author: Gummere, J.

text:
    The Pennsylvania Railroad Company et al., appellants, v. The National Docks and New Jersey Junction Connecting Railway Company, respondents.
    1. The verdict of a jury, upon an appeal from an award of commissioners, fixing the compensation to be paid to a landowner for the taking of his land by eminent domain, ceases to be a criterion of the value of such land after it has been set aside.
    2. The tender, to a landowner, of the amount of a verdict, which is afterward set aside, and the payment thereof into court upon his refusal to accept the same, is not the making of that just compensation which the constitution requires as a prerequisite to the taking of private property for public use, and does not entitle the condemning party to enter upon and take possession of the land which it seeks to acquire.
    3. A preliminary injunction will never issue where the right of the complainant depends upon an unsettled question of law.
    4. An order or decree which absolutely and finally disposes of every matter which is involved in the cause can only be made upon final hearing.
    On appeal from an order of the chancellor, directing the issuing •of a preliminary injunction, who delivered the following opinion:

      The complainant is a railroad corporation, duly organized under and in pursuance of the provisions of the act to authorize -the formation of railroad corporations and regulate the same, approved April 2d, 1873 (Rev. p. 925), and its supplements, known as the General Railroad law.
    That which it is to accomplish is a direct connection, as its name indicates, between two railroads — the National Docks and the New Jersey Junction — within the corporate limits of the city •of Jersey City.
    Its route is, approximately, a straight line between points upon 'the railroads designated, about half a mile apart. The route ■(beginning at the southerly end and tracing it northerly) crosses meadow land and public .streets, for some one thousand five hundred feet, until it reaches elevated land of the defendants, ■commencing at the northerly side of Railroad avenue and rising ■above that avenue some twenty-three feet, and extending- more ■than five hundred feet in width -northerly therefrom, upon which land the defendants have constructed a car yard. The route of ¡the complainant’s road is laid through this yard, and beyond it, northerly, reaches the New Jersey Junction railroad. It is proposed to cross the yard by means of a tunnel constructed of masonry, which, in process of construction, will necessitate the •opening of the surface of the yard for its entire width and the ■disturbance of twenty-one railroad tracks of the defendants -located and used in the yard, over the route.
    The United New Jersey Railroad and Canal Company is a •corporation of this state and the owner in fee of the property used for the car yard. It has leased that land, among other property, to the Pennsylvania Railroad Company, a corporation •of the State of Pennsylvania, for a long term of years.
    The complainant insists that by proceedings in condemnation 'against the two companies last named, it has acquired the right to cross the yard, by means of the tunnel indicated, in a reasonable manner, consistent with safety and the least possible interference with the ordinary and legitimate use of the car yard by the defendants. The object of the bill is to secure to the complainant the proper exercise of this right, and, as a preliminary step, to obtain a mandatory injunction which will require the defendants to remove from those parts of its three most southerly tracks in the car yard, which lie over the route of crossing, cars which they continually store there, so that the complainant may safely commence its work of excavation for the-tunnel. The insistment is that, by the condemnation proceedings, a right to cross the car yard has been acquired, the exercise-of which, though it must, to some extent, interfere with the use-of the property crossed for railroad purposes, must not so interfere as to be destructive thereof or as to exceed the bounds of reasonable necessity. Hence, it is argued, the case presented is-one where there exists mutual rights of use or easement in the-same land, the enjoymeut of which a court of equity will control and regulate, upon being satisfied of disagreement or of misunderstanding as to the use, between the parties concerned.
    This jurisdiction is established. Delaware, Lackawanna, and Western Railroad Co. v. Erie Railway Co., 6 C. E. Gr. 298; National Docks Railroad Co. v. Central Railroad Co., 5 Stew. Eq. 767; National Docks &c. Railroad Co. v. United Companies &c., 24 Vr. 217; Jersey City and Western Railroad Co. v. Central Railroad Co., 3 Dick. Ch. Rep. 379; National Docks &c. Railroad Co. v. Pennsylvania Railroad Co., 7 Dick. Ch. Rep. 58, 66; National Docks &c. Railroad Co. v. Pennsylvania Railroad Co., 7 Dick. Ch. Rep. 58, 590.

    The primary question in the present case is whether the complainant has duly acquired the right it asserts.
    It claims its right in virtue of proceedings in condemnation-which were instituted by application for the appointment of commissioners in March, 1889, by a petition which defined the character of the crossing then contemplated. The commissioners were appointed, and thereupon, upon the application of the defendants, the proceedings were taken in review, upon certiorari, to the supreme court, and from thence, by writ of error at the-instance of the complainant, to the court of errors and appeals. Pending this review, one of the commissioners died, and his place was filled by the appointment of another person, and that action also was reviewed upon certiorari at the instance of the-defendants. Thereafter two applications by the defendants to the United States circuit court further stayed proceedings. In •consequence of these several litigations and the trial before the commissioners, the report of the commissioners was not made until the end of May, 1893, more than four years from, the ■institution of the proceedings. It awarded to the defendants $182,569 for their land and damages. From this award both .parties appealed to the circuit court of Hudson county, and there, in September, 1893, the complainant, by amendment permitted by the court, changed its plan of crossing from a walled cut, which could be crossed by bridges and necessitated a considerable elevation of the southerly side of the defendants’ yard, to an arched '•tunnel, deeper in the ground than the cut, which materially reduces the elevation to which the southerly part of the yard will have to be brought. Upon trial under this plan, the jury by its verdict allowed the defendants $95,000 for their land and damages. Later, tender of the amount of this verdict, with interest thereon, was made by the complainant, and the amount of the tender being refused, it was paid to the clerk of the circuit court. 'Thereafter an action, similar in object to the present suit, was ■commenced in this court. The defendants resisted the granting of the relief sought by it, urging, among other things, that the •complainant had not secured the right to enter upon their lands because it had paid the amount found as compensation to the •clerk of the circuit court without the knowledge or consent of •the court evinced by its order, and hence had not paid the money into court, and also, that as the public easement in Railroad avenue, at the point where the complainant’s route crosses 'it, had been vacated by the municipal authorities, the northerly half of that avenue there was the property of the defendants free from the piublic easement and could not be entered upon by the •complainant, without which entry it would be impracticable for the complainant to proceed with its construction. In both these contentions they were sustained by this court (7 Dick. Ch. Rep. 58), and thereupon the complainant’s bill was dismissed, without prejudice, however, to another suit for the same relief, after the •due payment of the amount of the verdict into court. From

      this decree of dismissal the complainant appealed. See 7 Dick. Ch. Rep. 590.

    Since this decree, the complainant has again tendered the-amount of the verdict, with interest, and upon its being refused, has duly paid it into court, and it has also, by condemnation, proceedings, in which, upon appeal, there was a verdict of a. jury, ascertained what the just compensation for the northerly half of Railroad avenue for its purposes, within its route, is, and has duly tendered that sum ($10,000), with interest, and,, upon its refusal, has paid it into court. Thus it presents a completion of the title in the particulars in which it was formerly-held to be incomplete and removes the former objections to the-relief sought.
    The statute authorizes entry after just compensation shall first-have been made and provides a method for the ascertainment of' that compensation; in the first instance by the action of commissioners, and then, if an appeal is had from the commissioners’' award, by the action of a jury, and also prescribes how the compensation shall be paid, and there it stops.
    In dealing with an owner who is free from disabilities, the-just compensation must be tendered and actually paid if the-owner will take it, but if there be disabilities or it be refused upon tender, it may be constructively paid by its deposit in court for-the owner. By such ascertainment, tender and payment the-condemning company acquires the right to take possession of the land and proceed with the work of constructing its road.. Johnson v. Baltimore and New York Railway Co., 18 Stew. Eq. 1¡£4; Waite v. Port Reading Railway Co., 3 Dick. Ch. Rep. 346;■ Packard v. Bergen Neck Railway Co., 3 Dick. Ch. Rep. 281; S. C. on appeal, 3 Dick. Ch. Rep. 293; Jersey City and Western Railroad Co. v. Centred Railroad Co., 3 Dick. Ch. Rep. 384-

    As this case stood at the filing of the present bill, a writ of' error had been sued out to review the rulings of the circuit court, in accordance with which the verdict of the jury was rendered,, and it was urged that pending the determination of. that review the complainant’s right to enter was suspended or incomplete.
    The sufficient answer to this proposition has been given by-

      Vice-Chancellor Pitney in Packard v. Bergen Neck Railway Co., supra, that the statute (Rev. p. 988 §§ 18, 18) does not contemplate a stay upon the suing out of a writ of error, nor is there anything in the nature and effect of a writ of error to-stay the complainant’s exercise of its right.
    Now, by supplemental answer, it has been made to appear-that, since the bill was filed, the supreme court has determined that there was error in the trial at the circuit court, which has, induced a reversal of the judgment entered upon the verdict, the setting aside of the verdict and the adjudication that it shall be for nothing holden and that a venire de novo shall issue.
    In consequence this question is presented: Does the setting aside of the verdict affect the right to enter and proceed with the work of construction, which the complainant claims to have acquired by its tender and payment into court ?
    In support of an affirmative answer, it is argued that the verdict having been adjudged to be erroneous and having been set aside, it is demonstrated that the compensation tendered and paid into court was not just, and therefore that no right was acquired by the tender and payment relied on, and the appeals taken from the commissioners’ report having superseded their award, as was held in Johnson v. Baltimore Railway Co., supra, no right of entry can be obtained until a verdict, under correct instructions and rulings of the court, shall be had and the amount ascertained by it shall be paid.
    On the other side it is urged that the amount found by the jury having been duly paid while the verdict remained unreversed, that which the statute then established as just compensation was made, and a right thereupon vested which subsequent reversal of the verdict cannot affect.
    The mere reversal of the verdict for error at the trial does not determine that the compensation found is not just. It decides only that questions involved in the process of reaching it were not properly submitted to the jury, and that as they have or may have misled the jury, there must be a retrial. It may yet be decided that the sum paid by the complainant is adequate or even more than adequate compensation.

      That the legislature may prescribe a period, in proceedings before an impartial tribunal authorized by it to ascertain just compensation, when a sum found shall be deemed the compensation necessary to be made to secure possession of the land by the condemning company, is too well settled to need support by citations of authorities — and this even though it be held that review of these proceedings may follow. St. Louis, Keokuk and Northwestern Railroad Co. v. Clark, 119 Mo. 357. I think that such a period is fixed by the statute here involved. The statute provides that the condemning company shall not enter upon or take possession of any land until it shall have paid the amount assessed by the commissioners in case the report of the commissioners is not appealed from, or the amount which shall be found by the jury by whom the issues “shall be tried” in case of appeal. It is to be noted that the amount to be paid is not the amount of a judgment which may be rendered in the court appealed, to, but the amount found by the jury. Such a provision implies that the legislative design was to clothe the condemning company with ability to perfect its right of entry as soon as a verdict should be had, without waiting either for judgment upon the verdict or the conclusion of proceedings in review. This language in the statute is immediately followed by a provision which permits the landowner to accept the award of commissioners without affecting an appeal therefrom, and the condemning company to pay the commissioners’ award into court, and at the same time appeal from the award and take possession of the land. So far as the power sought to be conferred upon the condemning company to hold the compensation in court pending its appeal is concerned, this provision has been held to be unconstitutional (Redman v. Philadelphia, Marlton and Medford Railroad Co., 6 Stew. Eq. 165), but nevertheless it evinces a legislative purpose entirely consistent with and which supports the interpretation I have given to the language first referred to. •
    The evident design was to expedite the completion of a beneficial public convenience by a summary determination of just "Compensation, the payment of which is to precede the entry upon the land and prosecution of the work.
    In the former application to this court for the relief now ■sought, Vice-Chancellor Van Fleet said, in view of the proceeding in error then pending: “ The sum which must be regarded as just compensation for the land taken in this case has already been finally determined, so far, at least, as to invest the eomplain- • ant with a right, on tender and refusal of the money and its payment into court, to take such possession of the laud as may ¡be necessary to enable it to proceed with the construction of its road thereon, and the sum so paid has been tendered and .refused. So far I regard the complainant’s case free from doubt ■or dispute.”
    In Jersey City &c. Railroad Co. v. Central Railroad Co., 3 Rich. Ch. Rep. 384, the same distinguished justice said: “As I •understand the General Railroad law and the adjudications .respecting its construction, the verdict of the jury that tries an •appeal from the award of commissioners, fixes finally and conclusively the sum which, in that particular case, must be regarded as just compensation, so far as may be necessary to confer upon the condemning company the right, on the payment of the money, to appropriate the property condemned. The award of the commissioners is the first step in ascertaining what is just compensation to the landowner, and the verdict of the jury that ¡tries the appeal from such award is the last and final step.”
    "When the complainant paid its money this verdict remained unreversed bv force of the statute fixing the just compensation to be made, and, upon that payment, I think the right to enter upon the land and prosecute the work of constructing its road vested in the complainant and now remains as immutable by a subsequent reversal of the verdict, as the title of one who buys ¡at a judicial sale in enforcement of a decree of a court of general jurisdiction, which is subsequently reversed. Shultz v. Sanders, 11 Stew. Eq. 154; S. C. on appeal, 11 Stew. Eq. 293.

    It was insisted, in the next place, in virtue of the appeal by the complainant from the decree in its former suit in this court, :that that suit is still pending in the court of errors and appeals, and that as this suit is of the same nature and effect and between the same parties, notwithstanding the title here alleged depends upon another tender and different method of effecting payment into court, and the land in Railroad avenue has been taken by condemnation, this suit cannot be maintained.
    I need not consider the questions suggested under this insistment. The record and proceedings in the former suit are referred to in the bill in this suit and were used upon the argument of the order to show cause. Upon inspecting that record, I find that, since the argument before me, the court of errors and appeals, by its decree, has affirmed the decree of this court and has remitted the record to this court, so that the original bill in. the former cause stands dismissed without prejudice to the present proceeding. The opinion of the court of errors and appeals-is found- in 30 Atl. Rep. 581.

    It was next urged by the defendants that the proceedings for the vacation of Railroad avenue have been removed to the supreme court for review, and that in case it shall be determined that they are illegal, then Railroad avenue will be an. existing highway over which the complainant cannot construct its railway upon the grade it proposes, which is above the highway, but not high enough to permit free and uninterrupted use-of the highway as the statute (Rev. p. 930 § 14) requires, and as the complainant has no right to cross an existing highway at such a grade, and it is uncertain whether, if the proceedings for the vacation of Railroad avenue be set aside, a new and lawful vacation of it or change of its grade can be had, this court should not compel the defendants to submit to the inconvenience and damage they will sustain in the construction of a crossing which, may never be available for the complainant’s purposes.
    A proposition somewhat similar to this was presented to 'Vice-Chancellor Van Fleet in the former suit, by contention that the-injunction desired should not issue because the defendants’ land in Railroad avenue, within the complainant’s route, had not been condemned, and, the public easement having been vacated, the-complainant could not 'enter upon it to reach the point at which it desired to commence work, and the issuance of an injunction. to remove cars from three tracks over the complainant’s route at the southerly side of the car yard would work the defendants* inconvenience without benefit to the complainant. The vice-chancellor agreed to the proposition. That position, I think, was more tenable than this. If it be conceded that the proceedings for the vacation of Railroad avenue are illegal, then there can be no doubt of the right of the complainant to reach the southerly side of the car yard at Railroad avenue and work over that avenue with vehicles which may lawfully pass over a highway in the enjoyment of the public easement. But if the vacation be legal, then the Railroad avenue condemnation proceedings and tender and payments into court thereunder, give the complainant a special right of possession of the land condemned for the purpose, not only of crossing with its road, but also for the purpose of construction incidental to the maintenance and completion of that road. But more than this, upon examination of the amended plan of crossing, I do not find that the elevation of the roadbed of the complainant through its proposed tunnel is stated. The maximum height of the crown of the completed arch is given, but the depth to which the walls may go is not limited. Hence, the roadbed at Railroad avenue may be constructed upon the present grade of that highway. With the consent of the municipality such a crossing will be legal. This situation is then presented: The vacation proceedings have not been declared to be illegal. If they are illegal, the complainant may lawfully cross into its tunnel by procuring the assent of the municipality to a grade crossing, or it may secure a change in the grade of Railroad avenue or a new vacation of that highway. It thus appears that the crossing condemned through the defendants’ yard is not an impossibility.
    Under such circumstances I fail to perceive any sufficient reason for refusing the complainant the aid it seeks merely because it has not yet acquired the right to construct and operate its railroad across Railroad avenue. Months will elapse before the tunnel can be completed, and in that time the review of the proceedings for the vacation of Railroad avenue may be completed, and, if they result unfavorably to the complainant, either :a new vacation, a change in the grade of Railroad avenue, or a consent to a grade crossing may be had. But, however this may be, I think it would establish a precedent, detrimental to the expeditious construction of railroads and consequent development of the state, to hold that chancery will not aid the proper enjoyment of a duly-acquired right to cross another railway, until the right to the whole proposed route of the new company shall be •actually secured. If the condemning company were not solvent and acting in good faith, there might possibly be reason, in the situation stated, for staying the hand of the court. But here the condemning company has given every evidence of being possessed of ample means, and of being intent upon the completion of its road in good faith. Its entire route, with the exception of the right to cross Railroad avenue on grade or at an insufficient height above its present grade, to admit of traffic in that highway at its present grade, has been secured. It has constructed an expensive iron or steel trestle, resting upon stone foundations, from its southerly terminus to Railroad avenue, and over a portion of that avenue it has built an expensive stone causeway, and besides this it has practically paid the defendants more than $105,000 and now proposes to begin the construction of a tunnel which will probably exceed in cost all the work that it has thus far accomplished, and it submits to the control of this court in the performance of the work of building that tunnel, within the proper limits of the right it has secured. There is no suggestion of its inability to complete the tunnel as soon as the performance of the work is practicable with the least possible injury to the defendants.
    The consequence of an inability of the complainant to cross Railroad avenue with its railway will not be detrimental to the defendants if the tunnel be built with due expedition, and in the manner contemplated in the condemnation proceedings. After it shall be completed, if the railway cannot be operated through it, the injury will fall upon the complainant alone.
    It has been further objected that it does not appear that the complainant and defendants fail to agree as to the mutual use of the land in which the crossing is to be constructed; in other-words, as to the proper method of constructing the tunnel.
    The contention before me demonstrates such a disagreement.: At the condemnation trial in the Hudson county circuit court the complainant’s counsel declared that his client “ must make this'crossing in the most reasonable and consistent way of safety and also with the least possible interference with the operation of the old company’s line,” and later the same counsel declared that an opening of the entire route at one time for the construction of the tunnel would be unreasonable. The condemnation was tried apparently upon the understanding, by court, jury and parties, that the construction is to.be accomplished with the least possible injury to the defendants, under a method of construction which under all circumstances shall be reasonable.
    Upon that understanding the defendants now urge that it will be reasonable and of the least injury to them for the complainant to support the tracks under which excavation shall be made, during the excavation, by the use of stringers properly supported. They think that the walls of the tunnel may be constructed under the supported tracks and that it may be feasible to so-elevate the stringers that the arch of the tunnel can be turned while the tracks are in use. On the other hand, the complainant contends that it should be allowed to cut three of the defendants’ tracks, and upon their restoration over the completed tunnel cut three other tracks, and, pursuing such a course through the yard, shall not at any time put more than three tracks in disuse. It objects that if it should be required to support all tracks over its excavation during the progress of the work, the work would be retarded by the obstructions which the stringers, posts and bracings would occasion to the general prosecution of the work, and particularly to the use of derricks necessary to the expeditious building of the walls of the tunnel. It also objects that it would be difficult to securely support the tracks by stringers unless they can project beyond the cut, on each side thereof, for some feet, so as to obtain a more secure support for their ends than the edges of the cut will afford, though those edges should be shored up in the most approved manner, and, as the defendants will not consent to sucia extension of tlae stringers beyond the route condemned, it should not be required to support the tracks.
    This disagreement, in addition to the attitude of the parties to each other, as is evinced by the long litigation to which I have referred, convinces me that necessity now exists for the interference of this court. Bonaparte v. Camden and Amboy Railroad Co., Baldw. 205, 232.

    I am of opinion that the complainant should be permitted to enter upon the condemned route of crossing and prosecute the work proposed, but in such manner that not more than three of the defendants’ tracks shall be in disuse at any time. I think that, during the progress of excavation, the tracks under which the excavation is being done may be supported so that cars may be moved over them in the ordinary and necessary use of the car yard. I am also of opinion that, during the construction of the walls and arch, the complainant should be permitted to cut the tracks and keep them in disuse so long as reasonable expedition in that construction demands. It is obvious to me that ears should not be stored or suffered to remain upon temporarily-supported tracks, and, because of that, that the number of such tracks should also be limited to three at one time.
    I will order that an injunction issue to prevent the further storage of cars upon the tha’ee most southerly tracks of the car yard, over the complainant’s condemned right of way, pending the construction of the tunnel at that point, but will require the complainant to support those tracks so that cars may be moved over them as necessity in the use of the yard demands, until the excavation under them for the tunnel shall be completed. Then similar restraint in the use of the next three tracks shall become operative, and those tracks shall be supported until the excavation under them for the tunnel shall be completed. As the excavation under the second set of three tracks progresses, the first three may be cut and the tunnel completed under their location, and, after completion of the tunnel, the tracks shall be replaced. Thereupon, the second three tracks may be cut and the work of tunnel construction commenced under their loca¡tion and. the work of excavation go on under the third three tracks properly supported, and in this manner the work proceed ■throughout the yard. The practical working of this method of procedure may hereafter render some modification in it or addition to it advisable; therefore, either party, upon notice to the •other, may, from time to time, as the work progresses, apply for modification or addition.

      Mr. James B. Vredenburgh and Mr. Richard V. Lindabury, Tor the appellants.

      Mr. Charles JD. Thompson and Mr. Gilbert Collins, for the ■respondents.
   The opinion of the court was delivered by

Gummere, J.

This appeal is taken from an order of the chancellor providing the terms upon which, and the manner in which, the respondent shall construct its railroad across the car yard of the appellants, and directing that a preliminary injunction issue enjoining the appellants from interfering with the respondent in the construction of its railroad through said car yard in the manner designated in the order.

The facts upon which the order appealed from was made, briefly stated, are these-: The respondent instituted proceedings to con- • demn a right of way for its railroad across the car yard of the appellants. Those proceedings resulted in the making of an award by commissioners of $182,596 to the appellants as the compensation to which they were entitled for the taking of their land. There was an appeal taken from this award by the respondent ■ to the circuit court, and at the trial it substituted a new method of •crossing the appellants’ yard for that which had been considered by the commissioners. The jury, upon the trial of the appeal, by their verdict, awarded to the appellants the sum of $95,000 ■ as the compensation to which they were entitled for the taking •of their land by the substituted method of crossing. The amount of this verdict was tendered to the appellants, and, upon-their refusal to accept it, the respondent paid it into court, and then filed its bill in chancery setting out these facts, and stating, that it was nevertheless being hindered and prevented by the appellants in the construction of that portion of its road, and praying the court to direct the manner in which, and the terms upon which, it should construct its railroad across the appellants’' car yard, and also to restrain the appellants, by injunction, from, interfering with it in the construction of its railroad in the manner and upon the terms which the chancellor should direct.

An order to show cause why an injunction should not issue in accordance with the prayer of the bill was thereupon made by the chancellor. Before the return of the order to show cause-the appellants filed their answer to the bill of complaint, having previously sued out a writ of error to the supreme court to review certain errors alleged to have been committed by the circuit judge■ upon the trial of the appeal from the award of commissioners. The supreme court, after considering the alleged errors, set aside-the verdict which had been rendered, and directed a new trial of the appeal; whereupon the appellants filed a supplemental answer, alleging the annulling of the verdict as an additional1 reason why the respondent was not entitled to the relief which it sought.

In this situation of affairs the chancellor, considering that the • tendering of the verdict by the respondent to the appellants, and the subsequent payment thereof into court, was the making of that just compensation which the constitution requires as a prerequisite to the taking of private property for public use, notwithstanding the fact that such verdict had been set aside and annulled, and that, consequently, the respondent was entitled 1o have the order to show cause made absolute, made the order-which is now brought up for review.

The ground upon which the chancellor bases his order, namely,. that the payment into court by the respondent of the amount of this verdict, after tender and refusal by the appellants, vested in the respondent the right to enter upon and take possession of the land of the appellants, and that such right remained immu— table by the subsequent reversal of the verdict, is not tenable. The effect of the judgment of the supreme court, in vacating the judgment of the circuit court and annulling the verdict upon which it rested, was to place the parties in exactly the same condition in which they were before the trial of the appeal from the award of commissioners was begun. Keicher v. Turnpike Company, 33 Ind. 334; Dater v. Troy Turnpike Co., 2 Hill 629. After the verdict was annulled it could no longer be considered as a criterion of the value of the land taken ; much less could it be regarded as the just compensation required by the constitution, for the appellants no longer had any right to appropriate to their use the amount thereof which had been deposited in court; they were then only entitled to such sum as another jury should award them as compensation, upon a new trial of the appeal.

The command of the constitution is that compensation shall be made to the owners — that is, that the money shall become theirs absolutely, and that they shall have the same dominion over it that they had over the land before it was taken, and nothing short of this will satisfy the constitutional requirement. Redman v. Philadelphia &c. Railroad Co., 6 Stew. Eq. 169.

In this case no compensation, within the meaning of the constitutional provision, has yet been made by the respondent to the appellants for the land proposed to be taken, and, for this-reason, the order appealed from should be reversed.

But even if a different conclusion had been reached upon the effect which the judgment of the supreme court, setting aside this verdict, has upon the rights of these parties, the result would: be the same, so far as the determination of this appeal is concerned, for at best the right of the respondent to take possession of the land condemned, under the condition of affairs which exists in this case, must be admitted to be an unsettled question in this state, and nothing is more firmly settled in this court; than that a preliminary injunction will not issue where the right which the complainant seeks to have protected is in doubt.. Citizens’ Coach Co. v. Camden Horse Railroad Co., 2 Stew. Eq. 304; Haggerty v. Lee, 18 Stew. Eq. 256.

Moreover, the order appealed from, although it purports to he a mere preliminary order, made in the inception of the case .and upon ex parte affidavits, is, in reality, nothing more nor less than a final decree, for it disposes, absolutely and finally, of ■every matter which is involved in this suit. An order or decree ■of this character can only be made upon final hearing, had upon pleadings and proofs taken upon due notice and in accordance with the rules and practice of the court.

The order appealed from should be reversed.

For reversal — The Chief-Justice,. Gummeee, Magie, .Reed, Van Syckel, Sims — 6.

For affirmance — Dixon, Lippincott, Bogert, Brown — 4.


source: Caselaw Access Project

license: Public Domain

text:
    Seth L. Jenkins et al., appellants, v. The Guarantee Trust and Safe Deposit Company and The Presbyterian Hospital, respondents.
    M., by a will made five days before her death, gave to the Presbyterian Hospital a legacy of §5,000, and directed it to be paid out of her residuary estate, which consisted of certain lands situated in this state. The testatrix, a.t the time of her death, was a resident of and was domiciled in the State of Pennsylvania, and the Presbyterian Hospital was a Pennsylvania corporation. By a statute of that state any testamentary gift to a body politic, or to any person in trust for religious or charitable uses, is void, unless the will be made at least one calendar month before the decease of the testator. — Held, that the validity of such legacy, being a gift of money, is to be determined by the law ■of the domicil of the testatrix, notwithstanding the fact that it is necessary to sell lands in this state for the payment thereof, and that, consequently, it is void by force of the Pennsylvania statute.
    Ou appeal from a decree advised by Vice-Chancellor Pitney, who delivered the following opinion:

      This is a bill filed by a trustee asking the direction of the •court in the disposition of the trust property.
    The facts are as follows :
    Some years ago Gifford J. Maxwell and his wife, Margaret K. Maxwell, domiciled in Pennsylvania, executed a deed of •trust conveying certain land in New Jersey to the complainant •as trustee, inter alia, to hold for the lives of the grantors or for that of the survivor, and at the death of the survivor
    “ of the said Gifford J. Maxwell and Margaret K., his wife, to hold the said trust estate in trust for the same person or persons and for such estate and ■estates as, and in the same way and manner as, such survivor may by any instrument, in the nature of a last will and testament, direct, limit and appoint. And in •default of such appointment ” &c.
    Margaret K. Maxwell survived her husband many years and •died in the city of Philadelphia, having executed a will five days before her death, in which, after a few specific bequests and a recital of the power contained in the deed of trust, she wrote as the third item :
    “Now, therefore, as such survivor, and in exercise and pursuance of said ■above recited power and authority, I hereby direct, limit and appoint and I ■devise the said trust estate and lands in said deed mentioned, and I also give, ■devise and bequeath all the rest and residue of my estate, real and personal, to the Guarantee Trust & Safe Deposit Company, their successors and assigns in trust to hold the same, invest and reinvest the same in good securities, such as they may in their judgment deem safe and proper, whether designated or not as legal investments, to let and demise the real estate, receive the rents ■and income thereof, and after paying thereout all taxes and necessary expense, to pay over out of said net income the sum of Two Hundred and Sixty Dollars to my father John H. Jenkins of Beloit, Wisconsin, for the term of his life, and subject to such charge I give, devise and bequeath my said residuary estate, and I direct my said trustee to pay out of the same the following legacies, viz.: To the Presbyterian Hospital in Philadelphia the sum of Five Thousand Pollars, to endow a free bed, in perpetuity, said free bed to be known as the ‘Mary Groesbeck Maxwell Bed.’ The portrait.of my said daughter Mary hereinabove given to said Hospital shall be placed above said bed of the ward.”
    Here follow various pecuniary legacies to various people.
    Then the testatrix adds:

      “ I direct that the legacies above given in this third item of my will (that is, the legacy to the Hospital and the above pecuniary legacies) shall be paid: clear of tax. But should my residuary estate be insufficient so to pay the same in full then and in such case the legacy of Five Thousand Dollars to the Presbyterian Hospital in Philadelphia shall he paid in full clear of tax, next the legacies given in said item to Dr. William Parrish, etc., etc., shall be paid' in full clear of tax, the other legacies to abate pro rata. And after payment out of my residuary estate of said legacies and collateral tax thereon as above-directed should any of said residue still remain undisposed of, I give, devise- and bequeath the same to” certain persons.
    Then the testatrix further adds:
    “I authorize and empower my executors and trustees for the purpose of paying debts and legacies and also for the general purposes of this will, when-in their judgment it shall seem best for the best interest of my estate to sell at public or private sale all or any part of my real estate which I may own, or over which I may have any power of disposition, receive the purchase money, and upon receipt thereof execute good and sufficient deed or deeds to the pur- ' chaser therefor in fee simple, clear of all trusts and charges and without liability on the part of the purchaser to see to the application of the purchase money; the money to be.applied to the purposes of this will.”
    The testatrix names as her executor and trustee the grantee named in the deed of trust, the complainant herein.
    All the persons interested were made parties. Certain of the • beneficiaries under the will of Mrs. Maxwell attack the bequest to the Presbyterian Hospital, on the ground that it is void by reason of the eleventh section of an act of the legislature of the-State of Pennsylvania, in these words:
    “That no estate, real or personal, shall hereafter be bequeathed, devised or conveyed to any body politic, or to any person in trust for religious or charitable uses, except the same be done by deed or will, attested by two credible, and at the same time disinterested, witnesses, at least one calendar month, before the decease of the testator or alienor; and all dispositions of property contrary hereto, shall be void and go to the residuary legatee or devisee, next of kin, or heirs, according to law; provided, that any disposition of property within said period, bona fide made for a valuable consideration, shall not be-hereby avoided.”
    Though Mrs. Maxwell, who executed the testamentary disposition here brought in question, was a domiciled resident of Pennsylvania, and most of the beneficiaries under her will, as-well as the executor of it, are also residents of that state, the validity of the disposition in question must, for present purposes, be determined by the laws of this state where the lands affected by it are situate.
    Upon the admitted facts there was not sufficient property, whether real or personal, belonging to the testatrix in Pennsylvania to pay her debts, so that there was nothing for the will to •operate upon except the lands in New Jersey. That the laws of Pennsylvania restricting testamentary power can have no application or force in New Jersey seems to be too clear for debate. Story Confl. L. §§ 424, 427, 428, 445, 446; Whart. Confl. L. §§ 273, 293, 296, 560; Westl. Pr. Int. Law §§ 156, 165.

    In order to avoid the effect of this well-established rule, the 'learned counsel for the other legatees resorted to the doctrine of notional conversion, and contended, in an ingenious and able argument, that the effect of the disposition in question was to direct a sale of the lands in question, the effect of which, in turn, was to work an instantaneous conversion of the land into money, ■making it a movable instead of an immovable interest, and so at ■once to bring it within the jurisdiction of the lex domicilii.

    The weakness of this argument lies in the assumption upon which it necessarily rests, that the conversion took place in the lifetime of Mrs. Maxwell. Her will took effect from her death, ■and there could be no conversion until it did take effect. The mere fact that she in her lifetime formed the intention to cause •this land to be turned into money, and expressed that intention in writing in such a manner that it would be carried into effect after her death, did not work the conversion. That could only take effect at or after her death, which was a prerequisite. At the moment when she made the testamentary disposition in question, and every moment thereafter up to and including the moment of her death, this land remained land, both in fact and in equitable fancy, and, as such, subject to the laws of New Jersey. Mrs. Maxwell necessarily dealt with it as land, and, in ■converting it into money by her will, she was not only entitled to act in accordance with the laws of this state, but she was obliged to do so. She could not make the conversion without, exercising dominion over the land, and that dominion she must and could exercise according to the laws of New Jersey.
    Reliance was placed, in this connection, on the case of Hand v. Marcy, 1 Stew. Eq. 59, decided in 1877. In that case there was a direction to convert land into money, and there was a. bequest of the residue, which was composed in part of the proceeds of the sale of the land to three persons in equal shares, one of whom died in testator’s lifetime, causing a lapse as to one-third of the residue. The question was whether this lapsed share-■went to the next of kin or the heir-at-law. Chancellor Runyon held that it was converted into money and went to the next of kin. I do not find it necessary to determine whether or not that, decision can be sustained in view of the doctrine established in. Ackroyd v. Smithson, 1 Bro. Ch. C. 503; White & T. Lead. Cas.. 872, and the long line of cases which have followed it both in England and in this country, which are collected in the notes to the principal case in the leading cases in equity. Ackroyd v. Smithson was followed by Vice-Chancellor Van Fleet in Roy v. Monroe, 2 Dick. Ch. Rep. 356, decided in 1890, and musk still be considered as authority in New Jersey.
    But admitting that Hand v. Marey was well decided, it still falls short of holding, what is necessary in order to make it at all affect the present case, that land can be considered as converted into money before it is so converted.
    Reference was also made to that class of cases in which the-courts have held that an alien who is debarred from becoming seized of land, as such, by devise or conveyance, may, nevertheless, take under a will money which is the proceeds of the land sold for the purpose by order of the will. Craig v. Leslie, 3 Wheat. 564; Du Hourmelin v. Sheldon, 1 Beav. 79; 4 Myl. & C. 525; Anstice v. Brown, 6 Paige 448. But those cases were decided in view of the policy of the several acts disenabling aliens to hold lands, which acts are not infringed by their-receiving money.
    Undoubtedly they recognize the simple truth that where lands-have actually been sold and turned into money, which after-wards is paid to a person, he actually receives money and not land.
    But in truth the doctrine of notional conversion has no application to this case. Its proper office is to determine the devolution of a fund after it has once vested in interest in the beneficiary, but has not reached his actual possession. In such cases the question is whether the next of kin or heir of the deceased beneficiary shall take it, and that depends on whether it be considered as money or land. The general rule undoubtedly is that if, by the direction of the testator, the land is to be converted into money and paid to the beneficiary in money, it will be considered as having been so done, although not actually sold. On the other hand, if the purpose for which the land was to be sold has failed, it will still be considered as land, although actually turned into money. Ackroyd v. Smithson, supra; Roy v. Monroe, supra.

    I find no difficulty in the other points raised by the counsel for the heirs-at-law. The deed of settlement, in the event which occurred, placed the disposition of this land in the power of Mrs. Maxwell, the legal title being in the complainant herein. Mrs. Maxwell, by her will, directed the legal title to be vested in the complainant as her executor, and if the case is to be considered as if the complainant was not the grantee of the deed of settlement, the result is, nevertheless, that it now holds it for-the trusts declared in Mrs. Maxwell’s will, and those are, for present purposes, first, to pay her debts; second, to procure am annuity of $260 for her father during his lifetime; (I say am “ annuity,” for although the word “ annual ” or any equivalent is not used in the will, yet it is clearly understood;) and, next,, to pay $5,000 to the Presbyterian Hospital; and for other-legacies.
    ISTo question was raised as to the jurisdiction of this court to1 direct the complainant herein, although a non-resident, nor do I think the jurisdiction questionable. The title being vested im the complainant subject to certain trusts, it was perfectly proper for it to come here to be directed in the execution of those trusts.
    I will advise a decree accordingly.

      Mr. Edward PT. Dudley, Mr. William■ H. Burnett and Mr. John Sparhawh, Jr. (of the Philadelphia bar), for the appellants.

      Mr. Martin P. Grey and Mr. Arthur Biddle (of the Philadelphia bar), for the respondents.
   The opinion of the court was delivered by

Gummere, J.

This case presents for consideration the question of the validity of a legacy given to the Presbyterian Hospital, one of the ■respondents, by the will of Margaret K. Maxwell, a' resident ■of the State of Pennsylvania, and who, at the time of her death, 'was domiciled in that state. The facts upon which the decision ■of this question turns are these:

In 1878, Mrs. Maxwell joined with her husband in executing a deed conveying to the Guarantee Trust and Safe Deposit Company (respondents herein) certain lands belonging to him and lying in New Jersey, in trust, to hold said lands for the benefit of the grantors, or the survivor of them, during their lives, and, at the death of the survivor, to hold the same for the benefit of such person as said survivor might by will appoint. And in «default of such appointment &c.

Mr. Maxwell died in 1886, and, by his will, left all his estate, real and personal, to his wife. Mrs. Maxwellsurvived her husband several years, and died on August 8th, 1891, leaving a last will and testament, executed five days before her death, in which, among other things, after reciting the above power of appointment, she made the following provision:

“ Now, therefore, as such survivor, and in exercise and pursuance of said recited power and authority, I hereby direct, limit and appoint, and I devise the said trust estate and lands in said deed mentioned, and I also give, devise ■•and bequeath all the rest and residue of my estate, real and personal, to the Guarantee Trust and Safe Deposit Company [her executor] in trust, to hold the same &c., and I give, devise and bequeath my said residuary estate, and I direct my said trustee to pay out of the same the following legacies, namely: 'To the Presbyterian Hospital in Philadelphia the sum of five thousand dollars ; to [certain other legatees] one thousand dollars each, &e.; after payment •out of my said residuary estate of said legacies, should any of the residue remain undisposed of, I give, devise and bequeath the same and I direct my -said trustee to pay over and convey the same to and among my brothers and ■sisters, share and share alike, their heirs and assigns. * * *
“ I authorize and empower my executors and trustees for the purpose of paying debts and legacies and also for the general purposes of this will * * * •to sell at public or private sale all and any part of my real estate which I ■ may own, or over which I may have any power of disposition” &e.

It is admitted that the estate left by Mrs. Maxwell, exclusive •of the land in New Jersey which was embraced in the trust deed, was insufficient to pay her debts, and it cannot be controverted that her will operates to dispose of those lands either as an appointment under the power created by the trust deed, or else as a devise of the property which came to her by virtue of her husband’s will.

In this condition of affairs, the Guarantee Trust and Safe Deposit Company filed its bill in the court of chancery,, as executor -and trustee under Mrs. Maxwell’s will, asking the direction of >that court as to the payment of the legacy of $5,000, given to ■the Presbyterian Hospital, out of the proceeds of the sale of the property embraced in the trust deed.

It was insisted, in the court below, on the part of the other :beneficiaries under the will of Mrs. Maxwell, that the legacy to ■the hospital, having been given by a will which was made only five days before the death of the testatrix, was void by virtue of -the provision of the eleventh section of the act of the legislature •of the State of Pennsylvania, relating to estates held for corporate, religious and charitable uses, which reads as follows:

“No estate, real or personal, shall hereafter be bequeathed or deyised to any body politic, or to any person in trust for religious or charitable uses, except ■the same be done by will, attested by two credible, and at the time disinter■ested, witnesses, at least one calendar month before the decease of the testator; and all dispositions of property contrary hereto, shall be void and go to the •residuary legatee or devisee, next of kin, or heirs, according to law.”

The learned vice-chancellor who heard the case considered that this insistment was without force, and that the hospital was entitled to be paid its legacy out of the proceeds of the sale of the New Jersey land, notwithstanding the prohibition of the-Pennsylvania statute just cited; and he puts his decision upon the ground that there was no conversion of the land directed by the will, and that the laws of Pennsylvania, restricting testamentary power, can have no application or force in New Jersey so far as real estate located here is concerned.

It seems to me that this decision rests upon an erroneous-basis, and that the question whether or not there was an equitable conversion of this land by the will of the testatrix is one which is of no materiality in the determination of this cause. There has been no devise of this land to the hospital; the testatrix has merely bequeathed to it a pecuniary legacy of $5,000, aud lias directed its payment out of her residuary estate. It is true that she has authorized the Guarantee Trust and Safe-Deposit Company, as her executor and trustee, to sell this land for the purpose of paying debts and legacies generally in case it. should be advisable to do so, but this does not in any way alter the character of the gift to the hospital, which still remains a-money legacy, and not a devise of land situate in New Jersey.. The law of the situs of this land merely regulates its sale, when that shall take place as provided in the will, and the passage-thereof to the purchaser. That is all. It has nothing to do-with the distribution of the proceeds of such sale among the creditors and legatees of the decedent. That distribution is-regulated by the law of the testatrix’s domicil, which, at the time of the making of her will and of her death, was Pennsylvania. Bruce v. Bruce, 6 Brown P. C. 550; Doglioni v. Crisbin, L. R. H. L. Cas. 301; Ennis v. Smith, 14 How. (U. S.) 400; Shultz v. Pulver, 3 Paige 182; Banta v. Moore, 2 McCart. 97; Harral v. Harral, 12 Stew. Eq. 279.

The gift to the Presbyterian Hospital, contained in Mrs. Maxwell’s will, being a pecuniary legacy given by a person who was a-resident of and domiciled in the State of Pennsylvania, to a corporation of that state, is invalid by force of the eleventh section of the statute of that state relating to estates held for corporate, religious and charitable uses, hereinbefore referred to, having-been made by a will which was executed less than thirty days before the death of the testatrix.

The legacy being void, it must consequently fall into the residuary estate of the testatrix and be distributed therewith.

The decree below should be reversed and the record remitted, in order that a decree may be made in accordance with these views.

For reversal — The Chief-Justice, Dixon, Gummere, Lippincott, Van Syckel, Bogert, Brown, Krueger — 8.

For affirmance — Magie, Reed, Sim:s — 3.


author: Reed, J.

text:
    John A. Montgomery, receiver &c., appellant, v. Henry D. Phillips et al., respondents.
    1. A board of directors of an insolvent corporation cannot, by mortgage upon the corporate property, secure one of the directors the payment of an antecedent debt due by the company to such director, or a previous liability incurred by such director for the corporation.
    2. A mortgage.was made by a solvent company to one of its directors, under an arrangement that such mortgage should be kept from record for the purpose of strengthening the credit of the company, while the directors should test the success of the corporate business at the risk of future creditors, and' the mortgage was not recorded until the corporation became insolvent. — Held, that such mortgage was fraudulent.
    On appeal from a decree advised by Vice-Chancellor Bird, whose opinion is as follows:
    I will first consider whether Thomas B. Sewell became a stockholder and thereby eligible to be elected a director, and so-clothed with authority to participate in the management of the affairs of the corporation. The utmost that can be made of Phillips’ testimony is that lie advanced the money ($700) for the purchase of twenty-three shares owned by Martinette, and that he advanced this money to Sewell; that Sewell immediately bought the stock in his own name and thereby became a director. Giving this the utmost force from Phillips’ standpoint, it was not so understood by Thomas B. Sewell — that is, that the mere act of purchasing made the stock his. Certain it is that Sewell’s testimony is in very strong contradiction of Phillips’ understanding of the case. He says he acted as a director of the company from January, 1892, until in May, when it failed. It is alleged that, on the 15th of January, 1892, the company was reorganized, and Sewell says that he did not look into the affairs of the company. He neither knew anything about its assets or its liabilities, nor had he any idea of the value of its stock. I think it is clear from the testimony that Sewell did ’nothing in the interest of this company, except to attend a few meetings cf the directors which were held between the 15th of January and the 10th of May. On the 15th of January he says he did not hold any position in the company except that of stockholder. He afterwards says that he owned twenty-three shares of stock. Mr. Martinette was the prior owner of this stock. If Sewell became the owner of any stock, it was this stock so owned by Martinette.
    Upon being asked whence he got the money with which to purchase the stock, he said:

      “A. Mr. Phillips lent it to me.

      “Q. When you went to Mr. Martinette, for whom were you purchasing the «took ?

      “A. For my brother, Michael Sewell.

      “Q. Did you tell Mr. Martinette for whom you wanted the stock?

      “A. Yes, sir.

      “Q. Had you had a prior conversation with your brother about it?

      “A. Yes, sir; he says I did not own any property; he has nothing outside of his earnings.

      UQ. After you left my office, on the 12th of January, with the twenty-three •shares of stock issued to Mr. Martinette, and had delivered this paper, the ■receipt, to me, who was the owner of the twenty-three shares of stock ?

      “A. I was.

      “Q. You went there to buy it for your brother, did not you?

      “A. I had possession of it.

      “Q. Mr. Phillips sent you to huy it for your brother, didn’t he?

      “A. Yes, sir.

      “Q. Were you the owner simply because you had possession of it?

      “A. My brother refused to take it.

      “Q. Why did you sign the name of ‘Henry D. Phillips, per yourself?’

      “A. That is a common way of my signing papers.

      “Q. Did you receive that from me for Henry D. Phillips ?

      “A. Ho, sir.
    “<2. Did you sign it ‘Henry D. Phillips, per you?’

      “A. I was the owner of it, because my brother refused to take it, and I was the owner of it from that time.

      “Q. You did not know till the next day that your brother refused to take the stock, did you ?

      “A. Ho, sir.

      “Q. In the meantime he was the oiyner of the stock?

      “A. My brother was.

      “Q. You said a moment ago you were the owner ?

      “A. My brother was the owner, but I had the possession.

      “Q. Whose money was it, as you understood it, the $700; was this your money or Mr. Phillips’ at that time ?

      “A. It was Mr. Phillips’ money.

      “Q. And you understood the stock was your brother’s, and you simply had possession of it ?

      “A. Yes, sir.

      “Q. Why did you state that Mr. Phillips loaned you the $700? **

      “A. He loaned it to me as agent for my brother.

      “Q. Did you expect to pay it back to him ?

      “A. Certainly I did.

      “Q. On the 11th of January, when you received that money from Mr. Phillips, did you expect to pay it back ?

      “A. Yes, sir, I did.

      “Q. And Mr. Phillips was buying the stock for your brother?

      “A. Yes, sir; I bought the stock for my brother; my brother said that he would not take the stock and I took the stock, and after that considered1 myself indebted to Mr. Phillips, and do now.

      “Q. On the 11th of January did you understand this stock to be your brother’s or Mr. Phillips’ ?

      “A. My brother’s.”
    Thomas B. Sewell himself said that he had no property. He depended entirely upon his weekly wages. Phillips says that he earned $9 per week, and at one time for a short period only $7.

      “Q. What arrangement was made to pay you; you stated on your direct examination that Thomas was to take the stock and act as a director until he could sell; was that the understanding between you ?

      “A. The arrangement was he was to take that stock just as his brother did, and he was to pay me back after he sold it; I do not think he was to pay me back until he sold it, but I expected him to sell it.
    “ By the Court — What if he did not sell it ?

      “A. We did not go into that; if he did not sell the stock, I was to be the loser if I could not get the money.”
    Thomas Sewell says that, at and before the time of this-transaction, he knew nothing about the condition of the affairs of the company. He had no knowledge of its assets. He had not, nor did he at the time make any examination of the affairs of the company, or of its assets, or of the value of said assets.
    On the 5th day of March, 1892, a' resolution was passed authorizing the execution of a chattel mortgage by the company to Phillips, to secure the payment of a promissory note upon which was then due $650. This mortgage was never recorded and of no value as a security against creditors. After-wards, on the 17th day of March, 1892, a resolution was passed authorizing the company to execute a mortgage upon its real estate to Henry D. Phillips, to secure him against his endorsement upon a note for $4,300 given to the First National Bank, and also authorizing the execution of a mortgage upon all its chattels, “ to secure the payment of a loan of $650 made March 5th, 1892, and c any liability on above note.’ ” This refers to the $4,300 note. This resolution as is stated was passed on the 17th of March, with the exception of the last five words. Thosé words were added on the 9th day of May following. And it is agreed on all hands that those words were added after-wards, and there is nothing whatever in any of the minutes to show any authorization for such addition. It is claimed, however, that at an informal meeting of Shellenberger, Phillips and Sewell, it was agreed amongst them that these words should be added, and it is claimed that this is sufficient authority for their addition, and that being added in this informal way they became part of the resolution and as binding as though the words had been regularly incorporated therein. Mr. Phillips himself says that there were no other meetings after March 17th, except those which were recorded in the book of minutes.

      “Q. There is a meeting of April 23d, May 10th and May 18th — are you to :be understood that they were the only three meetings of thé board of directors held subsequent to the 17th of March; I mean as a board of directors ?

      “A. Yes, sir; there was only one other meeting; that was just prior to the •execution of the second chattel mortgage.

      “Q. Where was that meeting held ?

      “A. At my office; Mr. Sewell, Shellenberger and myself were present; it was an informal meeting, and the result was the addition of these five words; ‘there was no record kept of that meeting.

      “Q. Was there anything else done at that meeting ?

      “A. No, sir; not that I remember; probably the business of the company was gone over; I don’t remember anything else.
    “Q. How did Mr. Shellenberger come to your office that morning; was it for this purpose ?

      “A. The day he came there he came for the purpose of executing that mortgage and doing what was necessary in connection with it — the chattel mortgage of the 9th of May; he signed it that afternoon,.at the time the informal meeting was held.”
    Thus it appears that, on the 9th day of May, when they came to execute a chattel mortgage which had been previously authorized for the purpose of securing the $650 note, they added to the resolution the said five words, and “ any liability on above note,” referring to the $4,300 note, which had been secured by the real estate mortgage, by a resolution passed March 17th, ■ almost two months previously. They made this resolution by • an interchange of words between themselves. At best it was nothing more than this. There was not only no formal resolution passed and written upon the minutes, but there was not ■even the form of a resolution in writing.
    However informally it was done, the mortgage was executed. Phillips, to whom it was delivered and who was the creditor,, was the treasurer of the concern. Shellenberger, who executed it as president, was such officer. Sewell, who witnessed it, was one of the directors. There were no other directors than these three. There may be some uncertainty as to whether they were •all three together when an agreement was had that such mortgage should be executed, but as intimated, whether that be so or not, they all at one time or another joined in its execution— Shellenberger, by executing it as president; Sewell, by witnessing it and making the proof thereof, and Phillips, the creditor,, by accepting it as security. In the presence of the others, Phillips says, “ I explained the defect of the former mortgage.”

      “Q. What do you mean by that?

      “A. It was explained to Mr.- Sewell and Mr. Shellenberger that this chattel-mortgage I held, in case the first mortgage was put in execution and there-was a surplus, and there was a deficiency in the real estate mortgage, I would be a loser to a considerable amount; and that it was the understanding and the desire of the Capital Cracker Company to protect me as fully as possible; and that there was no provision in that mortgage as to the surplus, because there was a mistake in it at the time it was drawn, and this mortgage was-drawn for the purpose of curing that defect.

      “Q. Did you tell them it was the purpose of the Capital Cracker Company to secure you at that time ?

      “A. Ho, sir; not in these exact words, but in that sense.

      “Q. Did you mean that you, as the Capital Cracker Company, intended to-secure yourself?

      “A. I did not; I am not the Capital Cracker Company, nor never was.

      “Q. The original chattel mortgage was given to secure $650 ?

      “A. Yes, sir; that is true.

      “Q. And that did not secure you from any loss on the $4,300 ?

      “A. Ho, sir.

      “Q. And the object of that chattel mortgage was to extend the security to the $4,300?

      “A. It was the object to carry that surplus to the $4,300 note; that is the- . only answer I can give, sir.

      “Q. Was anything said by you as to including these five words, ‘and any liability on above note,’ to the March 17th meeting and resolution?

      “A. Ho, sir; I think not.

      “Q. You took that upon yourself, after the mortgage was executed, to add-the words, ‘any liability on above note?’

      “A. Yes, sir; as secretary of the Capital Cracker Company, I did.
    “ By the Court — Is there anything on the books of the company with reference to any liability on above note, except the words there appended to that-resolution ?
    “ Witness — Ho, sir; there is nothing.”
    The foregoing statement of facts presents a very singular con- ■ dition of affairs. It is not surprising that when such a situation was made known to creditors, or to the receiver of the defendant corporation, the conviction should arise that all was conceivedi in fraud. There was an old corporation reorganized on the 15th of January, and as so reorganized was turned over to a receiver on the 20th of the May following. Yet certain facts are interspersed which lead the mind to the conviction that they could scarcely exist if the purpose of those who were engaged in the management of the defendant company was a concoction and perpetration of a scheme to injure honest creditors. The facts to which I refer are the complete prostration of the company before its reorganization, the purchase of a large number of shares of stock by Phillips, the advancement of $700 for the purchase of twenty-three shares, which he says he gave to Sewell in order that Sewell might become a director, the reorganization of the company, the loaning of $750 to the company for its own benefit, and afterwards endorsing the note of the company for $4,300 which was reduced to $4,000, and trusting the company for the payment of these sums for some time before the execution of either the real estate or the chattel mortgage. It does not seem reasonable to suppose that a business man would attempt the resuscitation of a defunct company, and would also invest several thousand dollars in its business for the mere purpose of experimenting with creditors, when, according to all experience, the probabilities were against his making it a financial success, on the belief that he could cover up the fraud by means of which he might expect to carry the work through.
    The observations just made should be kept in mind in considering the other facts developed, and which were relied upon by the complainant. In the first place, it is insisted that there really was no reorganization of the company. This is based upon the allegation that Thomas B. Sewell never became a stockholder, and consequently never could be a director. Taking the testimony of Sewell alone, it would be extremely difficult to get to the conclusion that he regarded himself as at all interested. It is true, he says now he had possession of the stock, and now he says he bought it for his brother. But however variable may have been the condition of his mind in relation to the facts of the case, the evidence is that he acted as a director. Phillips himself swears that, when Michael Sewell refused to take the stock, lie told Thomas B. Sewell that he should take it. The result of his testimony is that he advanced the $700, which was paid to Martinette for this stock, for the purpose of having some one become the owner of the stock, in order to comply with the law in reorganizing the company, to do which there must be three stockholders and three directors. When he learned that Michael would not take the stock, he then said to Thomas that his $700 was invested anyhow, and that he (Thomas) must take the stock and act as director. It is true that the statement of Phillips with a party with whom he was negotiating for a sale ■of some shares of stock, was the owner of forty-one shares, was inconsistent with Sewell’s being the owner of any, for without these twenty-three shares Phillips could not have been the owner of forty-one. There is nothing, however, to show that Sewell was present at this interview, or that he ever assented to any declaration of Phillips of the ownership of these twenty-three shares. But whatever was in the mind of these parties subsequent to the reorganization, there is no room for doubt but that at that time Phillips had put himself in a position towards Sewell by which Sewell could have enforced the claim to the ownership of these shares. It was upon this foundation that Sewell was made a director and participated in the reorganization and in the future managing of the affairs of the company. Without reaching this conclusion there was, indeed, no reorganization and no company, and consequently nobody with whom dealers could act except as individuals. If the facts in the case should lead us to decide that there was no reorganization and consequently no company, then it is clear that creditors would be no better off and the receiver would show himself out of court. The receiver has no standing unless it be shown that there is a corporation, such as is contemplated by the statute, whose assets are committed to him for distribution.
    It may be that Thomas B. Sewell was, as it is styled in the bill, “ a mere figure-head,” acting solely upon the suggestions of Mr. Phillips, echoing his sentiments or obeying his commands. There is not a little testimony in the case to justify .this insistment. It is true that the statute declares that every •director shall be a bona fide stockholder, and it is equally true that it would be far better for the business community were this ■direction enforced iu the highest and best sense, yet enough is known of the management of corporations in this state to justify the observation that a very large number of corporations organized under our statute are controlled and really owned by one or two individuals only, notwithstanding there may be a third or fourth director, but only so in name.
    Therefore, I come to the conclusion that there was a lawful ■organization, and that the same stockholders who were made •directors and reorganized the company continued its management ■until the filing of the bill asking that the company be declared insolvent and that a receiver should be appointed. The receiver in this case owes his appointment to the proceedings under that bill. Every step which has been taken has been upon the premise that there was a corporate existence. Had creditors come into court and set up all these facts, and declared that the scheme was adopted for the sole purpose of deception and of defrauding creditors, praying for the aid of the court in the premises, the ■argument of counsel against the allegation that there is a corporation would have had some force. But I am unable to comprehend how the complainant can come into court as the receiver •of a corporation and attempt to establish the fact that no corporation in reality existed. In the next place, it is urged that the two mortgages — one upon the real estate to secure the loan of $4,000, and one upon the personal estate to secure the sanie loan and also the loan of $650 — are fraudulent. The view taken by counsel is that they are fraudulent as to creditors for the reason ■ above given, with respect to the reorganization of the company, and that the chattel mortgage is void if not fraudulent, because there was no proper incorporated authority for its execution.
    With respect to the allegation of fraud, I find no proof in support. As intimated, the $650 was advanced for the benefit of the company, aud the $4,000 note was endorsed and the money used for a like purpose. There is not a shadow of testimony to the effect that either the one or the other was made •with the view of wronging anyone. The result shows that it was done with as fair a chance of misfortune to the lender and' endorser as the contrary. If the loan and the endorsement were honest transactions, then Phillips had a right to demand protection against loss, and the company had a right to pledge all its assets, not otherwise under pledge, to him as security. The company undertook to do this. The attack upon the real estate mortgage I regard as having been abandoned. The mortgage upon the chattels has the advantage of being properly executed. To this extent the defence of Phillips to the assault is complete. However, the presumption arising from this situation has been assailed. It is urged that this mortgage was executed without any authority. There is no doubt but that the president executed it, the secretary witnessed it and made the proper proof of its execution, and Phillips, the mortgagee, accepted it for the purposes therein expressed, but it is insisted that these were individual acts and not the acts of the corporation. This fact is not enough for the objectors to show to overcome the efficacy of an-instrument under the seal of the corporation. It must be clearly established that there was no act of the body corporate authorizing it. There can be no doubt but that there must be the corporate act, which is presumed from the appearance of the seal of the corporation. The weight of the testimony in this case, notwithstanding the vagaries above referred to, instead of disproving such corporate act, establishes the contrary. There was-no written resolution, but that is not essential to a corporate act. So far as the testimony was presented for the purpose of discrediting the seal proves anything, it proves that there was a-meeting of the directors at which they determined that Phillips should have the benefit of this mortgage. I do not say that the meeting was called for that purpose, or that it was called for any purpose. I only say that there was a meeting at which all three were present, during which it was agreed that Phillips should not only have the benefit of the chattel mortgage to-secure the $650, but also as further security for his endorsement upon the $4,000 note.
    Very much was said upon the argument concerning the addition to the resolution, above quoted, of the five words, and “ any1 liability on above note.” This resolution was adopted and entered upon the minutes upon the 17th day of March, except said five words. The words so added were not added until about the date of the execution of the chattel mortgage, which was May 9th following. The testimony of Phillips makes it clear that he had no authority to add those words to the resolution dated March 17th. It is clear, therefore, that these words have no force whatever as they are there written. It is equally clear that this fact does not impair the presumption which arises from the presence of the seal upon the mortgage which is assailed. It is equally clear that the absence of any resolution to execute such mortgage, upon the minutes of the corporation, does not overcome the presumption. But as intimated in the effort upon the part of the complainant to overcome this presumption, the weight of the testimony is rather in support of the presumption than against it. Therefore, the effort to make it appear that this mortgage, as security for the $4,000 note, is void, has likewise failed.
    There is nothing in the case which leads me to question the propriety of the assignment of the book accounts to the First National Bank. The company was debtor to the bank, and the company had the same right to secure the bank that it had to •secure any other creditor.
    Nor do I find any testimony to satisfy me that the sale of the goods and chattels of the company, under the chattel mortgage, should be declared illegal. The complainant asks for an accounting. As I understand the testimony, the sale of the goods and chattels covered by the mortgage did not produce enough to satisfy the amount due thereon, but whether the real estate has been sold or not under the mortgage referred to, I believe does not appear. If both the real and personal estate have brought •more than enough to satisfy the claim of Phillips, the receiver will be entitled to an accounting, and he will be entitled to an ■accounting in any event if he deems it to the interest of creditors to demand it, taking upon himself, of course, the risk of the costs attending such accounting.

      Mr. John H. Baches, for the appellant.

      Mr. William M. Banning and Mr. Woodbury B>. Holt, for the-respondents.
   The opinion of the court was delivered by

Reed, J.

On August 14th, 1890, the Capital Cracker Company was-organized with an authorized capital stock of $20,000, divided-into two hundred shares of $100 each. Of this amount of capital stock, $7,500 were subscribed and paid for. The company bought a tract of land, and built a cracker factory upon it.. About January 1st, 1892, the company was reorganized. The-outstanding stock largely changed hands, and its officers wrere changed. All the outstanding seventy-five shares of stock, excepting thirty-four shares held by Herman H. Shellenberger, one-of the original stockholders, was bought up with the money of one Henry D. Phillips.

Phillips claims that of the forty-one shares bought with his-money, twenty-three shares were bought for one Sewell. These-three persons — Shellenberger, Phillips and Sewell — held a stockholders’ meeting on January 15th, 1892, and elected themselves-directors, and elected Shellenberger, president and manager, and Phillips, secretary and treasurer.

The company at this time was indebted to different persons in-an aggregate sum of $4,300. To pay these liabilities, the company, on January 20th, made a promissory note payable to the-order of Phillips and Shellenberger, for the sum of $4,325,.-which note endorsed by the payees was discounted by the First. National Bank.

On March 7th, 1892, Phillips loaned the company the sum of $650. On March 17th, by resolution of the board of directors,' the president was authorized, for the purpose of indemnifying-Phillips against his endorsement of the note, to make a mortgage of the real estate of the company to Phillips; and. for the purpose of securing Phillips for the loan of $650,' the president was authorized to execute a mortgage upon the personal property of the company to Phillips.

On March 18th, 1892, the real estate mortgage was executed. The chattel mortgage was also executed on the same day, but was never recorded, and so does not figure further in the case.

On May 9th following, the company was insolvent. On that day the company assigned its book accounts to the First National Bank, to secure the $4,325 note endorsed by Phillips and Shelienberger. On the same day, the president made a second chattel mortgage to Phillips, to secure the $650 loan. On May 10th, Phillips recorded the real estate mortgage executed on March 18th. On May 23d, Phillips, under his last chattel mortgage, sold the personal property of the company.

On June 7th, the complainant, on the bill filed by certain creditors of the corporation, was appointed receiver of the company as an insolvent corporation.

The bill prays that the real estate mortgage and the second chattel mortgage made to Phillips, may be set aside, and that Phillips may be compelled to account for the receipts of the sale-of the personal property made under the latter mortgage. It charges that the assignment of the book accounts to the First National Bank was fraudulent, and in fact, that the books never went from Phillips’ possession, but that he has collected the-accounts; that the bank has disclaimed any claim to the said' books. The prayer of the bill is that Phillips may account for-the sums he has so collected.

The bill also charges that Phillips employed one Robert-Green and paid him $20 per week, with the understanding that this should be charged up to the company, while Green -was to-repay $10 each week to Phillips. There is also a prayer that he account for these $10 weekly receipts.

I will consider the subjects involved in the litigation in an order inversely to that in which they -were just stated.

In respect to the claim that Phillips personally received and held a portion of the wages of Green, charged up to the company, I think the complainant has made no case. Phillips says that Green was not able to do his work, and that he, Phillips, was compelled to get other employes to do a portion of it, and the money was retained on this account, and has, as I understand it, been used for corporation purposes; at least, the misapplication of corporate money is not proved with any degree of certainty.

In respect to the assignment of the book accounts to the bank, I also think it has not been successfully attacked. The line of assault contained in the bill is not sustained by proof. "While the books did technically remain in the hands of Phillips, the undisputed testimony is that the assignment was made to the bank and the books were submitted to the bank officers; that the bills were collected, with the approval of the bank, in the name of the solicitor of the bank; the moneys received from them were paid to Phillips, who deposited the money in the bank, to be applied to the payment of the note.

While the payment of the money to Phillips has an air of oddity, yet no one is called to contradict the statement that the assignment was presented to the bank, and that the money was .subsequently collected for and was paid to the bank, to be applied to the payment of this note. The attack upon the assignment, made upon the argument, was put upon another ground, namely, that Sewell was not a legal director, and so there was no board existing qualified to make the assignment. But whether Sewell was or was not a de jure director, he was admittedly a de facto director. In respect to the bank, which was a third party, with no notice of the defect, if any existed, in his eligibility, the assignment was entirely efficacious. ■

The next attack is upon the chattel mortgage, by color of which Phillips sold the personal property. This mortgage was, as I have already remarked, executed on May 9th, 1892. At that time the corporation was insolvent. The mortgage was made to secure the antecedent liability of Phillips, as endorser for the benefit of the company. The mooted validity of this mortgage involves the question whether the board of directors of an insolvent corporation can secure one of their own members for an antecedent debt by a mortgage of the property of the company. The question is new in this court.

It was held in the. ease of Wilkinson v. Bauerle, 14 Stew Eq. 635, that an insolvent corporation could sell its property to a director if the sale was bona fide and brought the full value of the property. It was held that the officers of such corporation could not divert the corporate property from the payment of its debts, and it was because such a sale was only a transmutation, and not a diversion of the property, that the sale was sustained.

It was also held in Vail v. Jameson, 14 Stew. Eq. 648, that a mortgage made by an insolvent corporation for the purpose of preferring a creditor was not invalid. The great weight of authority is, however, opposed to the existence of any power in a board of directors of an insolvent company to prefer one of its own members. The weight of authority is in support of the wholesome rule that the directors of an insolvent corporation are trustees of its funds for its creditors. Curran v. State of Arkansas, 15 How. 307; Haywood, et al. v. The Lincoln Lumber Co., 64 Wis. 639; Wilkinson v. Bauerle, 14 Stew. Eq. 635.

The doctrine in respect to the power of trustees to use trust property for their own benefit to the disadvantage of their cestuis que trust thus becomes applicable to the dealing of directors with the funds in their hands, after the insolvency of the corporation.' If any of such directors are creditors, they stand upon the same footing as any other creditors; but by no act of such director can he obtain a position superior to that of the other creditors for whose benefit he holds the trust assets.

Mr. Morawetz remarks:

“ It is the duty of the directors, or other agents of insolvent corporations, to preserve its assets for the benefit of the creditors. The legal ownership of the assets is not altered by its insolvency, and the regular agents of the corporation retain the same powers of management with which they were originally invested. But upon the insolvency of a corporation, an equitable lien of the creditors attaches upon all the company’s assets; and the directors who only formerly stood in a fiduciary relation to the corporate members, become placed in a fiduciary relation to its creditors. * * * If themselves ■creditors, they cannot receive any advantage or preference in the payment of .their claims at the expense of other creditors.” Morawetz Corp. § 579.

Iu Haywood et al. v. The Lincoln Lumber Co. et al., supra, a mortgage had been made by an insolvent company to some of the directors, to secure an antecedent debt. The mortgagee filed a bill to foreclose the mortgage, which suit was defended by the receiver of the corporation. The court, in holding that the mortgage was void, employed this language: The directors and officers made the mortgage, or directly caused it to be made, to-themselves. They occupied a fiduciary relation to the company,, its stockholders and its creditors, and they had no right to use such relation and their official position for their own benefit, and to the injury of others in equal right. In Beach v. Miller, 130 Ill. 162, the question arose whether an insolvent company could secure an antecedent debt due a director by a sale to him of ils property to pay such debt. The court remarked that so long as-a -corpojation .remained solvent, its directors were agents or trustees for the stockholders; but the moment it became insolvent,, its directors occupied a different relation. The assets must then be regarded as a trust fund for the payment, of all its creditors, and the directors occupy the position of trustees, and the fiduciary relation then existing, they may, with propriety, be prohibited from purchasing the trust property.”

The court was speaking in view of the fact that the purchase-was to be paid for by the application of the precedent credit held' by the director.

In Richards v. New Hampshire Insurance Co., 43 N. H. 263, on a bill filed by the creditors of an insolvent company, it was held that the directors were trustees of the funds for the creditors,, and were bound to apply them pro rata, and could not use them, to exonerate themselves to the injury of other creditors.

All the cases bearing upon this question are collected by Mr. Justice Woods in his opinion in the case of Lippincott et al. v. Shaw Carriage Co. et al., 25 Fed. Rep. 577, 586.

He very carefully states the rule to be derived from these cases in these words: “ It has been often said by judges, including those of the federal supreme court, that the property of an insolvent company is a trust fund, and that the directors are trustees for the creditors; and if this were strictly "so, it is manifest that no preference whatever should be allowed between creditors standing in the same relation to the fund. These statements are,. however, true in a qualified sense, and lead legally, if not necessarily, to the conclusion that in such cases, the directors, if they give preferences, must do it unbiased by considerations of personal advantage or gain.”

I regard this as a salutary rule, grounded upon .general equitable principles. This view invalidates the chattel mortgage-executed on May 9th, to Phillips, as mortgagee.

Lastly, in respect to the real estate mortgage made to Phillips to secure him for his endorsement. It appears that this mortgage was authorized by the board of directors on March 17th, and was executed on March 18th, and was recorded May 10th. If it was delivered at the time it was executed, it would not be invalidated by the rule just applied to the chattel mortgage of May 9 th.

The bill states that the company was insolvent on May 9th, therefore, upon the pleadings, the real estate mortgage was executed while the company was still solvent.' What became of this mortgage after it was executed does not appear. There is no allusion in the pleadings nor in the evidence to the custody of this instrument, from the date of its execution to the time of its registration.

How I think that some evidence should have been produced to show that the mortgage was actually delivered, and so became an executed contract between the company and Phillips before the day it was recorded.

But aside from this view of the legality of that instrument, I think there is another aspect in which it is defective, when, as now, attacked by the representative of the creditors.

The mortgage, as I have already remarked,'was kept from record until after the company became insolvent.

The bill charges, and the charge is not denied, that all the debts were contracted between the date of the execution and the date of recording the mortgage.

How, it is admitted that the mere failure to record a mortgage is not in itself a conclusive reason for setting it aside for the benefit of 'subsequent creditors having no specific liens, but that any'concealment of an instrument of this kind is a badge of fraud, which may, by reason of the circumstances surrounding the concealment, be sufficient ground for avoiding such an instrument in respect to subsequent creditors, is entirely settled.

In Hungerford v. Earle, 2 Vern. 261, it was held that a deed, not at first fradulent, may afterward become so by being concealed or not pursued, by which means creditors are drawn in to lend their money.

The failure to record a deed or mortgage when there is no apparent change of possession, has been held in a number of cases to be a strong circumstance against the validity of such instrument when it was attacked by the creditors, who become such intervening the time of its execution and the time of its record. Coates v. Gerlach, 44 Pa. St. 43; Gill v. Griffith, 2 Md. Ch. 270; Hilliard v. Cagle, 46 Miss. 309; Neslon v. Wells, 104 U. S. 428; Blennerhassett et al. v. Sherman, 105 U. S. 100.

Now, in respect to the circumstances surrounding the execution of the present mortgage, the evidence is very strong that ■at the time this instrument was executed Shellenberger and Phillips held all the outstanding stock of the corporation. The shares ostensibly held by Sewell were bought with Phillips’ money, and although Phillips claims that there was an understanding that Sewell was to repay him, the conduct of both Phillips and Sewell is very persuasive that Phillips was to practically control the stock, and that the transfer of it to Sewell was for the mere purpose of equipping him with the nominal character of stockholder, so that he could be elected to constitute the required third director.

Phillips was an active agent in resuscitating the moribund corporation. He and Shellenberger were, in fact, the corporation. They had made, as the corporation, and both individually endorsed, the promissory note, by the discount of which the debts of the company, including a debt to Phillips himself, were paid.

The real estate mortgage was made to secure Phillips against his liability upon this note, and incidentally to secure Shellenberger also. The original chattel mortgage was to secure Phillips for the additional advance of $650. The future financial success of the company was, in the light of its past failure, problematical. If it should succeed, there would be no use for the two mortgages ; if it should fail, then they were to he resorted 'to for indemnity. The experiment was to be made at the risk of future creditors. Eor the purpose of leaving the credit of the company unimpaired, the mortgages were kept from record. When insolvency came, it was too late to record the chattel mortgage, so-the real estate mortgage only was registered.

I have no doubt from the testimony that these were the motives which induced the delay. When it is kept in mind that Phillips was the active officer for the corporation who caused the. execution of the mortgage, as well as the mortgagee for whose benefit it was made, the whole arrangement was equivalent to. an agreement between the parties, mortgagor and mortgagee, to keep the mortgage from record for the purpose of sustaining the-credit of the company by concealing its existence.

Under these circumstances, I think the mortgage must be regarded as made to hinder and delay creditors, and so held to be fraudulent.

The decree of the court of chancery should be reversed, and a decree made in conformity with the views herein expressed.

For reversal — Depue, Dixon, Garrison, Lippincott, Reed, Van Syckel, Bogert, Brown, Sims — 9.

For affirmance — None.