text:
    Godfrey M. Hyams, complainant-appellant, v. Old Dominion Copper Mining and Smelting Company, defendant-respondent.
    [Argued March 5th, 1914.
    Decided June 18th, 1914.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Howell, whose opinion is reported in 82 N. J. Eq. 507.

      Mr. Edward M. Colie, for the appellant.

      Mr. Edward F. McOlennen (of the Massachusetts bar), and Mr. Gilbert Collins, for the respondent.
   Per Curiam.

The petition for rehearing calls our attention to an error in the vice-chancellor’s statement of facts. He says that neither the directors nor officers of tire defendant corporation have in the remotest way become parties to the agreement as to what are called the “segregated assets.” This is a slip of the pen. The mistake does not, however, affect the result. The question is whether the financial situation of the company justified the dividend. We agree with the vice-chancellor that it did, and we think it malíes no difference whether the directors in declaring the dividend acted under the compulsion of the agreement as the complainant says or of their own volition, independent of the agreement. If we assume that the agreement was illegal and one that could not be enforced, its existence interposes no obstacle to such action by the directors as would have been proper in the ordinary management of the company. If the holders of so large a majority of the stock had filed a bill to compel the declaration of a dividend, it would have been no answer for the directors to say we have entered into an illegal agreement requiring us to declare out as dividends the proceeds of the segregated assets when realized upon in the course of administration. The majority stockholders might well say that such agreement is no excuse for failure to p'erform your present duty.

In other respects, we think nothing need be added to the opinion of the learned vice-chancellor.

For affirmance — The Ciiibe-Justice, Swayze, Trenci-iard, Bergen, Minturn, Kalisoh, Bogert, Vredenburgi-i, White. PIeppenjieimer — 10.

For reversal — None.


source: Caselaw Access Project

author: Walker, Chancellor.

license: Public Domain

text:
    Edwin Robert Walker, Chancellor.
    John R. Emery, Frederic W. Stevens, Eugene Stevenson, Edmund B. Leaming, James E. Howell, Vivian M. Lewis, John H. Backes and John Griffin, Vice-Chancellors.
    In the matter of the estate of William T. Quimby, deceased.
    [Decided October 28th, 1914.]
    1. The contract of suretyship is construed strictly and the liabilities flowing from it cannot be extended beyond its precise terms and scope.
    2. The duties of an executor and of-a trustee under a will are separate and apart, and a substituted administrator cum testamento annexo does not succeed to the powers of a testamentary trustee.
    8. If an administrator cum testamento annexo became possessed of a fund upon the theory that in virtue of his office of administrator he was also trustee under the will of his decedent, and afterwards defaulted with reference to that fund in his assumed capacity of trustee, a suit could not be maintained against the surety on his bond as administrator cum testa

      mentó annexo, because the surety’s obligation is not to answer for a trustee, but only for an administrator whose duties do not comprehend the execution of a trust, as such.
    4. A substituted administrator cum testamento annexo can only act as trustee under the will of his decedent by appointment by a court of competent jurisdiction.
    On. application for funds in court.

      Messrs. Lambert & Stewart, for the applicant.
   Walker, Chancellor.

The late William T. Quimby, of Morris county, in his last will and testament provided, concerning the balance of his estate, as follows:

“I give to my wife Mary E. the use of one-third so long as she remains my widow. I give the use of the remaining two-thirds to my daughter Anna F. Benbrook, at her decease the same is to go to her children, share and share alike.
“I appoint W. Fred Quimby of Newark, Essex Co., N. J., executor of this my will. I also ask him to act as trustee of this my estate.”

After the probate of the will, W. Frederick Quimby, the executor and trustee, and Anna F. Benbrook, a daughter of the deceased, having, under the devise above set out, a vested interest in the real estate of which her father died seized, filed a petition for the sale of the lands of the estate which were thus limited over to Mrs. Benbroolc's children; and such proceedings were thereupon had that an order was made for the sale of the lands, which sale was afterwards confirmed, and the proceeds, after payment of costs and expenses, were paid into this court and deposited with the clerk. Afterwards W. Frederick Quimby, executor and trustee under the will, and who qualified as such executor, departed this life, and thereupon Benjamin Y. D. Benbrook was, by the surrogate of Morris county, appointed substituted administrator with the will annexed. He qualified as such, and entered into a bond to the ordinary in the penal sum of $7,000, with the American Surety Company as surety (which bond is filed in the office of the surrogate), conditioned to administer the decedent’s estate according to law and the' provisions of his will. An inventory filed by the substituted administrator cum testamento annexo shows that goods and chattels amounting to the sum of $395.57, came to his hands as the entire personal estate of the testator. The proceeds of the sale of the real estate above mentioned, which were paid into court, amounted to the sum of $2,800. It is quite apparent that Mr. Benbrook, the substituted administrator, deems himself also to be the trustee under decedent’s will, as he has given bond for more than double the amount of the proceeds of the real estate and the value of the personal property, and now applies for an order that the clerk be directed to pay the fund to him, upon the theory that he is trustee, as well as substituted administrator cum testamento annexo of the decedent; and that, without the giving of any bond as trustee to the chancellor in this cause.

I am satisfied that the condition of this bond — that the administrator shall “well and truly administer according to law; and the provisions of said will” — will not operate to secure the estate in the hands of a trustee of the fund.

In In re Hibbler’s Estate, 78 N. J. Eq. 217. I pointed out that the duties of an executor and those of a trustee are well recognized in law as being distinct; that the general duties of an executor are to collect the effects of the deceased, pay the claims against his estate, and distribute the residue to those entitled, and, although an executor is a trustee in the broadest sense, he is not such in the general acceptation of the term. This case was affirmed by the court of errors and appeals for the reasons given by me in the prerogative court. S. C., 79 N. J. Eq. 230.

The contract of suretyship is construed strictly and the liabilities flowing from it cannot be extended by implication beyond its precise terms and scope. 39 Cyc. 648. A surety’s liability is strictissimi juris. United States v. Cheeseman, 3 Sawy. 424, 429.

In Stoutenbergh v. Moore, 37 N. J. Eq. 68, Chancellor Runyon held that a trust, created by a will, to invest the residue, pay over the interest, sell or convey real estate at discretion and to keep it -in repair, was an active one and did not devolve upon an administrator with the will annexed. This case was affirmed by the court of errors and appeals for the reason given by the chancellor. S. C., 38 N. J. Eq. 281.

The cases concerning the statutory power of an administrator with the will annexed to sell lands are illustrative of the doctrine that the duties of an executor and of a trustee under a will are separate and apart, and that a substituted administrator cum testamento annexo does not succeed to the powers of a testamentary trustee. See Varrick v. Smith, 67 N. J. Eq. 1; S. C., 69 N. J. Eq. 505, 507; Hegeman’s Exrs. v. Roome, 70 N. J. Eq. 562; Ker v. Banta, 71 N. J. Eq. 49; Casselman v. McCooley, 73 N. J. Eq. 253. In the last case Vice-Chancellor Learning said (at p. 254) :

“The trust duties imposed are essentially those of a trustee and should be administered as such, and it is wholly immaterial that the devisee in trust is defined in the will as an executor. Complainant, as substituted executor, succeeds to the powers conferred upon the executor as such, but not to the powers devolved on the executor as trustee with trust duties to perform.”

If Mr. Benbrook became possessed of the fund in court upon any theory that he was, in virtue of his office of administrator cum testamento annexo, also trustee under the will of William T. Quimby, deceased, and he afterwards defaulted with reference to that fund in his assumed capacity of trustee, I am of opinion that a suit could not be maintained against the surety on his bond as substituted administrator with the will annexed, because the surety’s obligation is not to answer for a trustee, but only for an administrator whose duties do not comprehend the execution of a trust, as such.

The case of Ordinary v. Lippincott, 10 N. J. Law 35, applies on principle. There, upon the death of a testamentaiy guardian, his administrator assumed to act as guardian also, and, upon failure to account as guardian, he was sued on his administrator’s bond, but judgment passed for the sureties upon the ground that the administrator had no authority to act as guardian, nor could his mistake in thus acting in the slightest degree enlarge the extent of his bond or increase the responsibility of his sureties.

A case quite on all fours with the one at bar is that of Barker v. Stanford, 53 Cal. 451, wherein Mr. Justice Rhodes observed (at p. 455) :

“The order made by the Probate Court, on the 11th day of July, 1859, is an order of final distribution. The funds in the hands of the administratrix were ordered ‘to be held and managed by her in trust, in pursuance of the will of .the deceased, for the children of the deceased;’ and she thereupon took the funds and thereafter held them in her capacity as trustee. Having taken the funds in that capacity, she was no longer subject, in respect to those funds, to the orders of the Probate Court, as the administratrix of the estate of the deceased. The sureties upon her bond as administratrix did not become liable for her acts or default as such trustee in the application of the funds.”

It is clear that Mr. Benbrook does not, in virtue of his appointment as substituted administrator cum testamento annexo of the will of William T. Quimby, deceased, succeed to the office of trustee created by that will, and that the surety on his bond as such administrator, would not be liable for any defalcation by him as trustee, if he assumed and undertook to act in that capacity. Indeed he could not so act without being appointed trustee. Varick v. Smith, 67 N. J. Eq. 1, 7; Casselman v. McCooley, 78 N. J. Eq. 253, 255. Therefore, an appointment by this court of a trustee under the will of the decedent for the fund in question will have to be made, and that trustee will be obliged to give a bond to the chancellor for the faithful performance of his duties.

An order may be entered appointing Mr. Benbrook trustee under the will of William T. Quimby, deceased, in the place and stead of W. Frederick Quimby, the deceased trustee, and, upon his entering into bond to the chancellor conditioned for the faithful performance of his duties as trustee under the terms of the will and the order, the clerk will be directed to turn the fund in court over to him.


text:
    Henry W. Bull et al. v. International Power Company.
    [Decided December 10th, 1914.]
    1. A summary hearing on bill and affidavits, and answer, if filed, is a final hearing on the question of the insolvency of a corporation under section 65 of the act concerning corporations (Revision of 1896), amended P. L.-X912 p. 585.

    2. When a suitor is entitled to relief in respect to the matters concerning which he sues, his motives are immaterial.
    3. In a suit for the winding up of an insolvent corporation the complainants need not be creditors, provided they are stockholders.
    4. A corporation having “book assets” of millions, comprised of the capital stocks of other corporations, none of which have paid a dividend for years, and having debts totaling in round numbers a quarter of a million dollars, without any money to pay them, is insolvent.
    On final hearing on motion for injunction and appointment of receiver.

      Messrs. Vroom, Dickinson & Bodine, for the complainants.

      Messrs. Bleakly & Stockwell, for the defendant.
   Walker, Chancellor.

The complainants, the owners of four hundred shares of the common stock of the par value of $40,000 and one hundred shares of the preferred stock of the defendant company of the par value of $10,000, out of a total issue outstanding of $6,400,-000 par value of common, and $6,000,000 par value of the preferred, stock of the company, filed their bill setting forth that the business of the company had been conducted at a great loss and in a manner greatly prejudicial to the interests of its creditors and stockholders, and praying that it might be dissolved and its affairs wound up and the stockholders and creditors paid what is justly due to them, and that it might be enjoined from exercising any of its franchises and receiving any debts due to it and from paying and transferring any of its moneys and effects and from continuing its business, and that a receiver might be appointed to take and state an account of the assets and liabilities of the company, who should be directed and empowered to take into his possession all the property of the company, and that pending an accounting the company should be enjoined and restrained from the exercise of any of its franchises, &c., and that its officers should be enjoined and restrained from performing any acts as such and' from making payment of any and all salaries, &c.

Subsequent to the filing of the bill a stockholders’ committee was formed for the purpose of inviting other stockholders to become parties complainant, and those holding one thousand six hundred and sixty shares of the common, and two hundred and fifty shares of the preferred, stock of the company, deposited their certificates with the committee, to whom they conveyed the title to their stock, which committee has been by order of the court admitted as party complainant in the suit.

The company by its charter was authorized to manufacture, buy, sell and deal in locomotives, engines, cars and certain other mechanisms, and to purchase, mortgage and deal in stocks and bonds of other corporations, &c. It operates only as a holding company.

Notwithstanding a peremptory mandamus issued out of the supreme court of this state against the defendant company at the November term, 1913, for an inspection of its books, and notwithstanding that subsequently the supreme court made an order, directed to the company to bring its books showing its general financial condition into this state and deposit them in the office of a supreme court commissioner, to permit the complainants to examine and inspect the books, the company refused to comply with either the writ or the order.

On the filing of the bill in this cause an order was made requiring the defendant to show cause why an injunction should not issue according to its prayer, and why a receiver should not be appointed under the general jurisdiction of this court, and, also, according to the statute in such case made and provided, namely, the amendment of 1912 to section 65 of the Corporation act, together with an ad mterim restraint, enjoining the defendant from selling or transferring any of the stocks, bonds or other securities, or other property owned or controlled by it, and from paying any salaries or other compensation to any officers or directors (except clerks and minor employes) and from contracting debts or entering into new obligations.

The bill did not allege the insolvency of the company, but gross mismanagement and fraud, for which, and for the disobedience of the writ and order of the supreme court, a receiver was asked under the general equity jurisdiction of this court, and also under the amendment of the statute.

On the return of the order to show cause the defendant company, through its counsel, stated that it would comply with the supreme court’s mandamus, and agreed forthwith to bring to its registered office in this state the books set out in the writ, to be subjected to the inspection and examination directed, and to keep them there until tire further order of this court. Hpon this being made to appear this court made an order tliat pending compliance by the defendant with the direction of the writ of mcmdamus and until the further order of this court, the order to show cause, and the restraint upon the defendant company contained in it, should be continued in full force and effect from week to week, with leave to the parties, or either of them, to apply to the chancellor for an amendment or modification of that order, or of the order to show cause, or that the latter be made absolute or discharged, or for further and other direction or relief. This order was complied with, and, after an examination of the books, the complainants, by leave of the court, filed an addition to their bill by way of supplement, setting forth conditions discovered by them in the examination of those books, which enabled them to aver that tire defendant was insolvent and unable to realize upon its assets even at a great sacrifice or by securing loans to pay its current obligations matured or which will mature in the near future, and that it was impossible for it to raise funds to enable it to prosecute its business with safety to the public and advantage to its stockholders; that it had suspended its ordinary business for want of funds to carry on the same, &c., adding prayers for injunction and the appointment of a receiver.

The defendant answered the original bill before the supplement was filed, and on the return of the order to show cause why a receivers should not be appointed on the supplemental bill, filed its answer thereto and several affidavits.

As already stated, the complainants’ bill (including supplement) has a dual aspect, one for the appointment of a statutory receiver as for an insolvent, or losing, corporation, under section 65 of the Corporation act, amended by P. L. 1912 p. 535, and the other for a receiver under the general powers of the court because of gross mismanagement and fraud practiced by the officers and directors of the defendant company. In the view I take of this ease it will not be necessary to decide whether the bill is multifarious, and whether, therefore, both phases of the question at issue can be considered. If the allegations involved third parties under the general jurisdiction feature of'the bill, then surely it would be multifarious. Pierce v. Old Dominion, &c., Smelting Co., 67 N. J. Eq. 399.

In that case Vice-Chancellor Stevenson disregarded the bill so far as it undertook to present the statutory action against the defendant and decided it on the motion for a preliminary injunction in aid of the situation under the general equity jurisdiction of the court. The case at bar, as to this dual aspect, is the reverse of that in Pierce v. Old Dominion, &c., Smelting Co., and this case will be considered with reference to the application of the statute to it, and the appeal to the general equity jurisdiction will be disregarded. See, particularly, the remarks of Vice-Chancellor Stevenson (at p. 416) referring to the dictum of Mr. Justice Van Syckel in Franklin Electric Light Co. v. Fort Wayne Electric Corporation, 58 N. J. Eq. 543, in the court of errors and appeals, wherein the vice-chancellor points out the difference between an order appointing a receiver and a decree for an injunction. They need not be combined in one and the same decree, although they usually are.

Unless finality is to be attributed to the decree for injunction the salutary provision for a summary hearing provided in the statute would be entirely frustrated. It has been the settled practice of the court to adjudge insolvency, issue an injunction and appoint a receiver on these summary hearings, both before and since the decision of the court of errors and appeals in Franklin Electric Light Co. v. Fort Wayne Electric Corporation, supra. In fact, the defendant concedes that this cause has been submitted on final hearing, and its counsel say in their brief that the charges under the corporation statute “call for a summary proceeding by the court and the entering of a final decree sustaining or dismissing the complainants’ bill.”

The defendant company attacks the motives of the complainants, alleging that they acquired their comparatively small holdings for ulterior purposes.

So far, at least, as the statutory feature of the case is concerned, the complainants’ motives are entirely immaterial. The case of McFadden v. May’s Landing, &c., Railroad Co., 49 N. J. Eq. 176, is in point. Said Vice-Chancellor Green (at p. 183):

“But if the' contention of tire defendant in this regard is admitted to its full extent, it furnishes no ground for refusing the complainant the relief he is otherwise entitled to. It attacks simply the motive of the complainant in bringing his suit. If he is the owner of these bonds and entitled to the accrued interest, he has the right to demand that the remedies given by the law shall be enforced, no matter what motive may have prompted his purchase.”

It is quite universally held that when a suitor is entitled to relief in respect to the matters concerning which he sues, his motives are immaterial. Hodge v. United States Steel Corporation, 64 N. J. Eq. 111 ; Fort Wayne Electric Corporation v. Franklin Electric Light Co., 57 N. J. Eq. 16; affirmed, 58 N. J. Eq. 543; Catlin v. Vichachi Mining Co., 73 N. J. Eq. 286.

The complainants’ motives here are quite immaterial. They have an absolute statutory right to maintain their bill, and, if they make a case under the statute, they are entitled to the relief they seek, namely, an injunction and receiver.

Although elsewhere, formerly, creditors only could sue for the winding up of insolvent corporations, our state from the first allowed the suit to be brought by either a stockholder or a creditor. Hoopes v. Basic Company, 69 N. J. Eq. 679, 686. Complainant need not be a creditor, but only a stockholder. Atlantic Trust Co. v. Consolidated Electric Storage Co., 49 N. J. Eq. 402, 404.

The complainants having standing to bring this suit (for, while they are not creditors they are stockholders), and their motives being immaterial, the only question remaining is as to the insolvency of the company, or, if it be not insolvent, then whether its business has been and is being conducted at great loss and greatly prejudicial to the interests of its creditors or stockholders.

The complainants in their bill as originally filed did not allege insolvency, but did, in their addition by way of supplement, attaching thereto schedules excerpted from the defendant’s books.

In 1904, the income of the company was $225,942.91. This year the income has been only $407.19. The salaries of the officers of the company have remained the same, the president having $20,000 a year, $5,000 of which was for expenses. One officer receives $6,000, another $2,500, and still another $1,200 a year. Latterly, these salaries have not been paid, there being no money to pay them-, but they have been charged against the company on its books. The corporation taxes due to the State of New Jersey amount to over $4,000, and the company is without funds to pay them.

While the defendant has "book assets” of millions, comprised of the capital stocks of other corporations, none of which have paid a dividend for years, it has debts totaling in round numbers a quarter of a million dollars, some of them quite old, with no money to pay them.

The president of the company, Joseph H. Hoadley, in his affidavit, among other things, says:

“The defendant’s only indebtedness, except perhaps for small current accounts, is as follows:
Chemical National Bank, principal and interest.. $73,000 00
Dividends declared but unpaid.......'........... 5,275 00
Joseph H. Hoadley............................ 55,465 27
American and British Manufacturing Co........ 116,332 61
State of New Jersey........................... 4,100 00
Or, a total of........................... $254,172 88”

While be says further' on that he has not made any effort to press payment of the indebtedness ($55,465.27) due to himself, that statement does not wipe out the debt or in any way tend to do so. Still further on he says:

“While it is true that at the present time it [the company] has no large amount of actual cash in hand, at the same time the board of directors can receive an income and get cash into the treasury by providing for the payment of dividends by the American and British Manufacturing Co., which is amply able to declare such dividends from cash actually on hand, and it will also be in receipt in a short time of income from new leases of the Trinity Zinc, Lead and Smelting Company.”

It is to be observed that the president says that the company has "no large amount of cash in hand” — thus giving the impression that it has a small amount of cash, not saying how small it is — and also says that the company "can” receive an income and get cash into its treasury by coercing another company which has cash, and whose stock it holds, to pay a dividend, and that the defendant will also in a short time be in receipt of an income from new leases to be made with a certain other company. These sources of revenue, it would appear, must be more imaginary than real — are certainly problematical.

Against the continuance of the present financial condition of defendant, with the improbability of relief from asserted sources of income, the complainants protest, and, I think, are entitled to be relieved.

Without further reviewing the condition of the defendant company, it is sufficient to say that the proofs clearly show not only that its business has been and is being conducted at a great loss and greatly prejudicial to the interests of its creditors and stockholders, but that' it is insolvent within the meaning of our statute. See the tests laid down in Trust Company v. Trustees of William F. Fisher &, Co., 67 N. J. Eq. 602; Catlin v. Vichachi Mining Co., supra.

The views above expressed lead to the conclusion that an injunction should issue in accordance with section 65, and that a receiver should be appointed with all the power and authority conferred by section 66 of our Corporation act.


text:
    Gwinnup T. Smith et ux. and Mary C. Smith v. Clinton B. Smith et ux. et al.
    [Decided December 18th, 1914.]
    After decree a bill will not be dismissed even with consent of all the parties.
    On application to open decree and dismiss bill.

      Mr. Nicholas Harris, for the motion.
   Walker, Chancellor.

This is a partition suit. Under a decree for sale the lands were struck off and sold to Lena K. Smith. The sale was confirmed some three years ago, since which time the cause has slept. The deed has not been delivered. Application is now made by and on behalf of all of the parties to the cause to open the decree and dismiss the bill. They have all consented, in writing, and the consent is also signed by the master who sold the property, but not by the purchaser. However, she signed the consent as a witness to two of the parties whose names appear upon it, and, it is fair to assume, that she too is consenting. Nevertheless, the motion cannot be granted.

It was expressly held, in Hudson Trust Co. v. Boyd, 80 N. J. Eq. 267, that —

“After decree the proceedings are under the control of the court and will only be opened to let in a defence, prevent fraud or mistake, or otherwise further the ends of justice, and this whether the proceedings and decree have been enrolled or not, a decree being efficacious to all intents and purposes as soon as it is made; after decree, in order to effectuate a settlement by the parties, the proper practice is to stay proceedings and not to dismiss the bill; a bill after decree will not be dismissed even with consent.”

It is perfectly obvious that the present application is not to let in a defence, or to prevent fraud or mistake, or otherwise to further the ends of justice. It is, on the contrary, to further no end save the convenience of the parties who invoked the jurisdiction of the court and obtained a decree settling the rights of all. This motion could not be granted without flatly overruling Hudson Trust Co. v. Boyd, supra. What the parties may do to effectuate their purpose is to have the deed executed and delivered, and then have the purchaser make a conveyance to them in proportion to their respective interests. That would revest in them the title divested by the sale and conveyance under the decree.

The petition will be dismissed.


author: Walker, V. C. Walker, Chancellor.

text:
    Edmund Wilson, attorney-general, v. Jesse A. Howland et al.
    [Decided March 11th, 1912.]
    1. An information by the attorney-general upon the relation of certain parties, to set aside a riparian grant on the ground that the grantee was not the owner of the lands constituting the ripa on which the grant was based, is an appeal to a purely legal jurisdiction of the court of chancery — one that existed in the chancellor himself before the institution of that court.
    2. An issue directed by this court to be tried by a jury may consist of a series of specific questions, and the propositions to be decided by the jury may be submitted to them in writing for their answer.
    3. The court of chancery is prone to submit a question of legal title to a jury even in a case in which it is not obliged to do so.
    4. On an information making an attack upon a grant of the riparian commissioners, a feigned issue in form to try the question whether the state is entitled to the possession of certain lands as against the defendant who is in possession, would give the defendant an opportunity to offer the riparian grant under which he claims, which would settle the question of the right to possession unless an objection to the validity of the grant should appear upon its face; but, as the question of fact to be determined is as to who owned the shore front at the time of making the grant, the form of the question to be submitted should be as to whether the defendant’s grantor was the owner of ^ny of the lands (which she made the basis of her application for a grant of lands under water in front of them), at the time of the riparian grant.
    5. A feigned issue will be framed with the defendants ■ as plaintiffs. The form of the issue, and practice thereon, outlined.
    On motion for feigned issue.

      Messrs. Durand, Ivins & Carton and Mr. Gilbert Collins, for the motion.

      Messrs. Cortlandt. & Wayne Parker, contra.

   Walker, V. C.

This ease arises on an information by the attorney-general upon the relation of certain parties, to set aside a riparian grant on the ground that the grantee was not the owner of the lands constituting the mpa on which the grant was based. This is an appeal to a purely legal jurisdiction of the court of chancery, and one that existed in the chancellor himself before the institution of the court of chancery. Van Schaick v. Board of Riparian Commissioners, 82 N. J. Law 219.

Precisely the same question is presented in the case at bar as was presented in Attorney-General v. Morris & Cummings Dredging Co., 64 N. J. Eq. 556, namely, one of ownership, or want of ownership, of the shore front at the time of making the grant. Affirmed, 69 N. J. Eq. 829.

The present application is for an order directing an issue at law to be framed, triable by a jury, in the supreme court, to inquire, ascertain and determine whether the title to certain islands described in the information is in the State of New Jersey or in the defendant Jesse A. Howland.

The application is resisted largely upon the ground that the questions to be determined are too intricate to be submitted to a jury, and that they can better be passed upon by this court. I fail to see any great force in this contention, as an issue directed by this court to be tried by a jury may consist of a series of specific questions. Black v. Lamb, 12 N. J. Eq. 108. And, as I understand it, the propositions to be decided by the jury may be submitted to them in writing for their answer.

The question in this case is one of legal title, and the court of chancery is always prone to submit such an-issue to a jury. In most cases it is obliged to do so. While it is not required to make that submission in this ease, nevertheless, the request for an issue at law appeals most strongly to the court, and, in the exercise of a sound discretion, I think it ought to be acceded to.

These views lead to the granting of the motion for an issue, and it will be framed upon application and on notice.

On motion to frame a feigned issue.

[Decided August 24th, 1912.]

Walker, Chancellor.

The bill malms an attack upon the grant of the riparian commissioners to Ellen Lucinda DeNyse. The defendant Howland is admittedly in possession under the DeNyse grant, and the attorney-general is attacking that grant and seeks to avoid it. The question thus involved is one for the decision of this court. An underlying question of fact-is, whether Mrs. DeNyse at the time of the grant was the owner of the shore lands (certain islands), and therefore entitled to the grant.

The defendant Howland has submitted a draft of an order for an issue in the form of an action of ejectment to try the question

“Whether the State of New Jersey is entitled to the possession of the said islands mentioned in the information in the above-stated cause, as against the said Jesse A. Howland, who is in possession thereof.”

An issue in this form, as I understand it, would give the defendants an opportunity to offer the riparian grant from the state to Mrs. DeNyse, under whom Howland claims, which would settle the question of the right to the possession of the islands, unless an objection to the validity of the grant should appear upon its face. Sooy Oyster Co. v. Gaskill, 69 Atl. Rep. 1084. The question of fact sought to be determined by an issue in this ease is as to the ownership of the shore front at the time of making the grant. Attorney-General v. Morris & Cummings Dredging Co., 64 N. J. Eq. 555; .affirmed, 69 N. J. Eq. 829. The question raised in that case was decided in this court without the intervention of a, jury. However, in the ease at bar the defendants have applied for a feigned issue to be sent to a jury, and I have already decided that it will be granted. (See the memorandum filed by me when vice-chancellor, March 11th, 1912.) Supra.

The informant, perceiving the narrowness, not to say conclusiveness, of the issue sought to be tendered by the defendant, claims that he is entitled to have presented to a jury the broader question, namely,

“Was Mrs. DeNyse the owner of any of the islands which she made the basis of her application for a grant of lands under water, in front of such islands, and if so what islands?”

In this I think he is right, and I will direct an issue with the defendants as plaintiffs — especially so as they seek, the issue — to determine the question as to who owned the islands at the time of the riparian grant. I am, however, unwilling to sign the draft of the order submitted by counsel for the informant. It makes provision for leave to apply, after the postea shall have been returned to this court, to send it back to the supreme court so that a writ of error may be taken. I understand the practice to be for this court to pass upon all questions of law and fact on the record returned, and that the party aggrieved by the denial of an application for a new trial may appeal to the court of errors and appeals. McAndrews & Forbes Co. v. Camden, 78 N. J. Eq. 244.

Let an order for a feigned issue be modeled upon tire form in Dick. Ch. Prec. (revised ed.) 245, omitting, of course, the provision on p. 246 that copies of depositions, &c., be read on the hearing, as none have been taken.

Now, the order for an issue only directs what questions shall be tried. The issue itself must be in the form of a common law action with appropriate pleadings. American Dock and Improvement Co. v. Trustees of Public Schools, 37 N. J. Eq. 266 (bottom of p. 269).

I do not see how the issue, in this case can be cast in the form of an action of ejectment when it is not intended to try the parties’ right to present possession, but only to ascertain a collateral fact of some time past.

In the case in 37 N. J. Eq. 266 (just cited), the court remarked (at p. 270) that “where convenience requires it the issue may be framed as if upon a wager.” This form of issue has not been abolished so far as I am aware. I presume the issue, in whatever form cast, must, as to pleadings, be controlled by “The Practice act (1912)” P. L. p. 377.

Let an appropriate order be submitted to me by counsel for the informant on notice to counsel for the defendants.


author: Emery, V. C.

text:
    Dinah Schneider et al. v. Emma Schmidt et al.
    [Decided December 28th, 1914.]
    1. A decree in a judgment creditor’s suit against a chattel mortgagee, who took possession óf the mortgaged chattels in 1907 for an accounting, in which the right to such relief was based on an execution levy made in 1911, and in which no claim under any earlier execution was made or set up, dismissing the bill on the ground that, as against the complainants claiming under such execution, the defendants were entitled to hold as owners and not as mortgagees in possession, and that complainants, under such levy, had no right to redeem, did not bar a subsequent suit for an accounting based on a levy made in 1904, although the laches or failure of the complainant to set up the claim under the earlier execution in the former suit might be a defence, since the second suit, though brought for the same kind of relief, was not based on the same right or title as the title on which the former suit was based.
    2. A plea of res adjudicata must show that the same point at issue on the present bill was at issue on the former bill, and that the title to relief is the same in the second bill as in the first.
    On bill, plea and replication and proofs.

      Mr. William A. Lord, for the complainants.

      Mr. Alfred F. Stevens, for the defendants.
   Emery, V. C.

This hill is filed against the defendants for an account as mortgagees in possession of certain goods and chattels described in the bill. Complainants’ right or claim to such account is based on this bill on their rights as lien holders under an execution levied on the goods on November 2d, 1904, of which the defendants took possession as mortgagees in 1907. Defendants plead as a bar to this suit a decree of dismissal in a former suit, brought against them for an accounting as mortgagees of these same chattels. Complainants took issue on the truth of the plea, and the question is whether its truth has been proved by defendants. The record of the former suit has been offered in evidence, and the conclusions filed by the vice-chancellor on the hearing of the cause have been treated as part of the record, and have been referred to in this hearing by both parties as evidence of the issues tried and decided. No other evidence than the record has been offered. The bill in the former suit was based on complainants’ rights as execution creditors under an execution levied on the goods and chattels described in that bill, which levy was made in August, 1911, four years after defendants had taken possession of the goods. The complainants, in the former suit, alleged in the bill that after the docketing of their decree on March 17th, 1905, they

“afterwards had several executions issued in the cause against defendants, but were wholly unable to secure payment of the money due under the decree except that on one of the executions, real estate was sold for $100 and credited on the execution,”

but no. further reference to the earlier executions was made in the bill, and-no right or claim under any levy made on the goods and chattels under any of these earlier executions was made or set out. To this former bill defendants (among other defences) pleaded possession of the chattels as owners. And on tire hearing it was held (as appears by the conclusions) that as against the complainants claiming under the execution set' out in the former bill (on which the levy was made in August, 1911) the defendants were entitled to hold as owners, and not as mortgagees in possession, all the chattels originally covered by the mortgage as well as the renewals and replacement thereof, and that under such levy the complainants, had no right to redeem (Schneider v. Schmidt, 82 N. J. Eq. 81), and decree was advised dismissing the bill.

The rights of complainants upon a title or cause of action based on a levy of November, 1904, were not in issue on the pleadings of the former suit. The present suit, therefore, although claiming the same kind of relief as the former suit, viz., an accounting by defendants as mortgagees in possession of chattels, is not based on the same right or title as the title for relief on which the former suit was based, and for that reason the decree dismissing that suit is not a bar to the present suit as an adjudication upon the record of the claim made in this suit. The plea of res adjudicada must show that the same point at issue on the present bill was at issue on the former bill, and that the title to relief was the same in the second bill as in the first. 1 Dan. Ch. Pr. (6th ed.) *661.

Upon the hearing of the present suit the laches or failure of the complainants in the former suit to set up therein any claim under the earlier execution as a ground of relief, and the effect of such laches may be defences to the present bill, but decision upon this question of the effect of laches was expressly withheld in the former suit. In the former suit the defendants, not the complainants, raised the question by setting up in their answer the earlier execution as one of the circumstances relied on to sustain this defence of laches in relation to the later execution The narrow issue on the present plea, as I take it, is whether the complainants’ right or title in the former suit is the same right or title relied on in the present bill, which is brought for the same kind of relief as the former suit, or was a right or title at issue therein and adjudicated xipon by the decree.

Defendants contend that the cause of action on the record in the former suit was the complainants’ right to require defendants to account as mortgagees in possession, and that a dismissal of the bill on the title to account set out, adjudicated upon all title to account upon whatever title then existed, whether set out in the bill or not. But, in my judgment, the cause of action in the first suit was the narrower one of the right or title of the complainants, by reason of the title as therein set out, to an account as mortgagees, and did not on the record either require or authorize an adjudication upon any other title to the same general relief. Certainly no other title than the one set out could be proved by the complainants or adjudicated on if objected to, unless the bill were amended. The New Jersey cases relied on do not, in my judgment, support defendants’ contention.

In Denver City Water Works v. American Water Works Co. (1913), 81 N. J. Eq. 139, Vice-Chancellor Howell held that where, in a former suit to quiet title under a foreclosure, a receiver as.defendant claimed that the sale was void, and the court affirmed the title, the receiver’s right to attack the validity of the sale was res adjudicada and he could not bring a subsequent suit here upon the same grounds to set aside the sale. He said, also (at p. 143), that it could not be attacked upon new grounds existing at the time of the former suit. This was a case where the issue on the record was the validity of the title under foreclosure, and the decree establishing it necessarily included all defences. In Rosenstein v. Burr (Vice-Chancellor Howell, 1912), 80 N. J. Eq. 424, complainant had previously brought suit to cancel a contract for specific performance alleging two grounds, and his bill was dismissed. It was held that in the subsequent suit brought against him for specific performance the decree in the former suit was res adjuckcata, as to other grounds claimed to be then existing for canceling the contract. The validity of the contract was considered to be at issue and to have been adjudicated. The general language used by the vice-chancellor in his opinions in these cases is of course to be considered with reference to the issues involved. These issues were, in each case, the claims to defend or set aside an existing legal act or contract, and in such eases the rule has been adopted that all existing causes relied on for asserting the invalidity of the act or contract must be conclusively taken to be included in the adjudication. -The doctrine of these cases is not, in my judgment, to be extended to a case like the present.

A decree or judgment establishing affirmatively a contract or other demand must, upon any theory of the finality of judicial procedure as ending litigation, necessarily include an adjudication upon all defences possible to be then made on the record, and a decree or judgment dismissing a claim to cancel or rescind the contract or other act which is the basis of a single cause of action may, on the same principle, be held to necessarily adjudicate upon all grounds or reasons for rescission existing at the time. But neither the establishment or cancellation of this single cause of action would necessarily or logically be an adjudication upon other complete and separate causes of action then existing, even though relief of the same general character be appropriate in these cases.

On a bill filed by complainant as junior mortgagee to foreclose the equity of redemption and a dismissal thereof, could complainant’s subsequent suit to foreclose a prior mortgage which he held be barred by this dismissal on the ground that the cause of action adjudicated on in the former suit was a general right to foreclose which must include all titles to that remedy ? Manifestly, where title is the foundation of the remedy claimed, the cause of action is narrowed to the title.

I will advise an order that the plea of res adjudicaba be overruled, but that the defendants have leave to answer, and that the overruling of the plea shall be without prejudice to their setting up by answer the decree of dismissal of the former bill as an equitable defence to tire bill or in connection with other defences. The case is one where the benefit of the former suit, so far as they are entitled to it, should be reserved to the defendants.


author: Stevens, V. C.

text:
    Catherine Simmons et al. v. The City of Paterson.
    [Decided November 6th, 1914.]
    1. The rule formulated in Doremus v. Paterson, 73 N. J. Eq. 476; 81 N. J. Eq. 27, and 82 N. J. Eq. 640, followed in ascertaining the damages sustained by the complainants in respect to their riparian lands bordering on the Passaic river by reason of its pollution by the sewage of that city.
    2. A property is riparian when, in a conveyance thereof, the premises are described as beginning “at the Passaic river,” which in legal parlance means at the medium filum aquas and, by the course of one chain from the road, it is carried back to the river as it used to flow.
    3. A property is also riparian when, in a conveyance thereof, the premises are described as running “thence (5) on the east side of the lake road, one hundred and ninety-one feet to the lands of Peter P. Kip; thence (6) easterly along said lines, fifty-five feet to Dundee lake; thence (7) southerly along the same to a point,” &c., Dundee lake, so called, being a part of the Passaic river, whose waters are widened at that point by the Dundee dam. Such a description carries the title to the medium filum aquae, if the grantor owns so far.
    4. A property is also riparian when, in a conveyance of the land, the deed describes the third course as running along the northerly line of Mary Ann Van Saun “to the easterly line of the Passaic river and thence (4) northerly along the easterly line of the Passaic river, the several courses thereof, eight chains and thirty-two links to the place of beginning,” the place of beginning being described as “a point in the easterly-bank of the Passaic river, where the same is intersected by the division line between William P. Vreeland (the grantor) and Peter H. Doremus,” and there being nothing apparent tending to indicate an intention to retain anything, the stream to its centre will be held by legal presumption to be embraced.

      Mr. Ohauncey O. Parker, for the complainants.

      Mr. Edward F. Merrey, for the defendant.
   Stevens, V. C.

The problem is to ascertain, the damages sustained by the various complainants in respect of their riparian lands bordering on the Passaic, by reason of its pollution by the sewage of Paterson. I have already formulated a rule in previous cases (Doremus v. Paterson, 73 N. J. Eq. 476; 81 N. J. Eq. 27; 82 N. J. Eq. 640), and as it has received the sanction of the court of errors and appeals, I have nothing to do but to apply it to the facts of this case.

I estimate the annual values of such parts of the various properties as are or may be affected by the condition of the river, as follows :

Catherine Simmons (house)....................... $350
Catherine Simmons (ice houses from 1897 to 1905) .. 400
Prom 1905 ................................. 200
John, William and James Hinchliffie............... 450
Alexander McDonald Granite Co. (% of sliding scale), 300
Mary R. Smith.................................. 400
Leonard Yanderbeek ............................. 450
John Hannema.................................. 300
Jessie Alyea .................................... 300
Peter D. Henderson.............................. 300

The above are the improved properties.

I estimate the annual loss arising from what has been called .arrested development, as follows:

C. Howard Parmley.............................. $25
Doherty Silk Co. (since June 28th, 1909).......... 150
Edo Terhune (since his ownership in severalty)---- 25
Harold and Irving Terhune (since such ownership) .. 15
Rosemont Land and Improvement Co............. 50

As to the latter of these two'classes of cases, I have only to say that an accurate ascertainment of the loss is impossible, and even an approximate estimate only problematical. Many of the considerations that enter into the problem have been adverted to in my former opinions, and as applied to the particular cases here under consideration there are others. Considering the advance of factories up the river from Passaic and down the river from Paterson, and the kind of neighborhood such factories create, the new methods of travel, and the new tastes of the people, I do not think it possible for anyone to assert, with confidence, what would have been the fate of the lands in question had the water remained unpolluted.

I have made awards to the Doherty Silk Company and to the Rosemont Land and Improvement Company. Lots have been plotted and sold on both tracts, and so it has been argued that the lots are separate pieces of property, and that as far as separated from the river by the old highways, they have become non-riparian. They were, unquestionably, riparian, notwithstanding those highways, when the Rosemont company and Doherty purchased, and I am not satisfied that because they have been plotted on paper and offered for sale they have lost their character as such. The so-called improvements are scarcely discernible on the ground, and the properties seem, still, to be in the stage covered by the decisions of the supreme court in Somerville and Easton Railroad Co. v. Doughty, 22 N. J. Law 495, and of the court of errors and appeals in Currie v. Waverly Railroad Co., 52 N. J. Law 381, 392.

It was argued by the city that three of the properties are not riparian in any part, viz., the Henderson, the Hinchliffe and the Hannema properties, because it said that they stop at the edge of the stream.

As to the first, the oral evidence satisfies me that it is riparian. I have no doubt that it was intended to front the Henderson farm on the river, just as all the other farms in that vicinity and around Dundee lake were at one time fronted on the river. It begins “at the Passaic River,” which, in legal parlance, means at the medium filum acquoe, and, by the course of one chain from the road, it is carried back to the river as it used to flow.

The Iiinchliffe property is also riparian. The fifth course in the deed from James Simmons to Margaretta Barney runs

“Thence (5) on the east side of the lake road one hundred and ninety-one feet to the line of lands of Peter P. Kip; thence (6) easterly along said line fifty-five feet to Dundee lake; thence (7) southerly along the same to a point,” &c.

Dundee lake, so called, is a part of the Passaic river, whose waters are widened at that point by the Dundee dam. By the great weight of authority such a description carries the title to the medium filum aquce, if the grantor owns so far. In this ease it is said that his grantors, John and Janet Bain, in May, 1837, conveyed to the Dundee Company, in fee, a tract of three-quarters of an acre lying in the Passaic river, “overflowed by the raising of the mill dam” of that company. If the last-mentioned lot lay in front of the Barney lot it would not be riparian, according to the cases of Stevens v. Newark and Paterson Railroad Co., 34 N. J. Law 532, and Simmons v. Paterson, 60 N. J. Eq. 385. But it lies in front of only a part of it. The plot has been located by the city surveyor of Paterson. From his map it appears that if the side lines of the Barney lot be prolonged to the middle of the stream, or if lines at right angles to the shore line be drawn from the corners of the lot to the middle of the stream, there will still remain a strip of land that belonged to James Simmons and that ran to the medium filum, untouched by the Bain deed.

The question whether John and Bankje Hannema are riparian owners may, under the general course of decision, be more doubtful. The deed to them describes the third course as running along the northerly line of Mary Ann Van Saun

“to the easterly line of the Passaic river, and thence (4) northerly along the easterly line of the Passaic river, the several courses thereof, eight chains and thirty-two links to the place of beginning.”

The place of beginning is described as

“a point in the easterly bank of the Passaic river, where the same is intersected by the division line between William P. Vreeland (the grantor) and Peter H. Doremus.”

I cannot find in the record any testimony which throws light upon the exact location of the beginning point thus mentioned.

To ascertain whether the title extends to the medium filum, or to some other line, we have nothing to guide us but the language of the deed itself and the surrounding circumstances. The decisions treat lines running to a stream very much as they treat lines running to a highway. The cases disclose differences of opinion as to the effect to be given to the descriptive words in both classes of cases, some of them attributing more importance to paramount intention and others giving effect to the ordinary significance of the words used. The cases in our own courts are necessarily of more authority on this question than those of other tribunals. Salter v. Jonas, 39 N. J. Law 469, is a leading case. There the premises were described as beginning at a stake standing at the junction of the easterly line of Rowland street with the northerly line of Johnson street and running thence along the northerly line of Johnson street south, &c.; “thence (3) north 23° 40' west fifty (50) to a stake in the easterly line of Rowland street; thence (4) along the same south 66° west one hundred (100) feet,” to the .beginning. The question was whether Rowland street, in front of the locus in quo, to its middle line, passed by this description. Chief-Justice Beasley, speaking for the court of errors and appeals, said: “This is a subject with respect to which the views of judges are much at variance.' The general opinion appears to be that there is so strong a presumption of an intention to convey the soil of the highway when the premises granted actually border upon it that very plain indications of a contrary purpose are requisite to exclude it. Under the operation of such a test tire present deed would not embrace the land in dispute, for the descriptive words cannot be extended from their intrinsic force, so as to have so wide a reach. The words here used will not, if interpreted in their familiar sense and standing by themselves, admit of being taken as delineatory of any part of the street. The only point for consideration is therefore whether, when the terms used have this restrictive force, they are to lose that force in the presence of the great presumption to the contrary, which is inherent in the position of affairs where a lot thus located is granted.” He then discusses the Pennsylvania rule, and adopts it, holding that notwithstanding the language of the deed the street passed by the conveyance. He says: “The particular words should in such transactions be controlled and limited by the manifest intention which is unmistakably displayed in the nature of the affair and the situation of the parties. When the conditions of the case are altered, as if the vendor should in a given ease have an apparent interest to reserve to himself the parcel of street in question, a different rule of interpretation might become proper.”

Now, it would be quite illogical and unnecessary to hold that the situation being similar, there should be one rule in the case of highways and another in the case of streams, if the reason of the rule should apply equally to both. The exception stated by the chief-justice is comprehensive enough to do exact justice between the parties in any case. If the vendor has an apparent interest to reserve to himself what title he has to the street or stream in question, then such reservation should be made. ít may be that he may more frequently have such an interest in the case of a stream than in the case of a highway. For example, a mill owner using water power sells a lot on his mill pond running to the “edge” or “bank” or “shore” of the stream. Here the interest is obvious. He needs the uninterrupted flow of the water and it is not likely that he would consciously do that which would tend to endanger it. Hence, many cases have held that in such a situation the words “edge,” “shore,” “bank” should receive their everyday meaning and so limit the grant. But where there is no apparent reason for making the reservation, and where there are no express words of exclusion, the paramount intent of the parties will, no doubt, be best effectuated by applying the rule laid down in Salter v. Jonas.

Vice-Chancellor Van Fleet, in Kanouse v. Slockbower, 48 N. J. .Eq. 42, said: “The law is well settled that a grant of land bounded upon or along a river above tidewater carries the title of the grantee to the centre of the stream, if the title of the grantor extends that far, unless the terms of the grant show that is was the intention of the parties that the grantee’s title should not extend to that point.” And Mr. Justice Dixon, in Attorney-General v. Delaware and Bound Brook Railroad Co., 27 N. J. Eq. 631, said: “Among these rules, none, I think, is more firmly settled than this, that grants of land bounded upon or along rivers above tidewater carry the exclusive title of the grantee to the centre of the stream, unless the terms of the grant clearly denote the intention to stop at the edge or margin of the river.” The precise point here under discussion was not before the court in either of those cases, but the general principle is stated, and, as it seems to me, should, when it comes to its application, be applied in such a way as to harmonize with Salter v. Jonas, supra.

Coming, then, to the case in hand, I find nothing to exclude the bed of the stream except the vague words, “beginning at a point in the easterly bank of the Passaic,” and the further words, “to the easterly line of the Passaic river and thence along the easterly line of the Passaic river the several courses thereof,” &c. These words are no more indicative of an intention to exclude the stream than were the corresponding words, in Salter v. Jonas, to exclude the street. In both, “the easterly line” is declared in terms to be boundary. But, looking at the surrounding circumstances, I find no more reason for giving them an exclusive effect in the one case than in the other. The grantor was not a mill owner, or, as far as appears, engaged in a business which required the use of water or power. He conveyed all his front on the stream. He reserved no means of access to it. He did not thereafter claim or use it. The objection comes, not from him, but" from the city of Paterson, which has not the slightest interest in the property. Then, again, I think it may fairly be said that if the grantor had really desired, to reserve the land over which the water flowed, or any part of it, i. e., the land over7 flowed by the damming of the stream or that overflowed by the river in its natural state, he would not, by ambiguous description, have conveyed “to the Passaic river the several courses thereof.” What did he mean by “river ?” Did he thereby intend to retain the river bed and not tire artificial lake bed? There is nothing apparent tending to indicate an intention to retain anything. As there are no words of express exclusion,' it seems to me that the rule in Salter v. Jonas, supra, should apply. Thereunder Hannema takes adI medium filum aquce.

I have put the rental value of the Vanderbeck properly at $450. This, though it would be warranted by the evidence of Mr. Van Duyne, is, I think, high. The property is, however, by reason of its peculiar situation, more exposed to the odors of the river than any other that I have considered, and the damages are therefore a little greater. By putting the rental -value a little higher, proportionately, and by applying to it the sliding scale heretofore formulated, Vanderbeck will receive an award corresponding to his greater injury.

The rental values assigned include, of course, not only the houses, but the barns, outhouses and curtilages attached thereto.

If, in any ease the rent actually received would, with the damages calculated according to the table, exceed the rental values assigned, the excess should be deducted.


text:
    Anton E. Muller v. Samuel Hubschman et al.
    [Decided December 28th, 1914.]
    1. Before a creditor can in this court avail himself of the provisions of the Bulk Sales act (P. L. 1914 p. 59), which annuls a certain class of sales as against the vendor’s creditors, unless certain prescribed steps are taken, the creditor must show that he has acquired by judgment and execution, or otherwise, a lien upon the vendor’s goods.
    2. A bill by a creditor of the vendor, against the buyer and the buyer’s vendee, is not maintainable, which alleges that the buyer had disposed of all the goods sold to him, and prays that so much of its price in the hands of the buyer’s vendee as will satisfy complainant’s claim be decreed to be paid over to the complainant.

      Mr. Elias A. Kmter, for the complainant.

      Mr. Joseph Steiner, for the defendants.
   Stevens, V. C.

This is a bill filed by a creditor of the defendant Hubschman, to obtain a money decree against Hubschman and his vendee, Sommer, on the theory that he has a cause of action against them in this court under the Bulk Sales act. P. L. 1914 p. 59 The bill alleges that Hubschman, being the owner of a hardware store, sold it to Sommer in violation of the provisions of that act, because the purchaser did not make inquiry of the seller for the names and residences of his creditors and of his indebtedness to them and did not give the requisite ten days notice. The bill further alleges that Sommer has disposed of all the goods sold to him and prays that he may be deemed trustee of their price:

The bill is, I think, demurrable, in that it does not show that complainant is a creditor, who has acquired by judgment and execution or otherwise a lien upon Hubschman’s goods. The charge is only that he is a general creditor, and it is sought to uphold his right to sue on the ground that the act in question avoids the sale “as against the creditors of the seller.” But the eleventh and twelfth sections of the statute of frauds (Comp. Stat. p. 2617) contain similar language, and yet it has uniformly been held that before the creditor can avail himself of the provisions of that act, “he must have his debt fastened on his debtor’s property by law, judicial process or some other way.” Graham Button Co. v. Spielmann, 50 N. J. Eq. 123. The contrary view was repudiated by the court of errors and appeals in Easton v. Castner, 31 N. J. Eq. 697.

The fourth section of the Chattel Mortgage act (Comp. Stat. p. 463) declares

“that chattel mortgages not accompanied by immediate delivery and followed by an actual and continued change of possession shall be absolutely void as against the creditors of the mortgagox-, xxnless recorded,”

and, “yet it is,” says Vice-Chancellor Emery, in Wimpfheimer v. Perrine, 61 N. J. Eq. 132; affirmed, 67 N. J. Eq. 598, “entirely settled that the recovery of such judgment and the issuing of execution entitling the judgment creditor to a lien upon personal property of the debtor is necessary in order to put a creditor in a position to attack the validity of an unrecorded mortgage.” There is nothing in the present act that would authorize the court to depart from this well-established rule. Its purpose, declared in-its title, is the prevention of fraud. Because proof of fraud is sometimes so difficult, it goes to the extent of annulling an entire class of sales, innocent or fraudulent, as against the vendor’s creditors, unless certain prescribed steps are taken whose object is to notify them of the contemplated sale. The act so far restricts the seller in the enjoyment of Ms property rights that some courts have held similar though perhaps somewhat more drastic legislation to be unconstitutional. Wright v. Hart, 182 N. Y. 330. While our supreme court has taken a' contrary view (Kett v. Masker, 86 N. J. Law 97), it yet remains true that if a creditor must clothe himself with a judgment before he can take advantage of that provision of the statute of frauds (section 12), which declares void every conveyance of goods and chattels contrived in fraud with intent to hinder, delay or defraud creditors, so must he, where the right is given to attack a transaction that may be innocent and is only voidable because the. statute makes it so.

It is said that the time limit would some time prevent relief from being had in this court, but I cannot understand why, because the right of attack is limited to ninety days, this should, of itself, be a ground for a different rule. It seems to me rather that when the legislature saw fit to give this new and drastic remedy — a remedy which confounds the innocent and the guilty because of the difficulty of discriminating between them — it did not think it wise to allow it to be applied, except for that limited period.

But there is another difficulty with complainant’s case. The relief ordinarily given by this court is to avoid the fraudulent sale and to declare that the vendor’s property is still subject to the lien of complainant’s judgment and execution. Here the relief asked for is different. The bill charges that the buyer has sold all the property. He asks that so much of its price, in the hands of the buyer’s vendee, as will satisfy his claixn, be paid over to him. This court would first have to determine the amount due from buyer to complainant — the appropriate function of a common law court — and then, on the basis of the finding, give a money decree against the buyer’s vendee. I doubt very much whether this court would have jurisdiction to do what a common law court could do equally well in an action for goods sold, as against Hubschman and for money had and received, as against Hubschman’s vendee, Sommer, if the act in question sxxbject him to this liability.


text:
    Maria Guatelli v. Charles J. Brown et al.
    [Decided January 13th, 1915.]
    1. That B. misled and induced ignorant and inexperienced women to sign a mortgage intended to secure his own debt, to a third person, which they did not understand, and would not have executed had they been properly advised, B. himself taking their acknowledgment and being bound, as the officer taking the acknowledgment, to make explanation to them suited to their limited intelligence, is ground for declaring it void in his hands.
    2. A mortgage is invalid in the hands of an assignee, if there be no consideration for the mortgage or assignment.
    3. Trusts may be raised against those participating in indefensible transactions, but not in their favor.

      Mr. John H. McCracken and Mr. Brown, for the complainant.

      Mr. Harry Kalisch, for the defendants.
   Stevens, V. C.

This is a bill which prays for a decree that a mortgage given by complainant to Henry C. Beach be declared void because procured by fraud.

Maria Guatelli is the widow of Philip Guatelli who died in November, 1904. He was the owner of two improved lots known as Nos. 17 and 18 Grove street, Newark. He occupied a part of the house built on one of these lots and leased the remaining part and the house adjoining. Hp to three years prior to his death he had been in the employ of Walters & Brothers, wholesale produce dealers, receiving $18 a week wages. After that time he was unable to work because he had contracted tuberculosis — the disease of which he died. During the years he was unable to work, his support came from the wages of his unmarried daughter, $7 per week; from benefits from his society of $7 a week or less, and from the net rents of his property, two or three hundred dollars a year. His family consisted of his wife and daughter, the latter being his sole heir-at-law. He left no will’ and no administration was taken out. The wife is an Italian, unable to read or write. The daughter, married to one Bruni in 1910, appears to be possessed of some intelligence and education, and was at the time of her father’s death twenty-four years old.

Philip Guatelli had made the acquaintance of the defendant Charles J. Brown, a note broker, as early as the year 1900. In November of that year he gave to Brown two notes, one for $100 and one for $250. The evidence indicates that they were given for money borrowed, to enable a friend of Guatelli to make a trip to Europe. They do not appear to have been discounted. Several other notes, however, made after that time by Guatelli, were discounted by Brown at the National Newark Banking Company, and their proceeds placed to Brown’s credit. Whether they, or some of them, were made for Brown’s accommodation or for Guatelli’s benefit does not clearly appear from Brown’s testimony. All that does appear with any certainty is that notes signed by Guatelli .were discounted and placed to Brown’s account.

Brown’s pass-book • with the banking company for' the year 1904 was produced and shows that in August, 1904, two Guatelli notes were thus discounted, one for $175, and one for $329, and that in September, 1904, two other Guatelli notes were also discounted, one for $250 and one for, presumably, $300, the amount placed to Brown’s credit on this latter being $293.98. None of these notes were produced.

Brown says that Guatelli having died in November, 1904, he went to the widow’s house to see about a renewal of the note coming due on December 20th, his first visit being in that month, and his next, two or three months afterward, and that the widow and daughter told him that whatever they owed they would pay; that he repeated his visits at intervals without result until 1910, when hearing that the daughter was about to marry, and fearing trouble from the son-in-law, and fearing, too, that the notes would soon be outlawed, he prepared the mortgage in controversy and went to the complainant’s house with it in August, 1910. This is his account of the interview: “I merely said that I came here to have the mortgage fixed up and the mortgage was all ready and they signed it.” The mortgage, he says, was made to secure two of the notes above mentioned, one for $175 and one for $250, amounting in the aggregate to $425, which, with six years’ interest, made up the $575, the amount for which it was given.

The transaction was a singular one. In the first place, he himself drew the mortgage, and took the acknowledgment. He knew, probably, that it would not do to take the acknowledgment of a paper made to himself, so he inserted the name Henry C. Beach as mortgagee. He had previously secured Beach’s consent to this and he had previously requested Beach to draw a check on the National Newark Banking Company for $575, payable to the order of Mary Guatelli. Beach drew the check but refused to sign it, so Brown took it unsigned, with the mortgage, to Mrs. Guatelli’s house, and she and her daughter endorsed it, Mrs. Guatelli doing so by making her mark. Brown afterwards handed back the check to Beach and Beach kept it unsigned. Brown also drew an assignment of mortgage from Beach to himself, but subsequently destroyed it and then, afterwards, wanting, he says, to secure a loan from the defendant Cinnamon, got Beach to execute a second assignment. This latter bears date November 25th, 1912; that is two years and three months after the transaction.

It must be borne in mind that the parties to. this peculiar transaction were a shrewd note broker on the one side and two ignorant and inexperienced women on the other, who say, and no doubt, truly, that they knew nothing of Philip Guatelli’s note transactions. Their ignorance and inexperience is apparent from the fact that at Brown’s request merely, without demur, they executed a bond and mortgage to a man of whom they had never heard and to whom they owed nothing and then endorsed an unsigned check, which could only have been intended to give the affair a false color.

The transaction as a whole must be separated. The first part of it occurred in 1904; the second in 1910. Brown’s bank passbook for the year 1904 shows that four Guatelli notes were discounted and placed to Brown’s credit. Brown does not explain how out of the four he selected the two. While he produces the cheeks to show that he took up the two notes at maturity, he does not produce anything to show that Guatelli received the money on them. Of course, it is elementary law that when a man makes a note, the presumption is that it represents the maker’s debt, but notes are often given for the accommodation of the payee, and Brown admits that he and two or three others were using notes in this way. It is at least unfortunate that Brown was unable by any writing to show that he paid to Guatelli what had been placed to his own credit. A cheek or receipt would have been the appropriate and usual evidence, whether the money was paid before or after the discount. It is not shown that Guatelli either needed or used the money. It may be that the proof is not sufficiently strong to defeat an action on the notes, but it suggests a doubt as to whether Guatelli really received the money This doubt is strengthened by Brown’s subsequent conduct. Instead of insisting upon an immediate payment or adjustment of the matter, while the facts were fresh in the recollection of those who had to do with it, he waited for six years, and then in order to keep the matter entirely in his own hands, devised the scheme which enabled him to take the acknowledgment himself. He says he wanted to save lawyer’s fees, but as he could have drawn the mortgage to himself just as easily as he could have drawn it to Beach, and as the acknowledgment fee was only the insignificant sum of fifty cents, the hollowness of this pretense is apparent. There is one very significant and undisputed fact. Beach was willing to have the mortgage made to him, but he was not willing to sign the check and have it go through the bank as if it were a real transaction and as Brown intended it should. In other words, when it came to the question of putting a deceitful appearance upon the transaction, he was unwilling to be a party to it. Why the necessity of putting such an appearance if the demand was honest ?

Brown does not testify that he explained to the women his reasons for thus coloring the affair or that they understood it. His evidence was: “I merely said that I came here to have the mortgage fixed up and the mortgage was all ready and they signed it.” It is hard to resist the conclusion that he did not fairly explain the transaction. Asked, on cross-examination, to say why he told them to endorse the check, he said he could not.

I have thus far considered the case from the standpoint of Brown’s version of the affair. Mrs. Guatelli and her daughter give a different account of it. Guatelli, as I have said, borrowed money from Brown in 1900 to enable a friend of his to go to Germany and gave two notes for $100 and $250, both of which were produced. The notes, which do not appear to have been discounted, were at the time they were made secured by a mortgage of $350. Mrs. Guatelli and her daughter both testify that it was of the $350 indebtedness that Brown spoke whenever he came to see them. In 1908 they appear to have paid $25 on account of this indebtedness, for Brown has himself endorsed the payment on the notes, which evidence it. They say, moreover, that it was of this indebtedness that he spoke when he brought them the mortgage telling them that the $575 included the interest they owed. People sufficiently ignorant to sign, without explanation, a bond and mortgage, made out to a man to whom they owed nothing, and to endorse an unsigned check, would be ignorant enough to sign a second mortgage to secure back interest. But it is not necessary to base the decision upon this evidence, nor to decide whether the notes of $175 and $250 really represented money lent. There is evidence enough on the face of the papers and on the undisputed facts to warrant the conclusion that Brown misled the women, and induced them to sign papers, which they did not understand and would not have executed had they been properly advised. Brown by putting himself in the position of an officer taking the acknowledgment was bound to make an explanation of them suited to their limited intelligence.

Another view of the matter leads to a similar conclusion. It is held, in Bogart v. Stevens, 69 N. J. Eq. 800, that if a mortgage is delivered to A without consideration, in order that A may raise money on it for the mortgagor, it becomes valid in the hands of A’s assignee for the money paid therefor by such assignee. Mr. Justice Dixon says: “Although the. contract as between the parties was wholly without consideration, yet if made for assignment, and if assigned for a consideration, the latter becomes the consideration of the original contract.”

In the case in hand, the mortgage -to Beach was admittedly without consideration given by Beach. Was it then made for assignment? Undoubtedly, Brown intended it to be made for assignment, but there is no evidence that the Guatellis did. Was it in fact assigned for consideration? Certainly, there was no consideration moving from Brown to Beach. Was there then any moving from Brown to the Guatellis? Brown says that he gave up the notes: the two women say that he did not. I think the weight of the evidence is with them. The ease then seems to be this: The mortgage in the hands of Beach was unenforceable. It remained unenforceable for over two years. Then it was assigned to Brown. How could the assignment give it validity ? It may be said that it had validity from its inception on the theory that Beach held as trustee of Brown. But it seems to me that before a trusteeship of this sort could arise the parties must have all concurred in making it. The transaction was not on its face a trust. A bond was given to Beach creating, apparently, an indebtedness to him. This rather negatives than suggests the idea of a trust in favor of Brown. The endorsed, but imperfect, check negatives the idea that a trust was intended. To transform so irregular and, I may say, reprehensible a transaction into a trust for Brown’s benefit, would not be doing equity. Trusts are often raised against those who participate in indefensible transactions, but not in their favor.

I think the bond and mortgage should be declared void.