author: Stevens, V. C.

text:
    Robert P. Lister et al. v. William R. Weeks.
    [Filed May 17th, 1900.]
    1. Trustees exist for the benefit of those to whom the creator of the trust has given the trust estate. Their acts may exhibit such a lack of reasonable fidelity, short of dishonesty, as to warrant their removal by a court of equity.

      2. Upon the proofs exhibited in this case — Held, also, that the trustee had been guilty of such misconduct in the management of his trust as to warrant his removal, especially in view of the ill-feeling engendered thereby between him and his cestuis que trust.

    On pleadings and proofs.

      Mr. Ghauncey G. Parlcer, Mr. Robert II. McGarier and Mr. Richard V. Lindabury, for the complainants.

      Mr. Charles L. Corbin, for the defendant.
   Stevens, V. C.

This is a bill to remove defendant from his position as trustee under the will of Edwin Lister.

Edwin Lister died on May 18th, 1898. He left personal estate to the amount of $1,200,000, together with a large amount of real estate. By his will, dated Fovember 29th, 1895, after giving a few small legacies and making a provision for his wife, he gave all the residue of his estate to his son, Robert P. Lister, and his daughter, Esther G-. Selby, share and share alike, and he appointed his son, Robert, and his son-in-law, William B. Selby, his executors. On the 7th of May, 1898, he made a codicil, in which he appointed William R. Weeks his executor, made other provision for his wife and ordered as follows:

“My interest in the Lister Agricultural Chemical Works I direct shall remain in the hands.of my executor, in trust, for the benefit of my children, during their lifetime and after their death to go to their children at their majority.”

The interest thus bequeathed consisted of three thousand five hundred and forty-four shares of stock in the Lister works, and was a controlling interest, the total issue of stock being six thousand shares. It w^is inventoried by Lister’s executor at $200 a share, and was actually sold for a little more than that.

At the time of his death Edwin Lister was the president and treasurer of the company. Its vice-president and assistant treasurer was his son-in-law, Selby. His son, Robert Lister, was one of its five directors and the other directors were Edwin Lister, William B. Selby, John E. Xehoe and P. H. Martin. Erom the ■date of Lister’s death (May 18th, 1898) until the annual meeting of the stockholders, on January 25th, 1899, Selby acted as president. On that day William E. Weeks was elected a director in place of Edwin Lister and the other members of the old board were re-elected. At the suggestion of Mr. Weeks the stockholders made a revision of the by-laws, which he had prepared. The only alteration- material to the present inquiry was the addition of a new section known as article 111, section 2, as f oIIoavs :

“The directors (for cause) may suspend any officer or director, except the president, and may elect some one in the place of the person so suspended.”

Immediately after the stockholders’ meeting was adjourned a directors’ meeting was convened, at which Weeks was elected president; Selby, vice-president and treasurer; Lancaster, secretary, and John E. Kehoe, general manager. The salaries of these officials were also fixed. Mr. Weeks, a few days before, had, by letter, requested the secretary to inform him what salary Edwin Lister had received. He was told that it was $8,000. At the meeting he produced a written list of salaries to be voted. To himself he assigned $10,000, to Selby $4,000 and to Kehoe $6,000. This was an increase of $1,000 each for Selby and Kehoe and of $2,000 for the president. These sums were voted, but Selby having protested against any increase'in the president’s salary, Weeks, a day or two after, instructed the secretary to change his salary on the minutes from $10,000 to $8,000. At the same meeting an annual dividend of fifteen per cent. — the same in amount that had been declared for several years previously — was voted. This dividend, according to Mr. Weeks’ statement (and his statement is corroborated by the evidence), consisted of five per cent, of earnings, five per cent, of savings (i. reduction in expenditures) and five per'cent, of accumulated surplus. Three days after, Mr. Weeks sent checks to Eobert Lister and Mrs. Selby for their share of the dividend. Each check was for $25,420.47, and consisted of the entire fifteen per cent., less what he calls “my commission of 5% to wit, $1,337.92.” In paying the money he made no deduction, in favor of his infant cestuis'que trust, either of the accumulated surplus entering into the dividend, or of the sum earned between January, 1898, and the date of testator’s death (May 18th).

Prior to the annual meeting Weeks and Selby had been notified of an effort to effect a combination of the various fertilizer works.in. different parts of the country, and options at $199.50 had been solicited by Hobbs & Gifford, a firm of New York lawyers, who acted as promoters of the undertaking. Neither Robert Lister nor Mr. Selby was willing to sell at this price.

Although there appears to have been considerable conversation .between Hobbs & Gifford on the one side, and Weeks, Selby and Lister on the other, no progress was made toward a definite conclusion. Mr. and Mrs. Selby and Robert Lister all testify that.Mr. Weeks said to them that he would not undertake to sell under any circumstances without consulting them. Mr. Weeks denies this, but I am inclined to think that his memory is at fault in this respect. At the directors’ meeting held in March, 1899, Lister and Selby were authorized to go to Philadelphia and Boston to get views of other manufacturers about the proposed combination. On their return they did not give, and Weeks did not ask for, their opinion about it. After that nothing of moment occurred until May 17th, except that Weeks says, and Selby denies, that he (Weeks) told them at the April meeting of the directors that it w'ould be suicidal not to go into the combination, and that if they would not take the matter up, he would, on his own discretion.

On May 17th, Weeks testifies that he went to Gifford’s office, in response to a call over the telephone, and that Gifford then offered to buy the stock at the option price; the same price that had been proposed to the minority stockholders — $199.50; that he (Weeks) insisted upon a higher price, and that finally $200 a share was conceded; that he asked for time — over night — to consider it, and that on the next morning he telephoned an acceptance; that Gifford met him in New York on that morning and gave-him.a check, and that he asked him if he (Weeks) would not favor him (Gifford) by taking the certificates to the factory, as he understood there was to be a directors’ meeting that day, and have them transferred. I think it highly probable that the question of what should be done in case Mr. Selby would not, as treasurer, make the transfer, was discussed either then or on the day previous, and a plan of action agreed upon. The meeting of the directors took place in the afternoon of May 18th. After the regular business was disposed of, Mr. Weeks announced that he had sold the stock, and said that he had received a check for it and had caused a new certificate to be made to the American Agricultural Chemical Company, and then requested the treasurer to sign it. TTp to this time Mr. Weeks had not communicated the sale to any member of the Lister family, notwithstanding his promise not to undertake to sell without consulting them. Mr. Selby, on being asked to sign, said it was a very serious matter, and that he wanted time to consult counsel. Weeks refused to give any time, saying that he had made arrangement to deliver the certificate that night. After some parley, Weeks said: “You know, as treasurer of the company, the consequence of refusing to perform your duty.” Selby replied that he could not sign. Then Weeks asked Eobert Lister, as assistant treasurer to sign, and Lister replied that he would rather cut off his right arm than sign. Weeks thereupon drew a resolution to the effect that Selby be suspended and that the office of treasurer be declared vacant for his refusal to perform the duties of his office, in the matter of the signing of the certificate. This resolution was offered by Martin and seconded by Kehoe. It was carried by the three votes of Martin, Kehoe and Weeks against the two votes of Selby and Lister. Then it was resolved that Edward Lancaster; the secretary, bo elected treasurer to fill the vacancy. Immediately upon his election Lancaster signed the certificate. This occurred Thursday afternoon. On Saturday, a bill filed by Mrs. Selby and Eobert Lister was presented to me asking that the sale be enjoined on the ground, among other things, that the trustee was without power to sell. On May 31st, an order to show cause was made and a hearing had on the answer of Weeks and the affidavits of the American Agricultural Chemical Company. The result was that on June 8th, the preliminary restraint was continued, but it was provided by the order that nothing therein contained should restrain the American Agricultural Chemical Company from returning the stock, and Weeks from receiving it. The parties concerned acquiesced in the view that I took that Weeks had no power to sell, unless authorized, by the court, upon a case made showing the corpus of the fund to be in danger. They agreed to a re-transfer of the stock and a return of the check.

Not long after new negotiations were commenced. The unwillingness of Selby and Lister to sell appears to have been chiefly based upon the inadequacy of the price offered. It is perfectly apparent that the Lister Company possessed a most valuable plant and most substantial assets. The total assets, as reported by the auditor, amounted to $1,755,691.13, and these included United States bonds to the amount of $233,000, which had been kept in reserve by the company for several years, and cash in bank to the amount of $166,000. The debts were insignificant. It is undoubtedly true that on some of the assets, notably the building, tools and machinery, and perhaps the land, too high a valuation had been placed, but after making every reasonable allowance, it is probably true that $1,200,000 could have been realized, even if the company had then been wound up. Certainly the offer of $200 per share, to be paid in cash, was not a high price.

After the court had decided that it was Mr. Lister’s intention that the stock should be kept intact for the benefit of his children and grandchildren, and that he could not sell, unless he was authorized to do so, it was obviously Mr. Weeks’ duty to put the company in the strongest possible position, so that if it became necessary to enter into a competition with the new company, it might compete under favorable circumstances; and so that if it became necessary to sell, he might obtain the highest possible price for the stock. So far from doing this he did precisely the reverse.

The most valuable contract which the company possessed was that which it had made yearly with the American Sugar Refining Company to furnish bone-black, and which had brought it $800,000 per annum. The officers of the Lister company to whom in former years had been entrusted the duty of securing this contract' were the president and the manager, Kehoe. Weeks had heard that the proposed combination would endeavor to deprive them of this contract, in the winter or early spring of 1899. He testified that he stated what he had so heard at the February or March meeting of the board. He further testified that it was Mr. Kehoe’s business to renew it, and that, “in a general way,” he then spoke to him about it as he had spoken to Selby; that afterwards, finding that Selby (not Kehoe) had neglected to do anything, he specially requested Kehoe to do what he could. Kehoe (although Mr. Weeks’ witness) denies this and says moreover that he (Kehoe) never made any effort whatever to get it. The reason why he did not is obvious. From the first he had been a zealous advocate of the new combination. The promoters of the new enterprise had asked him to go into it prior to the annual meeting of January, 1899. He had, at that meeting, on behalf of the promoters, solicited and obtained the signatures and options of all the stockholders except Selby, Selby’s father and Lister. He had declared it to be his opinion that it was best for all concerned to go into it. He says that he had resolved to go into it at the time he was elected general manager of the Lister company in Januarjq 1899. He was elected a member of the executive committee of the new combination immediately after its organization, in the latter part of May, 1899, and at the directors’ meeting of the Lister company, held on June 15th, he tendered his resignation as manager because of the conflict of duty — a resignation which was not accepted. The rival concern did not obtain the contract until August 1st. How it cannot be doubted that Weeks must have known of Kehoe’s relations to the new company as early as May, if not earlier, and yet with this knowledge, and although he was president, on a salary of $8,000, presumably taken as compensation for performing the duties of that office, he did not make any effort other than that which I have mentioned to secure 'it. His only excuse is that it wasn’t his place to do it and that it would have been futile to do it. Neither of these excuses are borne out by the evidence.

Knowing at least as early as May that Kehoe’s interests were adverse to those of the Lister company, it was his place, and his place alone, to do it. It comes with ill grace from him to say that Selby, whom he had in the most arbitrary fashion, turned out of office because of his refusal to do an illegal act, should have attended to it. And there is little to indicate that if he had made a real effort, his exertions would not have been successful. He was at least bound to try — at least bound to make such effort as any man of ordinary business ability and prudence would have made had the stock been his own. I think it must be obvious to anyone who reads the testimony with attention that the true reason why ho made no effort, either before or after May 18th, was that he was determined, with the co-operation of the promoters of the combination, and notwithstanding what had been decided bjr this court, to effect a sale. I am unable to explain his action subsequent to May 18th on any other hypothesis.

As I have already said, negotiations were renewed after June 8th. Mr. Gifford says he was first approached by Robert Lister and his adviser, Frank M. McDermit. It is apparent that, notwithstanding the declarations made on behalf of the American Agricultural Chemical Company that they did not care for the Lister concern, it was a matter of considerable importance to them to secure it. With the exception of a single company in Philadelphia (which did not enter the combination), there was no concern east of Detroit capable of producing enough bone-black to meet the requirement of the sugar refining company. If the bone-black were brought from Detroit the freight charges would materially affect the profits. So it is not surprising that Messrs. Hobbs & Gifford offered, by way of advance on their previous offer, common stock of the new company of the par value of $150,000. This stock (which they say was their own) has sold for from $35 to $50 per share since it has been put upon the market. Both Mrs. Selby and Robert Lister still held off. At the request of two of the minority stockholders, who all favored the sale (possibly on the ground that they had little confidence in the new management), Mr. Weeks called a special stockholders'' meeting for July 26th. The members state that it was called “to consider the question of disposing of and dividing among the stockholders the proceeds of the sale of certain Hnited States government bonds the property of the company.”

What occurred at this meeting is stated in the minutes as follows :

“The chairman (Weeks) reported that the sale of the stock to the American Agricultural Chemical Company was nearly completed. Mr. Shaw, the representative of the London & Chicago Contract Corporation L’td of Chicago, Illinois, suggested that thirty minutes more be allowed to complete the sale. Mr. McCarter, representing Esther G. Selby, stated that owing to some minor technicalities the sale could not be completed that day and he moved to adjourn, subject to the call of another meeting within 48 hours notice. Mr. E. C. Hay seconded the motion and it was carried unanimously.”

Still Selby and Lister refused to sign the necessary papers, and on August 15th another meeting was held “for the same purpose as the adjourned meeting of July 26th.” At this meeting, according to the minutes, Messrs. Hill, Hay, Gifford, Shaw and Condit spoke in favor of the distribution of the United States government bonds, after which E. M. Shaw, who does not appear to have been a stockholder, but who spoke for the combination, offered a resolution to the effect that the treasurer, at the discretion and with the approval of the president, sell the United States bonds and divide the proceeds among the stockholders in proportion to their several holdings. Mr. Weeks was requested by Mr. McCarter, on behalf of Selby, and by Mr. Parker, on behalf of Mr. Lister, to vote against the resolution, but he voted in its favor. He says he did so because as a discretion was left with him as president, he did not think it right to call the stockholders together again to consider the question. .He-says, however, that he then stated it to be his opinion that the bonds ought not to be retained.

Then Mr. Shaw offered another resolution, viz.:

“That a committee composed of E. G. Hay, Geo. K. Hill and W. C. Childs be appointed for the purpose of taking advice of counsel as to whether or not the company may be legally dissolved forthwith and as to how soon it may oe done and as to what steps may be necessary to -accomplish such dissolution.”

This was also, against the protest of Mr. Selby and Mr. Parker, voted for by Mr. Weeks, on the ground, as he testifies, that it was only to get information, which could do no harm, and that he thought it was only fair to the stockholders that a request of that' kind should be carried.

These resolutions, so obviously passed to compel Mrs. Selby and Mr. Lister to sign the contract, had the desired effect. They both signed. A supplemental bill was filed setting out the new facts. The bill was answered by the parties in interest, including the infant children, who were represented by Judge Dodd as their guardian pendente lite. The case came again before me-on the 21st day of December. Evidence was taken, and, after argument, I advised that the sale should be approved. I did this,, not because the evidence convinced me that, under able management, the Lister company could not have stood against its new competitor, or because I thought that the price obtained was the-highest possible price that could have been secured under other circumstances, but because I feared that with a president incapable of practically directing the affairs of the company, and! with the only officers capable of managing it in the new combination, with no one else suggested as a competent head, and with the principal source of profit, viz., the bone-black contract, then gone, the interest of the infants was endangered, and ought to be-secured in accordance with what must have been the paramount intention of the testator.

I have liras far narrated the facts necessary to a comprehension of Mr. Weeks5 position, and will now discuss as briefly as-possible the character of those acts which are said to have been breaches of trust sufficiently grave to warrant his removal.. Before doing so, however, I will notice an objection taken in limine. It is said that the acts done were done by him in his-character of executor and not of trustee. As to this I need only say that I think he was acting as -trustee from the time he assumed the presidency. He amended the by-laws, as he says, to-give himself greater power of control. By his own vote he became president — a position of permanency. In his speech to-the stockholders of the company, made just before his election, he says: “You are all well aware of the death of the president of these works and the trust which has devolved upon me by his-will to care for his interest in these works.55 He assumed the-presidency, therefore, in order to perform a trust. As the estate-was free from debt, he only did his duty in so doing. A few days after he became president he paid over the first dividend to his cestuis que trust on the same theory. I have no doubt that the court has, under these circumstances, the power to deal with him as trustee.

The first act complained of is his voting to himself a salary for which, it is said, he knew he neither would nor could render an equivalent in service. Primarily, this was a question for the ■company as such, but as he thus took an indirect profit from his trusteeship, and as his act tended to reduce the dividends or surplus, it cannot be altogether disregarded here. Judged by the service that, in the light of his subsequent conduct, he expected to render,- and that he did in fact render, it was excessive. The services actually rendered during the year were (1) to attend two out of the three stockholders’ meetings and eleven out of the fifteen directors’ meetings; (2) to consult with Mr. Kehoe (Kehoe saj^s not of tener than once a month) in reference to economies, and to authorize such economies as Mr. Kehoe proposed; (3) to visit, on one or two occasions, the works. He could hardly have intended to do more than this when he voted for the salary, for he had no practical knowledge of the business. He was, as he testifies, a lawyer, in large practice, with offices in Newark and New York, where he spent all his time. His willingness to make an undue profit out of the trusteeship is further illustrated by the fact that he voted himself $2,000 more than Mr. Lister, a practical man of great experience, had received, and only gave it up in consequence of the opposition of Mr. Selby.

The second act complained of, on behalf of his infant cestuis que trust, is that, in paying the first dividend to the life tenants, he neither reserved for them so much thereof as represented accumulated surplus, nor so much as was earned between January, 1898, and the date of Lister’s death. In failing to reserve the earnings of the stock between the last-mentioned dates, he violated the rule laid down in Lang v. Lang, 12 Dick. Ch. Rep. 325, but that rule is of such recent promulgation (November 18th, 1898) that he could hardly be said to have committed a breach of trust, involving any moral delinquency, by disregarding it. The rule had been supposed to be otherwise. The same cannot be said of his conduct in paying over that part of the dividend which represented accumulated surplus. He distinctly says in his testimony that he knew at the time that this dividend consisted, in part, of such surplus, and that he ought to have reserved it. This is his evidence:

“Q. Did you or not understand that under the law the children were entitled to have set apart for them as principal a certain portion of that dividend ?
“A. That was what I thought at the time, even though I did not look up the question.
“Q. Well, now thinking that way, how did you justify yourself in paying' the entire amount over to the life tenants?
“A. Because they insisted upon it.”

In another part of his testimony he says that it was his judgment that it was not right, and that he told them so. It seems to me that conduct of this sort in a trustee — a lawyer of experience —who was thus easily persuaded, against his known duty, to sacrifice the interests of his infant cestuis que trust, gives some indication of unfitness to discharge the responsibilities here cast upon him.

Another indication, though not so important, of his desire to profit by this trust is to be found in his letter accompanying the check for the dividend sent to the life tenants. He deducts from the full amount of each check what he calls “my commission of 5%, to wit, $1,337.92.” Two thousand six hundred and seventy-five dollars and eighty-four cents is rather liberal compensation for the work of drawing two checks. It may be that for his services, taken as a whole, after a considerable period of duty well performed, the orphans court would have allowed five per cent., though such an allowance, by that court, is not, so far as my experience goes, the usual allowance; but he had no,legal right to take it then. He testifies distinctly that he put it, not in his account as executor, but in his personal account.

I come now to what appears to me to be a much more serious breach of trust, and one, too, which seems to indicate an inability on the part of Mr. Weeks to comprehend the true position which a trustee ought to occupy with respect to his cestuis que trust. I refer to his attempt to dispose of the stock in May,' 1898. The trust was intended, primarily, for the benefit of the life tenants. These tenants were Mrs. Selby and Eobert Lister, both under forty years of age. Mrs. Selby’s husband represented her interest. He had been for many years vice-president and assistant treasurer. He is a man of character and intelligence. He was intimately acquainted with the company’s affairs. One would have supposed that, under these circumstances, a trustee, new to the business, willing to sell, in opposition to what seemed to be the intention of the testator as expressed in the codicil, would have been especially anxious to obtain the advice and concurrence of Mr. Selby. So far from doing so, he appears to have thought that he would best perform his duty by taking counsel with the attorneys of the promoters; of keeping all knowledge of the sale from both Selby and Lister until it was so far consummated as to be incapable of being disturbed, and of even contriving with those attorneys a plan of action whereby Selby might be removed from the treasurership in case he refused to sign the certificate. What he did was to prepare and carry through a resolution removing Mr. Selby for not doing what the court subsequently declared to be illegal, without giving that gentleman, in a matter of such life-long importance to him, even a few hours in which to consult counsel.

His failure to take any effective steps to secure the bone contract relates, primarily, to his management of the Lister company. It is argued that it majr demonstrate his incapacity to properly perform the duties of president of a corporation engaged in the manufacture of fertilizers, but does not show that he would not take proper care of the money derived from the sale of the stock. This is, perhaps, to some extent, true. His inaction appears, however, to illustrate, in a somewhat striking way, his conception of what is required of a trustee in the performance of a duty, which he has voluntarily assumed, and for which he has voted to himself a very liberal compensation. It cannot be said that he made an effort which was strenuous, though misdirected, and which failed by reason of his inexperience. He made no effort at all.

His conduct, after the decree enjoining the sale, cannot be justified. If he conscientiously believed that a sale of the stock was in the interest of the trust, he ought, at least, to have so acted as to have, in every legitimate way, enhanced its value, so that, if its sale were approved by the court, it would have realized the highest price. A new combination was being formed, which was, avowedly, to become the chief competitor of the Lister company. Now, certainly, it was a great advantage to this company, in the threatened competition, to be so strong financially: practically, not to owe a dollar, and to have a reserve of $233,000 invested in United States bonds. This advantage Weeks was-willing, at the instance of the competitor and against the protest of Ms cestuis que trust, to throw away.

He voted for and, by his own vote, carried a resolution authorizing the sale of the bonds, saying, when he voted, that it was his-opinion that the bonds ought not to be retained; and he also voted for another resolution looking to the appointment of a committee to consider whether the company might not be legally dissolved forthwith.

I am of opinion that these various acts, deliberately done and' covering a period of over six months, show such lack of reasonable fidelity on the part of the trustee as to warrant his removal. Holcomb v. Coryell, 1 Beas. 289.

There is another ground upon which the trustee should be-removed. In May v. May, 167 U. S. 310, Mr. Justice Gray uses the following language:

“The power of a court of equity to remove a trustee and to substitute another in his place is incidental to its paramount duty to see that trusts are properly executed, and may properly be-exercised whenever such a state of mutual ill-féeling, growing out of his behavior, exists between the trustees, or between the trustee in question and the beneficiaries, that his continuance in office would be detrimental to the execution of the trust, even if for no other reason than that human infirmity would prevent the co-trustees or the beneficiaries from working in harmony with him, and although charges of misconduct against him are either not made out or are greatly exaggerated.”

Of course, friction or hostility between trustee and beneficiaries is not of itself a reason for the removal of the trustee; but; where that hostility has arisen out of the misbehavior of the trustee it may be. Trustees exist for the benefit of those to whom the creator of the trust has given the trust estate. Letterstedt v. Broers, 9 App. Cas. 386.

Tested by this rule, Mr. Weeks cannot be retained in the trusteeship. It is perfectly apparent that a feeling of bitter hostility has been generated in the life tenants, who, as being younger, are likely to survive them trustee. This hostility has no other cause than his own ill-conceived acts. All confidence is at an end. The trustee and the life tenants cannot work in harmony. It seems to be clear, therefore, that the execution of the trust should be committed to others. ' ' •


source: Caselaw Access Project

license: Public Domain

text:
    The Inhabitants of the Township of Lodi v. The Hackensack Improvement Commission et al.
    [Filed June 28th, 1900.]
    A borough which was set off from a township is not liable for the previously-contracted debts of such township, under P. L. gf 1896 p. $70, providing a mode of equitable apportionment of the indebtedness and assets on the setting off of such township.

      Mr. Brnest Koesier, for the complainant.

      Mr. John M. Bell, for the borough of Lodi.

      Mr. Luther A. Campbell, for the borough of Hasbrouek Heights.

      Mr. Cornelius W. Berdan, for the borough of Little Ferry.
   Stevens, V. C.

. The complainant alleges in its bill that it is indebted- to- one Burke, who has recovered judgment against it for $1,167.54, and that the boroughs which were set oif from complainant after the liability was incurred, are liable in equity to contribute to the payment of this judgment. The claim cannot be sustained. There is no contract to pay alleged; there is no implied assumpsit; for the money paid by Burke was paid by him for the use of the complainant, before the defendants had come into existence. And the'claim is not grounded on any principle of justice which has been sanctioned by the courts.

Where there is no legislation on the subject, says Mr. Justice Clifford in Mount Pleasant v. Beckwith, 100 U. S. 525, “in case of division, the old corporation owns all the public property within her new limits, and is responsible for all the debts of the corporation contracted before the act of separation was passed. Debts previousty contracted must be paid entirety by the old corporation.” Dill. Mun. Corp. (Ith ed.) § 188. So that even if there had been no provision for apportionment, the bill could not have been sustained. But, in point of fact, the legislature has, by act of April 16th, 1896 (P. L. of 1896 p. 270), provided for the division of assets and liability in the mode therein prescribed, and this act has been declared effective. Inhabitants of Orvil Township v. Woodcliff, 35 Vr. 286. There is therefore not any reason whatever for coming into a court of equity.

The bill should be dismissed.


text:
    Israel Kelsey v. The New England Street Railway Company et al.
    [Filed August 3d, 1900.]
    Where a corporation, authorized to buy and sell stocks, by its board of directors, empowered a committee thereof to give an option for certain stocks in their discretion, subject to ratification by the stockholders, such sale could not become binding on the corporation until ratified by the stockholders. The ratification clause never having been waived, the sale to the complainant was not binding upon the corporation, and specific performance of the agreement to sell to him was denied.

      Mr. Flavel McGee and Mr. Morgan (of the Pennsylvania bar), for the complainant. '

      Mr. William H. Corbin, for the defendant.
   Stevens, V. C.

The New England Street Railway Compaq, a corporation organized under the act concerning corporations, was formed, inter alia, to purchase, hold, sell, invest, trade and deal in stocks. In October, 1899, it owned seventeen thousand nine hundred and fifty-four shares of stock of the Winchester Avenue Railroad Company. On October 9th of that year, the board of directors of the New England company passed a resolution appointing a committee consisting of the president and two other directors “to receive any offers that might be made for the property.” The committee opened negotiations with the complainant. On March 26th, 1900, the board of directors passed another resolution, as follows:

“On motion duly recorded it was unanimously voted that the committee appointed at the meeting of directors Oct, 9, 1899, be and are hereby authorized and empowered to accept any offers that may be made for the stock in the Winchester Avenue R. R. Oo., owned by this company, which in their judgment are for the best interests of all concerned and to make such agreements with reference thereto as they may be advised are necessary for the delivery of the stock and payment therefor. All' such agreements to be subject to ratification by the stockholders of the eom~ pany.”

On March 29th a written agreement to give complainant an option to buy the seventeen thousand nine hundred and fifty-four shares was made and signed by the committee. It begins thus:

“Acting on behalf and by the written consent of the directors of the New England Street Railway Co., and appointed by the directors for the express purpose, we do hereby give”

complainant the option to buy, &e. In this agreement’nothing is said about ratification by the stockholders.

On April 7th the option was accepted in writing. On April 9th the directors held a meeting, at which, according to the minutes,

“a discussion followed upon a proposition to sell to Israel A. Kelsey the stock of the Winchester Avenue Bailroad Co., owned by this company, but no formal proposition was submitted and no action was taken.”

After this meeting, three of the directors went to the office of Mr. Dennison, a lawyer, and requested him to prepare a call for a meeting of the stockholders to be held on April 23 d. He first prepared one which read as follows: “to see if the stockholders will vote to ratify, confirm and make valid a certain agreement between the directors of the company and Israel A. Kelsey,” &c., but learning that the stock was in the Boston Safe Deposit and Trust Company, and that it required a two-thirds vote of the stockholders to get it out, he prepared a second call, in which the foregoing purpose was stated, and the further purpose of seeing whether the stockholders would vote to withdraw the stock from the Boston company to carry out the proposed sale.

The call was issued, and the stockholders’ meeting held at the time indicated. A majority of the stockholders voted against the sale. The reason of this vote appears to have been that in the interval between April 9th and April 23 d, George A. Eernald & Company had offered more for the stock than Mr. Kelsey, and the interest which they represented had obtained control of a majority of the shares. On June 1st, the money paid by Kelsey on the delivery of the option ($1,000) was tendered back.

The complainant prays a specific performance of the contract and an injunction restraining the sale to Eernald & Company I am of opinion that the interlocutory injunction now asked for should be denied. The complainant’s argument is — first, that on proper construction of the resolution of March 26th, the assent of the stockholders was not required to make a valid sale; second, if such assent was, by the terms of the resolution, necessary in the first instance, it was by the action of the directors ¡subsequently waived or dispensed with. I agree that as the object for which the company- was formed was to buy and sell .stocks, the directors had power to sell without getting the consent of the stockholders; but they could if they chose, make it -.a condition of any sale, that the stockholders should assent to it. This they did in the present instance. The resolution is that the ■committee are authorized

■“to accept any offers * * * and to make such agreements with reference thereto (i. e., to the offers) as they may be advised are necessary for the delivery of the stock and payment therefor; all such agreements to -be subject to ratification by the stockholders.”

The resolution on its face plainly contemplates not only a bare acceptance of an offer, but an agreement as to delivery and •payment. How delivery on the one side and payment on the •other, constitute the gist of the entire transaction. It is an .agreement as to these which is to be the subject of ratification. It is said that the object of the clause which requires a vote of the stockholders is only to meet the requirements of the former resolution that the stock should not, without such vote, be taken •from the depository to which it had been confided; but this insistment, if it be permissible to restrict the word “delivery” to delivery by the trust company, is negatived by the insertion ■of the word “payment.” It seems to me plain that ratification by the stockholders was, under the terms of the resolution, necessary.

The complainant cannot claim to be a purchaser without notice of the scope of the agents’ authority. The agency was special. He was by the very words of the option informed that it was constituted by a writing and the weight of the evidence is that a copy of the resolution was furnished to him before he received or accepted the option.

The question then remains, did the directors subsequently, •either expressly or by conduct, waive the ratification clause? •Certainly they did not expressly. It is argued, however, that .at the meeting-of April 9 th, they were informed of the terms of the option and tacitly assented to it as it stood. The minutes ■.show otherwise; but it is said that the minutes do not correctly state what was done. The directors present at the meeting were examined and cross-examined. It is admitted by all of them that a copy of the option was not produced. There is little to indicate that its terms were fully and accurately stated, and there is still less to induce the belief that it was pointed out that the option had departed from the resolution of March 26th in the very important particular of omitting to make the sale subject to ratification. A very strong inference to the contrary is deducible from the undisputed fact that four out of the seven directors present at the meeting, immediately upon its adjournment, went to Mr. Dennison’s office and signed the two calls, both of which stated that one of their purposes was to see if the stockholders would vote to ratify. There was, no doubt, at the meeting of April 9th, assent to or acquiescence in a sale to Mr. Kelsey at $48, but there was no assent to or acquiescence in the omission to make the sale dependent upon the stockholders’ approval. There can be no ratification without knowledge.

I am of opinion, therefore, that there was neither an original authority to sell without the stockholders’ assent nor a subsequent ratification of the terms of the option as drawn.

The injunction should be denied.


author: Grey, V. C.

text:
    William H. Tenbrook v. George W. Jessup et al.
    [Filed May 22d, 1900.]
    1. A widow lias no estate in dower until actual assignment or admeasurement of that portion of the lands to which her estate is to apply.
    2. Her dower right becomes complete upon her husband’s death, in all the lands whereof, he was seized of an estate of inheritance at any time during the coverture, save so far as she is barred of her dower by her duly executed deed.

      3. Such complete dower right is a “thing in action,” within the contemplation of paragraph 88 of the Chancery act {Gen. Stat. p. 889), applicable to the payment of the debts of the dowress.
    4. A release of dower right without consideration, to avoid payment of debts, is fraudulent, and may be set aside at the instance of a creditor of the widow.
    5. A receiver will be appointed, upon a proper case being made, to have dower assigned for the benefit of the creditors, &c.
    On bill and demurrer.

      Mr. Herbert A. Drake, for the complainant.

      Mr. Thomas B. Hall, for the demurrant.
   Grey, V. C.

The complainant is the holder of a judgment entered in the supreme court of this state against- Fanny J. Kelly, defendant, execution issued thereon and returned “nothing found.” The complainant then filed his bill in this court, alleging that Samuel J. Kelly was, in his lifetime, the holder of certain lands whereof he died seized of an estate of inheritance, leaving his widow, Fanny J. Kelly, the defendant in the judgment, surviving him. That upon her husband’s death, the widow became entitled to a complete dower right in all the lands whereof he was seized as aforesaid; that the judgment was recovered while the wife held this complete dower right; that she, before any dower was assigned, without any consideration, and to hinder the complainant in collecting his debt, released and conveyed her dower right to her children, the heirs-at-law. The complainant prays that the release of dower may be declared void, that a receiver may be appointed to whom dower may be assigned for the benefit of the complainant’s judgment, &c.

The principle is entirely well settled that a widow has no estate in dower until there has been an actual assignment or admeasurement of that portion of the lands to which her estate is to apply. When that is effected, either by act of the heir, or by the judgment of a competent court, the right of the wife has ripened into an estate in those lands which are admeasured, and all the rest of the lands whereof the husband died seized of an estate of inheritance, are, by the act of admeasurement, dis- • charged from her dower right.

The widow in that case becomes seized of a life estate in the lands admeasured to her, and takes and holds the .property so admeasured with the rights, incidents, profits and privileges which belong to a life tenant.

In this ease there has never been any admeasurement of dower to Mrs. Kelly. The judgment which the complainant has recovered and which he sets up in his bill of complaint, could not be a lien upon a mere right to have dower assigned. But the dower right is a “thing in action,” which she, at her own choice, might put in motion to compel the heir to assign, or by a judgment of court obtained in her favor, she might enforce admeasurement. As long as she and the heir choose not to act, there can be no creation of such an estate as will become an asset, which may at law be applied in the payment of her debts. Being possessed of a “thing in action,” which is capable of being created into an asset or estate by her o.wn choice, she was equitably bound to apply it in satisfaction of her debts. If she did not do this, her creditor may compel it to be done. Gen. Stat. ¶. 389 88 (Chancery act).

The bill alleges that instead of taking such a course as would result in the creation of an estate, applicable to the payment of her debts, out of which the judgment might have been satisfied, the widow fraudulently and without consideration, and for the purpose of avoiding the payment of her debts, released her dower right to her children, the heirs-at-law. This allegation must be taken to be true on this hearing, because the bill is demurred to generally, for want of equity, and all pertinently pleaded -facts are admitted to be true. The bill prays that a receiver may be appointed who may, in the name- of the widow, compel dower to be assigned, for the purpose of ripening the dower right, or “thing in action,” which the widow has, into an estate, and.applying it to the payment of her debt, established by the judgment in favor of the complainant.

The course of procedure prayed for in this bill seems to follow very closely the case of Tompkins v. Fonda, 4 Paige 448, where, in a luminous opinion, Chancellor Walworth recognized the right of creditors of the widow to have her dower right enforced and ripened into an estate for the benefit of judgments which had been recovered against her.

It seems to me that case is “on all fours” with this, and not only with this case, but also with correct legal principles.

It is distasteful to the law that a debtor should be permitted to have and enjoy assets which ought to be applied to the payment of debts, without recognizing that obligation. It is still more repulsive to the law that a debtor, having things in action, should avoid taking such a course as would apply them to the payment of his debts, and make conveyance of them without consideration while they have not yet ripened into legal assets, all for the purpose of avoiding the payment of debts, and thereby defeating creditors of their rights.

The omission of the debtor to apply her dower right in payment of her debt was exactly the situation which called for the statement of the law on the subject in Tompkins v. Fonda. That case appears to have been accepted as a correct exposition of the law in the New York courts. Payne v. Becker, 87 N. Y. 157. The cases of Wade v. Miller, 3 Vr. 296, and Pollitt v. Kerr, 4. Dick. Ch. Rep. 67, cited by defendant, do not touch the point at issue. The principles laid clown in Tompkins v. Fonda are-not limited to cases in which the widow is in the actual possession of lands and the profits. It was determined that because-she had a right to have dower assigned in order to pay her debts, and did not do it, the court would take hold of the matter, and oblige it to be assigned for the benefit of her creditors.

The case is one which ought to be followed. It is right in principle, and I am quite willing to follow it, and to hold in the-cause before me that the bill discloses an equity in favor of the complainant which this court is competent to enforce, and which it ought to enforce.

I will advise an order that the demurrer be overruled and that the defendant answer the bill as required by the statute.

As to the question of costs. This cause was lately argued on-bill and answer. An intimation was given by the vice-chancellor that upon argument of the case thus presented the defendant should prevail. The complainant’s counsel then stated that he had overlooked the effect of setting the cause down for hearing on bill and answer, and the defendant thereupon agreed to relieve the complainant’s counsel from his embarrassment, withdrew his answer and filed the demurrer now being argued. The complainant’s counsel now declares himself willing to submit the question of costs to the discretion of the court. Under such circumstances no costs should be allowed against the demurrant, on overruling the demurrer.


text:
    Anna Gardom v. James M. Chester et al.
    [Filed June 2d, 1900.]
    A party in possession of lands under an unrecorded deed, who asserts constructive notice against one claiming under the recorded title, must prove such open, visible and exclusive possession and use of the premises, as an owner would be expected to exercise towards property in the situation and of the character of that in question; and such possession and use must be inconsistent with the record title, under which the party to be noticed claims his interest in the premises.
    On. bill, answer and proofs.
    The complainant, Mrs. Gar'dom, on November 15th, 1893, by deed dated and acknowledged on that day, bought the land in question from Samuel S. E. Cowperthwaite and wife for the sum of $300, which she paid to Cowperthwaite. The premises consisted of a town lot, with no improvements upon it, situate on the southeasterly side of Asbury avenue, in Ocean City, thirty feet front by one hundred feet deep. On making the purchase Mrs. Gardom did not record her deed.

      On the 26th day of February, 1895, while Mrs. Gardom’s deed was yet unrecorded, a judgment -Was entered in the supreme court of Yew Jersey, by Sarah C. Browning against Samuel S. E. Cowperthwaite, Mrs. Gardom’s grantor. Sarah C. Browning has since departed this life, testate, and the defendants Hollinshead and Coles have become executors of her will, and are defendants in that capacity.
    Execution was issued on the judgment and levy made in the county of Cape May upon all the property of Samuel S. E. Cowperthwaite, as the same stood upon record in the county clerk’s office, and among other properties levied upon was the lot which Cowperthwaite had already conveyed to Mrs. Gardom by the unrecorded deed, and for which he had been fully paid. The sheriff, under the instructions of the plaintiff’s • attorney, advertised the premises for sale as the property of the defendant Cowperthwaite, and on the 20th day of May, 1898, put the same up at public auction, and struck them doWn to James M. Chester for the sum of $100, and Chester afterwards interested the defendant William E. Massey, and they two subsequently took the sheriff himself into the partnership to share in the risks and profits of the purchase.
    The undisputed proof is that the property, on the day of the sale, was worth something over $1,000. Whether the purchase at the sheriff’s sale has yet been concluded was not -finally shown. Some reference was made, on the argument, to a deed which the sheriff had executed to the purchasers, but no such deed was produced, and the sheriff admitted that he has not as yet paid over the purchase-money to the - plaintiffs in-the judgment, though more than two years have elapsed since the sale.
    • Shortly after the day of the sale, perhaps within two days, Mrs. Gardom heard of the fact that her lot had been sold, and ^applied to the bidders, Massey and Chester, for information as to the matter, and, before they had paid any of the purchase-price except the “clown” money, explained to them that she was the owner of the property by deed made to her in 189-3 by Cowperthwaite.
    Conferences took place between Massey and Chester and Mrs. Gardom and also her daughter, Mrs. Stroubel, as to the terms upon which they would abandon their claim under the sheriff’s-sale. These negotiations between the parties failed to come to-any conclusion recognizing Mrs. Gardom’s rights. On the 31st-of May, 1898, she filed her bill in this court, subsequently amended, praying that the sheriff’s sale may be set aside; that ihe defendants may be restrained from conveying away the-premises, and that they may be decreed to reconvey the same to her, and for such other relief as may be equitable, &c.
    The complainant alleges that she held title to the premises by the deed from Cowperthwaite made in November, 1893, which she inadvertently failed to have recorded, but charges that the-defendant had notice of her ownership, because of her actual possession of the premises.
    The defendants deny that they, or any of them, had any knowledge either that she was in possession of the premises,, or that she had a deed therefor, which she had inadvertently failed to record, and say that they supposed the premises being" sold were the property of Cowperthwaite, the defendant in the judgment.
    The allegations of the amended bill are somewhat defective,, in that they aver notice of the unrecorded deed to Sarah C. Browning, the plaintiff in the judgment, and to her agents, only at the time of the levy of the execution, whereas, to be-effectual, the allegation should be of notice at the time of the entry of the judgment. All the defendants have answered, and none, either in pleading or argument, make any criticism of this ■ defect. The proofs have been directed on both sides to support the contentions of the parties touching the nature of the complainant’s possession of the premises under her unrecorded deed at and before the time of the entry of the judgment. The cause • having been tried on this basis, the complainant is entitled to - amend the defective allegation of her bill.

      Mr. John W. Wescott, for the complainant.

      Mr. Schuyler O. Woodhull, for the defendants Chester and::'. Massey.

      Mr. Charles R. Stevenson, fox Hollihshead and Coles, executors.

      Mr. William D. Lippincotl, for Robert E. Hand, sheriff.
   Grey, V. C.

The complainant claims to be in the position of one who was and is in the possession of her property by such open and notorious occupancy that all the world might know it; that the defendants, being chargeable with notice of this fact, are fraudulently endeavoring to deprive her of her property by and under the form of a judicial sale resulting in a deed to them conveying the premises. Her equity lies in-her right to prevent the further prosecution of the alleged fraudulent scheme.

That the complainant was a bona fide .purchaser of the premises in question, a year or more before the entry of the judgment under which the defendants claim, by a deed which was effectual to pass to her a fee-simple estate in the premises for which she had paid full consideration, is not denied by anyone. At that time it is conceded the lands were without improvement, and consisted of an ordinary seaside -resort -town lot. It is not disputed that the complainant erected on the premises a small resi-' dencé reconstructed from an election booth, being about eleven feet front by thirty feet deep and about eight feet high, with portico in front and a pump in the reap, and an outhouse such as usually attends small dwellings. She fitted the house with curtains and other indicia of -actual occupation, and has used the premises at her choice as a seaside,residence from the time she erected the dwelling-house to the time.

The dispute between the parties touching this possession of the complainant rests wholly upon three points — first, the defendants insist that the complainant placed the structure on the premises and began to occupy-it-after ,the date of the entry of Sarah C. Browning’s judgment; and secondly, that Mrs. G-ardom’s occupation was not a continuous personal possession; and thirdly, it was not inconsistent with the record title in Cowperthwaite. The complainant insists that she put up the building on 'the premises in the spring and early summer of 1894, and immediately occupied it as a seaside residence and place of health and recreation resort; that ever since the summer of 1894 she has so occupied and used the premises up to the present time; that the appearance of the property before and at the time of the entry of the Browning judgment, in February, 1895, showed that it was an occupied residence, whether’at every moment of time she or her family might have actually been upon the premises or not.

The position of the holder of title by an unrecorded deed is defined by Gen. Blal. ¶. 882 § 2-45, which provides that an unrecorded deed shall be void and of no effect against subsequent judgment creditors without notice. This notice must have been at and before the date of the entry of the judgment. Condit v. Wilson, 9 Stew. Eq. 371, and cases there cited. The notice might be either actual or constructive; that is, it might be because actual consciousness of the existence of the unrecorded deed was brought to the party to be charged with notice, or because the grantee in the unrecorded deed had, by open, visible and exclusive acts of ownership, given such warning to all persons that the inference of notice is necessary and unquestionable.

That the complainants occupation of the premises in this case was exclusive and was in assertion of her own right is not disputed. She used the property as her own residence, paid all the taxes and municipal charges, and her possession as owner was never, in fact, challenged by anyone save as the defendants now deny her right. The contention turns wholly upon the three points — when the complainant's acts of ownership began, whether they were so continuous as to charge the defendants with notice, and whether inconsistent with the record title in Cowperthwaite.

Taking up the first point — when the complainant first occupied: The complainant was a poor woman; her circumstances and situation were such that she needed an immediate occupancy of the premises to satisfy the inducements which led her to purchase. She bought in November, 1893, and it was an entirely natural thing that she should at once enter into the possession and enjoyment of the premises, as the condition of health of her sick son was such as to lead her to buy and use this place for his refreshment and improvement. She testifies, and in that she is supported by her daughter, that j&e dwelling-house and its attendant structures were placed on the property in March or April, 1894; that some weeks passed in construction, and that they occupied it in July in the summer of that year. She produces a receipt for the survey of the premises dated April 18th, 1894, which she says she paid to a surveyor for locating the lot preparatory to the erection of the buildings, and she verifies the date of the erection of the buildings by that receipt, and also by her own occupation of the premises. In, this she is corroborated, as to date, by her daughter, whose husband aided in the construction of the house, and who went down with her mother to occupy it shortly after it was built, and who has several times since occupied the premises as a seaside resort.

On the other side, the defendants’ testimony seeking to show that the structure was not put on the premises until the summer of 1895, after the date of the Browning judgment, is uncertain, conjectural and supported by no documentary proofs which fix the date in question.

The weight of the evidence sufficiently shows that during the spring and early part of the summer, at least as early as July of the year 1894, the complainant improved her lot as above stated, and entered into possession of the property as her seaside residence. This occupation antedated the -entry of the Browning judgment, which was in February, 1895; by seven months.

On the second point: The defendants insist that the occupation, in order to be effectual as notice that Mrs. Gardom claimed some estate in the premises in her own right, must have been not only actual, but so continuous that she was always personally present on the premises, in short, a pedis possessio. The Tide touching such possession as would give notice of ownership under an unrecorded deed, may more fairly be stated to be that the party claiming under such a deed must prove such open, visible and exclusive possession and use of the premises as an owner, considering the situation and character of the property, would be expected to exercise; and that such possession and use must be inconsistent with the record title under which the party to be noticed claims his interest in the premises.

In this case the property consists of a dwelling-house and town lot at a New Jersey seaside resort. 'The complainant used it as her- residence, paid the taxes assessed upon it, without dispute or denial of her right by anyone. She testifies that she personally occupied the house all the time that she did not have to work in the city to make her living. Her daughter also personally occupied it under,her mother’s title. These personal uses of the premises were shown to have been quite frequent during all the seasons of the year, at intervals sometimes of a week or two, and sometimes of, longer periods. At seaside resorts occupation of residences in this way is very - common. The population of such places increases tenfold in the summer time and decreases in the same proportion when the season is concluded. Hundreds of dwelling-houses are there held emptv during nine months of the year, to be occupied only during the three summer months. No one deals with such property expecting an owner to have it continually, personally occupied. The proofs show that the complainant’s personal presence on the-premises, in addition to her stay in the summer season, extended over other periods of the year.

The presence of the dwelling-house itself, with its curtains in the windows and other signs of personal use — the pump in the-yard and the outhouse — were effectual to give notice of an actual possession by those who lived there, whether during every hour of the day they were personally on the premises or not. In Losey v. Simpson, 3 Stock. 255, Chancellor Williamson held that the actual occupancy of one claiming adversely to the record title imposed upon the other claiming under it the duty of inquiring of the party in possession of the premises of what his right of possession consisted. Vice-Chancellor Pitney, in Essex County Bank v. Harrison, 12 Dick. Ch. Rep. 96, states the same rule even more forcibly in favor of the party in possession, and cites the New Jersey cases on the point.

The occupation of the premises in question by Mrs. Gardom for seven months before the Browning judgment was entered afforded the plaintiff in that judgment abundant notice that she-was in possession as owner, and the least inquiry made of Mrs. Gardom would have disclosed the existence of her unrecorded deed.

The last contention of the defendants is that the occupation of the premises by the complainant was in no way inconsistent with the record title as it stood at the time of the entry of the judgment of Sarah C. Browning, under which the defendants claim. That judgment was entered in February, Í895, against Samuel S. E. Cowperthwaite. By the record at the time of the entry of the judgment Cowperthwaite appeared to be the owner of the premises in question. The occupation by Mrs. Gardom was not the occupation of Cowperthwaite. Nothing in the case indicates that Cowperthwaite, as owner, had ever done anything to put Mrs. Gardom in possession as his tenant, nor did any evidence show that her occupation appeared to be under Cowperthwaite’s title. Her possession was her own, and entirely inconsistent with the record title in Cowperthwaite. If Sarah C. Browning, the plaintiff in the judgment claiming against Cowperthwaite, had gone to the premises before and at the time when the judgment was entered, and had there seen them in possession of Mrs. Gardom, used by her as her own residence, the plaintiff would at once have seen that there was a possession adverse to the record title in Cowperthwaite, and she would have been bound to have asked of the occupant, Mrs. Gardom, how she justified her tenure, and would, undoubtedly, have received the reply, as her title was entirely separate and adverse to Cowperthwaite, that she had a deed from him, by which she had become the purchaser of the premises.

This situation must be held to have brought to the plaintiff in the judgment, Sarah C. Browning, at the time when the judgment was entered, notice of title in Mrs. Gardom adverse to the record title in Cowperthwaite, and this notice is binding upon 'all the defendants who claim under that judgment.

The complainant contends, with much ingenuity and not without support in the proofs, that the Browning judgment was entered and pressed to sale of the complainant’s lot, with actual knowledge on the part of those acting for the plaintiff in the judgment, and of the defendants Massey.and Chester; that the complainant, Mrs. Gardom, and not Cowperthwaite, the defendant in the judgment, held the title to the lot. The evidence on the point is inferential and not direct, and somewhat contradictory.

I do not deem it to be necessary to consider the complainant’s argument on this point, as her actual use and occupation of the premises, both in point of time and in character, clearly support her right to a decree in accordance with the prayer of the bill.


text:
    Harry S. Ehret v. The Camden and Trenton Railway Company. Mary N. Baldwin v. The Camden and Trenton Railway Company.
    [Filed June 13th, 1900.]
    1. The contention that the construction of an electric railway, known as a “trolley,” longitudinally upon a country public road, imposes a servitude in addition to that charged upon the lands by the original taking for a public highway, entitling the owner of the fee to additional compensation to be first made, is an unsettled question in this state.
    2. When the case presented for a preliminary writ of injunction depends upon the acceptance of the above-stated contention as established, the writ will not be allowed.
    On bill and affidavits. Application for a preliminary injunction. »
    The two bills of complaint in these causes pray for in june- • tions restraining the defendant company from constructing its electric railway or trolley road along and in Warren street in the township .of Beverly, in the county of Burlington, over the lands in which the complainant, who is an abutting owner, has a fee-simple estate.
    Both causes are prosecuted and defended by the same counsel, and, as they involve the same question, have been heard together. Replying affidavits were presented, but were afterwards withdrawn, and the causes have been argued on the bills and affidavits thereto annexed, and orders to show cause, &c., why preliminary injunctions should not issue, &c.
    The claim for the allowance of the writ is based upon the complainants’ contention that the defendant was incorporated and organized under the Traction Company act (Gen. Slat. p. 3235), and is engaged in the construction of an electric railway longitudinally along Warren street, in Beverly township, which they allege is a public highway, or country road, and not a city street. They further allege that they are abutting owners, holding a fee-simple title to the lands over which that public highway runs, on which the railway is about to be constructed by the defendant; that the construction of that railway imposes a servitude upon their lands, in addition to that of a public way; that for this proposed additional taking of their lands they have had no .compensation made, and they ask that a preliminary injunction may go, to restrain the laying and construction of the proposed electric railway until compensation be first made, &c.

      Mr. Charles X. Chambers and Mr. Marie R. Sooy, for the complainants.

      Mr. Iiotvarcl Flanders, Mr. Samuel W. Beldon and Mr. David J. Pancoasl, for the defendant.
   Grey, V. C.

(orally).

The questions presented in these two cases lie within such narrow compass, and have been so fully enlightened by both citation and argument, that they may readily be disposed of at cnee.

The complainants apply for preliminary injunctions, and the only matter considered and passed upon is their right to that particular relief.

There is no claim that the complainants are in actual possession of the land proposed to be used for the electric railway, nor that they have any other interest than that of owners of the fee of lands lying within a public highway which is not located in a city.

The complainants in both cases admit that previous decisions in this state have declared that the use of a city street for a horse railway is within the servitude imposed by a taking for a public highway. Hinchman v. Paterson Railway Co., 2 C. E. Gr. 75. And that the laying and operating of an electric railway upon a city street is within the same public right. Halsey v. Rapid Transit Street Railway Co., 2 Dick. Ch. Rep. 380. Their contention in the case in hand is that the construction of an electric railway upon a country road stands upon a different basis, because, they say, the servitude originally imposed . upon land taken for use as a city street is vitally different from that' charged upon lands taken for a country road.

That in a city the density of population, the large, number of dwellings, factories and other buildings necessarily require the lighting of the streets, the carrying of passengers to and fro upon them by a rapid transit, and other incidents attending thereon which justify a greater and more varied use of the way. That none of these uses are required, on a country road, and that when it is sought to impose them on such public highway, they constitute an additional servitude and taking of the fee-owner’s lands, for which he must be first compensated. The cases of Pennsylvania Railroad Co. v. Montgomery County Passenger Railway Co., 167 Pa. St. 62, and Zehren v. Milwaukee Electric Railway Co. (Wisconsin), 74 N. W. Rep. 541, are cited as sustaining this proposition.

This contention necessarily involves the assumption that public easements imposed in the laying out of country roads are essentially different in their nature from those charged upon land in taking it for a city street; that only those methods of travel can be used which were in acceptance at the time of the taking, and that the introduction upon a highway taken for use ns a country road, of new modes of travel, substantially different, -which might be lawful if exercised on a city street, would be the imposition of a new and additional servitude. The con•struction of an electric railway upon a country road, the com-1 plainants insist, is such an additional servitude, for which compensation must first be made.

No decision of any of the courts of this state is referred to which supports the complainants’ contention. Chancellor Williamson, in Morris and Essex. Railroad Co. v. Newark, 2 Stock. 357, declared that it was consistent with the purposes for which public highways were originally designated that the public authorities should “adapt them in their use to the conveniences and improvements of the age.” In Halsey v. Rapid Transit Co., 2 Dick. Ch. Rep. 384, Vice-Chancellor Van Fleet takes the same . view, and holds that the landowner’s compensation is awarded upon a basis that he is to be perpetually deprived of his land, .and that the highway may be used not only in the manner observed when the land was taken, but by such other methods as the improvements of the age and new wants arising out of an increase of population, or an enlargement of business, may from time to time render necessary. It is true that these cases were presented because of alleged intrusions upon city streets, but the subject was by the learned judges treated from the broadest point of view, in discussing the constitutional right of the fee-owner in public highways. The supreme court of this state accepted these and other cases in this court, as establishing the doctrine that the adoption of the trolley system for the conveyance of passengers on city streets is not, per se, an invasion of private rights. Kennelly v. Jersey City, 28 Vr. 294, and cases there cited. .The court of errors, in Roebling v. Trenton Railway Co., 29 Vr. 273, in a unanimous opinion agreed to that proposition. In the same court they were again referred to as expositions of the law without unfavorable comment. Moore v. Haddonfield, 33 Vr. 390.

On the theory advanced by the complainant, the extent of the servitude imposed by a taking for a public highway must depend upon the question whether the locality in which the highway was taken was at that time in a city or in the country. If in a city, then the abutting owners’ land was charged with the greater servitude, and if in the country, with the lesser. Subsequent change in the nature of the locality could not increase the burden imposed upon the abutter, so that if the lands were originally taken for a country road, the additional changes incident to city use could not be thereafter cast upon them without additional compensation to the owner.

Many important avenues in the most populous cities in the state were originally laid out as country highways The increase of population and the improvements of the neighborhood have often within a very short space of time developed the country road into a village thoroughfare, a town highway and finally a city street.

If the principle declared in the Pennsylvania and Wisconsin cases above cited controls such a situation, the abutting-owners along such former country roads, but present city streets, may' claim to be entitled to additional compensation for their use for street railways.

The questions involved in this contention have never been determined in this state, and the present application for a preliminary injunction is clearly within that class which depends upon an unsettled and doubtful proposition. Citizens’ Coach Co. v. Camden Horse Railway Co., 2 Stew. Eq. 299; Hagerly v. Lee, 18 Stew. Eq. 255.

In the case of Borden v. Atlantic Highlands, &c., Railway Co., 33 Atl. Rep. 277, the late Chancellor McGill refused to grant a preliminary injunction to an abutting owner to restrain the building of an electric railway over a country road, on the ground that it imposed an additional servitude, holding that it had never been settled-in this state that there was a difference in the servitude imposed in taking a public highway in the country from that charged in taking a city street.

. I will advise a decree refusing the preliminary injunctions asked for, and dismissing the order to show cause, with costs in each case.


text:
    Allen Cornell v. William Redrow.
    [Filed July 30th, 1900.]
    1. Where there was an agreement between complainant and1 defendant whereby complainant rendered services in the business of defendant, and received a certain sum per week as compensation and half of the profits, but there was no understanding that complainant should share in the losses, such agreement did not constitute a partnership.
    2. Where complainant filed a bill alleging that a partnership had existed between him and defendant, and prayed for an accounting, a dissolution and the appointment of a receiver, and it appeared that there was only an arrangement whereby complainant was employed by defendant at a certain sum per week and, in addition thereto, half of the profits, complainant was entitled to a decree for an accounting.
    3. Although complainant was entitled to an accounting, no costs should be allowed him if an account ordered to be served on him by defendant should be found to be correct, since, having been charged as a partner, defendant had an excuse for not accounting as an employer.
    On bill, answer and proofs.

      Mr. William, I. Garrison and Mr. UlySses G. Styron, for the complainant.

      Mr. William F. Bex and Mr. Freclerich A. Bex, for the defendant.
   Grey, V. C.

(orally).

The questions in dispute are, I think, sufficiently easy of solution to be determined at once. The bill alleges the existence of a partnership between the complainant and the defendant; that the complainant was by the defendant unjustly forced out of his rights in the enjoyment of the partnership, and the ascertainment of the profits which were to come to him as a partner, and prays that the partnership may be declared void— I presume that means that it may be dissolved — that an accounting may be had, and a receiver appointed; with a further prayer that the defendant may be decreed to pay the balance found to be due, and also a prayer for an injunction (which has never been specially moved for), against the conduct of the business by the defendant, and a further prayer for any general relief to which the complainant may be entitled.

So far as there is any claim that there was a partnership, it is manifest that the complainant has wholly failed to prove any such relation. There is no claim that the parties made any written agreement on the subject. The complainant says that they did agree to enter into a partnership; the defendant explicitly denies that there ever was any such agreement or undertaking.

No other proof supports the contention that there was an agreement for a partnership. This situation of the proofs would defeat the complainant’s right to a decree, because he had the burden to show that there was a partnership. There are other incidents of proof which touch upon the question of partnership, and all support the statement of the defendant that there was no partnership agreement. It is proved by both parties that when the business association was commenced, all the property stood and continued to stand in Mr. Redrow’s name, and, under the terms of the agreement between them, he was ■ to ■collect and hold all the moneys paid into the business. The complainant says because of a special agreement to that effect; the defendant says because he alone was conducting the business. There is no dispute that the complainant was by the agreement to receive a weekly payment of $5, and it is quite evident that that sum was in the nature of compensation for services, and not for an additional or greater share of the profits. Mr. Cornell testifies that in addition to the $5 per week, it was ■agreed that he should have one-half of the profits of the business. The defendant admits that Cornell was by the agreement between them to have a share in the profits. He does not name -what share, but he does not contradict Cornell’s statement that it was agreed to be one-half of 'the profits. It should be taken to be established that there was an agreement between these parties whereby Cornell was employed for a compensation to be rendered him of $5 per week, and also - one-half of the profits, • if any, arising from the conduct of the business.

But such an agreement does not in itself create between the parties the relation of partnership. The participation was not in the profits as such. The arrangement was simply a mode of ascertaining what compensation should -be paid to an employe. The complainant made no proof that he was to share in the losses. When I asked him the question whether he was by the agreement to share in the losses of the business, it seemed to him an entirely novel proposition, which he had never before considered. His understanding evidently was that Eedrow was carrying on the business at his own risk, and was to compensate him (Cornell) for his services by a weekly payment and a share of the profits, if any were made.

The testimony-of the defendant is substantially to the same effect. This shows that there was neither in fact nor in law any partnership. The contract between the parties was that of employer and employe, and the arrangement as to profit sharing was, as stated, merely a mode of ascertaining the complainant’s compensation.

Both sides agree that compensation was to be made to Mr-. Cornell for his services, and that this compensation depended t6 some extent upon the profits of the business.

The law on the point is expounded in the opinion of Chancellor Zabriskie in Hargrave v. Conroy, 4 C. E. Gr. 283, who declares that a contract for the compensation out of a portion of the profits, of one who is not a principal, and has no control of the business nor power as a -partner,, does not make him a partner. On this point this case has been cited with approval by the court of appeals. Wild v. Davenport, 19 Vr. 132. In the case in hand, Eedrow owned the property, kept the bank account in his own name, and carried on the business in his own-name. The attempt to show that it was done for a few weeks in Cornell’s name was a failure. Eedrow discharged Cornell when and as he chose, and Cornell accepted his discharge.

All the facts proven go 'to show an employment and not an association as partners.

The complainant has failed to sustain his assertion of a right to an accounting because he and the defendant were partners. But the facts proven and admitted are sufficient under the general prayer to give the complainant a claim to equitable relief by way of discovery and the taking of an account to ascertain whether there were any profits which he is entitled to a share. Hargrave v. Conroy, ubi supra, 284. In that case it appeared on the face of the pleadings that the complainant had actually received all he was entitled to, and for that reason his bill was dismissed, but the right of a party whose compensation depended upon-profit sharing to file a bill for an accounting to ascertain whether there were any profits, and how much, wa.s distinctly asserted.

In McAndrew v. Walsh, 4 Stew. Eq. 341, the court of appeals referred to the opinion of Chancellor Zabriskie that one who has a contract for compensation by relation to a share of profits, is entitled to maintain a bill for an accounting in the first instance, without bringing an action at law, but inasmuch as the point was not raised by the case under consideration, the court of appeals did not decide the question. The opinion of Chancellor Zabriskie therefore stands as expository of the practice of this court, and is in my view a correct statement of the manner in which a party entitled to a definite share in the unknown profits of a business should proceed to obtain his rights.

Suing at law before ascertaining whether there were profits, and to what amount, his claim would lack the elements of certainty which the law courts require. An accounting of all the transactions of the business would be necessary, and this the mode of procedure in those courts is unfitted to accomplish.

In the case now before me it clearly appears that by the contract, the complainant was entitled to a share in the profits of the business. Mr. Redrow, who was the emploj'er, was bound to pay his employe his share of the profits, and if that pajunent involved a statement of his business dealings, he was bound to have furnished his employe such a statement, to show whether there were any profits. That obligation was not satisfied by Mr. Redrow’s remark to the complainant: “You can come and look at the books.” The defendant has not yet rendered an account which the complainant should' be compelled to accept as a showing whether there have been any profits oi the business.

Upon the whole case the complainant has failed to show any partnership, and as that constituted the gravamen of his bill, he should have iro costs against the defendant up to this stage of the proceedings. The defendant having been, charged in the bill as a partner, has some excuse for not having accounted as an employer under contract to share profits by way of compensation, and I will therefore retain the cause and give him a further day for such an accounting. If within thirty days from the date of an order to be made and served upon him or his solicitor, he shall serve upon the complainant or his solicitor an account showing the profits of the business, up to the time the complainant was discharged from his employment, or the fact that there were no profits, then the defendant, if his account is accepted or maintained, will not be subjected to costs. If he fails so to do, the matter will be sent to a master to state such an account, and costs will remain subject to the further order of the court.

There was a statement upon a little memorandum (Exhibit G 1) of some items of a stock of goods on hand on May 1st, to the total amount of $159.83. The ime item appears in one of the defendant’s books under the head, “Mr. Eedrow commenced business,” &c. That memorandum (Exhibit G1) and the entrjr, and the testimony all agree that the material mentioned was on hand at the time Eedrow took the business, and that it had been the property of Mr. Cornell. Mr. Eedrow’s testimony does not say that this stock on hand was conveyed to him by the second bill of sale. It is not mentioned in that bill of sale, and Mr. Eedrow in his testimony states that this stock remained on hand there and went into the business. Whether that means that that stock was sold and that the credits of the sale thereof went on Eedrow’s books and became his property I cannot say. It may have been that Mr. Cornell (who was in charge at the time, and continued to be for some time after-wards, with only an occasional visit from Mr. Eedrow) sold that $159.83 worth of stock and retained the proceeds.

Mr. Eex — Mr. Eedrow did not say that all he took possession of was on that bill of sale. lie said he took possession of that' and this also.

The Vice-Chancellor — I will not pass judgment upor any of' these possibly disputable matters. It may be that a statement of account may be rendered which the parties may voluntarily accept and thus end this litigation. I will advise an order such-as is above indicated.