author: Stevenson, V. C.

text:
    Lillie K. Moore v. William Moore et al.
    [Decided January 15th, 1915.]
    1. Under 2 Oomp. Btat. 1910 p. 201/8 § 16,' a devise to trustees for the use of the testator’s widow does not of itself affect her right of doVer.
    2. A devise of the exclusive use of land for an unlimited term is a devise in fee.
    3. A devise of the' exclusive use of land for the life of the beneficiary creates a legal estate in the land.
    4. A devise of the use of the testator’s house and premises to his wife and children as a residence until sold by the executors, and a devise of the residue of the estate to the executors in trust to pay taxes, assessments, and water rents, and keep the property in repair, gives to the wife and children the right to occupy the premises until a sale by the executors as trustees.
    5. Whether a widow can accept provisions for her benefit in her husband’s will, and also receive dower, depends on the intention of the testator, ascertained by considering the entire will in the light of the circumstances and conditions surrounding him.
    6. An antenuptial agreement executed in a foreign country deprived the wife, under the law of that country, of any dower right. The parties after marriage moved to New Jersey, and the husband acquired real estate there and was domiciled there at the execution of his will and his death. By his will he recognized the obligations imposed by him by the antenuptial agreement, and in addition gave to the wife the right to occupy his residence until a sale ,by the trustees. He disposed of other property to his children. No reference to any dower right to the wife was made in the will. — Beld, that, though the husband erroneously believed that the antenuptial agreement barred the wife of her dower right to real estate in New Jersey, the will, when considered as a whole in the light of the circumstances, made provisions for her in lieu of dower, and her acceptance of the provisions barred her dower right.
    7. The inaction of a widow in failing for many years to demand her dower right, but accepting, in lieu thereof, the provisions made for her by her husband’s will, does not amount to a waiver or forfeiture by her of her dower right, but may be considered with the circumstances in determining whether the will made provisions for her in lieu of dower.

      On final hearing on bill, answer, replication and proofs taken in open court.

      Messrs. Queen & Stout, for the complainant.

      Mr. Richard I. McAghon, Jr., for the defendant William Moore.

      Mr. Raymond P. Wortendyke, for James A. Gordon, trustee.

      Mr. John Milton, for the defendant Muriel Lawes.
   Stevenson, V. C.

1. There is some difficulty in defining the meaning and force of the antenuptial agreement made when the parties were both domiciled in the Province of Quebec, owing to the meagre disclosure which the proofs make of the circumstances and conditions which attended the transaction. Mr. Moore is described in the agreement as the “Quebec Manager of the Quebec Steamship Company” Mrs. Moore, then Miss Kaylor, is described as “of the Town of Iberville, in the County of Iberville, in the said Province,” but she is further described as “the daughter of Daniel Kaylor,. now of Tennessee, in the United States of America.” The agreement bears date June 12th, 1880. Whether the parties were contemplating a change of domicile we do not know. When Mr. Moore died in 1897, he and his wife were domiciled in Jersey City. When the couple lost their residence in Quebec we are not informed.

In regard to the property of this man and woman contemplating marriage, and making a contract in view thereof relating to their respective property rights, the exhibition of the facts made by the testimony is also unsatisfactory. I think the only piece of evidence in regard to the property owned by either of these two persons consists in the statement which Mrs. Moore makes that Mr. Moore owned “a farm” in Quebec. What the value of the farm was does not appear. Whether Mr. Moore when he made this agreement settling $10,000 on his wife had any substantial amount of personal property or not we are not informed. The testimony leaves us ignorant upon the important question whether when this agreement was made Mr. Moore had, or contemplated having, in the Province of Quebec, sufficient property to carry out the settlement which he had made upon his wife in the event of his death shortly after his marriage.

For the purposes of this ease I have concluded to assume that the views set forth in the elaborate and learned brief on behalf of the complainant, in regard to the extraterritorial effect of this antenuptial contract, are substantially correct. The result is that the douaire prefix, provided in the agreement, which, in effect, operates as a jointure under our law, has no legal effect upon the claim to dower of the complainant in respect of lands subsequently acquired by Mr. Moore in the State of New Jersey, the married couple being domiciled in New Jersey at the time of the husband’s death. The further consideration of this case, therefore, involves only the determination of the question whether Mrs. Moore having accepted for many years the provisions for her benefit contained in her husband’s will, may now also have her dower in this New Jersey real estate which Mr. Moore owned at the time of his death.

2. Under the provisions of our Dower act (2 Comp. Stat. p. 2048 § 16) a hard and fast rule has been established that the devise of any legal estate in lands, however small, directly to the widow, bars her dower in the absence of any declaration in the will in regard to the matter unless she expresses her dissent to receive the devised land in a certain prescribed manner. The devise of lands to trustees for the use of the widow, however valuable the equitable estate thus vested in her may be, of itself, has no effect under the statute upon the widow’s right of dower. Van Arsdale v. Van Arsdale, 26 N. J. Law 404.

Counsel for complainant in his brief states as an incontrovertible fact that the will in this case devised to Mrs. Moore no legal estate in land, but only an equitable estate, and this proposition was not controverted in the argument for the defendants. I find myself able to determine this cause without passing upon the nature of the estate in land, whether legal or equitable, which passed directly to Mrs. Moore under the terms of this will. I deem it my duty, however, to exclude the supposition -that I am conceding that under the terms of this will the widow, Mrs. Moore, did not take a legal estate in lands. While I have purposely refrained from the study of this question, and any exhaustive examination of the authorities which may control it, I shall briefly set forth herein some of the matters which may well receive consideration if the question is presented for decision in this case in the court of last resort. The third paragraph of the will gives to the testator’s wife and two children “the use” of his house and premises where he resided, known as 101 Waldo avenue, Jersey City, “as a residence until the same is sold.” It is well settled that the devise of the exclusive “use” of property for an unlimited term “is tantamount to a devise of the land itself in fee.” Traphagen v. Levy (1889), 45 N. J. Eq. 448, 452; Fitzgerald v. Faunce (1884), 46 N. J. Law 536; 596. In the last-cited case, Mr. Justice Depue, in delivering the opinion for the court of errors and appeals, says (at p. 597) : “Words of license or permission to occupy, or to enjoy, or to use, are a demise of an actual estate in the lands,” citing the old authorities. See, also, Hance v. West (1867), 32 N. J. Law 233.

It is also well settled that where the exclusive use devised is for the period of the beneficiary’s life, a legal life estate in the land is created. Morgan v. Titus (1835), 3 N. J. Eq. 201; White v. White (1837), 16 N. J. Law 202; Executor of Kearney v. Kearney (1864), 17 N. J. Eq. 59, 68, 69; Cooper v. Cooper (1897), 56 N. J. Eq. 48.

In the present case we have a devise of the use of a house and premises for a residence to a wife and two children jointly, and they are to enjoy this use until the land is sold. The executors are directed in the execution of the trust which the will created to sell this residence property whenever they shall think advisable, and “until such sale to pay the taxes, assessments and water rents levied against the same, and keep the said premises in repair.” The matter to be investigated, in order to determine the character of the estate, or right which the widow and children took in this residence property, seems to be whether by taking all the provisions of the will into consideration a trust by implication or otherwise can be discovered in respect of the use which the widow was to enjoy. It may be argued that the duty imposed upon the executors who are made trustees to keep the premises in repair includes the duty of entering, and in part, at least, occupying the same from time to time for such purpose.

It will be observed that the interest devised to the wife and children in this residence property in the third paragraph of the will, is not expressly affected by the subsequent devise of the rest and residue of the testator’s estate to his executors in trust. All the residue of the property, after fairing out this estate or right of the widow and children, and a few other items, is convej'ed to the executors in trust, and it is from this residue that the taxes, assessments, water rents and expense of repairs are to be paid. The widow and children are to occupy, possibly for many years, having the exclusive benefit of the property, while the residue of the testator’s estate in the hands of' his executors and trustees supplies apparently all the fixed charges with the exception of insurance. It will be observed that taxes, assessments and water rents can all be paid without the slightest interference with the “use” of the land by the widow and her children, and the residue of the estate, exclusive of the right of occupation vested in the widow and the children, is charged with supplying this money. It is in connection with these provisions that the will includes in the trust the keeping of the premises in repair. The language of the will, reduced to its simplest terms, amounts substantially to this:

“I devise the use of my house and premises known as No. 101 Waldo avenue, Jersey City, to my wife and two children as a residence until the same is sold, and I devise and bequeath all the residue of my estate, real and personal, to my executors in trust (among other objects specified) to pay the taxes, assessments and water rents levied against said residence property, and keep the same in repair.”

The trust estate consists of the testator’s property exclusive of what he has devised to his wife and children, viz., the use of the residence property until the same should be sold, and the portion of the testator’s estate which constitutes the trust estate is charged with the expense of the repairs of the portion of the testator’s estate which was excepted from the trust. There certainly seems to be a question whether the will gives the trustees any right, or imposes upon them any duty with respect to the making of the repairs except to furnish the requisite amount of money out of the trust estate in their hands.

We have seen that the direct language of the will does not include in the trust estate the interest or right of occupation devised to the widow and children. What the trustees are to sell is the interest and estate in the residence property which passed to them. But the estate or right of occupation given to the widow and children is terminated when the trustees sell. Down to the time when the trustees sell, while the widow and children remain enjoying the use and occupation of the property, it may well be argued that their estate is legal whatever may be the exact definition of the rights and duties of the trustees with respect to keeping the property in repair. The test question is this: If a stranger had unlawfully entered the premises and dispossessed the widow and her children, who would be the party to recover possession by an action of ejectment? Could the trustees maintain such an action or should the action be brought by the widow and children as tenants in common of a legal estate, determinable upon sale of the property ? As stated above, I leave this question unanswered because it was not argued, and I may add that I have not answered it finally in my own mind.

3. The last matter to be considered is whether the will evinces an intention that the provisions for the widow are in lieu of dower. My conclusion is that it does.

Whether a widow can accept provisions for her benefit in her husband's will, and also receive her dower in his real estate, is determined by the intention of the testator which is to be ascertained in the usual way by reading the will from the four corners, and considering all its provisions in the light of the circumstances and conditions which surrounded and necessarily influenced the testator in forming his testamentary purposes, and in using language directing the carrying out of those purposes. The older English decisions, based upon the policy of saving the dower of the widow, if possible, and for this purpose resorting to “numberless refinements and distinctions” (per Chancellor Vroom in Stark v. Hunton (1831), 1 N. J. Eq. 216, 226), have not been followed in New Jersey, and their original force in England has been largely abrogated by statute. “Express words of exclusion are not necessary in a will in order to bar dower.” Stark v. Hunton, 1 N. J. Eq. 224. The trend of our New Jersey decisions, as indicated in our law and equity reports, has constantly been toward the establishment of a natural and common sense method of determining this question whether a testator has intended that what he gives his widow in his will is to be in addition to her dower or in lieu of her dower. In ascertaining the testator’s intention it is of prime importance to ascertain whether the allowance of dower to the widow will “disturb” or be “inconsistent” with any of the provisions of the will. The whole law on this subject can, I think, be found by reference to the following cases: Stark v. Hunton, supra; Morgan v. Titus, supra; White v. White, supra; Colgate’s Executors v. Colgate (Chancellor Zabriskie, 1873), 23 N. J. Eq. 372, 378, 380; Stewart v. Stewart (Chancellor Runyon, 1879), 31 N. J. Eq. 398, 408, 409; Griggs v. Veghte (Vice-Chancellor Green, 1890), 47 N. J. Eq. 179, 184; Cooper v. Cooper (Vice-Chancellor Pitney, 1897), 56 N. J. Eq. 48, 54, 55.

We have in the first place the antenuptial agreement made while the parties were domiciled in Quebec, which, under the Quebec law, it is conceded displaced all right of the wife to any part of the estate of the husband, in ease she survived her husband, except the right to enjoy the income of this settlement of $10,000, including the right to dispose of one-half of that sum by her will. Mr. Moore, when he made his will a few days before his death, recognized the binding force of this obligation, and he provides for the exact carrying out of his obligation by his executors. At the commencement of his will, after a brief direction that his debts are to be paid, this testator directs his executors and trustees to invest $10,000 in securities and hold the same

“in trust in accordance with the provisions of the marriage settlement between me and my wife Lillie, and pay to her the income of said securities as provided in said settlement, and my wife shall have the right to dispose of one-half of said securities by will as provided in said settlement.”

It seems, to say the least, highly probable that Mr. Moore received no information which led him to suspect that the marriage settlement which he was causing scrupulously to be carried out on his part by his executors, had lost all its efficacy to protect his estate against a further demand for dower. The will was not made when the parties were domiciled in Quebec; it was made when the parties were domiciled in Jersey City, when the husband’s real estate consisted of lands in the State of New Jersey. If the husband did not know that the marriage settlement no longer barred the wife’s right of dower in the after-acquired New Jersey lands — if, when he made his will, he supposed that it was his duty to complete the settlement of $10,000 for the benefit of his widow, according to his engagement, and that anything else that he gave his widow in his will was an additional benefaction, then it was not the intention of this will that the wife should have both the additional benefactions and her right of dower in the real estate. In other words, the additional benefactions come from a testator who supposes that his widow, to whom he is giving them, cannot maintain any claim to dower.

It must be conceded that there is a process of artificial reasoning which leads in a different direction, starting out with the presumption in large numbers of cases absolutely false in point of fact, that testators know the law. This presumption, when applied to the construction of wills, has, in my opinion, in many cases resulted in substituting for an illegal and therefore ineffectual testamentary purpose of the testator, a legal purpose which he never intended, and which he would have in all probability repudiated if it had been suggested to his mind. To assume that this testator, who was not a lawyer, knew of the principle of private international law of comparatively rare application, which might be deemed to render the bar to dower established by the Quebec settlement ineffectual as to lands after-wards acquired in New Jersey, would, it seems to me, involve a substitution of technical and verbal reasoning for common sense. The lawyer who drew Mr. Moore’s will, and who is the surviving executor and trustee, testified without objection that he had proceeded during all the years of his administration of the estate on the supposition that the antenuptial agreement, and “the provisions of the will expressly referring to it,” were in lieu of dower.

The provision which the will makes for the residence of the widow, in my opinion, very strongly indicates that the testator thought the widow had no right of dower, and, moreover, these provisions seem to me to be inconsistent with any right of dower. The real estate, as we have seen, consisted of this residence property worth about $7^500, an old house standing on two lots which yielded hardly enough rent to pay its fixed charges, and two tracts of farm land, aggregating about thirty-three acres, adjacent to each other, one being situate in Kahway and the other in the township of Woodbridge. From the undisputed testimony of the surviving trustee, it is very plain that the dower of the widow in the lands other than the residence property on Waldo avenue, would he of little, if any, value to her. If this will therefore contemplates that the widow shall enjoy the provisions for the maintenance of her residence, and also her right of dower, we have this result, that the widow may have set off one-third of the Waldo avenue property as her dower, and then jointly with her children, have the use of the remainder of the Waldo avenue property during her widowhood until such time as the trustees should deem it advisable to sell that property and invest the proceeds in another residence for the widow and children. But how could the trustees hope to sell this property and .carry out the scheme of the will for the benefit of the widow, if the widow maintained her right of dower ? Is it not plain that the testator contemplated that there was no dower ? We cannot suppose that making his will as he did with the aid of competent counsel, he left his whole scheme, which included the possible or probable sale of the widow’s "residence and the procurement of another, dependent upon her being willing to join in the scheme and release her right of dower by an appropriate .conveyance.

The fact that this testator provided for the sale by his trustees of this residence property without making the slightest reference to any dower right of his wife, indicates that such sale would be made free of dower. Cooper v. Cooper, supra. In this case Vice-Chancellor Pitney expresses the following views (at p. 55) :

“Some of the older English cases, and perhaps a few in this country, have held that a direction to executors to sell and convey real estate, did not necessarily indicate that they were to sell free and clear of the dower of the widow. But the modern decisions which, in my judgment, are more in accordance with common sense, tend to hold that a power and direction to sell and convey necessarily includes the idea of conevying the title free and clear of dower. Except sales of real estate by sheriffs on common law judgments, the cases where a sale of real estate is made by a husband without his wife joining him are very rare indeed. Ordinary purchasers will not accept a title with an outstanding inchoate dower upon it, much less one that has dower fastened upon it by the death of the husband. Such a title is not marketable, in the ordinary sense of that word.”

I think there is a further indication of the intention of the testator in the provisions that the trustee should convey the Rahway tract and the Woodbridge tract and the Newark avenue property to the children, at the times and in the manner set forth in the will. While a dower right of the widow in these properties, as I have said, would be of very little, if any, value to her, the existence of such a right would greatly impair the value of what these children would get, for reasons which are indicated in the passage quoted above from the opinion of Vice-Chancellor Pitney.

It may be noted that the complainant, Mrs. Moore, apparently acquiesced in what I have found to have been the testator’s scheme, and for about fifteen years received the income of the $10,000 settled upon her. She resided also in the Waldo avenue property for a number of years until she remarried and went to Canada. The Rahway property and an undivided one-half of the residue of the testator’s real estate were conveyed by the surviving trustee in accordance with the provisions of the will to the testator’s son William Moore, when he attained the age of thirty years, in May, 1911, and it does not appear that the complainant made any claim until shortly before this bill was filed in 1912, that she had any dower in that parcel of land or in any other real estate of her deceased husband. The evidence indicates, I think, that not only the testator but his trustees and his family all understood and acted upon the firm belief that the provisions of the antenuptial agreement and of this will were in lieu of dower. Of course, this inaction of the widow does not amount to a waiver or forfeiture of any right which she held, and of which she was unaware, but it is conduct which I think may be taken into consideration with the conduct of all tire other parties concerned in determining whether this uniform and consistent construction of the will, accepted by all parties interested, must, after fifteen years, be disregarded.

A decree will be advised dismissing the bill.


source: Caselaw Access Project

author: Leaming, V. C.

license: Public Domain

text:
    William Lougheed v. Ernest Armstrong et al.
    [Submitted October 16th, 1914.
    Determined October 17th, 1914.]
    1. A conveyance by an owner of land to his wife, without consideration, is void as against one who at the time the conveyance was made was working for the owner, and who subsequently recovered a judgment for such services, part of which judgment was for money earned at the time of the conveyance, but not yet payable, and a small part of which was then due.
    2. In a suit to set aside a conveyance by a husband to his wife as a fraud upon creditors, evidence held to show that the property was originally purchased with the husband’s money, and not with that of the wife, as alleged in the answer.
    3. The fact that the recorded deeds show that a husband conveyed property to an intermediary for the consideration of one dollar, in trust to be conveyed to the grantor’s wife, and that the intermediary conveyed the property to the wife, also for the consideration of one dollar, does not put a grantee from the wife upon inquiry as to the validity of the conveyance, so as to render its title void against a creditor of the husband, since a voluntary conveyance by the husband to the wife is valid as to everyone except his creditors.
    On final hearing on creditor's bill to set aside fraudulent conveyances.

      Mr. Walter 8. Keown, for the complainant.

      Mr. Adam B. Sloan, for the defendants Ernest Armstrong and Anna Victoria Armstrong.

      Mr. William Early, for the defendant Economy Building and Loan Associaiton.
   Leaming, V. C.

The bill is filed by complainant as a judgment creditor in aid of his judgment. Belief is sought by complainant against conveyances of real estate made by Ernest Armstrong, the judgment debtor, to an intermediary and by the intermediary to the wife of the judgment debtor. At the time these conveyances were made complainant was working for Mr. Armstrong, and the major part of the money for which the judgment was subsequently recovered had been earned by complainant, but was not payable until the work should be finished; a small part of the money included in the judgment was due and payable at the time the conveyances were made. If the property in question belonged to Mr. Armstrong and was conveyed to his wife without valuable consideration, the conveyances are obviously void as against complainant. Haston v. Castner, 31 N. J. Eq. 697. The defence is that the property was originally purchased by Mrs. Armstrong with her own money and title taken in the name of her husband, and that the transfer of the title from her husband to her was to restore the legal title to its owner. The joint answer of Mr. and Mrs. Armstrong asserts that the title was taken in the name of Mr. Armstrong by inadvertence and without the knowledge of Mrs. Armstrong, and that the conveyance was made to her by her husband at her instance when she discovered that the title was in his name. At the hearing both Mr. and Mrs. Armstrong testified that the title was taken in Mr. Armstrong’s name by prearrangement between them for purposes of convenience only and that the money of Mrs. Armstrong purchased the property; her canceled check for the purchase price was produced in support of their claim.

There does not exist the slightest doubt touching the facts. Both Mr. and Mrs. Armstrong deliberately perjured themselves upon the witness-stand in the hope of escaping payment of the judgment held by complainant. In spite of searching cross-examination they maintained that the money with which the property was purchased — $2,500 in amount — had been made by Mrs. Armstrong during her married life by sewing, and had been kept by her in an envelope between the mattresses in her bedroom until the property was purchased, when it was deposited in bank by her and the check drawn by her to pay the cash purchase price. But when the books of the bank were produced disclosing the accounts of both Mr. and Mrs. Armstrong it was found that the property was purchased with a part of certain money Mr. Armstrong had received for the sale of a patent; a cheek had been drawn by him to his wife and by her deposited in bank and then a check had been drawn by her for the purchase price. It is indeed easier to determine the truth touching the transaction than to determine whether it may not be the duty of this court to cause both Mr. and Mrs. Armstrong to be punished for perjury.

The facts are that the property in question was purchased by Mr. Armstrong with his own money and the improvements to the property were made by him with his own money, and no thought of Mrs. Armstrong owning the property occurred to either of them until certain difficulties occurred between Mr. Armstrong and a contractor whom he had employed to work on the property. It was then that the transfer to the wife was made, and it was then made to protect the property from claims existing or to arise against Mr. Armstrong. As against complainant the transfer is void and will be 'set aside.

A more difficult question has arisen touching a certain mortgage which has been placed upon the property since the transfer of the legal title to Mrs. Armstrong. Mrs. Armstrong procured from defendant Economy Building and Loan Association a loan secured by a mortgage on the property in question. The loan was made by the application of a portion of the amount loaned to the discharge of a mortgage then existing against the property and the balance of the loan was paid by the association to Mrs. Armstrong. (It may be added, parenthetically, that this balance reached Mr. Armstrong, but not with knowledge of the association.) It is conceded that the building association will be subrogated to the lieu of the mortgage which it discharged, but, as to the balance of the loan, it is claimed that the mortgage lien cannot be enforced as against complainant. This claim is based upon the circumstance that the deed of conveyance from Mrs. Armstrong to the intermediary stated as its consideration “one dollar and other valuable consideration,” and was expressly made in trust to forthwith convey the premises to the grantor’s wife, and the deed from the intermediary to Mrs. Armstrong stated as its consideration “one dollar.” It is, therefore, claimed that the record of these deeds of conveyance charged the building association with notice that the transfer was a voluntary transfer from a husband to his wife, and put the association on inquiry touching its validity. It is not claimed that the association knew of any infirmity in Mrs. Armstrong’s title further than such knowledge would be imposed by the records.

So far as I am aware, this question has not heretofore arisen in this state. The authorities in other jurisdictions are in apparent conflict, but I think the clear weight of authority is to the effect that the mere fact that a deed of conveyance in a. chain of title discloses that it was a voluntary conveyance is not enough to put a purchaser upon inquiry. That doctrine is stated in Bump Fraud. Conv. § 495, as follows:

“The law sanctions a conveyance founded upon the consideration of blood, or of matrimony, merely. The legal presumption therefore is that such a conveyance is valid and not a fraud upon the rights of anyone. The mere fact that a purchaser from the holder of such a title has notice that it was not founded upon a pecuniary consideration is not sufficient to make it his duty at his peril to inquire whether the title of his grantor was not fraudulent. On the contrary, he has a right to act upon the legal presumption that such a deed of gift or voluntary settlement was honestly made until some other fact is brought to his knowledge to raise a suspicion in his mind that the conveyance is fraudulent.”

It is true that in this state a voluntary conveyance is regarded as void as against existing creditors, and in some circumstances void as to future creditors; but it is not the want of valuable consideration which renders it void; it is that circumstances accompanied by the additional circumstance of indebtedness or fraudulent intent, and even then the conveyance is only void as against creditors. A conveyance importing a valuable consideration is in like manner void as to creditors if no consideration in fact existed. So long, therefore, as the record imports validity, and not invalidity, it seems impossible to logically impose the burden of inquiry as to whether what appears valid may not in fact be invalid as against someone. The following cases will be found to sustain the views here suggested: McKee v. West, 141 Ala. 531; Frazer v. Western, 1 Barb. Ch. 220; Yardley v. Torr, 67 Fed. Rep. 857; Sparrow v. Chesley, 19 Me. 79. The contrary view will be found in Milholland v. Tiffany, 64 Md. 455, and New England Loan and Tr. Co. v. Avery (Tex.), 41 S. W. Rep. 673, and cases there cited.

I will advise a decree in behalf of complainant as against defendants Ernest and Anna Armstrong, and dismiss the bill as to defendant Economy Building and Loan Association.


author: Leaming, V. C.,

text:
    Di Tullio Daniele v. Burlington Real Estate and Manufacturing Company.
    [Submitted November 16th, 1914.
    Determined November 17th, 1914.]
    1. That a corporate agent, in carrying out specific instructions of the corporation as to the sale of real property, appeared to be clothed with a more general authority than he had or exercised, will not mate a subsequent contract entered into by such agent in excess of his actual authority enforceable against the corporation on the theory that it had held him out as having extensive powers.
    2. The treasurer of a corporation cannot, by virtue of his office, bind the corporation by a contract for the sale of land, even though the corporation was engaged in the real estate business.
    3. Where the treasurer of a corporation, who entered into a contract for the sale of land, explained to the purchaser that it would have to be ratified by the board of directors, but the purchaser did not understand him, that fact, where the treasurer honestly thought he understood, does not entitle the purchaser to enforce the contract.

      On final hearing on bill for specific performance.

      Messrs. Davis & Davis, for the complainant.

      Mr. Ernest Watts, for the defendant.
   Leaming, V. C.,

I am entirely convinced that the agency of Mr. Mott to bind the corporation of which he was treasurer by a contract for the sale of the lots in question has not been established by the evidence. The evidence offered in behalf of defendant fully establishes that no such authority had in fact been conferred by the board of directors. The ground of recovery, if any, must, therefore, be ujoon the theory that the course of dealings of the corporation was such that the corporation will not be permitted to deny that Mr. Mott was authorized to make such contract of sale for the corporation. A resolution of the corporation had fixed a price on certain improved lots and authorized its officers to sell those lots at the prices so fixed*, and Mr. Mott had made such sales. But the mere circumstance that in properly carrying out such specific authority the agent may have appeared to the public to have been clothed with a more general authority cannot be made the basis of relief where it affirmatively appears that no general authority was in fact conferred and that the agent at all times acted within and pursuant to his restricted authority. A contrary view would render it impossible for a corporation in any circumstances to authorize with safety an agent to sell a specific lot at a specified price. The relevancy of the course of dealings of the corporation is to establish an inference of knowledge and acquiescence upon the part of the corporation from which it may be ascertained that an agency in fact existed, rather than for the creation of an estoppel against the corporation in favor of a third party. Murphy v. Cane, Inc., 82 N. J. Law 557, 563. Mr. Mott was treasurer of the corporation. His contract of sale which is made the basis of this suit was executed in his own name as treasurer. A treasurer of a corporation cannot, virtute officii, bind his corporation by such a contract, and the evidence discloses no conduct upon the part of the corporation, either express or permissive, adequate to confer upon its treasurer the power to execute the contract here in question as a contract of the corporation.

Nor can it be properly overlooked that Mr. Mott has testified that he informed complainant that the contract was made subject to ratification by the board of directors of the corporation. It may well be that complainant did not fully comprehend the force of such a statement; but it is impossible to doubt the truth of- Mr. Mott’s testimony, to the effect that the statement was made by him and that he believed it was understood by corn-* plainant. If such statement was in fact made by Mr. Mott to complainant in good faith and with the belief that complainant understood its force, complainant’s ignorance of its force cannot now add to his rights under his contract.

I will advise a decree dismissing the bill.


text:
    Simon B. Fleisher v. West Jersey Securities Company, etc., et al.
    [Submitted October 15th, 1914.
    Determined November 21st, 1914.]
    1. Secret profits made by directors of a corporation by wrongfully causing it to purchase securities in which they were personally interested, must be recovered by the corporation or by stockholders in its behalf, the stockholders having no estate, legal or equitable, in the corporate property wrongfully diverted from the company.
    2. Under Corporation act (P. L. 1896 p'. 286 § 80), as amended by P. L. 1904 V• &75, providing that the directors of a corporation shall not make dividends except from surplus or net profits, nor divide or pay to the stockholders any part of the capital stock, and that, in case of any willful or negligent violation thereof, the directors shall be liable to 'the stockholders to the full amount of any loss sustained by the stockholders, a stockholder’s action against directors for declaring dividends out of the capital of the corporation is not an action on behalf of the corporation, and cannot be joined with a suit in behalf of the corporation to recover secret profits made by directors on a sale to the corporation of securities in which they were personally interested, assuming that the action may be maintained in a court of chancery.
    3. Since the amendment of Corporation act (P. L. 1896 p. 286 § 80) by P. TJ. 1904 P• 275, a corporation has no remedy against directors for declaring dividends out of the capital of the corporation.
    On bill to compel -directors of a corporation to account for secret profits and for dividends unlawfully declared. On hearing on demurrer to the bill.

      Messrs. Bourgeois & Coulomb, for the complainant.

      Messrs. Godfrey & Godfrey, for the defendant.
   Leaming, V. C.

The bill filed herein has been demurred to as multifarious. By the bill recovery is sought from the defendant directors of defendant corporation for two classes of items. One class comprises secret profits which the directors are alleged to have made by wrongfully causing defendant company to purchase certain securities in which defendant directors were personally interested. It is obvious that the primary injury resulting from conduct of that nature is to the defendant corporation. As a stockholder has no estate, legal or equitable, in the corporate property which has been wrongfully diverted from the treasury of the company, any suit for recovery" of the- loss must be brought by the injured corporation, or by a stockholder or stockholders in its behalf. The other class of items comprises dividends which it is alleged that defendant directors willfully declared and paid out of the capital of defendant corporation. The demurrer to the bill includes the charge of multifariousness, and it is accordingly urged that any right of action against the directors for injuries resulting from these wrongfully-declared dividends is in the stockholders, severally and personally, for injury to their stock and cannot be united with or included in a suit brought in behalf of the corporation against its directors for unlawful secret profits.

Under the provisions of the thirtieth section of our Corporation act (P. L. 1896 p. 286), as that section existed prior to its amendment by P. L. 1904 p. 275, an action was expressly given to a corporation against its directors for the recovery of dividends paid out of capital. Appleton v. American Malting Co., 65 N. J. Eq. 375. But the amendment of 1904 changed that section in such manner that it was made to apply only to willful or negligent violations of the section and gave the right of action

“to the stockholders of such corporation, severally and respectively, to the full amount of any loss sustained by such stockholders, or in case of insolvency to the corporation or its receiver to the full amount of any loss sustained by the corporation.”

Under that section, before its amendment, no doubt existed touching tire jurisdiction of this court to enforce the remedy there given, for the action was by the corporation as a cestui que trust against its directors as its trustees to recover a statutory measure of liability for breach of trust duties; and if brought by a stockholder in behalf of the corporation, ex necessitate rei, the aid of this court was peculiarly necessary. But it is not so clear that the several action given to a stockholder by the’ amended section for the recovery of the amount of any loss, sustained by such stockholder falls within the jurisdiction of this court. But assuming that the statutory action by a stockholder under the 1904 amendment may be maintained in this court, it is entirely clear that the action is .purely personal to the stockholder and in no sense in behalf of the corporation, and is an action in which the corporation is wholly without interest. The present bill, therefore, joins a suit against the directors in behalf of the corporation for the recovery of secret profits with one brought by a stockholder in his own behalf to recover from directors damages sustained by him by reason of injury to his stock through the payment of unlawful dividends. It happens that the two stockholders who bring the suit in behalf of the corporation for its recovery of secret profits are the same two stockholders who seek to recover in their own behalf for losses sustained by them personally as stockholders, but the situation presented is necessarily the same as though the corporation had sued in its own behalf for the recovery of secret profits and had joined as co-complainants two stockholders who sought to recover for the losses suffered to their stock by reason of unlawful dividends. The extreme flexibility of equitable procedure would no doubt enable a decree to be framed awarding to each of the three several complainants compensation for the injuries suffered by each, but that circumstance can afford no adequate justification for joining either parties or causes of action, which are wholly unrelated. T am convinced that'the statutory claim of a stockholder of a corporation against its directors under section 30 of the Corporation act, as amended, and the claim of the same corporation against the same directors arising by reason of secret profits made by the directors in buying for the corporation property in which they were personally interested, must be regarded as several, distinct and unrelated causes of action which can neither conveniently nor appropriately be joined.

It is, however, urged in behalf of complainants that recovery can be had by or in behalf of the corporation for losses which the corporation has sustained by reason of the payment of unlawful dividends. That action was given by the thirtieth section of the Corporation act before it was áxnended; since the amendment of 1904 that action no longer exists in favor of the corporation as a statutory remedy. The contention now is that it exists independently of any statute. On general equitable principles it would seem that in the absence of any statute on the subject the members of a board of directors of a corporation would be answerable to the corporation’ represented by them for any losses suffered by the corporation through the willful declaration of a dividend by the board out of capital contrary to law, but an exhaustive review of the authorities as disclosed in the opinion filed for this court in Siegman v. Maloney, 63 N. J. Eq. 422, discovered no well-recognized remedy of that nature except in suits brought in behalf of creditors of the injured corporation. The measure of liability which was given by our statute before the amendment of 1904 was the full amount of the dividends so paid. The effect of that act, as has been pointed out in the several cases heard under it, was to restore to the corporation the amount that its capital had been impaired and also leave a similar amount in the pockets of its stockholders. Unless the penalized directors should be given an action over in their own behalf against the several stockholders who had received the unlawful dividends, such stockholders would clearly profit by the transaction to an unwarranted degree. In the absence of any statute it seems practically impossible to determine a measure of liability which would be wholly equitable, for whatever amount should be ordered paid by the directors to the corporation would necessarily enure to the benefit of the stockholders who had received the unlawful dividends, except to the extent that changes in stock holdings had intervened. It hiay, indeed, be forcefully suggested as doubtful whether any remedy could be equitably administered by the requirement of payment of money to the corporation by the erring board. It is not improbable that these considerations may have occasioned the amendment of 1904 which removed the statutory remedy from the corporation to the individual stockholders and fixed the liability of the directors as the amount of loss suffered by the several stockholders. It will also be observed that if a liability to the corporation still exists the directors are subjected to the danger of double liability. In view of these circumstances, I am convinced that the legislative determination of a measure of liability, and the declaration of a remedy to the stockholders for its enforcement, must be regarded as superseding any equitable remedy in behalf of the corporation Avhich may have existed prior to that legislation.

I will advise a decree allowing the demurrer.


text:
    Hurley-Tobin Company v. Courtland Y. White.
    [Submitted May 5th, 1914.
    Determined July 3d, 1914.]
    1. The complainant became tenant to the defendant of a certain brick store and the land whereon it was erected, upon the terms contained in a written lease (which had been extended), and the substituted agreement endorsed thereon, signed by the defendant and the lessee, whereby the complainant was substituted as tenant in the place of the lessee. By the terms of the original lease as extended the lessee was granted an option to renew for an additional term, and also an option to purchase. In the substituted agreement no specific reference is made to the option to purchase, but the language used is that the defendant agrees and consents to recognize the complainant in the place of the lessee “under this agreement and agrees to renew this agreement, upon request for another period of six (6) years on December 1st, 1907.”— Held, first, that the option “to renew this agreement upon request” must be deemed to relate alike to an extension of the term and option of purchase for the period named; and secondly, that upon the evidence the complainant was entitled to a decree of specific performance of the contract for the conveyance of the premises, although at the expiration of the term, December 1st, 1907, no formal request was made by the complainant for the extension of the term, inasmuch as complainant continued to occupy the premises and to pay rent therefor until the end of the six (6) years’ period named in the substituted agreement, when it exercised its option of purchase and tendered the purchase price.
    2. In the absence of any provision of the agreement specifying the form and manner of request contemplated, any words or conduct of the tenant which reasonably apprised the landlord of the tenant’s desire or determination to enjoy the additional term should-be regarded as fully satisfying the stipulation.
    On final hearing on bill for specific performance.

      Mr. Peter Backes, for the complainant.

      Messrs. Wescott & Weaver, for the defendant.
   Leaming, V. C.

The bill is filed for the specific performance of a contract for the conveyance of real estate. The contract is embodied in a certain lease and endorsements thereon wherein defendant, owner of the real estate, extends to complainant, his tenant, an option of purchase.

The lease was made September 21st, 1899, by Courtland Y. White, defendant herein, and one George M. Williamson, and demised to Williamson certain land in Trenton, New Jersey, on which there was a four-story brick store for the term of three years from December 1st, 1899, at the yearly rental of $1,500, payable in monthly payments of $125 at the end of each month. The lease also contained a clause wherein the landlord extended to the tenant the option to occupy the premises for an additional term of five years at the same rent if the tenant should so elect at the expiration of the three years, and also contained the following provisions:

“It is also further agreed by the said party of the first part for himself, his heirs, executors, or administrators that at any time during said term or terms the said party of the second part may purchase if he so desires purchase (sie) the above-described premises for the sum of $25,000.”

The tenant having availed himself of tire second term named in the lease the period of tenancy was thus made to extend to December 1st, 1907, with an option of purchase extending to that date.

February 2d, 1906, the following agreement was entered into between the landlord and William L. Hurley, and endorsed on the lease:

“February 2d, 1906. — I hereby agree and consent to recognize William L. Hurley, his executors, administrators or assigns, or the ‘Hurley-Tobin Co.’ about to be incorporated in the place of George M. Williamson under this agreement, and agree to renew this agreement, upon request, for another period of six (6) years on December 1st, 1907, all rent to be payable to Samuel W. Foster, agent, 111 East State street, Trenton, N. J., it being agreed that all permanent improvements such as the moving of the stairway, the installation of a new elevator and a new heating system shall be made by the lessee at his expense and be left in the building.
“Horace F. Nixon. Courtland Y. White. (Seal.)
“Samuel W. Foster. William D. Hurley. (Seal.)”

At the time this agreement was made Hurley had purchased from the tenant in behalf of complainant, a corporation then being formed, the business which was then being conducted in the demised premises, and the agreement above quoted was endorsed on the copy of the lease held by the landlord and also on the copy of the lease which had been delivered by the tenant to Hurley, and both agreements, so endorsed, were executed by the landlord and Hurley.

It will be observed that this agreement contemplated an unexpired term of twenty-two months of the second term named in the Williamson lease, and an additional term of six years in the event of the new tenant exercising the right to that extended term. No specific reference is made to the option of purchase, but the language used is that the landlord agrees and consents to recognize Hurley-Tobin Company in the place of Williamson under “this agreement,” and agrees to renew “this agreement,” upon request, for another period of six years on December 1st, 1907. The agreement which is thus referred to under which a new tenant is to be recognized “in the place of” the old one, embodies not only an unexpired term but also an option of purchase in behalf of tire tenant, and as no part of the “agreement” is specifically referred to, it is impossible to conclude that the term alone and not the option of purchase was intended; and, in like manner, the option “to renew this agreement, upon request,” must be held to relate alike to an extension of the term and option of purchase for the period named. The subsequent conduct of the respective parties also reasonably discloses that such was their mutual understanding of the new agreement".

The present controversy arises from the circumstance that at the time of the expiration of the term (December 1st, 1907) no formal request was made by complainant for the extension of the term. This raises the question as to what force is to be given to the words “upon request” in that part of the agreement in which defendant agrees “to renew this agreement, upon request, for another period of six (6) years on December 1st, 1907.”

The testimony establishes the following facts: During the twenty-two months of the unexpired term named in the old lease complainant corporation conducted in the demised premises the business which it had purchased from the old tenant and made permanent improvements to the building to the amount of $4,600. At the end of that period no formal request rvas made of the landlord to renew the agreement for the additional term, but possession of the demised premises was retained and the business activities therein continued without interruption or change. The reason no formal request was made for the neAv term was obviously because no one connected with the corporation realized that such a notice or request might be necessary and possession Avas undoubtedly retained by the corporation as an exercise of the option given by the agreement. Hnder the new term the first month’s rent fell due January 1st, 1908; that being a legal holiday, a check Avas mailed to the Trenton agent of the landlord January 2d, 1908, for the preceding month’s rent, pursuant to the custom that had theretofore uniformly obtained in paying rent, the agreement providing for payment of rent to that agent and all prior payments having been made by cheeks mailed to him at the end of each month for the preceding month’s rent. About that time Mr. Hurley, president of complainant, discovered that a formal “request” might be necessary for an extension of the term and option of purchase; he accordingly took complainant’s copy of the lease to his attorney, who endorsed on it a formal extension, and on January 3d, 1908, Mr. Hurley took the lease to defendant in Philadelphia to get his signature to the endorsement which had been made on the lease for that purpose. Defendant informed Mr. Hurley that he would do nothing until he saw his agent, and Mr. Hurley left his copy of the lease in defendant’s possession. Defendant subsequently went to Trenton and saw his agent and then concluded not to sign the extension which complainant’s attorney had written on the back of complainant’s copy of the lease, and then defendant and his agent together went to the place of business of complainant and returned complainant’s copy of the lease to some person there whom defendant and the agent say was Mr. Tobin, defendant stating to that person that he would not sign it, and that he did not care to sell the property. This visit of Mr. Hurley to defendant in Philadelphia, and the subsequent visit of defendant and his agent to complainant’s store, are stated by defendant and his agent to have been in December, 1907, but the testimony of Mr. Nixon, and a pencil endorsement of the agent, fully establish that the visit of Hurley to defendant in Philadelphia was January 3d, 1908, and the visit of defendant and his agent to the store was necessarily thereafter. Mr. Tobin denies the interview at the store. Defendant and his agent were undoubtedly there, for complainant’s copy of the lease was left there, and I am unable to doubt their testimony of the visit. Their conversation may have been with a clerk whom they mistook for Mr. Tobin, or Mr. Tobin may not recall the interview.

Thereafter, complainant continued to 'occupy the demised premises and to pay rent monthly until the end of the six years named in the agreement; at that time complainant exercised its option of purchase and tendered the purchase price.

During the last year of complainant’s possession it made permanent repairs to the building to a further amount of about $1,400.

The right of complainant to require a conveyance is necessarily dependent upon its having complied with the requirements of the agreement of February 2d, 1906.

As already pointed out, that agreement contemplates an extension of the term and option of purchase for a period of six years from December 1st, 1907, but also contemplates a “request” upon the part of complainant for such extension at the end of the term which was current at the time the extension agreement was signed. No form of request is specifically stated, the language used being simply “upon request.” In entering upon the extended term complainant undoubtedly intended to avail itself of the option given it by the agreement. If, by holding over and paying rent for the first month of the new term, complainant by its conduct made a request for the benefits of the agreement within the spirit of that agreement, then complainant became thereby bound to defendant for the new term and in like manner acquired the rights of a tenant for that period with an option of purchase extending to the end of that period.

I think it unnecessary to attempt a review of the adjudicated eases which give consideration to the adequacy of notice by a tenant of his election to accept an extended term under an option for that purpose. The adjudications a,re numerous and not wholly harmonious and are reviewed at great length by all text-writers on the subject. There will be found in the adjudicated cases a distinction between an option given to a tenant for an extended term without any provision for notice of election by the tenant and a stipulation giving to the tenant such an option upon a specified notice of its acceptance being given by the tenant to the landlord; in the former case the election of the tenant is held to be sufficiently indicated by his conduct in holding over and paying rent; in the latter case the stipulated notice is sometimes deemed requisite to an election by the tenant to accept the new term. In the present case, as already pointed out, no specific notice-is stipulated; the agreement contemplated only a request for the additional term without specifying how that request should be manifested. If that request has been sufficiently manifested by holding over and paying rent, the tenant has clearly exercised his election within the purview of the agreement. In the absence of any provision of the agreement specifying the form or manner of request contemplated anj^ words or conduct of the tenant which reasonably apprised the landlord of the tenant’s desire or determination to enjoy the additional term should be regarded as fully satisfying the stipulation. In Batura v. McBride, 75 N. J. Law 480, 482, our court of errors and appeals hold that an election to accept an option for an additional term is indicated by the tenant continuing in possession and paying the rent. That was also the basis of the decision of the same court in Mershon v. Williams, 62 N. J. Law 779, 783. It is there stated that "if no notice is stipulated for, the tenant’s mere continuance in possession and paying rent, though with no express notice of his desire for the 'future term, entitles and binds him thereto.” The adjudication of an election upon tire part of the tenant in such case to avail himself of the option is necessarily based upon the circumstance that the conduct of the tenant in holding over and paying rent adequately apprises the landlord of his wish and purpose. Had the agreement here in question provided that a written notice should be given by the tenant of his election to accept the new term, the failure of the tenant to give such notice might well be operative as a bar to the exercise of the option, but I am unable to give to the word “request,” as contained in the agreement, a force or purpose that is not fully met and satisfied by conduct of the tenant which as clearly indicated a determination on its part to avail himself of the option as a formal notice to that effect would have done. Indeed, to give literal force to the language of the agreement, a formal notice of election would have been of no avail unless framed in the form of a request.

I will advise a decree of specific performance pursuant to the prayer of the bill;


text:
    Bernard M. Durkin v. Roberta Connelly, executrix, &c.
    [Submitted December 21st, 1914.
    Determined December 27th, 1914.]
    1. A court of equity cannot decree specific performance of a contract to sell trust land by an executrix, where by the terms of the will such executrix has no power to perform her contract.

    2. A 'naked power to sell under a trust instrument does not include authority to arrange terms for postponing payment of the price, or to accept a mortgage or anything other than money in payment.
    3. Where an executrix contracts to sell land, under a power in the will to sell and invest the proceeds, an acceptance by her of a second mortgage on the property to secure part of the price cannot be regarded as an investment of the proceeds of sale within the power given so as to enable the court to decree specific performance of the contract, since under the Orphans Court act (3 Comp. Btat. 1910 p. 8864 § 737) such an investment by a trustee is not authorized.
    4. Especially where beneficiaries are not parties to the suit, specific performance will not be granted of an executrix’s contract to sell land of tire estate for the total price of $45,000, of which $5,000 and the amount of a first mortgage is to be paid in cash and the balance by a second mortgage to the executrix, where the largest first mortgage which can be placed is only $16,000, since that would compel the executrix to invest $24,000 of trust funds in a second mortgage on property on which only $16,000 could be obtained on first mortgage.
    Complainant seeks a decree for the specific performance of a contract wherein defendant, Eoberta Connelly, as executrix and trustee of her deceased husband’s will, agreed to convey to complainant certain real estate in Atlantic City.
    Defendant resists performance under the claim that the will of her deceased husband does not clothe her with power to make the conveyance upon the terms stated in the contract which complainant seeks to enforce and which she admits having executed.
    By the will of defendant’s deceased husband his entire estate, after the payment of certain legacies, is given to defendant during her life, or widowhood in trust, with direction for her to collect, receive and appropriate the income for her support and the support and tuition of testator’s children, subject to these bequests and trust testator’s entire estate is given to his children, to be delivered to them upofi the death or marriage of his widow. The power of sale contained in the will is as follows:
    “I hereby give to my said wife, as trustee and executrix, full power and authority to sell and convey any and all of my real estate at private or public sale and to invest the proceeds or to lease the same or any part thereof at her discretion.”
    The terms of sale set forth in the contract, which complainant now seeks to enforce, are as follows: The contract price is $45,-000, payable in the following manner:
    ‘‘Three hundred dollars on the signing of this agreement, the receipt whereof is hereby acknowledged; forty-seven hundred dollars on delivery of deed, together with proceeds of such first mortgage as may be created on said premises by the purchaser with consent of party of first part [defendant] and a second mortgage securing the balance of the consideration above stated, payable in five years, bearing interest at six per cent., accompanied with Fire Insurance of not less than eight thousand dollars and which mortgage shall be reduced semi-annually by payment of at least six hundred fifty dollars each.”

      It is claimed by complainant (and the evidence at final hearing establishes the fact) that before the bill was filed the amount of the first mortgage was agreed upon as $16,000. -
    The decree which is sought is therefore a decree compelling defendant to convey the premises in question to complainant and accept in cash $5,000, together with $16,000 additional cash, which last-named sum is to be raised by complainant on a $16,-000 first mortgage on the premises to be conveyed to him, and to accept a second mortgage from complainant for $24,000, payable in the manner already stated, representing and securing the payment of the balance of the purchase-money.

      Messrs. Bourgeois & Coulomb, for the complainant.

      Mr. Clarence L. Cole, for the defendant.
   Leaming, V. C.

It is obvious that this court cannot by its decree require the specific performance of a contract of sale which has been made by a trustee if by the terms of the trust the trustee had no power to do what he contracted to do; in such circumstances a trustee will not be compelled to commit a breach of his trust. Repetto v. Baylor, 61 N. J. Eq. 501, 506. In Repetto v. Baylor, supra, it is also held that a mere power to sell does not include any power to arrange terms of postponed payment of price, or to accept a mortgage or anything else than money in satisfaction of it. If the principles defined in Repetto v. Baylor are here followed, it is clear that no relief can be afforded complainant in this case, for, by the terms of the contract here sought to be enforced, a postponed payment of more than one-half of the purchase price is provided for and a second mortgage on the premises conveyed is contemplated to secure such postponed payment.

With the power of sale here involved there is added the power “to invest-the proceeds,” but this added power cannot be made the basis of a decree herein, for, if the acceptance of a second mortgage on the property sold to secure the payment of a part of the purchase price is regarded as an investment of a part of the proceeds of sale, such an investment is proposed to secure in a manner not authorized by our Orphans Court act (3 Comp. Stat. p. 3864 § 137); the trustee cannot be properly required by decree of this court to make such an investment.

It is urged in behalf of complainant that Repetto v. Baylor, supra, is not in harmony with the earlier case of Woodruff v. Lounsberry, 40 N. J. Eq. 545. In that case a will authorized and directed executors to sell and convey real estate and to invest the proceeds thereof upon first bond and mortgage on property worth double the amount or in stocks or bonds of the United States or the State of New Jersey, and pay the income to testator’s widow. The executors sold certain real estate at a good price and accepted in payment forty per cent, cash and purchase-money mortgages — first liens — to secure the sixty per cent, deferred payments. Losses having been sustained on these mortgages, the question before the court was whether the executors should be compelled to make good these losses. It will be observed that*the mortgages accepted by the executors were in amount the percentage of value of the mortgaged premises authorized by the Orphans Court act. In determining that the executors should not be charged the losses, the learned ordinary said: “Although the executors were, by the will, directed to invest the proceeds of the sale of the property upon first bond and mortgage of property worth twice the amount invested, or in stocks or bonds of the United States, or of this state, it would not be just to hold them bound by that provision in taking mortgages for part of the purchase-money of the property. Those mortgages were not taken as an investment of proceeds of sales, but to secure the payment of part of the price at which the property was sold. They were themselves proceeds of sales. In taking the mortgages for which the accountant asks allowance, the executors appear to have acted in good faith and for the best interest of the estate. They, therefore, ought not to be charged with them.”

It is, therefore, insisted in behalf of complainant that Woodruff v. Lounsberry recognizes a power to sell as including a power to postpone payments of the purchase price for a period subsequent to the sale, and also determines that the acceptance of a purchase-money mortgage for a part of the purchase price is not to be regarded as an exercise of the power of investment. I am unable to adopt that view. In Woodruff v. Lounsberry the primary inquiry was whether under the special circumstances of that case the executor should be compelled to bear the loss which had arisen from shrinkage of the value of the tracts of land on which he had taken purchase-money mortgages. The learned chancellor points out with clearness and emphasis that the sales had been made at good prices and thát the purchase-money mortgages taken were in amount but sixty per cent, of the values' of the laaid covered by them, and that the executors had acted in good faith and for the best interest of the estate; he accordingly held that although the will limited mortgage investments to fifty per cent, of the value of the land, it would not be just to hold the executors in the circumstances stated. In Wms. Ex. 1630, it is laid down as a general rule adopted by the courts in suits to establish liability of executors-for breach of trust .duties, that while care must be taken to guard against an abuse of their trust, yet, in order' not to deter persons from undertaking these offices, the court is extremely liberal in making every possible allowance, and cautious not to hold'executors and administrators liable upon slight grounds. In Perrine v. Vreeland, 33 N. J. Eq. 102; S. C. affirmed, 33 N. J. Eq. 596, an executor, acting in good faith and under advise of'counsel, retained a'fund after it was payable to one who was entitled to it by the will, and in good faith invested the fund, after the time when it should have been by him paid over, in a mortgage on property then worth more than three times the amount of the loan, but which property so depreciated in value that the executor was compelled to buy it in upon foreclosure. In a suit to charge the executor with the loss, it was held that, notwithstanding his breach of trust duties, he should not be charged, but should be allowed to turn over the land in lieu of the fund. It may well be, as suggested in Woodruff v. Lounsberry, that in a suit in which the primary issue is whether an executor shall be made personally liable for losses sustained a purchase-money mortgage should not be regarded as so clearly an unauthorized investment as to justify an imposition of personal liability based on a breach of trust duties, and in like circumstances a postponement of payment of purchase price under a mere power of sale may not be deemed adequate to impose personal liability for loss. But in a suit for specific performance of a contract of sale made by an executor the primary inquiry is whether the contract is one which the executor had power to make and which a court of equity should compel him to specifically perform; before that form of relief should be administered both these inquiries must be clearly answered in the affirmative.

As already stated, in Repetto v. Baylor, supra, this court is committed to the view that a mere power of sale does not include any power to arrange terms of postponed payments of price, or to accept a mortgage or anything else than money in satisfaction of it. If the added power to invest proceeds of sale justifies the arrangement of postponed payments secured by a purchase-money mortgage, it is necessarily because the purchase-money mortgage is in the nature of an investment.

The second mortgage, in which the funds of this estate are proposed to be in effect invested, is $24,000 in amount, and is' to be second in lien to a mortgage of $16,000. The total proposed purchase price is $45,000. This makes the combined encumbrances $40,000, or eight-ninths of the entire purchase price. The testimony at the hearing disclosed that $16,000 was the largest amount that could be procured as a loan on first mortgage security. This court is therefore asked to compel this executrix, in effect, to invest $24,000 of trust money in a second mortgage (subject to a prior lien of $16,000) on'a property on which $16,000 was the utmost amount that any moneyed concern was willing to invest on first mortgage security. It is clear that no court would advise such an investment of trust fund, and the cestuis que trust, whose interests in the transaction are paramount, are not made parties to the bill. In such circumstances, specific performance should not be decreed even though the contract of the trustee be deemed within his powers; complainant should be left to his remedy at law. In 1 Lew. Trusts 423, it is said:

“If trustees, or those who act by their authority, fail in reasonable diligence in inviting competition, or in the management of the sale (as if they contract under circumstances of haste or improvidence, or contrive to advance the interests of one party at the expense of another) they will be personally responsible for the loss to the suffering party; and the court, however correct the conduct of the purchaser, will refuse at his instance to compel the specific enforcement of the agreement.”

In the cases cited in the foot-note to the text above quoted will be found numerous cases in which courts of equity have refused this form of relief against a trustee out of considerations alone involving the best interests of the cestuis que trust.

I am obliged to advise a decree denying the relief sought by the bill.


author: Howell, V. C.

text:
    Elizabeth and Trenton Railroad Company et al. v. Township of Woodbridge et al.
    [Submitted December 7th, 1914.
    Decided December 17th, 1914.]
    1. There is no law in this state which permits cars operated by a railroad company organized under the General Railroad law, Revision of 1903 (Comp. Siat. p. 1/219), to be operated over the line of a street railway company organized under the General Street Railway law of 1893 and its supplements and amendments. Oomp. Stat. p. 5021.

    2. The construction of a branch or Y, to connect a railroad organized under the General Railroad law of 1903 with a street railway organized under the General Street Railway law of 1893, is wholly unauthorized by any law of this state, and the presence of its tracks and switches and other constructions in the street, being unauthorized by law, constitute a public nuisance which may be abated by the municipality in which it is located by any lawful means.
    On final hearing on bill, answer, replication and proofs.

      Mr. Edward A. Armstrong, for the complainants.

      Mr. Ephraim Cutter, for the defendants.
   Howell, V. C.

The bill in this ease was filed to prevent the defendants from interfering with the complainants in the construction of a branch or Y to connect their railroad with a street railway operated by the Public Service Railway Company in Woodbridge avenue in Woodbridge township. The two complainants are severally incorporated under the General Railroad law of 1903. The Elizabeth and Trenton Railroad Company is under lease to the Public Service Railroad Company. They are, operating a railroad over a private right of way between certain terminal points, and in so doing cross Woodbridge avenue near the point now in dispute at grade.

The street railway company was organized under the General Street Railway law of 1893, and its supplements and amendments.

The General Railroad law, under which the complainants were organized, by section 7, authorizes corporations formed under it to lay out their routes and file surveys and locations thereof in the office of the secretary of state. The section contains also this provision:

“The company may also from time to time after the filing of the survey of the route of the main line, and either before or after construction thereon, file surveys of the route and location of branches within the limits of any counties in or through which the main line may be located, and of any county adjoining such counties.”

In pursuance of this authority the complainants, on December 17th, 1912, filed in the office of the secretary of state a survey and location of the branch or Y in question beginning in the middle of the right of way of the main line and upon the complainants’ property and running on an easterly curve to Woodbridge avenue, continuing the curve in Woodbridge avenue, and ending at a point in the tracks of the street railway within the lines of the avenue.

It will thus be seen that the branch or Y in question begins on the complainants’ own lands, extends upon and into Woodbridge avenue, but does not cross the avenue or in any manner reach the further side thereof.

The complainants sought and obtained from the board of public utility commissioners permission for the construction of connecting tracks between the tracks of the complainants and the tracks of the Public Service Railway Company, in Woodbridge avenue, over said Y, which permission is dated July 2d, 1914. No permission therefor was either sought or obtained from the township of Woodbridge or any other municipal authority.

When the permission of the public utilities board had been granted the complainants began the construction of the Y or branch in dispute. They were interfered with by the township committee of the township- of Woodbridge and its police officers, whereupon they began this suit for the purpose of enjoining such interference. Upon the filing of the bill an order was made requiring the township and its officers to appear and show cause why they should not be enjoined from such interference, and temporarily restraining them therefrom, but reserving authority to tire court in case the complainants should proceed with the construction of their tracks during the pendency of the order to make such further order as to the restoration of the then present conditions as might be thought proper. On the return day an injunction was ordered pendente lite, but subject to the power of the court to order a restoration of the conditions, if the same should be thought proper.

Being thus freed from interference by the defendants the complainants proceeded to finish the Y or branch in question and to connect its tracks with the tracks of the Public Service Railway Company, thus making a continuous line of track over which cars might be run from the line of the complainants and to and upon the line of the street railway company; and on the 3d or 4th day of July, 1914, the complainants began the operation of a line of cars from Newark to the point of junction between the tracks of the railroad companies with those of the railway company, and thence to Perth Amboy, making a continuous line from Newark to Perth Amboy. Advertisements were placed in the cars of the complainant companies calling attention to the fact that through cars were being run and operated over the lines of these companies to and from the city of Perth Amboy. The passengers were not required to change cars at any point on the journey, and the cars were under the control of the same conductor and motorman throughout the whole journey, there being no break whatever at the point or place now in dispute.

The principal objection which is urged by the defendants to the construction in question is, as'they allege, that there is no law in this state which permits cars operated by the railroad company formed under the act of 1903 to be operated over the line of a street railway company organized under tire act of 1895 and its supplements. And it will be observed that this is exactly what is being done by the complainants in this case. They are operating their cars from Newark to Perth Amboy over their' own line to the point of junction with the street railway company, and thence to Perth Amboy over the line of the street railway company, with nothing to indicate that there is any separation or division between the lines of the two companies.

A similar situation is found in the case of State v. Atlantic City and Shore Railroad Co., 77 N. J. Law 465. There a railroad company organized under the act of 1903 constructed its line so that it ran through Adriatic avenue. ' The Central Passenger Railroad Company, a street railway corporation, constructed its line in such manner as that its tracks met and were connected with the street railway line in Adriatic avenue, and there was a further connection with the West Jersey and Sea Shore Railroad Company. The shore company, so called, acquired all the bonds and stock (except qualifying shares) of the Central Passenger Railway Company, thus obtaining absolute control of the line of that company. It then proceeded to operate cars over the two lines, but without change of cars. There was, however, a . fiction that at the point of junction the ears were delivered by the one company to the other. The attorney-general conceiving that this mode of operation of cars upon the lines of these two companies in the manner above stated was a usurpation of franchises, filed an information in the nature of a quo warranto, and the question of law arising in the case was presented on a demurrer to a plea to the information. Without going into the argument of Chancellor Pitney, who wrote the opinion, it may be sufficient to say that it was held that the exercise by the shore company of the control that resulted from its ownership of the stock and bonds of the Central company, including the operation of its cars over the Central line and the agreement that was made for the continuance of such operation, constituted a usurpation of franchises by the shore company. In my opinion, this case is express authority for the position taken by the township as to the fundamental right of the complainants to operate their cars over the street railway lines, and I take it to have been decided that even though the incorporation papers of the complainants may have included such a right, such inclusion Avould confer no title upon them to operate their cars in that way, and that such operation would be a usurpation of franchises. If this position is correct then the construction of the branch or Y in question is Avholly unauthorized by any Iuav of this state, and the presence of its tracks and switches and other constructions in the street being unauthorized by law constitute a public nuisance which may be abated by the township by any lawful means. The authorities for the interference by the township committee to preserve and protect the highways under their control are found in Hudson County v. Central Railroad, 68 N. J. Eq. 507.

The result is that the bill must be dismissed and the complainants be directed to' tear up the tracks and switches laid by them at the point in question so that the conditions which existed at the time of the filing of the bill may be restored.

The foregoing view of the case makes it unnecessary to discuss the other point submitted by the defendant.


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    Aaron M. Cohen v. Augustus G. Pool.
    [Decided February 5th, 1914.]
    1. In a suit for specific performance, the lack of mutuality is cured by the beginning of the suit.
    2. It is a well-settled principle of law that this court will not make a decree for the specific performance of a contract in a case in which the contract sought to be performed is uncertain. The terms of the agreement, therefore, must be such as to demonstrate to the court the capability of accurate and exact specific performance.
    3. An instrument in writing signed by the defendant, alleged to be a contract and for the sale of real estate, provided as follows:
    “Elizabeth, N. J., March 3d, 1913.
    “I will give property No. 506-508 Elizabeth Ave. for rent at Sixty Dollars $60.00/100 a month for five years lease and five years more, and all repairing must be done by said 2nd party of said first party inside and look over said time afer to Thursday March 6. inst. at noon about 1 to 3 3?. M. and I will sine all papers wioli must be made by attorney and said party of 2. will the right to buy said said property for Twenty thousand dollars $20000 any time said party No. 2 will take property. All repairing outside must be done first party.”

      Held, to be a contract so indefinite and uncertain in its terms that it will not be decreed to be specifically performed.
    On final healing on bill, answer, replication and proofs.

      Mr. Abe J. David, for the complainant.

      Mr. Foster M. Voorhees, for the defendant.
   Howell, V. C.

The bill of complaint in this ease is filed for the purpose of compelling the specific performance of a document alleged to be a contract, and for the sale of real estate, of which the following is a copy:

“A. G. POOL,
“Manufacturer of Carriages, Wagons and Trucks, “506-508 Elizabeth Avenue,
“Elizabeth, N. J., March 3d, 1913.
“I will give property No. 506-508 Elizabeth Ave. for rent at Sixty Dollars $60.00/100 a month for five years lease and five years more, and all repairing must be done by said 2nd party of said first party inside and look over said time afer to Thursday March 6. inst. at noon about 1 to 3 p. at. and I will sine all papers wieh must be made by attorney and said party of 2. will the right to buy said said property for Twenty thousand dollars $20000 any time said party No. 2 will take property. All repairing outside must be done first party.
“(Signed) A. G. Pool.”

The defendant objects upon the following grounds: (1) that the so-called contract is merely an agreement for a lease; (2) that it is void for uncertainty; (3) lack of parties, it being alleged that the complainant was not the only party to the agreement; (4) that the contract is not mutual.

The lack of mutuality is cured by the beginning of the suit. It was held in Krah v. Wassmer, 75 N. J. Eq. 109, that a unilateral contract to convey lands ceases to be unilateral on the purchaser filing a bill for specific performance thereof. The decision of this point, therefore, must be in favor of the complainant.

The other three points must be considered together. It is a well-settled principle of law that this court will not make a decree for the specific performance of a contract in a case in which the contract sought to be performed is uncertain. Wharton v. Stoutenburgh, 35 N. J. Eq. 266; Clow v. Taylor, 27 N. J. Eq. 418; Brown v. Brown, 33 N. J. Eq. 650. The reason being that the court could not he assured that it is enforcing the agreement which the parties had made. The terms of the agreement, therefore, must be such as to demonstrate to the court the capability of accurate and exact specific performance. The first objection that strikes the eye is that no lessee is named in the agreement itself. The agreement was executed at the house of the defendant, and after its execution it was handed to the complainant, but that is tire only thing in the case which indicates that the complainant alone or in connection with other persons was to be the lessee or one of the lessees. In other words, in order to ascertain the name of the person to whom the lease is to be given, we must resort to extrinsic evidence to supply one of the most important terms of the contract.

Again, the phrase is that the complainant will “give” “for rent” the property described at $60 a month, &c. I am unable to determine from an examination of the document itself whether the lease which it is claimed was provided for therein should begin to run on March 3d, 1913, the date of the so-called agreement,-or March 6th, a date named in the agreement for signing further papers, or on some other date; and this point cannot be made clear without resorting to paxol testimony to add a term to the contract.

Again, the option to sell the property for $20,000 at any time that the indeterminate party No. 2 would take the property, lacks definiteness and certainty, and would require that the court should guess at what tire parties meant. Does it mean that the lessee can purchase the property at any time during the term of the lease, or during the term of the lease and of the extension, or is it indefinite so as.to compel the defendant to execute a deed at any time during his life ?

I am unable to see my way clear to advise a decree on a contract so indefinite and uncertain in its terms as this one is.

I will therefore advise a decree dismissing the bill of complaint.


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    Mary Gerba v. Mike Mitruske.
    [Decided February 19th, 1914.]
    1. In a suit for the specific performance of an agreement to convey a lot of land and the building thereon — Held, upon the evidence, that the building stood wholly upon the complainant vendor’s lot, and did not encroach upon the adjoining lands owned by a stranger'.

      2. In a suit for the specific performance of an agreement to convey land, at the time of the commencement of suit subject to another like agreement to sell made by the complainant vendor with a stranger, and also to a subsisting lease held by a stranger, the complainant is entitled to a decree where, at the time of the making thereof, such other agreement had been released, and the lease had expired by its own terms.
    On final hearing on bill, answer, replication and proofs.

      Mr. Adrian Lyon, for the complainant.

      Mr. Thomas Brown, for the defendant.
   Howell, V. C.

I am satisfied, not only from the evidence adduced on the hearing, but from a study of the maps that were put in evidence, that the building on the Gerba lot stands wholly within the lines of the lot which was convej^ed to her and her husband by Richnowsky and wife on August 10th, 1895. Mitruske knew all about the property because he occupied it as a tenant at the time he made the agreement to purchase it. What he undoubtedly bargained for was the lot as conveyed by Richnowsky, and while the lot described in the agreement is substantially smaller than that described in Mrs. Gerba’s deed, yet Mrs. Gerba proposes to convey to him thet same lot as was conveyed to her. One of the objections raised by the defendant was that the building in question did not stand wholly upon the Gerba lot, that it encroached upon the adjoining property, which belonged to other people, and that therefore the complainant was not able to give title to the land so encroached upon. This I find to be a mistake, and the point must be decided in favor of the complainant.

There were two other objections made to the title: one was that Mrs. Gerba had made a prior contract to sell the same premises to a man named Kish, and the other was that a brewing company held a lease upon the premises which was a subsisting document at the time of the Mitruske agreement. These no longer stand in the way of a specific performance of the contract. The Kish agreement has been released and the brewing 'company’s lease has expired by its own terms. There is now nothing in the way of a specific performance of the agreement, and I will advise a decree to that effect. The details will have to be settled at the time of the settlement of the decree.