text:
    Emma H. McCully v. Fannie Rowland and Alden M. Rowland, her husband.
    [Decided November 9th, 1922.]
    1. It is enough to warrant setting aside a deed of a' woman over ninety years of age for a nominal consideration that it appears that she was incapable of recognizing facte, as indicated by her failure to recall her previous execution of a will devising to another the property involved.
    2. The grantee in an unacknowledged deed of a woman ninety years old for a nominal consideration haa the burden of showing that the grantor fully appreciated the nature of her act, and had the preliminary benefit of independent advice, and that no undue advantage was taken of her.
    On pleadings and proofs.

      Mr. Pierre F. Goolc, for the complainant.

      Mr. Alexander Simpson, for the defendants.
   Lewis, V. C.

In the latter part of 1920 Martha L. Eield, an old lady over ninety years of age, executed a deed to the defendant Eannie Rowland for a property occupied by the grantee and her husband, Alden M. Rowland, for the consideration of one dollar. The deed was not acknowledged. At the time Mrs. Eield signed it there was no one present but herself and Mr. and Mrs. Rowland and their daughter. The husband of the grantee was the subscribing witness. He did not explain the contents of the deed to Mrs. Eield, nor was it read by her nor to her. It had been prepared by a lawyer at the request of Mrs. Rowland, and taken by her to Mrs. Eield for execution at the time Mrs. Eield signed it. Immediately after her signature was obtained the deed was taken away by Mrs. Rowland. The only conversation which occurred at the time of the execution of the deed was, as appears from the testimony of the two defendants and their daughter, a statement by Mrs. Rowland to Mrs. Eield that she had brought the paper with her, and Mrs. Field’s statement to her that she was glad. No explanation of its contents was made. At that time Mrs. Eield was almost totally blind, senile and forgetful. She had entirely forgotten the execution of her will, under which complainant' took the property in question, and which is in evidence in the case, dated January 31st, 1918. Mrs. Eield was not accorded the benefit of any independent and impartial advice. At the time of the execution of the deed she was an inmate in the “Home for Aged Women,” in Orange, where she had been placed after the death of her son-in-law, who had married the complainant after the death of Mrs. Field’s daughter, who was his former wife; and with whom Mrs. Eield had theretofore resided. The defendants had been tenants in the property in question for many years, but at the low rental of $26 per month. The value of the property, by the undisputed evidence of the real estate expert who testified, was $8,000; and its rental value about $70 per month. The deed recited that the conveyance was made expressly subject to'a mortgage of $3,000, which the grantee assumed and agreed to pay off as part of the consideration, but it was shown in evidence that the mortgage had been fully paid and canceled; and Mrs. Rowland, in her testimony, admitted that at the time of the conveyance to her it had been paid off. Mrs. Rowland also admitted paying rent for the property as usual after the execution of the deed up to and including the month of January, 1921; and that Mrs. Field asked her to say nothing about the conveyance to any one; and that she did not consider herself the owner of the property until after Mrs. Field’s death. Mrs. Eield died February 10th, 1921. Mr. Rowland testified that his wife was not to have the property until Mrs. Eield died, and that the execution of the deed was to be kept a secret. The deed was not recorded until June 28th, 1921; it was proved for recording, by the affidavit of Mr. Rowland as subscribing witness, and his affidavit is dated June 27th, 1921. He attempted to explain his failure to record the instrument earlier by stating that during the interval he was seriously ill, but he admitted on cross-examination that for at least two weeks after the deed was signed he was able to be about the house.

The bill is filed by complainant, Emma H. McCully, to set aside the conveyance by Mrs. Eield to the defendant Eannie Rowland, she contending that the conveyance was without consideration, and is ineffective and a nullity, because of the incapacity of the grantor and the undue influence brought to bear upon her by the defendants.

It is significant that under date of March 4th, 1921, the defendant Alden M. Rowland wrote the following letter to the complainant, which was received in evidence:

“Jersey City, 3/4/21.
“My dear Mrs. E. McCully:
“When. I reached home last evening my wife spoke to me in reference to you having 0 will. I told her you was certainly entitled to the place. How about it if we withdraw the case?
“Sincerely,
“A. M. Rowland.”

It is evident from the testimony that Mrs. Rowland shared this belief and that she feared she would be doing something wrong in accepting the deed, or get herself in trouble.

I am satisfied from the evidence that Mrs. Eield was incapable of recognizing facts, indicated by -her failure to recall the previous execution of her will and disposition of the property involved therein. Hammel v. Hyatt, 59 N. J. Eq. 174; Haydock v. Haydock’s Exrs., 34 N. J. Eq. 570.

Aside from this point, on which the case might well be rested, there is the further proposition that the obtaining of the execution of the deed by the Rowlands was accomplished in a most suspicious and unusual manner. The deed lacked an acknowledgment, and was in no way explained to Mrs. Eield, or its contents made known to her; nor was she given the benefit of independent and impartial advice regarding it.

In Lyons v. Van Riper, 26 N. J. Eq. 337, the court said: “In dealing with persons in the helpless' condition of this old woman, an officer having power to authenticate the execution of deeds is bound to go further than a simple, formal reading of the instrument. The contents are to be made known to the grantor by such means as will enable him to comprehend the nature and effect of his act. It is conspicuously manifest that that was not done in this case. I am satisfied the officer, by a grossly careless performance of his duty, unconsciously aided in the perpetration of a fraud, which he would have frustrated by the exercise of the care and vigilance the law requires him to employ in the discharge of his duties.” Walz v. Oser, 93 N. J. Eq. 280; Slack v. Rees, 66 N. J. Eq. 447; Post v. Hagan, 71 N. J. Eq. 243.

Under the circumstances attending the conveyance in question the burden was upon the defendant to show that the grantor fully appreciated the nature of her act; that she had the preliminary benefit of independent and impartial advice, and that no undue advantage was taken of her. This they have failed to sustain. Vass v. Warner, 92 N. J. Eq. 294, Walz v. Oser, supra.

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


source: Caselaw Access Project

author: Backes, V. C.

license: Public Domain

text:
    Ada C. McCoy v. Richard D. McCloskey.
    [Decided May 19th, 1922.]
    1. A bequest of corporate stock to trustee to collect all dividends, incomes and profits declared and. .paid on the stock, and to pay the same to testator’s wife so long as she remained unmarried and thereafter to her children, does not include all the income and profits from the stock, but only the dividends declared by the corporation.

      2. The book value of the assets of a corporation is not the true value, hut only evidence of the value of its assets which determine the value of its stock.
    3. The inhaneement in value of the assets of a corporation is corpus, not income, for the purpose of determining the rights of parties under a trust.

      4. Where a corporation, the majority of whose stock was held under a testamentary trust, was dissolved, as permitted by the will, and a purchase-money mortgage taken for a poi-tion of the assets sold, for which the trustees issued participation certificates to the former stockholders, the increase in value of the mortgaged assets, after they had been surrendered to the trustees by the purchaser and mortgagor in foreclosure proceedings, is to be considered a part of the corpus, not income, except in so far as necessary to pay the delinquent interest.
    5. If the mortgage referred to was merged in the legal title to the property, then, upon a sale at a profit, the person entitled toi the in-' come from the fund will be entitled to participate in the profits proportionately as her share of the accrued interest at the time of the merger bears to the principal debt. Parker v. Seeley, 56 N. J. Eq. 110. approved and followed.
    On bill to construe a will.

      Messrs. Lum. Tamblyn & Colyer (Mr. Ralph Lum), for the complainant.

      Mr. Rimer R. Wigg and Mr. Abraham H. Cornish, for the defendant.
   Backes, V. C.

This bill was filed by the widow of Edward A. McCoy, deceased, to have his will construed and her rights thereunder declared. The principal asset of his estate was two hundred and ninety shares of five hundred shares of the capital stock of J. B. McCoy & Sons, a Few York corporation, which, by the fifth paragraph of his will, he gave to three trustees to hold during the lives of his two children and the survivor of them, unless the trust should, sooner be terminated by the dissolution of the corporation or the sale of the stock, in trust, for the following uses and purposes, viz.:

“To collect and, receive all dividends, income and profits which may be declared and paid upon said shares of stock during the continuance of this trust and to pay and apply the same as follows:
“(a) The income and profits upon two hundred and fifty-five shares thereof to my wife, Ada 0. McCoy, so long a® she shall remain unmarried, and in the event of her remarriage, during the term of this trust, said income and profits shall thereafter be divided into two equal parts and one of said parts shall be paid to my said wife, Ada C. McCoy, and the other of said parts shall be paid in equal shares to my s'aid children, Mary Catherine McCoy and Frances McCoy.”

Then follows provision for the disposition of the income upon the death of the widow, and of either of the children. The income of the remaining thirty-five shares of stock was given to the testator’s two sisters. The trustees were given discretionary power to sell the stock or to dissolve the corporation and liquidate its affairs, and upon the happening of either event, the trust was to terminate “and the proceeds which may be received by my trustees by reason of such sale, or by reason of such dissolution or liquidation upon the two hundred and fifty-five shares of such stock,” were to be held in trust under the provision of paragraph 6 of the will, wherein he gave to his trustees all the residue of his estate, “including the proceeds when received upon the two hundred and fifty-five sharesof said capital stock of J. B. McCoy & Son,” in trust during the lives of his two children for the following uses and purposes: “To invest and reinvest the same and to collect and receive all the rents, income, issues and profits therefrom, and to pay and apply the same in manner following:”

The disposition of the income of this second trust is the same as the first. Provision is also made for the disposition of the corpus upon the death of the surviving child. The testator died January 24th, 1916. The trustees carried on the business of the corporation until the first of January, 1920, when they began to liquidate its affairs, and shortly afterwards effected a dissolution. During the administration of the first trust, the corporation earned $71,233.17 and declared and paid dividends amounting to $75,000, thus invading the capital to the sum of $3,766.83, and upon the dissolution, declared and paid liquidation dividends amounting to $200,000, and has on hand to be distributed $27,188.67. The capital stock of the company issued and outstanding was $50,000 of the par value of $100 each. At the death of Mr. McCoy, the book value of the corporation’s assets was $196,965j a book value per share of $393.93. The widow claims that the difference between the book value of $196,965 and the liquidation receipts of $227,188.67 constitutes income and profits within the meaning of the will, and that she is entitled to two hundred and fifty-five five hundredths of it. I do not think so. Under the first trust the gift of the income and profits of the trust is limited by its terms to dividends, income and profits “which may be declared and paid” upon the shares of stock of the McCoy company. In Howell v. Westbrook, 69 N. J. Eq. 641, the bequest was of the interest on forty-six shares of bank stock, “to pay the gaid interest to my wife, Lydia, as the same shall be declared by said bank,” and Vice-Chancellor Stevens held the gift to be the dividends as they were declared. This adjudication seems to me to be dispositive of the contention. But it is argued that the language of the will imports an intention of the testator that his widow should get not only the dividends declared and paid by the corporation, but the actual income and profits, and,, as already indicated, that such income and profits embrace all that was realized on the assets of the corporation in excess of their book value at the death" of the testator. I am quite willing to concede that equity would give her the operating profits, though they had not been declared and paid by.the board of directors, had they been unjustly withheld, but I cannot give assent to the proposition that the sale value of the assets in excess of the book value is income and profit. One of the fallacies of this proposition lies in the arbitrary assumption that the book value was the true value of the assets of the company, whereas it is only evidence of the value, as pointed out by Vice-Chancellor Emery in Lang v. Lang, 56 N. J. Eq. 603. But if the book value at the death of the testator was the true value of the assets at that time, the advance realized by their sale, three or four years later, must have been due solely to their enhancement in value (the accumulations during that time'had been divided), and under the authorities, where a testator’s estate consists of capital stock in incorporated companies, the income whereof is given to one and the stock to another, the appreciation in value is held to be corpus not income. VanDoren v. Olden, 19 N. J. Eq. 176; Ashurst v. Field, 26 N. J. Eq. 1; Van Blarcom v. Dager, 31 N. J. Eq. 783; Outcalt v. Appleby, 36 N. J. Eq. 73; Pratt v. Douglas, 38 N. J. Eq. 516; Lang v. Lang, 56 N. J. Eq. 603; 57 N. J. Eq. 325; Brown v. Brown, 72 N. J. Eq. 667; Day v. Faulks, 79 N. J. Eq. 66, and McCracken v. Gulick, 112 Atl. Rep. 317.

There is no obscurity in the testamentary scheme. During the period of the first trust the widow was to receive two hundred and fifty-five two hundred ninetieths of the income and profits derived from the operation of the business of the corporation. The corpus of the estate, represented by the holdings in the corporation, was to remain unimpaired, and when that trust came to an end, by the sale of the stock or the dissolution of the corporation, the proceeds were to pass to and become the corpus of the second trust, of which the widow was to receive the rents, income, issues and profits in the same proportion.

The only other question is this: A $60,000 purchase-money mortgage was taken by the corporation in payment of some of its assets. This mortgage formed a part of the $200,000 liquidation dividend and was divided by issuing participation certificates to.the stockholders, of which the trustees obtained their share. Upon default in the payment of one year’s interest, foreclosure proceedings were begun, and pending the suit, the mortgaged premises were surrendered and conveyed by the mortgagor to an appointee of the participation certificate holders. The evidence indicates that the property has since ’ greatly increased in value, and the widow claims that the increase is income and profits, under the terms of the second trust, and that she is entitled to a .proportionate share. The realization of any increase is, at this time, prospective and speculative, as the asset has not as yet been converted into money. When it is, the proceeds will be principal of the trust, under the ruling just announced, subject to the payment of the interest on the mortgage. If, however, the mortgage is to be regarded as merged in the legal title (the understanding as to this has not been made clear), then, upon a sale at a profit, the widow will be entitled to participate in the profits, proportionately, as her share of the accrued interest at the time of the merger bears to the principal debt. Parker v. Seeley, 56 N. J. Eq. 110.


text:
    Farmers Loan and Trust Company et al. v. Erskine Hewitt et al.
    [Submitted May 5th, 1922.
    Decided June 2d, 1922.]
    1. Whether iron mines owned by a corporation shall be operated at a loss during a business depression, or closed down at a smaller loss, is a purely business and economic problem to be determined by the directors and not by the court, and the judgment oí the majority must prevail in the absence of bad fiaith or abuse of power.
    2. Under a will bequeathing a large estate to a corporation organized by the testatrix, and bequeathing stock therein, toi her children, they hold the stock with all the privileges, powers and obligations granted to or imposed upon stockholders by law.
    3. Whether a corporation, owning assets of large value and having readily salable securities in the treasury, but in need of funds, shall obtain them by issuing bonds or by selling such securities, is a matter to be decided exclusively by the board of directors, and equity cannot review its decision.
    4. Whether a corporation in need of funds should raise them by issuance of bonds convertible into stock, or by bond and mortgage, or by borrowing on the company’s personal credit is also a matter to be determined by the directors.

      ¡5. A proposed issue of corporate bonds convertible into stock -to (be offered to the stockholders in proportion to their holdings, will not be enjoined, though stockholders failing to respond will suffer tremendous loss by depreciation in the value of their stock, all stockholders being dealt with alike.
    6. Where a corporation issues 'bonds convertible into stock and offers them to the stockholders in proportion to their holdings of stock, the purchase' of such -bonds by trustees owning stock to protect the tr'ust estates is not an investment within the terms of 2 Comp. Stat. p. 2211, especially where they have received a dividend in excess of the forced loan under an agreement that they will lend the company their share of any sum needed from time to time as additional working capital.
    7. In a suit to enjoin directors from submitting to stockholders the question of issuing bonds convertible into stock to be offered to the stockholders proportionately, evidence held insufficient to show that the proposed bond issue was in bad faith, for the purpose of confiscating the stock holdings of minority stockholders.
    8. A proposed corporate bond issue will not be enjoined at the suit of minority stockholders as too large where the bonds are to be issued in amounts necessary to meet the company’s requirements, since, if the demands become excessive, relief may then -be applied for.
    On bill for injunction, &c.

      Mr. Merritt Lane, for the complainants.

      Messrs. McCarter & English (Mr. Conover English),-for the defendants.
   Backes, V. C.

This is a stockholders’ bill to restrain corporate action, and the motion is for a preliminary injunction.

The Ringwood Company was formed in 1905 by Mrs. Sarah A. Hewitt, widow of Abraham S. Hewitt, for the more convenient management of her vast estate in the town of Ringwood and vicinity, in the Greenwood lake section of the state, and for the accommodation of her testamentary disposition. The capital stock is $6,000, divided into six hundred shares, par $10. Mrs. Hewitt conveyed to the corporation her lands in this state and also stocks and securities of other corporations. She died in 1921, and by her last will and testament devised and bequeathed to the company all her estate not therein otherwise disposed of, and then bequeathed to each of her six children one-sixth, or one hundred shares, of the capital stock of the comany—to five of them outright, and to one, Edward R. Hewitt, in trust, for his life, with remainder to his issue. As a result of an agreement entered into by the children, in October following, the will was admitted to probate; stocks and securities bequeathed to the children by their mother were transferred to the company; the directors were increased from three to six, and each child’s interest was given a representation on the board. The company’s assets at that time were estimated at $9,000,000. In November following, the company divided a million and a half of securities among the children, and the following April another million and a half of stocks and securities was distributed. In the latter month the company assumed all the obligations of the estate of Mrs. Hewitt, and her executors were discharged. Peter Cooper Hewitt, one of the sons, died in August, 1921, and the Earmers Loan and Trust Company of New York, one of the complainants, is executor and trustee of his will. The principal activities of the company have been the development' of the lands for residential purposes, and the operation of iron ore mines at Ringwood. The land improvement enterprise is progressing slowly, but the mines are at a standstill, owing to the present depression in the iron trade. The management has been, and is, in the hands of Mr. Erskine Hewitt, and a division of opinion has arisen between him and his three sisters, who, or whose representatives, form a majority of the directors, and the complainants, representing the estate of Edward R. Hewitt and Peter Cooper Hewitt, as to whether the mines should be shut down and flooded, at a resumption cost of $100,000, or be operated on a small scale, and ready-for-business basis when trade revives, at an expense of from $150,000 to $300,000 a year. The majority of the board is of the opinion that the latter course should be pursued, but, whichever may be adopted, the company stands in need of funds to carry on, and to that end the board of directors, on March 9th, 1922, passed the following resolution by a vote of four to two, the complainants voting in the negative.

“Resolved, That' the board of directors deems and declares it advisable that the company be authorized to- issue bonds to an amount not to exceed five hundred and ninety-four thousand dollars ($594,-000) to become due not less than three years nor later than five years from the date of issue, to be redeemable at the option of the company as a whole, but not in part at any time upon thirty days’ notice as hereinafter provided, and to bear interest payable semi-annually at a rate not less than six per cent. (6%) nor more than eight per cent. (8%) which bonds, as shall be therein so declared and prescribed shall unless redeemed prior to the expiration of two years from the issue thereof, be convertible at par at the option of the holder into fully paid common stock of the company at par at any time after the expiration of the said two years and before the fixed date for the maturity thereof or before their earlier redemption after the expiration of Lhe said two years; in case of the exercise by the company of its option to redeem the said bonds before their maturity, 'notice thereof and of the date fixed for such redemption to be mailed to the last-known address of each holder of said bonds, as it may appear on the books of the company, not less than thirty days prior to said date. Said bonds to be offered to the stockholders pro ra-ta in such multiples of $6,000 and at such times as may be required for the proper financing of the company as determined by the officers of the company, and any bonds so offered and not taken to be offered to subscribing stockholders in proportion to the amount of their subscriptions: any bonds not so taken to be sold on. such terms and to such purchasers as to the officers shall seem fit, the conditions as to the time within which subscriptions must be made for the said bonds, the denominations thereof and other details to be determined by the officers.
“Resolved, That the board of directors deems and declares it advisable that the total authorized capital stock of the company be increased from six thousand dollars ($6,000), divided into six hundred shares of the par value of $10 each to six hundred thousand dollars ($600,000), divided into sixty thousand (60,000) shares of the par value of ten dollars ($10) each, all of which shall be common stock; and that the certificate of incorporation be amended by amending article fourth thereof to read as follows;
“Fourth. The total authorized capital stock of this corporation is six hundred thousand dollars ($600,000), divided into sixty thousand (60.000) shares of the par value of ten dollars ($10) each, all of which is common stock.”

It was further resolved to submit the resolutions to the stockholders at a- special meeting to he held March 14th, then following,-for their consideration and approval. Thereupon this bill was filed by the two dissenting directors and a temporary restraint issued.

The prayer of the bill is twofold, to restrain the operation of the'mines during the pending business depression, because wasteful, and to prevent the raising of money by the plan indicated by the resolutions, on the grounds that it is unconscionably oppressive, confiscatory of the complainants’ capital interest in the corporation, and that it was conceived in bad faith by the majority stockholders with intent to deprive the minority of its holdings.

Whether the iron mines should be operated at a loss or closed down at a loss, but less, are purely business and economic problems to be handled by the directors, not by the court, and the majority judgment must prevail, in the absence of a showing of b"ad faith or abuse of power. Ellerman v. Chicago Junction Railroad Co., N. J. Eq. 217. It is to be assumed that the defendants, representing, as they do, four-sixths as agáinst the complainants’ two-sixths interest, will pursue a course that will best serve the interests of the company. Self-preservation alone would deter them from doing otherwise.

Statutory authority for raising the funds by bonds convertible into stock, as undertaken by the directors, is conceded, and that the procedure is in all respects in conformity with sections 27 and 29a of the Corporation act is not disputed, but the complainants set up a variety of reasons why the court should intervene.

They say that the scheme proposed will do violence to the intention of Mrs. Hewitt’s will. All that need be said on that score is that her testamentary wishes ended with her bequests of the capital stock of the company equally among her children. They were, thence, to hold and enjoy the gifts, with all the powers and privileges and obligations granted to and imposed upon stockholders by the laws governing corporations —nothing else is signified.

They next contend that the bond issue—-the result of which will be the pledging of their stock—-is an unwarrantable exercise of power, and unjustifiable, because the company has in its treasury securities of other corporations of the value pf $700,000, which could be readily sold. The answer made to this is that the company owes over $500,000, and that some of these securities are already pledged for a loan of $200,000; that when the company resumes mining operations, large sums will be required, and they should be kept to borrow on if that should become necessary; that borrowing in a tight market on personal credit, no matter how high the financial standing of'the borrower may be, is not as feasible as on securities, and that in the opinion of the majority it is inadvisable to strip the treasury of these quick assets, and that sound business policy dictates that they be kept as a reserve for such an emergeny. I see no reason to disagree with them. When it is considered that the company’s fabulous wealth is, for the most part, potential, and how swiftly disaster may overtake and' crumble it, if funds are not promptly available, the wisdom of the-action of the directors is at once apparent. However, the decision lies exclusively with the board; equity cannot review it.

They suggest that the money be raised by bond and mortgage on the lands of the company. This method, if adopted, would, in the opinion of the majority of the directors, be suicidal. This gloomy view is the privilege of the directors. Their further suggestion.that the company borrow the money on its personal credit is likewise a matter for the directors’ consideration.

Their next point is that the proposed -bond issue means, practically, the confiscation of their stock. It does mean the pledging of their stock, and, in effect, compelling them to contribute their proportion of the proposed loan, but I am not in sympathy with their pessimistic frame of mind, and hopeless attitude, that there will be a depletion of their capital interest. All the stockholders are to be dealt with alike. There is to be an equal apportionment of the bonds. There is to be no inequality in the burdens to be borne' or advantages to be gained. It is true that if any of the stockholders fail to respond they will suffer tremendous loss in depreciation of the value of their stock, but their loss will be of their own making. Berger v. U. S. Steel Corp., 68 N. J. Eq. 809.

Their claim that they will be embarrassed in taking their allotments of the bonds, because the bonds are not securities in which they may invest (Comp. Stat. p. 2271), is inadmissible. The will of Peter Cooper Hewitt gives express authority to do so. The trustees of Edward R. Hewitt’s estate have the power by implication, at least. Mrs. Hewitt’s will is not part of the record and I make this deduction from an excerpt contained in one of the affidavits. However that may be, I am of the opinion that the present call upon the trustees is not an investment within the meaning of the act. The mandate respecting investments by executors and trustees in certain securities must be read in connection with the Corporation act, which authorizes the present imposition upon executors and trustees if they be stockholders. In responding the trustees are not investing but protecting their estates. That the money is to be raised by bonds, and the transaction assumes the appearance of a loan by the stockholders to the corporation, does not argue that the bonds are an investment. The company could have accomplished the same thing by increasing its capital stock; and then would not they be derelict in their duty to their trust if they failed to subscribe proportionately ? The bonds are merely an added link in the chain of liability, to afford an opportunity for redemption, before conversion, if the company should come into funds. The trustees are surely not without funds, and will not be embarrassed in that respect, as they insinuate, for in 1912 and 1913 they, or those they represent, each received in the neighborhood of $500,000 in marketable securities, as already told. Moreover, I can see no hardship' in the-directors exacting from them the forced loans in view of an agreement made by the children with the company, between the payments of the first and second dividends in 1912 and 1913, and, unquestionably, in consideration of such payments, that if and when called upon they would each “from time to time lend to the Ringwood Company, on demand, one-sixth of whatever sum may be deemed from time to time necessary by the officers of the company as additional working capital, provided that the total amount to be loaned by each stockholder shall not exceed in all the sum of one hundred thousand dollars ($100,000), nor at any time the total of the cash dividends which shall, since the 14th day of August, 1912, have been paid upon the stock now owned by him (or in the case of Edward R. Hewitt, by his trustee).” The “cash dividend” undoubtedly refer to the division of the securities. The stockholders are simply being called upon to redeem their promises.

And now as to the charge of bad faith in the scheme to raise funds by the convertible bonds plan. It is far-fetched. It is based on declarations alleged to have been made by Erskine Hewitt to Edward R. Hewitt—“that he was going to compel the Earmers Loan and Trust Company * * * to sell out * * * at a low figure”—and to Mrs. Edward R. Hewitt, “that he would make it so troublesome for the Earmers Loan and Trust Company, and so expensive, that they would consider it the best solution of the matter to sell the holdings in the Ringwood Company at a very reasonable rate,” the implication being that he would “freeze out” the Eeter Cooper Hewitt interest; and on two paragraphs in a letter to the Earmers Loan and Trust Company, November 29th, 1921, as follows:

“If the estate of Mr. Peter Cooper Hewitt did not subscribe to the capital stock increase, it would result in a serious diminution of its proportional interest in the capital stock of the company, the capital stock being so small.”

And,

“To my mind the only sufferers of the conversion of the debt into stock would be the twoi trusts involved, and it is because of this that they have refrained heretofore in order not to injuriously affect the Edward R. Hewitt trust.”

■ The context proves clearly that the letter has no bearing whatever upon the subject to which it is now sought to be applied. When Mrs. Hewitt formed the Ringwood Company she also formed the Hewitt Realty Company to hold her real estate in New York, Bar Harbor and elsewhere, all of great value. The capital, like that of the Ringwood Company, was nominal and the stock was divided equally among her children, by her will. The children, including Peter Cooper Hewitt, from time to time, had loaned the Ringwood Company and the Hewitt company large sums of money, and at the time of writing the letter the trustees of Peter Cooper Hewitt’s estate were pressing for payment, and to dissuade them from suing, Mr. Hewitt wrote that “there are only two ways in which these [the loans] could be met at the present time, namely, by an increase of the capital stock of the company or by a sale of some or all of the respective companies’ property;” and sounded the warning that “coincident with the calling of your loans, the loans of the other stockholders will also be called,” and that “these in four instances are greater than the loan of Mr. Peter Cooper Hewitt, and would result, if such action were taken, I believe, in serious loss to the capital interest.” Manifestly, the resort to the letter, to bolster up the charge of fraud, is nothing short of perversion. And so as to the declarations attributed to Mr. Hewitt by Edward R. Hewitt and his wife: They were used by him in a sense, and to express a sentiment, so alien to the motive now ascribed to them, that I cannot escape the belief that they were unworthily seized upon and molded to suit the present exigency. Their then understanding of his attitude was certainly not as they now choose to interpret and convert his words. What was said by Erskine Hewitt occurred at an interview brought about by Mrs. Edward R. Hewitt. It was when the Earmers Loan and Trust Company was urging the payment of its loans, and at the same time prospecting for the sale of its stock to the Ring-wood- Company, Erskine Hewitt liad been approached, and his version of what he said, in substance, as he says, was: “That the situation or the circumstances would make the trust company wish to dispose of their stock even at a low price;” and he avows he “still believes this to be a correct forecast.” He denies entertaining any thought or intention of compulsion or pressure to compel the trust company to sell or expectation on his part to buy. Indeed, Mrs. Hewitt absolves him of coveting the stock, for she says that he said he was not interested, and he suggested that her husband and his sister might very profitably buy it in, as in his opinion it would, in the course of years, increase in value. The theme was so absolutely incompatible with the thought of a bond issue, or the like, as a compelling medium, in view of the obvious fact that the burden of meeting its demands would be as onerous and inimical to the interests of the Edward R. Hewitt estate, in which Mrs. Hewitt was vitally concerned, as to the Peter Cooper Hewitt trust, that subtle ingenuity alone could possibly force a connection between the two. Moreover, the charge of bad faith is utterly exploded, it seems to me, by the further fact that the proposed scheme, by the proportional allotment of the bonds to each of the stockholders, bars any possibility of overreaching. The complainants, like the other stockholders, have nothing to fear, for they will be immune from danger of loss if they meet their lawful obligation to the company.

The complaint that the bond issue is too large is not pertinent at this time. The bonds are to be issued in amounts as may be necessary to meet the requirements of the company, and if the demands should become excessive, and, hence, oppressive, relief may then be applied for.

The existing restraint will be dissolved and an injunction pendente lite denied.


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    Otto Lowy v. William V. McMinimen et al.
    [Submitted June 14th, 1922.
    Decided July 11th, 1922.]
    Where the complainant sold his invention toi a corporation under a contract providing for specified royalties on sales, and the corporation later sold the invention under a contract providing for certain royalties, and the complainant and the corporation then contracted that the former's royalties should remain unimpaired, and that they would be adjusted upon an equitable basis, the last contract eotuld be specifically enforced, as it provided a standard for determining the amount of the royalties.
    On bill, &c. On final hearing.

      Mr. Frank F. Bradner, for the complainant.

      Messrs. Henry J. Gaede <£• Dougal Herr, for the defendants.
   Backes, V. C.

This bill is in effect- a suit for the specific performance of a contract. Dr. Lowy, the complainant, invented a process for permanently liquifying powdered arsenical compounds used in the treatment of syphilis, for which he obtained letters patent. He sold his invention to one McMinimen, who, in turn, assigned it to the Lowy Laboratory, Inc., a corporation which he formed for the purpose of making and marketing the compounds. Dr. Lowy received a cash consideration and some of the capital stock, and was to receive an annual royalty of the gross sales in the United States on the following sliding scale:

Eor all sales of

1 to 100,000 ampules, 6/10 grain arsphenimine 10%
100.001 to 200,000 ampules, 6/10 grain arsphenimine 8%
200.001 to 300,000 ampules, 6/10 grain arsphenimine 6%
300.001 to 400,000 ampules, 6/10 grain arsphenimine 4%
400.001 to 500,000 ampules, 6/10 grain arsphenimine 2%

The royalty on. sales outside of the United States was also on a sealing rate, but it plays no part in this suit. The company assumed the contract, paid the doctor royalties from time to time up until January, 1921, but the output never reached the maximum of the first division of one hundred thousand ampules annually. The business was not profitable and in July, 1921, the company was about to go on the financial rocks. Failure was imminent and bankruptcy was staring it in the face, when Dr. Lowy, co-operating with his associates, interested E. R. Squibb & Sons, a wholesale drug supply house, and negotiations resulted in a contract granting to Squibb & Sons the sole and exclusive license to make, use and sell the products of Dr. Lowy’s invention, for which Squibb & Sons agreed to pay the company “for the plain arsphenimine solution a royalty of forty-five cents for each gram of arsphenimine contained in the solution sold by Squibb, calculated according to analysis.” There was also a provision for an adjustment of the royalties in the event that competitors of Squibb & Sons should undersell them, the formula of which is set out in the contract. Dr. Lowy was personally a party to the agreement. It was the understanding beforehand that his right to royalties under his contract was to remain unimpaired, but a new rate had to be fixed, and it was agreed that if he consented to the Squibb & Sons’ contract his royalty would be adjusted upon “an equitable basis.” The bill so charges and it is admitted by the answer. The parties have not been able to agree. The principal defence is an attack upon the jurisdiction of the court, the contentions being that the bill is one for an accounting and cognizable at law, citing Daab v. N. Y. C. & H. R. R. Co., 70 N. J. Eq. 489; Olds v. Regan, 32 Atl. Rep. 827, and that the court is powerless to fix the rate of the royalty, and that the remedy is at law for a breach of the contract. The suit is manifestly for more than an accounting—the accounting is incidental to the main relief for enforcement. At the hearing the defendant’s officers professed anxiety to settle on a royalty basis, and to test their sincerity I suggested that they withdraw their jurisdictional objections and allow the court, unhampered, to adjust their differences, which they promptly rejected, in the hope, no doubt, of driving the complainant into the law courts for damages and ridding themselves of the contract. The remedy at law is entirely inadequate. Damages could not be even approximately measured. The fruits of Dr. Lowy’s invention depend upon the successful marketing of the product. What that will be is problematical. Feigenspan v. Nizolek, 71 N. J. Eq. 382; Peoples Brewing Co. v. Levin, 81 Atl. Rep. 1114; affirmed, 78 N. J. Eq. 583. It is Dr. Lowy’s .privilege to have his contract specifically enforced, and as the parties themselves have established a standard by which the royalty may be determined with certainty—“equitable basis”—it is within the power of equity to grant him relief. “It is not necessary that the price be specified in figures or words at length. It is sufficient if a standard is established by which the price may be determined with certainty; as, for instance, the ‘fair value’ or ‘market value’ (VanDoren v. Robinson, 16 N. J. Eq. 256), or at a price offered by another upon a certain event, and accepted (Race v. Groves, 43 N. J. Eq. 284; Hays v. O'Brien, 149 Ill. 403), or the appraisal of arbitrators (Woodruff v. Woodruff, 44 N. J. Eq. 349).” McClung Drug Co. v. City Realty and Investment Co., 91 N. J. Eq. 216; affirmed, 92 N. J. Eq. 237. I can perceive no distinction in standards between “fair value” or “market value” and “an equitable basis,” as used and understood by the parties. It is said that the royalty contracts of Dr. Lowy and Squibb & Sons are so inharmonious as not to admit of an adjustment on an equitable basis. That is more apparent than- real. The adjustment is simply one of proportional abatement, and simple of computation, thus: by taking as the basis for the calculation, Lowy Laboratory’s net profit per gram of arsphenimine earned under its own manufacture and that derived from the Squibb & Son’s contract, and apportioning the latter to the Lowy company and Dr. Lowy on the basis of the division of profit prevailing during the existence of their contract. I am making the calculation upon the first division of output of one hundred thousand ampules. The uncontradicted testimony is that the Lowy Laboratory’s gross selling price per ampule of six-tenths grain of arsphenimine was $2.26. Of this, Dr. Lowy was entitled under his contract to twenty-two and six-tenth cents. The cost of production and marketing was $1.90, leaving a net profit of thirty-six cents, divided thus, twenty-two and six-tenths to Dr. Lowy and thirteen and four-tenths to Lowy Laboratory, Inc.—approximately two-thirds and one-third. The royalty from Squibb & Sons to the Lowy Laboratory is forty-five cents per gram, or twenty-seven cents for six-tenths of a gram. The rate per gram of profit to the Lowy Laboratory, under its own output, was sixty cents. Its income from Squibb & Sons, at forty-five cents per gram, means simply a drop of twenty-five per cent., which should be proportionally borne. Thus, calculated on the basis of a gram at forty-five cents, Dr. Lowy’s yield will be twenty-eight and twenty-five onehundredths, and the Lowy Laboratory’s sixteen and seventy-five onehundredths. But Dr. Lowy is willing to make concessions and offers to accept, as counsel says in his brief, as an equitable division, sixty per cent, for the Lowy Laboratory and forty per cent, to him of the proceeds o'f the royalties coming from Squibb & Sons. It will be so decreed and an accounting ordered.

For present purposes the foregoing will suffice. If, in the future, sales reach beyond one hundred thousand ampules, or one hundred thousand units of six-tenths gram of arsphenimine, then the sliding scale above set out will be a factor to be taken into the reckoning, but not until the division of the royalty from Squibb & Sons, calculated on the equity basis, touch the sixty to forty ratio accepted by the complainant.

The bill can also be sustained on this theory. If the arrangement to adjust the royalty on an equitable basis be not an enforceable contract, then the original contract between the two may be enforced. That contract retains its legal vitality, save as to the percentage of royalty. If the Squibb & Sons’ contract should terminate and Lowy Laboratory, Inc., should resume manufacturing, it would he restored to its full vigor. On an accounting therefor, to which the complainant is entitled at all events, he would be allowed his royalty, modified, however, consistently with the new situation he helped to bring about. This, clearly, would not be less than the complainant agreed to take.


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    Newark Trunk Company v. Ada R. Clark et al.
    [Decided July 18th, 1922.]
    1. A mortgagor’s failure to pay taxes as stipulated in the mortgage matures the mortgage when stipulated therein, unless the lapse is attributable in some manner to the conduct of the mortgagee.
    2. That the mortgagors were pinched for money was not a sufficient excuse for the non-payment of taxes.
    On bill, &c. On final hearing.

      Mr. Harry Levin, for the complainant.

      Messrs. Egner & Beatty, for the defendants.
   Backes, V. C.

The mortgage under foreclosure was made payable in five years from its date, but sooner, and on demand, at the option of the mortgagee, if the interest and $1,500 of the principal were not paid semi-annually, and remained due and unpaid for thirty days, and also if the taxes remained in arrears for sixty days. The first six months’ interest was promptly met, but only $1,000 was paid on the installment of principal. There was a default for more than thirty days, and taxes were in arrears for more than sixty days when the complainant called the loan and started suit. The taxes were paid before the bill was filed, but the balance of $500 of the installment of principal was not paid until afterwards, on the next interest bearing date. During the course of the argument it was intimated that there might be a distinction between a forfeiture for non-payment of taxes and one for failure to pay the interest or installment of principal, and I find authorities in other jurisdictions holding that the stipulation maturing the mortgage for non-payment of taxes is intended to preserve the security, and if paid before, and even after suit, thereby restoring the security, and the failure was not willful, equity will relieve against the forfeiture. Shaw v. Wellman, 13 N. Y. Supp. 527; Ver Planck v. Godfrey, 58 N. Y. Supp. 784: Noys v. Anderson, 124 N. Y. 175; Trowbridge v. Malex Realty Corp., 183 N. Y. Supp. 53. But Vice-Chancellor Pitney ruled otherwise in Arkenburgh v. Lakeside Residence Assn., 56 N. J. Eq. 102, and Vice-Chancellor Learning, in Bergman v. Fortescue, 74 N. J. Eq. 266, expressed the opinion that there was no difference in the result upon a default in either case. A failure therefore'to meet the terms of the stipulations is fatal unless it is shown that the lapse is attributable in some' manner to the conduct of the complainant. Baldwin v. VanVorst, 10 N. J. Eq. 577; Bergman v. Fortescue, supra. No excuse was offered for the non-payment of the taxes, except that the defendants were pinched for money, and that is not sufficient. It was claimed that the failure to pay the full amount of the installment of principal was due to confusion, and an effort was made to place the blame for it upon the complainant, but in this the defendants have failed. The storjq in short, is this: The complainant bought a manufacturing plant in Newark fox which it gave cash and a purchase-money mortgage for $27,000, payable in five years, with interest, and $1,500 of principal, payable semi-annually. Before the title was closed the complainant sold the major portion of the plant to the defendants for $20,000 in cash, they to assume the payment of the $27,000 mortgage, and secure the balance of the consideration price, $8,000, by a second mortgage. To insure the payment of the first mortgage it was agreed that the defendants should give the second mortgage for $35,000 (the one in suit), the two mortgages to correspond as to terms to co-exist, and that payment by them, of the interest or principal on the first mortgage should be treated as in discharge of the second. At that time the terms of the first mortgage had not been agreed upon between the complainant and its vendor, but it was understood that there were to be semi-annual payments of principal not to exce.ed $1,500, and in the agreement of sale between the complainant and defendants it was stipulated that the semi-annual installments of principal should “not exceed fifteen hundred dollars and to be one thousand, if possible,” meaning, thereby, that they should not be more than $1,500 and $1,000 if the complainant could induce its vendor to take that amount. It could not, at least it did not, and the sum was fixed at $1,500 in both mortgages. The defendants now claim to have been misled by the quoted words of the contract of sale and the representations of the complainant that they meant $1,000 installments. But they admit having read the provisions of the mortgage before signing it, and I entertain no doubt that they were at that time fully apprised as to the sum. If there was ever any misunderstanding it was cleared up before the mortgage under foreclosure was executed. When .they paid the $1,000 to the holder of the first mortgage they were conscious of their obligation to pay $1,500, for that was tacitly admitted by their excuse, that" it was not convenient to pay the full amount. The complainant alone can relent; the court is powerless to relieve.

The complainant is entitled to a decree.


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    Frances E. Roberts-Horsfield et al. v. Cecelia Grace Gedicks et al.
    [Submitted June 23d, 1922.
    Decided July 11th, 1922.]
    1. In a suit to enforce a parol gift of land, evidence held to warrant a decree for the complainant.
    2. Propinquity and the comfort afforded to an aunt and uncle by the society of th'e family of a niece, and the pleasure derived from close touch with the niece’s children, was an insufficient legal consideration to sustain a contract by the aunt and uncle to convey land to the niece, but the transaction was a mere gift.
    3. A parol gift of land is invalid, but when it is accompanied by possession, and the donee has been induced by the promise of the gift to make valuable permanent improvements, equity will enforce it.
    4. Proof of a parol gift of land must be dear and unequivocal. '
    5. Where an aunt expended money for the construction of a house for her niece on land orally given to the niece by the aunt’s husband, the niece was entitled to the benefit of the aunt’s expenditures for the improvements in an action to enforce the gift of the land the same as if she had been given the money and made the improvements herself.
    6. Open and notorious possession of property as a gift is sufficient to put a grantee thereof on inquiry as to the rights of the one in possession.
    On bill, &c. On final hearing.

      Mr. Joseph T. Hague, for the complainants.

      Mr. William Newcorn, for the defendants.
   Backes, V. C.

The object of this suit is to enforce a gift of land. The facts are these: When Mrs. Horsfield was a little girl of nine, at the death of her mother, she went to live with her aunt and uncle, who raised and educated her, and after she married she and her husband lived with them until 1912. The aunt was the wife of the defendant Albert C. Gedicks, and is now deceased. Prior to 1909 the two couples lived together in Brooklyn. In that year they moved to the outskirts of Plainfield, where Mr. and Mrs. Gedicks bought a tract of land, title to which they held by the entirety, and erected a home purposely large enough to accommodate the two families. By this time the Horsfield family had additions. The separation in 1912 was because either the Horsfield children annoyed Mrs. Gedicks, who was then ill, as Mr. Gedicks says, or, as Mr. and Mrs. Horsfield assert, Mr. Gedicks’ conduct sometimes created an atmosphere in which they did not care to rear their children. The cause is unimportant. They were thereafter on friendly and intimate terms until the aunt died in 1916, and with Mr. Gedicks until he married his present wife, the other defendant. When the Gedickses learned that the Horsfields were looking about for a house they remonstrated, saying, in substance, to use the language of Mrs. Horsfield:

“Why we wouldn’t think >of having you move away from us. We have all this land here. We will give you that corner there for yourself, and aunty said she would help build a house for me—contribute towards it; because she had her own money from the sale of this property that she had sold,in Brooklyn.”

The house was built on a piece of the tract, the boundaries of which were well defined, the aunt furnishing the money, $1,800, and when it was finished the Horsfields moved in and ¿remained in undisturbed possession until recently, when the present Mrs: Gedicks, to whom the land had been conveyed by her husband, began an action of ejectment. Thereupon this bill, was filed to restain the suit and to compel a conveyance of the land which had been promised. The Horsfields had contributed some little towards the original construction of the house, and later on made improvements at an outlay of five or six hundred dollars. I have not the least doubt that Mr. and Mrs. Gedicks intended to and promised to give the house and lot to Mrs. Horsfield—to convey it. Even the defendant Gedicks’ testimony indicates that that had been his attitude. A feeble effort was made to establish a contract, the alleged consideration being propinquity, and, in consequence, the comfort of the society of the Horsfields by the continued intimacy with them and the pleasures derived from close touch with their children. These things were undoubtedly the inducements for the gift, but they fall far short of a legal consideration to sustain a contract. The transaction was a gift pure and simple, and, under the circumstances above shown, is enforceable in equity. A parol gift of land is invalid, but when the gift is accompanied by possession, and the donee has been induced by the promise of the gift to make valuable improvements of a permanent nature, equity will enforce it. The principle is well settled; the doctrine is stated in 20 Cyc. 1200, and 12 Rul. C. L. 938, where many of the cases supporting it are cited. Proof of a parol gift of land must be clear and unequivocal. Bevington v. Bevington, 9 L. R. A. (N. S.), where the meaning of this rule is explained and the cases are collected. The instant case comes within the doctrine. The Horsfields, at their own expense, made some improvements, as already indicated, and if this were the extent of Mrs. Horsfield's claim, she could be relieved by compensation. But I think her equities go further, and to support them she is entitled to the benefit of the aunt's expenditures. Combined they represent the improvement, which is both substantial and permanent. The money laid out by the aunt in the original construction was in fact a gift to her niece. She intended it to be so, and it was none the less a gift that she paid it directly to the contractor instead of handing it first to Mrs. Horsfield and by her paid over. The entire improvement must be regarded as having been made by Mrs. Horsfield. Mr. Gedieks knew of his wife's donative purpose in furnishing the money and he realized that the improvement was not made other than in reliance, upon the gift, and he ought not to be permitted to profit by the mere accident of his survivorship. Mrs. Gedieks II is not an innocent purchaser for value and is chargeable with notice of the complainants' right. She, perhaps, did not know all the circumstances attending the gift, but the open and notorious possession by the complainants put her on notice and reasonable inquiry would have disclosed the truth.

I will advise a decree ordering a conveyance of the land by the description established at the trial, and suggest that the bill be amended describing the land to a certainty, and a prayer to conform to the decree.


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    Joseph Ovsiovitch v. The Federal Tool and Manufacturing Company.
    [Decided November 16th, 1922.]
    1. The Usury act, providing that no corporation shall set up the defence of usury in any action to enforce a remedy on an obligation executed by it, does not apply to a loan of a prviate nature, but the words “obligation executed” refer to obligations in the sense of bonds and mortgages, debentures and the like that are put upon the market, and go into the hands of the public.
    2. The lender of money on a usurious bargain can recover the amount actually loaned with legal 'interest where the defence of usury was not strictly pleaded, though if it had been strictly pleaded, interest would have been disallowed.
    On motion for payment of moneys.

      Mr. Harry Green, for the motion.

      Mr. Iiussell Fleming, contra.

   Backes, V. C.

Shortly before the defendant corporation was declared insolvent it borrowed from Charles Karsh $2,000, and gave him its promissory notes aggregating $2,500, with interest at six per cent., and secured the notes by a chattel mortgage on its machinery, tools of trade, &c. The receiver sold the chattels free and clear of the mortgage encumbrance, and Karsh now petitions to he paid the amount of the notes out of the proceeds. That the notes and mortgage were given on a usurious bargain is 'admitted, but Karsh claims that usury cannot be set up in defence by the receiver because of section 7 of the Usury act (Comp. Stat. p. 5706), which provides that—

“No corporation shall hereafter plead or set up the defence of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed .by said corporation.”

It has been held that this statute does not apply to transactions of a private nature, such as is here presented. Mr. Justice Garrison, in Mazarin v. Hudson County Real Estate and Building Co., 80 N. J. Law 35, said that “in view of the uniform legislative policy of the state in the matter of usury, the words ‘obligation executed’ by a corporation refers to corporate obligations in the sense of bonds, mortgages, debentures, and the like, that go on the market and into the hands of the public.” And Vice-Chancellor Foster entertained and expressed the same view in a case to foreclose a mortgage given to secure, in part, notes tainted with usury. Seacoast Real Estate Co. v. American Timber Co. et al., 89 N. J. Eq. 293. See, also, Lembeck v. Jarvis Terminal Cold Storage Co., 70 N. J. Eq. 757.

Karsh will be allowed the amount of his loan, $2,000, and legal interest. Had the defence of usury been strictly pleaded, interest would have been disallowed. Dunlap v. Chenoweth, 88 N. J. Eq. 496.


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    Rae Kirschbaum, petitioner, v. Emanuel Kirschbaum, defendant.
    [Decided September 25th, 1922.]
    The continuity of a husband’s desertion is not broken so* as to defeat a wife’s right to a divorce, by her submission to sexual intercourse fraudulently procured by his false promise to mate and home with her in marriage.
    In divorce. On exceptions-to master’s report.

      Mr. James Mango, for the exceptant.
   Backes, V. C.

The petitioner excepts to the master’s report that her petition for divorce be denied because the charge of willful, continued and obstinate desertion for two years is not sustained by the proofs. I think the exception should prevail The evidence satisfactorily establishes the offence. The, marriage took place in 1919. The couple lived at the home of the petitioner’s parents for a month or so, but not in marital relation, when the defendant disappeared and was gone for six months. They were friendly for a week, but lived separately, quarreled, and the defendant left the state. This time he was away for a year. Upon his return he visited his wife at her parents’ home, and for the first time they engaged in marital intercourse. After two weeks he again abandoned her. He has never supported her. His separation from her for more than two years was with intent to desert her. That was his mental attitude. The separation and the intent to desert are shown by ample proof.

The master was of the opinion that the sexual intercourse a few months before the filing of .the petition interrupted the continuity of the desertion and defeated the petitioner’s right to a decree. I cannot agree with him. She submitted on her husband’s promise to mate and home with her in marriage. Having gratified his passion he again took himself off. His promise was false and the submission was fraudulently procured. He was minded to continue the desertion and the sexual contact could no more break the continuity of the desertion than if the wife had merely kissed or caressed him. Jackson v. Jackson, 93 N. J. Eq. 216. Had the intercourse taken place after two years’ desertion and after the cause of action had become vested, a plea of condonation could only have been sustained upon a showing that the offender thereafter had treated his spouse with conjugal kindness. Bravo v. Bravo, 93 N. J. Eq. 56. The same treatment must be accorded to stop the running of the statutory period.

A decree of divorce will be granted.


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    Public Service Railway Company v. The Township of Weehawken.
    [Decided November 28th, 1922.]
    - 1. Where a grant of a right of way was made by a railroad company to the Public Service Railway Company to afford access to certain ferries landing at a plaza upon which numbers of people congregated to take passage, an implied or incidental grant to the Public Service Railway Company to erect a fence around its right of way coudl not be presumed, since such a fence would add to the congestion and be a menace to life and a public nuisance, since it must be presumed that the conditions were within the contemplation of the contracting parties at the time the grant was made, although not then foreseen.
    2. Where a railroad company granted a right of way to the Public Service Railway Company toi operate ears across a -plaza giving access to the railroad company’s ferries, the Public Service Railway Company could not fence its right of way as a regulation of the -plaza in right of the railroad company, which, while having a right to reasonably regulate the plaza, could not exclude local carriers awaiting passengers from the ferry, it appearing that the fence would have such effect.
    il. Nor could the Public -Service Railway Company fence off its right of way so as to exclude jitneys, on the ground that to erect such fence would be tor its own protection, the PuDlic Service Railway Company not having any exclusive rights as against the traveling public.
    4. Under such circumstances the township in which the plaza lay could resist the erection of such a fence as a police measure, the plaza though not dedicated to the public 'being nevertheless affected with a public interest.
    5. Where a railroad company maintained a plaza to give access to certain ferries, the fact that the township policed and gave fire protection there was insufficient to work a dedication of the plaza to the public, and the fact that the railroad company was assessed and paid taxes therefor, refuted the claim of dedication of the use of the plaza to the public.
    On bill, &e. On final bearing.

      Mr. William E. Speer, for tbe complainant.

      Mr. Albert Leuly and Mr. William 0. Asper, for tbe defendant.
   Backes, V. C.

The West Shore railroad operates two ferries on tbe Hudson between its Weehawken terminal and Forty-second street and Cortland street, New York, for tbe transportation of its railroad passengers, and tbe public traveling between tbe two places. Tbe approach to tbe ferry at Weehawken from 'the nearest public highway—tbe boulevard—a thousand yards away, is down Clifton road from an elevation of one hundred and fifty feet or more, southerly and easterly, to a plaza about sixty feet wide and of much greater length, maintained by tbe West Shore railroad along and in front of tbe ferry for convenient entrance and exit. In 1895 tbe West Shore (to be exact, tbe West Shore and Ontario Terminal Company) granted to tbe assignor of tbe Public Service Railway Company a right of way, at some points twenty-two and others twenty-five feet in width, from the boulevard down Clifton road to the easterly side of the plaza, and thence northerly, lengthwise the plaza, to the ferry entrance. The last stretch is close to one hundred and twenty feet, called the “spur,” and is the point in the right of way involved in this litigation. The right of way is described by metes and bounds, and the use is defined and limited to “to construct, operate and maintain a double-track railway thereon, and to run cars over the same propelled by electricity or cable, and to erect poles for carrying wires on any portion of said tract.” The Public Service and its predecessors in title have ever since occupied the right of way with double tracks, and until about eight years ago ran all cars-terminating at the ferry to the end of the spur. Then a loop was installed just south of the spur, and until a few weeks before the filing of this bill all cars were switched on the loop. In the meanwhile jitneys used the spur for loading and unloading passengers and for parking while waiting for the ferry. It would appear that the loop furnishes adequate accommodations for switching cars, but the Public Service desires to resume the spur for certain of its lines, and that is its right. It also wants to fence in the spur, which means taking up nearly half the width of the plaza, and means also, practically, the exclusion therefrom of the jitneys because of the lack of turning space. Weehawken, which has for years policed and regulated the traffic at the plaza, has prevented the erection of the fence, and to restrain this interference this suit is brought. The provoking factor of the controversy is undoubtedly the jitney, though the Public Service protests that its only aim. is the protection of its passengers from injury and itself from pecuniary liability for injury, while Weehawken claims that its single thought is to protect and safeguard the traveling public. Sincere, in a sense, no doubt, but disavowing, as both do, any ulterior purpose, it is too obvious for discussion that the object of the Public Service is to hamper and destroy jitney competition, while that of Weehawken is to encourage and maintain it. The motive of either is unimportant in law. The question is one of strict legal right. To succeed the Pub-lie Service must make out its case upon the strength of its own title. The grant does not expressly give the right to enclose the right of way with a fence, but it is the contention of the Public Service that that is implied as incidental to the full and'complete enjoyment of the easement, and cites in support Willoughby v. Lawrence, 116 Ill. 11; Patout v. Lewis, 51. La. Ann. 210; Herman v. Roberts, 119 N. Y. 87; Chandler v. Goodridge, 23 Me. 78; Harvey v. Crane, 12 L. R. A. 601; Cooper v. Louanstein, 37 N. J. Eq. 284, and Dunn v. English, 23 N. J. Law 126. These authorities are not sustaining, for, as it seems to me, the devotion of the plaza by the West Shore to quasi-public use alone denies the implication, and the present-day tax upon the capacity of the plaza forbids a construction of the grant that a right of enclosure was intended to be given. Let me explain.

When the grant was made twenty-seven years ago few used the ferry. Then Eorty-second street was uptown New York and Weehawken had a history. An enclosure of the spur would have been as harmless then as it would have been useless. Now Weehawken is thickly populated and the ferry is the outlet to North Jersey homes of the New York business men and worker. Daily thousands of ferry users, residents of New Jersey and employed in New York, avail themselves of the jitneys to carry them to and from the ferry: many use the trolleys; the better off have their automobiles. Then there is the through vehicular traffic, commercial and private. 'The ferry is overloaded and it does not and cannot meet its obligations. On the New York side automobiles stand in double rows, and for blocks, and sometimes for hours to cross, and on the Weehawken side conditions are even-worse. Waiting has become a habit. During the rush hours the milling and jostling and jam in the plaza is a human whirlpool. A fence almost through the centre of the plaza, as proposed, would add immeasurably to the congestion and confusion and would be nothing short of a menace to life and a public nuisance. This condition, while not foreseen at the time of the grant of. the right of way, must, nevertheless, be presumed to have been within the contemplation of the contracting parties, and to my mind utterly repels any implied or incidental grant upon which the Public Service, in the main, rests its right to relief.

It was urged on the argument and in the briefs that the West-Shore has the right to regulate the use of the plaza, and that, inasmuch as it is offering no objection to the fence enclosure, the Public Service, in right of the West Shore, is merely regulating the use. The railroad’s right to reasonably regulate the plaza is indisputable, but that right is not heritable. Furthermore, any regulation upon the part of the West Shore would have to be consistent with its duty to its passengers to furnish reasonable transportation, and that means not only on its trains and boats but also to and from them-—not to carry them, of course, but to provide suitable facilities at its stations (in this case the ferry) for the approach of their chosen means-of conveyance. If the West Shore itself were to furnish ample and convenient means, at reasonable fare, for its incoming passengers at Weeliawken to reach their destination, it would be its right to exclude from the plaza local carrier competition. And it could hire a local carrier for this purpose and give him a monopoly. But it could not exclude local carriers awaiting.passengers, who had hired them, no more than it could prevent a private car coming to meet its owner. For could the West Shore prevent a local carrier, be he hackman or jitneur, from entering the plaza to discharge his passengers at the ferry. All the authorities to which my attention has been called by the briefs, and many more that I have consulted, so hold. Donovan v. Pennsylvania Railroad Co., 199 U. S. 279; Smith v. New York, Lake Erie and Western Railroad Co., 24 Atl. Rep. 304; Napman v. People, 19 Mich. 352 The right of railroads to make reasonable rules and regulations in the use of their stations, and the limitationss, are stated by Mr. Justice Swayze in Thompson’s Express and Storage Co. v. Mount, 91 N. J. Eq. 497. The obvious fact that the fence would eliminate the jitney, and thus deprive the ferry users of this, their chosen means of conveyance, answers the question of reasonable regulation.

Another point made by the Public Service is that it is not only its right but its duty to fence in the right of way so as to protect the throngs from injury, and itself from damages for injury. The answer is that it assumed the. risk when it took over the right of way, and that if it observes reasonable care no harm can come to it. The higher degree of reasonable care imposed upon it because of the crowds finds compensation in increased fares. The Public Service has all along presumed that it has rights in the plaza superior to other carriers of passengers to the ferry. I do not thirds: so. It has as to the West Shore a vested right of location, but as to the traveling public it has no more right there than one afoot, those coming by jitney or by private conveyance, and as to' all of them it must exercise a reasonable care, at times a high degree of care.

The Public Service urges that it is entitled to a decree because Weehawken is an intruder and without standing. Weehawken’s resistance to the erection of the fence was justified as a police measure. Freund Pol. Pow. § 175. The plaza, though not dedicated was nevertheless affected with a public interest, and, furthermore, while the duty of policing it and regulating the travel was a self-imposed task, that duty was assumed by Weehawken upon the invitation of the West Shore, upon whom the law placed the burden of protecting its passengers.

Weehawken maintains that the plaza is public domain by dedication. The plaza is not a public place in the sense that it has been dedicated to public use. Policing and giving fire protection does not work a dedication. More than that is necessary to deprive an owner of his land in favor of - the public. Kiernan v. Jersey City, 80 N. J. Law 273. The West Shore dedicated to the township of Weehawken part of Clifton yoad, stopping short of the plaza, and it was formally accepted, and the West Shore is assessed and pays taxes for the plaza. This refutes dedication.

The bill will be dismissed.


author: Foster, V. C.

text:
    The Lehigh Valley Railroad Company and The Morris Canal and Banking Company v. The North Jersey District Water Supply Commission et al.
    [Submitted June 17th, 1922.
    Decided July 26th, 1922.]
    1. Evidence held to show that the proposed development of a water supply for a city under P. L. 1916 p\ 129, would divert from the owner and lessee of a canal a substantial part of the waters available to them, with'resulting injury to their riparian and charter lights, and would deprive them of the power to keep the canal in sanitary and navigable condition.
    2. The storage of water in developing a water supply for a city in such quantities as would leave the owner and lessee without an adequate supply of water, would violate the proviso of section 22 of P. L. 1916 p. HI.

    3. Where a water supply commission is authorized by law to acquire water rights of canal corporations by agreement or condemnation, they cannot lawfully divert water needed for the operation of the canal without any agreement or condemnation.
    -4. A court, in supporting the state’s policy to provide additional supplies of potable water for the rapidly increasing population of the northern part of this state, cannot disregard right® of property or ignore irreparable injuries to vested rights, or approve conduct, necessitating the abandonment of a canal in direct violation of the legislative policy expressed in the act.
    On bill, &C.

      Mr. William I. Lewis, for the complainants.

      Mr. Franlc H. .Sommer, Mr. Jeromé T. Congleton, Mr. Joseph G-. WoTber and Mr. Spaulding Frazer, for the defendants.
   Foster, V. C.

Complainants ask to have defendants restrained from proceeding with the development of a water supply from the Wanaque river and its tributaries until compensation therefor has first been made to them; and to further restrain defendants from so diverting and impounding such waters in any way or quantity that will interfere with or affect the rights and obligations of complainants as owners and lessees of the Morris canal.

Under the authority granted by chapter 71 of the laws of 1916 (P. L. 1916 p. 129), the defendant the North Jersey District Water Supply Commission has entered into a contract with the defendant the city of Newark for the development, by means of a large storage reservoir, of an additional water supply for the city, from the waters of the Wanaque and Greenwood lake and their tributaries—the same sources from which the waters of the Morris canal are in part obtained. Under this contract the reservoir, which is about six miles long and a half mile wide, will have a storage capacity of eleven billion gallons, and it is contemplated to release therefrom daily for the use of the city fifty million gallons or more.

Complainants claim the extent of this diversion is such that it will seriously affect both its rights and obligations and'will in effect compel the abandonment of the canal for navigation purposes.

Complainants assert that their status in these proceedings is that of riparian owners—the owners of the bed or banks of the canal—and they also claim not only the ordinary rights incident to such ownership, but also the additional and extraordinary rights to the waters necessary for the canal, granted them in 1834 by the charter of the Morris Canal and Banking Company, and this status is neither denied nor disputed by defendants’ pleadings or proofs.

The threatened diversion of waters now flowing into the canal is admitted and the real controversy between the parties can be considered in the following order:

1. Is the extent of the contemplated diversion of the waters now flowing into the canal so great that it will injuriously effect complainants’ rights and prevent them from performiiig their obligations and duties in maintaining the canal in an operating condition ?

2. And are the defendants unlawfully attempting to effect such diversion?

Considering these questions in their order, it appears from the proofs that the canal, which has been held to be a public highway, extends from the Delaware river to the Hudson river, and that the feeders are part of it. Barnet v. Johnson, 15 N. J. Eq. 481; Lehigh Valley Railroad v. McFarlan, 31 N. J. Eq. 706; Willink v. Morris Canal and Banking Co., 4 N. J. Eq. 377.

The canal is twenty feet in width at the bottom, forty feet at the top water line, and needs a five-foot depth of water for navigation purposes. Besides the canal and its feeders and tributaries, it has connected with it four hundred and fifty-six structures, including two hundred and eiglity-two bridges, forty-three culverts, twelve aqueducts, with flood gates to let out the water when necessary; ten dams, forty-five spillways, thirty-two locks and twenty-four planes and other miscellaneous structures.

By the act of 1871 (P. L. 1871 p. 445), under which the canal and banking company leased the canal to the Lehigh Valley Railroad Company, it is provided, in section 3, that the canal company and its lessee may use the surplus water of the canal, or of any of its feeders, not needed for the purposes of navigation in furnishing and supplying the inhabitants of any municipality along the canal with a sufficient quantity of pure and wholesome water for domestic, manufacturing and other uses.

Complainants’ proofs show that for the purposes of navigation alone a depth of five feet of water must at all times be maintained in the canal, and in order to keep the canal in such normal navigable condition, additional water must be supplied to meet the requirements of the factors of evaporation, lockage, breakage, individual waste and seepage, and to meet all of these requirements, it is reasonably necessary for them to have, and that there must be available to them at all times, a flow of not less than seventy-seven cubic feet of water per second into the canal; or, as the engineers term it, and as it will hereafter be referred to, seventy-seven second feet. Of this quantity complainants’ proof show that forty-eight second feet is needed for a period of many weeks in dry weather, and that at least forty-one and forty-one hundredths second feet is required in cold, wet weather, merely to keep the canal at the navigating depth of five feet. In this estimated requirement of seventy-seven second feet no allowance has been made for the water requited to refill any section of the canal, nor for complainants’ rights under the Leasing act of 1871 to sell surplus water.

Defendants’ proof is that to keep the level full merely for navigation purposes, requires a flow of only forty second feet, without taking into consideration the water requirements for seepage, lockages, &c.; and to produce this quantity of forty second feet, their engineers find at the head of the Pompton feeder a flow of twenty-seven and thirty-five hundredths second feet, and, as the contract between the defendants provides that there shall be let down daily from their reservoir twelve million gallons, the equivalent of eighteen and fifty-eight hundredths second feet, these two' sources produce a total of forty-six and forty-nine hundredths second feet, which defendants claim is an excess of six and forty-nine hundreths second feet, and is that much greater, according to their estimate, than the quantity which is needed by complainants for navigation purposes. Complainants contend defendants’ estimate of forty second feet actually produces a shortage of one and fifty-one hundredths second feet in the quantity required merely for navigation at the most favorable season, and that this forty-second-feet estimate also produces a total shortage for all canal purposes, not including the refilling of any section of the canal or the sale of surplus water, of thirty and fifty-one hundredths second feet.

Defendants further claim that they do not intend to affect complainants’ supply of water from Greenwood lake, as they contemplate letting the waters stored therein by complainants flow through the reservoir into the Wanaque river, but it is not clear from defendants’ proofs if this flowage from Greenwood lake through the reservoir is to provide the above-mentioned twelve million gallons daily, or if in addition to this quantity complainants will also1 have the flowage from the lake, nor does it appear when, or how often, or under what conditions the waters from the lake will be permitted to flow through the reservoir into the canal.

From my consideration of the evidence, I am convinced that complainants5 engineers, while! possibly making extremely careful provision for every contingency, are more accurate in their facts and estimates, than are the engineers and their estimates produced by the defendants. I am influenced in this conviction, not only by the ability and experience of Mr. Vermeule, the chief engineer of complainants, and by the evidence of his assistants, and by their much greater familiarity for years with this territory and its water supply, but also by the fact that it is admitted the twelve million gallons of water which it is proposed to release daily into the canal, or into the streams supplying it, was decided upon by the defendants, without consulting complainants and without particular regard for, or thought of, the requirements of the canal; and because the proofs of the defendants further show that this daily discharge from their reservoir is to be made primarily to prevent any interference with sanitary conditions, or with the rights of riparian owners below the dam. The result of this wall be that if the demands for these sanitary purposes and of riparian owners'below the dam exhaust this daily discharge, complainants will be left in dry weather with but about one-third of their requirements provided for, or with only twenty-seven and thirty-five hundredths second feet represented by the low flow of the free catchment area of the Pequannock, Ramapo and Wanaque rivers. Notwithstanding this, the defendants contend that the supply of water available for canal purposes after storage in the reservoir begins, will be ampfy sufficient for all practical purposes, as the canal is in a rundowm, dilapidated condition, unsuitable or impossible in many places for navigation, and it is true that in many sections the canal is badly in need of repair and should be cleaned out to its navigating depth, and complainants apparently realize this, for it appears that in 1920 they spent about $170,000 in repairs and maintenance and received no revenue from the operation of the canal, and it also appears that the canal in recent years has been but rarely used for the purpose of navigation by the company or by any of the public, and I am inclined to think these conditions, and the assumption and assertion by defendants that complainants’ rights in the canal are merely technical, intangible and unsubstantial, are refected in the estimate of the canal’s requirements stated by defendants’ engineers.

But notwithstanding these features of the practical use or non-use of the canal, it does affirmatively appear that defendants intend to divert from complainants a substantial part of the waters now available to them for all canal purposes, with resulting injury to their riparian rights and also to their rights under their charter; and with the further result that complainants will be deprived of the power to perform their duties and obligations of keeping the canal in both a sanitary and navigable condition, for it is admitted by defendants’ engineers that the control of the supply of water for canal purposes, in excess of twenty-seven and thirty-five hundredths second feet, will be in the defendant the water supply commission and its operating forces, to determine at any time what quantity of water shall be drawn from the reservoir for the use of the canal. There is no certainty that complainant will receive from the reservoir a daily discharge of twelve million gallons, and if they should not, then they will be left with the flow of but twenty-seven and thirty-five hundredths second feet at the head of the Pompton feeder, and this defendants’ engineers admit will be twelve and sixty-five hundredths second feet less than the forty second feet they estimate as the requirements for navigation.

This claim of defendants to control the discharge from the reservoir is in accord with the provisions of section 17 of the act of 1916; it is also, however, under the conclusion I have reached that the quantity of waters to be stored by defendants leaves complainants without an adequate supply for canal purposes, a violation of the inhibitions of section 22 of the act, which provides:

“That nothing in the act shall authorize any action or agreement that shall operate to abandon or make necessary the abandonment of any canal or waterway, * * * or relieve any canal company or any lessee of any canal from the obligation to maintain and operate said canal.”

Defendants by taking from the canal, as they intend doing, nearly two-thirds of its present supply, are clearly violating these inhibitions of the statute, as they thereby make the canal useless and “make necessary its abandonment,” in the language of the act, in that by depriving complainants of the means to do so, they relieve them from their obligations to maintain and operate the canal in a sanitary and navigable condition.

This consideration of the statute brings us to the second ground of objection, urged by complainants, viz., that defendants, by their agreement and conduct, are unlawfully engaging in this attempted diversion of water from the canal.

The basis for this objection is that the only power defendants have to acquire water and water rights is derived from the act of 1916, and defendants admit this and claim they are acting under this act and in accordance with its directions.

Section 11 of the act expressly authorizes the water supply commission to acquire by purchase- or condemnation any part or all of the water plant, water rights * * * of any existing private corporation or water company. The same section gives the commission further power to construct or cause to be- constructed reservoirs, &c.

Section 13 of the act provides that when the commission shall decide to construct any reservoir, which may intercept or interfere with the flow of waters tliat may be part of the feeder of any canal, or which may be claimed by any canal corporation, the commission is authorized to acquire from such canal corporation the necessary water rights for said reservoir by agreement with said canal corporation, and if it shall prove impossible to make such agreement, then the commission shall have the right to acquire by condemnation the necessary water fiowage or other rights from such canal corporation.

Assuming the powers thus conferred to be broad enough to warrant the condemnation of complainants’ riparian rights, it is contended they cannot be exercised to condemn the- rights of complainants under their irreparable charter. See Lehigh Valley Railroad v. McFarlan, supra. It is not necessary for present purposes to determine the merits of this contention, for it is admitted that no attempt has been made by defendants to acquire from complainants any of their rights by agreement, and that resort has not been had to condemnation nor to any other proceeding to acquire the riparian or any other rights of complainants, and no explanation is offered to show why these directions of the statute were not followed.

Acting apparently on the belief that this old water way had too long survived its usefulness, defendants, in violation of the explicit provisions of the act whose protection they now invoke, have undertaken to deprive complainants of valuable property rights, and by their actions, if consummated, they will permit complainants to evade or escápe the performance of the duties and obligations which they owe the public to maintain and operate the canal.

In justification for this conduct, it is pleaded that the act. of 1916, and action taken under it by the water supply commission, is a proper exercise of the police power, and this is not seriously disputed. The criticism made against the defendants is not that they have exercised the powers given them by the act; it is that they have failed or neglected to exercise such powers in the manner the act prescribes, or in any manner authorized by any law.

Eurther justification for defendants’ conduct is sought in the claim that the state has in this act adopted a definite policy to provide additional supplies of potable waters for the constantly and rapidly increasing population of the northern part of the state, and it is urged that this policy should receive the support of the courts.

That such support will always be granted by the courts to any such beneficent policy of conservation it seems unnecessary to state, but such support does not require the court to disregard all rights of property, or to ignore irreparable injury to vested rights, or to approved conduct which is directly violative of such legislative policy.

That the legislature had this canal and this canal property in mind when this statute was enacted is apparent from a reading of sections 11, 13 and 22; and it is further apparent therefrom that while the legislature intended to treat the canal company fairly and made provision to compensate it by agreement or condemnation, for any of its rights acquired, or . injured as a result of its enforcement, it is likewise apparent, that it was also intended that neither the policy which it thereby adopted nor the exercise of any of the powers which the statute conferred, could or should be used in any way to permit complainants to abandon the canal, or to escape or be relieved from the duty and obligation resting on them for its proper maintenance and operation.

It is not the province of the court to substitute its own course of procedure for that prescribed by the legislature, nor should the court approve a procedure substantially' different from that prescribed, particularly where such substituted procedure has produced or is certain to produce the very injury to private property and rights which the legislative enactment was clearly and expressly designed to prevent. As the conduct of the defendants, as well as the agreement between them, admittedly contemplate diverting waters from the canal which are reasonably necessary for its maintenance and operation, and as this purpose if permitted to be consummated will result in irreparable loss and injury to complainants, and will be in direct violation of the provisions of the act of 1916, in that no agreement or proceedings have been or are contemplated to be made or taken by defendants to compensate complainants for any such loss or injury, a case is presented for the exercise of equitable jurisdiction to prevent this threatened injury. Wolcott v. Melick, 11 N. J. Eq. 204; Sayre v. Newark, 58 N. J. Eq. 148; Paterson v. East Jersey Water Co., 74 N. J. Eq. 49.

And I will advise that the restraint prayed for be granted.

The terms of the decree can be settled on notice.