author: Swayze, J.

text:
    Harriet McCloskey, substituted administratrix, respondent, v. Jonas J. Thorpe, administrator, et al., appellants.
    [Argued March 11th, 1908.
    Decided June 15th, 1908.]
    A testator, by his will, provided as follows: “Third. I own one third of the saw mill, under the firm of S. L. Shimer & Co., it is my will and I do order the one third sold, within one year after my decease to the best advantage, and the money paid over to my wife Charity for her use, and I also will her all my Personal Property, that I am possessed of, and' if there should he anything left, after her death, then I want that divided also with the money from the House and Lot.”. — Held, that the widow took an absolute estate in the proceeds of sale and in the personal property.
    On appeal from a decree of the court of chancery advised by Nice-Chancellor Bergen, whose opinion is reported in 73 N. J. Eq. (3 Buch.) 200.

      Mr. Osiris D. McOonnell, for the complainant, respondent.

      Messrs. Smith & Brady, for the defendants, appellants.
   The opinion of the court was delivered by

Swayze, J.

John Books died in October, 1870. By his will, after directing that his debts and funeral expenses be paid, he provided as follows :

“Second. I give and bequeath unto wife Charity the House and Lot of Land with .its Out-Buildings in which I now live, as long as she lives, for her own benefit, and after her death to be sold and divide the money between Harriet Eicke, and John Zellers, (both children that I have raised,) when they come of age, Harriet two thirds and John one.
“Third. I own one third of the saw mill, under the firm of S. L. Shimer & Co., it is my will and I do order the one third sold, within one year after my decease to the best advantage, and the money paid over to my wife Charity for her use, and I also will her all my Personal Property, that I am possessed of, and if there should he anything left, after her death, then I want that divided also with the money from the House and Lot Provided, however, if either Harriet Iflicke or John Zellers should die before my wife, both die, Then I will that the money so left to them shall be given to the Trustees of Grace Lutheran Church of Phillipsburg to be appropriated for its benefit. I want S. L. Shimer with my wife to sell the saw mill property and make a deed for the same or his executor. I will and order that my sister Fannie Mundy have Four Hundred Dollars, Taken off of the two Harriet & John’s shares after my wife death and in case the boy, John Zellers dont turn out to he a sober honest upright man he can have no legacy in this will. Dated October first eighteen hundred and seventy.”

His widow, Charity, took out letters of administration with the will annexed, and with S. L. Shimer sold Rooks’s one-third interest 'in the saw-mill. Charity took possession of the testator’s personal property and received the proceeds of sale of his interest in the saw-mill, amounting in all to $5,000. She died intestate in 1904 and Jonas J. Thorpe, one of the defendants, was appointed administrator of her estate. Her personal property was appraised at a little less than $3,000, all of \vhich had been derived from the estate of her husband. This property is claimed by the complainant as property of the estate of John Rooks. The vice-chancellor so'held, and decreed that the complainant was entitled to an accounting. The question at issue is whether Charity took an absolute estate or only a life estate in the proceeds of the saw-mill and the personal property.

The principle underlying the case is thus stated by Chancellor Green in Annin’s Executors v. Van Doren’s Administrator, 14 N. J. Eq. (1 McCart.) 135 (at p. 146) : “The cases rest upon the principle that if the testator, either expressly or by implication, manifests an intent to vest ini the first legatee the uncontrolled power of disposing of the property, such power involves the idea' of absolute ownership, and the limitation over is void, as inconsistent with the rights of the first legatee. The uncontrolled.power of expenditure necessarily implies-absolute ownership as fully as the power of disposing of it. And this difficulty can only be overcome by limiting the right of expendíture to so much as may be necessary for the support of the legatee.” In that case he found no such limitation in the will which contained a bequest over of such part as remained unexpended.

In Downey v. Borden, 36 N. J. Law (7 Vr.) 460, where there was an express power of disposition of one-third of the estate, the first taker was held to have' a fee.

A similar result was reached by Chancellor McGill in Rodenfels v. Schumann, 45 N. J. Eq. (18 Stew.) 383, although Chancellor Runyon held differently upon the same will, and by this court in Tuerk v. Schueler, 71 N. J. Law (42 Vr.) 331.

In Wilson v. Wilson, 46 N. J. Eq. (1 Dick.) 321, the bequest over was of the remainder of the estate “whatever it may be at the decease of my said daughter.” Chancellor McGill held that these words did not necessarily imply a power of disposition or absolute dominion, because the testator in bequeathing over “whatever it may be at the decease of my said daughter” may have had in mind not the fact that the daughter might expend the bequest, but rather changes wrought by investment, for he said it is as likely that the 'testator contemplated a change in the character or nature of the residue as he did a change in the amount, and if he contemplated a change in amount it might have been by increáse as well as by decrease, or if by decrease, such decrease as might possibly be brought about by accident.

The eases were reviewed by Vice-Chancellor Pitney with his usual thoroughness and acumen in Tooker v. Tooker, 71 N. J. Eq. (1 Buch.) 513.

An examination of these cases demonstrates that if the language of.the will is such as necessarily to imply an- absolute power of disposition, the estate is absolute in the first taker, and such power of disposition is to be implied from an untrammeled power to expend the legacy.

In the present case the testator by clause 3 of the will directed absolutely á sale of the real estate, and then directed that the money be paid over to his widow for her use, and followed this by an absolute gift of the personal property. The language used in this blended gift of proceeds of sale of realty and of personalty was the language of an absolute gift. If this absolute estate is to be restricted to a life estate, such restriction should be apparent in the rest of the will. An examination of the will shows that the testator did not contemplate that anything would necessarily be left. Iiis language is not as in some of the cases cited “what remains/’ but “if there should be anything left.” The conditional form indicates that nothing might be left. By the second clause he was careful to give the widow a life estate only in the dwelling-house. He had in mind, therefore, the difference between a-life estate and a fee; that he had the distinction in mind when the third clause was drafted must be inferred from the direction that if there should be anything left after her death it was to be divided with the money from the house and lot.

The mill was to be sold not by the widow alone but by the widow and Shinier. If he had intended that his wife should have only the income of the proceeds, the natural thing would have been to leave the money in Shimer’s hands with directions to invest and pay over the income. Instead of doing so, he directs that the money be paid over to his wife for her use. The last words are significant. If they are meant in the technical legal sense of “use,” the gift amounts to a gift of the property itself. If they are meant in the popular sense of the words, they may quite as readily be held to mean that she might use it up as that she should have only the usufruct; -the former meaning is indicated clearly when he immediately thereafter intimates the doubt whether anything would be left.

The learned vice-chancellor thought that the words “if there should be anything left after her death,” were used as applicable to,the personal property which consisted in great part of consumable goods. There is some force in this view, but the conclusion to which it leads is adverse to the respondent. If the words apply only to the personal property with which they are in immediate collocation, there is nothing to indicate an intention on the part of the testator to limit the absolute estate in the proceeds of sale of the mill property which arises out of the previous language of the will.

We are satisfied that the testator intended that his wife should expend the proceeds of sale if she wished. To do this she must have an absolute power of disposition, and the case is within the principle relied on by Chancellor Green in Annin’s Executor v. Van Doren’s Administrator.

The decree is reversed, with costs.

For affirmance — Reed—1.

For reversal — Ti-ie Chancellor, Chiee-Justioe, Garrison, Swayze, Trenohard, Parker, Yoorhees, Minturn, Bogert, Yredenburgh, Yroom, Green, Gray, Dill — 14.


source: Caselaw Access Project

author: Reed, J.

license: Public Domain

text:
    Emma Krauss, complainant and respondent, v. Gustav A. Krauss, defendant and appellant.
    [Submitted March 24th, 1908.
    Decided June 15th, 1908.]
    Where one has applied for and secured an order from the court of chancery purging him of contempt and discharging him from an attachment, said order being made upon certain conditions to be performed by the party discharged, such party cannot, after accepting the benefit of the order, attack by appeal one or more of the conditions imposed.
    This is an appeal from an order of the court of chancery by .which the appellant, Gustav A. Krauss, upon certain terms and conditions, was relieved and purged of his contempt and discharged from imprisonment under an attachment theretofore issued against him for disobeying a decree of the court of chancery, which ordered him to pay alimony to his wife.

      Messrs. Hudspeth & Carey and Mr. Gilbert Collins, for the appellant.

      Mr. James C. Gordon, for the respondent.
   The opinion of the court was delivered by

Reed, J.

The situation when the order appealed from was- made was as follows: The wife of the appellant had filed a bill in the court of chancery to compel her jiusband to pay her alimony. In the suit so begun, a decree was made that Krauss should pay the costs of the suit, a counsel fee to his wife’s solicitor and should pay his wife $100 per month. Krauss paid nothing, but left this state, wandering through the south and southwest, until he reached South Dakota, where he brought a suit to divorce his wife and obtained a decree therein. lie then married another woman and took up his residence in the city of New York. He was indicted in Hudson county for malpractice, while previously practicing there as a physician. He was extradited, and while imprisoned in the Hudson county jail a civil action was brought against him for the same malpractice. This action was begun by a writ of capias ad respondendum. While still in jail an alias writ of attachment was issued out of the court of chancery, based upon his disobedience of the order to pay costs, counsel fee and alimony.

He was acquitted upon the trial of the indictment, and secured a nonsuit upon the trial of the civil action, but he was still held under the attachment issued for his contempt of the chancery decree.

He applied to the court of chancery for his discharge, and his application was denied. Later he again applied for his discharge, and upon this application the order under review was made.

The court first adjudged the defendant to be in contempt for his failure to pay the alimony awarded to the complainant in the case. It then ordered that the defendant appellant should be relieved and purged of his contempt and be discharged from further imprisonment upon several conditions: <

First, that he pay $500 on account of costs incurred, and the counsel fee allowed in the decree in the original cause.

Second, that he pay the costs in the contempt proceedings.

Third, that he make his promissory note to one Ackerman, trustee for Emma Krauss, the complainant, for all the alimony owing up to the date of the order, and the remainder of the costs.

Fourth, that he should execute an agreement that he would not use the decree of divorce alleged to have been procured by him in South Dakota as a defense or bar to any claim, demand or proceeding thereafter taken by Emma Krauss or in her behalf, to make secure or collect the alimony due or thereafter to accrue to her under the final decree providing for the payment of such alimony, or in any civil suit brought by her or in her behalf founded on the original marriage relations between the complainant and the defendant, and further, that Gustav Krauss should- join with her in the execution of deeds or mortgages upon her separate property. Further, that Gustav Krauss should keep books of accounts of his receipts and expenditures, and certify a transcript thereof upon the complainant every six months.

The appellant paid the $500 and the taxed costs in the contempt proceedings. He also gave his promissory note for the amount of alimony due, and for the payment of costs. He also executed an agreement in conformity with the conditions imposed. Upon the performance of all these conditions, he was, under the order, entitled to and obtained his discharge.

Thereafter he filed his petition of appeal from the order of the court of chancery granting his discharge upon the conditions named. In his petition of appeal he complains of each of the conditions imposed upon him.

The right of the court in the instance of one who has contemned its decree to order him to perform certain acts deemed requisite to annul his contemptuous conduct, and essential to procuring the operation of the decree, as a condition upon which the contemner shall purchase his relief from contempt and discharge from punishment, seems to be entirely clear. 9 Cyc. 61; 10 Cent. Dig. Con. § 283; In re Davies, 21 Q. B. D. 236; Roberts v. Donovan, 16 Ont. Pr. 456; Thornton v. Davis, 4 Cranch C. C. 500; In re Steinert, 29 Hun 301; Newton v. Askew, 6 Hare 319-325; Scully v. Skehane, Sau. & Sc. 710.

The principal attack upon the conditions imposed is leveled at the one which required the execution of an agreement that the appellant would not use the Dakota divorce decree as a bar to any claim for alimony. The effect of this condition, it is argued, is practically to annul the force of the foreign decree, and that this cannot be done upon a summary proceeding and without the orderly processes of a regular suit of equity.

Before passing upon the propriety of this condition, however, the prefatory question confronts us. This question is whether it is now permissible to the appellant to challenge the validity of that condition upon appeal. It is settled by a line of cases that the court of chancery possesses the ability to annul a foreign decree of divorce if fraudulently obtained. Doughty v. Doughty, 28 N. J. Eq. (1 Stew.) 581; Magowan v. Magowan, 57 N. J. Eq. (12 Dick.) 322; Streitwolf v. Streitwolf, 58 N. J. Eq. (13 Dick.) 563.

That the pretended Dakota divorce was obtained by imposition upon tbe foreign tribunal respecting the domicile of the appellant is transparent from the testimony taken in this cause. The only ground for complaint by the appellant is that he was not offered the privilege of answering and contesting in a regular suit, the charge of fraud in obtaining the Dakota decree.

It is to be observed, however, that the order of the court of chancery itself had 'not the slightest annulling influence upon the Dakota decree. The order did” not even strip the appellant of the power to use the decree in the modified form prescribed in the conditions. Whether it would have this effect depended entirely upon tbe volition of the appellant. He had the right to refuse to accept the purgation of his contempt and his discharge from the attachment upon the conditions imposed. The conditions only became forceful by his acceptance of the same, and by the execution of the required agreement. By his acceptance he waived pro tanto his right to a regular trial of the validity of the decree, and by this waiver secured his discharge from the restraint of the attachment.

The query now is whether after having secured by acceptance the benefit of the order by which he was set at liberty, and having returned, presumably, to his New York domicile, he can retain that benefit and at the same time challenge the validity of the condition upon which he obtained it.

It is a settled rule that where a party recovers a judgment or decree and accepts the benefits thereof voluntarily and knowing the facts, he is estopped to afterwards reverse the judgment or decree on error. The acceptance operates as and may be pleaded as a release of error. 2 Cycl. Pl. & Pr. 174, 175; 2 Cyc. 651; Ell. App. Pro. § 162.

The language of the text in these books of authority is sustained by a great array of cases. From this rule springs the difference between the position of a party who pays a judgment against him and a party who accepts the payment of a sum awarded to him by the judgment. The former has his right of appeal because he receives no benefit from the judgment, while he who accepts the fruits of the judgment is estopped from appealing. Ell. App. Pro. § 152.

From this rule, that when he accepts the benefit awarded to him by the judgment or decree, flows the corollary that where the award of a benefit is .coupled with the imposition of conditions to be performed by the person benefited, and he accepts the benefits, he is precluded from afterward challenging the validity of the conditions by an appeal.

The rule is stated in the text of 2 Cyc. 645 in this language:

“If a trial court imposes terms as a condition upon which a continuance or amendment will be allowed, or upon which an order will be granted, or other thing- will be done or not done, and the party upon which the terms are imposed accepts them, he will be deemed to have acquiesced in the ruling and he cannot afterward question its validity in the appellate courts.”

A party cannot avail himself of that portion of the decree which is favorable to him and secure its fruits while prosecuting an appeal to reverse such portion as mitigates against him. Moore v. Williams, 29 Ill. App. 597.

In Mahone v. Williams, 39 Ala. 202, the plaintiff was permitted to amend a pleading upon a certain condition, and the plaintiff proceeded to accept the conditions and amend. Upon appeal the appellate court refused to consider that part of the judicial order imposing the conditions.

In Tupper, Administrator, v. Kilduff, 26 Mich. 394, after one trial of the cause, the defendant asked permission to amend his plea and add an additional affidavit. This was granted upon condition that the defendant should stipulate that the amendment should have no other effect than to prevent the recovery of interest between two dates, unless the jury should find that the defendant had notice of certain forgeries, &c. The defendant entered into the stipulation and made his amendment and filed his affidavit. It was held that the administrator of the defendant — he having died — would not be heard on error to complain of the terms imposed in granting the order permitting the amendment and the filing of the affidavit.

In Flanders v. Town of Merrimac, 44 Wis. 621, an order to change a venue was granted upon condition that the plaintiff who asked for the order should pay certain costs. He paid the' costs, took the benefit of the order changing the place for trial. He then took an appeal from >so much of the order as required him to pay the costs. The appellate court observed that “if it were necessary in the decision of the appeal, they would be inclined to hold that, the appellant was entitled to his order without the payment of the costs, but in the view the court took of the case it was unnecessary to decide that question. It was held unnecessary to decide it because the appellant was precluded from questioning the validity of the condition's imposed. To permit him to do so, the court said, would be contrary to the maxim qui sentit commodum sentiré debet et onus. The appellant having accepted at the hands of the court the order applied for by him, he must take it with the burden imposed. If not satisfied with the burden, he should refuse the benefits.”

The appellant in this case, having accepted the benefit of t|re order purging him of contempt and discharging him from the attachment, cannot attack the conditions imposed by an appeal to this court.

The appeal must be dismissed.

For dismissal — The Chancellor, Chibe-Justice, Garrison, . Reed, Trenchard, Bergen, Yoorhees, Minturn, Bogert, Yre-DENBURGH, GREEN, GRAY, DlLL — 13.

For reversal — Swayze, Parker, Yroom — 3.


text:
    George P. Butler, complainant, v. Commonwealth Tobacco Company, defendant.
    [Argued March 10th, 1908.
    Decided June 15th, 1908.]
    In the case of State Bank v. Receivers of the Bank of New Brunswick, S N. J. Bq. (2 Or. Oh.) B66, decided in 1835, it was held that the “Act to prevent frauds by incorporated companies” was essential!, a bankrupt act; and it was further held that a creditor holding collateral security of an insolvent corporation must apply his securities to the payment of his debt and prove only for the balance. The essential bankrupt features of this act and its re-enacted provisions have since been repeatedly recognized by our court of chancery, and once by our supreme court. The practice in distributing the assets of an insolvent corporation under this act has been in conformity with the rule in bankruptcy, including the rule respecting the rights of creditors holding collaterals of the insolvent corporation. — Held, that the rule thus adopted seems quite as, if not more, equitable than the rule which permits a creditor to prove for his whole debt and retain his collaterals; but without considering and deciding upon the relative merits of the two systems — Held, that because this rule in bankruptcy has prevailed, with judicial recognition, for over seventy years, it should be retained.

      Mr. Otto T. Hess and Mr. Robert H. McCarter, for Jerome Taylor, receiver of the Commonwealth Tobacco Company, appellant.

      Mr. Maximilian T. Rosenberg and Royall Victor, for the Consolidated National Bank, appellee.
   The opinion of the court was delivered by

Reed, J.

The Commonwealth Tobacco Company was decreed to be insolvent and a receiver appointed by the epurt of chancery on October 17th, 1904. Among the claims presented to the receiver was that of the Consolidated National Bank of New York. This bank claimed for the full amount of its indebtedness, amounting to $54,440, as such indebtedness appeared at the date of the insolvency of the tobacco company.

It appeared in the case that the bank held as collateral security for the payment of this debt, warehouse receipts for tobacco in storage. Those receipts were pledged to the bank by the debtor, the tobacco company.

The learned vice-chancellor held that in view of the rule no. the federal courts, and in view of the weight of authority in the state courts, and for the purpose of establishing, as he thought, a harmonious doctrine in the administration of the assets of an insolvent in the state and federal courts; that a rule should be adopted which permitted the creditor to prove for his entire debt as it existed when insolvency was declared, and that the creditor should receive dividends thereon without regard to the amount of collaterals held by him to secure such debt.

The doctrine thus adopted was styled in the opinion, and in the arguments of counsel, the equity rule, as distinguishing it from the opposite rule, which was styled the bankruptcy rule.

It may be conceded that in instances other than strict bankruptcy proceedings, the equity rule for the administration of the assets of an insolvent is supported by the weight of authority in the state courts. It may also be conceded that the same rule has received the recognition of the federal supreme court in the case of Merrill v. National Bank of Jacksonville, 173 U. S. 131.

This case holds that the bankruptcy doctrine^ which requires the holder of collateral securities to exhaust them and credit the proceeds upon his claim, or else requires him to surrender them before he can prove for his entire claim, is not in terms recognized by the United States statute respecting insolvent national banks, nor in the provision in that statute for a ratable dividend on the. claims proved and adjusted. A majority of the court — a majority of one — concluded that the language of the National Banking act did not require the application of the rule in bankruptcy proceedings and adopted the opposite rule as the more equitable.

The comparative merits of the two rules, and the trend of authorities, are exhaustively discussed in the opinion of Mr. Chief-Justice Fuller, writing for the majority, and in the opinions of Mr. Justice White and Mr. Justice Gray, writing for the minority. A careful perusal of these opinions leaves upon the mind the impression that the argument is with the four dissenting judges, and the impression that equality in the distribution is better preserved by the bankruptcy rule than by the so-called chancery method.

One illustration of Mr. Justice White forcibly presents a result which may spring from the application of the chancery rule: “A loans to a bank $5,000 without taking security; B loans to the bank the same amount without taking security; B makes a further loan of $5,000 and takes $5,000 worth, of collaterals as security. The bank becomes insolvent and pays fifty per cent, dividend. A gets $2,500 for his $5,000, while B gets $5,000 in dividends upon the $10,000 and $5,000 from his collaterals. B gets his whole debt, although like A he had no security for $5,000 of it.”

But whatever may be thought of the comparative merits of the two doctrines, it is quite clear that it cannot be said that the rule adopted in bankrupt proceedings is clearly and conspicuously inequitable. It is the rule which has always obtained in the winding up of insolvent estates by purely bankrupt proceedings. It was a feature of the proceedings in the bankrupt acts of Great Britain as well as the bankrupt acts of the United States. It controls in the distribution of assets under the present Bankrupt act of 1898, section 5and 57/i. In the case of an insolvent corporation in this state where the assets are distributed in the United States district court, the creditor holding col-laterals has to deliver up his security as a condition precedent to proving his whole claim, or else he must apply the value of his security to his claim, and prove for the balance. If the chancery rule is adopted in this case, it will follow that if the same corporation should be wound up in the court of chancery, the same creditor could prove for his whole claim and retain his securities or enough of them to make him whole. So far as the notion of promoting uniformity of rule should be allowed to control, its influence would be in favor of the preservation of the rule in bankruptcy.

But with a nice balancing of the merits of the two doctrines there appears one consideration, which is controlling in this case. That consideration is that for nearly three-quarters of a century the act under which this insolvent corporation was being wound up has been regarded by the courts of this state as essentially a bankrupt statute, and a bankrupt rule of administration has been applied in the distribution of the assets of such corporations.

In 1835, in the case of State Bank v. Receivers of the Bank of New Brunswick, 3 N. J. Eq. (2 Gr. Ch.) 266, a receiver of an insolvent corporation was appointed under “An act to prevent frauds by incorporated companies,” passed in 1829, the act, which, by re-enactment, is the same as that under which the present proceedings were taken. The insolvent corporation had a claim against the state bank, and the latter held an independent claim against the insolvent corporation. The state bank also held a thousand dollar draft as collateral security for its claim 'against the insolvent bank. Chancellor Yroom was called upon to deal with two questions — first, whether there existed a right to set off the independent claims, and second, whether the state bank of New Brunswick was bound to apply to its debt the value of its collaterals and prove only for the balance, or was entitled to prove for the whole amount of its claim regardless of its collateral security. The chancellor (Yroom) held that while the independent debts could not beset off under our statute to enable mutual dealers to discount, yet they could be set off under the act of 1829, because that act partook largely of the character- of a bankrupt act, and under the bankrupt system, the set-off was permissible. The chancellor also held that the draft should be appropriated to the payment of so much of the debt due to the state bank of New Brunswick as it would liquidate, and dividends should be paid on the balance.

In 1852 the question of a set-off arose in the case of Receivers v. Paterson Gaslight Co., 23 N. J. Law (3 Zab.) 283. This was an action by a receiver against the gaslight company, a debtor of an insolvent corporation, but a debtor which held a claim against the. insolvent corporation. The question was whether, in that action at law, the defendant could set off its claim against that of the receiver, and it was held that it could. Chief-Justice Green, in delivering the opinion of the supreme court, remarked: “The act to prevent frauds by incorporated companies, so far as it relates to the estate of insolvent corporations, is, in all its essential elements, a bankrupt law. It leaves the creditor, indeed, the naked remedy of proceeding to judgment against the corporation, stripped at once of its property and the right of exercising its franchises, and thus avoids the constitutional objection of interfering with the obligation of contracts. But like a bankrupt law, it vests the whole property of the corporation, by operation at law, in the hands of assignees, to be distributed among the creditors upon principles of justice and equity.”

In 1854, in the case of Van Wagener et al., Receivers for the People’s Bank of Paterson, v. The Paterson Savings Bank et al., 10 N. J. Eq. (2 Stock.) 13, a question was presented to Chancellor Williamson respecting the effect of certain preferences made by the officers of the insolvent bank just before it closed its doors for business. In distinguishing between those preferences acquired by diligent creditors and those preferences voluntarily proffered by the officers of the bank, the chancellor said: “The object of the act to prevent frauds by incorporated companies is to secure all the creditors of such institutions an equal distribution of its assets. This is the primary object of the statute. Any act done with the view- and for the purpose of defeating this object is a fraud upon the act and illegal. The primary object of this act being the same as that of the bankrupt laws, in giving a construction to it we may properly examine those general principles which have been established by the courts in reference to transactions under those laws. And I may remark here that our courts have always recognized the object and provisions of the act in question and of the bankrupt laws to be essentially the same.” The chancellor then proceeded to apply the doctrines of the bankrupt courts in the solution of the question then before him.

In Spader v. Mural Decoration Manufacturing Co., 47 N. J. Eq. (2 Dick.) 18, Chancellor McGill said: “The receiver is not at liberty to recognize any liability or to make any payment which is not approved by the statute. Such is the view taken out of proceedings under the National Bankrupt act, and it can hardly be questioned that the proceedings now considered partake of the same character.”

In Frost v. Barnert, 56 N. J. Eq. (11 Dick.) 290, Vice-Chancellor Stevens, in passing upon the validity of a mortgage given by the corporation after it became insolvent, said that “The act of 1829, which had become by re-enactment section 63 et seq. of the Corporation act, 'had received a settled construction — that it had been repeatedly held to be in its essential element a bankrupt act.”

So it appears that in the decisions of questions arising in the administration of the assets of insolvent corporations, the courts of this state, since the earliest case, have uniformly regarded our statute as essentially a bankrupt act, and applied the doctrines which have controlled in bankruptcy proceedings. The practice of applying collateral securities to the liquidation of a debt against an insolvent corporation, and of proving only for the balance, has been uniform for over seventy years, and hundreds of insolvent corporations have been wound up and their assets distributed in conformity with this rule. Indeed, the influence of the doctrine laid down by Chancellor Vroom in 1835 has been much broader, for it seems to have controlled in the administration of insolvent estates in every form.

Chief-Justice Green, in writing the opinion of this court in the case of Bell v. Fleming, 12 N. J. Eq. (1 Beas.) 490, 491, which case involved the rights of a creditor of a person who had made a general assignment, expressed the broad view that it was well settled that such a creditor was entitled to have a mortgage due first satisfied out of the proceeds of the sale of the mortgaged premises, and if that proved insufficient, he was entitled to go in as general creditor for a dividend upon the balance.

Other cases recognizing the same general rule are cited in Whittaker v. Amwell National Bank, 52 N. J. Eq. (7 Dick.) 400-418.

It is unnecessary, however, in this case, to consider the general application of the bankrupt rule to all cases of insolvency. It is sufficient to say that the bankrupt character of our statute concerning insolvent corporations recognized so long, vindicates the rule adopted in the earliest case and followed ever since. Even if it should be conceded that the rule adopted in the court below is possibly a more equitable rule than that which has formerly obtained, nevertheless, more injury wiould result to the jurisprudence of the state by unsettling a practice which has prevailed for nearly three-quarters of a century, practically unchallenged, than by adhering to the rule which has hitherto been regarded as satisfactory and equitable.

We are constrained to the conclusion that the order of the court of chancery should be reversed.

For affirmance — None.

For reversal — -The Chancellor, Chiee-Justice, Garrison, Swayze, Reed, Trenchard, Parker, Yoorhbes, Minturn, Bogert, Yredenburgh, Green, Gray, Dill — 14.


author: Voorhees, J.

text:
    Charles H. Jeffries, administrator, et al., appellants, v. Selina A. Charlton et al., respondents.
    [Argued March 4th, 1908.
    Decided June 15th, 1908. ]
    An agreement, called an option, whereby C., the owner of certain lands which were under foreclosure, agreed with J.. a fourth mortgagee of said lands, to convey her equity to J., J. to purchase the lands at foreclosure sale and to reconvey them to C. within two years at an advance of $2,000, J. to rent the lands within said period and apply the rents to the fixed charges, interest on the cost to him of the premises, and also to the interest on the $2,000 agreed to he paid. — Held, to be an agreement to reconvey, of which time was not of the essence, and C.’s failure to comply within two years not to bar her from relief by the way of specific performance.
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Learning, whose opinion is reported in 72 N. J. Eq. (2 Buck.) 340.

      Mr. Harry W. Lewis, Mr. Enoch A. Higbee and Mr. Harry B. Coulomb, for the appellants.

      Messrs. Bourgeois & Sooy, for the respondents.
   The opinion of the court was delivered by

Voorhees, J.

On the 2d day of July, 1903, one Jacobson held the legal title to the Hotel Marsden in Atlantic City, the beneficial ownership whereof was in Selina A. Charlton. There were four mortgages upon the property, one held by the Penn Mutual Life Insurance Company for $10,000 and then under foreclosure, the sale under which was advertised to take place within six days; one held by John Young for $6,000; a third by Oliver Guttridge for $4,000; a fourth by Lewis E. Jeffries for $1,500; aggregating $21,500.

On the 2d day of July a written agreement was made between Lewis E. Jeffries and Selina A. Charlton, which recited the above mortgages and the pending foreclosnre of the Penn Mutual Life Insurance Company mortgage, and that “the parties hereto axe desirous of protecting their respective interests in the premises.” The agreement' then provided that Jeffries should acquire the Young and Guttridge mortgages hy assignment and allow the premises to be sold under the Penn Mutual mortgage and at such sale purchase the premises in his own name at a sum not to exceed $35,000; that if the premises produced at said sale more than $35,000, then the excess of the purchase price over the amount required to satisfy the mortgages should be paid to Mrs. Charlton. It was also agreed that if Jeffries purchased at the sale he would mortgage the premises for $10,000 and convey them subject to such mortgage to Jacobson at any time after the purchase and within two years from the date of the agreement for the sum of $24,000, in which event Jacobson was to assume the payment of the $10,000 mortgage to be placed on the property, to pay Jeffries $2,000 in cash and execute a second mortgage for $12,000 on the premises. The agreement also provided that Jeffries should rent the premises and from the rents pay the fixed charges against the premises — interest, taxes, insurance, &e. — as well as all repairs required, retain for himself six per cent, interest on the sum of $14,000, and pay over the balance of the rentals to Mrs. Charlton, retaining also any sheriff’s costs in excess of $40, and taxes in excess of $1,000,

“it being expressly understood and agreed by and between the parties that the party of the first part (Jeffries) shall at all times during the continuance of this option retain and receive for his own use and benefit six per cent, interest on a sum of money equivalent thereto on the amount of money or balance thereof due to him under this option, and in the event of said premises renting for a sum less than shall be sufficient for the payment of all expenses and repairs against said premises, as aforesaid. and the interest aforesaid, the party of the second part (Charlton) will pay to the party of the first part the deficiency arising from said rentals, and in the event of such deficiency arising as aforesaid, the party of the second part paying to the party of the first part such deficiency on or before the first of October of the then current year, this-option shall continue in force and effect, otherwise to become null andi void.”

At the foreclosure sale Jeffries purchased the property and went into possession of the premises, rented the same and collected the rents. Mrs. Charlton having failed to carry out the agreement within two years, the bill in this case was filed by the executor and widow and heirs-at-law of Mr. Jeffries, he having died June 12th, 1905, praying that Mrs. Charlton and Jacobson be absolutely debarred and foreclosed of all rights in and equity to the property, and that the aforesaid agreement be delivered up to the complainants.

Charlton and Jacobson answered, setting up that pursuant to the agreement Jeffries had purchased the premises at foreclosure sale subject to the rights of Mrs. Charlton under the agreement. They also filed a cross-bill alleging that Jeffries had entered into • the possession of the premises and had received the rents, that no account of the rents and disbursements had been rendered by Jeffries. Mrs. Charlton tendered' herself ready upon a proper accounting to pay such sums of money as might be due and prayed that upon jjayment by her of such sum the complainants might be decreed to specifically perform the agreement and convey the lands to Mrs. Charlton. The answer to this cross-bill denied that Jeffries did not account, averring that the accounting showed an indebtedness to him of upwards of $1,700, and that Mrs. Charlton had abandoned her rights in the premises.

By a stijmlation signed by the parties it appears that an attorney in the latter part of Majq 1905, at the request of Mrs. Charlton and with full power to act for her, visited Mr. Jeffries at his home in Baltimore, where he was then lying ill, and stated to him that he was present to make settlement for the Marsden property and pay the amount of $2,000 due under the agreement, whereupon Mr. Jeffries replied that he would not accept $.2,000, that Mrs. Charlton owed him much mor'e, and after some figuring, in which Mrs. Jeffries assisted, he further stated that the amount due to him was $3,552.72, and that he would convey to Mrs. Charlton when she paid him that amount.

Mr. Jeffries died June 12tli, 1905. His will was proved June 24th. After his death, and about three days before the so-called option -in the agreement expired, the same attorney called on the executor and stated that he was ready to pay the $2,000 mentioned in the agreement. The executor declined to accept it, stating that there was more than that amount due, and subsequently, on July 10th, filed the bill in this cause.

The vice-chanceller held the agreement to be a strict option and not to have in it the equity of the right to redeem after the period of two years had expired. The settled rule in this state is that in equity time is not of the essence of an agreement to convey lands, unless there is an express stipulation by the parties making it so, or a necessary implication arises from the nature of the transaction that the parties, so intended. Bullock v. Adams Executor, 20 N. J. Eq. (5 C. E. Gr.) 367; King v. Ruckman, 21 N. J. Eq. (6 C. E. Gr.) 599; Dynan v. McCulloch, 46 N. J. Eq. (1 Dick.) 11; affirmed, 46 N. J. Eq. (1 Dick.) 608.

No express agreement to that effect appears in this instrument. Does such result flow from a necessary implication? While in the body of the instrument it is called an option, yet it seems clear that it is really an agreement to reconvey. It is evident, not only from its recitals but from the object disclosed by its terms, that its real purpose and intended effect was for the benefit of the defendant, and to hold that a strict construction should be given to the time limit would be contrary to all else in the relation of the parties. This is also clear when we consider that during the period of two years Mrs. Charlton became entitled to the surplus of the rents over such sum as was required to keep down the interest, taxes, insurance and pay for the improvements, and that it was Jeffries’s duty to collect the rents and apply them to the above purposes, Mrs. Charlton being bound to make good to Jeffries any deficiency. Thus the property, was treated as if Mrs. Charlton was the owner. The management was wholly left with Mr. Jeffries for his protection and for which he was to be paid $2¿000 and interest. There is nothing in these arrangements to indicate that failure to carry out the agreement within the strict time would not be satisfied by the equitable rule allowing interest as compensation for the delay.

The provision for the settlement of accounts in October of each year would place Mr. Jeffries under the duty of rendering a statement showing on which side of the account the balance lay. As he was possessed of the.only knowledge upon the subject he alone could do this. It does not appear that any account was rendered by him uhtil it was figured up when the attorney applied to him during his illness in the latter part of May, 1905, when he claimed that the amount due was $3,552.72. Thus, Mr. Jeffries having failed to advise Mrs. Charlton of the amount due to him at the times specified in the agreement for the' settlements, and to call upon her for payment, a presumption arose that the rents were ample to meet the expenses. The one and only accounting came about at the instance of Mrs. Charlton when she tendered herself ready to perform the agreement by the payment of $2,000 shortly before Mr. Jeffries’s death. Then, for the first time, the deficiency of the rents was'made known to her. The dispute over this amount, the death of Mr. Jeffries following shortly thereafter, both within the two-year limit, the fact that his will was not proved until eight days before the expiration of the two years, within which time the executor also had refused to accept the sum of $2,000, all present reasonable ground for relief against the forfeiture claimed by the complainants to have resulted from the delay. Nor has there been any change in the relation of the parties or in their condition consequent upon the failure to perform within strict time, whereby an estoppel would arise.

There is nothing in this contract to indicate that time was deemed by the parties to be of its essence or that it has become .such, and therefore Mrs. Charlton’s failure to comply within two years does not bar her from relief by way of specific performance.

The decree should be reversed, with costs, and a decree entered directing the complainants to render an account and to specifically perform said agreement by a conveyance of the property to the defendants upon the said defendants complying . with the terms of the agreement within a reasonable time.

For affirmance — None.

For reversal — The Chancellor, Chief-Justice, Garrison, Swayze, Eeed, Parker, Bergen, Yoorhees, Minturn, Bogert, Yredenburgh, Yroom, Green, Gray, Dill — 15.


author: Minturn, J.

text:
    Charles H. Smith, respondent, v. Jacob Wigler, appellant.
    [Submitted March 24th, 1908.
    Decided June 15th, 1908.]
    Smith was defendant in a criminal cause. His brother, the complainant, to procure his release, induced Wigler to become surety on the recognizance, and as part indemnity for this suretyship assigned a bond and mortgage to Wigler. The recognizance was subsequently forfeited for the non-appearance of Smith before the federal court. The complainant then demanded an assignment of the bond and mortgage, claiming that the indemnity was limited to the appearance of Smith before the committing magistrate. — Held, that the testimony in the case and the circumstances attending the transaction satisfactorily indicate that the undertaking of indemnity was not limited to the preliminary hearing, but extended to the appearance of Smith before the federal court, and that the relief sought should therefore be denied.
    On appeal from the decree of the court of chancery advised by Yice-Chancellor Emery, whose opinion is reported in 7I£ N. J. Eq. [2 Buck.) 559.

      Mr. Frank Ii. Bradner, for the respondent.

      Messrs. Hood & Hood, for the appellant.
   The opinion of the court was delivered by

Minturn, J.

On August 17th, 1903, Edmund J. Smith was- in the custody of the United States marshal uppn a. criminal complaint and was seeking bail. He was taken by the marshal to the office of one Simon, who sent for the defendant, Wigler, a stranger to Smith, and an arrangement Was there entered into by which Wigler was to become one of two sureties upon Smith’s bail bond of $2,500, upon condition that Wigler would be indemnified. This indemnity was given by Albridge C. Smith and Charles H. Smith, brothers of Edmund J. Smith, in the form of a bond and mortgage for $800, held by Charles H. Smith as mortgagee, and the promissory note of Albridge C. Smith for $450. Wigler became bail with one Hargraves in accordance with this agreement and Smith was released upon the recognizance, to appear before the United States commissioner on August 27th. The promissory note to Wigler reads as follows:

“Newark, N. J., Aug. 18th, 1903.
“In consideration of Jacob Wigler becoming surety for the appearance of Edmund J. Smith to answer a charge made against him on behalf of the Merchants National Bank of Newark, N. J. before S. Howell Jones, U. S. Commissioner, I hereby agree to pay to him any loss he may suffer or incur by reason of being such surety, to the amount of $450., if the said Edmund. J. Smith shall neglect or refuse to appear in compliance with his recognizance.
“(Signed) Albridge C. Smith.”

Edmund J. Smith appeared before the commissioner on August 27th. An examination took place, as a result of which Smith was held to appear before the federal court, and Wigler and Hargraves renewed their recognizance for his appearance. Smith failed to appear; the recognizance was forfeited and judgment therein entered against Wigler and Hargraves. A bill was thereafter filed in the court of chancery by Charles H. Smith to compel a reassignment of the bond and mortgage by Wigler to him upon the ground that the condition of the indemnity had been satisfied by the appearance of his brother Edmund before the commissioner, which, as he alleges, was the only condition inciclent to the indemnity. Wigler, however, refuses to surrender the security upon the ground that the agreement of indemnity required him to continue his bail to answer for the appearance of Smith before the federal court and that his action in the matter corresponded with that understanding.. The learned vice-chancellor found in favor of the complainant’s view, and from the decree entered upon that decision this appeal was taken.

Our view of the case differs from that of the learned vice-chancellor for the reason, among others, that we cannot give to the promissory note of the brother Albridge Smith the weight and importance that the learned vice-chancellor attaches to it. It is open to the construction attempted to be put upon it by either party to the cause, and in either view it is decidedly ambiguous and of no great evidential value in the determination of this controversy. Albridge Smith’s testimony is contradicted by Wigler and Wigler is supported by the testimony of the marshal and by that of Simon. Mr. Trimble’s testimony also, although based only upon the best of his recollection, is not without weight in support of Wigler’s contention.

The circumstances that both the complainant and his brother Albridge were present at the commissioner’s office when the original bail was given for the subsequent hearing before the commissioner and their absence from that hearing, are indica,tive of a quiescent state of mind upon-their part relative to the extent of this indemnity and the safety of complainant from apprehension, which lends color and strength in our judgment to the defendant’s contention.

For these reasons we conclude that the decree-advised by the learned vice-chancellor should be reversed, with costs.

For affirmance — Swayze, Yroom, Gray — 3.

For reversal — The Chancellor, Chiee-Justice, Garrison, Reed, Trenohard, Parker, Bergen, Yoorhees, Mi-nturn, Bogert, Vredenburgi-i, Green, Dill — 13.


author: Bergen, J.

text:
    Robert W. Pryor, receiver, respondent, v. Allan J. Gray, appellant.
    [Submitted March 11th, 1908.
    Decided June 15th, 1908.]
    Proof by the oath of one who did not, in fact, subscribe his name as a witness to the execution of a chattel mortgage by a corporation, although he deposes that he did so subscribe, is not’ the proving of an instrument sufficient to authorize its record so as to give it priority over creditors under our statute, which requires such proof to be made “by one or more of the subscribing witnesses to it.” The proof must be made by one who subscribes his name as a witness after seeing the writing executed, or hearing it acknowledged.
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Grey, whose opinion is reported in TO N. J. Eq. (4 Robb.) 413.

      Mr. Frank Benjamin, for the respondent.

      Mr. Malcolm MacLear, for the appellant.
   The opinion of the court was delivered by

Bergen, J.

The complainant, as receiver of an insolvent corporation, filed his bill of complaint and therein prays that a chattel mortgage given by the corporation to the defendant be decreed void as to creditors, because its execution was not proven as required by our statute. The attestation clause reads: “In witness whereof the said party of the first part has caused this mortgage to be signed by its president and the seal of the company to be affixed." The mortgage was signed by the president, its common seal affixed, and under it written, “Attested, Robert D. Gemein, Secretary.” The execution of the writing was attempted to be proven by the oath of a person who deposed that the seal of the company was affixed, and the mortgage signed and delivered by the president of the company as its voluntary act and deed, “and that he' thereupon signed ¡the same as subscribing witness.” It is admitted that the deponent did not subscribe his name as a witness to the execution of the mortgage. The vice-chancellor held that the proof of execution did not conform to our statute and therefore the mortgage was void as to creditors. Whether the proof will be sufficient, if there be no subscription by the witness, provided the person making the proof testifies that the execution was completed in his presence, and that he subscribed his name as a witness, although in fact he did not' do so, as suggested by the vice-chancellor, need not now be determined. Our statute requires that instruments of this nature when proved, “by one or more of the subscribing witnesses to it,” shall be received in evidence, and that when so proved may be recorded. It thus appears that in order to justify the recording of any instrument, the execution of which is proven instead of being acknowleged, the proof must be made by the subscribing! witness, who is defined to be one who sees the writing executed or hears it acknowledged and at the request of the party thereupon signs his name as a witness. The right to have a preference against other creditors by way of chattel mortgage is controlled by the statute, and unless the requirements of the law are complied with, that right does not exist, and the mere statement under oath, by a person, who, so far as this mortgage was concerned, was a stranger to the transaction, that he subscribed his name as a witness, when in fact he did not, does not meet the requirements of the law on this subject. He is not such a witness to it as is contemplated by the statute. But in addition to this we think that the secretary was the subscribing witness and attested to the truth of the attestation clause, viz., that the corporation had caused the mortgage to be signed by its president and the seal of the company thereto affixed* and was the proper person to have made the proof, because as secretary, it is to be presumed, he had knowledge of the corporate action which justified the execution of the mortgage and the affixing of the seal. As the proof of the execution of this chattel mortgage does not meet the requirements of our statute, the decree will be affirmed.

For affirmance — -The Chancellor, Chief-Justice* Garrison, Swayze, Eeed, Trenohard, Parker, Bergen, Voorhees, Minturn, Bogert, Vredenburgi-i, Vroom, Green, Gray, Dill — 16.

For reversal — None.


author: Dill, J.

text:
    Patrick Fitzgerald, complainant and appellant, v. The State Mutual Building and Loan Association of New Jersey, defendant and respondent, and Dennis Ryan et al., appellants.
    [Argued March 6th, 1908.
    Decided May 8th, 1908.]
    1. It is repugnant' to the well-settled judicial policy of this state to permit the continuance in control, directly or indirectly, of directors or officers of a corporation against whom is made out a prima facie case of malfeasance in office, or who appear.under the proofs to have been unfaithful to their trust as representatives of the shareholders, and to have used their official positions to their own advantage and to the resulting injury of the corporation and its shareholders.
    2. Where directors and officers, pending an application for a receiver on the ground of insolvency alleged to have been caused by their wrongdoing, passed a resolution recommending the dissolution and liquidation of a building and loan association, and indirectly procured the appointment by the shareholders of three certain trustees in liquidation, it was the duty of the court, insolvency being shown, forthwith to remove the trustees, and appoint a receiver who, neither by his official participation in the affairs of the insolvent company nor by personal affiliation with the individual directors, would be embarrassed in the due administration of his office.

      3. Chapter 24 of the laws of 1904 (P. L. 1904 V• 44) does not provide a substitute method of winding up the affairs of an insolvent corporation. The statute is not applicable to insolvent corporations.
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Learning, whose opinion is reported in 78 N. J. Eq. (8 Buck.) 889.

      Mr. Joseph Eaighn, Mr. Daniel V. Summerill, Jr., Mr. Joseph J. Summerill and Messrs. Guild, Bum & Tamblyn, for the appellants.

      Mr. Edward Ambler Armstrong, Mr. S. Stanger Iszard and Messrs. Wilson, Garr & Stackhouse, for the respondent.
   The opinion of the court was delivered by

Dill, J.

The respondent is a building and loan association organized under “An act to encourage the establishment of mutual loan, homestead and building associations,” approved April 9th, 1875.

The complainant is not only a shareholder, but a gwosi-creditor, inasmuch as the company, after more than six months' notice of withdrawal given by him, defaulted-in the redemption of his shares.

On April 4th, 1907, the complainant filed a bill in chancery alleging the insolvency of the company, attacking the management of the directors and officers, and asking for an injunction and the appointment of a receiver.

A week later, after the filing of the bill and before any action by the court, the directors, pursuant to statute (P. L. 1904 p. 44), passed a resolution recommending the dissolution and liquidation of the association and the appointment of trustees to wind it up, and calling a meeting of the stockholders to effectuate the plan.

Two days later a bill .in chancery was also filed by the commissioner of banking and insurance charging insolvency, caused by mismanagement of the directors and officers. Attached to this bill were reports filed in the department tending in detail to substantiate these charges. Under this bill an injunction and receiver were asked by the department of banking and insurance.

On April 25th, pursuant to the resolution of the directors previously referred to, the stockholders proceeded to elect three trustees in liquidation, and the bill and affidavits tend to show that the nomination and election of these trustees were procured by or in behalf of these officers and directors.

On May 9th an order was entered giving leave to file a supplemental bill; which was accordingly done by Eyan and other withdrawing shareholders, admitted as complainants. In this bill insolvency was alleged and the officers and directors were charged with malfeasance in office.

Upon the hearing of the application for the injunction and receiver, on May 20th, the vice-chancellor, his attention being called to the action of the shareholders taken pursuant to our statute (P. L. 1904 p. 44) in appointing three trustees to wind up the allairs of the corporation, refused to appoint a'receiver, notwithstanding the fact that the corporation was insolvent, and from that order this appeal is taken.

The objection is urged that the order is not appealable, but the judicial discretion of the vice-chancellor is reviewable here, his order affecting, as it does, equitable and legal rights.

We are of the opinion that the vice-chancellor erred in denying the application for the appointment of a receiver.

First. There is nothing in chapter 24 of the laws of 1904, relating to building and loan associations (P. L. 1904 p. 44), which sustains the argument that this statute was intended to provide a substitute method of winding up the affairs of an insolvent corporation or in anywise to relieve the court of chancery of the duty of taking control of the affairs of such corporation under the statute applicable to insolvent corporations.

The General Corporation law (“An act concerning corporations, Eevision of 1896”) establishes a uniform system of procedure in case of corporate insolvency, applicable to all corporations alike, and governs the present ease.

The policy of this state, as shown by the decisions of its courts and its statutes, has been so long established that we may not assume, in the absence of specific language to that effect, that the legislature intended, by the act referred to (P. L. 1904 p. 44) , to limit or override this well-established procedure.

This act does not apply to insolvent corporations, but its purpose is only to afford a means of winding up solvent building and loan associations when the interests of the creditors are not involved and where the shareholders can see that their own interests will be best conserved by the dissolution of the association.

The commissioner of banking and insurance was specifically authorized by statute, in the case of such a corporation as this (P. L. 1903 p. 457), to make application for an injunction and receivership either in case of insolvency or violation of the law, and both were shown.

Second. There being, therefore, nothing in the statute restricting or limiting the exercise by the court of chancery of its usual and customary control over insolvent corporations, we think that, under the state of facts presented in this case, the relief asked for should have been granted.

Insolvency was demonstrated. But, more than this, there was made out a prima facie case of malfeasance on the part of officers and directors. The inference is strong that the appointment of these trustees in liquidation was procured by the directors and officers with a view to covertly maintaining the control, not alone of the assets of the company, but as well of the institution and maintenance of legal proceedings to which officers and directors' might be proper parties. If this be the fact, then the proceedings resulting in the appointment of these trustees was a palpable attempt on the part of the directors and officers to evade the consequences of the appointment of an independent receiver, whose duty it might be to call the officers and directors to account and to hold them responsible for the failure of the company to the extent they were properly chargeable therewith.

The settled judicial policy of this state is diametrically opposed to the continuance in control, directly or indirectly, of directors or officers against whom is made out a prima, facie case of wrong-doing in office, and who appear to have used their official positions, as representatives of 'the shareholders, to their own financial advantage and to the resulting injury of the company and its shareholders.

That any person or persons, appearing to have been appointed as trustees in liquidation upon the procurement of officers and directors under charges, should, upon a proper presentation of the facts, be allowed to remain in control of the situation, is not to be tolerated. No officer, director or other party interested, who is under charges, should have an influencing voice in the selection of the trustee or the receiver who is to pass upon his acts.

Both under the law and upon the facts the court of chancery should have assumed the administration of the affairs of the corporation through the appdintment of a receiver.

The order of the court below should be reversed, an injunction granted and a receiver forthwith appointed, who, neither by his official participation in the affairs of the insolvent company nor by personal affiliation with the individual directors, will be in anywise embarrassed in the due administration of his office and the strict and impartial performance of his duties.

For affirmance — -None.

For reversal — The Chancellor, Chief-Justice, Garrison, Swayze, Reed; Trenci-iard, Parker, Bergen, Voori-ibes, Min-turn, Bogert, Vredenburgi-i, Vroom, Gray, Dill — 15.


author: Per Curiam.

text:
    Fidelity Trust Company, complainant and respondent, v. George H. Kline et al., defendants and respondents, and Abraham L. Jacobs, trustee in bankruptcy, defendant and appellant.
    [Submitted March 23d, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the former chancellor advised by Vice-Chancellor Stevens, who delivered the following opinion:
    This -case appears to me to lie within a very narrow compass. It is an interpleader bill, the contesting defendants being, on the one hand, Abraham L. Jacobs, who is a trustee in bankruptcy of (inter alios) John VanSickle, and, on the other, George H. Kline, the father-in-law of VanSickle, to whom VanSickle made the assignment whose legality is the subject of this controversy.
    It appears that a Miss VanSickle was the owner of a lot on the corner of Bank and Halsey streets, Newark, which she contracted, in writing, to convey to one Wood for $50,000. She died in 1899, and before the contract was carried in effect. She left the greater part of her property to her nephew, John K. VanSickle. He was willing to convey'to Wood, but, owing to defects in the title, the conveyance was not .made until August, 1904, when, with the concurrence of all parties concerned,.the agreement was carried out. VanSickle, in 1890, was connected with a firm of feokers which failed. A petition in bankruptcy was on December 3d> 1900, filed against the firm and against him, in the district court, for the southern district of New York, and they were adjudicated bankrupts.
    By deed dated August 10th, 1900, VanSickle had conveyed the lot above mentioned to Kline to secure a debt due to him and to enable him (Kline) to raise more money for VanSickle’s benefit. The indebtedness amounted to about $17,500. No more money was raised. The deed was attacked by the trustee in bankruptcy in the federal court, on the ground that it had been made with intent to hinder and defraud creditors. It was sustained both in the circuit court and in the circuit court of appeals. 127 Fed. Rep. 62.

    On October 22d, 1900, VanSickle executed to Kline another paper, which, after reciting the above-mentioned deed of August 10th, provided as follows:
    “I do hereby assign to the said George H. Kline, so much of my interest in said property in excess of the amount due to him as may be necessary to pay all my creditors in full” (naming the creditors), “whose claims amount to about $11,000, and I do hereby authorize and request him to use and apply so much of the proceeds of my interest in said property in payment of my said creditors as may be necessary for that purpose.”
    If the conveyance of August 10th was not made with intent to hinder and delay the creditors, it is difficult to see how this assignment could have been. Indeed, this was conceded by counsel for tire trustee in bankruptcy. He argued that it was void under that provision of section 3 of the Bankruptcy acc, which makes a general assignment for the benefit of creditors an act of bankruptcy without any reference to the question of solvency or intent. Wesl Company v. Lea, 171¡. U. S. 690.

    If this were a general assignment, his position would be sound. It seems to me clear that it is not. So far from being a general assignment it is not even an assignment of all the residue of assignor’s interest in a single lot. The lot sold for $50,000. Of this amount $500 had been paid, before VanSickle got it. It came into his hands subject to legacies and other claims, amounting, at the time the assignment was made, to about $10,000. It was also subject to the Kline debt of $17,500. This left an equity of over $21,000 and of this only $12,000 were then needed to pay all his debts. He did not in terms assign all the money, but only “so much” of it as was necessary to pay his creditors in full. The situation then was this: Kline held the legal title to property in trust to pay debts and he held it as mortgagee. It was subject to VanSickle’s right to redeem. This being so, the case is on all fours with Muchmore v.
      Budcl, decided -by the court of errors and appeals in 53 N. J. Lato (2Jf. Yr.) 369.

    I have not been referred to any ease in the federal courts which clashes with that authoritative decision. I think the claim of the trustee to the fund now in court is not sustained.

      Mr. August C. Streilwolf, Jr., for Abraham L. Jacobs, trustee in bankruptcy, appellant.

      Mr. Frank Bergen, for the respondents.
   Per Curiam.

The decree under review herein should be affirmed, for the reasons expressed in the -opinion of Vice-Chancellor Stevens.

For affirmance — The Chancellor, Chief-Justice, Garrison, Swayze, Eeed, Trenci-iarjd, Parker, Bergen, Voori-iees, Minturn, Bogert, Vredenburgi-i, Vroom, Green, Gray, Dill — 16.

For reversal — None.


text:
    In the matter of the estate of John J. Jones, deceased.
    [Argued March 12th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the prerogative court advised by Vice-Ordinary Bergen, whose opinion is reported in 73 N. J. Eq. (3 Buck.) 353.

      Mr. Robert H. McCarter, attorney-general, and Mr. William R. Barrichlo, for J. Willard Morgan, comptroller, appellant.

      Messrs. Collins & Corbin, for the respondents.
   Per Curiam.

The decree under review herein should be affirmed, for the reasons expressed in the opinion of Vice-Ordinary Bergen.

For affirmance — The' Chancellor, Ci-iiee-Justice, Garrison, Swayze, Reed, Trenohard, Parker, Voorhees, Mintu'rn, Bogert, Vredenburgh, Vroom, Green, Gray, Dill —15.

For reversal — None.


text:
    Aaron E. Johnston, executor, &c., of Mary E. Throckmorton, deceased, complainant and respondent, v. Hugh E. O’Reilly, defendant and appellant.
    [Submitted March 23d, 1908.
    Decided June 15th, 1908.]
    On appeal from an order made by the former chancellor, overruling a demurrer to' the bill of complaint, upon an opinion reported in 73 N. J. Eq. (3 Buck.) 1.

      Mr. Charles J. Roe, for the appellant.

      Mr. Aaron E. Johnston, for the respondent.
   Per Curiam.

The order under review herein .should be affirmed, for the reasons expressed in the opinion of Chancellor Magie.

For affirmance• — Ti-ie Chancellor, Chief-Justice, Garrison, Swayze, Reed, Trenchard, Parker, Bergen, Yoorhees, Minturn, Bogert, Vredenburgh, Yroom, Green, Gray, Dill —16.

For reversal — None.


text:
    William Knoup, complainant, v. John D. Carver and Sitley & Son, incorporated, defendants.
    [Submitted March 24th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Bergen, whose opinion is reported in 70 Atl. Bep. 660.

      Mr. Norman Grey, for the appellant.

      Messrs. Wilson, Carr & Stackhouse, for the respondent.
   Per Curiam.

An examination of the testimony satisfies us that the transaction between the parties to this cause was executed at Manasquan in this state. While it is true that the preliminary negotiations for the loan were conducted in Philadelphia, the land involved is situated in this state, the contract is to be performed here, the money was paid here, the papers executed and the entire transaction consummated at Manasquan, and hence this jurisdiction furnishes lex loci contractus. This being so, we conclude that the question of usury involved in the transaction was correctly resolved by the learned vice-chancellor, and that the decree of the court of chancery should be affirmed.

For affirmance — The Chancellor, Ci-iiee-Justice, Garrison, Swayze, Reed, Trenci-iard, Parker, Voori-iees, Min-turn, Bogert, Vredenburgi-i, Vroom, Green, Gray, Dill —15.

For reversal — None.


text:
    John H. Pierce et al., complainants and appellants, v. The Old Dominion Copper Mining and Smelting Company et al., defendants and respondents.
    [Argued March 6th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the court of chancer)' advised by Vice-Chancellor Stevenson, whose opinion is reported in 78 N. J. Eq. (8‘ Buck.) 595.

      Mr. Edward M. Colie and Mr. Bennet Van Syckel, for the appellants.

      Messrs. Collins & Corlin, for the respondents.
   Per Curiam.

Upon the filing of the bill of complaint herein, application was made for an injunction and for the appointment of a receiver. Both applications were denied, for reasons set forth in an opinion delivered by Vice-Chancellor Stevenson, reported in 67 N. J. Eq. (1 Robb.) 399.

Answers having been filed, the cause'proceeded to final hearing, whereupon 'a decree was made dismissing the bill, without prejudice to the rights of the complainant herein to file a bill to restrain the Old Dominion Copper Mining and Smelting Company and its directors from diverting, misapplying or mismanaging the so-called “segregated assets,” described in the bill of complaint, and from carrying out any contracts which the complainants may -have- a right to declare void. See second opinion of Vice-Chancellor Stevenson, reported in 72 N. J. Eq. (2 Buch.) 595.

We concur in the views expressed by the learned vice-chancellor so far as they are pertinent to the questions raised by the present appeal, and the decree under review should- therefore be affirmed, with costs.

For affirmance-Tnis, .Chancellor, Chibe-Justice, Garrison, Swayze, Trenci-iard, Parker, Bergen, Voori-iees, Min-turn, Bogert, Vredenburgi-i, Vkoom, Green, Gray, Dill —15.

For reversal — None.


text:
    Amelia Albert, respondent, v. Emily B. R. Haeberly, appellant.
    [Submitted March 23d, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Grey, whose opinion is reported in-71 N. J. Eq. (1 Buch.) 587.

      Messrs. Garrison & Voorhees, for the appellant.

      Messrs. Bourgeois & Sooy, for the respondent.
   Per Curiam.

This cause was heard before the late Vice-Chancellor Grey, who expressed the view that the case was governed by the same legal principles that this court applied in a former litigation between the same parties (Albert v. Haeberly, 68 N. J. Eq. (2 Robb.) 664).

We concur in that view, and the decree under review should therefore be affirmed, with costs.

For affirmance — The Chancellor, Chief-Justice, Garrison, Swayze, Reed, Trenchard, Parker, Bergen, Vooriiees, Minturn, Bogert, Vredenburgi-i, Vroom, Green, Gray, Dill-,-16.

'For reversal — None.


text:
    George J. Bergen, receiver, complainant and appellant, v. John I. Rogers, defendant and respondent.
    [Argued March 5th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the former chancellor advised by Vice-Chancellor Garrison, whose opinion is reported in 73 N. J. Eq. (3 Buch.) 230.

      Messrs. Wilson, Carr & Stackhouse, for the appellant.

      Mr. John I. Rogers, pro se, for the respondent.
   Per Curiam.

The decree under review herein should be affirmed, for the reasons set forth in' the opinion delivered by Vice-Chancellor Garrison in the court below.

For affirmance — The Chancellor, Chiee-Justice, Garrison, Bergen, Voorhees, Minturn, Bogert, Vredenburgii, Vroom, Green, Gray, Dill — 12.

For reversal — Swayze, Trenoi-iard, Parker — 3.


text:
    Siscilia Sbarbero (otherwise called Matilda Barber), guardian, &c., appellant, v. Alexander A. Miller et al., respondents.
    [Submitted March 24th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Garrison, whose opinion is reported in 72 N. J. Eq. (2 Buch.) 248.

      Messrs. Munn & Church, for the appellant.

      Mr. George E. Peirce, for the respondents.
   Affirmed June 15th, 1908.

For affirmance — The Chancellor, Chiee-Justice, Garrison, Swayze, Reed, Trenchard, Parker, Bergen, Voorhees, Minturn, Bogert, Vredenburgii, Green, Gray, Dill — 15.

For reversal — None.


text:
    United States Fidelity and Guaranty Company, respondent, v. The City of Newark, appellant.
    [Submitted March 24th, 1908.
    Decided June 15th, 1908.]
    On appeal from an order of the court of chancery advised by Vice-Chancellor Howell, whose opinion is reported in 72 N. J. Eq. (2 Buck.) 8kl.

      Mr. Sherrerd Depue, for the appellant.

      Mr. Francis Child, Jr., and Mr. Herbert Boggs, for the respondent.
   Affirmed June 15th, 1908.

For affirmance — Ti-ie Chancellor, Chiee-Justice, Swayze, Reed, Trenci-iard, Parker, Bergen, Voorhbes, Minturn, Bogert, Vredenburgi-i, Vroom, Green, Gray, Dill — 15.

For reversal — None.


text:
    Atlantic City Gas and Water Company, complainant-appellant, v. Consumers Gas and Fuel Company et al., defendants-respondents.
    [Argued June 15th, 1908.
    Decided June 15th, 1908.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Learning, whose opinion is reported in 72 N. J. Eq. (2 Buch.) 346.

      Messrs. Thompson & Cole, for the appellant.

      Mr. Charles L. Corbin, for the respondents.
   Per Curiam.

This was an injunction bill. An application for a prelinrinary injunction was heard by Vice-Chancellor Bergen, who denied it for reasons expressed by him .in an opinion reported in 70 N. J. Eq. (4 Robb.) 536. The cause was afterward^ submitted’ on final hearing to Vice-Chancellor Learning upon the same testimony. He concurred in the views. of Vice-Chancellor Bergen, and advised the dismissal of the bill of complaint.

We likewise concur, and the decree of dismissal should be affirmed, with costs.

For affirmance — The Chancellor, Chiee-Justice, Garrison, Swayze, 'Trenchard, Parker, Bogert, Vroom, Green, Gray, Dill — 11.

For reversal — None.

CASES ADJUDGED IN THE COURT OF CHANCERY OF THE STATE OF NEW JERSEY. ' MAY TERM, 1908.