text:
    Richard G. Stevenson, administrator, v. Paul H. Markley et al., executors, &c.
    [Decided March 7th, 1907.]
    1. Ail amendment to a bill, intended only to strengthen matters alleged in the original bill, is not permissible under an order granting complainant leave to amend by inserting in the bill allegation excusing the delay in the bringing of the suit.
    2. Whether a court will strike out a bill on the allegation of laches is a matter of discretion, and the court will generally permit the proving of the facts excusing laches and determine whether such facts excuse.
    3. A suit by the representative of a deceased ward against the representative of the deceased guardian for an accounting is not properly cognizable in the orphans court, and is within the jurisdiction of a court of equity.
    4. A guardian receiving property of a ward becomes a trustee for the ward until a proper accounting is had, and the fact that the ward acquires the right to call for an accounting at a particular time does not fix such time as a period from which either the statute of limitations or equitable principles in analogy thereto apply.
    5. Gen. Stat. p. 5, concerning the action of account, gives a right of action for an account against a guardian, and Gen. Slat. p. 1D7J/ § 8 provides that an action of account shall be commenced within six years nexi after the cause of action shall have accrued.—Held, that a suit in equity to compel a guardian to account is not barred by the statute. The fact that a court of law acquired jurisdiction by the statute did not affect the jurisdiction of equity previously existing.
    6. A ward attaining her majority in 1883 died in 1885, before the guardian had rendered an account. The guardian died in 1905. In 1900 an administrator of the deceased ward was appointed, who, in the same year, sued the representative of the deceased guardian for an accounting. —Held, that 'the suit was not barred by limitations, though the cause of action accrued on the ward’s death, since limitations did not begin to run until the appointment of her representative.
    Hoard on motion, under rule 213, to strike out bill.

      Mr. Francia D. Weaver, for the complainant.

      Mr. Howard M. Cooper and Mr. Herbert A. Drake, for the defendants.
   Garrison, V. C.

(orally).

This is a hearing upon a motion made by the defendants for leave to withdraw their answer to the original bill, and to move to strike out the bill for want of equity, and various parts of the bill for specific reasons stated.

Upon a hearing had on the 10th day of December, 1906, it appeared to the court that the face of the bill disclosed a cause of action so old that, in default of explanation, the court would be inclined to dismiss the same for laches if the defendants had so moved the court. The court not finding among the reasons or objections of the defendants any one based upon laches, and the complainant moving for leave to amend by setting up facts explaining the laches, the latter motion was granted, and an order of the 10th of December, 1906, was entered. That order, in so far as it is now material, provided that the complainant “have leave to amend his bill by inserting therein such charges as he may be advised or able to do concerning the reasons for the delay in the bringing of his suit.” And it was further therein ordered that all other proceedings should remain in stain quo.

Thereafter the complainant filed amendments, which he has numbered 14a and 145, and upon the amended bill the defendants have now moved, under rule 213, to strike out this bill and various parts thereof.

I am inclined to the opinion that the amendment'numbered 14a is not within the permission of the order of the 10th of December. It does not seem in any way to set forth, or could it be considered as giving, a reason for the delay. It apparently is some additional allegation concerning some of the previous matters alleged in the bill, and is evidently intended to strengthen the charges of the bill in these respects. That was not within the purview of the order made on the 10th of December, and the complainant, under that order, cannot claim the right to make this amendment. If he has the right it must be asserted in a proceeding where that matter comes directly under consideration.

I will therefore grant the motion to strike out the amendment numbered 14a.

The other general heads are that the bill does not show equity; that because the thing sued for is a sum of money due the representative of a deceased ward by the representative of a deceased guardian, and is therefore an action of account, it is claimed by the defendants that suit must be brought thereon within six years, under the statute of limitations. It is also claimed that the complainant is in laches unexplained, and that there is therefore no equity in the bill.

It is further claimed that by the amendment 145 the complainant sets out another cause of action than that previously pleaded, and an incongruous one with respect to the latter.

I do not find that the complainant has changed his prayer in the least, nor that he prays any relief with respect to this matter as alleged in this paragraph. That matter seems to have been inserted wholly under the permission of the court as a reason or explanation of his delay in bringing suit upon the cause of action which is urged in the bill and for which appropriate relief is prayed in the prayer thereof.

With respect to the matter of the statute of limitations applying, I have examined this matter with great care, and have read most, if not all, of the authorities, and considered them very carefully. The matter is an open one in New Jersey, and is in grave doubt. I am rather inclined to think that our courts should follow the English and New York courts in holding that the relation of guardian and ward is a continuing trust, and that until the guardian settled with the ward or the ward’s representatives it must be held to be a continuing, direct trust which is not affected by the statute of limitations. This, of course, is in a case where the guardian has not denied the ward’s right and has not taken a position of antagonism, from the time of which open expression of antagonism the statutes of limitations or imputations of laches are always held to run. Therefore I am not going to strike this bill out, either for want of equity or because barred by the statute of limitations, or because the allegations of the amendment 146 are incongruous with the main cause of action set up in the original bill.

The defendants have answered so much as was in the original bill, and their answer may stand, if they so desire, or they may make a totally new answer to this bill as amended.

I do not wish by this decision to be understood as determining that the matter in 146 which is permitted to stay in the bill as an amendment is a satisfactory answer to the charge of laches, or that the court may not, on final hearing, reach the conclusion that there was laches, but I am disinclined to absolutely deprive the complainant of his 'day in court upon the ground of laches in the face of a charge in the bill that there was some sort of an agreement or understanding between him and the person whom he seeks to hold as trustee concerning the subject-matter of the trust which, when disclosed in detail, may explain or excuse the delay.

Whether a court will strike out a bill or sustain a demurrer—■' which is the same thing—upon the allegation of laches is, of course, a matter of discretion, and I do not think it would be discreet, legally speaking, to prevent this complainant from proving the facts, after which it will be entirely open to the court to determine whether such facts excuse or fail to excuse the long delay which has ensued in the asserting of his rights. I do not mean his rights as administrator, but his right, as husband of the deceased wife, to take all her personalty and to have administration. He had this right from the date of her death in 1885, and did not actually take out letters until 1906. It may be that upon final hearing the court will hold that his delay in this respect defeats his right. But, as just said, I think it more appropriate to consider and decide this upon final hearing, and after he has had opportunity to make proof of the excuses for delay that he offers.

The above was the oral deliverance of the court at the time of disposing of the motion at the argument. Having been notified that an appeal has been taken by the defendants, I think it due the reviewing court that a more extended statement of facts and law be given with respect to the important question disposed of.

•The essential facts are as follows: Mary Josephine Markley was the mother of Mary Markley, and was appointed her guardian by the orphans court of Camden county about October 6th, 1876, and, as such guardian, there was paid to her for the ward the sum of $4,087.14. Mary Markley, the ward, came of age on the 13th day of January, 1883. She married Richard G. Stevenson on the 26th day of March, 1885. She died on the 25th day of December, 1885. There was no accounting between her and her guardian. Her mother, the guardian, died on the 26th day of February, 1905. Richard G. Stevenson, the husband of the deceased ward, was appointed her administrator on March. 1st, 1906.

This suit is for an accounting, and was brought by Richard G. Stevenson, the administrator of the deceased ward, against the executors of the deceased guardian, some time in the summer of 1906.

It is the contention of the defendants that this suit is barred, either directly by the statute of-limitations or by the application by a court of equity of principles in analogy to the said statute.

It should first be observed that there are two periods to be considered and two different sets of parties, and that different principles are therefore applicable. First, there is the period between the coming of age of Mary Markley, the ward, on the 13th of January, 1883, and the time of her death on the 25th of December, 1885. During that period the parties concerned were the ward and the guardian. If the statute of limitations had begun to run then the death of the ward would not toll the same. This is too well settled to require citation. After the last-named date, and up until the death of the mother, the guardian, on the 26th of February, 1905, there was no one in existence in whom was vested the rights of the deceased ward against her guardian. Such a person did not exist until the 1st of March, 1906, when an administrator was appointed far the estate of the deceased ward. At that time the guardian had also died, so that the parties had completely changed, and the parties were, as above stated, an administrator of a deceased ward on one side and the executors of a deceased guardian upon the other. If the statute began to run at the death of the ward, notwithstanding that no administrator was appointed, then this suit is barred.

There are certain well-settled principies of equity which it is only necessary to refer to briefly.

A court of equity undoubtedly has jurisdiction over the accounts of guardians under the general jurisdictions over trustees, a guardian being held to be a trustee in the fullest sense of the word. In re Hannah Barry, 61 N. J. Eq. (16 Dick.) 135 (Vice-Chancellor Emery, 1900); Sleeman v. Wilson, L. R. 13 Eq. 36; 1 Perry Trusts § 430; 15 Am. & Eng. Encycl. L. (2d ed.) 75.

It is true that this jurisdiction will not be exercised saving in exceptional cases, and ordinarily an accounting between guardian and ward should take place in the orphans court. But I apprehend that the same rule with respect to the application or non-application of the statute would apply in the orphans court as in this court.

But the suit at bar is not one properly cognizable by the orphans court, because it is not between a guardian and ward, or between a guardian and the representatives of a deceased ward, but is between the representatives of a deceased ward and of a deceased guardian.

The determination of the whole question depends, in my view, upon whether the relation between a guardian and ward is held to' be a trust relation—that is, a direct, continuing, subsisting trust. If it is, then the authorities are clear that the statute of limitations does not apply. There can be no doubt, I think, that the relation between guardian and ward is a trust, and is a direct, subsisting, continuing trust.

Some courts, however, hold that the trust terminates at the majority of the ward (15 Am. & Eng. Encycl. L. 82 note 1), and others have even fixed the period of the termination of the trust, with respect to a female ward, at the date of her marriage. 15 Am. & Eng. Encycl. L. 82 note 1.

In some jurisdictions, therefore, it is held that when the ward comes of age, or marries, the trust relationship ceases, and the statute of limitations, or principles in analogy thereto, appty, and an action will not lie for an accounting after the period of limitation provided. 15 Am. & Eng. Encycl. L. 82 note 1.

But other courts hold that the relation is one of trust, and is direct, subsisting and continuing until there is an accounting. Mathew v. Brise, 14 Beav. 341; Matter of Camp, 126 N. Y. 377 (Court of Appeals, 1891). Although in a previous case in New York an opposite view had been distinctly taken and held in the case of Bartine v. Varian, 2 Edw. Ch. 343 (1832). This case was cited to the court in the Camp Case, and was, of course, disregarded. See, also, Pyatt v. Pyatt, 46 N. J. Eq. (1 Dick.) 285 (Court of Errors and Appeals, 1889).

The principle upon which these last-cited cases go is that where the guardian receives property belonging to the ward he becomes a trustee for the ward with respect to such property, and remains such trustee, subject to all the incidents thereof, until a proper account is had between him and the ward, and that the fact that the ward acquires the right to call for an accounting at a particular time, considered of course in connection with the concurrent right of the trustee or guardian to go into court of his own volition and account, does not fix such time as a period from which either a statute of limitations applies or equitable principles in analogy thereto are applicable.

There being no direct decision in this state upon this subject, we are free to adopt whatever view seems best. I think it best to assimilate this trust with all other like trusts, and to hold that so long as the guardian has the property of the ward—that is, so long as he has not accounted for it—he should be held as a trustee with a direct, subsisting, continuing trust, unaffected by statutes of limitations or principles in analogy thereto.

I think the reasoning of the cases taking this view is more satisfactory than that of those which take an opposite view. I am also of opinion that the rule that I have laid down is the wiser one. It is certainly more equitable to each of the parties concerned. I see no reason why a guardian having property of the ward confided to his care should be treated in any different aspect than any other trustee to whom is confided the property of a cestui que trust. He has it in his power, when the ward comes of age, of ridding himself of the burden of the trust by taking the proper proceedings either in a probate court or in this court, or of course by a direct settlement with the late ward. I do not see that any good purpose is served by holding that the right which the ward has of calling the guardian to account should be construed as a strict legal right subject to the statute of limitations, and I do not think that it is within the spirit of such.

Speaking generally, those actions which are within the spirit of the statute of limitations are such as lie with an actor, and if he neglects or fails to take advantage of the legal procedure open to him for a fixed period, it is the policy of this legislation to end the right. But where trusts are concerned the situation is radically different. There, there is no one who must be the exclusive actor. Either party nmy, at any proper time, apply to the court and obtain full relief. Under such circumstances I can see no reason why a trustee should have protection after a stated period because the other party has not proceeded, it having been all the time within the power of the trustee himself to have proceeded had he seen fit.

Succinctly stated, the argument of the defendants is that the statute of account of this state (Gen. Stat. p. 5) gives the right of action for an account against a guardian, and that the statute of limitations (Gen. Stat. p. 1974 § 8) provides, inter alia, that all actions of account shall be commenced within six years next after the cause of action shall have accrued. Therefore they argue that we have a case in which there is a concurrent remedy at law and in equity, and the legal remedy is barred by the statute, whereupon a court of equity will hold that an action in equity is likewise barred. It is unnecessary to cite any of the numerous cases which affirm this doctrine, but the doctrine is not applicable to the case in hand. The doctrine just contended for applies where the courts of law originally had jurisdiction and courts of equity subsequently obtained, or were held to have concurrent jurisdiction. There, as has been just stated, a statute of limitations which barred the right of action at law equally barred it in equity, but where the court of law did not originally have jurisdiction, the fact that it subsequently acquired it, and the action in it was barred by the statute, does not result in finding that the suit in the court of equity is likewise barred.

In the case of Hedges v. Norris, 32 N. J. Eq. (5 Stew.) 192 (Chancellor Runyon, 1880), it was held that the statute of limitations is not a bar to a suit in equity for the recovery of a legacy payable out of, the personal estate only. In that case the chancellor held that an executor was a trustee with respect to the sum of money due the legatee, and that while that trust subsisted the statute of limitations did not run in favor of the trustee. The trustee insisted that the legislature, by the act of March 11th, 1774, had provided for the recovery of legacies by actions at law, and that thereafter courts of equity and courts of law had concurrent jurisdiction, and what would bar the action in one would have a similar effect in the other. To this the chancellor replied that equity had jurisdiction over legacies before the courts of law assumed it, and he pointed out that where a court of equity has jurisdiction and a court of law subsequently acquires concurrent jurisdiction, this will not serve to deprive the court of equity of its jurisdiction, nor to bind it by limitations which affect the action at law.

With respect to the matter of account at law, it will be found that the action only lay, so far as guardians are concerned, against guardians in socage. 1 Bouv. Dict. (Rawle’s ed.) 64; 1 Encycl. Pl. & Pr. 84.

An interesting and instructive history of guardianship at common law will be found in Foley v. Mutual Life Insurance Co., 138 N. Y. 333 (Court of Appeals, 1893).

In the case of Green v. Johnson, 3 Gill & J. (Md.) 389, it is said that “this action of account for rents and profits maintained by the heir after lie had attained the age of fourteen against the guardian in socage was the only one, other than an action on the bond, that could be brought against a guardian, as guardian, in a court of law.”

Ordinarily proceedings to require guardians to account must be brought in a probate court (In re Hannah Barry, supra), or in a court of equity if there was anything exceptional in the case requiring the interposition of a court of equity. It therefore appears that at a time when courts of equity, under their peculiar jurisdiction respecting trusts, undoubtedly had jurisdiction over the accounts of guardians the common-law courts only had a limited jurisdiction respecting guardians in socage. The effect, therefore, of the act of our legislature passed in 1794 vesting jurisdiction in the common-law courts of actions of account against guardians generally was not to divest the court of equity of its jurisdiction with respect thereto, and any limitations placed upon such common-law action do not, directly or by analogy, bind the court of equity.

Determining, then, that the relationship between a guardian and ward is a direct, subsisting, continuing trust, the conclusion is reached that, as between this ward and her mother down to the time of the death of the ward, there was no running of the statute and no application of principles of limitation analogous thereto.

The next question to be considered, therefore, is whether the statute began to run at the date of the death of the ward.

It will be observed that the second period previously spoken of by me is now under consideration.

I am of opinion that if, in this state, a cause of action, arising upon the death of a person, and not until his death, is barred if the statutory period begins to run at the date of his death, then this action or suit is barred. But I do not find that this is the law. In fact, the decisions are to the contrary. The authorities hold that where the cause of action did not exist during the life of the party, and came into existence subsequent to the party's death, the statute does not begin to run until the appointment of a representative. De Kay v. Darrah, 14 N. J. Law (2 Gr.) 288 (at p. 296) (Supreme Court, 1834) 19 Am. Eng. Encycl. L. 219 note 3 (at p. 220). The time between the death of the party and qualification of personal representative is not counted. 19 Am. & Eng. Encycl. L. 220 note 3; 2 Eng. Rul. Cas. 133 note; Murray v. East India Co., 5 Barn. & Ald. 204 (1821); Pratt v. Swaine, 8 Barn. & C. 285; L. J. 6 K. B. 353 O. S. (1828); Atkinson v. Bradford Society, L. J. 59 Q. B. 360 (1890); Rhodes v. Smethurst, 6 Mees. & W. 351; 16 Eng. Rul. Cas. 146 (1840); Pinckney v. Burrage, 31 N. J. Law (2 Vr.) 21 (at p. 24).

My conclusions, therefore, are that as between guardian and ward there is a direct, continuing, subsisting trust until the guardian accounts; that the statute or implication of limitations does not apply thereto; that during the lifetime of this ward, after her coming of age and until her death, the statute had not begun to run; that at her death it may be proper to hold that the relation between the living guardian and the person entitled to call her to account was not a direct, subsisting, continuing trust outside the statute, but was a trust by implication, and therefore within the purview of limitations. But the limitation does not begin to run until there is a person entitled as representative of the deceased ward to call the guardian to account, and such a person in this case did not come into being until the appointment of the administrator of the deceased ward's estate in March of 1906. As this suit was brought almost immediately thereafter, it is, of course, not barred by the running of the statutory time against the administrator.

The motion to strike out the bill therefore fails.


source: Caselaw Access Project

author: Garrison, V. C.

license: Public Domain

text:
    Josiah White et al. v. Ella Etta Smith et al.
    [Decided March 7th, 1907.]
    1. An enrolled decree may be opened on petition to permit the defendant to make a defence on the merits.
    2. Where a 'decree was taken against a party without a trial on the merits as to a particular proposition in the case, it is within the discretion of the chancellor to open the decree and permit a defence on the merits of such question-.
    3. Evidence held to require a finding that an alleged lost deed executed by a son to his mother was not for the benefit of petitioners, and that they were therefore not entitled to open an enrolled partition decree for the purpose of claiming title to a portion of the property under such deed.
    This is a petition by the defendants Ella Etta Smith and her husband, Rufus, praying that the enrolled decree in this suit may be opened, and they may be let in for further pleading. I phrase the matter in this way because that which they wish to set up is not, by way of defence, against the complainants, but relates to a controversy with co-defendants.
    The decree is the ordinary decree in partition in which it is, inter alia, determined that the complainant owned one-third of the land in question, the defendant Ella Etta Smith one-third, and the defendants George H. Weaver and Josephine Maude Lake each one-sixth.
    The petitioners bring before the court in this proceeding the proceedings in another suit pending in this court in which the defendants Lake are complainants and the petitioners, among others, are defendants.
    From the pleadings, proofs and proceedings the following facts appear: Samuel W. Weaver was the owner, at the time of his death, of the land involved in the suit. He died in 1872, testate, his wife being the executrix of his will. He left a widow, Josephine T. Weaver, and three children, Theodore S., Alphonso and Ella Etta. Alphonso died in April, 1888. After his death the land in question belonged equally, one-third each to the ■widow, Josephine T., Theodore S. and Ella Etta. Josephine T., on the 13th of September, 1897, leased the whole property for six years to Josiah White and another, with an option to buy. They exercised the option within time, and upon her refusing to convey they, on August 3d, 1903, brought a suit for specific performance, in which she set up that she only owned a third of the land in question, and that Ella Etta owned a third and Josephine Maude (Weaver) Lake and George H. Weaver, the children of Theodore S. Weaver, then deceased, owned the other third.
    The court, in the specific performance case, decreed that Josephine T. Weaver should convey her interest, namely, one-third, to the complainants, and the other two-thirds were abated from the contract price, she receiving the one-third of the contract price for the one-third she conveyed. The decree in that suit was made on the 26th of May, 1904, was appealed and finally decided in favor of the Whites in March, 1905.
    On May 26th, 1904, Josiah T. White & Son brought this suit for partition. They made Ella Etta (Weaver) Smith (she having intermarried with one Rufus Smith), Josephine Maude (Weaver) Lake (she having intermarried with one Lake), and their respective husbands, and George H. Weaver, defendants. The complainants in this bill alleged that they were the owners of an undivided one-third, and that Ella Etta Smith and her husband were the owners of an undivided one-third, and that Josephine Maude Lake and her husband were the owners of an undivided one-sixth, and George H. Weaver was the owner of an undivided one-sixth. To this bill Ella Etta Smith and her husband filed an answer admitting the allegations as to the ownership of the land, and a decree was made on the 18th of May, 1906, finding the ownership as aforesaid, and ordering a sale of the property. The property was sold in July of 1906, and bought in by Ella Etta Smith for $15,535, and before the proceeds of the sale were paid over to the defendants Lake and Weaver notice was given by the solicitor of the Smiths to the solicitor of Lake and Weaver of an application to have the moneys dne the latter defendants held in court to await the determination of the suit of such latter defendants against the Smiths and others. An order was made, by consent of the solicitors, so providing.
    By their petition in this suit the Smiths set out that Theodore S. Weaver, on February 28th, 1889, gave a quit-claim deed unto Josephine T. Weaver for all his right, title and interest in the premises in question, and that
    “such conveyance was made to said Josephine T. Weaver in order that she might, in turn, convey such intei’est unto your petitioner Ella Etta Smith in part payment of the moneys which the said Josephine T. Weaver, as executrix of the estate of Samuel W. Weaver, deceased, should have paid unto your petitioner Ella Etta Smith, but which in reality she had paid unto the said Theodore S. Weaver.”
    They then set out that this deed was lost in or about August, 1903, and that they were advised that by reason of the loss the interest of the said Theodore S. Weaver reverted to his heirs-at-law, namely, the said George H. Weaver and Josephine Maude Weaver Lake. They then set out that they did not know, nor were they advised that it was possible to re-establish such lost deed until the latter part of the month of November, 1905, and that thereupon they caused proceedings to be instituted on the 11th day of December, 1905, in the supreme court of this state for the purpose of establishing the lost deed in accordance with the statute. That on the 26th of December, 1905, George H. Weaver and Josephine Maude Weaver Lake, together with the husband of the latter, instituted a suit in this court in which they set out the commencement of the proceedings by Josephine
    T. Weaver in the supreme court, asked that such proceedings be perpetually restrained, and further prayed that by the decree of this court the defendants Josephine T. Weaver, Rufus Smith, Ella Etta Smith and Laura Coston might be forever restrained from in anywise setting up any claim to the one-third interest in the lands and premises formerly owned by Theodore S. Weaver.
    The petition alleges that so much of the decree in this suit is erroneous as adjudges that George H. Weaver and Josephine Maude Weaver Lake are each seized and entitled to an undivided one-sixth of the land, and further charges that they are not entitled to any interest in said land.
    The prayer of the petition is that the final decree be opened and they be granted a rehearing, or else that said decree be per-, niitted to stand open until a final decree shall have been made in the case of Lake v. Weaver above mentioned.

      Messrs. Melosh & Morten, for the petitioners.

      Mr. John J. Crandall, for the respondents.
   Garrison, V. C.

While this petition may not be artistically drawn, the purpose of the petitioners is quite obvious. Having pleaded by their answer in this suit that the children of Theodore S. were entitled to a one-third interest, and the decree in the suit, in which they were all parties, having adjudged that fact, the petitioners desire now to have that decree opened so as not to be concluded thereby.

The first question to be considered is whether it is proper practice to seek by petition to open an enrolled decree for the purpose of giving the defendant an opportunity to make a defence on the merits. I conclude that under the authorities it is proper practice, and I endorse and agree with my brother Stevenson, who said: “In my opinion, the application by petition in the cause to vacate the enrollment and open the decree is to be encouraged, if not exclusively prescribed in all cases where such procedure will accomplish justice.” Kearns v. Kearns, 70 N. J. Eq. (4 Robb.) 483.

The next matter for consideration is under what circumstances the prayer of such a petition will be granted.

In Brinkerhoff v. Franklin, 21 N. J. Eq. (6 C. E. Gr.) 334 Chancellor Zabriskie, 1871), it was said (at p. 336) : “It has long been settled that an enrollment will be vacated and a decree opened when the decree has been made unjustly against a right or interest that has not been heard or protected, when this has been done without laches or fault of the party who applies.” Citing cases.

In Embury v. Bergamini, 24 N. J. Eq. (9 C. E. Gr.) 227 (Chancellor Runyon, 1878), speaking with respect to a default decree after an enrollment, the court said that it would be opened “for the purpose of giving the defendant an opportunity to make a defence, where such defence is meritorious, and he has not been heard in relation thereto, either through mistake, accident or surprise.”

In Day v. Allaire, 30 N. J. Eq. (3 Stew.) 231, the court of errors and appeals said: “The court of chancery has discretionary power, even after enrollment, to open a regular decree obtained by default, for the purpose of giving the defendant an opportunity to make a defence on the merits, where he has been deprived of such defence, either by mistake or accident, or by the negligence of his solicitor.”

In this last-cited case an answer was interposed by the defendant and testimony taken, but her solicitor abandoned the case without her knowledge, omitting and refusing to take testimony of several material witnesses, and did not present the evidence taken or argue the case before the chancellor; in that sense the decree was taken by default.

In the case at bar an answer was interposed but no question of merits concerning the subject-matter contained in this petition was raised by the answer. In that sense it may be said that this decree was taken by default on that point. ■

It is alleged in the petition that the reason for not setting up the facts which were perfectly well known to the defendants concerning this deed was because their solicitor advised them that when the deed was lost all rights of the grantee thereunder were also lost. This, of course, is not the law, since equity has jurisdiction to establish a lost deed. Kent v. Church of St. Michael, 136 N. Y. 10; 19 Am. & Eng. Encycl. L. (2d ed.) 555. And the remedy by statute is concurrent or cumulative. 19 Am. & Eng. Encycl. L. 556.

In Warner v. Warner, 31 N. J. Eq. (4 Stew.) 549 (Vice-Chancellor Van Fleet, 1879), and in Perrine v. White, 36 N. J. Eq. (9 Stew.) 1 (Chancellor Runyon, 1882), (affirmed, 36 N. J. Eq. (9 Stew.) 682), it was held that errors of judgment or mistakes of counsel are not valid grounds for granting a rehearing, and cases in other jurisdictions holding that the errors or negligence of counsel must be attributed to the client are collected in 16 Am. & Eng. Encycl. L. (2d ed.) 392.

It will be seen that the precedents and authorities do not lay down any hard and fast rule, and I think that this is by design and not from indecision. I think it is a matter left to the discretion of the court in each case, so that when merits and hardship are shown an inflexible rule will not prevent relief.

Hpon the question of merits in the case at bar it is necessary to rehearse certain facts before a decision can be stated.

There is no doubt from the proofs that Theodore S. Weaver gave to his mother, Josephine T. Weaver, a quit-claim deed for his one-third interest in the property owned by his father at the time of his death, and that such deed was dated on or about the 28th day of February, 1889. There is no doubt that the defendant Ella Etta Smith knew of this deed practically from the day of its delivery. This deed was in existence and was exhibited to the solicitor who represented Mrs. Josephine T. Weaver in the specific performance case begun by the present complainants against her about August 3d, 1903. It was lost shortly after that time.

' Josephine T. Weaver, it will be recalled, was the executrix of her husband, and she, her son Theodore and her daughter, Ella Etta, were each entitled to one-third of whatever he left. It appears from her testimony that in February of 1889 she and her son Theodore went over their mutual accounts and discovered that he had drawn a sum of money which they treated as having come to him from her as executrix. It is quite plain that since there was no settlement of the estate in the probate court, and no ascertainment of the indebtedness of the executrix to the legatees, it cannot be definitely ascertained what, if anything, the executrix owed the legatees. I think, however, that it appears undisputed in the case that the mother had given Theodore moneys, and that, as between themselves, they assumed that they were on account of his interest as legatee under his father’s will, and that such advances by her to him were in excess of what they then figured would be the amount eventually owing to him by her as executrix. The only living person who can give any evidence concerning the circumstances of the making and delivery of this deed is Mrs. Josephine T. Weaver, and her testimony thereon is as follows. Speaking in respect to her son Theodore, she said:

“After the settlement with him and myself he discovered and I discovered (to my astonishment, I will say) that he had overdrawn considerably what belonged to him, and he said to me, ‘I suppose Ella and Rufus will kick about that, that you have allowed me to overdraw so farI said—-well, I don’t remember just the answer I made to it, but he says, ‘All right, mother; I will make it all right; there shall be no hard feeling in our family; I will give you a quit claim deed to my interest in the old farm to make up to Ella what I have overdrawn on her share.’ ”

In other words, he gave to his mother, from whom he had procured what they determined was an excess of money over what was coming to him, this deed in payment or satisfaction of what he owed her, or perhaps as security therefor. It entirely lay with her as to what she should do with the property thus convejred to her. She could either accept and retain it, or could refrain from accepting it if she so desired. She could undoubtedly have conveyed it to Ella Etta in satisfaction of what she, as executrix, owed her, or could have declared a trust in her behalf, or could have sold it, and either kept the proceeds or paid them or some part of them to Ella Etta on account of her share; or she could have destroyed the deed, and thus divested herself voluntarily and intentionally of the interest thereby conveyed to her; or could voluntarily and intentionally have refrained from recording it fox the same purpose.

No express trust in favor of Ella Etta was created by the deed or by the conduct of the mother and Theodore. No implied trust in favor of Ella Etta arose out of the circumstances. Theodore’s dealings were with his mother, who was acting either individually or as executrix. What he owed he owed to her in one or the other of these capacities, and what he gave he gave to her. If she chose not to accept the benefit thereof no one else has any legal right to complain.

What Mrs. Weaver did after the deed was delivered to her is therefore of the utmost importance, and what the defendant Ella Etta did, in view of her knowledge and her present claim, is also important.

Mrs. Weaver received this deed in 1889, and does not claim to have lost it until 1903. During these fourteen years she did not record the deed, and never did anything to show that she intended to exercise any rights vested in her by the deed. While, standing alone, this failure to record might not be determinative, 'it certainly is some evidence of her attitude toward the matter. If she intended to accept the property from her son it is curious that she did not record the deed. If it was intended that she should convey the property to Ella Etta, as is now contended, there is no scintilla of proof as to why this was not done.

Ella Etta knew all the time of the deed, and if it be true that what she now says was the fact, she knew all the time that it was intended that this property was merely conveyed to her mother as a conduit through whom it was to reach her. Why she did not see to it that her mother conveyed to her is not in any way explained, nor is there any suggestion of a reason. The deed was still in existence and in the possession of Mrs. Weaver during the time in 1903 when the Whites, the complainants in this suit, began their action for specific performance against Mrs. Weaver. As before explained, she had agreed to convey the whole property to them for something over $8,000. In her answer she pleaded that she only owned one-third of the property and the children of Theodore owned another third and her daughter, Ella Etta Smith, a third. Here is confirmatory and determinative evidence that she did not intend to take the benefit of the conveyance of her son’s interest to her, and also evidence entirely at variance with the present contention of these petitioners.

Later in the year 1903 her daughter, Ella Etta, procures from her mother a bond for a sum alleged to represent the amount due by her mother as executrix to her, and subsequently judgment was entered on the bond and an execution issued and a sale had thereunder, and the property, namely, the real estate in question in this suit, which was levied on and sold, was conveyed through an intermediary to Ella Etta. The giving of this bond and warrant is entirely consistent with the idea that Mrs. Weaver owed her daughter, as executrix, the sum of money represented thereby, but is entirely inconsistent with the idea that the property conveyed to the mother by Theodore belonged to Ella Etta, and really was Ella Etta’s share of the personal property previously absorbed by Theodore.

It is inconceivable upon any rational theory of conduct that at a time when the mother held title to Theodore’s third for the benefit of Ella Etta, and was merely a dry trustee with no' duty to perform saving to convey to Ella Etta that she should not only not convey, but should confess judgment for the sum which, as executrix, she admitted she owed.

The taking of this bond and warrant by the daughter casts a strong light upon her attitude toward the subject-matter of inquiry, and what has just been said need not be repeated. If her present contention is sound,- and she was entitled to a conveyance from her mother, she has not even suggested a reason why she did not proceed to obtain the same rather than to recognize that the matter was an open one and proceed against her mother by bond, warrant, judgment and execution.

Furthermore, we have, as in the ease of the mother, conclusive proof of the state of mind of the petitioner in her answer in the suit at bar. Therein, as previously recited, although she had full knowledge of all the facts, she admits the ownership by the children of Theodore of one-third of the land in question. Her only explanation of this is that she was advised by her then counsel that when the deed was lost all rights thereunder were lost.

That a client is bound by the errors or mistakes of her attorney or solicitor is sustained by abundant authority heretofore cited, and it is also to be remarked that the absence of this solicitor as a witness in this suit is very suspicious and reflects seriously upon the good faith of the petitioners herein. This counsel is in active practice in this state 'and is easily reached by subpoena to testify. It is almost unbelievable that he could have given these petitioners the advice which they say he did. In view of the principles of equity which protect those who have suffered the loss of a deed before record, and in view of the express provisions by statute, it is very difficult to believe that a lawyer in active practice and of good standing at the bar should have advised clients that when a deed is lost all rights under it are lost, and yet this is the bald, unqualified statement that they contend was made to them. It would require strong and convincing proof that the fact is as they assert, and no reason is given to the court why this attorney was not subpoenaed as a witness to furnish the best evidence of the fact.

It seems much more likely to me that the counsel in question reached the conclusion which I have reached, namely, that the deed to Mrs Weaver gave her a right which she voluntarily chose to abandon, and by her conduct had shown that she had abandoned, and it was, therefore, no concern of these petitioners, because they had no rights with respect thereto.

However this may be, I am clear that parties who have conducted themselves with respect to a subject-matter as these petitioners have should not be permitted at this time, in view of the results which would ensue, to change and alter their previous position in the way which they now desire to do.

In passing, I think it proper to remark that a curious effect results to the complainants by permitting the defendants to set up this matter in this suit now. The complainants had the contract with Mrs. Weaver for the whole property. In the specific performance case she answered that she only had a third. The court therefore only decreed a third to be conveyed. The defendants now set up that at that time she had two-thirds. The proofs show that the property is at least twice as valuable now as it was at the time the contract was made between Mrs. Weaver and the complainants; the result to the Whites would be that by reason of Mrs. Weaver’s answer in their suit they were only able to secure a conveyance of one-tliird of the property from her, although at that time she had title to two-thirds, and could and would have been compelled to have conveyed two-thirds to them if she had truly represented the facts in her answer.

And this obvious illustration of the effect of permitting parties to untruly answer without being bound by their answers, and subsequently, when it serves their purposes, to suffer them to set up statements directly opposed to statements made by them in previous pleadings, is, I think, a cogent and striking reason against the court’s allowing such procedure.

Tf the defendants claim that by reason of the sale under the execution issued upon the judgment of Ella Etta against her mother and the transfer by the purchaser at that sale of the title, they obtained the legal title which Mrs. Weaver had theretofore owned, and that therefore they owned the legal title at the time of this suit, I think they have shown no reason for not setting that up. They do not suggest that their attorney or solicitor advised them that, owning a legal title, they could not plead it.

And what has just been said applies equally to whatever rights they acquired by a deed dated in April of 1905 from Mrs. Weaver to Ella Etta Smith.

Previous, however, to making this deed, Mrs. Weaver had quit-claimed to a purchaser from Josephine Lake whatever interest Mrs. Weaver had in the lands contracted to be sold by Josephine Lake to such purchaser, one Martin Keane. And here again is a strong reason against permitting these petitioners to now alter their attitude concerning the title and ownership of this property. After Mrs. Weaver, the grantee in the deed from Theodore, admits upon the record by her answer that the children of Theodore have title, and Mrs. Smith and her husband, with full knowledge of the deed, likewise, in an answer, concedes the title is in Theodore’s children, and the decree in this suit likewise so adjudges, and one of the children contracts to sell her share to a stranger, and Mrs. Weaver quit-claims to such stranger, then these petitioners desire to completely change, their own attitude toward this title and all that their ans-wer and that of their mother have admitted, and the decrees of this court based thereon have adjudged, and open up all the controversies which this course would give rise to.

My conclusion is that these petitioners have not shown themselves entitled to open this decree for the purpose of setting up rights under the deed in question. I think to permit them to do so would be to put a premium not only upon carelessness and laches, but upon false pleading and the lack of honesty and candor. The only explanation which squares itself with all of the conduct of the parties is that Mrs. Weaver, for reasons satisfactory to herself, determined not to take the benefit of this conveyance. She thus conducted herself from the beginning. I find that it entirely lay with her whether she would accept this property as her own or not. I find from her conduct that she, at least so far as these defendants are concerned, so conducted herself that they have no interests because of the conveyance of Theodore to her.

The prayer of the petition will be denied.


author: u-arrison, V. 0.

text:
    Clarence B. Iserman v. The International Stoker Company.
    [Decided March 15th, 1907.]
    Persons were stockholders and not creditors of a corporation, where they received stock under a resolution in the handwriting of one of them, directing its issuance to them for advances, and retained it over four months, when they attached the certificates to their respective claims filed with the corporation’s receiver; the papers in a suit by one of such persons in which the receiver was appointed reciting that they were stockholders, and not disclosing the amount of such advances as debts of the corporation, though a schedule of the corporation’s debts was set out.
    On appeals from receiver’s determination.
    The main suit was a proceeding under the Corporation act to have the company declared insolvent and an injunction issued and a receiver appointed.
    The injunction was issued, and the receiver appointed on the 13th of November, 1905.
    On the 26th day of February, 1906, Clarence B. Iserman and Harvey Iserman presented claims to the receiver, the former for the sum of $1,200 and the latter for the sum of $1,686.77. Attached to each claim was a certificate of stock of the defendant corporation. Clarence B. Iserman’s certificate called for one hundred shares, and was dated October 20th, 1905, and Harvey Herman’s certificate called for two hundred and seventy shares, and was dated the same day.
    The receiver disallowed the claim of Clarence B. Iserman for $1,000 and allowed it for $200. He disallowed the claim of Harvey Iserman for $1,468.29 and allowed it for $218.48. •
    Each of these claimants has taken an appeal from the determination of the receiver.
    Other creditors have taken appeals from so much of the receiver’s determination as allows anything to either of the Her-mans.
    The case was heard upon the testimony taken before the' receiver, together with the exhibits and documentary evidence.

      Mr. George G. Tennant, receiver, pro se.

      Mr. Cornelius Doremos, for Harvey Iserman and Clarence B. Iserman.

      Mr. Boyd McLean, for Paul L. Crowe, a stockholder and creditor.
   u-arrison, V. 0.

(after statement of issues).

The reason given by the receiver for disallowing so much of the claim of each of these claimants as he did not allow was that they had each taken stock in the company in liquidation or satisfaction of so much of the claim as was disallowed.

There is no dispute that each of these claimants advanced the amount of money each claims to have advanced. Their contention, however, is that they are entitled to be considered as creditors for such sums of money, whereas the contention of their opponents is that, with respect certainly to a portion of the moneys so advanced, they agreed to accept, and did accept, stock of the company in payment therefor.

Harvey Iserman was secretary and treasurer of this company during the period subject to inquiry. On the 9th day of August, 1904, an agreement in writing was entered into between Paul L. Crowe, Harvey Iserman and Clarence B. Iserman. This agreement recites that Crowe is the owner of a large block of the stock of the International Stoker Company; that the Isermans desire to purchase stock of Crowe; that Crowe thereby agrees to sell to the Isermans twenty-five shares for $500, said money to be used in installing a stoker in the building of the Commercial Trust Company in Jersey City; that if said stoker is not a success, then the International Stoker Company is to return the money to the Isermans and the stock is to be surrendered; that if the stoker is a success, then Crowe agrees to sell to the Isermans four hundred shares, or any part thereof, at any time within six months after the trust company accepts the stoker, the said stock to be sold at $20 a share; and it is further provided that in case the said stoker is accepted by the trust company, and more money is required, to develop and install other stokers before stock can be sold, the Isermans1 agree to furnish or obtain the money by taking the stock upon which they were given the option for the amount of cash they might advance, not exceeding $3,000, the judgment of the board of directors of the company to be binding as to the amount of money needed. There are other provisions in this contract which it is not necessary to recite.

In June, 1903, it was determined to double the authorized capital of the company, and on the 17th of October, 1904, there is a resolution of the board of directors, of which Harvey Iserman was a member, in which it is provided that certain stock shall be returned to the treasury for sale for the benefit of the company.

“Also, the option given to H. Iserman 200 shares; Clarence B. Iserman 200 shares............be doubled owing- to the increase of capital stock and placed in the treasury for the purpose above stated, and if said options are not taken either in part or in whole by the said persons [naming them] the stock to be sold and proceeds placed in the treasury as aforesaid.”

At this meeting the claim of Harvey Iserman for money advanced was audited, and he was shown to be a creditor for $700.

Between that meeting and the 25th of September, 1905, Harvey Iserman advanced moneys which, in addition to the $700, made his total advance about $1,500, and Clarence B. Iserman advanced $500 on the 13th of February, 1905, and $500 on the 13th of May, 1905.

On the 25th of September, 1905, the following preamble and resolutions were adopted by the board of directors:

“Whereas, Clarence Iserman has taken up 100 shares of the option given to him according to a certain contract with Mr. Crowe, and having paid the treasurer $500 February 13th and $500 May 13th, for which he holds receipts with a statement that the certificates of stock will be given him when issued; therefore, it was unanimously
“Resolved, That the certificates of stock be issued and given to him. “Whereas, II. Iserman has advanced about $1,500 to carry on the business of the company, said money being payment on the options of stock given by Mr. Crowe as per a certain agreement; therefore, be it
“Resolved, That certificates of stock be issued and given to H. Iserman for the amount advanced, according to the terms of the option.”

There are numerous provisions in the same resolution, among them one by which Clarence B. Iserman and Harvey Iserman give up the balance of their options, amounting respectively to three hundred shares and two hundred and fifty shares, so that the stock is to go into the treasury of the company and be sold by it, and the Isermans are to receive any sum realized over $25 a share, and there is a further provision that Crowe is to put a thousand shares of stock in the treasury, to be sold at an advance over $20 a share.

The company failed to pay the fee for filing the amended certificate authorizing the increase of the capital stock, and therefore the company at this time had not the right to issue the additional stock, and did not acquire the right until some time after these resolutions were passed, when the fee was paid and the company then was authorized to issue the stock.

The testimony is clear that all of the transactions between the Isermans and the company were carried on by Harvey Iserman. He is the father of Clarence B. Iserman, who was a young man just past his majority.

It seems too plain to require extended consideration that by this resolution (which, in passing, it may be remarked is in the handwriting of Harvey Iserman) it was agreed and understood between the parties that each of the Isermans was to receive from this company stock for the advances made by them up to that time, and all of the oral testimony bears out the righteousness of this conclusion. Clarence B. Iserman was to receive one hundred shares of stock for his $1,000, and Harvey Iserman was to receive the proper amount of stock for his $1,500. The reason why the stock was not then issued to them has just been stated.

Stock was actually issued to each of the Isermans on the 20th day of October, 1905. It was retained by each of them until the 26th day of February, 1906, when they attached the certificates to their respective claims to the receiver and delivered them with the claims.

On November 3d, 1905, the main suit was instituted by Clarence B. Iserman. The bill recites that Clarence B. Iserman is a stockholder of the defendant corporation, holding one hundred shares therein, “for which he paid $1,000 cash.” The bill refers to a schedule showing the debts of the company, and such schedule contains no item due Clarence B. Iserman, and recites a claim of Harvey Iserman for $353.48. In an affidavit annexed to the bill Harvey Iserman swears that he

“now owns 270 shares of the stock of the said company, and that Clarence B. Iserman, the complainant in the foregoing bill of complaint, is now the owner of 100 shares of the stock of said company, and that said company is indebted to various creditors whose names .are contained in the schedule B annexed to the said bill, with the amount due in each case set opposite their respective names.”

As has just been stated, said schedule does not refer to Clarence B. Iserman as a creditor at all, and only claims on behalf of Harvey Iserman $353.48.

As has been previously stated, the receiver was appointed on the 13th day of November, 1905, and on the 11th day of January, 1906, he sold all the assets of the company, and on the 26th day of February, 1906’ the claims of the Isermans were filed, each having annexed to his claim the shares of stock issued to him.

The claimants seek to break the force of the facts just recited, which so clearly indicate that they were stockholders and were not creditors, by claiming that their standing as stockholders or creditors should be determined with respect to certain agreements between them and Crowe and the company sought to be completed on the 20th of October, 1905. It is shown that there was a series of agreements which had been talked over between the parties, and which were intended to be executed on the 20th of October, 1905. I shall not take time to recite what these contemplated agreements were, or to consider whether the claim of the Isermans with respect to their rights under those agreements would have been well founded or otherwise if said agreements had ever been consummated. My reason for disregarding those agreements and the arguments based thereon is that I find as a fact that prior to the time that those agreements were in contemplation the Isermans had agreed with the company to accept stock for the'sums of money advanced up to the 25th of September, 1905. I can find no evidence in the suit which even tends to prove that at the time the Isermans agreed in September of 1905 to take stock under their options for the moneys advanced there was any qualification or contingency, or that the matters subsequently attempted to be included in the contracts of October 20th were even broached. In fine, I cannot see any connection whatever between the completed arrangement of September 25th, 1905, and the unsuccessful and uncompleted arrangement subsequently attempted to be consummated on October 20th, 1905.

The result is that the determination of the receiver is sustained with respect to the amounts disallowed, and the appeals of the Isermans are dismissed.

With respect to the sums of money advanced by either of the Isermans to the company after the 25th of September, 1905, I do not think it anywhere appears that they had agreed to take stock therefor, or that in advancing these sums they were exercising any option to take stock. I therefore think the receiver’s determination is correct in so far as it finds the Isermans creditors for sums advanced to the company after the 25th of September, 1905.

I have not sufficiently examined the accounts in detail to determine whether there are any sums allowed by the receiver to the Isermans which are not proper. It may be that some of the sums claimed were not advanced to the company, or were advanced to the company prior to September 25th, 1905. If so, that matter can be adjusted upon settling the final decree or order with respect to these appeals. Such settlement majr be made upon notice.


author: Garrison, Y. C.

text:
    Manchester Building and Loan Association v. J. Frank Beardsley et al.
    [Decided March 16th, 1907.]
    1. The by-laws of a building and loan association -provided that the secretary shall receive all moneys from members and others, and pay the same to the treasurer, who shall receive and hold for the association all moneys and securities. One who borrowed from an association received the money from its president, who transacted all the business relating thereto. Arrangements were made with the president to pay the loan, and pursuant to his directions the borrower went to his office, where he found the bond and mortgage. Payment was made to the president, who then tore the seals from the mortgage and endorsed a certificate of cancellation thereon.—Meld, that the borrower and the holder of a second mortgage, who furnished the money to pay the loan, could assume that the president was authorized to receive the money and endorse the certificate of cancellation.
    2. In a suit by a building and loan association to foreclose a mortgage which had been canceled by its president, to whom the money had been paid, but who had failed to pay it to the association, evidence held to show that the negligence of the association and its officers was the proximate cause of the loss, which must be borne by the association, and that the mortgage was properly canceled.
    3. 2 Gen. Stat. p. 2107 § 23 provides for entry by the clerk on the margin of a registered mortgage of a minute of its discharge. Section 25 provides that a mortgage registered or recorded shall be discharged by an acknowledged certificate, which shall be recorded. Revision of 181/6 (Nix. Dig. pp. S26, 527), Aot to Register Mortgages §§ 1, 5, the words “record” or “recording” are used synonymously with “register” or “registering.” In 1858 (P. L. 1858 p. 00) a supplement to the act to register mortgages provides for their being registered or recorded in full.—Meld, that the method provided in section 25 is not exclusive, but that the one contained in section 23 is equally effective.

      Heard on bill, answers, replications and proofs.
    This is a bill to foreclose a mortgage made by Beardsley to the complainant.
    The defendants are Beardsley, Baker, who is the holder of a mortgage upon the same premises, and Shippee, who is the present holder of the title to the property in question.

      Mr. Jacob W. De Toe, for the complainant.

      Mr. W. Carrington Cabell, for the defendants.
   Garrison, Y. C.

The defendant Beardsley, on the 14th of June, 1901, made application to the Manchester Building and Loan Association for a loan in the sum of $1,800. Up to this time he was not connected with the association as a shareholder. His application was acted upon favorably, and be became a shareholder of nine shares, and executed a bond and mortgage, dated July 8th, 1901, to the association to secure $1,800. This mortgage was recorded in full in the clerk’s office of Passaic county on the 12th of September, 1901. All of the business which Beardsley then transacted with the association was done with William H. Belcher, its president. Belcher had been president of the association for many years. Allee had been its secretary and Roe its treasurer during the same period. The association met .at Haledon, in Passaic county. Belcher, its president, practiced law in the city of Paterson, and in his office there there was also an office of the building association; its name was on the door, and its safe was in Belcher’s private office.

In December of 1902 Beardsley arranged with one Baker to borrow money from him and mortgage the property to him to secure the loan, and, with the money thus borrowed, to pay off the building and loan association mortgage.

Having been informed by Belcher that if he came to the office in Paterson on the 2d of Januar}', 1903, the business could be transacted, Beardsley, Baker and an attorney procured by Baker to protect his interests attended there upon that day. Beardsley had previously sent in his pass-book to be balanced, and when they got there it was figured up how much was due upon the bond and mortgage, and Baker gave his check to Beardsley for the amount, which check Beardsley endorsed and turned over to Belcher, who endorsed upon the mortgage, after tearing the seals off of the mortgage, the following language:

“This mortgage is paid and satisfied, and the clerk of Passaic county is hereby authorized to cancel the same of record. The Manchester Building and Loan Association, W. H. Belcher, President. Dated January 2d, 1903.”

The mortgage thus endorsed and mutilated, together with the bond, which was similarly mutilated by having its seals torn off, were then delivered to Beardsley or Baker.

The mortgage, on the same day, was taken to the clerk of Passaic county, who' made the following entry upon the margin of the record of the mortgage:

“This mortgage, given by J. Prank Beardsley to the Manchester B. & L. Assn., is this 2d day of January, a. d. 1903, canceled of record, the same being produced before me canceled, the seals removed and satisfaction endorsed thereon by Manchester Building and Loan Association, W. H. Belcher, president; Jno. J. Slater, clerk. Dated January 2d, 1903.”

At the same time a mortgage from Beardsley to Baker for $1,600 was filed to secure the money which Baker had just advanced.

Later in the same year another mortgage, to secure $500, was given by Beardsley to Baker, which was duly recorded.

On the 17th day of November, 1904, Beardsley conveyed the lands in question to David N. Shippee, who paid $700 in cash, and, of course, took the land subject to the mortgages of Baker aggregating $2,100. In July, 1905, Belcher, the president of the building and loan association, absconded, never having paid into the association’s treasury the money received on account of this mortgage. Among the papers in the safe of the building and loan association at its office in Paterson there was found, after Belcher’s departure, what purported to be a bond and mortgage from Beardsley to the association. The witness in each of these papers is William H. Belcher. The irresistible conclusion is that Belcher substituted at some time this forged bond and mortgage for the genuine bond and mortgage, which, as before stated, were delivered by him to Beardsley or Baker on the 2d day of January, 1903. There is also an irresistible conclusion that Belcher continued to pay into the treasury of the association the dues and interest upon the Beardsley stock and loan after the receipt of the principal due on the mortgage. Beardsley certainly did not continue to make these payments, as he assumed that when he paid the mortgage off all of his connection with the association ceased, and he did not consider that he was any longer a stockholder. The dues were paid, and, therefore, the conclusion must be that Belcher paid them. Of course, it is easy to conjecture why he made such payments, because, by so doing, there would not be any occasion to investigate the Beardsley loan or to commence foreclosure proceedings upon the mortgage, which, to his knowledge, was canceled, and in place of which he had substituted a forged mortgage.

After Belcher’s departure and a default then occurring in the payment of dues upon the Beardsley stock, the building and loan association commenced this foreclosure suit. It made as parties Beardsley, Baker and Shippee.

The complainant seeks to foreclose the mortgage notwithstanding the payment of the full amount due thereon to the president of the complainant association and the cancellation thereof by the said president, by claiming that the payment was not made to the proper officer so as to bind the association, and that the cancellation was not made by the proper officer so as to similarly bind the association. The contention on behalf of the association is that Beardsley was a member or shareholder; that the by-laws provide that the secretary

‘•shall receive all moneys from the members and others, and without delay pay the same over to 'the treasurer, taking a receipt therefor. He shall keep accurate account with all shareholders and others doing business with the association. He shall give such bonds as shall be satisfactory to the board of directors,” “shall receive and hold in trust for the association all bonds, mortgages, * * * and other securities upon which money may have been loaned by the board of directors.”

and that the treasurer shall receive all moneys, pay all orders, and

They argue, therefore, that Beardsley could only make payment so as to bind the association by giving the money to the secretary, and that because the treasurer was the one to have custody of the mortgage he was the only person authorized to execute a certificate of cancellation thereof.

It is undoubtedly true that members of building and loan associations are bound by the by-laws thereof, and may not bind the association by payments not made in accordance therewith, unless such irregular payments, or payments to persons not authorized, are ratified or confirmed by the association, or unless the association, by its conduct, has estopped itself to deny the righteousness of the conduct of the shareholder. Citation of authorities of this principle is unnecessary.

Another equally well-settled principle is that a president or other officer of a corporation may not bind the same unless he be authorized, but his action will frequently bind the association, if, by its conduct, it has estopped itself k> deny the right of the person dealing with the president to consider him authorized.

The sole question in the case before us, in view of the well-settled principles applicable thereto, is whether, under the circumstances of this particular case, the association is to be bound by the payment and bjr the action of the president with respect to the cancellation of the mortgage.

1 am of opinion that the association is bound.

The money which was paid was not dues, and was not paid by a member on account of dues, but was paid to satisfy a debt due the association. Of course, such payment must be made to someone who is either specifically or impliedly authorized to receive it. As all of Beardsley’s dealings with the association were had through Belcher, as he received the money from Belcher when he gave the bond and mortgage, and received from Belcher the word as to when he should attend to pay the same off, and, upon going to the Paterson office of the association, found Belcher there with the bond and mortgage, I think the only proper conclusion is that he was justified in believing that Belcher was authorized by the association to receive the debt due upon that bond and mortgage. And to the extent that Baker’s rights are involved, certainly he was justified 'in assuming that this bond and mortgage were being properly paid off when the money therefor was paid to the president of the association who had physical possession of the bond and mortgage.

Although it is argued by the complainant that the president was not the proper person to execute- or sign the informal certificate of cancellation, there is nothing to support this contention. I know of no law which, of itself, designates what officer of a corporation is the proper one to make such an informal certificate. While it may be true that the treasurer is the indicated person' to sign a receipt for money received by the company, or, perhaps, in cases where the secretary is the proper person to receive the money as in this case, he should be held to be the indicated person to sign a receipt; the writing in question is not a receipt, it is an endorsement upon a mortgage certifying that it has been paid and satisfied, and directing or authorizing its cancellation. Such a writing, it seems to me, in the absence of any specific law or by-law upon the subject, should more properly be made by the president than by any other officer, since his are general powers, and this is a writing in the name of the corporation of a general nature.

Therefore I find that the defendants Beardsley and Baker were justified in assuming that Belcher as president not only was authorized, as 1 have previously found, to receive the money, but also to make the certificate • of cancellation upon the mortgage which he did make.

There is ample testimony to show that this association entrusted large powers to Belcher and carried on a large part of its business through him, having its Paterson office, as just stated, in his private office, where it kept its safe in which its securities were contained. While it is true that the treasurer testifies that he had the Beardsley bond and mortgage at one time and put them in the safe and kept the key of the portion of the safe in which these papers were contained, it also appears that numerous other mortgages were paid o££ to Belcher, and I think it clear that he did have physical possession of them for that purpose. The treasurer swears that he did not give this bond and mortgage to Belcher, but there is no explanation as to how Belcher got them, and if the treasurer’s testimony is true Belcher could not have obtained them. The very fact that he had them shows that he did have access to the securities of the association, or that the treasurer did give them to him. In any event, as against the innocent persons whose moneys were paid in good faith on account of this' bond and mortgage, I think it proper to hold, under the proven facts, that the carelessness or negligence of the association and its officers was the proximate cause of the loss. Under such circumstances the authorities are clear that the association should be the one to bear the loss.

Furthermore, there is proof that during the ten years of Belcher’s presidency eighty-four mortgages were canceled in the clerk’s office of Passaic county, of which twenty-eight bore substantially similar endorsements to the one in question; three thereof were canceled on a certificate signed by Allee, the secretary ; one on the signatures of Belcher as president and Allee as secretary; ten on the signatures of Belcher as president and Eoe as treasurer; thirty-nine on the signature of Eoe as treasurer, and three certificates of discharge signed by the president and secretary under the seal of the association. It thus appears, not only from the oral testimony, but from the records of the county, that Belcher constantly exercised this power, and that he must have exercised it to the knowledge and with the consent of the association.

Under all the circumstances, therefore, I conclude that this mortgage was properly canceled.

The only other matter relied upon by the complainant is that since the mortgage was recorded in full, and not merely registered in abstract, it cannot be properly discharged excepting by a certificate of discharge duly acknowledged or proved and recorded. The argument is that 2 Gen. Stat. 2107 § 23 provides that when a mortgage is registered, and shall be redeemed and paid, it shall be the duty of the clerk, on application of the mortgagor or person paying the same and producing to him said mortgage canceled, or a receipt thereon, signed by the mortgagee, &c., to enter, in a margin to be left for that purpose, a minute of said redemption, payment and discharge, which minute shall be a full and absolute bar to and discharge of the said entry, registry and mortgage, while section 25 provides that any mortgage that has been recorded or registered shall be discharged upon presentation of a certificate signed by the mortgagee, his heirs, &c., acknowledged or proved, and certified in the manner prescribed, &c., and that every such certificate shall be recorded and a reference made, &c. Therefore the complainant claims that unless the certificate of discharge is acknowledged and recorded as provided by the twenty-fifth section, the alleged discharge is not effective. By going back to the revision of 1846 (Nix. Dig. 550) it will be found that in sections 1 and 5 of the act to register mortgages the words “record” or “recording” are used synonymously with the words “register” or “registering.” Since the registry of a mortgage has a limited use for the purposes of evidence, there was in 1858 (P. L. 1858 p. 90) enacted a supplement to the act to register mortgages, providing for their being registered or recorded in full, and such record then became receivable in evidence as copies of deeds are. In 1869 the act was passed which is now section 25 of the general statutes (Gen. Stat. p. 2107), providing for another and fuller discharge of mortgages by the instrument therein provided for. I am of opinion that this is not an exclusive method, and that the other statutory method as contained in section 23 of the same act (Gen. Stat. p. 2107) is equally effective.

The result is that the bill must be dismissed, with costs.


text:
    Pasquale Mazzolla v. Edwin Wilkie et al.
    [Decided March 19th, 1907.]
    1. An agent of an insurance company collected insurance money under a power of attorney from the beneficiary and deposited it with a third person, who refused to deliver it to the beneficiary unless the beneficiary would give him one-half thereof to pay to the agent pursuant to an alleged agreement between the beneficiary and the agent.—Held, that the beneficiary could bring an equitable action against the' agent and the third person to impress the money in the third person’s hands with a trust in favor of the beneficiary, and after adjustment to compel the payment of the money to the complainant.
    2. The court of chancery possesses a general jurisdiction in cases of fraud, as well where there is a plain, adequate and complete remedy at law, as in other cases.
    On demurrer to bill.

      Messrs. McCarty & McMahon, for the complainant.

      Messrs. Melosh & Morten, for the demurrant Edwin Wilkie.
   Garrison, V. C.

This is a demurrer to a bill. Prom facts charged in the bill the following sufficiently appears:

The complainant was the beneficiary named in life insurance policies upon the life of his wife to amounts aggregating $4,000, payable to him at her death. The same accident which caused her death, namely, the leakage into their sleeping apartment of illuminating gas, seriously affected him, so that he was taken to a hospital for treatment. While in the hospital, Wilkie, the agent who had effected the insurance, prevailed upon the complainant to give to him a power of attorney to collect the insurance money. He effected this by assuring the complainant that he was the only one who could collect the money. The complainant is an Italian who speaks and understands the English language with great difficulty. Subsequently, upon representations by Wilkie that the first power of attorney was insufficient, the complainant made a second power of attorney to Wilkie, in which the following words were “fraudulently” inserted:

“To pay all necessary and lawful expenses for the proper release and collection of each of said policies, and, after paying all necessary and legal expenses thereon or arising thereunder, to retain to himself for his services, the amount hereto agreed between us for that purpose and to pay me the balance in his hands as soon as the same is received by him from the said companies.”

It is charged that the complainant never made any agreement with said Wilkie to pay him any sum for his services.

Subsequently the money was collected by Wilkie, and upon the complainant applying to him for the same Wilkie informed the complainant that he had deposited the money in the hands of his lawyer, Henry J. Melosh, of Jersey City. The complainant thereupon applied to Melosh, who refused to pay bii-n the money, or any part thereof, unless complainant would give to him one-half thereof to pay to Wilkie pursuant to an agreement which Melosh stated the complainant had made with Wilkie. There is then a charge that the agreement as alleged was procured by fraud from the complainant, and that false representations were made by Wilkie.

The prayer is that the money in the hands of Melosh may be decreed to be held in trust for the complainant, and that Melosh or Wilkie may be decreed to pay the complainant, and that the alleged agreement may be decreed null and void, and that in the meantime Melosh and Wilkie be restrained and enjoined from paying out or disposing of the said money.

It is difficult, because of the phraseology of the bill and its construction, to determine whether the pleader intends to charge that the power of attorney was procured by fraud and misrepresentation, or that the agreement referred to in the power of attorney was so procured, or that the clause inserted in the power of attorney was the fraudulent matter complained of. If the bill were attacked by notice under the rules, I am inclined to think that it would be entirely proper to require the complainant to more clearly state, lor the defendant’s benefit, the matters complained of, but in the face of a general demurrer the bill must be sustained, if it is possible, from the charges contained in it, to spell out an equity in favor of the complainant.

The demurrer is filed by Edwin Wilkie, one of the'defendants, and attacks the bill upon two grounds—first, because the bill is without equity, and second, because there is a complete and adequate remedy at law.

I do not think that the bill is without equity. The complainant alleges'—leaving out, for the present, all charges of fraud—• that his agent, under a power of attorney specifying, among other things, that he was to collect the money, and after making certain deductions therefrom was to pay it over to the complainant, had collected the money and, instead of paying it over, had deposited it with a third person. The suit is against the agent and such third person to impress the money in the hands of the third person with the trust, and, after adjustment, to compel the' payment of the money to the complainant. Under these circumstances I do not see how the complainant could bring an action at law successfully. If he sued the agent and the depositary together he would fail, because he has no cause of action against them jointly, or any cause of action which could be litigated in a suit at law to which they were both parties.

If he sued the agent separately he could, of course, recover a judgment, but it would be without effect upon this particular1 property, which is not in the agent’s possession, and one situated as this complainant is surely is not required to forego his remedy against money earmarked as this is.

If he proceeded at law against the depositary alone he would fail, because the depositary would only be required to pay it over to him after the rights of the agent in the money were settled.

A court of equity is the only tribunal, under our system, which can settle and adjust the various rights of these parties.

The principle involved is illustrated and enforced in the case of Leonard v. Camden National Bank, 70 N. J. Law (41 Vr.) 660 (Court of Errors and Appeals, 1904). As is there said, the sole obligation of the depositary is to hold the fund until the rights of the claimants are settled between themselves, and then to surrender the fund to the rightful claimant.

In the situation disclosed by the bill under consideration the only obligation which Melosh seems to have undertaken is to hold the money until the rights of Wilkie and the complainant are settled with respect thereto. Under such circumstances equity has jurisdiction.

This, of course, leads to an overruling of the demurrer.

Because of the conclusion just reached and stated I do not think it necessary to consider or determine whether, by reason of the charges of fraud, this is one of those cases in which equity will retain jurisdiction, notwithstanding that there is a plain, adequate and complete remedy at common law. The court of chancery in this state possesses a general jurisdiction in cases of fraud, as well where there is a plain, adequate and complete remedy at law as in other cases. Eggers v. Anderson, 63 N. J. Eq. (18 Dick.) 264 (Court of Errors and Appeals, 1901); Dawson v. Leschziner, 65 Atl. Rep. 449 (Chancellor Magie, 1907).

I will advise a decree that the demurrer be overruled, with costs.