author: Eeed, V. C.

text:
    Mercer County Traction Company v. United New Jersey Railroad and Canal Company et al.
    [Filed January 20th, 1904.]
    1. Where a traction company has filed a description of a route in the secretary of state’s office, a judgment holding proceedings for an extension thereof invalid because proper consent was not procured for the original route, and there was no route to extend, leaves- the filed map and description unaffected, with the power in the company to procure new consents and a fresh ordinance authorizing construction on the route.
    2. Under P. L. of 1893 p. 308 § 8, requiring a railroad corporation organized under that act, before constructing a new road, to file in the office of the secretary of state a description and map of the route, showing its courses and distances, a map showing the termini with the route from one to another following a variety of courses, but nothing to determine the courses or indicate the points of the compass, is insufficient, so that notwithstanding the filing of such map the company may begin proceedings anew for the establishment of the route.
    3. Consents of abutting property owners to the establishment of a railway route, whose only limitation is that the road be built along the highway in front of the consenter’s land, are valid, though executed before the filing of the description and map of the proposed route in the secretary of state’s office.
    4. No legal presumption arises that consents, to the establishment of si railway route were given with reference to a map previously filed in the secretary of state’s office when that map was defective.
    5. A resolution by the board of directors of a corporation that it should construct a line of railway, and that the president and secretary were authorized to execute all papers to procure ordinances for that purpose, was sufficient to authorize the president and secretary to execute, under the corporate seal, an acceptance of an ordinance subsequently passed authorizing the construction of the road.
    (3. Where an ordinance was passed authorizing the construction of a railroad, and an acceptance thereof executed under the corporate seal by the president and secretary, the presumption of their authority, arising from such execution, is not rebutted by the absence of any written minutes showing that a meeting was held at which they were empowered to execute it.
    On petition to have tlie manner by which the petitioner, the trolley company, shall cross the tracks of the respondents defined.

      Mr. John II. Baches, for the petitioner.

      Messrs. Charles E. Glimmer e and Alan II. Strong, for the respondents.
   Eeed, V. C.

The petitioner was organized under the act of 1893, entitled '“An act to authorize the formation of traction companies,” &e. Gen. Stat. p. 8285. Its certificate of incorporation was recorded in the clerk’s office of Mercer county and filed in the secretary of state’s office on July 31st, 1899. A description of the route was filed in the secretary of state’s office on May 21st, 1903. The road is therein described as a single-track railway, upon and along a certain public highway in the township of Hamilton, Mercer county, known as the Crosswicks and Trenton Turnpike road, and also known as the White Horse road. It begins where this highway intersects the centre line of another highway leading from Hamilton Square to North Crosswicks, .and runs along the White Horse road certain courses and distances to a point in said road, ■which point is the northerly terminus of petitioner’s road. With this description a map was filed, exhibiting the line of the road with its courses and distances.

On May 21st, 1903, a petition was presented to the township committee of the township of Hamilton, asking permission to construct the said road, which permission was granted by an ordinance passed on June 11th, 1903. This ordinance was accepted within thirty days from its passage by an instrument under the seal of the corporation, signed by its president and secretary. Permission was also granted by the board of chosen freeholders of Mercer county.

The route of petitioner’s road crosses the line of the steam railroad of the respondents, where the same crosses the White Horse road, at Yardville. The prayer of the petition is that the mode in which this crossing shall be made shall be defined by this court.

The first objection interposed by the respondents is that the filing of the present route is a nullity, because the same company (the Mercer County Traction Company, the petitioner) had already, on December 7th, 1899, filed a description and map of a route along the same highway, extending from Yardville southerly to the Mercer county line. This route coincides with the present route from Yardville south to North Crosswicks. The insistence is that the location of the route defined in the description and map filed (of December 7th, 1899) excludes the company from filing a new route over a part of the same courses.

It appears that upon the assumption that the route filed on December 7th, 1899, and the ordinance granting.permission to construct its road upon that route, was valid, another route and map was filed on August 23d, 1901, as an extension of the road, a' description of which had been filed on December 7th, 1899, and a permissive ordinance was passed by the township of Hamilton to construct the extension described in the description and map of August 23d, 1901. The extension crosses the respondents’ railroad at Yardville, and upon a petition similar to the present it was held by this court that the township ordinance granting permission to build the first road, the route of which was filed on December 7th, 1899, was void, because no legal consents had been filed with the township clerk previous to the passage of the ordinance bjr the township committtee giving consent to the construction of the road on the route defined in the description and map of December 7th, 1899; that there was therefore no existing road from Tardville to the county line from which an extension could be made, and so the extension defined in the description and map filed on August 23d, 1901, was a nullity. Mercer County Traction Co. v. United New Jersey Railroad and Canal Co., 19 Dick. Ch. Rep. 588. The solicitor for the respondents insists that the force of that decision was spent when it declared that the township ordinance, giving permission to lay the road in accordance with the route defined in the description of December 7th, 1899, was invalid; that the decision still left the filed description and map unaffected, with the power in the company to acquire new consents and -a fresh ordinance. This position, respecting the effect of the former decree upon tire filed route and map of December 7th, 1899, is manifestly sound.

The counsel for petitioner, however, directs attention to the fact that the map filed on December 7th, 1899, did not comply with the requirements of the sixth section of the statute of 1893, which provides that the corporation shall, before the beginning and construction of an extension or new line, file in the office of the secretary of state a description of route of such extension or new line, together with a map exhibiting the same with the courses and distances thereon. Dpon an inspection of the map, it appears that there are no written statements of distances, nor of courses, along the route designated thereon. The termini are exhibited, with a route running from one to the other, following a variety of courses. Dpon the map there is a scale, by applying which to each of the several courses the distance could be ascertained with sufficient certainty to perhaps comply with the requisition of the statute. There seems, however, to be nothing upon the map from which the courses can be determined. The cardinal points of the compass are not even shown, although, in‘my judgment, if they were exhibited the map would not comply with the requirements of the statute, for it is Impossible to believe that the legislature intended that one ■who inspected the map must be an engineer, or employ an engineer to work out the courses from such data. On account of this failure to state the courses, I am of opinion that the map filed December 7th, 1899, was not in compliance with the sixth section of the statute of 1893. Because of this defect in filing the original description and route, I am of the opinion that the petitioner had the right to begin its proceedings ele novo.

It is to be observed, also, that the exclusive right of the petitioners to construct a road under the authority given them by the filing of the papers of December 7th, 1899, had expired, because no attempt at construction, within six months, had been made by them. Whether, after the exclusive right to use the route had thus expired, this company was in the same position as any other corporation, with the right to file a new description and map, it is not necessary to decide.

The second objection by the respondents is directed to the sufficiency of the consents of the abutting owners presented to the township committee, as a condition precedent to the passing of the ordinance, giving consent to the construction of the road.

It is not denied that the owners of a majority of the lineal feet of land fronting on that part of the- highway along which the present route runs were duly signed and filed with the clerk of the township' before the passage of the ordinance. The point made is that the papers so filed with the clerk of the township must be regarded as consents to the construction of a road to be built by the petitioner, in accordance with the description and survey filed on December 7th, 1899.

The acknowledgments' of nearly all the persons signing these consents were taken on April 29th, 1903, before the present description of route and map wére' filed in the secretary of state’s office, the date of which filing was, as already' observed, on Hay 21st, 1903.

The theory adopted by the court of errors, iu Currie v. Atlantic City, 37 Vr. 671, was that the consents were not grants to the railway company, but were authorizations given to the municipality as the agents of the consenting abutters and of the public to grant the permission applied for, if in the discretion of the governing body it chose to do so.

While the case decides that when the governing body has once acted upon the consents the efficiency of the consents is spent, nevertheless, until the corporation so acts, I do not see why the authorization might not be as broad as any other power of attorney. The consents in the present instance were of the most general character. The only limitation contained in the consents was that the road built by the petitioning company should be constructed along the highway in front of consenter’s land. The consents were in the following language:'

“We. the owners of property fronting on the public highway, in the township of Hamilton, county of Mercer and State of New Jersey, leading from the village of AVhite Horse in the said township, southerly by way of North Crosswicks to the village of Allentown in the county of Monmouth in said state, and formerly known as the White Horse road, do hereby consent to the construction, maintenance and operation of a street railway by the Mercer County Traction- Company, through and upon the said public highway, in the said township, and hereby consent that the township committee of the township of Hamilton, grant permission to the said Mercer County Traction Company to construct, maintain and operate the said street railway.”

The fact that the consents were given before the last description and route was actually filed, I think of no importance, except, perhaps, upon the point that the consents must -be regarded as referable to a description and route already on file. Of the efficacy of consents given before the actual filing of a description and map, I have no doubt. G. & W. Railway Co. v. New York Central and Hudson River Railroad Co., 163 N. Y. 228, 234.

If the map, filed on December 7th, 1899, was defective, there arises no legal presumption that the consents were given in reference to it. Nor, having regard to the situation and the general language of the consents, in my judgment, no inference of facts arises that the consents were made in reference to the original survey. In my judgment the consents were a sufficient authorization to the township committee to pass an ordinance, giving permission to the petitioner to construct and maintain a road upon any route thereafter filed if the township committee, in its judgment, thought it wise to do so. The consents endowed the township committee with plenary power to pass an ordinance without conditions or with such conditions for the benefit of the public or protection of the abutters as the municipal body thought fit.

It is next objected that there was no legal acceptance of the ordinance, because there was m> meeting of the board of directors at which the president and secretary were specifically authorized to sign and affix the seal of the corporation to the instrument filed as an acceptance. The provision which presently controls the matter of acceptance is to be found in the act of 1896. P. L. of 1896 ¶. 829 § 1. It provides:

“'That the permission granted by the municipal body shall be binding and effective, if an acceptance thereof, in writing, by the corporation making such petition shall be filed within thirty days after receiving notice thereof, with the clerk or other equivalent officer of the governing body granting such permission.”'

The validity of many corporate acts depends upon a resolution of the board of directors, regularly assembled as a board, of other acts by the implied power given to the agent who executes it, in the course of corporate business, or by ratification resulting from acquiescence in such acts by the individual officers of a corporation. Assuming that the acceptance of this ordinance was such a corporate act as must be executed by authority of the board of directors, assembled at a legal meeting, I am of the opinion that the president and secretary were invested with the power to execute the acceptance1 filed. By a resolution, passed at the meeting of the directors held on May 20th, 1903, it was resolved that the company should construct this line of railway, and it was further resolved that the president and secretary were authorized to execute all papers on behalf of the company to procure ordinances for that purpose. Under that authority the petition, presented to the township committee seems to have been prepared. The ordinance passed seems to have been exactly the same as the ordinance presented. The procuration of this ordinance was not complete until it was accepted. In my judgment this authorization was broad enough to cover the acceptance of the ordinance thus procured by the president and secretary.

Again, the acceptance being under the approved seal of .the corporation and signed by the president and secretary, is presumed to be the duty-authorized act of the corporation. Legget v. New Jersey Manufacturing and Banking Co., Sax. 541; Parker v. Washoe Manufacturing Co., 20 Vr. 465.

There is nothing to refute this presumption, save that it does not appear in the minutes of the corporate proceedings that any meeting was held at which the president was empowered to sign such an instrument. The minutes are certainty not conclusive as to the non-existence of a fact not stated therein. In this case neither the secretary nor any director was called to show that no such meeting was field at which authority was given to the president and secretary to execute this paper. In my judgment the presumption of authority, arising from the execution of the paper under the seal of the corporation and signature of the president and secretary, is not rebutted by the absence of written minutes of a specific authorization.

The three points discussed are, as appears to me, the only substantial objections raised against the right of the petitioner. In my judgment there should be a decree fixing the method of crossing.


source: Caselaw Access Project

author: Stevens, Y. C.

license: Public Domain

text:
    Regina Music Box Company v. F. G. Otto & Sons et al.
    [Filed December 22d, 1903.]
    1. A mortgage given by a corporation which is insolvent, or which is contemplating insolvency, to secure money lent at the time it is given, is valid under section- 64 of the Corporation act of 1896, if the mortgagee be without notice of such insolvency or without notice that it is in contemplation.
    2. Contemplation of insolvency, within the meaning of section 64, is something more than contemplation of the possibility of insolvency on a contingency which does not in fact happen. If a corporation, or its officers, regard a suspension of its ordinary business, for want of funds, as likely to happen in the event of its not being able to borrow money with which to meet its current engagements, and it is’ in fact able to borrow it, and it secures the money lent by a mortgage and goes on, it cannot be said to contemplate insolvency, within the meaning of section 64, at the time the mortgage is executed, for then it contemplates not insolvency, but the reverse.
    3. If the notes of a corporation go to protest, that may be prima facie evidence of insolvency, but it is not conclusive evidence of it.
    4. If a corporation mortgage to trustees to secure an antecedent indebtedness, pursuant to an agreement made with a creditor to whom such mortgage is to be given, and the mortgage, by its terms, is made to cover property then owned and afterward to be acquired, and contains a power authorizing trustees to sell on default of payment, and a further-provision that the trustees shall certify and deliver the bonds secured to or upon the order of the company, such mortgage is not fraudulent and void under the rule laid down in Owen, v. Arms, 2 Duteh. 123, and National Bank of Metropolis v. Spragtie, 6 O. E. Or. 50.

      Mr. George F. Seymour, Jr., for the complainant.

      Mr. Albert Chandler Wall, for the defendants.
   Stevens, Y. C.

This is a creditors’ suit, brought to set aside a mortgage because it is said to have been given by the defendant, F. G. Otto & Sons, a corporation, while insolvent, or in contemplation of insolvency. If relief he denied on this ground, then it is contended that the mortgage is fraudulent,' because it was contrived with intent to hinder and delay creditors, and so void as to complainant, under section 12 of the act to prevent frauds and perjuries.

The material facts are these: On April 1st, 1900, the defendant corporation executed a mortgage for' $115,000 to the complainants, Zenas E. Newall and George R. Turnbull, to secure the payment of one hundred and fifteen boiids of $1,000 each. The mortgagees were to hold the property mortgaged in trust for the equal and proportionate benefit of the respective persons and corporations who should at any time own the bonds. At the time the mortgage was made the assets of the mortgagor amounted to $-177,534.46, the liabilities to $268,300.73. Among the creditors of the company were the East River National Bank, to which the company was liable to' the amount of $55,000, on notes made or endorsed for the benefit of Paillard & Company, and Raymond Jenkins, president of the bank, to whom the company was liable to the amount of $20,000, on notes made or endorsed for the .benefit of the same firm. The evidence shows that the corporation of E. G. Otto & Sons, and its predecessors, had successfully prosecuted the business of manufacturing music boxes and surgical instruments for many years. Among its selling agents was the firm of Paillard & Company. This firm, in the spring of 1899, had, it is alleged — through bad manage-' ment, become very much involved. It had then given over the control of its business to Gustav Otto, the president of E. G. Otto & Sons. It was apparently this that led to the endorsement by the corporation of the Paillard paper to the amount I have already stated ($75,000). On February 13th, 1900, Paillard & Company made an assignment under the New York Assignment law. Its liabilities amounted to $110,994.49 and its nominal assets to $144,945.57, but not more than $25,000 has been realized from sales. It has, however, other property, chiefly real estate; of what value does not appear. On the day the deed of assignment bears date, there was a special meeting of the board of directors of F. G. Otto & Sons, at which it was resolved “that in the judgment of this board it is advisable, and most for the benefit of E. G. Otto & Sons, a corporation, that the same should be forthwith dissolved,” and to that end a meeting of stockholders was ordered to be held on March 16th following, but no meeting was in fact held. The resolution had been preceded by a resolution passed on February 9th, 1900. It is said in the minutes of that meeting that in view of the fact that notes were coming due shortly which could not be taken up, Mr. Cooley offered a resolution that the board order a meeting of the board of directors, to be called for February 13th, for the purpose of taking such action as might be necessary pursuant to the laws of New Jersey for the dissolution of the corporation. The stockholders’ meeting called at the meeting of February 13th did not, as I have said, take place, there being no quorum present, and the proceedings for dissolution were dropped. They appear to have been discontinued because the company found itself in a position to go on with its business. A statement of its assets and liabilities, prepared by an expert accountant of long experience, Mr. Yalden, had been presented by the president of Otto & Sons to the president of the East Kivcr bank. This statement showed assets amounting to $510,-v200.73; of floating liabilities amounting to $174,532.42; of mortgage indebtedness amounting to $29,500, and of profit and loss amounting to $9,268.31. This statement, however, did not include $55,000 of liability incurred on behalf of Paillard & Company. The president of the bank was so favorably impressed with this showing that he agreed to lend the company, of his own money, $40,000, and to take forty bonds, to be secured by the mortgage of $115,000, the Otto company giving to his bank the remaining seventy-five bonds as security for the Pail-lard paper which had been protested. The president testifies that he does not remember how the amount of his loan was arrived at, but he says “that was thought to be a sum that would put them in a very easy-going shape.” lie paid it in installments, between April and October, 1900. The company coiitimiecl to prosecute their business until May 18th, 1903, when the trustees under the mortgage took possession, and have carried on the same business ever since. The evidence is that at no time since the mortgage was made did the company’s running expenses exceed their receipts. On the contrary, it appears that a small profit was made. The trustees took possession for the somewhat singular reason (considering the small amount of the complainant’s judgments, viz., $3,365.07) that they desired that complainant should not be in a position to levy an execution with effect. The Regina company and Otto & Sons were competitors in the business of manufacturing music boxes. On January 15th, 1900, the former filed its bill in the United States circuit court charging Otto & Sons with an infringement of their patent rights. The suit was litigated until March 18th, 1902, when a final decree was made against the Otto company for infringement, awarding damages to the amount of $2,763.55-. Two other suits for other infringements had a like termination, the damages awarded on the same day in the one case being $263.81, and in the other $337.71. Executions issued thereon were returned unsatisfied; then alias executions issried, which are still in the hands of the marshal, and thereupon the complainant instituted this proceeding.

The first question to be considered is whether the mortgage of $115,000- was made when the company was insolvent or contemplated insolvency. Section 6-1 of the Corporation act of 1896, which is a copy of the act of 1895 (P. L. of 1396 p. 166), provides as follows:

“Whenever any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, neither the directors nor any officer or agent of the corporation shall sell, convey, assign or transfer any of its estate, effects, choses in action, goods, chattels, rights or credits, lands or tenements; nor shall they or either of them make any such sale, conveyance, assignment or transfer in contemplation of insolvency, and every such sale, conveyance, assignment or transfer shall be utterly null and void as against creditors; provided, that a 6ona fide purchase for a valuable consideration, before the corporation shall have actually suspended its ordinary business, by any person without notice of such insolvency or of the sale being made in contemplation of insolvency, shall not be invalidated or impeached.”

This section is identical with section 2 of the old act to prevent frauds, by incorporated companies and must receive the same construction. Frost v. Barnert, 11 Dick. Ch. Rep. 291. It forbids the preference of any creditor after insolvency, known or contemplated (Wilkinson v. Bauerle, 14 Stew. Eq. 635, 641). but does not invalidate a bona fide purchase for value, made before the company bad actually suspended its ordinary business by a person not having notice.

Complainant’s contention is that at the time the mortgage was made insolvency existed, or was contemplated.. Of the $115,000 secured, $40,000 was for cash paid at the time; $75,000 was for pre-existing indebtedness. As to these there is this distinction: If a company be in fact insolvent, or if it contemplate insolvency, it cannot secure a pre-existing debt, whether the mortgagee have or have not notice. But if the mortgagee advance money to an insolvent company, or to a company contemplating insolvency, and take a mortgage at the time of the making of the advance, then, if he has no notice, his security will stand. In the ease at bar, it is perfectly manifest that the president of the bank had no notice of insolvency, if we give to the word “insolvency” its ordinary meaning. The carefully-prepared Yalden statement showed that the assets were more than double the liabilities, and if to those liabilities we add $55,000, representing the company’s liabilities on the Paillard notes, not included in that statement, and deduct the items treasury stock, $21,300, and experimental work, $11,306.27, the statement still shows that the assets exceeded the liabilities by over $200,000. So that the company did not appear to be insolvent in the sense that its assets were insufficient to pay its debts. Nor was it insolvent in the sense that it had suspended its ordinary business of manufacturing, for it was then actually'' engaged in manufacturing, and it continued to be so engaged for three years thereafter. It is clear, then, that the president had no notice of actual insolvency in either of the senses I have mentioned. It is also clear, as it seems to me, that the president of the bank had no notice that the company contemplated insolvency in either of these senses. To contemplate insolvency within the meaning of the act, is to have in mind something more than the mere • possibility of insolvency. The failure of his debtors to make prompt payment, the oeeiirrence of some unexpected event, the stringency of the money market, may create an apprehension in the mind of the manufacturer that he may be unable to meet his obligations as they mature. He may, for the moment, be doubtful whether he will or will not be able to go on. If he succeeds in borrowing enough money to pay his obligations and goes on, he cannot be said to have contemplated insolvency at the time he borrows the money, merely because he had in mind at some former time the possibility of becoming insolvent in case he failed to borrow it. This is the language of common sense, no less than of the authorities. In Webster’s dictionary, it is said “we contemplate a design when the means are at hand and our decision is nearly or quite made.” In Burrill’s Law Dictionary, contemplation is defined as “having in view; consideration of an act or course of conduct with the intention of doing or adopting it.” • In Buckingham v. McLean, 13 How. (U. S.) 167, contemplation of insolvency is spoken of as a contemplation of an inability to pay, as debts should become payable — “whereby a man’s business is broken up.” In Belcher v. Prittie, 10 Bing. 423, Justice Bosanquet says: “The more important part of the case is whether this was done in contemplation of bankruptcy;” in other words, “whether Mr. M., at the time he assented to this proposal of his son [a proposal to secure certain indebtedness] expected that bankruptcy would take place; * * * whether he knew, or believed, upon the 1st of July that his affairs would end in bankruptcy.” To illustrate: When Gustave Otto found that the Paillard failure had made it necessary for his company to raise money, he probably said to himself: “My company must either borrow $40,000 in cash or suspend business.” He was then contemplating insolvency on a contingency; but when he was informed that Mr. Jenkins was willing to lend the money, the contingency on which he had contemplated it not having happened, the idea of insolvencj1' ceased to be present to his mind and he no longer contemplated it. When his company executed the mortgage he contemplated, not insolvency, but the reverse.

Any other construction of the statute would make it impossible for a corporate manufacturer, temporarily in need of money, to procure it by pledge of his property, although by procuring it he would terminate his embarrassment. The lender’s security would always be open to attack, and to successful attack, if at any time in the future the borrower failed. Section 64 docs, indeed, make a distinction between the case of an antecedent debt and the case of a bona fide purchase for valuable consideration paid at the time by a person without ■notice. In the former case, if the company be, in fact, insolvent, or if it contemplate insolvency, the ignorance of the creditor is immaterial (Brower v. Harbeck, 9 N. Y. 594), while in the latter want of notice will protect him. But this protection would not go very far if contemplation of insolvency meant contemplation by the lender of its mere possibility on a contingency which does not happen. The present case presents both phases of the question, for Mr. Jenkins paid $4-0,000 in cash and his bank took seventy-five bonds as security for an antecedent debt. The statement handed to Mr. Jenkins,'and on which he acted, showed that the company had only $755.63 in cash and he must have thought it possible that if he, or someone else, did not lend the company money it would be forced to suspend; in other words, he must have contemplated insolvency as an alternative possibility. As he did not contemplate it when he took the mortgage and made the loan, I think that, as to the forty bonds, they are clearly within the proviso of section 64.

As to the seventy-five bonds taken as security for the antecedent indebtedness, there are other relevant facts. These facts .were known to the company, but not to Mr. Jenkins. As I have said before, when the question relates to a mortgage, given to secure money paid at the time, notice must be brought home to the lender. It is otherwise when an antecedent debt is secured; then the only question is whether the company was, in fact, insolvent or was contemplating- insolvency.

On February 9th, 1900, the president of F. G-. Otto & Sons, at a directors’ meeting, reported that he had tried to get additional capital and had failed. The minutes state that, in view of the fact that notes are coming clue shortly which could not be taken up, Mr. Cooley offered a resolution that a meeting of the directors be called for February 13th to take such action as might be necessary to dissolve the corporation. Standing alone, this resolution would be evidence that the corporation contemplated insolvency in the sense that it would be obliged to suspend and go out of business for want of funds. In the subsequent minutes, of March 9th, it is stated that the president reported that negotiations for additional capital were proceeding satisfactorily. The treasurer testifies that the directors, after mature consideration, “had figured,” as he expresses it, that if they raised $4-0,000 they would be on “easy street;” that, after the resolution for winding up was passed, the negotiations for additional capital took a favorable turn, and that the negotiations referred to in the minutes of March 9th were those which resulted in the loan of $40,000 by Mr. Jenkins. Now, it seems to me very plain that if in February the company contemplated insolvency, in the sense of suspension, as the result of a failure to procure additional capital, in March they contemplated proceeding with the business, because of their successful negotiation for a loan.

I have thus far shown that the company was not insolvent in the sense that its assets, ultimately, were not sufficient to pay its debts, and I have now shown that it was not insolvent in the sense that it was unable, or thought that it would be unable, to proceed with its ordinary business for want of funds. In point of fact, as I have said, it continued to conduct its business at a slight profit for three years after the mortgage was made. Counsel was compelled, under stress of these admitted facts, to take another ground, and that is, as I understand his argument, that on April 1st, 1900, the date of the mortgage, a large amount of paper, on which the company appeared as maker or endorser, had gone to protest. I dismiss from view the attachment said to have been issued by one Patterson on a claim for $600, because there is no legal proof that it was issued in April, 1900, or, indeed, that it was issued at all. Counsel argued that the fact that the company's paper had gone to. protest showed that it had suspended business in the gense that there was, in the words of Chancellor McGill, in Fort Wayne Electric Corporation v. Franklin Electric Light Co., 12 Dick. Ch. Rep. 13, “an inability to presently pay indebtedness” and hence a “suspension of that function.” The chancellor was, in that ease, considering an application for the appointment of a receiver. The proof was that, while the company was then carrying on the business of lighting th§ streets of Cape May, judgments had been recovered against it which it was unable to satisfy, and which its directors did not propose to satisfy, and that there was “a strong disposition” to avoid paying some of its unsecured creditors.

It is obvious that the case at bar is, in its peculiar situation, quite unlike that before the chancellor. The fact that the notes of a manufacturing company have gone to protest may be, and often is, prima facie evidence of insolvency; but it is obvious that such evidence is open to explanation. The protest may have occurred by accident, or because it was intended, in good faith, to contest their validity, or because it was without funds to pay through some unexpected delay on the part of one or more of its own debtors to make prompt payment. If the note were paid or the claim successfully defended it could' hardly be asserted afterward that, for this reason alone, the- company was insolvent. And I do not think it could be said that if the company did not pay in cash but had sufficient credit to renew its notes, and did, in fact, renew them and went on with its business, it should be regarded as insolvent, if it also appeared that its assets exceeded its liabilities. It is obvious that the whole situation would have to be considered. Speaking of the principle which should guide a court in appointing receivers for insolvent corporations, Vice-Chancellor Van Fleet, in Atlantic Trust Co. v. Consolidated Electric Storage Co., 4 Dick. Ch. Rep. 402, in a passage quoted by the chancellor in the case I have just mentioned, said: “The principle which I think should control the court in the exercise of this power is this— never to appoint a receiver unless the proof of insolvency is clear and satisfactory and unless it also appears that there is no reasonable prospect that tire corporation, if left alone, will soon be placed, by the efforts of its managers, in a'condition of solvency.” If this be the true principle where the appointment of a receiver is concerned, certainly a, fortiori must it be the true one where the dispute is over the validity of a mortgage, taken by a creditor in good faith, in the ordinary course of its business, a considerable period of time before its failure.

There were three banks which, on April 1st, 1900, held paper of Paillard & Company and of Otto & Sons that went to protest, either just before or just after that date. The East River bank, as has been already stated, held notes and bills amounting to $55,000, and its president held notes for $20,000 more. It was to secure these notes that the Otto company bonds, to the amount of $75,000, were given. So far as this bank was concerned, the indebtedness was satisfactorily adjusted. It had never threatened suit and the evidence shows that the arrangement looking to an adjustment of its claim was at least under way before the notes were protested. They were protested, no doubt, for the purpose of fixing the liability of the endorsers, of which there were several. The Hoboken bank held paper on which Otto & Sons appeared as maker or endorser to the amount of $31,792.60. The first of the notes held by this bank became due and was protested on February 15th; the last on April 10th. They were all secured by a mortgage made by Charles W. Cooley and Emma Cooley, dated March 19th, 1900; delivered on April 14th. One of the notes (for $9,250) had'been made by Cooley himself, and a complete settlement and discharge of the account was had on December 13th, 1901, a part of the indebtedness having been paid in cash and a part by transfer of the property mortgaged. Of the particulars of the notes in the Germania bank we know nothing. The treasurer of Otto & Sons testified that they were protested about March 1st, 1901, which is probably a mistake, and that they are still outstanding. In the absence of evidence to the contrary, and assuming that they were protested in March, 1900, it must'be concluded that they were satisfactorily provided for or secured.

Now, it seems to 'me that on these facts the insolvency of the company at the time the mortgage was given is far from being clearly and satisfactorily established. Its assets were greater than its liabilities. It had never ceased to conduct its ordinary business in the ordinary way. The evidence is that up to May, 1902, it had never defaulted in its weekly payroll of from $1,400 to $2,000. There are a great many solvent companies, I imagine, which at some period or another of their existence have been pressed for money, and have, because of such pressure, been obliged to ask for time. If the test be present inability to pay in cash all maturing claims, then a successful effort to obtain further time, by a pledge of their properly, is a demonstration of their insolvency.

By section 42 of the act of 1849 it was enacted that in case of the insolvency of any company formed under its provisions the laborers in the employ thereof should have a lien upon the assets thereof for the wages due them, respectively, which should lie paid prior to any other debt, &c. It was held by Chancellor Green, in Bedford v. Newark Machine Co., 1 C. E. Gr. 117, that the company was to be deemed to be insolvent when it suspended business, and that the lien should be deemed to attach as of that time. He said: "The act respecting insolvent corporations under which these proceedings were instituted looks to the suspension of the ordinary business of the company or some overt act by which its insolvency can be ascertained and declared. The court cannot, upon an inquiry of this nature, undertake to investigate the financial ability of the company at previous periods, founded upon a mere failure to meet its engagements or upon the actual state of its finances, after its business has been suspended.” This language has been quoted with approval in subsequent cases. Delaware, Lackawanna and Western Railroad Co. v. Oxford Iron Co., 6 Stew. Eq. 193; Wright v. Wynockie Iron Co., 3 Dick. Ch. Rep. 29. If these decisions do not govern the construction of section 64, they at least suggest caution in undertaking to avoid securities given a considerable time before suspension of business.

To summarize: The evidence in the case at bar shows that Otto & Sons had up to May, 1903, carried on an established _ business of many years standing, successfully; that it did not suspend its ordinary business until that time, and that its assets in the spring of 1900 exceeded its liabilities by $200,000. One of its selling agents (Paillard & Company) had become embarrassed. It was thought that this embarrassment had been caused by bad management, and so, by resolution of April 14th, ’1899, Gustav Otto, its president, was authorized to take it into his own hands. This he did, but without success. When Pail-lard & Company failed, Otto & Sons became straitened for funds, and the notes of which I have spoken — which seem to have been nearly all Paillard paper — went to protest. This created an embarrassment, which was, as I have said, met (1) by a loan of $40,000 from the president of the East River bank; (2) by an issue of bonds to secure the Paillard paper held by that bank; (3) by an arrangement with the Hoboken bank by which a director first mortgaged and then conveyed certain property of his own in satisfaction of its claim; (4) by an arrangement with the Germania bank, which I must assume was satisfactory to it, for there is no evidence that it pressed its claim. An extraordinary emergency was met by these means’ and the company went on. I fail to find in these facts such clear evidence of insolvency, actual or contemplated, on April 1st, 1900, as compels me to avoid the mortgage in controversy.

The complainant next contends that the mortgage is voidable under the principle of the cases of Owen v. Arvis, 2 Dutch. 23, and National Bank of Metropolis, v. Sprague, 6 C. E. Gr. 50. The precise point of objection is, first, that the mortgage gives the trustees the right, upon default, to sell the property .which the company then owned and which it might thereafter acquire, to the prejudice of the general and unsecured creditors. This question was decided in Lister v. Simpson, 11 Stew. Eq. 438; affirmed on appeal, 12 Stew. Eq. 595, 607. Yiee-Chancellor Yan Fleet said: “The question is this: Is the mortgage of a stock of merchandise, which by its terms permits the mortgagor to sell the property mortgaged in the usual course of business, and also provides that its lien shall extend to such goods as may be subsequently purchased to replace those sold, fraudulent, ipso facto, as to creditors?” He answered both questions in the. negative, although it appeared that the stock mortgaged had been almost entirely changed, and that nearly all the goods purchased to replace the goods sold had been furnished by the execution creditor, who had actually levied and who was claiming, by virtue of his levy, priority over the lien of the mortgage.

The second objection interposed on this branch of the case is that the mortgage provided that the trustees should certify and deliver the bonds secured thereby to or upon the order of the company. With or without this provision, this, in a mortgage of this kind, would be the usual course. The bonds would be delivered as the company would direct. I am quite unable to see how such a provision would per se, and aside from the use that might be made of it, render it fraudulent. I suppose that in the ease of most of the mortgages that are given by railroad or industrial companies, the bonds are sold or disposed of by the trustees under the direction of the mortgagor. The case in hand seems to me to be distinguishable from National Bank of Metropolis v. Sprague in two vital particulars — first, the mortgagor was not, as I view-the evidence, insolvent. In all the cases relied on (Owen v. Arvis, National Bank of Metropolis v. Sprague, supra; Dewitt v. Van Syckle, 2 Stew. Eq. 210) this was regarded as one of the controlling facts; second, the mortgage in the case at bar was given pursuant to an antecedent agreement with a particular creditor for the security of that creditor and of its president. In the case of National Bank of Metropolis v. Sprague, the mortgage was made to trustees without any purpose of then securing any particular creditor, but after it was executed the bonds were left in the hands of the mortgagors for distribution among their creditors, or for such distribution as they might choose to make of them, and then they were held in the air, so to speak, and used as a club with which to compel creditors to take them. There was some criticism based upon the fact that the $40,000 was not all paid at the time the mortgage was executed. It was in fact paid between April 1st and October 1st, 1900, as the company needed it. It was all paid while it continued to be a solvent and going concern. Under these circumstances, I can see no real resemblance in essentials between the case in hand and those relied upon.

It is next insisted that if the complainant’s judgment and execution be not a lien prior to the lien of the mortgage in all respects, it is at least, a prior lien as to some of the property sought to be mortgaged. It is argued that it does not cover after-acquired property purchased with money of the company derived from the sale of its merchandise or from book account, or money in its possession when the complainant’s execution issued. The case of New York Security and Trust Co. v. Saratoga Gas and Electric Light Co., 53 N. E. Rep. 758, and other like authorities, are relied upon to sustain this position. So far as the question of after-acquired property is concerned, that has been disposed of by the before-cited case of Lister v. Simpson. So far as debts due the corporation and money — that is, coin or bank bills — are concerned, the facts are as follows: The property was taken over by the trustees under the mortgage on May 8th, 1903. The first execution was issued by complainant on April 4th, 1902, and was returned unsatisfied. The second was issued on July 28th, 1902, and is still unexecuted in the hands of the marshal. The execution js not a lien upon choses in action. Whitney v. Robbins, 2 C. E. Gr. 360; Tantum v. Green, 6 C. E. Gr. 364. And no coin or bank bills are shown to have been in the possession of the company after the execution issued. The company had, no doubt, one or more bank accounts, but while we, in common parlance, speak of money in bank, in legal contemplation the bank stands toward its depositor as any other debtor. Even if the case made by the bill were broad enough to cover this question, I do not think the plaintiff’s contention could prevail. In the case of New York Security and Trust Co. v. Saratoga Gas and Electric Light Co., supra, a receiver had been appointed in supplementary, proceedings, and the contest was between him and a receiver appointed in a mortgage foreclosure suit on the same day. A different question was therefore presented by that case, and it is unnecessary to consider whether it be, or be not, in all respects consistent with Lister v. Simpson, supra.


author: Grey, Y. C.

text:
    Roberta Connely, executrix, &c., of Patrick Connely, deceased, v. Mary Haggarty, administratrix, et al.
    [Filed November 24th, 1903.]
    1. The grantor, in a contract for the sale of land, having intentionally avoided giving the grantee an opportunity to make a tender, may not thereafter, in a suit by the grantee for specific performance, be heard to complain of the absence of a tender.
    2. Where a lease and contract for the sale of land held by one as a trustee, recite that such person, “trustee, residing at * * * doth hereby let,” and they are signed and sealed by such person, and relate to the trust property, they are to be construed as having been executed by him in his fiduciary capacity.
    3. A trust deed provided that the trustee might revoke or alter the trusts declared, or that he might convey the land impressed with the trust free of any trust, and receive the purchase-money, and that the purchaser should not be liable for the application of it, and that the trustee should hold it for the purposes declared in the trust, or such new uses as he might appoint. — Held, that it was not necessary to a valid conveyance by the trustee that he should “revoke” the trust, inasmuch as the power to sell or-to revoke might be exercised separately, and the exercise of the power to sell necessarily revoked the trust as to the land sold.
    4. Under the lease containing an agreement to sell at a named price at the option of the lessee, he became the purchaser of the right to buy the property. His privilege to buy induced the taking of the lease and the payment of the rent. He became a bona fide purchaser of the right to buy, for the valuable consideration paid by him in the rent.
    5. A trust deed provided that the trustee might convey the property by deed, duly signed, sealed and acknowledged. The trustee executed a contract whereby he, as trustee, leased the property to another for a term of years, the lessee having the right to purchase for a certain sum. Possession was given the lessee, who paid rent under the lease for several years. The contract, renting the premises and giving the lessee the right to purchase, was duly executed under the hands and seals of the trustee and the lessee", in the presence of a subscribing witness, its execution and delivery was duly proven and it was recorded in the county clerk’s office. — Held, the execution of the power by the trustee in making the agreement is not defective as a contract to convey lands. By a mistake the mode of its execution varies from that prescribed in the trust deed, in that it is not acknowledged by the trustee. It is an established principle of equity that when the donee of a power attempts to execute it and by mistake does it imperfectly, equity will interpose to carry .the donee’s intention into effect, in aid of a bona fi,Ae purchaser for valuable consideration.
    On bill for specific performance, answer and proofs.
    The bill in fliis case is filed to compel the specific performance of a contract to convey a house and lot of land situate in Atlantic City in this state.
    As originally filed, the complainant was Patrick E. Connely and the defendants were Michael Haggarty, trustee, and Daniel M. Haggarty.
    It is undisputed that Charles S. Stockman and wife, by deed, dated October 31st, 1896, conveyed the premises in question to Michael Haggarty in fee upon the following-named trusts, and conferring the following-named powers:
    “In trust for the uses, ends, intents and purposes, and under and subject to the several provisos,' restrictions, limitations and conditions following, that is to say, that the said Michael Haggarty shall have, hold and enjoy said real estate and premises above described and shall collect and receive the rents, issues, income and profits arising therefrom, to and for his own use and benefit, for and during the term of his natural life; provided, however, that during all the term of his natural life, he, the said Michael Haggarty, shall keep said premises in good order and repair and pay all taxes, water rent and other legal costs and charges, including expenses of repairing which shall accrue against said premises or for the same during said term or period; and from and immediately after the death of the said Michael Haggarty, then that the heirs, executors, administrators, successors or assigns of him, the said Michael Haggarty, trustee as aforesaid, shall grant and convey by full and proper deed or deeds of conveyance absolutely and in fee-simple, the said premises and real estate hereinbefore described, or assign, transfer and 'deliver the proceeds of said real estate (if it then be sold) unto Daniel M. Haggarty, son of the said Michael Haggarty, his heirs and assigns forever; provided always nevertheless, and it is hereby expressly declared, agreed and understood between said parties hereto, that it may , and shall be lawful for the said Michael Haggarty, by any deed or deeds, .writing or writings to be by him duly signed, sealed, executed, acknowledged, delivered and recorded, to revoke, alter, change and make void all and every of any of the uses and estates hereinbefore limited and declared of and concerning- the said hereby granted premises, or any part thereof, and by such deed or deeds, writing or writings, to grant, bargain, sell or convey said premises or any part thereof in fee-simple, in mortgage or for any less estate, freed and discharged of and from any and every trust or limitation whatever, to such person.or persons and for such price or sum as he, Michael Haggarty, shall deem proper; or by such deed or deeds, writing or writings, to appoint and declare new and other uses of the said premises as to him shall seem meet; and provided further, the moneys arising from any such sale or sales or loaned upon mortgage, shall be received by and receipted for by the said Michael Haggarty, without any liability to or on part of purchaser or purchasers or mortgagee.”
    On tbe 16th day of November, 1897, an agreement, under seal, signed by Haggarty and Connely, witnesses that Michael Haggarty, trustee, leases the premises in .question to Patrick J. Connely for a term of five years from the- 1st day of January, 1898, at the annual rental of $600, with full covenants between lessor and lessee, containing also the following clause:
    “It is also covenanted and agreed that at any time within the period of five years from and after the first day of January, A. D. 1898, the said lessee shall have the right and privilege of purchasing said real estate and premises for the price or sum of $10,000.”
    This agreement of lease and contract for sale under the hands and seals of both Haggarty and Connely has annexed to it the following proof:
    “State of New Jersey, Atlantic Oounty, ss. — Be it remembered, that on this twenty second day of November A. D. 1897, before me the subscriber, a Master in Chancery of New Jersey, personally came Horace J. Keller, of full age, who being by me duly sworn on his oath saith that he saw the within named Michael Haggarty and Patrick P. Connely sign, seal and deliver the within instrument as their voluntary act and deed, and that the deponent at the same time signed the same as subscribing witness.
    “Ií. J. Iveluer.
    “Sworn and subscribed before me at Atlantic City, New Jersey, the day and year aforesaid.
    “I-Iabry Wootton, M. G. G. of N. J.”

    The instrument was recorded in Atlantic county clerk’s office on November 23d, 1897, iii Book 4 of Agreements, page 47, &c.

      Under the agreement, Connely went into possession of the premises and has continued in possession since that time and still remained in possession at the time of the filing of the bill of complaint. About the 1st day of September, 1901, Connely sought to demand from I-Iaggarty the performance of the covenant to convey the premises, in accordance with the agreement. Mr. Connely, .in furtherance of this purpose, in November, 1891, gave written notice to Iiaggarty, fixing the 20th day of November, 1901, at twelve o’clock, noon, as the time and Ilaggarty’s own house as the place, when and ivhere Connely would attend to cany the agreement to purchase the trust property into effect, and asking Iiaggarty if the date did not suit him, to notify him (Connely). Receiving no reply, Connely, with his attorney, attended at the time and place named, with the $10,000 purchase-money and an unexecuted deed (conveying the premises in question), ready for execution, to be made to him by Ilaggariy, as trustee, in accordance with the agreement.
    Mr. Connely and his attorney did not find Mr. Iiaggarty at home, nor did they receive any explanation of his absence. It is quite clearly indicated by the circumstances of the case and by defendants’ answer in this cause, that Mr. Iiaggarty did not intend to comply with his agreement to convey to ' Connely, and that he was probably prompted thereto by his son, Daniel M. Iiaggarty, the remainderman under the terms of the trust above recited and one of the defendants in this cause.
    The complainant, by his agents and attorneys, sought at other times an opportunity to demand from Mr. Iiaggarty performance of his agreement, but was unable to find him for that purpose.
    On the 21st day of December, 1901, the complainant, Patrick E. Connely, filed his bill of complaint in this cause, praying that Mr. Iiaggarty might be decreed specifically to perform the agreement by conveying the trust property to the complainant upon payment of the purchase-money, $10,000, and for other relief, and making Daniel M. Haggart3r, the remainderman, also defendant.

      Michael Haggarty answered the bill individually and also as trustee, and Daniel M. Haggarty, the other defendant, joined with him in the answer. They admit the making of the agreement of lease, that complainant took possession of the premises, and that he paid rent therefor according to the term of the lease; but they deny that Michael Haggarty entered into any agreement as .trustee. They admit that Haggarty received a notice from Connely, demanding conveyance of the premises, but deny that he eluded the complainant in his effort to make a tender and demand for the performance of the agreement, and leave the complainant to make proof of his allegations in that respect; and they aver that Daniel M. Haggarty has an interest in the premises as cesiui que trust which the agreement does not affect; that Michael Haggarty was without power, either as trustee or individualty, to sell or convey the premises, and that, as against the right of Daniel M. Haggarty, Michael Haggarty’s agreement for the sale of the premises is void and unenforceable in law and in equity. The defendants pray the same benefit as if they had demurred to complainant’s bill.
    When the cause came on for hearing it was disclosed that Patrick E. Connely, the complainant, had departed this life on the-day of-, and also that Michael Haggarty, the principal defendant, had also died on the --- day of-. By agreement of counsel at the hearing, the legal representatives of the complainant, Patrick E. Connely, were substituted as complainants, and the heirs-at-law of the defendant, Michael Haggarty, were substituted as defendants, counsel agreeing that the bill of complaint and the answer should be taken to be the bill of complaint and answer of the substituted complainants and defendants, respectively.
    The cause came to a hearing between these substituted parties.

      Mr. Harry Woolton and Mr. Clarence L. Cole, for the complainants.

      Mr. David J. Pan coast, for the defendants.
   Grey, Y. C.

The questions in dispute between the parties in this case are almost entirely matters of law. Some contention was made by the defendants in argument that no efficient tender of performance was shown on the part of the complainants, but the testimony clearly indicates that Mr. Connely, in his lifetime, had made known to Haggarty, in his lifetime, that he (Connely) demanded the performance of the contract to convey the premises in question; that Haggarty was unwilling to do so, probably prompted thereto by the suggestions of Daniel M. Haggarty, his son, who was the remainderman in the above-mentioned trust.

This unwillingness on the part of Mr. Haggarty to convey the property in accordance with the agreement, was in no way based upon Mr. Connely’s omission to make a full and formal tender of the purchase-money and proffer the deed to be made conveying the premises. It is plainly indicated that, if all these things had been done, Mr. Haggarty would still have refused to convey the property, for he absolutely denied the right of Mr. Connely to have any such conveyance.

It is also but a fair inference from the testimony offered in the case, that Haggarty purposely avoided giving to Mr. Connely any opportunity to make the tender in question. It does not lie with Mr. Haggarty, or those who stand in his place, having created a situation which avoided the formalities of a tender, to complain that they were not observed.'

The defendants claim that Michael Haggarty had no power to convey the premises in question according to the terms of the agreement, and that, as against Daniel M. Haggarty, the remainderman under the deed of trust, Michael Haggarty’s agreement to convey, is void.

Two points are made against the obligation to convey — first, that the agreement was not made by Mr. Haggarty as trustee; second, that the agreement is not, in the mode of its execution, in conformity with the requirements of the deed of trust under which Haggarty held the title.

As to the first point, the agreement opens thus: “This agreement witnesseth, That Michael Haggarty, Trustee, residing, &c., * * * cloth hereby let unto Patrick E. Connely, of,” &c. Then follow the lease and. covenants and the agreement to convey, as above quoted. It is signed at the end, “Michael Haggarty, Patrick F. Connely,” with seals attached.

The agreement is, in its premises, one made between Michael Haggarty, in his capacity of trustee, witnessed and attested by his signature and seal. It was not necessary to its efficiency as an act done in the capacity of trustee that the full terms of the trust should be recited in the body of the instrument, nor that they should be appended to the signature of the trustee. The undertaking purports to have been made by the trustee; it relates to the trust property. Under it possession of the trust property has been given to the lessee, and rents have annually been received by Mr. Haggarty for many years. It was plainly intended to be a lease and agreement to convey by the trustee, who alone had power to make such an agreement.

The contract must be held to have been executed by Michael Haggarty as trustee.

The other contention is that by the terms of the Stockman trust deed to Michael Haggarty, the power to convey the property was required to be exercised by a deed or writing by Haggarty, “duly signed, sealed, executed, acknowledged, delivered and recorded,” revoking the trust and granting- the premises, &c. It is argued that the terms of the trust require that the trustee shall both revoke the trusts and grant the trust property.

The gift of the power to sell is separated by the disjunctive “or” from the gift of the power to revoke or alter the trusts. Either power may be exercised separately from the other. The exercise of the power to sell the land convej^ed in trust would necessarily revoke the trust, so far as it applies to the land sold, and relate the trust to the purchase-money. The deed, in terms, provides that the sale shall convey the property “freed and discharged of and from any and every trust or limitation whatever,” and further provides that Michael Haggarty should reccive the purchase-money, and that the purchaser should not be liable for the application of it, and that Michael Haggarty should hold it for the purposes declared in the trust, or such othey new uses as he may appoint.

The most significant contention of the defendants is that the trust deed requires that any grant of the trust property must be by a deed or writing by Michael Haggarty, signed, sealed, executed, acknowledged, delivered and recorded; that this is a prescription of the mode in which Haggarty must exercise the power to sell in order, effectively, to pass the title as against Daniel M. Haggarty, the remainderman.

The agreement to convey, upon which the complainants rely, was signed, scaled, executed and delivered by Michael Haggarty, and has been recorded, but it was not acknowledged by Michael Haggarty. It was, however, proven by the appended deposition" of H. J. ICeller, the subscribing witness,

“that he saw the within named Michael Haggarty and Patrick F. Connely sign, seal and deliver the within instrument as their voluntary act and deed, and that the deponent at the same time signed the same as subscribing witness.”

. The defendants contend that this proof is not a compliance with the requirement of the deed of trust that any conveyance made by the trustee of the trust property must be acknowledged by him, and I am referred to the case of Orton v. Metuchen, 37 Vr. 572. In that case a statute- required that the consent of the owner of land fronting on a street that a trolley road should be laid should be “executed and acknowledged as are deeds intended to be recorded/5 The trolley company presented a consent, the execution whereof was not acknowledged, but proven by the subscribing witness. The supreme court held that because of this failure to acknowledge as required by the statute the consent was invalid.

The complainants in the case now under consideration insist that the proof of the agreement by the subscribing witness was a substantial compliance with the requirements of the deed of trust in the execution of the power. '

.The rights of the complainants are, I think, to he ascertained and considered from a somewhat different point of view, and are not controlled by the necessity for rigid observance of the manner in which an instrument has been executed, as was enforced by the supreme court in the case cited.

The intent of Mr. Haggarty to enter into the agreement to convey the trust property to Mr. Oonnely is, I think, beyond question. The agreement itself is entirely clear in its expression of an undertaking to convey. The clause containing that agreement is all in manuscript, inserted in an appropriate blank provided for that purpose, indicating that it was the subject of especial preparation. Possession of the trust property was given under this agreement,- and rent was paid under its provisions for several years. The intent to lease and to agree to Convey is, I think, so plainly shown- that it cannot be questioned. The defect alleged is not that the power to convey was not intended to be exercised, but that in the execution of it the trustee did not observe with precision the mode prescribed in the gift of the power.

It must be noted that Mr. Oonnely, by the agreement of lease and privilege to purchase, became and was a bona fide purchaser of the right to have á conveyance of the trust property if he chose to demand it. This was not a mere option proffered to him, but a privilege, which induced the taking of the lease and •the payment of rent. McCormick v. Stephany, 16 Dick. Ch. Rep. 218, and cases there cited.

The situation is this: A donee of a power to convey lands, intending to exercise it, entered into an agreement with a bona fide purchaser, who paid him a valuable consideration for lands intended to pass under the power. The instrument executed by the donee fully shows the purpose on the part of the donee to convey the property. It is not defective in its legal force and effect as an agreement to convey, but only in the manner in which it was executed, in that it does not, with precision, comply with the mode prescribed in the gift of the power.

It is, I think, an entirely well established principle that when a part}' undertakes to execute a power, and by mistake does it imperfectly, equity will interpose to carry his intention into effect in aid of those persons who are within its proper consideration. 1 Story Eq. Jur. 170. Equity will extend this remedy to creditors, purchasers for valuable consideration and wives and children of the donee of the power. 1 Story Eq. Jur. 170; 2 Sugd. Pow. ch. 10.

The enforcement of this equity does no injustice to Daniel M. Haggarty, the remainderman. He takes under the trust deed apparently as a volunteer, and subject to the possibility of the exercise of the power of sale therein expressed. He still receives under the trust the benefit of the purchase-money of the trust property, and has no equity which is in any way superior to that of the bona fide purchaser from Michael Haggarty, the holder of the power, whose instrument, plainly imtended to execute the power, is defective solely because it was not in terms acknowledged, though it was proven.

If it be conceded, that the defendants’ contention is correct, and that the instrument by which Michael Haggarty executed the power was in the manner of its execution defective, the complainants are still entitled to the favorable consideration of this court, on the ground that Mr. Connely, under whom they claim, was a bona fide purchaser for value, and that the challenged instrument sufficiently expresses the intention of Mr. Haggarty to exercise the power, and is defective only in the manner of its execution, and equity will in such a ease aid that by its decree.

I will advise a decree for complainants in accordance with the views above expressed.


text:
    James H. Johnson v. Margaret H. K. Johnson.
    [Filed December 17th, 1903.]
    1. That married persons do not live together during the pendency of a suit between them for divorce, is a justifiable separation, and not an obstinate desertion, if the suit be prosecuted in good faith.
    2. In ascertaining and computing the term of two years of defendant’s desertion in a petition for divorce, no part of the time during which a previous suit for divorce was pending between the same parties can be estimated as part of the period of desertion, because during that time the separation is not obstinate.
    3. Quwre. If it be that the parties have lived separately more than two years, but previous divorce suits so intervene that omitting the period of their pendency from the computation the parties have not lived apart for any two continuous years, can it be said there has been a continuous desertion for the period of two years?
    On petition for divorce. Answer and' proofs.

      Mr. William I. Garrison, for the petitioner.

      Mr. Howard Garrow, for the defendant.
   Grey, Y. C.

(orally).

The bill in tins case is filed for a divorce from the bond of matrimony because of alleged desertion by the defendant.

The dates of the marriage and of the alleged desertion, as stated in the bill, were amended at the hearing. As so amended, they allege the marriage to have taken place on the 12th day of October, 1897, and that the defendant wife deserted the petitioner on the 26th day of May, 1900, and that she has since that time willfully, continuedly and obstinately deserted him, with a prayer for divorce a vinculo matrimonii.

The defendant answers the bill, denying any desertion on her part and alleging cruel and barbarous treatment of herself by the petitioner, resulting in several separations, until finally, on the 26th day of May, 1900, the defendant alleges that the petitioner deserted her, and that for more than two years last past he has willfully, continuedly and obstinately deserted her. While the defendant fully answers the petitioner’s complaint, she asks no cross-relief against the petitioner.

The case, as presented by the pleadings, is therefore a petition against the defendant asking a divorce on the ground of desertion, and an answer by the defendant denying any such desertion.

At the hearing the petitioner sought to prove that the defendant, who undoubtedly separated herself from the petitioner on the 26th day of May, 1900, and has not since lived with him, did on that day desert him, and that she has continued to desert him ever since, obstinately and against his will. The testimony exhibited many petty infelicities of married life and an entire absence of those mutual considerations and concessions which are necessary to the happiness .of the marriage relation. I do not deem it necessary to pass upon the relative contributions of the petitioner and the defendant to the production of the state of affairs presented by the proofs, because the evidence exhibited shows one element which is absolutely controlling in such a suit as that presently under consideration.

The petition in this case was filed on the 24th day of February, 1903, under the provisions of the Divorce act. P. L. of 1902 p. 502, &c. That statute provides that divorces from the bond of matrimony may be decreed for the cause of willful, continued and obstinate desertion for the term of two years. The term of two years, during which the desertion must have been willfully and obstinately continued, must have expired before the filing of the bill of complaint or petition.

In the course of the testimony it was- proven that on the 26th day of July, 1901, the petitioner filed a previous petition for divorce against the defendant in this case, on the ground of adultery, and that this petition was dismissed on the 31st day of March, 1902. It was also proven that the defendant in this case filed her petition against her husband, the petitioner herein, on the 18th day of June, 1902, for divorce, on the ground of desertion, and that her petition was dismissed in the month of January, 1903.

In order to maintain his right to a decree, the petitioner must prove not only a willful and continued desertion, but an obstinate one. Although the wife’s desertion from the husband may have continued for the term of two years, and may have been willful on her part, yet if she had a justifiable cause for living in a state of separation from her husband, it was not an obstinate desertion of him.

In the case of Weigel v. Weigel in this court, reported in 18 Dick. Ch. Rep. 677, and affirmed on appeal, it is recognized that the pendency of a divorce suit between a husband and wife is a justifiable cause for their living separately from each other, for the reason, if the previous suit were based on alleged adultery, that living together would presumptively condone it, and if for desertion, would have the same, effect. That decision declared that no part of the time during which a previous suit was pending can be computed in any subsequent suit as part of the period of desertion. Other cases may be found to the same effect in the decision above stated. The judgment in the case of Weigel v. Weigel turned upon an exception to this rule. In that case it appeared that the previous suit had been brought in bad faith, upon allegations of fact as grounds for a decree which were known to the complainant to be false at the time they were asserted.

In the ease now before me there has been neither proof nor claim that either of the previous suits between the parties to this suit was brought in bad faith, or upon grounds known by the party bringing it to have been false in fact. This case is therefore within the rule declared in Weigel v. Weigel and not within the exception there stated.

Applying the principles of that decision to this case, no portion of the time during which either of the previous divorce suits between the parties to this cause were pending, can be computed in making up the term of two years, during which the desertion of the defendant in this case must have been willful, continued and obstinate, in order to entitle the petitioner to a decree.

Both parties agree that their separation took place on May 26th, 1900. If it be assumed, for the purposes of this inquiry, that this separation was the fault of the wife (and upon this I make no determination), then a period of two years, eighteen months and twenty-nine days has elapsed during which the parties lived in a state of separation; but from this period must be deducted that portion of time during which each of the previous divorce suits was pending. The first suit was the husband’s petition for divorce because of the alleged adultery of his wife, begun July 26th, 1901, and dismissed March 31st, 1902, therefore continuing eight months and five days. The next suit was the wife’s petition for divorce for desertion, begun June 18th, 1902, and discontinued about March, 1903, therefore continuing for more than six months. Neither of these portions of time can be computed as part of the term of the alleged desertion in this cause. Together they make more than fourteen months, which, if deducted from the whole period of separation and alleged desertion, leaves but eighteen months of the separation which can bemomputed as the period of desertion, while the statute requires a full term of two years.

Under all the decisions there appears to be no question that the time during which previous divorce suits were pending cannot be computed as part of the term of two years’ desertion in the later suit, unless, as above stated, it.appears that the previous suits were brought in bad faith, which is not claimed in this case.

An interesting question may also be raised, whether in this case there ever has been a term of two years during which there was a continued desertion if the periods of pendency of the former suits cannot be computed. These suits have interrupted the continuity of the term of separation of the parties, so that there never was any term of two consecutive years during which the desertion could have continued, unless the period of the pendency of one or the other of these suits is computed. This contention, if sustained, would be another ground in favor of the defendant in this suit. I do not find it necessary to pass upon the point.

The petition must be dismissed, with costs, upon the grounds above stated.


text:
    The State Mutual Building and Loan Association of New Jersey v. James G. Batterson, Jr., et al.
    [Filed December 29th, 1903.]
    1. It is no defence to the foreclosure of a building association mortgage that the mortgagors received no personal benefit from the loan which it is intended to secure.
    2. A mortgagor cannot set up as a defence to foreclosure of the mortgage that he had no title to the premises.
    On bill, answer and proofs.

      Mr. Edward Ambler Armstrong, for the complainant,

      Mr. Francis Scott, for the defendants.
   Grey, Y. C.

(orally).

The bill is an ordinary bill for the foreclosure of a building-association mortgage. The defence, as pleaded in the answer, is that the' defendants did not make the mortgage, did not own the mortgaged property, that neither of them was a member of the complainant association and neither held any of its stock— in short, that they had nothing to do with the transaction.

• The undisputed evidence contradicts the denials of the answer. The defendants, Batterson and Chittuck, did make the mortgage; Mr. Chittuck did hold the title to the mortgage premises. Mr. Batterson acknowledged himself to be the owner of stock in the complainant association by signing as part - of the arrangement of the loan an assignment of shares of its stock. It is also proven that such shares were issued, but not delivered, to Mr. Batterson, because, by his agreement and assignment, they were transferred to the complainant association as security for the loan. Instead of having nothing to do with the mortgage transaction, as stated in the answer, Messrs. Batterson and Chittuck were active participants in its creation.

The evidence shows' that, for purposes satisfactory to them, Messrs. Batterson and Chittuck desired to raise the mortgage-money byway of loan on the mortgaged premises. It may be inferred that neither Mr. Batterson nor Mr. Chittuck personally received any benefit from the loan. It is also quite plain that they neither of them expected or intended, in arranging the loan, that either should personally have any benefit from it. Mr. Chittuck testifies that he was “a stool pigeon” in the matter. The mortgagors raised the mortgage-money for other purposes than their own benefit. It was paid out by the association and used as the mortgagors intended it should be.

The defence has made an argument here, based upon the idea that in making this loan the provisions of the constitution and by-laws of the complainant association have not been strictly observed; that the defendant Batterson was not a stockholder, &c., and that the mortgagors got no benefit from the mortgage-money.

It is not denied that the defendant Batterson executed the formal papers necessary to make him a stockholder; that the money which is named in the mortgage was obtained from the mortgagee, the complainant in this suit, on this mortgage”; that at the time the mortgage-money was raised it was not expected that it should go beneficially to either of the mortgagors. The mortgage itself shows that the money was obtained from the complainant association on the representation that Mr. Chit-tuck was .the owner of the mortgaged premises and Mr. Batter-son’s assignment recognizes his ownership of the stock. There has been no substantial showing that the mortgage-money was not paid out in accordance with the original purpose of the mortgagors.-

The argument of the defendants’ counsel seems to be that unless the mortgagors were the actual beneficiaries of the mortgage transaction, using the mortgage-money for their personal benefit, they may answer the suit for the recovery, according to their contract of payment, by saying "though we induced you to make this loan, and gave the mortgage to secure its payment, you have no right to foreclose the mortgage, because we jiersonally got no benefit from the transaction.”

I do not think that can possibly be held to be the law. The damage consideration to the complainant association in making this loan, according to defendants’ contract borrowing the money, is just as great whether the defendants had any benefit from the transaction or not. A mortgagor may give a mortgage, upon the understanding that the mortgage-money may be used for any purpose which suits him, whether beneficial to him or not. The mortgage is good in either case. All the varied transactions whereby one man becomes surety by making a mortgage to secure a loan made to another, are examples of this principle.

It is claimed that the complainant ought not to have a decree against Mr. Batterson, one of the mortgagors, because it is said that Mr. Batterson has no title to the mortgaged premises. By executing the mortgage, lie represented that he had the title. He obtained the mortgage-money to be paid out on that representation. I think it is quite clear that it does not lie with a mortgagor to make such a defence. A mortgage forclosure is not a proper suit in which to try the question of the title of the mortgagor to the premises which he has admittedly mortgaged.

There cannot be any decree that either of the mortgagors shall pay any deficiency of the mortgage-money. The statute prevents that. The complainant is, however, entitled to have the amount due on the defendants’ mortgage ascertained by an accounting against the mortgagors, and also a decree that the equity of both the defendants in the mortgaged premises shall be cut off and barred by a sale under a decree of foreclosure.

There is substantially no dispute as to the amount due upon the mortgage under the contract of the defendants.

I will advise a decree against all of the defendants, as above indicated.