source: Caselaw Access Project

author: Stevenson, Y. C.

license: Public Domain

text:
    Louis Singer et al. v. The National Bedstead Manufacturing Company.
    [Filed September 10th, 1903.]
    1. The federal Bankrupt act (Act of July 1st, 1898, cli. 541, 30 Siat. 544; ¡7- S. Oomp. Stat. 1901, p. 3418) provides a system of bankruptcy for particular cases only, to which it applies; and hence a proceeding in bankruptcy against an alleged insolvent corporation does not supersede a proceeding in a state court under a state statute entitling stockholders ■and creditors to the appointment of a receiver for a corporation under certain circumstances, which relief could not be granted under the Bankrupt act.
    2. Prior to the amendment of the Bankrupt act of February 5th, 1903, there was nothing in the Bankrupt act which makes the title of the trustee, appointed in bankruptcy proceedings against a corporation, reach back of the adjudication so as to take hold of assets lawfully vested in a state receiver, appointed under a state statute, whether the case presented to the state court in which the receiver was appointed was one of insolvency, violation of a statute, breach of condition, or anything else, provided! the case so presented was _ one of which the bankrupt court could take no cognizance.
    3. Quasre. Whether the amendment to the Bankruptcy act of February 5th, 1903, when properly construed, produces a different result in the case of a receiver of an insolvent corporation appointed under the New Jersey statute.
    ■ 4. The appointment or maintenance of a receiver by the court of chancery after the decree has passed placing an insolvent corporation under disabilities is entirely discretionary. Where the creditors and stockholders require no protection in respect of the assets through a receiver, there seems to be no reason for the appointment or maintenance of a receiver.

      5. In the present case, the defendant corporation having been adjudged a bankrupt and a receiver having been appointed, and there being danger that the assets would be wasted in litigation — Held, that in the absence of any opposition by creditors, all of whom had been notified, an order would be made without passing upon the question of conflicting jurisdiction directing that the receiver of this court forthwith present his account, and that the assets, after deducting a proper allowance for the receiver, be turned over to the bankruptcy receiver or trustee.
    On motion to discharge receiver of insolvent corporation.

      Mr. Louis O. Morten, for the complainant.

      Mr. William A. Lewis, for the defendant company.

      Messrs. Beetle, Edwards & Thompson, for the receiver.
   Stevenson, Y. C.

(orally).

I shall advise an order that Mr. Mesereau be discharged from his office as receiver of this court in order that all complications may be avoided, and that the estate of the defendant corporation may be administered under the direction of the bankrupt court.

In order, however, to avoid any misapprehension in the future, I mean to express some of the views which I entertain in regard to the present situation and which control me in the action which I intend to take.

The bill in this cause was filed under section 65 of the Corporation act, and the defendant corporation appeared. Upon the summary investigation prescribed by the act, which was made without notice to creditors, the corporation was found to be insolvent and a decree thereupon was made enjoining it from the exercise of its franchises and also appointing a receiver. The decree also provided for giving notice to all the stockholders and creditors of a hearing at a future day upon the question whether the receiver so appointed should be continued or some other person should be appointed in his place. At the time fixed a great majority of the creditors appeared by various counsel and desired the appointment of Mr. Mesereau as their receiver. Mr. Mesereau, accordingly, was substituted as receiver and the first one appointed was discharged. Each of these two receivers gave bond in the stun of $15,000. After the final decree in this cause was made and the receiver had been appointed, and had taken possession of the assets, application was made by three creditors to the United States district court for the district of New Jersey, sitting in bankruptcy, to have the defendant corporation adjudged bankrupt, the petition setting up the appointment of the receiver by the court of chancery as the act of bankruptcy. An adjudication of bankruptcy was thereupon made and an order was also made by the bankrupt court appointing Mr. Mesereau as receiver. This bankruptcy receiver also gave bond in the sum of $15,000. All the creditors were then brought before the court of chancery on an order to show cause obtained by the receiver, Mr. Mesereau, at the request of creditors, with a view of having some proper action taken which would prevent the waste of the assets in litigations growing out of the situation.

The constitution of the United States provides that congress may “establish uniform laws on the subject of bankruptcy throughout the United States.” The required uniformity, as is stated in an opinion of the supreme court of the United States in a recent case, is merely geographical. That is to say, congress can pass any law on the subject of bankruptcy (and that term is conceded to include insolvency) which it sees fit to pass, however lacking in uniformity in its operation upon different classes of persons and kinds of property it may be, provided that such a law must operate in precisely the same way in all parts of the United States. Congress is not obliged to establish bankrupt courts for the administration of these uniform laws, nor is congress obliged to pass a system of bankruptcy laws.

Congress can pass one law on the subject of bankruptcy embodied in a few lines, or ten laws, or a “system” of laws. To the extent that congress covers the field, the state laws are suspended. If it covers only a part of the field, the remainder may be occupied by state laws.

It may be that congress cannot impose upon the state courts the duty of administering any system of bankrupt laws, but if congress sees fit to pass general laws on the subject of bankruptcy without providing the judicial machinery for their administration, all state courts having jurisdiction of bankruptcy or insolvency cases would be obliged to enforce the laws on that subject enacted by congress, and any conflicting state laws or any state laws whatever applicable to the cases to which the federal laws applied would be suspended.

A very complete “system” of bankruptcy laws could, I think, be enacted by congress without creating any special bankrupt courts at all. Such a code would be enforceable by all the courts, state or federal, having jurisdiction of any case to which the code applied, the code being a part of the “supreme law of the land.”

Of course, congress cannot extend its power to pass laws “on the subject of bankruptcy” by merely giving names to laws, or by arbitrarily defining certain conduct of natural persons or corporations as acts of bankruptcy. Congress is confined to the “subject of bankruptcy” as that subject was recognized in the jurisprudence of England and America in 1787.

In the present instance congress has seen fit to provide a more or less elaborate code of bankruptcy laws applicable to certain specified cases, and to erect special tribunals who have exclusive cognizance of those cases, and who have, to a large extent, exclusive jurisdiction to administer this code of laws. The result is that the state courts lose jurisdiction of those cases, if they ever had any, because state laws which are applicable to them are suspended, and the state courts are not permitted to administer the federal bankrupt law except to a very limited extent.

A more or less indefinite, and I think misleading, notion has sometimes been expressed that the constitution has committed to congress the whole subject of bankruptcy and insolvency for appropriate legislation, and that therefore whenever congress passes a general bankrupt law, which it has doné four times, each time naming it a “uniform system of bankruptcy,” all power on the part of the states to legislate upon the subject of bankruptcy or insolvency is immediately suspended. The premise may be deemed to be correct, but it seems to me that the conclusion is entirely erroneous. Congress is not obliged to legislate on the whole subject of bankruptcy; it may deal with only one or several parts. It is the enactment by congress of a law applicable to a particular case which suspends any state law which otherwise would be applicable to that case. If every case of bankruptcy or insolvency were within the operation of a national bankrupt act, then no possible state law on the subject of bankruptcy or insolvency .would have any vigor, but every such law would ifso fado be suspended.

When the present Bankruptcy act was under discussion in congress my recollection is that a large and influential body of our national legislators earnestly proposed to enact merely a voluntary law — a law under which debtors could come into a bankrupt court, lay down their assets and get a discharge. Would anj'body seriously argue that if such a “uniform system of bankruptcy” had been enacted by congress that it would have had the effect to suspend the operation of state bankruptcy and insolvent laws under which insolvent debtors, or fraudulent insolvent debtors, are brought involuntarily into court and stripped of their assets for the benefit of their creditors ?

The present “system of bankruptcy” which congress saw fit to enact in 1898 does not pretend to cover the whole field of either voluntary or involuntary bankruptcy and insolvency. Corporations are not allowed to become voluntary bankrupts. Large classes of natural persons and corporations are excluded absolutely from the operation of the involuntary system. All corporations, as well as natural persons, are excluded if their debts do not amount to $1,000. It would be a most extraordinary state of affairs if transportation companies, insurance companies and many other kinds of business corporations not within the classes enumerated in-the present Bankrupt act, and also manufacturing, mercantile and trading corporations whose debts do not amount to $1,000, could not be subjected to the operation of our New Jersey statute, which provides a means for winding them up and distributing their assets. The result would be that such corporations, when insolvent, could not be wound up at all at the instance of their creditors. The Bankrupt act expressly provides that national banks and bardes incorporated under state or federal laws shall not be adjudged involuntary bankrupts, the intention plainly being to leave these respective banking corporations to be wound up under national or state statutes particularly applicable to them.

It is perfectly plain that state systems of voluntary and involuntary bankruptcy may remain to-day in full operation upon large numbers of insolvent natural persons and corporations who cannot be brought within the operation of the national Bankrupt act under any possible state of facts.

It is also, it seems to me, equally plain that a state system of involuntary insolvency also remains in full operation upon persons and corporations who are as possible bankrupts within the, operation of the national Bankruptcy act, so far as the state system deals with cases of which the bankrupt courts under the federal act can obtain no jurisdiction. To state the point otherwise, I may say that to my mind thdte is no distinction between an insolvent insurance company, railroad company or laundry company which owes $1,000 of debts and has committed an act of bankruptcy, on the one hand, and an insolvent manufacturing, mercantile or trading company which has committed no act of bankruptcy or does not owe debts amounting to $1,000, on the other hand, in respect of the operation of the national Bankrupt act and the New Jersey Insolvent Corporation act. In neither instance is a case presented of which the federal bankrupt court can take cognizance. Each case, therefore, is within the full and complete operation of the New Jersey statute.

As I read the present Bankrupt act, the intention of congress is that every case of bankruptcy or insolvency of which the bankrupt court has jurisdiction is to be dealt with exclusively by that court. The intention of the act is to supply the law for certain cases, and to supply a special court to enforce that law. All other cases of bankruptcy or insolvency are left to be dealt with as the state legislature may 'see fit.

It may be conceded that congress can provide a law for only a limited number of cases of bankruptcy and insolvency, and expressly prohibit the enactment of any other bankrupt or insolvent laws by the states. For present purposes, the concession may be that congress might pass a voluntary system of bankruptcy and enact that there should be no other law on the subject of bankruptcy or insolvency, voluntary or involuntary, throughout the United States. Even if this be a sound view it need not be considered, because the present Bankrupt act contains no words prohibiting states from passing insolvent or bankrupt laws which deal with cases which are not within the operation of the national Bankrupt act — which are expressly excluded from it. It would be a singular result, indeed, if because congress has not seen fit to provide a Bankrupt law applicable to corporations engaged in operating railroads, steamboats, insurance companies, laundries, livery-stables and large numbers of other business enterprises, the inference must be drawn that congress did not intend that any bankrupt or insolvent laws should be applied to this class of corporations, but that state insolvency laws applicable to them should be suspended.

So, also, where the corporation might be within the operation of the federal Bankrupt act, if it had committed an act of bankruptcy, it remains, it seems to me, without the scope of that act and within the full operation of state acts in respect of a charge of insolvency which includes no act of bankruptcy as defined by the Bankrupt act.

Of course, as I have intimated, it may be admitted that congress has the power to say in the Bankrupt act that no natural person or corporation, subject to its provisions, shall be liable to be involuntarily deprived of his or its property because of insolvency, at the instance of his or its creditors, under any state statute or in any state court. Congress, however, has said nothing of this kind, nor do I think can such an intention be gathered in any way from any or all of the provisions of the Bankrupt act.

The difficulty of finding such an intention in’ the present Bankrupt act is certainly greater in the case of our New Jersey legislation concerning insolvent corporations than it is in the case of natural persons under ordinary state bankrupt laws. Our legislation does not provide merely a creditors’ suit for the sequestration of the assets of insolvent corporations. The direct object of the suit is to place the corporation under disabilities by an injunction which prevents it from exercising its franchises. The Bankrupt' act does not undertake to touch the life of the corporation or its permanent capacity to exercise its franchises. It deals wholly with the assets of the corporation. After the bankrupt court has stripped a corporation of its assets, the corporation is amenable to proceedings under our state statute to have it disabled and then dissolved. Our state statute plainly remains at all times in full force for the purpose of affording stockholders as well as creditors the remedy of this statutory injunction, and not only the rights of stockholders, but the safety of the public also, must be recognized and cared for in our statutory suit. Is it possible that any mind can be so astute as to discover in any of the language of the Bankrupt act an intent that after the court of chancery of New Jersey, under the statute of the state, has disabled one of its corporations 'from the exercise of its franchises by an injunction in pursuance of the policy of the state, there must be no sequestration of the assets of the corporation' by a receiver for the equal benefit of all the creditors, even though the bankrupt court has no jurisdiction to grant the creditors such relief ? The mischiefs of such a supposed situation are numerous and manifest.

But if we must suppose that somewhere in the Bankrupt act there lurks an intention to prevent creditors of insolvent corporations from maintaining that part of the proceeding under our act which consists in the distribution of the assets of an insolvent corporation among its creditors, it would still seem that all parts of our act, including the provision for a receiver when one is necessary, would be fully operative for the protection of stockholders. If the conclusion could be reached in any way that congress intends that the creditors of an insolvent corporation shall not be allowed to secure, under our. statute, the distribution of the assets of the corporation through a receiver, it would require, I think, a further and deeper search to find any expression of intention to deprive the stockholders of this remedy of distribution which they now enjoy equally with the creditors. But I shall not pursue this subject further. It has never, to my knowledge, been suggested that our New Jersey statute has been suspended so far as it permits creditors to institute the proceedings which it authorizes against insolvent-corporations, while it remains unsuspended so far as it permits stockholders to institute these proceedings.

The whole case under our statute against an insolvent corporation is radically different from any case which can he brought against it under the Bankrupt act. Any stockholder, as well as any creditor, may institute the proceedings — may be the complaining party. Insolvency without any act of bankruptcy is the jurisdictional fact, and this insolvency is not the insolvency defined in the Bankrupt act, but common law insolvency of a certain kind and nature which the statute specifies. The direct and necessary decree, if any passes against the defendant, is for an injunction disabling the corporation from the exercise of its franchises. Subsequently an order may be made dissolving the corporation. The appointment of the statutory receiver is not a necessary part of the proceedings, and may not in fact take place. The corporation is first practically put to death, and then as a necessary consequence its assets, if there are any, are distributed first among its creditors and then among its stockholders. The bankrupt court has no jurisdiction of this ease, or any part of it, and if congress intended, under its power to pass bankruptcy laws, to enact that in such a state proceeding the defendant corporation shall not be involuntarily deprived of its property for the equal benefit of its creditors, congress would certainly have made such an extraordinary declaration in unspeakable language. Such an intention cannot be established by remote inferences.

That no part of our New Jersey statute -which we are considering has been suspended by the Bankrupt act, even in its operation upon those classes of corporations which are enumerated in the Bankrupt act and made the subject of its provisions, is now quite generally admitted in this part of the country. In the absence of bankruptcy proceedings the jurisdiction of the court of chancery under our statute is not, perhaps, very liable to be questioned. But conflicts of jurisdiction between federal and state courts in insolvency eases have taken place, or have been made possible, in instances where a case of insolvency has been presented to a state court under a state law, and has been acted upon, and then subsequently an entirely different legal case, under the federal Bankrupt act, has been presented to the bankrupt court and action has been taken in that court. The result is that there are two receivers, as in the instance now before this court, eaeh claiming the assets. It is this situation that I have been leading up to and which is the important matter to be discussed.

As the Bankrupt act stood until the recent amendments, I am unable to perceive how, when the court of chancery has acted under the New Jersey statute relating to insolvent corporations, has passed its disabling decree practically extinguishing the corporation, and has then, as a necessary result, appointed a receiver of the corporate assets, a receiver subsequently appointed by a bankrupt court — i. e., appointed subsequent to the vesting of the assets in the chancery receiver under our statute or a trustee appointed under a subsequent adjudication of bankruptcy — can acquire any title to those assets.

The title which the trustee in bankruptcy takes is defined in the Bankrupt act and practically includes only the property which belonged to the bankrupt at the time of the adjudication, and property theretofore transferred by him by way of preference or in fraud of creditors.

But it has frequently been said, in a general way, that it is the policy of the Bankrupt act to have the assets of bankrupts administered by the bankrupt court. This is true, but only in the cases for which the Bankrupt act makes provision. If the Bankrupt act makes provision for one case of insolvency and leaves another cgse to be dealt with by a state law, the two cases are not related to each other because they are both cases of insolvency. The case left under the operation of the state law is not recognized as a case of bankruptcy by the Bankrupt law. I know of no more reason why the subsequent bankruptcy trustee should take the assets in the course of administration from the prior chancerjr receiver, under our Insolvent Corporation act, than there would be for his taking'the assets from a receiver appointed as the result of a judgment in an action of quo warranto. All cases which are not cognizable by the Bankrupt act, but which warrant the appointment of a receiver by a state court, seem to constitute one class, and to be indistinguishable from each other with respect to bankruptcy proceedings. I fail to find in the provisions of the original Bankrupt act of 1898, which defines the title which the bankruptcy trustee takes, or'airy other provision of that act, any justification for the proposition that a subsequent bankruptcy receiver or trustee can take possession and administer assets of the bankrupt corporation which, prior to the adjudication of bankruptcy, have been lawfully vested in a receiver appointed by a state court under a state statute, which remains unsuspended by the Bankrupt act. Nor can I see that it makes the slightest difference whether the case against the corporation cognizable by the state court under the state statute is one of common law insolvency or of some special statutory insolvency to which no national bankrupt act, perhaps, could extend, or of forfeiture of franchises for breach of condition, or any other ground for the extinction of .a corporation and consequent administration of its assets by a receiver. As I have tried to explain before, it is the case— i. e., the state of facts presented to the court upon which remedies are prayed for — which must be looked at in order to determine what law is to be applied. If the case which the state court deals with is not cognizable in the bankrupt court, then not only the state statute remains unsuspended by the Bankrupt act, but the state receiver appointed under that statute clearly takes a legal title, which is not divested by a subsequent bankruptcy trustee.

An erroneous notion, according to my view, has been expressed to the effect that even though our state statute may remain in full force, yet when bankruptcy proceedings are started in some mysterious way the state act and proceedings thereunder become void as against the Bankruptcy act and proceedings. In brief, the state proceedings are considered a fraud upon the Bankrupt act when the latter is actually applied to the corporation, which is the subject of the state proceedings, with intent to administer the assets of the corporation. In support of this view, reference may be made to the doctrine which was established soon after the passage of the present Bankrupt act, that the trustee in bankruptcy takes title to the assets which the bankrupt has transferred to a general assignee, without preference, prior to the adjudication in bankruptcy. But the Bankrupt act made such a general assignment an act of bankruptcy. In the case of natural persons, also, the Bankrupt act provides by its voluntary sj'stem of bankruptcy for the very situation presented by a general assignment, and provides remedies for the debtor and his creditors arising out of that situation. The debtor, other than a corporation, who undertakes to make a general assignment of his estate so that the same may be administered under a state law, is deliberately avoiding and evading the provisions of the Bankrupt act, and is proceeding in defiance of its policy. He, plainly, is perpetrating a fraud on the act. It was thought to be an intolerable situation that while the assignor might be adjudged bankrupt because of his general assignment as an act of bankruptcy, nevertheless the general assignment should stand and the estate be administered by the assignee selected by the bankrupt, in violation of the spirit and intention of the Bankrupt law with reference to the voluntary transfer by insolvent natural persons of their estates for the benefit of their creditors. In dealing with unscientific statutes like the Bankrupt act courts naturally become courageous, and it is not surprising that, notwithstanding the definition of the title which the trustee in bankruptcy takes, contained in the Bankrupt act, did not include assets transferred by the bankrupt prior to the adjudication by a general assignment for the equal benefit of creditors, still an intention that such assets should go to the trustee in bankruptcy was derived from a perusal of the whole act.

I think, however, that none of the reasons which led the federal courts to the conclusion which I have stated in regard to general assignments apply'to a receivership under our Insolvent Corporation act. Neither our statute nor proceedings instituted under it at the instance of creditors can, I think, be shown to be in fraud of the spirit or purpose of the Bankrupt act, or in any way violative of its policy. In the first place, it may be observed that so far as the corporation may be deemed an actor in the proceedings, or a willing subject thereof, it (the corporation) is not evading the provisions or the policy of the Bankrupt act, because the Bankrupt act has shut the door of the bankrupt court in the face of the corporation.

But the great point of distinction lies in the fact that tho creditors of the insolvent corporation who bring their debtor corporation into the state court for relief have no reined)' whatever in the bankrupt court; the door of the bankrupt court is also shut in their face. The state court, at their instance, has dealt with a case of which the bankrupt court can take no cognizance, and has provided remedies appropriate to that case. By what possible course of reasoning can creditors be charged with committing a fraud upon or violating the policy of the Bankrupt act when the Bankrupt act does not recognize their case or afford them any remedies for their grievance ?

Even if, as a matter of fact, an insolvent corporation has committed an act of bankruptcy, the creditors who bring it, as a mere insolvent, into the state court, are not bound to know of the act of bankruptcy, and may in fact not have notice of it, or may not be able to prove it. Their case, under the state statute, should not be thrown out of the state court, because if they had the requisite amount of information and the requisite-amount of proof they might bring an entirely different legal case in the bankrupt court, and then that court would give them a part of the relief which they seek to obtain in the state court.

If the Bankrupt act remained to-day as it was originally enacted in 1898, I should feel constrained to hold, until the federal courts should speak with authority on the subject, that a receiver under our statute would hold title to the assets of an insolvent corporation against a receiver in bankruptcy subsequently appointed, and against a trustee in bankruptcy appointed by virtue of a subsequent adjudication of bankruptcy. I should hold that there is nothing in the Bankrupt act which makes the title of the trustee in bankruptcy reach back of the adjudication so as to take hold of assets lawfully vested in a state receiver appointed under a state statute, and that it would make no difference whether the case presented to the state court in which the receiver was appointed was one of insolvency, violation of a state law, breach of condition or anything else, provided the case so presented was one of which the bankrupt court could take no cognizance.

But we have not to deal with the original Bankrupt act. Last winter a very peculiar amendment of that act was enacted by congress. The section of the statute which defines acts of bankruptcy was amended so as to make it an act of bankruptcy, committed by a corporation, “when because of insolvency a receiver or trustee has been put in charge of its property under the laws of a state, or territory, or of the United States.” In the present condition of federal and state legislation that certainly seems to be a most extraordinary act of bankruptcy, and state courts must necessarily await the exposition and construction of this singular piece of legislation by the federal courts, who are its authoritative interpreters. If the inferior federal courts agree, probably their construction will stand the final test: if they disagree, we may have to wait for }rears to hear from the supreme. court of the United States so as to find out what the real law is.

While I do not intend to attempt to construe this amendment, it may be worth while to consider briefly some of the questions which are presented on its face.

The receiver must be put in charge of the property of the debtor “because of insolvency.” Now, it may be questioned what is meant by the word “insolvency.” The Bankrupt act defines the word “insolvent” as something altogether different from a common law insolvent. The Bankrupt act further provides that the words and phrases which it defines shall be taken in the sense so defined, excepting where the context shows that another sense is intended. If the definition of the word “insolvent” in the Bankrupt act carries with it, as it seems to do, a corresponding definition of the word “insolvency,” the proposition appears to be incontrovertible that no receiver is ever put in charge of the property of an insolvent corporation under our statute “because of'insolvency,” within the meaning of the Bankrupt act.

A corporation may be hopelessly insolvent under our statute and yet be entirely solvent under this definition of the Bankrupt act. Insolvency under this definition is not the subject of investigation, in our statutory suit. Probably it would not be argued that the word “insolvency” would include insolvency as arbitrarily defined by a state statute, but unknown both to the common law and to the bankrupt' law. If corporations entirely solvent, able to pay their debts as they come due, were arbitrarily defined as insolvent by a state statute whenever they lost one-half of their capital and were subjected to insolvency proceedings on that ground, I do not suppose that such a case of “insolvency” would be deemed within the meaning of the amendment which we are considering, if, indeed, congress would have the power to make the appointment of a receiver in such a case an act of bankruptcy.

It may also be questioned whether a receiver is put in charge of the assets of a corporation under our statute “because of insolvency” of any kind whatever. The immediate cause of the vesting of the assets of a corporation in a receiver under our statute is not any condition of insolvency, however defined, but the practical suspension of the life of the corporation by the injunction, which disables it from exercising its franchises. Our statutory receiver can never be appointed excepting as the result of the final decree disabling the corporation by enjoining it from the exercise of its franchises. The assets of a corporation after judgment of forfeiture are put in charge of a receiver because of that judgment of forfeiture, and not because of the particular ground upon which the judgment of forfeiture was based. The basis of the judgment in a quo warranto case, like the basis of the decree disabling the corporation under our statute, may be deemed the remote as distinguished from the immediate because of the receivership. The receivership is caused by the absence of the active corporation — by a situation which demands a custodian and caretaker of property which otherwise would be exposed to injury and waste. The cause of this situation may be insolvency, or may be a large number of other facts and conditions. There seems to be some room to question whether it was the intention of this amendment of the Bankrupt act to set the bankrupt courts inquiring back of the decree disabling or dissolving a corporation, which makes a receivership necessary, into the nature of the grounds upon which not the appointment of the receiver was based, but the decree disabling or dissolving the corporation was based. A man’s ‘estate is administered because of his death, while his death is caused by a particular disease. One would hardly say that the administration of the estate is “because of” the particular disease which killed the man.

There are other questions raised by this peculiar amendment of the Bankrupt law which are certainly interesting, although they are not presented by the case now before this court. Some of them are liable, however, to come up at any time. It may be doubted whether the temporary putting in charge of the assets of the debtor because of insolvency constitutes this novel act of bankruptcy, or whether such putting in charge must be permanent. Sometimes, upon filing a bill under our statute against a corporation charging it with insolvency, a receiver is at once appointed of all the assets of the corporation, such appointment being made under the general equity power of the court. A receiver appointed in this manner prior to the decree for an injunction does not take title under the statute, but is a mere custodian. Is such a receivership an act of bankruptcy on the part of the unfortunate corporation? If so, in case upon the return of the order to show cause a summary investigation results in favor of the defendant corporation, and the order is discharged and the receivership vacated, and the assets ordered delivered back to the corporation, is the act of bankruptcy which consisted in the receivership vacated or attoned for in any way ? After the temporary receiver in such a case has been put in charge “because of insolvency,” could any three creditors of the corporation have it adjudged a bankrupt? If so, what would be the effect of an order in the state court vacating the receivership?

Take the case of equity suits in the court of chancery of New Jersey, or in the United States circuit courts sitting in equity, the object of which is to dissolve a partnership on the ground of insolvency and secure an accounting and all other remedies incident to a partnership settlement in court. Is the appointment of a receiver in such a case an act of bankruptcy which can result in transferring the administration of the partnership assets to the bankrupt court, while the accounting and other remedies remain to be afforded by the court of chancery or the United States circuit court in which the equity suit was originally brought ?

This court does not intend to struggle with any of the legal questions raised by this curious piece of federal legislation which establishes this novel act of bankruptcy, because the United States district court for the district of New Jersey, sitting in bankruptcy, has decided that the appointment in this case of a receiver of an insolvent corporation by the New Jersey court of chancery under the New Jersey statute' — that is to say, the appointment oE a permanent statutory receiver after the decree for an injunction — is an act of bankruptcy, as defined by the amended Bankrupt act. I do not propose to question the soundness of this decision, which no doubt was based upon a far more careful examination and consideration of the law than I have attempted to give. Conflicts between receivers appointed by different courts, and especially conflicts between federal and state receivers, are to be avoided in every possible way.

Nor do I propose to raise the question whether, assuming the appointment of the receiver by this court to be an act of bankruptcy committed by the corporation, it follows that the bankruptcy receiver and trustee will take title to the assets already vested in the receiver of this court. It certainly does not follow that because a transfer of property is made an act of bankruptcy that therefore such property is recoverable by the bankruptcy trustee. There is also a wide distinction between a general assignment, especially by a natural person, and the appointment in invilum of a receiver under our statute even, although both of these things may now be acts of bankruptcy. Still it may be that the federal courts will hold that any transfer, voluntary or involuntary, by or from an insolvent corporation of all its assets, which is made an act of bankruptcy, is void as against the receiver or trustee of the bankrupt court appointed in proceedings based on the transfer as an act of bankruptcy. I refrain from considering this question. A part of the reasoning by which the title of the trustee in bankruptcy was extended to assets transferred under a general assignment for the equal benefit of creditors applies to the case now before this court, and a part does not. It is plain that the proceedings in bankruptcy against the insolvent corporation now before this court have been -conducted upon the theory that the bankruptcy receiver and trustee would have a title to the assets of the corporation which would overreach and displace the title which the receiver appointed by this court holds under our statute.

In this situation there is certainly room for litigation. Such a litigation might go to the supreme court of the United States before those unfortunate creditors would find out who their administrator in fact was. They do not care whether the assets are collected and distributed by the receiver of this court or a trustee in bankruptcy, and they certainly do not want .to have the assets wasted in an expensive litigation to determine this question of the jurisdiction of the two courts.

The appointment of a receiver by the court of chancery, after the decree has passed placing an insolvent corporation under disabilities, is entirely discretionary. The receiver is appointed to protect the creditors and stockholders. If there are no assets, no receiver is necessary and none will be appointed; if the creditors require no protection in respect of the assets through a receiver in a ease like this, there seems to be no reason for the appointment or maintenance of a receiver. All the creditors have been brought into court and no opposition has been made to the discharge of the receiver of this court. Such a course is manifestly greatly to the advantage of all the creditors. Therefore, the order of this court will direct that the receiver of this court forthwith present his account and report, that proper allowances to the two receivers of this court be paid, and that the residue of the assets be turned over to the bankruptcy receiver, and that the receiver appointed by this court be thereupon discharged from his office. This order will be made without any attempt on my part to decide any of the questions of conflicting jurisdiction to which I have referred. A situation similar to the one now before this court may justify a test suit to settle the law and ascertain the limits of the two jurisdictions. I merely decide that this is not the sort of a case in which such a test suit should be brought at the expense of this particular set of creditors, who are entirely willing to have either the state court or the bankrupt court administer these assets; or, at any rate, are opposed to any litigation over the question.

The attention of the bar of this state may well be called to the extraordinary condition in which the law relating to insolvent corporations in New Jersey now stands under this recent amendment of the Bankrupt act as construed by the United States district court for the district of New Jersey. In large numbers of cases of corporation insolvency, I think I may say in the majority of such cases, including those especially where the assets are of great value, no act of bankruptcy has been committed by the corporation when the creditors come into this .court for relief. What the creditors desire is to prevent acts of bankruptcy, such as fraudulent and preferential transfers. The corporation being insolvent and incapable of pursuing its corporate objects, it is arrested in the exercise of its franchises and placed under disabilities, and then its assets are distributed without preference among its creditors. In this situation — the common, every-day situation presented to this court — the creditors have no relief in the bankrupt court whatever. They are obliged, therefore, to come into this court as the only court having jurisdiction of the case which they present. The proceedings under our staute are not comparable with the voluntary making of a general assignment by an insolvent debtor. The creditors of the insolvent corporation start an expensive suit-in this court, which oftentimes is contested by the defendant-corporation. The litigation between the creditors and the corporation may go to the court of errors and appeals, and may be decided in favor of the creditors or in favor of the corporation. In the course of the proceedings all the creditors under our practice are brought into court, and frequently many lawyers are .employed to represent the different creditors. The appointment of a receiver is a judicial act, unlike the selection of an assignee by a debtor who makes a general assignment. It may be noticed, also, that first a temporary and then a per-' manent receiver may be appointed by this court, who will often greatly change the character of the assets and set in operation plans for the continuation of the corporate business. The creditors also, or stockholders, may take many and expensive steps in the direction of reorganization.

And yet after all the expense to which I have referred has been incurred, it seems that any three little creditors of the corporation, whose debts amount to $500, have the arbitrary right, within four months after the appointment of the receiver, to institute bankruptcy proceedings and have the administration of the assets of the corporation transferred from this court to the bankrupt court. These three creditors may apply to the bankrupt court because their wishes have not been carried out in the selection of a receiver in this court, or because their attorneys desire to make fees, or other unjustifiable motives may prompt their action which can readily be imagined.

In the present case before this court we have four different trustees in line, all of whom have given or will give bonds, and must be paid for their services out of the estate. We have, first, the temporary receiver appointed by this court; we have, next, the permanent receiver appointed by this court; we have, in the third place, the receiver appointed by the bankrupt court, and in the fourth place we shall have a trustee to be appointed by the bankrupt court.

It is unnecessary to further deal with the evils of a situation which are so conspicuous. If the construction of this amendment of the Bankrupt act adopted by our federal court is correct, the evil to which I have referred would be remedied if congress would either take a step backward or a step in advance. If the backward step is not to be taken by the repeal of this amendment, then the forward step would be to give the bankrupt courts jurisdiction of all these cases of insolvent corporations, of which the court of chancery and corresponding courts in other states now have exclusive jurisdiction. The jurisdiction of the court, of chancery and of the supreme court of the State of New York, and in some cases of the United States circuit courts now, at the option of three small creditors, is abrogated excepting that its exercise is made the basis of jurisdiction by the federal bankrupt court. Would it not be far better to give the bankrupt court original jurisdiction, so to speak- — i. e., jurisdiction of the case upon which the state court, under the state statute, is called upon to act? A brief amendment to the Bankrupt act, providing that whenever a corporation becomes insolvent according to the common law definition, so that it is not able to continue its business with advantage to the stockholders and safety to the public, it may be adjudged a bankrupt at the suit oí its creditors, might be- so drawn as to suspend the operation of the New Jeréey statute upon those classes of corporations which are made subject to the provisions of the Bankrupt act, so far as their -assets are concerned. Under such a condition of the law the entire administration of the assets of the insolvent corporations would be vested exclusive^ in the bankrupt court. Such a transfer of business from this court to the bankrupt court would certainly be a great relief to this court. The court of chancery is occupied a large part of the time in taking -care of the affairs and settling disputes that arise in entirely solvent corporations, and many would deem it wise and in accordance' with the general policy of the United States, to have the administration of the assets of all insolvent corporations of the classes enumerated by the Bankrupt act, whose debts amount to $1,000, committed exclusively to the federal bankrupt courts.


text:
    Edward H. Ward, Jr., et al., executors of Hannah D. Hopper, deceased, v. Stephen L. Tallman et al.
    [Filed June 11th, 1903.]
    1. Where a bill to quiet title to realty, under act of March 2d, 1870 (Gen. Stat. p. 3J/S6), omits a statutory allegation, but complainant’s peaceable possession with claim of ownership is admitted, and there is no misunderstanding as to the issues, an amendment may be made to bring the cause within the statute.

      2. In a statutory action to quiet title, under act of March 2d, 1870 (Gen. Stat. p. 3486), the complainants, being in peaceable possession-of the premises, are not required to establish their title until the defendant has shown prima facie the adverse title or interest which he claims.
    3. In a suit by complainants in peaceable possession of premises (o quiet title, defendant’s adverse title under an alleged heir of complainants’ intestate, who died seized of the premises, is not sustained by proof that such heir called intestate “cousin,” with inferences drawn from such fact by persons who had no knowledge in regard to the matter, where it appears that such heir and defendant, with full knowledge of the fact for a period of forty years, failed to assert any claim based on relationship to intestate.

      Mr. James Sieen, for the complainants.

      Mr. Frederick IF. Hope, for the defendants.
   Stevenson, Y. C.

The suit is under the act of March 2d, 1870 (Gen. Stai. p.' 8486), to quiet the complainants’ title to a house and lot in Eatontown, Monmouth county, of which one George E. Tiffin died seized in 1857. Tiffin died intestate and the premises in question constituted his “mansion-house.” The widow of Tiffin, whose name after her second marriage was Hannah D. Hopper, remained in possession of the premises continuously after Tiffin’s death for forty-two years, until her own death, in 1899.

The complainants, the executors of Hannah D. Hopper, succeeded to her possession as the representatives of her estate and of her general devisees. The defendants claim title through their ancestor, Mrs. Abigail Tallman, who they insist was heir-at-law of George E. Tiffin.

1. The course of pleading has been very irregular. Before the trial, however, the complainants’ bill was entirely recast and an amended answer thereto was filed. The cause has 'been prosecuted upon these amended pleadings strictly as a suit to quiet title under the statute, and any further amendments which have been suggested, and which have been considered made, may be actually made on the record before settlement of the decree in order that the issues which the parties have litigated and have deemed as presented by the pleadings may appear therein.

In a supplementary brief submitted on behalf of the defendants, the objection is taken that the devisees for whom the complainants, as executors, have acted, are not parties to the suit. The understanding was reached at the commencement of the ease that these parties could be joined as complainants.

The same brief takes tlie point that the evidence does not show that the complainants were in possession of the land in question.

The answer to the amended bill alleges that the complainants, as executors,

“being entitled to take charge of the personal estate of said Hannah D. Hopper at the time of her decease, and thereafter, entered into and upon the house and lot in question for the purpose”

of affecting a sale of the personal property there located, and that thé complainants entered “for that purpose and not by reason of any right, title and interest which the said Hannah D. Hopper had in said real estate.” The answer then goes on to allege that the

“complainants having entered upon the real estate and in the dwelling-house for the purpose aforesaid, wrongfully assumed custody and control of the property, and have since claimed to be in possession thereof, and have permitted some party for them to occupy the property, and attempted to exercise acts of control and possession over it, but (hese defendants expressly deny that they have any title thereto,” &c., and “show that their continuing to do so or placing someone in charge of said property, or retaining the custody and occupancy of said premises, excepting for the purpose of removing therefrom the personal property of said Hannah D. Hopper, is wrongful and illegal.”

The answer further alleges that the complainants, as executors of Hannah D. Hopper, deceased,

“or some of the parties interested in her estate as legatees, wrongfully and illegally and fraudulently continued to occupy and use the house and lot in question in this cause after the death of the said Hannah D. Hopper, and that the aforesaid executors or their counsel claimed, in answer to inquiries and requests, made on behalf of these defendants. to vacate said house and lot, and permit these defendants to use and enjoy the premises as they were entitled to, that Hannah D. Hopper had some rights, and that the executors could not give up the property to these defendants without an order of the court or the consent of the parties interested.”

The answer concludes with a prayer. or demand that “the complainants be compelled to vacate and surrender said premises to these defendants.”

Throughout the whole trial no evidence was offered to controvert the claim that the complainants were in peaceable possession, and that they were in such possession with claim of ownership, was admitted throughout the oral argument. A reference to the bill, however, shows that it is singularly defective in respect of the necessary allegations to bsing the case within our statute. Southmayd v. City of Elizabeth, 2 Stew. Eq. 203. One of the statutory allegations which appears in the original bill seems to have been dropped out of the amended bill.

There has, however, been no misunderstanding as to the issue which has actually been tried and argued in this cause. Under the circumstances, the bill may be amended by the addition of the necessary few lines in order to bring the case within the scope of the statute.

2. The complainants being in peaceable possession of the land in question, claiming to own the same, have a right to have their possessory title, whether it be good or bad, quieted as against all of the defendants who cannot show a better title. Every answering defendant in a suit under our statute stands in the position of a plaintiff in ejectment. The general intention of out statute is to enable the party in peaceable possession of land, claiming,to own the same, to compel all persons asserting claims of any kind at law or in equity hostile to such possession, to elect either to abandon those claims or undertake, affirmatively, to establish them. The statute gives no jurisdiction where any suit shall be pending to enforce or test the validity of the outstanding title-or interest which is asserted .adversely to the part3r in peaceable possession. The decisions of our courts indicate a further limitation of the jurisdiction to those cases where an adequate remedy cannot be had at law. Jersey City v. Lembeck, 4 Stew. Eq. 255, 272, 273; Sheppard v. Nixon, 16 Stew. Eq. 627, 633.

Our statute appears to have been designed, primarily, to afford a remedy against an inequitable situation. A person in peaceable possession of land, claiming to own the same, whose rights and advantages of ownership are impaired by an outstanding hostile claim of title, needs no protection under our statute, either in the case expressly excluded from the operation of the act, where an action is pending in which the adverse title can be tested, or in case he can bring an action at law in which such test can be made. The hardship arises when he cannot either bring an action at law or avail himself of any pending action at law to test the validity of the hostile title, while the holder of that title also refuses to institute any test suit and at the same time injures the title of the party in possession by the assertion of his hostile claim. In this situation of affairs our statute seems to be intended to permit the party peaceably enjoying possession of the land to compel the party holding an adverse title and refusing to test it in an action at law or suit in equity to choose between abandoning his title or asserting it, and thus putting it to a test through the proceeding in equity or at law which the statute provides for that purpose.

It would seem, therefore, from the very nature of this statutory action, that where the party in possession has the right to employ it in order to quiet his title, he is not obliged to disclose his own title, much less to defend it, until some defendant has come forward and established at least prima facie the adverse title or interest which he claims.

In this view of the case it is immaterial whether the complainants, or any of them, derived any title under the will of Mr's. Hannah D. Hopper, or whether Mrs. Hopper ever acquired, by adverse possession or otherwise, any interest in the premises beyond her interest as dowress or as widow occupying under her right of quarantine, until the defendants, or some of them, establish prima facie that they hold title as the heirs-at-law of George E. Tiffin, or some person who took title under George E. Tiffin by descent or purchase. ‘

The question, therefore, to be settled first is not whether the complainants, or any of them, have title by adverse possession or otherwise, but whether these answering defendants, or any of them, have established prima-facie any title in themselves. If they have, then the complainants must disclose their title and show it to be a better title than that of the defendants; if they have not, it would seem that the complainants need make no disclosure of their title. Their peaceable possessory title, although of unknown origin, is entitled to protection under the statute against a defendant who asserts an adverse title which he fails to support by proof.

3. The whole claim of title of these defendants is based upon the- proposition that their ancestor, Abigail Tallman, was the heir-at-law of one George E. Tiffin, who, as is admitted by both parties, died intestate seized of the premises in question, in 1857. This George E. Tiffin left a widow, Hannah D.-, in possession of the premises, who subsequently, in 1867, remarried with one John Hopper, and after such marriage continued to occupy the premises until her death. John Hopper died in 1894. Hannah D. Hopper, a second time a widow, survived until 1899, when she died, leaving a substantial estate, consisting, apart from the premises in question, of personal property amounting to about $50,000, with practically my debts. She left a will making legacies aggregating about $6,000, and then devised and bequeathed the residue of her estate to her nephew and three nieces in equal shares, who are deemed co-complainants, directing that the complainants Ward and Hopper, her executors, should sell all her property, with power to make deeds of the same. The premises in question are not specifically described in her will, although the proofs indicate that when her will was made, if she did not own, or claim to own, the premises in question, which was the residence which she had occupied continuously for over forty years after the death of her first husband, George E. Tiffin, then she owned no real estate at all to which the provisions of her will in relation to real estate could apply.

The complainants claim that Mrs. Hopper, if she did not have some other title by deed or devise from her first husband, George E. Tiffin, acquired a complete title by adverse possession against all who can now claim under him by descent or devise. The defendants insist that Mrs. Hopper occupied under her right of quarantine continuously during her lifetime, Abigail Tallman, the heir of George E. Tiffin, and the children and grandchildren of Abigail, after her death, refraining from asserting their rights and having dower set off in consideration of the poverty of the widow. As we have seen, it is unnecessary to consider this contention until it appears that the defendants, or some of them, have, prima facie, shown title by descent or otherwise from George E. Tiffin.

. I am unable to find in all this mass of testimony that the defendants have established prima facie the fundamental proposition which is necessary to maintain their case and to put the complainants upon their proof of title, viz., that Abigail Tall-man took the premises, or any interest therein, by descent from George E. Tiffin as his heir-at-law.

I shall not undertake to discuss the voluminous testimony presented in this case bearing upon the genealogy of George E. Tiffin and Abigail Tallman and their probable or possible relationship to each other. A large part of the testimony on behalf of the defendants bearing on these subjects was taken in flagrant disregard of the rules of evidence. Leading questions were put where it was of the utmost importance that the witnesses should testify without suggestion of any kind as to the answer. Many witnesses apparently state facts in relation to matters which occurred long before they were born, and their testimony is given in such shape that it is often impossible to determine when their affirmations are based on hearsay and family reputation and when they are based upon their own inferences.

The defendants’ case rests practically upon the proposition that Abigail Tallman and George E. Tiffin called each other cousin. There is no evidence explaining in what sense the word “cousin” was used, or whether in fact it indicated that the parties were related by blood in any way. Counsel for defendants endeavored to show that Abigail Tallman’s father and George E. Tiffin’s mother were brother and sister, but the proof to sustain that proposition entirely failed, and I think that the probabilities from the testimony strongly favor the contradictory proposition.

In the year 1830 George E. Tiffin was in business in Richmond, Va. George D. Tallman, Jr., a youth about sixteen years of age, son of Abigail Tallman, was a clerk in Mr. Tiffin’s employ. Some old letters from members of Mrs. Tallman’s family to this young man, George D. Tallman, Jr., written at this period, were produced in evidence by the 'defendants. In one of them a message is sent from Mrs. Tallman, and I think from other members of her family, to “Cousin George.” Assuming that -the “Cousin George” referred to was George E. Tiffin, which counsel for the complainants disputes, it is a significant fact that in another letter, written at this same time by Oliver Hicks, the brother of Abigail Tallman, to this same young man in Richmond, the writer asks the young man to give his “kind respects to Mr. Tiffin.” Such a message certainly is hardly to be expected under the circumstances from a man writing to his nephew and the message being sent to 'his own cousin.

The only other class of testimony in favor of the proposition that Abigail Tallman was the heir, or one of the heirs, of George E. Tiffin, to which I shall refer, consists of statements made by Hannah D. Hopper after, and probably long after, Mr. Tiffin’s death.

In order to appreciate the probative force of these statements, it is necessary that the extraordinary history, or lack of history, of this man George E. Tiffin should be thoroughly understood. It is almost safe to say that the origin of George E. Tiffin is left by the ■ testimony in this cause entirely shrouded in mystery. It was understood that his original name was Eaton — that he was taken into the family of a man of means named Tiffin, about whom, however, no further information, is given. He adopted the name of his benefactor and appears to have received a fair education and to have engaged in business with some-measure of success in Richmond, Va., and perhaps elsewhere. A Bible printed in 1784 is produced, which the testimony shows was given by Hannah Hopper to a granddaughter of Abigail Tallman as the Eaton family Bible, or a Bible which belonged to her first husband, George E. Tiffin. The entries of births in this book are extremely peculiar. The handwriting was not satisfactorily proved. If the record proves anything of value in the case, it indicates that George Eaton Tiffin was born in 1794 and that probably his parents were Robert Eaton and Phoebe Eaton, and probably he had three sisters, whose names and dates of birth are given. If the unexplained record is of a family, the above would be the fair inference. Practically'no trace of any of these persons beyond George E. Tiffin himself appears in the testimony.

In 1835 George E. Tiffin, when over forty years of age, married Hannah Drummond, who was then a mere child of fifteen. About the year 1840 Mr. Tiffin and his young wife settled in Eatontown, and soon after he purchased the property now in dispute and made it his home. He lived in Eatontown continuously until his death, in 1857. He is described as a man of good education and courtly manners. He was a judge of the court of common pleas of Monmouth county and appears to have been a man of somewhat conspicuous figure in his community, and yet no one to-day appears'to know where he came from or who in fact he was.

But the fact to. be observed in relation to this mysterious stranger is that there is no evidence that his wife, at the time of her marriage or at any time thereafter, ever acquired any more knowledge of her husband’s origin and family connections than the other persons whose declarations have been proved' on that subject. Abigail Tallman lived not very far away from Eatontown and visits were made between the Tallman and Tiffin families. These people, as we have seen, called each other cousin. Inferences of relationship from this fact undoubtedly were drawn during Mr. Tiffin’s lifetime and after his death by the, descendants of Abigail Tallman, and the same sort of inference may well have been drawn by Mrs. Tiffin during the lifetime of her first husband, during her widowhood and after her remarriage with John Hopper, in 1867.

The gift of the Eaton- Bible by Mrs. Hopper to one of the granddaughters of Abigail Tallman for the purpose of having the book remain in Mr. Tiffin’s family, or because of the propriety of having it so remain, indicates that Mrs. Hopper, long after the death of Mr. Tiffin, shared the apparently common belief that he was some sort of a relative of Abigail Tallman. The statements which Mrs. Hopper made in various forms twenty, thirty or forty years after her first husband’s_ death, to the effect that she had no title to the property which he occupied, and that the same belonged to the heirs of Mr. Tiffin, were-manifestly true from her point of view. It is a most significant fact that when she made these statements she apparently did not say who the heirs of George E. Tiffin were, and the absence of such a statement in some instances suggests that she did not know who those heirs were. So, also, the statement that Mrs. Hopper made, probably years after the death of her first husband and her remarriage, that the Tallmans, referring apparently to the descendants of Abigail Tallman, were Mr. Tiffin’s nearest relatives, was entirely natural, if Mrs. Hopper supposed, as others did, that these two persons who called each other cousin in fact were in some way related.

The utter inability of the witness for the defendants, Sarah M. Barclay, to give any information as to the family or relatives of Judge Tiffin, or to indicate how he was related, if at all, to his “cousin,” Abigail Tallman, seems to bear strongly against the defendants’ claim. Mrs. Barclay was a lifelong, intimate friend of Mrs. Hannah D. Hopper. She was the elder by two or three years. She knew Judge Tiffin, as well as his young wife, before their marriage, and she “lived in Eatontown for thirty years next door but one to Mrs. Hopper.” And yet this witness, while testifying to statements made by Mrs. Hopper in regard to Judge Tiffin and the Tallmans, of the kind above referred to, utterly fails to throw any light on the question what the relationship between Judge Tiffin and the Tallmans ivas or how it arose. She does not even say that Judge Tiffin and Mrs. Abigail Tallman were reputed to be cousins, or called each other cousin, or that Mrs. Hannah D. Hopper said that they were cousins, or said directly that they were related in any ivay by blood. When asked if she knew f<of any relationship” between Judge Tiffin and Mr. and Mrs. Tallman, the witness answered: “They were very intimate and visited each other when they were at Shrewsbury.” Mrs. Barclay also testified in regard to statements made by Mrs. Hopper containing admissions that the Tallmans had some interest in the Tiffin property. The substance of this testimony, so far as it is safe to accept it as purporting to give Mrs. Hopper’s language, appears to be contained in the proposition that Mrs. Hopper “thought they [the Tallmans] had a claim on her property.” If Mrs. Hopper thought the Tallmans were relations of Judge Tiffin, and knew of no nearer relations, she would naturally think that they could make some claim. All the statements of Mrs. Hopper in the nature of admissions which have been testified to in this case may, I think, be properly regarded, if proved, as nothing more than honest inferences which Mrs. Hopper drew from some supposed relationship between Judge Tiffin and Abigail Tail-man, the nature or degree of which she did not pretend to know —a relationship inferred by Mrs. Hopper, as well as other persons, from the use of the word “cousin.”

Without discussing further the testimony upon this subject, I think that all the evidence to sustain the claim that Abigail Tallman was a blood relative of George E. Tiffin rests upon proof of the fact that these two persons called each other cousin, together with the inferences drawn from that fact and stated by a number of very much younger persons, practically all of another generation, and some of them of a third generation, from Mr. Tiffin and Mrs. Tallman, who had no knowledge in regard to the matter whatever. An estate cannot be taken from one person who is in the peaceable possession of it and given to another on the strength of such evidence. Judge Tiffin and Mrs. Tallman, who appear to have been' old friends, their acquaintanceship dating back to a time prior to Judge Tiffin’s marriage, may have called each other cousin for a large number of reasons other than the existence of a tie of blood. As we have seen, it does not appear through which of the parents of Judge Tiffin or Mrs. Tallman the cousinship was traced, nor does it appear, if these two persons were cousins, whether they were first cousins or fifth cousins, or tenth cousins, or what the degree of relationship as cousins was. They may liave been cousins by marriage or cousins by courtesy, or cousins by blood, but of a kind who can never inherit from each other.

The answering defendants, in seeking to maintain the fundamental proposition to support their claim of title, are certainly confronted by a strong presumption against them arising from the conduct of their parents and their grandparent, Abigail Tallman, through whom their title is claimed. As we have seen, Hannah D. Hopper, the widow of George E. Tiffin, remained in exclusive possession of the family mansion, the premises in question, from the death of her first husband, Judge Tiffin, in 1857, until her death, -in 1899, a period of forty-two .years. Abigail Tallman and her children and grandchildren appear to have submitted to this exclusive possession and the proofs utterly fail to show that Mrs. Hopper was allowed to occupy in the continuous enjojunent of her right of quarantine by the favor of the Tallmans and in consideration of her poverty. Abigail Tallman died only five years after the death of Judge Tiffin, leaving children and grandchildren. Nine years after Judge Tiffin’s death his still youthful widow married a man who is shown to have had some means and apparently was abundantly able to support his wife. After this remarriage the second generation of Tallmans made no move to assert their alleged claim. As the years went by Mrs. Hopper received from her own family, from time to time, amounts of property which in the end aggregated a substantial fortune, apparently a large fortune as compared with the means of some of the Tallman family. And yet this comparatively rich dowress, after her remarriage, remained in exclusive possession of Judge Tiffin’s propertjq while his heirs, all of whom certainly were not rich people, submitted to this deprivation of their estate.

There is another most significant circumstance proved in this case which indicates that after the death of Judge Tiffin, in 1857, Abigail Tallman had no proof that she was his heir or next of kin, and that after her death her children and grandchildren had no such proof. It appears that Judge Tiffin’s widow and one Edward H. Yan Nuxson were appointed administrators of the Tiffin estate. These administrators filed their final account showing a balance remaining in their hands of $2,193.23 "to be disposed of as the law directs.” The records of the court show no order for distribution, no release or any paper indicating what was done with the above balance. It is admitted, however, by the parties to this suit, that Mrs. Hopper, then Mrs. Tiffin, appropriated this entire balance, and it does not appear that she did it either by leave of the Tallnians or against the protest of the Tallnians. The whole proceeding strongly suggests the appropriation of property for which no claim could be maintained other than by the public authorities, ■who oftentimes are not called in and reminded that they can make a claim on behalf of the state or the poor of the township. If Abigail Tallman, as the defendants insist, consented, in view of the widow’s poverty, that she should appropriate the half of this money, which belonged in whole or in part to her (Abigail), is it reasonable to suppose that the administrators would have been allowed and would have allowed themselves to be placed in the position, practically, of embezzlers? Would not the natural way of doing the business among such intelligent people have been to have an order of distribution made giving the widow her half of this balance and awarding the other half to Mrs. Tallman as next of kin, if, in fact, there was even presumptive proof at that time obtainable that she was such next of kin ? A release or transfer executed by Mrs. Tallman would then protect the'administrators and protect the widow. If the supposition can be made that Abigail Tallman consented to allow Mrs. Tiffin to appropriate a thousand dollars, to which, or in which, she, Mrs. Tallman, had a claim, while no protective writing or record of any kind was made, it hardly seems probable that after Abigail Tallman had died, and after her children died, and after this widow, who had received such kindness and generosity, had remarried and become rich in her own right, no descendant of Abigail Tallman would have come forward to ask, as a matter of justice, that this rich woman, a second time a widow, should now at last surrender the Tallman inheritance or make compensation therefor in some other way.

After these years of delay — after this unexplained or insufficiently explained acquiescence and laches on the part of Abigail Tallman, and more particularly on the part of her children and grandchildren. — the claim of these defendants, in my judgment, rests under a cloud and calls for more distinct proof than would be necessary in the absence of this unreasonable delay. The jnst inference in such eases often is that the claim has not been preferred, when the evidence in regard to it must have been more accessible, because, if it had, the evidence would not have sustained it. It seems to' me that this is the sort of a case to which the principle above referred to can most equitably be applied. When one with full knowledge of his rights allows forty years to elapse, during which he makes no claim, he may well be held under obligation to clearly explain and excuse his delay, or, in the absence of such explanation and excuse, to clearly and distinctly prove his claim. Doubts should be solved against him.

I fail to find any sufficient evidence presented in this case to justify a decree establishing in favor of any of these answering defendants any estate, interest or right in the land now in the peaceable possession of the complainants. Whether the complainants so in possession have a title by adverse possession or otherwise are.matters, therefore, which need not be considered in this case.

A decree will be advised for complainants, with costs.


text:
    Burrows Godfrey v. George M. Roberts et al.
    [Filed June 29th, 1903.]
    Where a testator devises his estate in trust, directing the payment of the interest to his daughter for life, and on her death the division of the fund equally among the daughter’s children who shall then be living, the assignee of the daughter and her children cannot require fhe distribution of the fund during the daughter’s life on the ground that any new beneficiaries may" hold the parties who have received the fund and compel restitution.

      On demurrer.

      Mr. John J. Crandall, for the complainant.

      Mr. Leverelt Newcomb, for the demurrants.
   Stevenson, Y. C.

The complainant in defending his bill against the criticism of the demurrants read from it the following case: George Roberts, by his last will, gives his entire estate, real and personal • — $10,000 of realty and $4,000 of personalty — to his widow for life, and at her death $4,000 of it to his son, the defendant George M. Roberts, who also is appointed executor in trust to invest the same in safe securities and pay the interest to the testator’s daughter, Esther E. Gill, semi-annually during her life, and on her. death to divide the fund equally among her (Esther’s) children who shall then be living. All the residue of the estate goes to the son, George M. Roberts, absolutely. The widow died about ten years ago. The daughter, Esther, and her three children, about a year before the filing of the bill, applied to the trustee of the fund, claiming the right to elect to take the fund and discharge the trustee. At first the trustee agreed to grant this request, but later refused, alleging that he was advised by counsel that it would not be legal for him to ¡jay over the fund, and that therefore he would retain it and execute the trust. Subsequently the daughter, Esther, and her three children assigned their interest in the fund to the complainant. There is no allegation that the fund is not invested according to the will, or any charge that the defendant, the trustee, has refused to give the beneficiaries all information to which they are entitled. The bill prays that the fund may be paid over to the complainant as assignee of Esther M. Gill and her three children, and that the complainant may have other, relief connected with such pajunent.

The sole ground on which the bill is sought to be sustained is that the complainant, as assignee of Esther E. Gill and her three children, is entitled to take the fund. No other relief disconnected from that demand and claim has been pointed out in the argument as based upon any of the allegations of the bill.

The defendants’ demurrers specify, among other grounds, that the bill shows that it is uncertain who the final takers of the fund may be — that the testator’s daughter, Esther E. Gill, may outlive all her children, or other children may be born tp her who will be entitled to shares, or even to the whole of the fund— that therefore the trustee must hold the fund until, at the death of Esther, the final beneficiaries shall be ascertained.

The complainant endeavors to meet this objection to the bill by urging that any new beneficiaries may hold the parties who have received the fund as trustee and compel restitution — that, in the language of the complainant’s brief, “equity will not continue the trust to exhaust every conceivable expectancy.”

This view is manifestly unsound. The testator established the trust in order to insure the final distribution of the fund in accordance with his directions. The complainant, as assignee of Esther and her three children now living, has no right at present to the fund, and may never have any right to any part of it. The trustee was properly advised that it is his duty to hold the fund in trust until the death of the daughter, Esther. The demurrers will be sustained.


text:
    Gertrude Pfefferle et al. v. Charles F. Herr, executor, &c., of John F. Pfefferle, deceased.
    [Filed October 13th, 1903.]
    1. Where a suit to enforce an alleged trust for the benefit of minors involved the construction of the will creating the trust — as to whether the income of the entire estate was applicable to the maintenance and education of the minors, or only the income of their several shares — all of the minors interested in the estate were necessary parties.

      2. Where a testamentary guardian of certain minors had never qualified, and'the trust created by the will for the support of the minors could be executed without reference to such guardian, she was not a necessary party to a bill to enforce such trust.
    On demurrer.

      Mr. Francis Child, for the demurrant.

      Mr. Samuel Á. Besson, contra.

   Stevenson, Y. C.

My conclusion is that the demurrer to the bill should be sustained for the reason specified, that Ida Pfefferle and Oscar Pfefferle are not made parties. I do not think that Margaret E. McClelland, widow of the testator, is a necessary party. The demurrer does not object to the failure to make Margaret B. McClelland, as testamentary guardian, a defendant, but if.it did it does not seem to me that she is a necessary party even in that capacity, inasmuch as she has never qualified as guardian, and the trust for the support of the children may be executed without reference to her. The testator made his will in November, 1891, and died in January, 1892. At that time he had a wife and five children, the oldest of which could not have been more than eleven or twelve years of age. All of these children excepting the eldest, at the time of the filing of the bill, were infants.

The entire estate was left to the five children in equal shares, subject to the widow’s right .of dower and subject to the right of the executor to sell the real estate. The fourth paragraph of the will is as follows:

“It is my will and I do hereby order and direct that none of my said real or personal estate shall be conveyed or paid over to my said children before they attain the age of thirty years respectively, they, however, to have so much of the income and profit thereof as may be necessary for their maintenance and education during their minority and their support until they attain said age.”

The executor, the defendant, has taken possession of the entire estate and collects the income of the realty.

Counsel for complainant argues that the estate is in the hands of the executor in trust until the children, respectively, reach the age of thirty years and become entitled to their shares. His insistment is that the true construction of the will requires that the executor, as trustee, should keep the five shares separate and distinct, and that each child is entitled to so much of the income of his share as may be necessary for his maintenance and education. He argues, therefore, that each child has a right to come into the court of chancery and compel the trustee to execute the trust for his benefit — each child being entitled to support and maintenance only out of so much of the income of his share as may be necessary. . Whether the right of each child to maintenance, &c., applies onty to the income of his share or to the income of the entire estate, is the question of construction to be determined at the start. The will says that “so much of the income and profit thereof” — i. of the entire real and personal estate — “as may be necessary” shall be applied to the maintenance and education of the children. The will does not say that so much of the income of each share as may be necessary shall be applied to the maintenance and education of the child entitled to the share.

The executor and trustee, in my opinion, is entitled to the protection of a decree in a suit in which all the infants'are made parties. If the application for maintenance had been made by petition by one or more of the infant children, the same rule, I think, should be applied. The two infants who are not made defendants are the youngest, and what their circumstances are, what the necessities of their case may be in respect of maintenance and education, the bill does not disclose. After a decree allowing maintenance to the three complainants out of the income of their respective shares, another suit might be brought on behalf of the two infant children who are not made parties, in which it would be claimed that a correct construction of the will required the trustee to furnish maintenance out of the income of the entire estate to the several five beneficiaries according to their respective necessities, and that the income of the whole estate might be required for the support and education of two or three of the children, or that half of the income should, in accordance with the will, be appropriated to two of the children.

Counsel for complainants, in an elaborate brief, assumes that the construction of the will giving each child maintenance and education only out of his share, is the correct construction. This contention, however, is liable to be disputed at any time in the future.

The demurrer will be sustained.