author: Emery, Y. C.

text:
    Charles H. Smith v. Jacob Wigler et al.
    [Decided February 16th, 1907.]
    1. A surety is not required to surrender any security given him against loss until his liability to p>ay is ended.
    2. The burden is on a surety, in a suit to compel him to reassign a mortgage assigned to him as indemnity, to show that the mortgage was intended to secure him as surety, not only on a bail bond then executed, but on others that it might be necessary to give in the proceedings.
    3. Evidence in a suit against a surety to compel him to reassign a mortgage assigned to him as indemnity considered and held that com plainant was entitled to a decree directing a reassignment.

      Heard on bill, answers, replication and proofs.

      Mr. Frank F. Bradner, for the complainant.

      Mr. Louis Hood, for the defendant Wigler.
   Emery, Y. C.

Complainant, who owned a bond and mortgage for $800, given by the defendant Ward, on lands in Essex county, assigned the bond and mortgage to the defendant Wigler. The assignment, dated August 18th, 1903, was in writing, and on its face was an absolute assignment, but it is admitted that the assignment was not absolute, but was intended to secure defendant Wigler against loss, by reason of his becoming bail on a recognizance in a criminal proceeding against one Edmund J. Smith, complainant’s brother.

The complainant’s brother had been arrested on a warrant issued July 31st, 1903, by United States Commissioner Jones, on a complaint for violation of the National Banking laws, and on August 18th was in the custody of the United States marshal before the commissioner. On that day defendant Wigler and one Hargraves gave bail in the sum of $2,500 for the appearance of the prisoner before the commissioner on August 27th, 1903.

The defendant Wigler became bail at the request of the complainant and his brother, Albridge C. Smith, and to secure him against loss to the extent of $1,250 (one-half of the bail bond) it was agreed that he should be secured by the mortgage in question for $800, to be assigned by complainant, and by a note for $450, to be given by Albridge C. Smith. The mortgage was assigned, and, together with the note for $450, delivered to Wigler just before or at the time of his becoming bail on the 18th.

Complainant swears that according to his recollection there was a paper written at the time declaring the purpose of the assignment, but none has been produced, and no other witness corroborates him on this point. The note for $450, written by Albridge C. Smith, who was himself an experienced lawyer, did express its purpose, as follows:

“Newark, N. J., August 18th, 1903.
“In consideration of Jacob Wigler becoming surety for the appearance of Edmund J. Smith to answer a charge made against him on behalf of the Merchants National Bank of Newark, N. J., before S. Howell Jones, U. S. commissioner, I hereby agree to pay to him any loss he may suffer or incur by reason of being such surety, to the amount of $450, if the said Edmund J. Smith shail neglect or refuse to appear in compliance with his recognizance. (Signed) Akbridge C. Smith.”

The accused did appear before the commissioner on August 27th, 1903, and, after a hearing on that day, was directed to be held in custody until bail in the sum of $5,000 for his appearance at the next term of the United States district court to answer any indictment by the grand jury. lie entered into recognizance in this increased sum of $5,000, with the same sureties and was released. This recognizance was forfeited and judgment on it for $5,000 against Wigler has been entered, upon which execution has been delivered, but no payment on account of it seems to have been made.

The disputed question in the ease is one purely of fact and is, whether the mortgage was assigned solely to secure Wigler on the recognizance of $2,500 for the prisoner’s appearance before the commissioner for the examination on August 27th, or whether it was to secure him as well on any recognizance to be subsequently entered into for Edmund J. Smith’s appearance to answer to any indictment found by the grand jury. If it was for appearance before the commissioner only, then Wigler’s liability on the recognizance for that purpose is discharged and complainant is entitled to a return of the mortgage. If, however, the assignment was to secure defendant for the second recognizance as well, then, inasmuch as his liability under that recognizance has been fixed, and has not been wholly discharged, complainant is not entitled to the return of the security given to protect him. While it is true, as complainant insists, that under our decisions—Jeffers v. Johnson, 21 N. J. Law (1 Zab.) 73 (Supreme Court, 1847); Miller v. Fries, 66 N. J. Law (37 Vr.) 377 (Supreme Court, 1901)—it has been held that on a bond “to save and keep harmless,” a surety cannot recover before payment, that principle does not require the surrender of any security the surety may have against loss if he does pay, until his liability to pay is ended. If held, as Wigler claims, it may be that the government itself, if necessary, can reach this security in Wigler’s hands for the purpose of satisfying the execution.

Neither complainant, nor his brother, Albridge C. Smith, attended the hearing before the commissioner on the 27th, nor did either of them after the 18th, and befoie the second recognizance was given, have any communication with Wigler. Only one arrangement was made between the Smith brothers and Wigler to secure him for giving bail, and this was made at the commissioner’s office on August 18th, and the disputed question is the extent to which they both then agreed to secure him. For it appears by the evidence of all the witnesses called to the conversation that Wigler was to be secured to the extent of $1,250 by the brothers of Smith—$800 by mortgage to be assigned by complainant, and $450 by the note of the other brother. He was, by the agreement, to have security for $1,250, and no difference was made or suggested as to the terms of security between the mortgage and the note, which together made up the whole security. The note, the only written evidence of any of the terms, limits the security to the appearance before the commissioner, and so far as Albridge C. Smith is concerned, its terms are final and conclusive and no others can be added. Defendant and a witness named Simon swear that both brothers agreed that the security should stand until the ease was disposed of at Trenton, and that Wigler was to renew the recognizance for this purpose on the 27th if the prisoner was held. Both of the Smith brothers deny any such agreement, and say that the security was only for appearance before the commissioner. Their statement is corroborated by the terms of the note written by Smith, and delivered on that day to Wigler. Defendant charges that the note did not express the true agreement, and that the agreement actually made was fraudulently omitted by A. C. Smith, who drew it for himself, and was a deception on Wigler, who could not read. The evidence offered to support this charge of fraud is that of Garside, the United States marshal, who says'that Albridge 0. Smith told him immediately after the agreement was made that he had agreed with Wigler to continue the bail for the grand jury, and that he would not be there on the 27th. Albridge C. Smith denies this positively. The whole question as to the extent to which the mortgage was assigned for security depends on the comparative credibility of the witnesses, affected as it is by the important fact that the extent of the security of the note (admittedly the same as the mortgage) was then fixed in writing.

Under the circumstances of this case the burden is on the defendant, I think, to satisfy the court that security was intended beyond the recognizance then actually entered into, and to show that the note did not express the true agreement between the parties. Upon the whole evidence, I think he has failed to establish this, and I conclude that the note did truly express the substantial agreement upon which both the assignment of mortgage and note were given. Wigler’s general credibility on any point affecting his liability in the case is very seriously affected by his statement, that the commissioner on taking bail on the 27th of August told him it was for the same amount, $2,500, and did not say it was for $5,000. The commissioner denies this, and I believe him. Simon’s evidence, too, must be considered in the light of the fact that, as it now appears, he was the person who in fact called up Wigler to come to the commissioner’s after the hearing on the 27th of August, and told him to go on the new bond. Simon was also instrumental in getting Wigler to go on the first recognizance, for which Wigler was paid $25 by the prisoner. And inasmuch as the whole matter of renewing the bail on the 27th seems to have been undertaken by the prisoner, Simon and Wigler, in the absence of the prisoner’s brothers, and without sending for them, I am inclined to think that these three persons took it for granted that the security would continue if they renewed the bail, either in the same or in an increased amount, and that this view has probably colored the evidence of Wigler and Simon as to the original agreement. But whether this view is correct or not, I am clear that the evidence offered on behalf of defendant has not overcome the evidence of the Smiths, supported as it is by the terms of security written out in the note at the time. The explanation of the brothers of the reason for giving security ■only for a short time is reasonable, and the claim that the true terms of the agreement were fraudulently suppressed from the note is without foundation.

Complainant is entitled to a decree directing the reassignment and delivery of the mortgage and also to an account of the interest received thereon by Wigler.


source: Caselaw Access Project

author: Emery, V. C.

license: Public Domain

text:
    William Naughton v. George W. Elliott.
    [Decided February 19th, 1907.]
    1. Where, in a suit by the vendee in a contract for the sale of land for specific performance, it appeared that after the time when conveyance should have been made defendant had leased the premises, on which there were buildings belonging to complainant, and which he had placed there under a lease, and that defendant had rented the real estate and buildings for a sum amounting to merely the value of the ground rent without regard to the building, on a decree for complainant, defendant should be charged, not only with such ground rent, but with the reasonable additional value of the rent of the buildings.
    2. The fact that, on an application to restrain defendant from collecting the rents and for a receiver, by consent of all parties an order was made authorizing defendant to collect the rent until disposition of the litigation,, did not sustain a contention that defendant had been in charge of the premises as a receiver for a certain period, and that during such period he should not be charged with more rent than he actually received.
    On bill fox specific performance. On settlement of account for rentSj &e.

      Mr. Frederick W. Hope, for the complainant.

      Mr. William J. Leonard and Mr. Sherrerd Depue, for the de-" fendant.
   Emery, V. C.

Complainant, as purchaser, has obtained a decree for specific performance against the vendor in possession, and the question 'now litigated is the amount of rents for which the vendor shall be charged for the property to be conveyed to complainant. He has received $650 a year from December, 1902, to May 10th, 1905, when complainant took possession under order of court, and insists that this is the gross amount of rents with which he is chargeable.

Ordinarily, in the accounting on decree for specific performance, a vendor, in possession and in receipt of tenants’ rents, is chargeable only with the rents actually received, but he may, under special circumstances, be charged with those which without his willful neglect or default he might have received if equitable and proper. Fry Spec. Perf. (4th ed.) §§ 1427, 1428.

The principle as stated by Lord Selbourne, chancellor, in Phillips v. Silvester, L. R. 8 Ch. App. 173, is “that where the vendor retains possession, it must be on the terms of his undertaking the duties of possession, while he insists upon retaining possession. He is pro tanto a trustee in possession for the purchaser, but a trustee who holds the purchaser at arm’s length, and a trustee, therefore, who is bound to do those things he would be bound to do if he were a trustee for any person.”

In the present case the complainant was a lessee of the premises with an option to purchase, which was duly exercised within the time limited, and before the expiration of the lease expiring November 10th, 1902. At that time a tenant was in possession under the complainant at a rental of $1,100, and negotiations were pending for a renewal of the lease. The rental included both the land, to which defendant held the legal title, and the buildings, which were owned by complainant, and were occupied for the purpose of a hotel under a license. Complainant paid $650 rental to defendant for the lands alone. On or shortly after the termination of the complainant’s lease, defendant secured possession of the lands, by threatening to dispossess complainant’s tenant, who then attorned to or leased from him at a rental of $650 a year. The defendant says that this rental was for the lands alone, and both he and the tenant Keenan in their affidavits or depositions called the rental ground rent, and it is the same sum which defendant had for some years received for the land alone: But the tenant occupied the buildings for hotel purposes, and the license was continued from year to year (apparently by the aid of both parties pending this litigation) until complainant received possession.

Defendant has offered and tendered by his answer $800 to the complainant, as the purchase price of the buildings, if the option was not exercised or the buildings removed. While defendant says that he didn’t think the buildings practically worth anything, it is clear, I think, that the continuance of the buildings on the land and their use for hotel purposes pending the litigation was a privilege or right which gave additional value to the premises for renting, and defendant was therefore bound, on renting the property, to see not only that his ground rent was secured, but also that a fair rental value in addition for the use of the buildings for hotel purposes on the land. He has failed either to secure or, so far as the evidence shows, to attempt to secure, as rent, anything more than that which would be rent for the land, all of which he claimed as his own. He seems to have taken the position that he had nothing to do with the rental of the buildings, and that the complainant must either take them off or collect his own rent for them. In this respect he took the risk of being finally held to be a trustee in possession either of the land or buildings.

In addition to the amount which he fixed as the rental value of the lands alone, the defendant should therefore be charged with such additional rent as he might have obtained by adding a fair rental value for the buildings used as a hotel. What this amount should be is not as clear upon the evidence as it should be, but as both parties have submitted all the proofs proposed to be given, I must reach the best conclusion practicable. Complainant claims that Keenan, the tenant, had agreed to renew his lease for $1,000, and that he could have obtained at least this amount from another person. But Keenan denies any final arrangement to pay this amount, and it is apparent that this sum was intended to be paid only if substantial improvements were made. The other offer of $1,100 was not definite or final. Keenan’s present statement is that the $650 paid was all the premises were worth, but, in my judgment, the ground rent alone was worth this amount on the basis of several years’ valuation, and neither Keenan’s nor the defendant’s present statements after the fact ought to be accepted as evidence of very conclusive weight, that in bargaining with complainant’s tenant originally for the lease defendant could not have obtained additional rent for the buildings had he desired to do so.

In the absence of any evidence showing that the defendant made any effort to procure for the rental of the whole property more than the amount of ground rent, he should be charged with a reasonable sum in addition for the occupation of the buildings for hotel purposes. I think $200 a year should be added for this sum, and that the defendant during his occupation should be charged with the gross amount of rent at the rate of $850 a year.

It was urged for defendant that, from December 10th, 1903, he was in charge of the premises as receiver, under an order of that date made in the cause, and, being in possession in that capacity, cannot be charged with more rent than the amount actually received. But this order of December 10th did not have, and was not intended to have, the effect of relieving him from any liability imposed on him as vendor on a subsequent accounting in the suit. It was an order made on an application to restrain him from collecting any rents from the premises in question, under the lease he had made to Keenan, and for a receiver of the premises, and, by consent of all parties, an order was made authorizing defendant

“to collect of the tenant, Keenan, the rent for the land in question in the suit, at the rate of $050 per year, now due, or which may become due, until the suit was disposed of, and to hold this money collected subject to the order of the court,”

and the application for receiver was thereupon suspended. This order merely allowed defendant to collect the rent under the lease he had already made, he stipulating to hold the money collected. The order did not in terms pass on the question of ultimate liability on accounting for rents as vendor trustee in possession if complainant obtained a decree, and no such question was then at issue. Defendant was not a receiver put in possession by the court, or acting as its officer, but was a defendant receiving rents under a lease made by himself, who, on his stipulation to hold the rents received, subject to the order of the court, was allowed to continue the collection of rents under the lease already made. The application to appoint any receiver was not acted on, but was expressly postponed. This order of December 10th should not, by any implication or construction, be extended to relieve defendant from any responsibility for rents beyond the amount he received.

The other items entering into the accounting were not disputed, and may be adjusted on final settlement of decree.


text:
    Butterworth-Judson Company v. The Central Railroad Company of New Jersey.
    [Decided March 11th, 1907.]
    1. Where a railroad purchased the fee of land for occupation by its tracks in the exercise of its public franchise of operating a railroad, one who had an easement of a right of way over such land, which easement was interfered with by the operation of the railroad, was entitled to compensation under the Eminent Domain act (Revision, P. L. 1900 p. 1/9), providing for compensation to all persons having any interest in the land taken.
    2. An injunction will lie to restrain a railroad from occupying- complainant’s real estate, and to compel the removal of its tracks, unless compensation be made.
    On bill for injunction. Heard on bill, amended bill, answer, replication and proofs.

      Mr. John A. Miller, for the complainant.

      Mr. George Holmes, for the defendant.
   Emery, Y. C.

The construction and operation by the defendant of its railroad across the strip of land in question is an interference to some extent with the right of way. over the strip, to which the •complainant is entitled under its deeds. This results necessarily from the fact that by reason of such operation the complainant is at all times required to observe, at the place of •crossing, increased care and attention to avoid danger, and is at some time during every day regularly deprived for a time of the use of the right of way at this crossing.

The railroad, as appears by the answer, is constructed and operated under the authority of defendant’s charter and the provisions of the General Railroad law authorizing the construction of railroads and their use as public highways with the right ■of taking tolls. The construction therefore is made under express statutory authority to construct and operate for public use that which would otherwise be a nuisance to the complainant. The strip of land in question has been purchased by the defendant railroad company, which owns the fee thereof, subject to the complainant’s right of way, but the ordinary use of the land by the owner of the fee does not include the erection and operation on it of a steam railroad for the purpose of reaching lands of other parties in the exercise of a public franchise of operating a railroad and taking tolls.. The company sets up in its answer that the road runs from its Newark and New York branch to the factories on the meadows, and it was proven in the case that it is operated for that purpose. This makes the use of the railroad at the strip of land in question, the operation of a portion-of its system which it holds under its charter and the General Railroad acts, and subject to the conditions provided by those acts, as to the interference with private rights in the lands on which the road is constructed and operated. One of these conditions is that private property cannot be taken for public use without just compensation first made, and the interference in any manner whatever with complainant’s easement of the right of way in question is a taking of the complainant’s propertjr under the statute. The General Eminent Domain act (Revision, P. L. 1900 p. 79, &c.,) provides for compensation to the owners, occupants and all persons appearing of record to have any interest in'the land taken, and under statutes of this character, it is settled that persons holding easements of right of -way are included as persons interested. State National Railway Co., prosecutor, v. Easton and Amboy Railroad Co., 36 N. J. Law (7 Vr.) 181, 184 (Supreme Court, 1873). The amount of compensation depends, of course, on the extent of interference, but the complainant has a right to compensation for any permanent disturbance of its right of way by the construction or operation over the strip in question of a steam railroad as a public highway for the payment of tolls.

The claim on the part of the defendant, that this construction and operation of a railroad is an exercise of the reserved powers of the owner of the fee to use his own land in such a way as not to interfere with the right of way, is not well founded, either in fact or in law, and does not, in my judgment, reach the case, which is altogether one of interference -with complainant’s right of way under powers given to defendant by its charter and the railroad acts. The situation and rights of the parties, both as to fact and law, are controlled by those acts, and not by the rules regulating the ordinary use by the owner as of common right of land subject to a private right of way.

I conclude, therefore, that so far as the rights of the complainant are concerned, I must declare that its right has been interfered with, and without the payment or tender of compensation therefor, provided for by the statute. I do not go into the extent of the interference, because, in the view I take of the case, that question is not at present material. As complainant did not consent to this erection or operation of the railroad across the strip of land in question, but did everything in its power to prevent it, it is a case where, I think, it is strictly entitled to the protection of its constitutional and statutory right to compensation, by the exercise of the power of this court to enjoin the further operation of the railroad and compel the removal of the tracks, unless compensation is made. See cases cited in Hart v. Leonard, 42 N. J. Eq. (15 Stew.) 416, 419 (Court of Errors and Appeals, 1886). The complainant’s right to an easement being admitted, and the facts on which the claim of right to interfere therewith is based being undisputed, there is no reason for sending complainant to a court of law merely to determine whether on these facts the interference is the lawful exercise of the common-law rights of an owner of land subject to an easement, or whether it is a taking of lands for public use under statutory authority. If it is such taking, then the right can be ultimately protected only by an injunction, and the case being on final hearing here, the relief should now be granted. But inasmuch as defendant would be entitled to take proceedings for condemnation, I will hear parties on the settlement of the decree as to whether the issuing of the injunction should be delayed until a time fixed, in order to give the defendant opportunity to institute condemnation proceedings, and will at the same time hear them on the terms, if any, upon which such delay should be made in the issuance of the injunction.


text:
    Merritt Leach v. Harriet G. Leach et al.
    [Decided April 3d, 1907.]
    1. Where a special order was made in a case on notice in regard to the signing of testimony on reference to a master, and that order has not been appealed from, exceptions to the testimony on the ground that it had not been read over or signed by the witnesses cannot be considered as well founded on exceptions to the master’s report.
    2. Where exceptant was not aggrieved by reason of the failure of a master in chancery to report on a matter as directed, his exceptions on account thereof will be overruled.
    3. The law authorizing the payment of a sum in gross to the holder of a life estate, out of the proceeds of land sold on foreclosure proceedings, on consent of the person entitled thereto (OUaneery Act, Revision, P. L. 1903 pp. 531, 533 § 00), passed subsequent to the marriage of complainant, the remainderman, to one of the defendants and after his title accrued, is not unconstitutional as depriving him of a vested right without his consent, since the amount to be paid to the life tenant is only the value of her interest, and the remainderman’s rights beyond that are secure.
    On exceptions to master’s report.

      Mr. James Steen, for the exceptant.

      Mr. Arthur II. Lovell, for tlie complainant.
   Emery, V. C.

In this case, lands to which the wife had title, were sold in a foreclosure suit, and the surplus ($551.50) over payment of the mortgage was paid into court. The husband had an estate by the curtesy initiate in the lands, and on application of the wife for the payment to her of the entire surplus in court, I decided that the respective interests of the husband and wife in the lands sold, and therefore in the proceeds of sale, were as follows, namely, that the wife had an estate for her life in the lands with remainder to the husband for his life, if he survived the wife, and then with remainder over to the issue in fee. On the death of the husband during the wife’s life, the entire sum converted is to be paid to the wife. See my opinion in Leach v. Leach, 69 N. J. Eq. (3 Robb.) 620, referring to the cases. The Chancery act (Revision. P. L. 1902 pp. 531, 532 § 60) provides that when money is paid into court on foreclosure proceedings, the owner of any estate for life may apply for the payment of a gross sum in lieu of the estate, and that the court shall direct the payment of such gross sum as shall be deemed a just and reasonable satisfaction for said estate for life, and which the person entitled shall consent in writing to accept in lieu thereof. The wife applied for the immediate payment to her of all the monejr to which she was entitled, but the husband did not consent to the payment of any gross sum to the wife, or to take any gross sum in lieu of his interest. He insisted that only the interest on the sum in court should be paid to the wife. Inasmuch as the statute directing payment to the life tenant of a gross sum did not require the consent of the persons interested in remainder, I held that the payment might be made without such consent and directed that it should be referred to a master to ascertain the amount that should be paid to the wife for her life estate in the lands, and that the balance be invested during the lives of the husband and wife, for the benefit of the wife during their lives, and for the_ further benefit of the husband during his life, if he survived the wife, and that on the death of the husband during the wife’s life, she should be entitled to the principal sum invested. The wife has filed in court her consent in writing under the statute to accept a gross sum' in lieu of her life estate. The master has reported that the gross sum to be awarded to the wife is $319.93.

Three exceptions are filed to the report.

First. That the testimony of the witnesses has not been read over or signed by them since the taking of the same. This exception is not well founded, for the reason that a special order was made in the case on notice, in reference to the signing of the testimony, and that order has not been appealed from.

The second exception is that the master has not complied with one direction in the order of reference, namely, fixing the value of the use and occupancy of the premises required by the order. This occupancy was that of the husband who had been in possession of the premises. The master has not made any report against the husband by reason of the value of this occupancy, but has simply reported the receipts for rents and payments. The husband is not aggrieved by reason of this failure to report on the value, and the exception must be overruled.

The third exception is really a reargument of the question decided on the former hearing, namely, whether the court has power, under the statute, to order the payment of a gross sum to the wife out of the proceeds of sale as the value of her life estate against the consent of the husband as entitled to a contingent estate in remainder. This argument is, perhaps, irregular, but inasmuch as a question of some importance, involving the correctness of that decision, is now raised, and was not raised at the original hearing, and this hearing is virtually an application for 'final decree in the cause, on the exceptions, I will consider the case as open for reargument on the new point now raised, rather than put the parties to -the expense or delay of a formal application for rehearing or an appeal for the. purpose of arguing that question. The point is that the husband and wife were married in 1878 and before the passage of the law authorizing the payment of a sum in gross to the wife, out of the proceeds of sale as the value of her life, estate, and that the law was passed after the husband’s title accrued. It is now claimed that as against the husband, this provision of the latter law is unconstitutional, as depriving him of a vested right in property and that it cannot be enforced against his consent. There is no doubt that the conversion of the lands into money by the sale under foreclosure is a valid conversion under a superior right as to all persons, and the question therefore is whether, on the conversion of lands into money on a forced sale in foreclosure, the legislature has the right to terminate, at its discretion, the period when the money resulting from the sale, and the interest therein of a person sui juris, shall cease to be land or to be held as if it were land. The general course of legislation on this subject in the different states has recognized (and without exception, so far as I can find) the power of the legislature to fix the terms and conditions on which money resulting from the conversion of lands by sales in legal proceedings should be finally disposed of as money to the parties who were interested in the lands and legally capable of receiving the proceeds as money. For example, Scrib. Dow. (2 ed.) pp. 663, 654, gives the legislation in the different states on the payment to the widow of a gross sum out of the proceeds of sale of lands in which there was a dower right. Some of them, including New York and New Jersey, give the option to the widow alone to accept a gross sum out of the proceeds of sale, or to take the annual interest. Other states, by legislation, require the consent of all parties interested in the funds before the gross sum can be given. In some others, the determination and payment of the gross sum on the application of any party interested in the proceeds is left to the discretion of the court. In 2 Freem. Part. p. 726 § 549, he says that on the sale and distribution of proceeds of sale of lands in partition, the court has the power (among other things) to determine the value of estates for life or years, and of all future estates, vested and contingent, and to direct the amount to be paid to the holders of each of such estates. I find no cases holding that the legislature has not this power relating to the continuance of interests in the proceeds of sale as money, and the power to terminate this by fixing the present value of the estates of parties sui juris who are interested in the money. In our state, as in New York, the option is given to the tenant for the life estate or for years alone, and it therefore requires her assent alone.

There is no question here of tbe deprivation of property, for the amount to be paid to the wife is only the value of her interest, and the husband’s rights beyond that are secure. So far as the mere question of property right is concerned, the conversion of lands into money, under a superior right, to which the tenure of the lands was subject, terminates ipso facto the precise property right in the lands, and the proceeds of sale in strict legal theory are held not as lands, but rather as in lieu of the lands, for the ultimate purpose of compensating the parties interested in the lands. The money cannot in fact be lands, and as money, is subject to contingencies (loss, shrinkage, &c.), from which estates in the lands itself would be free. Interest on the money during life is one way of giving compensation to the life tenant, but it is not the only method. A gross sum'for the value of the life estate is another way, and it is within the power of the legislature either to fix this method of compensation or to confer upon the courts the power of fixing it and its terms and conditions. This selection of the methods for compensation is a necessary result of the lawful conversion of the lands into money, by the superior right, and is an incident to which the estates in the lands are subject. In Ross v. Adams, 28 N. J. Law (4 Dutch.) 161, 179 (1859), where the purchase price of lands taken in eminent domain proceedings was paid into court, the supreme court, in the absence of any statute, directed payment of sums in gross for the value of all the interests where the parties were sui juris and could receive it. The court of errors and appeals, 1 Vr. 504, reversed the judgment on the point that the interests were not properly declared by the supreme court, and that the husband, to whom a payment was directed, was not entitled to any interest in the lands or proceeds. The judgment reversing directed the investment of the funds, but no question seems to have been made in the decision as to the power to direct a gross sum to be paid out of the proceeds, and the form of the judgment, which may have been by consent, cannot be considered as an adjudication overruling the opinion of the supreme court as to the power to direct a gross sum. It may, however, have the effect of rendering the opinion of the supreme court an obiter dictum and of confining its effect on the point now in question to the weight of the opinion of the judges delivering it. This aspect of it, when the question of the constitutionality of a law is raised, is important, for it shows that learned judges appeared to have no doubt of the validity of such procedure, even in the absence of statute, and this circumstance, taken in connection with the general course of legislation and practice under it, apparently unquestioned in this state as well as others, is sufficient to solve any doubtful question in favor of the validity of the law. On full consideration, therefore, of this point now raised, I think the conclusion reached on the original hearing was correct, and that this court has the right, under this legislation, and on the option of the life tenant alone, who is sui juris, to terminate the holding of the entire proceeds of sale in court, and to direct the payment to her in gross of the sum which has been fixed as the present value of her interest. The exceptions will be overruled, with costs, and a final decree be entered in accordance with the opinions.


text:
    Samuel Sivin et al. v. The Mutual Match Company et al.
    [Decided May 14th, 1907.]
    The stockholders of a going corporation who have not paid up their stock in full cannot maintain an action to compel other stockholders to pay up unpaid stock.
    Heard on bill, answer, replication and proofs.

      Mr Merritt J. Lane, and Mr. Kaplan (of the New York bar), for the complainants.

      Mr. Joseph Kahrs and Mr. Nathan Bilcler, and Mr. Max D. Steuer (of the New York bar), for the defendants.
   Emery, Y. C.

The principal object of this bill, which is filed by several stockholders of the Mutual Match Company, is to compel the defendant stockholders to pay up in full and to par value the stock issued to them. The defendant stockholders control the management of the company and the company is made defendant. The bill alleges that the complainants’ stock was purchased or taken on the false representation by the defendant stockholders that the defendants’ stock was fully paid up in cash or property to the full value thereof. But the proofs show that this charge was unfounded, and they also show, as I conclude, that none of the stock issued, either that to complainants or defendants, is full paid, but was issued mainly for property purchased on a basis of valuation of about $2.50 of stock to one dollar of money invested, or value of property transferred. The complainants acquired their stock as full paid in connection with the conyeyance of property to the Mutual Match Company by the Columbia Match Company, in which complainants were stockholders, and it appears satisfactorily that they received this excessive amount of stock in order to put their relative interests in the Mutual company on substantially the same basis as the stock of the Mutual company already issued and proposed to be issued to the defendants, on completing the practical amalgamation or consolidation of the two companies, by a sale of the assets of the Columbia company to the Mutual company. As against creditors of the Mutual company, or any person suing in the right of creditors, and for the payment of the company’s debts, none of the stock would be considered as paid-up stock under the statute, and all of the stockholders, complainants as well as defendants, would be liable ratably for the payment of the debts. This liability of stockholders to creditors is, however, worked out by an accounting of the debts to be paid, and the proportionate liability of each stockholder. If the company is in insolvency, the ratable liability is determined by a judicial hearing, ascertaining the quota due from each stockholder for the payment of all the debts—Cumberland Lumber Co. v. Clinton Hill, &c., Co., 58 N. J. Eq. (12 Dick.) 627, 630 (Court of Errors and Appeals, 1898)—and if no receiver has been appointed, then by a bill in equity for an accounting to which the creditors and stockholders are parties. Wetherbee v. Baker, 35 N. J. Eq. (8 Stew.) 501, 506 (Court of Errors and Appeals, 1882).

In the present case the company is a going company, and the management of its affairs, including the right to call for payments on unpaid stock, is in the directors of the company. Corporation act, Rev., P. L. 1896 p. 284 § 22. According to some authorities such assessment when made should be made ratably on all the stockholders liable. 3 Thomp. Corp., 79 Wis. 47; 47 N. W. Rep. 373, where a bill showing an unequal assessment was held to be demurrable. Ibid., § 3539.

In this aspect of it the object of the bill is not to require an assessment by the directors on all unpaid stock, but for a direct decree to compel defendants, and defendants alone, to pay up their unpaid stock, and if such decree should be made, without complainants also making any payments on their stock, it would result, of course, in giving complainants the substantial benefit of defendants’ payments. So long as the company is a going concern, the court will not interfere on behalf of a stockholder who is in the same default, simply to compel another stockholder to pay up his unpaid stock.

There is no express statutory liability of one stockholder to another for the payment to the company of unpaid stock (as in the case of creditors—Corporation act, Rev. 1896 § 21), and the stockholder suing in the right of the company must not only establish the company’s right to compel payment, but his suit is also subject to the application of the maxim, that he must come into equity with clean hands. The general rule is that a stockholder in the same default or participating in an alleged illegality or fraud, is estopped even from obtaining a decree in the company’s right. 4. Thomp. Corp. § 4497. And as the complainants’ default appears from the evidence necessarily taken as to the circumstances of the issue of their stock, the maxim withholding relief must be applied by the court in the exercise of equitable jurisdiction, whether the defence is specially pleaded or not.

If in the proper management of the company as a going concern, the duty to resort to the liability of a stockholder for payments on his unpaid stock should be shown, and it should also be shown that the directors, in violation of their duties and trusts to the company, or even to the stockholders who had paid in their stock in full, neglect or refuse to make such call, a court of chancery might, through a receiver or otherwise, make the assessment and call on the unpaid stock. But ordinarily such call or assessment would be made ratably on all stockholders liable. Such case or contingency should not be prejudged or affected by any refusal to compel payment in this case. So fax, therefore, as the bill seeks to compel this payment, I will advise a decree of dismissal, but as the bill is filed in right of the company, the dismissal will be without prejudice to any bill or suit by the company, or on its behalf, after an assessment or call duly made on the defendants, or either of them, or to any bill or suit by or on behalf of the company, in the right of creditors of the company, or by or on behalf of the company by any stockholders other than the complainants.

The bill also sought to have a mortgage of $12,000, held by defendant Cassel Cohen upon lands of the company, declared to be without consideration. This allegation was not sustained by the proofs, and at the oral argument no special relief against the mortgage was claimed. In the briefs sent in counsel for complainants, however, ask a reference to ascertain the amount due, and before advising a decree I will hear counsel (orally or by brief) on the right to any decree in this suit for relief touching this mortgage.


text:
    Sidney Mitchell v. United Box Board and Paper Company et al.
    [Decided May 14th, 1907.]
    1. An existing corporation agreed to sell its property to a new corporation organized by the officers of the existing corporation, the president and vice-president being the underwriters for twenty-five thousand shares of capital stock of the new corporation, being all of the stock except $1,000 subscribed for organization purposes. The agreement gave to the stockholders of the existing corporation the prior right to subscribe for the stock of the new corporation, and stipulated for a cash installment and for the payment of the balance in installments. To what extent stockholders of the existing company had subscribed to the new stock, or whether any stockholders other than the president and vice-president had so subscribed, did not appear.—Held, that a dissenting stockholder could question the validity of the sale, notwithstanding the offer to sell stock, since the condition of subscription for stock in the new corporation made the stockholder liable for additional payments and required his participation in another company.
    2. A sale by a corporation of its property may be adjudged voidable as against it, at its suit or at the suit of a dissenting stockholder, by reason of constructive fraud, arising from the fact that the sale was made to its directors or to a buyer controlled by them in making the purchase, or that the sale was not at a fair price.

      3. Contracts with a corporation for the services of a director, to be performed in the management of the ordinary business of a corporation, are valid, subject to judicial review, so far as the amount of compensation is concerned, either on behalf of stockholders of a going corporation or the creditors of an insolvent one.
    4. Advances of money to a corporation by a director thereof may be secured, and a sale of property to the director to pay the debt is valid, so far as the transfer is concerned, subject to review on the question of the fairness of the price.
    5. Where the proofs show that a dissenting stockholder, suing a corporation to restrain it from carrying out a contract for the sale of its property, may make out a case entitling him to avoid the sale on behalf of the corporation, he is entitled to such a preliminary injunction as will render a decree in favor of the corporation effective, if one should be |inally made.
    On application for preliminary injunction. Heard on bill and affidavits, answering affidavits and cross-examinations in open court.

      Messrs. Griggs •& Harding, Mr. Richard W. Morrison (of the New York bar), and Mr. James Todd (of the Chicago bar), for the complainant.

      Mr. James E. Howell and Mr. Frank R. Lawrence (of the New York bar), for the defendants.
   Emery, Y. C.

This is an injunction bill filed by a stockholder of the United Box Board Company against the company and its directors, and also against another corporation, the American Box Board Company, and its directors, to enjoin the execution of an agreement between the two defendant companies for (he sale of certain assets oi-the United/bomnanv to the American company. 'The defendant companies are corporations Of Lilly klurlie. ""The agreement for sale is attacked as a fraud on the United company, and the bill is filed to protect its rights in the assets proposed to be sold. Application is now made for a preliminary injunction restraining the sale.

The affidavits disclose substantially the following facts: The United Box Board Company (which I shall call the United company) is the owner of forty-two thousand nine hundred and eighty shares of the stock of the American Strawboard Company, of the par value of $100 per share, which stock is pledged with the Trust Company of America as security for $1,302,400 collateral trust bonds issued by the United company, and is also the owner of one thousand nine hundred and seventy-five shares of strawboard company stock not pledged as such security. It has also in its treasury for sale general mortgage bonds to the amount of $975,000, these bonds being secured on property of the United company, other than the strawboard company stock. The United companjüms a floating debt of'about $850,000, and of this about $765,000 has for some time been advanced by or carried on the credit of Mr. Barber, the president, and Mr. Fleming, the vice-president of the company, both of them directors of the company, by endorsements of the company’s paper. As security for these advancements and endorsements they hold the $975,000 bonds above referred to. Whether any others of the directors are creditors or endorsers does not clearly appear.

The United company, on December 20th, 1906, made an agreement with the American Box Board Company, a third company, for the sale to the latter of all of the strawboard company stock and $562,500 of its general mortgage bonds. The entire purchase price of the stocks and bonds is fixed together at the single sum of $850,000, payable in three installments of $250,000 each, on the 15th day of January, April and July, 1907, respectively, and the balance of $100,000 on October 15th, 1907. The American Box Board Company agrees, in addition, to execute an agreement assuming the payment of the outstanding collateral trust bonds, with interest, after January 15th, 1907, together with the sinking fund payments. The deliveries of the bonds and stock are, however, separated, and on the payment of the first installment of $250,000 on account of the whole purchase price, mortgage bonds to the amount of $300,000 are to be delivered, and on payment of the second installment of $250,000 on account the remaining $262,500 of bonds are to be delivered. On payment of the third installment of $250,000 the one thousand nine hundred and seventy-five unpledged shares of the strawboard company stock are to be delivered to the American company, and tlio United company is then to deliver to the trust company (■which holds the forty-two thousand nine hundred and eighty shares of strawboard company stock) an assignment to the^American company of the equity in these shares, subject to the collateral trust mortgage. The trust company is to deliver this assignment to the American company upon payment to the trust company (for account of the United company) of the last installment of $100,000, and upon the delivery to the trust company for account of the United company of a due and sufficient instrument in writing of the American company, assuming and agreeing to pay the collateral trust bonds, with interest.

The agreement contains two provisions, inserted, as is now claimed by the defendant directors, for the purpose of specially protecting the rights of the United company and all its stockholders. The first is a clause in-the agreement by which the United company has the right to repurchase all of the property and rights to be sold to the American company at any time before January 2d, 1908, upon repayment to the United company of the purchase-money which has been paid, with ten per cent, interest, and surrendering for cancellation any agreements assuming payments on the collateral trust mortgage. The second is a provision by which the American company gives to the stockholders of the United company the prior right to subscribe for its stock, for the purpose of carrying out this agreement of sale between the two companies, and the terms of subscription offered by the American company for its full-paid shares of $100 are cash installments of thirty-four per cent., three installments of ten per cent, each, payable on the 10th days of January, April and July, 1907,. and four per cent, on October 10th, 1907, the balance as called for by the directors of the American company (not more than ton per cent, a year) until fully paid.

It is admitted in defendant’s affidavits that the vendee companjp the American Box Board Company, was organized at the instance of the officers and directors of the United company, and also that Messrs. Barber and Fleming are the underwriters for twenty-five thousand shares of its capital stock, being all of its stock except $1,000 subscribed for organization purposes. To what extent stockholders of the United company have subscribed to the American company stock, or whether any stockholders other than the defendant directors have so subscribed, does not appear. The condition of the subscription making the stockholder liable for additional payments, and requiring his participation in another company subject to other control, precludes this offer from being considered as substantially an offer of an equitable share as on a division of the assets of the United company, and entitles the United company, or a dissenting stockholder suing in its right, to question the sale without regard to such offer. The thirty-four per cent, cash subscriptions makes up the $850,000 réquired for the cash payments of the agreement, which are proposed to be used by the directors of the vendor company to pay the floating debt of the vendor company due to or guaranteed by the two directors of the vendor company. The underwriting agreement of these two directors seems to be at present practically the sole asset of the vendee company, and in view of this situation it should, on the present application, be considered that the validity of the sale must or may be finally determined under the aspect of a sale to the two directors of the vendor company who control the vendee company, and whose claims against the vendor company are proposed to be satisfied from the proceeds of sale.

Counsel on both sides have argued the case from this standpoint, and complainant claims—first, that on the admitted facts the sale is illegal and void, and should be altogether restrained, without regard to the question of fairness of price; second, that the sale of the strawboard company stock is for a grossly inadequate price, and third, that the proposed sale is a scheme or conspiracy to deprive the United company of its most valuable asset and secure its benefit to the directors making the sale. On the part of the defendant directors it is claimed—first, that the sale is made by the directors as managers of the business of the company, and, in the absence of fraud or dishonest exercise of judgment, cannot be questioned by the company or stockholders suing in the right of the company; second, that the sale was for a full and fair price, and, in the present circumstances and financial condition of the company, is the best and only method of relieving it of pressing debts and assuring a more satisfactory financial condition; third, that the charge of actual fraud and conspiracy to obtain the stock for the directors is without any foundation or warrant.

The charges of conspiracy and actual fraud seem to be fully and fairly answered by the affidavits,’ but in order to have relief on this bill it is not necessary, in my judgment, to prove such actual fraud. If the sale should be held voidable as against the vendor company, by reason of legal or constructive fraud, arising from the fact that the sale was made to its directors, or to a vendee controlled by them in making the purchase, or that the sale was not at a fair price, the sale might be set aside on this bill. The application will therefore be disposed of from that view of the scope of the bill.

As to the validity of a contract made by a corporation, through its directors,, with om^OT^TOYA^o^Eelrji^yTmrUistinetion seems to be made in the decisions of our courts, dependent to ^ some extent-muthe naturej3fjbhe.xontract. Contracts for the services of a director, to be performed in the management of its ordinary business, are valid, but subject to judicial review so far as the amount of compensation is concerned, and this either on behalf of stockholders of a going corporation or the creditors of an insolvent corporation. I examined all the decisions of our courts on this point in Lillard v. Oil, &c., Co., 70 N. J. Eq. (4 Robb.) 197. Advances of money by a director to the corporation may be secured, and a sale of property to the director, to pay such debt, is valid, so far as the transfer is concerned, but the price must be a fair one, and the price actually fixed is not final, but is subject to review. Wilkinson v. Bauerle, 41 N. J. Eq. (14 Stew.) 635, 643, &c. (Court of Errors and Appeals, 1886). In Stewart v. Lehigh Valley Railroad Co., 38 N. J. Law (9 Vr.) 505, 522 (Court of Errors and Appeals, 1875), the language of Mr. Justice Dixon, while saving to the director of a corporation rights not arising out of express contract, including the right to the repayment of money loaned, is broad enough to-exclude all express contracts, and if applicable to the circumstances of this case might makeJbis sale-altogether- voidable 'Ey Yhe company. For while the transaction in one aspect of it was, or may be claimed to be, a sale of the company’s assets for the purpose of paying its debts, yet in view of the fact that these debts and liabilities appear to be already secured by the deposit of mortgage bonds, the transaction in other aspects may be taken to be substantially an independent sale of the strawboard company stock, as to the advisability and terms of which the directors were so responsible to the company in their fiduciary capacity, that a sale to any of their number could be avoided by the company, without inquiry as to its terms or its favorable or unfavorable character. The general rule, that directors cannot lawfully enter into a contract in the benefit of which even one, without the knowledge and consent of the stockholders, of their number participates, was restated in United States Steel Corporation v. Hodge, 64 N. J. Eq. (19 Dick.) 813 (Court of Errors and Appeals, 1902), and declared to be so firmly entrenched as not to be open to debate. The power of the stockholders to affirm the contract made with a director was recognized in this case, and for the reason that such contracts are voidable only as against the company considered as composed of the whole body of stockholders, not voidable by each stockholder in his own individual right. Lillard v. Oil, &c., Co., supra (Vice-Chancellor Emery, 1903). This view of the voidability of a contract of sale by a director to a corporation, and its affirmance by a stockholders’ vote, is affirmed in a leading English case. Northwestern Transportation Co. v. Beatty, 12 App. Cas. 589 (Jud. Comm. 1887). In this case a director sold one of his own vessels to a shipping company, and the sale was affirmed by the stockholders with the aid of his own vote. Sir Eieharcl Bagally says on this point: “The general principle is well established that, in the absence of charter provisions, a director of a company is precluded from dealing on behalf of the company with himself, and from entering into engagements in which he has a personal interest, conflicting, or which possibly may conflict, with the interests of those whom he is bound by fiduciary duty to protect, and this rule is as applicable to the case of one of several directors as to a managing or sole director. Any such dealing or engagement may, however, be affirmed or adopted b3r the company, provided such affirmance or adoption is not brought about by unfair or improper means, and is not illegal or fraudulent or oppressive towards those shareholders who oppose it.”

In the present case the agreement for sale was not communicated to the stockholders until after its execution. It has not been affirmed bjr the stockholders at any meeting, and if no such affirmance tabes place one of the questions at final hearing will be whether the^ company—for complainant suing on its rights) can avoid the transaction as being substantially a sale of the company’s assets to one or more of its directors, and not merely, as in Wilkinson v. Bauerle, an exercise in good faith of the power of the directors to sell or transfer assets of the company for the purpose of paying its debts, leaving the fairness of the price to be determined. If the sale should be held to be a proper exercise of the power of the directors, the further question will then arise as to the fairness of the transaction and of the price-If the sale is to be treated as a sale to the directors, then thej burden of showing such fairness is on the directors. These questions cannot be properly decided until all of the facts relating to the sale and to the value of the strawboard company stock, and the probable effect upon the United company of the permanent withdrawal of the strawboard company stock from its assets and from its control, are developed at final hearing.

But inasmuch as the proofs now presented show that the complainant may at the hearing make out a case entitling him to avoid the sale on behalf of the company, he is entitled to such preliminary restraint as will render a decree in the company’s favor effective, if it should finally be made. This can be secured, I think, by enjoining the final delivery of the shares of straw-board company stock, and the execution and delivery of the assignment of the shares of this stock now in the custody of the trust company, until the final hearing or further order.

As to the delivery of the bonds the situation is different. In the circular letter of December 20th, 1906, issued by the directors, announcing the sale to the American company and inviting stockholders to participate, the consideration price of the bonds and of the strawboard company stock is separated, $400,000 being fixed as the value of the stock in the directors’ judgment, and $450,000 as the value of the $562,500 bonds, being eighty per cent, of the par value. In the agreement, as above stated, on the first two payments, aggregating $500,000, the bonds are to be delivered. No objection is made to the price of eighty per cent, fixed for the bonds, or to their sale to the American company at that price. It would seem, therefore, that no injunction should be issued against carrying out this portion of the agreement of sale if the American company and the directors of the United company choose to do so, and upon settling the order for preliminary injunction I will hear them as to the necessity or propriety of imposing, as a condition of granting the injunction, such terms as will protect defendants if this portion of the contract be carried out.


author: Stevens, Y. C.

text:
    William H. Dixon v. Josephine T. Dixon.
    [Decided April 27th, 1907.]
    1. Where a decree awarded the custody of certain children to their mother, but authorized the father to visit them at specified intervals, a letter written to the father by the mother’s father that the mother had moved from New York to Portland, in the absence of any showing that the mother had authorized such statement, was insufficient to show that the mother had changed her permanent residence from New Jersey to Maine.
    2. Where, in a proceeding to determine the custody of certain children, the mother answered, claiming the custody of the children, and the court awarded the same to her, with the provision that the father should be permitted to visit them, and it was established in that proceeding that the mother and the children were residents of New Jersey, the court, having acquired jurisdiction in the first instance, was entitled to modify the previous decree, notwithstanding the removal of the mother and children to another state.
    3. A petition for the custody of children, as between parents living separately, authorized by P. L. p. 263 § S, in which a writ of habeas

      corpus may issue, as provided by section 12, is not a common-law habeas corpus proceeding, such writ being merely ancillary for the purpose of enabling the court to obtain jurisdiction of the children.
    4. Where parents are living separately, the court may order their children kept within the state, or, if absent, brought within it.
    5. Where the custody of children was awarded to the mother, who was living separate from the father, a modification of such order would not be made merely because the mother had taken the children to Maine, in the absence of proof that she intended to keep them there permanently, and to prevent the father from visiting the children as provided by the decree.
    On petition for modification of order relating to custody of children.

      Mr. Richard V. Lindabury, for the petitioner.

      Mr. Gilbert Collins, for the defendant.
   Stevens, Y. C.

On June 1st, 1905, William H. Dixon, the petitioner, filed his petition in this court, alleging that he and the defendant were married on January 30th, 1901, in the city of New York, and that they lived together in that city until May 3d, 1904, when his wife left him and went to live at her father’s residence there; that they have two children, viz., William R., born March 19th, 1902, and Barbara W., born April 30th, 1903; that on June 8th, 1904, the defendant took the children to Madison, in this state, to live with her in a house provided by her father, at which place she had resided ever since. The petition alleged the father’s willingness to provide for the children, and stated that he had difficulty in obtaining access to them. The prayer was for a writ of habeas corpus, to the end that an order might be made awarding their custody to the petitioner for the whole or a portion of the time, or for such other order with respect to their care and custody as should be just.

The defendant answered, denying that her father was a resident of New York, and averring that he had for several years been a citizen of New Jersey, with a home a.t Madison, where he resided during the greater portion of each year. She denied that she and petitioner had lived in the city of New York up to May 3d, 1904, and averred that they had lived together in Madison during the summer of 1901, and that in May, 1903, petitioner having gone away for his health, she and her children had gone to her father’s house in that town, and that in September, 1903, she and the petitioner, together with her children, after remaining a few days at her father’s house in Madison, had taken possession of a neighboring house there, where they had continued to reside during the winter, and that she and her children had continued to live there ever since, except for a short interval.

It will thus be seen that at the commencement of the proceeding, and for two years prior thereto, the defendant and her children had been residents of New Jersey.

To the answer petitioner filed a replication, and the case was heard on the merits. The court decreed as follows:

“It is, on this 3d day of August, 1905, on motion of Collins & Corbin, solicitors of defendant, ordered that the prayer of the petitioner to have the custody cf the children in the writ named, to wit, William H. Dixon, Jr., and Barbara Dixon, be denied, with costs.
“And it is further ordered that the petitioner shall be permitted to visit said children once in each week while living in Morristown, at such convenient time and place as the parties may agree, and that when the said children are living in New York they shall be taken, at least once in each week, for a reasonable time, at such convenient hour during the day as the petitioner may desire, to the house of the parents of the petitioner.
“Either party may apply to this court for further direction as there may be occasion.”

The petitioner appealed from this decree, and on December 3d, 1906, it was affirmed by the court of errors and appeals.

Its correctness and propriety in all its parts is therefore beyond controversy.

On February 13th, 1907, William H. Dixon filed a supplemental petition stating most of the foregoing facts, and alleging that he had been permitted to have access to his children pursuant to the terms of the order up to Saturday, January 26th, 1907, but that on the 8th day of February, 1907, he was notified by her father that defendant had "moved” from Madison to Portland, and, on February 11th, that his wife and children were at the Lafayette Hotel in that city. The first letter stated that it would be convenient (to Mrs. Dixon) that Mr. Dixon should see the children there, by appointment, as usual. The petitioner states that he is engaged in business in the city of New York, and that all his time is occupied therein except Saturday afternoons, and that it would be quite impossible for him to make weekly or even frequent visits to Portland.

The prayer is that if Mrs. Dixon is desirous of living in Portland she should not be permitted to keep the children there, and that she should be directed to return them either to the city of New York or to tire State of New Jersey, with an alternative prayer that the custody of the children should be awarded to him.

An order to show cause why the prayer of the petitioner should not be granted was made upon the filing of the petition. It, with a copy thereof, was personally served upon the defendant in Portland. She appeared by counsel on the return day and opposed the making of any further order, but did not file an answer or make any statement with reference to her future plans. She insisted by counsel, in addition, that the court was without jurisdiction to make any further order in the premises inasmuch as it appeared that none of the parties were at present within the jurisdiction of the court.

There is no proof on the part of Mrs. Dixon that she is not a resident of New Jersey. Mr. Dixon's allegation in that regard is, not that his wife had ceased to be a resident, but that he has been informed by a letter, written by defendant’s father in New York, that his daughter had “moved” from New York to Portland. It does not appear that Mr. Williams was authorized by his daughter to bind her to this statement. The word “moved” is somewhat indefinite. It may or may not, according to circumstance, warrant the inference of a permanent change of residence on her part. But if it be assumed that she has changed her residence, I am still of the opinion that the court has jurisdiction to modify its previous order. The wife’s answer in the original proceeding demonstrates that she and her children were then residents of New Jersey. The proceeding was not a pure common-law habeas corpus proceeding—a proceeding which either terminated or continued the restraint and so ended—but a proceeding “before the chancellor under his general power to superintend the affairs of infants and to provide who shall permanently have the custody of them during minority.” Rossell v. Rossell, 64 N. J. Eq. (19 Dick.) 22; State (Baird) v. Baird, 19 N. J. Eq. (4 C. E. Gr.) 481; Buckley v. Perrine, 54 N. J. Eq. (9 Dick.) 285; S. C., 55 N. J. Eq. (10 Dick.) 515.

The proceeding by petition in a case where the parents are living separately is expressly authorized by section 8 of the act of 1902 respecting minors. P. L. 1902 p. 263. The petition in this case is entitled in the court of chancery and it prayed the appropriate process of habeas corpus in order to bring the infants before the court. This writ might have issued in such a proceeding prior to the act of 1902 (State, Baird, pros., v. Baird, 19 N. J. Eq. (4 C. E. Gr.) 481, 487), but it is expressly authorized by section 12. It is also provided in express terms by section 10 that the court may make the necessary orders from time to time in relation to the custody or possession.

The situation then is this: A proceeding was instituted whose scope was the permanent custody of two minor children, and it was so instituted under the general jurisdiction of the court of chancery as declared and regulated by express statute. Under such a proceeding any order made was, in the nature of things, temporary and open to such modification as the situation itself might from time to time call for. The order itself expressly provided that “either party may apply to this court for further direction as there may be occasion.”

Under the circumstances it would seem to be clear that the court, having at the beginning acquired complete jurisdiction over the defendant and her children, may continue to exercise that jurisdiction as occasion may require. In Laing v. Rigney, 160 U. S. 531, a wife, resident in New Jersey, filed a bill for divorce against her husband, resident in New York. The defendant appeared and answered. Then the wife filed a supplemental bill charging other acts of adultery subsequent to the filing of the original bill. A copy of this supplemental bill was, pursuant to order, served out of the jurisdiction. To this defendant did not appear, and a decree was made ex parte finding him guilty of the adultery charged “in the said bill and supplemental bill,” and awarding alimony. On the decree, so far as it awarded alimony, the complainant instituted a suit in New York, and thereupon defendant’s counsel applied to this court to have the decree amended so as to make it read that the defendant had been guilty of adultery only as charged in the supplemental bill. The decree was amended accordingly, and then the defence set up to the suit in New York was that inasmuch as defendant had not been served with a subpoena to answer the supplemental bill, and the defendant had not appeared thereto, and service of the supplemental bill in New York was irregular and invalid, the court was without jurisdiction to make the money decree. It was held, however, that this decree was, under the federal constitution, entitled to full faith and credit in the courts of the State of New York, and could not be there impeached. This case goes further than I am required to go in the case at bar. In a certain sense a supplemental bill, alleging a fresh cause of -action, arising after the commencement of the suit, is a new proceeding not within the scope or contemplation of the original bill, but yet such a bill was regarded by the supreme court as a continuation only of the original proceeding, and on this theory it was held that jurisdiction, having once attached, continued to the end. Lynde v. Lynde, 181 U. S. 183, is in the same direction. The case in hand differs from the case of Laing v. Rigney in the important circumstance that from the very outset the proceeding was designed to regulate the custody and possession of the children by a succession of orders made from time to time as the then situation might require. The mere fact, therefore, that Mrs. Dixon may be out of the jurisdiction now cannot prevent the court from making such an order as the present situation may appear to warrant. It is not to be presumed that she will disobey.

As to the children, it has been repeatedly held that, if necessary, the court may order them to be kept within the state. In re Agar-Ellis, 24 Ch. Div. 317, 333; Miner v. Miner, 11 Ill. 43; Campbell v. Campbell, 37 Wis. 206, 221; Ryce v. Ryce, 52 Ind. 64 Or, if absent, brought within it. Campbell v. Mackay, 2 Myl. & C. 26; Reg. v. Barnardo, 28 Q. B. Div. 305; 24 Q. B. Div. 296; Gordon v. Gordon, Pro. Div. 141 (1903); In re Jackson, 15 Mich. 417, 420; People, ex rel. Billotti, v. New York Asylum, 57 App. Div. 383; People, ex rel. Dunlap, v. N. Y. I. Society, 58 App. Div. 133.

Whether the order already made, or any subsequent order, is of such a nature as to entitle it in other states to full faith and credit under the federal constitution is a question suggested by the argument, but not before me for decision.

The case was fully heard upon the merits in July, 1905. The children were then two and three years old. They were remitted to their mother because she was thought to be the proper person to care for them at their tender age. Nothing is alleged in the petition going to show that she has become an improper person to have charge of them, or that she should be deprived of their custody now. The order directed, however, that the petitioner should be permitted to visit them once a week, and of this permission he has regularly availed himself. It does not appear that it would be for the welfare of the children that he should not continue to see and interest himself in them. The strong presumption is that he should. I think the mother ought not to deprive the father of the opportunity of seeing them at short intervals, as she would do if she could keep them permanently in Maine. There is as yet little or no proof that she intends to do so, and I doubt whether I ought to make any new order till such proof be forthcoming. I will hear counsel on the question of whether a reference should not be ordered to ascertain the fact.


author: Steyenson, Y. C.

text:
    John H. Pierce v. The Old Dominion Copper Mining and Smelting Company et als.
    [Decided March 9th, 1907.]
    A minority stockholder filed a bill against his corporation, its entire board of directors and other parties, the object of which was to protect the corporation by enjoining certain contracts or transactions into which the board of directors proposed to have the corporation enter. A preliminary injunction was refused upon grounds which largely involved the whole merits of the case.—Held (1), that complainant was not entitled on the final hearing to bring in separate grievances of the corporation against some of the defendants only who were directors of the corporation and obtain injunctive relief with reference to such grievances with which the other defendants were not concerned, and which were not within the scope iof the broad relief prayed for against all the defendants; and (2) that the complainant was not entitled, after the most of the testimony in the cause had been taken, to set up by amendment to his bill a grievance against a part only of the defendants which arose before the filing of the bill, or to set up by an addition to the bill under Rule 210® such a grievance which arose after the filing of the bill; and that (S) the decree dismissing the bill would be made without prejudice to the filing hereafter of any bill on behalf of the complainant in respect of the grievances so excluded from consideration in this case.
    On bill, answer and proofs.
    • Mr. Edward M. Colie, for tbe complainant.

      Mr. Brundeis (of the Massachusetts bar) and Mr. Charles L. Corbin, for the defendants.
   Steyenson, Y. C.

My conclusion is that the bill should be dismissed. The opinion denying the motion for a preliminary injunction deals with substantially the same case as that which was argued upon the final hearing. 67 N. J. Eq. (1 Robb.) 399. Any further elaborate discussion of this case seems to be unnecessary. The reasons for the final decree which I shall advise are, I think, sufficiently indicated in my former opinion for the purpose of any appeal which may be taken.

Counsel for the complainant urges the same arguments, and asks foi the same drastic remedies which he presented and prayed for upon the hearing of the order to show cause. He insists that the large financial and mining operations in which the defendant the Old Dominion Copper Mining and Smelting Company is engaged or interested shall be paralyzed by an injunction restraining the officers and directors of that corporation from discharging their functions, and by the appointment of a receiver. Counsel has abandoned only the alternative prayer that, in case the court should refuse to appoint a receiver under its general equity power, then the corporation should be decreed to be insolvent and a statutory insolvency receiver be appointed.

Upon the final argument, which was exceedingly protracted, and in the elaborate brief on behalf of the complainant, it was insisted that in this case the court should at least enjoin certain particular operations of some of the defendants which may be generally described as instances of willful violation of duty and mismanagement on the part of the directors of the Old Dominion Copper Mining and Smelting Company, in which some of the other defendants are alleged to have participated. In my review of the testimony and the briefs I have endeavored to examine with care these particular charges. My conclusion is that they are not sustained, or if in any degree supported by the proofs as they now stand, and the legal presumptions established by those proofs, they ought not to be disposed of in this suit. An examination of the bill, including the specific prayers for relief, in my opinion shows conclusively that the complainant should not be allowed at the final hearing to bring in these separate grievances against some of the defendants only, and obtain injunctive relief, which, of course, would be confined to these particular grievances and affect only such of the defendants as have been connected therewith. Caution should be used I think in permitting an omnibus bill like this to be employed for remedying particular grievances against different groups of defendants when the broad relief prayed for against all the defendants is denied.

If, for instance, the directors of the Old Dominion Copper Mining and Smelting Company are actually diverting or misapplying in any way that portion of the property of the corporation which has been described as the “segregated assets”—if what they are doing is not merely a matter of bookkeeping beneficial to fourteen-fifteenths of their stockholders and not in the slightest degree injurious to the remaining stockholders—the complainant as the representative of the injured minority stockholders may file a distinct bill charging the directors with this misconduct. This matter as set forth or referred to in the bill of complaint is so directly connected with the broad objects of that bill, as presented in the stating part of the bill and the prayers for relief, that it is quite evident that those of the defendants who are in the slightest degree connected with this alleged grievance were not bound to dissect out this portion of the bill in which they alone were concerned, separate themselves from their co-defendants and defend themselves against this small dissected portion of the bill as an independent bill against themselves alone. They were not bound to cross-examine witnesses and introduce evidence in anticipation of the charge which the complainant makes definite or seeks to make definite only at the final hearing after the greater part of the testimony has been taken. The bill undertakes to attack the whole scheme which the majority stockholders of the Old Dominion Copper Mining and Smelting Company and all the stockholders of the United Globe Mines have devised for the distribution of whatever moneys the Old Dominion Company of Maine may receive in the shape of dividends from the proceeds of these “segregated assets” when disposed of by the Old Dominion Copper Mining and Smelting Company. There is no specific allegation in the bill that the directors of the last-mentioned company are wrongfully misapplying these so-called segregated assets. Such a charge presents a separate issue quite distinct from the issues presented by the bill, and one in which many of the defendants have no concern whatever. The proposed amendment submitted by counsel a year after the motion for the preliminary injunction had been decided, and when most of the testimony in the cause had been taken, in fact amounts to a separate bill of complaint against the Old Dominion Copper Mining and Smelting Company and its directors to enjoin a diversion or misappropriation of corporate assets. The impropriety of permitting such an amendment at such a time I think is apparent. It seems to me equally apparent that the proposed addition to the bill under rule 210a, setting up a grievance of the complainant against another set of these defendants, which arose after the filing of the bill, is equally improper.

In dealing with these applications to permit the complainant, who is denied the wide relief against all the defendants for which he filed his bill, to convert the bill on final hearing by amendments and additions into an instrument for obtaining particular relief against certain of the defendants only, it should be borne in mind that there is no allegation and no proof that the defendants who are alleged to be doing wrong are not amply responsible for all damages which the complainant may suffer. If the complainant should be allowed to make the amendment and the addition to his bill which he submitted at the final hearing, the defendants, of course, specially charged with wrong-doing in the amendment and addition, should have an opportunity to file, answers. If such a course of procedure would be proper or necessary in any case, I do not think that such a ease is now before this court.

The question also arises whether the proposed amendment and the proposed addition are not distinct equitable actions which could not properly be combined in one bill. It would seem that the United Globe Mines is a necessary party defendant in the one case, but hardly seems to be a proper party defendant in the other. Certainly it would not be permissible for the complainant to convert his bill with or without the aid of amendments and additions into a jumble of alleged equitable grievances against different sets of the original defendants. The bill of complaint in a case like this must to a large extent be construed as setting in court only the equitable cause of action against all of the defendants which it purports to exhibit. If, in addition to this, the pleader desires to bring into the cause a special grievance against a particular defendant with which the other defendants are not concerned, based upon some part of a transaction described in the bill, I think, as a general rule, he should be obliged to make this particular cause of action distinct and indicate by his prayer for relief that, in addition to the broad relief against all of the defendants, he seeks the narrow and special relief against one defendant. Of course, such a bill would have to pass the test of multifariousness.

The bill will be dismissed without prejudice to the filing hereafter of any bill on behalf of the complainant to restrain the Old Dominion Copper Mining and Smelting Company and its directors from diverting or misapplying the so-called segregated assets, or any other assets of the corporation to the injury of the complainant, and from carrying out contracts which the complainant has a right to have declared void. Possibly the complainant may wish to prevent the decree from appealing tó affect some other alleged causes of action against some of the other defendants which he has not succeeded in having recognized in this suit, but which are based upon some part or parts of the complex transactions set forth in the bill. Upon settlement of the decree these matters may he adjusted.


author: Bergen, Y. C.

text:
    Mary J. Sked, individually and as guardian, &c., v. Pennington Spring Water Company.
    [Decided January 28th, 1907.]
    Where the owner of land granted defendant the right to dig and build a reservoir at a certain spring on the land, the reservoir not to occupy more than one-half acre, and to lay pipes therefrom over such land and to draw the water from the reservoir, and defendant located a reservoir, an injunction would lie at the suit of the owner to restrain him from entering, after ten years, to put down a' well in order to acquire an additional supply of water, although the well would be within an area, including a reservoir, of one-half an acre, if the boundaries should be fixed as desired by defendant.

      On final hearing on pleadings and proofs.

      Mr. Frank S. Katzenbach, Jr., and Mr. Frederick R. Brace, for the complainants.

      Mr. J. Lefferts Gonard and Mr. John II. Baches, for the defendant.
   Bergen, Y. C.

On September 14th, 1896, Phillip S. Skecl, from whom these complainants took title, being the owner of a farm containing about one hundred and twenty acres of land, entered into an agreement with the defendant in writing, by the terms of which he granted, bargained and sold to the defendant the right to enter upon said premises

“to dig and build a reservoir at what is known as the ‘Middle Spring,’ the said reservoir not to occupy or cover more than one-half acre of land, also may lay pipes from the said reservoir over the lands of the said Phillip S. Sked, to the main pipe line of the said Pennington Spring Water Company three feet beneath the surface of the ground, and may draw and use all the water from said reservoir.”

Immediately after the execution of the agreement the defendant entered upon the lands, built a reservoir, in which it collected the water from the spring, and for the past ten years has conducted the water thus impounded through pipes laid across the lands of the grantor to its main distributing pipe, and thus applied the water for public and private use as allowed by its charter. The area of ground covered by the reservoir is less than a half acre, and the defendant, now requiring a larger supply of water than flows from the spring, has recently, in order to acquire an additional supply, commenced sinking a well, by driving an iron tube into the ground, outside of the reservoir, upon lands adjacent thereto which would be within an area, including the reservoir, of one-half acre, if its boundaries be now fixed where the defendant desires. The complainants deny this right, insisting that, as no precise amount of land was granted, the only description being that the quantity taken should not exceed one-half acre, and the defendant having, by building its reservoir, established the area required for it, fixed, by practical location, the limit of the grant, has not now, after so long'a period, the right to increase it in any direction it may choose, thereby taking-lands of the complainants lying beyond the boundary of the original selection. The effect of the agreement is a grant to enter upon the lands now of the complainants, to dig and build a reservoir, to collect therein and draw therefrom, at its pleasure, the water flowing from the Middle Spring, and creates only an easement. In Owen v. Field, 102 Mass. 90, the grantor granted, sold and conveyed to the grantee the whole use of four springs, and the right and privilege of laying an aqueduct across other lands of the grantor, together with the right and privilege of making reservoirs, and in construing this grant the court said: '“They were at liberty to dig up their pipes and abandon the enterprise whenever they found it for tlieir interest to do so. The effect of the indenture seems to be that it gave a license or ■authority to the party of the second part to be exercised so long as they should see fit, or, more properly, that it granted to them an easement.”

The agreement which we are now considering is substantially like the contract between the parties considered and interpreted by the court in the case just referred to. By it the defendant is to have the right to draw and use all of the water from the reservoir, which manifestly means all the water from the spring. The important element in the grant is the right to use and draw all the water from the spring, and such right is only an easement. Race v. Ward, 4 El. &. B. 702. The defendant, having had granted to it, by the owner of a tract of land, a right to enter upon said lands, to build a reservoir thereon at what is known as the “Middle Spring,” provided the reservoir should not occupy or cover more than one-half acre of ground, acquired an ■easement thereunder of indefinite location, but not the right to enlarge its scope where it had been once fixed and exercised in a ■definite manner. This defendant, acting under its grant, located its reservoir at the Middle Spring, and occupied therewith so much of the land as it deemed necessary for its purposes, and now, since the extent of the grant as determined by the defendant at the time has been acquiesced in by the parties for ten years, it is committing an act which amounts to an enlargement of the easement, and violates the rule that when a grant is made in terms so general or indefinite that its construction is uncertain and ambiguous, the contemporaneous acts of the parties giving a practical construction to it is to be taken as a manifestation of the intention of the parties.

“When a right granted has been once exercised in a fixed and defined course with the full acquiescence and consent of both parties, it cannot be changed at the pleasure of the grantee. If it be admitted that he has the right originally to select the place in which the easement is to be enjoyed, he cannot afterwards alter it. Convenience and justice both require this limitation on the right, otherwise it would be open to questions of great doubt, and would make the servient estate in a great measure subject to the unrestrained control of the owner of the easement.” Jennison v. Walker, 77 Mass. 423. To the same effect is the opinion of Mr. Justice Knapp, delivering the judgment of our court of errors and appeals in Jaqui v. Johnson, 27 N. J. Eq. (12 C. E. Gr.) 526. See, also, Wynkoop v. Burger, 12 Johns. (N. Y.) 222; Lore v. Stiles, 25 N. J. Eq. (10 C. E. Gr.) 381, 383.

To adopt the view of the defendant in this case would permit it from time to time, without limitation, whenever it saw fit, to pass and repass over the lands of the complainants, either to make constant enlargements of the reservoir or to sink driven •wells at its pleasure, thereby imposing a continuing burden upon the servient tenement which could not have been within the intention of either party when the grant was made. The grantor may be willing to suffer the inconvenience of a single invasion necessary for the purpose of constructing defendant’s works, but it by no means follows that he would contract to allow constant invasions covering an indefinite period, and justice requires that this defendant be limited to the selection made by it as to the extent of the easement to be enjoyed by it under the indefinite terms of this grant.

As the defendant is putting upon complainants’ land a permanent structure, .and under its claim of right may continue to sink numerous wells, which, in my opinion, it has no right to do, I will advise a decree restraining it.