author: Leaking, V. C.

text:
    Essex County Trust Company v. Lorenzo H. Abbey et al.
    [Submitted May 20th, 1913.
    Determined June 18th, 1913.]
    A corporation was in possession of corporate stock under an agreement between defendant and co-defendant that, if defendant should pay to the corporation for the use of co-defendant an amount stipulated, the corporation should deliver the stock to defendant, otherwise to co-defendant. A dispute as to the amount to be paid arose, and co-defendant demanded that the corporation should not deliver the stock unless a specified sum was paid by defendant, who insisted that a less sum was due, and subsequently notified the corporation that if it delivered the stock to co-defendant, it would be held liable.—Held, that the controversy presented adverse claims for possession of the stock, and the corporation could compel an interpleader.
    Hearing on demurrer to bill of interpleader.

      Messrs. Queen .& Stout, for Schwerin and others, demurrants.

      Mr. Francis Lafferty, for the complainant.

      Mr. Corra, N. Williams, for the defendant Abbey.
   Leaking, V. C.

Complainant has filed a bill of interpleader against defendants, Abbey, Schwerin and the Linden Building and Construction Company. The latter two defendants have demurred to the bill.

The bill discloses that complainant corporation holds in its possession certain certificates of corporate stock endorsed in blank. By the terms of an agreement between defendants Schwerin and Abbey, if defendant Schwerin on April 15th, 1912, should pajito complainant for the use of defendant Abbey the amount stipulated in the agreement, it became the duty of complainant to deliver the stock to defendant Schwerin or to his assignee, otherwise to deliver it to defendant Abbey.

April 11th, 1912, defendant Abbey notified complainant that the balance to be paid April 15th, 1912, would be $5,479.69, and authorized delivery of the stock to Schwerin upon the payment of that amount to complainant for the use of Abbey on that date. April 12th, 1912, defendant Linden Building and Construction Company notified complainant that it had assumed the contract on the part of defendant Schwerin, and that it was prepared to carry out the contract as it interpreted it; but that differences had arisen as to the interpretation of that part of the contract calling for interest by reason of defendant Abbey claiming that interest was payable on all installments and defendant Schwerin claiming that interest was payable only on defaulted installments, of which there were none; it therefore forbade delivery of the stock to any person other than itself. April 16th, 1912, defendant Abbey, by written notice to complainant, demanded possession of the stock. By a subsequent notice to complainant, defendant construction company stated that it held an assignment of Schwerin’s interest and threatened a claim for damages against complainant in the event of the stock being delivered to defendant Abbey. The bill further avers that complainant is unable to determine whether or not the amount claimed by Abbey as due from Schwerin, or from the construction company as Schwerin’s assignee, is the correct amount and cannot determine whether its duty is to deliver the stock to defendant Abbejr pursuant to his demand or to hold the stock pursuant to the demand of defendant construction company. The remaining averments of the bill are the usual averments of disclaimer of interest, indemnity and collusion, with a prayer for defendants to interplead.

The joint and several demurrer of defendants Schwerin and the Linden Building and Construction Company is based upon the claim that while defendant Abbey has demanded of com-;; plainant possession of the stock demurrants have not demanded possession, but have only demanded that complainant retain possession and refuse to deliver possession to Abbey; it is accordingly urged in behalf of demurrants that in the absence of a demand on their part for possession of the stock they cannot be compelled to interplead.

I think it entirely clear.that the position of demurrants is untenable. In the letter of April 12th, 1912, the demand made by the construction company to complainant is, “That you are not to deliver said stock to a^ party other than ourselves.” In the subsequent letter complainant is informed by the construction company that if delivery of the stock is made to Abbe31', “we will be compelled to look to 3rou for our damages in this matter.” The situation thus presented, as the same appears by the bill, is a demand made by Abbe3'" for possession of the stock upon a claim (hat the failure of demurrants to pay a,specified amount on a certain day had vested in him the right of possession, and a counter demand made on complainant in behalf of demurrants to the effect that the amount specified by Abbey as the final payment was in excess of the true amount and that the3r were prepared to pay the true amount, 'and forbidding- delivery to any other party, and a threat of suit for damages in the event of such delivery. The essence of the demand thus made upon complainant in behalf of demurrants is a demand that complainant shall accept for the use of the defendant Abbey the lesser amount which demurrants claim to be the real amount due, when that amount shall be ascertained, and then deliver the stock to demurrants. It is clearly immaterial that demurrants may desire or demand that complainant retain physical possession of the stock against the demand of Abbey until such time as demur-rants may adjust with Abbey the controversy touching the amount due, to the end that payment of the adjusted amount may be then made and the stock then received by demurrants; such a demand necessarily includes the idea that complainant shall hold the stock for demurrants, and equally presents adverse claims of the real parties in interest touching the duty of complainant as custodian of the stock. Abbey claims that he is entitled to the stock because $5,479.69 was not paid by demurrants April 15th, 1913. It will be observed that delivery to demurrants by complainants was only authorized by Abbey in the event of the payment to complainant of that amount on that day. Demurrants claim that they are entitled to the stock by the payment of a lesser amount and that they cannot be denied their right by Abbey’s requirements upon complainant for the payment of the excessive amount. The fundamental controversy is the amount which was payable April 15th, 1913. Demurrants’ real claim is the right to pay to complainant less than $5,479.69 and receive the stock. The claim of Abbey is that he is entitled to the stock because demurrants were not entitled to receive it by paying less than $5,479.69. Such a controversy inherently presents adverse claims of possession to the stock in question, and complainant is clearly entitled to require the adverse claimants to interplead to the end that complainant’s duty as a disinterested custodian may be fully and safely performed.

I will advise a decree overruling the demurrer to the bill.

Defendant Abbey has filed an answer to the bill of interpleader and a cross-bill against his co-defendants. To this cross-bill the co-defendants have demurred. At the hearing of the demurrer to the bill of interpleader it was suggested that in the event of the bill being sustained, the answer and cross-bill of defendant Abbey should stand as statements of claim under the rule, to the end that at final hearing all questions of law and fact could be conveniently heard together. As that suggestion was accepted, the decree of interpleader to be entered may contain that provision.


source: Caselaw Access Project

author: Leaming, V. C.

license: Public Domain

text:
    Atlantic City National Bank v. Mary D. Thompson and Estate of Robert L Brownfield, deceased.
    [Submitted June 2d, 1913.
    Decided June 25th, 1913.]
    1. A bank which received a note from a depositor for collection for the latter’s use, and which enters the note in her individual pass-book for collection and credit to |her account, thereby creates the relation of bailor and bailee between the depositor and the bank, and the bank may not inter-plead her with one claiming the fund by paramount title.
    2. Bailees, agents or tenants may interplead their bailors, principals or landlords and a third person setting up an opposing claim only wheie the title o£ the opposing claimant is derivative and not antagonistic, and paramount to that of the bailor, principal or landlord.
    Bill of interpleader with, prayer for injunction. Hearing at return of order to show cause for injunction.

      Mr. John G. Slape, for the complainant.

      Mr. Lee F. Washington and Mr. Chcuies G. Babcock, for the defendants.
   Leaming, V. C.

I think it clear that complainant is not entitled to enjoin the further prosecution of the suit at law by defendant Mary D. Thompson.

By the verified answer of that defendant it appears that she deposited the note with complainant bank for collection for her own use, and that the bank entered the note in her individual pass-book for collection and credit to her account. That transaction created the relationship of bailor and bailee between her and the bank, and the bank is not, in consequence, now privilegecl to interplead her with one claiming the fund by a paramount title. The case of the First National Bank of Morristown v. Beninger, 26 N. J. Eq. (11 C. E. Gr.) 345, is conclusive to that effect. The case of Third National Bank of Boston v. Skillings, 132 Mass. 410, is to the same effect, and is practically identical with the present case.

The only instances in which bailees, agents or tenants are permitted to interplead their bailors, principals or landlords and a third person setting up an opposing claim to the thing, fund or duty appears to be in cases in which the title of the opposing claimant is derivative under, and not antagonistic and paramount to, that of the bailor, principal or landlord; that is, where the adverse claim originates from some act of the bailor, principal or landlord done or suffered after the commencement of the bailment, agency or tenancy and causing a dispute as to which of the parties is entitled to the thing, fund or duty. This is clearly set forth in Pom. Eq. Jur. § 1327, and in 1 Pom. Eq. Rem. § 54. I am unable to adopt-the view that a privity of contract can be found in the circumstances antecedent to the bailment as set forth in the bill.

I will advise an order discharging the order to show1 cause.


author: Teaming, Y. C.

text:
    John Milton Compton, individually and executor, v. Sender Feldmark et al.
    [Submitted December 18th, 1912.
    Determined July 3d, 1913.]
    1. Under act April 20th, 1906 (P. L. 1906 p. 269), requiring notice of sale under foreclosure decree to specify all liens subject to which the sale is to be made, the court was required in a suit to foreclose a mortgage to decide whether the mortgage is superior to the rights of defendant under a tax title.

      2. Act March 14th, 1879 (P. L. 1879 p. 340), as amended (3 Gen. Stat. 1893 p. 3353), provides that no sale of land for taxes under the act shall destroy or affect the lien of a prior mortgage duly recorded, unless the purchaser shall give to the mortgagee notice to redeem, which shall be served personally, if mortgagee can be found, if not, then by mailing it enclosed in an envelope plainly addressed to his last-known post-office, with postage prepaid, and requiring the purcihaser to transmit a copy of same with due proof of service to the county clerk to be recorded.—Held, that the proof of service transmitted to the clerk—the affidavit of purchaser—was insufficient to show due service of notice, since it did not disclose that statutory requirements were complied with.
    3. Act March 14th, 1879 (P. L. 1879 p. 340), as amended (3 Gen. Stat. 1895 p. 3358), provides that no sale of land for taxes under the act shall destroy the lien of a prior mortgage unless, within a prescribed time, the purchaser shall serve a prescribed notice to redeem upon the mortgagee of prior mortgage, which notice, with proof of service, shall by the purchaser be transmitted to the county clerk to be recorded.—Held, that, though the proof of service, transmitted to the clerk and forming part of a public record, was competent evidence of service, it is not evidence of more than it actually contains, since it is unaided by any statutory presumptions.

      Mr. James S. Ware and Walter 11. Bacon, for tbe complainant.

      Mr. Edwin F. Miller, for the defendants.
   Teaming, Y. C.

The single question here presented is whether the lien of complainant’s mortgage is superior to the possessory rights which defendant Sadie Cohen claims in the mortgaged premises under a certain tax title.

The bill is filed to foreclose a mortgage held by complainant on certain-real estate in Maurice Eiver township, Cumberland county. The bill makes Sadie Cohen a defendant under an averment to the effect that the mortgaged premises were sold by Maurice Eiver township for taxes levied subsequent to the execution and record of complainant’s mortgages, and purchased by that township for a-term of years which has not yet expired, and thereafter a conveyance of the term was made by the township to Sadie Cohen, and by reason of such conveyance Sadie Cohen claims an interest in the mortgaged premises; the bill avers that any interest the said Cohen may have in the mortgaged premises is subordinate to the lien of complainant’s mortgage, and sets forth, among other things, that no notice was given to complainant to enable complainant to make redemption in behalf of his mortgage lien.

The answer “of Sadie Cohen asserts that the tax title held by her is superior to the lien of complainant’s mortgage.

The bill also sets forth certain irregularities in the levy and assessment of the tax and in the sale fir the township, and also charges that the sale -was void and'of no effect as against complainant. These alleged irregularities are denied by the answer.

The answer in no way challenges the jurisdiction of this court to examine into and pass upon the regularity of the proceedings of the township and its officers antecedent to the tax sale and to declare the tax title thus acquired by the township void as against complainant; but in Ihe briefs filed since final hearing it is objected that this court is without jurisdiction for that purpose. It is, however, clearly unnecessary to here consider how far this court can properly inquire into the validity of a tax title which is brought in question in a suit to foreclose a mortgage, for the primary question for consideration in this ease is not the validity of defendant’s tax title, but is whether assuming that title to be valid the lien of complainant’s mortgage is superior or subordinate to any rights of defendant under her tax title. ’Under the present statute (P. L. 1906 p. £69) the notice of sale under a foreclosure decree must specify all liens subject to which the sale is made, and in the present suit I think it entirely clear, without any inquiry into the validity of the tax title, that the lien of -complainant’s mortgage is superior to the rights of defendant under her tax title, and that this court is required, under the issues as framed, to so determine.

The tax sale to the township, under which sale defendant Sadie Cohen holds, was made December 2d, 1899, for a term of thirty years from that date and wras for the taxes of the years 1897 and 1898. This sale wras made under the act of March 14th, 1879, as amended. Gen. Stat. p. 3353 et seq. That act made a tax against real.estate a first lien as against a prior mortgage for two years from the 20th day of December of the year the tax should be assessed. Section 12 of that act provided that no sale of land for taxes under the act should destroy or affect the lien -of a prior mortgage, duly recorded, unless the purchaser should give to. the mortgagee, within a period there named, a certain written notice of the sale. The question here presented is, therefore, whether such notice was in fact given. A failure to give the notice in no way affects the validity of the tax title; if the notice was not in fact given the lien of the mortgage is paramount.

The question therefore is merely one of evidence. If there is evidence, either direct or presumptive, that the statutory notice was in fact given the lien of the mortgage is subordinated; otherwise it is, by the very terms of the statute, unaffected.

The only evidence touching' this controlling fact is to be found in certain exhibits which have been offered by defendant to establish the fact.

The provisions of the statute touching the service of this notice are that it shall be served personally or by leaving it with a member of the family over the age of fourteen years; and if the mortgagee cannot be found then by mailing' the notice enclosed in an envelope plainly directed to him at his last-known post-office address, rvith full postage prepaid thereon. The statute then provides that the purchaser shall, within twenty days after the service of the notice, transmit a true copy of such notice with due proof of service to the clerk of the county in which the lands are situate, and which notice shall then be by the county clerk recorded and indexed in the same book in which the mortgage is recorded, and a marginal note made thereof in the book where the original mortgage is recorded.

The record book of mortgages was produced by defendant, and there is recorded therein a notice by the township to the mortgagee, which notice may be here assumed to conform to the requirements of the statute. Forming a part of this record is an affidavit of the township clerk, as follows:

“State of New Jersey, t Cumberland County, j
“Samuel Foster, of full age, being duly sworn according to law on his oath saith, that on the twenty-seventh day of February, in the year of our Lord one thousand nine hundred, he served a notice of which the within is a true copy upon Daniel B. Compton, of Mauricetown, N. J., mortgagee, that said service was made upon the said mortgagee by mailing said letter containing said notice to his last-known post-office address, and if not delivered in five days to be-returned back to this post-office address, and-that said notice was served or given within three months from the date of such sale of lands for taxes the within notice mentioned.
“Sworn and subscribed to before me, this first day of March, 1900.
“Japhet M. Fox,
“Notary P-ablic.”

Is this record sufficient evidence of the fact that notice to redeem was given to the mortgagee in. accordance with the requirements of the statute?

The acf. contains no provision to the effect that this record shall be received in evidence in any court for any purpose; but if the requirement for a public record of the notice may be deemed sufficient to make that record competent evidence in a court, it clearly cannot make it evidential of more than it contains in the absence of a statutory provision making it presumptive evidence beyond the scope of its terms. No such statute is to be found. Certain records of tax sales and tax deeds are by statute made presumptive evidence that the sale and all antecedent proceedings were regularly made and had in accordance with the act; but these provisions do not include the record here in question. Defendant’s tax deed may be regarded as valid by reason of these statutory presumptions, but tire record here in question appears to be unaided by any statutory presumptions which have been brought to my attention.

As already stated the statute requires that the purchaser shall “transmit a true copy of such notice with due proof of service to the clerk of the county.” The proof of service transmitted to the clerk with the notice and forming a part of the record does not disclose that the statutory requirements touching service were complied with. The statute only authorizes service by mail in case the mortgagee cannot be found. Under a provision of that nature “due proof” of service, which the purchaser is required to transmit to the clerk, would seem to necessarily include proof that some effort was made to make personal service. See Gardner v. Small, 17 N. J. Law (2 Harr.) 162. The affidavit does not even disclose any knowledge of the party making the affidavit touching the last-known post-office address of the mortgagee, nor does it specifically state to what address the notice was in fact sent or that the postage was prepaid as required by the act. It is clearly impossible to treat this recorded notice and affidavit as evidence of compliance with the statutory requirements of section 12 of the act touching service, in the absence of some legislation giving to the record presumptive force.

It will be observed that the statutory notice to be given to the mortgagee forms no part of the proceedings relating to the municipal assessment or sale for the enforcement of the tax. The notice is one that any purchaser at a tax sale is privileged to give who seeks to render the lien of the mortgage subservient to his possessory rights during the term for which he has purchased; his failure to give the notice merely leaves the mortgage lien unaffected by the possessory right of the purchaser during his term.

The certificate of tax sale from the collector to the township does not, of course, carry any presumptive evidence touching the notice here in question, which notice could only be given at a date subsequent thereto. The subsequent deed from the township to itself can carry no presumptions touching the notice. That deed is by the. terms of the statute made unnecessary. Gen. Stat. p. 3357 § 357. No statutory presumptions can accompany the deed from the township to defendant Sadie Cohen; that deed cannot be regarded as a deed falling under the provisions of the Sales of Land act, as it is merely a conveyance by an owner of the term to a private purchaser thereof.

By reason of the absence of evidence that notice to redeem has been given to the mortgagee pursuant to the provisions of the statute for that purpose, I will advise a decree pursuant to the prayer of the bill.


author: Luaming, V. C.

text:
    John C. Brooks v. William H. Davis.
    [Submitted July 3d, 1913.
    Determined July 17th, 1913.]
    1. Testatrix bequeathed to her grandson $4 a week, to be paid to him weekly during' his natural life from the income of her property, the balance after paying for upkeep to be put on interest by the executor, except that, in case the legatee’s present wife should die before him, then he should receive the entire profits of the estate for life.—Held, that such provision did not render the grandson’s interest inalienable, and that it was assignable.
    2. Where testatrix’s entire estate and the entire beneficial interest under a trust had become vested in complainant, the chancery court had jurisdiction to terminate the trust on complainant’s application.
    Final hearing on bill to terminate a trust under a will.

      Mr. Ralph 17. E. Eonges, for the demurrant.

      Mr. Samuel S'. Richards, contra.

   Luaming, V. C.

The bill discloses that the will of Lenora Flowers directs that her real and personal estate he held in trust by her executor, defendant herein, during the lifetime of Aaron ICraft, grandson of testatrix; that the executor is directed to pay to the grandson $4 per week, during his lifetime, from the income of the property, and to paj' to him the entire net income of the property during his lifetime in the event of the decease of his wife; that at his death the entire trust estate is to go to certain designated devisees; that since the decease of testatrix complainant has purchased from the life cestui que trust his rights under the will, and has also purchased from the several devisees their several rights, and by virtue of such purchases is now the sole and only person interested in the estate. The bill prays that the trust may be terminated and that an accounting may be.had and the entire estate turned over to complainant.

A demurrer has been filed by defendant, and in support of the demurrer, it is claimed that the equitable life estate of Aaron Ivraft is not assignable and that this court is without jurisdiction.

The provision of the will in behalf of Aaron Kraft is as. follows:

“Fourth. 1 give and bequeath to my grandson Aaron Kraft the sum of four dollars per week, to be paid to him by my executor weekly during his natural life from the income from my properties, the balance, if any, after the properties are kept in good condition to be put on interest by my executor, but should my grandson Aaron Kraft present wife, Lottie Kraft, ‘nee’ Jolnie, depart this life before the death of my said grandson Aaron Kraft, I then do order and direct that he shall receive from my executor tihe entire profits from my properties after they are kept in good condition the remainder of his natural life.”

■It is urged in behalf of demurrant that the provision oE the will above quoted creates a spendthrift trust in behalf of Aaron Kraft, and that his rights under such a trust are inalienable.

It is clearly unnecessary to here determine whether, or to what extent, in this state a testator may lawfully exempt an equitable life estate created l)3r his will from voluntary or involuntary alienation by the cestui quo trust. In Camden Safe Deposit and Trust Co. v. Schellinger, 78 N. J. Eq. (8 Buch.) 138, I had occasion to refer to the conflict between what is known as'the English rule and the rule which has been adopted by some of the American states, and to suggest that our court of last resort has not, so far as 1 am aware, been called upon to determine the rule. that controls in this state. The great diversity of views on tills subject will be sufficiently disclosed by the following collections of adjudicated cases: 8 Rose’s Notes to U. S. Rep. 755; note to De Peyster v. Michael, 57 Am. Dec. 488; note to Smith v. Towers, 9 Am. St. Rep. 404; note to Garland v. Garland, 24 Am. St. Rep. 686; 24 Am. & Eng. Encycl. L. (2d ed.) 870; 26 Am. & Eng. Encycl. L. (2d ed.) 137.

- But should the most liberal views in support of the right of restraint against alienation be here adopted it is apparent that the terms of the will annexed to the- bill in this ease are inadequate to accomplish that result. An examination of the authorities collected in the above citations will disclose that the view is adopted with entire uniformity that to create a restraint against alienation it must clearly appear that such was the intention of the testator or donor. Cases are to be found to the effect that a provision exempting the gift from claims of creditors of the donee ora provision that the gift was for the support of the donee may include by implication a provision against voluntary alienation, 'but it will be observed that in the will here in question no provision in any way suggests a purpose on the part of testator to restrict the donee’s powers over the gift, unless the direction for small weekly payments may be held to indicate that purpose. I think it clear, however, that that circumstance cannot properly be held to justify a provision against alienation to be read into the will.

In the absence of an express or implied provision against alienation the assignment from Aaron Kraft to complainant must, under the averments of the bill, be sustained.

The entire estate having at this time become vested in complainant, there can be no doubt of the jurisdiction of this court to grant the relief sought. Huber v. Donoghue, 49 N. J. Eq. (4 Dick.) 125.

I will advise a decree overruling the demurrer.


text:
    Amelia Sparks et al. v. Charles S. Ross et al. Charles Ross et al. v. Amelia Sparks et al.
    [Submitted July 22d, 1913.
    Determined July 23d, 1913.]
    1. 1 Comp. Stat. 1910 p. 1/1/5 § 91, authorizing an allowance for a counsel fee on behalf of the successful litigant in a suit to quiet title to real estate, does not authorize such an allowance to an unsuccessful litigant to such suit, nor is the court authorized to make such an award independent of the act, though the claim of title urged by the respective parties to the suit was through or under the will of the deceased person; not involving the administration of a trust or the estate of such person.
    2. Where a bill for an accounting as to a bequest to trustees involved the issue whether complainants were testator’s grandchildren, born of his son in lawful wedlock, which question had been determined against them, they were not entitled to an allowance for counsel fees on the theory that the suit involved the inquiry whether complainants were entitled to a share in testator’s estate under the trust provisions of his will, and accordingly involved the proper administration of the estate.
    Hearing on application for allowance for counsel fees.

      Mr. John J. Grmdall and Timothy J. Middleton, for Eoss and others.

      Mr. Thomas B. French, for Sparks and others.
   Leaming, V. C.

A motion has been made by counsel for defendant in the first case above stated and by counsel for complainant in' the second case above stated for an allowance of a counsel fee to be paid out of or made a charge on certain trust property, adverse claims to which property occasioned the litigation.

The first suit was a statutory suit against defendants to quiet title to certain real estate and was determined by a final decree against defendants. ■ 1 am convinced that no power exists upon the part of this court to award a counsel fee to the unsuccessful litigant in a suit of that nature. Comp, Stat. 445 § 91 authorizes such an allowance in behalf of a successful litigant, but does not include an unsuccessful one. The circumstance that the claim of title urged by' the respective parties was through or under the will of Samuel Ross, deceased, in no manner constitutes the suit, one for the administration of a trust or of an estate of a deceased person.

The second case above stated was a suit by Charles Ross and others for an accounting as to a certain bequest made by the will of Samuel Ross to certain trustees, and also sought to have that bequest declared a lien on the real estate of which that testator dies seized. By the will of Samuel Ross this bequest was payable at -the death of Edmund B. Ross, son of Samuel Ross, to any children that should after the date of the will of Samuel be born to Edmund in lawful wedlock.

Complainants in the bill claimed to be such children. The issue presented was the identical issue presented in the former suit; that issue was whether complainants (defendants in the former suit) were children of Edmund B. Ross, born to him in lawful wedlock after the date of the will of Samuel Ross. That issue was determined by final decree against complainants and the bill was accordingly dismissed.

It is now urged in behalf of this motion that the allowance should be made because the suit involved the inquiry whether complainants were entitled to share in the estate of Samuel Ross, deceased, under the trust provisions of his will, and accordingly involved the proper administration of his estate.

In suits in equity brought by executors, administrators or by trustees under a will' or otherwise in aid of the administration of trust property or the performance of trust duties costs and necessary disbursements are properly made a charge against the trust fund and may, it seems, include allowances for costs incurred by necessary and proper parties to the proceedings; and a legatee, filing a bill for his legacy will, if successful, be entitled to costs out of the estate. But I find no authority for an allowance to an unsuccessful claimant in a suit instituted by him against an estate or trust fund. .

The rule, as defined in Dan. Ch. Pl. & Pr. *1427, is as follows :

“When it is said, that a legatee, filing a bill for his legacy, will be entitled to ihis costs out of the estate, it must be understood only as applying to those cases in -which he is successful in the suit. If a person claims as legatee, and his bill is dismissed, he will not, in general, be allowed his costs out 'of the testator’s estate, notwithstanding there is an ambiguity in the will, which renders it necessary to apply to the court for its construction. In such cases, the court will usually, if the case involves considerable difficulties, occasioned by conflicting decisions or the acts of the testator, or the plaintiff has a fair ground for making his claim, make each party bear his own costs, by ordering the dismissal to be without costs. Therefore, where a bill was filed by the next of kin of a testator against the executors, for the undisposed-of residue, and the next of kin failed, the bill was dismissed- without costs; because the court thought-there was some excuse for their litigating tike executor’s right to it. And, where, after a verdict upon an issue, finding against the legitimacy of a person claiming a legacy as a legitimate child, a question arose as to the costs, the court refused to give costs against him; as he had always borne the name of the family, and been received in it. Where, however, the bill is not simply dismissed, but a declaration of right is made, the plaintiff, though unsuccessful, is often given his costs.”

The text above quoted presents the exact situation here presented. The suit was to enforce the payment of a legacy and the single question involved was whether complainants were the persons named in the will as legatees. That issue was determined adversely to complainants and the bill was accordingly dismissed. I am satisfied that no justification can be found for an allowance of the nature here sought.

I am obliged to deny the motions in both suits.


text:
    Annie Loomer v. Nathan Kliegman et al.
    [Submitted and determined October 16th, 1913.]
    The rule declared with respect to the issuing of writs of assistance in Barton v. Beatty, 88 N. J. Eq. (1 Stew.) 1¡18, and in Board of Some Missions y. Davis, 10 N. J. Eq. (4 Robb.) 511, followed in this suit.
    On bill to foreclose. Hearing on petition for writ of assistance.

      Mr. Henry S. Alvord, for the complainant.

      Mr. Austin H. Swaclchamer, for the defendants.
   Leaming, V. C.

I am convinced that this court is powerless to extend to petitioner the relief here sought.

The present controversy clearly falls within the principles defined in Barton v. Beatty, 28 N. J. Eq. (1 Stew.) 412, and Board of Home Missions v. Davis, 70 N. J. Eq: (4 Robb.) 577.

The evidence in behalf of the defendant named in the petition is clearly sufficient, standing alone, to make out a prima facie case of right of possession in him extending to the end of the present year by reason of the payment of rent by him to petitioner for that purpose subsequent to the sale; in consequence a well-defined and material issue is presented whether the person now in possession has a right to hold the land by reason of matter arising subsequent to the sale. That issue is surrounded by such doubt that its trial must be by another tribunal; its trial forms no part of the jurisdiction exercised by this court in awarding writs of possession.

The same principles obtain in an effort to give effect to or enforce the subsequent engagement to vacate on payment of an agreed amount.

I am obliged to deny the prayer oE the petitioner, but without costs.


text:
    Joseph R. Beckett v. Ferdinand Andorfer et al.
    [Submitted November 26th, 1912.
    Decided November 30th, 1912.]
    1. To justify a decree in a judgment creditor’s suit to set aside a conveyance from the judgment debtor to a grantee for the use of the judgment debtor’s wife, and to subject the lands so conveyed to the lien of the creditor’s judgment, the evidence must warrant a finding of fact to the effect that at the time the conveyance was made, there existed an actual intent to defraud subsequent creditors, if no creditors existed at the time the conveyance was made.
    2. Whether an agreement between the judgment debtor and his wife whereby she waived the wrongs her husband had committed and resumed cohabitation with him, affords such a consideration for the conveyance that it cannot be treated as voluntary is immaterial for the reason that the acceptance of the fact that the conveyance was the result of such engagements of the parties, and that her purpose was to protect herself against being again deserted and left wholly destitute, renders it impossible to conclude that an intent to defraud future creditors entered into the transaction.
    3. The fact that no writing exists manifesting a trust title in the grantee for the benefit of the wife is immaterial, so far as the rights of complainant are concerned.
    Final hearing on bill, answer, replication and proofs, to set aside a conveyance.

      Mr. Austin H. Swaclchamer, for the complainant.

      Mr. Samuel H. Richards, for the defendants.
   Leaking, V. C.

To justify a decree in this suit setting aside the conveyance from Andorfer to ICeeley and subjecting the land so conveyed to the lien of complainant’s judgment, the evidence must warrant a finding of fact to the effect that at the time the conveyance was made there existed an actual intent to defraud subsequent creditors; for no creditor existed at the time that conveyance was made.

I am convinced that the evidence is insufficient to justify such a finding. It is impossible to doubt tire truth of the testimony of Mrs. Andorfer to the effect that the conveyance was exacted by her as a prerequisite to her consent to resume cohabitation with her husband. I think it unnecessary to here consider whether the agreement between her and her husband, as disclosed by the testimony, whereby she waived the wrongs her husband had committed and resumed cohabitation with him, afforded such a consideration for the conveyance that it cannot be now treated as voluntary; for the acceptance of the fact that the conveyance was the result of such engagements of the parties and that her purpose was to protect herself against the danger of again being deserted and left wholly destitute, renders it impossible to conclude that an intent to defraud future creditors entered into the transaction. The conveyance was promptly recorded and any subsequent creditor could have easily ascertained the condition of the title before extending credit, and there is no evidence that Mrs. Andorfer ever knowingly gave encouragement to anyone to believe that the property did not belong to her; her occupancy of the property with her husband cannot be properly regarded as inconsistent with her ownership. It may be, as urged in behalf of complainant, the conveyance in question was executed and accepted in anticipation of a future hazardous business enterprise on the part of Mr. Andorfer and with an actual intent to defraud creditors of that enterprise; but the evidence does not, in my judgment, establish that fact or justify that affirmative finding. On the contrary, I am convinced that the conveyance was made in the manner and for the reasons stated by Mrs. Andorfer and without reference to or thought of possible dangers of future business enterprises or creditors of Mr. Andorfer, further than that element is contained in any transfer of property which is operative to devest a grantor of his title.

It is urged in behalf of complainant that as no writing exists manifesting a trust title in Mr. Iveeley for Mrs. Andorfer that trust cannot be established by parol. That question does not appear to me to be hero involved. The material inquiry in this case is whether the conveyance was made with an actual intent to defraud future creditors of Mr. Andorfer. That inquiry involves the ascertainment of the real purpose of the parties. If the purpose to defraud-was not present it is immaterial to creditors whether Neeley has manifested his trust in writing in such manner as to enable Mrs. Andorfer to enforce it against him; such a trustee can at any time declare 1ns trust in writing and satisfy the statute of frauds. Some testimony exists to the effect that Neeley and his cestui que trust have made settlement touching the trust property, but I think that immaterial, so far as the rights of creditors of Andorfer are concerned.

I will advise a decree dismissing the bill.


author: Howell, V. C.

text:
    Francis J. Swayze, executor, &c., v. Harriet M. Huntington et al.
    [Decided June 4th, 1913.]
    1. Evidence held, insufficient to show a delivery by a donor of shares of corporate stock with the intention of divesting himself of all dominion over them.
    2. To establish a gift inter vivos there must be a donative intention on the part of the donor, actual delivery of the subject-matter, except in case of a eshose in action, in which the delivery must be of the character of which it is most capable, and the donor must devest himself of all dominion over the subject-matter.

      On final hearing. On bill, answer, replication and proofs.

      Mr. Edward M. Colie, for the complainant.

      Mr. John B. Hardin, for the defendant Edwin W. Merriam and others.

      Mr. Edward 8. Atwater, Jr., and Mr. Charles E. Littlefield (of the New York bar), for Harriet M. Huntington and others.

      Mr. William A. Smith, guardian ad litem of infant defendants Carlisle R. Lane and others.

      Mr. Thomas P. McKenna and Mr. John W, Sheehan (of the Massachusetts bar), for Charles R. Lane.

      Mr. Thomas M. Kays, for Edward M. Dutcher, guardian.
   Howell, V. C.

The bill in this case is in form a bill filed by the complainant as sole surviving executor and trustee under the will of Henry W. Merriam for a settlement of his accounts and those of his deceased co-executors, and the ascertainment of the balance in his hands. As incidental thereto and part thereof it was prayed that the court might ascertain whether certain persons who were made defendants to the suit were accountable for the value of shares of stock of the H. W. Merriam Shoe Company which stood in the name of the testator on the books of the company at the time of his death, or for any part thereof, and, if so, what part; and whether a certain attempted gift of the same by the testator was perfected or not in his lifetime. There was likewise a prayer for the discharge of the trustee.

The principal question raised by the pleadings and presented by the evidence is whether the testator made a gift inter vivos of certain shares of stock of the said shoe company. This question affects the question of the accounting in this respect. If it shall be found that the gift of the shares was perfected, then the complainant is exonerated from accounting for them; if, on the other hand, it is found that the gift was not perfected, then the lega] title to the shares remains vested, in the complainant in his trust capacity, and they must be accounted for as assets of the estate.

The salient facts are these: The testator had a sister who lived in Hyde Park, Massachusetts, who came to Newton, in the state, the home of her brother in 1897, and lived in his family as a member of it until the time of his death. Some time in that year he gave her a large envelope with eight small ones enclosed in it, and directed that the small envelopes should be delivered by her to the various parties to whom the same were addressed. He asked her to take charge of them and deliver them to the parties, but stated that he would like to have it done quietly, as he did not feel able to bear a great deal of excitement, and that she should use discretion so as to avoid any public comments that he might be forced to listen to. Mrs. Huntington accepted the package and placed the same in a safe which belonged to Mr. Merriam and which stood, in his house in a small room on the second floor, sometimes called the office. This safe was used by both Mr. Merriam and Mrs. Huntington; both had keys to the outside door, and by means thereof had access to the interior of the safe. Mr. Merriam kept his valuable papers, such as bonds and mortgages, &c., in a private compartment in the safe, to which he only had the key. He assigned to Mrs. Huntington another portion of the safe for her private and separate use, to which she only had the key. This assignment to her appears to have been made shortly after she became an inmate of her brother’s family. It does not appear that any of the witnesses ever saw the contents of these eight envelopes; the only evidence on that subject is the very slight evidence given by Mrs. Huntington on page 256 of the state, of the case, in which she says’that, on that occasion he spoke of his shoe company’s stock and’ said that he proposed to distribute some among his relatives, and' that she was directed to see that they had it, and that it was to. be distributed at her discretion.

Several weeks after this first deposit, if it may he so called, and early in the month of March, 1898, Mr. Merriam remarked to Mrs. Huntington that his wife had died, that he had no children,, that lie hacl just made a codicil to his will which had revoked the provisions of that instrument concerning the disposition of his shoe company's stock so that fit was "released/' as he put it, from the operation of the will, and that he desired to change the arrangement of the certificates. Thereupon, at his request, she delivered to him the large envelope containing the eight small ones, which he took out of her sight. Several weeks later, perhaps two or three, Mr. Merriam and Mrs. Huntington met in the so-called office at the house, on which occasion he gave her another large envelope, describing orally its contents, which consisted of small envelopes, each containing an endorsement of the name of a person. On the witness-stand she stated the subsiance of her conversation with him at that time. She says that he directed her to take charge of the envelopes and deliver them at her discretion, for the reason that he wished it done rather quietly, and not to have a public announcement of it, which might bring excitement to him or compel him to listen to all the public might say about it, and that he thought she could so arrange it; and, continuing, he said, “There is an envelope with your name on, and you can receive it now.” And opening it, she found therein a certificate of the shoe company’s stock for five hundred and sixty-eight shares, which he said he hoped she would live to enjoy. The small envelope which had been addressed to Mrs. Huntington was destroyed, and on the same day, or the next, she obtained a new envelope into which she put the certificate for five hundred and sixty-eight shares, sealed the same, wrote her own name on the address side, placed the same in the large envelope with the others, and then deposited the large envelope in her private ■drawer in her brother's safe, locked the same and retained the key in her possession from that time forward until the testator’s death. She occasionally opened this private drawer between that time and the date of her brother’s death, and probably occasionally removed the large envelope therefrom for the purpose of rearranging the contents of the compartment, but she retained the actual custody and possession of the package as she originally received it, and at the date of the death of her brother it was still in her possession. On the day of the funeral, and after the burial, there had assembled at the house a number of relatives of tlie family, and among the others, decedent’s brother, John J. Merriam. William L. Dutcher and the complainant, who were the executors of the will. John J. Merriam called u.pon Mrs. Huntington to produce Mr. Merriam’s private papers. She must in some way have obtained the'key to the testator’s private compartment in the safe, because she appears to have produced papers therefrom, and at the time of their production and delivery to her brother, John J. Merriam, she delivered to him the large envelope containing the nine small ones, including the one addressed to herself, all of which he took out of the room with him. Fifteen or twenty minutes later Mrs. Huntington received the envelopes again into her possession from William L. Dutcher, now deceased, who was one of the executors, to whom they had apparently been delivered by John J. Merriam, and who said that it was thought proper, inasmuch as she had been custodian of the papers, that she should present them to Judge Swayze in the presence of those who were to hear the reading of the will. To this she assented, and, at the time of the reading of the will, she gave them to Judge Swaj^ze, but she does not remember that a word was said by either of them about it at the time. From that time forward the envelopes remained in the possession and custody of the executors of Mr. Merriam’s will, until the distribution thereof in accordance with the arrangement made on March 26th, 1901, by Exhibit C 8, called the indemnity agreement.

Down to the date of the indemnity agreement it does not appear that anybody had full knowledge of the contents of all the nine envelopes. They are mentioned in the indemnity agreement as containing certificates of shares of stock of the shoe company, but without mentioning the number of shares in each. It now appears that the envelopes which contained the names' of James E. Warbasse, George L. Dutcher and John Tozer contained their several promissory notes which had been long before made to the order of the testator, with shares of the stock of the shoe company as collateral security for the payment of the notes; and at the hearing it turned out that those represented transactions by which these three men purchased stock in the shoe company from Mr. Merriam, gave their notes thereof, and transferred back the shares so purchased as collateral security for payment of their notes. The other six envelopes contained nothing but certificates of shares in the shoe company.

Under this state of facts were the so-called donees entitled to the shares of stock certificates and notes which were enclosed in their respective envelopes at the time of the death of Henry W. Merriam?

I pause at this point to say a word about the so-called indemnity agreement. In 1901 it seems to have been considered advisable, or at least desirable, that there should be a distribution of the stock certificates which were contained in the envelopes among (he persons who claimed to be entitled thereto. Such distribution was made by consent of all the persons who were of full age,.but could not be consented to by the Lane children or tire youngest Dutcher child because of their minority. Mrs. Huntington and her brother, John J. Merriam, thereupon indemnified the executors in the manner set out in the indemnity agreement against any loss which might accrue against them by reason of such distribution. I do not find that this agreement has in any respect varied, changed or altered any of the rights of any of the parties of this litigation as those rights stood at the time of the death of the testator. I consider the agreement as one of mere indemnity and as an instrument to which the complainant may resort in case any claim shall be established against him by tire infant defendants to this suit. In my opinion the rights of all these parties are to be adjudicated upon as of the date of the testator’s death, and I do not find that anything was done by the agreement which has abrogated any of their rights.

The claims made by the so-called donees of the shoe company’s stock rests entirely upon a conversation or conversations had between the testator and Mrs. Huntington, who is one of the-claimants. If under the rule of evidence established by section 4 of the act of 1900 her testimony shall be held to be inadmissible, then the whole claim of the so-called donees must fail, for then there would be no evidence of either a donative intention on the part of the testator or of the delivery of the-subject-matter of the so-called gift. Her evidence was admitted for reasons stated on page 168 of the record. The case-upon which reliance was then placed (McKinley v. Coe, 66 N. J. Eq. (21 Dick.) 70) seems to have been approved by the court of errors and appeals in the case of Cowdrey v. Cowdrey, 71 N. J. Eq. (1 Buch.) 353; affirmed, 72 N. J. Eq. (2 Buch.) 951, under circumstances which point to the applicability of its principles to this case. I must say, however, that the question of the admissibility of this testimony is very obscure, and I admitted it with a degree of doubt which fully justifies a review by the court of last resort.' A well-considered case on the other side of the question is Van Wagenen v. Bonnot, 72 N. J. Eq. (2 Buch.) 143.

But accepting Mrs. Huntington's evidence, and giving it the full force and effect of undoubted admissibility, does it demonstrate the facts necessary to the establishment of a completed gift of the shares in question? The general subject of gifts has been dealt with by the courts of this state, including the court of last resort, so many times and under so many circumstances that there can be no question about the rule which prevails in this jurisdiction, I adopt in its entirety the conclusion reached by Yice-Chancellor Bergen in his opinion in Taylor v. Coriell, 66 N. J. Eq. (21 Dick.) 262, which holds that in order to establish a gift inter vivos the following factors must appear— first, a donative intention on the part of the donor; second, an actual delivery of the subject-matter of the gift except in cases where it is a chose in action, like a certificate of shares of stock or evidence of indebtedness, in which case the delivery must be of that variety of which it is most capable (Matthews v. Hoagland, 48 N. J. Eq. (3 Dick.) 455); third, the donor must strip himself of all ownership and dominion over the subject-matter of the gift. These requisites appear in all our eases. Stevenson v. Earl (Court of Errors and Appeals), 65 N. J. Eq. (20 Dick.) 721. There is no difficulty in ascertaining what the law is. The ascertainment of the facts and their application to the well-settled rules of law constitute the difficulty in this case.

Let us suppose then that Mrs. Huntington’s evidence is clearly admissible and that we have it before us as the basis of ascertaining the fact as to the gift. Let us take her testimony and apply to it the ordinary tests which prevail for ascertaining its credibility, truthfulness, good faith and reliability. In other words, admitting her testimony, let us ascertain how it on its merits'bears out the claims of the so-called donees. There is one matter, however, which ought to be alluded to before touching the merits. Mrs. Huntington’s testimony was given in December, 1912; it relates to the conversations which took place in 1907 and early in 1908. As far as the testimony shows she had ho occasion to recall these conversations until after the death of her brother, the testator, which occurred in October, 1900, at which time, or soon thereafter, she did have occasion to notify the executors of Mr. Merriam’s will, of the circumstances under which she became possessed of the shares of stock in question. She appeared at the time of the hearing about sixty years of age. She is now called upon to give, in the greatest possible detail, an important conversation had with her brother fifteen years or thereabouts previously, without having made any note or memorandum of it, or having in her possession anything corroborative of these details. She has a vital interest in stating the conversations in such a manner as to favor her own pecuniary advantage, because upon her statement depends the question whether she shall receive five hundred and sixty-eight shares of the stock in question. This is not referred to for the purpose of charging Mrs. Huntington with any willful or intentional variation from the truth, but to demonstrate the care with which her evidence must be examined, and the weight that should be accorded to it.

Again, I do not see how the events which attended the first so-called delivery to Mrs. Huntington in 1897 cut any figure in this cause, except possibly to indicate that Mr. Merriam then had in mind the idea that he could withdraw the gift at any time, arguing therefrom that he might have had subsequently the same idea concerning his right to interfere in the second delivery. But in view; of my findings, which will be stated later on, I do not see how anything that was said or done on that first occasion can aifect in the slightest degree the real issue made up by the pleadings.

IVe come notv to the discussion of the case upon its merits. 1 have no doubt of the donative intention which influenced Mr. Merriam in placing the stock in question in the hands of his sister. I think that he undoubtedly meant that the six persons whose names appeared upon the envelopes containing the certificates of stock, and the three persons whose names appeared upon the envelopes containing their several promissory notes, with certificates of stock as collateral, were meant by Mr. Merriam to be his beneficiaries, to the extent indicated by the number of shares and notes contained in their respective envelopes. This leaves open only the question of delivery and the subsiduary question whether the so-called donor, in case there was a delivery, stripped himself of all control and dominion over the shares in question. I feel no hesitation whatever in declaring that there was no delivery of the certificates of stock contained in the nine envelopes, either to Mrs. Huntington herself or to the other eight persons whose names appeared upon the envelopes. All the shares of stock contained in the nine envelopes had the proper endorsements for transfer on the books of the company, so that if there had been an actual delivery a valid and legal transfer could have been made without further waitings; but such transfers were not made, and the shares of stock continued to stand in the name of Mr. Merriam and did so stand at the time of his death. In my opinion it would have been entirely competent and lawful for Mr. Merriam to have demanded and received back into his possession all the certificates which he had handed to his sister, and to have made sale of the shares and delivery of new certificates therefor, or have made such transfers thereof on the books of the company as he saw* fit. The delivery of shares in a corporation is symbolical, for the reason that the shares themselves being intangible are incapable of actual tradition from hand to hand. This symbolical delivery is effected by a tradition of the certificate as a symbol of the shares. I do not think that the delivery of the certificates to Mrs. Huntington, with instructions to deliver them to the parties named, in her discretion as to time, is such a delivery in prcesenti as carried title immediately to the persons whose names were severally endorsed upon the •envelopes. It' any relation of agency was created by the transaction it was Mrs. Huntington’s agency for Mr. Merriam. It ■could not well have been an agency in favor of the intended ■donees, because with the exception of Mrs. Huntington they knew nothing of the transaction. Neither do I find in these ■circumstances the creation of a trust in Mrs. Huntington in favor of the intended donees. The testimony of Mrs. Huntington upon which the so-called donees must rely is explicit on the point of the time of delivery. There -was no< direction to make the delivery immediately, or as soon as possible, or in the ordinary round of events, or within any particular period. It was to be done at her discretion, and the reason of confiding such wide discretion in her was apparently the fact that Mr. Merriam’s health was not good, and that he did not desire to encounter the comments of the people on his action.

It is well to keep in mind the fact that the whole case on the part of the donees rests upon the recollection of Mrs. Huntington of an important conversation which took place many years ago. A- careful examination of her testimony convinces me that while she intended to State the exact facts, her memory of the circumstances is notably defective, and on some important points contradictory and uncertain. It is a kind of testimony which I hesitate to take as the basis of a decree to dispose of property of the approximate value of $99,000.

The case of Young v. Young, 80 N. Y. presents a striking parallel to the case at bar. In that case the donor owmed municipal coupon bonds which upon his death were found in two packages enclosed in envelopes upon which wrere endorsed memoranda signed by him describing the bonds enclosed by numbers, and stating that certain of them belonged to his son, William, and others to his son, John. Then followed a statement of which the following is a copy: “But the inst. to become due thereon is owmed and reserved by me for so long as I live, at my death they belong absolutely and entirely to them and their heirs,” using the phrase “absolutely and entirely” in one case and “wholly and entirely” in the other. The envelopes were placed in a safe which belonged to the donor, to which William H. Young had access, and they wrere found there at tlie time of his death. The court of appeals held that the do-native intention appeared, but that there was no delivery and no intention to deliver the bonds because it was necessary that he should have them in order to collect the interest which he had reserved. The testimony shows that the donor had cut off the coupons, and that on some occasions his son, William, assisted him in so doing, but that William never asserted any ownership over the bonds as against his father. The court says: “This is the substance of all the testimony by which the delivery to the donee is sought to be established. It shows that the deceased at no. time parted with the possession or control of the bonds, but merely confirms the intention expressed in the memoranda. The change of the position of the bonds in the safe where they were kept, from the pigeonhole to the compartment, might have been significant had William been the only donee and had the intended gift been accompanied by any reservation. But under the existing circumstances it cannot be construed into a delivery of the bonds. * * * The memorandum on each envelope sa)^ that the interest to become due on the bonds is 'owned and reserved’ by the donor. This interest up to the dates of its maturity of the bonds respectively was represented by coupons attached to the bonds. It clearly could not have been intended to deliver them, for so many of them as might become due during the life of the donor were reserved from the gift, as the interest was expressly declared to be 'owned’ by the donor, and not parted with. The possession of these coupons was necessary to enable him to collect the interest, and he availed himself of it for that purpose from time to time. No intention was manifest to deliver up these vouchers, and look *to the donees for the interest. No division of the coupons could be made, for the period of the donor’s life was uncertain; and, further, if all the coupons were retained by the donor they might not represent the entire interest reserved by him.”

The opinion likewise contains an- argument to show that no ■ trust was created. I fail to see any difference between the reservation of the interest in the Young Case and the actual taking of the dividends in this case. The action of the donor in each case demonstrates his intention to retain control of the fund tuitil his death, and thus perform a testamentary act without the formalities attending the execution of a will.

But it may be said that Mrs. Huntington’s certificate stands on a different basis from that on which the others stand. She testified that when the nine envelopes were laid out before her by her brother, and she found that one was addressed to her, he said to her “there is an envelope with your name on, and you can receive it now,” and that she then opened it and thanked him for what she found therein, namely, a certificate of the stock in the shoe company for five hundred and sixty-eight shares. Perhaps if this fact stood alone, and it were supported by competent legal evidence, it might he sufficient to carry title, upon the ground that there was a delivery to her at that time. She could then have taken the certificate and had the shares transferred on the books of the company and she would have been the undisputed owner. But instead of accepting the intended gift, she treated her own certificate in the same manner in which she treated all the others. Having destroyed the envelope in which Mr. Merriam had enclosed it, she on that day or on the next day, re-enclosed it in another envelope which she provided herself, endorsed her name on it in her own handwriting, laid it away with the other envelopes, and after klr. Merriam’s death delivered it to the executors without making any special claim for it. These acts seem to me to negative the idea that she considered that there was at that time a delivery to her.

There are, however, other objections which apply to all the certificates and which lead me to the final conclusion that Mr. Merriam did not intend to surrender his control of the shoe company by means of a gift of his stock holdings until Iris1' death should supervene, and that he did not do- so. He was the holder and owner of one thousand and eighty shares of the stock; this gave him control. By the scheme of gift which he had projected he had placed all his holdings in these nine envelopes, and he must have known as a business man that if the envelopes were delivered and the stock transferred he would have been ousted of his control of the corporation and of all interest therein. All his actions thereafter negative any such intention. In addition to the non-delivery during his lifetime the circumstances show that he not only intended toi but did retain control of the shares in question. He voted on them at the annual meetings of the company; he received the dividends and accounted to no one therefor; he continued in control of the company in the same manner in which he had controlled it for many years previously. Mrs. Huntington owned at the time of this transaction twenty shares of the stock which stood in her name on the books of the company. She received her dividends regularly on these shares, but she neither received nor demanded the dividends on the five hundred and sixty-eight shares, the certificates for 'which were contained, in the envelope. The account of Mrs. Huntington on the books of- the company printed on page 357 of the state of the case shows this to be a fact.

It will therefore be seen that the donee in this ease, even though there were a donative intention and a symbolical delivery, did not strip himself of all dominion and control over the subject-matter of the gift, nor indeed do I think that he meant to do so. The case of the so-called donees must therefore fail, and the stock in question must be declared to be an asset of the estate, for which the complainant must account.

The complainant for his indemnification can at once apply the securities held by him in pledge to make up the deficiency contemplated by the indemnity agreement. If, however, it should be necessary for him to resort to that agreement after the application of the fund pledged, it may be doubted whether jurisdiction over a cause of action arising thereunder exists in this court. Primarily a suit on such an agreement would lie only in the common law courts, but I do not deem it necessary to decide this point at the present time. It may be reserved on the decree and dealt with when the necessity arises.

There is no objection to permitting the trustee to resign, but a decree to that effect cannot be made until the passage and allowance of his accounts.

I will advise a decree in accordance with those conclusions.


text:
    Marcus Goodbody et al. v. Ordener J. Delaney et al.
    [Decided June 5th, 1913.]
    1. Evidence examined in a suit brought by the stockholders of the Fisheries Company, a New Jersey corporation, against Ordener J. Delaney, to compel the restitution by him to the treasury of the company of the value of certain property alleged to have been abstracted from the company by him in the process of reorganizing it after its failure, and for the 'further purpose of compelling him to account 'for certain profits made by him in the year's 1908 and 1909, by the use of the property of the Fisheries Company under leases made to himself or to a corporation of which he was the principal stockholder, be being a director, the general manager and one of the receivers of the Fisheries Company when insolvency finally supervened, and held, that he is liable to account therefor upon the ground that he occupied a fiduciary position with relation to the Fisheries Company and its stockholders, and that he either concealed or did not disclose the extent to which he was making a profit out of the transactions.
    2. The defence of an estoppel because at a meeting of an independent board of directors of the company it was voted that it was not expedient for the company to bring suit against Delanej' on account of the allegations against him, is not available, for there was no release executed by the company to Delaney, and the company by a mere vote by its directors could not estop itself from rescinding its resolution and bringing suit the next daj' after the passing thereof. If there is an estoppel it can only lie in facts which go to show that all parties acted upon the vote and that it would be inequitable to allow it afterwards to be rescinded or disregarded.
    3. If estoppel is claimed by reason of any act of the company, the court will look into the bill in its entirety, and determine whether, under all the circumstances, the complainant has made such a showing of wrong on the part of the corporation or its officers, and injury to himself, as will justify the suit. If it be true, as alleged, that Delaney, trustee as he was, diverted several hundred thousand dollars worth of property from the company to himself by means of a manipulation of the reorganization scheme, and without notice to the stockholders of the company, a case has been made which gives the complainants an equity, and negatives any claim of estoppel which it might otherwise lie in his mouth to assert.

      4. The equitable defence of laches is not available to the defendant Delaney upon the ground that a certain party is dead, he having died only a few months after these transactions begun, and long before it had been discovered that Delaney was chargeable under the present state of facts.
    On final hearing on bill, answer, replication and proofs.

      Messrs. Humphreys $ Sumner, for the complainants.

      Mr. Samuel H. Richards and Mr. Robert H. McCarter, for the defendants.
   Howell, V. C.

This suit is brought by stockholders of the Fisheries Company, a New Jersey corporation, against Ordener J. Delaney, to compel the restitution by him to the treasury of the company of the value of certain property alleged to have been abstracted from the company by him in the process of reorganizing it after its failure, and for the further purpose of compelling him to account for certain profits made by him in the years 1908 and 1909 by the use of the property of the Fisheries Company under leases made to himself or to a corporation of which he was the principal stockholder. In other words, he is sought to be made liable personally for the diversion of funds of the company of which he was a director, the general manager and one of its receivers when insolvency finally supervened.

The Fisheries Company was incorporated on May 25th, 1900, for the purpose of engaging in the catching of fish in the ocean and the conversion thereof into commercial products, such as oil, fertilizers, &c. Its history from the date of its incorporation down to October 19th, 1907, when it was declared insolvent, is not before the court. On the last-named day the United States Circuit Court for the District of New Jersey, on complaint made for that purpose, appointed two receivers for it, of whom the defendant Delaney was one. Steps were taken almost immediately looking toward a reorganization of the company, the satisfaction in some way of its debts and the restoration of its property to it. In order to force Heller, Hirsch & Company, a New York corporation, into compliance therewith, a suit was brought by the receivers against it, a bondholder of the Fisheries Company, to set aside its bond holdings on the ground of fraud. This bill was filed on January loth, 1908, a date which I consider important in the history of the transaction, as the beginning of the reorganizing proceedings. The filing of this bill seems to' have had the desired effect. On January 21st, 1908, six days after the filing of the bill, Heller, Hirsch & Company entered into an agreement (page 58) with C. Monteith Gilpin and Benjamin Tuska, as trustees, in which it was recited that Heller, Hirsch & Company were the owners of two hundred and sixty-seven of the first mortgage bonds of the Fisheries Company, of the par value of $1,000 each, secured by a mortgage held by the Guaranty Trust Company, and that proceedings had been taken by the receivers of the Fisheries Company to invalidate a large number of their bonds. It was thereupon agreed that if that suit should be discontinued and proper releases made, Heller, Hirsch & Company would assign, transfer and set over to the said Gilpin and Tuska, trustees, two hundred and sixty-seven of the Fisheries Company’s bonds, and two thousand eight hundred and ninety-four shares of its preferred stock, and that the said trustees should thereupon cause to be conveyed to Heller, Hirsch & Company, free and clear of all liens whatsoever, including the mortgage securing the said bonds, all the property contained in Schedule A thereunto annexed, and would likewise cause to be conveyed to the International Securities Corporation the ju’operty described in Schedule B thereunto annexed; and Heller, Hirsch & Company authorized the said trustees in their own names, but as trustees under that agreement to make the offer therein contained to the Fisheries Company, or to its receivers, or to such reorganization or other committee as might thereafter undertake to act in the premises. Said trustees agreed that they would accept the terms of that agreement when the same might become effective.

There are three matters connected with that agreement which deserve mention at this point: one is that Gilpin and Tuska in their trust capacity were self-constituted, self-appointed, except in so far as Heller, Hirsch & Company may have requested them to act, and that they held title to no property whatever. Another matter is that the so-called agreement contains nothing binding upon any of the parties to it. It looks forward to the making of a binding agreement, but is not such in presenil. -The third and most important branch of it is that the Schedules A and B therein referred to and thereto annexed are schedules of property belonging to the Fisheries Company, and not to either Heller, Hirsch & Company or Gilpin and Tuska, trustees. There is no explanation in the case of the reason why these gentlemen should be dealing with the property of the Fisheries Company and dividing it by schedules into two parts, nor as to who made the division, or upon what principle it was made; but for reasons which will hereafter appear, I think it safe to say. that the agreement in question, and the arrangement of the schedules thereto, was made upon the request and by the direction of Mr. Ordener J. Delaney, the defendant to this suit.

On January 29th, 1908, Tuska and Gilpin, “as trustees,” wrote a letter to the reorganization committee of the Fisheries Company, in which they described themselves as trustees for certain bondholders of the Fisheries Company, and submitted a proposition which contemplated the delivery to the reorganization committee of two hundred and sixty-seven bonds of that company and about two thousand eight hundred and ninety-four shares of its preferred stock, provided the committee would cause to be conveyed and assigned to said trustees certain property which is described in the letter. There are two things concerning this letter which deserve mention at this point: one is that the letter was addressed to the reorganization committee of the Fisheries Company. As a matter of fact, there was at that time no reorganization committee of the Fisheries Company, and it may be doubtful whether any such committee was ever authorized to act. It does, however, appear that later on, and on February loth, 1908, such a committee was “self-constituted,” consisting of J. B. MacAllister, an officer of the Franklin Bank of Philadelphia, E. H. Ferry, an officer of the Hanover Bank of New York, and Thomas B. Harned, a lawyer practicing in Philadelphia. The document in which this appears is Schedule No. 3 to the bill (page 64); it described the committee as a self-constituted bondholders, stockholders and creditors committee of the Fisheries Company. This agreement deals wholly with the property and the, indebtedness of the Fisheries Company, but does not appear to have been authorized by that company or anyone on its behalf. The agreement provides that there shall be deposited with the committee, by Joseph Wharton, $150,000 par value of the Fisheries bonds, seven thousand two hundred and thirty-five shares of its common stock, and seven thousand one hundred and twenty shares of its preferred stock, which should be contributed by Mr. Wharton for the purpose of satisfying creditors of the Fisheries Company, and that he should receive in return therefor no consideration except a complete release from all liability of every nature and character, whether as stockholder or othérwise, and in particular a full and complete release by the Hanover National Bank of New York of any suit then pending or which might thereafter be brought against him by it by reason of his connection with the Fisheries Company; and that upon receipt of the said stock and bonds by the said committee they should duly receipt for the same, and as such committee agree to indemnify him against any liability whatever by reason of his connection with the said Fisheries Company. The agreement likewise provides for the deposit with the committee of the Heller, Hirsch & Company bonds, aggregating $267,000, and two thousand eight hundred and ninety-four shares of the company’s preferred stock. And it proceeds thereafter to arrange for the disposition of the property of the Fisheries Company, the satisfaction of its debts,, and the reorganization of its business. Three days later the court in which, the above-mentioned suit was brought vacated all proceedings relating to the service of process on the defendants, and two days later than that ordered that in case the matters in dispute therein were adjusted, and agreements in relation thereto carried out, the receivers should discontinue the suit against Heller, Hirsch & Company and execute proper instruments of settlement and release. Thereupon the suit against Heller, Hirsch & Company came to an end. On February 25th, 1908, an order was entered in the administration suit discharging the receivers and turning the assets over to the company. This put the company back into the control of its own affairs, but with arrangements made which if carried out would eventually strip it of a large amount of its property. Two days after the company was reinvested wiih the title to its property an agreement was made between Delaney and Gilpin (page 169) dividing the stock of the company between them, and on the same day Delaney caused the New Jersey Fish Products Company to be incorporated. After that the events occurred rapidly. On March 2d, 1908, there was a meeting of the board of directors to pass upon the reorganization plan, at which Mr. Wharton resigned as president, and Mr. Delaney Avas elected in his stead, and at which there was provision made for calling a stockholders’ meeting to act upon the reorganization proposition of the creditors’ committee.- Such meeting was held on March 16th, 1908, and ratified the action of the committee. Then came the conveyances of the property known as Schedule B property. On March 14th, 1908, it was conveyed by the Fisheries Company to Chester M. Headley, who, on the same day, conveyed the same to Gilpin and Tuska, trustees. On March 17th, 1908, Gilpin and Tuska, trustees, conveyed it to the International Securities Corporation, and on the same day the International Securities Corporation conveyed the said property to the Ne\v Jersey Fish Products Company, which had been incorporated a month before. Upon the dissolution of the New Jersey Fish Products Company two years later the Schedule B property was transferred by it to the Menhaden Fishing Company, which was incorporated on May 28th, 1908, of which Mr. Delaney Avas the principal stockholder. Mr. Delaney, at the time of the failure of the Fisheries Company, was its general manager; he continued in that capacity until March 2d, 1908, when he was elected president, and in the meantime, for a short period, he had acted as one of the receivers appointed by the United States Circuit Court for the District of New Jersey. His position in each one of these three places was that of a trustee; he was bound to do the best he could for his cestui que trusts, to make full disclosure to them of all the affairs of the company which came within his authority, and not to betray them or permit anyone else to do so, without giving them notice and an opportunity to litigate.

Down to this point the complainants allege that it fully appears that the property known as Schedule B property, which had a large value, had been taken from the company without any consideration whatever, and T am constrained to hold to that positron. At the time the Fisheries Company transferred this property to Headley it is not claimed that any consideration passed. In the answer filed by Mr. Delaney it is alleged, and it likewise appears in one of the agreements, that Mr. Wharton deposited his bonds and stock with the committee upon condition that he should be released from all liability to the Hanover bank, the Franklin bank and to the creditors; but it appears from the testimony that although the Hanover bank had brought suit against Mr. Wharton to compel him to pay the indebtedness of the Fisheries Company to that bank, the bank claimed only a moral obligation on his part, and it is not claimed that he was under any obligation of any sort to the Franklin bank, or to any of the other creditors. Neither does it appear that his liability as a stockholder was ever raised or insisted upon.

Mr. Delaney in his evidence attempts to justify the transaction concerning the Schedule B property by saying that it was necessary to provide for compensation to Mr. Wharton for the delivery of his stock and bonds to the reorganization committee; but it does not appear that Mr. Delaney ever accounted to Mr. Wharton, or since his death, which occurred in November, 1908, to his personal representatives, but instead thereof he alleges that he retained control of the Schedule B property for the reason that Mr. Wharton owed him '-$150,000 on another “deal,” which he had never paid or satisfied This statement seems to me to be disingenuous, and I think the mere reading of his deposition will convince an unprejudiced mind that the statement is untrue. But there are other reasons for such conviction. It does not appear that he ever settled with the Whartons in any way, and to show that it was a mere afterthought, it is necessary only to read his answer to the bill, which omits all reference to any such agreement between him. and Mr. Wharton. In paragraph 22 of his answer he denies that he falsely or in any way represented to Gilpin that the provision in the agreement between the trastees and Heller, Hirseh & Company in regard to the conveyance of the property mentioned in Schedule B, was for the benefit of Joseph Wharton, or that Joseph Wharton was to receive the Schedule B property. And further along in the same paragraph he says that he is unable to state how persons acquainted with the affairs of the Fisheries Company considered him as being the personal representative of Mr. Wharton, and denies that he ivas so considered, or that he made any such representations as are stated in the bill in that behalf, either to Mr. Wharton or to any other person, that he was acting as the agent of Wharton in obtaining shares of the stoAc of the New Jerse3r Fish Products Company; and he there denies that he made any statement or representation that the said shares of stock were to become the property of Wharton, or any similar statement or representations to Gilpin or to any other person. This is a position that is entirely inconsistent with the evidence that he gave on the final hearing. Delane3q therefore, puts himself in this anomalous situation. He declares that the Schedule B property was reserved to satisfy Mr. Wharton for the deposit of his bonds and his stock and the clearance of his liability to the banks and to the creditors of the compa^, while in his answer he practically denies all connection between Mr. Wharton and the transaction, and then in his testimony attempts to cover up his ill-gotten gains by the statement that he retained the same because Mr. Wharton was indebted to him upon another transaction concerning which he gives no details, nor is there to be found in the case any evidence whatever which will support and corroborate his statement in that behalf. The pleadings in the cause give no intimation of any such state of facts. There is no mention thereof except by Mr. Delaney himself. It cannot be that so important a transaction as one involving $150,000 could rest in the memories of the two parties to it without any writing whatever to preserve its memory. Yet no such writings are produced, nor is their existence hinted at. I am convinced that this whole defence is without foundation, in fact, and was invented by Delaney at the last moment for the purpose of making at least a plausible defence to the strong case made against him by the complainants.

Again, the only real defence which Delaney has to the suit relates to Mr. Wharton’s connection with the transaction. If Wharton was no party to it, and it would seem from some portions of the answer as if Delaney meant to say that he was not, then the whole defence fails. In my opinion it has so failed, and Delaney should account to the company for the value of the Schedule B property which was taken from the company not only by his consent but by his connivance and procurement.

The other cause of complaint consists in the allegation that Delaney obtained leases of the property remaining to the Fisheries Company for the years 1908 and 1909 to his company, the Menhaden Fishing Company, without disclosing to the directors that the leases were for the benefit of himself, or of a company of which he was the principal stockholder, or, in other words, that by concealment of his interest in the lease he obtained from the Fisheries Company a right out of which he made large profits. ’ I find, as a matter of fact, that the allegation is true, and that Mr. Delaney has thus made himself liable to pay into the company whatever profits were made by him during the terms of the two leases.

The defendant Delaney is held liable upon the charges contained in the bill upon the ground that he occupied a fiduciary position with relation to the Fisheries Company and its stockholders, and that he either concealed or did not disclose the extent to which he was making a profit out of the transactions. This question of disclosure was considered by me in the ease of Arnold v. Searing, 78 N. J. Eq. (8 Buch.) 146. That was a case involving the question of promoter’s profits. In this case I place Mr. Delaney in the position of a promoter. The case discloses the fact that the negotiations for the reorganization were begun long before anything was put in writing, and that they were begun by Mr. Delane}q who had long conferences with the parties in interest, and it is quite apparent that the whole thing was prearranged with great cunning, so that all the important transactions which led to the disposition of so much property and the rearrangement of so many securities and the transactions with so many men could be completed between January 15th, 1908, and the month of March of the same year. It is quite apparent to my mind that Mr. Delaney himself arranged for the abstraction of the Schedule B property from the company, and it is quite as apparent that neither he nor anyone on his behalf ever made any disclosure to the board of directors or to the company that such abstraction was about to take place.

The defendant by way of defence objects to the inference to be drawn from the facts alleged in the bill and proved. But, in my opinion, the conclusion is irresistible, and unless it is borne down by the questions of law raised by the defendant, the complainant must prevail at all points. The legal defences are two —first, that the company is estopped from any proceeding to collect from Mr. Delaney, because at a meeting of an independent board of directors it was voted that it was not expedient for the company to bring suit against Mr. Delaney on account of the allegations against him. It will be observed that there was no release executed by the company to Delaney, and I fail to see how the company by the mere vote of its directors could estop itself from rescinding their resolution and bringing suit the next day. The estoppel cannot lie in the resolution. If there is an estoppel, it can only lie in facts which go to show that all parties acted upon the vote and that it would be inequitable to allow it afterwards to be rescinded or disregarded. I think the true rule governing this case is found in Groel v. United Electric Co., 70 N. J. Eq. (4 Robb.) 616, and in Corbus v. Alaska Gold Mining Co., 187 U. S. 455, and Siegman v. Kissel, 71 N. J. Eq. (1 Buch.) 123; affirmed, 72 N. J. Eq. (2 Buch.) 403. If, therefore, an estoppel is claimed by reason of any act of the company, the court will look into the bill in its entirety and determine whether under all the circumstances the complainant has made such a showing of wrong on the part of the corporation or its officers, and injury to himself, as will, justify the suit. If it is true, as alleged, that Mr. Delaney, trustee as he was, diverted several hundred thousand dollars’ worth of property from the company to himself by means of a manipulation of the reorganization scheme, and without notice to the stockholders of the company, in my opinion a ease has been made which gives the complainants an equity and negatives any claim of estoppel which it might otherwise lie in the mouth of Mr. Delaney to assert.

Neither do I think that'the defendant can avail himself of the equitable defence of laches. It is true that Mr. Wharton is dead, but he died only a few months after these transactions began (November, 1908) and long before it had been discovered that Mr. Delaney was chargeable under the present state of facts. This appears to be the only ground of fact on which to base the defence of laches.

My conclusion, therefore, is that the defendant Delaney must account for the property and the profits so abstracted from the Fisheries Company before a master, to be appointed by the decree. On confirmation of the master’s report provision will be made by appropriate decree for the disposition of the fund, counsel fees, costs, &c.