author: Stevenson, V. C. (orally).

text:
    Martin Beckhard v. James Rudolph et al.
    [Argued May 31st, 1904.
    Decided November 4th, 1904.]
    1. Subcontractors, such as plumbers, plasterers and painters, who supply the material and put it into the building, are not materialmen within the meaning of section 3 of the Mechanics’ Bien law, and are not protected thereby.
    2. A stop notice must show a demand upon the contractor for payment as well as his refusal to pay.
    3. A notice of a materialman, stating that a certain amount of money is due to the undersigned “for work done and materials furnished,” is fatally defective, because a part of the debt exhibited in the notice is due for labor, for which only a “journeyman or laborer employed” by the contractor can obtain a lien through a stop notice, while a materialman’s notice must exhibit a debt due only for “materials used in the erection” of the building.
    On bill of interpleader. Final heading on defendants’ statements of claims.

      Mr. Frederick Frambach, for the complainant.

      Mr. John W. Slocum, for the defendants Adamson & Son.

      Mr. Winfield S. B. Parlcer, for the defendant Poole.

      Mr. Thomas P. McKenna, for Otto H. Wickliflie and Messrs. Chandler & Mapps, defendants.
   Stevenson, V. C. (orally).

This is an interpleader case. The bill is filed by Martin Beckhard, the owner of the building with which we are concerned in this case, against James Rudolph, the contractor, between whom and the complainant there was a written contract for the construction of the building, duly filed in the clerk’s office, and also against four other parties who claim to have furnished materials used in the building or performed labor in its erection, and on that account claim to have liens upon the money due from the complainant, Beckhard, to the defendant, the contractor, Rudolph, fixed upon the fund by the service of stop notices under the third section of our Mechanics’ Lien law. Being unable to file liens upon the building because of the fact that the contract between the owner and the contractor was duly filed, they claim the right to get a lien upon the fund in the hands of the owner under the third section of the act to which I have referred.

The bill is in the usual form, merely asking that the complainant be allowed to lay down tire fund which he admitted he owed to the contractor, some $824, in court, and be excused from further attendance, leaving the defendants to litigate their several claims inier sese over this fund. The four parties who filed the stop notices and claim liens filed answers which merely denied the right of the complainant to a decree that they inter-plead. These answers are correct in form where the defendants desire to prevent the complainant from obtaining the final relief, so far as he is concerned, of a decree of interpleader. They denied his right to such decree, and prayed that they be dismissed. None of these answers were accompanied by any cross-bills or statements of any kind setting up the claims of the defendants as against each other. Each, I think, sets up a claim that the answering defendant is entitled to a lien on the fund. The contractor, Rudolph, filed no answer, and a decree fro confesso was taken against him. He admitted, practically, that the complainant was entitled to a decree that the defendants interplead, but he made no admission that the parties serving stop notices had acquired liens on the money; he only admitted that the complainant was entitled to lay down the $824 and go without day.

The cause was duly heard on the pleadings and proofs, and a decree was made discharging the complainant on his payment into court of $824, and directing that the defendants interplead and file statements of their respective claims pursuant to rule 221. The four defendants who claimed liens thereupon filed statements of their claims. The defendant Rudolph filed no statement, although at the suggestion of the court he was notified of the hearing for the determination of the contentions among the defendants. He had a very great interest. The defendants are seeking to get money that belongs to him, and they have to prove their case against him. He was notified, but did not appear. The four parties serving stop notices, however, are obliged to prove their liens. If they do not prove their liens the money, of course, belongs to Rudolph. If no money were due from the complainant, Mr. Beckhard, to the contractor, the defendant Mr. Rudolph, there would be nothing to which any of the liens could attach. This whole proceeding, under the third section of our Mechanics’ Lien act, is predicated upon an indebtedness from the owner to the contractor, which will be paid to him unless the liens are perfected. On the trial, therefore, as I have said, it became necessary for the defendants who served stop notices and filed their claims to prove that they had acquired liens under the statute upon this money, the $824 which the complainant had paid into court, and which is due to Mr. Rudolph, unless'the liens absorb it.

Now, I have to deal with four claimants who have served stop notices and claim liens. The court is obliged in this case to find out whether these four claims are such as are lienable under the third section of our statute, and then whether notices were served pursuant to the terms of our statute, so as to fix these liens upon the fund. You may have money in the hands of the owner which a creditor of the contractor cannot reach by a stop notice, upon which the .creditor cannot fix a lien, because he is not such a creditor as, under section 3, is permitted to acquire a lien by service of the stop notice. You may have a creditor of the contractor who is able, under the terms of the third section, to acquire a lien- by serving a stop notice, but he may, by failure to pursue the statute, in fact, fail to acquire a lien. In order to give any one of these four men a lien on this fund it must appear satisfactorily that the claim is one which is lienable within the meaning of the third section, and it must then appear that the lien has been fixed on the fund by compliance with the terms of the statute, or, as may be said — practically covering every case— it must appear that a notice has been given in compliance with the terms of this statute. If, I may add, a creditor of the contractor gives a notice which is in full compliance with the act, he will have no lien unless his claim is lienable within the meaning of the act. A creditor of the contractor, whose claim is lien-able and who does not serve the proper notice, gets no lien. A creditor of the contractor whose claim is not lienable, but who serves a notice in conformity with the act, gets no lien.

Now, those things must be borne in mind in dealing with each one of these claims. The claimant must have a debt due him which is lienable under the act, and then he must pursue the act, or, in other words, give the written notice in conformity with the act. The mitten notice must have all these characteristics which are defined here.

Now, before I take up these papers in order, I am going to refer briefly to the act, first, to see what debts are lienable, and next to see what kind of a notice must be served in order to fix a lienable debt as a debt on the fund.

Section 3 of the present act — the act of 1898 — says:

“That whenever any master workman or contractor shall, upon demand, refuse to pay any person who may have furnished materials used in the erection of any such house or other building [and that is, any house or building for the construction of which a contract has been filed], or any journeyman or laborer employed by him in the erecting or constructing any building, the money or wages due to him, it shall be the duty of such journeyman or laborer or materialman to give notice, in writing, to the owner or owners of such building, of such refusal and of the amount due to him or them and so demanded.”

Now, I shall not read the rest of the section, or raise any questions that might come up in considering closely its phraseology. So much of the section as I have read which relates to the case of the journeyman or laborer has come down from quite an early statute. My 'recollection is, from the brief examination that I made the other day, that the lien by a stop notice was created in favor of the journeyman and the laborer by a special lien law, passed in 1835, relating to Trenton and some other adjacent places. There was no lien by stop notice provided in tire Camden act of 1830, which is the origin of all our legislation in regard to mechanics’ liens. A lien by a stop notice may have been provided in some special law prior to the Trenton act of 1835, but the Trenton act is the first one that I now recollect containing such a provision. The revised statute of 1846, which covered a number of counties and townships,-contained this same provision in favor of the journeyman or laborer only, and when this statute, in 1851, was extended to the entire State of New Jersey, and the state had for the first time a general Mechanics’ Lien law, the lien by .stop notice was not extended. In the general Mechanics’ Lien law of 1853 a bungling attempt was made to extend tire lien by a stop notice to a materialman, but whether such extension in fact was effected or not I do not think. the courts ever decided, although I may be mistaken about this. However this may be, the law was extremely imperfect until the revision of 1874, when the lien by stop notice was distinctly provided for the materialman and a proceeding to - enforce it was expressly prescribed.

Thus we see that there never has been any effort made in New Jersey to give everybody whose lien on a building is cut off by the filing of the general contract a substituted lien on the money in the owner’s hands. Hnder the revised statute of 1874 and the present statute, there are two classes of persons whose debts are made lienable by a stop notice. The first is “any person who may have furnished materials used in tire erection” of the building. That is the first class. During the argument I raised the question whether a subcontractor, who has furnished materials and labor under a contract, can be deemed a person who has furnished materials used in the building, within the meaning of this law. In order to find out what the exact meaning of that phrase is, “any person who may have furnished materials used in the building,” we must read the whole statute, and we find that further on this person is called a “materialman.” In the early part of the statute we have the two classes — first, any person who may have furnished materials used in the erection of the building; second, any journeyman or laborer employed. by the contractor in erecting the building — and a little further on the phrase “money or wages” is employed — the word “money” relating to the person who has furnished materials, the word “wages” plainly relating to the journeyman or laborer. The language is used distributively and with accuracy. A little further on we find these same classes called by these terms: “Such journeyman, or laborer, or materialman.” So that the person who, in the first part of the section is called “any person who may have furnished materials used in the erection of the building” is called a “materialman” in the latter part of the section.

Now, the question is whether a subcontractor, like Mr. WicklifiOe, the painter, who was just on the stand, or Messrs. Adamson , & Son, the plumbers — Mr. Wickliffe was the painter, who furnished the paint and put it on; Messrs. Adamson & Son are the plumbers, who furnished the plumbing and set it up — I say the first question is whether these subcontractors are materialmen who have furnished materials used in the erection of the building, within the meaning of this act.

I suggested to counsel that the phraseology first employed— “any person who may have furnished materials used in the erection of any building” — might be deemed to cover the case of the painter, the plumber and the mason' and plasterer. I suggested that the plumber might be said to furnish materials for a contract price — not as brick are delivered, dumped in the yard, but set up, installed. The furnishing of materials installed in the building may be twice as expensive as the furnishing of the materials, leaving tlieir installation to some other contractor or person. My suggestion was that the plumber, who was a subcontractor, might be deemed to be furnishing material, and therefore would be entitled to a lien under this section for the amount of his contract price. But I think the force of the word “materialman/5 in the latter part of the section, prevents such construction from being made. I think it might be claimed, in view of that word “materialman/5 that the phrase “who may have furnished materials/5 in the first part of the section, practically means “who may have furnished materials only.55 A lien is given to a> materialman — to a man who has furnished materials — -for the value of the materials. If his charge is for materials alone, then he is a materialman; if his charge is for work and labor in putting the materials in the building, then he is a contractor for the erection of the building. He is not a materialman. He never is described as such. The distinction has been taken in many of the statutes and is perfectly well recognized in trade between the purveyor of labor — I mean mere hand labor, for wages, or labor of a higher class — and the purveyor of materials. There are two distinct classes. And a materialman is a man who simply supplies to the building, or for use in the building, material which some one else is to incorporate in the building by his labor. If a man makes a contract to supply material, and by his labor incorporates that material into the building, he is not a materialman, in my judgment, and by no construction of this act, therefore, can he be allowed to obtain a lien by a stop notice.

I said that the statute does not pretend to give every person who would have a lien upon a building, but who is deprived of that lien by the filing of the contract, a substituted lien on the money. That is perfectly plain, in my judgment. I gave some illustrations to counsel during the course of the argument. Take the case of the mason, who agrees, for a contract price, to lay the brick at so much per thousand — the builder furnishing the brick, and the mortar or cement. That is not an uncommon contract. If a master mason made such a subcontract, with the builder to lay all the brick of a certain building, with the mortar and the brick supplied by the builder, at so much per thousand, he might have a bill due him of $1,000 or $3,000. He could file a lien if the contract between the owner and the contractor were not filed. But if the contract between the owner and the contractor were duly filed, so as to cut his lien off, he certainly could get no lien by a stop notice, because he is not a material-man ; he has not furnished materials used in the building at all. Nor is he a journeyman or laborer employed by the contractor. He is a subcontractor for labor, and he can get no lien of any kind. I think I also suggested to counsel the case where the contractor, in the execution of his contract, might be obliged to employ professional help- — might be obliged to employ a very scientific surveyor to make some very accurate adjustments. I do not see how such a scientific, professional gentleman could get a lien by a stop notice on the ground that he was either a journeyman or a laborer employed by the contract, and yet, undoubtedly, he would have his lien, under section 1, if the contract had not been filed. While listening to counsel I thought of quite a wide variety of instances where undoubtedly a person supplying labor for the erection of a building would have a lien against the building unless the contract was filed, and if the contract is filed he would have no lien, and could acquire none, under the third section, by the service of a stop notice. So that it is misleading to suppose that because a party supplying labor or materials, or both, to a building, would have a lien if the contract had not been filed, such lien being cut off by the filing of the contract, he could acquire a lien by service of the stop notice. That is not true. In order to acquire a lien under the third section the party must stand in the position of a materialman, or of a journeyman or laborer employed by the contractor.

Applying this ruling to three of the notices, they are excluded. I should not say the notices. Applying this ruling to the cases proved on behalf of these claimants, three of them, I think, exhibit debts which are not capable of being made liens upon the fund in the owner’s hands by service of a stop notice. These are, first, the claim served June 6th, of Adamson & Son, and this is proved to have been a bill for plumbing work done under a subcontract, and Mr. Adamson testified that about one-half of the claim represents material — that is, the cost of the material laid down in the building — and the other one-half represents labor. Messrs. Adamson & Son stand as partial builders — partial erectors of this building. They are not materialmen in any true sense of the term. Their claim is not merely for furnishing materials; it is for furnishing materials and building them into this structure.

The claim of Poole is for work done under a subcontract with Rudolph for mason and plaster work, as I recall it, and it is of precisely the same character as Mr. Adamson’s claim.

The claim of Mr. Wickliffe is the ordinary claim of the painter. He made a subcontract for doing the painting, supplying the paint and laying it on with the brush. He is not a materialman. I do not think any of us ever heard that a painter was called a materialman; The tendency would be to call him a workman— a contractor for labor — because we generally regard the work of laying on the paint as the more prominent feature of his business, as compared with the mere supplying of the paint itself. Oftentimes a painter makes a contract that he will paint a building with paint to be supplied by the owner at the building, and he simply lays it on — merely brings labor to put it on. No one would ever call a painter, who enters into a contract to supply the paint and lay it on, a materialman. It is trae he has furnished materials which have been used in the building, but he himself has used them. He has put them into the building, and incorporated them with the building by his own labor, and is not therefore a materialman.

The one claim that seems to be lienable beyond .all question is the claim of Chandler & Mapps, and that is a claim for lumber ; and I do not recall that any criticism of that claim was made by any of the defendants, except that it was for an excessive amount. My finding in regard to this claim and the others was, in each case, in favor of the claim. The amount was the true amount, although it was reduced by subsequent- payments. And I may say here that if any distinction is to be drawn between work done under the contract and .extra work, that all the work of these claimants seems to have been done under the contract. The contract which was put in evidence seems to provide for ' extra work, and there is nothing to show that any of the work done by each of these claimants was not done under the contract.

Of course, where under a subcontract materials and labor are both furnished, there is no difficulty in having the two items kept distinct. This plumber, or this painter, or this plasterer, might have placed himself in the position of a materialman, furnishing the plumber’s supplies or the brick and plaster, or the paint, at a price named and then incorporating the materials so furnished into the building at another price named. In such case no doubt a materialman’s lien could be acquired by a stop notice for the amount of the first item, while no lien could be acquired for the second item.

Notwithstanding that what I have said seems to have stated the conclusion of the court in regard to each one of these claims, I think it is worth while to look at the forms of the notices themselves. I have so far dealt with the lienability of these four claims, respectively, and I have found that three of them are not lienable within the meaning of the third section, and that one of them, that of Chandler & Mapps, is lienable. Now, while I might dismiss from further consideration the three claims which I have found not to be lienable, I think it is due to counsel that I should point out some things in regard to the form of these notices, because, I think, even if I am in error in regard to my construction of section 3, and if a subcontractor like this painter, or this plumber, or this mason, could get a lien on the fund by a stop notice, still these notices are defective. The section provides that a materialman who wishes a lien on the fund must give notice in writing to the owner of a certain thing, and that thing is described by the act as “such refusal.” The word “such” relates back to the prior part of the section. The materialman must give notice of a certain kind of refusal that is described in this section. He is not allowed to get a lien by simply giving notice that the contractor has refused to pay him money. That does not give him any lien. He has to give notice that the contractor, upon demand, has refused to pay him an amount due him for materials used in the erection of the building. That is what he must give notice of. If a journeyman or laborer is undertaking to get a lien, then his written notice must recite the fact that there are wages clue to him, a journeyman or laborer employed by the contractor, and that he has demanded the amount due, and the contractor has refused to pay him. All these things must appear. Tire order in which these things appear in the section, or are enumerated in the section, is not the natural order. The natural order is this: in the case of the material-man it must appear from the notice that the man who serves the notice is a materialman, that is to say, that he has furnished materials which have been used in the building. That is the first thing. Second, that an amount of money is due to him on account thereof; third, that he has demanded this amount of money from the contractor; and fourth, that the contractor has refused to pay him. And in the same way you can state the different things which the notice of the journeyman or the laborer must set forth.

Now, taking this notice of Adamson & Son, it states that a certain amount of money is due to the undersigned for work done and materials furnished for and in the erection, alteration and remodeling of the cottage. It does not say that the materials were actually used. But if that is not a fatal mistake it combines the amount due for materials and the amount due for work. It does not show how much is due for materials; it does not show how much is due for work, and, in respect to the amount due for work, it does not show that Adamson & Son are journeymen or laborers. Even if I am in error in' holding that this claim is not lienable, if the correct construction of section 3 would allow these plumbers to serve a notice as materialmen, they would have to allege in that notice, in order to perfect their lien, that they-had furnished materials amounting to so much, and so much was due, and they had made demand and the demand had been refused. When they incorporate in their notice a statement that a portion of the money is due to them for work done, they vitiate their whole notice. They are not laborers; they are not journeymen; they cannot get a lien for money due to them for work, and they might just as well say, in this notice, that $665 is due to them for materials furnished and used in the building and groceries sold and delivered by them to the contractor. They would then have in their notice a gross sum of money mentioned, part of which is a lienable debt and part of which is not. And that is just what they have got here. They mention a gross amount of money due them for work done and materials furnished, and if their claim for materials is lienable their claim for work certainly is not, because, as I said, they have to be in the position of laborers or journeymen employed by the contractors in order to entitle them to a lien for work. The notice also fails to set forth that the amount was demanded. I regard that as a fatal defect. The statute says that the lien may be acquired when there is a refusal “upon demandThere can be no lien acquired unless there is a refusal upon demand. It is the intention of the-act that the claimant shall go to the contractor and make legal demand of his money so- as to put the contractor in default. A refusal may be made without any demand. I am not satisfied with the ingenious argument of Mr. Slocum that the word “refusal” implies a demand — means, by its own force, a denial on demand. The statute expressly provides that the refusal must be upon demand, and the notice is to be of such refusal, i. <?., of a refusal upon demand and of the amount due and so demanded. I think it is plainly the intention that the demand shall be made, and that the notice shall inform the owner that the contractor has been put in default by having the demand actually made of him. This construction is accepted without question in 02ie of these cases — the Johns Gase — where a number of notices were passed upon., and the form, I think, uniformly for years and years which has been followed in New Jersey invariably has set forth that the deinand was made.

The notice of Mr. Poole, the mason, is- subject to the same objection that I have mentioned already with reference to the Adamson notice. It states that $619.28 is due for work and labor done and performed and fox materials furnished. It does not say that the materials were actually used in the building. It combines the two claims and treats them as lienable. And what I have said in regard to that matter, while dealing with the Adam-son claim, applies to this, and I need not repeat it. The notice, however, sets forth a demand preceding the refusal, and is not objectionable in regard to that matter.

The notice of Mr. Wickliffe, the painter, is open to the main objection that I have pointed out in the other two notices— states that there is due “the sum of $460.50 for balance of labor and materials for the painting which I have furnished to the said Messrs. Rudolph & Company, and which was used in the erection,” &e. I do not recall that there is anything in the body of -the notice which calls for consideration or suggests any other defect. The notice, however, is addressed to “Mrs. M. Beck-hard.” It is hardly necessary, now, to pass finally upon this question, but such consideration as I have given to it has led me to the conclusion that this notice would be insufficient to establish a lien if in other respects it complied with the statute, on account of its being addressed to the wrong party. The statute provides for the giving notice in writing of certain things that I have enumerated to the owner or owners — the nature of the debt due from the contractor to the materialman, or to the journeyman or laborer employed by him — the amount of it, the demand, the refusal. Those things are to be set forth in a notice in writing to the owner. The owner is the man to be notified of those things, and notified in writing. Now, if all those things are set forth in writing, and the materialman, or the laborer or journeyman, as the ease may be, should come and hand the writing to the owner, I do not say that the notice would be defective because of a failure to indicate at the top of the notice, or at the bottom, or anywhere else, to whom it was addressed. If tire paper writing is handed to the owner on behalf of the claimant, and signed by him, as it usually is, the owner would perhaps riot be allowed to object that the paper was not addressed to him. It might be said that he got notice in writing of what the written notice contained when the paper was delivered to him, but I very strongly doubt whether it is a compliance with the statute to hand the owner a paper writing, which is, on its face, addressed to some one else. You may give John Jones a notice in writing of a fact, and hand tire paper to Jones, eveir although you do not insert his name in the paper; but if you write a fact out on a paper, and address it to John Smith, and then hand it to Jones, can you say that you have given notice in writing to Jones, when what the paper contains is addressed to Smith? Would not Jones have a right, the moment he saw the paper was addressed to someone else, to refrain from reading it? When Mr. Beclchard got this notice addressed to “Mrs. M. Beclchard,” had he not a perfect right to say, “Why, this is a paper for my wife,” and to lay it down ? What he did with it, I believe, does not appear in the testimony. I think it is a very serious question whether, if the notice of Mr. Wiekliffe had been for a lienable debt and correct in form, its being addressed to Mrs. Beclchard would not have been fatal.

These are the views which I entertain in regard to these four claims, and the result is that as to three of them no lien is established on the money as against Mr. Rudolph, to whom the money belongs, except so far as it is subjected to these liens. The lien of Chandler & Mapps alone is established, and the decree will provide for its payment.

I will say here that there are a number of questions presented involving the construction of this statute, and if counsel desire to have this decree reviewed the proper course will be taken to hold the money pending such proceedings for review in a higher court.


source: Caselaw Access Project

author: Stevenson, V. C. (orally.).

license: Public Domain

text:
    The Morris and Essex Railroad Company and The Delaware, Lackawanna and Western Railroad Company v. The Hoboken and Manhattan Railroad Company and The New York and Jersey Railroad Company.
    [Argued September 20th, 1904.
    Decided November 19th, 1904.]
    1. A tunnel company, in the course of condemnation proceedings to acquire a right of way under the property of a railway company, executed a covenant that it would not at any time thereafter institute proceedings to condemn any right or interest whatever under any lands belonging to such railroad company lying between certain boundaries where the tunnel was located. — Held, that if such covenant was valid it could not be enforced in equity by an injunction restraining a successor of the tunnel company from acquiring a further right of way under such property, but the parties should be left to their remedies at law.
    2. The covenant was not one running with the land, and therefore did not pass to defendant, who acquired property of the tunnel company under foreclosure of a mortgage.
    3. If the covenant be treated as creating an easement, it would not entitle the. complainant to an injunction.
    4. Such covenant would not preclude another corporation from condemning a right of way through the complainant’s property in another
    »direction, and thereby deriving benefit from a prior construction by the tunnel company, though such corporation was on friendly terms with the tunnel company and the stockholders in the tunnel company were also stockholders in the new corporation.
    On motion for preliminary injunction.

      Mr. William D: Edwards and Mr. John W. Griggs, for the complainants.

      Mr. Charles L. Corbin, for the defendants.
   Stevenson, V. C. (orally.).

In the case of the Morris and Essex Railroad Company and the Delaware, Lackawanna and Western Railroad Company against the Hoboken and Manhattan Railroad Company and the .New York and Jersey Railroad Company my conclusion is that no proper case is presented for an injunction. I shall endeavor, as fully as I can, to indicate to counsel the main reasons which have led me to this conclusion, reserving for a written opinion, in case of appeal, a more accurate statement, with citation of authorities. I have examined, I think, all the authorities cited by counsel and some others, although, of course, it is impossible for me to cite them, and impossible for me to refer to many of them at present.

The object of the bill is to obtain an injunction, restraining the defendant corporation, the Hoboken and Manhattan Railroad Company, from exercising the right of eminent domain for the condemnation of property belonging to the complainants along the line of the route which the defendant corporation has laid out, and which is the route of a tunnel railroad, extending, in part, from the Pavonia ferry, in a northerly direction, parallel with the Hudson river and not very far from it, through and under the entire terminal property of the complinants, consisting of a tract of, I think, about one hundred and sevent3r-five acres, to a point beyond that tract and near the Hoboken ferry.

As I recall the bill, it is an injunction bill simpliciier. It is not a bill to restrain the defendants in the unreasonable and injurious location of their route through the property of the complainants when they might, and ought to, so locate their route as to do less injury. It is not a bill to prevent the defendants from exercising the right of eminent domain in such a manner as to prevent the complainants from pursuing their corporate business and accomplishing the purposes, largely of a public nature, for which they exist and have corporate existence. It is not a bill to restrain the defendants from using that portion of the tunnel which may be called the old tunnel, extending out from the original high-water line of the river, or rather I may say extending from what is called the shaft under the river, excepting in a manner in which the original proprietors of that tunnel would be allowed to use that particular piece of land. The bill prays for an injunction which will prohibit the main defendant corporation from exercising the right of eminent domain for the condemnation of a very large portion of their route. If the defendant corporation should be so enjoined and still wished to build a tunnel route between the two points that I have indicated, counsel for the complainants, in opening the case, states and admits that it would be necessary for this defendant corporation to construct its tunnel all the way around this large tract of land at a very much greater expense than it will cost to construct the tunnel which they have located, which is practically a direct line through the terminal property of the complainants.

Upon this application, what are merely legal objections to the action which the defendant corporation, the Hoboken and Manhattan Railroad Company, is now engaged in taking, are not to be considered. A few moments ago counsel for the complainants handed me the case, which is now before me, of Jersey City v. National Docks Railway Co., reported in 55 N. J. Law (26 Vr.) 194. I have merely glanced at this case; but it seems to be a certiorari case, and, from what I have seen of the report of it, it appears that tire principle in that case is laid down and enforced that it is a condition precedent, under the General Railroad act, to the taking of property under the right of eminent domain by a railroad company that the parties have been unable to agree. I do not exactly see with what view this case was pre^sented to me. If, in this case, there has been no failure to agree and it follows that the defendant corporation cannot exercis'e the right of eminent domain under the General Railroad act, that is a complete defence which undoubtedly will be presented to the supreme court in the certiorari suit, which is now pending. In this court we have only to deal with the equitable claims of the complainants. The complainants- in this case set up that they have an equity which can be enforced in this court and cannot be enforced in the supreme court, in which the certiorcvri suit is pending, to have an injunction, restraining the Hoboken and Manhattan Railroad Company from condemning their route through the complainants’ terminal property; and that is the question with which we have to deal.

The sole origin pf any such equity consists in, and arises from, a covenant that was made on January 10th, 1877, by a corporation now practically extinct, the Hudson Tunnel Railroad Company, by which that original tunnel company undertook to covenant and agree with the complainants in the terms which I shall read. As a matter of fact, on the date which I mentioned — January 10th, 1877 — two covenants were made by this original tunnel company, one with the complainants and one with a land company; but, inasmuch as the complainants afterwards acquired all this land affected by this covenant from the land company, and may possibly, although I do not think the fact appears, have acquired, by assignment, all the rights of the land company growing out of the covenant made by the tunnel company with it (the land company), the covenant may be, I think, conveniently dealt with as if there were but. one covenant between the Hudson Tunnel Railroad Compan)'' and the Morris and Essex and Delaware, Lackawanna and Western railroad companies, and it be assumed that, at the time the covenant was made, the railroad companies owned all -the land affected by the two covenants.

The words of the covenant, which I am about to read, come near the end of a long instrument, executed by the Hudson Tunnel Railroad Company under its seal, which appears to have been made — was made — while, certain condemnation proceedings were pending in which the original tunnel companjr was endeavoring to acquire a right of wajr extending from the centre of the Hudson river in a westerly direction under the terminal property of the railroad companies to a point at Henderson street, which is at or near the westerly boundary of the whole terminal tract, a point quite remote from the river and quite remote from the line of the route of the Hoboken and Manhattan Railroad Company, as now laid out.

The main object of the agreement or covenant, because it was an instrument executed only by one party, appears on its face. It is recited that the tunnel company makes the agreement for the purpose of inducing the commissioners, who1 had been appointed in the condemnation proceedings, to award a less sum for the land, easement, rights and privileges which were sought to be taken than they otherwise might or would award, it being understood that the agreement was to be shown to the commissioners. A further consideration of one dollar is recited.

The provisions which come first in. the agreement may be described generally as undertaking to protect the property of the railroad companies from certain injurious effects that might accrue from the construction and operation of the tunnel; and, of course, the theory was that if the tunnel company bound itself by this covenant in such a way. as to properly indemnify the railroad companies against such possible injurious effects the damages to be allowed by the commissioners would be lessened.

The fifth paragraph, near the end, is as follows:

“And the said tunnel company hereby further covenants and agrees to and with the said railroad companies that the said tunnel company shall not and will not at any time hereafter institute or prosecute any suit or proceedings whatsoever to condemn or acquire dor any use or purpose whatsoever any lands, or any right, title, interest or easement whatsoever, in, to, over, or under any lands now belonging to or in the tenure of the said railroad companies, or either of them, situate in the said city, lying between Provost street on the west and the exterior line of piers on the east, or north of the centre line of Sixteenth street, and if any such proceedings shall be attempted this agreement shall be a complete bar and defence to any and every such proceeding.”

I may say here that the route, extending from the river or from the shaft in a westerly direction under this terminal property, ran along what was Fifteenth street, and Sixteenth street was the next street, parallel with Fifteenth street, on the north. The similar agreement, executed at the same time with the land eompanjr, to which I referred, contained precisely this same covenant, excepting that it undertakes to exclude from the possibility of future condemnation all land belonging to the land company south of Fourteenth street and lying between Henderson street or Provost street and the exterior line of piers.

So that the result of these two covenants was to give or recognize a right of way on the part of the tunnel company from the river extending practically in a straight line westerly under the entire terminal tract to Provost street or Henderson street, and to leave that right of way shut in on both sides by land which came within one block on each side; so that, in pursuance of any existing or future legislation, if it became useful and important to the tunnel company and to the public service to extend the tunnel either north or south, such extension would be impossible without a breach of this covenant, except by making the extension from a point remote from the river, way out at Provost or Henderson street; that was the object of the covenant. It was to shut in this public right of way within these narrow limits, and the tunnel company undertook to covenant that it would not exercise the right of eminent domain under legislative sanction as it then existed or might thereafter exist so as to open a door through this barrier on the north or on the south.

The propositions of the complainants axe that that obligation of the original tunnel company was not illegal, was not void; but, on the contrary, legal and valid. And of necessity they advance the further proposition, which goes a long way beyond those which I have stated, that this covenant is specifically enforceable in equity by the instrumentality of an injunction, because an injunction in this suit is practically a decree of specific performance. The other proposition of the complainants is that the obligation of this covenant has in a lawful manner been devolved upon and now rests upon the Hoboken and Manhattan Railroad Company, which was organized under the General Railroad law in 1903. Under the old or the new General Railroad act?

Mr. Corbin — Under the new General Railroad act.

The Court — I may say that at first blush this last proposition would seem to be somewhat audacious. Here we have a corporation created under this General Railroad act of 1903, laying out its route according to law — of course, if they have not proceeded according to law they would be stopped in the certiorari suit; we are assuming that they are proceeding according to law — through the terminal property of the complainants, along this defined line; and the bar, which is said to be in equity an absolute bar to the exercise of the right of eminent domain for the condemnation of a large part of this route, for all of it which lies through and under and across this great terminal tract of the complainants — an absolute bar in equity — is a covenant made by this old tunnel company in the year 1877, twenty-seven years ago.

Now, as briefly as possible, I shall try to deal with those two positions. They are the main positions which the complainants take and seek to sustain.

The first question is whether this original covenant, at the time it was made, was legal and enforceable specifically in equity as between the original parties. And I may say here that it seems to be proved — I think admitted — that all the obligations of the original Hudson Tunnel Railroad Company, by virtue of certain consolidations, finally devolved upon the Hudson Tunnel Railway Company, a corporation which was created by the consolidation of the original Hudson Tunnel Railroad Company and certain other railroad tunnel company or companies. So that it makes no difference whether the inquiry is whether the original tunnel company was bound by this covenant, and bound in a court of equity, so that the covenant might be specifically enforced against it, or whether the Hudson Tunnel Railroad Compaq, the. consolidated Compaq, was bound in that way.

I have not found it necessary to express a final opinion upon the very interesting question which is thus presented at the start, whether a railroad corporation organized under the General Railroad act can, for a sufficient consideration, I may say — a valuable consideration — make a covenant which strips it of the power to condemn a particular piece of land for the purposes of its incorporation under the act; or, in other words, for the discharge of its corporate duties, which have not only a private relation, but a very important public relation, so as to subject itself to an action for damages in case of a breach. In other words, I do not undertake to decide, whatever impressions or opinion I may have, whether such a covenant can be made the basis of an action at law for damages. I think the complainants, in order to secure an injunction in this case, would be bound to establish the affirmative of, that proposition. It may be that such a covenant should be deemed illegal — contrary to public policy — and having in it such an evil element that the law would not take cognizance of it at all, and would not give either party airy relief growing out of the making of the covenant or of its breach. There is strong support in reason and authority for the proposition that a state cannot strip itself of the power to exercise the right of eminent domain, and when for the construction of great public highways this right is exercised, and from the nature of the case is practically exclusively exercised by delegates of the state, the reasons for leaving the principal untrammeled seem to apply to the agent as well.

It may be that the covenant should be deemed void, but that any consideration paid for it might be recovered — the parties might be restored to the original status. That is a possibility. I do not pause to discuss whether such a doctrine could be maintained or not. I am thoroughly satisfied that even if the view is taken most favorable to the complainants that an action at law would lie upon the breach of such a covenant, and the damages of the covenantee could be so recovered, still, the covenant should not be specifically enforced in equity by means of an injunction; but, on the other hand, the parties should be left to their rights and remedies as they would be ascertained and enforced in a court -of law.

I call the attention of counsel to a ease which I have just happened to find that bears upon this branch of the discussion (Beasley v. Texas and Pacific Railway Co., 191 U. S. 492), a very recent decision of the supreme court of the United States. I have only had a few moments to hurriedly glance through this case. I cite it because of the very sharp distinction which Mr. Justice Holmes draws between a right in a case like this, which might be enforceable growing out of a covenant running with land- — of course, a valid and legal covenant — or growing out of an easement created by a covenant, or a right in the nature of an easement, on the one hand, and the claim of the covenantee to have specific performance in equity through the instrumentality of an injunction. I do not say that the case is on all fours with the present one by any means. The case also involves, to a certain extent, the peculiar law of Louisiana, but, nevertheless, it also involves the very same law with which we have to deal. In that case — I will only endeavor to give the outlines of it — an owner of land conveyed what apparently was a most valuable right of way to a railroad company, and the instrument of conveyance, I think, contained a covenant on the part of the railway company not to establish or maintain a depot within three miles of a certain depot which the parties stipulated should be constructed and maintained upon the property.

Now, as counsel stated, and I think made plain on the argument, the decisions on this general subject are variant. Mr. Justice Holmes refers to this conflicting course of judicial decision, but he points out the possibility that the case may have presented a covenant running with the land; and also, I think, the possibility that what was done operated to create an easement, or right in the nature of an easement, appurtenant to the remaining land of the grantor who granted the right of way to the railroad company. He takes pains to avoid undertaking to decide the precise legal character of this covenant and transaction connected therewith. I think he expresses no opinion upon the various questions raised in regard to the legal rights of the respective parties. But he holds that even if — no, I will not say that he holds — as I recall the case, he indicates the opinion that even if the covenant or other right — whatever it was — in the nature of an easement or otherwise, belonging- to the owner of the plantation, is in some way enforceable in law, and against, of course, the grantee of the original railroad company — for the grantee is the party in the suit — still equity would not interfere with the performance of the public duties of the railroad company in the erection of new depots by specifically enforcing this alleged right by means of an injunction. Perhaps I may have overstated or misstated in some degree the opinion expressed by-Mr. Justice Holmes. I cite the case because in it the learned justice so sharply points out the' distinction which I have undertaken to draw in this case between a decision of the legal rights of the parties growing out of this covenant and the decision of the simple question whether, apart from those legal rights — conceded thát they exist — a court of equity will specifically enforce the right by means of an injunction.

Why, it is perfectly plain that if the original tunnel company had, under existing legislation in 1877, or in pursuance of future legislation, adjudged that the convenience of the public required a branch tunnel line from near the line of the river south to Pavonia ferry, or north to the Hoboken ferry, they would have been confronted by this covenant. They could not possibly have given the public the benefit of such branch tunnels without violating their covenant. It may be that the law ultimately will hold that if they make that kind of a covenant they must pay the damages, but that is a very different thing from holding that when they adjudicate that, notwithstanding their improvident covenant, the public interests, as well as their own interests, require an extension laterally of their tunnel, they must be barred, and the public must be barred, forever because of this covenant.

It was urged on behalf of the complainants, with very great force, that even if a covenant like this may not in all eases be specifically enforced by a court of equity through an injunction, that nevertheless there was nothing about it that was, per se, opposed to public policy; or, in other words, a court of equity could not say that the public would be harmed by the observance ■ — the enforced observance — of this covenant on the part of the railroad corporation, acting under the powers of the General Railroad act. The argument was that unless it could be shown affirmatively that the public interests in fact required the exercise of the right of eminent domain in contravention of the covenant, that then an injunction should go to enforce the covenant, because nothing but a private right was in any way involved.' In support of that contention, the case of Union Pacific Railroad Co. v. Roch Island Railroad Co., 163 U. S. 564, was cited, and it was claimed that the decision of the supreme court of the United States in that ease very much modified the doctrine laid down in the prior cases. I cannot discuss this case at length. It was decided by a divided court, a very vigorous dissent being expressed by Mr. Justice Shiras. It presented, very briefly, this sort of a case: The Union Pacific railroad had not undertaken to make a lease giving exclusive possession of a portion of its route to the Rock Island road. It had undertaken to allow the Rock Island road, for a very long period of time, to use its tracks— given it trackage rights; the right to use for a short distance the tracks, the rails and facilities of the Union Pacific road for the transportation of trains. Now, as I understand the decision, the real gist of it is that there is nothing in such an arrangement which is per se necessarily hostile to or inconsistent with the performance of the public duties of the lessor company. It is a most important matter to' be observed that what the Rock Island road undertook to do with these tracks was the performance of a great public duty, precisely similar to that of the lessor company. The Rock Island company was not a party who undertook by lease to acquire a portion of the railroad facilities of the Union Pacific railroad, which were of a public nature, and divert them to some private business of the lessee company in which the public had no share and no interest. The devotion of all this property to the great work of transportation for the public benefit was not interfered with by this arrangement that these two corporations made. It is not surprising that the supreme court of the United States paused before they supported the claim of the lessor company that their own act in making this arrangement with the other great public corporation was void as against public policy. Such a decision as that, it seems to me, would play havoc with scores of most important arrangements that all our transportation companies are making from year to year, and which are of the utmost importance to the public welfare. All the railroads centre at certain points. We are now only a short distance from what may- be called a great ganglion, where numerous railroads come to a point — a focal point — and get access to a ferry, and are brought in contact with the shipping of the New York harbor. It would be a disastrous thing if a corporation like the Pennsylvania Railroad Company could not make an arrangement giving terminal facilities, the use of its railroad terminal, to another railroad corporation without meeting this objection that it was permanently parting with the property which was necessary for it to discharge its public duties. That is a very different sort of a case from this.

I doubt very much whether a court of equity — 3res, I will say I am of opinion that a court of equity ought not, in the situation that we are now considering, to obtrude itself into the affairs of a great corporation, organized under the General Railroad act, and displace the board of directors and adjudicate whether or not the public interests — the proper service of the public— would or would not be promoted by the establishment of a branch line, the erection of a station and the acquisition of property for that purpose, or by the widening of the main stem. These are things which the directors of the gwasi-public corporation, in the discharge of their important duties, not only to the corporation, but to the public, are bound to meet and decide. A court of equity ought not to be thrust into their seats and, for instance, in this case, determine whether the public interests in fact do call for the construction of a branch line, under legislation permitting such action, from, for instance, the shaft, in a southerly direction, to the Pavonia ferry, or, in a northerly direction, to the Hoboken ferry. A court of equity cannot go into railroad business like that and usurp the functions which are vested by law in these directors.

My conclusion on this branch of the case, therefore, is that, without imdertaking to determine the many very interesting and novel questions in regard to the legal status of this sort of a covenant, the rights, the possible easements which it may create —I say my conclusion is that no right can be founded upon such a covenant to an injunction from a court of equity restraining the railroad corporation from exercising the right of eminent domain for the purposes of its incorporation, the carrying out of its great objects, many of which are of a public nature.

I think, if that conclusion is sound, we have an end of the complainants’ case. And I may say here I do not pause to consider the effect of the agreement of 1903, which it was urged on behalf of the defendants amounted to a release from the railroad companies of all benefit from this covenant made in 1877.

The next question is — assuming that the conclusion that I have stated is erroneous, and -all these old tunnel companies, for instance, the Hudson Tunnel Railway Company, was liable by virtue of this covenant to -an injunction in this court restraining it from condemning any of the property described in tjhe covenant — has any such obligation passed over and devolved upon the Hoboken and Manhattan Railroad Company. I leave out of view the New York and Jersey Railroad Company. They are joined as co-defendants upon the theory that they are promoting this action on the part of the Hoboken and Manhattan Railroad Company of which the complainants complain; that they are the real principals and are back of the Hoboken company in this matter. Counsel for the complainants, I think, failed to point out any adequate theory upon which it may be held that the obligation of this covenant ever went beyond the Hudson Tunnel Railway Company. In fact, counsel for complainants hardly discussed that very important question. I think the view expressed by counsel for the defendants, and set forth very fully in his brief, is the correct view — that that covenant contained in the instrument of January 10th, 1877, was' not a covenant that ran with the land, so as to be imposed upon not only the tunnel company which made the covenant, but also every successive owner of the tunnel property deriving title from the original tunnel company. The general rule is stated" and explained at great length in the case of National Bank of Dover v. Segur, 39 N. J. Law (10 Vr.) 173, cited by counsel — the famous Dover Case. In that ease the owner of land conveyed it and made a covenant by which he bound himself not to engage in the business of banking in Dover so as to compete with the banking business which the parties contemplated would be carried on on the land which the covenantor sold, and he expressed distinctly the intention to make that covenant available not only for the covenantee, but for any person who should take the property from him. The object of the parties was to bind the grantor so as to prevent him from competing with the banking business or corporation which the covenant ee proposed to form to carry on on the property which was purchased from the covenantor. That was the object of the parties, and it is perfectly plain. Chief-Jus tice Beasley discussed the whole subject of covenants running with the land, and pointed out the distinction between covenants which are- a benefit to the land and covenants which are a burden. In that case it was held that the covenant of Mr. Segur that he would not compete with the business which the future owners of this lot would carry on, the banking business, on the lot — that that covenant bound Mr. -Segur for the benefit of the bank which, afterwards became the owner of the property, and that right appertaining to that piece of land would pass from owner to owner through successive conveyances. But it was not suggested that a man could sell a lot of land in Dover and place a burden upon that land which would attach to it and be imposed upon every future owner which would prevent him from' carrying on the banking business, or any other business, on that land. That is the sort of a covenant not running with the land. If it did, why all sorts of absurd and capricious burdens could be imposed upon plots of land. A man might have a grocery store on one lot and own a vacant lot next to it, and then sell the vacant lot and impose upon that lot as a burden upon all future owners an incapacity to have it applied to the grocery business, for the benefit of the lot which he retained, pos'sibly, or for the benefit of himself personally. Such a covenant as that will not run with the land.

Now, then, in this case the effect of this covenant was, as alleged by the complainants, to prevent the owners of the tunnel, all future owners, the then owner and all successors in title, from exercising the right of eminent domain so as to condemn certain property of the covenantee. Anybody who buys the tunnel would find himself under this most extraordinary and peculiar disqualification. I am speaking of the owner as a man; of course, the proper term to employ is one to describe a company organized under the General Railroad act. My conclusion is that the covenant did not run with the land, and, therefore, did not pass over to the New York and Jersey Tunnel Company, which acquired all this property upon the foreclosure of the mortgage made by the Hudson Tunnel Railroad Company.

There was another possible ground which, perhaps, has to be considered, although I do not understand that either party dealt with the subject — another possible ground on which it might be claimed that the obligation of this covenant practically passed over to the future owners of the tunnel. It might be claimed that, although this was not a covenant which ran with the land for the benefit of the covenantees as individuals or as corporations — as parties — it had the effect to create an easement or right in the nature of an easement appurtenant to the land which the parties sought to exempt from condemnation. There is a very great difference between these two1 theories. In the one case we have the future owner of the tunnel, alleged to be under a personal obligation to the covenantees, the two railroad companies — the Delaware, Lackawanna and Western Railroad Company and the Morris and Essex Railroad Company. In the other case we have the owners of the land which the Delaware,' Lackawanna and Western and the Morris and Essex companies owned and which was sought to be exempted from the exercise of the right of eminent domain, protected by the covenant from the exercise of that right as against the future owners of the tunnel. Thus we have the land to the north of Sixteenth street and to the south of Fourteenth street, in some way invested with a peculiar right in the nature of an easement to be protected from condemnation proceedings instituted by any person owning the tunnel. I do not know that it is necessary to discuss this subject. I am not surprised that the elaborate and careful discussion of the whole case by the counsel for the defendant, contained in his brief, did not include the discussion of such possible easement. There can be no- authority shown, in my judgment, which will justify any such claim of easement. Such an easement is an unknown thing — the right vested in the owner of lot A by virtue of his ownership to prevent any person who becomes the owner of lot B from doing things of this character. If, however, such an easement or right in the nature of an easement belongs to the complainants as appurtenant to their land, and such easement or right is destroyed or impaired by the condemnation proceedings, it would seem that such injurious result would be a matter to be considered and allowed for in the assessment of the complainants’ damages to be made in those proceedings.

I do not think, whether we deal with this covenant as a covenant running with the land, or whether we deal with the whole contract as possibly creating some easement in the adjacent lands of the covenantees, there is any basis for the claim that any obligation passed over to the New York and Jersey Tunnel Company. If that conclusion is correct, then, of course, we reach again an end of the complainants’ case.

And if that conclusion is incorrect, I think the further position taken on behalf of the defendants is unassailable that there is nothing in this case which shows that the obligation which wre are now assuming rested upon the New York and Jersey ■Tunnel Company by virtue of this covenant in any way binds the action of the defendant the Hoboken and Manhattan Railroad Company. That company stands here before this court as an independent railroad corporation, organized in 1903, under the General Railroad act. It la3rs out its route. It has a right to lay out its route. It lays it out, with straight lines, substantially, between these two great centres of population and traffic— these two great points where the ferries come and the railroads meet — and it has its independent capital. I believe it is shown— not disputed — that the Ne-w York and Jersey Railroad Company does not own a share of the stock of the Hoboken and Manhattan Railroad Company. Assuming that-the New York and Jersey Railroad Company is owned very largely by persons who are interested in and own the stock of the Hoboken and Manhattan Railroad Company; assuming that the relations of these companies are as intimate in all respects and just as friendly as the complainants claim, I can find no way of imposing upon this new railroad corporation the burden which now we are assuming rests upon the New York and Jersey Railroad Company. If the New York and Jersey Railroad Company found itself confronted with a situation in which it could not build a line by a certain route, I know of no reason why other persons should not come in independently and build that line, and I know of no reason why the persons interested pecuniarily as stockholders in the New York and Jersey Railroad Company should not take stock in the new corporation if they saw fit to do so. As I think I suggested to counsel in the argument, if the New York and Jersey Railroad Company should find themselves with a complete tunnel route from the city of New York, extending under the Hudson river and extending within the exterior pier line of this terminal property to a point beyond the margin of the river, the present line of the river, where there is a shaft — I say if the New York and Jersey Tunnel Company should find itself in possession of such a tunnel, built at enormous expense, and then should find that owing to its own covenant, or the covenant of prior owners of its route, or prior owners of portions of its route, it had no way of proceeding any further, so that its railroad would begin in New York City and pass under the Hudson river and end at a point thirty or forty feet underground within the terminal property of the complainant corporations, and it thus would find itself with an enormously expensive property, not worth a dollar as it then stood, and incapable of being made available by extensions which the company itself could promote and make, would there be any reason why other persons should not combine and form a railroad corporation under the General Railroad act and build another expensive tunnel from Pavonia ferry continuously up to the Hoboken ferry, intersecting this tunnel at the shaft and thus making the New York tunnel valuable, and thus availing themselves of the existence of the New York tunnel to make their property valuable? I see no reason why that should not be done, and I know of no way by which the railroad companies, even if they had succeeded in effectually barring the progress of the New York and Jersey Tunnel Company beyond the shaft, could interfere with the operation of the new corporation in building the road or tunnel in the way that I have indicated.

I think these are the main points which were covered by the arguments of counsel, and, of course, the general conclusion which I have stated is that no injunction will be allowed in the case.


author: Stevenson, V. C.

text:
    James Waker v. Theodore B. Booraem, surviving executor of Christian Jacob Waker, deceased.
    [Filed November 28th, 1904.]
    1. On a bill for the construction of the will of W., the great-grandfather of J., a demurrer, because of the non-joinder of J., as a legatee under the will of his grandfather, 0., does not raise the question of his non-joinder as a possible legatee under the will of W.
    2. A person who, by a possible construction of a will, may become a legatee thereunder should be made a party to a bill for the construction of the will.
    On demurrer to bill.

      Mr. George S. Silzer, for the demurrant.

      Mr. James H. Van Cleef, contra.

   Stevenson, V. C.

Since the oral argument I find upon examining the files that only two causes of demurrer are specified, viz., want of equity and the failure to bring in as defendants the legatees named in the will of Christian J. Waker, who was a son of Christian Jacob Waker, above named. Both of these objections, I think, were practically disposed of at the argument.

At the conclusion of the oral argument, however, I stated to counsel that I should reserve the consideration of the question whether the great-grandson of the testator, the infant James J. Waker, was not a necessary party defendant as a possible'legatee, in order that the defendant executor might be protected by the decree in paying out the fund in his hands. It appears, however, that no objection which raises this point, is specified in the demurrer. It is true that the demurrer objects to' the nonjoinder of James J. Waker as a legatee under the will of his grandfather, Christian J. Waker, deceased, but there is not the slightest hint that the non-joinder of James J. Waker is objected to because of a possible claim that he may make to the fund under the will of his great-grandfather, Christian Jacob Waker, deceased.

All the rights of all possible parties depend upon the correct construction of the will of the great-grandfather. The grandfather’s will is not brought in question in any way. The grandfather’s surviving executor is made defendant because he is in possession of or is chargeable with the fund in dispute which his testator held in trust during his lifetime.’ If there is any possible basis for a claim that the fund is a part of the grandfather’s estate, or that the grandfather’s estate is not chargeable with it for the benefit of the legatees under the great-grandfather’s will, the well-settled rule is that in such case the grandfather’s executor is the only necessary party to assert this claim and defend the estate against the enforcement of an unjust demand.

Counsel for the demurrant, however, insists that it appears on the face of the great-grandfather’s 'will that it is a debatable question whether the fund in dispute should go to James Waker, the complainant, or to the infant James J. Waker. In case the construction of the will insisted upon by the complainant should be adopted, it has not been argued that there would be room to question whether any issue of the complainant’s deceased brothers and sisters, if there be such issue, would have a right to participate with the complainant in the fund recovered. The argument is that according as the words “child or children,” as employed in the great-grandfather’s will, may be adjudged to include or exclude a child of a deceased child, the title to the fund in dispute must be awarded either to the infant James J. Waker or to the complainant. This objection, however, not being in any way suggested in the specification of grounds of demurrer, cannot now be considered. Essex Paper Co. v. Greacen, 45 N. J. Eq. (18 Stew.) 504 Demarest v. Terhune, 62 N. J. Eq. (17 Dick.) 663, 666.

The result is that the demurrer must be overruled.

It may be well, however, to point out that while rule 209 requires a specification of the grounds of demurrer, and in passing upon demurrers the court confines its attention to the grounds specified, these limitations are upon the rights of the demurrant only; they are limitations upon the right of the party defendant to object to the sufficiency, not of the case made out against him, but merely of the bill in which the complainant has endeavored to set forth his case. The defendant, by neglecting properly to object to the exhibition of the case against him in the bill of complaint, does not put equity into the complainant’s case on the proofs where otherwise there would be no equity. The complainant’s case, as proved, may be defective because of his failure to bring the necessary parties before the court. In all eases the court has the right to arrest the proceedings until necessary parties are brought into the suit, where justice requires that such a course should be taken. Van Keuren v. McLaughlin, 21 N. J. Eq. (6 C. E. Gr.) 163, 379.

In this present ease, assuming that James J. Waker, a grandchild of Christian J. Waker, is living, it is quite possible that the complainant, if he does not amend his bill and make James J. Waker a party defendant, will encounter difficulty arising from action on the part of the court, taken upon its own motion, of the kind to which I have referred. As the suit involves the construction of a will, the right of the complainant to recover being entirely dependent upon a clause in a will, one possible construction of which it is alleged will defeat the complainant’s right to recover the fund and award the fund to the infant James J. Water, the general rule to be applied would seem to be that both parties interested in the settlement of this question of construction should be made parties to the suit.


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    Louis Resnick et al. v. William A. Campbell and Neil Campbell.
    [Filed November 28th, 1904.]
    Specific performance of a contract to convey land may be enforced in equity where the two defendants are able to convey a complete title according to contract, though neither could alone do so.
    Bill for specific performance. Pleas.

      Messrs. Hudspeth & Puster, for the complainants.

      Mr. James F. Minium, for the defendants.
   Stevenson, V. C.

The defendants have each filed a plea. I do not think that either plea is good. Both will be overruled.

1. Although the pleas will be dealt with according to their merits, and without regard to formal objections, I think I should point out that neither plea has annexed to it the affidavit or the certificate of counsel prescribed by the statute. Each plea, therefore, is at least -liable to “be treated as a nullity.” Chancery Act § 22.

2. Neither plea discloses any defence to the case presented by the bill.

On motion for the appointment of a receiver in this canse, I dealt with the question presented in a somewhat different form by the pleas, whether the mere liquidation of the damages by the parties to a contract for the sale of land discloses an intent that there- shall be an option either to perform or pay the damages. My conclusion was that the agreement set forth in the bill does not suggest any alternative — that the parties merely undertook to liquidate the damages which would be assessed in case damages were sued for in a court of law — that nothing in the agreement under the authorities which control this court affected the right of the complainants to a decree of specific performance. Crane v. Peer, 43 N. J. Eq. (16 Stew.) 553; O’Connor v. Tyrrell, 53 N. J. Eq. (8 Pick.) 15; Brown v. Norcross, 59 N. J. Eq. (14 Dick.) 427; Avon-by-the-Sea Land Improvement Co. v. Thompson, 60 N. J. Eq. (15 Dick.) 207.

It may be observed that the argument on each side proceeds upon the theory that the sum of $500 in fact is the liquidated amount of damages to be assessed against either party who shall fail “to perform” an agreement containing a number of provisions varying quite widely from each other in respect of their importance to the parties, and in respect of the pecuniary value of their observance and the damages which would result from their breach. I shall dispose of this case, however, without inquiring whether this theory is correct, or whether, on the contrary, in spite of the words in the agreement, which by themselves indicate an attempt to liquidate the damages at $500 in case of any breach of any part of this agreement, the sum named must be regarded merely as a penalty. See Monmouth Park Association v. Wallis Iron Works, 55 N. J. Law (26 Vr.) 132; Monmouth Park Association v. Warren, 55 N. J. Law (26 Vr.) 598; Robinson v. Centenary Fund Society, 68 N. J. Law (39 Vr.) 723.

The brief for the defendants argues that the result of the New Jersey authorities above cited is merely that, where the party defendant is able to perform, he is not allowed, on account of the liquidation of the damage's in the agreement, to exercise an arbitrary option to pay the damages instead of performing the contract. The further argument is made that where performanee is impossible, as I understand it, strictly according to the contract, then the defendant has the option to pay the damages as liquidated in the agreement. What the extent of this alleged rule may be I do not stop to consider. It would seem to exclude specific performance with compensation where the agreement contains a proper clause liquidating the damages in case of breach.

The defendants’ whole argument, I think, is sufficiently answered by pointing out that no impossibility of performance is set forth. Of course, neither of these defendants is able of himself to perform the agreement. If these pleas could be sustained in this case, it seems'to me that where the tenant for life, the remainderman and a mortgagee all unite in agreeing to convey the land in fee, each one might defeat a decree for specific performance by pleading his inability to perform and his unsue-’ eessful bona 'fide application to the other parties who united with him in the agreement to have them join with him in a proper conveyance.

• The bill sets forth two separate written agreements of the same purport, bearing the same date, one of which was executed by the defendant Neil Campbell, and the other by the defendant William A. Campbell. The two agreements manifestly constituted a single transaction, their object and legal effect being to bind both of these defendants to execute the conveyance described in each agreement so as to give the complainants the title which each agreement called for. The defendant Neil Campbell, who is the father of the defendant William A. Campbell, made his agreement first, claiming to be the owner of the land and to have full power to sell the same. The bill alleges that after the defendant Neil Campbell had signed and executed his agreement he disclosed

“the fact that the record title to the land and premises in question was in his son, the said defendant William A. Campbell, and who he represented was carrying the same in his name in trust for and for the uses and purposes of the said defendant Neil Campbell, and that for further security unto the said defendant Neil Campbell, he, the latter, held a second mortgage, purporting to secure the sum of $14,000, with interest, upon the said land and premises, which he had had his said son, the said defendant William A. Campbell, make and deliver to him, and which was recorded * * * and which the said defendant Neil Campbell claimed was to secure whatever equity he had in the said land and premises should anything happen to his said son, the said William A. Campbell, while the title to the said land and premises stood in his name as aforesaid.”

The bill further alleges that, upon the disclosure of the facts above stated, the proposition was made that

“the said defendant Neil Campbell should obtain an additional contract, in writing, from his said son, the said defendant William A. Campbell, for the sale and conveyance of the said land and premises, upon the terms and conditions agreed upon between the said parties as aforesaid, and thereupon the said defendant Neil Campbell caused the said contract * * * to be drawn, and had his said son, the said defendant William A. Campbell, execute, acknowledge and deliver the same.”

In the face of these unanswered allegations, the plea of Neil Campbell undertakes -to set up that he (Neil Campbell) was unwilling to cancel his mortgage, and was unable to perform the contract because he had no title to the premises. On the other hand, the plea of the defendant William A. Campbell sets up that he had endeavored to carry out his contract, but was unable to procure the release or cancellation of the mortgage for $15,000 held by the other defendant, Neil Campbell.

There is no impossibility of performance here which lets in any such rule of equity as the counsel for the defendants argues for in his brief.' Both defendants are within the power of the court and can be compelled to execute a conveyance, or conveyances, which will give the complainants precisely the title which they have a right to call for under each of these agreements.


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    Gustav W. Lembeck v. Jarvis Terminal Cold Storage Company.
    [Argued October 17th, 1904.
    Decided December 9th, 1904.]
    1. Mortgagees,' bondholders and lienors of a corporation take subject to the effect of insolvency proceedings which may subsequently be commenced, and in which a receiver may be appointed of all the corporate assets, including the property upon which the encumbrance has been so acquired.
    2. A receiver and his counsel, appointed in a suit begun on behalf of the stockholders and general creditors of an insolvent corporation, but which from the start was practically a mortgagee’s suit to foreclose liens and adjust priorities, should be allowed the same compensation which they would have been entitled to receive if they had been appointed in a suit to foreclose the mortgage.
    3. An allowance of $4,000 to receivers, and $2,500 to their counsel, which, with the costs and disbursements incurred, was a little more than four per cent, on the amount administered, is not excessive, and should be allowed in insolvency proceedings, where the plant of the insolvent corporation is equipped for its particular work, so that it is necessary to operate the same to preserve it, and there is considerable work and skill involved in selling the property and protecting the various equities.
    On application for allowance of compensation to receivers of an insolvent corporation and. to their counsel on settlement of receivers’ account.

      Mr. Willard G. Fisk, for the receivers.

      Mr. Gilbert Collins, for the Erie Railroad Company, mortgagee.

      Mr. John M. Enright, for the creditors.

      Mr. William Brinkerhoff, for the Commercial Trust Company of New Jersey, trustee.

      Mr. Pierre F. Cooke, for the bondholders, &c.
   Stevenson, V. C. (orally).

It is difficult to do exact justice in a case of this sort in awarding compensation to the receivers and to counsel, but I shall endeavor to make the best approximation that I can.

The case is peculiar. The case was started on behalf, undoubtedly, of the stockholders and creditors of this corporation, and if the cause had proceeded, as such causes generally do, these questions would not have been before the court; the receiver would have taken the property subject to the liens that were upon it, and would have sold that property, and what he got would have been the fund out of which, primarily, he would receive his compensation. If he did not get any fund he might not get any compensation; it would be what has been termed a dry receivership, and it is proper in such.cases for the complainant to be compelled, oftentimes, to put up a bond to secure the fees of the receiver whom the court appoints at his instance.

But in this case I think I may rely on my memory to say that practically from the start it was apparent to all parties interested that there was no equity to administer for the general creditors at all, and that the'proper course to take was to have the property sold under this statute and have all the proceeds brought into court by the receiver, to await the same sort of adjudication in regard to the title to the fund which would be made upon a suit or suits of foreclosure — suits to foreclose mortgage liens. From the time when that situation was declared, and I think it was apparent at the start, this whole proceeding was practically converted into a mortgagee’s suit — lienors’ suit— to foreclose their liens, have their priorities adjusted, to have the property sold to the best advantage, and meanwhile have the property preserved for them — not preserved for tire general creditors. The general creditors practically disappeared from view at the very start.

.Every person who accepts a mortgage, or a bond'secured by a mortgage, from a corporation, or in any way acquires a lien upon the property of a New Jersey corporation, takes subject to the effect of insolvency proceedings which may subsequently be commenced and .in which a receiver -may be appointed of all the corporate assets, including the property upon which the encumbrance has been so acquired. This mortgagee — these bondholders —accepted their securities knowing that in future insolvency proceedings against this cold storage company the legality of their encumbrances might be called in question, the whole property might be administered by the receiver, and not the equity only, and their liens, if found valid, would attach to the proceeds which would result from the receiver’s sale. Where, under our statute, the receiver sells not the equity but the property itself, he is acting not for the stockholders or unsecured creditors necessarily, but for whatever class of creditors may finally be adjudged entitled to the fund in his hands. Where this kind of a sale is had under our statute the proceedings amount to a foreclosure suit for the benefit of the encumbrancer, in case the validity of the encumbrance is established.

In this case not one dollar of compensation is allowed out of the fund to the receiver or to his counsel which was not earned in the care and sale of the mortgaged property. If, instead of taking advantage of the insolvency proceedings to realize upon their pledge, these bondholders, or'rather their trustee, the mortgagee, had filed a bill, is it not perfectly plain that precisely this same receivership, with its attendant expenses, including compensation to counsel, would have been incurred? My recollection is that the mortgage covered the whole plant practically as a going concern, but if it did not, then the encumbrancers may have secured a more valuable receivership in insolvency proceedings than they would have been able to get in their own suit to foreclose.

The rule upon which I have acted in cases of this class a number of times is to allow to the receiver and his counsel at least the same compensation which they would have been entitled to receive if they had been appointed in a suit to foreclose the mortgage or other encumbrance which received the benefits of the receiver’s care and the receiver’s sale. Where the encumbrance is finally adjudged invalid, no difficulty arises because the entire proceeds of sale stand as a fund for the benefit of the unsecured creditors. But where the encumbrance is finally adjudged valid, then that part of the services of the insolvency receiver and his counsel which have directly benefited the encumbrancer, and have corresponded precisely with similar expenses which he would-have been obliged to incur on his own behalf in his own suit, plainly should be charged against the fund upon which the encumbrance is fastened. Where the insolvency receiver has had other assets besides those found to be subject to the mortgage, the effort, of course, should be to make ....each class, the encumbrancers and the general creditors, pay for the services of which it derived the benefit.

I do not know that, there has been any published adjudication on this subject, but the matter came up directly before the late Chancellor McGill in the case of Boehme, Receiver of the New York Silk Ribbon Manufacturing Co., v. Rall, about ten years ago. 51 N. J. Eq. (6 Dick.) 541. In that case the mortgagees accepted from the corporation a mortgage of doubtful validity upon the entire assets, and thereupon the corporation was immediately put into insolvency and a receiver was appointed. Before tire mortgagees could file a bill to establish and foreclose their mortgage, the receiver filed a bill to have it declared void. Meanwhile the receiver was obliged to care for the plant and operate it for the completion of goods, all of which were covered by the mortgage, if there was any mortgage. After a time the statute was invoked and the whole property was converted into cash by the receiver. The litigation between the receiver and the mortgagee then proceeded to a conclusion, and the result established the mortgage as a valid lien. The entire fund in the hands of the receiver was thus subjected to the mortgage and was not sufficient to pay the amount due thereon. Nevertheless, upon an application by the receiver, which was resisted, Chancellor McGill allowed substantial compensation to the receiver and to his counsel. Whether the late chancellor, in fixing the counsel fee, consciously compensated the receiver’s counsel out of the mortgagees’ money for trying to defeat the mortgage, I do not know. I have never been obliged to decide this precise point, and it is not raised in this case, because no allowance is made to the receiver or his counsel for any services rendered to the stockholders or general creditors in any proceeding hostile to the interests of any mortgagee, bondholder or lienholder who will take any part of the fund in the receiver’s hands, or who would receive any part thereof if no compensation were allowed to the receiver or his counsel. The allowance is made on the theory that the encumbrancers who' have had the advantage of this receivership to have their pledge cared for, kept in shape for sale and sold to advantage, and have thus been saved similar expensive proceedings in a suit on their own behalf, ought in equity to pay for the advantages which they have received. The fund has been administered by this court through its officers for their benefit, and they acquired their encumbrances subject to the very condition which has occurred.

The receivers had a very difficult and delicate problem before them when they took possession, of this plant. It was in peculiar shape. A magnificent factory was built and equipped for this peculiar work. The corporation failed, as I recall it — at least, the indications were that the corporation failed because they did not have any capital to carry on the business after they had their plant installed. Well, the receivers took hold of it, and then they could not stop the business; if they did, great damage would follow, not merely to the large amounts of vegetables and meats on storage, but to the plant itself from the suspension of the business. The plant had to be kept in operation for its own preservation. I do not think that the situation of a railroad more imperatively requires from a receiver its operation than the situation of this plant called for such service on the part of these receivers, and the indications are that they performed their duties faithfully and with skill. They have had, and their counsel has had, a great deal of work in getting this property sold, and sold in such a shape that all of the equities would be protected, and these bondholders would not be obliged to put up more money than was necessary; and the whole proceedings have been handled with great care to protect these bondholders from unnecessary hardship and loss, and to protect the lienors to the extent that they had a claim, and of course to protect the Erie railroad, the mortgagee, to the extent to which it may have a claim. The receivers and their counsel did all this really for the mortgagees, the bondholders and lienholders; and there is hardly any part of their work, as I now recall, the work of the receivers or of tlieir counsel, which can be attributed to the insolvency proceedings in their original form. Practically there is nothing of their work which is to be so classified. There may be a little. I don’t know about how it would be about this bill of costs; perhaps the very earliest items in it would belong to the insolvency proceedings pure and simple. Do counsel desire to' have that bill of costs examined and the portion disallowed which preceded the appearance of the lienors and bondholders?. I think it is hardly worth while; and really, the costs of the filing of the bill saved the bondholders the costs of filing a foreclosure bill.

Mr. Fisk — This bill was filed by Mr. Lembeck, representing a committee of bondholders.

The Court — Yes, it is very plain that even the bill of complaint itself and the earliest costs incurred practically belong to the mortgagees and correspond exactly with the costs of a foreclosure bill, and saved them the costs of a foreclosure bill — took the place of a foreclosure bill. I don’t think any distinction can be drawn between the possible two kinds of services .rendered by these two receivers and their counsel.

As to the amount asked for the two receivers, no specific objection is made. They certainly have had considerable work to do, and work that required a good deal of skill and involved a good deal of responsibility. Certainly there is a large amount of property involved, and property that had to be handled with great care. It does not strike me that the total amount asked for, $4,000, is excessive. The amount that counsel asks for, $2,500, does not strike me to be beyond what is the fair compensation. I know myself that a good deal of work has been done;' services have been performed involving a great deal of work and skill on the part of counsel, for the benefit of all these different interests, and the whole business has been done to the satisfaction of all those interests; and at the end we have two or three sharp questions, which can be litigated and decided on petition, and in which the receivers have no concern whatever.

The total amount — $6,500, and tire few dollars of costs and disbursements — $180 about of actual disbursements — is a littlp more than four per cent, on the amount administered. It does not seem that the charge is excessive, and therefore those charges will be allowed..

Mr. Eisk can take an order approving tins report as against all of these parties that appear here — the Erie railroad, Mrs. Jarvis, Mr. Enright’s clients and the others; and then all these other matters can be saved and the parties may be permitted to present them to the court by petition.