author: Leaking, Y. C.

text:
    Melvin R. Van Keuren v. Charles Siedler.
    [Submitted May 24th, 1907.
    Decided May 27th, 1907.]
    1. Where a contract for the sale of land calls for a conveyance free from encumbrances, in the absence of an unwillingness on the part of the vendor to have the encumbrances discharged from the purchase-money at the time of conveyance, equity will not entertain a bill for specific performance to compel the vendor to discharge the encumbrances from his funds prior to the passing of title.
    2. An agreement to convey land free from encumbrances calls for a marketable title.
    3. In a suit by a vendee for specific performance, the bill alleged that defendant had contracted to convey the same’ land to a third person, which contract was of record prior to the contract with complainant.— Held, that the bill was demurrable, as a determination of the validity of the prior contract at the time of the contract with complainant could not be determined in a suit to which the third party was not a party.
    4. Though the bill praye.d for compensation in case defendant could not give a marketable title, it could not be entertained as a bill to recover damages, as such remedy must be at law.
    On demurrer. Bill by vendee against vendor for specific performance of a contract for the sale of land. Demurrer by ' defendant.

      Mr. James Steen, for the complainant.

      Messrs. Gondict, Gondict & Boardman, for the demurrant.
   Leaking, Y. C.

Complainant’s bill is for the specific performance of a contract wherein defendant agreed to convey to complainant certain land in Jersey City free and clear of encumbrances. The bill avers the existence of a mortgage and certain unpaid taxes on the land in question and also avers that a certain contract of sale exists wherein defendant agreed to convey the same land to the Realty Development Company which last-named contract was executed and recorded prior to the execution of the contract with complainant, and avers that time is not of the essence of the prior contract of sale. The bill prays for a decree to compel defendant to convey the land to complainant free from encumbrances and for compensation in case defendant is unable to comply with his contract in whole or in part.

So far as the taxes and the mortgage are concerned there can be no difficulty. A decree can appropriately be made authorizing their payment from the money yet to be paid by complainant. In fact the bill does not clearly disclose any unwillingness upon the part of defendant to have had that course heretofore adopted. Where there are outstanding undisputed liens against a property, which is to be conveyed free from all encumbrances, it is, in ordinary business practice, the custom to discharge the liens out of the purchase-money at the time the conveyance is delivered, and I doubt the right of a vendee to require such liens to be discharged by the vendor from his own funds prior to that time. In the absence of an unwillingness upon the part of vendor to have the purchase-money so applied when it is ample in amount, I am of the opinion that this court should not entertain a bill on behalf of the vendee based upon the neglect or refusal of vendor to discharge the encumbrances in advance of the time for passing title. Worch v. Woodruff, 61 N. J. Eq. (16 Dick.) 78, 84.

From the bill it is manifest that the real controversy arises from the existence of the prior-recorded contract wherein defendant contracted to convey the same land to the Eealty Development Company, and' complainant charges that this contract is a cloud upon the title, rendering it unmarketable, and alleges that defendant refuses to remove the cloud under a claim upon his part that it is not a defect in or cloud upon the title. The bill does not positively assert whether or not the prior contract of sale is at this time a live and enforceable contract, but proceeds upon the theory that it renders the title an unmarketable one and that this court will, by its decree, compel defendant to deliver a marketable title.

The contract which complainant now seeks to enforce entitles him to demand a marketable title, and the title to the land in question is clearly unmarketable so long as the prior-recorded contract of sale remains an apparent binding contract. But the difficulty at this time encountered is that complainant having entered into his contract with constructive notice of the existence of the prior contract is not entitled to a conveyance of the land if in fact the prior contract is still alive, and no judicial ascertainment of that fact can be had in this suit because the Eealty Development Company is not a party. A decree requiring defendant to convey the land to complainant would, in consequence, be necessarily based upon an assumed fact which cannot be inquired into in this suit. The same considerations manifestly render it impossible for this court to grant any relief under the present bill. The bill cannot be entertained as a bill to recover damages for the failure of defendant to deliver a marketable title. That remedy must, under the facts stated in the bill, be sought in a court of law. The demurrer must be sustained.

It may not be inappropriate to suggest, for the consideration of complainant, the possibility of relief through a bill against both defendant and the development company based upon. a claim of the invalidity of the prior contract and seeking a cancellation of the record and specific performance. This suggestion is made wholly for complainant’s consideration and in no way as an expression of opinion on the subject.


source: Caselaw Access Project

author: Beaming, Y. O.

license: Public Domain

text:
    Mary Young Ferrell v. Robert A. Strong.
    [Submitted May 27th, 1907.
    Decided May 28th, 1907.]
    Where the facts set forth in a bill show that complainant has an estate in. lands which cannot be ascertained in a pending action at law against her, but can only be asserted in a court of equity, further proceedings in the law court will be suspended until a decree may be had in equity.
    On bill for injunction.

      Mr. John Boyd AviSj for the complainant.

      Mr. G. Dore Cogswell, for the defendant.
   Beaming, Y. O.

A more careful consideration of this ease confirms the views expressed by me at the hearing.

• The facts set forth in the bill disclose an estate' in the lands in question, which can onty be ascertained and asserted in a court of equity. In the pending action at law against complainant these rights cannot be asserted, and she is in consequence entitled to have further proceedings in the law court suspended until a decree may be had under the present bill in equity. Atlantic City Railway Co. v. Johanson, 65 Atl. Rep. 719. 1 will advise a decree accordingly.


author: Leaking, V. C.

text:
    Gilbert & O’Callighan v. J. Lukens Anderson.
    [Submitted May 27th, 1907.
    Decided May 29th, 1907.]
    Where one partner, who was the manager of the business, purchased the interest of the other partners, it was his duty to make full disclosure of the condition of the business in every way essential to an adequate knowledge on the part of the other partners as to what they were selling.
    On bill for injunction. Heard on return of order to show cause.

      Mr. John D. McMullin, for the complainant.'

      Mr. Harry G. Kramer, for the defendant.
   Leaking, V. C.

Complainants and defendant bore to each other a trust relationship as partners, and when defendant purchased the interest of complainants in the partnership business it was his duty, as a partner and manager of the business purchased, to make a full and complete disclosure of the condition of the business in every way essential to an adequate knowledge on the part of complainants as to what they were selling, and the burden is upon the defendant to establish the fact that he performed his full duty in that respect. It is impossible to draw any conclusion from the affidavits filed other than that defendant performed his full duty. Complainants fix the date of dissolution as March 15th, 1907. Defendant fixes the date as March 8th, 1907. It is manifest that on either of these dates the ■prospect of effecting a sale of the land in question was so remote that neither complainant nor defendant, with all the facts touching the transaction before them, could properly have regarded the negotiation as an asset of value or worthy of consideration. Up to March 20th, the negotiations were in effect abandoned, according to the testimony of Mr. Meyer. If Mr. Meyer’s testimony is ta be credited, it is manifest that at the date of the dissolution neither he nor defendant could have entertained any expectation that negotiations would ever be renewed touching the sale of the lands in question. I think it is entirely clear that it was only the subsequent reduction in price by the owners of the land which suggested the 'resumption of the negotiations of sale. If defendant, at the time of dissolution, stated (as it is claimed by complainants) that no business or deal was pending, I entertain the view that such statement was fully justified so far as the transaction in question is concerned. As a blocked or abandoned negotiation it could scarcely have been properly considered as pending or worthy of serious consideration. Had the increased offer for the land or the reduction in the price for the sale of the land been made prior to the dissolution different aspect might be given to the situation.

I am convinced that under the evidence before me a preliminary writ would be without sufficient justification.

The order to show cause will be discharged.


author: Teaming, Y. C.

text:
    Isaac C. Harned v. Anna H. A. Harned.
    [Submitted May 28th, 1907.
    Decided June 22d, 1907.]
    In a bill for annulment of marriage because of a prior-existing marriage of defendant, it is not necessary to allege that at the time of complainant’s marriage she was ignorant of the prior marriage.
    On demurrer.

      Tlie bill is filed by complainant to procure a decree declaring his marriage with defendant null because of her prior marriage. Defendant demurs on the ground that the bill fails to aver as a fact that at the time of the marriage now sought to be annulled complainant was in ignorance of the fact that defendant had a husband then living.

      Mr. Ilenry IV*. Kehoe, for the complainant.

      Mr. Adrian Lyon, for the demurrant.
   Teaming, Y. C.

The single question raised by this demurrer is whether it is necessary for a complainant to aver, in a bill for nullity of marriage on the ground of a pre-existing marriage contract of defendant, that complainant at the time of the marriage was without knowledge of the existence of the prior marriage contract.

In Rooney v. Rooney, 54 N. J. Eq. (9 Dick.) 231, it is held that such knowledge of the prior marriage will operate as an equitable bar to relief. It does not follow, however, that the absence of such knowledge is a necessary averment of the bill. If complainant can be denied the statutory relief upon the equitable ground that he entered into the present marriage contract with knowledge of the existing marriage contract of defendant, such bar manifestly arises as a matter of equitable defence and in no sense through the failure of complainant to meet the statutory requirements. The averments of the present bill fully cover the elements prescribed by the statute as essential to entitle complainant to the relief sought and also the facts essential to the jurisdiction of the court over the cause and parties. Further than this the pleader is not required to go. In such a bill it is clearly unnecessary to negative such equitable defence as may exist. In a bill for divorce based on desertion the willingness to receive back need not be averred. Gray v. Gray, 15 Ala, 779. Tefft v. Tefft, 35 Ind. 45, cannot be. regarded as an authority against the views here expressed. In that case the decree of annulment was sought through the general equity powers of the court in the absence of any statute making a prior marriage ground for relief. The jurisdiction of the court was exercised through its powers to relieve against fraud and accordingly a count in the petition which failed to disclose the fraud was overruled, while a'second count which averred fraudulent concealment of the prior marriage was sustained. In the present case the allegations of the bill fully cover the requirements of the statute and the demurrer must be overruled, with costs.


author: Leaming, V. O.

text:
    Julius Kretz v. Sophie Kretz.
    [Submitted June 3d, 1907.
    Decided June 24th, 1907.]
    1. A husband is not entitled to divorce on the ground of adultery, where the wife at the time of the commission thereof was insane.
    2. Though there may be some doubt as to the right of the court of chancery in a suit for divorce on statutory grounds to enforce purely equitable rules and maxims against the complaining party, yet where that question has been considered in this state the right has been recognized.
    Ombill for divorce.

      Mr. William T. Boyle, for the complainant.

      Mr. Thomas P. Gurley, for the defendant.
   Leaming, V. O.

The bill is filed by complainant for the procurement of a decree of divorce against defendant on the ground of adultery. The answer of defendant denies the adultery charged. During the progress of the trial it became manifest that defendant was insané. A guardian ad litem was then appointed, who answered for the defendant, denying the commission of the adultery charged, and also averring that at the time of the alleged adultery defendant was insane. Complainant now admits that defendant is insane at this time, but insists that the insanity did not exist at the time the adultery is alleged to have been committed, and further insists that even though the insanity of defendant in fact existed at the time of the alleged offence, that fact will not operate as a defence. As to the latter claim complainant relies upon the case of Matchin v. Matchin, 6 Pa. St. 332. In that case it is held that, although insanity will operate as a defence to a criminal charge of adultery, principles of public policy require that the insanity of a wife at the time of the commission of the offence shall not be permitted to defeat the right of a husband to a divorce based upon the of-fence. The theory of the decision appears to be that the paramount purposes of marriage are the procreation and protection of legitimate children, the institution of families and the creation of natural • relations among mankind, and that these public considerations so far outweigh the private interests of the immediate parties that the marriage relation will be dissolved for the offence named, when committed by the wife, notwithstanding her insanity at the time of the commission of the act. I am unable to accept the views expressed in the Matchin Case. Eor a husband to cast off a wife for an act committed by her while insane impresses me as scarcely less than barbarous, and as wholly inconsistent with the necessities arising from social conditions. If society has any demand to assert in such a case, it is a demand for the protecting care of the husband alike before and after the unfortunate act. The principles of the Matclún Case would require a court to grant a decree of divorce to a husband whose wife had-been the victim of a rape. I am unable to conceive how any court can properly give sanction to the views expressed in the case under review, and I must decline to recognize it as a binding precedent. No other court, so far as I have been able to discover, has given sanction to the views expressed in the Matchin Case, while the very contrary has been established by the courts of several states. Nichols v. Nichols, 31 Vt. 328 Broadstreet v. Broadstreet, 7 Mass. 474; Wray v. Wray, 19 Ala. 522; Mims v. Mims, 33 Ala. 98; Wray v. Wray, 19 Ala. 187. See, also, Yarrow v. Yarrow (1892), L. R. Prob. 92, and Hill v. Hill, 27 N. J. Eq. (12 C. E. Gr.) 214. In 1 Bish. Mar. & D. § 712, it is stated, that the doctrine of Malchin v. Maiclim has found no support. I conclude, therefore, that if defendant was insane at the time of the alleged adultery that fact constitutes a complete defence to the bill.

. It is probably impossible to determine with entire accuracy the condition of the mind of defendant at the date of the alleged offence. The offence is alleged to have been committed in January, 1906. For a number of }rears prior to that date the wife had indulged in alcoholic stimulants to such an extent that her mind had become enfeebled, and all the witnesses agree that her condition gradually grew worse until she finally became insane as the result of alcoholism. The only dispute is as to the exact time when she may be said to have reached that condition. About six months before the alleged offence her husband filed a petition for her commitment to an asylum for the insane, based upon an allegation of her insanity. Doctors Bray and Horning then examined her' and certified that she was a proper person for commitment to the asylum. She was not committed, but the reason why the proceedings were discontinued docs not Cully appear. Dr. Bray irow testifies that she was not then insane, but that he recommended her commitment on account of her condition, which he describes as “alcoholism,” as distinguished from insanity. Iiis testimony is that alcoholism is not insanity, but that insanity is the result of alcoholism, and that while she has reached the condition of insanity at this time, sire had not reached that condition at the time named. Dr. Horning, who was the family physician, testifies that she was then insane and that she had been insane from a time long prior to the date of the alleged offence. As family physician his opportunity for knowing her exact condition was much superior to that of Dr. Bray. Neither of the physicians profess to be specialists in mental diseases, although Dr. Bray appears to have given the subject the more extended consideration. The other witnesses touching the mental condition throw little light upon the question as to just when defendant may have first reached her present unfortunate condition. Upon the whole testimony my best judgment is that if defendant had not at the time of the alleged commission of the offence named reached a mental condition which may be technically defined as insanity, she had reached a mental condition so far from normal that to charge her with full responsibility for her conduct would be inconsistent with the principles upon which equitable relief is uniformly founded. She was then, at the very least, in a mental condition where no one could properly expect from her the complete exercise of a rational judgment, although it appears impossible to say with positiveness that she may not have then known right, from wrong. Upon this branch of the case my conclusion is that defendant’s mind was so far impaired at the date of the alleged offence that no decree can properly be made against her based upon the acts charged.

Another feature of the ease merits attention. Whether defendant was technically sane or insane in January, 1906, it is entirely clear that at that time her condition was such as to demand from her husband his most solicitous care and attention. Only six months prior to that date he had alleged that she was insane and sought her commitment on that ground. His testimony now is that he sought the commitment in the hope that confinement in an asylum would operate to cure her habit of intemperance; but whatever his belief may have been at that time as to her sanity, he was fully aware of her unfortunate condition, and .owed to her the utmost care and attention. Instead of bestowing upon her that care which her condition demanded he went to Europe in December, 1905, and remained absent until February, 1906, leaving defendant entirely alone and unprotected in her home during all of that time. During that period of absence the offence now in question is alleged to have occurred. I am impressed that under such circumstances the primary responsibilitj^ for the act charged may be said to equitably rest upon the husband. By a proper observance of his plain duty to his wife the offence now charged against her could not have occurred, and, on the other hand, his conduct was such that he should have reasonably anticipated the happening of exactly that which he now charges. I am not unmindful of the fact that the neglect of a husband to perform his duties to his wife will not ordinarily excuse her infidelity, even though such neglect may be a natural and probable cause for her wrongful act; but where, as in the present case, a husband knows his wife to be utterly incapable of protecting herself against evil-doers, there can be but slight difference between leaving her alone and unprotected for so long a period and a deliberate procurement of her infidelity. In Derby v Derby, 21 N. J. Eq. (6 C. E. Gr.) 40, Chancellor Zabriskie said: “A party who has negatively violated a solemn contract in its two most vital parts, to love and cherish, and has only performed it in the last and least, to support, comes into a court of equity with an ill grace to complain of a positive breach by the party whom he first injured. His hands are not unclean in the sense which would apply if he had committed the same crime, but they were so weakened, blanched and attenuated by willful non-performance, that they take but feeble hold on the horns of the altar of justice. Such a complainant cannot expect any favorable leaning of the court, but must present a case free from any reasonable doubt.” These views I heartily endorse. There may be some doubt as to the fight of this court in a suit for divorce on statutory grounds to enforce purely equitable rules and maxims against the complaining party; but so far as that question has been consi déred in this state the right has been recognized, and I think rightfully so. Rooney v. Rooney, 54 N. J. Eq. (9 Dick.) 231, 242. Hnder the views already expressed I am compelled to deny to complainant the relief sought. This leaves it unnecessary for me to pass upon the sufficiency of the evidence offered to establish the fact of adultery, and I, therefore, express no opinion on that subject.

I will advise a decree dismissing the bill.


text:
    Amelia Sparks et al. v. Thomas W. Fortescue et al.
    [Submitted May 27th, 1907.
    Decided June 26th, 1907.]
    A bill was filed to quiet title against but one of the children of a person named, counsel for complainant not being aware of the existence of others. No testimony was offered on behalf of defendant, though he was represented by counsel, and an answer was filed, and a decree was entered for complainants. Subsequently a similar bill to quiet title was filed by the same complainants against the remaining children, and the same issues were raised. In the second suit there was a verdict for complainants, and, on the same being ordered to be set aside and the granting of a new trial by the court of chancery, there was an appeal to the court of errors and appeals. — Held, on a motion to open the decree in the first suit, that as the appeal in the second suit was then pending in the court of errors and appeals, and as the first suit was practically undefended, the decree therein would be opened on condition that the court of ^errors and appeals granted a new trial in the second suit, and on the further condition that defendants should consent in such event to the consolidation iof the two suits, should complainants desire it.
    On petition to -open final decree.

      Mr. Timothy J. Middleton and Mr. John J. Qrandall, for the petitioner.

      Messrs. French & Richards, contra.

   Teaming, Y. C.

Defendants seek to open a final decree entered and enrolled nearly three years ago. If this suit stood alone I should incline to the view that the reasons assigned for permitting the decree to be entered and stand so long unchallenged are insufficient to warrant this court in ordering the enrollment opened. But it appears that the bill was filed to quiet title to certain real estate, and the basis of complainants’ claim was that the children of one Edmund B. Eoss were not born in lawful wedlock; if born in lawful wedlock they became the owners of the property in question; if not, complainant was entitled to a decree. But one of the several children of Edmund B. Ross was made a defendant in this suit, counsel for complainants not being aware, at that time, of the existence of the others. No testimony was offered on behalf of defendant, although he was represented by counsel and an answer was filed in his behalf. Subsequently a similar bill to quiet title was filed by the same complainants against the remaining children of Edmund B. Ross and the same issues were raised. The second suit was defended by other counsel and defendant in the first suit alleges that he believed that his interests would be fully protected in the second suit. In the second suit a feigned issue was awarded and that issue was tried at the supreme court circuit and a verdict was instructed in favor of complainants. Subsequently this court ordered that verdict set aside because of insufficient evidence to warrant the peremptory instruction given. From that order of this court an appeal is now pending in the court of errors and apjoeals. The two suits are identical. If the children of Edmund B. Ross were born in lawful wedlock, that is to say, if his marriage to the mother of these children was a lawful marriage, then the title to the land in controversy is in them, otherwise it is in complainants. It would, indeed, be an anomaly if the two suits should be ultimately determined differently. As the court of errors and appeals is yet to determine whether a new trial shall be had in the second suit, and as the first suit was practically undefended, I entertain the view that the equitable course is to open the decree pursuant to the prayer of the petition on condition that the court of errors and appeals grants a new trial in the second suit and on the further condition that defendants shall consent, in such event, to the consolidation of the two suits, should complainants desire such consolidation.

I will therefore hold the present petition until the decision referred to is rendered by the appellate court, and then advise an order in accordance with the views herein expressed. Such costs as complainants were compelled to expend in taking the depositions before the master and in entering the decree should be paid by petitioner in the event of the decree being opened.


author: Leaming, V. C.

text:
    William S. Casselman, substituted administrator, &c., v. James McCooley.
    [Submitted June 20th, 1907.
    Decided June 26th, 1907.]
    1. A trust, vesting the legal title to land in trust in the person named by testatrix as executor, and requiring the estate to be divided at his marriage and the shares invested and the interest paid to certain persons during their lives, implies a power of sale in the trustee.
    2. Where a trust vested the legal title to land in trust in the person named by testatrix as executor, and required the estate to be divided at his marriage and the shares invested and the interest paid to certain persons during their lives, the sale of the land, permitted by implication, was necessarily to be made by the person named as executor in his capacity as trustee, and not as executor, though he was defined in the will as an executor, and hence one appointed substitutionary administrator with the will annexed cannot exercise the power of sale.
    On bill for specific performance.

      Messrs. French Richards, for the complainant.

      Mr. Thomas F. Gurley, for tlie defendant.
   Leaming, V. C.

Tlie bill is filed by the substituted administrator with the will annexed of Matilda C. Yarrow for the specific performance of a contract made by him as administrator for the sale of certain lands of his testatrix. The vendee defends on the ground of want of power of sale in complainant. The provisions of the will may be sufficiently expressed by the general statement that the legal title of the land in question is, by the will, made to vest in trust in tlie person named by testatrix as executor. The trust created requires the entire estate, consisting of the land in question and certain personal property, to be divided info four equal parts at the marriage or death of the executor and each four shares invested in lawful securities and the interest paid to certain devisees named, during their lives. Two questions are raised by defendant — first, whether the executor named in the will is given a power of sale; second, if so, whether complainant, who was appointed substitutionary administrator cum testamento annexo upon the death of the executor, can exercise such power of sale.

The duties required in the execution of the trust created are such that they necessarily include the power of sale. The direction to divide the estate into four equal shares and to place each share “out at interest in good and lawful securities and pay over the interest and dividends” discloses a clear intention on the part of testatrix that the real estate should be sold and the proceeds invested. Under such provisions the power of sale Is implied. Vanness v. Jacobus, 7 N. J. Eq. (2 C. E. Gr.) 153; Haggerty v. Lauterman, 30 N. J. Eq. (3 Stew.) 37; Belcher v. Belcher, 38 N. J. Eq. (11 Stew.) 126; Cruikshank v. Parker, 51 N. J. Eq. (6 Dick.) 21; Parker v. Seeley, 56 N. J. Eq. (11 Dick.) 110.

I am unable, however, to determine that the power of sale passes to the substituted administrator cum testamento annexo. As already stated the legal title to the property in question was vested in the person named in the wall as executor and was to be held by him upon the trusts declared. The sale of the real estate, permitted by implication, was necessarily to be made by the person named as executor in his capacity as a trustee holding the real estate as devisee in trust, and not in his capacity as an executor. The trust duties imposed are essentially those of a trustee and should be administered as such, and it is wholly immaterial that the devisee in trust is defined in the will as an executor. Complainant, as substituted executor, succeeds to the powers conferred upon the executor as such, but not to the powers devolved on the executor as trustee with trust duties to perform. These principles are fully defined in Varick v. Smith, 67 N. J. Eq. (1 Robb.) 1, where it is held that the statute of April 6th, 1888 (2 Gen. Stat. p. 1429 § 21), grants no power to an administrator with the will annexed to sell lands which are the subject.of an express devise in trust. I am compelled to hold that the appointment of a trustee will be necessary before a valid sale of the real estate in question can be made.

This suit is for specific performance. The decree should be based upon the unmarketability of the title. As to what constitutes an unmarketable title see authorities collected in Fischer v. Eggert, 64. Atl. Rep. 957. I will advise a decree dismissing the bill upon that ground.


author: Leaming, Y. C.

text:
    Jessie L. Colson, trustee of Francis W. Pancoast, v. Omar B. Pancoast et al.
    [Submitted July 1st, 1907.
    Decided July 3d, 1907.]
    Testator devised land to his son, subject to a charge for a sum named in favor of a grandson, to be paid when he arrived at the age of twenty-one years, interest, however, to be paid on the same annually “clear of tax” to his trustee. A succeeding clause of the will imposed a like charge on the land in favor of another grandson, but omitted the provision that the annual payments should be made “clear .of tax.” — Held, that the use by testator of the unnecessary words “clear of tax” in one clause and their omission in the succeeding clause did not manifest an intention on his part to authorize a deduction for taxes from the annual payments directed to be made in the succeeding clause.
    On bill and answer.

      Mr. Enoch 8. Fogg, for the complainant.

      Mr. Joseph J. Summerill, for the defendant.
   Leaming, Y. C.

The issue presented requires the construction of the will of James C. Pancoast, deceased. The provisions of the will touching which the present controversy arises are as follows:

“I give and devise my John Moore farm (so called) and the Dr. Sharp meadow used with it unto my son, Omar B. Pancoast, to him and his heirs in fee. I charge this farm with payment to my wife, Charlotte, of a yearly sum of one hundred and fifty dollars, in half-yearly payments during her life, first payment in six months after my decease. I also charge said farm with a sum of two thousand dollars to be by my said son, Omar B., paid to my grandson, James C. Pancoast, Jr., son of my son, Samuel Pancoast, when he arrives at the age of twenty-one years, interest, however, to be paid on the same at the rate of 4% per cent, per annum, clear of tax, to his trustee, commencing one year after my decease. X also charge said farm with the payment of a sum of three thousand dollars, to be paid to my grandson, Francis W. Pan-coast, son of my deceased son, Frank Pancoast, when he arrives at the age of twenty-one years, interest, however, to be thereon paid at the rate of 4% per cent, per annum to his guardian, commencing one year after my decease.”

The single question for determination is whether the annual payments for the benefit of Francis W. Pancoast must be made by the owner of the land which is subject to the charge to the full amount of four and one-half per cent, of $3,000 without any deduction for taxes. The contention is that inasmuch as testator specifically provided that the annual interest payments on the preceding $2,000 charge named in the will should be made without any deduction on account of taxes, the omission of that provision in the somewhat similar succeeding clause manifests an intention upon the part of testator in the latter instance, to authorize a deduction for taxes.

I am unable to reach the conclusion that testator intended that taxes should be deducted from the amount which he names as the annual payments to be made by the devisee for the benefit of Francis W. Pancoast. The language used by testator is entirely clear. lie directs the annual payment of four and one-half per cent, interest on the principal sum of $3,000, and no possible suggestion could arise that he desired any deductions to be made from these annual payments but for the fact that in the preceding clause of a similar nature he uses the additional words “clear of taxes.” But the use by testator of these wholly unnecessary words in the former clause will not justify a conclusion that testator did not accurately express his meaning and purpose in the well-selected language of the latter clause. If the language of the latter clause, standing alone, could be said to be of doubtful import, the maxim, expressio unius est exclusio alterius, might be advantageously invoked in aid of construction; but as the language used is clear and of no uncertain meaning, I am convinced that no justification can be found for attributing to testator a meaning different from that expressed. Testator may have, in the first instance, used the words “clear of tax” with the thought that without these words taxes would be deducted from the amount ordered to be paid, but this cannot be properly assumed as a fact. The addition of unnecessary words to a sentence already sufficiently clear, with a mere purpose of “making certainty additionally certain,” is not unusual. I will advise a decree in accordance with the prayer of the bill.


author: Teaming, V. C.

text:
    First Methodist Episcopal Church of the City of Cape May, New Jersey, v. Cape May Grain and Coal Company.
    [Submitted July 19th, 1907.
    Decided July 20th, 1907.]
    In a suit by a church society to restrain defendant from operating a roller-skating rink in a building adjacent to the church, it appeared that the noise from the rink was so great as to render it impossible to holt! services in the church while skating was in progress, that the pastor and his family occupying the parsonage adjacent to the church were annoyed by the noise, and that the pastor was compelled to leave his home by reason of the noise during the time the rink was in operation and prevented from devoting his time to study necessary for his pastorate. — Held, to justify the granting of an injunction pendente lite, notwithstanding the affidavits of defendant that the rink was carefully managed and conducted without unnecessary disturbance.
    On bill for injunction.

      Mr. James M. E. Hildreth, for the complainant.

      Mr. Lewis T. Stevens, for the defendant.
   Teaming, V. C.

The bill is filed by the First Methodist Episcopal Church of Cape May City to restrain defendant from operating a rollerskating rink in a building erected by defendant upon a lot adjacent to the church property. If the averments set forth in the bill and verified by the several affidavits accompanying the bill are -to be relied upon as true, it is entirely manifest that the operation of the skating rink renders it impossible for the church, to conduct its regular religious services without serious disturbance from the noise occasioned by the roller skating, and also by the orchestra which supplies music for the patrons of the rink; and also impossible for the pastor of the church to occupy the parsonage with any reasonable degree of comfort. It is admitted that the skating rink is in use every weekday between the hours of three and five-thirty o’clock p. m., and the hours of eight and ten-thirty p. m., and the regular church services are: A class meeting on each Tuesday evening; a prayer meeting on each Wednesday evening, and two class meetings on each Thursday and Friday evenings, each meeting beginning at 8 o’clock in the evening. The skating rink is not operated on Sundays.

The affidavits accompanying the bill disclose that the noise 'from the operation of the skating rink is so great that at times it' prevents the members and patrons of the church from hearing the words of the preacher or the prayers which are offered by the members and visitors of the church, and renders the church services ineffective; that in the main audience room of the church, where it is the custom to hold services on Wednesday evenings during the summer season on account of the large chui-ch attendance requiring the use of that room, it is impossible to hold services during the time the skating is in progress; that the parsonage is adjacent to the church and is occupied by its pastor and his family as a home, and that the study of the pastor is within twelve and one-half feet of the skating rink, it being in the second story of the parsonage and on the same level as the skating rink, which occupies the second story of the building of defendant, which building has twenty-three windows opening from the rink, six of which are on the side of the building nearest to the church property, and all of which are open during the time the skating rink is in operation; that the pastor is often compelled to leave his home by reason of the noise during the time the skating rink is in operation, and that the noise denies him the ordinary comforts of his home and prevents him from devoting his time to the study and meditation necessary for his pastorate, and renders sleep for him and his family impossible until after the skating rink is closed in the evening, and that he has determined to vacate the building on account of such noise unless the operation of the skating rink is discontinued, and has already notified the church to that effect.

The affidavits filed in behalf of the defendant satisfy me that the skating rink is well and carefully managed, and is conducted without rowdyism or unnecessary disturbance. But the affidavits of defendant entirely fail to disclose facts which can be held sufficient to throw substantial doubt upon the truth of the averments of the bill and its accompanying affidavits. The affidavit of Frank B. Sitley, the president of the defendant company, states that “the noise created in the operation of the rink is not of a character which would interfere with the comfort or health of any person,” and states that “any noise which may be created in the operation of said rink is not of a nature which would interfere with the comfort or health of any person residing in the building adjoining said rink, or in any other place.” The affidavit of F. Sydney Townsend, who resides on the same street at a point nearly opposite the skating rink, is to the effect that he has had occasion to retire for sleep at times in the evening before the hour of ten-thirty o’clock, and that- “he has so far been unable to hear any noise from the said skating rink which disturbs him or prevents him from sleeping, and that the noise from the said skating rink is not as great as is the noise from locomotives puffing and blowing and ringing their bells at the station of the Atlantic City railroad adjoining said skating rink building, nor of passing trolley cars on said Washington street, and that the noise is not of the character which would endanger the comfort or health of any person living in the building adjoining the same.” The affidavit of Harry Iiebenthal adopts the same language as that above quoted from the affidavit of Mr. Townsend. The remaining affidavit, filed by the defendant is that of Irvin H. Eldridge, who is manager of defendant company. Mr. Eldridge testifies that he has been in the room of the parsonage nearest to the skating rink for more than a half hour when the skating rink was in full operation, and that “he was at the time unable to detect or hear any noise which might, could or would annoy any person, or interfere with their comfort or health in any manner whatever ; that in the upper room of said church the noise from the skating rink cannot be heard at all; that in the main church room, when the windows of the church alone, or of the skating rink are closed, no noise can be heard in the said church while persons are skating on rollers in said skating rink.” This embodies all the evidence supplied by defendant touching the character and extent of the noise produced. It will be observed that no witness denies the facts averred by the bill touching the character and extent of the noise in the church or parsonage upon his own knowledge excepting Mr. Eldridge, and he expresses no more than an opinion that the noise which he heard in the parsonage should not operate to disturb its occupants, and touching the noise in the church he fails to disclose whether he was ever in the church at a time when the rink was being operated. 'Upon the record, as it stands, I am obliged to accept the facts as stated by the several witnesses for complainant, and I am obliged to proceed upon the assumption that the noise occasioned by the operation of the skating rink by defendant company is of such a nature that religious services cannot be appropriately conducted in the church building of complainant, and that the parsonage cannot be occupied by its tenant with the reasonable comforts of life.

Under these facts the duty of the court is plain.

While defendant is entitled to the enjoyment of its property in ’the pursuit of a lawful business, that business must be conducted with, due regard to the well-recognized rights of surrounding property owners. When such business becomes creative of conditions which clearly render the appropriate enjoyment of surrounding properties impossible, the rights of others are invaded, and equity will restrain the persistent pursuit of such injuries. In the language of Chancellor Zabriskie, in Ross v. Butler, 19 N. J. Eq. (4 C. E. Gr.) 294, 298: “The law takes care that lawful and useful business shall not be put a stop to on account of every trifling or imaginary annoyance, such as may offend the taste or disturb the nerves of a fastidious or over refined person. But, on the other hand, it does not allow anyone, whatever his circumstances or condition may be, to be driven from his home, or to be compelled to live in it in positive discomfort, although caused by a lawful and useful business carried on in his vicinity. The maxim, sic ubere tuo ut aliermm, non Icedas, expresses the well-established doctrine of the law.” In Cleveland v. Citizens Gas Light Co., 20 N. J. Eq. (5 C. E. Gr.) 201, 205, the same chancellor says: “Any business, however lawful, which causes annoyances that materially interfere with the ordinary comfort, physical, of human existence, is a nuisance that should be restrained.” The decisions of this court dealing with cases of this class are numerous and need not be reviewed. It is sufficient to say that no case can be found the principles of which will justify a person in establishing a business adjacent to a church, the noise of which will render the continuance of the customary religious services in the church practically impossible, or which will interfere with such religious services to the extent of at times rendering it impossible for worshippers to hear the words of the preacher or the prayers which form part of such services, or which will render the occupancy of the church parsonage a burden.

The suggestions made in the affidavits on behalf of defendant that passing railroad trains, trolley cars and automobiles and wagons make louder noises than those produced from the operation of the skating rink are without force. These several means of conveyance have become recognized public necessities, and private interests have, in a measure, given way to the public good. In the present case we have a private business which is in no sense a public necessity and that business so conducted as to render the appropriate enjoyment of complainant’s property impossible. If the injury could be regarded as doubtful equity would not interfere. Demarest v. Hardham, 34 N. J. Eq. (7 Stew.) 469, 475. But the record clearly discloses a substantial invasion of a clear legal right resulting in permanent and serious injury, and I am obliged to allow an injunction pendente lite.


author: Beaming, Y. C.

text:
    Thomas J. Arnold et al. v. Frederick F. Searing et al.
    [Decided August 24th, 1907.]
    1. Neither a corporation nor a shareholder on its behalf can complain of a fraudulent transaction to which all the stockholders assented with full knowledge of the facts.
    2. A subsequent transferee of shares in a corporation, who was deceived by false representations touching the capitalization of the company, sustains an injury purely personal to himself, and not to the collective rights of the stockholders.
    3. The principle that a corporation cannot complain of a transaction to which all of its stockholders absented is inapplicable unless the assent was that of the real parties in interest.
    4. Defendants, as promoters of a consolidated corporation, procured options for the purchase of the property to be consolidated for $1,400,000, and, representing that the cost of these assets was $1,900,000, organized a syndicate to raise such amount, under an agreement by which the syndicate members were to receive syndicate shares each exchangeable for $10,000 of the mortgage bonds of the new company, which was to mortgage its assets for $2,500,000, and $10,000 stock as a .bonus; the total capital stock being $5,000,000. — Held, that the members of the syndicate in effect were the stockholders of the new company for whom the promoters acted as trustees, and that the promoters were therefore accountable to them for the secret profit made by them in the purchase of the assets.

      5. The new corporation having refused to sue the promoters to recovei such profit, transferees of stock were entitled to sue in their capacity as stockholders on behalf of the corporation on grounds of public policy.
    6. Stock in a corporation, issued as a bonus with the sale of bonds or stock issued through the means of overvaluation of the property, is not necessarily fraudulent as between the stockholders, in the absence of intervening rights of creditors.
    7. In a suit to recover illegal profits made by promoters in the organization of a corporation, the non-joinder of a trust company alleged to have participated in the fraud cannot be made a ground for demurrer to the bill.
    8. Where complainants were entitled to sue in their capacity as stockholders of a corporation to recover illegal profits made by promoters, and the bill prayed that defendants be decreed to pay such profits to the corporation, an allegation describing complainants as “stockholders and bondholders” of the company, and as filing the bill for and on behalf of them; selves and all other bondholders and stockholders, other than the defendants, of the corporation, who should come in and contribute to the expense of the suit, should be amended by eliminating the word “bondholders.”
    On demurrer.

      Messrs. Humphreys & Sumner, for the complainants.

      Messrs. Griggs & Harding, for the defendants Searing and Fairchild.

      Messrs. Collins & Gorlin, for the defendant Bell.
   Beaming, Y. C.

The bill is filed by complainants as stockholders of the Passaic Steel Company to compel defendants to restore to that corporation certain secret profits alleged to have been fraudulently res ceiyed by defendants as its promoters. The demurrers filed b$ defendants assert that any right of action based upon the fraud alleged in the bill is purely personal to complainants and not a right which may be asserted by complainants in behalf of the corporation. This contention on the part of demurrants is based on the claim that under the averments of the bill complainants cannot be treated as original non-assenting stockholders of the Passaic Steel Company, but that, on the contrary, the stock now held by complainants must be treated as stock the owners of which, at the organization of that corporation, assented to the acts now complained of.

The bill alleges that the defendants, while holding an option for the purchase of the entire capital stock of the Passaic Rolling Mill Company (hereinafter referred to as the old company) for $1,400,000, became the promoters of a corporation to be formed to be known as the Passaic Steel Company (hereinafter referred to as the new company), to 'acquire the assets of the old company. The money with which the stock of the old company was to be acquired by the new company was to be raised by the means of complainants and others becoming members of a “syndicate,” and each member of the syndicate paying cash for syndicate shares at a price which would realize an aggregate fund of $1,900,000. This latter amount of cash defendants falsely represented to complainants and the other contributing syndicate members as the amount for which the stockholders of the old corporation had agreed to sell its entire capital stock. The new company was incorporated and organized by defendants and its capital stock was issued (except as to thirty shares subscribed for by defendants in the certificate of incorporation) through the medium of a merger agreement between the old and new companies. Prior to the date of the merger agreement all or nearly all of the stock of the old company had been acquired or controlled by defendants with the money paid in by complainants and the other syndicate members. By the merger agreement the old company became merged in the new and the stockholders of the old company became entitled to the stock of the new to the amount named in the merger agreement, and the stockholders of the new company retained the stock then held by them, which latter stock was, as stated, merely the thirty shares subscribed for by defendants in the certificate of incorporation. While the bill does not specifically state whether all of the stock which under the terms of the merger agreement went to the stockholders of the old company, was, in fact, so issued, and a portion of it afterwards transferred to complainants and other syndicate members, or whether a part of it was issued directly to the syndicate members, the fair inference may be said to be that the former plan was adopted. It will thus be observed that all persons to whom the stock of the new company was originally issued —that is, all of the stockholders of the two consolidating corporations were assenting parties to the transaction with full knowledge of the amount for which the old company’s assets were sold. This.being so, the question arises whether complainants, who appear to hold a part of the stock so issued, are entitled to complain that the new company, as such, was injured by reason of the false representations made by defendants to the syndicate members.

There appears to be no dissent to the general proposition that a corporation cannot complain of a transaction to which all of its stockholders assent with full knowledge of the facts, and if the corporation cannot complain it necessarily follows that a shareholder cannot on behalf of the corporation. It also appears to be1 well settled that a subsequent transferee of shares, who is deceived by false representations touching the capitalization of a company, sustains injury purely personal to himself; such an injury is not to the collective rights of the stockholders. Morcuwetz Priv. Gorp. §§ 290, 291, 292. But the principle that a corporation cannot complain of a transaction to which all of its stockholders assent necessarily embodies the idea that the assent is upon the part of the real parties in interest. One who, in fact, though not in form, occupies the position of a non-assenting stockholder should not .on any theory of unanimous consent be barred the assertion of his rights as such. The real relation of complainants to the new corporation at the time of the merger is, in my judgment, dependent upon an accurate conception of the syndicate agreement already briefly referred to. If that agreement was, in effect, a mere engagement upon the part of defendants to sell to the syndicate members certain stock of a proposed corporation to be capitalized in a defined manner, any injuries sustained by the syndicate members by reason of misrepresentations upon the part of defendants touching the cost or value of the assets which the proposed corporation was to own might well be urged as injuries purely personal to the persons to whom the false representations were made, as distinguished from injuries to the collective rights of stockholders, and that such false representations could not be made the basis of a suit of this nature. But the syndicate transaction, as defined by the bill, embodied other essential elements. The money supplied by the syndicate contributors was not money for the purchase of stock, from defendants, but was the money with which the assets of the old company were to be acquired by the new. It was the money which was, in effect, to form the capital of the new company with which it was to acquire the assets of the old. Defendants were not selling to the syndicate members anything which they owned or were to own. The so-called syndicate was merely an aggregation of persons whom defendants induced to supply these funds for the purpose named. The "syndicate shares” referred to by the bill, as sold by defendants to the several syndicate members, simply represented the proportionate parts which the several syndicate members were to own in the aggregate amount of stock and bonds of the new company, capitalized on the basis proposed, which was to go to the syndicate members. In selling syndicate shares defendants were, in effect, soliciting contributions to the capital of the new company. They were in no sense vendors or parties to a contract of sale. While the members of the syndicate did not sign any formal subscription for the stock of the new company, and may not have received their stock directly from the new company, they in fact supplied the money which was to form the capital of the new company with which it was to acquire the assets of the old and on which its stock issue was to be based. The method in which this was to be accomplished was entrusted by the syndicate members to defendants. Under these conditions the members of the syndicate must be regarded as equitably the original subscribers for this stock to essentially the same extent as though the transaction had consisted of formal stock subscriptions by the several syndicate members. The syndicate members thus became the real parties in interest. They were, in substance, the stockholders, even though the transaction was managed in such manner and took such form that at the time of the consolidation of the two companies the syndicate members did not appear- on the face of the transaction as parties in interest. To them (the syndicate members) defendants represented that they held options covering the assets of the old company at $1,900,000, when, in truth, the options called for but $1,400,000, and the latter amount was the amount actually paid, with the result that defendants received and the new company lost, the benefit of the difference, as the money was supplied by the syndicate members for the new company. The syndicate members entrusted defendants with the organization of the new company in a way that should carry out the plans proposed. In carrying out these plans defendants operated with a free hand and completed the organization of the new company and made the distribution of its stock and bonds among the syndicate members without restraint, controlling the boards of directors of both the old and the new companies at the time of the merger agreement. I think the bill clearly discloses that defendants were essentially trustees for the members of the syndicate, and their fiduciary relation necessarily extended to the new corporation which they were promoting, not alone as its promoters, but also because it is quite impossible to distinguish between the syndicate members and the proposed corporation which they were capitalizing. The injury to complainants through the false representations made by defendants, was, in my judgment, an injury to them in their corporate rights.

Demurrants also urge that complainants come into court without clean hands and cannot in consequence ask the affirmative aid of this court. This claim necessitates an examination of other details of the syndicate agreement. By the syndicate agreement there were to be two thousand syndicate shares of the par value’ of $10,000 each, making a total of $2,000,000. Each syndicate share was to be exchangeable for $10,000 of the mortgage bonds of the proposed new company (the mortgage to be for $2,500,000) and for $10,000 of stock of the proposed new company (total stock to be $5,000,000). The bill avers that of the $10,000 in mortgage bonds alid $10,000 in stock which each $10,000 syndicate share was to receive, the stock was regarded as a “bonus.” These syndicate shares of $10,000 each were to be taken by the members of the syndicate for $9,500 in cash, which made the total cash to be paid in by the syndicate members $1,900,000, that being the amount represented by defendants as the amount to be paid to the owners of the stock of the old company. It will thus be seen that the plan contemplated by the syndicate members was that the new company should take over the assets of the old by the purchase of those assets with the $1,900,000 provided by the syndicate members and issue mortgage bonds to the syndicate members for $2,000,000 and bonus stock for a like amount. Is there to be found in this plan such unconscientious conduct as will operate as a bar to equitable relief at the instance of complainants? I think not. Stock issued as a bonus with the sale of bonds, or stock issued through the means of overvaluation of property cannot properly be regarded as necessarily issued fraudulently. In the absence of intervening rights of creditors such transactions appear to have been generally supported by the courts unless positive fraud has been clearly established, notwithstanding the constitutional and statutory provisions of many of the states designed to secure a proper relationship between the capital stock and the assets of corporations. See 1 Cooh Gorp. §§ 1/.6, 1$, where the authorities’ at common law and under the statutes and constitutions of the several states are collected. Scovell v. Thayer, 105 U. S. 143, 153; Hebbard v. Southwestern Land and Cattle Co., 55 N. J. Eq. (10 Dick.) 18. Complainants are de facto stockholders. The management of the corporation will not sue. To whatever extent the syndicate plan may be said to be violative of the spirit of our legislation touching the issuance of stock, I think the case presented by the bill is one in which public policy may be said to be promoted by allowing complainants to sue in behalf of the corporation for the restoration of the assets alleged to have been fraudulently appropriated by defendants. 1 Pom. Eq. Jur. § 403.

The failure of complainants to make the Citizens’ Trust Company a defendant is also urged by demurrants as fatal to the bill. The bill does not aver that the Citizens’ Trust Company was a party to the fraud. But even regarding that company as a co-conspirator and participator in the results, the non-joinder cannot be made a ground of demurrer. Stockton, Receiver, v. Anderson, 40 N. J. Eq. (13 Stew.) 486.

Another ground of demurrer is that complainants in the introductory part of the bill describe themselves as stockholders and bondholders of the Passaic Steel Company and as filing the bill “for and on behalf of themselves and all other bondholders and stockholders (other than the defendants) of said company who shall come in and contribute to the expense of this suit.” But it will be seen that the theory of the bill is that of a stockholders’ bill. The specific relief prayed for is that defendants may be decreed to be liable to the Passaic Steel Company for the secret profits which they made while acting as promoters of that company and that they may be decreed to pay the same to that corporation. It is manifest that complainants have no standing in the suit except in their capacity as stockholders, and that they have not intended to assert a right in any other capacity or for the benefit of merely such persons as were both bondholders and stockholders. I think the language of the bill above quoted should be treated as an inadvertence, and that the bill should be considered as amended by the elimination of the word “bondholders” wherever it appears in the introductory part of the bill. This request was made by complainants at the hearing and should be allowed.

The other grounds of demurrer were not urged at the hearing and will not be considered.

I will advise a decree overruling the demurrers.


author: Lemming, V. C.

text:
    Edgar A. Hellman et al. v. Pennsylvania Electric Vehicle Company et al.
    [Submitted August 30th, 1907.
    Decided September 17th, 1907.]
    1. Preferred stock is not entitled to a preference in the distribution of the surplus assets of the corporation on its dissolution, in the absence of a provision to the contrary in the statutes or in the contract under which the preferred stock was issued.

      2. Under revised Corporation act of 1896 (P. L. 1896 pp. 28Ó, 288, 804 oh. 185 § § 8, 18, 86), requiring the certificate of incorporation to describe the different classes of stock, authorizing corporations to create different kinds of stock with preferences, and declaring that in the distribution of the assets of a corporation the surplus funds, after payment of the creditors and the preferred stockholders, may be divided among the general stockholders, when considered in connection with the history of legislation on the subject as embodied in revised Corporation act of 1875 (Rev. Stat. 1875 pp. 10, 29 §§ 25, 80), and the judicial interpretation of such act, a certificate of incorporation which gives to the holders of the preferred stock a yearly dividend before any dividend shall be set apart on common stock creates a preference in favor of the preferred stock in the assets on a dissolution of the corporation.
    3. Where preferred stockholders are entitled to a preference in the distribution of the assets of the corporation on its dissolution, the act of the directors, as statutory trustees under proceedings of voluntary dissolution in reducing the par value of the preferred stock to the amount actually paid in thereon, is not unlawful, justifying the appointment of a receiver, for if the stock were held at its original value, and the holders were required to pay in the unpaid amount of their subscription, the money so paid would necessarily be repaid to the same persons.
    Oil bill for receiver.

      Mr. George J. Bergen, for the complainant.

      Mr. Martin V. Bergen, Jr., for the defendant company.

      Mr. Sherrerd Depue, for William H. Page, defendant.

      Mr. Morris Wolf, for P. B. Eeed, defendant.

      Mr. Edgar J. Kohler, for Prank A. Barnett, defendant.
   Lemming, V. C.

The affairs of defendant corporation are being settled by its board of directors, as statutory trustees, under proceedings of voluntary dissolution. T'he bill in this case seeks the appointment of a receiver to supersede the trustees in winding up the corporate, affairs. The assets of the company being ample to pay its debts no rights of creditors are involved. The present controversy arises through a claim upon the part of the common stockholders that the preferred stockholders are preferred only as to the payment of dividends and are not to be preferred in the distribution of the assets. This claim is based upon the fact that neither the amended certificate of incorporation, which provides for the issuance of preferred stock, nor the certificates of preferred stock, as issued, state that the preferred stock is to have a preference in the distribution of assets at dissolution. The provision in the amended certificate of incorporation is as follows :

“Holders of the preferred stock of this company to receive, and the company to pay, a fixed yearly dividend of six per cent. (6j¿) before any dividend shall be set apart on the common stock.”

I am unable to reach the conclusion contended for by complainant. It appears to be well settled that preferred stock is not entitled to a preference over common stock in the distribution of the surplus assets of a corporation at its dissolution in the absence of any provision to the contrary in the statute or in the contract under which the preferred stock was issued, and that the language above quoted from the certificate of incorporation, standing alone, would be held to create a preference in the payment of dividends only. 1 Morawetz Priv. Corp. § 461; 1 Cook Corp. § 273; 26 Am. & Eng. Pncycl. L. (2d ed.) 834. But 1 think that the language above quoted from the certificate of incorporation must be regarded as having been used and understood by the contracting parties in the light of a long existing legislative declaration of the rights of holders of preferred stock, and when so regarded I am convinced that the language used must be held to have been intended to confer upon preferred stockholders a preference over common stockholders in the distribution of surplus assets at dissolution. The legislative declaration of the rights of preferred stockholders, to which I allude, is first found in section 80 of the revised Corporation act of 1875. Gen. Stat. p. 928. That section provided that in the final distribution of the assets of a corporation the surplus funds,

“after the payment of the creditors and the costs and expenses as aforesaid, and the preferred stockholders, may be divided and paid to the general stockholders proportionately, according to their respective shares.”

In the year 1880, Vice-Chancellor Van Fleet, in McGregor v. Home Insurance Co., 33 N. J. Eq. (6 Stew.) 181, in determining the rights of preferred stockholders at the dissolution of a corporation, where the express contract touching the issuance of the stock provided for a preference as to dividends and was silent as to preference in the distribution of assets at dissolution, recognized the general rule that such a stiioulation, standing alone, would be held to relate only to the rights of the stockholders in the corporation as a going concern, but construed the section of the statute above referred to as a legislative declaration of the rights of preferred stockholders where no contrary provision could be found in the law or in the contract under which the preferred stock was issued. Section 25 of the act of 1875 provided that the corporation should have power to issue general and preferred stock, but contained no provision contemplating a statement in the certificate of incorporation touching the rights of holders of the several kinds of stock. The revised Corporation act of 1896, under which the corporation now in question was incorporated (P. L. 1896 p. ¡B77) re-enacts section 80 of the act of 1875 in substantially the same language, retaining the provision touching distribution of assets to preferred stockholders at dissolution in preference to general stockholders. P. L. 1896 p. 801 § 86. Section 18 page 283 of the act of 1896 provides that

“every corporation shall have power to create two or more kinds of stock of such classes, with such designations, preferences and voting powers or restrictions or qualifications thereof as shall be stated and expressed in the certificate of incorporation.”

Section 8 requires that the certificate of incorporation shall set forth, among other things,

“a description of the different classes of stock, if there be more than one class created by the certificate, with the terms on which preferred shares are created.”

It will thus be seen that the act of 1896, while re-asserting the old declaration that the holders of preferred stock shall participate in the distribution of surplus assets at dissolution in preference to the holders of common stock, at the same time adopts provisions to enable a corporation to create preferred stock the holders of which shall not be so privileged. In view of the fact that the effect of the language used in section 80 of the act of 1875 had been regarded in this state for so many years, under unquestioned judicial construction, as a legislative declaration that the stipulation for preferment as to dividends would, in the absence of contrary stipulations or law, be treated as sufficient to effect a preferment as to assets at dissolution, I think that the re-enactment of the same language in section 86 of the act of 1896, in connection with other provisions enabling a corporation to specifically define, in its certificate of incorporation, the extent of preferments of various classes of stock must be held to be a continuation of the same legislative declaration in all cases where a contrary rule of preference is not specifically and clearly stipulated. In the McGregor Case the express contract of prefeiment was as to dividends only. In the present case the preferment defined by the certificate of incorporation is in the substance the same. I think that the contracting parties in the present case, in view of the provisions of section 86 of the act of 1896, and the prior legislation and its judicial construction, were entitled to regard the language of the certificate of incorporation touching preferment as sufficient to effect a preferment in distribution of surplus capital at the dissolution of the corporation.

This view disposes of the other questions raised. It was urged that there has been an unlawful reduction of the par value of the preferred stock, and that with this unlawful action set aside the holders of the preferred stock will be subject to further calls on their subscriptions. These considerations were urged as reasons for the removal of the present statutory trustees whose personal interests are opposed to these contentions. It is manifest, however, that if the preferred stockholders are entitled to preference in the distribution of assets it is entirely purposeless to adjudge their stock to be of the par value at which it was originally established and to then require payment by them of the amount of the increase, for the money so paid would necessarily be repaid to the same parties.

I am unable to find any sufficient reason for the appointment of a receiver.


text:
    Anna R. McGrath v. William F. Norcross.
    [Submitted September 16th, 1907.
    Decided September 26th, 1907.]
    1. Under the laws of 1901 (P. L. 1901 p. 57), authorizing suits to quiet title by claimants in peaceable possession, and providing that ione claiming unoccupied land under a recorded deed, and having paid taxes thereon for five years, shall be presumed to be in possession, in a suit to quiet title to unoccupied lands, complainant should be made plaintiff in the issue at law framed by the court of chancery to enable a law court to settle the facts upon which the controverted title depends, unless some special conditions render it more convenient for the issue to be disposed of with the defendant in chancery made plaintiff in the issue at law.
    2. In a suit to quiet title to unoccupied lands under the express terms of the laws of 1901 (P. L. 1901 p. 57), it is immaterial whether the issue at law, which is framed by the chancery court to enable a law court to settle the facts upon which the controverted title depends, be framed in the usual form of feigned issues resting upon a supposititious wager between the parties as to title, or whether a simpler form be adopted.
    On bill to quiet title. Motion to settle issue at law.

      Messrs. Collins & Corbin, for the complainant.

      Mr. Thomas E. French, for the defendant.
   Leaking, Y. C.

I entertain the view that in a suit to quiet title to unoccupied lands, under the provisions of P. L. WOJ. p. S3, complainant should be made plaintiff in the issue at law, which is framed by this court to enable a law court to settle the facts upon which the controverted title depends, unless some special conditions are found which operate to render it more convenient for the issue to be disposed of with the defendant in this court made plaintiff in the issue at law.

The practice, as stated in % Dan. Oh. PI. & Pr. lili, is as follows:

“The party supporting the affirmative of the question to be. tried is usually directed to be the plaintiff in the issue. This is generally the plaintiff in equity; but the court will direct any other party to be plaintiff at law if the issue can be thus more conveniently raised.”

The text quoted refers to feigned issues arising during the progress of ordinary suits in equity. In the statutory bill to quiet title peaceable possession by complainant of the land in question was required as a jurisdictional fact prior to the amendment of 1901. Gen. 8tat. p. 3^86. In a case arising under that requirement of the act it would seem to be appropriate to require the defendant to assume the affirmative of the issue in a court of law to support the title which he asserts as sufficient to overcome complainant’s peaceable possession under claim of title. But where the preliminary jurisdictional adjudication in this court relates to unoccupied lands and ascertains no more than that complainant has paid taxes for five years and claims title to the land under a recorded deed, I am unable to discern the propriety of requiring defendant to assume the burden of the affirmative of the issue in the law court where the legal title is to be determined. In the former case the peaceable possession adjudicated in this court is sufficient to constitute a self-supporting title, and the propriety of requiring defendant to assume the burden in the law court to overthrow that title seems manifest; in the latter case the facts adjudicated are insufficient to constitute a prima facie title at law, and are without force except to entitle complainant to proceed under the amended act. Defendant in this case claims that substantial embarrassments would attend the assumption by him of the affirmative of the issue in the law court. I am not clear that such is the case; but whether these embarrassments are real or fancied I think that no reason exists in this case to depart from the general rule touching feigned issues from chancery, as defined by the text above quotjed. I will advise an order'for an issue at law with complainant as plaintiff.

I think it immaterial whether'the issue be framed in the usual form of feigned issues resting upon a supposititious wager between the parties as to the title, or whether a simpler form be adopted.. As is stated in American Dock and Improvement Co. v. Trustees, 37 N. J. Eq. (10 Stew.) 266, the nature and purpose of the issue gives it character.


text:
    Anastasia A. McNichol et al. v. Walter Townsend.
    [Submitted September 23d, 1907.
    Decided September 30th, 1907.]
    1. One selling part of his land may lawfully restrict its use for the benefit of the remaining part, if the restricted use does not infringe public policy, and in such case a subsequent purchaser of all or a part of the remaining land may in equity enforce the stipulation against the pi'ior grantee, or against the prior grantee’s grantee with notice of the restriction.
    2. On a bill to enforce a restrictive building covenant against a prior purchaser from a common grantor, the burden is upon complainant to show the covenant was made for the benefit of his land.
    3. Complainant cannot enforce against a prior purchaser from a common grantor a restrictive building covenant prohibiting the erection of a building within thirty-two feet of the street line, where complainant’s lot is across and about one hundred and fifty feet down the street from such prior purchaser’s lot, there being no showing that the restriction was reserved for the benefit of complainant’s lot, and no showing of a general scheme for the improvement of the avenue according to a defined plan to be accomplished by exacting uniform building covenants from the several purchasers.
    On bill for injunction.

      Messrs. Bourgeois & Sooy, for the complainants.

      Messrs. Thompson & Cole, for the defendant.
   Leaking, Y. C.

Complainant seeks the enforcement of a certain restrictive stipulation which is contained in a deed of conveyance made to defendant’s predecessor in title. Omitting unimportant details, the facts may be briefly stated as follows: October 19th, 1888, one Brown owned several lots on States avenue in Atlantic City. On that day he conveyed to one Graham a lot on the easterly side of the avenue at the corner of Pacific avenue. The deed of conveyance contained the restrictive clause now in question, which was in this language:

“Under and subject, nevertheless, to the following conditions and restrictions ; that the house erected upon said lot shall be of good style and in keeping with the other properties on said United States avenue, to be built in line with the other houses and at a distance of not less than thirty-two feet from the line of said United States avenue, and that the depth or width of the porch shall not be more than eight (8) feet, and that there shall be no stable, outside privy or outbuilding erected upon the same, and that no building erected upon said lot shall be used as a hotel, tavern, boarding-house or other like purpose.”

By sundry mesne conveyances the title to this lot became vested in defendant with notice upon the part of defendant of the existence of the restrictive stipulation contained in the Graham deed. October 16th, 1899, Brown conveyed to complainant a lot on the westerly side of States avenue, about one hundred and fifty feet southerly of Pacific avenue. This deed contained a similar clause. Defendant is about to erect a building on his lot which is to extend to within six feet of the line of States avenue and complainant seeks a preliminary injunction against this violation of the terms of the Graham deed above quoted.

The equitable grounds on which restrictions of this nature may be enforced at the instance of a subsequent grantee of the common grantor are well defined. One owning a tract of land may convey a portion of it and by appropriate convenant or agreement may lawfully restrict the use of the part conveyed for the benefit of the unsold portion, providing that the nature of the restricted use is not contrary to principles of public policy. In such case a subsequent purchaser of all or a part of the remaining land, for the benefit of which the stipulation was made, may, in equity, enforce the observance of the stipulation against the prior grantee upon the principle that the rights created by such a stipulation are iransferrable as part of the land to which they are attached. Coudert v. Sayre, 46 N. J. Eq. (1 Dick.) 386, 393. And such subsequent purchaser may, in equity, enforce the stipulation against a person who holds title under the prior purchaser, who has acquired title with notice of the restriction, upon the principle which prevents a party having knowledge of the just rights of another from defeating such rights. Brewer v. Marshall, 19 N. J. Eq. (4 C. E. Gr.) 537, 542. As no privity exists between the subsequent purchaser from the common grantor and tire original grantee or the persons holding under him, the right of action is necessarily dependent upon the existence of the fact that the stipulation was originally made for the benefit of the remaining land of the common grantor. Rogers v. Hosegood, 2 L. R. Ch. 388, 404 (1900). It follows that if the stipulation contained in the conveyance made by Brown to Graham in the j^ear 1888 was made for the benefit of that part of the remaining land of Brown’s which was, in the year 1899, conveyed to complainant, complainant is in this suit entitled to the injunction which is now sought to restrain defendant from erecting the building proposed. It may therefore be said that the controlling question now presented is whether the restrictive stipulation above quoted was inserted in the Graham deed for the benefit of the land now owned by complainant. The burden is necessarily upon complainant to establish this fact. The Graham deed, so far as the record discloses, contains no statement that the restrictive clause now in question was for the protection of any part of Brown’s unsold property and contains no engagement upon the part of Brown, and the adjudicated cases do not appear to have recognized that a stipulation or covenant of this nature will be presumed to have been made for the benefit of the remaining land of the grantor in the absence of some evidence of the fact. In Master v. Hansford, 4 Ch. Div. 718, 724, and again in Renals v. Cowlishaw, 9 Ch. Div. 125, 129, it is recognized that such restrictive covenants may be intended for the benefit of remaining land of grantor or may be intended only to enable the grantor more advantageously to deal with his property. In the affirmance of the latter case on appeal it is also suggested that there should be something in the deed containing the restrictive covenant to define the property for the benefit of which it was entered into. 11 Ch. Div. 866, 868. Should it be assumed that the restrictive stipulation contained in the Graham deed was for the benefit of remaining land of the grantor it would be difficult to indulge the assumption that it was for the benefit of that part of his remaining land which complainant now owns, as other land nearer to the land conveyed appears to have been owned by Brown at the date of the Graham deed. In Hemsley v. Marlborough Hotel Co., 62 N. J. Eq. (17 Dick.) 164, 170, Vice-Chancellor Eeed clearly defines the necessity of evidence to establish the fact that the restriction which is sought to be enforced by a subsequent grantee of a common grantor was intended for the benefit of the remaining land. Where a general building scheme exists the intent of the parties is sometimes easily ascertained by the application of the words of the deed to the surrounding circumstances, but the evidence in this case fails to disclose the existence of such general scheme. Brown had at one time been the owner of all the land on either side of States avenue, extending from Pacific avenue to the ocean. At the date of the Graham deed nearly all of the land had been sold by him. In many deeds of lots so sold by him covenants or stipulations had been inserted substantially the same as the one now in question, but four of the conversances so made by him contained no restrictions whatever. In view of that fact it cannot be said that any general scheme existed for the improvement of the avenue according to a defined plan to be accomplished by the exaction of uniform building covenants from the several purchasers of lots. Mulligan v. Jordan, 50 N. J. Eq. (5 Dick.) 363, 364, 365; Leaver v. Gorman, ante p. 129. I am unable to find that sufficient evidence exists of the fact that the stipulation in question was intended for the benefit of the land now owned by complainant to entitle complainant to the relief sought. This view renders unnecessary the consideration of the other defences urged.

The order to show cause will be discharged, with costs.