author: Leaming, V. C.

text:
    Millville Improvement Company et al. v. Millville Water Company.
    [Submitted February 10th, 1921.
    Determined March 23d, 1921.]
    1. A water company organized under 3 Comp. Stat. p. 3635, and charged with a public duty of furnishing water to all inhabitants without discrimination, may adopt reasonable rules for its business and operation of its plants, which are binding on its patrons, and may be enforced even to the extent of denying water to those refusing to comply with them, such power being incident to corporations of that nature; yet they must, return to the patron such part of the advanced payment as is unearned when discontinuing his service.
    2. Under the Water act, the right of the company to enforce reasonable rules is necessarily subordinate to its recognized public duty touching uniformity and universality of service, and it must recognize and respect the paramount right of all citizens similarly situated to receive water, and cannot deny water to a tenant whose premises are adequately equipped and who is willing to pay for water.
    3. In the absence of legislative authority, there is no lien in favor of a water company on real estate for water supplied to an owner or a tenant.
    4. As between landlord and tenant there is no liability on the part of the former to pay for water supplied to the premises for the latter’s use, in the absence of an express or implied agreement to that effect. Water pipes and fixtures are appurtenances of a building, the use of which passes to the tenant, but the water is not the property of the landlord, and the water company may not impose a condition that the landlord become responsible for the charges.
    5. In the absence of legislation to the contrary, a tenant is privileged to contract for water service to' the same extent as the owner of the property, and any restriction upon, or discrimination against, a tenant’s right is inconsistent with the public duties imposed upon the water company, and, in the absence of legislation creating a lien on the real estate for water service, or other legislation of like effect, no person can be denied service because of the delinquency of a prior owner or tenant.
    6. In the absence of statute or regulation, it is the duty of a water company to lay water mains to all lateral fixtures and connections in such a manner that connection may be made with properties at the boundary lines between streets and alleys and private lots, and it is not the duty or privilege of such company to enter upon private property in ’ the construction of a system beyond such boundary line, nor of a citizen to lay pipes in the streets beyond such boundary, and owners and tenants must accept the entire responsibility for the suitable equipment of buildings to receive reasonable service.
    7. Where property is so equipped with fixtures that if a tenant should become delinquent his service could not be cut off by the water company without cutting off that of another tenant, the company cannot be required to serve tenants.
    On bill for injunction. On hearing at return of order to show cause.

      Mr. Louis 11. Miller, for the complainants.

      Mr. Lewis Starr, for the defendant.
   Leaming, V. C.

Complainant corporation is the owner of eight several residence buildings in the city of Millville; the individual complainants are the several tenants who occupy the buildings. The corporation, as landlord, and the individuals, as tenants, join in the bill filed-herein to restrain defendant water company from carrying out its purpose to refuse to supply water to the several tenants unless complainant corporation, as owner of the buildings, pays or guarantees the payment of the usual charges for water to be supplied to the buildings for the use of the several tenants.

There is no dispute touching the essential facts. Each of the eight buildings referred to is what is known as a double tenement-house—that is, two residences united in one building. Each residence is occupied by a tenant, making in all sixteen tenants as complainants.

Defendant corporation is a water company supplying the inhabitants of the city of Millville with water. Defendant is incorporated under the Water act of 1876. P. L. 1876 p. 318; 3 Comp. Stat. p. 3635.

It has long been the custom and may be said to be the adopted rule of defendant company in supplying water to the inhabitants of the city to deal exclusively with the owners of buildings and to require from such owners the payment for water service at defined and uniform rates payable in advance each six months. Water rents for the several buildings here in question have heretofore been paid in that manner by complainant corporation. Complainant corporation has now made leases to the several individual complainants in which each of the tenants has engaged to pay the water rents. All of the tenants are willing to pay defendant ■ company in advance in accordance with defendant’s rules as to rates; but defendant is unwilling to treat with any of them or to accept their money or to in any way recognize their liability to pay unless complainant corporation, as owner of the buildings, first guarantees the payments.

The single question for determination and the sole controversy between the parties is whether defendant water company is privileged to require the owner to pay for the water to be supplied to the tenants of the buildings or to guarantee such payment, and to refuse to recognize the claim of right of the several tenants to pay in advance for water to be supplied to them.

This question does not appear to have heretofore arisen in this state; but the authorities in other jurisdictions touching the relations of water companies to their patrons appear to be so uniform and sound in principle that the general inquiry here submitted can scarcely be said to be an open question.

It is well recognized that a water company, though charged with the public duty of furnishing water to all of the inhabitants without discrimination, may adopt reasonable rules for the conduct of its business and the operation of its plant, and such rules, so far as they affect its patrons, are binding on- them, and may be enforced, even to the extent of denying water to those who refuse to comply with them. Such power is not dependent upon'any express legislative authority,; it is incident to a corporation of that nature. Robbins v. Bangor Ry. & El. Co., 100 Me. 496; State v. Butte City Water Co., 18 Mont. 199; American Water Co. v. State, 46 Neb. 194; State v. Water Supply Co., 19 N. M. 27; Watauga Water Co. v. Wolfe, 99 Term. 429. This right of reasonable regulation is uniformly held to include the right to shut off the waier supply of delinquents and also the right to require consumers to pay water rents for a reasonable time in advance. State v. Water Supply Co., supra; Watauga Water Co. v. Wolfe, supra; Hatch v. Consumers Co., 17 Idaho affirmed, 224 U. S. 148; State v. Butte City Water Co., supra. Various periods for advance payments have been held reasonable; but in Rockland Water Co. v. Adams, 84 Me. 472, one jrear was held an unreasonable period. In all such eases it is to be assumed that the regulation includes a right of the patron to a return of such part of the advance payment as is unearned by reason of the service being discontinued before the end of the period for which an advance payment has been made.

Section 13 of the Water act, under which defendant company is operating, provides:

“That said company may sell and dispose of the water issuing from their reservoirs, aqueducts or pipes, for such price or prices, or quarterly or annual rents, and such restrictions as they may think proper.”

So far as this provision relates to rates or regulations it can only be understood as contemplating reasonable rates and restrictions.

But, although the right of a water company to adopt and enforce reasonable rules for the conduct of its business and operation of its plant is thus uniformly recognized, such rules, to meet the requirements of reasonable regulations, are necessarily subordinated to the recognized public duty of corporations of that nature touching uniformity and universality of service—that is, the public duty of corporations of that nature to recognize and respect the paramount right of all citizens, similarly situated and appropriately circumstanced, to receive water, and to receive it on the same terms. Consistently with that duty it is clear that service of water cannot be denied to a tenant whose premises are adequately equipped to receive such service and who is willing to pay for it.

That conclusion is rendered manifest by a more detailed consideration of the relations of a water company to its patrons. In the absence of legislative authority there is no lien on the real estate for water supplied to either an owner or a tenant; the water is supplied on the credit of the patron. Turner v. Revere Water Co., 171 Mass. 329; State v. Albuquerque Water Supply Co., supra. In the cases last cited it is also held to be an unreasonable regulation to deny water to an owner or occupant oi a building because of a default of a prior owner or prior occupant, though reasonable to deny water to a delinquent patron. This personal nature of the service and the rights of all citizens to its enjoyment necessarily exclude the notion that a water company can deny service to a tenant whose landlord refuses to guarantee payment for such service.

Nor is there, as between a landlord and his tenant, any liability on the part of the landlord to pay for water supplied to the premises in the absence of express or implied agreement between them to that effect. Water pipes and fixtures are appurtenances of a building and the use of them passes to a tenant. But the water is a commodity in no way attached to the realty, and is not the property of the landlord; it is to be furnished at a price to such person as is entitled to receive it and desires to purchase it. Sheldon v. Hamilton, 22 R. I. 230. As between the water company and the tenant who is entitled to receive water service, and whose premises are properly equipped for such service, it has been specifically held that tire public duty of the water company to serve patrons without discrimination denies to such company the right to refuse to supply such tenant or to impose a condition that the landlord become responsible for the charges. State v. Butte City Water Co., supra. In that case the precise question was presented which is here under consideration. Farmer v. Nashville, 127 Tenn. 509, is to the same effect, and further holds that in the absence of legislative authority a denial of water to a tenant because the landlord is in default for water supplied to the landlord prior to the inception of the tenancy is unlawful because in conflict with the public duty of tire water company to supply all patrons. Bourke v. Olcott Water Co., 84 Vt. 121, is to the same effect as State v. Butte City Water Co., supra. In the Bourlce Cam, however, the specific language of the charter of the water company may be said to have materially contributed to the conclusion there reached. Turner v. Revere Water Co., supra, also holds that a tenant is entitled to water service because of the public duty to supply water to all persons, notwithstanding the landlord’s delinquency in payment for prior service, and that it is in violation of the public duty of the water company to deny service to the tenant until the prior delinquency of the landlord shall have been paid, in the absence of a statute making the charge a lien on the real estate. In State v. Water Supply Co., 19 N. M. 27, it is held that in the absence of legislation making delinquent water charges a lien on the land a tenant cannot be denied water service because of arrearages of a prior tenant or prior owner; but that such service could be denied if the statute imposed a lien. Linne v. Brides, 43 Wash. 540, is to the same effect, holding that an owner cannot be denied water service because of delinquency of a prior tenant, in the absence of legislative authority. To the same effect are Chicago v. Northwestern Mutual Life Insurance Co., 218 Ill. 40; City of Covington v. Ratterman, 128 Ky. 336; McDowell v. Avon, &c., Imp. Co., 71 N. J. Eq. 109.

The general rale which appears to be recognized by practically all the authorities on the general subject may be said to be that in the absence of legislation to the contrary a tenant is privileged to contract for water service to the same extent as the owner of the property, and that any restriction upon, or discrimination against, that right of a tenant is inconsistent with the public duties imposed upon a water company and, accordingly, unlawful; and that in the absence of legislation creating a lien on the real estate for water service, or other legislation of like effect, no person can be denied service because of delinquency of a prior owner or tenant. No legislation in this state of the nature suggested has been brought to the attention of the court.

But, notwithstanding the views above expressed, touching the general right of a tenant of a property to contract for and receive water service, and- the duty of a water company to supply such tenant on his sole credit, it seems clear that complainants in this suit are not entitled to the relief sought by the bill.

The premises here in question are eight double buildings with a separate tenant in the-enjoyment of half of each building. Each building is supplied by one service pipe in such manner that in order to supply one-half of either building with water, water must also be supplied to the other half of that building, since no stop cock.or shut off has been provided to enable one-half of any building to be separately supplied with water. In the practical operation of that equipment it is obvious that should an}>' tenant for any cause determine to discontinue contractual service or seek free service or become delinquent, in order to serve the remaining tenant in such building the water company would be compelled to continue to supply both tenants.

As heretofore stated, the right of a tenant to exact service of water necessarily presupposes a premises suitably equipped for that purpose.

It appears to be held with entire uniformity of decisions that in the absence of statutory regulation to the contrary, it is the duty of a water company to lay water mains and all laterals, fixtures and connections in such manner that connections may be made with properties at the boundary lines between streets and alleys and private lots; that it is not the duty or privilege of a water company to enter upon private property in the construction of its system beyond that boundary line and is not the duty or right of a citizen to lay pipes in the street or beyond the boundary referred to. Bothwell v. Consumers Co., 13 Idaho 568; Pine Bluff Corporation v. Toney, 96 Ark. 345; Title Guarantee Co. v. C. R. Com., 168 Cal. 295. Accordingly, the owners and tenants of a building must accept entire responsibility for the suitable equipment of such buildings to receive reasonable service.

The equipment of the buildings here in question is of the same class as that of office buildings or apartment-houses, having no provisions made for the supply of water to the several offices or apartments except by a supply to the entire building as one unit. In such circumstances it is obviously impracticable for the water company to contract with the tenants of the several offices or apartments unless provision exists to control the supply to each office or apartment.

No suggestion is herein intended to be made, touching the eight, of a water company to deal exclusively with the owner of an office or apartment building which is supplied with water through a single tap, but which is also equipped with separate taps for each office or apartment. (See Kelsey v. Fire, &c., Commissioners, 113 Mich. 215; Gaines v. Charleston Light and Water Co., 104 S. C. 136; Jopling v. Bluefield Water Co., 70 W. Va. 670; Young v. Boston, 104 Mass. 95; Cox v. Cynthiana, 123 Ky. 363.) But where a building is supplied with water through a single tap and separate parts of the building are occupied by tenants and no equipment is provided to enable the water company to supply with water any part of the building without supplying water to the entire building, it is clearly impracticable for the water company to adequately operate through contracts with the several tenants; in such circumstances, in reasonable and practical operation, the building can only be regarded as a unit and the water company can. only reasonably be required to treat with the owner.

In this view the relief sought by the bill must be denied.


source: Caselaw Access Project

author: Leaking, Y. C.

license: Public Domain

text:
    David P. Brown v. Francis C. Ely et al.
    [Submitted April 26th, 1921.
    Determined May 6th, 1921.]
    Where the buyer of a lot, on account of the seller’s attitude and the consequent course of dealing of the parties with reference to the contract, was justified in believing that it was not necessary for him to pay installments promptly, the buyer was entitled to notice from the seller of a change of attitude on his part, or a notice that his rights would be terminated unless he should promptly make payment of the final balance due, and without such notice the seller could not declare a forfeiture, even though the written contract made time its essence.
    On final hearing. On bill for specific performance.

      Messrs. Avis & Avis, for the complainant.

      Mr. Austin II. Sumckhamer, for the defendant.
   Leaking, Y. C.

It may be here assumed that the parties to a contract for the sale of real estate are privileged to contract that the time stipulated for payment of the purchase price shall be deemed essential, to the end that failure of the purchaser to pay at the time named shall terminate his right to enforce the contract.

It is a wholly different and independent question whether in such a contract in which the payments are .to be made in a series of installments a failure to pay an installment on a stipulated day will be operative to forfeit all prior payments under a clause of the contract providing that in case of default the amount theretofore paid shall be deemed liquidated damages; in such circumstances the drastic or unconscionable stipulated effect of a failure to pay a relatively insignificant and perhaps final installment on the day named may well justify a court in regarding the forfeiture clause a penalty and unenforceable as such.

In this case the right of defendant to retain the moneys paid is not involved. The question here presented is whether time is so far the essence of the contract as to deny to complainant the right to its specific enforcement.

In contracts of the nature of the one here in question time is not of the essence of the contract unless made so by the terms of the contract, or by circumstances of the case which are not here present. In this contract, however, it is specifically stipulated that time of payment is to be regarded as of its essence.

But while the parties are privileged to make a binding stipulation of that nature, they are equally privileged to unmake it after it has been made.

The present contract made the purchase price of the lots $300. It stipulated that $10 should be paid in cash at the signing of the contract, and that the balance should be paid in monthly payments of $6 each until the full purchase price should be paid. The initial payment of $10 was made pursuant to the contract, and thereafter eighteen payments were made and accepted by the vendor in practically total disregard of the stipulations of the contract touching the times and amounts of payment. These several nineteen payments embraced a period from June 10th, 1915, the date of the contract, to February 11th, 1919,'and left a balance of $56.50 clue under the contract according to the testimony of defendant taken from his books of account. Except 'the original deposit of $10 no single pajonent was made at the time called for by the contract and only one payment appears to have been for $6 called for by. the contract as the amount to be paid monthly. A number of the payments were credits given to complainant for work performed for defendant. At no_time did the aggregate amount of the payments and credit for work equal the amount due under the contract. Soon after the contract was made complainant, with defendant’s acquiescence, erected a small bungalow on the lots and thereafter enjoyed possession until defendant declared a forfeiture of the contract, in 1919, for the $56.50 unpaid balance of the contract price, at which time defendant took possession. During all that period complainant and defendant were on friendly terms, and complainant claims that defendant gave no indication of dissatisfaction further than saying at times, “You are getting a little behind,” “I want a little money,” or similar remarks, and when told by complainant that he could not arrange to pay each month, said, “All right, we will manage with that.” Defendant, on the contrary, claims to have written complainant in April, 1916, threatening forfeiture for delinquency, and again in February, 1919. Carbon copies of these letters were produced by defendant, but complainant is positive that he never received either of these letters. But whether the letters were received or not payments irregular in amount and time continued as before after the letters of April, 1916, and one pa3rment of $36 was made after the date of the letter of February, 1919. The latter letter fixed a date on which forfeiture was threatened unless the overdue amount should be then paid and a payment appears to have been made and accepted on that date for less than the amount. After the February, 1919, payment of $36, no further payments were ever made or demanded, and in November defendant, without further warning, declared a forfeiture.

From all the testimony it seems clear that the attitude of defendant in relation to this contract, and the consequent course of dealing of the parties with reference to it, was such as to fully justify complainant in the confident belief which he undoubtedly entertained that it was not necessary for him to pay promptly. It cannot be reasonably doubted that complainant fully believed that he was privileged by defendant to disregard the contract terms touching prompt payment; it seems equally impossible to doubt that defendant’s assurances to complainant, express and implied, not only occasioned that confident belief but justified it. In these, circumstances complainant was at least entitled to notice from defendant of a change of attitude on his part or a notice that his rights would be terminated unless he should promptly make payment of the then small final balance due. But without warning to complainant the letter of defendant of November, 1919, notified complainant that his rights had been forfeited. Even should it be assumed that complainant received the warning letter of February, 1919, the payment by him of $36 and its acceptance by defendant on the day named in that letter —a payment of less than the amount then due—appropriately justified complainant’s belief that the old relations and course of dealings were re-established. It seems impossible to doubt the truth of complainant’s statement, to the effect that had he been apprised of a change of attitude of defendant touching his requirements under the contract he would have raised the small final amount due; and it seems equally impossible to doubt that the change of attitude of defendant touching the extension of credit and his determination to terminate or forfeit the contract in November without warning may have been stimulated by his opportunity to dispose of the property to advantage.

My conclusion is that the terms of the contract here in question, in so far as they may be said to have privileged defendant to terminate the contract without notice to complainant by reason of delinquency in payment became inoperative and unenforceable by defendant without notice to complainant by reason of the fact that the negotiations and long continued course of dealings of the parties under the contract fully justified complainant in acting under that assumption.

■ Complainant elects to accept a decree for specific performance, subject to the rights of Mrs. Gallagher, as lessee, with option of purchase. Such an election is permissible; so long as the decree directs performance only so far as defendant is able to perform, the rights of others are not disturbed.

A decree of that nature will be advised. Defendant will account for any rents received under the Gallagher lease. Unless the amount can be agreed upon a reference will be made.


author: Lewis, Y. C.

text:
    Gertrude Zinsser, petitioner, v. Rudolph Zinsser, defendant.
    [Decided July 30th, 1920.]
    1. Under P. L. 1902 p. 259, and under its general jurisdiction over the custody of the persons of infants which the chancellor exercises as parens patria, a court has jurisdiction over the custody of the person of an infant domiciled in this state, though the father was a non-resident of the state and the mother had separated from him and brought the child with her into this state. „
    2. On petition for the custody of a two-year-old girl, evidence that the mother had separated from the father because of his mistreatment of- her, and that even visiting the father affected the child’s health—Held, to warrant an order giving the custody of the child to her mother.
    On petition for custody of a child.

      Mr. A lexander Simpson, for the petitioner.

      Mr. Samuel TJntermyer and Mr. Frank P. McDermott, for the defendant.
   Lewis, Y. C.

This application for the custody of an infant child, Marie Louise Zinsser, was heard before me on petition filed by the mother of the infant. It appeared from the petition and affidavits that the mother was living at the present time with her father in the city of Passaic, Few Jersey; that she had separated from her husband at his residence in the city of Few York. The mother had taken the child at the time of her separation from her husband to the residence of her father in Passaic. The petitioner and defendant had had differences which resulted in the separation on the 26th day of May, 1919.

At the outset of the case, the defendant’s counsel appeared, specially, challenging the jurisdiction of thei court on this ground: The father of the infant defendant, being a resident of Few York and not before the court, the court, therefore, was without power in the premises to make an order relative to the custody of the infant. I am unable to see how this view could prevail.

The proceedings in this case are on petition under the statute, and the child and mother are both domiciled in this state, the child having been born in the state. In re Williams, 77 Atl. Rep. 350; P. L. 1902 p. 259. It is not, however, the limited jurisdiction upon the petition which is invoked alone but it is the general jurisdiction over the custody of the person of infants which the chancellor exercises as parens patries.

The breadth and nature of this jurisdiction has been elucidated in many of our cases. Baird v. Baird, 19 N. J. Eq. 481; Rossell v. Rossell, 64 N. J. Eq. 21; Cunningham’s Case, 61 N. J. Eq. 454.

Subsequently, an order was made by the chancellor referring the cause for hearing to me, and at the time of this hearing, there was no appearance by the defendant. The mother gave testimony to the effect that owing to the conduct of the defendant and his treatment of her, that her health was endangered and her life rendered miserable. For this reason she was obliged to depart from her home in New York. Her testimony was fully corroborated by the nurse in attendance on her child and by her family physician.

Evidence was also offered to prove that the husband had refused to take his wife back to his home in New York and had brought a suit against her in the State of New York. It appeared also that a writ of habeas corpus for the custody of the child had been issued in New York on behalf of the father.

After the separation, the child from time to time was sent to New York to the father’s home, spending the night there. Upon the advice of physicians, the mother discontinued these visits of the child to the father, on the ground that it was injurious to the child’s health and welfare. Evidence in corroboration of this was offered by the mother, the nurse and the physician.

After hearing an order was made by me giving the -custody of the child to the mother, and there was also a provision in this order that 'the father might at any time apply for an order of this court permitting visitation to the child at the Passaic home of the mother.

The child is but two years old—a little girl—and it is quite apparent to me from the testimony that her welfare would be promoted by the custody being lodged with the mother.

The case presented is one which seems to me to be clearly within the jurisdiction of this court.


author: Lewis, V, C.

text:
    The A. B. Newbury Company, Inc., v. George G. Tennant, trustee in bankruptcy of The Rohdenburg Company, Inc., and Beachwood Service, Inc.
    [Decided March 18th, 1921.]
    The R. Co., after having agreed to build a bungalow for L. on land owned by the R. Co., went into bankruptcy, prior to which its managers and directors organized the B. Service, Inc., and induced L. to contract with it to build the bungalow, which it did. D. paid into the bankruptcy fund the balance due on the bungalow.—Held, that one having an unsatisfied judgment and execution against the B. Service, Inc., for materials used in the construction of the bungalow was entitled to the fund rather than the general creditors of the R. Co., that company having acquiesced in the construction of the bungalow on its land.

      On pleadings and proofs.

      Mr. Maja Leon Berry, for the complainant.

      Mr. Randolph Perkins and Mr. George G. Tennant, for the defendant.
   Lewis, V, C.

This is a creditor’s hill in aid of judgment and execution at law. Iauch v. de Socarras, 56 N. J. Eq. 524.

The facts are practically undisputed.

In the summer of 1917, The Rohdenburg Company agreed to build, for Jeptha H. Lanning, a bungalow, on property then owned by The Rohdenburg Company, at Beachwood, New Jersey. Lanning made a deposit on account, and work on the bungalow was to be commenced the following year. As part of the consideration of this agreement Lanning was to transfer to The Rohdenburg Company four lots that he then owned at Beachwood. Subsequently, The Rohdenburg Company went into voluntary bankruptcy in the United States district court for the district of New Jersey; and George G. Tennant was elected as the trustee in bankruptcy of that company.

It is not entirely clear from the evidence whether the bankruptcy proceedings were begun before or after the commencement of the construction of the bungalow, but it is certain, in, any event, that not more than $25 to $50 worth of material had been furnished by The Rohdenburg Company for the use of the building when Camburn, the builder, started to work on it some time between the 1st and 5th of July, 1918. Meantime, Kearnin and Von Saal, who were the managers, directors and substantially the whole of The Rohdenburg Company, with one other person, whose name does not appear, organized a new corporation under the General Corporation act of New Jersey, called The Beach-wood Service, Inc.

Prior to the commencement of the bankruptcy proceedings of The Rohdenburg Company, Kearnin and Von Saal, or one of them, represented to Lanning that The Rohdenburg Company was unable to carry out its agreement to construct the bungalow, and induced Lanning to make a new contract for that purpose with The Beachwood Service, Inc. The bungalow originally planned and contracted to be erected by The Rohdenburg Company was then built for Lanning by The Beachwood Service, Inc.

After the appointment of Mr. Tennant as trustee in bankruptcy of The Rohdenburg Company these facts were made known to him. Thereupon Lanning filed a petition in the United States district court for the district of New Jersey, setting up that he was- the owner of the four lots at Beachwood referred to; that he had made the contract mentioned with The Rohdenburg Company; that the company had since become bankrupt; that he had put his money into the bungalow, built by The Beachwood Service, Inc., on property which stood in the name of The Rohdenburg Company, and asked leave to pay into the bankruptcy fund the balance due, namely, $1,000; and that the trustee in bankruptcy be directed to convey to him the title to the lots on which the bungalow had been actualy built, and that he, in turn, convey to the trustee the four lots at Beachwood, which he had agreed to transfer to The Rohdenburg Company as part of the consideration of the original contract, the money to be paid to the trustee in bankruptcy for the benefit of whoever might be entitled thereto. This has been accomplished and the funds are in the hands of the trustee in bankruptc3r, George G. Tennant, one of the defendants in the present suit.

The Newbury Company, the present complainant, furnished material to The Beachwood Service, Inc., which was used in the construction of the bungalow in question, and, failing to receive payment therefor, instituted an action at law and recovered judgment against The Beachwood Service, Inc., upon which execution was issued, but which remained wholly unsatisfied.

The amount actually paid to The Rohdenburg Company by Lanning, in addition to the transfer of his four Beachwood lots, to the trustee in bankruptcy, is asserted to be full value for The Rohdenburg Compairy’s land; and it does not appear that any of that compan3’’s general creditors supplied a^thing of value that went into the bungalow property.

Complainant contends that, as a judgment creditor of Beach-wood Service, Inc., it is entitled to follow the money paid by Lanning into the hands of the trustee in bankruptcy of The Rohdenburg Company and to have it applied in, satisfaction of its judgment against The Beachwood Service, Inc., inasmuch as its material was used in the construction of the building which produced the value, now the subject-matter of the controversy, through the contract of The Beachwood Service, Inc.

The trustee in bankruptcy contends, however, that the fund so produced constitutes assets in his hands to be distributed among the general creditors of The Rohdenburg Company, on the technical theory that the bungalow having been built upon the lands of The Rohdenburg Compañía, became the property of that company, and that The Beachwood'Service, Inc., had no right of any kind in the land of The Rohdenburg Company, or the bungalow built thereon, and argues that The Beachwood Service, Inc., is in the position of a mere volunteer who has erected a building on the land of another, without the owner’s consent and acquiescence.

I am of the opinion that the complainant in this case should prevail, and that the funds involved should be applied in satisfaction of its judgment and execution at law against The Beach-wood Service, Inc.

To hold otherwise would be to permit the general creditors of The Rohdenburg Company to appropriate the funds arising from the completion of the contract to construct the bungalow in question by The Beachwood Service, Inc., without having contributed in any way to its production, while the complainant, who furnished the material used in the construction of the building—and without which the fund would not have been produced —would go unpaid.

This would seem to me to be inequitable, particularly in view of the fact that The Rohdenburg Company, through Kearnin and Von Saal, who entirely controlled and directed its affairs, not only had full knowledge of what ivas being done, but actually brought it about, and must be taken to have acquiesced therein. King v. Morris, 74 N. J. Law 810; Perkins v. Trinity Realty Co., 69 N. J. Eq. 723; affirmed, 71 N. J. Eq. 304; J. J. McCaskill Co. v. United States, 216 U. S. 504; Linn, &c., Timber Co. v. United States, 196 Fed. Rep. 593; Philadelphia Creamery Co. v. Davis, &c., Building Co., 77 Fed. Rep. 879. See also 14 Corp. Jur. 59, 61.

I shall advise a. decree in accordance with these views.


author: Lewis, V. C.

text:
    Elizabeth Carey v. Thomas H. Brown, William H. Reilly and The First National Bank of the Town of Union.
    [Decided April 11th, 1921.]
    ■1. That the statute of limitations has run against the right to enforce the claimant’s claim at law presents no difficulty, in view of P. L. 1912 p. 1(17, to transfer a cause begun in this court in due time to the law court with like effect as though the action had originally been commenced there before the statute of limitations had run.
    2. In a proceeding in chancery by an assignee to recover shares of stock transferred prior to the assignment to the defendant in part payment for real estate, the title to which was never transferred to the assignor—Held, that the complainant did not have a complete and adequate remedy at law, under the circumstances presented, especially in view of the action of the law court in striking out two complaints in trover and conversion filed therein.
    3. Whatever may have been the disability of an assignee of a chose in action, assigned without consideration under Practice act 1903, section 19, such assignee may now maintain such action.
    4. If a complete determination of a controversy cannot otherwise be had between the parties in equity, the court may, at any stage of the proceedings, add any party whose presence is necessary to the complete determination of the controversy, under chancery rules 13 and 14.
    5. Where an assignor of stock before the assignment to the complainant, suing to recover the stock, transferred it to the defendants in part payment for lands which were not conveyed because of the assignor’s inability to perform, and the land was sold by the defendants, one of whom made advances for the assignor—Held, that the rights of third parties had not intervened nor the parties failed to proceed in a way that would justify applying the doctrine of laches.

      8. Wihcre bank stock previous to its assignment to the plaintiff had been transferred by the assignor to the defendant in part payment of land, which land was not transferred to the assignor because of his breach of contract, which land was subsequently sold by the defendant, he was entitled to sue the assignor for damages; hence, in a suit by such plaintiff, such defendant might, under section 101 of Practice act of 1912, and section 86 of Chancery act of 1915, counter-claim or set off any cause of action against the complainant or plaintiff, or against any third party necessary to be brought in.
    7. In such suit the defendant could elect to resist the complainant’s claim to the extent of defeating the right to the relief sought, but, in any event, the proper procedure requires a counter-claim by the defendant to the extent of damages for the assignor’s breach of contract.
    S. If a defendant in such a suit desires to take an affirmative decree for any excess of damages through such breach, it is necessary to make the assignor a party.
    9. In such a suit where the evidence showed that there were several accounts to be considered—Held, that an accounting should be taken between the parties.
    On pleadings and proofs.

      Mr. Dougal Herr, for tire complainant.

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

The bill is filed to compel the defendants Brown and Beilly to turn over to the complainant one hundred and seventeen shares of stock of the First National Bank of the Town of Union, and to restrain its disposition otherwise, alleged to have been delivered to the defendant Brown by one John Conway, in part payment of the consideration for a, transfer of certain real estate of which Brown was the equitable owner, but the legal title to which was bold by the defendant Beilly. Under the terms of the contract of sale a deed for the property was to be delivered to Conway, upon his performing tbe conditions therein required of him. Brown says that Conway not only failed to comply with the provisions of the contract within tbe time fixed, but that, ultimately, after the date for settlement bad been postponed a number of times to enable Conway to comply,, Conway told Brown that he was unable to perform bis part of tbe contract and that he could not go ahead with it. At that time Brown tendered a delivery of the deed to Conway, but Con-wav was unable to comply with his part of the contract and accept delivery. Brown thereupon carried the property several years, during a period of great depression in the real estate market, and -was unable to dispose of it until some time in the year 1916, when he sold it at a. loss. He was also obliged to meet and pay off certain obligations and charges xrpon the property and make advances of cash for the benefit of Conway and to assume certain of his obligations. This is, to some extent, disputed by Conway, but I am inclined to accept the testimony of Brown in' this respect. Later, Conway assigned whatever interest he may have claimed to have in the stock in question, to the First National Bank of the Town of Union, and it, in turn, assigned the same to the present complainant, Elizabeth Carey, but without consideration. '

The theory of the complainant is, that Brown and Eeilly having failed to convey title to the real estate to Conway, and having sold tire property to a third person, are not entitled to retain in equity and good conscience the stock which was so deposited by Conway with Brown in part payment of the consideration.

It appears that a short time after the difficulties arose between the parties, in 1912, or thereabouts, a suit in trover and conversion was brought against Brown in the law courts, but that it was discontinued by agreement between the parties, after two complaints filed in the cause had been stricken out by tire court, as failing to set forth á legal cause of action.

The present bill was filed on July 12th, 1915, and meantime the statute of limitations has run against the right to enforce complainant’s claim at law. This, however, would present no difficulty in view of the Transfer of Causes act of 1912 (Supp. Comp. Stat. p. 1252), which permits the court of chancery, even when the statute of limitations will bar a suit at law, if a suit has been brought in the court of chancery prior to the six years by mistake, to transfer the cause over to the law court, with like effect as though the action had been originally commenced there within a competent period.

But I am inclined to hold that complainant has not a complete and adequate remedy at law under the circumstances here presented, especially in view of the action of the law court with “respect to the suit already mentioned, and I shall therefore retain the bill.

I It is urged by the defendants that the present complainant, Elizabeth Carey, has no interest in the subject-matter which will permit her to maintain this action; that the court is without power to substitute other complainants; and that, in any event, laches bar a prosecution of the claim sued upon.

Whatever mayNiave been the disability of an assignee of a chose in action earlier in the history of the law (Pom. Eq. Jur. §§ 1280, 1284), it seems,clear that under our statutes such assignee may now maintain an action upon the chose in action assigned. Practice act of 1903, § 19; 3 Comp. Stat. p. 4056.

And if a complete determination of the controversy cannot be had between the parties to this suit, the court has the undoubted power at any stage of the proceedings to add any party whose presence is necessary to the complete determination of the controversy. Chancery act 1915, rules 13 and 14; Supp. Comp. Stat. p. 128 §§ 71, 72.

I do not think that the rights of third persons have intervened, or that the parties have failed to proceed in a way that would justify the application of the doctrine of laches to the facts of this case.

This brings us to the consideration of the merits.

When Conway breached the contract Brown was entitled to sue him for the damage he thereby sustained.' This damage is indicated above. He did not, however, actually dispose of the property until several years after the breach, and, meantime, Conway’s assignees took action against Brown. Under lire Practice act of 1912 (Supp. Comp. Stat. p. 1205 § 101) and the Chancery act of 1915 (Supp. Comp. Stat. p. 129 § 86) the defendant majr counter-claim or set off any cause of action against the complainant. or plaintiff, as the case may be, or against any third party necessaiy to be brought in.

From the evidence already in the case it seems clear that Brown’s loss, resulting from Conway’s breach of the contract, is. equal to or in excess of the value of the equity in the stock claimed by the complainant, and that he, if he sees fit, could counter-claim against the complainant and the assignors. He, however, may have elected to simply resist the complainant’s claim to the extent of defeating her right to the relief she seeks by the bill. That is his privilege, if he so elects. But, in any event, I think that the proper procedure requires a counter-claim by Brown to the extent of the damage sustained by him; for it would be unjust, in my opinion, for Brown to retain the stock delivered to him by Conway, in part payment of a consideration that has failed, and at the same time hold the property which was to have been conveyed to Conway for that consideration, or the proceeds realized from its sale to third parties. As against this stock or its value, however, Brown is entitled to charge Conway with the damage resulting to Brown from Conway’s breach of the contract. This should be done through the medium of a counter-claim, and to that end the pleadings should be amended accordingly.

If Brown desires to take an affirmative decree for any excess, it will be necessary to bring Conway in as a party.

On the hearing complainant requested the court to reserve the right to an accounting, and, inasmuch as the testimony with regard to the damage sustained by Brown is somewhat general, and considerably complicated, I think that an accounting should be taken between the parties when they have been ultimately determined.

The decree will be settled upon application and notice.


text:
    Edward A. Grant v. The New Jersey Refrigerating Company, a corporation of New Jersey.
    [Decided May 14th, 1921.]
    1. Where a suit at law on a promissory note is restrained the chancellor may direct the complainant in the equity suit to give bond conditioned to pay the party enjoined such damages as he may sustain by reason of the injunction, if the court shall find that the complainant was not entitled to the injunction.
    2. The power to require the bond rests in the discretion of the court.
    3. Where the allegations of the bill set forth a case cognizable in a court of equity, restraint of the law suit may be had, and resort to equity, without testing the ruling of the law court by appeal.
    On bill, &C.

      Mr. Saul Nemser, for tlie complainant.

      Mr. 1). Eugene Blankenhom, for tlie defendant.
   Lewis, V. C.

The complainant’s bill is filed to restrain defendant’s suit in the law court on a promissory note paj'able on demand, given.by the complainant to the defendant, for the sum of $5,118.00, and bearing- date1 September 18th, 1916.

The allegations of the bill are similar in many respects to those found in O'Brien v. Paterson Brewing and Malting Co. 69 N. J. Eq. 117; Gallagher v. Lembeck & Betz Eagle Brewing Co., 86 N. J. Eq. 188.

Under these cases complainant’s right to maintain his suit in equity and restrain the law suit is unquestioned, and he may resort to equity without testing the ruling of the law court by appeal.

I do not understand the defendant to seriously question the right of the complainant to maintain his bill; nor has he challenged it by motion to dismiss; but upon the return of the order to show cause for a preliminary injunction, it was urged that the complainant either give a bond or be compelled to stipulate that if complainant’s bill should be dismissed after hearing, complainant should not defend the law suit.

In the case of Gallagher v. Lembeck & Betz Eagle Brewing Co., supra, security was given, the bill having been filed after judgment in. the law court.

An examination of the facts in the present case leads me to agree with the defendant’s contention.

The obligation of Grant is the sum in- which McGrath was indebted to the defendant. The note of Grant, by its terms, is a promise to pay the debt of McGrath.

The following is a recital in the note:

“This note is given as evidence of my indebtedness to Lembeck & Betz Eagle Brewing Company by reason of having assumed the payment of a certain chattel mortgage of the amount of this note, dated December 10, A. D. 1895, and made to them by Thomas E. McGrath, .the amount of the mortgage having been deducted from the consideration set forth in a certain bill of sale made by ( ) to me, dated ( ) 19 ( ).”

The complainant asserts that it is impossible for him to set up a proper defence in the law court, and that his defence to the note is an equitable one. " Whát right of his can, therefore, be jeopardized by requiring him to give a bond as a condition of the continuance of the restraint? He has selected his forum, and should he not abide by its decision ? He says he has no defence to the note at law.

Rule 20? (chancery) provides for the giving of a bond under circumstances such as are here presented, which bond is conditioned to pay the party enjoined such damages as he may sustain by reason of the injunction, if the court shall find that the complainant was not entitled to the' injunction:

' The power to require the bond rests in the discretion of the court. Kerr Inj. 18; Henwoord v. Jarvis & Schafer, 27 N. J. Eg. 247.

My view is that a bond should be given by the complainant.

Application to fix the terms and conditions of the same may be made before me on any motion day.


author: Baokes, Y. C.

text:
    J. C. Smith & Wallace Company v. Nathan J. Goldner and Frederick Isaacson.
    [Presented March 22d, 1921.
    Decided March 23d, 1921.]
    1. A sale in bulk is void as to creditors of the vendor, unless the provisions of the Bulk Sales act of 1915 are complied with.
    2. Though a sale in bulk is void as to the vendor’s creditors, unless the provisions of the act of 1915 are complied with this does not give creditors a claim upon the purchase price.
    3. Where a sale is void under the Bulk Sales act of 1915, creditors may execute their judgment by a levy and sale of the goods, or if unable to do so, may cause the writ to be returned nulla bona and proceed in equity against the purchaser for the value of the goods as transferred without consideration with, intent to defraud creditors.
    On motion for preliminary injunction.

      Messrs. Reed & Reynolds, for the motion.

      Mr. Abraham Henig, contra.

   Baokes, Y. C.

The defendant Nathan. Goldner sold his stock of merchandise, in bulk, to the defendant Isaacson. The purchaser failed to demand and receive a list, in writing, of the vendor’s creditors and to notify them of the proposed sale, as required by the Bulk Sales act of 1915. P. L. p. 377. The complainant recovered a judgment against Goldner and levied on the merchandise, the subject of the sale, and then filed this bill to compel the defendants to discover the articles sold, the terms of sale, and the amount of purchase price remaining unpaid, that defendants be decreed to pay the judgment* and for an injunction to restrain the payment of the unpaid purchase price. The present motion is for a temporary injunction restraining the payment of the balance of the purchase price. The motion must be denied.

A sale in bulk is void as to creditors unless the provisions of the act are complied with, but this does not give creditors a claim upon the purchase price. The act implies that, the sale being void, creditors have a remedy at law and in equity—that is, as I take it, creditors may execute their judgment at law by a levy and sale of the- goods, or, if unable to execute the judgment by a levy and sale, they may cause the writ to be returned ntulia Iona and proceed in equity against the purchaser for the value of the goods, exactly as if the goods had been transferred without consideration, with intent to cheat and defraud creditors.

The bill may be amended to charge Isaacson, the purchaser, with the value of the goods.


author: Backus, V. C.

text:
    The Village of South Orange, a municipal corporation of New Jersey, v. David L. Heller.
    [Decided May 11th, 1921.]
    A village zoning ordinance is invalid under P. L. 19%0 p. 455, where it does not apply to all persons alike throughout the zone, but provides for special permits to be granted by the board of trustees of the village after a hearing.

      On bill, &c.

      Messrs. Biker & Bilcer and Mr. Robert N. McGcarter, for the complainant.

      Mr. Thomas A. Davis, for the defendant.
   Backus, V. C.

This bill is filed by the village of South Orange to restrain the defendant from erecting a public garage in violation of its “zoning” ordinance.

The legislature in 1920 (P. L. p. 455) enacted that—

“The governing body of each and every municipality in this state shall have power by ordinance to regulate and restrict the location thereafter of trades and industries and the subsequent location of buildings designed for a specified use in any designated area and may divide the municipality into districts of such, number, shape and area as it may deem best suited to carry out the purposes of this act. For each such district regulations may be improved designating' the trades and industries which 'shall be excluded or subjected to special regulations and designating the uses for which buildings may not be erected or altered. Such regulations shall be designed to promote the public health, safety and general welfare.”

Pursuantly, the village of South Orange passed an ordinance entitled “An ordinance to regulate and restrict the location of •trades- and industries and the erection of buildings designed for a specified use within designated areas and dividing the village of South Orange into districts to carry out the purposes hereof.” The ordinance divided the village into two districts, designated respectively as (1) the business- district, and (2) the residential district. The third section of the ordinance provides:

“Section 3. In the residential section, designated as No. 2, hereafter no building shall be erected, altered or used as a factory, chemical works, public garage, power plant, slaughter-house, abbatoir, shop or store for 'the sale of merchandise of any kind, excepting only such buildings as may mow, be in actual use for any of the said purposes, without a special per'iiiit to be granted only upon resolution of the board of trustees, and after a hearing, notice of which shall be advertised in a newspaper published in the village of South Orange at least once ten days prior to the date fixed for such hearing.”

It is charged that the defendant is about to erect a public garage in the prohibited area and the bill is filed to restrain him.

I do not find myself called upon to pass upon the constitutionality of the legislation, or the jurisdiction of this court to enforce a municipal ordinance, or the propriety of interfering by injunction pendente lite where the right at law is not clear, or the question of fact whether the proposed building is to be a public or private garage, for I find that the ordinance upon which the complainant’s right to maintain this suit is predicated is without legal sanction and void. The power delegated to municipalities by the legislature is to fix zones within which certain supposedly obnoxious businesses are not to be carried on and buildings intended for these purposes are not to be erected, and the restrictions imposed are to be uniform and obligatory upon all persons and property alike throughout the zone. The ordinance, the basis of this suit, forbids infringement except, to use the language of the ordinance, “without a special permit to be granted only upon resolution of the board of trustees and after a hearing.” The discretionary powers reserved to the trustees to give to one and withhold from another the privilege of violating the ordinance is not conferred by the act and is without legal force, and upon certiorari' it would be declared' without legislative authority and void.

The order to show cause is discharged and the bill dismissed.


text:
    Joseph A. Wright et al. v. William H. Fissell.
    [Decided May 10th, 1921.]
    1. Complainants who contracted to use their personal and political influence to obtain contracts from the United States government for the defendant in consideration of one-half the profits on all contracts so procured, were not copartners with the defendant, since they were not to share losses as well as profits, nor were they attorneys, agents or employes, but independent contractors, between whom and the government there was no privity.
    2. A contract whereby the defendant, a building contractor, agreed to pay the complainants one-half of the profits on all contracts they might procure for Mm from the United States government, through the use of “their best efforts, influence and endeavors” with the emergency construction committee of the council of national defence, upon the recommendation of which contracts were awarded by the war department, is void as subversive of the public welfare and against public policy, personal and political influence being the only consideration for it.
    On bill, &c.

      Mr. James B. Nugent, for the complainants.

      Messrs. Lmñábwry, Depne'& Faullcs (Mr. Josiah Stryher), for the defendant.
   Baokes, Y. C.

This bill is for an accounting of the profits made by the defendant in constructing Camp> Merritt (Tenafly, New Jersey), under a contract with the federal government, and to recover one-half thereof.

The contract, like others, let by the government during the war for the building of cantonments, was on a cost plus ten per cent, profit basis, and it yielded the defendant approximately $150,000. The contract was awarded by the war department upon the recommendation of .the emergency construction committee of the council of national defence, upon which committee was imposed the duty of investigating the character, capacity and dependability of bidders, and the responsibility of selecting only those of the highest ability and integrity. The defendant, Fissell, trading as Fissell & Company, a contractor and builder of undoubted capacity and eligibility, and a constant but unsuccessful applicant for some of the work, conceived, or, rather, misconceived, the idea that the committee was susceptible to political influence, and that to win a contract he had to secure a political “pull,” and to that end sent for the complainant Wright, a lieutenant of the complainant Nugent (Nugent is a power in politics and recognized as the Democratic “boss” of New Jersey), and, after telling him of his plans, and receiving from Wright fulsome assurances of his chief’s endowments, a bargain was struck that Wright and Nugent should use their “best efforts, influence and endeavors” to obtain contracts from the United States government, for the defendant, in consideration of which they were to receive one-half the profits on any and all contracts the complainants might procure for him. Headquarters were established in Washington, maintained by Nugent and Fissell, in which Wright was held out as Fissell & Company’s representative, and Wright and Nugent, unquestionably, exerted their “best efforts, influence and endeavors” by personal appeal to some of the committee, by the intercession of their personal and political friends in Washington, who were also intimately friendly and influential with at least one member of the committee, and by other channels calculated to bring about results; and, eventually, the defendant was selected to build Gamp Merritt.' The choice was well merited, and the defendant, Fissell, was in all respects worthy, as was well known, and as his work afterwards proved. The members of the committee, all men of impeccable character and loyal to their office, were actuated by a single purpose—securing the best—and in their selection of Fissell from among thousands of bidders, personal or political pressure played no part. But for all that, the complainants were, to a marked extent, instrumental in bringing about the award. No doubt other and wholly independent forces vouched for Fissell and helped, but it cannot be denied that the campaign of publicity joromoted by the complainants gave Fissell a conspicuous prominence over the multitude of competitors, and had much to do with his selection. Assuming, without deciding, that the complainants performed their part of the contract, is the promise of the defendant enforceable? The complainants were not, as claimed, copartners with the defendant, promoting a common enterprise; they were not to share losses as well as profits, and there was no privity between them and the government. They were not attorneys, agents or employes, nor were they other than independent contractors, dealing with the defendant for half his profits in consideration of their influence, and the enlisted influence of others, with the government’s officials. Influence—individual and inspired, personal and political—was the commodity and the only consideration for the contract. Contracts based upon such a consideration are universally condemned as subversive of the public welfare and against public policy, and tire reason is obvious, as the authorities show.

In Tool Company v. Norris, 2 Wall. 45, Norris procured from the United States government a contract for the Tool Company for muskets, through "concentrating influence at the war department”—that is, through letters from persons of supposed influence with the secretary of war, and bjr personal introduction to the secretary by a United States senator. He was promised, if he succeeded in landing a contract, all in excess of $17 per musket the government would pay. The suit was for an accounting, and in holding the promise to be against public policy and void, Mr. Justice Field, speaking for the United States supreme court, said: "All contracts for supplies should be made with those, and with those only, who will execute them most faithful^, and at the least expense to the government. Considerations as to the most efficient and economical mode of meeting the public wants should alone control, in this respect, the action of every department of the government. No other consideration can lawfully enter into’ the transaction, so far as the government is concerned. Such is the rule of public policy; and whatever tends to introduce any other, elements into the transaction is against public policy. That agreements, like the one under consideration, have this tendency, is manifest. Théy tend to introduce personal solicitation, and personal influence, as elements in the procurement of contracts; and thus directly lead to inefficiency in the public service and to unnecessary expenditures of the public funds.

‘"The principle which determines the invalidity of the agreement in question has been asserted in a great variety of cases. It has been asserted in cases relating to- agreements for compensation to procure legislation. These have been uniformly declared invalid, and the decisions have not turned upon the question whether improper influences were contemplated or used, but upon the corrupting tendency of the agreements. Legislation should be prompted solely from considerations of the public good and the best means of advancing it. Whatever tends to divert the attention of legislators from their high duties to mislead their judgments, or to substitute other motives for their conduct than the advancement of the public interests, must necessarily and directly tend to impair the integrity of our political institutions. Agreements for compensation contingent upon success, suggest the use of sinister and corrupt means for the accomplishment of the end desired. The law meets the suggestion of evil and strikes down the contract from its inception.”

In Oscanyan v. Arms Co., 103 U. S. 261, the Turkish consul-general, in New York, through his personal influence with Rustam Bey, a representative of the Turkish, government, secured for his government a contract for rifles for the Remington Arms Company, for which the Arms company had agreed to pay him a percentage of the total contract price. The agreement was held to be invalid and unenforceable. Mr. Justice Field again spoke the eoiirt’s opinion, saying: “But, independently of the official relation of the plaintiff to his government, the personal influence which he stipulated to exert upon another officer of that government was not the subject of bargain and sale. Personal influence to be exercised over an officer of government in the procurement of contracts, as justly observed by counsel, is not a vendable article in our system of laws and morals, and the courts of the United States will not lend their aid to the vendor to col]ect the price oí the article. Numerous adjudications to this effect are found in the state and federal courts. This is true when the vendor holds no official relations with the government, though the turpitude of tire transaction becomes more glaring when he is also its officer.”

In a recent case in England (Montefiore v. Menday Motor Components Co., Ltd. (1918), Eng. L. Rep. 2 K. B. 241), it appeared that the defendant agreed with the plaintiff that if he would procure an advance of capital (war loan) for it from the English government, it would pay him ten per cent, of the amount so. secured and allot him forty shares of its stock. It was shown that the plaintiff was to recommend the defendant, and exercise his influence with servants of tire crown, and it was found that the true consideration of the bargain was that the plaintiff should use his position and the value of his good word in favor of the defendant in getting government assistance. In addressing itself to the illegality of the contract, the court said: “A contract may be against public policy either from the nature of the acts to be performed or from the nature of the consideration. In my judgment, it is contrary to public policy that a person should be hired for money or valuable consideration when he has access to persons of influence to use his position and interest to procure a benefit from the government. This was expressly decided by Lord Eldon in Norman v. Cole (1800), 3 Esp. 253, when he said: ‘I cannot suffer this cause to proceed. I am of opinion this action is not maintainable; where a person interposes his interest and good offices to procure a pardon, it ought to be done gratuitously, and not for money; the doing an act of that description should proceed from pure motives not from pecuniary ones.’. So long ago as the reign of Edward VI. it was provided by the statute of 5 & 6 Edw. 6, c. 16, that it was illegal to bargain for any brokerage or money for the transference of an office, or any part of an office, concerning the .receipt, controllment or payment of any money or revenues of the crown. And a later statute (49 Geo. 3, c. 126) made it a misdemeanor to receive money for any office, place or employment particularly specified in that act. * * * It is well settled that in judging this question one has to look at the tendency of' the acts conteníplated by the contract to see whether they tend to be injurious to the public interest. In my judgment a contract of the kind has a most pernicious tendency. At a time when public money is being- advanced to private firms for objects, of national safety it would tend to corrupt the public service and to bring into existence a class of persons somewhat like those who in ancient times of corrupt politics were described as ‘carryers’—men who undertook for money to get titles and honours for those who agreed to pay them for their influence. See the remarks of Lord St. Leonards in Egerton v. Earl Brownlow (1853), 4 H. L. C. 1, 234.”

Other cases which are in denial of the complainants’ right to recover are: Marshall v. Baltimore and Ohio Railroad Co., 13 How. 314; Trist v. Child, 21 Wall. 441; Hazelton v. Sheckells, 202 U. S. 71; Crocker v. United States, 240 U. S. 74; Hayward v. Nordberg Manufacturing Co., 85 Fed. Rep. 4; Frost v. Belmont, 6 Allen (Mass.) 152; Mills v. Mills, 40 N. Y. 543; McCallum v. Corn Products Co., 116 N. Y. Supp. 118; Clippinger v. Hepbaugh, 5 Watts & S. (Pa.) 315; Elkarl County Lodge v. Crary, 98 Ind. 238; Chippewa Valley & S. Ry. Co. v. Chicago, St. P., M. & C. Ry. Co., 75 Wis. 224; 44 N. W. Rep. 17; Hare v. Phaup, 23 Okla. 575; 101 Pac. Rep. 1050; Kaufman v. Catzen, 81 F. Va. 1; 94 S. E. Rep. 388; Wood v. M'Cann, 6 Dana (Ky.) 366; Gil v. Williams, 12 La. Ann. 219; Kansas Pac. Ry. Co. v. M’Coy, 8 Kans. 538; M’Bratney v. Chandiler, 22 Kans. 692; Rose v. Truax, 21 Barb. (N. Y.) 361.

The cases in New Jersey are Gulick v. Ward, 10 N. J. Law 87; Hope v. Linden Park Blood Horse Association, 58 N. J. Law 627; Slocum v. Wooley, 48 N. J. Eq. 451, and Brooks v. Cooper, 50 N. J. Eq. 761. In Hope v. Linden Park Blood Horse Association, Chancellor McGill, speaking for the court of errors and appeals., said in part: “It is too well established to admit of question that an agreement which controls or restricts, or tends or is calculated to control or restrict, the free exercise of a discretion for the public good, vested in one acting in a public official capacity, is illegal and so reprobated by the courts that no redress will 'be given to a party who sues for himself in respect of it.” In Brooks v. Cooper, Mr. Justice Lipjoincott, for the court of errors and appeals, said: “Whatever tends to injustice or oppression, restraint of liberty, restraint of legal right; whatever tends to the obstruction of justice, a violation of a statute, or the obstruction or perversion of the administration of the law; whatever tends to interfere with or control the administration of the law as to executive, legislative or other official action, whenever embodied in and made the subject of a contract, the contract is against public policy and therefore void and not susceptible of enforcement. ** * * Any contracts which have for their object'the influencing the action of public officials are void as against public policy. * * * An agreement whose object or tendency is to influence any officer of the state in the performance of a legal duty, partially or completely, is void. * * * It is distinctly held that an agreement for compensation for procuring a contract from the government' of our own, or that of another country, is against public policy and void. * * * All agreements, for financial consideration, to control or influence the business operations of the government, or the appointment of public officers, are void as against public policy, without reference to the question whether improper measures are contemplated or used in their execution. The law looks to the general tendency of such agreements, and it closes the door to temptations by refusing them recognition in the courts. * * * And, so, considerations of the same kind, of inferior moment, apply, whenever the. necessary or even probable effect of the contract will be to divert any public servant from the path of duty, or cause favoritism or interest to prevail in the determination of questions which’ should be examined, with a view to the general good and the just claims of the parties in interest.”

The bill will be dismissed, with costs.


author: Backes, V. C.

text:
    Thomas J. Prindiville, complainant, v. Johnson & Higgins, defendant.
    [Decided May 2d, 1921.]
    1. The power of a corporation to prescribe the terms on which the respective classes of stock are created, and to define, limit and regulate the powers of the corporation, the directors and the stockholders, or any class of stockholders, must be exercised consistently with section 20 of the Corporation act, declaring shares of stock personal property and in subordination to such provision.
    2. If a corporation, by providing in its charter that, when a stockholder is not an officer, director or employe, he shall not 'be entitled to dividends until he surrenders the stock to the corporation and accepts in lieu thereof a ten-year dividend certificate, has arrogated to itself powers not conferred by law or against the policy of the law, redress may be had by the state through the attorney-general, but a stockholder receiving benefits in the past from such provision cannot attack it.
    3. A provision in a corporate charter that when stock becomes the property of one not an officer, director or employe, or if any owner of stock of the corporation ceases to be an officer, director or employe, he shall not be entitled to dividends in such stock unless he surrenders the stock and accepts a ten-year dividend certificate, is not in conflict with the policy of the law against restraint of trade.
    4. Where shares of stock are unqualified, restraints upon their transfer, by charter or by law, except for convenience of corporate regulations, are in contravention of public policy and void.
    5. Where the charter of a corporation provides as above stated a court of equity cannot compel payment of dividends to a stockholder who has ceased to be a director, officer or employe, because to exscind this provision from its charter, or ignore it, would give the stock qualities and characteristics not created by the incorporators or their successors, and would not merely determine, protect and enforce property rights, but would create them.
    6. If the provisions of the charter above stated exceeds the powers conferred on the corporation by the Corporation act, a stockholder who has accepted pecuniary benefits thereunder is estopped to attack such proceedings on that ground.
    7. If such provision constitutes an unlawful restriction on the transfer of stock, and is void against public policy, a stockholder who has been an active participant in the violation of the law, and who does not offer to restore what he has gained thereunder, is in pari delicto, and not entitled to relief in equity.

      S. Where the charter of a corporation contained the provisions above stated, a stockholder not complying therewith was not entitled to sue to restrain the corporation from paying excessive salaries to' directors, as excessive salaries are in diminution of dividends, and only those entitled to dividends may complain.
    On final hearing.

      Messrs. McCarter d English' (Mr. Henry Woilman, Mr. Royal Vidor and Mr. Eustace Seligmm, of the New York bar), for the complainant.

      Messrs. Pitney, Hardin d Slcinner (Mr. A. H. Larkin and Mr. F. -W. M. Culcheon, of the New York bar), for the defendant.
   Backes, V. C.

This is a stockholders) bill, alleging two causes of action; to compel the defendant corporation to declare and pay dividends, and to restrain the directors from paying themselves excessive salaries.

Johnson & Higgins was incorporated in 1899, under “An act concerning corporations” (Rev. 1896), with an authorized capital stock of $500,000—half preferred and half common. The preferred stock is eight per cent., non-cumulative, dividend bearing, with priority over the common,, in dividends, and in the capital upon dissolution. The authorized capital stock has been increased to $1,000,000, similarly divided. The preferred stock is not entitled to vote for directors or officers. The principal object for which the company was formed, as stated in the charter, was

“to purchase, acquire and take over the business of the copartnership of Johnson & Higgins, as insurance brokers, insurance agents, agents of underwriters and of insurance companies, adjusters of averages and their kindred business, all as conducted by them in New York and in other places [excepting their business as now conducted in Boston, Philadelphia, Baltimore, New Orleans, Chicago and San Francisco].”

i

'In 1845 Messrs. Johnson and Higgins formed a copartnership 'to engage in the insurance business as brokers, agents and adjusters, and prospered, extending their business throughout the nation, and earning for themselves, besides riches, an enviable good will. 1899 the members of the firm, then eight in number (there are now twelve), concluded to. incorporate part of their business, and to that end caused the corporation of Johnson & Higgins to be formed, and conveyed to it the partnership business described in the charter, for all the common stock and $50,000 of the preferred. The partners thereupon divided the stock among themselves in proportion to their interest in the firm’s business, electing themselves directors, and assumed the management of the company’s affairs, which they andi their successors have since carried on with marked success. The co-partnership business, not incorporated, continued, and also has been conducted profitably, the members and the board of directors being, as a rule, identical. The corporation was designed to be a strictly personal service concern, a copartnership,- as nearly as ingenuity could achieve, and to embody all of the advantages of both, without incurring, in full, the obligations of either. The scheme was simple. The common stock was to be held only by the officers, directors and employes of the company actively promoting its affairs, and among them was to be divided the net annual profits, in part, according to the appraised or real value of their services., and in part according to their stock holdings, and when any of them became inactive, the right to dividends was to cease after the expiration of ten years. To that end it was provided in the charter that—

“In tlie event that any share or shares of the common stock of the corporation become the property of any person who is not an officer, director or employe of the corporation actively engaged in its service, or in the event that any owner of a share or shares of the common stock of the corporation ceases to be an officer, director or employe of the corporation actively engaged in its service, the owner of such share or shares of stock shall thereby and thereupon be disentitled to dividends upon such stock unless and until he shall surrender or cause to be surrendered the said stock and the certificate therefor to the corporation, upon which surrender he shall receive from the corporation in exchange for such stock a certificate entitling him to such dividends as may be declared upon said stock for the next succeeding period of ten years, and such stock shall from the time of surrender be subject to reissue under the direction of the board of directors and upon any terms approved by them, and with or without specific consideration [any eonsideration, however, to be the property of the corporation] ; but the new holder or holders of such stock so reissued shall not be entitled to dividends thereon until ten years from the time of the surrender of the stock to the corporation as aforesaid, and prior to the reissue of such stock there shall be written or stamped upon the face of the new certificate or certificates therefor a statement indicating at and after what time the holder of the stock shall be entitled to receive dividends.”

.For twenty years there was perfect harmony and cohesion. The directors held the common stock during their period of service, and when they ceased to be active they turned in their stock for the ten-year dividend paying certificates, and their places were taken bjr others. The stock so turned in was reissued to the remaining members, usually in proportion to their holdings.' The uniform practice of the directors was to set aside at the beginning of each year one-half of the pet profits in prospect, for their compensation; the* other half for dividends. Then the amount set aside'for salaries was apportioned among the members on a j>ercentage basis, presumably, according to- the value of their service.

In 1911, the complainant, Prindiville, was selected a director. He had been engaged in the insurance business in Chicago under the name of Prindiville & Company, a corporation, of which he was half owner, the other half belonging to Johnson & Higgins. His interest was taken over at an appraised value of $12,500, for which he was given one hundred and twenty-five shares in the defendant company of the par value of $100 each. Mr. Prindiville was taken into the corporation, not for his assets in Prindiville & Company, but for his singular excellence in the insurance line, which was calculated to add to the prestige, advancement and success of Johnson & Higgins. That, he and his associates fully understood, and he took his position and his stock,'well knowing the plan of operation and tire limitation of his status. He continued with Johnson & Higgins, with headquarters at Chicago, until December 31st, 1918, subscribing at all times to its scheme, taking his share of the yearly profits by way of compensation and dividends upon his stock, and also from time to time accepted his allotment of the common capital stock surrendered by his fellow-members of the dictorate who ceased to be active—in all, one hundred and fifteen shares. His annual compensation and dividends during his connection with the company were enormous. The profits of the company were fabulous.

His retirement came about in this manner: When America entered the war in April, 1917, he went into the service, without consulting his coworkers and obtaining their leave. They protested, not against his ideals and zeal, but against his arbitrary and abrupt manner of putting country above company. All was smoothed over, however, and throughout his service in the navy, until the end of 1918, he drew his annual compensation as before—and it was princely—and also dividends on his stock for the year 1917, which was no paltry sum. Upon his release by the government, and when he was due to resume Ms duties as an active director on January 1st. 1919, he demanded an increase in compensation for the year 1919, equal in percentage to that of Lowe and Davy, his so-called ‘Tunning mates,” who had come into the concern with him, but who worked while he was absent. During the period of Ms absence he drew pay at the rate of six per cent, of the net profits set aside annually for directors5 compensation, and the company proposed continuing him at that rate. Lowe and Davy had in the meantime been raised to nine per cent. plus. After considerable controversy, sometimes acrimonious, the directors refused to accede to his demands, and he quit. He then brought this suit to recover dividends aggregating two hundred and five per cent, on the common stock declared out of the profits of 1918. The company stands ready and oilers to pay them upon surrender by him of his certificates of shares .in exchange for dividend certificates in accordance with the requirements of the charter. This he declines to do, maintaining that the condition is ultra vires the corporation, and that it is an unlawful restraint upon the alienation of his capital stock. His contention is, that the Corporation act does not authorize a charter, with limitations upon shares perpetuating the control of the company in the organizers and their chosen successors; that capital stock in a corporation, is personal property, so declared by section 20 of the Corporation act; and that inasmuch as the free and untrammeled right of disposition is an essential and inalienable incident to ownership of personal property, the requirement of- the charter, that he surrender his stock to entitle him to dividends, is in restraint of trade, and void as against public policy. However sound in principle the argument may be, it is weak in appeal and application.

(1) It may well be doubted that a partnership may be perpetuated-in the garb of a corporation, with its corporate rights and powers, and immunity to personal liability, without complete submission to its cardinal ordinances, of which a conspicuous one 'is that “the shares of stock in every corporation shall be personal property” (Comp. Stat. p. 1610 § 20), and I seriously question that the provisions of section 8 of the Corporation act countenance corporate existence with copartnership privileges of choosing one’s associates. Subdivision -1 requires that the certificate of incorporation contain:

“If there be more than one class of stock created by the certificate of incorporation, a description of the different classes, with the terms on which the respective classes of stock are created,”

and subdivision 7 provides that

“the certificate of incorporation may also contain any provision which the incorporators may choose to insert, for the regulation of the business and for the conduct of the affairs of the corporation, and any provision creating, defining, limiting and regulating the powers of the corporation, the directors and the stockholders, or any class or classes of stockholders; provided, such provision be not inconsistent with this act.”

These broad grants of power were intended^ in my opinion, to be exercised consistently with the declared policy that “the shares of stock in every corporation shall be personal property,” and in entire subordination to this declaration. The point is not, however, up for decision. If the defendant corporation has arrogated to itself powers that are not conferred, or that are obnoxious in the eyes of the law as against its policy, it is guilty of an invasion of tire public right, and direct redress lies with the state through its duly-appointed agency—the attorney-general.- Strangers may resist- their imposition, but the complainant is not in a position to assail them. The charter restriction, of which he complains, forms the very keystone of the corporate scheme and structure he helped build, and under which he holds, and he cannot be heard to obliterate it. He has supped sumptuously at the table of plenty for eight years, and he cannot bring the feast to an end simply because he is indisposed.

(2) The principal point to which counsel have addressed their arguments, orally and in voluminous briefs, is whether the charter provision above quoted, terminating the right to dividends, is in conflict with the policy of the law against restraint of trade, and therefore void; and much that has been said and written, supported by long lines of authority pro and con the subject, though exceedingly helpful in interpreting the clause, is, it seems to me, beside the question. As I view the clause, it limits the quality of tire shares, not their alienability. That is to say, the limitation is upon the property in the shares, their normal dividend bearing capacity is curtailed, but there is no restraint upon their transferability. The shares came into being with this condition as a part of their essence; it was one of their original incidents, and the complainant contracted with the corporation and his fellow-stockholders for them with this inherent characteristic attached. He and his associates are not deprived of the rights or privileges of stockholders, save as to dividends, and those he agreed to forego in a certain contingency, which has come to pass. He got all he bargained for, and what he has he is at liberty to sell and transfer. As to that there is no restriction. He may transfer his shares, such as they are, at will, and to whom he pleases. That he will not be able to find as ready-a market or as smart a price as could be secured for shares otherwise unlimited, may be embarrassing and disappointing, but that’ does not impair the vendibility of the article he bought and has for sale. I can perceive no infraction of public policy.

Where shares are unqualified, full fledged, so to speak, restraints upon their transfer, whether by charter or by-law, except for convenience of corporate regulations, are in contravention of public policy and void. The authorities are unanimous' in enunciating this principle, but a call for its application in the present circumstances is inopportune. The cases cited by complainant are illustrative and conclusive of the doctrine. Morris v. Hussong Dyeing Machine Co., 81 N. J. Eq. 256; Chouteau Spring Co. v. Harris, 20 Mo. 382; Kretzer v. Cole Brothers Lightning Rod Co., 193 Mo. App. 99; Fisher v. Bush, 35 Hun 641; In re Petition of Klaus, 67 Wis. 401; 29 N. W. Rep. 532; Miller v. Farmers Milling & El. Co., 78 Neb. 441; 110 N. W. Rep. 995, and McNulta v. Corn Bell Bank, 164 Ill. 427; 45 N. E. Rep. 954. Longyear v. Hardman, 219 Mass. 405; 106 N. E. Rep. 1012, cited by the defendant, is not an exception. There the court upheld a charter provision that none of the shares should be sold, hypothecated or transferred without the consent of three-fourths of the capital stock of the corporation. It was held to be valid upon the authority of section 8 (e) of the Massachusetts statute, which provides that the articles of association shall state “the number of shares into which the capital stock is to be divided, and the restrictions, if any, imposed upon their transfer.” Other cases cited by the defendant as recognizing, in a measure, the right of a corporation to control the transfer of shares, will be found to deal with preemption rights, or options, reserved to the corporation, or to the stockholders, to acquire the shares of a retiring stockholder at a price fixed by a legal standard, as, for instance, the sum he offers to take from another, par, their book value, or what they are reasonably worth, to be determined by appraisers, and the like. Charter provisions of this character, obviously, are not restrictions on the transfer, but conditional contracts of sale, and specifically enforceable as contracts, and were sustained in the cases upon that theory. New England Trust Co. v. Abbott, 162 Mass. 148; 38 N. E. Rep. 432; Nicholson v. Franklin Brewing Co., 82 Ohio St. 94; 91 N. E. Rep. 991; Farmers M. & S. Co. v. Laun, 146 Wis. 252; Weiland v. Hogan, 177 Mich. 626; 143 N. W. Rep. 599; Garrett v. Philadelphia Lawn Mower Co., 39 Penn. Sup. 78; Bloomingdale v. Bloomingdale, 107 Misc. (N. Y.) 646; Jones v. Brown, 171 Mass. 318; 50 N. E. Rep. 648; Borland's Trustee v. Steel Brothers & Co., Ltd. (1901), 1 Ch. 279. See also Barrett v. King, 181 Mass. 476; 63 N. E. Rep. 934; Scruggs v. Cotterill, 73 N. Y. Supp. 882, and Williams v. Montgomery, 148 N. Y. 519; 43 N. E. Rep. 57. Authority for the English cases cited by defendant as sustaining liens on shares for debts due the company from stockholders, and upholding refusal to transfer shares while the stockholder is indebted to the corporation, may be found in the Companies act of 1862 (25 & 26 Vict. 798), section 14 of which provides that the companies may in their articles of association “adopt all or any of the provisions contained in the table marked A in the first schedule hereto.” Paragraph 10 of the schedule reads: “The company may decline to register any transfer of shares made by a member who is indebted to them.” Banking companies are subject to the company legislation of 1862. 1 Hals. L. Eng. 582. See New London and Brazilian Banking Co. v. Brocklebank, 21 Ch. Div. 302; Brandford Banking Co. v. Henry Briggs Son & Co., Ltd., 12 App. Cas. 29.

(3) Furthermore, to exscind from the charter the limitation upon the right to dividends, or to ignore it altogether—and that is really the complainant’s aim—would evolve property by judicial decree that had never been acquired by complainant, nor created by the parties, incorporators and their successors, nor had ever been within the contemplation of either. By the new order of things thus to come into being, the complainant’s shares —not only those which he acquired by his initial purchase from the company, but also those that were allotted to him through the corporate scheme he now denounces—would take on qualities and characteristics for which no warrant can be found in his engagement. By the magic stroke of the judicial pen, so to speak, that which was a conditional fee would be metamorphosed into an absolute estate, if I may indulge in those terms; the shares would become perpetually dividend bearing, translated from choses in action to things in possession, as it were, and this, not by virtue, but in spite of the complainant’s undertaking. Equity determines, protects and enforces property rights, it never creates them.

(4) Now, if we were to accept the complainant’s contention and argument at face value, and as sound (a) that the Corporation act does not grant charter privileges of conditional shares such as the defendant’s articles of incorporation presume to appropriate, and (5) that the conditions imposed on the shares are unlawful'restrictions upon their transfer, and void as against public policy, it would not be to his advantage or helpful to him in the least in maintaining this suit. In setting up the first proposition he is met by an equitable estoppel, or an estoppel in the nature thereof, and the doctrine finds excellent expression in the opinion of Mr. Justice Willard Bartlett in Wormser v. Metropolitan Street Railway Co., 184 N. Y. 83, as follows: “Where the objection to the acts of a corporation is that they are ultra vires, without being either mala proMbita or mala in se, a stockholder cannot maintain an action in his own behalf based on such objection, where he, himself, with knowledge of the character of the act, has acquired and accepted pecuniary benefits thereunder. Whether his conduct in so doing constitutes an estoppel, in the strict sense of that term, or a quasiestoppel, as Mr. Bigelow puts it (Big. Estop, (4th ed.) ch. 19), or be denominated merely an acquiescence or an election, or the assumption of a position inconsistent with an attack, makes no essential difference here. The point is, that the seeking and acceptance of a substantial benefit which would be unavailable to the stockholders except as a result of the acts which he would attack as ultra vires preclude him from assailing those acts on that ground. A litigant is not at liberty to deny the validity of a contract, which is neither prohibited by law nor evil in itself, after he has knowingly sought and obtained pecuniary advantages, pay or compensation, under and by virtue of such contract.” See also Treadwell v. United Verde Copper Co., 134 App. Div. 394; Bonta v. Gridley, 77 App. Div. 33, and cases cited. As to the second, the complainant was a party to the 'wrongful imposition upon the statute, and an active participant in the violation of the law, and he stands before the court guilty, by his own confession, of transgressing the law by the acts which he himself now condemns as vicious and injurious to the public weal. He comes not in a penitent mood to restore what he gained by the unlawful means and to retrace his steps to virgin soil—locus penilentis—but as an unregenerated sinner praying the court to help him to more. Where the parties to the litigation are equally guilty in the execution of an unlawful venture, equity will help neither. Its strong arm becomes limp> as of paralysis, and it pronounces upon them its invariable sentence, in pari delicio potior est conditio chfendentis, In St. Louis Railroad Co. v. Terre Haute Railroad Co., 145 U. S. 393, Mr. Justice Gray, in applying the doctrine, said: “The general rule, in equity as at law, is in pari delicto potior est conditio clefendentis; and, therefore, neither party to an illegal contact will be aided by the court, whether to enforce it or to set iti aside. If the contract is illegal, affirmative relief against it will not be granted, at law or in equity, unless the contract remains executory, or unless the parties are considered not in equal fault, as where the law violated is intended for the coercion of the one party and the protection of the. other, or where there has been fraud or oppression on the part of the defendant.” See Harriman v. Northern Securities Co., 197 U. S. 244; Arnot v. Pittston & E. Coal Co., 68 N. Y. 558; Leonard v. Poole, 114 N. Y. 371; Unckles v. Colgate, 148 N. Y. 529; Knowlton v. Congress, &c., Spring Co., 57 N. Y. 518; 103 U. S. 49, cited in 197 U. S. 244; Gould v. Head, 41 Fed. Rep. 240; Continental Securities Co. v. Northern Securities Co., 66 N. J. Eq. 274.

(a) The complainant’s second cause of action—to restrain the corporation from paying the directors excessive salaries in the future—is, in view of the foregoing conclusion, not ripe for decision. Excessive salaries are in diminution of tire dividends, and only those who are entitled to them may complain of their deprivation. The complainant sues only in right of the one hundred and twenty-five shares originally purchased by him, and as to these he has lost his claim to dividends, only to be restored upon the surrender of his shares, and to be vouched to him by a ten years’ certificate. When he shall have complied with his contract and assumes the status of a dividend certificate holder he will then, and not until then, be in a position to complain that he is deprived of his just share of the company’s profits.

The bill will be dismissed, with costs.