text:
    In the matter of the application of the West Jersey Traction Company to define the mode of crossing the line of the West Jersey and Seashore Railroad Company line, in the borough of Haddonfield, in the county of Camden and State of New Jersey.
    [Filed January 4th, 1900.]
    1. On an application to define the mode of crossing a steam railroad by a ■trolley road, a map filed by the petitioner, showing that the route of a trolley iroad crosses the railroad at the point where the mode of crossing is to be defined, is sufficient, though it does not exhibit any indication of a crossing.
    2. It will be presumed, in the absence of proof, that an instrument bearing the seal of a corporation, and the signature of its secretary and solicitor, was • signed and sealed by proper authority.
    3. The adoption of a resolution by the board of directors of a corporation, reciting that an act of its secretary and solicitor was done with their aequi- - escence, and that they ratified it, is equivalent to an original authorization.
    4. Under Pamph. L. 1853 p. 368, requiring a railroad company to construct bridges or passages over or under its railroad where any “roads shall cross •the same and to alter and grade the said roads so that carriages, horses and • cattle, passing and repassing, shall not be impeded thereby,” the railroad has the right to cross a highway at grade.
    5. On an application to define the mode of crossing a railroad by a trolley line, the question is whether, taking into account the danger of collision, and facility and economy with which it may be avoided by adopting a crossing other than at grade, the latter method should be required.
    On final hearing.

      Mr. E. Ambler Armstrong and Mr. David J. Pancoast, for 'the petitioner.

      Mr. Joseph H. Gaskill and Mr. Herbert A. Drake, for the West Jersey and Seashore Railroad Company.
   Reed, V. C.

The West Jersey Traction Company, which operates a trolley ¡.line, filed a petition in this court asking this court to fix the manner in which ifc should cross the tracks of the West Jersey and Seashore Railroad Company, in the borough of Haddonfield.

An answer to the petition has been filed by the latter company. It is objected in limine that the map of the route as filed by the petitioner, does not show that the route crosses the West Jersey and Seashore Railroad Company. What is meant by this objection is that the map does not exhibit any indication of a crossing.

But the map shows that its route runs across the right of way of the steam road at the point where the mode of crossing is to be defined. This is all that is essential.

It is next objected that the application to this court was not made by the West Jersey Traction Company, but was in fact made by the Camden and Suburban Railroad Company, which owns a majority of the stock of the former company. The purchase of the stock occurred in April, 1896, since which time there seems to have been no books of account kept by the West Jersey Traction Company, which company was leased to the Camden and Suburban Railroad Company. The petition is over the seal of the West Jersey Traction Company and signed by its secretary and solicitor. This raises the presumption that the seal was affixed by proper authority. Leggett v. New Jersey Manufacturing Co., Sax. 541; Manhattan Manufacturing Co. v. New Jersey Stoch Yard Co., 8 C. E. Gr. 165.

But it is said that this prima facie presumption is rebutted by proof of the want of corporate authority to fix the seal and execute the corporate act; that the minute-book of the petitioners fails to show that William Browning was authorized to attach the seal of the company to the present petition.

But by a resolution appearing in the book under date of September 11th, 1899, after the filing of the petition, it is recited that Browning did the act with the acquiescence of the directors who ratified his act.

This adoption of the act of the secretary was, I think, equivalent to an original authorization. Kountze v. Morris Aqueduct Co., 29 Vr. 303; S. C., 695.

The main question is in respect to the manner in which the trolley road should cross the steam road.

It is insisted by the counsel of the trolley road that the steam road is itself illegally crossing a highway at grade and that the trolley has the right to use the surface of the highway in the same manner as any other vehicle. The duty of the steam road to elevate or depress its tracks so as to leave the surface of the highway free for. the passage of vehicles, horses, &c., is put upon the provision of the ninth section of the charter of the Camden and .Atlantic Railroad Company (Pamph. L. 1852 p. 268):

That it shall be the duty of the said company to construct and keep in repair good and sufficient bridges or passages over or under said railroad where any public or other roads shall cross the same, and to alter and grade the said roads so that the passage of carriages, horses and cattle passing and repassing shall not be impeded thereby.”

Similar provisions are to be found in other charters of steam roads, and I am not aware that it has ever been held that this provision compelled the railroad to elevate its tracks so that it shall not cross public roads at grade. Railroads pass over public roads when they cross at grade. The act compels the railroad to conform the surface of the highway to the surface of the railroad, so as not to impede the passage of cattle and horses over the railroad, and this is all. This has always been the practical construction of these provisions. The railroad then has the right to cross the highway at grade.

The question then is whether the trolley shall be compelled to cross the railroad otherwise than at grade.

No one suggests that it should be compelled to build a structure which will permit the passage of the trolley cars above the railroad tracks.

The insistence is that it should build a tunnel so as to permit its cars to pass underneath the railroad. The argument in favor of such a crossing is grounded upon the danger of collision which will arise from a grade crossing. It cannot be denied that there is an element of danger in every grade crossing of a steam railroad. Every public road that crosses a steam road'at grade presents a point of possible peril. ■ If all persons were constantly vigilant danger would disappear or be reduced to infinitesimal proportions. So long, however, as men are careless, as they always will be, the instances of-collision on grade crossings will engage the attention of courts and create the wish that grade crossings may be abolished.. The policy of the state in fostering the building of railroads as instruments for the transportation of persons and merchandise- has not required elevated or underground crossings. The expensé which would attend the construction of railroads, if so compelled, would be a practical prohibition against the opening up of new sections of the country by new railroads. So grade crossings have been permitted, and where such crossings are, by their environments, exceptionally perilous, such dangers have been guarded against by such provisions as gates, flagmen and signals.

It cannot be said, therefore, that because there is an element of danger in a grade crossing, some other method is to be provided. The question is whether, taking into account the degree of such danger in the particular instance, and also the facility and economy with which such danger may be avoided by adopting some crossing other than at grade, the latter method should be required. The statute in the present case fixes the conditions upon which a crossing other than at grade may, in the discretion of the chancellor, be ordered, namely, first, when such other method is reasonably practicable, and second, where the public safety so requires. The discretion of the chancellor must be controlled by the conditions attending the particular crossing.

At the point where the present trolley road crosses the steam road, there passes and repasses along the main street, over the steam road, five hundred and thirty-five wagons every twenty-four hours. Now, it is said that a trolley car is a vehicle, having a right to use the surface of the highway, without compensation, because it is a vehicle. It is urged that if these five hundred and thirty-five wagons pass each day at grade, why cannot the trolley cars of the trolley company do the same?

If the motive power which propels these cars was as certain and continuous in its operation as the motive power which propels the wagons, this argument would be sound. But it is not.

The evidence- shows conclusively that, from causes therein stated, the power is liable to be interrupted at any moment. Nor am I satisfied that the momentum acquired by a car, before reaching the track, can be safely relied upon to carry the car completely over the track or tracks, for if, while acquiring this momentum, the power should be withdrawn at a critical point, too late to stop the car before reaching the track, it would be left helpless in the path of danger. While such an occurrence may not happen for months or years, yet it is proved that collisions have occurred, and they will occur until a safer method of propulsion is discovered. The query is now whether the conditions here are such as to so increase the likelihood of such an occurrence as to impose upon me the duty of advising an underground crossing. In three instances I have advised a grade crossing of a railroad by a trolley line. In each of these the conditions were unlike the present. In two the railroad crossed was used infrequently by freight trains running along at a slow rate of speed. ' In the other the trains were few, with a station at which all the passenger trains come to a stop within a short distance from the point of crossing.

In the New York and Long Branch Railroad Co. v. Atlantic Highlands, &c., Railway Co., 10 Dick. Ch. Rep. 522, the chancellor ordered a grade crossing. In that case ninety trains passed over the railroad at that point, several of them at high speed and without stopping. The underground crossing there proposed would require a change in the grade of two streets and an expenditure of between $60,0.00 and $70,000, and also subject the company to the payment of damages to the owners of property which bordered upon the streets. The depression of the street would have materially interfered, also, with the facility of approach from the street-to the station of the steam railroad and would have caused considerable inconvenience to the public. Under these conditions the chancellor coupled with his permission to cross at grade the duty of maintaining a towerman with a Gibbs signal system.

In this case there are in summer seventy-two regular trains and sometimes thirty special trains running over the steam road. Of thesé forty stop at Haddonfield station, near the point of crossing, four of which are freight trains. The remainder of the one hundred and two trains are fast trains running between Camden and Atlantic City, crossing Main street, Haddonfield, at a speed of from forty to sixty miles an hour. To the south from this crossing there is a view of the track of from one-half to three-quarters of a mile.

• .An undergrade crossing can be built fourteen feet in width' for $12,653. The slope of the street favors an undergrade crossing, as there is a rise towards the steam railroad tracks from each side. Only fourteen feet of the street need be depressed, and on each side of an iron railing fencing the tunnel there would be ample room for the passage of vehicles, because Main street is an exceptionally wide avenue. Therefore, no material inconvenience would result to those using the street in going to and from the station of the steam railroad.

Under these conditions, in my judgment it is reasonably practicable to avoid a grade crossing, and I think that public safety requires it. The details in respect to the undergrade tunnel will be fixed upon the framing of the decree. (,


source: Caselaw Access Project

author: Reed, V. C.

license: Public Domain

text:
    Anna Plummer, by Mary E. Moore, her guardian, v. Emma Cordelia Gibson.
    [Filed January 4th, 1900.]
    1. Where a testator left his estate to two daughters, as joint tenants, and to the survivors of them, on condition that they should live together on the estate, because he expected one to care for the other, who was an imbecile, with the intention that her interest should be used for her support by the former, as trustee, according to her discretion, the trustee’s interest could not .be taken by the guardian of the imbecile for her support, when the trustee had not refused to support her.

      2. Where a trustee is given discretionary power by will to devote, not only the income, but the entire trust estate, for the support of an imbecile beneficiary, a court of equity can direct that a part of the corpus of such estate, as well as the income, shall be used for that purpose, if essential.
    3. A trustee of an imbecile is not disqualified to have custody of the person of such imbecile merely because he is entitled to the imbecile’s estate after death.
    On final hearing.

      Mr. Horace F. Nixon and Mr. David O. WatJdns, foi the complainant.

      Mr. Glement H. Sinniakson, for the defendant.
   Reed, V. C.

James L. Plummer, by his will, left the residue of his property to his two daughters, Emma Cordelia Gibson, the defendant, and Anna Plummer, an imbecile, as joint tenants, and to the survivor of them; and appointed Emma Cordelia Gibson trustee of Anna’s share, with power to sell or dispose of any of said property, as well the share of Anna as her own, whenever in her judgment such sale should be advisable.

The testator then proceeded as follows:

“ I desire her to see that my daughter Anna is suitably nursed and attended and provided for, so long as she may live, and authorize said trustee to apply principal or income of Anna’s share of said residue as may answer for that purpose. I make this disposition of my property because I deem my other children well provided for, and that my daughter Emma Cordelia Gibson has always lived with me and cared'for me and for her afflicted sister Anna. I ■desire to provide as far as possible for the care and maintenance of Anna, who is unable to care for herself, and I regard my property as no more than sufficient for the comfortable maintenance and support of my said two daughters.”

James L. Plummer, the testator, died Jamlary 23d, 1892, aged eighty-two. Previous to his death Anna had been declared a lunatic, and Mary E. Moore, a sister of Anna, was appointed guardian of her person and property on June 9th, 1891.

Up to the time of her father’s death, Anna, the imbecile, had lived with him and her sister, Emma Cordelia Gibson, who was her father’s housekeeper. Anna remained with her sister, Emma Cordelia Gibson, after their father’s death until June 19th of that year, when Mary E. Moore, her guardian, visited the house where they lived, and took Anna away with her. From that time Anna has lived with her sister, Mary E. Moore.

Mary E. Moore now files the bill in this case in behalf of her ward, for the purpose of compelling Emma Cordelia, her sister, and the trustee for the imbecile sister under the will of their father, to account to the imbecile ward, and for the further purpose of getting a decree of this court fixing the amount which shall be paid, both now and in the future, by' Emma Cordelia to the complainant.

At the time of his death, James L. Plummer, was the owner of considerable real estate in and around Swedesboro, New Jersey. Some of it was mortgaged, and Mrs. Moore, by inducing the mortgagees to foreclose, created a surplus belonging to the estate, amounting to $3,356.34, which surplus has been paid into this court. There are still left belonging to the estate fourteen lots variously valued. The tract styled in the testimony “No. 14” is occupied by Mrs. Moore and her husband. In that tract, I understand, Mrs. Moore hás owned a one-half interest, the other one-half interest belonging to the estate, and there is a mortgage upon the property amounting to $2,000. The real estate belonging to the estate is now worth probably $6,500, possibly $7,000. The imbecile’s one-half of this, at the latter figure would be $3,500, which, added to her one-half interest of the money in court, namely, $1,678.17, would make up the sum of $5,178.17. Mrs. Moore has a sum of $191.50 coming from another source, which also belongs to the imbecile. Mrs. Gibson has a balance of $610.75, less her commissions, in hand, one-half of which balance belongs to the estate. The aggregate of all these amounts will reach less than $6,000.

Now, the guardian of Anna asks that she be allowed $5 a week for her care and maintenance since January 19th, 1892, and that this court shall decree that Emma Cordelia, as trustee of Anna’s estate, shall hereafter pay the same sum per week, or that the property of Anna shall be sold. Five dollars a week during the past period mentioned would amount to over $1,900. If all of Anna’s interest in the money now in court, namely, $1,678.17, should be turned over to the guardian, it would not pay this claim for past services, nor would it if the guardian is charged with the balance in her hands, amounting to $191.50. It would require a part of the small balance in the hands of the trustee to liquidate this claim. Any future allowance would have to come out of the income of the principal of about $3,500 worth of real estate. Indeed, the complainant claims that all the estate left jointly to the sisters can be sold for this purpose. This insistence is rested upon the notion that a one-half interest was left Emma Cordelia in consideration for her care and maintenance of her sister, and so, inasmuch as Mrs. Moore has relieved her of this care, Mrs. Moore is entitled to all the property if she needs it for that purpose. There is no doubt that one reason, if not the principal reason, why the testator gave one-half of the residue of his property to Emma Cordelia was because he expected her to care for his imbecile daughter, but it is transparent that she was to care for her under the roof which he had .provided for both of them. That was the basic idea of this provision. The sisters were to live together after, as they had lived before, his death. Emma Cordelia was to take care of Anna after his death in the same manner as she had before his death. To provide for their support while carrying out this intention of the testator, he expressly gave them the residue jointly, with the power conferred upon Emma Cordelia to sell any or all of the property. There is no doubt whatever that the testator expected and wished that Anna should remain with her sister, Emma Cordelia.

But the technical control over the person of Anna remained in Mary E. Moore, the guardian appointed by the Gloucester orphans court. If Emma Cordelia had refused to keep her sister there would have been good ground for insisting that a trust was impressed upon the property given to her for the support of her sister, but upon what ground the share of Emma Cordelia can be taken to support her sister, when she never refused to support her, I fail to perceive. A view which possesses much more plausibility is that one-half of the property was given to Anna with the intention that it should be administered by Emma Cordelia in accordance with her discretion and upon the condition that Anna should live with her, and that, therefore, the property could only be utilized for Anna’s benefit in the way intended by the testator. However, notwithstanding the testator created a trust in Emma Cordelia for the benefit of Anna Plummer, which she was to execute, this court will direct such parts of the trust funds as are essential for the support of the ward to be paid to the guardian. The control of a court of equity over trust funds under such circumstances depends upon the extent to which the property was devoted by the settler of the trust. The court will not take the corpus of the estate from the possession of the trustee (Matter of Wilson 2 Pa. St. 325, 329), unless it is apparent that the trust was created to last only until a committee should be appointed. In re Earps’ Estate, 2 Pars. Eq. Cas. 180. A court has jurisdiction in equity to require the trustee of the property of a married woman who has become insane, the income of which is secured to her sole and separate use by a marriage settlement, to pay over to her husband, as guardian, such portion of the income as may be reasonable to aid in her support. Davanport v. Davanport, 5 Allen 464.

The trust, in the present instance, gave the trustee the power to devote not only the income of Anna’s one-half interest but the power to sell the corpus of the one-half interest, if essential, for the support of the lunatic. A court of equity, therefore, has the power to direct, if necessary for the maintenance of the imbecile, that not only the income of the estate but a portion of the corpus should be devoted to that purpose.

The question then presented is what allowance should be made for the support of the non compos?

In fixing the amount, it must be kept in mind that the imbecile could have had a home with Emma Cordelia. It is apparent that if Anna had'remained with Emma Cordelia, the income of the estate would, have been amply sufficient for her support. The accounts presented by Emma Cordelia show that, under her careful management, the receipts from the property for five and a half years was $3,396 in excess of payments for interest, taxes and repairs. Nor is there anything to show that Emma Cordelia was a cruel or incompetent keeper of her sister. The remarks attributed by Mrs. Moore to Anna, on the day the latter left the house of Emma Cordelia, were not competent evidence. The fact that no act of cruelty is proved, or that Mrs. Moore, so far as appears, ever heard of any act of cruelty, goes far to show that the father’s confidence in Emma Cordelia was well placed. Now, it does not seem fair that Mrs. Moore should ask from the estate of the imbecile a greater amount, as a consideration for her own care, than she would have to pay to another sister, who, so far as appears, would award her attention and care quite as considerate and effective. It is, however, said that Emma Cordelia having a right by survivorship to the remainder of Anna’s estate, is, therefore, by reason of the temptation so presented, rendered unfit to be the custodian over her sister. It is true, an old English rule discriminated against the heirs-at-law or one next entitled to the lunatic’s real estate after death, as custodian of the lunatic. But Lord Macclesfield, in Neal’s Case, 2 P. Wms. 544, refused to apply the rule to the next of kin of a lunatic; and the same chancellor, in Dormer’s Case, 2 P. Wms. 262, said that the maxim that the next of kin, to whom the land cannot descend, is to be guardian in socage, is not grounded upon reason, but prevailed in barbarous times before the nation was civilized. “ It is shocking [he went on to say] to think that any brother or uncle would do murder upon his own brother or nephew to get his estate.” The old rule is now disregarded in England as well as the United States. On the contrary, the law now supposes that “those standing nearest to the lunatic by the ties of kindred will bring him more affection and patient fortitude than strangers in blood.” Matter of Livingstone, 1 Johns. Ch. 436; Ex parte Richards, 2 Brev. 375 ; Matter of Colvin, 3 Md. Ch. 278, 385. A son, if no particular objection exists against him, will be appointed. Matter of Bangor, 2 Moll. 518.

Indeed, when the intention of the testator, who devised this property, and who had lived with both Anna and Emma Cordelia, is recalled, together with the fact that no act of cruelty or incompetence is proved against the latter, I think it would be a far-fetched conclusion to say that Anna would not be safe under the care of Emma Cordelia. Again, while the court has, I think, the power to compel a devotion of a .part of the corpus of the estate of the imbecile to her support, if it is deemed essential, yet any present depletion of the corpus should be made with regard to her future support. She is only fifty-two years of age. Her estate should be so managed as to support her during her life. If the estate had not been depleted by the expenses of the litigation for the probate of James L. Plummer’s will, and if the most lucrative property had not been sold away under foreclosure proceedings, induced by Mrs. Moore’s advisers, the income would have been sufficient to keep Anna in the modest way in which she had always lived, and there would have been in the hands of Emma Cordelia, as trustee, after paying all the debts of her father’s estate, from $2,000 to $2,500.

But the condition of the estate is unfortunately less prosperous, and the allowance must be made upon its present showing.

The guardian has been in the possession of property in which the imbecile has at least $1,000 interest. This has been worth to the guardian at least $1 a week. The total allowance of $3.50 a week is, in my judgment, under the circumstances, all that can be allowed. This would leave $2.50 a week additional to be paid since June 19th, 1892. That would amount to about $980.22. Mrs. Moore has in her hands $191.50 belonging, to the estate of her ward. Deduct this from the amount due, it leaves $788.72. Emma Cordelia has in her hands as trustee a sum of $610.75, one-half of which belongs to the ward. She claims commissions on the sum of $1,814.61, the amount received by her as shown in her last account. In awarding her commissions it should be taken into account that the devise was made by her father of a joint interest in this property to her, coupled with the duty to care for her sister’s share of the property. Keeping in view this consideration, two per cent, is a sufficient allowance, which would amount to $36.30, or, more correctly, $18.15, commissions on Anna’s share. This would leave $287.22. Applying this to the remainder of the amount due Mrs. Moore, it would leave $501.50 still due lier. She is entitled to be paid this amount out of the fund in the court of chancery. The remainder of this fund will be directed to be paid to the trustee, to be by her invested.

. The matter of accounting by Emma Cordelia to her cestui que trust has been adjusted by.agreement of the solicitors, and in respect to it the decree will be made conformably to such agreement.

I will advise no order in respect to future payment, but a right will be reserved to apply in this suit for future directions.


text:
    Aurelius J. Swayze, surviving executor of James K. Swayze, v. Alexander Schuyler et al.
    [Filed January 16th, 1900.]
    1. Where the executor of an unsettled estate of which he was the sole beneficiary, purchased bonds as executor with funds of the estate, which bonds were secured by a mortgage on property owned by Kim subject to such mortgage, the payment of which he had assumed through purchase and inheritance, there was no merger of such interests, and hence the executor was entitled to foreclose the mortgage as against a subsequent owner of the property.
    2. Where a widow accepted an annuity bond secured by a mortgage executed concurrently with another mortgage securing payment of other bonds in lieu of dower, interest accruing on such bond before her death did not constitute a prior lien on the property, as against sucli other bonds.
    3. Where a widow accepted an annuity bond secured by a mortgage executed concurrently with another mortgage securing bonds payable with interest at her death in lieu of dower, the fact that interest on the annuity bond accrued before her death did not entitle her personal representative to payment of such interest as a prior lien on foreclosure of the property, but all the bonds being due, such representative was only entitled to share ratably with the other bonds secured by the mortgage.

      On hearing.
    This bill is filed to foreclose a mortgage given to secure the payment of several bonds, two of which are held by the complainant. The facts are these: One Stiff, on April 1st, 1868, executed four bonds, each for $333.75 — one to Nelson Banghart, another to Euphemia Frace, another to Clarissa Price, and still another to Matilda Price. These four bonds were made payable on April 1st, 1870, with interest from date. .
    He also executed four other bonds on the same day for like amounts, one to each of the said parties, all payable at the death of one Hannah Banghart, without interest. He also executed the mortgage now sought to be foreclosed in this suit, for the purpose of securing these bonds. On the same day Mr. Stiff, to secure a dower interest which Hannah Banghart had in the mortgaged property, made a bond conditioned to pay her interest during her life upon the sum of $1,335, with a mortgage to secure such payment. The two mentioned mortgages were given and recorded contemporaneously. In respect to the bonds, Clarissa assigned her interest-bearing bond to Nelson Banghart. Banghart died March 10th, 1888, and his administrator assigned Banghart’s interest in both bonds, which he then held, to John C. Welsh. Welsh assigned them to the complainant, who is the surviving executor of John K. Swayze.
    Hannah Banghart, the holder of the dower bond, is dead, and an administrator ad pros, has been appointed to represent her in this suit.
    The course taken by the mortgaged property is as follows: Stiff, the owner of the equity of redemption in the mortgaged property, sold the same to James A. Swayze, Edward G. Bulgin and George Bulgin on July 7th, 1873, a one-half interest being conveyed to Swayze, and the other half to the two Bulgins. The Bulgins sold their interest on May 29th, 1880, to James A. and Aurelius Swayze. James A. Swayze died in 1885, and Aurelius, his brother, took the share of James A. by inheritance. Aurelius J. Swayze thereafter owned the whole of the equity of redemption. On April 15th, 1891, he sold a one-third interest in the same to Joseph A. Davis, and on April 24th following he sold his remaining interest to his mother-in-law, Sarah Larue, who, on the same day, conveyed this interest to Josephine Swayze, the wife of Aurelius Swayze.
    A judgment was entered against Aurelius on the 24th of April, and his interest in the property was sold to one Stewart and one John B. Swayze, and they afterwards, in July, 1892, sold their interest to Josephine Swayze, wife of Aurelius. In October, 1892, Davis also sold his interest to Josephine Swayze. Aurelius J. and his- wife, Josephine, thereafter sold the premises to the defendant Schuyler.
    In the deeds, including those made to James A. and Aurelius Swayze, there is an assumption of the payment of the mortgages existing upon the property.

      Mr. John II. Dahllce, for the complainant.

      Mr. William II. Morrow, for the defendant Jacob S. Fisher, administrator.

      Mr. Joseph M. Roseberry, for the defendant A. A. Van Horn and A. A. Van Horn, administrator.
   Reed, V. C.

The counsel of the defendants insist that the complainant cannot foreclose because the debt, for which the mortgage purports to be a security, has been extinguished. This, it is insisted, results from the fact, that the equity of redemption was sold to James A. Swayze and the Messrs. Bulgin, by deeds in which the payment of these debts was assumed by the grantees; that the Bulgins sold their one-half interest to James A. and Aurelius Swayze, by a deed in which there was the same assumption, and that Aurelius succeeded to the rights of James A. Swayze in the property as his heir-at-law. It is argued, therefore, that Aurelius having bought this part of the mortgage debt, he cannot prosecute a suit to foreclose the mortgage.

If Aurelius J. Swayze bought the bonds as executor, there would result no merger by legal operation, because he thereafter held the debt and the equity of redemption in different rights.

To meet this objection, it is said that he bought the bonds with his own money, and therefore he is the substantial.owner. This, however, is not proved. The assignment itselfj whenever actually made, shows that it was made to the complainant as executor. And the probabilities are that whatever money Aurelius J. had to be applied to the purchase of these bonds, was money of the estate of John E. Swayze.

Nor would his assumption of the debt or the assumption of James A., from whom he inherited three-fourths of the equity of redemption, extinguish the debt in his. hands as the executor of James E. Swayze.

If thefunds of the estate were used then the estate is entitled to the security bought with those funds. Aurelius J. had the right to keep alive the mortgage security; and as merger is always a question of intention, it is quite clear that the intent was to preserve the two interests distinct. By their assumption James A. and Aurelius became, in equity,'liable personally for the payment of the mortgage debt, but that in no way prevented the representative of the estate of John K. Swayze, whether such representative was Aurelius J. or a stranger, from proceeding in rem to make the money due out of the real estate security.

But it is said that the property of James E. Swayze goes to Aurelius J. as the surviving child, and therefore, if the funds with which the bonds were purchased were derived from the estate of James E. Swayze it was really the property of Aurelius J. But the estate of James K. Swayze has never been settled. The assets of the estate are still held as a trust by his executor, and any property bought with those trust funds constitute a part of the trust assets.

It is to be observed that the defendants, who raise these objections, are the owners of other portions of the debt secured by the mortgage. Originally,' that debt had nothing to do with either Aurelius J. or John E. Swayze. The purpose of the defendants now is to strip the holder of these two bonds of the real estate security to enhance the security of the holders of the remaining bonds. There is no equity in this endeavor, for the subject-matter covered by the mortgage now is the same as when taken — in fact, better than when taken, for two o'f the outstanding bonds, it is said, have been paid.

I am of the opinion that the debt of the complainant still •exists and that he is in no way precluded from pursuing his suit.

The counsel for the personal representative of the deceased widow raised another question.

They say that, upon the assumption that the interest due to ■her during her life upon her bond was not paid, so much of it as is not paid is a debt which is prior in lien upon the mortgaged premises to the debts which are secured by the other mortgage given at the same time.

Now, the two mortgages, being executed at the same time, would be, ordinarily, concurrent liens.

But the special facts upon which the preference of the widow’s mortgage is claimed is, first, that it was given to secure her •dower interest in the mortgaged property, and secondly, that her debt first matured.

I see no substance in the first of these contentions.

She consented to take her mortgage concurrently with the ■other mortgage, and she had the right to accept any security she ■chose in consideration of her right to have her one-third interest in the property set off to her for life. Having so accepted it, she took it as any other mortgagee. The second point is that the interest upon the bond of the dowress matured before the death of the dowress and that the second class of bonds matured at her death, and therefore the claim first maturing is •entitled to priority of payment out of the mortgaged premises.

I know this has been so held in some courts, but I do not • think it should be adopted as a general rule. The claims have all matured, and if there is anything due upon the annuity bond it should be paid ratably with the rest of the debts secured by the mortgage.

There will be a reference to a master, to ascertain the amounts due, which will include the inquiry whether any, and if so what, "interest upon the dower mortgage remains unpaid.


text:
    Murrell Dobbins et al. v. Charles B. Coles et al.
    [Filed January 18th, 1900.]
    Where a committee was appointed at a regularly-called creditors’ meeting to investigate an insolvent’s assets, and was authorized at a subsequent meeting to adjust claims against the insolvent’s estate, without preference except as to certain secured claims, and to distribute certain of the property, &c., but it did not appear that all the creditors knew of such distribution, or that there had been a regularly-called creditors’ meeting after that at which the committee was appointed, or that all the creditors were present at any meeting when such distribution was discussed and approved, and it further appeared that those present had agreed to a distribution under the impression that the assets would prove sufficient to pay all claims, creditors not sharing in such distribution were entitled, on a deficit, to an accounting of the value of the assets of the estate, in order that a dividend might be declared to all the creditors, though it did not appear that the committee had been guilty of any fraud.
    The general scope of the bill in this case was set out in the former decision rendered upon a demurrer to that pleading. The facts appearing upon the trial were these: Matthew Flemming, in 1895, was engaged in building thirty houses at Collingswood, N. J., upon land the title to which was in the name of one Connolly, but as trustee for Flemming. Flemming became financially embarrassed, left the state, and an attachment was issued against his property.
    On August 16th, 1895, Connolly conveyed what was left of the real estate to the West Jersey Title and Guaranty Company, and on the same day, Darnell, as trustee for the said Flemming, made a bill of sale to the same company of the personal property on and about the premises.
    On September 4th there was a meeting of Flemming’s creditors called at Collingswood, at which meeting a committee was appointed, the members of which were Charles B. Coles, John S. MacNaughton and John A. Gross, for the purpose of investígating the nature and value of the assets of Flemming and to confer with the West Jersey Title Company and Mr. Darnell as to the encumbrances upon Flemming’s property, and to formulate a plan by which Flemming’s operations might be completed and handled, and also a plan by which an amicable settlement might be had with all the creditors, and to report to the creditors on September 9th following.
    On September 9th twenty-five creditors were present at the meeting, and the report of the committee was read and the recommendations therein were approved. The report was signed by Coles and Gross, two of the three members of the committee. The report showed property estimated at $100,250, encumbrances amounting to $60,150 .and claims amounting to $27,732.32.
    John S. MaoNaughton, Charles B. Coles, Charles R. Stevenson, John A. Gross and Thomas D. Weaver were appointed a committee to act for the creditors and the West Jersey Title Company was appointed trustee.
    On September 11th, at a meeting of creditors, it was resolved that a new agreement, embodying the suggestions made at that meeting between Flemming and the creditors, be prepared. This agreement, after reciting the attachments which had been made by Connolly and Darnell and Flemming to the title company and declaring a trust in the title company in favor of the creditors, provided that the committee representing all the creditors was authorized to adjust the claims to the best interests of all the creditors and without giving preference or priority to any except the two secured creditors and the two attaching creditors, who had legal preferences or prior liens, and to direct the title company, trustee, to make such sales, conveyances, mortgages or pledges and assignments as the said committee might deem necessary and for the best interests of the said creditors; to direct the collection and payment of any moneys to be raised and paid by the said title company, trustee, and if deemed advisable, to direct the completion of such buildings as were still unfinished, or to surrender the equity of such buildings to the mortgagees, and generally to do all lawful acts necessary to the winding up and settlement of the said operation.

      The two secured creditors alluded to in the said agreement were Charles B. Coles and Schivers aud Moffatt.
    Afterwards a meeting of the committee was held on August 15th, a't which Messrs. Coles, MacNaughton and Gross were present, and the committee, after reducing the value of the property which Coles held as security for his claim, proceeded to distribute property to claimants upon a value fixed by the committee.
    On. motion of Mr. MacNaughton, a member of the committee, the value fixed upon the equity of redemption of lot No. 2, section A, was reduced to $500, and title was made to Mrs. MacNaughton, his wife, at that rate, in settlement of MaeNaughton’s claim against Flemming.
    Mr. Charles B. Coles held a deed of property for certain claims, as collateral security for the same, and, on motion, it was ordered that absolute deeds be made to him of the said property at a value fixed.
    Mr. Gross also agreed to take property in settlement of his claim at a value also fixed by the committee.
    At the same meeting one Sfeigle, by his attorney, agreed to take a house in settlement of his claim, and a Mr. Algor agreed to take another house for the same purpose.
    At the same meeting it was resolved to accept the proposition of Mr. Dobbins, the complainant, to take property, but this was never carried out. At this time the signatures of all the creditors had not been obtained to the composition agreement, agreed upon on September 11th.
    On October 9th, 1895, there was a meeting which is styled “a creditors’ meeting,” but concerning which there is nothing to show that it was held in pursuance of an adjournment of a former creditors’ meeting, or upon notice to all the creditors. There were present four members of the committee, Mr. Darnell and two lawyers. At that meeting Charles B. Coles proposed to take sufficient material to pay off the Miller Brothers’ attachment, and the amount of the building and loan arrearages and certain taxes, to which proposition the meeting acceded. Certain other creditors were also given material for their claims at invoice prices.

      On October 19th Messrs. Cross, MadSTaughton, Coles, Stevenson, Darnell, Peirce and Bleakly met. This meeting is marked in the minutes as “ a creditors’ meeting,” but it obviously was not such. At this meeting'other claimants were given permission to take property for their claims.
    On December 3d. there was a meeting of the committee, at which there was a statement made of the amounts which had ■been paid by Mr. Coles in settlement of the attachments, and of the property which he had taken for the said payment, and

      “ it was ordered that the secretary of the committee and the West Jersey Title •Company should make the deeds and bill of sale to carry out the various settlements made by the committee, upon payment to them of the various moneys -which the respective creditors are to pay as shown by the statement prepared ..to-day.”
    Then follows a statement of the settlement. Afterwards a notice of sale of the undistributed property was given by the • committee to occur on June 6th, 1895. The creditors were requested to be present at such sale, and it 'was stated that it was not probable that enough would be realized to pay all claims in full, and a meeting of creditors was called for June 4th.
    On June 4th, upon motion of Mr. Dobbins, the sale was postponed, and it was ordered that the committee arrange a meeting ■ of the creditors at Collingswood, at which the property should be distributed by auction among the creditors in proportion to their claims. A meeting was had on June 20th, when it was ordered that the property be disposed, of as soon as possible— not later than July 2d.
    The property was sold and realized $926.88, to pay unsettled ■claims of $9,152.73. The complainant, for himself and others who had not taken property, then filed this bill to have the in•equitable distribution of the assets rectified.

      Mr. Samuel K. Robbins, for the complainants.

      Mr. George IP. Peirce and Mr. Edward G. G. Bleakly, for the -defendants.
   Reed, V. C.

It is manifest that the result of the operation, conducted by the committee, is directly contrary to the letter and spirit of the-agreement by which the committee was to be controlled. That agreement was to secure equality among the unsecured creditors.

The answer of the defendant is that the complainants are estopped from now raising any objection to the manner in which the property was distributed to the creditors. It is said that the complainants knew that property was being distributed, and they then raised no objection; that they had the opportunity to share in such distribution but chose to await the sale-of such property as might remain undistributed and to take their percentage of the product of such sale.

It is clear that some of the complainants knew that property was being distributed. It is not clear that all of the creditors knew this. Indeed, there is no proof that there ever was a regularly-called • creditors’ meeting after that of September 4th, nor is there proof that all of the complainants were present at-•any such meeting when the matter of distribution was discussed:' and approved. And as to those who knew that such distribution was occurring and who interposed no objection at the time,it is to my mind clear that their consent to such distribution was based upon the report of the committee presented at the meeting of September 19th, at which the assets were shown to be about $40,000 and the debts less than. $30,000. None of the-creditors, unless members of the committee for some time at least, were informed that there would not be enough to pay all the debts if the property was not sacrificed, and they undoubtedly thought that the- taking of the property by some of the-creditors at -the valuation fixed was calculated to prevent any sacrifice. It is clear, from the testimony of defendants’ witnesses, that until near the end there was no thought of a deficit and that the property was taken by some of the claimants, and such taking was assented to by other claimants under the impression that there would be enough to pay all. There was a generally-prevalent mistake, which worked a very inequitable-result.

In my judgment, this result should now be corrected so far as rit is possible to do so. I don’t find any fraud in the manner in which the distribution was made. True, the members of the .committee took property for their own claims, but at the same time all claimants were permitted to select and take property upon a similar basis of valuation. It is unfortunate that the ■result has been as it is.

In my judgment, there should be an account taken by a master .of the value of the property received by each claimant at the ■time of its reception. This value need not necessarily be upon -the basis of the value at which it was taken, for it may have been taken for more than its value for the purpose of cancelling ■the claimant’s debt. Where the property was taken at invoice prices that should be regarded as its value, but where the valuations were fixed by the committee, the true value at the time ■should be found by the master.

I think also that if any of the property received by a claimant is still in the same condition it was when received, and the ■claimant wishes to return the property and leave his claim upon ■the same footing as the other creditors who have received none, ■to be paid out of the fund which will be finally realized and ■ distributed, he should have the opportunity of returning his property. Any claimant desiring to do so can make his offer to do so to the master in writing within twenty days after the signing of the interlocutory decree, and upon such tender the master •shall inquire whether such property is in substantially the same condition it was in when received by the claimant, and whether .any profit has been received by the claimant from such property .while in his possession. Any property so returned will, of course, be sold by order of this court.

The purpose of the accounting, and the scheme for the returning of property, is to fix the valuation of the entire assets of Elemming, so that a percentage may be declared to all the claimants, and to fix the amount of a call which will have to be made •upon those claimants who have received property unretunied, to pay the difference between the value of such property received and the amount of their dividend to be fixed upon final accounting.

Mr. Coles will be entitled to hold the property to which he-had title as collateral security for his debt without contribution, so far as the value of such property does not exceed the amount of the debt.

In case of property taken upon the understanding that it is-to be in consideration of a payment of the attachment lien, of the taxes and other liens, the person making such payment will be subrogated to the right of the lienor whose lien he paid, and will hold the property taken by him in consideration of such payment, without liability to contribution, to the extent that its-value does not exceed the amount of the lien so paid by him.

The necessity of further direction in working out in detail this scheme to make an equal distribution of the assets underthe present circumstances will no doubt occu,r to counsel, and such directions may be embodied in the interlocutory, decree or any future directions as the requirement for the same may occur


text:
    Thomas B. Taylor v. John Taylor and Edward H. Murphy et al.
    [Filed February 2d, 1900.]
    1. Where a creditor of an insolvent acquired an equitable lien on his assets-by filing a creditor’s bill before bankruptcy proceedings were begun by the-debtor, the trustee in bankruptcy took the property subject to such lien.
    2. The Bankruptcy act of 1898, section 67, paragraph 6 providing that whenever a creditor is prevented from enforcing his rights as against a lien ■ created by the debtor, who afterwards becomes a bankrupt, the trustee shall be subrogated to and may enforce such rights for the benefit of the estate, does ■ not transfer to the trustee the right of a judgment creditor to enforce an equitable lien acquired by the filing of a creditor’s bill before bankruptcy proceedings were begun, or abate such creditor’s right to prosecute such suit.
    On motion to strike out a bill and part of an answer.

      This suit was brought by the complainant, who has a judgment against John Táylor, under the eighty-eighth section of the Chancery act, to reach certain property named or things in action of the defendant, and have the same reduced to possession and delivered to a receiver, in order that the complainant’s judgment may be satisfied. An amended answer, and an answer in the nature of a cross-bill, sets up that on January 20th, 1899, after the filing of the bill and issuing subpoena, one "William C. Brandt filed his petition in bankruptcy in the United States district court for the district of New Jersey, and prayed that John Taylor be decreed a bankrupt; that on February 27th, 1899, John Taylor was so adjudicated, and on March 16th, 1899, filed a schedule of assets; that a trustee in bankruptcy was duly elected, and on April 14th John Taylor applied for his discharge from all debts provable against his estate under the Bankruptcy act, and that on May 18th following he was discharged from all debts and claims provable against his estate which existed on February 27th, 1899.

      Mr. Garret D. W. Vroom, for the motion.

      Mr. John J. Joyce, contra.

   Reed, V. C.

If this suit is regarded as a supplementary proceeding in an action at law of Thomas B. Taylor against John Taylor, the bankruptcy of the latter would in no way affect the progress of the suit. So far as the suit concerns John Taylor, who is a defendant, it is entirely settled that his bankruptcy does not abate the suit. The trustee would be substituted for Taylor and the suit would proceed. Esterbrook Co. v. Ahern, 3 Stew. Eq. 341, and cases cited; Davis v. Sullivan, 6 Stew. Eq. 569, 572.

The point, however, made by the counsel for Mr. Murphy is that the trustee represents all the creditors, and that inasmuch as this is a suit brought by a creditor to reach the property of his bankrupt debtor, the right to sue for such assets upon bankruptcy passed to the trustee.

In respect to general creditors of a bankrupt the trustee is undoubtedly their representative. In' gathering in the assets of a bankrupt he can, as such representative of the general creditors, seek to uncover property fraudulently conveyed or concealed by the debtor. The right of a trustee to pursue and recover by suit any property which legally or equitably belongs to the estate of a bankrupt cannot be doubted. A receiver, as the representative of an insolvent corporation, may file a bill to set aside illegal or fraudulent transfers of the property of a corporation. Smith. Rec. 397, 406; Speilmann v. Graham Button Co., 5 Dick. Ch. Rep. 120, 796. So, an assignee under our Assignment act and executors and administrators of an insolvent estate as the representative of the general creditors may, for the benefit of the creditors, set aside conveyances of the assignor or decedent made in fraud of their creditors to the extent that such property is needed for the payment of debts. Pillsbury v. Kingon, 6 Stew. Eq. 287. But while the trustee so represents general creditors, and while the entire right of such creditors to pursue the property of the bankrupt passes to the trustee, he thus obtains an exclusive right to bring such suits. McCartin’s Executors v. Perry, 12 Stew. Eq. 198. Such officer does not succeed to the rights of secured creditors. A creditor who has a lien upon the property of the bankrupt is his own representative so far as concerns his security. Dudley v. Easton, 14 Otto 99.

In the language of Mr. Justice Bradley, used in Goddard v. Weaver, 1 Woods 260, he is not the assignee of all the judgments, executions, liens and mortgages outstanding against the bankrupt’s property. Thus, in Yeatmans v. Savings Institution, 95 U. S. 764, it was held that a pledgee of property of a person who became bankrupt was entitled to retain his possession and make his debt.

Now, the complainant in this case had at the date of the institution of the proceedings in bankruptcy a lien upon the equitable property of the bankrupt — a lien which arose by the commencement of this suit more than four months before the bankrupt proceedings were" begun.

As a general rule an equitable lien is acquired by the filing of a creditor’s bill or a bill in the nature of a creditor’s bill upon the choses in action and equitable assets of the judgment debtor. Sm. Eg. Rem. Cred. p. 234 220.

The existence of this lien was elaborately considered by Vice-Chancellor Sandford in Storm v. Waddell, 2 Sandf. Ch. 494 An assignee in bankruptcy applied to the court of chancery for money which had been discovered' by means of creditors’ bills against several bankrupt judgment creditors.

The statute under which the bill was filed was similar to ours. It was held that the right acquired by the creditor was a lien upon the things in action which the creditor had at the time of the commencement of the suit.

The same was held in Fetter & Co. v. Ciroda et al., 4 B. Mon. 482, where suit was brought by judgment creditors to set aside fraudulent conveyances, and in Watkins v. Pinkney, 3 Edw. Ch. 533, upon motion to attach defendant in creditor suit for discovery for not assigning his property to the receiver appointed in the suit, and who set up that since the filing of the creditor’s .bill he had made-application for the benefit of the bankrupt law.

To the same purport are the following cases: Sedgwick v. Menck, 6 Blatchf. 156; Johnson, Assignee, v. Rogers, 15 Bankr. Reg. 1; In re Hinds, 3 Bankr. Reg. 351; Stewart v. Isador, 1 Bankr. Reg. 485; Carr v. Fearington, 63 N. C. 560.

Aside from the question of its existence in relation to bankrupt proceedings, but in support of the lien generally as against .other creditors, are the eases of First National Bank v. Shuler, 153 N. Y. 163; Corning v. White, 2 Paige 567; McDermutt v. Strong, 4 Johns. Ch. 687; Miller v. Sherry, 69 U. S. 237.

In Coleman v. Roff, 16 Vr. 9, the question was whether, in •discovery proceedings taken under the Execution act, an assignment made by defendant to one with notice after proceedings ■for discovery had been commenced, but before a receiver was appointed, was legal.

It was held that it was not, and in his opinion the Chief-Justice said: “If this judgment creditor, instead of taking steps ,by force of this act respecting executions, had filed his bill in equity to reach the intangible property of his debtor, and it had appeared that subsequently to the bringing of such suit and with knowledge of its pendency this defendant had taken an assignment of this property, a decree requiring the payment of such moneys to the receiver would have been a matter of course.” As against anyone but a bona fide purchaser for value, it is settled by the overwhelming weight of authority that upon filing a bill and issuiug a subpoena the judgment creditor acquires alien which becomes specific when propérty of the debtor is-discovered.

It is entirely settled that a trustee or assignee in bankruptcy takes the property of the bankrupt subject to all equitable liens/. Coll. Bankr. 375.

As we have already seen from the language of federal judges-when considering previous bankrupt acts, the assignee does not represent the lienors, but his representative character is in respect to the general unsecured creditors whose interests are opposed to those of the lienors.

As such representative, the assignee can attack the' alleged liens and can defend a suit to enforce them. The policy of the federal supreme court seems to have been to permit any such suit which was pending in a state court at the time when bankruptcy proceedings were begun to proceed to-final settlement. This policy is exhibited in two cases. .

The Bankruptcy act of 1867 (Rev. Stat. 5106) provided for a suspension of suits commenced before proceedings in bankruptcy until the discharge of the bankrupt. It was held in Hill v. Harding, 17 Otto 631, that a suit previously begun in the Illinois court by attachment was only suspended; that after the determination of the question whether a discharge should be granted the creditor could continue his action. “If the discharge is refused [said the court] the plaintiff, upon establishing his claim, may obtain a general judgment. If the discharge is-granted the court in which the suit is pending may then determine whether the plaintiff is entitled to a special judgment for the purpose of enforcing an attachment made more than four-months before the commencement of the proceedings in bankruptcy or for the purpose of charging sureties on a bond given to dissolve such an attachment.”

Eyster v. Gaff, 1 Otto 521, involved a decree in a foreclosure-suit when the mortgagor had pendente lite become bankrupt. It was insisted that all questions in respect to the lien of the mortgage was, by operation of the bankruptcy proceedings, drawn into the bankruptcy court. But, said Mr. Justice Miller: “The-opinion.seems to have been quite prevalent in many quarters at one time that the moment a man is declared bankrupt the district court which has so adjudged draws to itself by that act not only all control of the bankrupt’s property and credits, but that no one can litigate with the assignee contested rights in any court except in so far as the circuit court have concurrent jurisdiction, and that either courts could proceed no further in a suit of which they had at that time full cognizance; and it was-a prevalent practice to bring in persons who contested with the assignee any matters growing out of disputed rights of property dr of contracts into the bankruptcy court by the service of a rule-to show cause and dispose of their rights in a summary way.. This court has already set its face against this view. The debtor of a bankrupt, or the man who contests the right to real or personal property with him, loses none of those rights by the bankruptcy of his adversary. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions.”

Unless, therefore, some provision is to be found in the act of 1898, which abates or suspends pending suits to enforce secured rights in the property of the bankrupt or which confers exclusive jurisdiction upon the bankrupt court to settle those controversies, I do not think the present suit is suspended or abated by the bankruptcy of Mr. Taylor.

It is urged that section 67, paragraph b, transfers to the trustee the sole privilege to enforce the rights of this judgment creditor. This paragraph provides

that whenever a creditor is prevented from enforcing his rights as against a lien created or attempted to be created by his debtor, who afterwards becomes-a bankrupt, the trustee of the estate of such bankrupt shall be subrogated to- and may enforce such rights of such creditor for the benefit of the estate.”

It is perceived that the trustee, by this clause, merely repre-sents the general creditors in attacking an alleged lien upon the bankrupt’s property and that he acts for the benefit of the estate. The trustee can contest the lien of the present complainant, but that does not draw the litigation into the bankrupt court.

I find nothing in this clause which abates this suit. I am .-aware that an injunction has been issued by a referee appointed under the recent Bankruptcy act, to stay a pending suit to set aside a fraudulent conveyance made more than four months ■before filing the petition in bankruptcy, as well as against supplemental proceedings upon a judgment. In re Adams, 1 Am. Bankr. Cas. 94; In re DeLong, 1 Am. Bankr. Cas. 66.

If the conclusions of the referee in the first case are sound, yet the case only goes to the point that the district court can intervene by injunction, not that bankruptcy proprio vigore -abates the suit in the state court.

There are two recent cases arising since the recent Bankruptcy act was passed. In the case of Continental National Bank v. Katz, 1 Am. Bankr. Cas. 19, a creditor’s bill was filed in which the judgment creditor sought to reach specific assets. More than four months after this the defending debtor filed his petition in bankruptcy, and then applied to the state court to stay the ■creditor’s suit. The motion was refused. This case was followed in Reed, Murdock & Co. v. Cross et al., 1 Am. Bankr. Cas. 34, where it was held that the complainant had, by filing his bill to reach equitable assets of his debtor, got a lien which was superior to the claim of the bankrupt court, and a stay was refused.

The jurisdiction of state courts to take cognizance of suits between a trustee in bankruptcy and an adverse claimant, is discussed in the recent case of Heath v. Shaffer et al., 2 Am. Bankr. Cas. 98, by Judge Shiras. He points out that the trustee can appear in the state court and have all his rights protected. 'There is nothing to prevent the trustee of John Taylor from filing a creditor’s bill to reach equitable assets of the bankrupt, nor from appearing in the present suit and contesting the right of this complainant to prosecute his suit or his right to a lien ire preference to other creditors.

It is also to be observed that it is not the trustee of Mr. Taylor who files the answer now in question, nor Mr. Taylor. In respect to the defendant who files the answer, it is clear that the pleading can only be effectual upon the theory that the facts stated of themselves, and without the request of the trustee,, strips this court of all jurisdiction to proceed with the cause.

I am constrained to the conclusion that they do not, and that the amended answer must be struck out.


text:
    Peter G. Polhemus v. The Holland Trust Company
    [Filed February 2d, 1900.]
    1. Where defendant held bonds of a foreign corporation as security for a-loan, under an agreement that they should be surrendered as the corporation might sell them, and that the proceeds of the sale should be applied in liquidation of the debt, and plaintiff was induced to purchase some of the bonds by defendant’s clerk, by false representations that they were first mortgage bonds, defendant was not liable for the loss sustained, since the clerk, in such transaction, acted for the corporation and not as defendant’s agent. -
    2. A transferee of bonds cannot rescind the sale on the ground that it was induced by fraudulent representations and recover the amount paid, in equity, since the recovery of money paid under false representations is not within the scope of modern equity jurisdiction.
    3. Where a trust company held a mortgage to secure bonds issued by a foreign corporation, by the terms of which the bonds were to be delivered to the corporation and to the holders of other bonds, in exchange for bonds previously issued, and the trust company was not required to sell the bonds, it was not a trustee for the bondholders, and hence was not liable for false representations of its clerk in the sale of part of the bonds pledged to secure a loan to the corporation while such clerk was acting as agent of the corporation.

      4. Where a trust deed given to a foreign trust company to secure bonds of a foreign corporation required the trust company -to certify the bonds and deliver them to the corporation on resolutions showing expenditure of certain sums in improvements, and the trust. company certified and delivered the "bonds in the state of its domicile without the improvements being made, the •courts of New Jersey had no jurisdiction of a suit by a purchaser of the bonds in that state from an agent of the corporation against the trust company for •such wrongful certification and delivery.
    Ou final hearing.

      Mr. John S. Vooi'hees, for the complainant.

      Mr. Washington B. Williams, for the defendant.
   Reed, V. C.

The Ellenville Gas Light Company of New York State, on September 5th, 1880, issued twenty-five bonds, par value $500 .•each, aggregating $12,500. These bonds were payable to one Terwilliger. To him was also made a mortgage upon the plant of the gas light company to secure the said bonds.

On August 31st, 1889, the gas light company entered into an agreement with the Holland Trust Company, by which a new and enlarged issue of its corporate bonds were to be made, and the old issue was to be withdrawn, by the substitution of new bonds for the old bonds. The new issue of seventy-five bonds •of $500 each (total, $37,500) to be secured by a mortgage upon the plant of the gas light company to be made to the Holland Trust Company. Upon the execution of the new mortgage' ■upon all of the property of the gas light company, twenty-five bonds, which will be styled the first of the three series, were to be executed by the- president and secretary of the gas light company, and certified by the Holland Trust Company, and immediately delivered to the treasurer of the gas light company, to be by him applied to the payment of the then outstanding liabilities or floating debt of the gas light company. These bonds were to be and were numbered from one to twenty-five.

Another twenty-five bonds, which will be styled the second issue, were pledged and set apart for the retirement of the twenty-five old bonds secured by the Terwilliger mortgage. They were to be separately certified by the Holland Trust Company, and delivered to any person presenting and surrendering up for cancellation any one or more of the old bonds. They were to be numbered from twenty-six to fifty.

Another set of twenty-five bonds, which will be styled the third series, were to be issued and the proceeds used for extensions and permanent improvements of the gas light company’s plant. The Holland Trust Company was to certify and-deliver to the gas light company so many of the said bonds as to equal the money so expended, and upon a resolution of the board of directors duly certified by the secretary, under seal of the gas light company, showing that the said company had actually expended in extensions and permanent improvements to its works an amount of money equivalent to the par value of the bonds to be so approved. These bonds were to be numbered ■from fifty-one to seventy-five.

The complainant is the owner of bonds of each of these series. He brings this suit against the Holland Trust Company to compel it to make good his loss. He became possessed of these bonds in this way: On March 8th, 1891, he bought one bond at the office of the Holland Trust Company, in New York City. He says that in doing this he dealt with one of the clerks — a Mr. Mabon — and paid him for the bond. Afterwards, at New Brunswick, he bought six bonds of the same Mr. Mabon, for which he gave stock and a check to the order of the Holland Trust Company. He says at the time of these sales Mr. Mabon represented to him that the bonds were first mortgage bonds.

The complainant also says that in 1890 Mr. Van Sicklen, the secretary of the trust company, told him at the company’s place of business in New York City that these bonds were first mortgage bonds, but this is not established by a preponderance of testimony.

It is claimed that these representations of Mabon were false, and by means of them complainant was induced to part with his money, and that those who received it should now be compelled to refund. This is the primary ground for relief.

It is insisted, in the second place, that the issue of those bonds of the third series, held by the complainant, were the result of the negligent conduct of the defendant in not getting proper certified resolutions in respect to the amount of permanent improvements made by the gas light company.

It is insisted, in the third place, that the defendants are liable-to pay over to the complainant four twenty-fifths of the amount received at the foreclosure sale under the Terwilliger mortgage, upon the theory that the trust company should have received nine twenty-fifths on account of the nine old bonds which it had taken in exchange for the new bonds.

First, then, in respect to the right of the complainant to recover upon the ground that Mr. Mabon falsely represented that the bonds were secured by a first mortgage.

The defendant insists that Mr. Mabon, whatever his representations, was not its agent. I am of the opinion that it is-not proved that Mr. Mabon did represent the Holland Trust Company in the transaction. The bonds belonged to the gaslight company. Mr. Hilliard, the secretary of the gas light company, had put- them in pledge with the trust company for a loan. Hilliard was trying to sell the bonds, and for the purpose of using the money received from such sale to pay off the said loan. The bonds were delivered up by the trust company upon condition that the price received for them was to be paid to it in liquidation of the loan. This accounts for the fact that the checks for the bonds were made payable to the Holland Trust Company. Mr. Mabon, in selling the bonds, was working in the interest of Mr. Hilliard and not as agent of the trust company.

But if I should have concluded that Mr. Mabon was selling these bonds for the trust company, would the suit lie? The only theory upon which the suit can be maintained in respect to the bonds now under consideration is that the sale was fraudulent, and therefore the complainant has the right to rescind the transaction and recover back his money. But the recovery of money paid by the inducement of false representations is not within the scope of modern equity jurisdiction. Krueger v. Armitage, 13 Dick. Ch. Rep. 3657.

The only conceivable answer to this recent promulgation of this equitable rule in this court is that the defendants are trustees, and as such owed a duty to the bondholders, in the performance of which duty it failed through the act of its agent. But an inspection of the provisions contained in the mortgage agreement between the two companies discloses no duty on the part of the trust company to sell bonds. By the terms of that agreement the first and third series of bonds were to be delivered absolutely to the gas light company, and the second series were to be delivered in exchange for the bonds of the old series. The possession of the trust company of those particular bonds occurred not by reason of its being trustee of the bondholders, but because it had taken them in pledge, and they were so taken, as any other property of like character might be taken, as collateral security for a loan. If they sold the bonds, they did so as pledgees with the concurrence of Mr. Hilliard, the pledgor.. The relation being that of vendor and purchaser was no more a trust relation than would be that of any other seller and purchaser.

Upon the first point I do not see any ground for relief.

Secondly, in respect to the certification of those bonds of the third series, as to which there was no certified resolution in conformity with the mortgage agreement.

I am of the opinion that the trust company owed a duty to the bondholders to certify such bonds only upon performance of the condition precedent mentioned in the trust mortgage. It was the duty of the trust company to see that the provisions for increasing the security of the mortgage pari passu with the increase of the debt, after $25,000 worth of bonds were issued, should be observed.

It is true the observance of these provisions might not be a complete safeguard against the fraudulent conduct of the board of directors of the gas light company, but so far as it was a protection it was incumbent upon the trust company to see the condition carried out. The very first resolution of the board of directors, it is true, was fraudulent, for not $1,000 had been expended in permanent improvements, and the resolution stated that $5,000 had been so expended. The other resolutions were, I think, intentionally defective and intended to mislead, for it conclusively appears that no more work had been done in the way of improvements upon the gas light company’s plant. While the trust company was not responsible for the fraudulent passage of such resolutions without its knowledge, it was responsible for the fact that it approved bonds with no resolution at all properly certified.

But, assuming that the trust company, as a trustee, owed a debt to all bondholders in this respect and that it failed to perform its duty, how does the case stand ?

In the first place, this ground for relief is not set out in the -bill. The complainant’s right to relief is rested upon the false ■representation of the alleged agent of the trust company that the bonds sold to complainant were first mortgage bonds.

In the second place, a plea to the jurisdiction of this court to take cognizance of the subject-matter of the suit was filed tothe bill, and the ground of such plea was that the defendant was a foreign corporation not amenable to service of process in this state.

The plea was overruled, upon the single ground that if the person whom it was alleged in the bill sold the bonds in this state at the time made the false representations set out in the bill was the agent of the trust company to sell such bonds, then the cause of action arose here, and this fact conferred jurisdiction upon this court in this state.

The court refused to try the question of agency under the issue raised by the plea because it involved directly the whole merits of the controversy and because the facts stated in the plea, being such as defeated the suit, could be pleaded as such, .and therefore was not a fit ground for a plea to the jurisdiction of the court. National Condensed Milk Co. v. Brandenburgh et al., 11 Vr. 112.

The plea being stricken out, the objection to jurisdiction was reserved in the answer.

Now, I have determined that the person who made the alleged representation was not the agent of the Holland Trust Company for the sale of the bonds. Therefore, the foundation upon which jurisdiction is rested, namely, that the cause of action raised in •this state, has disappeared. If, therefore, by amendment to the bill, the facts supporting the second ground for relief were inserted they would not invest this court with jurisdiction to try them. It is clear that the liability of the trust company, under this phase of the case, would have arisen at the moment they approved the bonds without requiring the production of a properly-certified resolution, as provided for in the trust mortgage, and this act was executed in the State of New York and not in this state. For this reason I am constrained to refuse relief upon this ground.

In respect to the third ground for relief, the same difficulty ■which prevents the complainant from obtaining the relief under the second point also supervenes in this. The ground for relief is not set out in the bill, and the facts upon which the right to such relief is grounded makes the transaction one occurring within the State of New York. For these reasons I am constrained to the conclusion that the complainant is not entitled to relief in this court, and his bill must be dismissed.