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    The State Mutual Building and Loan Association v. Edward A. O’Callaghan et al.
    [Submitted January 5th, 1904.
    Decided March 1st, 1904.
    Filed July 9th, 1904]
    1. On the foreclosure of a mortgage a decree pro confesso was taken and an order of reference made to a master to report the amount due. Defendant petitioned the court to correct the decree before sale, claiming that the decree was for too large a sum, exceeding by about five per cent. the sum admitted to be due. The petition was denied. On appeal from the order denying the petition, and from so much of the decree as adjudged the amount due and directing a sale of the property, the court reversed the order denying the petition. Thereafter defendant moved that the sale under the foreclosure, made and confirmed pending the appeal, be set aside. — Held, that though the court on appeal determined that the owner of the equity of redemption of mortgaged premises has the absolute right to have the precise amount due on the mortgage judicially settled before the sale of the premises can take place, the sale would not be set aside.
    2. A purchaser purchased at a sale under a mortgage foreclosure decree unimpeachable except as to the amount due the mortgagee. No notice was given at the sale of an appeal from an order denying an application for the correction of the amount adjudged to be due, and the only notice the purchaser had of such an appeal was such as might be imputed to him by the filing of the notice of appeal in the clerk’s office three days before the sale. The sale was duly confirmed without objections or exceptions. — • Held, that the purchaser was a tona fide purchaser.
    3. A mortgagor neglecting to give notice at the sale under the foreclosure decree of his appeal from an order denying his application to correct the amount adjudged by the decree to be due the mortgagee, and failing to except to the confirmation of the sale, is, as against the purchaser, estopped from claiming that the sale is invalid.
    4. An applicant to a loan association for a $40,000 loan was informed as to the terms under which loans were made, which were that applicants, on being accepted, became stockholders, required to pay fees for the stocks, monthly dues and premiums. He was informed that the initial payment for premiums and fees would be $1,000. He accepted the terms and received $30,000. — Held, that $1,000 originally deducted from the loan was a voluntary payment by the applicant, and hence he was not entitled to any credit therefor, either on account of principal or interest.
    Hearing on petition of defendant O’Callaghan and answer of complainant thereto.

      Mr. Edward A. Armstrong, for the complainant.

      Mr. James B. Bowen, for Messrs. Goldstein & Einebnrg.

      Mr. Fislce. for the Commercial Trust Company.

      Mr. Warren Dixon, for Mr. O’Callaghan.
   Pitney, V. C.

This matter comes before the court under peculiar and unusual circumstances.

The object of the bill is to foreclose a mortgage made by O’Callaghan and wife to complainant, dated November 9th, 1900, to secure the payment of $40,000 in one year, with interest, payable monthly.

The bill was filed November 2d, 1901, and alleged complete default in payment of interest, and also of dues under complainant’s charter and by-laws in accordance with the terms of the mortgage and the terms of the bond given to secure the same debt.

Beside the defendant O’Callaghan and his wife, three judgment creditors of O’Callaghan were made parties defendant and duly served with process; and, no answer having been filed, a decree pro confesso was taken December 24th, 1901; and notice under the rule having been duly given by two of the judgment creditors that they desired to have their judgments passed upon by the master, an order of reference to a master was incorporated in the decree pro confesso.

In pursuance of that order the master made a report, dated January 8th, 1902, by which he found that there was due to the •complainant on that daj'- the sum of $45,132.92, which included dues, fines, interest and premiums in arrear to the amount -of $8,753.32 less the withdrawal value of stock held by O’Callaghan in complainant’s corporation, amounting to $3,620.40, being the full value thereof.

He also found that there was clue to one judgment creditor $175.77, and to another $3,328.89, which, after adding costs ■of $155.33, made a total encumbrance of $48,792.91, with interest from January 8th, 1902, besides sheriff’s execution fees.

Upon that report final decree was made January 18th, 1902, and execution issued accordingly to the sheriff of Hudson county. He duly advertised the property for sale on March 20th, 1902, at a place specified.

At that time and place the defendant O’Callaghan appeared, with his counsel, and, at his request, the sheriff adjourned the sale for one week, to March 27th. On that day the defendant O’Callaghan and his counsel again appeared and procured an adjournment from week to week for four weeks, to April 24th. •

On April 21st, 1902, counsel for defendant O’Callaghan presentecl to me a petition in which he set up briefly the proceedings in the cause, and in which he asserted that the decree was erroneous and oppressive

“in that the amount of interest due, together with the principal from November 9th, 1900, less the amount of $600 paid by your petitioner thereon, would be the sum of $2,000 only, and that the decree should have been for the sum of $42,155.33 — principal, interest and costs.”

The prayer was that the decree might be opened, and that he might have such relief in the premises as equity and justice require and all proceedings under fieri facias he stayed until the further order of the court.

Annexed to that petition was an affidavit by Mr. O’Callaghan, stating ‘That there is due on said bond and mortgage for principal and interest as aforesaid on January 8th, 1902, the sum of $42,000.”

That petition was sworn to on April 16th, 1902, and an order was prepared to be presented with the petition to a vice-chancellor, which order bears date April 17th, 1902, and was, in fact, on or shortly after that date presented to a vice-chancellor, who declined to advise an order thereon.

On the presentation of that petition to me, and not being informed of the fact that the petition had been refused by another judge, and failing to observe the date written in the order, I advised the order, returnable on Monday, April 28th, 1902, calling on the complainant to show cause why the decree should not be opened, and ordered that all proceedings thereunder he stayed until the further order of the court, and that the sheriff adjourn tlie sale from week to week until the further order of the court.

The hearing on that order was adjourned, by consent, to May 22d, and at that hearing I was informed, for the first time, that there were defendants who had decrees in their favor who had not been, as I recollect, brought into the hearing on the present petition, by notice or otherwise, and that the sale had been adjourned for nine weeks.

I also learned that the amount found due by the master was actually due upon the bond executed by the defendant, and which was mentioned in the mortgage, but that the defendant claimed that certain fines, premiums and monthly payments on stock which were covered by the bond were not specifically included in the verbiage of the mortgage.

It was also stated, and admitted by counsel, that the premises covered by the mortgage were what is known as tenement-house property, bringing in a large rent, and that the defendant was in possession, receiving the rents and profits.

I asked the counsel of the defendant, the petitioner herein, if he was willing that a receiver should be appointed at once to-take the rents and profits pending the proceedings before the master to restate the account and ascertain the. amount due. This he positively declined. Whereupon, being of the opinion that inasmuch as the petitioner admitted that there was $42,000' due upon the mortgage on January 8th, which with interest up to the time when the sale could take place and the deed be delivered would be at least $1,000 more, besides costs and sheriff’s execution fees, and inasmuch as the judgment creditors clearly, by the practice of this court, were entitled to and had not received notice of the present proceedings, and the largest one of them — the Second National Bank of Jersey^ City — was a strong institution, with a considerable sum of money at stake and entirely able to take care of itself, and that it would probably bid the property up to its full value, and that complainant would naturally feel inclined to bid it up to the amount of its decree, it would be unfair and inequitable, not to say unlawful, to stay the sale, therefore, I discharged the rule, but with my own hand inserted in the order of discharge the words “without prejudice to defendant’s right to renew the application after the sale of the premises.”

Of course, it was within the power of the court to control the disposition of the proceeds of the sale, and on the (as it now appears, erroneous) view I then took of the rights of the parties and the proper mode of enforcing them, I should have added an order to the sheriff to withhold enough of the proceeds of the sale to cover the amount in dispute.

The premises were sold May 29th, 1902, to Messrs. Goldstein and Fineburg, for $46,505.

The sale was duly reported and confirmed without objection on June 9th, 1902, and the deed was delivered to Messrs. Gold-stein and Fineburg, and they paid the consideration money and, in aid. of such payment, obtained a loan from the Commercial Trust Company, which is now a mortgagee of the premises.

The amount paid and bid was some $362.60 less than the amount due the complainant by tire decree at the date of the delivery of the deed.

Fo evidence was offered before me, on the hearing of the present matter, to show that the property did not bring its full value at the sale.

If defendant, after the sale, had pursued the remedy reserved to him by the order of May 22d, and had made prompt application to the court, an inquiry would have been made into the correctness of the master’s report and any error found therein corrected,. and the amount which the proceeds of the sale exceeded the amount really due the complainant would have been applied to the payment of the junior encumbrances, and if it exceeded the amount due thereon would have been paid as surplus money to the petitioner. There was ample time to arrest the purchase-money in the hands of the sheriff.

(It was admitted by his counsel that he paid no attention to and did not attend the sale, and gave no notice thereat of this appeal.)

The defendant, however, who is an attorney of the supreme court, was not advised to take that course, but, on May 26th, .appealed from the order of May 22d to the court of errors and appeals.

His notice of appeal is as follows:

“The defendant, Edward A. O’Callaghan, hereby appeals from an order made on the twenty-second' day of May, nineteen hundred and two, discharging an order to show cause why the final decree entered in this cause should not be opened, and from the whole and every part thereof.
“And the said defendant hereby appeals from so much of the final decree made in this court in the above-stated cause as declares that there is due to the complainant on the said mortgage the sum of forty-five thousand and pne hundred and thirty-two dollars and ninety-two cents ($45,132.92), and directing sale of said property to realize said amount to the court of( errors and appeals in the last resort in all causes.”

The petition of appeal is to the same effect.

After the hearing of that appeal, the court of errors and appeals entered a decree as follows:

“It is thereupon * * * ordered, adjudged and decreed that the order of the chancellor, made on the twenty-second day of May, nineteen hundred and two (filed May 23d, 1902), discharging the order to show cause returnable on the twenty-eighth day of April, nineteen hundred and two, be and the same hereby is in all parts reversed, and that the record and proceedings be remitted to the court of chancery, to be therein proceeded on according to law and the practice of said court.”

Thus it will be seen that though the final decree was brought directly before the court of errors and appeals for review,- it was not disturbed by that court.

After the entry of this decree of reversal, the petitioner moved, upon notice to complainant, to the purchaser at the sheriff’s sale and to the mortgagee, as follows:

“Take notice, that on Monday, the second day of November next, at the chancery chambers in Jersey City, at ten o’clock in the forenoon, or as soon thereafter as counsel can be heard thereon, I shall apply to the court of chancery to set aside the sale by the sheriff of the property sold under execution issued in the above-entitled cause, and shall also apply to-set aside all deeds and encumbrances and all proceedings had under or by virtue of said sale by said sheriff of Hudson county, and I shall apply for such other relief as may be proper or incidental to the reversal of the order made by said court on the twenty-second day of May, nineteen hundred and two, discharging an order to show cause, with stay theretofore made.”

That motion was resisted by all the parties.

It was supported by. counsel for petitioner upon two grounds— ■first, by the language of the judge who spoke for the court of errors and appeals, 65 N. J. Eq. (20 Dick.) 738, upon which the decree of reversal was entered; and second, upon the strength of the case known as the National Docks Case, 54 N. J. Eq. (9 Dick.) 647.

With regard to the first ground: I declined, at the argument, to refer to the opinion of the court of errors and appeals, for the reason that I thought I was properly confined to the language of the decree of reversal.

My own learning and (until recently) unvaried experience have been that a decree of either modification or reversal granted by the court of errors and appeals should direct specifically what decree the court below should enter. This, according to i&y experience, has always been the practice, and, in my humble judgment, is the only proper practice.

Eor instance, if the decree appealed from be for complainant, and the opinion of the appellate court should be that the complainant was not entitled to any relief, but that the bill should have been dismissed, it is the duty of the counsel of the successful appellant to have it declared in the decree of reversal that the court below shall enter a decree dismissing the bill.

Or, if the court in such a case should hold that the complainant is entitled to some relief, but not to as much or the same that the court below has awarded Mm, the decree of reversal should state exactly to what relief he was entitled; then, when the decree of reversal or modification is presented to the court of chancery, it, by its decree, simply says “that in obedience to the mandate of the appellate court, it is decreed as follows,” &c.

This practice, in my time at the bar, was carried so far that in complicated cases of reversal or modification the counsel for the successful party was expected to submit a draft of the proposed decree to the opposite party, and in cases of objection, then to the appellate court for approval.

Another reason why 1 declined to look at the opinion was that I had in mind at least one instance where I found that the actual decree entered in the appellate court did not correspond with the opinion. I refer to the case of Pancoast v. Geishaker, 58 N. J. Eq. (13 Dick.) 537. This will be seen by a copy of the actual decree in that case presented to me in the case of Bacon v. Fay, 63 N. J. Eq. (18 Dick.) 411, and copied by me at p. 417.

This risk of variance between the actual decree and the opinion of the court arises out of the well-known circumstance that until recently, at least, all the members of that court have not, at all times, had an opportunity to scan closely the opinion read or filed in the cause, and hence that opinion has not always expressed the views of a majority of the court, although they concurred in the result.

Above all, I thought, in a case like the present, where rights of third parties might and in fact did intervene, I ought to presume that if the higher court expected the court below to adopt any such radical, and, I may add, destructive, measure, it ought to and would have expressed clearly in its decree its mandate to that effect.

I have, however, since declining to set aside the sale, naturally examined with care the opinion of the learned judge who spoke for the court of errors and appeals. Upon such examination, I do not find any warrant therein for granting the motion in question. The opinion uses this language:

“The appeal from the final decree has, for obvious reasons, not been considered. The defendant pursued the proper course in bringing the matter to the notice of the court in which the cause was pending. We are dealing now with the action of the court below upon such application, and not with the final decree, which it is still holding under advisement.

“The order discharging the order to show cause must be set aside, and the cause be remitted, to be proceeded with from that point in the court below, in accordance with the views herein expressed.”

I am not sure that I understand the precise force of the language used, as quoted, with regard to the final decree. If I am to understand that the court of errors and appeals presumes that this court is .still holding the decree under advisement, and that it will, in obedience to the mandate, take up the proceeding at the point and in the situation-of affairs when the order of May 22d, 1902, was made, and deal now with the final decree as it should have done at that time, then I have to say that, as I understand the practice of this court, all that this court then would have done, after ascertaining and fixing the extent of the error in the amount due complainant, was to have made an order reducing accordingly the amount found due by the decree, and ordering a corresponding credit made on the execution, thereby modifying the direction to the sheriff as to the amount which he should levy.

It would not have vacated or set aside in toio the decree and the proceedings under it, so far as it ordered the property sold. This for the very good reason that the defendant admitted that about ninety-five per cent, of the decree was due, and he thereby admitted, in the absence of an offer of payment of the amount so admitted to be due, that the property must be sold.

So far, then, as the decree ordered the property sold, it was unimpeached and unimpeachable.

Moreover, the complainant was entitled, at law, to either immediate payment of the amount so admitted to be clue or to the immediate possession of the premises. Surely some regard should be paid bjr this court to the rights of complainant, and also to the rights of the parties holding subsequent decrees.

I find nothing in the opinion of the court of errors and appeals which conflicts with my views of the practice as just expressed.

, The opinion does, indeed, as I read it, lay down emphatically the, to me novel, doctrine and rule that the owner of the equity of redemption of mortgaged premises has the absolute and unqualified right, under all circumstances, to have the precise amount due upon his mortgage judicially determined before the sale of the mortgaged premises can be permitted to take place.

This rule necessarily includes a review by the court of errors and appeals of the determination in that respect of the court below. For, it must be observed, that this court, before the defendant's application was made, had judicially determined the amount due complainant in the ordinary and time-honored mode of a reference to a master, an investigation and report by him, and an express ratification and confirmation of that report by this court. So that I must hold that the canon referred to includes the right to appeal from any determination of this court of the amount due, and to have the sale stayed until that determination is had.

The effect of the rule so stated finds practical illustration in this ease where the owner of the equity admitted in his application that ninety-five per cent., or thereabouts, of the amount so judicially determined and found due was actually due, and made no offer either to pay that amount or to hand over the rents and profits to the mortgagee pending-investigation.

The opinion further holds that the owner of the equity may, without prejudice to his rights in that behalf, pay no attention whatever to the judicial proceedings put in train to determine the amount so due, and may rely upon the master making no mistake either in the computation of the amount due or in the construction which he may put on the order of reference or its scope, for I conceive that the construction of the order of reference in the matter of its scope is necessarily within the judicial province of the master.

The opinion further holds that the owner of the equity may, with like immunity from prejudicial injury to his rights, neglect to take advantage of the time-honored rule of practice of this court which requires the execution to lie on file ten days after decree before issue, for the very purpose of enabling defendants to examine the report and decree and ascertain if any error has been made.

All this, I must assume, is now established law. What effect it may have in the way of encouraging defendants to interpose captious objections and take groundless appeals, remains to be seen.

But it does not reach far enough, as contended by counsel, to vacate, set aside and annul a sale regularly made under a valid and regular decree of this court, and afterwards confirmed without objection by a decretal order of this court and conveyance made thereunder to third parties.

The remaining point upon ■ which the petitioner. rested his motion was that the appeal taken from the order discharging the order of May 22d, 1902, had the effect, under the decision in the National Docks Case, of rendering invalid further proceedings under the decree.

Here, again, I feel justified in saying that the supposition prevails with the bar that the members of the court, as then constituted, cannot be held to have approved all that was said by the late chief-justice in that case. I also feel justified in saying that the general sentiment of the bar of the state is that the doctrine there laid down must be limited in its application to cases strictly analogous to the case then before the court. Such seems to have been the view of Vice-Chancellor Emery, in Delaware, Lackawanna and Western Railroad Co. v. Breckenridge, 55 N. J. Eq. (10 Dick.) 159 (at pp. 162, 163). In the same direction is the language of Mr. Justice Garrison, speaking for the court of errors and appeals, in the case of Morton v. Beach, 56 N. J. Eq. (11 Dick.) 791 (at p. 792).

The principle upon which the learned chief-justice went, and upon which the petitioner herein relies, is found on p. 653 of 54 N. J. Eq. (9 Dick.), and is to the effect that the right of the appellant is that he shall be, by an appeal, protected thoroughly against the result of any error into which the court below may have fallen.

A slight consideration of the numerous modes in which a chancellor may fall into error in applying the rules of equity shows that the end sought and claimed by the learned chiefjustie'e is practically impossible under the present constitution of our courts.

Let us take one or two simple examples:

The owner of a recently erected house is charged by his neighbor with having placed a portion of it on his neighbor’s land, and that neighbor demands its removal, and on failure of such removal threatens destruction of so much of it as is found on his land. The owner applies for an injunction on ex parte affidavits. The chancellor, to whom the application is made, adjudges that he has not made out a case calling for the interposition of the court, and signs an order refusing the application. The complainant appeals. The defendant at once destroys a portion of the house. The court of errors and appeals reverses tlie order refusing the injunction and holds that the injunction should have been issued. Here it is manifest that the injured party can obtain no benefit from his appeal, unless we hold that an appeal will create an injunction, or unless the court of errors and appeals is then in session.

How, suppose, in the case just stated, the chancellor had called on the defendant, by an order to show cause, to answer summarily the complaint of the owner of the' house, and in the meantime had restrained him from injuring the house, and, after hearing in a summary -way -what the defendant had to advance in support of his right to abate what he considered to be a nuisance, had come to the conclusion that, the defendant was right and the house-owner wrong, and had discharged the restraint, and the complainant had taken an appeal, and the defendant had at once destroyed the house, and the court of errors and appeals should hold that the complainant was entitled to restraint, why should there be any difference in the result in the two cases? Why should the mere fact that the chancellor had in one case decided in favor of the defendant without hearing him, and in the other case after hearing him, make any practical difference in the result ?

I am unable to perceive any.

In each case judicial approval of the restraint is wanting at the time the building is destroyed, and the intrinsic difficulty lies in holding that there may be judicial restraint without judicial approval.

■ It has been the time-honored practice of the chancellors to exercise a discretion in the matter of the dissolution of a restraint, and in a case of doubt to continue the restraint until the next meeting of the court of errors and appeals, and this practice seemed, until the decision of the National Docks Case, to be the only remedy of the party seeking the restraint in the absence of a continued session of that court.

In short, the sentiment of the bar seems to be that the doctrine-of the learned chief-justice, carried to its logical conclusion, results in this: that the complainant who has been refused an injunction by this court may obtain that injunction by simply appealing from the order of the chancellor refusing it, and may obtain and enjoy the benefit of the extraordinary power of restraint of this court without the judicial approval of any court or judge. 'This, it is claimed, amounts to a reductio ad absurdum. .

With regard to the importance of assuring to suitors the benefit of their appeals, I can only suggest that, in order to effect that result in all cases, the legislature, or some supreme power in the state, must'provide a court of appeals which must either be in continuous session or have power by one or more of its judges to grant injunctions in vacation.

I shall add that, immediately after the promulgation of the opinion in question, the court of chancerjq in order to guard against the injurious results which would' arise almost certainly from the practical application of the doctrine that a restraint contained in a simple order might be continued by a mere appeal from the order discharging that restraint, adopted the practice of limiting the interim restraint to a particular day and hour, so that it came to an end without any order to that effect.

Turning now to the case in hand. Here, as before remarked, •the sale was had under a perfectly valid decree, unimpeachable, except as to the amount due complainant, and as to that only to the extent of five per cent. Moreover, it was in the plural and included decrees for other defendants who had rights under it to have the sale proceed and whose rights are not in any way impeached. It stood as the actual, deliberate act of this court. No judicial order or opinion then, in existence affected in the least its validity. No notice was given at the sale either that an effort had been made to stay it or that any appeal had been taken from an order discharging a stay. The onty notice the purchasers had of those matters was such as may be imputed to them by the filing of the notice of appeal in the clerk’s office three days before the sale. No authority was cited in favor of the position that the purchasers were bound to take notice of such filing. The authorities are all in the contrary direction and will be found collected in Wiltsie Mort. For. § 589, and Kerr’s Supp. § 589.

I find no foundation for it in reason or justice. It would, in my opinion, never do to hold bidders to the duty of taking notice of the filing of papers of that kind up to the moment of sale. The well-established rule, I' think, is that persons having such objections to a sale must give public notice at the sale. Further than that, the sale was duly reported to this court for confirmation, and ample time was given, according to the rules of this court, for objections to be made thereto. „ Yo objections or exceptions were made, and the sale was duly confirmed by a solemn decree of this court, directing the sheriff to complete the same. The purchasers, therefore, claim under a decree, or rather two decrees, of this court made in a matter in which it had undoubted jurisdiction, and they had and have the right to rely thereon. They became and were Iona fide purchasers for a valuable consideration without any notice which this court can recognize of any weakness in the proceeding. The pe-. titioner, by his neglect to give notice at the sale and to except thereto, is estopped as against the purchasers.

It follows that the sale has created vested rights in third parties. The land has been converted into money in due course of law. Yo complaint is made that it did not bring its full value.

Under all these circumstances I will not be the first judge to hold that all that proceeding must be undone. I can find no foundation for such action either in precedent or reason.

The well-settled rule is that sales to third parties under erroneous but unreversed judgments and decrees are valid. See Freem. Exec. § 345; Wiltsie Mort. For., and Kerr’s Supp., supra.

Without, therefore, inquiring whether this sale can be disturbed in this summary mode upon a mere notice without pleading of any kind, I conclude this motion must be denied.

I come now to the action I took under the mandate of the court of errors and appeals immediately after denying the motion to set aside the sheriff’s sale and conveyance.

I ordered the complainant, within fifteen days, to file and serve upon the solicitor of the defendant O’Callaghan his answer to his petition upon which the order to show cause was originally granted, and that the petitioner have leave to bring on the hearing on the petition and answer on live days5 notice.

This, I conceive, was a strict and complete obedience of the mandate of the court of errors and appeals and the language of the opinion.

The complainant duly filed his answer to the petition and the cause was brought on for hearing.

Testimony was heard and statements of counsel and admissions thereof made, and the following case was disclosed:

The petitioner inherited the premises in question from his father, subject to a mortgage of $30,000 and large arrearages of taxes and assessments. That mortgage was put in course of foreclosure, whereupon the defendant applied to the complainant, which is a building and loan association organized under the laws of the State of New Jersey, for a loan, and was granted a loan of $40,000. That application, according to the constitution and by-laws of the association, was, in form, an application to become a member, and to have allotted to him four hundred shares of stock, of the par value of $40,000.

He-was fully apprised of the terms of the application, which were, among other things, that the stockholder should pay a fee of $1 for each share of stock, called an entrance fee; he was also to pay a monthly due of fifty cents for each share and a fine of ten per centum for non-payment of monthly dues, besides which a premium was exacted for the loan, and then the shares of stock, when issued, were to be held by the association as collateral security for the loan.

These matters were all explained to the defendant and the monthly rents of the premises were stated to be some $700 or more, and it was explained to him that the monthly dues under his loan would amount to nearly the amount of his rents, but. that such monthly payments would go to increase the value of his stock, so that when the stock reached par in value his mortgage would be paid and satisfied and the result of the transaction would be the gradual paying off of his mortgage.

He was informed that the initial payment for premiums and éntranee fees would be $1,000.

To this the defendant assented, and $39,000 was actually paid and advanced by complainant and the shares of stock were issued.

In all of this the defendant had the benefit of counsel, besides being, as I have already remarked, himself an attorney-at-law and a solicitor of this cortrt.

The defendant paid none of his monthly dues, either by way of premiums or interest, and this suit for foreclosure was commenced, with the result already stated.

Of course, as defendant was duly served with process, and as he put in no answer, he could not set up surprise, except that the master’s report was not authorized and warranted by the allegations in the bill, and this is the precise point which the court of errors and appeals decided in his favor, upon its merits, and upon which the case is now before me. _

Coming to that point in the proceedings, I am of the opinion that the $1,000 originally deducted from the loan was a voluntary payment by him of the entrance fee and premium, duly and fairly exacted by the complainant under its constitution and by-laws, and voluntarily consented to by petitioner, and that the petitioner is not entitled to any credit therefor on account of either principal or interest thereon.

The question of usury was not raised, and it was assumed that it could not be raised successfully under the legislation authorizing the complainant’s organization.

Hence the complainant is entitled to maintain its decree to the extent of $40,000, and interest thereon, which up to the date of the master’s report, commencing with the date of the mortgage, November 9th, 1900, to January 8th, 1902, would be $2,800. (The complainant, in its statement, makes it $2,786.66.)

The difference of $2,352.92 between the amount of principal and interest and the amount found by the master, amounting to $45,152.92, is made up of premiums at the rate of fifty cents per share per month, monthly dues on four hundred shares, and fines for non-payment, amounting in all to $5,966.66; against which is credited what I interpret to be the withdrawal value of $3,620.40 of the capital stock, leaving $2,346.26 included in the master’s rep.ort for items not covered by the language of the mortgage.

But against this result the complainant contends that the neglect and inattention of petitioner to the proceedings before the decree, tq which reference has already been made, viz., neglect to attend before the master, though as a solicitor well familiar with the practice of the court, his neglect to examine the decree and execution on file before the issue of the latter, and his neglect, as he alleges, to examine the execution in the sheriff’s hands until after the property was advertised for sale, and his conduct after it was so advertised, were such as to bar him in equity from having this correction made in the master’s report.

Complainant alleges that petitioner knew of the error at least as early as the property was advertised for sale, and probably sooner; that he deliberately procured adjournments and rested, without taking action, from March 20th until April 21st, and then, by applying to the court, procured further adjournments, so that the sale was actually delayed about ten weeks, during which time the defendant was receiving the rents and profits.

I think the allegation of knowledge by petitioner of the error in the decree, although denied by him, is sustained by the proofs.

The petitioner accounts for his conduct by stating that he was looking for a new loan on the premises, and this, I think, would naturally and almost necessarily lead him to ascertain from the sheriff the sum total of the amount to be raised by the execution. Moreover, proof was offered that on March 27th, the first adjourned day, counsel for defendant stated to counsel for complainant, who attended the sale, that the decree for complainant was much too large.

All these matters were, as I thought, proper matters for consideration on the motion to stay the sale. The court of errors and appeals thought otherwise.

But, I think, it does not lie in the mouth of the complainant to set up either defendant’s non-action or his knowledge by way of estoppel.

In the first place, it has already received of the purchase-money more, by about $2,000, than was due to it on the basis above stated; and, in the next place, it will receive interest in full, at the rate of six per cent., on a loan of $40,000, when in fact it only advanced $39,000. While I do not say that the terms of the original loan, as to dues, premiums and fines, were unlawful or usurious, I do say that they were so severe and hard .as that a court'of equity will not render any extraordinary aid to it in enforcing them.

The result of these views is that the complainant must be charged with the precise sum of money which it received, or should have received, from the sheriff as of the day when his deed was delivered, or should have been delivered, and should be credited with $42,800, and interest thereon, • from January '8th, 1902, and costs of the suit, amounting to $155.33, with interest thereon from January 18-th, 1902, to the same day, and that the balance found in its hands be paid into court, to await the further order of the court, after notice to the subsequent •encumbrancers.

I do not charge interest against the complainant on that balance because I am of the opinion that the defendant O’Callaghan could have had that amount ascertained and immediately applied toward the subsequent encumbrances by simply taking advantage •of the leave reserved to him in the order of May 22d, 1902

His petition was not dismissed and some time necessarily and naturally elapsed between the sale and its confirmation in due ■course of practice. That time was ample for him to renew his ajoplication under the leave reserved. The moment that it appeared that the sale produced more than enough to pay what he admitted to be due by the terms of the mortgage, this court would have made an order retaining such excess within its control until its proper application could be judicially determined. 'There was not the least occasion for the expense and delay of an appeal.

Moreover, the evidence heard on the petition and answer ■satisfies me that it is highly probable that if the complainant’s decree had been reduced before the sale to the amount above stated, the property would not have produced more than the amount to which it was reduced.

The result is .that the effect of the refusal to stay the sale was to produce the very fund which I shall order paid into court for the benefit of the petitioner and his creditors.

1902.

June 23. Amount of bid................................. $46,505 00

Less sheriff’s execution fees..................... 336 28

Received by complainant...................... $46,168 72

Amount due complainant — principal... $40,000 00

Interest from November 9th, 1901, to January 8th, 1902 ................ 2,800 00

$42,800 00

Interest thereon to June 23d, 1902.... 1,178 00

Costs ..................... $155 33

Interest thereon from January 18th, 1902, to June 23d, 1902 ..............’...... 4 08

- 159 41

- 44,137 41

$2,031 31


source: Caselaw Access Project

author: Pitney, V. C.

license: Public Domain

text:
    The Public Service Corporation et al. v. The American Lighting Company et al.
    [Submitted March 14th, 1904.
    Decided March 17th, 1904.
    Filed July 9th, 1904.]
    1. Corporations enjoying a gas franchise, and the complete or partial monopoly resulting therefrom, are bound to serve the public upon reasonable terms and at reasonable rates, and are similarly entitled to reasonable dealings from the public.
    2. A foreign corporation having no franchise within the state, being neither a citizen nor a householder thereof, the sole business of which is the furnishing of a patent gas burner, has no standing, in its own right, to demand and receive a supply of gas from a domestic corporation for any purpose whatever.

      3. "Where a gas company, having a franchise and virtual monopoly, demands of a city an unreasonable price for gas, the city may offer, a reasonable price; and, if the gas company refuses to furnish gas at that price, the city may obtain a mandamus, if the supply has not been commenced, or may sue in equity to enjoin the stoppage of a supply being furnished.
    4. A gas company cannot be compelled to furnish gas to a city without its being measured.
    5. The obligation of a gas company to supply a dwelling or tenement' with gas, and for that purpose to lay down a supply-pipe and set a meter, is subject to the limitation that there shall exist a reasonable expectation that the consumption of gas will warrant the necessary preliminary expenditure.
    6. "Where the proposal and contract of a successful bidder for street lighting are based on the lamp, and not on the cubic feet of gas used, a demand by such bidder that the company controlling the gas supply shall furnish gas by the cubic foot is not warranted by its contract with the city.
    7. A demand, conceding that it is on behalf of a city, by a foreign gas company having a contract with the city to furnish light for nine months, that the corporation controlling the supply shall furnish it with gas by the cubic foot, measured by a wholly unreliable standard, or else furnish and place its own meters, is unreasonable.
    8. A corporation engaging to furnish light to a city is charged with knowledge of its disabilities, arising from differences with the company controlling the gas supply, to fulfill the contract, and should have first made investigation and arrangements with such company.
    9. A corporation having a contract to furnish light to a city has no right to forcibly detach and remove burners used by the gas company, and attached to its pipes encased in the city’s lamp-posts, and to replace them with its own lamps, but should have accomplished its purpose in a legal manner, either by contract with the gas company or by enforcement of the city’s right to gas on reasonable terms. ^
    On order to show cause why inj unction should not issue. Heard on bill and affidavits on the part oi the complainants and answering affidavits on the part of the defendants.

      Mr. Frank Bergen, Mr. William D. Edivards and Mr. Frederich J. Fault's, for the complainants.

      Mr. Albert C. Wall, for the defendant the American Lighting Company.

      Mr. Robert Carey, for the defendant the city of Jersey City.
   Pitney, V. C.

The complainant, the Public Service Corporation, is the lessee for a long term of years, and in the possession as such, of the property of the other complainants, the Hudson County Gas Company and the Jersey City Gas Light Company.

The complainants own and control, and have been in the undisputed possession for many years of a gas manufacturing and distributing plant in the city of Jersey City, which distributing plant covers the entire city, and the companies are enjoying the franchise of laying and maintaining their gas mains under the surface of the streets of that city.

They have for many years supplied the householding inhabitants with gas for domestic use, and have also, for a like period of time, supplied the municipality with gas for street lighting purposes.

All gas for domestic purposes has been, and is, in accordance with common knowledge, delivered and sold by the cubic foot; the ascertainment of quantity being by gas meters placed in some convenient position on the premises occupied by the householder, where the same will be reasonably protected from injury by violence and also accessible to the agents of the company for the purpose of taking periodical “readings” thereof.

The lighting of the streets has been accomplished by annual contracts for lights of a certain candle power, furnished for certain hours according to a fixed schedule, varying with the season of the year, and paid for by the lamp and not by the quantity of gas consumed. But in the latter case the gas was turned on and off night and morning by the agents of the gas companies, so that they were able to control absolutely both the length of time the lights were burning and also the pressure of the flow of gas while burning.

It is proper here to say that the lamps were set in cast-iron lamp-posts owned by the city, but the gas was conducted thereto through ordinary gas pipes attached to the street main and leading from thence to the foot of the lamp-post and thence through the centre of the lamp-post by a “riser” to the top. This gas pipe and the lamp, or burner, were all the property of the complainants.

. The only check which the city had upon the companies was a right to test and determine both the intensity of the lights produced and the number of hours they were maintained.

The contracts with the city ran from December 1st to November 30th, and a new contract was made each year. For that purpose proposals for bids were annually put out and advertised. But, as the complainant corporations enjoyed a practical monopoly, there could, in the nature of things, be very little room for competition. This, however, as I shall show further on, did not compel the city to pay any price that the gas company might be pleased to demand by its bid. The fundamental and cardinal principle'being that all corporations enjoying a franchise of this character,- and the complete or partial monopoly resulting therefrom, are bound to serve the public upon reasonable terms and upon reasonable rates, so that neither the public is at the mercy of the corporations enjoying the franchise nor are the corporations at the mercy of the public. Their dealing must all be subject to the test of reasonableness on both sides.

The defendant the American Lighting Company is a corporation of the State of Maryland and has no franchise whatever in the State of New Jersey or in the city of Jersey City, nor does it pretend to have any. It is simply the proprietor of what it claims to be a peculiarly meritorious light-producing lamp, or burner, which it claims will produce a much greater amount of light from the same amount of gas than the burner heretofore in use by the complainants and known as the “Welsbach Burner.” By its affidavits it states that it has recently introduced its burners into several cities, including Baltimore, with great success.

This being its sole business, and, it not being either a citizen or householder of Jersey City, it has in my judgment no standing whatever in its own right to demand and receive from the complainants a supply of gas for any purpose whatever.

In this state of affairs the city of Jersey City, about the 1st day of December last, went through the usual process of making a contract for lighting its streets for the year intervening between December 1st, 1903, and November 30th, 1904. Proposals were made by the city in the usual form, calling for proposals to furnish street lights at so much per lamp.

It appears by statements of counsel on both sides, though not shown by the affidavits, that bids were made by both the complainant and the defendant the American lighting Company, which were rejected by the city, and fresh proposals on the same basis, viz., by the lamp, were asked.

A second set of bids were put in by the same parties with the result that the bid of the American Lighting Company was accepted, and a contract was entered into between the city and that company Maxell- 2d, 1904, for the lighting of the streets of the city at a certain sum per lamp.

I do not find, among the affidavits handed up, a copy of that contract; I find only the bid.

This contract for lighting, I understand, -expires on November 30th, 1904, and that the complainant corporation furnished the lights for the months of December, 1903, and January and February, 1904, at the old rates. So that though the bid of the American Lighting Company was somewhat less than that of the. complainant, yet, inasmuch as it was at the rate of so much per lamp per month, taking it from March 1st to November 30th, it is claimed by counsel for the complainants that it will in fact amount to a little more than the bid of the complainants for those months.

But this is a matter of no consequence.

As soon as the contract was signed, the American Lighting Company, claiming that it was satisfied that the complainants would not furnish it with gas, applied, on a bill and affidavits, to Judge Bradford, of the federal court, and obtained from him, on March 4th, which was Frida}1, an order to show cause, on the first Monday of April next, why an injunction should not issue in accordance with the prayer of the bill, which was to the effect that the defendants be restrained from discriminating between the American Lighting Company and other gas consumers in Jersey City, and from stopping the-present passage and flow of gas through said lamp-posts in Jersey City, and it contained interim restraint against such discrimination and against interfering with the passing and flow of gas to, in and through the lamp-posts situate in the streets, &c., and to the burners which are affixed thereto.

Under the protection of this injunction and the police force of Jersey Cit3r, the American Lighting Company proceeded at once, without stopping for the Sabbath, to detach the Welsbach burners and lamps owned by complainants from the lamp-posts of Jersey Cit}r, and to place instead thereof its own particular burner. All this was done against the protests of the complainants.

The latter applied to Judge Bradford, by telegraph, to be permitted to have an immediate hearing on the order to show cause, but were unable to procure the same, whereupon they applied to this court by bill, supported by affidavits, setting forth, briefh', the foregoing facts and praying that the defendants may be restrained from removing any of their gas lamps from their pipes in the said lamp-posts, and that the lighting company may be restrained from taking or using any of complainants’ gas until reasonable arrangements have been made for measuring, metering or ascertaining the quantity of gas used, and that it may be required to pay in advance therefor before using.

On presentation of that bill, this court made an order to show cause, dated March 8th, 1904, returnable March 14th, 1904, on flic defendants to show cause why an injunction should not issue according to the prayer of the bill, with interim restraint, against detaching any of the kmps of the complainants from the pipes in said lamp-posts, and from taking any of the gas belonging to complainants, without first causing the same to be measured.

On the return day affidavits were presented by the defendants, and upon these and statements made by counsel on each side, which were undisputed, the matter was submitted to this court.

I am entirely of the opinion that the defendant, the lighting compant', has no standing whatever, in its own right, to demand from the complainants a supply of gas, for the simple reason, above stated, that it is neither a householder nor a resident of Jersey City, and the obligation which is imposed upon complainants by reason of their enjoyment of a public franchise of laying mains in the streets to furnish gas, extends onty to residential citizens of the city and to the municipality.

It is quite absurd to say that any person who might happen to be walking along the street, and yet be destitute of any local habitation within the corporate limits of Jersey City, has the least right to demand a supply of gas from the complainants.

I shall assume, however, for present purposes, and for present purposes only, what is not conceded by the complainants, that the lighting company, by reason of its contract with Jersey City, is entitled to demand a supply of gas for street lighting, to the same extent, precisely, that the city itself would be if it should determine itself to undertake the task of supplying burners or lamps,, and of managing tire same and purchasing the gas from the complainants.

Fow the question is, what would be the right of the city under such circumstances ?

We have seen that the right to demand and the obligation to furnish gas must be subjected to reasonable terms. One of those terms is that a reasonable price shall be paid. But, as before remarked, the city is not at the mercy of the gas-producing company; for, if the latter demands an unreasonable price, the city may offer what it conceives to be a reasonable price, and in case the gas company refuses to furnish gas at that price, the city has its remedy in the courts, either by mandamus, where the supply has not yet been commenced, or in equity for an injunction, where such supply is being furnished, to enjoin its stoppage.

The last remedy was, to my own knowledge, enforced by the late Vice-Chancellor Van Fleet, many years ago, in a case of a supply of water for fire hydrants, and has recently been applied by this court in a similar case in a cause now pending and unfinished.

As a part of this fixing of a reasonable price, a necessary and essential element in tlie case of illuminating gas is tlie ascertainment, with, reasonable certainty, of the amount consumed.

That gas is usually and almost universally sold by the cubic foot is common knowledge, as is also the fact that machines, called gas meters, are in universal use fox that purpose.

The affidavits herein show that with the exception of the supply for street lights all gas supplied to consumers in Jersey City is measured by meters.

To hold that the complainants can be compelled to furnish gas to a city without its being measured, is to hold that private property may be taken for public use without just compensation.

But it is urged by defendants against the application of this' rule in the present case, that it is not the custom to measure gas burned for street lighting purposes, and that it has not been done by the complainants in Jersey City; and it is further said, in that connection, that tlie quantity of gas flowing through a given aperture in a given time may be ascertained, with reasonable certainty, and by that means the amount which the city would use fox lighting purposes be ascertained.

But the answer by the complainants to this contention is the following: They say that when they b3r contract furnish the light to the city by the lamp they burn their own gas and are directly interested in saving any waste thereof. They, by their own agents, turn it on, and are careful not to turn it on earlier than the contract requires, and that they can and do turn it off as soon as the contract permits. They have immediate possession and control of the cocks regulating the flow and they can and do see to it that no gas is permitted to escape and run to waste when the lights are not burning.

Then another element contained in the defendants’ proposition is of great importau.ee and must be noticed here, and that is that the amount of the flow of gas through an aperture of -a certain size depends not only on the size of that aperture, which may be and usually is uniform, but upon the amount of the pressure, which is not uniform, and this is an element which it is absolutely necessary to take into account when determining the amount of flow of gas through a given aperture. This is undisputecl and fundamental. It is also a -matter of common knowledge, and not disputed by the defendants, that the pressure of gas at’ any time acting upon a certain aperture depends, in a great degree at least, upon the whole number of apertures open at that particular time and giving vent to the pressure of the gas in the general system of the mains.

In illustration of this it is only necessary to call attention to the common phenomenon of the increase of flow, or what is called “blowing” of gas from an ordinary burner in a dwelling at that time in the evening when people in that dwelling, and other parts of the city or town, are about retiring and extinguishing most of their lights. *

An almost insuperable difficulty, then, in applying the rule of the size of the aperture, is the natural and necessary fluctuation in the pressure.

But, again, it is s-aid that notwithstanding this objection the complainants have hitherto furnished the street lighting without meters.

The answer, again, is that they have done so at a price which is doubtless sufficient to cover the contingencies due to those fluctuations.

But, then, it is shown by the affidavits of defendants that they have introduced their lamps in Baltimore and other cities, by contract with the gas companies, by which the amount burned is ascertained in a particular manner, which, as I read the affidavits, amounts to a series of experiments to ascertain how much is actually burned during a given period and applying the “average principle.”

The means so resorted to are not stated in the affidavits with sufficient explicitness to enable me to judge of their reliability. Moreover, it appears that the arrangements have been in existence for not more than a year or two, and therefore cannot be treated as having the endorsement of long experience.

But be that as it may, those arrangements were all by convention freely entered into by the gas companies without compulsion. Those companies had the right to make such contracts as they chose, and those cases, therefore, furnish no judicial precedent for upholding the present demand of the defendant lighting company standing in the shoes of the city.

But the defendant goes further, and asserts and argues that when called upon to furnish gas by quantity it is the duty of the complainants to furnish and maintain their own meters.

Let us look at that proposition for a moment.

Admitting such to be the general rule, let us inquire whether it does not still, in the present case, contain the element of unreasonableness. Must not the demand for measured gas be reasonable? To illustrate: Suppose a person should rent for the three summer months a vacant lot in Jersey City, and facing on a street in which complainants had a gas main, and should place thereon a tent or erect a rough-board shanty, and then should demand of the gas company to excavate the earth and lay down a service pipe leading to the tent or shanty, and place a meter to suppiy the same, all at its own expense. Would anybody say that such demand was reasonable? Would the obligation of complainants, arising out of their exercise of a public franchise, extend so far as to compel them to excavate the earth and lay down a gas supply-pipe to that tent or shanty, place therein a meter, without proper protection, for the purpose of supplying gas for three months to such a tenant, who might, after all, not use any gas ?

Suppose, again, a person should rent, from month to month, one room on the top floor of a many-storied building, which the owner had not thought fit to have furnished with gas pipes, and should demand of the gas company that it put in a pipe and “riser,” through premises not belonging to it, to supply a single gaslight to a tenant from month to month. Would such a demand be reasonable ?

In short, is not the obligation to supply a dwelling or tenement with gas, and for that purpose to lay down a suppty-pipe and set a meter, subject to the limitation that there shall exist a reasonable expectation that the consumption of gas shall be sufficient to warrant the necessary preliminary expenditure?

I think there can be but one answer to these questions.

The principle that the element of reasonableness enters into the practical application in each particular case of the obligation resting on the gas companies, was not seriously disputed by counsel of the defendants. But they say that whenever the city, which is a large customer, shall require that gas, to he furnished to it, or to its contractee, shall be paid for by the cubic foot, the duty rests upon the gas company to furnish its own means of measurement.

Let us consider the reasonableness of that proposition as applied to the present case.

By long usage, the complainants have furnished lights for the streets by the lamp and not by the cubic foot. All the apparatus for so furnishing street lights has been adapted to that mode. No provision has ever been made for furnishing or placing meters. Confessedly, it will be very inconvenient, if not absolutely impracticable, so to do. The city cannot, as does tire householder, furnish a safe location for the meter — at least it has not done so. I make this last remark because I am well assured that a lamp-post has been and can be inanufaetured which, shall contain within its -shell a chamber for a meter.

I say not only has the city furnished no facilities for the placing of meters, but in its proposals for bids for street lighting for the present year, it called for bids by the lamp and not by the cubic foot of gas burned.

The proposals of the successful bidder were by the lamp and not by the cubic foot of gas used, and so is its contract. The demand now made by the lighting company for gas by the cubic foot is a sudden demand, and entirely unwarranted by any authority from the city.

Therefore, I cannot hold that in demanding gas by the cubic foot it is standing in the shoes of the city.

But waiving that. Supposing, 'now, that the city were demanding gas by the cubic foot, would it be reasonable for it to do so without giving any preliminary notice to the gas company, and without a special arrangement as to the price per cubic foot, and without having provided a place, either in a new lamp-post or in a receptacle beneath the surface of the ground, for the meter ?

Would it be reasonable for the city, any more than for a private householder, to ask the gas company to furnish a meter for the supply of a single gas burner, though it burns an average of eleven or twelve hours a day ?

Would such a consumption be a sufficient consumption to make it reasonable for the gas company to furnish a meter and supply gas at the same rate per cubic foot that it is furnished to householders, where several gas burners are in use?

I think not. I think such a demand unreasonable, certainly so, unless the complainants can be assured that the use of gas by the cubic foot shall continue long enough to warrant the'initial expenditure for the installation of the meters.

Here we have a foreign company, which has a contract for nine months only, demanding that the complainants shall furnish it with gas by the cubic foot by a kind of measurement which I conceive and adjudge to be wholly unreliable, and therefore unreasonable, and asserting that if áuch measurement is not satisfactory to the complainants they must furnish and place their own meters.

This alternative, I consider, their contract with the city does not authorize it to make, and even if authorized by the city, it is inherently unreasonable.

One word more with regard to the defendant’s proposed mode of measuring. In the first place, as the defendant will not be burning its own gas, it will have no pecuniary interest to serve by saving the gas — by care in not turning it on too early and in not turning it off too late. It will not find it necessary to employ a great number of lamplighters and light-extinguishers to go from one lamp to another promptly at the stated hours to light and extinguish the lights, but may use a less number by starting earlier in the afternoon and completing the extinguishing later in the morning.

Another consideration is that defendant proposes to malee its profit in this transaction out of the capacity of its burner to make the greatest amount of light out of the consumption of the least amount, of gas. Its interest, then, will be to pay for as little gas as possible and to be sure to obtain, at least, the full measure of gas for which it pay's.

Again, the quality of the gas and its heat-producing power will come in question. If the light produced by defendant’s burner does not reach the standard for which it contracts and promises, the disposition will be to attribute the failure to the quality of complainants’ gas. These matters will be liable to give rise to continual disputes between, the parties, and show the importance of the defendant relying upon being able to induce gas companies to adopt its lamp upon its merits, as it seems to have been able to do in certain other cities, and to abstain from attempting to force it on a gas company by the means resorted to in the present case.

Again, counsel for the defendant admitted that their peculiar lamp is never entirely extinguished; that it is turned down to a very small flame in the morning and turned up in the afternoon, so that a match is never used after once lighting the lamp, and that this is accomplished by a pair of strings hanging down the side of the lamp-post. So that the lamplighter or extinguisher, while standing on the ground, has only to pull one or the other of these strings to do his work.

It was not stated that these strings were protected from handling by any chance passer-by, and I can imagine no mode of so protecting them upon an ordinary lamp-post; hence I see nothing to protect the gas company against having its gas wasted by the interference of a mischieviously inclined person.

It was hardly contended by counsel for defendant that it was reasonable to cast upon complainants the obligation to provide against the several chances of waste above mentioned by employing a force of watchers to patrol the streets and see how long the lights were kept burning, and that the gas was not allowed to burn full blast in the daytime.

It is asked, if the foregoing views are correct, how is the defendant Lighting company to fulfill its contract ?

To this I answer that the defendant must be charged with knowledge of its disabilities in that respect, and should not have entered into the contract without proper preliminary investigation and provision by convention with the complainants for its fulfillment.

It is further asked, what is the city to do, in the meantime, for light? To this it is answered, and I think well answered, by the complainants, that they are willing to continue supplying the city with gas upon the precise terms of its contract with the defendant Lighting company, and I advised an order, March 14th, 1904, providing for such continued supply. This arrangement seemed to be satisfactory to the counsel for the city.

It is further argued that this is a mere contest between the proprietors of the Welsbach burners and the defendant Lighting company as proprietors of its burners, which it claims to be superior to the Welsbach burners.

This may be so, but it cannot affect the rights of the complainants herein.

It is said that they claim to be the owners and lessees of the four hundred and eighty Welsbach burners which they had iirstalled and in use at the time of the intervention by the defendants. The desire of the defendants is to supersede the Welsbach burners and to install its own in place thereof, and before protection from this court could be procured it had succeeded in removing a large number of the Welsbach burners. I think the defendants were entirely unjustified in so doing.

The burners and the gas pipes to which they were attached, and which connected them to the gas mains, were all the property of the complainants. Their encasement in the lampposts of the city does not, in my opinion, result in their gift to the city nor to their dedication by the gas companies to a public use.

If the city desire to acquire the title to those gas pipes, they must take the proper methods so to do.

So with the Lighting company. If it wished to install its own lamps in Jersey City, it must either induce, in the ordinary way, the complainants to contract voluntarily with it for such use, or it must, standing in the shoes of the city, make reasonable arrangements with the complainants for the use of gas to supply them.

Yone of these conditions has been fulfilled, either on the part of the city or the defendant Lighting company.

For these reasons, I will advise an order that the restraint be continued until the final hearing of the cause.


text:
    Christian Buttlar v. Mina Buttlar.
    [Submitted July 2d, 1903.
    Decided January 11th, 1904.]
    1. A husband and wife, having an estate in lands by the entirety and living separately and having entered into an agreement whereby the husband was to receive all the rents and profits in consideration of his paying the wife a certain sum each month, were divorced from the bonds of matrimony by a competent decree. — Held, that the result of the decree of divorce was to change the estate to a tenancy in common, and that the agreement for support was no defence by the divorced wife against a suit by the husband for partition of the premises.
    2. The general rule iá that-no vested interest, as between husband and wife, is disturbed by a decree of divorce unless the instrument under which the vesting arose provides therefor.
    3. The fact that property once held by parties jointly was voluntarily conveyed by one to the other for the purpose of hindering and delaying the grantor’s creditors, and after those creditors were all satisfied was by proper conveyance restored to its original status, does not injuriously affect the right of the original fraudulent grantor to a partition of the premises.
    On final hearing on bill, answer and cross-bill and replication and proofs in open court.

      Mr. Marshall W. Van Winicie, for the complainant.

      Mr. John I. Weller, for the defendant.
   Pitney, V. C.

The facts displayed and the questions arising on the pleadings may be briefly stated as follows:

In the year 1894 the complainant and defendant, being husband and wife, were seized in a joint estate of two parcels of real estate in Hudson county, one on Malone street in the town of West Hoboken, and one on First street in the city of Hoboken.

At that time they entered into a contract, in writing, for separate living, dated January 31st, 1894, and printed in ex-tenso in Buttlar v. Buttlar, 57 N. J. Eq. (12 Dick.) 650. The effect of that contract was to give the husband the rents and profits of the premises in question during his natural life and to put him under obligation to pay his wife the sum of $75 per month. The length of time such payments should continue is not mentioned, but the wife agreed to take such sum in full satisfaction of all support and maintenance and all alimony whatsoever.

Some time subsequent to the decision of Buttlar v. Buttlar ■complainant brought an action against defendant for divorce on the ground of desertion, to which she filed a cross-bill against him for divorce on the ground of adultery, with the result that on March 24th, 1902, a decree for divorce on the ground last mentioned was made in favor of the defendant and against the complainant, which contains a reservation of the right of the defendant to apply for permanent alimony. Whereupon, on the 25th day of March, 1902, the complainant served upon defendant a paper in which he declared that he rescinded the contract above mentioned, stating, among other things, .as ground for his rescission that the agreement was made between the parties while they were husband and wife and in ■consideration of that relationship, and, further, because the agreement was made in consideration of the real estate being held between the parties by the entirety, which particular estate had been determined by the decree of divorce.

On May 6th, 1902, complainant filed his bill against defendant for a partition of the two pieces of property above mentioned, on the ground that the estate of the parties had been ■changed by the decree of divorce to an ordinary tenancy in ■common. iSTo mention is made in the bill of the agreement above mentioned and no relief is prayed against it.

The defendant, by her answer and cross-bill, admits in substance all the facts above stated and that the premises in question are now held between, the parties as tenants in common ns the result of the divorce.

She sets up in defence of the partition the contract of January 31st, 1894; alleges that the same is still in force between the parties and that by reason thereof the lands are not now subject to partition between the parties.

Thus far the questions raised by the pleadings are almost entirely of law. But the defendant proceeds, by her cross-bill, to set up what she claims to- be an equitable title to all the premises, and for that purpose she goes into the history of the married life of the parties from its inception, in which she-sets up facts and circumstances tending to show, and she charges the truth to be, that the property in question was all purchased and paid for with her individual funds, and that complainant, having no beneficial interest therein, compelled her by threats to have the title vested in their joint names, and asserts that under the circumstances he holds the title to the equal undivided one-half part thereof, standing in his own name, in trust for her, and prays a decree to that effect.

All the facts upon which this theory is based are denied by the complainant in his replication, and in it he points out and claims that the contract of January 31st, 1894, was rendered inoperative and of no binding effect by the decree of divorce and by the notice of rescission thereof.

That the effect of the divorce was to destroy the estate by the 'entirety was admitted not only in the answer of the- defendant but in the argument, and seems to be the result not only of the authorities but of sound reasoning.

The effect of the divorce upon the contract of January 31st, 1894, raises a question of more difficult solution.

First. Is it still binding? Second. Does it give the wife an equitable lien upon those premises?

But laying aside for the present the first question, let us look at the next question, whether the contract of January 31st, 1894, gives the defendant any lien, legal or equitable, on the interest of the complainant in the property in -question for the monthly payment provided for therein.

The language is that the defendant, in consideration of the covenant of the complainant to- make to her the monthly payment of $75, “does hereby agree to and with her said husband that he shall be entitled to receive, during the term of his natural life, all the rent, income and profits of the property.”

Now, the right which the wife had to give in those premises was settled in the case of Buttlar v. Rosenblath, reported in 42 N. J. Eq. (15 Stew.) 651 (at p. 657). The wife has simply a right to one-half of the rents and profits, and those, and those only, she pledged to her husband.

That right the complainant has deliberately renounced both in the written rescission, to which reference is above made, and also in filing his bill for partition. I am not aware of any authority for the proposition that a tenant in common of an equal undivided share in lands who also holds an encumbrance on the other share, cannot prosecute a suit for partition where he waives his lien upon the other share.

I can find nothing in the agreement of January 31st, 1894, which gives the defendant any lien upon complainant’s share for the monthly payment provided therefor. I think that the existence of the agreement, even if the complainant has by it a continuing lien upon defendant’s share to secure his liability thereunder, furnishes no defence to his suit for partition. He prays no relief against it, nor does he pray in the alternate that if it be held binding upon him that he is entitled to a lien upon the defendant’s share to protect himself against it.

This view renders it unnecessary to determine whether the complainant’s obligation under that agreement has been discharged by the divorce obtained against him by defendant.

It may be observed, however, that the general rule is that no vested interests are disturbed by a decree of divorce unless the instrument under which the vesting occurred provides therefor. Dixon v. Dixon, 23 N. J. Eq. (8 C. E. Gr.) 316; S. C., 24 N. J. Eq. (9 C. E Gr.) 133; Lister v. Lister, 35 N. J. Eq. (8 Stew.) 49; Charlesworth v. Holt, L. R. (1873), 9 Exch. 38; 2 Bish. Mar., D. & S. § 1654 et seq.

One ground upon which complainant relied in argument as to the validity of the contract was that, being himself about fifty-nine years old and defendant about sixty-six years old, his right of survivorship, arising out of the estate by the entirety, had a distinct value, and that this valuable right was destroyed by the action of the defendant.

The principal contest between the parties was that raised by the defendant, setting up an equitable title to the whole fee of the premises in question.

To this counsel for complainant pointed out in argument as a complete answer that the defendant, by entering into the contract of Jaxruary 31st, 1894, and now still asserting its 'validity, distinctly ratified and affirmed the title of the complainant in the premises. Perhaps I might rest the case on that point alone, or, perhaps, I might decide it in favor of the complainant on the merits and give as my reason simply that I had gone through the evidence carefully and had come to the conclusion that the defendant’s case wholly failed, and say that while I found both parties to be industrious, thrifty and saving, and to have contributed, as such people under such circumstances usually do, in proportion to their several ability to the little fortune accumulated by them, and while the complainant distinctly declared that defendant had been during nearly the whole of their married life a faithful, economical helpmeet, and that he was entirely willing that she should have •one-half of this property, yet I foimd, as a matter of fact, that the complainant was air unusually energetic man and possessed of unusually good business judgment in-business affairs and was the principal creator of the fortune.

Nevertheless, I deem it my duty to state somewhat in detail the result of my study of the evidence. (Discussion of evidence omitted.)

The net result is that the two properties here in question are held between the pax-ties in equal shares, and the defendant has beside her share therein nearly $5,000 worth of property, which came from the same source as the properties here in question, so that she has, and must continue to have, much more than an equal one-half of their joint earnings.

The evidence shows clearly three matters — first, that the source of the money was threefold: profits in the bakery business, profits in the horse feed business, and profits on the judicious investments of money in real estate. For all these the complainant is entitled to the principal credit. Second, that from the start up to the time that the Clinton street property became vested in the name of the defendant alone the complainant handled all the money and had every opportunity to-place it to his own credit in bank, but voluntarily placed it to the joint credit of himself and defendant. Third, the defendant repeatedly, in the course of her evidence, testified that the reason why she resisted, as far as she did resist, complainant’s-entreaties to reinvest the property in their joint names, was that' she was afraid that he would run in debt and be sued and that she would be obliged to pay it, as she had the Rosenblath debt. She nowhere, when off her guard, put herself on the ground that she was the meritorious owner of the property.

The fact that the property once held by the parties jointly was voluntarily conveyed by the complainant to- defendant for the purpose of hindering and delaying complainant’s creditors does-not prevent a court of equity from favoring its return to the original owner. I had occasion to express my views on this subject in the case of Pitney v. Bolton, 45 N. J. Eq. (18 Stew.) 639 (at p. 643). The language I there used was that “our innate sense of jirstice is always gratified when- we find the rules of equity as applied to any particular case squaring themselves with what is honorable and just between man and man,” and I cited as an illustration the case of Davis v. Graves, 29 Barb. 480, which was this in brief: A debtor, desiring to hinder and delay his creditors, conveyed his property to a third party, who-held it for'a considerable time as a fraudulent grantee. Subsequently the fraudulent grantee became himself considerably indebted, and in order to prevent his creditors from seizing on the property held in trust by him for the fraudulent grantor reconveyed it to the fraudulent grantor, and the court refused to assist the creditor of the fraudulent grantee in applying the property so conveyed back and forth to the payment of the debt of the fraudulent grantee. The decision in the case against Bolton was' affirmed in the court of errors and appeals for the reasons given by me in the court below. 46 N. J. Eq. (1 Dick.) 610.

My conclusion is that the defendant’s cross-bill is without merit and must be dismissed, with costs, and that the complainant is entitled to a decree for partition. I will advise a decree accordingly.