author: Bergen, Y. C.

text:
    The Easton National Bank v. The American Brick and Tile Company.
    [Decided February 16th, 1905.]
    1. Under the Corporation act of 1875, authorizing the issue-of full-paid stock for the purchase of property, and requiring such stock to have stamped upon the face thereof the words, “issued for property purchased,” the issue, in exchange for property, of full-paid stock, stamped as required, constitutes a contract which will prevent an assessment of the stockholders, until and unless it is set aside as an agreement in fraud of creditors.
    2. The proper course to obtain relief is by bill to have the contract set aside and the delinquent stockholders decreed to pay a sufficient proportion of all unpaid subscriptions to satisfy the liabilities of the company.
    8. In the absence of actual fraud, the overvaluation, by the directors, of property taken in exchange for stock, does not render the transaction fraudulent 'as against creditors.
    4. Any device by which the stock of a corporation passes to a stockholder as full paid, without .payment in full, either in cash or property purchased, to the amount of the value of the stock, such as an intentional overvaluation of property on the understanding that a portion of the stock issued shall be returned for distribution among the directors voting for a purchase of the property, without payment by them, constitutes actual fraud against the creditors of the corporation.
    5. Bona fide transferees of stock certificates which recite that the stock is full paid, are not bound to make good to creditors the contract of the original subscribers to pay for the stock in full, according to its par value, where they have no knowledge or notice that the subscribers have not paid in full.
    G. Creditors of a corporation who knew that stock issued as full paid was not in fact full paid, and nevertheless extended credit to the corporation, cannot, in the event of its insolvency, require the stockholders to pay their unpaid subscriptions.
    On bill, &c. On final hearing.

      Mr. George M. Shipman, for William M. Davis, receiver.

      Mr. W. S. Kirkpatrick (of the Northampton county bar, Pa.), for the Easton National Bank, a creditor.

      Mr. Bichard T. Lindabury and Mr. Samuel Dickson (of Pennsylvania), for Edward M. Paxson, Charles A. Mayer and E. P. Wilbur, individually, defendants.

      Mr. B. G. Stewart (of the Northampton county bar, Pa.), for Frederick Green, individually, and as executor of the estate of Henry Green, deceased.

      Mr. W. H. Walters and Mr. F. J. Fox (of the Pennsylvania bar), for the Easton Trust Company, Mary B. Knight, executrix, and Samuel W., William EL, Elizabeth, Fletcher H. and R. S. Knight.

      Mr. J. H. Thayer Marlin, for Henry A. Potter.

      Mr. James Buchanan, for E. P. Wilbur Trust Company and Lehigh Yalley National Bank.

      Mr. H. M. Iiagerman, for Henry Short, a creditor.
   Bergen, Y. C.

Upon the filing of the original bill in this cause the defendant was decreed to be an insolvent corporation, and William M. Davis was thereupon appointed receiver of the same under the law of this state, and, qualifying, gave the proper notice to creditors; sundry claims were presented, and finding no assets of the company, other than the obligations of the subscribers to the capital stock of the defendant corporation for alleged unpaid subscriptions, he filed his petition praying that an order be made directing an assessment against the holders of such stock to the extent required for the satisfaction of the debts of the company. All stockholders were duly notified and have answered the petition denying their liability, and have also appealed from the order of the receiver allowing the claims of the creditors. The evidence on the hearing disclosed the fact that all the stock was issued by the company as full paid, and had stamped upon it the statement that it was issued for property purchased. I am satisfied that the stock, in the form in which it was issued, constituted a contract between the company and its stockholders which would prevent an assessment until that contract was set aside as an agreement in fraud of creditors; also that no such order can be properly made under these proceedings, and that the proper course is by bill to have the contract set aside, and the delinquent stockholders decreed to pay a sufficient proportion of all unpaid subscriptions to satisfy the liabilities of the company, but as all the evidence necessary to settle the questions that would be raised by such a bill has been taken, and counsel for all parties having on the hearing expressed their desire to have the controversy determined, I shall permit the petitioner to amend his petition, making it a bill of complaint, and thus present the issues raised to which the testimony, which is quite voluminous, was directed, and the answers filed will be taken as answers to that bill of complaint.

The corporation was organized under the Corporation act of 1875 (Rev. 1877 ¶. 174), by the terms of which stock was issuable for the purchase of property to the “amount and value thereof,” and when so issued

“shall be declared and taken to be full-paid stock, and not liable to any further call; neither shall the holder thereof be liable for any further payments under any of the provisions of this act, and said stock shall have legibly stamped upon the face thereof the words, ‘issued for property purchased.’ ”

It will be observed that this differs from the law of 1896, in that the later act does not require stock issued for property to have stamped upon it the statement that it was issued for that purpose, but makes the judgment of the directors conclusive as to value in the absence of actual fraud. This change has no other effect than expressing what our courts had already determined in construing the earlier legislation, for in Bickley v. Schlag, 46 N. J. Eq. (1 Dick.) 533, the court of errors and appeals held that if the transaction was not fraudulent the difference in value between the property and the stock had no legal significance, and cited with approval Coit v. Gold Amalgamating Co., 119 U. S. 345, where the court said: “But where full-paid stock is issued for property received there must be actual fraud in the transaction to enable creditors of the corporation to call the stockholders to account.” The question now presented is, did these defendants, in issuing the whole capital stock of the company, representing at par $1,000,000, in payment for patents assigned to the company, commit an actual fraud upon the subsequent creditors of the corporation? The expression “actual fraud,” as used in the cases last mentioned, must be interpreted to mean and include any device by which the stock of a corporation passes to a stockholder without payment in full, either in cash or by property purchased, “to the amount of the1 value thereof,” and that an intentional overvaluation of property, upon the understanding that a portion of the stock issued should be returned for distribution among the directors voting for the purchase without payment by them, is such a device, and falls within the definition of “actual fraud” as intended by the' court of errors and appeals.

The minutes of this corporation contain no record of the determination of the board of directors to purchase the patents and to issue all of the capital stock in payment therefor, and it is sought by the testimony of witnesses to show such action, but the effort resulted in an utter failure, no proof sufficient to warrant a judicial finding of such a fact being offered. Chief-Justice Paxson, in undertaking to state his recollection on this point, said “a certain amount of this stock was to be issued to the patentees, and The balance of the stock was to be issued to those gentlemen who agreed to put in some money for the purpose of operating under the patents.” Elisha P. Wilbur said: “I can only remember that a certain amount of stock was to be given to these gentlemen for their patents,” but he was unable to state how much was to be issued for patents and how much for cash. Henry A. Potter does not recall where the meeting was held, nor anything more than the purport of the resolution, which was to issue the stock “for the possible value of the patents.”

These are all the parties testifying to this resolution, a resolution disposing of $1,000,000 of property, the contents and purport of which depend upon the recollection of busy men engaged in large and most important enterprises given nearly seventeen years after its adoption, none of them being able to state where this meeting was held, and their’recollection of the persons present is very indistinct and unsatisfactory. This evidence does not satisfy me that there was distinct official action by the directors fixing the value of the property and determining that all of the capital stock should be issued to the patentees in payment for their patents. On the contrary, I am of the opinion that no official action was taken, and that with the exception of informal meetings and perhaps general conversations with Judge Green, the carrying out of the negotiations with the patentees was confided entirely to Judge Green; that the expectation of the parties was that he would in some way arrange matters, so that for the $10,000 each had advanced stock would be issued to them which, at par, would be greatly in excess of that sum, and that they never expected that if all of the stock was issued for patents, it would be retained by the patentees, for under the view insisted upon, that all of the stock was to be issued for the patents, nothing would remain for those who had contributed towards the incorporation of this company, and this belief finds support in the fact that at the time Judge Green held a contract with the patentees as to the distribution of this stock to which I shall hereafter refer.

If we should accept the claim of these defendants that there was a meeting of the board of directors, at which it was voted to issue all of the stock for the patents, I am yet of the opinion that the proceeding was a device to issue to these directors stock for which they had not and did not expect to pay in “money or money's worth,'' and that to accomplish this there was an intentional overvaluation of the patents, which, as against creditors, was such a fraud as a court of equity should discountenance.

There is, however, another view to'he taken of this case, which is equally fatal to the defence interposed, and that is, that it was neyer intended to issue all of the capital stock in payment for the patents. It clearly appears that prior to the organization of the company Judge Green had entered into a written contract with the patentees, bearing date March 12th, 1886, in which, after reciting that Lenox Simpson and M. P. Canfield having acquired the ownership of letters-patent for making bricks from slate refuse, it was proposed to form a corporation for the purpose of putting the patent to use, and that Judge Green was willing to undertake the placing of the stock upon such terms as might be agreed upon between him and the pur1 ehasers thereof, it was agreed that such corporation should be formed with a capital of not less than $1,000,000; that upon the pajuuent by Judge Green into the treasury of the company of $20,000, and to Simpson & Canfield $5,000, he should be entitled to six-tenths and Simpson & Canfield, upon transferring to the corporation their patents, should have the remaining four-tenths. It was further stipulated that Simpson & Can-field should pay into the treasury of the company stock of the par value of $55,000, to be used for sale to raise working capital, and that Judge Green should deliver to them $20,000 at par of the stock retained by him. It nowhere appears that the part of the agreement relating to the deposit of stock was ever carried out; on the contrary, when the stock was issued, Simpson & Canfield, by a release in writing dated September 29th, 1887, discharged Judge Green from further compliance with the contract in consideration of the issue to them of four thousand two hundred shares of stock, and the payment by Green of $5,000 into the treasury of the company, so that the actual price paid by Judge Green for the patents was four thousand two hundred shares of stock, more than one-half of which afterward came into the hands of Judge Green, the reason or consideration therefor not appearing. .

The reason for the basis npon which the stock was issued by Judge Green to his associates was not shown, but the fact that each was assigned one thousand five hundred shares, just one-fourth of the six-tenths allowed to Judge Green under the contract, justifies the inference that he was giving to each an equal proportion of the benefit of his contract with the patentees, and this is supported by the statement of Mr. Potter, who testifies, “1 was to be equal with Judge Green,” and also that he knew of the contract and its terms. The conclusion to be drawn from the evidence is irresistible that these incorporators knew that sixty per cent, of the capital stock was to be issued to them in equal portions, representing a par value of $150,000 each, for which they paid only $10,000, nor was the formality of issuing the stock to Judge Green observed, the record showing that the first issue was to the incorporators, from which it is fair to infer that Judge Green was the agent of the parties, and that they had full knowledge of the situation. I am therefore of the opinion that the issue of this stock as full paid, while good as between the parties to it, was a contract made by the company with its stockholders in derogation of the rights of creditors, which should be set aside, and the holders of the stock decreed to pay on account of their holdings, in addition to what they have paid in cash, a sum sufficient to liquidate the debts of the company.

The conclusion I have reached disposes of the rights and settles the liabilities of the original subscribers, but the receiver insists that those stockholders who purchased shares of this stock from Judge Green are equally liable with those who subscribed and to whom the stock was first issued, and seeks to maintain the doctrine that the transferee of stock, issued in payment for property at an intentional overvaluation, is liable to make good the subscription to the extent required to satisfy creditors, even where the stock certificate contains a statement that the stock was issued for property purchased and is full paid, the purchaser having in good faith relied upon such statement without notice of the conditions under which the stock was issued, or of any fact which should put him on inquiry.

The defendants affected by this question are Samuel, William EL, Fletcher H., Elizabeth and R. S. Knight, legatees of John T. Knight, deceased, estate of R. P. Lindermann, W, A. Wilbur, 0. A. Mayer and the estate of P. W. Sheafer.

By a statement of the capital stock account in the handwriting of Judge' Green, the president of the corporation, no stock ledger having been kept other than this statement, it appears that all the shares held by the above persons were transferred to them by Judge Green, presumably from- stock originally issued to the patentees for property purchased, which in some way not disclosed came to Judge Green, who sold the stock to the foregoing parties- and applied the proceeds of the sales to his own use, for the cash account of the corporation contains no entry showing that it ever passed into the treasury of the company. The books of this company contain very little information Upon which we may safely rely, but the presumption that the sales were made from stock, other than that originally issued to Judge Green, is justified by the fact that the original amount of stock, one thousand seven hundred and fifty shares, issued to him, still stands in his name. The stock sold and transferred by Judge Green was issued as full paid, stamped with the statement that it was issued for property purchased, and there is no evidence in the cause showing any knowledge upon the part of these transferees that it was not what it put-ported to be, full paid, and under the law permitting its issue, free from any liability to further assessment. It was urged on the argument that these parties having recognized an assessment of four dollars per share, by paying some of- them in full and others in part, thereby admitted that the stock was not frill paid, from w^hieh it is fair to assume they knew when they purchased that their stock was under paid, but I am satisfied from the evidence that these payments were voluntary, made for the purpose of providing additional funds for the company, and that the assessment was a plan adopted for the purpose of equitably distributing the burden, rather than the assertion of a right, for the resolution provides that if the payments are not made treasury stock shares he sold to raise the shortage, and it is quite clear that the money was needed to protect their investments.

The liability of transferees for assessments on account of unpaid stock, has been the subject of much consideration by the courts of this country, resulting in radical differences of opinion, but in my judgment the weight of authority and sound reason support the view that a bona fide transferee of stock, the certificate for which recites that it is full paid, is not liable to make good the contract of the original subscriber if the transferee has no knowledge that the subscriber has not paid in full, nor notice of any fact from which knowledge may be inferred, or which requires him to inquire as to the truth of such statement.

The right to hold a stockholder for an unpaid subscription, in the interest of creditors, rests upon the doctrine that the capital stock is a trust fund for the payment of the obligations of the company, and that the subscription creates a debt due to the corporation upon which a creditor may rely and which the company cannot remit to his injury. The contract between the corporation and the subscriber is, that for the stock issued he will make full payment, and any attempt to avoid this, by waiver or other device, will not excuse the subscriber to the injury of the creditor, but there is no equitable reason why the creditor should be allowed to shift the right he holds against the contractor to a bona fide transferee without knowledge of the infirmity, and to imply that he has assumed a contract of which he has no knowledge and which he would not have made had he been informed regarding it.

In Sanger v. Upton, 91 U. S. 56, 60, the court said, in speaking of the capital stock of a company: “The creditors have a lien upon it in equity. If diverted they may follow it as far as it can be traced, and subject it to the payment of their claims, except as against holders who have ialcen it bona fide for a valuable consideration and without notice”

In Steacy v. Little Rock Railroad Co., 5 Dill. 348, it was held that transferees of stock, which was not full paid, although represented so to be, could not be held liable, the court saying: “If the representation thus made is true they are under no liability to pay again. If the shares had been represented to have been unpaid, non constat, they would have purchased. * * * Again we ask in what consists the superior equity of the creditor over the obvious equities which exist in favor of such a purchaser of the company’s shares? The creditor trusted that the company’s officers would not violate their duty; the purchaser trusted that they had not violated their duty.” In Brant v. Ehlen, 59 Md. 1, 23, it was held that where shares are issued as full paid, and sold by the subscriber as such, a promise cannot be implied on the part of a purchaser without notice that he will be answerable to the company or its creditor should the representations prove false, for he could not be held liable on the ground of contract, because he never agreed to purchase any other than full-paid shares, and if the shares were fraudulently issued he would not be liable for the fraud, because he was no party to it. In Rood v. Whorton, 67 Fed. Rep. 434, where the transferee had no knowledge of the facts which governed the issue of the stock, and there was nothing on the face of the stock from which notice could be inferred that the stock was not paid up, or of any infirmity in the issue, it was held he was not liable, and the court declared that cases of this class were not within the ruling in the. Upton Cases, 91 U. S. 45—72, and that “the decisions exempt the holder of such stock, who purchases or takes as a creditor, bona fide, and clearly so in the absence of recitals or circumstances to give notice. * * * While the certificates are not strictly negotiable paper, they approximate to it as nearly as possible (Bank v. Lanier, 11 Wall. 377), and tlie cases above cited recognize that they possess so much of the attributes of negotiability that purchasers in the open market may accept as true the clear representation on their face that they were fully paid.”

The cases above referred to contain many citations in support of the rule announced, a rule which appeals to me as wise and just, and, being so persuaded, shall adopt it in this case, with the result that, in my judgment, the transferees of the stock above mentioned are not liable to further payments on account of stock purchased by them.

The next question to be considered is, which of these creditors, if. any, are entitled to relief against the original subscribers ? The claims presented are as follows: Henry A. Potter, $6,-210.13; E. P. Wilbur Trust Company, $16,515.58; Lehigh Valley National Bank, $1,002.31; Easton National Bank, $18,-185.75; Henry Short, $2,000; estate of Henry Green, $22,-947.88; estate of Henry Green, $30,100; Frederick Green, $6,655.

As to the claims of the Easton National Bank and Henry Short no substantial defence was interposed, as the claim of the Lehigh Valley National Bank was not proven, and is not now in position to be passed upon, I will hold it for future consideration. The claim for $30,100, on behalf of the estate of Henry Green, was withdrawn before argument, leaving the claims of Henry A. Potter, Frederick Green, the E. P. Wilbur Trust Company and the remaining claim of the estate of Henry Green to be dealt with. Henry Green, on behalf of whose estate a large claim is made, Elisha P. Wilbur, president at the time the stock was issued of the E. P. Wilbur Trust Company, and Henry Potter, were directors of the defendant corporation, and Frederick Green was its secretary and treasurer at the time the stock found to be unpaid was issued, and each, at the time they became creditors, knew the exact condition of the company, and that the stock they now seek to impress with their claims was not issued for property at its value. Their right to hold subscribers for unpaid balances on account of stock issued depends entirely upon the fact that it was issued fraudulently as to creditors. If it was so issued it was by the act of the directors and within the knowledge of the treasurer, and they each extended credit with notice that the stock was not full paid, and that the company had entered into a contract with its stockholders that no further payments would be required. The E. P. Wilbur Trust Company is chargeable with knowledge of all facts possessed by its president, E. P. Wilbur, one of the offending directors. He had notice of the conditions under which the stock was issued, which it was not against his interest to communicate to the trust company, and the presumption is that he did.

It is not every creditor who can call upon a stockholder to pay an unpaid subscription in satisfaction of his debt, or insti tute an inquiry as to the value or amount of the consideration given for stock. It is only those creditors who can fairly allege that they have relied, or whom the law presumes to have relied, upon the amount of the capital stock. The doctrine that the capital stock is a trust fund for creditors, which the company may not dissipate, cannot be invoked, when the .creditor has knowledge of the arrangement under which the stock was issued as full paid. First National Bank of Deadwood v. Gustin Mining Co., 42 Minn. 327; Cook Stock. § 39; Hospes v. Car Company, 48 Minn. 174.

It therefore follows that these last-named claimants are. not in a position to call upon the delinquent subscribers to contribute towards the payment of their claims. I will advise a decree setting aside the contract under which the stock was issued to the original subscribers as full paid, and they will be required to pay to the receiver such proportionate amounts of their unpaid subscriptions as may be sufficient to satisfy the claims of the Easton National Bank and Henry Short, and also the expenses of the receiver’s administration, together with the cost of this proceeding. As these amounts are readily ascertainable an order of reference will not be required.


source: Caselaw Access Project

author: Bekgek, Y. C.

license: Public Domain

text:
    Sarah C. Stout et al. v. Archibald T. Apgar et al.
    [Decided March 2d, 1905.]
    Where a husband conveyed lands in trust for the benefit of his wife and. children, creditors of the wife cannot subject such lands to the payment of- her debts.

      On bill for relief.

      Messrs. Clark & Case, for the complainants.

      Mr. II. Burdeii Ilerr, for the defendants.
   Bekgek, Y. C.

In 1892 Sylvester A. Hall conveyed certain lands in Somerset county to one Martin Wyckoif, in trust,

“to hold, rent, sell, convey and mortgage any and all of saidHots, if he shall think best to do so, for the purpose of raising money for the maintenance and support of said Ella Hall and her children, for their clothing and education, and, if deemed best, to buy and provide a house for them.”

The beneficiaries were the wife and children of the grantor, who lived apart from his family and made no provision for their support or maintenance other than the trust above mentioned. The wife incurred obligations, in supporting and maintaining herself and family, for which the complainants recovered judgments against her, and now file their bill of complaint as judgment creditors of the wife, making parties defendant the trustee, wife and infant children, praying that their judgments may be declared to be a lien on the trust property, and that the lands be sold free and clear of the interests of the defendants, and the judgment debts satisfied out of the proceeds of such sale.

A demurrer was interposed by the trustee, stating as a cause that the trust, as disclosed in the bill of complaint, did not proceed from Ella C. Hall, the judgment debtor. It is quite clear that the objection raised by this demurrer is well taken, .and that tire pleading presenting it should be sustained. The .aid which the complainants seek is the subjecting of this trust ■property to the lien of their judgments at law against one in whose favor, in part, the trust was established. The statute under which relief is sought by its terms excludes appropriation by creditors of trust property when the trust has been ereatecl by or the fund has proceeded from some person other than the debtor himself, and our court of last resort has held that this statute defines the jurisdiction of the court oyer trust funds in their application to the payment of debts. Hardenburgh v. Blair, 30 N. J. Eq. (3 Stew.) 645, 665.

In the case under consideration the trust property proceeded from a person other than the debtor, and thus falls within the prohibition of the statute. The trust was created to provide a fund for the support not only of the wife but of the children, and it was purposely put beyond the reach of the creditors of the wife. If these complainants dealt with the wife, and extended credit to her on the strength of the trust, they did so with full knowledge of the conditions, and are chargeable with notice that the trust proceeded from another and could not be reached to satisfy their claim without abrogating the exception in the statute.

I will advise a decree sustaining the demurrer, with costs.


text:
    Mary J. Sterling, executrix, v. German-American Insurance Company.
    [Decided March 4th, 1905.]
    In a suit to set aside an award by appraisers, to whom, the question of damage by fire was submitted, where a witness for complainant estimated the cost of new buildings at $2,890, while the appraisers fixed it at $2,750, the difference was not sufficiently radical to show that plaintiff was injured by the award, or to justify the court in setting it aside because the complainant was not notified that the appraisers intended to meet and estimate the damages.
    On bill. On final hearing.

      Mr. Linton BaLlerthwait, for the complainant.

      Mr. James Buchanan, for the defendant.
   Bergen, Y. C.

The complainant, having suffered a loss by fire, submitted the question of damage resulting therefrom to appraisers, according to one of the conditions of the policy of indemnity issued by the defendant to her. The appraisers awarded to the complainant '$1,800 as compensation for her loss, and this amount was arrived at by ascertaining the costs of reproducing new buildings and foundations similar to those injured, and deducting therefrom the value of the foundations, which were not destroyed or appreciably injured, and also an allowance for depreciation resulting from age. The principal building destroyed was a bam, the first story of which was built of stone. The upper story was a frame building, and naturally depreciated in value during the fifty years since its erection, notwithstanding usual and necessary repairs. A witness produced by the complainant, being a carpenter from the neighborhood, estimated the cost of new buildings at $2,890, while the appraisers fixed it at $2,750, a difference in estimates not sufficiently radical to warrant the assumption that the appraisers were actuated by any improper motives. The stone wall was standing and its condition subject to the view of the appraisers, who are not charged with being either incompetent or dishonest, and the allowance made by them for the stone wall, constituting the first story, tpgether with that for depreciation, cannot be said to be so excessive as to justify the inference that the appraisers acted upon an erroneous principle or made any such mistake as to call for a review of their judgment. I have considered this branch of the case only upon the theory suggested by counsel when the evidence was offered, viz., that in order to have the benefit of the allegation that the complainant had no notice of the meeting of the appraisers, which is the potent factor upon which the complainant relies, it was necessary to show that she had been injured by the award, or that such a doubt as to the accuracy of the conclusion had been raised as to justify the court in setting aside the award because the complainant was not notified that the appraisers intended to meet and estimate the damages.

' It has been held in this court that similar proceedings under like policies were not ordinary arbitrations, but only an appraisal and ascertainment of the amount of loss, American Central Insurance Co. v. Landau, 62 N. J. Eq. (17 Dick.) 73, and that the necessity of notice to the parties of the time and place of the meeting of the appraisers depends upon the circumstances surrounding each case, and whether the insured has already furnished all necessary information, or whether he has- requested that he be present to make any additional explanation or to hear what may be said by others. Stout v. Phœnix Assurance Co., 65 N. J. Eq. (20 Dick.) 566. In the latter case tire relief here sought, the setting aside of the award, was granted for want of notice of the meeting, but that determination was reached because the court found that “neither of the appraisers had seen the personal property destroyed nor, except casually, the dwelling itself. All information respecting the personalty was' derived from the list contained in the proof of loss, and'all information concerning the real estate from the description contained in the policy. The appraisers had no knowledge of the age or condition of either. Uo effort was made to ascertain their original cost or to what extent the property had depreciated by time or use.”

Turning to the case we" are now considering, it appears that Mr. Kirkbride, the appraiser selected by the complainant, was her neighbor, living on an adjoining farm, and had resided there for at least twenty years, on which were located buildings similar, if not identical, with those partially destroyed. It appears that he had often visited the buildings on complainant’s farm, and was quite familiar with their size, construction and condition, and, as a witness, impressed me as being a person of more than ordinary' intelligence and well qualified to perform the duty cast upon him by the complainant in her selection. ■ The appraiser selected by the defendant was a carpenter and builder of many years’ experience, in consequence of which he had been repeatedly called upon to act as an appraiser in similar cases. The testimony shows that two or three days before the appraisement was made, Mr. Kirkbride and the complainant met and had some conversation with reference to the time when the appraisers would meet. These parties do not agree exactly as to what took place, but I am satisfied from the evidence that Mr. Kirkbride, in reply to a question put by the complainant, told her that it was not necessary that she should be present, and that he did not then know when they would meet, but before the complainant left, Mr. Kirkbride had ascertained the date, and told the complainant that they would meet the following Mon‘day. This the complainant denies, but it appears that she was on the ground at the time appointed; she gives as a reason for her being there that she went from Trenton to the property, which was located in Bucks county, Pennsylvania, on that day to attend to the putting in of a pump. It does not appear in this case that she took any steps to carry out the alleged object of her visit, and I am not disposed to give much credit to this statement. I believe she went there because Mr. Kirkbride had told her of the proposed meeting. However, whatever the reason may be, she was there and called the attention of the appraisers, while they were measuring the foundation to ascertain the size of the building, to certain elements of loss which she apparently thought they would overlook, and expressed no dissatisfaction with their proceeding at that time.

The circumstances which influenced Vice-Chancellor Eeed in the case last cited are not present here. The appraiser, Mr. Kirkbride, had full knowledge of the age and condition of the buildings, which he communicated to the other appraiser. The complainant was present with the opportunity to make any additional explanation she desired, and these appraisers did ascertain the cost of the building and the extent the property had depreciated by time and use.

I am not convinced that this complainant is entitled to have this award vacated for the reasons set forth in the bill of complaint, because I am satisfied from the evidence that she had notice that the appraisers would meet at the time and place when they did meet, in pursuance of which she attended, and that she acquired this notice a sufficient length of time before their meeting to notify her counsel to be present if she desired it, her residence in Trenton being, at the most, three or four blocks from the office of her counsel, and I am of opinion that she relied more upon Mr. Kirkbride, her friend and neighbor, to look after her interest in the matter of appraisement than she did upon her counsel.

The conclusions I have reached lead to a dismissal of this bill, and I will so advise.


author: Beegeet, Y. C.

text:
    Lydia Y. Ayres v. John H. Ayres, administrator of John Ayres, deceased.
    [Decided March 17th, 1905.]
    Complainant’s husband executed a note to her dated May 1st, 1880, payable ten days after date. The husband, by promising the complainant that if he outlived her he would pay her sister, had acknowledged the debt on several occasions, the last time being a few months prior to his death, in October, 1903.—Sold, in an action against the husband’s administrators on the note, that such facts rebutted the presumption of payment from lapse of time.
    On bill. On final hearing.

      Mr. Linton Sailerthivaii, for the complainant.

      Mr. Ilervey G. Scuddar and Mr. Edwin Robert Walker, for the defendant.
   Beegeet, Y. C.

The complainant, as the widow of John Ayres, seeks to enforce the payment of a debt which she claims to be due her from the estate of her deceased husband. The evidence which she oilers is a promissory note drawn in due form, made by her husband, payable to her order ten days after its date, May 1st, 1880, and also the testimony of a witness establishing to my satisfaction the admission of the husband that he was indebted to his wife. The acknowledgment of the debt was made on several occasions, the last time being a few months prior to his death in October, 1903. All of these admissions, as I recall, were promises made by the husband to the wife that if he should outlive her he would pay to her sister Susanna the money which he owed her, and is only competent as evidence of the fact that the husband was indebted to the wife. At the date of the death of the husband this ■ promissory note, with other papers belonging to the wife, were found in a desk of the husband, one of the drawers of which was used by complainant as a depository for her securities. In making an inventory of the estate the appraisers found in this drawer an envelope containing papers belonging to the wife, which were handed to her sister, to be delivered to the complainant. Among the papers handed over was the note in question, but the witnesses do not agree about the place where it was found, one of them testifying that it was not in the envelope, but among the receipts and vouchers of the deceased, and others testified that it was in the envelope with the other papers of the wife. The fact that it was delivered to the complainant, is now in her possession and produced at the hearing, convinces me that the weight of the evidence sustains the complainant’s contention, for it is hardly to be believed that the administrator would, as he testified he did, turn over to the complainant an obligation of his intestate which bore no evidence of its satisfaction by way of cancellation or mutilation, if it had been found among the evidences of the discharged debts of the deceased. The note is the written admission of the husband that on May 1st, 1880, he had in his hands $300 of the property of his wife, and of his promise to return it to her. The defendant has not undertaken to assail the bona, 'fides of the original transaction, nor to interpose as a bar the statute of limitations, but insists that as more than twenty years have elapsed since the making of the note without acknowledgment, bjr pajunent on account of interest or principal, a conclusive presumption arises which a court of equity should recognize, that the debt has been discharged notwithstanding the parties are husband and wife, between whom the statutory bar would not be effective. Alpaugh v. Wilson, 52 N. J. Eq. (7 Dick.) 424. That a presumption of the payment of a debt arises where more than twenty years have elapsed since its accrual is well settled, but it is equally true that this presumption may be rebutted by an explanation of the delay, or the production of proof sufficient to satisfy the court that the debt remains unpaid, and it “does not act like a statutory limitation, but as a rule of evidence as well as a rule of public policy.” Magee v. Bradley, 54 N. J. Eq. (9 Dick.) 326. If an equitable right is being enforced, a right not cognizable at law, a court of equity will apply the doctrine of neglect and lapse of time according to discretion;." regulated by precedents.and the 'peculiar circumstances connected with the ease. Colton v. Depew, 60 N. J. Eq. (15 Dick.) 454, 459.

' The parties to the transaction we are considering were husband and wife between whom a confidential relation does and of right sh'Ould'exist, of such a character as to induce'a court of equity to consider transactions of this nature between them almost in the light of a trust, and while cases will undoubtedly arise in which the circumstances will justify a court of conscience in applying the presumption, the court, owing to the close relationship of such parties, should protect the trust and confidence which a faithful wife ever reposes in her husband, and give due weight to every fact and circumstance, however small or unimportant, which tends to support a rebuttal of the presumption.

One ground for a presumption of payment growing out of lapse of time is that a man is always ready to enjoy what is his own. Whatever will repel this will take away the presumption of payment,' and for this purpose it has been held sufficient that the party was a near relation. Wanmaker v. Van Buskirk, 1 N. J. Eq. (Sax.) 685, 694. The ground stated by Chancellor Yroom, just cited, cannot in justice be applied to a wife, for however ready she may be to enjoy what is her own, or to reclaim it from her husband, she is ever subject to his counsel and advice, and his refusal to pay must be submitted to by her, if domestic peace and happiness -are- to be preserved. That at the time this husband took the complainant’s money he agreed to return it is manifested by his written promise; to require the wife to enforce her right by legal proceedings against her husband in order to prevent the conclusive presumption of payment contended for here, will introduce a doctrine tending to provoke litigation between husband and wife, while the settled policy of the law is in favor of its prevention. The presumption was held to be overcome in Wanmaker v. Van Buskirk, supra, by the relationship of the parties and the fact that to have exacted payment would have brought distress upon a daughter and grandchildren who remained in possession of and depended on the mortgaged premises for support, and the harshness of such a proceeding was held to make the indulgence and the delay resulting therefrom reasonable. If the relationship and conditions existing in the case last cited were sufficient to sustain a- rebuttal of the presumption, then I have no doubt that the confidential relation present here, combined with the husband’s acknowledgment of his indebtedness, and his permitting the evidence of his debt to remain in existence, when, to say the least, its possession was accessible to him, and its surrender to him upon demand if discharged fairly presumable, overcomes the presumption of-payment.

The admission of the husband would not be competent to remove the bar of the statute of limitation, but we are not now considering the effect of the statute, nor controlled by its limitations as to evidence, and the husband’s statements were not received for the purpose of creating 'a new debt by way of acknowledgment, nor to remove the bar of the statute, but simply to aid us in ascertaining whether the presumed payment arising from lapse of time did, in fact, exist.

My conclusion is that, under the facts disclosed in this case, the complainant is entitled to have refunded • from' her husband’s estate the principal and interest due on the note presented, and I will so advise.


author: Bekgen, V. C.

text:
    Thomas J. Clement et al. v. Young-McShea Amusement Company et al.
    [Decided April 5th, 1905.]
    1. Where an officer of a corporation has managed its affairs, his authority to represent it may be implied from the manner in which he has been permitted by the corporation’s directors to transact its business, and may be shown by the exercise of previous acts with others with the permission of the corporation.
    2. Y., who owned more than nineteen-twentieths of the stock of an amusement corporation, and was one of its directors, treated the enterprise substantially as his own, made most of the leases in his own name, collected the rents and acted as general manager, with full powers, without any interference by the other officers of the company, rendering them general statements each year of the amounts collected and disbursed by him. He negotiated with complainants for a lease of corporate property for a reasonable term, under which they were required to invest a large sum in preparing the property for use, and, with knowledge of such occupancy, treasurers of the corporation were permitted to collect rents and apply them to> the benefit of the corporation. —Held, that such facts were sufficient to establish a ratification of the lease by the corporation, and that complainants were entitled to enjoin the further prosecution of an ejectment suit by the corporation to recover possession of the property.
    3. Where the negotiations for a lease of property belonging to a corporation were carried on by one of its officers, and he executed a lease to complainants for a term of years in his own name, such lease, though ineffective as a lease against the corporation, was a sufficient memorandum of the agreement to satisfy the statute of frauds, and the complainants are entitled to a similar lease from the corporation for the premises.
    On bill for injunction.

      Mr. Howard Garrow, for the complainants.

      Messrs. Thompson £ Cole, for the defendants.
   Bekgen, V. C.

May 1st, 1902, John L. Young executed a lease to the complainant Mary J. Clement for a small room situate on the south of the entrance to what is called “Young’s Hotel,” in Atlantic City. The period covered by the lease was ten years, from July 1st, 1902, at an annual rent of $1,000. The tenant entered into possession and has complied with all of the conditions of the lease assumed by her, in strict accordance with their terms. In order to put the property to the use for which it was rented, the complainant expended in machinery and fixtures over $8,000, the value of which will be practically destroyed if the defendant corporation succeeds in its effort to dispossess her, because it was manufactured with reference to the size and shape of the leased building and could not be put to use elsewhere; The premises are part of a business venture, originally of John L: Young, which includes a large ocean pier of extensive proportions, devoted to public amusements, known and advertised as “Young’s Pier,” the portion of “Young’s Hotel” occupied by the complainants being nearly if not quite opposite the entrance to the pier.

The properly, previous to the execution of the lease, had been conveyed by Young, the former owner, to “The Young-McShea Amusement Company,” but the management and control thereof continued to be exercised by Young, and it was with him, without notice of the corporate ownership, that the defendants negotiated. When the terms had been agreed upon, a writing in the form of a lease, executed by John L. Young of the one part and Mary J. Clement of the other part, was delivered to- the complainant by Mr. Shackelford, the son-in-law and general manager for Young. Under this lease the complainants entered into possession, expended the large sum of money above mentioned in fitting up the property, and for two years paid the rent to Mr. Young or Mr. Shackelford, treasurers of the company, when an ejectment suit was commenced by the amusement company to recover from the complainants the possession of the property. Since the bringing of this ejectment suit the complainants have remained in possession of the property, paying- rent for the period since elapsed, to the amount of $1,000, to the treasurer of the plaintiff in ejectment.

The capital stock of the defendant, company is divided into fifteen hundred shares, all of which, with the exception of sixty-one shares, at the time of the making of this lease, were and still are owned by Young, who, at the time of the execution of this lease, was the treasurer, and acted as the manager in control of all of the property, making leases with other tenants in his own name as lessor, precisely as the lease with complainants was executed. While the negotiations were conducted and concluded with Mr. Young, the signature to the lease was written by Mr. Shackelford; but in view of the fact that Mi*. Young, who concluded the negotiation, afterward accepted the rent, with knowledge of the lease, he will be held to have authorized his signature. The amusement company, desiring to obtain possession of the demised premises, commenced a suit in ejectment against the complainants in the supreme court of this state on the 19th day of July, 1904, based upon the ground that Young, not having the legal title, was unable lawfully to let the premises. To restrain this suit and compel the amusement company to execute a proper lease according to the terms agreed upon between the complainants and Young as its agent, the bill in this cause was filed. All of the rent, now amounting to $6,000, was received by the respective treasurers of the company and used for the benefit of the amusement company. While the complainants were making their expenditures, and after they had opened business, they were visited at different times by nearly all of the officers of the company, the president being one, who saw complainants in possession, and had actual knowledge of the character of the business they were carrying on and the improvements made. .The defendants now insist that Mr. Young had no authoritjr from the company to make this lease, and that their standing by while the complainants were acting under their agreement with Young, and permitting Young to collect during 1902 as treasurer—and Shackelford since then as treasurer—the rents, and apply them for the benefit of the company, cannot amount to a ratification, because the officers of the company, other than Young and Shackelford, had no knowledge of the character of the lease, and consequently could not be held to have intended a ratification. They also claim that if Mr. Young was acting as the agent of the company when the lease was made, he did so without written authority, and therefore his act contravenes the statute of frauds on this subject. It is beyond question that the officers of the company knew that the complainants were in possession as tenants, and it was within their power to ascertain the character of their holding, as the written evidence of it was in the hands of one of its officers, and they should be charged with notice of every fact which a reasonable inquiry would have put them in possession of. “Presumptions which, by the general rule of evidence, are continually made in cases of private persons, of acts even of the most solemn nature, when those are the natural result or necessary accompaniment of other circumstances, are equally applicable to corporations. Grants and proceedings beneficial to the corporation are presumed to be accepted, and slight acts on their part, which can be reasonably accounted for only upon the supposition of such acceptance, axe admitted as presumptions of the fact. If officers of a corporation openly exercise a power which presupposes a delegated authority for the purpose, and other corporate acts show that the corporation must have contemplated the legal existence of such authority, tire acts of such officers will be deemed rightful and the delegated authority will be presumed.” Pittsburg, Cincinnati and St. Louis Railway Co. v. Keokuk, &c., Bridge Co., 131 U. S. 371, 382.

The treasurer and person authorized to receive the same accepted from the complainants rent for the leased premises and applied them to the benefit of the company for nearly three years of the term granted. Being officers of the company, acting in this particular, in the line of their duty, the presumption is that they communicated to their superior officers the fact that they were accepting the rent under this lease and applying it to the use of the company. The facts, briefly stated, show that Mr. Young, being practically the owner of the company and one of its directors, treated' the enterprise substantially as his own, making most of the leases in his own name, collecting the rents, and acting as general manager with full powers without any interference by the other officers of the company, rendering them general statements each year of the amount collected and disbursed by him. Under these conditions he negotiated with these complainants for a lease for a term of years, not unreasonable as to time, in view of the fact that the lessee would be required to invest a large sum of money in the preparation of the property for use. With knowledge of this occupancy, Mr. Young and Mr. Shackelford, as treasurers, were permitted to collect the rents and to apply them to the benefit of the corporation, and now, without offering to return to tire complainants the benefits which, the company have received from this contract, it seeks to avoid'' it, notwithstanding the fact that it has been paid, and accepted through its treasurer, $1,000 on account of the rent reserved since it denied its validity, and with knowledge of the contents commenced the ejectment suit, for it is not pretended that its officers did not know, when they brought their suit at law, that the complainants claimed possession under this lease, and that they had knowledge of its contents. In my judgment, the acceptance of the rent after the existence of this lease was known to its officers amounts to a ratification of the act of Mr. Young, its treasurer and manager. That the management and control of the property and- business was committed to Mr. Young is properly to be inferred from the facts shown in the case. The evidence discloses that in -most instances leases for other portions of this property were executed by Mr. Young in his own name as lessor, and that the rents in all instances went to the benefit of the company. He was permitted to conduct the business of the company in the way he did, holding himself out as authorized to act as he did, without any protest from the other officers of the company, whose interests in the corporation were little more than nominal. The representatives of this company had no right to stand by and permit its officers to deal with innocent third persons as if he had full authority without- a single remonstrance, and now, when the company desires to be rid of this lease, cannot be allowed to excuse the supineness of its officers by asserting want of authority in Mr. Young, who for all practical purposes, he being the principal owner, is pleading his own want of power to make a contract the benefit of which he and his company have unhesitatingly accepted. It is a well-settled rule that if a corporation ratifies an act performed by -an agent on its behalf, such act will be treated as the act of the company, although the agent may have had no authority to bind it; and where the directors of a corporation, having notice of an, unauthorized act, performed on their behalf by one of their officers, remain silent and take no steps to disaffirm the act, they may generally be charged with the consequences of such act on account of their acquiescence or ratification; nor have they the right to await the result and, if profitable to them, insist on its validitjq or, if unfavorable, reject it. In the casé we are considering all the equities rest with the complainants; they acted in good faith, and were led, by the conduct of the persons who now complain, to rely upon the method in which they permitted their business to be conducted, a method which justified them in believing that they were dealing with the real owner of tire property, and these defendants, having received the benefits of the contract and acquiesced in it for so long a time, ought now to be estopped from denying its validity.

The authority of an officer may be inferred from the general manner in which, for a period sufficiently long to establish a course of business, he has been permitted, without interference, to conduct the affairs of the corporation. It may be inferred from his conduct of the business of the corporation allowed by its directors, and that which the directors ought by proper diligence to have known as to the general course of the conduct of their business, they may be presumed to have known in any contest between the corporation and those who are justified by the circumstances in dealing with its officers. Martin v. Webb, 110 U. S. 7.

It has been held in this state that where an officer has been allowed to manage the affairs of a. corporation, his authority to represent it may be implied from the manner in which he has been permitted by the directors to transact its business, and that the powers of an agent may be proved by the exercise of previous acts with other persons with the permission of his principal. Fifth Ward Savings Bank v. First National Bank, 48 N. J. Law (19 Vr.) 513, 527; Blake v. Domestic Manufacturing Co., 64 N. J. Eq. (19 Dick.) 480, 495.

I am entirely satisfied from the evidence in this cause that practically the entire management and control of this property and business was committed by its officers to Mr. Young. It was practically Ms property, and lie managed it in Ms own way, holding himself out to the public as its owner, and that all of these acts were submitted to .by the officers he had selected to represent the company, with full knowledge of what he was doing, without protest or interference.

I have considered the question presented by the defendants, which they claim arises under the statute of frauds,, but, in my judgment, they are not entitled to the benefit of that statute. The negotiations were carried on by an officer of the company, and if the paper which he executed is not effective as a lease, it is a written recital of the result of the negotiations for a lease, based upon which the - complainant Mary J. Clement entered into possession of the property and has partly performed her agreement by the payment of rent, besides incurring great expense in improving the property, and where negotiations have been conducted by parol, even as to agreements within the statute of frauds, and such agreement has been partly executed, specific performance will be decreed. Wharton v. Stoutenburgh, 35 N. J. Eq. (8 Stew.) 266.

Having permitted the complainants to enter under an agreement made with its agent, and accepted pajnnent of the rent agreed upon, it would be inequitable to now allow the defendants to shield themselves behind an informality in the execution of a lease both parties have acted under and compel tire complainants to suffer the loss of their investment of $8,000 incurred in fitting up the property for tire uses contemplated by the lease or the agreement for a lease.

.The result which I have reached is that the complainants are entitled to an injunction restraining the action in ejectment, and that the complainant Mary J. Clement is entitled to have the agreement or lease which was contracted for executed by the defendant corporation, for whom its treasurer, Mr. Young, was acting, under which she entered into possession and which she has partly performed, and I will advise accordingly.


text:
    Charles B. Case, receiver, v. William McGill et al.
    [Decided April 8th, 1905.]
    1. Where, in pursuance of its agreement with a contractor, a brick company furnished him, in his own name and on his own credit, all the brick necessary for the performance of a street paving contract with a city, the fact that, after learning of a partnership formed by him subsequent to such agreement, it furnished him, for the fulfillment of the contract, with a quantity of brick representing in money the unpaid balance due it, does not make the moneys owing by the city to the contractor partnership assets - as against the brick company.
    2. The brick company, by securing judgment against the contractor, for the brick furnished, and the execution being returned unsatisfied, by filing a bill setting forth such facts and the indebtedness of the city to the contractor, and praying for discovery of the amount due and the application of the same to the payment of its judgment, secured an equitable lien on the moneys due from the city which is prior to any claims of members of the partnership or of the receiver of the firm or its creditors.
    On bill. On final hearing.

      Mr. John U. Baches, for .the complainant.

      Mr. William J. Walsh, for William McGill.

      Mr. Erwin E. Marshall, Mr. John Sykes and Mr. John T. Bird, for the Trenton Eire Brick Company.
   Bergen, Y. C.

September 14th, 1903, Timothy Byan entered into a contract with the city of Trenton for the paving of certain streets, and on the 2d of November following a copartnership was formed, the terms of which were reduced to writing, between Byan and Charles D. Ginder, for the fulfillment of this contract. The work has been completed, and as the partnership was limited to this particular work the active part of it is at an end. The present proceedings relate to the distribution of the unpaid portion of the money due thereon from the city, which is represented by two city Avarrants, directed to the city treasurer for the payment of $1,885.98 and $518.|'/9, respectively, issued to and held by the complainant as receiver of the copartnership, and by two other Avarrants issued to Timothy Ryan, and by him endorsed to and now held by the defendant McGill for $1,000 each. The complainant was appointed receiver of the copartnership of Ryan and Ginder under proceedings instituted for that purpose in this court, on November 2d, 1903, and as such has filed his bill in this cause to establish his right to the moneys due from the city, insisting that it is firm property, and should be first applied toward the payment of the partnership debts. The defendant, the '.Trenton Fire Brick Company, has ansAvered and claims an equitable lien upon the funds to the extent of about $1,200, prior to the rights of the partnership creditors, and to sustain its claim shows, that previous to the bidding for the'contract, Ryan had applied to it for a price at which it would agree to furnish all the brick necessary to perform the contract if awarded to him; that Ryan, being the successful bidder, notified them that he accepted their proposition, and under this agreement the brick company furnished all the bricks required to complete the contract; that all of the goods Avere furnished to Ryan in his name and on his credit, and that it had no knowledge of any partnership between Ryan and Ginder. I am satisfied from the evidence, and so find, that so far as the brick company is concerned it had no knowledge of the partnership, and that as to it Ginder was a dormant partner. Nor does it appear that this partnership was acknowledged or disclosed to anyone, at least not until long after it was formed. The city Avarrants were all issued payable to the order of Ryan and by him in most, if not all instances, endorsed to the brick company, it returning to him by check drawn to his order the difference between the account he owed it at the time and the amount of the Avarrants, all of which was within the knowledge of Ginder, the partner, ayIio took no steps to correct the impression entertained and acted upon by the brick company that Eyan was carrying on the work on his own account. There is some proof that about May 1st, 1904, the officers of the brick company had knowledge of this partnership, and it was urged on the argument that, as that company had furnished to Eyan after that date a sufficient quantity of brick to represent in money the balance due them, it should be charged with having furnished them with knowledge of the partnership. But this claim is sufficiently disposed of by the fact that the brick company had entered into an agreement with Eyan to furnish the whole quantity required, and it was bound to complete its contract with him. On August 23d, 1904, the brick company recovered a judgment against Eyan in the supreme court of this state for $1,244.69 damages and costs, and the execution issued thereon having been returned unsatisfied for want of property to> be levied on, the brick company, on October 25th, 1904, filed its bill of complaint in this court, setting forth the facts above stated, and also^ that the city of Trenton was indebted to Eyan in a large amount for the performance of said contract, and thereupon prayed for a discovery of the amount due, and the application of so much of the money due by the city to Eyan as might be necessary for that purpose towards the payment of their judgment. These proceedings established an equitable lien in favor of the brick company upon the money in the hands of the city belonging to Eyan. Taylor v. Taylor, 59 N. J. Eq. (14 Dick.) 86. The complainant, however, insists that as Eyan and Q-inder were partners, the money due belonged to the firm and must first be applied to the satisfaction of the partnership debts, and that, as it was not the property of Eyan, no equitable lien could attach. This claim, in my judgment, is not well founded, for it would be most inequitable, after it had made its agreement with Eyan and fulfilled it, giving credit to him as an individual upon the strength of this very contract with the city from the proceeds of which they expected him to pay it, to now deprive the brick company of the benefit of a right which it had a right to rely upon.

It is undoubtedly true that where the partnership is an open one the creditors of a partnership have a right to be paid first

out of the partnership property in preference to those of the individual partners; but a different rule prevails when the partnership is a silent one, and the business is conducted in the individual name of one of the partners. As was well said Chancellor Pennington in Cammack v. Johnson et al., 2 N. J. Eq. (1 Gr.) 163, 169, “After dealing with a man under the idea that he was carrying on business on his own account, and prosecuting demands to judgment and execution, if a secret partner may then, for the first, announce the fact of his being a member of the firin, and claim all the rights of an open partner, there would be no security in trade, * * .* and a creditor may, at his election, sue either the visible partner alone or join any latent partner he may discover.”

It therefore follows, under the circumstances of this cas'e, that the brick company having recovered its judgment and filed its bill, obtained an equitable lien as a reward for its diligence upon the money due from the city, which lien is prior to any claim of the members of the partnership, their representative, the receiver, or the creditors of the partnership, for claims, none of which, so far as this case shows, have been reduced to judgments, and I will advise that it is first entitled to be paid out of the moneys due from the city the amount due to it on its judgment, together with its costs of this suit.

There yet remains to be disposed of the question between the receiver and the defendant McGill. It appears that in July, 1904, Ryan obtained from the city two warrants for $1,000 each payable to his order; that he endorsed these warrants to the defendant McGill, who testifies that he bought the warrants from Ryan at a discount of $150, but he admits that he was only to pay for them at his convenience, and has paid but $877.10. I am not disposed to credit the story of McGill that he really purchased these warrants, nor is it sustained by the evidence. It is not reasonable to suppose that Ryan, being so greatly in need'of money as to sacrifice by way of discount $150, actually sold these warrants upon any such terms of payment as McGill testifies to. However that may be, he yet owes to Ryan the difference between the amount he has advanced and the amount due from the city as represented by these warrants, without allowance for the alleged discount. As between the partners, Ryan and Ginder, this money is partnership funds, and the attempt of l-tyan to place the amount due beyond the reach of the partnership creditors, or to waste it by allowing unusual discounts by this protended sale, cannot be sustained. While some question has been raised as to the actual amount advanced by McGill, I think the evidence justifies me in finding that he pant on account of these warrants and advanced to Ryan on their security different sums which amount to $877.10, and he will be decreed to deliver to the complainant as receiver, With such assignment as may be required to transfer the title, the two warrants, upon being paid by the receiver $877.10 with interest from the date of the respective payments by him to Ryan, and if the amount cannot be agreed upon when the decree is presented I will fix it.