text:
    Munn & Company (a corporation), v. The Americana Company et al.
    [Decided August 9th, 1913.]
    1. Where a corporation which succeeded a partnership of the same name claimed the right to use the name “Scientific American,” which had been previously owned by the partnership, parol evidence that the transfer of the partnership assets to the corporation included the right to the use of such name was sufficient to sustain a finding’ that the corporation owned the name, in the absence of any objection thereto or insistence by defendants that the transfers should be produced.

      2. Where complainants, engaged in the issuance of a periodical known as “Scientific American,” authorized defendants, by written contracts for a consideration, to use the name “Scientific American Compiling Department” in the compiling' and sale of a scientific encyclopedia called the “Americana,” before such contracts were finally determined in June, 1911, defendants were not entitled to use such name in editions of the work put out after that time, except to show that the original work had been compiled in connection with complainants' bureau.
    3. Where defendants’ right to use the words “Scientific American” in connection with the sale of subsequent editions of a scientific encyclopedia terminated in June, 1911, and complainants showed instances of loss of advertising or subscriptions as a result of dissatisfaction with the encyclopedia, and also that defendants’ further use of the name was calculated to injure complainants’ property, and would probably expose complainants to risk or liability, injunction was the proper remedy.

      4. Where defendants, in compiling a scientific encyclopedia, procured the right from complainants, which published the “Scientific American,” to put out the encyclopedia under the name “Scientific American Compiling Department,” defendants’ right to use the name depended solely on contract, so that on the termination thereof defendants were not entitled to longer use the name in- connection with subsequent editions of the work, both on the principle of estoppel, and on the theory that to longer use the same would tend to mislead the public.
    5. A corporation, in assuming a name in which to carry on its business of publication, has no right to adopt a name which, prima fade without explanation, will fairly indicate to a person dealing with it, of average and ordinary intelligence, that the work is the publication of another, since the restriction on the selection and use of corporate names or methods of business, tending to deceive the public, are independent of statutory restriction, and additional thereto, and may be enforced on behalf of persons to whom the use of the name would occasion injury.
    6. Where a contract authorizing defendants to use the words “Scientific American” in connection with the sale of a scientific encyclopedia finally terminated in June, 1911, the fact that complainants delayed filing a bill to enjoin defendants’ continued use of the name until December, 1911, which delay was due largely to time required to procure evidence, was insufficient to charge complainants with laches.
    7. An injunction restraining the further use of the name “Scientific American” in the corporate name of a corporation, putting out a scientific encyclopedia, which, under contract with complainants, had previously been published as coming from complainants’ compiling department under the name “Scientific American Compiling Department,” would not be denied on the ground of hardship, where the hardship or injury to such corporation from the discontinuance of the name, if any, would be brought about by its acts in increasing its stock and taking over the assets and contracts of another corporation, which had previously published the encyclopedia, after the contracts authorizing- the use of the name had expired.

      Heard on bill, answers, replication and proofs.
    Munn & Company, a New Jersey corporation, are the owners and publishers of the “Scientific American,” a weekly publication, commenced under that name in^the year 1845 by Munn & Company, a partnership, and continued until tire present time. The New Jersey corporation have published the “Scientific American” since 1900, when they took over the property and business of a New York corporation of the same name, which had been there incorporated in 1896, and which had then taken over tiie publication and the business of the partnership called Munn & Company, who founded the enterprise in 1845. The complainant corporation also issue at the present time other publications besides the “Scientific American,” these being “The Scientific American Supplement,” a periodical similar in general character, and “American Homes and Gardens,” formerly the “Scientific American Building Monthly,” and have also published books, these being “The Scientific American Encyclopedia of Beeeipts” and “The Scientific American Encyclopedia of Formulas.” By its charter it is authorized generally to manufacture, publish and sell newspapers and other publications. The general character and scope of the “Scientific American” is the treatment of scientific and industrial subjects, mechanical news, inventions, chemistry, astronomy, engineering news, &c. It is probably the oldest of the American publications of this character and has a circulation of at least fifty thousand all over the United States, Canada and British possessions, besides a large foreign circulation. The bill is filed against three corporate defendants, the Americana Company, a Maine corporation, the Americana Company, a New York corporation, and “The Scientific American Compiling Department,” a New Jersey corporation, and one individual defendant, Bobert S. Peale, an officer of the corporation, alleged to be the promoter of them all.
    The defendant companies are all publishing companies which were formed at different times in connection with the publication of an encyclopedia called the “Encyclopedia Americana,” or, later, “The Americana,” the publication of which was originally projected by the defendant, Peale, under the name of “The International Society,” of which he was the president.
    Eor several years the use of the name “Scientific American” in some connection with the placing of the encyclopedia upon the market was under contracts made by the complainant with the American Company of New York, or its predecessor, the International Society. This continued from November, 1902, until June, 1911, when the last contract was formally "terminated and complainants refused to receive payments under it. At that time, and at the time of filing the bill (December 28th, 1911), the edition of the encyclopedia being placed on the market bore on the title page as publisher the name “Scientific American Compiling Department.” The title itself of the book was then “The Americana.” Complainants had at and before the formal termination of the contract demanded the discontinuance of the use of the name “Scientific American” in connection with the publication, and this not being complied with, filed the bill. The main object of the bill is to enjoin the use in any manner of the name “Scientific American” by any of the defendants in connection with the corporate title or with any of their publications. The complainants put their right to relief upon the grounds:

      First. That the right to use the name “Scientific American” was never granted to the corporate defendant “Scientific American Compiling Department.”

      Second. That the name is a trade name of complainants, to which they have a property right, and which cannot be used by pny of the defendants without consent, after the termination of the contract.

      Third. That the use of the name has subjected and will continue to subject complainants to loss, injury and damage, and is a fraud on complainants and on the public, entitling them to injunction and equitable relief.
    As to the right to the use of the name in the corporate title, and for all corporate purposes, defendants claim—first, an absolute legal right to its selection and to its continuance, without reference to any right under the contracts; and as to the use of the name in connection with the publication and placing of the encyclopedia upon the market, they further claim—second, that the situation and circumstances connected with the use of the name for this purpose by virtue of the contracts and the course of business with complainants thereunder has been such as to entitle them to continue this use of the name in connection with the “Americana,” notwithstanding the termination of the contract; third, that complainants having failed to show any loss or damage by reason of this use of the name in connection with the defendants’ publication, is not entitled to equitable relief by injunction. As further defences they set up estoppel and laches as bars to equitable relief, in case it should be held that the use of the name “'Scientific American” by either of them is without legal right.
    The ease, in my judgment, turns largely upon the question of the effect of the contracts and the course of dealing under them, in reference to the publication of the “Americana,” either as qualifying any right complainants may originally have had to the exclusive use of the name or words “Scientific American,” in connection with any publication, or as qualifying the relief they may be entitled to on this bill. And a statement in some detail will, therefore, be necessary in reference to the contracts and course of dealing, and also in reference to the acts and conduct bearing on the defences of estoppel and laches.
    (Here follows a statement of the evidence in detail.)

      Messrs. Fort & Fort and Mr. Masten and Mr. Hamilton (of the New York bar), for the complainants.

      Messrs. McCarter £ English and Mr. Thomas P. McKenna, for the defendants.
   Emery, V. C.

(after statement).

A preliminary objection was raised at the hearing, that complainants had failed to prove any right or title to the use of the name “Scientific American” as a trade njme or trade mark for their publications or otherwise, because of the failure to prove a conveyance of the same from Munn & Company, the original partnership who adopted it in 1845, or from Munn & Company, the New York corporation who succeeded to the rights of Munn & Company in 1896. The use of the name by complainants as successors in business to Munn & Company, since their incorporation in 1900, is sufficient, even without proof of a formal .written conveyance of the right to use the name, certainly as against those using the title or name without any authority. But, secondly, there was proof, by the evidence of Mr. Charles A. Munn, on cross-examination, that the transfers were made by written documents. He was requested to¡ produce them arad promised to do so, if he could find them, but as nothing further took place at the hearing in reference to their production, and his parol evidence as to the contents of the papers was allowed to stand, complainants’ right to the name stands proved on the parol evidence brought out by defendants and not objected to, so that there is no technical basis for the objection . of complainants’ failure to prove title.

First. As to the defendants’ right to the use of the name “Scientific American” since the termination of the contract for its use.

The substantial facts which I find to be established by the evidence above stated in relation to the use of the name “Scientific American” by any of the defendants at the time of filing the bill and subsequently are as follows: By the original contracts of 1902 and 1904, one of defendants, the Americana company (of New York) was expressly' authorized by the complainants to use exclusively the name “Scientific American Compiling Department” for the purpose of selling the- “Encyclopedia Americana” in connection with subscriptions to the complainants’ periodical, the “Scientific American;” at the time of making the contracts of 1904 giving the exclusive use of the name,, the “Scientific American Compiling Department” had been previously used, not as the publisher of the work, but merely as a. selling name used by the Americana company, under whose name as publisher the work was published originally and at the time of making the contract of 1904; during the continuance of this contract (which by its terms extended to March 1st, 1906), the complainants without any express obligation under the contract to do so, did in fact co-operate in the preparation of the encyclopedia by giving the publishers the use of their illustrations and of their collections and compilations of information organized and developed in connection with the publication of their paper, “The Scientific American,” from the date of its original publication in 1845, and appropriately called a “Compiling Department,” and also advertised this kind of connection and assistance in the “Scientific American” newspaper; shortly after the making of the contract of 1904 with the Americana Company of New York, the defendant, the “Scientific American Compiling Department,” was incorporated in New Jersey by Mr. Peale (who controlled also the Americana company of New York) with a small capital stock—$2,000— but with broad powers of publishing as well as selling; during the continuance of the contract of 1904 and its extensions, the only power used by the Scientific American Compiling Department was that of a selling agent, in whose name the contracts of subscription were taken, and the contracts so made in this name, both before and after the incorporation, were delivered over without assignment to the Americana company (of New York), the publisher of the work; about or shortly after the expiration of the contract of 1904, and before the agreement for its extension, the complainants through their director and officer, Mr. Beach, who was not at that time interested in any of the defendant corporations, knew of the fact of the incorporation of the Scientific American Compiling Department, but had no knowledge or information that it was incorporated for any other purpose than in connection with the publication of the “Americana” under the contract, and. as an instrument for carrying it out; that none of the other officers of complainants had at that time any knowledge of such incorporation, and that at the time of the extension of the contracts in May, 1906, neither Mr. Beach nor any officer of the complainants had any notice of any right or claim of any of the corporate defendants to the use of the name “Scientific American” in their corporate title or otherwise, except in connection with the carrying out of the contract; that in this posture of affairs and when the new “Americana” was complete, the defendant, the Americana Company (of New York), and Munn & Company, the complainants (through all their officers), agreed upon the terms of a circular letter which should give information to the public as to the connection of the publishers of the “Scientific American” with the new “Americana.” This circular letter, issued in May, 1906, addressed to the American people and signed by Munn & Company, described the work as published by the “Scientific American Compiling Department” (not the Americana Company) with their (Munn & Company’s) full co-operation, “under the direct editorship and personal supervision of Mr. Frederick Converse Beach, editor of the Scientific American,” and assured the public that it would be found standard in its information and fully equal to the reputation of the “Scientific American” for accuracy and reliability. In connection with this circular letter, the contract of 1904, expiring by its terms on March 1st, 1906, was extended to March 1st, 1907, with provisions for future extensions. After this circular letter and the subsequent extensions of the contract, and up to the termination thereof in 1911, the title pages of the “Americana,” copyrighted by and in the name of Mr. Beach, bore the name “Scientific American Compiling Department” as publisher. The real publisher and owner was, however, the Americana Company (of New York) until December, 1906, and from that time the Americana Company (of Maine), which succeeded to the rights of the Maine company and owned the plates and contracts. During the same interval (1906 to 1911) the volumes on the title page were also advertised as “issued under the editorial supervision of the Scientific American,” and copies of the circular letter were by the publishers placed in the hands of the agents of the Americana for use in reply to inquiries as to the connection of complainants with the “Americana.” During all this time the complainants received the benefits of the payments under the contract which were, or were intended to be, enhanced and increased by the use of this circular letter, assuring to the public and especially to subscribers for this work of reference the benefit of complainants’ long and thoroughly established reputation for reliability and accuracy. Pending the running of the contract and partly by reason of the impression of complainants’ connection with the work given by agents soliciting subscriptions, confusion occurred which, required attention by complainants to claims involving financial responsibility for the contracts and representations of the agents securing them, as well as responsibility from a literary or editorial standpoint. As a rule, these communications, which increased during the latter part of the connection, were referred to Mr. Beach during the running of the contracts. These claims, based both on financial and literary responsibility, were so frequent—every two weeks on an average—and of such a character as to impose upon complainants the burden of repelling or answering them in order to avoid claims of responsibility. This was of itself, in my judgment, an injury or damage to complainants in their business as publishers of the “Scientific American,” which could not be imposed on them without their consent and from which on the termination of the contract, they were entitled to be relieved, except so far as it was the necessary result of the contract and their dealings under it. For six months previous to June, 1911. the date of actual termination of the contract, the complainants and the defendants, the Americana Company of Maine and the Scientific American Compiling Department, contemplated and prepared for the termination of the contract, the defendants requesting delay as necessary for the elimination of the “Scientific American” from the enterprise. As a part of this elimination complainants insisted on the abandonment of the use of the words or name “Scientific American” in the corporate name, or otherwise, but defendants insisted on the right to the continuous use of this corporate name as publishers of the “Americana,” and since the termination of the contracts have continued this use of the corporate name, as well as in the contracts of subscription, but no other reference to the “Scientific American” appears on the title page than the designation of the Scientific American Compiling Department mentioned as publishers. In the “canvasses” or instructions to agents soliciting subscriptions for the editions previous to that of 1911, the publishers instructed them to state that they came from the “Scientific American- People,” the leading scientific paper of the world, which for forty years had maintained an information bureau for its subscribers free of expense on any subject, and that the “Scientific American” had built up a national system of reference used in making the “Americana.” In the canvass for the editions of 1911 the agents are instructed to state that they are from “The Scientific American Compiling Department:” the reference to the “Scientific American” paper is omitted, but there is in the canvass a. reference to an “Information Bureau” originated by it, “The Scientific American Compiling Department,” as the foundation of the work. This bureau in its character is substantially the .same as that of the “Scientific American” referred to in the earlier canvass. The canvass of 1912 (used since the beginning of the suit) is of the same character. Since the termination of the contracts the agents, while being instructed to continue the use of the name “Scientific American Compiling Department,” have also been instructed both verbally and by letters to discontinue mentioning Munn & Company and “The Scientific American” as connected with the edition, but they do not appear to have been instructed to disavow such present connection, if no inquiries relating to it are made, either by new subscribers, or by old subscribers, who are applied to by agents to take the new and present edition with the allowance of an abatement from the regular subscription price on the return of the old edition for exchange. Notwithstanding the instructions which have been given, and as the result of the use of the corporate name “Scientific American Compiling'Department” in obtaining the contracts of subscription and the representations of agents in procuring the same or in connection therewith, many instances have occurred, since the termination of the contract and up to the time of the hearing, of confusion in the minds of subscribers or proposed subscribers as to the complainants being still connected with or co-operating in the present publication of the work, ¿nd applications to the complainants arising from this confusion require attention from them in order to repel or avoid responsibility therefor, either financial or literary. Some instances of loss of advertising or subscriptions as the result of dissatisfaction with the “Americana” or the agents have also been shown. If what is being done by defendants is calculated to injure the property of complainants and the probable effect of it wall be to expose them to .risk or liability, then an injunction is the proper remedy. Walter v. Ashton (1902), L. R. 2 Ch. Div. 282, approved in Vanderbilt v. Mitchell (Errors and Appeals, 1907), 72 N. J. Eq. (2 Buch.) 910; Edison v. Edison Polyform Manufacturing Co. (Vice-Chancellor Stevens, 1907), 73 N. J. Eq. (3 Buch.) 136.

This confusion requiring attention and action on the part of the complainants to avoid responsibility, has already, in my judgment, caused an injury and damage to the complainants in carrying on their business as publishers of the “Scientific American” newspaper, and is a confusion against the further continuance of which, in the present and future publications of the “American^.” they are entitled to equitable relief as the only effective relief. The confusion results primarily and directly from the use of the complainants’ well-known and long established name, “Scientific American,” in connection with the name of publishers and sellers of a book of reference like the "Americana,” including in its volumes scientific and other information, the collection and compilation of which the “Scientific American” lias made a specialty for sixty years. The addition of the words “Compiling Department,” so far from distinguishing or disassociating the publisher and seller of the work from those of the “Scientific American” prima facie indicates a special and appropriate character of the association of the publishers of the paper with the publisher of the “Encyclopedia.” The latter is published by the “Scientific American •Compiling Department,” the natural and ordinary method of describing a department of the “Scientific American,” and of ■describing such a department as would be specially concerned with the compilation of information on scientific and other kindred subjects included in an encyclopedia. Both parties to the suit have from the time of their first contracts concurred in this view of the effect of this name “Scientific American Compiling Department” in connection with the encyclopedia, as ■giving it the benefit of this special information bureau or “Compiling Department” of the “Scientific American” newspaper, developed in their half century or more of its publication. In the stationery and literature of the “Scientific American Compiling Department” used during their co-operation prior to 1911, a “comma” followed the words “Scientific American,” thus making the direct formal representation that the- “compiling department” referred to in the name “Scientific American, Compiling Department” was a department of the paper.

It must also be considered that the defendant, Americana Company, procured the original use of the name “Scientific American Compiling Department” for the purposes of the contract and solely on the faith of the contract and upon very substantial money consideration given, therefor, and under the contract and the dealings and course of business of the parties has received the benefit of the name and of the reputation of the “Scientific American” as an accurate and reliable compiler of information on a great number of topics, treated in such a book of reference as the “Americana.” On the termination of the contract they cannot, as it seems to me, equitably have the right to appropriate permanently and without compensation, as long as the corporation continues to exist and publish a work of reference, the benefit of the name “Scientific American” for that purpose. The continued use of the name after the expiration of the contract and the continued appropriation of benefits which had their origin solely in contract, comes, in my judgment, within the operation of the principle of estoppel, and upon this ground, as well as upon that of confusion actually arising from the use of the name in the corporate title, complainants are entitled to relief. These two grounds relate to the right to the use of the name, considered solely with reference to its effect as between the parties themselves by reason of their contracts and dealings and the loss or injury resulting to complainant by reason of confusion. And there is another consideration involved in cases of this character, viz., that of the public to whom the name “Scientific American Compiling Department” is held out as the publisher and seller of the “Americana.” No corporation has the right in assuming a name in which to carry on its business of publication, to adopt a name which prima facie and without explanation would fairly and reasonably indicate to a person dealing with it, of average and ordinary intelligence, that the work was the publication of another. The restrictions upon the selection and use of corporate names, or methods of business, tending to deceive the public, are independent of statutory restrictions and additional thereto, and may be enforced on behalf of persons (in this case other publishers) to whom the use of the name would occasion an injury. L. Martin Co. v. L. Martin and Wilckes Co. (Vice-Chancellor Stevenson, 1908), 75 N. J. Eq. (5 Buch.) 39. In the absence of specific explanation from the agents that the “Scientific American55 no longer had any connection with, or co-operated in the publication, I think it would naturally and reasonably be taken for granted by anyone dealing with the agents, that the publisher of the present edition of the “Americana55 was a department of the Scientific American newspaper, called the “Scientific American Compiling Department.55 The public to whom the work, is offered for subscription, are entitled to know that with the publication and placing on the market of the present editions of the “Americana55 the publishers of the “Scientific American55 have no connection or responsibility of any kind, financial or literary. To compel, or attempt to compel, specific explanation by soliciting agents, that the publishers of the “Scientific American55 are not connected with the present publication of the work, or with the company itself is, in my judgment, a futile and impracticable method, and the only certain or practicable method of insuring to complainants proper protection is that of enjoining altogether the further use of the name “Scientific American55 in the corporate title, and also enjoining its use in the publication or vending of the “Americana55 of the editions of 1912 and any future editions except as hereafter stated.

Reaching this conclusion upon the question of the continued use of the name, merely as one of right in the respective parties, upon the termination of the contract, there remain to be next considered the further questions of the extent and scope of the relief as to the use of the name in the publication and the bar of complainants5 relief by reason of estoppel, laches or hardship.

Second. The extent and scope of the relief to which complainant is entitled in reference to the use of the name “Scientific American55 in connection with the publication and vending of the “Americana.55

The complainants, as publishers of the “Scientific American,” in fact co-operated with the defendants in the preparation and publication of the “Americana/’ up to and including the editions of 1910, and in the issues up to June, 1911.. Their bill for injunction against tire use of the name was not filed until December, 1911, and until after some portions of the editions of 1911 had been put on the market. The entire editions from 1903 to 1910, and the edition of 1911, so far as the same had been placed on the market up to the termination of the contract, must, for the purposes of any injunction, be considered as published or allowed to be published under the contracts. The injunction prayed by the bill extends to the restraint of any representations that the “Americana” % ms prepared under the auspices of or any connection with complainants. Such representations, if made with reference to the editions up to 1910, would be true, and complainants are not entitled to any injunction against such representations. The co-operation during the contracts was moreover one for which the publishers of the “Americana” paid the large consideration provided by the contract, and they are entitled to the full benefit of this, and also, if they desire, to continue to state, according to the truth and the facts, the connection of the “Scientific American” with the editions of the “Americana” up that of 1912, and the injunction should not restrain any statements of the truth as to their past relations. - And not only is this right to the truth and facts about the complainants’ connection with the previous editions one to which the defendants are entitled on the basis of fair dealing- under the contracts, but it is also a right and benefit, no doubt of considerable value to the subscribers to the “Americana” procured while the co-operation in its publication existed, and was publicly announced by complainants’ circular letter and otherwise for the purpose of procuring these subscriptions. Complainants ,have no equitable standing whatever, in my judgment, to restrain or enjoin any truthful representations of defendants in relation to the complainants’ past connection with the work, which do not give a false impression as to any present connection. The basis for the representations which defendants are entitled to make as to these past editions must, as it now seems to me, be the circular letter of 1906, which was after clue consideration agreed upon by the parties as a careful and correct statement, and was for this' purpose given to the public, but these representations as to past connection should, however, be only made in such manner as to show that it no longer exists, and before making any change from the temporary restraining order, it will be necessary to settle with some care in any decree for injunction against the future use of the name in publishing or marketing the work, the form of exceptions as to statements relating to the past connection of complainants. .

Third. As to the equitable relief by injunction being barred on the grounds of estoppel, laches or hardship.

The defence of estoppel is based on the equities claimed to have arisen by reason of the license to use the name “Scientific American Compiling Department” in connection with the. publication of the “Americana” under the circumstances above detailed, and the defendants’ purchase of this right and expends ture of large sums of money in connection with the right or license and on the faith of it. These give it, as is claimed, a perpetual license, and complainants after receiving the consideration and permitting the expenditure, are estopped from setting up a right to enjoin the continuance of the use of the name in connection with the present or future publication. Defendants are entitled, in my judgment, to the benefit of all estoppels arising from the license to use the name, given by the contract itself, or arising necessarily out of this use under the contract, and this will include the right to retain the proper connection of the' name as to all editions published during the co-operation under the contracts, but cannot be extended beyond the contract, and to give defendants the perpetual right to the use of the name. So far as the defendants are entitled to the benefit of any estoppel arising out of the publication of the editions previous to 1912, they can be protected by the decree.

The claim of laches is not well founded. The disuse of the name “Scientific American” was formally demanded in June, 1911, and the filing of the bill (in December, 1911) was not such a delay as to deprive complainants of the right ever to apply for protection against its future use. The delay was considered important in reference to a preliminary injunction, but, on the question of right, delay such as occurred in this case, due largely to the time required to procure evidence, is not of a character to disentitle complainants to all future protection against the use of their name and reputation.

The objection of hardship was strongly urged against enjoining the further use of the words “Scientific American” in the corporate name, and the complications which may possibly arise by reason of the disuse of the name, in order to preserve the full benefit of all defendants’ existing property rights connected with the use of the name, should certainly be matter for careful com si deration, in fixing the time, terms and conditions upon which the decree for injunction shall go into effect. These may, if necessary, be made the subject of special reference or inquiry, but the difficulty of adjusting proper relief is not a basis for denying altogether the relief by injunction to which complainants are entitled. And all these difficulties and hardships now claimed to affect the absolute right of relief have arisen and been intentionally brought about by the defendants, since the termination of the contracts, or in anticipation thereof. ITp to April 1st, 1911, the capital of the “Scientific American Compiling Department” was only $2,000; it was only the selling agent for the “Americana Company,” and the outstanding contracts of subscription (fifty thousand or more), although taken in its name, had been delivered over without assignment to the Americana Company, which owned or controlled it, and on or about the date mentioned all of these outstanding contracts were assigned over by the Americana Company to Mr. Peale in consideration of his assuming its obligations. All of the contracts since that time taken by and in the name of the “Scientific American Compiling Department,” as the selling agent of the “Americana Company,” still belong to the latter company. Suits on any of these contracts whenever necessary heretofore seem to have been brought in the name of special assignees to whom they were assigned for the purpose, and if any provision or exception be necessary as to the use of the name for the purpose of retaining the benefit of any of these contracts, it can be secured by the decree itself which provides against the future use of the name.

The hardship or injury to the present stockholders of the “Scientific American Compiling Department,” from the discontinuance of the name, if it be considered as reasonably to be expected, is also one that has been brought about after the termination of the contract, by the deliberate action of those who controlled the issue of the stock at that time. The stock was increased from $2,000 to $2,000,000 for the purpose of exchanging it for “Americana Company” stock, and this latter stock is all now owned by the “Scientific American Compiling Department.” Complainants had no notice or knowledge of these proceedings, for the knowledge and participation of Mr. Beach, who had, in April, 1911, become adversely interested, was no knowledge or notice to complainants.

The increase of stock cannot, as it seems to me, confer on the stockholders any individual or personal right as such to the perpetual continuance of a company name in derogation of complainants’ rights to the name. The question is altogether one of corporate right, and the only bearing which the personal holdings of stock has upon the question now at issue is whether the facts proved show that by reason either of their acts or neglect, the complainants can be held to have had such notice of the general issue of this increased stock and its circumstances, as now to disentitle them to complain of it, because of their own neglect. No such notice or responsibility on the part of complainants or any connection therewith appears except on the part of their Mr. Beach, who was adversely interested and participated in the increase of the stock, and there is no equitable ground, in my judgment, for denying relief in regard to the further use of the corporate name to which they may be entitled, on the ground of any supposed hardship to the stockholders who, without knowledge of any controversy as to the use of the.name, have purchased or acquired its stock by exchange since the termination of the contract. The terms of the decree can protect against the disturbance of any existing property rights, and apparently to stockholders the only loss or hardship is that resulting from the prima facie connection of the “Scientific American” with the company by reason of the corporate name. As there is no such connection, and has not been since the purchase or exchange of the stock, this hardship, if it exists, even as to those who purchased the increased stock, is one as to which they must be considered as having taken the risk, and they are not entitled to make any loss or hardship to them as individual stockholders a ground for continuing the use of the name. The stockholders who exchanged Americana Company stock are in a still less favorable position to set up this defence, for so far as they are individually interested, the exchange made after the termination of the contract is apparently for the purpose of giving to them as stockholders of the Americana Company the continued benefit of the use of the name “Scientific American” after the right to such benefit had expired under the contract with the “Americana Company.” And Mr. Peale, Mr. Huntley and Mr. Beach, the stockholders who actually brought about the increase and exchanges, manifestly have no standing personally as such stockholders to set up 'any loss or hardship resulting from these proceedings as a bar to complainants’ relief.

A decree for injunction will be advised upon the basis of this opinion, and as to the terms and conditions, if any, upon which it should be issued and the time when it should issue and take effect, I will hear counsel at the time of settling decree. In the meantime, or until farther order, the temporary injunction as issued is to remain in full force and effect. Defendants may apply for a settlement of decree or for modification of the temporary injunction on the basis of above opinion at the time of settling decree. I will hear counsel of complainants, if they desire upon the matter of complainants’ right to a decree for an account of profits which is also prayed by the bill.


source: Caselaw Access Project

author: Emery, V. C.

license: Public Domain

text:
    Dinah Schneider et al. v. Emma Schmidt et al.
    [Decided August 25th, 1913.]
    1. As to personal property, a judgment creditor’s right to an accounting against the debtor’s mortgagee does not depend on his judgment but on the levy of execution thereon, which alone creates a lien.
    2. The levy on personal property is seizure of the judgment debtor’s right at the time of delivery of the execution to the sheriff.
    3. A transfer of personal property by a debtor is subject to attack by an existing creditor, claiming under a subsequent execution, if the transfer was in effect substantially a gift in fraud of creditors.
    4. A mortgagor may release or convey his equity to the mortgagee, and the transfer if fairly made is binding on those claiming under the mortgagor by rights subsequently acquired; but existing creditors of the mortgagor, with a decree obtained before the transfer, could question such transfer under a subsequent levy.
    5. On a bill by judgment creditors against a mortgagee of the debtor who had taken possession of the property, evidence held to show that a transfer of the equity of redemption by the debtor to the mortgagee was vali'd.
    6. Though a mortgage was good only in equity, being to the mortgagor’s wife, who claimed there was a foreclosure and purchase by her and a transfer to her of the equity of redemption, it was not necessary, as against his creditors, that the foreclosure be by bill in equity, but it was sufficient if on all the facts there was a transfer of the equity of redemption, valid in a court of equity against the mortgagor or those claiming under him by a subsequent levy on the goods.
    7. A partner has power by bill of sale to convey title to the personal, property of the firm in payment of its debts.
    8. A debtor’s wife petitioned for injunction against a sale of goods-under execution against him, claiming that she formerly had had a mortgage on the goods which she had foreclosed and had purchased the property. She also claimed that, if not owner thereof, she held possession-, partly as mortgagee.—Seld, in a subsequent suit against her as .mortgagee by the same creditors claiming tihe debtor’s equity of redemption, that she was entitled to set up and prove ownership by a bill of sale to her by the mortgagor’s execution after the foreclosure.

      9. Where a sale under execution was enjoined by the debtor’s wife, and her petition set up a claim as mortgagee, the creditors were justified in bringing a bill against her claiming the debtor’s right to redeem, and, on her then proving ownership by virtue of a subsequent bill of sale, the dismissal of their bill would be without costs.
    Heard on bill, answer, replication and proofs'.

      Mr. William A. Lord, for the complainants.

      Mr. Alfred F. Stevens, for the defendants.
   Emery, V. C.

Complainants Dinah Schneider and Valentine, her husband, are creditors of the defendants Charles Schmidt and John Huber, their debt being founded on a decree of this court, obtained on October 4th, 1904, for the payment of $1,004, besides costs, all of which, with interest, is still due except $100, which was realized by sale under execution of the right of defendant debtor Schmidt in certain real estate. Under execution upon this decree, issued in the cause, on August 22d, 1911, levy was made by the sheriff:' on August 31st, 1911, upon a carousel or merry-go-around, with its engine, boiler, organ and other equipments in the possession and management of the defendant Emma Schmidt, wife of the judgment- debtor, and then located at Hillside park, Newark, New Jersey.

Previous to the securing of the decree, and on November 4th, 1903, Charles Schmidt and John Huber had given a chattel mortgage to Mrs. Schmidt upon a carousel, with its engine, boiler and equipments, then located at Passaic wharf,1 Newark, New Jersey, to secure $1,500, with interest for one year. Complainants issued an execution on their decree under which a levy was made on November 2d, 1905, upon the mortgaged chattels, and in a suit afterwards brought in this court to set aside the mortgage as invalid and fraudulent, a decision was rendered sustaining the mortgage and advising a dismissal of the bill.

The present bill charges that in the year 1907, and after default in payment, Mrs. Schmidt took possession of the mortgaged chattels as mortgagee in possession, and has since eon-tinned in possession thereof as such mortgagee. Complainants claim that the chattels of which she took possession under her mortgage are the same chattels as those upon which the levy-under their said execution was made in August, 1911, and that Mrs. Schmidt since taking possession as such mortgagee has received the rents and profits of their use without accounting therefor, or applying the same to the redemption of her mortgage, and that such receipts over and above the expenses of operation and maintenance of the carousel have been more than sufficient to pay the entire amount due on the mortgage; that these receipts have not been so applied, but the mortgage has been kept alive and uncanceled, in order to impair complainants’ lien under their execution. An account of the amount due is prayed, with an application of payments to the mortgage, and the sale of the carousel under complainants’ execution free of the encumbrance.

In reference to the claim that Mrs. Schmidt took possession as mortgagee in 1907, the complainants’ bill specially charges that by her petition filed in this suit after the levy on the execution in August, 1911, and to prevent an injunction against the sale thereunder, she set up an agreement of the mortgagors in 1907, to transfer to her all their right, title and interest in the chattels so that she might become owner, and that she took possession as owner, and has remained in possession thereof, and from time to time purchased new appliances to replace portions of the old carousel.

The defendant Mrs. Schmidt (who answers jointly with her husband) admits taking possession in 1907 of the chattels mortgaged to her, under an agreement with the mortgagors to transfer all their right and interest to her, so that she might become owner, and that she then took possession as owner and has since remained in possession, she herself conducting the business of running.

At the time of this taking possession, about February 14th, 1907, the goods, she claims, were sold at public auction for $650, their full value at that time; and after her acquiring the property in 1907, and before the levy, she had largely replaced the equipments of the carousel, so that at the time of the levy, in August, 1911, the only portions of the original carousel left were the rim and' a few small figures. The identity of the chattels included in the mortgage with the chattels levied on is denied.

Defendant, also, as an additional defence, claims that the complainants’ delay, and their omission to proceed on their previous executions issued on the decree, allowing her to incur the expense and risk of maintaining and operating the carousel, amounted to an abandonment of a claim that there was any value in the mortgaged chattels beyond her mortgage, and complainants are now barred from any equitable relief by way of accounting.

Evidence was taken at the hearing bearing upon the question of the amount of rents, profits and income from the business since defendant took possession, and which would show apparently that the expenses for maintenance, repairs, new equipments, &c., were largely paid out of the receipts of Mrs. Schmidt from the business, and that (if no allowance to her for her services in managing the business) the amount of profits she has made from the business is sufficient, and more than sufficient to pay her mortgage, if the complainants at the time of their levy were entitled to redeem the mortgage and have an accounting.

The primary question to be decided is the right of the complainants as creditors under the execution and levy set out in the bill, to any accounting against Mrs. Schmidt as mortgagee.

So far as relates to personal property, a judgment creditor’s right to an accounting against a mortgagee depends not upon the judgment or decree alone, as in the case of real estate, but upon the lien obtained under the execution, which lien alone gives the creditor any right or standing for an accounting or other relief against the judgment debtors or those claiming-under them. Dunham v. Cox (Court of Errors and Appeals, 1855), 10 N. J. Eq. (2 Stock.) 437, 467: Hall v. Nash (Court of Errors and Appeals, 1899), 58 N. J. Eq. (13 Dick.) 554.

This distinction as to the time when the judgment creditor’s right attaches is important, and in the present case is vital. For the levy on personal property is a seizure of the judgment debtor’s rights at the time of the delivery of the execution to the sheriff, and the judgment debtor, therefore, stands in the-debtor’s place, and tbe property levied on is subject to all valid transfers previously made, whether to mortgagees or others. A transfer of personal property previously made is subject to attack by an existing creditor claiming under a subsequent execution if the transfer of his equity was in effect substantially a gift of the debtor’s property in fraud of creditors, or otherwise substantially a fraud.

But a mortgagor may release or convey the equity of redemption to the mortgagee, and although always subject to inquiry in a court of equity, the transfer, if fairly made, is binding upon the mortgagor and those claiming under him by rights in the property subsequently acquired. There is no question, I think, that upon the facts proved, the mortgaged chattels in their condition when taken over by the mortgagee in 1907, were not worth the amount then due upon the mortgage. The carousel and equipments were originally bought by Schmidt and Huber in 1899 for $2,300, $1,000 of which was secured, by a chattel mortgage to the vendor. It had been in use since that time and was property of a character which rapidly deteriorated in value unless kept in repair and renewed. A dealer in these equipments who saw the carousel about the time of the transfer, and subsequently renewed or replaced a large portion of the equipment, fixes its value as not over $1,100 at that time. This is the most reliable evidence given as to the value. The amount then due on the chattel mortgage, $1,500 principal sum with over three years’ interest at six per cent, from November, 1906, was over $1,800, and I am satisfied on the proof that the equity of redemption, if then conveyed to the mortgagee in satisfaction of the mortgage, would have been a sale or transfer, which could not have been questioned by the mortgagors, or those subsequently claiming under them as invalid on the ground that any property of the mortgagors was conveyed in fraud of creditors. Complainants as existing creditors under their decree obtained before the release of the equity would have the right to question such transfer -by way of gift, even under their subsequent levy, standing in this respect in a different situation from a creditor who became such after the gift, and therefore could not question it unless made with actual fraudulent intent. Hagerman v. Buchanan (Court of Errors and Appeals, 1889), 45 N. J. Eq. (18 Slew.) 292.

Complainants’ riglit to redeem depends, therefore, on the decision of the question whether in 1907 a valid transfer of the equity in the property was made by the mortgagees to the mortgagors. The facts proved show that in the early part of 1907, and after default, proceedings took place which were intended to be a public sale under Mrs. Schmidt’s chattel mortgage, conducted by her attorney, Edward Beers. An advertisement of the sale, signed by him, has been produced, dated on the 8th day of February, 1907, announcing the sale at No. 11 Lentz avenue, Newark, New Jersey, where the goods were then stored on February 14th, 1907, at ten o’clock a. m. No proof, however, has been made as to the posting or other notice of any advertisements, and the only proof relating to the sale is that of the defendants Mrs. Schmidt and Huber, who say substantially that there was a public sale at that place, at which the mortgaged chattels were then and there offered for sale at public auction, and that Mr. Huber made a bid of $600, followed by a bid of $650 made by Mrs. Schmidt for which the property was sold to her. No bill of sale or other writing appears to have been executed at this time, but, subsequently, Huber, by a bill of sale, dated April 4th, 1907, for the consideration stated, of $650, conveyed the mortgaged chattels to Mrs. Schmidt, with warranty. The original mortgage given by Schmidt & Huber to Mrs. Schmidt, on property belonging to Schmidt & Huber as partners in the merry-go-round business, bound Huber and Schmidt jointly for the whole amount of the mortgage. This point was decided in the suit to set aside the mortgage. This conveyance by Huber was made, as the proofs show, after the foreclosure sale in consideration of his being released from any further demands on the mortgage, and in order to transfer all rights in the property to Mrs. Schmidt. The bill of sale on its face conveyed the chattels, not merely Huber’s interest in them. Mr. Schmidt did not join in this bill of sale, nor does he appear to have executed any writings as evidence of a transfer of his interest. Mrs. Schmidt, by virtue of this oral purchase at public sale, and of this bill of sale of Huber, took possession of the property sold and recorded the bill of sale on April 18th, 1907, but did not cancel or satisfy the mortgage. This possession was taken by the consent both of her husband and Huber. From the time of taking possession, the possession has been to the knowledge, both of Huber and her husband, that of an absolute owner, and so far as relates to both Schmidt and Huber, the mortgagors, this was the character of the possession at the time of the levy on the execution under which complainants now seek to enforce a right of redemption. Complainants claim that the transfer by public sale has not been proved, inasmuch as it has not been shown that public notice was given, and was invalid because there was no written bill of sale or transfer. And it is also claimed that inasmuch as the mortgage was one from a husband to his wife, and therefore good only in equity (Garwood v. Garwood (Vice-Chancellor Reed, 1897), 56 N. J. Eq. (11 Dick.) 265), title to the equity of redemption could be transferred only by a bill to foreclose in equity. In my judgment, however, the substantial question is, whether, on all the facts in the ease, a transfer of the equity of redemption in the mortgaged chattels valid in a court of equity, as against the mortgagees, or any creditors claiming under them by subsequent levy, has been made. And upon this question my conclusion upon the facts proved is, that such valid transfer was made, and has been perfected by a delivery to the mortgagee of the mortgaged chattels which, at the time of the delivery, were not worth the amount of the mortgaged debt. Huber understood that he was absolutely discharged from any further liability under the mortgage, and his evidence is not denied'by Mrs. Schmidt. Whether, as against the husband, the mortgage is satisfied,'is immaterial on this inquiry, for as he consented to the sale and transfer to Mrs. Schmidt, as the owner, the only right which the subsequent execution creditor has to attack the transfer is upon the ground of fraud, as being substantially a gift of the debtor’s property, and a mere colorable transfer in fraud of his creditors. Title to personal property is fully transferred by delivery intended to transfer title, and the acquiescence of the mortgagors in the delivery and possession by the mortgagee, under the proceedings for public sale, followed by Huber’s bill of sale, operated to transfer the legal title of the mortgagors, and as to them and all persons standing in their place to foreclose the equity of redemption.

One partner has power by a bill of sale to convey the title to the personal property of the firm in payment of its debts. Boswell v. Green (Supreme Court, 1856), 25 N. J. Law (1 Dutch.) 390 (Mr. Justice Potts, at pp. 395, 396); 22 Am. & Eng. Encycl. L. (2d ed.) 150. The addition of a seal to the bill ■of sale by one partner does not affect its validity, if the sale is consummated by delivery. Anderson v. Tompkins (Chief-Justice Marshall, 1820), 1 Brock. C. C. 456; 1 Fed. Cas. No. 365; Everit v. Strong (1843), 5 Hill 163.

Complainants insist that in her petition for injunction against the sale under complainants’ execution, Mrs. Schmidt who set up the foreclosure sale substantially admitted that after this sale she held possession partly as mortgagee, and this admission is relied on in connection with the other facts, as establishing the nature of her claim. On her whole petition, however, she puts her claim to the goods primarily on the ground of ownership, following the sale and the delivery, and it is only in case such claim fails that she claims to be mortgagee. The petition did not set up the sale from Huber, which, however, was proved at the hearing in this ease, and the admissions in the petition being sworn to, while evidential, are not conclusive as to petitioner’s title, and she is entitled on this application for redemption and account to set up and prove her title as owner under the bill of sale.

On the whole case proved, I conclude that as against the complainants’ claiming under the levy, on the execution' set out in their bill, the defendants are entitled to hold as owners all of the property levied on, including as well the property originally taken or covered by the mortgage, as the portions thereof replaced or renewed by the defendant, and that under such levy the complainants have no right to redeem. This conclusion renders it unnecessary to consider the other question raised in defence of the claim to redeem, viz., the identity of the goods levied on with the mortgaged chattels, and the effect of the renewal or additions to the carousel made by Mrs. Schmidt after taking possession, and the further question whether complainants’ right to any equitable relief has been barred by delay or laches.

A decree will be advised dismissing the bill, but in view of the fact that Mrs. Schmidt did in her petition for injunction set up a claim as mortgagee which complainants were justified in probing by the bill they have filed, no costs will be allowed.


author: Stevens, Y. C.

text:
    The Grand Court Foresters of America, State of New Jersey, v. Court Cavour, No. 133, Foresters of America, et al.
    [Decided July 14th, 1913.]
    1. Where a subordinate branch of a beneficial association was incorporated under 'the state laws, its so-called constitution and laws by which, it recognized the authority of the supreme court of the order, &c., and agreed to abide by and conform to its general laws, &c., from a legal standpoint could be regarded as nothing more than the corporation’s by-laws.
    2. Where a subordinate court of a beneficial association was cited by the grand court to show cause why it should not be suspended or dissolved for improper conduct, and for neglecting' or refusing to conform to the rituals, &c., it could only be subject to punishment after adjudication of guilt and a finding that the charges had been sustained by the evidence.
    3. An incorporated subordinate court of a beneficial association adopted by-laws acknowledging- its allegiance to the supreme body, but on the subordinate court devolved the duty of administering tihe funds collected for the benefit of its members. One of the grand court’s by-laws provided that, should any subordinate court become dissolved or suspended by operation of law or otherwise, or should be expelled or should secede 'from the order, all property, money, goods and effects should vest in and be delivered to the grand lodge on demand. It did not provide, however, that the grand court should take the money and other property of the dissolved court and apply them to the payment of its debts or for other uses for which they had been contributed.—Held, that the grand court of the order had no jurisdiction to dissolve the subordinate court and recover its funds and property and administer the fund, whether the subordinate court should be considered as a voluntary association or a corporation.
    4. A forfeiture will not be enforced in equity as against a subordinate court of a beneficial association, which was incorporated under the state laws, where the enforcement of the forfeiture will incapacitate the corporation from performing the very duty for which it'has been constituted.
    On final hearing.

      Mr. Philip J. Scho Hand, for the complainant.

      Mr. Anthony B. Finelli, for the defendants.
   Stevens, Y. C.

This bill prays that Court Cavour, a beneficial societ}1-, allied to the Foresters of America, may turn over to the complainant the funds and property heretofore belonging to it, on the ground that Court Cavour has been dissolved and that under the constitution and by-laws of the Foresters, the title to the property has vested in complainant.

The Foresters of America consist of a supreme court or society, grand courts and subordinate courts. It is enough for the understanding of the case to say that the subordinate courts are the basic organizations; that where there are ten or more of them in any one state they elect delegates who meet and form a grand court, and that tire grand courts of different states, thus composed, likewise in their turn elect delegates to the supreme court, which with its officers, present and past, are the head of the order. To the supreme court is given the prerogative of granting charters, so called, or dispensations for the formation of subordinate courts.

Each candidate for admission to a subordinate court, in his written application declares, among other things, that he will conform to and abide by all the rules of the court and of the order now in force or hereafter to be made, or submit to the penalties therein contained.

The foundation of the society is declared, in the constitution of the supreme court, to be

“upon the broad principle of benevolence and is established to provide relief in sickness and distress, and burial at death, and to inspire its members with the elevating influence and of a proper recognition of the stern realities and responsibilities of life.”

The supreme court, the grand court for the State of New Jersey and Court Cavour, have all become incorporated under the New Jersey act of legislature entitled "An act to incorporate associations not for pecuniary profit.” The certificate of incorporation of Court Cavour, dated February 16th, 1904, antedates that of the supreme court, and that of the present certificate of incorporation of the grand court, which is dated May 8th, 1906.

The certificate of incorporation of Court Cavour, stating its object to be one of benevolence, uses the language of the above-quoted declaration of the supreme court. It does not make any reference to the order of which it is or was a constituent part. Its so-called constitution and laws adopted in July, 1909, which from a legal standpoint can be nothing more than its by-laws, declare (section 5) that it recognizes the authority of the supreme court of the order and the authority of the grand court of the State of New Jersey, and that it will abide by, obey, agree to and conform with the general laws of the order and of the grand court laws of the State of New Jersey as now in force, or as they may be hereafter enacted or amended.

Among the so-called supreme court laws is the following:

“Section 215. Any grand or subordinate court found guilty after due notice and hearing of any of the charges hereinafter set forth may be suspended for a period not exceeding two years, dissolved or expelled. If dissolved or expelled, its charter, dispensation, rituals, money, books, paper and all other property, real or personal, shall be forfeited to tihe supreme court, or the respective grand court. * * * The executive council of each grand court shall hear and decide all charges preferred against subordinate courts within its jurisdiction:
“A. For improper conduct.
“B. For neglecting or refusing to conform to the rituals, laws, ceremonies, enactments or resolutions of the supreme court, grand courts or executive council thereof.”

On September 28th, 1912, the grand chief ranger addressed to the financial secretary of Court Cavour a written eommunicar tion, citing him to appear before the executive council of the grand court on October 12th, 1912, at eight p. m., to show cause why Court Cavour should not be suspended or dissolved for violating the general laws, section No. 215, as follows: A. For improper conduct. B. For neglecting or refusing to conform to the rituals, laws, ceremonies, &c.; stating that it was by order of the executive council. This notice was communicated to the members of the court, or a large majority of them, and a trial was had at the time named, at which the court was represented by counsel. Decision was reserved until November 9th, 1912, at which time the following resolution was passed by the members of the executive council, who had heard the evidence:

“Whereas, Court Cavour, No. 133, of the Foresters of America, located at Newark, New Jersey, was suspended on the-twenty-eighth day of September, 1912, for failure to comply with certain regulations of the order, and the said court was cited to show cause why it should not be dissolved, as a subordinate court of the order and the hearing was set for Saturday evening, October 12th, 1912, in the office of the grand secretary, No. 275 Grove street, Jersey City, New Jersey, which trial proceeded by the introduction of and taking of said evidence; and
“Whereas, section 215 of the general laws of the order, edition of 1911, vests the executive council with full, ample and sufficient authority within the premises; and • •
“Whereas, a fair and impartial trial was conducted on the date herein set forth and at the place above mentioned, the said Court Cavour, No. 133, of the Foresters of America and executive council of the grand court of New Jersey, both being represented by counsel; and
“Whereas, we have carefully considered the testimony and all matters surrounding the case; therefore be it
“Resolved, that it is now the order of this executive council of the grand court of the State of New Jersey that the said Court Cavour, No. 133, of the Foresters of America, Newark, New Jersey, be and is hereby dissolved as a subordinate court of the grand court of New Jeresy, Foresters of America, and its charter, dispensation, rituals, money, books, papers and all other property, both real and personal, be and hereby is forfeited to the grand court of the State of New Jersey, Foresters of America; and be it further
“Resolved, that the grand secretary of the grand court of the State of New Jersey be and is hereby authorized and empowered, on behalf of the executive council, to take such steps as may be necessary to collect all property of Court Cavour not now in possession of the executive council of the grand court of New Jersey; and be it further
“Authorized to take such action as may be necessary to recover from the said dissolved Court Cavour, No. 133, of the Foresters of America, all money in the possession of the officers of said court or on deposit and secure the same for the executive council * *

This resolution is open to serious criticism. It begins with declaring that Court Cavour was. suspended. The suspension proceedings appear in the evidence and do not warrant the declaration that the court was suspended. No suspension proceeding was taken against the court as such. Then the resolution says that the court was cited to show cause why it should not be dissolved as a subordinate court. It was not so cited, but was cited to show cause why it should not be suspended or dissolved for improper conduct and for neglecting or refusing to conform to the rituals, &e. And even this form of citation was not warranted by the section above quoted. Under it the court should have been notified that charges for improper conduct, &e., had been preferred and that it must answer them. The punishment was to follow only after adjudication of guilt—that is, after the council should have found that the charges were sustained by the evidence. Then, and then only, was the committee to determine whether the society should be suspended, dissolved or expelled.

In their resolutions the council do not find. that the charges or any of them are true. They only declare what might be the consequence of such a finding, and that, too, not the necessary consequence. Having found the charges true, they would still have had to determine whether suspension, dissolution or expulsion was the appropriate remedy. It is as if a court of justice should adjudge that the alleged debtor’s property should be sold, without having first adjudged that he owed a debt. Nothing is better settled than that a decree that adjudicates a matter not within the issue is a nullity. Reynolds v. Stockton, 43 N. J. Eq. (16 Stew.) 211; 140 U. S. 254. The proper issue, and the only issue warranted by section 215, was whether the court was guilty; and that the council has not passed upon. The complainant is confronted with this dilemma: If the citation did not call upon the defendant to answer a charge of improper conduct, &c., then it was not warranted by the laws of the order; if it, in substance, did, then the decree made did not pursue the issue. In either event it appears to afford a very slender foundation for the demand for the property sought to be recovered in this suit.

But there is another difficulty: In State Council v. Enterprise Council, No. 6, 75 N. J. Eq. (5 Buch.) 245, it was held that under the laws of the order the state council had no authority to administer the trust fund created by the local council for the benefit of its members and no power to dissolve the local court, considered either as a voluntary association or as incorporated society. That seems to be the case here. Counsel for complainant sought to convince me, in a very elaborate argument, that the grand lodge was. vested with authority to carry out the trusts or objects for which Court, Cavour was constituted, but after a careful examination of the various laws of the order, I fail to find any such authority. It is true that section 1 of article 18 of the grand court laws prescribes that

“should any subordinate court become, either by operation of law or otherwise, dissolved or be suspended, expelled or secede from the order, all property, money, goods and effects shall vest in and be delivered to the grand lodge upon demand being made therefor.”

But it is not provided that i't shall take the money and other property of the dissolved court and apply them as a separate fund for the payment of its debts or for the other uses for which they were contributed. As far as appears they go into the general fund of the grand court subject to be disposed of according to its rules.

Counsel refers to the testimony of Mr. Donnelly, the supreme secretary, who says that complainant is obliged under its laws to recognize the members of a defunct branch by giving them a clearance card to enable them to join another subordinate court of the order, and, during the life of the clearance card, pay the benefit which the member was entitled to from the defunct court. But assuming that the course thus indicated imposes no uncontracted for burden upon the applying member, and assuming further that members not in arrears can, on application, get such card, it is plain that the section relied upon (section 112, page 32 of Exhibit C-3) is not applicable. It provides that

“any member who voted with the minority against their court disbanding or seceding, or against their court being suspended or expelled (whatever that may mean) for non-compliance with the laws or decisions of the order, on satisfactory proof thereof; may still be recognized as members of the order.”

This provision applies to a situation that has not here arisen. The question of disbanding or seceding was not brought before the society and no one voted either for or against it. It was the grand court that sought to dissolve it, not the subordinate court that sought to disband or secede. Counsel has not been able to refer me to any other provision, and, consequently, the case stands, in this regard, as it did in State Council v. Enterprise Council, supra.

The rationale of the situation is this: The right of the member is contractual. He has agreed that the fund contributed by himself and by the other members shall be managed and applied by the officers of the court to which he belongs. He has further agreed that on dissolution the property shall go to the grand court; but he has not agreed that, on the contingency that has happened, and while the local society, whether incorporated or not incorporated, exists, it shall be administered by the officers and agents' of any other court. There has been no dissolution, first, because the judgment was unwarranted; second, because, if warranted, the grand court has no power to dissolve the local society. The court- of errors and appeals expressly says: “The fact is that the word 'dissolution’ is inapt to express any legal intent which the parties may have entertained, for, even in the case of an unincorporated association, it would be quite impossible for the state council to dissolve such a voluntary association as long as its members chose to continue together.” The fund cannot, therefore, be given into the custody of those officers or agents without his consent, and in this case there has been no consent. The ease is unlike State Council v. Sharp, 38 N. J. Eq. (11 Stew.) 24. There, as pointed out by Mr. Justice Swayze in the case cited, the constitution itself provided that the amount received by the state council upon dissolution of the subordinate council (the local council had disbanded itself and returned its charter) should be appropriated for the assistance and support of the widows and orphans of members of the subordinate council, and that if there were no such widows and orphans, the amount should be invested and paid in case of reorganization to that council.

There are three particulars in which the case in hand differs from State Council v. Sharp—first, the dissolution entailing forfeiture has not been adjudged according to the rules of the order; second, even in the event of disbandment or secession there is no provision that the fund shall he preserved Intact and used for the payment of the debts or for the relief of the members of the subordinate court; third, Delaware council had disbanded itself and had therefore left the fund without any trustee to administer it.

The objections above indicated apply, according to the view of the court of errors and appeals, even to the case of an unincorporated society. But Court Cavour is incorporated. The so-called constitution and laws of the order are, as far as this corporation may have adopted them, nothing but its by-laws. Unlike the' certificate of incorporation of the supreme and grand courts, the certificate of incorporation of Court Cavour does not recognize any obligation to or dependence upon or connection with the order at large. It is, in legal contemplation, an independent entity and its by-laws must stand or fall on that assumption. As long as it exists, it cannot devolve upon any other organization those duties or obligations which by its charter derived from the state, it is bound to perform itself. The supreme and grand courts can, by appropriate action, for cause, sever the bond which unites it to them, but after severance, it is still a corporation and bound to the obligations of a corporation; ’ to paraphrase the words of Mr. Justice Swayze: “It has not been dissolved. It is still an existing body. All that has happened has been that its allegiance to the order is at an end.’'

Forfeitures are not favored. They certainly will not be enforced, where enforcement must incapacitate the corporation from performing the very duty for which it was constituted. Counsel lays great stress upon the agreement to which each individual must subscribe on joining: “I will conform to and abide by all the rules of the court and of the orders * * * or submit to the penalties therein contained.” But this is the subscription of the individual binding, no doubt, upon him, but' not upon the corporation. It is the right-of the corporation and not of the individual that is here in controversy.

I think the bill should be dismissed.


author: Stevens,. V. C.

text:
    Jessie Farrell, administratrix, v. The Passaic Water Company et al.
    [Decided September 19th, 1913.]
    1. Nothing is better settled than that there is no equity to perfect an imperfect gift. A man may transfer his property without valuable consideration in one of two ways; he may either do such acts as amount in law to a conveyance or assignment of the property and thus completely divest himself of the legal ownership, in which case tliG person wiho by those acts acquires the property takes it beneficially or on trust as the case may he; or the legal owner of the property may by either one of the modes recognized as amounting to a valid declaration of trust, constitute himself a trustee and without an actual transfer of the legal title may so deal with the property as to deprive himself of its beneficial ownership and declare that he will hold it from that time forward in trust for the other person.
    2. The several modes of assignment are as applicable to the case of gifts as to those of transfers for value. The gift is just as completely vested by the one mode as by the other, and it is settled law that the fact that a bond is not payable to bearer, and that the instrument is not negotiable, does not prevent a valid gift of it by manual tradition without writing.
    •3. Where A., a business man of mature years, possessed of considerable property, while engaged to be married to Miss F., handed her a coupon bond of the Passaic Water Company for one thousand dollars, registered as to principal in the name of A., and on its face payable to bearer or registered holder thereof, and providing that it “may at any time be registered in the name of tike owner on the books of the company ; * * * after which this bond shall be transferable only upon the books of the company, until it shall, at the request of the holder, be registered as payable to bearer, which shall restore transferability by delivery,” and although he lived for six or seven years after it came into Miss F.’s possession, did not reclaim it, reclamation being all the more easy because of the fact that tike bond stood registered in his name, and told a friend that he had made Miss F. a present of a bond of that description, and she took the interest accruing upon it for ten or twelve years before her death—Held, that it was natural, situated as they were, that he should have made a gift, and there being no evidence against it, the inference that a gift was actually made was the only fair inference from the proofs.

      4. The gift did not remain incomplete because of the clauses in the bond, which provide that it is payable to the bearer or registered holder, and that if registered it shall be transferable only on the books of the company, until it shall, at the request of the holder, be registered payable to bearer “whieh shall restore transferability by delivery."

    5. There are two kinds of corporation bonds in common use to-day: those that are negotiable, and those that are merely assignable. The object of the clause in question was to give the owner the option of having- either the one form of obligation or the other, at his pleasure.
    ’6. The failure to direct the company to make a transfer on its books, standing by itself, is without significance as long as it is the doctrine of this court that a valid gift may be made by parol. Proof of failure to make in one way is no proof of failure to make in another.
    7. The administratrix of Miss F. having requested the defendant company to register the bond in question, and such request having been refused, this court will compel a performance of the company’s agreement to register the bond. A suit for damages based on the refusal to do so would not be a complete or satisfactory remedy.

      Mr. Josiah Dadley and Mr. Clifford L. Newman, for the complainant.

      Mr. Robert H. Cunningham, for the defendants.
   Stevens,. V. C.

This is a. bill filed by the administratrix of Catherine Farrell against the Passaic Water Company and the executors of James Atkinson. It is alleged that Mr. Atkinson was engaged to be married to Miss Farrell, and that about the year 1905, and while so engaged, he handed her a coupon bond of the Passaic Water Company for $1,000, intending to make her a gift of it. The bond was, at the. time, of the alleged gift, and still is, registered, as to principal, in the name of Atkinson. The principal sum is payable in July, 1937. Miss Farrell drew the interest coupons during her life and died in 1909. Atkinson died in 1902. Since the death of Miss Farrell, the bond has been in the possession of either her next of kin or her administratrix. On its face it provides that it is paj’able to the bearer or registered holder thereof and that it

“may at any time be registered in the name of the owner on the books of the company; * * * after which this bond shall be transferable only upon the books of the company, until it shall, at the request of the holder, be registered as payable to bearer, which shall restore transferability by delivery.”

The bill prays that the bond may be declared to be a part of the estate of Catherine Farrell, and that the company may be decreed to register it in the name of her administratrix.

The defence is, first, that no gift is proven, and second, that if an intention to give has been shown, such gift was imperfect without registry and a court of equity will not lend its aid to perfect it.

Nothing is better settled than that there is no equity to perfect an imperfect gift. Says Sir George Jessel, M. R., in Richards v. Delbridge, L. R. 18 Eq. 11: “The principle is a very simple one. A man may transfer his property without valuable consideration in one of two ways: he may either do such acts as amount in law to a conveyance or assignment of the property and thus completely divest himself of the legal ownership in which case the person who by those acts acquires the property takes it beneficially or on trust, as the case may be; or the legal owner of the property may by one or other of the modes recognized as amounting to a valid declaration of trust constitute hiinself a trustee and without an actual transfer of the legal title may so deal with the property as to deprive himself of its beneficial ownership and declare that he will hold it from that time forward in trust for the other person.”

There is nothing in this case to indicate that Atkinson declared that he held the bond in controversy as trustee for Miss Farrell. What he did was, not to set it aside among his own papers and to declare in any way that from that time forth, he held it for her benefit, but to give her the possession of it, and, as far as appears, concern himself no further about it. If, says the master of the rolls, in the case cited, the gift is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be1 made effectual by being converted into a perfect trust.

If, then, the complainant has a valid title, it must he because-Atkinson completely divested himself of all title.

I think considerable confusion has resulted from the use, in some of the later cases, of the term “equitable” in connection with the title of the assignee to a chose in action. If by “equitable” is meant such a title as only a court of equity can give effect to, the assumption is manifestly erroneous If a right is recognized, and protected by a court of law (of course, I am speaking of those jurisdictions in which the courts of law and equity are still constitutionally distinct), and if such a court has come to be the proper tribunal in which to enforce it, it is a misuse of terms to call the right equitable in contradistinction to legal.

The history of the law on this subject is somewhat curious. In the time of Coke, the property in the paper on which an obligation was written and in the wax with which it was sealed could be divorced from the property in the debt which the paper manifested. He says (Fol. 232b § 377) :

“it is implied that if a man hath an obligation, though he cannot grant the thing in action, yet he may give or grant the deed, viz., the parchment and wax, to another who may cancel and use the same at his pleasure.”

This distinction constituted the basis of decision by the Lords-Justices in Rummem v. Hare, 1 Ex. D. 169, as late as 1876.

Property in the debt evidenced by the paper stood on a different footing. As the advantages arising from commerce began to be felt, the custom of merchants whereby a foreign bill of exchange was assignable by the payee to a third person so as to vest in him the legal as well as the equitable title, was recognized and supported by the English law courts as early as the fourteenth century, and a like custom rendering an inland bill transferable was established in the seventeenth century, /Chit. Bills *10. Promissory notes were put upon the footing oflnland bills by the statute of 7 Anne. Other choses in action Ibng stood upon a different footing. Lord Coke (1211(0) says that it is one of the maxims of the common law that no right of action can be transferred,

“because under color thereof pretended titles might be granted to great men. whereby right might be trodden down and the weak oppressed, which the common law forbiddeth.”

.But the necessities of trade and commerce were too strong for this maxim, and courts of equity at an early period began to recognize the interest of the assignee. During this period the title of the assignee was equitable, and equitable only. Then the law courts began, indirectly at first, to recognize his right. In Winch v. Keeley, 1 T. R. 619 (A. D. 1787), they did so for the first time explicitly. There a suit was brought in the name of the assignor for the use of the assignee. The defence was that the assignor had become bankrupt and that his title had passed to his assignee in bankruptcy. It was held that the title had not passed and that the suit would lie. Having recognized and protected the assignee’s right, it became, at least to jsome extent, a mere question of procedure whether the suit should be brought in the one name or the other. This was the view of Mr. Justice Buller in Master v. Miller, 4 T. R. 341 (A. D. 1791). He says: “It must be admitted that though the courts of law have gone the length of taking notice of dioses in action and acting upon them, yet in many cases they have adhered to the formal objection that the action shall be brought in the name of the assignor and not in the name of the assignee. I see no use or convenience in preserving that shadow when the substance is gone, and that it is merely a shadow is apparent from the later cases in which the courts have taken care that it shall never work injustice.” Still, in England, the action continued for many years to bo brought in the name of the assignor. But it became mere form, for, said Chief-Justice Hornblower, in Allen v. Pancoast, 20 N. J. Law (Spenc.) 68: “It has long since been held that an assignment of a chose in action carries with it by implication a right to use the name of the assignor even against his consent and in opposition to his release or defeasance of the debt or security assigned.”

It is going pretty far to call the right of such an assignee, so protected, an equitaMe in contradistinction to a legal right. But when our legislature in 1797 enacted that the

“assignment of bills, bonds and other writings obligatory for the payment of money shall be good and effectual in law and an assignee of any such may thereupon maintain an action of debt in his own name,”

the only excuse for calling the assignee’s title equitable vanished. Reed v. Bambridge, 4 N. J. Law) (1 South.) 358. The legal title to the wax and paper had always been in the assignee, the legal title to the debt was now also in the assignee.

It thus conclusively appears that the aid of a court of equity to perfect the title of an assignee to a sealed bond for the payment of money is unnecessary, for the right is perfect already. Agreements to assign stand upon quite another footing. If based upon valuable consideration, equity may sometimes enforce them; if not so based, it will not.

Then a perfectly distinct question arises. By what formalities may title be vested in an assignee? At first it was held that an instrument under seal could only be assigned by an instrument of equal dignity (Wood v. Partridge, 11 Mass. 488); but this view has been abandoned, and it is now held that instruments such as bonds, mortgages and policies of insurance may be assigned by writing without seal, or even by parol accompanied by delivery. Vreeland v. Van Horn, 17 N. J. Eq. (2 C. E. Gr.) 137; Travelers Insurance Co. v. Grant, 54 N. J. Eq. (9 Dick.) 208; Allen v. Pancoast, 20 N. J. Law (Spenc.) 71. The effect of the assignment is precisely the same in any of these forms—• it vests the legal title in the assignee. The proof of it may be more difficult in the case of an assignment by parol, but in any mode the debt theretofore owing to the obligee passes to the assignee; he is the creditor, and the only creditor.

These several modes of assignment are as applicable to the case of gifts as to those of transfers for value. The gift is just as completely vested by the one mode as by the other, and it is settled law that the fact that the bond is not.payable to bearer or that the instrument is not negotiable does not prevent a valid gift of it by manual tradition without writing. Executors of Egerton v. Egerton, 17 N. J. Eq. (2 C. E. Gr.) 421; Corle v. Monkhouse, 50 N. J. Eq. (5 Dick.) 537; Travelers Insurance Co. v. Grant, 54 N. J. Eq. (9 Dick.) 208; Thompson v. West, 56 N. J. Eq. (11 Dick.) 660. Proof of delivery, coupled with proof of intent to pass a present interest by way of gift, has precisely the same effect as a formal written transfer. A moment’s consideration will show that this is necessarily so. The instrument given remains, in either case, unchanged. If payable by A to 33 it remains so payable on the face of it, whether transferred by writing or not; but by the effect of the transfer, what theretofore was paj^able to B has in law become payable to C, the transferee. In the case of Green v. Tulane, 52 N. J. Eq. (7 Dick.) 169, the question was not before the court. I do not think it can be fairly gathered from what Yice-Chancellor Pitney said that he thought that a writing was necessary, but if he there so expressed himself, when the point came squarely before him, in the Insurance Case, he held otherwise. The question then is, did Atkinson make a gift—that is, a perfect gift? Two objections are made—first, it is said that the proof fails-to show delivery accompanied with a declaration of intent, and secondly, that the instrument itself forbids the making of a gift in the manner in which it is alleged to have been made.

As to the first objection: The evidence is that Atkinson, a business man of mature years, possessed of considerable property, while engaged to be married to Miss Farrell, parted with the bond in question; how or when does not appear. Although he lived for six or seven years after it came into Miss Farrell’s possession, he did not reclaim it; reclamation being all the more easy because of the fact that the bond stood registered in his name. He told a friend that he had made Miss Farrell a present of a bond of that description. She took the interest accruing upon it for ten or twelve years before her death. It was natural that, situated as they were, he should have made a gift, and there is no evidence against it. Under these circumstances, I think the inference that a gift was actually made is the only fair inference from the proofs.

But counsel argues that, conceding that an intention to give is proved, the gift remains incomplete because of the clauses in the bond, which provide that it is payable to the bearer or registered holder, and that if registered, it shall be transferable only on the books of the company, until it shall, at the request of the holder, be registered payable to bearer, "which shall restore transferability by delivery."

There are two kinds of corporation bonds in common rise today—those that are negotiable and those that are merely assignable. It seems quite apparent that the object of the clause in question was to give the owner the option of having either the one form of obligation or the other, at his pleasure. It is hardly to be supposed that the company was endeavoring to put upon the market a new kind of obligation, viz., one, Litio to which would not pass from one man to another unless or until there was an actual transfer on the books. The implied prohibition against transfer would be just as effective in the case of a written assignment, even an assignment under seal, as in the case of a 'verbal one. There might indeed be a question whether such a limitation could be made effective; but here, I do not think it was intended to impose it. The clause was probably suggested b}r the similar one put in the ordinary stock certificate, as to which Chancellor Green said: “The title of the holder is in nowise affected b}r a provision in the charter or by-laws of the corporation that the stock is transferable only on the books of the corporation. Such a provision is intended merely for the protection and benefit of the corporation.” The fact that in the one case the provision is intended chiefly to protect the company and in the other the bondholder, can make no difference, so far as the point under consideration is concerned. It is well settled that as between the transferrer and transferee, title to the stock certificate is completely vested without transfer on the books. Matthews v. Hoagland, 48 N. J. Eq. (3 Dick.) 486.

But it is said that the failure to direct the company to make a transfer on its books is evidence that Atkinson did not intend his gift to be irrevocable. If the facts justify the inference that he did so intend, proof that he failed to authorize the company by power of attorney to make a transfer is immaterial. He had, I have shown, the option of making the gift with or without writing. Such failure might indeed be a circumstance militating against ihe gift, if coupled with other circumstances tlirowingdoubt upon it. Standing by itself, it is without significance as long as it is the doctrine of this court that a valid gift may be made bjr parol. Proof of failure to make in one way is no proof of failure to make in another.

Considering, as 1 do, that tlie question as between the administratrix of Miss Earrell and the executor of Mr. Atkinson is one of legal title—title of which the law courts take cognizance—it would seem to follow that if there were a real doubt as to who was legal owner, that doubt would have to be, under our system, settled by the law courts. There is, however, no dispute as to the material facts and no reasonable doubt as to the inference to be drawn from them. The case seems really to be one between the administratrix and the water company; Atkinson’s executors being proper parties because their testator stands upon the company’s books as registered owner. There is proof that a request to register was made by the administratrix and that such request was refused. If a court of equity lias jurisdiction to decree a registry of stock (Archer v. American Water Co., 50 N. J. Eq. (5 Dick.) 50; Reilly v. Absecon Land Co., 75 N. J. Eq. (5 Buch.) 71), I see no good reason why it may not compel performance of the company’s agreement to register the bond. A suit for damages, based on a refusal to do so, would not be a complete or satisfactory remedy.

Under the peculiar circumstances of the case neither party should have costs.'


author: Leaming, V. C.

text:
    Charles Sumner Stevens v. Wiliam L. Edson et al.
    [Submitted April 13th, 1913.
    Decided June 16th, 1913.]
    The words “surviving children” in a will devising the rents of real estate to testator’s wife for life and then to bis “surviving children forever, of whom there are now three,” refers to children surviving the wife, under the rule that where a gift to survivors is preceded by a particular estate for life, or years, words of survivorship, in the absence of anything indicating a contrary intent, refer to -the termination of the particular estate.

      Final hearing on bill to quiet title.

      Mr. Henry 8. Alvord, for the complainant.

      Mr. Leverelt Newcomb, for the defendant Edson.
   Leaming, V. C.

■ The single controversy here presented is whether the words “surviving children” as used in the will of James H. Stevens reíales to¡ the date of the decease of testator or to the date of the decease of the life tenant.

The language of the will is as follows:

“I devise unto my wife, Emily, the rents, issues and profits of all my real estate * * * for and during her natural life, and then to my surviving children forever, of whom there are now three.”

Three children of testator survived him, only one of them surviving the life tenant. If, therefore, by the words “surviving children” testator referred to the children who survived him, the remainder vested in interest in his three children at his decease; if he referred to the children who survived his widow the remainder was contingent until the decease of the widow and then vested in possession in the surviving child, who is complainant herein.

In this state the rule of construction which controls cases of this class is too firmly established to permit further consideration. Briefly stated, that rule is that where the gift to the survivors is preceded by. a particular estate for life or years, words of survivorship, in the absence of anything indicating a contrary intention, refer to the termination of the particular estate. Williamson v. Chamberlain, 10 N. J. Eq. (2 Stock.) 373; Holcomb v. Lake, 24 N. J. Law (4 Zab.) 686; Van Tilburgh v. Hollinshead, 14 N. J. Eq. (1 McCart.) 32; Slack v. Bird, 23 N. J. Eq. (8 C. E. Gr.) 238; Dutton v. Pugh, 45 N. J. Eq.(18 Stew.) 426; S. C., 46 N. J. Eq. (1 Dick.) 554; Ashhurst v. Potter, 53 N. J. Eq. (8 Dick.) 610; S. C., 54 N. J. Eq. (9 Dick.) 699; Stout v. Cook, 79 N. J. Eq. (9 Buch.) 573.

Nothing is contained in the will indicating an intention of testator contrary to the natural import- of the language above quoted.

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