author: Fielder, V. C.

text:
    In the matter of the petition of the Young Women’s Christian Association.
    [Decided October 31st, 1924.]
    1. Conditions subsequent are not favored in equity, and are to be construed strictly because they tend to destroy estates.
    2. Wlhen a gift for charitable uses can no longer be administered in exact acdordance with the intention of the donor, a court of equity has power under its general equity jurisdiction to direct that the gift be administered cy pres.

    3. But where there is an absolute failure of the use to which the donor directed his gift to be devoted, and the donor has directed what disposition shall, in such event, be made of his gift, the court will not direct the application of the gift to another charity, as nearly as may be, according to the donor’s intention.
    4. Under Supp. Comp. Stat. p. ]308 §§ 1, 2, the chancellor is authorized to order that lands conveyed to a religious, educational or charitable association be sold, when a sale will promote or benefit the trust. Such sale may be made free from the limitations of the trust, and the trust will thereupon attach to the proceeds of sale.
    On petition to sell land.

      Mr. Lewis R. Conhlin, for the petitioner.

      Mr. .Julian C. Harrison, for the defendant Domestic and Eoreign Missionary Society, &c.

      Mr. Edward L. Eaizenbach, attorney-general, pro se.

   Fielder, V. C.

In the year 1900, Armide Y. Smith acquired a tract of about two and a half acres, situate at Oceanic, in this state, on which she erected t\ro dwelling-houses, one of which she called “Armide Best” and the other “Ellen Cottage,” both of which she maintained as a summer vacation home for working girls, until her death, April 18th, 1907. By her will, admitted to probate by the surrogate's court of Yew York count}", she provided, in the sixth clause thereof, as follows:

“I give, devise and bequeath to the following institutions incorporated under the laws of the State of New York the respective .sums of money, or parcels of property, set opposite the name of each respective institution” (then follow five items of bequests of sums of money to five institutions and the clause continues) :
“6. The Young Women’s Christian Association of New York, the premises at East Oceanic. * * * and which are now known as ‘Tile Armide Rest’ and ‘Ellen Cottage.’ ” upon the following conditions :
‘‘a. That the said premises be permanently maintained as a home for working girls and working unmarried women, between the ages of sixteen and forty years.
“b. That it be maintained as a non-seetarian institution.
‘‘p. That the names ‘The Armide Rest’ and ‘Ellen Cottage’ be permanently retained.
“d. That in ‘The Armide Rest’ there be kept permanently a free bed to be known as the ‘Armide Bed.’
“e. That in ‘Ellen Cottage’ there be kept permanently a free bed to be known as the ‘Ellen Bed.’
“It is my will that if any of the foregoing bequests lapse, or in case said ‘The Young Women's Christian Association of New York’ shall refuse to accept said premises on said conditions, or in the event of said association being unable, for any reason, to accept the same; or in the event at any time of the failure of any one or more of said conditions, that then and in that event, the bequest or devise so lapsing, shall revert to and become part of my residuary estate.”

The testatrix gave her residuary estate to trustees—

1. To pay the income from one-half to- her sister, Mary Y. Tiffany, for life, and upon her death to pay one-half of said estate to John P. Kellogg (now dead), or, if he be dead, to pay said one-half to the Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America.

2. To pay the income from the other half for the use of her nephew, Rene de Fontinelliat, for life, and, upon his death, leaving issue, to pay one-half of said estate to his issue, or, if no issue, to pay said one-half to the Domestic and Foreign Missionaray Society of the Protestant Episcopal Church In the United States of America.

The Young Women’s Christian Association of New York accepted the devise and maintained the premises and cottages as a summer home for working girls and unmarried women from 1908 until the close of the summer of 1919, but the further maintenance of the property fox the purposes being impracticable, it has not been so used since 1919. The association filed its petition in this court April 19th, 1921, setting forth the reasons why it deemed it impracticable to- maintain the property for the object specified by the testatrix, showing that it owns lands and buildings at Allendale, in this state, devoted to use as a vacation home for working girls and unmarried women, open throughout the year and representing that the devise and charitable intentions of the testatrix can be effectuated if the association be permitted to< sell the land and premises at Oceanic and use the proceeds either as an endowment fund to be known as the “Armide Smith Fund” in connection with its Allendale home, or use the proceeds for the erection of an additional cottage on the Allendale property. The petition prays that the land and premises at Oceanic be ordered sold free from the limitations of the trust specified in the will, and that the proceeds of sale be held upon the same or like conditions, limitations or trusts as were declared in the original trust or be devoted to some other use^ not inconsistent therewith, as may be directed by 'this court. The petition prays process to< answer directed to Alva E. Belmont, surviving trustee under the. will of Agmide Y. Smith, Mary Y. Tiffany, Bene de Eontinelliat (he having had no issue up to date of final hearing of the cause), the Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America and the attorney-general of the State of New Jersey. No appearance was entered and no answer was filed by the defendants Alva E. Belmont, trustee, and Bene de Fontinelliat, and a decree pro confesso was entered against them. Mary Y. Tiffany filed an answer admitting the truth of the allegations contained in the petition, and consenting that the prayer of the petition be granted, upon condition that the decree of the court shall require that the proceeds of sale be used and applied in such manner that the name “Armide” shall always-be retained in connection therewith. The attorney-general filed an answer alleging that it is for the best interests of the public that the trust in question be enforced by a decree of this court, and that the intention of the testatrix be carried out, and that the petition be dismissed. The Domestic and Foreign Missionary Society of the Protestant 'Episcopal Church in the United States of America filed an answer alleging that the will in question provides that if the petitioner is unable to comply with the conditions of the devise to- it, the land and premises in question revert toi the residuary estate for the benefit of the missionary society and others, and that the intention of the testatrix -will best be effectuated by directing a sale and requiring the proceeds to be paid to the clerk of this court, or to a trustee to be appointed, subject to the trusts created by the will. The answer prays that the petition be denied in so far as it seeks to have the proceeds of sale held for the benefit of the petitioner, and that the co-urt appoint a trustee to administer the fund realized from a sale, in accordance with the provisions of the will. The proofs taken and the stipulated facts show that the property is no longer adapted for the purpose which the testatrix had in mind. The cottages can be used only in the summer months because they contain no provision for heating, and they have no cellar in which heating apparatus can be installed; they are not equipped for lighting by gas or electrieity, and they have totally inadequate facilities for bath, lavatory and toilet purposes, and the cost of installing these lacking improvements and conveniences is prohibitive. The property is in a built-up neighborhood and its location is neither country nor seashore. It is about two miles from the ocean, which is reached either by walking or by public omnibus, and the use of the beach for bathing purposes requires the girls to hire bath houses. While the cottages were maintained by the association, the girls were charged a small sum for board, but the money thus received was insufficient to employ a proper matron, the necessary help and cover the cost of maintenance and repair. The association owns a tract of land of about five acres in the open country at Allendale, upon which it has two buildings, and which, since 1919, has been operated by the association as a place where working gilds and working unmarried women may spend their vacations, holidays and week-ends. It is open throughout the .year. The main house can accommodate from thirty to forty girls, and the other building contains a large hall used for dancing and entertainments, and has sleeping accommodations for twenty-five girls. Both buildings are equipped with running water.and ample bathing and toilet facilities, and are lighted by electricity. The main house is heated by steam. The Saddle river is nearby and has been dammed into a swimming pool, and dressing rooms for bathers have been installed in one of the association’s buildings. So popular is this place that two thousand six hundred and twenty-four girls were entertained during 1923. It is practically self-supporting and is' capable of expansion, but it has no funds to expand for improvements or additions which would increase its usefulness. If such funds were available, a larger number of girls could be accommodated and given the benefits of rest and recreation which its facilities offer. The association proposes that the property at Oceanic be ordered sold and the proceeds of sale be devoted to the work at Allendale, and that in such event it will name one of its buildings “Armide Rest.” It is admitted that the Oceanic property is now unsuitcd and inadequate lor the purposes to. which the testatrix desired it to be devoted, and that the Allendale property is operated by the association lor such purposes and is suitable and adequate therefor.

The trust declared by the testatrix was for the benefit of an indefinite number of persons, and it was her expressed purpose to make that benefit permanent. To her devise she attached certain terms, and she provided that, in the event of the failure of any one of the terms (which she called conditions), the devise should lapse and be devoted ultimately to a purpose wholly foreign to her original intention. If these terms are to- be regarded as conditions, it must be as conditions subsequent, which are not favored in equity and which are to be construed strictly because they tend to destroy estates, and the leaning of this court is therefore not to hold such terms to be conditions subsequent, but rather as limitations in trust. Mackenzie v. Trustees, 67 N. J. Eq. 652. The petitioner accepted the devise and administered the trust in strict accordance with its terms for twelve years, and until through lapse of time and changed conditions, for which it is in no way responsible, an exact compliance with such terms is impossible1, and the question is whether the plan or scheme which the petitioner proposes for the further administration of the charity is such a use as will effectuate the testatrix’s dominant intention and whether this court has authority to order the trust property to-be devoted to a use not inconsistent with such intention.

When a gift for charitable uses can no longer be administered in exact accordance with the intention of the donor, this court has power, under its general equity jurisdiction, to direct that the gift be administered cy pres—that is, as nearly as possible in conformity with the intention of the donor. Mackenzie v. Trustees, supra; Brown v. Condit, 70 N. J. Eq. 440; Larkin v. Wikoff, 75 N. J. Eq. 462; affirmed, 77 N. J. Eq. 589. Tint when there is an absolute failure of the use to which the donor directed his gift to be devoted, and the donor has directed wdia.t disposition shall, in such event, be made of his gift, this court will not direct the application of the gift to another charity, as nearly as may be, according to the donor’s intention. Larkin v. Wikoff, supra.

Where a testator has two objects in view, one primary or general and the other secondary or particular, and these are, literally speaking, incompatible, the secondary object must be sacrified in order that effect may be given to the general object. Where the will exhibits an intention that the donation shall be devoted to a specific charitable purpose and prescribes a particular mode or means by which the purpose shall be carried out, the failure of the mode or means, after the donation has taken effect, will not defeat the charitable purpose. The specification of the manner of doing the thing •often is only directory, and the implication in such ease is that the donor has intended that his purpose shall, if necessary, be effectuated in some other way. This is not substir tuting a different charity for the one which the donor founded and which has failed, but it is carrying out the donor’s general intention by the use of means other than those specified by the donor, when the specific means have become impracticable. Mackenzie v. Trustees, supra; Brown v. Condit, supra.

It is apparent from the provisions of the will that the primary and dominant intention of the testatrix was to help working girls by providing a non-sectarian place for rest, recreation and social enjoyment, and she designated her property at Oceanic as the place-at which such purpose should be effectuated, because she was using it for that purpose. It was at hand and was the most available place at the time. The location, therefore, was merely an incident. She provided that the cottages should bear certain names and that a free bed be maintained in each, the name "Armide” to be a memorial to herself and the name "Ellen” a memorial to another but undisclosed person.' It can scarcely be doubted, that had she foreseen the impracticability of carrying out her dominant intention at the particular location, she would have made provision for carry it out elsewhere at a more suitable place, and that she would have been willing to sacrifice her desire for a memorial bearing her name for a monument, albeit unlettered, in the better and happier lives of those in whose welfare she1 was so deeply concerned. It may be noted that, if her gift should be held to' lapse, the perpetuation of her name as a memorial to1 her beneficience cannot be accomplished, but if the petition can be granted, the association offers either to use the proceeds of sale as an endowment fund to be known, as the “Ajrmide Smith Fund,” or to name one of its cottages at Allendale “Armide Rest.”

The proposition of the petitioner is not that the devise he devoted to another or to a different use, but that it be continued for the use for which the testatrix intended it, only changing the place of the use. My conclusion is that, under the general equity powers of this court, the prayer of the petitioner can and should be granted; that for failure to do the impossible, namely, to- cany on the testatrix’s philanthropic design at Oceanic, when it can better be carried on at Allendale by her designated trustee or agent; the gift should not be held to lapse and thus defeat the primary intention the testatrix had in mind. .

By two statutes the legislature has attempted to provide for a situation such as has arisen here. P. L. 1905 p. 287, which was in force when the testatrix died, applies to land devised to religious associations and to corporations formed for the purpose of- education. Without pausing to consider whether the petitioner is an association which falls strictly within the meaning of this act, I refer to the second act. P. L. 1911 ¶. 76; Supp. Comp. Stat. 1308 §§ 1, 2. The act of 1911 is retroactive as well as prospective in its?- provisions. It provides that whenever lands shall have heretofore been devised by will to any religious, educational or charitable association upon a trust that the same shall be used for specific uses or purposes, but without power to sell or convey the same, and it shall be made to appear to the satisfaction of the chancellor that a sale of such lands will promote and benefit the trust upon which the same is held, the chancellor may order such lands to' be sold by such association free from the limitations of such trust, and the proceeds shall be held upon the same or like conditions, limitations or trusts as were declared in the original trust, or shall be devoted to some use not inconsistent therewith, as the chancellor shall order, and the chancellor may order such association to invest the proceeds of sale in such securities as trustees are authorized to invest trust funds, or may direct the whole of the proceeds to be invested in other more desirable lands and tenements, the same to- be held by such association in the same manner and subject to the same conditions, limitations and trusts as were the lands originally devised to it.

Under this statute-, as well as under the general equity powers of this court, and upon the circumstances and facts here present, the prayer of the petitioner can lie granted. I shall advise a decree that the petitioner sell the land and premises at Oceanic free from the limitations of the trust contained in the will of Amide Y. Smith, and I shall hear the parties now, or after such sale has- been held, as to the particular disposition to he made of the proceeds pi sale in connection with the property owned by the' petitioner at Allendale.

Costs of the petitioner and of tiro answering defendants, including reasonable counsel fees, will he allowed, to he paid from the proceeds of sale.


source: Caselaw Access Project

author: Bentley, V. C.

license: Public Domain

text:
    Richard Zaft et al., complainants, v. John Milton, prosecutor of the pleas of Hudson county, defendant.
    [Decided August 13th, 1924.]
    1. Where the proseeutor of the pleas of a county seized a large number of machines which had been placed in a warehouse upon the ground that the same, were intended to be used for gambling purposes within the intent and meaning of the statute mentioned, and the court determines that the machines were intended to be used for gambling purposes, the prosecutor will not be enjoined from destroying them.
    2. Where goods are shipped from one state to another, and are stopped in transit by the owner and stored in this state, the property is subject to the laws of this state.
    On bill, &e.

      Air. I. Faerber Goldenhorn (Air. Marie A. Sullivan, of counsel), for the complainants.

      Mr. Aloysius McMahon, for the defendant.
   Bentley, V. C.

This is a bill for an injunction to restrain the prosecutor of the pleas of Hudson county from destroying certain vending machines, under the Criminal Procedure act. Comp. Stat. p. 1875 § 168.

The defendant, as the prosecuting officer of Hudson county, has seized a large number of machines that had been placed by the complainant in a warehouse in Jersey City, upon the ground that the same were intended to be used for gambling purposes within the intent and meaning of the statute mentioned. Upon his declaration that he intended to destroy them, a restraining order was granted to prevent the irremediable damage that would thereupon have fallen on the complainant if the prosecutor had exceeded his authority. The complainants manufacture, or have manufactured for them, machines for the vending of chewing-gum, or other such commodities, which they lease out to shopkeepers for the purpose of selling gum, &c., to the latter’s customers. Those in question have somewhat the appearance of ordinary cash registers such as are used in small stores. On the front of the machine, and in a position such as to almost certainly arrest the • attention of a prospective customer, appears the legend “For 5c. you receive a package of mintgum and ( ) premium checks.” In the place indicated by the parentheses there is a glass-covered opening in which there appears sometimes the word “No” and at other times a numeral, which is always an even number, and varies from 2 to 20. The customer inserts a nickel in a slot provided for that purpose and operates a lever which causes a spinning of wheels that deposits in an aperture a package of the article vended, where the customer can conveniently take possession of it. This procedure is always repeated whenever the machine is operated, after being unlocked by the introduction of the coin mentioned, but only when a coin is used. At the completion of the operation the machine again stands in the same condition, to all outward appearances, as it did before the nickel was introduced into it. However, the word “No” may appear again, but, on the other hand, there may be presented in the glass-covered opening a numeral which indicates that upon the next operation of the machine with a nickel there will be returned or delivered to the customer not only a package of the commodity sold, but, in addition thereto, a number of metallic discs corresponding to the numeral just mentioned. These discs are, in shape and -size, the exact counterpart of a five-cent piece except that through the center of each one there is cut a round hole. Now, the customer, supplied with two or more such discs, is at liberty to purchase any article sold in the store where the machine is displayed, credit being given to the extent of Jive cents for each disc so won. But if he does not choose to put such discs to that use, he may in place thereof deposit them one by one back into the same machine from which they came, or any other similar one, in lieu of a nickel. If this be done, the operation of the machine and the result thereof are precisely the same as if a coin were used, except that a bar, operated whenever the lever is pulled, is thrust forward so as to pierce the hole in the center of the disc and thereby prevent the actuation of the machinery that deposits the commodity sold, but permits the revolving of the other machinery so as to make it a matter of chance whether the word “No” will next make its appearance or a numeral instead. So, that, while a package of gum or other article is always secured when a nickel is placed in the appropriate slot, there is never any such sale when the disc is substituted for the nickel. In the powerful argument made by counsel for the complainants, great stress was laid upon the fact that the one operating the machine always knows, in advance of the operation, exactly what he will receive for the coin or the disc that he places in the slot. This, it is said, eliminates all element of chance* and the transaction becomes a bona fide matter of barter or sale in every instance, and that in each of the constituent acts, whether they be 1, 10, 15, or any other number, cannot become illegal if each one is, in itself, no transgression of the law. I think, nevertheless, as Vice-Chancellor Buchanan held in Pure Mint Co. v. Le Barre, 2 N. J. Adv. Rep. 1168, not yet officially reported (96 N. J. Eq. 186), that there can be no question that a machine designed as above indicated is a gambling device within the meaning of the statute. It is clear to me that the underlying philosophy of these instruments is to take advantage of the cupidity of human nature and the gambling instinct so prevalent, else,'why make the so-called premium checks in the form and size of the coin adapted to be used in its operation? It is also significant that the discs are perforated in the manner I have described so that when reintroduced into the aperture, provided for that purpose, no longer does the operator receive the commodity vended but may receive more of the discs having a two-fold value, either to be used in lieu of money for the purchase of goods or to again try fortune for still more premium checks. In the opinion just cited, the argument as to the right of any individual to continue to play the machine has been sufficiently answered.

I have read the opinion of Mr. Justice Benedict, of the New York supreme court, in Byk v. Enright, but I am not only at variance with his reasoning (he cites no authorities except to condemn them), but, in addition, his decision has been appealed and his injunction against the police stayed by the appellate division. Nor do I feel that I should permit my decision to be forced by that in People v. Hirt, in some Ohio court, or Yale Wonder Clock v. Surman (193 N. Y. 632, affirming 120 App. Div. 904, without opinion).

It is also argued that there is no difference between the plan underlying the use of these machines and the practice of so many shopkeepers in giving premium coupons or additional merchandise to purchasers to attract and hold customers. Of course, that is an entirely different thing, because the purchaser always knows in advance by a simple arithmetical process how much he will receive in return for any given amount of money that he intends to lay out in purchases. There is not the slightest semblance of a chance. While here, if a person starts with fifty cents, he knows before spending any part of that amount what he will receive for the first nickel, but when the tenth nickel has been used up he may have nothing to show for his outlay except ten packages'of gum, or, if he is fortunate, if luck is with him, he may, at the end, in addition to the gum, find himself with any even number of discs not exceeding two hundred in number. This is the very vice described in State v. Shorts, 32 N. J. Law 398. As Chief-Justice Beasley there pointed out, while the odds against the winning of a prize was great, “still there was a chance of a disproportionate gain, and the offer of this or any other chance is the stimulus to the spirit of gaming which the law prohibits.”

Were there no more to this case than I have discussed I might well rest my” conclusion upon the opinion of Vice-Chancellor Buchanan, to which I have already referred. But, in the case sub judice, the learned counsel for complainants has argued with great skill, more fundamental objections to the action of the prosecutor attacking both his power under the act of the legislature and the applicability of the statute to these particular machines, under a well-recognized rule of construction.

It is contended that the machines in question do not come within the restriction of the gtatute upon which the defendant relies. The act is as follows:

“Whenever any furniture or implements made or used for the playing of the game of faro, roulette, rouge et noir or any unlawful game, shall be seized or captured by the police, constabulary or other officers, it shall be the duty of the prosecutor of the pleas of the county where such seizure is made, to have the same destroyed or rendered useless for the uses and purposes aforesaid, and it shall be unlawful to return, the same to the-person or persons owning the same, or to any person whatsoever.”

Relying upon the canon of construction dealt with in Syms v. West Hoboken, 130 N. J. Law ISO, the complainants say that only furniture or implements made for playing games similar to those denominated, in the act may be destroyed. The Standard Dictionary defines roulette as a game played at a table divided into numbered and colored spaces, and having in the center a rotating disc on which a ball is rolled until it drops into one of the thirty-seven spaces, the player winning if he has staked his money on that space, or its color, or on a combination including it.

I can see no distinction, for the purposes of this case, between a game of chance, as I have already decided this to be, played upon a revolving disc according as a ball drops by luck into this, that, or another resting-place, and a wheel revolving within a case and coming to a stop- by chance before a glazed aperture. In one instance the pellet, by its position at the cessation of motion, determines the fortune of any particular player, and in the other, a portion of a wheel containing a numeral or the word “No,” determines the player’s luck as it stops in front of the little window-upon which all eyes interested will be intently focussed. I feel that this machine is within the general terms of the statute, as construed in the light of the specification of the particular classes. Livermore v. Camden, 31 N. J. Law 507.

The next point made by the complainants is, that the detention of their goods by the defendant is unlawful, because there was an unlawful seizure. My difficulty with this argument is, that while there was no search warrant and they are not held as evidence, it is perfectly clear that they are designed for the purpose of gaming, and will be put into operation for that end if they are restored to their owners. These machines deliver to each so-called purchaser a package of gum or other small purchase, worth five cents for every five cents deposited in the machine. So far, no fault can be found with the implements, more than can be leveled against thousands of vending machines within our own state and throughout the civilized world. But, in addition thereto, after having delivered full value for his money, there is held out to the person attracted, the promise of a chance that he may secure, for the deposit of a single nickel, a return of twenty times the amount he hazards, over and above that for which he has ostensibly parted with Iris coin. It is únescapable that the underlying hope of the operator is based upon the chance of getting something for nothing, or gain out of all proportion to what one has a right to expect. State v. Shorts, supra. It is true that property which may be used either lawfully or unlawfully is not subject to seizure, unless for the reasons mentioned above or upon proof that it has been put, or is intended to be put, to its illegal use. But, for the reason I have just given, it is incredible that the designers of these machines intended them for the innocuous us'e of vending chewing-gum, or what not, without any other purpose in mind, and the purpose, of course, was to lure the adventurous to a trial of fortune.

The last point to be considered was raised upon behalf of only one of the defendants, and is to the effect that the goods in question were in interstate shipment, and, therefore, beyond the power of this state. The facts are that the goods were shipped through from some point in the middle west to the city of New York, and were removed en route, to be placed in storage in Jersey City to meet the convenience of the complainants because, they say, of lack of storage capacity at their place of business in New York. Of course, it is firmly established that where a delay in such a shipment is caused by matters beyond the control of the consignee, such as insufficient rolling stock on the part of the carrier to complete the journey, the constitutional protection against intermeddling by local authorities continues. But where, as in this case, the break in the journey of the commodity is for the benefit or convenience of the consignee, the exclusive federal jurisdiction ceases and the property at once becomes subject to the laws of the state in which it finds its resting-place. Pittsburg and S. Coal Co. v. Bates, 156 U. S. 577.

I will advise a decree dismissing the bill and dissolving the interlocutory injunction.


text:
    Evelyn M. Ultcht, petitioner, v. Floyd S. Ultcht, defendant.
    [Submitted October 14th, 1924.
    Decided October 15th, 1924.]
    Where a husband, who was a resident of a foreign state, came into this state for the purpose of a conference with his wife as to their matrimonial affairs, coming by arrangement with his wife, or her representative, service on him of process of citation in a divorce suit will be set aside.
    On petition, &c.

      Messrs. Kappes & Hille, for the petitioner.

      Messrs. Heine, Bradner <& Laird, for the defendant.
   Bentley, V. C.

This is a motion to set aside process of citation in a divorce suit.

The husband is a resident of the State of Florida, and his wife is domiciled within this jurisdiction. He has, apparently, already secured a decree of divorce in Florida, and she has filed a petition in this state to secure a like decree in her favor. The proofs before me must be determined upon the effect of three letters which passed between the respective fathers of the parties hereto, the wife’s father being named Howard and the husband’s, of course, Ultcht. After a long separation of the parties the wife’s father, on April 11th, 1924, wrote to the elder Ultcht, saying that he had previously that day telephoned the latter at the request of some police officer, and said further:

“I wrote almost a month ago a letter to Floyd in which I told him I would be glad to keep an appointment with him, and I named a time and place that would be convenient for me.”

He concluded the letter by saying:

“However, I will be glad to hear from you relative to- having a friendly meeting.”

Two days later the husband’s father replied to the foregoing letter, complaining of the failure of the wife and her father to keep appointments, and, after saying that there Were some matters that should be discussed by all of the persons mentioned, concluded his letter as follows:

“If you will not meet us here in Mt. Vernon, kindly state the time and place, making it in the afternoon, if possible, next week, where we may see you all in New Jersey.”

In response to that the father' of the wife replied, almost three weeks later, as follows:

“Yours of August 13 came at an inopportune time because of vacation plans, so I take this opportunity now of answering.
“What you have to say is of course of great interest to me, as the welfare of Evelyn and Betty of course have meant a great deal to me, especially in the way of care and attention. I can readily understand and' heartily agree with you that there are matters to be gone over especially as between Floyd and Evelyn.
“Thing's with me just now are in such shape that I cannot give the time to go to Mount Vernon, but if you and Mrs. Ulteht and Ployd can arrange to be at my house some evening before you leave for the South, we can all conveniently meet. We can make it any evening but if time presses you we will fix it for this Friday, and as you say you prefer the afternoon we will expect you at four-thirty.”

On September 5th, the day fixed in the last letter, the husband and his father kept the appointment by going to the home of the wife’s father in Union Hill, New Jersejr, the former two being domiciled at that time in Mount Vernon, New York, and after arriving at the Howard home the husband was served with the process to which objection is now made, either before or after a discussion of the family troubles. There is some dispute as to whether it was before or after, but with that I am not concerned, for reasons which will be apparent.

The husband’s objection to the service is based upon the broad dictate of justice, that one shall not be inveigled into a jurisdiction for the purpose of service of process upon him. But the wife says she had nothing to do with procuring his presence in this state, and, furthermore, that the husband came here voluntarily upon his own suggestion and without solicitation. As to the first proposition, it is perfectly clear that her father was acting in her behalf, and she is bound by whatever he did equally as much as if done by her in person. In- the second place, I agree that the conference at which service was made was at the request and suggestion of the husband. The letter of August 11th from her father clearly indicates that there had, for a long time before, been some effort on the part of the husband to secure a meeting with his wife. The language which I have quoted above, to the effect that he had proposed a time and place of appointment, leads me to so believe.

If, in truth, the proposal of a conference to settle a number of questions, as indicated in the letter of August 13th, had been initiated by the husband or his representative, he should be protected when he came into this jurisdiction, upon an agreement with the wife that it was to be for the purpose of discussing their affairs. I can see little difference between the proposal of a plaintiff that he and the defendant meet for a settlement of their differences in a state where the latter is not resident, and thereupon, effects service on the latter, and a case where, as -here, the wife contends the proposal for sitcli a meeting is made in the course of correspondence by the defendant, and the plaintiff takes a sharp advantage of the latter’s unwariness and lures him into the foreign jurisdiction by pretending to acquiesce in his desire for a settlement. When she accepted Ids offer and allowed him to put his head in the noose, every dictate of justice and fair dealing precluded her from taking a sharp advantage of his trust in her sincerity. She knew that, in reliance on her agreement, he was placing himself in danger of service that could not otherwise have been accomplished. Acting upon faith in her word, he lost an immunity which he had previously enjoyed. She should not be permitted to agree upon his coming for one purpose and then take advantage of his presence for another. The process of this court should not be lent for such uses. The- policy of all courts favors an opportunity of the parties to private disputes settling the same, and as Mr. Justice Van Dyke said in Williams v. Reed, 29 N. J. Law 385:

“Common justice as well as common courtesy to our neighbors requires that we should do1 to them as we would have them do to us in such cases.”

The wife further contends that, according to her husband’s own proofs, he was constantly passing back and forth into this state, and that, therefore, his privilege had been waived. I cannot agree with this either, because, while it is true, as pointed out in Case v. Smith, 152 Fed. Rep. 730, that had he been served upon any other visit to this state it would have been effectual, that does not in the slightest change the situation where the action was taken at a time and place to which the husband had been invited (and it makes no difference whether expressly or by implication) to attend by the adverse party.

Finally, it is said that the service should not be disturbed, because there is no.reason for the application of the rule in question in a divorce suit where, as here, the defendant has already secured a decree severing the bonds of matrimony in the State of Florida, and the petitioner only seeks to supplement that decree by one here that will sever their relations everywhere. It seems to me apparent that the slightest consideration of this argument would disclose its weakness. Legal proceedings are carried on under established rules of procedure, and any individual is entitled to object to a judgment or decree being entered against him except in accordance therewith. Means have been provided by the legislature to acquire jurisdiction without any enticement being practiced ; so that the wife is by no means remediless if the present sendee is declared invalid. But to allow such service to stand in violation of the rule of common justice herein discussed, would be to subject the defendant in a divorce suit to litigation of the most important questions, such as alimony, custody of children and others in a (to him) foreign jurisdiction at a great distance from the one in which he is living. It may be said that substituted service will place him in the same position; but, at least, in that event, he cannot be heard to complain that his rights have been invaded, or that any fraud or trickery has been employed against him in the service of the process of this court against him.


author: Griffin, Vice-Ordinary.

text:
    Edwin Robert Walker, Ordinary.
    Edmund B. Leaming, Vivian M. Lewis, John H. Backes, John Grieein, John E. Foster, Malcolm G. Buchanan, James F. Fielder, Alonzo Church, Robert H. Ingersoll and John Bentley, Vice-Ordinaries.
    In the matter of the estate of Sarah A. Cooke, deceased.
    [Decided June 30th, 1924.]
    1. Matters substantially included in an appeal pending in the prerogative court from a decree of an orphans court are out of the orphans court’s jurisdiction.
    2. Where an appeal is taken to the prerogative court, all future proceedings in the execution of the trust, when not involved in the appeal, must be presented in the orphans court.
    On appeal from an order of the orphans court of the county of Passaic, signed by Mr. Justice Mintum, who> filed the following memorandum:

      “The question involved in this application is net a question of power, but whether the matter presented is substantially included in the appeal now pending in the prerogative court from the decree of this court allowing the final accounts. I so consider it, and the contention therefore urged before me is out of this court’s jurisdiction'. Nothing can be lost to the estate by awaiting the determination of the prerogative court, since the permanent situs of the former trustee in this jurisdiction subjects it with certainty to compliance with any decree which may be made against it; and no question is now made as to the solvency and financial ability of such trustee to respond to the requirements of any decree which the prerogative court may make.
    “This court intervened in this matter only for the purpose of supplying the estate with a new trustee in view of the expressed desire of the former trustee to resign from the further execution of the trust, and the desire of the present trustees, who are residuary legatees, to assume its obligations. That. situation having been dealt with by the former order entered herein appointing the present trustees, all future proceedings which the present trustees may deem necessary to the proper execution of their trust, when not involved in the pending appeal, must be presented to the judge of the orphans court.
    “The order to show cause will therefore'be discharged, without costs.”

      Mr. Edward Beam, Mr. John G. Beam and Mr. William B. Beam, proctors pro se, for the appellants.

      Mr. John L. Griggs, proctor for the respondent.
   Griffin, Vice-Ordinary.

The order appealed from will be affirmed, for the reasons stated in the memorandum of Mr. Justice Mintum in the Passaic orphans court.


text:
    In the matter of the estate of Sarah A. Cooke, upon appeal of William B. Beam from the decree of the orphans court of the county of Passaic allowing the final account of Paterson Safe Deposit and Trust Company.
    [Decided June 30th, 1924.]
    1. Under orphans court rule 21 the actual or market value oí securities listed in statement annexed to a trustee’s account need not be stated.
    2. A trustee’s final account need not set forth the method by which a bond and mortgage listed in the assets was acquired, nor the number of bonds and stocks held by the trustee, the value of which is given.
    3. A trustee under rule 21, supra, must annex to his final account a statement of changes in securities since the last preceding account, and a decree dismissing an exception to the account for non-compliance with this rule is erroneous.
    4. Testimony offered on appeal as to matters outside the exceptions to the trustee's final account will not be considered.
    5. On sustaining exceptions to a final account for the absence of a statement of changes in the corpus, such statement may be filed, exceptions taken and hearing had thereon in the prerogative court.
    (S. When exceptions to a trustee’s final account for omission of changes in the corpus are sustained, the question of the accountant’s right to commissions, counsel fees, &c., cannot be decided until the filing of such statement in the prerogative court, and its decision on exceptions thereto.
    On appeal from Passaic county orphans court.

      Mr. Eugene Blankenhorn (with whom was Mr. Harold R. Medina, of the New York bar), for the appellant.

      Mr. John W. Harding (of Messrs. Griggs & Harding), for the respondent.
   Griffin, Vice-Ordinary.

This is an appeal from a decree of the orphans court of the county of Passaic, made on the 24th day of February, 1921, allowing the account of the Paterson Safe Deposit and Trust Company, trustee, and overruling the exceptions thereto; and also from the allowance in said decree to the said trustee of $400 for commissions, and a counsel fee of $250 to Griggs & Harding, proctors for the accountant; and further commissions of $81.86 on income received during, the period of said account. Two sets of exceptions were filed, one by William B. Beam and John C. Beam, and the other by Edward Beam, John C. Beam and William B. Beam. Both sets are alike, and are as follows:

“1. The accountant does not state the actual or market value of the securities set forth in schedule C of the final account.

“2. The accountant does not set forth the correct value of the stock in the Brooklyn City Railway Company mentioned in schedule C of said final account.

“3. The accountant does not set forth the method by which the bond and mortgage of Max Gold, mentioned in schedule C of.said final account, has been acquired by it as trustee as aforesaid.

“4. The accountant does not set forth the number of the bonds and stocks held by it as trustee and mentioned in schedule C of said final account.

“5. The accountant has not annexed to the said account a full statement or list of the securities, investments and assets, of which the balance of the estate in its hands consist, and a statement of all changes made in the securities since the settlement of the last intermediate account.

“6. The accountant has not set forth the correct value of the stock in the Central Park North and East Railroad Company mentioned in schedule C of said final account.”

• The first point made is addressed to the first exception, namely, that it does not conform to. rule 19 of the orphans court, in that the petition annexed to the account does not state the actual or market value of the securities set forth in schedule C of the account. I find, on an examination of the petition annexed to the account, that it strictly conforms to rule 19. . The rule which governs is No. 21, under the caption “statement of assets to be annexed to the account,” and is as follows:

“21. In the settlement of the accounts of executors, administrators, guardians or trustees, the accountant shall annex to the account a full statement or list of the securities, investments and assets, of which the balance of the estate in his hands consists, and a statement of all changes made in the securities since the filing of the inventory or since the last settlement.”

The accountant has annexed to its account a full statement or list of the securities, investments and assets of which the balance of the estate in its hands consists, and is not bound to state the actual or market value. This leads to the conclusion that the orphans court, in overruling exceptions 1, 2 and 6, was right.

As to the third exception, there is nothing in the rule which requires the accountant to set forth the method by which the bond and mortgage of Max Gold had been acquired. As to the fourth exception, the accountant is not bound to set forth the number of bonds and stocks held by it. It does set forth, as against each item of bonds or stocks, the par value on one side and the book value on the other, thuso fully apprising all persons in interest of the total amount of the several bonds and stocks. The orphans court was therefore right when it overruled exceptions 3 and 4.

The fifth exception contains two separate objections. The first is as follows: “The accountant has not annexed to the said account a full statement or list of the securities, investments and assets of which the balance of the estate of the said Sarah A. Cooke, deceased, in its hands consists.” This, I find, as above stated, is not the fact, and, as to this objection, the decree of the orphans court should be affirmed.

The next objection stated in the fifth exception is as follows : “This accountant has not annexed to the said account * * * a statement of all changes made in the securities since the settlement of the last intermediate account.” Comparing the account from the 15th of April, 1911', to the 15th of April, 1919, with this final account (which runs from the 15th of April, 1919, to the 5th of January, 1921), I find that certain changes were made in the> securities since the filing of the last account, and no statement of these changes are set out in the account. The changes are as follows:

Securities appearing in the account last settled which do not appear in the final account:

Bond and mortgage, Mary J. Berdan........ $500.00
Bond and mortgage, Joseph Sharpe......... 2,000.00
Bond and mortgage, Catherine Warren, appearing in the account last settled at $1,200, and in the final account at $800.
Securities purchased since the last settlement:
Victory loan bonds ($200 par), book value.. . $191.84
Victory loan bonds ($200 par), book value... 195.00
Victory loan bonds ($550 par), book value... 550.00
Bond and mortgage, Max Gold, book and par
value .................................. 2,000.00

In a letter written by Mr. Connolly, secretary of the accountant to Mrs. Carrie S. Beam, on-April 13th, 1920 (Exhibit B-2), among other things he said he enclosed a list of the securities held in her trust at that writing and the amount at which the securities were carried on its books, and also a list showing the changes in her trust for the past year. Turning to the list of securities of the date April 13th, 1920 (which was marked Exhibit B-S), there is shown the Max Gold bond and mortgage for $2,000, which does not appear in the last account down to April 15th, 1919; and also the Catherine Warren mortgage is listed at a book value of $1,000 in Exhibit B-S, whereas the account filed in 1919 shows it as listed at $1,200, and in the final account it is listed at $800. In the statement of changes in the trust from April, 1919, to April, 1920 (marked Exhibit B-J/.), it is shown that on November 11th, 1919, the trustee bought the Max Gold mortgage for $2,000, and that, on account of the principal of the Warren mortgage, $200 was paid between February 2d, 1919, and April 3d, 1920. Touching the Sharpe mortgage, this Exhibit B-.(. of the changes in the trust shows that on November 11th, 1919, the Joseph Sharpe mortgage was sold for $2,000. Turning to the final account, it appears in the income account (schedule A) that the accountant charges itself as follows: “August 18th, 1919, interest on Sharpe mortgage to June 30th, 1919, $60.-” The accountant does not charge itself with interest on the’Sharpe mortgage from June 30th, 1919, until November 11th, 1919, when the mortgage was sold according to Exhibit B-J'h

Referring to the Victory loan bonds, aggregating $950 par, there is nothing in the final account which shows when these were acquired, or the price paid for the same. By reference to Exhibit B-lt, it appears that the block of $550 par of these bonds was purchased on July 14th, 1919. The accountant should have stated when the bonds were acquired, and, perhaps, from what source the fund with which to purchase them was derived, and the price paid. Koch. N. J. Prob. L. 1206 § 2.

There also appears in Exhibit B“June 18th, 1919, Zax mortgage paid in full, $500.” There is nothing in the account to show when this mortgage was acquired. Turning to schedule A of the final income account, we find the following entry: “June 1st, 1919. Interest on Zax mortgage to date, $13.89.” This security does not appear either in the account of 1919 or the final account; and how the interest could be $13.89 on a $500 mortgage, unless it was purchased prior to the account of 1919, is to me inconceivable. The interest on this mortgage, if at six per cent., amounted to $30 a year, or $2.50 a month, and for $13.89 of interest to accrue thereon the mortgage must have been in the hands of the accountant for upwards of four and a half months, and going back four and a half months from June 18th, it would seem as if this mortgage was acquired some time in January of 1919, some two or three months prior to the filing of the account of April 15th, 1919. At least, this and the Sharpe mortgage required some explanation, which, if the rule was followed, would have enabled the beneficiaries to intelligently except to the account.

As to the other investments, they were carried forward from the account of 1919, which was allowed by the orphans court.

It was the duty of the trustees, as above stated, to annex to the account a statement of these changes.

In rule 6 of the orphans court, revised May 16th, 1893, it is provided, among other things, “that in the settlement of the accounts of trustees * * * the accountant shall be required to annex to the account a full statement or list of securities, investments and assets of -which the balance of the estate * * * consists, or a statement of all changes made in" the securities since the filing of the inventory or since the last settlement.” In the rules of that court, revised February 11th, 1902, rule 6 was changed to rule 8 without further change therein. In the rule of the orphans court, promulgated December 1st, 1915, to take effect April 1st, 1916, rule 8, above referred to, was changed to rule 21, and amended so as to require a trustee, on the settlement of his account, to annex a full statement or list of the securities, investments and assets of which the balance in his hands consist, "and a statement of all changes made in the securities since the filing of the inventory or since the last settlement.” In the former rules (6 and 8) it will be perceived that the accountant had the option either to annex a list of the securities, &e., of which the balance of the estate in his hands consisted, or, in the alternative, a statement of all changes made in the securities since the filing of the inventory or since the last settlement. In rule 21 the rule is preemptory, that the trustee must annex the’ list of securities as well as a statement of the changes in the securities. The purpose of this amendment, as I see it, was to- give the fullest information to the beneficiaries of the dealings of the trustee in carrying out its trust. The trustee can probably explain the apparent discrepancies in the Sharpe and Zax mortgages; and if the orphans court had directed the trustee to comply with the rule, and the beneficiaries, on such compliance, were dissatisfied, they might then address their exceptions to any irregularity that might then appear. But, in the absence of such compliance, the exception was proper and sufficient, and the decree of the orphans court in dismissing this exception was erroneous.

The result is that the decree of the orphans court on this one exception will be reversed, and, as to the others, affirmed.

On this appeal further testimony was taken in this court, and the greatest latitude was given to the exceptants to1 sustain their case, and there was offered evidence dealing with subject-matter that was entirely outside of the exceptions. This testimony I have decided not to consider. Luse v. Rarick, Ex’r, 34 N. J. Eq. 212; Trimmer's Ex’r v. Adams, 18 N. J. Eq. 505; 1 Koch. N. J. Prob. L. 674.

The decree mil be that all exceptions, excepting the one which is sustained, be affirmed, and, as to the remaining exception, the decree mil provide that the accountant file a statement of all changes made in the securities since the settlement of the last account. This statement may be filed in this court, to which the beneficiaries may except, and, if exceptions be filed, the hearing on the same may be had here. Hill’s Case, 55 N. J. Eq. 764, 768; Trimmer’s Ex’r v. Adams, supra; 1 Koch. N. J. Prob. L. 95.

In addition to filing exceptions, the appellant also appealed from the decree of the orphans court allowing commissions, counsel fees, &c. This question cannot be decided until after the accountant has filed the statement above mentioned, and the court has passed upon any exceptions which may be filed thereto, which decision 'may have a bearing on the right of the accountant and counsel to such allowances. Frey’s Case, 73 N. J. Eq. 346; 1 Koch. N. J. Prob. L. 410; Idem. 691.


author: Backes, Vice-Ordinary.

text:
    In the matter of the last will and testament of Eliza C. Bishop, deceased.
    [Decided June 25th, 1924.]
    1. An attorney who draws or actively participates in the making of his client’s will, by which he substantially benefits, has the burden of establishing the fact that he did not unduly influence his client.
    2. Evidence examined, and held that the testatrix had testamentary capacity, and was not unduly influenced in the making of her will.
    On appeal from the orphans court.

      Mr. L. Edward Herrmann and Mr. Elmer E. Wigg, for the appellant.

      Messrs. Osborne, Cornish & Schenk, for the respondent.
   Backes, Vice-Ordinary.

This is an appeal from a decree of the orphans court of Essex county admitting to probate the last will and testament of Eliza C. Bishop, dated December 9th, 1914, and a codicil thereto, dated July 12th, 1919. Mrs. Bishop died April 19th, 1922, aged eighty-five, a widow and childless. Her only relative was a grandniece, the caviatrix. She left an estate of approximately $70,000. The will contains twenty-four items of pecuniary and specific gifts to her grandniece, friends and charitable institutions, aggregating approximately $25,000, and the residue to J. Henry Harrison, who is appointed executor. The codicil revokes certain gifts and substitutes other' legatees, one being the grandniece.

The ground of contest in the orphans court was the alleged incompetence of the testatrix, at least, all the testimony was directed to that question, and the trial judge (Judge Caffrey), in his opinion, holding that the testatrix was competent, observed that “there was no suggestion of undue influence at the hearings, nor is there any evidence that would justify such a contention.”

After carefully reading the evidence, I am of the opinion that it does not establish that the testatrix was incompetent to make the will and codicil. I concur in the view entertained. by the trial judge that she possessed testamentary capacity, and for the reasons expressed by him in his opinion reported in 2 N. J. Mis. R. 521.

At the hearing on the appeal counsel for caviatrix, as well, attacked the will on the ground of constructive undue influence, claiming that the relation of attorney and client existed between the testatrix and the residuary beneficiary, and that he counseled her in the making of the will, and contending that from these circumstances arise a presumption of undue influence which has not been refuted.

The relation of attorney and client is admitted. To prove that the residuary beneficiary participated in the making of the will, the caviatrix offered in evidence on rebuttal in the court below an envelope and contents found by her after the death of the testatrix in her bureau drawer. They were marked for identification as 16, 17 and 18, but were rejected as evidence, and, I think, correctly, for want of proper proof, and because irrelevant and immaterial to the issue of incompetence. They were offered on appeal and admitted in evidence, but not' until after they were established by the testimony of the residuary beneficiary in his explanation of them. Exhibit 16, the envelope, is endorsed in typewriting “last will and testament of Eliza C. Bishop.” Exhibit 17 is, apparently, a rough typewritten draft of the pencil notes of Mr. Church, the draftsman of the will, and Exhibit 18 is, obviously, a rough typewritten draft of the will, with a blank space in the residuary clause for the name of the beneficiary. Exhibit 18 bears corrections in the handwriting of the residuary beneficiary in a number of places. In the second item, gift to Anna Wolf, there is interpolated “and her lawful issue her surviving.” In the fourth item, gift to Rebecca E. Metcalf of glassware “the cut,” is prefixed to glassware. In the twenty-first item, gift to my faithful servant, William E. Jones, the amount is changed from “two” to “three” thousand dollars. (The change is duplicated in the handwriting of testatrix.) And in the margin is “and three pictures to be selected by him,” evidently an addition to the nineteenth item, giving J. EL Harrison the “engravings fAt School’ and the ‘Last Supper.’” The draft also contains many lead pencil alterations and additions in an unidentified handwriting. The will was prepared by Mr. Church, of the law firm of Munn & Church, of which the residuary beneficiary was a member, from instructions given him by the testatrix and of which he took lead pencil notes. Mr. Church asserts that the residuary beneficiary had nothing whatever to do with the drawing of the will, and Mr. Harrison has no independent .recollection of having conferred with him or with the testatrix in relation to it, he admitting, however, that he may have been in consultation with his partner in its preparation, and that he may have talked about the matter with the testatrix. These tell-tale corrections, it seems to me, admit of no other rational conclusion that they were made by .Mr. Harrison at the instance of the testatrix, m consultation over her will and in confidence as her attorney.

An attorney who draws or actively participates in the making of his client’s will, by which he substantially benefits, has the burden cast upon him of establishing that it was not the result of undue influence. In re Cooper Will, 75 N. J. Eq. 177. The law requires an honest and satisfactory explanation of the circumstances that raise the presumption of undue influence to overcome it. That, Mr. Harrison has given as well as can be given by a busy lawyer after a lapse of eight years and more. His only connection with the making of the will, so far as shown, is reflected in his handwriting on the rough draft, Exhibit 18. The source from, or circumstances under, which he obtained the data has escaped his memory—whether they came from Mr. Church or directly from Mrs. Bishop he is unable to recall—but he does say that apart from these implicating circumstances he had no hand whatever in the making of the will; that he did not advise the testatrix, offered no suggestion to her concerning it; that he did not know who was the residuary legatee until after her death, and positively and emphatically denies that he in any manner whatever influenced the testamentary disposition. That he did not know he was to be the residuary legatee is borne out, in a measure, by the fact that in the rough draft of the will the residuary legatee is not mentioned. His protest of absolute good faith towards his client, and his denial of imposition upon her, cannot be doubted or disregarded. His excellent character and his well-earned reputation in the community and at the bar, as an upright, honest citizen and lawyer, are sturdy vouchers that his testimony is truthful and believable. He has candidly and satisfactorily explained all that is susceptible of explanation, and more than that the law does not demand. What motivated the testatrix in her benefaction, other than her loyalty to him and friendship towards him of many years, was her secret, not his. Her preference of him to her grandniece was her privilege, and the- privilege is not to be denied, when capably exercised, free from unlawful influence-, because the preferment may be unconventional or disappointing to a remote relative. While courts are keen to- guard testatmentary disposition against imposition, they are no less anxio-us to sustain them when lawfully made.

The decree below will he affirmed.


author: Gummere, Chief-Justice.

text:
    James H. Toothe, respondent, v. Walter J. Dozier and Charle R. Hedden Company, appellant.
    [Decided October 20th, 1924.]
    A stockholder of a corporation has no status to file a bill to enforce a strictly corporate right existing in the company of which he is a member, unless be first applies to the governing body of such corporation to institute the suit, or unless it is apparent that if such application was made it would be be denied, or, if granted, that the litigation following would necessarily be under the direction of persons opposed to its success; and, where the facts set out in his bill do not clearly demonstrate the existence of such a situation, a motion to dismiss should prevail.
    On appeal from the court of chancery advised by Vice-Chancellor Backes, ydiose opinion is reported in 96 N. J. JSq. 46.

      Mr. Conover English, for the appellant.

      Mr. Ralph E. Lum, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The appeal brings before us for review an order refusing a motion to strike out the complainant’s bill. It was filed by Toothe, as a stockholder of the Charles R. Hedden Company, a corporation of this state, in the right of the corporation. The facts upon which the right to relief is based, as they appear in the bill, are that on the 15th of August, 1922, when the board of directors of the corporation consisted of three members, one of whom was the defendant Dozier, a resolution was passed by the board, providing that if at any time in the future Dozier should desire to withdraw from the active management of the company’s affairs, his stock holdings should be purchased by the corporation at the book value thereof at the closing of business for the fiscal year ending December 31st preceding his withdrawal. Nothing was done looking to the putting in force of this resolution until January 15th, 1924, when, at a meeting of the board, Dozier, who was then not only a memebr thereof but also the treasurer of the corporation, moved that the company purchase his stock pursuant to the resolution above referred to. This motion was lost by a vote of two to two, the membership of the board having been increased in the meantime to four by the election of Mr. Toothe, the present complainant. Mr. Dozier thereupon resigned as director and treasurer, and the complainant thereupon was elected to the latter office to fill the vacancy. After the election of complainant as treasurer, but on the same day or the day thereafter, the defendant Dozier drew the company’s check to his own order for the sum of $65,219, signed it as treasurer, although he no longer held that office, presented the check to the bank upon which it was drawn, received the money thereon, and then attempted to surrender to the company the certificate of his shares of stock by handing it to the complainant and requesting from him a receipt therefor on behalf of the company, which the complainant refused to do. The relief sought by the bill is a judicial declaration that the resolution of the board of directors of the defendant company adopted on the 15th of August, 1922, was ultra vires and void; that the defendant Dozier may be decreed to repay to the corporation- the moneys obtained by him upon, the check already referred to, and that the defendant corporation may be directed to return to Dozier the stock certificate which he had handed to the complainant, notwithstanding .the fact that, so far as the bill discloses, this certificate never came into the possession or under the control of the company.

The motion to dismiss the bill was based upon the contention that a stockholder of a corporation has no status to file a bill to enforce a strictly corporate right existing in the company of which he is a member unless he first applies to the governing body of the corporation to bring the action, or unless it is apparent that if such application was made it would be denied, or, if granted, that the litigation following would necessarily be under the direction of persons opposed to its success; that the bill contains no averment that such an application was made, and that the facts set out therein do not justify the conclusion that, if made, it would have been futile. The soundness of the legal principle upon which the application was rested is conceded by counsel for the respondent and by the vice-chancellor before whom the application was heard. It is also conceded that in the absence of any averment in the bill to the contrary, it is to be presumed that no application was made to the board of directors to institute the present proceeding; but it was contended by the complainant before the learned vice-chancellor and before us that, upon the facts above recited, it is apparent that such application would have been unavailing, and the vice-chancellor considered this contention to be sound. We cannot concur with him in this view. Assuming that the resolution of August, 1922, w-as invalid, the fact that in January, 1924, the corporation refused, by a tie vote of the directors, to purchase the Dozier stock, notwithstanding their earlier resolution, and that immediately after such refusal Dozier resigned from the directorate, justifies the conclusion that two of the present directors voted against the purchase of the Dozier stock at the meeting of January 15th, 1924, and that, as they constituted a majority of. the board, an application to that body to institute a suit for the purpose of accomplishing the primary purpose of the present bill would not have been denied. And even if a majority of the board as at present constituted was in favor of the purchasing of the Dozier stock, we cannot believe that this fact would have led to a refusal to institute such a proceeding, or, if instituted, that it would not have been prosecuted honestly and vigorously. If the statements in the bill are true, if Dozier drew a check against the account of the corporation and signed it as treasurer, although he did not then hold that office, and then induced the bank upon which it was drawn to pay it by concealing the fact that he had no authority to sign it, and so no right to collect upon it, and then appropriated the money so obtained to his own use, his conduct was not only wrongful but criminal— as much so as if he had, without authority, taken money out of the company’s safe and fraudulently appropriated it to his own use. To say that a majority of the members of the directorate would have been guilty of condoning this criminal action, and would either have refused to take steps to have it invalidated and to compel a restoration of the funds into the treasury of the company, or, if they had taken such action, would have prosecuted it without any desire to bring about a successful result, is to east an aspersion upon the integrity of the directors which the facts set out in the bill will not justify.

We conclude therefore that the motion to dismiss the bill should have prevailed and that- the order refusing it should be reversed.

For affirmance—None.

For reversal—The Chief-Jus tice, Trbnchard, Min-turn, Kalis ch, Black, Katzenbach, Campbell, Lloyd, White, Van Buskirk, Clark, McGlennon, Kays—13.


text:
    Davis White Markets, Incorporated, v. George Lefas et al., partners, &c.
    [Decided October 20th, 1924.]
    A judicial order made nunc pro tuno for the purpose of giving effect -to its mandate as of a time anterior to that when it was in reality made is, ultra vires, null and void.
    On appeal from an order advised by Vieo-Chancellor Church.

      Mr. Edward 11. McGlynn, for the appellant.

      Mr. Harry S. Neiwirth, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The bill in this case was filed by the complainant against the defendants Lefas & Lagios, partners, for the winding up of the partnership business through the appointment of a receiver, the basis of the application for relief being that the partnership was insolvent. The bill was filed in November, 1923, and upon the hearing of the application one Wilson was appointed temporary receiver, and an order was also made requiring the partners to- show cause on the 27th of that month why a permanent receiver should not be appointed to wind up the affairs of the- partnership. Pending the return of this order to show cause an application was made and granted joining Mosko-janis and Machel as parties defendant, for the reason that they claimed to be the holders in good faith of a chattel mortgage covering the fixtures, tools and implements belonging to- Lefas & Lagios and used by the latter in the conduct of their partnership business. Subsequently, an order was made referring it to- a special master of the court of chancery to- take testimony fo-r the purpose of determining whether Mosko-janis and Machel were Iona fide holders fo-r value of the chattle mortgage which, it was alleged, they owned; and the special master on the 17th of. December, 1923, filed his report, expressing his conclusion that these two- alleged chattel mortgagees had the status which they claimed. Exception was filed by the complainant to this portion of the report of the special master; and, apparently, so far as it can be ascertained from the state of the case sent up with the appeal, the exception came on to be heard on the 18th of December. Pending a determination by the court upon the exception, and on the 23d of January, 1924, the receiver having sold the partnership property and assets of Lefas & Lagios for the sum of $1,105, and having reported that sale to the court, it was ordered that the receiver be allowed for his services the sum of $450 out of this purchase-money, and that his. solicitor, Mr. Niewirth, be allowed a counsel fee of $480, besides taxed costs of the proceeding. A few days after the making of these allowances, and on January 30th, the defendants Noskojanis and Machel filed their appeal from the order making these allowances upon the ground that they were grossly excessive, and the case is now before us upon that appeal.

From the above recital it appears that the award of the receiver’s and counsel’s fee was made, and that the appeal now before us was taken while the question was pending before the court of chancery as to whether or not the chattel mortgage held by the present appellants was a valid lien upon the property described therein, or was fraudulent as against the creditors of the mortgagors and null and void. Some- five weeks after the taking out of the appeal, however, and on the 3d of March, 1924, the vice-chancellor reached a conclusion upon the question then before him for adjudication, viz., the validity of the chattel mortgage, and a decree was then entered declaring it to be null and void. Apparently, for the purpose of nullifying the- present appeal, this decree was- antedated some two months, and, as it reads, precedes the filing of the notice of appeal. We say this was the apparent purpose, for the reason that, if the making of the decree had preceded the taking out of the appeal, it would have rendered any appeal from the order fixing the allowances to the receiver and his counsel, by Mosko-janis and Maehel, nugatory, because of the fact that, if their chattel mortgage was null and void, they were not “parties aggrieved” by the making of such order. Coryell v. Holcombe, 9 N. J. Eq. 650; Green v. Blackwell, 32 N. J. Eq. 768.

The underlying question which the case presents, therefore, is whether it ivas within the power of the court of chancery to make a mine pro tunc order, the effect of which, if it was valid, was to destroy the then existing status of the present appellants. We think it was not. The office of an order nunc pro tunc is only to supply some omission in the record of an order which was really made, but omitted from the record. If an order is actually made by the court, but there is a failure to enter it, the court may correct the mistake so as to make the record show the order which the court actually made as of the time when it was, in fact, made; but no court has power to make an order nunc pro tunc, the purpose of which is to give effect to its mandate as of a time anterior to that when it was in reality made. Wilson v. Vance, 55 Ind. 394; Hegeler v. Henckell, 27 Cal. 491; Priest v. McMaster, 52 Mo. 60; 29 Cyc. 1516 § B, and cases cited.

After a consideration of the whole matter, we reach the conclusion that, as the question of the validity of the mortgage of Moskojanis and Maehel had been submitted to the court of chancery for its consideration and determination prior to the taking out of the first appeal, and, as a determination of that question, will either establish or destroy the status of the appellants as parties aggrieved, we should withhold consideration of the present appeal until the court of chancery has adjudicated this fundamental question, and, in case such adjudication is adverse to the rights of the appellants, until they have also brought before us for review such adjudication.

For affirmance—The Chief-Justice, Trehchard, Parker, Mihturk, Kalisch, Black, Katzehbach, Campbell, Lloyd, Whtte, Yah Buskiek, Clark, McGlehhoh, Kays —14.

For reversal—None.


text:
    J. A. Migel, Incorporated, respondent, v. Theodor Bachofen, appellant.
    [Decided October 20th, 1924.]
    The remedy by specific performance is discretionary; and, where the enforcement of a contract will be attended with great hardship and manifest injustice to the defendant, the court should always refuse its aid.
    On appeal from the court of chancery.

      Mr. Edward P. Stout, for the appellant.

      Mr. Merritt Lane, for the respondent.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The bill in this ease was filed to enforce a contract for the assignment of certain patent rights covered bjr letters issued by the United States patent office to the defendant, Bachofen. The patented invention was an appliance to be used in the manufacture of silk fabric, its purpose being to produce a velvety appearance on the face thereof. .

At the time the contract was entered into' the defendant was an assistant superintendent in the plaintiff’s silk fabric factory and had charge of experiments looking to' the creation of novel samples of silk. The complainant was then using in the manufacture of its product a machine known as the Veleut motion, which, by cutting certain threads upon the surface of the silk, produced the velvety appearance de-‘ sired. The defendant considered the operation of these machines unnecessarily costly, and undertook to design a loom attachment which would produce similar results at a less price, but which would not infringe upon the patent of the Velcut company. He communicated this fact to the complainant, and, having progressed to a certain extent in his experiments, which were conducted in the complainant’s factory and with its consent, he, at the latter’s request, executed, under date of August 23d, 1921, a contract, by the terms of which the latter agreed to pay all the expenses connected with the obtaining of letters patent on the defendant’s invention, if it should be successful, and to supply a loom and pay the expense of having the attachment applied thereto and trying it out, but limiting its pecuniary obligation to the sum of $400. -The agreement further provided that, if the attachment should work satisfactorily, the complainant would pay to Bachofen as a royalty for the use bf it a sum equal to five cents per finished yard of goods manufactured on machines equipped with the defendant’s invention. Bachofen, on his part, assigned the invention to the complainant, with a right to obtain letters patent thereon in this and other countries. He further agreed to execute and deliver a separate assignment of his invention for each country in which the complainant should elect to apply for patents, and to execute licenses to the complainant for the use of his invention in foreign countries upon the same terms and conditions already set forth—that is, the payment of a royalty of five cents per yard upon the manufactured goods. He also assigned the sole and exclusive rights to make, use and sell machines embodying his invention, not only in this country, but in every other country where letters patent should be issued thereon.

About a month after this agreement was executed Bachofen was discharged from the complainant’s employ, the latter up to that time having expended something like $900 in the development of the invention, plus lawyer’s fees. After his discharge, at which time, apparently, his invention seemed to be impracticable, he further experimented upon it, with the result that, after having expended somewhere in the neighborhood of $10,000, he developed a machine which accomplished the purpose he originally had in mind. Having done this, and in June, 1922, he applied for and received letters patent for his invention, and thereafter issued licenses to manufacturers other than the complainant permitting the use thereof.

In the meantime, the complainant had continued the manufacture of its product with the use of the Velcut motion machines, having increased the number thereof from ten in 1921, at the time of the defendant’s discharge, to about one hundred and twenty in March, 1922, and on this latter date acquired the exclusive fight to use the Velcut motion.

The complainant, although it apparently took no interest-in the attempt of Bachofen to develop his invention after his discharge in 1921, and took no steps to- ascertain whether he was still working upon it until after he had succeeded in perfecting it, and in obtaining letters patent on it and licensing parties thereunder, when it finally awoke to the situation, filed the present bill, the purpose of which, as has already been stated, was to compel the assignment c-f the patent rights which have been acquired by the defendant as the result of the development of his invention; and the hearing resulted in a decree directing that the relief asked for by the complainant should be granted.

The defendant has appealed o-n various grounds, only one o-f which we find it necessary now to consider, and that is that it was inequitable for the court of chancery to enforce this contract against him.

In considering this contention, the sequence of events is quite significant. The original expenditure by the complainant in assisting Bachofen to develop his invention was not much in excess of $1,000. After it had apparently ceased to be interested in the matter, Bachofen expended in the neighborhood of $10,000 in the perfecting thereof. During the period of his experiments the complainant had not only largely increased the manufacture of its velvet-finished marterial by the use of the Velcut motion machines, but had also acquired the full and exclusive control of those machines and of the patent under which they were constructed. The primary consideration to the defendant, Bachofen, for the making of the contract, was the payment of royalties upon goods manufactured by the use of the appliance which he was seeking to perfect, whether the goods were manufactured by the complainant itself or by its licensees in this and other countries. The contract itself was prepared by counsel for the complainant, and it is significant that there is nothing in it which obligates the complainant to make any use whatever of the Bachofen appliance, if it should be perfected, 'notwithstanding the fact that it might produce the manufactured article more economically than the Velcut motion. The manifest purpose sought by the complainant through this litigation, so far as it can be ascertained by a reading of the proofs sent up with the appeal, is not the enjoyment by it of the use of the defendant’s patented appliance, but the prevention of the use thereof by any competitor in business, so that, having absolute control of the Velcut motion machine, it will be protected against competition in the sale of goods manufactured with it. Stated in another way, the purpose sought to be accomplished by the complainant is not the enjoyment of the use of this invention, but the destruction of its use, and, as a necessary result, the deprivation of the defendant from the reception of any revenues under it by way of royalties either from the complainant or anybody else, and this, nothwithstanding the fact that the defendant has expended out of his own pocket in developing his invention more than ten times the amount that the complainant agreed to advance, and did (presumably) advance, as a part of the consideration for the agreement of the defendant to transfer the invention to it. A court of equity ought not to lend its aid in the carrying into execution a scheme so manifcstlv unfair to the defendant, and for this reason a decree of specific performance should have been denied. The remedy by specific performance is discretionary; the question is not what must the court do, but what, in view of all the circumstances of the case in judgment, should it do to further justice, and, where the enforcement of the contract will be attended with great hardship or manifest injustice to the defendant, the court should always refuse its aid. Plummer v. Keppler, 26 N. J. Eq. 481, and cases cited; Blake v. Flatley, 44 N. J. Eq. 231.

For the reason indicated, the decree appealed from will be reversed.

For reversal—The Chief-Justice, Trenchard, Parker, Minturn, Kalisch, Black, Katzbnbach, Campbell, Lloyd, White, Gardner, Van Buskirk, Clark, MoGlennon, Kays—15.

For affirmance—None.


text:
    Mitford C. Massie et al., complainants, v. The Asbestos Brake Co. et al., defendants.
    [Decided October 27th, 1924.]
    1. Where a license to manufacture a patented article contains a covenant on the part of the licensee to pay royalties on his manufactured product, and a further covenant on the part, of the licensor to enforce the monopoly controlled by the patent against, all infringers thereof to the best of its ability, such covenants are mutual and not independent; and a breach of its covenant by the licensor is a complete defense to a claim on its part for the payment of royalties by the licensee.
    2. Wilfley v. New Standard Concentrator Co., 164 Ned. Rep. approved and followed.
    On appeal from the court of chancery. On appeal of H. W. Johns-Manville Co. et al.

      Mr. John Ii. JIardin and Mr. Edward L. Katzenbach, for the appellants.

      Mr. Francis C. Lowlhorp and Mr. Robert II. McCarter, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The bill in this case was filed by Massie and others, stockholders of the Asbestos Brake Company, in the right of the corporation, to compel an accounting for and payment of certain royalties by the Johns-Manville Company and the Thermoid Eubber Company.

The Asbestos Brake Company, being the owner of certain patents covering the manufacture of asbestos brake linings, granted non-exclusive licenses to the Johns-Manville Company and the Thermoid Eubber Company on the 2d of May, 1911, to manufacture and sell these patented brake linings. The license in each ease provided that the asbestos brake linings manufactured by the respective licensees should be sold at prices to be established by the patentee, as set forth in a schedule attached to the license, and that the licensee should every four months submit to the patentee a statement of the brake linings sold during the past quarter, and should pay to the patentee royalties of ten per cent, on the selling price, less certain discounts. The license also contained this agreement on the part of the company for the protection of the licensees: “The patentee shall enforce the monopoly controlled by this patent against all infringers thereof to the best of its ability.”

One of the defenses set up by the Johns-Manville Company and the Thermoid Eubber Company as a bar to the relief sought by the complainants was the absolute failure of the Asbestos Brake Company to protect them against unfair competition, by enforcing the monopoly conferred by its patent, against infringers, or even making any effort in that direction. The act was conceded by the complainants, but they asserted as a justification for that failure that it was due to lack of funds in the treasury of the company resulting from the non-payment by the two licensees of the royalties called for by their respective contracts. The hearing of the cause in the court of chancry resulted in a decree in favor of the complainants, requiring the defendant licensees to account for unpaid royalties. The defendant appealed from that decree, and after a hearing on that appeal the decree was affirmed. Subsequently, a reargument of the cause in this court was applied for and granted, limited, however, to a discussion of the following questions: First, as to the right of the respondents (the complainants below) to an accounting from the appellants, in view of the failure of the Asbestos Brake Company—in whose right the bill in this cause was filed—to observe its covenant to protect its two licensees by enforcing the monopoly, conferred by its patents, against all infringers thereof, to the best of its ability; second, whether the parties to this litigation are entitled to relief of any kind in a court of equity, owing to the fact that, as it seemed apparent to some of the members of the court on the case sent up with the appeal, they conspired to conceal from the United States patent office the existence of an English patent which covered some portions of the invention which the incorporators of the Asbestos Brake Company sought to have embraced in patents applied for by them, the purpose of the concealment being to bring ’about the granting of their application.

As to the second question upon which argument was ordered, it is enough to say that the members of the court are not in accord as to the fact of fraudulent concealment from the United States patent office of the existence of the English patent by the parties to this litigation, and that the conclusion which we reach upon the first of the reargued questions makes the determination of this second one unnecessary.

Taking up the consideration of the question of the right of the respondents to an accounting, notwithstanding its failure to observe its covenant to enforce the monopoly conferred by its patents against all infringers thereof to the best of its ability. It is manifest that unless the licensees should be protected by such enforcement they could not successfully carry on their business in competition with such infringers, but would be at their mercy, for the reason that the latter could, and undoubtedly would, undersell them in the market, fixing a price less than that which was fixed by the patentee in the license schedules. In our opinion the failure of the Asbestos Brake Company to perform its covenant was not excused by the failure of the present appellants to pay royalties under their licenses. The obligation taken upon itself by the corporation was not limited to the protection of its licensees only so far as the royalties to be paid by them would meet the expenditures necessary to be incurred by the licensor in the enforcement of its patent rights against infringers. Their contract was to use every reasonable effort to protect the appellants against unlicensed competition, whether the royalties would be sufficient to meet such expenditures or not.

Our view on the original hearing, as to the extent of the obligation of the corporation, did not differ from that now expressed, but we considered it a matter not involved in the determination of the appeal, for the reason that, as we then thought, the covenant to pay royalties and the covenant to protect against infringers were independent, and that, therefore, the failure of performance by one of the parties did not excuse performance by the other. But further argument upon and consideration of the point has led us to the conclusion that this view is unsound. A similar question was presented for solution in the United States circuit court, in the case of Wilfley v. New Standard, Concentrator Co., 164 Fed. Rep. 421, and Judge Gilbert, in delivering the opinion of the court, laid down, as we now think, the correct doctrine, and that is that the two covenants are mutual and not independent; that, the whole contract being executory, the party who seeks to enforce it against the other must show performance, or a tender of performance, or readiness to perform on his part; that a covenant to guard the claims of the patentee and protect the rights granted to the licensee against infringers is a concurrent condition, upon which the obligation of the licensee to pay royalties depends, and that this covenant of the patentee is to be complied with at all times during the life of the license; that the right granted under such a license is in the nature of a monopoly, distributed among licensees, and, so long as it is enjoyed by the licensees, they are bound-to pay the consideration therefor, but that when, by reason of something beyond their control, they are deprived of that exclusive right, there is a failure of consideration; and, finally, that where one who has agreed to pajr royalties for an exclusive right under a license is deprived of that right by the default of his licensor in violating a covenant to protect the exclusive right so granted, and to prevent infringement thereof, thereby depriving him of the substance of that for which he contracted to pay royalties, the breach of the covenant by the licensor is a sufficient answer to a claim on his part for the payment of royalties, and defeats recovery thereof. The justice of the conclusion expressed by Judge Gilbert seems to us manifest, and the reasoning upon which it is based convincing. Our further consideration of the cause satisfies us that we were in error in affirming the decree under review, and that it should be reversed. It will be so ordered.

For affirmance—Parker, Minturn, Black—3.

For reversal—The Chief-Justice, Teen chard, Kalisoh, Campbell, Lloyd, White, Gardner, Van Buskirk, Clark, McGlennon, Kays—11.