text:
    George Conover, complainant, v. West Jersey Mortgage Company, defendant.
    [Decided November 21st, 1924.]
    1. It is irregular for a receiver and his counsel to join in a petition for their compensation; the application for allowance to both should be made by the receiver alone.
    2. Although a receiver be a member of the bar, his duties as receiver being strictly executive and administrative, he is not obliged to perform legal services on behalf of the estate, but may (now by leave of the court) employ counsel to advise and assist him in matters of law; and while a receiver should be allowed! reasonable fees for legal services rendered necessary in the discharge of his duties, he will not be allowed fees to counsel for services which are within the ordinary duties he is presumed to know how to perform.
    3. Upon compensation awarded to a receiver for his services as such, namely, for executive and administrative work, there cannot be an additional allowance to him as compensation for legal services rendered to the estate besides and apart from compensation lo counsel aiding and assisting him in the performance of those legal services, but only one allowance for counsel fees should be made, the same to he divided between them in just proportions.
    4. Where a larger portion of the work in settling a receivership is necessarily done, not by the receiver, but by his counsel, the compensation of counsel may exceed that awarded to the receiver.
    5. The nature and incidents of a retaining fees mentioned and commented on.
    6. Compensation awarded to a receiver and to counsel is a lien upon the fund in the hands of the receiver prior to the claims oE creditors; the allowance of counsel fees is made to the receiver in order that he may compensate counsel for his services, and the latter is entitled to payment from the receiver and has a lien therefor.
    7. Disbursements made by a receiver and his counsel, consisting of necessary, actual expenses of a fixed amount, concerning which the court does not make an allowance upon the principle of what they are fairly and reasonably worth, should be charged as items in tile receiver’s account; but this cannot include items paid by counsel for clerk hire, as the services of clerks to lawyers are rendered directly to them and not to their clients, and the lawyer’-s compensation is predicated upon the totality of their services, and necessarily includes all services rendered to, as well as by, them.

      8. A receiver, who is a lawyer, is entitled to compensation for legal services rendered to the trust estate, and, having had the benefit of the advice and assistance of counsel, the legal services being jointly rendered by them,1 there will not be a separate award of counsel fees to each, but one award to both to be divided between them in just proportions. There can be no duplication of counsel fees based upon the number of counsel employed by a receiver.
    9. An application by a receiver and by his counsel for clerical work done for them in the course of legal .services rendered to the trust estate, will be disallowed, because counsel fees are awarded with some regard to the amount of clerical work done by and for counsel, as well as with regard to- the value of the services rendered by counsel, based, to an extent, upon avails gotten for the trust estate by counsel's endeavors-; and this applies equally to clerical services rendered to a receiver when acting as counsel for the estate in bis hands.
    10. It is the duty of courts, whether objections are or are not made by creditors, to supervise and scrutinize trust accounts, and to pass and confirm them only when, after proper vouching and auditing, it appears that they are correct and ought to be confirmed.
    11. The creditors of an estate in the hands of a receiver in chancery should receive the same protection on accounting as that required by statute and rule in the probata courts.
    On joint petition of receiver and his counsel for compensation.

      Mr. Ilarvey F. Carr, receiver, pro se.

      Mr. Henry F. Btoclmell, counsel, pro se.

   Walker, Chancellor.

The bill in this case was filed September 24th, 1915, and o-n October 8th, 1915, upon the return of an order to show cause thereon the late Judge. John G. IKo-riier was appointed receiver for the creditors and stockholders of the defendant corporation. Judge Horner having died, Harvey F. Carr, Esquire, was appointed receiver in his place and stead on March 18th, 1918. The assets of the estate, services of the receiver and his counsel, result thereof, the amount paid on account of compensation and the amount now asked, can, perhaps,- be best stated by quoting in full the notice sent by the present petitioners to the creditors, which forms the basis of this application, as follows-:

“To the Creditors of West Jersey 'Mortgage Company:
“The receiver has heretofore filed in the court of chancery his second and final report and account of the administration of the said estate. Said report shows that the receiver received on the date of his appointment [March 20th, 1918] inventoried assets of $304)08.03; that by the work of the receiver and his counsel the receiver has brought into the estate, and collected the sum of $274,047.9(5; that this result was obtained, not by increase in value of any real estate in the hands of receiver, but by litigation, &c., of the receiver; that the total claims filed with the receiver amounted to $552,348.08, being two hundred and sixty-eiglit in number; that, by the determinations of the receiver, these wore reduced by the sum of $214,150.59; that the total amount of claims allowed wag $338,197.19; that there was on the date of saicl final report and account in the hands of receiver $120,374.29, subject to being increased by interest on bank balances accruing since June 1st to date of settlement. In the said report the receiver prays for the allowance of compensation to the receiver and his counsel and for an allowance for disbursements and expenses of the receiver and his counsel, including- clerical assistance. After deducting said proposed allowances, the receiver will be able to pay further dividend of approximately twenty-five per cent. Accompanying said report, there was filed a petition of the receiver and his counsel, setting forth in detail the services performed by the receiver and counsel, and also the character, nature and amount of the clerical services for which receiver and his counsel are asking reimbursement.
“Take nntice, that a hearing upon said final -account and petition of the receiver will take place before the Honorable Edwin Robert Wlalkei’, chancellor of the State of ¡New Jersey, at the State House, in the city of Trenton, New Jersey, on Tuesday, the 5th day of August, 1924. at ten-thirty o’clock [daylight-saving time] in the forenoon of said day, at which time the receiver will ask that the said account and report be approved, and that the prayer of the said petition be granted, and that there be allowed to said receiver as compensation the sum of $12,000, in addition to moneys paid to him on account before the filing of said report and account; that there be allowed to Henry E. iStoelcwell, counsel for the said receiver, as compensation $10,000, in addition to moneys heretofore paid to him on account before the filing of said report and account; that allowances be made to the receiver and to his counsel as reimbursement to them for the clerical assistance in their respective offices as follows: To the said receiver at the rate of $1,000 per annum for the six-year period, or a total of $(5,000. and to his counsel, Henry F. Stock-well, at the rate of $1,200 for the first four years and $800 for the last two years of sa.id period, or a total of $(5,400 for said clerical assistance; that the sum of $2,000 he allowed to Harvey E. Oafr as solicitor for the original receiver, and that the balance on hand, after all disbursements and allowances, be distributed pro raita among creditors whose claims have been allowed. During. the six years since the appointment of the said receiver and his counsel, there have ■been allowances to the receiver on account of compensation up to the filing of said final account, aggregating the sum of $11,000, and for the same period there have been allowances made to receiver’s counsel on account of services rendered amounting to the sum of $10,000.
‘‘The general character of the work and the use of extra clerical assistance may be indicated by the fact that there were about two hundred foreclosure suits, in which the receiver was a defendant; that there were numerous suits requiring extensive investigation, in which officers, directors and stockholders of the West Jersey Mortgage Company were defendants [in some suits as many as twenty defendants] ; that the said investigations covered the x'elations between the mortgage company and six or eight inter-related corporations; that separate investigations and adjudications had to be made as to each of the two hundred and sixty-eight claims filed; that at times two to three clerks of the receiver and of his counsel were engaged continuously for weeks in aiding the receiver and his counsel in the above matter; that the ¡actual amount expended by the receiver and his counsel, in wages for services outside of the ordinary administration expenses will equal or exceed the sums hereinbefore mentioned [to wit, $6,000 in said receiver’s office and $6,400 in said office of the counsel for receiver], for which sums the receiver and his counsel ask reimbursements, either by way of a designated allowance for such clerical services or by way of addition to the sums asked for by the receiver and his counsel as conrpensation, and to ¡be included therein. The services thus rendered are set forth in greater detail in the petition of the receiver and his counsel hereinabove referred to, copies of which are available for inspection at the office of the receiver and his counsel, and the original is on file in the office of the clerk in chancery, at Trenton, New Jersey.”

In the first place, I desire to- observe that there should have been no joint petition by the receiver and his counsel, but the application for compensation to himself and counsel should have been made by the receiver alone. The counsel is not a party to the suit and should not have projected himself into the litigation, not even upon this application. No ond but a party to a suit can make any motion in it except for the purpose of being made a party, and a petition filed by a, stranger to the suit will be dismissed. Collins v. Kiederling, 87 N. J. Eq. 12. In that case a petition by a master, appointed to. sell, was dismissed. A receiver can always apply to the court that appointed him for relief or instructions in a proper case, either personally or by counsel; but the latter being but the representative of the receiver, cannot apply for himself and in his own name, unless to protect himself from some unwarranted hostility of the receiver.

No one appeared in opposition to the pending application, but, on. the contrary, several counsel representing creditors expressed the entire satisfaction of their clients with the requests made for compensation and disbursements, having regard to the great amount of work and labor bestowed by the receiver and his counsel, and the avails gotten by them for the creditors. All of the creditors, however, were not represented, and it becomes the duty of the c-ourt to examine carefully into the matter. It is the duty of the courts, whether objections are or are not made by creditors, to supervise and closely scrutinize trust accounts. Olson v. State Bank, 72 Minn. 320.

At the time of the death of Judge Homer, the first receiver, Mr. Carr, the present receiver, was, and had been, his counsel, and, by order made at that time, received $3,000 on account of his services, and he now prays an additional allowance of $2,000, as above stated, in the notice to creditors. There was allowed to> the estate of the first receiver at the same time the sum of $5,209.08 (being five per cent, of $104,181.59, the amount of Iris receipts), making in all $8,209.08 for receiver and counsel, which was over seven per cent, upon the collection of $104,181.59 for them. The amount now asked by the present receiver and his counsel together is $36,400, which is, approximately, thirteen per cent, of the sum of $274,047.96, which the present receiver has collected. Included therein, the receiver and his counsel ask for allowances to be made them as reimbursement for clerical assistance in their respective offices; to the receiver, $6,000, and to counsel, $6,400. This is a claim for clerical services rendered in the prosecution of legal work, or, at least, so, almost exclusive^ so, as to render it unnecessary to consider it as anything else. Especially as it appears that the sendees of the receiver m this case consisted almost exclusively of law business.

This was no case of a receiver of a manufacturing or commercial enterprise where he was directed to operate a business. He says himself that the assets of the estate were evolved out of litigation, and this was in litigation both offensive and defensive. The receiver was given power, by order of the court, to employ counsel, and in the petition for such appointment he says that the administration of the trust presented many difficult questions of law, and in all probability worrld result in a considerable amount of very important litigation. This prediction was prophetic of what turned out to be true, and emphasizes what I remarked above, namely, that the administration of the estate consisted practically of legal business. And the receiver and his counsel assure me that the legal work was, approximately, equally divided between them.

Although a receiver be a member of the bar his duties as receiver being strictly executive or administrative, he is not obliged to perform legal services on.behalf of the estate, but may employ counsel to advise and assist him in matters of law. High Rec. (4th ed.) 961 § 808; Olson v. State Bank, supra. And while a receiver should be allowed reasonable counsel fees for legal services rendered necessary in the discharge of his duties, he will not be allowed fees paid to counsel for services which are the ordinary duties he is presumed to know how to perform. Henry v. Henry, 103 Ala. 582; Saulsbury v. Lady Ensley C. I. & R. Co., 110 Ala. 585. The application of this doctrine to the case at bar is that Mr. Carr, the receiver, an able lawyer, well knew how to perform the legal services which he so successfully rendered in this case; and, be it said, that Mr. Stockwell, another able lawyer, also gave him valuable advice and assistance in the discharge of those legal duties. But, it seems to me that after reasonable compensation made to the receiver for his sendees as such, namely, for executive and administrative work, there can be no duplication of compensation for similar sendees rendered by these two officers of the court, but that compensation in a gross sum should be allowed for legal services to be divided between them in just proportions.

In this class of cases much larger fees have frequently been paid to counsel than to receivers, even where the latter were lawyers. In Silvers v. Merchants, &c., Building Association, 56 Atl. Rep. 294, it was held that where a large proportion of the work in settling a receivership, involving very large sums of money, has necessarily been done, not by the receiver, but by his counsel, a commission of three and one-half per cent, is a sufficient compensation to the receiver. Vice-Chancellor Grey, in that ease, said that the receiver asked an allowance of five per cent., which would be over $5,000, and that he was not willing to allow the receiver so large a sum, for the reason that it was apparent that much the larger portion of the work was done, not by the receiver, but by his counsel. The receiver’s counsel suggested that he ought to have a fee of $10,000, and the vice-chancellor observed that the amount of work done by the receiver’s counsel was very large; that the services of several clerics for some months, and of counsel over practically the whole period of the receivership, were required to adjust the matter and prepare the assets for distribution; that those services justified the allowance of a fee which would be fairly compensatory for the work done, although it might not have been so large as counsel might have demanded. There appears to have been no claim for payment for clerical services in this case in addition to the counsel fee, but the vice-chancellor in making the allowance appears to have had them in mind as a constituent element in the services rendered by the counsel. The amount passing through the receiver’s hands in the Silvers Case was somewhat in excess of $100,000, and the total fees allowed, although the situation was extraordinary and the result satisfactory, the vice-chancellor thought ought not to exceed $10,000, and he therefore allowed the receiver’s counsel as fees for all his services in the matter the sum of $6,500 (which necessarily included his disbursements for clerical services) and allowed the receiver the sum of $3,500 in full for his services.

See v. Heppenheimer, 69 N. J. Eq. 36, was the suit of a receiver against stockholders for an assessment on unpaid subscription to stock of a corporation, for the benefit of the creditors of the concern. The amount involved was over $200,000. The cáse was first heard on demurrer to the bill, which was overruled, and the decree thereon was affirmed on appeal. The report of the case on the merits covers fifty-two pages in 69 N. J. Eq., opinion by Yice-Chancellor Pitney. It was argued orally and on briefs, the briefs covering six hundred printed pages. The receiver was offered $170,000, in full settlement, which, by order of the court, was accepted. Pending the litigation, Mr. See, the receiver, died, and the late Prank P. McDermott was appointed receiver in his stead. Both Mr. See and Mr. McDermott were lawyers, but did not participate in the litigation as such, and the avails appear to have been gotten exclusively by the efforts of counsel who were allowed $25,000, which amount was ascertained by order in the cause filed June 15th, 1905, and the sum was made a charge upon the funds in the hands of the receiver prior to the claims of creditors thereon. And the estate of Mr. See, he having performed very few duties, almost all the work being done by his counsel, was awarded $500 as full compensation, and Mr. McDermott, who received and disbursed the avails of the litigation, was allowed $1,000. All this is disclosed in the files of the two cases: In re Solomon Marx for Appointment of Receiver for Columbia. Straw Paper Co., docket 18, page 719, and William G. E. See, Receiver, v. Columbia Straw Paper Co. et als., docket 20, page 790; reported as See v. Heppenheimer, supra. These records in the most pointed manner show the view and action of the court with reference to fees of receivers, strictly as such, and the fees of counsel for receivers, whose professional endeavors raised the fund which was collected and disbursed.

The allowance of counsel fees is regarded as being made to the receiver as an item in his account and not directly to counsel, the allowance being made in the receiver’s account in order that he may make compensation to counsel for such service. High Rec. (4th ed.) 954 § 805; Harrigan v. Gilchrist, 121 Wis. 127, 439. And counsel, of course, is entitled to- payment from the receiver, and has a lien therefor on the fund. See Ely v. Peet, 52 N. J. Eq. 734; Hoboken Trust Co. v. Norton, 90 N. J. Eq. 314; also the files in See v. Columbia Straw Paper Co. (20-790).

Under our practice it is not necessary for a receiver to fix the fees of his counsel in the first instance and insert them as an item in his account, as is done in a great many jurisdictions ; in fact, with us it may he said that that course is not allowable. But disbursements, consisting of actual expenses of a fixed amount, such as carfare, hotel hills, &e., where necessary, concerning which the court does not make an allowance upon the principle of what they are fairly and reasonably worth, should be charged as items in the receiver’s account, if recovery of them is sought. But I have been referred to no case, and have seen none, wherein counsel was allowed as a disbursement moneys paid by him for clerk hire.

In the early days, when there were few lawyers and few eases, all, or practically all, clerical services were performted by ihem as part of, and incident to, their professional endeavors. No counselor can argue a case without some preparation. When he writes a brief he either does it with his own hand or through an amanuensis. The size of his fee will, and should, contemplate the totality of the services rendered, as well that which is mental as that which is physical. As I understand it, the fees of counsel are fixed somewhat upon the theory of his necessary expenses. His fees are gross and not net, so to speak. If they were net—that is, clear profit free from any expenses—he would not only have to be reimbursed for clerk hire, but, proportionally, for rent, cost of paper, typewriter and ribbons, and a variety of other things. Large fees are given upon the theory that they will be for compensation and by way of reimbursement for expenses, and the fees, allowed and being allowed, in this case, are, I think quite large, even in the circumstances of stress and difficulty.

In Harrigan v. Gilchrist, supra, it was observed (at p. 438) that a very large amount of work was done, and in -a most methodical way, much of it of the kind commonly performed by law clerks; that the compensation allowable was not the value of the work actually done by the attorney to he computed from the time spent and the amount which an attorney customarily charges his clients, hut it is what may appear to be proper for the work that was reasonably necessary to the due administration of the trust, citing Richardson v. Tyson, 110 Wis. 572, 86 N. W. Rep, 250. The time actually spent and work actually done are important elements, but the controlling feature is the work reasonably required. There must also be considered, of course, the character of the work, the manner in which it was done, and the beneficial results to the trust. See, also, In re Hahn, 84 N. J. Eq. 523.

In the case at bar the activities of the receiver have consisted almost exclusively of legal sendees rendered by him for the benefit of the estate, and, being a lawyer, he is entitled to compensation for legal services. EDe had, in addition, the benefit of the advice and assistance of associate counsel selected by himself with leave of the court. These legal services were therefore jointly rendered by them; and for those services there will be an award made for counsel fees, not separate awards to each, but one award to both. That they will divide it between themselves is not material to the court or to the creditors, Harrigan v. Gilchrist, supra (at p. 439). The important point is that there is a single award made for legal sendees, no matter how many participate in its ultimate division. This is usual.

Now, as to the allowances: Mr. Carr, as counsel for the first receiver, was awarded $3,000. This, with the more than $5,000 awarded to the receiver, makes over seven per cent, of the amount collected by that receiver. I would not feel like allowing any additional amount were it not for the fact that, when the $3,000 was awarded, it was expressed in a memorandum, to be made upon the condition that at the conclusion of the receivership an aggregate amount could be more intelligently paid to Mr. Carr as counsel to the first receiver. ■He now asks for $2,000 in full for service rendered as such counsel. The allowance will be $1,000.

• The present receiver now asks $12,000 in addition to the $11,000 heretofore paid him on account, and his counsel asks for $10,000 in addition to' the $10,000 heretofore allowed him on account. The present receiver will be allowed $1,000 in full for his executive and administrative services strictly as receiver. There will be an award of $30,000 in full for legal services, to be divided between the receiver and his counsel, share and share alike, as they agree that they performed equally, or nearly so, the legal work.

The amounts asked for reimbursement for office expenses will be denied. I am entirely unwilling to allow, as a disbursement, any amount representing clerk hire to lawyers in the performance of legal services. I know of no precedent for it, nor am I willing to make one. Counsel fees have always been fixed with some regard to the amount of clerical work done by or for counsel, which is necessarily involved in their legal endeavors. As already stated, counsel fees are not net, but gross. A retaining fee is intended to remunerate counsel for being deprived, by being retained by one party, of the opportunity of rendering services to the other and of receiving pay from him, and the payment of such a fee, in the absence of an express understanding to the contrary, 'is neither made nor received in payment of sendees contemplated. 6 Corp. Jur. 727. And it is a fee paid to counsel to make sure that ho will represent and render service to his client in a given matter or matters. Even this sort of a fee is not, in a certain sense, net, as the counsel receiving it certainly has an office and clerks, and as certainly has to abate some part of that fee in the payment of office rent, clerk hire, &c. Then, too, retaining fees are not, at least as a rule are not, paid to counsel retained by a receiver. In such cases they look for compensation to be awarded by the court for services rendered.

In Silvers v. Mechanics, &c., Building Assn., supra, the fact that receiver’s counsel had the services of several clerks for some months in the discharge of his legal duties, was taken into consideration, but no award was made to reimburse him for clerk hire as such; and in See v. Heppenheimer, supra, no suggestion appears as to clerical services rendered counsel, which must have been very great. If I were to make these allowances, such an adjudication would undoubtedly be drawn into a precedent likely to be extensively followed in the future. I am not only unwilling to make such a precedent, but I think it would be decidedly wrong to do so.

Regarding the former allowance of $11,000 to the present receiver as $1,000 for receiver’s services as such, and $10,000 for professional services, we have an initial allowance to the present receiver and his counsel of $20,000, which, together with the like amount now awarded, makes their counsel fees in loto $40,000, ample, I think, for their personal services, and to repay them for disbursements to law clerks who- assisted them in their professional endeavors, being over fourteen per cent, of $274,047.96, collected by the present receiver, to which is to be accredited the $1,000 included in the amount heretofore allowed to Mr. Carr as receiver herein upon the theory that it represents receiver’s fees out of the award heretofore made him, also the $1,000 now allowed him in full for fees as counsel to tire former receiver, and the $1,000 awarded to him in full for receiver’s fees herein. These awards herein made to the receiver and his counsel could not be justified save for the enormous amount of legal work done by them, as reflected in approximately two. hundred foreclosure suits in which the receiver was defendant, and the numerous suits requiring extensive investigation in which the relations between the mortgage company and six or eight interrelated corporations were involved, and also the amount saved to, and collected for, the creditors, making a total collection of $274,047.96 produced only by an enormous amount of legal services extending over a period of some six years, not only in litigation in this court, but also in the court of errors and appeals. In fact, every dollar of it may be said to have been produced only through prodigious and successful legal endeavors, and by such alone.

It will be observed that, in the notice to creditors, above set out, the receiver states that a hearing upon his final account and petition would take place before the chancellor at the state house on the. return day, at which time the receiver would ask that the account and report be approved and the prayer of the petitioner -(for allowances) be granted. The practice has grown up in this court of late years for receivers to file their accounts and give notice that on a day certain they would apply to- have them confirmed and allowed, and would then and there ask for receiver’s and counsel fees, usually naming the amount and sometimes including in their order a direction that until the return day the report he kept upon the files of the clerk, open to reasonable inspection and examination of any persons interested therein. This practice of directing that the report be kept on file is desirable at chambers elsewhere than in Trenton, and in such caso the direction should be that the report be kept by the sergeant-at-arms, open to inspection, &e., but where the report is filed with the clerk of this court, at Trenton, it is more or less absurd to say that it be kept on file until the return day, because it must be so1 kept and forever thereafter, and is, of course, subject to inspection and examination by any person interested. So1 far, however, as this practice has entailed the passing and confirmation of accounts by the court because no objection is made by counsel representing interested parties, without the receiver vouching the account and its being audited by or for the court, it will be discontinued—that is, the practice of confirming an account, without vouching and auditing, will be discontinued. It is unobjectionable, and/ I think, quite desirable, that these accounts be submitted to the court at chancery chambers in the vicinage where the receiver has been appointed and the trust administered, and where, on the return day, counsel and parties can conveniently appear; but the]'" can only be expected to object to large items and matters of importance, notably, urge some principle affecting the administration and account of the receiver, leaving to an audit, which requires vouching of the account with reference to numerous, sometimes innumerable, items, extending occasionally over a period of years, and sometimes containing almost daily entries.

As is well known, it is qnite impossible to settle an account in the orphans court without an audit. The surrogate shall audit and state the accounts of executors, administrators. guardians and trustees, &e., and shall report the same to the orphans court for allowance. Comp. Stat. p. 3855 § 121. The surrogate shall not report any account to the orphans court for allowance and settlement unless the vouchers and receipts have been lodged with him. Orphans Court Buie 17. To audit an account is to see that the accountant is charged with everything with which he is chargeable, and that nothing is placed on the credit side for which he is not justly entitled to credit. 1 Koch. N. J. Prob. L. 642. In the prerogative court the account is to be audited and stated by the register. Dick. Prob. Ct. Pr. 107, wherein the bar is referred to the valuable suggestions on accounting by executors, &c., from Griff. Treat. 109. As in the orphans court, the accountant is required to lodge with the register the vouchers and receipts for payments and disbursements claimed in his account. Prerogative Court Rule 2b. Whether or not accounts are excepted to, it is the duty of the court to scrutinize them and pass and confirm them only when, after proper vouching and auditing, it appears that they are correct and ought to be confirmed. See Olsen v. State Bank, supra.

There is no reason why the creditors of an estate in the hands of a receiver should receive any less protection on an accounting in chancery than is required by statute and rule in the probate court. It is hardly to be expected, and should not be required, that small creditors should, either in person or by counsel, inspect the accounts of receivers and file exceptions as the only method of protecting themselves on an accounting. Every guardian and receiver appointed by this court is required to file an inventory and to file in the clerk’s office his account, which account may, from time to time, be referred to one of the special masters for report. Chancery Rules 251, 252. And in Dick. Chan. Prec. (rev. ed.) 547, 548, is the form of an order of reference to state receivers’ accounts, whereby it is referred to a special master to take and state the account of a receiver. In Tuttle v. State Mutual Liability Insurance Co. (conclusions recently filed but not yet reported) Vice-Chancellor Buchanan held that the receiver's account before him was one which should go to a special master for audit and report under rule 252, it covering such period and amounts of such size, and had so many items as to require a more comprehensive examination than could be given by the court on an order to show cause, and that the numerous parties, whose interests were small, were entitled to more than a pro forma, examination, irrespective of the apearance of counsel and objection made ,on their behalf. And again: That in addition to the vouching and proof of expenditures there should be inquiry by the master as to their propriety and reasonableness where his judgment so prompts; such, for instance, would be indicated as to items for office rent, payment of salaries to assistants and telephone service, &c. And this as to expenses incurred by the receiver in the ^performance of the duties of the receivership strictly as such, there being no claim for the allowance of compensation for clerks rendering service m connection with law business for the receivership.

I do not say that the account of a receiver extending ever a fairly short period of time, and comprising but comparatively few items, especially where there is no very great amount of money involved, may not be settled by the court on notice to creditors, without a reference to a special master for vouching by the receiver and audit by the master with report thereon by him to the court; but in an account like the present one extending over a period of about a year, which commences at the foot of a first account, which extended over a period of about five years, neither of which has been audited (although the first one Was approved in proceedings on order to show cause such as referred to above), the present and final account of the receiver should be vouched and audited according to the methods pursued in the orphans and prerogative courts, and in accordance with the rule of this court, and as pointed out in the TuLtle Case, supra.

Let an order be entered making the allowances aforesaid and referring the account to a special master for auditing in accordance with the rules and practice of the court. 1


source: Caselaw Access Project

author: Leaming, V. C.

license: Public Domain

text:
    Jacob B. Fox, complainant, v. Israel E. Fridrich et ux., defendants.
    [Submitted October 21st, 1924.
    Determined October 29th, 1924.]
    1. While the stipulated time for payment by the vendee is not ordinarily of the essence of a contract for the sale of real estate, it may be, though not strictly essential, an element sufficiently material in the circumstances of a given ease to justify a refusal of a decree for specific performance if the complainant’s delay is found to have been inexcusable and unjustified. A complainant must show himself ready, desirious, prompt and eager to perform the contract on his part.
    2. Evidence examined and held that the time named for the completion of the sale in this case cannot be considered immaterial, and that performance on that day, or a day reasonably soon thereafter, would more nearly appear to he the very essence of the contract.
    On final hearing on bill for specific performance.

      Mr. Joseph Beds Tyler, for the complainant.

      Mr. Albert 8. Woodruff, for the defendants.
   Leaming, V. C.

. I am convinced that decree for specific performance cannot property be made in this suit.

I am satisfied that, on the day named in the contract for complainant to pay the purchase price, his failure to do so was because of his determination to abandon his contract of ■ purchase, and I am also convinced that at that time, and also on the following Monday (June 4th, 1923), he so informed defendant. Also, it is reasonably certain that until the receipt of the letter of August 21st, 1923, demanding ■performance, defendant understood and was justified in understanding from complainant’s statements and attitude that he had abandoned thei contract. I find nothing that affords complainant a shadow of excuse or justification in thus determining to withdraw from the contract at the time it was his duty to perform his obligations under it and more than two months thereafter demanding performance. I am unable to accept certain reasons assigned by way of justification.

While the stipulated time for payment by the vendee is not ordinarily deemed of the essence of a contract for the sale of real estate; it may yet be, though not strictly essential, an element sufficiently material in the circumstances of a.given case to justify a refusal of the remedy here sought if complainant’s delay is found to have been inexcusable and unjustified. In the language of Professor Pomeroy touching specific performance of contracts in which time is not of the essence, but is yet material: “The delay, whether long or short, must be accounted for and explained by facts and circumstances which are regarded by courts of equity as sufficient to justify and excuse it.” Pom. Cont. (Spec. Perf.) § 402. After the purchaser has fully determined he will not complete his purchase a contract 'of that nature should not be considered as automatically converted into an option of purchase in his behalf to enable him to change his mind at some future time; laches may afford a bar to relief to the same extent as in other equitable remedies. This is the spirit of the language often used to the effect that a complainant must show himself ready, desirous, prompt and eager to perform the contract on his part. Meidling v. Trefz, 48 N. J. Eq. 638, 644; Pom. Cont. 403.

It matters little whether the contract here sought to be enforced be deemed one in which time for performance is inherently of its essence or merely material; it is clearly a contract in which the time named for performance cannot be regarded as immaterial. By this contract defendant agrees to sell to complainant certain real estate, together with a moving-picture business then owned and conducted fey defendant in the building erected on the land,, including the good-will and all personal property in the building and connected with the business. The contract was to be performed on a day specified therein, at which time $13,000 in cash was to1 be paid by complainant to defendant as the final cash payment. Defendant was anxious to perform on the" day named and tendered complete performance on his part, but, as already stated, was informed by complainant that he had determined not to purchase. Believing complainant, had abandoned performance, defendant continued in possession and has continued to operate the theatre as his own to this time. The evidence further discloses that at the time the contract was made defendant did not desire to sell, but was impelled to agree to sell at a low price, which price he regarded as a sacrifice, because of pressing financial obligations which he was compelled to. meet in a building enterprise he had undertaken; it was the necessity to procure cash to meet these obligations that induced defendant to agree to sell to complainant at the price determined upon. As defendant expressed it, it was to save him from bankruptcy. The evidence further discloses that,-when complainant failed to perform, defendant continued the business, having then made financial adjustments involving sacrifices; that the period between complainant’s default and his subsequent demand for performance was what is known as the “lean” period for business of that nature; that in the operation of the business after complainant’s default the personal services of defendant and his son were contributed to make the business successful, and various and necessary contracts were made and obligations, incurred and met in the ordinary course of operations. All this was an obvious necessity between the time for performance, when complainant determined not to perform, and so informed defendant, and the subsequent time, over two months later, when he demanded performance; and this necessity was equally obvious to. complainant when the contract was made and when he determined not to perform. The hazard of operation was thus forced on defendant by complainant’s default; had such operation been unsuccessful it reasonably may be 'assumed that complainant’s determination not to. perform would have remained unchanged. It seems impossible to determine that in a contract of this nature, involving the sale of a going business> and in which these obvious consequences of a default in prompt performance upon the part of complainant exist, the time agreed upon when payment is to be made and the business is to be turned over to complainant, can be considered an immaterial element of the contract. Indeed, performance by the purchaser on that day, or reasonably soon thereafter, would more nearly appear to be of the very essence of such a contract. A decree for performance would necessarily involve an accounting during the period of .defendant’s operation of the business since complainant’s default, to determine what charges and allowances growing out of such management and operation of the business should be equitable and just, a difficult, if not an impossible, undertaking, and a task imposed by complainant’s default.

Upon the return of the deposit money the bill will be dismissed.


text:
    Hampton E. Williams, complainant, v. Board of Commissioners of the Borough of Audubon, defendant.
    [Submitted October 27th, 1924. Determined October 31st, 1924.
    Filed November 14th, 1924.]
    1. The method of judicial review of the proceedings of a municipal body is by certiorari, which method is not only adequate but exclusive in the absence of special equities invoking equity jurisdiction, or acts ultra vires.

    2. Wlhere a writ of certiorari was refused by the supreme court, the circumstance that no appeal lies from such refusal in no way suggests either special equities or the want of an adequate remedy at law.

      On bill for injunction. On hearing at return of order to show cause for injunction.

      Mr. Louis B. LeLuc, for the complainant.

      Mr. B. Wayne Kraft, for the defendant.
   Leaming, V. C.

It cannot be doubted that “due process of law” embraces the right to a judicial review of proceedings of a municipal body of tire nature here involved, or that to meet the constitutional requirepient provision in the law for such review must be substantial, adequate and available. But it is equally well settled that the remedy afforded in this state by certiorari is not only adequate but is exclusive, in the absence of special equities invoking equity jurisdiction or acts ultra vires.

The circumstance that, in the exercise of its discretionary judgment, our supreme court has refused to allow a writ of certiorari in behalf of complainant herein, and that no appeal lies from that decision of that court, in no way suggests either special equities of complainant or the want oían adequate remedy at law. The determination of the supreme court was not to the effect that certiorari was not an appropriate and available remedy in a case of the nature presented; it was that the facts presented did not disclose an unlawful invasion of private rights, and were for that reason inadequate to justify the allowance of a writ. To entertain the application for the -writ, and deny its allowance upon the grounds byr that court specifically stated, was to proffer an adequate remedy at law for the alleged unlawful invasion of the rights of complainant herein. This court is now asked to determine in behalf of the same person who soirght the writ, and on precisely the same facts by him pi’esented to the supreme court, that that court erred in its judgment of the law, to determine that complainant’s rights were unlawfully invaded and that the writ should have been allowed by that tribunal.

A preliminary injunction will be denied because the proceedings of the municipal body, of which complaint is here made were taken in the exercise of powers which by law are confided to that body, and cannot be classed as ultra vires, and no elements are disclosed raising special equities to support the independent jurisdiction of this court. Jersey City v. Lembeck, 31 N. J. Eq. 255, 268; Goodwin v. Millville, 75 N. J. Eq. 270; Booth Bros. v. Bayonne, 85 N. J. Eq. 281; Sutton v. Maurice River Township, 93 N. J. Eq. 484.

No consideration is herein given to our statute (P. L. 1921 p. 515) forbidding injunctions in cases of this class at this late period of the public work. The views herein expressed are deemed adequate.

The bill will also be dismissed unless complainant can suggest by way of amendment material facts which are net at this time disclosed by the1 record.


text:
    Frederick Fagen, complainant, v. Michael F. Falvey et ux., defendants.
    [Submitted October 28th, 1924.
    Determined November 7th, 1924.]
    1. One who sets up a resulting trust in real estate in himself, the conveyance being to another, must show that the land was bought with his money, and not merely that the purchase was made for his benefit.
    2. Evidence examined, and held that the money paid for the real estate involved was the money of the complainant, who is therefore entitled to an accounting and a decree establishing the trust.
    On final hearing on bill for relief

      Mr. D. Trueman Stackhouse, for the complainant.

      Mr. Patrick H. Harcling, for the defendants.
   Leaming, V. C.

The law is clearly settled to the effect that one who sets up a resulting trust in himself, the conveyance being to another, must show that the land was bought with his money, and not merely that the purchase was made for Iris benefit. Nor will a subsequent payment of the money by relation attach a resulting trust to the original purchase, since a resulting trust arises from the fact that the money of the real and not the nominal owner formed the consideration of the purchase at the time and became converted into land.

But it is not necessary that the money forming the consideration of the purchase pass through the hands of the real purchaser. If the purchase-money was, in fact, advanced by the nominal owner as a loan of money to the real owner, trust results.

It is entirely’' clear from the evidence that the money paid to the Fairview Bealty Company at the time the contract of sale was executed was the money of complainant. The testimony of tire agent of the shipping board clearly discloses that Mrs. Falvey loaned to> complainant the money which was paid at the time the contract of sale was executed, but wanted the contract changed from complainant’s name to her name to better secure her for the loan. That transaction made the money, which was then paid, the money of complainant, to the same extent as though the money had been first paid to complainant by Mrs. Falvey and by complainant paid to the Fairview Bealty Company. Accordingly, Mrs. Falvey acquired the contract from the Fairview Bealty Company to her for the sale of the premises here tire subject of controversy in trust for complainant’s use and benefit. The right to pay the balance of the purchase price and acquire the legal title thus became the right of complainant; as against complainant Mrs. Falvey could not thereafter, without complainant’s consent, advance the balance of the purchase price and acquire more than an equitable lien for her expenditures.

Nor do I think any substantial doubt can exist as to the subsequent occurrences. It is my belief that at the time of settlement no change had occurred in the relations or purposes of either of the parties, and that Mrs. Ealvey at that time advanced for complainant, and not for herself, the balance of the cash purchase price and executed the purchase-money mortgage in precisely the same manner and for precisely the same purpose that she had advanced the original payment—that is, as a loan to complainant, thinking herself adequately secured by the deed of conveyance then made to her. I am convinced that complainant did not even know what arrangements, if any, had been made by Mrs. Ealvey with the realty company; he was confidently and ignorantly relying upon Mrs. Ealvev’s promise to procure for him a building association mortgage and to accept in installments the cash advanced, or to be advanced, by her for him. If, in fact, Mrs. Ealvey lulled complainant into inactivity for the purpose of procuring for herself the legal title to the property in hostility to complainant’s rights, a constructive trust would follow the accomplishment of that purpose; but it is my belief that no notion of holding the legal title in hostility to complainant arose in the mind of Mrs. Ealvey until more than a year thereafter.

A number of circumstances impel acceptance of the facts stated. At the time of settlement with the realty company, when Mrs. Ealvey took over the legal title to the property, complainant had repaid to her the major portion of the money she had advanced for him. Ilad complainant been apprised of a desire on the part of Mrs. Ealvey for the payment by him of the small balance, or had he been apprised that it was necessary for him to make settlement with the realty company to save for himself his home, it is reasonably certain that he would, at least, have made some effort to protect himself. Nor did Mrs. Ealvey, in taking over the legal title, return to complainant the payments he had already made on the original loan to him or credit him with those payments. Nor is it possible to believe that the subsequent payments made by complainant were as rent, as claimed by Mrs. Falvey. For over a year payments were made by complainant to- Mrs. Falvey monthly far in excess of a reasonable rental, and during that period complainant paid, in addition to the monthly payments, the taxes and water rents assessed against the property. The aggregate payments so made by complainant far exceeded the total amount of cash required by the realty company, with interest on that amount and interest on the purchase-money mortgage added. It is my belief that during all of that time complainant reposed in the confident and justifiable belief that all payments which Mrs. Falvey had made had been made by her for him as advances to him, and that all payments which had been made by him to her, except those made for taxes and water rents, had been received by her as payments on account, and it is further my belief that, up to the time that the breach occurred, Mrs. Falvey entertained precisely the same belief and intent. I am unable to accept the view that Mrs. Falvey’s advances, originally intended as loans to complainant, had in any way undergone a change 'in their nature, purpose or effect. Mrs. Falvey appears to have been a woman who found great pleasure in aiding others less fortunate than she. ' She found that pleasure in aiding complainant. When paid the full amount she had advanced to complainant, together with interest, and is relieved from the obligation of any encumbrance she may have placed on the premises, she will be fully compensated, complainant being also credited with all payments made by him to’ her, with interest.

A decree will be advised in accordance with the views herein expressed. A reference to a master may be made for an accounting in case the parties cannot agree as to amounts.

It should be noted that it is not an easy task to define with technical accuracy all possible equitable rights, interests or estates. The terms “constructive trusts” and “resulting trusts” will be found confused at times even in judicial utterances and by text-writers. Professor Pomeroy has made the forceful suggestion that this confusion could and should be avoided by eliminating from the former name all trusts that result from -acts not accompanied with fraud. The second cause of action in the amended bill filed herein defines the trust claimed by complainant as a “constructive trust.” In the present case it also is doubtful whether the averments of the amended bill fully disclose a resulting trust, in that it does not therein clearly appear that the advances of money made by Mrs. Ealvey were advances for complainant, as loans to him, and very naturally, complainant. was unable to clearly distinguish between an advancement of money by defendant in the nature of a loan and a mere promise of aid. The inherent spirit of such transactions, more than their phrasing, determine their real nature and effect. But since the evidence which has been heard embraces all transactions between the parties and has not been restricted in any way by the averments of the pleadings, I think a decree should be made based upon the facts as I have found them to exist, with leave to complainant to further amend Ms bill to conform, should he be so advised.


text:
    DuPont Chemical Company, complainant, v. Martin D. Buckley, trading and doing business under the name and style of Mathes Vinegar Company, defendant.
    [Submitted November 13th, 1924
    Determined November 19th, 1924.]
    1. Equity will not relieve parties from the consequences of a mistake where there was no mistake as to the identity of the goods sold, but the mistake occurred in the representation of the vendor and the consequent mutual belief that they were made of a certain material which was an element going to quality and usefulness.
    2. Where a mistake is wholly caused by the want of that care and diligence in the transaction which should be used by every person of reasonable prudence, and the absence of which would be a violation of a legal duty, a court of equity will not interpose its relief.

      On bill for injunction and relief. On hearing at return of order to show cause for restraint.
    Complainant offered to sell to defendant certain secondhand tanks, representing them to be Cyprus tanks. Defendant then inspected the tanks and agreed with complainant on a price. The written contract took the form of a sales order in which the tanks ordered are specified as Cyprus tanks. After shipment it was ascertained were pine tanks; both parties had theretofore believed them Cyprus.
    Action at law has been brought by defendant against complainant for damages. Complainant now seeks an injunction against the pending action at law, and also a rescission of the contract by reason of the mutual mistake.

      Mr. J. Forman Sinnickson, with whom appeared Mr. Walter II. Bacon, for the complainant.

      Mr. Edward T. Magoffin, with whom appeared Mr. Thomas G. Milliard, for the defendant.
   Leaming, V. C.

This is not the kind of mistake from the consequences of which equity relieves. There was no mistake as to the identity of the tanks; the mistake was in the representation and mutual belief that they were made of Cyprus wood, an element going to quality or usefulness. If this were not so, equity would be privileged to relieve from the consequences of any honest misrepresentation. Any inspection by defendant which did not discover complainant’s error is an immaterial element. In the language of Judge Story: “Where each party is equally innocent, and there is no concealment of facts which the other party has a right to know, and no surprise or imposition exists, the mistake or ignorance, whether mutual or unilateral, is treated as laying no foundation for equitable interference. It is strictly damnum absque injuriaI Story Eq. Juris. § 151.

Yor can the equitable notion of mistake arise when the mistake is the result of complainant’s negligence. Prof. Pomeroy thus concludes his analysis:

“Mistake, therefore, within the meaning of equity, and as the occasion of jurisdiction, is an erroneous mental condition, conception or conviction, induced by ignorance, misapprehension, or misunderstanding of the truth, ltut toithont negligence, and resulting in some act or omission done or suffered erroneously by one or both of the parties to a transaction,, but without its erroneous character being intended or known at the time.” % Pom. Bq. Juris. § 839.

The degree of negligence which denies equitable relief is defined in a subsequent section as follows:

“TVIhere the mistake is wholly caused by the want of that care and diligence in the transaction whi?h should be used by every person of reasonable prudence, and the absence of which would be a violation of a legal duty, a court of equity will not interpose its relief.” ITiicl. § 856.

In Graham v. Berryman, 19 N. J. Eq. 29, 35, it is said by Chancellor Zabriskie: “The mistake must be as to a fact, not only not known to the 'party, but one which he could not, by reasonable diligence, have ascertained.” See, also, Hagerty v. McCanna, 25 N. J. Eq. 48; Dillet v. Kemble, 25 N. J. Eq. 66; Voorhis v. Murphy, 26 N. J. Eq. 434; Scott v. Hall, 60 N. J. Eq. 451. The positive representation of complainant that the tanks were Cyprus removed any obligation of special care on the part of defendant touching that element of quality.

The restraint contained in the order to show cause will be dissolved.


author: Lewis, V. C.

text:
    Arthur S. Hughes, complainant, v. Mary E. Hadley, trustee, defendant.
    [Decided August 15th, 1924.]
    1. Where a vendee enters into a contract to purchase lands in ignorance of a defect in the title thereto, he may compel conveyance of whatever the vendor has with a proportionate abatement from the price, even though the defect is very considerable, but if he knew of the defect in title at the time he entered into the contract he has no claim to an abatement of price.

      2. Evidence examined, and held that the vendee had sufficient information .as to the' title to the land he was contracting to purchase to put him on his inquiry as to the title, and, therefore, is not entitled to specific performance with abatement.
    On bill, pleadings and proofs.

      Messrs. Humphreys cG Sumner, for the complainant.

      Mr. Arthur S. Corbin (associated with Mr. William H. Carey, of the firm of Wall, Haight, Carey & Hartpence), for the defendant.
   Lewis, V. C.

This is a bill for specific performance with abatement.

Complainant entered into a contract with the defendant to purchase two tracts of land and lease a third for five years. Complainant is willing to carry out the whole contract, provided he can get a good title to both the tracts, but he claims that the defendant cannot give good title to the second tract, and, therefore, he asks for specific performance only as to the first tract and abatement as to the rest.

Harry Stein, a real estate broker, first conceived the idea of the purchase of the property from the trustees (the defendant’s husband having been a. co-trustee up to the time of his death, which took place after the contract was entered into between the parties), and he spoke to Mrs. Hadley about the matter, and she said she would sell the whole subject-matter of the contract for $125,000. Afterwards, she informed Stein that she could only give a lease on the third tract, and would deduct $10,000 from the purchase price, but that the party purchasing would have to take a lease for five years at $600 per annum, with an option to purchase at the end of five years. Stein had found a prospective pm chaser in the complainant, who agreed to the terms specified by Mrs. Hadley, namely, that $10,000 should be paid down and the balance remain on mortgage. Complainant insisted that the mortgage should be divided between the first and second tracts, so that $50,000 would remain on tract 1 and $55,000 on tract 2. Mrs. Hadley agreed to that, but the defendant claims that she did not understand for a moment that the purchase-money mortgages of $50,000 on tract 1 and $55,000 on tract 2 represented the true values of the tracts, but she was willing to accommodate the complainant, as he professed that he was going to improve both tracts, and as he was a man of excellent standing in the community, financially and in every way, she thought it would be all right to do as he wished in that regard. The trustee insists that tract 1 is much more valuable than tract 2.

Mrs. Hadley and her husband, Dr. Hadley, were made trustees under the terms of her father’s will, and the significant part of that will sub judice is as follows:

Paragraph 10 of the will of Henry P. Simmons, the father of Mrs. Hadley provides—•

“I give, devise and bequeath to my trustees hereinafter named all the rest, residue, remainder and remainders of my estate, real, personal and mixed, wheresoever the same may be, and of whatsoever the same may consist, to have and to hold the same, to them and to the survivors and survivor of them, and to his or her successor or successors, and I do hereby authorize and empower them to sell and dispose of my said estate, at such times and in such manner and upon such terms as they shall deem proper, &c.”

Subdivision 2 of the tenth paragraph provides that the hoiise in which the testator resided, with the barn and outbuildings—•

“shall not be sold but shall be held -by my said trustees until one of my three children, to wit, Jane Elizabeth Gillen, Henrietta Simmons and Mary Eliza Hadley, shall survive, and thereupon the said premises shall be conveyed in fee-simple to that one of my said three children who shall have survived the other two. * * * X also desire that the unimproved lots lying next south of Henry street shall likewise be held by my said trustees until but one of my said three children shall survive, and thereupon said premises shall be conveyed to such surviving child.”

It seems clear to my'mind that the intention of the settlor was to devise the unimproved lots lying next south of Henry street to the survivor of his three children. I am satisfied from the context that his intention was clear, and he simply meant it to read as though the words “I” and "desire” were not present; at any rate, his intention is so clear that I shall find that it was binding on the trustees, and that being so, the trustees could not, without a breach of trust, convey tract No. 2, or give an option on lot 13.

The defendant does not ask for specific performance, and is quite willing to cancel the contract and return the $2,500 which Mr. Hughes, the complainant, has already paid. Of course, under my finding, I should unhesitatingly have refused specific performance of any part of the contract if the trustee had been the complainant. The rule is somewhat different in regard to whether the vendor brings a suit for specific performance, or whether the vendee brings the suit. It often happens that the vendor is unable to convey exactly what he contracted to convey; that the land is deficient in amount, or in quality, or is subject to an easement, or that the vendor has not a full estate in fee-simple, &c. If, after making allowance for the defect, the vendee will get substantially what he contracted for, the court will compel the vendee to take the land, with a deduction from the purchase price. If, however, the defect concerns an important or essential matter, e. g., if title to the part of a farm on which the farm building stood was defective, specific performance would not be granted to the vendor. But, where the vendee, as in this case, is suing for specific performance, the rule is different. If he entered into the contract in ignorance of the defect, he may compel’conveyance of whatever the vendor has, with a proportionate abatement from the price, even though the defect is very considerable, though the vendor owns but half the land, or owns a life estate merely instead of a fee-simple. If, however, the vendee knew of the defect when he made the contract—if he entered into the contract with his eyes open—he has no. claim to an abatement from the price, though he may, of course, if he sees fit to accept the land with its defects, and pay the full price, compel a conveyance of whatever the vendor is able to convey.

The defendant contends that the testimony established the fact that the defendant had notice that there was some doubt as to the trustees’ power under the will to sell tract No. 2.

The testimony shows that the complainant knew he ivas dealing with trustees under a will, and he knew that a question had been raised about their right to sell some portions of the property. Mr. Corbin, the defendant’s counsel, informed him in regard to this before complainant signed the contract. Complainant had drawn up the contract and had inserted in it that he was to have a good merchantable title; Mr. Corbin thereupon informed him that all they could give him was a trustees’ deed. ’The complainant then signed the contract, saying, “I want to assure you I won’t sign that mortgage until I know I am getting a good title.” Complainant then went to see his counsel, who advised him that the trustees had no power to convey tract No. 2, and he thereupon refused to carry out the contract except as to tract No. 1, and he has filed this suit for specific performance as to tract No. 1, with abatement as to tract No. 2.

The main question, therefore, is as to whether, from the information he had before he entered into the contract, he was put on inquiry, that is, whether he had notice.

The question, what gives to B notice of A’s right, means, what acts or circumstances are equivalent in their legal effect to an actual knowledge by B of A’s right.

The test is, what would an honest man, of ordinary common sense, do, on the strength of the information received? His knowledge of a custom among business men may often necessitate an inquiry.

One of the commonest species is that arising from possession of the land by a third person.

Notice by lis pendens is another very important species ©f notice, as is also, notice by reference in the chain of title; also notice by recording.

Often, the circumstances are such that they are said to put the person suing for specific performance upon inquiry, as in the instant case.

If the complainant was put on inquir3r, if it is shown that he has made as thorough an investigation as could be reasonably expected, he has rebutted the inference of presumption of notice.

I am satisfied, after reviewing the testimony, that the complainant was put on inquiry, and that he should have made an investigation, which he did not.

I find therefore that he is not entitled to specific performance with abatement.

He may have a decree for specific performance without abatement if he so desires, otherwise, I will advise a decree dismissing the bill, and the $2,500 which, the complainant had paid must be returned to him.

The other beneficiaries have not been -made parties, nor have they filed a bill to enjoin the trustees.

There will be no costs allowed to either side, and no counsel fees, as I think both parties were partly at fault.


text:
    Anthony Maturi, Rudolph Corrado and Joseph Machetto, complainants, v. Catherine M. Fay, Anna E. Fay, James P. Fay and William J. Fay, defendants.
    [Decided September 8th, 1924.]
    1. An election between remedies for a breach of contract is regarded in law as made whenever such unequivocal act has taken place as to indicate to the other party that he has made a choice, but such choice is not conclusive upon him until he has done some act making it impossible for him to chose again, or making it unjust to the opposite party.
    2. The act of bringing a suit for return of deposit and damages for a breach of contract does not bar a suit for specific performance after such action for deposit and damages is discontinued.

      3. In a suit for specific performance with abatement for defect in title, if the vendor is complainant and the defect concerns an important or essential matter, specific performance will be refused, but where the vendee is the complainant, he may compel conveyance of whatever the vendor has with a proportionate abatement • in price, even though the defect is very considerable, but if the vendee knew of the defect when he made the contract he has no claim for abatement in price.
    On bill, answer and replication.

      Mr. Ativood G. Wolf, for the complainants.

      Mr. L. Edward Herrmann, for the defendants.
   Lewis, V. C.

This is on bill for specific performance with abatement. The parties have entered into the following stipulation of facts:

1. On June 23d, 1922, the defendants entered into a contract with the complainants for the sale of certain lands and premises in. the city of Jersey City, described therein, a copy of which contract is annexed to the bill and marked Exhibit “A.” A survey showing the land agreed to be conveyed is hereto annexed.

That prior to September 15th, 1922, complainants, through their attorney, notified defendants of the existence of certain alleged defects in the title of the defendants to the premises.

The title was derived through the following deeds: Vreeland to Chitty, conveying said premises, dated September 9th, 1836, recorded in book T-10 of deeds for Hudson county, page 690, the following exception is set forth in this deed:

“Excepting the use and privilege of a road twelve feet wide on the southwest side of said lot along the line of land of Mindert and John G. Van Horne, to be used by Michael Vreeland, Mindert- Vreeland, John M. Vreeland and each of our heirs as a road to the back lot.”

Deed, Chitty to Yandervoort, conveying the premises in question, dated December 14th, 1850, recorded in book 17 of deeds, page 746, contained the following:

“Subject, however, to a right of way over a part of said land to John M. Yreeland and his heirs forever.”

In deed, Yandervoort to Henderson, dated May 10th, 1855, recorded in book 46 of deeds, page 99, and in which Elizabeth Chitty also joins, the following recital appears with regard to the right of way:

“Subject to a right of way over the southerly side of said tract reserved in a former deed or deeds, the house lot of said Elizabeth Chitty was conveyed to her heretofore by said Yandervoort and wife.”

The premises in question were devised under the will of Henderson, who died, holding the record title thereto. The executors under the will and the heirs of Henderson made a deed, dated October 24th, 1877, to Mary G. Wood, daughter of Henderson, recorded in book 317 of deeds, page 437. Mary G. Wood died intestate.

The next deed appears by William G. Bumsted, special guardian of her children and husband, to Benjamin D. Daumont, dated December 31st, 1995, recorded in book 640, page 72. Eo reference is made in either of these two deeds to the right of way created by the exception in original Yreeland deed to Chitty.

Daumont conveyed the premises to Mary Ann Fay, the mother of defendants, by deed dated February 4th, 1896, and recorded in book 636, page 569, and contains the following :

“Subject, however, to any easement that may exist over, on or across said lands as reserved in deeds Yreeland to Chitty, recorded in libers T, page 690; T-12-172, book 46-92, and in deed Chitty to Yandervoort, 17, page 746, and deed Yandervoort to Henderson, 46, page 99.”

Mary Ann Fay died, and the contract of sale which is. the subject-matter of this suit was entered into by all of her heirs-at-law who are the defendants herein.

Upon notice to defendants of the claim of the complainants, the defendants gave notice to complainants that they denied that the land was subject to the said easement of a right of waj*, and the time for performance of the contract was extended by acquiescence of the complainants and defendants without day. Under date of October 28th, 1922, upon notice from the complainants to the defendants, the time for performance of the contract was fixed for November 14th, 1922, at eleven a. m., at the office of the attorney for the defendants, at which time the complainants appeared and made a tender of the money and mortgage provided in the contract, and 'the defendants tendered to the complainants a deed containing full covenants and warranty, which deed contained no reservation with respect to the right of way, and by which deed the defendants purported to convey the premises free and clear of all encumbrances. This deed the complainants refused to accept, stating as the grounds therefor that there existed over the premises the right of way referred to in the deeds above set forth. The right of way referred to is not, and was not at the time of the making of the contract, enclosed or shut off by a fence or other enclosure.

On January 12th, 1923, the complainants instituted suit against the defendants in the Hudson county circuit court to recover the deposit paid under the contract, $1,000, together with $685 damages for search fee and survey, together with interest thereon from June 23d, 1922, and costs of suit.

No answer was filed by the defendants up' to the date of discontinuance, although the time therefor had expired. This action was voluntarily discontinued by the complainants on March 27th, 1923, and on March 31st, 1923, the complainants filed the bill herein and subpoenas were issued under date of April 3d, and served upon the defendants.

This stipulation of facts was signed by counsel.

Fifteen thousand five hundred dollars was the purchase price agreed upon, payable $1,000 by way of deposit, $3,500 on September 15th, 1922, and by making, executing and delivering a bond secured by a purchase-money mortgage upon the same in the sum of $11,000, to run for a period of two years, with interest at the rate of six per cent, per annum, payable semi-annually.

The contract provided that the premises were to be conveyed in fee-simple, free and clear of all encumbrances, and not subject to any existing encumbrances.

Prior to September 15th, 1922, the complainants, through their attorney, notified the defendants of the existence of certain alleged defects in the title to the premises. Upon receipt of this notice, defendants gave notice to the complainants that they denied the defects. The time for performance of the contract, however, was extended by acquiescence of the parties, without day.

On November 6th, 1922, the complainants notified the defendants, in writing, that they would appear at the place stated in the contract for the purpose of tendering the balance of the purchase price, together with an executed bond and mortgage in the sum of $11,000, as provided in the contract, on November 14th, 1922, at eleven-thirty A. m., adding thereto this notice :

"In the event of you being unable to cure the defects with which you are already familiar, I desire to take this opportunity of informing you that suit will be immediately instituted in the Hudson county circuit court at once for the return of the deposit money paid on said contract, together with a reasonable fee for searches, survey and disbursements.”

At the time so fixed, the complainants appeared and made a tender of the balance of the purchase price agreed to be made and the mortgage agreed to be delivered. The defendants tendered to the- complainant a deed containing full covenants and warranty of the premises agreed to be conveyed, free and clear of all encumbrances. The complainants refused to accept said deed, stating as the grounds therefor that there existed over the premises a right of way created in the earlier deeds in the record title.

On January 12th, 1923, the complainants instituted a suit against the defendants in the Hudson county circuit court for the breach of the contract by the defendants to recover the deposit paid under the contract, together with damages for search fees, and survey and interest from the date of payment, and costs of suit.

On March 27th, 1923, the action was voluntarily dismissed or discontinued by the complainants.

On March 31st, 1923, the complainants filed the bill herein for specific performance with abatement, and the defendants’ contention is that the complainants, in instituting the action for the return of the deposit, abandoned the contract and virtually rescinded the same, and should not now be permitted to have specific performance decreed by this court.

It has been judicially affirmed that an election should be regarded as made whenever such an unequivocal act has taken place as to indicate to the other party that he has made a choice; but the cases can scarcely be said to bear this out as a general rule. On the other hand, it has been argued that an election by the party having a, choice should not be conclusive upon him until he has done an act making it impossible for him to choose again, or making it unjust to the opposite party.

I incline to the view that as the defendants have suffered no injury by the abandonment of the law suit that the complainants have a right to file a bill for specific performance, subject to the limitations which I shall refer to hereafter.

In specific performance eases the rule is different as to whether it is the vendor or the vendee who is bringing the suit. In case the vendor is the complainant, if the defect concerns an important or essential matter, specific performance will be refused. But where the vendee is the complainant, if he entered into the contract in ignorance of the defect, he may compel conveyance of whatever the vendor has with a proportionate abatement from the price, even though the defect is very considerable. If, however, the vendee knew of the defect when he made the contract, if he entered the contract with his eyes open, he has no claim to an abatement from the price, though he ma3r, if he sees fit, accept the land with its defects and pay the full price; if he is satisfied to do that, then he may compel a conveyance of whatever the vendor is able to convey.

In this case, it is clear that the defendants had notice by reference to the chain of title. A person is bound by notice of matters recited or referred to in his chain- of title; that is, in the succession of deeds or other instruments by which he traces the title back to its original source.

The complainants may have a decree for specific performance without abatement or compensation, if they so desire, otherwise they will be left to their remedy at law.


text:
    Anna Neill and Thomas Neill, her husband, complainants, v. Samuel C. Petry, defendant.
    [Decided October 30th, 1924.]
    1. Specific performance is discretionary in a court of equity, and will not be decreed if there is a substantial doubt regarding- the validity of the title involved, or if it be unmarketable.
    2. Where an estate oí freehold is limited to a person, and the same instrument contains a limitation, either mediate or immediate, to his heirs or the heirs of his body, the word “heirs” is a word of limitation, i. e„ the ancestor takes the whole estate- comprised in this term. Thus, if the limitation .be to the heirs of the body, he takes a fee-tail; if to his heirs general, a fee-simple.
    3. WJiere an estate is devised to a man with limitation to his heirs general in the same instrument, and the devisee has had no children, section 10 of the Descent act does not apply.

      ' 4. WJiere such owner makes a contract for sale of said lands, which contract is also signed by the purchaser of said lands at a tax sale, which sale is not attacked, such contract 'will be specifically enforced.
    On bill and answer.

      Mr. Gustav A. Hunzilcer, for the complainants.

      Messrs. Young & Randall, for the defendant.
   Lewis, V. C.

This is a bill for specific performance, brought by the vendor, to compel the vendee to' take title to certain real property which the defendant had refused to accept under tire contract, on the ground that the complainants5 title was doubtful and unmarketable. The facts and questions at issue are contained in the pleadings, and the parties have submitted the case on the allegations therein contained, which, for the purposes of this suit, are to be taken and considered as true.

The lands in question were formerly owned by one Thomas Neill. He died in 1879, leaving a will, which was duly probated, and which contained, among other things, the following provision :

“I give and bequeath to my grandson Thomas Neill, son of my daughter Margaret Ann Neil, all my property that I bought from 6. Van Houten, with my mare, harness and wagon, as his mother’s share of my property, and to go to his heirs at his death, and it is my wish that my wife Harriet Neill shall collect my grandson’s rent during her life.”

Thomas Neill, the devisee, defaulted in the payment of taxes upon the lands so devised, and the same were sold under Martin act proceedings by the receiver of taxes of Paterson, where the lands were located, the purchaser being one Henry S. Writenour. The tax sale took place in 1916. "Wntenour gave due notice to redeem, as provided by the statute, to' all persons having interests in the lands, hut none of them redeemed, and deeds for the property were, in due course, delivered to Writenour, and were recorded by him in the registear’s office of Passaic county. Thereafter, 'Writenour conveyed the lands in fee-simple to Anna Neill, the wife of Thoanas Neill, the devisee aforementioned. Thereafter the contract for the sale of the lands involved in this suit was made, both Anna Neill and Thomas Neill, the complainants, joining therein.

The defendant, conceiving that the devise above quoted vested in the complainant Thomas Neill a life estate only, refused to take title under the contract. The complainants, however, contend that by this devise- Thoanas Neill, the de-’ visee, acquired an estate in fee-simple- in the lands involved, and that by the tax sale under the Martial act title in fee-simple- ultimately.vested in the complainant Anna Neill, the devisee’s wife; and that, if the tax sale was valid, the wife has title in fee, and, if invalid, the husband has title in fee by virtue- of the devise. In either event the title tendered by complainants to- defendant is valid and marketable, and the defendant should be compelled to- specifically perform his contract.

It is well established that specific performance is discretionary in a court of equity, and that this court will not decree specific performance if there is a substantial doubt regarding the validity of the title involved, o-r if it be unmarketable.

In the preseait case the validity aaid marketability of the title depend upon the- effect of the devise in the will of the testator, Thomas Neill, and the strict regularity of the Martin Act tax sale. Hpoaa the facts submitted, which must be taken to be true for the purposes- of this suit, no question of the regularity of the tax' proceedings is raised. The effect o-f the devise in the will of Thomas Neill, however-, is not free from difficulty; but under the rule- in Shelly’s Case, which, except as modified by statute, prevails in this state, I am of the opinion that the devisee under that will, who- is one of the coanplainants in this suit, took title to the lands involved in fee-simple. The rule is as follows:

“That where an estate of freehold is limited to- a person and the same instrument contains a limitation, either mediate o-r immediate-, to his heirs or the- heirs o-f his body, the word ‘heirs’ is a. word of limitation, i. e., the ancestor taires the whole estate comprised in this term. Thus, if the limitation be to the heirs of the body, he takes a fee-tail; if to his heirs general, a fee-simple.” Lippincott v. Davis, 59 N. J. Law 241 (at p. 244).

Tested by this rule, it is clear that the devisee, Thomas Neill, took a freehold with a limitation, in the same instrument, to his heirs general, thereby acquiring under that rule a fee-simple. This he could alien, or it could be divested and transferred by operation of law. He has had no children. Through the operation of the tax sale this fee has become vested in the complainant Anna Neill. Both she and her husband, the devisee aforesaid, have joined in the contract to convey to the defendant. The title is valid and marketable, and the defendant should be decreed to specifically perform his contract to purchase the same.

It is urged, however, that section 10 of the Descent act (2 Comp. Stat. p. 1921) has modified in this state the rule in Shelley’s Case, and would operate in the present situation to vest in the devisee, Thomas Neill, under the provision of the will quoted, a life estate only, with remainder in fee to his children; and that, therefore, complainants cannot convey in fee-simple to the defendant. This section, however, as was pointed out by Chief-Justice Beasley in Lippincott v. Davis, supra, has no effect beyond the “single instance where there are children or the issue of children in whom the remainder can vest,” and has no application except where lands are devised for life, and at the death of the life tenant to go to his heirs or his issue, or to the heirs of his body.

But under the view which I have taken of this case> upon the facts presented by the complainants, the devise in question does not present a situation which comes within the section of the Descent act referred to. Badgley v. Hanford, 12. N. J. L. J. 75; Zabriskie v. Wood, 23 N. J. Eq. 541 (at p. 550); Shugrue v. Long, 82 N. J. Law 717 (at p. 725).

I will therefore advise a decree for specific performance in accordance with these views,' pursuant to' the prayer of the bill.


text:
    William B. Clough and Minnie E. Clough, his wife, complainants, v. Samuel J. Mesnick, Samuel Glass and Sadie Glass, his wife, and David L. Stemer and Dyna Stemer, his wife, defendants.
    [Decided November 28th, 1924.]
    Where a building restriction in a deed provided that any dwelling-house on the land conveyed «hall stand back at least thirty feet from the line of the street, and the restriction in the adjoining - tract is in the same language except that the house line is forty feet from the street, a two-story front porch covering almost the entire front of a building, exitending into the restricted area thirteen and a half feet, sixty-two per cent, of which is enclosed, and roofed over nearly to the height of the gable of the main house roof, is not an open porch, and is a plain violation of the building restriction aforesaid.
    On bill, pleadings and proof.

      Mr. Henry 0. Whitehead, for the complainants.

      Mr. Jacob I. Jaffa, for the defendants.
   Lewis, V. C.

This is a bill to enforce a restrictive building covenant contained in a deed made by the complainants to- the defend - ant Mesnick, dated December 1st, 1921, and duly recorded in the office of the register of deeds of Passaic county, in which county the. lands involved are located. The deed conveyed three’ contiguous tracts of land situated on Yan ITouten avenue, in the city of Passaic, immediately adjoining property then and still owned by the complainant Minnie E. Clough, and which she and her husband occupied as their residence. The properties are located in a high-class residential^ neighborhood, where the houses have been built with considerable open ground space around them. This is clearly shown both by the testimony and by the exhibits offered in the case. The property in which the complainants reside, and which was retained by them at the time of the conveyance to Mesnick, is located at a distance of forty feet from the Yan Houten avenue line. When complainants conveyed to Mesnick the tract next adjoining that retained by the complainants was restricted to a like forty-foot-house line. The second tract from the complainants5 property, which is the tract involved in the present suit) was restricted to a thirty-foot building line. The third tract, which is nearest the corner of the intersecting street, has no- restrictions. The restriction in complainants5 deed covering the second tract is as follows:

“That no building fox manufacturing or mercantile purposes shall be erected thereon, and that any dwelling-house erected thereon shall stand back at least thirty (30) feet from, the northeasterly line of Van Houten avenue.55

The restriction covering the tract next adjoining complainants5 land is in the same language, except that the house line is foriw feet from the Yan Houten avenue line, instead of thirty feet.

Subsequent to the recording of complainants5 deed to Mesnick, the second tract, having the thirty-foot restriction, was conveyed by Mesnick to the defendants Glass and Sterner, but without restriction, and immediately thereafter Mesnick contracted with the other defendants for the erection on that second tract of a two-family dwelling-house. Shortly after the building was commenced the complainants -filed their hill to restrain its construction in the manner in which it was being erected, alleging that it violated the restrictive covenant above quoted.

On the preliminary application no acl interim restraint was imposed, but the court indicated to defendants that if they proceeded with the construction of the building pending final hearing and the determination of the suit they would do so at their peril, and if it should be determined that the building, as constructed, was in violation of the restriction, the encroachment would have to1 he removed.

The facts are not materially in dispute, and it is conceded that the main foundation wall of the house in question does stand back thirty feet from the northeasterly line of Van Houten avenue. It is also conceded that a two-story front porch, covering almost the entire width of the building, extends beyond the front house line and out into the restricted area, a distance of thirteen and one-half feet; and it appears that about sixty-two1 per cent, of its construction, measured vertically, is enclosed, and it is roofed over nearly to the height of the gable of the main house roof. This is plainly shown by the photograph “Exhibit C 4,” and the blueprint “Exhibit W-D 1¼."

The several steps leading up to- the porch extend further .into- the restricted" area towards the Van Houten avenue line. The testimony is somewhat conliieting in respect tO' the specific nature of the construction of the porch and its sever-ability from the main house structure, and the substance of the contention of the defendants, whereby they seek to justify the plan of construction, is that the porch is what should be held to be technically “an open porch,” which, they assert, is permissible under our decisions.

The complainants, on the other hand, contend that, irrespective of what the adjudications may have determined in this respect, the porch is not an o-pen porch, hut it palpably and obviously a part of the building itself, and that the present construction is violative of the restrictive covenant, in that the house erected on the tract in question does not stand back at least thirty feet from the northeasterly line of Van Houten avenue.

I am inclined to accept the contention of the complainants.

The purpose of the restriction, as shown by the testimony of the complainant Minnie Clough, who was the owner of the whole tract at the time of the conveyance to Mesnick, was to protect her’ propeily, and that the reason why she reduced the house line limit on the tract in question was because Mesnick said to her, “Have a heart, and let me put a new house but one from you thirty feet back.”

Aside from the testimony of the complainant in that respect, I think that it is clear from the general character of the neighborhood that a reasonably uniform house line and cor respondingly uniform open ground area, would be obviously beneficial to the property retained by the complainant. 1 do not sec how it is possible to consider the testimony of the witnesses in the case, and to observe the photographic and blueprint exhibits offered in evidence and reach any other conclusion than that the building in question does not “stand back at least thirty feet from the northeasterly line of Van Houten avenue/’ and that it encroaches upon the restricted area as at present constructed from the main foundation wall line outward towards. Van Houten avenue.

This being so> the right of the complainants to the relief prayed for is clear. Winfield v. Henning, 21 N. J. Eq. 188; Coudert v. Sayre, 46 N. J. Eq. 386; Bowen v. Smith, 76 N. J. Eq. 456, and cases there cited; Ross v. Duffy, 92 N. J. Eq. 318; Hemsley v. Hotel Co., 62 N. J. Eq. 164; affirmed, 68 N. J. Eq. 804.

I will therefore advise a decree for the complainants in accordance with these views.