source: Caselaw Access Project

author: Emery, V. C.

license: Public Domain

text:
    Thomas A. Edison et al. v. Mills-Edisonia.
    Decided June 1st, 1908.]
    1. Where, in a suit by Edison and corporations manufacturing and selling, by his authority, phonographs and kinetoscopes invented by him, seeking to restrain the use of the word “Edisonia” in the name of defendant corporation, engaged in conducting musical, phonographic and moving picture exhibitions, the bill alleged that because of said inventions by Edison, and that his name was universally associated with them in the public mind, and the fact that the Edison phonograph was manufactured and sold by complainant phonograph company, and because the .kinetoscope was manufactured and sold by complainant Edison Manufacturing Company, and because of the use of “said” kinetoscope and phonographs by defendant, the public was led to believe that the arcades maintained by defendant were conducted by complainants, and that they were interested or in some way connected therewith, it would be presumed that the instruments exhibited in defendants’ arcades were Edison machines.
    2. Where defendant corporation became the owner, or legally possessed, •of patented Edison phonographs and kinetoscopes, it was entitled to use such machines for public entertainment, and to advertise that the machines used were in fact Edison machines, both under the rule authorizing a statement of the truth in the conduct of a business, and the law with reference to the use of patented articles.
    3. The right to describe an article by the trade-mark or patented name passes by implication of law to the person who purchases the article from the inventor or his assignee while the patent is in force, and passes to the general public after the patent has expired, on the ground of the assumed dedication of the name by which the patented article was known.
    4. The use of the word “Edisonia” in the name of defendant corporation, Mills-Edisonia, organized for the purpose of conducting phonographic and moving picture exhibitions by the lawful use of Edison phonographs and kinetoscopes, was not calculated to mislead the public to believe that either Edison, or the other complainants, manufacturers under his authority of such phonographs and kinetoscopes, were in any manner interested in defendant corporation, or in its exhibitions, and •did not constitute an infringement of any property right of the complainants or of any personal right possessed by complainant Edison, in bis name.
    5. A corporation which is lawfully using machines, the invention of an individual, has authority, implied from the purchase of the machines from the inventor or his grantees, to use the name of the inventor for the purpose of truly and properly describing the machines.

      On bill and demurrer.

      Messrs. Harlshorne, Insley & Leake, for the demurrant.

      Messrs. McCarter & English, for the complainants.
   Emery, V. C.

The object of this bill is to enjoin a corporation from the use of the name by which it was incorporated. Defendant was incorporated under the General Corporation law March 10th, 1906, under the corporate name “Mills-Edisonia,” for the purpose of conducting arcades, moving picture exhibitions, amusements, games, &c., with a capital stock of $3,000. The three incorporators were E. W. Mills, M. P. Mills and P. G. Klaub. This corporation has established in many cities and towns in the United States and other countries, places of amusement known as “penny arcades,” which arc fitted up with machines, in some of which kinetoscopic or moving picture exhibitions arc given, and in others phonographs for reproducing music. Over the entrances to these “penny arcades” are displayed conspicuous signs of electric light globes, lighted at night, and made up of or containing' the words “Mills-Edisonia” or “Mills Edisonia Co.”

Thomas A. Edison, the individual complainant, is known throughout the business and scientific world as an inventor, and among his inventions are the phonograph and the kinetoscope. The National Phonograph Company, one of the corporate complainants, manufactures the phonographs invented by Edison, is the assignee of the trade-mark of Edison for the phonographs, and sells these phonographs by express permission and authority of Edison, and is his authorized agent for that purpose. The Edison Manufacturing Company, the other corporate complainant, manufactures the kinetoscopes invented' by Edison, is the assignee of the Edison trade-mark for the manufacture, and manufactures and sells the same by Edison’s express permission and is his authorized agent therefor.

The right of the complainant Edison to relief is based in the hill on the statement that when his name or any derivative of it is used in connection with any business, the public assumes that lie is interested in the business and is sponsor therefor, and that the articles used in the business were invented or manufactured by him, or that the business is in some way countenanced by him, and by reason thereof, “the value thereof is very greatly enhanced in the public mind.” The National Phonograph Compairy, as its basis of claim, alleges that because of the great reputation the Edison phonographs have obtained and its extensive sales thereof, and its extensive use in the commercial world, the use of the name “Edison,” or any of its derivatives, in connection with any business in which phonographs are employed, causes the public to assume that the phonographs used in said business are the Edison phonographs used and sold by it, and that the business is in some way connected with this phonograph company, and that it is sponsor thereof, and by reason of this “the value of said business is very greatly enhanced in the public mind.”

The Edison Manufacturing Company make like allegation as to the use of the name “Edison” in connection with the kinetoscope. All three complainants then unite in the allegation (paragraph 8) that, because of the fact that these inventions, the phonograph and kinetoseope, were made by Edison, and his name is universally associated with them in the public mind, as is also the fact that the Edison phonograph is manufactured and sold by the phonograph company, and the kinetoseope by the Edison Manufacturing Company, and because also of the use of saicl kinetoscopes and phonographs in said penny arcades so conducted by defendant, “the public are led to believe that the arcades are being conducted by complainants and that they have an interest therein or are in some way connected therewith.” They further allege that they have no connection with the corporation, have never authorized the use of the name, that defendant has adopted it without authoritjr, because of the reputation of Edison and of the commercial value which attaches to the use of his name; that this is clone without any compensation to complainants and “tends to deceive and defraud the public and to greatly injure the name and reputation of the complainant Edison.” The relief sought is an injunction against continuing the use of the name or any of its derivatives in the corpórate title or in connection with the business or its advertisement, and from holding out in any way that complainants are connected with, countenance or stand sponsor for the business.

From this statement of the bill it is obvious that the improper use by defendant of complainant Edison’s name, in unfair competition or- infringement of trade-marks, is not relied on, and that the claim for relief is not based on rights of this character. It is not claimed that defendant is engaged at all in the manufacture or sale of either phonographs or kinetoseopes, and it appears affirmatively that it is engaged in a business which none of the complainants are engaged in, viz., the use of machines for exhibition, and I think it must also be taken as appearing that the instruments used for exhibition by defendant are those manufactured and sold by the corporate complainant. In view of the allegation in the bill that "said kinetoseopes, &c., are used,” this must be the inference in the absence of any direct allegation that the instruments used are not the Edison phonographs and kinetoscopes, and that the sign and name are on that account fraudulent. Assuming that the defendant owns, or has properly and legally possession of, the Edison machines, by purchase or otherwise, then the right to use the machines for public entertainment passes with the purchase or other legal possession. It must be assumed that part of the value realized by complainants on the manufacture and sale of the inventions is derived from the adaptability to this public use. With this right so to use the machines, goes also the right to advertise that the machines used are in fact the Edison machines. This results not only from the general rule of law authorizing the statement of the truth in the conduct of a business, but from the special principles relating to the use of patented articles. The right to describe the article by the trade-mark or patented name must pass by implication of law, as it seems to me, to the person who purchases from the inventor or his assignee, while the patent is in force, and that it passes to the general public after the patent has expired, on the ground of an assumed dedication of the name by which the patented article was known, is settled by the highest authority. Singer Manufacturing Co. v. June Manufacturing Co., 163 U. S. 169 (1896). No manufacture or sale of the machines appear to be intended by this defendant, and its right to conduct its business of exhibiting the machines by properly advertising that it exhibits the Edison machines (which presumably it has purchased directly or indirectly from the complainants themselves) cannot be enjoined. To hold that a proper use of the name of Edison as describing the character of' the machines exhibited can be enjoined, would probably result in continuing indefinitely and as a property right, the use of a name which was protected for a limited period, under the patent laws, against the general public, and for which use the public, by the privileges given under the patent laws, have made a compensation that entitled them to the proper use of the name after that period.

The substantial question, therefore, is whether the mere use of the word “Edisonia,” or the manner in which it is used, by a company which has the right to exhibit the Edison phonographs and kinetoscopes, and which intends to exhibit genuine instruments, is such use as to infringe any property right of either of the complainants or any personal right of the individual complainant Edison. The case differs from Edison Storage Battery Co. v. Edison Automobile Co., 67 N. J. Eq. (1 Robb.) 44 (1904), where the use of the name of Edison in the corporate name was enjoined by Vice-Chancellor Pitney, because one of the objects for which the defendant was incorporated was the manufacture of storage batteries of complainant, and the circumstances showed that the purpose of using the name was to obtain in their business of selling automobiles, and in competition with complainant, the benefit of the name of Edison, who had assigned his storage battery for automobiles to complainant. In Edison v. Edison Polyform Co., 73 N. J. Eq. (3 Buch.) 136 (July, 1907), Vice-Chancellor Stevens, on the application of present complainant, enjoined the use of his name in the defendant’s corporate name, because on all the facts of the case it appeared that this use of the name was part of a fraudulent contrivance of the company in connection with the use of certificates appearing to be signed by him, and of his pictures, to lead the public to believe that Edison was connected with the business.

There are no circumstances here showing that any fraud on the public is intended by exhibiting as Edison instruments those which are not such, and the injury to tire public is alleged to be that by the defendants’ manner of using tins name, the public are led to believe that in some way the complainants are connected with this business.

This general allegation of the bill is not of itself sufficient, unless made in connection with such specific allegations as will enable the court to judge whether there is any reasonable ground for alleging that the public are likely to be so deceived by the representation. The only specific allegation here made is that of the use of the word “Edisonia” in the corporate name and in the advertisements or signs, and the whole question, therefore, is can it be reasonably said that by tin's use the public are reasonably entitled to believe that either of the complainants are connected with the business. As to the National Phonograph Company the use of the word would seem to be no basis whatever for supposing them to be connected with the exhibition business, nor as to the Edison Phonograph Works, which is apparently the name of a manufacturing company. -Complainant Edison stands in a different relation, of course, because his well-known name is used as part of the entire word “Edisonia,” but even as to him the inference that by the mere use of the word “Edisonia” the public would believe him to be connected with this business of exhibiting his machines, seems to- me to- be a strained one. The name in this form indicates, if it has any descriptive meaning, things made by Edison, or.Edison’s instruments, and it cannot be reasonably supposed that this name, even if used alone, would refer to anything except to describe the instruments, and I think it would not of itself to any reasonable person indicate that Edison was personally connected with the company, even if without the prefix “Mills-Edisonia.” The addition of this prefix of a proper name makes the name even less likely to indicate Edison’s personal connection with the company. In Edison v. Hawthorne, 106 Fed. Rep. 172; affirmed on appeal, 108 Fed. Rep. 839 (1901), it was held that tire words “Edison Phonograph Agency” in defendants’ sign did not indicate that defendants were agents of Edison, but that it was an agency for the sale of Edison phonographs, and that complainant had no right to enjoin the continued use of the name even by persons who had formerly been his agents. Edison’s claim for relief must therefore be based, not on the protection of any property right, but on his personal right to enjoin the use of his náme, or any plain derivative of it, by any corporation with which he was not personally connected. No court has ever yet gone to this extent and in our decisions the question of the existence of such personal right, as distinct from a property right, has been reserved. Vanderbilt v. Mitchell, 72 N. J. Eq. (2 Buch.) 910 (Court of Errors and Appeals, 1907); Edison v. Edison Polyform Co., supra, 143.

In this case there exists a circumstance which specially affects the protection of any merely personal right, and that is that if the defendant is lawfully using and exhibiting Edison’s inventions, the authority to truly and properly describe them as such, including the use of Ediáon’s name for that purpose, must be considered as given to it by Edison, and under the authority of Edison himself, implied by the purchase of the machines from him or his grantees. If having sold the machines to exhibitors, Edison or his grantees can now enjoin any proper descriptive use of Edison’s name by the purchasers, the legal situation would be that the vendors have on the sale retained a right to control to that extent the conduct of defendant’s business in the use of their machines. Such right in vendors, under the patent or trade-mark laws, is absolutely new in our law, and might practically lead to an indefinite extension of the benefit of some of the privileges of those special laws. The demurrer will be sustained.


text:
    Frederick G. Agens et al. v. Julius Koch.
    [Decided July 9th, 1908.]
    1. That two judgments were on record against vendors was a valid objection to their title to land.
    2. A dedication of a proposed street across land made by filing a map in 1857 was a cloud upon vendors’ title, entitling proposed purchasers to refuse to take title in the absence of a vacation of such street, though the street was never accepted and the land covered by it had been mostly, if not entirely, improved and enclosed.
    3. Ordinarily, if time is not of the essence of a contract to convey, it is sufficient if the vendor can give clear title at the date of a decree to compel the purchaser to specifically perform, though the vendor has no clear title when the bill is brought.
    4. A contract dated September 22d provided for a conveyance of vacant land on or before October 15th, and that on the passing of title the purchaser might take possession. The purchaser intended to build and early possession was important, if not necessary, to effect the object of the purchase. Vendors knew that the purchaser intended to build, and that he desired immediate unclouded possession. — Held, that while the contract itself did not make it so, considering its terms with the other facts stated, time of passing title was of the essence of the contract.
    5. Where one party to a contract to convey land notifies the other that he will not perform, a bill to specifically perform the contract must be filed speedily, unless the party receiving the notice be in possession.
    6. That one who contracted to buy land rejected vendor’s title October 19th, and they did not sue to specifically perform until February 19th, does not show laches barring their right to sue, where the purchaser was ’ absent for some time in the meantime and did not sue to recover the deposit made by him on the purchase price until February 1st, and there were other circumstances which might have reasonably led plaintiff to suppose that the negotiations were not finally closed.
    Heard on bill, answer, replication and proofs.

      Mr. Alfred F. Skinner (Messrs. Pitney, Hardin & Skinner, solicitors), for the complainants.

      Mr. Frank F. Bradner (Messrs. Woerner & Woerner, solicitors), for the defendant.
   Emery, V. C.

This is a bill by the vendors for the specific performance by the purchaser of a written contract for the sale and purchase of land on Broad street, in the city of Yewark, and to enjoin a. suit at law brought by the purchaser for the recovery of the deposit money paid on the execution of the contract. The defendant resists the specific performance of the contract on two grounds — first, that 'the complainants have not, as required by the contract, “a perfect record title” to the premises, and second, because the time of conveyance was of the essence of the contract, and the complainants not being able to convey a perfect title by the time stipulated, specific performance should not be decreed. The first objection, as to title, was in fact well founded, at the time of filing the bill and the answer, the premises being on the record encumbered by two judgments against the vendors, and also by a dedication of a proposed street across a considerable portion of the frontage of the premises, on Broad street, made by the filing of a map showing such proposed street (called Pyat-t street) in the year 1857, by a former owner of the premises. The street was never accepted by the public, and the lands covered by it had been mostly, if not entirely', improved and enclosed, but the proposed street had never been vacated, and in the absence of such vacation by public authority, the right of the municipal authorities to accept the dedication, even after this lapse of time, was a cloud on the title, and the defendant, who proposed to build upon the premises covered by the proposed street, was justified in declining to accept the title as a perfect record title at the time fixed for passing title. These objections to the title, however, have been removed and at the hearing (Februarj'-, 1908) releases or discharges of the judgments, and also a vacation of the proposed street by the proper municipal authority, were produced, and a perfect record title can now be given. Objection was made at the hearing to the validity of the vacation, but, as I think, without sufficient grounds. If time is not of the essence of the contract, it is sufficient ordinarily, if -clear title can be given at the time of tire decree. Oakey v. Cook, 41 N. J. Eq. (14 Stew.) 350, 363, 364 (Court of Errors and Appeals, 1886, affirming Vice-Chancellor Bird); Moore v. Galupo, 65 N. J. Eq. (20 Dick.) 194 (Vice-Chancellor Grey, 1903) Fry Spec. Perf. (4th ed.) 1366, &c.; Pom. Spec. Perf. § 422. The material question, therefore, is whether time was of the essence of the contract, and whether by reason of the failure to tender a perfect record title at the time stipulated, conrplainants have no right to specific performance. The contract was dated September 22d, 1906, and by it the vendors, for the consideration of $20,000', agreed to- convey by deed of warranty free from all encumbrances (the taxes for the year 1906 to be apportioned to the date of settlement), “a good perfect record title to the premises, subject to a mortgage of $7,500, on or before the 15th day of October next ensuing the date hereof.” The purchaser on his part agreed

“to pay the said sum of $20,000 as and for the purchase money, as follows: $500 on signing the agreement, $7,500 by taking the property subject to a mortgage for that amount now upon the same, interest to be apportioned to date of settlement, $7,500 by giving a second mortgage for one year, with interest at five per cent., payable semi-annually, the balance to be paid on the delivery of the deed.”

It was then further agreed that the purchaser

“may enter into and upon the said land and premises on the 15th day of October next ensuing the date hereof, or upon the day of passing title, and from thence take the rents, issues and profits to his use.”

The time and place for the delivery of the deed and mortgage was then fixed for October 15th, 1906, at the office of defendant’s attorney. The deposit money, $500, was paid on the execution of the agreement. On October 15th, by written agreement endorsed on the contract, signed by the vendors, and by the purchaser through his attorneys, the time for the performance of the agreement was extended to October 19th, 1906. The contract and this endorsement are the only writings signed by the parties bearing on the matter of fixing the time. The contract itself cannot be said to have made the time of passing title of the essence of the contract, but the clause expressly providing for the delivery of possession on October 15th has some weight as one circumstance showing the intention on this subject. For this provision as to possession on October 15th, “or upon the clay of passing title,” must, in view of the fact that the conveyance was to be made “on or before October 15th,” be taken to mean that by the contract itself, and so far as any intention at all is shown, it was intended by the parties, at the time of its execution, that possession should be delivered not later than October 15th, and earlier, if the title was passed. Possession after the delivery of the deed would be by virtue of the deed itself, in the absence of any qualification of this right by the contract, and the provision in the contract for possession “on passing the title” is, therefore, reasonably to be referred to a possession to be taken before October 15th. There is nothing in the contract itself, however, indicating that this delivery of possession on October 15th was of the essence of the contract, and the essentiality, if it exists, must arise out of the facts proved in relation to the purpose or object of the purchaser in making the purchase, and disclosed to the vendors. The property was vacant, unimproved property, fronting on Broad street, in the vicinity of the Lackawanna railroad station, and the defendant intended to build on the premises immediately on the purchase. The building which he proposed to erect was an automobile garage, in connection with a skating rink, to occupy the second floor of the building, and the probable cost was about $30,000. It- is not disputed that the vendors knew before and at the time of the contract that the defendant proposed to construct a garage upon the premises. The adaptability of the lot for that purpose was one of the inducements to the contract discussed between the parties or their representatives. A young man, Joo, living with defendant, and in whom defendant was interested, was engaged in the automobile business, had lately taken an agency for an automobile manufacturer, and one object of the purchase was to have a place in which he could without delay start this business. The vendors themselves had previously had plans made for a garage to be erected on the premises, and on the day of the execution of the contract gave these plans to the purchaser. Whether the vendors knew at the time of the contract that the building' to be erected was also to have a skating rink is disputed. The vendors deny that any information of this kind was given, but I am inclined to think, on this disputed point, the weight of evidence is that this was also disclosed, and that the vendors knew that the purchaser was in negotiations with a tenant for the skating rink, and that to this tenant it was necessary that he-should have the building bjr January 1st. Had the title been passed on October 19th, the building, as it was proved at the hearing, could probably have been ready for the skating rink within two months, and for the garage within three month's.. Immediately after the contract the purchaser employed an architect to prepare plans for the building as a garage and skating-rink, but further work on these plans was stopped not later than October 14th, after the purchaser had been notified by Iris solicitor, on or about October 11th, of the cloud on the title by reason of the proposed street. This solicitor on the 15th called the attention of the vendors to this dedication as a jrossible objection to the title and requested a week’s extension for further investigation on this matter. The vendors declined to grant a longer extension than four days, and this extension was then endorsed on the contract. The defendant’s solicitor says that the reason given for refusing a longer delay, given by one of the vendors,, was that a higher price had been offered for the property, and they would not keep the matter open longer. This evidence was not contradicted, and, if true, would tend to indicate that in fixing the time in the extension of the contract time was considered essential, not only by the purchaser but by the vendors. The-mere fixing of a date by written extension has of itself been sometimes considered as having a bearing on the question whether time was considered of the essence of the contract. Wiswall v. McGown, 2 Barb. 270. On the 19th the title was definitely rejected on account of the dedicated street. This rejection was made pursuant to-instructions received from the-defendant by his solicitor on the evening previous, after consultation at defendant’s home with the solicitor as to the time-which would be required for removing the defect, estimated as-at least a month, and the improbability of securing a loan on any building erected before the defect was removed.

The defendant, shortly after October 1st, was taken ill, and was not able personally to attend at the passing of title, but on being communicated with over the telephone, lie declined to grant any further extension of the contract.

On the evidence, a question is fairly raised, whether the defendant’s illness and his inability personally to look after the building, majr not have had some influence on his determination not to extend the contract, but on the whole evidence relating to the purchase and its circumstances it would not be fair or just to conclude that the defect, or supposed defect, was a mere pretext to get out of the contract, or to refuse to extend the time. The evidence satisfies me that the object of the purchase was the immediate improvement of the premises, by building, and that possession as early as practicable to pass the title, on or soon after October 15th or October 19th, was important if not necessary to carry out the objects of the purchase. It is also clear, I think, that the vendors knew of this object, and knew also, at the time of the contract, of the defendant’s desire for this immediate unclouded possession.

The question is whether, under the circumstances, this knowledge on the part of the vendors, at the time of the contract, or of the extension, is sufficient to make time of the essence of the contract.

Under the clear language of the authorities, I think it was. Baron Alderson, in Hipwell v. Knight, 1 Younge & C. 401 (1835), one of the leading cases on this point, gives this clear statement of the equitable doctrine and its reasons (at p. 415, &c.) : “While upon this subject of the essentiality of time, a court of law ascertains only what the parties have expressed in their contract, a court of equity endeavors to ascertain what is in truth the real intention of the parties, and to carry that into effect; in so doing, however, the court must, in the first place, look carefully at what they have expressed, that being in general what thej’’ intend, and the burden is thrown on those who assert the contrary. In the ordinary case of purchasing an estate, the fixing of a day for passing the title is merely formal, and the stipulation means in truth that the purchase .shall be completed within a reasonable time, regard being had to all the circumstances of the case and the nature of the title to be made. But this is a mere corollary from the general proposition, which is, that the real contract and all the stipulations really intended to be complied with literally shall be carried into effect. We must take care, however, that we do not mistake the corollary for the original proposition. If, therefore, the thing sold be of greater or less value, according to the efflux of time, it is manifest that time is of the essence of the contract, and a stipulation as to time must then be literally complied with in equity as well as in law. Tire cases of sales of stock and of a reversion are instances of this. So, also, if it appear that the object of one party, known to the other, was that the property should be conveyed on or before a given period, as the case of a residence or the like.” Mr. Justice Story, in Taylor v. Longworth, 14 Pet. 172 (1840), also a case of specific performance, says: “There is no doubt that time may be of the essence of the contract for the sale of property. It may be made so by the express stipulations of the parties, or it may arise by implication from the very nature of the property, or the avowed object of the seller or the purchaser.”

In both of these cases it had been contended that under the doctrines established by previous decisions in equity, time could not be, and that it could not in any way be made, essential to the conveyance, and it was therefore pertinent to examine and define the grounds of exception to the general doctrine. The views of these distinguished judges that time may be of the essence of the contract, by reason of the avowed object of one party known to the other, has been followed as settled law in subsequent decisions denying tire relief of specific performance. In Tilley v. Thomas, L. R. 3 Ch. App. 61 (1867), the object of the purchase, as the vendor knew, was the immediate occupation as a residence by the purchaser, and this possession could not be given. In Hyde v. Warden, L. R. 3 Exch. Div. 72 (1878), a farm was required, as the vendor knew, for immediate occupation for stocking purposes, and this could not be given. In Nokes v. Kilmorey, 1 De G. & S. 444 (63 Eng. Rep. 1141), the purchase was for the purposes of building, and the time was extended for the purpose of perfecting title. On the failure to complete the title by the extended time, it was held that the purchaser was entitled to abandon the contract.

I have not been referred to any decisions in our own courts upon the precise point, and have therefore referred to the decisions in other courts somewhat at length, for the purpose of examining the principles which should control the case. The leading text-books repeat the doctrine of these cases. Fry Spec. Perf. (4th ed.) §§ 1081, 1086; Pom. Spec. Perf. § 385.

It is my conclusion, upon the whole evidence, that in this case the time for passing the title fixed by the provisions of the contract and its extension was of the essence of the contract, by reason of the object of the vendee in making the purchase for the purpose of immediate building thereon for the purposes of trade, which purpose of immediate improvement was known to the vendors at the time of making the contract. In such purchases of urban property for immediate improvement, the purchaser, as he is entitled to do on the faith of the contract, and tire reasonable expectation that it will be earned out at the time agreed on, often, if not generally, incurs obligations and secures contracts in reference to the building and occupation of the premises, dependent upon his procuring possession for building at the time specified. The essentiality of time in the performance of contracts made under these circumstances should not be disregarded.

Before the signing of the contract, the defendant had negotiations for renting part of the building proposed to be erected, and upon the execution of the contract at once continued these and secured agreements for renting, with security for the rent conditional on delivery of possession not later than January 1st, and although these agreements may not have assumed such final formal character as to bind the parties legally, there is no reasonable ground for supposing that such binding contracts would not have been made had the title passed on the day agreed on. And these subsequent negotiations of defendant, relying on possession at the time fixed by the contract, and the fact that defendant has been deprived of the benefit of them, by the failure to deliver possession at the time fixed, are matters which can be fairly taken into account on considering the whole equitiea of the case for specific performance.

In another aspect of the case the matter of time was relied on as a defence, this being the lapse of time which occurred between the time of defendant’s rejection of the title on October 19th, 1906, and the filing of complainants’ bill on February 19th, 1907, and not until after defendant had commenced suit at law on February 1st for the recovery of the deposit money. On October 20th complainants served written notice that defendant had defaulted on the contract on the 19th, while complainants were then ready and able to perform on their part, and that defendant would be held responsible for complete performance of the contract. At the same time they offered to remove the defect of title on account of the street, if such defect existed. Defendant, on October 22d, replied with a notice to complainants that the latter had defaulted on the contract, by failing to produce a good record title, although defendant was ready to perform and demanded the return of the deposit money, adding that it was understood that time was of the essence of the contract by reason of the facts known to the vendors at the signing of the agreement, that the premises were desired for the erection of a building before January 1st.

The lapse of time, in this aspect, is set up as a defence to the suit, because of laches in seeking the equitable remedy, an altogether different question from the element of time in the contract itself. As to this defence of laches the general rule is that where one party, arbitrarily or otherwise, notifies the other that he will not perform the contract, the bill must be filed speedily unless the party receiving this notice be in possession. In Ketcham v. Owen, 55 N. J. Eq. (10 Dick.) 344, 349, &c. (1897), I referred to the cases on this subject, and held that a delay of three years was fatal. The doctrine is that the failure of the party receiving notice of abandonment, to make immediate assertion of his right to enforce the contract, may be considered as such an acquiescence in the notice and an abandonment of equitable rights as to leave the parties to their legal remedies and liabilities. Walker v. Jeffreys, 1 Hare 341, 348 (Vice-Chancellor Wigram, 1842). Whether such delay is an acquiescence or abandonment depends, of course, on the circumstances of each case, and the explanation of the delay. In the present case the delay is, I think, satisfactorily explained. The first definite notice received by complainants of the rejection of the title on account of the street dedication was on October 19th, and up to this time they had no notice of any such defect, nor were they reasonably chargeable with notice, for the land occupied by the proposed street had long been enclosed or built up and no question had ever been raised on previous searches of the title. The defendant himself, on October 19th, was too seriously ill to attend at his attorney’s office, and proposed to go to a milder climate as soon as possible. He told his attorney on the night of the 18th, when he instructed him to reject the title, that he might take up the matter again on his return, and on the 19th, at the meeting in the attorney’s office, it was stated to the complainants that on defendant’s return he would in all probability go on with the matter. Complainants say this statement was made by the defendant’s attorney, but the latter says this is a mistake, and that the remark was made by Mr. Joo, the young man for whom defendant proposed to build the garage. Joo, who was anxious that the purchase should be carried through, made this statement, but without any authority whatever either to bind or to speak for defendant. I am inclined to take the attorney’s statement as the more reliable on this matter, but so far as relates to the present subject, complainants’ delay, it is Immaterial, for if the complainants, from the conversation which then took place — Joo being one of the parties interested as procuring the purchase — were reasonably entitled to await defendant’s return, such delay cannot be looked at as an acquiescence or abandonment of their rights, especially as they held in hand the deposit money, and the weight of the evidence is that no demand for the return of the deposit was made on the 19th. Defendant did subsequently go away and returned about December 10th, and a few days later one of the complainants called on him with reference to carrying out the purchase, and was then Informed that the matter was closed and would not be taken up again. Complainants then said they would have to take counsel as to their rights, and soon after did so. Defendant did not at once, after this interview, begin suit for the deposit, as being money he was entitled to on his abandonment of the contract, and his short delay in commencing suit might with as much reason be considered as an abandonment of his notification, as complainants’ failure to file a bill be taken as acquiescence in defendant’s abandonment. The comparatively short delay in the assertion of their rights or claims made by complainants in this case cannot be considered under the circumstances as such acquiescence in the claims of the defendant as to bar any equitable rights they may have to specific performance. Their right to this, as I have said above, depends on the question whether time was in this case originally of the essence of the contract. Being of opinion that it was, I must advise a dismissal of the bill for specific performance.


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    Stephen L. Tingley v. International Dynelectron Company et al.
    [Decided September 25th, 1908.]
    1. Where an original chattel mortgage on the property in controversy, containing no defect in the paper itself or its execution, but only in its proof for record, was destroyed, and a new mortgage executed and accepted by the mortgagee, without objection, subsequent to a sale of the property by the mortgagor and a remortgage thereof by the purchaser, such original mortgage could not be resuscitated and enforced as a prior lien on the property against such purchaser and its mortgagee without proof that the latter sale and mortgage was voluntary or taken with notice of the existence of the first mortgage.
    2. Where a chattel mortgage given to P. did not describe him as a trustee, and the consideration was obtained through a sale of the mortgagor’s notes, secured by the mortgage, and was in fact furnished by B., an affidavit attached to the mortgage in which P. verified that he was the trustee and beneficiary in the mortgage, and that the consideration was $5,000 paid to the mortgagor, could only be construed to mean that the consideration was paid by P. himself, either personally or as trustee, and was therefore false.
    3. Where a mortgagee’s affidavit attached to a chattel mortgage on personal property was false, the landlord’s claim for rent of the building in which the property was located was entitled to priority of payment from the proceeds of the sale of the property, though the mortgage was made prior to the accrual of the claim for rent.
    Heard on bill, answers, replication and proofs.

      Mr. Frank Bradner, for the complainant.

      Mr. George M. Titus, for the defendant Crosselmire.

      Mr. Elwood G. Harris, for the defendant Purcel, trustee.

      Mr. Herbert Boggs, for the defendant Electron company
   Emery, V. C.

The complainant, Tingley, as assignee of a chattel mortgage given by a company called the International Dynelectron Company, of Washington, District of Columbia, to one Kenyon, his assignor, seeks to establish this mortgage as a lien prior to a sale of the chattels made by the mortgagor to another company, the Dynelectron Company, of Arizona, and also as prior to a mortgage subsequently given by the vendee to the defendant Purcel, as trustee for five note holders, also made defendants. The bill also asserted priority over a claim of defendant Crosselmira for rent due from the vendee, the Dynelectron Company, but at the hearing this claim of priority was abandoned by complainant. Pending the suit, the mortgaged chattels have been sold by a receiver and the proceeds of sale deposited in court, and the present dispute is on the disposition of the money. In the bill the claim of priority is based on an agreement alleged to have been made by the International company with Kenyon on November 2d, 1905, for the advance by him to the company of $3,500, to be secured by a chattel mortgage on the goods in question, and it is also alleged that as part of the agreement, the chattel mortgage to be given was also to secure the advances already made and thereafter to be made to the company by the directors, of whom 'Kenyon was one. It is further alleged that on November 8th, 1905, the board authorized the execution of the chattel mortgage by the president on behalf of the companjq and that Kenyon advanced the $3,500, and the other directors made other advances, but that for some reasons unknown to complainant, the mortgage was not actually executed until May 9th, 1906, at which time the total advances by Kenyon and the other directors is alleged to have been $23,560.28. The sale of the chattels to the Arizona company took place in April, 1906, prior to the execution of its mortgage to Purcel on May 7th, 1906. The latter mortgage was recorded on this date, while complainant’s mortgage was not recorded until June 20th, 1906. Complainant’s priority, by its bill, is based on an alleged equitable lien on the chattels, arising by virtue of the agreement to mortgage, on the faith of which the advance of $3,500 by Kenyon was subsequently made, and the charge that the subsequent purchase and mortgage were with knowledge of this lien. Complainant’s own proofs showed, however, that a mortgage and a note to Kenyon for $3,500 was actually executed by the International company on November 8th, 1905, and that on that day the note and mortgage were delivered to Kenyon, and the $3,500 paid by him to the company, at Providence, Rhode Island, the principal office of the company.

The mortgage was not recorded, and the only explanation made is by Tingley, who says that the reason was that it -was not properly proved, and that the register of Essex county, where the goods were located, refused to record it for that reason. The time wdien this attempt to record the! mortgage was first made appears only b3 a minute of the meeting of the directors of the company on May 9th, 1906, at which the president of the Compaq, James H. Reid, reported that there was something wrong in the form of proof in the mortgage given to the company by Kenyon on November 8th, 1905, which prevented its being recorded. The minute further shows that the attorney of the company was authorized to correct the mortgage and make the necessary additions, and that having done so, the mortgage was presented to the board, who authorized the president (Reid) and the secretary (Tingley, the complainant), to execute the mortgage and deliver it to Kenyon. This correction made and thus authorized was not in fact the correction of the mere proof of the mortgage, but was the actual execution of a new mortgage, and as appears by Tingley’s evidence, part of the first mortgage was used and the balance of the mortgage rewritten, and the mortgage executed as a new paper. And on the proof it is this new mortgage delivered to Kenyon and recorded, actually executed, and afterwards assigned to Tingley, which is sought to be enforced. The case made by the bill was one to declare effective against the purchaser and those claiming under it, a mortgage executed subsequent to the transfer of chattels, but pursuant to an agreement made before the transfer and of which the purchaser had notice. The case on the proofs shows that a mortgage was actually executed and delivered at the time agreed on and before the sale, passing the legal as well as equitable title to' the goods, and that this mortgage, subsequent to the sale and apparently for no defect in the paper itself or in its execution, but only in its proof for record, was destroyed and a new mortgage executed and accepted by the mortgagee apparently without objection. And this destruction of the old mortgage and execution of the new mortgage in its place was not only made without the inducement or even knowledge of the- purchaser, but with the knowledge of the complainant, who, as secretary of the company, was present and participated. On the proofs, therefore, a mortgage to secure the $3,500 was actually executed and delivered to Kenyon, according to the agreement, duly passing in form the-legal as well as equitable title to the goods, and this mortgage, after the transfer to the Arizona company and its mortgage toPurcel, was destroyed without any participation or knowledge on their part.

It is clear, I think, that the substantial case made by the bill, the enforcement against a purchaser with notice of an equitable agreement existing at the time of the sale, not only has not been made out, but has been disproved, by showing that the agreement sought to be enforced was actually carried out, and that at the time of the sale Kenyon had in his possession the mortgage giving expressly the lien on the chattels, which the complainant seeks to declare to be subject to an implied equitable lien by virtue of the agreement. The maxim expression facit cesscvre iaciium applies to this agreement for lien to secure a loan, and the substantial equitable question on the proofs is whether, as against the purchaser and its mortgagee, the new mortgage by the International company after the sale being the only mortgage now relied on by complainant, can be established as a prior lien. The acceptance of the new security in place of the original one by Kenyon was voluntary on his part, and confirmed by his assignee, Tingley, who took part in the substitution, and as it was not in any manner attributable to the defendants, there would seem to be no equitable basis for re-establishing the mortgage of November, 1905. Eeid, the president of the International company, who executed the new mortgage, had previously executed the bill of sale on behalf of this company to the Arizona company, and knew of its claim to the property included in the new mortgage. It appears by Tingley’s evidence that the destruction of the old mortgage and the execution of the new one was made with the advice of counsel, but whether with or without considering its effect does not appear. No claim of mistake is made either in the bill or at the hearing, and as any mistake either of law or fact which occurred was due to the negligence of the .parties themselves, and in no> sense attributable to defendants, the right to relief against it, by reestablishing the destroyed mortgage, admits of question. Certainly it cannot be re-established except upon proof that the transfer to the Arizona company and its mortgage to Purcol were either voluntary or taken with notice of the existence of the first mortgage. 2 Pom. Eq. Jur. §§ 776, 871. Nor could the mortgage of November 8th, 1905, if it had not been destroyed, have been declared a prior lien in the absence of similar proof of notice of such equitable lien. This notice the complainant has failed to make out upon the proofs. The transfer was made upon a consideration agreed on, which has been fully paid and performed by the purchaser, and it is now impossible to restore the status existing at the time of the purchase. And the purchase was made, as I also find upon the proofs, without notice of the alleged lien. The mortgagee, Purcel, and the note holders for whom he is trustee, are also Iona, fide- purchasers for full value without notice, and so' far as complainant’s claim as assignee under the second mortgage to Kenyon is concerned, there is no equity either to declare it a lien or to give complainant any equitable standing under the original mortgage of November, 1905. Before taking the mortgage from the Arizona compan)', searches of the records were made for chattel mortgages, and none being found, and the money being subsequently advanced under this mortgage to pay debts of the International company assumed by the purchaser on the transfer, the notice of the alleged lien should be clearly proved. Such notice as against Bergstrom, the holder of $1,500 of the notes, is sought to be established by the evidence of Tingley himself and to some extent by Eeid, the president of the company. Their testimony on this subject is not only outweighed by the evidence in contradiction, but under the circumstances disclosed in the case should be considered with extreme caution on tin's point of notice. As against the five other defendants, parties as holders of the notes secured by the mortgage, there is no evidence whatever of notice of any lien at the time of their respective advances of money for the notes.

I will advise a decree that complainant has failed to establish a right to any of the funds in court.

The second question arises on the claim of defendant Crosselmire for rent claimed to be due from the Dyneleetron Company to November, 1906, besides the expenses of distress warrants issued for the collection of the same. It was objected that the rent was not payable by the company after July 1st, 1906. But on full examination of the circumstances connected with the retention of the property in the rented premises during litigation against the company in the Tansey litigation, to which the Arizona company was a party, and the orders of the court made respecting the custody and removal of the property, I conclude that rental is fairly chargeable up to the time of the sale of the property under the order of the court, and that, so far as relates to the amount claimed, must be allowed. The rent, however, becoming due after the mortgage given by the Dyneleetron company, the question of its priority over that mortgage depends on the validity of the affidavit to the mortgage which is attacked, as not complying with the statute.

The chattel mortgage, dated April 19th, 1906, is given by the Dynelectron Company, of Arizona, to “Theodore M. Purcel,” not describing him, however, as trustee, and conveys the absolute title to the chattels in question, with general warranty of title, and with the following statement :

“This conveyance is made on condition, however, that the said Dynelectron Company is indebted in the sum of five thousand dollars ($5,000) represented by ten notes of five hundred dollars ($500) each, bearing even date herewith and payable on or before six months from date hereof, and bearing interest at the rate of six (6) per cent, per annum, said notes being numbered from one to ten respectively. Now if the said Dynelectron Company shall well and truly pay or cause to' be paid said notes, principal and interest, then these presents shall be void,” &c.

The affidavit attached to the mortgage is as follows:

“State of New York, County of New York, ss. Theodore hi. Purcel, being duly sworn, says he is the trustee and beneficiary in the foregoing mortgage. That the consideration for said mortgage is the sum of five thousand dollars ($5,000) paid to the said Dynelectron Company. (Signed) Theodore M. Purcel.” Sworn to, &c.

The mortgage was in fact intended to be given to Purcel as trustee for the holders of the notes referred to in the mortgage, and it was intended that the notes should be given to persons advancing money on them. The ten notes of $500 each were payable “to the order of Theodore M. Purcel or bearer,” and were declared to be secured by the chattel mortgage. The firm of Bergstrom & Company, one of whose members was president of the company, had agreed to advance $5,000 to the company on the security of this mortgage, reimbursing themselves from the moneys received on placing the notes. Two thousand dollars was advanced by Bergstrom & Company to the company the clay after the mortgage was authorized (April 17th, 1904) and the day before its execution, about $2,000 more within five days of the execution, $550 within a month, and the residue within two months. The persons other than Mr. Bergstrom himself, who received notes, paid Bergstrom & Company and received the notes from them for their money advanced to purchase them after the recording of the mortgage. Mr. Bergstrom himself received three notes on the execution of the mortgage. On this state of facts relating to the consideration of the mortgage and the actual advance of money thereon, it would seem to be beyond question that the statement of Purcel in the affidavit, “that the consideration for said mortgage is the sum of five thousand dollars paid to the said Dyneleetron Company,” was not a true statement of the status and consideration of the mortgage at the time of recording it, which is the time when it must be true. In the absence of any statement by Purcel in the mortgage that he was trustee, and in the absence of any statement either in the mortgage or the affidavit, as to how or for whom he was trustee, the affidavit that the consideration of the mortgage was for $5,000 paid to the company, could only be taken to mean, paid by Purcel himself, either personally or as trustee, and manifestly this was not a correct statement of the facts relating to the mortgage. The mortgage was, undoubtedly, an honest mortgage, and, as between the company and the holders of the notes secured by it, the mortgage is valid, but as against the landlord, a creditor of the company, the failure of the affidavit to state truly the substantial facts relating to the consideration as they existed at the time of recording it, the mortgage must be declared invalid. The company itself, which appears and defends this suit, sets up no defence to the mortgage, and after the payment to the defendant Crosselmire of the amount due him for rent, the balance of the money in court should be paid to the holders of the notes, the payments being fro rata, if not sufficient to pay in full.


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    Nathan Bijur et al. v. The Standard Distilling and Distributing Company et al.
    [Decided October 2d, 1908.]
    1. The rule allowing stockholders to avoid contracts made with another corporation by common directors, applicable where the contract is made through the directors alone, is inapplicable to the action of directors in those statutory proceedings where the final action is that of the stockholders themselves, acting in their individual rights and according to their individual interests.
    2. Complainants, stockholders of a dissolved corporation, having sued to wind up its affairs and having consented to a decree for a sale of the assets, the proceeds to be distributed among the stockholders, are precluded from showing in a subsequent suit against another corporation that the dissolution was brought about through fraud of such other corporation, as one of the stockholders, acting through its own directors.
    3. Preferred stockholders agreed that if defendant, another corporation, would guarantee six per cent, dividends on their stock, they would consent to a reduction of their dividends from seven per cent., as fixed by the charter. The stockholders’ agreement required defendant’s agreement to be endorsed upon new stock certificates to be exchanged for old certificates and to be deposited with a trust company. — Sold, that, since the trust company was bound to receive the new certificates and surrender the old, it must be assumed, in the absence of proof, that the trust company' accepted the new certificates from the corporation issuing them, with the form of agreement adopted by defendant and consented to by the other corporation, to carry out the agreement of endorsement, and as a sufficient endorsement under the agreement, that the new cortifieates were accepted by the stockholders as being properly endorsed, that the old certificates were surrendered without objection, and that the previous negotiations cannot be resorted to. to give the endorsed agreement any operation different from that expressed on its face.
    4. Defendant corporation’s agreement, “guaranteeing” payment of a fixed dividend on stock of another corporation, did not constitute a guaranty', but an independent contract, where it was made in a readjustment of such other’s corporation’s affairs, in which defendant was interested. defendant receiving substantial independent consideration on a consummation of the whole plan.
    5. A stockholder’s rights do not necessarily depend on the issue or holding of the stock certificate itself, but are rights of which the certificate is the evidence or muniment of title, the certificate not being the property itself.

      6. A stockholder’s rights, evidenced by a certificate, include the personal rights inherent in a stockholder- as a member of the corporation, as the right to attend meetings, vote, &e., the property right to share in the dividends and in distributions of assets, and the’ rights conferred by law to protect such personal and property rights.

      7. Dissolution of a corporation terminates a stockholder’s personal, but not his property, rights.
    8. Defendant corporation guaranteed payment of a fixed dividend on stock in another corporation, so long as the 'certificate of stock should be “outstanding.” — Hold, that a dissolution of such other corporation, and a decree distributing its assets, terminated a stockholder’s right to dividends, under the agreement, the term “outstanding,” as used, meaning “lawfully outstanding,” and the certificate remaining effective only for the purpose of production as evidence of the holder’s right under the decree of distribution. '
    9. Defendant corporation, by guaranteeing paymgent of a fixed dividend on stock in another corporation, in which it held stock, so long as the guaranteed certificates should be outstanding, ^YtIcTTñdFTmplié3N- Jlgree | that it would nolTexercise its statutory "right as a stockholdir to vote to \ dissolve such other corporation, Decause a dissolution might, terminate | its liability~tnxdei the agiedhient. ° t — 1
    10. A claim for breach of contract by a corporation is chargeable against its assets on dissolution.
    Heard on amended bill, answers, replications and proofs.

      Mr. James E. Howell, and Mr. Bijur and Mr. Engelhard (of the New York bar), for the complainants-.

      Messrs. Coult & Smith, solicitors.

      Mr. Richard 7. Lindabury, and Mr. Levi Mayer (of the Chicago bar), and Mr. II. G. Deming (of the New York bar), for the defendants.

      Messrs. Linddbury, Depue & Fcmlhs, solicitors.
   Emery, V. C.

The Standard Distilling and Distributing Company, a corporation organized under the General Corporation act, the corporate defendant in this suit, has been dissolved by the voluntary action of its stockholders under the act and is now being wound up under the act by the individual defendants, the directors at the time of the dissolution. The complainant Bijur, as a creditor of the Standard company, filed this bill on behalf of himself and other creditors, for the adjudication of his claims and their payment out of the assets of the corporation. By stipulation of the defendants, made on the application for a preliminary injunction restraining the distribution of the assets-pending the adjudication of complainant’s claim, the bill, being sworn to, was taken as a presentation of complainant’s proof of claim, and an order was made in the cause that it be so taken. Complainant’s claim against the Standard company is based on written agreements endorsed by or on behalf of the Standard company, on the certificates of first preferred and second preferred stock of another corporation called the Spirits Distributing Company. These certificates of stock were issued under-date of April 13th, 1899, and the endorsement on the certificate for first preferred stock is in the following form:

“For good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned hereby guarantees and agrees to pay to the holder of record of the within certificate, so long as said certificate shall be outstanding, but not to exceed the present unexpired term of' the period for which said Spirits Distributing Company is incorporated,, one and one-half per cent, dividend on the fifteenth days of January, April, July and October in each year, beginning with the year 1899, on every share of First Preferred Stock of said Spirits Distributing Company represented by the within certificate.
"Standard Distilling and Distributing Company,
“By N. E. D. Huggins,
“Secretary.”'

The endorsement on the certificates for second preferred stock is similar in form, except that the payments are “one per cent, dividend on the fifteenth days of April and October in each year, beginning with the year 1899.”

Complainant Bijur, since April, 1899, has been the owner of four hundred and four shares of first preferred, one certificate for fifty-four shares issued to one Arnold, and one certificate for three hundred and fifty shares issued to one Liebman, and also-the owner of one thousand one hundred shares of second preferred stock in a single certificate, issued also to Liebman; Arnold & Liebman are still the holders of record, but it is admitted by the pleadings and at the hearing that the stock standing on the record in their names always has been, and is now,. owned by the complainant Bijur, who has the certificates in his possession and has also assignments oí their interests and is entitled to whatever may be due or become due on the certificates. The other complainant, Windmuller, who was allowed to intervene in the suit, is the owner and holder of record of ten shares of the first preferred and ten shares of the second preferred stock. Payments were made by the Standard company to the complainants as owners or holders of the certificates, according to the terms of the endorsement, from the date thereof up to but not including the payments of April 15th, 1902. For the payments due, or claimed to be due on that date (about $1,731), suit was brought against the Standard company in the supreme court of the State of New York, by the complainant Windmuller, on his own behalf and as assignee of Liebman, and judgment recovered, which judgment was affirmed on appeal to the appellate division. Windmuller v. Standard, &c., Co., 106 App. Div. 246, and also by the court of errors and appeals, 186 N. Y. 572 (November, 1906). The present claim of complainant’s bill, which was filed September 30th, 1905, is based on the payments alleged to be due from and including July 15th, 1902, to the filing of the bill, and the payments subsequently accruing and to accrue up to the year 1946, the period for which the Spirits Distributing Company was incorporated (fifty years from January 6th, 1896), expiring on January 6th, 1946. The situation as to the liability of the Standard company to the holders of certificates, upon the agreement endorsed, is changed, 'or claimed to be changed, since April 15th, 1902, by reason of the dissolution of the distributing company by vote of its stockholders, and proceedings for that purpose taken under the act, beginning with a resolution of the directors advising dissolution, passed December 27th, 1901. The formal regularity of these statutory proceedings for dissolution is not disputed, and this company was dissolved on June 2d, 1902. Two days later, and on June 4th, 1902, the two complainants, together with Arnold, filed, a bill in this court, as the holders and owners both of the first and second preferred stock, against the Spirits Distributing Company and its directors at the time of the dissolution, alleging the dissolution of the company by the proceedings taken, and praying, for reasons stated in the bill, the appointment of a receiver, other than the directors, to wind up the affairs of the company. In this cause a decree was made on July 8th, 1902, the complainants in the cause consenting to it, for the sale to a corporation called the Distilling Company of America, of all the assets of the Spirits Distributing Company of every kind and description, for $1,243,538.80. It was further declared by this decree that this sum constituted the total assets for distribution among the shareholders of the distributing company, less liabilities, which were feed at $209,910.03, leaving for actual distribution $1,033,628.77, or $82.69 for each of the first preferred shares of the company, which were' by the charter of the company entitled to be first paid the par value of their shares before any distribution on the second preferred or common stock. And it was ordered by this decree of July 8th, 1902, that the trustees (the directors at the time of the dissolution being by the order continued as trustees) forthwith make distribution among the first preferred shareholders of this sum, according to their respective holdings, as set out and determined in the order itself, including Arnold for Bijur as owner of fifty-four shares first preferred stock, Liebman for Bijur as holder of three hundred and fifty shares first preferred and one thousand one hundred second preferred, and Windmuller as holder of ten shares first preferred and ten shares second preferred stock. The payments, however, were not required to be made by the trustees except to such stockholders as should present their certificates of first preferred stock, and permit the endorsements of the payment of the dividend to be made thereon. The further direction was made

“that the distribution of the assets of the Spirits Distributing Company herein provided for is intended to be and is a final distribution of all the assets of the said corporation of every kind among its shareholders.”

This decree for a final distribution of assets among all shareholders entitled was made to carry out the leave reserved by a previous order made July 2d, 1902, when, after the complainants had accepted the offer of purchase, the cause was directed to stand over for the purpose of giving notice to the stockholders of record, not represented in court, and by this order of July 2d, 1902, special leave given on tlie final acceptance of the offer, to apply at once for the orders and decrees necessary to carry the same into effect, and for a decree of final distribution of the assets of said Spirits Distributing Company among the parties entitled thereto. This decree of July 8th, 1902, consented to and procured by complainants, was not appealed from, and must stand as in substance and effect a decree for the payment of a definite sum fixed as complainants’ share of the assets of the distributing companjyon dissolution.

Complainants do not appear to have tendered or presented their certificates of stock to the trustees for the receipt of dividend, under this decree, from the assets of the distributing company. The present claim against the Standard company on its agreement endorsed on the certificates, is based on the view that notwithstanding the dissolution of the Spirits Distributing Compaq, their claim against the Standard company on its agreement is still a continuing claim, and will continue until the time expressly fixed as limiting the period of its liability, viz., the time for which the distributing company was incorporated, -January, 1946. This claim is, by the bill, based — first, on the construction of the agreement, which, it is insisted, was not made to depend upon the existence of the distributing company so that the certificates are still “outstanding” without regard to the dissolution; and second, because, if dependent on the existence of the company, the dissolution was fraudulent and void as against complainants, and of no effect for the reason that it was brought about unlawfully and in fraud of complainants and of their rights under the certificate. Thp resolutions for dissolution passed in December, 1901, are attacked because not honesL-hut in the interest of the Standard comnan.y„ajicL of ths-JUstilling Company of America, which together, as owners of nearly all of the stock, preferred and common, of the distributing company, controlled th pH a tte.r..Jn -its interest and dissolved the .com-nany for the purpose of terminating liability under the agreement. The further ground of fraud alleged is thafNhe threiTcomjKinies interested in the'terminatirar^fYlro^Uirtracir were governed and controlled by the same or common directors, which seems to be claimed as of itself• making the proceedings of the directors for dissolution fraudulent against the minority stockholders. The rule allowing stockholders of a company the option to avoid contracts or agreements made by common directors, on behalf of both comiSniásTand which is appiié^~ÍB^TrupE'r-eases--whT3rg' the contract, finally binding the company and at. it? stockholders, is madajhrough the directors alone, has no applicationTcT the ; action of directors in those statutory uroceedmgs wherelhe final action is that of the stockholders themselves acting, a¡Tl;héy are entitledAo act, in theñurdividual rights and, if they choose, according’fo their^hmvidual interests. In Colgate v. United States Leather Co., 73 N. J. Eq. (3 Buch.) 72 (1907), I examined this question with reference to the statutory proceedings in the merger of corporations. This case is now pending in the appellate court. Substantially the same view was taken in reference to the rights of the stockholders in voting upon the dissolution now complained of by Judge Kirkpatrick in a suit brought by the complainants and Arnold against the Standard company and the Distilling Company of America, the record of which has been offered.

Nor has the charge of fraud in the passage of the resolution been at all made out. On the contraiy, the evidence of the witnesses called by complainant on this hearing to testify in relation to the passage of the resolution for dissolution disproves the charge, and on the hearing and in the briefs the evidence mainly relied on to support the charge is that of the reports of the several companies and the financial condition of the compan3 as inferred from these reports. These statements do not justify such inference. But as to all of the objections to the dissolution of the distributing company, based on the alleged fraud of the Standard company as one of the stockholders, acting through its own directors, I think the complainants are concluded by the bill and proceedings in their own suit in chancery above set forth, in which they accepted the dissolution, took procéedings to carry it into effect and procured a final decree distributing its assets among all its stockholders, including as well the Standard and distributing company as themselves. The decree is set up in the answer as res adjudícala, and it must therefore be given full effect on all the matters foreclosed by it. The claim of complainants against the Standard company must therefore depend upon the contract, and this is the ground upon which the claim is mainly placed by the bill, the allegation of fraud in the proceedings for dissolution being set up apparently only as an alternative answer or basis of relief, in ease the contract be construed as terminated merely by the dissolution of the distributing company. Paragraph 7 p. 11. Construing the contract, the complainants claim that the contract must be construed solely by its terms, and that the certificate is still “outstanding,” within the meaning of the agreement, and that in the absence of any express provision to that effect, the dissolution of the company does not of itself terminate the contract. The defendants, upon this branch of the case, the construction of the contract, claim that the contract itself contemplates payment of the dividends only during the existence of the company, and that by the dissolution of the company, the certificate ceased to be outstanding. And as a further defence upon the continuance of the claim for dividends after dissolution and •affecting the construction of the contract in this respect, they set up that the agreement, in the form signed, was the result of, and intended solely to carry -into effect, prior negotiations (through one Eicks, an intermediary promoter), to which the distributing company and the Standard company and their individual stockholders, including complainants, were parties. The following facts in relation to these negotiations appear by the undisputed evidence. In these negotiations the stockholders’ agreements (signed by the complainants on their part, along with the other stockholders), described and referred to the proposal of the Standard company as one by which it would

“guarantee the payment during the existence of the said Spirits Distributing- Company of a dividend of one and a half per cent, upon the 15th days of January, April, July and October in each year, upon $1,250,-000 of said first preferred stock, or so much thereof as may be outstanding from time to time.”

The stockholders’ agreement recited, among other things, that in consideration of this guarantee, they were willing on their part to consent to the reduction to six per cent, of the dividend on their stock (fixed by the original charter at seven per cent.). This reduction was one of the features of the readjustment. As to the form which the contract of the Standard company thus referred to should assume, the stockholders’ agreement further provided that the new certificates of stock (to be exchanged for the old certificates)

“shall have endorsed thereon the agreement of said Standard. &c., Co. to pay to the holder of said first preferred stock a dividend of one and a half per cent, upon the par value thereof, on the fifteenth days of January, April, July and October in each year,” &c..

and that upon receiving certificates so guaranteed, the Manhattan Trust Company (the depositary of the stock) was authorized to cancel the old certificates of stock deposited with the trust company under the agreement, and surrender them to the distributing company.

The stockholders’ agreement was ratified by the stockholders, including complainant Bijur, who had, however, procured an injunction in a suit brought by one Pronick against carrying-out an amendment to the charter of the Spirits Distributing-Company, which was also a feature of the adjustment. This injunction, as he says on the hearing in this case, was released upon the matter being adjusted in a way satisfactory to him, and he then deposited his. stock and took the new stock. The form of the agreement of the Standard company actually endorsed on the new certificates differs from that given in the stockholders’ agreement in this respect, viz., instead of following the precise language of the agreement,

“to pay during the existence of the Spirits Distributing Co. a dividend of one and a half per cent., &c., on every share .of first preferred stock represented by the within certificate, or so much thereof as may be outstanding (or provided the same be outstanding)

the agreement is

“guarantees and agrees'to pay to the holder of record of the within certificate, so long as said certificate" shall be outstanding, but not to exceed the present unexpired term for which the company is incorporated.”

The above facts relating to the matter of the form of the agreement as originally proposed and finally executed are up-disputed. How the form in question came to be adopted does not appear, but inasmuch as under the agreement the trust company was charged with the duty of receiving- the new certificates and surrendering the old ones, it must, in the absence of proof, be assumed that the trust company accepted from tire distributing company the new certificates with the form of agreement adopted; as the form adopted by the Standard company and consented to by the distributing company to carry out the agreement of endorsement, and as a sufficient endorsement under the agreement. And it must also be assumed that the certificates so endorsed were accepted by the stockholders (including complainants) from the trust company as having endorsed thereon the agreements to which they were entitled, and which they were bound to receive under the agreement, and that without objection from any stockholder the old certificates were surrendered by the trust company on the delivery of the new certificates.

Under these circumstances, my view is that the previous negotiations cannot be resorted to- for the purpose of giving to the endorsement in question any construction or operation different from that expressed in the agreement itself finally delivered, and that the parties on both sides must stand on the contract as finally executed and accepted. The right to resort to prior negotiations for the purpose of qualifying, by circumstances ultra the contract, the terms of the contract by construction or otherwise is sometimes allowed under special rules relating to contracts of guaranty, and on the ground that a guaranty is a secondary liability which in such cases arises only on the whole circumstances of the case as proved, and cases are cited by counsel which authorize such evidence. But as bearing on the question whether these prior negotiations can be resorted to for the purpose of controlling the contract in the present case, it is proper further to add that the Standard company, although referred to as guarantor, in this one feature of the plan of adjustment — the endorsement of the certificates — really occupied the position of an independent contractor, when the entire scope of the negotiations is considered, and it received consideration for the contract of guaranty, which was only one of the contracts made in a transaction which was a readjustment of the financial condition of the distributing company, in which the Standard company had an interest. On the consummation of the whole jolan, it received substantial independent consideration, which was sufficient, legal basis for the contract in question considered as an independent and original contract, and the contract was in form made not as a contract merely of guaranty, but in the words “guarantee and agree to pay.” The contract in question was, in the Windmuller Case in New York, above referred to, construed to be such original contract of payment, and not a mere contract of guaranty, and the whole transaction was held by that court to be “in reality only a method of paying part of the price which the Standard company was willing to expend for the acquisition of the controlling interest which it sought.” It was therefore held not to be ultra vires as a mere guaranty.

The right of the complainants to- recover from the Standard company dividends after April 15th, 1902, depends, therefore, in my judgment, solely on the construction of the contract for payment endorsed on the certificates, and on the undisputed facts above stated the precise question is whether, after the dissolution of the company and the final decree for distribution of its assets to the shareholders, including complainants, and made in the suit instituted by them for that purpose, the certificates are, within the meaning of the contract, “outstanding.” The solution of this question involves some consideration of the nature of a certificate and its relation to the shareholder’s rights in a company. The shareholder’s rights in the company of which he is shareholder are not necessarily dependent on the issue or holding of the certificate itself, but are rights of which the certificate is the evidence or muniment of title, and so far as relates to the stockholder’s rights in the company, the certificate is not itself the property. 2 Thomp. Corp. § 2348; Low. Trans. Stock § 109. The rights of the stockholder evidenced by the certificates are all comprised in two classes — first, the personal rights inherent in a stockholder as a member of the corporation, being the right to attend meetings, vote and the like, and including all personal rights as member, and second, the property rights, which are the rights to- share in the dividends of the corporation and in the distribution of its assets. These rights, with those conferred by law, as incidental solely to their protection, comprise, I think, all the rights of the stockholder and the certificate of stock is, as between the shareholder and the company, and all its other shareholders, the evidence of thisi membership and right to share in the property and assets. A dissolution of the corporation terminates those rights of a shareholder which are merely personal to- him as a member, but does not terminate his property right in the assets. It has, however, been held by high authority, which has never been questioned, that on dissolution, the title evidenced by the certificate becomes merely an equitable right to a distributive share in the funds, and that the stockholder can-no longer convey any legal title to his stock by the mere assignment of the certificate. Ang. & A. Corp. (10th ed.) 779; James v. Woodruff, 10 Paige 541; affirmed on appeal, 2 Den. 574 (1845).

Taking this to be the true nature and scope of the certificate,, as I think it is, the question of construction is narrowed to this r _ In view, first, of the dissolution of the company which destroys all membership and rights of- membership, and second, of the final decree of a court of equity distributing the assets of the corporation, ¿djudicating the property rights of the shareholder and decreeing payment to the complainants of specified sums of money as their proportionate share of the assets, can the certificates be now said to be “outstanding?” This must be taken to mean lawfully outstanding,” and for what lawful purposes is the certificate now outstanding? . By the decree of distribution givin'g complainants a definite sum out of the assets, the general right to share in those assets, evidenced by the certificate, has been merged and ended, and no further right to the assets continues to exist under the certificate. The sole purpose for which-the certificate now exists is its production to the trustees, as evidence of the right to receive the money adjudicated to complainants by the decree.’

The trustees, by the decree of the court, now hold a fixed sum in special and direct trust for the complainants, in satisfaction of the general property right evidenced by the certificate while lawfully outstanding against the company, and this requirement of production for endorsement of payment cannot be considered as in anjr sense creating by the decree itself a situation which continues the certificate as “outstanding,”- within the meaning of the agreement.

Suppose the Standard company had endorsed the bonds instead of the stock of the distributing company, agreeing to pay interest on each bond so long as said bond is “outstanding,” such liability to pajr interest would continue so long, and to the extent interest was due on the unpaid principal, and after, as well as before, the principal became due. But should judgment be recovered for the principal when due, and the money be paid into court on writ of execution, could the bond be then said to be “outstanding,” merely because the holder declined to apply for the money in court and retained the bond? When merged and extinguished by the judgment and its payment, the bond is no longer lawfully “outstanding.” The decree of distribution was in fact and in form a judgment in favor of the shareholder for the amount due on his certificate, and the direction to the trustees to pay out of the moneys in hand the amount adjudicated to the complainants was an execution in their favor, and so far,as the distributing company and its shareholders are concerned the cei>M tifica-te is’certainly from that date no longer outstánding. As a'\ matter of construction of contract, therefore, I conclude that the 5 complainants have no claim under the agreement for any pay- \| ment of dividends after the dissolution and decree of distributiq^T

In the complainants’ brief a liability to pay continuing after dissolution and distribution was also pressed on the ground— first, of a supposed obligation,of the Standard company not to exercise ij^right_3s_shaxehoMm_im- order to dissolve the distributing companjq implied by law from the terms of the agreement, and secondly, because of an estoppel against denying the continued existence of the”company, based on equities claimed to arise frinn-air'tlTircircumstances of the case.

The first ground depends on the construction of the contract itself, and there is no reason why the principle, expressum fácil cesswre taciturn, should not apply to a contract of this kind. The limit of time expressly agreed on by the parties for the payment of dividends on the shares represented by the certificates was, “so long as the certificates are outstanding.” |The statutory right of a shareholder to vote tipon the question of dissolution existed at the time the, contract in question was made and accepted, and the contract in its present form must be taken to have been made in contemplation of it. An obligation, from the nature of the. contract itself, that the contractor will not exercise such independent right because of its possible effect as terminating the contract if construed according to its terms, cannot be implied by law. Several of the cases cited upon the point of implied obligations are thoseloLcouris^iwhere the dissolution of a corporation is held to haveYhc-effee-kof-SQ-ierminating contracts for employment or like continuing contracts, that no action against the corporation :for__damages -for breach of contract j!xists^_jmd these courts have applied the doctrines, of implied obligation, or of equitable estoppel m these casés/where the act of rlissolnlion was that of the contractor itself, and was inequitable. We have !( not adopted This ctocTTrme that the mere dissolution of the con- | tracting company itself dissolves its continuing contracts, and J under our law the claim inr damages for breach ofTllí^oontract is / chargeable on its assets. Spader v. Mural Dec. Co., 47 N. J. Eq. (2 Dick.) 18 (Chancellor McGill, 1890); Bolles v. Crescent Drug Co., 53 N. J. Eq. (8 Dick.) 614 (Vice-Chancellor Reed, 1898), approved and followed in Rosenbaum v. Credit System Co., 65 N. J. Law (36 Vr.) 255 (Court of Errors and Appeals, 1898). lEad the Standard distilling company trustees set up the dissol^ff^^~tte--S-taMaixl"cbmpanv itself as a defence to-an-artiini^ir’ffi^ these cases on estoppel cited would'be ap]J]jc!rMepif"themmle"were here in force, that the dissolution itself ordinarily or generally terminated a contract ■ which on its face did not refer to the dissolution, but which would have continued had there been no dissolution. In this case the question is the altogether different one whether, by its own terms'as to continuance, the contract has not terminated, and if so, then whether any different or other time for its termination can be fixed, by applying the doctrine of implied obligation to affect the period of termination fixed by the terms of the contract.

As to the second ground set up in the briefs, the estoppel to-deny the continued existence of the distributing company, the-facts relied on to raise the estoppel are the same as those relied on to sustain the charge of fraud in the dissolution of the distributing company which I have held not to be sustained.

I will advise a decree dismissing the bill.


author: Stevens, V. C.

text:
    Frank Voigt et al., executors, v. August H. Dowe et al.
    [Decided July 11th, 1908.]
    Parol testimony was admissible to show that the real consideration for a deed was natural love and affection, though the deed recited that the-consideration was the payment of money.
    On pleadings and proofs.

      Mr. Frcmlc E. Bradner, for the complainants.

      Mr. Nathan Eussy, for the defendants.
   Stevens, V. C.

The complainants’ testatrix made a deed of land to the defendant Dowe, expressed to he for the consideration of $2,000r the receipt of which was, in the usual formal language, thereby acknowledged.

The complainants bring suit for the consideration-monejr, alleging its non-payment. The defendant in his answer admits-that the money was not paid, bnt he avers that the real consideration was natural love and affection. The proof sustains the answer. The contention is that it is competent to contradict the writing for the purpose of showing non-payment, but that it is not competent to vary it for the purpose of showing what the real consideration was. I have read with care the cases referred to in the brief of counsel, but I cannot find in them any support for this very inequitable proposition. As the matter appears, either on the face of the deed standing by itself or on the proof standing by itself, the intent of the grantor was, not to subject the grantee to a future money payment. It would be strange, indeed, if, by an arbitrary exclusion of part of the evidence, he should be subjected to it.

The cases in this state are all one way, and they hold “that the true consideration of a deed may be shown by parol though it vary from that expressed, but not to vary or enlarge the grant.” Morris Canal v. Ryerson, 27 N. J. Law (3 Dutch.) 457; Herbert v. Scofield, 9 N. J. Eq. (1 Stock.) 492; Speer v. Speer, 14 N. J. Eq. (1 McCart.) 240; Silvers v. Potter, 48 N. J. Eq. (3 Dick.) 547; Hattersley v. Bisset, 51 N. J. Eq. (6 Dick.) 597.

The bill should be dismissed.


text:
    Percy E. Williams, by next friend, v. Lola Maria Brokaw.
    [Decided July 16th, 1908.]
    1. A statute will not be given a retroactive effect, when the words in it can be construed as designed to make it prospective only; and before a statute will be given a retroactive effect there must be found in it such clear expression of legislative design as will preclude any other reasonable interpretation of the words used.

      2. P. L. 1907 p. Ji71¡, authorizing- the annulment of a marriage at the suit of the husband “when he was under the age of eighteen at the time of the marriage.” &c.. is not retroactive, and does not authorize the annulment of a marriage entered into prior to its enactment.
    On demurrer to petition.

      Mr. Ralph US. Lum, for the demurrant.

      Mr. Malcolm MacLear, for the petitioner.
   Stevens, V. C.

The petition alleges that petitioner was married to defendant on June 14th, 1904; that the petitioner was then sixteen years and nine months old and the defendant fifteen years old. lie prays for the annulment of the marriage under the following provisions of the Divorce act of May 17th, 1907. P. L. 1907 p. 474:

“Decrees of nullity of marriage may be rendered in all cases * * * VI, at the suit of the husband when he was under the age of eighteen at the time of the marriage, unless such marriage be confirmed by him after arriving at such age.”

The defence is that this act is not retrospective; that it does not affect marriages entered into before the time of its enactment. I think it is plain that it does not.

At the time the marriage in question was contracted'it was perfectly lawful. The union created by it was indissoluble, unless one of the spouses should commit certain specified off enees or crimes that would give to the other the right to terminate it. It is now sought to- annul it without fault on the part of the defendaait and against her consent, at the mere will or caprice of the petitioner. The court is slow to give to a statute a retrospective effect unless its language plainly demands it. I can find nothing in the act under consideration that is not entirely consistent with the idea that the statute is prospective only. The words “when he was under the age,” &c., plainly refer to past time anterior to the bringing of the suit, not to past time anterior to the passage of the act.

The language of the court of errors and appeals in Citizens Gas Light Co. v. Alden, 44 N. J. Law (15 Vr.) 648, 653, is applicable to this statute. “Laws generally are enacted for the regulation of future affairs and conduct and to establish the basis on which rights may thereafter under them be rested and are not usually designed to alter ox affect the quality or legal relation of past acts and concluded transactions, much less to disturb rights which have arisen under laws concurrently with their birth. Hence, we do not look for- or expect in any enactment that it shall be operative as of time prior to its own existence, and before we are permitted to ascribe to it such a purpose, there must be found in the law such clear and indubitable expression of the legislative design as precludes any other reasonable interpretation of the words used. The rule in the courts is that retroactive effect will not be given to a. statute when the words in it can be construed as designed to make it prospective only. All legislation is framed, or presumed so to be, in view of this conspicuous canon of construction governing the court when the duty of interpretation is reposed. And when the legislature intend to give to laws of their enactment, operation upon the past, they will and must do it with such choice of words as places it beyond the realm of doubt.”

If, hereafter, any person shall be so ill advised as to enter into a marriage with an infant under the prescribed age, he or she will do it with the knowledge that the relationship can be terminated at the mere will of the infant. I am quite unable, in the light of the above canon of construction, to find anything in the act which would countenance the idea that it was the intention, of the legislature to allow persons to affirm or annul at their pleasure unions entered into before the act was passed and at a time when, by law, they were understood to be indestructible. The demurrer should be allowed.