text:
    Hoover Steel Ball Company, a corporation, v. Schaefer Ball Bearing Company, a corporation.
    [Decided May 29th, 1919.]
    1. After decree in foreclosure of a mortgage interest runs, on the decree, as matter of damages for the detention of the debt at the legal rate.
    2. Whether interest, after maturity of the debt secured by mortgage in the absence of express provision, runs as an incident of the contract, or as matter of damages, before judgment, query?
    3. Interest as matter of damages is charged and allowed in accordance with principles of equity in order to accomplish justice in each particular case.
    4. The rule is that interest on claims against an insolvent corporation whether allowable as matter of contract or of damages, but certainly where allowable only as. matter of damages, ceases to run upon' the property being taken in custodio legis, and this rule applies as well to preferred as to general claims. The rule is subject to its exceptions and in each case the question is what is fair jn right and justice.
    5. The rule that where a creditor has a lien upon specific property by contract he is entitled to receive from the specific property the amount due him with interest, if provided for by the contract, is subject to its exceptions and the solution of the question may depend upon the nature of the events which prevented payment.
    O. Mortgagees having a lien upon property of an insolvent corporation by decree in foreclosure, at the time of the appointment of a statutory receiver, which property was sold in the insolvency proceedings free of the lien, the lien attaching to the proceeds, the proceeds being more than sufficient to satisfy the amount of the decree with interest, were allowed interest to the date of the payment of the purchase price to the receiver, it not appearing that delay in disposing of the property was occasioned by litigation as to the validity or extent of the lien. After payment to receiver, the mortgagees are entitled only to such interest as ma.y have been actually earned by the portion of the purchase price upon which the lien attached.
    Oil bill, &c.

      Messrs. Bilder & Bilder, for the receiver.

      Mr. Ilenry Smith, for the mortgagees.
   Lane, V. C.

The controversy is between mortgagees of real estate of the insolvent corporation and the' receiver as to whether interest should he allowed on the claims of the mortgagees to the date of the adjudication of insolvency or to the date of payment to the mortgagees. At the time of the adjudication of insolvency and the appointment .of the receiver mortgages upon its real estate had been foreclosed and sale had been advertised by the sheriff under a writ of fieri facias issued on a final decree. The receiver represented to the court, among other things, that there was a dispute as to the property, subject to the operation of the decree and fieri facias. Certain property was claimed by the receiver to he personal chattels, and by the mortgagees to be fixtures. The court thereupon stayed the sale under the fieri facias and directed the disposal of the property under the provisions of section 81 of the act concerning corporations. 2 Comp. Stat. p. 1649. An amount more than sufficient to satisfy the decree in favor of the mortgagees with interest was raised from the sale of the property, but, as I understand the law, interest is allowed on a decree as matter of damages for the detention of the debt. There is no statute in 'this state that I am aware of specifically covering the subject. The practice is, on the foreclosure of a mortgage, to allow interest from the date of the decree at the legal rate to the date of payment. Interest runs not at the rate provided in the mortgage- or bond but at the legal rate. Wilson v. Marsh, 13 N. J. Eq. 289; Cox v. Marlatt, 36 N. J. Law 389; Deshler v. Holmes, 44 N. J. Eq. 581; Moore v. Durnan, 70 N. J. Eq. 1. See, also, 1 Jones Mort. (7th ed.) § 74;"27 Cyc. tit. “Mortgages” 1657; Wilson v. Cobb, 31 N. J. Eq. 91; 19 R. C. L. tit. “Mortgaged’ 569 § 380;

In England the early practice was, as is our practice now, to allow interest upon the full amount of the decree which itself might include interest. Brown v. Barkham (1720), 1 P. Wms. 653; 24 Eng. Reprint 555; Perkyns v. Baynton (1784), 1 Bro. C. C. 574; 28 Eng. Reprint 1305. The later practice appears, to be to allow interest only on so much of the decree as represents principal. Whatton v. Cradock (1836), 1 Keen 267; 48 Eng. Reprint 309; Whether the practice in England has been changed since the last case cited I do not know.

Whether interest after maturity of the debt secured by the mortgage, in the absence of express provision, runs as an incident of the contract or as matter of damages before judgment seems to be the subject of dispute. 1 Jones Mort. (7th ed.) § 74; Brannon v. Hursell, 112 Mass. 63; Brewster v. Wakefield, 22 How. 118. The point is not before me for decision.

Interest on the decree being allowed as matter of damages, the language of Vice-Chancellor Stevénson, in Agnew v. Board of Education, 83 N. J. Eq. 49; affirmed by the court of errors and appeals on the vice-chancellor’s opinion (83 N. J. Eq. 336), is applicable. He said (at p. 67) : “It should be borne in mind that the whole tendency of courts of law and courts of equity for a considerable period of time, has been to break away from hard and fast rules and charge and allow interest in accordance with principles of equity, in order to accomplish justice in each particular case.” See, also, Hills v. Aetna Life Insurance Co., 39 N. J. L. J. 132 (opinion by Circuit Judge Speer); Le Branthwait v. Halsey, 9 N. J. Law 4; Backus v. Crane, 100 Atl. Rep. 900; 15 R. C. L. tit. “Interest” 34 § 31.

The rule based on the authorities is that interest on claims against an insolvent corporation, whether allowable as matter of contract or as matter of damages, but certainly where allowable only as matter of damages, ceases to run upon the property being taken in custodio legis, and this rule applies as well to preferred as to general claims. The.rule^ however, is subject to its exceptions. In each case the question is what is fair in right and justice. 34 Cyc. tit. “Receivers” 372 § 4; Thomas v. Western Car Co., 149 U. S. 95; Chemical National Bank v. Armstrong, 65 Fed. Rep. 573; 28 L. R. A. 231; American Iron and Steel Manufacturing Co. v. Seaboard Air Line Co., 233 U. S. 261; Lippitt v. Thamas Loan and Trust Co., 90 Atl. Rep. 369 (at p. 377) (Ct.); In re Torchia, 185 Fed. Rep. 577, and In re Hershberger, 208 Fed. Rep. 94, two district court decisions, from Pennsylvania) were determined upon a peculiar statute of that state. In Pennsylvania Steel Co. v. New York City Railway Co. (Circuit Court of Appeals, Second Circuit), 216 Fed. Rep. 459, and Spring Coal Co. v. Keech (Circuit Court of Appeals, Fourth Circuit), 239 Fed. Rep. 48, the courts, while recognizing the general rule, found that the situations required, in order that equity should be done, that interest should be allowed as did the supreme court in American Iron and Steel Co. v. Seaboard, supra. It has been held that where a creditor has a lien upon specific property by contract, he is entitled to receive from this specific property the amount due him with interest if provided for by the contract. ■ But this rule also is, I think, subject to its exceptions, and the solution of the question is any given case may depend upon the nature of the events which. prevented payment. 34 Cyc. tit. “Receivers” 372 § 4; Brazelton v. Campbell (Texas), 108 S. W. Rep. 770 (at p. 773), and see cases heretofore cited. Tn the instant case the mortgagees by their decree had a lien upon specific property, but they were entitled to interest, not by virtue of the contract, but by way of damages for the detention of the debt. If they had been permitted to pursue their remedy under the decree they would have been entitled to interest to the date of payment. I do not find that any subsequent delay in disposing of the property was occasioned by the fact that the receiver raised the contention that certain of the property sought to be sold under the fieri facias was not subject to the operation thereof. If such a'delay had occurred I might have found that the mortgagees were entitled to interest only to the date of the appointment of the receiver, or to the date of his application to this court to stay'the sale under the writ of fieri facias. After the property was, in fact, sold, 'the lien of the decree was, by the terms of the order for sale, transferred from the property to the fund created by the sale. But I do not think that fund can be considered as in esse (for the purposes of this case) until actually paid to the receiver. I think that when the fund was paid to the receiver the lien of the decree was transferred to that portion of the fund •representing the amount due to the mortgagees on the decree with interest to the date of payment to the receiver. I think, in this casé, the equitable rights of the parties will be subserved -if the mortgagees are allowed interest on their decree to the date of the payment of the purchase price of the property to the receiver, and that thereafter they are entitled only to such interest as may have been earned upon that portion of the fund to which they were equitably entitled. The delay in distributing this fund, if delay there was, is due to the operation of the law.


source: Caselaw Access Project

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

license: Public Domain

text:
    Philip Rapoport v. Rapoport Express Company, a corporation.
    [Decided May 12th, 1919.]
    1. The contract evidenced by an instrument purporting to lease an automobile truck at a monthly rental, and providing that, at the termination of the period, the lessee is to return the machine to the lessor, and that the lessor will then sell the machine to 'the lessee for a consideration of one dollar, is that of a conditional sale.
    2. The court will not tolerate an evasion of the statutes requiring record of chattel mortgages and conditional bills of sales, and will look at the real transaction between the parties notwithstanding the terms of any written instruments.
    3. Where conditional bill of sale is invalid as against judgment creditors for lack of record but not against a receiver, creditors who have suits pending at the time of the appointment of the receiver will be permitted to enter judgments and the receiver directed to exercise their rights as judgment creditors.
    4. It would seem that the statute now in effect in respect to conditional sales is the act of May 9th, 1889, as amended March 14th, 1895 (1 Gen. Stat. p. 891)', and not section 71 of the act concerning conveyances (2 Comp. Stat. p. 1561).

    5. Where all installments have been paid on a lease providing for the rental of an automobile and for the sale of the machine to the lessee at the termination of the lease for one dollar, and the machine in possession of the lessee is taken by an officer at the instance of the lessor, for a claim under the Garage Lien law, and a new lease is then executed. the aggregate amount of rental being fixed by the amount due the lessor for repairs, &e., on other ears as well as on that leased, and an additional sum arbitrarily added by lessor, and the machine is then released to the lessee, the transaction is really that of chattel mortgage and the instrument not being recorded is void as against a receiver.
    (j. Must the words “attachment or levy” in section 5 of- “An act concerning conditional sales and to make uniform the law relating thereto,” passed 1919, to become effective July 4th, 1919, be confined to technical attachment or levy, or may the clause be extended to any lien acquired by operation of law or judicial process including the equitable lien acquired through the appointment of a receiver, query.

    On bill, &c.

      Messrs. Fursl & Furst, lor the receiver.

      Mr. David Boblew, for the Continental Guaranty Company and Federal Truck Company.
   Lane, V. C. (orally).

The case calls for a determination of the nature of a document alleged by claimant to be a lease and by the receiver to be either a conditional bill of sale or a chattel mortgage, and its validity as against the receiyer of an insolvent corporation appointed by this court under the statute.

The instrument is, in form, a lease purporting to be made March 22d, 1919, and by its terms the Federal Truck Company leases and demises to Rapoport Express Company a Federal second-hand truck for a period of eight months, the lessee agreeing to pay $1,793 in ten monthly installments. There is a great deal of fine printing in the instrument, almost as much as there is on the standard insurance policy. In this fine printing there is a clause reading as follows:

“The lessee further agrees that at the expiration of the lease he will surrender the said motor vehicle to said lessor in as good condition as when he received it, natural wear excepted; and if, upon surrendering the same, such installments of rental have been fully paid as herein provided, said lessee desires to purchase said motor vehicle, the said lessor agrees to sell the same for the sum of one dollar ($1.00).”

There is a further provision that if any of the rentals remain unpaid, the rights of the lessee in the motor vehicle shall cease and terminate absolutely and the payments made by the lessee shall be forfeited. If the paper is what it purports to be — that is, a lease, I can see no significance whatever in this particular clause. There would be no forfeiture because the lessee would have enjojred that for which he paid, to wit, the use of the car for the portion of the term of the lease paid for. It is quite apparent that the paper does not evidence a contract .of leasing. The real agreement between the parties evidenced by a paper such as this, is that for a certain consideration the one party sells the car to the other, who agrees to pay for it in monthly installments, title to remain in the.vendor until the installments have- been paid, and then title to vest in the vendee. The insertion of the provision for the renting of the car for the term of the lease, and then for the sale for one dollar, is merely for the purpose of defeating the provisions of the Conditional Bill of Sales act so that there will be no necessity for record. This court will not tolerate any such evasion of the statute. To hold that the paper evidences such a contract as it purports to evidence would be to- permit a fraud upon the statute and it might as well be repealed. It is insisted that I am precluded from holding this instrument a conditional bill of sale by the determination of the 'supreme court in Singer Manufacturing Co. v. Wolff Company, 70 N. J. Law 127. In that case Mr. Justice G-arretson held that an instrument in form a lease,' renting a sewing machine for a period of time upon monthly rentals was, in fact, a lease, although the total of the monthly -rentals represented the full value of the machine. He based his conclusion upon the written instrument which, in terms, provided that, at the expiration of the -time for which the machine was rented, the lessee should return it. There was no provision for sale or a transmission of title. He expressly stated: “Cases cited in which it appears that, upon the payment of the full value of the goods, the title is to be vested in the vendee, although the instruments are called leases and payments of installments called payments of rent, are not applicable to this case.” The Wolff Case, if it is to be considered as authority, must be confined to cases in which the facts aré identical. The true agreement between the parties, if other than as evidenced by the written paper, did not appear to the court. It was distinguished by tire supreme court in National Cash Register v. Daly, 80 N. J. Law 39, opinion by Mr. Justice Garrison, and by the same court in Lauter Company v. Isenreath, 77 N. J. Law 323, opinion by Mr. Justice Reed. And see the second definition of a conditional sale contained in section 1 of an act concerning conditional sales and.to make uniform the law relating* thereto, 1919, effective July 4th, 1919. The provision in tire instrument before me for-a return of the car after the payment of the rental and a sale for one dollar, palpably, did not express the true contract between the parties, and it would be a mere subterfuge to call the transaction one of leasing. In re Gaglione & Sons, 28 A. B. R. 694; 200 Fed. Rep. 81, the court said, and with its language I agree: -“To constitute a valid bailment, the intent to return the property must be evidenced by the agreement. Now, if this so appears from the writing, and it is otherwise shown conclusively that it was not so- intended, a. bailment is not to be presumed.-” And see Whitcomb v. Woodworth. 54 Vt. 544; 94 Cyc. 658; In re Unitype Company v. Long, 16 A. B. R. 285; 143 Fed. Rep. 315.

It has been held that a conditional bill of sale unrecorded is good as against a receiver. Falaenau, v. Reliance Steel Co., 74 N. J. Eq. 325; Smith v. Hotel Ritz Co., 74 N. J. Eq. 296; Cumberland Trust Co. v. Ayars & Sons Co., 83 N. J. Eq. 479. General Flectric Co. v. Transit Equipment Co., 57 N. J. Eq. 460, has been cited as authority for this proposition, but a consideration of the case indicates that what the vice-chancellor (Pitney), held was that, it not appearing that judgment creditors were protected if they become such after the record of the contract, the claim of the receiver, “who can have no higher standing than that of a judgment creditor,” was disposed of. The Falaenau, Cumberland Trust and Smith Cases are, however; directly in point, and I imagine that it must be now considered as settled for this court that a conditional bill of sale is not invalid as against a receiver because of lack of record where there are no judgment creditors.

In view of the fact that the appointment of a receiver prevents creditors from proceeding to obtain judgments, it seems to me that the receiver should be given the rights of a judgment creditor. Such contracts have been held to be invalid as against a trustee in bankruptcy. In re Franklin Lumber Co., 117 Fed. Rep. 852. In view of our decisions, it seems to me that a receiver should be given, as are trustees in bankruptcy, the rights and powers of judgment creditors, or with- respect to this particular subject-matter, the result may be accomplished by amending the act concerning conditional bills of sale and making such contracts invalid as against creditors, generally. The reasoning underlying the legislation with respect to necessity of record for chattel mortgages, is just as potent in cases of conditional sales.

While I have reached the conclusion that in this case the transaction is that of a chattel mortgage, and hence may be questioned by the receiver, I think that the creditors who have suits pending against the corporation should be permitted to enter judgments (Brockhurst v. Cox, 71 N. J. Eq. 703; affirmed, 72 N. J. Eq. 950), so that there may be parties to the record who can question the transaction if it be one of conditional sale. The judgment creditors may be directed to exercise their rights for the benefit of the receiver. By virtue of the provisions of section 2 of chapter 208 of the laws of 1919, the court may direct the receiver to exercise the rights of judgment creditors where the judgments have been obtained prior to the appointment of the receiver, and I think power also exists in the court to authorize the receiver to exercise the rights of judgment creditors where the judgments have been entered, by permission of the court, after the appointment of the receiver.

In passing it might be well to note that it would seem that by force of the decision of the supreme Court in Lauter & Co. v. O’Toole, 77 N. J. Law 29, referred to by the same court in National Cash Register Co. v. Daly, 80 N. J. Law 39, and in 84 N. J. Law 128, the statute'with respect to conditional bills of sale now in effect is not section 71 of the act concerning conveyances (2 Comp. Stat. p. 1561), but is the act requiring contracts for conditional sales of personal property to be recorded, approved May 9th, 1889, as amended March 14th, 1895. 1 Oen. 8tai. p. 891.

In this case I find that the instrument does not even evidence a cotitract of conditional sale, but rather a contract of chattel mortgage.

•It appears that the Federal-Truck Company during the year 1917, or the early part of 1918, sold to the Rapoport Express Company, under agreements similar to that at bar, three trucks; that each one of these trucks was fully paid for, ijhe last installment on the last truck having been made the day before March 22d. The Rapoport Express Company owed to the Federal Truck Company, and to others bills aggregating some $1,100 or $1,300, for repairs and for garage charges. The Federal Truck Company, the day after the last installment on the last car sold was paid, issued some kind of a paper to a constable of the county of Essex authorizing the constable to take the trucks to satisfy a garageman’s lien, and thereupon the constable took possession of the three trucks under this authority. The Rapoport Express Company expressed to the Federal Truck Company the idea that this proceeding would put it out of business and a way was sought by which the Federal Truck Company could be secured. The result was that the Federal Truck Company paid, I think, certain garage fees then due on the trucks besides other bills, and this particular paper was executed. Fow, at the time the paper was executed title to this truck was not in the Federal Truck Company. The installments had all been paid; title had vested, under the previous lease (the instrument being held to be a conditional bill of sale), in the vendee, the Rapoport Express Company; there was no revesting of title in the Federal Truck Company which would put it in the position where it could make either a conditional bill of sale or a lease. The real transaction between the parties, I think, must be looked at, and I am of the opinion that if this instrument were called either a lease or a conditional bill of sale, it would be á fraud on the Chattel Mortgage act. The result is, that I hold the paper to be a chattel mortgage,, and inasmuch as it has not been properly recorded (it has ño affidavit annexed), it is void as against the creditors and also void as against the receiver representing them.

The conduct of the parties indicates very clearly that these papers were not to.be considered leases. At the termination of the periods provided for, and after all installments had been paid, no bills of sale were given, no actual delivery back by the lessee to the lessor, and then redelivery by the lessor to the lessee. The entire scheme indicates that its purpose is to defeat the recording provisions of the Conditional Bill of Sales act. If successful, parties .may be permitted to purchase machines under some such agreement and go out and obtain credit as. if they owned them.

There is a grave question, in my mind, as to whether 'the claim of the Federal Truck Company or the Continental company as a general claim is good for the amount of $1,793. The claim was made up in part of the amount due to the Federal Truck Company. In it was included $75, for the constable paid him by the Federal Truck Company for taking possession of these three cars and then arbitrarily twenty-five per cent, of that sum was taken and added to the bill. There was absolutely no consideration whatever for this twenty-five per cent, additional. It would seem that the twenty-five per cent, added will have to be disregarded. It cannot be retained as interest. It would be usurious, and the transaction would appear to be one in which a corporation, or its receiver, may set up usury. As' I understand it, this does not affect the claim of the Continental company, which only advanced on the instrument seventy-five per cent., or less, of the $1,793, but it does affect any claim which may be filed by the Federal Truck Company. If there is an appeal, judgment creditors will be permitted to enter judgments, and the receiver permitted to proceed on these judgments and levy execution, so that he may be placed in a position where he. can question the validity of the instrument if it be found to be a conditional bill of sale by the court of errors and appeals. That court will then be in a position where it may deal with the entire situation.

My order will be that the instrument evidenced a. contract of chattel mortgage and that it is void as against the receiver.

Since writing the above my attention has been called to “An act concerning- conditional sales and to make uniform the law relating thereto/' passed by the legislature at its last session to become effective July 4th next. The contract which I am dealing with seems to fall clearly within the second definition of a conditional sale contained in section 1. I draw attention to the fact that section 5 pf the act now makes conditional sales invalid as against creditors who, without notice, acquire by attachment or levy a lien, &c. Whether these words “attachment or levy” can be considered to refer to and include any lien acquired by operation of law or judicial process, including- the equitable lien acquired by creditors through the appointment of a receiver, or whether the words must be confined to technical attachment or levy is, I imagine, going to be the subject of considerable judicial inquiry.


author: Lane, V. C.

text:
    Joseph F. McGann v. La Brecque Company, Inc.
    [Decided June 3d, 1919.]
    1. The court of chancery may enjoin a landlord from interfering with the possession of his tenant notwithstanding the landlord may have a judgment of possession in the district court in proceedings under section 107 of the act concerning district courts (¡8 Comp. Stat. p. 1988), and notwithstanding the provisions of section 113 of such act, where the remedy in an action in trespass at law is wholly inadequate.
    2. The court of chancery has jurisdiction, where the remedy at law is wholly inadequate, to entertain a bill to protect possession of land,' although there are no equitable rights involved other than the inadequacy of the remedy at law.
    3. Where it appears the subject of dispute is a storage warehouse, that complainant cannot find another place to locate, that his good will is worth in the neighborhood of $500,000, that he is under contracts for the storage of goods, and that goods under such contracts are in storage aggregating in value upwards of a million dollars, that if he is forced to surrender possession not only will he suffer loss or damage arising out of injury to his good will and loss occasioned by inability to secure business and carry out contracts, but because of breach of contracts with his customers, he will be exposed to rights of action by them against him, that it is impossible to calculate the loss, that before the consequential damages can be determined it will be necessary for him to wait until actions brought by customers against him shall be determined, that defendant is a foreign corporation and not able to respond in damages, that, if in an action for trespass he is entitled to recover consequential damages, such damages cannot, with any degree of certainty, be fixed, the remedy at law in. such an action for trespass is wholly inadequate and equity has jurisdiction to restrain interference with the possession.
    4. A tenant who invokes equitable jurisdiction to enjoin a landlord from interfering via summary proceedings with his possession, must establish his present right to possession as against the landlord. Hence it is immaterial, if in fact the tenant has no such present right, whether the defeasance clause in the lease is a condition or a limitation, however important that question might be in determining the jurisdiction of the district court.
    On bill, &C.

      Mr. Milton M. Unger and Mr. Frank M. Bradner, for the complainant.

      Messrs. Burnett, Sorg, Murray & Duncan (Mr. Burnett), for the defendant.
   Lane, V. C.

The bill alleges that the La Breeque Company is in possession of a large storage warehouse under a lease dated August 1st, 1917, for a period terminating April 30th, 1926. The lease contains the following clause:

“It is further understood and agreed between the parties hereto that a sale of the property by the party of the first part shall terminate this lease upon six months written notice to the party of the second part, and in lieu of compensation it is hereby agreed that the rent shall be waived during the six months notice to vacate.”

On October 30th, 1918, the following notice was served upon complainant:

“Newark, N. J., October 30, 1918.
“To the MeGann Company,
J. F. MeGann, Proprietor, and Joseph F. MeGann, individually and trading as The MeGann Company.
“You will please take notice that the premises leased by you from P. Ballantine & Sons by written lease dated the first day of August, 1917, have this day been sold to LaBrecque Company, Inc., and notice of the cancellation of your said lease is hereby given you pursuant to that clause of your lease reading as follows: It is further understood and agreed between the parties hereto that a sale of the property by the party of the first part shall terminate this lease upon, six months written notice to the party of the'second part, and in lieu of compensation it is hereby- agreed that the rent shall be waived during the six months notice to vacate.
“P. Ballantine & Sons,
“F. T. Frelinghuysen, President.
“Attest:
“Henry P. Lindsley,
“Secretary La Breeque Company, Inc., by Louis C. La Bre.cque, President.
“Attest:
“Edmund J. La Breeque, Secretary.”

■The bill alleges that complainant refused to surrender possession, whereupon proceedings were instituted by defendant in the second district court, of .Newark under the provisions of section 107, &c., of the District Court act (2 Comp. Stat. p. 1988) which resulted in a judgment for possession; application was made to the chief-justice for a writ of certiorari, which application was denied; the chief-justice sanctioned the presentation of an application for a writ to- the supreme court which opens for the June term on June 3d, but declined to grant an order to show cause or a stay; application was made to the judge of the second district court for a stay, which was denied; under the statute and practice in the district court a warrant of possession máy issue at- any time and that if it is permitted to be executed, complainant will be forced to vacate the premises.

Complainant alleges that the notice given him and set forth as above is not sufficient, under the clause of the lease, to- terminate the tenancy and that he is still entitled to possession of the premises under the lease; he has built up a good will worth in the neighborhood of $500,000; he is under- contract with many individuals and interests for the storage of goods and that goods under such agreements are in storage aggregating in value upwards of a million dollars; he cannot find another place to locate; if he is forced to surrender possession of the premises not only will he suffer loss or damage arising out of injury to his good will and loss occasioned by inability ta secure business and carry out contracts, but, because of breach of contract with his customers, he will he exposed to rights of action by them against him; it is impossible to calculate the loss; before the consequential damages can be determined it will be necessary for him to wait until actions brought by customers against him shall have, been determined; defendant is a corporation of New York and is not able to respond in damage; bis remedy by action in trespass as provided by section 113 of the aforesaid act (2 Comp, tftat. p. 1990) is wholly inadequate; if in an action for trespass be is entitled to recover consequential damages, such damages cannot, with any degree of certainty, he fixed.

Upon the filing of the hill an order to show cause with ad interim restraint was allowed returnable June 3d, 1919. Under permission given by the order a motion is now made by defendant to vacate it and a motion is also made to strike out the bill. I will consider the case as. upon a motion to strike the bill and argument upon the return of the order to show cause. It is objected that this court has no jurisdiction; that the defendant lias a judgment at law for possession and that the statute, section 113, relegates complainant, if the judgment at law he erroneous, to an action in trespass. Section 113 reads as follows:

“Proceedings liad by virtue of the one hundred and seventh section of this act shall not be appealed from nor removed by certiorari, but the landlord-shall remain liable in an action for trespass for any unlawful proceedings under this act.”

The specific prohibition of the statute is against appeal or certiorari. Certiorari will, however, lie if the district court have no jurisdiction. The effect of the statute is to permit a party vtfio has obtained a judgment for possession to secure immediate possession, but he still remains liable in.an action of .trespass. Tbe legislative intent was to permit possession of property to bo physically secured in such a proceeding, but not in this summary way, to determine any right. The legal and equitable rights of the parties remain the same after the judgment for possession as before.

Without considering whether the legislature could deprive this court of any jurisdiction it might otherwise exercise, it seems to me that the legislature has not attempted to curtail the jurisdiction. The statute does not, in terms, forbid the intervention of'this court. It does in terms provide -that the landlord shall remain liable in an action in trespass. The landlord being liable in trespass, it seems to me that where the remedy at law in trespass is wholly inadequate, the landlord remains liable to be enjoined by this court from committing the trespass. I think the case must be determined precisely as if the proceedings in the district court and an application for the writ of certiorari had not taken place.' The denial of the writ of certiorari does not add to the force of the judgment in the district court; if the writ had bben allowed and argued, and dismissed upon the merits, the judgment of the district court would have had no-other effect than as provided for by the act.

This then is a case in which'a person alleging himself to be legally entitled to possession of real estate endeayors to prevent a person, alleging the legal right to possession, from ousting him. There is no equitable right involved and jurisdiction must be based wholly upon the inadequacy of the remedy at law. That this court has jurisdiction in-all cases in which the remedy at law is inadequate, whether involving the right of possession to real estate or not, is, I think, settled. Hart v. Leonard, 42 N. J. Eq. 416 (sixth subdivision); Public Service Corporation v. Westfield, 82 N. J. Eq. 43, 47; affirmed, 82 N. J. Eq. 662; Kiernan v. Jersey City, 76 N. J. Eq: 114; Allen v. Distillers Co., 87 N. J. Eq. 531; Renwick v. Hay, 90 N. J. Eq. 148. Tn a recent case in the court of errors and appeals (Hedden v. Bierman-Everett Foundry Co.), it appeared that complainant sought an.injunction to prevent a threatened interference by respondents with her use of a siding. The vice-chancellor had dismissed the bill. While holding against complainant on the merits he also stated in his conclusions that if the complainant had the right she said slie had it was a legal right, whose nature and extent could have at least, in the first instance, been determined only in a court of law. This point was argued in the court of appeals; that court, without referring to it, reversed the vice-chancellor and granted the injunction. It-seems to me that the statement of tire loss which would .he suffered hy complainant indicates quite clearly that a remedy at law is wholly inadequate and that this court has jurisdiction. Defendant insists that its damages, by being kept out of possession, cannot he compensated for in any action at law.

Before complainant can succeed he must show that he had a legal right to the continued possession of the .property. It is immaterial, I think, in this court whether the clause in the lease, under which possession is claimed by defendant, be termed a condition or a limitation, however important the determination of that question may be in order to settle the jurisdiction of the district court. If the complainant’s term has expired by limitation or if the defendant is entitled to re-enter for breach of condition, complainant is not entitled to relief here. The sole question is whether the notice given was a notice in pursuance of the clause. I am quite clear that it was. The lease provided that the landlord might terminate it upon a sale upon six months’ written notice and it was agreed that in lieu of compensation, rent should be waived during the six months’ notice to vacate. The notice served on October 1st specifically referred to the sale and gave notice of the cancellation of the lease and included a copy of the clause relied on. The argument that complainant did not know whether to consider this notice a notice to vacate or whether he might remain liable for the rent after the termination of the six months’ period is, I think, specious. When he tendered his rent month hy month during the period of six months after October 1st it was refused. There is no question in my mind but that he was fully advised hy this notice that defendant had elected to terminate the lease., I think his right of possession ceased on May 1st. This construction of the notice is in accord with the construction put upon it by the judge of the district court and I am informed by the chief-justice.

The order to show, cause will be dissolved, the restraint vacated and the motion to strike out the bill granted. I need hardly say that I have not rested jurisdiction upon the inability oí complainant to secure relief on appeal or certiorari because of the law courts not being in session. Clark v. Board of Education of Bayonne, 76 N. J. Eq. 326.


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

text:
    Virginia A. Cavagnaro and Rosa L. Cavagnaro v. Indian Tire and Rubber Company, a corporation.
    [Decided May 20th, 1919.]
    1. After the issuance of an injunction under the statute enjoining a corporation, its directors and officers from exercising any of its privileges and franchises, directors who meet and pass a resolution authorizing the filing of a voluntary petition in bankruptcy and officers who execute such a petition are guilty of contempt.
    2. That directors and officers who perform acts in violation of an injunction of this court acted upon advice of counsel is no excuse.
    3. The effect of the appointment of a receiver and the award Of the statutory injunction is to take from those who previous thereto were officers and directors of the corporation their, power to act as such and to confer upon the receiver the right to exercise all of their powers and privileges.
    4. Acts performed and instruments executed after the appointment of a receiver and the award of the statutory injunction are as if performed by strangers and are in nowise binding on the corporation, nor are they corporate acts.
    5. A receiver appointed by this court of an insolvent corporation may not turn over assets to a receiver appointed by another court without consent of this court.
    O. AVhere it appears that after the award of the statutory injunction and the appointment of a receiver, officers and directors of a corporation have authorized and executed a petition in bankruptcy which has been filed and that the corporation is not insolvent within the meaning of the Bankrupt act, the receiver of this court will be directed to appear in the federal court and move to strike from the files the petition upon the ground that those purporting to act as directors had no power to act as such and that their acts are in no respect binding on the corporation, and the acts, the resolution and proceedings being in violation of the order of a court of competent jurisdiction they must be considered as void.
    f. That a receiver may so appear and not submit in any other particular to the jurisdiction of the federal court seems to be settled by the federal eases.
    S. Where it is represented that upon a voluntary petition in bankruptcy filed by officers and directors of a corporation acting in violation of the orders of this court, which acts are not binding upon the corporation, the referee in bankruptcy appointed a receiver, and it is represented that such appointment is contrary to the general practice of the federal courts in this district, the receiver of this court will be directed to apply to the judges of the federal court to vacate the order appointing the receiver and will be directed until such application can be made to retain control of the assets.
    On bill, &c.

      Mr. Elgin L. McBurney, receiver pro se.

      Messrs. Bilder é Bilder (Mr. Samuel Kaufman and Mr. David II. Bilder), for the receiver.

      Mr. Russell E. Watson, for the directors.
   Lane, V. C.

This is the return of an order to show cause addressed to creditors and stockholders why a receiver of defendant corporation should not he continued or some one substituted in his place. On May 9th, 1919, the corporation was adjudged insolvent and a receiver appointed under the statute. .The statutory injunction order enjoined the corporation, its officers and agents, from exercising any of its privileges or franchises, and from collecting or receiving any debt or paying out, selling, assigning or transferring any of its estate, money, &c., except to a receiver appointed by this court, which order was, before the performance of the acts hereinafter mentioned, served upon, or brought to the knowledge of the officers and directors. No objection is made to the personnel of the receiver. It is represented to the court by the receiver that he has been informed that on May 16th the directors' of the company held a meeting and adopted a resolution authorizing the officers to file a voluntary petition in bankruptcy and that thereupon there was prepared, in the name of the corporation, a voluntary petition yhich was executed on behalf of the corporation by the vice-president and treasurer and attested by the. secretar}', which petition was filed in the office of the clerk of the United States district court on May 17th, and that such proceedings were had upon the petition that on the same day an order was made adjudging the defendant bankrupt and referring the matter to Adrian Lyon, Esq., one of the referees of the court, and that the referee on May 19th appointed a receiver. Mr. Watson appears for the directors, and concedes that the facts are as above stated; and informs the court that the proceedings were taken in accordance with his advice. The custody of the property has not been changed and the receiver appointed by this court is in possession. This is a case in which the officers and directors of the corporation should 'be called upon to- show cause why they should not be punished for contempt. The injunction forbade the officers and directors exercising any of their powers. In re Hudson River Electric Power Co., 173 Fed. Rep. 934, the court said that the act of the directors of a corporation, who had been enjoined by the United States circuit court in an equity suit from commencing or prosecuting any proceedings “involving in any way the property or property rights of the corporation, or incumbering or embarrassing the same,” in adopting a resolution consenting to an adjudication in bankruptcy was a contempt. This case was affirmed by the circuit court of appeals in 183 Fed. Rep. 701, although mention of this particular subject-matter was not made. The act of the officers of the company, which had the effect, if successful, of a transfer of.all of its assets, is a clear violation of the injunctive order of this court and a contempt. It is said that this court has no power to enjoin a party from seeking relief in the federal courts. That may be so, but this court has power to enjoin certain individuals from acting as -officers or agents of a corporation and-from exercising the rights and privileges of a corporation, and that this court had at the time the acts were performed, done. It is further urged that the officers and directors acted under the advice of counsel. Advice of counsel cannot be considered as excusing a contempt although it may be considered in mitigation of sentence. 13 Corp. Jur. tit. “Contempt” 43, § 57, and New Jersey cases cited, and see In re Bowers, 89 N. J. Eq. 307.

The receiver is directed to apply to the United States district court to vacate the order appointing a receiver and to strike out the petition upon the ground, among other things, that the acts of the officers, or those pretending to exercise the rights of officers, of the corporation, were not binding upon the corporation and represented no corporate act.

The receiver, as I understand the law, is entitled to be heard in the district court. In re Gold Run Mining and Tunnel Co., 200 Fed. Rep. 162; Rosenbaum v. Dutton, 203 Fed. Rep. 838; Blair v. Brailey (Circuit Court of Appeals for the Fifth Circuit), 221 Fed. Rep. 1.

It is uniformly held that a board of directors may file or authorize the filing of a voluntary 'petition or may execute or direct the execution of a voluntary admission of insolvency, but it is stated in all of the cases that I have had an opportunity to examine that the authority exists only if not prohibited by statute or by-laws. It seems to me that the effect of our statute, upon the appointment of a receiver, vesting in him the privileges and franchises of the corporation and the right to act for the corporation, is a prohibition by statute against such acts as the directors took in this case. The effect of our statute has been considered by Vice-Chancellor Stevenson in Singer v. National Bedstead Mfg. Co., 65 N. J. Eq. 290; Gallagher v. Asphalt Co., 65 N. J. Eq. 258; Elm v. International Steam Pump Co. (not yet reported), and by me in Hitchcock v. American Pipe and Construction Co., 89 N. J. Eq. 440; and Michel v. Necker, 90 N. J. Eq. 171. By force of the statute, so far as ability to act for the corporation is concerned, those who, at the time of the appointment of the receiver and the issuance of the injunction were officers and directors ceased to be such. Whatever acts they performed are not binding upon .the corporation. In Bissell v. Besson, 47 N. J. Eq. 580; ViceChancello]' Aan Kleet held that a mortgage executed after the award of the statutory injunction was void. It may well be claimed that the paper writing purporting to be executed by the officers of the company is no more the act of the corporation than if it had been executed by total strangers. In Re Hudson. River Electric Power Co., supra, the court held that the resolution adopted by the board of directors confessing the inability of the corporation to pay its debts and signifying a willingness to be adjudicated a bankrupt on that ground, was not only in contempt of the order of the circuit court issued in an equity suit but that it was void. Although Remington says that this case is not well reasoned, it -was affirmed by the circuit court of appeals in 183 Fed. Rep. 701, only, however, upon one branch, but without criticism of anything that the district court judge had said, and it has been cited in at least six subsequent federal cases without criticism. So that it would seem that, on two grounds, it may be claimed that the resolution of the board of directors is void and not binding upon the corporation, first, because'by operation of the statute and of the injunction those purporting to act as directors had no power to act as such and their acts are in no respect binding on the corporation; second,' because the resolution having been adopted in violation of the order of a court of competent jurisdiction, it must be considered as void. The receiver will be directed to appear in the federal court for the purpose of moving to quash the proceedings hereinbefore referred to, but he will not submit to the jurisdiction in any other particular. That an appearance for the purpose aforesaid is not a submission is settled in Blair v. Brailey, supra.

I am advised that the bill of complaint filed in this court did not indicate a condition of insolvency as defined by the Bankruptcy act, and that the voluntary petition filed in the federal court did not indicate such a condition. AVhile, of course, if the case is one in which the federal district court has jurisdiction this court will, under no circumstances, put, or permit to be put, any obstruction in the way of the exercise of that jurisdiction, if, on the contrary, the case is one in which the bankruptcy court has no jurisdiction, it is the duty of this court to administer the affairs of this insolvent corporation. If the bankruptcy court would have jurisdiction on a voluntary petition notwithstanding the corporation be not bankrupt (a matter 1 do not consider) inasmuch as the receiver of this court has been substituted for the officers and directors with all their powers, it seems to be to be the privilege of the receiver and of this court to determine whether such a petition should be filed, precisely as it is the privilege of a board of directors in office at the time the petition is filed and not the privilege of a board, the terms of office of the members of which have expired, or whose powers have been taken away.

It is the privilege and duty of the district, court to determine whether it had jurisdiction or not. By the course which the proceedings took in the federal court, that court has not yet had an opportunity to determine whether it has or has not jurisdiction. There has been no hearing. If the receiver is convinced that the corporation is not insolvent within the meaning of the Bankruptcy act and is not subject to the jurisdiction of the bankrupt court, ho should have the permission of this court to report such facts to the bankruptcy court and to apply to that court for leave to intervene and file such answer or take such other steps as he may be advised is proper and he has that permission. The case is different from that of Singer v. National Bedstead Co., in which Vice-Chancellor Stevenson permitted the turning over of the assets to the federal trustee without a determination as to the merits. In that case there were no parties appearing objecting and in order to save needless expense ,to creditors, the vice-chancellor permitted'the turn over. Here there is objection.

The receiver also asks for instructions as to what he should do as to turning over the assets to the federal receiver if demand ■be made therefor. I understand that the rule in the district court in this district has been not to appoint a receiver in a case where a state receiver is in control, not only because of a feeling* of comity, but because, under the Bankrupt act, the district court cannot appoint a receiver except it be absolutely necessary for the preservation of the estate, and the courts here have held as matter of law that, where there is a receiver in charge appointed by a court of competent jurisdiction and no extraordinary circumstances present, which would indicate that the court and its officials are not acting properly and in good faith, there is no absolute necessity and therefore no jurisdiction. In no event may the receiver of this court turn over-the assets to the federal receiver until -he shall have had his administration of the affairs of the corporation passed upon by this court, his accounts settled and an allowance made, &c. Cudahy Packing Co. v. New Jersey Dairy Products Co. (not yet reported); Kennedy v. American Tanning Co., 81 N. J. Eq. 109. If the receiver be at this time directed to turn over the assets to the federal receiver it will merely mean extra expense to the estate; not only will the receiver in this court be entitled to his compensation, but'also the receiver in the federal court as well as the trustee in the federal court. It seems to me that not only should the receiver of this court refuse at this time to turn over the assets to the federal receiver but he need not make formal application to this court for instruction to do so, until the question of the appointment of the receiver by the federal court has been passed upon by one of the judges of that court.

. It may be argued that the case of In re Yaryan Naval Stores Co., 214 Fed. Rep. 563, is authority for the proposition that the act of the directors, although in contempt of the state court, still is effective to confer jurisdiction upon the court in bankruptcy. In that case the district court based its conclusion upon the fact that the order of the state court properly interpreted contained nothing which indicated an intention to prohibit due application being made to the appropriate bankruptcy court. The situation in that case was different from that here present. In that case, as I gather from the opinion, the injunction of the state court was merely against interference with the duties of the receiver and against the institution or prosecution of any suits, &c., against the stores company without the order or permission of the state court. It seems that construing this injunction the circuit court of appeals for the sixth circuit interpreted it differently than it would have been interpreted l>v the court speaking in Re Hudson River Electric Power Co., which case was not referred to by the sixth circuit, but however that may be, in this case the injunction enjoins the officers and agents of the company from acting as such. As I have before indicated, the injunction, taken in connection with the statute, is tantamount to a removal of the particular persons from the positions ■which they, at the time the injunction was issued, occupied in the corporation. The corporation still has its privilege of seeking relief in the bankruptcy court but the only officer who can set in motion the proceedings, who can act for the corporation, is the receiver appointed by this court in whoni] reside all the powers formerly exercised by various individuals. Cases intimating that the act of a state court in appointing a receiver on the ground of insolvency, being an act of bankruptcy, may be disregarded by the federal court, are without application because the receiver in this case was not appointed on .the ground of insolvency within the meaning of insolvency as used in the Bankruptcy act, nor was the corporation bankrupt. Creditors could not file a petition against it. Only by the method which was pursued could any apparent jurisdiction be conferred on the federal court. I will point out here that it seems to me at this time that the proper course for the parties to have pursued would have been to have applied to this court for permission to file the petition, or for leave to permit the officers to act, in which event, had leave been given, they would have acted as mere agents of the receiver. It needs no stretch of my imagination for me to conceive of a case in which this court would direct its receiver to file a voluntary petition in bankruptcy on behalf of the estate. It is clear to me that no one had authority to act for this corporation save the receiver and this court. Cases from other states under other statutes, particularly cases involving receivers of assets as distinguished from receivers of corporations are without application. The receiver in this case is the corporation plus,-he is the statutory successor of its officers, in him are vested all its rights. He is an independent ego. Hitchcock v. American Pipe and Construction Co., supra, and cases cited.

[Filed .May 23d, 1919.]

Lane, V. C. (orally).

The order will be discharged as to the director Adelbert Hauschild, it appearing that he did not in anywise participate in the alleged contemptuous conduct. Counsel does not now argue that the acts committed by the directors were not in violation of the orders of this court. The excuse offered by the directors is that they acted upon advice of counsel. It appears that they knew that what they proposed ’to do might be in violation of the order of this court. Counsel examined certain cases and came to the conclusion that the proposed act of the directors would not lie a contempt and fortified his opinion by asking the advice of the referee in bankruptcy. I have no doubt but that both counsel and the directors acted bona fide. It is almost needless to point out that this court cannot accept, under the circumstances of this case, the excuse, for what I held to bo a gross contempt, that it was committed under advice of counsel. This court ordinarily acts only in personam and to accept such an excuse would lie to paralyze it. The rule that advice of counsel will not be accepted does not work any particular hardship in this case. The parties knew that they might be in contempt. This court was open to them at all times as well as to their counsel. If they elected to rely upon advice of counsel, reinforced by advice of the referee in bankruptcy, rather than to apply direct to this court, they must stand the consequences. See 6 Rul. Cas. L. tit “Contempt” § 14; In re Bowers 89 N. J. Eq. 397; Seastream v. New Jersey Exhibition Co., 61 Atl. Rep. 1045; 13 Corp. Jur. tit. "Contempt" p. 43, § 57, and cases cited; McKillopp v. Taylor, 25 N. J. Eq. 139; Cape May, &c., v. Johnson, 35 N. J. Eq. 422; West Jersey Traction Co. v. Camden, 58 N. J. Law 536. I might add that it appears that in order to perfect the petition in bankruptcy the seal of the corporation and the minute book were removed from the possession of the receiver, without his knowledge or consent.

The respondents will be adjudged guilty of contempt. I will not at this time fix the punishment.


text:
    Cudahy Packing Company v. New Jersey Dairy Products Company.
    [Decided May 17th, 1919.]
    3. If bankruptcy proceedings are initiated after the appointment of a receiver of an insolvent corporation under the statute, and his taking possession' of the assets, and it appears that the bankruptcy court is entitled to the ultimate control of the property, the proper practice is for the receiver to apply to this court to pass Ms accounts, fix his fees and direct him to turn over the balance to the trustee.
    2. If the receiver fails to act, the trustee in bankruptcy may move this court for the same purpose.
    8. If the trustee in bankruptcy is dissatisfied by the determination of . this court, appeal lies in the ordinary course.
    4. A receiver appointed by this coui*t may not, without the consent of this court, either submit to the jurisdiction of the bankruptcy court to fix his compensation or turn over to the trustee in bankruptcy or to any other officer of the bankruptcy court, or of any court, the assets of the corporation.
    5. If the receiver has parted with control of the assets, this. coui'L will not ordinarily Indicate its views as to the amount of compensation, the court ordinarily declining to make an order or decree which cannot be made effective by its own process.
    On bill, &0.

      Mr. Selick J. Mhides, lor the receiver.
   Lane, V. C.

Subsequent, to the appointment of a receive]’ of a New Jersey corporation adjudged insolvent, in proceedings under the statute, and bis taking possession of the property, bankruptcy proceedings in the federal court .were initiated and a trustee has been appointed. The receiver now makes application to this court to pass his account, fix his fees and direct him to turn over the balance to the trustee in bankruptcy. Prior to this application I understand the receiver informally applied to the United States district court in bankruptcy to fix his fees. I take this opportunity to indicate the practice in these matters. Upon the appointment of a trustee in bankruptcy of the assets of a corporation, the property of which is in the control of a receiver of this court, where it appears that the federal court has jurisdiction and is entitled to the ultimate control of the assets, it is the duty of the receiver of this court to apply to this court to pass his accounts, fix his compensation and direct that he turn over the balance to the trustee. The receiver may not, without the consent" of this court, either submit to the jurisdiction of the bankruptcy court to fix his compensation, or turn over to the trustee in bankruptcy, .or to any other officer of the bankruptcy court, or of any court, any of the assets within his control. If the receiver does not move, then the trustee in bankruptcy may apply to this court to compel the receiver to file his account and may ask this court for an order fixing the compensation of the receiver and for a direction that the balance be turned over to the trustee. If the trustee in bankruptcy is dissatisfied with the determination of this court, appeal lies in the ordinary course. Singer v. National Bedstead Co., 65 N. J. Eq. 290; Kennedy v. American Tanning Co., 81 N. J. Eq. 109. It is conceded, of course, that in a ease in which the bankruptcy court has jurisdiction the Bankruptcy law is paramount, but the practice which should be pursued is clearly indicated by the supreme court of the United States. In re Watts & Sachs, 190 U. S. 1. I am aware that there may be found statements of federal judges to the effect that judgments of state courts as to fees, &c., may be reviewed by courts of bankruptcy, but I know of no instance in which such assumed power has been exercised. The review spoken of by the supreme court in the Watts Case is a review by appeal in the ordinary course. Oases in which the federal courts have fixed the fees of state receivers at their request, after the assets have been turned over to the trustee, are without application.

There have been eases in which, after the receiver of'this court has parted with possession of all of the property of the insolvent estate, he has applied to this court to indicate the amount he should be allowed for fees and in which the referee in bankruptcy has indicated a desire that the 'fees should be indicated by this court, subject, however, to review by the bankruptcy court. In such cases, however desirous the individual members of the court may be to lend any aid or assistance possible to the federal courts, the court will not ordinarily fix the compensation or indicate officially its views as to the proper amount. The court will not ordinarily make an order or decree which cannot be .made effective by its own process.


text:
    Lucius L. Slater v. Slater Press, Inc.
    [Decided June 2d, 1919.]
    Where a chattel mortgage is void as to creditors of an insolvent concern whose claims accrued prior to its record, and is valid as to "creditors whose claims accrued after its record, in distributing the assets and arriving at the amounts to be paid the respective classes, the following procedure should be adopted: the net assets of the insolvent concern should be taken; from the sum of the assets should be deducted the amount of the chattel mortgage; the amount of all of the other claims should be taken and a dividend rate struck; this is the dividend rate that the creditors whose claims accrued after the recording of the chattel mortgage are entitled to have used; the net assets should be taken; the amount of all of the claims, in which should be included the claim of the chattel mortgagee as a general creditor, and a dividend rate struck; this is the dividend rate that the creditors whose, claims accrued prior to the recording of the chattel mortgage are entitled to have used; the amount represented by the difference between these two dividend rates must be made good by the chattel mortgagee to the creditors whose claims accrued prior to the recording of the chattel mortgage pro rata.

    On bill, &e. On claim of the American Type Pounders Com- ' pany, based on a chattel mortgage.

      Messrs. Burnett, Sorg, Murray & Duncan, for the receiver.

      Mr. l^obert Cwrey, for the American Type Founders Company.
   Lane, V. C.

The matter vigorously debated has been the procedure in arriving at the determination of the rights of the parties in whatever fund there may be for distribution in case this chattel mortgage is held to be invalid as to creditors whose claims accrued prior to its recording and valid as to creditors whose claims accrued after its recording. I am inclined to think that the way to work it, out is this: All of the net assets of the company should be taken; there should be deducted from that sum the amount of the chattel mortgage; a dividend rate should be struck; that dividend rate the creditors whose claims have accrued after the recording of the chattel mortgage are entitled to. The chattel mortgage being invalid as against the creditors whose claims accrued prior to its record, their claims are to be treated as if the chattel mortgage was not in existence; the claim, however, of the chattel mortgagee must he considered as a general claim. In order to strike a theoretical rate that should be used in arriving at their dividend, the net assets of the company should be taken and'the amount of the claims, in which should be included the claim of the chattel mortgagee as a general claim, and a dividend rate struck. This is the dividend rate that the creditors whose claims accrued prior to the record of the chattel mortgage would he entitled to, if Ihe chattel mortgage was not in existence. For the difference between the two rates, the chattel mortgagee is responsible and must make up out of the amount that he receives out of the net assets. There is no other way I can think of, at the present time, in which all of the rights of the parties can, be subserved. My first impression that the creditors whose claims accrued prior to the recording of the chattel mortgage wore entitled to ho made whole to the extent of the amount received by the chattel mortgagee was sufficient to make them whole, T think is erroneous, for that would he giving to these creditors the right of subrogation, whereas their right is to lie treated as if the chattel mortgage was not in existence.


author: Lane, V. C. Lane, V. C.

text:
    Solomon Sachs v. High Clothing Company.
    [Decided April 22d, 1919.]
    1. One, who in order to secure the action of the court in his own interests, presents at one time an 'affidavit setting up a certain state of facts and thereafter in his own interests, in order to secure the action of the court, presents another affidavit setting up a different state of facts, is guilty of contempt.
    2. In proceedings to punish for contempt to impose upon the court by perjured affidavits, where two affidavits filed by the respondent set up a contradictory state of facts, it is immaterial which affidavit represents the true facts.
    On bill, &C.

      Mr. William Harris, for the complainant.

      Mr. Isidor Kalisch, pro se.

      Mr. William A. Lord, for the defendant.
   Lane, V. C.

The application is to compel'the receiver to account for certain mone3s which he had paid out under the orders of this court. The charge of the applicant is that an arrangement was made that certain claims, among them, the claim of one Lichtman for $1,000, should be held until established at law or by this court. I have no difficulty whatever in dealing with the application and in denying it upon the record. An order was originally made upon the application of Staw, the present applicant, under the sixty-ninth section of the Corporation act directing the receiver to make certain payments and then turn the assets of the corporation back to it. There was no attempt to induce the court to change the directions of the order, nor do I believe that any arrangement was attempted between the parties under which the terms should be considered changed. This is not what I consider the important matter now before the court. The petition made to the court hy Staw upon which the order was based contained the following language:

“Section 7. That the liabilities of said corporation consist of the following * * * (2) Money owing to creditors on guarantees and notes whicdi are endorsed by Solomon Sachs and which debts are to b» paid immediately upon the dismissing of the proceedings heretofore instituted by Solomon Sachs against the High Clothing Company, Inc., as is set forth in schedule B hereto attached and made a part hereof.”

That petition was sworn to on the 7th of February, 1919, by Benjamin Staw and his brother. The affidavit is that “they are the petitioners named in and who subscribed the foregoing petition and know the contents thereof and that the same is true.” Schedule B, referred to, contains' the claim of 'Liehtman for $1,-000. An affidavit was made hy Benjamin Staw on the 20tli of March, 1919, before William Harris, as a master in chaneeiy, in paragraph 5, subdivision a, of which Liehtman is referred to as a creditor of the High Clothing Companjg and subdivision b, of which reads as follows:

“(b) Deponent further says that he has made arrangements with the following creditors to pay all of their claims in full to date, by paying them the following amounts, to wit, Africk & Liehtman, $1,000.”

In the affidavit upon which the present application is based, verified April 17th, 1919, Benjamin Staw swears that the claim of Liehtman for $1,000 is false and fraudulent. He also swears that he never authorized the receiver to pay the claim, notwithstanding his affidavit which was sworn to on the 20th of March, 1919. One or the other of the statements of Staw is palpable perjury, at least, it so appears now. ' His excuse is that he was advised by his counsel when he made the first affidavit to keep still about the real facts until after this court had made its order. That excuse, of course, only adds to the offence. I am of the opinion that in the interests of justice this man should he called to account. Perjury of this kind has got to stop, and people when they make affidavits must understand that, if it is demonstrated that they are testifying falsely, they will be called to account by this court. I-direct counsel to take an order to show cause requiring Staw to show cause why he should not be adjudged guilty of and punished as for a contempt of this court for his per jmy, and also in endeavoring to induce this court to make an order upon perjured testimony which would interfere with the due administration of justice.

[Decided April 25th, 1919.] '

Lane, V. C.

When application was made to this court under the sixty-ninth section of the Corporation act to .turn back the assets of the corporation Staw represented, under oath, that the claim of Liehtman for $1,000 was an indebtedness and that he had arranged for its liquidation. On his verified petition an order to show cause was allowed directed to all directors and stockholders. The statements contained in that petition were all material. The care with which this court acts in cases of this nature is illustrated by Sullivan v. Newark Lunch Room Company, 89 N. J. Eq. 146. Staw, in order to move this court to surcharge the receiver, has presented an affidavit in which he swears that the Liehtman claim was not a valid obligation of the' corporation; that he was advised by his counsel when he made the affidavit to keep still about the real facts until after this court had made its order; that he did conceal the real facts in order to secure an advantage for himself. In other words, he has under oath, taken two diametrically opposite positions. I have already found that he is entitled to no relief upon this second application, but that does not dispose of the charge for contempt. It seems to me to be immaterial'whether the statements contained in his first affidavit or in his second represent the true facts. By one or the other affidavit he has attempted to impose upon the court and the statements contained in one or the other are false. This is not a case where a person has committed perjury and attempts to recant. In such a case the court, in view of the circumstances, might not feel inclined to punish as for a contempt. One who has repented and is endeavoring to set himself right, is entitled to every consideration, but, as I have above indicated, that is not this case. Staw took the position he did originally, because at that time it was in his interests to do so. He takes the position that he does now because it is now in his interest to do so, and both positions he takes under oath. While in a prosecution for perjury it might be necessary to determine which one of the statements of respondent is the true one, it is not necessary in this proceeding to punish for contempt. In any event, he has been guilty of attempting to impose upon the court by false affidavits and his conduct constitutes contempt. Edwards v. Edwards, 87 N. J. Eq. 546.

The respondent will'be adjudged guilty of contempt and the matter of his punishment will be deferred.


author: Gummere, Chief-Justice.

text:
    In the matter of the offering for probate of a certain paper-writing alleged to be the last will and testament of William Book, deceased.
    [Decided June 20th, 1919.]
    A last will and testament, made when the testator has a living child adopted pursuant to the authority conferred by “An act concerning minors,” &c. (Comp. Stat. p. 2808), is not void under section 20 of “An act concerning wills” (Comp. Stat. p. 3865), although no provision is made therein for a child of which his wife is enceinte at the time of his death, and which is born thereafter.
    On appeal from an order of the prerogative court, reported in 89 N. J. Eq. 509.

      Mr. Harry Campion and Mr. George D. Mulligan, for the appellant.

      Mr. Thomas 8. Henry ana Mr. Francis Child,, ion the respondent.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The present appeal challenges the validity of an order of the prerogative court which reversed an order made by the orphans court of Essex count}', admitting' to probate a certain paper-writing as the last will and testament of William Book, deceased.

The facts necessary for the determination of the matter before us are as follows: William Book and Annie, his wife, in April, 1908, adopted Frederick, the infant child of one William Feindt. The child’s mother had previously died. The adoption was in accordance with the provisions of an act concerning minors, their adoption, custody and maintenance (Rev. 1902; Comp. Slat. p. 2808), which^was then in force. In 1911, Annie Book, the mother by adoption of the infant child, died; and about a year later William Book married one Emma Goldman, who is still living. On the 35th day of May, 1915, Book executed the paper-writing involved in the present litigation. He died in January, 1917, leaving his wife enceinte of a child which was afterwards born. In due course the executors named in the will offered it for probate. By its terms, after providing for the payment of his debts and funeral expenses, the testator gave to his adopted son, Frederick, all of his jewelry, devised a certain house and lot to his wife, Emma, and then directed the residue of his estate, real and personal, to be divided into three equal parts, two of which he gave to his wife, and the third of which he directed to be held in trust for his adopted son until he reached the age of twentj'-five, when he was to become the absolute owner thereof, providing he retained the name of Frederick Book. The adopted child, Frederick Book, by his next friend, filed a caveat against the probate, upon the sole ground that the will was void under section 20 of the act concerning wills. Comp. Stab. p. 5865.

The statute relied on declares:

“That every last will and testament made when the testator had no issue living, wherein any issue he might have is not provided for or mentioned, if at the time of his death he leave a child, children or issue, or leave his wife enceinte of a child or children which shall be born, such will shall be void, and such testator be deemed to die intestate.”

The argument in -support of the caveat was, and is, that the statutory provision recited makes a will void when the testator had no children born to him living at the time of its execution, nor any lineal descendants of such issue; and, consequently, that, as Frederick Book was not a child horn to the testator, the statute applies.

The attitude assumed by the caveator is certainly an anomalous one. In one breath ho asserts that at the time of the execution of the will the testator had no child living, within the meaning of section 20 of the Wills act, and in the next breath he justifies his filing of the caveat because of his status as a child of the testator, and his resulting right to participate in the distribution of the latter’s personal estate, and to inherit his real estate if the will is void. Can lie, under our statutes dealing with the subject-matter of our inquiiy, successfully maintain these two apparently conflicting positions?

Section 20 of the Wills act became a part of that statute in December, 1824. Elm. Dig. pp. 600,1601. At that time a testator could have no lawful children except those born to him in wedlock. A child born to him of a woman who was not his wife was not recognized by tlie law- as having any claim to share ill the real or personal estate of the father. At that time, too, the laws of this state recognized no power existing in any of its citizens to adopt a child of other parents, and by the act of adoption vest in it the right to share in the distribution of the estate of the adopting party. In other words, the illegitimate child and the adopted child were neither of them recognized by our law as a lawful child of the actual or the adopting parent.

The act of 1902 providing for the adoption of minors was a revision of a statute originally enacted March 9th, 1877. P. L. 1S77 p. 128. It materially changed the then existing law regullating the devolution of the estates of decedents. By its fourth section (which has remained unchanged by subsequent revision or amendment) it provided that the effect of the decree of adoption should divest the natural parents of the child of all legal rights and obligations due from them to the child, or from the child to them, and that the adopting parent or parents should be invested with every legal right in respect to obedience and maintenance on the part of the child as if it had been born to them in lawful wedlock, and that the child should be invested with every legal right, privilege, obligation and relation in respect to education, maintenance, and the rights of inheritance to real estate, or to the distribution of personal estate on the death of such adopting parent or parents as if born to them in lawful wedlock; and that if the adopting parent or parents should have other child or children, then and in that case the children by birth and by adoption should respectively inherit from and through each other as if all had been children of the same parents born in lawful wedlock. The statute contains certain limitations which, however, have no bearing upon the question now under consideration, and which it is therefore not necessary to recite.

The effect of the legislation just adverted to is to clothe the adopted child with all the rights of a natural child so far as inheritance of real estate or the distribution of personal estate is concerned. It makes such child the lawful child of the adopting parent in these respects. It changes the statutory rules regulating the devolution of property, not by amending or repealing pro Hcmto the provisions of pertinent legislative enactments, but by enlarging the class for whose benefit they were originally passed (that is, the children born to the decedent and their issue), by making the adopted child a lawful child of the decedent for the purpose of sharing in the distribution of his estate.

The act concerning wills, the statute of descents and the statute of distribution composed the entire legislative system regulating the transmission of the estates of decedents, testate or intestate, prior to the passage of the act for the adoption of minor children. By the enactment of this latter statute that system, as we have just said, was, to some extent, changed. To determine the purpose of the legislature in making that change, and the extent thereof, all of these statutes must be read together; for it is a universally recognized rule of statutory construction that where there are different statutes in pari materia, though made at different times, and not referring to each other, they shall be taken and construed together as one system, and as explanatory of each other. Sedgw. Stat. Con. (2d ed.) 211; 26 Am. & Eng. Encyd. (2d ed.) 620, and cases cited; White v. Hunt, 6 N. J. Law 506; Koch v. Vanderhoof, 49 N. J. Law 621; Gartney v. Cohen, 51 N. J. Law 127. Applying this rule, we are of opinion that the legislative intent to be gathered from a reading of all these statutes was to vest in adopted children all the rights and privileges which, by the act concerning wills, the statute of descents, and the statute of distribution, had been conferred upon children born in wedlock; that is to say, to place them in the same position as if they had been natural born children of the decedent, so far as those statutes are concerned— to substitute the lawful children of the decedent, no matter what the source of their origin, in the place of those born of his body. To give this legislative purpose its full significance the meaning of the words "child,” "children” and “issue,” wherever appearing in the various statutes comprising the legislative system embodied therein, when used with relation to the testator or intestate, must be considered to have been enlarged so as to include adopted as well as natural born children within their scope.

The prerogative court adopted the view advanced by the caveator as to the construction to be given to the provision of the Wills act, which we have discussed, rather than that put upon it by the orphans court of Essex county. Eor the reasons we have indicated we conclude that the prerogative court in so doing was in error, and that, consequently, the order under review must be reversed.

For affirmance — Hone.

For reversal — Ti-ie Chibe-Justice, Swayze, Trenoi-iarjd, Parker, Bergen, ' Minturn, Kalisch, Black, White, HepPENHEIMER, WILLIAMS, TAYLOR, GARDNER — 13.


author: Swayze, J.

text:
    Charles F. Neslor, respondent, v. William K. Grove et al., appellants.
    [Decided June 20th, 1919.].
    1. By executing a mortgage representing the lands, otherwise described to be the property of her husband, a wife is estopped from afterwards asserting that the lands were equitably her separate estate, against a creditor of her husband.
    2. Where a wife permits her husband to retain title to lands, thereby giving him a falso show of credit, she is estopped from asserting that the lands wore' equitably her separate property against a creditor of her husband.
    3. A surety is not discharged by conduct that would otherwise amount to a discharge, if he assents.
    4. A corporation creditor is not estopped from asserting its claim because one of.its officers and one of its directors stated that the debtor-owned a fine property, without stating that the corporation held a mortgage upon it.
    On appeal of Second National Bank of Hoboken.

      Mr. Julius Lichtenstein (Mr. Frederick N. Eberhard on the brief), for the appellant.

      Mr. William M. Seufert and Mr. Robert II. Southard) for Mary B. Grove.

      Mr. John M. Enright, for Globe Tire Co.
   The opinion of the court was delivered by

Swayze, J.

This is a foreclosure bill. There is no question as to the complainant’s mortgage and he is entitled to- a decree of foreclosure. The controversy relates to a second mortgage held by the Second Xational Bank of Hoboken and a judgment in attachment in favor of the Globe Tire Company. We may pass foi the present the question as to the priority between these two liens and deal with the claim of the defendant Mary B. Grove that the mortgaged premises, the title to which is in her, have been discharged from the lien of ihe bank’s mortgage. The situation is this: Prior to July 28th, 1913, the Grove Hat Manufacturing. Company was indebted to the bank on notes aggregating $45,000. These notes had been outstanding some time, one certainly since 1911. They were endorsed by William K. Grove, who was the principal man in the hat company. On that day he and his wife, Mary B. Grove, executed the mortgage for $45,000 now in question to Allen H. Terbell, who immediately assigned it to the bank. The mortgage is in the ordinary form. The debt secured thereby is in fact the same debt represented by two notes of the . same date, one given by the hat company for $35,000 and one given by Grove for $10,000. These notes took the place of earlier notes of the hat company amounting to $45,000, and it is evident that the object was to make an appearance which would indicate that the bank had not loaned the hat company more than the act of congress permitted. The mortgage contains a covenant which recites that William K. Grove is the qwner of the mortgaged premises; it is executed by him and his wife, the defendant Mary B. Grove. Mrs. Grove claims that in equity the property was hers, that it was mortgaged for her husband’s debt, and that she occupied the position of a surety and has been released by the conduct of the bank. The history of the title, so far as material to this case, is as follows: Grove bought the land in 1909 with his own money. He is said to have made an oral gift to his wife by way of a Christmas present in 1909, but the title remained in him until March'8th, 1917, when the land was conveyed to his wife. In the fall of *1911, Mrs. Grove built an expensive house on the land with her own money. At that time her husband was obligated to the bank for endorsements of the hat company paper. One note for $10,000 was then outstanding, dated Eebruary 3d, 1911. When in 1913 the hat company became financially embarrassed, Mrs. Grove, with the advice of her brother and of her private counsel, who had been concerned in the settlement of her father’s estate, joined in executing the mortgage to Terbell now held by the bank. Her counsel advised her of the situation with the care demanded. He wrote her that 'as the property stood in her husband’s name, the bank could reach it if it were to enforce the notes; that the mortgage did not materially .change the situation so far as she and her husband were concerned; that she was not giving them a mortgage on anything which they could not already reach by their claim if disposed to do so; that in consideration of the mortgage the bank was willing to wait a reasonable period for the payment of the notes, but otherwise would press for payment at once; that it would be necessary for her to join in the mortgage in order to release her dower, and that he advised the making of the bond and mortgage. This was an accurate statement of the legal situation. Mrs. Grove’s claim of an equitable estate rests upon the parol gift of Christmas, 1909. If her husband was then indebted to the bank on his endorsements of the hat company notes, the predecessors of the present notes, a gift of the land to- his wife was fraudulent as to. the bank. If he was not then indebted, his wife was es-topped to deny his title since she permitted him a false show of credit by leaving the record title in him. -In either event, she was estopped by having executed the mortgage representing the property as- his for the purpose of securing an extension of time for him, and having thereby secured that extension. The estoppel itself is enough to protect the bank against her present claim of an anterior equitable estate, but the case is stronger against her since the letter of her own counsel and the terms of the mortgage make it clear that she claimed no equitable estate and merely intended to join for the purpose of releasing her inchoate right of dower. We need not consider whether she has any equity by reason of her inchoate right of dower. That right merged in the fee when the deed of-March 8th, 1917, was. delivered, and no claim by reason thereof is made an issue by the pleadings. 'Nor could it be made an issue; since the bank is certainly entitled to the security of the mortgaged premises, it is entitled on this foreclosure of the prior mortgage to surplus money on the sale and the right of the dowress, if any she have, can only be ascertained and protected in an application for surplus money. Vreeland v. Jacobus, 19 N. J. Eq. 231. Mrs. Grove has no standing as the owner of an equitable estate. The decree must be reversed unless the mortgage has been paid or discharged in some other way. It is suggested first that it was paid by time notes subsequently taken by the bank in renewal of those given at the time of the mortgage. It seems to be thought that the entries on the bank books indicate that the later notes were taken in satisfaction of the debt. We find nothing to indicate any such unusual intent. The entries are only what would be necessary, or at any rate proper, to make a full record of the transactions. The bank retained the mortgage in its possession and there is no suggestion that Grove ever claimed that it had been satisfied. The mortgage on its face is an ordinary mortgage to secure Grove’s bond for $45,000 payable July 28th, 1916, i e., one year from date. It does not refer in any way to the hat company notes. The bank in its proof of claim against the hat company did not set forth this mortgage as a security held by it, and this can be justified only upon the theory that the mortgage was-given as security for Grove’s personal obligations — the individual note for $10,000 and the contingent liability as endorser on the note for-$35,000. It makes little practical difference. The benefit of the collateral inured to the bank. As to the $35,000, Grove was certainly in the position of a surety and it seems probable that he was in the same position as to the $10,000 note, the substantial consideration of which was the debt due the bank represented by the note of February 3d, 1911. We may at any rate, in favor of the defendant, assume that Grove was in the position of a surety as to the whole amount; if so, a discharge of the principal would discharge him and discharge the mortgage on his land, now the land of Mrs. Grove. This brings us to the suggestion that the mortgage if not paid has, been discharged.

In 1915 the hat company became bankrupt. A composition with its creditors was approved by the bankruptcy court, July 21st, 1915.

The orders of approval directed the payment of fifteen per cent, to creditors, and the payment of the balance remaining on deposit to the bankrupt or his attorney. This had the effect of discharging the bankrupt. Bankruptcy act, 1918, § 14c. The bank assented to this composition. We need not consider whether a composition assented to by the creditor would release the surety or whether like an ordinary discharge in bankruptcy it would not alter the liability of the surety. Banlcrnptcy act, § id. Under similar statutes it has been held in other jurisdictions that a creditor who assents to a composition does not thereby discharge the surety. Megrath v. Gray (Lord Coleridge), L. R. 9 C. P. 216; 43 L. J. (N. S.) C. P. 63; Ex Parte Jacobs (Lord Justice James), L. R. 10 Ch. 211; 44 L. J. Bankr. 34; Simpson v. Henning, L. R. 10 Q. B. 406; 44 L. J. Q. B. 143; Hill v. Trainer (Wisconsin, 1880), 5 N. W. Rep. 926.

The point has not been decided under the Bankruptcy act of 3898 but the reasoning of the cases cited is applicable. - The question, however, is one of the construction of a federal statute and would more properly be decided by a federal court, especially as it is not necessar}'' for us to decide it now.

Grove assented to the action of the bank and on December 29th, 1915, five months after the composition, settled with the bank by giving his individual note for $30,000 and endorsing over the note of one Wharton for $2,540.68. A surety is 'not discharged by conduct that would otherwise amount to a discharge, if he assents. Solomon ads. Gregory, 19 N. J. Law 112. That is the present case. The mortgage therefore still remains as security for the debt. How much is unpaid is not now a question. The learned vice-chancellor did not make any decree on this question and no ascertainment of the amount was necessáry on his theory of the case. As the decree must be reversed, the amount due will have to be ascertained by the court of chancery when the record is remitted.

The learned vice-chancellor advised a decree that the bank was estopped from asserting any claim under its mortgage as against the Globe Tire Company and that, the latter’s judgment was a lien next in priority .to the complainant’s mortgage. The theory is that Grove was recommended early in 1916 for employment to the Globe Tire Company by Terbell, vice-president and cashier of the bank; that Terbell stated that Grove owned a beautiful piece of property in Orange, but did not say anything about Grove owing the bank money or having a mortgage on the property; and that Eberhard, who was a director of the bank, spoke well of Grove’s financial circumstances and of the beautiful home he owned without mentioning the indebtedness to the bank. In short the theory is that Terbell and Eberhard committed a fraud for which the bank is to be held responsible. It seems a rather long shot to give priority to an attachment of March, 1917, on a cause of action which could not have existed before 1916, over a mortgage of July, 1913, by reason of an alleged fraud of two officials of the bank.,

The tire company’s complaint against Terbell and Eberhard sounds in tort. Its claim is a claim for damages for their alleged fraud. Before the bank can be held responsible for a tort of its officers, it must be shown that they were acting in the real or apparent scope of their authority. The commission of a fraud is not within the express or implied powers of the officers. There is nothing to show that either Terbell or Eberhard had ever before assumed such authority, nor do we think that any one of common sense could ever have supposed that an officer of the bank was under any duty to an outsider to reveal the financial affairs of a customer of the bank. Short indeed would be the tenure of a bank officer who so conducted himself, and in the absence of proof of unusual innocence of business ways on the part of the officers of the Globe Tire Company we cannot believe that they were in any way deceived by the silence of Terbell or Eberhard as to the mortgage. Ostensibly and in fact Terbell and Eberhard seem on the facts of this case to have been acting merely as individuals iira friendly way to get Grove some employment. We need not go into the matter at length since the claim of the tire company if it has a valid claim is one that ought to be established by an action at law. The essential elements of an estoppel are absent.

The decree must be reversed, with costs, and the record remitted for further proceedings in accordance with this opinion.

For affirmance — None.

For reversal — The Chibe-Justice, Swayze, Trenci-iard, Parker, Bergen, Minturn, Kalisci-i, Heppenheimer, Williams, Taylor, Gardner — 11.