text:
    The State of New Jersey, at the relation of the department of the health of the State of New Jersey, v. The Chemical Company of America, Inc.
    TSubmitted April 10th, 1919.
    Decided May 9th, 1919.]
    1. inhere a company manufacturing- chemicals at a point on a river, five miles above the intake of water' supplied to a city for drinking purposes. discharges factory refuse into the river, and deposits such refuse on tlie river bank, such company will be enjoined from so doing at the suit of the department of health of the .state. Actual pollution of the water by the refuse need not be shown, as the statute imperatively prohibits the deposit of sueli refuse in portable streams or upon the banks thereof.
    2. Banks and rivers defined.
    On bill, &c.

      Mr. Thomas F. McCran, attorney-general, Mr. William New-corn and Mr. Grover O. Richmcm, assistant attorney-general, for the state.

      Mr. John K. English, for the defendant.
   Backes, V. C.

The defendant is charged with discharging factory refuse into the Rahway river, and with depositing such refuse on. the river bank above the point from where the city of Rahway takes its water supply, in violation of the statute of March 17th, 1899 (Comp. Stat. p. 5811), as amended by chapter 229 of the laws of 1918. P. L. 1918 p. 836. That act provides that—

“No excremental matter, domestic, factory, workshop, mill, or slaughter-house refuse, creamery or cheese factory waste, garbage, dye stuffs, coal tar, sawdust, tank bark or refuse from gashouses or other polluting matter”

shall be discharged into any river, stream, &e., or placed or suffered' to remain upon the banks thereof, above the point from which any municipality obtains its supply of water for domestic use, and provides the remedy of injunction.

The defendant manufactures chemical products at its plant located at the confluence of two streams, called for convenience north and south branches, which empty into the Railway river five miles and more above the Rahway intake. When the company began operating in 1915 all the liquid waste of the factory was emptied directly into the south branch, and this continued for two years until the department of health interposed upon the complaint of Rahway. The defendant then took measures to clarify the refuse by eliminating the more objectionable properties, the solids, and to store and retain the effluent upon its own premises. Elevated settling basins were installed, and a lagoon was constructed, and later a second and connecting lagoon, into which the effluent from the settling basins is discharged. These remedial steps were taken after consulting the health authorities of the state, and,, as I understand, with their approval. The progress made and methods pursued were, it seems, unsatisfactory to these officials, and before the work was completed the attorney-general filed this bill. • At the hearing last May'pollution of the streams was established, but as it was not appreciable at Rahway, and the defendant was furnishing to the federal government an. exclusive product for the prosecution of the world war, the inconveniences of the parties, in the trying circumstances, were considered, and an injunction was withheld, contrary to the peace-time rule laid down in Hennessy v. Carmony, 50 N. J. Eq. 616. The bill was retained with leave to bring the matter-on for further hearing if the dyke and other devices then under construction failed.of their object. After the armistice the state brought the cause to a further hearing in February last, complaining that the pollution continued, notwithstanding the efforts of the defendant to abate it. At that time the dyke of the outer or second lagoon had been finished; a moat, of a depth lower than the lagoons and skirting the dyke, was dug and connected to sumps (catch basins) to intercept seepage, and the sumps were fitted with automatic pumps to pump the seepage back into the lagoon. - More than that, before the second hearing came to an end, the bed of the south branch was filled up and the stream diverted, so that its nearest point to the lagoon is one hundred and fifty feet and more instead of fifty feet awa3, and scientific experiments to neutralize the effluent were under way.

Despite this earnest endeavor the lagoons are not watertight, and some of the waste content still leaks into the streams polluting them, not to any great extent, it is true, and may be not noticeable, or even chemically discoverable, at Rahway, as the defendant contends. A part of the easterly wall of the first lagoon is made up of a pervious railroad embankment through which the liquid seeps into a narrow and shallow run called Flemmeris ditch that empties into the north branch. Personal observation, bottle samples and analyses of the brook water satisfy me of this. It is also evident that the lagoons are fissured, and that the diversion of the channel of the south branch furnished but. a temporary remedy. Before the south branch was filled up and diverted the liquid waste entered the stream subterraneously at a point known as the “spring hole” in considerable volume, and in the natural course it is only a matter of time when the effluent will find an outlet in the new bed.

That the refuse, the wash of chemical compounds, is deleterious to health and objectionable because of odor, taste and discoloration is proved by the facts that all fish life in the immediate vicinity of the factory was destroyed during the first years of operation, when the flow of the waste into the streams was unrestrained, and that at that time it could be smelled and tasted in the drinking water of Rahway. Its color is orange to dark brown.

It is not a good plea that the pollution is not now perceptible at Rahway because of mitigation in quantity and quality of the effluent; nor that the more obnoxious of the polluting matter is nitrobenzol which to taste and smell is likened unto oil of bitter almonds, and sometimes used as its substitute bj bakers ■and confectioners in their wares, or that it is benzalclehyde; nor that to take a poisonous dose one would have to drink more of the polluted water than would be required to drown in ; and it is a feeble and irrelevant argument that the inhabitants of Rahway would suffer no inconvenience if their filtration plant were of an up-to-date type and properly managed. These extenuating circumstances advanced by the defendant would be, perhaps, admissible if the cause were for the suppression of a common law nuisance, but as this suit is in aid of the police power of the state they are wholly beside the issue. The aim and policy of the legislature, as evinced by the statute, is to secure to populated communities wholesome drinking water, and, in vindicating the sovereign right of the state to the purity of its streams, it last year adopted measures more emphatic than before by placing its ban upon specific contaminations and things in general that are polluting. As the act originally read it prohibited the discharge into, or depositing upon the hanks of, streams furnishing potable water to- municipalities, of

“sewage, drainage, domestic or factory refuse, excremental or other polluting matter of any kind whatsoever which, either by itself or in connection with other matter, will corrupt or impair, or tend to corrupt or impair, the quality of the water of any river, brook, &e., * * * or which will render, or tend to render, such water injurious to health.”

This involved in the trial of every offence, not only the fact that the proscribed foreign substances were being discharged into the streams, hut also the determination by the courts that they corrupted or impaired or tended to corrupt or impair the quality of the water, or rendered or tended to render it -injurious to health. State Board of Health v. Diamond Mills Paper Co., 63 N. J. Eq. 111; affirmed, 64 N. J. Eq. 793. In the amendment of 1918 the legislature itself determined that factory refuse and the other mentioned wastes and castoffs are contaminating, and peremptorily forbade their discharge into streams and their deposit upon the banks thereof.

The defendant is violating the law in both of these aspects. As has been pointed out, there is drainage of the refuse into the streams, at least into one of them, and it is of no moment that it has not been or cannot be traced to spigots in Rahway. The pollution aimed at by the statute is at the point of discharge into the stream. State Board of Health v. Diamond Paper Mills Co., supra; State v. Wheeler, 44 N. J. Law 88. The vast body of liquid waste stored on the banks — the lagoons cover an area of approximately five acres and the average depth of the liquid conient is two and one-half feet — is a standing menace. Overflows after heavy downpours of rain, break in the dyke from wash or lateral pressure, wastage through the fissures in the lagoons, and its ultimate escape into the new bed of the south branch, are ever-threatening dangers. And these do not comprise all the reasons for apprehension. There is constant seepage at various places in the dyke, as T personally observed, that flows, generously, through the moat into the sumps, and in prolonged and heavy rains the contrivances for catching the waste and pumping it back into the lagoons are of little utility, as was recently experienced, as I understand, when the moat overflowed carrying the- refuse into the brooks. In the circumstances, the confidence expressed by the defendant that it can successfully retain the refuse in the lagoons, and its assurance that it will, to the immunity of the water, cannot be considered. The statute condemns not. only actual pollution but pronounces as imperatively against the threat and menace of it upon the banks of streams.

The defendant makes no point of it that the effluent stored on the land near the banks was not “placed or suffered to remain upon the banks’’ of the streams, within the meaning of the statute. The attorney-general moots the proposition in his brief. I entertain no doubt tha,t the legislature did not use “banks” in the literal sense and according to the strict definition of the lexicon, and I assume that defendants’ counsel considered the question not open to argument.

“The bank is the outermost part of the bed in which the river naturally flows. In the words of the Digest, That is considered to be bank which contains the river when fullest.’

“The bank may he thus rightly defined as that line or ridge of earth which contains the river holding the natural direction of its course.” Houck R. 3, 5.

“The banks of the stream, are the elevations of land which confine the waters to their natural channel when they rise to the highest point at which they are still confined to a definite course and channel.” Farnham W. R. 1462.

“The banks of a. river are those elevations of land which confine the waters when they rise out of the bed; and the bed is that soil so usually covered by water as to be distinguishable from the banks, by the character of the soil, or vegetation, or both, produced by the common presence and action of flowing water. But neither the line of ordinary high-water mark, nor of ordinary low-water mark, nor of a middle stage of water, can be assumed as the line dividing the bed from the banks.” Howard et al. v. Ingersoll, 13 How. 381, 427; Sun Dial Ranch v. May Land Co., 61 Ore. 205.

“A river is a running stream of water pent in on either side by banks, shores or walls; a fresh water river, like a tidal river, is composed of the alveus, or bed, and the water; but it has banks instead of shores. The banks are the elevations of land which confine the waters in their natural channel when they rise the highest and do not overflow the banks; and in that condition of the water the banks, and tire soil which is permanently submerged, form the bed of the river.” Gould W. §§ 41, 45; State v. Faudre, 54 W. Va. 122, 125.

The legislative scheme to purify the streams of the state contemplates the exclusion of two avenues of corruption — that 6f direct discharge of polluting matter into the water, which necessarily includes depositing on the bank from which it is bound to fall or flow into the stream, and that of depositing it so near the banks as to constitute a threat or menace of ultimately reaching the water, contaminating it. Now, to give to the word “banks,” as used in the statute, a construction other than its popular signification — the immediate drainage region of lands contiguous to streams — would render the design of the second feature of the act wholly abortive. It would be playing with words and trifling with legislative mandate to hold that discharges of polluting matter on the bank anywhere below the brink would be violative of the statute, while a deposit on the bank an inch away from the brink would not be. When Chancellor Walker had State v. Town of Phillipsburg, 83 N. J. Eq. 422, under consideration, he seems to have had no doubt that, garbage dumps on lands immediately adjacent to the bank of the Delaware' river, the refuse of which, in normal times, by reason of the natural slope of the ground, found its ways into the waters of the river, and in case of freshets was washed directly into the waters of the river, violated the provisions of the act. The decision turned upon another ground, but it is significant that in that liotly-contested case, the point was passed siib silentio.

At the second hearing there was testimony of human excremental deposits at a number of places on the banks of the two streams. This offence was not alleged and from aught that appears there were no grounds for it when the bill was filed. The deposits were accidentally discovered by the state’s witnesses in their search for evidence of waste pollution, and upon notice to the defendant the offending feces were removed. _ At the beginning of the argument I told counsel to dismiss this ground of complaint from further consideration because tire occurrences were incident and isolated. It appeared that the defendant had provided ample sanitary accommodations for its employes and that the infractions were due to their predilection or perversion of which the defendant was not cognizant.

I will advise a decree enjoining the defendant from discharging its factory refuse into the north and south branches of the Rahway river (by whatever names they may be known) and from placing or suffering its factory waste to remain on the banks of these streams. The injunction upon the discharge of waste into the streams will go into effect at once and the injunction against storage will be effective on October 1st, 1919. The defendant has assiduously and in good faith sought to abate the pollution, and, as it has prospects of neutralizing the waste, it ought to be given reasonable opportunity to develop the treatment. The injunction may stipulate that the escape of waste by seepage will not, in the meanwhile, lie considered a violation of the injunction, provided reasonable care is taken to prevent overflow and to keep- the dyke, moat,- sumps and pumps in repair and working condition, and provided the defendant forthwith takes measures to prevent seepage through the railroad embankment into Elemmer’s ditch by extending the moat northerly to the end of the old or first lagoon.

The complainant is entitled to costs.


source: Caselaw Access Project

author: Backes, V. C.

license: Public Domain

text:
    George W. Sarson v. Carmelia Maccia.
    [Decided June 3d, 1919.]
    1. Where the record of a case exhibits the identity of the parties, the cause of action and the subject-matter, the essential elements of a plea of res adjudicata are exhibited; the forum, the form of the remedy and the nature of the xelief are immaterial.
    2. If after a decree in equity a party shall proceed at law for the same matter, eqixity will restrain him by injunction; such suit at law is treated as a contempt of court.
    3. Where a court of equity has jurisdiction over a transaction on account of alleged fraud, it does not lose jurisdiction because of the equities of an innocent pxxrchaser; it may refuse to exercise its juiisdiction agaixxst such higher equities.
    On bill, &c.

      Mr. Joseph M. Roseberry, for the complainant.

      Mr. Charles O. Giffoniello, for the defendant.
   Backes, V. C.

The complainant seeks to restrain the defendant from prosecuting her action in the supreme court to recover damages for an alleged deceit, on the ground that the cause of action has been determined by this court on its merits, adversely to the defendant, and is res adjucHcata.

The defendant sold to the complainant her property in Newark, and took in pajnnent $1,100 in cash, a promissory note of one Park for $800, and a certain mortgage of $1,500. The mortgage was a second mortgage and was barred and wiped out by a foreclosure sale under the first mortgage shortly after the deal was consummated. The defendant in her suit at law alleges that the mortgage was worthless, and that the complainant, knowing it tó be so, with intent to cheat and defraud her, falsely represented it to be “a gilt-edged security” for $1,500, and that by reason of such false representation she was-induced to part with her property.

In a former suit in this court for a rescission of the contract . and restoration of her property, the defendant by her bill alleged, after stating events leading up to it, that the complainant represented to her that the second mortgage was second only to a first mortgage of $5,000 held by a building and loan association, and the installments and interest thereon were paid up to elate; that the promissory note was good ancf the maker was the owner of several pieces of real estate in Essex and Union counties and was financially able to pay it; that in truth the installments and interest on the first mortgage were then greatly in arrears, and the mortgage was under foreclosure; that the maker of the note was an absconder and heavily indebted; that the note and second mortgage were worthless; and that the complainant, well knowing that the representations made by him were false and fraudulent, 'did, by his deceit, connivance and fraud, induce the defendant to- part with her property without his paying her a fair, bona fide and valid consideration. Issue was taken on the charges of fraudulent representations, and the cause came before Vice-Chancellor Stevens for trial. He dismissed the bill after a hearing, reciting in the decree of dismissal that no misrepresentations had been made, nor fraud practiced upon the defendant by the complainant. While the bill did not specifically set up the cause of action now alleged in the sxrit at. law, viz., that tire complainant, with intent to cheat and defraud the defendant, falsely represented the second mortgage to be a gilt-edged security for $1,500, it is clear that it was one of the issues tried, and was treated by the vice-chancellor as raised by the pleadings, and that the decree of dismissal turned upon its, decision. Counsel has furnished a transcript of only a portion of the testimony, and the vice-chancellor’s oral conclusions; but from the little before me, and the opinion, it is plainly to be seen that the transaction, in all its details, was laid before the court; that the question of fraudulent representation was uppermost, and that the case was decided, upon its merits. In the opinion, after reciting the history of the negotiations for the properties, the rice-chancellor said: “The charge of the bill ié that the $1,500 mortgage and the Park note were worthless, to the knowledge of Mr. Sarson, and that he fraudulently transferred what he knew to be worthless securities, representing that they were good. That is the allegation of the bill, and the whole case, as I understand it, turns upon the proof o^that allegation.” After a discussion of the testimony bearing upon this point he continued: “As I said before, the whole case turns upon the question whether or not Mr. Sarson, at the time when be handed over these securities, represented, either by word of mouth, or otherwise, they were good, when he knew them to be worthless. There is no evidence at all that at the time when he turned them, over he knew them to be worthless. On the contrary, the evidence seems to be that he supposed them to be good. I cannot believe that any man in his senses would knowingly buy at' their face value securities when he knew them to be bad. -So, it seems to me, that the very' foundation of the case fails on this vital question.” And, in conclusion, he said: “The suit must fail for three reasons — first, for the reason that there is no proof that at the time when Mr. Sarson handed over these two securities he knew they were worthless; second, for the reason that Mr. Benker is not shown to have been other than a bona fide purchaser for value without notice, and third, for the reason that whatever action the parties might have maintained in February or March they lost by not beginning proceedings until the following August.” The first of these reasons necessarily implies the decision, in the light of what had already been said, that Mr. Sarson did not misrepresent the second mortgage, for, had misrepresentation been established, his knowledge of its untruth would have been immaterial in equity. Equity grants relief if the representation be false, in fact, even though not consciously made to defraud. DuBois v. Nugent, 69 N. J. Eq. 145. To sustain an action at law for deceit, the representation must be shown to have been not only false, in fact, but known to be false and made with fraudulent intent. Cowley v. Smyth, 46 N. J. Law 380. The second disposed of the éharge that- Benker, to whom Sarson had conveyed the property acquired from the defendant, took with notice of the alleged fraud, adversely to the defendant. And the third held the defendant to he in laches. *

The record of the case exhibits beyond question all the essential elements of a plea of res adjudícala — the identity of the parties, the cause of action, and the subject-matter. The onty difference between the suit in equity, decided, and the action at law, pending, is the forum, the form of the remedy and the nature of the relief. In the former, had the defendant been successful, the recovery would have been in specie; in the-latter the award would be damages pro lanío of the property lost. This difference does not prevent the decree from operating in estoppel. 23 Cyc. 1116, 1169. Nor, in order to raise the estoppel, is it necessary that the pleadings in the first suit should have counted upon the precise false representations set up as the cause for action in the second. It is enough if the matter was triable in the first suit, and that it was actually litigated and adjudicated. Here the same misrepresentation forms the basis of each suit, and the primary inquiry, vital to a recovery in either, is, Was the mortgage misrepresented? A test of the identification of the cause of action is, Would the evidence, adequate to a recovery in the second suit, have been sufficient to support the first? 23 Cyc. 1158. In the equity suit the thing controverted was whether the complainant misrepresented the nature and character of the security of the second mortgage, hoAvever the misrepresentation may have been phrased; and the deterniination of that question by the court must be regarded as a finality. The defendant threw her lot with the court of-chancery, and after an exhaustiA'c, investigation, and upon principles more favorable to her than the law courts could afford, the cause, which she again desires to litigate, Avas determined against her; and by that, determination she is hound. Marsh v. Masterton, 101 N. Y. 401, contains many examples of the rule of ' former recoveries, but we need not go beyond our own books for illustrations of the application of the doctrine. In City of Paterson v. Baker, 51 N. J. Eq. 49, this court decreed the surrender of two city bonds, to be canceled, based upon the conclusiveness of a judgment in an action at law, brought by Baker, to recover on the interest coupons of the bonds. The suit had been determined against him on the ground that he was not the bona fiifa owner of the bonds. Yiee-Chancell or Van Fleet, as usual, illuminated his'learned discussion of the rule of res adjudícala by the citation of eminent authorities. A reference to a principle in one of the eases cited, that of Cromwell v. County of Sac, 94 U. S. 351, will serve to demonstrate the applicability of the rule to the present ease. After stating that where the second suit is based upon the same claim or demand involved in the first, judgment in the first, must be treated as an absolute bar, Mr. Justice Field said: . “But where the second action is upon a different claim or demand, but between the same parties, the judgment in the prior operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered. In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always lie as to the point or question actually litigated and determined, for it. is only upon such matters as were actually litigated and determined that the judgment is conclusive.” And by way of further illustration may be added the language of Chief-Justice Shaw in Sawyer v. Woodbury, 7 Gray 499 (at p. 502) : “It is not necessary that the action in which it (the judgment.) is found, and that in which it is relied on as an estoppel, should bo of the same kind, or for the same cause of action. If a question upon the execution or validity of a deed in fee be put in issue in an action of trespass, and expressly found by the jury, such verdict and judgment upon it may be relied on as a conclusive evidence of such fact, on the trial of a real action or writ of right, between the same parties, for the same estate. It has bocome a fixed fact between these parties for all purposes.” These cases hold the judgment to be an estoppel'though the suits involve different claims; a fortiori, is a judgment a bar to a second suit involving the same cause of action, only seeking different relief. See In re Walsh's Estate, 80 N. J. Eq. 568.

Counsel for the defendant questions the jurisdiction of this court to restrain the suit for deceit, contending that the complainant has a complete and adequate defence at law. Res adjudicaste» by a decree in equity is, doubtless, pleadable in the action at law, but the party holding the decree is not driven to that defence. It is the settled law of this state (and I quote’ from the opinion of this court in Putman v. Clark, 34 N. J. Eq. 532, affirmed by the court of errors and appeals) that: “If, after-, a decree in equity, a party shall proceed at law for the same matter, equity will restrain him by injunction. Such suit at law is treated as contempt of court, for it is gross oppression to vex another with a double suit for the same cause of action.” Lead. Cas. Eq. 1319 ( 635); Story Eq. Jur. 889; Joyce Inj. 1040; Simpson v. Hart, 1 Johns. Ch. 91 (a); Washington Packet Co. v. Sickles, 24 How. 333; 5 Wall. 580.

Another point was suggested — just that — which'ought not to be passed without comment. The proposition advanced is, that the decree is not a bar to the action at law because the court of chancery was without jurisdiction to grant the relief prayed for, even had- it found that fraud had been perpetrated, because of the equities of an innocent purchaser. At the time the defendant filed her bill to -rescind the contract the complainant had parted with the' land to Benker, a bona fide purchaser. This fact was set up in the bill and the good faith of the purchaser was challenged. The vice-chancellor, after deciding that there was no fraud, and denying relief on that score, held further that Benker was an innocent purchaser, and for that reason, also, relief must be denied. The fallacy of the point lies in the failure to distinguish between jurisdiction and the exercise of jurisdiction. The court, unquestionably, had jurisdiction, for it could and would have granted the -relief prayed for liad the charge of fraud, and notice thereof in Benker, been-made out. If the fraud had-been-established and notice had not, the court would have refrained, not for lack of jurisdiction, but because it would not exercise its jurisdiction as against the higher equities of an innocent purchaser. Here the two issues, indispensable to a recovery, were tried and determined; and both or either is res adjiodicata, and pleadable as the exigency may demand. --

The complainant is entitled to a perpetual injunction.


text:
    Robert N. Keely et al. v. Henry M. Black et al.
    [Submitted June 10th, 1919.
    Decided July 10th, 1919.]
    1. A secret profit realized by a president of a company from an undertaking to deliver the corporate control of the company, enures to the corporation.
    2. Where the president of a company clandestinely dealt with corporate assets for his private gain, he is culpable, and not personally entitled to the profits of the transaction; and it makes no difference whether or not the transaction was independently -profitable to the company. A trustee is liable for secret profits even though the transaction from which they arose benefited the trust.
    On bill, &c.

      Mr. Martin V. Bergen and Mr. Thomas P. Curley, for the complainants.

      Mr. Harold B. Wells, for the defendant Henry M. Black.

      Messrs. Collins & Corbin {Mr. Gilbert Collins of counsel), for the defendant Farmers Telephone Company.

      Mr. Carl M. Abromelt, for the defendant the New York Telephone Company.
   Backes, V. C.

This suit is brought by stockholders of the Farmers Telephone Company to recover for the companj, from Henry M. Black, its president, secret profits made by him in securing -the transfer of certain property rights of the company, and the control of the company, to the New York Telephone Company and the Delaware and Atlantic Telegraph and Telephone Company, known as the “Bell Companies,” in breach o£ his trust.

The facts are not in dispute. The Farmers Telephone Company is capitalized at $100,000, divided into two thousand-shares of the par value of $50, and was a dividend paying corporation. Black owned upwards of five hundred shares, and controlled others belonging to members of his family; the remaining shares were held by farmers and merchants of the vicinity in which the company operated, lie was the largest individual stockholder, and had been president of the company for many year-s. The company’s telephone system covered an area of approximately four hundred and fifty square miles, connecting communities in. Burlington, Monmouth and Ocean counties, locally and with “long distance,” and it had the exclusive right, by contract with the Bell companies, of furnishing telephonic communication within this district. In June, 1917, just after we entered • the war with Germany, Wrightstown, within the district, was selected by the federal government as a cantonment — Camp Dix — and the Farmers company installed telephonic service, and engaged with the military official in charge of the camp to provide for future needs and to that end arranged with a leading supply company to furnish the equipment. Shortly afterwards the Farmers company was notified by the supply company that the Bell companies would install the system ai Camp Dix, and that the equipment would be furnished to those companies. Without notice or apology the ’phones of the Farmers company were disconnected and ’phones of the Bell companies took their place. And this is the explanation: Black secretly agreed with- the Bell companies to release them from their exclusive- grant to the Farmers company of the territorial* rights to Camp Dix, and to deliver to them at least fifty-five per cent, of the capital stock of the Farmers company on or before August 1st, then next, in consideration that the Bell companies would purchase his holdings and additional shares up to fifty-five per cent, at par. The Bell companies further agreed to pay Black $4-5,000 if he procured to he delivered to them within one year all the shares at par, or $15 per share if over eighty per cent., or $10 per share if over seventy-five per cent., or $5 per share if over fifty-five per cent, be delivered. The arrangement'was at first verbal. Black employed crude, but by no means original, methods to accomplish his purpose, lié browbeat the twelve directors of the Farmers company into handing over their shares by the threat that he would so manipulate the company that it would never again pay a dividend, and they believed him: and then he salved them with a promise of $5 per share above par if they would accede, of which, they have not, as yet, seen the color. Tie sent his emissaries with the same bug-a-boo to the remaining stockholders, with the result that he gathered in all the stock except eighty shares held by the complainant Dr. Keely, who refused to be intimidated. "When Black secured the holdings of the directors, some four or five hundred shares, he caused lo be reissued to each of them a single share to colorably qualify them as a board, but he was careful to exact an assignment in blank of the certificates. He then, under date of June 29th, signed, as president, ah agreement between the Farmers company and the Bell companies releasing the exclusive rights to Camp Dix, and, under date of July 2d, he executed another personally (it is fair to assume they were executed simultaneously), wherein he and the Bell company reduced to writing their verbal arrangement that Black was to obtain the release and deliver to the Bell companies the control of the Farmers company. The agreement recites that it is entered into by the Bell companies, relying solely upon the truth of representations made by Black as to the Fanners company’s legal status, and its physical and financial condition therein enumerated in detail, and that Black was the holder of at least fifty-five per cent, of the capital stock, and that he was in position to' acquire more and was willing to sell it to the Bell companies. By the “first” section Black agrees to sell and the Bell companies agree t’o purchase on or before August 1st, 1917, fifty-five por cent., or one thousand one hundred shares, for $55,000,

“provided and upon condition (a) that the Farmers Telephone Company shall have duly released, in writing, so much of the territory sub-licensed to it by the respective Bell companies under the sub-license agreement or agreements now in force between the Farmers Telephone Company and the Bell companies, as is within the proposed United States army cantonment, and its environs, contemplated to be establislied or which may hereafter be established, at or near Wrightstown, New Jersey, and that said Farmers Telephone Company shall have formally consented, in writing, to the furnishing by the Bell companies, or either or both of them, of telephonic service within the territory so released, and has released and discharged the Bell companies severally from any further obligations under or by virtue of said sub-license agreement or agreements with respect to the territory so released except so far as said territory thereby shall become a part of the territory operated by the Bell companies, and said Farmers. Telephone Company shall have agreed in writing to the use by the Bell companies, or either or both of them, of the poles, lines, plant and equipment of the Farmers Telephone Company within the territory so released, at the usual rental or attachment charges therefor

and (b) that the authorization of the board of public utility commissioners to the transfer be obtained. By the “second” section the Bell companies agree, provided the one thousand one hundred shares have been delivered and transferred according to the terms set forth in the “first” section and “the provisos of said section have been fully met and complied with,” to purchase the remaining shares within one year at $50 per share, if procurable. In. the “third” section Blade covenants, warrants and guarantees the representa.tions made in the recital of the contract, and further that “(I) During any time or period affected by this agreement no dividend shall be declared or paid, nor any distribution of capital or surplus made or attempted to be made by the Farmers Telephone Company.” By the “fourth” section the Bell companies agree to pay Black $45,000 if he shall have within one year delivered all the stock at $50 per share, “and all the provisions and conditions of this agreement 'shall .have been carried out and complied with,” or $15 a share if more than eighty per cent., or $10 per share if more than seventy-five per cent., or $5 per share if more than fifty-five peícent., -of the stock shall have been delivered and transferred. At the time Black executed these agreements he had, of course, everything fixed for the ratification of the release by the Farmers Telephone Company. The directors were then mere “dummies” to whom he presented it on July 11th, and they, withoiit any fore-knowledge of it, or of the part it played in the stock-sales agreement, of which they knew nothing, although they ■suspected Black was profiting heavily, perfunctorily confirmed it. Tlie $-15,000 goal was blocked by Dr. Keely’s unyielding attitude, but the scaled-down bonus, amounting to $28,635, was paid to Black when he delivered up one thousand nine hundred and nine shares.

We need look no further than the Avritten agreements for proofs plenary that the bonus was paid in part for the release and in part for the control of the company. The main thing the Bell companies sought, bargained for and got through Black’s conduct was the surrender by the Banners company of its ex-elusive right in the camp> for which they paid him instead of the company, but, nevertheless, in conscience, to the use of the companjg $28,635. The contract of July 2d leaves no doubt of this. In the “fourth” section it is repeated that the moneys were to be paid only in the event that, among other things, “all the provisions and conditions of this agreement shall have been carried out and complied with,” and the most prominent of these is the provision relating to the release. The other consideration for the bonus Ayas the control of the company. A secret profit realized by a director from an undertaking to deliver the corporate control of his company, enures to the corporation. 4 Fletch. Cyc. lit. “Corporations” § 2321; 2 Thomp. Corp. § 1237; McClure v. Law, 161 N. Y. 78; Heineman v. Marshall, 117 Mo. App. 546; Porter v. Healy, 244 Pa. 427. In either aspects of the case Black is culpable. Complainants’ counsel characterize the transaction as bribery of the president to sell out the company, and they may be right, but it is not necessary to resort to such harsh denunciation in order to call him to account. It is enough that it appears, as it does, unmistakably, that Black, while president of the company, and in fiduciary relation to it and the body of stockholders, clandestinely dealt with corporate assets for his private gain. The established policy of the law is that a trustee shall not make a penny-piece of personal profit out of his trust, and the rule, based upon this salutary policy, is inexorable, and the courts tolerate not the least encroachment, whatever the circumstances may be. The duty of a fiduciary first and all the time is to his trust. It is not only foremost, ■ but his self-interest must be entirely eliminated. It would be 'a difficult task to find in the books a principle more uniformly upheld and rigorously enfoieed than the one that a. trustee shall not enrich himself by the use of his trust. The authorities are collected in 2 Thomp. Corp. § 1233 et seq.; 4 Fletch. Cyc. tit. “Corporations” § 2303 et seq.; Kelsey v. New England Street Railway Co., 62 N. J. Eq. 742; Barry v. Moeller, 68 N. J. Eq. 483; Goodbody v. Delaney, 82 N. J. Eq. 140; Comm. T. I. & Tr. Co. v. Seltzer, 227 Pa. 410.

It is claimed, and not denied, that the terms of the contract of June 28th, whereby Camp Dix was. released, were highly advantageous to the Farmers Telephone Company, and it is therefore urged on behalf of Black that he is not liable for tho profits because, forsooth, they were not made at the expense of tho company. This begs the question. It may he assumed that the bargain was beneficial to the Farmers company. The testimony is to that effect. It would have cost the company $50,000 to install flic telephone system at the cantonment, and it was questionable whether the revenues would have justified the outlay; and it was also an open question whether the traffic arrangement under the contract would not he the more profitable of the two schemes. But whether the contract was or was not advantageous to the Farmers company is a. matter entirely irrelevant to the question of Black’s accountability. A trustee is liable for secret profits, even though the transaction from which they arose benefited his trust. 4 Fletch. Cyc. tit. “Corporations” § 2307; 2 Thomp. Corp. 1234. The cestui que, trust is not only entitled to a'part; but to all the benefits.

Tt is also possible that the stockholders, individually, may recover from Black for deceit. The authorities are collated in the notes to section .2564 of 4 Fletch. Cyc. tit. “Corporations.” That possibility is not, however, involved in the proposition here presented and decided. — that a president of a, corporation cannot use corporate property nor his office for private gain.

I will advise a decree in favor of the Farmers Telephone Company for the amount received by Black from the Bell companies in excess of $50 a-share, with interest. If there is any question as to the exact amount I will hear further testimony.

The complainants are entitled to costs.


text:
    Ann Isabel Smith, by Frank S. Kelley, her next friend, v. Harry H. Pond et al.
    [Submitted June 17th, 1919.
    Decided July 15th, 1919.]
    1. A gift to be effective in perpetuity must be charitable exclusively.
    2. Where a gift is to the trustees of a church, the income therefrom to be used “for support of the church or such benevolent purposes as the trustees of said church shall direct,” the power to use the fund for “such benevolent purposes as the trustees shall direct” embraces objects not charitable, and brings the gift within the rule" against perpetuities.
    On bill, &c.

      Mesxrx. Lum, Tamblyn & Colyer, Cor the complainant.

      Mr. Herbert O. Bartlett, for tbc executors.

      Mr. William. Bhner Broten, Cor the defendant the First Methodist Episcopal Church of Vineland.

      Mr. Thomax F. ’Medran, pro xe,' fop the attorney-general.
   Backes, V. C.

The question propounded is. Does the following bequest create a valid perpetual trust for public charity?

“Twenty-second. I order and direct mv executors to sell at either public or private sale my home property now occupied by me and situate on the north side of Landis avenue between East and Valley avenues. Vineland, New Jersey, consisting of buildings and five acres of land, and I do hereby give and bequeath to the trustees of the First Methodist Episcopal Church of Vineland, New Jersey, the amount of the net proceeds of said sale of m3' home. The said church trustees to hold the amount received in trust nevertheless as an endowment fund. Said endowment fund to be safely invested and the net income arising therefrom shall be used for support of' the church or such benevolent purposes ns the trustees of snitt church shall direct.”

The italics axe used to emphasize the point upon which the discussion hinges. The bequest is contained in the twenty-second clause of the will of. Anne Beaumont, deceased. The executors have sold the land. The bill is filed by the residuary legatee, a lunatic, by her next friend, thereunto duly authorized, for a construction of the bequest, and a declaration that it is void for uncertainty and in violation of the rule against perpetuities and a decree that the executors hold the legacy as a part of the residuary estate.

As I read the paragraph of the will, the trustees were given discretionary power to do either one of two things, to devote the entire income of the fund to the support of the church or wholly to such benevolent purposes as they might select; or, perhaps, they may allot it between the two sots of objects. To which of the twoi sets of objects the testatrix intended the income to go, or if to both how much to either, is left in uncertainty. The trust to the use of the church is charitable and not within the rule against perpetuities, but the alternative use to "such benevolent purposes as the trustees -shall direct” embraces objects that are not charitable and is within the rule. A gift to objects charitable in their nature, or to charity generally, to be appointed at the discretion of the trustees, is sufficiently certain and will be enforced in equity. Equity will compel the trustees to exercise their discretion, or, upon their failure to act, equity itself will administer the trust, supplying the trustee and defining the objects, and, when necessary, will administer it according to tire doctrine of cy pros-. But a gift to be effective in perpetuity must be to charity exclusively and must be so indicated by the donor, although the selection of the objects of the charity may be delegated to the discretion of the trustees. If the trust be to rises charitable or to uses not charitable, in the discretion of the trustee, promiscuously and unapportioned, it will fail for want of certainty. Equity is powerless to' compel the trustee to exercise his discretion favorably to the lawful use as against: the direction of the donor that he may exercise it in favor of a use not countenanced by law, and equity itself is equally powerless to apply the trust to the lawful use in the face of the donor’s intention that it may be applied to one not lawful. A trust to such mixed uses is void. This is the established doctrine, and 1 am bound by authority to apply it to tlie bequest in hand and to declare the trust invalid.

In Norris v. Thomson's Executors, 19 N. J. Eq. 307; affirmed, 20 N. J. Eq. 489, the testator empowered his wife by her last will and testament, to give and devise a certain portion of his estate “among such benevolent, religious or charitable institutions as she may think proper.” The bequest was held to be void because it was vague and indefinite, and was not sustainable as a. gift to charity because it was to “benevolent, religious or charitable institutions,” benevolence having a wider meaning than charity in its legal signification.

In De Camp v. Dobbins, 31 N. J. Eq. 671, the gift was to the North Reformed Church of Newark, in trust, to irse the fund to “promole the religious interests of the church and to aid the missionary, educational and benevolent enterprises to which said church is in the habit of contributing.” The church bad been in the habit of contributing to certain enterprises which were charities. The gift was upheld in an opinion delivered by Chief-Justice Beaslej-, who also spoke for the court of errors and appeals in. Thomson’s Executors v. Norris, in which lie pointed out the distinguishing- features of the two cases. He said: “It is urged that this entire trust cannot he said to be charitable, within the legal signification of that term, inasmuch as tlie word ‘benevolent/ by its natural force, takes in objects and purposes that are not charities. That this term has this latitudinarian meaning was, upon full consideration, decided by this court in the case of Norris v. Thomson’s Executors, 5 C. E. Gr. 489. That exposition went on the ground of the intrinsic meaning, and the unchecked foim, of the term, for on that occasion it was considered that there was nothing present tending to hem in or narrow its import. As the word ‘benevolent’ is admittedly broader in its meaning than, the word ‘charitable’ in its technical sense, I am unable to comprehend how the decision in question could have been other than it is, unless upon th.e inadmissible assumption that, when there is no guide to the testator’s intention but his language, the court is possessed of the arbitrary power of altering such language. It will be found, 1 think, in almost all the decisions that when .these expressions have been taken in any sense but the technical or popular sense, respectively, there has been something in the context justifying the particular interpretation.” * * * “In this will the words in question clo not depend on their intrinsic qualities alone for their signification. The facts shown clearly demonstrate the sense in which the testatrix rased these terms. Tt does not seem to me that the matter has been left in the least un'certainty. It appears in the case by the proofs that this church has been in the habit of making donations to certain enterprises and objects, such as the foreign and domestic missions, the Bible society, &c., all of which enterprises are charities in the legal sense of the term. When, therefore, this will declares the trust, and directs the property to be used, ‘to aid the missionary, educational and benevolent enterprises to which the said church is in the habit of contributing,’ the will itself provides a standard by which the word ‘benevolent is to he measured. The fund is not to be used to aid any benevolent enterprise, but: only benevolent enterprises of a certain defined character, and they are charities. The word ‘benevolent’ is thus, by the context and the subject-matter, cut down into legal dimensions.”

In Hyde’s Executors v. Hyde, 64 N. J. Eq. 6, the gift was to executors in trust “for such religious, charitable or educational or other purposes as they may deem advisable.” The gift was declared to be void because of the addition of the words “or other purposes.” Chancellor Magee remarking that “the clause, looked at by itse] f, clearly expresses the intent to permit the trustee to devote the fund, if they chose to do so, to purposes other than those which are educational or religious or charitable.” ’

Tn Hegeman’s Executors v. Roome, 70 N. J. Eq. 562, the gift was to the testatrix’s husband “for the purpose of making such distribution among religious, benevolent or charitable objects as he may select.” In declaring the trust ineffective Vice-Chancellor Bergen, said: “A bequest to benevolent, religious or charitable institutions without qualification has been so often held to he void by the courts of this state as to plaee the question beyond successful argument. . Citing tlie cases from which I have quoted.”

In Van Syckel v. Johnson, 80 N. J. Eq. 117, the fund was to executors in trust to use the income for the care of graves .(not a charity) and for the payment of any deficiency in the salary of the pastor of a named church (a charity). Vice-Chancellor Walker (now chancellor) held that, because there wasra mixing of charitable uses with objects not charitable the bequest- was void.

There is nothing in the will other than what is contained in the twenty-second clause above quoted to indicate the intention of the testatrix. With an earnest desire to sustain the gift T have carefully searched the context of the clause for something to limit the word “benevolent” to a purpose strictly charitable, but without success. Counsel point out as significant of the charitable intentions of the testatrix that the gift was to- the church eo nomine that the “church trustees” were to hold the fund, and that it was to- be held as an “endowment fund;” and I have considered these incidents in connection, with the third section of the Religious Society act (Comp. Stat. p. 4308), which, enables church trustees to receive and hold legacies for the use of the congregation, but they do- hot impress me as of importance, in view of the discretion given to the trastees to use the income- for benevolent purposes. They are, of themselves, too feeble, it seems to me, to restrict the- broad meaning of benevolence; and, as for the statute, the limited power thereby vested in church trustees cannot, be read into- the will to circumscribe and limit the uses otherwise declared by the testatrix. And further, I cannot allow that the testatrix intended the fund as an, endowment of the church — and in this, such charitable benevolences as the church, under its regulations, is called upon to support — for, had that been her aim, the primary bequest to the church, without more, would have accomplished her purpose To give such a construction to- the clause wo-uld be to entirely ignore the- bequest upon trust with the uses declared to the support of the church or to benevolences-, as- the trustees may decide, which, of course, is inadmissible.

Testimony was admitted 'to show that the church, under its discipline, contributes regularly to home and foreign missions and other worthy causes that are legal charities; that they are known in the church literature as benevolences; that the testatrix was a devout member of the church and familiar with its mies and heaself was -a liberal contributor to them. These facts, it is contended, show the sense in which the executrix used the terms benevolent and fix with certainty the objects of her bounty and bring the case within the doctrine of De Camp v. Dobbins. In that case the testatrix nominated the objects of her benevolence, and, upon the evidence being let in to identify them, they -were found to be charities. “The will itself,” said the chief-justice, “provides a standard by which the word ‘benevolent’ is to be measured.” In the present ease there is no guide to the intention of the testatrix except the word “benevolent.” Now, if wo assume that the facts brought out were all within the knowledge of the testatrix, where is there anything in the will to show that she intended to confine “benevolent” to those charitable benevolences to which she and the church were accustomed to contribute? The intention of the testatrix must be found in the will. It cannot be established aliunde. ■

Counsel further contend that the gift should be upheld as a charity because the delegation of power to the trastees to designate the objects was in the alternative; that the use of the disjunctive “or” permits them to ignore the gift to benevolent purposes and enables them to perforar the trust consistently with the law by using the entire income for the support of the church. I fail to see any force in the argument. It seems to me to be utterly immaterial whether the disjunctive “or” or the copulative “and” was used, as it was in Van Syckel v. Johnson, supra, which case counsel endeavor to- distinguish. The determination of whether the gift is a valid charity depends upon the intention of the testatrix, as expressed in the will, and if it is not found there, the contrivances of the trustees, cannot supply the deficiency. I am referred for authority to the text in 11 Corpus Juris 330, where; after stating the principle, that a gift fails as a charity where purposes charitable are mingled with those not charitable, it is said that a

“class of cases exists where there is a general overriding trust for charitable purposes, hut some of the particular purposes to which the fund may he applied are not strictly charitable, or one of two alternative modes of application is invalid in law. In such cases the court will give effect to the general charitable trust, but the trustees are restricted from applying the fund -to the purposes or in the manner which is objectionable.”

The text is supported by the authorities cited. Judge Gray, in Jackson v. Phillips, 96 Mass. 539 (on p. 556), expresses it in this manner: “When, a charitable intent appears on the face of the will, but the terms used are broad enough to allow of the fund being applied either in a lawful or unlawful manner, the gift will he supported, and its application restrained within the bounds of the law,” and he quotes from and cites leading English cases that illustrate this secondary rule of interpretation. A cursory reading of the authorities found in the foot-notes to Corpus Juris and in Judge Gray’s opinion will readily disclose the inapplicability of the rule to- the will under consideration. If we keep in mind that the trust and not the gift is in the church — that is, that the gift was not to the church as a charity that the bequest is not complete, and that the testatrix confided to the trustees to supplement her will, by writing into it the objects of the gift, charitable or non-cliaritable, in their discretion, we experience no difficulty in reaching the conclusion that a charitable intent as to the whole fund does not appear on the face of the will. If the gift had been to tlie church to be devoted to its charities and benevolences^ of which some might not be charities, we would have a familiar example of a general overriding trust for charitable purposes. For other illustrations see the cases in the foot-notes to Corpus Juris.

The result that I have reached, upon principle and authority, is not to my satisfaction, for I am of the impression that the testatrix understood benevolent, to be synonymous with charitable, and it is regrettable that her wishes should be frustrated by the inadvertent use of an inept term. However, it is the court’s duty to- construe wills, not to make them.

The complainant is entitled to .a decree according to the prayer of her bill.


text:
    William A. Shawell v. Grace V. Shawell et al.
    [Submitted June 30th, 1919.
    Decided July 23d, 1919.]
    Where a life tenant of real estate, which was encumbered by a mortgage to a building and loan association, which also held shares of its own stock, the property of the life tenant’s deceased wife, as additional security for the mortgag-ed loan, paid dues to the building and loan association on isuch stock which dues will ultimately be applied to extinguish the mortgage indebtedness, he is entitled to be subrogated as to the shares of stock to the extent that he has made or will make payments thereon, and also when the association applies the dues paid on the stock in satisfaction of the mortgage, his right to subrogation as to the mortgage will then .be completo, and the mortgage must then be transferred to him to be realized out of the mortgaged premises.
    On bill, &c.

      Mr. Clarence D. Meyer, for the complainant.

      Mn Samuel Jloestler, for the defendants.
   Backes, V. C.

The complainant and his wife, by their combined efforts, accumulated a little, which found éxpression in two dwelling-houses, one on Grier avenue and the other on South. Broad street, in .the city of Elizabeth, the titles to which were in the wife at the' time of her death. She left a will by which she devised to her husband the rents, issues and profits of her real estate upon “condition that he pay all' the taxes, assessments and charges accruing against the same, and make all the repairs necessary to said properties,” and after a. general and special bequest she gave the remainder of her estate to her executors in trust, to be divided among seven of her eight children and an infant grandchild, all of whom, together with the executors, are parties defendant. The executors were given power of sale, and under this power, consented to by the husband as required by the will, have sold the Grier avenue house, the net proceeds of which — $4,000—thej' have a,t interest which they pay to the complainant. The Broad street property is encumbered by a $3,000 building and loan mortgage given by the husband and wife. The wife held fifteen shares in the loan, which, with the mortgage, was pledged to the association to secure the debt, and upon which she had, up to the time of her death, paid the monthly installments of $30 — $15 for dues and $15 for interest —a total for dues of $1,200. Since then the complainant has paid the installments, which for clues, amount to $600, and he is continuing to pay them.

The bill is filed to subrogate the complainant to the rights of the building and loan association -in the mortgage security pro tanto the amount he lias paid for clues, and such clues as he -will be called upon to pay from time to time hereafter until the shares mature; for an accounting of income on the $4,000 fund, the proceeds of the Grier avenue property; and for the recovery of $1,500, the amount of a check the complainant turned over to his wife in trust, as it is alleged. The right to an accounting was withdrawn because the income had been paid in full;- and at the conclusion of the hearing I decided that the $1,500 check was a gift by the complainant to his wife; so that the only question remaining for decision, upon which counsel asked leave to submit briefs, is whether the complainant is entitled to be subrogated. The first thing that I encounter is that the building and loan association is not a party to the suit. A favorable decision, cannot bring effective relief unless the society is joined and becomes bound by the decree. On the assumption that it will be brought in, I will proceed to decide the point. The complainant’s status is that of a tenant by the curte? — a life tenant. He took nothing by the will of his wife. What she professed to give he already had by operation of law, and the charges she imposed were only those that the law imposes, and so it seems that the will may be laid aside. In the consent given by the complainant to the sale of the Grier avenue house, he stipulated that he would “take care of the encumbrances, assessments and charges 'against property No. 409 South Broad street, Elizabeth, New Jersey, in the same manner and to the same extent as if property No. 510 Grier avenue, Elizabeth, New ,Terse}', had not been sold, and. he was receiving the rents, issues and profits thereof,” and, as this added nothing to his legal burthens, that, too, may be laid aside as unimportant. Defendants’ counsel'concedes the applicability of the principle of law that a life tenant is not obliged to pay the principal of mortgage indebtedness, and that if he is compelled to do so to protect his estate, he is entitled to be reimbursed through subrogation, hut he contends that the payments made by tire complainant were on the shares of the building and loan association, now the property of the estate, and not on account of the mortgage debt, and, as a corollary, that the payments were voluntar}', and, on familiar principles, not recoverable. Now, taking the law to be as declared by Vice-Chancellor Reed in Sudbury v. Merchantville Building and Loan Association, 57 N. J. Eq. 342, that “it is entirely settled that payment of dues upon the stock is not a payment upon the mortgage debt, and does not, ipso facto, work an extinguishment pro lanío of the mortgage,” and that the installment payments on the shares were not pari passu in reduction, of the mortgage debt, and that the mortgage remains unimpaired until the shares mature, it by no means follows that the payments were voluntary, and that the complainant is not entitled to stand in the shoes of the loan association. The fact that the complainant in order to protect his life estate in the mortgaged premises from foreclosure has been and will be compelled to pay the full amount of the monthly installments, in default of the remaindermen contributing their half towards the principal, proves conclusively that he was not a volunteer. And as to the relief: While it is true that as between the shareholder and the association the payment of clues is to-be treated as in discharge of the shareholder’s liability on his subscription to the stock, the compulsory payment by the complainant nevertheless entitles him to an equity in the shares; and as the shares and the mortgage together, constitute the security for the debt, and as the payment in full of the shares trill automatically discharge the mortgage, ^ so far, at least, as the association is concerned, his right to subrogation will at that time reach out to the mortgage. In other words, the complainant’s right of subrogation presently extends only to the shares, hut when the association applies the dues he will have paid on the shares, in satisfaction of the mortgage, his right to subrogation to that security will then be complete. A decree may be entered upon the association being brought in, with proper words to charge the shares and the mortgage, that the complainant has an equitable lien upon the shares-, and is entitled to subrogation to- the- amount he has paid for dues, and for such amount as he shall hereafter he compelled to pay: and upon the maturing of the shares, and the liquidation thereby of the mortgage debt, that the mortgage be transferred to- the complainant to be realized upon out of the mortgaged premises.

The complainant is entitled to costs against the defendants other than the executors, the guardian for the infant defendant, the infant and the loan association.


text:
    Elizabeth B. Mason v. Home Real Estate Company.
    [Submitted July 1st, 1919.
    Decided July 28th, 1919.]
    1. -Possession is presumed to be in the holder of the legal tine to land, and a decree must go to him unless the defence of adverse possession is made out, clearly and positively, by a preponderance of evidence.
    2. In suit to quiet title to a strip of land fronting- about four feet on a street, and extending back about forty-one feet between the bouses of complainant and defendant, evidence held to show that defendant had not established adverse possession beyond a certain point, which included only one-lialf of the strip in dispute.
    On bill, &c.

      Messrs. Swackkamer & Bird (Mr. Winfield B. Angleman of counsel), for the complainant.

      Messrs. Godinglon & Blaiz, for the defendant.
   Backes, V. C.

This is a bill to- quiet, the title to a “Y”-sha.ped strip of land fronting four feet plus, on Watchung avenue, Plainfield, and extending forty-one feet plus, between houses of the complainant and defendant, called the Mason and Stevens houses. It was formerly a part of the lot of one Pound, the predecessor in title of Stevens. In 1844 Pound conveyed the strip to his.next-door neighbor, the predecessor in title of Mason. In 18'66 he sold his house and lot and conveyed it by the description of the original survey, failing to except the strip, and by that description, through mesne conveyances, paper title has come to the defendant. Mary S. Stevens, the grantor of the defendant, in 1882, purchased and occupied the premises, including the locus in quo, it is alleged, until 1910, when she sold to the defendant. The documentary and record title is in the complainant, Mason. The defendant claims title by adverse possession.

The possession is presumed to be in the holder of the legal title, and the decree must go in favor of the complainant unless the defence of adverse possession is made out, clearly and positiveljc by a preponderance of the evidence. Licari v. Caar, 84 N. J. Law 345. The actual possession of tíre owners of the respective properties was delimited, up' to a few years ago, by an ancient picket fence between the two houses, standing when Mrs. Stevens bought in 1882, and which she kept in more or less repair during her ownership, but of which all reliable trace lias now disappeared.» That it was on the title-boundary line from the apex of the triangular strip to the rear of the lots is admitted. The decision turns upon the location of the fence in its relation to the locus in quo, and as to that the evidence is hopelessly conflicting. The complainant’s witnesses place it at eighteen inches to two feet from the Stevens house at the street lino, while the defendant’s witnesses say it was four feet ¿way. The ]louse is within an inch and a half of the “Y” at the street line, and in the rear-, at a point ten feet about the apex of the “.V,” is within five inches of the title-boundary line of the two properties. The effect of the complainant’s proofs is to put the fence practical^' through the centre of the “V,” and that of the defendant’s on the division of the lots as originally surveyed. Little reliance can be placed on the recollection of the witnesses as to where the fence stood, expressed in foot measurement. All is mere approximation. Mental measurement of space or distance between seen objects is, at best, nothing but guess work; and when based upon impression fathered by a dim recollection of the distant past, is most precarious, yielding gracefully according to fancy or conviction. There is in the case, however, certain undisputed facts and permissible inferences that lead me to believe that the complainant’s approximation is more nearly correct. Whether the house was built before or after the strip was sold does not appear, but the map before me shows the facade parallel with the avenue to be at right angles with the side which substantially parallels the near line of the “V,” and it would seem, therefore, that the house was built before. The fence was far enough away from the Stevens house to permit’ of a person standing comfortably in the space between, at least in the front part; but the space was not so great as four feet, and this, E conclude', partly from Mrs. Stevens’ own basis of estimation. She testified that the last visible monument of the fence was a post that; stood in the street line, .which fell away through rot some years ago, and which, she says, had on it at the top a cross-piece four feet in length that reached from it to the house-, to which it was nailed. Now, if allowance be made for the overlap, on the post and on the house, it cuts down the distance by just so much, whatever it may have been, and to that extent discredits the defendant’s claim to the entire strip. Then, too, as is conceded on all hands, the space between the Mason house and the fence was used by the former owners of the complainant’s property as a driveway for coal and ash wagons, and the distance between: the house and the triangular strip was only six feet six inches, hardly sufficiently wide for wagons of the average width — six feet over all. The only possible motive for buying the strip by the complainant’s predecessor, it seems to- me, would have been the widening of the driveway. The evidence is, as I have said, that the fence ran along the title lines of the two properties, from the extreme rear’ to the point of the strip, and it may be that originally it extended in a continued straight line to the street, but that it did, and so continued during Mrs. Stevens’ twenty-eight years of occupancy, is not established by the defendant. Wiry the purchaser of the strip- should have fenced in only a part of it, if he did, or why lie should have fenced it in at, all, is beyond ascertainment at this time — sixty years afterward. 1 would not venture an opinion as to where the fence was. I am not called upon to do that.

The decree which I shall advise may be safely rested on these grounds: Mrs. Mason, the complainant, concedes that the fence was ■ from feighteen inches to two feet from the Stevens house. I shall accept the greater, distance plus one and a half inches. Beyond that the defendant has not established adverse possession by a preponderance of the evidence; and I assume, upon the hypothesis that the fence was built at that point, that it was erected in a direct line to the- apex; that Mrs. Stevens entered into possession in 1882, in good faith, believing that her lawful title extended to the point of the fence-; and that such possession was actual and exclusive, adverse and hostile, visible and notorious, continued and uninterrupted for more than twenty years. Foulke v. Bond, 41 N. J. Law 527. The decree will settle the title to one-half of the strip- in the defendant, the other half in the complainant.

No costs.


text:
    Bella Olitsky v. Celia Estersohn et al.
    [Submitted July 8th, 1919.
    Decided August 21st, 1919.]
    1. Where O. bought real estate at a bankruptcy sale in his own name, which sale, was afterwards confirmed by the bankruptcy court, and the trustee ordered to execute a deed to the purchaser, and afterwards the trustee executed a deed to O. and his wife, on the death of O. the wife takes the property as surviving tenant by the entirety.
    2. Under the evidence in this case — I-Ield, that the inserting of the name of the wife in the deed was not procured by her through “fraud, coercion and importunities" practiced upon her husband.
    On bill, &C.

      Mr. Martin P. Devlin, for the complainant.

      Mr. Aaron V. Dawes and Mr. TIarry Helier, for the defendants.
   Backes, V. C.

This bill is to assign dower and for arrears. Harry Olitsky died leaving the complainant, his widow, and five children by a former marriage, the defendants. He died intestate seized of twenty-eight improved properties in which it is admitted the complainant is entitled to dower and to a third of the income since his death. By way of counter-claim the defendants seek an accounting of the rents of a property at Broad and Beatty streets, Trenton, conveyed by the trustee in bankruptcy of one AVineberg to Harry Olitsky and Bella-Olitsky, his wife, the legal title of which is now in the complainant by survivorship'. The counter-claim assails the validity of this conveyance, in so far as it includes the name of the complainant, on the- ground that she procured it to be made “through fraud, coercion and importunities” practiced upon her husband, and on the further ground that the deed was void as to her because it was not made in conformity with the' order of 'confirmation of the bankruptcy court. At the bankruptcy sale the property was struck off to Harry Olitsky, and was so reported to the court and confirmed, and the trustee was ordered to execute and deliver a deed to him. Instead of following this direction, the trustee conveyed to him and his wife. Besides a prayer for an accounting for the rents, and one for general relief, the counter-claim prays “that it may be decreed that the said Bella Olitsky by fraud, coercion and importunities in violation of her duties, procured her said husband to have inserted her name in the said deed,” and “that this court may, according to. the statute in such cases made and provided [whatever that means] decree and determine that the said Bella. Olitsky did not take any estate, interest or title under'the deed made by Harry Klagg, Jr., trustee of Morris Wlneberg to Harry Olitsky, and that the said deed may be so accordingly construed.” There is no prayer for an ultimate disposition of the deed, and the ambiguous prayers, which I have quoted, appear to be merely by way of inducement to the prayer 'for an accounting of the rent as an offset i» the rents collected by the defendants. At the hearing I intimated doubts as to the propriety of the counter-claim, but as the parties regarded it as a direct attack upon the deed, calling for a decree setting it aside as to the complainant, the case was tried and submitted, upon that theory, botlr sides agreeing to waive all irregularity, and that it should he treated as an original bill if necessary.'

1. “The fraud, coercion and importunities” particularized in the counter-claim are that Olitsky was fifty-five to sixty years old, and his wife thirty; that he “was sick, and had been so- for some time, to such a degree that he was dependent upon his said wife, Bella Olitsky, for wifely administration and services in his greatly weakened condition;” that the complainant was his second wife “and was greatly jealous of the children by his first wifethat from the time of her marriasre she “was continually importuning him to make over his property to her and to disinherit his said children, and she was so greedy and so importunate in her demands that the said Harry Olitsky, on account of her greed and attempts to get hold of his property, became greatly distressed and was worried to such an extent that he several times stated that he could hardly restrain himself from taking his own life;” that “the said Bella 01itsl<y, at the time her said husband was depressed, and in addition to the unwifely conduct above detailed, knew that her husband was wrought up to a high state of nervous tension, from the pressure of his debts and liabilities, and in order to hamper him in meeting his obligations, and with a view of getting possession of this piece of property, refused to assist him in any way in raising money on his property unless he gave in to her extortionate demand in putting this property in their joint names; which property was the most valuable piece which the said Harry Olitsky owned, worth more than all his other property put together;” and that “it was by and through the fraud, coercion and importunities of the said Bella Olitsky, under the circumstances above detailed, that sire procured the deed to be made for the above tract of land in the joint names of herself and husband.” Yague and indefinite as these allegations are. to make out a case of duress, the proofs are even less satisfactory.

Olitsky was forty-two, not fifty-five to. sixty years of. age, and his wife, a widow, was 'thirty-eight, when they were married July 4th, 1916. He was not sick. He had stomach trouble, but otherwise was healthy, physically and mentally. He died of pneumonia. He was never in a weakened condition, greatly or otherwise, nor was he ever dependent upon his wife, nor was she jealous of his children. He held the purse. He personally bought and paid for the household provisions and his children’s and wife’s apparel, and the latter. stintedlv. Ready cash, lie dealt out to her penuriously. She was simply wife and housekeeper and the caretaker of his children. She was the dependent; he dominated. He had been in the butcher business from which he retired some time before contracting the second marriage. After that and until his death, June 15th, 1918, he dabbled in real estate and mortgages, and sold his credit for a bonus. lie was a keen, shrewd business man and a money-getter until he met the not uncommon fate of those who endorse commercial paper for profit or out of friendship. Shortly after the marriage two notes of $5,000 each,, upon which he was endorser for pa)', were-protested, and the makers, one of whom was Wineberg, were adjudged bankrupts. The prospect of a total loss made him “sick,” indeed, but with an ailment that does not yield to medication. He was grief-stricken and heart-sore, no doubt, and suicidal with reservations. The deed was executed during this period of agitation and despair. There is nothing-in this situation- of the parties to raise the presumption of undue influence within the doctrine of Haydock v. Haydock, 34 N. J. Eq. 570, and the string of authorities in this state that follows the rule of that case that “where a person enfeebled in mind by disease or old age, is so placed as- to- be- likely to be subjected to the influence of another, and makes a voluntary disposition of property in favor of that person, the courts require proof of the fact that the donor understood the nature of the act, and that it was not done through the influence of the donee.” Nor can I perceive the slightest resemblance, in fact- or principle, to the case of Thorp v. Smith, 63 N. J. Eq. 70; affirmed, 65 N. J. Eq. 400, which the defendants’ counsel say most closely fits their case.

The inquiry, then, is, Was there actual duress or undue influence exerted? Olitsky had courted his wife a very short time. He had made it plain that he wanted her to mother his children, and she understood. That the marriage was one of reciprocal material welfare is evident, and as an inducement he had promised her some of his realty. The amount of the dot was not fixed. I have no doubt she often reminded him of his promise, and urged its performance, but that he fulfilled it through “fraud, coercion and importunities,” is far from established. The Broad and Beatty street property was struck off to Olitsky December 12th, 1916, free and clear of encumbrance, for $14,500. . This was barely sufficient to discharge the liens prior to the mortgage of $4,300 held by him to secure the bankrupt’s note of $5,000, which he had endorsed. He paid down ten per cent, of his bid and then defaulted. The deed was delivered March loth, 1917, under pressure of a rule to show cause why the property should not be resold because of the default. Olitsky raised the purchase price by mortgaging the piemises for $9,000, by a mortgage of $4,000 on other property, arid by a note of $1,300 endorsed by his counsel and discounted at a local bank, secured by mortgage. Effort was made to show that the delayed action was due to the refusal of the complainant to join her husband in the execution of these mortgages unless and until he agreed to have her name inserted in the trustee’s deed as one of the grantees, and that in his financial distress, of which the complainant took advantage, he was forced to comply with her demand, and that he was the helpless victim of her oppression. I pause to say that if the complainant had taken advantage of her position, I would have had great difficulty in finding duress, considering the antenuptial promise, and that the refusal to pledge her dower right was perfectly lawful. But I need not pass upon this because the proofs show that the delay of more than three months in carrying out the conditions of sale was due entirely to Olitsky’s vacillation. That is made clear by the testimony of Lavine, his nephew and adviser, who says that Olitsky wanted to drop- the sale because he did not think it would pay him to bother with it, and that it was only through the witness’s constant and persistent urging and advice not to do so that it was eventually consummated. And to this witness he said that he was going to put, the property in his name and that of his wife’s, and afterwards told him that he had done so.

Wineberg, the bankrupt, who was deeply interested in having the deed set aside, and two of the children, defendants, who showed bitterness towards their stepmother, say that the complainant threatened to leave her husband unless he made her a co-grantee. Denying, the complainant admits having made such a threat, but explains, the occasion to have been her mortification when her husband stole a fish from a grocery and was arrested for it. I take little stock in these so-called threats. If made, it does not appear that 'they were uttered menacingly or that they were looked upon with alarm. The only other witness, Mr. Heher, Olitsky’s legal adviser, who now represents the defendants, was pressed, into service, but I am confident that his professional relation to the case would not consciously influence him to swerve an iota from the truth. He describes his client’s financial dilemma and his great'mental distress and excitement and restlessness and threats at suicide with lawyer-like solicitude. I can imagine him depressed and distracted, but also discern an exaggeration of his woes when seeking financial succor and sympathy and advice from his friend and counsel, often fallen for by the experienced practitioner with later embarrassment and regret. With all, it is perfectly apparent- that Olitsky liad his wits about him. and, amid his tribulation and lamentation, was scheming and striving intelligently and desperately to disentaúgle himself. Before the situation became acute the complainant called upon Mr. Heher two or three times to have him persuade her husband to protect her by a. will. These visits came to naught, either because of Olitsky’s refusal or Heher’s failure to intercede. In the meanwhile, Olitsky negotiated the mortgages of $9,000 and $4,000 with the Mortgage and Securities Company, and by appointment he and his wife went to' Mr. Iieher’s office to> arrange for their execution. Mr. Heher says the complainant refused to sign unless protected cither by the conveyance of some property or by will; and that her husband declined, protesting that he had to take care of his children, and that they were deadlocked when they left, but that the complainant later yielded and the mortgages were executed. There is not a word of evidence in the case to the effect that the complainant executed the mortgages upon condition that she be joined as a co-grantee of the Bioad and Beatty street property, or that her husband was forced to include her to induce her to sign. Mr. Heher is careful not to say that she made any such demand; what she asked, he said, was that she be protected by the conveyance of some property or by will. What mollified her does not appear, but I surmise it was a. reassurance of the fulfillment of the antenuptial promise. The complainant says she executed the mortgages willingly and as voluntarily as she had many others^ and that it was not until after the mortgages were executed — a few days afterwards — that it was first suggested to incorporate her name in the trustee’s deed. Her story is that when Wineberg, the bankrupt, came to her home to lease the premises (a lease was afterwards made to Wineberg’s wife with an option to buy, in which the complainant refused to join because the price was not to her satisfaction) she said to her husband she wanted the property put iai their names jointly, which he at first refused to do, and being again reminded of his promises, consented and told her to call up Mr. Heher and tell him to have the deed made out in both their names; that she telephoned the message and was told to come to his office with her husband. This, she says, was Saturday, and they went the following Monclaj'-, when her husband verified the message that he wanted the title put in both names, and' that Mr. Heher explained to him that if he died the property would belong to the complainant, to which he replied, “She is not my servant; she is my wife.” Mr. Heher does not say this did not occur. He seems to have no recollection whatever of the circumstances attending the drafting and execution of the deed, nor that it contained the name of the complainant when he sent it to be recorded. I feel satisfied that his client gave him the directions as the complainant states, for Mr. Dickinson, the trustee’s lawyer, who drew the deed, says he got his instructions as to the grantees from Mr. Heher, and from no one else. And I have no doubt Mr. Heher knew of the arrangement, although it has passed from his memory, for in the mortgage he took, on the day the deed was delivered, to secure the $1,3.00 note he endorsed, it is recited that the property was conveyed to Olitsky and the complainant. Another telling thing is: The mortgages bear date and were signed and acknowledged March 8th, and the trustee’s deed was not drawn until March 13th, five dajs later. This is clear from a letter before me written by Mr. Heher to Mr. Dickinson instructing him as to its form and phraseology. This letter bears date March 13th and proves conclusively that the deed was not in existence at the time the mortgages were signed by the complainant and establishes beyond pcraclventure that her name was not inserted under pressure of refusal to sign the mortgages. Another- feature evincing that the deed was the voluntary act of Olitsky is, that during the remainder of his life — fifteen months — he did not dispute it nor in the least complain that he had been imposed upon. This re Sects his attitude, and his long acquiescence is a confirmation and ratification. Pom. Eq. Jur. § 964.

2. The other attack on the deed is upon the purely legal ground that it is void because it does not conform to the order of confirmation. In Den v. Lambert, 13 N. J. Law 182, commissioners appointed by the orphans court to make sale of lands of a decedent, struck off the property to a bidder, the sale was confirmed and they were ordered to make a convey airee to him. They conveyed to the bidder and another. In the action in ejectment tire trial court rejected the deed and nonsuited the plaintiff. Upon a rule to show cause the supreme court sustained the nonsuit and declared the deed void, because it was not in compliance with the order confirming the sale, the court holding; that a. naked power must be strictly pursued. There the authority of the commissioners was the order directing the specific conveyance. The principle governing that decisión is not applicable where the power of sale is by law in the official, to be exercised with the approval of the court, as the report of the case shows. Under section 72 (a) of the Bankruptcy act title to lands of a bankrupt vests in the trustee, upon his appointment and qualification, as of the date of the adjudication in bankruptcy. The power to sell is inherent; when practicable, sales are subject to the approval of the court. The authority to convey -does not originate in the court’s orders. The court’s function is supervisory, to approve or not in sound discretion. The direction to execute and deliver a deed is mere formality.

The defendants cite the cases of In re Burr Manufacturing and Supply Co., 217 Fed. Rep. 16; Stang v. Redden, 28 Fed. Rep. 11; Robertson v. Howard, 229 U. S. 254; In re Shea, 126 Fed. Rep. 153, and Davis v. Ives, 75 Conn. 611, all of which are to the effect that a. sale by a trustee in bankruptcy must be confirmed by the court, and that upon such confirmation the equitable title vests in the purchaser. In Cropper v. Brown, 76 N. J. Eq. 406, this court held that the equitable title passed at the time of the sale and before confirmation. And from this their counsel argue that as the equitable title was in Harry Olitsky, the conveyance b3 the trustee of the legal title to him and his wife was ineffectual as to the complainant, because he had not conveyed to lier the equitable title pro imito- by writing, as provided by section 4 of the Erauds and Perjuries act (Comp. Stat. p. 2612), which provides “that all grants and assignments of any trust or confidence shall be in writing signed by the party granting or assigning the same.” The argument is far-fetched. The question whether the equitable estate rvas conveyed by writing in compliance with the statute is wholly irrelevant. Tlie litigation does not involve the equitable estate, and the issue is not whether such an estate should be enforced in defiance of the statute. The legal estate superseded and merged the equitable estate when Olitsky caused the trustee to convey the legal and equitable title to him and his wife. Olitsky could not raise the objection, nor can the defendants. The law applicable to such a situation is discussed in a dictum in Den v. Lambert, supra. There the property, it will be remembered, was struck down to Hoppoek, and the conveyance was made to Hoppoek and Lara-son, which was held not to pass title as against another claimant of the land, but as between Hoppoek and Larason, Mr. Justice Drake had this to say, and I quote a.t length: “There can be no doubt that a person may bid at an auction, as well as buy at private sale, either for himself alone, or for himself jointly with another, or wholly as agent for a third person; and the sale •will be valid, whether he bids in his own name, and is set down as purchaser, or in the name of his principal. 2 Taunt. 38; 4 Taunt. 209; 5 Esp. Rep. 70; 1 Bos. & Pul. 323. And if he buy at private sale, or bid for himself at auction, he-may after-wards transfer his contract and interest in the property, so that the transferee shall have an equitable title, which a court of equity will enforce, if unexecuted, very generalty, as against the vendee who thus transfers Iris interest, and, under circumstances, as against the vendor. Sugd. Vend. 130, 1, 2, 3; 2 Ves. & Beame 389; 6 Ves. Jr. 352; 7 Ves. Jr. 265; 1 Meriv. 47. And there are good reasons for the application of the same principles to sales made by public officers, under the direction of a statute, or the order of a court. A policy less liberal might have an injurious operation upon the price of property exposed to such sales.

“Upon these principles, if Hoppoek bid for himself and Lara-son, or for himself alone, and afterwards transferred to Lara-son his interest in one-half the property, a court of equity would oblige him to convoy the legal title in conformity with such equitable interest.

“But what is the evidence of such relationship between Hop-pock and Larason ? I answer, the acknowledgment of Hoppoek. He has accepted'a deed from the commissioners uniting Lara-son with himself in the purchase, and taking the land with him as tenants in common. Hoppoek, after this, without further proof, cannot deny the fact that Larason is in equity equally entitled with himself. Why, then, should not this deed, purporting to convey the property to them, as tenants in common, in strict accordance with their equitable interest, be deemed valid? In a contest between them it should be considered as a conveyance to both, if to either. As between them, it purports to do, precisely what, according to equity, should be done. And to set it aside, in order that a new conveyance may be made from Hoppoek to effect tire same result, would be idle. I am, therefore, of opinion that if this deed conveyed any title to Hop-pock, it did also to'Larason, and that there is no good ground to distinguish between them.”

The counter-claim will be dismissed, with costs.