author: Teaming, Y. C.

text:
    Robert H. McCarter, attorney-general, v. Vineland Light and Power Company.
    [Submitted February 8th, 1907.
    Decided February 11th, 1907.]
    1. The legislature has the power to bestow upon an individual the right to exercise those public franchises which can only be exercised through legislative sanction to the same extent that such powers can be bestowed by legislative enactment upon private corporations.

      2. The act of March 11th, 1842 (P. L. 181/2 p. 161/ which has been preserved by Rev. Stat. 181/6 p. 138 tit. 5 eh. 3 § 20; Rev. p. 192 § 85; P. L. 1896 p. 303 § 82), authorizing the franchises of public utility corporations to be sold through the medium of receiverships, sanctioned the use of such franchises by an individual purchaser.
    3. The act of March 11th, 1S42, and the subsequent acts extending its operation, will not receive that strict construction which is applied to legislative grants, because the act grants no new rights, but simply makes provision for the transmission of title, by sale or lease, of rights already granted.
    4. The act of February 17th, 1881 (Gen. Stat. p. 3891/ §§ 31/, 35), operates to withdraw legislative sanction for the use, by an individual, of the sovereign prerogatives purchased under decrees of courts, and requires their use by corporations created by the act e* proprio vigore.

    5. On information, filed by the attorney-general, this court may restrain the unwarranted use of sovereign prerogatives.
    On information by the attorney-general for injunction.
    The information seeks to restrain defendant corporation from extending its gas mains through the highways of the borough of Vineland and township of Landis. Defendant was incorporated in the year 1900 under the General Corporation act. P. L. 1896 p. 277. Among the objects named in its certificate of incorporation is the power to perform the acts which are now sought to be restrained. No permission has been given to defendant, by either of the municipalities named, to open or occupy the highways. Defendant claims the right to clo so as lessee of the franchises granted by the legislature to the Yineland Gas Light Company, by act approved March 15th, 1870. P. L. 1870 p. 577. That act granted to the company last named the right to lay gas pipes in the highways now in dispute. Defendant company claims title to the franchises of the earlier company in the following manner: In the year 1884 the Yineland Gas Light Company became insolvent and passed into the hands of a receiver appointed by this court. Pursuant to an order of court the receiver made public sale of all the property and franchises of the insolvent company and John E. Farnum became the purchaser at that sale. The sale was thereafter duly confirmed by the court. Farnum operated the works until the year 1900, when, on March 27th, he conveyed the same to Arthur A. Halbrook. The conveyance included all the real and personal property purchased by Farnum at the receiver’s sale and some additional property and extensions of the works, and specifically included the franchises sold by the receiver. At the same time, though under date of March 31st, 1900, Halbrook and wife conveyed the same property, except the franchises, to defendant company, and, by a separate instrument, leased the franchises to defendant company for the term of ninety-nine years. Since that date defendant company has operated the works and made such improvements and extensions as the growth of the community has seemed to warrant. At the time the information was filed defendant was engaged in making further extensions, and the present information is filed to enjoin this proposed new work. The present application is for a preliminary injunction and has been heard on the information, answer and accompanying affidavits.

      Mr. Edwin P. Miller and Messrs. GasTcill & GasTcill, for the informant.

      Messrs. French & Richards and Mr. LevereM Newcomb, for the defendant.
   Teaming, Y. C.

By act of March 11th, 1842, the legislature authorized the sale, through the medium of receiverships, of the franchises of public utility corporations. P. L. 1842 p. 164. This legislation, with but. minor changes, has been preserved since that date. Rev. Stat. 1846 p. 136 tit. 5 ch. 3 § 20; Rev. p. 192 § 85; P. L. 1896 p. 303 § 82. This statute authorized the sale of the franchises of insolvent public service corporations to any person or persons for the unexpired term of the franchises, and bestowed upon the purchaser the use and enjoyment of the franchises so sold to the same extent that the stockholders of the corporation to which the franchises had been theretofore granted could have used and enjoyed the same. The corporations referred to by the act are only insolvent corporations engaged in work of a public nature, and the franchises referred to are manifestly such parts of the sovereign power as had been granted to the corporation—rights and privileges which can only be enjoyed through legislative grant. In the case of the gas corporation in question this would include the right to lay and maintain gas pipes in the public highway's now in dispute for the purpose of supplying the public with gas. Unless some limitation can be found upon the legislative power to grant such franchises to an individual, the act must be regarded as vesting in an individual purchaser at the receiver’s sale an absolute title to the franchises sold, including the power to operate under the franchises so conveyed to the same extent that the insolvent corporation could have operated; this necessarily includes the right to make extensions within the territory defined in the charter act of the insolvent corporation. I am not awaie of any limitation upon the legislative power of the nature suggested. I apprehend that it is, at this time, within the legislative power to authorize gas works to be constructed and operated by an individual in substantially the same manner that such privileges are now conferred upon gas corporations. It is urged that a strict construction of the act authorizing sales of franchises must be adopted, and that such a construction will discover limitations upon the rights passing to the purchaser under the sale. I cannot regard the statute as one requiring that strict construction which is applied to legislative grants. The statute g'rants no new rights, but simply makes provision for the transmission of title, by sale or lease, of the rights already granted. Blade v. Delaware and Raritan Canal Co., 22 N. J. Eq. (7 C. E. Gr.) 130, 402. The title transmitted at the sale is to the highest bidder and cannot be regarded as a right bestowed in personal confidence and incapable of future transmission, or one that will terminate at the decease of the purchaser. The duration of the term for the enjoyment of the franchise is specifically defined by the act as the remaining portion of the term of the franchise as originally granted.

Our law appears to have contained no provision contemplating other than that a purchaser at such sale should be privileged to operate, as an individual, under the franchises so acquired by the purchaser or to transmit the title to the rights so acquired in the same manner that the title to other property rights could by law be transmitted, until the year 1875, the year that the constitutional amendments took effect. March 25th, 1875, an act was approved (P. L. 1875 p. 41) which provided that whenever any railroad, canal, turnpike, bridge (or) plank road, of any corporation of this state, should be sold under the decree of court or under power of sale in a mortgage deed, the person or persons for or on whose account the purchase should be made were, by the act, constituted a body politic and corporate and vested with

“all the right, title, interest, property, possession, claim and demand, in law and equity, of, in and to such railroad, canal, turnpike, bridge or plank road, with the appurtenances, with all the rights, powers, immunities, privileges and franchises of the said corporation, which may liavebeen granted to or conferred thereon by statute or statutes, in force at the time of such sale and conveyance, and subject to all the restrictions imposed upon such corporation by any such act or acts, except so far as the same are modified hereby.”

The act then, required the persons for or on whose account the purchase was made to meet, within thirty days after-the conveyance, at the county town of one of the counties in which the works were located, two weeks’ notice of such meeting first being given by newspaper notice, and organize “said new corporation” by-electing a president and six directors. At that meeting a corporate name and seal were required to be adopted, and the amount of the capital stock determined. Preferred stock is also authorized, as well as bonds not exceeding in amount the aggregate amount of stock. The new corporation was also required to file in the office of the secretary of state, within one month after organization, a certificate of the date of organization, the name adopted, the amount of stock and the name of the officers selected.

This statute of 1875 does not authorize the persons, in whose interest the purchase is made, to form themselves into a corporation. The act ex proprio vigore makes them a corporation, and requires them to effect an organization in the manner and within the time specified. Whatever legal title may pass by the conveyance, in form made to an individual purchaser or to individual purchasers, is clearly intended by the statute to be held by him or them, not for his or their individual use, but for the use of and to be used by the statutory creation. It seems entirely manifest that this act denies legislative sanction to the exercise of the franchises by an individual or individuals as such, and in effect forbids such use, and requires that any use of the franchises shall b.e exercised through the medium of the corporation created by the act and organized pursuant to the directions of the act.

It will be observed that the act last referred to does not include gas corporations. No legislation of this nature appears to have been adopted touching gas corporations until the act of February 17th, 1881. P. L. 1881 p. 33; Gen. Stat. p. 3694 §§ 34, 35. This act relates to sales made pursuant to a decree of court which include the “property, rights, powers, immunities, privileges and franchises of any turnpike, plank road, gas, water, or gas and water corporation.” By language almost identical with the former act, it provides that

“the person or persons for or on whose account such property, rights, powers, immunities, privileges and franchises may be purchased shall be and they are hereby constituted a body politic and corporate, and shall be and they are vested with all the right, title, interest, property, possession, claim and demand, in law and equity, of, in and to such turnpike, bridge, plank road, gas, water, or gas and water company, with the appurtenances, and with the rights, powers, immunities, privileges and franchises of the corporation as whose the same may have been sold, and which may have been granted to or conferred thereupon by any law of this state in force at the time of such sale or conveyance.”

The act then provides that the persons in whose interest the purchase was made,

“may organize said new corporation by the election of such officers and directors, issue such certificates of stock, create and issue such preferred stock, and from time to time issue such bonds and secure the same as was authorized by the act or acts under and by which said former corporation was created.”

The act then makes it the duty of the new corporation to file a certificate of the organization with the secretary of state within one month after the date of the organization. This provision touching the certificate is in almost the exact language of the similar provision of the act of 1875. It will be observed that the later act differs from the earlier in the matter of the organization of the new company in that the later act introduces the organization provision with the word “may” whereas “shall” is used in the earlier act. In the later act no time is named for the organization and no place for meeting is named and no notice to the meeting is required.' The later act fixes the amount of the stock and bonds authorized as that authorized "by the predecessor corporation, whereas in the former act these matters were to be determined by action of the organization meeting.

It is entirely clear that the general scope and purpose of the act of 1881 is the same as that of the act of 1875. It clearly withdraws whatever legislative sanction might have theretofore existed for the use, by an individual, of the sovereign prerogatives purchased under decrees of courts, and requires their use by a corporation which is created by the act and which it is intended that the purchasers of the franchises shall organize as an operative concern by the election of its officers pursuant to the act. It is possible that, in the absence of an adjudication of forfeiture, through quo warranto, long delay, upon the part of the person or persons holding the legal title to the franchises, in organizing the corporation pursuant to the act of 1881, will not operate to destroy the right to clo so; but I am entirely clear that until this shall have been done any exercise of these franchises by an individual, or by a corporation not created by the act and organized in substantial compliance with the act, is without legislative sanction and is an unwarranted usurpation of power. If this be true, there can be no doubt of the power of this court to restrain such acts at the instance of the attorney-general. Stockton v. Central Railway Co., 50 N. J. Eq. (5 Dick.) 52, 78.

Farnum, who purchased at the receiver’s sale in 1884, instead of associating with himself the requisite persons and organizing the corporation created by the act, conveyed the works and franchises to Halbrook, and Halbrook conveyed the works and leased the franchises to defendant corporation. Defendant is a corporation created by and organized under the General Corporation act, and can in no sense be considered or treated as the corporation created by the act of 1881 and organized pursuant to the requirements of that act. The construction which I have given to the act of 1881 as denying to the individual purchaser the right to operate under the franchises purchased operates in like manner to deny the right to defendant.

Acquiescence upon thejpart of the state in the operation of defendant’s works is urged as a bar to the relief sought by the present information. If it should be assumed to be possible for the sovereign, by acquiescence in encroachments upon sovereign prerogatives, to be barred from the assertion of sovereign rights, such view could not properly be extended to the new or additional encroachments here sought to be restrained.

I am not unmindful of the duty of this court to withhold its extraordinary writ when rights are not clear, and especially when it is sought to restrain the progress of a public work upon a preliminary injunction. But the present record appears to disclose all the facts useful to the determination of the questions involved, and I consider it clear that informant is entitled to the relief sought.

A preliminary injunction will be advised.


source: Caselaw Access Project

author: Leaking, Y. C.

license: Public Domain

text:
    William B. M. Burrell v. Melbourne F. Middleton and Emily M. Middleton.
    [Submitted February 13th, 1907.
    Decided February 15th, 1907.]
    1. A court of equity will not assume jurisdiction to try a controverted legal title to an easement of way, but when the substantive right which complainant seeks to enforce or protect consists of an equitable estate in lands, a court of equity has primary jurisdiction.
    2. If A, for a valuable consideration, agrees to bestow upon B a right of passage over land of A, such agreement operates to vest in B an equitable estate in the land of A co-extensive with the terms of the agreement, and it is within the exclusive jurisdiction of a court of equity to enforce the execution of the agreement by decree of specific performance, and to protect B against the violation of the agreement until the agreement shall have been executed by the delivery of the necessary assurances of legal title.
    3. The statute of frauds will not operate as a bar to the enforcement of a parol agreement for the sale of an interest in land if the agreement has been in part performed in such manner as to render it a fraud upon the vendee to permit the vendor to avail himself of the statute to avoid his agreement, but such parol agreements are not favored, and must be clearly proved.
    4. Preliminary injunction refused because the rights of complainant were not clear.
    On bill for injunction and relief.
    The bill seeks to enjoin defendants from interfering with the use by complainant of the rear portion of defendants’ lots. The nse sought by complainant is the right to pass over the rear portion of defendants’ lots with teams in order that complainant may have access to and from the rear of his own lot. The three lots in question are adjacent, one is owned by complainant, one by defendant Melbourne E. Middleton and the other by defendant ■Emily M. Middleton, the wife of Melbourne. To pass from the rear of complainant’s lots to Markley place, it is necessary to cross the rear of the two lots owned, as stated, by defendants. The right claimed by complainant is based upon a parol agreement, alleged to have been made by defendants with complainant when complainant purchased his lot. Complainant alleges that he purchased his lot of defendant Melbourne F. Middleton, believing that it, and the two adjacent lots now in controversy were owned by the wife of Melbourne, and alleges that both Melbourne and his wife agreed, at the time the ^ale was consummated in June, 1895, that if complainant would pay the price asked for the lot, thejr, defendants, would afford complainant a passageway across the rear of the two lots owned by them to enable complainant to conduct his business as undertaker on the rear of the lot he was purchasing. Complainant alleges that the privilege of passage across defendants’ lots was one of the inducements of his purchase, and that, without that privilege, he would not have purchased at the price by him paid or at all. Complainant alleges that when title was made to him he ascertained that the lot he was purchasing was owned by Harriet M. King, a sister of Mrs. Middleton, and title was then taken from her, but that the agreement touching the passageway across the rear of defendants’ lots was not embodied in the deed because, and only because, the grantor had no interest in the lots over which the way was to cross. Complainant has exercised the right claimed by him to cross the rear of defendants’ lots from the year 1895 until shortly prior to the filing of the bill, at which time defendants denied to complainant the right. Complainant has made valuable improvements in connection with his business on the rear of his lot in reliance upon his right to cross defendants’ lots. Defendants answer and deny having made the agreement claimed by complainant. Defendant Melbourne F. Middleton avers that he had no interest in the sale, but was making it for his wife’s sister, and that no agreement touching a right of way entered into the consideration of the sale or purchase. Defendant Emily M. Middleton denies ever having made any agreement touching a way and denies ever having authorized her husband to do so for her. Defendant Melbourne states that at the time of the sale he stated to complainant’s father that if complainant purchased the King lot defendants would have no serious objection to his crossing the back portion of the lots of defendants as long as defendants owned and occupied them. This statement or promise upon the part of defendant Melbourne is claimed by defendants to have been wholly voluntary upon his part and to have in no way entered into the terms or consideration of the sale.
    The present application is for a preliminary injunction and has been heard on bill, answer and affidavits.

      Mr. Edward A. Armstrong, for the complainant.

      Mr. John W. Wescott, for the defendants.
   Leaking, Y. C.

This court will not assume jurisdiction to try a controverted legal title to an easement of way. Todd v. Staats, 60 N. J. Eq. (15 Dick.) 507. But where the substantive right which complainant seeks to enforce or protect consists of an, equitable estate in lands, this court has primary jurisdiction. The right which complainant here seeks to enforce is of the nature last stated. If defendants, for a valuable consideration, agreed to bestow upon complainant a right of passage over the land of defendants, that agreement operated to vest in complainant an equitable estate in the land of defendants co-extensive with the terms of the agreement, and it is within the exclusive jurisdiction of this court to enforce the execution of the agreement by decree of specific performance, and to protect complainant against the violation of the agreement until the agreement shall have been executed by the delivery-of the necessary assurances of legal title. The statute of frauds will not operate as a bar to the enforcement of the parol agreement if the agreement has been in part performed in such manner as to render it a fraud upon the vendee to permit the vendor to avail himself of the statute to avoid his agreement. But such parol agreements are not favored and must be clearly proved. Vreeland v. Vreeland, 58 N. J. Eq. (8 Dick.) 387. I am unable, in view of the denials contained in the answer and the scope of the affidavits filed by the defendants, to regard the rights of complainant as established with that clearness which is necessary to warrant the issuance of a preliminary injunction. It may also be observed that a denial of the preliminary writ will not, in this case, occasion irreparable injuiy to complainant. Should defendants hereafter deny to complainant the use of the way and complainant’s right be established at final hearing, such damages as complainant may suffer in the interim may be easily measured and recovered at law.

The order to show cause will be discharged, with costs.


author: Leaming, Y. C.

text:
    Anna Miller Smith v. Daniel Smith et al.
    [Decided February 15th, 1907.]
    Under Gen. Btat. p. 1988 § 1, providing that where no time is fixed by a will within which legacies are to be paid, the executors have one year after probate in which to make payment, where an order of the orphans court admitting a will to probate was suspended by appeals, the executor had one year from the day certified copies of the decrees of the appellate courts were filed with the surrogate and probate adjudged by him within which to pay the legacies.
    On petition for payment of legacy.

      Mr. Townsend Godfrey, for the petitioner.

      Messrs. Gaskill & Gaskill, for the respondents.
   Leaming, Y. C.

I entertain the view that the executors of the estate of Philip M. Wheaton, deceased, have one year, from May 16th, 1906, in which to pay legacies.

The order made by the orphans court, June 8th, 190-1, admitting the will to probate, was suspended by the appeals to the prerogative court and the court of errors and appeals. Brown v. Ryder, 42 N. J. Eq. (15 Stew.) 356. Operative probate was not effected until the termination of these appeals. May 16th, 1906, certified copies of the decrees of the appellate courts were filed with the surrogate of Cape May county, and probate was on that date adjudged by the surrogate upon proofs made before him by the subscribing witnesses to the will, and letters were then issued. Under Gen. Stat. p. 1938 § 1, the executors are entitled to one year from that date in which to make payment of legacies, where no time is fixed by the will within which such legacies are to be paid. Should the inoperative order of probate made by the orphans court be held to be the probate contemplated by this statute, these executors would have been subjected to actions for all legacies the day after their appointment.

The prayer of the petition must be denied. The petition will be held until the expiration of the year, when the application may be renewed.

No costs will be taxed.


author: Leaming, V. C.

text:
    Phebe H. Hibbert v. Robert J. Hibbert.
    [Submitted February 5th, 1907.
    Decided February 21st, 1907.]
    1. Where the domicile of matrimony is in a certain state, and the husband deserts the wife, the domicile of the wife continues in that state until she has acquired one elsewhere.
    2. The law will not presume the place of birth as a domicile, based upon the abandonment of the last domicile, without the intention of adopting a new one, unless the evidence clearly establishes the facts on which that presumption is based.
    3. In an action for divorce, evidence held not to show an abandonment by the complainant of the domicile of matrimony.

      On bill for divorce for desertion. On exceptions to report of master advising against a decree of divorce.

      Mr. Ulysses G. Styron, for the exceptant.
   Leaming, V. C.

The sole question for determination is one of jurisdiction. Complainant was deserted by her husband, in Atlantic City, more than two jrears prior to the filing of the bill. They had resided there continuously since their marriage. The desertion is fully established by the evidence. The only question for consideration is whether or not complainant maintained her domicile at Atlantic City during the period between the desertion and the filing of the bill. The doubt cast upon that question arises from the fact that during the period named complainant, being without means, was obliged to accept employment which necessitated her absence from this state during almost the entire time. Soon after the desertion she sold most of her household goods and stored the remainder with a friend in Atlantic City, and accepted employment as demonstrator. At that time it was entirely manifest that the desertion of her husband was a finality with no reasonable hope of his return. Complainant’s duties as demonstrator were almost wholly out of this state and were chiefly in Philadelphia, New York, Washington, Albany, Troy and other large cities, at which points she would demonstrate for her employers. While demonstrating in New York, Brooklyn and Troy she spent much of her time with her married daughter in Easton, New York. She seldom returned to Atlantic City, but when there boarded with the friend with whom her goods were stored.

The domicile of matrimony having been in Atlantic City, and the husband having there abandoned complainant to avoid hi^ matrimonial obligations, the domicile of complainant continued in Atlantic City and is still there, unless a new domicile has been acquired by her elsewhere. Haddock v. Haddock, 201 U. S. 562, 570; Watkinson v. Watkinson, 68 N. J. Eq. (2 Robb.) 632, 638. The testimony clearly discloses that complainant has not acquired a new domicile animo et facto. Since her first departure from Atlantic City she has not made for herself the semblance of a home elsewhere, and it is manifest that she has at no time entertained any fixed purpose to do so. The utmost that can be said adverse to her continued domicile at Atlantic City is that she may not have retained a fixed purpose to return there permanently. I think a fair deduction from the testimony is that during most of the period of her absence from Atlantic City she did not know whether it would ever be possible for her to return to that city permanently, but that she wished to do so and only remained away from necessity. Had she definitely abandoned the hope or expectation of returning to Atlantic City as her home and continued a wanderer with no new domicile adopted by her either in fact or intent, then her domicile of origin, which was Delaware, might have become her legal domicile. Valentine v. Valentine, 61 N. J. Eq. (16 Dick.) 400, 406. But the testimony will not support that view. Before the law will artificially establish the place of birth as a domicile, based upon the abandonment of the last domicile without the intentional adoption of a new one, the evidence should clearly establish the facts on which that unusual presumption is based. I do not think that the conclusion can be property drawn from the evidence that complainant has, at any time, abandoned her Atlantic City domicile.

I will' advise a decree in accordance with the prayer of the bill.


text:
    Charles W. Maxwell et al. v. Charles Leichtman et al.
    [Submitted February 11th, 1907.
    Decided February 21st, 1907.]
    The right to file a bill of interpleader is not lost by filing pleas in bar in actions brought at law, unless the defence at law is persisted in until verdict.

      On bill of interpleader. Hearing on return of order to show cause for injunction pursuant to prayer of bill of interpleader.

      Mr. Harry Wootton, for the complainants.

      Messrs. Thompson & Cole, for the defendant Leichtman.
   Leaming, Y. C.

I am convinced that complainants are entitled to a preliminary injunction as prayed.

It is not clear that complainants may not have imperiled their right to full relief by filing pleas in the actions at law before applying to this court for relief, but I am unable to find authority or satisfactory reason for the claim that by so doing they have destroyed their right to maintain the present bill. The rule that to entitle a party to relief by bill of interpleader he must apply before verdict or judgment at law appears to be well recognized and almost uniformly enforced. See Cornish v. Tanner, 1 Younge & J. 333; Holmes v. Clark, 46 Vt. 22; Danaher v. Prentiss, 22 Wis. 311; Haseltine v. Brickey, 16 Gratt. 116; Yarborough v. Thompson, 8 Sm. & M. 291. But where the effect of the verdict is merely to settle the quantum of damages the rule referred to is not uniformly applied. See Hamilton v. Marks, 5 De G. & S. 638, criticised in Danaher v. Prentiss, supra. I find no authority, however, which gives sanction to the view that the right to file a bill of interpleader is lost by the act of filing pleas in bar in the actions brought against one at law, unless the defence at law is persisted in until verdict. In Jacobson v. Blackhurst, 2 Johns. & H. 486, complainant’s bill was entertained, under the circumstances named, but terms were imposed including the withdrawal of the plea at law and the payment of costs at law and also in equity up to the time of the withdrawal of the plea. See, also, Jew v. Wood, 3 Beav. 579. To at this time determine the right to costs, however, would be beyond the scope of the issues now presented.

The delivery to complainants of the indemnity bond cannot be held to bar complainants’ right to relief under their bill of interpleader. 2 Dan. Ch. Pl. & Pr. 1566. The affidavits filed do not justifj1' the conclusion that the delivery of the indemnity bond referred to operated to establish a contractual relation between the parties.

The claims of the respective defendants are not independent claims without privity or derivation from a common source. Even in the more strict cases of bailees, agents and tenants the contractual relation with the bailor, principal or landlord Avill not operate as a bar to a bill of interpleader when the opposing claim is derivative under that of the bailor, principal or landlord. 4 Pom. Eq. Jur. § 1327. In the present case the claim of defendant Clayton is based upon the original right of defendant Leichtman, and emanates from failure of the latter to sue within six months.

The order to show cause will be made absolute.


text:
    Thomas S. Wills and Sarah Wills v. Eliza A. Wills, Eliza A. Wills, executrix.
    [Submitted February 18th, 1907.
    Decided February 22d, 1907.]
    1. Where lands are devised in the first instance in language indeterminate as to the quality of the estate, from which an estate for life would result by implication, and words adapted to the creation of a power of disposal, without reservation as to mode of execution, are added, the will vests in the devisee an estate in fee.
    2. A power given to a devisee to sell when in her judgment a sale is necessary for her comfort and convenience, is a power without limitation within the rule that where lands are devised in the first instance by language indeterminate as to the quality of the estate, and words adapted to the creation of a power of disposal, without reservation, are added, the will vests in the devisee an estate in fee.
    3. While force should be given to the intention of the testator, his intention must be gathered by the application of the known rules of construction and interpretation.

      On motion to strike out bill.

      Messrs. Berry & Riggins, for the complainants.

      Mr. Ephraim, Tomlinson and Mr. Howard M. Cooper, for the defendants.
   Leaming, V. C.

1 entertain the view that the provisions of the will in question fall within the defined rule of construction that where lands are devised in the first instance in language indeterminate as to the quantity of the estate from which an estate for life would result by implication, and words adapted to the creation of a power of disposal, without reservation as to mode of execution, are added, the construction will be that an estate in fee is given. I am unable to find in the power of sale contained in the fifth paragraph of the will any limitation upon the power of disposition sufficient to remove it from the operation of this rule. The power of sale named in the will is, as I understand the force of the language used, the power to sell, when, in the judgment of the devisee, a sale is necessary for her comfort or convenience. The testator apparently sought to make the .judgment of the devisee the sole criterion for the exercise of the power. No power could do more. Had the power of sale been limited to conditions where a necessity should exist to provide funds for the support of the devisee, the views expressed by Vice-Chancellor Pitney in Cox v. Wills, 49 N. J. Eq. (4 Dick.) 130, and Bradway v. Holmes, 50 N. J. Eq. (5 Dick.) 311, might apply. But here the devisee's power of sale is based upon her own judgment as to her own convenience. I deem such a power practically without limitation. I am convinced that the provisions over must fail. While full force should be given to the intent of the testator, yet that intent must be gathered by the application of the known rules of construction and interpretation established by oft-repeated and longstanding adjudication. Tuerk v. Schueler, 71 N. J. Law (42 Vr.) 331, 333.

I will advise an order striking out the bill.


text:
    Walter Cresse v. John B. Loper.
    [Submitted March 4th, 1907.

      Decided March 4th, 1907.]
    The rule that if a trustee, or oue standing in a similar capacity, becomes a purchaser of the trust property, such act is voidable at the instance of the person whom he represents, applies to a sale of partnership property by a master, pursuant to a decree in partition, and where the same is purchased by one of the partners the other partner may avoid the sale.
    On bill, answer, replication and proofs.
    The bill is filed by complainant to procure an accounting from defendant as a partner, and also to have defendant declared to hold the title to certain real estate in trust for the partnership. Complainant and defendant were engaged in the meat and vegetable business at Holly Beach, New Jersey, as partners. In March, 1903, complainant was adjudged insane and committed to an institution for the insane, where he remained until October, 1905, at which time he was discharged as cured. During the period of incapacity of complainant defendant continued to conduct the partnership business. Among the assets of the partnership was certain real estate which had been purchased by the partners with partnership funds and title taken in the names of the partners as tenants in common. In December, 1903, defendant filed a bill for partition of the real estate so owned by the partnership, and in April, 1904, pursuant to decree in the partition cause, public sale of the real estate was made by a special master. At that sale defendant became the purchaser as the highest bidder. In the final decree in partition the parties were not expressly authorized to purchase at the sale. Complainant now seeks an accounting from defendant, as partner, for the period during which complainant was confined, and also seeks to have defendant decreed to hold the title to the real estate, which he purchased at the master’s sale, as trustee for the partnership. The testimony at the trial established that the real estate, at the time of the sale, was worth at least $2,300. The amount for which the property was sold to defendant at the sale was $1,430. Defendant admits his liability to account, but asserts absolute title to the real estate purchased by him at the master’s sale.

      Mr. James M. E. Hildreth, for the complainant.

      Messrs. Douglass & Douglass, for the defendant.
   Leaking, Y. C.

Since the case of Staats v. Bergen, 17 N. J. Eq. (2 C. E. Gr.) 554, it has been the recognized policy of the law of this state that if a trustee, or one standing in any similar capacity, becomes the purchaser of the trust property, such act is voidable at the instance of the person whom he represents. The rule is adopted as a wise and necessary public regulation, and is applied to judicial sales as well as to sales made by the fiduciary agent. Carson v. Marshall, 37 N. J. Eq. (10 Stew.) 213, 215; S. C., 38 N. J. Eq. (11 Stew.) 250, 255; Romaine v. Hendrickson’s Executors, 27 N. J. Eq. (12 C. E. Gr.) 162; Creveling v. Fritts, 34 N. J. Eq. (7 Stew.) 134; Porter v. Woodruff, 36 N. J. Eq. (9 Stew.) 174; Deegan v. Capner, 62 N. J. Eq. (17 Stew.) 339.

Tt is not, in my opinion, essential to the application of the rule that the purchaser be a trustee in the strict sense. A trustee is forbidden to purchase because his interest, as a purchaser, is opposed to the interest of his cestui que trust. The philosophy of the rule extends its application to all cases where it is the legal duty of the purchaser to cause the property to be sold for its full value. In the present case the property sold was that of the partnership. Defendant, as a partner, owed a legal duty to the partnership and to his absent partner to cause the partnership asset to be sold at its full value. As a purchaser it was to his personal advantage to buy the property as cheaply as possible. The duty which defendant was under legal obligation to perform in reference to the sale of the property was clearly inconsistent with his interests as a purchaser. Partnership relations are usually defined and measured by the principles of agency, but to the same extent that the powers of partners are thus defined, corresponding resulting duties arise which carry the essential elements of trust relationship, and the same rules and tests are necessarily applicable to the conduct of partners, with reference to the partnership assets, as are ordinarily applicable to that of trustees. It is in this view that I understand Partridge v. Wells, 30 N. J. Eq. (3 Stew.) 176, 178, in which Vice-Chancellor Van Fleet gives expression to the idea that partners hold to each other the relations of trustee and cestui que trust. S. C., affirmed 31 N. J. Eq. (4 Stew.) 362. See, also, Pomeroy v. Benton, 57 Mo. 531, 545; Kelley v. Greenleaf, 3 Story (U. S.) 93, 100; Goldsmith v. Eichold Brothers, 94 Ala. 116. Tn the present case the principles of trusteeships are peculiarly applicable by reason of the circumstance of the insanity of complainant at the time of the sale. Insanity of one of the partners does not, per sc, work a dissolution of the partnership. The remaining partner may, in such case, assume the whole management of the partnership business, or may institute proceedings for dissolution. The former course was adopted by defendant.. In the adoption of that course his fiduciary relationship clearly embodied all the essential elements of a trusteeship. Raymond v. Vaughn, 128 Ill. 256. I am of the opinion that in purchasing the property in question defendant subjected himself to the operation of the rule in Staats v. Bergen, supra.

The propriety of extending the operation of this rule to judicial sales of partnership assets is well exemplified by the facts of this case. The property was sold for scarcely more than onelialf of its value. The uncle of complainant testified that he was induced not to bid at the sale by a promise upon the part of defendant that, if he would not “bid on the property and run it up” defendant would see that complainant got all that was coming to him. While this is denied by defendant it is clear from the testimony that the uncle was deterred from bidding by reason of what he understood to be a promise of this nature.

I will advise a decree that defendant holds the title to the land in question in trust for the partnership, and that the special master already appointed make public sale of the real estate. In the accounting before the master all just allowances will be made to defendant.


author: .Teaming, V. C.

text:
    Woodbine Land and Improvement Company v. Isaac Riener et al.
    [Submitted March 11th, 1907.
    Decided March 13th, 1907.]
    All deeds of lots sold by complainant in a settlement established by it contained a covenant that no liquor should be sold on the granted premises except on consent executed with the formalities of a deed.—Held, that though liquor has been sold on the tract for a number of years in violation of law and the covenant, and a wholesale liquor license has been issued for three years authorizing sale in a building on the tract, yet, complainant having at no time given even tacit sanction to violation of the covenant, but all sales having been against its honest efforts to prevent such violation, and the delay in filing bill to enforce the covenant having been due to hope that the sale could be otherwise stopped, there has been no waiver of right to enforce the covenant.
    On bill, answer, replication and proofs.
    Complainant seeks to enforce a restrictive covenant contained in a deed made by complainant of lands now owned by defendant Jennie Riener.
    In the year 1891 complainant purchased some five thousand acres of land in Cape May county for the purpose of establishing thereon a settlement of Hebrews. The enterprise was for the benefit of the Hebrew race and not for profit, and was conducted by money forming a trust fund left by Baron Hirst for that purpose. The tract was divided into building lots for residences and into garden lots, which, were to remain open, and these lots were for sale to Hebrews. The general plan included the adoption of certain covenants to be inserted in all deeds, and among these was a covenant against the sale of intoxicating liquors, as follows:
    “Also, that no spirituous, malt, intoxicating or vinous liquors, preparations or substances in the nature thereof, shall be manufactured, bought, sold or kept for sale as a beverage upon the premises above granted without the written consent first had and obtained of the party of the first part, duly executed and proven under its common or corporate seal, in the same manner that conveyances of land are properly executed and proven in the State of New Jersey.”
    Over two hundred and fifty conveyances have been made by complainant and each conveyance contains the above covenant, as well as other uniform restrictive covenants. At this time over two thousand people reside on the tract. The lot known as No. 22, block No. 1, in section D, was conveyed by eomplainant March 4th, 1897, to Emma Pesselnik, and by sundry conveyances the title became vested in defendant Jennie Riener. Defendant Reuben Riener now occupies the lot in question. The bill alleges that defendants are. now engaged in the business of selling intoxicating liquors on the lot named in violation of the terms of the covenant above quoted, and seeks the enforcement of the covenant by process of injunction.
    The answer admits the violation of the covenant and justifies under the claim that complainant has waived its right to enforce the covenant by permitting violations of the same covenant by other grantees, and also by permitting the violation of other uniform covenants contained in the deeds made by complainant.

      Messrs. Goult, Howell <& Smith, for the complainant.

      Mr. James M. R. Hildreth, for the defendants.
   .Teaming, V. C.

The courts of this state have so frequently given consideration to' the .enforcement of covenants of this, nature that the law con-trolling questions oJE this class may be said to be fully defined. Complainant is clearly entitled to the relief sought unless it has by its conduct lost its right to the aid of this court. As restrictive covenants in deeds are for the purpose of preserving designed conditions, it necessarily follows that when one who is entitled to enforce them fails to do so, he is"liable to be deemed to have acquiesced in the violation and abandoned the scheme originally intended. If the failure to enforce the covenant has induced physical changes permanently destructive of the harmony of the original scheme designed to be preserved by the covenant, it is manifest that an abandonment must be assumed; but where no substantial change in the conditions sought to be preserved 'by the covenant has been brought about by the failure to enforce, no good reason appears to exist for treating the failure to enforce as a bar, unless the circumstances of the case clearly disclose acquiescence to a degree manifesting the absence of an intention to preserve the original conditions. In Ocean City Association v. Chalfant, 65 N. J. Eq. (20 Dick.) 156, 158, Vice-Chancellor Reed said: “It is only when the person in whom the right to enforce the covenant resides has permitted such infringement of its provisions as results in alterations that cannot be corrected, or which it is manifest there is no intention to have corrected, that he is precluded from further enforcing the covenant.” It has frequently been held that acquiescence may operate as a waiver of the right to enforce covenants respecting the use of the property for certain occupations, without any physical changes of a permanent nature having occurred in the property, but in all such cases it will, I think, be found that such substantial changes have been permitted in the special conditions sought to be preserved by the covenant as to clearly indicate an intention upon the part of the person entitled to enforce the covenant to relinquish the original purpose or scheme defined by the covenant, or that adverse equities have intervened by reason of the failure to enforce the covenant.

In the present case I am unable to find any acquiescence upon the part of complainant amounting to a waiver of its right to enforce the covenant in question. Liquor has undoubtedly been sold upon the tract in violation of the covenant and in violation of law for a number of years prior to the filing of the bill, but the evidence satisfies me that complainant has persistently combated the practice in the hope of wholly preventing it without the necessity of an appeal to this court. In every case of illicit sales brought to the knowledge of complainant indictments have been procured at its instance or attempts have been made by complainant to procure indictments. In September, 1903, a wholesale liquor license was granted to Simon Pesselnik by the court of common pleas of Cape May county authorizing him to sell liquor in a building on this tract. In September, 1904, a similar license was granted to Isaac Baynor. In September, 1905, a similar license was again granted to Isaac Baynor. The bill was filed in November, 1905. Prior to this complainant had earnestly endeavored to prevent these licenses by moral influences, and when satisfied that it could not be accomplished in this way the bill in this ease was promptly filed. I am entirely satisfied that complainant has at no time given even tacit sanction to the violation of this covenant, and that such violations as have occurred have not only been against the will of complainant but against the honest efforts upon the part of complainant to prevent the sale of liquor on the tract in violation of the covenant, and that the only cause of delay in filing the bill was the hope that the covenant could be controlled by complainant by moral influences and the necessity of filing the bill thus obviated. Under these circumstances there can be no acquiescence in the essential elements of that term, and no adverse equities appear to have arisen by reason of the delay in filing the bill.

Violation of other uniform covenants of. the deeds of complainant were also urged as a defence. The testimony was admitted at the hearing, but I deem it irrelevant. The other covenants referred to have no relation to the liquor covenant now in question.

I will advise a decree in accordance with the prayer of the bill.


text:
    Harrison H. Voorhees, receiver, &c., v. Horace F. Nixon et al.
    [Submitted March 13th, 1907.
    Decided March 15th, 1907.]
    1. In a suit by the receiver of a corporation to set aside a mortgage given by the corporation in part payment for land sold to it by the wife of the president, it appeared that the wife purchased the land for $450 and sold it to the corporation for $3,000; that the president was the moving spirit in the organization of the corporation, and that but three of the five directors were present at a meeting at which the resolution for the purchase was passed, and that at such meeting the wife was elected secretary; that no notice of the first meeting of the directors was given and no waiver of notice executed. It was shown that when an application was made for the appointment of a receiver of the corporation, the wife pledged the mortgage to raise money to contest the receivership, and that thereafter she sold it and applied part of the proceeds to the husband’s uses.—Beltl, that the facts warranted an abatement of the mortgage, except as to the amount which the wife had paid for the land.
    2. In a suit by the receiver of a corporation to set aside a mortgage given by it to the wife of an officer, it appearing that practically all of the stockholders had been ignorant of the facts on which the right to relief was based, and that they had been deceived by the officer in question, no laches could be imputed.
    3. The assignee of a mortgage securing a bond takes it subject to all defences to the bond, whether with or without notice, as the mortgage is a mere incident of the debt.
    4. Where a corporation executed a mortgage to the wife of the president in part payment for land sold to the corporation by her, and thereafter the corporation was restrained from transferring any of its property rights, which was known to one who purchased the mortgage, and without any action of the board of directors authorizing it, the president and his wife, as secretary of the corporation, executed in the name of the corporation, at the instance of the purchaser, a declaration against offsets, such instrument was no bar to the assertion by the corporation’s receiver of defences against the mortgage, on the ground that the execution thereof arose from a violation of a fiduciary relation.
    On final hearing on pleadings and proofs.

      The bill is filed by the receiver of the Ocean Crest Hotel Company, an insolvent corporation, to test the validity of a mortgage which was given by that corporation in part payment for land sold to the corporation by defendant Mrs. Lillie M. Malott. Horace E. Nixon is made a defendant as the present holder of the mortgage. The land in question was conveyed to the corporation by Mrs. Malott, pursuant to an agreement for that purpose made at the organization meeting of the corporation for the price of $3,000, of which $1,000 was paid in stock of the corporation at par and $2,000 by the execution of the mortgage now in question on the land conveyed. Mrs. Malott was secretary of the corporation and II. J. Malott, her husband, was president and a director. The theory of complainant’s suit is that the fiduciary relations which existed between the Malotts and the corporation rendered the contract violative of the established principles controlling trusteeships, and that the contract should be set aside to the extent of charging against the mortgage the difference between the amount which Mrs. Malott paid for the property and the amount for which she sold the property to the corporation.

      Mr. Lewis Siarr, for the complainant.

      Mr. James B. Nixon, for the defendants.
   Leaming, Y. C.

It must be regarded as the settled policy of the law of this state that express contracts between a corporation and one of its directors are voidable at the instance of the corporation. When the transaction is one in which there arises by operation of law obligations co-extensive with the contract, as would be the case in the loan of money bjr a director to his corporation, it is manifest that no reasonable objection can be found'to the transaction, but where the right must find its support in the convention it will not be sustained as a right. The underlying reason for the rule is that it is the duty of a director to represent the interests of his corporation, and that duty cannot be impartially performed when he contracts with it in his own behalf. I understand this to be the rule as defined by the court of errors and appeals in Stewart v. Lehigh Valley Railroad Co., 38 N. J. Law (9 Vr.) 505, 522. There are cases which hold that where the transaction is fair and open the contract may be supported, but such cases, when applied to contracts between a director .and his corporation, are clearly in conflict with the principles of the case above cited. When the contract has been executed and the parties cannot be restored to their original position, I take it to be the duty of a court of equity to decree such relief as will place the parties as nearly as possible in the position where they stood at the time the voidable contract was made.

The contract of sale in this case, however, was made between the corporation and Mrs. Malott, who was not a director, but was the wife of a director. I entertain the view that the policy which forbids a contract between a corporation and- its director necessarily includes a director’s wife. A trustee, or an agent bo sell lands, could not properly be permitted to make sale of the trust property to his wife. Irrespective of the husband’s interest in his wife’s property, present or prospective, his interests in her welfare would, in such cases, necessarily interfere with an impartial exercise of his duties to his trust. A contract made by a trustee to purchase lands owned by his wife would, in like manner, operate as a strain upon his duties to his trusteeship. See Reed v. Aubrey, 91 Ga. 435, and cases there collected. If, therefore, a contract between a corporation and its director is to be deemed voidable, a like contract between a corporation and the wife of a director should stand upon the same plane. I entertain the view that the contract of sale from Mrs. Malott to tire corporation was, on these grounds, voidable at. the option of the corporation.

I reach this conclusion with perhaps greater freedom than I should otherwise exercise by reason of the fact that other considerations in this case lead me to the same result. October 7th, 1905, Mrs. Malott contracted with a land company for the purchase of the two lots which were afterwards sold by her to complainant corporation. By her contract of purchase she took the lots at a valuation of $450 per lot, but a clause in the agreement made the entire purchase price $450 in case she built on the property purchased, pursuant to the agreement, by September 1st, 1906. The $450 payment was completed by her October 25th, 1905. Complainant corporation was formed in December, 1905, for the purpose of acquiring these lots and erecting thereon a hotel. In the formation of the corporation Mr. Malott was the moving spirit. He associated with him four incorporators and filed the certificate of incorporation with the secretary of state, December 13th, 1905. Of' the $1,000 capital stock with which the company was to commence business Mr. Malott subscribed for $500. He prepared minutes for the incorporators’ organization meeting and for the first directors’ meeting in advance of the meetings, and submitted them to his co-incorporators in Philadelphia. The following day, December 21st, 1905, three of the five incorporators met in New Jersey and adopted these minutes as already prepared. These minutes of the organization meeting included the adoption of a set of by-laws, the election of the five incorporators as directors and the passage of a resolution for the purchase of the lots in question for $3,000, payable as already stated. The minutes of the first directors’ meeting, prepared in advance, were also adopted. These minutes included the election of Mr. Malott as president of the board and Mrs. Malott as secretary, and also the approval of the resolution for the purchase of the lots from Mrs. Malott. While the minutes recite that the five directors were present, only three were, in fact, present. No notice of this first meeting of the board of directors was given and no waiver of notice was signed. From the testimony it is apparent that Mr. Malott was the dominating factor throughout. I am entirely satisfied that no proceedings touching the purchase of these lots can be properly said to have been a genuine exercise of a discretion upon the part of a board of directors of the corporation. The proceedings were conceived and carried into execution by Mr. Malott with a free hand, and do not, in my opinion, in any proper sense represent the deliberative exercise of an intelligent or independent judgment of á board of directors. Whether the members of the board, other than Mr. Malott, knew that the lots for which they were paying $3,000 had cost but $450 does not appear, but one member of the board testified that the matter was not mentioned. All this may be xmimportant if it be assumed, as a fact, that Mrs. Malott was dealing with the corporation as an independent principal touching her own property, and that, as the wife of a director, she was privileged to do so, but I am not prepared to find as a fact that, as between Mr. and Mrs. Malott, this property was purchased by her from the land company in her own interest. When she made the contract of purchase of these lots and agreed to pay $450 for them and to erect a building upon them costing not less than $2,000, her sole resources were $508.03 which she had in a bank. When an application was made for the appointment of a receiver of complainant corporation she pledged the mortgage now in question to raise $300 to enable Mr. Malott to contest the receivership. Later she sold the mortgage and applied part of the proceeds of sale to Mr. Malotfs uses. I incline to the view that, as between them, the contract of purchase of these lots was probably in his interest as much as in hers, and that she cannot properly be treated as having been an independent owner of the lots at the time of the sale to complainant corporation. I find it impossible to view the transaction other than as one essentially between Mr. Malott and his corporation, and as one in which no independent judgment of a board of directors has been exercised.

It is urged that the corporation has not promptly asserted its rights to avoid -the contract. The testimony discloses that much if not all of the capital which came into the corporation by the sale of stock to new stockholders after the organization meeting was procured through misrepresentations of fact by Mr. and Mrs. Malott touching this very transaction. These new stockholders have testified that both Mr. and Mrs. Malott represented to them that Mrs. Malott had sold five instead of two lots to the corporation, and that they remained under that belief until the contrary was disclosed by a search of title made after the insolvency of the corporation. The bill in this ease was originally filed under the claim that Mrs. Malott had in fact contracted to sell five instead of two lots, and had failed to convey the remaining three. Both Mr. and Mrs. Malott deny having made these representations, but the evidence is strongly against them as to that fact. Under these circumstances it is manifest that no laches can be imputed, for practically all of the stockholders who were entitled to relief were ignorant of the facts. . •

The contract of sale having been subsequently executed by a •conveyance to the corporation, and a hotel having been built on the property, the parties cannot now be'placed in their original positions. It becomes necessary, therefore, to restore to Mrs. Malott'what she is rightfully entitled to. She paid for the contract of purchase which she sold to tire company $450. • It is claimed that when she sold it to the company it had greatly en-haneed in value by reason-of certain developments in the land company enterprise. The claim that it increased in value from $450 to $3,000 in less than three months .cannot be seriously entertained. It may have increased in valúe in s'ome degree, but I cannot conclude that its enhancement in value during that time was-of such substantial amount that Mrs. Malott can at this time, under the circumstances of this'case, become equitably entitled to more than the amount which the contract cost her, with interest on that amount.

• It remains to be considered whether defendant Nixon, as present owner of the mortgage, enjoys rights superior to those which would be extended to Mrs. Malott as owner- of the mortgage. The mortgage was assigned to defendant Nixon as security for a fee of $300 for defending the application for a receiver of complainant corporation. Later, and after Mr. Nixon had been informed that defences existed to this mortgage, he purchased it absolutely at a valuation of fifty per cent, of its face value, paying for it $700, in addition to the $300 owing to him as a fee. Even as an innocent purchaser of a negotiable instrument he could not, under these circumstances, claim protection beyond the $300 originally loaned. But the assignee of a mortgage securing a bond takes it subject to all defences to the bond, whether with or without notice. “The mortgage is a mere incident of the debt which it is intended to secure, and a defence to the debt is a defence to the mortgage.” Magie v. Reynolds, 51 N. J. Eq. (6 Dick.) 113, 117. Before making the loan of $300 on the mortgage defendant Nixon procured a declaration against offsets executed in the name of complainant corporation, and this is urged as an estoppel against complainant. This declaration against offsets was executed by Mr. Malott as president and Mrs. Malott as secretary of the corporation without any action of the board of directors authorizing it, and at a time when the corporation was under restraint, by order of this court, from transferring any of its property rights, and Mr. Nixon at that time knew of that restraint. It is clear that this instrument cannot be treated as a bar to the assertion of any defences which complainant corporation at that time had against the mortgage.

The receiver of the corporation urges that the entire abatement from the contract price should be charged against the mortgage. I cannot accede to that view. I think the $150 and interest, which is to be restored, should be allowed to stand as due on the mortgage, and that the decree should adjudge that amount as due on the mortgage, and no more. I will so advise.


author: Leaking, V. C.

text:
    Phineas B. Marr v. William B. Marr and Beacon Land Company.
    [Submitted March 15th, 1907.
    Decided March 22d, 1907.]
    1. A director of a corporation may purchase the corporation property sold under an execution on a judgment obtained by him against the corporation, and the sale will not be set aside because of his trust relationship, unless some undue advantage has been secured by reason of that position.
    2. In an action by a stockholder of a corporation to set aside a sale of the corporate property under an execution on a judgment obtained by a director against the corporation to the director, the fact that notice of the sale, other than the statutory notice, was not given to all the stockholders was insufficient to show that the director had taken any undue advantage.
    The bill is filed by complainant, as a stockholder of Beacon Land Company, in behalf of himself and other stockholders, to set aside a sale made by the sheriff of Ocean county to defendant William A. Marr under an execution issued on a judgment held by defendant Marr against the land company. The land company having ceased the transaction of business, and having no organized board of directors, complainant seeks to enforce such rights as could have been appropriately enforced at the instance of the company in behalf of its stockholders.
    In the year 1898 the Beacon Land Company was indebted to defendant Marr for money which he had prior to that time loaned to it. On failure of the company to make payment, defendant Marr brought suit and recovered judgment. On an execution issued on that judgment the sheriff of Ocean county made sale of the hotel property now in question, known as “Beacon-by-the-Sea.” The property consisted of the hotel lots, buildings and furniture, and comprised all of the property of the land company. At the sale the property was purchased by defendant Marr, as plaintiff in execution. At that time defendant Marr was president and a director of the land company. The theory of complainant’s suit is that by reason of the trust relationship at that time existing between the land company and defendant Marr, as its president and one of its directors, the title which he received by that purchase will be decreed to be held by him in trust for the benefit of the stockholders of the land company and an accounting ordered. Final hearing has been had on bill, answer of defendant Marr, replication and proofs.

      Messrs. Blealcly & Sioclcwell, for the complainant.

      Mr. Thomas B. Hall, for the defendant Marr.
   Leaking, V. C.

It is a general principle of equity, firmly established and frequently applied in this court, that if a trustee becomes the purchaser of the trust property, such act is voidable at the instance of the cestui que trust. The rule is adopted from wise considerations of public policy with a view to remove from transactions by trust agents the clanger attendant upon the existence of personal interests inconsistent with trust duties. In Staats v. Bergen, 17 N. J. Eq. (2 C. E. Gr.) 554, 559, the learned chief-justice, speaking for the court of errors and appeals, said:

“I think, upon correct principle, a trustee, in no case, nor in any crisis, can become the purchaser of property when the fact of his making such purchase has a tendency to promote his own interest at the expense of his cestui que trust. This, it is conceived, is the groundwork of the decisions in England and in this country.”

The rule has been uniformly applied in this state to purchases by a trustee at public sales, and also at judicial sales, to the same extent as to sales made by the trustee in eases where the purchaser has a duty to perform in reference to the sale inconsistent with the character of a purchaser. Staats v. Bergen, supra; Marshall v. Carson, 38 N. J. Eq. (11 Stew.) 250; Romaine v. Hendrickson’s Executor, 27 N. J. Eq. (12 C. E. Gr.) 162; Creveling v. Fritts, 34 N. J. Eq. (7 Stew.) 134; Porter v. Woodruff, 36 N. J. Eq. (9 Stew.) 174; Deegan v. Capner, 44 N. J. Eq. (17 Stew.) 339.

A director of a corporation is not a trustee in the strict sense. The title to the corporate property is in the corporation. But the duties which a director is required to perform for the corporation which he represents are in many respects similar to the duties of a trustee, and his relation to the corporation is, in general, essentially that of a 'trustee. ' He is not, in consequence, allowed that freedom to contract with his corporation which a stranger could enjoy. In Stewart v. Lehigh Valley Railroad Co., 38 N. J. Law (9 Vr.) 522, it is shown that his trust relationship to his corporation is such as to render his contracts made with it voidable to the extent that such contracts cannot be enforced, as express contracts, against the will of thé corporation. He may loan money to his corporation or perform personal service for his corporation, and the obligation for the repayment of the money loaned or for the payment of reasonable compensation for the service performed will arise by operation of law, but cannot exist by force of the express contract. Gardner v. Butler, 30 N. J. Eq. (3 Stew.) 702, 721.

In the present case defendant Marr, while a director, loaned to his corporation money which was at that time needed by the corporation, and which was used by it in its regular business. After repeated efforts upon the part of defendant Marr to induce the corporation to repay the money due to him he was compelled to bring suit and to issue execution on the judgment procured and make sale of the property of the corporation. It is now contended upon the part of complainant that the trust relationship which existed between the corporation and defendant Marr, as its president and one of its directors, denied to him the right to become a purchaser at the sale made under his execution.

I have not been able to reach the conclusion that the principles already stated can be properly extended to render such a sale invalid at the mere option of the corporation or its stockholders. Conditions may easily exist to justify a decree setting aside such a sale, for the purchase of the property of a corporation by its director, even under the circumstances named, may appropriately subject the transaction to the closest scrutiny in all its aspects as to fairness and good faith, but I entertain the view that something more is necessary to set aside such a sale than the mere exercise of a purpose to do so upon the part of the corporation or its stockholders. To deny to the judgment creditor the privilege to buy at such a sale is to deny to him a substantial right which may be essential to the effective enforcement of his judgment. His attitude of hostility to his corporation has, in such a case, become a necessity which has been brought about' and made necessary by the wrongful conduct of the corporation. I find it difficult to recognize the undoubted right of a director to occupy the attitude of hostility to his corporation which arises in the enforcement of his claim by an action at law to compel payment and to deny to him the right to enforce the judgment procured with all the privileges which are incident to the judgment. In the exercise of that attitude of hostility, which is made necessary for the enforcement of his just claim against his corporation, it would seem that he should be entitled to the full privileges of a stranger, not only in the prosecution of his action, but as well in the enforcement of his judgment. If the evidence discloses that he has in fact exercised no other privileges, I think the sale should stand. It is urged by complainant that he should first resign, and thus render himself free to act. Such a course would ordinarily be empty and fruitless and equally subject to judicial investigation. When the facts disclose that he has not used his office to his own advantage, I cannot recognize the necessity or propriety of the application of a principle which operates, in such a ease, to render the sale invalid at the mere instance of the corporation. In treating such sales as voidable, I think they should be so treated only to the extent that other judicial sales are so treated. If an inadequate amount has been bid, the law court from which the execution issued can afford an adequate remedy. Palladino v. Hilpret, 72 N. J. Eq. (2 Buch.) 270. If unfair advantage has arisen attributable to a trust relationship this court can appropriately grant relief.,

I have found but little assistance in the adjudicated cases upon the subject. The case of Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, which is frequently cited in support of the right of the director-creditor to purchase, goes no further than to support the right in the case of a sale made by the trustee of a mortgage deed given by the corporation to secure a debt due to the director, and the suggestion is there made that the trustee making the sale is appointed by the corporation for the purpose and to that extent represents the corporation. Saltmarsh v. Spaulding, 147 Mass. 224, is to the same effect as Twin-Lick Oil Co. v. Marbury, supra. The case of Lucas v. Friant, 111 Mich. 426, 436, expressly holds that a director who is a judgment creditor may buy at the execution sale, but the decision is based on Twin-Lick Oil Co. v. Marbury, supra, and Saltmarsh v. Spaulding, supra, and other eases which do not fully support the text. The case of Hoyle v. Plattsburgh and Montreal Railway Co., 54 N. Y. 315, 329, after holding that a director who is not a judgment creditor cannot purchase the property of his corporation at a judicial sale, proceeds as follows:

“Vilas, however, was not only a director; he was also the plaintiff in a judgment against the railroad company, and had a clear right to sell, upon execution on his judgment, the personal property of the corporation which was liable to sale on execution. Whether in this right he might not, at a sale under his own or under prior executions, purchase in protection of his own right as judgment creditor, and hold property so purchased absolutely against the company, need not be determined in this case.”

The subsequent case of Preston v. Loughran, 58 Hun 210, 214; S. C., 12 N. Y. Supp. 313, 316, refers to Hoyle v. Plattsburgh and Montreal Railway Co., supra, and proceeds as follows:

“He (the director of a corporation) is not absolutely excluded from the right of dealing with it. He can loan money to it and become its creditor, and he can receive by the act of the corporation security for his debt. If he has a mortgage security he may foreclose the mortgage, and it follows, almost of necessity, that if he can foreclose he may protect himself by bidding at the sale. Of course, if he takes any undue advantage, another question arises. But when his acts are fair and open they are not invalid.”

In Hallam v. Indianola Hotel Co., 56 Iowa 178, the same view is taken, and In re Iron Clay Brick Co., 19 Ont. Rep. 113; S. C., 33 Am. & Eng. Corp. Cas. 277, the contrary view is adopted.

I think that both reason and authority must be said to support the view already stated that a director in the enforcement of his execution against his corporation is privileged to purchase at the execution sale, and that the sale will not be set aside because of his trust relationship arising from the fact that he is a director, unless it appears that some undue advantage has been taken by him by reason of the position which he occupies.

It is urged in behalf of complainant that the conduct of defendant Marr was not fair and open in that he should have given notice of the sale to all the stockholders. I am unable to concur in that view. From the evidence adduced at the hearing I am satisfied that defendant Marr must be regarded in this case as the victim of the corporation rather than as one who has received undue advantage. The corporation had but few stockholders and was essentially the enterprise of a brother of defendant Marr, now deceased, whose stock complainant now holds by inheritance. Defendant Marr originally advanced a small amount of money to tbe corporation and also became a stockholder at the instance of and as a favor to his brother. As more money was needed by the corporation from time to time, defendant Marr was induced to make further advances because no other person identified with the enterprise appeared to be able to do so, and because of his desire to help the enterprise along on account of his brother’s active interest in it. The advances thus made finally aggregated over $10,000, and over $2,000 had in the meantime, in like manner, been advanced by the wife of defendant Marr. After the death of his brother defendant Marr, at a meeting of the stockholders in December, 1897, stated that he must have the money due to him, and that he would proceed unless something was done. He also urged the stockholders to contribute and also offered to turn over his claim to anyone who would supply the money. Again, at a meeting of the stockholders in February, 1898, he urged payment and stated that he would proceed to collect unless paid. At one of these meetings a committee was appointed to make public sale of the entire property of the company. The sale was undertaken by a Philadelphia auction-house in April, 1898, and no bids were received. Mrs. Marr had, in the meantime, brought suit for the money due to her, and recovered judgment for $2,088.15. In October, 1898, defendant Marr brought suit for the money due to him and recovered judgment for $10,318.30, and in December, 1898, made sale of the property in question under an execution issued on that judgment. The judgment recovered by his wife had, in the meantime, been assigned to him. While no notice of the sale was given to the several stockholders, other than the statutory notice, I am entirely satisfied that it would have been utterly futile to have given such notice. Defendant Marr had earnestly tried to get the stockholders to interest themselves in raising the money due to him and had found it impossible. It is entirely clear to me that had each stockholder been personally notified of the day of sale no attention whatever would have been given to the matter by any of them. Defendant Marr did not want the property. He was judge of a court in Pennsylvania and did not wish to be burdened with the ownership of a seashore hotel property, and especially one which had been found from the beginning to afford insufficient revenues to maintain it. His instructions to the attorney whom he employed to make the sale were to let the property be sold for less than was due on his judgments if a purchaser could be found. I am satisfied that the only reason that all parties in interest were not especially notified of the sale was because it was useless to do so. The property was purchased by defendant Marr at the sale because, and only because, no other purchaser could be found. No bid was made except that of defendant Marr. Since the purchase defendant Marr has found it necessary to continue to add to the investment in the hope of making the property remunerative, and at this time it stands him in about $40,0.00. I am unable to find any circumstance from which I can conclude that defendant Marr has not performed his full duty to the corporation.

Touching the value of the property purchased I think that, in the proper hands, a purchaser could have probably been found for more than the amount of the judgments of defendant Marr. Witnesses at the hearing believe that the property, at the date of the sale, was worth at least $25,000. At the sale attempted in Philadelphia $18,000 was fixed as the price at which it should be sold. There was due to defendant Marr at the sale about $12,500. His bid was but $3,850. The small amount was bid because there were no other bidders, and it was sought to save sheriff’s commissions. The bid was, in effect, from the standpoint of defendant Marr, the amount of the judgments, as the corporation had no other assets. If the property was in fact worth $25,000 at the date of the sale, it is entirely clear that neither defendant Marr, or anyone else connected with the corporation, had any such idea of its value. It is not improbable that subsequent developments have given an enhanced idea of values in the retrospect. But, as already stated, I do not conceive it to be the duty of this court to disturb this sale, under the circumstances of this case, on the ground of inadequacy of price.

-The bill is filed at this late date, seven years after the sale, by the heir of the brother of defendant Marr, on reaching his majority. At the \ime the transactions here occurred complainant had a guardian who attended the stockholders’ meetings referred to at whichTproceedings were threatened to enforce the Marr claim. While I am not inclined to deny relief upon the ground of laches, the evidence clearly shows that the guardian of complainant had ample notice -to apprise him that the Man-claim would probably be enforced by judgment. lie testified: “'I inferred that there would be a suit by the judge and a sale of the property.”

I will advise a decree dismissing the bill.


author: Teaming, V. C.

text:
    Michael O’Grady v. Clara McDonald.
    [Submitted March 25th, 1907.
    Decided March 27th, 1907.]
    1. The proprietor of a hotel managed as “The Hotel Dominion” is entitled to restrain another from operating a new hotel under the name of “The New Dominion,” as against the objection that the owner of the new hotel as tenant of the old improved its reputation by reason of his labors.
    2. The proprietor of a hotel managed as “The Hotel Dominion” is entitled to an injunction restraining the use by another proprietor of a hotel of the name “The New Dominion,” on the ground- that the name of the new hotel will aid in procuring guests theretofore patronizing the old one.
    On bill for injunction.
    Complainant is the owner of a hotel on Arkansas avenue, in Atlantic City, known as “The Hotel Dominion,” and seeks to restrain defendant from using the name “The New Dominion” for a hotel which defendant has recently erected on that avenue within a few hundred feet from the hotel owned by complainant. The theory of the bill is that defendant is violating rights which complainant has acquired by prior appropriation of the trade name stated.
    Heard, at the return of an order to show cause for a preliminary injunction, on bill and affidavits and answer and affidavits.

      Messrs. Thompson & Cole, for the complainant.

      Messrs. Bourgeois & Sooy, for the defendants.
   Teaming, V. C.

There can be no doubt of the power of a court of equity to restrain the improper use of a trade name. The principles involved are, in many respects, analogous to those arising in the protection of trade marks. Busch v. Gross, 71 N. J. Eq. (1 Buch.) 508; International Silver Co. v. William H. Rogers Corporation, 67 N. J. Eq. (1 Robb.) 646; Eureka Fire Hose Co. v. Eureka Manufacturing Co., 69 N. J. Eq. (3 Robb.) 159. Complainant’s hotel has been conductetd under the name “The Hotel Dominion” for upwards of twelve years. That name has necessarily become so associated with the hotel that complainant is clearly entitled to protection against the use of the same or a similar name in such manner as to be likely to deceive or mislead the public. Defendant claims, however, that she was a tenant of complainant’s hotel from March 1st, 1896, to March 1st, 1897, and during that time gave the hotel of complainant a high standing under its old name, which name, she claims, was of little value prior to that time. I think this fact wholly immaterial. Defendant leased the hotel for one year furnished and ready for occupancy. Her lease described the property as “The Hotel Dominion.” If during the year of her tenancy the reputation of the hotel was improved by reason of her labors, that fact cannot properly be held to entitle her to the use of the name for an opposition hotel at the end of her term. Had the name been one of her own adoption, as in Wilcoxen v. McCray, 38 N. J. Eq. (11 Stew.) 466, and not one which she only became entitled to nse because she was a tenant of the property of complainant, an altogether different condition might exist.

The more difficult question is whether the name “The New Dominion,” as used by defendant, is likely to operate to deceive or mislead the public. A question of this nature necessarily depends largely upon the special circumstances of the individual case. In Weinstock, Lubin & Co. v. Marks, 109 Cal. 529, the proprietors of a store known as “Mechanics Store” were awarded an injunction against the use, by an opposition concern, of the name “Mechanical Store.” In Gamble v. Stephenson, 10 Mo. App. 581, the proprietor of “What Cheer” restaurant was awarded relief against the name “New and Original What Cheer Restaurant.” In Colton v. Thomas, 2 Brews. 308, the name “Colton Dental Association” was protected against the use of the name “Colton Dental Rooms.” In Cady v. Schultz, 19 R. I. 198; S. C., 61 Am. St. Rep. 763, the name “United States Dental Association” was protected against the use of the name “U. S. Dental Association.” In each of these cases various circumstances existed of more or less force to control the decisions rendered, but the essential inquiry in all cases is: Is the new name, as used, calculated to deceive or mislead? In the present case no reason is suggested by defendant for her desire to use the name “dominion” in her new enterprise, but the inference is present that she finds in the name adopted some aid to'the procurement of guests who have heretofore patronized the old hotel. I am unable to believe that this will not be the effect of the use of the name if that use is permitted.

I will advise that a preliminary injunction issue pursuant to the prayer of the bill.


author: Leaming, Y. 0.

text:
    The Centenary Fund and Preachers' Aid Society of the New Jersey Annual Conference of the Methodist Episcopal Church, trustee, under the last will and testament of Ezra B. Lake, deceased, v. Martha H. Lake et al.
    [Submitted March 25th, 1907.
    Decided March 29th, 1907.]
    1. The provision in a will, “I do hereby will and bequeath unto * * * all my real estate and personal property not disposed of in some other way,” carries the legal title to the real estate referred to, since the word “bequeath,” when expressly applied to real estate, is equivalent to the word “devise,” and under 8 Gen. Stat. p. 3168 § 85, words of inheritance are made unnecessary.
    2. Where an absolute power of sale is given in a will, no condition subsequent or limitation in trust can be held operative against a title emanating under a proper exercise of the power, since the power of sale ex proprio vigore subordinates the condition.
    On bill for the construction of the will of Ezra B. Lake. Heard on bill, answer, replication and proofs.

      Mr. S. Stanger Iszard, for the complainant.

      Messrs. Bleakly & Slockwell, for the defendants.
   Leaming, Y. 0.

I find no uncertain features touching this will. The intention of the testator appears to me to be clearly manifest throughout.

The expression, “I do hereby will and bequeath unto * * * all of my real estate and personal property not disposed of in some other way,” carries the legal title to the real estate referred to. The word “bequeath,” when expressly applied to real estate, is uniformly treated as the equivalent to the word “devise,” and words of inheritance are made unnecessary by 3 Gen. Stat. p. 3763 § 35.

The apprehensions which appear to have arisen by reason of the forfeiture clauses contained in the will are equally groundless. It is entirely immaterial whether these clauses be treated as conditions subsequent or as limitations in trust, for where an absolute power of sale is given no condition subsequent can be held operative against a title emanating under a proper exercise of the power. An intention upon the part of testator to authorize a sale subject to conditions subsequent is an impossible conception. The power of sale ex proprio vigore subordinates the condition.

The power of sale is equally clear. 'Testator expressly authorizes the sale of real estate when there is insufficient cash on hand to pay the fixed charges. The testator also clearly expresses his purpose that the proceeds of sales of real estate shall be preserved intact, except as to the temporary use of such proceeds in anticipation of revenues to be received from other sources to supply the proceeds thus temporarily used. To comply with this requirement it is now manifestly necessary to sell all the real estate in order that its value may be made revenue producing, and thus afford a fund from which the fixed charges can be paid.

I entertain no doubt as to the power to sell the entire real estate at either public or private sale, and to confer an absolute title upon the purchasers.


text:
    Hazer Feinberg v. Annie Feinberg.
    [Submitted April 1st, 1907.
    Decided April 2d, 1907.]
    Though the removal from the state, by defendant in a divorce suit, without consent of petitioner or order of court, of the minor child, custody of which was awarded defendant, with right of visitation to petitioner, was contrary to P. L. 1902 p. 259 § 7, petitioner cannot be relieved from making payments for maintenance of such child, which have accrued under the order of court, without complaint to the court touching such removal.
    On petition of Hazer Feinberg for modification of that part of the decree of divorce providing for maintenance of minor child Sylvia Feinberg, and for correction of taxed costs.

      Mr. Andrew J. King, for the petitioner.

      Mr. John W. Wescoit, for the defendant.
   Leaming, Y. C.

It is clearly contrary to the terms of section 7 of the act concerning the custody and maintenance of minor children (P. L. 1902 p. 259) for defendant to remove the minor in question out of the jurisdiction of this court, without first obtaining the consent of petitioner or an order of this court for that purpose. I am unable, however, to relieve against the payment of such moneys as have accrued -under the existing decree during the period in which no complaint has been made to the court touching such removal. It is not the privilege of petitioner to refuse payments accruing pursuant to the terms of the decree. When new conditions arise which, in the opinion of petitioner, entitle him to a modification of the decree, he should make application to the court for such modification if he desires to avail himself of rights arising from the new conditions. On such an application the court may or may not, according to the circumstances of the case, under the terms of the section referred to, permit the custody of the minor to be maintained in another jurisdiction. It is manifest that in this cause it would be destructive of the right of visitation to make an order permitting tire custody of the minor to be maintained in Pittsburg, but it is not clear that circumstances may not exist which would equitably demand an order for such privilege in Philadelphia. I am obliged to deny the application to reduce the amount now due for maintenance under the terms of the decree, but I am not prepared to make a final order touching the future modification of the decree without further hearing. On Monday, April 8th, 1907, the respective parties may, if so advised, file further affidavits to aid the court iu determining whether an order should be made discontinuing payments until the minor is returned to this jurisdiction, or whether the order should permit the minor to be maintained in Philadelphia, with the right of visitation, as specified in the decree, fully protected. If no further affidavits are then filed, an order will be made on the present record.

Touching the taxed costs, I find that the order of September 4th, 1906, as advised by Vice-Chancellor Bergen, adjudges it error to include the items based on the petition for rehearing. These items, I find, amount to $35.69. I will advise that the costs be reformed by the elimination of these items.

The decree of affirmance made by the court of errors and appeals is in the ordinary form of general decrees of affirmance, and reads “with costs.” I am not prepared to assume that the court intentionally awarded costs against a wife until opportunity shall be afforded to her to apply to that corrrt for relief against that part of its decree. Petitioner will be privileged to insist upon the benefit of the decree of affirmance as it exists, but if insisted upon by petitioner, defendant will be given the opportunity to apply to the court of errors and appeals for its modification before a final order will be here made touching that feature.