text:
    Harrison B. Schuler v. Southern Iron and Steel Company.
    [Decided January 31st, 1910.]
    1. The allegations oí a bill as to the contents of a document, a copy of which is attached to it, are not controlling; but the document will be read and construed by the court.

      2. Every material fact necessary for complainant to prove to establish his right to the relief prayed for must be alleged in the premises of his bill with fullness and particularity.
    3. A demurrer to a bill in equity does not admit facts pleaded on information and belief.
    4. The court, in considering the sufficiency of a bill in equity, will not accept the conclusion drawn by the pleader, but will determine for itself the legal force of the facts alleged.
    5. Where the averments of a bill in equity are ambiguous or capable of two constructions, the one favorable to defendant must be adopted because a pleading must be construed most strongly against the pleader.
    6. A complainant in equity who desires to complain of fraud must set forth the facts constituting the fraud, and the mere use of the words “fraud* and “misrepresentation” are insufficient.
    7. The price obtained at a sale of assets of a corporation in bankruptcy bought in by the creditors by agreement for reorganization is not conclusive on the value of the assets.
    8. A bill by a stockholder of a corporation adjudged a bankrupt who has signed a reorganization agreement to enjoin the carrying out of a reorganization plan involving the formation of a new corporation to take over the assets of the bankrupt and to issue securities and stocks amounting to $27,000,000 (of which $18,830,000 were to be used to take care of security holders, creditors and stockholders, and of which last-named amount $12,773,300 was to be stock), by restraining the issuance of stock in excess of the amount permitted by law, which bill alleged that the statements in the plan of reorganization were false, in that, as shown by an appraisement in the bankruptcy proceeding's filed subsequent to the time complainant became a party to the reorganization plan, the value of the property of the bankrupt did not exceed $7,750,000, and which did not allege the value of the property, was insufficient for failing to unequivocally state the value of the property passing to the new corporation as a consideration for stock to be issued against it, since an appraisement in the bankruptcy proceedings is not conclusive on the issue of fraud.
    9. Where the entire subject-matter of a trust is to be dealt with, and every person’s rights in it are to be affected, all the cestuis que trustent are indispensable parties.
    Heard on bill and demurrer of tire Southern Iron and Steel Company.

      Messrs. Edwards & Smith, for the complainant.

      Mr. Chauncey G. Parker (with whom was Mr. William B. Hornblower, Mr. J. Norris Miller and Mr. Earle L. Beatty, of the New York bar), for the demurrant, the Southern Iron and Steel Company.
   Garrison, V. C.

The bill in this suit sets out that the complainant owned stock in a corporation known as the Southern Steel Company, of the par value of $5,206,700, its total outstanding stock being $25,-000,000, par value. That proceedings in bankruptcy were taken against said company, and receivers 'in such proceedings were appointed on the 24th of October, 1907, and, subsequently, trustees in bankruptcy were appointed on February 3d, 1908. That a reorganization committee was appointed and prepared a plan and agreement of reorganization, and the complainant became a party to such plan and agreement of reorganization.

The bill sets forth the pleader’s construction of the said plan and agreement; but since a copy thereof is attached to the bill, the allegations of the pleader in this respect are not controlling, but the document itself will be read and construed by the court. Dick v. McPherson (Supreme Court, 1908), 72 N. J. Law (43 Vr.) 332; Dillon v. Barnard, 21 Wall. (U. S.) 430; Equitable Life Association Society v. Brown, 213 U. S. 25; Bogardus v. New York Life Insurance Co., 101 N. Y. 337; Greeff v. Equitable Life Asso. Society, 160 N. Y. 19.

Generally speaking, the plan and agreement was to the following effect: The physical property owned by the Southern Steel Company was set forth; the amount of the bonds, and the different classes of indebtedness, and of outstanding stock of said company, were set forth. The general plan of reorganization was the familiar one of forming a new company and transferring the assets of the old company to such new company, which was to issue a stated amount of securities (in this case, bonds, preferred and common stock) to be used for certain purposes in taking care of the holders of the old securities, creditors and stockholders.

Roughly speaking, it was stated that the outstanding obligations of the old company, including the stock, was over thirty-three millions of dollars; that the securities and. stock to be issued by the .new company was $27,000,000, of which only $18,-830,000 were to be used for taking care of the existing security holders, creditors and stockholders, and of which last-named amount, $12,773,300 was to be stock, common and preferred, and tLi balance of the bonds and stock was to be either sold for cash ox held in the treasury for further use.

There is nowhere in the plan and agreement of reorganization any statement of any kind as to the value of the property of the old company, the Southern Steel Company.

The purpose of the bill, which is filed on behalf of the complainant and such others as choose to join him, against the reorganization committee and a corporation formed in this state and called the Southern Iron and Steel Company, is to prevent the carrying out of the reorganization agreement and the issuance of stock by the defendant corporation in pursuance thereof.

To this bill a demurrer is interposed by the Southern Iron and Steel Company.

The claim of the complainant to be entitled to this relief is based upon the argument that the bill shows that the issue of stock provided for in the reorganization agreement (of which approximately twelve million is now to be issued in exchange for existing securities) is for a larger amount of par value than is lawful to be issued by the defendant corporation for the property in question; and that if such stock is issued, the complainant will thereupon become liable to future creditors of the last-mentioned corporation for the difference between what it may be found that the true value of the property was and the par value of the stock issued therefor.

If the situation of the complainant and the demurring defendant is to be viewed in the narrowest way, it may be somewhat difficult to define the nature of the complainant’s right as against this demurring defendant. The only relief which he seeks against such defendant is an injunction preventing it from issuing a certain amount of stock for certain property. He is not in the position of those persons who have successfully filed bills in this court and obtained restraint against overissues of stock, because he is not a stockholder of the company which is, according to him, about to create an overissue. The only way in which he becomes a stockholder, or could be held to have analogous rights to those of a stockholder, would be because of the agreement which he had made that the property should be taken over by this company and stock issued therefor to the amount specified; and in this view he could not complain because the thing complained of would then have been an accomplished fact, and no remedy by injunction would be available. Viewed thus narrowly, the corporation would have a right to say to him:

“You either are not a stockholder and, therefore, have no right to object to the issuance of our stock; or else, you are a stockholder by reason of the issuance of our stock for the property in question, in which event your present application for an injunction is a futility.”

But I do not purpose dealing with this case upon any narrow issue of that character, whatever the proper holding thereon may be found to be. I intend to consider this case as if the complainant was complaining because certain property in which he is interested is about, by his own agreement, to be transferred to a New Jersey corporation to be created, to carry out the purposes of the agreement, and his insistment that the agreement in question provides for a larger amount of stock than the value of the property.

I therefore assume, without deciding, that one thus circumstanced, upon a proper showing, would not be held in pari delicto, or, even if so held, would still be permitted to apply to the court to prevent the issuance of the stock for the purpose named.

Counsel upon each side of this case have exhibited most commendable industry and great skill and ability in presenting every possible question suggested by the situation; but, in my view, the ease turns upon a very simple point, and does not call for a consideration of the numerous important and interesting questions dealt with at such great length by the respective counsel.

The sole injury which the complainant suggests that he may be subjected to is, that in the carrying out of this plan in exact compliance with its terms, and with the agreement that he made therein, he will receive stock to which a liability attaches because issued to a larger amount than is permitted by law.

Before any such question can arise it seems to me entirely clear that he must state clearly and unequivocally in his bill that such is the result of existing facts. He can only do this by a clear, unequivocal statement of the value of the property which is to pass to the new company as consideration for the amount of stock that is to be issued against it. In no other way can he show on the face of his bill, as he must do, that he has any equity of the character claimed.

As Vice-Chancellor Learning says in Hageman v. Brown, 73 Atl. Uep. 862 (at ¶. 863) : “There are probably few rules of equity pleadings more firmly established than the requirement that every material fact which it is necessary for a complainant to prove to establish his right to the relief he asks must be alleged in the premises of his bill, with fullness and particularity * * Smith’s Arm’d v. Wood (Vice-Chancellor Van Fleet, 1887), 42 N. J. Eq. (15 Stew.) 563; Arnett v. Welch (Court of Errors ancl Appeals, 1890), 46 N. J. Eq. (1 Dick.) 543; Ter Knile v. Reddick (Vice-Chancellor Stevens, 1898), 39 Atl. Rep. 1062; Brown v. Carpenter (Chancellor McGill, 1898), 57 N. J. Eq. (12 Dick.) 23; Schrafft v. Wolters (Court of Errors and Appeals, 1902), 63 N. J. Eq. (18 Dick.) 793; Graham v. Spence (Vice-Chancellor Garrison, 1906), 71 N. J. Eq. (1 Buch.) 183.

The only statement in the bill of any facts concerning the matter with which we are dealing, is contained in paragraph 12, in which the complainant saj^s

“tliat the representations and statements contained in said plan or scheme of'reorganization were false and untrue, in that, as shown by an appraisement in said bankruptcy proceedings filed subsequent to the time your orator became a party to said reorganization scheme, the value of the property of said Southern Steel Company and its subsidiary companies does not exceed the sum of $7,750,000, which fact was unknown to your orator at the time he became a party to said reorganization agreement. That subsequently and on or about the twelfth day of April, 1909, as your orator is informed and believes, the property of the said Southern Steel Company, including the stock of the subsidiary companies owned by it, was sold for the sum of $5,110,000 to the defendant William W. Miller,, a member of the firm of Homblower, Miller & Potter, attorneys for the defendants as reorganization committee aforesaid, and said property was bought in by said Miller acting for'and on behalf of said reorganization committee, and for the purpose and with the intent of turning the same over to said defendant Southern Iron and Steel Company, all as provided in said reorganization agreement, and for which company said defendant Southern Iron and Steel Company proposes to, and unless restrained by this court will, issue bonds and preferred and common stock in payment therefor to the amount of $27,000,-000, as provided in said plan.”

As to so much of this paragraph as is on information and belief, the demurrer is not an admission of the facts so pleaded. Trimble v. American Sugar Refining Co. (Vice-Chancellor Emery, 1901), 61 N. J. Eq. (16 Dick.) 340. So, that even if it were seriously contended, which it was not, that the allegation of what the property brought at a bankruptcy sale was an averment of its value, such fact is not so pleaded in this bill as to be effective on this demurrer.

It was contended on -behalf of the complainant that the first part of this twelfth paragraph is an averment that the value of the property of the Southern Steel Company, and its subsiduary companies, did not exceed the sum of $7,750,000. I think it perfectly fair to the complainant to say that he concedes that unless he has averred this fact he has not stated any case for relief. If he does not so concede, E decide without any question that such is the necessity of the situation, and that unless it be found that he has so averred, he has not made out any case for relief.

No charge or statement in general vague form will take the place of an averment of the substantial necessary facts. So, that it is immaterial, if elsewhere in the bill there are statements that an excess of stock is to be issued or that the stock issued will be assessable, and other like general vague conclusions of the pleader. As Chief-Justice Beasley said in Stephens & Condit Transportation Co. v. Central Railroad of New Jersey (Supreme Court, 1869), 33 N. J. Law (4 Vr.) 229, where the declaration demurred to charged that defendant was "unlawfully” doing this and that, "neither adjectives nor adverbs, no matter how numerous or sonorous, can fill the place of * * * substantial statements” (at p. 232); and Chief-Justice Gummere, in Marples v. Standard Oil Co. (Supreme Court, 1904), 71 N. J. Law (42 Vr.) 352 (at p. 353), said * * * “in considering the sufficiency of the declaration, the court does not accept the conclusion drawn by the pleader, but determines for itself the legal force of these facts,” citing Breese v. Trenton Horse Railroad Co., 52 N. J. Law (23 Vr.) 250, and Clyne v. Helmes, 61 N. J. Law (32 Vr.) 358. See, also, to the same effect, Redmond v. Diclcerson (Court of Errors and Appeals, 1853), 9 N. J. Eq. (1 Stock.) 507; Sullivan v. Browning (Vice-Chancellor Stevenson, 1904), 67 N. J. Eq. (1 Robb.) 391; Equitable Life Association Society v. Brown, 213 U. S. 25.

It will be observed, upon reading the twelfth paragraph of the bill, as quoted in full above, that he first states that the representations and statements contained in the plan or scheme of reorganization

“were false and untrue, in that, as shown by an appraisement in said bankruptcy proceedings filed subsequent to the time your orator became a party to said reorganization scheme, the value of the property of said Southern Steel Company and its subsidiary companies does not exceed the sum of $7,750,000,” &c.

As I have before stated, there were no representations and statements contained in the plan or scheme of reorganization concerning the value of the property of the Southern Steel Company; and, therefore, no appraisement (prior or subsequent to the said plan or agreement) of the valué of the said property could possibly show that the representations and statements in the said plan or scheme of reorganization were false and untrue in this respect.

But, passing this, it is impossible for me, upon this demurrer, as it was at the time that the bill was presented for a preliminary injunction, to give to this language the effect claimed for it by the complainant.

If the averments of the bill are ambiguous, or capable of two constructions, that one must be adopted which makes in favor of the defendant — the pleading is always construed most strongly against the pleader and in favor of his adversary. Stephens & Condit Transportation Co. v. Central Railroad of New Jersey (Supreme Court, 1869), 33 N. J. Law (4 Vr.) 229; Marples v. Standard Oil Co. (Supreme Court, 1904), 71 N. J. Law (42 Vr.) 352; Dick v. McPherson (Supreme Court, 1905), 72 N. J. Law (43 Vr.) 332.

In disposing of the application for preliminary injunction, counsel for the complainant was informed that if a statement, clear and unequivocal in its character, was inserted in the bill averring that the value of the property did not exceed the sum named in this twelfth paragraph, the court would consider the very important and interesting questions which would then be raised.

The same question which now comes before the court on this demurrer finds, in my mind, the same answer, namely, that it is-impossible to give to this language any such force as contended for by the complainant; it is impossible from this language to find that the complainant charges, shows or avers that the value of the property of the Southern Steel Company does not exceed the sum of $7,750,000. All that this paragraph avers in this respect is that the appraisement made in the bankruptcy proceedings shows that the value of the property does not exceed the sum named.

It seems to me to be perfectly clear that the material issue is not what that appraisement shows. The material thing is, what is the value of the property for the purpose of a stock issue by a. New Jersey corporation?

If the demurring defendant herein should answer this twelfth paragraph by denying that

“the representations and statements contained in'the plan or scheme of reorganization were false and untrue in that, as shown by an appraisement in the bankruptcy proceedings, the value of the property did not exceed the sum of $7,750,000,”

an issue would be joined upon a perfectly immaterial matter; and the proof by the complainant that the appraisement was for the sum named, or a lesser sum, would clearly and certainly not entitle him to the relief sought for in this suit. Such proof would not, as before demonstrated, show that the representations and statements in the plan and agreement were false and untrue, because there were no such representations or statements in said plan and agreement, and the proof of the value shown in said appraisement would not show the only thing beneficial to the-complainant, namely, that the actual value of the property was less than the stock to be issued for it.

Until the complainant in this suit assumes the responsibility of charging just what the value is, he does not state a case that the defendant is bound to meet, and does not state a case that entitles him to relief in this court. I think that this complainant is in a similar situation to the one dealt with by Chancellor Williamson in the case of Philhower v. Todd (1855), 11 N. J. Eq. (3 Stock.) 54, where he held the complainant, by refusing to commit himself upon the vital point, had failed to state a case for relief. And the same chancellor, in the case of Herbert v. Scofield, (1853), 9 N. J. Eq. (1 Stock.) 492, adverts to the fact that the complainant must state his case with accuracy, and holds that if the bill is so framed as to be disingenuous, it is obnoxious, and deprived the complainant of the benefit of doubts which might otherwise be resolved in his favor.

It is quite clear, in the consideration of the case at bar, that the complainant, as a party to the plan and agreement of reorganization, feared that the same would be carried out, so far as any right to object thereto by him was concerned. It is perfectly apparent that there were no misstatements, misrepresentations or fraud which would permit him to-rescind, or to retire from the plan and his agreement. He therefore feared to charge in this bill, as a fact, that the value of the property was less than the amount of the stock to be issued, because if he so committed himself in this suit and was not successful in preventing the plan being carried out, such admission might be used against him in the future, in the event that creditors' of the new company should pursue the stockholders for unpaid balances on their stock.

The bill being an injunction bill would be sworn to and might, therefore, be used against the complainant.

If, without committing himself to anything in this respect, and by merely referring to the appraisement made in the bankruptcy proceedings, he could cast the whole burden upon the defendant and obtain a decree either that the value was sufficient to found the stock issue upon, or that it was not, he would have procured protection upon an issue which he never tendered or assumed any responsibility concerning.

As will be observed from the most casual reference to this bill, the complainant assumes no responsibility of proving any fact excepting the appraisement in bankruptcy. He does not assume the responsibility of proving that this was more or less than the value of the property, or that it had any real relation to the actual value of the property.

Apparently, the pleader’s theory was that the entire burden, by this bill, could be shifted to the defendants to prove that the value of the property equaled the amount of the stock about to be issued for it. Without deciding anything more than the case before me, I am clear that one who has joined in an agreement such as this complainant has, is not in a position to cast any burden upon the defendants with whom he has contracted until after he has charged, and thereby undertaken to prove, such facts as make it improper, as to him, to hold him to his agreement and have it carried out.

While the word “fraud” is used in the bill, and the word “misrepresentation,” I am utterly unable to perceive their signification or relevancy to the facts charged. I cannot find anything in the plan or agreement which, by any proper use of language, can be said to represent or state the value of the property of the Southern Steel Company, and, consequently, no proof as to its value could possibly show any misrepresentation or misstatement in the said plan or agreement.

It is entirely settled that the mere use of the word “fraud” is futile, and that a complainant who desires to complain of fraud must set forth the facts which he claims constitute the fraud upon him. Byard v. Holmes (Supreme Court, 1870), 34 N. J. Law (5 Vr.) 296; Smith’s Administrator v. Wood (Vice-Chancellor Van Fleet, 1887), 42 N. J. Eq. (15 Stew.) 567; affirmed, 44 N. J. Eq. (17 Stew.) 603 (1888); Davis v. Davis (Chancellor McGill, 1896), 55 N. J. Eq. (10 Dick.) 37; Hageman v. Brown (Vice-Chancellor Leaming, 1909), 75 Atl. Rep. 862; see also, State v. Minnesota L. and I. Co., 20 Mont. 198; 50 Pac. Rep. 420; Equitable Life Association Society v. Brown, 213 U. S. 25.

In the case at bar, the complainant, who was a holder of a very large amount of stock in the old company, had every source of information open to him before he went into the agreement. The committee refrains from making any statments of the value of the property, and further explicitly informs all concerned that whatever they have said is not to be taken as if its accuracy was guaranteed, but is only to be taken as having been obtained from the best sources available to the committee.

The only other thing, besides the agreement in question which has happened, so far as the complainant’s bill shows, which has any relevancy at all, is an appraisement in the bankruptcy proceedings and a sale. As to the sale, it cannot be possible that any court will hold that the price obtained at a sale of assets in bankruptcy, bought in by the creditors by agreement, is so conclusive upon the value of those assets that the mere proof of the amount brought at such a sale is conclusive of such value. This is too clear upon reason to require authority, but it has the latter. Pomeroy v. New York Smelting and Refining Co. (Vice-Chancellor Emery, 1901), 48 Atl. Rep. 395.

Similarly, I cannot believe it possible that a filed appraisement in a bankruptcy proceeding is conclusive proof of the value of the assets thus appraised. Whether it is an instrument of proof at all I do not decide.

And yet this appraisement and sale are the only facts set forth in the bill which in any way affect the vital question involved.

T cannot conceive how, under any proper principles of equity pleading, it would be possible under this bill to raise the only issue which could be beneficial to the complainant. That issue, as above pointed out, is an affirmance upon his part of the fact that property of a certain value is about to have stock of a much larger amount issued for it.

Since the bill, as above stated, utterly fails anywhere to aver what the value of the property is, the issue is not even suggested, much less tendered.

For him to charge or state or show (whichever this bill may be claimed to do) that in a bankruptcy proceeding appraisers, appointed for some purpose in that proceeding, estimated the property as having a certain value, is merely to plead, at most, a portion of his evidence; and is certainly not a pleading of what the actual value is, which is the only thing with which we could be possibly concerned in this suit.

With respect to the responsibility assumed by the complainant under this charge, all that he assumed to do was to produce the appraisement, and prove that it was filed, in the bankruptcy proceeding.

In the case of Brokaw v. Brokaw (1886), 41 N. J. Eq. (14 Stew.) 215, there was a demurrer to the bill. One question sought by the complainant to be raised was whether the defendant executors had neglected to perforin a duty enjoined upon them bjr the will. In dealing with the bill upon this point, Vice-Chancellor Van Fleet said (at p. 220) : “The bill, it is true, says that the father complained to the complainant * * * that he was not receiving the support * * * he was entitled to undei1 the will, but this averment * * * does not affirm the truth of any actionable fact. Under an averment in this form, the complainant would not be required to prove that the father had been deprived of anything which the will gave him, but he would maintain the issue tendered by his pleading by simply proving that the father had complained that he was not receiving what he was entitled to. Such proof would, of course, show no right of action. It is an elementary rule of pleading that a bill must state all the facts on which the complainant’s right to relief rests with certainty and clearness, and positively.” Story Eq. Pl. § 241. Surely, the appraisement filed in the bankruptcy case, which could not be subjected to the customary test by cross-examination, could not he held to be conclusive; and yet that is all that the complainant tenders in this case.

Unless, therefore, the complainant could maintain that which seems to me to be an. impossible contention, he cannot succeed upon the facts averred.

If he could maintain that because this property was appraised in a bankruptcy proceeding at a certain sum, such sum must, in this court, be taken as conclusive proof of the value of the property, so that an issue of stock by a New Jersey corporation to a larger amount than such sum would be an overissue to the amount of the excess, he might then succeed in this suit. But I have not found, nor was I furnished with any authority for any such principle. And I cannot conceive that any court could reach such a conclusion.

Whatever the functions of the appraisers in bankruptcy may be, and whether their appraisement is evidential or not in other proceedings, it does not seem to me that it can. be reasonable to hold such appraisement to be anything more than evidence. I feel that I would waste time were I to indulge in elaboration with respect to what seems to me to be so plain and clear a proposition.

The vital determining question in this case is whether the complainant has averred, shown or stated that a New Jersey corporation is about to issue more stock than certain property is worth. And the onhr way he can do that is to show what that property is worth.

Unless the appraisement in the bankruptcy proceedings is conclusive, he has nowhere in his bill charged any facts raising this question. I End that the appraisement in the bankruptcy proceedings is not conclusive; that it may be (although I do not decide that it is) evidential, but it is nothing more than evidential; and therefore the complainant, by merely pleading that, has not pleaded the facts which he must plead to raise the question which he seeks to raise.

Upon this ground, my judgment is clear that the demurrer must be sustained.

The demurrant urged with equal insistence many other grounds.

It insists that this bill is defective because it is brought by the complainant on behalf of himself and others, whereas the charge seems to be a fraud perpetrated upon Mm. Chester v. Halliard (Court of Errors and Appeals, 1882), 36 N. J. Eq. (9 Stew.) 313.

If the pleader’s apparent theory of his own case were adopted, there would be much in this objection. But, as above pointed out, I do not think that theory can possibly be tenable. I cannot see how, from any of the facts that he alleges, it would be possible to End a fraud perpetrated upon him or upon anyone. The sole cause of complaint which I see it possible to urge, if the facts were properly pleaded, would be that under the law of JSTew Jersey it is against public policy to issue more stock than the value of property paid in for it; and therefore these parties who had agreed to. put in property at a certain price had agreed to do a thing prohibited by the law of New Jersey; and therefore any one of the parties might appeal to the court to undo such unlawful agreement and prevent its being proceeded with.

In this view of the case, it seems to me that it would not only be proper but necessary to bring in all the parties so that the court could make a binding decree affecting them all.

Another insistment of the demurrant is that this complainant is not in a position to ask for the relief prayed for, even assuming that his bill charges all that it should charge, because what he, in effect, is asking for is rescission, and rescission, under the circumstances, is impossible.

The contention of the demurrant is that the status quo ante cannot possibly be restored; and since the complainant is in a similar situation to all the other parties, and has not been the subject of any fraud nor has any concealment been practiced with respect to him, he cannot now have the contract rescinded as to him without the acquiescence of all the others, because it would be impossible to restore him or the others to any position which a court would deem equitable.

It certainly would be extremely difficult to work out any equitable result under the circumstances. Parties owning $33,-000,000 of securities, stock, &c., have joined in this plan, or at least a very large majority have. It contemplated settlements upon agreed bases. It contemplated a sale of the assets and a purchase for the benefit of all, and a revesting of the assets in a new corporation, and an issuance of securities by that corporation in exchange for rights against and securities of the old corporation.

The only remedy in this view of the case would be a completely new agreement, which it seems to me would be practically impossible for the court to make, even if all the parties were before it and the court had jurisdiction to do so. The parties are not before it, since only the reorganization committee and the new company are defendants. If the entire subject-matter of the trust is to be dealt with, and everybody’s rights in it are to be affected (as they would have to me to meet the complainant’s demand) , it seems to be clear that the other cestui que trustent are indispensable parties. This latter principle, if it.is applicable, is too familiar to require citation of authorities.

Another insistment is that in reorganizations the courts have held that an overissue does not result if what is done is merely exchanging new securities for old. The following authorities are cited for this: Pomeroy v. New York Smelting and Refining Co. (Vice-Chancellor Emery, 1901), 48 Atl. Rep. 895; Memphis and Little Rock Railroad v. Dow, 120 U. S. 287; Mackintosh v. Flint and P. M. R. Co., 34 Fed. Rep. 582; Sioux City O. and W. Co. v. Manhattan Trust Co., 92 Fed. Rep. 428; Toledo and R. Co. v. Cont. Tr. Co., 95 Fed. Rep. 497; Blum v. Whitney, 185 N. Y. 232, 240.

And it is also pointed out that our statutes concerning reorganizations seem to indicate that this is the public policy of our state.

Finally, it is insisted that even if all necessary facts were properly charged, the laches apparent on the part of the complainant would bar him from relief under the doctrine recently enunciated in the case of Dana v. Tobacco Company (Vice-Chancellor Pitney, 1907), 72 N. J. Eg. (2 Buch.) 44; affirmed, 73 N. J. Eq. (3 Buch.) 736 (Court of Errors and Appeals, 1908). It is pointed out that in that ease a certain number of weeks was held to be too long for the complainant to have delayed before acting, and in this ease, at least, the same number of weeks must be found to have intervened between the time when the complainant will be charged with knowledge and the time when he actually acted.

This brief reference to the various objections to the bill urged by the demurrant indicates their seriousness and importance. But I do not conceive it proper for me to attempt to formulate the law with respect to these different contentions; because I do not find, as above fully stated, that the facts charged in the bill make a ease calling for their consideration.

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


source: Caselaw Access Project

author: Garrison, V. C.

license: Public Domain

text:
    George Ewald v. Soter Stephen Ortynsky et al.
    [Decided February 4th, 1910.]
    1. The allowance of a plea to the jurisdiction of the chancery court in a suit against a domestic corporation in which the court has jurisdiction of the subject-matter, praying for dismissal on. the ground that the court has no jurisdiction of the suit for want of proper service on defendant, would result in a denial of justice to complainant; such fact only being matter in abatement entitling defendant at most to have the service quashed.
    2. At law pleas to the jurisdiction were either in bar or in abatement.
    3. While at law the declaration must follow the writ and fell with it, the subpoena in equity was a mere notice, and could be quashed without affecting the bill, so that failure properly to serve the subpoena was merely ground in abatement, and would not support a plea to the jurisdiction.
    4. The return of an officer upon the process is conclusive, even as to matters of opinion stated therein by him; the only remedy for a false return being an action against him.
    5. In the absence of a statute, the courts of a state have jurisdiction of a transitory suit against a foreign corporation if found and served within the state having jurisdiction of the subject-matter.
    6. A plea in abatement to a bill in equity is bad which states matter in bar.
    7. Upon finding against defendant, upon issue joined, upon its plea to the jurisdiction, praying dismissal of the bill for want of proper service, if that were the proper manner of making the objection, complainant would be entitled to proceed as upon a decree pro oonfesso.

    8. Upon finding that defendant was not properly served, upon joinder of issue upon a plea to the jurisdiction praying dismissal for want of service, the court may, in order to avoid error in presenting the matter as a plea to the jurisdiction instead of in abatement, permit complainant to withdraw the replication to the plea upon just terms to defendant, preserving to him the benefit of the evidence taken on the question.
    9. While a plea to the jurisdiction of a chancery court is proper where it has no jurisdiction of the subject-matter, where it has such jurisdiction and jurisdiction of the person as in case of a domestic coiporation, the objection of want of service upon it should be made by motion to abate the suit until defendant is properly served, and not by plea to the jurisdiction.

      10. Where the want of service upon defendant was improperly presented by plea to the jurisdiction and issue joined therein, upon permitting complainant to withdraw his replication to the plea, the court may strike the plea and permit defendant to properly restate the matter in abatement. ,
    11. Chancery rule 209» provides that the validity of a plea is not admitted by joinder of issue thereon, and if the facts pleaded be determined in defendant’s favor, they shall avail him only so far as in law and equity they should do so. Defendant filed a plea to the jurisdiction praying dismissal of the bill for want of service upon it, and issue was joined therein, and found for defendant as to want of service. — Held, that defendant was only equitably entitled to have the improperly served process set aside, and was not entitled to have the bill dismissed, and the suit barred.
    In this case a bill was filed by the complainant against three defendants, an individual and two corporations. The subject-matter of the suit is conceded to be within the jurisdiction of a court of equity.
    The two corporations defendant are each corporations of the State of blew Jersey.
    One of such defendants filed a plea as follows:
    “The defendant, St. Peter and Paul Russian Greek Catholic Church of Jersey City, appearing for the sole purpose of objecting to the jurisdiction of this honorable court over this defendant in this suit, and for no other purpose and by protestation not confessing or acknowledging the matters and things in and by the said bill of complaint of the said George Ewald, set forth in such manner and form as the same are thereby and therein set forth and alleged for plea to the jurisdiction of this honorable court in the premises says: ‘That jurisdiction has been sought to be obtained over the St. Peter and Paul Russian Greek Catholic Church of Jersey City, in this case by the issuance of a writ of subpoena ad respondendum, out of and under the seal of this honorable court, bearing date the sixth day of April, nineteen hundred and eight, directed to St. Peter and Paul Russian Greek Catholic Church of Jersey City,’ together with other defendants, and the service of the same by the sheriff of the county of Hudson upon Sam Barna as appears by a return thereof by said sheriff as follows: ‘Served within subpoena April 16, 1908 * * * on the defendants St. Peter and Paul Russian Greek Catholic Church of Jersey City by leaving true copies thereof with Sam Barna, President and Agent of said defendant church. John C. Kaiser, Sheriff, by Eugene Thomas, S. D. S.’ That at the time of said service said Sam Barna was not the president, agent or other representative or officer of the said St. Peter and Paul Russian Greek Catholic Church of Jersey City, in the State of New Jersey or elsewhere and had no connection whatever, as officer or director or otherwise with the St. Peter and Paul Russian Greek Catholic Church of Jersey City, and that no decree can be entered in this suit which is enforceable against this defendant under the laws of the State of New Jersey.
    “By reason thereof this defendant humbly submits that this honorable court has not now and never had and cannot have jurisdiction over it. AU of which matters and things this defendant avers to be true and pleads the same in bar to the said complainant’s bill, and to the jurisdiction of this honorable court in the premises, and prays the judgment of this honorable court whether it should be compelled to make any further or other answer to said bill, and prays to be hence dismissed with its costs and charges in this behalf sustained.”
    Within the time required the defendant set this ease down for hearing on bill and plea, and it was upon the list for hearing at the October term, 1908, of this court.
    The complainant, having filed a replication to the said plea before the opening day of said October term, no hearing was had upon the bill and. plea, but in due course a trial day was set for the hearing upon the bill, plea and replication.
    Upon the trial, the testimony of the witnesses convinced the court that at the time of the service of process upon Barna he was not the president or agent of the defendant corporation. If the determination of this fact should lead the court to make an order in accordance with the prayer of the plea, such order would deny the jurisdiction of the court, bar the complainant’s suit as to the pleading defendant, or dismiss it therefrom. Since such an order would be in effect a denial of justice to the complainant, the court perceived the difficulty created by the course of pleading and called the same to the attention of counsel (adopting much the same course as that suggested in Schoettle v. Hengen (Vice-Chancellor Learning, 1907), 66 Atl. Rep. 922). Thereupon the solicitor for the complainant moved for leave to withdraw the replication to the plea, and for leave to move to strike out the said plea, and, if these motions were granted, for leave to move to set aside the service of the process which he had caused to be served upon the pleading defendant. Due notice of these motions having been given to the solicitor of the pleading defendant, arguments and briefs were submitted upon each side.

      Mr. Herbert C. Gilson, for the complainant.

      Mr. Adolf L. Hngeike, for the pleading defendant.
   Garrison, V. C.

By a reference to the plea, which is printed in full above, it will be seen that it is to the jurisdiction of the court, and pleads that this court has not now, and never had, and cannot have, jurisdiction over the defendant; is specifically in bar, and prays that the defendant shall be dismissed from the suit.

Since the pleading defendant is a corporation incorporated under the laws of the State of New Jersey, and the subject-matter of the suit is one within the jurisdiction of the court of chancery of New Jersey, it would be a denial of justice for the court in this suit, merely because process had not been properly served upon the defendant, to order or decree that this court has no jurisdiction, and never had, and never can have; or that, by failure to properly serve the defendant, the complainant’s suit is barred; or to dismiss the defendant from this properly brought suit.

The utmost limit of the right of the defendant in this suit is not to be called upon to answer the bill, unless and until it is properly brought before the court for that purpose. The sole question before the court in this suit is whether the subpoena was duly served as required by law upon the defendant. The determination of this question does not affect the jurisdiction of the court, properly speaking, at all; it merely affects its ability to enforce its jurisdiction over the person of this defendant.

What might be termed pure pleas to the jurisdiction (and those to which, in my judgment, they should always have been confined) were cases where the determination on the plea settled the jurisdiction of the court over the subject-matter. There were, however, some questions which were permitted to be settled by pleas to the jurisdiction which did not determine that the court might not have jurisdiction over the subject-matter, but did settle that at that time it had not, and, therefore, the suit abated. In England, at the time when we inherited the chancery practice, pleas to the jurisdiction of the court were used to assert that the court of chancery of England was not the proper court to take cognizance of the rights sought to be enforced by the complainant; and those which were based upon the person of the complainant or defendant asserted that the complainant was incapacitated to sue, or that the defendant was not the person who ought to be sued.

Under the first head of such pleas, the fact that the defendant, for some reason, was solely suable in some other court was a proper subject-matter, and for this reason the defendant was required always to set out the other court which had exclusive jurisdiction. If he did not do this, his plea was bad, because the court of chancery had jurisdiction of all cases of equitable cognizance, and the assertion in the plea that the court of chancery of England did not have jurisdiction, without asserting what court had, really set forth a cause of demurrer and not of plea — it merely asserted that the case was not one of equitable cognizance. Mitf. Pl. (6th Am. ed. from 5th Land, ed.) 258, *219, 262, *223, 263, *224, 265, *226; Story Eq. PI. § 705; Beam. Eq. PI. 53; Fletch. Eq. Pl. & Pr. 289.

Generally speaking, in the courts of the different states, there is no analogous plea of privilege — corporations and individuals being liable to suit where “found.”

The real question most often sought to be raised does not really go to the jurisdiction of the court at all, but merely to its right to enforce that jurisdiction with respect to a defendant who claims that he has not been found within the jurisdiction, has not, in other words, been properly brought before the court for judgment.

At law there were two classes of pleas to the jurisdiction of the court — those in bar, and those in abatement. But the study of the course of pleading at law will not be very helpful to us because of the difference between the practice in the two courts.

At law, the foundation of the suit is the writ; whereas, in equity, the foundation of the suit is the bill. If the writ was abated at law, the suit necessarily fell with it; whereas, in equity, the subpoena could be set aside or abated or quashed without affecting the stability of the bill at all.

At law, the return of the officer upon the process was conclusive, and if it was false, the remedy was not to disprove it in that suit and have it set aside, but the party was relegated to his action against the officer for a false return.

There will not, therefore, be found in the early precedents at law any pleas in abatement or in bar -based upon the allegation that the writ was not served by the officer in the manner in which his return purports to show that it was served.

The presumption just stated concerning the truth of the officer’s return even went to what the courts termed “the opinion of the officer” — that is to sajq his designation of the character of the person whom he served, whether as agent or as director, or as a member of the family, or what not. Von Roy v. Blackman (United States Circuit Court, 1877), 3 Woods 98.

In equity, the subpoena was not of the same nature as the summons or other process at law, but was a mere notice. It was not required, under our practice, to be served by the sheriff or any other officer, and might be served by an individual. This was subsequently changed by statute.

The necessity, at law, of the declaration following the writ, and of the effect of a variance between the two, and other like matters, contradistinguish the pleadings in equity from those at law to such a degree that there is, as above stated, little or no analogy between the course of pleading in the two courts in this respect, at least.

Even at law, when a plea of the nature of the one interposed in this case was first brought to the attention of our supreme court, Chief-Justice Beasley remarks that he could not find any model of the same in any of the books, but sustained it by reason of its analogy to a plea for which he did find a precedent. Camden Rolling Mill Co. v. Swede Iron Co., 32 N. J. Law (3 Vr.) 16.

With the utmost deference to the very learned judge who decided this case, I cannot refrain from suggesting that he fell into an error therein similar to that which appears in some of the later cases in our own court, with which I shall have occasion to deal hereafter. A New Jersey creditor was seeking to enforce a right of a transitory nature against a foreign corporation. The New Jersey court had jurisdiction if it could properly get the defendant into court. Unless the defendant, the foreign corporation, was.doing business here it could not enforce its jurisdiction. The real question, therefore, was not jurisdiction or the lack of it, but ability to enforce jurisdiction at that time upon the service then made or attempted — non constat — that the very next day the defendant would not, by transferring its business to New Jersey, bring itself fully within the compulsory process of the court.

In that case the pleading defendant was a foreign corporation who asserted its immunity here because it was not doing business here and had not been properly served, &c. The chief-justice found an analogy between that plea and those pleas of personal privilege in the English courts, and sustained the propriety of the plea in this case. The error which I think was committed was in considering that a foreign corporation was privileged from suit in the courts of New Jersey, because it had not been found .within the state. It undoubtedly was in a position to assert that the jurisdiction of the court could not be exercised over it until it was properly brought before the court; and unless it was doing business here or had specified an agent, &c., it could not be found herein. But it was not in an analogous position to the English privileged person who could claim that some court had exclusive jurisdiction over him. If the subject-matter were one cognizable by the courts of New Jersey, and the sole objection was that the defendant, a foreign corporation, had not been properly brought before the court for judgment, I do not think the precedents support the plea.

It is not necessary to decide whether the subject-matter in that suit was one cognizable by the New Jersey court, but it may be useful to note that the supreme court of the United States in Barrow Steamship Co. v. Kane (1898), 170 U. S. 100, said that “the constant tendency of judicial decision in modern times has been in the direction of putting corporations upon the same footing as natural persons in regard to the jurisdiction of suits by or against them,” and in that case entertained a suit begun in New York by a citizen of New Jersey against a corporation of Great Britain for a tort committed in Londonderry, Ireland; and from the reasoning, of the court, the principle deduced is that, unless there is something restrictive in the legislation of the state, the courts of the state would have jurisdiction of a transitory cause of action brought against a foreign corporation if the latter was “found” therein and served.

I have had occasion to point ont elsewhere (Groel v. United Electric Co. (1905), 69 N. J. Eq. (3 Robb.) 397) that at first corporations were held to be only suable within the jurisdiction of the state which created them, but that this early theory was abandoned, and now corporations created by any sovereignty may be sited within any jurisdiction which has jurisdiction of the subject-matter, provided they are “found” therein and served in accordance with the practice of that jurisdiction concerning service; and I see no reason why the proper court should not have jurisdiction of the subject-matter in all suits of a transitory nature.

While there has been much discussion and a difference of opinion upon the question as to whether there is any distinction in equity between pleas in bar and those in abatement (Story Eq. Pl. (7th ed.) 587 § 708, and notes), I do not find it necessary in this matter to determine which is the correct theory. The plea in this suit is framed upon the theory that it is in bar. The proper effect to be given to the proof of the facts of the plea is clearly not to bar the complainant’s suit, but, at the most, to abate it. But even here I do not see how it would be proper to abate the suit by dismissing the bill, or dismissing the defendant from the bill (which is the same thing, in effect), even if this plea went no further in its prayer than that.

Assuming that it is a proper ease for a plea in abatement in equity (and it surely cannot be claimed that a defendant, situated as this one is, can have any greater relief by not having been served than to abate the suit until he is served), the plea is an improper one. Pleas in abatement are improperly begun and concluded if the matter set up is stated to be in bar. 1 Encycl. Pl. & Pr. 27, notes. This plea, therefore, is defective, and no proper order or decree can be entered upon it, even if the allegations of non-service set up in it are proven.

The contention of the pleading defendant is that it having filed this plea, and the complainant having joined issue, and it having proven the facts concerning non-service, the court, under the authorities (Hunt v. West Jersey Traction Co. (Vice-Chancellor Grey, 1901), 62 N. J. Eq. (17 Dick.) 225), is bound to find for the defendant and dismiss the bill, or dismiss the defendant from the suit, as was done by the court of errors and appeals in Wilson v. American Palace Car Co., 65 N. J. Eq. (20 Dick.) 730.

Were such an order entered it would, in my view, be a bar to-the complainant. The only theory on which such an order could be entered would be that the defendant had pleaded and proven matter which barred the complainant from the further prosecution of the suit by showing that the court had not jurisdiction thereof. I cannot conceive that this court, merely because of an error in the course of pleading, would ever enter"what might be termed a self-stultifying order of that nature. I so term it because it would be an order that, with respect to a subject-matter cognizable by this court, a party within the jurisdiction of this court could never be made amenable to its compulsory process-so that the jurisdiction of the court might be exercised over such party if that party had been improperly served and entered a plea to the jurisdiction of the court.

Each of the counsel in this suit shaped his course' in accordance with what he conceived to be the law as enunciated in the case of Wilson v. American Palace Car Co., supra. They each conceived that that case, and those which followed it in this court, decided that whenever a defendant in a suit in equity desired to object to the method pursued to bring him into court' the proper practice was by plea to the jurisdiction of the court. They also conceived that the plea filed in that case, and approved by the court, was the model plea to be used. It was, because the complainant’s solicitor was of this impression that he did not pursue the hearing upon the bill and plea but replied to the plea.

The embarrassment produced by the course of pleading in this suit has been heretofore alluded to; and, in addition to those embarrassments already mentioned, the court must consider the. effect upon the defendant if such a plea were, upon trial, found not to be true. The authorities are that under such circumstances the complainant is entitled to proceed as if upon a decree pro confesso. Hunt v. West Jersey Traction Co., supra; Fletch. Eq. & Pl. 316. It surely cannot be a proper course of pleading which would result in subjecting a defendant to a decree against l;im on the merits merely because he ■objected to the manner or effect of the service of the subpoena upon him.

The court now finds it is in a position where the defendant has proven that it was not served with process, as it pleaded it was not, but cannot, with any proper regard to the due administration of justice, make the order prayed for by the defendant. Under these circumstances, I conceive that there can be no question of the right and power of the court in the premises. I conceive that this court has the right and power to permit the ■complainant to withdraw the replication upon terms which shall do justice to the defendant, to whom the full benefit of all that has taken place shall be secured. Dan. Eq. Pl. & Pr. (6th ed.) 417, 482, 483; Fletch. Eq. Pl. 381; Story Eq. Pl. § 877; Coop. Eq. Pl. 328; Swayze v. Swayze (Chancellor Williamson, 1853), 9 N. J. Eq. (1 Stock.) 273. In this latter case, the chancellor held that tjae court could, of its own motion, dismiss a bill to which no objection had been taken by demurrer or plea, and concerning which the defendant had lost all right to make any objection; and that looseness of pleading which embarrassed the court and interfered with the administration of justice would not be encouraged, but would be controlled by the court in the exercise of its discretion whenever occasion required.

The next consideration is whether, after the replication is withdrawn, the complainant should be permitted to move to strike out the plea, or to have a hearing upon its sufficiency, or-to have the matter adjudged upon the plea properly framed as a plea in abatement.

Since the court will mould the pleading so as to effectuate the ends -of justice and give to the defendant all of the benefit to which it is entitled by reason of the erroneous course of the complainant in not earlier objecting to the plea, the next question involves the whole matter of practice in this respect.

The subject is one which is involved in great confusion, and should be clearly and definitely settled, for which reason I go more fully into the matter than the circumstances might otherwise warrant, in the hope that if I have misconceived, or do not correctly state the practice, the court of ultimate decision will take occasion to point out what the proper practice is.

The unfortunate results arising out of an incorrect practice in this respect are numerous. The plea (if it be found that a plea is the proper form) is without a model, and one must be created; and the order which shall be made upon such a plea is without precedent, and its phraseology and effect must be carefully considered and determined. If, on the other hand, a plea be an improper method, then it should bo never permitted, because of £he delay incident to a hearing upon that form of pleading, to the embarrassment with respect to the form of pleading^ itself, and to the order to be made thereon.

A similar confusion was found to exist in the federal courts on the equity side with respect to this subject-matter; and Judge Hammond, of the district- court of Tennessee, took occasion to study the matter with great care, and to express his conclusions with clearness, and to set forth the authorities and precedents at length. Romaine v. Union Insurance Co. (1886), 28 Fed. Rep. 625. Since he is speaking of the English practice at a time when it applied to our courts (as it did to his court), what he says is with respect to the authorities by which we are bound, and is, therefore, directly in point. I cannot, therefore, better elucidate the matter than by quotation. He says: “We can have no trouble in any case if we distinguish between a substantive objection to the jurisdiction, technically considered, and one for mere irregularity of the service of the process, because, as was said in Drummond v. Drummond, 2 Ch. App. Cas. 35, ‘much confusion has arisen by treating want of power to enforce jurisdiction as tantamount to want of jurisdiction.’ ” He points out that in the federal courts jurisdiction over the subject-matter very often depends upon diversity of citizenship an"d other questions concerning the person, and that great care should be taken in studying the federal cases by reason of this fact; because, in such cases, jurisdiction of the subject-matter does depend upon jurisdiction of the person (concerning which see Funck v. Smith (Supreme Court, 1884), 46 N. J. Law (17 Vr.) 484). He says, after pointing this matter out: “Except, therefore, in that class of cases peculiar, perhaps, to the federal courts, where, in certain situations of residence or citizenship, the power to proceed against the particular persons is wholly-denied under all circumstances whatever, the objection that the defendants to a bill- in equity have not been effectually served with process to bring 'them within the presence of the court for judgment, is not. as at law, one of jurisdiction to be pleaded by formal plea to the writ, but one of mere irregularity of process, properly cognizable on motion, according to the practice always prevailing for that especial purpose.”

(It will be found that this practice is the one pointed out by Dan. Ch. Pl. & Pr. *536, and note.)

He then reviews the English cases and finds a uniform practice as above indicated; finds that in the federal courts there liad been unfortunate departures from the proper practice, and concludes: “But, if we are to have technical practice in making the objection, it must be done, in a federal court of equity, in the way I have indicated; for that was the uniform method in the English court of chancery at the time our equity rules were adopted. There is no doubt of this, * * * and this practice must be followed, if insisted upon, no matter how much the practice has been disregarded by our courts.”

It is, perhaps, suggestive to point out that in that case the objection was made by motion, and the objection thereto was that it should have been made by a plea to the jurisdiction of the court, the motion proceeding upon the. ground that the return to the subpoena should be quashed upon the ground that it appeared that the defendants had no residence in the jurisdiction, and no agent, and had not been properly subpoenaed.

The practice of raising the objection by motion was followed in our earlier cases. Wagner v. Blanchet, 27 N. J. Eq. (12 C. E. Gr.) 356; Harrison V. Farrington (Chancellor Runyon, 1882), 35 N. J. Eq. (8 Stew.) 4; Hervey v. Hervey (Vice-Chancellor Emery, 1897), 56 N. J. Eq. (11 Dick.) 166. And this is the practice in the federal courts. Goldey v. Morning News Co. (Supreme Court, 1894), 156 U. S. 518. And I can find no case in New Jersey in which a resident defendant ever raised this question or objection by a plea to the jurisdiction of the court.

It will be found by reference to the English precedents on the subject, many of which are cited in Romaine v. Union Insurance Co., supra, that the objection to jurisdiction over his person asserted by one attempted to be brought in by publication or substituted service was taken by motion, and, therefore, in my view, in Kirkpatrick v. Post (Court of Errors and Appeals 1895), 53 N. J. Eq. (8 Dick.) 641, and in Puster v. Parker Mercantile Co. (Vice-Chancellor Stevens, 1903), 64 N. J. Eq (19 Dick.) 599, the court should have passed upon the question of whether the objecting defendant was in court.

It was thought by counsel in the case at bar that the case of Wilson v. American Palace Car Co., supra, and the cases which followed and relied upon it, sanction such a practice even with respect to resident defendants — that is, that the theory and reasoning of those cases leads to the conclusion that a plea to the jurisdiction of the court is proper wherever the defendant has not been regularly brought before the court so that its judgment might be pronounced against the defendant.

First, it should be observed that there is not, in my view, any warrant whatever for such a deduction from the cases in question. In each of them the pleading defendant was a non-resi dent individual or corporation, not amenable at that time to the compulsory process of the court; and it was found in each case that the procedure adopted to bring such pleading defendant before the court, was not effectual for that purpose.

But with all deference to the learned judge who pronounced the opinion in the case of Wilson v. American Palace Car Co., I am led to say that unless the subject-matter was one that was not within the jurisdiction of the court of chancery of New Jersey, I think that the proper practice would have required the objection, with respect to the method adopted to bring the defendant before the court, to be made by a motion and not by a formal plea to the jurisdiction of the court. Groel v. United Electric Co., supra. A plea to the jurisdiction of the court is undoubtedly proper in those cases in which the court has no jurisdiction over the subject-matter, and the distinction to be drawn is between such cases and those in which it has jurisdiction of the subject-matter but cannot enforce it until it obtains jurisdiction over the person; but no useful purpose will be served by stopping to analyze the cases above cited upon this point, or to attempt to determine into which class these cases fall if the distinction is applicable to them. Whatever may have been the course of practice adopted in different cases in this state, I think that it is clear, from the reasoning which should be applied, and the precedents which do apply, that in every case in which the court of chancery has jurisdiction of the subject-matter which it can enforce if it obtains jurisdiction of the party, there is no propri&ty in a plea to the jurisdiction of the court based upon an allegation that the court has not obtained jurisdiction of the person, but that, in such case, the objection should be made by motion based upon a conditional appearance.

If, however, it should be determined that in this state, by reason of the decisions, the distinction just alluded to will not be made in cases where the defendant is, at the time of pleading, a non-resident person or corporation not amenable to compulsory process, the innovation in practice thus effectuated should not be further extended. It surely should not be extended so as to include a resident defendant, individual or corporate, who is amenable to compulsory process, and whose only objection is. that such compulsory process -has not as yet been properly served upon such defendant. That is the precise question raised in the case at bar; and my conclusion is that the plea in this case is defective in form and is improper pleading — that is to say, that the matter therein contained is available to the defendant for the purpose for which he may be permitted to use it; but that it is not available in a plea to the jurisdiction of the court, and is defective because it contains matter in abatement only and pleads it in bar.

I have concluded, therefore, since the replication is withdrawn by permission of the court, that it is within the power of the court to strike out this defective and improper plea.

The right of the court in this respect is affirmed by authority. 16 Encycl. Pl. & Pr. 621; Stanbery v. Baker (Vice-Chancellor Emery, 1897), 55 N. J. Eq. (10 Dick.) 270; Mount Pleasant Cemetery Co. v. Erie Railroad Co. (Supreme Court, 1906), 65 Atl. Rep. 192.

I am aware that if my finding were that the matter set up by the plea is insufficient, proper practice would require that such insufficiency should be adjudged upon a hearing upon the bill and plea, and not upon a motion to strike out; it is likewise true that if the case had been set down for hearing on bill and plea, and such hearing had been had, it would be proper to overrule the plea; but where the question is not of sufficiency of the matter, but defects in the plea and the form in which the matter set up should be pleaded, I conceive that it is proper for the court to strike out the pleading (if a plea is an improper method'of presenting the matter to the court) and to permit the party to restate the matter in a proper form.

I will, therefore, in this case, permit the defendant to raise the same question upon a motion, and will require the complainant to submit the same upon the evidence taken already in the suit. All of the evidence upon the subject has been submitted to the court, and the defendant should not lose the benefit of this.

If the defendant does not desire to avail itself of the right to make such a motion under the circumstances, I will grant the motion of the complainant to set aside the service of the subpoena, upon the defendant in question, upon the condition that he pay to such defendant all of the costs accruing to such defendant to date under the plea filed by such defendant.

The defendant may elect which course it prefers, and the final order will be made accordingly.

After the formulation of the above portion of the opinion, and before its promulgation, a new rule was adopted concerning pleas. The necessity of such a rule undoubtedly arose out of just such cases as the one now being dealt with. The rule reads as follows :

“209a. If issue be joined upon a plea, its validity shall not be thereby admitted, neither shall the plea be overruled as false for failure of the defendant to prove immaterial averments thereof. Upon the hearing of such issue the question shall be whether upon the material facts pleaded, so far as substantiated by the proof, the complainant ought to be precluded from having the discovery or relief prayed for in the bill. If the facts pleaded be determined in favor of the defendant, they shall avail him only so far as in law and in equity they ought to avail him; if they be determined against the defendant, such determination shall avail the complainant only so far as in law and in equity it ought to avail him, and shall not, as heretofore, entitle the complainant as of course and without proof to the discovery or relief prayed for by the bill, or shall the defendant be debarred as of course,from the privilege of answering the bill.”

If this rule be applied to the decision of this case, the result is exactly similar to that reached by me and stated above. The facts pleaded being determined in favor of the defendant, the rule prescribes that they shall avail him only so far as in equity they ought to avail him.

The extent to which the facts proven in this case ought, in equity, to avail the defendant, is a setting aside of the process which was improperly served.

The form of the order may be settled upon notice.


text:
    Walter D. Lee v. Anna C. Lee.
    [Decided February 14th, 1910.]
    1. Where, in a suit by a husband for divorce for the adultery of the wife, the evidence of the husband did not identify the co-respondent, there was no burden on the wife to produce any testimony from the alleged co-respondent.
    2. In a suit by a husband for divorce on the ground of the wife’s adultery, evidence held insufficient to support the charge.
    Heard on petition, answer and proofs in open court.

      Mr. Qharles II. Bwrtis, for the petitioner.

      Mr. Elmer W. Demarest, for the defendant.
   Garrison, V. C.

Having been notified that the petitioner lias taken an appeal from the decree pronounced in this case, I feel it proper, in justice to the reviewing court, to express more clearly my reasons for the judgment which I reached and announced at the conclusion of the case.

I do not find it necessary to consider any questions of law, as the sole question involved is whether the petitioner has proven that' the defendant committed adultery upon all or any of the occasions alleged in the petition.

The parties were married in February, 1901. The wife was about five years older than the husband. They lived together unhappily from the beginning. Within four months after their marriage, she was compelled to leave him on account of his treatment, but returned in about two weeks at his solicitation. They then continued living together until December of the year of their marriage, 1901. At this time he was not properly supporting her, and she applied to the police court in the city of Eew York, where they were living, and obtained an order against him requiring him to pay her $4 a week. He then left her, but came back in the month of February, 1902, and lived with her down to October, 1902. At that time the parties agreed to separate and have since lived apart.

The petitioner alleges that the defendant committed adultery with unknown men upon the following days and places in the city of Eew York: Upon the 21st of February, 1904, at the Hotel Aldine; upon the 17th of September, 1906, at the Eew Star Hotel; and upon the 20th of October, 1906, at a house of assignation, known as Alice Gray’s, on East Thirteenth street, in the city of Eew York. He also alleges adultery with one Hovagewsky, or Reed, at dates from the month of October, 1906, on, at 3151 Broadway, in the city of Eew York.

In the month of May, 1903, the wife commenced a suit in the supreme court of the State of Eew York against the husband for maintenance and support, and in that month an order pendente lite was made therein requiring him to pay her $7 a week alimony, which, by agreement between counsel, was reduced to $o a week, and which he paid until about May, 1909, a period of six years.

The three first-mentioned charges are so similar in character, and the proof concerning each is so similar, that I propose to deal with them generally and without precise specification.

On behalf of the petitioner, there is produced his own evidence and that of his brother and a cousin, and of a private detective. With respect to each of these instances, some of these witnesses testify that they saw the defendant with a man, unknown to them, enter the place in question, at night (or, in one instance, in the afternoon), and remain there for a considerable period of time, when they saw them emerge, or, in one instance, I think, they failed to see them come out at all. They swear that these were hotels or houses of bad repute; and the inference they ask the court to draw, is that the defendant, and the man accompanying her, went to some room1 within the place mentioned and there committed adultery. Eo witness, other than those just mentioned, corroborates this testimony. There was no confronting of the defendant upon any of these occasions. Eo person from any of these places is produced to testify that the woman was at any of the places mentioned at the times named. There is no evidence, except inference, that the defendant and the unknown man entered any bedroom or other place (apart from casual inspection) where the act of adultery could reasonably be supposed to have been committed. But laying aside these omissions of proof, I was, and still am, unwilling to find a defendant guilty of adultery under all the circumstances disclosed with respect to these charges in this case.

It will be recalled from the previous part of this opinion that the wife, in May of 1903, had commenced an action for some marital dereliction on the part of her husband, and had secured an ad interim order therein requiring him to pay her alimony, and that he continued to pay her alimony under that order for a'period of six years. The three offences now being dealt with are alleged to have been committed by the wife in 1904 and 1906. The present action was commenced on the 23d of January, 1909. With respect to each of these offences the husband, according to his own testimony, was either an eye witness with respect to all of the facts that he alleges, or received immediate information concerning them. He made no move of any sort against his wife until he brought tins' suit in 1909. During all of the periods from 1904 to 1909, and from 1906 to 1909, he was possessed of all the proof that he now produces against his wife; and during all of that time he did not use the proof in any way to either bring a suit himself or to oppose her suit by a counter suit in New York to rid himself of the payment of $5 a week alimony, which he was paying under the New York suit.

With respect to each of the charges just dealt with, the wife does all that, under the circumstances, it seems possible for her to do, namely, denies them. At the time of the bringing of the suit, the earliest of these charges was five years old, and the others were three years old. The whole gist of the petitioner’s evidence is that

“on a certain day five years ago you, the defendant, went to a certain place with a man that we cannot identify; and similarly went on two other occasions three years ago.”

Since the man is not identified in any way, there is no burden on the defendant to produce any testimony from the alleged corespondents concerning the incidents.

After the great length of time which ensued between the alleged offences and the beginning of the suit, it would only be by fortuitous chance that the defendant could account for her actions upon the days upon which each of the alleged offences is stated to have taken place.

If it were ever proper to grant a decree of divorce upon a finding of adultery where the only proof on behalf of the petitioner is that his witnesses saw the defendant, the wife, and a man unidentified, go into a hotel and not come out until morning, the accusation should follow so soon after the charge as to enable the wife to fairly meet it; or the petitioner runs the risk of having the court find, as I do in this case, that his testimony is incredible. It is upon this basis that I refused to find a proven offence against the defendant with respect to the three charges first above mentioned. I cannot believe, and do not believe, that if a husband, situated as this petitioner was, separated from his wife, paying her alimony in a marital action pending in the court, detected his wife, while he had with him corroborating witnesses, entering into hotels and spending the night there with strange men, that he would wait, in one instance, five years, and in the other instance three years, before taking some affirmative action based upon the proofs thus in his possession. That he has not taken such action leads me to find that the testimony of the witnesses is incredible and I do not believe it.

His attempted explanation is that it took all the money that he had to pay the alimony, and therefore he had no money to prosecute a suit. This is too trilling to receive more than passing attention. He had counsel in New York in the very suit in which he was paying the alimony. Pie had separated from his wife by agreement, and does not pretend to have any affection for her or any desire ever to resume relations with her. He employed detectives for the express purpose of detecting her in wrong-doing. The detective, with a recklessness that casts doubt upon his entire testimony, testifies that this woman was a common solicitor of men upon the street, and furnishes corroborating testimony of the woman going to hotels with strange men. Yet the husband would have the court believe, under all these circumstances, that he obtained, at the times named, the evidence now produced. My mind is unable to reconcile such conduct with the ordinary behavior of the average person. He had every reason to wish to get rid of his wife, and to wish to be rid of the obligation of supporting her; and if he had the evidence in his possession which he now produces, it is inconceivable that he did not use it. The only conclusion that I can reach which squares itself with all the facts, is that he did not then have the evidence, and that the testimony produced before me is not worthy of belief.

It will be noted that he refers to some advice given him by his New York counsel; it would have been a very easy matter for him to have produced this counsel to state the reason, if there was any, why he did not act on behalf of this petitioner and utilize, in the New York suit, by way of defence or counter suit, the testimony which was gathered under his direction. He did not produce this attorney, nor show any reason why he did not.

This disposes of the first three charges.

The last charge, and the only one in which any co-respondent is named, is with respect to conduct with one Novagewsky. Apparently, without any justifiable reason for so doing, the petitioner attributed the name of Eeed to this alleged co-respondent. The proofs show that the defendant took Novagewsky and a friend of his to board with her; that these two young men occupied a bedroom in her house, or apartment, for a period of about six months, beginning in October, 1906, and extending to the spring of 1907; that, during all of that period they, each of them, lived there with her as a boarder, and paid her $10 a week for their board and lodging.

There is no proof of any improper conduct of any sort between the defendant and Novagewsky. Unless the court is going to hold, as a bald proposition, that a married woman, living away from her husband, must not have male boarders, there are no .facts proven in this ease which should properly lead the court to find this defendant guilty of adultery with Novagewsky.

Novagewsky himself was a witness. The other young man could not be produced, because he had gone back to Germany, and was still there at the time of the hearing, so far as the defendant knew. Novagewsky was a clean-cut, well spoken young man, of nice appearance, who gave his testimony in a manner to induce belief. He ceased to board with the defendant shortly before he was married. He is a resident of New York, and his attendance in New Jersey was therefore voluntary; and I do not find any facts which should cause me to disbelieve his testimony.

The result is that the petition should be dismissed.


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    Marguerite B. Sulk et al. v. Philip Tumulty.
    [Decided March 2d, 1910.]
    Equity will not decree the specific performance of a contract for the sale of land and a building thereon, where the vendor has no paper title to a portion of the property, and he attempts to show title by adverse possession on evidence of a prior owner of the land when’vacant that he erected the building by mistake over his land, and bad no intention to encroach on land over the line, and the land, in this condition, came through mesne conveyances to the vendor.
    Heard on bill, answer, replication and proofs in open court.

      Mr. Marshall IF. Van Winkle, for tlie complainants.

      Messrs. Tumuliy é Gulley, for the defendant.
   Garrison, V. C.

This is a bill filed by a vendor against a vendee to compel the specific performance of a contract for the sale of real estate. The property in question is Ho. 140 Cornelison avenue, in the city of Jersey City. There? is but a single question presented. It is admitted by all parties that the building just mentioned, and which it was the intention of the parties to sell, as it now stands, covers more land than that to which the complainant has paper title, and encroaches several inches upon the adjacent land to the north, which is in a different ownership. The complainant seeks to remedy this defect, and to show title in herself, by alleging and proving adverse possession.

She produces a witness named Spengeman, who owned this land when it was vacant, and who, about 1882, erected the building as it now stands. He testified that he had procured a survey to be made and located his building upon the lines of his lot as indicated by tlie surveyor. He had no intention nor desire to encroach upon his neighbor’s land, and did not assert the right to do so, and did not intentionally do so, although it is the fact that he did.

About 1888 he sold the property to the Mutual Benefit Life Insurance Company of Newark, who owned it for many years, and thence it passed into the ownership of the complainants.

The sole question in this case is whether, under the circumstances, the court will force this title upon the defendant.

In my view, it would not be a proper exercise of the discretion which resides in the court in specific performance cases to require this defendant to take this title. Where the validity or market1 ability of a title depends upon facts outside of public records, the court should not force the title upon a defendant unless the necessary proofs are available to him when he may have future need of them. Authority for and illustration of this principle will be found in the following eases: Meyer v. Madreperla (Court of Errors and Appeals, 1902), 68 N. J. Law (39 Vr.) 258; Dobbs v. Norcross (Chancellor Runyon, 1874), 24 E. J. Eq. (9 C. E. Gr.) 327; Tillotson v. Gesner (Court of Errors and Appeals, 1880), 33 N. J. Eq. (6 Stew.) 313; Cornell v. Andrews (Chancellor Runyon, 1882), 35 N. J. Eq. (8 Stew.) 7; Lippincott v. Wikoff (Vice-Chancellor Emery, 1895), 54 N. J. Eq. (9 Dick.) 107; Rutherford Land Co. v. Sanntrock (Vice-Chancellor Pitney, 1899), 44 Atl. Rep. 938; affirmed, 60 N. J. Eq. (15 Dick.) 471 (Court of Errors and Appeals, 1900); Fahy v. Cavanagh (Vice-Chancellor Pitney, 1900), 59 N. J. Eq. (14 Dick.) 278; Barger v. Gery (Vice-Chancellor Stevenson, 1902), 64 N. J. Eq. (19 Dick.) 263; M. E. Church v. Roberson (Vice-Chancellor Bergen, 1904), 68 N. J. Eq. (2 Robb.) 431; Zelman v. Kaufherr (Vice-Chancellor Stevens, 1909), 76 N. J. Eq. (6 Buch.) 52; Deseumeur v. Rondel (Vice-Chancellor Garrison, 1909), 76 N. J. Eq. (6 Buch.) 394.

In the ease at bar the facts outside the records which are necessary to be proven to make the title good, with respect to that part of the building which encroaches, are those to support a finding of adverse possession in the complainants and their predecessors in title.

In the case at bar no one can be concluded with respect to this question, saving the complainants and the defendant; and if a decree is made against the defendant,' it will, of course, be no protection to him in any future proceeding by the owners of the adjacent property upon which his building impinges. He must, with respect to them, therefore, be always prepared to show possession in his predecessors in title for the statutory period, which must be proven to have been actual, exclusive, adverse, hostile, visible or notorious, and continued and uninterrupted.

Without attempting to decide that a title founded upon adverse possession will not be found to be marketable and such as a vendee will be required to take, I do not find in the case at bar that this defendant should be required to take this title. The proof in this case merely shows that about twenty-eight years ago a man, who owned the land when vacant, caused a survey to be made of it and built a house upon it, which house, as a matter of fact (although not intentionally), was several inches on its north line over upon the neighboring property. There is nothing to show the relations between the holders of the various claims or rights after this original owner sold in 1888. At that time the house had not been built more than six or seven years. If at any time within twenty j^ears after the building of the house there 'was any consent, agreement, protest, joinder of title in the same owner, or other thing which would interrupt the adverse and' hostile nature of the possession, the claim to title by adverse possession would fail.

While it may be true, as argued by the complainants, that many other persons than the witness Spengeman could undoubtedly be found at the present time to testify to the length of time that the building in question has stood where it now is, this is not sufficient.

All of the elements required to make out a title by adverse possession must be fully proven; and then, in each case, the question becomes one of fact whether, under the circumstances of that particular case, the party relying on the title so derived has satisfactorily shown that his possession has been such as to meet the requirements of the law. Foulke v. Bond (Court of Errors and Appeals, 1879), 41 N. J. Law (12 Vr.) 527.

Finding, as I do, that the facts necessary to show that the complainants’ title is marketable are not matters of record, and are not such as to be surely available to the defendant for future use as he may need them, I conclude that the discretion of the court should not be exercised in favor of the complainants so as to require the defendant to specifically perform the contract in question.

In his brief, the counsel for the complainants suggests that the complainants may be aided in their claim of adverse possession by the doctrine of practical location. I do not recall any testimony in the case upon which any finding could properly be based that there was any practical location.

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


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    Frank Lake et al. v. Josephine T. Weaver et al.
    [Decided March 4th, 1910.]
    Defendant began statutory proceedings to establish a lost deed, and complainants filed a bill to enjoin the action. Defendant filed a cross-bill, and the court enjoined her from proceeding with her statutory remedy, and dismissed the cross-bill. The court on appeal reversed the decree, “to the end that the complainants’ bill be dismissed” and defendant “suffered to proceed with the remedy provided by statute,” and the remittitur directed that the final decree be reversed and the bill of complaint dismissed. — Held, that the court below could not permit defendant to proceed to establish the lost deed in equity, but must relegate her to her statutory action.

      Mr. John J. Crandall, for the complainants.

      2fessrs. M elosli é 2lorien and Mr. Gilbert Gollins, for the defendants.
   Garrison, V. C.

This is an application to the court to enter a decree upon a remittitur from the court of errors and appeals.

Since I am informed that an appeal has been taken from the decree thus entered, it becomes necessary for me to state the reasons which induce me to make the decree.

The defendant Josephine T. Weaver began proceedings under the statute to establish a lost deed.

The complainants, conceiving that they had a right to prevent her from prosecuting this statutory remedjq filed their bill against her.

She answered, justifying her right to proceed under the statute. She also filed a cross-bill in which she set out that the lands had been sold in the partition suit, and that the share formerly held by Theodore was conveyed to her by him as trustee, as set out in the fourteenth paragraph of her answer, and that during Theodore’s lifetime she advanced considerable moneys to him for the support and maintenance of himself and his children, and subsequent to his death she maintained, supported and educated the children, the complainants, and that in any accounting for the money which she now holds as trustee she is entitled to charge against the complainants the moneys advanced as just stated; and she prays that they may make discovery, and that she may have the relief to which she is entitled.

This court, finding equities in favor of the complainants, made a decree enjoining the defendant Josephine T. Weaver from proceeding with the remedy provided by statute in the case of a lost deed, and dismissed the cross-bill. The defendants took an appeal from, this decree.

The opinion of the court of errors and appeals — 76 N. J. Eq. (6 Buch.) 280 — concludes as follows: “The result reached is that the decree of the court of chancery should be reversed, to the end that tlic complainants’ bill be dismissed, and the appellant Josephine T. Weaver suffered to proceed with the remedy provided by statute in the case of a lost deed.”

The remittitur from the court of errors and appeals provides that the final decree entered herein be reversed, and that a decree be entered dismissing the bill of complaint.

I was requested by the defendant Josephine T. Weaver to enter a decree in her favor based upon her cross-bill, and by such decree to establish this lost deed in equity, and decree, as prayed in the cross-bill, that she holds the property as trustee, and is entitled to deduct from the property, or its equivalent — -the money in court — all sums found to have been advanced by her to Theodore or the children.

Whatever my view concerning the proper course of procedure might otherwise be, I am constrained, under the instructions contained in the opinion of the court of errors and appeals to make such decree now as, to quote their own language, will suffer Josephine T. Weaver “to proceed with the remedy provided by statute in the case of a lost deed.”

This precludes me from suffering her to proceed to establish the lost deed in equity, and I can only follow the directions of the appellate court by making a final decree denying all relief in equity, and thus suffering her to proceed with the remedy provided by statute.

I cannot assume, in the face of the unambiguous language used by the appellate court, that it intended that this court should permit Josephine T. Weaver to proceed in equity to establish her deed. The whole case, upon the bill and cross-bill and the respective answers, was before the appellate court, and if it had concluded that it was proper for the court of chancery to administer relief in favor of the cross-complainant it would have so stated, and would have found what equity she was entitled to, and directed what decree should be made in her favor; or, if it considered that this was a proper ease for the court of chancery to first pass upon the equitable claims of the cross-complainant, would have so indicated, and would not have stated that the result of their conclusions was that she should be left free to proceed at law.

If it be the desire of the court of errors and appeals that the equitable claims put forward by the cross-complainant shall be dealt with by this court, a direction from that court to this effect would result in this court opening this decree and hearing and passing upon such claims. Upon the expressed views of that court as now before me, I would not be justified in entering any other decree than one which relegates the cross-complainant to her statutory action.