author: Berry, V. C.

text:
    Clarence H. Hershey, complainant, v. Stone & Hershey, a corporation, defendant.
    [Decided July 29th, 1932.]

      Messrs. Lum, Tamblyn & Colyer (Mr. Chester W. Fairlee, of counsel), for the receiver.

      Messrs. Hendrickson & Hendrickson, for the creditors.
   Berry, V. C.

This matter is before me on the return of an order to show cause why the final account of the receiver of the defendant company should not be approved, fees of receiver and his counsel fixed and allowed, and the receiver discharged.

Milton L. Dake was appointed receiver of the defendant company by me on January 24th, 1929, on application of the president of the defendant company and by consent of the company itself. The appointment was confirmed on February 5th, 1929.

This case presents a shining example of how a receivership should not be conducted.

According to the inventory, filed on October 17th, 1929, the assets of the company on January 24th, 1929, consisted of promissory notes receivable, having a face value of $28,595.44 and an estimated value of $9,123.46; accounts receivable having a face value of $66,582.39 and an estimated value of $27,224.81; office furniture having an estimated value of $300; lumber which cost $5,088.83, estimated value $3,911.21; three automobiles, estimated value $675; cash in banks $7,473.58 of which $6,973.95 was applied by the depository banks to notes of the defendant company held b}' said banks, leaving a balance of $499.63 in cash actually received by the accountant. The total face value of the assets of the defendant company was $108,715.24 and the receiver’s estimated value was $41,734.11. Ho appraisement of these assets, except by the receiver, was had. (It is, perhaps, a mere coincidence that the total cash receipts of the receiver amount to exactly $41,414.17.)

The liabilities of the defendant company as of January 24th, 1929, according to the inventory, were as follows:

Hotes payable .................... $20,636.13
Accounts payable ................. 75,799.98
Pref. salary claims ................ 167.72
Contingent liabilities as endorser on trade notes ..................... 102,702.59
Total liabilities ................. $199,306.42

On October 15th, 1929, the receiver filed his first report and account showing cash received amounting to $20,381.56, cash disbursed $6,137.90, and a balance of cash on hand amounting to $14,243.66. The receiver then reported a balance of assets on hand as follows:

Balance of notes receivable .......... $32,480.85
Balance of accounts receivable ....... 45,541.44
Balance of lumber ................. 1,365.54

He also reported preferred claims filed and allowed amounting to $390.21, unsecured claims of $109,023.35 and contingent liability claims amounting to approximately $25,000.

After due notice to all creditors and stockholders, that account was approved and allowances of $1,800 to the receiver and $900 to counsel were made, and the receiver was directed to pay the preferred claims in full and a dividend of ten per cent, to unsecured creditors, which was done.

On April 12th, 1932, the receiver filed his second and final report and account, whereupon it was referred to a master for audit and an order to show cause issued thereon. The master was directed to audit both the intermediate and the final accounts of the receiver and this has been done. As a result of such audit the receiver has been obliged to file an amended final account because of the numerous errors and irregularities discovered by the master and many items of discharge which the master refused to approve, some of which will receive special mention later.

In his original final account the receiver reported cash received between July 23d, 1929 (the date as of which his first account was filed), and April 1st, 1932, of $21,032.01. The amended account shows that this item should have been $20,918.20. Total disbursements shown by the original account were $22,548.92 while in the amended account this item is reduced to $21,913.44. Included in this sum, as it appears in the amended account, is an item of $858.75 for personal expenses of the receiver, of which the master recommended that all but $450 should be disallowed. The balance of cash on hand as of April 1st, 1932, as shown by the original final account was $12,727.35; that shown by the amended account is $13,250.40.

So many irregularities in the conduct of this receivership have been disclosed by the master’s audit of the receiver’s accounts that some detailed consideration of them is necessary.

Although the receiver’s original final account showed the balance of cash on hand as of April 1st, 1932, to be $12,727.35; and the amended account a balance of $13,250.40, the only money on deposit in any bank to the credit of the receiver on that date was the sum of $5,409.93 deposited to his credit in a small out of town bank, in which he had opened an account shortly after his appointment. On April 15th, 1932, however, three days after the receiver’s final account was filed, he deposited the sum of $7,000 in the Perth Amboy Trust Company at Perth Amboy, New Jersey, to his credit as receiver, and on April 21st, 1932, he deposited the further sum of $1,200 in the same account. This circumstance led to an inquiry by the master which disclosed the following astounding facts: On September 3d, 1929, the receiver drew a check on his receiver’s bank account for $3,000 to his own order; on October 30th, 1929, he drew another check on the same account for $2,000 to his own order; and on September 21st, 1931, he drew a third check to his own oi’der for the sum of $2,000. None of these cheeks were mentioned in the receiver’s account, nor were they shown by his check stubs. His check-book stubs do contain, however, a record of cheek No. 120 under date of November 25th, 1929, drawn to his own order for $1,800, marked "in payment of receiver’s fees,” and this item appears in his final account of disbursements. The check itself, however, was not produced, and the bank statement shows no such payment. The two first checks aggregating $5,000 he deposited in the bank account of Milton L. Dake Company, which is the corporate name of the receiver’s individual business. The receiver claims that the $2,000 cheek drawn on September 21st, 1931, was in payment of his $1,800 fee allowed by the court on his first account; that the bookkeeper made a mistake and drew the check for $2,000 instead of for $1,800, and that he kept the extra $200 of the check for expenses; this notwithstanding the fact that there appears amongst his check stubs a notation of an $1,800 check drawn to his order on November 25th, 1929, in payment of this fee. Accepting the receiver’s own explanation of this transaction leaves unexplained the check stub entry of check No. 120 for $1,800. The $5,000 represented by the other two checks did not again appear in his receiver’s account until April 15th, 1932, when it was deposited in the Perth Amboy Trust Company. The receiver’s explanation of this transaction as reported by the master, and supported by the receiver’s testimony before the master is:

“That while he was at the * * * Trust Company, where he had an account for twenty-five years, arranging for loans for his company he was told by the bank that he would have to pay off his loans, and he figured that as long as the bank was forcing him to pay off his company’s loans, he was not going to keep any money in the * * * Trust Company, and take a chance of there being a loss to the creditors of Stone & Hershey.

“That he had in the * * * Trust Company quite a number of personal loans; that he had put up with the bank some insurance money; that the cashier of the bank told him that the withdrawals in the bank had exceeded its deposits; that he spoke to Mr. McQuade, an attorney and an officer of the Milton L. Dake Company, who advised him that if anything happened to the bank, the creditors would have to take what they could get, and that his whole idea was to have the money for the creditors when the time came to disburse it.

“The two cheeks, aggregating $5,000, he first deposited in the bank account of the- Milton L. Dake Company, and within a few days withdrew the $5,000 and placed it in his private vault which he rented in the National Newark and Essex Banking Company, where it remained until he made the deposit in the Perth Amboy Trust Company on April 15th, 1932, of $7,000, said deposit being made up of the $5,000 cash which he removed from his safe deposit box and a $2,000 check drawn on the same day by the receiver on his account in the * * * Trust Company to the order of the Perth Amboy Trust Company.

“That the $1,200 deposited in the Perth Amboy Trust Company on April 21st, 1932, was made by a check of the Milton L. Dake Company. The receiver now claims that there is more money in the receiver’s account in the Perth Amboy Trust Company and in the National Newark and Essex Banking Company than belongs in the receivership.

“That he kept no record of the moneys which he placed in the safe deposit box, belonging to the receivership of Stone & Hershey, or his personal money, or to the Milton L. Dake Company. He has no record of the total amount he put in the safe deposit box. He admitted that in case of his death there would have been no way of proving who was entitled to the funds in said box.

“The receiver testified that before he made the deposit in the Perth Amboy Trust Company there was almost $7,000 in cash in the safe deposit box, some of which did not belong to the receivership of Stone & Hershey, but belonged to the Milton L. Dake Company and the receiver personally.”

The receiver’s explanation of the $5,000 item is naive, to say the least; perhaps “asinine” would be the better word. An examination of his testimony before the master discloses that he had some doubt as to the solvency of the bank where he maintained his receiver’s account and claims that this was his main reason for withdrawing this $5,000 from the account; but it is significant that he redeposited both cheeks in the account of his own company, Milton L. Dake Company, in the same bank, almost immediately, and that after he had withdrawn this $5,000 from the receiver’s account there still remained over $14,000 to his credit as receiver in that bank. The receiver testified that after the deposit of the two checks aggregating $5,000 in the account of Milton L. Dake Company he withdrew that sum from the bank, not all at one time, but in amounts of $200, $300 and $400 at a time, and took the cash and deposited it in the safe deposit vault in the Newark bank, “because I did not want to disturb my own moneys over there. I was afraid they would call my loans and I would go busted before I could get the money out of the bank.” The only reasonable conclusion to be drawn from this transaction is that for a period from September 3d, 1929, to April 15th, 1932, the receiver had in his possession, available for his own personal use as he saw fit, the sum of $3,000 of trust funds which belonged in the receiver’s account; and that from October 30th, 1929, he likewise had $2,000 of such funds; and further, assuming that his explanation of the $2,000 check of September 21st, 1931, is correct, although it is open to serious doubt, he still has $200 of that sum to which he is not entitled, no authority-having been given him to retain those moneys. The receiver will be charged with six per cent, interest on these several sums for the periods indicated. The check stub entry of check 120 for $1,800 is probably a false entry, as no such check was ever paid by the barde. The purpose of this entry is obscure and unexplained.

It further appears from the master’s report that on August 6th, 1931, the receiver collected $2,436.08 from one of the insolvent company’s debtors and deposited it in his own company’s bank account. How long it remained in that account is uncertain. He claims he had to leave it there for some time because the bank had called his personal loans and that he withdrew it in small amounts of cash from time to time and put it with other cash in his safe deposit box. He charged himself in his final account with this item at $2,236.08 instead of $2,436.08. This money never reached his receiver bank account until April 15th, 1932, three days after the final account was filed, if at all. The receiver will be charged with six per cent, interest on $2,436.08 from August 6th, 1931, until the fund was, or is, returned. Seven other items of receiver’s collections are understated in' his account in amounts varying from $25 to $65 and totaling $337.57, for which he must account. It also appears that he has mixed personal funds and funds of others for whom he had made numerous collections on commission, with receivership funds in the receiver’s individual business bank account.

The master also reports that the receiver claims credit for salaries paid by him to bookkeepers, stenographers and assistants amounting to $3,494.07. Among these assistants was C. H. Hershey, the complainant in this suit, who was paid the sum of $557.20. Checks totaling $900 and drawn to the order of another employe were endorsed by him to Milton L. Dake, but never put through the bank. The receiver claims he paid this employe in cash and now claims reimbursement. The item will be disallowed. The master’s report in this connection is both illuminating and interesting, but is omitted here because of its length. It appears that this latter employe had been in the employ of the receiver for two years prior to the receiver’s appointment and is still in his employ and during all that period has received full time salary from the receiver’s company, the Milton L. Dake Company. In addition to the checks aggregating $900 the receiver claims credit for $1,188 paid to this same employe. This sum will also be disallowed.

I have carefully read the transcript of the testimony taken before the master in connection with.the audit of the receiver’s accounts, and find that the report of the master is in all particulars fully justified. All of the expenses referred to, involving the employment of numerous assistants, were wholly unauthorized and were incurred by the receiver at his peril. In addition to those items specifically mentioned by the master in that portion of his report above referred to it appears that the receiver expended the sum of $1,959.16 for counsel fees which were totally unauthorized. Shortly after his appointment, and upon his application, the receiver was authorized to retain Lum, Tamblyn & Colyer as his counsel, to “render such legal services to the receiver as may be required by him in the performance of his duties as such receiver.” Notwithstanding this authorization the receiver appears to have employed other counsel as and when he saw fit, fixing their fees and paying them such sums as in his judgment he thought proper, without any authority whatever from the court. It is true that most of this expense was incurred in collections by ’foreign attorneys and was possibly necessary under the circumstances; but it is believed that better results at less cost would have been obtained had all these collections and legal matters been handled through the office of the receiver’s counsel duly appointed. Except that it is inferred from the master’s report that this expense was necessary, the receiver would be surcharged.

It is clear that there was little co-operation between the receiver and his duly appointed counsel, because of the reeeiver’s sublime egotism. Not only clid the receiver ignore his appointed counsel, but he actually consulted counsel for the creditors, and on the return of this order to show cause such counsel appeared and attempted to justify and defend the receiver for the transactions disclosed by this audit.

The receiver also paid a firm of accountants the sum of $800 for an audit of the insolvent company’s books, without any authority from the court. He has expended in his administration of the insolvent estate for services of assistants the sum of $6,253.23, without any authority whatever, much of which might very possibly have been dispensed with had the estate been properly administered. The receiver is not a novice in affairs of this kind, as it appears that he had twice before served as receiver of insolvent corporations by appointment of this court. He was at one time president of the Lumbermen’s Association, and it was because of this fact, and the recommendation of counsel for complainant and defendant, in whom I had, and still have, the utmost confidence, that he was originally appointed by me, although it was against my better judgment. The receiver himself now says his appointment was a mistake, as appears from his voluntary statement for 'the record, hereinafter recited in part. But notwithstanding his admitted poor administration and incompetence, he now has the audacity to ask for additional fees to the amount of $5,000 and his counsel asks for an additional allowance of $2,500. A receiver is an officer and representative of the court; is responsible directly to the court for his official acts; is liable for fraud or negligence resulting in injury or loss to the estate; incurs unauthorized expenses at his own peril; must keep regular and accurate accounts of receipts and expenditures; cannot act on his own discretion without leave of court; must not mingle trust funds with personal funds; and he will be held to a strict accountability for all his acts, either of omission or commission ; in short, he will be held to the same measure of responsibility as a trustee, which he, in fact, is. The receiver’s administration has already cost this estate over $9,000, which is in excess of twenty per cent, of the amount of cash realized by him, and no further allowance will he made to him. The court will not ratify any unauthorized expense unless it appears to have been necessarily incurred. The item of $858.75 for personal expenses for which he claims credit will be reduced to $450 in accordance with the recommendation of the master. He will be required to restore to the trust estate, if he has not already done so, the following items:

$3,000.00 Eepresented by check dated September 3d, 1929, and interest at six per cent, to April 15th, 1932.

$2,000.00 Eepresented by check dated October 30th, 1929, and interest at six per cent, to April 15th, 1932.

$2,000.00 Eepresented by check dated September 21st, 1931, and interest at six per cent, to April 15th, 1932. (This item should be reduced to $200 on the assumption that the check stub entry concerning the $1,800 payment is false, as it appears to be.)

$2,436.08 Collected from Babylon Mill and Lumber Company and deposited in the account of Milton L. Dake Company, and interest at six per cent, to date of repayment.

$337.57 Eepresenting collections on seven accounts not reported.

The following items in the account will be disallowed: $2,088.00 Por salary to Klimowicz.

$858.75 Expenses, less $450, as recommended by the master.

The receiver has filed voluminous affidavits indicating the services which he has performed in the administration of his trust. There is no doubt that a large amount of time and effort has been expended by him in the performance of his duties as receiver, but I think it is apparent that there has been much lost motion, and in view of the results obtained, and the questionable transactions and misconduct of the receiver as disclosed bjr the master’s report, and ■ especially in view of the amount of money expended by him for payment of assistants in his work, and for which allowance has been made, it is deemed that he has already been well paid for his services. Except that I am unable to satisfy myself that his misconduct is criminal, rather than the result of ignorance and ineptness, he would be directed to restore what he has already been paid.

(Since the above was written I have asked the receiver to produce before me the bank records, including check stubs and canceled checks of the Milton L. Dake Company covering the period of the receivership, in order that I might check some of his testimony before the master and determine to my own satisfaction this question of misconduct, and although this request was made more than ten days ago, it has not yet been complied with. I am informed by his counsel that a similar request was made by the master and that the receiver then claimed that he could not comply because all such records had been destroyed. This is the usual refuge of those who do not desire to have their personal conduct too closely scrutinized. It is not accepted as a sufficient explanation of his failure to comply with such a reasonable request, but rather as proof of his culpability and unfaithfulness to his trust. An unfaithful trustee deserves no reward, and has only himself to thank if the results of such unfaithfulness bear down hard upon him. In addition to the items for which the receiver will be required to account as above stated, he will be directed to pay back to the trust fund the fee of $1,800 previously allowed him.)

Notwithstanding the failure of the receiver to co-operate with counsel appointed by the court I think it is evident that counsel has performed services for which they have not already been compensated. An additional allowance of $G00 will be made.

At the conclusion of the receiver’s examination before the master who made this audit, the receiver voluntarily made a lengthy statement for the record, which is, in part, as follows :

“With the permission of the court, I should like to enter the following memorandum on the record, to the end that the court may be informed of the views of at least one business man on the question of receiverships:

% % * }¡í * ^

“When Stone & Hershey became insolvent, a great many of the creditors of that company, to my knowledge, felt that a wholesale lumber concern could only be liquidated by one familiar with the business, and as I had had previous experience at the appointment of Vice-Chancellor Bentley in liquidating such a company, I was recommended to the vice-chancellor for this particular receivership both by Lum, Tamblyn & Colyer, solicitors for the complainant, and by William L. Brunyate, solicitor for the corporation.

$$$$$$$

“I wish, however, emphatically to state that I have come to the reasoned conclusion that no business man is either competent or equipped to properly handle receivership cases, despite the general opinion of business men to the contrary. Personal experience has taught me otherwise. Even though a receiver has the best of legal counsel, he is confronted daily with innumerable questions involving points of law and procedure, and perhaps out of pride of his own business ability he continually seeks to solve these questions himself—often wrongly.

“Moreover, no business man has the office equipment for such services. If he really is a competent business man, he only has such help in his own business as is necessary for his own uses when used at one hundred per cent, capacity. If he takes on a burdensome receivership he must either get additional help at a greater expense to the receivership, or he must impair his own business organization. Another difficulty is that a business man is accustomed to achieve results by practical means. Many times these practical short cuts, while wholly justifiable from the standpoint of a business man, run afoul of legal ethics and technicalities of the law. This only involves the average business man in more difficulty which a lawyer would escape.

“After two experiences in liquidating insolvent corporations, both in businesses with which I am entirely familiar, I am constrained to say that I neither have the facilities nor adequate knowledge of legal technique to liquidate an insolvent corporation in my own line of business, and I feel ■certain that the average business man is in the same position despite their opinion to the contrary. Certainly, a business man could not liquidate an insolvent corporation in any other line of business than his own with the dispatch that a lawyer can.

“My own final conclusion is that not only a lawyer but a lawyer of greater than average ability is required to properly liquidate insolvent corporations.”

With this statement I am in entire accord.

And, it may well be added, that the certain knowledge of .a lawyer that disbarment will result from unfaithfulness to his trust is a guaranty of fidelity above that afforded by the usual receiver’s bond, too little appreciated by the general public. Also, that the appointment of lawyers as receivers ■of insolvent corporations results, as a general rule, not only in more efficient, but in more economical administration, particularly as the appointment of counsel for such receivers is usually unnecessary, and thus a duplication of fees is .avoided. On the other hand, a layman receiver without counsel to guide him is like a ship without a rudder. There are undoubtedly cases in which special circumstances require the .appointment of business men as such receivers, as where the corporate business is to be continued, or where a reorganization is contemplated, although in the latter class conceivably the modern lawyer is better equipped for the task by both ■education and experience than is the ordinary business man. But where the duties of the receiver consist mainly of marshalling and liquidating assets, as here, it has been my experience that better results are obtained by the appointment of lawyers of recognized ability and standing at the bar aud in whom the court has complete confidence based upon its •own knowledge. In the last analysis, the responsibility for such appointments is that of the court itself, and that responsibility justifies the court in making its own selection •of its appointees. When the responsibility is shifted to other shoulders it will then be time enough for this court to surrender its ancient prerogative.

I will advise an order in accordance with these conclusions.

ADDENDUM.

Since the foregoing opinion was filed I have received from counsel for the receiver the check stubs and canceled checks of the Milton L. Dake Company covering the period of the receivership, but the bank statements requested have not been received. I have carefully examined such records as I have received, and they show beyond peradventure of doubt that the receiver appropriated receivership funds to his own personal use throughout the greater period of his trusteeship, as will appear from a statement of some of the information gleaned from these records.

On September 1st, 1929, the bank balance of the Milton L. Dake Company was $182.70. No deposits were made in this account on September 1st and 2d; but on September 3d, three deposits of $1,935.91, $18 and $3,000 respectively were made. The third item was the $3,000 check drawn on the receiver’s account on September 3d, 1929, to the receiver’s own order. On the same day the company paid two of its notes, one of $2,000 and the other for $3,000, held by the bank. This appears from entries on check stubs Nos. 2603 and 2604. By the issuance of other checks the company’s bank account was overdrawn $3,938.01 at the conclusion of the day’s business. During the month of September the withdrawals from this account exceeded the deposits by $3,503.95, which was the amount of the overdraft on October 1st. On October 28th, the company paid its note of $3,000. It appears from the testimony before the master that the receiver’s check of October 30th, 1931, for $2,000 drawn to the receiver’s own order was deposited in this account, although the check stubs do not show it; but neither do they show the deposit of $2,436.08 Babylon Mills and Lumber Company item which it is admitted was deposited in his account on August 6th, 1931. The check stub entries are plainly incomplete, but during the whole receivership period the Milton L. Dake Company bank account was frequently overdrawn—apparently that was its normal condition. Without the use of receivership funds it would have been overdrawn oftener than it was.

Now as to the withdrawal of cash from this account by the receiver. He testified that the receivership funds deposited therein were withdrawn by him from time to time in small amounts of from $200 to $500 and the cash placed in a safe deposit box in a Newark bank. The check stubs show withdrawals by the receiver amounting to $28,081.90 during the receivership period of thirty-one months. Most of the withdrawals were marked for “salary” or “traveling expenses.” During that same period the receiver personally is credited on the check stubs with deposits amounting to $10,168.94. Add to this amount the Babylon Mills and Lumber Company item of $2,436.08 and the receiver’s check for $2,000 dated October 30th, 1931, and we have $14,605.02 of total deposits by the receiver in this account. The net amount of his withdrawals during this period is, therefore, $14,476.88, or approximately $467 per month, slightly more than $100 a week. He had no other visible source of income; he had to live, and his story of $7,000 in cash in a safe deposit box seems a myth and does not appeal to the reasoning mind. The difference between this receiver and the ordinary embezzler is that he was caught after, instead of before, the restoration of most of the embezzled funds. Coincident with the filing of this supplemental memorandum I am advising an order removing the receiver and directing him to account to a substituted receiver thereby appointed.


source: Caselaw Access Project

author: Kremer, J.

license: Public Domain

text:
    First Judicial District of the County of Monmouth.
    ALBERT LIFSON & SONS, INCORPORATED, A CORPORATION, PLAINTIFF, v. HERBERT WILLIAMS, TRADING AS JAMES CALKINS & COMPANY, AND SERENA CONDE, NASH, DEFENDANTS.
    For the plaintiff, A. Lawrence Plager.

    For the defendant Herbert Williams, Jacob Sieinbach, Jr.

   Kremer, J.

This is an action in replevin. The plaintiff seeks to recover possession of certain furniture it claims to have leased to the defendant Serena Conde Nash. She, in turn, stored the goods with the defendant Williams, who resists the present action and claims a lien upon the goods to the extent of the storage charges under the so-called “Uniform Warehouse Receipts law.” 4 Comp. Stat. p. 5776.

The testimony tended to establish that on the 10th day of September, 1930, Mrs. Nash negotiated with the plaintiff and acquired certain furniture under an arrangement which the plaintiff claims was merely a rental, but which the defendant says was, in fact, a sale. A document in the form of a lease was signed by the defendant, under the terms of which she agreed to pay $315.04 for the rental of the furniture. $35.04 was to be paid on delivery and then $5 per week. The agreement in form was in all respects comparable to that discussed in the case of Singer Manufacturing Co. v. Wolff, 70 N. J. L. 127; 56 Atl. Rep. 147, and the language of the lease in the instant case was apparently patterned after the language of the lease under discussion in the Singer case.

In addition to the lease, however, the purchaser, Mrs. N ash, was given a hook by the plaintiff. In this book the merchandise sold was set forth and pages provided to note her installment payments. There were other provisions in the book which shed light on the nature of the original transaction between the plaintiff and the defendant Mrs. Nash. The book contained, among others, the following provisions:

“Bring this book with you when making payments or more purchases, or transacting any business with our firm.”

“No money refunded if article must be taken back.”

The defendant Mrs. Nash further testified that she went to plaintiff’s place of business to purchase furniture and that she was shown furniture and informed the plaintiff’s representative that she could not pay for it in cash. She testified that after some conversation with the salesman she was informed that there was another method of payment provided by the plaintiff, and then the lease was drawn and the passbook issued to her in which provision was made for the entry of her weekly payments.

The first question to be disposed of is whether parol evidence is admissible to show the real transaction between plaintiff and the defendant Mrs. Nash. The plaintiff, in its brief, urges that the written instrument in the form of a lease is conclusive as to the arrangement between the parties. The defendant Herbert Williams, however, was not a party to the agreement and he was not bound by its terms. It was competent for him to show what the true arrangement was between the plaintiff and Mrs. Nash. The parol evidence rule is binding only on those persons who are parties to the document. 4 Wigm. Ev., ¶ 2446. It is firmly established in New Jersey that the rule which excludes the introduction of evidence to vary or contradict a written instrument does not apply to third persons. First National Bank of Plain- field v. Dunn, 55 N. J. L. 404; 27 Atl. Rep. 908; Shreve v. Crosby, 72 N. J. L. 491; 63 Atl. Rep. 303; Halliwell v. Trans-States Finance Corp., 98 N. J. L. 133; 118 Atl. Rep. 837

It is clear, therefore, that in the present case the defendant Williams was entitled to show the actual transaction between the plaintiff and the defendant Mrs. Hash, and to introduce in evidence not only the passbook given to the defendant Mrs. Hash concurrently with the other agreement, but also oral testimony to show what took place at the time of the original negotiations.

While the agreement contended for by the plaintiff was in the form of a lease, the testimony of the defendant Mrs. Hash, and the provisions in the passbook clearly indicate to me that the intention of the parties was that a sale was being-effected. The words “no money refunded if article must be taken back,” indicate that if the article was fully paid for it would not be taken back and that if it were not paid for, the plaintiff might repossess it. If the statement does not mean this it has no significance whatever. In the other-quoted clause printed in the passbook, the words “more purchases” indicate that this was in fact a purchase. I am of the opinion, therefore, that the transaction between the plaintiff and Mrs. Hash was not a lease, but was a conditional sale; it being the intention of the parties that if Mrs. Hash paid for the property and complied with the terms of the so-called lease, the furniture was to become her own, but that if she did not pay the plaintiff might repossess the goods.

The case of Singer Sewing Machine Co. v. Wolff, 70 N. J. L. 127; 56 Atl. Rep. 147, has been relied on by the plaintiff as establishing its right to recovery in the instant case. An examination of the authorities in our state, however, will clearly indicate that our courts, in passing upon the case of Singer Sewing Machine Co. v. Wolff, supra, have inclined to limit the applicability of that case to cases in which the facts are clearly identical. Commenting upon it in the case of Rapoport v. Rapoport Express Co., 90 N. J. Eq. 519; 107 Atl. Rep. 822, Vice-Chancellor Lane made the following very significant statement:

“The Wolif case, if it is to be construed as authority, must be confined to cases in which the facts are identical. The true agreement between the parties, if other than as evidenced by the written paper, did not appear to the court.”

The present case may easily be distinguished from the Wolif case in that in the present case there were additional facts beyond the so-called lease itself to show what the true agreement between the parties was. No such additional proofs appear in the Wolif case.

The tendency of our courts to penetrate the fiction by which a document, which is in reality indicative of one transaction, is so framed as to purport to show a different transaction, is illustrated in the case of Wood v. Cox, 92 N. J. Eq. 307. In that case the agreement was in the form of a lease of a soda fountain for a period of six months at a rental of $850, of which $200 was paid on the execution of the agreement and the balance in sums of $100 per month, with the provision that if the lessee should desire to purchase the leased property, the lessor agreed that upon payment by the lessee of such sums as would, with the previous rent, amount to $850, the lessor would execute to the lessee a bill of sale for the leased property; that no title should vest in the lessee under the agreement, and if default be made by the lessee in keeping the covenants then the lease should forthwith cease.

Chancellor Walker held the agreement to be a conditional sale and in his opinion, quoting with approval the Eapoport case, said:

“The terminology in the paper before me describing the document as a lease is a mere subterfuge and a palpable attempt to evade the law, as was the situation in the Eapoport case.”

In this connection, referring again to the Eapoport case, there is the following succinct quotation from Vice-Chancellor Lane’s opinion:

“To hold that the paper evidences such a contract as it purports to evidence would be to permit a fraud upon the statute and it might as well be repealed.”

Applying the facts above stated to the authorities quoted, it is apparent that the plaintiff sold goods to the defendant Mrs. Wash on terms which amounted to a conditional sale.

The defendant Williams is a warehouseman. The goods were stored with him by Mrs. Wash and it was undisputed that $36 was due to him for storage charges. The act under which his lien attaches and may be enforced has already been referred to. It remained only to state that section 5 of the Conditional Sales act (Pamph. L. 1919, p. 462), provides that:

“Every provision in a conditional sale reserving property in the seller shall be void as to any purchaser from or creditor of the buyer who, without notice of such provision, purchased the goods before the contract or a copy thereof shall be filed * * *.”

This contract was never recorded in compliance with “An act respecting conveyances” (Revision of 1898). Pamph. L. 1898, p. 670.

The defendant Williams therefore is entitled to his lien for the amount of. his storage charges. Testimony was offered at the trial tending to establish the fact that plaintiff, after having obtained the warehouse receipt from the defendant Mrs. Wash presented it to the defendant Williams but refused to pay the charges. Tailing so to do, they were not entitled to possession.

In so far as the defendant Serena Conde Wash is concerned, a different situation exists. There is no question that she was in default under the terms of her agreement and had not paid the installments which she contracted to pay. The contract gave the plaintiff the right to repossess the articles in the event of such a default.

Let judgment of possession be entered in favor of the defendant Herbert Williams.


author: Per Curiam.

text:
    DAVID CAMPBELL, PROSECUTOR, v. JOSEPH SIEGLER, JUDGE OF THE JUVENILE COURT OF THE COUNTY OF ESSEX, RESPONDENT.
    Submitted May term, 1932
    Decided August 22, 1932.
    .Before Justices Parker, Campbell and Lloyd.
    Por the prosecutor, Francis A. Nott.

    Por the respondent, Arthur T. Vanderbilt, William Q. McLoughlin, pro se, and Robert L. Flemming, amicus curice.

   Per Curiam.

This writ purports to bring before us, for review, a judgment of mayhem, against the prosecutor, David Campbell, a boy of about ten years of age, and which judgment is said to have been rendered and entered against him by the judge of the Juvenile Court of Essex county.

There is, in fact, no such judgment returned and there is nothing in the record before us indicating that there was such a finding or judgment.

Complaint was made against the prosecutor as a delinquent particularly charging him with engaging in a fight with another lad of eight years of age, and biting a finger of the right hand of the latter, causing it to become infected requiring the amputation of a part of the finger. Upon a hearing of the matter the judge of the Juvenile Court directed the parents of the prosecutor to regularly present him to the official psychiatrist of Essex county for examination and observation. This order appears not to have been obeyed by the parents of the prosecutor. The court below had before it a report of the psychiatrist, resulting from an examination of the prosecutor, who was by the probation officer of Essex, county, taken to the former officer by the court’s direction.

The brief of the prosecutor advances four reasons for setting aside the findings of the court below and, although it is doubtful that any reason filed by the prosecutor properly raises any of the grounds we have, nevertheless, considered them.

1. (a) That there is no proper docket record of the conviction of the prosecutor; the only record of said court is-a memorandum record.

(b) The docket does not show the substance of the testimony of the proceedings.

The return to the writ does show an adjudication of juvenile delinquency, and likewise shows complete and sufficient docket entries of the proceedings, and the testimony, upon, which the finding is based, is fullly set out in such return.

2. The court erred in admitting certain irrelevant, incompetent and improper testimony, as follows: the witness William 6. McLoughlin, Sr., was allowed to testify that the-physician who attended William G-. McLoughlin, Jr., said, “the boy will not have a quarter use of the finger.”

In the first place these proceedings are informal and summary. In the second place no objection of any character was-made to this testimony and finally we cannot see how it was-harmful or prejudicial. It went only to the extent of the-injury said to have been inflicted by the prosecutor and there-was other competent proof in that direction and, still further, the matter before the court below was not the seriousness of the injury but the act of the prosecutor causing it showing- or tending to show delinquency.

3. The court erred in permitting William G-. McLoughlin,. Jr., to testify that a neighbor, Mr. Eoster, said, who was present: “You had better go home and have it taken care of.”

In addition to what has been said by us under the last preceding ground we are at a loss to see how this testimony could be in anywise prejudicial to the prosecutor.

4. That the court lost jurisdiction over the cause when it adjourned sine die.

The record before us does not show any such adjourment.

The summons was returnable November 7th, 1930, on which date proofs were taken and the prosecutor adjudged •delinquent. An adjournment was taken for two weeks, to November 21st, 1930, and then the cause adjourned to December 5th, 1930, when the report from the psychiatrist, Dr. Plant, was before the court, read and explained by the court to the parents of the prosecutor who were directed to ■continue taking the prosecutor regularly to Dr. Plant as often .as the latter required and the prosecutor was placed under the supervision of the probation officer.

This ground or reason, therefore, is not based upon any .fact shown by the return before us.

The writ is, therefore, dismissed, with costs.


author: Pee Cueiam.

text:
    ALBERT E. CAMPBELL, PROSECUTOR, v. JOSEPH SIEGLER, JUDGE OF THE JUVENILE COURT OF THE COUNTY OF ESSEX, RESPONDENT.
    Submitted May 10, 1932
    Decided August 18, 1932.
    Before Justices Paeicbe, Campbell, and Lloyd.
    Por the prosecutor, Francis A. Noti.

    Por the respondent, Arthur T. Vanderbilt, William, G. McLoughlin, pro se, and Robert L. Flemming, amicus curice.

   Pee Cueiam.

This writ brings up for review a judgment of the Juvenile ‘Court of Essex county adjudging the prosecutor in contempt of that court and sentencing him to five days in the Essex county jail, which sentence was suspended. The alleged contempt grew out of the proceeding reviewed in this court in Campbell v. Siegler, 10 N. J. Mis. R. 987. That case was upon complaint of delinquency against David Campbell, the ten-year-old son of the prosecutor in this proceeding. The order of the Juvenile Court was that the prosecutor here was to continue the taking of his son to the official psychiatrist of Essex county. This he did not do and the result was the proceedings here complained of.

The prosecutor says that the proceedings should be set aside because there is no record of the order of the court for failure to obey which he is said to be in contempt. This is entirely without merit because the return to the writ shows there was such an order.

He next urges that the judgment of contempt should be set aside because he was never served with any written order of the court which it is said he disobeyed. But this is also without merit, because he was present, in court, at the time such order was made and he does not claim tha't he was without knowledge of it but simply that he was not formally served with a copy thereof.

He then urges that the judgment should be set aside because the court below lost control of the matter on February 17th, 1931, by adjourning the cause without day.

We also find this to be without merit. Prosecutor had notice of the proceeding, appeared and defended by counsel.

Finally prosecutor urges a setting aside of the proceedings because, he says, there is no proper docket entry of them. This is not the fact. The record shows a very exact and complete docket entry of the proceedings.

We conclude that the proceedings under review should be affirmed and the writ dismissed, with costs.


author: Pee Curiam.

text:
    MATTHEW A. CUTLEY, PROSECUTOR, v. NEW JERSEY STATE HIGHWAY COMMISSION, RESPONDENT.
    Submitted May 10, 1932
    Decided August 18, 1932.
    Before Justices Paetcee, Campbell and Lloyd.
    For the prosecutor, Eric H. Jente.

    For the respondent, William A. Stevens, attorney-general, Walter H. Bacon and George T. Viclcers.

   Pee Curiam.

We think the writ in this case should be dismissed for both legal and factual reasons.

In the first place the writ is improperly directed to the highway commission and should have been directed to the civil service commission. This would be sufficient to require its dismissal.

Prosecutor, prior to April 8th, 1930, was employed as supervisor of maintenance by the state highway commission. He is a veteran of the World War and holds an'honorable discharge and claims under Pamph. L. 1907, ch. 14, the right to continue to enjoy the benefit of such position unless properly discharged after hearing upon written charges.

He was discharged by the highway commission and then appealed from its finding to the civil service commission which latter body seems to have approved of the dismissal on October 15th, 1930. The return of the present writ does not show any judgment of the civil service commission. This situation is created, undoubtedly, because the writ is not directed to that body but to the highway commission. The fact that such a judgment was reached by the civil service commission upon the appeal to it by the prosecutor is shown by the latter’s testimony taken under the present writ.

While, as we have already said, the present writ, for the reasons before given, might, and in fact should be, dismissed, yet turning to the merits we find that prosecutor complains that he was not properly dismissed by the highway commission through a hearing upon written charges and that, upon his appeal from such dismissal to the civil service commission, such appeal was interrupted by an adjournment, without date, and the latter body proceeded to judgment against him without proper notice.

The facts as shown by the record return, and depositions taken, do not substantiate either of these contentions but, on the contrary, show such assertions to be utterly without foundation.

The proceedings under review are affirmed, and the writ dismissed, with costs.


text:
    BYRON M. HARMAN, PROSECUTOR, v. ERNEST A. REED, SUPERVISOR OF ESSEX COUNTY, DEFENDANT.
    Argued October 7, 1931
    Decided August 15, 1932.
    Before Gummeee, Chief Justice, and Justices Paek.ee and Case.
    Por the prosecutor, Robert H. McCarter.

    Por the defendant, Arthur T. Vanderbilt.

   Pee Cueiam.

This writ brings up the proceedings before defendant Deed, sitting as a special statutory tribunal, resulting in the conviction of the prosecutor of misconduct in his capacity as superintendent of the Essex County Sanatorium, and his removal from that office. At the original hearing in this court it was determined that the supervisor was without jurisdiction. Harman v. Reed, 8 N. J. Mis. R. 340; 150 Atl. Rep. 218. The conviction was accordingly set aside but on appeal, the judgment of this court was reversed (108 N. J. L. 191; 155 Atl. Rep. 145), and the ease was remanded to this court for consideration on the merits. We have accordingly examined with care the voluminous printed transcript of the testimony and other evidence adduced at the hearing before the supervisor, and conclude that the conviction was not warranted by the evidence.

The prosecutor was tried on ten original charges and one supplemental charge formulated during the trial. Of the ten original charges, seven were dismissed as not proved, the other three, of which prosecutor was found guilty, charged in effect undue intimacy with two female employes named Galloway and Galler, entertaining them in his private office, serving liquor to them, taking them riding in a motor car, making indecent proposals, and in one ease “assaulting” the Galler woman. Jt does not seem to have been claimed that as the result either of the “proposals” or the “assault” the prosecutor had carnal intercourse with either woman. The charges were wholly indefinite as to dates, the only specification of time being “between Labor Day, 1925, and August, 1926” in charges numbers one and four and between Labor Day, 1923, and August, 1926, in number two. The charges and trial came in the fall of 1928 so that they were all over two years old. The proof under all of them rested on the unsupported testimony of the Galloway woman as to matters in which she was concerned, and of the Galler woman touching matters relating to herself. Dr. Harman, testifying in his own defense, fully denied them. The testimony of Miss Galloway is greatly discredited by the fact that she told no one of the alleged indecent advances for months afterwards, though testimony to such complaint if made, is clearly competent. State v. Ivins, 36 N. J. L. 233. As was said in State v. Rodesky, 86 Id. 220; 90 Atl. Rep. 1099: “The effect of the fact thus proved is to remove from the state’s witness an otherwise discrediting circumstance, and thereby to affect favorably her credibility.” See, also, State v. Schaeffer, 87 N. J. L. 663; 94 Atl. Rep. 598. Moreover, her testimony has not the ring of truth, as we read it, and hence is unworthy of credit, apart from the fact that counsel for prosecutor in view of objection from opposing counsel, was debarred from cross-examining her touching her character for chastity and past record in that regard. It was shown, however, that she was given to midnight meetings with a male employe, and that when she left the night supervisor was not at all sorry.

The testimony of the Galler woman is somewhat more direct, but to our minds little, if at all, more reliable. She claimed to have left the institution because of Dr. Harman’s advances, and she did tell her story to the roentgenologist, Dr. Bennett. The matter was laid before the Catholic chaplain, who held a hearing of his own, apparently at Bennett’s instance, and quite obviously came to the conclusion that her story was unworthy of belief, and that her general character was not good. In the case of this witness, also, cross-examination on her past life and record was shut out and we are satisfied that substantial harm was done the prosecutor by that exclusion. Even without it, we take the same view as the chaplain, particularly as it is fairly clear that both the Galler and the Galloway charges were instigated by Bennett out of enmity to Harman.

The eleventh charge, of which the county supervisor found the prosecutor guilty, was that he had discharged one Eloise Travers as night supervisor without charges and a hearing. This charge was formulated after the hearing on the other ten had been completed. Mrs. Travers had testified, early in the hearing on another charge, that something had occurred between her and Dr. Harman which she construed as a discharge, and left. Perhaps it was a discharge, but no complaint on that score was pending at the time this testimony was given. Harman’s counsel objected to it as irrelevant, asked if a further charge was intended, and was told that was not the case. The following day Mrs. Travers was killed by a subway train in New York, and later the eleventh charge was formulated, and the testimony previously objected to relied on to support a conviction on charge eleven. The irregularity of such procedure requires no argument. The question then remains as to the Galloway and Galler charges, whether in view of their indefinite character and in view of the testimony and the conduct of the hearing, there is a “rational basis” for the conviction. Reilly v. Jersey City, 64 N. J. L. 508; 45 Atl. Rep. 778; Herbert v. Atlantic City, 87 N. J. L. 98; 93 Atl. Rep. 80. We conclude that there was not, and that the conviction and proceedings must be set aside, with costs.


text:
    NORRIS C. VAN SANT, PROSECUTOR, v. C. J. ADAMS COMPANY, DEFENDANT.
    Submitted May 3, 1932
    Decided August 27, 1932.
    Before Justices Parker, Campbell and Lloyd.
    For the prosecutor, Flwood F. Kirlcman.

    For the defendant, Joseph II. Carr and Bernhard G. Luethy.

   Pee Cueiam.

This writ brings up a judgment of dispossession in a landlord, and tenant case.

Van Sant, as tenant, rented certain premises from defendants under a written lease for a year from February 1st, renewable yearly until terminated by thirty days’ notice, which was not required to be in writing. In February, 1932, the landlord demanded possession, claiming expiry of term, sued in the District Court and had a judgment, which is before us on this writ.

The only question is whether there is any evidence of a legal notice working a termination of the tenancy.

Carl Adams, a witness for defendant, testified that in September, 1931, he ivas talking with Van Sant about collecting the rent, and Van Sant said he could not pay over $6,000 for the coming year and to please take it up with the owners. Later that witness told Van Sant they would not take $6,000 and Van Sant made a vulgar reply indicating that was all he would pay. Adams: “You mean you don’t want the lease for another year?” Van Sant: “No, not unless I can get it for $6,000.” Adams: “Positively they will not take $6,000.” Later when Adams was collecting rent, Van Sant asked if he had a new tenant. Mrs. Biley, a clerk in the Adams office, testified that Van Sant came in the office January 13th and remarked as he made the last payment for the year, that it would be the last check from him.

We are not concerned with the weight of evidence. Was, then, the District Court justified in regarding the conversation in question taken with subsequent acts of prosecutor as testified to, as an adequate thirty days’ notice? Clearly* we think, it was justified.

The judgment will be affirmed.


author: Pee Cukiam.

text:
    JOHN RATH, PROSECUTOR, v. CITY OF BAYONNE ET AL., DEFENDANTS.
    Submitted May 13, 1932
    Decided August 27, 1932.
    Before Justices Pabkeb, Campbell and Lloyd.
    Por the prosecutor, John Milton.

    Por the defendants, Alfred Brenner.

   Pee Cukiam.

The writ brings up an ordinance of September loth, 1931, repealing an ordinance of December, 1927, creating the city office of inspector of buildings; and a resolution of October 6th, 1931, assigning the duties of building inspector to the city surveyor. Prosecutor was building inspector at the time of the repealer, and claims to have been illegally deprived of his office.

The first point made is that the repealer ordinance is invalid as undertaking to contravene chapter 50 of Pamph. L. 1914, providing in substance that inspectors of buildings in second class cities (Bayonne is one) shall have indefinite tenure and shall not be removed without charges and a hearing.

The second point is that the repealer also runs counter to the act of 1927 (Pamph. L., p. 422, ch. 223), making similar provision in case of indefinite terms of office in all but first class cities.

If the office itself remained, these statutes would be applicable; but the office was created by ordinance, under authority of Pamph. L. 1886, p. 321; and the power to enact the ordinance implies' a power to repeal. Stemmler v. Madison, 82 N. J. L. 596; 83 Atl. Rep. 85. It is conceded that an office may be abolished bona fide in the interest of economjr, and perhaps for other similar reasons, but it is alleged that the present abolition was for political reasons. We find no fact in the case pointing in that direction, except perhaps that the personnel of the city commission had changed. It seems 'to be recognized in the cases that there must be something indicating a lack of good faith. For example, in Carroll v. Bayonne, 3 N. J. Mis. R. 308; 128 Atl. Rep. 234 (cited in prosecutor’s brief), there was a wholesale shedding of policemen and firemen; in McGillvray v. Linden, 5 N. J. Mis. R. 1049; 139 Atl. Rep. 433, the testimony showed political motive; in Womsley v. Jersey City, 61 N. J. L. 499; 39 Atl. Rep. 710, the office was retained or recreated under a transparent change of name.

In the present case the office is definitely abolished at a saving of some $3,500 a year, and the work, under the resolution before us, will be done by the city surveyor without extra pay so far as appears. We are unable to read any bad faith out of this action.

The writ will be dismissed, with costs.


text:
    STATE BOARD OF MEDICAL EXAMINERS, PROSECUTOR, v. THOMAS H. BROWN, JUDGE OF THE HUDSON COMMON PLEAS, ET AL., DEFENDANTS.
    Submitted May 13, 1932
    Decided August 27, 1932.

      Before Justices Parker, Campbell and Lloyd.
    For the prosecutor, William A. Stevens, attorney-general, and Robert Peacock, assistant attorney-general.
    For the defendants, Meyer Resin.

   Per Curiam.

One Golda Swerdlow-Badin, coming before Judge Brown on a writ of habeas corpus, was by him ordered released from custody under a commitment of the First District Court of Jersey City in a proceeding under the Medicine and Surgery act of 1894, as amended by Pamph. L. 1921, pp. 702, 708, 709. The ground of ordering such release was that said Golda is a female and therefore is immune from imprisonment for refusal to pay a judgment against her in a proceeding for violation of the Medical act, which provides by section 10 that the court may cause a defendant refusing to pay the judgment “against him” to be “committed to the county jail for any period not exceeding one hundred days.”

No constitutional point was made. The sole argument was and here is, that section 10 is in contravention of section 64 of the Practice act of 1903 which says that “no female shall be arrested or imprisoned by virtue of any mesne process or process of execution in any civil action.” Judge Brown regarded this as controlling and released the defendant. We think it has nothing to do with the ease.

1. The Practice act is not applicable to these summary proceedings under special statutes. 2. These penal actions are criminal or at least quasi-criminal. 3. The Medical act of 1921 is later than the Practice act of 1903 and if in conflict with it supersedes it. 4. The fact that the titles are different does not affect the matter.

The fact that the statute says “him” does not of itself affect the matter, as words importing masculine gender include females. Comp. Stat., p. 4972, ¶ 9.

The order of discharge will be reversed, and the respondent Golda Swerdlow-Badin remanded to the custody of the sheriff to carry out the penalty imposed by the District Court.


text:
    APOLINA NAROZNIAK, ADMINISTRATRIX, ETC., PROSECUTRIX, v. JOSEPHINE PERDEK AND WORKMEN’S COMPENSATION BUREAU, DEFENDANTS.
    Submitted May 13, 1932
    Decided September 6, 1932.
    Before Justices Parker, Campbell and Lloyd.
    Por the prosecutrix, J. Thaddeus Respond.

    Por the defendant, William Hartshorne.

   Per Curiam.

The controversy in this case arises out of the facts that the employer carried compensation insurance, and the insurance company made the weekly payments agreed upon pursuant to the statute up to the death of the employer, and thereafter until the usual proceedings had been taken for the settlement of his estate, including order limiting creditors and later order barring creditors; after which the insurance company became insolvent and ceased paying, and it then transpired that the compensation claim had never been presented to the administratrix, although of course the estate was primarily liable for the payments. Doubtless the contingency of the insurance company breaking down had not occurred to any of the parties concerned.

Payments having ceased, the employe took the course of having them adjudicated under the Compensation act. The referee designated in that proceeding held that the bureau had jurisdiction to go so far as to ascertain and adjudicate the amount due and to grow due, but was without jurisdiction to enforce it; no doubt in view of the order barring creditors, which was put in evidence and was expressly recognized in his findings.

We concur in his view that the bureau had no jurisdiction to enforce an award, and confess our inability to see how, by the statute, the bureau is endowed with authority to make an award which it cannot enforce. The two things are inseparable, for by section 11 of the act of 1918 (Pamph. L., p. 429 (at p. 433), amended Pamph. L. 1921, p. 733) it is provided that the award, when filed in the county clerk’s office, “shall have the same effect and may be collected and docketed in the same manner as judgments rendered in causes tried in the Court of Common Pleas.” Such judgments, in the nature of things, are enforceable by execution.

At the death of the employer, who was the party primarily liable, orderly procedure required that the claim should be presented to his estate for audit and recognition, as in any other case of a claim. Ray Estate v. Steelman, 90 N. J. L. 184. Even if the claim were in tort, the rule would still apply. Hackensack Trust Co. v. Van Den Berg, 92 Id. 412. But the present claim, as the referee properly held, is contractual in its nature, and a fortiori it is within the rule.

There is no suggestion of any fraud or concealment on the part of the prosecutrix, who conceivably may not even have known of the accident. In any event, the situation seems to be that of an employer and employe who, when the settlement of the amount and the making of the payments have been taken over by an apparently solvent insurance company, dismiss the whole thing from mind, and after the employer is dead for over a year and the estate has been settled, the claimants are awakened by the stoppage of payments by the insurance company. Legally they are in default for not having presented their claim in due season, and are barred, except as against a surplus remaining after settlement (Orphans Court act, Comp. Stat., p. 3836, § 72), or unless some estate not accounted for is discovered. Ibid., p. 3834, § 69.

The award will be set aside, but without prejudice to proceeding under the pertinent provisions of the Orphans Court act for an audit and settlement of the claim against assets remaining by way of surplus, or other assets not accounted for in the settlement of the estate. Should the claim be recognized as valid as against such assets, payments will of course be made by the estate to the extent of such assets, so far as needed to satisfy the balance remaining due bn the agreement of award filed with the bureau in August, 1928, the total of which is stated in the findings of the referee at $7,284.86. Should the claim be disputed, and there be assets of the nature above specified to satisfy it in whole or part, then a petition may be filed for enforcement of the claim to the extent indicated above, provided it be filed within the statutory period of limitation.


author: Berry, Y. C.

text:
    Esther Bertha Wolf, complainant, v. Herman C. Schlichting and Emma Schlichting et al., defendants.
    [Decided August 17th, 1932.]

      Mr. Lester 0. Leonard, for the complainant.

      Messrs. Quinn, Parsons & Bor emus, for the defendants.
   Berry, Y. C.

The complainant foreclosed a mortgage of $6,000 covering the dwelling house and garage of the defendant. The bill was filed on August 2d, 1930; and the property sold to the complainant by the sheriff of Momouth county on April 13th, 1931. The deed was recorded on September 1st, 1931, and thereafter the complainant had to resort to an order of this court and a writ of assistance to get possession.

On September 29th, 1931, complainant brought suit at law against the defendant for deficiency on the bond, the sale having produced only $100. By stipulation the defendant’s time to answer was extended to October 31st, 1931. On the following day, and before any answer was filed, fire completely destroyed the garage and damaged the house. Complainant collected $6,037.50 from the fire insurance companies; and either has discontinued the action for the deficiency or’ expressed his willingness and desire to do so.

The defendant then filed a petition praying that he be permitted to redeem the property by paying to the complainant approximately $1,900 representing the difference between the amount of the foreclosure decree and the insurance money; or, in the alternative, that the complainant account to him for the fund which she received from the insurance companies. The policies in question were written in the name of the defendant as owner and complainant as mortgagee. They were issued by the fire insurance agent of the defendant; but, while the premiums were charged to the defendant on the books of the agent, they were paid by the complainant.

When Mrs. Wolf, the complainant, acquired the title by purchase from the sheriff she notified the agent of the change of ownership and requested that he endorse the policies to protect her interest as owner. He attached the following endorsement on each policy:

“It is hereby understood and agreed that the interests of Herman Sehlichting as owner of the within described property covered by this policy have been assigned to Bertha Wolf. All other conditions remain unchanged.”

The defendant, Sehlichting, argues that Mrs. Wolf collected the insurance money either as mortgagee or assignee, and that in either event she is accountable to him for the proceeds of the insurance policies.

His position is untenable. It cannot be said that she collected the money as mortgagee because the policies were endorsed to provide for payment to her as owner.

Neither was she an assignee from Schlichting. Her status was changed from mortgagee to owner when she bought the property and she did the usual and necessary thing when she notified the insurance agent of the transfer of title; necessary, because without such notice the companies would have had the right to cancel the policies. Hanson v. National Liberty Fire Insurance Co., 100 N. J. Law 215; 126 Atl. Rep. 153. The mortgagor’s agent used the word “assignee” in writing the endorsement; but no assignment, as generally understood, was intended.

The petitioner urges that it would be inequitable to permit Mrs. Wolf to retain the property and also the insurance money, and insists on his right to redeem even though the statute clearly indicates that the privilege of redemption accrues only after a judgment is entered in the deficiency action. P. L. 1880 p. 256, as amended, P. L. 1881 p. 185 (Comp. Stat. p. 3422), amended, P. L. 1915 ch. 178 p. 339.

The reason for the statute is stated by the court of errors and appeals in Pennsylvania Company for Insurance, &c., v. Marcus, 89 N. J. Law 633 (at p. 636); 99 Atl. Rep. 405 (at p. 406).

It is in derogation of the common law and must be strictly construed. Callan v. Bodine, 81 N. J. Law 240; 79 Atl. Rep. 1057; Development Building and Loan Association v. Nurock, 10 N. J. Mis. R. 23; 157 Atl. Rep. 452; Algrod Realty Co. v. Bayerl, 10 N. J. Mis. R. 651; 160 Atl. Rep. 504.

Mrs. Wolf did not enter judgment in her deficiency action and she cannot be compelled to do so. A plaintiff has the right to submit to a voluntary nonsuit at any stage of the proceedings up to the moment when the jury retires to deliberate on a verdict. Comp. Stat. p. 4103 § 160; Bauman v. Whiteley, 57 N. J. Law 487; Greenfield v. Cary, 70 N. J. Law 613.

There is no merit in the defendants’ contention that the position of the complainant is inequitable.

By retaining the property in its damaged condition and keeping the insurance money the complainant has nothing more than she had before the fire. She is not unjustly enriched; the assumption being that the amount paid to her by the insurance companies is equal to the extent of the damage caused by the fire, and nothing more than compensation for the damage. It is reasonable to believe that she will have to use the entire sum to restore the buildings to the condition in which they were before the fire. On the other hand, the defendant is benefited by the complainant’s abandonment of the deficiency suit. He is saved from a judgment. He had sufficient opportunity to stop the foreclosure at any moment of its course and then to bid for the property at the sheriff’s sale. He failed to take advantage of those opportunities. Neither law nor equity is on his side. The bill will be dismissed.


author: Ingersoi/l, V. C.

text:
    Adelaide Reid, complainant, v. Anthony Stankowitch et al., defendants.
    [Decided August 24th, 1932.]

      Messrs. Cole & Gole, for the complainant.

      Messrs. Thompson & Hans Lein, for the defendants Betty Popenoe, Paul Popenoe, Emily Eager and Alvin Eager.
   Ingersoi/l, V. C.

This hill is filed for the purpose of having this court declare complainant’s right and status in certain lands and premises. The contention arises under the last will and testament of Emily Stankowitch, dated Eebruary 3d, 1931, the salient points of which are as follows:

“First. It is my express wish that the house and ground which I own at 10 N. Providence Ave. remain intact and not be dismantled, and the entire house and contents I give and bequeath to my sister Adelaide Reid. I desire that said house at 10 No. Providence Ave. Atlantic City be not sold unless at a good price.”

This clause, by itself, grants an absolute estate. 4 Comp. Stat. p. 5873, clause 36.

The first question is: Is this gift limited by the last clause?—“I desire that said house at 10 N. Providence Ave. Atlantic City be not sold unless at a good price.”

It should be said that almost the same language is used in the second clause, whereby she gives certain premises in Pennsylvania to her brother Anthony.

Chancellor Runyon, in Hoxsey v. Hoxsey, 87 N. J. Eq. 21, said:

“Where the language of a testator shows a clear intent to devise the fee of his lands to Ms wife, words of recommendation or suggestion or advice as to the management or occupation thereof by the family, contained in other clauses, will not limit her estate.”

Vice-Chancellor Learning, in Deacon v. Cobson, 83 N. J. Eq. 122 (at p. 124) 89 Atl. Rep. 1029 (at p. 1080), said:

“A rule of construction early adopted by the English court of chancery was to the effect that when, by will, property is given absolutely to a person, and the same person is by the testator ‘recommended,’ ‘entreated,’ ‘requested’ or ‘wished’ to dispose of that property in favor of another, the recommendation, request or wish will be held to be imperative and to create a trust, if the subject and objects of the trust are certain. That rule of construction was adopted by our court of last resort more than half a century ago, and has since been uniformly recognized by the courts of this state; it cannot be now questioned in this court. Van Duyne v. Van Duyne, 15 N. J. Eq. 503; Eddy v. Harlshorne, 34 N. J. Eq. 419; Wood v. Camden Safe Deposit Co., 44 N. J. Eq. 460; 14 Atl. Rep. 885; Eberhardt v. Perolin, 48 N. J. Eq. 592; 23 Atl. Rep. 501; S. C. (reversed on appeal, but soundness of rule not. questioned), 49 N. J. Eq. 570; 25 Atl. Rep. 510; Cox v. Wills, 49 N. J. Eq. 130; 22 Atl. Rep. 794; S. C. (reversed only as to method of accounting), 49 N. J. Eq. 573; 25 Atl. Rep. 938. It necessarily follows that the requests of the testatrix in the will and codicil here in question must be given the same force as though the language adopted by testatrix had been, wherever the word ‘request’ occurs, it is my will and I do hereby order and direct. With this rule of construction uniformly recognized by our courts for so long a period of time, testators and scriveners may be said to have been privileged to rely upon its existence and future recognition.”

There is nothing, however, in this clause which, under this latter rule, limits the gift. The main question, however, is—does clause seven of the will, which reads as follows: “In the event of the death of either my brother or sister, his or her share is to revert to the other surviving heir, and upon the death of both my brother and sister the residue is to be divided between my three nieces in California, the children of my brother Anthony,” create a limitation? The contention of the complainant is that the language applies only in the event of the complainant and her brother predeceasing the testatrix.

In West Side Trust Co. v. Giuliano, 106 N. J. Eq. 475; 151 Atl. Rep. 275, Vice-Chancellor Backes held that a devise of lands, by words which clearly would give the absolute estate, will be construed into a devise or bequest for life only, if the will contains words giving it to another upon the death of the first taker.

Vice-Chancellor Learning, in Fithian v. Fithian, 109 N. J. Eq. 383, 157 Atl. Rep. 563, discusses the intent of the testator to vest in the first taker an uncontrolled power of disposition which must be ascertained from the entire will, and held that the trust in this case was not solely for the widow, but by other provisions of the will, was made to continue after the death of the widow for the benefit of the son.

It follows, therefore, that the complainant only holds a life interest in the premises 10' North Providence avenue, and a decree will be advised in accordance with these views.

The complainant calls my attention to Husted v. Husted, 109 N. J. Eq. 378; 157 Atl. Rep. 666, decided by me, as being quite in point. I am unable to see the application.


author: Backes, Y. C.

text:
    Oliver C. Clements, complainant, v. R. J. Arrowsmith, Incorporated, a corporation, and R. J. Arrowsmith, individually, defendants.
    [Decided August 30th, 1932.]

      Messrs. Lum, Tamblyn Golyer, for the complainant.

      Mr. Richard J. Fite Maurice, for the defendants.
   Backes, Y. C.

R. J. Arrowsmith, Incorporated, was a stock brokerage house in East Orange until it failed in December, 1930. The complainant, Clements, dealt with it in stocks on a margin account, was an ardent speculator and its best customer. His margin was in the thousands, his speculations in the hundreds of thousands of dollars, and his account usually carried fifteen to twenty different stock issues which he bought and sold in his daily play with the market. He was experienced in the game when he started the account with the Arrowsmith company in 1928 and was successful until the crash in November, 1929. Even after that event he had a substantial balance to his credit and continued to play until finally, June 19th, 1930, his account was closed, leaving him indebted to the Arrowsmith company, according to the closing statement, in the sum of $10,843.33, for which he gave his note.

The bill is filed to cancel the note on the ground of the breach of a trust alleged to have been assumed by R. J. Arrowsmith, the president, in January, 1930; that during a period of the complainant’s absence in Arizona, and while his brother would have charge of the account, Arrowsmith would give the account his best personal attention and avoid involving the complainant in investments in stocks and other securities of a speculative value. The breach alleged is that the brother was advised on April 9th, 1930, to purchase one thousand shares of the Plastic Stone Products Corporation at $13.50 per share, which in the closing statement of the account was marked off at $1, a total loss to the complainant; that since the settlement it has been discovered that the stock was not a good and safe investment and that the defendant knew it to be worthless; that it was not purchased in the open market, but was sold to the complainant directly by the defendant company through R. J. Arrowsmith (president) and that the company made a large profit; that the defendant company and R. J. Arrowsmith knew and concealed from the complainant and his brother that the corporation had never made a profit and had from its inception lost money, and that the shares in reality had no value and were not a good and safe investment, and that as a result of the misrepresentation (no specific misrepresentation is charged) and of the concealment as to the financial condition of the corporation the complainant was induced to purchase the stock, to his loss. Although there is a charge of fraudulent concealment and a general charge of misrepresentation, Mr. Lum says that the gravaman of the bill sounds in contract, in breach of contract, breach of trust, and that any implication of fraud arising from the testimony is “incidental only to our charge of breach of contract;” and we approach the decision in that aspect. The closing statement, as an account stated, is not in dispute except as to the one item, and the case, as tried, turns upon whether there was a trust (or contract) and, if so, was it breached in permitting the brother to purchase the one thousand .shares.

Before leaving for Arizona the complainant gave a general power of attorney to his brother on January 29th, 1930, who immediately took quarters in the Arrowsmith office to watch the ticker and the account, both of which were active and needed watching. The complainant testified, in effect, that he asked Arrowsmith to “supervise my account,” and “I advised him I did not care to buy any speculative stock, only A-l dividend stock” and “I told him I did not care about making so much money in it; that I wanted to keep it intact,” and that Arrowsmith promised “to supervise the buying and selling of the stock.” The brother, in corroboration, adds that the complainant said to Arrow-smith that he did not care to speculate “but asked him to invest in good investment securities,” and “Mr. Arrow-smith agreed to give it his personal attention and supervision.” Quite a task and responsibility for a busy broker to undertake, and Arrowsmith says he refused, that it would take up all his time to the exclusion of all his other customers and their business. His denial is believable, for what was asked of him, practically, was to guarantee the account; he was to supervise a speculative account, but not to spoculate, and yet to speculate in only A-l dividend stock, or, as the brother says, in good investment securities—a responsibility for which, in those feverish days, he could have set his own price with almost any operator. He is outnumbered by the two brothers, but the weight of testimony is not governed by the number of witnesses. The tale of the two brothers is out of harmony with all common experience, and their testimony is self-discredited by the fact, as admitted by the brother, in charge of the account, that he never thereafter consulted Arrowsmith about the account and that Arrowsmith was not called upon to and did not supervise it. Why not, if he was to give it his personal attention? The alleged promise of personal supervisión finds further disproof in the brother’s admission that his consultant was one Meeker, a stock salesman of the Arrow-smith company, and not Arrowsmith. Meeker was an intimate friend of the complainant and the brother, who brought the complainant’s account to the Arrowsmith company. Their confidence was in him and, when advice was sought in the gamble, throughout the account with the Arrowsmith company, they turned to him. And faith in them is further shaken by the fact that the two brothers, in constant touch with each other by mail and phone, speculated as intensively after as before the alleged Arrowsmith arrangement, although Arrowsmith’s supposed instructions were not to buy any speculative stock except A-l dividend stock, or to invest only in good investment securities. What were at that time or are at any time “A-l dividend stocks” or “good investment securities” admits of no definition. Ask those now in the dumps who in the flush days of ’29 thought they knew. We point out these things to manifest the improbability of the complainant’s story, our belief that it is an exaggeration and distortion of his relation with the broker, and a conviction that there was no contract or trust.

When the account was started in June, 1930, the Arrow-smith company treated the complainant with uncommon consideration. His indebtedness to it was $117,229.33, against which it held his stocks. Had he been closed out in the regular course oí trade, by a sale oí the stock on the market, his deficiency would have reached, it is said, upwards of $30,000. Throwing large blocks of stock on the market kills the price. Instead, the securities were taken over by the Arrowsmith company at their market ratings, aggregating $106,386, and later parted with at a terrific loss. Two items of stock were taken over at $1 each, a total loss to the complainant; one thousand shares of Detachable Bit •Corporation purchased at $15 a share, and the one thousand shares of Plastic Stone Products Corporation at $13.50. The Detachable Bit stock was bought by the brother February 5th, 1930, the Plastic, April 9th, while the complainant was in Arizona. Neither was a listed stock and both were in violation of the supposed instructions to Arrowsmith to purchase none but A-l dividend stock or “good investment securities.” Both were selected by the brother without consulting Arrowsmith, but the Plastic stock purchase is seized upon as the more vulnerable to establish a breach of trust and to escape the obligation of the note. Silence as to the purchase of the Detachable Bit stock is significant, for if Arrowsmith was in charge of the account and responsible he was guilty of a breach of confidence and liable for delinquency as to both, and yet he is charged only as to the Plastic stock. The brother says Arrowsmith recommended the Plastic stock as a good investment. That is demonstrably untrue as to the issue of stock he purchased, for it was not authorized until March 6th, it was bought by the brother April 9th, and it is an established fact that Arrow-smith was stricken on March 6th and was away from his business from that day until May. It may be that Arrow-smith, before he was taken down, recommended an earlier issue and if that be so, the brother was not careful to state that the advice was unrelated to the purchase he made.

The Plastic Stone Products Corporation was a New York concern developing the patents of a Dr. Zerlup, for the manufacture of artificial marble for walls in public buildings. Snyder & Company, New York brokers, underwrote the original stock issue at $2.50 a share, which gave the corporation a working capital of $50,000. The stock was sold to the “dear public” at $12.50 a share. The Arrowsmith company purchased it at $7.50 per share and sold it to clients-at the standard price. That seems to have been the way of the day; everybody was speculating. Arrowsmith himself' was an investor and so were the members of his family and his friends. Another Ford was in the making, but something went wrong and, in February, 1930, the company’s capital was nearly exhausted. Arrowsmith, by then a director, heavily involved personally, and morally to his customers, undertook a refinancing. Dr. Zerlup had additional and supposedly valuable inventions which he assigned to-the company. “Insiders” put in $30,000 and Arrowsmith. agreed to purchase a new issue of twenty thousand shares at $7.50 a share, which Avould give the company an additional working capital -of $150,000. The stock issue was trusteed with the Chemical National Bank of New York and was to be taken down by Arrowsmith in installments at fixed periods within twelve months. The agreement was signed March 6th and Arrowsmith paid down the first installment of $25,000. That is the day he was stricken. Meeker, the salesman, went among his (Meeker’s) customers, purchasers of the first issue, let them in on the ground floor at their previous price of $12.50 a share, and they bought. New customers, and the complainant was one of them, paid $13.50 per share. In all, Meeker says, he sold $180,000. The difference between his purchase and the sales price, Arrowsmith says, was eaten up in the refinancing and sales costs; the salesman got sixty per cent, of it, leaving a profit to his company of $1 a share. Before Arrowsmith returned in May, the Plastic Products Corporation collapsed. Dr. Zerlup, the inventor, became dissatisfied and withdrew, and with him went his investions and patents. The merits of the inventions are not questioned, nor can the good faith of Arrowsmith be doubted, for his own heavy losses bear testimony to his honesty of purpose as well as his gullibility. Everybody in the “street” was that way. Meeker, who made the sale to the complainant’s brother, gave him, he says, and it is not denied, all available information he had, and the brother took his time in buying. The Arrowsmith company, it is true, was responsible for Meeker’s limited salesman agency, but his conduct is not impugned, except, as counsel says, as “incidental to our charge of breach of contract.”

Were we called upon to decide the question of fraud as a primary issue, we could not find that there was deceitful misrepresentations or concealment, but that is not our office at present. We hold that there was no contract or trust and no breach of trust and we decide the issues as raised by the pleadings as limited by the trial counsel, against the complainant.

The bill will be dismissed.


author: Baokes, Y. C.

text:
    Town of Kearny, complainant, v. New Jersey Suburban Water Company et al., defendants.
    [Decided September 2d, 1932.]

      Mr. Merritt Lane, for the complainant.

      Messrs. McCarter English, for the defendants.
   Baokes, Y. C.

The history of this litigation will not be again told. It may be found in 105 N. J. Eq. 368. The matter was referred to a master to determine what was due the water companies (New Jersey Suburban Water Company and New York and New Jersey Water Company) from the town of Kearny, and his report is now up on exceptions by the water companies.

It will be recalled that up to January 1st, 1923, the water companies obtained their water supply from the East Jersey Water Company (now Passaic Consolidated Water Company) at $56.25 and they furnished it to Kearny and adjoining municipalities at $82.50 per million gallons; that in March, as of January 1st, 1923, the board of public utility commissioners fixed the rate, as between the East Jersey Water Company and the water companies at $78, and the increase, $21.75, was passed on to Kearny. The water companies protested against the increase allowed the East Jersey Water Company, and litigated in the state and federal courts and lost finally, December 10th, 1928. Meantime, Kearny refused to shoulder the increase and the water companies threatened to shut off the water supply as East Jersey Water Company, had previously threatened the water companies to do. Kearny then filed this bill offering to pay what was just and an injunction issued July 2d, 1925, restraining East Jersey Water Company, and the two water companies. The court sent the litigants to the board of public utility commissioners which fixed $99 per million gallons as the rate Kearny should pay the water companies from August 1st, 1928, the commissioners holding that it had not jurisdiction to determine earlier values. Kearny and the water companies have agreed that $99 per million gallons is a fáir rate from January 1st, 1923. They have also agreed that the water companies supplied Kearny from January 1st, 1923, to August 1st, 1928, with six billion sixty million seven hundred and ninety-one thousand seven hundred and fifty-seven gallons of water which, multiplied by the $16.50 differential, amounts to $100,303.10. The amount due on the differential alone is in dispute, Kearny having paid at the old rate pendente lite. The master allowed the increased rate from April, 1924, only, which reduced the

debt to ................................... $72,289.34

To this he added a charge for water furnished the

quarter ending December 31st, 1921........ 21,375.94

$93,665.28

Against this he allowed for overcharge, $69,390.75 Dor cash paid to the use of the water

companies................... 3,000.00

- $72,390.75

And found there was due ................$21,274.53

The master allowed $72,289.34 instead of $100,303.10 because he found that the account between the water companies and Kearny had been stated and settled to April 1st, 1924, and he held that the increased rate should begin as of that date and not as of January 1st, 1923. These are the circumstances: The water companies rendered their bills quarterly. The bill for the first quarter of 1923 (March 31st) was submitted at the old rate of $82.50; the next three-quarters of that year (June 30th, September 30th and December 31st) were at the rate of $104.25 and for the first quarter of 1924 (March 31st) again at the old rate of $82.50, and the bills were paid. The finding is unsound as a strictly legal proposition. The bills were quarterly invoices rendered in a running account, which begun years ago and is still unsettled. Especially does it remain unsettled since January 1st, 1923, for when the four installments for 1923 and for the first quarter of 1924 were paid there was a large balance due from previous years and even the five invoices were not paid in the order in which they were rendered, for instance: the invoices for the first two quarters of 1923 (March 31st and June 30th) were not paid until June of the following year and then at the rate of $82.50, whereas the other three were paid within the months of their submission, two of them (September 30th and December 31st) at the increased rate of $104.25. The whole account is open for correction and adjustment. The complainant attacks it; it demands credit for overcharges for water, for money advanced and for overpayment on the two installments of 1923; in fact correcting and adjusting is what it is seeking and it is the very thing the master has done in his findings and which the court is trying to do at this moment. But this is all beside the question. As an equitable proposition, the master altogether overlooked the equities due by Kearny for the relief it sought, and was granted, upon its tender to do equity, an item of which was, that it would pay such rate as the court would fix, and it prayed the court to determine the rate. Kearny is the supplicant; it cannot escape its equities by resorting to legal niceties. The exception is sustained.

The master allowed to Kearny $69,390.75, overcharged ■for water. The water companies supplied Kearny, East Newark, Harrison and the Clark Thread Company with water through a single pipe. The East Jersey Water Company furnished the water companies all the water to this pipe, which was meter-measured at the point where the pipe tapped the main of the East Jersey Water Company. The accuracy of this meter measurement is not disputed. The water sold by the water companies to the four consumers was meter-measured at their respective intakes. The water companies billed the four consumers for the years 1916 to 1919, inclusive, for eight hundred and fifty-four million gallons more of water than the East Jersey Water Company supplied to their pipe; and they collected the price, $69,390.75. That they did this knowingly, and fraudulently concealed it, there is not the shadow of a doubt; that some of the water companies’ officials were unmindful of the oath in testifying is obvious, and that the books of account of the water companies (public utilities, gmsi-publie bodies) were destroyed, because useless, is highly incriminating. That the volume of water supplied to the three consumers other than Kearny and paid for by them was correctly meter-measured at their intakes is not controverted; and the water companies do not contend that they were victimized. The volume billed to Kearny during the four years was mostly “estimated;” its meters were most of the time, and for long periods out of order, and overcharging resulted from over-estimating. The water companies, protesting their good faith, say that when the meters were out of order, estimates were based on meter readings of corresponding quarters when the meters were in order, but that does not account for “selling” eight hundred and fifty-four million gallons more of water than they bought, nor does it answer the charge of fraudulent retention of the •overpayments. The East Jersey Water Company called attention to the overcharges, and, refusing to profit by them, returned its share, $37,002.20, to the water companies; they kept it.

The water companies, like Kearny, also claim an estoppel, an account stated, because, as they argue, the “estimates” were agreed to by Kearny’s employe, assigned to take meter readings, and were concurred in by Kearny officially. The answer is simple: The water companies knew and Kearny did not know that the bills were fraudulent. The exception is overruled.

The installment for the quarter yearly water supply to December 31st, 1921, was withheld when the past overcharges came to light. The charge for supply for the quarter, $21,-375.94, was allowed by the master. The water companies claim interest. Kearny rightfully withheld payment. Interest is due Kearny for the balance of the overcharge. It filed no exception on that score and the question is not before us. Exception overruled.

In 1919 Kearny paid to two riparian owners $3,000. It deducted the sum from the first quarterly bill of that year (March 31st) and remitted the balance to the water companies. Years ago when Kearny bought its water supply from the East Jersey Water Company it agreed to exercise its power of condemning riparian rights in behalf of the East Jersey Water Company, the latter to pay the price and to hold the town harmless. East Jersey Water Company had not the right of eminent domain. When the water companies succeeded the East Jersey Company as purveyors to Kearny, they took over the right and assumed the responsibility. Two riparian owners obtained injunctions against the East Jersey Water Company restraining the diversion of their water rights, but time was given to condemn the rights. Whether Kearny was called upon or how it got into the litigation does not appear, but instead of condemning, it paid each of the suitors $1,500 and deducted the sum from the water companies’ account, as it would have had the right to do had the amount been determined in condemnation proceedings. The water companies protested at the time, but they cashed the warrant for the balance of the quarterly dues (April, 1919), and apparently acquiesced, for thereafter quarterly bills were regularly rendered without referring to the item; and the item slept until it was resurrected in 1930 by an amendment to the counter-claim in this suit. In 1924 the water companies sued Kearny in the law courts for water supplied since 1919 and it filed its counterclaim in this cause for the same items, but no mention was made of the $3,000; at the hearing before the master the charge was withdrawn upon the assurance of the East Jersey Water Company to reimburse the water companies, and it was reinstated when the assurance was withdrawn. The issue is really one between the East Jersey Company and the water companies and explains the latter’s silence for eleven years.. The compromise made by Kearny with the two riparian owners is not shown to be more than they would have-recovered in condemnation nor that it was not an advantageous settlement of the litigation which, if successful,, threatened Kearny’s water supply. Exception overruled.

The question of interest on the balance found by the master to be due the water companies was settled in an earlier opinion (Kearny v. New Jersey Suburban Water Co., 110 N. J. Eq. 214; 159 Atl. Rep. 520). Exception overruled.