text:
    Mina Buttlar v. Christian Buttlar.
    [Decided June 20th, 1906.]
    1. Since equity has exclusive jurisdiction of contracts between husband and wife, it was proper to bring a suit in equity to recover money due complainant from defendant under a separation- agreement, though the parties were at the time of the suit divorced.

      2. In a suit by one against her former husband to recover under a separation agreement, equitable defences will be open to him, he being not restricted to matters that would be defences at law.
    3. Where complainant sued in equity to enforce a separation agreement made before she was divorced from defendant, he could urge any equitable defence based on circumstances arising- subsequent to a previous adjudication in a suit brought by her under the same agreement.
    4. Where a separation agreement made by a husband and his wife provided that he should have all the income from their joint real estate “during the term of his natural life,” but no term was mentioned during which he was to pay her $75 per month, he was bound to continue the payments during their joint lives, and that she obtained a divorce, thus changing- the estate from one in entirety to one in common, did not divest her of her rights under the agreement, nor afford him grounds to rescind it.
    5. Where a husband and wife made a separation agreement whereby he should receive the income of their joint property, and should pay her $75 a month, and after her divorce from him he procured the partition of the property, the fact that he was thereby deprived of the income of her portion of the property did not relieve him from liability for the monthly payments.
    Heard on bill, answer, replication, cross-bill and answer thereto, and proofs in open court.
    This is a bill filed by Mina Buttlar against Christian Buttlar. The parties were husband and wife until they were divorced by a decree dated March 24th, 1902. The bill is filed to secure the payment by the defendant to the complainant of money alleged to be due to the complainant under an agreement between the parties dated January 31st, 1894.
    The answer denies the liability of the defendant under the contract, and the cross-bill seeks to have the agreement canceled.

      Messrs. Weller & Lichtenstein, for the complainant.

      Messrs. Vredenburgh, Wall & Van Winkle, 'for the defendant.
   Garrison, Y. C.

At the time when Mina Buttlar and Christian Buttlar were husband and wife they entered into the agreement in question, which is dated January 31st, 1894, and which is printed in extenso in Buttlar v. Buttlar, 57 N. J. Eq. (12 Dick.) 650.

The-defendant, in November, 1895, declined to make further payments under this contract, and the complainant filed her bill to compel him to do so. In the court of chancery the defence of the husband that it would be inequitable to enforce the agreement against him was sustained, but the decree in his favor was reversed in the court of errors and appeals. Buttlar v. Buttlar, supra.

Thereafter the defendant made pa3'ments in accordance with the terms of the agreement down to and including the 24th day of March, 1902. Upon that date a decree of divorce was entered in favor of the wife against the husband upon the ground of his adultery. He began a suit for divorce against her upon a charge of her desertion, to which suit she filed a cross-bill. The bill of the husband was dismissed, and the decree was in favor of the wife upon her cross-bill.

From the date of this decree of divorce he has refused to make payments under the terms of the contract.

On the 25th day of March, 1902, the defendant served upon the complainant a paper in which he declared that he rescinded the contract above mentioned, stating, among other things, as grounds for the rescission that the agreement was made between the parties while they were husband and wife, and in consideration of that relationship; and further, because the agreement was made in consideration of the real estate being held between the parties by entireties, which particular estate had been determined by the decree of divorce.

In 1903 the defendant in this suit began a suit in partition against the complainant in this suit with respect to the real estate above mentioned. She endeavored to have his bill dismissed, setting up, among other things, the agreement aforesaid. The court of chancery decreed the partition. Buttlar v. Buttlar, 67 N. J. Eq. (1 Robb.) 136 (Vice-Chancellor Pitney, 1904); affirmed on appeal, June 18th, 1906. The real estate was sold under the decree in partition, and the net proceeds were divided equally between the parties.

The present suit is to recover the money alleged to be due under the agreement from the 24th of March, 1902, to the date of suit.

Notwithstanding the--fact that the parties are no longer husband and wife, it was proper to bring this suit in equity, and not at law. This is -so because equity has exclusive jurisdiction of ■contracts entered into between husband and wife. It is not the incapacity .of one spouse to sue the other at law which is controlling, but their incapacity at law to malee a contract. At law agreements between husband and wdfe are void, but in equity they will be recognized, and will be enforced if fair and fairly obtained. Wood v. Chetwood, 44 N. J. Eq. (17 Stew.) 64 (Vice-Chancellor Van Fleet, 1888); affirmed, 45 N. J. Eq. (18 Stew.) 369; Demarest v. Terhune, 62 N. J. Eq. (17 Dick.) 663 (at p. 666) (Vice-Chancellor Stevenson, 1901).

- The complainant insists that the court of errors and appeals has decided that this identical contract is valid; that although suit upon it must be brought in equity, it is not open to equitable defences, and therefore that the defendant is restricted in the present suit to those matters which wmuld be defences at law. In support of this contention he points out those parts of the opinion in the case in the court of errors and appeals (¡57 N. J. Eq. (1.2 Diclc.) 654) in which the court says: “Such suit is held to be a form of legal proceeding which is carried on in a court of equity merely because the legal right cannot be asserted in the form of a suit at law.” And again: “It would * * * be a clear denial of a remedy to hold that in such a case the injured party is obliged to waive her rights at lawr.” It will be observed, however, that in disposing of the case the learned judge waiting the opinion of the court of errors and appeals did not rest his decision upon the point that no equitable defences wrero admissible, but proceeded to analyze the equitable defences which were set up, and reached the conclusion that they wrere not sustained by the proofs;

I do not think, therefore, that it can be safely concluded that the court of errors and appeals in the reported case decided that equitable defences wrere not admissible in these suits in equity to enforce agreements entered into between married people. As I have heretofore stated, in my view it is the incapacity of married people to contract with each other in a way recognized at law wdiich vests equity with jurisdiction.

The expressions of Chief-Justice Beasley upon this subject are so clear and. comprehensive that the matter cannot be better elucidated than by quotation. In the case of Woodruff v. Clark, 42 N. J. Law (13 Vr.) 198 (at p. 200) (Supreme Court, 1880), he said, speaking with respect to the Married Women’s act and its effect upon the right of married people to contract with each other: “The object was to leave the husband and wife, touching their capacity to bargain together, on the ancient footing of the common law. The clause is virtually a legislative declaration that, as heretofore, they may enter, inter sese, into equitable agreements, but not into legal agreements. It was obviously intended that the court of equity should, as it had always done prior to the amplification of the rights of the wife, exercise a supervision over the engagements of married persons. Nor is it deemed-that such an adjustment was an unwise or illiberal one. The subject is one that requires more delicate handling than could be given it through the instrumentality of -a jury. Contracts of this class do not always rest, in point of validity, on fixed and palpable rules of law. Sometimes they approach closely to the field of discretion. * * * So it often happens that relief is afforded only upon equitable conditions. All these precautionary measures would be wanting to a suit at law. The union arising from the matrimonial connection is so entire, the interest so mutual and the confidence so-complete that the question in the given- case, whether a transfer of property has been equitably obtained by one of the married persons from the other, or is the creature of coercion or undue influence, is often one of the most subtle and abstruse subjects that can be presented for judicial investigation—an investigation to which the methods of a court of conscience are alone adapted. Few subjects would seem to fall more appropriately under equitable cognizance.”

Many cases in our courts since this decision have cited and enforced this principle.

I therefore conclude that in these suits the proper rule is to permit any defences which are open to a defendant in equity.

In the suit at bar certain matters between these parties are res acljudicala. It is res adjudicata that this agreement was fair, and was not obtained by any means which, a court of equity would hold to unfavorably affect it.

The defendant,' however, insists that since the complainant again applies to the court of equity to enforce it, he is entitled to any defences which might be urged in equity which are based upon circumstances arising subsequent to the previous adjudication. I conclude that this is the right of the defendant.

The defendant sets up three separate defences of this nature:

First. That by reason of the decree of divorce entered upon the 24th day of March, 1902j he is no longer under liability with respect to this agreement.

Second. That by reason of the notice of rescission given by him to the complainant on the 25th day of March, 1902, the contract is ended, and she may not now enforce the same.

Third. That by reason of the fact that the property has been sold in partition, and the complainant has received her one-half of the net proceeds of such sale, he is no longer under any liability to her with respect to this agreement.

It will be observed that the agreement provides that the defendant shall have the right to all of the rent, income and profits of the real estate owned by them jointly “during the term of his natural life.” There is no term mentioned in the agreement during which he is to continue to pay her $75 a month, but I think it perfectly clear that a reasonable construction of this agreement is that he was to so continue during the period of their joint lives. I think it clear that this was the intention of the parties at the time'that they entered into this agreement.

The obtaining by the wife of a divorce against her husband would not, according to the authorities, divest her of her vested rights under such an agreement. Buttlar v. Buttlar, 67 N. J. Eq. (1 Robb.) 136 (at p. 139) (Vice-Chancellor Pitney, 1904). To the authorities cited there add Galusha v. Galusha, 116 N. Y. 635; 24 L. Ed. 174.

This is dispositive of the defence first mentioned.

I do not think that the second of the suggested defences is of any greater efficacy. I cannot see how this defendant has shown any right to rescind this contract. The court of errors and appeals, in its decision (57 N. J. Bq. (If Dick.) -6%5) in passing apon this identical contract, said (at p. 65-5) : “That it was fairly procured is not denied by this defendant either in his answer or in his proofs. It was drawn, at his own request, by his confidential lawyer and adviser, who was then, and has ever since remained, not only in the court of chancery, but also in this court, his chosen counsel. Nor has this defendant claimed that this paper was procured through any fraud, accident or duress.”

In my view he is absolutely debarred from setting up any grounds for rescission, unless they be such as have arisen since the adjudication just referred to. With respect to such grounds, the only ones suggested by him are the divorce suit and the fact that the effect thereof was to change the estate from one by the entirety to one held in common. I fail to see how this in any way gives him a right to rescind.

As I have just concluded, the divorce suit did not have the effect of ending this agreement, and this is the only subsequent event urged by him in his notice, and is not, as I have just held, effective.

The third defence urged is with respect to the partition suit and its effect. In that suit, as will appear from an inspection of the opinion of the vice-chancellor in deciding the same (67 N. J. Eq. (1 Robb.) 136 (Vice-Chancellor Pitney, 190p), it was determined that the contract of January 31st, 1894, did not give Mrs. Buttlar any lien, legal or equitable, upon the interest of Mr. Buttlar in the property in question for the monthly payment provided for therein. • That which that agreement did give to the husband was the one-half of the rents and profits of the land to which the wife had a right. The court said, speaking of the right of the wife thus vested in the husband by her: “That right the complainant [Mr. Buttlar] has deliberately renounced both in the written rescission, to which reference is above made, and also in filing his bill for partition. I am not aware of any authority for the proposition that a tenant in common of an equal undivided share in lands, who also holds an encumbrance on the other share, cannot prosecute a suit for partition where he waives his lien upon the other share. I can find nothing in the agreement of January 31st, 1894, which gives the defendant [Mrs. Buttlar] any lien upon the complainant’s [Mr. Buttlar] share for-the monthly payment provided thereunder. I think that, the existence -of the agreement, even if the complainant [Mr. Buttlar],-has by it a continuing lien upon defendant’s [Mrs. Buttlar] share to secure his liability thereunder, furnishes no defence to his- suit for partition. He prays no relief against it, nor does he pray in the alternate that if it be held binding upon him that he is entitled to a lien upon the defendant’s [Mrs. Buttlar] share to protect himself against it.”

This defence, therefore, amounts to this—that the husband, having received from the wife the right to all of the income and profits of the property during his life, and having deliberately and of his own volition given up that right, has thereby released himself of liability under the agreement of January 31st, 1894.

Speaking generally, it may be said that one cannot voluntarily waive, or neglect to- protect himself-with respect to, his rights and- base upon such waiver- or neglect a right in himself to defend against an existing liability. It is no fault of Mrs. Buttlar that her husband has not to-day the right to collect the rents and- profits, or to have a lien upon the entire proceeds of sale of the property for his protection. In the partition suit she vigorously defended against the right of partition, insisting that the .property- should remain as it was, in his possession, so far as enjoying.the income thereof was concerned.

As- is clearly- pointed out in the opinion just referred to, he could have obtained protection of his rights had he sought it. He not only did not seek it, but voluntarily waived it. I cannot find any principle in aid of one thus circumstanced.

As was said by the court of appeals of New York, in the case of Galusha v. Galusha,. previously cited, speaking with respect to such a- contract-: “After its making'it-was not in the power of either party, acting alone and against the will -of the other, to do any act which would destroy or affect that contract.” Whether this statement of-the law is too broad or not, it certainly applies, in -my judgment, to the acts herein set up by the defendant as def enpes against the enforcement of this contract. •

Such contracts- as these, the authorities show, will be carried out by a decree for the payment of the money provided therein in cases, in which there is'no monetary or , other valuable consideration of, a tangible nature passing between the parties. If-in the ease at bar the defendant urges that it is apparent that this contract had other consideration, than the marital relation subsisting between the parties at the time and his obligation to support her, it may be, for the purpose of the argument, conceded, and the answer is already given, namely, that such consideration, as is not attributable to, the relationship, then subsisting between the parties is still his, so far as any act of the other spouse is concerned, and if it is not his, it is because of his voluntary waiver thereof. ... . . ••

The conclusion which I reach, therefore, is that the defendant has not made out any one of the defences urged.

From the time of the divorce, March 24th, 1902, to the 'date' of the sale in partition -lire defendant was under obligation - to pay to the complainant the sum of $75 a month, from which, however, there must be deducted certain sums of money which have been, paid to her by him under circumstances which need not be detailed since they do not affect the issue.

As a result of the sale in partition the complainant, as heretofore stated, received the one-half of the net proceeds.of sale, amounting to $9,178.65. The net proceeds just alluded to were arrived at by deducting the mortgages, expenses, costs, &c., and also certain mortgage interest.. The defendant was under • obligation to pay this mortgage interest, and I conclude that under, the agreement she is entitled to the repayment to-her by- the defendant of the sum thus improperly deducted from her share. This amounted to $132.33.

There remains to be disposed of the liability of the defendant from the time when, as a result of the sale in partition, the net proceeds -of the sale of the real estate were equally divided between the parties down to the time of the filing of the bill.. This is a subject which might have given rise to much difficulty were it not for the position-which the complainant has taken respecting the same.

As I have previously said, the authorities are clear that the divorce decree did not relieve the husband of liability under this agreement, and his plea that he is relieved from liability thereunder because he no longer is in receipt of the rents and profits of the real estate, and the defendant is in possession of her one-half of the net proceeds of the sale of the real estate, is answered by the fact that it is entirely by his own act and volition that such is the case.

I think it a very grave question whether he could escape liability to the full extent of his contract under the circumstances of this case. So far as the complainant is concerned, she has done nothing to deprive him of every right which he had, or could possibly claim to have, under the agreement. Any right which he once had thereunder, and which he has not now, so far as the real estate is concerned, he has voluntarily waived or relinquished. It is very questionable whether a defendant who has thus himself given away his rights or waived them is in any position to ask a court of equity to extend protection to him when the existing liability is sought to be enforced against him. If any such right is accorded this defendant, its utmost extent would be that the contract would not be enforced in such a way as to leave him in a worse position than he would have been in if he had retained a lien upon the share of the proceeds of the sale which belonged to Mrs. Buttlar. If her share of the proceeds of the sale of the real estate were impounded and put out at interest, and he received the interest therefrom, he would be getting all to which he could possibly be entitled, and the complainant would then be entitled to a decree for the $75 a month, as provided in the agreement.

The complainant concedes to the defendant even more than this. I say “concedes” because I am-not deciding that he has the right, and have suggested as above that it is very questionable whether he has. But I do not stop to consider or decide this, because this is all that the complainant asks for, and is certainly all to which the defendant is entitled. In the original and in the answering brief of the complainant it is said that the position which she takes is that “the complainant should be allowed the $75 a month, less the legal rate of interest on her share of the proceeds in the equity of redemption.” To the extent that the legal rate of interest would exceed the actual rate of interest which the investment of this sum of money would realize, this is gratuitously favorable to the defendant.

The decree, therefore, with respect to the period between the date of the receipt by the complainant of her share of the proceeds of sale and the filing of the bill, will be that the defendant is liable for $75 a month, less the legal rate of interest on the amount received by her as her share of the proceeds of the sale.

The cross-bill of the defendant must be dismissed, with costs.

I will advise a decree in accordance with these conclusions.


source: Caselaw Access Project

author: Garrison, V. 0.

license: Public Domain

text:
    Martha Wyckoff and Elizabeth Wyckoff v. William O’Niel, executor of Mary E. Harris, deceased.
    [Decided June 22d, 1906.]
    1. W’here there has been a final decree in a suit,to compel distribution of an estate by the orphans court on the accounting of the executor, such final account is conclusive on the parties in interest, as provided by P. L. 1898 p. 761 § 127.

    2. The orphans court has full jurisdiction, on the .application of any party in interest, to make a just distribution of the assets of an estate in accordance with the directions of the testatrix’s will, and to enforce its decrees with like effect to those of a court of chancery, as authorized by P. L. 1898 p. 781 § 178.

    3. The orphans court has jurisdiction of an action by legatees against the executor to recover legacies, as authorized by P. L. 1898 p. 787 § 192.

    4. While the court of chancery has equitable jurisdiction of a suit by legatees to recover their legacies, notwithstanding the pendency of the probate proceedings in the orphans court, such jurisdiction will not be exercised unless special cause exists therefor.
    5. Where complainants were both pecuniary and residuary legatees, they were not entitled to maintain a bill against the executor to compel payment of their pecuniary legacies only.
    6. All the residuary legatees named in a will are necessary parties to a suit in equity by two of them to compel distribution and payment of their legacies.

      Heard on bill and demurrer.
    This is a bill filed by Martha and Elizabeth WyckofE against William O’Niel, executor of Mary E. Harris. . Mary E. Harris was the aunt of. the complainants. In her will, of which O’Niel is the executor, she gave many legacies to various institutions and persons, among such legacies being one of. $5,000 to the complainants-, to be equally divided between them; and to the complainants, together with several- others named, she left all the residue and remainder of her estate. She died on the 17th day of August, 1904, and her will was probated in the county of Warren. The inventory and assessment filed in the surrogate’s office of that county showed the personal estate of the testatrix to be the sum of $25,768.16.
    The bill charges .that on the 8th of November, 1905, the executor, having collected all the moneys belonging to the estate, and having paid all the debts, made and exhibited in the surrogate’s office the final account of himself as said executor, showing a balance in hand to distribute of $23,191.98; that the complainants filed exceptions to the allowance of the said account, which came on to he heard before the orphans court of the county of Warren, which said court, by its decree made on the 2d day of February, 1906, sustained certain of the exceptions and dismissed the others; and that, as the result of said decree, there now remains in the hands of the said executor the sum of $23,000, which is more than sufficient to pay all of the pecuniary legacies in the said will bequeathed.
    ■The bill charges that the executor should have paid the legacies to the complainants, and to the other legatees standing on the same footing, at the end of one year from the date of the death of the testatrix, and that interest therefor is recoverable from such date.
    The bill further charges that the executor pretends that it is his duty to settle, in the proper probate court of 'Pennsylvania, in the county of Northampton, his account with respect to moneys due the estate under mortgages upon lands in the State of Pennsylvania, and that he cannot safely pay the legacies and make final settlement without having such administration in the State of Pennsylvania. But the complainants .insist that, the executor has collected all the said moneys on the mortgages in the State of Pennsylvania, and has brought such moneys into this state and deposited them to his credit as executor in this state and accounted for them in his final account aforesaid.
    The complainants charge that this court has jurisdiction to compel the said executor to pay over to them the amount of the legacy of $5,000 before mentioned and interest on the principal thereof, if there be sufficient in his hands with which to pay interest thereon, and on all other legacies of a similar character.
    The sole defendant is the executor of the estate. ■
    To this bill the executor files a demurrer, and states as his reasons:

      First. That no reason appears in the said bill why the complainants should resort to a court of chancery for the relief prayed. Eor a recovery of their specific legacies they have an action at law. For distribution of the estate in full, the orphans court of the county of Warren has full jurisdiction.

      Second. If the said bill .states a sufficient reason for resorting to the court of chancery to settle the estate of the decedent, then all the residuary legatees of said testatrix should have been made parties to the. bill.

      Third. That the complainants have no right to. limit their bill to the recovery of their specific legacies, with interest, they being residuary legatees also, and it being their duty, if they bring a suit of this nature, to include all of their claims in one suit.

      Fourth. That it appears from the bill that ancillary administration upon this estate was necessary in Pennsylvania, and the defendant cannot safely pay legacies until his account in that state has been settled and due order made thereon for .the distribution of the assets collected therein.

      Mr. William II. Morrow, for the complainants. • ■

      Mr. -Joseph U. Wilson and Mr. Gilbert Collins, for the defendant.
   Garrison, V. 0.

(after stating facts).

While it is undoubtedly true that the court of chancery of New Jersey has all of the ancient equitable jurisdiction with respect to the administration of estates, and is a proper forum in which to bring an action for the recovery of a legacy, it is equally true that where the administration of an estate is proceeding in the probate courts, the court of chancery will'not interfere unless special cause and good reason be shown therefor. Salter v. Williamson, 2 N. J. Eq. (1 Gr. Ch.) 480 (Chancellor Pennington, 1841) Van Mater v. Sickler, 9 N. J. Eq. (1 Stock.) 483 (Chancellor Williamson, 1853); Clarke v. Johnston, 10 N. J. Eq. (2 Stock.) 287 (Chancellor Williamson, 1854); Frey v. Demarest, 16 N. J. Eq. (1 C. E. Gr.) 236 (Chancellor Green, 1863); Hoagland v. Titus, 39 N. J. Eq. (12 Stew.) 298 (Court of Errors and Appeals, 1884); Borough of Rutherford v. Alyea, 54 N. J. Eq. (9 Dick.) 411 (Court of Errors and Appeals, 1896); Bird v. Hawkins, 58 N. J. Eq. (13 Dick.) 229 (Vice-Chancellor Grey, 1889).

As was said in Salter v. Williamson, supra (at p. 1¡90) : “Until the final decree of the orphans court, there is no legal impediment in the way of this court taking cognizance of the case, if they think proper so to do,” but (Van Mater v. Sickler, supra) “it is not the right of the party to change the forum of settlement at his pleasure. The chancellor must exercise his discretion and judge as to the propriety of the court of chancery’s interposing.”

There has been a final decree in this suit by the orphans court upon the accounting of this executor. Under the provisions of the Orphans Court act such final account is conclusive. P. L. 1898 p. 761 § 127. That court has ample jurisdiction, upon the application of any party in interest, to make just distribution in accordance with the directions of the will of the testatrix, and to enforce its decrees with like effect to those of the court of chancery. P. L. 1898 p. 781 § 178. Furthermore, legatees may now sue for legacies in the orphans court, where the proceedings are in all respects governed by the rules and practice of the court of chancery in similar suits. P. L. 1898 p. 787 § 192.

Under these circumstances, and in the present state of the law, I cannot see that the complainants in this suit have shown any need to come into a court of equity to secure their rights. The •complainants do not suggest any special cause or good reason why the matter is not proceeded with in an orderly way in the orphans court, which, as has just been shown, has full jurisdiction.

I think that if they show no need of equity, it may properly be said that their bill shows a want of equity, even if it be true that the case is cognizable in equity, if the chancellor, in his discretion, determines to entertain it.

To properly administer the relief asked for by the complainants it would be necessary to take over the accounting and final distribution from the point it has now reached in the orphans court. In no other way could this court determine whether the interest demanded by the complainants was payable to them. If this accounting and final settlement were taken over, as stated, then I think that all of the parties interested are proper and necessary parties to this suit.

Furthermore, these complainants are by their bill shown to be, together with others, residuary legatees of this estate. I think that they should include all of their claims as legatees against this estate in one suit, and should not be permitted to split them up into several suits. If this is so, then, of course, the other residuary legatees are necessary parties to a suit for the ascertainment and distribution of the residuary estate. Read v. Patterson, 44 N. J. Eq. (17 Stew.) 217 (Court of Errors and Appeals, 1888). They are not parties to this bill.

In conclusion, I think it only necessary to sa.y that this court has, from the earliest reported cases, shown a disinclination to take over from the orphans court, when the latter was properly proceeding, matters entirely within its jurisdiction, and which may, in most instances, be much better dealt with in that court. This tendency is, and undoubtedly should be, strengthened by the increasing jurisdiction that has been, and is constantly being, given to the orphans court.

The original papers, the parties and the proper judicial machinery to administer the rights are all present in the counties in.which the orphans courts are situated, and unless a complainant clearly, exhibits to the court of chancery that, by reason of some complication, intricacy or lack of jurisdiction in the orphans court, -the case requires the aid of a court of equity, in my view the latter court should discourage applications to it, and should leave the parties in the court of first jurisdiction, from which they may, in the event of its erring, appeal eventually to the same court from which appeals lie from this court.

For- the reasons indicated. I will sustain the demurrer.


author: Garrison, Y. C.

text:
    William Armstrong Mackey et al. v. Annie J. Mackey et al.
    [Decided June 22d, 1906.]
    1. Where, in partition, it appeared that the deceased owner left a will whereby he gave the land sought to be partitioned to a trustee, and that the trustee'held the title to the land, the trustee as such was a necessary party. ■
    . 2. An unprobated will is capable of conveying an interest in the property devised, and .where-a conveyance is made under a power in the will before probate, a subsequent probate validates the conveyance.
    ' 3. A plea is a proper method to take advantage of a want of parties.
    4. By setting down a cause in equity for hearing on the bill and plea, the complainant on the hearing is bound by the facts pleaded.
    5. In a suit for partition, a plea alleged that the deceased owner left a will duly executed, in which he devised the land sought to be partitioned to a trustee, in. trust for specified purposes, aud that the trustee, by virtue of the will, held title to' the land in trust, and that the trustee was a necessary party .to -the bill.—Held, that the plea sufficiently showed a non-joinder of parties.
    Heard on bill and plea.

      This is a bill for partition. The complainants are William A. Mackey and his wife, and the defendants are the persons stated in the bill to have interests in or title to the real estate sought to be partitioned.
    The real estate in question formerly belonged to Elias J. Mackey and Sarah E. Mackey, his wife, who were the mother and father of the complainant William A: Mackey. John H. Mackey was a brother of the complainant William A. Mackey. He died on the 17th of January, 1906, and his widow and four minor children are made parties.
    It is charged that John H. Mackey was entitled to the one-eighth part of the lands in question.
    The bill states that complainants are not informed whether said John H. ’Mackey' died intestate or not, and again recites that his interest is subject to the right of dower of his widow, and to the terms of his last will and testament, if there should be one, “to which your orator refers.”
    To this bill the widow of John H. Mackey, Annie J. Mackey, filed a plea alleging that John H. Mackey left a last will and testament, duly executed in manner and form required by law tn pass the title to -lands and real estate, and did, in and by the same, give and devise all his lands and real estate to William A. Mackey (who is the complainant in this suit) in' trust for the benefit of the four children of John H. Mackey, and did further, in and by the same, authorize the said trustee to sell and dispose of all of the said real estate owned by the said John H. Mackey, either at public or private sale, in as full a mauner as he, the said John H. Mackey, might do if he were alive.
    The plea further alleges that the said William A. Mackey, as trustee as aforesaid, by virtue of the provisions of the said will of the said John H. Mackey, now' deceased, holds title to the equal undivided one-eighth part of the real estate sought to be partitioned in trust under and in pursuance of the terms and provisions of the said will.
    The plea then charges that the said William A. Mackey, as trustee, is a necessary party to the said bill.

      Mr. Joseph II. Wilson and Mr. George A. Angle, for the complainants.

      Mr. William II. Morrow, for the defendants.
   Garrison, Y. C.

(after stating facts).

It seems too plain to require discussion that if John H. Mackey did leave a will, executed in compliance with the law, and did constitute therein a trustee with full power of sale, and such-trustee now holds the title to the land formerly owned by John H. Mackey, as in said plea set up, such trustee is a necessary party to this suit.

The complainants, however, insist that the plea does not show that the will has been admitted to probate, and therefore they claim that the plea is not a complete defence to the bill, and should not be sustained. Their contention is that the probate of a will is the judicial determination of its character and validity as such, and that until it has been duly admitted to probate it is wholly ineffectual as an instrument of title. And this undoubtedly is the general rule. 23 Am. & Eng. Encycl. L. {2d ed.) 111. But it is also true that an unprobated will is capable of conveying an interest in property devised, and that if a conveyance he made under a power in the will before probate, subsequent probate will validate the conveyance. 23 Am. & Eng. Encycl. L. {2d ed.) US; 1 Jarm. Wills {6th ed.) *662. The latter authority going to the extent of saying: "Executors derive their title under the will, and not by virtue of the probate, which is merely the proof of their title.”

A plea is a proper method to take advantage of a want of parties. 1 Dan. Oh. PI. & Pr. {6lh Am. ed.) *287. And at p. 638 he says:

“If it can be shown to the court that, with the parties already before it, the suit has been so framed as to be insufficient to answer the purpose of complete justice, a plea suggesting the facts necessary to make such a case would prevail.”

This plea certainly does suggest facts showing that all of the necessary parties are not before the court in this suit.

By setting down the case for hearing on bill and plea, the complainant on this hearing is bound by all of the facts pleaded. It is pleaded as a fact that there is a will duly executed, and therefore capable of being admitted to probate; that this will vests title in a named trustee, and that such named trustee now holds title under the will, and that such trustee is not a party to this suit.

I am of opinion that, under these circumstances, the plea is good, aud must be sustained.


text:
    Anna Hesselman v. August Haas et al.
    [Decided June 22d, 1906.]
    1. The chancellor has general power to superintend the affairs of infants and to provide for their custody.
    2. As against any person, except the putative father, the mother of a natural child has the natural right to its custody.'
    3. For three years after the birth of a natural child the mother maintained it at the home of another woman, when, an abandonment becoming necessary, the mother inserted an advertisement offering the child for adoption, and stating that there would be complete surrender, and that the child might be seen at the home where it: was being maintained. It was understood between the mother and the one caring for the child that the mother should be notified if anyone cared to take it. A woman called and took the child, but did not adopt it. The mother was' not notified of the taking at the time, and, though she made efforts, she did not discover the child’s whereabouts for six years.—-Meld, that the mother had not forfeited her right to custody of the child. «
    4. On an issue as to whom should be awarded the custody of a child of ten years, the chancellor will not consult the child’s predilection.
    Heard on writ of habeas corpus, return thereto, traverse, and proofs in open court.

      This is a hearing upon a writ of habeas corpus obtained by Anna Hesselman respecting the custody of her child, in which writ the defendants are August Haas and Amaele Haas, his wife.

      Mr. J ohn Wahl Queen, for the petitioner.

      Mr. Robert Adrain, for the defendants.
   Garrison, Y. C.

Tlie jurisdiction of the court is invoked by this writ of habeas corpus, and the pleadings and proofs present an issue as to the right to the permanent custody of'an infant, and the matter is therefore before the chancellor under his general power to superintend the affairs of infants and to provide permanently for their custody. Rossell v. Rossell, 64 N. J. Eq. (19 Dick.) 21 (Chancellor Magie, 1902).

J find the facts as follows: The petitioner is an unmarried woman, twent}f-nine years of age. She is employed as a bookkeeper in an advertising agency in New York City, and receives $12 a week. She is a well-appearing woman, in good health, and seemingly of good disposition. Her family are people of some little means, and live in Chicago, Illinois, excepting the sister of the petitioner, who lives with her in New York. Her sister and her mother, who were upon the witness-stand, were each nice looking people, and the impression that they created was favorable. The petitioner and her sister—who is somewhat younger than she, aiid who is also employed in New York City— live together in an apartment there, and rent rooms therein to two other women, who are also self-supporting. From the location of the apartment, the appearance of the petitioner, and of her sister, mother and the acquaintances whom she called to the witness-stand, I should sav that her surroundings were all respectable and proper. In 1895 she was employed in the family of a Mrs. Schultz, in Chicago. She was at that time eighteen 3'ears old. She became acquainted with a man who seduced her some time in the month of April, 1895. Shortly after this time Mrs. Schultz removed to New York City, and finding that she was compelled to go abroad, and having two children whom she desired to have eared for during her absence,- sent for the petitioner to come to New York, which the petitioner did some time in the year 1895. She remained in the employment of Mrs. Schultz for some time, and then obtained employment in a restaurant on Twenty-third street, New York City. From there she went to a lying-in hospital, where, on the 2d of January, 1896, she gave birth to a daughter. This is the child the custody of whom is in controversy in this case.

Within ten days after the birth of the child the petitioner was employed as a wet nurse in the family of E. II. Harriman, in New York. Her child was placed with a woman to be taken care of, but was not well taken care of, and was transferred to the custody of a Mrs. Hoffmann. Mrs. Hoffmann was a German woman who for some years was in the employ of the Harriman family, and who, from all accounts, was a thoroughly respectable woman and a proper person to whom to commit the care of the child. An arrangement was made by the petitioner to pay Mrs. Hoffmann $10 a month to care for the child. The child remained with Mrs. Hoffmann for something over three years, when Mrs. Hoffmann informed the petitioner that, owing to the condition of her health, she could no longer care for the Child, and the petitioner, not being then in a position to maintain a home herself, or to have the child with her in her then employment, determined to surrender the child for adoption if those applying for it appeared to her as proper persons to whom to confide it. With this end in view the petitioner inserted an advertisement in a German newspaper published in New York City called the “Staats Zeitung.” That advertisement, which was inserted on the 28th day of September, 1899, read as follows :

“To adopt—Nice, pretty little girl; brunette; three and a half years; complete surrender. To be seen with Mrs. Hoffmann, Cypress Post-Office, Evergreen, N. Y.”

Before inserting the advertisement the petitioner informed Mrs. Hoffmann of her intention to do so, and told her, as she testifies, “the minute'anybody came she should let me [the petitioner] know, so that I could speak to them, to see whether they were worthy of having, the child/’- Mrs. Hoffmann’s version of the instructions being that the petitioner said, “When anybody comes and will, take the child, then -write me at once, so that 1 could speak to them.”

On the morning after this advertisement was inserted, namely, ►September 29th, 1899, Mrs. Haas, the wife of a baker in Jersey City, went to - the home of Mrs; Hoffmann and obtained the child and brought it with her to Jersey City. .The conduct of Mrs. Hoffmann in permitting Mrs. Haas to take the child under the circumstances seems unaccountable, unless it was due to her condition of health. She not only did not obey her instructions and notify the mother so that she might interview the people applying for the child, but she did not even obtain the address of the ■ applicant, or learn anything about her condition, surroundings -or- intentions with respect to the child. It is quite obvious, from her examination in this suit, that she completely lost her head, and. allowed Mrs. Haas to take the child without obeying her instructions or-doing any of the things which she subsequently realized she should have.done under the circumstances. It appears that she did insist that Mrs. Haas should bring back the child at.least once a year. I think it clear that there was-some talk between-these .two women, concerning the necessity of the mother’s consent, because Mrs. Hoffmann quotes Mrs. Haas as having said that she did not want anything to do with the mother. This could only have been said by Mrs. Haas in response to some suggestion by Mrs. Hoffmann -that the former should see the mother concerning the permanent custody of the child.

Mrs. Haas and her husband are hard-working, frugal and worthy people of German extraction. They made a very favorable impression by their appearance and manner. They had lost by death the two children born to them, and were anxious to adopt a child. They saw the advertisement above quoted, and in response to it Mrs. Haas went to the home of Mrs. Hoffmann, a g above stated. Their family consists of themselves and a nephew about fourteen years of age. At that time the husband was occupied in running a bakery in the basement of the building in which they lived, and the wife in running a delicatessen store oii the first floor; back of which they had their dwelling apartments. I have no doubt, from the evidence, that their home was in every way a decent and proper place, and'su'ch as people of like circumstances customarily have.

The child has hot been given much education because of the fact that she could only obtain schooling on half days, but she is a well-appearing child, and looked as if 'she were well cared for.

At the present time the Haases have neither of them any employment, having sold the bakery business and the delicatessen store. The man testifies that he is looking around now for something to do. •

Mrs. Hoffmann, as soon as she had parted with the-child, ■wrote to the petitioner, who Was still'in the employment of the Harrimans, and the petitioner immediately went to see Mrs. Hoffmann. It is evident, from all of the testimony, that she was much disturbed by the happenings, and was'very desirous' of locating her child. She immediately' set''about 'ascertaining tiro whereabouts of the people who had taken the child. She searched the directories of New York City, Brooldyn, Jersey City and the adjacent towns, arid made inquiries in such directions as she thought would produce the information she sought. Beginning in 1901, when she had more money at her disposal than theretofore; she advertised. The wording of the advertisement was such as to elicit information of the address of the persons who had taken her child. She received no response to' any of these advertisements until 19Ó6. In that year she advertised ihat a reward'of $100 would be given by'her for information. As a result of this latest advertisement she did obtain information of the dwellirig-place of the defendants, and called there and interviewed them. Shortly afterwards this proceeding- was commenced. ■' '

While it is'‘undoubtedly trufe that the modern tendency in eases involving the custody of infants is not to give conclusive effect to the legal rights of the claimants for custody, it is nevertheless necessary, since such legal right is undoubtedly a factor for consideration, to determine in this' case whether the petitioner has the legal right, or has'parted with it- to the extent that, as between herself and the transferee of the right, she may have had power to do so.

Although there is some discussion as to whether, as between the putative father and the mother of an illegitimate child, the latter has a superior right to its custody (Schoul. Dom. Bel. (5th ed.) § 278 et seq.), it is entirely settled that, as against any other than the putative father, the mother of such a child has the natural right to its custody. Reg. v. Nash, 10 Q. B. D. 454 Eng. Rul. Cas. 26, in the note to which the English and American cases are given; Friesner v. Symonds, 46 N. J. Eq. (1 Dick.) 521 (at p. 527) (Vice-Chancellor Van Fleet, 1890).

The petitioner, therefore, in this case has the natural right to the custody of this child. But this is a right that she may have lost or forfeited. It is the contention of the defendants that she has forfeited it under the circumstances proven in this case.

There is 'considerable discussion in the authorities as to contracts or agreements transferring parental rights, but they will undoubtedly be upheld in some cases. Schoul. Dom. Bel. (i5th ed.) 891/. § 251 et seq.; Ousset v. Euvrard, 52 Atl. Rep. 1110 (Vice-Chancellor Stevenson, 1902).

It therefore becomes necessary next to consider whether it can properly be held in this case that the petitioner.surrendered or forfeited her right of parental custody of this child.

For three years and a half after the birth of the child she maintained it at the home of Mrs. Hoffmann, paying Mrs. Hoffmann for her services in caring for it. The state of Mrs. Hoffmann’s health making a change necessary, and the petitioner not then being able to make a home for the child, she determined to give it up for adoption, completely surrendering all of her parental rights, provided she found people who appeared to her to be worthy to have the child. Her intention is clearly expressed in the advertisement which she inserted. It states that the child is to be adopted, and -that the mother will completely surrender it. Undoubtedly, if Mrs. Haas had taken the child with the mother’s consent, and had obtained the mother’s surrender in such a way as to enable her to adopt the child, it would be extremely difficult, if not impossible, for the petitioner to regain the custody of the child by any legal proceeding. But this was not the course which the events took. Mrs. Haas took the child without seeing the mother, without anything at all evidencing the mother’s consent to her taking it, or anything evidencing a surrender by the mother of her natural right of custody, and Mrs. Haas did not adopt the child.

It will be observed that the advertisement does not suggest that Mrs. Hoffmann was anything more than the custodian of the child, at whose house the same could be seen. There was nothing in the advertisement to lead one to-the conclusion.that Mrs. Hoffmann had authority to act on behalf of the mother as to surrendering or as to transferring the custody of the child.

Under these circumstances I do not think it .can properly be held that Mrs. Haas acquired any rights as against the petitioner. She, so to speak, took her chances.- She was informed by the advertisement that the child was for adoption, and that the mother would completely surrender. She must be presumed to know that she could only obtain such surrender by some communication, at least verbal if not written, from the mother; and there would seem also equally to rest upon her the obligation, if she obtained the child, that she would adopt it. It is hardly to be conceived that the mother intended to completely surrender all her own rights without seeing to it that the child acquired rights as against the person who took it.

The petitioner has never shown the slightest neglect of her child, or carelessness concerning its welfare. It is true that for several years she did not see the child, but that was through no fault of her own. Up to the time that Mrs. Haas took it, the attitude of the another toward the child was entirely commendable, and she is, of' course, not to be charged with neglect, or with ■ any lack of feeling or proper conduct toward the child during the period that she did not know or had no means of knowing or ascertaining where it was.

I conclude that Mrs. Haas did not acquire any right by reason of the facts proven in this suit.

The modern tendency of the courts in these matters of custody is so permeated with determination to do that which will best serve the interests of the infant that, notwithstanding the presence of a legal, right, upon orre side and a lesser right of the same nature, or the entire absence of any legal right upon the other, it is necessary, to. determine whether. the granting of custody to the one having the legal right will be prejudicial to the welfare of the infant. If, in this, suit, after I have reached the conclusion above stated that the petitioner has the natural right of custody, and has not forfeited, it, and that the defendants have not therefore any legal right, I concluded that the petitioner, was an unfit, person to.have custody of the child, I should feel constrained by the authorities to refuse to grant her its custody. . .

But I do not find such to .be the fact. . I need not reiterate that which I. have heretofore said concerning the petitioner. 1 need only state that my finding is that she is a fit and proper person. Under.such circumstances, the mother having the natural right, .and not being shown to be unfit, will be aw,arded the custody. Giffen v. Gascoigne, 60 N. J. Eq. (15 Dick.) 256 (Vice-Chancellor Grey, 1900); Reg. v. Nash, supra ; Mayne v. Baldwin, 5 N. J. Eq. (1 Hal. Ch.) 454 (Chancellor Hoisted, 18k&). In this last-cited case the chancellor awarded the custody to the father, although he had verbally committed the child to the defendant to be kept and adopted until it arrived, at full age. Baird v. Baird, 18 N. J. Eq. (3 C. E. Gr.) 194 (at p. 198) (Chancellor Zabriskie, 1867).

The child is now ten years of age. I have not consulted its predilection. I feel that Sir George Jessel properly expressed the attitude of a court of. equity concerning a child of this age. He said: “I hive never consulted so young a child, and it has not been the practice of courts of equity to do so.” Reg. v. Nash, supra;. Schoul. Dom. Rel. (5th ed.) § 250.

So that no injury may ensue to the defendants, I assume, for the purposes of this case, that the child, if consulted, would express her preference to remain' with them. The defendants undoubtedly believe that they are acting, for the best interests of the child. But, as was said by Lord-Justice Bowen, in Reg. v. Nash, supra, “'Philanthropy sometimes makes mistakes. * * * The question-is whether, in considering what is for the benefit of the child, the court will have regard to natural relationship.”

Haying regard to the natural relationship between this child and the petitioner, and the fact that she is not shown to be an unfit person, but is affirmatively shown to be’a fit person to have custody of it, I will award it to the petitioner.


author: Garrison, ,V- 0.

text:
    Isaac Seligman v. Victor Talking Machine Company.
    [Decided July 12th, 1906.]
    Where testimony of a number of disinterested witnesses showed thal the continued operation of defendant’s manufacturing, plant in the same block with plaintiff’s dwelling caused noises and vibrations which prevented the inhabitants from sleeping during the night, plaintiff was entitled to' an injunction restraining' the operation of the plant during the .night, although other residents in the same locality testified that their rest was not disturbed.
    Heard on bill, answer, replication and proofs in open court.

      Messrs. French & Richards, for the complainant.

      Messrs. Grey & Archer, for the defendant.
   Garrison, ,V- 0.

This is a bill filed by Isaac Seligman against. the Victor Talking Machine. Company, complaining of an alleged nuisance. The plant of the defendant company and the dwelling-house of the complainant are each in a block of land in the city of Camden practically square, bounded on the west by Front street, on the east by Second street, on the north by Cooper street and on the south by Market street. The dwelling of .the complainant, No. 117 Market street, abuts on the west a line drawn north and south through the centre of the block. The defendant now owns all the land north from a line drawn east and west through the centre of the block.

Market street is one of the principal • streets of the city, and on it, in this block at the time complainant came there -to live in 1878, there dwelt some of the most prominent and influential men of the city, among them Abraham Browning, Peter L. Voorhees and James B. Dayton. There were at that time nothing but residences in the block with two exceptions—there was a blacksmith shop almost immediately north of and in the rear of complainant’s lot, and there was a carriage factory on the Front street side of the block a little to the south of the middle thereof. The entrance to the blacksmith shop was from Front street, but the shop itself stood far back from the street, as above described. Subsequently this building was used as a machine shop, and about ten years ago was used by the originator of the Victor talking machines as a place in which to manufacture his machines.

The Victor' Talking Machine Company was incorporated in 1901. It has erected many large buildings on the lands owned by it, and it first operated the machinery therein from a one hundred and twenty-five horsepower engine, located in a building on the north side of the block about one hundred and sixty-five feet northwest from the'north end of complainant’s house. In August of 1905 the defendant completed a building the nearest point of which is about one hundred and twenty feet from the complainant’s house, and is so located that if the east line of complainant’s lot was projected it would form the west line of the building. In this building, which is of two stories, there was installed upon the ground floor two boilers capable of generating steam of a combined capacity of six hundred horsepower. On the second floor were installed two engines and dynamos or generators of a combined capacity of three hundred and seventy-five horsepower. The balance of the horsepower of the steam was utilized for heating tables to .heat the metal records used in the talking machines and also to furnish electric lighting for the plant, to run pumps and other machinery.

.Some time in the winter of 1905 the defendant company inaugurated a new method of distributing to their customers the records used in the talking machines, and, by reason of such new method of distribution, were compelled at certain times to operate their machinery continuously from six o’clock in the morning until late hours at night, and finally until four o’clock in the morning. This machinery, so operated, was located in the building last described, and it is the noise and vibrations therefrom of which complaint is made.

The vibrations are shown to be about of the same character and intensity as those occasioned in the same building by the passage of trolley cars or of heavily-loaded trucks, the only difference being that those occasioned by the machinery were continuous.

I am satisfied from the proofs that, so far as the making of noise or the causing of vibrations are concerned, the machinery in this factory is properly installed and carefully operated and does not cause any more noise and vibrations than usually accompany or are incident to the operation of any considerable amount of machinery using steam. In other words, I think that the situation is that of an ordinary manufacturing plant producing the ordinary noises of such an establishment, and if it were operated only during the hours of the day when such plants are customarily operated, it would not be subject to restraint upon the proofs in this suit.

The complainant, although the prayer of his bill is broad enough to cover such restraint, does not, as a fact, ask for it. He limits his application to a prayer that the defendant be restrained from operating during such hours of the night as are necessarily devoted by him and his family to rest.

This raises the question whether a manufacturing establishment, which has come into a city block theretofore free from annoying noises and vibrations, may operate its machinery with the usual noise and vibration accompanying the same during the hours of the night usually devoted to rest, if the effect of such customary noise or vibration at the unusual hour is to keep awake those dwelling adjacent to the plant?

There is, of course, no reason in law why a manufacturing establishment may not operate throughout the entire twenty-four hours if it causes no actionable or legal wrong 'to'others. It is well recognized, however, in 'cases of nuisance,' that the things to be taken into account include not only the' degree -and .character of the annoyance and the circumstances under which it occurs, but also the time of its occurrence. As is well1 said' by Vice-Chancellor Pitney, in Gilbough v. West Side Amusement Co., 64 N. J. Eq. (19 Dick.) (at p. 28) (1992): “So the time when a noise is made is also to be taken'into account. Mankind needs sleep for a succession of several hours once in'every twenty-four hours, and nature has' provided a time for that purpose, to wit, the night time, and by common'consent of civilized man the night is devoted to rest and sleep, and noises which would not be adjudged nuisances, under circumstances, if made in the 'daytime, will be declared to be nuisances if made at night, during the hours which are usually devoted by the’’ inhabitants of that neighborhood to sl&epV

.Many other authorities are to the same effect. Kerr In j. (8d ed.) *216, note 87; Wood Nuis. (2d ed.) § 618; 21 Am. <& Eng. Encycl. L. (2d ed.) 697, note 8.

It is not disputed in the case at bar that the noises and vibrations complained of exist, and that when the plant was 'in operation at night they seriously affected some of those in the neighborhood. The gravamen of the defence is that those who were thus affected were persons of extraordinary sensibility and were not such as the law would protect by injunction by reason thereof.

The complainant and the three other members of his family were undoubtedly guilty of exaggeration, more, however, in describing the ’ effects upon them of the annoyances than with respect to the character or degree of the annoyances. The other witnesses for the complainant are not, however, open to any such charge, and the undisputed facts are'that'there was the hum or whirr of this heavy machinery, the' pounding or pulsating thereof, .the noise of the exhaust of the steam and the continuous vibration conveyed through the earth to the walls of the adjacent house's. In addition to that which emanated from the machinery itself, there were tire noises occasioned by removing the metal discs from the presses, which'operation'required the dropping of heavy masses of metal a distance of several inches upon a metal-topped table:

The standard to guide the court is well stated by Chancellor Zabriskie, in Ross v. Butler, 19 N. J. Eq. (4 C. E. Gr.) 294 (at p. 298) (1868) : “The law takes care that lawful and ^useful business shall, not be put a stop to on account of every trifling or. imaginary annoyance such as ¿nay offend the taste 'or disturb the nerves of a fastidious or over-refined person'.' But, on the other hand, it does not allow anyone, whatever his circumstances or condition may. be, to be driven from his home,' or to be compelled to live in it in positive discomfort, although caused by a lawful and useful business carried on in his vicinity. The maxim sic utere. tuo ut alie-rmm, non lo,edas, expresses the well-established doctrine of the law. It is not necessary, to constitute a nuisance, that the matter complained of should affect the health or do. injury to material property. It is sufficient, in tide language of Sir Knight Bruce,, if it is ‘an inconvenience materially interfering with the ordinary comfort, physically, of human existence, not merely according to elegant and dainty modes and habits of living, but aecprding to plain and sober and simple notions among the English people/ ” Cleveland v. Citizens Gas Light Co., 20 N. J. Eq. (5 C. E. Gr.) 205 (Chancellor Zabriskie, 1869); Meigs v. Lister, 23 N. J. Eq. (8 C. E. Gr.) (at p. 204) (Chancellor Zabriskie, 1872).

It has been observed that where witnesses are alleged to be of other than normal condition of mind and body it must appear by the proofs that they are sireh, as the presumption, in the absence of proof, is that all citizens enjoy a normal condition of mind and body. Board of Health v. Lederer, 52 N. J. Eq. (7 Dick.) (at p.678) (Vice-Chancellor Bird, 189k)

Confining the investigation solely to the witnesses who dwelt in. the vicinity and who were therefore subject to annoyance at night, there were produced by the complainant five witnesses, including the four members of his own family, who dwelt upon the Market street side of the block and who were each seriously affected by the noises and vibrations at night and were kept awake thereby. The defendant produced nine witnesses from the Market street front of the block who testified that they w.ere not annoyed or disturbed by the night operations. From the Second street side of the block the complainant and defendant each produced two witnesses, those for the complainant testifying that they were seriously annoyed and kept awake, those for the defendant testifying that they were not. Three witnesses were produced by the complainant who dwelt in adjoining blocks and who testified to the annoyances occasioned to them by the noises resulting from the night operation of the plant.

There was nothing in the proofs, or in the appearance of the complainant’s 'witnesses, to show to the court that they were persons having the tastes or the nerves of the fastidious or the over-refined; they each appeared to be persons accustomed to plain, sober and simple existence such as is lived by the average person in an American community. As before pointed out, the complainant and his family described effects produced upon them by the annoyances which I cannot help but believe were largely mental or imaginary. But this does not in any way militate against the proven fact that the annoyances did exist and did keep them from obtaining rest and did render their dwelling practically unfitted as a place for rest; and, as previously said, the charge of over-exaggeration which properly lies against the complainant’s family in this respect, does not at all apply to the other witnesses produced by the complainant, each of whom was affected at night so seriously as to disturb his rest. The fact that others, either because they were differently situated with respect to the plant, or differently constituted physically, did not suffer a similar annoyance, does not deprive the complainant of his right to relief. As the court said in Citizens Gas Light Co. ads. Cleveland, 20 N. J. Eq. (5 C. E. Gr.) (at p. 205) (Chancellor ZabrisJcie, 1869) : “The discomforts must be physical, not such as depend upon taste or imagination. But whatever is offensive physically to the senses, and by such offensiveness makes life uncomfortable, is a nuisance; and it is not the less so because there may be persons whose habits and occupations have brought them to endure the same annoyances without discomfort. Other persons or classes of persons whose senses have not been so hardened, and who, by their education and habits of life, retain the sensitiveness of their natural organization, are entitled to enjoy life and comfort as they are constituted.” See, also, Harrison v. St. Mark’s Church, 3 W. N. C. (Pa.) 384.

In view of the authorities and the undisputed facts in this case, it seems to me that the complainant is entitled to have this plant restrained from operating after a reasonable hour at .night and until a reasonable hour in the morning. He has suggested that the restraint should be from ten p. m. until five a. m. ; I will, however, settle the hours upon the settling of the decree, which may be done upon notice.

I will advise a decree in accordance with the above views.


text:
    Harry B. Brockhurst v. John H. Cox.
    [Decided July 12th, 1906.]
    1. The “immediate possession” or “immediate recording” essential to rendering a chattel mortgage valid under the Chattel Mortgage act (P. L. 1902 pp. 487, 488 §§ 4, 5), requiring an immediate possession by the mortgagee or a recording of the mortgage, in default of which the same is void as against the creditors of the mortgagor, mean as soon as may be by reasonable dispatch under the circumstances of the case.
    2. A chattel mortgage was dated May 2d, and was delivered to the mortgagee May 3d. It was filed for record May 18th. The mortgagee could, either by messenger or mail, have easily recorded the mortgage on the 4th or 5th of May. No attempt at any explanation for the delay was made.—Held, that the mortgage was invalid as against the creditors of the mortgagor under the Chattel Mortgage act (P. L. 1902 pp. 487, 488 §§ 4, 5), .requiring the recording of mortgages to render them valid as against creditors of the mortgagor.
    3. The Chattel Mortgage act (P. L. 1902 pp. 487, 488 §§ 4, 5), providing that a chattel mortgage, unaccompanied by an immediate delivery of the chattels mortgaged or recorded, shall be void as against the creditors of the mortgagor, makes an unrecorded mortgage, unaccompanied by immediate delivery to the mortgagee of the chattels mortgaged, void at least as to creditors of the mortgagor existing at the time of the giving of the mortgage; " ■ i •
    4. A creditor, whose debt was subsisting at the time of the giving of a chattel mortgage, may, by subsequently obtaining a judgment and levying on the property mortgaged, place himself in a position to attack the chattel mortgage or to resist its enforcement. '
    5. A receiver of an insolvent partnership, appointed for the purpose of winding up the affairs of the partnership and distributing its assets to its creditors, is the representative of the partnership creditors, and as such he may, by suit or defence, avoid a chattel mortgage given by the partnership which is void as against the creditors.
    Proceedings with respect to the claim of Elizabeth A. Brockhurst.
    Tbe bill in this cause was filed on the 5th day of May, 1905, and is the ordinary bill for the dissolution of a partnership and an accounting, together with a prayer for a receiver.
    A temporary receiver was appointed, and subsequently, in December, 1905, a decree of dissolution of the pártnership was made, a permanent receiver and manager was appointed, and it was decreed that an accounting should be taken and stated between the parties, "that the creditors of the said firm should be ascertained, and the amounts due to each of them.”
    Among the claims filed with the receiver was one by Elizabeth A. Brockhurst, for the sum of $800, with interest from the 8th day of December, 1904. This claim was secured by a chattel mortgage to her, dated May 2d, 1905.
    Some testimony was taken before the receiver sitting as a master, .but the case aetualty was heard before the court as if upon a petition by her as chattel mortgagee to be paid the amount of her chattel mortgage out of the funds in the hands of the receiver.
    The funds in the hands of the receiver are slightly in excess of the amount of this mortgage and interest, and are mainly composed.of the moneys received upon a sale of the assets of the firm held on the 19th day of May, 1905. The assets are insufficient to pay the debts.

      Mr. Adolf L. En-gellce, for Elizabeth A. Brockhurst.

      Mr-. J. Merritt Lane, receiver, pro se.

      Mr. Frank W. Hastings, for E. D. Depew & Company, a judgment creditor.

      Mr. Jaimes F. Pyle, for the “Evening Journal” Association, a judgment creditor.
   Garrison, Y. C.

(after stating facts).

Harry B. Brockhurst and John H. Cox entered into a partnership about the 4th of December, 1904, for the purpose of selling-dairy products. On the 8th day of December, 1904, Harry B. Brockhurst purchased a quantity of butter, and alleges that, for the purpose of paying for this butter, he borrowed from his mother, Elizabeth A. Brockhurst, the sum of $800. He alleges that this butter was sold and the proceeds therefrom kept by the firm of Brockhurst & Cox.

On the 3d day of May, 1905, Harry B. Brockhurst executed and acknowledged, on behalf of the firm of Brockhurst & Cox, a chattel mortgage, upon practically all of its assets, to Elizabeth A. Brockhurst, to secure the payment of $800 borrowed on the 8th day of December, 1904. On the same day Elizabeth A. Brockhurst makes affidavit to the consideration of this mortgage.

On the 5th day of May, 1905, Harry B. Brockhurst filed his bill in this suit, and a receiver was appointed, who entered into possession of the property. On the 18th day -of May, 1905, the mortgage in question was duly recorded in the proper office of Hudson county, New Jersey.

On the 21st day of February, 1906, Edward D. Depew & Company obtained a judgment against the partnership aforesaid for $264.04. On the 23d day of February, 1906, the “Evening Journal” Association obtained a judgment against the partnership for $107.17.

The assets of the firm were sold by the temporary receiver appointed in this suit on the 19th day of May, 1905.

While the proofs concerning the loan by Mrs. Brockhurst to the firm of Brockhurst & Cox lack clearness and create suspicions, I cannot say, after mature deliberation, that there is not sufficient proof to sustain her claim that she loaned $800 to the firm, for which the chattel mortgage in question was subsequently given.

The receiver denies her right under this chattel mortgage, because he contends that the same is void as to the creditors of the mortgagors, and that he, as such receiver, represents those creditors to such an extent as to enable him to set up their rights as against this mortgagee.

The provisions of the Chattel Mortgage act (P. L. 190'2 p. M87 §§ M, 5) have been construed by the courts to require an immediate possession by the mortgagee, or an immediate recording of the mortgage, in default of which the same is absolutely void as against the creditors of the mortgagor. “Immediate possession” or “immediate recording” is held to mean “as soon as may be by reasonable dispatch under the circumstances of the case.” Roe v. Meding, 53 N. J. Eq. (8 Dick.) 350 (Court of Errors and Appeals, 1895). Five days have been held to be too long a delay under the circumstances. Hardcastle v. Stiles, 69 N. J. Law (40 Vr.) 551 (Supreme Court, 1903); affirmed, 70 N. J. Law (41 Vr.) 829.

The mortgage in the ease at bar was dated May 2d, 1905, and was actually delivered to the mortgagee on the 3d of May, 1905, upon which day she made an affidavit, which is endorsed on the mortgage itself. The mortgagee at that time was at Red Bank, Monmouth county; New Jersey, and her sons were each in business in and about Jersey City, and were in constant communication with her. She could, either by messenger or mail, have easily and readily gotten this mortgage to the register’s office in Jersey City on the 4th or 5th of May at the outside. The mortgage was not filed for record until the 18th of May, 1905. No attempt at any explanation or reason for this delay is made, and I therefore find that this mortgage was not recorded as required by the statute so as to protect it as against subsisting creditors of the mortgagors.

Under the statute, the effect of not immediately recording the mortgage is to make the same absolutely void as to the creditors of the mortgagor. There has been considerable discussion as to the meaning of these words, and various reasons have been suggested for the different interpretations placed thereon.

By reason of the ninth section of the act, as construed in Roe v. Meding, supra, those who become creditors after the recording are deprived of the right of attacking the mortgage. But with respect to the fourth section it' has been suggested, and is argued in this case at bar, that the statute only applies to those creditors who became such after the time of giving the mortgage and befoxe possession is taken or record of the mortgage is made.' The argument is that such creditors are the only ones who are injured by the failure to take possession or to record the mortgage.

Laying aside, for the moment, the obvious answer that the legislature did not, by any language used' by it, specify any restricted class, but used general language, inclusive of all creditors, I cannot agree with the reasoning which' results in such interpretation.^) It is, of course, true that by leaving the mortgagor as the apparent owner of unencumbered chattels injury is done to those who trust him upon such apparent ownership. It is nevertheless true that injury accrues to creditors whose debts are in existence prior to the giving of the mortgage. Such creditors may delay taking either legal or other means at their command to collect their debts so long as no one apparently has any preference to them and all of the creditors of the common debtor are on- the sanie plane.

■ By permitting secret preferences to be given by chattel mortgages hot recorded, other creditors would be lulled into security, and would be likely to refrain from pressing the debtor at law or otherwise, to the great benefit of the debtor and the preferred creditor, but to the serious injury, in many cases, of the unsecured creditor./

But, as I have Suggested above, I do not see that the court is called upon to determine what influenced the legislature in protecting a class, the duty of the court being to determine merely what class is protected.

The language of the statute is clear. The mortgage unrecorded is absolutely void as to the creditors of the mortgagor. This certainly must 'mean the creditors of the mortgagor existing at the «time that tile mortgage was given, whatever else of a more inclusive character it may also mean.

Since all of the creditors in the case at 'bar were such at the time of the giving of the mortgage, it is not necessary in this case to go further than I have just done in the matter of construction. That the construction I have placed upon this act is justified by the authorities will be found by consulting the following : Bank of Metropolis v. Sprague, 21 N. J. Eq. (6 C. E. Gr.) 530 (Courl of Errors and Appeals, 1870); Williamson v. Railroad Company, 29 N. J. Eq. (2 Stew.) 336 (Court of Errors mid, Appeals, 1878); Roe v. Meding, 53 N. J. Eq. (8 Dick.) 350 (Court of Errors and Appeals, 1895).

A creditor whose debt was subsisting at the time of the giving of a chattel mortgage may, by subsequently obtaining judgment find levying upon the property, place himself in a position to attack the chattel mortgage or to resist its enforcement. But this is not the only way in which the right of a creditor to attack the validity of the chattel mortgage or to resist its enforcement may be asserted. It has been held that such right may be asserted by a receiver appointed in pursuance of the General Corporation act. Graham Button Co. v. Spielmann, 50 N. J. Eq. (5 Dick.) 120 (Vice-Chancellor Van Fleet, 1892), affirmed, 50 N. J. Eq. (5 Dick.) 796.

On the other hand, it has been held that a general assignee by a voluntary assignment is not such a representative of creditors as to enable him to assert, on their behalf, this fight of attacking the validity of an otherwise valid chattel mortgage. Wimpfheimer v. Perrine, 67 N. J. Eq. (1 Robb.) 597 (Court of Errors and Appeals, 1904).

The real question for decision in this case, therefore, is, Does a receiver of a partnership, who is appointed after a decree of dissolution for the purpose of winding up its affairs and distributing the money to its creditors, so far represent such creditors as to be invested with power in their behalf to attack the validity or to resist the enforcement of a chattel mortgage given by the partners ?

From tire proofs in this suit it appears that this partnership is insolvent. Before a decree of dissolution the receiver appointed pending the suit is nothing more than a custodian of the property, and represents nobody excepting the court, and represents it solely for the purpose of conserving the property until the further order of the court. The court, having-taken the property in charge solely for the purpose of conservation, has not, by that act, attempted to adjudicate any claims nor to settle any rights. The suit may be discontinued, or in any one of a number of ways it may result in some disposition other than a final decree of dissolution, the effect of which would be to revest the partnership with its property.

After a decree of dissolution, however, the situation is entirely changed. The court, by such decree, determines that the partnership is dissolved; that its property must first go to pay the creditors of the partnership, and that such creditors will be ascertained by the court, their rights passed upon, and their debts, to the extent that the property will go toward that end, paid.

Under such circumstances it appears to me that the correct holding is that from the time of the decree, of dissolution there is, by virtue thereof, fastened upon tire assets of the company a lien in favor of subsisting creditors. The receiver appointed in such final decree of dissolution becomes the representative of the creditors, and as such may, by suit or defence, avoid any instrument which is void as against them.

After the decree of dissolution the distribution of the property of the partnership among the creditors is an involuntary proceeding. In Wimpfheimer v. Perrine, supra, Mr. Justice Yan Syckel (at p. 600) says: “In an involuntary proceeding, as in the case of a receivership, or assignee appointed by the court, the proceeding is adverse to the debtor. The law takes the property in the position in which it is with reference to the rights of creditors and appropriates it exclusively and irrevocably to the payment of debts. Anyone claiming a superior right must show his title stricti juris. The receiver is the embodiment of creditors. He stands as and for them. When he challenges the validity of the mortgage, he does so in the character of creditor, having, in virtue of his receivership debts, fastened upon the mortgagor’s property. It is then a question strictly between creditors and the mortgagee, and the statute, declaring the'mortgage void as to creditors for want of recording, applies as fully as if it was a suit between a single judgment creditor and the mortgagee.”

The effect of the decree of dissolution and the settlement of the affairs of the partnership through tire court has been held to be, so far as creditors are concerned, analogous to a creditor’s bill, and the debts existing are held to be fastened on the assets. Ross v. Titsworth, 37 N. J. Eq. (10 Stew.) 337 (Chancellor Runyon, 1888); Kirkpatrick v. McElroy, 41 N. J. Eq. (14 Stew.) 589 (Court of Errors and Appeals, 1886) ; Smith v. Crater, 43 N. J. Eq. (16 Stew.) 641 (Court of Errors and Appeals, 1887); Van Alstyne v. Cook, 25 N. Y. 495.

Since the court will not permit the creditors of the partnership to enforce their rights as against the property in the possession-of the receiver (Ross v. Titsworth, supra), it would seem that after dissolution it must necessarily be held that the receiver represents the rights of all of the creditors whose debts have thus become fastened upon the property. Lawson v. Dunn, 66 N. J. Eq. (21 Dick.) 90 (Vice-Chancellor Reed, 1900). To hold otherwise would be clearly inequitable. It would prevent the creditors from protecting themselves without extending to them a substitute for the rights thus taken away from them.

I therefore conclude that the receiver- of this insolvent partnership, after tbe decree of dissolution, became vested with the rights of the creditors to such an extent as to'enable him to resist the enforcement of this chattel mortgage, and that he has successfully done so by showing that the same was not immediately recorded under the ciraimstances of the case.

The result is that Elizabeth A. Brockhurst, the claimant, will not be given the benefit of the' chattel mortgage as a preference, but will be considered as a general creditor of the partnership for the sum of $800 and interest.

This finding makes it unnecessary to determine the question raised by two of the creditors of the insolvent firm who obtained judgments after the decree of dissolution, and who proved their judgments in this proceeding. Since I have held that the receiver represents all the creditors, and since, by obtaining these judgments, they can get no, preference, there is no necessity to malee any finding concerning their claims in this suit.

I will advise a decree in accordance with the views above expressed.


author: Leaking, Y. C.

text:
    David O. Watkins, Banking and Insurance Commissioner, v. Commonwealth Savings and Loan Association.
    LDeeided October 8th, 1906.]
    1. The claims of general creditors of an' insolvent building and loan association are entitled to priority of payment from the assets over the claims of shareholders as such.
    2. In the distribution of the assets of an insolvent building and loan association among the shareholders, a certain class of shareholders held to be entitled to priority of payment.
    Heard on appeal from the decision of a receiver refusing to allow the claim upon the part of certain shareholders to participation in .the distribution of the assets of an insolvent building and loan association.

      Mr. Francis D. Weaver, for the appellant.

      Mr. William Early, for the receiver.
   Leaking, Y. C.

The Commonwealth Savings and Loan Association was incorporated in the year 1901, under the Building and Loan Association statutes of this state. Becoming insolvent, a receiver has been appointed by this court, and the question now presented is the determination of the relative status, as to priority, of the claims of two classes of its stockholders. It is not represented to the court that any creditors exist other than the stockholder creditors now under discussion. If any general creditors exist, that is, any creditors other than those whose claims are based on their rights as holders of stock, such creditors are manifestly entitled to priority of payment out of the assets, before any of the stockholders can participate in a distribution of the assets. This rule is well established and applies to building and loan associations the same as to trading corporations.

The relative rights of the two classes of stockholders now in question must be determined by the philosophy of the general scheme as disclosed by the charter and by-laws. No course of dealing has been disclosed by the evidence to suggest other equities. ,

By the charter two classes of stock are authorized, one called “founders’ stock” and the other “general or common shares;” the former to be divided into forty shares of the par value of $50 each, and the other into four thousand nine hundred and eighty shares of the par value of $100. each. The seven incorporators subscribed for the entire forty shares of “founders’ stock” by the certificate of incorporation and paid into the treasury of the company, in cash, the full amount of their subscriptions. This fund is referred to in the charter as the capital with which the association will commence business. The common stock to be issued after the company commenced business consisted of three classes, called, respectivety, installment, prepaid and permanent shares. The installment stock called for monthly payments until the stock should “mature” by reaching a value of $100. This was estimated in the by-laws to occur in seventy-two months, when paid in at one dollar per month, and in one hundred and twenty months, when paid in at fifty cents per month. The prepaid stock was sold at $70 per share, payable in advance, and the permanent stock at $75 per share, payable in advance. Both the prepaid and permanent stock were by the by-laws guaranteed six per cent, cash dividends, payable. semi-annually, and both participated in the earnings by having not more than four per cent., annually, carried to their credit to mature them.

Tbe important provisions of the charter and by-laws touching the question here involved were as follows:

The charter provided:

“Fifth. That this association is hereby incorporated under and by virtue of the provisions of an act designated as the Mutual Loan and Building Association act of February 28th, 1849, the act of February 28th, 1852, and of the revised statute approved April 9th, 1875, known and designated as ‘An act to encourage the establishment of mutual loan and homestead and building associations,’ and of the act of March 21st, 1888, and the supplements and amendments thereto.
“Sixth. That the parties who sign this certificate of incorporation are the original associates or founders who have formed themselves into the Commonwealth Savings and Loan Association under the acts for the creation of mutual loan and building associations and their supplements, and have actually created the fund of two thousand dollars ($2,000) to be expended for the expenses and needs of the association, and in acquiring lands and tenements, and said original associates or founders and their assigns alone shall be deemed to have and exercise the rights of members in said association, as provided in section 11 of the revised statute of April 9th, 1875, and the voting privileges for directors as hereinafter provided, and the said members of said original association and their assigns shall be entitled to all the benefits, profits, rights and interest in said Commonwealth Savings and Loan Association, and the assets thereof, after the payment to the subsequent subscribers to the stock of said association of at least six per centum of the cash payments from the time of payment to said association’s stock in addition to their stock payments, and their share of any surplus as may be provided by law, or, in the absence thereof, by the by-laws of the association.
“That said association is formed for the benefit of the incorporators and their successors and assigns who sign this certificate, to whom is allotted original associates’ or founders’ shares, fully paid, and also for all others who afterwards become members, their successors and assigns, subject to the rights of said original associates or founders, as hereinafter provided.
“Seventh. The total authorized capital stock of this corporation is five hundred thousand dollars ($500,000), divided into forty shares of the par value of fifty dollars ($50) each, which said forty shares shall be known and designated as original associates’ or founders’ shares, and four thousand nine hundred and eighty shares (4,980) of the par value of one hundred dollars ($100) each, which shall be known and designated as general or common shares. That the forty shares so issued to the original associates constituting the original associates’ or founders’ fund shall not be deemed a liability of said Commonwealth Savings and Loan Association, except at the time and upon a dissolution of the business of said association, or upon a final termination of its affairs, but shall confer on the contributors, to said fund, and their successors and assigns, ratably and in proportion to the amount contributed, all the right and privileges following; that is to say—
“(a) All the profits, rights, benefits and interest in said Commonwealth Savings and Loan Association and the assets thereof after the payment to the subsequent subscribers to the common stock as hereinbefore particularly provided in clause 6 of these articles of incorporation.”

The by-laws provide:

“Seo. 2. The nature of the business of this corporation shall be that of a savings' and loan association, its object being to provide a method by which its members may deposit small sums of money monthly, at a good earning rate, or invest larger sums and receive cash dividends thereon, and to loan money to its members to cancel real estate mortgages, and to purchase homes on an easy monthly-payment plan.
“Sec. 4. * - * The stock of the association shall be divided into forty-nine hundred and eighty (4,980) shares of general stock, of the par value of $100 each, which may be paid monthly, or in advance, or in one cash payment, and forty shares of founders’ stock, of $50 each, which founders’ fund is paid in cash by the incorporators, and shall constitute and be part of a reserve fund account, which, with its accretions, shall be apportioned, accredited and distributed in such manner as the directors may determine, and ratably, to the owners of these shares, upon a final termination of the business, or when the total present: issue has been subscribed, and shall not be a liability of the association until that time.
“Sec. -7. * * * The compensation of the officers, directors and employes shall from time to time be fixed by the board. The expenses of the company shall be drawn exclusively from the reserve fund.
“Sec. 20. * * * Membership fees, premiums, appraisal and attorney fees, and such of the profits over and above the stipulated dividends as the directors may determine, shall be placed in the reserve fund. The expense of the company shall be drawn from this fund, and the fund maintained in sufficient proportion to provide against possible contingent losses, and to serve as a guarantee of permanency and security of the investments of the association, provided that additional earnings, not to exceed four per cent, per annum for actual time of investment, may be drawn from this fund and accredited to the stock of the company, which will aid in its early maturity, and shall be withdrawable only at that time. Under no circumstances shall any deduction from the general stock payments of the company be made for running expenses or maintaining the reserve fund.”

By the charter the directors were required, to consist of four members to be chosen from the owners of the “founders’ stock” and three from the owners of common stock.

It will be seen from the above provisions of the charter and bylaws, that the original incorporators—owners of the “founders’ stock”—occupy a position in many respects similar to that occupied by the stockholders of an ordinary trading corporation. The money paid by these founder shareholders for their shares formed a capital with which the association was to commence business. This capital, with its accumulations, was referred to in the bjrlaws as the “reserve fund.” This capital or “reserve fund” was to be augmented from time to time by having carried to its credit all profits of the association which should exist after paying to the prepaid and permanent shareholders the guaranteed six per cent, and crediting the prepaid permanent and installment shares, respectively, with not to exceed four per cent, to mature them. The expenses of the association were also to be paid from this “reserve fund.” Thus the general scheme of the owners of the “founders’ stock” was to enter into an enterprise with a paid-in capital in the hope of profit accruing to their shares through the business to be transacted, and the business to be transacted consisted of conducting a business along the lines of ordinary building and loan association operations, including the idea of customers becoming members and known as common stockholders. If these common stockholders were general creditors and not trammeled with the idea that they were in name, at least, members and stockholders, their right to priority of payment would be entirely clear. It seems manifest, however, when the equities arising from the relation between the two classes of stockholders are considered, that the mere fact of membership cannot change the rights arising from those equities. The founders invited the common shareholders to invest their funds in a scheme designated to guarantee to them certain fixed returns. The founders were to profit by such gains as arose from the business over and above the fixed obligations. These conditions operate to create a clear equity of priority of payment in behalf of the common stockholders as well after as before insolvency. As between the founder stockholders and the common stockholders the latter are, in effect, general creditors. Every contract entered into by a trading corporation includes an implied agreement that the company’s capital shall be held and used as a trust fund, equitably pledged as security for the corporate debts; and the general scheme of this association, as between its founder shareholders and common shareholders, creates the same equities in behalf of the latter as against the former.

The sixth paragraph of the charter, above quoted, clearly provides for the participation of the founder shareholders’ stock only after the common stockholders shall have been paid.. The language of the seventh paragraph of the charter, above quoted, to the effect that the “founders’ stock” shall not be deemed a liability except at the time and upon a dissolution of the business of the association, is urged to be the equivalent of a declaration that it shall at that time be deemed a liability. Such is its plain meaning; and such meaning is entirely consistent with the views here entertained. Capital stock of a corporation is always a liability in a restricted sense; it becomes an active liability at dissolution, but is then postponed in its payment to all claims having either legal or equitable priority.

In reaching these conclusions I am not unmindful of the underlying principles of co-operation, equality and mutuality upon which building and loan associations usually exist, nor of the tendency of courts to declare against preferential contracts in the affairs of such association. The present- case presents to my mind equities in favor of the common shareholders which I cam-not disregard. The decision of the receiver is sustained, and distribution is directed in accordance with this opinion.