text:
    The Consolidation National Bank v. John Larkins.
    [Filed March 18th, 1904.]
    A final decree of foreclosure will be opened and a petitioner, who is the equitable owner of the mortgaged premises, will be let in to defend, where it appears that the complainant is attempting to foreclose the mortgage against the holder of the legal title only, with the knowledge at the time the bill of complaint was filed that the petitioner was the equitable owner, and with further knowledge that the mortgage itself has been assigned to the complainant in breach of the purpose for which it was created and held by the mortgagee.
    On bill to foreclose and petition to open final decree to let in a new partjq &c.
    The bill of complaint in this cause is filed by the Consolidation National Bank against John Larkins, as sole defendant, for the foreclosure of a mortgage for $12,000 upon a number of lots of land in Gloucester City, New Jersey. The bill of complaint alleges that Larkins, the mortgagor, was indebted to one Watson in the sum of $12,000, and, being so indebted, made to him the bond and mortgage in question on the 27th day of June, 1895. The mortgage was recorded'on July 2d, 1895. The bill alleges that, on the 10th of December, 1902, Watson assigned and transferred the mortgage and bond with all moneys due and to grow due thereon to the complainant; that all the principal moneys mentioned in the bond and mortgage, with interest thereon from June 27th, 1895 (the date of the original transaction), remains due and unpaid. The bill prays a decree of foreclosure and sale. It has been amended by making Minnie Larkins, wife of John Larkins, a defendant, and charging that any interest which she may have in the mortgaged premises is subject to the mortgage.
    The defendant, Larkins, answered the bill, denying that the bond and mortgage were given for his debt. He alleges that they were in fact made to one Michael McManus, and that whatever title he had in the mortgaged premises was as trustee for McManus, who was the real owner of the mortgaged premises.
    Issue was joined on this answer and the cause came to a hearing. The counsel for Larkins sought to postpone the hearing, and, being overruled, the cause was heard on the part of the complainant alone and a decree of foreclosure was made in favor of the complainant.
    Shortly after the decree was made, a petition was filed by Michael McManus (mentioned in the defendant’s answer), alleging that, at the time the mortgage was made, he was the equitable owner of the premises described in the complainant’s bill; that Larkins, the defendant in the foreclosure suit, held the title to the property solely as trustee for the petitioner, McManus; that the mortgage foreclosed was in fact made to Watson, the mortgagee, by Larkins, by the petitioner’s direction, as collateral security to save Watson harmless respecting certain advancements made, or to he made, by him to the petitioner, McManus; that those matters, which were secured by the mortgage in question, are the subject of an unsettled accounting pending between the petitioner, McManus, and said Watson, which, when justly determined, the petitioner alleges, will show ■that nothing is in fact due to Watson. The petitioner, Mc-Manus, charges that before and at the time of beginning the foreclosure suit the complainant, the Consolidation National Bank, knew all the above-recited facts, and with that knowledge filed its bill, making Mr. Larkins, who held the mere naked title to the mortgaged premises, the sole defendant.
    The petitioner, McManus, prays that the decree made in the case may he opened and he be let in to defend the suit.
    On the filing of his petition an order was allowed that the complainant show cause why the decree'should not be opened and petitioner made a part}', ■ with ■ privilege to set .up such defence as he may be _ advised,' with leave to take affidavits on notice, in support of the rule. . ’ '

      Mr. Peter■ V. Voorhees and Mr. Howard M. Cooper, for the complainant.

      Mr. Schuyler C. Woodhull and Mr. David J. Pancoast, for McManus, petitioner.
   Grey, V. C.

On the coming in of the order to show cause in this case the deposition of the petitioner, McManus, and certain documentary proofs were presented. By these it appears that the title to the mortgaged premises stood in the name of the defendant, Larkins, who held it as trustee for McManus and at his absolute disposal. Larkins was in fact a “straw man” for McManus.

The mortgage foreclosed by the complainant, the Consolidation National Bank, came into being in this way: The petitioner, McManus, was engaged in business by which he became the owner of warrants on the city of Philadelphia for large sums of money and was also in need to raise large amounts from time to time. Up to -the year 1891'McManus had been a depositor with the complainant company, and it had collected his warrants, and loaned him money on notes. In that year (1891) McManus ceased to do business with the bank save as he renewed certain notes which it had discounted for him. Mr. Watson, the president of the complainant bank, thereafter took, the bank’s place and, from 1891 to 1898, collected Mr. McManus’ warrants and aided him in raising money for his business. In- 1895, while the account between McManus and Watson was still running, the bond and mortgage in question were made by Larkins to Watson, by McManus’ direction, as collateral -security for any balance which might on settlement of the accounts between McManus and Watson, be found to be due to Watson. The whole arrangement for the making of the mortgage was directed by McManus, who paid all the expenses. Watson had no dealings with Larkins with respect to the mortgaged premises or -the making or delivery of the mortgage. Larkins made it because he held the title for McManus, and the latter used it to secure his account. Watson accepted it from McManus for that purpose and no other. Watson, recognized McManus as the real mortgagor by requesting him to pay the taxes on the mortgaged premises, which he did. Watson does not appear ever to have had any dealings with Larkins.

■ McManus and Watson’s financial dealings ended in 1898 without any settlement of accounts. In 189.9 McManus filed a bill-in equity in the court of common pleas, Ho. 4, for the county of' Philadelphia, against Watson for a settlement of the various transactions between- them, averring, among other things, that he had delivered the Larkins mortgage to Watson as collateral security and praying that he be required to retransfer it to him (McManus).

While this suit was pending, Watson, on the 10th day .of December, 1902, assigned the Larkins mortgage to the complainant, the Consolidation Hational Bank, of- which _ he was president. This assignment of the mortgage appears to have been absolute on its face. It was made without either the knowledge or authorization of McManus, who was not. informed of the fact until after the bill in' this case had been filed by the bank to foreclose it.

The complainant company, on March 5th, 1903, brought suit in the court of common pleas, Ho. 1, of the county of Philadelphia, against McManus on the several renewed promissory notes which it held against him, and appended to its statement of its claim an averment that, as collateral security for Mc-Manus’ indebtedness, the bank held “a certain mortgage, given by one John Larkins, secured upon premises-in Gloucester, Hew Jersey, in the sum of $12,0.00,” and stated that nothing had by the plaintiff ■ been realized upon said mortgage and ■ that McManus was entitled to no credit thereon.

Mr. McManus testifies that, in fact, he is not indebted in any balance either to Watson or to the complainant bank, and insists that the suits pending, as stated, in the Philadelphia courts will adjudge this to be true.

On March 31st, 1903, the complainant filed its bill of complaint in this cause.

The foregoing facts appear in the deposition and documentary proofs offered by McManus under the order to show cause. The only challenge of the truth of McManus’ statements appears in his cross-examination, when the' complainant’s counsel attempted to show' that McManus had, at some previous time, sworn that he did not own some properties in Philadelphia which had been exchanged for the Gloucester City properties, the mortgaged premises now in dispute. From which it is argued McManus is not, in fact, the equitable owner of thosb mortgaged premises. Mr. McManus explained that this matter had been adjusted so that he was in truth the equitable owner. The whole trend of the case shows that both Mr. Watson and the complainant bank, of which he is president, dealt with McManus as the equitable owner of the mortgaged premises. It does not lie with either of them, having accepted the mortgage security on this basis, to retain' it and at the same time to avoid the responsibilities which attend upon that acceptance.

The statements of Mr. McManus are not incredible. They are supported rather than contradicted by the documentary proofs. The hank’s own filed statement in its Philadelphia suit shows that it claims to hold the mortgage as collateral to a debt owed by McManus. Its bill of complaint in this cause shows that it received the assignment of this mortgage in December, 1902, several years after all tire notes mentioned in its statement had matured. The bank and its officers must know whether Mr. McManus’ testimony, taken on notice under the order to show cause, is true. The bank appeared, by counsel, to cross-éxamine Mr. McManus, but did not call any witnesses to contradict him. Under these circumstances his testimony ought not to be discredited.

On the above exhibition of the facts it appears that Mr. Mc-Manus was the equitable owner of the mortgaged premises when the mortgage was made. That Mr. Watson, the mortgagee, knew that fact and accepted the mortgage and dealt with Mr. McManus in recognition of that relation. That the mortgage was given solely as collateral security for the payment of any balance which might be found to be due from McManus to Watson on their final accounts and was held for that purpose from 1895 to 1902. That Watson then transferred the mortgage to the name of the bank of which he is president, separating it from the accounts which it was given to secure, and dealing with it as if it were an independent security. That McManus neither authorized nor knew of this transaction. That the bank, which received the assignment of the mortgage from its president, Mr. Watson, was then charged with knowledge that he held it as collateral security only, to protect any balance which might be found to be due him, and not as an independent security.

Under these circumstances, and with this knowledge, the ' complainant bank filed its bill to foreclose the mortgage, making Mr. Larkins, who held the legal title to the mortgaged premises, the sole defendant, and entirely omitting from the bill of complaint any mention, of Mr. McManus, who was, to the complainant’s knowledge, the real equitable owner. The effect of this course of procedure was to pervert the mortgage from the use for which it was created, namely, from being a security to Watson, to protect him for any balance which might be found to be due him, into an independent security for the payment of $12,000, which the bank may collect and use for other purposes.

It was the duty of the complainant bank, under the knowledge it had of the equitable rights of Mr. McManus, to have made him a defendant in its bill of complaint to foreclose this mortgage.

The defendant, Larkins, the “straw man,” is a non-resident. Mr. McManus, also a non-resident, casually heard of these foreclosure proceedings while they were pending. His attitude is not that of a party served with process, against whom a decree has inadvertently been permitted to be entered. There is, as to him, no. need of proving surprise and -merits. The complainant, on the showing made by the uncontradicted proofs in this cause, is attempting to enforce a mortgage by foreclosure against the holder of the legal title, -with knowledge at the time the bill was filed that another person, whom it has not made a party defendant, was the equitable owner of the mortgaged premises, and with further knowledge that the mortgage itself has been assigned to the complainant in breach of the purpose for which it was created and held by the mortgagee.

On such an exhibition a court of equity will stay the proceedings at any stage of their progress, short of the actual inter- • vsntion of a bona fide purchaser without notice of the outstanding equities of the petitioner. .

An order will- be advised in accordance with the views above expressed.


source: Caselaw Access Project

author: Grey, V. C.

license: Public Domain

text:
    Wesley B. Porch v. The Agnew Company.
    [Filed March 31st, 1904.]
    1. Inadequacy of price is uot alone a sufficient reason for refusing confirmation of a judicial sale, unless the bids reported are so low in their relation to the market price that great injustice will be done by confirming the sale.
    2. Where a sale of lands charged with superior liens is made under section 81 of the Corporation act (P. L. ob 1896 p. 308), whereby such liens are discharged and related to the purchase-money, the court, when confirmation of such a sale is asked, will consider the equities of such lienholders. •
    3. If a sale he refused confirmation on the ground of inadequacy of price alone, the applicants for a resale will be required to give some security or assurance that at such resale a higher purchase-price will he hid for the property.

      Oil application to have receiver’s sale confirmed. Order to show cause, &c.

      Mr. David J. Pancoast appeared for the creditors resisting confirmation of the sale.

      Mr. Clarence L. Cole, for the purchaser.

      Mr. Lindley M. Garrison, for the receiver.
   Grey, V. C.

The sale in this case is reported by the receiver of the insolvent defendant corporation. The receiver was appointed by this court in this cause. The property consists of a large hotel and a lot of land whereon it is erected, situate in Atlantic City, on the ocean, in a desirable and valuable location, having about one hundred and sixty-three feet and a fraction, of frontage on the ocean. It is that frontage which is usually made the standard or basis for computation of values in that locality. It is proven to be worth over $500 per lineal foot of ocean frontage. The hotel building on the premises is comparatively new, having been completed for use in the summer of 1902. It is appropriately and fully furnished. Both the hotel and its furnishings are in fairly good condition, save that the roof of the hotel was somewhat carelessly built and the building has been located so near the ocean that it is subject to some threats from the heavier sea storms.

The land on which the hotel is built cost $81,500. The contract price for building the hotel itself was more than $120,000. The receiver appraised the furniture at the sum of $14,899.45. The aggregate of these sums makes a total apparent value of the real and personal property sold by the receiver of more than $216,000.

The receiver, under section 81 of the Corporation act (P. L. of 189-6 p. SOS), was ordered, in view of disputes touching the validity of the mortgage and the mechanic lien claims, to sell the property clear of all those liens. The mortgage claim is a single mortgage, securing an issue of $235,000 of bonds. The lien claims may be stated in round numbers at $3,000. The present lien charges on the property which will be cleared by the receiver’s sale of this property are therefore $238,000, with accrued interest. This summary of claims does not include any of the $250,000 capital stock.

By the order for sale the receiver was directed to require a cash payment of $35,000 from the purchaser at his sale. He duly advertised the property for sale at auction, and put it up in two separate lots — one the hotel and land, for which he received and- accepted a bid of $30,000; the other the furnishings of the hotel, for which he received and accepted a bid of $3,000, making the total amount bid for the whole property to be $33,000.

Upon the coming in of the receiver’s report of this sale an order was allowed to show cause why the sale should not be confirmed, with leave to take affidavits. The undisputed proof is that the property, for which the receiver accepted bids to the amount of $33,000, is actually worth at least $60,000 to $100,000. Several affidavits state its value to be more than $150,000. The previous proceedings in this cause also indicate that the value of the property sold is at least several times the amount of the present bids.

The question here is whether this sale should be confirmed. The rule is settled that mere inadequacy of price is not of itself sufficient ground for refusing confirmation of a judicial sale. The variance between the bid reported and the fair market value must be so- great as to bring the court to the opinion that serious injustice would be done by a confirmation — so-great, indeed, that the purchaser himself could not fairly expect the court to ratify the sale, which he was notified it must do, in order that his bid should be finally accepted.

I have no doubt whatever that the receiver in this ease has done what he conceived to be his duty. There is no claim or charge that he has by act or omission willfully brought about the present condition. But it is claimed that'without any intention on his part to do any wrong thing, the bids reported by him are so 'low, with relation to the true market value of the property, that it would be unconscionable to confirm the sale.

I do not see how that can be denied as an established fact. The property is shown to be worth from two to three times— probably four times — the amount of the bids which the receiver' has reported. On that ground, under the circumstances, I think I am bound to refuse to confirm this sale.

There is, however, an additional reason, which does not appear in the reported cases to have been considered at all, which should, it seems to me, have the consideration of counsel and of the court in discussing this question. This property was offered for sale by the receiver, not by an ordinary judicial sale made after a hearing and judgment or decree thereon, in which the rights of the parties have been inquired into and established. This sale is made by the receiver under a special statutory order of the court, by which all the liens antecedent to the receivership will be compulsorily wiped off of the premises. If a foreclosure of the mortgage had taken place, the mortgagee could have selected the time and ’manner of the sale; he could have postponed it if he thought the price offered was -unfavorable — in fact, he would have had control of the whole transaction.

When, however, the sale is made by the receiver, under section 81 of the Corporation act, although there are $235,000 of outstanding bonds secured by the mortgage whose lien on the mortgaged premises will be discharged by the receiver's sale, the mortgagee and bondholders have no control whatever over the conditions of sale, the acceptance of bids or the postponement, if the bids are too low. Their only opportunity to protect themselves in case of mis judgment on the part of the receiver is by an application to refuse confirmation of a sale which they did not ask for, over which (although they have a superior lien) they have no control, and which takes from them the property mortgaged to them. That, I think, is an additional reason which should lead this court to listen favorably to the present application, and to hesitate to compel these bondholders to accept as a price for. the property mortgaged to- them, a bid , of only one-seventh .of the amount of their bonds.

There is something to be said, however, with regard to.the attitude of these creditors who resist confirmation of this sale. They, ought not to be permitted to require this, property to be put up again for sale without giving some assurance that substantially higher bids shall-.be secured. The practice in-such cases was indicated by the mode of procedure in the case of Rowan v. Congdon, 8 Dick. Ch. Rep. 385. The court of appeals in that case refused, because of gross inadequacy of price, to change the order of the chancellor confirming a sale, unless within thirty days after the remission of the ■ record to the court of chancery some prospective purchaser should enter into bond, with security satisfactory to the chancellor, that in the event of a resale a greater bid would be made for the mortgaged premises.

The creditors in this case have not as yet.made any suggestion which assures the court that on a future sale bids will be made which are any higher than those named in the report of sale now under consideration. Although the equities in this case justify a refusal to confirm this sale, I ani quite unwilling to malee such an order unless something is tendered in the way. of á better bid which shall be absolutely secured to be made at such future sale. This requirement, may come as a surprise to the parties who resist this -sale. Their interests are somewhat variant, their claims numerous and not, individually, very large in amount. If their counsel desires, I will give them, an opportunity for a conference and joint action looking towards the tender of such a bond as was required in Rowan v. Congdon. I think I ought now to indicate the least sum which, the court would accept as being guaranteed to1 be bid in case this, sale shall be set aside. I will hear counsel as to what that sum should be.

Mr. Pancoast — I do not care to be heard on that question.

' The Vice-Chancellor — I think the parties interested in resisting this sale should enter into a bond, with security satisfactory to the chancellor, that at a. resale at least $60,000 will in the aggregate be bid for the two lots of property — the real estate and the personal. If such bond is given, confirmation will be refused 'and the receiver will be directed to resell, the property;. if such bond is not ■ given, the- sale will, have .to be confirmed. I will heár counsel 'on the1 question of the time within which such a bond should be given.

Mr. Pancoast — Ten days.

The Yice-Chancellor. — -Ten days is a reasonable period. I will give the resisting creditors ten days within which to prepare and produce here such a bond. Otherwise the sale will have to be confirmed.

Eo costs will be allowed on this matter.

Afterwards the receiver suggested that it had been intimated to him that an appeal would probably be taken by the bidder at the receiver’s sale from any order refusing confirmation; that the receivership funds were so low that it was doubtful whether the insurances and expenses of the care of the property could be provided for during the period of an extended litigation. The parties again appeared, and an additional stipulation was required to be inserted in the condition of any bond which might be given, providing for the contingencies noted, as the court might order.


author: Stevenson, V. C.

text:
    Henrietta M. J. Wilson v. John E. Wilson.
    [Filed March 17th, 1904.]
    1. The duty of a deserted wife to invite her husband to return in order to be entitled to a divorce is not measured by the rule which is applied to the case of a deserted husband.

      2. Where a husband deserted his wife because she refused to support him in idleness according to his desires, and the wife’s acquiescence in his continued desertion arose from a belief that if he should return he would, notwithstanding any efforts on her part to effect a reformation, resume the course of conduct grossly violative of his duty to her of which he had been previously guilty, causing her constant physical or mental suffering, such acquiescence was not a voluntary consent to the husband’s desertion, so as to preclude her from a divorce on that ground.
    On petition for divorce.

      Mr. Nicholas W. Bindseil, for the petitioner.
   Stevenson, V. C.

In this ex parte case the master reports that the defendant has been guilty of willful and continued desertion for more than two years, but further reports that such desertion has not been obstinate — that the separation has not been against the will of the petitioner. The petitioner excepts to the report and the question is thereby raised whether the state of the petitioner’s mind during the separation has been so far that of assent as to bar her suit.

In my opinion the evidence does not show such assent on the part of the petitioner, the wife, as would be necessary to prevent the conduct of the defendant, the husband, from constituting the matrimonial offence defined in our statute as a cause for divorce. The defendant had grossly violated his duty to the petitioner. The evidence fully sustains the master in reporting that the defendant had “failed to contribute as he should have done to the support of his wife and family; * * * that he was lazy and satisfied to live with his wife at her expense.” The defendant’s drunkenness and idleness interfered with the industrious efforts of the petitioner to support her family, including her worthless husband, by dressmaking and keeping a boarding-house. When the defendant failed to pay the rent for the house, and the necessities of the petitioner’s condition induced her to put a boarder in the room which the defendant had for a time occupied by himself, he refused to accept the narrow quarters, which, appear to have been the best which the petitioner could furnish to him, and he therefore deserted the petitioner — left the home which she was providing for him with the avowed intention of permanently remaining away, where he could be accommodated more to his taste. He left her to struggle with somewhat hard conditions of life alone. He has remained away and his state of mind is not open to any doubt. He plainly indicated that he would not return to his wife and live under the conditions created by his own violation of duty, and it does hot appear that he would return under any conditions. He has expressed no penitence, no regret, no purpose or desire to live with his wife and even try to perform his duty to her.

An injured wife, under such circumstances, is not bound to invite her husband back — to invite him to return and resume a career of brutality, drunkenness or other misconduct which has made her life miserable. It is the duty of the husband to repent and signify his repentance to his wife. Cases like the present one, where a husband has ended a long period of persistent violation of duty to his wife by willfully deserting her and by remaining so separated from her for two years, involve several nice questions in regard to. the effect of the wife’s state of mind as affecting her right to a divorce. It is well settled that the duty of the deserted wife to invite her husband back is not measured by the rule which is applied to the case of the deserted husband. Sargent v. Sargent, 9 Stew. Eq. 644; Costill v. Costill, 2 Dick. Ch. Rep. 346.

Where the wife is the deserted part}*, the examination of her state of mind during the continuance of the desertion involves the discussion of two questions:

First. Whether the assent of the wife has in any degree caused the continuance of the desertion?

Second. Assuming that the assenting mind of the wife has not in tiro slightest degree caused the continuance of the desertion, must it be deemed to bar her from.making any-complaint under the principle volenti non fit injuria?

The evidence in this case does not justify the inference that the desertion of the defendant has been in the slightest degree caused by the petitioner’s state of mind. He probably, if he is a fairly intelligent man, has inferred that his desertion was submitted to by his wife with entire cheerfulness, in view of the presumption which she had a right to entertain that his return Avould be accompanied by the same gross and continuous violation of duty on his part Avhich he had formerly committed. Not a fact is presented from which this derelict husband could properly have drawn the inference that if he had returned to his wife Avith even a promise of reform he Avould not have been gladly received.

The question of importance in this case, however, is whether the state of mind of the petitioner with reference to the continued separation of her husband from her has been of such a character that she must be deemed as consenting to the matrimonial offence of which she now complains.

Where the acquiescence of the ivife in the continued desertion of her husband arises from a reasonable belief on her part that in case her husband should come back to live with her he Avould, notwithstanding any efforts on her part to effect his reformation, resume a course of conduct grossly violative of his duty to her, and causing her constant physical or mental suffering, such acquiescence is not a voluntary consent to the matrimonial offence of desertion. It is practically a consent obtained by duress.

The doctrine of constructive desertion, applied to cases AAdrere the husband drives the Avife from his home by cruelty and thus causes a separation, Avould he entirely untenable as a part of our divorce law if the consent of the injured wife to the continuous separation in such cases could be deemed a voluntary consent so as to bar her suit.

When a husband has persistently treated his wife Avith extreme cruelty, and then has been guilty of Avillful and continued desertion of his Avife for the statutory period, it would be a most astonishing condition of the laAV if he could defeat his Avife’s suit for divorce by eliciting from her a confession that she not only acquiesced in the separation, but preferred that it should continue. What the Avife in fact does in such a case is simply to make a choice between two evils. As between having a husband living with her and beating her every day and having the same husband living away from her, she naturally prefers the latter condition.

I shall not undertake to formulate any definition of the nature and extent of the husband’s violation of duty to his wife which will prevent her acquiescence in his desertion of her from 'operating as a bar to her suit for a divorce. It would seem that the measure of the husband’s guilt need not equal that’which is necessary to justify the wife in leaving his home and then to enable her to maintain a suit for divorce on the ground of his desertion. Where a drunken, lazy husband has chosen to spend his earnings in dissipation while he has been boarded and lodged at'the home maintained by his industrious wife, and then at length, when his accommodations fail to satisfy his demands, has willfully deserted his wife, in my opinion, the consent of the wife to such separation, which has not in the slightest degree caused its continuance, does not bring her within the scope of the maxim volenti non fit injuria.

Nor does it seem necessary in this case to discuss the question how far the deserted wife is under an obligation to endeavor to procure the reformation of her husband so that their life together might be free from the evils from which she formerly has suffered. There is no evidence in this case that if the petitioner had made every effort within her power to reform her husband such efforts would have been attended with the slightest chance of success. The evidence seems to justify the inference that the defendant, after his desertion of his wife, abandoned himself to drunkenness and idleness; that he had no desire to reform; that he entertained the most vindictive feelings towards his wife, and that no persuasions from her could have changed his character or the motives and sentiments which governed his life.

In the very careful and accurate report of the master, it is pointed out that the petitioner says in her testimony, when referring to the separation of herself and her husband, “one was too stubborn to give in to the other.” The petitioner, however, immediately goes on to explain that the stubbornness to which she referred related to her preference to have a husband who had treated her as had the defendant remain away from her as long, at least, as there was no prospect of any reformation on his part. The true meaning of the witness was brought out more fully by the master when the petitioner was recalled for the last time. Being asked why she had never done anything to bring about a reconciliation, she answered:

“Well, in the first place, because lie said lie would never live with me again, and the next reason because I knew that he wouldn’t be any support to me at all; he wasn’t doing anything to help himself and I knew that it was against mjr business, because I had lost some of my people on account of his conduct, and I was afraid that if he came back I wouldn’t be able to make a living at all.”

The witness further testified that the above were the “main reasons” why she did not undertake to bring about a reconciliation with her husband. It is plain that her reasons were sound and sufficient. She saw, in brief, no hope of any reformation on the part of her husband, so that to bring him back to her home would only replace a burden of labor and misery upon her life. And yet, further answering the master, the petitioner went on to testify that if her husband had come back to her she would have taken him in.

A number of cases in this court and in the court of errors and appeals support or suggest the views which I have expressed, and I know of no Hew Jersey case which stands at present as a precedent to the contrary. Sargent v. Sargent, supra; McVickar v. McVickar, 1 Dick. Ch. Rep. 490; Smith v. Smith, 10 Dick. Ch. Rep. 222; Van Wart v. Van Wart, 12 Dick. Ch. Rep. 598; Jeroleman v. Jeroleman, 54 Atl. Rep. 166.

In Smith v. Smith, supra, Vice-Chancellor Pitney holds “that the state of mind of the complainant, having been caused by the misconduct of the defendant, is no bar to her right to a divorce against him on account of his willful and continued desertion.”

I shall advise that the petitioner is entitled to a divorce.


text:
    Michael Brady v. The Carteret Realty Company and William Carman, sheriff of Middlesex county.
    [Filed March 17th, 1904.]
    1. Under Gen. Stat. p. 2980 § 7, providing that sheriff’s deeds on execution shall transfer and vest in the purchaser as good an estate to the premises therein mentioned as could be given by the person against whom the execution was issued, and as fully as if such person had himself sold the lands and delivered the deed, a sheriff, in a sale of real estate on execution, acts as an involuntary agent of the debtor in effecting a conveyance of the latter’s land, and his deed passes the same title which a deed of bargain and sale executed by the debtor would pass.
    2. Where a creditor stands by during an execution sale of *his debtor’s property, and by his silence conceals his own hostile title, his own title, as well as that of the debtor, will pass by estoppel to the purchaser under the sheriff’s deed.
    3. Equity will enjoin the purchaser of a judgment, who claims a title to the judgment debtor’s property hostile to that of the judgment debtor, from selling such property on execution, and announcing at the sale that the judgment debtor has no title in the land, but that he (the owner of the judgment) in fact owns the estate which the sheriff is offering for sale, and that the purchaser will get nothing of value by the sheriff’s deed.
    On motion for injunction on bill and affidavits.

      Mr. Ephraim Cutter and Mr. Willard P. Voorhees, for the motion.

      Mr. Gilbert Collins, contra.

   Stevenson, V. C.

The bill is filed under the statute to' quiet the title of the complainant against the adverse claims, of . fhe defendant, the Carteret Realty Company. Pending the litigation to determine' the question of title an injunction is prayed for to restrain the-defendant, the sheriff of Middlesex county, from selling the land in dispute under an execution upon a judgment owned by the Carteret Eealty Company.

The only question on this motion is whether such an injunction should be issued.

The leading facts, which must be gathered from the bill which is sworn to and the annexed affidavits, there being no-answer or answering affidavits on behalf of the defendants, are as follows:

In April, 1881, the complainant took possession as owner of the land in question, being a tract of eleven acres near the growing village of Carteret, in Middlesex county. The tract is now worth about $11,000. Prior to April, 1881, the tract had been occupied by one Parsons, who, however, admitted that his title was defective, or that he had no good title to the same; Parsons made a bargain with the complainant to give him the tract in consideration of certain services that complainant was to render with reference to the sale of other property. Complainant rendered the services and took possession, and ever since has remained in open, continuous possession, adverse to all other parties, including Parsons and his heirs and assigns.

The defendant the Carteret Eealty Company recently “claims in some way to have purchased the interest” of ■ Parsons, but the complainant charges that such purchase was with full knowledge of his claim of title. The first assertion of title on behalf of the Carteret Eealty Company, or those under whom the said company makes its claim, was made after the expiration of twenty years from April, 1881, at a time when the complainant’s title had become an absolute fee by adverse possession.

In May, 1903, the Carteret Eealty Company commenced am action of ejectment in the supreme court against the complainant for the recovery of the possession of the land. In September, 1903, the Carteret Eealty Company made default at the Middlesex circuit court, “and judgment of non-suit was entered in said action in said supreme court on the 4th day of .November last,” On or about September 23d, 19.03, the ■Carteret Eealty Company took an assignment of a judgment which had been recovered against the complainant May 14th, 1888, for $1,500 debt and $183.24 damages and costs. On the .same day (September 23d, 1903), the Carteret Eealty Company “caused an execution to be issued to'the sheriff of the county of Middlesex on the said judgment,” under which a levy was made on the land and the same was advertised for sale. The complainant admits that “the whole of said judgment is due and unpaid, with interest from the date thereof,” but alleges that the Carteret Eealty Company paid only about $300 for the ■same.

The sheriff’s sale came on, according to the advertisement, on November 25th, 1903, and then, on application of the complainant, was adjourned, and subsequently was further stayed by order of this court in this cause. At the above-mentioned appointed^time for the sale, the attorney of the Carteret Eealty ■Company, who was also a director thereof, .

“stated to the sheriff and those present, in opposing an adjournment, that the complainant had no title to said tract of land and was not the owner thereof, and that an adjournment should not be granted because his interest in said tract, by possession, was not worth anything.”

This attorney and director has also declared to the complainant that he intended

“to give notice of the same thing on the day of the sale of said lands under said execution, and that no one would give anything for the said tract of land at such sale.”

The complainant, in his affidavit attached to the bill, states that the attorney of the Carteret Eealty Company, in opposing the adjournment, stated that the complainant

■“had no title to said tract of land and was not the. owner thereof, * * * and that the Carteret Realty Company was the owner of said tract.”

An affidavit of the complainant’s attorney states that the attorney of the Carteret Eealty Company above referred to stated, in his presence,

“that the object of said company in taking an assignment of said judgment and advertising said lands for sale was to obtain possession of said lands, and that the director's of said company thought that it would be easier to obtain possession by a sale under execution on said judgment than by bringing a new action of ejectment, * * * and that he intended on the day to which the sale of said tract had been adjourned to again announce that the complainant had no title whatever to said .tract and did not own it, but was a mere tenant, and to state that the Carteret Realty Company was the true owner thereof.”

Although there is some discrepancy in these various statements, the meaning, I think, is plain. The Carteret Realty Company proposes, at the sheriffs sale of this tract of land, to deny that its execution debtor has any estate whatever in the land —that a purchaser, therefore, will get nothing of value by the sheriffs deed, and that it (the Carteret Realty Company) in fact owns the very estate which it has caused the sheriff to offer for sale under the execution.

I do not think tliat under the allegations of the bill and affidavits it can be properly inferred that the Carteret Realty Company proposes to stand by and allow the sheriff to offer for sale any legal interest or estate in this tract of land which it (the Carteret Realty Company) will not at such sale openly claim to own. In brief, this company proposes to have the sheriff, under this execution against the complainant, offer in form an estate of the complainant for sale, the existence of which it will deny, while it claims to be the owner of this very estate itself. The question is whether equity will permit a judgment creditor to hold this sort of an execution sale.

In order to deal intelligently with the situation, I think we must regard the Carteret Realty Company as occupying precisely the same position as if it had recovered the judgment against the complainant in its own name and had issued the execution thereon. It owns the judgment; it is to receive all that may be collected upon it, and it has caused the writ of execution to be issued and the sale of this tract of land to be brought on thereunder.

In solving the problem which the ease presents, the motives of the Carteret Realty Company, and any hardship or misfortune from which the complainant may suffer, must be excluded from consideration, provided all that the Carteret Realty Company is doing is to enforce its legal and equitable rights. Davis v. Flagg, 8 Stew. Eq. 491.

It may also be conceded that if the original owners of the judgment who recovered the same had, for the purpose of collecting the amount thereof, levied upon the estate of the complainant in this tract of land, he (the complainant) would not have been able to stay the execution sale by an injunction out of this court upon the plea that by such stay his title could "be made good, and thus a more advantageous execution sale could be held, which would fully pay the judgment creditors’ claim and leave a substantial balance for himself. It may be questioned whether any equitable principle has so far been evolved under which this court could step in and stay such an execution sale in order that it might be held subsequently to greater advantage. The execution creditor, generally, has a right to sell what the execution debtor claims he holds. Delay may improve the value of the thing so held and levied upon, but, on the contrary, delay may destroy its value. The execution creditor often desires to take advantage of the willingness of. some one to purchase perhaps a doubtful title before such doubt can be solved against such title. It is easy to imagine cases where an execution debtor, whose lands are apparently encumbered with a large mortgage, would be greatly the gainer if he could hold off the execution sale until the cloud of 'the encumbrance might be removed. By staying the sale, however, the result might be that the encumbrance would be declared valid and purchasers who would have paid something for the benefit of the execution creditor would no longer be willing to come forward as bidders.

We must assume that the motives of the Carteret Realty Company in acquiring this judgment and forcing on this execution sale, although perhaps unfair and censurable in the forum of morals, and even oppressive toward the complainant, cannot be inquired into unless it is threatening to violate some equitable right of the complainant by holding this sheriff’s sale under the conditions which have been described. Davis v. Flagg, supra.

It may be tliat such a sheriff’s sale as the Carteret Realty Company proposes to hold will not in fact be held for the purpose of accomplishing any of the objects which our law has in view in subjecting the lands of a man to public sale for the payment of his debts, but if this company has a legal and equitable right to bring on such a sheriff’s sale the only remedy of the execution debtor is to pay the amount which he admits is -due and thus defeat the actual purpose of his pursuing creditor.

After some hesitation I have reached the conclusion, in the absence of any satisfactory authorities which have been cited or which I have been able to find, that it is not equitable fox any execution creditor to expose real or personal property for sale under his execution when at the time of the sale he stands by and openly declares that nothing is being sold; that the execution debtor has no property in the thing offered for sale which can pass by the sheriff’s deed or bill of sale; that, on the contrary, he (the execution creditor) holds, and will hold after the sheriff’s sale, the entire property in the thing so offered for sale. This proposition may require modification and its application in this particular case is modified by the fact that the execution creditor has expressly avoided testing the two inconsistent titles while the execution debtor is standing in court with a bill filed for that purpose.

If the complainant’s title as the result of this suit should prevail against the title of the Carteret Realty Company, then the entire judgment which the company now holds will be readily collected. If, however, the title of the Carteret Realty Company finally prevails, then it will have lost the opportunity of securing a possible pajmient, or partial pajnnent, of its judgment by sale of something the existence of which it denies at the sale, and the existence of which it subsequently and finally disproved.

In a sale of real estate the sheriff acts as the involuntary agent of the execution debtor in effecting a conveyance of the debtor’s land. The sheriff’s deed passes the same title which a deed of bargain and sale executed by the judgment debtor would pass. Gen. Stat. p. 2980 § 7; P. L. of 1799 p. 386 § 12; Pat. L. p. 371; 1 Neville p. 280 § 6; Hackensack Savings Bank v. Morse, 1 Dick. Ch. Rep. 161; S. C. on appeal, 2 Dick. Ch. Rep. 279; Voorhis v. Westervelt, 16 Stew. Eq. 642, 646.

The execution creditor, by his proceedings at law, forces this sort of an involuntary conveyance to be made by the debtor for his (the creditor’s) benefit. What right in equity ought to be recognized in any creditor to compel his debtor to make a conveyance of property for the payment of his debt while he (the creditor) warns all persons not to buy by declaring that the property offered to be conveyed - does not belong to the debtor, but belongs to him ? Such conduct seems to exhibit an instance of blowing hot and cold, which ought not to be tolerated if it can be safely avoided.

If the creditor in such case stands by and by his silence conceals his own hostile title, then-under the familiar principle of the law of estoppel his own title, as well as that of the debtor, may pass by the sheriff’s deed. It was urged in this ease that there was nothing inequitable in the announcement which the Carteret Bealty Company made and proposes to make at the sheriff’s sale, because if they concealed their title they would be estopped. This may be conceded to be entirely true. The inequity does not consist in the announcement, but in the holding of a sale at which such an announcement is to be made.

This is a case, I think, where the relation of the party acquiring a judgment by assignment to'the property levied upon under it is such that in respect of the sale of that property the assignee is encumbered with a limitation which did not rest upon the assignor. There are many situations in which if a man sees fit to purchase a judgment he cannot enforce it against the judgment debtor or against the particular property of the judgment debtor, while the original holder of tire judgment in respect of those matters would have .been entirely free to act as he saw fit.

A somewhat analogous situation, where a judgment creditor is subject to equitable control in the sale of a particular piece of property for the satisfaction of his judgment, is presented in the ease of a holder of a bond and mortgage who recovers a judgment upon his bond and then undertakes to levy upon the mortgaged land and sell the same for the satisfaction of the judgment. The limitations upon the mortgagee in respect of the collection of his judgment by sale of the mortgaged premises have been the subject of considerable variance of judicial opinion. 3 Pom. Eq. Jur. § 1204 n; 2 Jones Mort. (4th ed.) § 1229; Lydecker v. Bogert, 11 Stew. Eq. 136; Lanahan v. Lawton, 5 Dick. Ch. Rep. 276, 281.

There is a general consensus of opinion that this situation is one which calls for equitable control wherever the judgment debtor — the mortgagor and obligor of the bond — comes into a court of equity and asks for relief.

The case of Havens v. Thompson, 8 C. E. Gr. 321, is in some respects similar to the one now before this court. The bill was filed under the statute to quiet title. Two of the defendants, as creditors of a third defendant, had attached the title of the latter in certain lands, which title the complainant sought by his bill to'have declared void, and an injunction restraining these attaching creditors from selling the disputed title pending the suit was applied for. The chancellor retained the preliminary injunction until the final hearing, stating that the delay could not “be of serious injury to the defendants.” On final hearing, however, it turned out that the interest which the attaching creditors desired to sell was non-existent. 11 0. E. Gr. 888. The result was that the attaching creditors -were deprived of the opportunity of finding a purchaser who might be willing to bid something for the possible interest of the defendant in attachment, which subsequently was proved to be of no value. If the injunction was properly held in that case, it seems to me that it should be held in this case. The attaching creditors were not attempting to hold a sale of an interest in lands the existence of which they denied; they were seeking-in good faith to sell the interest of the defendant in attachment —such interest as he apparently had or claimed to have, and they stood in a position to commend that interest. In the present case the execution creditor (the Carteret Realty Company) not only is not in a position to commend the sale, or at least let the thing -which they offer for sale commend itself while they remain silent, hut they slander for their own protection- — are obliged to slander the very title which in form they are procuring to be sold for their benefit. To restrain such a sale, it seems to me, cannot deprive a creditor of any advantage which an honest man ought to claim. Such a sale would, I think, be a perversion of the objects of the statute which subjects land to the payment of the owner’s debts, not because of any bad motives or ulterior purposes of the judgment creditor in pursuing- Ms strict legal rights, but because the sale itself is held under conditions which make it not a bona.fide proceeding to convert the judgment debtor’s property into as much money as possible for the payment of the judgment. It is hard to see how a creditor can in good faith, in accordance with the meaning and spirit of the statute, force a sale of his debtor’s property for the purpose of collecting his debt, when he proposes to endeavor to persuade all possible purchasers that the sale is a mere form and that in fact nothing will be sold. Even if the Carteret Realty Company had not intentionally placed itself in the position which it occupies, it seems to me that the situation is one which justifies equitable intervention.

It is no answer to say that the remedy of the judgment debtor is to pay his debt; his complaint is that the legal proceedings for the collection of the debt are being conducted in violation of Ms equitable rights.

I have not inquired'whether if this sale should go on the Carteret Realty Company, in spite of their announcement, would be estopped to set up a title in themselves inconsistent with the title which they caused to be sold under execution for their benefit. If the Carteret Realty Company are willing to bind themselves to have the whole estate in fee which they have caused to .be levied upon as a thing belonging to the complainant sold at this sheriff’s sale, the complainant, of course, would have no well founded objection to make. The Carteret Realty Company do not offer to hold such a sale, nor is it reasonable to suppose that they would make such offer.

On the other hand, the complainant is in a position to make and to be compelled to make every possible concession necessary to preserve the legal and equitable rights of the Carteret Realty Company. This suit now pending in this court can be forced to a speedy trial. The Carteret Realty Company has the right, under the statute, to a trial by jury. The complainant may be compelled to consent to a reinstatement of the action of ejectment if the Carteret Realty Company so desire, or may be obliged to'accept service of process in a new action of ejectment and take all reasonable steps to speed the trial of the same.

The terms under which the injunction restraining the sheriff’s sale will be issued may be determined upon the settlement of the order.


text:
    Fleckenstein Brothers’ Company v. Edward Fleckenstein et al.
    [Filed April 20th, 1904.]
    1. A covenant, on the sale of a business and good will, not to engage in the same business, does not bind the covenantor’s wife or prevent her from using' her own name in a similar business established by her, though such use injures the good will of the purchaser of the husband’s business.
    2. In a suit for an injunction, evidence held to show that defendant was engaged directly, as agent, in carrying on a business, in violation of his covenant not to engage “as agent or servant” in such business.
    ' 3. One who has sold his business and good will, and has covenanted not to engage as agent or servant in that business, may not, although he is not engaged in any way in the prohibited business, hold himself out to the world as the manager or superintendent of a similar business carried on under his wife’s name, as one giving to that business the benefit of his special skill and personal attention, and' thereby attract to it the good will which he has sold.

      4. Where a proprietor of a business has sold the same, and has covenanted not to engage in that business as agent or servant, strangers to the contract, who establish a similar business under the name of the wife of the covenantor, may be enjoined, at the instance of the purchaser of the business, from causing the covenantor to violate the contract by employing him, and holding him out as their active agent and superintendent, with knowledge that the purchaser is thereby being injured and obtaining a corresponding advantage to themselves in their business.
    On bill, supplemental bill, &e. On motion to settle decree.

      Mr. Charles W. Fuller and Mr. George T. Werts, for the complainant.

      Mr. James A. Gordon, for the defendants.
   Stevenson, V. C.

Upon the settlement of the decree in this cause elaborate arguments were made in regard to the scope of the injunction to be issued against the defendants, Rosina E. Fleckenstein and Mcklaus Kerber, a matter which was expressly reserved in the announcement of my conclusions. ,

I shall undertake to consider only the most important of the many questions which were discussed in this argument.

1. On behalf of the complainant it was urged that the business which these defendants were carrying on under the name of R. E. Fleckenstein & Co. was in fact the business of- Edward Fleckenstein, who was using them and their name as a mere cover, and that therefore the business should be suppressed by a-n injunction, although it was conceded that Mrs. Fleckenstein and Mr. Kerber might lawfully set up and carry on an honest business of their own at any' time.

The evidence, in my opinion, does not sustain the charge that this business is in fact the business of Edward Fleckenstein, and if it did, an injunction falls upon persons, not upon property or business. If the situation in fact is such as the complainant claims, the injunction which will issue in this case will effectively deal with it, as will appear in the sequel.

2. Mrs. Eleckenstein has a right to use her own name, which apparently is a thing of value in the bologna business in Hudson, Hnion and Essex counties. By using her own name she may injure the business of the complainant far more than if she adopted some other name. Still she is not bound by any covenant, and so far as the use of her name injures the good will of the complainant and thus causes more damage than would accrue merely from the samé competitive business not carried on under the Eleckenstein name) the complainant is without remedy.

Smith v. Hancock [1894], 2 Ch. 377, illustrates how in cases of these restrictive covenants a wife may with impunity impair the good will which her husband has sold and for which he has been paid a substantial sum. Lord-Justice Lindley (at p. 385) says that “no honorable man would have done” what the defendant (the husband) was proved to have done, and that “no honorable man would, if he could help it, allow his wife to do what she has done and is.doing.” Yet the conclusion was reached that there should be no injunction against the husband, who was the sole defendant, because his covenant not to “carry on, or be in anywise interested in” a business similar to that of the complainant could not be construed as including voluntar]1- services rendered by him to his wife in her similar business carried on 'by her under her name, i. e., her husband’s name with “Mrs.” prefixed. The words “carry on” appear to have been held to mean substantially the same tiling-as the words “conduct as principal,” and the word “interested” was held to involve only “pecuniary interest.”

No effort was made to enjoin the wife. She was in the same situation as Mrs. Eleckenstein, i. a., not hound by any covenant. In each case, excluding the charge against the husband for breach of covenant from all consideration, there is no foundation for any charge against the wife of unfair competition. The defendants, Bosina E. Eleckenstein and Nicklaus Berber, are not charged with palming off their goods as the goods of the complainant, to the injury of the complainant and in fraud of the public. On the contrary, the charge against these two defendants is that the public are induced intentionally to buy their goods in preference to the complainant's goods. If the defendant Edward ■ Fleckenstein were not tainting this business of his wife and brother-in-law by his breach of covenant, it seems plain that the wife and brother-in-law would have an undisputed right to continue their business as they are now carrying it on, notwithstanding they might attract all the customers of the complainant by appearing practically as the successors to this famous sausage maker. The same result might follow if Mr. Fleckenstein’s son should come out in his own name and prosecute the business, which he had learned from his father, and thus attract his father's old customers. Thus the father might receive a large sum of money for the good will of a business protected by his covenant and immediately thereafter the son might destroy this protection and, in effect, appropriate the good will which the father had sold.

The conduct of a wife or a son in destroying or appropriating a good will which a husband or father has sold may be morally justifiable or morally reprehensible according to circumstances. A purchaser takes the risk when he purchases the good will of a business protected by one of these covenants that after all the covenant may prove to have little or no protective value. As long as .he enjoys the full protection which honest observance of the covenant can afford, he cannot complain merely because he is disappointed in respect of the adequacy of his protection and finds that he has paid a large sum of money for what turned out to have little value.

3. The complainant also insisted that Mrs. Fleckenstein and Berber should be enjoined from using the factory where they manufacture their bolognas and carry on their provision business, and further contended that the lease of these premises, made by Mr. Fleckenstein to the new firm, should be canceled and Mr. Fleckenstein should be enjoined 'from collecting rent for the alleged unlawful use of the demised premises.

I have not held in this case that the fitting up of the factory by Edward Fleckenstein for the bologna and provision business, and letting the same to Mrs. Fleckenstein and Berber for canwing on that business, considered as a single transaction, can constitute “engaging” in the bologna and provision business either directly or indirectly as principal, agent or servant on the part of Mr. Eleckenstein. See Bird v. Lake, 1 H. & M. 111.

One cannot properly be said to be “engaged” in a business unless there is, to some extent, a continuous occupation of his faculties and powers directed toward the carrying on of the business as an object or purpose. The extent of continuity implied when the word “engaged” is employed depends upon the thing which “engages.” A man may be engaged in prayer, although the engagement may occupy but a few minutes; a man may be engaged in building a house, which cannot occupy in the natural course of things more than a few months. A man also may be engaged in any occupation or pursuit for a limited time.

In addition to some substantial continuity in the conduct or occupation which constitutes engaging in a business, I think, also, that such conduct must have for its purpose or object the carrying on of that business. The men who supply the pork and beef to this bologna factory are not engaging in the bologna business, although they may be continuously, from day to day and month to month, occupied in supplying the goods without which the bologna business could not be continued. These men are engaged in tire business of selling meat, because that is the object or purpose to which they apply their efforts as principals or as agents of others.

It is unnecessary to undertake to define the exact content of this word “engage,” or the words “engage in business,” if such definition were possible. Whether a man is directly or indirectly engaged as principal or agent in a business must be determined, I think, by a comprehensive judgment of his whole conduct taken together; what he has done and what he is doing. In dealing with the conduct of a vendor of the good will of a business with reference to a charge that such vendor had unlawfully injured the good will which he had sold, Lord Ilerschell says: “It is often impossible to draw the line and yet possible to be perfectly certain that particular acts are on one side of it or the other.'' Trego v. Hunt [1896], A. C. 7, 20.

It is the conduct of the defendant Edward Eleckenstein, as it is disclosed from day to day — his continuous conduct— which may be deemed engaging directly or indirectly,' if not as principal certainly as agent, in the bologna business. Perhaps the clearest and safest statement in regard to Edward Eleckenstein’s violation of his covenant, as exhibited by the testimony in this cause, is that he is shown to be engaging directly as agent in carrying on this business.

It may be noted here, in passing, that the cases which hold that the phrase “carry on55 means “conduct or prosecute as principal,55 and the cases which hold that the phrase “be interested in55 refers to a pecuniary interest in profits, do not apply to this case, where the covenant is not to engage “as agent or servant." Smith v. Hancock [1894], 1 Ch. 209 ; S. C., on appeal [1894], 2 Ch. 377; Gophir Diamond Co. v. Wood [1902], 1 Ch. 950; see Jones v. Heavens, 4 Ch. D. 636.

The proofs in this case show that Edward Eleckenstein, after retiring from the bologna and provision business in Jersey City, became eager to enter that business again, and that he proceeded with endrgy to construct and fit up a large factory with machinery adapted to carrying on this business. He was stopped by the threat of an injunction. He then proceeded to complete the factoiy and let the same to his wife and brother-in-law, who proposed with his consent, if not by his procurement, to carry on the same business under the Eleckenstein name. He took up his residence above the factory and from day to day employed his time largely in watching the preparations for the business, and then the commencement and prosecution of the same. It was proved to my satisfaction, notwithstanding the contradictory character of a great deal of the testimony, that, from time to time, he acted directly and personally as agent for the firm in the practical operations of the factory and business connected therewith. A part of the business was carried on in his own living-rooms. Although an active man and eager for business, he appears to have abstained from making any effort to “engage” his time and abilities in any other business venture.

It was all of the above circumstances taken together, and, perhaps, some others of less importance, which I do not recall, which led me to the conclusion that the case called for an injunction, the main object pf which would be to restrain Edward Fleckenstein from engaging in the bologna or provision business, indirectly or as agent for his wife and brother-in-law, in violation of his covenant; it was not any one particular act of the many proved which was adjudged to be the subject of injunction. I also reached the conclusion that if, as a matter of fact, Edward Fleckenstein had not engaged in any way or in any capacity in the prohibited business, he had no right to hold himself out to the world as the manager or superintendent of this business, as one giving to this business the benefit of his special skill and personal attention, thereby attracting to it the good will which he had sold. Such conduct would be a fraudulent tort in the nature of unfair competition.

A more careful analysis of the nature and extent of the injunction against Edward Fleckenstein was rendered necessary by the extensive argument made on this motion to settle the decree- in regard to the nature and extent of the injunction against Eosina E. Fleckenstein and Ficklaus Kerber. Edward Fleckenstein is not enjoined from doing any act in furtherance of the establishment of a business similar to the one which lie sold, nor will these other defendants, strangers to the contract, be enjoined from receiving the benefit of every such particrilar act on the part of Edward Fleckenstein. The injunction upon Eosina E. Fleckenstein and Ficklaus Kerber, who are strangers to- the contract, plainly may be confined to conduct which has the effect to give occasion or cause for a violation of covenant by Edward Fleckenstein, which is subject to injunction upon him and by which they profit in their competitive business.

4. The important question remains, what is the principle on which Rosina E. Fleckenstein and Ficklaus Kerber, strangers to this contract, can be interfered with in the prosecution of their lawful business because of this contract which Edward Eleclcenstein made ? •

It would, I think, be a difficult proposition to maintain that third parties to such a contract as this are liable to an injunction in equity at the suit of the covenantee, restraining them from merely aiding or abetting the covenantor in a violation of his contract. If Edward Eleckenstein openly and honestly undertook to set up the bologna and provision business in Jersey City in his own name, would the complainants be able to enjoin a third party from letting a bologna factory and shop to Edward Eleekenstein for the purposes of his business?

One interesting feature of the situation is that an injunction goes against the covenantor to restrain him from committing a breach of a contract, while the same injunction, in the same suit, goes against a third party, a stranger to the contract, between whom and the complainant there is no privity, to restrain him from the commission of a tort, which tort consists in causing the covenantor to violate his contract. So far as I have observed no English case belonging to the class v;ith which we are dealing presents anything more than an injunction upon the party to the contract restraining him from a violation thereof. The leading English case of Lumley v. Gye, 2 El. & B. 216 (1853), was an action at law for damages in which the plaintiff was allowed to recover against the defendant for persuading an opera singer to break her contract to sing at his theatre. It would seem that in such a case a suit in equity for ah injunction would be maintainable against both this same defendant and the opera singer, but no such English case has been brought to my attention.

Several American cases have been cited which allowed the injunction to go against the contracting party, who was threatening to violate his contract not to compete, and also against a third party, a stranger, who was aiding such violation of contract and profiting thereby, but these eases present no adequate discussion of the principle upon which the scope of the injunction was thus extended.'

“The idea' of interference with contract relations as a specific tort is of recent origin.” 16 Am. & Eng. Encycl. L. 1109.

See the sections following the above citation where the modern cases are cited and commented upon.

I do not propose in this case to undertake to formulate or act upon any principle wider than one which will cover the exact facts of this case. The defendants, Mrs. Fleckenstein and Nicklaus Kerber, are not merely aiding and abetting Edward Fleckenstein in violating his covenant, they are not merely causing such violation with knowledge that the complainants are being thereby injured. They are in my judgment guilty of what may be deemed to be a form of unfair competition, which is a fraudulent tort entirely distinct from conduct, which merely causes someone to break his contract. They are, speaking figuratively, stealing the good will which they know Edward Fleckenstein sold to the complainant’s assignors and for which Edward Fleckenstein was paid a price which he retains. They know that Edward Fleckenstein cannot seize,'resume possession of this good will, this property which he has sold, without violating his contract. When the defendants cause Edward Fleckenstein to violate his contract — do an illegal act which equity will enjoin — and the direct effects of such illegal act are to give them an advantage in their business and inflict a corresponding disadvantage upon the complainant in its business, I think that they, the defendants, are guilty of conduct which has the essential elements of a fraud. They are certainly making a gain for themselves at tire expense of .a competitor by causing another party to- injure such competitor and thereby subject him to damage through an'illegal act. Whether such a tort in every case could be properly classified among frauds or not, in this instance it is accompanied with concealment and false pretence.

The case is in many respects in analogy with Stone v. Goss, 55 Atl. Rep. 736, decided by the court of errors and appeals in' 1903. The learned judge, who delivered the unanimous opinion of the court in that case, after citing a large number of cases, says (at p. 737): “These cases establish the principle that employes of one having a trade secret, who are under an express contract, or a contract implied from their confidential relation to their employer, not to disclose that secret, will be enjoined from divulging the same to the injury of their employer whether before or after they have left his employ; and that other persons who induce the employe to disclose the secret, knowing of his contract not to disclose the same, or knowing that his disclosure is in violation of the confidence reposed in him by his employer, will be enjoined from making any use of the information so obtained, although they might have reached the same result independently by their own experiments or efforts. We approve the principle thus established.”

In the above-cited case we have one defendant, enjoined from violating his express contract, which the court found to have been proved by the testimony, and the other defendants, who were strangers to the contract, enjoined from committing a tort which consisted in appropriating to their own use through such violation of contract, caused or induced by them, a’trade secret which was valuable to the complainants’ business and the possession of which was protected by the contract.

The case of Stone v. Goss and the case now before this court have one most important feature in common, viz., the defendant, between whom and the complainant there is no privity of contract — the defendant, who stands charged with an equitable tort, is not merely injuring the complainant by causing the breach of a contract between the complainant and a third party, but by causing such breach is acquiring an advantage for himself and is in effect appropriating the property of the complainant.

I have endeavored to frame the final decree in accordance with the views above set forth.