text:
    Edmund Wilson, attorney-general of the State of New Jersey, v. State Water Supply Commission et al
    [Decided July 11th, 1913.]

      P. L. 1910 cJi. 808, creates the state water supply commission a body corporate and authorizes it to own property. P. L. 1912 oh. 818, authorizes it to acquire property for the purpose of appropriating or conserving the potable waters of the state and provides that it may deliver bonds payable at such time, and upon such terms, and bearing such interest, and with such provision for sinking fund, &c., as it may determine, and may secure their payment by a mortgage. Under this authority the commission contracted for the purchase of certain land, for which it agreed to deliver fifty-year bonds of the par value of $1,000,000, secured by a mortgage on the property which sihould contain elaborate provisions for payment of the interest, for the conservation of the lands, sinking fund, and further indebtedness or liability secured on the property.—Held, that the execution of such contract, or the statutes authorizing it, did not violate constitution, article 4, section 6, paragraph 4, providing that the legislature shall not create any debt of the state which with previous debts shall at any time exceed $100,000, unless authorized for some single object or work, to be distinctly specified by law, which shall provide the ways of paying such indebtedness within thirty-five years, and that no such law shall take effect until it shall have been submitted to the people, since the commission is a corporate entity apart from the state, and the constitutional provision applies only to debts of the state and not to debts of public corporations for the paj'ment of which the state is not liable.
    On demurrer to information.

      Mr. Edmund Wilson, attorney-general, for the informant.

      Mr. J. Edward Ash-mead and Mr. Frederic J. Faulks, for the demurrants.
   Walker, Chancellor.

The information in this ease avers that the state water supply commission was created by chapter 252 (P. L. 1907); that the commission by that act and those amendatory thereof and supplemental thereto is charged with a general supervision over all .the sources of potable and public water-supply to the end that the same may be developed for the use of the people of the state; that by chapter 318 (P. L. 19W), the commission was authorized to acquire lands, water rights and interests therein for the purpose of appropriating or conserving the potable waters of the state to the common use of the inhabitants thereof with authority to provide for payment for such lands, water rights and interests therein as might be acquired; that the commission by appropriate proceedings resolved upon the purchase of all the lands and premises owned by the estate of Joseph W. Wharton, deceased, situate in Burlington, Camden and Atlantic counties, which resolution was approved by his excellency, the governor, and a formal contract entered into between the parties, assented to in writing by the governor in pursuance of the statute.

The consideration to be paid, or rather secured, for the conveyance of the Wharton tract, is $1,000,000, to be secured by duly-executed bonds of the commission of the par value of $1,-000,000, to consist of an issue of one thousand bonds of the denominator of $1,000 each, payable fifty years from date, with interest; the bonds, and the mortgage by which they are to be secured, to he a lien on the premises conveyed and to provide, among other things, that the commission, or its successors, will, from time to time, in order to pay the interest and for the conservation of the lands, use for such purpose in each year during which any of the bonds shall remain unpaid, at least the sum of $1,000 out of all other moneys and credits that may be unappropriated to other specific uses; that a sinking fund shall be provided into which there shall be paid, among other moneys, any and all moneys which from time to time may be appropriated by any legislature toward the principal of the bonds; and, for a period of five years from date of the bonds and mortgage, an additioiral sinking fund of one per cent, of $1,000,000 shall be annually set aside for the payment of the bonds and mortgage at maturity, and that this sinking fund shall be created in part from any appropriation made by the legislature and in pari from any moneys and credits the commission may have unappropriated to other specific uses. The usufruct of. the premises is also to be pledged.

The informant charges that the commission in negotiating the purchase of the lands acted as agent of the state, and that if it acquires title according to the terms of the contract, the title so acquired will be that of the state, and that in consummating the purchase and in the execution and delivery of the bonds and mortgage and in the method and means provided for payment, and in fixing the time of the maturity of the bonds, the commission has been acting, and will act, without authority in law and in violation of article 4, section 6, paragraph 4 of the constitution of this state, which reads as follows:

“The legislature shall not, in any manner, create any debt or debts, liability or liabilities, of the state which shall, singly or in the aggregate with any previous debts or liabilities, at any time exceed one hundred thousand dollars, except for purposes of war, or to repel invasion, or to suppress insurrection, unless the same shall be authorized by a law for some single object or work, to be distinctly specified therein; which law shall provide the ways and means, exclusive of loans, to pay the interest of such debt or liability as it falls due, and also to pay and discharge the principal of such debt or liability within thirty-five years from the time of the contracting thereof, and shall be irrepealable until such debt or liability, and the interest thereon, are fully paid and discharged; and no such law shall take effect until it shall, at a general election, have been submitted to the people, and have received the sanction of a majority of all the votes cast for and against it at such election.”

The information prays an injunction restraining the commission from executing the proposed contract, &c., and for other and further relief. The parties of the second part to the agreement and proposed contract, namely, the owners of the Wharton tract, have demurred, assigning certain causes, all of which amount to an assertion that the commission has acted within its powers, and has not, nor does it propose, by the acts complained of, to violate the constitution. This brings us at once to the law of the ease.

The question is, is the contract under review a contract of the state itself and an attempt to do by indirection what cannot be directly done, or, is the commission an independent entity having executive and administrative powers, and is it obligating itself alone and not fastening any debt or liability upon the state, its creator? It ought to be stated that by chapter 303 (P. L. 1910) the commission was created a body corporate and invested with the ownership of property, &c. It ought also to be stated that the contract provides that the bonds and mortgage proposed to be made shall contain an express provision to the effect that no present or future indebtedness or liability of the State of New Jersey shall in any manner or for any purpose be created or constituted thereby, and that the principal and interest on the bonds and mortgage must be paid and satisfied from the property, rights and moneys mentioned, including all moneys arising from the sale of the property and rights, or any portion thereof, and not otherwise, unless a special appropriation be made by the legislature therefor, and that in developing or paying recourse must be hacl solely to the property, rights and moneys mentioned and not from any other source or sources.

If there were no decisions directly' affecting the question, I would, I think, incline to the view that the commission with respect to the contract mentioned would, in effect, though not in form, make, or attempt to make, a contract for and binding upon the state, and would, therefore, be within the constitutional inhibition; but, upon careful consideration of this matter, I am convinced that the doctrine enunciated by the supreme court in Van Cleve v. Passaic Valley Sewerage Commissioners, 71 N. J. Law (42 Vr.) 183, settles the‘question in favor of the demurrants.

In that case (Van Cleve v. Passaic Valley Sewerage Commissioners) there was brought under review two resolutions passed by the commissioners, one estimating the cost and expense of the whole work to be undertaken and constructed by them, under statutory authority, at the sum of $9,000,000, and another by which they had determined upon an issue of $1,000,000 in order to provide for the payment of the cost and expense to be incurred in the purchase of land and construction of certain of the works in question. The act, under which the commissioners were operating, provided that for the payment of costs and expenses incurred or to be incurred for the purchase of lands and other property and the construction of its works, they should have power from time to time to issue corporate bonds in an amount not exceeding $9,000,000, and not exceeding the estimated cost and expense of the whole works, the bonds to run not exceeding fifty years from date, bearing interest not exceeding four per centum per annum, with provisions for sinking fund, &c. Regarding the powers of the corporation the supreme court (at p. 196) said:

“The powers conferred upon the sewerage commissioners are executive and administrative in their character. The commissioners are constituted by section 3 a body politic, with the essential powers of corporations, and by section 21 they are authorized to make rules and regulations for the use, protection and management of the works, property and plant, and for the protection of the rivers and streams within the district from pollution.”

Among the other objections invoked by the prosecutors in the Van Clem Case was one challenging the right of the commissioners to incur an obligation in excess of $100,000; and article 4, section 6, paragraph 4 of the constitution, was pointed out as the barrier. Said the supreme court, speaking to that subject— 71 N. J. Law (42 Vr.)—at p. 228:

“Next, the prosecutors invoked article 4, section 6, paragraph 4 of the constitution, declaring that the legislature shall not, in any manner, create any debt or liability of the state exceed-' ing $100,000, without the previous approval of the people at a general election. But this prohibition has no applicaney to local or municipal indebtedness. People v. Flagg, 46 N. Y. 401, 406; Cass v. Dillon, 2 Ohio St. 607, 613; Clark v. City of Janesville, 10 Wis. 136; Bushnell v. Beliot, 10 Wis. 195, 221; Pattison v. Board of Supervisors, 13 Cal. 175, 182; Cooley Const. Lim. (7th ed.) 321, 325. A contrary view would overthrow practically all our municipal bond issues, for they depend ultimately on legislative authorization.”

Now, the court’s observation that the constitutional prohibition referred to has no application to local or municipal indebtedness, means, as I interpret it, that it has no application to any indebtedness which is not that of the state itself, and, applying the doctrine thus enunciated to the case at bar, I am constrained to hold that the legislature in authorizing the state water supply commission to purchase lands, water rights and interests therein, did not in any manner create any debt or debts, liability or liabilities, of the state, or authorize the commission to create any such; nor has the commission, in point of fact, done, or attempted to do, any such thing.

• It ought to be observed that the cases cited by Mr. Justice Pitney, speaking for the supreme court, in the Van Cleve Case, amply bear out his assertion that the constitutional provision referred to has no application to local or municipal indebtedness.

The constitutional prohibitions in the cases cited are not in a general way unlike that in our own constitution, which is the subject of the present examination. On the contrary, in effect, they are, I may sat', entirely like ours.

In People v. Flagg, 46 N. Y. 401, 406 (one of the cases cited in the Van Cleve Case), it is said:

“It is evident that the prohibited debts are state debts—that is, debts against the state as such, and not town, county or city debts.”

In State v. Madison, 7 Wis. 688, reviewing a similar constitutional prohibition, the court said (at p. 691) :

“The language of the provision is plain, and evidently refers to a debt on behalf of the state, and contracted in its political capacity as such; and cannot, without great violence, be held to apply to the debts of city and municipal corporations.”

The reason that the courts in these eases refer to municipal as distinguished from state debts, of course, is because they were treating of the former kind of debts. It is clearly apparent that the principle enunciated applies with equal force to a debt created by a public corporation, other than municipal, when the debt or obligation is made that of the corporate enffiy alone, and in no way or manner that of the state.

In Clark v. City of Janesville, 10 Wis. 136, the remarks of the court (at p. 172) are pertinent. It was there said :

“If this, then, is so; if the credit of a city is not the credit of a state, nor its debt a state debt, such acts are not liable to the objection of doing indirectly what cannot be done directly. The thing that cannot be done directly, is to contract a state debt for works of internal improvement. If the legislature should attempt to authorize a city to contract a state debt for such works, that would be attempting to do indirectly what it could not do directly, as well as being a veiy great absurdity. But when it only allows it to contract a debt against itself, that is liable to neither objection. Nor is it liable to the logical objection of deriving power from a source where it does not exist. The state may have power to grant a power, and at the same time not have power to execute it. This is clearly shown by reference to this very prohibition against its being a party in carrying on internal improvements. No one doubts that it may authorize a railroad company to. build a railroad. But it could not build one itself. And is l:hat deriving power from a source where it does not exist? Clearly not. Because the state has the power to grant the authority, and is prohibited only from being itself a parly to its execution. The difficulty with this objection is, that it confounds the power of granting a right, with the power of being a party to its exercise; whereas the two are essentially distinct. This is illustrated by reference to the king’s prerogative of granting offices. See Bao. Air., tit. ‘Prerogative B/ where it is said: ‘The king cannot execute any office relating to the administration of justice, although all such officers derive their authority from the crown, and although he hath such offices in him to grant to others.’ ”

Turning again to the constitutional prohibition invoked by the informant, we find that the provision is that the legislature shall not in any manner create any debt or liability of the state beyond a certain amount, &e. Turning to the act of the legislature under which the commission has proceeded in this case, we find (P. L. 1912 ch. 318 § 2) that the commission in acquiring property and rights shall have power to assume the payment of the principal and interest of any outstanding bonds or mortgages upon or affecting any or all of such property and rights, &c. It appears, therefore, that the legislature has studiously avoided doing the thing which is inhibited, and that by no process of reasoning can it be said that it has in any way or manner fastened any debt or liability upon the state in its capacity of sovereign in violation of organic law.

TJpon this whole matter I am clearly of opinion that the state water supply commission is a corporate entity, apart from the state, created by the state in the exercise of lawful authority; that there has been devolved upon the commission power to make the contract, which is the subject of this inquiry, pledging the property to be acquired and other property of the commission for the payment of the purchase price, without any authority to obligate the state therefor; that the commission in executing the contract has not bound, or attempted to bind, the state, but, on the contrary, has made ample provision for the protection of the state itself against any debt or liability in respect to the property acquired; that the state, as such, is in no way or manner obligated or indebted in the premises, nor can it be; and that, therefore, the transaction does not fall within the constitutional prohibition.

The demurrer must be sustained.


source: Caselaw Access Project

author: Walker, Chancellor.

license: Public Domain

text:
    Anna R. Brown v. Harry F. Brown.
    [Decided July 12th, 1913.]
    Under Comp. Stat. 1910 p. 2043, enlarging a wife’s right of dower to include lands whereof her husband, “or any other to his use,” was seized of an estate of inheritance at any time during coverture, where a husband paid the purchase price for land, but had the title conveyed to his brother to hold in trust for the husband, the wife was entitled to maintain a bill to protect her dower in the land against the possibility of a conveyance to an innocent purchaser before the dower becomes consummate.
    On motion to strike out bill under rule 213.

      Mr. Thomas Brown, for the motion.

      Mr. Charles T. Cowenhoven, for the complainant.
   Walker, Chancellor.

In substance, the bill of complaint prays that the wife’s inchoate right of dower in the lands described in the bill of complaint, held in trust for her husband, be protected. The facts admitted on this motion are: That Harry F. Brown, the husband of the complainant, purchased the lands; that he paid the purchase-money; that he fraudulently for the purpose of depriving his wife of her dower interest, caused the lands to be conveyed to his brother, Oliver, who now holds the same in trust—an equitable estate in fee—for him; the implication that the lands may be conveyed by the trustee to an innocent purchaser to her injury.

By the common law a widow was entitled to dower in all of the lands whereof her husband was seized in fee-simple at any time during coverture. Our statute enlarges the right, and endows her of all lands whereof her husband “or any other to his use” was seized of an estate of inheritance at any time during coverture. Comp. Stat. p. 2043.

The doctrine of courts of equity is that equitable estates are considered to all intents and purposes as legal estates. Cushing v. Blake, 30 N. J. Eq. (3 Stew.) 689.

In Mershon v. Duer, 40 N. J. Eq. (13 Stew.) 333, and in Radley v. Radley, 70 N. J. Eq. (4 Robb.) 248, a widow’s right of dower in lands held by another in trust for her husband was affirmed.

In re Alexander, 53 N. J. Eq. (8 Dick.) 96, Vice-Chancellor Green, without attempting to define inchoate right of dower, cites cases showing the manner in which it has been entertained by various jurisdictions, and concludes upon the authority of Wheeler v. Kirtland, 27 N. J. Eq. (12 C. E. Gr.) 534, “that it is an interest in the land from the time of the seizin of the husband is the law in this state.”

That a wife by reason of her inchoate right of dower has such an interest in her husband’s lands which a court of equity will protect, has frequently been asserted.

In Wheeler v. Kirtland, supra, the property of the husband was condemned for public use, and upon a bill filed by the wife, it was held that she by reason of her inchoate fight of dower in the land, had an interest in the award which equity would secure to her.

In Petty v. Petty, 4 B. Monr. 215, the wife filed a bill a few days after her marriage, to set aside a conveyance made by her husband in anticipation of the marriage and in fraud of the wife’s rights. The court decreed the • conveyance void as against her right, and directed a reconveyance to her of one-third for life to be enjoyed by her after her husband’s death. In this case it was held that the inchoate right of dower of the wife was such an interest as to entitle her to the protection of a court of equity.

In Burns v. Lynde, 6 Allen 305, a deed in which it was made to appear that the wife joined with her husband, was set aside as against her inchoate right of dower.

In Madigan v. Walsh, 22 Wis. 501, it was held that an inchoate right of dower is such an interest in land as will enable the wife to maintain an action to establish such a contingent right, and remove a cloud fraudulently intended to be put upon it.

In Clifford v. Kampfe, 147 N. Y. 383, it was held that “the inchoate right of dower is a valuable, subsisting, separate and distinct interest which is entitled to protection, and for which the wife may maintain a separate action.” In this case a deed as against the wife’s interest was set aside at her instance as a forgery.

In Buzick v. Buzick, 44 Iowa 259, a sheriff’s sale to the husband’s son, procured by the fraudulent conduct of the husband, was set aside as against the wife’s inchoate right of dower.

In Smith v. Smith, 6 N. J. Eq. (2 Halst.) 515, a widow was awarded dower in lands which her husband conveyed just before marriage, and in fraud of her rights.

In re Turner v. Kuehnle, 70 N. J. Eq. (4 Robb.) 61, a demurrer was overruled to a bill filed by a widow for dower in lands which heT husband caused to be fraudulently sold under a foreclosure sale to which she was a party. The difference between the bid and the value of the .property was paid by the purchaser to the husband, and in overruling the demurrer Vice-Chancellor Pitney said that the fraudulent conduct of the husband could not deprive a wife of her inchoate right of dower.

It is the common practice of this court to conserve the wife’s inchoate right of dower in the surplus moneys in mortgage foreclosures, and in the husband’s dividends of the sale of lands in partition suits.

The equitable fee'in the land involved in this suit is in the husband. He paid the purchase price. Cutler v. Tuttle, 19 N. J. Eq. (4 C. E. Gr.) 549. In this estate the complainant has an inchoate right of dower.

Eone of the foregoing cases deal with the exact point raised on this motion. Some sustain the widow’s dower in lands held in trust for her husband, while others hold that a wife may maintain an action to protect her inchoate right of dower in lands, the legal title of which was in her husband, and of which right it was attempted to deprive her by lawful means. Upon principle supported by the above authorities, it seems to me that a wife’s inchoate right of dower in lands held by another to the use of her husband, may be secured to her by a bill in equity. Unless the wife acts diligently the holder of the legal title may convey the estate to an innocent purchaser, and thus estop her from claiming her dower when it should be consummate.

The motion to strike out the bill will be denied, with costs.


author: Emery, Y. C.

text:
    Public Service Corporation v. Town of Westfield.
    [Decided July 13th, 1913.]
    1. Where the jurisdiction of this court was invoked by complainant’s bill expressly on the ground of irreparable injury, and the legal rights of complainant were submitted for decision to the court at final hearing upon the basis that if they existed the complainant was entitled to protection against this irreparable injury, and the complainant itself did not by its bill or at the hearing ask that this be settled at law, nor did the defendant insist on any right to have a settlement at law, the circumstances of irreparable injury gave it undoubted jurisdiction of the case, and a right, so far as the question is one of jurisdiction, to proceed to the final determination of the cause.
    2. Where the complainant can settle the legal title by action at law, and the injury complained of is not irreparable, the court of equity, even at final hearing, and when the parties have tried and submitted the question of title to the court without objection or request for trial at law, should not ordinarily settle the title and protect it by final decree, but retain the bill until complainant had reasonable opportunity to establish its title at law.
    8. The rule is established that where the jurisdiction of the court to protect complainant’s legal title is based on the ground of irreparable damage, and the defendant, without proper objection by its answer or otherwise, goes to hearing on the merits, any rigiht to a settlement of title at law may be considered as waived and the court has, as a matter of jurisdiction, the right to settle the title at final hearing, and on the question of exercising this right instead of holding the case for settlement at law, will consider all the circumstances of the case.
    Memorandum on form of decree and application to hold cause for trial at law.

      Mr. Frank Bergen, for the complainant.

      Mr. Paul K. Oliver, for the defendant.
   Emery, Y. C.

In making the suggestion at the close of my opinion filed in this case (Public Service Corporation v. Westfield, 80 N. J. Eq. (10 Buch.) 295, 304), that if the complainant would file a stipulation to appear to any suit brought by defendant on its legal rights, I would consider an application to continue an injunction pending the trial of the suit at law, and in announcing my decision at the close of the hearing on the application, I had in mind the general course which seemed to be indicated in the late opinion of the court of errors and appeals, which was decided after the hearing in this suit. Imperial Realty Co. v. West Jersey, &c., Railroad Co., 79 N. J. Eq. (9 Buch.) 168, decided November 20th, 1911. In that case an injunction was granted oar final hearing; in this case, to restrain interference with complainant’s right of way over an alley on defendant’s laaad, and it was held, on appeal, that the aid of a court of equity in the enforcement of a legal right, the existence or extent of which is disputed, cannot be invoked until the right is settled at law, arad there being a substaaatial dispute as to the extent of complainaart’s alleged right, the decree below was reversed. • Inasmuch as the complainaait in the present suit is in possession, aaad therefore could not bring an action at law to settle the title of the land occupied by the poles, the only method of settling the title at law would be by defendant bringing the action and requiring the complainant to stipulate to appear in such action. Where the defendant is thus required to bring the suit as the only party who can raise the question of title at law, the method of enforcing such suit at law is to direct that the injunction be made permanent unless such action be brought in a reasonable time. 1 Pom. Eq. Rem. § 506, citing Echelkamp v. Schrader, 45 Mo. 505.

On further consideration, and before signing any order on the application, the question arose whether there is not a jurisdiction in equity to settle the legal title on its own final decree in this case upon the ground that its jurisdiction on the original bill is really based on the question of irreparable injury —a clearly settled ground for jurisdiction. This would seem to be the distinction which is drawn in the previous decisions of the appellate court which were relied on in the Imperial Realty Co. Case as settling the law. These cases were Todd v. Staats, 60 N. J. Eq. (15 Dick.) 507; Borough of South Amboy v. Pennsylvania Railroad, 77 N. J. Eq. (7 Buch.) 242; Mason v. Ross (1910), 77 N. J. Eq. (7 Buch.) 527. In Mason v. Ross the decision of the court in Hart v. Leonard, 42 N. J. Eq. (15 Stew.) 416, was referred to as specifying the exceptional classes of eases in which equity had power to entertain jurisdiction over legal rights and enforce them. Among these classes are—at p. 420 (6) “those where the object of the bill is to prevent an injury which will be destructive of the inheritance, or which equity deems irreparable, i. e., one for which the damages which may be recovered according to legal rules do not afford adequate compensation.”

The wrongful removal of poles in actual use for the jDurpose of supplying electric light or telephone and telegraph service, belongs to this class considered as irreparable injuries. American Union Telegraph Co. v. Town of Harrison (Vice-Chancellor Van Fleet, 1879), 31 N. J. Eq. (4 Stew.) 627 (at p. 629).

The jurisdiction in this suit was invoked by complainant’s bill expressly on this ground of irreparable injury, and the legal rights of complainant were submitted for decision to the court at final hearing upon the basis that if they existed the complainant was entitled to protection against this irreparable injury. The complainant itself did not either by its bill or at the hearing ask that this be settled at law, nor did the defendant insist on any right to have a settlement at law. The question, therefore, is whether the court of equity has not in cases of this character, where the circumstances of irreparable injury gave it undoubted original jurisdiction of the case, a right, so far as the question is one of jurisdiction to proceed to the final determination of the cause. Where the complainant can settle the legal title by action at law, and the injury complained of is not irreparable, the court of equity, even at final hearing, and when the parties have tried and submitted the question of title to the court without objection or request for trial at law, should not ordinarily settle the title and protect it by final decree, but retain the bill until complainant had reasonable opportunity to establish its title at law. Todd v. Staats, 60 N. J. Eq. (15 Dick.) 507; Delaware, Lackawanna and Western Railroad Co. v. Breckenridge, 55 N. J. Eq. (10 Dick.) 141, 150; affirmed, Ibid. 593 (1897).

As hearing upon this question of jurisdiction in equity to settle disputed legal title at final hearing, I have examined all of the cases cited by Mr. Justice Dixon in Hart v. Leonard, under class (6), cases of destruction to the inheritance or “irrep^ arable injury,” and find that, with one exception (Zinc Company v. Franklinite Company, 13 N. J. Eq. (2 Beas.) 322, and 15 N. J. Eq. (2 McCart.) 418), every decision was rendered on an application relating to preliminary injunction, and these decisions, applied strictly as precedents, may, undoubtedly, be placed on the auxiliary jurisdiction for protection of .property pending the establishment of the legal title. But in none of those preliminary injunction applications does the application seem to have been put specially on the ground of protection pending settlement of title at law, or -upon any ground other than that relating to the legal title of the respective parties as a matter to be determined either upon the motion itself or upon final hearing in the court of equity. In four of the cases referred to, the court of chancery, after granting preliminary injunctions, settled on final hearing the disputed legal title: Zinc Company v. Franklinite Company (Chancellor Green, 1861), 13 N. J. Eq. (2 Beas.) 322, 350; Johnston v. Hyde (Chancellor Runyon, 1880), 32 N. J. Eq. (5 Stew.) 446; Fulton v. Greacen (Vice-Chancellor Van Fleet, 1886), 44 N. J. Eq. (17 Stew.) 444; Lord v. Carbon Iron Co. (Vice-Chancellor Van Fleet, 1886), 42 N. J. Eq. (15 Stew.) 157; and in two of these the court of errors and appeals also established the legal title on appeal—Zinc Company v. Franklinite Company (1862), 15 N. J. Eq. (2 McCart.) 418; Johnston v. Hyde (1881), 33 N. J. Eq. (6 Stew.) 632. In the'appellate court the Zinc Company Case, however, was decided as one involving the equitable as well as legal title, 15 N. J. Eq. (2 McCart.) 436. The jurisdiction of the court of equity in cases of irreparable injury, to establish at final hearing the legal title where the right to its establishment at law is not asserted by the answer, is confirmed by the earlier decisions of the court of errors and appeals—Holmes v. Jersey City (Court of Errors and Appeals, 1857), 12 N. J. Eq. (1 Beas.) 299; where the question of legal title, involving as it did a mere question of law (at p. 310), was finally decided upon the application for a preliminary injunction which was made permanent, and the decree of the chancellor dissolving the injunction was reversed. In Morris Canal and Banking Co. v. Jersey City (Chancellor Williamson, 1859), 12 N. J. Eq..(1 Beas.) 253, irreparable damage was expressly relied on (at p. 263) as an exception to the general rule that the court would not settle questions of legal title, and the failure of the defendant to assert in the answer an objection to the jurisdiction on this ground and coming to hearing on the merits was held to be a waiver of any objection to jurisdiction— following on this point Holmes v. Jersey City, supra. The chancellor established complainant’s legal title on final hearing, and on the appeal, the court of errors and appeals—12 N. J. Eq. (1 Beas.) 547 (1859)—reversed the decree, and dismissed the bill, on the merits of the ease, considering and settling the legal -title. Chancellor Green, in Zinc Company v. Franklinite Company, 13 N. J. Eq. (2 Beas.) supra, after stating that the course «most consistent with the practice and inclination of the court, where an injunction (to protect against irreparable damage) was granted, was to have the right tried at law, held, that on account of the peculiar circumstances of the case, the question of legal title should be decided at final hearing, and the chancellor and the court of errors and appeals on appeal did settle the legal title, as well as the equitable title, which was also involved. These decisions of the court of errors and appeals, earlier than Hart v. Leonard (a case not involving irreparable damage), seem to establish the rule that where the jurisdiction of the court to protect complainant’s legal title is based on the ground of irreparable damage, and the defendant, without proper objection by its answer or otherwise, goes to hearing on the merits, any right to a settlement of title at law may be considered as waived and the court has, as a matter of jurisdiction, the right to settle the title at final hearing, and on the question of exercising this right, instead of holding the case for settlement at law, will consider all the circumstances of the case. With these qualifications, the exception as stated in class (6) in Hart v. Leonard is applicable to the exercise of the jurisdiction on final hearing. In the later eases above referred to in its opinion (Imperial Realty Co. v. West Jersey Railroad Co.), the court of errors and appeals, of its own motion and without regard to the waiver or consent of the parties in going to final hearing or other special circumstances in the cases, declined to-exercise jurisdiction as at final hearing on appeal, and either dismissed the bill where the-jurisdiction in equity had been objected to, or held the cause for settlement of title a-t law where objection had not been made below. But in none of these cases was the prevention of irreparable damage the object of the suit, and, therefore, it should not be considered that any of these later decisions overruled, or was intended to overrule, the practice previously established in this class of cases. The view generally taken in other states is that the court of equity having taken jurisdiction to protect against irreparable injury, has the right to do complete justice and settle t-he conflicting title. 1 Pom. Eq. Rem. § 506.

The application (which was made pursuant to the .original suggestion of the court) should be denied. In view of the nature of the questions involved, which are purely matters of law, there can be no question, I think, that the ends of justice would be better sustained by an immediate settlement of the disputed questions here, and on appeal from the chancery decree, than by a delayed settlement through another action at law, with a final appeal to the same appellate court.

The application will therefore be denied and decree will be advised dismissing complainant’s bill on the merits of the case.


author: Emery, V. C.

text:
    The Germania Building and Loan Association of the City of Newark v. B. Fraenkel Realty Company et al.
    [Decided July 24th, 1913.]
    1. While a mortgage to secure future advances is valid, yet, if it is optional with the mortgagee whether to make future advances or not, those made after notice of a subsequent encumbrance or transfer are not a prior lien.
    2. 8 Oomp. Stat. 1910 pp. 8302, 8808 §§ 11/, 15, limiting the right of the mortgagee under advance money mortgages given to secure building loans to claim only for moneys applied to the erection of the -building, &c., while applicable between a lien claimant and the mortgagee, does not apply as between the mortgagee and mortgagor and those claiming under the latter by assignment, whose rights are governed by the principles relating to advance money mortgages.
    3. Where a building and loan association accepted an advance money mortgage to secure a building loan, the association’s right to control the application of the advances, when made, was only incidental to its right to sufficient security for the loan, and was a right, the exercise of which, as between it and the mortgagors, was optional with the association.
    4. Where a realty company had executed an advance money mortgage to a building and loan association to obtain money to erect buildings, the realty company's right to future advances, under the mortgage was an assignable property right, and, having been in part assigned, the assignee was entitled to receive the advances covered by the assignment as against grantees of the property who had notified the mortgagee not to make further advances.
    5. After a valid assignment of future advances to be made under an advance money mortgage to a building and loan association, neither the assignor nor a subsequent assignee, standing on their rights, is entitled, as against the prior assignee, to revoke the assignment.
    G. Where a mortgagor, under an advance money mortgage to a building and loan association, directed the association to pay to a lumber company $582.50 out of the third payment on the mortgage and a similar amount out of the fourth payment, making a total of $1,165 in two mortgages, &c., it was a sufficient equitable assignment; the test being whether the contract authorized the depositary to pay the fund directly to the assignee without further intervention of the debtor or party originally entitled thereto.
    7. A mortgagor under'an advance money mortgage to a building association directed the association to pay a lumber companji- $582.50 out of the third payment and a similar amount out of the fourth payment.— Held, that the order was not invalid because no further payments outside of the order were made on the mortgage; the association being bound and having held itself in readiness to make advances demanded until default of the mortgagor or abandonment of the contract, &c., so that, the contract for future advances being in force at the time of the assignment, the first payment thereunder would operate as the third payment, and the fourth payment, out of which the balance was payable, would become due at the latest when the association directed the commencement of foreclosure proceedings.
    Heard .on bills, answers and cross-bills and replications and proofs.
    These two cases (consolidated for the purpose of hearing) are foreclosures of two advance money mortgages given to a building and. loan association by a realty company, one of its shareholders, on procuring the loans, and the principal question is whether a certain order given by the realty company on thie association for $1,165, which order was paid by the association, can properly he charged as an advance under the mortgages. The propriety of the payment and the validity of the order is disputed by the answers and cross-hills of the realty company and of grantees to whom the realty company conveyed its interest in the mortgaged premises and shares of stock after the making of the order and with notice of it, hut before its actual payment of the association. The payment was made after notice of the conveyance by the realty company. The right to deduct the payment depends, in my judgment, upon the decision of the question whether, as between the mortgagor and conflicting claimants under it, the association was bound to pay the order as an equitable assignment prior in time to the conveyances and not postponed by any special equities of the subsequent grantees. The facts proved at the hearing are in detail substantially as follows:
    On or about July 21st, 1910, the Fraenkel Realty Company executed and delivered to the complainant, the Germania Building and Loan Association, two mortgages securing $4,500 each upon two separate properties, 203 and 205 Runyon street, Newark. The loans were taken out in connection with the ownership of shares in the association, and in the application for one of the loans of $4,500, in answer to the question, “Is any portion of this loan to be used in improving the property?” The answer was, “To be used to erect houses.” The applications were granted, the applicant agreeing *to pay a bonus or premium of two per cent, besides expenses of preparing and approving the necessary papers by counsel of the association. The applications were made on May 16th, and the loan was directed to be made on May 16th, 1910. Bonds and mortgages in the usual form on loans to members were prepared and executed. The bonds (in the penal sum of $9,000 each) were conditioned only for the payment monthly of $23 (dues on the twenty-three shares of the association), and $22.50 interest at six per cent, on the principal sum of $4,500, and also fines, forfeitures and other payments due as holders of the shares, and with the further provision that on six months’ default in the payment of interest, the principal sum should become due at the option of the association. The' mortgages (in the usual form) secured payment as provided in the bonds. The bonds and mortgages were dated June 20th, 1910, and the first monthly payment was fixed for July 11th, 1910, but the mortgages were not acknowledged until July 14th, 1910, and together with the bonds seem to have been actually delivered on or about July 19th, 1910, when the first payment or advance of $3,000 less dues and interest upon the mortgages was made to the realty company pursuant to the application. . The mortgages were recorded July 21st, 1910. By two written assignments, dated June 28th, 1910, the realty company also assigned to the association its right in the shares -of stock (represented by two separate certificates for twenty-three shares each), each assignment being “as collateral security for a loan of forty-five hundred dollars on bond and mortgage.” These assignments were delivered to the association with the bonds and mortgages. At the time of the original application, and of the execution of the mortgages, houses were in the process of construction and the mortgages were intended by the parties as mortgages not to secure the immediate loans of the money, but future advances thereon, up to the amount of $4,500 on each mortgage less the premium and expenses. This understanding is clear from the acts of the parties under the application and mortgage, and by the granting of the loans and the execution and delivery of the assignments of shares and bonds and mortgages under it, the association became obligated, in my .judgment, to make to the mortgagee the future advances for which it received and held the securities. As to the terms and conditions which (as between the mortgagor and mortgagee) these advances were to be made, there is no evidence of any formal agreement by writing or otherwise, and the only agreement as to these terms and conditions is the implied condition, derivable from the nature of the transaction and the status of the parties in reference thereto, and the subsequent conduct of the parties relating to the advances. The advances being intended to be made on buildings in the course of construction which (as appears by the application for loans) constituted the main security for the loans, and the statutes relating to loans by the association to its members being limited to first liens of eighty per cent, of the value of the real estate (P. L. 1906 ch. 54l Qomp. Slat. p. 840 § 24), it is clear that the conditions as to future advances must be held to have contemplated that at the time of making any future advances, the building and loan association had the right to require that the property should be free from liens and of a value twenty-five per cent, above the advance. Upon making the first advance of $3,000, on July 18tli, 1910, a committee reported in favor of making an advance of $1,500 on each house, and before making it, the realty company delivered releases of existing liens or postponement of any mechanics’ liens “then existing or thereafter arising” for work or materials furnished for the erection of the buildings on the mortgaged property. These were dated July 1st, 1910, and the postponement of existing or future liens was signed by J. N. Holloway & Company (among others), to whom a few hundred dollars were then due, and the release (of existing liens only) was signed by Wolf, Stewart & Company (among others), to whom the realty company at that time owed about $685 for materials furnished foT these buildings, and to whom also B. Fraenkel owed at that time an individual account for material furnished by them to him for other buildings. On signing this release, and from the $3,000 payment to the realty company, Wolf, Stewart & Company received a payment of $1,000 by the check of Mr. Gurney (the solicitor of the association), dated July 23d, 1910, payable to the realty company and endorsed to Wolf, Stewart & Company. This payment was credited by Wolf, Stewart & Company, not to the realty company account, but to Fraenkel’s individual account, and therefore still left the realty company in debt for the $685 due on the materials already furnished for the buildings in question. Out of the first payment of $3,000, the checks given by Mr. Gurney to the order of the realty company (after endorsement by Fraenkel as president) were endorsed by him individually and apparently deposited to his individual credit, to the extent of $1,568, the association not undertaking through its attorney to supervise or be responsible for the appropriation of the money received by the realty company on the delivery by Fraenkel of the releases and postponement of liens. On Aug-ust 12th another payment of $2,000 on account of the mortgage was made by a check of that date, given by the association, payable “to the order of B. Fraenkel Realty Co., or Charles B. Gurney, Atiy.” This check was delivered to Mr. Gurney, the attorney of the association, and after endorsement as attorney, deposited to the credit of his individual account in the Federal Trust Compaq. The minutes of the association do not show any other report by the committee than a report of progress, or any direction bjr the committee or the board for this payment to the realty company on the mortgage. The payment, however, was made and Mr. Gurney subsequently gave his checks, dated August 13th, 1910, one of $300 and one of $1,700, to the order of the realty company, which checks were after similar endorsements, apparently deposited or used by B. Fraenkel individually. No further releases or postponements of liens seem to have been delivered in connection with this further payment to the realty company. On August 23d, 1910, the realty company (by Fraenkel, its president) signed and delivered to J. N. Holloway, then trading as Union Lumber Company, the following order:
    “Newark, N. J., Aug. 23, 1910.

      “Germania B. <G L. Assn.,

      “Newark, N. J.:

    “You may please pay to Union Lumber Co. $582.50 out of 3rd payment and $582.50 out of the 4th payment, total $1,165.11 on (2) mortgages $4,500 each now being' taken b3- 3'ou on properties 203 and 205 Runyon St, Newark, N. J.
    “B. Fraenkel Realty Co.,
    “B. Fraenkel, Prest.”

    At the time of receiving the order, notes of the realty company liad been given to the Union Lumber Company for the amount, one of which, for $448, was due on the date of the order, and two others due thereafter, one for $522.11, due September 14th, and one for $195, due September 2d. The Union Lumber Company signed on August 23d an agreement that on payment from the loan association of the order for $1,165.11 on that date, they would return their notes. Shortly afterwards Holloway,- individually, and trading as Union Lumber Company, assigned to Herman C. Schneider, his claim of $1,165.11 against the realty company and also the above order, authorizing him to sign all releases and give all acquittances and receipts for the same to any claims for lumber sold to the realty companj'' for said houses. This assignment, expressed to be for one dollar and other valuable considerations, was actually signed and delivered after the date of the order. (August 23d), but was dated August 15th, 1910, by direction of Mr. Schneider, in order to make it of a date of some claim lie liad against Mr. Holloway. Mr. Schneider seems to have had business dealings with Holloivay and the Union Lumber Compan}1, and says that he received many notes from the Union Lumber Company, but cannot tell whether he received the three notes referred to in the agreement of August 23d. This order does not seem to have been.formally presented to the association at the time of its delivery, but it was delivered with its assignment to Mr. Schneider, who, at that time, was and still is the president of the association. On September 23d, 1910, the association drew another check for $4,000 (being the amount of the balance of the entire loan of $9,000), this check being like its previous checks, drawn payable “to the order of B. Fraenkel Realty Co., or Charles B. Gurney, Atty..” and it was delivered to Mr. Gurney. Payment of this or any other amount on account of the loan was not directed to be made by the directors or officers of the association, and Mr. Gurney’s statement is that the check was given for the purpose of closing the books for the annual statement, and making the statement of loans agree with the secretary’s annual report. The final payment on the loan could not, according to the usual practice of the association, have been, made until after the buildings were finished and the payment was recommended by the committee in charge of the loan and the approval of the board. At filis time the buildings were not finished, and after-wards and before any further payments to the realty company, as contemplated bjr the order, the realty company discontinued work on the buildings, and by assignments dated January 7th, 1911, assigned 'to Wolf, Stewart & Company and Vreeland-Kearney Lumber Company, defendants in this suit, its interest in the stock of the association assigned by it as collateral security for the two loans of $4,500 each, and authorized and directed the association to credit all past and future payments on the stock to the assignees, and also to pay to' the assignee the balance of the money due to it on account of the loans. Subsequently, and by deed dated January 24th, 1911, the realty company conveyed to the same persons the mortgaged premises “expressly subject to all encumbrances now thereon.” These transfers were made, as Fraenkel and Wolf both say, upoh an agreement that the grantees were to take over what the realty company hacl and finish the buildings. Fraenkel says also that the grantees were to sell the buildings, pay all the claims, and if there was any surplus, turn it over to him. At the time of the conveyance, the realty company still owed to Wolf, Stewart & Company, one of the grantees, $685, and also owed the other grantees, the Vreeland-Ivearnev company, for materials furnished the houses, but the amount then due therefor to this company is not proved. On taking the conveyance no additional consideration was given, and according to the evidence of Mr. Schneider, which is not controverted by Mr. Wolf, the latter, at the time of taking the conveyance, knew that the order to the Union Lumber Company for $1,165 had been previously given by the realty company. At the time of these conveyances, by which the realty company turned over the premises, the buildings were unfinished, but the realty company had, according to FraenkeFs evidence, expended over $8,000 on the buildings, besides $1,000 for the lots. On January 26th, 1911, two days after the date of the deed, Mr. Gurney, who had retained the cheek of the association for $4,000 since its delivery to him, September, 1910, deposited the check to the credit of his personal account in the Fidelity Trust Company. On the 6th of February, 1911, a special meeting of the association was called, of which Mr. Wolf had notice, and at which the matter of paying the order for $1,165.11 was taken up. Mr. Wolf at this meeting protested against the payment of the order until after the buildings were finished, and either at this meeting or before, the association seems to have been notified of the transfer of the mortgaged premises and of the shares by the realty company, and that the grantees proposed to'finish the buildings. And at this meeting Mr. Schneider applied for payment of the order, and offered his personal bond for $18,000 to secure the association against losses on the loans, and also agreed to complete the. buildings ■ “'against the lumber bill of Holloway Lumber Company, $1,165.” Over the protest of Mr. Wolf, and declining to hear his counsel, who had attended for the purpose, the board directed the payment of the order, and pursuant to this direction Mr. Gurney, on the following day, gave his check for the amount of the order, $1,165.11, to Schneider, the bond of Mr. Schneider having been given. On the 20th of February, a written notice was served on the association, on behalf of Wolf, Stewart & Company, the Yreeland-Kearney Lumber Company and the realty company, notifying them (among other things) that the lumber company and Wolf, Stewart & Company held the legal title to the mortgaged premises and were the owners of the stock given to the association as collateral for the two mortgages of $4,500 each; that these mortgages were for construction loans to be used in erecting and finishing the buildings, and that the amount still due on the mortgages was not sufficient to finish the buildings and pay the order of the lumber company assigned to Mr. Schneider, the president of the association; that only a small part, if any, of the amount represented by the order, was for materials used in the buildings, and that the order was void and of no effect. The'notice also demanded a statement of the amount due on the mortgages, and that the association use the amount represented by the mortgages in finishing the buildings and the (payment of the) lien claims against them. After their protest and notice, the grantees proceeded to finish the buildings at their own expense, Wolf, Stewart & Company expending $1,263.69, and the other grantees, $2,091.55. Plans and specifications for the buildings to be constructed had been given to the association on the application for the loan, and according to the estimates on these plans, made by the realty company, the value of the buildings was to be $11,400. The committee in granting the loan estimated their value at $10,400. Assuming FraenkePs evidence, which is not contradicted, to be correct, that he had expended $8,000 on the buildings at the time of transferring the property, and taking cost as a basis of estimating the value at the time of ordering the payment of $1,165.11, on February 6th, 1911, the advance of this additional amount would clearly have been within the statutory limit of eighty per cent, of the value of the property. The dues and interest on the shares, while the realty company held them, had been retained by Mr. Gurney on the moneys received by him for payment to the realty company, and the dues and interest for August and September, 1910, being $182, as well as the premium, on the loan, were charged by him against the payment of $4,000 made to him by the cheek of the association on September 23d, 1910, under the circumstances above stated.
    Neither the realty company nor its assignees and grantees ever paid any interest or dues, as required by the terms of the bond and mortgage, after September, 1910, and on July 17th, 1911, after more than the six months’ default limited by the mortgage, the association exercised its option under the mortgage of declaring, the whole principal due, and directed bills to foreclose the mortgages, which were filed August 14th, 1911.
    On August 21st, 1911, Mr. Gurney returned to the association the balance of the $4,000 payment made to him in September, 1910, after deducting the payment of the order.
    Complainant claims as due upon the mortgages the amounts actually advanced to the realty company thereon, including the $1,165 order, together with the premium on the loan and interest and dues, payable under the terms of the mortgage, up to July 17th, 1911, being $7,002.59, with interest on that sum from that date.
    Defendants deny the validity of the payment of the order as an advance under the mortgage, and also claim that only the actual advances to the realty companjf are recoverable under the

      Mr. Charles B. Gurney and Mr. Frank E. Bradner, for' the complainant.

      Mr. Hugo Woerner, for the defendants.
   Emery, V. C.

(after statement of facts and issues).

Mortgages to secure future advances are valid, but where it is entirely optional with the mortgagee, whether to. make future advances or not, advances made after notice of a subsequent encumbrance or transfer are not chargeable. Heintze v. Bentley, 34 N. J. Eq. (7 Stew.) 562, 566 (Court of Errors and Appeals, 1881). This case at bar raises the different question as to the rights of conflicting claimants under the mortgagor where, on the delivery of the mortgages the advance was not optional. On the facts above stated, and in view of the application for loan and the granting thereof, and the actual execution and delivery of the bonds and mortgages, it is clear that the mortgages in question were mortgages upon which the mortgagee, the association, was obligated on its part to make advances to the realty company to the extent of the mortgages. That the mortgages were of this character is not contested by defendants’ brief, but the right to charge the payment of the order as an advance under the mortgage is disputed upon several grounds:

First. Because the association had no right to make advances or pajnnents under the mortgages, except for the payment of debts incurred in the erection of the houses on the mortgaged premises. If this were a question between lien claimant and mortgagee under their lien law, as to their respective rights under advance money mortgages (P. L. 1895 p. 313), the objection might be good, but as between mortgagee and mortgagor and those claiming under the latter by assignment, the provisions of this statute limiting the mortgagee’s rights are not applicable, and their rights are to be governed by the general principles relating to advance money mortgages. Any right of the association to control over the application of the advances was only incidental to their right to sufficient, security for the loan, and was a right, the exercise of which (as between them and the mortgagors) was optional as being intended solely for their protection.

It was not a right which the association could be required to exercise for the benefit of the mortgagors, or as between adverse claimants under them. On none of the previous advances had any such right of control been recognized, and the realty company on receiving them had apparently used them (or' a large part of them) to pay debts not arising out of the construction of the buildings, and $1,000 of the first advance was paid to Wolf, Stewart & Co., who applied it to Fraenkel’s individual account,, leaving the amount then due for material used in the buildings ($685) still unpaid, and due when they took over the property.

Second. Because it was an advance made after notice of the conveyance of the premises subject to the mortgages to the delend ants and against their protest. This contention is based on the claim that the grantees took the premises subject only to the advances then actually made by the mortgagors, and ignores any rights in the mortgagors, or those claiming under them, to any of the future advances, except to the extent to which these rights have been actually realized or carried out, at the time of the conveyance. As it seems to me, this claim is not well founded, and for this reason: The right of the mortgagor at any fixed or specific time to future advances under the mortgage is a property right existing at that time, and as such is, in equity at least, assignable. And when the mortgagor has duly assigned, either wholly or in part, his right thereafter personally fo receive the advances, the assignee is entitled to receive the advances from the mortgagee, and is so entitled by virtue of the assignment and as deriving right thereto at that time.

As to the vesting and priority of estates and rights the general rule applicable both in law and equity, as between the assignor or.those standing in his stead and the assignee is "qui prior est tempore potior est jure.” Jenkinson v. N. Y. Finance Co., 79 N. J. Eq. (9 Buch.) (1911).

The precise question then is not, as defendants claim, whether under a mortgage for future advances, the mortgagor or his grantees have generally the right to require future advances to be discontinued, but whether the mortgagor having assigned to! one person for value the right to a portion of the future advances to which he is at the time of the assignment entitled, has himself the right to revoke the order or does, by a subsequent conveyance of the mortgaged property to a grantee standing only on the assignor’,s rights, confer on such grantee the right to countermand the advance previously directed by the grantor, and solely upon the ground that it has not been paid.

The grantees of the mortgaged property in this case were also assignees of the shares of stock and of the mortgagor’s- right to future advances payable by the mortgagee after the assignment, and having notice of the previous assignment, stand in the stead of the assignor, and payments on orders previously given which were valid assignments as against the realty company, are also valid as against them.

My view is that after a valid assignment of future advances neither the assignor nor the subsequent assignee, standing only on his rights, has the right, as against the prior assignee, to revoke the assignment. This conclusion leads to the consideration of the third objection.

Third. That the order itself does not operate as an equitable assignment. Neither of the two reasons relied on to support this objection is valid. The first is that the order is not an imperative direction for payment out of any fund, its language being: “You may please pay to Union Lumber Company $582.50 * * * out of third payment, and $582.50 out of fourth payment, total $1,165.11, on two mortgages,” &e. No particular form of words is necessary to constitute an equitable assignment, and if the writing or act indicates the intent of the assignor to make an appropriation of the fund or part of it, it will in equity be enforced as an assignment. Weaver v. Atlantic Roofing Co. (Vice-Chancellor Grey, 1898), 57 N. J. Eq. (12 Dick.) 547, and cases cited (at p. 553). The test to be applied in the case is whether the contract or agreement in question between the assignor and the assignee authorized the depositary of the fund to pay it directly to the assignee without the further intervention of the debtor or party originally entitled to it. Lanigan v. Bradley & Currier Co. (Vice-Chancellor Pitney, 1892), 50 N. J. Eq. (5 Dick.) 201, 206. Treated merely as a matter of its construction, the written order meets this test. So1 far as the form of the order is concerned, and for the purpose of directing control of the fund, authority to the depositary to make the payment to the assignee is equally effective with a positive direction to pay. And where there is a good consideration for the assignment, the real nature of the transaction rather than the mere form of it, including all the acts of the parties in reference thereto, as well as the written documents must, as between them, be considered to decide the question of assignment. Malcolm v. Scott, 8 Jur. 283; 3 Har. 39 (Vice-Chancellor Wigram, 1844). The Union Lumber Company, the name under which J. N. Holloway carried on business, had furnished materials for the construction of the building at the time of the first $3,000 payment to the realty company under the mortgage, and had for the realty company’s benefit postponed its existing and future liens to the mortgages in question, in order that it might receive this payment. And at the time of receiving the order in question the lumber company further agreed upon payment to deliver up certain notes of the ¡realty company, one of which was due on the receipt of the order. Substantially the order was delivered as security for existing and future debts for part of which security was released, and it was therefore upon good consideration. The second reason urged against the validity of the order as an assignment is that the order authorizes or directs payment out of the third and fourth payments on the mortgages, and it is claimed that as no further payments (outside of the order) were ever made under the mortgage, the orders were not according to their terms ever effective. There has been no proof as to> any agreement between the realty company and the association in reference to the number and time of payments, and as to number of payments the only proof is that by two previous payments a portion of the advances had been made. At the time of giving the order the realty company were proceeding in the construction of the buildings and the association also still held itself in readiness to make the advances, and did,in fact subsequently and while the realty company was still constructing the buildings, set aside funds by its check to Mr. Gurney for the balance of the advances. The association on its part was obligated to continue the mortgage as one for future advances until b}7 six months’ default of the realty company or its assignees and grantees to make the payments required by the mortgage, or for some other abandonment of the contract by the mortgagor, the principal of the mortgage became due and the contract for future advances terminated by the act of the realty company or its grantees. At the time of directing the payment the obligation for future advances was still in force and the right to them had been assigned to and was held by the grantees who gave notice of their rights. The grantees protested against the payment of the order at any time or out of any funds, on the ground that if paid there would not be money enough left to finish the buildings, but did not then abandon or give up the contract for future advances under the mortgage. The subsequent abandonment of the contract for future advances by the grantees, by their failure to make the payments called for by the mortgages, did not give them or tbe realty company the right as against the association, or against the prior assignees of the future advances, to set up that the time for third and fourth payments never arrived. If the contract for future advances was in force, the payment in question was in fact the third payment, out of which one-half of the order was payable, and tbe fourth payment, out of which the balance was payable, would become due, at the latest, when the foreclosure was directed, and the whole amount of the order being then due and payable, tlic complainant ivas then entitled to1 recover the amount paid on tbe order as an advance to the realty company under the mortgages.

Decree including this payment will be advised, and the amount due will be settled on the usual basis, including interest, dues, &c., up to the time of complainant’s exercising its option of declaring the principal due because of default.