Pasteurized Milk Co. v. Burton, 80 N. J. Eq. 185. We there said: “The defendant having made no express covenant, may engage in a competing business.” We there restrained the defendant from soliciting customers of the former business, the good will of which he had sold. It is gratifying to know that the English rule adopted by us has the support not only of reason but of the weight of authority in other jurisdictions. The more recent cases are collected in a note to Von Bremen v. Macmonnies, 200 N. Y. 41; 21 Ann. Cas. 423. The New York court of appeals holds to our rule. The supreme court of Massachusetts takes a different view. Cases are collected in a note to Foss v. Roby, 195 Mass. 292; 11 Ann. Cas. 571, but the cases cited in that note show that the great weight of authority is with our rule. On the on-e hand then, the vendor having the right to conduct a rival business may from the necessity of the case seek for trade by any honest method including public advertisement or private advertisement among those who were not customers of the old business, but he may not specially solicit the trade of those who were customers of the old business. The question still remains whether he may deal with the old customers, who may perhaps be attracted by their knowledge, from advertisement or otherwise, that he is in business. This question was left in doubt by what Justice Dixon said in Richardson v. Peacock. Sir George Jessel in Ginesi v. Cooper, L. R. 14 Ch. Div. 596; 49 L. J. Ch. 601, enjoined a vendor who had sold his good will from dealing with the old customers and vindicated his action in his usual vigorous style. Afterward in Leggot v. Barrett, L. R. 15 Ch. Div. 306; 51 L. J. Ch. 90, an injunction granted by him in accordance with Ginesi v. Cooper came before the court of appeals and his order was reversed. Lord-Justice Brett said: “The truth is, that to enjoin a man, or to prevent him by means of damages when he does it, against dealing with people whom he has not solicited, is not only to enjoin him, but to enjoin them, for it prevents them from having the liberty which everybody in the country might have of dealing with whom they like. If they are induced by his solicitations, that is a different thing; but it seems to me that it would be quite wrong to imply any contracts that he will not deal with people who come of their own accord to deal, even though they were former customers.” The judges agreed that there was no authority for the extension of the relief attempted by the master of the rolls. The argument is unanswerable. It cannot be that every customer of a great department store, for instance, must be restricted in his choice of a place in which to trade merely because partners dissolve and one sells the good will to the other. The necessary corollary of the right to do business is the right to serve all who come of their own motion. Moreover, the rules of law must be practical, and it would be quite impossible for the proprietor even of a small business to be personally present in all parts of his establishment prepared to turn away all the old customers, and of course no clerk can be supposed to know them even if the proprietor can be.

The right to make known that one is in business by advertising addressed to the public generally, is a necessary concomitant of the right to do business, without which that right would be hardly more than nominal. The reason for making a difference between such advertising and special solicitation is that the former is public and open to all, the latter is private and secret in a sense, and the vendor of good will has'the advantage of knowing the customers, and, if permitted, could by reason of that knowledge detract from the value of the good will he had sold.

Ho relief is open to the complainant by reason of his purchase of good will except an injunction against soliciting customer'' of the old business. Ho such solicitation was proved, no issue was made of it. In the present state of the case, at any rate, no relief can be granted on that score.

The decree must be modified, and to that end the record remitted in order that a decree may be entered according to the prayer of the bill. Ho costs will be allowed in this court. The respondent is entitled to costs in the court of chancery since lie gets the relief he prayed for.

For affirmance — Hone.

For reversal — Hone. ' '

For modification — The Chief-Justice, Swayze, Trenchard, Parker, Bergen, Minturn, Kalisch, Black, Taylor, Gardner — 10.


text:
    Bertha E. Feick, executrix of Charles A. Feick, complainant-respondent, v. Hill Bread Company, defendant-appellant.
    [Decided June 17th, 1918.]
    Among the claims filed against an insolvent estate was a claim hy a bank on notes of the H. B. Co. endorsed by the insolvent, and also a claim by the H. B. Co. on a note made by the insolvent for money loaned • — -the H. B. Co. claimed that it had paid the insolvent on account of its notes, and that in equity he was bound to apply the money to that purpose, and that-his failure to do so altered the equitable situation as between themselves and made the insolvent in equity the principal debtor; the only consideration for the insolvent’s note to the H. B. Co. was the cash alleged to have been paid on the H. B. Co.’s own notes. — Held, that on the evidence this was a loan to the insolvent and not a payment on the H. B. Co.’s notes, and that there was a failure to prove an equitable situation different from what was shown on the face of the papers.
    On appeal from a decree advised by Yice-Chancellor Foster.

      Mr. Waldron M. Ward (Messrs. Pitney, Hardin & Skinner), for the complainant-respondent.

      Mr. Frank E. Bradner, for the defendant-appellant.
   The opinion of the court was delivered by

Swayze, J.

Such difficulty, if any, as there may be in this case, disappears when the facts are clearly apprehended. The situation is this: Feiek’s estate has been decreed to be insolvent. Among the claims filed with the executrix, which, by the adjudication of the orphans court, are to be held and deemed as justly due (Comp. Stat. p. 3850 pl. 104), are a claim by the Union National Bank and a claim by the Hill Bread Company. The claim of the bank includes a claim for the amount due on notes of the Hill Bread Company endorsed by Feick, amounting to $10,500. The rest of the bank’s claim is not material to the present controversy. The claim of the bread company includes a. claim on a note of $10,000 made by Feick, which is subject to a set-off of $2,500 due from the bread company to Feick, leaving $7,500 due besides some interest. The rest of the bread company’s claim is not material to the present controversy. On the face of tire papers, the bread company is primarily liable on the notes held by the bank; Feick’s estate is liable to the bread company for the balance due on the $10,000 note after crediting the $2,500 set-off. The orphans court decreed a dividend of forty-five per cent, on each claim. The executrix paid the dividend to the bank, but refused to pay the dividend to the bread company on the ground that she was entitled to be reimbursed for what she had paid the bank in discharge of the bread company’s primary liability. In this she was clearly right unless the equitable situation is not that shown on the face of the papers. -The defendant undertook to prove this proposition. The claim is that the bread company paid Feick $10,000 in cash on account of its notes; that in equity he was bound to apply the money to that purpose; that his failure to do so altered the equitable situation as between themselves, and made Feick in equity the primary debtor. Since the $10,000 cash was the only consideration for Feick’s note to the bread company, that note would not be enforceable as between them, if in fact the $10,000 was not a” loan to Feick but was payment of the bread company’s own obligation. The same money could not do double duty as payment of a debt and as the consideration of a new note. The disputed fact, therefore, is whether the money was a payment or a loan. On the evidence the vice-chancellor could not help finding that it was a loan. (1) It was so treated by the parties at the time. We cannot conceive that Feick would have given a note rather than a receipt if the intent of the bread company had in fact been to make payment; and although his failure to return the notes which had been made by the bread company to his order is susceptible of the explanation that they were then held under discount by the bank, it would, nevertheless, have been just as easy to have given a receipt and agreement to return the notes as to give the new note. (2) Both Eeiek and the president of the bread company continued for some time and until Eeiek’s death to treat both the set of notes endorsed by Eeiek and the note of which he was maker as outstanding obligations. Interest was paid and notes given in renewal. There is no adequate explanation, hardly what can be called an attempt at explanation, of conduct so unusual if the defendant’s view of the transaction be accepted. (3) The defendant filed a sworn claim with the executrix on the note. This could not be rightfully done if the $10,000 had beeir in fact payment of the other notes. This claim is now in the form of an adjudication of the orphans court, final so far as the settlement of the estate is concerned; and the defendant claims its dividend thereon. It is said that the president of the bread company had no authority to file the claim with the executrix. We need not consider this question. It is enough to say that the defendant’s case rests on his testimony, and in considering its value, his own affidavit to the claim is weighty evidence against the construction he seeks to give the transaction by his testimony at the hearing. It was incumbent on the defendant to prove an equitable situation different from what was shown on the face of the papers. It has failed to do so. The complainant is therefore entitled to set off against the dividend she owes the defendant, the amount she has already paid the bank as a dividend on what the defendant was primarily obligated to pay. The defendant’s dividend was less than that which the complainant paid the bank. The same reasoning requires that the balance be charged upon any future dividends to which the defendant may be entitled; and it was, of course, proper to provide that she might apply on .the foot of the decree for an execution to secure any balance that might still remain unpaid. The vice-chancellor advised such a decree. It is affirmed, with costs.

For affirmance — The Chief-Justice, Swayze, Trenchard, Parker, Bergen, Minturn, Black, White, Heppenheimer, Williams, Taylor, Gardner — 12.

For reversal — None.