text:
    The City of Newark, petitioner, v. Hugh F. Cook et al., defendants.
    [Decided June 24th, 1926.)
    1. Irregularity in the proceedings upon which a tax title is based cannot be attacked collaterally at law or in equity. The remedy is by certiorari.

    2. The refusal of the supreme court to review a tax title by certiorari because of laches or that the right to the writ is barred by statute is not a ground for equitable interference.
    3. An equity will not be enforced. on the ground 'of laches after fifty-five years of idleness and delay.
    4. A stenographer’s transcript Of the proceedings of a trial is not evidence of the purported facts appearing therein.
    5. Lands taken by condemnation terminates a lease and the relation of landlord and tenant under section 31 of the Landlord and Tenant act (Oomp. 8tat. p. 3078), but the termination does not deprive the tenant from recovering the value of his lease out of the award.
    6. A tenant is permitted to participate in the distribution of an award in condemnation to the extent of the difference between the fair market value of his lease and the rent reserved.
    7. A tenant’s loss of business, profits, good-will, fixtures, cost of removal and the like are not elements of damage awardable in condemnation proceedings for public highways, and cannot be allowed out of the sum awarded to the owner of the land.
    On bill, &c.

      Messrs. McCarter & English (Mr. Arthur F. Egner), for Cook et al.

      Mr. Cecil H. MacMahon, for Charles A. McEuen.

      Messrs. Stein, Stein & Hannoch, Mr. Merritt Lane and Mr. Spaulding Frazer, for the Surety Realty Company.

      Messrs. Lindabury, Depue & Faullcs (Messrs. Bishop & Horner), for Liggett & Company.

      Messrs. Bilder & Bilder (Mr. Samuel Kaufman), for McDonald & Co.

      Mr. Max Schwartz, for John Harrington and Radio Shop.
   Backes, V. C.

For the purpose of widening Washington street the city of Newark condemned the two four-story stores at the northwest corner of Market and Washington streets, Newark, and paid the award into court, $479,550. Both buildings were taken and razed, although only half the land was taken, that which lies southeasterly of a line extending from the northerly corner of the lot on Washington street to the westerly corner on Market street. Cook et al. are the owners in fee of a two-thirds undivided interest, and the holders of a tax title (called that for convenience) for the term of two hundred years, expiring in August, a. d. 2057, of the remaining one-third, the fee of which is in Charles A. McEuen.- There are numerous claims upon the fund by a tenant and subtenants, and by McEuen, who takes the position that the tax title is invalid for irregularities in the proceedings-on which it is based, and for fraud in its procurement, and that the court in these proceedings may hold it to be of no effect.

The title in 1850 was in one Leavitt, who conveyed an undivided two-thirds interest to Charles H. Sherman and a one-third to McEuen and his brothers and sisters, by separate deeds, February 13th, 1850. McEuen succeeded to his brother’s and sister’s interest by inheritance. Title to the Sherman two-thirds’ interest passed to William H. Sherman and by mesne conveyances to Nehemiah Perry, and from Perry to Martin Burne in 1866. About the same time Burne acquired the tax title. Burne remained in possession until his death in 1912, and Cook et al. hold by devise from him.. On August 24th, 1857, the property was sold by the city of Newark for an unpaid sewer assessment to John R. Weeks for two hundred years. He assigned to Perry and Perry to Burne. At the time of the assessment and sale the fee was in Abraham H. Sherman (who was also in possession) and the McEuen children, then infants. The assessment map designated Abraham H. Sherman as the owner of the lot; the McEuens were not parties to the proceedings. The deed to the McEuens did not come to their knowledge until 1869, and in 1870 they brought an action in the supreme court against Burne to recover possession of their interest, and judgment was rendered against them. The “phonographer’s” transcript of his notes of the trial at the September term, 1870, of the Essex circuit, is in evidence, without objection, and from it it appears that Abraham H. Sherman, the co-tenant of the McEuens, furnished Weeks, the purchaser of the tax title, with the purchase price the day after the sale, and that Weeks, at the instance of Sherman, assigned the certificate of sale to Perry in 1861, who assigned it to Burne in 1866. Mr. Justice Depue, presiding, held the certificate of sale to be in due form, and that the proceedings upon which it was founded could not be attacked collaterally, but only on review by certiorari as provided by the then recent act of 1869, now section 15 of the Sale of Lands act (Comp. Stat. p. Jt-679); that the question of fraud, because Sherman procured the tax sale to Weeks instead of paying the assessment, or of a resulting trust, because the purchase price was paid by Weeks, the co-tenant, was cognizable only in equity, and left to the jury the single question whether the money was furnished by Sherman to Weeks to procure the certificate of sale, or paid to him to satisfy and extinguish the tax title, and, if the latter, they must find for the plaintiff; and the jury found that it was not so paid. Nothing further was done until just.before the award in these proceedings (1925), when McEuen applied to the chief-justice for a writ of certiorari, and, being refused, applied to the supreme court, and upon denial on the ground of laches (In re McEuen, 4 N. J. Adv. R. 548) appealed to the court of errors and appeals, where it is now pending.

If by .the tax sale .McEuen’s property was taken without due process of law, i.e., without notice, and, consequently, in violation of his constitutional rights to be heard, as he claims, his remedy is by certiorari. This objection .to the tax sale would have been available in ejectment before the act of 1869, which made it reviewable by certiorari only. Baxter v. Jersey City, 36 N. J. Law 188. The act did not, as suggested, deprive him of his remedy by ejectment; it simply regulated the legal steps to the remedy. Bozarth v. Egg Harbor City, 85 N. J. Law 412. If McEuen is entitled to relief in these proceedings it cannot be granted until the certificate of sale is invalidated by certiorari. Until then it must be taken at its face value. The act applies as well to this court as to the courts of law. Jurisdiction to set it aside is exclusively in the supreme court. Nugent v. Hayes, 94 N. J. Eq. 305; Sutton v. Maurice River Township, 93 N. J. Eq. 484. McEuen’s right to a review by certiorari, for invasion of his constitutional rights, was co-extensive with his right of action in ejectment, limited by statute to twenty years. Comp. Stat. p. 8169. It was not abridged by later legislation reducing the time to three years and now to eighteen months. Comp. Stat. p. 254; Groel v. Newark, 78 N. J. Law 142. The refusal of the supreme court to grant the writ on the ground of laches is not, as counsel states in his brief, “an invitation” to- equity to intervene, and it does not argue that this court has complete jurisdiction to hear the controversy, because in this particular case the law has proved “deficient.” The law is simply unwilling. Equity has jurisdiction in cases where the law cannot, not where it can, but will not, grant relief.

McEuen is in no better position on the purely equitable grounds of fraud of his co-tenant in procuring the tax title to another, or of resulting trust because the purchase by his co-tenant inured to his benefit. Weller v. Rolason, 17 N. J. Eq. 13. The only evidence offered to sustain the charge of fraud or the claim of a resulting trust is the transcript of the testimony taken at the trial of the ejectment.suit, and McEuen’s offer to testify to what occurred — that is, to repeat what appears by the transcript to have taken place, and the cheek of Sherman to Weeks of August 26th, 1857, for $178, the amount of the.assessment. It was there proved that Sherman supplied Weeks with the purchase-money for the sale certificate. Though the transcript was admitted in evidence without objection, it is without legal effect. It has no place in our law of evidence as an official document and is without probative value. Its recital of legal testimony in that suit is but hearsay testimony here. And even if the transcript were treated as verity, as establishing the fraud or resulting trust, the charge could not be entertained. McEuen’s claim to relief in this respect rests upon a latent equity, enforceable, if timely pursued, but not if it appeared that Burne was a purchaser for value without notice. Bridgewater v. Ocean City Asso., 85 N. J. Eq. 379; affirmed, 88 N. J. Eq. 351. It is too late to press it now. He slept on his rights too long before asserting the fraud or the equity against Burne or those who succeeded to the title, after he was fully apprised of his legal and equitable rights by Mr. Justice Depue fifty-six years ago. The proofs in the case are buried. .The witnesses have all passed on — all .but McEuen. Their tongues are stilled and his voice is too feeble to be heard.

McEuen is the owner of the reversion and the right to repossession one hundred and thirty-two years hence. Its present value has been calculated at $46.85, and that sum, subject to correction, is awarded to him.

Oook et al. advance the proposition that the tenants are not entitled to compensation because of the provisions of section 31 of the Landlord and Tenant act. Comp. Stat. p. 8078. “That whenever any building or buildings erected on leased premises shall be injured by fire without the fault oi the lessee, the landlord shall repair the same as speedily as possible, or, in default thereof, the rent shall cease until- such time as such building or buildings shall be put in complete repair; and in case of the total destruction of such building or buildings by fire or otherwise, the rent shall be paid up to the time of such destruction, and then and from thenceforth the lease shall cease and come to an end; provided, always, that this section shall not extend to or apply to cases where the parties have otherwise stipulated in their agreement of lease.” By this enactment the harsh common law rule that the tenant continued bound by his lease though deprived of its benefits, was abrogated and a more equitable one substituted; that in the event of the destruction of the building by fire, or by any other means as effectual, whereby the tenant lost the enjoyment, the term should come to an end and both landlord and tenant relieved of their obligation one to the other (Carley v. Liberty Hat Manufacturing Co., 81 N. J. Law 502), and having regard for the mischief aimed at and giving to “otherwise” the liberal construction to which it is entitled in this remedial legislation, it cannot be seriously questioned that destruction by condemnation is included within the spirit and letter of the statute, and terminates the relation of landlord and tenant. That is, however, as far as it goes, and it- does not concern us in these proceedings. The act operates inter sese and does not disturb the rights of tenants to recover compensation from others for the loss of their estates taken from them by condemnation. If the city had taken them by unlawful methods the tenants would have had a direct cause of action against it, and, having taken them by lawful means and shifted the obligation to the award paid into court, and though the issue now relates to the portions due the tenants, the recovery, in effect, will be from the city of Newark. The award was for the value of the property as a whole; what is left after satisfying the outstanding terms represents the value of the fee.

The buildings were under lease to the Surety Realty Company for twenty years, expiring April 1st, 1930. They were sublet in parcels: Liggett & Company, druggists, had the corner store and basement; McDonald & Company, shoes, the store and basement adjoining on Market street, and the second floor of both buildings; John Harrington, billiard parlor, the third and fourth floors of both buildings; Ace Radio Shop, two stores on Washington street (one known as the restaurant), and the roof was rented for advertising signs. '

The lease held by the surety company was made by Martin Burne to Sebastian A. Kresge for the term of twenty years, from April 1st, 1910, at a yearly rental of $18,000 for the first ten years and $19,000 for the remaining ten, the tenant to make repairs, pay water rates and any increase in insurance rates caused by tenants’ improvements. The actual yearly yield from the sub-lessees for several years prior and up to October 1st, 1925, was—

Louis K. Liggett ....... $15,000 (leased to April 30, 1930)
R. E. McDonald, Inc..... 19,000 (leased to April 30, 1930)
Radio Shop ............ 2,100 (leased to Sept. 15, 1926)
Billiard parlor, 3d floor. . 1,500 (monthly tenancy)
Billiard parlor, 4th floor. . 1,100 (monthly tenancy)
Roof .................. 1,200 (monthly tenancy)
Restaurant ............. 900 (monthly tenancy)
Total rental income ................................. $40,800.00
DISBURSEMENTS.
Rent to Burne estate...................... $19,000.00
Average carrying charges based upon charges for four years next preceding 1926........ 2,063.82
Total carrying charges ............................... 21,063.82
Net profit per year ........................... $19,736.18

The correctness of these figures of income, and that they represented the fair annual market value, is not disputed, nor is there any protest by the owners against measuring the value of the leaseholds based upon them, but, large as they are, they deserve to be increased in respect of the third and fourth floors and the restaurant store, which were under monthly tenancies, and which, it appears, could have been let upon better terms on lease for the balance of the term had it not been for the impending condemnation proceedings. It is well recognized that assurance of a long term commands a better price. It is the testimony that the third and fourth floors have a rental value, on long term leases, of from $2,800 to $5,500 per year, and that the tenant Harrington had offered $5,000 but was refused. Making due allowance for the partisanship in. expert testimony, the things reserved in the offer, and for the difference' between: expectation and realization, the amount is fixed at $4,000; and for the same reason the restaurant, which was rated at from $3,750 to $5,250, is fixed at $4,000. The surety company has a reversionary right to the Eadio shop (10x18) on Washington street. The rent ($2,100) for this tiny place was all the traffic would stand. The owners’ single objection is that, as against annual rentals, there should be charged, approximately, $3,000, because in the income tax for some years an item of $2,080 was listed for salary to Mr. Kamm, the president of the company, and another for $960 for improvements. The company belongs to Mr. Kamm and he is entitled to all its income, and whether he takes it by way of salary or income is immaterial, and as to the improvement there is no likelihood of a recurrence. The total annual net profits, and which are found to represent the annual value of the lease, amount to $24,236.18. The market value of the lease for the unexpired term, calculated according to the rule laid down in Holcombe v. Trenton White City Co., 80 N. J. Eq. 122; affirmed, 82 N. J. Eq. 364, following West Jersey Railroad Co. v. Thomas, 23 N. J. Eq. 431, that “the true method of calculating the value of an unexpired lease is not by ascertaining the yearly rental value and then multiplying the figures by the number of years the lease has to run, but by calculating its value by the annuity tables — that is, by multiplying the annual value by the value of one dollar per year for the number of years in the unexpired term,” and at the present value of a dollar for four and a half years at six per cent., viz., $3.84, equals the sum due and allowed to the Surety Eealty Company, subject to correction, $93,065.93. Upon.first blush this seems disproportionate to the amount of the award, and it is suggested by the owner that a more equitable solution would be -to pay the tenant the interest on the award, as it accrues, during the four and a half years of its term, and the tenant seems not to look upon it with disfavor if the owner will add to that sum the value of the half of the lot remaining, which, it was testified, is $365,000, and which, it is asserted, was recently sold for $300,000, but the owner fails to justify his proposed course-upon principles or authority. Though the allowance seems high,' the rental value was, no doubt, an important factor in the award, and is reflected in the enormous sum awarded. The interest on the award, plus the interest on the amount of the value of the remaining land, exceed the net rental value of the property by a substantial sum.

As to the claim of Liggett & Company, McDonald & Company and the Radio Shop, it would appear that they are paying peak prices. There is testimony that leases of other stores could be had, and of the prices asked, all of which were higher than the rentals these tenants were paying, but there are such marked differences in the structures, locations and circumstances generally from the demised premises that comparative figuration is of little or no value to the court and of doubtful aid to the experts in forming their opinions. Their opinions were chiefly based on the “asking” price, none on the “bidding” price, none on vacant stores or those about to be vacated, but on places with a going business, some involving bonuses for their surrender, some not for the stores only, but for- the business as well. The leased premises are in the business zone of the “Four Corners,” two blocks away from the centre, desirable and in ready • demand, no doubt, at prevailing rates, and, perhaps, at a premium in some instances because of the limited' supply, but it is questionable ' whether any of the lease's could be sold for more than the rent reserved. The trade would not warrant it, nor hardly the rent the tenants were paying. Liggett & Company, with their almost perfect business organization and heavy capital ' investment, were able to make an' annual profit of only ■ $5,000, and McDonald -& Company had a deficiency in the last two years, which, perhaps, may be accounted'for, as they tried to, by sacrificial sales of stock in contemplation of closing out, and “milking” by their Boston supply house. The good-will of a stand often plays an important part in rental value, but it cannot be said for either concern that theirs made any contribution in this respect. Liggett & Company and McDonald’s expert, Mr. Maier, gave as his opinion that the rental value of Liggett’s store was $26,400 per annum— $800 per front foot, with an additional fifty per cent, for corner influence, and that McDonald’s was $38,956.73, or more than double the rent reserved, and offered plausible explanations and reasons, but it is difficult to share in his confidence and to accept his judgment, and it is thought that the more conservative and dependable figures of Mr. Berry, called by the surety company, and Mr. Houston, called by the owners, more nearly approximate the true value. They estimate the fair rental value of the Liggett store at $15,-400, or $700 a front foot, and the McDonald store and upper floor by Berry at $19,300, or $500 per front foot, and by Houston at $17,000; the latter is, apparently, of the opinion that the McDonald rent was excessive. The slight excess of $400 in one case and $300 in the other in rental values over the rent reserved does not warrant an allowance, because it would be consumed in broker’s commissions in the event of a sale.

Liggett & Company argue, in support of Mr. Maier’s opinion of the rental value of their lease, that the Washington street side of their store was a continuous show window seventy-four feet in length; that the opinions of real estate agents were that Washington street frontage was worth $300 per foot, adding an additional fifty per cent, for the fifteen feet nearest Market street, and that this, multiplied by the number of feet, street length, made the total $24,500. This is ingenious but not sustainable. The testimony is that the $300 per foot is for store front, not show-window front.

The Liggett and McDonald leases were made in 1923, and the consensus of opinion is that there was no marked change in rental values between that time and the condemnation, .and that there was no likelihood of one until the terms expired in 1930. It has not been proved that the fair market value of the leases is more than the rent reserved, and, consequently, no allowance can be made to the lessees on this :score.

The remaining question is, Are the tenants entitled to compensation for the loss of their business, profits, good-will, fixtures and cost of removal ? The right to compensation for lands taken for public highways is purely statutory. Before the constitution of 1844 compensation was not required, and by that instrument it is provided that “land may be taken for public highways as heretofore until the legislature has directed compensation to be made.” The compensation is such only as is fixed by statute, whether it be adequate or inadequate, just or unjust. Simmons v. Passaic, 42 N. J. Law 619; Hudson Land Improvement Co. v. Seymour, 85 N. J. Law 47. The condemnation was had pursuant to article 30, section 33 of the act concerning municipalities (Supp. Comp. Stat. p. 2201; amended, P. L. 1924. p 501; P. L. 1925 p. 288), which provides for “an award for said lands and real estate or right or interest therein to be taken to the owner or owners thereof.” Loss of business, profits, good-will, fixtures and cost of removal and the like suffered by the tenants, obviously, are not lands or real estate, or rights or interest therein in the legal sense and not within the criterion fixed by the statute. In Freeholders of Hudson v. Emmerich, 57 N. J. Eq. 535, Vice-Chancellor Emery had before him the very question, which arose under a statute (P. L. 1888 p. 897), in effect, indistinguishable from the one under consideration, in which he, in disposing of a claim for injury to a tenant’s business, held — “As to the first ground, the general rule, as settled by the -best authorities, is that injury to a business carried on upon the premises, either by the landlord or tenant, is not a proper element of damage. Lew. Em. Pom. 187, and cases cited. And while no reported cases in our own courts have been referred to, this rule, as I understand, has always been applied in this state. Whatever may be the rule in other condemnations, the damages to be given on the condemnation for public roads are, under our constitution, such as are fixed by the legislature. Const, art. 1 § 15; Crane v. Elizabeth (Court of Errors and Appeals, 1882), 9 Stew. Eq. 889. In this case the award is by the act clearly limited to the value of the land and damages to the remaining land of the owner after considering the benefits (P. L. 1888 p. 100 § 6), and the damages are limited to the damages done to the fee-simple, where a single assessment is made for all the owners and persons interested in any lot. This statute, as it seems to me, clearly excludes any allowance for injury to the business carried on on the premises taken, and • cannot by construction be extended to such damages.” See, also, Philadelphia and Camden Ferry Co. v. Inter-City L. R. R. Co., 76 N. J. Law 50. That is the law. It works hardships. The remedy lies with the legislature; the courts cannot relieve. The rule, in principle, applies to all particulars of damage set up by the tenants, including their claim for the value of the use of their fixtures during the remainder of their term, which was especially emphasized in the briefs, and their prayer to participate in the award, in which it must be presumed their losses did not figure, will be denied.


source: Caselaw Access Project

author: Backes, V. C.

license: Public Domain

text:
    Mable Lawrence Potter, complainant, v. William Bell Watkins et al., defendants.
    [Decided July 2d, 1926.]
    ' - 1. A widow is entitled to a discovery of the assets of her deceased husband’s estate before being required to elect between her dower and a gift in the will in lieu of her dower.
    ' 2. A gift to trustees to use the income of the trust estate to pay encumbrances, which may require more time than lives in being and twenty-one years thereafter, does not contravene the rule against ■ perpetuity, where the trust estate is to come to an end within twenty-one years.
    3. Under the Chancery act of 1915, section 7 (0. 8. Omn.' Supp. 27i), a suitor must have a fixed equitable right of future enjoyment in the subject-matter of the instrument to be construed; the subject-matter in litigation must be ripe for decision, and the decree must be binding upon all parties interested, and all parties in interest must be before the court.

      On bill, &c.

      Mr. Otto A. Stiefel, for the complainant.

      Messrs. Lichtenstein, Schwartz & Friedenberg and. Mr. Stuart A. Young, for the defendants.
   Backes, V. C.

The complainant is the widow of Robert H. McCarter Potter, deceased, by whose will she was given a part of the income of his estate for life in lieu of her dower in his lands, and her bill is filed to obtain a discovery of the estate in order that she may judiciously elect whether to take the gift or her dower.

The deceased was childless, and upon the suggestion that she would be the sole distributee under the statute of his personal estate in the event that some of the provisions of the will are invalid, resulting in total or partial intestacy, the complainant also asks that the will be construed and her rights declared.

By the third paragraph of the will the residue of the estate is given to the executors in trust to

“[a] convert tlie personal property into cash, [b and d] to sell the real estate, [c] invest the proceeds in certain securities, [e] pay the encumbrances on improved real estate and farm property ‘as in their [trustees’] judgment they may deem advisable from time to time.’ [f] If the proceeds of sales of personal property and unimproved real estate and'farm property are not sufficient to pay the encumbrances on the improved property ‘and my executors shall deem it advisable, then, and in that event, to use so much of the net income derived from my estate for the purpose of paying off the whole or any part of the encumbrances that may be due upon my improved real estate.’
“ ‘[g] To pay over the net income from my estate, except if used as above provided unto the following persons in the following proportions : Unto my wife, Mable Lawrence Potter, thirty-three and one-third per cent. [33ys%] thereof from and during the term of her natural life, and this in lieu of any and all dower rights which she may have in and to my said estate. In the event my said wife shall refuse to take under the provisions hereof, then, and in that event, she shall take nothing hereunder.’ Of the balance of the income twenty-five per cent, is given to William Bell Watkins for life, and upon his death to his wife, Gladys Watkins, for life; fifteen per cent, to Henrietta Heloise Gittens for life; ten per cent, to Joseph Marsh Stanford for life, and sixteen and two-thirds per cent, is given to Mary Williamson and Frances Williamson in equal shares for life.
“Fowrth. Upon the death of any of my said legatees in the above paragraph third mentioned [other than my friend, William Bell Watkins], and upon the death of Gladys Watkins, wife of said William Bell Watkins, the net income from my estate to which said deceased legatee would be entitled shall be invested and reinvested in the same Securities hereinbefore mentioned, for the benefit of William Bell Watkins, Junior, and Virginia Watkins, children of William iBell Watkins and Gladys Watkins, in equal proportions, share and share alike, until .they and each of them arrive at the age of twenty-one [21] years.
“Fifth. Upon the death of my said legatees, Mable Lawrence Potter, William Bell Whtkins, Gladys Watkins, Henrietta (Heloise Git-tens, Joseph Marsh Stanford, Mary Williamson and Frances Williamson, then, and in that event, I give, devise and bequeath, in equal proportions, all of my estate of every nature and description whatsoever, unto said William Bell Watkins, Jr., and Virginia Watkins, or the survivor of them, when they and each of them arrive at the age of twenty-one [21] years.”

It is conceded that the bequest to the widow is precarious in that the trustees have the discretionary right to appropriate the income to the payment of encumbrances or divide it among the life interests, and the right of the complainant to a discovery for the purpose of electing is not denied. The complainant is not entitled to any further construction of the will in respect of her right to a discovery, for in exercising her election she is confined to a choice between her estate in dower in the lands and her own gift in lieu of dower, and, consequently, the other gifts are not involved. And if any of the bequests are invalid, resulting in intestacy, she would take as distributee under the statute irrespective of her election. She would take by operation of law wholly ■ apart from what she would take by election. The declaration in the will that she shall take nothing under the will if she refuses the gift means exactly what it says, but that does not deprive her of her dower in her own right nor from taking as distributee under the statute of that of which her husband died intestate. The right to take under the statute of distribution in case of partial intestacy is not defeated by the words of disinheritance in the will. Nagle v. Conard, 79 N. J. Eq. 124.

The complainant’s right to have the will construed rests on section 7 of the Chancery act of 1915, that “any person claiming a right cognizable in a court of equity, under a deed, will or other written instrument, may apply for the determination of any question of construction thereof in so far as the same aifects such rights, and for a declaration of the rights of the persons interested.” C. S. Cum. Supp. 271. The complainant does not claim any right. She simply alleges that she “is advised that it may well be that the third item in the said will and the provisions thereof are invalid and contrary to the laws of the State of New Jersey,” and that she “is advised that the trusts attempted to be created by the provisions of said third item of said will may extend beyond lives in being,” and that she “is advised that the provisions of the fifth item in said will are or may be invalid under the laws of the State of New Jersey, and that by reason of invalidity in many provisions of said last will and testament complainant may have certain rights in the personal property of her late husband, of which rights no mention is made in said will.” Such statements do not tender an issue upon which a decree can be based declaring the rights of the parties. Assuming that the issues will be properly framed, the opinion is that the trust does not contravene the rule against perpetuity. The time that may be consumed in the payment of encumbrances out of the income cannot extend beyond lives in being and one and twenty years, because the residue of the trust estate is to be paid to the Watkins children when they attain their majority. The use of the income to pay encumbrances comes to an end with the termination of the trust at that time. As to the gift of the residue of the trust estate to the Watkins children the inclination is to hold, on authority of Nielson v. Bishop, 45 N. J. Eq. 473, that the bequest vested on the death of the testator and that the contingency attaches to the payment. The estate vested at that time in the trustees to the use of the remaindermen, and is regarded in equity as vested in the cestuis que trust. The further gift to the remaindermen amounted to a direction to pay it over to them when they arrived at twenty-one years' of age. The principle is discussed in Fidelity Union Trust Co. v. Rowland, 99 N. J. Eq. 72. But a dispositive opinion is not intended to be expressed. The point is not ripe for decision. The Watkins children are both living, and the complainant only has a possible, interest as distributee under the statute if their bequest be contingent and both should die before twenty-one, and if they should die before reaching maturity their legal representatives would be vitally interested in the question of whether the gift was vested or contingent, and they cannot at this time be bound by a declaratory decree. The event may never come to pass, and, at all events, the decision must wait until it does, if it ever does. Nagle v. Conard, supra.

The statute of 1915 contemplates that, in order to be entitled to a construction, a suitor must have a fixed equitable right of future enjoyment in the subject-matter of the instrument to be construed; that the judgment should be binding upon all the parties interested in the subject-matter, and that all parties in interest should be before the court. The act was not intended to apply to equitable rights presently enforceable by existing remedies, nor was it intended that the court should construe documents simply for the purpose of advice and counsel, nor to declare possible rights depending upon future happening, but to construe and declare existing rights and bind the parties by a decree enforceable in the future as the circumstances may warrant. Chancellor Walker considered the purposes of the act. In re Ungaro, 88 N. J. Eq. 25, and in Miers v. Persons, 92 N. J. Eq. 17; see, also, Snyder v. Taylor, 88 N. J. Eq. 513.

The complainant’s interest is too remote to qualify her as a suitor under the act.


text:
    Charles R. Hedden Company, a corporation, complainant, v. Walter J. Dozier, defendant.
    [Decided June 30th, 1926.]
    Treasurer of a company ordered to return money fraudulently abstracted.
    On bill, &e.

      Messrs. Lum, Tamblyn & Colyer (Mr. Ralph E. Lum), for the complainant.

      Messrs. McCarier & English (Mr. Conover English), for the defendant.
   Backes, V. C.

The Charles R. Hedden Company sues to recover from Walter J. Dozier, its former treasurer, $65,219, which it charges he procured through fraud. The defendant answers ¡that the sum was paid to him as the purchase price of his two hundred and seventy-five shares of the capital stock of the company.

There appears in the minutes of the company a resolution purporting to have been passed by the board of directors at a meeting on August 15th, 1922, that "should the treasurer at any future time and at his pleasure withdraw from the active management of the company’s affairs, his stock-holdings in the company shall be purchased by the Charles R. Hedden Company at the book value per share at the closing of business for the fiscal year ending December 31st, preceding his intention to withdraw, and date of resignation.” It is charged that this resolution was never before the board for its consideration and is a false record, surreptitiously incorporated in the minutes by Dozier; and it is further charged that a check of the company, dated January 14th, 1924, to the order of Dozier for $65,219, which he claims was given for his stock, was fraudulently obtained.

The business of the Hedden company is that of constructing engineers and builders of large structures, and its operations are extensive. It is a close corporation, with Charles R. Hedden, now seventy-three years of age, the master mind. He has been engaged in that line in Newark for upwards of fifty years, and erected many of the imposing buildings of that city and vicinity. Dozier, a much younger man, was for many years his bookkeeper and confidential secretary, until the company was formed in 1918 by Hedden and Dozier, and two others, who later sold their holdings to Hedden and Dozier. In Eebruary, 1922, James H. Toothe and Harold E. Eisher became stockholders. Toothe held twenty shares by gift from Hedden, his grandfather; Eisher, one hundred and fifty shares; Dozier, two hundred and seventy-five shares, and Hedden the balance, slightly more than a majority of the outstanding nine hundred shares, of the par value of $100. Hedden has always been the president and the practical man in charge of operations and Dozier was treasurer and the indoor man in charge of the finances and clerical force and affairs of the company, until he resigned January 15th, 1924. He was also secretary until he was succeeded by Toothe in Eebruarj>, 1922. Hedden, Dozier and Eisher constituted the board of directors from the time Eisher became a stockholder until Dozier quit the company in 1924. These three, according to the minutes, are supposed to have voted for the disputed resolution of August 15th, 1922.

Whatever question there may be as to the integrity of the August 15th, 1922, resolution, there can be no doubt that the check of January 14th, 1924, was not the result of negotiation and settlement’based on that resolution. The resolution was never adverted to either by Hedden or Dozier, as the latter admits, from the date it bears until, as he says, at the conference of January 5th, 1924, he mentioned it to Hedden, and that “he didn’t say very ranch about it.” In view of what he says happened at that meeting and the ensuing events, it is not believable that Dozier referred to it at that time. The relations between Hedden and Dozier became strained in the fall of 1933, and Dozier was constantly pressing Hedden to buy his stock, Hedden always refusing. Finally, at a pre-arranged conference on January 5th, 1934, Dozier sajrs he offered to sell his or buy Hedden’s shares at $300 per share; that Hedden refused the offer, but agreed that the company would take his (Dozier) shares at their book value as of December 31st, 1933, and directed him to prepare a statement of the financial standing of the company, which, he sajrs, he forthwith proceeded to do; that on January 11th he showed Hedden his work sheets and told him that the book value of the stock would be, approximately, between $335 and $340 per share, and that he again expressed himself as willing to sell for $300 per share, as he had offered to do on January 5th, but that Hedden told him to go ahead and settle on the basis of the book value, which later, Dozier says, he determined to be $337.16 per share, by including in the assets items amounting to $134,379, anticipated profits on the ineompleted contracts, which, on completion, according to a later accounting, were $57,061.03, and an item for good-will of the business of $53,354.16, which in the treasurer’s annual statement was set down at one dollar. Hpon completing the statement on January 14th, Dozier, according to his own admission, without again consulting Hedden or advising him of the result, drew the company’s check for $65,319, and the next morning put it in an envelope with seventy-five other checks to be signed by Hedden, and placed the envelope on his desk. Hedden arrived later, signed them and handed them back to Dozier, who quickly drove to the Montclair bank, had his check certified and deposited it to his credit. He was late getting back to the annual meeting of the company held that afternoon. At the meeting he submitted the financial statement of the company showing assets, $490.166.51; liabilities, $329,066.99 (not including the outstanding capital stock, $90,000), and net worth, $161,099.52, which was approved, subject to audit. Thereupon, Dozier submitted this resolution :

“Resolved, That Charles It. Hedden Company purchase shares of stock of Charles B.. Hedden Company now standing in the name of Walter J. Dozier on the books of the said company at the book value thereof as shown on the treasurer’s report submitted to this meeting and accepted and approved.”

The resolution was rejected by a two to two vote, Dozier and Eisher voting for and Hedden and Toothe against. Dozier thereupon resigned as vice-president and treasurer and the next day turned his books over to Toothe, his successor, and also tendered him his certificate of stock, which he refused to accept. On the following day the bookkeeper discovered the entry of the check of $65,219 on the stub of the cheek book and reported it to Hedden. The reaction was confusion and consternation. The resolution of August 15th, 1922, was also found, and immediately a bill was prepared, filed on January 31st, in the name of Toothe on behalf of the company. Toothe v. Dozier, 96 N. J. Eq. 46; reversed, Ibid. 601. Upon the dismissal of that suit, as improperly brought by a stockholder, this bill was filed by the company. ■ There is not much mystery as to how Dozier got the check. He was in charge of the financial affairs of the company, was implicitly trusted, and he was all prepared. A few days before he deposited a check for $82,000 in the Montclair bank, which, on account of its size, ordinarily would have gone to the Eidelity-Union in Newark, and he gave directions that it be not drawn against. Of the seventy-six checks made out by his secretary, Miss Jackson, on the morning of January 14th, 1924, all but the one to Dozier had the amount filled in, transversely, in heavy red type, seemingly by a check-protecting device. Dozier filled in his own in the same red type the next morning, slid it into the envelope with the rest, laid the envelope on Hedden’s desk and took a gambler’s chance that it would be signed as routine, and he was not disappointed. To Hedden they were simply a batch of business checks — and they were, all but one — and, unsuspectingly, he signed them on the dotted line without inspection, as he had done thousands of times before, exactly as Dozier expected he would. It was not a clever trick, just a vulgar cheat, a constructive forgery, perfidious and despicable. Dozier’s fanciful story that he had offered his stock at $200 per share, and that Hedden insisted upon paying him the book value approximated to him at between $225 and $240 per share, and that he assumed that Hedden signed the check without comment in consequence of that arrangement, and without curiosity or inquiry as to how the obviously excessive sum total was reached, is only further testimony of his cunning. There was nothing in the activity over the' books, or even if Dozier showed Hedden the work sheets or told him the approximate value of the shares to attract Hedden’s attention or to arouse his suspicion, for it was the time for the annual statement which Dozier had been getting out for years. If the deal had been as amicably arranged as Dozier professes it was, why did he plant the check among others of ordinary affairs, and to which it bore no relation ? Why was there no allusion to this check, given in settlement of this extraordinary transaction and that brought to a close a lifetime affiliation, either before or after it was signed, and why did Dozier rush to the bank to have it certified? And why the resolution that the company buy the stock at the book value as shown by the treasurer’s report, when he had already pocketed the price at his own figures? And again, why, when his resolution was turned down, did he not retort that the stock had already been bought and paid for ? The fraud is so palpable and glaring, on his own word, that it hardly need be stated that Hedden denies making any arrangement with Dozier on January 5th or at any other time to buy his stock, and it is not believable that he, having consistently refused to be a purchaser, suddenly shifted the sale to the company, of which he was the majority stockholder, and at a price of from $225 to $240 per share when the shares had been offered at $200.

The indictment against the resolution of August 15th, 1922, is of secondary interest.

The minute book is of the loose-leaf type, and the minutes of meetings from the election of Toothe as secretary, February 14th, 1922, to the last entry, January 16th, 1925, twelve in all, appear to have been regularly entered, and to each is appended a formal certificate signed by Hedden as president and Toothe as secretary that they were present at the meeting, and that they “have read the foregoing minutes of said meeting, and the same are in all respects a full, true and accurate record of the acts and things done thereat.” Moreover, each page bears the impress of the corporation seal and each impression bears Toothe’s initials. Dozier and Fisher affirmed that it was duly passed, after discussion, while Hedden and Toothe deny and say that there were no meetings held after Toothe was elected secretary until the annual meeting the following January (1923). Fisher denied having any recollection of it at first when Hedden discovered it, but on the witness-stand professed to have dissembled because he was in sympathy with Dozier. The minutes, as a whole, appear regular on the face of the record, and Hedden and Toothe, because of their certifications, would, ordinarily, be estopped from challenging them, and particularly so in view of the allegations in the bill of Toothe v. Dozier, supra, that the board of directors had adopted the resolution, and a similar allegation in the complaint in a civil action in the supreme court brought by the company against Dozier, Fisher and others for conspiracy to ruin the company’s business, and a sworn statement to the same effect in an affidavit made by Toothe as a basis for criminal prosecution against Dozier. Yet, in the face of this impressive evidence, it is impossible to escape the feeling that the fraud had its inception in the disputed resolution. It is admitted by Dozier that up until the very day of the resolution Hedden refused to agree to an option to buy Dozier’s stock or to sell his to Dozier upon the death of either, and Hedden says that the day following the date of the resolution, and he has an entry of it in his diary. Dozier again pressed him to sign a form of agreement which he had previously submitted. It is singular that Hedden should refuse to buy at Dozier’s death, and still, according to the resolution, agree to take at Dozier’s pleasure. The minutes were prepared under Dozier’s direction after Toothe was elected secretary of the company until the fall of 1923. His secretary would place them on Hedden’s desk for signature. Hedden in his blind ' confidence signed them without much attention, and Toothe, inexperienced, followed suit to his grandfather’s signature. It is not strange that the disputed resolution, which is one of many of the alleged meetings, covering three typewritten pages, should have escaped notice. It is in evidence that many of the minutes of meetings were prepared in group and handed to Hedden in batches, and it is evident that some of them were manufactured, as, for instance, the noting of Toothe’s presence at the meeting of February 14th, 1922, when he was away on his honeymoon; Dozier’s record of the meeting of September 19th, 1922, when he (Dozier) was away, and the recital in the minutes of the meeting of October “that the reading of the minutes of the regular meeting of the board of directors held on the 12th day of August, 1922, be ratified, approved and confirmed,” which appears as the first entry, when, according to Dozier, the reading was had in connection with another subject before the meeting (Kelly Tire Company). These discrepancies adverted to go to prove Dozier’s complete domination over the internal management. The things that are inexplicable and utterly discredit the minute of the disputed resolution are the facts that Dozier at no time for nearly a year and a half after the entry alluded to it, and that after its date, and especially in the fall of 1923, Dozier constantly importuned Hedden to buy his stock, and at the January 5th conference, and again at the January 11th interview, when, according to his story, the book value approximated between $225 and $240 per share, he offered to sell for $200. Why, if he had the promise of the company by resolution,, honestly enacted, to take his shares at any time he felt like quitting, and if he were not conscious that it would stand daylight, did he pursue and urge Hedden to take them off his hands? It is not difficult to believe that one wicked enough to stoop to the mean deception of which Dozier stands convicted upon his own attenuated recital of the manner in which he raided the treasury of the company, would lay his plans far enough in advance to have, as Fisher, his friend, naively wrote to Toothers father, “a card up his sleeve” for an emergency.

Whatever may be the secret behind the resolution, or the solution of the manner in which it crept into the minutes, there is no question in my mind that Hedden was not aware of its existence until after his disillusionment of faith in Dozier in January of 1934. The allegation in the suits and the averment in the affidavit to which reference has been made ought not to be held against him. They were matters of pleading dictated by counsel, who assumes responsibility of failure to accurately state the facts by prefixing “it appears by the minutes of the company,” &c.

The fraud has been so clearly established that little need be said of the inefficacy of the resolution as a binding obligation, assuming that it was adopted. There was no consideration. It was not the unanimous act of the stockholders. Toothe did not assent to it, and its consummation would have impaired the capital of the company. The statute forbids the payment of any part of its capital stock to a stockholder. Comp. Stat. p. 1617; Siegman v. Electric Vehicle Co., 72 N. J. Eq. 403. Of course, Hedden’s alleged promise of January 5th could not bind Toothe or the company.

Dozier will be decreed to pay back the' money he unlawfully abstracted, with interest and costs.


text:
    Charlotta E. Ostrom, Frank B. Rieber et al., complainants, v. Warren Ferris et ux. et al., defendants.
    [Decided July 26th, 1926.]
    1. A decree quieting the title to lands as against unknown heirs will be set aside, on an original bill for that purpose, if the heirs were known and the decree was obtained on false testimony that they were unknown.
    2. A decree quieting title to lands as against unknown heirs will be set aside as against a subsequent purchaser for value, on an original bill for that purpose, where the purchaser procured the decree in the name of his grantor, before he paid the purchase price, solely on the perjured testimony of the grantor, that the heirs were unknown, the untruth of which he could have discovered by reasonable inquiry.
    3. A decree quieting the title to land protects an innocent purchaser for value, though later it be set aside or reversed on appeal on proceedings taken after the purchase.
    4. A bill to set aside a decree for fraud in its procurement or for fraud extrinsic and collateral to matter on which the decree rests and under'which a third party has acquired an interest is an original bill and not a bill of review, and permission to file it is unnecessary.
    On bill, &e.

      Mr. William P. Martin, for the complainants.

      Mr. James PL. Butler, for the defendant Warren Ferris.

      Mr. Horace Roberson and Mr. Charles L. Carricie, for the defendant Charlotta M. Keffer.

      Messrs. Hudspeth <.§ Demarest, for the defendant Consumers Coal and lee Company.
   Backes, V. C.

Anton Hirschman died May 19th, 1920, intestate, seized of two adjacent parcels of land in Bayonne. He had lived with his wife in a dwelling on one of the tracts nearly fifty years. His wife predeceased him a few months. He died childless. His heirs-at-law and next of kin were the children and grandchild of three deceased sisters. The defendant Warren Ferris, of North Bergen, Hudson county, is the only child of his sister Julia. The complainants Charlotta E. Ostrom, of Johnson City, near Binghampton, New York, is a daughter; Erank B. Rieber, of Benton Harbor, Michigan, is a son, and George A. Rieber, of Binghampton, New York, is a grandson of his sister Anna Maria, and the other complainants Erank C. Steffens, of Charleston, South Carolina, and Marie W. De Bussey, of Baltimore, Maryland, are children of his sister Fannie. When Hirschman died, Eerris, the only nearby relative, pretended and represented himself to be the only next of kin and heir-at-law of his uncle, and took out letters of administration on his estate. Charlotta M. Keffer, daughter of Daisey Hadlick, also pretended and claimed that her mother, then deceased, who had been raised in the Hirschman household, was the adopted child of the deceased. Mrs. Keffer also was reared as a member of the family. Within the week of the death of Hirschman, Eerris and Mrs. Keffer composed their pretentions ;and agreed, in writing, to divide the estate, share and share alike,^ and accordingly divided the personal property, each taking $1,384.09. They took possession of the real estate and as only heirs-at-law of Anton Hirschman conveyed it to the Consumers Coal and Ice Company, by deed dated October 5th, 1933, for $31,000, and they divided that, too, and squandered most of it. The Consumers Coal and Ice Company was not satisfied with the representations of exclusive kinship by Eerris and Mrs. Keffer, so, after it had entered into an agreement with them to purchase the previous March, it, through its attorneys, retained to examine and pass upon the validity of the title, filed a bill in the name of Eerris and Mrs. Keffer to quiet the title as against the claims of, inter alia, “Anton Hirschman, his heirs, devisees and personal representatives, and their or any of their heirs, devisees, executors, administrators, grantees, assigns or successors in right, title or interest,” and after process and service by publication, and following the usual procedure, a final decree was entered September 21st, 1922, declaring and decreeing, inter alia, “the defendant Anton Hirschman, his heirs, devisees and personal representatives, and their or any of their heirs, devisees, executors, administrators, grantees, assigns or successors in right, title or interest * * * and each of them, have no estate, interest in or encumbrance upon said lands and premises, and so far as relates to any claim therein by or on behalf of any of the hereinbeforementioned defendants, the title of the complainants of, in and to the said lands and premises and every part thereof is hereby determined, fixed and settled and declared to be good.” Fortified by the decree the Consumers Coal and Ice Company took title. Shortly afterwards the complainants herein, the heirs-at-law of an undivided two-thirds interest in the lands, learned of their inheritance and the suit and decree, and thereupon filed this bill against Ferris and Mrs. Keffer and the Consumers Coal and Ice Company to set aside the decree as fraudulent and to restore to them their rights. The bill sets out the history just related and charges that Ferris and Mrs. Keffer knew that Ferris was not the sole heir-at-law of Anton Hirschman, and that the mother of Mrs. Keffer was not the adopted daughter of Hirschman, and that they knew the complainants and their kinship to Hirschman and their whereabouts, and that the decree was procured by their false allegations and perjured testimony as a result of a conspiracy entered into by them to defraud the complainants of their inheritance. Their answer, in effect, is that they were innocent of any intentional wrong-doing. The Consumers Coal and Ice Company is charged with notice of the fraud, and it answers that it is an innocent purchaser for value.

There is no question as to the culpability of Ferris and Mrs. Keffer. Their professed innocence of intentional wrongdoing is beyond credence. The proofs leave not the shadow of doubt that both knew that Anton Hirschman had sisters and that the sisters had children — they met some of them, and knew where to find all of them if they eared to look. Ferris knew it to be false when he swore in his affidavit annexed to the bill to quiet the title, “that he, the said Anton Hirschman, died on or about the 19th day of May, 1920, intestate, leaving me, this deponent, as I believe, his only heir-at-law,” and he knew it to be false when he swore in the deposition in support of the bill and upon which the decree was entered “I never heard of any brothers or sisters [of Anton Hirschman] except my mother.” It is impossible of belief that never had he heard' his mother speak of her sisters. She and her sister, Mrs. Rieber, lived in the same town, Binghampton, and he and his mother visited her, and Ferris’ wife attended Mrs. Rieber’s funeral, and sent photographs of herself and daughter to the complainant Frank B. Rieber, and Ferris corresponded with him by mail. And the same censure goes to the depositions of Mrs. Keffer that “he [Hirschman] never had any brothers or sisters as far as I ever knew except his sister, Julia Ferris” (the mother of Ferris). She was a member of Hirschman’s family, and knew. Steffens, one of the complainants, visited his uncle Anton occasionally and she met him; she had his address and wired him the news of Hirschman’s death, and at the time of the funeral spoke of his absence and that of other relatives living in Binghampton. That Ferris and Mrs. Keffer represented themselves to be the sole owners of the estate, when, in fact, they were not; they admit and offer to make restitution of what is left, but that they boldly conspired to cheat the complainants and corruptly procure the decree is proved to the point of conviction, and the Consumers Coal and Ice Company concedes this in their brief.

A decree setting aside the false decree only as to Ferris and Mrs. Keffer, of course, will not bring the relief desired. The more troublesome question is, Is the Consumers Coal and Ice Company chargeable with the fraud and accountable for the property? Its defense is that it is an innocent purchaser for value, a status which, if established, does not give it a title superior to that of the complainants, but simply induces equity not to intervene. To persuade the court not to restore to the complainants their estate the company must show itself blameless of responsibility for the fraud — that is, it must appear that it had no notice, actual of constructive, that the complainants were heirs-at-law, and, consequently, none that Eerris and Mrs. Keffer were perpetrating a fraud. That the company did not have actual notice, and that it did not knowingly participate in the deceit, is freely admitted, but that is not enough to absolve it.

The case is to be distinguished from those where a purchaser takes title innocently relying on a decree, regular on its face and in the record, quieting the title. Here the company itself obtained the decree by proceedings instituted in the name of fraud-doers and upon their admittedly perjured testimony, and it cannot have the protection of the decree if, in its procurement, it was, in point of law, put on notice of the fraud and did not reasonably guard against it. Whatever puts a party upon inquiry, amounts in judgment of law to notice, provided the inquiry became a duty, as in case of purchasers and creditors, and would lead to the knowledge of the requisite facts by the exercise of ordinary diligence and understanding. Hoy v. Bramhall, 19 N. J. Eq. 563; Raritan, &c., Co. v. Veghte, 21 N. J. Eq. 463. That the company was apprehensive that all was not well with the pretentions of Eerris and Mrs. Keffer would appear by the reservation in its contract of purchase by which it provided that the time for closing should be extended “if upon examination of the title to said lands it became necessary, in the judgment of the attorneys of the party of the second part [the company] to institute proceedings for perfecting the title to said lands.” And that it was unwilling to purchase on the word of Eerris and Mrs. Keffer, and was sensible that other heirs might exist, is indicated by the suit it brought to quiet the title. Eerris’ claim to ownership as sole heir — a claim not admitting of record proof, and of which it was skeptical, was alone enough to excite inquiry, and had it used ordinary caution it would have discovered the truth and averted the fraud. It would seem that even a casual visit to the neighborhood of the premises in which Anton Hirschman lived forty-seven years and an interview with one or more of his many neighbors, friends and acquaintances, would have disclosed that he had had sisters, and that sisters’ children, other than Eerris, survived; and it is reasonable to suppose that inquiry would have led to their whereabouts. But it made no inquiry at all, except from Eerris and Mrs. Keffer, who were deeply interested and the most likely to deceive them, and in them it seems to have had no over-confidence. That such inquiry is indifferent and futile authorities agree. 27 R. C. L. 712. The proof of inquiry made by the attorneys of the company shows that they made some effort among the acquaintances of other unknown heirs of prior owners in title who were made defendants, because the title in that respect was unsatisfactory to ascertain their relationship and addresses, but there is not a scintilla of proof of any kind of search for the heirs of Anton Hirschman. Its absence is striking of the company’s absolute reliance on the two conspirators, and the stupid blindness with which it accepted their falsehoods at face value indicates almost a willingness to be duped. It needs no argument or citation of authority to hold that the company cannot claim the status of an innocent purchaser when it had the means to knowledge of the truth before its eyes and within its hearing, and did not use its senses, and the consequences of its misplaced confidence must fall upon it.

No criticism is intended because the company brought the suit agaainst the unknown heirs in the names of the pretended owners, who were in peaceable possession, but it must be regarded as its suit, not their suit, and the company, as suitor and purchaser, must be held as not justified in supinely relying upon the statements of Eerris and Mrs. Keffer, and to be charged with the duty of reasonable diligence to ascertain from other sources, if possible, whether there were other heirs of the record owner, so that they should not be defrauded of their lawful rights. It was its rigüt to shield itself against the claims of other and unknown heirs by decree, but it is not entitled to the protection of a self-procured decree based solely on the perjured testimony of Eerris and Mrs. Keffer, whose assurances it would not take without the' decree and against whose possible deception it failed to guard itself. It is not sufficient that it has a decree based on statutory process, for it must have occurred to the company and its attorneys to whom it intrusted the matter, and whose delinquency is imputed to it, that the published notice to unknown heirs would not result in response and the truth, and that they were merely following formula and not the substance of the statute to foreclose them. The company having assumed to sue in the name of Eerris and Mrs. Keffer, and having recovered against the complainants exclusively on their false allegations and testimony, the falsity of which they could have discovered by reasonable inquiry, it must be held to hold the decree affected by their fraud, and it will be set aside.

The complainants are entitled to recover against Eerris and Mrs. Keffer their shares of the personal property.

On the filing of the bill motion was made to dismiss on the grounds that the complainants’ remedy was by an appeal of the decree to quiet the title, and because leave was not first obtained to file a bill of review.

As to the first objection, if the complainants were duly served as absent defendants and they were in default, they had no standing to appeal. New Jersey Building Loan and Investment Co. v. Lord, 66 N. J. Eq. 344. And further, on appeal, the upper court could only have disposed of the case on the proofs below, and as the record showed title in the complainants in that suit it would have resulted in affirmance. The complainants had the right under the Chancery act (Comp. Stat., p. 416) to move to open the decree within three years after the entry, and while it had that opportunity such an application would not have been helpful. The title had passed to the Consumers Coal and lee Company and would not have been affected by a reversal. An innocent purchaser for value may rely on and is protected by a decree quieting title, and subsequent proceedings to reverse, modify or annul will not affect his status. Schultz v. Sanders, 38 N. J. Eq. 154.

The bill is an original bill to set aside a decree for fraud in its procurement, and for fraud extrinsic and collateral to matter on which the decree rests, and under which a third party had acquired an interest, and permission to file was not necessary. Story Eq. PI. (7ih ed.) § 426; Mitf. Pl. 138; see Dringer v. Receiver of Erie Railway, N. J. Eq. 573.


text:
    Berry Brothers, Incorporated, a corporation, complainant, v. Toney Peter Paul et al., defendants.
    [Decided July 14th, 1926.]
    1. Payment of a lesser sum than is due on a judgment, upon the plaintiff’s promise to discharge it, will not bar a recovery of the balance, if there is not some additional consideration for the promise.
    2. Costs will not be allowed complainant on a creditor’s bill to recover the balance of a judgment which he had agreed to discharge upon the payment of a lesser sum, and which had been paid and accepted in satisfaction. EJguity cannot refuse to enforce a judgment, but it can refrain from penalizing the judgment debtor, with costs
    On final hearing.

      Mr. George A. Henderson, for the complainant.

      Mr. J eróme Alper, for the defendant.
   Backes, V. C.

The complainant recovered a judgment against the defendant Toney Peter Paul, in the district court, for $281.20 and costs, afterwards docketed in the common pleas, and on August 13th, 1925, filed this bill to set aside a conveyance made by Paul, alleged to have been made to defraud the complainant. Paul’s counsel arranged a settlement with complainant’s counsel for $265, and Paul later arranged one with complainant for $250, and on August 25th paid $200 on account, and November 6th the balance. After the payment of the first installment of $200 the complainant’s counsel, not knowing of the settlement, entered a decree by default, setting aside the conveyance as fraudulent as against the full amount of the judgment, and it was ordered that the property be sold to make the judgment, with costs and interest and a taxed bill of costs in the cause for $114.48. The decree was opened to permit the defendant to answer, and he set up inter alia the alleged accord and satisfaction.

Acceptance of a lesser sum in satisfaction of a judgment is not a bar to a recovery of the balance of the debt if there is not some additional consideration for the satisfaction. Gillman v. Sonventino, 130 Atl. Rep. 442. Paul claims that his failure to defend the bill, due to failure of the complainant to abide by the compromise, was an added consideration within the rule of Gillman v. Sorventino, supra, and Roberts v. Banse, 78 N. J. Law 57, in which eases there were payments of smaller sums than the judgments, and it was held that the waiver by the judgment debtors of their proceedings to review the judgments formed part of the consideration for the creditors’ promise to discharge their judgments. It is difficult to see how the defendant was prejudiced or the complainant benefited by the defendant’s release from answering the bill and defending the charges of fraud. He stood to lose the costs had he defended and lost, and had he succeeded he would have gained nothing by the recovery of his costs and counsel fee, and if the complainant won out it would not gain, but only have its just due. If he was injured by the complainant’s unwarranted entry of the decree on default, that cannot be held to relate to the contract of compromise. The additional consideration need be slight, but here there was no consideration other than the payment of the lesser sum. Part payment of the judgment under pressure of the creditor’s bill was not a consideration, and the defendant is liable for the balance of the judgment, with costs and interest, but not the taxed costs of this suit. Complainant’s counsel not only erred in entering the decree for the full amount of the judgment when there was but a fraction due, but after the decree was opened, and after knowledge of the settlement persisted in prosecuting the bill, and the chancellor’s discretion to award costs ought not to be exercised in its favor. While the defendant cannot, because of the rigorous rule of law, hold the complainant to its agreement, which on his part he has faithfully fulfilled, quity will not require him to do more than the rule exacts. Equity cannot refuse to enforce the judgment, but it can refrain from penalizing the defendant with the costs. The fendant will be allowed costs in this suit.

The court may, when the justice of the case requires, impose costs upon the successful party. P. L. 1915 p. 181¡. § 6. Hpon the payment of the balance due on the judgment, with interest,'the bill will be dismissed.


text:
    Fannie Meyers, complainant, v. Samuel Meyers, defendant.
    [Decided July 14th, 1926.]
    1. A gift by deed, delivered, is valid, though the subject of the gift does not accompany the deed.
    2. A gift is valid if delivery be made to another for the donee.
    On bill, &e.

      Messrs. Osborne, Cornish & Bchech, for the complainant.

      Mr. Harry Castelbaum, for the defendant.
   Backes, V. C.

Isador Meyers while ill, and about to undergo a serious surgical operation, signed and acknowledged a deed assigning tc^his fifteen-year-old son his two-third interest in a bond and mortgage, and, retaining the bond and mortgage, left the deed of assignment with the lawyer, who had just drawn it, with instructions to put it on record if anything hap-' pened to him. He had informed the lawyer of his illness and impending operation, and he died following the operation. The administratrix of' the deceased attacks the assignment on the ground that there was no complete gift, in that there was no delivery of the subject-matter, and that the assignment was testamentary in character and invalid for non-compliance with the statute of wills.

The gift is typically causa mortis. The legal requirements of this form of gift are the same as a gift inter vimos. The two are alike in composition and legal effect, differing only in their consummation. Both are "between living persons; the former is made under apprehension of death, the latter is not, and while both gifts must be presently operative, causa mortis is conditional, inter vivos is absolute. A more nearly accurate statement, perhaps, would be, that in both classes the donee must be completely vested of the title, the gift causa mortis being subject to divestment by the donor revoking it in his lifetime, or automatically if he escapes the peril. It is, of course, essential to the validity of a gift of personal property that the donor deliver the subject-matter to the donee with intent to make a gift and part with all dominion and control over it. The delivery is good if made to another for the donee. The gift is valid if made by deed and the deed be delivered with donative intent, though the subject does not accompany the deed. The delivery of the deed is equivalent to a delivery of the subject. It has been held that a deed, delivered, operates as an estoppel, because of our ancient reverence for sealed instruments, but the weight of authority is that the delivery of the deed is an effective symbolical delivery of the thing given. Eor instructive discussion of gifts causa mortis see Baskett v. Has- sell, 107 U. S. 602, and Emery v. Clough, 63 N. H. 552, and the authorities sustaining the foregoing fundamental propositions collected in 21 L. R. A. 694; Dilts v. Stevenson, 17 N. J. Eq. 407; Ruckman v. Ruckman, 33 N. J. Eq. 354.

It is not questioned that the deceased executed the deed of assignment and left it with the lawyer with donative intent, but it is contended that he did not deliver it to him for his son, intending to then strip himself of all ownership and control of his interest in the bond and mortgage, and that this is indicated by his retention of the bond and mortgage. The donor’s mental attitude must be determined by his acts, of which we have a clear expression in the absolute and disposing language of the deed assigning the interest to the donee, and in putting it into effect by delivering it to the lawyer, without reservation or qualification, save the instructions, perfectly consistent with a gift causa mortis, to put on record if anything happened to him, meaning death. The fact that the donor had, or the supposition that he believed he retained the right to revoke the gift, are not incongruous. The right to revoke is a condition of a gift causa mortis. The direction to record the deed was the equivalent of a direction to deliver it to the donee, and the delivery of the deed to tire lawyer for the purpose of, a second delivery to the donee ^as in perfect harmony with the situation, for the son was an infant and the deed could not very well have been given to him to hold during the precarious period. The argument that the donor did not intend absolutely to deliver the deed as a then present gift, because he took away with him the bond and mortgage, reacts to the inference that if he did not intend the legal effect of the deed, delivered, he would have taken that too. No rational conclusion can be drawn from all the circumstances other than that the donor intended to make the deed presently operative subject to being defeated if death did not overtake him. Persuasive reasoning for sustaining the gift is to be found in the opinion of Vice-Chancellor Learning in Rowley v. Bowyer, 75 N. J. Eq. 80, in which he upheld as legally delivered deeds executed by father to son, and left with the lawyer, who drew them, with instructions to "deliver these to my son after my death.” The learned vice-chancellor restated the true principle of gifts in respect of delivery, as again he did in Watson v. MaGill, 97 Atl. Rep. 43; affirmed, 85 N. J. Eq. 592, and pointed out that Slicher v. Keeler, 67 N. J. Eq. 635, affirmed the principle to which he adhered, but was decided on the finding of fact that the deed-in that case was not delivered with intent to pass the title to the subject of the gift. Williams v. Guile, 117 N. Y. 343, is very much like the present case. There the donor, aged and paralytic, executed an assignment of a life insurance policy and handed it with the policy to his attorney with directions to deliver it to the donee if anything happened to him. Judge Gray, upon principle and authority, upheld the transfer as a gift causa mortis. The delivery of the policy with the assignment, wherein the facts differ, was not dwelt upon as a factor.

The bill will be dismissed.


text:
    Blum Building Company, complainant, v. Charles H. Ingersoll and Eleanor B. Ingersoll, defendants.
    [Decided August 4th, 1926.]
    An election of a right and remedy in disaffirmance of a contract, made with full knowledge of the facts, is irrevocable, and bars any subsequent action based on an affirmance of the contract. The institution of a suit determines the election.
    On bill, &c.

      Mr. Milton M. linger, for the complainant,

      Messrs. Howe & Davis, for the defendants.
   Backes, V. C.

The bill, as supplemented, is by the vendee against the vendors to compel them to convey a parcel of land in South Orange as they had contracted to do1.

In the preface to the contract, dated March 10th, 1924, it is recited that the complainant was willing to buy if it could obtain a permit from the village of South Orange to erect on the land a four-story apartment-house, and that the defendants were willing to enter into* a contract of sale and to give to the complainants until May 1st, 1924, to obtain the permit, and that the complainant was willing to enter into such a “conditional agreement,” with the understanding that time was of the essence of the contract, and that in the event that the complainant failed to obtain a permit, - or declined to take the property without a permit, on or before May 1st, the contract should be void upou the return to the complainant of its deposit of $1,000. In the body of the agreement the defendants bound themselves to convey the land to the complainant on May 1st, 1924, for the consideration therein stated, the contract, however, to be binding upon the complainant forthwith upon obtaining the permit by May 1st, and that title should be closed within thirty days after obtaining it, or such longer time as might be agreed upon; and if the complainant failed to obtain the permit before May 1st, the agreement should be null and void upon the return of the deposit. It was further agreed that if the complainant failed to apply for the permit within twenty-one days after the court of errors and appeals handed down a favorable decision in the Nutley Zoning Case (Ignaciunas v. Nutley, 125 Atl. Rep. 121), and which time was not to run until notice in writing of the decision was given by defendants to the attorney of the complainant, then the defendants could apply for the permit, and if granted the con-, tract should be binding on the complainant. Before the time expired, on April 30th, a further agreement was entered into which recites that the parties desired the contract to remain effective until June 1st, 1924, and it was stipulated “that the time of conditional settlement be extended to June 1st, 1924; that if the court of errors and appeals have not rendered its decision by said time, affirming the decision of the supreme court in respect to zoning ordinances, then the original contract hereinbefore referred to shall be null and void and the parties of the first part shall return to the party of the second part the deposit paid by virtue of and mentioned in said original contract, to the same effect as stated in the provisions contained in the original contract.” The decision was handed down May 19th, 1924, but was not regarded as controlling the situation in South Orange. The complainant did not apply for a permit nor elect to take without the permit by J une 1st. On August 8th the complainant filed its bill setting up the contract and the extension agreement; its failure to obtain the permit and its refusal to take the prop^erty without the permit by June 1st, and that the court of errors and appeals had not rendered its decision before that time (which was not so), and that it had been ready and willing, but that the defendants had not been able to perform, and that it was entitled to the return of its deposit, and prayed for relief accordingly, and a lien on the property. The defendants answered that with the knowledge and consent of the complainant they, the defendants, demanded a permit from South Orange; that upon refusal, at the request and upon the consent of the complainant, they, in March, 1924, applied to the supreme court for a mandamus; that it was argued at the May term; that a decision was expected at the October term; that all was done in pursuance of the contract of sale and the extension agreement, and with the knowledge of the complainant that the decision -would not be secured before June 1st; that the complainant waived the provisions of the contract for the performance and that' it must wait until the coming down of the decision, and was not entitled to the $1,000 deposit unless an adverse decree be rendered in the suit! In reply the complainant denied the waiver and the facts alleged, and insisted that it was not required to wait. The cause" was set down for hearing January 14th, 1925. At that time the supreme court had granted- an alternative writ of mandamus (Ingersoll v. South Orange (September 13th, 1924), 123 Atl. Rep. 218), and the suit for a peremptory writ was pending, and the hearing was adjourned without day at the request of complainant’s counsel, and upon his representations to defendants’ counsel, to use his own language, that “so long as it is pending in court (the mandamus suit) and we are going to take the property if it is in our favor, let us call the hearing off,” to which defendants’ counsel agreed. On March 26th, 1925, a peremptory writ was ordered (128 Atl. Rep. 898), and South Orange took an appeal. Shortly thereafter defendants’ counsel, Davis, notified complainant’s solicitor, Kaplan, that his clients felt that the complainant should take the property without their having to go to any additional expense of the appeal, or that they would return the deposit. The complainant thereupon offered to pay the expenses, which was unacceptable and declined. Kaplan and the Blums now say that they were then willing to take the title, and Kaplan ventured so far as to say that he told Davis so, but it is more in harmony with the situation to believe the Blums and their counsel, Unger and Davis, that the proposition to take the title was neither accepted nor declined, and also to believe that the complainant’s inclination was not to take the title pending the appeal. On April 14th Davis wrote Unger, offering to pay back the $1,000 and the costs, to which the latter replied, two days later that his client (one of the Blums) had informed him that he had practically arranged whereby he was to defray the expenses of the appeal “and that he was then [after the decision] to take the title,” and asked if there was any misunderstanding. The next day Davis answered that the offer to defray the expenses was not acceptable to his clients and renewed the offer to return the deposit. There the matter stood until April 29th, when notice was served by the defendants of a motion for leave to withdraw their answer, which was followed by complainant’s notice of motion for leave to amend the bill. Both motions were granted at the same time, the complainant being permitted, generally, to file a supplemental bill. In the supplemental bill the complainant completely reverses its position to recover the deposit, and, after recounting the allegations and prayers of the original bill, the answer thereto, and the replication, it alleges that it was true, as the defendants had set up in their answer to the original bill that the time for the performance of the contract had been extended until the coming down of the decision of the supreme court; that it had acquiesced in the mandamus suit, and that it had been agreed that the hearing of the cause should be delayed to await the decision, and that the complainant would take the title if the court ordered a permit; that the supreme court had since so ordered, that an appeal had been taken, and that complainant was ready and willing to perform in accordance with the terms of the contract, and it prays for a specific performance of the contract. The answer admits the state of the original pleadings, denies all the allegations (except the fact of the final judgment in the mandamus suit), and points out that the complainant, in its replication to the answer to the original bill, had denied the waiver' of time of performance, and had claimed that it was not bound to wait the judgment of the supreme court; that the complainant never, except by the supplemental bill, expressed its willingness to take title, or tendered performance; that defendants have tendered the deposit with interest and costs, and that it was refused, and concludes with a denial that the complainant is entitled to the relief prayed by the supplemental bill. The prior election of the complainant to treat the contract as at an end is not specifically pleaded as a defense, and attention to this is called in complainant’s brief, but the face-about of both litigants appearing in the record, it may be considered under the denial of the complainant’s right to relief. If necessary it may be formally set up; for the present it will be regarded as correctly pleaded.

A word as to the practice. Setting up a maintainable new and inconsistent cause of action is not allowable after issue. The course is to take a dismissal without prejudice and start anew. Coddington v. Mott, 14 N. J. Eq. 430. Here the defendants withdrew their answer; there was no issue when the amendment was allowed and made.

The complainant having by its original bill elected to be no longer bound by the contract is not privileged to again choose to be bound. Having committed itself to a recovery of the deposit, its right to have the property is forever .gone. The election is irrevocable. Claron v. Thommessen, 96 N. J. Eq. 650; Heller v. Elliott, 44 N. J. Law 467. The commencement of an action, where all the facts are known, is conclusive evidence of an election. Conrow v. Lillie, 115 N. Y. 387. “A party,” says Bigelow, “cannot, either in the course of litigation or in dealings in pais, occupy inconsistent positions. Upon that rule election is founded. A man shall not be allowed to approbate and reprobate. And where a man has an election between several inconsistent causes of action he will be confined to that which he first adopts. The election, if made with knowledge of the facts, is in itself binding. It cannot be withdrawn without due consent. It cannot be withdrawn though it has not been acted upon by another by any change of position.” Big. Estop. (6th ed.) 782. A comprehensive statement of the effect of an election is giv¿n in 20 Corp. -Jur. 88, thus: “An election once made between co-existing remedial rights which are inconsistent is not only irrevocable and cannot be withdrawn without due consent even though it has not been acted upon by another to his detriment, but it is also conclusive and constitutes an absolute bar to any action, suit or proceedings based upon a remedial right inconsistent with that asserted by the election or to the maintenance of a. defense founded on such inconsistent rights.” Chancellor Kent, in Sanger v. Wood, 3 John. Ch. 416, put it in this-way: “Any decisive act of the party, with knowledge of his rights, and of the fact, determines His election in the case of conflicting and inconsistent remedies.” In Connihan v. Thompson, 111 Mass. 270, it is said that “the defense of waiver by election arises when the remedies are inconsistent, as where one action is founded on an affirmance and the other upon the disaffirmance of a voidable contract, or sale of property. In such cases any decisive act of affirmance or disaffirmance, if done with knowledge of the fact, determines the legal rights of the parties once for all. The institution of a suit is such a decisive act, and if its maintenance necessarily involves an election to affirm or disaffirm a voidable contract or sale, or to rescind one, it is generally held to be a conclusive waiver of inconsistent rights, and thus to defeat any action subsequently brought thereon. In Thompson v. Howard, 31 Mich. 312, this language is used: “A man may not take two contradictory positions, and where he has a right to chose one of two modes of redress, and the two are so inconsistent that the assertion of one involves the negation or repudiation of the other, his deliberate and settled choice of one with knowledge or means of knowledge of such facts as would authorize a resort to each, will preclude him thereafter from going hack and electing again.” In Rodermund v. (Clark, 46 N. Y. 354, the principle is stated in this manner: “Where there exists an election between inconsistent remedies the party is confined to the remedy which he first prefers and adopts. The remedies are not concurrent, and the choice between them being once made, the right to follow the other is forever gone.” It is not helpful to multiply these citations, but for outstanding eases expressing the doctrine see Livingston v. Kane, 3 Johns. Ch. 224; Kennedy v. Thorp, 51 N. Y. 174; Acer v. Hotchkiss, 97 N. Y. 395; Terry v. Munger, 121 N. Y. 161; Mills v. Parkhurst, 126 N. Y. 89; Washburn v. Insurance Co., 114 Mass. 175; Metcalf v. Williams, 144 Mass. 452; Elevator Co. v. U. P. Ry. Co., 97 Iowa 719; Thompson v. Howard, supra; Farwell v. Myers, 59 Mich. 179. A collection of many of the cases is to be found in the note to Crossman v. Universal Rubber Co., 13 L. R. A. 91. The principle is so fundamental and universal of application that our court of errors and appeals in the Ciaron Case simply applied it without discussion.

It is the contention of the complainant that the subsequent conduct of the defendants, and the dealings of the parties, released it of its election, or, if not released, that the defendants are estopped from setting up the election. An election once made, being irrevocable, nothing short of a contract reviving the lost remedy will restore it. In Moller v. Tuska, 87 N. Y. 166, the plaintiffs brought an action in replevin to recover property procured by fraud in the sale. Afterwards the vendee was declared a bankrupt and the plaintiffs filed their claim with the assignee in bankruptcy and received a dividend which they later returned on demand and their claim was expunged. The filing of the claim and acceptance of the dividend was held by the court below as an affirmance of the contract, a second election, and a bar to the recovery of the property. In reversing the judgment of dismissal the court of errors and appeals, speaking through Judge Danforth, said: “The plaintiffs manifested their election by bringing this action. After that,- the other way of redress was not open to them; for, according to Comyn (Dig. Died. 0. 2), if a man once determines his election it shall be determined forever. Hence, they could never successfully assert a claim against the purchaser under the contract, for the election to disaffirm it had been manifested, and to revoke it was not in their power,” and “we are of opinion that by the election made to disaffirm the contract of sale and resume their property, the rights of the plaintiffs to maintain this action became fixed, and could only be extinguished by release or actual payment, or the making of a new engagement.”

While a contract of release, or a counter estoppel, is not deemed available to the complainant, nevertheless the reasons upon which it seeks to avoid the effect of its election will be considered and disposed of.

It cannot be said that the answer to the suit for the deposit, that it was not due because the-time of performance had been extended until the decision in the mandamus suit, waived the election. The answer amounted to a denial of liability at that time, and the allegations therein of an agreement to extend the time was expressly denied by the complainant in its replication and its right to recover the money was re-asserted. The replication constituted a renewal of the disaffirmance of the contract. Hor can the complainant’s choice of remedy be considered as falling within the class of cases where relief is given because of mistake of fact or law, for, if there was, in fact, an extension of the time of performance, as the defendants alleged and the complainant denied, and which denial the complainant by its supplemental bill retracts, and wherein it affirms the contract, the complainant cannot escape the indictment that it brought its suit in bad faith and that it made its election with full knowledge of the agreement to which it was a party, if it be true, as it now claims, that there was such an agreement.

The representation of the complainant’s counsel at the time he sought an adjournment of the hearing in January, 1925, that his client intended to take the property if the mandamus suit resulted favorably to his client, was merely by way of inducement to a consent to the postponement of the trial of the issue then before the court. There was no retreat by the complainant, or withdrawal of its repudiation of the contract; it was simply a self-serving assurance that it would take if the outcome of the suit at law, and the taking, would be advantageous, but otherwise it would adhere to its disaffirmance.

The willingness and the offer of the defendants to perform the contract after the supreme court ordered a permit was purely voluntary, without consideration, unaccepted until after withdrawal, and unexecuted, and it was only after a sharp rise in the value of the property (nearly double the contract price) pricked the cupidity of the complainant that the supplemental bill was filed.

The complainant must be held to its election and the bill will be dismissed.