text:
    Nathan Worth v. Ernest Watts, executor.
    [Submitted April 27th, 1908.
    Decided June 2d, 1908.]
    1. Reaffirmance by vendor oí the original contract of sale on six several occasions, extending over a peripd of eighteen months, and receipt by him, in the aggregate, of all but $200 of the price, cannot be properly disregarded, where presented, in specific performance, to repel a presumption of fraud which might arise from inadequacy of price.
    2. Though equity will not decree specific performance of a contract which is unfair or unjust, any inadequacy of price, unaccompanied by other evidence of fraud, which is not so gross as to be of itself conclusive evidence of fraud, will not bar the relief sought, but may be considered in connection with other circumstances tending to show undue advantage or other elements of fraud.
    On pleadings and proofs.
    The bill is filed by complainant to procure the specific performance of an agreement for the sale of land, made by Firman Dubel in his lifetime. The following is a copy of a receipt embodjdng the agreement which complainant seeks to enforce:

      “Buelington, N. J., February 2, 1904.
    “Keceived from Nathan Worth two thousand five hundred dollars ($2,500) on account of purchase price for house and lots 303, 305 High street, and 20 and 22 Union street, Burlington, N. J., which X agreed to sell to him. clear of all encumbrances for four thousand ($4,000), deed to be delivered on the payment of the balance of the money, but to continue paying rent as before, until balance is paid.
    “Fieman Dubel.”
    The body of this paper is in the handwriting- of complainant, and tire signature, is that of defendant’s testator.
    Six additional receipts for payments, on account of the purchase price of the property, were received in evidence. These receipts are dated, respectively, June 17th, 1904, July 11th, 1904, August loth, 1904, September 19th, 1904, October 18th, 1904, and November 1st, 1904, and aggregate in amount $1,300. The same language is used in each receipt, and the body of each receipt is in the handwriting of complainant, and each is signed by defendant’s testator. These receipts, omitting dates and amounts, are as follows:
    “Received of Nathan Worth-dollars as a payment for properties 303-305 High street and 20 and 22 Union street, Burlington, N. J., agreed to be sold by me to him as per receipt of February 2, 3904.
    “Fieman Dubel.”
    Firman Dubel died December 28th, 1904, and upon the refusal of defendant, as his executor, to accept $200, which was tendered to him by complainant as the balance of the purchase price, this suit for specific performance of the contract was brought.
    At the date of the agreement (February 2d, 1904) complainant was occupying the premises referred to as 303 and 305 High street, under a lease from Dubel made June 10th, 1902, at a rental of $40 per month for the first year, and $45 per month for the two subsequent years. At the end of the first year the increased rental provided for in the lease was waived by Dubel, and complainant thereafter continued to occupy the premises at $40 per month.
    Defendant has undertaken to establish such fraud, in connection with the agreement of sale which complainant seeks to enforce, as will operate to deny the relief sought.

      Mr. John IF. Wescott and Mr. Alexander J. Brian, for the complainant.

      Mr. Echará P. Budd and Mr. Joseph JI. Gashill, for the defendant.
   Leaming, V. C.

(after stating the facts as above).

Defendant urges that the consideration named in the agreement is so grossly inadequate that it affords conclusive evidence of fraud. The law of this state touching inadequacy of consideration, aa a defence to a suit for specific performance of a contract for the sale of land, may, I think, be said to be well settled. A court of equity will not refuse to decree the specific performance of a private contract for the sale of land because the price for which the land is to be sold is less than the market value of the land. Inadequacy of price, however, is a feature which may be considered in determining the existence of fraud. It ma)^ in connection with other evidence, establish the existence of fraud, or the inadequacy of price may be so gross as to shock the conscience of the court, and thus furnish satisfactory and decisive evidence of fraud, In either case it may be said to be the fraud so ascertained, and not the inadequacy of price, which operates as the bar to relief. Rodman v. Zilley, 1 N. J. Eq. (Sax.) 320; Executors of Wintermute v. Executors of Snyder, 3 N. J. Eq. (2 Gr. Ch.) 489; Ready v. Noakes, 29 N. J. Eq. (2 Stew.) 497; Shaddle v. Disborough, 30 N. J. Eq. (3 Stew.) 370, 384; Phillips v. Pullen, 45 N. J. Eq. (18 Stew.) 5.

In the present case the difference between the market value of the land in question and the price named in the agreement for its sale closely approaches_that which some eminent judges have defined as “gross inadequacy.” Ten witnesses testified, in behalf of defendant, touching the value of the premises described in the contract of sale. From their testimony it is apparent that the value of the premises was about $10,000 at the date 'of the contract. Assuming that amount to have been the value of the premises named in the contract of sale, it will be observed that the consideration specified in the contract was something less than one-half of the value of the property. Any extended review of the adjudicated cases, with a view of ascertaining when the difference between the value and contract price may be said to become so great as to amount to gross inadequacy, and shock the conscience of the court, and in itself operate to deny relief, would, I think, be of little assistance. Most of the authorities touching that subject will be found collected in a footnote to 26 Am. & Eng. Encycl. L. (2d ed.) 28. Any considerable inadequacy of price naturally suggests unfair dealing on the part of the one favored by the terms of the contract, when the engagement is considered, as it must be, as a contract, and not as a gratuity, but it is difficult to conceive any case in which some circumstance may not exist which will operate to either repel or to accentuate such suggestion of unfair dealing. Even in a case where there exists such gross inadequacy of price as may be appropriately said to shock the conscience of the court, and afford in itself satisfactory and convincing evidence of unfair dealing, other circumstances may exist, which, if considered, would tend to destroy the conclusion which might be otherwise reached. Such circumstances should, I think, be given due con-i, sidefation. I am convinced that where it is established (as I understand it to be, both in this state and by the weight of authority elsewhere) that it is the ascertained fraud, and not the inadequacy of price, which operates as the bar to' specific performance, such fraud must be ascertained by a consideration of all the circumstances of the individual case, and that it is quite inrpracticable to define any exact ratio between values and price as a boundary line, which, when; crossed, affords, in itself, conclusive evidence of fraud. One feature of the present case well illustrates the thought here suggested. While the inadequacy of price in the present contract of sale may suggest that complainant in some improper way pbtained an unjust advantage over defendant’s testator when the original agreement was made, yet the mind cannot close itself from the knowledge that on June 17th, 1904, over three months after the original receipt, which embodied the terms of the agreement, was signed, defendant’s testator signed a receipt for another portion of the purchase price, and in that receipt specifically referred to the receipt of February 2d, 1904, as embodying the terms of the agreement of sale. If this second transaction was fairly conducted, it was a reaffirmance, by defendant’s testator, of the terms of the original agreement.- Again, in the following'July, August, September and October, respectively, additional receipts for portions of the purchase price were signed by defendant’s testator, and in each receipt the original contract was, in like manner, referred to. Thus on six several occasions, extending over a period of eighteen months, defendant’s testator reaffirmed the original contract, and received, in the- aggregate, all but $200 of the purchase price. His death occurred in the month following the payment last referred to. Assuming that these payments were actually made at the times stated, and that the contents of the several receipts were fully understood by defendant’s testator, it seems clear that such repeated affirmances of the original contract would have operated as a serious bar to any claim, which might have been thereafter made by defendant’s testator for a rescission of the'contract, based upon fraud in the original transaction. Surely such affirmances of the con-' tract cannot be properly disregarded, when presented to.repel an assumption of fraud arising from gn inadequacy of price, of a degree which, standing alone, might be sufficient to lead the mind to a conviction of fraud. It is my opinion that specific per-. formalice of this contract cannot be properly denied upon the theory that the inadequacy of price, in itself, furnishes conclusive evidence of fraud.

But it is earnestly urged, in behalf of defendant, that other circumstances of the ease, when considered in connection with the evidence touching inadequacy of price, justify the conclusion of fraud, or disclose a contract of such unfairness and hardship that a court of equity should deny relief. While a court of equity will not decree specific performance of a contract which is unfair, unreasonable, or unjust, any inadequacy of price (standing alone, and unaccompanied by other evidence of fraud or imposition), which is not so gross as to be, of itself, what some courts call conclusive evidence of fraud, cannot be treated as such an iu stance of unfairness or hardship as - will bar the equitable relief sought; but such inadequacy may be considered nn. connection with other circumstances tending to show undue advantage, or other elements of fraud. As already stated, I understand that to be the rule established in this state, and also by the more modern authorities elsewhere. See Pom. Con. § 194, and cases there collected. A number of circumstances, other than inadequacy of consideration, are urged by defendant as evidences of fraud upon the part of complainant. It has been shown that defendant’s testator was eighty-four years of age; that he was a man with careless methods of doing business; 'that he was of a trustful nature, and habitually signed receipts without first reading them, and usually received money without counting it; that he drank to excess, arid was more or less drunk almost every day; and it is also urged that complainant did not have sufficient money to enable him to make the payments evidenced by the receipts, to which reference has already been made. It was also shown that defendant’s testator made some permanent improvements to one of the buildings covered by the contract, at a date subsequent to the date of the contract. I have undertaken to give adequate consideration to all of these circumstances, in connection with the low price at which the property was sold, with a view of reaching the conclusion that some improper conduct upon the part of the complainant may have existed; but I have been unable to reach that conclusion of fact. Any suggestions of improper conduct upon the part of complainant, emanating from the circumstances referred to, fail to impress upon my mind a conviction of fact; and especially is this true when all the evidence in the case is given due consideration. The suggestion arising from the advanced age and intemperate habits of defendant’s testator, and from his custom to sign receipts without reading them, is that the signature to the contract may have been procured by complainant through some subterfuge, or that defendant’s testator may have been incapable of fully comprehending his acts. But defendant’s testator was a man who owned a considerable number of properties in that vicinity, and these properties were successfully handled by him, and his ability to intelligently transact Ms own business does not appear to have been materially impaired by either his age or intoxication. The impression of the man, as I have received it from the evidence, is that of a man who was quite as capable of making a bargain when under the inllueh.ee of liquor as at other times. While he appears to have been in the habit of signing rent receipts for various tenants without reading the receipts, he was keenly aware of the times when the rent wás due, and it cannot be inferred that he could have been induced to sign papers when nothing was due him, as he must have done if the contract now in question and the several receipts for payments on account of the contract price were signed by him when the payments called for in the receipts were not in fact made; for it must not be overlooked that if it be assumed that the original receipt, which embodies the terms of the contract, was signed by defendant’s testator without an intelligent knowledge of its contents and force, or through any subterfuge upon the part' of complainant, a like assumption must be indulged touching the severaTsubsequent receipts, and it is impossible for me to believe that complainant has procured the signature to these seven papers without defendant’s testator having comprehended the nature of any of them. Each month a rent receipt was signed in a book kept by complainant for that purpose. As to the claim that complainant was not able to raise the money which the' receipts disclose that he paid for the property, it is my opinion that the claim is not supported by the evidence. While I have referred to.the value of the premises in question as $10,000 ($9,000.for the property which complainant occupied as a tenant, and $1,000 for the property in the rear, which was occupied by the Salvation Army), it also appears that the rental paid by complainant was $40 per month, and by the other tenants $15 per month; and, according to the testimony, this rental, when used as a guide to determine valuation, indicates a total value of about $7,000.. It is, of course, impossible to determine what may have impelled defendant’s testator to agree to part with his property for the amount named. The diversified! considerations which control human conduct are too complex to warrant the effort of affirmative ascertainment. The evidence ¡ discloses that the relation of the contracting parties was, to say the least, friendly. That fact alone renders it natural and reasonable that the terms of payment should be made easy rather than otherwise. As the case has been tried upon the theory, on the part of counsel on both sides, that our statute forbids testimony, by either of the present parties to the record, touching statements made by or transactions with the deceased, we are denied the benefit of their testimony in that field. But the evidence discloses that the contract was in fact made, and I find nothing in the ease to lead my mind to the conclusion that the contract was not the intelligent and deliberate act of defendant’s testator.

I will advise a decree pursuant to the prayer of the bill.


source: Caselaw Access Project

author: Leaming, V. C.

license: Public Domain

text:
    Elizabeth Smith v. Hotel Ritz Company.
    [Heard July 27th, 1908.
    Decided July 31st, 1908.]
    The receiver or general creditors of an insolvent corporation are not “judgment creditors” within P. L. 1898 ptf. 699, 700 §§ 71, 72, relating to conditional sales of chattels, and protecting only judgment creditors, subsequent purchasers and mortgagees without notice.
    On petition by Elizabeth Smith against the Hotel Ritz Company to determine whether an unrecorded conditional sale agreement is valid as against a receiver and general creditors of defendant insolvent corporation.

      Mr. Ulysses G. Styron, for the complainant.

      Mr. Eli H. Chandler, for the petitioners.

      Mr. Oliver Y. Rogers, for the receiver.
   Leaming, V. C.

1 am unable to determine that the unrecorded agreement of conditional sale now in question is void as against the receiver or general creditors of defendant corporation. The Chattel Mortgage act under' consideration in Graham Button Co. v. Spielmann, 50 N. J. Eq. (5 Dick.) 120, and in Currie v. Knight, 34 N. J. Eq. (7 Stew.) 485, provided that mortgages not executed and recorded in accordance with the act should be void as against creditors of the mortgagor. While in Currie v. Knight, supra, it was held that creditors could not, without a judgment or other lien on the chattels, assert their' claims against the validity of such a mortgage, it was also held that, when a lien should have been procured by a creditor and the invalidity of the mortgage asserted by virtue of the lien, the infirmity of the mortgage would be ascertained by reference to conditions obtaining at the time the creditor became a creditor, and not at the time the lien of the creditor was procured. The provisions of the act that the mortgage should be void as to creditors (general creditors) was thus observed and enforced. In Graham Button Co. v. Spielmann, supra, it is held that insolvency of'a debtor corporation operates, under our statute, to fasten the debts of such corporation on its property in such manner as to enable the receiver of the corporation, in behalf of its creditors, to assert the invalidity of a chattel mortgage which has not been executed and recorded in accordance with the provisions of the Chattel Mortgage act. It is manifest that the principles controlling these decisions do not extend to the present case : for the provisions of our statute touching conditional sales of chattels (P. L. 1898 p. 700 §§ 71, 72) protect only judgment creditors, subsequent purchasers, and mortgagees without notice. While the claims of general creditors of an insolvent corporation are fastened upon its property by force of the provisions of our Corporation act touching insolvency and the appointment of receivers and distribution of assets, in such manner as to enable either a receiver or general creditor to assert in this court the invalidity of a chattel mortgage which the statute declares void as to creditors, yet it is apparent that such receiver or general creditors cannot in any sense be regarded as judgment creditors within the meaning of the conditional sales statute referred to.

I will advise an order directing the receiver to deliver the chattels in question to petitioners.


text:
    Anastasia A. McNichol v. Walter R. Townsend.
    [Heard and decided June 9th, 1908.]
    An owner of lots abutting on a street conveyed a lot, subject to a covenant prohibiting the erection of a building within a specified distance of the street line. The lot vested in defendant under mesne conveyances. The owner subsequently sold to complainant a lot across the street, and about one hundred and fifty feet from defendant’s lot, making the conveyance subject to a similar covenant. Before conveying defendant’s lot, the owner had made other conveyances of nearly all the lots on either side of the street, about one-half in number containing no restrictive covenant. — Held, that complainant could not enforce the covenant against defendant, in the absence of a general scheme for the perpetuation of a defined building line, by the exaction of uniform covenants for the benefit of the several purchasers of lots, there being no sufficient evidence that the covenant in question was for the benefit of the lots remaining when the conveyance was made.
    Heard on final bearing, on bill, answer, replication and proofs.

      Messrs. Bourgeois & Booy, for the complainant.

      Messrs. Thompson & Cole, for the defendant.
   Leaming, V. C.

I am unable to advise a decree for complainant. The testi- . mony presented at final hearing discloses no facts which can operate to modify the views expressed by me on the motion for a preliminary injunction, as reported in 73 N. J. Eq. (3 Buch.) 276. The evidence at final hearing discloses that prior to October 19th, 1888, when Brown conveyed to Graham the lot now owned by defendant, Brown had conveyed all of the lots on either side of States avenue but three, namely, the lot then conveyed, the lot at the northwest comer of States and Pacific avenues, and the lot now owned by complainant. Of the several conveyances so made, about one-half in number contained no restrictive covenant against erecting buildings adjacent to the avenue. The conveyances which contained no such restrictive covenants were the following: Deed dated March 6th, 1880, to Mary Woelpper, and a subsequent deed to the same, grantee dated December 7th, 1880, increasing the width of the lot first conveyed from seventy to eighty feet, and a subsequent deed of confirmation to the same grantee, dated December 15th, 1881. Deed dated November 17th, 1881, to William Wilson. Deed dated December 1st, 1881, to George M! Troutman. Deed dated October 21st, 1881, to Anna Martha Kremer. Deed dated October 3d, 1903, to Horace C. Disston. Of two lots conveyed by this deed, one is now owned by E. E. Hammell and another by William Aikman, free from building restrictions. Deed dated May 25th, 1883, to the United States Hotel Company. This deed contained a restriction “that all buildings erected on said land shall be of good style and shall conform as nearly as may be with the cottages now thereon erected.” This covenant may relate to the distance buildings are to be erected from the avenue, but that construction is doubtful. These details render it clearer to me than it was at the preliminary hearing that no general scheme can be properly said to have existed for the perpetuation of a defined building line, by the exaction of uniform covenants for the benefit of the several purchasers of lots. In the absence of such a general scheme I am unable to find any evidence which justifies the conclusion that the covenant now in question was for the benefit of the remaining lots owned by Brown when the Graham conveyance was made. Under the opinion in Hemsley v. Marlborough Hotel Co., 62 N. J. Eq. (17 Dick.) 164, 170; 50 Atl. Rep. 14, adopted by the court of errors and appeals in 63 N. J. Eq. (18 Dick.) 804; such evidence must be regarded in this court as a necessary element to support the claim asserted by complainant.

I will advise a decree dismissing the bill.


text:
    William M. Brown et al. v. Sarah M. Gaskill et al.
    [Submitted July 9th, 1908.
    Decided July 9th, 1908.]
    1. P. L. 1898 p. 648 §§ 9, 10, authorizes the orphans court to entertain jurisdiction for partition of lands on “application by petition made by one or more of said coparceners, joint-tenants or tenants in common,” and requires the person proposing to apply to the court for partition to give four weeks’ notice to all cotenants of the time when the petition will be presented to the court. — Meld, that the orphans court acquires no jurisdiction until the petition for partition is presented; the notice required not being “process,” and until the petition is presented there is no pending cause in the orphans court, which will abate a suit for partition in chancery, filed after such notice is given.
    2. Court of Chancery rule 213 is limited to motions against defects apparent on the record, and does not give a defendant the right to move against a bill on matters appearing only by affidavits accompanying the motion.
    On bill for partition. Motion of defendant to dismiss bill.

      Mr. Joseph E. P. Abbotl, for the motion.

      Messrs. Thompson & Cole, contra.

   Leaming, V. C.

Defendant moves to dismiss complainant’s bill upon the ground that a suit for the partition of the same property was pending in the Atlantic count}' orphans court at the time the bill for partition was filed in this court.

Section 9 of the Partition act (P. L. 1898 p. 644) authorizes the orphans court to entertain jurisdiction for partition of lands, in the class of cases there named, “upon application by petition made by one or more of said coparceners, joint-tenants or tenants in common.” Section 10 requires that the person who proposes to apply to the orphans court for partition of lands shall give four weeks’ notice to all cotenants of the time when the petition for that purpose will be presented to the court. The bill which is now moved against was filed after the notice under section 10 was given and before the petition was presented to the orphans court.'

I think it entirely clear that the orphans court acquires no jurisdiction until the petition for partition is presented. The notice given pursuant to the provisions of section 10 is in no sense a process. Until the petition is presented there is no pending cause in the orphans court.

In this reference to the merits of the motion I would not be understood to recognize the right of defendant to move against a bill upon matters appearing only by affidavits accompanying the motion. I understand rule 213 of this court to be limited to motions against defects apparent upon the record.

The motion will be denied.


text:
    Amelia Sparks et al. v. Charles S. Ross et al.
    [Submitted July 7th, 1908.
    Decided July 14th, 1908.]
    On the issue of the existence of a lawful marriage celebrated in 1873, evidence held to require the submission to the jury of the question whether the marriage of the man to another woman in 1862 was subsisting in 1873.

      On motion for a new trial.
    A feigned issue in this suit directed the law court to ascertain whether the marriage which was celebrated between Edmund B. Ross and Mary Cavanaugh October 24-th, 1873, was a lawful marriage. At the trial in the law court the jury was instructed to return a verdict to the effect that on- the date named Edmund B. Ross was the husband of Maria Moose. This instructed verdict operated to declare the marriage of Edmund B. Ross and Mary Cavanaugh unlawful and the children of that marriage illegitimate. A motion for a new trial was made’ in this court in behalf of the children so declared illegitimate, and a new trial was ordered upon the ground that the evidence offered to overthrow the presumption of legality of the marriage of Ross and Cavanaugh was not of that character which commanded absolute acceptance or afforded a conclusive demonstration of the facts sought to be established, and, in consequence, the jury should have been permitted to pass upon the issue presented. Sparks v. Boss, 72 N. J. Eq. (2 Buck.) 762. On appeal the court of errors and appeals affirmed the order made by this court. Sparks v. Boss, 73 N. J. Eq. (3 Buck.) 735. The same issue has again been tried in'the law court and again a similar verdict has been directed. A motion for a new trial is now made in this court.

      Mr. Eckard P. Budd and Messrs. French & Bichards, for the complainants.

      Mr. Timothy J. Middleion and Mr. John J. Crandall, for the defendants.
   Leaming, V. C.

The only material new evidence received at the second trial was testimony to the effect that Jacob Loudenslager, who is alleged to have celebrated the marriage between Edmund B. Ross and Maria Moose December 4th, 3862, was at that time an ordained minister of the Methodist Episcopal church. I am unable to conclude that the added testimony was sufficient to remove the ease from the consideration of the jury. As heretofore stated the presumption of legality of the marriage of Eoss and Cavanaugh is a powerful presumption which cannot be disregarded. When Edmund B. Eoss married Mary Cavanaugh and resided with her as his wife for the remaining eighteen years of his lifetime and raised a family of children by her, in the same general section of this state in which the Moose woman resided, his conduct declared with -great' force and power that the impediment to his marriage, which is here claimed, did not exist. I am convinced that it was the province of the jury to weigh the force of these circumstances against the force of evidence which was offered in opposition. Even if it be assumed that Eoss was married, to Maria Moose in 1862 the court of errors and appeals declared, when the former case was there for review, that it “was not conclusive that that marriage was still subsisting in the year 1873, when, according to the evidence, Eoss contracted a marriage with Mary Cavanaugh.” TJpon that aspect of the case the evidence at the second trial was the same as presented at the former trial. The Moose woman at the former trial and at the recent trial testified that she had never been divorced, but as she remarried in 1870 her conduct either discredits her testimony or her morality. It was clearly a jury question whether the bonds of any former marriage still subsisted in 1873.

I will advise an order for a. new trial.


author: Howell, V. C.

text:
    William Einstein v. Raritan Woolen Mills.
    [Submitted May 11th, 1908.
    Decided May 21st, 1908.]
    1. Where a special charter provides that the capital stock may be increased from time to time to' any sum, not exceeding a sum named, this limitation on the power of the company is a part of the contract existing between the stockholders themselves and between stockholders and the corporation, and its abrogation against the objection of a stockholder violates the federal constitution, which prohibits the impairment of the obligation of contracts.
    2. The decisions of the supreme court of the United States are the final authority on questions arising under the constitution prohibiting the impairment of the obligation of contracts.
    3. The creation of preferred stock by a corporation not authorized by the special act incorporating it, nor under general laws existing at that time, and against the objection of a shareholder, violates the obligation of the contract between the corporation and shareholder.
    4. Act March 22d, 1860 (P. L. p. 60S), providing that manufacturing corporations might creare two kinds of stock, viz., general stock and special stock, the latter subject to redemption with a fixed half yearly sum or dividend, not exceeding four per cent, before any dividends should be set apart or paid on the general stock, was repealed on April 7th, 1875 (Rev. Stat. 187J/-75 p. 10 § 25), without any reservation of any rights acquired under it, and, even if such act were a part of the charter of a company organized under a special act, it would not authorize the creation of preferred and common stock under a plan contemplating dividends at the rate of seven per cent.
    5. Act April 6th. 190S (P. L. p. If7). authorizing the creation of new stock by corporations, merely gives the consent of the state that the stockholders may do so if they all agree, but, if all do not agree, such act cannot be held to be a portion of the charter of a corporation organized under a special act or as an amendment thereto.
    On bill for injunction.

      Mr. Richard V. Lindabury, for the complainant.

      Mr. Nelson Y. Dungan and Mr. Edward Lauterbach (of the New York bar), for the defendant.
   Howell, V. C.

The Earitan Woolen Mills was incorporated by a special act of the legislature of New Jersey entitled “An act to incorporate the Earitan Woolen Mills,” which act was approved March 23 d, 1869, and is found in the laws of that year at p. 586. The charter provides that the capital stock shall be $100,000, “with the privilege of increasing the same from time to time to any sum not exceeding $250,000.” Capital stock to the amount of $150,000 has been issued and is outstanding. The directors have passed a resolution providing for the amendment of the company’s charter by increasing the total capital stock of the company to $525,000, $150,000 of which shall be first preferred cumulative seven per cent, stock, and the remainder common stock. The resolution further provides that the present outstanding common stock 6f the corporation shall be converted into the first preferred cumulative seven per cent, stock which the resolution provides for; so that when the change shall have been effected the capital stock of the corporation shall consist of $150,000 of preferred stock and $375,-000 of common stock. The directors have called a meeting of the stockholders to vote upon the adoption by them of the resolution, and the complainant, who is one of the stockholders of the corporation, now files his bill to enjoin the corporation, its officers and directors, from increasing the capital stock or issuing any preferred stock or converting the present outstanding issue of $150,-000 of common stock into a like amount of preferred stock, and restraining the stockholders from voting at the stockholders’ meeting in favor of the directors’ resolution. Two questions are raised — fwsl, the power of the corporation without the universal consent of its shareholders to increase the amount of its capital stock; second, the right of the corporation to issue preferred stock and compel its substitution for the present outstanding common stock without the consent of all the shareholders. The charter of the corporation confers upon it the general powers and subjects it to the general restrictions contained in the Corporation act of 1846 (P. L. 181(6 p. 16), and it may be sufficient, without further reference to the statute, to say that it contains no specific authority to a corporation organized under it to do any of the things that are attempted to be done in this case. The charter provides in so many words that the capital stock may be increased from time to time to any sum not exceeding $250,000.

This, I take it, is a limitation upon the power of the company which is part of the contract existing between the -stockholders among themselves and between the stockholders and the corporation itself, and that it cannot be abrogated or avoided by the corporation or by its directors, or by any majority, however large, of its stockholders against the objection of the holder of a single share. This is on the ground that such action would violate that provision of the federal constitution which prohibits the states from passing any laws which impair the obligation of contracts. The decisions of the supreme court of the United States are the final authority on questions arising under this provision of the constitution, because they are necessarily federal questions. In Chicago City Railway v. Allerton, 18 Wall. 233 (1873), the question which is now before the court arose for final decision in the supreme court of the United States. The appellant was a street railway company having a capital of $1,250,000, which it proposed to increase to $1,500,000.' The appellee, Allerton, objected and filed his bill to prevent the increase. The charter of the corporation provided the capital stock should be $100,000, and that this might be increased from time to time at the pleasure of the corporation, and that all corporate powers of the corporation should be vested in and exercised by the board of directors and such officers and agents as the board should appoint. The board of directors attempted to make the increase by a mere resolution of that body.- Mr. Justice Bradley, without attempting to decide questions which arose under the constitution and laws of the State of Illinois, affirmed the decree in favor of the complainant below'upon the broad ground that a change so organic and fundamental as that of increasing the capital stock of the corporation beyond the limit fixed by the charter could not be made by the directors alone unless expressly authorized thereto. He says:

“Authority to increase capital stock of a corporation may undoubtedly be conferred by a law passed subsequent to the charter, but such a law should regularly be accepted by the stockholders; changes in the purpose and object of an association or in the extent of its constituency or membership involving the amoiint of its capital stock are necessarily fundamental in their character and cannot, on general principles, be made without the express or implied consent of the members.” This case has been followed, and its authority has never been questioned. Its doctrine followed in Scoville v. Thayer, 105 U. S. 143, and in Bank v. Railroad Company, 13 N. Y. 599; Railroad Company v. Schuyler, 34 N. Y. 30; Kent v. Quicksilver Mining Co., 78 N. Y. 182. I quote from the opinion of Judge Folger in that case: “There is a power in this charter to alter, amend, add to or repeal, at pleasure, by-laws before made. It is argued from this'that it was in the power of the corporate body, in due form and manner, to alter the by-laws which had fixed the amount of the capital stock and the number and relative value of the shares thereof. The power to make by-laws is to make such as are not inconsistent with the constitution and the law, and the power to alter has the same limit, so that no alteration could be made which would infringe a right already given and secured by. the contract of the corporation. Nor was the power to alter, to the extent of affecting the contracted relative value of a share, reserved when the share was sold to the stockholder, so as to enter into and form a part of the contract. An alteration is a pro tanto repeal; but no private corporation can repeal a by-law so as to impair rights which have been given and become vested by virtue of the by-law afterwards 'repealed.”

, The reasoning of these cases goes to the question of the violation of the contract as alleged by the complainant, and it applies to the other matters mentioned in the resolution, namely, the creation of preferred stock and the compelling of the present shareholders to surrender their common stock and accept preferred stock in lieu thereof. It is true that at the time of the creation of this corporation there was an act in force (P. L. 1860 p. 603), providing that manufacturing corporations might create two kinds of stock, viz., general stock and special stock, the latter at no time to exceed half the capital paid in, and subject to redemption with a fixed half yearly sum or dividend not exceeding four •per cent, before any dividend should be set apart or paid on the general stock. This act was repealed on April 9th, 1875, without any reservation of any rights acquired under it, and, at anyrate, if it were a part of the company’s charter it would not authorize the present action, for the reason that the rate of dividend provided for is four per cent., while the present plan contemplates dividends at the rate of seven per cent.

All the other provisions of our statutes relating to the creation of preferred stock have been passed since the Raritan Woolen Mills was organized as a corporation, and it not appearing in the case that these subsequent provisions have been accepted by the shareholders as amendments to the charter, I feel obliged, to hold / that there is no authority for the creation of preferred stock without the consent of every shareholder. The same line of argument applies to the attempt of the directors to convert the present common stock into preferred stock. It is said on behalf of the company and its directors that the complainant cannot be compelled to convert his own stock into preferred stock, and that he there-, fore need not do it; that he may continue to hold it as common stock, and that inasmuch as one share of stock is like another, it can make no difference to him whether he holds his shares which have been heretofore authorized or whether he holds shares which shall be authorized by virtue of the resolution in question. The reasoning of Mr. Justice Bradley in the Allerton Case above cited seems conclusive on'this point. He says: “Second, as it respects the constituency or cajoital and membership. This is the next most important fundamental point in the constitution of a body corporate; to change it without the consent of the stockholders would be to make them members of an association in which they never consented to become such. It would change the relative influence, control and profit of each member; even when the additional stock is distributed to- each stockholder pro rala it would often work injustice, because some of the stockholders might be unable to take their respective shares and might thus lose their relative interest and influence in the corporate concerns.” I take it that when Mr. Justice Bradley speaks of the consent of the shareholders he means the consent of every shareholder, and that a mere majoritjr, however large, would not have the power to interfere with the rights and property of the minority.

My attention is called by the defendant to an act of April 6th, 1908 (P. L. 1908 p. 127), which on its face and by its terms, permits to be done the very thing that is sought to be accomplished in this case. But I am unwilling to accede to this. I must hold that this act is merely the consent of the state that the stockholders may, if they all agree, do the things which are provided for in that act. But if all the stockholders do not agree the act cannot be held to be a portion of the charter of the corporation or an amendment thereto. This is specifically held in Kean v. Johnson, 9 N. J. Eq. (1 Stock.) 417; Zabriskie v. Hackensack Railroad Co., 18 N. J. Eq. (3 C. E. Gr.) 178; Black v. United Railroad and Canal Companies, 24 N. J. Eq. (9 C. E. Gr.) 455; Mills v. New Jersey Central Railroad Co., 41 N. J. Eq. (14 Stew.) 1, and many other cases which have engrafted this doctrine into our law so deeply as to be beyond disturbance.

The motion for the injunction should therefore prevail.


text:
    Valina R. Crocheron v. Edward S. Savage.
    [Submitted March 25th, 1908.
    Decided May 29th, 1908.]
    1. A solicitor, who purchases from his client property which is the subject-matter of the employment, must show, not only that the bargain is as good, as could have been obtained by due diligence from other purchasers, but also that he gave his client all that reasonable advice against himself which his office of solicitor would have made it his duty to have given the client against a third person.
    2. Where a solicitor, who purchased land from his client, was not her general solicitor, but acted solely in prosecuting a claim, as to such land, against a railroad company, and kept his client fully informed as to the negotiations with the company, and the client saw letters written by the company to the solicitor, and in particular one stating-that the company was not disposed to make any substantial offer for the client’s interest, if any she had, but stating that to close the discussion the company would pay $100 for a quit claim from the client, and where in the interview, which resulted in the sale to the solicitor, the only subject that was pointedly discussed was the question whether the company had offered more than $100, and the client and her son, who was her adviser, knew as much about the situation and prospects of the land as the solicitor, the solicitor was in such a situation as to qualify him to become a purchaser of the land, provided the price was fair.
    On final hearing on bill, answer, replication and proofs.
    The bill in this case is filed to set aside a conveyance made by the complainant to the defendant of an interest in a small tract of land in Middlesex county. The property consists of 'an undivided one-half interest in about three acres of salt meadow lying at the junction of Thorp’s creek with Staten Island sound; it is triangular in shape, is bounded on the north, by Thorp’s creek, on the south by the sound, and extends easterly to the junction between the creek and the sound. It is thus bounded on its two long sides by water, the third or westerly side abuts upon land belonging to other proprietors. It is not accessible except by boat, and that fpom the sound side only. The railroad of the Port Reading Railroad Company adjoins the tract and lies a short distance to the northeast of the mouth of the creek; the docks and other constructions of the railroad terminal are built wholly across the mouth of the creek and for a few feet in front of the salt meadow lot in question. All parties agree that it has but little value to anyone except the railroad company, and that such value arises from what is called its strategic situation. The railroad company claims title to the whole tract and denies that either of the contending parties in this suit have any title to any part of it or any interest in it.
    Prior to 1903 the complainant employed a solicitor.to make an attempt to dispose of the property and realize its value. The only obvious customer at that time was the railroad company. After the lapse of some year or two, no result having been reached, the complainant dismissed her solicitor and in the early part of 1903 entrusted the management of the negotiations for the sale of the property to the defendant, who is a solicitor of this court, his compensation for his services in the matter being fixed at one-fourth of the recovery. The defendant took the matter vigorously in hand, opened anew the negotiations, and interested several of the railroad .officials connected with its real estate department therein. These negotiations continued for about three years. During all this period the railroad company denied the complainant’s title and claimed title in itself, and, finally,' toward the end of the negotiations, practically discontinued the same on its part upon the ground that the whole title was vested in the railroad company. The company meantime had offered $100 for a conveyance from the complainant, and it finally declined any further negotiations. All this is shown by the correspondence between the defendant and the railroad company, by the evidence of the defendant, and by that of the complainant and her son, Jesse O. Crocheron, who was the representative and adviser of his mother, the complainant. It may be said that Mr. Crocheron, who is about forty-two years old, is engaged in the coal business at Eossville, on Staten Island, and he lives in the same house with his mother, and appears to be a man of business capacity and affairs. And it likewise appears that his mother consulted him about the property and its disposition; that he advised with her in relation thereto, and that he had more or less to do with the negotiations and was kept quite fully advised of the whole situation.
    The complainant, at the beginning of the negotiations with the railroad company, claimed to own only two-thirds of the undivided half of the disputed territory. Tile other third was claimed by several persons who were the children and descendants of a deceased brother of the complainant. They are known in the case as the “Virginia heirs.” In 1903, very shortly after the defendant was - employed by the complainant, these Virginia heirs conveyed all the-undivided interest which they claimed to the complainant, for the mere purpose of convenience in making disposition of the land. All the correspondence between the defendant and the railroad company and the officials of its real estate department and Mr. Ephraim Cutter, a solicitor of this court, who in some way represented the railway company, was put in evidence. Por the purpose of showing how the negotiations closed the following citations from this documentary evidence is made. [The opinion then discusses the evidence at length.. This discussion is omitted.]

      Mr. John J. Enright, for the complainant.

      Mr. Robert R. McCarter, attorney-general, and Mr. William R. Osborne, for the defendant, Savage.
   Howell, V. C.

The law has placed rather close restrictions upon the dealings between two parties where one stands in a fiduciary relation: to the other. In the case of trustee and cestui que trust the restriction amounts to a prohibition. In the case of other fiduciary relationships the burden is cast upon the purchaser of showing that the bargain is, speaking generally, as good as any that could have been obtained by due diligence from any other purchaser. This rule applies to the relation of solicitor and client. Where a solicitor purchases from his client the property which is the subject-matter of the employment, the solicitor must show, in case the transaction is attacked, not only that the bargain is'.as good as could have been obtained by due diligence from other purchasers, but also that he gave his client all that reasonable advice against himself which his office of solicitor would have made it his duty to have given the client against, a third person, or, in other words, he must show that the client was duly informed, duly advised, and that the transaction was fair. In the absence of these requisites the court will set aside the purchase if completed, or refuse specific performance of the contract. In Edwards v. Meyrick, 2 Hare 60, Sir James Wigram, V. C., states the law to be that a solicitor is not under an actual incapacity to purchase from the client. “There is not in that case the positive incapacity which exists between a trustee and his cestui que trust, but the rule the court imposes is that inasmuch as the parties stand in a relation which gives or may give a solicitor an advantage over the client, the onus lies on the solicitor to prove that the transaction was fair.” Montesqueiu v. Sandys, 18 Ves. 302; Cane v. Allen, 2 Dow 289. The rule is expressed by Lord Eldon * * * to be that if the attorney will mix with the character oif attorney that of vendor'he shall, if the propriety of the transaction comes in question, manifest that he has given his client all that reason•able advice against himself that he would have given him against a third person. Gibson v. Jeyes, 6 Ves. 266. * * * In some cases as between trustees and cestui que trust the rule 'goes to the extent of creating a positive incapacity, the duties of the office of trustee requiring, on general principles, that that particular case should be so guarded. The case of solicitor and client is, however, different. * * * The nature of the proof which the court requires must depend upon the circumstances of each case according as they may have placed the attorney in a position in which his duties and his pecuniary interests were conflicting, or may have given him a knowledge which his client did not possess, or some influence or ascendency or other advantage over his client, or, notwithstanding the existence of the relation of attorney and client may have left the parties substantially at arms’ length and on an equal footing. Hatch v. Hatch, 9 Ves. 292; Welles v. Middleton, 1 Cox 112; Hunter v. Atkins, 3 Myl. & K. 113. See, also, Hugenin v. Baseley, 2 W. & T. L. C. 1156, and notes (at p. 1216).

It was held by the house of lords in Lewis v. Hillman, 3 H. L. Cas. 607, that in a case where an attorney was able to convince the court that- he had a right to- purchase from his client he must purchase openly, and if he purchased in the name of a third person as his, the attorney’s, trustee or agent, without disclosing the fact, the purchase was void. This case is mentioned for the reason that it appears that in the case in hand the defendant took title not in his own name, but in the name of his clerk, so that under the authority last cited the deed would be void if no disclosure of the name of the true purchaser was made. The defendant testifies that he made such a disclosure to the complainant at the time the deed was executed, and his statement in relation thereto is not denied by her. The point of the case of Lewis v. Hillman was that there the solicitors put forward their clerk as the real purchaser, when in fact the solicitor himself advanced the money and was the responsible vendee. Here no such fact exists.

The cases concerning this delicate relation between attorney and client are harmonious and of universal application. They have been adopted by the court of errors and appeals of this state in tile case of Dunn v. Dunn, 42 N. J. Eq. (15 Stew.) 431, and to the opinion, in that case of Mr. Justice Magie, after-wards chancellor, nothing can be added. Applying the rule to-the case in hand, we find that the defendant was not the general solicitor for the complainant, but acted with relation to the single matter above mentioned; that he kept the complainant fully informed of the progress of the negotiations which he was-carrying on with the railway company, and that she saw from time to time the letters written by the railway company’s officials to the defendant, and.- in particular did she see the letter of September 22d, 1903, written by Mr. Loomis to the defendant, in which he sa}rs that he is advised that the railway company is not disposed to regard this'tract of land of any signal value, or to make any substantial offer for the complainant’s interest, if she has any, which seemed doubtful; that he was willing, however, in order to close the discussion and avoid expense to pay the complainant $100 for a quit claim to the company of any alleged interest in the property.

At the interview which resulted in the execution of the deed by the complainant-to- the defendant, the only subject that was-pointedly discussed was the question whether the railway company had offered more than $100 for the land in question. I have been unable to find any" fact in the case which was kept from the complainant. When she executed the deed she and hex-son, who was her adviser, knew as xixuch about the situation, location, value, salability and prospects of the property as did the defendant. It was within sight of her home, and there were-annually more or less transactions to bring it to her attention. A perusal of her own testimony shows that she had perfect knowledge of the sitxxatioix. It is significant that the complainant aixd her son tell the same story practically], as does the defendant, about the interview of Januax-y 3d, 1906, when the-, deed was executed, and likewise significant that after the proposition had been made by the defendant to purchase the land the-complainant axxd her son adjourned to another room to confer about the matter. I therefore think that the defendaxxt had put himself in such a. situation! as to qualify him to become a purchaser of the land ixi question, provided the price was fair. There was no testimony in the case on behalf of the complainant touching the value of the land which-can be relied upon as evidence of its present market value. In fact, it-would be difficult to ascertain the market value of a'piece-of land which was accessible onh- by boat, and admitted on all hands to be of little or no value to anybody except the railroad company. There was some conversation between the defendant and the railway officials, in which rather large values were mentioned, but these conversations took placé after the deed had been executed by the complainant to the defendant, and were quoted b_y the railway officials and the defendant in negotiations between the railroad company and the defendant for the partition of this land and the straightening of lines between his property and its property in other locations. I do not think that the valuations so discussed could be relied upon as any safe criterion of the present market value of the .property. There was no evidence of sales in the neighborhood, nor any direct evidence by experts of the actual market value.

There will therefore be a decree for the defendant.


text:
    Sloss-Sheffield Steel and Iron Company v. Ætna Life Insurance Company.
    [Submitted May 18th, 1908.
    Decided June 2d, 1908.]
    1. An insurance company designated an agent a “general agent,” who so advertised, by means of letter-heads and otherwise. The agent .negotiated for, wrote, and delivered a policy. Insured did not know that the agent did not have the power, as shown by his apparent authority as general agent, to make contracts and fix the terms thereof. A telegram and letter from the company to the agent, and exhibited to insured, con-fix-med the opinion-of insured that the agent had full authox-ity. — Held, that insured might treat with the agent on the theory that he was a general agent with the power to fix the terms of contracts of insurance.

      2. A clause in a policy that no condition or provision therein shall be waived or altered, except by written endorsement attached thereto, and signed by the officers of insurer, does not prevent a general agent from making a contract of insurance outside of the matters written and printed on the face of the policy itself, since the clause is directed against a waiver of provisions, or alterations, of a contract in existence, and which has become a binding obligation between the parties.
    3. Where the issue raises the question what really were the terms of a contract which has been reduced to writing, parol evidence is admissible.
    4. Contracts may be reformed by equity when, by reason of mutual mistake, the instrument fails to express 'the agreement on which the minds of the parties met, or where there is mistake by one of the parties, or fraud, or other inequity, on the part of the other.
    5. A contract of insurance may, in a proper case, be reformed, and made to accord with the real agreement entered into between insured and the general agent of insurer.
    6. Where a written contract of insurance was not the contract made by insured and the general agent of insurer, and insured, though knowing that the policy as written did not accord with the agreement as made, had the right to rely on the representations made by the general agent, and was led to believe that the misstatement in the policy was merely formal, and could not be taken advantage of by insurer, equity can reform the policy, since insured either acted under an erroneous conviction in accepting- the policy containing the terms not agreed on, or he was imposed on, and became a victim of misplaced confidence; the word “mistake” being defined to be either the doing of an act under an erroneous conviction, which act, but for such conviction, would not have been done, or some intentional act or omission or error, arising from ignorance, surprise, imposition, or misplaced confidence.
    On final hearing on bill, answer, replication and proofs.
    The bill of complaint in this case is filed by the Sloss-Sheffield Steel and Iron Company, a New Jersey corporation, against the NUtna Life Insurance Company, a Connecticut corporation, engaged, among other things, in issuing policies of the class known as employers’ liability insurance policies, primarily to reform seven policies of liability insurance issued by the defendant to the complainant, and incidentally to enjoin the Insurance company from prosecuting an action in the New Jersey supreme court to recover an excess of premiums which it claims has accrued on the policies during the years 1905 and 1906. The case turns on the authority of an agent of the insrirance company, located at Birmingham, Alabama, it being claimed by the assured that the agency was of a general and unlimited character, and by the insurance company that it was limited to soliciting for business and to the delivery of policies and the collection of the premiums. The agency which the insurance company had established was conferred upon the Alabama Eeal Estate and Insurance Company, of which, in 1904, one A. M. Hobson was president. This Alabama corporation at that time was advertising itself as the general agent of the insurance company. Letterheads were provided on which was printed the name of the insurance company and the fact that the Alabama corporation was its general agent. The Alabama corporation likewise occupied offices in an office building in the city of Birmingham, and on the entrance doors thereto were printed similar advertisements of the general agency of this corporation for the insurance company. There was nothing to indicate the fact that there was any limitation on the scope of the agency, nor was there during all the negotiations hereinafter mentioned any special notice given to the assured that the' so-called general agents did not have the general authority necessary for the transaction of the business which the insurance company had entrusted to it. On May 18th, 1904, the vice-president and general manager of the assured received a letter from the Alabama corporation, which reads as follows:
    “If consistent we will call on-you in the morning (19th inst.) in re your employers’ liability insurance. We have a special inducement to offer for the above company, and hope to secure this business. Yours truly, Alabama Beal Estate & Insurance Company, by A. Mabon Hob-son, President.”
    This letter was written on a sheet of paper, at the head of which was a printed advertisement containing the names of the president, secretary and assistant secretary of the insurance company, and the words: “Accident and Liability Department, FEtna Life Insurance Company of Hartford, Conn.,” and the further words, “Alabama Eeal Estate and Ins. Co., General Agents, A. Mabon Hobson, President; Geo. A. Smith, Manager; M. Porter Walker, Secretary and Treasurer, 221-222 First National Bank Building.”

      The assured by its vice-president replied to this letter on June 13th, 1904 (having in the meantime had a conversation with Mr. Hobson), in which reply he asked the Alabama corporation to quote the best rates at which it could carry its employers’ liability insurance for one year on an estimated payroll, the figures concerning which, were given.
    Considerable further negotiation ensued which was carried on b3 the Alabama corporation from the Birmingham office by the so-called general agents, all the correspondence being written upon paper with printed letter-heads of the character hereinabove mentioned. There was nothing during these days of bargaining disclosed to the steel company which would indicate to the mind of its manager that the Alabama corporation did not have the power to conduct the negotiation, to fix the terms of the contract and to close the transaction without reference to the home office. It is true that the Alabama corporation reported its bargaining to' the home office of the insurance company and was instructed by telegram as early as June 20th, 1904, to decline to issue policies at a less rate than that which was established and set out in the manual of rates issued from the company's office, but it does not appear that this notice ever came to the attention of the steel company, and I do not think, therefore, that it can affect the situation as between the steel company and the insurance company. The policies were issued on June 24th, 1904, on printed blanks, on and at the foot of which were printed the names of Walter C. Faxon, secretary, and M. G. Bulkley, president. Under the printed signature of the president appears that of the Alabama corporation, its name being impressed upon the paper with a rubber stamp, the only writing being the name of A. Mabon Hobson, president, written over the words “General Agent.” These policies on their face appear to be at the rate of $10,502.10 premium for one 3'ear on an estimated payroll of $1,400,000: that is to sa3r, the premium was fixed at $10,502.10 as the sum which the assured would have been obliged to pay under the terms of the policies for the one year’s protection. The sum which actually was paid, however, wasi$8,506.88, this sum having been fixed by the agreement between the assured and the so-called general agents of the insurance company. So far as appears tbe insurance company permitted its agents to carry through this transaction without notice of the agent’s incapacit}, and under such circumstances and with such general appearances as to satisfy the steel company that the agents had the most ample power to do what they were doing. Mr. McQueen, the vice-president of the steel company, testifies that at the time the transaction was closed on June 24th, Mr. Hobson, the president of tire Alabama corporation, stated most positively that the amount which the assured would be obliged to pay on the estimated payroll before them was $8,506.88, and that the reason why a different amount was written in the policies was that the policy rates were what are called manual rates that had been fixed by an agreement between the companies issuing liability ‘ policies and related to business to be written in different districts' or in different lines of business, and that competition was keen, and that this was a desirable risk, and that the Alabama corporation was authorized to take it: There is one other circumstance attending the delivery of the policies which throws light upon the manner in which the steel company dealt with the so-called general agents. When Mr. Hobson tendered the policies there vras attached thereto a rider giving the assured the. privilege of renewing the policies for three years.at the same rate. The president of the assured who was present at the time of the delivery stated that he did not care to have the matter complicated, and that he would not receive the policies with the riders, whereupon these riders were then and there detached and delivered back to the president of the general agent. Just before these policies expired in 1905 the general agency of the Alabama corporation seems to have been revoked and the firm of Walker & Egleston to have been appointed instead. Mr. Walker of that firm had been secretary of the Alabama Eeal Estate and Insurance Company, the predecessors of the firm of Walker & Egleston. On June 12th, 1905, J. S. Eowe, assistant secretary of the insurance company under whose general superintendence the employers’ liability insurance business was carried on, sent a telegram to Walker & Egleston in these words: “Endeavor renew Sloss last year’s rates on three-year contracl. Waive application new coal mine rates this risk.” And at the same time he wrote a letter to Walker & Egleston, addressing them as general agents. The letter is important, and is here copied at length.
    “¿Etna Life Insurance Co.,
    “Hartford, Conn., June 12th, 1903.

      “Walker & Egleston, C/A.

    “Re. Renewal Sloss Sheffield S. & I. Co.
    “Gentlemen — Referring to above risk which is now up for renewal, we to-day wired you as follows which is hereby confirmed:
    “ ‘Endeavor renew Sloss last year’s rates on three years contract. Waive application new coal mine rates this risk.’
    “You will observe that we have suggested that you endeavor to obtain renewal of this risk on a three year basis, in order that same may be removed from annual competition.
    “Yours truly,
    “ (Sgd) J. S. Rowe, Sect’y.”
    About June 15th, Mr. Walker, one of the general agents, called upon the vice-president of the steel company and exhibited to him the telegram from Mr. Rowe of June 12th, and at the same time, or at another time, the witness did not distinctly remember, Mr. Walker showed him the letter frQm Mr. Rowe of the same date, and in the conversation which followed Mr. Walker told Mr. McQueen that he could renew the insurance for three years at the same rate at which it had been written for the previous year, and that he would give the steel company the privilege of canceling the policies at the end of the first year upon payment of two and one-half per cent, more, making $8,725, or, iu other words, that he would write the policies for $8,725 for one year on the estimated payroll, and would deduct therefrom two and one-half per cent., bringing the premium down to $8,506.88, provided the policies'should run for three years. This offer was put in writing, signed by Mr. Walker as general agent and sent to Mr. McQueen, the vice-president of the steel company. The letter is as following:
    “Birmingham, Ala., June 20, 1905.

      "JLr. J. W. McQueen, Vice Prest.,

      “Sloss Sheffield Steel é Iron Company, City.

    “Dear Sir — We are in receipt of your favor of June 15th, also your supplementary letter of June 19th, in reference to your company’s Employers’ Liability Insurance" for one year, and in reply thereto we beg to quote you a net price of $8,725.00 on a payroll of $1,400,000.00, divided as follows:
    Furnaces .....\.......................... $330,000 00
    Machine shops .......................... 25,000 00
    Coal mines (including convicts)........... 600,000 00
    Coke ovens ...'............... 175,000 00
    Quarry ................................. 20,000 00
    Red ore mines (slope).................... 150,000 00
    Brown ore mines (surface)................ 100,000 00
    $1,400,000 00
    “If your company will enter into an agreement to carry this insurance with the ¿Etna Life Insurance Company for three years, we will allow you a discount of 2% per cent, from the price of one year, or $8,506.88, practically the same figures at which the business was written last year, subject to cancellation at your election after the first year by paying the difference between the price for one year and the price for three years.
    “We have every reason to believe that our present adjusting arrangement for attorneys, which has proven so satisfactory, will continue, - and assure you that should we rewrite your policies, no effort will be spared to take the same good care of you in the future as we have in the past.
    “Tours very truly,
    “M. Porter Walker,

      “General Agent.

      “2Etna Life Inswance Company of Hartford, Conn.”

    The terms offered by this letter were accepted by the assured, 'and later on the policies were delivered. The aggregate, amount of the premiums 'provided for in the 1905 policies was $10,-502.10, the same as the year before. Nevertheless, the general agents rendered a bill to- the assured for $8,506.88, which was also the same as the year before, and this was paid by the assured to the general agents on August 17th, 1905, by a check which with the receipt for the same was produced.
    It appears now that the negotiations between the general agent and the assured were never truly reported by the general agent to its principal, the insurance company at Hartford; that the insurance company was not informed o-f the fact that the premiums received were at a rate less than the manual rates, and that whatever reduction in the premiums there were, came out of the agents’ commissions and not out of the- portion of the premium which was payable to the company, and that the general agent disregarded the positive directions of the insurance company touching this particular risk.
    The steel company canceled these 1905 policies at the end of the year, and the insurance company then brought a suit in the supreme court for the premium which would be due under the policies as they were written, i. <?., at the high rate, but calculated at the short rates mentioned in the policies.

      Mr. Frederick J. Faulks, for the complainant.

      Messrs. James & Malcolm G. Buchanan, for the defendant.
   Howell, V. C.

From the circumstances above detailed I do not hesitate to declare that the insurance company held out the persons whom it designated as its general agents as agents qualified not only to solicit business, but also- to make'contracts which would be binding on it. The 1904 policies were negotiated for, written and delivered bv these general agents who had apparent authority; and secret instructions from the principal, not communicated to the other party, are entirely overriden by the apparent authority deducible from the circumstances. Again, these agents were not denominated special agents; the appellation given to them was of much broader significance. Anyone dealing with them, knowing that they were general agents and - seeing the manner in which they transacted the business,.would be naturally led to the belief that they had full authority to transact each and every part of the business in hand. This view is confirmed by the exhibition to the insured of the letter and telegram of June 12th, 1905, which had a tendency to confirm the opinion that the assured had previously derived from their manner of dealing that they had full and ample authority to make original contracts. The case is within the rule laid down by Mr. Justice Van Syckel in the court of errors and appeals in the ease of Millville Mutual Co. v. Building and Loan Association, 43 N. J. Law (14 Vr.) 653. He quotes from Story Ag. § 10:

“On the other hand (although this is not the ordinary commercial sense) a person is sometimes said to be a special agent, whose authority, although it extends to do acts generally in a particular business or employment. is yet qualified and restrained by limitations, conditions and instructions of a special nature. In such a case the agent is deemed, as to persons dealing with him in ignorance of such special limitations to be a general agent; although as between himself and his principal, he may be deemed a special agent. In short, the true distinction (as generally recognized) between a general and special agent is this: A general agency does not import an unqualified authority, but that which is derived from a multitude of instances, or in the general course of an employment or business; whereas a special agency is confined to an individual transaction.
“Such genera] authority enables the agent to bind the principal, without orders, in dealing with those who, acting in good faith, have- no notice of the want of lawful power in the agent.
“One who entrusts authority to another is bound by all that is done by the agent within the scope of his apparent power, and ca'nnot screen himself from the consequences thereof upon the ground that no authority was given to do the particular act.”

A case similar to the one in hand is Smith & Wallace v. Prussian National Insurance Co., 68 N. J. Law (39 Vr.) 674, where the question was as to the authority of an agent to make an original contract of insurance. The insured applied to one Yanderveer, an agent, for insurance on its warehouse. The agent, who appears to have been as between him and his employer, a special agent, wrote wha.t is known in insurance circles as a binder, and delivered it to the insured. A question arose about the rate to be charged for the insurance, and this question was left in abeyance for a short time, during which the building burned. The question was whether the agent had made a contract of insurance or not. Mr. Justice Garretson says: “It is admitted that Yanderveer was the agent of the company appointed by a regular commiission and authority from them signed by the manager. As such agent lie had signed the binding slip in question, and did so within the limits of his authority as an agent to countersign and issue policies. His authority to enter into the contract in question for the insurance company will be inferred from his general agency.” Gulick v. Grover, 31 N. J. Law (2 Vr.) 182; Perkins v. Washington Insurance Co., 4 Cow. 645; Brown v. Franklin Insurance Co., 165 Mass. 565.

The Alabama eases are to the same effect. Piedmont Insurance Co. v. Young, 58 Ala. 476; Robinson v. Ætna Insurance Co., 30 So. Rep. 665; Triple Link Indemnity Alps v. Williams, 26 So. Rep. 19; Birmingham Mineral Railway Co. v. Tennessee Coal and Iron Co., 127 Ala. 137.

It is argued on behalf of the insurance company that clause N in the policy prevents the making of any contract by the general agent beyond and outside of the matters which are written and printed on the face of the policy itself. The clause in question reads as follows:

“No condition or provision of this policy shall be waived or altered except by written endorsement attached hereto and signed by the president and vice president, secretary or assistant secretary of the company, nor shall notice to any agent, nor shall knowledge possessed by an agent or by any other person be held to effect a waiver or change in any part of this contract.”

In further support of this contention defendant cites the time-honored rule that parol evidence shall not be admitted to vary or contradict the written instrument, with a long line of eases from our own courts and elsewhere as authority for the proposition that an agent without express authority may not waive or alter the provisions of the contract. I think that the clause itself and tire cases referred to are not applicable to the conditions of the case in hand. Clause N is directed against the waiver of provisions or the alterations of contract which is in existence and which has become a binding obligation between the parties. If this action were to recover on the established or admitted contract the .clause and the rule of evidence and the cases cited by the defendant would be pertinent and applicable as to matters which arose after the delivery of the policies, but such is not the case here. Here the inquiry is not as to what the contract means or how it should be interpreted, or what remedy should lie had on it, or how broad and deep its provisions are, but the question is far more fundamental. It is what is the contract? The bill alleged that the parties agreed upon the terms of a contract and that these terms were not inserted in the document that was delivered. This is denied by the answer, and thus is made an issue as to what the contract is. Parol evidence is admissiblc on this class of issues for the plain reason that in most cases no other evidence exists. To deprive the court of the benefit of parol evidence on an issue as to what the contract is, would be to destroy its jurisdiction to reform contracts and to avoid them for fraud or mistake. Vice-Chancellor Pitney says, in O’Brien v. The Paterson Brewing and Malting Co., 69 N. J. Eq. (3 Robb.) 117, concerning the rule against admitting parol evidence: “Without stopping at this moment to enumerate and classify the numerous exceptions to that rule, especially in a court 'of equity, it is sufficient to say that the evidence here relied upon does not tend to vary the terms of the contract. There is no contention that the complainant did not understand that he was signing an absolute promissory note in favor of the defendant, payable one day after date, and negotiable in its terms. What he does contend is that it never had any binding effect upon him in equity. To show this by p’arol is no more a breach of the rule invoked than it is to prove that an absolute deed is given as a mortgage, or that a promissory note is given by the maker to the payee without consideration and as an accommodation to the latter.”

In .other words, the rule does not apply when the inquiry before the court is what are the terms of the contract, what did both parties agree to, what were their respective rights, duties and liabilities to be when the agreement was formally committed to writing. Continental Insurance Co. v. Ruckman, 20 N. E. Rep. 77 (Illinois Supreme Court); State Insurance Co. v. Hale (Neb.), 95 N. W. Rep. 473; Mutual Benefit Life Insurance Co. v. Robison, 58 Fed. Rep. 723 (Judge Caldwell); Wood v. American Fire Insurance Co., 149 N. Y. 382.

The next question that arises is whether this contract of insurance can now be reformed and made to accord with the real agreement entered into between the vice-president of the insured and the general agent of the insurance company. This inquiry must he answered in the affirmative. Contracts inter partes may be reformed by this court whenever by reason of a mutual mistake the written instrument fails to express the agreement on which the minds of the parties met, or where there is a mistake by one of the parties and fraud or other inequity attempted on the part of the other. Pomeroy says:

“Reformation is appropriate when an agreement has been made or a transaction has been entered into or determined upon as intended by all the parties interested, but in reducing such agreement or transaction to writing either through the mistake common to both parties or through the mistake of the plaintiff accompanied by the fraudulent knowledge and procurement of the defendant the written instrument fails to express the real agreement or transaction. In such case the instrument may be corrected so that it shall truly represent the agreement or transaction actually made or determined upon according to the real purpose and intention of the parties.” Pom. Spec. Perf. § 870.

In Bryce v. Lorillard Fire Insurance Co., 55 N. Y. 240, Judge Folgor says: “The mistake which w-ill warrant a court of equity to reform a contract in writing must be one made by both parties to the agreement so that the intentions of neither are expressed in it, or it must be the mistake of one party by which his intentions have failed of correct expression, and there must he fraud in the other party in taking advantage of that mistake and obtaining a contract with the knowledge that the one dealing with him is in error in regard to what are its terms.” Beach Eq. Jur. § 544, and following.

In Lloyd v. Hulick, 69 N. J. Eq. (3 Robb.) 784, the same rule was applied, in the opinion of Chief-Justice Gummere, but to a quite different state of facts. Here the written contract is not the one that the parties made. It is true that the insured knew that the policies as actually written did not accord with the agreement as actually made, because this fact was stated at the time the policies were delivered, but the same course had been taken the year before and the complainant had a right to' rely upon the representations made by the general agent and was led to. believe that the misstatement of the premium rate was a merely formal matter, and as such the statement cannot now be taken advantage of by the insurance company.

Vice-Chancellor Van Fleet, in Cummins v. Bulgin, 37 N. J. Eq. (10 Stew.) 477, defined mistake to be “The doing of an act under an erroneous conviction, which act, but for such conviction, would not have been done.” Story defines it as “Some unintentional act or omission or error arising from ignorance, surprise, imposition, or misplaced confidence.” Story Eq. Jur. § 110.

It must be conceded, I think, that the insured acted under an erroneous conviction in accepting the policies containing terms which had not been agreed upon. The more invidious view would be that it was imposed upon or became a victim of misplaced confidence. Under either view it is entitled to a decree. There is a common law action pending to recover $5,400, which is claimed as the excess of premium earned over the premium paid. The insured admit an indebtedness of $3,300. In order .to save further litigation the decree may provide for an adjustment of the difference, the amount of which I suppose counsel can readily agree upon.