author: Grey, Y. C.

text:
    Barnes Cycle Company v. Joseph E. Haines et al.
    [Decided July 1st, 1905.]
    1. A judgment recovered for the price of goods sold and delivered is a provable debt under the United States Bankruptcy law of 1898, and is released by a discharge of the defendant obtained under that law. In order to be saved from the operation of such a discharge the judgment itself must have been recovered in an action for fraud, or obtaining property by false pretences or false representations, or for willful and malicious injuries to the person or property of another, &c., as prescribed by clause 2 of section 17 of that law.
    2. A testator, by his will, gave his homestead and its furniture to his wife during- her natural life, and some railroad stock and a cash fund to a trustee for the benefit of his wife during her natural life, and disposed of the remainder in that property by the following clause: “And it is my will that, from and after decease of my wife, I give, devise and bequeath all my estate heretofore willed to my wife, and in trust for her benefit, unto such child or children as I shall leave or have living at the time of my decease, and to their heirs and assigns forever; and the representative of any deceased child to have the share of his, her or their parents per stirpes.”—Held, the children of the testator, all of whom survived him, took upon his death a vested interest in the remainder. The construction of this clause in the will is controlled by the decisions of the court of errors and appeals in the cases of Howell, Executor, v. Green, Administrator, SI N. J. Laio (2 Vr.) 570, and Post v. Herbert's Executors, 27 N. J. Eq. (12 O. E. Gr.) 5J/0.

    On bill, answer and proofs.
    This complaint is the statutory bill for discovery of the property of defendants in a judgment at law, on which an execution has been returned unsatisfied. P. L. 1902 ¶. BS4- § 70.

      The complainant .recovered a judgment on the 29th day of January, 1898, in the supreme court of New Jersey, against both defendants, trading as the Berkley Cycle Company, for $2,177.30 damages and $35.94 costs, issued execution thereon on July 8th, 1904, to Camden county, which was returned unsatisfied.
    The complainant files this bill alleging that gifts of Joseph M. Haines, the father of the defendants Joseph E. and Abel Haines, to them, by his last will, are equitable assets of those defendants, applicable under the statute to the payment of the above-named judgment. The father died in 1901. His will is dated February 12th, 1896. It was proven August 13th, 1901, and contained these clauses:

      “Third. I give, devise and bequeath unto my wife, Martha A. I-Iaines, the house and lot at Mount Ephraim where I now reside. Together with all the household furniture contained therein for and during her natural life.

      “Fourth. I give, devise and bequeath unto J. J. Albertson, of Magnolia, New Jersey, in trust for the benefit of my wife, Martha A. I-Iaines, (first) one hundred and twenty shares of the capital stock of The Pennsylvania Railroad company, and (second) the sum of six thousand two hundred and fifty dollars ($G250.) in cash or in good securities, for and during her natural life, which bequests are hereby made to her and for her benefit in lieu of her dower in. my lands.

      “Fifth. And it is my will, that from and after decease of my wife, I give and bequeath all my estate heretofore willed to my wife, and in trust for her benefit unto such child or children as I shall leave or have living at the time of my decease, and to their heirs and assigns forever, and the representative of any deceased child to have the share of his, her or their parents per stirpes.

      “Sixth. I give, devise and bequeath all the rest, residue or remainder of my estate which shall belong to or be owned by me at the time of my death, to my five children, to wit: Joseph E. Haines, Emily M. (now) Dobbs, Abel Haines, Mar.tha R. Haines and Harry O. Haines, to be divided equally among them, share and share alike; and to the representative of any deceased child to have the share of his, her or their parents per stirpes.”

    The defendants answer separately, but by the-same solicitor. The defendant Joseph E. Haines admits the complainant’s judgment, execution and its return unsatisfied. He admits the above-recited will of his father, and that a considerable sum of money is - about to become due to him under the provisions of that will, but he denies that anything is due or collectible under the complainant’s judgment, for the reason that on October 22d, 1900, he filed his petition in bankruptcy in the United States district court of Yew Jersey, and was, on the 31st day of December, 1900, discharged by that court from all provable debts which existed on October 22d, 1900, save only those which are excepted from the operation of a discharge in bankruptcy. He further avers that the complainant’s judgment is not within that exception.
    The defendant Joseph E. Haines further answers that the complainant, though aware of his discharge in bankruptcy, purposely disregards it and intends to ignore it, and he insists that by reason of his said discharge in bankruptcy, the complainant is precluded from filing its said bill of complaint for discovery in aid of its judgment and execution, &c., and that the prosecution of its suit is contrary to law.
    The other defendant Abel Haines also answers, admitting the complainant’s judgment, execution, return, &c.; also the death of Joseph M. Haines in 1896, leaving his will as set forth in the bill of complaint. The defendant Abel Haines also admits that the amount to become due under that will will be a considerable sum of money,, but he denies that it is now due or likely to become due within any reasonable time. He denies that at the time of the filing of the bill of complaint he had any personal property which belonged to him, or in which he was in any way beneficially interested, or that he had any equitable interest in anything in action of any nature or kind.
    Issue was joined on these answers and the cause was heard thereon.

      Messrs'. French ■& Richards, for the -complainant.

      Mr. Francis D. Weaver, for the defendants.
   Grey, Y. C.

The defendant Joseph E. Haines sets up as his sole defence to the complainant’s claim his discharge in bankruptcy by the United States district court on December 31st, 1900, from all his provable debts which existed on October 22d, 1900, save those excepted by the' United States Bankruptcy act from the operation of that discharge. It is not denied that the complainant’s judgment was a provable debt under the Bankruptcy act of 1898, which would be released by a discharge, unless it was within the second class of exceptions from the operation of that act, i. e.,

“judgments in actions for fraud, or obtaining money by false pretences or false representations, or for willful and malicious injuries to the person or property of another.”

The complainant admits that its judgment was obtained in an action for the price and value of goods furnished to the defendants Joseph E. and Abel Haines. In order to bring its debt within the above-quoted exception, it has offered proof in this cause to show that these goods were sold to the defendants upon tire faith of a written collateral guarantee, and that the defendant Joseph E. Haines, by a suppressio veri regarding the legal incapacity of his guarantors, induced the complainant to make the sale. The complainant contends that this was an obtaining property by false pretences, and that a debt arising from such a transaction is not released by a discharge in bankruptcy.

If .the second clause of section Yt of the Bankrupt act is carefully read, it will be observed that the debts saved by it from the operation of the discharge are judgments in actions of a certain character, viz., in actions for fraud, or obtaining property by false pretences or false representations, or for willful and malicious injuries, &c.

To be within the exception, it is not enough that there may have been fraud in the creation of the debt, and certainly not enough that there may have 'been a suppressio veri in the giving of a guaranty securing payment of the debt. The provable debt, to be within this exception, must itself have been a judgment recovered in an action brought for fraud, &c. This quality the complainant admits its judgment does not possess. Its judgment was recovered simply for the price of goods sold and delivered, not for any fraud whatever. This construction of this exemption clause is given both by the federal courts, In re Blumberg, 94 Fed. Rep. 476, and by our own courts, Barnes Manufacturing Co. v. Norden, 67 N. J. Law (38 Vr.) 493.

It must be held that the complainant’s debt as against the defendant Joseph E. Haines was released by the subsequent discharge of Joseph in bankruptcy, and as to that defendant the bill of complaint must be dismissed, with costs.

The testator appears to have dealt with the body of his estate in two portions, one consisting of the homestead and its furniture, certain shares of Pennsylvania railroad stock, and a sum of money he secured to the use of his wife during her natural life. The other, consisting of the residue of his estate, he gave directly to his five children by name, “to be equally divided between them, share and share alike, and to the representatives of any deceased child to have the share of his, her or their parent per stirpes.”

There can be no question that the portion of the testator’s estate included in this residuary gift under the sixth clause vested in his children as tenants in common, in equal shares, immediately upon the testator’s death. The defendant Abel Haines was one of those children, and on his father’s death became the owner of a one-fifth share in this residuary property. This appears to have been paid to him after the settlement of his father’s estate. If any of this portion of the property of the defendant Abel Haines which came to him under the sixth clause of his father’s will is now existent, the evidence in this case has failed to locate and identify it. This inquiry, therefore, is practically limited to the construction of the third and fourth clauses of the will of Joseph E. Haines, by which he gives the homestead and its furniture to his wife during her natural life, and the Pennsylvania railroad stock and the cash for investment to the trustee for the benefit of Ms wife during her life, and the fifth clause, which is above recited.

The wido^y of the testator is still living. Eive of the testator’s children survive him. They are all yet living. The defendant Abel Haines is one of them.

By the express terms of the statute (P. L. 1902 p. 535 § 71) power is given to this court (if there be a judgment at law and an execution issued thereon returned unsatisfied, leaving a balance due exceeding $100), at the instance of the plaintiff, to compel the defendant to discover any property or thing in action belonging to him, and to force the application of the discovered property to the payment of the amount owing on the judgment.

In this case the complainant contends that the above-quoted fifth clause of the will of Joseph M. Haines gave the defendant Abel Haines property which the statute enables this court to apply to the satisfaction of the complainant’s judgment.

The defendant Abel Haines, by his answer in this cause, admits the' existence of the situation contemplated by the statute. He admits the fact that he has the possibility of an interest in the homestead and its equipment, and in the railroad stock and the cash invested, in all of which his mother enjoys a life interest, and thus makes the discovery contemplated by the statute, but he denies that his interest in the property referred to is a vested estate, and contends that is a contingent interest, which will vest only in case he shall outlive his mother, the widow of the testator.

The jurisdictional incidents prescribed by the statute are admitted. The defence is put upon the ground that when discovery of the defendant’s property is made according to the statute it shows that his estate in it is not such an interest as can under the law be applied to satisfy the amount admittedly due on the complainant’s judgment.

The defendant Abel Haines bases this contention upon the fifth clause of his father’s will, above recited, insisting that a proper construction of that clause must declare that his fifth part in remainder in the homestead and its equipment and furniture given to the widow for life, and in the railroad stock and the cash investment given to the trustee for the benefit of the widow during her life, is a mere possibility; that if he shall survive his mother he may, upon her death, receive that fifth interest, and that the statute does not reach out to and apply a contingent interest such as this to the payment of j udgments of creditors.

Whether the defendant Abel Haines has, under his father’s will, in the property in remainder a vested or a contingent interest is the question raised by the answer and the proofs in this cause.

The testator’s dominant purpose in making this will plainly appears on its face. His first and controlling object was to provide a home and maintenance for his wife during her life. This is shown by his devise of the homestead and its- equipment to her during her natural life, and by his creation of a trust fund in Pennsylvania railroad stock and in cash which should produce for her an income during her natural life.

Having accomplished, this principal object of his will, he gave all the rest of his estate to his children.

In prescribing who shall take the remainder of the property sot aside for the widow for her life, the testator gives it to such of his children as shall be living at the time of his death and to the representatives of any deceased child who are to have the deceased parent’s share. This provision that the share of any deceased child, should go to his representative clearly referred to the possibility that any child of the testator might have predeceased him leaving a child or children. He evidently contemplated the time of his decease as the period when those who were to take the remainder should be in being.

In fact, there were no children who predeceased the testator, leaving children. This fixes as a certainty the remaindermen. They were those children of the testator who were living at the time of his death. The five persons named in the bill of complaint, of whom the defendant Abel Haines is one.

That defendant insists that the expression “from and after decease of my wife, I give,” &c., is a declaration of the testator’s intent that the title to the remainder of the estate shall vest only upon the happening of the decease of his wife, and therefore only in those of his children who should survive her and in the representatives of any child who should have predeceased her.

This construction conflicts with the express words of the testator. In selecting the class of persons which should take, he declared it to be those children who should be living at Ms'death, not at his wife’s death.

It is true that the remainder of the estate secured to the widow during her life is expressed to be given over “from and .after” her death, and that the general rule is that when a period is thus related, not to the payment merely, but to the gift itself, the legacy does not vest until the period arrives. Gifford v. Thorn, 9 N. J. Eq. (1 Stock.) 729.

The court of errors and appeals, though recognizing the rule above stated, has declared that it is an equally well-settled rule of construction that where an absolute property in a fund is bequeathed in fractional interests in succession, at periods which must arrive, the interests of the first and subsequent takers will vest together. Howell, Executor, v. Green, Administrator, 31 N. J. Law (2 Vr.) 570. In that case the testator bequeathed to his sister the interest of $1,000 during her natural life. Then follows this gift over, “and after her decease I give and bequeath the said $1,000 to her two daughters Deborah and Sarah, to be equally divided.” The legacy to Sarah lapsed because of her death in the lifetime of the testator. Deborah survived the testator, but died before her mother, and the question was whether the legacy to Deborah vested at the death of the testator or depended upon the contingency of her surviving her mother.

It should be observed that the words of gift in the case at balare “from and after decease of my wife I give,” &c. In the case cited they are “after her decease I give,” &c. Their legal significance is the same.

The supreme court held that the case was. controlled by the principle above referred to, that a gift in fractional interests in succession, at periods which must arrive, &c., will vest the first and subsequent interest at the same time. That the death of the mother was certain to happen, sooner or later, and there never could be any doubt that the event in which the daughters would take would come to pass. That the language of the will was equivalent to saying: “I give this $1,000 to my sister and her two children, she to have it during her life, they to have it after her death.” Green v. Howell, 30 N. J. Law (1 Vr.) 326.

The court of errors and appeals unanimously affirmed this judgment, approving the language quoted.

In the same case the court of errors and appeals also declared that the gilt to the daughters was merely postponed to let in the mother’s life interest (at p. 573), and that in such cases the remainder over will be held to be vested.

This principle of construction is moré elaborately discussed by the court of errors and appeals in the case of Post v. Herbert’s Executors, 27 N. J. Eq. (12 C. E. Gr.) 540, where it is declared that if upon the whole will it appears that the gift over is only postponed to let in some other interest, it will be held to be vested, although the time of its enjoyment may be postponed.

These cases are the accepted law of this state, and must control all others which come within their scope.

In the case at bar the testator, as above, shown, gave the remainder over to those of his children who might be living at the time of his death and their representatives then living. He evidently used the words “from and after decease of my wife” to apply, not to the gift, which intended those children to have who were living at his own death, but to the time when those children should enjoy that gift, namely, after the death of his wife. There is no gift over to anyone else in case at his death neither his children nor representatives (descendants) of them were then living. The testator plainly meant to give his whole estate in the homestead and furniture and in the trust fund for the benefit of his wife during her life, and absolutely to his children and their representatives who were surviving him at his death. He postponed their possession of this gift rintil the death of his wife, in order to allow his wife to enjoy her life estate in the same property.

The result is that it must be held that the defendant Abel Haines became seized and possessed of a vested interest in an undivided one-fifth part of the homestead and furniture and in the railroad stock and trust fund upon the death of the testator.

A decree will be advised accordingly.


source: Caselaw Access Project

author: Grey, V. C.

license: Public Domain

text:
    John Cook v. Anderson Food Company.
    [Decided July 1st, 1905.]
    In a proceeding by a bank to establish certain notes as a claim against the assets of a corporation in insolvency, evidence held insufficient to establish that the notes were given for a loan to the principal stockholder of the corporation in order to enable him to purchase certain stock of another corporation for his individual benefit, instead of for the corporation, and that the bank had knowledge of such fact.
    On bill adjudicating insolvency of defendant company and appeal from receiver’s rejection of claim of National State Bank, &c.

      Mr. Lewis Starr, for the receiver.

      Mr. Joseph E. Gaslcill, for the contesting creditors.

      Mr. William D. Lippincott and Mr. Edward Dudley, for the National State Bank.
   Grey, V. C.

In this matter the receiver reports upon the claims presented by the creditors of the defendant company.

The National State Bank offered in proof a claim for a dividend, two promissory notes for $26,000 each, both made by the Anderson Food Company, defendant, as promisor, • one designated No. 1, which is dated February 24th, 1903, the other as No. 2, which is dated February 2d, 1903, both paj^able three months after date, to the order of John T. Cox, and by him endorsed. These two notes represent, through a succession of renewals, two original notes, both dated September 20th, 1901, in one of which the insolvent company.was promisor, in the other endorser.

The receiver has refused to allow the National State Bank to participate in the dividend of the^ assets of the insolvent company, the Anderson Food Company, upon the ground that no consideration proceeded to the Anderson Food Company for making or endorsing the two notes originally given on September 20th, 1901;^ that the use of the food company’s name on those notes by Mr. Cox was unauthorized and unratified by that company; that the food company was only an accommodation maker or endorser at the most; that the officers of the National State Bank, before they discounted the original notes, had full knowledge of the terms of the contract between Mr. Cox and Mr. Anderson which is dated September 20th, 1901, and knew that the proceeds of those notes which were placed to the credit of Mr. Cox were to be used by him in purchasing the stock of the Anderson Preserving Company for himself individually, under the terms of the contract of September 20th,. 1901. The receiver finds that those shares were in fact purchased from Anderson by Cox for the latter’s sole individual benefit, and not in any way for the Anderson Food Company; that the bank’s officers, under the circumstances of the case, were certainly so warned and put upon inquiry; that if they had performed their duty by proper investigation they would have discovered that there was no consideration existing between the food company and Cox as the basis for the making or endorsing of the notes by the food company.

Mr. Anderson was the owner of substantially all of the stock of the Anderson Preserving Company up to September 20th, 1901. Preceding that time, during the months of August and September, 1901, negotiations had been carried on between Mr. Anderson and Mr. Cox for the purchase of the Anderson Preserving Company by a new company to be formed by Mr. Cox. These negotiations resulted in the making, modifying, canceling and renewing of agreements in writing between Anderson and Cox, the last of which, dated September 20th, 1901, was carried into effect.

This contract of September 20th, 1901, was made between Abraham Anderson ancl John T. Cox. By it Anderson agreed to sell to Cox, or to his nominee, two thousand two hundred and fifty shares of capital stock of the preserving company upon the making of the payments and performance of the conditions named in that contract. Cox agreed to pay to Anderson $75,000 in cash, to deliver him a mortgage for $100,000 on the plant, and notes of the food company for $58,000. Cox further agreed to sell Anderson two hundred and fifty shares of the capital stock of the food company at $77.77 per share; that the net profits of the food company (which should absorb the assets of the preserving company and assume all its liabilities) should be used exclusively to pay $55,557.50 advanced by Cox for the purchase of the stock, and the obligations to be given to Anderson Until all were paid. It'was expressly agreed that each and all of the foregoing covenants and promises should be carried out and performed at the same time.

The testimony which it is claimed shows that the National State Bank was aware of the terms of the agreement of September 20th, 1901, between Mr. Anderson and Mr. Cox, appears in the testimony of Mr. Cox, who was the promoter of the Anderson Food Company, and related to conferences between himself and Mr. Hewlings Lippincott, president of the National State Bank, touching the discounting of the two original notes for $26,000 each, the allowance of the renewals of which, as proofs of claim against the insolvent Anderson Food Company, the receiver has refused to the bank.

Mr. Cox was asked, on examination before the receiver, the following questions and made the following answers regarding the agreement of September 20th, 1901, between Anderson and Cox:

“Q. What property was transferred under that agreement?
“A. The plant, machinery and stock.
“Q‘. Of what company?
“A. Of the Anderson Preserving Company.
“Q. Anderson Preserving Company?
“A. Yes, sir.
“Q. To whom was it transferred?
“A. To myself, and then to the Anderson Food Company.
“Q. Under this agreement?
“A. I don’t remember the exact wording of the agreement now, but it was for ultimate transfer to the food company.
“Q. This money, 'or these notes that were issued, why did you have the Anderson Food Company sign them?
“A. Because the money was loaned for th,e benefit of the food company, that is, in order that the food company might acquire the plant.
“Q. Of what company?
“A. Of the Anderson Preserving Company.
“Q. Pursuant to this agreement?
“A. Yes, sir.
“Q. Did you at the time of negotiating the discount of these notes inform Mr. .Lippincott or any of the officers of the National State Bank of Camden that there was such an agreement in existence?
“A. Yes, sir; fully aware of it.”

It is this answer of Mr. Cox, “Yes, sir; fully aware of it,” which is claimed to charge the hank with knowledge of all the contents of the agreement of September 20th, 1901, between Anderson and Cox:

All the dealings with regard to the discounting of the two original notes.took place between Mr. Lippincott, president of the bank, and Mr. Cox, the president of the Anderson Eoocl Company.

The food company, on September 20th, 1901, had neither plant, equipment or business. It was a close corporation, controlled by Mr. Cox, who promoted it, as all the proof shows, with the assent of all its stockholders, and of the food company itself, acting in its corporate capacity, for the sole purpose of acquiring the plant and assets, &c., of the preserving company, which was controlled by Mr. Anderson.

The theory of the receiver is that the food company, in its corporate capacity, acquired all the plant, assets, equipment and business of the preserving company; and that, coincidently, Mr. Cox, by the same agreement (the contract of September 20th, 1901), separately acquired for himself, in his individual capacity, the two thousand two hundred shares of capital _ stock of the preserving company owned by Mr. Anderson; that the two-original notes were, with the knowledge of Mr. Lippincott, the president of the bank, discounted to enable Cox to buy for himself, and not for the food company, those shares of the preserving company stock.

It becomes a matter of first importance to ascertain whether the proofs sustain the receiver’s theory that the two thousand two hundred and fifty preserving ■ company shares were bought by and for Mr. Cox individually, and not for the food company; and whether the bank, when it discounted the two original notes, had knowledge or warning of that situation of affairs.

The argument made in support of the receiver’s finding against the bank assumes that by the agreement of September 20th, 1901, Mr. Anderson agreed to transfer the two thousand two hundred and fifty preserving company shares exclusively to Mr. Cox, and that the bank knew this fact. This is, however, a mistake; that agreement, on its face, declares that Mr. Anderson agrees that he will sell, assign, transfer and set over those shares to Mr. Cox, “or such person or persons as may be nominated by him.”

It must be remembered that Mr. Cox was the controlling stockholder in the new food company, and that it was through Anderson’s agreement of September 20th, 1901, with Cox, that the new food company bought out the Anderson Preserving Company.

Anderson was the controlling stockholder of the preserving company. At the time the testimony was taken in this matter, Anderson was bitterly hostile to Cox. There was no possibility that they combined to color their testimony regarding this transaction favorably to the bank. An examination of that portion of their evidence which deals with the purchase of the two thousand two hundred and fifty preserving company shares will, I think, throw light on the question whether Cox bought these shares for himself individually or nominated another person to whom Anderson should transfer them.

Mr. Cox testifies, as above shown, that the plant, machinery and stock of the preserving company were, by the agreement of September 20th, 1901, to be transferred to him for ultimate transfer to the food company; that the food company signed the notes because the money was loaned for the benefit of that company in order that it might acquire the plant of the preserving company. Cox was asked, “For whom did you buy this stock of the Anderson Preserving Company—for yourself or for the food company?” and he answered, “For the food company.”

Mr. Anderson swore that the consideration of the notes was the plant and stock of the Anderson Preserving Company, which he says he sold to the Anderson Food Company, and that he gave the Anderson Food Company the plant, fixtures, stock in trade, the book accounts, bank accounts and stock of the Anderson Preserving Companjr, referring to the two thousand two hundred and fifty shares of capital stock of the preserving company. He declares that it was all- a part of one transaction.

The testimony of both Anderson and Cox, who made the bargain (though they are hostile to each other), agrees that the purchase of the two thousand two hundred and fifty shares of capital stock of the preserving company was made for the benefit of the food company.

The officers of that company obviously so ■ understood the situation, as is shown by the allegations of a cross-bill filed by the food company, verified under the oath -of Mr. Henderson, its secretary, in March, 1902. The thirty-sixth paragraph of the food company’s cross-bill contains the following statement:

“And this defendant further says that all of the stock of the Anderson Preserving Company, having been turned over to this defendant company incident to the purchase of said Anderson - Preserving Company by defendant, is now held by defendant company.”

This unity of the testimony of all the acting parties to the c-ffect that the original notes were discounted by the bank to carry into effect the purchase of the two thousand two hundred and fifty shares of the preserving company for the benefit of the food company, accords with the actual disposition made of the proceeds of that discounting and of the shares themselves.

The undisputed testimony is that the $52,000 proceeds of the discount by the bank of the two original promissory notes were credited on the books of the bank to Mr. Cox, the promoter and principal owner of .the Anderson Food Company; that this sum was immediately, by certified check, turned over by Mr. Cox to Mr. Anderson, in a lump, to pay for the two thousand two hundred and fifty shares of the capital stock of the Anderson Preserving Company.

The interest on Loth the notes, and on their renewals, was paid by the food company as it came due from time to time.

The certificate for these shares of stock was by Mr. Anderson assigned in blank. It was not surrendered to the preserving company and reissued to anyone, but was deposited with other' papers of the Anderson Food Company. When that company became insolvent this certificate of stock of the Anderson Preserving Company, assigned in blank, came into the possession of the receiver of the Anderson Pood Company, as part of that company’s assets. These shares of stock were sold by the receiver of the food company, as part of its assets, and bought in by Mr. Anderson at a nominal sum, and the receiver has accounted for the proceeds of that sale as part of the assets of the Anderson Pood Company. Mr. Anderson evidently believed the shares belonged to the Anderson Pood Company or he would not have thus bought them.

That the food companjr, and not Mr. Cox, as an individual, should have taken over the two thousand two hundred and fifty preserving company shares, was the natural and reasonable result of the situation. The food company had purchased every asset that the preserving company possessed. The capital stock of the preserving company, when it had thus been shorn of all its property, became comparatively valueless to any other person.

Mr. Anderson saw that this result would follow the sale of all the assets of the preserving company to the food company, for he inserted in the agreement of September 20th, 1901, a requirement that each and all of the covenants and promises of that agreement—that is, the purchase of the assets and of the capital stock of the preserving company—“should be carried out and performed at the same time.”

That the transfer of the two thousand two hundred and fifty preserving company shares was in fact made by delivery of the certificate to the food company is also shown by the fact, that from the time of the transfer of all the assets of the Anderson Preserving Company to the Anderson Pood Company, and the delivery to the food company of the certificate of stock for the two thousand two hundred and fifty shares, the Anderson Preserving Company does not appear to have performed a single corporate act nor to have attempted to do any corporate business. Nowhere does it appear-that Mr. Cox ever attempted to exercise, or that he ever did exercise, any individual' ownership whatever in or over the two thousand two hundred and fifty shares of the capital stock of the Anderson Preserving Company.

The receiver bases his rejection of the bank’s claim upon the fact that no corporate action of the food company appears in the minutes of that company, or in any written memorandum recognizing or ratifying the purchase for that company of the two thousand two hundred and fifty preserving company shares by Cox. Formal corporate ratification of that purchase would undoubtedly be conclusive evidence of the purchase of these shares for the food company, but proof that such a purchase was effected is not limited to entries on the food company’s minutes, or to written agreements executed under its corporate seal.

Every person who participated in the transaction,.both before and at the time it took place, testifies that the purchase of those shares from Anderson by Cox was made for the food company, and that that company got the benefit of it. It is true, the credit of the proceeds from the discount of the two notes passed on the bank’s books to Cox as an individual, and not' to the food company’s credit, but all the proofs agree that the whole proceeds of the discount were at once paid over by Cox (who was at that time acting as controlling stockholder and promoter of the food company) to Anderson, and that the certificate for the two thousand two hundred and fifty shares was contemporaneously delivered to the food company.

Mr. Lippineott, the president of the bank, who conducted all the business of the discounting of the two original notes, also testifies that the bank understood that in discounting those notes the bank was loaning the money to the Anderson Food Company, which made one of the notes as promisor and endorsed the other as payee.

Some testimony was taken before the receiver regarding the transactions of the food company after the original discounting of these two notes by the bank in relation to the renewal and re-discounting of those notes. Such testimony, even if it showed that Cox had misused the stock purchased with the proceeds of the original notes, cannot be forceful to charge the bank with knowledge of the situation as it existed at the previous time, when thosé notes were discounted. At that time all the proofs indicate that the bank, in discounting the food company’s paper, acted in good faith, under the same information and belief as Mr. Cox, Mr. Anderson and the Anderson Food Company, that the proceeds-of the discount were to go to purchase the two thousand two hundred and fifty shares of the preserving company for the Anderson Food Company.

So also claim was made by way of argument that Cox himself, individually, took the two thousand two hundred and fifty shares of preserving company stock and turned them over to the food company in exchange for shares of its capital stock, and this, it was insisted, showed that Cox, contrary to his own and Anderson’s testimony, bought the preserving company shares for his own individual benefit, and not for the food company. I asked the counsel who advanced this argument what evidence there was that such an exchange had been made. It was admitted that there was no proof to support the contention.

If there had been such a transaction it could only have happened after the bank had discounted the notes, and it could not have known of it when it made the discount.

Considering all the proofs, it is, I think, affirmatively shown that the two original notes made or endorsed by the food company were discounted by the bank for the purchase of the two thousand two hundred and fifty shares of the preserving company for the food company; that it was understood and intended by all parties that the proceeds of the discount should be applied to the purchase of those shares for the food company, and that they were in fact so applied.

This view of the testimony leads me to sustain the appeal from the receiver’s finding and to reverse his determination refusing to admit the bank to participate in the dividend of the assets of the food company.


author: Stevenson, Y. C.

text:
    Samuel Weinberger v. Estella Brumberg et al.
    [Decided August 12th, 1905.]
    In a suit to foreclose a first mortgage for $6,000 the defendant F., holding a third mortgage according to the record for $5,000, filed a cross-bill against the defendant H., who held, according to the record, a second mortgage for $9,000 to have his (F.’s) mortgage given priority over H.’s mortgage. The following facts were set forth in the cross-bill or were treated oh the argument by both sides as appearing therefrom: F. had originally owned the land subject to the above-mentioned two mortgages for $6,000 and $9,000, respectively, the mortgage • debt of $9,000 being one for which he (F.) was personally liable on the bond. The record assignees of the $9,000 mortgage were the two daughters of the original mortgagee, their assignment having been kept off the record for a long time. In this situation of affairs F. conveyed the land to the record assignees of the $9,000 mortgage in full satisfaction of the same and took back a purchase-money mortgage for $5,000, and thereupon the new owners took possession and proceeded to collect the rents. The bond and mortgage for $9,000 were not produced at the time of this transaction, nor did F. call for them. The cross-bill did not allege that the record assignees were in any way pecuniarily responsible beyond whatever value^might be placed upon their equity. The result of the transaction if valid was that F. changed his position so as to cease to be owner of the equity subject to $15,000 in possession of the rents, and to become the holder of a mortgage for $5,000 subject only to the first mortgage for $6,000, while his debt for $9,000 was paid. As a matter of fact, when this bargain was carried out the bond and mortgage for $9,000 were impounded in New York in a suit there pending brought by the trustee in bankruptcy of the mortgagee against the record assignees, in which suit a decree had already been made adjudging the assignment fraudulent and void as against the creditors of the mortgagee. After an appeal the bond and mortgage were sold at auction to the defendant H. No notice of any of these proceedings in New York was given to F., nor did he learn of them until long after he had carried out his contract with the record assignees and, permitted them to take possession, collect the rents and give a fourth mortgage on the property for $2,000. The cross-bill alleged most positively that F. acted in entire innocence and in good faith and without any notice of any fraudulent intent on the part of the record assignees.—Held, that the allegations of good faith .and want of notice were not overcome or in any way nullified by the suspicious circumstances set forth in the cross-bill; that U1., in case he proved his cross-bill, which might be a difficult matter, would be entitled to affirmative relief against H., the exact nature and extent of which would be determined upon the final hearing; that the motion to dismiss the cross-bill must therefore be denied.
    On motion to dismiss cross-bill.

      Mr. James P. Northrop, for the motion.

      Mr. William W. Watson, contra.

   Stevenson, Y. C.

The cross-bill of the defendant Abraham Einkelstein is filed to have the mortgage for $5,000 held by him given priority over the mortgage for $9,000 held by the defendant Emmanuel Heilner. Ileilner’s mortgage bears date January 27th, 1900, and was recorded January 29th, 1900. Einkelstein’s mortgage bears date September 26th, 1902, and was recorded on October 7th, 1902.

The facts set forth in the cross-bill upon which FinkelsteiiTs claim of priority is based are as follows:

The defendant Einkelstein, on September 26th, 1902, was the owner of the mortgaged premises, which are situate in Passaic eitjr, in this state. The premises were then subject to complainant’s mortgage for $6,000, which is not called in question in this suit, and a second mortgage originally for $11,000, on which, however, only $9,000 remained unpaid, then held, according to the record, by the defendants' Estella Brumberg and Grace Brumberg, but now held by the defendant Heilner. This mortgage for $9,000 had been originally given on January 27th, 1900, by the defendant Einkelstein and one Eeder to the defendant Solomon J. Brumberg, the father of Estella and Grace, to secure a. part of the purchase price of the conveyance of the property then made by Solomon J. Brumberg to Einkelstein and Eeder. Subsequently Eeder conveyed his interest to Einkelstein, who thereby became the sole owner, subject to the two mortgages above mentioned, on which $6,000 and $9,000 were due respectively. It is important to hold in mind while dealing with the facts that this second mortgage for $9,000 secured' the obligation of Einkelstein—that Einkelstein owed the amount of the mortgage to the lawful holders thereof. October 20th, 1900, the defendant Solomon J. Brumberg, by writing under his hand and seal bearing that date, assigned the mortgage for $9,000 to his daughters, the defendants Bstella and Grace Brumberg, which assignment was recorded on June 5th, 1901. December 1st, 1901, the defendant Iieilner and one Moses J. Wolf recovered a judgment in the supreme court of the State of Dew York against Solomon J. Brumberg, who then was and still is a resident of that state, for the sum of $6,418.74. December 19th, 1901, Moses J. Wolf was appointed trustee in bankruptcy in certain proceedings in the United States district court for the southern district of Dew York, in which Solomon J. Brumberg had been adjudged a bankrupt. Subsequently Moses J. Wolf, as trustee in bankruptcy, brought suit in the supreme court of the State of Dew York against Solomon J. Brumberg and his two daughters, Estella and Grace, to enjoin the transfer or collection of the mortgage for $9,000,, and to obtain a decree that the assignment of said mortgage by Brumberg to his daughters was fraudulent and void, and that the mortgage belonged to the trustee. On May 8th, 1902, in lieu of the appointment of a receiver, the bond and mortgage were, by stipulation of the respective parties, deposited with the Trust Company of America, a banking corporation of the State of Dew York, “to be held by it in like manner as if it were the receiver in such cause.”

July 9th, 1902, a final decree in the above-stated cause was rendered adjudging that the assignment from Brumberg to his daughters was made with intent to hinder, delay and defraud the assignor’s creditors, and that the same should be set aside and declared void against certain creditors, including Heilner and Wolf,-which decree was afterwards affirmed by the appellate division of the said supreme court.'

Dovember 10th, 1903, the bond and mortgage were sold at public auction pursuant to said decree, and were purchased by the defendant Heilner for $4,000, with full notice, however, of the rights and claims of the defendant Einkelstein.

The mortgage of the defendant Einkelstein dated September 26th, 1902, for $5,000, which he seeks to have made prior to his own mortgage for $9,000, was executed and delivered to him, according to the allegations of the cross-bill, under the following circumstances: At that time (September 26th, 1902) Einkelstein, as we have seen, was the sole owner of the premises which were subject to two mortgages, the second of which was his own mortgage for $9,000. This mortgage for $9,000, according to the record, was owned by the defendants Estella "and Grace Brumberg, and had been owned by them for nearly two years, the assignment to them having been on record over one year. The bond and mortgage, however, were not in the possession of the apparent owners thereof, according to the record, because they had been first impounded in New York and then had been transferred to "Wolf, as trustee in bankruptcy, by á decree in a cause which bound these defendants Estella and Grace Brumberg, such decree having been entered two months before the transaction with which we are now particularly concerned. In this situation of affairs the defendant Einkelstein, according to the allegations of the cross-bill, relying partly on the representations of Estella and Grace that they were owners and holders of the mortgage in question, and partly upon'the fact that the records of Passaic county showed no assignment of the mortgage, conveyed the mortgaged premises to Estella and Grace in satisfaction of his (Einkelstein’s) mortgage for $9,000 and took back the purchase-money mortgage for $5,000, which he now holds. The cross-bill alleges the absolute innocence of Einkelstein in this entire transaction and his entire want of notice of any of the proceedings in New York which resulted in the setting aside of the assignment from Solomon J. Brumberg to his daughters. The cross-bill alleges that Joe learned for the first time of these New York proceedings long after the consummation of his arrangements with Estella and Grace Brumberg above set forth. Whether the defendant received notice of the defect in the title of Estella and Grace Brumberg before they had put a fourth mortgage on the property to the defendant Isidor Bloch does not appear. The cross-bill, however, sets forth the belief of the defendant Einkelstein, founded on information which he received after his transaction with Estella and Grace Brumberg, that these defendants obtained title to the premises from him and executed to him the mortgage for $5,000, which he holds “with the fraudulent intention of hindering, delaying and preventing the said Emmanuel Heilner and Moses J. Wolf from collecting their said judgment and for the further fraudulent purpose of evading the said decree of the Yew York supreme court,” but further affirms that he carried out the transaction “innocently and without any knowledge of such intention or purpose on the part of the said Estella Brumberg and Grace Brumberg,” and believing that Estella and Grace were as innocent as he was, and that he, the defendant Einkelstein, by the transaction obtained a mortgage second only to the mortgage of the complainant.

The notice of this motion does not specify any technical defects in the cross-bill as a pleading, or that the allegations of the cross-bill are inadequate to present the questions between these two defendants which have been argued. The notice claims that the cross-bill discloses no equity in favor of Einkelstein against Heilner, and does not show that there was a merger effected by the conveyance from Einkelstein to Estella and Grace Brumberg, and shows no facts under which Einkelstein’s mortgage should be made prior to Heilner’s mortgage. Adopting the views of both counsel who have argued this motion, I shall assume that the correct inference from the cross-bill is that Estella and Grace Brumberg, on September 6th, 1902, held under their assignment from their father not only the mortgage for $9,000, but the bond of Einkelstein which accompanied that mortgage and was secured by it, and that, according to the record, they therefore stood as the creditors of Einkelstein upon this bond and mortgage to the extent of $9,000.

My conclusion is that the motion to dismiss this cross-bill should be denied for reasons which I shall endeavor briefly to set forth.

The cross-bill sets up most positively that Einkelstein had nO' notice whatever that Estella and Grace Brumberg were not what the record showed them to be, the tona fide owners of the mortgage debt of Einkelstein for $9,000. It is a well-settled rule that

“the debtor or party liable on an assigned chose in action is not affected by the assignment until he has notice thereof, and consequently he may set up against the claims of the assignee any defence acquired before notice that would avail him against the assignor had there been no assignment. Thus payment by the debtor to the assignor or any compromise or release of the assigned claim by the latter before notice will be valid against the assignee and discharge the debtor.” 2 Am. & Eng. Encyl. L. (2d ed.) 1077, 1099.

The qualification of this principle discussed in and applied to the case of Terney v. Wilson, 45 N. J. Law (16 Vr.) 282, plainly has no application to this present case.

A large part of the argument on behalf of Heilner upon this motion ignores the fact that Einkelstein, in his transaction with Estella and Grace Brumberg, was contracting for the satisfaction of a debt which he (Einkelstein) had a right, under the allegations of the cross-bill, to suppose he still owed to them. The following cases were cited as sustaining the position of counsel for Heilner: Purdy v. Huntington, 42 N. Y. 334; Curtis v. Moore, 152 N. Y. 159; Kamena v. Huelbig, 23 N. J. Eq. (8 C. E. Gr.) 78; Harrison v. New Jersey Railroad and Transportation Co., 19 N. J. Eq. (4 C. E. Gr.) 488. In these cases the courts had to deal with purchasers of mortgages or purchasers of mortgaged premises who relied upon mergers or upon the apparent status of the party with whom they were contracting and from whom they were to receive either the mortgage or the land, as the owner of an outstanding bond and mortgage.

Ho authority has been presented to sustain the proposition that the obligor upon a bond secured by a mortgage may not safely bargain for the extinguishment or the partial payment of his debt without having the bond and mortgage actually produced. The authorities are the other way. The non-production of the bond and mortgage may or may not be a controlling circumstance in determining whether the obligor has acted in good faith. In the case of Kamena v. Huelbig, supra, Chancellor Zabriskie expressed the opinion that under the circumstances proved, one who purchased a bond and mortgage which had already been assigned as collateral received notice from the failure of the mortgagee to produce and deliver the bond and mortgage that they were held -by some other claimant. In that case we have a person pretending that he has bought and paid for goods which uniformly are forthwith delivered without even inquiring where they were. Manifestly the case has no bearing upon this present controversy.

In Harrison v. New Jersey Railroad and Transportation Co., supra, a party ^who purchased land from the mortgagor having notice of an uncanceled mortgage relied on the fact that the mortgage without the bond was in the possession of the mortgagor, and he accepted with his deed from the mortgagor this mortgage with the seals removed for cancellation, and thereupon procured the entry of satisfaction on the record. The mere statement of these leading facts makes any further discussion of the case unnecessary.

In Purdy v. Huntington, supra, the purchaser of mortgaged premises from the mortgagee, who in fact had assigned his mortgage, was not allowed the benefit of a merger. Plainly no merger in fact occurred, as the court found. The purchaser made no inquiry, and hence was denied the protection of a bona fide purchaser (at p. 339).

Curtis v. Moore, supra, followed Purdy v. Huntington, undqr a very similar state of facts. The rights passed on were those of a purchaser, not those of a debtor who has undertaken to pay his debt or to rearrange the terms of his obligation, contracting in good faith with his creditor after an assignment of the debt or obligation had been made, of which, however, lie had no notice.

But it'is quite unnecessary to discuss any of these cases in detail, because they do not touch the case presented by this cross-bill in any'way whatever. "We are not discussing the question what notice Einkelstein must he charged with as the purchaser of a bond and mortgage, or as the purchaser ■ of land charged with a bond and mortgage if a merger has not in fact taken place. The sole question is, what notice must be imputed to Einkelstein. in making' this bargain with Estella and Grace Brumberg, whom he supposed in good faith to be his creditors, which bargain involved the satisfaction of his debt.

The non-production of the bond and mortgage by Grace and Estella Brumberg did not, in my opinion, amount to notice to Einkelstein that the bond and mortgage were held by some other claimant. This fact is simply one which must be considered in connection with others alleged in the cross-bill or which may be proved in the cause in determining whether the allegation of the cross-bill that Einkelstein had no notice and acted in entire innocence,is true. It may be conceded that the,cross-bill presents a suspicious ease. There are other circumstances alleged which cast doubt upon the transaction under investigation. The bond and mortgage were transferred by a man to his two daughters. The assignment was kept off the record for a long period. The cross-bill does not allege that the obligation of these two women was' worth anything. ' Einkelstein by his bargain canceled his indebtedness, amounting to $9,000, and exchanged his equity in the property encumbered by $15,000 for $5,000 worth of the equity in the same property when encumbered only by a mortgage of $6,000. But all these facts, taken together, in my judgment, do not of necessity conflict with the positive allegations of the cross-bill that Einkelstein in fact acted in good faith without any notice of the legal proceedings which had transferred the bond and mortgage from Estella and Grace Brumberg to their father’s trustee in bankruptcy. The cross-bill stands alleging good faith and want of notice, and the issue thus presented must be tried, although the facts above mentioned may increase the difficulties of the defendant Einkelstein in establishing his contention.

A very little reflection will show that the non-production of the bond and mortgage is naturally and necessarily far less significant of an outstanding hostile title in cases where the mortgagor is contracting for the payment, compromise or readjustment of his debt than in cases where a stranger to the assignee is purchasing the mortgaged land or the mortgage itself. In the latter class of cases, to which the cases cited above all belong, the assignee may have no possible opportunity to give actual notice to the party who afterwards claims' to have bought in ignorance of his rights. But in the former class of cases the assignee—the outstanding claimant—has ample opportunity to give such notice. The present case sharply illustrates this important distinction. The defendants Wolf and Heilner were grossly negligent in not giving notice to Einkelstein of their suit and claim against Brumberg and his daughters. The New York court enjoined the two daughters from transferring the bond and mortgage on March 4th, 1902, and yet Einkelstein was •allowed to remain in ignorance of the fact that this litigation was going on. Apparently for nearly a year Messrs. Wolf and Heilner were endeavoring to sequestrate this debt of $9,000 owed by.Einkelstein, while they did not take the trouble to give Einkelstein the usual notice not to pay his debt to the party who appeared to be his creditors. It would seem to require considerable hardihood for these men to complain of Einkelstein for bargaining for the payment of his debt without first calling for the production of the evidences of that debt after they had for so long a time practically concealed from Einkelstein the rights which Einkelstein’s bargain affected.

It would, in my opinion, be very unwise to impose upon a mortgagor a rule requiring him to have the bond and mortgage produced before him every time he makes a payment or enters into a contract affecting the mortgage debt in order to protect some possible unknown holder of the bond and mortgage who has, by refraining from giving notice, concealed the fact that he had become entitled to receive the mortgage debt.

Where a party is buying the mortgage or buying the land it is incumbent upon him to make inquiries, and oftentimes, in respect of most important elements of the transaction, he buys at his peril. Where a mortgagor pays his debt he has no concern about the title to tire land, nor does he concern himself about the apparent status of the' mortgage, on the record or otherwise 'so long as the fact of payment is established. Where the mortgagor conveys the land in payment of the mortgage debt, the deed may very properly recite that the conveyance effects such payment, and in such case the mortgage may be left uncanceled of record as a part of the title, while the bond, being dead in law, is disregarded.

I think that the correct conclusion is that if the defendant proves the allegations of his cross-bill ho 'is entitled to have enforced, so far as is equitable, the rights which he obtained 'by virtue of his contract with his creditors—the persons whom he honestly believed to be the holders of his obligation.

The nature and extent of the relief to which the defendant Einkelstein will he entitled in case he proves his cross-bill are matters left entirely open for determination upon the final hearing of the cause. It is enough for present purposes to reach the conclusion that in. such ease Einkelstein will be entitled to some affirmative relief as against Heilner.

Although it is not alleged that Einkelstein surrendered possession of the premises when he conveyed them to Estella and Grace Brumberg, I shall, in accordance with the arguments made on both sides of this motion, infer that fact from the allegations of the cross-bill. It is not specified in the notice of this motion, nor has it been claimed by counsel for Heilner on the argument, that such was not the ease. It would seem that if Einkelstein is found to have made an honest bargain with, his creditors for the satisfaction of his debt that he is entitled as against the actual holder of that debt by a concealed assignment who failed to notify him (Einkelstein) of his (the assignee’s) rights to have the bargain enforced, at least so far as is necessary to secure complete indemnification. If Einkelstein’s bond is good against him in the hands of Heilner, -at least he (Einkelstein) would have an equitable right, it seems to me, in the case stated to have the rental value of the premises which he gave up deducted from the amount which Heilner has a right to recover from him (Einkelstein) or to collect out of the mortgaged premises before Einkelstein’s mortgage is paid. In reliance upon the apparent situation Einkelstein has lost this rental value which otherwise would be in his pocket, and could be applied by him to the reduction of Heilner’s claim.

Whether the contract between Einkelstein and Estella and Grace Brumberg must stand in equity as a bona fide payment of the $9,000 mortgage and a release of the land therefrom, so as to put Einkelstein’s mortgage for $5,000 next to the first mortgage, as counsel for Einkelstein has strenuously insisted, will be left at present an entirely open question. The argument on behalf of Einkelstein is based partly upon general principles of law and equity relating to the rights of debtors’ to pay their debts and. to malee bargains in relation to their debts without regard to the possibility of assignments of those debts of which they have no notice, and partly upon the provisions of our statute in regard to the recording of assignments of mortgages. 2 Gen. Stat. p. 2109 § 34.

There is perhaps another possibility in regard to the character of the relief to which the defendant Einkelstein may be entitled. It may be that a state of facts will be established by the proofs which will raise the question whether the equity of Einkelstein to be recognized and enforced in this case is not to have the transactions which resulted in the exchange of his equity for a mortgage of $5,000 and the giving of a mortgage of $2,000 to the defendant Isidor Bloch entirely set aside upon terms and under conditions which will also indemnify Einkelstein against loss and place him in the same position which he occupied before these transactions took place.


author: Stevenson, V. C.

text:
    Herman Hoopes et al. v. Basic Company.
    [Decided August 26th, 1905.]
    1. Where a proceeding is brought by a stockholder of a corporation to have it placed under disabilities because of insolvency, whether the complainant is a stockholder, and so entitled to sue, may be tested in a summary ’manner by plea, in case the .suit is commenced by bill, or by answer, in case it is instituted by petition.
    2. To enable one, as a stockholder, to institute proceedings under the Corporation act to have a corporation declared insolvent, he must be the actual .owner of some of its stock, by virtue of which he has an interest in the assets of the corporation.

      Mr. George Whiiefield Betts, Jr., and Mr. Leavitt J. Hunt ¡(of the New York bar), for the complainants.

      Mr. Thomas B. Earned, for the defendant.
   Stevenson, V. C.

(orally).

This is a bill filed under our Corporation act to have the defendant corporation, the Basic Company, declared insolvent and placed under disabilities in reference to the exercise of its franchises by an injunction and a receiver appointed. At the start the question was raised whether either of the complainants was qualified under our statute to bring this suit. One of the complainants alleges that he is a stockholder holding one share of stock» of the par value of $10, the total capital stock being $1,000,000, par value. The other complainant, alleged to be a creditor, but practically counsel for the complainants withdrew the claim that this co-complainant could be qualified as a creditor, and the question was presented whether Mr. Hoopes, the remaining complainant, is shown here to be a stockholder, so as to be.qualified to be the actor in this statutory suit against the corporation.. The court suggested, and I think counsel acquiesced in the suggestion, that it would be proper to take the proofs, first, in regard to the status of Mr. Hoopes as a stockholder. Whether counsel acquiesced or not in that suggestion, it seems to me that in most cases it would be very wrong indeed to compel a corporation to submit all its financial affairs to the inspection of the court and the public as long as it was uncertain whether the party complainant bringing the corporation into court had any status as a stockholder to carry on the suit. When the suit is commenced by bill a proper mode of contesting the capacity of the complainant as a creditor' or stockholder to bring the suit would be by plea. When the suit is commenced by petition, so that the technical rules of pleading which distinguish between demurrers, pleas and answers are to a large extent inapplicable, the answer to the petition, in my opinion, may well be strictly confined to the defence which we are considering in all'cases where that defence is set up. But in all cases under. our statute, whether on bill or petition, the trial is not hampered by forms or technical rules of procedure, hut is “summary” in its nature and very largely, at every stage, under the control of the court.

My conclusion is that the complainant is not qualified under our statute as a stockholder. The leading facts are these: At a time antedating the commencement of this suit by quite a period the complainant Mr. Hoopes, having a very considerable stock interest in this corporation, transferred all his holdings of stock to- the Union Dredging Company, and received in exchange about $60,000 par value of the stock of the Union Dredging Company. He admits on the stand, with great frankness, that what he received was full compensation fox his stock. At the time this transaction occurred the Union Dredging Company transferred back to him a single share of stock of the par value of $10, the share of stock by virtue of which he (Mr. Hoopes) now undertakes to sustain in this court his suit as a stockholder and invoke the statutory remedy against this corporation. There is no doubt, however, about what the purpose of this transfer, was. There was no intention that Mr. Hoopes should be the beneficial owner of this share of stock. The transfer was made in order that he might appear on the books of the company as a stockholder, and thus apparently be qualified to act as a director. The intention was that he should become, and he did become, what is commonly called a “dumm)'” director. Immedately after the transfer of this stock—this single share of stock—to him, and its proper transfer on the only stock book they had, Mr. Hoopes, immediately after, or within a year or two—not later than the summer of 1904, long before this suit was brought—endorsed the share in blank and handed it back to the real owner’ the Union Dredging Company. There is a discrepancy in the testimony as to the time-when this was done. It is no.t material, even if we accept the complainant’s testimony, because' this transfer was made, as I said, not later than the summer of 1904. I strongly incline to the opinion that the transfer was made immediately after the share was made out to him. The share was made out to him for the purpose which I mentioned; he endorsed it and handed it back, and he did not have it in his possession afterwards; and whichever date we take, in the summer of 1904, long before this suit was commenced, the Union Dredging Company, the actual owner of this share of stock, had the certificate in its possession, with the endorsement in blank of Mr. Hoopes, the party who appeared on the face of it as the holder of it. Of course, Mr. Hoopes’ name appears on the books of the company, if that expression can be applied to the mere stock book; but Mr. Hoopes appeared on what books the company had as the holder of this .one share of stock. How, the question is, on which this whole controversy turns, whether Mr. Hoopes, holding this share of stock nominally in this way, without any beneficial interest in it whatever—the sharp question, I say, in this case is whether Mr. Hoopes, holding this single share of stock in this manner and for the purpose which I have indicated, is to be regarded as a stockholder within the meaning of that word, as used in the sixty-fifth section of our Corporation act. This section provides—and the language is the same that was employed when the law was first enacted as a part of the act to prevent fraud by incorporated companies, in 1829—whenever any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, any creditor or stockholder may by petition or bill setting forth the facts invoke the jurisdiction of the court of chancery, and upon proof of the facts upon summary hearing have a decree placing the corporation under disabilities by an injunction in respect to the exercise of its franchises, and also, if necessary, the appointment of a receiver. How, the question is, “Is this man a stockholder within the meaning of that act?” There are no cases that I am acquainted with, either in New York or New Jersey, in which this question has been discussed. I gave counsel an opportunity to present cases and discuss the question, but their briefs do not contain anything that is helpful. They undoubtedly made careful examination and failed to find any authorities that would throw light on this subject.

There is one case, and one only, that I know of, where the meaning of the word “creditor” in this clause of the act which I have read was the subject of investigation. There have been a number of cases where the meaning of the word “creditor” in the subsequent clause which defines- the parties who may come in and prove claims and take a share of the assets has been discussed, and the rule is well settled that the word “creditor,” in that part of the act—that part which deals with the beneficiaries who are to take dividends—is to be construed very liberally. The last case in which this matter is discussed was the case of Lehigh and Wilkesbarre Coal Co. v. Stevens & Condit Transportation Co. The report of the case will be found in 63 N. J. Eq. (18 Dick.) 107. I can state the leading facts sufficiently for present purposes from memory. In that case Yiee-Chancellor Stevens holds that one having a claim for damages— unliquidated damages-—against the corporation, based upon a tort of the corporation, may come into the insolvency proceedings and have his damages assessed, by a jury or otherwise, under the provisions of the act, and take a dividend ratably with the other creditors, and the reasoning upon which the vice-chancellor supports his conclusion seems to me to be unanswerable. He does not hold, nor has it eve? been held, that such a person holding a claim for unliquidated damages is qualified as a creditor to be the actor in the suit; that does not follow. The case goes upon the idea that the assets are distributable to those who have just claims of all kinds against the corporation, and as the residue is to be -distributed to stockholders it would be -exceedingly unjust to leave claimants whose claims were based upon torts without relief against the assets, while the stockholders were allowed to absorb- them; and so, while such a claimant as I have mentioned is not a creditor, strictly speaking, at the time of the commencement of the insolvency proceedings, he is permitted to become a creditor by the establishment of his claim by a judgment, and thus he stands as a creditor before the proceedings are concluded and he takes his dividend. I give that case simply as an illustration to show the distinction between a creditor as defined in this act, for the purpose of distribution, and a creditor as defined in the act for the purpose of allowing him to invoke the jurisdiction of the court, as in this case.

The ease that I referred to a moment ago, which I think is the -only case where the meaning of the word “creditor,” under the first clause oi section 65, is discussed, is the Fort Wayne Electric Corporation v. Franklin Electric Light Co., 57 N. J. Eq. (12 Dick.) 16. In that case Chancellor McGill holds, and the court of errors and appeals affirmed his decision, for the reasons which he stated, that a creditor who had assigned his claim away, or had agreed to assign it away, but stood as the legal owner of the debt, having also a beneficial interest in the debt because he had not been paid the price for the assignment— he had neither made the assignment nor received the price— was qualified to maintain this suit.

In the case of Gallagher v. Asphalt Company of America, 65 N. J. Eq. (20 Dick.) 258, I referred to this subject as follows: “The meaning of the word ‘creditor/ as used in our statute in defining the classes of persons who are authorized to 'maintain this statutory proceeding, has been discussed in several cases [which are here stated]. It is settled that the word ‘creditor’ is not used in our statute in a narrow, technical sense. It is used in a broad sense, and I think it is safe to say that the general intention is that if a party is so related to the corporation and its assets as to be entitled to a share of what is divided among creditors—if the party can come into the proceedings as a claimant and prove his claim so as to be entitled to a dividend— it must be generally true that he is qualified as a creditor to institute the proceedings which result in the distribution of the assets in part, to himself. But in this case it is not necessary to lay down so broad a rule as that in order to find that the complainants are qualified as creditors.”

In that case I indicated a general opinion that as a general rule if the party posing as a creditor claiming the right to institute this statutory action stood in such relation to the assets that he had a right to a share or a dividend, then he was properly qualified as a creditor to institute the action. Such further reflection as I have given to the subject has not disturbed that impression. I think, however, especially in view of this decision of Vice-Chancellor Stevens, one modification is necessary. The party who claims to be a creditor só as to be entitled to institute this action must, I think, at the time he comes into court with his bill, be a creditor as distinguished from being merely entitled to become a creditor by the proof of a claim for damages. If the party complainant asserting that he is a creditor by proving before the receiver precisely what he proves before the court in order to qualify himself to bring the suit is entitled to a dividend, then I think he passes the test. Of course, a man who has a claim for damages for a tort cannot meet that test. He cannot come into court with a bill against the corporation and say “I am a creditor,” but he can say, “I can make myself a creditor, if somebody else will only start these proceedings, by bringing forward my claim and having it proved, having a trial by jury.” 'How, then, when you pass from the case of the creditor to the case of a stockholder, I know of no other test. If the party asserting that he is a stockholder has no interest as a stockholder in the assets, then it seems to me he cannot maintain.this suit; he is not a stockholder within the meaning of this first clause of section 65. I stated to counsel, in postponing this case, the other day, some of the leading principles which I think control, and which relate to the fundamental nature of this statutory action. I had occasion to discuss these principles at considerable length in the ease of Gallagher v. Asphalt Company of America, supra. In the same case, in a subsequent opinion reported in 67 N. J. Eq. 441, and more recently in the case of Pierce v. Old Dominion Copper Mining and Smelting Co., 67 N. J. Eq. 399. It was because of the views which I expressed in these cases in regard to the nature of our statutory action that I laid this point over for further argument and further consideration. We have here not a private action inter partes. The complainant, whether he is a stockholder or a creditor, acts as the representative of the public, and particularly of the whole body of stockholders and creditors of the corporation. It is a great mistake to suppose that this is a collection suit or a creditor’s suit. The complainant, if he is a creditor, by his decree whether he is a creditor or stockholder—by his decree against the corporation resulting in its being wound up and its assets being distributed—gets nothing necessarily advantageous to himself. He is obliged, after7 wards, to come humbly before the receiver and prove his claim, and it may be rejected, and he may never have any share awarded to him in the assets, and that fact, as I have pointed out in this case, very strongly indicates that Chancellor Williamson and Chancellor Vroom were entirely right in saying that this is an action in which not the particular grievance of the complainant is redressed, but the grievance of the public, including the whole body of stockholders and creditors. Yow, with that sort of an action, in which the actor appears as the representative of other interests, in which the actor is not prosecuting for a decree which entitled him, necessarily, to anything himself, the question was raised in my mind what the legislature meant originally and what it means now in saying that a stockholder—any stockholder'—may file this bill, in which the rights of the public are so directly concerned, in which the rights of all the ■ stockholders and all the creditors are concerned, and in which finally the actor, this representative, the complainant, may take nothing at all. The result of my reflection upon the subject, in the absence of any authorities, is that the legislature means to commit the institution of this suit to the parties who are interested as creditors or as stockholders. ■ The legislature relies upon the selfish interest of the creditor or of the stockholder to have suit brought when public interests require it. That is a very common principle that runs all through our jurisprudence and is an ancient principle. All qui tam actions are based upon it. The original Yew York statute of 1825, upon which our act of 1829—the act to prevent fraud by incorporated companies—was modeled, made it the duty of the attorne3rgeneral to bring the suit. A creditor, also, was permitted to bring the suit, but not a stockholder. A little later the stockholder was enabled to appear as the actor. Our Yew Jersey statute, from the start, allowed the suit to be brought by either a stockholder or a creditor, while it conferred no power and imposed no duty upon the attorney-general of the state in relation thereto. The legislative theory appears to have been that the public interests, and the interests of stockholders and directors of corporations particularly, would be best cared for if reliance was had upon the selfish interest of some stockholder or some creditor to come forward when the corporation becomes insolvent and its operations become inimical to public interests. Now, applying the 'test, does Mr. Hoopes appear as an outsider? He holds this piece of paper—no, he does not even hold the piece of paper, which represents $10, one share of stock of this 'corporation. He was not even trusted to retain that certificate. It was issued to him; he endorsed it and turned it back to the Union Dredging Company, and the dredging company owns it to-day, and if this suit should proceed, and there should be a dividend payable to stockholders, Mr. Hoopes would not get any dividend on that share of stock; it would go to the dredging company. In my judgment, no corporation of the state should be bound to meet the attack of one who comes into court with a share of stock, which he admits he does not own, which belongs to somebody else. The views which I have endeavored to indicate lead to the result that the bill of complaint should be dismissed.


author: Bergen, V. C.

text:
    Florence E. Serena v. Laurence Moore et al.
    [Decided May 17th, 1905.]
    Where a testator devised land to his children, subject to the use of one-third thereof by his widow during her life, and also bequeathed to her the income from a certain sum of money while she remained his widow, and made legacies a charge upon the real estate, the land cannot be partitioned until the settlement of the executor’s account, which will show how far the legacies are unpaid from the personal estate and the extent of the lien therefor upon the land.
    On bill and plea.

      Mr. Alan II. Strong, for the complainant.

      Messrs. Guild & Marlin, for the defendants.
   Bergen, V. C.

The bill in this cause seeks the partition of certain real estate in Middlesex county, of which Ellis E. Moore died seized, and which was by his last will devised to his children, of whom the complainant was one. The devise is expressed in these words: “I do hereby give, devise and bequeath the residue of all my property both real and personal to my three children.” The. will also conferred upon the executors named a power of sale, under which some of the lands were sold, the proceeds of which, as well as the personal estate, has been distributed, and is now the subject of a disputed accounting in the orphans court. To the bill of complaint a plea has been interposed which sets up in substance that in the administration of the estate the executors have made payments and advances in excess of the funds in their hands, to repay which a sale of some of the remaining land will be required, which sale the executors have, under the will, the power to make, and until their accounts have been passed by the orphans court, the amount required, and as a sequence the quantity of land necessary to be sold, to meet the administration cannot be ascertained, and under these conditions the partition proceedings should be suspended until the amount required by the executors has been ascertained.

The devise to the children was ma<j.‘e subject to the use of one-third of all the real estate by the wife of the testator during her lifetime, and the will also bequeathed to his wife the income from $5,000 during the time she remained his widow. Under these conditions this cause falls within the rule established by the chancellor in Adams v. Beideman, 33 N. J. Eq. (6 Stew.) 77, for until the executors of the testator have ascertained what amount of the personal estate is applicable to the legacies before a sale of land, such legacies 'being a charge upon the real estate, the amount of the lien against the lands cannot be definitely fixed. It therefore follows that a decree for sale ought to be withheld until the settlement by the executors of their account in the orphans court, and for that purpose the plea will be sustained.


text:
    Eleanor Griffiths v. Henry W. Griffiths.
    [Decided May 17th, 1905.]
    Evidence in a divorce suit hold to show that the petition was filed by the petitioner in collusion with her husband for the purpose of dissolving their marriage by consent.
    On petition for divorce.

      Mr. Herbert Boggs, for the petitioner..
   Bergen, V. C.

The petitioner seeks a divorce from the defendant, and bases her claim, to a decree upon the statutory offence of desertion, which she says was committed in August, 1898. Both parties were then and, so far as the evidence shows, always had been residents of the State of New York until January 38th, 1903, when the petitioner came to this state, as she asserts, with the' intention of making it her permanent home, the defendant now being a resident of Hew York State. The separation complained of happened while the 'parties were living at Bath 'Beach, New York, and followed a dispute between the parties over defendant’s attentions to another woman, which took pláce in the evening, and on the following day defendant left home for business, as usual, but did not return, sending, as the petitioner testifies, a letter to her, the contents of which she is not able to recall beyond the statement that he would not return. The petitioner did not reply to this letter, and shortly after packed and sent to the defendant his trunk and clothing, she remaining at Bath Beach about a month longer, then removing to New York City, where she continued to reside until she came to New Jersey in 1903. During all this time the defendant paid to the petitioner a weekly allowance of $15, and called at her boarding place during the six years she remained in New York at least once in each week. These visits, she testifies, were made for the purpose of seeing their child; that her husband, on each visit, remained at least an hour, and sometimes longer; that she and her son had but one room; that she was present at all of the visits, but never spoke to her husband, nor he to her; that at the beginning of his visits she spoke to him, and because he replied that he was not talking to her she never spoke to him again. It further appears from the petitioner’s testimony that her husband has visited her since she has been in East Orange, in this state, four times. The last three visits were in April and I\lay, 1904. The first was on the 2d day of April, when she saw him alone at his request. During the conversation at this interview the defendant asked the petitioner if she would care to live with his folks in New York, to which request she made no reply, and he then said that there was no use talking about it; that they would never live together again; that he wanted to marry someone else, and desired to know whether she would accept a lump sum so that he could be free, and that she refused to consider the offer. Two weeks later he came again and asked the petitioner to bring a suit for divorce, and promised to give her a lump sum, provided she obtained a decree, which proposition she declined; that a few weeks later he came again and told the petitioner that if she did not take a lump sum he would go to Australia, and she would get nothing. The only corroboration which the petitioner offers of her testimony regarding the causes of the separation is the testimony of the son, who was just past thirteen years of age when he was sworn, to testify to facts which occurred six years- before, when he was about seven years of age, and it cannot be considered of much weight. All he testifies to, however, is the dispute, the non-return of his father and the sending of the father’s trunk, packed with all his clothing, to him. While I am strongly inclined to the belief, based upon the conduct of these parties, that their living apart was consented to by- the wife, it is not necessary to put the determination of this cause upon that ground alone. The law of this state deprives this court of jurisdiction unless the petitioner shall make oath, to be annexed to the petition, that her complaint is not made by any collusion between her and the defendant 'for the purpose of dissolving their marriage, and it necessarily follows that if at any time during the procedure it shall appear that the jurisdictional condition is not present, the. petition should be dismissed.

In Pohlman v. Pohlman, 60 N. J. Eq. (15 Dick.) 28, Vice-Chancellor Pitney held that the desire of a defendant to be divorced, and her voluntary appearance in a court where she is not obliged to appear in order that the decree may be valid in a foreign jurisdiction, does not amount to collusion, but the facts offered for consideration in the case- just cited differ in a very marked degree from those appearing in this case. Collusion in cases of this class is not only a corrupt agreement between the parties whereby one shall commit the matrimonial offence, or under the terms of which evidence of an offence not committed is fabricated, but also includes any agreement whereby evidence of a valid defence is suppressed, and in my judgment, such an agreement, if not expressed, may be implied from the acts of the parties.

It has been well said that in the granting of divorces, the state, as well as the parties, is interested, and that the public is represented by what is called “the conscience of the court,” and a judicial investigation of all such cases, particularly when they are ex parle, should be pursued with the utmost vigilance for the purpose of determining the bona fides of the application. In this case the testimony shows that in May, 1904, and shortly after the interviews between the petitioner and the defendant at East Orange, when the defendant appealed to the petitioner to bring a suit for divorce, and agreed that if she would do so he would give her a lump sum of money, provided she obtained a decree, the petitioner consulted her solicitors in New York City about bringing a suit for divorce in that state, based upon the alleged adultery of the defendant. The New York solicitor testifies that he had about decided to bring the suit, when the solicitor of the defendant called upon-the solicitors of the petitioner, and negotiations were opened between them which resulted in an agreement, which was afterwards reduced to writ ing, by the terms of which, as testified to by the solicitor, $5,000 was to be paid in full in lieu of any alimony, a counsel fee of $500 to the solicitors of the petitioner, and all the costs and expenses of the suit.- This sum, however, was to be paid in installments, $500 when the interlocutory decree was made, and $3,000 upon the entering of the final decree, and the balance in notes endorsed by some responsible party. It thus appears that the payment of the sum contracted for depended upon the obtaining of a final decree. This solicitor further testified that after this arrangement between the parties had been entered into they discovered that, as the petitioner did not then reside in the State of New York, she was not qualified as a suitor in that state, and they then decided to shift the scene of action from New York to New Jersey and change the ground of complaint. The same solicitor testifies that the agreement in regard to alimony and counsel fee had relation to the suit to be brought in New York City, and not to this cause, but this statement he qualified later in his testimony, when he said that if a favorable decree be obtained in this suit, including permanent alimony, he expects the solicitor of the defendant will force him to pay the sum of $5,000 in lieu of such permanent alimony, and that the petitioner will accept it.

It is impossible under the evidence in this cause to come to any conclusion other than that this defendant, being anxious that he should be divorced from his wife; the petitioner, applied to her to bring a suit for that purpose, and that after two or three interviews with her on the subject, negotiations looking to that end were entered into between the New York counsel of the respective parties, resulting in a written contract, which, for some reason best known to counsel, has not been produced, by the terms of which the petitioner was to bring her suit in New York, to which, it must be inferred, the defendant was to make no defence, and upon the obtaining of a decree by default, the petitioner was to be paid the sum of $5,000. To be sure, counsel of the petitioner when a witness describes this lump sum as alimony, but the condition that it was not to be paid unless the divorce should be had exhibits, as was said by the chancellor in Costill v. Costill, 47 N. J. Eq. (2 Dick.)346 “the shallowness of such a pretence.”

If arrangements between parties providing for the institution of divorce suits, in consideration of the payment of a largo sum of money,- are to receive the sanction of this court, every legal restriction against the voluntary dissolution of the marriage tie can readily be avoided by designing and unprincipled parties. Can it for a moment be supposed that this defendant, anxious to be divorced, soliciting and importuning his wife on different occasions to begin a suit for that purpose, which importunities she testified she resisted, would, when he had succeeded, by the offer of money, in overcoming her opposition, interpose any defence he might have, and is’it not a just inference that the arrangement included the suppression of any defence he might have? Nor do I believe that this petitioner is sincere in this application. At the time her husband applied to her in April and May, 1904, her husband had deserted her, if her story be true, for a period of over six years. Her right of action, if she chose to exercise it, then existed, j^et she resisted the persistent request of her husband until, by negotiations, the amount of the “lump sum” she was to be paid if she succeeded in obtaining a divorce had been arranged to her satisfaction, and justifies the inference that the complaint was made by collusion with her husband.

In addition to the foregoing, it is a eircunistance of no little moment that this written agreement made between these parties with reference to the institution of this suit has not been offered in evidence, while the Hew York solicitor of the petitioner has been permitted to testify to so much of the contents as in his judgment might aid his client. If its contents were material in aid of the petitioner’s cause, and her solicitor appears to have thought so," because he undertook to prove b^^ oral testimony a portion of its contents, the court is entitled to all of it, for if produced it may afford a complete defence,, such a defence as the court, in the interest of the public, would of its own motion interpose, and its suppression was undoubtedly controlled by an implied agreement between these parties that no defence was to be interposed.

In my judgment, no such case has been made by the petitioner as, under the law of this state, justifies this court in extending its aid to further her wishes, and the petition will therefore be dismissed.


author: Bergen, Y. C.

text:
    Katie O’Donnell Cronan, executrix, &c., v. Maurice Coll et al.
    [Decided May 31st, 1905.]
    The devisees of the résidue of real estate, which is devised subject to a power of sale by the executor, can defeat the exercise of the power by an election to take the land only when all the devisees join in the election, and express such election before sale by the executor.
    On bill, &c.

      Mr. Irwin A. Schultz, for the complainant.

      Messrs. Smith & Brady, for the defendants Erank and Edward J. Albus.

      Mr. John I. Blair Reiley, for the defendants Maurice Coll and Nancy MoCole.
   Bergen, Y. C.

The complainant, as executrix of Anthony Coll, deceased, sold at public auction the real estate of the deceased to the defendants Erank and Edward J. Albus, who refuse to comply with their written contract of purchase upon the ground of want of power in the executrix to make a lawful conveyance. The bill of complaint seeks the specific performance of the contract as to defendants named, and also as to the defendants Maurice Coll and Nancy McCole, relief of so different a nature as to render the bill unmistakably multifarious, and as to the last-named defendants it must be dismissed, and is only retained as to the defendants Albus because they waived any advantage and desired that, as to them, the bill be held and the issue raised disposed of.

The complainant grounds her power of sale upon the following paragraphs of the will of Anthony Coll, viz.:

‘‘Fifth. I bequeath all my personal property and real estate wherever situate unto Maurice Coll, Nancy McCole, Katie O’Donnell, share and share alike.
‘‘.Sixth. I hereby appoint my friend, Katie O’Donnell, executor of this my last will and testament, with power to sell all my real estate herein devised, and execute a deed or deeds therefor, and to do all other lawful things to carry out this my last will and testament.”

After the sale and contract foi’ its performance had been made, Maurice Coll and Nancy McCole objected to the further carrying out of the sale, upon the ground that they were the owners in common with the executrix of the land and were opposed to its sale by the executrix, denying her power to lawfully sell and convey it. No objection is made to the prices obtained; the opposition is rested entirely upon their right to take the land by election and the resulting want of power in the executrix to convey. This objection being made known to the purchasers they' refused to 'comply, urging as an excuse the absence of power to convey a merchantable title. In my judgment the objection is not well taken, nor is there sufficient doubt raised to require the court to withhold a decree for specific performance. The bequest was of the whole of testator’s estate to the three legatees in equal shares; it included all personal and real estate remaining after providing for payment of debts and special legacies, and was in effect a gift of the residue, which, so far as the personal portion was concerned, the executrix would of necessity have to divide between them.

The will contains an express power, of sale., as to all the “real estate herein devised,” and the devisees took subject to such power, which might perhaps have become ineffective if before its exercise they had elected to take the property; but a power of sale will not be defeated by an election to take the subject of the devise exercised by less than the whole number of persons interested in it; all must concur (Bolton v. Stretch, 30 N. J. Eq. (3 Stew.) 536, 538), and that all have concurred here is not pretended. In addition to this the election must be exercised before the sale. These two devisees admit .that they made no election prior to the sale, and in their answer deny that after the sale of the said lands and premises aforesaid by the complainant, and before the date of the delivery of the deed, protested the action of the complainant in making sale of said real estate, and they deny that they challenged the right of the said complainant to exercise the power of sale provided in item six of said will, but they now insist that she did not have any right to sell the real estate. The power of sale, although only a naked one, was ample if exercised previous to any lawful election; it was so exercised, and the opposition to it comes too late.

The complainant is entitled to a decree for spéciñc performance against Erank and Edward H. Albus, with costs, and the bill will be dismissed as to Maurice Coll and Nancy McCole, but without costs.