author: Stevens, Y. C.

text:
    Frederick Conrad, administrator, &c., v. Charles A. Conrad et ux.
    [Decided August 17th, 1912.]
    On a bill- for au accounting charging that the defendants took advantage of fhe mental weakness of a great uncle, who was living with them, to obtain considerable sums of money (either the proceeds of real estate or other money) for which they are bound to account, evidence examined and held, insufficient to establish either fraud or incompetency, no fraud being shown, at farthest, a money demand, recoverable at law, the bill should be dismissed.

      Mr. George II. Peirce, for the complainant.

      Mr. Alan II. Strong, for the defendants.
   Stevens, Y. C.

This is a bill for an accounting. The charge is that the defendants, Charles A. Conrad and his wife, took advantage of the mental weakness of Charles Conrad, a great uncle, who was livmg witli them, to obtain considerable sums of money (either the proceeds of the sale of real estate or other money) for which they are bound to account.

In addition to what was said' on the argument, I will very briefly indicate why I think this bill should be dismissed. The specific charges made, viz., those relating to the sale of real estate, have no evidence to support them. There are, however, general charges to the effect that defendants, received other moneys drawn from banks and it is prayed that they may account for them.

On defendants’ examination it appeared that deceased had a savings bank account in the Mutual Savings Eund Harmonia of Elizabeth. Charles A. Conrad admitted that at the request of his uncle he drew out various sums of money, and in particular $900 in June, 1906, and $1,000 in September, 1907. He says that he paid over the money thus drawn to his uncle. It is proved by an officer of the bank that he had express authority to sign his uncle’s name to the drafts, and there is no direct evidence that the money when drawn was appropriated by defendants.

As to the $900 the complainant’s evidence is that Charles A. Conrad received the money and gave $.200 to Henry Conrad, by his uncle’s order, and that his uncle informed Henry, when Henry a year afterwards repaid what he had borrowed, that Charles A. Conrad had drawn $700 (presumably as a,loan).

As to the $1,000, the complainant’s evidence is that the nephew deposited the money in his own bank account and that it appears from a transcript of that account that his statement on the-witness-stand that he drew a check upon his individual account for $500, within a few days after he made the deposit; that he cashed it, and that he gave the money to his uncle, does not accord with the facts.

The bill, as I have said, made no specific charges as to the money. The defendant’s attention was, for the first time, directed to them when, without any writing to aid his memory, he was compelled to testify to the details of transactions that had occurred five or six years previously. His manner of testifying was unfortunate, but it is not surprising that his memory was at fault. He is a plumber in the growing town of Carteret. His bank account shows that his business was considerable, and that he was at -the time the moneys were drawn under no apparent stress for funds. I am asked to find, on the strength only of inaccurate statements made with too much positiveness, that he deliberately perpetrated a fraud for which he would have been criminally liable, upon an uncle who had already given him property in return for his engagement to take care of him for the rest of his life, and this for no motive except the desire for illicit gain. I am unwilling, on the slender proofs offered, to make such a finding.

Charles Conrad died in December, 1909, at the age of eighty-four or eighty-five. Some time after his wife’s death, and about the year 1900, he went to live with defendants, with whom he remained until May, 1908, after which he went, first, to two nieces, and then to his nephew, Frederick. These and other members of the family are manifestly hostile to defendants. In the fall of 1908 a lunacy commission issued, and in December of that year he was found a lunatic. The finding was, further, that he bad been such for five or six years previously. The latter part of this finding is manifestly based on inadequate evidence. The defendants were not called as witnesses and did not even know that the inquiry was proceeding. It is completely disproved, at least, as to the time prior to 1908. While physically infirm, he' was not mentally incompetent!

I do not think the evidence sustains the charge in the bill that defendants obtained Charles Conrad’s money by taking advantage of his lunacy and advanced age. It may be that there is some money, for instance, the $75 for-painting, owing by Charles A. Conrad to complainant, recoverable in an action for money had and received. While the defendants’ evidence might have been more satisfactory, I do not think that either fraud or incompetency has been proved. There is present, consequently, no equitable feature. The bill should be dismissed without prejudice and without costs.


source: Caselaw Access Project

author: Stevens, V. C.

license: Public Domain

text:
    Henry W. Doremus et al. v. The City of Paterson.
    [Decided January 4th, 1913.]
    1. An award fixing the damages to a landowner during a stated time from pollution of a stream by a city is not an adjudication of the amount of damages suffered subsequently.
    2. In an action for damages to suburban real property caused by the pollution of a stream, the damages must be assessed on the value of farming property, even though complainants’ experts testified as to its problematic value for city purposes.
    3. In a suit for damages to real property caused by the pollution of a stream, where a depreciation of $800 in the sale price was admitted, but the defendant undertook that at the end of five years such pollution would be removed, the measure of damages for that depreciation is not the interest on the difference in price calculated on the assumption that the city’s undertaking- was improbable, but the interest on the difference between the present price calculated as if the pollution would be removed at the end of several years, and the price as if there were none.
    4. In a suit-for damages to real property caused by the pollution of a stream through the introduction of sewage, the owners are entitled to' adequate compensation, and so, where the bed and banks of the stream have been permanently polluted, they are entitled to damages therefor, even though the emptying of the sewage has been stopped.
    5. Where a right depends upon the happening in future of some contingent event, the court will not pass upon it until the contingency occurs; hence the amount of damages to which landowners may be entitled for the pollution of a stream at the end of a given period will not be computed, where defendant claims that after that time it will no longer pollute the stream, and it does not appear in what condition the stream will bo left.

      Mr. J. Edward Ashmead and Mr. Ohauncey G. Parker, for the complainants.

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

This case has been before me on several previous occasions. 63 N. J. Eq. (18 Dick.) 606; 65 N. J. Eq. (20 Dick.) 711; 69 N. J. Eq. (3 Robb.) 176; 70 N. J. Eq. (4 Robb.) 296; 73 N. J. Eq. (3 Buch.) 476. 1 shall not repeat what has been said, nor shall Y attempt any further discussion of the merits than is necessitated by the new evidence. The question is, What award shall be made to the complainants for the injury done and to be done to their respective properties because of the continuance, for four years, of the pollution of the Passaic river by the defendant’s sewage?

The prayer of the bill was, originally, for an injunction only, but, in accordance with the decision of the court of errors and appeals (60 N. J. Eq. (15 Dick.) 385), it was so modified that it prayed for an injunction unless and until the defendant made such compensation to complainants respectively, for the diminution in value of their-said lands and property rights, as should be ascertained to be just. The city elected to make compensation and an award was made accordingly. The final decree, made June 26th, M08, awarded compensation on the basis of a continuance of the nuisance until 'March 26th, 1911, and then provided that an injunction should issue on that date with, however, the following proviso :

“If notwithstanding the exercise of due diligence, the mayor and alder-. men of the city of Paterson is unable to cease polluting the river by the time aforesaid, leave is reserved to apply to this court, upon such terms as this court may deem equitable, to postpone the time of issuing said injunction to a day to be fixed by this court.”

The city at first applied for a further term of five years/ but subsequently changed it to four.

On the former hearing, as a convenient means of reaching a definite result, I prepared a table of the annual or rental values of the various properties. It will be found in 73 N. J. Eq. (3 Buch.) on page 506. I then, arbitrarily, for reasons there explained, estimated the diminution in annual value caused by the pollution of the river, attributable to Paterson alone (for I found pollution from other sources), as follows: Eor the year 1892, five per cent, of the sums named in the table, and for each succeeding year, one per cent, in addition. The amounts computed on this basis were promptly paid. The gradually increasing percentage was given because of the admitted fact that as the city increased in population and built new sewers, the pollution also increased.

Erom this table it would have been possible to have computed the probable injury for the four years’ period now under consideration, but the complainants, with a view of showing that the compensation thus ascertained would be inadequate, introduced new evidence.

At the former hearing, although the complainants put in a great deal of evidence on other points, they did not introduce testimony as to annua] or rental values. I, necessarily, took as my guide on that subject, evidence of the defendant’s experts. On this hearing, the complainants have, themselves, called experts, and as their testimony differs widely from1 that of the city’s, I am obliged to subject the above mentioned table to revision.

Counse] for defendant argues that the matter is res judicata, but it is evident that it is not. The injury to be inflicted on the complainants by the wrongful acts of the defendant for the four years beginning March 26th, 1911, will be, no doubt on the whole, greater jnar by year than that inflicted upon them in the five years immediately preceding that date. The adoption of an arbitrary standard for the ascertainment of the probable amount of injury that would be suffered in the earlier period, could not operate to prevent the court from making a new finding as to the later period, if the evidence justified it — the injuries both in point of time and of quantity being distinct.

On the former hearing, I gave compensation only for loss in annual values. It is now very earnestly argued that the evidence demands an additional award that will compensate the complainants for the injury to be suffered in not being able to sell their respective properties except at greatly depreciated prices.

Mr. Harrison Yan Duyne, and the other experts called by complainants, thus estimate this loss. They say (taking the property of Mr. Cadmus, on the Bergen county side of the river, as an illustration) that thirty acres of his land, excluding the frontage, which they estimate on a different basis,

“is materially damaged in its selling value by the present condition of the river. If the river was clean it would be worth $800 per acre, or $24,000 ; under present conditions it would not sell for over four hundred dollars per acre, or $12,000, making a loss of $12,000 in value.” •

They then calculate interest on $12,000 at six per cent., or $720 per year. This, multiplied by four, amounts to $2,880, and is, they say, the compensation Mr. Cadmus should receive for the four-year, period. They make a similar estimate in the case of other complainants.

The defendant’s estimate is altogether different. Mr. Lee, and other witnesses for the city, say that the Cadmus property is nothing but a “farming proposition,” worth $200 per acre, and that it has, at present, little, if any, speculative value.

Two of the complainants’ five witnesses on this point, Mr. Mercer and Mr. Coe, come from Bergen county. Mr. Allen comes from Passaic, Mr. Van Duyne from Fewark, and Mr. Karl from Garfield. Fewark is growing more rapidly than Paterson, and the increase in population in Garfield, Passaic and Bergen county is phenomenal. Mr. Coe testifies that there are very few farms left in Bergen county except along the Passaic; that “they are most all cut up,” and either developed or awaiting development, except in the northern part, which is rocky and mountainous. ' The optimistic testimony given by these witnesses is very naturally ascribable to the rapid rise in values in the localities with which they are most familiar. On the other hand, the witnesses for the city come either from Paterson itself, where it would seem rents are very low, or from the farming districts of Passaic county, west of-Paterson, where good farm lands may still be had for $100 per acre. It is not unlikely that the judgment of the various witnesses on both sides has been colored by the development, or lack of development, of the districts from which they come. Fow, such of the complainants’ lands as lie in Bergen county, east of the Passaic river, and which, with the exception of the Gelderman property, are still farmed, and, apparently, with success, seem from their situation at its western extremity to be quite as much affected by conditions in Paterson, which they immediately adjoin, as by those resulting from the New York overflow. It would, however, seem that even these lands are not altogether exempt- from the immense rise in values which are taking place in that-county. It would seem, too, as I have pointed out in my former opinion, that at no very distant day they, or a considerable part of them, are destined to be used for factory purposes. There is a steady advance of this character up the river from Passaic, and perhaps not so marked an advance down the river from Paterson. This might, in the estimation of buyers, give them some added value, although the witnesses for the city will, hardly admit it.

In view of the conflicting evidence, it is hard enough to assign a value to the lands, even under present conditions. It is harder to say what they would be worth if conditions were such as prevailed thirty years ago, and still harder to guess their additional value (over present values) if the factory pollution, for which Paterson is not responsible, and which I have heretofore found to amount to from one-quarter to one-third Of the total pollution, should be admitted.as a factor in making an estimate— that is, an estimate based upon the assumption that the river would be free from the Paterson pollution but fouled by the factory pollution.

The properties which lie on the east bank of the Passaic have been for two hundred years or more utilized as farms; they were so utilized thirty years ago when conditions were perfect, and they are now so utilized. The witnesses for complainants, notwithstanding, divide each tract into two separate parts. They convert the front parts, which include the farm houses and six or seven acres adjoining the river, into suburban residences assigning a rental value to them as such, and they give to the rear parts, embracing much the larger acreage, a price such as it ■would have if ready for speculative development.

Basing their valuations, as they do, upon assumptions which are so problematical and incapable of verification, I do not feel justified in making them the basis of an assessment. The principle of Hatfield v. Central Railroad Co., 33 N. J. Law (4 Vr.) 252, referred to in my former opinion, would seem to apply.

There is another fallacy (at least from a legal standpoint) in complainants’ estimates. They are all, evidently, based upon the assumption that the injury will continue after the lapse of four years. Defendant, in its amended answer, says;

“2. That defendant has not taken the respective lands and property rights of the complainant except so far as the injury to them, if any such injury there may be through or by means of its sewerage system in the complainants’ bill mentioned, may be considered as such taking, and that such injury or taking is to be temporary and is to continue no longer than five [now four] years from the date of the filing hereof,” &c.

It is apparent that the assumptions made by the witnesses and those which must be made by the court are different. If I am to assume that the pollution is to cease on March 26th, 1915, as the answer says it will, an estimate that the property will be worth in the market at any time prior to that date $100 per acre, and thereafter $800 is altogether unreasonable. I shall revert to this subject hereafter in another connection.

My conclusion as to these farm properties is that they must be dealt with as such. They are farm properties now and they are likely to remain so for an indeterminate time longer.

Notwithstanding all this, I would not be justified in disregarding the testimony of complainants’ witnesses altogether. It is given by gentlemen of intelligence and large experience. At the former hearing, I had only the defendant’s witnesses to guide me; now I have experts on both sides. It is, unquestionable, that the value of a property is one of the factors which goes to fix the amount of rent to be asked, and it is, on the other hand, equally unquestionable that a farmer cannot afford to pay a rent that will prevent him from making a profit. In view of all the facts and of those considerations which will be found in my former opinion, I have come to the conclusion that the rental values in the table should he somewhat increased for the purpose of estimating the injury, and that the sliding percentage heretofore adopted should be applied to these values thus corrected.

There are some exceptional cases—

First. The Gelderman property. This is the only suburban residence property on the east side of the river. It has been considerably improved since the last hearing and its rental value has been increased. Mr. Lee, testifying for the city, says that it is now $500, and with the river free from pollution, not more than $600. Mr. Van Duyne, and some of the other witnesses for complainants, say that on an eight per-cent, basis, the rent should be, if the river were pure, $1,080. Considering the value they place upon the building this would seem high. Eor the purposes of estimating the injury, I will assign to it and to the land appurtenant to it a rental value of $650 — more than double my former estimate.

Second. The Nash property. This is on the west side of the river. My previous estimate of its annual or rental value was $850. In view of the new evidence, this is manifestly too low. One thousand two hundred dollars for the three houses is not, I think, excessive. In addition to the three houses, Mr. Hash has a separate tract of twelve acres, fronting on the lake and unimproved. Since the last hearing, and in consequence of the rapid growth of the city of Passaic northward, it would seem that this lot has become ripe for development. Its advantageous disposition is unquestionably affected by the pollution. Mr. Lee, a witness for Paterson, and Mr. Van Duyne, a witness for the complainants, agree that, with the pollution, it is worth $1,300 per acre: without, $3,000. But $1,300 represents the value, not on the basis of a pollution to cease on March 36th, 1915, but on an indefinite continuance of it. This is what Mr. Van Duyne says:

“Q. Suppose that assurances were given that within three years that nuisance would be removed, what effect would that have on the purchaser?
“A. It would depend somewhat upon how the purchaser looked at that matter. My own judgment is against all possibility of removing the nuisance in three years, even if the sewage is taken out.
“Q. Answer the question as it is put now. I am asking you how, if there was assurance given that the nuisance would be removed in three years, what effect would that have upon a possible purchaser? Would he give more'with that assurance than he would under the theory on which you testify?
“A. If he had positive assurance that within three years the river would be clean — why I think that the difference then would not be one-half, the way we have concluded that it would be in' a number of these cases.
“Q. With the effects removed now, a person knowing it would be done within a certain time, he would give a great deal more than the one-half you mention?
“A. Then I think he would give more.
“Q. A great deal more, too?
“A. Well, considerably more.”

Mr. Lee, giving evidence from the city’s standpoint, after saying that $1,200 would represent the value, in the polluted condition of the .river, and $2,000 in the unpolluted, says:

“Q. Suppose assurance were given to you that within three years.the sewage would cease to flow into the river, what would you consider the present value per acre?
“A. Well, then I would get down to figures. I would try to establish what it was going to cost me to hold that property for three years. I would take into -consideration the interest and the taxes. I would arrive at it in that way, I think.”

Mr. Yan Duyne’s way of arriving at the amount of injury, on the basis of pollution to continue indefinitely, I state in his own words:

“In my judgment if the river were clear it [12 acres] would be worth $2,000 per acre or $24,000. With the present condition of the river I don’t think it is worth over $1,200 per acre or $14,400. Loss in value $9,600, interest on same at six per cent. $576.00.”

Multiplying $576 by four, we have $2,304, as Mr. Yan Duyne’s estimate of Mr. Fash’s injury during the four-year period. But it is perfectly apparent that if the nuisance were to cease at the end of the period, the loss would be less. A purchaser who pays $1,200 for what in four j^ears he will be able to sell for $2,000, not only gets back his interest which, at six per cent, would amount to $288, but gains, in addition, over $500. Prom this, however, should be deducted taxes, which would amount, perhaps, to from $50 to $75. A purchaser paying $1,550 for the property at the beginning of the four-year period would be fully reimbursed for his outlay at the end of it, if he could realize $2,000. Taking $1,550 and applying Yan Duync’s method of computing the injury, we would have the following: Subtract $18,600 (L e., 1550x 12) from $24,000 and there is left $5,400, which multiplied by six gives $324 as the annual loss. This multiplied by four ($1,296) would represent Mr. Fash’s compensation for his injury thus estimated. If we take into account the fact that he not only loses interest on his investment, but also pays taxes, that sum would not appear to be excessive. I doubt whether the factory pollution alone would materially affect values at this point. Mr. Van Duyne very properly estimates the loss of annual interest, not on $3,000, but on that sum diminished by what he regards as the present selling price.

Third. The Mercelis property. This property is on the west bank of the Passaic not far from the Rash property. It is a single tract extending from the river to Lake View avenue. Eor the rental value of the house and land, about twenty-six acres, I gave at the former hearing, $350. I am inclined to think that this is a fair rental for the house, considering its character, and for the ground immediately adjoining it. It fails, as the evidence now stands, to represent the injury to the remaining property, which is, according to the testimony, ripe for development. The'tract is somewhat injured by the nuisance, though not to the same extent as the' Rash property just considered, for it is back from the river. The sum to be given for the injury is necessarily an arbitrary 'one. One hundred and fifty dollars per annum on this* account would not, I think, be too much.

Fourth. The Outwater properly. The evidence will not justify an addition to the sum heretofore allowed. It is argued that the amount is excessive. Taking into account the effect of the nuisance — less here, however, than on the lake — it does not seem to be so, as applied to the property remaining unsold.

The table of values will then-be as follows:

Nash. ....................................... $1,200
Mercelis .................................... 350
Terhune .................•................... 900
Cadmus ..................................... 560
R. Van Riper................................ 550
H. Doremus ................................. 550
Alea ....................................... 450
G. Van Riper................................ 1,150
Edo Van Riper .............................. 700
Mary Van Saun ...... 425
P. Doremus ................................ 550
Gelderman .................................. 650
Outwater ................................... 450

To which must be added the sums allowed to Mr. Rash and Mr. Marcelis for arrested development.

I now come to the consideration of a subject that is not without difficulty. The court- of errors and appeals, in the Simmons Case, 60 N. J. Eq. (15 Dick.) 385, uses, in reference to these property owners, the following language: “The relators are here asking equity (i. e., an injunction), and they must do equity. A substituted remedy by giving them adequate compensation for their injury would be a just disposition of the controversy.” According to this decision, on which all the subsequent proceedings have turned, the compensation must be full. In the paragraph of the city’s amended answer, heretofore quoted, it is said, not that Paterson will cease emptying its sewage into the river at the date mentioned, but that “such injury or taking (Through or by means of its sewerage system’))is to be temporary and is to continue no longer than five (now four) years from the date of the filing hereof.” The city, therefore, in substance, avers that the mjwry will cease at that time. The decree was that if, notwithstanding the exercise of diligence, the city was “unable to cease polluting the river by the time aforesaid” (March 26th, 1911), leave was reserved to apply to the court upon such, terms as it deemed equitable to postpone the •issuing of the injunction.

To cease emptying sewage into the stream and to cease.polluting it are two different things. The evidence makes it probable that the injury will continue after Paterson ceases to empty its sewage into the river. When it first began to do this, in the decade beginning with 1810, Jersey City and Fewark obtained their drinking water from the lower Passaic at Belleville. In the beginning so little did the sewage affect its purity that Passaic took its drinking water from a point not far below Paterson until 1882, and Jersey City took its, lower down, until 1898. Fow, more than one hundred million gallons of water are taken daily from the river and its tributaries above Paterson, and the amount is constantly increasing. The result is that the volume of the flow of the stream past Paterson is much less than it formerly was. There is more sewage and less water to carry it off. Then we have the fact that Dundee lake is formed by damming the river just above Passaic. With these conditions, it is no wonder that the diminished flow of water, retarded by the darn, is insufficient to carry off the polluted matter which, in large quantities, is being deposited, not only on the shores of the river and lake, but throughout its bed. It is these deposits which are now largely responsible for the nuisance. Even if the sewers cease to discharge their'contents into the stream at the time named, these deposits will remain; but how long no one can undertake even to guess. As I have shown in my former opinion (73 N. J. Eq. (5 Buch.) on page JflS), the flow of water through Paterson varies enormously, not only at different seasons of the year, but in different years. If a freshet should occur, such as inundated Paterson several years ago, a great deal of this accumulated matter would, I suppose, be swept out in a few days. On the other hand, if there should be several years of comparatively even flow, the nuisance might last for a long time. I do not feel qualified to express an opinion as to how far it would be possible to abate the nuisance by opening the gates of the Dundee canal, or resorting to other artificial methods. This much is certain, that the property owners would not get “the adequate compensation for their injury” to which, in the Simmons Case, they were declared to be entitled, if, after the four years’ period, the polluted matter thus accumulating should continue to create a nuisance.

Where the right depends upon the happening, m future, of some contingent event, it is a common practice for this court not to pass upon it until the contingency occurs. This principle would here seem applicable. Eirst, because Paterson says it will not pollute after the date named, and it must here be assumed that it will make its averment good. Second, because of the impossibility of estimating the injury, even approximately, at this time. If it be competent for the court to assess damages at all, it is competent for it to determine when it will assess them, and if there be an obvious propriety in deferring the assessment, in part, until at least some idea can be formed as to what it is likely to be, I see no legal difficulty in the way. The city, by its submission, has given this court power to make an award, and therefore a complete award.

This course will avoid a real difficulty and be just to both sides. As a matter of law, I have been obliged to assume the existence of a condition which, as a matter of fact, may not be present in March, 1915, and which the witnesses say they cannot assume because of its extreme improbability. I think, there- ' fore, that leave should be reserved to apply to this court for further compensation when the city shall cease to empty its sewage into the stream, if the pollution shall then continue; but without prejudice to the raising by the city of such legal or other objections to any further award as it may see fit. This will safeguard the right of the city, if it desires to contend that no further award should or can be made.


author: Stevenson, V. C.

text:
    Carrie S. Beam v. The Paterson Safe Deposit and Trust Company et al.
    [Decided October 21st, 1912.]
    1. A bill against a defendant as trustee, for an accounting for losses occasioned by his continuance of a decedent’s investment, charging that the defendant continued the same “negligently and not in the exercise of good faith and reasonable discretion, and that great loss has been occasioned” to the complainant “by reason of such negligent continuance of said investment,” will not be stricken out under the two hundred and thirteenth rule, where the notice of the motion states as its sole ground that the bill “does not make or state a case entitling the complainant to a decree, and that the defendant is not bound to answer the same.”
    2. Such a ground of objection as that specified in the notice relates not to the substance of the charge which the complainant makes, but to the form in which that charge is made, and the character of the objection is not even indicated in the notice.
    On motion to strike out bill of complaint.

      Mr. John W. PLardmg, for the motion.

      Mr. Pierre F. Ooolo, contra.

   Stevenson, V. C.

The bill sets forth that the defendant the Paterson Safe Deposit and Trust Company holds as trustee for the complainant and others certain bonds and stock under the provisions of the will of Sarah A. Cooke, deceased; that these securities were investments made by the testatrix in her lifetime, and after her death, in May, 1905, passed to the defendant in trust as aforesaid, the complainant being entitled to the Income of an equal one-fifth share, the principal upon her decease passing to her children or next of kin. The exact date when the trustee received the securities in quéstion does not appear, but under the form of the notice this matter may he disregarded.

The hill alleges that the securities have with some little fluctuations steadily declined in market value from the date of the death of the testatrix down to 'the time of the filing of the bill. The percentage of loss from this depreciation is very great. Certain of the bonds have lost over nine-tenths of their value; • other of the bonds have lost about three-quarters of their value, and the third class of securities, certain stocks, have lost nineteen-twentieths of their value, all by this steady depreciation during this period of about seven years during a substantial portion of which period it may he assumed the trustee has been in possession of the securities charged with their care.

Apart from all general equitable rules controlling this situation, our statute (P. L. 1899 p. 286) provides that when a decedent has made an- investment in bonds or stocks like these now in question, and the securities come into the hands of a trustee under the will of such decedent, the trustee shall not be accountable for any loss by reason of his continuance of the investment, provided he so act “in the exercise of good faith and reasonable discretion.”

The hill charges that the defendant continued these investments of the testatrix “negligently and not in the exercise of good faith and reasonable discretion, and that great loss has been occasioned” to the complainant “by reason of such negligent continuance of said investment.”

The object of the bill is to compel the trustee to account for the above mentioned loss.

The notice of the motion to strike out this bill states as its sole ground that the bill “does not make or state a case entitling the complainant to a decree, and that the defendant the Paterson Safe Deposit and Trust Company is not bound to answer the same.”

The sole objection to the bill presented by the oral and written arguments for the defendant is that it does not set forth any facts or circumstances from which the inference must be drawn that the defendant trustee has been guilty of negligence or bad faith. In brief, the objection is that a general allegation of negligence like a general allegation of fraud is a conclusion of law and is not adequate in a pleading in equity. As a demurrer, to which this motion to strike out the bill is an equivalent, only admits the well pleaded allegations of the bill, it is insisted that this bill must be condemned on the general grounds stated in the notice which with sufficient accuracy may be deemed “want of equity.”

It may be that there is room to argue that the steady and substantial loss upon these securities while the defendant trustee has had them' in charge, casts the burden upon such trustee of vindicating its management. The reasons why the trustee has retained these securities are certainly better known to the trustee than they are to the complainant. I do not, however, deem it necessary to determine the exact force of this suggestion.

I think this motion must be denied on the ground that the objection to the bill specified in the notice relates not to the substance of the charge which the complainant makes, but to the form in which that charge is made — to a mere matter of pleading and the character of the objection is not even indicated in the notice. If the defendant had a right to a specification of the circumstances during this period of five, or six or seven years from which the inference is warranted that the trustee acted negligently or in bad faith, it was very easy to specify this objection to the bill as. a pleading, and thereupon the complainant might have promptly amended her bill. The form of this notice conceals the real objection. A complete cause of action undoubtedly is alleged against the defendant trustee. The objection to the setting forth of such cause of action is merely that it is embodied as to an essential part in a proposition which, is a conclusion of law. A trustee charged, in a bill in equity with having negligently refrained from selling securities may be entirely willing to go to the hearing on such general charge. The defendant trustee certainly knows more about its own conduct in holding onto these securities and its reasons for such action or inaction than the complainant does, and may be entirely willing to await the disclosures of the complainant’s evidence at the trial. If the complainant cannot make out a prima facie case by showing, as the pleading seems to show, the unexplained re-ten tion of these investments which were steadily depreciating in value, then the complainant must go further and establish affirmatively the facts and circumstances which counsel for the defendant on the argument insists ought to have been alleged in the bill. I see no great hardship in requiring the defendant, who has not specifically objected to the form of this pleading, to answer the bill and go to trial on the general charge of negligence and bad faith. The complainant’s case is put in first. The court will not allow on trial any surprise, and it seems to be highly improbable that in a case like this the evidence produced by the complainant can cause the defendant trustee any surprise or put it to any disadvantage either in the cross-examination of the complainant’s witnesses or in the production of its own evidence in defence.

Without stopping to determine whether the objection to the . complainant’s bill would in this case have been fatal if the same had been specified in the notice of this motion, I confine my ruling to the single point that in the absence of such specification the bill will not be stricken out for want of equity. It seems to me that to strike out this bill for the reason assigned on behalf of the defendant in this notice would, to a large extent, emasculate the well-settled rules which are established limiting the force and effect of mere general demurrers. Demurrers at the present time are discouraged. It might be well, in my judgment, to abolish the demurrer in equity except when filed by leave of the court. In this case while the defendant’s brief sets forth the sharp and technical objection to the bill of complaint as a pleading, which I have discussed the complainant’s counsel has shown by his oral argument, and especially by his brief, that he had no idea that any such technical question was to be raised and argued. His whole argument relates to the question whether a trustee who has negligently continued investments is liable to his beneficiaries for the loss thus caused. This argument, in my judgment, well illustrates the value of the rules established in our modern equity practice according to which large numbers of objections to bills, which formerly were fatal under general demurrers, are excluded from consideration unless they are distinctly pointed out and specified so that counsel for the complainant may speedily, without loss of time, amend his bill or come prepared to defend his bill against the charge, oftentimes a mere technicality, which the defendant makes against it.

The conclusions above stated, I think, axe sustained by the following authorities: Essex Paper Co. v. Greace, 45 N. J. Eq. (18 Stew.) 504; Van Houten v. Van Winkle, 46 N. J. Eq. (1 Dick.) 385; Bishop v. Waldron, 56 N. J. Eq. (11 Dick.) 484; Goldengay v. Smith, 62 N. J. Eq. (17 Dick.) 354; Demarest v. Terhune, 62 N. J. Eq. (17 Dick.) 663, 665, 666; Stafford v. Barber, 74 N. J. Eq. (4 Buch.) 352; Central Railroad Co. v. Van Horn, 38 N. J. Law (9 Vr.) 133, 139, 140; Race v. Easton and Amboy Railroad Co., 62 N. J. Law (33 Vr.) 536, 539.

In considering the force of the authorities above cited, and particularly the two last cited cases decided at law upon demurrers to declarations, it must be borne in mind that this motion under rule 213 to strike out a bill of complaint is the exact equivalent of a. demurrer and was expressly provided by Chan.cellor Zabrislde, as the rule on its face demonstrates, as an elective substitute for a demurrer. As our rules (209 and 213) now stand regulating demurrers and notices of this character, the requirement is the same in regard to each mode of objecting to the sufficiency of a bill. The demurrer' must “distinctly specify the ground or several grounds of demurrer,” and the notice must “state the particular ground or grounds of objection.”

The policy of strictly confining the force of objections to declarations on demurrers in the law courts has been established and expanded by alterations of the Practice act during the last thirty years. In 1882 (P. L. 1.882 p. 12J¡.) the Practice act was amended so as to permit the' plaintiff to demand in writing a specification of the “causes of demurrer on which the demurrant intends to rely upon the hearing,” and this statute confined the demurrant to the causes of demurrer contained in his specification. In the new Practice act of 1903 (P. L. 1903 p. 572, § 181, 3 Comp. Stat. of N. J. p. 409-4) the form of a demurrer is prescribed requiring the “grounds of demurrer to be specified,” and it is further enacted that “at the hearing the demurrant shall be confined to the grounds of demurrer stated in his demurrer.” These statutes provide for amendments to the specifications. No doubt this court in a proper case will allow the “grounds of demurrer” to be amended and a motion under rule 213 to be continued so as to permit the party making it to state additional “grounds of objection.” No application to amend the defendant’s notice was made in this ease.'


author: Stevenson, Y. C:

text:
    Adelia A. Leonard v. The Leonia Heights Land Company.
    [Submitted October 22d, 1912.
    Decided October 30th, 1912.]
    1. The act respecting conveyances, by section 54 (8 Oomp. Stat. 1910 p. 155S), provides that every unrecorded instrument mentioned in section 21 of the act, which includes assignments of mortgages, shall be void as against subsequent lona fide purchasers, for value and without notice, whose deed is first recorded. — Held, that where a mortgagee assigned the mortgage ■ and the assignment was not recorded, and subsequently acquired the equity of redemption and sold it for the full value of the land to a Iona fide purchaser, representing that the mortgage was lost, the purchaser on recording his deed got title discharged of the mortgage.
    2. An act concerning mortgages (3 Comp 8tat. 1910 p. 81/19 § 84), providing that, when an assignment of a mortgage is not recorded, a release by the assignor to a person not having actual notice of the assignment shall be as valid as if the mortgage had not bafn assigned, is meant to afford protection to the purchaser of the land itself who believes the mortgage to be lost, as well as purchasers of the mortgage.
    3. Evidence held to show that the purchaser of land acted in good faith and after all inquiry possible, in taking title relying on the vendor’s assurance that a mortgage standing of record in the vendor’s name had been lost, though in fact he had assigned it.
    On bill to foreclose a mortgage, answer and proofs taken in open court.

      Mr. Louis A. Cowley and Mr. William W. Watson, for the complainant.

      Mr. Frederick P. Schenck, for the defendant, the Leonia Heights Land Company.
   Stevenson, Y. C:

(orally).

My conclusion is that .the defendant, the Leonia Heights Land Company, is entitled to a decree dismissing the foreclosure bill, on the ground that the company is a bona fide purchaser for a valuable consideration without notice of the interest of the complainant which she acquired under her assignment, the assignment having been left unrecorded.

In another aspect of the case I think the conclusion is warranted that the defendant, the land company, is protected against the mortgage of the complainant under the thirty-fourth section of the act in relation to mortgages, which provides, in effect, that when an assignment of a mortgage is not recorded in accordance with the system provided for in the act, any payments made to the assignor in good faith and without actual notice of such assignment, and any release by the assignor of said mortgaged premises or any part thereof to a person not having actual notice of such assignment, shall be as valid as if the mortgage had not been assigned. The defence which I first referred to is founded upon the fifty-fourth section of the act in relation to conveyances, which must be read in connection with section 21 of the same act.

. We have here a purchaser of mortgaged premises who pays full value and takes a warranty deed from the owner. The owner had recently acquired the property. Before he had acquired the property he had taken the mortgage in question now held by the complainant. The owner then assigned the mortgage to the complainant for value and afterwards, a considerable time after he had thus parted with all interest in the mortgage, he acquired the equity of redemption. Thus, at the time of the transaction with which we have to deal, the Leonia Heights Land Company acquired, by warranty deed, the property in question from a person, one Eyan, who appeared on the record as the owner of the equity of redemption, and the owner of the bond and mortgage in ease no merger had occurred. In case a merger had occurred, this man Eyan appeared on the record as the owner of the entire fee, free and clear. In fact, as between Byan and the assignee of the mortgage, the complainant, Mrs. Leonard, there was no merger. Eyan sold the bond and mortgage to Mrs. Leonard before he acquired the equity of redemption, and when he acquired the equity of redemption as between himself and Mrs. Leonard he acquired it subject to the mortgage which she held.

As between these two parties no question of intention arises. There is no ground upon which any merger can be found to have been effected, but the question is, under the fifty-fourth section of the act respecting conveyances, does the defendant, the Leonia Heights Land Company, occupy the position of a subsequent bona fide purchaser for a valuable consideration, not having notice of Mrs. Leonard’s assignment so as to get the protection provided by that section, which consists in making the assignment to Mrs. Leonard void as to it, the Leonia Heights Land Company ?

The argument has been urged that the language of section'54 must be construed in some way distributively, and that the protection against an unrecorded assignment of a mortgage duly recorded, provided by that section, for a purchaser in the position of the Leonia Heights Land Company, is confined to a purchaser of the mortgage. In other words, according to this argument, if a man had dealt with Mr. Ryan,’ supposing him to be what he appeared to be on the record, the .owner of this bond and mortgage, and had bought the bond and mortgage for a valuable consideration, in good faith, without notice_ of the assignment made by Ryan to Mrs. Leonard, then that assignment would be void as against such purchaser of the mortgage. But it is insisted that no such protection is afforded to a purchaser of the land itself.

I am unable to adopt this view. Some cases have been cited from other states which are based on statutes which I think are somewhat different from ours but containing dicta which favor this view; but, in my judgment, the construction of section 54 and the policy of the enactment contained in that section are beyond doubt. Section 21 of our act respecting conveyances provides a means whereby all persons who acquire interests of a great many different kinds in real and personal property may have their instruments under which they acquire their interests acknowledged and recorded, and then they are safe, and all parties who deal with respect to the res, the subject-matter — the real estate in this case^ — are charged with notice of this outstanding interest. If a party acquires such an interest and ignores the provisions of the statute for his protection, then it is the intention of'the act that liis title shall be void as against all parties who subsequently acquire an interest in the subject-matter — in the res — which would be injuriously affected if the outstanding unrecorded title could be asserted and enforced. The only proviso is that the party subsequently acquiring his interest must pay a valuable consideration, act in good faith, and not have notice of the outstanding title. Any other construction, it seems to me, would defeat the perfectly' plain purpose and policy of our statute.

According to this view the defendant, the Leonia Heights Land Company — -if they acted in good faith and paid a valuable consideration and had no notice, about which matters I shall say something further on — had a right to deal with Mr. Ryan precisely as if the assignment to Mrs. Leonard was void. The statute makes that assignment void. It would perhaps be more accurate to say that the defendant, the Leonia Heights Land Company, according to this view of the construction of the statute, did deal with Mr. Ryan with the advantage to them that this assignment was void, provided, of course, this company was a Iona -fide, purchaser of the interest affected by .the assignment of the mortgage for a valuable consideration and without notice.

I think also that there is another view of this case which gives the Leonia Heights Land Company the full benefit of section 34 of the act in relation to mortgages, which provides, in substance, that any payment made in good faith to the assignor without actual notice of the assignment and any release of the mortgaged premises, or any part thereof, to a party not having actual notice of the assignment, shall be as valid as if said mortgage had not been assigned.

How, in fact, there was no merger, as we have seen, and for present purposes I am considering that the complainant’s view is correct, and that the defendant, the Leonia Heights Land Company, under section 54 of the Conveyancing act, cannot be deemed to have purchased from Ryan the entire fee upon the theory of a merger. If, in transacting their business with Mr. Ryan when they acquired this property, the assignment to Mrs. Leonard must be deemed void under this section 54, then there was a merger as between the Leonia Heights Land Company and Mrs. Leonard.

But now I am supposing that we lay aside that view and for a time adopt the other view, that there was no merger as between the Leonia Heights Land Company and Mrs. Leonard, the holder of the outstanding unrecorded assignment. We have, then, this case: The Leonia Heights Land Company is making a deal plainly for Mr. Ryan’s entire interest, whatever that was. It may be that the president of the company thought that there was a merger, and thought that when he paid the full value and took a warranty deed from Mr. Ryan he was acquiring the land free and clear of all encumbrances from a party who held the land in that way, from a party who held the entire fee, the mortgage having merged in the equity of redemption. I say the president may have thought he was doing that, but if, in fact, there was no merger as between his company and Mrs. Leonard, then the mortgage was outstanding against the property, and what the Leonia Heights Land Company in fact did, was to pay full value for both interests, the value of the equity of redemption and the value of the outstanding mortgage unmerged.

Now, then, in my judgment, Mr. Ryan accepted the full value of the whole fee, the mortgages and stock or whatever the Leonia Heights Land Company turned over to him in payment of his entire apparent interest, including this mortgage interest. He knew that he had no right to undertake to transfer the whole interest, the equity of redemption and mortgage interest, to the Leonia Heights Land Company. He knew that they were paying a part, if not the whole, of what they paid to him as the price— not of the equity of redemption but of the mortgage interest which, in fact, was held by Mrs. Leonard.

This transaction, therefore, on the theory that there was no merger, on the theory that the mortgage interest was outstanding in Mrs. Leonard, effected, in substance, in equity a payment made by the company to Mr. Ryan, who the company supposed held the entire interest in the property, as I have said, including the mortgage interest which, in fact, was held by Mrs. Leonard.

Now, 'then, the last question is whether, within the meaning of these two statutes, section 34 of the Mortgage act, and particularly section 54 of the act respecting conveyances, the Leonia Heights Land Company is to be deemed to be, or to have been, a subsequent bona fid$ purchaser for a valuable consideration without notice of Mrs. Leonard’s assignment? It is conceded, or perhaps T should say it is not denied, that the Leonia Heights Land Company had no»actual notice of the assignment from Ryan to Mrs. Leonard. Mrs. Leonard was a friend, or a sort of family connection of Mr. Ryan, and she lived in a distant place, another state — I think she lived in Buffalo, New York — and she transacted her business with Mr. Ryan by correspondence. She trusted him implicitly. There was no way suggested by which tire Leonia Heights Land Company could have received notice of the assignment of this bond and mortgage from Mr. Ryan to Mrs. Leonard except from Ryan himself. It is also beyond ail question that the Leonia Heights Land Company paid a full, fair, valuable consideration for the transfer to it of the entire interest which they thought Mr. Ryan held; that is to say, a title to the property free and clear of all-encumbrances. The particulars of the consideration have not been very minutely exhibited in the evidence, but there is no question on this point.

The sole question in determining whether the Leonia Heights Land Company was a bona fide purchaser or not relates to the question of good faith — I incline to think that is the correct way to put it — on the part of the company. Perhaps the question might be made a little broader and put in this form: Whether the company acted in good faith and after discharging every duty in respect of inquiry in regard to the existence of Mrs. Leonard’s assignment.

How, then, it appears that the transaction between Mr. Eyan and the company was negotiated on the part of the company by the president, Mr. Paulin. We may disregard, as I have heretofore disregarded, the conveyances to and from Mrs. Cornell who, as plainly appears, had no interest which can affect the transactions which we have to deal with between the Leonia Heights Land Company, Mr. Eyan and Mrs. Leonard. As I have said, the company paid Mr. Eyan in stock and mortgages full value for the land. I think it appears that Eyan had paid about $750 an acre for. the land in question. There is no dispute that the mortgage which Mr. Eyan had received originally upon this property for $6,000, which he subsequently assigned to Mrs. Leonard, was what was called a dummy mortgage, Eyan holding the land at the time in the name of the mortgagor, one Flood. For purposes of his own he took on these six lots a mortgage for $6,000, the mortgage being proved to have been for at least twice the value of the property. It was not a mortgage which could have been readily assigned excepting in the way in which Mr. Eyan assigned it to Mrs. Leonard, namely, through a gross fraud practiced by him upon her.

When Mr. Paulin was negotiating with Mr. Eyan for the purchase of this property by the land company in which they both were interested very largely, a search was made and the mortgages which were upon the property were all disclosed and this particular parcel containing, I think, six lots covered by Mrs. Leonard’s mortgage was found to be unencumbered by that mortgage because of the apparent merger.

These facts being disclosed to the company and its president, Mr. 'Paulin, it became the duty of the company to inquire. This is a very important point. In one or two cases which were cited the purchaser failed to get protection from a statute somewhat similar to ours because he made no inquiry whatever. It certainly is a very significant fact if a party who, on the record, holds both the equity of redemption and also a bond and mortgage, when offering the whole property — the whole fee — for sale, does not exhibit and offer to deliver the bond and mortgage which, according to the record, he holds. No doubt such a situation calls for investigation. But in this instance, in my judgment, the Leonia Heights Land Company fully discharged the duty which was cast upon them to make inquiry.

I have pointed out, and. it must be borne in mind in connection with this point, that that mortgage was not one which, from the nature' of the case, a purchaser would suppose Mr. Ryan could readily transfer. But if the company could, or should, have surmised that Mr. Ryan may have had this dummy mortgage made for twice the value of the land in order to assign it to somebody and perpetrate a fraud, how could they discover who that party — that possible assignee — might he, except through Mr. Ryan?

It appears from the evidence, which is not contradicted, that Mr. Paulin persisted for two weeks before the title was taken on behalf of the company in endeavoring to get this bond and mortgage from .Ryan. Mr. Ryan said first that he presumed he had the mortgage papers at the hotel where he was then stopping, and he would endeavor to find them and produce them. This was a scandalous falsehood. Mr. Ryan 'certainly knew he could not produce those papers. He had been paying tire interest on this mortgage to his client, and practically his beneficiary who trusted him. Mr. Paulin says that after they had persisted for some time in endeavoring to procure the bond and mortgage from Mr. Ryan, he, Ryan, said they must be misplaced, but he would find them. ' In other words, Ryan put off the complainant and finally represents that the papers had been lost. Mr. -Ryan, at the time of this transaction, it seems, was a man of financial responsibility, and the indications are that those who were assodated with him would not have suspected that he could have been guilty of the gross fraud that he practiced upon Mrs. Leonard. Mr. Partlin also says that they knew that Mr. Ryan was careless about his papers. The fact that no assignment appeared of record, of course, added to the force of Ryan’s representations.

What more could the Leonia Heights Land Company have done in the way of prosecuting inquiries to discover whether this bond and mortgage had been assigned in any way by Mr. Ryan? In my judgment, they did all that they could do, and they, therefore, must stand before the court within the purview of section 54 of the Conveyancing act as a Iona, fide purchaser for a valuable consideration without notice, actual or constructive, of the outstanding mortgage held by the complainant under an unrecorded assignment, and must also occupy the corresponding favorable position under section 34 of the act concerning' mortgages.

Of course, the transaction between Ryan and the Leonia Heights Land Company effected a merger and gave the company a title free from the mortgage, unless Mrs. Leonard can assert her unrecorded assignment against this company, which I find under the provisions of section 54 of the.act in relation to Conveyances and in the light of the evidence in this ease she cannot do.

Of course, equity disregards mere forms in a transaction like this. It is evident; as 'counsel for complainant seemed to concede, that if the Leonia Heights Land Company had' divided the warranty deed into two instruments, making one a conveyance of the equity of redemption and the other a release from the mortgage, or had split the consideration which it paid into two portions, and one of these portions had been accepted as the price of the equity, and the other as the payment of the mortgage, Mrs. Leonard’s assignment would be void, or, to speak more accurately, her mortgage would be deemed paid, as against the title of the Leonia Heights Land Company under section 34 of the act concerning mortgages.

The same result would seem' to follow in case, after exhausting all inquiries for a possible assignee and being satisfied with the truthfulness of Mr. Ryan’s representation that he still owned the mortgage but had mislaid it, the Leonia Heights Land Company had taken an assignment of the bond and mortgage from Mr. Ryan. The essential and controlling fact in this affair was the payment by the Leonia Heights Land Company to Mr. Ryan of' the full value of the two estates, which both parties knew Mr. Ryan at some time had held, after this company by its agents had exhausted every reasonable means to procure the bond and mortgage and having the firm conviction — in my judgment, entirely justifiable under the circumstances — that Ryan had never transferred the mortgage to anyone.

What erroneous theories of the exact nature of the transaction the president of the Leonia Heights Land Company had does not, in the slightest degree, concern Mrs. Leonard, or affect .any interest which she had under her assignment, provided he paid Ryan in good faith full value for both interests in the land which, according to the record, Ryan held. 'Whether the Leonia Heights Land Company, in fact, paid for this mortgage interest merged in the land, or unmerged and apparently held by Mr. Ryan, is entirely immaterial for all purposes relating to fixing ’ the status of Mrs. Leonard’s unrecorded assignment under section 34 of the act concerning mortgages.

This is not a case of hardship under our statutes such as might found or suggest some argumentum ab inconvmienti against the construction which I have made. Mrs. Leonard’s loss is not attributable to our laws which she in her ignorance disregarded, but to her blind confidence in a man who betrayed her trust and 'defrauded her. She never saw these vacant lots or knew their value, but accepted a mortgage upon them from Ryan accom-. panied by his personal guaranty for double the value of the lots without, as she testified, making any inquiry of anybody, either as to value or title. She saj^s she knew nothing about the affair but “depended upon Mr. Ryan’s honesty.”

The evidence seems to show that Mrs. Leonard made Mr. Ryan her agent or trustee for the purpose of giving her a safe mortgage upon property of adequate value and then protecting such investment by observance of all legal requirements, including the recording of the assignment. There is no evidence that her mind was ever directed toward the question of recording her assignment, but she appears to have allowed this most important part of her business to be left absolutely within the control of her plenary agent, Mr. Byan.

Under these circumstances, as between Mrs. Leonard and the Leonia Heights Land Company, it seems to me that our recording acts would be quite imperfect if we were obliged to construe them so as to place the loss which falls upon Mrs. Leonard because her trustee left her assignment unrecorded, upon this innocent purchaser, the Leonia Heights Land Company, rather than upon herself. I should be sorry to be obliged to construe the sections of our statutes, which I have referred to, so as to bring about such a result. Ho system of laws could protect this unfortunate lady against' the injurious results of her misplaced confidence.

The following axe the citations of the statutes hereinbefore referred to and construed:

An act respecting conveyances (Revision.of 1898), P. L. 1898 pp. 677, 639 §§ 21, 54; 2 Comp. Stat. pp. 1541, 1553 §§ 21, 54.

An act concerning mortgages (Revision of 1874), 3 Comp. Stat. p. 3419 § 34-

The following are a few of the cases which have been cited by counsel and through which access can be had to the most important expressions of judicial opinion having a bearing more or less direct upon the questions raised in this case: Harrison v. N. J. R. & T. Co., 19 N. J. Eq. (4 C. E. Gr.) 488; Weinberger v. Brumberg, 69 N. J. Eq. (3 Robb.) 669; Purdy v. Huntingdon, 42 N. Y. 334; Curtis v. Moore, 152 N. Y. 159.


text:
    Eugene Woolsey v. Virginia M. Woolsey et al.
    [Decided November 26th, 1912.]
    1. Where a testator leaves his estate in trust for a grandson and provides that, in case such grandson dies before majority and without issue, the estate should be divided as though testator dmd intestate on the date of the will, on the death of such grandson before majority the trustees should divide the estate as though the testator had died intestate on the date of the will, and, if no other descendants existed at the date of the will, the next of kin of the deceased grandson should get the estate, taking not by intestacy, but by gift.
    2. Testators have wide power and discretion in laying down rules to be followed to find out who are to be the takers of their bounty upon the happening at a remote time of various more or less, remote contingencies.
    Bill by legatee for an accounting of executors and trustees, and the recovery for the estate of moneys paid by executors to defendant Virginia M. Woolsey, the establishment in favor of complainant of'an “executory devise” of property under the will, &c.; and cross-bill by executors asking for instructions in regard to the payment of moneys in their hands.
    Heard on pleadings and testimony stipulated into the cause from prior case between the parties in the court of errors and appeals.

      Mr. Maximilian T. Rosenberg, for the complainant.

      Mr. Charles L. Camele, for Woolsey and Northrop, executors. Mr. Randolph, P'erlcins, for defendant Virginia M.-Woolsey.
   Stevenson, V. C.

It is agreed by counsel that all the questions raised by the pleadings in this cause have been disposed of with the exception of the one herein to be considered. The solicitors of all parties interested have also by an ample stipulation submitted the said question to the determination of this court, without regard to the technical form of the pleadings.

The subject-matter of this controversy is presented by the pleadings and the sharp question argued by counsel, and submitted as aforesaid, is distinctly put to the court in the cross-bill filed by the executors, to which cross-bill the defendant Virginia M. Woolsey alone was called upon to answer. The stipulation signed by the solicitors of all the parties in this cause makes the decision of the issue presented by the cross-bill and answer thereto of the defendant Virginia M. Woolsey binding upon all the parties.

The testator, Charles A. Woolsey, resident in Hudson county, New Jersey, made his mil June 14th, 1894, and made a codicil, which throws some light upon this controversy, on November 20th, 1894.

The testator died July 4th, 1895, leaving him surviving as his next of kin, his daughter Alice Woolsey, now deceased, his infant grandson Herbert W. Woolsey, now deceased, and also leaving a sister of the whole blood, Sarah A. Newell, and two brothers of the half blood, Frank Woolsey and Eugene Woolsey; and also leaving a daughter-in-law, the defendant Virginia M. Woolsey, widow of the testator’s deceased son Herbert and mother of the said infant grandson Herbert W. Woolsey. The family relations of the testator were- the same at the time of the making of the will and at the time of his decease. There seem to be no other facts or circumstances existing at the time of the making of this will which throw any light upon the question of construction to be decided in this cause;, excepting that the testator was a man of substantial fortune, a large part of which was invested in a paint and oil business, which subsequently failed. The will, after making certain comparatively small bequests, which have a bearing upon the controversy in this cause to be hereinafter noticed, gives, devises and bequeaths all the residue of the testator’s estate of every kind to his executors and trustees, and the survivors and survivor of them, their heirs and assigns in trust, nevertheless, for certain specified uses and purposes. It may well be noted here that the entire residue of this estate, after taking out legacies which constituted a small' proportion of it, is vested in these executors and trustees, and thereupon the further provisions of the will are occupied with directions as to the parties to whom the estate shall be paid by these trustees. The executors hold the residue of the estate under the terms of this will, and they are to pay it out- as the will directs. The takers oC the fund do not take by intestacy,

The residue constituting the trust fund was disposed of for the support and benefit of the testator’s daughter Alice Woolsey and his grandson Herbert W. Woolsey. Provision was made for the death of this daughter and grandson before the grandson should arrive at the age of twenty-one years, which provision shows that the testator contemplated- the probability of a considerable period of year's during which his estate would be held in trust, and for the distribution of it at the termination of the trust among his descendants, if any should then be surviving. The latest possible time for distribution was fixed at the time when the grandson Herbert should become of full age, which, in ease the grandson reached that age, would he many years after the testator made his will and framed this trust.

Subparagraph (8) of the third paragraph of the will is as follows:

“(8) In case of tlie death of said Herbert W. Woolsey and Alice M. Woolsey, before the division herein provided for, and without one or each of them leaving lawful issue, and no directions for such contingencies being herein specifically set forth, then such share or shares shall be divided in the same manner as though I had died intestate, and a resident of the State of New Jersey, upon the day of the date of this instrument.”

It is claimed on behalf of the next of kin of the testator, the complainant, Eugene Woolsey, the defendants Ejrank Woolsey and Kitty May Wadsworth, succeeding by will to any title or interest of her deceased mother, Sarah A. Newell, that this clause of the testator’s will should be read as if after the words “I had died intestate” the words “Herbert and Alice being then dead” had been interpolated.

It is claimed, on the other hand, bn behalf of the defendant Virginia M. Woolsey, that no such proposed interpolation is proper or necessary in order to reach the plain meaning of the testator, and the exact force of the language which he employed; and that the true construction of this provision gives to the defendant Virginia M. Woolsey, as the next of kin of her deceased infant son Herbert, one-half of the fund in dispute concerning the payment of which the trustees ask for instructions from this court.

In my judgment, the construction contended for on behalf of Mrs. Virginia M. Woolsey is the correct construction, while the construction contended for on behalf of the next of kin of the testator can only be established by a violent and unjustifiable wrenching of the testator’s words resulting in the establishing, not of the testator’s will, but of some will which this court may think the testator might have made if he had given due thought to the business which he had in hand.

1. The vice, it seems to me, which inheres in the whole argument on behalf of the next of kin, lies in the fact that the construction for which they contend ignores the force and significance of the provision which makes it necessary, in determining who are the takers, to consider the date of the execution of the will, and not the date of the decease of the testator. The will does not say that at the probably remote period, which the testator contemplated as the time for distribution, if all the trusts had been performed and the trust provisions had become inoperative, the estate should go as if he had died intestate.

What the testator does is to lay down a rule, whether a wise or a reasonable rule we.have no right to inquire, but a perfectly clear rule according to which the takers of this trust estate are to be ascertained in the event of the decease of the principal beneficiaries without leaving issue. The testator might have made no provision for such a contingency in which case his next of kin would take by intestacy — take something undisposed of by the will. But the testator disposes of his entire estate. He vests it in his executors in trust and provides for the contingencies under which the estate is to be paid out to different beneficiaries, and contemplating perhaps as a remote possibility that both his daughter and his grandson would die before the grandson had . reached the age of twenty-one years, and without leaving any issue, he then lays down a rule by which the trustees are to find the person or persons to whom they are to pay over the “share or shares” which otherwise would have gone under this will to the testator’s descendants or descendant.

A direction in a will made by a testator who could not know whether he would live one year or ten years, providing in the event of certain contingencies occurring for the distribution of a trust fund by the payment thereof “in the same manner as though” such testator had died intestate and a resident of the State of Yew Jersey upon the day of the date of the will, makes a direction for the payment of money which involves no case of intestacy and in my judgment gives rise to little if any difficulty in its application. The takers under this rule are found by inquiring where the fund would have gone if the testator had died intestate on the arbitrary, day fixed as the test. The ultimate question, however, is not where in the ease stated the fund would have gone; the practical question is where does the fund now go from these trustees who hold it. The two questions, however, follow each. oilier. Having ascertained in answer to the first question where the fund would have gone in case the testator had died intestate on the day of the execution of his will, it becomes necessary to trace any other devolutions to which the fund or any part thereof would have been subjected owing to events which occurred subsequent to the test date. If the testator had died intestate at the date of the execution of his will, the estate which he put in trust would have gone in equal shares to his daughter Alice and- to his grandson Herbert. Tlie testator when he made his will certainly knew that both his daughter and his grandson were then alive, and presumably knew that they would take his entire estate if he tiren immediately died intestate. I am unable to adopt the view of counsel for the next of kin that we must suppose that the mind of the testator was so occupied with the possible distribution of his estate years after he made his will, and after both his daughter and his grandson were dead without leaving issue, that when he laid down this test by which the takers of the fund were to be ascertained, he misspoke himself and did not make his next of kin, who were alive before him, the hypothetical stirpes through whom the takers were to be ascertained, but that he made his two brothers and his sister such stirpes.

It must at all times be kept in mind that this estate is in the hands of trustees by whom distribution is to be made, and we are to find from this will directions as to whom these trustees are to make the payment. They make the payment by following the rule for the ascertainment of the payees laid down by the testator.'

How, then, if the testator had died when he made his will intestate, which is not the case, the fund in question would have gone to Alice and Herbert, which is not the case, and which manifestly the testator could not have contemplated as a possibility, because he was providing for a condition of affairs after the death of both these persons. But if these two persons had received equal shares by intestacy, then when Herbert died his mother, the defendant Virginia M. Woolsey, would have taken his one-half share by intestacy as his- next of kin, while if Alice had received her one-half then upon her death unmarried and intestate, which followed the death of her nephew Herbert by a few years, her one-half would have passed to her next of kin, to wit, the defendants Erank Woolsey and Eugene Woolsey, and Sarah A. Hewell, whose interest is represented in this case by her general legatee, the defendant Witty May Wadsworth.

It may be urged that the recognition of such an artificial and peculiar rule for the ascertainment of the takers of this trust fund might lead to most extraordinary results which the testator never could have contemplated. This same vicious argument has perhaps sometimes prevailed so as to cause courts to make and enforce wills which they think testators ought to have made and would have been liable to make if they had known this, that, or the other thing, or thought of this, that or the other contingency.

Where language is employed in a will like that which is now under consideration, the question arises, or may arise, whether all possible forms of the devolution of property may not sometimes have to be examined and considered, not in order to trace title to the fund which is to be paid under the will, but to ascertain the person to whom such payment is to be made. A general assignment for the benefit of creditors might perhaps have to be given force and effect not as having actually passed title to the fund in question, which is held by trustees, let us suppose, as in this ease, and is paid out in execution of the will, but to lead up to and indicate with certainty the beneficiary fbr whom the trustees are making search. 'Whether in this sort of a case theoretical devolutions of property other than by will or by intestacy are to be dealt with differently in their relation to the testator’s intention, and the testator’s rule for finding the beneficiary, it is unnecessary in this case to discuss or determine. It may be conceded that if, under language like that employed in subparagraph (8) of this will, the beneficiary is always to be found by assuming a fictitious vesting by intestacy and subsequent transfers by any and all forms in which the hypothetical vested interest, if it had been a real- interest, would, in fact, have passed perhaps through a series of owners by virtue of wills, 'deeds, escheats, &c., oftentimes results would be reached which in fact the testator never contemplated. In such cases a good deal can be said about enforcing the intention of the testator, and also about making a will for him which he did, not make but which a court may conclude he would have made if he had thought about the matter.

Testators undoubtedly have wide power and discretion in laying down rules for executors and trustees and courts to find out who are to be the takers of their bounty upon; the happening art a remote time of various more or less remote contingencies. In this present case, in. my opinion, there is no temptation to think out a will for the testator which the court may suppose he would have made, but which in fact he did not make, because in the hypothetical or fictitious transfers which must be taken into consideration in determining who shall take under the terms of this will, or in other words, to what persons these trustees are to make payment, we have the very simple eases of a mother taking the personal estate of her deceased son by intestacy, and a daughter taking the personal estate of her deceased mother under a will making her her mother’s universal legatee, and it may be added, that for all that appears if no will had been made this daughter would have taken the mother’s estate by intestacy.

2. At this point we may observe that if the contention on behalf of the next of kin is correct, we still have precisely the same artificial rule assuming hypothetical devolutions of property in order to ascertain the actual devolution to be recognized and effectuated under this peculiar subparagraph (8). We still have not certain named, ascertained beneficiaries whom the testator says shall take, but a mere arbitrary rule for ascertaining, in the light of subsequent events how the takers are to be found. Adopting, arguendo, the proposed interpolation, we reach the result that in the hypothetical case put by the testator, the estate in question would have devolved not upon Alice and Herbert, but upon the testator’s brothers and sister. How, suppose that Mrs. Hewell, who died, in fact, after both Herbert and Alice, had died at some time after the death of the testator, but before the death of either Alice-or'Herbert. In such case the defendant Mrs. Wadsworth, it seems to me, would take one-third of the estate under the terms of this will, and not under the terms of her mother’s will, although the mother’s will constitutes a necessary part of the hypothetical devolution of this third share which is to be; taken as a guide in ascertaining the actual devolution of that third share under this testator’s will.

3. The whole scheme of this will strongly supports the view that the testator practically adopted his daughter-in-law as a daughter, and contemplated that she might through her son, the testator’s grandson, receive a substantial share of his estate. The will exhibits plainly how much larger a place in the testamentary plans and purposes of this testator was occupied by his daughter-in-law Yirginia than by any of his collateral relatives. This daughter-in-law was an absolute participant, to a very large extent, in the benefactions of this will, while these collateral relatives were practically ignored.

The testator’s only sister, Mrs., Hewell, receives a legacy of $5,000, while the daughter-in-law, Mrs. Yirgina M. Woolsey, receives a legacy of $10,000, and after disposing of certain household goods and personal articles, evidently of little value, the great bulk of the testator’s estate is put in trust, and the provisions of the trust are for the benefit of the testator’s daughter, grandson and this daughter-in-law, Mrs. Yirginia M. Woolsey, to the exclusion of his brothers and sister. Mrs. Woolsey is provided with an annuity of $2,000 a year, which seems to be substantially the same as the sum of the annuities left for the daughter Alice. The testator apparently contemplated that if his grandson Herbert became of age so as to receive his share of the corpus of the estate, his daughter-in-law, the mother-of Herbert, would naturally be thereby provided for. In the codicil the testator expressly provides that the annuity to Virginia shall cease in case of her marriage or the coming of full age of her son Herbert, and then proceeds to direct that if Herbert shall die before reaching the full age of twenty-one years, then Virginia’s' annuity is to be continued until her .death or marriage. These provisions for Virginia’s support terminating when her son Herbert should arrive at twenty-one 3rears of age and receive a substantial fortune from his grandfather, which would enable him to properly care for his own mother, strongly suggest the view that the testator knew precisely what he was doing when he established his daughter Alice and his grandson Herbert as what I have called hypothetical stirpes through whom as the supposed equal owners of his estate at the time of the execution of his will the devolution of that estate would be ascertained in after years in ease both Alice and Herbert should die without leaving issue before Herbert reached the age of twenty-one years.

That the testator actually contemplated situations and conditions iu which his daughter-in-law might receive through her son a large portion of the testator’s estate, is indicated by another important provision. In the event of the death of Alice without issue the entire estate became vested in Herbert, and the testator recognized that this might occur while Herbert was an infant and incapable of making a will, and therefore he expressly directs that in such case the estate should be ¡managed by his executors until Herbert became of full age. How can we escape the conclusion that the testator, aided, as he no doubt was, by counsel in drawing this portion of his will, recognized the possibility by no means remote, that his entire residuary estate, comprising the bulk of his fortune, might pass by intestacy from his grandson Herbert to Herbert’s mother, the defendant Mrs. Virginia Woolsey. There seems to be little force in the argument that the testator did not consider the possible devolution of one-half of the residuary estate upon this favored daughter-in-law under the provisions of this will, and also was strangely blind to the obvious contingency that under the will the entire estate might become vested in an infant from whom the favored daughter-in-law might receive the whole by intestacy.

4. The whole argument oh behalf of the next of kin seems to me to lose force if we consider this very probable situation which might have occurred, and which the testator presumably contemplated, viz., that before the death of Alice and Herbert the two brothers and the sister had all died. Is there any semblance of reason or common sense in the claim'that these dead collaterals should be taken as the hypothetical stirpes, displacing .the daughter and grandson, who were alive and in the contemplation of the testator when he made his will?

In case such a substitution were made', the favored daughter-in-law would be excluded from the distribution under consideration, while a husband of the testator’s sister and a large number of strangers to the testator, including charitable institutions, might stand as claimants.

5. The case of White v. Springett (1869), 4 Ch. App. 300, while I think strongly supporting the views herein expressed, is particularly valuable on account of the opening statement in the opinion of Lord-Justice Selwin, which is as follows (at ¶. 302) :

“I accede to the argument on behalf of the appellants to this extent, that the current of modern decisions, and especially those in the house of lords, has set strongly in favor of adhering strictly to the literal meaning of the words used by the testator in each case, without alteration or addition, and, as far as possible, without reference to other cases or other wills.’3

Lord-Chancellor Halsbury, in a series of recent cases in the house of lords, has protested against the tendency to follow the construction of phrases in one will as a precedent for the construction of other wills, and of working- out a will which courts or lawyers may think the testator would have made “if he had had the whole circumstances present to his mind.” Higgins v. Dawson (1902), A. C. 1, 6; Kingsbury v. Walter (1901), A. C. 187, 188.

See, also, the remarks of Lord H.eischel in Hickling v. Fair (1899), A. C. 15, 25.

So far as authorities and precedents may be resorted to for help in this case, perhaps the most useful decision is that of the house of lords rendered in 1860 in the case of Bullock v. Downes, 9 H. L. C. 1; 11 English Reprint 627. See, also, 1 Jarm. Wills (ed. of R. & T.) 682. In White v. Spring ett, supra, the supposititious intestacy ■which was to be assumed in order to find the takers of the estate, was placed, not at the time of the death of the testator nor at the date of the will, but at the death of certain persons named who, in fact, died after the testator. To make the rule for finding the beneficiaries more artificial, the will required that in ascertaining the supposed next of kin of the testator a,t the supposed time of his death one grandchild should be excluded from consideration, and in fact at the supposed date this excluded grandchild was the testator’s sole next of kin. The court followed the suppositions and fictions of the will pointing out that the takers were not the testator’s next of kin at the time of his death, but that “he creates for himself an arbitrary class to be ascertained in a particular manner, and the question of the persons who are to constitute that class is what we have to look- to.”

6. Where, under the words of a will, the vesting of an estate upon a remote contingency is in the next of kin of the testator, or is to be ascertained by supposing that he died intestate, there may be good grounds for holding in some cases that the testamentary language effects no gift, but constitutes merely a declaration that in case his main purposes are defeated, for instance, by the death of all his direct descendants, that he has no further testamentary purpose to accomplish and is content to die intestate as to the estate or the residue of the estate of which his attempted disposition lias been thwarted by time and death. No such view, however, seems tenable when the testator disposes of his estate upon the happening of a more or less remote contingency as if he had died intestate upon some arbitrary date such as the date of his will or the date of an event which may happen before or after his own decease, on which assumed date he did not, in fact, die. In every such case a gift must be found to have been made by the- will to a donee who remains unknown until the eontingency happens and then must be ascertained by applying an artificia] rule as was done in White v. Springett, supra.

Of course, if the assumed date for the hypothetical intestacy is the date of the will, or any date prior thereto, the testator’s next of kin on such assumed date are known to him, as was true in this case. But in such case there seems to be no reason why, if the gift of the contingent interest is made to these next of kin, they should not be named instead of indicating them by a clumsy circumlocution. The purpose of the suppositions and the fiction of intestacy seems to be to keep the takers of the estate upon the happening of the contingency unknown and indeterminate until such contingency shall happen.

7. It may be deemed by some minds that the effect of what the testator in this ease did was to vest the contingent interest in question in his daughter-in-law and grandson, notwithstanding the circumlocution which he employed. This would not be, as was I think erroneously suggested in the argument, a gift to deceased persons, but a gift to living persons of a contingent estate which, from the nature of the contingency, they could never have in possession. It is unnecessary in this case to discuss this theory of construction, because it leads to the same result which is reached if we hold that the will makes no gift of the contingent interest to the daughter and grandson, but merely lays down an . artificial and arbitrary rule by which the donee theretofore being undetermined is to be ascertained upon the happening of the eontingenc3r.

8. It is understood that in accordance with the arguments of counsel and in harmony with the stipulation signed by the solicitors of all the parties, this decision is confined to the force and effect of the paragraph of the will above set forth. The defendant Virginia M. Woolsey, in her answer to the cross-bill, claims a balance of $8,000 due on her legacy of $10,000, but whether such a claim could be substantiated in this case has not been the subject of any argument, and in accordance with the stipulation I have given no consideration to it. If I have been misled in regard to this matter by the statements and stipulation of counsel, the matter may be disposed of after further argument upon settlement of the decree.

9. A decree will be advised instructing the trustees to pay oneIialf of the fund in dispute to the next of kin of the testator’s daughter Alice, and the other half to the next of kin of the testator’s grandson Herbert.