text:
    Annie Estell Bourgeois v. Lewis Miller et al.
    [Submitted June 25th, 1918.
    Decided July 12th, 1918.]
    1. A restrictive covenant in a deed against a livery or sales stable does not include a public garage.

      2. A public garage is not a nuisance per se. Whether it is a nuisance in fact depends upon the manner in which it is kept and the business conducted.
    On final hearing.

      Messrs. Bourgeois & Coulomb, for the complainant.

      Messrs. Babcock & Champion, Mr. Clarence L. Cole and Mr. Robert H. McCarter, for the defendants.
   Backes, V. C.

This bill is to restrain the nse of a building, in the course of construction, for a public garage.

The defendants own a lot at the corner of Ocean avenue and Finth street, in a residential and closely built-up section of Ocean City, and upon it they intend building a one-story public garage, capable of housing from seventy to one hundred automobiles. It is to be of brick construction, with a slag roof supported by wooden trusses, rafters and sheathing, cement floor and framework windows and doors. Two five hundred-gallon gasoline tanks are to be sunk under the pavement of Ocean avenue, from which gasoline is to be supplied to automobiles by a pump on the outside of the building. It is to be lighted with electricity, and as it is to be operated during the warm seasons only no heating appliances are to be installed. The complainant, Bourgeois, owns the Formandie, a six-story frame hotel, opposite and across Finth street, sixty-eight feet away, and the complainant Frey owns the Traymore Hotel, a filve-story structure in the rear of the proposed garage and twenty feet distant. Both are summer hotels and open for trade from the late spring to the early fall only.

Upon the filing of the bill and after a hearing the defendants Avere restrained pendente lite from keeping within the building then erected on the lot, and of which the proposed garage is to be an extension, “any gasoline stored therein in barrels, automobile tanks, cans or otherwise,” and thereupon further building operations ceased. At that time there was an element in the case, which perhaps had some influence upon the court, that has since been eliminated: An ordinance of the municipality prohibited the erection of a public garage in the district in which the complainants’ land is located, which was recently repealed by a vote of the people on a referendum under the Walsh act.

One of the grounds upon which the complainants rest their claim to a permanent injunction is that the use of the building for a public garage will violate a restriction contained in all of the deeds of the Ocean City Association, the promoter of the town and the common grantor of all the lands within its boundaries, which provides—

“No building or any part thereof erected upon said lot or lots shall be used or occupied as a livery or sales stable, dye house, bone boiling or skin-dressing establishment, soap, candle, glue, starch, lamp black, poudrette or fish guano manufactory, slaughter-house, piggery or tannery, nor shall any building be used or occupied as a drug store without the written consent of the said party of the first part hereto.”

The argument is that the terms “livery or sales stable” are the equivalent of, and comprehend, a public garage. It has been observed that a public garage is a modern substitute for the ancient livery stable (Smith v. O’Brien, 94 N. 7. Supp. 673), and that garages occupy with relation to automobiles the same place that stables do with relation to horses (Diocese of Trenton v. Toman, 74 N. J. Eq. 702); and the lexicographer says that “a garage is a stable for the storage of automobiles or other horseless vehicles” (Cent. Dict. 1905-1908), but the definition manifestly does not meet that of a livery stable — “a stable where horses are kept for hire and where stabling is provided” (Webster). The restriction relates solely to the nature of the business and not to the type of the building. An unsightly livery stable may be erected with impunity, and any lawful business, other than those proscribed, may be carried on without danger of infraction. It might even be permissible to put up a stable and rent stalls for horses and storage for wagons. The covenant aimed at the assembling of multitudes of horses and was intended to rid the neighborhood of the annoyances of noise, odors and flies usually centered about a livery stable, and the restriction is only upon the business calculated to bring about that result. Now, it may be that garages are more objectionable in a residential quarter than livery stables, and so are many other enterprises, as, for instance, a planing-mill, machinery or boiler-shop, street car barn or a railroad station (Bridegwater v. Ocean City, 62 N. J. Eq. 276), that are not under the ban. Public garages are not specifically interdicted. The inclusion in the covenant of specified objectionable trades excludes all other forms of lawful business. The livery or sales stable may have been the commercial predecessor of the public garage, but the covenant against the one is not therefore to be extended by implication to the other. A public garage is neither within the spirit nor the letter of the covenant. When the covenant was formulated, nearly forty years ago> such a thing as a public garage was unknown; and it would require terrific stretching of the definition of a livery or sales stable to embrace “a place for housing automobiles.” It is not, however, required to go to this lengTh in disposing of this phase of the bill, and relief must be denied if it appears that the complainant’s right thereto is not clear. That it is, at least, highly questionable whether the forbidden livery or sales stable includes a public garage cannot be denied. Courts of equity do not aid one man to restrict another in the uses to which he may lawfully put his property, unless the right to such aid is clear. Fortesque v. Carroll, 76 N. J. Eq. 583. In that case, Mr. Justice Garrison, speaking for the court of errors and appeals, said that “it is well settled that in cases where the right of a complainant to relief by the enforcement of a restrictive covenant is doubtful — To doubt is to deny.’ ” The reasons for the rule, as pointed out in the opinion, axe — first, because of restrictions of the lawful uses of property are against common right, and second, because restrictions, in the framing of which a subsequent purchaser has had no voice, ought to be so clear that by the acceptance of the deed that declares them lie may reasonably be deemed to have understood and acceded to them. Howland v. Andrus, 81 N. J. Eq. 175.

The other grounds of complaint are that the noises and odors of a public garage will be a nuisance; that asphyxiating fumes from partially burnt gasoline will be dangerous to life, and that gasoline in large quantities in the supply tanks, and in the automobiles to be stored in the garage, will be an ever-present menace to life and property. These are all purely questions of fact. The burden of proof is upon the complainants and is all the more difficult to sustain because the dangers are merely apprehended. The proofs must establish, clearly and satisfactorily, that the business of a public garage in the immediate vicinity of the complainants’ property will be of a character as to necessarily produce the mischief which the court is called upon to prevent.

The nuisance feature of noises and odors was not pressed in the argument.

The danger to life from asphyxiating gases is negligible. In starting machines there sometimes occurs a backfire, due to gross neglect in cleaning, or to an excess of gas, in common parlance called too rich a mixture, which emits a fume, said to be poisonous, causing asphyxiation if inhaled in sufficient quantity. That a fatality may happen under favorable circumstances is possible, but it seldom occurs, and then only in closed quarters where the gas is generated and discharged. Automobiles do not, of course, normally backfire at starting, nor do all start out of a public garage at the same time, but suppose that in the usual course of daily trade the average mishaps in this respect take place, is it at all likely that the fumes would set up the grave danger the complainants apprehend? Experience does not confirm it, nor is it established by the proofs. Employes and others in and about garages suffer no serious inconveniences from the gas, although they come directly in contact with it, and far less is there possibility of harm to 'those in adjacent properties. Noisome fumes that escape from the building are taken up by the air, neutralized and dissipated, so that there is little ground for alarm or fear that they will penetrate contiguous homes in such volume as to threaten health or life. The distance from the proposed garage to the complainants’ hotels — twenty feet from the one and sixty-eight feet from the other — gives ample clearing space and reasonable assurance against the danger causing the anxiety.

It remains to be considered whether the business is to be enjoined because of the danger from explosions. A public garage is not a nuisance per se, and the complainants do not contend that it is; they rest their right to relief expressly on the ground that the storing of large quantities of gasoline in tanks and in automobiles in the garage, in close proximity to their hotels, will subject them, their property, and their guests, to an extraordinary hazard, to which they ought not to be obliged to submit. The principles upon which a court of equity acts in such a situation are informingly discussed by Vice-Chancellor Garrison in O'Hara v. Nelson, 71 N. J. Eq. 161, 629, and were the circumstances the same I would feel bound, authoritatively, by that case. There, upon a bill filed to enjoin a public garage, the keeper was restrained from filling automobiles inside the garage and from storing therein automobiles containing gasoline, on the ground of danger from explosions, in surroundings where the destruction of person and property would not nearly have approximated the damage that would ensue from a similar occurrence here. Whether a catastrophy would involve one or more persons or property of small or great value is, of course, beside the issue. An individual is as much entitled to protection as are communities. The question is whether, with reasonable care, a public garage can be conducted without danger of such a calamity. The learned vice-chancellor, upon the facts before him, ruled that it could not, but the evolution in the automobile field impels me to a different view. The inflammable and explosive properties of gasoline and its vapors, as described and compared with other explosives in the case cited, is borne out by the evidence before me, and need not be dwelt upon further, but an entirely different state of affairs exists to-day in the handling of gasoline as a garage commodity, and in its use as motive power of automobiles, than prevailed in 1906, when the O'Hara Case was decided. Such vast improvements have been made in both directions that the dangers at that time apprehended have been reduced to a minimum and the causes for alarm practically removed. The methods then employed are archaic now. Although only twelve years ago, the automobile was still in the formative and experimental stages and as much an object of curiosity as the aeroplane is to-day. Then there were but thirteen thousand in this state; now there are one hundred and thirty-seven thousand, and over seven million in the United States. Then, in a day’s trip of fifty miles, the operator often spent more time on his back than he did at the wheel; "chauffeur” was a word of uncertain pronunciation; kerosene was used in the lamps; the self-starter, demountable rims, electric lights, the racer and the truck, the luxurious limousine and the practical Ford were either not conceived or still in the homing. And with all of these the development of the motor mechanism has kept stride, until it has about reached the point of perfection. Leakage of gasoline is the result of inexcusable carelessness or the purest accident. The accumulation of grease and dirt is due to tire sheerest neglect. In these deplorable circumstances, fire may occur from a short circuit of the electric appliance, but only when the insulation is worn off. Gasoline contained in the ordinarily well-constructed and well-kept automobile is comparatively as free from danger of explosion as steam in a boiler. The lurking danger in the one is external; in the other internal. Both can be guarded against by proper attention and reasonable care. To require automobile tanks to be discharged before storing is impracticable and would close down the business. But if, perchance, an automobile should take fire in a garage, followed by an explosion of the tank, the danger would be local, confined to the machine or the immediate surroundings. There is no evidence before me throwing light upon the force of an explosion of a twenty-gallon tank, but my investigation satisfies me that it would not be so great as to do harm beyond the garage itself, and if this be so, and I have learned nothing to the contrary, the complainants are without footing. It is said of gasoline that as an explosive the danger is ten times greater than gunpowder. Standard Oil Co. v. Tierney, 92 Ky. 367. Yes, in the abstract, but not in the automobile. We recline unconcernedly in touring cars over a tank of gasoline, but it would indeed be a reckless spirit who would ride over a can of gunpowder, smoking. Instances of explosions of automobile tanks while in garages are extremely rare and isolated. The infrequent explosions generally follow violent collisions. Destructive fires from that source are at least as uncommon as formerly were fires in livery stables, and they were not regarded as common law nuisances on that score. The housing of from seventy-five to one hundred machines in a public garage would, admittedly, multiply the risk, but that would call for increased attention and care, which is not to he assumed would not be forthcoming.

Now, as to the danger from the supply tanks: The prevailing practice of former clays of filling automobiles was by decanting from open vessels, the danger from which, more than anything else, influenced the vice-chancellor to grant the injunction in the O’Hara Case. This method has been abandoned. The tanks, sunk in the earth, either under the pavement or immediately inside of the door, are charged direct from the supply wagon, and automobiles are filled on the outside of the garage by an automatic measuring pump, through a hose. There is little or no escape of gas during either operation, and the chance of fire coming in contact with the supply tank is remote. This standard method, universally adopted as an economic as well as a safety measure, has long stood the test of reasonable assurance against explosion, and its capacity in that respect is no longer open to speculation.

Granting that gasoline, uneonfined, is inherently dangerous, so that the “greatest care is but the slightest assurance of safety,” and that its explosive properties by far exceed those of gunpowder, it is noí a permissible corollary that public garages are in the category of dangerous agencies to which powder magazines and nitro glycerine and TNT plants belong.

Tn confirmation of the views I entertain that a public garage is not of, and in, itself a menace to contiguous life and property, and that whether it is a nuisance in fact depends upon the manner in which it is kept and the business conducted, I need only point to the myriad in operation throughout the land, erected in densely populated communities, amid and alongside hotels and hospitals, theatres and public buildings, and without casualty more than usual in ordinary trade and enterprise. Like in other towns, they are numerous in Ocean City, some in the business portion and others in the residential section of the complainants, surrounded by frame structures, private and sipublic, and with due care they have been managed for years without hurtful result to the adjacenejc So free from danger is the automobile regarded that it is not an uncommon practice to build a garage in the basement of dwellings. The residence adjoining the proposed garage is a sample. It may properly be said of public garages, as new institutions in our social and commercial life, as was once'upon a time said concerning steam agencies: “They are absolutely necessary to the progress of the community, and each member must suffer the incidental damage- and. liability to danger which arises from their non-negligent use. They are not nuisances if properly maintained and operated.”

There was some evidence to support the complaint that a public garage would increase the complainants’ fire insurance premiums and would also depreciate the value of their property. Mere diminution of the value of the property of the party complaining, by the nuisance, without irreparable mischief, will not furnish any foundation for equitable relief. Zabriskie v. Jersey City and Bergen Railroad Co., 13 N. J. Eq. 314; Morris and Essex Railroad Co. v. Prudden, 20 N. J. Eq. 530.

The bill will be dismissed, with costs.


source: Caselaw Access Project

author: Foster, V. C.

license: Public Domain

text:
    Seacoast Real Estate Company v. American Timber Company et al.
    [Submitted June 5th, 1918.
    Decided July 10th, 1918.]
    1. In a suit to foreclose a mortgage the complainant has the burden of showing how it credited or disposed of the proceeds of sale of any collateral covered by the mortgage. '
    2. The defendant, who was the owner of lots subject to a certain mortgage, having conveyed eight of them as collateral security to complainant mortgagee, who then bought the mortgage, is entitled to credit for the entire proceeds of complainant’s sale of the eight lots, without deducting the amount due on the mortgage on them, unless complainant surrenders such mortgage.
    á. The law of the state where notes are made and payable governs as to usury.

      4. The defence of usury may be pleaded by a surety.
    5. The defendant is not estopped from pleading usury on notes because in a prior proceeding against it, which has not been tried, it was not pleaded. The question may still be raised in that suit by amendment of the pleadings.
    6. The act of 1902 (P. L. 1902 p. 459) does not relate to the ordinary debts of a corporation.
    7. A mortgagee in possession has authority and is under the duty to keep the mortgaged premises in repair, and is entitled to be repaid any disbursements made for the protection or preservation of the property; but where he knowingly makes permanent improvements, without the consent or fault of the owner, he cannot, as complainant in equity, obtain reimbursement for such expenses even to the value of the benefit conferred upon the landowner. *

    8. If, under expert advice, and in the belief that such repairs were necessary for protection of the property, he makes such repairs which under some other method might have been made for a smaller expenditure, he is entitled to reimbursement.
    On bill, &c.

      Messrs. Durand, Ivins & Carton and Mr. John D. McMullin (of the Philadelphia bar), for the complainant.

      Mr. Martin V. Bergen, Jr., and Mr. DeWitt Robinson (of the Philadelphia bar), for the defendants.
   Foster, V. C.

Complainant's bill is filed to foreclose as a mortgage a conveyance made by the defendant American Timber Company to Lydia S. Hinchman, under date of May 31st, 1912. On June 22d, 1914, Lydia S. Hinchman and Charles S. Hinchman, her husband, assigned this conveyance, or mortgage, and the indebtedness secured thereby, to complainant. These deeds were given to secure tire payment of the indebtedness owing by one Henry H. Yard to both Mr. and Mrs. Hinchman.

The premises in question consist of two iracts of land at Manasquan Beach, in Monmouth county, with an ocean frontage of about three thousand feet, and the lands extend southerly along the beach from a point about five hundred feet north of the Brielle road to the Manasquan river.

At the time the deed from the American Timber Company to Mrs. Hinchman was made and delivered, Henry H. Yard and wife gave to Mrs. Hinchman a quit-claim deed dated June 1st, 1912, for their interest in the premises.

The defendants are the American Timber Company, of which Henry H. Yard, now deceased, was president, and his widow and minor son. The complainant, of which Mr. Hinchman, now deceased, was president, is practically another name for Charles S. Hinchman and the members of his family, and the defendant corporation is only another name for Mr. Yard and members of his family.

The indebtedness which these deeds were intended to secure, complainant claims now amounts to $37,818.90, and arises out of the following transactions:

In 1901 Mr. Yard borrowed from Joseph M. Gazzam and A. O. Granger certain sums of money and gave to each of them his notes for $3,000. On October 1st, 1901, the indebtedness being unpaid, Yard gave to Gazzam and Granger his notes for $3,500, each payable in one year with interest. After maturity these two notes were purchased by Mrs. Hinchman and later were assigned by her to complainant. The security which Gazzam and Granger held for their notes was the first tract of land in question, which the American Timber Company had conveyed to Gazzam and Granger and which they in turn conveyed to Mrs. Hinchman when they sold her the notes, and which she transferred, with other security, to complainant when she assigned the notes.

The indebtedness of Mr. Yard to Mr. Hinchman is entirely distinct from the indebtedness due on the notes bought by his wife, and is based upon a note dated October 31st, 1904, payable to Hinclnnair's order for $22,452.12. This note was given as a result of a settlement between Yard and Hinchman at this date; and attached to this note is a statement, dated October 19th, 1904, showing the collateral held by Hinchman for its payment.

Since the delivery of the deeds, in 1912, Mr. and Mrs. Hinchman and complainant have been in actual possession of the premises and have rented portions thereof, and Mr. Hinchman has had the entire control and management of the property and has collected a gross animal income therefrom of about $5,000, and complainant now values the property as being worth about $75,000.

The parties recognize that the Hinchmans and the complainant have since 1912 been occupying the position of mortgagees in possession, but defendants dispute the amount claimed to be due complainant on the following grounds:

1. That complainant has not given proper credit for the amount realized from the sale of some of the collateral shown on the above-mentioned statement.

2. That the amount claimed to he due on the notes to Gazzam and Granger is usurious.

3. That the amount charged for repairs to the mortgaged premises is improper and illegal.

Considering these objections in the order stated, it appears that the first objection is based upon the following circumstances :

In the statement of collateral prepared by Mr. Yard and Mr. Hinchman, under date of October 19th, 1904, appears, among other property, the following:

Belmar lots 2952-59, $3,000.00.

In the account attached to the replication complainant makes this statement:

12/31/08 proceeds. 2952/7, Belmar........... $2,297 51
Less Brown mtg. & int. for 9/15/04.......... 1,402 30
$S95 21

The Brown mortgage referred to was a mortgage given by Harry Tatú and wife to Peter and Anthony Brown on October 15th, 1900, covering about ten acres of land at Belmar, and not part of the lands involved in this action. Subsequently, Tatu and wife conveyed this property to the American Timber Company, .subject to this mortgage, and on January 27th, 1902, the American Timber Company, as part of the collateral for Yard’s indebtedness, conveyed to Charles S. Hinchman, out. of this tract, eight lots, Nos. 2952-2959, both inclusive, subject to the Brown mortgage.

On September 14th, 1901, the Browns assigned this mortgage to C. Eussell Hinchman, the son of Charles S. Hinchman, for the consideration of $1,115. On September 9th, 1901, Charles S. Hinchman sold lots Nos. 2958 and 2959 for $1,200, and on December 5th, 1908, he sold the remaining lots, Nos. 2952 and 295?, for $2,500. Releases of the Brown mortgage were given by C. Russell Hinchman for all these lots for the nominal consideration of one dollar in each case.

The total amount received from the sale of the eight lots by Mr. Hinchman was $3,?00, from which he paid taxes, commission and a recording fee amounting to $232.49, leaving a net balance in Hinchman’s hands of $3,46?.51, and of this sum complainant gives defendants a credit of only $895.21.

Complainant seeks to justify its position by claiming that lots Nos. 2958 and 2959 had evidently been included in the statement of collateral through mistake; that the sale had been made and credit therefor given to Mr. Yard’s account six months before the settlement was reached between Yard and Hinchman. Complainant contends there is no proof to show that the proceeds of this sale were not properly credited as it claims, but the answer is that there islio proof to show that it was, and the burden is upon complainant to show how it credited or disposed of the proceeds of the sale of any of the collateral held by Mr. Hinchman or itself as security for Yard’s debt. The deed for these two lots was executed and acknowledged by Mr. Hinchman on September 19th, 1904, just one month before the date of the collateral statement; and I am unable to find anything in the record to support the claim that the proceeds of the sale had been previously credited on Yard’s indebtedness, or that the collateral statement erroneously included these two lots; and my conclusion is that defendants should be credited with $1,1?0, the net amount realized by Mr. Hinchman from the sale of these lots, with interest.

Complainant further insists it is entitled to charge against the proceeds of the sale of the remaining six lots, Nos. 2952-295?, the amount due on the Brown mortgage.

It appears that C. Eussell Hinchman actually bought and held the Brown mortgage for his father. Tt further appears that for reasons satisfactory to Mr. Hinchman, the son released the lien of this mortgage from the collateral lots as they were sold for a merely nominal consideration of one dollar. Complainant claims Mr, Hinchman was obliged to purchase the Brown mortgage to protect his collateral, and prevent its foreclosure, and it is clear that he did not buy it for the Yai’d account, but apparently held it as an investment and did not charge it against nor connect it with the Yard account until 1912 — eight years after he bought it and four years after the last of the eight lots were sold. At the time of the sale of the lots, Hinchman credited the entire proceeds thereof in his books and did not charge the principal and interest of the mortgage to defendants until December, 1912. It would seem that Mr. Hinchman in releasing the lots for a nominal consideration thought he had ample security in the balance of the Tatu property, for the amount due on the Brown mortgage; and in this he was probably correct. Whether he was or not, defendants are entitled to have either the entire net proceeds of the sale of these eight lots credited on the amount now claimed to be due, or they are entitled to have the Brown mortgage surrendered to them for cancellation. If complainant desires to hold the Brown mortgage as ait investment, which it is entitled to do, because the transaction is entirely independent, of the matters involved in this controversy, then defendants are entitled to be credited, on the amount now claimed to be due, with the net proceeds of the sale of the Belmar lots amounting to $3,467.51, instead of the credit of $895.21.

The defendants’ next objection, that the Gazzarn and Granger notes are usurious, is based on the claim that between October 9th, 1901,' and December 11th, 1901, Mr. Yard had borrowed sums of money from both Gazzarn and Granger; that the amounts he actually borrowed from each of them was $2,400, and that as evidence of his indebtedness he gave each of them four notes for sums aggregating $3,000. Apparently, Yard did not ¡ray either tire principal or interest of the notes when due, and on October 1st, 1904, he gave Gazzarn and Granger the notes in question for $3,500 each, payable in one year; the balance of the interest due on the old notes of $21.26 was paid by Yard to Gazzarn and Granger.

It appeal's from the testimony of Wm. S. Wallace, a member of the Philadelphia bar, and who for years acted as the attorney of Mr. Gazzam, that he is personally familiar with these transactions, and he states that Gazzam and Granger agreed to loan-Yard $4,800; that each of them loaned him $2,400, and that Yard gave each of them his notes for $3,000, the difference between the amounts of the loans and the amount of the notes representing the bonus Yard had agreed to pay them for the accommodation; that in 1904, when Yard ivas pressed for payment, he agreed to give Gazzam and Granger each his note for $3,-521.26, representing the principal of, and the interest due on, the old notes. Later he gave his note, dated October 1st, 1904, to each of them for $3,500, and paid $21.26 to each of them in cash. Wallace is corroborated by a copy of his letter to Gazzam’s nephew, in which he explains the transactions between Yard and Gazzam and Granger in connection with negotiations then pending for the sale of these notes to Mrs. Hinchman. He is further corroborated by the entries on the stubs in Mr. Gazzam’s cheek book, and the proof is convincing that the amount actually owing by Yard to both Gazzam and Granger, including interest, on October 1st, 1904, the date o£ the notes in suit, and which were purchased in the name of Mrs. Hinchman after maturity, was $5,592.28, and not $7,000, as complainant claims.

The pleadings and proofs show that notes were made and. were payable in Pennsylvania under the Pennsylvania act on usury and negotiable instruments. P. L. (Pa.) 1901 p. 208 §§ 52, 58. Only the amount actually loaned on them, with legal interest, can be recovered, and the law of Pennsylvania governs such a situation. Trust Company v. Electric Company, 57 N. J. Eq. 42.

Complainant contends, however, that if the notes are usurious this defence has been waived, and that defendants are estopped from setting up such defence in this action. This contention is based on the fact that in other proceedings instituted by Mrs. Hinchman, in 1911 (and not yet tried), to collect the amount due on these notes, Yard and the American Timber Company appeared and filed pleadings therein, but they did not, in any of these actions, set up the defence of usury against the amount claimed to be due; and in consequence, by their failure so to do, it is claimed that the defendants herein are estopped from doing so. And it is further claimed that it is doubtful if the American Timber Company as a surety can, under P. L. 1902 p. 459; Comp. Stat. p. 5706, which forbids a corporation to set up usury as a defence to an obligation, set up the defence of usury now. All the defendants have pleaded usury in this case — the Ameri-. can Timber Company pleading it especially as surety — which it may do (39 Cyc. 1074), and, if necessary, the pleadings filed in the other actions could, on proper application, be amended to permit the defendants therein to set up such defence. Hill v. Colie, 25 N. J. Eq. 469; Corning v. Ludlum, 28 N. J. Eq. 398. The right of the timber company to raise the defence is not affected by the-act of 1902, as this statute has been held to be limited in its application, not to the ordinary debts of a corporation, but to obligations of a corporation which have been bought in the open market and have gone before the public for investment. Lembeck v. Storage Company, 70 N. J. Eq. 757 (at p. 761); Mazarin v. Building Company, 80 N. J. Law 35. As the proofs show that neither Mrs. Hinchman nor complainant paid the face value of the notes, and as they also show that the transactions with respect to them, between Yard and Gazzam and Granger, were usurious, all that complainant-can be permitted to recover thereon is the amount actually loaned on the notes, with lawful interest.

The last objection, to complainant’s claim questions the necessity for and the legality of the charges made by complainant for repairs to the mortgaged premises.

Defendants claim the repairs were unnecessary; were extravagantly made and were actually improvements, and not repairs : and that they were made for the present and future permanent improvement and development of the property, with the intent on the part of Mr. TIinchman to improve defendants out of their property by making the amount they would be required to pay. in order to redeem, so large that. defendants would be unable to pay it.

About one-half of complainant’s total claim, or $18,986.16, represents the cost of the repairs which complainant claims it was necessary to have made, in order to protect and preserve the mortgaged premises, and that, these repairs were absolutely necessary because of the following circumstances:

About 1882 the federal government completed the construction of a stone crib at the southeasterly end of the mortgaged premises ; this crib extended from the line of the beach into the ocean for a distance of about one hundred feet and extended inland for about two hundred feet; in connection therewith the government also constructed a dike extending inland from the westerly end of the crib for a distance of about one thousand eight hundred feet to Stump Point, the highest and nearest point of firm land on what is called the Island of Sedges. The government’s purpose in building the crib and dike was to establish a permanent channel for the Manasquan river. Prior to the construction of the crib and dike the river had no fixed outlet to the ocean; the action of the elements caused the outlet to shift from time to time towards the north; the sand would be washed and blown away; at times the erosion on the beach would be very pronounced; sometimes the greater part of the beach was washed away by the shifting of the inlet as much as half a mile north of its present location. Before the government improvement was made there was no building of any kind on the beach.

As a result of the construction of the crib and dike, the inlet was retained in its present- location; the beach became wider and ten or more feet higher; the creeks or bodies of water back of the beach became smaller and the marsh land firmer; all erosion ceased; a street was built nearly the entire length of the beach; water mains were laid therein by the municipality; about two hundred bungalows have now been built on the beach, producing an annual rental of about $5,000. And complainant claims that under Mr. Hinchman’s management the rental value of the lands has increased from $10 per lot, in 1911, to $50 a lot now; and that the value of the property has increased from $25,000, in 1912, to $75,000 now.

Under the deed from defendant timber company to Mrs. Hinclnnan. she entered into possession of the property in 1912, and from that time to the present the property has been under the solo charge of Mr. Hinclnnan and complainant. For some time prior to 1912 the dike, which was then about thirty years old, has been getting out of repair; about half of the plank sheathing had broken or rotted away, and some of the piling was gone and some of the stringers were rotten. Some of the stone rip-rap that lay in front of the piling had been allowed to drop down by the water scouring the sand from under it. The government had not, and apparently would not, make any repairs; the crib at the mouth of the inlet adjoining the beach was, and is, in fairly good condition. As a result of the changed condition of the dike the waters of the river got behind it and formed large sized pools or lagoons at times — some of them more than seventy-five feet in width, and washed or scoured some sand away from part of the beach adjoining the crib. Mr. Hinchman did nothing to remedy this condition until the summer of 1914, and then he called on one Howland, a practical bulkhead builder, and after they had inspected the situation and talked tire matter over, and without consulting defendants, he gave Howland an order to repair the dike at a cost of about $11,970, without any plans, specifications or written contract; Mr. Hinchman told Howland’s son, who actually did the work, that the purpose in repairing the dike was to fill in behind the dike with sand level with the plank on the dike. In 1913, Hinchman told the witness Haberle that he intended to fill in on the northwest side of the dike and put a boulevard there parallel with the dike, and while Howland was at work on the dike, Mr. Hinchman told the witness Mount that he was going to improve the river front and put a boulevard in there and lay out some lots and gave Mount an option to purchase one of the lots. Within a few months after Howland had finished his work, the severe storms of the winter practically demolished all of it and left the dike in almost the same condition it was in during the early part of 1914.

In 1915, Hinchman had the dike repaired again and employed Mr. Rogers, an engineer, to advise about the work. Rogers examined the dike in the fall of 1915 and found that in the central portion of it, for a distance of probably one hundred and fifty feet in length, the piling and sheathing had been taken out by the action of the tides, and a contract was given on his specifications to the Logan Construction Company for $6,&82, to rebuild, repair and reinforce about one thousand feet of the dike; and an additional contract was also made for $490 for repairs to the crib. In connection with their talk about repairing the dike, Hinchman gave Eogers the idea that he contemplated HEng in the swamp or meadow land out to the dike, and Eogers, at Hinchmarfis request, prepared maps in January, 1915, showing the meadow lands north of the dike and west of the beach strip laid out in streets and lots, and from what Hinchman told him, Eogers understood that there was a general scheme to deepen the creek and fill in north of the dike by pumping sand from the bars in the river on the northerly side of the dike.

The repairs made to the dike in 1915 are still very largely intact, although some part of the piling has been drawn out of place and is leaning out towards the river, and the scouring of sand and the formation of the pools back of the dike have almost entirely ceased.

Practically all the parties agree that the crib and dike have kept the inlet in a permanent location; most of them agree that it is probably necessary that the crib and the dike, or some substitute for the dike, should be maintained in order to prevent the tide of the river from reaching the beach and from washing away the sand that has formed back of the crib or dike, but they greatly differ as to the methods to be adopted and the expenditures that would be required for such purposes.

Complainant and its witnesses, with the exception of Mr. Oram, who was the engineer of, and superintended the repairs made by, the Logan Construction Company in 1915, all claim that the repairs were necessary and that their cost was reasonable. Mr. Oram states that the work necessary to preserve the property could have been done for about $3,000 by building a spur dam, but he did not inform Mr. Hinchman or Mr. Eogers of this, because there was more profit in it for his company to do the work as Hinchman and Eogers outlined it, and because the spur dam would not answer the purpose Mr. Hinchman told him he had in mind in doing the work, which was to pump in sand from behind the present bulkhead and fill it up; and the work his company did was not to preserve the property, but to fill in with sand and carry out a further development scheme. The engineers of defendants claim that scarcely any repairs were required to be made to the dike for the purpose of protecting the property; they agree with Oram that if protection and not development had been the object in doing the work, then the total cost of the same would not exceed two or three thousand dollars.

It further appears that whatever scheme of improvement or development was contemplated, nothing further had been done to carry it out.

It is admitted that at the time these expenditures were made in 1914 and 1915, Mr. Hinehman knew that he was simply a mortgagee in possession, and that he did not make the repairs or improvements under the mistaken-belief that, he was the absolute owner in fee.

The law applicable to the present situation is well settled and the principle adopted by our courts is, that a mortgagee in possession has the authority and is under the duty to keep the premises in necessary repair, and is entitled to be repaid any disbursements made for the protection or preservation of the property. In Clark & Smith v. Smith et. al., 1 N. J. Eq. 121. (at p. 139), Chancellor Vroom remarked that “the language of the books is ‘necessary repairs/ and this language has been construed strictly.” In Vanderhaise v. Hughes, 13 N. J. Eq. 410, Chancellor Green held that credit should be given the grantee for both necessary repairs and lasting improvements, but this extension of the principle was made, as Mr. Justice Dixon points out in delivering the opinion of the court of errors and appeals in Freichnecht v. Meyer, 39 N. J. Eq. 551 (at p. 562), on the inference that all parties considered the grantee to be the absolute -owner, and that as such he had made the lasting improvement. And in this latter case, where complainant sought the redemption of the mortgaged premises, it was held that when the grantee under the mistaken belief that he was the absolute owner of the property, made permanent improvements thereto, complainant in order to redeem must pay the mortgagee the value of the improvements, applying the maxim that one who seeks equity must do equity. All the authorities that have come to my no-" tice in cases where the mortgagee is the complainant, limit his right to reimbursement to the money expended for necessary repairs añade for the protection or preservation of the property. Where allowance has been granted to a mortgagee as complainant for permanent improvements, it has been based on the fact that such improvements had been made under a mistaken belief of absolute ownership on the part of the mortgagee; or it has been allowed in cases where the mortgagor as complainant sought to redeem and attempt to appropriate the benefit of the mortgagee’s expenditures without compensation.

The principle that must control the present situation is stated in the opinion of the court of errors and appeals in Laible v. Ferry, 32 N. J. Eq. 791 (at p. 801), where it is held that—

“It. is perfectly well settled that where one knowingly makes permanent improvements upon the lands of another, without the consent or fault of the latter, he cannot, as a. complainant in equity', obtain reimbursement for such expenses, even to the value of the benefit conferred upon the landowner.”

The facts in this case bring it within the range of this principle. Complainant when he made his expenditures in 1914 knew that he was not the owner of the premises, but only the mortgagee in possession. Assuming some repairs to the dike were necessary, the danger at the time, of injury to the property and mortgage security was neither imminent nor impending. The expenditures were made without notice to the owners and without their knowledge, and these expenditures were made not merely for repairs but as a part of a scheme to improve and develop the property.

At the time the expenditures were made in 1914, there was not much more than $15,000 due on the mortgage, which was past due and which could have been foreclosed with little delay at any time. The Hinchmans had possession of the property from 1912- but made no repairs thereon until 1914. If the dike was out of repair in 1912, as they claim, then they neglected it for nearly two years. At the time these expenditures were made the property is estimated to have been worth at least $50,000— over three times the amount due on the mortgage; the net annual income from the property was then about $4,000, and Mrs. Ilinehman and complainant were in position to apply it at any time to the reduction of the amount due on the mortgage, and such reduction would have resulted in paving off the greater part of the mortgage debt by the time the expenditures now claimed were made.

The expenditure of over $11,000, in 1914, was wasted, because the work it paid for was either badly designed or improperly executed, or both, as most of it did not last a year; and neither the property nor any of the defendants were in any way benefited thereby. The expenditure of nearly $7,000 on the dike in 1915 may be said to have been of some value to protecting a part of the property, and the work done then, or the greater part of it, is still in a fair condition and is a benefit to the property.

This work of 1915 was done under expert advice and was fairly thought to be necessary, and I believe these or some other repairs were necessary at that time. It is true that the proofs show that some other method of repair could have been adopted, the probable cost of which would not have exceeded $2,000 or $3,000. This proof, however, is largely a matter of speculation and estimate on the part of defendants’ engineers. The other methods of repair suggested by them might or might not have proven as effective as the one Mr. Hinchman’s engineer advised him to adopt, and these other methods of repair might have been built for the estimated amounts, and they might have cost much more. The whole subject is largely based on speculation and estimate of the most general character and is too uncertain to justify me in holding that the cost of the necessary repairs made in 1915 was excessive.

On all the facts I find that Mr. Hinchinan was not justified in making the expenditures for repairs and improvements to the dike which he did in 1914; that he was justified in making the expenditures he did in 1915, in making repairs that were necessary to both the dike and the crib, and while these expenditures for 1915 are considerably in excess of defendants’ estimate of the cost of such repairs, still I am satisfied they were honestly made in the belief that they were necessary to protect the property and were made under expert advice and for the repair work only which Mr. Hinehman’s engineer had designed as necessary for the proper repair of the crib and dike in order to protect the property.

A decree will be advised in accordance with the views herein expressed.


author: Lane, V. C.

text:
    In the matter of William Bowers.
    [Decided April 24th, 1918.]
    1. Where a husband sued for divorce on the ground of desertion, and the wife answered denying the desertion and charging constructive desertion, a letter written to the wife by the husband’s father requesting her to consent to the divorce, making certain promises to her, inasmuch as it might have the effect of fraudulently imposing on the court, is a clear contempt.
    2. Where the father of the husband goes to the wife’s solicitor and threatens to bring political or other pressure to compel the solicitor to withdraw from the case, such act is a clear contempt.
    3. The act of 1917 (P. L. 1911 p. 71) is unconstitutional, in so far as it may be claimed to apply to the court of chancery.
    4. The act (1 Comp. Stat. 1910 p. 442 § 82) does not apply to a contempt committed by attempting to induce a defendant in a divorce action to consent to a divorce, or to threats to the defendant’s solicitor with political injury upon his refusal to withdraw from the case.
    5. A person who attempts to do the things above stated is in contempt, although he was not an attorney and did not know the legal effect of his act; but such ignorance is a mitigating circumstance.
    On proceedings to punish for contempt. On order to show cause.

      Mr. Nelson B. Gaskill, for the order.

      Messrs. King & Vogt, for the respondent.
   Lane, V. C.

This is a proceeding instituted, at the request of the court, to punish respondent, William Bowers, for contempt, in that he did commit acts which tended to obstruct, interrupt, prevent and embarrass the proper administration of justice.

A divorce suit was pending in this court brought by one Edmund H. Bowers, petitioner, against Mabel B. Bowers, defendant. The respondent is the father of the petitioner. The acts alleged to be contemptuous were two in number — first, on or about December 17th, 1917, the respondent called at the office of the solicitor of Mabel B. Bowers and threatened the said solicitor that unless he should cease his opposition to the efforts of the petitioner to obtain a divorce from the defendant, Mabel B. Bowers, or withdraw from the then pending divorce action he, William Bowers, would bring political and other pressure to bear upon the said solicitor to compel him to sever his connection with the case. The divorce action was based upon the ground of desertion. There had been an answer filed denying the desertion and charging constructive desertion. At the time the threat was made the solicitor was a candidate for reappointment as attorney and counsel for the town of Boonton, and the respondent, Bowers, either had, or thought he had, through his acquaintance with those who had, some political influence. Second, on January 11th, 1918, the respondent wrote to the defendant in the divorce action a letter containing the following language:

“I wish now to request you to allow Ed his divorce (on grounds of desertion only) no alimony, no lawyer's fees, and no defence to be put in by you whatever. These present impossible conditions must be changed at once, for good. These two dear children must be cared for properly and immediately. We have Marguerite here, and have arranged for her to start in school Monday a. m. Ed will have Edrew, and with Mrs. Barker’s and our help, he will have the best of care. These arrangements will permit you to live your own life in your own way. There is no reason why Ed cannot take them to N. Y. to stay with you over a Sunday occasionally as you may desire, in the same manner as you allowed them to come here. Finally, I assure you that nothing will be said by any of us concerning the reasons of your living apart. When they are old enough to realize — incompatibility will answer all questions. Kindly reply promptly, and greatly oblige.”

The matter was referred by the chancellor by formal order of reference to me as vice-chancellor. The respondent appeared and was examined. He admitted the writing of the letter; admitted the visit to the office of the solicitor but denied that the conversation was as related by the solicitor. I find against him on the issue of fact.

The law of this state provides that no divorce shall be obtained by collusion; the very jurisdiction of the court depends in part upon there being annexed to the petition an affidavit of non-collusion. The extent to which this court has gone in endeavoring to prevent a divorce being obtained by collusion is well illustrated by the case of Sheehan v. Sheehan, 77 N. J. Eq. 411. The attempt of the respondent to induce the wife to consent to a decree which, as in this case, might have the effect of fraudulently imposing upon the court, is a clear contempt.

The act of the respondent in threatening the solicitor for the defendant in order to compel him to withdraw from the case is a clear contempt. It tends to deprive the court of the services of one of its officers. It was intended also in this case as a step in deceiving the court, to the end that a collusive divorce might be granted. The chancellor (In re Merrill, 88 N. J. Eq. 261; 102 Atl. Rep., at p. 402) said: “It is a contempt of the dignity of the court for one of the litigants before it to denounce and abuse to the judge the lawyers representing the adversary party, because lawyers are officers of the .court.”

The statute (P. L. 1917 p. 71) which provides that no power of any court to punish for contempt shall be construed to extend to any case except the misbehavior of any person in its actual presence, the misbehavior of any officer of court in his official transactions, and the disobedience or resistance by any officer or other person to any lawful writ, process, order, rule, decree or command of the court, is unconstitutional, in so far as it may be claimed to apply to the court of chancery. The chancellor doubted (In re Merrill, 88 N. J. Eq. 261; 102 Atl. Rep., at p. 408) whether it applied to the prerogative court. That it does not apply to chancery is too clear for argument. Flanigan v. Guggenheim Smelting Co., 63 N. J. Law 647; see also, In re Thompson, 85 N. J. Eq. 221, 236.

The act providing for punishment for contempt for disobedience of orders of the court of chancery (1 Comp. Stat. p. 442), does not apply to the class of contempt now under discussion. See Frank v. Herold, 64 N. J. Eq. 371.

The respondent upon the hearing denied any intent to contemn the authority of the court; stated that he did not realize that his acts were contemptuous and apologized to the court. He must at least be held to have known that his act in threatening the solicitor was, whether it constituted a contempt or not, a wrong. He deliberately and without respect to the rights of the parties endeavored to secure that which he desired by every means within his power, legal or illegal. The head-note of Seastream v. New Jersey Exhibition Co., opinion by Vice-Chancellor Pitney, 61 Atl. Rep. 1045, expresses the law, as I understand it, as follows:

“The fact that one accused of contempt in attempting to improperly influence the administration of justice was not an attorney, and was therefore possibly ignorant of the legal effect of his acts, did not excuse him or purge him of the charge of contempt, although it was a mitigating circumstance to be considered in determining the degree of his culpability.”

I have consulted with the chancellor as to the punishment to be inflicted, and, after taking into consideration all of the circumstances of the case, including the disavowal on the part of the respondent to contemn the court and his apology to the court, and the fact that the ease is novel, at least in the sense of publicity and trial, we have concluded that in this instance there will be inflicted only a penalty of $50 and the costs of the prosecution. The extent of the punislmient in this case is not to be considered in anywise as a precedent should a case of similar nature come before the court.

I adjudge the respondent guilty of contempt upon both counts and impose upon him a penalty of $50 and costs of this prosecution. Let him be committed to the common jail of the county of Morris until the penalty and costs are paid.


text:
    Harry G. Runkle et al. v. William E. R. Smith, executor, &c., et al.
    [Decided June 17th, 1918.]
    1. Where an obligation could not be enforced against a principal debtor to the extent of the amount by which it was usurious, it could not be enforced to the same extent against persons collaterally liable.
    2. In a suit by the creditor, the sureties of the principal debtor may set up the defence of usury.
    3. In the determination of this court that part of the debt was usurious, there was included a determination that there was justly due on the claim the sum for which it was valid, and this determination (is res adjudieaia, as to the parties before the court, of any right the creditor may have against the principal debtor’s guarantor.
    Ou motion to oxdex payment.

      Messrs. McCarter & English (Mr. Egner), fox William A. Maxburg.

      Messrs. Lindabury, Depue & Faulks (Mr. Ashmcad), fox the Union and New Haven Trust Company.

      Mr. Frank S. Moore, fox the complainants and Daniel Runkle.

      Messrs. Colby & Whiting, for the Casualty Company of America.
   Lane, V. C.

The Logan Trust Company holds an assignment of the interest of Harry G. Runlde in the residuary estate of William Runkle. There was also assigned by Daniel Runlde and Mary Runkle Heiberg their interests in the income of the trust fund of which the Fidelity Trust Company of Newark is trustee. The Casualty Company of America gave to the Logan Trust Company a bond securing the payment by Harry G. Runkle of the debt, as stated of $73,000, due from him to the Logan Trust Company. As security, the casualty company took from Harry G. Runkle an assignment of his interest in the residuary estate of William Runkle. The papers were .contemporaneously executed and delivered and refer to one transaction. The Logan Trust Company filed a claim upon its assignment executed by Harry G. Runkle of his interest in tire residuary estate of William Runkle, and I have already held that the loan was usurious to the extent of $7,300, and have disallowed the claim of the Logan Trust Company, so far as the residuary estate of William Runkle is concerned, to that extent. It has now filed a cross-petition asking this court to direct payment, out of the income accruing upon the shares of Harry Runkle and Mary Runkle Heiberg in the trust fund, of the amount that this court has refused to direct paid out of the residuary estate. To this cross-petition Daniel Runlde and Mary Runkle Heiberg have filed answers setting up the usurious nature of the transaction. The casualty company filed its claim upon its assignment, and it has been adjudicated, by a prior decree of this court, that there is due to it, upon its assignment of the interest of Harry G. .Runkle in the residuary estate, the sum of approximately $1,100. That decree directed the distribution of the residuary estate upon the basis that there was, and could be, due to the casualty company, upon its assignment, only the sum of $1,100. This sum has been paid. It would appear that the claim of the casualty company upon its assignment has been fully satisfied. It is now suggested, however, orally, that the court ought not to make distribution of the $7,300, the amount of the usury already found to he in the loan of the Logan Trust Company, to the assignee next in order of priority (no order having yet been signed upon the prior opinion of the court), unless the casualty company be in some way protected against liability to suit by the Logan Trust Company upon the bond of guaranty, and it is suggested that, either the court ought to order the $7,300, with its accumulations, to be paid to the casualty company upon its assignment, or that the fund should be retained until the liability of the Casualty Company of America, upon its bond, shall have been determined. It is now stated by counsel for the casualty company that a determination of this contention will be academic because, since it was made, the casualty company has been declared insolvent by a New York court and placed in charge of a liquidating agent, and under the law in New York claims of such a nature as that which the Logan Trust Company would have cannot be enforced. See the cases considered in Allen v. Distilling Company of America, 100 Atl. Rep. 620; 87 N. J. Eq. 531. Exhaustive briefs have been filed on behalf of all parties. I will not consider, unless there be an appeal taken, of which I desire to be notified at once, the cases cited, but will merely express generally the reasons which have induced me to come to the conclusion I have. So far as the Logan Trust Company’s claim against the income accruing to Daniel Runkle and Mary Runkle Heiberg is concerned, the case is now' in such a position that the Logan Trust Company is asking affirmative relief against Daniel Kunkle and Mary Runkle Heiberg. Their liability is collateral to that of the principal debtor, Harry G. Kunkle. Having already found that the obligation cannot be enforced as against Harry G. Runkle to the extent of $7,300, it follows that it cannot be enforced to the same extent against Daniel Runkle and Mary Kunkle Heiberg. It is not denied that the law is such that sureties may set up the defence of usury. The claim of the Logan Trust Company against the interest of Daniel Runkle and Mary Runkle Heiberg will therefore be denied. The casualty company is a guarantor of Harry G. Kunkle, the principal debtor. Its assignment is of the same fund of which the Logan Trust Company holds an assignment. To direct the fund to be paid to the casualty company would be in effect to turn it over to the Logan Trust Company, which this court has already refused to do. To segregate the fund and hold up its distribution until it may be determined whether the Logan Trust Company has a claim against the casualty company is, in the nature of things, impossible. Substantially, the court is administering the affairs of an insolvent estate, although not so in form. If suit should be brought by the Logan Trust Company against the casualty company the defence of usury is available to the casualty company, but aside from this it appears to me that the Logan Trust Company has submitted to the jurisdiction of this court, and there was necessarily included in my finding that it could not recover the $7,300 usury, a determination that there was justly and equitably due upon its claim the sum for which I held it to be a valid claim, and that, all parties being before the court, that determination is res adjudicata upon any right that the trust company may have against the casualty company.

I will, therefore, deny the application of the casualty company for the payment to it, or to withhold distribution until its rights may be determined in some*other forum.


text:
    Hesser G. McBride and Harry H. Richman, as executors of the estate of Edward M. Richman, deceased, v. Mabel Brooks Garland and the Prudential Insurance Company of America.
    [Decided June 18th, 1918.]
    1. That an insured had his life insurance policy made payable to his mistress, upon her promise to continue illicit relations with him, does not entitle the executors of insured’s estate, upon insured’s death, to have the policy reformed to make it payable to them.
    2. Where there is no fund or policy within the jurisdiction of the court, in a suit to reform a life insurance policy to change the beneficiary thereof, the named beneficiary is a necessary party and he cannot be forced into the jurisdiction by publication, as the action is one in personam and not in rein or quasi in rem.

    3. That a necessary party who refuses to appear cannot be brought within the jurisdiction of the court by service of process cannot be raised by motion to strike out the bill, but may be raised by motion to stay the suit until such defendant actually be in.
    On bill. On order to show canse. On motion to strike ont bill.

      Mr. George Edward Quigley, for the complainants.

      Messrs. Wolber & Blake, for the defendant Mabel Brooks Garland.

      Mr. Alfred Hurrell and Mr. James Guest, for the Prudential Insurance Company of America.
   Lane, V. C.

The bill, considered as favorably to complainants as possible, may be said to allege that the Prudential Insurance Company of America, at the request of Edward M. Riehman, deceased, and in consideration of premium paid by him, issued its policy of insurance upon his life, payable to Mabel Brooks Garland, his mistress; that Riehman obtained the policy and had it made payable to Garland upon Garland’s promise that she would continue illicit relations with him; that such illicit relations continued; that the contract between Garland and Riehman was immoral and illegal; that the policy provided that in case of the death of Garland prior to Riehman, the proceeds should be paid to the executors, administrators or' assigns of Riehman. No other provision of the policy is set out. The bill alleges that the proceeds should be paid not to Garland but to the contingent beneficiaries. The bill also prays that the policy be reformed by striking out the provisions making it payable to Garland and inserting a provision making it payable to the executors, administrators or assigns of Riehman.

I have not been favored with a brief of complainants. The defendant Prudential company, moving to strike out, has furnished me with exhaustive briefs. It seems to me that it would be superfluous to consider the numerous cases cited. Hpon what theory complainants insist that the proceeds should be paid to them, as contingent beneficiaries, is not disclosed. It is only in case Garland predeceases Riehman that the latter’s executors, administrators or assigns are given any rights under the policy. The fact that Garland was the mistress of Riehman, and that the policy was made payable to her for this reason, does not equal her death. The attempt of complainants, in reality, is not to reform the policy but to make a contract not thought of by either of the parties to it. It seems to be the idea of complainants that, because Garland induced Richman to have the policy written in her favor by an immoral promise, this court may compel the Prudential company, not a party to the immoral transaction, to make a contract which it never dreamed of making. Whether the Prudential company can resist the claim made by Garland is, so far as the allegations of the bill disclose, no concern whatever of complainants. Their uttermost rights would be to recover, for the estate, the premiums paid by Richman if, in fact, the Prudential company does not pay the amount due on the policy. No case has been brought to my attention that would warrant the court in taking any such action as complainants ask.

As there may be an application to amend the bill, there is another insurmountable difficulty to the granting of any relief that should be mentioned. Defendant Garland is a necessary party. She is a non-resident and has appeared specially objecting to the jurisdiction of the court. Her objection is well founded. The action is one in personam and not in rem or quasi in rem. Cross v. Armstrong (Ohio), 10 N. E. Rep. 160; Gary v. Northwestern Masonic Aid Association (Iowa, 1891), 50 N. E. Rep. 27; Coe v. Garvey (Ill.), 130 Ill. App. 221.

There is no fund within the jurisdiction of this court. The policy is not within the jurisdiction of this court, so that even if Ely v. Hartford Life Insurance Co., 110 S. W. Rep. 265, may be considered as expressing good law, complainants are not aided. The Prudential company could not interplead unless it could acquire jurisdiction over defendant Garland by personal service or appearance. Hills v. Aetna Life Insurance Co. (Circuit Court, Judge Speer, 1916), 39 N. J. L. J. 132; Hinton v. Penn Mutual Life Insurance Co. (N. C.), 35 S. E. Rep. 182; Gary v. Northwestern Masonic Aid Association, supra. Any decree which might be rendered in this court would not bind defendant Garland and she might sue the company in California or any other state. That a double recovery is not a remote possibility is illustrated by a consideration of some of the foregoing cases in which it has actually occurred. It. seems to me that defendant Garland is a necessary party and that this suit cannot proceed without her presence. Reed v. Baker (Mich.), 3 N. W. Rep. 959; Hyams v. Old Dominion Co., 204 Fed. Rep. 681. This being so, it would be useless to permit the bill to be amended unless defendant Garland agrees to appear. Hyams v. Old Dominion Co., supra. The fact that defendant Garland cannot be brought within the jurisdiction of the court cannot, of course, be raised by motion to strike out. It may be raised by motion to stay the suit until the defendant be brought in. Whether it should not be raised by answer in lieu of plea under the sixty-eighth rule with permission to defendant to answer over if the plea be found insufficient or untrue and what, if such a plea be filed and found true and sufficient, the decree should be, are questions not now before me. In any event, it appearing on the return of the order to show cause that defendant Garland has not been served with process within the state and will not appear, the order to show cause would have to be dismissed and the restraint dissolved even if the bill were sufficient.

The motion to strike out will be granted; the order to show cause dismissed and the restraint dissolved. Settle order on two days notice.


text:
    Jennie Lettau, petitioner, v. Emil Lettau, defendant.
    [Decided June 17th, 1918.]
    1. Where a husband, who had willfully and continuedly deserted his wife, came to his wife’s place of business and offered to take her to Europe if she had money to pay the expenses, and she told him she had no money, but would live with him in America, to which he replied that he was “through with her” and “wanted to have nothing more to do with her,” whereupon the wife asked him to sign a paper to that effect, such request did not amount to an acquiescence in the separation on the part of the wife or deprive the desertion of its obstinate quality.

      2. Nor did the fact that the wife, at the time of the original desertion, after the husband had expressed his intent to desert and after he had refused her pleas as well those of her mother, ask him to put his intention in writing, amount to acquiescence, or deprive the desertion of its obstinate quality.
    3. Grover v. Grover, 63 N. J. Eq. 774; Wilson v. Wilson, 66 N. J. Eq. 237, followed.
    On petition for divorce. On exceptions to master’s report.

      Mr. William B. Davidson, for the petitioner, exceptant.
   Lane, V. C.

The learned special master found the desertion continued and willful, but not obstinate. I agree with his finding that the desertion was continued and willful for the required time and I have come to the conclusion that it was also obstinate. The master based his conclusion upon the facts that at the time of the desertion, in March, 1912, after the husband had expressed his deliberate intent to leave his wife forever, and after he had refused her pleas and those of her mother to remain with her, the wife asked him to put his intention in writing, and that in 1914 when the husband came to the place of business of the wife and told her that, if she had the money to pay the expenses, he would take her to Europe, and upon her statement that she had no money but that she would live with him in America he had then said that he was through with her and wanted to. have nothing more to do with her, she again asked him to put tire statement in writing so that they might live separate. The master distinguishes Grover v. Grover, 63 N. J. Eq. (at p. 774), and Wilson v. Wilson, 66 N. J. Eq. 237, upon the ground that in this case the attitude of mind of the wife was communicated to the husband. Vice-Chancellor Stevenson, in Wilson v. Wilson, laid stress not so much upon the mere communication of the attitude of the wife to the husband as the effect upon the husband”s mind. In the case at bar, the husband, as the master found, was a shiftless individual, he never supported his wife properly; in 1910 he abused her physically; she left him but returned after a short absence and lived with him until March, 1912, when he deliberately went. The wife had been advised by a lawyer in 1910 when she was contemplating a suit for separation and maintenance that it was advisable for her to have the consent of her husband, and it was undoubtedly with this advice in mind that, failing in her efforts to induce her husband to remain, she asked him to sign the paper which would express his intention to leave, and, unquestionably, this same idea was in her mind in 1914. In both instances the request to sign the paper came after an absolute refusal on the part of the husband to live with her. She in reality asked no more than that he put in writing what he had expressed orally. I cannot see that what the wife did amounted to an acquiescence in the separation of that it had any effect whatever upon the mind of the husband.

Exceptions will be sustained and a decre nisi advised.

This case has been slumbering for an unreasonable space of time. I wish counsel would present decree at once.


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    International Signal Company v. Marconi Wireless Telegraph Company of America.
    [Decided July 8th, 1918.]
    1. The word “sell” in a contract settling infringement suits — Held, to include a contract to sell.
    2. In construing a contract the cardinal rule is to ascertain the intention of the parties.
    3. If more than one construction is possible, surrounding circumstances may be considered.
    4. If the intention is doubtful or obscure, the most fair and reasonable construction, imposing the least hardship on either of the contracting parties, should be adopted.
    5. Where possible invalidity of patents is a recognized factor leading to a contract for the payment of royalties, there is no failure of consideration because the patents are afterwards held invalid.

      6. A contract settling litigation over patents, and whereby a party acquired the right to use over one hundred patents, and was bound to pay a flat royalty on each set of apparatus sold, without any apportionment of such royalties, is not so separable as to permit a finding of failure of consideration as to two patents afterwards held invalid.
    7. A suit for infringement, wherein a patent was declared invalid, was not a “proceeding in rem,” and does not prevent the same, or a different plaintiff suing another defendant and establishing the validity of the patent on the same or different evidence.
    S. In a suit for royalties, the patents cannot be held invalid because of a judgment against their validity in another suit between different parties.
    On bill, &e.

      Messrs. Lindabury, Depue & Faulks (Mr. Ashmead and Mr. Stryker), for the complainant.

      Messrs. Griggs & Hording (Mr. Griggs and Mr. Harding), for the defendant.
   Lane, V. C.

The first question to be determined is whether the word “sell,” used in the eighth paragraph of the agreement under consideration, is used in its strict legal sense so that a transaction to come within it must have been accompanied with delivery or passing of title, or whether it is used in a sense which would include a contract to sell. That it may be used in either sense is settled. The cardinal rule to be applied in construing a contract is to ascertain the intention of the parties. If more than one construction of the language used is possible, the circumstances surrounding the transaction may be considered as well as the written document. If the intention is doubtful or obscure, a construction should be adoptéd which is most fair and reasonable and which will impose the least hardship rqpon either of the contracting parties. Citation of authority would be superfluous. At the time of the execution of the contract, on October 15th, 1914, complainant and the defendant’s predecessor claimed each to be the owners of numerous valid patents of apparatuses and processes employed in -wireless telegraphy; each claimed that certain of the patents of one infringed those of the other; that certain of the patents were invalid. There had been considerable litigation with respect to the contentions of the respective parties. The public were injured; the licensees of one were subjected to infringement suits by the other. The chaotic condition in which the situation stood is illustrated by the fact that the circuit court of appeals for the third circuit had declared valid, in an infringement suit, two of complainant’s patents (Marconi Telefunken Wireless Tel. Co., 208 Fed. Rep. 679), and that the same two patents in another suit, since the making of the contract, have been declared invalid by the circuit court of appeals for the second circuit. Kinter v. Atlantic Communication Co., 240 Fed. Rep. 716.

On October 15th, 1914, a contract was entered into in which there is a recital of the then pending litigations, and the following statements:

“Whereas, it is desired, in the interests of the public, that said conflicting claims of each of the parties hereto against the other should be adjusted, and the right of each party to manufacture, sell, use and lease to others to be used, the patented apparatus, so that users of wireless telegraph and wireless telephone apparatus may obtain the most efficient apparatus and will not be subjected to claims under the patents of one party by reason of the purchase, lease or use of such apparatus from the other party; and
“Whereas, the parties to this agreement are mutually desirous of settling and adjusting the controversy regarding the aforesaid patent rights which they respectively own, and of compromising the claims of the parties hereto against each other for past damages or profits arising out of any infringement of said letters patent of one/party by the other, and of acquiring a license to transact its business under one or all of said patents owned by the other, as well as of protecting their said respective patent rights or the monopoly thereof.'’

The right is given to each party to make, sell, or cause to be sold, lease or cause to be leased, use or cause to be used, wireless telegraph and wireless telephone apparatus embodying the inventions of each and all of the patents enumerated and set forth in schedules annexed to the agreement. By the eighth paragraph there is to be paid by each party to the other twenty per cent, of the gross selling price of each set of wireless telegraph or wireless telephone apparatus which it may, under the terms of the contract, sell, including sales to the United States government. By the fourteenth paragraph it is provided that settlements should be made at certain stated times, and that the license fees and royalties should be paid on such sets as the parties had sold, leased or otherwise disposed of under the agreement during the preceding three months, and for which it had received payment from its lessees, vendees or licensees. By the nineteenth paragraph it is provided that the term of the agreement should extend until the 13th day of April, 1926, unless previously ean'celed or terminated in accordance with the provisions thereof, that either ¡oarty might terminate or cancel the agreement at any' time after the 15th day of October, 1918, by written notice, which cancellation or termination should become effective one year after the giving of the notice. The Marconi company might at any time after October 15th, 1915, and prior to October 15th, 1918, terminate or cancel the contract by giving written notice, which cancellation or termination should become effective ninety days after giving of notice.

On March 1st, 1917, pursuant to paragraph 19, the Marconi company gave notice of cancellation or termination. The question is whether it must account for sets contracted to be sold, but not delivered, within the ninety days succeeding March 1st, 1917, and the determination of that question, as I have indicated, depends upon the meaning of the word “sell,” used in the eighth paragraph. If the construction sought to be put upon the word by the defendant be adopted, it follows that, had the agreement run its natural course until April 13th, 1926, the parties would not be obliged to account for any sets contracted to be sold prior to April 13th, but not delivered until afterwards.

If the construction insisted upon by the defendant be put upon the language used in the contract, the defendant, and all users of any sets of apparatus contracted to be sold during the term of the contract, but not delivered until after its termination, would be exposed to suits for infringement.

If the complainant had, during the term of the agreement, entered into a contract of sale for an apparatus which would infringe the patents of the defendant, were it not for the agreement., and for some reason or other delivery was not to be made for four months, and within ten days after the contract was made the defendant gave a notice of cancellation, the complainant or its customer would be subject to suit for infringement. I cannot conceive that such a result was contemplated by the parties.

In view of the avowed purpose of the agreement to terminate litigation and to protect the public, I think that such a construction ought not to be adopted unless it clearly appears from the instrument that the parties used the word “sell” in its narrow legal sense. That it was so used defendant insists is indicated by the fact that, in the sixteenth paragraph, in providing for releases by the respective parties from claims for damages for alleged past infringements, the draftsman provided that the parties might continue the use of the apparatus which had at the date of the agreement, “been delivered, or contracted to be delivered, to such vendees, lessees or customers.” It is said that the distinction recognized between delivery and contract of delivery indicates that the draftsman must have had in mind the distinction between a sale and a contract of sale. In the sixteenth paragraph, however, the parties were dealing with an entirely different subject-matter. They had in mind the physical situation of the apparatus. Having used the word “deliver,” it immediately occurred that, to cover articles sold and not yet delivered, it was necessary to include the phrase “contracted to be delivered.” They could not use the word “sell,” which might have included either, for they were dealing with lessees; and they had in mind also that apparatus may have been parted with other than by sale or lease, for they included not only “vendees and lessees,” but also “customers.” I can find no assistance from the sixteenth clause in construing the eighth.

By the twenty-eighth paragraph a special provision is made for the continuance of the payment of royalties or license fees upon apparatus leased prior to cancellation and termination, and it is argued that, because it was assumed necessary to include this specific clause, in order to continue liability as to leases made prior to the cancellation, it must be considered that the absence of such a clause, with respect to apparatus contracted to be sold, indicates that the parties did not intend a continuance of liability as to that. But here, again, the parties were dealing with a different subject-matter, and I can find nothing in this paragraph which assists me in defining what the parties meant by the word “sell.”

By the fourteenth paragraph payment is to be made at certain intervals for apparatus for which the parties had received payments from its lessees, vendees or licensees, and it is intimated that the effect of this paragraph is that no royalty is to be paid except upon apparatus not only sold and delivered, but also paid for during the term of the agreement. Such a construction ought not to be put upon the contract unless no other construction is possible.

I think that the purpose of the thirteenth paragraph was merely to arrange a convenient method of settlement. Singer Sewing Machine Co. v. Brewer, 93 S. W. Rep. 755.

I find nothing in the written contract which requires me to hold that the word “sell” was used in the eighth paragraph in its technical sense. In common usage the word “sell” does not convey the idea, that delivery has been made or title passed. It is used indiscriminately to convey the idea of a technical sale and a contract to sell. In business usage an article is said to be sold when an agreement has been made that it should be taken; and this, notwithstanding the fact that it may not at the time have been manufactured and that when offered for delivery may be rejected for non-compliance with specifications.

To hold that the word “sell” was used by the parties in its ordinary sense would, I think, lead to a result by which the manifest intentions of the parties would be accomplished, and which would be most fair and reasonable. Fot only would the parties but the public as well be most adequately protected. It is conceded that at best the meaning of the contract is doubtful. Purchasers of apparatus during the period of ninety days would be uncertain, whether they could be sued for infringement or not. Those who had been advised that they might purchase without being subject to suits would find, if the construction sought by the defendant to be put upon the contract be adopted, themselves open to attack. After the expiration of the ninety days, or the termination of the contract, whoever dealt with the parties would do so with their eyes open.

It is next insisted for the defendant that because the two patents of the complainant, the only ones which the defendant say's it is using, have been held invalid by the United States circuit court of appeals for the second circuit, there has been a complete failure of consideration, and they base their insistence upon a line of cases which hold that where a contract: is entered into for the payment of royalties based upon the assumed validity of a patent, and the patent is afterwards declared invalid, there is no further liability under the contract. But in the case at bar, that the patents might be invalid, was a recognized factor which led to the making of the contract. The case is somewhat analogous to Strong v. Carver Cotton Gin Co. (Supreme Court of Massachusetts), 83 N. E. Rep. 328.

Nor do I think that the contract is so separable as to permit a finding that there was a total failure of consideration, so far as these two patents were concerned. The defendant acquired the right to use over a hundred patents. No attempt was made to apportion the royalties. Defendant was obliged to pay a fiat royalty upon each set of apparatus sold. The consideration of the contract was not merely the right to use patents but the settlement of disputes which had led to vexatious litigation.

No evidence of the invalidity of the patent was offered other than the record of the United States circuit court of appeals in the case of Kintner v. Atlantic Communication Co., 240 Fed. Rep. 716. But that proceeding was not a proceeding in rem, and it does not prevent the same or a different plaintiff from prosecuting a suit against another defendant and establishing the validity of the patent upon the same or different evidence. The fact that the complainant here was a party to the New York litigation is without significance.

I have examined the cases cited by defendant and fine none which lead me to conclude that this court would be justified in holding that for the purposes of this suit the two patents were invalid merely because of the judgment in the Kintner Case. See Pope Manufacturing Co. v. Owsley, 27 Fed. Rep. 100; Consolidated Roller Mill Co. v. Geo. T. Smith Middlings Purifying Co., 40 Fed. Rep. 305.

I will advise a decree that the defendant is bound to account for apparatus sold, although not delivered within the ninety-day period.