text:
    Elizabeth Kocher v. John S. Kocher et al.
    [Filed October 17th, 1898.]
    1. A life tenant who pays a mortgage on the premises is entitled to be subrogated to the rights of the mortgagee ; and the cancellation of the mortgage by inadvertence will not alter such right, where no other rights have been affected thereby.
    2. The life tenant was not barred from enforcing her claim when less than twenty years had elapsed.
    On demurrer to bill.
    John Kocher, the husband of the complainant, Elizabeth, died seized of a house and lot in the city of Newark, which was subject at his death to the lien of a mortgage thereon for $1,000. By his will he left the use of all his real estate for life to his widow, the complainant, and she has enjoyed the possession of it since. He left no personal estate whatever, except a little furniture, the precise value of which does not appear. Some time after his death, which occurred in 1879, the holder of the mortgage called on the widow for payment, and she paid the same out of her own estate, and, through inadvertence, had the same canceled of record. The property has since been taken on condemnation proceedings by the city of Newark, and the proceeds paid to the defendant trust company, to hold in trust for the purposes of the will. The object of the bill is to obtain payment out of the fund of the amount due upon the mortgage.

      Mr. Herbert Boggs, for the complainant.

      Mr. Edwin B. Williamson, for the trust company, demurrant.
   Pitney, V. C.

The complainant, being interested in the premises as life tenant, and, being obliged to pay the mortgage in order to protect her life estate, was clearly entitled, upon such payment, to be subrogated to the rights of the holder of the mortgage. In fact, she became the beneficial holder by virtue of the payment. On the case presented, the fact that she, through inadvertence and ignorance, canceled the mortgage of record, does not alter her right. Coudert v. Coudert, 16 Stew. Eq. 407. It could only take effect against her by way of estoppel, and the case made by the bill discloses no room for the operation of that principle. Nobody has changed his position or acquired any rights based on the idea that the mortgaged premises were free and clear of the mortgage in question. The right of the widow is to so much of the money in the hands of the trust company as represents the amount which was due upon the mortgage at the death of the testator. From that time on she was bound by her position as a tenant for life to keep the interest down. Twenty years have not elapsed since she made the payment, and there was no occasion for her to sooner assert her rights. Irick v. Clement, 4 Dick. Ch. Rep. 590.

The demurrer must be overruled.


source: Caselaw Access Project

author: Pitney, V. C.

license: Public Domain

text:
    John S. Kocher v. Elizabeth Kocher et al.
    [Filed October 17th, 1898.]
    Where a son loaned his father money with which to pay assessments which were a lien on a lot, he was not entitled to be subrogated to such lien.
    On demurrer to a part of the bill.

      Mr. Edwin B. Williamson, for the demurrant.

      Mr. Herbert Boggs, contra.

   Pitney, V. C.

The ease made by the bill is this: John Kocher died seized of a lot of land in Newark, encumbered by a mortgage given to William T. Haines, which has, since his death, come by assignment to the complainant. Subsequent to the Haines mortgage, but in John Kocher’s lifetime, the mortgaged and other premises of the decedent were subjected to a lien for assessments for benefits, and the complainant, who is the son of John Kocher, loaned his father the money with which to pay those assessments, amounting to $450. John Kocher died seized of the premises in 1879, and devised them to his widow for life, and at her death to his children. The widow survives and is a defendant. She gave to the complainant a mortgage upon her interest in the lot in question, to secure him for the amount he had advanced to his father in his lifetime, to pay the assessment in question. The testator left no personal estate whatever. Subsequently, the city of Newark took, by condemnation proceedings, the mortgaged premises and two other lots of land near by, of which the testator died seized, and the price was paid to the defendant trust company to hold in trust for the purposes of the will.

The complainant files his bill, asking to have paid out of the fund (1) the amount due upon the Haines mortgage and (2) the amount due on the mortgage given to him by his mother to-secure the money advanced by him to his father, and in support of this last claim, asserts a right of subrogation to the lien of the assessment which the money so advanced went to pay.

To this part of the bill the trust company demurs, and I think the demurrer is well taken. The case is not governed by the doctrine of subrogation. The complainant was not, at the time he advanced the money to his father, interested in anywise in the property in question, and occupied the position simply of a creditor of his father for money which the father happened to-use for the payment of that encumbrance. I know of no principle upon which he can claim subrogation.

The right of subrogation must either arise out of the circumstance that the party paying or asking subrogation was interested in the property and entitled to pay the encumbrance in order to protect himself, or he must have made the payment at the request of either the debtor or the lienor, with the understanding that he should be subrogated. This latter is called subrogation by convention. A leading case is Payne v. Hathaway, 3 Vt. 212, but the present case is not within the principle of that case. There a party recovered a judgment against the owner of land and made, as he supposed, a valid levy. The land was subject to a mortgage of $2,000, and, supposing that his levy gave him a valid lien, the judgment creditor borrowed money to pay the same and gave a mortgage on the lands to the lender of the money to secure him. Subsequently, it was decided by the courts that the judgment creditor’s lien was invalid, and hence the mortgage he had given was worthless. The lender of the money filed a bill for relief against the land for the amount of the money advanced, and it was held that he was entitled to subrogation. That is an extreme case. But the present case is not within it.

The demurrer must be sustained, but of course this decision does not affect the right of the complainant to be paid the amount due on the mortgage, which he holds by assignment, or his right to be paid the amount of his mother’s life interest in the fund.


text:
    The Long Branch Banking Company v. Sarah E. Dennis et al.
    [Filed October 17th, 1898.]
    1. Though a voluntary conveyance by one of all his property to the wife of his son, when contingently liable as endorser of the notes of his son, was not conclusive proof that such conveyance was made to defraud the holder of such notes, as such holder was not an existing creditor of such grantor, the fact of such contingent liability should be considered, with other facts, as tending, to show actual fraud.
    2. The endorser of certain notes of his son, after their renewal and after the son had become financially embarrassed, conveyed all of his property to the "wife of such son in consideration of “one dollar and other good and valuable .considerations.” In an "action to subject such property to a judgment on such notes, the son’s wife claimed that she had rendered services for, and loaned money and furnished clothing and food to, her father-in-law in consideration uf such conveyance. It was admitted that the son’s wife had agreed, as a part .of such transaction, to support her father-in-law for life, and it appeared that his alleged debt to her was inflated and that the immediate occasion of the conveyance was the financial embarrassment of the son. — Held, that, though the deed in question could not stand against such judgment creditor as an absolute conveyance, it should have effect as a mortgage to the extent of the reasonable value of the grantee’s services.
    Heard on bill, answer and proofs.

      Messrs. Parker & Van Gelder, for the complainant.

      Messrs. Fay & Van Note, for the defendants.
   Pitney, V. C.

The object of the bill is to subject certain lands, the title whereof is vested in the defendant Sarah E. Dennis, to the lien of a judgment which the complainant holds against Edwin Dennis, who was previously the admitted owner and conveyed them to Sarah E. Dennis by deed dated January 18th, 1896.

On the 29th of January, 1897, 'the complainant obtained judgment in the Monmouth county circuit court against Edwin Dennis and Charles E. Dennis for the sum of $872.34 and $38.90 costs, in all $911.24. The judgment was based upon four promissory notes made by Charles E. Dennis, the husband of Sarah and son of Edwin Dennis, to the order of and endorsed by the latter, which matured on the 8th, 13th, 14th and 16th of October, 1896, respectively. Those notes were given in renewal of other like notes which were discounted by the complainant bank for Charles E. Dennis, and which renewals ran back to a period prior to the date of the conveyance in question.

The consideration mentioned in the deed from Edwin Dennis to Sarah is $1 and other good and valuable considerations, and the premises included the whole of the grantor’s property.

Thus, briefly presented, and in the absence of any other facts, the case would be this: That on the 18th of January, 1896, Edwin Dennis, being contingently liable as endorser for his son, Charles, to the amount of between $800 and $900, to the complainant bank, made a gift of the land in question to his daughter-in-law, Sarah E. Dennis, the wife of his son, Charles. Thus stated, the case would be within the doctrine of Severs v. Dodson, 8 Dick. Ch. Rep. 633, reversing Dodson v. Severs, 9 Dick. Ch. Rep. 305.

The gist of the decision in that case, as I read the opinion, is that a contingent liability as an accommodation endorser of a promissory note, on the part of a person making a gift of land, is not of itself conclusive proof that the gift was made for the purpose of defrauding the holder of the note. The settled rule in this state is that, as to all existing creditors, voluntary conveyances are conclusively fraudulent without regard to the existence of an actual intent to defraud. Severs v. Dodson held that the holder of such accommodation endorsement is not such a creditor, and the endorser is not a debtor. It, however, recognized the right of the holder of endorsed mercantile paper to show actual fraud in a conveyance by the endorsee. At p. 635 the court says: “At the time in question they were not creditors of the donor. It is readily admitted that they were such in a sense that entitled them to the remedies provided in the act for the prevention of frauds and perjuries. They can undoubtedly set aside conveyances and transfers of property made to defeat their just claims. But at present we are not called upon to construe the statute itself, our present function being to construe the rule of evidence that this court has superinduced upon the statute. This discrimination has not always been made, and the omission has confused the subject. The act invalidates certain transfers of property infected with fraud. The rule now being considered relates to the proof of such fraud, declaring that the contemporaneousness of the gift and the debt establishes it for certain purposes and to a definite extent. * * * When a man is in debt, especially if such debts be due, it is certainly not irrational to infer, if he give away his property, that the intention was to defeat such claims, but such deduction would seem to be most extravagant if, instead of a present indebtedness, he has incurred a mere liability as a warrantor of title, as a tort-feasor, or as surety on an administrator’s bond. If such responsibilities as these latter, which may, in the long run, be transformed into debts, should have the effect of invalidating voluntary settlements of property, then such settlements would be the most uncertain of legal transactions.” And at p. 639: “But the present case demands the application of a rule the most opposite of this. We are not now called upon to ascertain the meaning of statutory language in legislative policy, our entire province being to demarcate the rule of evidence promulgated by ourselves that makes the existence of fraud in voluntary conveyances, under a certain condition, a mere inference of law, irrespective of the truth. The rule is one of the most rigorous character, having the operation of an estoppel, and is to be kept within the narrowest limits. It is, therefore, enough for this court to say that the contingent liability of an accommodation endorser, before dishonor, does not make him a debtor so that the holder of the paper can invalidate a voluntary conveyance made by him when there was no actual fraud in the transaction.”

This view does not deprive the fact of the existence of a contingent liability oh the part of the grantor of its ordinary and natural probative force, in connection with other facts and circumstances to show actual fraud, but simply of any conclusive effect in that respect. Hence, I conclude that the decision leaves the parties in the present case at liberty to allege and prove fraud on the one side and to repel it on the other, and leaves the contingent liability of the grantor to be considered as a fact in the case.

Neither party was content at the hearing to rest the case upon the bare facts as above stated, but went into proof on the issue of fraud or no fraud.

The defendant Mrs. Dennis sets up a consideration for the conveyance in the shape (1) of services rendered by her to her father-in-law, who is quite aged, and has been somewhat helpless for many years, and (2) moneys loaned and advanced and clothing and food furnished by her to him.

[Discussion of facts omitted.]

My conclusion upon the whole case is that this deed cannot stand against this judgment creditor as an absolute conveyance; At the same time, however, I- think there is sufficient merit in the wife’s claim, particularly with regard to her services in taking care of the old gentleman, to warrant the court in allowing it to stand as a mortgage for a reasonable sum. The difficulty in the ease is to arrive at a just amount. We have seen that no account whatever was kept of moneys advanced and substantially no vouchers are produced. The whole transaction is a family affair, and this increases the difficulty.

Taking the case altogether, the best estimate I can make is the sutíi of $800, and I will advise a decree that the-conveyance in question shall be deemed and held to be a mortgage for $800, as against the complainant; without interest up to the date of the decree.

Two modes of enforcing this decree suggest themselves; one is that the premises be sold by a master to pay the complainant’s claim, with interest and costs, subject to a mortgage in favor of Sarah E. Dennis for $800; or second, that the premises be sold free of the mortgage, and the defendant Sarah E. Dennis be first paid out of the proceeds $800, with interest from the date of the decree. In either case the balance, if any, to go to Mrs. Dennis.


text:
    George Laws v. Elihu Williams et ux.
    [Filed October 17th, 1898.]
    Where an executor and trustee, under a will probated in the surrogate’s court of New York, was found, in a compulsory accounting in that court, to be indebted in a certain sum to a devisee under the will, and the trustee invested said sum in land in New Jersey, in his own name, and transferred title to his wife, the devisee was entitled to have said sum declared a lien on the land, without first obtaining a personal money judgment against the trustee in New Jersey.
    Motion to strike out bill for want of equity.

      Mr. William D. Daly, for the motion.

      Mr. Frank P. McDermott, contra.

   Pitney, V. C.

The bill alleges that the defendant Elihu Williams is the sole acting executor and trustee under the will of one George Laws, of New York, by virtue of letters testamentary issued upon said will by the surrogate of the city and county of New York; that $4,000 of the estate was set aside by the testator as a fund for the use of a certain person for life, and after the death of the tenant for life then to go, in part, to the complainant. It further sets out the death of the tenant for life and a compulsory accounting in the surrogate’s court of the city of New York, in which a sum of over $3,000 was found due front the executor to the complainant. It further alleges that the whole of this fund of nearly $4,000 was invested by the executor in the purchase, in his own name, of certain real estate specifically described, situate in the county of Monmouth, which real estate the defendant Elihu Williams afterwards conveyed, through an intermediary, to his wife, the other defendant, Albina Williams. The prayer is that the complainant’s share of the funds of the estate, ascertained by the decree of the surrogate of New York, may be declared to be a lien upon those lands, notwithstanding the conveyance to the wife, which is alleged to be without consideration and fraudulent. The equity of the complainant consists in the fact that his funds were invested by the trustee in the purchase of lands and the title taken in his own name.

It is objected by the counsel of defendants that preliminary to relief there should have been a suit brought in the courts of this state and a judgment obtained against Williams, and that the decree of the surrogate of New York cannot be dealt with by this court as a judgment which gives the complainant a lien upon the lands of Williams in this state.

The complete answer to that is that the complainant’s equity does not rest upon a lien obtained or sought to be obtained by a judgment, but upon the fact that his funds, with others, were invested in this land. The function of the New York decree is simply to establish the fact that the funds in question did belong, to an ascertained extent, to the complainant. That being established conclusively by the decree in the New York court, the right of the complainant to follow those funds in whatever shape the trustee may have put them is a matter of course. 2 Lew. Trusts (by Flint) 892.

The motion to strike out is denied, with costs.


text:
    Lazar Sternberg et ux. v. David Wolff et ux. and L. Sternberg & Company, a corporation.
    [Filed November 28th, 1898.]
    1. The court of chancery ought not to interfere with the business of a solvent corporation, by the appointment of a receiver, unless there is a present danger to the interests of the stockholders consisting of a serious suspension of, or interference with, the conduct of the business and a threatened depreciation of the value of the assets consequent thereupon, which may be met and remedied by a receiver. In other words, it must appear that the appointment of a receiver will serve some beneficial purpose to the stockholders.
    2. It clearly appearing in this case, by the proofs, that, notwithstanding dissensions and litigations between the directors and officers, the business of the company was being conducted by the president in strict accordance with the corporate scheme, in full volume, and with the usual profit to the stockholders, and that it was not being interfered with by the litigation, and that no corporate action was necessary in order to its continuance, the appointment of a receiver, upon the application of the officer who was found by the court to be in fault, was refused.
    3. The president of a corporation is, by the very nature of his office, its executive and general manager, and, while he personally performs those .duties in an unexceptionable and successful manner, the mere fact that he excludes another officer of the corporation from participating in the conduct of its business, is not sufficient reason for the appointment of a receiver.
    On motion for a receiver.

      Mr. Charles D. Thompson and Mr. Chandler W. Riker, for the motion.

      Mr. Robert H. McCarter and Mr. Louis Hood, contra.

   Pitney, V. C.

This is a contest between two sets of stockholders of a corporation for the control of the same. It was organized originally in 1892, and reorganized, with amended by-laws, August 26th, 1897.

The complainant holds in his own name one-half of the capital stock, less one share, and that is held by his wife. The defendant Rosa Wolff owns the other one-half of the stock, less one share, and that is owned by her husband, David Wolff. It thus appears that the stock is equally divided between them. The four persons just named constitute the board of directors, and, by the amended byrlaws, it requires the whole to make a quorum. By the same by-laws, the complainant Lazar Stern-berg is the president, with a fixed salary, and the defendant David Wolff is the secretary and treasurer, with a fixed salary, and neither can be removed- nor his salary changed without the consent of all the directors, and both are authorized to draw and endorse checks, drafts, notes and other negotiable instruments.

These and other provisions in the by-laws create at once a deadlock’in the affairs of the corporation, so far as taking any corporate action is concerned, unless by the consent of all persons interested.

The original bill was filed by Sternberg and wife against the defendant David Wolff alone, and the corporation, on the 15th cf October, 1897, and after alleging certain irregular and improper conduct on the part of David Wolff, prayed that he might be restrained from, exercising the functions of treasurer, and from doing other acts of the character complained of, and further prayed “ that if necessary a receiver may be appointed to take charge of said company and manage the same pending the'decision of this suit,” and for other relief.

Upon the filing of the bill with a mass of affidavits, interim restraint was granted against David Wolff, and an order was made upon Wolff returnable on Monday, the 25th of October, to show cause why an injunction should not issue. On that day the parties appeared, and the defendant David Wolff presented numerous affidavits, the reading of which and those of the complainant occupied all the remaining business hours of the. court. Counsel for Wolff asked for a receiver, which elicited from the court' the remark that no bill or petition on Wolff’s part praying such relief was before the court, and hence that none such could be granted bn his application.

The further hearing of the motion was adjourned until Wednesday, the 27th, on which day the parties appeared before me, and the defendant Rosa Wolff then asked to be made a party defendant because she was a large stockholder in the concern, which motion was not opposed by the complainants, and she was duly made a party and filed an answer and cross-bill accordingly, in which she charged improper conduct on the part of the complainant Lazar Sternberg, and prayed an injunction against him in that respect, and further prayed that Sternberg and wife may specifically perform the terms of a certain written agreement entered into between the four parties, dated the 26th of August, 1897,

and failing therein, that a receiver may be appointed to take charge of and wind up the affairs of said corporation and to divide the proceeds of the sale of the assets of said corporation among the stockholders thereafter, of the payment of all its liabilities.”

The contract referred to, made on the 26th of August, was one for the reorganization of the corporation on certain terms therein specified, and which were intended to be embodied in the by-laws just referred to, but there appears a slight difference’ between the by-laws and the agreement.

The argument proceeded before me for two days, the complainants protesting, against any interim relief being granted on the defendants’ cross-bill until they had an opportunity to answer the same.

Late in the afternoon of the 28th of October, at the close of the argument, I decided that the defendant David Wolff was in fault and in the wrong, and that an injunction should issue against him according to the prayer of the bill, but that no receiver should be appointed on the prayer of the defendants’ cross-bill without the consent of the complainants, and the complainants not asking for the appointment of a receiver under the-prayer of their bill, and not consenting to the appointment of a receiver on the application of the defendants under their cross-bill, none was appointed. The injunction in favor of the coriiplainants against the defendants was made upon terms that the complainant Sternberg should be under like restraint, and an order accordingly was advised on the 6th of November.

On Monday, November 8th, upon a short notice to the defendants, the complainants having appealed from that part of the order restraining Sternberg, applied to me to suspend the operation of the injunction against him until the meeting of the court of errors and appeals, which would take place on Tuesday, the 16th of November. After hearing the parties I decided to suspend the injunction as against Sternberg, on the ground that I was in doubt as to whether those terms should have been imposed. And upon hearing the matter on the 16th of November, the court of errors and appeals, as I am informed, sustained my action and suspended the injunction against the complainants, retaining that against the defendants until the hearing of the appeals which each party had taken from the order of November 6th. This was done upon condition that both appeals should be put on the list at the present term and be argued if reached. Both the appeals were thereupon put upon the bottom of the list for argument at the present term.

On Thursday, the 18th of November, the defendants ."Wolff and wife presented to me their petition, with further affidavits, and asked for the appointment of a receiver under the prayer of the cross-bill, and I advised an order to show cause why such relief should not be granted, returnable on Wednesday, November 24th.

On that day the parties appeared and the complainants, the Sternbergs, filed an answer to the petition of the Wolffs, and the motion was heard on the bill, answer and cross-bill, the petition and answer and all the affidavits and exhibits.

The petitioners confined their application for a receiver to one simply to supervise and manage the affairs of the corporation' pending the suit, and their prayer for an injunction to one restraining Mr. Sternberg from usurping the powers and duties of the treasurer, from drawing or signing any notes, checks or bills of exchange, and from in any way interfering with the' department of the secretary and treasurer of the company, and further enjoining him from interfering with the business so far as relates to the ladies’ goods department, and that he be enjoined from hiring any employes whatever except in accordance with the by-laws of the company.

The reorganization agreement between the parties of the 26th of August, 1897, contains two clauses providing for the breaking of the deadlock by amicable proceedings. It provides that after one year from date both Sternberg and wife, on the one side, and Wolff and wife on the other, shall have the right, by notice in writing, to require the other side to purchase their capital stock, or, at the option of the party to whom such notice was given, to sell their stock to the person giving the notice. The agreement provides that upon giving such notice the parties shall immediately come to an agreement as to the value of the capital stock; that in case of non-agreement, then each shall appoint an appraiser, and the two so appointed shall appoint a third, and that the three shall proceed to make an appraisement of the stock and report to the parties in writing with convenient speed. Within one month after the receipt of such report, but not in less than two months after the receipt of the original notice, the side receiving the original notice shall elect, in writing, either to buy the- stock of the party giving the notice or to sell to that party the stock at the valuation fixed; and at the end of two months after notice of such election, or earlier, at the option of the purchaser, the sale should be consummated by the transfer of the stock and payment thereof as provided.

In the answer of the Sternbergs to the petition of the Wolffs, now under consideration, the Sternbergs offer to forego that part of the contract just referred to which fixed the time of one year before any such proceedings could be had, and agree that if a notice be now given by the Wolffs, in accordance with the contract, they will consider themselves bound thereby, exactly as if the year provided in the contract had expired, and agree to carry out the provisions of the contract in reference to the purchase of the capital stock of the parties so notifying, in the manner therein provided ; and the answer is signed by both Mr. and Mrs. Sternberg in their proper handwriting.

Without going into any extended discussion of the powers of this court to interfere with the management or wind up the affairs of a solvent corporation and distribute its assets among its stockholders, I content myself with the simple remark that I can find no case — and the industry of counsel has pointed out none, with a single exception presently to be stated — in which it has been held that this court has the power to distribute all the assets and wind up a solvent corporation simply on the ground of dissensions among the stockholders. Mr. High, in his treatise on Receivers § 288, pronounces against the power of the court to interfere by a receiver in any case except where provided by statute, and cites numerous authorities in support of his text; and counsel for the Sternbergs cited other authorities in the same direction.

In the case of Fougeray v. Cord & Korb, 5 Dick. Ch. Rep. 185, 756, there were three stockholders, each with an equal interest in the corporation, and two of them, the defendants, combined to defraud the third, the complainant, out of his interest in the venture. I thought it was a case where not only the wrong attempted to be perpetrated by the two against the one should be righted, but that the business of the corporation, which was dealing in real estate, was in such a'state that its assets could be conveniently divided in specie, and the one share belonging to the complainant, the injured stockholder, might be set off to him, and thereby placed beyond the power of the other two to deal with to his disadvantage, and to that end I treated the affair as a partnership and appointed a receiver. The effect of the decree advised was not to dissolve the corporation, but merely to compel a dividend at once, in specie, of the property of the corporation. The assets consisted almost entirely of real estate and liens upon real estate; the only business of the corporation was dealing in real estate, and the result of the decree was, in effect, to make a partition of real estate. But the court of errors ■ and appeals disagreed with me in that view, as I read the opinion, discharged the order for the receiver, and left the two defendants in control of the corporation, subject, however, to the restraint of this court against the renewal of their improper conduct. It is to be observed that the two defendants were both non-residents of this state, and therefore practically beyond the reach, of an injunction. In dealing with the question the court of appeals used this language: “ The dismemberment of a corporation, even though it be a trading company, and the part distribution of its assets to a shareholder who is permitted to withdraw under the protection of the court, coupled with the-disturbance of corporate functions incident to a receivership, are-extreme powers and may not be decreed by a court of equity when the specific acts complained of are capable of redress and complete restitution, and those apprehended fall within the ordinary jurisdiction by injunction.” i

I do not construe that language as admitting even that this court has power to absolutely wind up and distribute the assets of a corporation simply on account of dissensions among its stockholders. I do consider it as a distinct repudiation of the idea that the remedy between partners and joint adventurers is to be applied by analogy to corporations, however closely the stock may be held, for it is to be observed that if the action had been between partners or joint owners the propriety of a partition was manifest.

If the power to wind up the affairs of a solvent corporation, and for that purpose to appoint a receiver, were conceded, the exercise of it on interlocutory application, and prior to final hearing, is one that seems to me ought not to be exercised except in a very clear case.

The power, however, to appoint a receiver for temporary purposes, simply to preserve the property until a certain object can be attained, stands on a different footing, viz., the general power of the court to preserve the subject of litigation pendente lite, and has been recognized by our courts in several instances but never-acted upon.

The notion had its origin, so far as I can find, with Vice-Chancellor Malins, in two causes decided in 1873 and reported in L. R. 16 Eq. Cas. 298, 303 (1873). In both cases there was-a dispute among directors as to which should have control of a corporation, and a receiver was appointed to preserve the property until k new election could be held and the proper machinery regularly set in motion.

In the first of the two cases Vice-Chancellor Malins (at p. 301) uses this language: “With regard to private partnerships, nothing is of more frequent occurrence than the quarrels of partners. If partners quarrel, oust each other from the management or so conduct themselves that the partnership cannot go on with advantage, it is every day’s practice for the court to interfere by injunction and appoint a receiver if necessary. With regard to public companies, I apprehend the same principle is applicable. If a state of things exists in which the governing body are so divided that they cannot act together, and there is the same kind of feeling between the members as there is frequently in the case of private partnerships, it is clearly within the rule of this court to interfere, and it will do so.”

In the next case, decided on the same day,' he uses this language (p. 305): “ This case, above all others, strongly illustrates the danger of departing from principles which ought to be well settled. Those principles are, I apprehend, what I laid down in Featherstone v. Cooke, that the court will not interfere with the internal affairs of .joint stock companies unless they are in a condition in which there is no properly-constituted governing body or there are such dissensions in the governing body that it is impossible to carry on the business with advantage to the parties interested. In such a case the court will interfere, but only for a limited time and to as small an extent as possible.”

His dictum first above stated is the only one to that effect which I can find reported.

These cases were referred to by Chancellor Runyon, in Einstein v. Rosenfeld, 11 Stew. Eq. 309 (1884). There, as here, the complainant and defendant were each the owner of one-half of the capital stock of the corporation, and the complainant was in control of the management of it. The defendant applied to a court of law for a mandamus to compel the complainant to do a certain act, and the complainant filed his. bill to enjoin him from prosecuting that 'mandamus, and prayed the appointment of a receiver. The bill alleged that the corporation was a quasi partnership. At p. 312 Chancellor Runyon uses this language: The bill alleges that the corporation is a quasi partnership. It appears by the answer that a partnership was at first agreed upon between the parties, but it was afterwards agreed between them to form a corporation instead. It is entirely clear that the court, in dealing with' the subject, must treat the company as a corporation, and it cannot, in order to acquire jurisdiction over it to dissolve it, disregard and ignore its form and character. It is argued, however, that, admitting that it is a corporation, this court has, under the circumstances, jurisdiction over it to dissolve it. The circumstance relied upon is the existence of a disagreement between the two parties who own all the capital stock in equal shares, by reason of which disagreement the corporation is deprived of a lawful governing body. The cases cited are Featherstone v. Cooke, L. R. 16 Eq. 298, and Trades Auxiliary Co. v. Vickers, L. R. 16 Eq. 303. In those cases the companies were joint stock companies, and the principle was observed that equity will only interfere in the internal affairs of such companies where the company has no properly-constituted governing body or where there are such dissensions in the governing body that it is impossible to carry on the business with advantage to the parties interested, and that in such cases the interference will be only for a limited time and to as small an extent as possible.

“ In the case in hand the business of the company is being carried on. The complainant appears to have assumed full control of it, and seems even to have excluded the defendant therefrom, and the latter has- submitted to such assumption and exclusion. There is, therefore, no need of immediate interference on the part of this court for the protection of the property or business interests of the company.”

And again, by the chancellor, in Archer v. American Water Works Co., 5 Dick. Ch. Rep. 33 (at p. 52) (1892), where he uses this language: “I think it is. plainly my duty to interfere by injunction to prevent the perpetration of the wrong here threatened. If the present directors of the company — and they are all parties to this suit — continue their dissensions so that the affairs of the company are not speedily attended to, upon a proper application I will care for the property pending determination of a suit, through the instrumentality of a receiver. Such action will be supported by precedents and authority. Featherstone v. Cooke, L. R. 16 Eq. 298; Trades Auxiliary Co. v. Vickers, supra; Einstein v. Rosenfeld, 11 Stew. Eq. 309. My interference, however, by injunction and receiver will be limited to the imperative requirements of the present emergency.”

And again, by Vice-Chancellor Van Fleet, in Edison v. Edison United Phonograph Co., 7 Dick. Ch. Rep. 620 (at pp. 625, 626) (1894): “The power of this court to appoint a receiver of a corporation, either because it has no properly-constituted governing body or because there are such dissensions in its governing body as to make it impossible for the corporation to carry on its business with advantage to its stockholders, I think must be regarded as settled, but I think it is equally well settled that this power is subject to certain limitations, namely, it must always be exercised with great caution and only for such time and to such an extent as may be necessary to preserve the property of the corporation and protect the rights and interests of its stockholders. As soon as a lawfully-constituted and competent governing body comes into existence, whether it is brought into existence by an adjustment of the dissensions or by the election of a new body, and such body is ready to take possession of the property of the corporation and proceed in the proper discharge of its duties, the court must lift its hand and retire.”

With this exposition of the rules governing this class of applications, I take it to be clear that this court should not interfere by a receiver for purposes of preservation even, unless there is a present danger to the interests of the stockholders, consisting of a serious suspension of or interference with the conduct of the business, and a threatened depreciation of the value of the assets consequent thereupon, which may be met and remedied by a receiver. In other words, it must appear in this, as in all other such cases, that the appointment of a receiver will serve some beneficial purpose to the stockholders.

Now, the following facts sufficiently appear: The business of the corporation is a complicated one. It consists of a central store and office in Newark, and ten or more branches in different cities and towns in that neighborhood, all of which report to and receive orders from the central office. The profits of the business depend largely upon sales upon the installment plan, made naturally and almost exclusively to persons of little or no pecuniary responsibility. They pay down a sum of money in cash, and pay the balance in weekly or monthly installments, which are collected by collectors sent out from the various stores. And it was admitted before me, at the argument, that a large part of the assets of this concern consisted in these outstandings payable in installments.

It will be seen at once that the appointment of a receiver and the knowledge of it by the debtors of the corporation, would tend at once, necessarily, to very much depreciate the value of these outstandings. The idea of insolvency, actual or threatened, is so thoroughly associated in the minds of the public with the appointment of a receiver, that it is readily seen that many .of the debtors of the concern would feel themselves absolved from any further obligation to pay. Then, also, we must consider the effect upon the general credit of the corporation of the appointment of a receiver; and I cannot but think it will seriously injure, if not destroy, its credit.

In the next place it appears affirmatively that the business of the corporation is being continued in its usual and regular course pending this litigation, without serious interruption and with the usual profits. In other words, that the business of the company is prosperous, and has not fallen off or been interfered with by the litigation, and that no corporate action is necessary in order to its continuance. This element at once takes the case out of the rule above referred to, and brings it within the decision of Einstein v. Rosenfeld, supra.

It further appears that Mr. Sternberg has not exercised any duties not imposed upon him, nor exceeded the authority given to him by the by-laws adopted and approved by each holder of stock of L. Sternberg & Company. The president of a corporation is, by the very nature of his office, its executive officer and general director and manager. In the absence of any restriction in the by-laws, he is the responsible head and director of the corporation, and is responsible for all the details of its business. In addition to that general authority implied by the-very office which he holds, Mr. Sternberg is, by the terms of the by-laws, as we have seen, entitled equally with the nominal-treasurer to act as treasurer in drawing checks, notes and making deposits, &c. It does not appear that in what he has done in this respect since this disagreement broke out, he has acted other-' wise than in strict accordance with the by-laws, and, moreover, in strict accordance with what his habit had been prior to the disagreement. And it does not appear that his mode of manipulating the bank account has injured the credit of the corporation with the bank.

The only evidence in that respect is found in the affidavit of-Mr. Wolff, in which he swears that at one time — date not given — one of the officers of the bank said to him that the habit of overdrawing must be stopped, or something of that kind. But Mr. Wolff was himself responsible for the original overdraft, as we have seen.

It does not appear that Mr. Sternberg, as president, has excluded Mr. Wolff from a proper share in the management of the business. It does not appear, except- in a single instance presently to be noticed, that he has ever refused to listen to his suggestions with regard to any business detail, or to exclude him from his duties as treasurer, except so far as the by-laws con-' template. It is alleged that Mr. Sternberg keeps the bank account in a chronic state of overdraft, so far as the books of the corporation show, for the purpose of preventing Mr. Wolff from drawing his own salary, and so cut him off from funds to carry on this litigation. But this allegation is not borne out by the proofs. It does not appear that any salary is due to Mr. Wolff, but the contrary is inferable from the facts as found by me at the previous hearing, and as they still exist. And if complaint is made in that respect it should be by a distinct showing that the salary is due, and that Mr. Wolff is, in substance, prevented from drawing a check to satisfy it.

It is here to be observed that the injunction against. Mr. Wolff in this respect is limited, and, in effect, only restrains him from drawing checks for debts not due.

ISTor does it appear that Mr. Sternberg has improperly interfered with Mr. Wolff’s functions in purchasing goods.

These matters show clearly enough that there is not the shadow of ground for the appointment of a receiver in this case. Almost all the facts were before me and thoroughly discussed on the previous application, and I then expressed myself very strongly against the appointment of a receiver, and I am still of the same opinion. I think it would be ruinous to the parties so to do.

It was argued by counsel for Mr. and Mrs. Wolff that the present situation is without precedent, and is such as to make it an exception to the general rules I have cited, in that it is impossible for the business of the corporation to proceed in the presence of the deadlock. On that topic it is proper to observe in addition to the fact that the business does proceed Successfully, that the deadlock does not arise fortuitously, as in Vice-Chancellor Malins’ cases, but is the direct and palpable result of the deliberate action of the parties, and must have been, and was in fact, anticipated by them, as is shown by the provision in. the contract of August 26th, 1897, already referred to. That contract was adopted as a way out of a situation most injurious to Sternberg, which was brought about by conduct on the part of Wolff of a decidedly inequitable character; and when the contract was made it was in the nature of a compromise, and all parties must have felt that a situation such as now exists was likely to arise under it. Hence the provision for an appraisement and buying and selling by one party or the other. The Sternbergs now offer to submit to the remedy just mentioned, if Mr. and Mrs. Wolff are dissatisfied with the present situation. I think this offer has weight in the present situation, as well as the offer of October 28th, before referred to. It is to be observed that Sternberg’s name is borne by this corporation, and it is not clear that he stands upon an equal footing with Wolff on a proposition to give or take at a certain price; and I cannot say that it is unfair for Sternberg to say, as, in effect, he does say, to Wolff by the answer to the petition, that after the value of the stock is fixed by arbitration, I will tell you whether I will buy or sell.

Further, it sufficiently appears that the character, scope and extent of the business, as well as the mode of conducting it in all its details, was agreed upon and entirely settled and established at the organization of the corporation in 1892, and has never been in dispute between the parties. So that, in point of fact, no meeting of the directors ever took place prior to August, 1897, except on two occasions, and then its only business was to declare a dividend. In August, 1897, a new organization was effected, without change, however, in the character or extent of the business or the mode of conducting it. It fact, no question affecting the conduct of the business was ever brought before the board of directors for corporate action by the board in that respect.

There is no proof that Sternberg has failed to conduct the business strictly according to the plans so adopted, and, as I have already said, successfully. There is, therefore, at present, no need of, or occasion for, any corporate action, and the so-called deadlock is entirely harmless. This condition of affairs differentiates the case from those dealt with by Vice-Chancellor Malins, and spoken of by the chancellor and Vice-Chancellor Van Fleet in the eases above cited.

But if I thought otherwise on the subject of a receiver, it would be necessary for me to consider the situation of the applicants for the receiver. In the previous hearing I found Mr. Wolff altogether to blame for the present situation, for reasons there given at length and not necessary now to be repeated. In his position as treasurer and co-manager of this corporation he represents his wife, who is the actual capitalist. She assumes and approves, by her affidavits and answer, his conduct, and it is quite impossible to disassociate her from him in the whole affair. In fact, the affidavits indicate that she is acting entirely in concert with him.

Now, it is argued, and, I think, with great force, by the counsel for the Sternbergs, that Mr. and Mrs. Wolff are not in a position to come here and ask the court to appoint a receiver based upon facts and circumstances for which they are wholly responsible. In other words, that they cannot themselves create a situation which tends to produce an injury to the business interests of the corporation, and then turn around and ask the court to appoint a receiver to cure or prevent those threatened injuries.

Upon the whole case, then, I am of the opinion that there should be no injunction or receiver, and I will advise an order dismissing the petition, with costs.


author: Emery, V. C.

text:
    The Consolidated Traction Company v. The South Orange and Maplewood Traction Company.
    [Filed March 1st, 1898.]
    1. One street car company cannot restrain another from crossing its tracks on the ground merely that the extension of defendant’s street railroad on the proposed route is unauthorized by law.
    2. A street railway company is not entitled to compensation for mere interruption of its road during the time another company is constructing a crossing oyer its tracks.
    3. The question of complainant’s right to compensation for the privilege of crossing its street car tracks will be determined on an application for a preliminary injunction to prevent its tracks being crossed hy another company, where complainant was in actual use of the property, and all the facts relating to the existence of defendant’s right to interfere were fully presented on the application.
    4. A street railroad company operating the trolley system along a public street is not entitled to compensation for the construction of a crossing over its tracks by another company duly authorized, where such crossing, when properly constructed, will not interfere with the exercise of its franchise, although it necessitates some actual interference with the tracks and wires as constructed, and changes complainant’s exclusive use at the crossing.
    5. Where the right to construct a crossing over the tracks of a street railway company exists, a court of equity will control its construction and operation on application of either party.
    6. Where one has a right to construct a crossing over the tracks of a street railway company, he must give notice of the time and manner of its construction.
    On bill, &c., and application for preliminary injunction.

      Mr. Joseph Coult and Mr. Halsey M. Barrett, for the complainant.

      Mr. Alfred Skinner and Mr. Jay Ten Eyck, for the defendant.
   Emery, V. C.

The complainant is a traction company operating street railways, organized under the Traction act of March 14th, 1893, and under this act entered upon and is operating the street railroad of the Orange and Newark Horse Car Railroad Company, as one of its lines. This street railroad is a double-track road running through Main street in the city of Orange, and, at the time of the entry on it by complainant, was operated by horses, but is now equipped and operated by the electric overhead trolley system.

The rights of the complainant to the occupation of the portion of Main street now in question for the purposes of its railroad, were first conferred on the Newark Passenger Company, a predecessor in title of the complainant, by a resolution of the common council of the city of Orange, passed August 25th,. 1890, which authorized this company to construct, maintain, and operate their street railway for the transportation of passengers from the point on Main street where their line then ended, westerly to the city boundary line. A previous resolution of the common council of August 8th, 1890, gave the Newark Passenger Company the right to use the overhead trolley system for propelling their cars.

The defendant is also a. traction company organized under the Traction act of 1893, incorporated November 8th, 1897, and on or about this date entered upon the street railroad of the South Orange and Maplewood Street Railway Company. This latter company was organized as a street railway company in 1894, and by its original articles its road was to be constructed entirely within the limits of the village of South Orange, and-was to run over private property, except where it crossed two. public avenues. The road was subsequently extended, beyond the village of South Orange and into the,township of West. Orange and into the city of Orange, up to the south side of Main street, where complainant’s railway is now operated. This extension is alleged by complainant to have been m.ade without authority of law. The extension of the road of the South Orange and Maplewood Street Railway is also built upon pri-. vate lands, except where it crosses the public highways, and for this crossing of the highways by the road as extended, the municipal authorities of the township have given authority. The extension of the road by the street railway company as far as the south side of Main street in Orange (according to the bill) was completed and-the road in operation as long ago as the 7th of June, 1897, and on this date the street railway company applied to the city of Orange for permission to cross Main street, and the city council passed an ordinance on August 9th, 1897, granting this authority. On August 30th, 1897, a certiorari was granted by Mr. Justice Depue on the application of complainant, removing the ordinance to the supreme court, and by consent of the street railway company, which was a party defendant to the proceedings, the ordinance was afterwards set aside. One of the reasons assigned in the certiorari proceedings for setting aside the ordinance was that the street railway company had no authority to construct or operate a street railway beyond the limits of South Orange. After this ordinance had been set aside, the defendant, the South Orange and Maplewood Traction Company, was organized under the Traction act of 1893, and entered upon the railroad of the South Orange and Maplewood Street Railway Company as constructed and operated by the latter company. At the time of filing the certificate of entry required by the Traction act of 1893 (P. L. of 1893 p. 306 § 5), the road was constructed and in operation as far as the south side of Main street, and ever since its entry thereon, has been operated by the defendant from that point. On November 8th, 1897, the defendant, under the Traction act (section 6) filed a route for a proposed extension of its road from the terminus of the extension of the road on the south side of Main street, and across Main street, where complainant’s tracks are laid. The Traction act (section 6) requires the consent of the municipal authorities to the location of the route of an extension by a traction company before the construction thereof, and the defendant on its application to the common council procured an ordinance, approved on December 21st, 1897, granting permission to construct, maintain and operate a double-track street railway across Main street. This ordinance did not provide for the location of the tracks and poles of the extension across Main street, but a resolution passed January 3d, 1898 (three days before the filing of the bill), provides for these locations. The defendant’s railway is also operated by the overhead trolley system, and it now proposes to construct its system across the complainant’s tracks, and claims the right to do so under this ordinance. Such construction cannot be made without to some extent interfering with the complainant’s tracks during construction, and the continued operation of both roads at the point of crossing, in the method provided by the ordinance, will require the removal of the present rails of complainant, and the substitution» at the crossing of rails especially constructed for crossings, and will also require the adoption of the overhead wire system now owned and used by complainant in such way that at the place of crossing a joint use for a short distance either of some portion of complainant’s wire, or of defendant’s wire, is necessary.

The complainant has given no consent to the construction of the crossing by defendant, nor has any offer' of compensation for damages to complainant, by reason of the construction, been made. Complainant’s bill' asks an injunction upon two grounds —-first, that the defendant has no right to make its extension across the street, for the reason that the railroad of the street railroad company, upon whose road defendant entered, was not lawfully constructed beyond the limits of South Orange, and defendant’s entry thereon under the Traction law, outside of that township, was unauthorized; second, that complainant’s rights in its track and trolley system, operated in the public streets, are property rights which cannot be interfered with against their consent, without compensation. A preliminary injunction is now applied for.

Such preliminary injunction cannot be granted upon the first ground. The only ground upon which the complainant’s right to equitable relief, based upon the illegal construction and operation of the defendant’s railroad outside of the limits of South Orange, and up to the south side of Main street in the city of Orange, can be based, is the interference with the authorized business of the company, by competition carried on without authority of law. Such unauthorized competition with the business operated under a legal franchise, is a recognized ground of equitable as well as legal relief. Raritan and Delaware Bay Railroad Co. v. Delaware and Raritan Canal Co., 3 C. E. Gr. 546; Pennsylvania Railroad Co. v. National Railway Co., 8 C. E. Gr. 441; Jersey City Cas. Co. v. Dwight, 2 Stew. Eq. 242.

The only other legal injury which complainant can sustain by reason of an illegal extension of the defendant’s road beyond the limits of South Orange and up to Main street, is an injury common to the public or to all other owners of property, and such common injury affords no basis for equitable interference on behalf of the individual or property-owner to enjoin the illegal exercise of a public franchise. In such cases, jurisdiction for the purpose of deciding upon such illegal use is to be exercised only upon proper proceedings at law or in equity by or on behalf of the state. But in order to obtain equitable relief upon the special ground of illegal interference with its business, the bill must be expressly based upon this right to-.the business, and the object of the bill must be to enjoin the illegal interference. And, if a preliminary injunction against such illegal interference is sought, the application therefor must also be made promptly. None of these conditions exist in the present case. The portion of the road charged to be operated without legal authority was in- operation from the south side of Main street for about two months before the bill was filed, or perhaps (according to the bill) from June last. The sole express object of complainant’s bill is the protection against the extension across Main street, and its property rights in Main street; nor does the bill either charge that the illegal extension south of Main street diverts its business, or ask any relief against this operation. It should also be stated that the defendant insists upon the legality of the extension of the street railway beyond South Orange, and also' upon the legality of their operation of it, under the Traction Company act, and that a fair question exists as to whether, under the statutes relied on, the use of the road as extended by defendant is illegal. This status of the dispute as to the legality of defendant’s structure, taken in connection with the delay in the application and the-object of the bill as stated, will prevent the allowance of a preliminary injunction based on defendant’s want of legal authority to operate its road from the south side of Main street. .

Second. The principal ground upon which the right to a preliminary injunction is based, is that the construction of defendant’s railroad across complainant’s tracks, and its operation by the trolley system, will necessarily invade complainant’s property rights, as owner of the track and trolley system, and interfere with its franchise of operating its road. The construction of the crossing as proposed will undoubtedly interfere to some extent with the operation of complainant’s road during the construction. And if constructed in the manner disclosed by the affidavits, and by the plans produced at the hearing, it will also permanently change the present actual condition of complainant’s property at the crossing in the following particulars: In lieu of its continuous unbroken rail, a rail of special construction, a cross in shape, called a frog, is laid .down,-the arms of which are laid on the lines of the respective roads, and in such manner that when laid, the line upon each road is continuous, except that at the angle or very point of crossing, a groove or opening exists, sufficiently wide to admit the passage of the wheels of the ears which are to cross on the other line. This is the method now adopted as the best form of crossing for cars operated by trolley, and is the form of crossing adopted by steam and trolley cars in crossing, instead of leaving the line of the old road continuous, and breaking the rails of the new road. In the old form of crossing steam railroads by horse cars, there was no break in the railroad track, but the horse car wheels were pulled against and over the railroad tracks. When the tracks are actually constructed in the manner now proposed, there will be no interference with the operation of complainant’s road, so that, so far as the tracks are concerned, the question of property rights is whether such change of the rail at the point of crossing can be made without consent or compensation. The operation of the trolley wires at the point of crossing will require a change, in the complainant’s system, of more permanency. For when these are constructed in the manner now considered the best, and according to the plan proposed by defendant, there must be, at the place of crossing, a use for a short distance, by one road, of a trolley or feed wire supplied with electricity by the other road. The trolley feed wires of the two crossing systems are laid in the same plane, and, inasmuch as the electric current operating each line must be continuous, so far as possible, and in the direction of the line, the trolley or feed wire of one of the companies is cut at the proposed crossing in such manner as to interrupt it for the whole width of the crossing of both tracks — about thirty feet — and for this space the current is carried between the points of the cut wire by-a'loop wire extending upwards and running over the crossing. The wire of the other company is not cut, but its current is continued as before. This leaves a space of about' thirty feet at the crossing, where the trolley wheel of the other company receives no current from its own wire or system, but must be taken from one end of its own wire (and of the loop) to the other end without its own current, and, inasmuch as this loss of current for so great a distance would be unsafe, it has been provided against by the method of welding to the continuous wire of the company whose line is uncut, a cross wire extending to the ends of the other company’s cut or loop wire, but not connected electrically with these ends; this connection being prevented by the insertion of what is called a circuit breaker. This cross wire, thirty feet in length, is supplied with a current from the wire of the continuous system. The general result, therefore, is that this cross wire between the points of the disconnected line is supplied with a current by one company, for the sole use of the other company, and in order that it may now have a practically continuous current over the actual crossing, which is the point of danger. Devices by switches, &c., for supplying electric currents to the cross wire from either system, may also be applied, but are not important or considered for the present purpose for the reason that the defendant is undoubtedly bound to construct its crossing with as little interference with complainant’s structures as is reasonably practicable, and this principle would give complainant the right or option to have its own continuous wire left intact. This could, on the proposed method, be accomplished, however, only at the burden or expense of providing on the cross wire the electric current for the company whose wires are cut, and, in disposing of the case, I will therefore consider the right to compensation on this basis of alteration.

Another method of crossing is practicable, and is sometimes used, by which the wires of both companies are cut for a space of about nine inches at the crossing of each set of tracks (in this instance making four crossings), and a concave circular plate of this diameter or other device is inserted which holds all the wires, and over which the two currents are also passed by loops of wire joining the disconnected ends, and thus supplying a continuous current. But in this method the trolley wheel of each car “jumps” the nine-inch space covered by the plate without a current, and inasmuch as four of these would occur at the crossing, the method above referred to, of supplying a continuous current, is now considered the best and safest, and is the one proposed to be adopted by defendant.

The defendant, in its answer, admits its liability to construct the crossing at its own expense, and offers to supply the current for the cross wire to be used by complainant if its wire is cut-in the affidavits, the president of the defendant states that the' defendant is prepared to bear all the cost attendant upon or incident to said crossing, either in its construction or subsequent maintenance.

It is manifest, therefore, that the construction of the crossing, as proposed, will to some extent change the nature and character of the complainant’s ownership of its tracks and wires laid and erected by it in a public street, and will create hereafter at the; place of crossing, joint rights or interests of some character in> the use of the tracks and wire system at this place. The question is whether this can be done against complainant’s consent, without compensation. So far as relates to the mere interruption of the operation of complainant’s road during the period of, construction, there can be no basis for compensation, for complainant’s right to the use of the street must be subject to the-right of the public to cross its tracks located therein, and to the-right of the public authorities to provide for crossing the tracks-by any carriages or vehicles which have the right to use the-street for travel, and to interrupt complainant’s operation in such reasonable manner as may be necessary to provide for the construction of the crossing, when the right to cross exists. National Docks, &c., Railroad Co. v. Pennsylvania Railroad Co., 9 Dick. Ch. Rep. 142; affirmed March Term, 1896.

As to the permanent changes in complainant’s tracks and’ wires, the precise question now involved has not been expressly. adjudicated in our courts, nor has the right of the complainant, for such taking or use of its property as is purely and necessarily incidental to the crossing of its tracks by street cars,, moved either by horse or electric power, in the safest and most, approved method, been expressly recognized; and, on the other hand, the decisions of our courts thus far have recognized the-; right of street railway companies to cross the tracks of steam, railroads laid in the public street, without the consent of the latter and without compensation.

In Morris and Essex Railroad Co. v. Newark Passenger Railroad Co., 6 Dick. Ch. Rep. 379 (1892), Chancellor McGill refused to enjoin a trolley company from crossing a steam railroad laid where the latter crossed a public highway, and from erecting its poles and wires over the complainant’s road. The decision was affirmed by the court of errors and appeals for the reasons given by the chancellor. 7 Dick. Ch. Rep. 340 (1894). In West Jersey Railroad Co. v. Camden, &c., Railway Co., 7 Dick. Ch. Rep. 31 (1893), Chancellor McGill likewise refused to enjoin a trolley company from crossing the tracks of a steam railroad company laid in a public street. In both of these cases the decisions, so far as they were made on the merits of the case, involved the denial of any right to compensation to the railroad company, unless it be considered that being applications for preliminary injunctions, the denials of such injunctions were correct because the right to compensation was doubtful, and therefore could not be protected by preliminary injunction. From the report of the Morris and Essex Railroad Case on appeal, in 17 N. J. L. J. 242, it would seem that this was the ground relied on ; but in the official report (7 Dick. Ch. Rep. 340) all the reasons given in the court below are approved. This principle of refusing preliminary injunction if the complainant’s right be doubtful, if now applied, would require, I think, the denial of the preliminary injunction in the present case. The recent decision of the supreme court in a late case, Paterson Railroad Co. v. Newark, 32 Vr. 80 (November, 1897), is relied on by complainant’s counsel as settling the legal right to compensation in this case, but I do not so read the decision. In that case a public street was laid out over a railroad operated at this point on the company’s own land, for which land, and damages for the use of it as a street, the railroad company was, under the law relating to the opening of streets, entitled to compensation. The question was whether the expenses of a flagman and of gates at the new crossing were proper elements of damages for the opening of the street, and it was held that they were. The right to any compensation whatever in the case was based on the taking of land belonging absolutely to the co mpany, as a private, owner, and for which it had paid ; and the company being therefore entitled by the express provisions of the statute to damages for the taking of its land, the question was as to the elements properly included. This case is no authority for the present application of complainant, which depends upon its right to compensation for tracks and other structures erected not on its lands but in a public street.

The Coach Company Case, 6 Stew. Eq 267 (1880), is also relied on as establishing the nature of the complainant’s ownership of its tracks and wires, and inferentially the right to compensation for any interference whatever therewith. But that case related to the habitual wrongful use of the railway company’s tracks for the purpose of passage along the same, and did not touch upon or settle the question of necessary interference for the purpose of legitimate public travel across the track. Nor was the Coach Company Case considered in the later decisions above referred to as settling the rights at crossings. In these decisions (Morris and Essex Railroad Company and West Jersey Railroad Company Cases) the respective right of the electric street car and steam railroad companies at crossings in the public streets were fully treated on the merits of the question, and principles were laid down which, as it seems to me, when read in connection with our previous decisions, govern the question of the right of complainant to compensation for crossing its tracks laid in a public street. And, in view of the fact that the right to compensation, if it exists in this case, is a constitutional right to compensation previous to talcing, which can be fully protected and enforced only by the prevention of the taking of complainant’s property, I am inclined to think that where the complainant is in actual possession and constant use of the property proposed to be taken or interfered with by the defendant, under claim of statutory authority, and all the facts relating to the existence of the right of the defendant to thus take or interfere with the property in complainant’s actual possession and use, are fully presented on application for preliminary injunction, leaving no substantial dispute as to the facts which should be settled by a final hearing, and no other special reason appears in the case for delaying the decision of the legal question arising on the facts until final hearing, then this court should decide the legal question of the right to compensation on application for preliminary injunction. Such cases would seem to come within the class referred to in Hart v. Leonard, 15 Stew. Eq. 416, 419 (Errors and Appeals, 1886), as cases where one attempts to appropriate the land of another, under color of statutory authority, without complying with the legal conditions precedent. In the cases there cited as belonging to this class, the right to compensation was affirmed and protected by preliminary injunction. See, also, Township of Franklin v. Nutley Water Co., 8 Dick. Ch. Rep. 601, and cases cited on page 606, as to the use of preliminary injunctions for the protection of constitutional or statutory rights requiring previous consent of complainants previous to interference with their property or right of control. These cases, as to the decision upon preliminary injunctions, differ from the cases where the complainant is not in the actual possessiou and use of the property proposed, to be taken, and where complainant’s own right to the legal possession free of defendant’s right to take without compensation, was the doubtful right asserted. Such cases of doubtful right in complainant nothin actual possession were Hinchman v. Paterson Railroad Co., 2 C. E. Gr. 75 (Chancellor Green, 1864), and Halsey v. Rapid Transit Co., 2 Dick. Ch. Rep. 380 (Vice-Chancellor Van Fleet, 1890). And although in both of these cases, protection of complainant’s doubtful right by preliminary injunction was denied, yet it should be noticed that complainant’s right to compensation was in both cases fully examined on its merits and decided adversely to complainants, and both cases have been since accepted as settling the important questions of right involved, viz., that additional burdens in the public easement on streets are not created by the use of street cars operated by horses or trolley.

In the present case, all the facts relating to the manner of. crossing, upon which the right to compensation must depend, are as fully presented as they would be on final hearing, the property of complainant in constant use by. it is proposed to be actually interfered with, and there would seem to be no sufficient reason why the question of the right to compensation should not be now considered, and that right be protected, if it be held to exist. Considering the question, therefore, upon its merits, I shall apply the principles relating to it which seem to me to be settled by our decisions above referred to, especially in the Hinchman Case, the Halsey Case, the Morris and Essex Railroad Case, and the West Jersey Railroad Case, supra. These cases settle that electric street railways, operated by the overhead trolley system with its poles and wires, are not additional burdens upon the soil of the highway, and that these structures may be placed in the public streets without compensation to the ■owner of the soil, subject to the public easement of passage, and other ordinary uses of a highway.- They also settle that a steam railroad, lawfully constructed across a public street cannot exclude the public from the right to use the highway at the point of crossing, or from crossing their tracks by street cars operated by either horses or trolley, except to the extent that interference may be necessary to permit the lawful operation of the steam railroad at the point of crossing. These principles, as it seems to me, control the right of trolley companies, whose tracks are laid longitudinally in the public street, to prevent the crossing of their tracks. They can only prevent this crossing so far as the crossing interferes with or prevents the operation of their road or the exercise of their franchises. Their tracks occupy •the streets longitudinally, without compensation to the abutting owner, only upon the theory that they provide a method of passage over the street which does not interfere with the ordinary use of the streets for public travel, and that their construction or operation in their ordinary mode does not exclude or prevent reasonable crossing of its tracks by the public. And the right of the legislature or of a municipality under its authority to provide for crossing of tracks already laid down, by other tracks operated in the same manner, seems to rest upon the same foundation as the original right of the complainant to construct its own tracks in the public streets, and operate by overhead trolley, without compensation. The right of one street railway to cross another street railway already constructed, is the same legitimate use of the highway as the construction and operation of the original road, and the original right to construct and operate a road in the public streets is necessarily subject to all legitimate purposes of crossing. This would include the methods of crossing made necessary by the development of legitimate methods of using the streets for travel. Nor does the fact that the crossing, as at present proposed, necessitates some actual interference with the tracks and wires as constructed, and to some extent changes thereafter the exclusive use by complainant at the crossing, prevent the crossing by a similar railway company without compensation, if made under the proper legislative authority. For these changes are the necessary result of the development of the method of operating electric roads at their points of crossing, and are such as are made necessary as the best and safest methods now attainable for the safety and convenience of the public in the operation of both roads at the point of crossing. They are, therefore, changes and burdens in the use of its tracks and trolley system, to which the original right to lay and construct them was necessarily subject, and, in a legal point of view, are different only in degree, and not in character, from the changes in the property and control of its tracks made in the ordinary horse car crossing. By reason of the operation of both railroads by electricity supplied by overhead wires, the actual joint use at the point of crossing, which was, with the horse railways, confined'to a short space on the tracks and surface of the ground, is now extended to a more complicated system of tracks on the surface, and also of wires overhead. But it is still, in the whole extent of the crossing appliances, and in every part thereof, merely a crossing in the safest and best manner by two street railroad companies, each of which has the right to use electricity at the place of crossing, with the proper tracks and wire system for that purpose. The use of the whole system, although a complicated use, is still, in its essential nature, only a joint use of the public highway at the point of crossing for the sole purpose of crossing, and, inasmuch as the complainant’s tracks and wires were originally laid and constructed subject to the right of the proper authorities to disturb them for the purpose of legitimate public travel in the public street across their tracks, and the changes and disturbances are necessarily incident to such crossing, these' are not, in my judgment, the subject of compensation. If the complainant is to be compensated for the changes in its property to which it is subjected, solely by the necessity of providing for legitimate public travel across its tracks, and can prevent such travel on the streets from crossing its tracks until compensation for the changes in its property and damages (whatever they may be) arising solely from the necessary provisions for such travel, then a situation arises in which it may perhaps be necessary to consider, whether the structures which complainant has erected in the street have not now become such as interfere with and obstruct public travel at the point of crossing, and for such exclusive benefit of the complainant that they go beyond its right of occupation of the street, and whether the company, on its part, has not become subject to claims for compensation based on the imposition of an additional burden on highways at the point of crossing, for its exclusive use. The only basis for the existence or continuance of complainant’s structures in the street, without compensation, is that they do not substantially interfere with the ordinary and proper use of the highway for public travel, and so long as the structures it erects are kept within its limit, no right to compensation would arise, but if the structures it now erects do interfere with legitimate public, travel across its tracks, by methods of travel which are legitimate on the other portion of the public street, then, as it seems to me, the complainant has erected and is operating a system which is no longer a mere instrument for public travel over the highway, subject to the right of the public to cross it in any legitimate manner, but has, by its structures, interfered with and obstructed a certain portion of the legitimate travel across its tracks. And if these structures of complainant cannot be safely or reasonably crossed by such legitimate travel, without compensation, then the operation of them goes beyond the original limitation of complainant’s right to occupy the streets for travel in common with the public, and as to the legitimate travel in crossing, complainant’s structures are not entitled to be protected by injunction for the purpose of securing compensation.

I reach the conclusion, therefore, on the merits of the question, that the complainant is not entitled to compensation for damages to its property by the proper construction of this crossing, and as the crossing, when properly erected, will not interfere with the exercise of its franchises, the application for preliminary injunction on this ground of right to compensation is refused.

This conclusion agrees with the- principles settled by the decisions of the courts of other states, in cases involving the rights of crossing in public streets, so far as I have been referred to them. These are cases of street car tracks crossing steam railroads, and deny this right to compensation. Brooklyn Central, &c., Co. v. Brooklyn City Railroad Co., 33 Barb. 420 (1861); Chicago, &c., Railway Co. v. West Chicago Shore Railway Co., 156 Ill. 255 (1895); Philadelphia, Wilmington and Baltimore Railroad Co. v. Wilmington City Railway Co., 38 Atl. Rep. 1067 (Delaware, 1897); Pennsylvania Railroad Co. v. Greensburgh, &c., Street Railway Co., 176 Pa. St. 559; New York, &c., Railroad Co. v. Bridgeport Traction Co., 65 Conn. 410.

It was suggested, in the brief of complainant’s counsel, that a court of equity has jurisdiction to control the construction of this crossing if the parties cannot agree. Such jurisdiction can, undoubtedly, be exercised, and where the right to construct a crossing exists, a court of equity will, if necessary, and on application of either party, interfere to control the construction. This was the course taken in this court where the right to construct a crossing arose after condemnation proceedings, and the jurisdiction for the purpose of finally deciding upon the character of the crossing was affirmed by the court of errors and appeals. National Docks, &c., Railway Co. v. Pennsylvania Railroad Co., 9 Dick. Ch. Rep. 142; affirmed, Pennsylvania Railroad Co. et al. v. National Docks, &c., Railway Co., 10 Dick. Ch. Rep. 820. And such equitable jurisdiction relating to the joint use of the public highway would probably extend to the settlement of all questions relating to the construction, operation and maintenance of the crossing, in ease the parties did not agree. But the bill in the present ease is not based on the right to equitable interference for the purpose of constructing the crossing properly, either as to time or manner, but to prevent its construction at all in any manner, without compensation. Nor has the argument on this application been addressed to the question of controlling the joint use, and I am not satisfied that an interference by this court is yet necessary for this purpose. The defendant, of course, has no right arbitrarily to select its own time or manner of erecting the crossing, but, as it now strikes me, is bound,>if no agreement is made, to give due notice, both of the time and manner in which the crossing is proposed to be made. This was the course pursued in the National Docks Case. The rights and obligations arising upon the notice are matters which are not now before the court. The present application is denied.