author: Garrison, V. C.

text:
    South Jersey Realty Company v. Samuel S. Staley et al.
    [Decided December 16th, 1908.]
    1. Upon a bill and affidavits to which there was neither answer nor affidavits on behalf of {he defendants, a preliminary injunction will issue restraining the defendants from interfering with the complainant’s title to land, where it appeared that such title had been established in a former suit in this court, and the complainant in the present suit is privy to the complainant in such former suit, and the defendants in the present suit are either parties to such former suit or privies of such parties by grant.
    2. The bill in the present suit not purporting- to be a supplemental bill in the original suit, is not strictly an original bill, since it is occasioned by a former bill, and assumes as its basis a decree, or the principle of a decree sought to be executed.
    3. Such a bill may be exhibited by a person who is not a party to the original suit, and even by one who does not claim under a party to an original decree, but who claims under a like interest.
    On application for preliminary injunction.

      Mr. Lewis Starr, for the complainant.

      Mr. 0. Rodney May, for the defendants.
   Garrison, V. C.

This is an application for a preliminary injunction based upon a bill and affidavits to which there is neither answer nor affidavits on behalf of the defendants.

, Briefly stated, the case made by the complainant is as follows: The beach called and known as Seven Mile Beach, in Middle township, in the county of Cape May, this state, was at one time in the possession of a corporation known as the Seven Mile Beach Company. While so in its possession claims of title to the said property were made by Jolm Learning, Eenben Learning, George Learning and Isabella Smith. A decree pro confesso was taken against Smith and one other defendant brought in by supplemental bill, but answers were filed by the other defendants, John, Eeuben and George Learning. A trial was had upon the issues, and on the 7th day of May, 1901, a final decree was entered in that suit. By such.final decree it was found “that the said defendants and each of them have no estate, interest in or encumbrance upon the premises described in the bill of complaint or any part thereof,” with the usual clause finding title in the complainant, so far as any Claim of the defendants was concerned. Incidentally, although not in my view important, an application was subsequently made by the said defendants, J ohn, Eeuben and George Learning, to have this decree opened, which application, on the 2d day of May, 1905, was refused. The title to the premises involved in the suit just stated was, by mesne conveyances, transferred from the Seven Mile Beach Company to the complainant herein, the South Jersey Eealty Company, in September of 1907, and that company has spent a sum approximating $150,000 in improving said premises, laying it out into blocks and lots, filling in the same, and improving and grading and constructing wharves and the like, and is engaged in the business of selling the said lots, and has already sold a great many thereof, a list of which is given in the bill, and is and has been, since the date of its deed, in possession of the premises, paying taxes, &c. After the complainant acquired title as aforesaid, J ohn Learning and certain of the other defendants named, Learning began again to assert ownership of the property, and represented to prospective purchasers of the lots that they were such owners, and sought out purchasers to induce them not to buy from the complainant, and actually executed various deeds for various parts of the said land to different persons, eight of such deeds being referred to and described in the bill. By a ninth deed, mentioned in the bill, the balance of the land not purported to be conveyed by the previous deeds was alleged to be conveyed by Jolm Learning for himself, and as attorney in fact for his brothers and sisters, to one Samuel S. Staley. This deed was dated the 8th of July, 1908, and was recorded on the 5th of October, 1908. It is charged in the bill that Staley and Learning entered into a conspiracy for the purpose of defrauding the complainant, the owner of this land, and that Learning has some interest in any money that is obtained by sales of lots made by Staley; that Staley has, in fact, made many deeds for lots, three of which are set forth and described in the bill of complaint; that Staley and Learning have, since the making of the deed from Learning and others to Staley, endeavored to influence prospective purchasers of lots from the complainant not to purchase from them, and are greatly embarrassing the complainant in the prosecution of its business; that the complainant has ispent approximately $20,000 in advertising its lots for sale; that recently Staley has caused advertisements to be printed and Circulated, offering to sell lots at the premises in question, that is to say, has offered to sell land which is the very land which is in controversy in the suit before mentioned, and in which a final decree was made that Learning and the others named had no title; and it is charged in the bill that the only title which Staley lias is that which he obtained from the defendants in the former suit. It is further charged that the defendants John, Reuben and George Learning, Isabella Smith, Samuel S. Staley, and one Charles H. Berryman (who has a deed for some of this land made by the Learnings after the decree aforesaid) are financially irresponsible and insolvent, and that no damages recovered against them could be collected. The damage to the complainant is set out, and it is prayed that the defendants may make answer to this bill, and that the complainant may be decreed to have a perfect title; that it may be decreed that the complainant’s title -was fixed, determined and settled by the decree in the previous suit between the Seven Mile Beach Company and the Learnings, in so far as any claim of the defendants therein was concerned, and that the defendants herein have no interest in or claim upon the said land or any part, and that an injunction may issue restraining the defendants from making any contract for the sale or other disposition of the said lands and premises, or any part thereof, and from making, executing and delivering any deed or deeds therefor, or any part thereof, and from recording or lodging for record any such deeds, and from assuming or taking or entering into possession of such lands or any part thereof, and from advertising the same for sale, and from claiming, alleging, stating or in any manner' or wise holding themselves out to be the owner or owners of said lands and premises or entitled to any interest, estate or claim therein, and from doing any act or thing which will in anywise disturb the complainant in the full, complete and absolute possession and ownership of the said lands.

There is also a prayer that the county clerk of the county of Cape May, where the lands lie, may be restrained from receiving for record any deeds from the defendants, or any of them, for any parts of the premises in question.

Since the facts are undisputed, the sole question is whether or not a preliminary injunction is proper under the circumstances.

This bill has no designation other than the usual one of “on bill,” &c. It does not purport to be a supplemental bill in the original suit. This raises the only doubt in the matter. It is, in its nature, undoubtedly a bill to enforce a decree of the court, and it is, of course, well settled that a court of equity has jurisdiction to carry into effect its own orders, decrees and judgments which remain unreversed.

Such a bill is not strictly an original bill, since it is at least occasioned b3r a former bill, and assumes as its basis a decree, or the principle of a decree sought to be executed. But it has been said to be, general^, partly an original bill and partly in the nature of an original bill, and is sometimes also a bill of revivor, or a supplemental bill, or both, the frame of the bill being varied accordingly. See 3 Encycl. Pl. & Pr. 601 et seq.

Such a bill may be exhibited by a person who is not a party to the original suit, and even by one who does not claim under a party to an original decree, but who claims under a like interest. A fortiori, it may be brought by or against a person claiming as assignee of a party to a decree. 3 Encycl. Pl. & Pr. 603 et seq.

Where, as in the ease at bar, the complainant is privy to the complainant in the original suit, and the defendants are either parties in the original suit, or privies of snch parties by grant, I think it perfectly clear that the bill will lie, and I think it immaterial whether it is termed a supplemental bill or an ancillary bill, or what phrase will properly describe it. It certainly partakes somewhat of the nature of an original bill, because it brings in new parties against whom the relief of injunction is at least asked, although the right to that injunction is based upon the determination in the suit to which all the parties are privy.

It seems to me that, if necessary, this bill can be denominated a bill in the nature of an original bill, or an ancillary bill, or, I presume, could even be treated as a supplemental bill, since the defendants have not answered, and the complainant could obtain leave to refile the same as a supplemental bill.

A case so nearly analogous as to make it a controlling one will be found in Root v. Woolworth (Supreme Court, 1893), 150 U. S. 401. I gather that the bill in that suit was an ancillary, supplemental bill, but, as I have above stated, I do not think that the title in this case makes any difference.

Briefly stated, the facts in that case were that M. filed a bill in equity against R. to establish his right to certain real estate, and obtained a decree, and a conveyance of the property was made to him by the master. M/s interest thereafter passed by mesne conveyances to W. Thereafter R. interfered with W/'s right of possession. W. thereupon filed his bill, praying that R. be restrained from asserting his pretended title, and that he might be decreed to have no interest in the lands, and that a writ of possession might issue, and that a perpetual injunction be awarded to prevent B. from setting up his claims, and the decree was granted in conformity with this prayer.

Analogous relief will be found to have been administered in this court in the eases of Paterson and Hudson River Railroad Co. v. Jersey City, 9 N. J. Eq. (1 Stock.) 434, and Morris Canal and Banking Co. v. Jersey City (Chancellor Williamson, 1859), 12 N. J. Eq. (1 Beas.) 227; affirmed, 12 N. J. Eq. (1 Beas.) 545. In these cases, however, the right protected had been settled by a previous judgment at law instead of in equity, and therefore they were in the nature of bills of peace. See 3 Encycl. Pl. & Pr. 556 et seq.

On this preliminary application, therefore, I think it clearly appears that the complainant has shown a right entitling it to protection, and the defendants are shown t'o have invaded that right.

I shall, therefore, advise the issuance of a preliminary injunction.


source: Caselaw Access Project

author: Teaming, V. C.

license: Public Domain

text:
    Elizabeth Mathis v. Charles R. Stevenson, executor, &c., of William Mathis, deceased.
    [Submitted and decided October 30th, 1908.]
    1. Orphans Court act, act June 14th, 1898 (P. L. p. 788 § 07). requires a decedent’s creditors to bring their claims against the estate within a certain time. Section 70 (page 740) bars a claim not made within that time, and section 71 (page 740) provides that the executor may give written notice that the claim is disputed, when the creditor must commence suit thereon within three months from such notice, or the claim will be barred. Complainant's claim for money loaned her husband during his lifetime was disputed by the executor, and suit was not brought thereon within three months.—Held, that the purpose of the statutes being to effect a speedy settlement of estates, section 71 applied, as a general rule, to suits in equity, as well as legal actions, and complainant’s suit, having been brought in equity only because of the relationship when the debt was created, was barred by her failure to bring it within the required time.
    2. The term “suit,” though frequently used to include both actions at law and suits in equity, is more appropriately applied to the latter.
    The bill is filed by a widow against the executor of her deceased husband to recover money alleged to have been loaned by her to her husband in his lifetime.
    The plea asserts that complainant presented her said claim, in writing, to defendant and that defendant gave notice, in writing, to complainant that her claim was disputed; and that this suit was not brought until after the expiration of three months from the time of the giving of such notice; and that the surrogate has, by final decree, ordered that all creditors of defendant’s testator who have not brought in their claims shall.be barred from any action therefor against defendant.
    The plea has been set clown for hearing to determine its sufficiency as a bar to recovery.

      Messrs. French Richards, for the plea.

      Messrs. Thompson & Oole, contra.

   Teaming, V. C.

It is contended in behalf of complainant that the provisions of our statute barring claims against executors do not contemplate claims of the nature of the present one over which a court of law cannot take jurisdiction. I am unable to reach that conclusion. While a court of law will not entertain jurisdiction over an action by a wife against her husband, or of a widow against her deceased husband’s executor, for a debt clue from the husband to the wife, the jurisdiction of a court of equity to maintain such a suit has long been recognized; and I find, nothing in either the terms or the policy of our statute barring claims against executors which indicates that the statute relates alone to actions at law. Section 67 of the Orphans Court act (P. L. 1898 p. 738), requires “creditors of the decedent to bring in their debts, demands and claims against- his estate” within the time therein specified. Section 70 provides for a final decree barring a creditor who has not brought in his claim within the time limited, and enacts that such creditor “shall, by such decree, be forever barred of his or her action therefor against such executor.” Section 71 provides that when a claim is presented the executor may, in writing, give notice that the claim is disputed, and in such case

“such creditor shall bring suit therefor in three months from the time of giving such notice; and in any suit not commenced within said time, said decree shall bar any recovery of the account or part so disputed, as if said debt or claim had not been presented within the time so limited by the court.”

It will be observed by reference to the provisions of the statute above quoted that the terms of the statute clearly include any debt of the deceased without limitation as to the court where such debt must be recovered. The requirement that “suit” shall be commenced within three months from the time the claim is disputed contains no suggestion that an action at law is alone contemplated. The term “suit” though frequently used to include an action in a court of law, as well as a suit in a court of equity, is more appropriately applied alone to the latter. See Black’s L. Dict. tit. Suit.” The well recognized spirit and purpose of the provisions of the statute under consideration also indicate that the intention of its framers was to require a creditor to litigate a claim for the recovery of an alleged indebtedness of deceased, within the time specified, without limitation as to the court in which such claim of indebtedness should be appropriately asserted. It has been repeatedly held that the general purpose of the statute is to effect a speedy settlement of estates of deceased persons. Newbold v. Fenimore, 53 N. J. Law (24 Vr.) 307, 309; Emson v. Allen, 62 N. J. Law (33 Vr.) 491, 493; Simons v. Forster, 73 N. J. Law (44 Vr.) 338, 341. With such general legislative purpose in view no reason suggests itself why the statutory requirement should not be held to include suits in equity as well as action at law.

I have not undertaken to inquire whether it may not be possible for some class of equitable claims to arise against the estate of a deceased person, the assertion of which may not fall within the provisions of the act. But where, as here, the claim is for the recovery of a debt arising from money loaned by a wife to her husband and the assertion of the claim falls within the jurisdiction of the court of chancery only because the indebtedness arose at a time when the relationship of husband and wife existed, I am entirely clear that both the terms and spirit of the act must be held to include such a claim.

I will advise an order sustaining the plea.


author: Leamtng, V. C.

text:
    James B. Reilly v. Absecon Land Company et al.
    [Submitted and decided November 6th, 1908.]
    1. A sale of corporate stock, accompanied by a delivery of the certificate and power of attorney authorizing its transfer on the books of the corporation, is valid as against a creditor of the seller, and gives the buyer a precedence over subsequent judgments, executions, and attachments procured by creditors of the seller, though a by-law of the corporation provides that its stock shall be transferable only on its books.
    2. A sale of corporate stock, accompanied by a delivery of the certificate and power of attorney authorizing its transfer on the books of the corporation, deprives the seller of any interest therein subject to attachment, though a transfer on the books of the corporation has not been applied for or made.
    3. Where a buyer of corporate stock, accompanied by delivery of the certificate and power of attorney authorizing its transfer on the corporate books, failed for a long time to demand a transfer on the books of the corporation, and during the interval the stock was levied on and sold in attachment proceedings against the seller, the court would require him to indemnify the corporation against loss as a condition precedent to a decree requiring the corporation to transfer the stock to him on its books.
    4. The fact that an officer holding a writ of attachment under which corporate stock which had been sold by the debtor to a third person was levied on and sold, directed1 the corporation to issue to the purchaser at the sale under the attachment proceedings a certificate of stock did not prevent the enforcement of the right of the third person to have a transfer to himself of the stock on the corporate books.
    5. Equity will compel a transfer on the books of a corporation of stock to a buyer thereof, on the theory that the buyer is the equitable owner, and seeks to consummate a legal title.
    Oil bill, answer, replication and proofs.
    One Wills was the owner of certain capital stock of defendant corporation and sold the same to complainant. At the time of the sale Wills delivered to complainant the certificate representing the shares and executed on the back of the certificate the usual assignment and irrevocable power of attorney authorizing its transfer on the books of the company. Complainant now surrenders the certificate to defendant company and seeks to compel the company to issue to him a new certificate in lieu thereof.
    The defence which is interposed arises by reason of an attachment having been issued against complainant’s assignor. After the stock had been sold by Wills to complainant, and before a transfer had been applied for or made on the books of the corporation, an attachment was issued against Wills and levied upon the stock by notice.to the secretary of the corporation; subsequently a sale of the stock was made under the attachment levy and one Lewis became the purchaser. After the sale the officer holding the writ gave notice to the secretary of the corporation that Lewis had become the purchaser at the sale and requested’ the secretary to “turn over” to Lewis the certificate. A new certificate was then issued by the corporation to Lewis as purchaser at the sale under the attachment. Subsequently (about a year after complainant purchased his stock), Lewis sold the stock so acquired by him to defendant Stewart, and Lewis, having lost the certificate issued to him, indemnified the corporation against loss and a new certificate was issued by the corporation to defendant Stewart who now holds it. Complainant had no knowledge of the attachment or the subsequent transfers until he presented the certificate received by him from Wills for transfer upon the books of the company, when he was then informed by the secretary of the corporation of the matters above recited and the request for transfer was refused. Neither Lewis nor defendant Stewart knew of the sale from Wills to complainant; but defendant Stewart knew that the stock which he purchased had been acquired by his vendor under an attachment sale. The by-laws of defendant company contain the usual provision to the effect that the stock of the company shall be transferable only on the books of the company.

      Messrs. Godfrey & Godfrey, for the complainant.

      Mr: Eli II. Chandler, for the defendant Stewart.
   Leamtng, V. C.

Some courts have held that a sale of corporate stock accompanied by a delivery of the certificate and usual power of aftornejq without further steps toward completing the transaction by notice of the transfer to the company or by causing an actual transfer to be made on the books of the company, is presumptively fraudulent, and therefore invalid as against judgment or attaching creditors of the assignor. A different rule, however, must be regarded as settled in this state. Our courts have uniformly held that such a sale is valid as against creditors of the assignor, and that the sale gives the assignee a precedence over subsequent judgments, executions and attachments procured by creditors of the assignor. The provisions touching transfers on the books of the company are held to be intended for the protection of the company. It is manifest that such provisions cannot be easily considered as intended to have the effect of recording statutes for the protection of creditors of stockholders, for the public at large is not entitled to access to the stock books of our corporations. Broadway Bank v. McElrath, 13 N. J. Eq. (2 Beas.) 24; Hunterdon County Bank v. Nassau Bank, 17 N. J. Eq. (2 C. E. Gr.) 496; Mt. Holly, Lumberton and Medford Turnpike Co. v. Ferree, 17 N. J. Eq. (2 C. E. Gr.) 117; Prall v. Tilt, 28 N. J. Eq. (1 Stew.) 479; Matthews v. Hoagland, 48 N. J. Eq. (3 Dick.) 455, 490. As a valid title to the stock had passed from Wills to complainant at the time the attachment against Wills was issued, it necessarily follows that there could be no interest in Wills subject to attachment and no title conferred by the attachment sale.

It is urged in behalf of the corporation that it should be protected, as it has issued a certificate to the purchaser at the sale under the attachment and a subsequent certificate to defendant Stewart. I cannot see that the corporation is in danger of loss. The purchaser at the sale under the attachment knew, in the light of the adjudications already cited, that his purchase was void as against any bona fide purchaser of the stock prior to the date of the levy of the attachment. Defendant Stewart also knew that the interest which he was purchasing had been acquired under the attachment proceedings, and defendant company was indemnifled against loss by reason of the certificate issued to him. But inasmuch a? the provisions touching a transfer on the books of the corporation are for the protection of the corporation and some danger of loss to the corporation may exist, I think it proper to impose terms upon complainant to the effect that he indemnify the corporation against loss arising from the issuance of the certificates now sought by complainant. The long delay of complainant in presenting his certificate for transfer on the books of the corporation seems to make these terms appropriate.

There was no statutory authority for the direction given by the officer holding the writ requesting the company to issue a new certificate to the purchaser, and that direction can afford no obstacle to the enforcement of complainant’s rights at this time..

This court will exercise jurisdiction to compel a transfer on the books of a corporation in a case of this nature on the theory that complainant is the equitable owner and seeks to consummate a legal title. Archer v. American Water Works Co., 50 N. J. Eq. (5 Dick.) 33, 50.

I will advise a decree for complainant, pursuant to the prayer of the bill, -with terms imposed as above stated.


author: Teaming, V. 0.

text:
    Mary M. Fischer v. George A. Fischer and Anna Fischer.
    [Submitted November 6th, 1908.
    Decided November 16th, 1908.]
    1. Where there is a bequest to one and “in case of his death,” to another, the expression “in case of his death,” unexplained by the context, refers to the event of 'death happening before the death of the testator.
    2. An absolute bequest to a person, followed by the expression “in case of his death,” cannot be construed to mean “at his death” or “from his deaththe element of contingency being absent in that case, as no proper force could1 then be given to the expression, “in case of.”

      3. Where the context of the will is silent, the words “in case of,” and similar expressions, referring to the death of a prior legatee in connection with some collateral event, apply to the contingency happening as well after as before the death of testator.
    4. Testatrix, by the first paragraph of her will, gave her entire estate to her son and his wife. By the second paragraph she imposed on both the burden of supporting her infirm husband for life, and by the third declared that, in case the son should die before his wife, his widow should then become the owner of the property in common with her two children, with the added condition that, in case she remarried, the two children should1 become the owners of the entire estate.—Field, that as to testatrix’s real estate, the will created an estate in fee by the entirety in testatrix’s son and his wife with limitation over by way of executory devise in the event of the son’s death before his wife, irrespective of the death of testatrix, and, at the son’s death, the estate by the entirety was defeated by the happening of the contingency named, and the fee passed to the widow and her two children in equal shares; the fee in the widow’s share being defeasible in case of her remarriage, in which event the entire estate passes to the children.
    On final hearing on bill to quiet title to land.
    The bill is filed by complainant against her two minor children to quiet the title to certain real estate, which was owned by the grandmother of the two minors at the time of her decease and disposed of by her will. In effect the bill is to procure a construction of the provisions of that will touching certain real estate therein referred to.
    The will of Kunigunde Fischer (the mother of the father of the two defendant minor children, and the mother of the husband of complainant) provided as follows:

      “First, after my lawful debts are paid I give and bequeath and devise all my real estate being my house known as ‘number (10S) one hundred and eight Monroe street’ in the city of Hoboken, county of Hudson, and state of New Jersey as well as, all my personal estate, goods and chattels of whatever nature and kind soever to my beloved son Otto A. Fischer and his wife Mary N. Fischer and their heirs and assigns forever.

      “Second, my dear husband Charles August Fischer who had been and is now in feeble health and will be taken care of by my son and his wife so that they have to care for all his necessities and wants and will receive from them as pocket money Four (4) dollars cash every month during his lifetime.

      “Third. In case my son Otto August Fischer should die before his wife it is my will that as long as his wife Mary N. Fischer does not remarry and will be his widow, that in this case she becomes the heir to the property with her two children Anna and George, otherwise the property has to go to these two children alone as their inheritance from their grandmother.”
    The will bears date March 13th, 1901. Kunigunde Fischer, testatrix, died April 12th, 1901. Charles August Fischer, the husband of testatrix named in the second paragraph of the will, died November 8th, 1901. Otto. Fischer, the son, died April 15th, 1906. Mary N. Fischer, the son’s wife named in the will, and the two minor children Anna and George, grandchildren of testatrix, are still alive, and Mary N. Fischer, complainant, has not remarried. The bill is filed by Mary N. Fischer, widow of the son, against her two minor children Anna and George. It is contended in behalf of complainant that upon the death of testatrix an estate by the entirety vested in the son Otto A. and complainant, and that upon the death of Otto A. an absolute estate became vested in complainant, and that the two minor grandchildren of testatrix in consequence take nothing under the will.

      Mr. William S. Btulir, for the complainant.

      Mr. Samuel A. Besson, for the defendants.
   Teaming, V. 0.

It will be observed that testatrix by the first paragraph of her will devises an absolute estate to her son Otto and his wife. By the third paragraph two successive contingencies are introduced to the effect—first, that if the son Otto dies before his wife the property shall go to the wife and the two grandchildren, and second, if the wife thereafter remarries, the property shall go wholly to the two grandchildren. The question is, therefore, presented whether the death of Otto before his wife is a contingency which testatrix intended to be operative only in the event of the contingency occurring before the death of testatrix, or as a contingency to be equally operative in the event of the contingency happening after the death of testatrix. As the contingency did not occur until after the death of testatrix her intention in the respect named must be ascertained.

The provisions of the will which are to be here construed relate to both the real and personal property of testatrix; and the contention in behalf of complainant is that the gift falls within the well-recognized rule of construction that where there is a bequest to one person and “in case of his death” to another person, the expression “in case of his death,” unexplained by the context of the will, will be understood as referring to the event of death happening before the death of testator. While the rule of construction referred to is in most cases applied to bequests of personal property, the same rule has by some authorities been applied to devises of real estate. The precise purpose and application of the rule should, therefore, be considered in this case.

Conceding the rule of construction referred to as applicable to the same extent in devises of real estate as in bequests of personal property, I am unable to reach the conclusion that the contingency of the death of Otto referred to by testatrix was intended by her to relate to the death of Otto only in the event of the death of Otto occurring before the death of testatrix. Where a bequest is made to one person with a gift over in case of his death, courts have uniformly held that the expression “in case of his death” must be understood to mean in case of his death before the death of testator, or in case of his death before distribution where a period of distribution may be said to be contemplated. But the reason of that rule is apparent and well understood, and, as is the case with any general rule, it is difficult to find justification for its retention when the reason for its application disappears. The expression “in case of his death” imports a contingency in the mind of testator, and j^et death is not a contingency, but, on the contrary, is the most certain of all events; hence an absolute bequest to a person followed by the expression “in case of his death”-cannot be understood to mean “at his death” or “from his death,” because in that ease the element of contingency is absent and no proper force is given to the expression “in case of.” To give full meaning to the words “in case of,” something that is a real contingency must be understood to have been in the mind of testator, so in order to- give entire force to the expression it is necessary to connect with the death of the legatee some circumstance which is not certain, but which is contingent; that circumstance is necessarily the contingency of the death of devisee before the death of the testator. Such expressions are therefore understood to mean the contingency of death of the legatee before the death of the testator. The tendency of courts to favor the vesting of estate is also thought to have had an influence in establishing the rule of construction referred to-. But it seems manifest that where death is referred to in connection with some collateral event which is in itself a pure contingency, the reason for the rule is absent, so far as it seeks to determine testator’s intent by giving force to all expression of tire will. In the,will now under consideration the contingency referred to is as follows : “In case my son Otto- Augustus Fischer should die before his wife.” This is a pure contingency and I am aware of no logical reason that can be found for adding to- this contingency the additional contingency that Otto shall also die before testatrix, if the intention of testatrix is to be sought by giving appropriate force to all of the provisions of her will. In consequence, in 2 Jarm. Wills 640,the author has, with some hesitancy, it is stated, defined a second rule, as follows: “The general rule is that where the context is silent, the words (“in case of” and similar expressions) referring to the death of the prior legatee, in connection with some collateral event, apply to the contingency happening as well after as before the death of the testator.” The following cases which are reviewed by the author sustain the rule as it is there defined. Allen v. Farthing, 2 Mad. 310; Child v. Gilbert, 3 Myl. & K. 71; Smith v. Stewart, 4 De G. & S. 253. I am aware that the rule last referred to fails to find entire recognition in many adjudicated cases. These cases in the main relate, so far as I have examined them, to bequests over in case of the death of the first legatee without issue. In such cases the event of death without issue does not appear to be uniformly treated as a collateral event and an absolute estate is held to vest in the first legatee if alive at the time of distribution.

But I find it unnecessary to base my conclusions upon the rule above quoted from the text of Jarman on Wills. All authorities appear to agree that where the context of the will discloses any manifestation of an intent upon the part of testator to refer to death subsequent to testator’s death, such manifestation of intent will be recognized and regarded as controlling, even though such manifestation of intent may be but slight. The English cases to that effect are reviewed and followed by Chancellor McGill in Burdge v. Walling, 45 N. J. Eq. (18 Stew.) 10. I find in the subject-matter of the present will evidences of the intention of testatrix to limit the estate of her son Otto in the event named irrespective of whether his death occurred before or after her death. By the first paragraph of the will the entire estate of testatrix is given to her son Otto and his wife absolutely. By the second paragraph the will imposes upon both the son and wife the burden of supporting the infirm husband of testatrix during his life and paying him $4 per month during that period. The third paragraph contemplates the contingency, now in question, of the death of the son, and pro'vides, in substance, that in case tire son should die- before his wife, his widow (complainant herein) should then become owner of the property in common with her two children, grandchildren of testatrix, with the condition added that in the event of her (complainant) remarrying, then the two grandchildren of testatrix should become owners of the entire estate. This provision, designed to defeat tire estate of complainant and to secure to the grandchildren of testatrix the entire estate in the event of the remarriage of complainant is one so usual that its purpose can scarcely be mistaken. It seems manifest that testatrix entertained a defined purpose to guard against the possibility of a second marriage of her daughter-in-law to the detriment of her children by the son of testatrix. If this purpose of testatrix can be discerned it seems manifest that this contingency is one which cannot be assumed to have been intended to be guarded against only in the event of the death of the son before the death of testatrix. It will be observed also* that the second paragraph of the will enjoins both the son Otto and his wife to care for the enfeebled husband of testatrix during his lifetime and to pay to him a monthly stipend. This also indicates that testatrix had in mind the death of her son after her death, at least so far as the provisions of that paragraph of the will axe concerned; for the necessity of support and the provisions of the will touching support, which are directed alike to the son and daughter-in-law, could only become operative at the death of testatrix.

Touching the real estate in question I think it entirely clear that the will created an estate in fee by the entirety (Den v. Hardenberg, 10 N. J. Law (5 Halst.) 42) in Otto and his wife with limitation over by way of executory devise in the event of the death of Otto before his wife, irrespective of whether Otto’s death occurred before or after the death of testatrix. At the death of Otto the estate by the entirety was defeated by the happening of the contingency named, and the fee passed to complainant and her two children in equal shares, with the fee of complainant in her share made again defeasible in the event of her remarriage, in which latter event the whole estate will pass to the two children absolutely. This appears to be in accordance with the manifest intent of testatrix and I find no rule of construction or principle of law touching the disposition of real estate by devise inconsistent with the creation of the estates above defined.


author: Leaking, V. C.

text:
    Sarah Ann Rowley v. William W. Bowyer et al.
    [Submitted November 11th, 1908.
    Decided November 24th, 1908.]
    1. The delivery of a deed of conveyance of land by the grantor to a third person to be held by the third person and delivered to the grantee upon the death of grantor will operate as a valid delivery, where there is no' reservation on the part of the grantor of any control over the instrument, though the grantee had not empowered the third party to act for him in holding the deed.
    2. Schlieher v. Keeler, 61 N. J. Eq. (1 Rohli.) 685, distinguished.

      On bill, answer, replication and proofs.
    The bill is filed to set aside two certain deeds of conveyance of real estate made January 25th, 1906, by John Bowyer, now deceased, to his son, William W. Bowyer.
    A few days before the date of these deeds John Bowyer employed William Casselman, an attorney-at-law, to prepare his will and to draw these deeds. He gave the attorney a list of his several tracts of real estate and directed that his will should dispose of all of them excepting three, and requested the attorney to prepare two deeds conveying the three pieces of real estate not covered by the will, to his son, William W. Bowyer, defendant herein, stating that he owed his son William some money, and that the deeds were to pay him.
    The will and deeds were accordingly prepared by the attorney as directed. The will made devises of real estate to all of Bow-yer’s children, except his son William, grantee in the deeds, and his daughter, Sarah Ann Rowley, complainant herein. All of Bowyer’s real estate, except the three properties covered by the deeds, was disposed of by the will, and the will contained no residuary clause. The will was executed January 23d, 1906, and two days later the deeds were executed. After executing the deeds Bowyer handed them to the attornejr and said: “Deliver these to my son after my death.” The deeds were accordingly retained by the attorney until the death of Bowyer, which occurred some three months later, when the deeds were delivered by the attorney to the grantee named in them and recorded.
    Complainant, who receives nothing under the will, now seeks to set aside the deeds on the ground that there was no valid delivery of the instruments.

      Mr. S. Conrad Ott, for the complainant.

      Messrs. Bleakly & Stoclcwell, for the defendants.
   Leaking, V. C.

The delivery of a deed of conveyance of real estate is essential to its validity. Its delivery is a matter of intention, and the acts and declarations of the grantor are evidence of his intention. It is not delivered unless or until it is the intention of the grantor to perfect the instrument and make it presently effective as a conveyance.

These elementary principles have been recognized in this court in Crawford v. Bertholf, 1 N. J. Eq. (Sax.) 458, 467; Wood v. Woodward, 8 N. J. Eq. (4 Halst.) 779, 784; Martling v. Martling, 47 N. J. Eq. (2 Dick.) 122; Vreeland v. Vreeland, 48 N. J. Eq. (3 Dick.) 56, 60; and in the supreme court in Folly v. Vantuyl, 9 N. J. Law (4 Halst.) 153, 160; and in the court of errors and appeals in Ruckman v. Ruckman, 33 N. J. Eq. (6 Stew.) 354, 358, and Schlicher v. Keeler, 67 N. J. Eq. (1 Robb.) 635, 639. In Ruckman v. Ruckman it is said: “The essence of delivery consists in the intent of the grantor to perfect the instrument, and to make it at once the absolute property of the grantee, and his acts and declarations are the evidence of such intent.” In Schlicher v. Keeler it is said: “A deed does not become operative until it is delivered with the intent that it shall become effective as a conveyance. To constitute a good delivery it must appear from the circumstances of the transaction that it was the grantor’s intention to part with the deed, and thereby put the title in the grantee.”

Consistently with the principles above defined it must be held that if the grantor handed the deed now in question to the third party with the instructions already stated and with an intention to part with all dominion and control over the deed to the end that it should be presently effective as a conveyance, there was a valid delivery of the deed and a consequent present transmission of title from the grantor to the grantee co-eztensive with the grantor’s purpose; if, on the other hand, the grantor’s intention was that the deed should not permanently pass from his control, the deed would be ineffective as a present conveyance for want of delivery, and it could not be supported in such case as a conveyance to take effect after the death of the grantor, as the transaction would then embody the essential elements of a testamentary devise and be violative of the terms of our statute of wills.

In Schlicher v. Keeler, 61 N. J. Eq. (16 Dick.) 394, a deed had been handed by the grantor to a third party with instrucfions for delivery to the grantee at the death of the grantor, and Vice-Chancellor Eeed held that the delivery was sufficient and the deed, in consequence, presently operative as a conveyance. The case was reversed in the court of errors and appeals (67 N. J. Eq. (1 Robb.) 635), and it is now earnestly urged in behalf of complainant that the decision of the court of errors and appeals referred to is in conflict with the rule already stated. I am unable to adopt that view. The conclusion reached by the learned vice-chancellor is accurately stated in the headnote of the case as follows: “Where a grantor delivers a deed to a stranger as agent of the grantee, to hold till the grantor’s death, with no power of control reserved by the grantor, there is a valid delivery, though the grantee had not empowered the stranger to act for him in holding the deed.” While the decree which was entered was reversed, I do not understand the opinion filed by the court of errors and appeals to repudiate, in any way, the* legal principles defined by the learned "vice-chancellor. By refer- • ence to page 639 of the opinion of the court of errors and appeals it will be observed that that court was unable to reach the conclusion of fact that the deed there in question had been delivered by the grantor to the third party as a wholly voluntary act. Assuming the delivery to have been to any extent involuntary, it is manifest that no defined intention upon the part of the grantor to place the deed beyond his control, or that the deed should become presently effective as a conveyance could be properly ascertained. The subsequent statement contained in the opinion to the effect that the deed could not be sustained as a grant, to take effect after the death of the grantor, because violative of the terms of the statute of wills, further discloses the view of ihe court to have been that the deed then under consideration had not been delivered with an intent upon the part of the grantor that it should be presently operative as a grant.

The precise question here involved has frequently been before the courts of our sister states. The conclusions reached are almost uniformly to the effect that where the delivery of the deed by the grantor to the third person, with instructions for its delivery to the grantee at the grantor’s death, lias not been accompanied with some acts or words of the grantor indicating a purpose on his part to reserve to himself the control of the deed, the delivery will be considered sufficient to render the deed operative as a conveyance and to vest a present estate in ijue grantee co-extensive with the purpose -of the grantor. I say co-extensive with the purpose of the grantor, because in all cases of this class the grantor by the very nature of the transaction reserves to himself until his death the possession of the premises conveyed. But where the grantor fails to reserve to himself the control of the deed, the delivery of the deed to the third person is held to presently vest the fee in the grantee. The following cases will be found to support this view: Prutsman v. Baker, 30 Wis. 644; Bury v. Young, 98 Cal. 446; Wittenbrock v. Cass, 110 Cal. 1; Ruiz v. Dow, 113 Cal. 490; Meech v. Wilder, 130 Mich. 29; Shea v. Murphy, 164 Ill. 614; Stewart v. Stewart, 5 Conn. 317; Belden v. Carter, 4 Day 66, where it is held that title passes «presently by delivery to a third person with instructions on the part of the grantor that the third person should keep the deed, and,'if not called for by the grantor, deliver it to the grantee after the death of the grantor. St. Clair v. Marquell (Ind.), 67 N. E. Rep. 693, where the conveyance wras sustained notwithstanding the fact that the grantor subsequently procured possession of the deed. Lippold v. Lippold, 112 Iowa 134, vdiere the grantor retained the power to recall the deed during his lifetime, but failed to exercise the power. Arnegaard v. Arnegaard, 7 N. Dak. 475; Marvin v. Stimpson, 23 Colo. 174; Haydon v. Easter, 15 Ky. L. Rep. 597; Doe v. Beeson, 2 Houst. (Del.) 246; Wright v. Worden, 7 Ohio Nisi Prius 122; Hoffmire v. Martin, 29 Oreg. 240; Studebaker Brothers v. Hunt (Tex.), 38 S. W. Rep. 1134; Griffis v. Payne (Tex.), 47 S. W. Rep. 973; Stepens v. Huss, 51 Pa. St. 20; Wheelwright v. Wheelwright, 2 Mass. 447; Hatch v. Hatch, 9 Mass. 307; Foster v. Mansfield, 3 Metc. 412; O’Kelly v. O’Kelly, 8 Metc. 436; Moore v. Hazleton, 9 Allen 102; Church v. Gilman, 15 Wend. 656; Hathaway v. Payne, 34 N. Y. 92; Ladd v. Ladd, 14 Vt. 185; Meech v. Wilder, 130 Mich. 29; Linton v. Brown’s Administrator, 20 Fed. Rep. 455; McCalla v. Bane, 45 Fed. Rep. 828.

The reasons for the conclusions reached in the cases above cited are not entirely uniform; but all of the cases cited hold that title passes either at or as of the date of the first delivery where no reservation of control of the deed is made by the grantor. In 13 Cyc. the following text (at p. 569), is adopted without qualification :

“The delivery of a deed by the grantor to a third person to be held by him and delivered to the grantee upon the grantor’s death will operate as a valid delivery, where there is no reservation on the part of the latter of any control over the instrument. If, however, a power to recall the deed is reserved by the grantor there is no effectual delivery and the deed cannot take effect.”

In the several eases above cited the acceptance by the grantee is uniformly regarded as sufficient. In some cases the acceptance is assumed to be complete because of the presumption of acceptance bjr the grantee of that which is in his favor; in others the final acceptance by the grantee is held to relate to the first delivery.

In harmony with the adjudications already referred to, I think it must be held in this ease that the title to the land in controversy is in defendant. The deeds in question were delivered by the grantor to the third party with the instruction that at the death of the grantor they should be delivered by the third party to the grantee. The delivery to the third party was without reservation of control, on the part of the grantor over the instruments. No word was said to qualify the specific direction which was given, and nothing occurred to indicate a purpose upon the part of grantor to qualify the direction so given. The direction given was specific, complete and absolute. It is manifest that no purpose to recall the deeds existed in the mind of grantor at the time he delivered them; his purpose at that time was entirely fixed and definite. The suggestion is perhaps incident to all transactions of this nature that the grantor may have believed that he could recall the instrument in the event of a subsequent but unanticipated' change of purpose; but such suggestion enters the field of conjecture and cannot be properly entertained in the absence of some evidence of the fact. In Linton v. Brown’s Administrators, 20 Fed. Rep. 455, 465, Mr. Justice Bradley adopts the view that in the absence of some evidence of a contrary intent, full force must be given to the language of the deed and acknowledgment to the effect that the instrument has been signed, sealed and delivered. The retention of possession of the land by the grantor is but consistent with the obvious purpose of a grantor in all transactions of this nature. If a purpose existed to surrender possession of the land at once, no occasion to deposit the deed for the life of the grantor would exist. The intention manifest from the irrevocable delivery to a depositary is to convey the fee but to reserve the possession for life. Accor dingty, in Prutsman v. Baker, 30 Wis. 644 (supra), in referring to facts similar to those now present, it is said: “As to the grantor, the delivery is absolute and final, and so is his conveyance of the land, the title to which passes, at once, to the grantee, qualified only by the right of the grantor to use and occupy, or take and receive the rents and profits during his life, or until the event shall have happened, upon which second delivery is made. The grantor, in such case, converts his estate into a life tenancy, and makes himself the tenant of the grantee. These conclusions result, unavoidably, from the certainty of the event upon which the second delivery is made to depend, and from the impossibility under the circumstances, that the grantor will ever be able to recall or repossess himself of his deed. He delivered his writing, therefore, as his dead, always so to remain, and never to return to him, and it becomes presently operative and the title vests immediately in the grantee.

* * * As observed in Cook v. Brown, 34 N. H. 460, the owner of land desiring to make disposition of it'afc his death, has three courses open to him, either of which he may adopt according to circumstances and as will best suit his convenience and intentions. Tf he desires to convey the same, but not to have his deed take effect until his decease, he can make a reservation of a life estate in the deed; or it may be done by the absolute-delivery of the deed to a third person, to be passed to the grantee upon the decease of the grantor; the holder in such case being a trustee for the grantee. But if he wishes to retain the power of changing the disposition of the property at his pleasure, that can only be properly effected by a will/ ”

But other circumstances of the present case exist which tend to strengthen the conclusion that it was the intention of the grantor to irrevocably deliver the instruments. The grantee was the soil of the grantor and had during a long period of time advanced various sums of money to his father and has never exacted repayment. No exact account of the moneys so advanced has been kept by the son; but in June, 1892, the father, by a promissory note to his son of that date, recognizes an indebtedness of $2,000. In April, 1894, he executed another note to the son for $100, and in June, 1901, another note for $50. None of these notes had been paid at the date of the execution of the deeds. While these are all the written evidences of loans which the son can at this time produce, he testifies that many other similar advances were made to his father and no account' kept of them. I think that the evidence justifies the conclusion of fact that at the time the deeds were executed by the father he was indebted to his son for an amount approximating the value of the property which was conveyed to the son by the deeds now in question. Charles P. Bowyer, a brother of grantor, testifies that some five years ago grantor stated to him that he had received considerable money from his son William at various times, and that he saw no way of securing him but to deed certain properties to him, and that he intended to do so. Later, about a month after the deeds now in question had been executed, the grantor told this witness that he had executed the two deeds to his son AVilliam to discharge a debt that he owed him. Charles D. Bowyer, a brother of defendant, testified that grantor stated to him that he was using some of William’s (defendant’s) money and would have to make him whole in some way. A somewhat similar statement was made by grantor to John R. Bowyer, another brother of defendant. Ida Bowyer, a sister-in-law of defendant, testified that shortly before the date of the deeds in question, grantor told her that he owed defendant money and intended to deed to him the properties which are included in the deeds. Defendant testified that before the date of the deeds his father told him that he did not know that he would ever be able to pay him unless he paid in real estate by deeding to him the properties now in question; and that after the date of the deeds his father told him the deeds were executed and were in the hands of Mr. Casselman, and that witness could have them at any time he wanted them. Mr. Casselman, the depositary, testified that the grantor stated to him when the deeds were drawn that he owed the grantee some money ancl that the deeds were to pay him. While some of the testimony of the witnesses referred to are in a measure consistent with the idea that the grantor may have thought that the deeds did not become operative as conveyances until his death, yet the testimony here briefly summarized is substantially corroborative of the conclusion already reached that the grantor treated the delivery of the deeds to the third party as a finality and as operative to discharge his indebtedness to the grantee.

I will advise a decree denying the relief prayed for!


author: Beaming, Y. C.

text:
    William D. Vanaman v. Solomon R. Fliehr et al.
    [Argued and decided December 18th, 1908.]
    1. The language “mortgagees in good faith,” as used in P. 1902 p. J87 § 1¡, providing that a chattel mortgage not accompanied by immediate delivery, followed by actual and continued change of possession, shall be absolutely void against mortgagees in good faith, unless the mortgage, having annexed thereto a prescribed affidavit or affirmation, bo recorded as directed, &c., includes a mortgagee whose mortgage secures a preexisting indebtedness.
    2. A “subsequent» chattel mortgagee in good faith” is one who receives his mortgage without knowledge of the existence of a prior mortgage.
    3. P. L. 1902 p. 1¡81 § 1/ provides that a chattel mortgage not accompanied by immediate delivery, followed by actual and continued change of possession, shall be absolutely void as against mortgagees in good faith, unless the mortgage, having annexed thereto an affidavit stating the consideration, be recorded as directed, &c.—Held, that in the absence of actual notice of a prior mortgage or the record thereof, the good faith of a subsequent mortgagee is not destroyed by the constructive notice afforded by a record containing a false affidavit touching the consideration, and the subsequent mortgage will receive the protection of the statute.

      On bill for injunction. On return of order to show cause.

      Mr. S. Conrad OH, for the complainant.

      Mr. Horace F. Sutton and Mr. D. Truman Stackhouse, Jr., for the defendants.
   Beaming, Y. C.

Knowles Loom Works v. Vacher, 57 N. J. Law (28 Vr.) 490; affirmed, 59 N. J. Law (30 Vr.) 1586, must be regarded as conclusive in this court to the effect that the statutory language “mortgagees in good faith,” as used in section 4 of our Chattel Mortgage act (P. L. 1902 p. 487) includes a mortgagee whose mortgage has been executed to secure a pre-existing indebtedness.

A subsequent mortgagee in good faith is a mortgagee who receives his mortgage without knowledge of the existence of a prior mortgage. Graham Button Company v. Spielman, 50 N. J. Eq. (5 Dick.) 120, 123; affirmed, 50 N. J. Eq. (5 Dick.) 796; Boice v. Conover, 54 N. J. Eq. (9 Dick.) 531, 538; Bank v. Sprague, 21 N. J. Eq. (6 C. E. Gr.) 530, 536. It follows that complainant’s mortgage will receive the protection of the statute if complainant is a mortgagee who at the time of the execution of his mortgage had no knowledge of the existence of the prior recorded chattel mortgage, which contained a false affidavit touching its consideration. I am unable to reach the conclusion that any constructive notice afforded by the record of such prior mortgage operates, in the absence of actual notice of the prior mortgage or of the record thereof, to destroy the good faith of a subsequent mortgagee. The mortgage which the record protects against creditors and subsequent bona fide mortgagees of the mortgagor is a mortgage recorded with an affidavit annexed thereto, which complies with the requirements of the statute. The fifth and eighth sections of the act clearly refer to mortgages executed in conformity to the provisions of the fourth section.

While the bill in this case does'not in terms aver that complainant was without knowledge of the existence of the prior mortgage at the time he took his mortgage, the affidavit of complainant states that at the time complainant received his mortgage, defendant induced him to believe that no prior mortgage existed. As the relief sought will be lost unless the present status is maintained until final hearing, I think complainant should be permitted to amend his bill and supplement his affidavits that it may appear with positiveness, if true, that complainant was wholly without notice of the existence of the prior mortgage or of the record thereof. Defendant may also, if he desires, file any additional affidavits, which may tend to show knowledge on the part of complainant. If, after amendment and further hearing, it clearly appears that complainant was without notice of the prior mortgage, I will advise an order that no sale be made under the prior mortgage until after a final hearing can be had. I will hear the amendment and supplemental affidavits on Tuesday, December 22d, 1908, at ten o’clock.


author: Leaking, V. C. (orally).

text:
    Albert C. Stephany v. John E. Marsden et al.
    [Decided December 16th, 1908.]
    1. It being contrary to public policy to permit a director of a corporation to freely contract with the corporate body, such contracts are voidable at the option of the corporation.
    2. A corporation must exercise its right to avoid a contract with a director within a reasonable time, the length of which is dependent on the circumstances of a given case.
    3. Where a corporation elects to avoid a contract with a director, equity will place the parties in statu quo by requiring payment of what the corporation has received.
    4. A director of a corporation occupies a fiduciary relationship to it in the nature of that of a trustee to a cestui que trust.

      5. Since the stockholders of a corporation owe no fiduciary relation to it, all of the stockholders by mutual agreement may authorize the corporation to contract with a director, or may ratify such a contract already made which they believe to be beneficial to the corporation.
    6. While the .duty to sue to cancel stock issued to promoters without adequate consideration is primarily in a corporation, a stockholder may sue for such relief, where the control of the corporation is in such interests that it would be futile to expect that it would prosecute the suit with vigor.
    7. A corporation voted certain stock to a promoter in return in part for a mail order system for the sale of the corporation’s product. Complainant for several years acted as a stockholder, director, and secretary of the corporation, with knowledge of such transaction, and, while the system was probably worth much less than what the corporation paid for it, complainant made no objection to the contract until after the system became obsolete, and until it was practically impossible to determine its value at the time the contract was made, nor until after the stock increased greatly in value, because other profitable means of disposing of the corporation’s product were devised.—Selcl, that complainant was barred by laches from maintaining a suit on behalf of the corporation to have the contract set aside.

      Mr. Joseph H. Gaslcill and Mr. TJlysses G. Styron, for the complainant.

      Mr. Norman Grey, Mr. Charles A. Baalce and William B. Linn, for the defendants.
   Leaking, V. C. (orally).

The law which controls our courts in dealing with transactions of this nature is so well defined, and the facts of the case are so much fresher in my mind at this time than they will he at some later period, that I doubt the advisability of taking the case under advisement.

The court of errors and appeals of this state has held that it is so far contrary to public policy to permit a director of a corporation to freely contract with the corporate body of which he is a director that contracts so made must be deemed voidable at the option of the corporation. I have observed a tendency of recent years, arising largely from the extensive and complex dealings and relations of modern trading corporations, to relax this rule; the tendency being, as I have observed it, to inaugurate the modifiecl doctrine that such contracts should not be deemed voidable at the mere option of the corporation, but that the burden should be imposed upon those seeking to enforce or support such a contract to clearly establish its fairness. I think, however, that the general rule, as I have briefly defined it, as established by our court of errors and appeals, cannot be said to have been in any way relaxed by that court since it was there first stated in the case of Stewart v. Lehigh Valley Railroad Co., and it has since been by that court so repeatedly approved and recognized that I must regard it as a fixed part of the jurisprudence of this state. The rule, however, is subject to certain well-recognized and well-defined limitations. One limitation may be said to be that the right of a corporation to avoid at its option a contract in which a director of the corporation is a party must be exercised by the corporation within a reasonable time. What is a reasonable time must be dependent in a large measure upon the particular circumstances of any given case; but it is manifest that in any case the longer delay occurs in the exercise of the privilege upon the part of the corporation, the more likely it is that changing conditions will render it impossible for a court of equity to restore, with any degree of accuracy or completeness, the original conditions, and relief, if granted, must always be granted upon equitable terms and with an object to restore the pre-existing conditions as nearly as possible. A director of a corporation may loan money to his corporation and may be unable to recover the money so loaned by the inherent force of the contract by reason of the fact that the corporation will be privileged to avoid the contract as such; but in such a case there still exists upon the part of the corporation an obligation which the law imposes upon it to repay the money which it has received, and that obligation a court of equity must protect in any effort upon the part of the corporation to.avoid the contract. So, where property has been conveyed to a corporation by a director of the corporation, while the contract under which the conveyance has been made may be avoided by the corporation, it will be the duty of a court of equity to restore to the party who made the conveyance such property or values as he has parted with and as have passed to the corporation, and any considerable efflux of time after such a transaction is liable to render it more or less difficult, or, perhaps, impossible for a court to restore original conditions or tp adopt substituted conditions with fairness or accuracy. A second limitation which may be said to exist arises from a distinction which must be recognized between the relation of a stockholder to a corporation and the relation of a director to a corporation. A director’s duties are trust duties, or, more accurately speaking, are so nearly of the nature of the duties of a trustee to his cestui que trust that a fiduciary relationship with its attendant responsibilities is appropriately said to exist between the director and the corporation; whereas, the position of the stockholder of a corporation is not one of trust, for a stockholder owns that which may be said to represent an integral proportionate part of the corporation as a property right, and it is his privilege to protect that right and to deal with it and to deal with his corporation in accordance with his best judgment, so there is no reason why all of the stockholders of a corporation may not, by mutual agreement, co-operate to enable the corporation which they collectively comprise to make a contract with one of its directors, or to ratify such a contract already made, if the stockholders believe that such a course is beneficial. The limitation to which I refer therefore is that the stockholders may either authorize or approve of a contract between a corporation and one of its directors when they believe such a contract to be beneficial.

In the present case, the light of the corporation to avoid the contract now in question is asserted by an individual stockholder of the corporation; complainant asking as a stockholder that three hundred shares (of the par value of $15,000) of the capital stock of the Liberty Cut Glass Company of New Jersey be canceled. This stock was issued by the corporation named to three parties, who have been called its promoters, 'and now belongs to one of the three, namely, defendant John E. Marsden. Where rights of this nature of a corporation are to be asserted, it is primarily the duty of the corporation to assert such rights; but, where the management of the corporation is in hands whose interests will be injuriously affected by the assertion of the rights claimed, it cannot be reasonably expected that the corporation will be active in the matter, and the privilege is accordingly given to an individual stockholder to protect his individual stock interests in a suit of the nature of the present one in behalf of the corporation, and I think the evidence in this case sufficiently shows that the management of the Liberty Cut Glass Company of New Jersey is in such hands that it would have been entirely futile for the complainant to have asked that this suit be prosecuted with vigor by the corporation itself, and this suit may therefore be sustained in its fullness by the individual stockholder, the complainant here, Albert C. Stephany.

The question therefore presented is whether a conveyance made by Mr. Marsden, the defendant, and his two associate promoters, to the Liberty Cut Glass Company at the time of its organization, for which conveyance there was received by the three promoters the $15,000, par value, of stock of the corporation, shall be set aside and the stock so issued canceled, either in whole or in part. The ground of the relief sought is tflat the contract of sale was not only a contract between the corporation and three men who were the promoters and directors, but it is also claimed affirmatively upon the part of complainant that the contract of sale was made under false and fraudulent representations upon the part of defendant Marsden and his two associates, and that values and existing conditions were by them represented to the corporation to exist, which, in fact, did not exist, and that there has been a failure, if not entire, then nearly so, of the consideration for which the stock was issued. I doubt the propriety of going at length into the details of the conditions which existed at the time of the organization of the Liberty Cut Glass Company, and the transfer to it of the property rights which were made the consideration for the stock in question; but perhaps I should briefly summarize the situation at that time by the statement that Mr. Marsden and his two associates were at the time the owners of nearly all the corporate stock of a Delaware corporation operating at Philadelphia, and known as the “Quaker City Cut Glass Company,” which corporation was engaged in a business similar to that of the proposed business of the New Jersey corporation then about to be formed. Mr. Marsden and his two associates referred to were also associated as partners in an enterprise which in effect made them sales agents of the Philadelphia corporation.

The enterprise consisted of what they called a “mail order system” of placing cut glass irpon the market. That system Mr. Marsden and his two associates claim to have originated and to have actively prosecuted for a period of eighteen months prior to the formation of the New Jersey corporation, and by the testimony of Mr. Marsden it is claimed that a'considerable sum of money has been spent in developing the system to its then condition ; their expenditures having included a large amount paid for advertising and other incidental expenses. At the time of the proposed formation of the New Jersey corporation in the fall of 1902, the partnership business of the three sales agents referred to, known as the “mail order business,” had reached, as Mr. Marsden claims, a considerable magnitude and was prosperous. It was at that time that the plan was originated whereby it was proposed to establish a New Jersey’ corporation at Egg Harbor under the same name which the three partners had been using up to that time, namely, the Liberty Cut Glass Company, which corporation should take over the name and the trade and whatever tangible business assets there were of the Philadelphia partnership, and should issue to the three partners in payment for such assets the stock now in question. To that end a public meeting was held in Egg Harbor, at which meeting defendant Marsden and his two associates enlightened those present as -to the general plan, and at that meeting some stock was subscribed. The idea given out at that meeting appears to have been that Mr. Marsden and his two associates were to supply to the new company, in value at least, dollar for dollar against such money as the Egg Harbor people should put into the concern. To that end subscriptions to stock were taken, with a view of raising $15,000 by local subscription's, and $15,000 in value was to be supplied by Mr. Marsden and his associates by conveying to the corporation the assets already referred to which they possessed. The corporation was formed, and the three incorporators met on October 3d, 1902, to hold the organization meeting. At that time there were present a number of the stockholders who had or were about to subscribe for shares which were to be paid for in cash. At that meeting a resolution was passed b3r the three men named in the charter of the corporation, who were holding the organization meeting, authorizing- the board of directors to take over these assets from Mr. Marsden and his associates and to issue full-paid stock to them to the amount of three hundred shares, or $15,000. The Egg Harbor people, who were present at that meeting in considerable number, were invited to participate in the proceedings of the meeting, and did so, and I think the minutes show that those who were present unanimously voted for the resolution authorizing the purchase. A preliminary agreement had already been drawn under date of October 3d, 1903, which embodied very fully the general proposition in effect as I have stated it, except that other details to which I have not yet referred were embodied in the written proposition. After the meeting of the incorporators and the election by them of a board of seven directors, of whom Mr. Marsden and his two associates were three, and of whom Egg Harbor subscribers for stock were four, a directors’ meeting was at once held, and the contract in question was made with Mr. Mars-den and his two associates, pursuant to a resolution of that meeting, which resolution was in accordance with the vote of the preceding organizers’ meeting; and pursuant to that authorization the conveyance now in question was made to the corporation of the rights which Mr. Marsden and his two associates had been up to that time exercising and which they owned, and the stock now in question was issued. While I think the bill of sale which was made by Mr. Marsden and his two associates to the company refers only to the mail order business and its assets, the testimony discloses that what was in fact the consideration for the issuance of the stock to Mr. Marsden and his associates was not only the mail order business, but also the engagement of Mr. Marsden and his associates to cause the Philadelphia company, the Quaker City Glass Company, to enter into a five years contract with the new Liberty company, whereby the former company should agree to take of the manufactured products of the new Liberty company $35,000 worth of manufactured products a year for five years at a profit above cost to the new Liberty company of fifteen per cent. So the two elements, the mail order business and the guaranteed contract, were the things which formed the consideration for the issuance of this stock. Whether or not both are expressly named in the bill of sale I am not sure, but both are set forth at length in the written preliminary agreement.

I am strongly impressed, as I view the situation in the light of developments which have transpired since this transaction occurred in 1902, that the values conveyed by Mr. Marsden and his associates to the Liberty Cut Glass Company were less, considerably less, than $15,000 in amount, but the difficulty which necessarily confronts one, after so long a time has elapsed, in ascertaining what the real values were which were conveyed, arises from the fact that it is almost impossible for one to transport himself, in effect, to that early date and accurately view conditions from the more limited viewpoints that one would then have had. This mailing contract business, according to Mr. Marsden’s testimony, was then of great value and a source of great profit both present and prospective, but soon thereafter became less valuable by reason of a fact which could not then have been discerned, namely, that others soon inaugurated the pursuit of the same system, and the opposition which thus arose destroyed the profits which before that time had been possible through those channels.

In undertaking to assume a viewpoint of the year 1902 we can only appropriately view such things as could then have been seen, and, if it were not within the reasonable contemplation of the parties at that time that new business conditions of the nature referred to would arise, it is improper at this time to base a judgment upon those new conditions which have since developed and become presently apparent. So it is manifestly difficult to determine, in case this stock should at this time be set aside, what values should equitably be restored to Mr. Marsden in lieu of the cancellation of the contract. Such values as should equitably be restored would be the values which then existed of the assets which Mr. Marsden and his associates placed in the hands of the new compam3r, and they included, as already stated, not only the mail-order business, but also what then appeared to be, and what I may say now appears to have been, a valuable asset in the nature of a guaranteed contract with the Quaker City Glass Compairy, under which that corporation was to become obligated to purchase, at a fifteen per cent, profit to the new corporation, the amount already stated of the products of the new concern. So I find myself embarrassed, extremely so, in ascertaming a satisfactory method whereby I may, with what I can regard as reasonable accuracy, determine upon a basis for compensation to defendant Marsden in the nature of a restoration of rights in value equal to the rights which were delivered to the new company, should the stock be canceled pursuant to the prayer of the bill.

It is manifest that rights cannot be restored as they originally existed, because the business which was conveyed has now disappeared entirely, and the difficulties which thus exist arise primarily from the fact that the present suit was instituted at a time so long after the time when the original transaction occurred, the present bill not having been filed until August, 1907. It is apparent that no corporation has the right to speculate upon its privilege to avoid a contract which it has made. Its right of rescission cannot be held in abeyance awaiting the changing conditions of time to the end that the results of the contract may be retained if found desirable or profitable and rejected if found unsatisfactory. The importance and extreme fairness therefore of the principle that a right of this nature, an option of this nature, should be exercised, if at all, promptly, is manifest in almost every aspect in which we approach this or any case. At the organization meeting to which I have referred, Mr. Stephany was present and participated. His name was proposed as a director, but others received more votes than he, and his name was not among those who were declared elected. He was, however, made a director at the annual meeting which was held January 19th, 1904, and during the time between the organization meeting in October, 1902, and the annual meeting in 1904, Mr. Stephany had remained continuously a stockholder. I am unable to agree with the suggestion made by counsel of the defendant to the effect that the participation of the stockholders in the organization meeting would operate as either a ratification or direction upon the part of the stockholders for the purchase of this property and therefore become the individual act of the stockholders or the act of the corporation by virtue of the unanimous or practically unanimous consent of its stockholders given at that time; but it does appear that a meeting of the stockholders was held January 20th, 1903—the first succeeding annual meeting—-at which meeting there were present four hundred and twenty-nine shares of stock and were absent seventy-six shares of stock, the total stock having been five hundred and five shares. At that meeting a new board of directors was elected. The three hundred shares of stock in question were voted by Mr. Marsden and his associates, but of the four hundred and twenty-nine shares present one hundred and twenty-nine, which was more than a majority of the stock exclusive of the stock in question, was represented and voted for those directors. That meeting, as will be seen, was only a short time, three months, after the organization meeting. The next annual meeting after operations had actively begun was on January 19th, 1904. At that meeting there were four hundred and eleven shares present, which, excluding the three hundred shares now in question, left one hundred and eleven shares of stock, or more than half of the stock held by the Egg Harbor people. At that meeting Mr. Stephany was present and was elected a director, and I believe nominated by Mr. Diamond, one of Mr. Marsden’s associates, as a director. At that meeting a report was made by the president of the corporation to its stockholders, and in that report it was shown what the-amount of sales had been under the Quaker City contract, and also what the amount of sales had been up to that date under the mail-order system, so that at that time the practical operative results of the two classes of assets which had been turned over to, the Liberty company were displayed to the assembled stockholders, and if the results which had been obtained during that period of one year and three months by the use of those assets by the Liberty company indicated a lesser value of these assets than had been represented by the promoters, or indicated a lesser value than the amount which had been paid, then a duty at that time devolved upon the stockholders who were present to exercise any rights they had in the way of avoidance of the obligations of the company which had been given as a consideration for the transfer of the assets.

Stockholders who were not present were privileged to be present and were in a measure chargeable with notice of what occurred. Mr. Stephany is a man of acute intelligence. At that time he well knew what had been paid for the assets which had been turned over to the corporation, and at that time was informed what the practical results had been in the handling of those assets by the corporation, and as an intelligent man it became his duty and the duty of all stockholders to inquire and ascertain the value of these assets, and to ascertain whether any misrepresentations of value or failure of consideration existed, and to assert such rights as belonged to the corporation, rather than to permit the corporation to continue to utilize the assets for an indefinite period and in effect speculate upon the developments of time. No action, however, was taken looking to the rescission of the contract,. and again in January, 1905, there were present at the stockholders’ meeting four hundred and forty-seven shares, which, excluding the three hundred shares in question, left one hundred and forty-seven shares, more than a majority of the stock held by the Egg Harbor people, and Mr. Stephany was present and was elected secretary and director. On January 16th, 1906, another stockholders’ meeting occurred, at which more than a majority of the stock, excluding the three hundred shares in question, were present and participated, and ■Mr. Stephany, I think, at that meeting was again re-elected both as a director and secretary. I think it also appeared at that meeting that the profits of the concern had reached ten per cent, net for the then current year. At that time the company was ..still operating under the Quaker City contract, but, as I recall it, the mail-order business had at that time practically ceased. On May 15th, 1906, the Quaker City contract was canceled. The reason for its cancellation may not be material, but it was canceled by mutual agreement of the Quaker City company and the Liberty company. It does appear, and is undoubtedly a fact, that up to that time the Liberty company had been suffering for want of capital. It had been anticipated at the outset that they would need $15,000 cash capital, and the subscriptions which were forthcoming only reached about $10,000, and there had been, in consequence, a shortage of cash capital, and the Quaker. City company had, according to the testimony, gone, far in the line of indulgence to the Liberty company. They had supplied to the Liberty company a line of credit which, in some measure, had enabled the Liberty company to conduct its affairs at a profit, ancl without that line of credit it appears that the Liberty company would, in all probability, have been embarrassed. At any rate, a friction occurred between the two companies, and that friction seems to have occurred because of a claim upon the part of the Liberty company, or Mr. Marsden representing the Liberty company, that the Liberty company was entitled, under the contract, to a fifteen per cent, profit on the cost of the blanks, which blanks, as I understand it, were articles manufactured by other glass companies in the rough, and which were ground by the Liberty company. Without undertaking to ascertain whether- such a' claim was valid or not, I am impressed that any charge upon the part of the Liberty company; under the contract referred to, of fifteen per cent, of the cost of blanks, when those blanks had been supplied by the Quaker City company to the Liberty company and had not been paid for, was a severe strain on the spirit of the contract. However, the controversy resulted in a compromise agreement by which the contract was abrogated, and there seems to be no doubt that that occurred as the deliberate act of both companies. Since that time the Liberty company has been proceeding with its work at a profit, and at a considerable profit. They have gone into a new system of handling their products to advantage, as appears by the testimony, so that in the year 1907 they appear to have made, as nearly as I can ascertain, something like thirty per cent, on their capital of $25,000. The concern is manifestly a flourishing concern at this time. They have been enabled to carry to a surplus account enough' profits to give them a better working capital, and are now making profits to the amount I have named. If the $15,000 stock held by Mr. Mars-den is wiped out, the remaining stockholders, at the present rate of earnings, will be receiving something like eighty per cent, profits in the way of dividends and surplus under the present showing. Each year the annual stockholders’ meetings have been held, and I think at each annual meeting Mr. Stephany has been present, and such stockholders who have not been present have been privileged to be and have been privileged to acquire an intimate knowledge of the affairs of the concern. They had the opportunity to know what was being done and what had been done, and it wa,s their duty to embrace that opportunity.

If these circumstances and this long delay in the assertion of corporate rights have not amounted to a ratification of the contract by the stockholders, it seems entirely clear that the long delay in the assertion of the claim now asserted has operated to render it impossible for this court to ascertain at this time with reasonable accuracy or certainty the equitable terms on which relief may now be based, and I am fully convinced that the long-delay, under the circumstances named, must be regarded as operative to bar the relief now sought»

It is my judgment, therefore, that the relief which the complainant now seeks must be denied, and I will so advise.


author: Beaming, V. C.

text:
    Mary L. Swift v. Robert D. Craighead, individually and as executor, &c.
    [Argued January 2d, 1909.
    Decided January 12th, 1909.]
    1. A sale by a trustee to himself, of the trust property, is uniformly held to be voidable at the option of the cestwi que trust, even though the trustee may have given an adequate price and gained no advantage.
    2. But where trust property has been acquired by a trustee through the medium of direct dealing with the cestui que trust, the transaction, although presumed to be invalid, will be supported if the trustee can establish that the cestui que trust acted voluntarily and with entire freedom from any influence arising by reason of the trust relationship, and with intelligence and full knowledge of all the circumstances.
    On. bill, answer, replication and proofs.

      Messrs. Bleakly & Siockwell, for the complainant.

      Mr. 8. Cameron Hinkle and Mr. Richard V. IAndabury, for the defendant.
   Beaming, V. C.

Defined principles of public policy are clearly opposed to the unrestricted right of a trustee to acquire the property of a cestui que trust. A sale by a trustee to himself, of the trust property, is uniformly held to be voidable at the option of the cestui que trust, even though the trustee may have given an adequate price and gained no advantage. Scott v. Gamble, 9 N. J. Eq. (1 Stock.) 218, 235; Obert v. Obert, 10 N. J. Eq. (2 Stock.) 98, 103; Huston v. Cassedy, 13 N. J. Eq. (2 Beas.) 228; Smith v. Drake, 23 N. J. Eq. (8 C. E. Gr.) 302, 306; Romaine v. Hendrickson's Executors, 27 N. J. Eq. (12 C. E. Gr.) 162, 164; Staats v. Bergen, 17 N. J. Eq. (2 C. E. Gr.) 554. But where trust property has been acquired by a trasteé through the medium. of direct dealing with the cestui que trust, it is manifest that the right of the cestui que trust to avoid the contract should not be without limitation. While some courts have held such dealings to be contrary to public policy and voidable at the instance of the cestui que trust, the better and prevailing view appears to be that such dealings are presumed to be invalid, but will be supported if the trustee can establish that the cestui que trust acted voluntarily and with entire freedom from any influence arising by reason of the trust relationship, and with intelligence and full knowledge of all the circumstances. Coles v. Thecothick, 9 Ves. Jr. 234; Nicholas v. McCarthy, 53 Conn. 299; Perry Trusts § 195; Fetter Eq. 146 § 93; 1 Lew. Trusts 275, 277.

In the present case I am convinced that defendant has not sustained the burden thus imposed. I am satisfied that when complainant executed the revocation of trust and thereby, in effect, conveyed practically her entire estate to her mother, she had no definite knowledge of her mother’s ultimate purpose and no defined purpose of her own other than to comply with her mother’s request. Eor years the mother had been not only complainant’s trustee, but the dominant factor in her life, and I do not believe it can be reasonably said that at the time of the execution of the instrument in question complainant was in any complete sense a party to an intelligent, or well considered, and voluntary engagement. Her act was, in my judgment, merely responsive to her mother’s expressed wish, without thought or concern of consequences. I think that the trust assets must be now treated as having been vested in the mother until her death, for the benefit of complainant, and that complainant will now be entitled to an accounting from defendant.

I share the view of defendant’s counsel that complainant’s best interests may lie with the present trusteeship; but I am unable to give that consideration a controlling effect.

If the revocation of the original trusteeship was not the free, voluntary and intelligent act of the cestui que irust, she is entitled to be relieved of it even though the ultimate benefit to her may be doubtful.

At the hearing I entertained doubt as to the sufficiency of the bill; but, as the instrument set up in the answer by way of bar, when considered in connection with the admissions of the trusteeship, is not operative as a bar until its presumption of invalidity is overcome, I am satisfied that the general replication is sufficient without an amendment to the bill making a direct attack upon the instrument set forth in the’ answer.