text:
    Bessie S. Shepard v. Halsey M. Barrett, as receiver, &c., et al.
    [Submitted March 30th, 1915.
    Decided April 8th, 1915.]
    1. Although the. common law procedure o'f strict foreclosure is almost entirely superseded by the more equitable method of foreclosure sale, as regulated by the statute, nevertheless strict foreclosure may be had where a mortgagee is in possession under a legal title from the holder of the equity of redemption, for the purpose of cutting off intervening-liens or encumbrances, where the mortgage is given for the entire purchase-money. and the value of the land does not exceed the amount of fhe mortgage, or where a purchaser in good faith, at a mortgage foreclosure sale which is not conclusive against some encumbrancer not made a party (o the suit, lias gone into possession under such sale.

      '2. In an action for strict foreclosure of a mortgage by one. in possession of the property against a subsequent encumbrancer, where the answer merely denied complainant's allegations that she had no knowledge of such subsequent encumbrance when purchasing under her own foreclosure sale, such answdr offered no bar to complainant's relief, since only an intentional omission from tlie bill in a sale-foreclosure prevents the prior mortgagee from being’ a purchaser in good faith and not to be afforded the harsh remedy of strict foreclosure.

      Mr. Robert M. Boyd, Jr., for the complainant.

      Mr. Samuel F. Leber, for the defendants.
   Backes, V. C.

This bill is for a strict foreclosure. The complainant’s original bill went to a decree and sale, at which she became the purchaser, and now is in possession of the mortgaged property. The American Mortgage Company, holder of a second mortgage, was made a party defendant, but on the day the bill was filed the company was adjudged insolvent, and Mr. Halsey M. Barrett was appointed receiver. The American Mortgage Company was not served with process, and the receiver, to whom title to the company’s mortgage passed, was not made a party to the suit. The receiver has since sold his mortgage to the defendant Guarantors’ Securities Company. The complainant alleges that she did not become aware of the appointment of the receiver until after the sheriff’s sale, and she prays that the receiver and the Guarantors’ Securities Company be decreed to redeem her mortgage, or be foreclosed. The Guarantors’ Securities Company denies that the complainant had no notice of the change of ownership of the second mortgage at the time of the filling of the bill. Motion is now made to overrule the answer, and for a decree. The common law procedure of strict foreclosure has been almost entirely superseded by the more equitable method of foreclosing by sale, as regulated by the statute. It is still, however, an available remedy in this state, as where a mortgagee is in possession under a legal title from the holder of the equity of redemption, for the purpose of cutting off intervening liens or encumbrances. Eldridge v. Eldridge, 14 N. J. Eq. 195; Lockard v. Hendrickson, 25 Atl. Rep. 512; or, when the mortgage is given for the entire purchase-money and the value of the land docs not exceed the amount of the mortgage; Jones Mort. (6th ed.) § 1540; or, in case one has purchased in good faith at a mortgage foreclosure sale which is not conclusive against some encumbrancer not made a party to the suit, and the purchaser has gone into possession. Jones Mort., supra; Parker v. Child, 25 N. J. Eq. 41.

Where a subsequent mortgagee is intentionally omitted from a bill in a sale-foreclosure, and the prior mortgagee purchased with knowledge of the omission, he is not a purchaser in good faith and ought not to be afforded this harsh remedy to extricate him from a situation which he himself created. In Parker v. Child, supra, the chancellor observed that in that case “the first mortgagee, in foreclosing his mortgage omitted, not from design, but from the oversight of his solicitor, to make the holder of the second mortgage a party to the suit,” although the second mortgage had been registered; the clear intimation being that if the omission had been intentional, the relief would not have been granted.

The answer in the present case is simply a denial of the complainant’s- allegations that she had no knowledge of the receiver’s appointment when the bill was filed. Notice of the receiver’s claim and that the failure to make him a party, was intentional and by design, is not pleaded, and, therefore, the answer offers no bar to the relief the complainant seeks. It does not exclude accident or inadvertence.

I have been referred to the case of Moulton v. Cornish, 138 N. Y. 133; Denton v. Ontario County National Bank, 150 N. Y. 126. The general rule there laid down, that the right to a judicial sale of the mortgaged premises is one of the incidents of the mortgage contract, which cannot be denied or suppressed, except in the presence of some adverse dominating equity, as something in the nature of an estoppel, does not prevail in this state.

The amount due to the complainant was agreed upon by counsel in open court. That the land is worth no more than the amount of the complainant’s mortgage is not denied. The complainant oilers to make a grant of her legal title and to surrender possession upon the payment of the amount due upon her mortgage. I will advise a decree that the defendant redeem within thirty days, or be foreclosed. The complainant is entitled to her costs in this suit, but not in the former cause.


source: Caselaw Access Project

author: Backes, V. C.

license: Public Domain

text:
    Mary Elizabeth Swallow v. Charles S. Swallow.
    [Submitted March 16th, 1915.
    Decided March 31st, 1915.]
    1. A final decree of divorce will not be amended by inserting a clause for alimony, when such relief was neither prayed for in the petition nor in any manner presented to the court for judicial determination at the time of the entering of the decree.
    2. When permanent alimony is allowed in the final decree it may be permitted to start from the filing of the bill. When no provision is made for permanent alimony in the final decree, and thereafter application is made for the same under the statute (Comp. Stai. p. 2035), it will be ordered to run from the date of the application, and' not from the date of the final decree.

      Mr. James J. McGoogan, for the petitioner.

      Mr. William M. Jamieson, for the defendant.
   Backes, V. C.

The final decree of divorce in this case was entered April 13th, 1905. It contained no provision for permanent alimony. The petition prayed for a divorce and' for “such further and other relief as shall seem meet.” There was no specific prayer for alimony. Application is now made to open the final decree and to amend it by inserting a clause for alimony, and, if that be denied, for an order allowing permanent alimony, to date from the final decree.

Under the first alternative, the petitioner sets up that she was ignorant of the absence of any provision for permanent alimony in the final decree until recentty, and that she always understood she was entitled to alimony of $5 a week after the entry of the final decree of divorce; all of which is undoubtedly true. An order for alimony pendente lite, at $5 a week, had been made, and, doubtless, her conception of the legal effect of this order led her to so understand. Swallow v. Swallow, 92 Atl. Rep. 872. But I do not perceive upon what theory the petitioner’s ignorance of the terms of the final decree, or her erroneous impressions of her rights thereunder, can be entertained as causes for disturbing and reading into it a relief which was neither prayed for nor in any manner presented to the court for judicial determination. This case is materially different in principle from Lynde v. Lynde, 54 N. J. Eq. 473; 55 N. J. Eq. 591, relied upon by the petitioner’s counsel. There the petition prayed for alimony, but, through the inadvertence of counsel, the final decree failed to reserve for future consideration the question of alimony. The chancellor ordered the decree amended by adding that the petitioner “shall have the right to apply to this court at any time hereafter at the foot of this decree for reasonable alimony,” &e., upon the ground that the subject-matter of the amendment had been before the court for consideration, and would have been incorporated in the decree had attention been called to it, and that the amendment was necessary to give full expression to the court’s judgment.

The next question is, can a decree for alimony be made now to extend back to the date of the final decree of divorce? The common, and, perhaps, true, practice is to allow permanent alimony from the date of the final decree, when the adjudication thereof is a part of, or incidental to, the main litigation. In Holmes v. Holmes, 29 N. J. Eq. 9, the final decree of divorce ordered the matter to a master, to report the amount of permanent alimony. Upon the coming in of the master’s report, a supplemental decree for alimony was made, to run from the date of the final decree.

The rule has sometimes been departed from, arid the alimony has been permitted to start from the filing of the bill. Tn Wheeler v. Wheeler, not reported (docket 32, page 312), a bill for maintenance, Vice-Chancellor Emery, in a memorandum, stated that he would advise a decree that the permanent alimony commence from the date of the filing of the bill. In Hammer v. Hammer, not reported (docket 24, page 561), on a petition for divorce a mensa et thoro, Vice-Chancellor Pitney advised a consent decree for alimony from the date of the.filing of the petition, with permission to compound the alimony for the past and then future at $1,100, and ordered that upon its payment the defendant lie forever discharged. There was no decree of divorce entered. In Burr v. Burr, 7 Hill 207, on a bill for separation from bed and board on the grounds of cruelty, the chancellor made a decree allowing alimony from the time of the filing of the bill. On appeal, affirming the decree, Nelson, Ch. J., said: “This is a matter of discretion, depending upon the special circumstances of the ease. * * * Perhaps in pi'actice the ecclesiastical courts in England usually date the allowance from the time of the decree; but this is not binding upon us here. I confess, it seems to me, that in point of consistency and propriety the allowance should commence at the time of filing the bill. The case Was then made out. All the facts existed at that time upon which the alimony was allowed; and if the respondent is entitled to it at all, she was as much entitled to it then as at any subsequent period.” In Forrest v. Forrest, 6 Duer 102, 149, on a decree of divorce a vinculo, the court of appeals observed “that it was not erroneous to allow alimony from the time when the suit was commenced if, under all the circumstances, that seemed just to the court.” In Cooke v. Cooke, 2 Phillim. 40, Sir John Nicholl said: “In respect to the time from which the alimony is payable, namely, from the return of the citation, this, I apprehend, is contrary to the rule of the court and to the reason of the thing. * * * I can see no ground to depart from the ordinary rule of these courts, by carrying back the permanent alimony beyond the date of the sentence. It is dear, from several eases, that the true rule of the court is to decree permanent alimony from the date of the sentence.” In Durant v. Durant, 1 Hagg. 528, sentence was pronounced in 1825, and the cause, after appeal and vexatious delay. was remitted in 1828, when it was ordered that the permanent alimony be allotted from the date of the sentence. In Kempe v. Kempe, 1 Hagg. 532, alimony was allowed to commence from the date of the sentence, the judge remarking that he would interfere with the usual course of practice if he decreed its commencement to date from an earlier period. See, also, Covell v. Covell, 2 Prob. Div. 411, citing, with approval, Cooke v. Cooke, supra.

It must not be overlooked that in the English cases the alimony decrees were all made adjunctly to the principal litigation. The practice which prevails in this court is in this respect in entire harmony with the course laid down by these authorities, as for example: If, forthwith upon the entering of a final decree, application should be made for permanent alimony, undoubtedly, it would be ordered to run from the date of sentence - — that is, the decree nisi. Brit the situation here is that the parties have rested upon the final decree which was entered nearly ten years ago. That decree is to be regarded as having determined all the matters then involved in the suit between the parties, even as to alimony, if that subject could have been entertained under the prayer for general relief, without additional notice to the defendant. The petitioner now applies under the power reserved by the statute in all divorce actions for permanent alimony, by proceedings distinct and separate from, though dependent upon, the original cause. Now, for the first time, the questions are presented whether the defendant should pay alimony, and, if so, how much? These questions are to be determined after notice, upon proof of contemporaneous facts and circumstances regarding the husband’s financial capacity, present and futrare, and it seems to me that the correct practice is, if permanent alimony be allowed, .it should go back no further than the time the petition for it was filed. This was the course taken in the case of Lynde v. Lynde, supra. There the application to open the decree was made on February 11th, 1896, and upon the decree being amended it was referred to a master to ascertain the husband’s capacity, upon whose report it was adjudged that the defendant pay alimony “at the rate of $80 per week from the 11th day of February, 1896, to the date hereof,” the accumulations of which amounted to $7,840, and also the sum of $60 a week permanent alimony thereafter. The same practice was followed by Vice-Chancellor Stevenson in McKensey v. McKensey, 65 N. J. Eq. 633.

I will allow permanent alimony at the rate of five dollars ($5) a week. The petitioner, through her counsel at the hearing, expressed herself as satisfied with this amount. The defendant is married and has two children. His earning capacity does not exceed $1,000 a year. Recently, he inherited from his father about $3,000, and it was not until then that the petitioner moved in the matter. This sum, under all the circumstances, is quite reasonable, and a decree may be entered for that amount, to run from January 4th of this year, the date of the filing of the petition. The defendant will give a bond of one thousand dollars ($1,000) to secure the payment of the alimony. The matter of counsel fees may be brought up on the presentation of the decree.


text:
    Alfred S. Wright et al. v. The American Finance and Securities Company.
    [Submitted March 30th, 1915.
    Decided April 8th, 1915.]
    1. A corporation organized to promote and finance other corporations, whose authorized capital stock was all “water,” issued to a subsidiary company and used in promoting the sale of special contract bonds, whoso liabilities from the start exceeded its assets by $250,000, which had defaulted in interest payments, in taxes to the state, and in the payment of other claims, and all of whose subordinate companies whose stock it held were either bankrupt or defunct, and which itself had begun a policy of retrenchment amounting almost to a suspension of business, and which had no funds to carry on its business, was bankrupt and insolvent. within the statute; the term “insolvency” denoting a general inability to meet pecuniary liabilities as they matured, either from available assets or any honest use of credit, and not negatived because one may ultimately have a surplus, after winding up his affairs.
    2. In such case, where the company had no hope of new capital, or any reasonable prospect of paying the principal and interest of its bonds through which the public had already suffered a loss, and where its officials had maladministered its affairs, an injunction will issue against it, and a receiver be appointed.

      Mr. Scott Scammell, for the complainants.
    Mr. J. Fithian Talem, for the defendant.
   Backes, V. C.

This bill sets forth that the defendant company is insolvent and prays for an Injunction and the appointment of a receiver. A temporary receiver was appointed, and an order to show cause issued, upon the return of which the defendant filed an answer, with .affidavits annexed, denying insolvency, and on the hearing the witnesses on both sides were heard in open court.

The defendant was formed in 1903, chiefly for the purpose of promoting and financing other- corporations. It was organized with an authorized capital of $5,000,000, divided into fifty thousand shares of the par value of $100 each. For the purpose of putting it in funds, the defendant created an issue of one and a quarter million dollars “of bonds, called “Special Contract Bonds,” which it sold or agreed to sell to the Eastern Finance Company, another creature of the promoters of the defendant, at eighty per cent, or for $1,000,000. The whole of the $5,000,000 of capital stock was issued to the Eastern Finance Company, in exchange for holdings of that company in still other companies formed by the same promoters, all of which had but a -fancied, or no, value. The $5,000,000 of capital stock was “water” and was used to promote the sale of the special contract bonds, the purchasers of the latter being-given blocks of the stock as bonus. A subsidiary company of the Eastern Finance Company was to be used to sell the special contract bonds to the public, but upon this method falling through or being abandoned, the defendant itself made the sales which yielded, as it claims, the contract price of the Eastern Finance Company, of $1,000,000 in this manner. As the contract bonds were sold from time to time, eighty per cent, of their face value was credited to the account of the Eastern Finance Company, until the one million dollar figure was reached, and the account was squared. The difference between the eighty per cent, and the amount for which the bonds were sold, was absorbed in organization and operation expenses. The Eastern Finance Company still holds twenty-seven thousand, five hundred shares of the defendant, the remaining twenty-two thousand, five hundred shares having been handed over, as occasion required, to the purchasers of the special contract bonds. Hp to this point in the history of the defendant it appears that it was launched upon the financial world with possible assets of not more than $1,000,000 and fixed liabilities of one and a quarter million dollars of bonds, plus $5,000,000 of capital stock.

It would, indeed, make interesting reading, to review the career of the defendant, its exploitations and vicissitudes of fortune, from its inception to the present application, so ingenuously related on the witness-stand by its president, but it would be without profit, and I will therefore confine myself to adverting only vto those operations which have a bearing- upon the present question of insolvency, and these I will discuss mainly, if not entirely, from the case as made by the defendant.

The financial condition of the defendant, as of December 31st, 1914, is shown by its balance-sheet, which was distributed among its stock and bondholders:

General Balance Sheet.
December 31st, 1914.
All figures, both debit and credit, represent face values.
Assets:
First mortgage bonds, par value......... $372,900.00
Preferred stocks, par value.............. 7,SOO.OO
Cash .................................. 3,244.71
Bills and accounts receivable............. 984,152.67
Common stock of subsidiary companies, par value ............................... 6,266,975.00
Furniture and fixtures.................. 948.34
Liabilities:
Accounts payable ...................... $23,214.88
Bond interest accrued................... 187,500.00
Income bonds .......................... 1,250,000.00
^Capital Stock ........................ 500,000.00
* Surplus .............................. 5,675,305.84
$7,636,020.72 $7,636,020.72
* Owing to the recent reduction of the par value of our capital stock from $5,000,000 to $500,000, our liabilities are nominally decreased $4,500,000 and our “surplus” is thereby correspondingly increased. Had no change been made in the par value of our shares, our “surplus” would be $1,175,305.84, the relative value of shares being the same in either instance.
I hereby certify that the general balance sheet is correct and that the same agrees with the books of the company.
C. J. SCHLAECHTER,
Philadelphia, January 29th, 19.15.
Treasurer.

It will be noted, as the balance-sheet states, that “All figures, both debit and credit, represent face values,” only. The observation at the bottom of the sheet is amazingly frank in calling attention to how the “surplus” was swelled to an attractive figure. To this reference will be made later on. I will analyze the assets in the light of the testimony before me.

The largest item is “Common stock of subsidiary companies, par value $C>,2(>6,975.” This is made up of the common stock of the following companies:

Guanajuato R. & M. Company............... $2,217,580
Empire Lumber Company.................... 1,091,400-
New Jersey Steel Co........................ 454,980
El Tiro Copper Company.................... 2,500,015
$6,266,975

These companies were all created by the defendant or its promoters. The capital stock is only part of a larger issue of each company, and all “water,” as the defendant admits, and as its president says was issued “to represent prospective profit if it should ever come.” This was said with., reference to one company, but it applies to the others. It might be well to give the modus operandi of the defendant’s promotions and how it came into possession of the enormous amount of stock which it represented to its creditors and the public, as “assets.” A subsidiary company would be formed to engage in a commercial enterprise. The subsidiary company would make a bond-issue running into the millions and far in excess of the cost to it of its property, which would be mortgaged to a trust company to secure the bonds. An issue of capital stock would then follow, usually in double the amount of the bonds. The defendant marketed as many of the bonds as it could induce the public to buy, usually at eighty per cent., and gave to each purchaser a block of the capital stock, varying in amount, as the exigency demanded. Whatever of the bonds remained unsold and stock not given away, was treated by the defendant as its property and went to make up the "assets” of the general balance-sheet. The first item of the balance-sheet, "First Mortgage Bonds, par value $312,900,” is made up of these unsold bonds, and are divided between the aforementioned companies as follows:

Out of an issue of
Guanajuato Reduction and Mines Company... $102,500 $2,800,000
Empire Lumber Company................... 11,900 2,344,000
New Jersey Steel Company.................. 2,000 ' 250,000
El Tiro Copper Company................... 256,500 1,256,500
Total ............................... $372,900

The next item of "Preferred Stock, par value $1,800,” is that of the New Jersey Steel Company. The third item of cash has been reduced to about $1,200, and was paid over to the temporary receiver. The fourth item of "Bills and Accounts Receivable, $984,152.61,” is made up thus:

Bills and Accounts Receivable.
Notes.
The New Jersey Steel Co............... $450,104.48
Mrs. M. Porter......................... 8,500.00
L. H. Bott............................. 500.00
Blanche Tracy ......................... 500.00
$459,604.48
A ccomits.
The Guanajuato R. & M. Co............. $402,602.S6
El Tiro Copper Co...................... 28.51
The N. J. S. Co. Pfd. Stk. Int. advces.... 68,250.00
Suspense account ...................... 260.50
$471,141.87 •
Cíeo. W. Chase.............. $8,282.62
E. C. Kenney.......................... 944.2±
II. D. Moore........................... 600.00
C. I. Goessman......................... 6,000.00
G. D. Bouton........................... 3.21
$35,830.07
Empire Lbr. Co. Int. coupons............ $6,510.00
The G. R. & M. Co Int. coupons......... 3,075.00
El Tiro Copper Co. Int. coupons.......... 22,095.00
The N. .7. S. Co. bond interest............ 260.00
$31,940.00
Empire Lumber Co. bond sales............ $300.00
Findley College ........................ 2,000.00
Postage purchase ....................... 1.25
$2,301.25
Development Co. of America, Coll, trust note ................................ $1,000.00
Congress Const. Mines Co. Ltd. Stk....... 900.00-
Agents’ stock purchase.................. 1,435.00
$3,335.00
---$524,548.19
$984,152.67

The large sums due from the New Jersey Steel Company and the Guanajuato Reduction and Mines Company amounting to over $920,000, are for moneys loaned by the defendant to these companies, and accrued interest. The other items on the list, consisting of indebtedness from individuals, are conceded to be uncollectible. Let us now turn to an inspection of the present financial condition of the subsidiary companies, for mainly upon their standing turns the issue to be disposed of.

The Guanajuato Reduction and Mines Company is engaged in separating the left-over silver from the dumps of ancient mines in Mexico, which, under old methods, could not be extracted. The company has been able, so the defendant says, to pay the interest on its bonds, but is now in default on its last semi-annual installment due January 1st of this year. Owing to the revolution in Mexico, the future operations of the company are in a very precarious condition. It is very frankly admitted by the defendant that, because of the state of unrest in that republic, there is no market for the sale of the bonds, and of course none for the stock, even though the public would otherwise be willing to buy. The president of the defendant stated that he would be able to sell the bonds of this company, held by the defendant, now amounting to $92,500 ($10)000 worth having recently been hypothecated to secure a $4,000 note), at fifty cents on the dollar, but not in the market. The only possible purchaser he had in mind was a gentleman who is an investor in the defendant’s securities to the sum of a million dollars and upward and who probably could be persuaded to pipchase, if by so doing the life of the defendant could be prolonged, but not otherwise. He also added that a large block of the capital stock would have to be given as an inducement. It may be unnecessary to say that this company never earned or paid any dividends on its common stock, aai.d the likelihood of its ever doing so is far removed. The debt of $402,602.82, which it owes the defendant is of long standing — some seven or eight years — and at the present time absolutely uncollectible, owing, as the defendant says, to the prevailing disturbances.

The Empire Lumber Company is engaged in the lumber business in British Columbia. It suspended operations at the beginning of the present European war, although it is said to have since resumed trade. It is in default in the payment of the interest on its bonds and, of course, never paid any dividends on its capital stock, which has no market value and also no intrinsic value that has been demonstrated.

The El Tiro Copper Company, located at El Tiro, Arizona, long ago suspended business and is defunct. Although the bonds and capital stock of the face value of more than $3,000,-000, are carried by the defendant as an asset, it cannot be denied that they are worthless. The defendant says their value is problematical. The bonds were brought into court and were found to be nothing but blank forms, unsigned, unsealed and uncertified by the trust company. The defendant says that it could have them signed, sealed and certified by paying to the trustee fifty cents a piece for doing so, but it is quite evident that this outlay would be a squander.

The New Jersey Steel Company operated a plant at Rahway, in this state. It has been out of business since 1913, and is conceded to be bankrupt, its stock and bonds to be worthless and the debt due to the defendant of $518,614.48 uncollectible. The item in the foregoing statement of assets of “The N. J. S. Co. Pfd. Stk. Tnt. Advces. $68,250,” is for money paid by the defendant to holders of the preferred stock of the New Jersey Steel Company, as dividends. The stock was put on the market by the defendant while these advances were being made, and the obvious purpose in making them was to lead the holders and possible purchasers into believing that the company was prosperous and earning the dividends.

This summary of the defendant’s balance-sheet strips the stupendous “face values” assets of practical^ all virtue, leaving only, of possible, though not of probable, sales value, at fifty per cent., the $92,500 of the Guanajuato Reduction and Mines Company, and $11,900 of the Empire Lumber Company bonds, and cash of $1,200; at the most, a total asset, possible convertible at the present time into cash, of less than $55,000, out of which to meet liabilities of nearly one and a half million dollars. In the face of this tremendous deficit, counsel for the defendant strenuously insists that the defendant is not insolvent, and his argument is that the defendant owes no presently payable debts which it cannot liquidate, if given ten days’ time; the point being that the special contract bonds of $1,250,-000, and the two and one half year’s accrued interest of $187,-500, are not liabilities of the defendant in the legal sense; and this may be true. The terms of the bonds are that

“The company hereby agrees to pay * * * One thousand dollars * ®, * in twenty equal installments * * * out of a Retirement Fund created from the net surplus earnings of the company, as hereinafter stipulated * * * but not otherwise; also that the company agrees to pay * * * from an Interest Fund created from the net surplus earnings of the company as hereinafter stipulated and not otherwise * * * interest * * * at the rate of six per cent, per annum, payable semi-annually in equal installments on the first days of January and July in each year, before any dividends are paid on the stock of the company.”

Attached to the bond is the special contract, the purport of which is that the net proceeds derived from the sale of the bonds shall be strictly devoted to the creation of a reserve loan fund, which shall be used by the company in carrying on its legitimate corporate purposes. • The earnings of the company were to be divided into special funds called operating, interest, surplus, dividend and retirement funds, in the order stated. In the first, sufficient of the earnings for operation, in the second, to maintain a sum equal to one’s interest on the outstanding bonds; in the third, six per cent, of the current year’s profits, which was to be transferred to the reserve loan fund, until the same reached the sum of $1,250,000; in the fourth, a sum sufficient to pay an annual dividend of six per cent, on the outstanding shares of the capital stock of the company; and lastty, the retirement fund was to be supplied, and whenever the moneys of this fund equaled one-twentieth of the principal sum of all the bonds outstanding, they were to be equally divided between the bondholders. None of these funds was ever in fact established by tire defendant, and although for eight years and more the company regularly paid the interest on its bonds, it is doubtful that the interest was paid out of earnings. But while it may be, as counsel argues, that according to the strict letter, the holders of the bonds are foreclosed from recovering at law, nevertheless I take it that the bonds represent their investments in the defendant, and a corresponding obligation of the company to them, which must be taken into the reckoning-in determining whether the corporation is insolvent and whether an injunction should issue and a receiver be appointed. Furthermore, the non-payment of interest on the bonds for two and one-half years last past, bears strongly upon a condition of insolvency, for it must be assumed that during all that time the defendant earned no more than was sufficient to pay its operating expenses, if it did earn that much. Other tangible and persuasive proof of insolvency is to be found in the fact that the defendant is four years in arrears to the State of New Jersey for taxes, amounting to $16,000, which it has been unable to pay. The state brought suit in this court to restrain the defendant from exercising its franchises, and also an action in the supreme court to recover the tax. These suits are pending under an arrangement with the company to pay the arrearages in installments of $1,000 each, every three months. This will take four years. To the Hanover National Bank of New York is due, for rent, $3,800. To Finley College is owing $8,000 upon an agreement to redeem some of the securities sold by the defendant to that institution, which claim is now being pressed; and a note of $4,000 negotiated in January of this year for current use, is outstanding. To meet these debts the defendant has no funds. The oiler made at the hearing by the president to pay them out of the proceeds of the sale of the Guanajuato bonds, was made under the pressure of this suit, and can have but slight bearing or influence upon the question as to whether the company is insolvent. The bonds, from the sale of which the president says he can realize sufficient to tide the company over, would have to be sold at a greatly reduced figure below par, and the capital stock to be given as a bonus would only further deplete the face value assets.

Next let us turn to the management and manipulations during the past year. To sell $50,000 o£ securities during the year 1914, cost the defendant $18,000, and during the same period its “face values” assets shrunk some $5,000,000. The shrinkage was neatly recovered in the next annual balance-sheet; the previous balance-sheet, as of December 31st, 1913, showed a surplus of $5,992,551.94 and liabilities for capital stock of $5,000,000. The balance-sheet above set out, of 1914, shows an almost equally handsome surplus, with a capital stock liability of only $500,000. It was accomplished by ingeniously reducing the par value of the stock from one hundred to ten dollars a share, thus enabling the defendant to add four and one-half million dollars to its “surplus,” and keep that alluring item unscotched. The officials of the defendant protest that their motive in this maneuver was purely economic — the saving of an annual state tax of $3,500 — but I apprehend that the use to which they put the result was otherwise quite satisfactory.

Moreover, we have this situation: the business of the company has gone into voluntary retirement for the present. Its officers appreciate that the defendant’s financial condition is desperate and inextricable, at least for the time being. Confessedly, it has no means with which to carry on its business of promotion, and I fail to see how it can survive long, even under the policy of retrenchment recently inaugurated. During the enforced retirement, the president says the company can exist on $7,000 a year, the amount of interest he expects to receive on $11,900 of bonds of the Empire Lumber Company, owned by the defendant. This is the only possible source of income and its forthcoming is, in my opinion, dubious. But, even if this sum could be realized, I think the president has underestimated the current expenses and obligations. It will require annually $4,000 for arrearages of state taxes, and $500 for franchise assessments. The treasurer of the company draws a salary of $3,000, and an assistant bookkeeper and one stenographer must be compensated. The office rent is estimated at $667. a year; and in this calculation is not included discount on outstanding notes of $29,000 and sundry office expenses. The companjq in the past, has also necessarily expended annually $9,000 for the preservation of the property of the El Tiro Copper Company', and $6,000 for that of the New Jersey Steel Company.

And further, as to the management in the days of its tribulation. The president sold an Empire Lumber Company bond for $500, paid into the treasury $400, pocketed the difference, and justifies his action on the ground that the company was willing to sell these bonds at eighty per cent, of the par value. He also says that he made a profit on every bond he sold above eighty', since he ceased drawing a salary. He formerly drew a salary of $15,000 a year, but recently agreed to forego it as a part of the retrenchment plan. In January of this year he borrowed $500 from the already scant treasury of the company', for his private use, which has not been paid back. These transactions may be regarded as minor, but they -vividly indicate how the business is intended to be conducted.

Tt is manifest from this arraignment of the defendant’s affairs, that it was bankrupt from the start, in that its liabilities exceeded its assets from the beginning by a quarter of a million dollars, and it is equally clear that if the defendant ever had cash assets of a million dollars, claimed to have been realized from the sale of its special contract bonds which, from the evidence I seriously doubt, because some of the bonds were given in exchange for securities of underlying companies, more than seventy-five per cent, of the- defendant’s capital is now tied up in the New Jersey Steel Company and the Guanajuato Reduction and Mines Company, over half of which is admitted to be lost and the balance to be unavailable, its eventual collection being problematical. With all of its millions of supposed assets, the defendant defaulted four successive years in the payment of its franchise tax and was not able to muster a comparatively paltry $16,000 to pay the accumulations, when pressed by suit. And just before these proceedings were instituted, it had to borrow money to pay current expenses. It seems to me that the conditions to which I have called attention must cany conviction even to the most optimistic that the defendant is hopelessly bankrupt and is insolvent, within the meaning of the statute.

“Insolvency,” said Justice Dixon, in Trust Co. v. Fisher & Co., 67 N. J. Eq. 602, “denotes a general inability to meet pecuniary liabilities as they mature, by means of either available assets or an honest use of credit.” In Skirm v. Eastern Rubber Manufacturing Co., 57 N. J. Eq. 179 (on p. 184), Vice-Chancellor Reed says: “Insolvency means a general inability of a debtor to answer pecuniary engagements, and it does not follow that he is not insolvent because he may ultimately have a surplus after winding up his affairs.” In Reinhardt v. The Inter-State Telephone Co., 71 N. J. Eq. 70 (on p. 79), Vice-Chancellor Pitney said: “Of late years numerous corporations have been adjudged insolvent and receivers appointed therefor without any interruption of their business and before any debt has actually matured without payment, on proof merely that the corporation would be unable to meet its immediately maturing obligations, and that a scramble would ensue among its creditors, resulting in inequality of distribution of its assets.” And in Catlin v. Vichachi Mining Co., 73 N. J. Eq. 286 (on p. 290), Vice-Chancellor Howell says: “Tlie corporation is still running its business. It has not suspended the same for want of funds, and it was argued that inasmuch as this condition did not exist there could be no adjudication of insolvency or appointment of a receiver. I think the defendant’s argument is not sound. A corporation may be insolvent and yet not have suspended its business for want of funds to carry on the same. It likewise may have suspended its business for want of funds and still be able to pay its debts if properly wound up. If either fact, insolvency or suspension exists without the other, the court may entertain the bill and proceed in a summary way to hear the affidavits, proofs and allegations which may be offered on behalf of the parties. The inquiry then goes to the questions ‘insolvency’ and ‘resumption,’ and the query is, what is meant by resumption in the second part of the section under which this action is taken. The query is fully answered by Chancellor McGill in Fort Wayne Electric Corporation v. Franklin Electric Light Co., 57 N. J. Eq. 7. It is here contended, as it was in that case, that the second requirement of the section defines insolvency so broadly as to necessarily include a suspension of business, because principally of the conjunctive construction of the sentence, and that inasmuch as the company had not entirely suspended its business the word ‘resumption’ puts this case out of the statute. The plain, logical and satisfactory interpretation of the language of tire section given by Chancellor McGill, in the case just cited, makes it include the very situation disclosed bjr the testimony at bar. He says: ‘I agree that the word “resume” as used in the statute, predicates some interruption of the insolvent’s business, but I do not understand that it contemplates an entire suspension of all its workings. Such has been the practical interpretation the bar and the courts have given it, for manufacturing and other companies with plants in operation have constantly been adjudged to be insolvent and put in the hands of receivers, and in so doing large values have been saved to creditors and stockholders because of the salable condition of a live plant as compared with one that is dead. Insolvency carries with it inability to presently pay indebtedness and suspension of that function, and the word “resume,” used in the statute, is, I think, to be taken in the sense of taking up again that suspended function, so that payment of indebtedness as well as the operation of the work of the corporation, after temporary, partial or complete paralysis, may be resumed with safety to the public and advantage to its stockholders.’ ” In Bull v. International Power Co., ante page 209, Chancellor Walker held a corporation to be insolvent although it had a large balance of assets over and above its liabilities, yet showing that it had not sufficient .money on hand to meet the taxes due to the State of New Jersey, salaries of officers and the administrative expenses of employes, although the president of the company declared that he could “coerce” another company to declare a dividend which would be sufficient to put cash capital into the treasury and meet its current obligations.

In arriving at my conclusions, I have borne in mind Vice-Chancellor Van Fleet’s instructive views, in Atlantic Trust Co. v. Consolidated Electric Storage Co., 49 N. J. Eq. 402 (at p. 407), who, in speaking of the exercise of the power of injunction in cases of this kind, said: “The principle which I think should control the court in the exercise of this power is this: Never to appoint a receiver unless the proof of insolvency is clear and satisfactory, and unless it also appears that there is no reasonable prospect that the corporation, if let alone, will soon be placed by the efforts of its managers in a condition of solvency. To illustrate: Where the corporation attacked is shown to bo insolvent, but it also appears that its managers arc honest and capable, and that they are striving to the best of their ability, with a fair prospect of success, to relieve the corporation from its embarrassment and to put it in a condition where it may prosecute its business successfully, and the property of the corporation is free from judgment or other lien under which it may be sold speedily, at a sacrifice, the court should not interfere. Mere insolvency is not enough to induce' the court to act ; but to induce it to act, such' a state of insolvency must be shown as satisfies it that the corporation will not be able in a short time to resume its business with safety to the public and advantage to the stockholders.”

Now, what are the chances of the defendant resuming business? It entertains no hope of an infusion of new capital, and the prospect of bringing into its coffers funds to pay its bondholders their principal and interest, depends altogether upon the profitable marketing of a lot of self-created capital stock, of no intrinsic value. To permit this company to continue business would simply be inviting a duplication of the hardship from which the public is now suffering through a million dollars and more of losses sustained in investments in the defunct El Tiro Copper Company and the New Jersey Steel Company, and from which it is entitled and ought to be safeguarded. And from the maladministration of the defendant’s officials, the bondholders and stockholders are also entitled to protection.

T will advise a decree adjudging the defendant insolvent, and that an injunction issue and a receiver be appointed.


text:
    John E. Lanning v. Lucretia F. Parker et al.
    [Submitted March 30th, 1915.
    Decided May 3d, 1915.]
    1. Premiums paid for life insurance are, as against existing debts, voluntary gifts and conclusively fraudulent.
    2. Premiums paid on life insurance policies, in fraud of creditors, may he, recovered to the extent of those paid within the statutory period of limitation, i. e., six years before the commencement of the suit. Yorlc v. Flaherty, f,10 Mass. $5, criticised.
    3. Doans made to assured upon the security of life insurance policies and deducted from the proceeds by the company, will not be set off against premiums paid in fraud of creditors in a suit brought to recover them.

      4. In a suit to recover premiums paid in fraud of creditors, it is an immaterial issue where the insurance was contracted, or whence and under what laws the property was acquired, since the property — the proceeds of the insurance — is held by virtue of an enabling statute of this state.
    5. Voluntary payments out of the proceeds of life insurance policies to creditors within the class protected by the statute, are entitled to be. set off in a suit brought to recover premiums paid in fraud of creditors.
    6. Dues paid for beneficial society insurance in fraud of creditors are not recoverable. But querré.

    7. A creditor who by his diligence discovers assets fraudulently concealed by his debtor, is entitled to priority of payment, and this is not lost by the form of his bill which lets in other creditors.

      Mr. Ruliff V. Lawrence, for the complainant.

      Mr. Harry Truax, for the defendants.
   Backes, V. C.

This is a creditor’s bill to recover 'from the proceeds of life insurance policies premiums paid by the assured in fraud of creditors. The cause is before me on an agreed state of facts.

The complainant’s debt of $1,875 was originally contracted in 1897, represented by a note, which has been kept alive by renewals. In 1904, and from time to time thereafter, Winfield S. B. Parker, the debtor, caused to be issued, by the New York Life Insurance Company, four policies on his life, payable at his death to his widow, the above-named defendant. He paid the premiums until he died, December 8th, 1913, amounting in all to $4,575, and with interest totals the sum of $5,871.26. The value of the policies at his death was $11,770. Upon their pledge, the assured in his lifetime borrowed from the insurance company, with interest, $2,636.42, which sum was deducted, and the net proceeds of $9,133.58 were paid to the defendant. Parker’s estate has been declared insolvent by the orphans court. The claim of the complainant has been probated by the administrator, and his standing to maintain this suit is unimpeachable. Haston v. Castner, 31 N. J. Eq. 697; Merchants’ and Miners’ Transportation Co. v. Borland, 53 N. J. Eq. 282.

As the law stood prior to the statute of April 4th, 1896 (P. L. 1896 p. 240), now sections 38, 39 of the Insurance act of 1902 (2 Comp. Stat. p. 2836), all premiums on life insurance paid in fraud of creditors were assets for the payment of debts, and it was.debatable grounds whether the proceeds of policies procured by such fraudulent payments were not also amenable. Merchants’ and Miners’ Transportation Co. v. Borland, supra. But the legislature at its next session, after the deliverance of Vice-Chancellor Pitney’s opinion in the last-named case, and, undoubtedly, influenced by bis exploitations of the unsettled condition of the law, and the conflicting and irreconcilable views entertained upon the subject by the judiciary generally, intervened and declared a policy with reference to the rights of creditors as against their debtors in respect to this sort of property, as follows:

“38. When a policy of insurance is effected by any person on bis own life, or on another life in favor of some person other than himself having an insurable interest therein, the lawful beneficiary thereof, other than himself or his legal representatives, shall be entitled to its proceeds, against the creditors and representatives of the person effecting the same; and the person to whom a policy of life insurance is made payable may maintain an action -thereon in his own name; provided, that, subject to statute of limitation, the amount of any premiums for said insurance paid in fraud of creditors, with interest thereon; shall inure to their benefit from the proceeds of the policy; but the company issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the company shall have written notice by or in behalf of some creditor, with specification of the amount claimed, claiming to recover for certain premiums paid in fraud of creditors. P. L. 1902 p. 422.
“39. Every policy of life insurance made payable to or for the benefit of a married woman, or after its issue assigned, transferred or in any way made payable to a married woman, or to any person in trust for her or for her benefit, whether procured by herself, her husband or by any other person, and whether the assignment or transfer is made by her husband, or by any other person, shall inure to her separate use and benefit, and to that of her children, according to the terms and provisions of the policy or assignment, subject to the above provisions relating to premiums paid in fraud of creditors.” P. L. 1902 p. 422.

The prototype of this enactment is to be found in the insurance laws of the State of Massachusetts (statutes 1894, chapter 522, section 73), ill which commonwealth the model has been under review, and where it received judicial sanction and construction. In Bailey v. Wood, 202 Mass. 549, Mr. Justice Morton, in discussing the act, says (at p. 551) :

“Whether the statute, as we construe it, is a good statute or a bad statute in respect to the opportunities which, as the plaintiff contends, it offers for fraud is a matter for legislative consideration. Since 1844, with the exception of the seven years from 1887 to 1894, if they can be called an exception, it has been the policy of the commonwealth to enable the husband and father to provide by insurance on his life for his wife and children, subject only to have premiums paid in fraud of creditors within the statutory period of limitation inure to their benefit out of the proceeds of the insurance, and since 1894 the law has included assignments from the husband to the wife of policies issued to the husband. This has been regarded as a wise and humane policy, and the constitutionality of the legislation has never been questioned, and we do not see how it can be successfully. 'It proceeds,’ as has been said, 'upon the theory that the interest of a man’s wife and children in his life, and his duty to make reasonable provision for their support, are not wholly subordinate to the claims of his creditors; and that he may malee an irrevocable settlement of a policy of insurance on his life for the benefit of his family.’ Gould v. Emerson, 99 Mass. 154. See, also, Central Bank of Washington v. Hume, 128 U. S. 195. The interests of creditors are protected by the provision that subject to the statute of limitations premiums paid in fraud of their rights shall inure to their benefit from the proceeds of the policy. They were similarly protected in the beginning. See statute 1844, chapter 82. Strictly speaking, only to the extent to which funds have bpen withdrawn from his estate by the debtor for the payment of premiums, can it be said that the insurance on his life has operated to the prejudice of Ms creditors. His life constitutes no part of the assets of his estate, and nothing therefore is taken from his creditors by an insurance upon it in favor of his wife or the assignment to her of a policy of insurance already issued, though it may be true, as contended by the plaintiff, that, except for the statutory exemption in her favor, the policy, like any other contract entered into by him and inuring to his benefit, would constitute or could be found to constitute a part of the assets of her husband’s estate.”

That all of the payments of premiums in the case before us were made after the complainant’s debt was incurred, and, as such, were voluntary gifts, and conclusively fraudulent, is not controverted. Haston v. Castner, supra. The sum total is far in excess of the complainant’s claim, and if it could be appropriated, this case would be at an end. But, the defendant contends that by the express terms of the statute no more can be applied of the premiums, with interest, than was fraudulently diverted within six years next before the commencement of this suit. In the changed condition of the law, the rights of the contending parties rest exclusively upon the statute,-and that upon which the complainant founds his demand is contained in the proviso that

“subject to statute of limitation, the amount of any premiums for said insurance paid in fraud of creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy;”

by which enactment it will be observed that creditors former equities in funds created by the premiums are transformed into a strictly statutory claim and lien upon the proceeds of policies in the hands of the beneficiary, or, upon notice, in the hands of the insurance companies. So, therefore, the matter in issue involves an interpretation of the proviso, and the significance to be attached'to the words “subject to statute of limitation.” The complainant argues that it should be held to mean only to bar a recovery six years after the cause of action' accrued, i. e., the death of the assured, if the statute were pleaded, and in this he is supported by the supreme court of Massachusetts in the case of York v. Flaherty, 210 Mass. 35. That case was similar to the one under consideration. There the master ruled that the liability was for premiums paid within six years before the bringing of the suit. The plaintiff, on appeal, insisted that his cause of action did not accrue until the death of the insured, and-included the premiums paid within six years before that event— the six years covering all of the premiums which were found to have been paid in fraud of creditors. In this he was sustained, Mr. Justice Sheldon writing the opinion of the court, holding that—

“These premiums, by the terms of the statute, are to inure to the benefit of the creditors 'from the proceeds of the policy,’ and in no other way. The right to recover their amount cannot accrue until the maturity of the policy, which was to be upon Mr. Flaherty’s death. The stipulation for surrender values does not affect this, for that was conditional upon a surrender by the beneficiary, which never was made or required to be made. Blinn v. Dame, 207 Mass. 159; Wilde v. Wilde, 209 Mass. 205. But the statute of limitations begins to run only after the cause of action has accrued. R. L. ch. 202. Accordingly, it has been held in Alabama, that a cause of action like this arises and becomes fixed upon the death of the person insured. Lehman v. Gunn, 124 Ala. 213. No action could have been maintained by a creditor of Mr. Flaherty at the time of the payment of any premium, either against the company (Central Bank of Washington v. Hume, 128 U. S. 195) or airyone else, for there could be then no proceeds of the policy. There is nothing to the contrary of this in Troy v. Sargent, 132 Mass. 408.”

I cannot reconcile my judgment to the argument by which the conclusion is reached. No criticism can be made of the abstract proposition of law, but I cannot assent to their application. True it is that the right of creditors to recover the premiums does not arise until the death of the assured, but, it does not follow as a legal sequence, that the statute of limitations does not begin to run until the cause of action accrued, when, by the very act which defines the right, it is provided that upon the inchoate obligation of the beneficiary to account for the premiums, galvanized by the act into a legal duty, the statute is to operate. The opinion, as it seems to me,-is not in harmony with the legislation on the subject, the trend of which indicates the legislative purpose. By the Massachusetts statute of 1844, chapter 82, it was provided that where premiums were paid in fraud of creditors, a proportional amount of the interest in the policy should inure to the benefit of such creditors. In 1854 (statute 1854, chapter 453, section 28) this was modified by giving to the creditors all of the premiums fraudulently paid for policies, without limitation. By the act of 1864 (statute 1864, chapter 197) the limitation was appended thus, “subject, however, to the statute of limitations.” Later the law was moulded in language of which our statute is a copy (statute 1894, chapter 522, section 73, now R. L., chapter 118, section 73). The further provision that the premiums’ are to inure to the benefit of the creditors “from the proceeds of the policy,” is of importance only as furnishing a security for the payment of the premium in the hands of the insurance company, or in those of third parties. The evident scheme of the legislature was, and I entertain the notion that the restrictive terms of the proviso of the act were intended to place a limit upon the amount the beneficiary was to pay for the exemption or immunity afforded her by the statute, gradually scaled down by the bar, and not in limitation of the right of action which was already assured her by the statute for the limitation of actions. This was manifestly the conception of the statute of the judge who delivered the opinion in Bailey v. Wood, supra, and of Mr. Justice Hammond, who wrote the later opinion of Bailey v. Wood, 202 Mass. 562, in which he observed that “As the statute was originally passed, the right of the creditors was measured by a proportional part of the proceeds of the policy, but is now measured by the amount of premiums, with interest, subject to the statute of limitations.” And his meaning is emphasized by another passage in which he says: “As to the matter of premiums, it (the statute) was amended so as to give the creditors only the amount of the premiums paid in fraud of them, instead of a proportionate share of the proceeds,” and this right of the creditor was still further restricted by Comp. Stat. 1864, chapter 197, to those premiums not barred by the statute of limitations. (I note that Justice Hammond later sat in the case of York v. Flaherty, supra.) This construction was placed upon a similar act by the supreme court of Illinois (Cole v. Marple, 98 Ill. 58; Houston v. Maddux, 179 Ill. 377; see also Wagner v. Koch, 45 Ill. App. 501). As already observed, it appears to me that the obvious legislative design was to fix a maximum sum which the proceeds of the policy could be made to yield, subject to being diminished by the supervening of the limitations contained in the act defining the liability. To ascribe to the restriction of the proviso the meaning contended for by the complaint, would be to altogether excise it from the act, or to ignore its consideration. My' conclusion upon this phase of the case is that the complainant can only recover for an amount equal to the premiums paid within six years of the filing 'of the bill.

The next ground of defence is that $2,636.42, borrowed by the assured on the security of the policies, and deducted by the insurance company from the proceeds, should be set off against the premiums. The point was raised and decided in York v. Flaherty, supra, and I adopt the ruling that “Full premiums * * * were in fact paid both before and after the loan was made, and the statute is expressed that these payments shall inure to the benefit of the husband’s creditors * * * She (the beneficiary) has chosen to claim the benefit of the statute which gives to her the proceeds of the policy at the expense of his creditors; she must bear the burden which the same statute puts upon her by accounting to them for the amount of the premiums which were paid in fraud of their rights. As was said by the plaintiff in his brief, it would frustrate the purpose of the statute to allow her to diminish this amount by deducting therefrom the- amount of this loan, or even by reducing it in proportion to the amount of the loan as compared with the total amount of the policy.”

In the next place, the defendant contends that the contracts of insurance were made in the State of New York, and that the laws of that state govern. The exemption there is “except that the premium actually paid out of the husband’s property exceeds $500, that portion of the insurance money which is purchased by excess of premium above $500, is primarily liable for the husband’s debts.” If this litigation were between the beneficiary and the company upon the policies, the argument advanced, assuming the premises to be true, would be pertinent. But, here the effort is to subject property, created by a debtor of this state in fraud of creditors, to the payment of his debts, which property the fraudulent grantee is permitted to hold by virtue of an enabling statute of this state, only upon condition that if called upon, she discharge the obligation imposed by that statute. Regarding the act as one operating upon the assets of an insolvent debtor, it becomes an immaterial issue where and under what laws the property was acquired. Miller v. Campbell, 140 N. Y. 457.

The defendant paid out of the proceeds of the policy $1,851.61 to certain creditors of her husband, for which amount she claims allowance out of the premiums. It is not shown by the state of the case when the debts were created, and consequently it does not appear that any of the premiums were paid in fraud of these creditors. The statute creates a fund, measured by the premiums, only for those creditors in fraud of whom the premiums were paid, and this fund cannot be resorted to to pay creditors not within the class. Payments voluntarily made to creditors protected by the statute, would be entitled to allowances. Horton v. Bamford, 79 N. J. Eq. 356; Thompson v. Williamson, 67 N. J. Eq. 212.

The defendant received from the Royal Arcanum, a beneficial association, of which her husband was a member, $2,000. HE membership dues amount to $370.14. During six years prior to his death, he paid in dues $149.76. This form of life insurance seems not to be within the protection of the Insurance act (2 Comp. Stat. p. 2836). The Royal Arcanum was incorporated and exists under an act entitled “An act regulating fraternal beneficiary societies, orders or associations,” approved March 11th, 1893; and is excluded from the operation of the Insurance act by section 90. But section 19 of the Fraternal Beneficiary Society act (1 Comp. Stat. p. 200) provides:

“That the money or other benefit, charity, relief or aid to be paid, provided or rendered by any association authorized to do business under this act, shall not be liable to attachment by trustee, garnishee or other process and shall not be seized, taken, appropriated or applied by any legal or equitable process, or by operation of law, to pay any debt or liability of a certificate-holder or of any beneficiary named in a certificate, or of any person who may have any right thereunder.”

From this it would appear that these dues or premiums cannot be reached. The question, however, is not before me. The facts above related are stated in the agreed state of facts, but they are not counted upon by the complainant in his bill.

The complainant filed his bill “for his own benefit and the benefit of such other creditors of the deceased as shall come in under this bill and contribute to the expenses of this suit.” One creditor having a claim of $1,000, with interest from October 22d, 1907, was admitted upon petition, as a party-complainant. This practice tends to convenience and economy, and is not objectionable. Iauch v. de Socarras, 56 N. J. Eq. 524, is cited in approval. But, because of this open bill, the complainant is not to lose his right of priority of payment, earned by his diligence. “Where property has been fraudulently conveyed by a person who afterwards dies, such a property is not assets in the hands of the administrator for general distribution among all the creditors. The administrator cannot file a bill and reach such property, but a creditor can; and when he obtains a lien by filing a bill, and, in the end, recovers the property, he is justly entitled to be rewarded for his superior diligence, and receive the payment of his debt before other creditors can come in. We do not regard this, however, a new question in this court.” Cole v. Marple, supra; Whitney v. Robbins, 17 N. J. Eq. 360.

If, according to the conclusion at which I have arrived, the premiums are not sufficient to pay the complainant and the joining creditor, the complainant will be paid first, with costs.


text:
    James DeWitt Fay v. Francis M. Herbert et al.
    [Argued December 29th, 1914.
    Decided December 31st, 1914.]
    On an accounting with respect to credits claimed by a defendant in a foreclosure suit, evidence Held to show that defendant was not entitled to the credits claimed by him.
    On exceptions to master’s report.

      Mr. William P. McMichael and Mr. Joseph S. Conover, for the complainant.

      Mr. Halsted H. Wainright, for the defendants.
   Backes, V. C.

A final decree by default, foreclosing two mortgages of the complainant, aggregating the sum of $3,871.11, on the same lot of the defendant Herbert, was entered, and under a writ of fieri facias to the sheriff of Monmouth county, the property was advertised for sale, when he petitioned the court to stay the sale, alleging that there was but $316.83 due to the complainant. An order was made referring the matter to a master to report if any credits should be made upon the execution, and the sale was stayed. The master has reported that the defendant is not entitled to any credits upon the complainant’s decree, to which exceptions have been filed, some of which were abandoned on the hearing.

I will take them up in the order of the argument. The first relates to the complainant’s mortgage of $1,420. The claim is that this was paid by the defendant issuing to the complainant fourteen shares, of the par value of $100 each, of the capital stock of the E. M. Herbert Company. Herbert ran a grocery store at Belmar. He was in financial distress, and the company was formed to take over his stock of groceries, for which $4,000 of capital stock was issued. Twenty-six shares were taken by Herbert and his wife, and fourteen shares by the complainant. It appears that the complainant had been, and nearly up to the time of the filing of the bill, financing Herbert and his company, and he was taken into the corporation to add to its credit. The complainant was a man of means and good standing in the community. Herbert, his wife, daughter and the lawyer who formed the company, gave testimony tending to show that the complainant agreed to surrender this mortgage in consideration of the stock. The complainant’s insistence is that the stock was issued to him, and he gave credit for it to Herbert on an indebtedness which Herbert then owed. Herbert, at that time, according to the evidence, was heavily indebted to the complainant. The complainant kept a set of books of his financial dealings with Herbert, and in the books he recorded the credit of the fourteen shares to the open account which was unsecured. The exceptant argues that by the great weight of testimony, his claim is made out. If the weight is to be measured by the number of witnesses, this may be conceded, but that, I take it, is not the guide. The circumstances arc clearly against the exceptant’s contention. It is hardly conceivable that the complainant agreed to surrender gilt-edged security for capital stock in a corporation which was of doubtful value, when at the same time the complainant was a heavy creditor of Herbert, and with little hope of collecting his debt. The facts that the complainant credited the item of stock on his books, which were regularly and carefully kept; that he did not cancel the mortgage, and that he brought foreclosure proceedings thereon, to which there was no protest until the property was about to be sold, weighs strongly against the likelihood that such a bargain was made. Their testimony was not satisfactory to the master, and upon a careful reading, does not convince me that the claim is made out. The master had the witnesses before him, and opportunity to observe them, the manner in which they gave their testimony, which, of course, is not at all reproduced in the cold type of the transcript sent up, and I see no reason for disturbing his view on this aspect of the case.

The remaining exceptions relate to credits claimed upon another mortgage known as the Arthur mortgage, which was assigned by Mrs. Arthur to the complainant, for $1,600. This mortgage was given to secure two notes, one of $1,000, the other of $1,826.88. The $1,000 note was paid oil, and is not involved. At the time the complainant took an assignment, it appears by the endorsement on the $1,826.88 note that there was $1,594.33 due for principal. The complainant arranged to pay the mortgage in August of 1910, but it was not assigned to him until December following.

Fourteen checks made by the defendant, thirteen of which were made to the order of the complainant, and one to the order of “Seacoast” (meaning the Seacoast National Bank) for $57.30, were produced before the master. The defendant claims that the amounts of these checks were to be applied by the complainant on the Arthur mortgage. The check to the Seacoast is not brought home to the complainant, except by the testimony of Herbert. The opinion I form from the testimony is that it is connected with payments made by Herbert on the note of $1,000.

The remaining checks, with the exception of one for $11, the complainant admits he received, but he states that they were in liquidation of the unsecured debt and in repayment of moneys which he was continually advancing to Herbert or his company during the period when these checks were given. And the complainant’s books show that he gave credit to Herbert, or his company, on the open account. I am entirely in agreement with the view of the master that there was no application by Herbert of the sums of these checks towards the payment of the mortgage, and that the complainant did not receive them as payments. It would be strange indeed, incomprehensible, that the complainant should, during the period of these checks, lend his money to Herbert and his company without security, receiving in return moneys in discharge of his secured debt. He was, as the defendant’s counsel says, Herbert’s “financial angel,” constantly advancing money, and the inference from the circumstances strongly supports the complainant’s evidence that these various checks were in repayment of' moneys which he had, or was, advancing.

The defendant sought to charge against the mortgage 14/40’s of the rent of the store in which the E. M. Herbert Company was carrying on its business, and that fraction of Herbert’s wages, at the rate of $18 per week. I disallowed them at the hearing, because if these amounts were owing to Herbert from anyone, the E. M. Herbert Company was the debtor.

An account for merchandise of $185.57, $19 of which was furnished after the corporation was formed, was also endeavored to be used as a credit. The evidence does not show any agreement on the part of the complainant to apply this amount in reduction of his mortgage. The complainant has not been furnished with a statement of the account, but agrees that if this sum is justly due, it ought to be, and he will apply it, in reduction of the unsecured debt — and there it belongs.

The exceptions will be overruled, and the stay heretofore granted will be discharged, with costs.


author: Griffin, V. C.

text:
    Holland Reformed School Society of Passaic County, New Jersey, a corporation, v. Jacob DeLazier and The Lewis Grease Cup Company, incorporated.
    [Submitted September 21st, 1914.
    Decided November 18th, 1914.]
    1. A purchaser, assuming payment of a mortgage on the premises executed by the vendor, becomes, as between the parties, the principal debtor, and the vendor is only a surety.
    2. Where a purchaser assumed payment of a mortgage'on the premises executed by the vendor, the mortgagee might, by way of subrogation, have the benefit of all collateral obligations which the person standing in the situation of a surety for another holds for indemnity, and the remedy of the mortgagee in equity is independent.of a foreclosure suit, unaffected by the acts of 1880 or 1881.
    3. Where a vendor, selling to a purchaser assuming payment of a mortgage on the premises executed by the vendor, paid a deficiency on foreclosure of the mortgage, he became subrogated to the rights of the mortgagee against the purchaser.
    4. Where a vendor, selling to a purchaser assuming payment of a mortgage on the premises executed by the vendor, paid a deficiency on a foreclosure, and the mortgagee assigned to him all his interest under the foreclosure decree, the vendor became invested with the rights which the mortgagee had to proceed against the purchaser as principal debtor, including the right to proceed against him in equity.
    5. Where a bill in equity is sufficient on its face without reference to allegations of certain covenants entered into between the parties, a demurrer to the bill must be overruled.
    On demurrer to bill.

      Mr. Francis Scott, for the complainant.

      Messrs. Ward & McGinniss, for the demurrant, DeLazier.
   Griffin, V. C.

The bill in this cause was filed to charge the defendants with a deficiency ascertained in a foreclosure suit. To the bill the defendant, DeLazier, demurs, substantially on five grounds— first, that the court was without jurisdiction; second, that the remedy of the complainant is at law; third, that the complainant has no right to call upon the defendant, Jacob DeLazier, concerning the subject-matter of the suit; fourth, that the complainant has no right to the relief that it prays for, and fifth, that there is no privity between the complainant and the defendant, Jacob DeLazier.

The facts appearing by the bill are as follows: The complainant executed its mortgage on the 11th day of July, 1894, to Agnes A. Gould, to secure the amount due on a bond for $1,500, and interest. The mortgage, by mesne assignments, became vested in John O. Benson and Jacob DeLazier, executors of the estate of John O. Terhune, deceased, and they assigned the bond and mortgage to David H. Wortendyke, and the bill alleges that said Jacob DeLazier, in consideration of said assignment of said bond and mortgage to David II. Wortendyke, and also in consideration that said Jacob DeLazier had been the owner of said property and had assumed and agreed to pay said mortgage, expressly covenanted that he would be responsible for said sum of money in consideration of said mortgage; and that he would pay any deficiency that might arise upon the foreclosure of said mortgage. The complainant conveyed to DeLazier on December 14th, 1908, and DeLazier assumed the mortgage. DeLazier and wife conveyed to the Grease Cup Company subject to the mortgage, which the Grease Cup Company assumed and agreed to pay. David H. Wortendyke foreclosed the mortgage and there was a deficiency of $1,306.96, with interest from January 13th, 1914. Wortendyke sued the complainant in the Passaic circuit and obtained judgment, and in consideration of paying the judgment, Wortendyke, in the language of the bill—

“assigned in writing, in consideration of the sum of $1,314.89, to your orator, its successors and assigns, all the right, title and interest under the said final decree and said judgment, and all the sum and sums of money that may be had or obtained on any proceedings to be had thereupon, and further constitutes the plaintiff, its successors and assigns, his lawful attorney to demand and receive, and to pursue any action at law or in equity for the recovery of the money due and to become due by reason of said assignment, and against any person or corporation as plaintiff may deem fit. Said assignment was duly executed and acknowledged by said David H. Wortendyke.”

When DeLazier assumed the payment of the mortgage, as between the parties, DeLazier became the principal debtor, and the liability of the complainant was that of surety only; and by a well-settled doctrine of equity, the mortgagee, as a creditor, may, by way of subrogation, have the benefit of all collateral obligations which the person standing in the situation of surety for another holds for his indemnity. And the remedy of the mortgagee is not affected by the acts of 1880 or 1881. The remedy in equity is independent of the foreclosure suit. Green v. Stone, 54 N. J. Eq. 387, 390, 391. This conclusion was reached by the court of errors after a careful examination of the cases cited in the opinion, which are unnecessary to refer to here. Therefore, when the complainant, as surety, paid the deficiency, it became subrogated to the rights of the mortgagee against DeLazier and the Grease Cup Company; and when the mortgagee assigned to the complainant, it became invested with all the rights which the mortgagee had to proceed against the defendants as principal debtors in the assumption of the debt. One of these rights was to proceed against them in equity.

Touching the allegation in the bill that when Benson and DeLazier, as executors of Terhune, assigned the mortgage to Wortendyke, DeLazier, in view of the liability on his prior assumption of the mortgage, covenanted to pay any deficiency that might thereafter be made to appear — this seems to be an independent covenant for the breach of which a suit at law might be maintained. Bolles v. Beach, 22 N. J. Law 680. But as the demurrer is to the entire bill, and as the bill is sufficient upon its face without the subsequent covenants entered into between DeLazier and Wortendyke when the mortgage was assigned, the demurrer should be overruled, and a decree will be advised accordingly..


text:
    Robert H. Ingersoll et al., trading, &c., v. Sam Goldstein.
    [Submitted February 3d, 1915.
    Decided February 19th, 1915.]
    1. At common law, where the vendor sells his whole interest or property in chattels, with conditions restricting the sale thereof, the title passes, but the conditions, being against public policy, are void.
    2. Act April 1st, 1913 (P. L. p. 377), forbidding merchants from discriminating goods of any maker by depreciating the value of such products, &c., is in derogation of the common law, and must be strictly construed.
    3. Under act April 1st, 1913 (P. L. 377), forbidding merchants from discriminating against goods of any maker by depreciating the value of such products, &c., except in cases where the goods do not “carry any notice prohibiting such practice,” a notice in an Ingersoll watch, under the heading “License,” forbidding a sale at less than the price therein fixed, but not in terms prohibiting, the practice denounced by the statute, is insufficient.
    Heard on bill, answer and replication.

      Mr. George L. Record, for the complainants.

      Mr. J. Emil Walscheid, for the defendant.
   Griffin, V. C.

The bill in this cause, among other things, alleges that the complainants are manufacturers and dealers in watches, widely advertised throughout the country as Ingersoll watches and sold under certain trade names, viz.: the Ingersoll Eclipse Watch, the Ingersoll Junior Watch, and the Ingersoll Dollar Watch, the latter being also known in the trade as the Yankee Watch. The bill charges that large sums of money have been expended by the complainants in advertising; that in all the advertising these watches are announced on sale at retail, the Dollar Watch at $1.00; the Eclipse Watch at $1.50; and the Junior Watch at $2.00. The bill is framed under chapter 210 of the laws of 1913, page 377. The statute without its title and enacting clause, is as follows:

1. It shall be unlawful for any merchant, firm or corporation, for the purpose of attracting trade for other goods, to appropriate for his or their own ends a name, brand, trade-mark, reputation or good will of any maker in whose product said merchant, firm or corporation deals, or to discriminate against the same, by depreciating the value of such products in the public mind, or by misrepresentation as to value or quality, or — by~pricg_jnducement, or by unfair discrimination between buyers, or in any other manner whatsoever, except in cases where said goods do not carry any notice prohibiting such practice, and excepting in case of a receiver’s sale, or a sale by a concern going out of business.
2. Any person, firm or corporation violating this act shall be liable at the suit of the maker of such branded or trade-marked goods, or any other injured person, to an injunction against such practices, and shall be liable in such suit for all damages directly or indirectly caused to the maker by such practices, which said damages may be increased threefold, in the discretion of the court.
3. This act shall take effect immediately.
Approved April 1st, 1913.

Eor the purpose of this case I find that the bill alleges a perfect right against the defendant, provided the notice is as prescribed by the statute. It is as follows:

License.
Robt. H. Ingersoll & Bro., Makers.
New York, Chicago, London, San Francisco.
Mechanism in this watch is covered by United States Patents and the watch is licensed and sold under and subject to the following conditions assented to by purchase and controlling all sales and uses thereof, any violation of which license conditions revokes and terminates all rights and licenses as to this and all other watches of makers in violator’s possession and subjects the violator to suit for infringement of said letters patent.
(1) Jobbers may sell only to retail dealers, may not sell to anyone designated by makers as objectionable, may not detach or sell without this notice and may sell only at rates specified in schedules furnished by makers.
(2) Retailers may advertise and sell only to buyers for use at one dollar.
(3) No donation, discount, rebate, premium or bonus may be allowed or given in connection with any sale at wholesale or retail.
(4) It will not be offered as a premium or bonus for or in connection with the sale of other goods; or included in any combined sale.
(5) Guarantee with date of sale endorsed thereon to accompany each watch.
Ingersoll Dollar Watch.
Trade Mark Reg. U. S. Pat. Off.
Nickel Finish. Arabic.

The foregoing is a copy of the notice carried with the Ingersoll Dollar Watch. Similar notices were carried with the other watches, the only change being the substitution of the price at which they were to be sold for the words “One Dollar.”

The prayer of the bill is that the defendant be restrained “from advertising for sale or from selling any of the watches of the complainants at a less price than that advertised as the price to the consumer by your orators.”

The defendant, by a pleading styled an answer, but which is really a demurrer, sets up the following defence:

“That this defendant admits the allegations in the said bill of complaint contained, but denies that the facts therein stated entitled' the complainants to the relief prayed for in the said bill of complaint, and this defendant hopes he shall have the same benefit of this defence as if he had demurred to the said complainants’ bill.”

In the absence of the statute, it is quite clear that the complainant could not obtain relief in this court under its bill, because at common law, where the vendor sells his whole interest or property in chattels, with conditions restricting the sale thereof, the title passes, but the conditions, being against public policy, are void. Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373; citing Lord Coke, 2 Coke on Littleton, § 360; Bauer & Cie v. O’Donnell, 229 U. S. 1.

By the statute under consideration, the legislature has modified this common law rule of public policy, setting up a new standard of business morals, but the standard thus fixed, being in derogation of the common law, the statute must be strictly construed. Compton v. Pierson, 28 N. J. Eq. 229, 231; Tinsman v. Belvidere and Delaware Railroad Co., 26 N. J. Law 148, 166; Shields v. Lozear, 34 N. J. Law 460; Eayre v. Earl, 8 N. J. Law 359-362; Sinnickson v. Johnson, 17 N. J. Law 120, 144.

The rule is very plainly stated in Sinnickson v. Johnson, supra, as follows: “It is the well settled rule, that statutes in derogation of common law rights are to be strictly construed; and we are not to infer that the legislature intended to alter the common law principles, otherwise Ilian is clearly expressed.” Citing 11 Mod. 149.

In Eayre v. Earl, supra, the case called for a consideration of the act abolishing imprisonment for debt; the action was against the sheriff for escape. The act provided that the bond taken should be “in double the sum for which” the defendant was “arrested or taken in execution.” The defendant was taken in execution for the costs as well as the debt, yet the bond was taken in double the amount of the latter only; the court said, “This statute introduces a new principle in derogation of the common law, and in the statute itself, and by a strict compliance with its enactments the officer must find his ‘protection/ ” and entered judgment against the sheriff for a voluntary escape.

Construing this statute in the light of the foregoing decisions, the first question to be settled is, Did the goods, i. e., the watches referred to in the bill, “cany any notice prohibiting such practice,” i. e., the practice condemned by the act?

Under the statute, to afford relief, not only must the merchant and others therein mentioned “appropriate for their own ends a name, trade-mark,” &c., or to do other things denounced in the first section, “for the purpose of attracting trade for other goods,” but the goods of the merchant must carry a notice “prohibiting such practice.”

There was carried with these watches the notice above-mentioned (called a license); this notice, however, does not in terms prohibit the practice denounced, but, on the contrary, it forbids under certain penalties the sale under all conditions at a price less than that fixecl; the notice is too broad; it, in fact, forbids a sale to which the act has.no application. Therefore, construing the statute in the light of the above decisions, I must find that the watches did not “carry any notice prohibiting” the practice condemned by the statute, and will advise a decree dismissing the bill.


text:
    In the matter of Arthur D. Colyer, a solicitor of the court of chancery of New Jersey.
    [Decided April 29th, 1915.]
    Where an attorney falsely represented to Ms client that he had instituted divorce proceedings, and by means of such misrepresentations procured moneys which he claimed were for necessary costs, he should, in the absence of defence or explanation, be disbarred.

      Mr. Nelson B. Gaskill, for the rule.
   Griffin, V. C.

Hilda E. Hummel filed her affidavit setting forth that she was married on June 15th, 1910, to William M. Hummel, and lived with him in New Jersey until the 1st day of January, 1912, when he deserted her. In November, 1913, Mrs. Hummel discussed the matter of divorce with a friend who was a member of the New York bar, and thereupon he introduced her to Arthur D. Colyer. She says she signed a, number of papers for Mr. Colyer, which, she ivas informed, related to her divorce proceedings. On the 28th day of January, 1914, she received a letter from Mr. Colyer as follows:

“I learn that Mr. Peavey was talking to you over the phone this morning during my absence from the office. I have had no opportunity previously of informing Mr. Peavey that there were more papers for your signature and which required immediate attention. Also considerable costs in your suit have accrued and should be paid.
“I would be pleased, therefore, to have you meet me at the office tomorrow (Thursday) at say 2: 30 P. an. if possible.”

Upon receipt of this letter, as a result of a telephone communication between them, an appointment was fixed at the Hotel Astor on January 29th, 1914, at which time they met and she signed a number of papers, one of which she was informed was an order to publish. Colyer then informed her that costs amounting to $37 had been expended and paid, and that it was necessary for her to pay him some money. She then paid him $100, taking his receipt for the same, in which receipt it was stated “ac’t costs in Hummel v. Hummel.” She had been informed that the entire cost would be $150. Colyer informed her that the $37 had been incurred in making several trips to Trenton. At the same time he informed her that she would hear from him in the course of ten days or two weeks; that owing to the circumstances of Hie case, it would not be necessary to advertise for six weeks, as he had previously informed her; that he had found, when he was in Trenton, that it would only be necessary to advertise ten days. She did not hear from him again until the 18th of February, 1914, when he telephoned her that there were additional papers requiring her signature, and they again met at the Hotel Astor on February 18th, at nine o’clock,-and she signed additional papers, one of which papers she said asked the judge to appoint a referee. At that time Colyer informed her that considerable additional expense had been incurred and it was necessary for her to make a further payment, and she paid him $25 more, taking a receipt for the same, “account costs in Hummel v. Hummel.” At this time she was informed by Colyer that the paper asking for the appointment- of a referee was to be sent to Trenton, and would be sent back to a referee, either in Jersey City or Elizabeth, and that the matter would be disposed of and a decree entered in the latter part of the month. She says she has not seen or heard from Colyer since that time.

Annexed to the affidavit is a certificate of Robert H. McAdams, Esquire, clerk in chancery, certifying that he had examined the indices of his office from May 10th, 1912, to the date of the certificate, July 9th, 1914, and that he did not find any divorce suit of record brought by Hilda. R. Hummel against William M. Hummel. Upon this affidavit and certificate an order was made, returnable before the chancellor at the chancery chambers in Jersey City, on Monday, the 27th day of July, 1914, requiring the said Colyer to show cause why he should not be adjudged guilty of malpractice as solicitor of this court in the matters aforesaid, and thereupon be debarred from further practice as a solicitor or counsel of this court, or be suspended from further practice as a solicitor of this court,-for such period of time as the chancellor should order, or to be otherwise disciplined and punished for his misconduct as might be deemed equitable and just.

Certified copies of the foregoing order to show cause and affidavit and order referring the matter to a vice-chancellor were served personally on Colyer. On the return day of the order to show cause the vice-chancellor fixed Thursday, the 22d day of October, 1914, at eleven o’clock in the forenoon, at the chancery chambers in Jersey City, as the time and place of hearing.

A certified copy of the order fixing the time and place of hearing, together with a notice of hearing, were served personally upon Colyer, on the 17th day of August, 1914. At the time and place appointed the hearing was had. Colyer did not appear, was not represented by counsel, nor did he in any manner communicate with the court. The case was proceeded with, and all the charges contained in the affidavit were proved to my satisfaction. It therefore appears that Mr. Colyer obtained from Mrs. Hummel $100 on the 29th day of January, 1914, on the representation that her suit for divorce had been instituted and considerable expense incurred; also that on February 18th, 1914, he obtained from her the further sum of $25 upon the representation that the suit was progressing; all of which representations were false and fraudulent. This brings the case directly with In re Simpson, 82 Atl. Rep. 507, where a solicitor was disbarred for obtaining money from a client under false pretences.

Mr. Colyer, although duly notified, did not appear either to deny the charges or offer any evidence in extenuation of his conduct. Hnder such circumstances, as his conduct, unexplained, discloses him to Be one unfit to occupy such a position of trust as that of solicitor, he should be permanently debarred from further practice as such in this court, and a decree will be advised accordingly.

I am authorized to say that this matter was considered in conference, and that the chancellor and all the vice-chancellors concur in these views.