author: Magi®, Cíiaitoelloe.

text:
    Mary Elizabeth Aller v. Cornelius P. Crouter et al.
    [Filed March 7th, 1903.]
    1. Reformation.' of a conveyance of lands will not be decreed except on clear proof that, by mutual mistake of the parties thereto, it expresses something which they did not intend, or omits to express something which they did intend.

      2. A trust in lands will not result in favor of the grantor in a conveyance thereof upon a valuable consideration therein expressed, upon parol proof that no part of the consideration was paid and that the conveyance was wholly voluntary, because such proof is in contravention of the statute of frauds and forbidden by the canon of evidence which prohibits the admission of oral testimony to vary the effect of a written instrument.
    3. Lands were conveyed by A to B for an expressed valuable consideration. Thereafter B made and signed a lease thereof to a third person, in which it was expressed that he demised the same as “trustee for A,” and B also opened an account in his book of accounts, headed in his own handwriting, “A account with B, trustee,” in which account B charged himself with rents received from the tenant in said lease, and claimed credits for payments made for the benefit and use of A.—Held, that an express trust 'was thereby “manifested and proved” within the requirement of the statute of frauds.
    On bill to reform a deed and for other purposes.

      Mr. Cornelius Dor emus, for the complainant.

      Mr. David Ackerman, for some of the defendants.
   Magi®, Cíiaitoelloe.

The labor involved in the examination of this cause has been largely increased by the manner in which it has been presented. No attention seems to have been paid to the rules of pleading or practice in the courts of equity, and I have had extreme difficulty in attempting hr discover whether the case presented admits of determination by decree.

The bill in this cause was filed by Mary Elizabeth Aller, admitted to be a person of unsound mind, by a next friend. It states that she and her husband, Daniel J. Aller, on October 20th, 1876, by deed, with full covenants of warranty and seizin, conveyed to one Peter Ackerman, for the expressed consideration, of $7,500, certain lands in the county of Bergen. It avers that, immediately upon the execution and delivery of the deed, Peter Ackerman, the grantee, went into possession of said lands, and received the rents, and continued in possession until his death, on August 17th, 1901. It proceeds to state that the deed was made upon the express agreement, between the grantors and grantee, that Ackerman should hold the same as trustee for Mary Elizabeth Aller, upon a trust thus expressed, viz.:

“Upon the express trust and agreement that said Peter Ackerman should rent said premises and pay the net income derived therefrom, after payment of all charges connected with the management of said property, to said Mary Elizabeth Aller, or use the same for her maintenance and support, and that if said Peter Ackerman should sell said premises, that the proceeds of such sale and all income derived therefrom, after payment of all expenses and charges touching the same, should be used for the support and maintenance of said Mary Elizabeth Aller, and that upon the death of the said Mary Elizabeth Aller any balance remaining in the hands of said Peter Ackerman should be paid to her lawful heirs.”

It is further stated therein that Peter Ackerman, together with his wife, on November 29th, 1876, had conveyed a portion of the said lands to one Mason, at the request of the complainant, and had afterwards died, on August 17th, 1901, leaving a last will and testament, by the residuary clause of which he devised all tire rest, residue and remainder of his estate to, or for, certain persons therein named, all of whom were made parties- to the bill.

The bill expressly- avers that it was the intention and agreement of the parties thereto, at the time of the execution and delivery of the deed, that the same should be considered and treated as a trust deed, and that, through “inadvertence, ignorance and mistake, said deed was drawn as a warranty, and not as a trust, deed.”

The prayer of the bill is for an answer without oath; for an account of the rents and profits, and for a reformation of the deed by the insertion of the words “trustee for Mary Elizabeth Aller” after the words “Peter Ackerman” wherever they occur in the deed, and by the substitution of apt words in the habendum clause, and other clauses, to show that the deed is a trust deed, and intended to convey an estate in trust for the complainant.The prayer also contains the extraordinary request that the warranty clause in the deed should be eliminated, together with all other words purporting to convey an estate in fee-simple to said Ackerman.

To this bill the next friend of the unfortunate complainant made parties Cornelius P. Crouter and Peter G-. Zabriskie, who are the executors of the will of Peter Ackerman; James Turner Ackerman, David D. Ackerman, Mabel Harper, Ánnie M. Ackerman and Edwin Ackerman, devisees under the residuary clause of said will; and John Pake, brother of the complainant; John II. Pake, his son, and Louisa Duryea, a niece of complainant, the three last named being made parties apparently on the theory that they are heirs presumptive or apparent J ames T. Ackerman and Edwin Ackerman, and Crouter and Zabriskie, executors, each filed an answer expressing ignorance of the charges made in the bill, and leaving the complainant to make such proof of her allegations as she was advised to do. Louisa Duryea, John Pake and John H. Pake unite in an answer admitting the charges of the bill, and praying for such decree as may be proper. David D. Ackerman, Anna M. Ackerman and May Belle Harper unite in an answer by which they deny the trust set up in the bill, and deny that the complainant has any title to the lands in question, or that the deed was intended to be a deed in trust, or that it was made under any mistake with respect to the form of the deed and its meaning.

To this answer, which denied all the facts upon which the equity of the bill was based, no replication was filed within the time required by the practice.

On April 22d, 1902, an order was made, with the written consent of the solicitors of all the parties. It recited that the matters in controversy were proper subjects of a reference to a special master, and that the parties had agreed that the issues in the cause should be heard by James M. Van Valen, a special master. It directed him to take evidence in respect to the allegations of the bill and answers subject to> objections, and to take and state an account of the transactions between the complainant and Peter Ackerman, and to' report the same, with the evidence.

The special master to whom the reference was thus made has reported to this court the evidence taken before him. Upon his report being filed the cause was set down for hearing, under a ■written stipulation of all the solicitors, and was submitted on briefs.

When attention was called to the fact that the cause was not at issue, a replication was filed, by the agreement of all the solicitors and the permission, of' the court.

After the evidence had been taken the death of Mary Elizabeth Aller, the complainant, was suggested to the court. The affidavit of her death stated that her sole next of kin were John H. Pake and Louisa Duryea, who wore parties defendant in the cause. Thereupon an' order was made for the amendment of the bill, by admitting them to appear as complainants instead of defendants. As the contest relates to real propert}', and as the evidence discloses that they'are the sole heirs-at-law of the deceased, Mary Elizabeth Aller, this circumstance has not been deemed sufficient to prevent consideration of the cause. As the cause has been thus presented, it has been deemed best to consider it as a cause submitted on evidence taken before an examiner within the practice of the court, and it has been tons considered.

The apparent object of the bill is to reform a certain deed, and the main prayer thereof is for such reformation. But the evidence produced, on the part of the complainant, renders it perfectly clear that such relief cannot be granted, and should not have been asked. In respect to such relief, it has not been contended, nor is it open to doubt, that parol evidence; may be admitted toi establish a case for the reformation of such a deed.

The facts disclosed by the admissible evidence arc, in the main, these: In 1816 the original complainant, Mary Elizabeth Aller, was the owner, in fee-simple, of a tract of land in Bergen count}!, containing about ten acres, which was improved by buildings. She was in possession of the property. She was a married woman, having been married to Daniel J. Aller some years before. The marriage had proved an unhappy one, and after a few months they had separated, and thereafter lived apart. Her marriage does not seem to' have been generally known, for she resumed her maiden name of Pake, and was spoken of and to as “Miss Palee.” In that year she contracted to sell a portion of the property, and the proposing purchaser discovered that she had been married, and declined to take the deed without her husband joining in it. In that situation Mrs. Aller sought the advice of' Peter Ackerman, a person long resident in the county, whom she had known for many years. He appears to have been a man of position and character. After a conference with him it was decided by them that a deed should be prepared, to be executed by her and her husband to Ackerman, conveying to the latter the whole of said tract of land. The plain purpose of this conveyance was, primarily, to enable Ackerman to make a deed to the intending purchaser .for the part of the land of Mrs. Aller which he had agreed to buy, and secondarily, to enable Ackerman to make other conveyances if complainant desired to sell other portions or the whole of said land. The deed was so prepared, and Ackerman went with Mrs. Aller to her husband, and they procured the husband’s signature thereto, upon the payment to him of $100, which was either furnished by her or advanced by Ackerman and afterwards repaid by her. This deed appears to have been duly executed by Mrs. Aller and her husband, and was recorded. Ackerman thereafter made conveyance of the part of the land which Mrs. Aller had agreed to sell. The evidence justifies the inference that the consideration which Ackerman received was used for Mrs. Aller’s benefit.

The proofs above stated comprise, substantially, all the evidence having any bearing upon the relief now under consideration, viz., that of reformation of the deed in question. It seems obvious that they are • insufficient to justify a decree for such relief.

Reformation of such a deed can only be decreed when the proofs convincingly establish that, by a mutual mistake of the parties thereto, the deed, as executed, expresses something which they did not intend, or omits to express something which they did intend. The claim of the bill is that there was omitted from the deed a clause declaring that Ackerman, the grantee, held the lands conveyed in trust for Mrs. Aller. There is not a syllable of evidence that the parties intended that such a clause should have been inserted in the deed. On the contrary, the insertion of such a clause could not have been within their intention, for it would have defeated their purpose in executing the deed; for any intending purchaser would have declined to take title to any part of the land from Ackerman, under a deed so framed, without a conveyance from the cestui que trust, Mrs. Aller, which would- have required the concurrence of her husband. The deed was- undoubtedly made to avoid the necessity ■of seeking the concurrence of the husband to such conveyances, and it cannot be conceived that there was an intent to make it ineffective to serve the purpose for which it was designed.

It may be that Mrs. Aller did not properly appreciate the extent to which the delivery of this absolute conveyance put it in the power of Ackerman to deprive her of the land thus conveyed, and take it to himself. But there is no evidence that Ackerman took advantage of her ignorance, if she ivas ignorant. It is equally credible that she was willing to confide in the honesty of her friend, and the proofs show that she was justified in such confidence, for they make it appear that neither by word nor act did Ackerman ever make claim to the land conveyed, or deal with it other than as the trustee of Mrs. Aller.

The failure of proof to justify a decree of reformation must result in a dismissal of the bill, unless there is relief prayed for thereby which is within its scope and justified by the evidence.

The bill contains no prayer for general relief. Under such a prayer no question could arise but that an appropriate relief could be given in respect to matters falling within the scope of the bill.

The brief filed in behalf of Mrs. Aller contends that the prayer for a decree, that the deed “should be held, construed and regarded as having conveyed the said premises in trust,” indicates relief that can be afforded upon the evidence. I am inclined to the view that, if the evidence justifies such relief, it ought to be afforded, and, if necessary^, by an amendment of the bill, - or even of its prayer. I will therefore consider the -evidence to determine whether the facts proven justify relief of that nature.

It is first contended that the circumstances proved establish a case of trust by implication, or construction of law, which is excepted from the provisions of the statute of frauds, and is provable by parol evidence. In addition to the evidence previously recounted, it was further proved that, notwithstanding the execution, -delivery- and recording of the deed to-Ackerman,. Mrs. 'Aller remained in possession of-the property. She employed-it in the ■ business- of taking boarders, from whom she annually received an-income, which she applied,--with the knowledge- of- Ackerman, -in -repairing the property, improving the buildings- thereon and keeping-them in good condition. In short,- she acted, a.nd -was permitted to act by Ackerman, precisely as--if she were the owner in'fee-simple. This continued for some eleven or-twelve-years, when she lost her mind and became -demented, in which state she continued to the day of her death, more than thirteen years afterward. During all the time Mrs. Aller was-thus incapacitated Ackerman took charge of the lands and buildings in question. He permitted her at times to -reside there with liar niece, and at other times lie-leased the premises. He received the rents. He-paid the taxes, or procured them to be paid by tenants on account of rents. He looked after and paid for repairs upon the property. He obtained- insurance in his own name upon the buildings, and in his bQok of account ho opened and continued to keep an account- with Mrs. Aller, apparently including all his receipts from the rent of- the property, and all his disbursements on account thereof, and on her account. These disbursements include items paid for taxes, insurance and repairs, a-s well as items paid for care and treatment of Mrs. Aller in asylums and sanitariums and elsewhere, where she was kept restrained by reason of her infirmity. In short, he-acted, during the whole period of his life after she became insane, as an honorable man would act with respect to property, the title to which he had for the benefit of another person. His conduct was unchanged to the day of his death.

'The facts above stated are proved by Avitnesses present at the negotiation between the parties, by witnesses who heard admissions of Ackerman, by the handwriting of Ackerman in his books- of account, and upon some of the receipts for disbursements upon the lands, and by a lease of the premises, hereafter to be considered.

Upon this evidence the' question is whether -a' resulting trust in-'the lands conveyed to Ackerman, for the’ benéfi-t 'of Mrs. Aller, is sufficiently established''to justify a decree for relief.

''Besulting trusts have been considered, since the decision of Lord Hardwicke in Lloyd v. Spillet, 2 Atk. 148, to fall riaturally within'one-of three classes, and the distinction has freqxtently been' recognized by our courts. One class 'of such trusts '.arises when-title to lands which-are'purchased, in whole or in'part, with the money of one is taken in the name of' another, our leading case in respect to that class being Cutler v. Tuttle; 4 C. E. Gr. 549. Another class'of such trusts arises when a'trust is 'declared in respect to a portion of the title to lands, and nothing is declared in' respect tO''the remainder of the title, which was considered in Duvale v. Duvale, 11 Dick. Ch. Rep. 375. The remaining class, which is now more generally classified by the text-writers under the head of constructive trusts, is 'that where title to lands is acquired by fraud or mala-fide, of which we have many examples in cases where solicitors-or agents have purchased for their principals at judicial sales, and taken title in their own names. . • ■ ' ■

The'case with which wc:are dealing evidently does'mot fall within the second of these categories. Nor is there'ground to contend that it is a case of constructive trust, for there cannot be the least pretence .'that Peter Ackerman acquired the title to the land by this deed by any species of fraud.

If, therefore, a‘trust results from the covenants, it must be because the case falls within the first-class of trusts-thus distinguished. But it- is-plain that it does not bear the ordinary characteristics of that class, because nothing is clearer from the evidence than'that no''consideration was paid for the'deed. 'So far as Mrs. Aller,- the -real owner, was concerned, it was wholly without' consideration a'nd voluntary. Her husband had no estate therein, not even the-estate by the curtesy initiate, 'and the small sum paid' him would not support a trust for the 'whole property. If a trust results in'this--case,-it must'arise' from the fact that the conveyance to Ackerman was purely voluntary, and Conveyed to’him a-n appárently absolute title, without a dollar having been paid therefor.

Whether a trust results under such circumstances was a matter considered by this court in Lovett v. Taylor, 9 Dick. Ch. Rep. 311. The well-reasoned and satisfactory opinion of Vice-Chancellor Pitney in that case renders any discussion of the matter superfluous. It establishes convincingly that, by the settled law of this state and the weight of authority in this country, a resulting trust cannot be established by mere proof of the fact that no consideration was paid for a conveyance operating under the statute of uses. In my judgment, he properly criticises the modern English decisions as departures from correct principles. In this state I apprehend there can be no-doubt on the subject, since the decisions of the court of last resort establishing that a grantor in one of the conveyances now used to pass title cannot .claim a resulting, trust in himself, upon proof that there was no consideration paid, such evidence being deemed to be in contravention of the express provisions of the statute of frauds, and contrary to the canon of evidence which forbids the admission of oral testimony to vary the effect of a written instrument. Whyte v. Arthur, 2 C. E. Gr. 521; Osborn v. Osborn, 2 Stew. Eq. 385.

It results that there is no proof upon which a resulting trust can be established by decree.

It only remains to consider the contention that, upon the evidence, an express trust has been established and may be decreed.

In dealing with this contention it is at once obvious that I must dismiss from consideration very much of -the evidence taken by the master, -some of which has been adverted to. The defendants did not attempt to impeach the credibility of the witnesses who gave the evidence. They did not contradict the evidence given. They produced no witnesses who testified that Peter Ackerman, in his lifetime, made claim to the lands in question. But the evidence was of a parol character. Howr ever adapted to convince my judgment that Peter Ackerman took the title to the lands without payment of a dollar for them, and thereafter held them fot Mrs. Aller, and that, if living to-day, he would probably recognize the claim of her heirs-at-law, if the evidence is such as I am prohibited by law from considering, the defendants have a legal right to insist that I must shut my eyes and close my ears to it.

• By the provisions of section 3 of our “Act for the prevention of frauds and perjuries” (Gen.-Stat. p. 1603), which is a copy of the provisions contained in sections 7 and 8 of the English statute of frauds, it is enacted that all creations of trusts in lands (not being such as arise upon a conveyance by mere implication or construction of law) must be “manifested and proved” by some writing signed by a party having, by law, capacity to declare such trust, or by his last will in writings The construction of this statute in our courts has been uniform and consistent. ■ It excludes all parol testimony to the creation of air express trust in lands. It does not require that the trust shall be created by a writing, but only that it must be proved by such means. The written proof need not be contemporaneous with the creation of the trust, but will suffice if made after long intervals. The proof may be found and deduced from one or more writings, if they bear a relation to' each other and import a trust. The writing need-not be of a formal character, but a trust may be imported and proved by letters, deeds and other writings signed by the party to be charged. Hutchinson v. Tindall, 2 Gr. Ch. 357; Smith v. Howell, 3 Stock. 349; Newkirk v. Place, 2 Dick. Ch. Rep. 477; Silvers v. Potter, 3 Dick. Ch. Rep. 539; Tynan v. Warren, 8 Dick. Ch. Rep. 313; Jauch v. De Socarras, 11 Dick. Ch. Rep. 538; Brown v. Combs, 5 Dutch. 36.

There was produced in evidence in this case at least one writing which measures up to the requirements of the statute of frauds. It is an indenture of lease bearing date February 4th, 1891, at a time when Mrs. Allcr was mentally incapacitated. It is proved to have been signed by Peter .Ackerman. It is made between Peter Ackerman, as “trustee of Mary E. Pake, of the first part, and Elizabeth B. Kerr, of the second part.” It demises to the party of the second part the “house, outbuildings and about seven acres of land at Hohokus,” in Bergen county, known as the “Osborn Place” or “Pake Place,” for the term of one year, with the privilege of three additional years, at the yearly rent of $000. By the description the demised land is clearly identified as that which remained of the land conveyed to Peter'Ackerman by the deed in question. That this instrument is an' acknowledgment in writing sighed by Peter Ackerman; that he held the lands in trust for Mary E. Pake, the name by which Mrs. Aller was designated, does not, in my judgment, admit of the least question. It is, to use the language of Mr. Perry,'a writing in which the fiduciary relation between the parties, and its terms, can be clearly read. Standing alone, it 'satisfactorily establishes that Peter Ackerman held the naked title to "the land for the use of Mrs. Aller, who had the beneficial" interest therein.

While parol 'evidence of'an express trust is to be rejected, yet, when an instrument is claimed to be an acknowledgment and proof of such a trust, the circumstances under which it was made may lie used to elucidate its construction.' Morton v. Tewart, 2 Younge & C. 66. In this connection the facts that the conveyance in question had been made and recorded many years before; that Mrs. Aller remained t'hereáfter in possession of the lands until she became incapacitated, and that this lease was afterward made by Ackerman, the grantee in the conveyance, are extremely significant.

Nor can I'yield" to' the defendants’ contention that this instrument fails to: disclose.the terms of the trust." It affords as complete a descriptión of the' terms as would be' afforded by a conveyance of lands to A.in'trust for B. There could be no doubt that siich a conveyance’ would vest the legal title in A, and B would acquire thereby the complete beneficial interest, which ha could convey or devise, and which would descend to his hoirsr-at-law. . Precisely" 'such a'trust is acknowledged and proved by this instrument.

There are in evidence other writings which, I think, may be read with the lease above considered and aid'in its construction. Upon one page of the book of 'account kept by Peter Ackerman is an account headed'thus': “Mary E. Pake account with Peter Ackerman, trustee.” The heading is shown to be in Ackerman’s handwriting. Although' this is not a'subscription, it is a “signing” within the meaning of the statute of frauds. Smith v. Howell, ubi supra. The account which follows, on that and other pages,' contains’ entries whereby he has charged himself with rent received from Mrs. Kerr, the lessee in the lease, and allowances in his favor for payments for Mrs. Aller’s benefit. There are also other entries for rent in subsequent years and allowances' thereon.' It may be added that the account shows that Ackerman, before he died, had'advanced for Mrs. Aller’s benefit more money than he had received.

There is also evidence that Peter Ackerman kept the vouchers for payments made by 'him on Mrs. Aller’s account in an envelope, on which he wrote “Papers of Mary E. Pake, Peter Ackerman, trustee,” but the envelope was not produced. Many receipted bills for work done or materials furnished for the property were produced in evidence. They showed, in many instances,'that the work 'or materials furnished for the property had been charged to him,, and he had added to his name the word “trustee.” But, as it is doubtful whether these writings can be deemed to have been signed by him, I have given them no consideration. The lease and the account are signed by him, and thereby, in my judgment, he has acknowledged a trust, which is proved in conformity with the provisions of the statute.

It results that a decree declaring the trust would he supported by this evidence.

If counsel desire it, I will hear them further on two questions: (1) Whether such a decree can be made without amendment of the bill, and (2) what the terms of the decree should be.


source: Caselaw Access Project

author: Magie, Chakcellok.

license: Public Domain

text:
    John J. McCook and William T. Lawson, trustees, &c., v. Spencer M. Mumby and Malcolm Campbell, executors, &c., et al.
    [Filed March 16th, 1903.]
    A testator, by his will, created a trust fund for the benefit of a son, to whom a life interest therein was given, and empowered the trustees thereof to advance and pay over to such son, in his lifetime, out of said fund, any sum, not exceeding $100,000, at their discretion; and further empowered such son, by his will, made under certain circumstances, to dispose of $150,000 out of said fund to any person he might see fit. The trustees advanced to said son from said fund an amount less than $100,-000. The son died under circumstances which rendered applicable the power conferred on him to dispose of $150,000 out of the fund by his will. —Held, that upon the true construction of the will of the father, the son’s power of disposition was not diminished by the amount previously advanced to him, but extended to the whole amount of the fund remaining in the trust after such advancement, if the same was less than $150,000.
    On bill for direction to trustees.

      Mr. John O. H. Pitney, for the complainants.

      Mr. Charles L. Corbin, for Adele Mittant Day.

      Mr. Elmer King, for Spencer M. Mumby and Malcolm Campbell, executors.

      Mr. George Holmes, for Sarah Lord McCormick et al.

      Mr. John E. Miller, for Susan Dc Forest Day Parker.

      Mr. William A. Barlealow, guardian ad litem of Mildred Day McCormick, an infant.
   Magie, Chakcellok.

The complainants, John J. McCook and William-T. Lawson, as trustees of a trust fund created under the provisions of the last will and testament of Henry Day, late of Morristown, in this state, deceased, and of the codicils thereto (which will and codicils were duly admitted to probate in the county of Morris on January 22d, 1893), by their bill in this cause, seek the direction of this court as to the disposition of the fund thus created, which is now in their hands.

They have made parties defendant to their bill Spencer MMumby and Malcolm Campbell, executors and trustees under the will of George Lord Day, deceased; Adele Mittant Day, Susan De Forest Day Parker, Sarah Lord McCormick, Robert Hall McCormick, Henrietta Hamilton McCormick, Elizabeth Day McCormick, Phebe Lord McCormick and Mildred Day McCormick (the last named being an infant); and they charge that conflicting claims to the trust funds in their hands have been made by the defendants, which claims conflict by reason of variant constructions of certain of the provisions of the will and codicils of Henry Day, in respect to Avhich constructions-the complainants have doubts. They therefore seek a judicial construction thereof and directions for their conduct for their protection.

They called upon the defendants to answer and set up their respective claims.

Answers have been filed by the defendants which, it is sufficient to say, do indicate conflicting claims to the trust fund in the hands of complainants, dependent upon conflicting constructions of the will and codicils of Henry Day.

The clauses of the will which are thus drawn in question are contained in the sixth item and a portion of the seventh item thereof, which read as follows:

“Sixth. The remaining half of my residuary estate, real and personal, and in case my said wife should not survive me, the whole thereof, I direct to be disposed of in the following manner: I direct it to be divided into-as many shares as I may leave children me surviving, and children who may then be deceased, leaving issue me surviving. One of these shares I give to be divided equally among the issue of each of my then deceased children per stirpes and not per capita.
“The other shares I direct my executors to hold each as a separate trust estate, one to the use of each child me surviving during the life of such child, to keep the same invested in securities by them considered ’good, to receive the rents, profits and income of the same and to pay over the net proceeds of the same ,to the use of such child half y,early or oftener during his or her life, and upon his or her death, I give the said sum so held for the use of such child to be disposed of as shall be" directed' by the last will and testament or appointment-of any such child, made according to the powers hereinafter named and duly executed, and in default of„any such will or appointment, I give said sum to the lawful issue of such child, to be divided among them per stirpes and not par c'dpita, and in default of any such will, appointment or issue, thelrto my lawful issue" then living, such issue taking per stirpes, and not -per capita. .And,I. hereby authorize any such child, last named, to dispose of the share limited to his or her use by will or appointment to'or'among hié'or her or my lawful issue, in such-shares and upon such' legal"' trusts ,!as ea’cli child respectively-may direct, and in default of any such issu,e of such child, then I authorize said child to dispose of one hundred and fifty thousand dollars of said fund held in trust'for his or her use to any person or: persons or charities he or she may see fit, and the remainder'of said fund I give to my'lawful issue then living, such issue taking per stirpes and,,not per capita.
“The share appropriated to the usé of my son George under this clause shall be held by my remaining executrix and- executors, but the investments of the same shall be made by and with the consent of my said son.
“Seventh. I authorize my executrix and executors, in their discretion, and if they shall think it for the best interest of my son George, at any time and from time to time, to 'advance and pay to him any portion of the share above mentioned limited to his use; not’exceeding -in all'the sum of one hundred thousand dollars.”

In connection with these provisions, .there is to lie considered the first clause of the second codicil, which reads as follows:

“First. I do hereby appoint as trustee for. .the fund to be set apart for the use of my son-, George Lord Day, under the sixth clause of my said will¡ Daniel Lprd and John J. McCook, with all tlie powers and duties in said will and codicil thereto mentioned. '■ ■
“I hereby revoke the appointment-of -other trustees for said fund in said will and codicil mentioned;”.

and the sixth item of the same codicil, which reacts as follows:

“Sixth. Inasmuch as the executrix and the executors of my said will will not in every case be trustees "of each "trust fund in said will mentioned, wherever in" my said will'I have''givcn ány powei—or authority to my execXitrix or executors,' by name, over any’'of the trust funds, it is to be understood that that 'authority shall apply to the respective trustees of such trxiát fund after’said funds are appropriated 'and set apart, and the power of the executors over the samé‘shall from" that time cease. This-shall apply especially to the seventh article óf my said will.”

The circumstances, under , which the complainants’ relief is sought, as established by the proofs, are the following: The complainant McC.qok was one, of the trustees of the fund set apart for the testator’s son, George Lord Day, appointed by the first item of the second codicil. The complainant William- T. Lawson has ■ been appointed a trustee, with the complainant McCook, of theMsariie fund/'in conformity with the provisions contained in the said-, ufill and codicil. George Lord Day has died testate, and complainant's have duly stated and settled their account as trustees, in the Qrphans court of Morris county, and there has been found, to be in their hands $119,636.80, which amount -that court has directed them to pay over according to the terms of their trust.

During the lifetime of George Lord Day the trustees of this fund paid to him out of the-same in all the sum of,$96,813, which payments were made pursuant to the authority conferred by the provisions of the seventh item of the will and the sixth item of the second codicil.

George Lord Day died without leaving children., but leaving a widow, Adele Mittant Day. By his will he bequeathed certain legacies, and their made therein the following provision:

“All other property of which I shall be seized or possessed at the time of my death, whether such property be real or personal, and whether it shall be mine in absolute ownership, or held in trust for my benefit by trustees under the will of my father or of my mother, with powers granted to me to dispose thereof by my will, 1 give (intending hereby to exercise the said powers of disposition by my will) to my executors hereinafter named (acting as trustees), to have and to hold unto-them, their successor or successors upon the following trusts, viz. :
“To invest the same and keep the same invested as a trust fund, and to hold the capital of said trust fund during the life of my wife, Adele Mittant Day, and to pay over to .her the net income thereof (after deduction of all necessary and proper expenses of said trust) in equal quarterly or semi-annual payments, according as my said wife shall desire; and upon the death of my said wife, to pay over the capital of said trust fund, in equal shares, to any child or children of mine, and any child or children of any deceased child or children of mine, who shall be living-at the decease of my said wife, such children and grandchildren to take per stirpes and not per capita; and if but one child of mine and no grandchildren, or but one grandchild and no children, shall survive my said wife, then, upon the death of my said wife, to pay over the entire capital of said trust fund to such child or grandchild.
“Should no child or children, grandchild or. grandchildren of mine survive my said wife, then, upon the death of my said wife, I give the entire capital of said trust fund to the issue then living of my father, Henry Day, such issue to take per stirpes and not per capita.
“Furthermore, should the above disposition of the property bequeathed in trust for my benefit by the will of my father be held to be invalid as an ■exercise of the power of appointment by my will, granted to me by the said will of my father, in respect of said property, then, and in that case, X make no alternative disposition of said property beqrreathed in trust for my benefit by the will of my said father,.with power to me to dispose thereof by my will; hoping'that the person or persons who, upon my failure to exercise said power, will, according to the terms of the said will of my father, be entitled to said property, will bo able and willing to find means of carrying out my wishes in respect thereto as hereinabove expressed.”

It further appears that Henry Day had four children—Elizabeth, who married one Inglis; Sarah McCormick, one of the defendants; George Lord Lay, deceased, and Susan De Forest Day Parker, also one of the defendants. Mrs. Inglis died intestate, in the lifetime of Henry Daj', without issue. Mrs. McCormick has five children; four of them are adults and one, named Mildred, is a minor. These children arc also defendants. Mrs. Parker is now living, and has no issue.

The contention on the part of the executors and widow of George Lordi Day. is that, by the will of Henry Day, a power of appointment was conferred upon George Lord Day extending to $150,000 of the fund, and that the will of George Lord Day duly executed that power, and took effect upon the whole of the fund in their hands, which was less in amount than the sum which he was empowered to appoint.

The contention of some of the defendants, and particularly of the infant, answering by her guardian ad litem, is that no power of appointment was Conferred on George Lord Day by the will of Henry Day, but if such a power was conferred, it ■extended only to so much of the $150,000 named therein as had not been advanced and paid over out of the fund to him in his lifetime, and that, in case the power to appoint is discoverable, it extended only to so much of the fund in the hands of the •complainants as remained after deducting the $96,813 previously advanced and paid to him. Under this construction it is further contended that, by the will of Henry Day, so much of the fund as was not properly disposed of by the appointment of George Lord Day is to be distributed and paid by the trustees to the issue of Henry Day, and that the living children of Mrs. McCormick are entitled to share therein.

The first question to be considered relates to the power of appointment conferred on George Lord Day, and its extent.

Under the provisions of the wiil of Henry Day it seems to me that there can be no doubt that the testator conferred upon George Lord Day, his son, a power of appointment in connection with the fund in which he had an interest. The provisions of the sixth item of the will fall naturally into four' categories. The first provides for the disposition of the fund in case George died leaving no will and leaving issue. The second for the case of George dying leaving no will and leaving no issue. The third provides that if George died leaving issue he could dispose of the entire fund by his will among the issue of Henry Day, including his own issue. And lastly, it provides for the case of George dying leaving no issue, in which case power is conferred to dispose of -$150,000, out of this fund, by his will, “to any person or persons or charities that he should see fit.”

The whole clause conforms, in substance, to the usual testamentary description of powers of appointment. The testator, after indicating the right of the children having a life interest in the fund, bequeaths the sum held for the use of the child, to be disposed of as directed by such child’s last will and testament or appointment, under the powers conferred by the will. In case George had left living issue, he was empowered by will to appoint to whom of the issue of Henry Day, including his own issue, the fund should go. In case George left no issue, he was, in like manner, empowered -to appoint, by will, to whom $150,000 of the fund should go, and tire testator disposed of any excess that might remain in the fund.

The facts proved establish the right of George Lord Day to make the appointment under the last category of the provisions of the sixth clause of Henry Day’s will. He died leaving no child. He was therefore empowered, by testamentary disposition, to appoint $150,000 out of.this trust fund, to any person, at his discretion. His. will seems to have been executed with all the formalities required to make a. valid testamentary disposition of his property, and it executed the power of Appointment. It probably would-have been a sufficient; appointment if it had failed to indicate an intent to exercise, the .power, conferred on him in that respect. But -there is. an express- declaration in his will of an intent to make the. appointment under the power conferred upon him by the will of his father, and although he expresses some doubt whether his appointment can be effectuated, his doubt can have no effect upon the judgment of the. court, if, in fact, liis will, on a proper construction of the provisions of the .will of Henry Da)^, was a valid appointment by George Lord Day. On that subject I have no doubt, and find in the circumstances nothing to indicate why George Lord Day' expressed a doubt on this subject in his. will, though it may be conjectured that lie had in mind a possibility of issue being born to him and living at the time of his death. In.such ease, the provisions of his will would have been, so far as the interest of his wife is concerned, ineffective.

Upon the execution of a power of appointment of this sort it is well-settled law that the appointee takes, not from the person who appoints, but from the original donor or testator, so that the interest of any person in this fund acquired by the appointment of George Lord Day was an interest which emanated from the original testator, Henry Day, George being only the indicator pointing, out to whom the testator’s bounty should go. Leggett v. Doremus, 10 C. E. Gr. 122.

The provision contained in the seventh item of Henry Day’s will giving authority to the executors, at their discretion and if they deemed it for the best interests of his son, George, to advance and pay to him any portion of the share limited to his use, not exceeding $100,000, an authority afterward extended, by the sixth item of the second codicil, to the trustees-of the fund, indicates, in my judgment, a plain intent on the part of the testator to withdraw from the fund so much as was advanced and paid to George, which sum so paid became his property, and to leave the remainder of the fund under the trust. When. therefore, the testator gives authority to any child to appoint out of the trust fund limited to- his use the stun of $150,000 under certain „ circumstances, the trustees must recognize the interest of the appointee in the fund remaining in tlieir hands after advancement and payment of the permitted sums to the child having a life interest. It results that the fund in the hands of the trustees, being less than the amount which George Lord Day was empowered to- dispose of bjr appointment, is wholly disposed of by the appointment contained in his will, and a decree must be made giving this construction to the will for the benefit of the trustees thereunder.

This result renders it unnecessary to give any attention to the further question asked respecting the persons to whom the residuum of this fund, if there were any, would pass under the provisions of the will of Henry Day.


author: Magie, Ohaitcellok.

text:
    Elenore Smith v. Emma Shepherd et al.
    [Filed April 14th, 1903.]
    1. A widow who buried the remains of her deceased husband in a burial plot belonging to Ms sister, with the consent of the latter, and who- prepared the grave for the reception of her own remains after death with like consent, knowing that the said plot was so occupied that no consent would be given for other interments therein, is not entitled to- require the owner of the plot to permit her to remove the remains merely because his children by a former wife (also buried therein) and his children by her cannot be buried, there.
    2. The fact that the sister, the owner of the plot, refuses- to consent to the removal of her brother’s remains from said plot for- the purpose of burying the same in a plot belonging to the widow, and also refuses to consent to the removal of the remains of the first wife of the deceased for the purpose of burying the same in the plot of the second wife, now his widow, raises no equity justifying a decree requiring her to give such consent in either case.
    3. The right of the widow, in respect to access or care or adornment of 'the grave of her deceased husband, is not involved in or decided in the present case, and the dismissal of the bill is without prejudice to her seeking relief hereafter if her rights in those respects, if any, shall be interfered with.

      Miss Florence Hose, for the complainant.
   Magie, Ohaitcellok.

The bill in this cause was filed by Elenore Smith, the widow of Edwin Smith, and its purpose is to obtain a decree permitting .lier to remove the body of her late husband from a lot in Eairmount Cemetery, in the city of Newark, in which it was buried, to another lot in the same cemetery, and enjoining the defendant from preventing such removal. There is also a prayer for an injunction against the defendants preventing complainant from visiting the grave in which the remains of complainant's husband now are, and planting flowers upon it and keeping it decorated.

The defendants to the bill are the Fairmount Cemetery Association and Emma Shepherd, the owner of the lot in which the remains of complainant's husband are now buried.'

The Fairmount Cemetery Association filed an answer, submitting itself to the judgment of the court.

The defendant Emma Shepherd filed, pro se, a paper, presumably intended to be an answer. Upon exceptions filed thereto the answer was found insufficient, and liberty was given to file another answer. The defendant did not avail herself of the permission, and a decree pro confesso was made against her, and the complainant was ordered to produce proofs to sustain the allegation of her bill of complaint. Proofs having been taken, the matter was brought to hearing ex parie, and an application was made for a decree in conformity with the prayer of the bill.

The rights of parties, and the powers of this court in respect ■to matters such as are the subject of this bill, have been so recently and carefully considered and expounded in this court that it is only necessary to refer to the principles which have been, in nay judgment, correctly settled. It is thus settled that there is no property right in a dead body; that, upon the death of a married person, the surviving husband or wife is entitled to the custody of the dead body, and charged with the dirty of furnishing proper burial; that, when that duty has been discharged, and the remains of the dead have been buried, the right of custody in the surviving husband or wife at once ceases, and it may properly be said that the dead body thereafter is in the custody of the law, because the disturbance of its resting-place and its removal is subject to the control and direction of a court of equity in any case properly before it. Peters v. Peters, 16 Stew. Eq. 140; Toppin v. Moriarty, 14 Dick. Ch. Rep. 115.

In Peters v. Peters, supra, upon these doctrines, a widow was enjoined from removing the remains of her deceased husband from a cemetery lot belonging to his father, in which he had been buried with her consent.

In Toppin v. Moriarty, supra, the court enjoined a husband from interfering with, and preventing the removal of, the remains of his deceased wife, which had been buried, with his consent, in the cemetery lot of her father, and its reburial in another lot in the same cemetery, provided by her father. The ground upon which the court exerted its authority in that case was that the original interment of the wife’s body in a lot procured by her father was consented to by her husband, in eonformitj'- with the request of his wife before her death, that she should be buried in a lot in which her father and mother were afterwards tó be buried, and that the father, after the interment, had arranged to exchange the lot in which the remains were buried for another lot, which was deemed a better one, which arrangement was with the consent of the husband, and that the father had, with the knowledge of. the husband and without any objection from him, expended a large sum of money in preparing the lot which he obtained in exchange for his burial plot, and with the known intention to remove thereto’ the remains of his daughter.

The problem in this case is whether, upon the circumstances presented by the proofs, the relief asked, or any part of it, .should be granted.

The proofs disclose that the complainant Was the second wife-of the deceased, Edwin Smith, and 'that he was a brother of Emma Shepherd, the 'defendant. At some time, not clearly fixed by the evidence, the defendant became the 'owner of this-burial plot in Eairmount Cemetery, and her brother, afterwardscomplainant’s husband, agreed with her that he would take one-half of the lot and pay one-half its cost. This arrangement was made at the time of the death of the brother’s first wife,, and she was buried in that plot. The brother thereafter married the complainant, and at his death left her surviving, with three-children, the offspring of his first wife;, and three other children,, the offspring of complainant. He had not then paid to his sister, the defendant, the one-half of the cost of the cemetery plot, or any part of the cost. When, upon his death, it became necessary to arrange for his burial the complainant proposed to the defendant to pay the one-half of the cost of the burial plot, which she-was aware had not been paid by the deceased. Defendant then informed her that she had been obliged to sell two spaces in that plot; that she intended reserving two other spaces, and that’ there remained but a single vacant space therein for a grave,, but that complainant might make use of that space for the-burial of her husband. Complainant accepted this permission,, and it was further agreed between them that the grave might be so- constructed that the complainant, upon her death, might' also be interred therein. By the direction of the complainant-the grave was so prepared, and the remains of the husband were-placed therein. The expenses of the interment were paid by the-com-plainant. Since that time the complainant and the defendant Emma Shepherd have become estranged from each other. The complainant thereupon became desirous of removing the-remains of her husband from the spot in which they were buried to another plot in the same cemetery, and applied to the.defendant for permission so to do, which permission was refused, and' thereupon this bill was filed.

Upon these proofs it is impossible to conclude that, at the-time of the burial, there was contemplated a mere temporary interment of the remains. In Weld v. Walker, 130 Mass. 422, the supreme court of Massachusetts held that a surviving husband Was entitled to such order of the court, sitting as a court ■of chancery, as would permit him to remove the body of his •deceased wife from the lot of another person in which it had been buried, when the court, might find from the evidence that "he had not consented to its burial there with the intention that it should be her final resting-place. But in this case nothing •can be clearer, from the complainant’s proofs, than that the ■burial of her husband’s remains in the burial plot of his sister ■was done by her with the purpose that it should be their final .resting-place. This is clear from the fact that she had the grave prepared for her own interment in the same. In this respect this case resembles that which was presented to Vice-Chancellor Bird in Peters v. Peters, ubi supra. It is true that the com•plainant asserts that she was, at the time this arrangement was ■made, much broken by her grief at the loss of her husband, .•and “didn’t think much over” the matter, but it is impossible, upon her own testimony, to fail, to recognize that, in consenting to the interment in the sister’s plot, she knew that none of the •children of the deceased, either those by the first wife or those who- were her own children, could be buried there, and was con■tent to have the grave adapted only for her own interment after her death.

I am unable to. discover any ground for equitable relief arising •out of the circumstances under which the complainant originally arranged for, and consented to, the burial of her husband in defendant’s lot.

Yo subsequent agreement between the parties is disclosed, and it only remains to consider whether circumstances since occurring have altered the situation, or present equitable- grounds for the relief prayed for.

The bill charges that the defendant, at the time of the burial, agreed that complainant should have the right to visit the grave, to plant flowers upon it and keep it decorated, and that she has broken her agreement and refuses to allow complainant to decorate the grave. It also- charges that defendant has desecrated the grave by leveling it, and disturbing the flowers planted by complainant, and that defendant has made known.to complainant that she will not, allow complainant to be buried in ■ the grave with her husband at her death.

There is no- proof of any special agreement between the parties in respect to- access to, or care of, the grave. iTo-r is there any sufficient or competent proof that the defendant refused to- allow complainant to decorate the grave-, or that she has desecrated it, as’ charged. The testimony of complainant on these matters was evidently not given as the result of personal observation, but frpm reports 'and statements of others.

The complainant admits that she has never made to the defendant any compensation for tire use, present and prospective, of the burial plot. It would seem to have been within the contemplation of the parties that such compensation should be made. But complainant admits that defendant -sent her a bill, charging her with certain sums for the space occupied 'by the remains of the first wife, and the space occupied by the remains of the husband, and the future right of the complainant to be buried in the latter space.’ This bill complainant admits she refused, to pay, but she has not made it appear that she has offered to pay any -sum as reasonable compensation for the right to- maintain her bus-band’s remains in the- lot of defendant, and to have her own remains deposited there.

It is clearly shown that defendant has absolutely 'refused to comply with the request of complainant to- consent to the removal of the remains of complainant’s husband from the lot in which they were buried to another lot. It is, fortunately, unnecessary for me to determine who has been at fault in the disagreement between these parties. It is obvious-, however, that the complainant’s request was not one which the defendant might not decline to- accede- to without being charged with unfairness. The demand was that she should consent that the remains of her brother should be removed to another lot. They were resting in the same plot with those of his first wife, and, presumably, by her side. There was no- reason why the second wife should require the sister of her deceased husband to consent to the removal of the remains which were thus interred. It is true that complainant states that she further offered to remove the remains- of the first wife, and reinter them in her own lot, along with the remains of her husband. But the defendant, who- had consented to the burial of the first wife in her own plot, might well hesitate to consent that those remains should be removed by a second wife and reinterred in a plot belonging to her. The unfortunate disagreement between these parties'cannot blind us to the unfairness of requiring the defendant’s consent under such circumstances.

The complainant insists that the defendant has desecrated the grave, and is preventing her from showing proper respect to her husband in planting flowers and decorating it. In the course of her proofs complainant showed that her counsel had made a written demand upon defendant for permission to remove the remains of her deceased husband, and presented a letter signed by defendant, or in her name, and apparently in response to the demand, in which defendant refused compliance, on the ground that “experience has taught me not to grant any more permits, either to inter or to disinter in my property.” She added, “My brother’s remains were placed there not for any temporary purpose and I decline to sell them.” She further added, “She [evidently meaning the complainant] has my permission to' place any flowers, but mine must not be mutilated. That is my property to do with as I please.”

While this letter indicates no- little bitterness of feeling, I think that it disposes of the charge that defendant is prohibiting complainant from placing flowers upon her husband’s grave. Under the circumstances, I fail to find any support for the complainant’s claim that defendant’s conduct justifies her in demanding the- removal of her husband’s remains.

The result is that complainant has failed to show that she is entitled to the relief asked for, and her bill must be dismissed. The defendant the Eairmount Cemetery Association is entitled to costs.

As tire right of the complainant to visit the grave of her deceased husband, and to place flowers thereon, has not been found to be involved in the present case, and therefore no opinion has been expressed in regard to it, the dismissal will be without prejudice to her filing a bill for relief hereafter if she should be interfered with in that respect.


author: Magie, Chancellor.

text:
    Jennie T. Lamprey and C. Percy Lamprey, her husband, v. Henry C. Whitehead.
    [Filed April 14th, 1903.]
    1. Under a devise to which the provisions of section 10 of the Descent act (Gen. Stat. p. 1193) apply, while an estate in the lands devised vests in any child of the devisee for life, it is an estate which will be devested by the death of such child, leaving issue, during the life of the devisee for life.
    2. A title made by a conveyance executed during the life of the devisee for life, from a child having a vested estate under the provisions of that section, being subject to■ be devested in the event of the death of such child leaving issue, during the life of' the devisee for life, is not a marketable title which a purchaser oitght to be compelled to take by a decree for specific performance.

      Mr. Thomas M. Moore, for the complainants.

      Mr. Arthur 8. Corbin and Mr. John II. Beam, for the defendant.
   Magie, Chancellor.

The bill in this cause seeks a decree compelling the specific performance, by the defendant, of a contract in writing, made by him with the complainants, for the purchase of certain lands in the city of Passaic.' By the terms of the contract complainants agreed to1 convey to the defendant the said lands in fee-simple, free from all encumbrance, except the right, if anjq of any child bo*m to one Evaline Brainerd (a former owner of the premises) after the date of the contract, and the defendant agreed to pay complainants, on delivery of the deed for said lands, the sum of $8,000. The complainants aver that they tendered to defendant a conveyance which would have vested in him a title to the lands in question in fee-simple, free from any encumbrance, except that mentioned in the contract, and that the defendant refused to accept the same, or to pay the consideration which he had agreed to pay therefor.

The defendant, by his answer, admits the making of the contract, the tender of the conveyance to him, and his refusal to accept the same and pay the consideration. He asserts that he ought not to be compelled to accept a conveyance or to pay the consideration because the title which would have been vested in him by the conveyance'is not one of a merchantable character. The precise point of his objection is that the title which he would thereby acquire is subject to be devested by the happening of a certain contingency.

The complainants, by their bill, set up their title to the premises thus: The lands were owned in fee-simple by Nathan Stevens, who died seized thereof in 1885- leaving a last will and testament, executed so as to pass the title to real estate, and hearing date July 1st, 1880. By the sixth section of that will he devised to his daughter, Evaline Brainerd,

“for ancl during her natural life, * * * two vacant lots of land * * * in the city of Passaic, in the state of New Jersey, and upon the death of Evaline A. Brainerd, leaving issue, I give and devise all the above-mentioned real estate to such issue, and in case there should be no issue her surviving, then I give and devise * * * said land at Passaic to my sons, Melvin Stevens and Clarence Stevens, as tenants in common.”

The two lots which were thus devised comprise the lands which were the subject of the contract in question.

Evaline A. Brainerd had turn children, Grace E. Brainerd and Allen V. Brainerd, who, in 1894, were both of age. On the 22d day of November, 1894, the said children, Grace E. and Allen W. Brainerd, and Melvin Stevens, all being unmarried, conveyed all their right, title and interest in said lands to the said Evaline A. Brainerd, and on November 26th, 1894, Clarence Stevens, also unmarried, conveyed his right, title and interest in the said lands to Evaline A. Brainerd. On November 23d, 1894, Evaline A. Brainerd and her husband, by a deed with warranty, conveyed said lands to the complainant Jennie T. Lamprey.

The bill asserts that Allen W. Brainerd afterward died unmarried; that Grace E. Brainercl, after the execution of her deed to- Evaline A. Brainercl, intermarried with one John T. Underwood, and is now living with her said husband, with possibility of issue hereafter to be born.

The defendant admits, by his answer, the facts asserted in the bill above mentioned, and contends that if Grace E. Underwood should die before her mother, Evaline A. Brainerd, leaving-issue, such issue would become seized of the said lands, and that the title made by the conveyance from Grace E. Brainerd to Evaline A. Brainerd would be wholly defeated by the happening of such contingency.

It does not admit of any doubt that the devise in the will of Nathan Stevens is one which falls within the provisions of the “Act further regulating the descent of real estates,” passed June 13th, 1830, and which have been in force since the passage of that act, and are now included as sections 10 and 11 of the “Act directing the descent of real estate.” Gen. Stat. p. 1193.

The devise is a counterpart, in all respects except two, of the devise considered in the celebrated case of Hopper v. Demarest, 1 Zab. 525; S. C., 2 Zab. 599. The devise in that case was to testator’s daughter, Catherine, for and during her life, and after her death the lands devised were to be equally divided among her heirs. The devise before us is to testator’s daughter, Evaline, for life, and upon her death to such issue as she may leave surviving her, With the condition of a devise over in case of no issue surviving her.

The section of the act of 1830, which is now section 10 of the Descent act, was admitted to be applicable to the devise which was the subject of consideration in Hopper v. Demarest, both in the supreme court and in the court of errors. The provisions of that section are equally applicable to the case in hand. It is thereby enacted that if any lands are thereby devised to any person for life, and “at the death of the person to whom the same shall be devised for life, to go to his or her heirs, or to his or her issue,” then “said lands -shall go- to and be vested in the children of such devisee equally, to be divided between them as tenants in common in fee.”

In expressing the opinion of the supreme court upon the construction of this statute, in its application to the devise considered in Hopper v. Demarest, Chief-Justice Green, with the concurrence of Mr. Justices Whitehead 'and Randolph, declared that the devise in the will then in question would have given to the daughter to whom the testator devised it for life an estate in fee-simple, by virtue of the rule in Shelley’s Case. He further held that the first section of the act of 1820, now section 10 of the Descent act, entirely abolished the rule in Shelley’s Oase, and gave to the devises therein described a statutory significance and meaning. He also held'that the estate, which, by the meaning which that statute required the court to-attribute to such language in the will then in question, went to the. children of the tenant for life, was not a vested, but a contingent, estate. This construction, though admitted by the learned chief-justice to be apparently counter to the purpose of the legislature, was deemed to be rendered necessary by the language of the last clause of the section, which provided that the children of the devisee for life should take the lands as tenants in common in fee, but if only one child, then that one should take the lands in fee, and if “any child be dead, the part which would have come to- him or her shall go to his or her issue in like manner.”

The last clause was deemed to- be clearly indicative of a legislative intent that the lands, or some part thereof, should go to the issue of a child if such child had died in the lifetime of the tenant for life. The declaration of the distinguished chief-justice that the legislation, thus construed, entirely abolished the rule in Shelley’s Case, was correct in its application to- the case then under consideration, but it has been since pointed out that the legislation in question is limited to cases within its terms, and that in other cases the rule in Shelley’s Case is still in force-in this state. Lippincott v. Davis, 30 Vr. 241.

When the case of Hopper v. Demarest was reviewed in the-court of errors the applicability of the provisions of the act of 1820 to such a devise as was then in question was admitted, both by Chancellor Halsted, who delivered the prevailing opinion of the court, and by- Mr. Justice Carpenter, whose dissenting ■opinion closely followed the lines of Chief-Justice Green’s opinion- in tire supreme court. But Chancellor Halsted, with the ■concurrence of a majority, of the court, gave a construction to the statute which was different from that given in the supreme ■court. He concluded that the estate, which, under the statute, devolved upon the children during the lifetime of the tenant for life, was not a contingent estate, but was a vested estate. This ■decision, for obvious reasons, was much criticised at the time it was pronounced, but it has been frequently recognized since as laying down the rule which must be followed in respect to the transmission of property by devises of this sort. In re Heaton, 6 C. E. Gr. 221; Ross v. Adams, 4 Dutch. 160; Lippincott v. Davis, ubi supra; Zabriskie v. Wood, 8 C. E. Gr. 541.

But the case of Hopper v. Demarest did not require the consideration of the question which is presented here. In that case it appeared that the daughter of the tenant for life, whose conveyance of the title had been made during the-lifetime of the tenant for life, had, in fact, survived her mother. The estate, which, by the devise, had become vested in her, under the construction given to the statute by Chancellor Halsted, was, therefore, not devested by the contingency provided for -in the last •clause of the section in question.

But in the case before me the title conveyed by Mrs. Underwood, before her marriage, was such title as she acquired by the ■devise in Nathan Stevens’ will, construed- in conformity with the provisions of section 10 of-the Descent act. It was undoubtedly a vested title, which she might alienate and convey. But if she had conveyed the same, and had died leaving issue during the lifetime of her mother, Evaline A. Brainerd, the question is whether her title, although vested as above stated, would not thereby be devested in favor of such issue. If her title would be thereby devested, then the title of her -grantee would also be devested upon the happening of that contingency. As the grantor is yet married, and of an age rendering it possible that issue may be born to her, and it is possible that she may die before her mother, the further question is whether a purchaser, whose title to a material part of the lands is derived from her conveyance, should lie compelled to take a title subject to such contingency. I clo not think that there is the least doubt that if, under the proper construction of the statute applicable to-this devise, the title of Mrs. Underwood or that of her grantee-would be devested by her death, leaving issue, in the lifetime-of her mother, -that it would not be equitable to- compel the purchaser to take the title upon her grant.

I have been- unable to discover any authoritative exposition of the statute in question in respect to the point now presented-In Hopper v. Demarest the supreme court construed the last clause of the section, now section 10 of the Descent act, as giving' to the issue of -a child deceased during the life of the tenant for life an estate in the lands, and upon the ground that the-event upon which such issue was to- take could not be determined before the death of the tenant for life, it was held that the estate-of any of the children was contingent and not vested. In the-prevailing opinion in the court of errors tire construction given to -the last clause of the section, as effective in determining the-legislative intent of the enactment, was repudiated. What the-true construction of that clause was the court was not called-on to declare, for. the reason above given, viz., that the child’whose conveyance was then in question had, in fact, survived' her mother, and the contingency, consequently, had not happened. Chancellor Hals-ted, however, admitted that the clause-was open to two constructions. This was his language: “And* if this last clause can be construed as doing anything -more-than declaring what would be the result in case the person in whom the remainder was vested had not conveyed it, and had died leaving children; if it can be considered as legislating aii~ additional limitation to- the estate, my opinion is that it is a-limitation by way of executory devise. If it is an executory' devise, then the person to whom Maria, in Catherine’s lifetime,conveyed took subject to be defeated of her estate by the happening of that contingency on which the executory devise was to take effect.”

It will be perceived that, by one suggested construction, the-last clause- of the section in question is treated as a mere legislative declaration of the mode in which the title of a child,, dying in the lifetime of the tenant for life leaving issue, would! devolve, if the child had not previously disposed .of the title. By the other suggested construction the title of a child is subjected to a limitation over to his or her issue, in tire event of death, leaving issue, in the lifetime of -the tenant for life. Whether the interest or estate thus limited over is properly called an executory devise it is immaterial to- inquire.

A construction of this legislation which attributes to it an intent to vest in the child of the devisee for life an indefeasible estate seems to me entirely inadmissible. In the first place, the last clause of the section expressly declares that the child’s estate, in the event of death, leaving issue, during the life of the devisee for life, shall devolve, not on the heirs-at-law, but on the issue. Lippincott v. Davis, ubi supra. And, if there is to be attributed to the word “issue,” as so used, the meaning of “heirs-at-law,” the clause was wholly unnecessary, and might have been omitted from the act. For, without that clause, an estate which was vested and would devolve upon heirs-at-law, in the absence of conveyance or devise, would have resulted from the previous enactment.

Whether, as was suggested by Chief-Justice Green, the last clause of the section was inserted by inadvertence, or design, it is a part of the legislative act, to which the rules of construction require a court to attribute some meaning, if a reasonable meaning, consistent with the rest of the section, can be discovered therein. That distinguished jurist found in the language of that clause a legislative intent to limit over the estate of a child to his or her issue in the event of death, leaving issue, during the lifetime of the devisee for life, and on that ground pronounced the child’s estate to be a contingent remainder. The court of errors, while denying the effect held by the supreme court to have been produced by his construction, admitted that the language, under that construction, could be held to limit over the estate of a child to his or her issue in the event of death, leaving issue, during the lifetime of the devisee for life.

In my judgment, there is no possible meaning to be given to the last clause of the section in question other than that which defeats the estate of a child of the devisee for life, in the event mentioned, and vests that estate, upon the happening of that event, in the issue of the child.

The result is that, while the conveyance tendered to the defendant will vest in him a title to the lands which he contracted to buy, that title, in respect to. so much, of the estate as Mrs. Underwood has therein, would be subject to the possibility of its being devested in case she died before her mother leaving issue. This liability will undoubtedly affect the marketable value of the estate, and I do not think that a purchaser should be compelled to accept a title affected thereby.

The bill must be dismissed.


author: Pitney, V. C.

text:
    Charles C. Black, receiver, v. Hobart Trust Company et al.
    [Submitted December 15th, 1902.
    Decided December 29th, 1902.

      Filed April 6th, 1903.]
    1. P. L. of 1896 p. 283 § 18, as amended by P. L. of 1901 p. 245, authorizes corporations to issue preferred stock, which may pay cumulative dividends, and provides that, in case of insolvency, corporate debts and other liabilities shall be paid in preference to the preferred stock.—Held, that holders of preferred stock, paying cumulative dividends under the statute, were precluded, on the company’s insolvency, from enforcing their mortgage security to the detriment of general creditors, as they could not reap the advantages of the statute, while ignoring its burdens.
    2. The mortgage recited that' the preferred stock thereby secured should have a cumulative dividend and be subject to redemption on June 1st, 1900, and, in case of the company’s previous dissolution, should be paid out of its assets after the payment of its just debts and liabilities. If the stock was not redeemed by June 1st, 1906, and. the mortgaged premises had not been before disposed of, they were to be sold, and redemption effected, including unpaid dividends. The company was, in fact, dissolved and the property disposed- of before that date.—Held, that the terms of the mortgage also precluded the preferred stockholders from enforcing'it against the fund derived from the property, to the detriment of general creditors.

      3. The fact that the mortgage was recorded before the claims of the general creditors were incurred would not affect the case; such creditors' having the right to rely on- the statute and the terms of the mortgage, giving them a preference.
    4. The fact that the postponement of the preferred stockholders to the general creditors might permit the company’s promoters to- work a fraud on the purchasers of the preferred stock would also not affect the case.
    The complainant is the receiver of the Colonial Clock Company, an insolvent corporation of this state, and files his bill for directions as to- the disposition of certain 'funds in his hands, the proceeds of the sale of certain real estate belonging to the corporation.
    The bill sets out a mortgage given by the corporation to the defendant the Hobart Trust Company, in trust for the other defendants, and alleges that it is void as against the general creditors of the company, and prays relief against it, and that the fund in question may be declared to- be assets to be divided among the general creditors.
    The complainant was appointed receiver on November 26th, 1901, and applied to1 the court, by petition, in January, 1902, for an order for the sale of the lands in question free and clear from the encumbrance of the mortgage and other liens which he found upon it. An order in accordance with that petition was granted, and the receiver was directed to hold the proceeds-of the sale in place of the land itself, subject to the further order of the court.
    Those proceeds amount to the sum of $8,500.
    The claims of general creditors against the insolvent corporation amount to a little less than $8,000; and there are, besides, between $500 and $600 of preferred claims. At that stage of the proceedings, by leave of this court, the present bill was filed.
    A joint answer was filed by all of the cestuis que trusteni1 under the mortgage. The trustee company did not answer, and a decree pro confesso was made against it. The cause was duly-referred to Vice-Chancellor Pitney, and set down for hearing' on the 20th of October, 1902. On that day the complainant was ready for trial, and the defendants asked for a postponement, on the ground that their solicitor and counsel, Mr. Ely, was at that moment engaged in the trial of a cause in the city of New York. Conceiving that the reason for a postponement was quite insufficient, the vice-chancellor proceeded and heard the cause. Little or no evidence, beyond tire record of the insolvency proceedings, was taken, because the complainant relied upon the facts, appearing on the face of the mortgage.
    Subsequently, Mr. Ely asked to have the cause opened for further hearing, and for leave to file an amended answer. This was opposed by the complainant, but the vice-chancellor determined to consider the cause as if the facts set up in the proposed amended answer were proven, expressly saving, however, the rights of the complainant to have the defendants confined to the allegations of the first answer.

      Mr. J. Herbert Potts, for the complainant.

      Mr. Addison Ply, for the answering defendants.
   Pitney, V. C.

The contest here is between the general creditors of the insolvent corporation and certain persons named as preferred stockholders in the mortgage which is attacked.

The corporation was organized on October 30th, 1900, and on July 6th, 1901, it executed the mortgage in question, which was duly recorded on the 19th of July, 1901.

It recites a resolution of the directors of the corporation, adopted on the 6th of June, 1901, which recites that the company desired to increase its capital for the purpose of procuring a proper building and plant, &c., and does not desire to mortgage any part of its property, nor issue bonds for such purpose, and that Mr. Brunner, one of the defendants, has agreed to raise the sum of $18,000, as the same may be required for the purposes aforesaid, under the following conditions:

First. The company shall cause its certificate of incorporation to be amended by the unanimous consent of all the stockholders, SO' that the same may permit an issue of preferred sioclc, to an ¿mount not greater than $18,000,

“said preferred stock to have a fixed dividend of seven per cent, per annum, cumulative, to be paid annually on the first day of June before any dividend is set apart or paid to the common stock, subject to redemption at par on June 1st, 1906, and in case of the dissolution- of said company before said date, to be paid first out of the assets of this company after the payment of its just debts QAid liabilities and before any distribution or payment to the holders of common stoeh shall be made.’’’

Second. Hie company shall convey to the Hobart Trust Company, of the city of Passaic, its factory site, in trust, (1) to hold the same, keep the same insured, and pay the taxes and assessments; (2) as security for the payment of the annual dividend of seven per cent, provided to be paid on the said preferred stock; (3) on default in the payment of any dividend, to sell and dispose of the property to pay said dividend, and hold the surplus to secure the payment of further dividends; (4) after June 1st, 1906, if not before disposed of,'to sell and dispose of the said property, either at public or private sale, and redeem, at par, all the preferred stock that may then be outstanding and issued to the stockholders; (5) if, on the 1st of June, 1906, the company shall have redeemed all the principal of the stock - and paid all accrued dividends, then the trustee shall reconvey.

It then recites that it was resolved that the proposition be accepted in all its. terms; that the resolution be submitted to the stockholders; that it-was so submitted and was approved by all the stockholders; that, on July 12th, 1901, the board of directors examined the instrument proposed to be executed and approved the same; that all the preferred stock had been subscribed, and that the corporation had made out certificates for one hundred and eighty shares of $100 each, giving a list of the persons whp- had subscribed the same, among whom was Mr. Brunner for $8,000. It then recites a resolution, on the 12th of July, 1901, making the Hobart Trust Company a transfer agent of tire preferred stock -authorized to be issued and secured by the trust deed, and that the trust company was requested to countersign certificates of the same; and that ■ certificates' numbered from one to- twenty-six had been countersigned, which includes all the subscriptions. : - - • ■

The deed proceeds to say that the party of the first part, in ■order to secure equally the payment of the principal and dividends on the stock as the same may be issued and delivered hereunder, or to whom tire same may hereafter be transferred, conveys the property to the trust company, upon the following trusts now enumerated:

(1) As before stated, to keep the premises insured, and pay the taxes and ■ assessments.

(2) To hold the property as security for the payment of the annual dividend of seven per cent, upon its $18,000 of preferred stock.

(3) On default in 'the payment of the dividend for three months, to sell and dispose of the premises at public sale to pay off said dividend, and hold the surplus, properly invested, to secure the payment of future dividends as due or the redemption of the principal.

(4) After June 1st, 1906, if the premises have not been before disposed of,

41 to sell and dispose of the said property either at public or private sale, •and' out of the proceeds to redeem at pm• all of said preferred stock that may then he outstanding and issued to stockholders, together with any ■arrears of dividends that may he due wflon any of said preferred stock.”

(5) If, on the 1st day of June, 1906, all of the stock shall have been released, then to reconvey the property.

The bill further alleges that the shares of preferred stock subscribed by the twenty-six subscribers, or so much as have been paid for, are now held by twenty persons, naming them, who are defendants to the suit; and then sets out the insolvency proceedings, the order of the court to. sell, and the sale.

The answer actually filed admits all the facts alleged in the bill; sets up that the original certificate of incorporation - was ■duly amended so as to' authorize the'issuing of the stock; denies the legality of .the order that the property should be. sold free .and clear of encumbrances, and alleges- that $9,100 • only of the preferred stock has been actually'issued to the defendants' named; challenges the equity of the complainant’s bill, and asserts the rights of defendants as mortgagees.

The amended answer sought to be hied alleges that the money was advanced for the express purpose of buying the land in question and erecting a factory thereon, and that the agreement, in fact, was that the defendants should be secured for the amount, so advanced hy a mortgage, and that, at the time the money was advanced and the property bought and the building erected, there were no- debts due by the insolvent corporation, -and that tire moneys advanced by the defendants were advanced upon the security of the mortgage and in consideration thereof. And the defendants urge, as a further equity, that the proceeds of the sale represent the very money which the defendants advanced and invested in the purchase of the lot and the building of tire factory.

It is worth while just here to state the provision of -the statute under which this stock was issued. It is section 18 of the Corporation act of 1896 (P. L. of 1896 p. 283), as amended by the act of 1901 (P. L. of 1901 p. 245; Dill Corp. 40), and is in these words:

“Every corporation organized under this act shall have power to create two or more kinds of stock, of such classes, with such designations, preferences and voting powers or restrictions or qualifications thereof as shall be stated and expressed in- the certificate of incorporation or in any certificate of amendment thereof; and the power to increase or decrease the stock as in this act elsewhere provided shall apply to all or any of the classes of stock; but at no time shall the total amount of the preferred stocks issued' and outstanding exceed two-thirds of the capital stock paid-for in cash or property, and such preferred stocks may, if desired, be made subject to redemption at any time after three years from the issue thereof, at a price not less than par, and the holders thereof shall be entitled to receive, and the corporation shall be bound to pay thereon, dividends at such rates and on such conditions as shall be stated in the original or amended certificate of incorporation, not exceeding eight per centum per annum, payable quarterly, half-yearly or yearly; and such dividends may be made payable before any dividends shall be set apart or paid on the common stock, and such dividends may be made cumulative; provided, the corporation shall set apart or pay the said' dividends to the holders of non-cumulative preferred stock before any dividend shall be paid on the common stock; and' in no event shall a holder of preferred stock be personally liable for the debts of the corporation; but in case of insolvency, its debts or other liabilities shall be paid, in preference to the preferred stoeh; the terms ‘general stock’ and ‘common stock’ are synonymous.”

The general line oi argument of the defendants’ counsel is that the mere fact that his clients occupy the position of stockholders does not prevent them from being, in fact, creditors, and entitled to- the position of secured creditors, if that be, upon the whole case, their actual position; and for this he cites several authorities.

I have gone through most of them carefully, and while they do, in a measure and to a certain extent, sustain his position, I am of the opinion that they do not meet the present case.

In the first place, the section of the statute under which the preferred stock was in this case issued expressly provides that, in case of insolvency, its debts or other liabilities shall be paid in preference to- the preferred stock. And it will be perceived that the defendants have taken advantage of the provisions of that section to- give them a valid claim against the company to receive cumulative dividends at the rate of seven per cent, per annum. Upon obvious principles, they are prevented from taking advantage of a part of the act and ignoring the remainder. They must take the act as a whole.

But, in the next place, the teams of the mortgage itself, when carefully examined, are, as it seems to me, fatal to the defendants. The mortgage or trust deed recites that Mr. Brunner, the principal preferred stockholder, has agreed to raise the s-um of $18,000 (and this is asserted to be true by the unfiled answer), upon certain conditions, and among them is this: That there should be issued therefor preferred stock, which shall have

“a fixed dividend of seven per cent, per annum, cumulative, -to be paid annually on the first day of June, before any dividend is set apart or paid to the common stock, subject to redemption at par on June 1st, 190G, and in case of the dissolution of said company before said date,- to be paid first out of the assets of this company after the payment of its just debts and liabilities and before any distribution or payment to the holders Of common stock shall be made.”

That provision, obviously, was made for the purpose of issuing preferred stock in accordance with the terms of the section of the act above quoted.

Now, if we look further through the mortgage, we find nothing to contradict or weaken that statement until we come to the fourth paragraph of those stating the trusts upon which the trustee was to hold the property; and that is: .

“After June 1st, 1906, if the premises have not been before disposed'of, to sell and dispose of the said property, either at public or private sale, and out of the proceeds to redeem, at par, all of said preferred, stock that may then be outstanding and issued to stockholders, together with any arrears of dividends that may be due upon any of said preferred stock.”

It is thus seen (1) that it was onty after the 1st of June, 1906, if the property was not previously disposed of,.that the stockholders were to 'be paid the principal amount of their stock; and (2) that it fails to- state that they were to1 be paid before the creditors of the conrpany. It is entirely silent as to the status of the mortgagees, as against general creditors: a significant circumstance in view of the previous statement of the creditors" priority.

In point of fact, the company had been dissolved, and the property disposed of long before the 1st of June, 1906, so that the contingency mentioned in that fourth paragraph of' the trust has not happened.

Again, it is .argued that this mortgage was duly on record before any of these debts were incurred. And, for present purposes, I am taking that statement to be true, although I am aware that it may do an injustice to' the creditors who are represented by the receiver to so hold, because, in point of fact, that may not be true. The mortgage was recorded in July, 1901, and the corporation became, insolvent in November, .as we have seen; and it is quite possible that, some-of the-debts which the company owed' at the time the mortgage was -recorded were not paid before tlje insolvency, and are rejpresented by some of the existing creditors. But be that-as it may, the persons dealing with the corporation had a right to1 rely- upon the' section of tire statute which I have quoted, and upon the recital in the .trust deed, if they saw it on'record, which provided that the preferred'stockholders were'to* be paid after the creditors:

It is argued with much force that this construction of the trust deed renders it’of little or’nó valué,"and enables the promo-ters of the 'Company, or Mr. Brunner, to practice a fraud on the persons advancing their money on the strength of the mortgage. That position is probably true. The promoters, or Mr. Brunner, probably did assure the subscribers to this preferred stock that they 'would be secured by a mortgage. I say “or Mr. Brunner” because, according to- the amended answer, Mr. Brunner undertook- to raise $18,000, and no- doubt the directors' of the corporation made their calculations for their building and plant and the launching of their business in expectation of receiving that sum. ' But Mr. Brunner was able to raise only $9,100, with the result that the directors were unable to pay for the building, and failed before the enterprise was fairly launched. It may well be that the defendants made their advances of money entirely upon the representations of Brunner, and that the officers of the corporation are quite innocent of any fraud.

But -be that as it may, it seems to me that the general creditors of the corporation are not affected by that fraud. They had a right, as I have said, to rely upon the terms of the statute, and of the mortgage as found on the record,' and it was the duty of the persons advancing their money on the strength' of this mortgage to scan with great care the instrument which secured them this high rate of interest; and it is not the first time that-persons, in their eagerness to' secure high rates of interest, have lost their principal. ' ' - - '

‘ Now1, turning to the authorities cited by the counsel for the defendants, I find the one most in point in his favor to be Burt v. Rattle, 31 Ohio 116 (1876). That case would be 'precisely in point if the statute authorizing the mortgage and the- terms of the mortgage were similar to those before the'court; but they are not. 'The'statute allowing- preferred stock to be issued in that case did -not declare that the right of the holders should be subject to the right of creditors, and the mortgage did'not so provide, as in this case. The arguments of the counsel on either side, as reported, are 'elaborate ’and thorough, and well worth perusal;' and', after all, the decision in favor of the priority of the lien of the. preferred stockholders in that case-was by a divided court; and put upon the distinct' ground that the transaction was a loan of money, and not a creation of preferred stock.

The text of Jones Corp. B. & M. (2d ed.) § 627, is based on Miller v. Ratterman, 47 Ohio 141. The question there arose, not between the preferred stockholders and general creditors on a winding-up' of an insolvent corporation, but between preferred stockholders and common stockholders of a solvent corporation, on a question of taxation. As in the previous case in 31 Ohio, the argumentation, as printed, is thorough and elaborate. The court held in that ease, under the special provisions of the act there involved, that the preferred stockholders were real stockholders, and not creditors; and, as far as it is authority at all, it is authority in favor of the complainant.

The case of West Chester and Philadelphia Railroad Co. v. Jackson, Administratrix of Gray, 77 Pa. 321 (1875), cited by the defendants' counsel, was an action of assumpsit, by holders of preferred stock against the railroad company, to recover dividends under the terms of certificates of stock. The only question seems to have been the right to maintain an action, and the solution of that question depended upon the construction of divers acts of the legislature of Pennsylvania; and it was held that the action would lie. The case presented no question between preferred stockholders and general creditors, such as arises in that now under consideration.

The subject is discussed by Mr. Thompson (2 Thomp. Corp. §§ 2278, 2279), referring to the case of King v. O. & M. R. R. Co., 2 Fed. Rep. 36, and, on appeal, sub nom. Warren v. King, 108 U. S. 389, which directly supports the view I have taken in favor of the complainant in this case.

The subject is also discussed by Mr. Cook (Cook Stock & S. (3d ed.) § 271), where a collection of the authorities will be found, and I heartily concur in what he says in that section, as follows:

“Occasionally, however, a mortgage is given by the corporation to secure the payment of dividends on preferred stock and to give it a preference in payment over subsequent debts of the corporation upon insolvency or dissolution. It is difficult to see how such a mortgage would be legal, except where it is issued under express statutory authority. It is difficult to see how stockholders can contrive legally tO' obtain a preference over corporate creditors secured or unsecured, as they would do by such a mortgage. Certain it is that the courts will not readily give the stockholders a preference over creditors, even though the preferred stock is by its terms to be a first claim on the property.”

In this case I think the position taken by the counsel for the defendants, namely, that the question in all cases is, are the parties actual stockholders, or are they creditors? is the true one. But I am of opinion that they cannot occupy both positions, of stockholders and secured creditors. In this case they have attempted to do so, under a statute which forbids them to occupy the position of secured creditors. Hence their case fails, and I shall advise a decree in favor of the complainant as prayed for in his bill.