author: Leaking, V. C.

text:
    City of Camden, complainant, v. West Jersey and Seashore Railroad Company et al., defendants.
    [Decided February 8th, 1924.]
    1. A city ordinance authorizes the construction and operation of a steam railroad longitudinally over a public street. Held, the ordinance does not confer upon the railroad company a right to store engines and cars and make up and break up trains on said street in the ordinary course of its business. The right conferred is merely to use the street for the purposes of a waj', and not as a station-yard.
    2. The inability of the railroad company to discharge its duties to the public if compelled to immediately discontinue the use of a public street for station-yard purposes may be made the ground of a judicial ascertainment of the earliest time at which its unlawful use of the street can be wholly discontinued without unnecessary injury to its public service, to the end that restraint may be withheld during the intervening period of active readjustment of terminal operating facilities.
    On final hearing on bill for injunction.

      Mr. Howard'L. Miller, for the complainant.

      Messrs. Boiorgeois & Coulomb, for the defendants.
   Leaking, V. C.

The bill of complaint filed herein seeks to restrain defendant company from using a highwajr in Camden, known as Main street, in the operation of its steam railroad, as a station-yard or for terminal purposes, and from storing engines and cars and making up and breaking up trains on said highway.

There appears to be no substantial dispute in this ease touching the essential facts.

Tlie Camden and Atlantic Railroad Compaq, predecessor in title of defendant, was incorporated by act of the legislature of March 19th, 1852. P. L. 1862 p. 268. By that act the corporation was authorized to construct a railroad from Camden to Atlantic City over a route to be located by it.

No authority of the corporation to construct its railroad along and across streets in the city of Camden was conferred by that act. That authority was conferred by an ordinance of that city, passed February 12th, 1853. Defendant contends that that ordinaiice confers upon it authority to operate its railroad on and along Main street in the manner here complained of by complainant.

I find nothing in that ordinance which can be said to confer upon the railway corporation, either expressly or by inference, any rights or privileges in the use of Main street other than to use that street for the ordinal y purposes of a way. Nothing, in that ordinance even remotely suggests the use of that street or its several street intersections for purposes of a station, a station-yard, or a terminal. Tlie language of the ordinance is: “That the Camden and Atlantic Railroad Company be authorized to construct their said railroad along and across said streets, upon the said route as described and delineated in said petition and accompanying-map.” The petition there referred to is recited in the preamble of tlie ordinance as a petition of the Railroad Company to the city of Camden “to grant their permission to construct their said railroad along, over and across certain streets in said city, to wit: Commencing at a point and in the river Delaware at 'Coopers Point, near to and south of the ferry at said point, and there crossing river road on lYater street and Front street, to a point in Main street at or near its junction with Vine street; thence along said Main street to a point in said Main street between Sixth and Seventh streets; thence curving to the right and crossing Seventh, Penn, Eighth, Cooper, Ninth, Market and Federal streets to the city line, near its junction with the Iiaddonfield turnpike.”

It will be observed by reference to the large map produced by defendant that this route begins in what is now commonly known as the terminal or freight yard of defendant and extends thence in an easterly direction and curves on to Main street at about its intersection with Vine street, first crossing several intermediate streets, and then extends longitudinally along Main street several blocks, crossing Second, Third, Fourth and Fifth streets, and then curves to the right from Main street at about Sixth street, and then crosses a number of streets to the city line; in all a great distance, but not shown in its entire length on the map above referred to. It seems impossible to contemplate this grant as a grant for the use of the several streets and street crossings for station-yard or terminal purposes, or as anything more than a grant of the use of the several streets and street crossings for purposes of a way, and thus rendering the route theretofore adopted, by the railway corporation pursuant to the requirements of its charter available for the company. As said by Mr. Justice Dixon in Pennsylvania Railroad Co. v. Angel, 41 N. J. Eq. 316 (at p. 328) : “The primary privilege given is that of passage; this and its reasonable incidents cover the whole scope of the grant. The right of storing engines and cars, either for a longer or shorter period; the right of making up and breaking up trains, are not ■embraced in such a concession. These are strictly station •and terminal purposes, and by providing for station-yards the legislature has indicated its intention that business of that nature should be transacted there.” It will be noted that section 13 of the charter act of the railroad company specifically authorized the company “to purchase, have and hold real estate at the termini of its road and at, intermediate depots upon the line of the same, not exceeding five acres at each place, and may erect and build thereon such houses, warehouses, machine shops, and other buildings and improvements as they may deem expedient for the safety of property and the construction and repairing of cars, carriages, ■steam engines and for other necessary uses.” And by legislative act of February 26th. 1855, cited in the Angel Case, already referred to, tlie company was authorized to acquire additional land for similar purposes.

But the contention of defendant herein is that the ordinance contains certain specific features which bestowed upon the railroad company rights in the use of the streets and street crossings for purposes other than as a way.

By the second section of the ordinance the authority granted “to construct their said railroad along and across said streets upon said route,” as contained in the preceding section, is defined to be upon the express condition that the company shall procure Main street to be widened twenty feet on each side, as set forth in the preamble of the ordinance, and shall also bear the expense of paving and grading as well as certain other burdens. The widening of Main street appears to have been accomplished by a deed of dedication to the public for street purposes of twenty feet on either side of Main street, and it may be here assumed that the company fully performed the other burdens imposed by the ordinance. The argument now urged is that this widening of Main street and the location of tracks in its centre in effect made two streets of Main street—one on either side of the railroad—and vacated that part in the centre of Main street which is occupied by the railway tracks. This view is clearly untenable. Streets are not vacated in that manner; and the same view, if adopted, would be operative to vacate the several streets crossing Main street at the points of crossing. I find nothing in the ordinance to indicate an intent upon the part of the city to grant by the ordinance more than the use of Main street and the several street crossings for the purposes of a wajr, and nothing to indicate an intent to grant the use of that street and the several street crossings as a station-yard.

As already stated, the material facts can scarcely be said to be in substantial dispute. Main street and the several street crossings over Main street and Front and Second streets at the points where they cross the defined route are being regularly used by defendant for yard purposes. Indeed, the officers of defendant have testified that it is impossible for tlie road to efficiently handle the freight which conies to it without regularly using Main street and the several streets crossing Main street at the crossings to make up and break up its freight trains. This necessity appears primarily to arise from the circumstance that the terminal grounds of defendant at Coopers Point are too small and are illy shaped to meet present needs, and from the further circumstance that a great amount of freight goes to and comes from large factories located along what is referred to as a belt line, which line approaches the terminal grounds of defendant at Coopers Point at right angles to the general direction of its system of freight tracks as now located in that yard; but be the ’ cause what it may, it is reasonably clear that with its present yard facilities at its Coopers Point terminal defendant cannot efficiently handle the freight which comes to it without using Main street as essentially a part of its terminal yard; and in using Main street for drilling purposes to make up and break up its freight trains it necessarily obstructs the various street crossings over Main street for varying periods of time and interferes with public travel to a degree that would not otherwise occur. This drilling of freight trains on the street also necessarily occasions a great amount of soot, cinders, smoke and noise that would not otherwise occur, and creates conditions that render residence in the vicinity of Main street with a reasonable degree of comfort impossible. The evidence discloses that the defendant has exercised every possible- care to avoid these annoyances to the public. It endeavors to obstruct street crossings to the least-practicable degree and to create the least possible discomfort to the public; but the troublesome fact remains that Main street cannot be used to make up and break up freight trains without injury to the public which would not arise if that work should be performed elsewhere.

Complainant is entitled to relief. Complainant is entitled to require defendant to discontinue the use of Main street and its several street crossings for making up and breaking up its freight trains. On the other hand it is a matter of great public interest that the business houses on the line of defendant’s railway should be efficiently served, and that cannot be done if defendant is required to discontinue its present use of Main street immediately. In such circumstances courts of equity are privileged to define complainant’s rights and insure their observance at the earliest practicable time, and to that end ascertain and fix that time.

I will award a hearing, on notice to be given by complainant, to fix a future date on which the present methods of operation by defendant shall be terminated. Evidence will at that hearing be entertained on the single inquiry as to the earliest time at which it will be possible for defendant-to comply with an order to cease the operations complained of with the least injury to its public service. If it appears that defendant cannot remedy present conditions if allowed a reasonable time for that purpose an injunction must issue at once.


source: Caselaw Access Project

author: Lewis, Y. C.

license: Public Domain

text:
    Harris Thrown Silk Corporation, complainant. v. George Harris, Bernard Klingbeil and Charles Lampell, defendants.
    [Decided December 19th, 1923.]
    Where all parties to an agreement know that a plain fraud has been committed, but are willing to acquiesce and close their eyes to the irregularities that have been committed they are parti dips oriminis, and neither side has clean hands, and therefore is not entitled to relief in this court.
    On pleadings and proofs.

      Messrs. Humphreys & Sumner, for the complainant.

      Mr. Filbert L. Rosenslein and Mr. William 17. Evans, for the defendants.
   Lewis, Y. C.

The stockholders of the Harris Thrown Silk Corporation, the complainant, were George Harris, Charles Lampell (two ot tire defendants), Elias Goldstein, Walter Leon Hess and the Gosho Corporation. The defendant Klingbeil was connected in a business way with the Gosho Corporation. The defendant Harris was the president of the Harris Thrown Silk Comporation, its general manager, chairman of its board of directors, and the holder of fifty per cent, of its stock. He had a contract covering his services in the capacity of general manager, that, in January,- 1922, still had about two and a half years to- run. The Gosho Corporation was desirous of obtaining Harris’ stock in the Harris Corporation, and negotiations to that end were conducted in behalf of the Gosho Corporation by its attorney, Frank L. Weil, and an agreement was concluded between the parties on January 25th, 1922, whereby Harris was to sell his stock in the Harris Corporation to the Gosho Corporation, and cancel bis existing contract with the Harris Corporation, and retire. In addition to the money consideration for this settlement, Harris was to be given a general release by the Harris Corporation. On January 26th, the defendant Klingbeil disclosed to Weil, the attorney of the Gosho Corporation, a transaction between himself and Harris, which had taken place in October, 1921, by means of which he claimed a fraud had been perpetrated upon the Harris Corporation. It appears that Harris had furnished Klingbeil with funds to purchase from the Harris Corporation two hundred and forty pieces of two-thread Georgette silk, which were taken over by him and then transferred to the defendant Charles Lampell, with full knowledge of the fraud. The goods were, in fact, four-thread Georgette, of a far greater value than the two-tliread variety. Weil, upon being apprised of this transaction by Klingbeil, directed an examination to he made of the Harris Corporation’s books by its expert accountant, which resulted in a verification of Klingbeil’s charge. Thereupon, Weil protested against the giving of the general release to Harris by the Harris Corporation, assert-mg that there might be other irregularities of which they had no knowledge, which would be extinguished by the release. But Harris insisted that the release be given, and said that he would not carry out his part of the agreement unless the Harris Corporation performed its })art. Notwithstanding the disclosure of this situation, Weil, who had acted throughout for the Gosho Corporation, secured the execution of the general release exacted by Harris, and on February 1st closed the transaction and delivered the release to Harris in accordance with the terms of the agreement of January 25th, and in pursuance of Harris’ demand. Two days later the Harris Corporation instituted a suit in replevin in the supreme court to recover possession of the silk referred to, but that case seems to have been blocked by the release, and recourse was had to this court by the filing of the present bill, in order, I take it, to avoid, if possible, the effect of the release, and ultimately to secure its cancellation and rescission, although the bill in its specific terms appears to be simply a bill praying relief, which amounts to no more than could be obtained by the suit in replevin instituted in the law court.

On the hearing the facts as stated in the bill with respect to the alleged fraud were admitted by counsel for the defendants Harris and Lampell, and the proofs were confined to the evidence offered by the defendant, in an attempt to establish the release; and to the evidence offered by the complainant to show that Lampell had resold the silk, and to fix the amount which he received for it upon such resale. The defendants sought to show that prior to the delivery of the release the complainant had knowledge of the alleged fraud, and that because of its having such knowledge Harris was relieved from the duty which his counsel admitted would otherwise have existed, of disclosing the situation complained of, and that, therefore, the release was immune from attack.

At the conclusion of the hearing I was inclined to the view that the defendants had not succeeded in establishing that the complainant corporation had knowledge in fact of the transaction referred to. I further felt that, inasmuch as the commission of the fraud had been admitted, a duty had rested upon the defendant Harris, by reason of the fiduciary relationship existing between him and the complainant corporation, to make a full disclosure to complainant of the situation referred to before the delivery of the release. An opportunity, however, was given defendants’ counsel to submit authorities upon the question of Harris’ duty to make such disclosure.

Upon further consideration, however, and after careful examination of the briefs submitted by counsel for the respective parties, I have reached this conclusion: By the transfer of the stock of Harris and his co-stockholders, Lampell and Goldstein, as specified in the agreement of January 25th, 1922, to the Gosho Corporation, the latter corporation acquired complete control of the Harris Corporation. Harris specifically stated that he would not yield up his stock and his contract and his control in the Harris Corporation unless the release referred to was given him in accordance with the express agreement between the parties made at the conclusion of their negotiations on January 25th, 1922. The facts indicate clearly that as soon as the Gosho Corporation became completely in control of the Harris Corporation by the transfer of the stock mentioned to it, and Harris’ contract with the Harris Corporation had been canceled, and Harris had been eliminated therefrom, steps were taken in the name of the Harris Corporation to avoid the effect and operation of the very safeguards which Harris had obtained as part of the consideration for the yielding up of Ms property rights. This latter company became the holder of practically all the stock of the Harris Thrown Silk Corporation, and by the cancellation of Harris’ contract for services as general manager of the Harris Corporation, Harris was completely eliminated from the complainant company.

It is inconceivable to me, upon reflection, that Weil could have been in full possession of the facts of this alleged fraud, and could have conducted the examination and inquiry, which he did, in order to verify it, without his having disclosed it to the Gosho Corporation, for whom he was conducting the negotiations with Harris. The Gosho Corporation secured the stock from Harris and his co-stockholders, and the Harris Corporation obtained the cancellation of its ten-thousand-dollar-a-year contract with Harris, which still had two and a half years to run, and without which he had positively asserted lie would not make the arrangement which the Gosho Corporation sought to effectuate with him.

While I am satisfied that the defendants’ part in the transaction complained of is tainted in a wajr that cannot help but subject those parties to the disapproval of a court of equity, still I am of the opinion that the position of the parties with whom Harris was negotiating is equally subject to disapproval. 1

With full knowledge by all the parties to the agreement that a plain fraud had been perpetrated, to characterize it mildly, they, nevertheless, were willing to close their eyes to the irregularities which had been committed, and to acquiesce in them because of the desire on the one side to secure Harris’ rights, and eliminate him from the Harris Corporation; and the desire on the other side to obtain immunity from prosecution upon a liability that was perfectly patent.

This court could not set aside the release without putting Harris in statu quo, which, under the circumstances, is now impracticable, and is without power to force a contract upon Harris which he never assented to, and which, indeed, he specifically refused to make, which would be the result of granting the prayer of the present bill. But, however this may be, I am constrained to the view that the parties to this proceeding are particeps crimims, and that neither side is here with clean hands.

The bill, therefore, should be dismissed, and I will advise a decree accordingly.


text:
    Louis Stern Sons, Incorporated, a corporation, complainant, v. John Connolly, defendant.
    [Decided December 31st. 1923.]
    1. Where an agreement has been entered into between parties, and the terms thereof are subsequently reduced to writing, and the writing fails to correctly and accurately set forth the terms of the agreement as made, a court of equity, upon clear proof thereof, will reform the instrument and make it conform to the real agreement between the parties.
    2. Evidence examined and held that the contract in question should be reformed as prayed for in the bill.
    On pleadings and proofs.

      Messrs. Lichlenulem <0 Lichlenxlein, for the complainant.

      Mr. John J. Fallon, for the defendant.
   Lewis, Y. C.

The bill in this case is filed to cancel or reform the following instrument;

“Kearny, X. J.. December G, 1919.
I, the undersigned, John Connolly, of Hoboken, X. J., hereby agree to buy, and Louis Stern Sons, Inc., of Kearny. X. J., agree to sell about twenty-five thousand (25,000) empty barrels, single and double heads, soft and hard wood, at seventy-five cents ($.15) each ex Louis Stern Sons, Inc., Kearny, N. J., plant.
It is further agreed that the delivery will bo completed April 1st, 1020.
It is further agreed that Louis Stern Sons. Inc., will not sell barrels whose capacity is between forty-five (45) and fifty-five (55) gallons to any cooperage concern within the term of this contract.
Receipt of two thousand dollars ($2,000) is hereby acknowledged as deposit on the fulfillment of this contract and to be deducted at the expiration of same. Settlement to be made for each week’s delivery'.
John J. Connolly.
Louis Stern Sons, Inc.,
Edward Stern,
Secretary.”

There is no dispute but that prior to the signing of this agreement the parties had entered into a contract for the purchase and sale of certain barrels of the complainant. The contention of the complainant is, that this instrument does not accurately set forth the terms of that contract. The defendant, on the other hand, insists that the writing is in accord with the verbal terms agreed upon.

It appears that complainant conducts its business of rendering fats, &c., at or near Kearny, New Jersey. Material is sent to the plant in barrels, and in the course of the complainant’s business some of the barrels are returned or otherwise disposed of, but a large number, from time to time, accumulate. It was this accumulation that led to the making of the agreement in question. It was estimated that the number of barrels which had accumulated at complainant’s plant at the time the agreement was made, less those that might be used in the regular course of its business or be defective and incapable of use, plus additional accumulations during the four months’ period which the contract covered, would amount to “about twenty-five thousand (25,000) empty barrels * * * ex Louis Stern Sons, Inc., Kearny, N. j!, plant.”

As a matter of fact, only about fifteen thousand (15,000) barrels were delivered under the contract. Connolly thereupon brought an action at law against the Stern corporation. alleging damage because of the failure of the Stern corporation to. deliver ten thousand more barrels, and claiming that he was entitled to twenty-five thousand barrels under the terms of the contract. Thereupon this bill was filed to restrain the suit at law and to cancel or reform the contract referred to, complainant conceding that in the law court a strict construction of the provisions of the contract would hold it obligated to deliver the twenty-five thousand barrels, as contended by Connolly; and averring that the Teal intent of the agreement between the parties was that the number of barrels mentioned in the writing was only an estimate; and that it was never at any time intended that barrels should be delivered except from the accumulation resulting from tlic complainant’s business.; and that it was never intended that it should go outside to obtain barrels for the purpose of supplying them to Connolly.

Connolly, however, contends that complainant should be held to a strict performance of the contract, and that he is entitled to receive twenty-five thousand barrels, with the allowance of some slight deviation because of the word “about,” or else should be paid damages for the non-delivery thereof; and denies that any such intent, as claimed by the complainant, existed.

Where an agreement has been entered into between parties, and the terms thereof are subsequently reduced to writing, and that writing fails to correctly and accurately set forth the terms of the agreement as made, a court of equity, upon clear proof thereof, will reform the instrument and make it conform to the real agreement between the parties. This is a well-established principle of equity jurisprudence, and if the proofs in this case made it clear that such a situation exists between these parties, the complainant would be entitled to a reformation.

I do not think the testimony in any way discloses a right to cancellation.

In view of the testimony adduced by the complainant, and of the circumstances surrounding the making of the agreement, I am satisfied that the complainant never contemplated selling to the defendant any barrels except those which accumulated at1 its plant in Kearny in the course of its fat rendering business. This is particularly strengthened by the concluding phrase of the contract above quoted, i. ex (from) Louis Stern Sons, Inc., Kearny, N. J., plant. It is unlikely that the complainant had any other thought or intent than that of disposing of such surplus. It was not in the cooperage business, but it simply possessed these barrels as an incident to its other business.

There was a clear attempt on the part of both the complainant and the defendant to estimate and ascertain the number of barrels which had accumulated at the plant when the agreement was made, and of the accumulation that would result during the life of the contract.

Ahilé, ordinarily, the term “about” would not permit of so extensive a deviation as ten thousand barrels, under a contract to supply twenty-five thousand barrels, still, I am satisfied that in the present instance, the number of barrels stated in the contract was based simply upon an estimate under existing conditions, and not intended to be binding in number beyond the limits o£ the existing accumulation and the probable addition thereto.

I am not so sure that the law court would give any other construction to the contract than that claimed by the complainant, but in the event that the law court should rule otherwise, the granting of equitable relief at this time would at least prevent recurrent litigation. Green v. Morris Railway Co., 12 N. J. Eq. 165.

If, therefore, equitable relief oL' reformation, customarily exercised under the circumstances heretofore indicated, is properly applicable to a situation where the complainant goes so far as to seek reformation, not because the written instrument fails to set forth the correct terms of the verbal agreement, but because it fails to clearly indicate the real intent of the parties, their I would be inclined to grant the reformation prayed for by the complainant in this case.

This proposition is not free from doubt in my mind, but there are authorities which seem to go that length. In Hunt v. Rhodes, 26 U. S. 1, the United State supreme court stated:

“Where an instrument is drawn and executed which professes or is intended to carry into execution an agreement, whether in writing or by parol, previously entered into, but which, by mistake of the draftsman, either as to fact or law, does not fulfill or which violate the manifest intention of the parties to the agreement, equity will correct the mistake, so as to produce a conformity of the instrument to the agreement.” Stines v. Hay, 36 N. J. Eq. 369; Green v. Morris Railway Co., 12 N. J. Eq. 169; Cochran v. Burns, 91 N. J. Eq. 7; Weart v. Rose, 16 N. J. Eq. (at p. 297); Tenebaum v. Lambert Co., 215 S. W. Rep. 596; 8 A. L. R. 745; Fow ler v. Vreeland, 44 N. J. Eq. 268; affirmed, 44 N. J. Eq. 272; Trusdell v. Lehman, 47 N. J. Eq. 218; Zarecki v. Guar. R. Co., 82 N. J. Eq. 489.

The other phases of the ease argued by counsel I am not concerned with on the question of reformation. They will doubtless be disposed of on the trial of the action at law.

I will therefore advise a decree granting the reformation prayed for.


text:
    Esther E. Voorhees, complainant, v. Martha L. Christie and James H. Christie, her husband, defendants.
    [Decided January 2d, 1924.]
    Where ¡m old lady, nearly ninety years old, transferred to her niece almost all the property she possessed, and the claim is made that such transfer was made in trust for the niece to collect the income and apply it on the board of the assignor, who lived with the niece; but the niece claimed, after the death of the assignor, that the property was transferred to her in consideration of her support and care of the transferor during her life, the transfer having been made without independent advice, and when the transferor was ill and infirm; held, (hat the property is held in trust and the niece must account therefor.
    On pleadings ancl proofs.

      3fr Ilenry Smiih and Mr. Addison P. Rosenhrans, for'the complainant.

      Messrs. Morrison, Lloyd & Morrison, for the defendants.
   Lewis, Y. C.

'Mrs. Esther E. Yoorhees, a woman nearly ninety years of age, transferred, in September, 1918, to defendant Martha L. Christie, her niece, mortgages aggregating $6,500 in amount; and, thereafter, a further mortgage for two thousand dollars ($2,000), live hundred dollars ($500) of which appears to have been repaid to Mrs. Yoorhees. These mortgages were láter sold, or collected, by Mrs. Christie. Mrs. Christie contends that this was done in consideration of her agreement to support and care for Mrs. Yoorhees during her lifetime, and that the transfer to her was absolute.

’’ The present complainants, who are the executors of Mrs. Yoorhees, contend, on the contrary, that this fund passed to Mrs. Christie in trust to take the income as payment of Mrs. Yoorhees’ board in Mrs. Christie’s home at the agreed rate of $-10 per month, and to account for the corpus on demand. Whatever the agreement between the parties was or may have been, it was not reduced to writing.

Prior to the death of Mrs. Yoorhees she sought to recover from Mrs. Christie the difference between the amount stated and the sum which would be clue Mrs. Christie for the board of Mrs. Yoorhees referred to, Mrs. Yoorhees having ceased to live with Mrs. Christie.

Considerable testimony was adduced upon the hearing in support of the respective contentions of the parties, which it is unnecessary to review in detail. Suffice it to say that, in my opinion, the evidence sustains the view urged by the complainants, namely, that the'arrangement between Mrs. Voorhoes and Mrs. Christie constituted s. trust, and that the transfer to Mrs. Christie was not absolute.

At the time the arrangement was entered into Mrs. Voorliees was extremely ill and was desirous of being cared for by her niece, Mrs. Christie. It is not contended that Mrs. Christie did not give Mrs. Voorliees good care during the period of that illness, but it seems clear to me that, when Mrs. Voorliees recovered sufficiently to care for herself, she no longer required or desired the services of Mrs. Christie in this respect. Her residence with Mrs. Christie thereafter became irksome because of restrictions upon her freedom of action, and which Mrs. Voorliees had hitherto enjoved: and after a time Mrs. Yoorhees concluded to take up her residence where it would be more congenial.

The. bargain, which Mrs. Christie contends was made occurred at a time when Mrs. Yoorhees was ill and infirm and very aged. Mrs. Yoorhees does not appear to have had any efficient independent advice as to the nature and extent of the transfer, whereas Mrs. Christie and her husband, the co-defendant, were both in full possession of their mental faculties, and in a position where it was very easy for them to prevail upon the aged aunt to make such an arrangement as had been referred to.

In view of the fact that the property transferred constituted almost all that Mrs. Yoorhees possessed, and that what little remained to her was not of sufficient value to maintain her, and by reason of her early efforts to have the funds repaid to her after she recovered from her incapacity, I am convinced that the contention of the complainants should prevail.

Mrs. Yoorhees was very clear in her own testimony to this effect, which was given early in the progress of the case.

She died pending the litigation, and her executors were substituted as parties complainants to continue the suit.

The defendants are entitled to be paid for the period during which Mrs. Yoorhees lived 'with them, at the rate agreed upon. The balance of the fund should be accounted for to the complainants. An accounting will therefore be decreed accordingly. The terms of the decree may be settled upon application of counsel.


author: Lewis, Y. 0.

text:
    Robert L. Fitzpatrick, trustees in bankruptcy of Alexander Infald and Philip Infald, partners, trading as Infald Bros., complainant, v. Barnard Phillips & Company, Incorporated, a corporation, defendant.
    [Decided January 14th, 1924.]
    1. Where a chattel mortgage does not conform to the statutory requirements it is invalid as against the creditors of the mortgagor.
    2. A trustee in bankruptcy has the right to test the validity of a chattel mortgage in this court, if he so elects, notwithstanding any concurrent jurisdiction of the bankruptcy court.
    3. Where an affidavit to a chattel mortgage stated that the true consideration therefore was “for money loaned and advanced by the said company to the said P. I. and A. I., partners, trading as I. Bros., in the city of New York, divers days and times under and by virtue of a contract * * * hereto annexed, and under the guaranty of payment hereto annexed, the exact amount of said advances cannot be ascertained until the final accounting * * * but is estimated at approximately $75,000.” “This mortgage is given to secure the payment of said amount after being ascertained as above stated * * such affidavit is in substantial compliance with the statute.
    Oil pleadings and proofs.
    ' Mr. Abram I. Bluestein, associated with Mr. John W. Harding, for the complainant.

      Mr. J. Vincent Barmbt, associated with Mr. William B. Gowiey, for the defendant.
   Lewis, Y. 0.

The defendant, Barnard Phillips & Co., l’nc., lield a chattel mortgage upon certain property of Alexander Infald and Philip Infald, partners, trading as Infald Bros., to secure advances made to them by tlie defendant, pursuant to a contract between them, growing out of sale's of silk in the well-known usual course of that trade. The Inialds later became bankrupt and a trustee in bankruptcy took charge. That trustee is the complainant in the present suit, and he has tiled a bill to invalidate the chattel mortgage referred to, and for an accounting.

The property purporting to be covered by the chattel mortgage was sold under the direction of the bankruptcy court, in the course of administration of the bankrupts’ estate, free and clear of the lien, if any existed, of the chattel mortgage, with the consent of the defendant and upon an agreement that the proceeds, less administration expenses, should be paid to the defendant, to be retained by it pending the determination of the validity of the chattel mortgage by the court of chancery. Thereupon the trustee in bankruptcy filed the present bill for the purpose indicated.

The validity of the chattel mortgage is attacked solely upon the ground that the affidavit of the mortgagee, accompanying it, does not comply with the requirements of the statute, in that it fails to truly state the consideration of the mortgage .and the amount due and to grow due thereon. The trustee claims that because of the invalidity of the mortgage the defendant had no lien upon the property thus sold, and that the proceeds of the sale, now retained by the defendant under the agreement, should be paid to the trustee as assets of the bankrupts’ estate. The defendant, however, contends that the affidavit is'in substantial compliance with the requirements ■of the statute and that the chattel mortgage should, therefore, be decreed valid and that he should be permitted to retain the proceeds of the sale of the property covered by it.

If the chattel mortgage be invalid the trustee in bankruptcy has the undoubted right to have it set aside for the benefit ■of the creditors of the bankrupts.

It is established by a long line of decisions in this state that a chattel mortgage which does not conform to the statutory requirements is invalid as against the creditors of the mortgagor. Graham Button Co. v. Spielman, 50 N. J. Eq. 120; American Soda, Fountain Co. v. Stolzenbach, 75 N. J. Law 721; Bollschweiler v. Parker, &c., Co., 83 N. J. Eq. 459; affirmed, 84 N. J. Eq. 502.

And the trustee in bankruptcy, representing all the creditors, and standing in the shoes of the bankrupts, has the right to test the validity of a chattel mortgage, in this court, if he so elects, notwithstanding any concurrent jurisdiction to that end which might be exercised by the bankruptcy court, if invoked, in the administration of the bankrupts5 estate. Coll. Bank. (10th ed.) 476; A. B. Newbury Co., Inc., v. Tennant, Trustee, &c., 92 N. J. Eq. 493.

But, in my opinion, tlie chattel mortgage involved in the present suit should not be decreed to be invalid, because, I think that the affidavit is in substantial compliance with the provisions of the statute, and, in the absence of fraud (which is not asserted or proved in this case), is sufficient. Breit v. Solferino, 77 N. J. Law, 436; Vanaman v. Fliehr, 75 N. J. Eq. 88; Horowitz v. Weidener, 31 Atl. Rep. 771; Hunt v. Ludwig, 93 N. J. Eq. 314; Simpson v. Anderson, 75 N. J. Eq. 581; Shupe v. Taggart, 93 N. J. Law 128; Howell v. Stone, 75 N. J. Eq. 289; American Soda Fountain Co. v. Stolzenbach, 75 N. J. Law 721, supra.

Section 4 of the Chattel Mortgage act (1 Comp. Slat. 463) provides that a chattel mortgage

“shall be absolutely void as against the creditors of the mortgagor and as against subsequent purchasers and mortgagees in good faith, unless the mortgage having annexed thereto an affidavit or affirmation made and subscribed by the holder of said mortgage, his agent, or attorney, stating the consideration of said mortgage and as nearly as possible the amount due and to grow due thereon, be recorded as directed&c.

The affidavit under attack in the instant case avers

“that the true consideration of the said mortgage is as follows: viz., for money loaned and advanced by the said company to the said Philip Infald and Alexander Infald, partners trading as Infald Bros, in the city of New York, divers days and times under and by virtue of a certain contract made by and between the said Infald Bros, and the said Barnard Phillips & Co., Inc., which contract is hereto annexed, marked ‘A,' and under the guarantee of payment which is hereto annexed, marked ‘K.’ and A and B being true copies, the exact amount of said advances cannot be ascertained until the final accounting between the parties as per said contracts annexed; but it is estimated that the advancement is approximately seventy-five thousand ($75,000) dollars.
“This mortgage is given to secure the payment of said amount after being ascertained as above stated in the manner -and at the time above stated.”

In Graham Button Co. v. Spielman, 50 N. J. Eq. 120, supra, Vice-Chancellor Van Fleet said:

'‘The legislative purpose in the enactment of that statute was held to be to compel the mortgagee to commit himself to a statement or disclosure of his debt or claim, under oath, when he made his mortgage a matter of public record, sufficiently precise and explicit to afford the creditors of the mortgagor, in case fraud was suspected, a fair opportunity to ascertain, by judicial investigation or otherwise, whether the mortgage was an honest security or a mere fraudulent cover.”

Testing the present affidavit by the rule thus enunciated, I am satisfied that it is sufficiently precise and explicit in stating the consideration of the mortgage and as nearly as possible the amount due and to grow due thereon, to bring it within the requirements of the statute.

It follows, therefore, that the bill should be dismissed, and I will advise a decree accordingly.


author: Lewis, V. C.

text:
    Realty Improvement Company of New Jersey, complainant, v. H. H. Montgomery, superintendent of banks of the State of Alabama, defendant.
    [Decided December 20th, 1923.]
    1. Where a contract provided that upon executing a conveyance of land, the superintendent of banks will file a petition in court asking for the approval and confirmation of a contract of sale, and that in event of such approval the terms of the contract shall become binding and obligatory upon each of the parties thereto, and that in event of the non-approval by the court (and other contingencies), the contract shall cease to be binding on each of the parties thereto, and each party will be absolved from any liability to the other, and the consummation of the contract failed, no application having been made to the court for its approval, and the defendant notified the complainant that all the rights and privileges as provided by said contract were terminated, the defendant has no right to retain the land conveyed to him in pursuance of the terms of the contract.
    2. Equity does not favor a forfeiture, except where there is no alternative.
    On pleadings and proofs.

      Mr. Michael 'Dunn, for the complainant.

      Messrs. Linclabury. Depue £ Faullcs, for the defendant.
   Lewis, V. C.

This is a bill to set aside a conveyance of land in Bergen county, New Jersey, made by the Realty Improvement Company of New Jersey, the complainant, to D. E. Green, as superintendent of banks for the State of Alabama, pursuant to a contract entered into between those parties on June 28th, 1920, whereby the complainant was to purchase from Green, as superintendent of banks, the property in Birmingham. Alabama, which had been used as the bank building of the Jefferson County Bank, which was in process of liquidation by the superintendent of banks at the time the contract was made. This land represented an agreed valuation of sixty-three thousand dollars ($63,000), which covered the fifty thousand dollars ($50,000) mentioned “as the consideration for entering into this contract, and is to be considered as earnest money, and that in the event the realty company fails to consummate the purchase from the superintendent of banks of the property herein specifically described, on or before January 1st, 1921, by the payment to the said superintendent of banks in cash, of the difference between the aggregate of the indebtedness secured by the first and second mortgages on said property, and one million two hundred and fifty thousand dollars ($1,250,000) which is herein fixed as the purchase price of the property hereinabove described and designated as the Jefferson County Bank Building,” that thereupon the superintendent of banks should become the absolute owner of the land.

The mortgage indebtedness on the bank property amounted to four hundred and eighty thousand dollars ($480,000).

The contract further provided that

“upon the execution of said deed by the realty company so conveying said lots to the superintendent of banks, the superintendent of banks will file a petition in the circuit court of the tenth judicial circuit of Alabama in equity, asking for the approval and confirmation of this contract of sale. In the event this contract and the sale as herein provided for is ratified and approved by the court, then the terms of this contract shall become binding and obligatory upon each of the parties hereto, and the superintendent of banks will furnish unto the realty company an abstract of title to the property herein-above specifically described; but, in the event the said court fails to confirm this contract and to authorize the sale of the property as herein provided for, or if the title to the property hereinabove specifically described, known and designated as the Jefferson County Bank Building, should not be good, with the exception of the mortgages now existing thereon; or in the event the representatives of the superintendent of banks should conclude that the lots herein provided to be conveyed to the superintendent of banks were not of the value of $03,500, then, in either of said events, this contract shall cease to be binding upon either of the parties hereto, and the superintendent of banks will reconvey unto the realty company the property theretofore conveyed to it, and each of the parties hereto will he absolved from any and all liability of every nature whatsoever to the other created or sought to be created by the terms of this contract.”

D. F. Green subsequently was succeeded by H. H. Montgomery, as superintendent of banks, who is the present defendant in this suit.

The time of performance of the contract of June 28th, 1920, was specifically extended from January 1st, 1921, to April 1st, 1921, and later to August 1st, 1921, and negotiations were in progress to extend the time still further to September 1st, 1921. These extensions were evidenced by written agreements personally executed between the parties, and they provided that “all of the terms, conditions and covenants contained in said contract hereinabove referred to, dated June 28th, 1920, shall continue in force and effect.”

The consummation of the contract, however, failed, and on September 2d, 1921, the superintendent of banks notified the realty company that “all rights and privileges as provided for by said contract, and the extensions thereof, are terminated and no longer in force and operation.”

Later, representatives of the superintendent of banks demanded of the realty company the possession of the Bergen county land, and attempted to put an agent in charge thereof for the purpose of selling it. Thereupon the present bill was filed to set aside the contract referred to, and for a reconveyance of the land conveyed under it, and for ad interim restraint. A preliminary injunction was issued in accordance with the prayer of the bill, and the case came on for final hearing upon the pleadings and proofs.

The evidence disclosed that shortly aft.er the making of the contract a portion of the bank building was leased for a long term of years to the Federal Beserve Bank of Atlanta, without the knowledge or consent of the realty company. This not only took an important part of the building out of the control of the realty company, but seriously embarrassed it in its efforts to finance the transaction in accordance with the contract; so much so, in fact, that it was this phase of the situation which made it necessary for the realty company to apply for an extension of the time within which to complete the operation, and when that first extension was granted, the Alabama people were evidently so much concerned about their action in thus leasing that portion of the bank building that they insisted upon the realty company expressly waiving “any objection to any and all leases now existing for any and all parts of said Jefferson County Bank Building.”

Following the second extension carrying the date of performance down to August 1st, 1921, a further extension to September 1st, 1921, was agreed upon, provided the realty company would convey to the superintendent of banks additional land of the value of $3,000. A controversy arose, however, regarding the realty company’s compliance with this condition, and the deed for the additional land was rejected by the superintendent of banks as not being in compliance with the arrangement.

It also developed that the bank building was not owned by the Jefferson County Bank at all, but by the Jefferson Realty and Buildiug Company, a separate and distinct private corporation (although it did hold a large proportion of the stock of the latter company), and that, therefore, the superintendent of banks had never been in a position to specifically perform that part of the contract which provided that the “said D. F. Green, as superintendent of banks;, in charge of the affairs and assets of the Jefferson County Bank for liquidation, agrees to sell to the party of the first part, upon the terms and conditions hereinafter stated,” the property covered by the contract.

The contract to purchase the bank building was subject to a condition precedent, i. e., “subject to the approval and confirmation by the circuit court of the tenth judicial circuit of Alabama in equitjr, wherein there is now pending, under the statutes of Alabama, the liquidation of the Jefferson County Bank.”

In addition to the provisions previously quoted the contract also contained the following condition:

‘'On condition that the court now having jurisdiction under the statutes óf this state of the liquidation of the Jefferson County Bank, approves and confirms the sale as herein provided for, the superintendent of banks will, upon the payment to him in cash by the realty company, on or before January 1st, 1921, of the difference between the then aggregate indebtedness secured by the first and second mortgages on the above described property and one million two hundred and fifty thousand dollars ($2,250,000), have executed a deed conveying to the realty company or its assigns the property hereinabove described, subject to the then outstanding first and second mortgages, and freed from all other liens and encumbrances, and the superintendent of banks will also convey unto the realty company or its assigns, or such person, firm or corporation as it may designate, the lots theretofore conveyed by the realty company to the superintendent of banks, in payment of the fifty thousand dollars ($50,000), as the recited consideration for the execution of this contract.”

It is conceded that no application was ever made to the circuit court of Alabama for the approval stipulated in tbe contract, and that the court mentioned never did, in fact, grant tbe approval specified. The realty company contends that, therefore, the superintendent of banks failed to perform the covenants and conditions of the contract which it was incumbent upon bim to perform, and that because of this the realty company was unable to secure tbe necessary financial co-operation to carry through the transaction, and is absolved from performing its part of tbe contract. The superintendent of banks, however, through his counsel and representatives, took the position that inasmuch as the title to the bank property was not in the banking corporation, bnt was held by the private corporation referred to, it became unnecessary to obtain the approval of the contract and tbe sale, by tbe circuit court, and that the subsequent action on tbe part of the corporation, holding title to the bank property in executing a deed for the premises to the realty company, and tendering it or placing it in escrow was a substantial compliance with the covenants of the contract. He further contends that Seaman, the secretary of the realty company, who had been active in conducting the negotiations for the purchase, had assented to this changed procedure, and that there had been an acquiescence in it by the realty company.

Even assuming that there had been an acceptance of the rights and privileges granted to the Realty Improvement Company of New Jersey by the Jefferson Realty and Building Company, as set forth in the resolutions of the stockholders of the latter company, still I am unable to accord to that the force and effect of a waiver by the Realty Company of New Jersey of the covenants and conditions of the original contract. At the most, it was but the expression of a willingness on the part of the Realty Improvement Company of New Jersey to accept a deed from the Jefferson Realty and Building .Company, especially in view of the express provisions of the formally executed extensions heretofore referred to and made contemporaneously therewith, that “all of the terms, conditions and covenants contained in said contract” should continue in force and effect. And I am unable, after a careful examination of the proofs, to find any formal corporate action by the Realty Improvement Company of New Jersey, whereby it can be said that it either waived the terms and conditions of the original contract of June 28th, 1920, or acquiesced in any substituted procedure in lieu thereof. Nor do I find any memorandum in wiiting agreeing to a substituted contract which would satisfy the requirements of the statute of frauds.

Seaman, indeed, was extremely desirous of bringing about' a consummation of the transaction, and expressed willingness from time to time to yield to the line of least resistance, in an effort to accomplish this, but the proofs are replete with evidence showing the opposition of Jennings, the president of the Realty Improvement Company of New Jersey, to Seaman’s wishes, even to the extent of his retaining individual counsel to represent his interests and views.

The situation reached its climax by the sale or offer or contract to sell the bank property to other parties, at a distinct advantage over the terms of the contemplated sale to the complainant; so that, in its present aspect, it shows the final disposition, or opportunity of disposition of the bank property by its owners to a better advantage than that contemplated by the contract involved in this suit, and the land tbe complainant vested in the superintendent of banks of Alabama, who seeks to assert his prerogatives of ownership in it, notwithstanding his failure to perform the important covenant stipulated as a condition precedent in the contract..

When the corporation in Alabama that held title to the bank building tendered their deed in escrow, they slipped in a condition different from that which appeared in the original contract, for, in the original contract the Eealty Improvement Company of New Jersey was to purchase from the superintendent of banks, subject to two mortgages, aggregating four hundred and eighty thousand dollars ($480,000), but in the resolutions and deed of the private corporation holding title, it was provided that the Eealty Improvement Company of New Jersey should “assume and agree to pay” those mortgages, which is quite a different proposition, and which would have obligated the Eealty Improvement Company of New Jersey to pay them in the place of the original makers of the bonds.

There is another significant fact, and that is this: In every sale made by the superintendent of banks, either of personalty or realty belonging to the bank, except this one, he did go to the Alabama court and get the approval of that court of the sale, which may indicate that that approval was necessary in this case, and that for some reason or other they were afraid to make the application, and hence sought to get the New Jersey corporation to take title without it.

To find in favor of the defendant would, it seems to me, under these circumstances, work a forfeiture of the Kealty Improvement Company’s property, which, in my opinion, would be most inequitable, and equity does not favor a forfeiture, except where there is no alternative.

I am, therefore, constrained to grant the prayer of the complainant’s bill and will advise a decree accordingly.


text:
    Ernest Heidler, complainant, v. Werner & Company, a corporation, defendant.
    [Decided March 11th, 1924.]
    1. Where capital stock is issued in payment for property the judgment of the directors as to the value of the property is conclusive, in the absence of fraud.
    2. Where one who had agreed to purchase stock in a corporation caused that corporation to make a mortgage to the owner of that stock, who was an officer and director of the corporation, on receipt of which the owner of the stock transferred it to the agreed purchaser, such transaction did not invalidate the mortgage, as the mortgagor parted with his stock and relinquished his official position in the corporation in consideration thereof.
    3. Wliere fifty-five shares of the stock of the corporation were issued to the mortgagee as part of the transaction of purchase and sale, the value of such shares should not be set off against the amount due on the mortgage, the company not being insolvent.
    On bill to foreclose. On pleadings and proofs.

      Messrs. Weinberger t& Weinberger, for the complainant.

      Messrs. Sim,onion & Michel, for the defendant.
   Lewis, V. C.

This is a bill to foreclose a mortgage for $15,000 given by the defendant corporation, Werner & Company, to tlie complainant, Ernest Heidler, on March 15th, 1920.

The corporation was formed in August, 1919, and the complainant was its principal stockholder. He was also the president and a director of the company. At the time of the incorporation one hundred and ninety-five shares of the capital stock, having a par value of $100 per share, were issued to Heidler, full paid and non-assessahle, payment therefor being made by real property conveyed by Heidler to the corporation at a valuation of $19,500, fixed by the directors. The total authorized capitalization of the company was $25,000, so that fifty-five shares of the capital stock remained unissued, after the transfer of the property by Heidler in payment for the one hundred and ninety-five shares had been accomplished. A small portion of the one hundred and ninety-five shares thus issued appears to have been transferred to Heidler’s son, who became a co-director with complainant, and Werner was apparently the third member of the corporation.

In March, 1920, Paul Eose purchased from che Heidlers the one hundred and ninety-five shares of stock referred to. Not having the ready money with which to pay for the stock, he arranged for the execution and delivery of the mortgage in question by the corporation to complainant, in payment for the stock thus acquired. In addition to the mortgage for $15,000 the corporation also issued to Heidler the remaining fifty-five shares of its capital stock, which was also to be full paid and non-assessable. This was ostensibly to cover the difference between Heidler’s original investment and the mortgage. Heidler thus was eliminated entirely from control' of the company, retaining simply the fifty-five shares referred to, as against the one hundred and ninety-five shares transferred to Eose, and he thereupon ceased to be either a director or an officer of the corporation.

The corporation paid interest on this mortgage for one year and then defaulted. This bill to foreclose was thereupon filed.

The defendant contends that the mortgage is invalid because it was given to a director and officer of the corporation, and that complainant, in any event, should not be permitted to recover any amount due thereon in excess of what he actually paid into the corporation, insisting that the true value of the property transferred in payment for the original stock was not more than $10,000. Defendant also seeks to set off against any amount found to be due the complainant, the par value of the fifty-five shares of the capital stock issued to Heidler at tire time the mortgage was given, and for which it claims Heidler has never paid value.

There is no allegation or proof of insolvency, and the rights of creditors do not intervene. The controversy is between the original parties—the corporation and its obligee.

Our Corporation act (P. L. 1896 p. 277 §§ k8, lt9) permits payment for capital stock to be made with property, and provides that in the absence of actual fraud the judgment of the directors as to the value of the property shall be conclusive. No fraud in this transaction has been proved, and, indeed, counsel for the defendant at the hearing specifically disclaimed fraud. The testimony further shows that this property has enhanced in value and is now worth approximately $50,000.

It is plain, therefore, that Heidler, at the time he took the mortgage now under foreclosure, parted with, not only his property rights in the corporation, but with his control and official positions therein, and that, had he retained his stock instead of transferring it to Eose, it would now be wortn practically $50,000 to him. Eose, on the other hand, obtained the complete control of the corporation, and almost its entire capital stock. He saw the golden opportunitjr and availed himself of it.

I can see no reason why this defendant corporation should not perform its obligation, and the mortgage should be paid in full. Whatever, ultimately, may be the situation with regard to the fifty-five shares of the capital stock subsequently issued to Heidler, if insolvency should hereafter intervene, and a receiver be appointed—upon which no expression of opinion is at this time called for—the corporation, as between itself and Heidler, cannot complain, and is, therefore, not entitled to set off the par value of that stock as against the moneys due Heidler on the mortgage. I will therefore advise a decree in favor of the complainant and against the defendant for the full amount proved to be due upon the mortgage.


text:
    Max Pasternack, Sarah Pasternack, his wife, William Pasternack and Joseph Fortgang, complainants, v. Benjamin Alter and Max Storch, defendants.
    [Decided March 11th, 1924.]
    1. To justify a decree for specific performance of a contract to sell lands the vendor must tender a marketable title.
    2. Where prior deeds to the land to be conveyed show defective descriptions, and a survey shows a small encroachment, the title to the premises is not marketable, and the agreement to purchase it will not'be specifically enforced.
    On bill for specific performance. On pleadings and proofs.

      Messrs. Ranzenhofer & Ranzenhofer, for the complainants.

      Mr. Samuel Staff and Messrs. Weinberger & Weinberger, for the defendants.
   Lewis, Y. C.

This is a bill for specific performance of an agreement to convey certain premises situated on the easterly side of Main avenue, in the city of Passaic, New Jersey, entered into between complainants, who were the vendors, and defendants, who were the vendees, on April 5th, 1923. Title was to pass under the contract on June 5th, 1923. It is undisputed that on the date fixed for the passing of title the vendors tendered a deed for the premises, but the vendees refused to accept the same. Defendants set up, in justification of their refusal to perform, certain alleged defects in the title, viz.: (1) That a prior deed in the chain of title was not properly acknowledged; (2) that the description in a prior deed located the property on the westerly side of Main avenue, instead of on the easterly side, and (3) that there was an encroachment on the premises of about two inches by an adjoining building on the southerly side. They therefore claimed that the vendors did not tender a good, clear and marketable title, and insisted that the defects should be remedied. This the complainants refused to do, and the testimony fails to show that the objections made to the title were removed by the complainants.

Complainants contend that the objections raised by the defendants are without merit and that the title tendered is a good, clear and marketable title. They therefore filed this bill to compel the vendees to specifically perform their contract to purchase the premises.

The property is located in the business center of the city of Passaic, and the purchase price therefor was $42,000.

In Doutney v. Lambie, 78 N. J. Eq. 277, the court of errors and appeals, through Mr. Justice Parker, stated the rule in this class of cases to be “that the vendor must prove that his title is good beyond a reasonable doubt, and will not expose the defendant to litigation.”

The court further stated that “the question for decision, therefore, was whether the complainant’s title was so plainly marketable as to require a court of equity, in the exercise of a legal discretion, to decree specific performance.”

And, further, quoting from Tillotson v. Gesner, 33 N. J. Eq. 313, decided by that court, that “the purchaser should have a title which shall enable him not only to hold his land but to hold it in peace, and if he wishes to sell it, be reasonably sure that no flaw or doubt will come up to disturb its marketable value. The court cannot satisfactorily or conclusively settle a title in the absence of parties who are not before them in the suit to assert their estate or interest in the lands.”

And in sustaining the decree of the court of chancery dismissing the bill on the ground that the title offered by the complainant was unmarketable, the court concluded that, referring to the quotation from Tillotson v. Gasner:

“These propositions are both elemental and fundamental, and we need not go outside of them to confirm the decree below. Having examined the evidence, we are satisfied that, to say the very least, the question of encroachment is a doubtful one, and might well lead to troublesome and vexatious litigation in the future, which might be decided adversely to the owner and compel a substantial alteration of a large apartment building. This is sufficient to render the title unmarketable, and to justify, if not require, a court of equity to refuse specific performance to a vendor.”

And in Van Riper v. Wickersham, 77 N. J. Eq. 232 (at p. 237), the court of errors and appeals, through Mr. Justice Yoorhees, said:

“The principle adopted by courts of equity in matters of specific performance is that they will not compel a purchaser to take a title of which there is a reasonable doubt, and such doubt is held to exist if the purchaser, desiring to sell the lands, would be adversely affected by such doubt. * * * “So it is the uniform rule in this state to decline to decree performance where such doubt exists, though rested on grounds merely debatable, but which might visit upon the purchaser litigation in that regard, and that, too, where at law the title might, in fact, be declared good.”

Applying these rules to the situation presented in the case at bar, I am clear that although the first objection regarding the alleged defective acknowledgment in a prior deed might not be of sufficient materiality to warrant the defendants in refusing to accept title, nevertheless, the second and third objections pertaining to the defective description in a prior deed, and the encroachment of the adjoining building are sufficient to justify the defendants in refusing to accept the deed.

I am satisfied that a cautious subsequent purchaser of these premises would exact of the present vendees the rectification of the defective description, which would, in all probability, require a suit to quiet title, and the removal of the encroachment by the adjoining building referred to, which might well involve a suit in ejectment.

To my mind, this is sufficient to render the title so plainly unmarketable as to require a court of equity, in the exercise of its legal discretion, to refuse specific performance to the vendor.

In accordance with these views I will therefore advise a decree dismissing the bill.


text:
    Margaret Moran, guardian of the person and estate of Margaret Kelley, complainant, v. Mamie Kelley and Annie Kelley, administrators with the will annexed of William J. Kelley, deceased, defendants.
    [Decided March 26th, 1924.]
    Where a will provided that the residue of the testator’s estate be paid to certain trustees, who should employ the funds to have masses said for the happy repose of his soul, this bequest, being to definite persons in trust for a specific purpose, creating a use intended for the benefit of the testator specifically, is valid.
    On bill for construction of will, &c. On pleading and proofs.

      Messrs. Perkins <£• Dreiven, for the complainant.

      Mr. John Wahl Queen, for the defendants.
   Lewis, Y. C.

The testator, William J. Kelley, by his last will and testament, after making certain bequests, devised and bequeathed all the residue of his estate to his two cousins, Mamie Kelley and Annie Kelley, in trust, however, that they should, when said residue was paid to them after his death, employ said sum or sums to have masses said for the happy repose of his soul.

This bill is filed by the guardian of the testator’s daughter, who contends that the bequest, provided for in the residuary clause, is invalid.

The defendants, however, who are the persons named as trustees in the trust created by the residuary clause, and who are also the administrators with the will annexed of the testator, assert that the provision is valid as a charitable use and should be sustained.

It is to' be noted that the bequest is to definite persons, in trust for a specific purpose, and creates a use intended for the benefit of the testator specifically. Such a use, when possessing those elements of definifeness, is sustained, generally, by the American authorities (6 Cyc. 920), and a similar bequest was sustained by Vice-Chancellor Emery in this court in Kerrigan v. Tabb, 39 Atl. Rep. 701, which is cited with approval by Vice-Chancellor Stevenson in Brown v. Condit, 70 N. J. Eq. 440, and by Vice-Chancellor Stevens in While v. Newark, 103 Atl. Rep. 1043.

See, also, Kerrigan v. Connelly, 46 Atl. Rep. 227, where the same principle was sustained by this court.

I will therefore advise a decree sustaining the validity of the residuary clause in question, and directing the administrators with the will annexed of William J. Kelley, deceased, to pay over the residuary estate to the trustees named therein.


author: Backbs, Y. C.

text:
    Flockhart Foundry Co., petitioner, v. Cox Automatic Pipe Bending Co., defendant.
    [Decided December 19th, 1923.]
    1. Where the affidavits to chattel mortgages state that there was an amount loaned by the mortgagees to the mortgagor, when as a fact the amount paid was reduced by the amount of discount paid on notes on which the money was obtained, such affidavits are not untrue, as the discounts were paid for and on behalf of the mortgagor, and formed a part of the loans. Sunt v. Ludwig,'98 S. J. Eg. 314, distinguished.
    2. Where a chattel mortgage is given for a present valuable consideration moving to the mortgagor company, and the mortgagor company is solvent and not contemplating insolvency, it had a right to borrow the money and pledge its property as security. TanOleef v. Millville, 78 N. J. Eg. 176, distinguished.
    3. Where a company is not insolvent at the time it g'ave mortgages, and insolvency was not contemplated within the meaning of the statute, its assets far exceeding its liabilities as a going concern, and the loans were made to relieve the company of the embarrassment of not having sufficient ready cash, in the belief of all concerned that the company would prosper, and some of the money was borrowed to extend the company’s business, such mortgages were not made to hinder and delay creditors, but were made in good faith to advance the interests of the company.
    On final hearing.

      Messrs. McCarter & English (Mr. Arthur F. Egner), for the petitioner.

      Mr. Elmer W. Demare,si, per se, for the receiver.
   Backbs, Y. C.

The Coz Automatic Pipe Bending Company was declared insolvent and the receiver sold its assets free and discharged of the lien of two chattel mortgages given by the company to Messrs. Cronan, Cox and Lemke for $10,000 and $15,000, respectively. The mortgagees, Cronan and Lemke, now petition the court to direct the receiver to pay to them the mortgage debts out of the proceeds of sale. The receiver resists the application, setting up that the mortgages were invalid because (a) the affidavits annexed do not meet the requirements of the statute; (b) that the mortgages are in fraud of creditors in violation of the statute of frauds and (c) that they were given when the company was insolvent or at a time when insolvency was contemplated, to the knowledge of the mortgagees, in violation of section 64 of the Corporation act. Comp.- Stat. p. 1688.

For some years Cronan and Cox had been partners, engaged in building pipe bending machines, under Cox’s patents. Cronan furnished the means. In 1918 the defendant company was incorporated and took over the partnership business. In the fall of 1919 the company was in need of cash to pay its pressing debts and for capital to extend its operations. Up to that time it had only been building pipe bending machines and it was arranging to engage also in the business of bending pipe. Cronan, Cox and Lemke—Lemke was a director—borrowed from a local bank $25,000 on two notes of the company, endorsed by Cronan, Cox and Lemke, one for $10,000 and the other for $15,000. The proceeds of the notes were paid to Mr. Cronan, who turned them into the company’s treasury. As security the mortgages in question, covering the plant of the company, were executed. The money was used to satisfy pressing creditors and for necessary equipment for the pipe bending business.

a.. Cronan made the affidavits to the mortgages for himself and as agent of Lemke and Cox. The mortgages and affidavits set forth the transactions in detail, but it is claimed that the statement in the one that the consideration was $10,000 loaned by the mortgagees to the mortgagor, and in the other that the consideration was $15,000 loaned by the mortgagees to the mortgagor were untrue, in that only the proceeds of the notes were paid to the company. I'cannot see the force of this contention. The discounts were paid for and on behalf of the company, and formed part of the loans, and'the aggregate made up the total sworn to in the respective affidavits. The case does not fall within Hunt v. Ludwig, 93 N. J. Eq. 314, or any of the cases there cited.

b. The Detroit Engineers, a corporation, had a claim against the company for unliquidated damages. Its first demand was for $7,000 and then it was increased to $74,000, and suit was threatened and begun but never finished. Cox testified—he is now at odds with Cronan and Lemke—that the mortgages were executed for the single purpose of thwarting the Detroit Engineers in the collection of its claim, if it should recover judgment. Two or three clerks gave fragmentary testimony in support. This is denied by Cronan, Lemke, Mr. Warren, a member of our bar and counsel to the company, and a Mr. Cane, a prominent business man and friend of Cronan who helped negotiate the loans. Cronan, Lemke and Cox testify that they regarded the claim without merit. And, moreover, Cox says that the assets of the corporation at the time were worth, in his opinion, $500,000. If that be so or only half true, how, possibly, could mortgages aggregating but $25,000, accomplish what he said was designed. The circumstances attending the loans indicate, and most reliable testimony shows that the mortgages were made in good faith to advance the interests of the company.

The receiver further contends that although actual fraud is not made out, yet if the mortgages have the effect of hindering and delaying creditors, they are fraudulent and void under the statute of frauds, and he relies chiefly on the case of Van Clief v. Millville, 79 N. J. Eq. 176, which he insists is controlling. I think the cases are widely different in principle. In the instant case the security was given for a present valuable consideration moving to the company and the company being solvent and not contemplating insolvency it had the right to borrow money and pledge its property as security. In the cited case the mortgage was given by a corporation in financial difficulties to a trustee, covering all its property for an amount equal to its debts and for such additional sums to be advanced by the trustee for the protection of the property during the trusteeship. The mortgage was available only to those creditors of the company who would assent and submit to its terms which, among other things, provided for an extension of time for the payment of their debts. Creditors who refused to submit to the scheme, who refused to take what their debtor saw fit to dole out to them on the debtor’s terms, manifestly were hindered in the collection of their debts by lawful process, and it was held that such hindrance was in violation of the statute of frauds and that the mortgage was void, and it having been given in violation of the statute it was held to be void as a whole, even as to the money advanced by the trustee to protect the property.

c. The company was not insolvent at the time the mortgages were given, and insolvency was not contemplated within the meaning of the statute. At the time the loans were made and the mortgages given the company’s assets, consisting of shop machinery and utensils, pipe bending machines, machines in process of manufacture, parts in stock, book accounts, &c., far exceeded its liabilities as a going concern engaged in the special line this company was engaged in. It is true that the business had never been profitable and that the company was often hard up for ready cash to meet its obligations, but it struggled along although at times it was on the brink of statutory insolvency and had a bill in insolvency been pressed it could not have been successfully resisted. The loans were made to relieve the company of this embarrassing predicament and to stimulate its functions and credit and in the belief and expectation of all concerned that with this handicap out of the way and the new venture in sight, the company would prosper.

The fact that some of the money was borrowed to extend the company’s business, and was so used, seems to me argues strongly that insolvency was not contemplated, and the confidence that Cronan, Cox and Lemke had in the future of the company, displayed by their willingness to advance the company the $25,000, by borrowing it on their own credit, is almost a complete answer to the charge that they contemplated insolvency. I think the case, on 'this score, comes within the principle in Read v. Helois Carbide Specialty Co., 64 N. J. Eq. 231; Miller v. Gourley, 65 N. J. Eq. 237; Regina Music Box Co. v. Otto, 65 N. J. Eq. 582.

The mortgages are valid and are sustained.


author: Backes, Y. C.

text:
    In the matter of the application of Silas Paramore and Seria Paramore for writ of habeas corpus.

    [Decided January 15th, 1924.]
    1. Where the governor of a sister state made requisition on the governor of New Jersey for the delivery of a person indicted for murder, so that he might be conveyed to the sister state to be tried for that offense, and such requisition is honored, the fear that the person so indicted may be lynched in the sister state does not constitute legal ground for this court to nullify the governor’s writ of rendition, on application for a writ of habeas corpus.

    2. Where a requisition and rendition are in due form, the only questions before this court are: “Is the prisoner the person named in the requisition and renditionand “Is he a fugitive from justice from the demanding state?”
    3. It must be presumed that the demanding state will protect the prisoner from violence and give him a fair trial.
    On petition, &c.

      Mr. Klemmer Iialieissev anti Mr. William I). Danberry, for the relator.

      Mr. Joseph, E. Strieker and Mr. William L. Bryan (of the Georgia bar), for the State of Georgia.
   Backes, Y. C.

Silas Paramore was indicted June 3d, 1923, by the grand jury of Seminole county, Georgia, for the murder of I. J. Williams, in that county. After the alleged murder Para-more fled to this state and was apprehended in Middlesex county. Thereupon the governor of Georgia requested the governor of this state to deliver Paramore to J. L. Alday, his .agent, to convey him to Georgia. The governor honored the request. Thereupon Paramore sued out this writ of habeas corpus, praying that he be set at liberty because he fears that if he is returned to Georgia he will be lynched, this fear being based upon alleged threats and demonstrations made against him by some evil disposed people of the community in which he formerly lived, and upon mob violence suffered in the past by persons of the colored race in the State of Georgia. That this plea does not constitute a legal ground for nullifying the governor’s writ of rendition is too plain for discussion. To heed the appeal would be to give the prisoner his absolute freedom—an impossible alternative to a dismissal of the writ.

The requisition and rendition are in due form and the only questions before me are: Is the prisoner the person named in the requisition and rendition, and is he a fugitive from justice from the demanding state? The first is admitted. The second cannot be denied, for he was in the vicinity where the murder (if a murder) was committed, and at or about that time he fled from Georgia into this state. See People v. Byrnes, 33 How. 58; Re Reggel, 114 U. S. 643; Hogan v. O’Neil, 255 U. S. 52.

The prisoner’s counsel seems to labor under the impression that the court may, in the exercise of a sound legal discretion, grant relief, but this is a misconception of the power of the court. The court is controlled by the law, and the law applicable to the case in hand is not in doubt and the duty of the judge is imperative. A similar appeal to the court based on fear of lynching is reported in United States v. Cooke, 209 Fed. Rep. 607, where the writ was dismissed, the court observing that it must be presumed that the demanding state will protect the prisoner from violence and give him a fair trial. See, also, Marbles v. Creecy, 215 U. S. 63.

At the hearing before Governor Silzer on objections to granting the extradition, the reason here assigned was there fully exploited and the governor was at pains before signing the mandate to secure from the governor of Georgia his personal assurance of safe conduct for the prisoner and a fair trial. Since then I have been informed that the governor has caused further investigation to.be made in the vicinity of the murder and that he has received additional assurances that there is no ill-feeling against the prisoner in the community. In granting the extradition the governor very properly concluded that the fear and apprehension of the prisoner that he would be lynched could not be lawfully entertained by him as a justification for refusing the request of the governor of Georgia. The United States constitution and the federal statute made it obligatory upon him to honor the requisition. In re Thompson, 85 N. J. Eq. 221. As no legal cause has been assigned in these proceedings to justify judicial interference the writ will be dismissed and the prisoner remanded.


author: Backes, V. C.

text:
    Anson B. Moran, complainant, v. United States Cast Iron Pipe and Foundry Company, defendant. John Day, complainant, v. United States Cast Iron Pipe and Foundry Company, defendant.
    [Decided February 27th, 1924.]
    1. Where the statute provides that a corporation shall be bound to pay a fixed yearly dividend on its preferred non-eumulative stock not exceeding eight per cent, such company, after paying its yearly dividend, may in the same year pay an additional dividend from profits of previous years withheld from preferred stockholders.
    2. Where the statute provides that a corporation shall be bound to pay a fixed yearly dividend on its preferred stock before any dividend shall be paid on its common stock, and the profits of past years were allowed to accumulate in the company’s treasury, such obligation to pay dividends on the preferred stock must be discharged before any dividends may' be paid on the common stock.
    On final hearing.

      Messrs. Pitney, Hardin & Skmner (Mr. Hardin), for the complainant, Anson B. Moran.

      Messrs. Lindabury, Depue ds Faulks (Mr. Faulks), for the defendant.

      Messrs. Besson, Alexander & Stevens (Mr. Besson), for the complainant, John Day.

      Messrs. Lindabury, Depue .<& Faulks (Mr. Faulks), for the defendant.
   Backes, V. C.

There has been no material change in the subject-matter of this litigation since the decision in 1908 in Bassett v. United States Cast Iron Pipe and Foundry Co., 74 N. J. Eq. 668; affirmed, 75 N. J. Eq. 539.

It will be recalled that at that time the company had a reserve fund, accumulated by withholding dividends from its preferred and common stockholders, which, though listed on the books as “Eeserve for Additional Working Capital,” was held to be surplus profits and not working capital in the statutory sense of section 47 of the Corporation act, and that so much thereof as was derived from withholding dividends from the preferred stockholders was held to be available for division among them—that is to say, whenever in the opinion of the directors it was no longer needed for the purpose for which it was reserved, and they, in their discretion, saw fit to divide it. The character of that fund remains the same except that its book title is now “Working Capital Eeserve,” and the respective amounts composing the fund withheld from the two classes of stock have changed. At the end of the fiscal year, 1922, the amount' of dividends withheld from preferred stock was $700,000; from common stock, $1,800,-000, in round figures. The outstanding capital stock is now $12,000,000 preferred, seven per centum, non-cumulative dividends, and $12,000,000 common.

The company’s earnings during the year 1922 were over a million dollars, and after paying a dividend of five per cent. ($600,000) on the preferred stock the balance ($559,-595.75) was transferred to the 'working capital reserve. Later, á further dividend of two per cent, was declared for the year 1922, and the amount ($240,000) was withdrawn from the working capital reserve to pay it. On November 16th, 1923, the company resolved to pay to the preferred stockholders an additional dividend of one-half of one per cent., and a like dividend of one-half of one per cent, to the common stockholders, and drew upon the working capital reserve lor the amount ($130,000). The resolution declaring the dividend on the preferred stock recites that it was out of earnings withheld from the preferred stockholders in previous years and was no longer needed as working capital, and the one declaring the dividend on the common stock, after setting forth the fact that a dividend of seven per cent. had been paid to the preferred stockholders for the year 1933 out of tlio profits of that year, states that it is out of the net earnings for the year 1933. At this juncture the complain-: ant, Moran, a common stockholder, filed his bill to enjoin the payment of the additional dividend to the preferred stockholders, and the complainant, Day, a preferred stockholder, filed his bill to prevent the paymenc of the dividend declared on the common stock.

The Moran bill. The complainant, a common stockholder, contends that the company having paid seven per cent, in dividends on the preferred stock for the year 1922—the yearly maximum fixed by its charter—it was unlawful to declare the extra dividend of one-half of one per cent, out of withheld dividends of prior years because the charter limits the payment of dividends in any one year to seven per cent. The certificate of incorporation fixes the yearly dividend at not to exceed seven per centum.

Section .18 of the Corporation act of 1896 provides, as to preferred stock, that

“The holders thereof shall be entitled to receive and the corporation shall be bound to pay thereon a fixed yearly dividend, to be expressed in the certificate not exceeding eight per centum, payable quarterly, half yearly or yeaxdy before any dividend shall be set apax-t or paid on the common stock.”

This, obviously means, as to non-eumulative dividends, that out of the profits of any fiscal year not more than the percentage fixed by the charter shall be paid on such stock for such year, but it does not prohibit the company, after having paid the fixed yearly dividend, from, in the same year, declaring and paying additional dividends ont of profits earned in prior years applicable to dividends for such years, and which, but for holding them in reserve for economic reasons, would have been distributed in dividends in those years. These profits belong primarily to the preferred stockholders, and the directors are in nowise restricted, either as to amount, time or occasion, when distribution shall be made.

It has been suggested that the withheld profits are available only for dividends in lean years to make up deficiencies, and that that was the effect of the opinion in the Bassett Case. That situation was involved but the point was not.

The resolution declaring the dividend is lawful and the bill will be dismissed.

The Day bill. This bill is by a preferred stockholder to prevent the' payment of the dividend declared on the common stock “out of the profits of 1922.” The dividend was declared after the company had paid seven per cent, on the preferred stock for that year. The point made is, that no dividend can be declared on the common stock until all the withheld profits applicable to dividends on the preferred stock have first been divided and paid.

It will l)e observed that section 18 provides not only that preferred stockholders shall be entitled to receive, and the corporation shall be bound to pay, a fixed yearly dividend, but also declares that such dividend shall be paid “before any dividend shall be set apart or paid to* the common stock.” The quoted language is unmistakable,' and the reason for it is aptly demonstrated in the present effort of the board of directors to favor the common stock at the expense of the preferred stockholders. While the statute says that the preferred stockholders shall be entitled to receive, and the company shall be bound to pay, a fixed yearly dividend out of the profits, when that obligation is to be performed is largely a matter of discretion with the directors. They are at liberty to pass dividends year after year and pile up profits if in their opinion it is for the welfare of the company that this bo done—as was done here—and in the absence of fraud, actual or constructive, their judgment is controlling. But once having- decided to divide the profits, duty supplants discretion, and it becomes incumbent upon the directors to discharge the company’s obligation to pay the fixed yearly dividends, and this before any dividend shall be set apart or paid on the common stock, viz., to holders of cumulative dividend shares, all arrearages; to holders of non-cumulative dividend stock, the dividends withheld. Otherwise, if the action of the defendant company were sanctioned, and the directors pursued the course they have outlined, the rights of the pre-« ferred stockholders in the reserve profits could be indefinitely ignored and altogether subordinated to those of the common stock. Although each class has a definite sum in the reserve, and one cannot encroach on the other’s for dividends, the preferential right of paym'ent of dividends assured by the statute cannot be disregarded. The statutory design was to meet just such a situation as here confronts the preferred stockholders. The legislative scheme was to- protect them in their priority rights to dividends over the common stock in all events, and where, as here, profits of past years applicable to dividends on both preferred and common stock are held in reserve, or there are current profits applicable to dividends on common stock, it was conceived that this protection would be afforded by forbidding the payment of any dividends on the common stock until the amount due the preferred stockholders was first paid. The statute in this respect is nothing-more or less than a definition of the equitable rights of the preferred stockholders arising out of the company’s obligation to pay the yearly fixed dividend, for if the company had profits not needed in its business, and was about to distribute, them among the common stockholders when it owed dividends on the preferred stock, a court of equity would enjoin the diversion, just as it would intervene in behalf of creditors of a corporation when dividends are in derogation of their rights.

The fact that the dividends was declared out of the profits of 1922 adds no merit. The profits of that year had been in fact transferred to the working capital reserve, and the amount of the dividend was later withdrawn to meet it; but that is unimportant. The profits of 1922 were bulk surplus profits, by whatever name, and, as Vice-Chancellor Howell observed, mere bookkeeping entries cannot change their character. The dividend cannot be differentiated, because it was out of the profits of the last fiscal year, any more than if it had been declared out of the profits of any preceding year and carried in the working capital reserve.

The defendant company’s conception of section 18 is illustrated by the stock preference clauses contained in the certificate of incorporation, which read as follows:

“The preferred stock shall be entitled out of any and all surplus net profits, whenever declared by the board of directors, to noncumulative dividends at a rate not to exceed seven per cent. (7%) per annum for the fiscal year beginning on the first day of June, 1899, and for each and every other fiscal year thereafter, payable in preference and priority to any payment of any dividend on the common stock for such fiscal year. In the event of the dissolution of the corporation the holders of the preferred stock shall be entitled to receive par value of their preferred shares out of the surplus funds of the corporation remaining after the payment of its debts, before any payment shall be made therefrom to the holders of the common stock. The common stock shall be subject to the prior rights of the holders of the preferred stock as herein declared. If after providing for the payment of full dividends for any fiscal year on the preferred stock there shall remain any surplus net profits for such year, any of such net profits of such year and of any other fiscal year, after full dividends shall have been paid on the preferred stock, shall be applicable to such dividends upon the common stock as from time to time shall be declared by the board of directors; and out of any such surplus, net profits, after the closing of any fiscal year, the board of directors may pay dividends upon the common stock of the corporation for such fiscal year, but not until the dividends upon the preferred stock for such fiscal year shall have been actually paid or provided for and set apart.”

This interpretation, if such it be, is, in effect, that noneumulative dividends are entitled io precedence only in years for.which dividends are declared on the common stock out of profits of such 3rears sufficient to pay dividends on both preferred and common stock, and not for years when applicable profits are available but undivided. The view is manifestly too narrow, for in the favored circumstances the preferred stock would be, as a matter of course, entitled to priority because of, as has already been pointed out, the company’s bounden duty to pay the preferred stockholder a fixed 3rearly dividend. The fixed yearly dividend is the measure oí their income per year out of profits per year, and the obligation of lean years is not met by preferential payments in fat years. Sight is lost entirely of the specific subordination of all dividends on the common stock.

Section 18 was amended in 1901 (P. L. 1901 p. 840), and in respect of dividends on preferred stock it provides:

“And such dividends may be made payable before any dividends shall be set apart or paid on the common stock, and such dividends may be made cumulative; provided- the corporation shall set apart or pay the said dividends to the holders of non^cumulative preferred stock before any dividends shall be paid on the common stock.”

The preservation of the priority right of non-cumulative dividends, it would seem, emphasizes the view here entertained that the legislature intended that no profits were to be divided among common stockholders, whatever may have been their origin or however applicable, unless the company’s obligation to the preferred stockholders was first discharged.

The statutory ban on payments of dividends on the common stock, until the preferred stockholders have been awarded their just due, is explicit and imperative. The preference clauses in the certificate of incorporation, in so far as they are thus inconsistent with the statute, are invalid. Gen. 3tat. p. 1604 §' 8 ¶ 7. The dividend under consideration is without warrant in law and will be enjoined.