text:
    Howard K. Stokes v. Newark Meadows Improvement Company et al.
    [Decided February 7th, 1919.]
    1. In a case in which a corporation was organized for the purpose of reorganizing two preceding corporations, and its securities, first and second mortgage bonds, and stock were issued to security holders of the preceding corporations, and its board of directors from the outset was, in reality, representative of its first mortgage bondholders, and not in any true sense representative of its creditors and stockholders, and where, after a plan of reorganization had been formulated, under the provisions of which the first mortgage was to .be foreclosed, and all of its property bought in by a representative of the first mortgage bondholders, and then transferred to a corporation to be organized, the securities of such new corporation to be issued to the security holders of the old corporation, and proceedings were instituted to foreclose the first mortgage in pursuance of such plan, consented to by the board of directors, upon which there are a majority of the committee of first mortgage bondholders having power to bind the first mortgage bondholders to any act which might be considered necessary to secure the success of the plan, and with the consent of the board of directors a receiver was appointed, held that the first mortgage bondholders will be considered as mortgagees in possession and the new corporation to whom the assets have been transferred in pursuance of the plan, and whose securities have been issued in pursuance thereof, will be held liable upon a contract entered into by the old corporation, and a contractor, at a time after the plan had been formulated and agreed to and a short time prior to the filing of the bill to foreclose the first mortgage in pursuance of the plan of reorganization, providing for the filling in and enhancing the value of the lands of the corporation, the work proceeding during the time of the receivership and under the direction of the receiver, the contract having been entered into with the knowledge of the committee of bondholders.
    2. Bondholders are estopped from denying responsibility on a contract. the result of the performance of which, during a time when their representatives knew that proceedings in their behalf were being taken to foreclose the interest of the mortgagor and to effect a vesting of title in their creature, has been to enhance the value of their property, the contractor being without notice of any such proceedings.
    S. The second mortgage bondholders of the old concern who have been let in gratuitously to participate in the securities of the new concern, after a foreclosure of their rights in the old concern, cannot complain if the claim of a contractor, for work performed, which has enhanced the value of the property during foreclosure proceedings, is preferred to any interest that they may have.
    4. In a situation where a corporation was in control of a board of directors in reality representing first mortgage bondholders, and there was a committee of first mortgage bondholders, the majority of whom were members of the board of directors of the corporation, which committee had power from the bondholders to perform all acts which might be necessary in their judgment to effect a plan of reorganization, and a plan had been formulated, which provided for the foreclosure of the first mortgage, the purchase of the property by the representative of the first mortgage bondholders, the transfer to a corporation to be incorporated, and the issuance of securities by the new corporation to holders of securities in the old corporation, and on the eve of proceedings to foreclose being instituted and the plan carried out, a contract was made, to the knowledge of the representatives of the first mortgage bondholders, providing for work on the land which enhances its value, and the work proceeded without notice to the contractor of the plan, or of the proceedings thereunder, during most of which time the property was under the control of a receiver appointed at the instance of the first mortgage bondholders, with the acquiescence of the corporation, and the receiver supervised such work and actually participated therein, and the property was subsequently bought in by the nominee of the bondholders, and by him transferred to a corporation, incorporated by the bondholders, and the securities of that corporation issued to security holders of the old concern, in accordance with the plan, held that the land in the hands of the new corporation is charged with the lien for the amount that it has been enhanced by the work of the contractor, and that second mortgage bondholders who have been gratuitously let in after the foreclosure by the first mortgage bondholders are not entitled to any rights as against the contractor.
    5. In such a ease the land upon which the improvement had been made having 'been sold to a bona fide p'urchaser for value, without notice, a money decree may go against the new corporation, or such other decree as will have the effect of preferring the contractor to the interests of the first and second mortgage bondholders of the old concern.
    On bill, &C.

      Messrs. McDermott & Enright (Mr. Enright), for the complainant. .

      Mr. Kenneth D. Cranslovn and Mr. Gilbert Collins, for the defendants.
   Lane, V. C.

Complainant has a judgment obtained in the supreme court on December 13th, 1917, for $14,297.83 against Newark Meadows Improvement Company. The judgment was for the amount dúe complainant for work performed under a contract between complainant and Newark Meadows Improvement' Company made April 16th,. 1913, for the improvement of a portion of the lands of said company. The object of the present bill is to impress the judgment as a lien upon the lands of Newark Factory Sites, Inc., which became possessed of all of the property of Newark Meadows Improvement Company under the circumstances hereinafter related (that -portion of the lands upon which the improvements were made have been sold by Newark Factory Sites, Inc., to a bona fide purchaser for value without notice); or to have a money decree against Newark Factory Sites Company, or for relief against the holders of certain securities of that company. Newark Meadows Improvement Company was incorporated'in 1908, and was in fact a reorganization of two corporations Then existing — the Hackensack Meadows Company and New Jersey Terminal Dock and Improvement Company. Its securities were distributed to the holders of securities of the last-named corporations. There were issued, approximately, $1,800,-000 of first mortgage bonds and $2,000,000 of second mortgage bonds. The trustee of the first mortgage was the Standard Trust Companjg now merged in the Guaranty Trust Company; the trustee of the second mortgage was the same. From its inception the corporation was under the control of representatives of the first mortgage bondholders and representatives of certain banking institutions which had advanced money from time to time either to the corporation or to the two preceding corporations. There never was an independent board of directors representing outside stockholders and general creditors. The con-, trolling interests were Harvey Fisk & Sons, representing first mortgage bondholders, representatives of the Chase National Bank, Standard Trust Company and the Columbia Knickerbocker Trust Company, and a representative of the Pike estate, which came into the situation through its original ownership of the land. Wilbur C. Fisk, of Harvey Fisk & Sons, representing first mortgage bondholders, who was the president until March 14th, 1913, was the directing genius of the company. Harvey Eisk & Sons held at the time of the foreclosure $747,000 of first mortgage bonds; Robert E. Tilney, a partner, held, individually, $92,000; A. N. Tilney, a relative of Tilney, held $82,000; Tilney & Wadsworth, executors, held $81,000; out of a total issue of $1,850,000. In February, 1912, the company being in financial difficulties, Harvey Fislr & Sons demanded that the Standard Trust Company, trastee, foreclose the first mortgage. On February 14th, 1912,'at a meeting of the board of directors, Pliny Eisk, a partner of Harvey Fisk & Sons, addressed the meeting and stated that since sending the request to the Standard Trust Company to bring suit for the foreclosure of the first mortgage, and to apply for the appointment of a receiver, an opportunity had arisen by which the company might be able to realize on certain of its assets- and said, “that in view of the foregoing facts it was, in his opinion, inadvisable for the Standard Trust Company to proceed immediately as requested by bondholders.” Then follows this resolution:

“Upon motion duly seconded, it was resolved that the Standard Trust Company be and it hereby is requested to take no action upon the request of first mortgage bondholders until further requested by them,”

no further action was taken. The plan of rehabilitation failed, and under date-of February 15th, 1913, a printed document was promulgated entitled, “First Mortgage Bondholders’ Protective Agreement.” It nominated as a committee William C. Lane (president of Standard Trust Company), A. A. Tilney and Thomas Thaeher. Lane and Tilney were, and continued to be, directors of the company. Thaeher was a member of the firm of Simpson, Thaeher & Bartlett, who were, and continued to be, attorneys for the company. This agreement, after inviting bondholders ' to participate, provides that the committee should formulate a plan for readjustment of the affairs of the corporation, or its reorganization, and that in the interval, until the adoption of a plan, the committee should have power to act for the bondholders in all matters deemed by the committee to require action. On March 14th, 1913, Wilbur C. Eisk resigned as president, although not as director, and John A. Seely, who theretofore had been general manager, was thereupon elected as director and as president, and lias ever since continued. I find that the resignation of Fisk was prompted by the impending foreclosure, plans for which at that time-had been formulated and that Seely was a mere figurehead, Fisk remaining as the real executive. On April 11th, 1913, the trustee of the first mortgage, the Guaranty Trust Company, was notified of a breach of its conditions and directed to foreclose. This notice was signed by Harvey Fisk & Sons, Tilney & Wadsworth, executors, Bobert F. Tilney, A. H. Tilney, A. W. Hutchins, the latter representing the Columbia-Knickerbocker Trust Company. There was a meeting of the board of directors on April 1-ttli, 1913, at which there was a discussion with respect to the refinancing of the company. The meeting was adjourned until April IGth, when at a meeting attended by Seely, Wilbur C. 'Fisk, Lane, Tilney and Wiggin, it was stated that the directors had been unable to make the necessary financial arrangements. These directors were representatives of first mortgage bondholders, and Lane and Tilney were members of the first mortgage bondholders’ protective committee. After knowledge, as I find, that there would be a foreclosure and reorganization, Fisk and Seely entered into negotiations with Stokes, which finally culminated in the contract of April 16th, under the terms of which Stokes was to fill in a part of the lands of Hewark Meadows Improvement Company designated as tract Ho. 8. The agreement provided that Hewark Meadows Improvement Company should not pay for the material deposited upon the land unless that portion of the land upon which the fill was deposited was sold, and that in the event of the sale with fill on same, then complainant was 'to be paid ten cents per cubic yard. This contract was consummated upon the very day that the meeting of the board of directors was held, at which it was stated that plans for rehabilitation had failed, and that the foreclosure must proceed, and at a time when it was known, and had been known for at least a month previous, that in all human probability there would be a foreclosure of the first mortgage and a purchase of the property on behalf of first mortgage bondholders. Two members of the first mortgage bondholders’ committee sat in the meeting and had notice of the contract. Preliminary work had been started on the contract prior to April 16th, 1913; the actual work of dredging .and filling commenced immediately thereafter and was carried on continuously until October, 1913. On May 16th, 1913, the bill to foreclose the first mortgage was filed in this court by the Guaranty Trust Company. On May 20th, 1913, William B. Kaufman, connected with the firm of Harvey Risk & Sons, was, by consent of the company, appointed receiver. The work of filling was supervised by Allen, the engineer of the company. He continued as engineer after the receiver was appointed and made his reports direct to, Kaufman, and Kaufman paid Allen for his services. Seely, Lane and Wilbur C. Risk, on one or-two occasions, examined the fill; on one occasion they thought it was too high, and Seely thinks he wrote a letter to Stokes calling attention to the fact. On June 9th, 1913, there was promulgated by the bondholders’ protective committee a, document entitled, “Eirst Mortgage Bondholders’ Plan and Agreement of Reorganization.” It purports to be an agreement between Lane, Thacker and Tilney, designated as the committee of the holders of the first mortgage bonds, and those who should become parties to the agreement by depositing their bon dé. The agreement contained a provision empowering the committee to designate additional members, and under this Keep, a director of the company, was named as an additional member. The agreement provided substantially that a new corporation should be organized to acquire the mortgaged property through the foreclosure; that the committee, or its representatives, should purchase the property at foreclosure sale .and cause the same to be transferred to the new company; that the new company should have an authorized capital stock of $1,838,000, and have an issue of first mortgage income bonds of the aggregate principal amount of $500,000; that the new company should pay for the mortgaged property by delivery to the committee of so many of the mortgage bonds as “the committee may need (estimated as not to exceed $300,000) in order to pay, so far as the committee shall decide to pay the same, all said floating debt and any taxes on the property, and also the expenses of reorganization,” and by the delivery to the committco of all tlie capital stock, or so much thereof as the committee should determine. The committee was to distribute to the depositing bondholders stock of the new company, par for par. By the agreement the depositing bondholders expressly assented to the plan and authorized the committee “to do all things in its judgment necessary or proper in their behalf as such, holders to e&rry out said plan,” “to make any agreements in its judgment necessary or proper to carry out said plan, especially agreements for the payment of any of the floating debt.” All bondholders deposited their bonds, except one of the Tilney family holding seven bonds, which lor a time could not be located. During the foreclosure proceedings the Columbia-Knickerbocker Trust Company was substituted as trustee for the second mortgage bondholders, and thereafter, on December 11th, 1913, and before the final decree, Raymond Dawson was substituted as trustee in place of the Columbia-Knickerbocker Trust Company. The substitutions were made at the direction of Harvey Fisk & Sons, Columbia-Knickerbocker Trust Company, Guaranty Trust Company, S. F. Telleen, the latter representing Chase National Bank, holders in the aggregate of $1,107,000 of the second mortgage bonds. On August 27th, 1914, the foreclosure proceedings reached a sale, the property was bought in for the benefit of the reorganization committee by one Darning. On December 23d, 1914,’there was a change in the plan of reorganization. By this change the first mortgage bondholders were given debentures in exchange for their holdings of bonds, par for par, and stock for the amount of the'accrued interest. This stock amounted to $511,873. The second mortgage bondholders were, for the first time, let in. They were given stock to the extent of twenty-five per cent, of the par of their holdings. This stock amounted to about $187,000. The property at this time had been foreclosed, the rights of the second mortgage bondholders had been cut oil, and the explanation is that the second mortgage bondholders were let in as a mere gratuity. Newark Factory Sites, Inc-., was incorporated in February, 1915, and all of its securities were issued as contemplated by the plan to Burning and by him distributed so that the outstanding securities of the new company were first mortgage bonds issued to pay floating debt and expenses to the amount of $300,000 (leaving unissued some $200,000) debentures held by old first mortgage bondholders to the extent of the par of their bonds, stock held ■by the first mortgage bondholders to the amount of their accrued interest and stock held by the second mortgage bondholders of the old concern to the extent of twenty-five per cent, of the par of their second mortgage bonds. No other stocfi or other security has ever been issued by Newark Factory Sites, Inc. In the spring of 1915 the committee took steps to ascertain the amount of the floating debt of the old concern; it authorized the sending out of the circular {Exhibit G IS) to the creditors o£ the company; that circular invited the creditors to send in their claims and expressly states tfiat the claims are to be sent in for the approval of the committee; the resolution under which it was sent out directed that it should be sent to all of the creditors. There was, undoubtedly, at the time an intent on the part of the committee to pay all of the creditors, including Stokes, but in some way or another he was overlooked. All the other creditors were paid. ' No notice was sent to Stokes. The floating debt was less than $300,000, so that less than $300,-000 of first mortgage bonds were used and $200,000 of them remained in the treasury. 'Early in 1917 Newark Factory Sites, Inc., sold the land improved by Stokes, together with some other land to the American Bridge Company for $-330,000. Stokes then learned, for the first time, of the foreclosure proceedings. On August 21st, 1917, the first mortgage was canceled of record. The land upon which the filling was put was enhanced in value by the work of Stokes in an amount at least equal to the amount of his judgment. All the security holders of Newark Factory Sites, Inc., who can be affected by the decree, arc parties.

From this perhaps rather too extended review of the facts, I think it clearly appears that Newark Meadows Improvement Company was, always in the absolute control of its'first mortgage bondholders; its board of directors acted for the bondholders ; at the time the contract with Stokes was made a definite plan had been worked out contemplating a foreclosure of the first mortgage bondholders by a. new corporation (which plan was subsequently carried out), the directors of the company in entering into or permitting tlie consummation of the contract with Stokes acted not only, for the company but as a committee of bondholders under the agreement promulgated in February, 1913; under this agreement they had authority to bind the bondholders and notice to them was notice to the bondholders;‘the receiver was appointed at the instance of the bondholders and was a representative of the bondholders; the actual work of filling was done during the regime of the receiver; it was supervised by the receiver; payments were made by the receiver to the engineer for supervision of the work; the property was purchased and the rights of the second mortgage bondholders foreclosed prior to the creation of any rights in the new corporation for them; permitting second mortgage bondholders to participate in the securities of Kewark Factory Sites, Inc., was a gratuity on the part of the .first mortgage bondholders (no effort is made by representatives of the second mortgage bondholders -to show otherwise); second mortgage bondholders took their securities charged, with the knowledge that first mortgage bonds to the extent of $300,000 might be used to pay floating debts of the old concern; the property of the bondholders had been enhanced in value by work performed by Stokes without knowledge that at the very time his contract was made, and during all of-the time that the work was being performed, proceedings were in progress instituted by the first mortgage bondholders, actual owners of the property, which would result, if the position taken hv the defendants is tenable, m his not being paid.

If it wore the intent of the directors that Stokes should not be paid by the new company, then, undoubtely, there was a fraud committed on Stokes. The contract provides that he should not be paid until the property be sold. At the time the contract was made, the directors and representatives of the bondholders knew that in a few months the rights of the corporation would be foreclosed. They knew that there would he no sale, in the ordinary sense, of the property by Kewark Meadows Improvement Company; the sale contemplated was a sale of all of the property under foreclosure. Attributing honest motives to the directors they must have intended the term “sale of properly” to refer to the sale of the property by the new corporation. The subsequent actions of the committee indicate that- it was their intent to pay all of the floating debt. I am quite dear, in my mind, that these directors did- not intend to defraud Stokes; that they intended to pay him as they paid the others, and that he was overlooked until such a time as that when the matter did come up they considered, as their counsel suggests, that they liad no right to pay him. I think that the first mortgage bondholders at the time the contract was made and during the time it was performed to all intents and purposes, were in the position of mortgagees in possession through their control of the board of directors prior to the receivership, and through the receiver thereafter; that when Durning bought at the foreclosure sale he took the property burdened with the contract of Stokes; that when the second mortgagees were given consideration their rights were subsequent to the rights of Stokes under his conr tract; that when Newark Factory Sites, Inc., acquired title, it did so charged with the obligations of the contract with Stokes; that the right of Stokes to recover arose at least on the sale of the property to. the American Bridge Company, Newark Factory Sites, Inc., assumed, in writing, all of the liabilities of the committee of bondholders. I conclude -that the bondholders are estopped from denying responsibility on a contract, the result of the performance of which, during a time when their representatives knew that proceedings in their behalf were being taken to foreclose the interest of the mortgagor and to effect a vesting of title'in their creature, has been to enhance the valire of their property. If the bondholders and their committee are estopped so is Newark Factory Sites, Inc., it having assumed the liabilities of the committee.

The'case differs materially from Toledo, D. & B. R. Co. v. Hamilton, 134 U. S. 296; 33 L. Ed. 905. In that case the supreme court of the TTnited States held that a contractor with a railroad company for the improvement of its property was not entitled to -priority ovqr a mortgage recorded three years prior-to the work being done. It was claimed that part of the work was performed after the bringing of the foreclosure suit and the appointment of a receiver. The court held that the evidence did not support the claim. It did not intimate an opinion as to whether, if the claim had been supported, there might have been a recovery. The material features of .the case sub judice were absent. In this case the work was performed under a contract entered into on the eve of the receivership with the acquiescence of a board of directors, in reality a committee of bondholders, and most of the work, if not.all, was performed during the receivership, during a time that the property was wholly within the control of bondholders: The bondholders, through tlieir representatives, not' only actually sat by and let Stokes enhance the value of their property, without notice of the.pending foreclosure proceedings which would deprive him of compensation, but, actually, through their receiver, participated in the improvement work. The excerpt quoted from Wendell v. Van Rensselaer, 1 Johns. Ch. 344, by Vice-Chancellor Pitney, in Summer v. Seaton, 47 N. J. Eq. 103, expresses the law: “There is no principle better established in this court, nor one founded on more solid foundations of equity and public utility, than that which declares, if one man, knowingly, though he does it passively, by looking on, suffers another to purchase or expend money on land, under an erroneous opinion of title, without making known his claim, he shall not afterwards be permitted to exercise his legal right against such person. It would be an act of fraud and injustice, and his conscience is hound by his equitable estoppel.” While it is time that Stokes had knowledge, constructive, at least, of the existence of the first and second mortgages, he had no knowledge of the foreclosure proceedings and no knowledge of the plan which, if carried through, would deprive him of any compensation. He might be perfectly willing to gamble on the chance of the mortgages be-ing foreclosed and a reorganization effected at some future time, but if the position taken by the defendants he correct, there was no gamble. It- was a moral certainty at the time Stokes entered into his contract that he never would be paid. The powers given by the bondholders to the .committee, which was in existence at the time the contract was made, and the powers subsequently conferred during the time -of the performance of the contract and the act of the new corporation in taking the property charged with the liabilities of the committee were sufficient to bind both the bondholders and the corporation for the acts of the committee and to bind them by notice to the committee. I have already dealt with the situation of the second mortgage bondholders, the only other security holders of the corporation.

I think in a situation where a corporation is in control of a board of directors, in reality representing first mortgage bondholders, and there is a committee of first mortgage bondholders, the majority of whom are members of the board of directors of the corporation, which committee has power from the bondholders to perform all acts which may be necessary in their judgment to effectuate a plan of reorganization, and a plan has been formulated which provides for the foreclosure of the first mortgage, the purchase of the property by a representative of the first mortgage bondholders, the transfer of the property to a corporation to be incorporated, and the issuance of securities by the new corporation to holders of securities in the old corporation, and on the eve of proceedings to foreclose being instituted and the plan carried out, a contract is made to the knowledge of the representatives of the first mortgage bondholders, providing for work on the land which, enhances its value and the • work proceeds without notice to the contractor of the plans or of the proceedings thereunder, during most of which time the property is in the control of a receiver appointed at the instance of the first mortgage bondholders, with the acquiescence of the corporation, and the receiver supervises such work and actively participates therein, and the property is subsequently bought in by the nominee of the bondholders, and, subsequently, transferred to a corporation incorporated by the bondholders, and the securities of that corporation issued to security holders of the old corporation in accordance with the plan, that the land in the hands of the new corporation is charged with a lien for the amount that it has been enhanced by the work of the contractor, and that second mortgage bondholders who have been gratuitously let in after the foreclosure by the first mortgage bondholders are not entitled to any rights as against the contractor.

In this case the land upon which the improvement has been made has been sold to a bona fide purchaser for value without notice so that the land cannot be followed. A money decree, however, may go against the new corporation. The method provided for the payment of the floating debt was the issuance of first mortgage bonds in an amount not exceeding $500,000. The plan contemplated that all of the creditors should be treated alike, and I think that Stokes is entitled to equal treatment with the other creditors. He is entitled to preference over the rights of the first and second mortgage bondholders of the old company. Inasmuch as he cannot have a lien upon the land improved, I think he is entitled, if he desires it, to a reinstatement of the first mortgage of Newark Factory Sites, Inc., to the extent necessary to secure bonds to be issued to him for the par of his claim. The reinstated mortgage, however, to exclude from its operation lands sold by Newark Factory Sites, Inc., to Iona fide purchasers without notice.

I will advise either a money decree against the defendant Newark Factory Sites, Inc., or a decree reinstating the first mortgage as hereinbefore stated and directing the corporation to issue bonds to Stokes for the par of his claim, or such other decree as counsel may suggest as will have the effect of preferring Stokes to the interests of the first and second mortgage bondholders of the old concern.

Settle decree on two days’ notice.


source: Caselaw Access Project

author: Lane, V. C.

license: Public Domain

text:
    Leslie N. Simpson et al. v. Ernest C. Klipstein
    [Decided March 4th, 1919.]
    Where a decree of the court of chancery is reversed by the court of errors and appeals, with costs, both in the court of errors and appeals and the court of chancery, the court of chancery may, under the provisions of section 91 of the act concerning the court of chancery (1 Comp. 8tat. p. JJiS), on entering a decree on the remittitur, award a reasonable counsel fee to the party prevailing in the court of errors and appeals, for services rendered in the court of chancery, to be included in the taxed costs.
    On bill. On application for the entry of decree on remittitur. On application for allowance of counsel fee.

      Mr. Frederick Seymour and Mr. Borden D. Whiting, for the defendant applicant.

      Messrs. Griggs & Ilarding and Judge Holmes (of the New York bar), for the complainants opposed.
   Lane, V. C.

The decree of this court granting specific performance was reversed by the court of errors and appeals. A motion is now made in this court on behalf of defendant to enter a decree dismissing the bill, in accordance with the remittitur from the court of errors and appeals, and at the same time application is made for a counsel fee to be included in the taxed costs awarded defendant in this court. The decree in this court granting specific performance awarded complainants costs in this court and directed that there should be included therein a counsel fee of $350, the allowance being made by virtue of the provisions of section 91 of an act concerning the court of chancery. 1 Comp. Stat. p. 445. The power of this court to include a counsel fee in the costs of a party unsuccessful here, but successful in the court of errors and .appeals, upon the entry of a decree upon remittitur, or otherwise, seems not to have been passed upon either by this court or by the court of errors and appeals. The remittitur from the court of errors and appeals reads as follows: “Ordered, adjudged and decreed that the decree of the chancellor filed the 5th day of January, 1918, be and,the same is hereby reversed, set aside and for nothing holden, with costs 'both in this court and in,the court of chancery, to be paid by the respondents.” While the opinion filed in the court of errors and appeals says nothing with respect to costs in this court, the opinion concluding: “The decree helow will be reversed, with costs,” yet I conceive I am bound by the terms of the remittitur, which in precise terms awards costs in this court.

The respondent is placed in precisely the same position," J think, so far as costs are concerned, as if he had originally prevailed in this court, in which event this court might have awarded a counsel fee under the provisions, of the statute. Unless the court now has power to award a counsel fee it would seem that a party who the court of errors and appeals has held ought to have originally prevailed here would bo unable to in any event take advantage of the statute, as it is unlikely that the court of errors and appeals would, in the' first instance, award a counsel fee for services performed in this court, the award and the amount of which is by the statute committed to the discretion of the chancellor. Although there are no decided cases upon the point in this state, yet I am advised that the Ordinary has, in one or more cases, awarded fees to counsel for services rendered in the court of errors and appeals on appeal from the prerogative court as well as for services rendered in the prerogative court. It has been held in New York that the lower court may upon a remittitur from the court of appeals carrying costs in the lower court, entertain a motion made by the prevailing party in the court of appeals for an additonal allowance which, under our practice, would be a counsel fee. Jermain v. Lake Shore & M. S. R. R. Co. (January Term, First Department, 1884), 31 Hun 558; Parrott v. Sawyer (January Term, First Department, 1882), 28 Hun 466. See City of New Orleans v. Whitney, Administrator, 138 U. S. 595; 34 L. Ed. (at p. 1109) ; 15 Corp. Jur. §§ 650, 651, &c., and notes.

I am of the opinion that a reasonable counsel fee may be allowed to be included in the taxed costs in this case.

As to the amount: I allowed the complainants who prevailed in this court $350. Application is made by counsel for defendant for a considerably larger allowance. Tor reasons which I think will appear from a consideration of my opinion in this court, T consider that an allowance to counsel for defendant in this court of $300 would be adequate. This is as much of the expense of defendant of the litigation that I think complainants should be compelled to bear. The allowance, of course, is without prejudice to counsel for defendant charging his client whatever may be a reasonable fee.


text:
    Steel and Iron Mongers, Inc., a corporation, v. Bonnite Insulator Company, a corporation.
    [Decided February 24th, 1919.]
    The preference given by section 22 of the Workmen’s Compensation act (Comp. mat.-first supp. p. 16ÜS) is. in the case of insolvent corporations. under section SB of an act concerning corporations (Comp. Stat. p. 1650), confined to an amount representing the weekly award for the two- months preceding the institution of the proceedings in insolvency.
    On bill, &c. On appeal from receiver’s determination.’

      Messrs. Cortlandl & Wayne Parker, for the claimant-appellant.

      Mr. Samuel Kaufman, receiver, pro se.

   Lane, V. C.

'Pile appellant filed with the receiver of the Bonnite Insulator Compairy, an insolvent corporation, a claim for $951.50, based on an award made by the Workmen’s Compensation Aid Bureau under the provisions of the Workmen’s Compensation act (Comp. Slat, first supplement p. 1688), and an agreement made between the employer and employe, after the award, under the terms of which the employe was to receive compensation at the rate of $5.50 per week for seven weeks for temporary disability, and compensation for permanent injury at the rate of $5.50 a week for two hundred weeks, totaling $1,100, which agreement was duty filed witli the department of labor and approved by the department .June 19th, 1918. Compensation for temporary disability, was fully paid and compensation on account of permanent disability had been paid to the extent of $148.50, leaving due, or to become due, on account of the award and agreement, $951.50. Appellant asks preference in the distribution of the assets of the estate. The receiver allowed the claim as preferred for $44, making up such figure by considering the $5.50 per week unpaid for the two months preceding the date when proceedings in insolvency were actually instituted and begun against the insolvent corporation as preferred under the provisions of section 83 of the act concerning corporations (Rev. of 1896; Comp. Stat. p. 1650), and allowed the claim as unsecured for the balance of the award. Appellant rested his right to preference upon the provisions of section 22 of the Workmen’s Compensation act (Comp. Stat. first supplement p. 1651), which reads as follows:

“The right of compensation granted by this act shall have the same preference against the assets of the employer as is now or may hereafter be allowed by law for a claim for unpaid wages for labor.”

By a supplement to the Workmen’s Compensation act (P. L. 1915 p. 364; Comp. Stat. first supplement. p. 1651 arbitrary section 22a) it is provided that any judgment entered in the court of common pleas, pursuant to the provisions of the act, may be docketed in the supreme court and thenceforward operate as a judgment rendered in that court. Section 21 of the act (Comp. Stat. first supplement p. 1649) gives the court of common pleas power to commute the compensation awarded at its present value when discounted at five per cent, simple interest. In the instant case, there has been no commutation, nor has any judgment been entered or docketed as provided by section 22a.

The determination of the question turns upon the meaning of section 22. That section does not purport to give a general preference. The preference given is such “as is now or may hereafter be allowed by law for a claim for unpaid wages for labor.” When, resort is had to legislation providing for preferences for claims for labor, it will be discovered that there is no general preference provided for. The act to secure to operatives in manufactories and other employes their wages (Comp. Stat. p. 3044 § 94) provides that no goods, chattels or personal property whatsoever, being in this state, and belonging to any manufacturer or other person or persons, of to any corporation, shall be liable to be removed by virtue of any execution, attachment or other process, unless the party by whom, or at whose suit said execution,, attachment or other process was issued or sued out, shall first pay or cause to. be paid to the operatives, mechanics and other employes wages then owing, not exceeding two months. Section 83 of the act concerning corporations (Rev. of 1896; Comp. Stat. p. 1650) provides:

“In case of the insolvency of any corporation the laborers and workmen, and all persons doing labor or service of whatever character in the regular employ of such corporation, shall have a first and prior lien upon the assets thereof for the amount of wages due to them respectively for all labor, work and services done, performed or rendered within two months next preceding the date when proceedings in insolvency shall be actually instituted and begun against such insolvent corporation.”

. Under the General Assignment act (Comp. Stat. p. 118 § 10) labor is made preferred to the extent of $300.

It is difficult to understand precisely what the legislature meant by the language used in section 22 of the Workmen's Compensation act. If it had been intended to give a general preference to the amounts awarded as compensation clear language expressing such purpose might have been used. The term “right of compensation,” used in section 22, must, of course, refer to the amounts awarded as compensation. The same preference then is given to the claimant for such amounts as is allowed by law for a claim for unpaid wages for labor. The claim for unpaid wages for- labor allowed in the case of insolvent corporations is prescribed by section 83 of the Corporation act, and is for claims for labor for a period not exceeding two months prior to the institution of the proceedings in insolvency. Labor is therefore given but a limited preference. A holding that the entire amount of the award for compensation under the 'Workmen's Compensation act is entitled to preference would require a disregard of the limited preference given to labor and of the fact that if such had been intended, apt and clear language was available to express such an intent. .While the award may not be considered in all respects as wages accruing, the award being-in reality for injuries sustained, yet in order to make effective, in any wav', the provisions of section 22 I think that, for the purpose of that section, the award must be considered as in the nature of wages and the preference is confined to the amount accrued and unpaid computed at the weekly rate for the two months preceding' the institution of the proceedings in insolvency.

The action of the receiver upon the claim 'therefore will be sustained.

I express no opinion, the matter not being before me upon this appeal, as to whether the receiver is correct in allowing the unpaid balance to accrue as an unsecured claim for the face amount, or as to whether he ought not to have allowed it for the present value commuted in accordance with the. provisions of the act.

No costs to either party. Settle order on one day's notice.


text:
    Edward J. Grassman et al. v. Samuel S. Badgley et al.
    [Decided August 5th, 1919.]
    1. The right of the court of chancery to partition property in this state does not depend upon: statute.

      2. Where it appears that complainant and others, parties to the suit, derive title through a will made in 1836, probated in 1844, of lands, which are vacant salt meadow, not subject to be taken possession of in the ordinary method, and it not appearing that there are any adverse claimants, the parties having color of title, and there being nothing to prevent actual entry, the rights of the parties may be partitioned in equity.
    3. The general rule that, before a court of equity will decree partition, proof of title must be made which would prima facie entitle parties applying to a verdict in ejectment does not apply in all cases.
    On bill. On exceptions to master’s report.

      Messrs. Day, Day, Smith & Slingerlwnct, for the exceptant.
   Lane, V. C.

This is a partition suit in which the master has reported that it has not been proven before him that complainant has title to any part of: the lands and premises referred to in the bill, and that the description of the property in the bill is too indefinite. The premises sought to be partitioned are vacant salt meadow lands in the city of Elizabeth, described in the bill of complaint as a tract or parcel of land and premises situate, lying and being in the city of Elizabeth, county of Union and State of New Jersey, being a tract of salt meadow containing six acres, more or less, and lying and being in the Elizabeth Town great meadows and adjoining meadows of Aaron Bryant and others. The history of the title is as follows: Samuel Badgley died in 1844 leaving a last will and testament duly probated, and by such will, which was made in' 1836, he devised to his son Henry “the one equal one-half part of a lot of salt meadow I now own near Elizabeth Town Containing in all about six acres,” and to his son Jacob the other equal half part of a lot of salt meadow. By deed dated April 1st, 1845, a daughter of Henry conveyed, what is stated in tire deed to be one undivided sixth part of several tracts o£ land in the townships of Springfield, New Providence and Westfield, in the county of Essex, New Jersey, to Samuel S. Badgley, another child of Henry, and among the tracts conveyed is the sixth described as follows: “Being a piece of salt meadow adjoining Jacob E. Badgley and others.” It is stated in the deed

“all of -which tracts of land are the same owned by Henry Badgley, late of Springfield, and of which he died seized, 'and it is the intention hereby to convey all right, title and interest of the said Jeremiah and Lavinia. his wife, of, in and to the estate, lands, etc., whereof the said Henry Badgley died seized wheresoever the same may be as heirs at law of the said Henry Badgley, deceased.”

There never was any salt meadow in the township of Springfield, and the lands referred to in the last deed must haye been the salt meadow near Elizabeth Town referred to in the will of Samuel Badgley and by him devised to his sons, Jacob and Henry, in equal parts. Nothing further of record, directly affecting the lands in question, appears until deeds obtained by complainant, from various of the lieirs-at-law of Jacob and Henry, during the last few years, were recorded on October 30th, 1918. No conveyance, grant or devise of any description into Samuel Badgley is shown. On September 28th, 1825, one Clark ■conveyed -to one Martin a tract of land adjoining the lands sought to be partitioned and in the description of this adjoining-tract is contained the following: “'Thence along his line and Samuel Badgley’s to the east, etc.,” and the following: “Bounded * * * easterly by the meadows of "William Dayton and Samuel Badgley’s.” By deed dated December 4th, 1816, one Dayton conveyed to one Byrant lands adjoining in which conveyance the lands in question are referred to as those 'of William Price. By deed dated May 19th, 1854, one Norris, executor, conveyed to one Wade lands adjoining in which the lands in question are referred to as follows: “Thence (3) south * * * to a stake standing as a corner of John Henderson’s meadow.” The testimony is to the effect that there are no conveyances or devises affecting the lands in question out of or into either Price or Henderson. Elizabeth Babig, fifty-two years of age, a daughter of Pbebe Dillon, who was a daughter of Henry Badgley, testified that she had often heard her mother speak of the six-acre tract of meadow land in the Elizabeth meadows of which her grandfather, Samuel Badgley, died seized. Joseph Brant, seventy-six years of age, the husband of one of the children of Mary Welshman, who was a daughter of Henry Badgley, testified that he liad always known about the interest his wife had in the six-acre tract of salt, meadow in the Elizabeth Town great meadows of which her great grandfather, Samuel Badgley, died seized.

Complainant Grassman, who is a civil engineer and surveyor, testified that he had examined the records and that he knew that the sixth described tract in the deed of 1845 was .called the Badgley meadow, and that it is known that this meadow wa.s cut by the Badgleys about forty years ago, and that one of the oldest members of the family definitely located the tract which that, family owned as being the tract under partition.

At the time the bill was filed the lands were unoccupied and had been for many years. The' only evidence of any act of possession was the testimony of Grassman that it was generally known that the Badgley family cut the land for salt hay about forty years ago. The lands are incapable of continuous physical occupation in their present condition. The only act of ownership that complainant has performed has been to go over the land in a general way. They have not been fenced or posted. There is nothing to prevent, complainant from .entering upon the lands, so far as they may be entered upon, and from fencing or posting them. There is no one in possession and no one so far as known asserting an'adverse title.

The master based his determination upon section 1 of an act concerning partition (Comp. Stat. p. 3897), holding, in effect, that before there can be partition in this court complainant must prove his' title. But the power of this court to decree partition is not limited by the statute. Section 44 of' the act (Comp. Stat. p. 3910) provides that the court of chancery shall have power upon bill filed in that court for the partition of real estate, to decree the sale thereof, and the jurisdiction of said court shall continue as heretofore, anything in this act to the contrary notwithstanding. The jurisdiction of a court of equity to decree partition.is not based upon statute. 17 Am. & Eng. Encycl. L. (1st ed.) 677, 679; 1 Story Eq. Jur. (11th ed.) 683, &c., §§ 646, &c.; Hay v. Estell, 18 N. J. Eq. 251. The statutory method does not deprive courts of equity of their inherent power. Gutheridge v. Gutheridge (Court of Appeals of Texas), 161 S. W. Rep. 692.

The rule has been generally expressed that even in case of a default the court, before decreeing partition, will require evidence which would prima fade entitle the party to a verdict in ejectment. 17 Am. & Eng. Encycl. L. (1st ed.) 745 subd. c; 30 Cyc. tit. "Partition’’ 246 subd. B note 89. It wall be observed, however, tliat the cases cited in support of the general proposition are cases from New York, and that these cases are based upon a construction of their statute. ' It is uniformly held in ejectment that a prima fade title is, at least, established by proof of a deed or deeds to one’s self and possession in one’s self or the grantor or devisor, or of his predecessor in title. 9 Rul. Cas. L. tit. “Ejectment” 843 § 15.. See also note to Cottrell v. Pickering, 10 L. R. A. (N. S.) 404, and note to Dodge v. Irvington Land Co., 22 L. R. A. (N. S.) 1100. Complainant, unquestionably, has color of .title. Sedgw. & Wait Tr. Tit. Land (2d ed.) § 762.

Partition, generally speaking, may be had in equity of any class of property or of any rights held in co-tenancy. 30 Cyc. tit. "Partition’" 153.

Where lands sought to be partitioned are vacant, actual possession is not necessary if the applicant is the holder of the legal title. 21 Am. & Eng. Encycl. L. (2d ed.) 1149 subtit. “Vacant Lands.”

The reason for the rule requiring that an applicant for partition must show title, so far as courts of equity are concerned, is that the court wall not make a futile decree, nor will it assist in embarrassing titles. A decree in partition does not settle the title nor does it hind others than those parties, to the litigation or those holding under them or whom they represent in some manner. 20 Rul. Cas. L. tit. “Partition” 787 § 58.

There is nothing to prevent complainant’s immediate entry upon the lands so far as they may he entered upon. Under the circumstances, I think, he is entitled to partition in this court.

The master also reports that'the description is too indefinite. Tt is generally held that the description must be sufficiently particular to actually identify the property upon which the 'decree is intended to operate. 17 Am. & Eng. Encycl. L. (1st ed.) 733; 30 Cyc. tit. “Partition” 218 subd. 10. The description is indefinite. Counsel for exceptant agrees to have a survey and procure a more accurate description.

The matter will he re-referred to the special master so that he may take such additional evidence as may be offered before him with respect to the description of the property and with respect to what steps complainant may take to actually take possession of the land, and ho is then to report the rights and interests of the respective parties as he was directed to by the prior order of reference. His report is to be in line with this opinion.

Unless the rights held by the parties to this litigation are partitionable in equity, it would appear that the parties are remediless. They cannot maintain ejectment or trespass. It is difficult to conceive how a suit to quiet title, in the present state of the law, at least, can be maintained.. Whatever difficulty the purchaser at the sale may have with respect to Ms title is ¡a¡ matter with which this court has no concern at this time. I am quite convinced that the rights of the parties may be partitioned in equity.


author: Stevenson, Vice-Ordinary.

text:
    In the matter of the appeal from a decree of the Hudson county orphans court denying probate to a certain paper-writing propounded as the last will and testament of Jessie G. Sage, deceased.
    [Decided March 21st, 1919.]
    A declaration by a testatrix that slie has signed an instrument which she publishes as her will is not an acknowledgment of the signature to the will as required by statute unless the witnesses were able to see tlie signature.
    On appeal from Hudson county orphans court.

      Mr. Richard Board-man, for the appellant.

      Mr. Harry Lane, for the respondent.
   Stevenson, Vice-Ordinary.

1. I concur with the learned judge of the Hudson orphans court in his opinion that the instrument -propounded as Mrs. Sage’s will was neither signed by her in the presence of the witnesses nor was the “making” of the signature acknowledged by her in the presence of the witnesses.

It is not disputed that Mrs. Sage brought the paper, all in her handwriting, to the witnesses and sufficiently published the paper as her will in their presence, and that they subscribed their names thereupon as witnesses in her presence and in presence of each other.

The narrow question is whether it may be inferred from the evidence, in the absence of any attestation clause, that Mrs. Sage acknowledged her signature in the presence of the witnesses, which testamentaiy ceremony is made by statute the alternative to the making of the signature in the presence of the witnesses. Mrs. Sage did not subscribe the will. It is claimed, however, oji behalf of the appellant that she sufficienty declared her name, which she had written in two places in the first paragraph of her will, to be her signature to the will. The paper purporting to be a will appears now enti3ely in the handwriting of Mrs. Sage, with the excejition of the signature of the two witnesses. It is not denied that if Mrs. Sage filled in her name in the introductory part of the instrument with intent to make her signature to the will, and when, the subsequent testamentary ceremonies were performed, acknowledged the signature within the meaning of our statute, the execution of the instrument as a will would be in confomrdy with our statute, although the testatrix did not subscribe the instrument. In re Phelan's Estate, 83 N. J. Eq. 316; S. C. affirmed, 83 N. J. Eq. 647.

The important circumstance pertaining to the attempted execution of this alleged will is that Mrs. Sage brought the paper to the witiiesses so folded that they did not, and in fact could not, see her alleged signature. The witnesses subscribed tlieir names and Mrs. Sage placed the paper in her bag and took it. away with her without the witnesses being able at any time to see her signature.

2. Let us concede for the purposes of this case that if Mrs. Sage had exhibited to the witnesses an instrument bearing on its face her name, and had then published the instrument as her will, and thereupon the two witnesses had signed their names in the manner prescribed by the statute, that such conduct on her part would have been in substance and effect an acknowledgment to the witnesses that what they saw with their own eyes was her genuine signature to the will. See 30 Am. & Eng. Encycl. L. (2d ed.) 589, and particularly the cases cited in note 7; Ludlow v. Ludlow, 35 N. J. Eq. 480, 489; S. C. affirmed, 36 N. J. Eq. 597; Stewart v. Stewart, 56 N. J. Eq. 761, 764; Baskin v. Baskin, 36 N. Y. 416.

Under the wide admission which is. only made curguendo that the exhibition to the witnesses by a testator of an instrument apparently bearing his signature, accompanied by a distinct publication of the instrument as the testator’s will, amounts to the acknowledgment of the signature prescribed by our statute, I am still of opinion “that there is no sufficient acknowledgment unless the witnesses either see, or are able to see, the signature.” 30 Am. & Eng. Encycl. L. 589. The great weight of authority sustains the proposition that where the testator purposely prevents the witnesses from seeing his signature, even the positive declaration by the testator that he has in fact signed the instrument, will be of no avail; much less can the acknowledgment in such case be inferred from the testator’s declaration that the instrument is his will. In view of the elaborate discussions of this subject in the English and American cases cited below, it would seem to be unnecessary to discuss at length the reasons which I think .sustain the principle which I have stated. It may be well, however, to refer to the repeated declarations by our courts that the signing of the will is a testamentary ceremony quite distinct from the publication of the will. There is no alternative to the publication, but the statute does prescribe an alternative to the signing in the presence of witnesses, viz., that the signature be acknowledged by the testator in the presence of the witnesses. Where, as in this case, the instrument is so folded that the» witnesses cannot see the signature, the most solemn declaration by the testator that in fact the will bears his signature is merely a statement on his part, and all that the witnesses can attest is that statement. They are not witnesses to whom the testator has acknowledged a certain'specific signature as his -own signature. They can merely attest that the testator informed them that the will was signed by him. As a matter of fact, in such ease the will may have been left unsigned by mistake or it may have been purposely left unsigned so that the testator at any time in the future, in fraud of the statute, could affix his signature or elect to die intestate.

It is not claimed that Mrs. Sage expressly stated to the witnesses or to anyone that the instrument had been signed by her. The argument is that the production of the paper, and her declaration to the witnesses that it was her will, under the circumstances, constituted conduct equivalent to an acknowledgment of the signature. Counsel for the appellant contends that Mrs. Sage’s declaration “This is my will,” was equivalent lo “This is my signed will.” Counsel for the appellant states in his brief that “a careful scrutiny of the will itself shows that in all probability she (Mrs. Sage) kept the paper which is offered for probate, for a period of years after it was written before she filled in her name at the head of the paper.” The evidence, I think, fully sustains this proposition. Mrs. Sage made two drafts of a will in her own handwriting, and one of them appears with two blanks in the first paragraph, manifestly intended to be filled in with her name in case she should conclude to execute the instrument as hex will. Conceding that Mrs. Sage regarded the writing of her name with her own pen in these spaces, or one of them, as her signature to the will, the significant fact remains that this so-called holographic will remained unsigned by Mrs. Sage for a long period of time, and there is absolutely no evidence when it was signed. We may surmise or think it probable that Mrs. Sage believing that she could sign her will by filling in the blanks, would not have left those blanks unfilled when she declared that the document was her will and caused the witnesses to subscribe their names, but there is no evidence that Mrs. Sage did not procure the attestation of the witnesses first, and, subsequently, at her convenience, insert her name in the spaces which she had left for that purpose. The .case would bear a different aspect if the paper signed by the witnesses showed on its face that it had been completely written currante calama by Mrs. Sage. In such case there would be no evidence that the body of the instrument had been written first and the signature or signatures inserted subsequently. I see no ground for the affirmative conviction that Mrs. Sage’s signature or signatures had been inserted in the will before she brought it to the witnesses which is not mere surmise —a presumption of a fact which the law requires to be proved. Even if Mrs. Sage had said, “This is my signed will,” that would not present legal proof of her signature if the witnesses did not and could not see any signature.

The argument of tins case on both sides proceeded, I think, with the express or tacit admission that there was evidence from which the inference could be drawn that Mrs. Sage had filled in her name in the reserved spaces when she presented the document to the witnesses for their attestation, and, therefore, I prefer to deal with the case with that presumption which certainly is exceedingly favorable to the appellant. The narrow question to be considered therefore is whether, in the absence of any attestation clause, there is any evidence that Mrs. Sage, by word or by conduct of any kind,’acknowledged what in fact was a signature made by her to her will. I have nothing to add to the lucid discussion of the learned judge of the Hudson orphans court, in which he reaches the conclusion, without referring to the fact that the paper was folded so as to conceal any signature of Mrs. Sage from the witnesses, that there was no sufficient declaration by word or conduct that she had signed the paper, or that her signature was affixed to it in any way. I intend in this additional opinion merely to deal with the proposition that under our law a mere declaration by the alleged testator that he has signed an instrument which he publishes as his will, is .not an acknowledgment of tlie signature unless the witnesses see or are able to see the signature. A brief glance at the history of our statutes regulating devises and testaments throws light, I think, on this question.

The fifth section of the statute of frauds (29 Car. II. c. 3) abolished verbal devises and provided that all devises of lands “should be in writing and signed by the party so devising the same, or by some other person in his presence and by his express direction, and should be attested,” &c. After a period of some uncertainty the English courts appear to have finally decided that an acknowledgment of the signature to the witnesses satisfied the statute. (1 Jarm. Wills (R. & T. ed.) 208 ch. 6 § 1.

The New Jersey act of 1713 required devises to be in writing and to be “signed and published by the testator in presence of three subscribing witnesses.” Bradf. 35; Elm. Dig. 595. It was settled by our courts that the exhibition of the signature by the testator to the witnesses, and a positive declaration by him that the same was his own signature, did not meet the requirements of the statute — that the signature must actually be made in the presence of the witnesses. Den v. Milton (1830), 12 N. J. Law 70; Den v. Matlack (1839), 17 N. J. Law 86; Combs v. Jolly (Prerogative Court, 1835), 3 N. J. Eq. 625.

It will be observed that the English statute of Charles allowed an alternative to the signature of the testator in the presence of the witnesses, viz., the writing of the testator’s signature by some other person in his presence and by his express direction. The New Jersey statute provided no alternative.- Neither statute expressly recognized the acknowledgment of the signature as the equivalent of making the signature in the presence' of the witnesses. The establishment of this equivalent was reached in England by construction, no doubt recognizing the established custom supported by convenience and common sense of having a signature to a document attested by witnesses after the maker of the signature has exhibited the same to the witnesses and declared that the signature was his. There is an exact equivalence in point of fact. No doubt cases of hardship were liable to arise under the New Jersey statute which ignored a well-settled custom pertaining to the execution of solemn instruments and the exact equivalence of the two methods by which a party executing an instrument could procure that fact to be attested by witnesses.

AVhen the English law of wills covering clevises of real estate ancl bequests of personalty was passed in lSS?1, the propriety of allowing the exhibition of the signature, ancl contemporaneous acknowledgment of it as the equivalent of signing, was expressly recognized. The same course was taken in the Yew Jersey statute of wills passed in 1850. P. L. 1850 p. 280. The statutes regulating wills in other states quite generally exhibit the same feature. In this manner the statute law of England ancl America was made to conform with the natural habits and customs of men.

If, by any construction of our statute, the declaration by a party attempting to make a will to the witnesses whom'lie called in, to the effect that the instrument had been signed by him, when in fact the. witnesses could not possibly see any signature, should be held to be an acknowledgment of the signature, it seems to me quite evident that a third method of having a testator’s signature attested would be established, not by any means equivalent to the others, but far less forceful and significant as a testamentary ceremony.

Yo Yew Jersey decision dealing with the subject under consideration has been cited by counsel or has in any way come to my knowledge. The following are a few only of the decisions of courts of other jurisdictions which support the view which I have expressed. Lewis v. Lewis (1854), 11 N. Y. 220.

The Yew York statute of wills construed in this case is, as to the matter now finder consideration, the same as our own. The case seems to be on all fours with the one at bar. The testator folded the will so that the witnesses could not see whether it was signed by him or not. The opinion of the court (at»p. 225) contains the following paragraph:

“If the party does not subscribe in their presence [the presence of the witnesses], then the signature must be shown to them and identified and recognized by the party ancl in some apt and proper manner acknowledged by him as his signature.”

In the Matter of the Probate, ,&c., of Mackay, deceased (1888), 110 N. Y. 611.

In this case Judge Earle delivered the unanimous opinion of the Yew York court of appeals directly holding that where the testator so folded the instrument that the witnesses could not and did not see his signature, or any part thereof, the will was not properly executed, however distinctly it was published. The ■court held (at p. 614) that "there would undoubtedly have been •a formal execution of the will in compliance with the statute if the witnesses had at the time seen the signature of the testator to the will.” This decision is directly in point.

In re Goods of Mary Gunstan; Blake v. Blake (1882), L. R. 7 P. D. 102.

In this case the English court of appeal unanimously sustain the probate court and hold that an acknowledgment of a signature to an instrument purporting to bo a will is insufficient unless the witnesses are able to see the signature. Master of Rolls Jessel approves Mr. Jarman’s proposition that "there is no sufficient acknowledgment unless the witnesses cither saw or might have 'seen the signature, not even though the testator should expressly declare that the paper to be attested by them is his will,” and then adds his opinion that "it. is not sufficient even if the testator were to say, My signature is inside the} paper,’ unless the witnesses were able to see the signature.”

One of the most recent elaborate discussions of the subject in hand may be found in the opinion of Judge Loring, speaking for the Massachusetts supreme court in Nunn v. Ehlert (1914), 218 Mass. 471. The Massachusetts statute has by construction been held to require as. the alternative to the making of the signature of the testator in the presence of the witnesses, the acknowledgment of the signature by him in the presence of the witnesses, thus giving as much force in New Jersey to Massachusetts" decisions as can be attributed io decisions of the English courts or the New York courts. The five judges of the Massachusetts court who heard the case last cited hold directly that "a-will is not attested lawfully by a subscribing witness it the person who intended and attempted to execute the instrument as his will concealed the signature from the subscribing witness so that he could not see it or know that it was there.” Judge Loring states (at p. 72) that the case "presents the question whether a will is duly attested when the signature of the deceased is hidden from the witnesses when they attest and subscribe the will.” It is this question which the court unanimously answers in the negative. I agree with the Massachusetts court in disregarding the Michigan Case (In re Dougherty’s Estate, 168 Mich. 281), in which it appears an “opposite conclusion” was reached.

The decree oí the Hudson orphans court will he affirmed.


author: Lewis, Vice-Ordinary.

text:
    In the matter of the estate of Hartman V. Van Riper, deceased.
    [Decided June 3d, 1919.]
    1. A trustee may hire clerical help in the management of his trust estate, and may pay them a reasonable compensation out of the estate ; and such clerical help may include a collector of rents.
    2. A trustee may pay a reasonable commission to an agent for the sale of real estate.
    3. Repairs to real estate are chargeable to the life tenant, and not to the remainderman.
    4. The allowances made to the trustee for commissions, and to his proctor for counsel fee, are not disproportionate, and should not be modified.
    On appeal oí Jane IT Yan Winkle from order or decree of Bergen county orphans court.

      Mr. Frederic Beggs, proctor for the appellant.

      Mr. Wayne Dumont, proctor for Robert H. Fordyee.

      Mr. David D. Zabrisleie, proctor for Jane E. Van Riper.
   Lewis, Vice-Ordinary.

This is an appeal from certain portions of the order or decree of the Bergen county orphans court allowing the account of Robert H. Fordyee as substituted trustee of the estate of Hartman V. Van Riper, deceased.

The decree was made on the 11th da3 of February, a. 'd. 1918. '

The appeal is taken from those portions of the order or decree of the orphans court which disallow the following exceptions filed by Jane E. Van Winkle to the account of the trustee:

(1) Exception number 2 of the original exceptions, alleging that the several items of credit prayed for being those items paid to L, A. Van Riper as commissions for collecting rents, should not be allowed to the accountant.

(2) Exception number 4 of the original exceptions, alleging that the items for commissions for sale of property allowed to L. A. Van Riper are not proper charges against the estate.

(3) Exception number 7 of the first supplemental exceptions, alleging that certain items claimed to have been paid for repairs, should be wholly disallowed, because the same should be paid by the life tenant of the property upon which such repairs were made.

And from those portions of the said order or decree which adjudged as follows:

(4) That the accountant at the time of his discharge had on hand a balance of corpus, amounting to $96,624.83, as trustee of the trust contained in the last will and testament of the deceased, for the grandchildren of the deceased, &c.

(5) That there is a balance of corpus, amounting to $23,-600.00, in the trust fund for the benefit of the widow of the de-' ceased, wherein it is ordered that from the income arising thereupon the Hackensack Trust Company shall pay the sum of $1,-431.62, surcharged, &c., within three years, &c.

(6) That the accountant be allowed the sum of $2,000 as and for his commissions on the corpus of the trust for the benefit of the grandchildren of the deceased, and that he be allowed the further sum of $500 as and for his commissions on the corpus of the trust for the benefit of Jane E. Van Riper, widow of the deceased, to be paid from the respective trusts; and that a counsel fee of $2,000 be allowed to Wayne Dumont, Esquire, proctor for the said accountant; eighty per cent, to be paid out of the trust.for the benefit of said grandchildren, and twenty per cent, to be paid out of the trust for the benefit of the said Jane E. Van Riper; and that a counsel fee of $500 be allowed to David D. Zabriskie, Esquire, proctor for the said Jane E. Van Riper, the widow, to be apportioned as aforesaid.

(1) It cannot be contended that a trustee is bound to devote his personal time and attention to the collection of rents; or be obliged to pay out of his own pocket someone that he may employ for that purpose; otherwise, a high-class trustee, every moment of whose time, and every ounce of whose energy might be’ in demand in large and extensive enterprises and operations, would be obliged to devote that time and energy to the mere hack-work of collecting rents, or use up all his. compensation as trustee in paying someone else to do it. The deterring and discouraging effect of such a rule upon high-class men who might be designated as trustees is obvious. So long as the compensation paid to the person employed for the purpose indicated is itself reasonable in the light of the services rendered, the expenditure is a proper one to charge against the estate. This is on the same principle as a trustee is always entitled to hire such clerical help as is necessary to handle the affairs of the estate. Brown v. Brown, 72 N. J. Eq. 667; Dey v. Codman, 39 N. J. Eq. 258; Rabbitt v. Fidelity Trust Co., 73 N. J. Eq. 745.

(2) The same principle applies to the payment of commissions for the sale of the real estate as to the collection of rents. The only question really involved here is whether or not the commissions paid were reasonable in the light of the services rendered and the surrounding circumstances.

L. A. Van Riper was an insurance and real estate man. He produced to the executor the customer for the properties sold, and the commission paid him was the customary commission paid to real estate men. The mere fact that he was the son of the testator should not militate against his right to be compensated for the services he rendered in the disposition of the property of the estate. He received no more for his services than a stranger would have received had he produced the customer and consummated the sale. This expenditure is also a proper one to charge against the estate.

(3) The rule is clearly settled that repairs during the life tenanc3 are chargeable to the life tenant, and not to the remainderman. The trustee had charged these repairs against the corpus of the estate, and the exceptions to his account in that respect should have been sustained, and the amount expended for repair during the life tenancjr charged against the life' tenant’s interest. Pratt v. Douglass, 38 N. J. Eq. 516.

(4) This is a mere matter of calculation in the light of the altered figures in the account, resulting from the court’s present decision. When the amount of the altered figures is determined by the restraining of the account, the decree of the court below will be modified accordingly.

(5) This directs the pajunent out of the income due to the widow for moneys which the trustee, Mr. Eordyce, paid out of his own funds for the benefit of Mrs. Van Riper’s estate.

He is, undoubtedly, entitled to be reimbursed for such payments, but the question of the propriety of the account in this respect is not before this court on appeal by the person whosfi estate is affected; and appellant in the present proceeding is not aggrieved by the decree appealed from, and, therefore, has no status to question it.

If it be true that the account is not in proper form or correctly stated in this respect, application might be made to the court below uj)on the filing of the remiUitur to rectify any discrepancy or irregularity that might exist in its own decree.

(6) In the light of the services rendered, and of all the attendant circumstances, I do iiot feel inclined to say that the allowances made to the proctors of the respective parties by the court below were disproportionate to the estate involved and the services rendered. I, therefore, decline to disturb them.

As I view the account it does not appear to me that the allowance of $2,000 to the trustee is in excess of the five per cent, on the amount which came to his hands, which appellant contends is the limit which the law permits to be paid.

The only question I am concerned with, therefore, is whether or not the amount so allowed should be in any way modified by me on appeal.

As in the case of proctors’ allowances, I am disinclined to disturb this allowance to the trustee and for like reasons.

With the modifications above indicated, the decree appealed from should be affirmed, and I will advise a decree in accordance with these views.

The terms of the decree may be settled on application of counsel.


author: Backes, Vice-Ordinary.

text:
    Louis W. Wolff, individually, and Louis W. Wolff and Edward A. Wolff, as executors of last will and testament of Francis Hucsmann, deceased, petitioners, v. The Comptroller of the Treasury of the State of New Jersey.
    [Submitted November 6th, 1918.
    Decided December 23d, 1918.]
    Where a fund was on deposit in a business enterprise and by written document the owner of the fund agreed that the owner of the business should pay him interest in the fund during his life, and at his death the fund should belong to the owner of the 'business, such fund is not a “gift to .take effect at death” within the meaning of the Transfer Inheritance Tax law.
    On appeal from an assessment of the transfer inheritance tax.

      Messrs. Benny & Gructen, for the petitioners.

      Mr. John IF. WescoLt, attorney-general, and Mr. Francis II. Magee, assistant attomej-general, for the state.
   Backes, Vice-Ordinary.

In levying the transfer inheritance tax on this estate of a resident decedent, the comptroller included in the assessment an item “Gift to take effect at death, $30,000.”' The donee and the executors appeal.

Under the third subdivision of section 1 of the Transfer of Property Tax act (Comp. Stat. p. 5301), as amended in 1914 (P. L. 1914 p. 267), a tax is imposed upon the transfer of a decedent’s estate:

“When the transfer is of property made by a resident, or is of real property within this state, or of goods, wares and merchandise withjn this state, or of shares of stock of corporations of this state, or of national banking associations located in this state, made by a non-resident, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect, in possession or enjoyment at or after such death.”

The gift upon which the tax was levied is in writing .and reads:

“Whereas, I, Francis Huesmann, have this day withdrawn from the firm of Huesmann & Co., which is continued by Louis W. Wolff, my nephew, as sole member thereof; and
“Whereas, There is now on deposit with the said firm the sum of thirty thousand 00/100 ($30,000) dollars as a special fund, at the risk of the business;
“Now, therefore, in consideration of the love and affection which 1 bear him, and in consideration of his paying to me a sum equal to two (2) per centum xier annum thereon, in equal semi-annual installments from the date hereof for and during my natural life, I give unto him, said Louis W. Wolff, the above sum absolutely.
“And I, Louis W. Wolff, on my part agree and bind myself to pay the said Francis Huesmann the said two (2) per centum per annum during the term of his natural life, and in the manner above mentioned and to leave the said principal sum in said business at the risk thereof.
“In Witness Whereof, The parties hereto have hereunto set their hands and seals, this first day of March, one thousand nine hundred and sixteen.”

The single question for decision is whether the gift was to take effect in possession or enjoyment immediately or at the death of the decedent. By the express terms of the document the stun is given absolutely, but it is the contention of the comptroller that the donee’s promise to pay interest -and to leave the principal in the business during the lifetime of the donor, postponed the enjoyment of the gift until the death of the decedent within the ineaning of the statute.

For a better understanding of the true character of the gift we must look to the circumstances that- led up- to its making. Mr. Huesmann and Mr. Wolff, uncle and nephew, were partners in trade in New York City, under the name of Huesmann & Company, importers of bristles, from 1901 to March 1st, 1916, when the uncle retired, handing the business over to the nephew. They were equal partners save as to $100,000, the uncle’s capital in the business at the time he took his nephew into partnership, and the item of $30,000, the subject of the gift. The nephew assumed the payment of the $100,000 and the uncle advanced him $69,000 more to carry on the business These sums wofe to be repaid at stated times with four per cent, interest. The $30,000 was a credit to the account of Mi. Huesmann on the confidential ledger of Huesmann & Company, and arose in this manner: Mr. Huesmann succeeded to the business established in 1848 by his grandfather, who at his death had accumulated $61,000, represented by the business. Mr.' Huesmann’s mother inherited one-half of the estate and she elected that it remain with Huesmann & Company, then the decedent, at four per cent. At her death, in 1896, she bequeathed one-half of the inheritance, estimated by her to he worth $16,-000, to the decedent, and the other half in trust for four grandchildren, which is still invested in the business of Huesmann & Company. Instead of canceling the debt of his mother pro tanto Mr. Huesmann chose to credit the legacy to his account as against the business, and thereafter periodically added interest at four per cent., the. rate he had been paying his mother, until he retired, when the accumulations amounted to $31,-5.25.50. At the time of the gift $1,525.50 was checked out to him, leaving the net amount of $30,000 to his credit.

The nature of the gift was not'along manifested by the document above set out, but on the day of its execution Mr. Huesmann, in his own handwriting, transferred the credit on the ledger of the firm from his account to that of Mr. Wolff, and delivered to him the book. Thus we have two unequivocal expressions of intention on the part of the donor that the gift should take effect in possession and enjoyment forthwith. By the formal transfer he gave the sum “absolutely,” and the personal entry by the donor in the books of account, destroying forever the evidence of his ownership, accentuates his meaning. It is urged, however, by the comptroller that the promise of the donee to pay interest “and to leave the principal sum in said business at the risk thereof,” imports a trust for the protection of the donor, which equity would have enforced, and that, therefore, the gift, though in terms absolute, was in fact conditional, not that it was revocable, but in the sense that this enforceable equity of the donor held the gift in abeyance and prevented the taking effect in possession and enjoyment until the death of the decedent. I am unable to follow the reasoning, logically, to such a result. If the subject-matter of the gift were soihe tangible asset of the firm delivered into the hands of the donee, something that he could have utilized, there might’ possibly lie merit in the contention, but here the donee was the owner of all that was of the partnership and the thing given, or rather forgiven, was an obligation of the partnership to the donor partner, which he gratuitously surrendered.' True, the deeds of gift treat the $80,-000 as though the sum were actually on deposit as a special fund with the firm, and available commercially and the argument assumes this to have been the fact, but manifestly that which passed was nothing else than a liability, as between the partners. Upon the uncle’s retirement, and upon an accounting, Wolff would have become Huesmann’s debtor to the extent of one-half of the $30,000. The gift acquitted him of this and dissolved the debt inslamier. It would be anomolous if Wolff could hold the debt as against himself — be a debtor to himself.

The comptroller’s notion of an implied- trust to maintain the donation as capital in the business until the donor’s death, and that because of this the enjoyment of the gift was deferred until the decedent’s death, altogether loses sight of the nature of the thing given. If we keep before the mind’s eye that it was an obligation and not an asset of the copartnership that Iiuesmann gave to Wolff, the futility of the effort to transform the donee's liability into business capital is at once apparent. There was no trust, and none-was intended, and in the,very nature of things the gift came into absolute enjoyment when the debt was handed over to the debtor as a gift. The promise to leave the gift in the business was metaphorical, and, as Mr. Wolff said, to gratify the sentiments of his uncle. The family had for four years invested with the firm of Huesmann & Company all or some parts of the fortune made out of the business by the founder, and though these investments were'from time to time paid off, they were carried on the books as a charge against the business. This practice of memorializing the success of his grandfather, and, perhaps, his own, the uncle desired to have continued.

Whether the gift was changed into a bargain or sale by the promise to pay interest as the appellants contend, is of no importance to the point at issue. I, however, entertain the view that it did not work a change. I am also of the opinion that the promise was simply an executory and enforceable contract and not a condition of the gift.

I have examined the authorities relied on by the comptroller and find them to be cases in which it-.clearly appeared that the gifts were not to be enjoyed until after the death of the decedent, or, where from the circumstances, the intent that they should not be was plainly deducible. In the Matter of Green, 153 N. Y. 223, the property was assigned to a trustee upon trust to collect the income and apply the same io the grantor’s use during life and after his death to distribute the property among the designated remaindermen. In the Matter of Cornell, 170 N. Y. 423, the gift was of securities under an agreement that the donor should have, during his life “all or such part of the net income of the gift as he might wish.” In In re Orvis Estate, 223 N. Y. 1, two partners created two funds of $500,000, each upon agreement that the survivors should take the whole. The court held that the -transfer upon death to the survivor was in essence and in effect beneficent and donative and similar in nature and effect to transfers by wills. In the Matter of Dana (decided by the appellate division of the supreme court of New York), 164 App. Div. 45, the decedent, owner of corporate capital stock, caused the certificate to be reissued to himself and another person “and the survivor,” with the right of revocation. It was held that it was a gift intended to take effect in possossien at tlie death oí the donor, and hence that the gift was subject to a transfer tax. In Estate of Reynolds, 169 Cal. 600, the decedent’s father, who was suffering from a mortal disease, four months before his death transferred his department store and its contents, valued at upwards of $100,000, to his son upon the son’s agreeing to assume the indebtedness of the business, amounting to about'$30,000, and to pay the father $600 per month during his life. It was held that under the provisions of the Inheritance Tax act, imposing a tax upon the transfer of any property,

“When the transfer is of property * * * by deed, grant, bargain, sale, assignment, or gift made without valuable and adequate consideration, in. contemplation of the death of the grantor, vendor,. assignor or donor,” .

the undertaking by the son did -not constitute a valuable and adequate consideration within the meaning of the act.

The assessment will be revised bjf striking out the item appealed from.


author: Gummere, Chief-Justice.

text:
    Nellie F. Hedden et al. v. Bierman-Everett Foundry Company et al.
    [Decided March 3d, 1919.]
    Where a deed and agreement, construed together, vest a right of user of a railroad siding so long, as the siding-, .continues to exist, unless sooner terminated on notice, any interference with the enjoyment thereof, so long as it remains in full force, entitles the aggrieved party to injunctive relief.
    On appeal from a decree in chancery advised by Vice-Chancellor Stevens.

      Mr. Maximilian M. Stallman, for the appellants.

      Mr. Frank F. Bradnxr, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The purpose of tire present litigation is thus stated in the brief., of counsel for the respondents: -“The contest is chiefly between the complainant Nellie P. Hedden, as owner of a tract of land in Irvingtqn, and Bierman-Everett Foundry Company, owner of an adjoining tract of land. The complainant seeks an adjudication that she has a right to the unrestricted use of a railway siding which extends aqross her land, arid the laud of the defendant, and partly across land of Lehigh Valley Railroad Company, and connecting with a branch line of that railroad. Complainant also seeks an injunction to prevent, an alleged threatened interference with her right of way” — that is, with her right to the unrestricted use of this siding.

The rights of the respective parties are fixed by a deed made by William L. Glorieux to John S. Hobbs on April 3d, 1908, and a tripartite agreement entered into between those parties and the Lehigh Valley Railroad Company on the same day.

Glorieux is the predecessor in title of the respondents, and Hobbs of the appellants.

The deed referred to conveys a part of a tract of land owned by Glorieux, '

“together with the right to use a certain proposed single track railroad siding as described in a certain triplicate agreement bearing even (late with tiloso presents, and entered into by the said William L. Glorieux, the said John S. Hobbs and Lehigh Valley Railroad Company of Now Jersey, which siding is to run over other lands of said Glorieux from the easterly line, of, the property of the said railroad company to the lands hereby conveyed.”

The agTeement referred to in this deed provides for the construction of a railroad siding partly upon land of the railroad company (party of the third part), partly upon lands of Glorieux (party of the first part), and partly upon lands of Hobbs (party of the second part). It further provides that the cost of the construction and maintenance of the siding is to be borne by Glorieux and Hobbs, and “shall he owned b3 them.” The agreement then provides for the shipment of the product of the parties of the first and second parts over the railroad lines of the party of the third part, and for the responsibility for loss or damage which may occur to cars while standing on said siding, and then proceeds as follows: - '

“This agreement shall continue in force unless or until terminated by any of the parties hereto giving thirty,days’ written notice tp the others of intention so to terminate, and upon the expiration of such period this agreement shall absolutely end. * * * This agreement shall be binding upon and enure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors and assigns.” ^

The principal contention on the part of the appellants is that the effect of the quoted words in the deed from Glorieux to Hobbs was to vest in the latter, and his heirs and assigns, a perpetual easement of way over the land of Glorieux upon which the siding was constructed, and not a mere license, terminable at the will of the grantor, or his successors in title. The learned vice-chancellor before whom the cause was heard in the court below held that the deed and the agreement were to be construed together, and that when this was done, it became apparent that no easement of way was vested in Mr. Hobbs, or his assigns, but a mere right of user o£ the railroad siding, so long as it continued to exist. Holding this view he advised a decree dismissing the bill of complaint.

TVe concur in the view of the learned vice-chancellor as to the construction of the deed and agreement when read together; but we are unable to approve his disposition of the case. The principal relief sought by the complainant was an injunction to prevent an alleged threatened interference by the respondents with her user of the siding. The testimony of Mr. Bierman, the president of the respondent corporation, shows that such interference was not only threatened, but had actually occurred, and we think it can be fairly concluded from other statements made by him while on the witness-stand that further interference by his company was intended. Although the right of the appellant is that of a licensee, that right is not terminable at the option of the-respondent; except in a certain way, namely, by the exercise of the power to put ah end to the triplicate agreement. So long as the agreement itself remains-ja. force, just so long are the rights of the appellants under i£g. provisions, and the provision of tire deed, safe from attack by the respondents, and any intended interference therewith M the respondents is without legal justification, and should be,,restrained by the court' of chancery.. As we have already said, the respondents may terminate the right of the appellants to use this siding, but they can only, do so by 'destroying their own right of /-user therein, and the rights of the Lehigh Yalley Bailroad Company, which were created by that agreement. Unless .and until they do this, the appellants are entitled to the complete and continued enjoyment o£ the siding, and to an injunction restraining the respondents from interfering with their use thereof.

The decree under review will be reversed.

For affirmance — Bone.

For .reversal — The Chief-Justice, Swayze, Trenohard, Parker, Bergen, Minturn, Kalisch, Black, White, Heppeniieimer, Williams, Taylor, Gardner — 13.


author: Swayze, J.

text:
    Harry D. Gihon et ux., respondents, v. James H. Morris et al., appellants.
    [Argued November 26th, 1918.
    Decided March 3d, 1919.]
    1. A vendor conveyed land with full covenants for title. The vendees took and retain possession; after some years they filed a bill t'o rescind for an alleged defect in title; there was no fraud. — Itelii,' that the vendee cannot rescind and recover the purchase-money, but must be content with his rights under the covenants for title.

      2. The court of chancery was called on to determine merely the validity of a legal title, and to declare it bad before an actual eviction and before it can be known whether there can ever be an actual eviction, and in a case where actual events may at any moment make the title good. — Held, that the court is without jurisdiction in the absence of fraud:
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Backes and reported ante p. 65.

      Mr. Martin P. Devlin (Mr. John. If. Kafes on the brief), for tlie respondents.

      Mr. Frede rick Ik. Gnichtel, for the appellants.
   The opinion of the court was delivered by

Swayze, J.

On September 26th, 1908, James il. Morris conveyed to Iiarry D. Gibon and his wife a tract of land in Trenton. The deed contained covenants of seisin, power to convey, quiet enjoyment, against encumbrances and of warranty. The grantees took possession and have held it ever since. The title came through the will of Donoghue, who had devised the land to his wife for life and, after her death to tlieir five children. His will provided that if either of the children he deceased at bin wife’s death, and leaving lawful issue, tlio survivors should take the whole estate. The widow and three of the children are living. They conveyed the property in 1906 to one of the defendants with the usual covenants. On July 12th, 1917, the present hill was filed to rescind the deed of the defendant James H. Morris to the complainants and to recover hack the money paid on the ground that the title was defective and that the defendants had at tlie time of the conveyance represented that the title was all right and that an examination by counsel was unnecessary. The vice-chancellor found that there was no fraud; and this finding was clearly correct. The case is the ordinary one of a grantor believing that he had a good title, when in fact his title was defective, and.giving the vendee full covenants for title. Tlie vice-chancellor, however, thought that there was a mistake and decreed in favor of the complainants. He relied on Eibel v. Von Fell, 55 N. J. Eq. 670; Dubois v. Nugent, 69 N. J. Eq. 649; Strauss v. Norris, 77 N. J. Eq. 33. But none of these authorities are applicable to a case where both the vendor, by giving covenants for title, and the vendee, by accepting them, recognize that the title may be defective and that it is the duty of the vendor to make it good. It follows as a corollary that the vendee must be content with his rights under the covenants for title and cannot rescind and recover the purchase-money. It must be assumed, until the contrary appears, that the vendor' will make good his covenants and thus fully perform the contract on his part, if the title eventually proves defective. More-over, before there can he a. rescission for mistake, it must appear that the vendee relied on the representations of the vendor as to title instead of on the covenants, and this can seldom be, since the very object of the covenants is the protection of the vendee; it is generally, as in this case, the covenants on which he relies, not the prior parol statements, which are, so to speak, merged in the covenants. The law has long been settled in this court. Waddell v. Beech, 9 N. J. Eq. 793. The opinion cites the earlier New York cases decided by Chancellor Kent. Waddell v. Beech arose on a cross-bill in a foreclosure suit, and there was, therefore, no question of the jurisdiction of equity. In the present case the court of chancery is called on to determine merely the validity of a legal title and to declare it bad before an actual eviction and before it can be known whether there can ever be an actual eviction. Actual events may at any moment make the title good. The .court of chancery has no jurisdiction in such a case in the absence of fraud.

The bill must be dismissed, with costs.

For affirmance — Parker, Taylor — 2.

For reversal — Shis. Ci-itee-Justice, Swayze, Trenoiiard, Bergen, Minturn, Kaliscii, Black, White, Heppeniieimer, Williams, Gardner — 11.