text:
    Edward J. Turner, trustee of the Rutherford National Bank, and the said Rutherford National Bank v. Ridge Heights Land Company et al.
    [Decided November 12th, 1920.]
    Where a bank discounts a note of a corporation, and the corporation gives a mortgage on its property to an officer of the bank to secure the note and the bank afterwards knowingly accepts a note of an individual to take the place of the note originally discounted, the mortgage is extinguished.
    On final hearing on amended bill, amended answer and counter-claim and proofs taken in open court.

      Mr. Luther Shafer and Mr. Albert 0. Miller, Jr., for the complainants.

      Mr. Edward P. Johnson and Mr. Loto (of the New York bar), for the defendants.
   This is a suit to foreclose a mortgage upon several tracts of real estate in Rutherford, New Jersey. The testimony is quite voluminous and the exhibits are numerous, presenting a somewhat complex case. This memorandum will undertake merely to state so much of the evidence as is necessary for the proper understanding of the points which are decided.

1. In the )rear 1907 Mr. Addison Ely was interested in a number of land companies, and, perhaps, other corporations, located at Eutherford, of all of which apparently he had the control and management. He kept accounts for these corporations with the complainant the Eutherford National Bank. While Mr. Ely seems sometimes to have used the credit of one of these companies for the benefit of another, there i'si nothing in the emdence which warrants the view that these corporations were not distinct entities. The defendants the Eidge Heights Land Company, the Addison-Ely Company and the Colonial Construction Company were three of these corporations which Mr. Ely controlled and managed.

On July 26th, 1907, Mr. Ely procured the Eutherford National Bank to discount a note of $4,400 for the benefit of the Addison-Ely Compare, on which the Eidge Heights Land Company appears as maker, and the Addison-Ely Company appears as endorser. The Eidge Heights Land Company was in fact an accommodation maker having no interest in. the proceeds of the discount, the same having been credited to the account of the Addison-Ely Compare

On the same day, and in order to secure this note, the Eidge Heights Land Company executed a bond and mortgage in the usual form for $4,400 to Andrew H. Brinkerhoff, as trustee. Mr. Brinker’hoff was at the time the cashier for the Eutherford National Bank, but there is no disclosure made in the bond or mortgage of the party for whom Mr. Brinkerhoff was acting' as trustee in taking this security. It also may be noted that there was no mention made in any writing that has been produced, of any relation between the bond and mortgage to Mr. Brinkerhoff and the note for the same amount which the bank discounted as above mentioned. As a. matter of fact the evidence establishes beyond question that the bond and mortgage were given to secure the payment of the note and for no other purpose. Inasmuch as the complainant the Eutherford National Bank was governed by the National Bank act, we may surmise reasons why the transactions under consideration took the form they did.

While the making of this independent bond and mortgage may have put remedies within the reach of the bank which would not have been available if the mortgage had been' given directly to the bank to secure the note, the whole transaction resulted in the common situation in equity where a mortgage or a bond and mortgage are given to secure a debt. Payment of the debt extinguishes the mortgage.

2. After this mortgage for $4,400 had been duly recorded on August 5th, 1907, a series of mortgages which, some of the defendants now hold were placed upon a portion of the tracts included within the said mortgage for $4,400. At a later time Mr. Brinkerhoff assigned the bond and mortgage which he held as trustee for an undisclosed beneficiary to the complainant Mr. Edward J. Turner, as trustee also for an undisclosed beneficiary. Mr. Turner was, and is, now the president of the Rutherford National Bank. The connection between the note and the mortgage was still concealed, but the evidence shows, and the fact is not disputed, that Mr. Turner merely stepped into- the place of Mr. Brinkerhoff and held the bond and mortgage for the sole benefit of the Rutherford National.Bank and solely as security for the payment of tire note of $4,400.

After the junior mortgages above mentioned had been, made and recorded the trustee, Mr. Brinkerhoff, and later Mr. Turner, executed a series of releases whereby they discharged from the lien of their mortgage certain portions of tire lands covered by their mortgage not covered by the junior mortgages.

3. The note for $4,400 originally given, asi we have seen, on July 26th, 1907, was at two months, while the bond and mortgage ran for one year. The inference would seem to- be that renewals of the note were contemplated, but, however that may be, in fact the note was renewed a great many times through a series of years, and partial payments upon it were made. Complainants in their bill allege that the amount due om the mortgage is $2,850. Complainants’ counsel argue that this is a mistake and that the amount actually due i'si $3,000 and interest. The defendants say that the note, at most, if not wholly, paid stands to-day only for $1,750 and interest. I do not think that it will be necessary to consider these conflicting claims in detail.

4. On July 10th, 1911, the last renewal or partial renewal of the note for $4,400, amounting then- to $3,000, fell due. The situation of the parties with reference to this last renewal note for $3,000 was precisely the same as their situation with reference to the original note for $4,400. All the renewal notes clown to this date (July 10th, 1911), were in the same form. The Addison-Bly Company was primarily liable; the Eiclge Heights Land Company was secondarily liable as accommodation maker, while the land of the Eiclge Heights Land Company mortgaged' to Mr. BrinkerlioiS stood as collateral security for the note. When this last-mentioned note for $3,000 fell due on July 10th, 1911, the same in fact was not renewed. Mr. Ely, as the manager of both of .these corporations, the Eiclge Heights Land Company and the Addison-Ely Company, tendered to the bank what is on its face his individual promissory note to the Addison-Ely Company for $3,-000, dated July 10th, 1911, drawn at two months and signed with his proper name, Addison Ely, and endorsed by the Addison-Ely Company, without a suggestion anywhere of the Eiclge Heights Land Company. The only possible qualification of this last statement I think arises from the fact that the clerk who drew the note used the phrase “We promise” instead of “I promise.” The Eutherford National Bank accepted this note in payment of the note of the Eiclge Heights Land Company which they held, and thereupon surrendered the note of the Eiclge Heights Land Company. The new note of Addison Ely, individually, was thereupon entered in the books of the Eutherford National Bank, and all mention of the Eiclge Heights Land-Company as a party to the original note of $4,400 or any renewal or partial renewal of that note ceased to be made. The loan was carried on the note of Mr. Ely with the endorsement of the Addison-Ely Company—Mr. Ely stepping into the place of the Bidge Heights Land Company as accommodation, maker. The note was not paid when it fell due—was protested and not renewed.

5. The defences which are set up are the following :

(1) The defendants claim that the whole mortgage debt for which the note for $4,400 and itsi renewals a.t all times stood as the primary security was fully paid when the Eutherford National Bank accepted the obligation above mentioned of Addison Ely, individually, and surrendered for cancellation the promissory note upon which the Riclge Heights Land Company was only secondarily liable.

(2) The Rutherford National Bank when it gave, or caused its trustee to give, the releases above mentioned, had actual notice of the junior mortgages now held by the defendants, and that, therefore, according to the familiar rule in equity as between the bank and these defendants, the mortgage held by the bank must be charged with a payment to the extent of the value of the security which the bank gave up bjr the releases. The defendants, the junior encumbrancers, claim that the value of the released lands was far in excess of any amount which could be found due upon the mortgage of the complainant, and that, therefore, they, the defendants, the junior encumbrancers, have a right to the entire proceeds of the sale of the land covered by their mortgage1;! until their mortgage debts are fully paid.

If this defence alone should be sustained it is probable that some adjustments would have to be made owing to the fact that-the junior mortgages do not all cover the same parcels, but I do not think that this matter calls at present for investigation.

To the defences above stated the complainants reply:

(1) That the acceptance of the note of Addison Ely, individually, instead of a strict renewal note on which the Ridge Heights Land Company would stand as accommodation maker, was a mere mistake and did not accord with the intention of the' parties, and that therefore they have a right to hold the bond and mortgage of the Ridge Heights Laud Company as security for the land named therein, less the amount of the partial payments.

(2) That the hank had no actual notice of the junior encumbrances when the releases were made.

6. My conclusion is that the first defence must be sustained; that as fhe evidence stands the complainant the-Rutherford National Bank must be adjudged to have knowingly accepted the individual note of Addison Ely, endorsed by the Addison-Ely Company, in place of the note made by the Ridge Heights Land Company and endorsed by the Addison-Ely Company, and that as the result of this transaction the mortgage of the Ridge Heights Land Company covering its own lands, which stood as security for its note, was extinguished.

The conspicuous facts axe—(1) that the cashier of the bank testifies that “the mortgage was given as security for a note,” i. e., the note of the Riclge Height® Land Company for $4,400, dated July 26th, 1907, and the defendants seem to concede that the mortgage would stand for any renewals or partial renewals of that note; (2) that Mr. Ely testifies,. without contradiction, that he gave his individual note of July 10th, 1911, “to pay off” the renewal note for $3,000 of the Ridge Heights Land Company which then fell due; and (3) that this last renewal note of the Ridge Heights Land Company for $3,000 was then surrendered as a paid note and was never demanded back by the bank.

There ia no credible evidence which leads to any other conclusion than that the Ely note was intentionally accepted by the bank in discharge of the note of the Ridge Heights Land Company except that which relates to the alleged mistake. The bank certainly would not have knowingly surrendered the note of the Ridge Heights Land Company if it had not been paid—if the bank still'held any claim against the Ridge Heights Land Company as accommodation maker.

The claim of the complainants that the acceptance of the individual note of Mr. Ely was a mistake on their part as well as on the part of Mr. Ely, in my opinion, isi not sustained by the evidence. It is true there is some support for the surmise that a mistake was made in drawing the note by the clerk who prepared it. This clerk may have thought, and probably did think, that a renewal of the note of the Ridge Heights Land Company was to be executed, and therefore used the word “we” at the start, supposing that the rubber stamp' of the company would be placed below with the line for Mr. Ely’s signature as president.

The testimony of Mr. Ely, however, indicates that whatever the clerk thought who drew the body of the note and made it ready for signature, the note in fact was given instead of the note of the Ridge Heights Land Company, because it was at that time a stronger note and the bank intentionally accepted it and forthwith surrendered the note of the Ridge Heights Land Company as a paid note for cancellation. Eor 'all that Mr. Ely knows this stronger note may have been requested by the cashier of the bank. The new note—the note of Mr. Ely, individually, was duly entered upon the books of the bank. Mr. Shafer testifies to statements made by Mr. Ely immediately before, of, what is more .probable, immediately 'after the judgment was entered against him on the Ely note in 1913, to the effect that there had been a mistake. A very slight change of phraseology will make Mr. Shafer’s testimony fully accord with that of Mr. Ely. It may be noted, however, that statements: made by .Mr. Ely for the purpose of extricating himself from liability and substituting the Ridge Heights Land Company, cannot be deemed evidence as against that company. Mr. Ely swears that he did not defend the.suit on the note because he “supposed it [the Ely note] paid the Ridge Heights Land Company loan;” and he further testifies that in his urgent plea to the bank through Mr. Shafer he stated that the giving of his individual note instead of a note of the Ridge Heights Land Company “could be easily treated as a mistake,” and he adds, “I remember that, but I do not think it was a mistake,” and he goes on to state the reasons, viz., that at the time of the transaction, July, 1911, his note was a better note'than that of the Ridge Heights Land Company.

The story of this note transaction which the cashier of the bank tells is a tissue of gross inaccuracies, if not falsehoods. His testimon}'’ on all points in favor of the bank is utterly discredited by his failure to recollect the facts or state of facts correctly. Counsel for the complainants admit in their brief that the cashier “was mistaken” in regard to a most important matter. This witness represents that the substitution of the Ely note for the note of the Ridge Heights Land Company was a mistake; that he, the cashier, was not present when the note came in; that there was “absolutely no intention on anybody’s part to accept anything but a note similar to what those were we had had theretofore;” that “some employe of the bank accepted” the note and thereupon “surrendered the Ridge Heights Land Company note.” The witness further testifies that he found out the mistake in. ten or fifteen days and took charge of the business of correcting it, and that he sent “this note [referring to the Addison Ely note] down to the Ridge Heights'Land Company” objecting to the exchange which had been made. The witness further testifies.that ■the president of the Ridge Heights Land Company thereupon gave another note in what he considers the “correct” form. In fact no such “correct” note was given until about two years later when the bank threatened to sue Mr. Ely, and I think had sued him, and, perhaps, had taken ¡judgment, when Mr. Ely drew and offered to the bank the note of the Ridge Heights Land Company dated back to July 10th, 1911, and the bank refused to accept the same and surrender Mr. Ely’s note. When asked why, when the witness alleged he had procured a correct note upon his discovery of the alleged mistake, Mr. Ely’s note had not been surrendered, he said there was m> reason whatever and that Mr. Ely might have obtained it. Thus it appears, according to the story of the cashier, that a mistake in. giving the wrong note was discovered by him, a new note was demanded in the old form, such new note was promptly delivered to the bank, while Mr. Ely, or his messenger or representative, made no- demand for and did not receive the old note, Mr. Ely’s individual note,' for which the new note of the Ridge Heights Land Company was given. As we have seen, no change of entry was made in the books, and two' years later the bank put the Ely note in judgment.

According to the cashier's story the conduct of the bank in entering judgment on the Ely note on which it had no1 claim whatever was not “an honest mistake,” as counsel for the bank now argue, but a gross fraud.

The cashier’s testimony in regard to the entry of the note of July 10th, 1911, in the books of the bank is contradictory and unsatisfactory. At first he says “that there was no entry made of the so-called correct note. The account book of the bank before the witness showed only the entry of the Addison Ely note—the so-called incorrect note. The witness, however, stated that there was another book not present in which there was an original entry of the note of the Ridge Heights Land Company, so that, when that note upon his demand came in, it fitted the entry which had been made and no other entry was necessary. By request the absent book in which the witness alleged the correct entry appeared was subsequently produced. It proved to be the regular discount, book of the bank and there was an original entry in it under date of July 10th, 1911, of the'Addison Ely note, and no entry of any note of the Ridge Heights Land Company.

The question might be raised whether the bond and mortgage to Brinkerhoff, trustee, could stand after the surrender and cancellation of the note of the Ridge Heights Land Company as security for the balance of the indebtedness for which the AddisonEly Company was primarily liable. An arrangement made when the bond and mortgage were given, or afterwards, might have so provided, but there is no evidence that any such arrangement was made. The Ridge Heights Land Company was an accommodation maker apd its collateral bond and mortgage secured its secondary liability in the absence of an express agreement otherwise. The cashier volunteers the testimony that “the mortgage was given as security for a note." It follows that when the note of the Ridge Heights Land Company was paid and surrendered for cancellation the mortgage was extinguished. It is highly probable that the officers of the bank did not understand the equitable rule that a mortgage apart from the obligation which it secures is of no value. In this case the bond and mortgage in form were distinct from the note which they were intended to secure. Although the officers of the bank knew that t-hisi trustee mortgage at all times was collateral security for the payment of a note, this collateral security in form was an independent principal security and they might well have thought that they could properly continue to hold the bond and mortgage as collateral security for any number of different notes, which represented parts of the original debt, upon which notes the Ridge Heights Land Company was not liable. ‘The slightest reflection will show how very important a matter it is to an accommodation party to a promissory note who- further strengthens the note bjr a bond and mortgage covering his own property, to understand distinctly that although the note upon which he is secondarily liable may be paid and surrendered, his bond and mortgage—his personal obligation under seal and the mortgage of his real estate—can still be held to secure the obligation® of other parties in which he is not concerned. ■

As to Mr. Ely’s view of the status of the bond and mortgage after the note had been surrendered, we can only surmise. He was not interrogated in regard to the matter. He, too, may have overlooked the effect upon the mortgage of the payment of the obligation which, it was given to secure. Such misunderstanding on his part, if it existed, would not affect the legal or equitable rights of the Bidge Heights Land Company. If Mr. Ely shared the erroneous notion above mentioned, or in the multifarious transactions jn mortgages and notes and corporations, in which he seems to have been engaged, neglected to procure for the Bidge Heights Land Company its bond and mortgage for cancellation, the continued possession of that bond and mortgage by the bank is not a circumstance taken with all the other evidence in this case which would warrant the court in inferring that there must have been an agreement by the Bidge Heights Land Company that the bond and mortgage should continue to stand as security for another note after its note had been, paid.

Mr. Ely appears to have been 'somewhat negligent in getting the papers purporting to be obligations of himself or his companies after they had been paid or rejected, as is illustrated by his failure to demand or obtain the note of the Bidge Heights. Land Company for $3,000 after the Butherford National Bank had refused to accept that note in place of the Ely note.

We have this situation in August, 1913, when the Butherford National Bank sued Mr. Ely and the Addison-Ely Company on the note which the cashier says was accepted in July, 1911, by mistake, and would have been, surrendered to Mr. Ely if he had demanded it; the bank knew, according to its present pretence, that it had no just claim against Mr. Ely on this note, but, nevertheless, put it in judgment and refused to exchange the note for the noté of the Bidge Heights Land Company, which Mr. Ely drew and dated back and which tire cashier swears was the “correct” obligation which it ought to have received, and did receive, in July, 1911.

Mr. Ely, on the other hand, swears that he knew of no mistake and had no defence; he submitted to judgment after trying vainly to get the bank to accept the note of the Bidge Heights Land Company and take judgment on that note. Whether this effort of Mr. Ely was before judgment was entered or afterwards is immaterial. The 'important matter is, that Mr. Ely knew of no mistake in regard to the note and testifies in accordance with all the probabilities of the case that if he had known of any. mistake he would have defended the suit as- best he could.

The complainant evidently thought that it was to- its advantage to prosecute its action on Mr. Ely’s note to- judgment, although, according to its present admission, it had no just claim whatever on that note, Mr. Ely having an absolute right to- the surrender of .that note. When, however, it became to the advantage- of the bank for the purposes of its foreclosure suit to reinstate the liability of the Ridge Heights Land Company on the- note, it undertook to do so, practically admitting that it had been- guilty of fraud in taking judgment against Mi*. Ely. Counsel for the complainants in their brief state that the bank “made an. honest mistake” in suing on the Ely note and that the bank now “offers to cancel the judgment.” Eor blowing hot and cold, committing fraud and then offering to undo the fraud—all according to what seemed advantageous at the time—the conduct of the bank is a somewhat striking illustration.

The history of the litigations between, these parties at law and in equity throws some light, I think, upon the merits of this present case.

As we have seen, the Ely note (Exhibit D. No. 2) on which the Ridge Heights Land Company was not a party, fell due September 10th, 1.911, was protested and held without any proceedings being taken to collect it, until August, 1913, when an action was commenced thereon in which judgment w-as entered on October 10th, 1913. Immediately before, or immediately after this judgment was entered, Mr. Ely drew and executed as president the note of the Ridge Heights Land Company (Exhibit D. No. 1). and delivered the same, or caused the same to be delivered, to the Rutherford National Bank, and vainly sought to have that note substituted for his personal note (Exhibit D. No. 2) upon which the judgment had been, or was about to- be, recovered. This note remained in the possession of the bank or its attorney, although, of course, it had no validity, not having been accepted. Both notes were produced by the complainants upon the defendants’ call and were offered in evidence by the defendants. The complainants rested their case, I think, without voluntarily producing any evidence in regard to the existence of either note. I think the references to these notes were brought out on cross-examination.

However this may be, the evident design of the complainants in their foreclosure suit was to ignore the notes and the judgment. The bill, as originally filed on October 11th, 1911, made Edward J. Turner, trustee, the sole complainant, not disclosing for whom he stood as trustee. The draftsman of the bill used the common form with the printed blanks for the commencement and the conclusion and made no reference either to the note or to the judgment, but treated the bond and mortgage as original, independent securities. Being compelled by a demurrer to disclose the principal an amended bill was filed November 13th, 1916, making the Rutherford National Bank the trustee’s beneficiary, a co-complam'ant, but still ignoring the notes and making no mention in any way of the indebtedness to secure which tire mortgage was merely collateral.

The answer of the defendant Ridge Heights Land Company alleges that “at the time of the execution, and delivery of the bond and mortgage 'sought to. be foreclosed by the bill of complaint herein, said Ridge Heights Land Company gave to said Andrew H.' Brinkerhoff, trustee, a note for the sum of $4,400 (representing the same indebtedness mentioned in said bond and mortgage), and that subsequently payments on account” were made and renewal notes from time to time taken, and that on or about July 10th, 1911, the complainants claimed a balance of $3,000, and “that thereupon the complainants accepted in payment, satisfaction and discharge of said balance the note of Addison Ely for the sum of $3,000, payable to Addison-Ely Company and due two months from the date thereof, and endorsed by said AddisonEly Company to the complainant Rutherford National Bank.”

The answer further alleges that the note was not paid at maturity and that suit was brought and judgment entered on October 10th, 1913, for the sum of $3,437.54, “and the mortgage sought to be foreclosed by said bill was, and is, paid and satisfied.”

It may be conceded that the complainants were not bound to •anticipate the defence of payment which they had every reason to believe could be set up; the noticeable fact is that the complainants filed a bill and then an amended bill to foreclose a mortgage without making the slightest reference to the original primary indebtedness for the payment of which their mortgage originally was a mere collateral.

7. The second defence to the claim of the bank based on the releases I think should also be sustained. The only question seems to be whether the bank had. actual notice of the junior mortgages when it gave its releases. I shall not taire the time to go through the testimony again in order to state all the indications that the bank had actual notice. The following now occur to me:

(a) The bank knew of the large operations of Mr. Ely and his corporations in real estate mortgages in Rutherford. The first release appears to have been dated August 1st, 1908, over a year after the junior mortgages had been, put upon the property. The other releases were given on different dates in the year 1909.

(b) In July, 1908, after the mortgages, or some of them, nearly all, I think, had been given, the bank accepted another mortgage for $2,200 from the Ridge Heights Land Company upon property already covered by the mortgage for $4,400, which the bank tiren, held, and the testimony, though not positive, indicates that a search was then made by an attorney of the bank, the result of which was communicated to the bank. The president of the bank testifies that he thinks that the bank “ran down the search to find out if there were any other liens in between”— i. e., between its mortgage for $4,400 and its new mortgage for $2,200.

(c) The bank produces no searches. I think the intention is to have the court believe that the searches cannot be found.

(cl) The attorneys who made the searches for the bank are not produced as witnesses, although the indications are from the testimony of the president that whatever searches were made when these mortgages were accepted were made by one of two well-known attorneys in Rutherford.

(e) The officers of the bank, the president and the cashier, though testifying at length in regard to the transactions in question, including'the releases., do'not testify that they had no notice of anjr junior mortgages when releases were made.

While it must be conceded that actual notice must be proved to create the equity which the defendants claim, when we find that the matter of notice is in controversy and these officers go on the stand presumably having knowledge on the subject, and give no testimony, the usual rule of evidence seems to apply and the conclusion is warranted that the testimony which they could give would be unfavorable to their side.

It seems to me that counsel on both sides erroneously supposed that the junior encumbrancers have some equity in the mqney paid to the first mortgagee aa the consideration of a release. No authority is cited to support such a supposed equity and I see no foundation for it. The first mortgagee may make what bargain he pleases with the mortgagor with respect to the conditions under which a release will be given. The mortgagee may exact double the value of the land released; he may take one-half. The money paid for the release and its application to the mortgage debt or any other debt is a matter purely between the mortgagor and mortgagee.

The equity of the junior encumbrancers arises from the fact that the mortgagor with his encumbrance on two parcels of land, knowing of the junior encumbrances covering only one, has knowingly and intentionally given up a security which in equity he was bound to exhaust before resorting to the other security which stood as tlie only security of the junior encumbrancers. Whether the mortgagor had paid double the value of the released land or only one-lialf such value, the equity of the junior encumbrancers is the same. According to the well-settled rule the first mortgage, after the releases, is cut down as a. mortgage prior to the junior mortgages, to the extent of the value of the released land, and continues to stand as a mortgage subsequent to those junior encumbrances for the amount subordinated to those encumbrances, which amount the mortgagor still owes. If the first mortgage is for $5,000, and the released lands are worth $ 1,000, the decree gives the first mortgage priority to the extent of $1,-000, then provides that the junior encumbrances shall come next, and then, last of all, if there is any surplus, it will be applied to the payment of the $4,000 still'due on the first mortgage as against the mortgagor.

8. The discussion immediately preceding disposes of the' counter-claim on behalf of the junior encumbrancers which prays that the mortgage of the complainants be surrendered for cancellation. The basis of this claim seems to be that the released land far exceeded in value the utmost which could be found due upon the complainants’ mortgage.. This fact, however, if it be a fact, does not affect the status of the mortgage between the complainants as mortgagee and the Ridge Heights Land Company as mortgagor. It would, indeed, be a most extraordinary result of equitable principles if the mortgagee who has voluntarily released to the mortgagor lands greater in value than his mortgage debt should be obliged to release his mortgage debt to the mortgagor and cancel his mortgage. It may be in this case that if the widest claim of the defendants to priority in respect of their junior mortgages is sustained, and the sale of the property covered by their mortgages pays their mortgage debt in full, a substantial sum may be left which will be applicable to the complainants’ mortgage debt which stands unpaid as against the mortgagor and as against it an encumbrance' upon' the unreleased land.

9. I have considered both of the defences which have been interposed, notwithstanding the fact that the first, which is the defence available to the Ridge Heights Land Company having been sustained, the result must be a dismissal of the bill.

The second defence, however, which is available to the junior encumbrancers only has been fully argued and the facts, according to the judgment of the defendants, are such that if the defence is sustained the entire amount of the junior encumbrances in question will be placed prior to' the whole of the complainants’ mortgage debt. It would seem in the condition of the proofs that in case the first defence should be finally overruled and the second defence sustained a reference to a master would be necessary.

It will be observed that the mortgagor, the Ridge Heights Land Company, and the junior encumbrancers unite in the counter-claim which prays for the surrender of the bond and mortgage for cancellation. As we have seen, neither the mortgagor nor the junior encumbrancers can possibly be entitled on account of the releases to any such relief as against the complainant. The complainants’ mortgage, notwithstanding the releases, stands as against the mortgagor as an encumbrance upon all the unreleaised land for the full amount due thereon, while as against the junior encumbrancers it is subordinated as a lien to their mortgages to1 the extent of the value of the released land..

My conclusion is that the defendant the Kidge Heights Land Company is entitled to a decree sustaining its defence of payment and giving it the affirmative relief prayed for in its counterclaim, viz.,'the surrender of the bond and mortgage for cancellation.

Inasmuch as the matter has been tried, argued and submitted for decision, I think I may state the further conclusion that if the conclusion first above stated is to be deemed erroneous so that the complainant must he adjudged to hold its mortgage for the full amount due thereon as an encxunbrance upon the unreleased land, it must be subordinated to the junior encumbrances upon that land to the extent of the value of the releásed land.

The final decree may be settled on notice and any unconsidered matters may then be determined.


source: Caselaw Access Project

author: Stevenson, V. C.

license: Public Domain

text:
    August Thiel and Margaret Thiel v. Randolph Perkins and the Tuttle Corporation.
    [Decided September 25th, 1916.]
    1. Where A. and B. made a contract of sale of land, which was after-wards consummated by delivery and acceptance of a deed, and A. after-wards filed a bill for reformation of the contract on the ground that, by mutual mistake, the contract did not call for the conveyance of the land upon which a building was erected, the building as a fact encroaching upon adjoining- land, but only covered a lot twenty-five by one hundred feet—Held, that the evidence shows that the parties contracted for the conveyance of a lot twenty-five by one hundred feet, which was duly conveyed, and the agreement for sale should not be reformed.
    2. Where A. filed his bill for reformation of a contract to convey lands on the ground of mutual mistake, and one year afterwards, before that suit was tried, filed an amended bill asking for a rescission of the contract on the ground of mutual mistake as to the location of the building upon the lands, and during that year the building greatly deteriorated— Held, that he is not entitled to the rescission of the contract because by filing his original bill he abandoned all claim to rescission, and was not equitably entitled to such rescission when he amended his bill and changed the whole ground of his suit, because, on account of the deterioration of the building, he is unable to convey it back in the condition it was in when he commenced this suit soleljr for reformation.
    On suit to effect rescission of a conveyance of corner lot and brick building thereon on the ground that the parties were under a mutual mistake in supposing that the building rested wholly on the lot, whereas it encroached upon adjacent property belonging to third parties. Alternative relief of reformation praj'cd for.

      Mr. J. Emil Walsclieid, for the complainants.

      Mr. Marshall W. Van Winkle and Mr. Randolph Perkins, for the defendants.
   Stevenson, V. C.

The important question in this suit is whether, under the circumstances proved, the vendee of a corner lot twenty-five by one hundred feet, in the town of Guttenberg, is entitled to have the whole transaction rescinded because both grantor and grantee were under a mutual mistake—both supposing in good faith that the brick building, which apparently occupied the corner lot, stood wholly within the boundaries of the lot, whereas in. fact the brick walls encroached on adjacent property and on the street at certain points about an inch and a half, a condition which greatly injured the value of the structure.

1. It is somewhat surprising that the diligent efforts of industrious counsel have produced no- case in which rescission has been sought on the ground of an encroachment of a building covering the land conveyed which was unknown to the parties— in fact, unsuspected by them and undiscoverable by careful observation with the eye.

If a vendor offers a corner lot for sale, with a valuable brick building apparently covering it, and conceals the fact known to him that the building encroaches upon adjacent property owned by a third party', it may be conceded that a clear case of fraud is made out—fraud which consists in suppressio veri—and that the right of the vendee to relief is not affected by the fact that he refrained from making a survey which would have disclosed the encroachment. A vendor is guilty of fraud when he falsely represents that there is no mortgage upon the property, whereas there is a mortgage duly recorded which the vendee would have discovered if he had made a search. It is unnecessary to point out that the neglect of a vendee to' search the public records when purchasing real estate has far more fatal effect in the way of depriving Irinr of remedies than his failure- to have a survey made to see whether the owner of a lot twenty-five by one hundred, which he is about to buy, or such owner’s predecessors in title, have been foolish or careless enough to erect an expensive brick building covering the lot without having the walls of tire building located in accordance with an accurate survey.

A variety of cases may be stated which it would be perhaps • very difficult to place in one class and under the operation of one rule with respect to liability on account of an encroachment as between vendor and vendee.

If the vendor himself erected the building, and this fact is known to the vendee, it would seem to be somewhat harsh to hold that the vendee could not accept the offer of the property as. a representation on the part of the vendor that he had erected the building upon his own land, and not in part upon the land of his neighbor. If the vendor knows what the truth is and knows, as, of course, he must, that the truth is not discoverable by the eye, and that the vendee unless he'makes a survey will be deceived, the case would seem, a® I have above intimated, to be one of fraud. If both parties are innocent it would seem to be a case of mutual mistake, and there are .strong grounds for holding that generally the vendor is responsible as the cause of the mistake.

When we take the case of a building which, was erected by a former owner, the present owner and grantor being ignorant of the encroachment, there seems to be room for considerable argument concerning the comparative equities of the parties and the just allotment of liability. In other words, the question then arises whether when men buy and sell real estate in good faith the vendee does or does not take subject to what a survey would disclose, and if he sees fit to carry out the transaction without a precautionary survey, whether he must not under the old rule “look to his covenants.”

In the present, case the right of the complainant to rescind is more difficult to establish because of the history of the lot and building in question. Treating the defendant the Tuttle Corporation, the holder of the title, who made the deed to the complainants, as the mere agent and trustee for Mr. Perkins, and treating Mr. Thiel as representing his wife as well as himself, it appears that Mr. Thiel, or his attorney, in some degree was responsible for the original honest but erroneous belief among all these parties, that the brick building was located wholly within the lines of the corner lot twenty-five by one hundred feet. Without going into the more or less complex transactions between the parties which preceded the conveyance from the Tuttle Corporation to the complainants, which conveyance they now seek to rescind, it is enough to point out- that Mr. Thiel filed a lien claim against this building and the curtilage upon which it was alleged to have been erected, and described the curtilage as lot 414, in block 27, on a certain specified map, declaring that the lot was situate on the northeast corner of Hermann avenue and Second street. All parties to this whole transaction at all times knew that this corner lot was twenty-five by one hundred feet. Mr. Thiel, so far as he is concerned, swears to this fact positively. Mr. Thiel, or his attorney, who drew the lien claim, thus placed on record the representation! that the brick building in question was erected upon the curtilage described, viz., this corner lot twent3r-five by one hundred feet. If Mr. Thiel is to be charged with notice that the walls of this building upon which he filed his lien encroached upon the neighboring lot, and, notwithstanding that fact, filed his lien claim, and carried through the proceedings thereon to an execution sale, and stood by, as he did, at such sale and gaye no notice of the facts to purchasers, it would seem that, according to the argument now made in this case on behalf of the complainants, any purchaser at such sheriff’s sale would have a right to a rescission as against Mr. Thiel upon discovery of the encroachment.

If, however, as no doubt was the case, neither Mr. Thiel nor his attorney had any suspicion that the curtilage which was described in the lien claim did not contain the entire building, then a different 'situation, of course, would be created which need not now be discussed. The point to be observed is, that Mr. Thiel, being the cause of the representation that the corner lot contained the whole building, and was the curtilage upon which it was erected, prosecuted his lien claim suit to judgment and caused a sheriff’s sale of the property described in the lien claim to be held, at which sale the property was offered in its apparent condition, no notice being given of those encroachments which were apparently discoverable only by a survey. At the sheriff’s sale Mr. Perkins, having a mortgage interest which he held as trustee of an estate to protect, made an. arrangement with Mr. Thiel—a bargain was made between the two—by which Mr. Perkins bought in the property for the amount off Mr. Thiel’s claim, something over $1,100. Mr. Perldn'Si had no notice of the encroachment, but bought the propert3r under the same mistake under which it was subsequently purchased by Mr. and Mrs. Thiel. The sheriff’s deed, by the direction of Mr. Perkins, was made to his agent or trustee, the defendant the Tuttle Corporation. Mr. Perkins had no personal interest in this property but acted as trustee for an estate and the Tuttle Corporation, his agent, held the property for the protection of the mortgage and other interest of this estate, of which Mr. Perkins was the trustee.

It thus appears that Mr. Thiel, not only brought on the sale of this property and caused it to be offered for sale to the public, without giving notice of the encroachment, but actually allowed Mr. Perkins, in ignorance of the encroachment, to pay out over $1,100 of money of his trust estate for his (Mr. Thiel’s) benefit and take a conveyance of the property for the benefit of that estate.

After further transactions in regard to this property, which need not be set forth, a further deal was made between Mr. Perkins and Mr. Thiel, by which the property in question was conveyed by the Tuttle Corporation to Mrs. Thiel, and Mrs. Thiel gave back to Mr. Perkins as trustee as part payment a mortgage on certain lots owned by her to secure the amount due to Mr. Perkins as trustee on his original mortgage. As a part of the deal it was agreed that the amount bid by Mr. Perkins at tire lien claim sale and paid by him from his trust estate to the sheriff should be returned to Mr. Perkins.

Starting with the assumption that in. the simplest case first above stated, where the vendor himself has erected the building, the vendee, in case he discovers an encroachment greatly injurious to the building, which was. unknown and unsuspected by either party, has a right to have the contract rescinded upon prompt application after discovery of the mutual mistake, the question, I think, still remains whether a vendor in the situation of Mr. Perkins or the Tuttle Corporation must bear the loss from the encroachment in favor of a. vendee in the situation of the complainants.

If we make the further assumption that, if the vendor himself purchased the property in ignorance of the encroachment and innocently conveyed it to his vendee^ both parties being under an honest mistake in regard to the location of the building, the vendor has in fact made a misrepresentation by holding out the property for sale with the building apparently located wholly on the lot, and therefore the vendee is entitled to the remedy of rescission, I think tiiat even with such an assumption of law and fact a question yet remains for discussion, as to the liability of Mr. Perkins or the Tuttle Corporation under the facts and circumstances above set forth.

Whatever my own impressions may be, I do not find it necessary to answer these questions in order to arrive at a determination of this present case. Eor the purposes of the further discussion of this case I shall assume that the defendants would háve been liable to a decree in favor of the complainants rescinding this conveyance on the ground of mutual mistake, if application for such remedy of rescission had been made by the complainants promptly upon the discovery of the encroachment— the discovery of the mutual mistake.

2. The building in question was in an unfinished condition when the bargain was made between Mr. Perkins and the Thiels which the Thiels now seek to rescind.

On October 2d, 1913, the Thiels after having an expert examination made of the building in its then condition, and an estimate of the cost of completion, entered into an agreement with Mr. Perkins which was drawn by him on one of his office letterheads and reads as follows:

“Agreement made between Randolph Perkins and August Thiel and Margaret Thiel, his wife.
“Perkins agrees to sell and Thiel to buy unfinished building corner Hermann avenue and Second street, Guttenberg, for $2,700 mortgage on Thiel’s properties Nos. 863, 864, 865, 866 and 867 on Hermann avenue and 3d street, Guttenberg, and $1,111.69 now in hands of sheriff realized from sale in Thiel v. Perkins. Title of Thiel’s property to be satisfactory to Perkins. Perkins agrees to convey free and clear of all encumbrances. Thiel to give order to sheriff for said sum.
“(Signed) Randolph Perkins.
August Thiel.
Margaret Thiel.”

This agreement was within a short time after its execution carried out by both parties. Mr. Perkins caused his holding agent, the Tuttle Corporation, to execute a warranty deed not to August Thiel and Margaret Thiel, but by Mr. Thiel’s direction to Margaret Thiel alone, by which deed this same lot described in the lien claim and 'sheriff’s deed, viz., lot 414, in block 27, was conveyed, no mention being made of any building. The deed bears date November 6th, 1913, and was-proved before a master in chancery on that same day, and was recorded in the Hudson county register’s office the next da3r, November 7th, 1913.

It is unnecessary, I think, for the further consideration of this case to go back of this contract of October 2d, 1913. The build-mg had stood in an unfinished condition for two or three years, but the evidence indicates that it liad only slightly deteriorated, if at all. However that may be, the complainants made their bargain with full and accurate knowledge of the condition of the building, and bargained for that building as it then stood.

On November 6th, 1913, Mrs. Thiel thus became the owner of this property. It has not been argued, however, that she occupies any better position than she would have occupied if the conveyance had been made in accordance with the contract to both herself and her husband.

A few days after the conveyance to Mrs. Thiel, Mr. Thiel was informed by the owner of one of the adjoining’ lots that the building encroached on his property, and thereupon Mr. Thiel had a survey made which disclosed all these encroachments upon the two adjacent lots and upon the streets. Mr. Thiel promptly gave notice of the encroachments to Mr. Perkins, and the result was a series of conferences and considerable correspondence in which the Thiels were aided by their counsel, Mr. Walscheid.

Although the matter is in dispute I shall assume that the Thiels at first demanded of Mr. Perkins that, the whole contract in all its parts be rescinded, and that Mr. Perkins induced them to- withdraw float demand, or to let it. remain in abeyance upon his assurance that he would procure conveyances from the adjacent lotowners of the land over which the building encroached or an easement which would be' amply protective. The engagement on tire part of Mr. Perkins included the procurement of conveyances of real estate but was not put in writing. I have adopted the view for the purposes of this- case that the attitude of the parties was as follows:

' Mr. Thiel, for himself and through his counsel, said to Mr. Perkins: . •

“You must rescind this whole contract on account of these encroachments which destroy a large part of the value of what we bought and prevent us from borrowing any money to complete the building.”

Mr. Perkins, recognizing either a legal or moral obligation, and very naturally assuming that he could easily acquire for fifty or one hundred dollars a strip of land one hundred and twenty-five feet long and less, than two inches, perhaps, less than one inch, wide, on the average, came back with what Mr. Walscheid calls a counter-proposition, viz., that he (Perkins) should procure the conveyance from the adjacent lotowners necessary for the protection of the building. The parties do not seem to have made any legally enforceable agreement and no provision was made for what was to be done in case Mr. Perkins should be unable to procure conveyances from the adjacent lotowners.

Assuming, as we now are, that the complainants made a prompt demand for a rescission, I think that during the period of one year which followed before this suit was commenced, the attitude of the parties may be stated as follows: The complainants demanded rescission. The defendant Mr. Perkins, by his representation made in good faith, that he would acquire the necessary strips of land, induced the complainants to stand still and await the result of his efforts. The complainants agreed that if Mr. Perkins would procure these necessary conveyances they would accept the same in settlement of all claims. I do not think, therefore, that if a demand for a rescission was made the same could be deemed absolutely withdrawn because the complainants were induced by Mr. Perkins’ representations and promises, to stay the enforcement of that demand.

At the suggestion of Mr. Perkins, Mr. Thiel undertook to negotiate with the owner of the lot on the east for the desired conveyance. It is proved that this lot, which was vacant, was worth about $1^200. The owner, who was aware of the encroachment, declared that he would not sell less than a strip six inches wide, and for such strip his price was $500.

Mr. Perkins declined to pay $500 for $24 worth of land. In fact, the necessary strip two inches wide was worth, about $8. In view of the persistent attitude of this lotowner no effort was made to acquire the desired strip- twenty-five' feet long on the northerly side of the property. As to the encroachments on the street, the parties seem to have felt assured that no public complaint would be made, and the Thiels were willing to consider their demand.satisfied and to keep- the property if all danger on account of the encroachment upon the lot on the east and the lot on the north was removed by appropriate conveyances. It will thus be seen that in the end of 1913, or the early part of the year 1914, the complainants consented to remain the owners of the property at least for a reasonable time in order to give Mr. Perkins a fair opportunity to make good his representation and promise and procure the required protective conveyances. The complainants and their counsel repeatedly urged Mr. Perkins to carry out his undertaking, and it is evident that Mr. Perkins was greatly embarrassed by what he deemed the. extortion which one of the lotowiners was endeavoring to practice upon him.

Continuing the assumption in favor of the complainants, I shall assume that the complainants by their delay at the request of the defendant Perkins did not waive or in any manner lose their right to a rescission in case of Mr. Perkins’ failure to make the settlement which had been agreed upon. It is, however, a very different question whether in view of the serious deterioration of the building which took place during the year 1914, the complainants had a right to refrain from properly protecting the building which they owned, and which they expected to continue to own, in case Mr. Perkins could obtain the derived conveyances, and then upon renewing their demand for rescission, force upon Mr. Perkins the building which they had allowed to go partly to ruin under the action of the elements and the spoliation of marauders. Ordinarily, under the well-settled rule, rescission is granted only upon a restoration of the original status. He who rescinds must surrender and restore what he received under the contract whic-h is rescinded. It is argued that Mr. Perkins caused this delay, and it may be that this fact should be deemed a complete defence against any charge of waiver or laches. But was Mr. Perkins bound to take possession of the premises, put on a roof, and close the open side on the. street so as to exclude trespassers? There is no evidence that the complainants owning, and hoping to continue to own, the property, requested Mr. Perkins to take possession of the property or enclose the open side sufficiently to exclude trespassers. The evidence indicates that the protection of tire property against the elements and against trespassers could have been accomplished at a comparatively small cost. The boards were on the roof, and, as Mr. Thiel testified, “all it needed was the tinning.”

Accepting the view of tlxe ¡situation most favorable to the complainants, we find that, first, they demanded rescission which involved an immediate surrender of the property by them to Mr. Perkins or the Tuttle Corporation. Next, they agree with Mr. Perkins that they will for a reasonable period remain the owner of the property, and in case within that period Mr. Perkins shall procure the desired conveyances from the adjacent lot-owners, then they will accept such conveyances, withdraw absolutely their claim to a rescission, and remain permanently the owners of the property already conveyed to Mrs. Thiel. If Mr. Perkins failed to procure the conveyances, we are assuming, in favor of the ■ complainants, that they might successfully urge their right to a rescission, but down to this stage in the proceeding the complainants were to remain owners. The complainants did not assent to this proposition to give Mr. Perkins time to get the conveyances upon the condition that Mr. Perkins should discharge any of their duties as owners. There certainly seems to be cogency in the argument that just as Mr. Perkins was to spend his time ancT money during the reasonable period of delay in order to procure the conveyances, so the complainants were to stand as owners and take care of the property in order that at the end of the period in contemplation they might, in case they were obliged to renew their demand for a rescission, tender the property substantially in the same condition in which it was when they took it and when they made their attempted settlement with Mr. Perkin1?.

I shall, however, also leave undecided this question of the right of the complainants to a rescission upon a reconveyance from them to the Tuttle Corporation of this property in its then condition, at the end of the period of delay caused by Mr. Perkins, or, to be m.ore specific, we-may say at the time of the commencement of this suit in November, 1914. The evidence shows that this year was a period of great depreciation of the property—that during this period the complainants allowed the property to remain wholly unprotected against, the elements and against trespassers.

The complainants were held off as above set forth for a period of nearly one year until their patience was exhausted, and they thereupon commenced this suit. The original bill of complaint was filed in this court on November 17th, 1911, about ten months after the arrangement for a settlement was made betunen the complainants and Mr. Perkins. This bill of complaint sets forth the agreement of October 2d, 1913, which provided for the conveyance of the property in question to Mr. and Mrs. Thiel, the complainants. The bill then alleges that it was expressly agreed that in addition to the unfinished building Mr. Perkins “was to convey the lands upon which it was erected,” and that it was the intention of the parties to make a contract for the conveyance of the land as well as the unfinished building upon which it was erected, and that through the mutual mistake of the parties the words “and the land upon which it is erected” were not inserted in the fifth line of the agreement after the word “Guttenberg,” and that therefore the agreement does not truly express the intention and meaning of the parties.

The bill further alleges that the complainants- have performed the contract on their part by delivering the mortgage for $2,700 and giving an order on the sheriff for the sum of $1,111.69, and that the sheriff had turned over the money to Mr. Perkins, and that the complainants did not discover the mistake or omission in the written agreement until they had performed it on their part, arid that thereupon they called upon Mr. Perkins to perform his part, and that he (Perkin-s) then “refused to convey” to the complainants, “in addition to the unfinished building, the land upon which it was erected.”

It will be observed that not the slightest mention is made in this bill of the deed of conveyance from the Tuttle Corporation to Mrs. Thiel in performance of this contract. The Tuttle Corporation is not made a party to the suit. The sole defendant is Mr. Perkins, and the prayer for relief is that “said agreement lie corrected and reformed so as to have inserted therein” the words above mentioned, at the point indicated, “so as to express the true intention of the parties thereto.” The usual prayer for further and other relief is added. Assuming that prior to the commencement of this, suit there is room for argument concerning the position of the complainants with reference to the rescission of the contract of October 2d, 1913, their position was sharply defined and absolutely fixed when their bill of complaint was filed. In that bill the complainants did not aak for any rescission of the contract involving a restoration of the status on both sides, but, on the contrary, they came into court as the owners of the propertjq reaffirming the contract which they now seek to rescind, and praying that the contract might be reformed in order that it might be further enforced. No alternative cause of action was presented, and no alternative relief was prayed for. The omission of the Tuttle Corporation as a defendant excluded the possibility of any rescission of the contract of October 2d, 1913, because that contract had been, carried out by the conveyance from the Tuttle Corporation to the complainants, and the execution and delivery of the mortgage covering Mrs. Thiel’s lands from the complainants to the Tuttle Corporation. The complainants came into this court saying:

“We stand upon the agreement as the. parties intended to make it. We expect the performance by Mr. Perkins of the agreement as it was drawn, and we hold, and intend to hold, the fruits of that performance. What we want is to have the agreement reformed so as to extend the scope of Mr. Perkins’ obligation and then sue at law for damages because of his failure or inability to carry out the provision which we ask to have added to the agreement by the decree of reformation.”

All claim to a rescission of the agreement of October 2d, 1913, was plainly abandoned when this bill was filed, and no intimation was given that if this suit for reformation should fail the complainants proposed to endeavor to revive the inconsistent or alternative claim to a rescission.

The answer of the sole defendant, Randolph Perkins, to this original bill of complaint was brief, and amounts practically to a denial of the alleged mistake, and an allegation that it was the intention of the .parties that the property acquired by Mr. Perkins through the mechanics’ lien'sale should be conveyed, and that the complainant August Thiel knew that the title acquired at said sale was all that it was possible for Mr. Perkins to convey to the complainants, viz., lot No. 414, in block 27, &c. The order referring this case to me for final hearing was made on March, 18th, 1915, and the ease came on for final hearing- on November 9th, 1915, at which time the pleadings were read, or in some way the nature of the complainants’ case was expounded. Some colloquy then took place between court and counsel, in which it was suggested that a case of rescission was indicated rather than a case of reformation, and the propriety of amending the bill and bringing in the Tuttle Corporation as a party defendant was suggested. The hearing was then adjourned by a brief order until the 16th day of November, 1915, and leave was given to the complainants to amend their bill so as to present a case of rescission and make the Tuttle Corporation a party defendant. I do not think that this application was resisted b3r counsel for the defendant. November 16th, 1915, was a regular motion da3r, and, presumably, this short adjournment was made in order to give the counsel for the complainants an opportunity to look into the questions with which he had been unexpectedly confronted.

On November 16th, 1915, counsel for complainants took an order reciting that air amended bill had been theretofore served on Mr. Perkin?., which amended bill made the Tuttle Corporation a party defendant, and directing that said amended bill be filed, and that the defendant Randolph Perkins do answer the same within twenty days, and that the complainants forthwith issue a subpoena to bring in the Tuttle Corporation, and that the Tuttle Corporation have the time allowed by law in which to answer the amended bill, and .that the hearing of the cause be continued to the 3d day of May, 1916.

The amended bill, filed just one year lacking a day after the original bill for reformation had been filed, sets forth practically a new case which presented to the court, not the facts including particularly the condition of this building as it stood at the commencement of the suit, but the facts including the condition of this building as they stood a year later. The amended bill sets forth the agreement between- the complainants and Randolph Perkins individually,- dated October 2d, 1913, and that in performance of the agreement the complainants gave the mortgage and order for the $1,111.69 mentioned therein, and that Perkins, in consideration of the performance of the agreement- by the complainant, caused to be conveyed by the Tuttle Corporation to Margaret Thiel, with the consent of August Thiel,

“a certain lot of land known as lot number four hundred and fourteen (414), in block twenty-seven (27) on the map of Guttenberg aforesaid, being twenty-five feet wide in front and rear and one hundred feet deep as by reference to said map will more fully and at large appear.”

The amended bill further alleges the omission from the agreement of the words set forth in the original bill, and further alleges “that said contract as it now stands does not truly express the intention of the parties thereto.”

The amended bill further states that the complainants accepted the deed from the Tuttle Corporation for said lot No. 414, believing that 'said deed “conveyed to your oratrix, Margaret Thiel, said unfinished building and the lands and premises upon which the same is erected.”

The amended bill then sets forth that subsequent to the making and recording of the deed from the Tuttle Corporation to Mrs. Thiel, the complainants discovered the encroachments and immediately notified Mr. Perkins of the same. The arrangement between Mr. Perkins, and the complainants for the acquisition of the necessary strips of land, and the frequent calls which the complainants made upon Mr. Perkins to cany out the arrangement winch had been agreed upon, are then set forth. The bill then alleges that the complainants did not seek the aid of this court for the protection of their rights owing to'the promises which Mr. Perkins had made until January 5th, 1915, when they filed their bill. The date of the filing of the bill was not January 5th, 1915, but November 17th, 1914.

The amended bill alleges, also that the original bill prayed for a reformation of the contract of October 2d, 1913, “so that said contract should agree to sell and convey” the unfinished building, “together with the land upon which it is erected,” the complainants “intending on the reformation of said agreement to institute an action at law against said Randolph Perkins for damages by reason of his failure to convey unto your orators the unfinished building aforesaid, together with the lands upon which the same is erected.”

The amended bill then sets forth that the suit came on to be heard on November 9th, 1915, and counsel for “complainants having opened the cause to the court, your orators were advised that their remedy in the premises might perhaps be bj1' prayer for rescission and cancellation of the contract aforesaid, instead of by reformation of the same; whereupon your orators begged leave of the court to- continue the hearing of said cause to some future day with permission in the meantime to amend the bill of complaint'by them theretofore filed, so that said bill of complaint should include, in addition to the facts essential for reformation and a prayer for reformation, a statement of facts necessary to give the court jurisdiction of a prayer for rescission of said contract, and the hearing of said cause was thereupon continued to the sixteenth day of November, a. d. nineteen hundred and fifteen, with permission to your orators to amend and serve their amended bill of complaint 'in conformity with their request as aforesaid.”

This frank declaration of the intention of the complainants in seeking- the reformation of the agreement is certainly significant. It shows distinctly that the complainants stood as owners of the property claiming the right and boldly declaring their intention to remain such owners. They occupied this position for a year after they commenced their suit. This declaration, also, in the light of the other facts and circumstances of this case, discredits the complainants’ claim that they sought at the start a rescission of the contract, and sustains Mr. Perkins’ contention that what they originally sought was compensation in some form for the loss which they had suffered on account of the mistake. If what the complainants originally sought for was rescission, and they then merely held their claim hr abeyance in order to give Mr. Perkins a chance to relieve them from the effects of their mistake, why, it may be asked, when they became tired of waiting upon Mr. Perkins, did they not renew their claim to a rescission and bring their suit to accomplish that result? The definite position which they took in their original bill that they intended to hold onto the property which they had received, make no claim to a cancellation of the mortgage on Mrs. Thiel’s lands and leave Mr. Perkins in possession of the $1,100 while they brought an action against Mr. Perkins for damages, seems to accord far better with the defendants’ theory of the original position which the complainants took than it does with the complainants’ theory.

The point, however, at present in mind is the conduct of the complainants from the commencement of this suit until their amended bill was filed in its relation, not to any defence of laches or ratification, but to the defence that while they stood before the court as the absolute owners of the property, and claiming their right to remain such owners, they suffered it to fall into ruin so as to make a restoration of the status even as it stood at the commencement of the suit entirely impossible.

The amended bill further alleges that the complainants “now are, and always have been, ready to rescind and cancel the contract aforesaid, and now are, and always have been, ready to re-convey. unto the Tuttle Corporation aforesaid, or unto the said Randolph Perkins, the lands and premises received by the said Margaret Thiel from the said Tuttle Corporation by the deed aforesaid, and do now tender themselves ready and willing to execute such deeds of conveyance for said land upon such terms and conditions as may be imposed by this honorable court upon a decree rescinding the contract aforesaid.”

The prayer of the amended bill is in the alternative that it may be decreed that the contract of October 2d, 1913, be rescinded and canceled, and that the complainants “be restored to all things which they have lost by reason of the making of said contract and the actions of the parties subsequent thereto,” or, in the alternative, that it may be decreed that the said agreement be corrected and reformed so as to have the words above mentioned inserted therein at the place indicated.

If the application of the complainants for leave to make these radical amendments of their bill had been resisted, 1 am by no means sure that such amendments would have been allowed. It is not worth while, however, to pause to consider this matter. What in fact the complainants did was to file an entirely new bill containing a cause of action which was inconsistent with, that which had been set forth a year’ before in the bill of complaint as originally filed, and which could only be established as an alternative of that original cause of action. As. stated before, the new cause of action presented by the amended bill included necessarily the consideration of facts and circumstances as they existed in November, 1915, and not merely the facts and circumstances as they existed in November, 1914. This new cause of action required a new party defendant, the Tuttle Corpora,tion, to be brought in.

The answer of Mr. Perkins to this amended bill, as hereinbefore stated, sets up, the deterioration of the property, the practical destruction of the building down to its foundations, resulting from neglect of the complainants to protect the same. In brief, this defence is based upon the proposition that the complainants are not entitled to a. decree of rescission because they are unable to restore the property to. Mr. Perkins or the Tuttle Corporation in the condition it was in when the contract was made on October 2d, 1913.

I think this defence is 'Sustained if the evidence shows, that for the whole year during which the complainants were prosecuting this suit upon their original bill for reformation onty, the property suffered substantial deterioration. The evidence does show that during this year, November, 1914, to November, 1915, the building suffered a very great deterioration in value under the operation of the causes hereinbefore referred to. AVhen the amended bill was filed the defendants,, in my judgment, were not obliged to accept hack this building even if we may assume that they would have been obliged to, accept the building in its then-condition when the original bill was filed in November, 19.14, in case that bill had set forth a. case of rescission and had not ratified the conveyance from the Tuttle Corporation to Mrs. Thiel.

AYhatever may be the true equitable rule in regard to the obligation of the complainants to preserve this building from falling into ruin during the year in which Mr. Perkin,si promises and representations had induced them to delay their suit, I do not think there can be anj'"’ doubt about the equitable rule to be applied one year after this suit solely for reformation had been commenced. Mr. Perkins, it seems to me, had a right to come into court when this amended bill presenting a new cause of action was filed on November 16th, 1915, and sajr in answer to the bill: , "Conceding that if you had filed this sort of a bill and asked for rescission a year ago, it would have been my duty to submit to rescission and take back this building in its then condition, nevertheless, you had no right to postpone your claim for rescission for a year, stand hand and fast on your ownership of the property, claim the right to retain the property and sue me for damages because I did not convey more property to you, and now, at the end.of the year, change the whole character of your suit, pray for a rescission of the contract and demand that I shall take back the building in its present condition, when during the year it has been greatly damaged by the elements and by the plundering of trespassers.”

I am not suggesting that the lapse of this year while this suit has been pending, as a mere suit for reformation, is to be deemed a period of laches on the part of the complainants. The question of laches is not under discussion. The defence under consideration is not that the amended bill praying for rescission was filed too late, but that when it was filed the complainants had rendered themselves by their neglect of the property incapable of conveying it in the form it was in a year before. .

3. The argument in this case has related to the claim to rescission first presented in this cause by the amended bill, but the amended bill also endeavors to present in the alternative the original case for reformation, and in the alternative prays for such relief.

The statements of the amended bill without the aid of the testimony would seem to destroy the original fanciful claim of the complainants that the subject-matter of the bargain was the parcel o f land, whatever its shape or size, upon which the building rested. According to this theory, if the building had occupied a parcel of land on the comer of these streets, having a width of twenty-four feet and ten inches, the Tuttle Corporation would have performed this contract if it had conveyed this parcel to Mrs. Thiel, and had remained the owner of a strip of land two inches wide and one hundred feet deep. Mr. Thiel swears positively that he knew that he was buying this comer lot, No. 414, in block 27, and that this lot had a frontage of twenty-five feet. -Mr. Thiel also knew that Mr. Perkins owned this corner lot, twenty-five feet'wide and no more, and knew the history of his title which rested upon Mr. Thiel’s sheriff’s sale under his lien-claim judgment and execution.

But the conduct of the parties in carrying out this contract establishes what the subject-matter of the contract was beyond all question. The Tuttle Corporation gave, and the Thiels accepted, in performance of the contract on the part of Mr. Perkins, a deed convoying this comer lot (No. 414) without making mention of any building. The amended bill alleges as follows:

“Your orators accepted the deed from the Tuttle Corporation aforesaid for said lot No. 414, in block 27, on the map of Guttenberg aforesaid, believing that said deed conveyed to your oratrix, Margaret Thiel, the said unfinished building and the lands and premises upon which the same is erected.”

Inasmuch as Mr. Thiel knew that lot 414, this corner lot, was twenty-five feet wide by one hundred feet in depth, and the deed which he accepted described this lot of land and no more, he believed, as alleged in the bill, that the unfinished building stood wholly on this corner lot. The mistake that was made, we may surmise, originated with the party who- erected the walls of the building. Presumably, that party did not intentionally encroach but “believed” that the walls had been located wholly upon the corner lot twenty-five by one hundred. Mr. Thiel, or his attorney, when Mr. Thiel’s lien claim was filed, unquestionably, were under this same mistake, and they supposed that the “curtilage” on which the building was erected consisted exclusively of this, corner lot twenty-five by one hundred feet. Mr. Perkins was under the same mistake when he made the arrangement with Mr. Thiel, in pursuance of which he bought in the property at the lien claim sale, and had the sheriff convey the same to the Tuttle Corporation. Mr. Thiel, his wife and Mr. Perkins were under the same mistake when they made their contract on October 2d, 1913—the contract which the bill of complaint in one aspect prays in the alternative to have reformed.

I am unable to see the slightest justification for the proposition that these parties did not contract for the corner lot, which was conveyed and accepted in performance of the contract, but that they contracted for a parcel of land, the dimensions of which were measured by the size of this building, and that Mr. Perkins intended to convey such a lot whether he owned it or not.

4. When the amended bill was filed praying in the alternative for rescission a year after the suit had been commenced solely for a reformation, the Tuttle Corporation became a necessary party, and, accordingly, was brought in as a defendant. Randolph Perkins,, individually, remained as the other party defendant. Neither Perldns, as trustee, nor the beneficiaries of his trust were brought into the suit, although it appeared from the pleadings that the mortgage for $2,700 given'by Mrs. Thiel to Mr. Perkins, as trustee, was necessarily involved in the suit and would be liable to rescission and cancellation if such a decree passed against the Tuttle Corporation, and Randolph Perkins. It was admitted, however, by counsel, and I think it also appears from the testimony, that this mortgage at some time was paid off. It was stated, and I think agreed to by counsel, that a suit had been brought to foreclose this mortgage, and that the same had gone to decree, and that the propert3r, the lots of Mrs. Thiel, had been sold under execution upon such decree. It would seem, therefore, that Mr. Perkins’ estate, his beneficiaries, are not interested in this present suit on account of the mortgage for $2,700.

The situation, however, is somewhat peculiar. The right of the complainants to rescind this contract of October 2d, 1913, involves necessarily the right to rescind the deed from the Tuttle Corporation to Mrs. Thiel, and the mortgage from Mrs. Thiel to Mr. Perkins, as trustee, and the right to rescind the assignment of money from Mr. 'Thiel to Mr. Perldns individually or as trustee. One of these connected transactions cannot be rescinded while the others stand. In the absence of allegations in the pleadings and of evidence and argument in regard to this foreclosure suit and decree, I dismiss the matter without consideration. ’ It may be that as between Randolph Perkins,, as trustee, and the beneficiaries of his trust estate on the one hand, and Mr. and Mrs. Thiel on the other, it is res adjvMcata that this mortgage was unaffected by any mistake, and that in respect to. it the complainants were not entitled to any decree of rescission.

5. For the reasons hereinbefore set forth, I find that the complainants are not entitled to a reformation of the contract of October 2d, 1913. If the3r were entitled to a rescission of that contract npon discovery of the encroachment, in November or December, 1913, and remained entitled to such rescission until they commenced this suit in November, 1914, I think it is clear that by suing solely for reformation they abandoned their claim to rescission and were not equitably entitled to such rescission when they amended their bill and changed the whole ground of their suit in November, 1915, because, on account1 of the ruinous condition of the building, they were unable to convey it back in the condition it was in when they commenced this suit solely for reformation.

A decree therefore will be advised dismissing the bill.


author: Lewis, Y. C.

text:
    The Central Railroad Company of New Jersey v. The Mayor and Aldermen of Jersey City.
    [Decided September 11th, 1920.]
    1. Where a city contracted with a railroad company that the city should construct and complete certain sewers, designed for the use of the city, through and across the lands of the company to the exterior line for piers in New York bay, and the city left the sewer uncompleted at a point four thousand five hundred and fifty feet from the outlet, the result being that an immense cesspool was formed on the lands of the complainant, thereby creating a continuing nuisance, on bill filed by the company for an injunction and other relief, a decree for specific performance will be granted, as the public health is involved in a high degree and an injunction against the use of the sewer might prove detrimental to the public health.
    2. The contention on the part of the city that it was without power to make the contract sued on, and that therefore no right can accrue to the company under it, is without merit, as the company does not seek to be relieved from any assessment for benefits, or to enforce any benefit arising from the contract, except to be relieved from the existing nuisance.

      S. Against such a continuing nuisance, it is apparent that the complainant can have no complete and adequate remedy at law, and the parties are forced into equity for ultimate relief.
    On bill and answer with exhibits.

      Mr. Edwin F. Smith, Mr. Charles E. Miller and Mr. George Holmes, for the complainant.

      Mr. Charles M. Ega.n, for the defendant.
   Lewis, Y. C.

The bill is filed in this case, inter alia, to compel the city of Jersey City to carry out a contract admittedly made between the city and the Central Railroad Company of New Jersey, the complainant herein, to construct and complete certain sewers designed for the use of the city, through and across the lands of the complainant, located at what is known as Communipaw, in the city of Jersey City, to the exterior line for piers in New York bay, as established by the riparian commissioners of the State of New Jersejr, in accordance with the specific terms of the contract mentioned; and to restrain the city (which Iras left the outlet sewer uncompleted at a point about four thousand five hundred and fifty feet from the terminus designated) from perpetrating and maintaining the continuing nuisance which results from the emptying of the sewage on to the lands of the complainant where the point of outlet now exists, thus forming what is, in fact, an immense cesspool on the lands of the complainant, to the alleged detriment of the health of a large number of people, and to the manifest interference of the complainant with the use of its property as contemplated in the contract referred to.

The facts are not disputed, and the legal issues involved a.re raised by the pleadings and certain exhibits which have been submitted to the court upon the arguments.

The significant portions of the contract are in substance as follows:

“Whereas, the city and its authorities desire and require for public uses, the use of certain lands of the railroad company for the purposes of a right of way in which to construct two trunk line sewers * * * [reciting the purposes and directions of said sewers] * * * ; and in order that there shall be a proper outlet for the said sewers into New York bay. the city and its authorities desire to construct said sewers across the right of way, railroad and tracks, yard and other lands of the railroad company to the exterior line for piers on said bay; * * *
"Whereas, the railroad company now have a large number of railroad tracks upon their said lands and also have in course of construction many other railroad tracks and contemplate in the near future a construction of other railroad tracks thereupon so that all of their said lands, as •shown upon the 'said map hereto attached, may be ultimately covered with railroad tracks and their appliances and other structures, yet the said railroad company is willing to demise the use of so much of their said lands and rights of way as shall be necessary for the construction and maintenance of said sewers for public uses to the exterior lines for piers on New York bay, as now fixed or hereafter fixed by the riparian commissioners of the State of New Jersey, or by such other authorities having jurisdiction of the same, without the payment of any money compensation on the part of the city; and in lieu of money compensation the railroad company desires to obtain from the city certain privileges, rights, authorities and grants as are hereinafter set forth as the consideration moving the railroad company to give and demise the use of the said right of way hereinbefore mentioned; provided, always, that the said sewer is so constructed and protected that the surface of the ground over the same may be freely and uninterrupted!}7 used at all times for the construction, maintenance and operation of the company’s railroad tracks, their appliances, and such other structures as it may desire to erect, as well as the free and uninterrupted use of the surface or otherwise of the said right of way by the said company for the transaction of its business and such other purposes as the said company may desire.
"Therefore, it is agreed:
“By Railroad Company—
“(b) Grants and conveys to the city a right of way twenty-five feet in width in which to construct and maintain sewers mentioned, through and across the lands and rights of way of the company, from the westerly side thereof to the exterior line for piers on New York bay;
“(b) ^Vithout costs, to convey to city the use of all lands necessary for the relocation of any of the streets herein required to be relocated, and do all the work of reconstructing the relocated portions thereof, without charge or expense to the city;
“(c) To construct, at its own cost, a brick sewer of certain dimensions, from the easterly end of Philip street,” &c.
By City—
“(a) Agrees to construct on said right of way the sewers as provided in said agreement;
“(b) To keep the work of building said sewers in advance of the work of filling and reclaiming said lands as will in anywise hinder or delay the work of filling and reclamation, and at all times permit the free, clear and sanitary venting of said sewers into the waters of New York bay and so that the same shall not be in anywise a nuisance, and indemnify and save harmless the company from all claims, fines, damages, &e., by reason of said venting of said sewers into the waters of New York bay or by l'eason of the same being a nuisance, public or otherwise;
“(c) Agrees -that the lands so conveyed to it a.re worth $75,000, and in consideration of the conveyance of such land to it without any money consideration, no assessment for benefits shall be made against the company, for the cost, or otherwise, of the sewer;
“(d) Gives the company the right to make connections with the sewer free of charge;
“(e) Gives company right to construct lateral sewers in certain streets to drain water from the cut of the Newark and New York Railroad Company;
“(f) Agrees to change the grade and vacate a portion of Communipaw avenue and relocate a portion thereof and construct a new bridge;
“(g) Agrees to pass the necessary ordinances, resolutions, &c., railroad company to pay costs;
“(h) Agrees to change the grade of Gates avenue and that company to construct new bridge over its lines at said avenue and to pass the necessary resolutions, &c.;
(i) Agrees to vacate a portion of Philip street and relocate the same, and grant the company the right of way to lay tracks across a portion thereof, and to pass the necessary resolutions, &c.;
“(j) Grants to company the right to open Philip street for the purpose of constructing a sewer, and will pass the necessary resolutions, ordinances, &c.;
(h) Will compel all house drains to connect with said sewer and will keep the sewer in repair;
“(l) Grants to company the right to connect said sewer free of charge.”

The issues raised by the answer filed by the defendant are as follows:

“(a) That it had no authority to relieve complainant from the payment of assessments for the benefits arising from the cost of the construction of the sewer.
“(h) That it had no authority to permit the complainant, without costs, to make connections with said sewers from such lateral sewers as complainant might eonsti'uct.
“(c) Exemption from assessment and costs of such sewers was illegal, and the agreement was ultra vires.
“(d) It had no power or legislative sanction to vacate and relocate a part of Philip street.
“(e) It had no power or legislative sanction to enter into the agreement, and. the same is ultra vires.
(f) The court has no jurisdiction.”

The complainant company has performed its part of the contract in full.

The defendant, city, has performed its part of the contract in all things except the completing of the outlet sewer to the point fixed in the exterior line for piers. It refuses to continue on with the construction of the sewer to completion, hut persists in using the sewer, and tints dumping its sewage on the lands of the complainant in the manner already indicated.

In spite of the fact that the complainant, in carrying out its part of the contract has practically vested in the defendant property to the value of between $75,000 and $100,000, the city, in seeking to avoid the full performance of its part of the contract contends, chiefly'', that it was, without power to make the contract, and that, therefore, no- rights can- accrue to the railroad company, enforceable in this court, by virtue of a contract which they claim to be ulira vires.

It is sufficient to say, in this respect, that the complainant does not seek in its bill to be relieved from any assessment or other charge arising from the improvement involved; or to enforce in its favor any benefit which it might claim in these respects under the contract except as hereinabove set forth. The complainant apparently leaves the ultimate disposition of those phases of the contract to subsequent adjustment or determination as occasion may arise.

The sole issue to be disposed" of at this time seems to resolve itself into the matter of the completion of the sewer, and the restraining of the existing nuisance, the offensive character of which cannot be questioned.

From the very nature of the situation which is presented it seems clear that complainant can have no complete and adequate remedy at law. It is entitled to the free and untrammeled use of its property, and the city has no right to invade the complainant’s property under the guise of a solemn contract, and then use it for its own offensive purposes; leaving the complainant to seek redress for such unwarranted! action through the medium of damages in a court of law.

The city had the undoubted power to construct the séwer; and it had the undoubted power to acquire lands, or an easement in lands for such purpose, either by purchase or by condemnation. It has, by its contract, induced the railroad company to part with valuable property rights, and to incur large expenditures in improvements, in g'ood faith, under the contract, on its part; and the city’s failure to carry out its part of the contract is, to my mind, on the case as presented, unjustifiable.

Again, in the very nature of the situation, the nuisance which has been thus created, is a continuing one, and there could be no end to the successive suits at law if the complainant was left to its remedy in’ damages, if any; and, eventually, the parties would be forced into equity for ultimate relief.

I think that the complainant is entitled to relief from the nuisance that is shown to exist; and that the proper way to grant it is to decree a specific performance of the contract made by the city to construct its sewers to the outlet at the exterior line for piers in New York bay.

The only other alternative would be to enjoin the city from using the sewers to dispose of the accumulating sewage and to remove its pipes from the lands of the complainant, upon the theory of a complete breach of the contract on the part of the city.

The public interest in this situation is so great, however, and the public health is involved to such a high degree that I am convinced that the effective method of accomplishing the result, to which the complainant is clearly entitled, will be to enforce the completion of the sewer as designed.

I will, therefore, advise a decree accordingly.

The terms of the decree will be settled upon application.


author: Lewis, V. C.

text:
    Joseph D. Bardo v. Elizabeth Bardo.
    [Decided September 30th, 1920.]
    1. A gift of personal property from a husband to a wife must be clearly proved. There must be clear and convincing evidence'of a delivery of the property with the intention of divesting himself of all dominion and control of it, and of vesting it in his wife.
    2. Where such clear and convincing evidence is not produced, the. husband may have an accounting from his wife as to his personal property taken by her and sold to a third party.
    On bill, &c.

      Mr. Elmer Demaresi, for the complainant.

      Mr. Frank G. Turner, for the defendant.
   Lewis, V. C.

The bill in this case is hied for an accounting.

The controversy arises over money derived from the sale of a dry goods and notion store in Bayonne, the ownership of the fund being claimed by each of the parties who in this cause are husband and wife.

The fund, or what remains of it, is in the custody of the defendant.

The parties have had other litigation before me which unfolds a long chapter of matrimonial discord. They have been married since 1889 and have had four daughters. Almost from the time of their marriage they disagreed. The testimony shows that at the time of the hearing, they had not spoken to each other, except on very few occasions, since 1914, although they were living in the same house and occupying the same bed. The necessary communications were carried on through the children.

The complainant is a man advanced in years, and has been employed for a long period as an electrical superintendent by the Tide Water Oil Company of Bayonne.

The proposition confronting him in his home is a rather difficult one. Iiis wife refuses -to talk to him, and the daughters apparently sympathize with her in her attitude towards their father.

I am unable to find that during the entire married life of these people that there has been any income of importance coming to the home, except that derived from the father’s exertions and the store he purchased, in which they all labored. This store he secured in 1908 from one Clark and wife. It was located at 745 Broadway, Bayonne. He paid for it $750—$600 in eash and the balance by note. The bill of sale is in the complainant’s name, and he borrowed $500 of the purchase price from one Conklin, for which notes were given and subsequently paid by the complainant. This somewhat negatives the defendant’s claim of ownership, and these facts are admitted by her. During the day, the defendant and her two eldest daughters attended the store, and during the evening the complainant worked there, waiting on the customers and keeping the book0.. This continued until May, 1917, when the defendant decided, without the knowledge of the complainant, to close the store at six o’clock and place a new lock on the door.

The complainant borrowed upon his life insurance and invested it in the business, advancing money saved from his salar}', to a considerable extent, for the purpose of increasing the -stock. The daughtersmmployed at the store received salaries and their clothing. The complainant contributed $60 per month to run the house, and the profits from the store were used to supply the balance required. He also provided the house in which the family lived.

My view of the testimony is, that the complainant 'evidently ■ told the truth on the stand when he said that he purchased the store so that in case anything should happen to him, his wife and children would surely have ¿orne source of income.

There is no convincing evidence from the lips of the mother or daughter who testified that Bardo ever gave his wife the store. He says positively that it was never turned over to her; that she was simply to manage it.

It is difficult.to understand why it was necessary for Mrs. Bardo, in May, 1918, if she owned the store absolutely, to secretly make sale of the business and attempt to conceal the funds. She closed the business and sold the stock at this time entirely without the ■ knowledge of the complainant. She says she received in the neighborhood of three thousand and odd dollars, and tlia.t after the payment of the debts there was. about $1,100.

The complainant, after the sale had taken place, upon learning of it, inquired what price the store had been sold for and what the debts were, but all information was refused him. He then said he would stop his contributions of support to his family and that there must be an accounting from the business.. Mrs. Bardo then instituted a suit for maintenance against the complainant, and, after hearing, I dismissed the bill for lack of jurisdiction. It appeared from the evidence that the husband had in the meantime continued to contribute to the support of his wife and their infant daughter, and I felt satisfied from the evidence at that time that the fund representing the proceeds of the sale of the store belonged to the complainant.

The defendant does not claim to have held any title to the store, or to be now entitled to it by reason of any contract with the complainant. She claims that certain conversations between him and her daughter operated as a gift.

In Farrow v. Farrow (Court of Errors and Appeals), 72 N. J. Eq. 421, Mr. Justice Trenchard, speaking for the court, says: “A gift of personal property from husband to wife must be clearly proved. There must be clear and convincing evidence of a delivery of the property with the intention of divesting himself of all dominion and control of it and of vesting title in the wife.” The evidence of the wife and the witnesses does not meet these requirements.

I think the complainant is entitled to relief, and I shall refer the matter to á special master to state an account between the parties.