author: Lewis, V. C.

text:
    Conrad Muller et al. v. Nathan Weiss et al.
    [Decided November 28th, 1919.]
    1. A grantor’s release of restrictive covenants does not preclude other parties to whom he made deeds previously, or subsequently, from enforcing their rights against any purchaser violating the restrictive covenants.
    2. The seller of land to a buyer who intended to erect an apartment-house is not entitled to specific performance where he misrepresented the dimensions of the lots and also the cost of excavating the rock on the property.
    S. In a suit for a specific performance of a contract to buy lots, the evidence held to show that when the defendant buyer contracted to take the property, the only restriction thereon that he had been informed of was as to its use for saloon purposes, and not any restriction as to the erection of an apartment-house.

      4. Where the seller sought to -take advantage of a restriction against-erecting an apartment-house, of which the buyer had not been informed, and the agent who negotiated the deal, anxious 'to secure his commissions, and the agent’s son, attorney for both parties, knew of the other restrictions, hut did not inform the buyer when the contract was signed late -at night, the seller is not entitled to specific performance.
    On pleadings and proofs.

      Messrs. Weller £ Lichtenstein, for the complainants.

      Mr. J. Philip Dippel and Messrs. McDermott & Enright, for the defendants.
   Lewis, V. C.

This bill is filed for specific performance of a contract dated December 23d, 1915.

By this contract Nathan Weiss and wife agreed to- sell and convey to the complainants certain lands and tenements, described in the bill of complaint, for the consideration of $45,000, subject to a mortgage of $25,000; and the complainants agreed to sell and convey to Weiss and wife the lands secondly described in the bill for the consideration of $10,000, subject to a mortgage of $2,500, and to pay the difference of $7,500 as follows: $1,000 in cash on the passing of title, and by giving back to Weiss and wife a mortgage for the 'sum of $6,500.

On the date fixed for the passing of title, the defendant refused to take title, 'for the various alleged defects, the principal one being that there were restrictions on the land of complainant of which he was not advised. On this question there was considerable evidence taken before me. It appears from -this that the1 contract was drawn late at night by Isador Haber, a member of the bar. Weiss asked, as he had done on two previous occasions, whether or not there were any restrictions on the land; and Conrad Muller, the complainant, said he had heard that the town authorities would not allow any saloon there.

The contract was executed by both parties. The scrivener, Haber, made it read: “Subject to all restrictions of record.”

It is clear to my mind that the defendants were misled, for not only were there restrictions as to the maintenance of a. saloon on the property, hut also' one which prevents the carrying on of manufacturing; and the one which raised the greatest objection on the part of the defendant, which prevented the building of ah apartment-house on the premises.

It 'is apparent from the testimony that it was known that the defendants contemplated putting up an apartment-house. Muller had exhibited to Weiss during their transactions a blueprint prepared when Muller expected to erect such a building; and Weiss proceeded, undoubtedly, with the negotiations with Muller in the belief that he could so use the property. ' •

The complainants show by their subsequent action that the rinderstanding as to the restriction was as Mr. Weiss testifies, for their attorney went to Gerber, the grahtor of the Mullers, to secure a deed from him releasing the restrictive covenants.

The effect of such a deed:, however, would not be to preclude the parties to whom he made deeds previously or subsequently from enforcing their rights against any purchaser violating the restrictive covenants. DeGray v. Monmouth Beach Co., 50 N. J. Eq. 329; Henderson v. Champion, 83 N. J. Eq. 554; Wootton v. Seltzer, 83 N. J. Eq. 163.

The statement of Muller as to the size of the lots also appears from the testimony to be material misrepresentation: He said the corner lot was thirty feet by ninety-five feet; and the inside lot twenty-five feet by one hundred feet. As a fact, the corner was thirty seven hundredths feet by ninety-three forty-six hundredths feet on the street lines; and the other three lots all less than one hundred feet in depth, although the centre line of number 55 is about six inches over'one hundred feet. This tract is not a large one, and the difference in area, as represented by the complainant, is substantial; in the building of a large apartment-house on it as contemplated by Weiss its size was a matter of considerable financial interest. _ . .

There is also evidence as to a misstatement of Muller as to the cost of excavating the rock .on the property. These misstatements are in themselves sufficient to warrant me in denying' specific performance. In suits for specific performance anything said or done to mislead the purchaser compels the court to deny relief to the complainant. Bowker v. Cunningham, 78 N. J. Eq. 458; Pyatt v. Lyons, 51 N. J. Eq. 308; Brisbane v. Sullivan, 86 N. J. Eq. 411; Neptune Fisheries Co. v. Cape May Real Estate Co., 89 N. J. Eq. 552.

There is, however, another phase of this case which must-be. adverted to now. The testimony of the scrivener as to the transaction late at night is rather' astonishing, coming from a member of the bar. He says he was called in to draw tire contract, which was prepared at the Muller home. His father, Hill Haber (a witness), a real estate man, sent for him prior to the meeting at the Muller home. Hill Haber had talked with Weiss and suggested that they ought to have the contract executed that night. Weiss told him that he ought to see his lawjrer if that was the case, but he, nevertheless, went to the Muller home and then young Haber was sent for. The elder Haber was interested in putting the transaction through. He wanted to close it to get his commissions. The parties present when the contract was signed, therefore, were the Mullers, Hill Haber, Isador Haber, his son, and Weiss. Isador Haber’s evidence is, that he was tire attorney for both parties at the time the contract was made. He, however, on the witness-stand says that the reason he did not tell Weiss about all the restrictions is that he did not observe the full page of typewritten restrictions in the deed from which he was copjdng the description. He says that he did not hear the conversation between Muller and Weiss when Weiss, asked about the restrictions, because he was busy preparing the papers. Surely, the defendant, under these circumstances, should not suffer in consequence of young Haber’s neglect to make known to him the entire typewritten page of restrictions. In response to a question under cross-examination Haber said:

“I really believe I was derelict, X will admit that, but that is the situation. Possibly,- if it had been in the afternoon I would have taken more time, but it was about midnight.”

Pressing, further, the cross-examiner asked him: “Q. You have no doubt that Weiss was misled by that,? A. It appears so from what he says now.”

The testimony of Hill Haber corroborates to a large extent the statement of Weiss as to his conversation with Muller relative to the restrictions, i. e., that all Muller said to Weiss about the restriction© was that a saloon should not be maintained on the property. He was asked by me as to what he heard regarding what his son was to put in the contract about restrictions, and his reply was:

“Ans. To put in the restrictions that there were no restrictions there except that there should not be. a saloon there; there was no saloon dares to be put in there.”

There is little doubt that it would be a hardship- to compel Weiss to take the title. The evidence satisfies me that the complainants are seeking an advantage. Their testimony is contradictory and unsatisfactory. They have endeavored to- convey the impression that their lack of knowledge of the restrictive covenants in their deed was due to unfamiliarity with the English language; yet, in completing the transaction, they had the services of a lawyer whose father was interested in closing it with Weiss to- secure his commissions.

I cannot escape the conclusion that when, Weiss contracted to take the complainants’ property, the only restriction he had been informed of was as to the non-use of the property for saloon purposes. I am- satisfied that he was misled. He is not a man of much information and experience; and he was without anyone at hand to advise him when the contract was executed, and a mere perusal of the testimony of young Haber will satisfy anyone that he made no attempt to give him any information regarding the restrictions contained in the same.

Specific performance will not be decreed where it will work a hardship or an unfairness, but the court must, be satisfied that the claim is fair, reasonable, just and equal.

Specific performance in this case must be denied.


source: Caselaw Access Project

author: Backes, V. C.

license: Public Domain

text:
    William Cranstoun, administrator with the will annexed of John J. Smisson, deceased, v. Georgina Westendorf et al.
    [Submitted September 10th, 1919.
    Decided October 16th, 1919.]
    1. Where an executor is directed to sell land and divide the proceeds, the land is converted into personal property.
    2. A power of sale of lands vested in an executor, deceased, is transmitted to the administrator with the will annexed under Comp. Stat. p. 2262 § 13.

    3. A testamentary gift in remainder expressed in terms of to pay and distribute only is, as a general rule, contingent and does not vest until the time for distribution arrives. But the rule does not apply when the gift in remainder is postponed for the convenience of the estate. In such case the gift vests at the death of the testator; following Post v. Herbert, 27 N. J. Eq. 540.

    4. A power of sale of land vested in an executor cannot be defeated by an election of the heirs-at-law to reconvert the personalty into realty except by the unanimous action of the beneficiaries, and then only when their interests in the land as oestuis que trust and heirs-at-law are identical.
    5. Where it appears to be to the advantage of an infant to reconvert the personalty into realty, equity may make the election for him.
    On bill for the construction of a will.

      Mr. Samuel A. Besson, for the complainant.
    ' Mr. Harlan Besson, for the defendants Georgina Westendorf and Carrie Smisson.

      Messrs. Weller & Lichtenstein, for the defendants John Jacob Schaab and Carrie Smisson, executrix of Lillian Smisson Schaab, deceased.

      Mr. Kenneth D. Cranstoun, for the defendant Margaret Smisson, administratrix of James Smisson, deceased.
   Backes, V. C.

John J. Smisson left a last will and testament as follows:

“Item: It is my will, and I do order that my wife Jane Smisson shall be permitted to occupy the premises wherein I now reside, free of rent so long as she shall desire so to do, and while she continues to occupy the said property, I do order my executor to ¡pay to her out of my estate the sum of $400.00 per annum to be used by her for keeping the place in order.
“Item: I do give and bequeath unto my said wife the income of one-third of my estate during the term of her natural life. The remainder of the 'income of my estate I do order to be distributed as follows:
One-fifth thereof shall be paid to my son John Smisson. Two-fifths thereof shall be paid to my son James Smisson, and two-fifths thereof shall be paid • to my daughter Sarah Jane Turner, and in addition thereto my said son James and daughter Sarah Jane shall be permitted, to occupy the preim ises where they now reside upon Washington Street in Hoboken, free from rent, so long as they desire. It being expressly understood, however, that none of my children are to draw any income from my estate until the mortgage upon my property in Bloomfield Street, Hoboken, has been paid and satisfied by my executor; which shall be done out of two-thirds of the income of my estate.
“Item: Upon the death of my wife I do-order that the one-third of the income hereby bequeathed to her shall be distributed among my surviving three children.
“Item: Upon the death of any of my three children, I do order the portion bequeathed herein to him or her to be distributed among his or her heirs.
“Item: Upon the death of my wife and three children, above named, I do order my executor to sell and dispose of all my real and personal estate at private or public sale, as he shall deem most advisable, and distribute the proceeds of such sale among the children of my said three children equally share and share' alike.
“Item: In giving my wife the use of the property where we now re- ■ side I also give and bequeath unto her the free use of all the furniture, goods and chattels of every description connected with the house and premises, intending that .she shall be responsible to no person for her use of the same.
“Item: I do. constitute and appoint James Benson of Hoboken, James Smisson and Sarah Jane Turner, executors of this my last will and testament.”

- The deceased was survived by his wife, daughter and two sons. All are dead. James was the last to die. The daughter and J ames died childless. J ohn left three daughters, Georgina Westendorf, Lillian Smisson Schaab and Carrie Smisson. Mrs. Schaab died before her uncle, James, leaving a husband and an infant son, John Jacob Schaab. She devised and bequeathed her estate to her son. The three grandchildren were living when the testator died. J ames Benson, remaining executor, is dead. The complainant has been appointed administrator with the will annexed. He was also appointed substituted trustee under the will. The testator died possessed of personal and real property. The estate is readjr for distribution, and the complainant asks instruction as to its disposition. •

1. The direction to sell the land and divide the proceeds after the termination of the life estates constitutes an equitable conversion of the realty into personalty. Cook’s Executor v. Cook’s Administrator, 20 N. J. Eq. 375.

2. - The power of sale vested in James Benson, one of the dxecutors, was transmitted to, and is exercisable by, the complainant as administrator with the will annexed. Comp. Stat. p. 2262 § 13; Griggs v. Veghte, 47 N. J. Eq. 179. I assumle tire complainant was appointed substituted trustee under the will because of what former Chancellor Pitney said in In re Smisson, 79 N. J. Eq. 233, where that learned chancellor had under consideration certain features of this will relating to the income. It appears to have been suggested on the argument that the legal fee to the lands was in the heirs-at-law during the existence of the life estates, and while he said that it had no bearing upon the question before him, he expressed the opinion that, except for the decision of Mr. Justice Dixon in an ejectment suit brought by the children of the testator against the administrator cum testamento• annexo that the children took the fee, he would be inclined to think, reading the whole of the will together, that it imposed a trust by implication upon the executors, which would carry with it the fee of the land as necessary to the execution of the trust. Accepting this view as correct, it did not call for the appointment of a trustee'to sell the lands. The implied trust which carried with it the fee as necessary to- its execution was annexed to the office of executor and devolved upon the suecessor to the office, the administrator, under the statute. ’ In other words, th$re is no trusteeship-, nor holding of the- fee as trustee, independent of the office of executor, as was the case in Varick v. Smith, 67 N. J. Eq. 1; Hegeman's Executors v. Roome, 70 N. J. Eq. 562, where it was held that the statute (supm) does not confer upon an administrator with the will annexed power to make sale of real estate, which by the will was devised to the executors upon trust to be performed by them not as executors but as trustees. The question, however, is wholly academic, as the complainant is both administrator and. trustee, and may execute conveyances in his dual capacity.

3. The two surviving grandchildren, Mrs. Westendorf and Carrie Smisson, claim the whole of the principal of the estate to the exclusion of the estate of their deceased sister, Mrs. Schaab, upon the theory that the bequest of the remainder was to the grandchildren as a class and was contingent upon their surviving J ames, the last living child of the testator. The gift in remainder to the grandchildren is contained in the direction to sell and distribute the proceeds among them upon the death of the life tenants, and, as a general rule, such a bequest is contingent and does not vest until the time for distribution arrives. The reason for this is that the direction to divide being future, the gift also is •future. But the rule does not apply when the gift is postponed for the convenience of the estate. Post v. Herbert, 27 N. J. Eq. 540. And that was the case here. The scheme of the testator is not obscure. The estate was to be kept intact for the benefit of his wife and children, and when that purpose had been served, the grandchildren were to enjoy the principal. The postponement of the payment of -the legacy was not because of anything incident to- the grandchildren, but was solely for the purpose of letting in the interest of the life tenants. The legacy stands virtually on the same footing as does a bequest for life with remainder over in words of gift, as in Security Trust Co. v. Lovett, 78 N. J. Eq. 445. The three grandchildren took a vested estate upon the death of the testator and Mrs. Schaab’s interest passed to her personal representative.

■ 4. Georgina Westendorf and Carrie Smisson elect to take the land in lieu of the; proceeds of the sale directed by the will. This would have been their right had they been adjudged the sole remaindermen. Doyle v. Blake, 77 N. J. Eq. 142. The personal representative of Mrs. Sehaab cannot, of course,’ elect. The power of sale cannot be defeated except by the unanimous action of the beneficiaries (Rogers v. Lippincott, 90 N. J. Eq. 70), and then only when their interests in the property as cesiuis que trust and heirs-at-law are identical. Fluke v. Fluke, 16 N. J. Eq. 478. And even if we should regard John Jacob Sehaab, the infant son of Lillian Smisson Sehaab, as one of the beneficiaries, by virtue of his mother’s will, there could be no' election on his behalf because the reconversion would diminish his interest b}r the immediate attachment of his father’s curtesy to the land. In Condict v. Condict, 73 N. J. Eq. 301, it was said that the power of sale could not be defeated because one of the beneficiaries was an infant, who could not for himself elect, and that there was no one authorized to elect for him. This statement is to be accepted with the modification that where it appears to be to the advantage of the infant to reconvert the personalty into realty, equitj’’ may make the election for him. 13 Corp. Jur. 890; 6 R. C. L. 1085; Tomkins v. Miller, 27 Atl. Rep. 484.

' 5. It is claimed that James Smisson, one of the life tenants, ■ advanced moneys for permanent improvement of the realty, and ’■his administratrix by counter-claim .seeks to be reimbursed. I understand proofs are to be furnished in support of the claim, arid, if well' founded, there will be an equitable apportionment.

A decree will be advised in accordance with the foregoing ■views.


text:
    Edward D. Stokes v. Burlington County Trust Company et al.
    [Submitted November 14th, 1919.
    Decided November 17th, 1919.]
    1. The surety of a defaulting trustee may, as against the creditors of the trustee, recover the proceeds of property purchased by the trustee with trust funds, on the principle that a surety is entitled to be relieved from the dishonesty of his principal by compelling him to return the loot.
    2. A cestui que trust may trace and recover trust funds unlawfully diverted by 'his trustee.

      3. The Orphans Court act as to insolvent estates (section 99) does not apply to trust funds in the hands of decedent at his death.
    4. A substituted trustee who, in ignorance of the fact that the deceased trustee who had misappropriated trust funds, had used the same to purchase land, taking title in his own name, filed a claim as a creditor in the orphans court against the estate of the deceased trustee, did not waive the right to trace the funds into the land.
    5. Where a trustee and guardian with the joint funds of the two estates purchased land, taking title in his own name, the proceeds realized by the executor of the guardian and trustee inure to those two estates.
    On bill, &C.

      Mr. V. Claude Palmer, for the complainant.

      Mr. Samuel A. Atkinson, for the defendant Mount Holly Safe Deposit and Trust Company.

      Mr. George B. Brans, for the defendant Burlington County Trust Company.
   Backes, V. C.

This suit is to recover trust funds fraudulently misappropriated. The facts are few and undisputed.

Thomas Wood bequeathed to Israel H. Johnson $15,000 in trust for the benefit of his demented son, Reading Wood. Upon Johnson’s death William B. Wills was substituted as trustee, and about the same time he was appointed guardian of the incompetent son by the Orphans Court of Burlington county. Among other items, there came to- Wills’ hands, as trustee, Lehigh Coal and Navigation'bonds of the par value of $11,000; and as guardian, Lehigh Coal and Navigation bonds of the par value of $2;500. Shortly after his appointments, 1895, Wills sold these blocks-"of bonds .for $11,893.75 and $2,703.13, respectively, and with the proceeds purchased the Indian Hill Earm, paying therefor $13,411.19, and took title in his o-wn name. Wills continued as trustee and guardian until his death, 1915, when he was succeeded in both offices by the Mount Holly Trust Company. Wills’ estate has been declared insolvent. His executor, the Burlington County Trust Company, sold the Indian Hill Earm for $15,109.60, which now forms part of the liquid assets of the estate for pro mta distribution among the creditors. Pursuant to a rule to bar creditors, the Mount Holly Trust Company, as trustee and guardian, presented its claims for $35,360.90 and $9,364.85, respectively, which were allowed. These claims represented the principal and accumulated interest on the sums turned over to Wills when he took office as trustee and guardian. When they were presented and approved, and up until shortly before the hearing of this ease, the Mount Holly Trust Company was unaware that Wills had used the funds of the two estates to purchase the Indian Hill Earm.

The complainant, Stokes, is one of the sureties on Wills’ bond of $24,000 given for the faithful performance of the trust. To indemnify himself he filed this bill against Wills’ executor to recover for tire Wood (trust) estate so much of the proceeds of the sale of the Indian Hill Earm as represents the trust funds misappropriated by his principal in its purchase. The Mount Holly Trust Company, as substituted trustee and substituted guardian, filed a counter-claim against Wills’ executor to recover the entire proceeds.

■ The defences interposed by the Burlington County Trust Company, executor of Wills, are technical. It sets up that the complainant, as surety, has no standing to bring this suit — that he is not entitled to protection against ultimate loss by a restoration, of the misappropriated trust funds. I am not referred to any authorities to support the proposition, and believe none can be found to even give color to its soundness. Common honesty and morality dictate that a surety be relieved from the consequences of the dishonesty of his principal by compelling him to return the loot. That is the complainant’s effort and his right to relief in equity is unquestionable. Irick v. Black, 17 N. J. Eq. 189; Philadelphia and Reading Railroad Co. v. Little, 41 N. J. Eq. 519; Kidd v. Hurley, 54 N. J. Eq. 177; Beacon Lamp Co. v. Travellers Insurance Co., 61 N. J. Eq. 59. But the question is academic, in view of the counter-claim interposed by the Mount Holly Trust Company, representing the ceslui que trust, whose' right to institute proceedings to recover the trust funds is conceded. It is settled law that a cestui que trust may trace and recover trust funds unlawfully diverted by his trustee. Smith v. Combs, 49 N. J. Eq. 420; Babcock v. Standish, 53 N. J. Eq. 376; Hunt v. Smith, 59 N. J. Eq. 25; Ellicott v. Kuhl, 60 N. J. Eq. 333.

The objection to the relief prayed for by the Mount Holly Trust Company, as substituted trustee and guardian, is, that the orphans court’s decree of insolvency fastened the claims of creditors of Wills upon the estate in the hands of the executor, equally, and that it has elected to become a common creditor by presenting its claim under the rule to bar creditors, and, consequently, has waived- its right to. trace the funds. The position is untenable. The Orphans Court act (Comp. Stat. p. 3848 § 99), providing that a decedent’s estate, if insufficient to, pay debts, shall be distributed equally among the creditors in proportion to their debts, applies only to the estate proper of a decedent, and does not include trust funds of which he dies possessed. As Vice-Chancellor Howell remarked in Koch v. Feick, 81 N. J. Eq. 120: “It is a decree in favor of creditors only, and can fasten their debts only on those funds which are applicable to the payment of debts.” And there was, manifestly, no waiver because, as admitted by the pleadings, the Mount Holly Trust Company did not know at the time it presented its claims that the trust funds were traceable into, and formed part of, the Wills estate. There can, obviously, be no waiver without knowledge of the facts upon which the alleged waiver is predicated.

As the farm was purchased by the trustee with the joint funds of the trust and guardian estates, the entire proceeds realized by the executor from its sale enures to these estates (Shaler v. Trowbridge, 28 N. J. Eq. 595), and a decree will be advised awarding it proportionately, with costs.


text:
    Josephine Kern Dodge et al. v. Mary A. Jordan, administratrix, &c., et al.
    [Submitted November 25th, 1919.
    Decided November 28th, 1919.]
    1. The question of whether the complainants have misconceived their form of action cannot be seized upon to strike out a replication.
    2. On a bill to quiet title where it appears that the conveyance under which the defendant claims whs in effect a mortgage, and that there is a balance of the mortgage debt due, the court will ascertain the amount of such balance, and permit the complainants to redeem.
    On motion to strike out replication.

      Messrs. Pierson & Schroecter, for the motion.

      Mr. James B. Nugent, contra.

   Backes, V. C.

This bill is to quiet the title to an undivided half interest in waste lands in Newark, and is drawn strictly in accordance with the act to quiet titles. Comp. Stat. p. 5399.

The complainants claim by inheritance from separate ancestors, who- acquired title by descent from a common ancestor, and allege that they have been paying the taxes for more than five years. The usual charge is made against the defendant Mary A. Jordan, administratrix of the estate of Cornelius Poilion, and, individually, that she denies the complainants’ title and claims some adverse right, title or interest.

Mrs. Jordan answers, admitting the title to- have been in the ancestors of the complainants, but sets up- that they were indebted to her intestate, and that she, as administratrix, in 1879, recovered a judgment against them in the supreme court of the State of New York for $8,979.72; that she released the judgment upon the pajunent by the said ancestors of $2,000 in cash the assignment of an interest in an estate of the value of $1,500, and bjr a conveyance of the land in question, the agreement being

“that this defendant (Mrs. Jordan), as such administratrix, should, upon sale and conveyance of the same, after the payment of said judgment and expenses, account and pay over to the said Dodge and Mapes (complainants’ ancestors) any surplus after such payment thereof, with interest and expenses.”

She further alleges that she has not received sufficient moneys to pay off the judgment, and that the title to the one-half interest is in her in fee.

The complainants, in reply, join issue upon, or admit or deny, severally, the first thirteen paragraphs of the answer. In the remaining paragraphs, 14 to 21, inclusive, they admit the indebtedness of their ancestors to Poilion, the intestate, but say the debt, initially, was $3,800, evidenced by a bond in the penal sum of $7,600, and that the judgment recovered in New York was for the penalty, interest and costs. They further admit the liquidation of the judgment by the payment of the $2,000 in cash, the assignment of the estate of $1,500 and the conveyance of the land in question upon the. agreement, just related, and as to this conveyance they charge that it was in the nature of a mortgage to secure the balance of the debt; that the debt, was paid in full by their ancestors, and that in acknowledgment Mrs. Jordan, as administratrix, reconveyed the lands by a deed which has become lost. The complainants offer to pay, if the debt has not already been paid, the balance that may be due, and to that end ask that the administratrix account, so that it may be ascertained whether the debt has been satisfied.

The defendant moves to strike out paragraphs 14 to 21, or the material parts thereof, and the outstanding ground, running through the multitude of reasons assigned, is, that it discloses that the complainants have a direct remedy in equity by bill to redeem the lands, and that, consequently, relief cannot be had by means of a bill to quiet the title, and her counsel cites in support of this position Jersey City v. Lembeck, 31 N. J. Eq. 255; VanHouten v. VanHouten., 68 N. J. Eq. 358; Fittichauer v. Metropolitan Fire Proofing Co., 70 N. J. Eq. 429; McClave v. McGregor, 72 N. J. Eq. 218.

In defining the scope of the act, and its place and function in 'our jurisprudence, Chief-Justice Beasley, in the Lembech Case, held that it did not supplant prevailing remedies at law and in equity for the purging of titles to land; and that as these inherent remedial methods were constitutionally vested in the courts, and, consequently, unalterable by the legislature, the provisions of the act were exclusive of causes where common law and equity procedure were available and adequate. These principles were applied by this court in the opinions in the cases just ■cited. They are not, however, relevant on this motion. The replication quite properly pleads the deed to be a mortgage, that it has been paid, or, if not paid in full, is subject to redemption by the complainants, which right they seek to exercise upon .ascertainment of the amount due. (The allegation of a lost re-conveyance is parenthetic and not for special relief.) This goes in avoidance of the defence of title in fee in the defendant, set up by the answer; is in amplification of the allegations therein ■contained tending to show the deed to be a mortgage, and is in denial of the allegation that the mortgage debt is unpaid. The fact that these things, alleged' in avoidance, malee it appear, in view of the doctrine above expressed, that the complainants have misconceived their form of action, cannot be seized upon at this -time to strike out the reply. They may furnish grounds for dismissing the bill on final hearing, because the appropriate action is by bill to redeem, which question is not now before me, but, if ultimately it should be decided upon such a contention that the bill is maintainable in its present form, the matters set up by the replication would undoubtedly be pertinent. It will be found, upon examination of the cases above cited, that the rights of the complainants therein to maintain their actions were contested on final hearing — on issue joined or upon demurrer.

A further reason for denying the motion is, that the so-called new matters introduced by the replication are simply in explanation and clarification of the allegations of the answer, that the deed is, in effect, a mortgage. Pleading them was unnecessary. The issues thus more plainly put would have been triable upon the filing of the common replication, for, upon a showing at the hearing that the defendant’s deed was a mortgage and had been paid, the cloud of the defunct document would doubtless be removable on this bill. And I am also of the opinion that if it were to appear that there was a balance due, the court would ascertain the amount and permit the complainants to redeem. Devine v. Franks, 47 Atl. Rep. 228, is authority. There Vice-Chancellor Emery held that “the court has jurisdiction; the defendant’s claim being that of a lien upon complainant’s land under a sale for taxes, as to- which lien, if it exists, the complainant has a right of redemption. By the act quieting titles, under which the bill is filed, the court is required by the final decree to fix and settle the rights of the parties in the lands. Equity has jurisdiction for the purpose of redeeming lands from taxes (Culver v. Watson, 28 N. J. Eq. 548), and, therefore, in fixing the rights of the parties in the land, would clearly have the right to determine whether defendant’s lien existed, and to what extent, and whether complainant had the right to redeem. Baldwin v. City of Elizabeth (Chancellor Runyon, 1886), 42 N. J. Eq. 11; 6 Atl. Rep. 275, approved on this point. In re Commissioners of the City of Elizabeth, 49 N. J. Law 488, 507; 10 Atl. Rep. 363, is an authority for the jurisdiction. The Lembeck Case, 31 N. J. Eq. 255, does not apply to the case.”

The motion will be denied, with costs. ■


author: Griffin, V. C.

text:
    Joseph G. Shannon, executor of Ellen J. B. Shea, deceased, v. John Ryan et al.
    [Submitted May 20th, 1919.
    Decided June 27th, 1919.]
    1. If there is nothing contrary in the will, the mere giving of general legacies, and the passing of real and personal property in a residuary clause, makes the legacies a charge on such property.
    2. To determine Whether general legacies are chargeable on residuary real property, this court-must construe the will in its entirety and give effect to the intention of the testatrix with the aid of extrinsic evidence as to the condition of her estate, and the objects of her bounty.
    3. Considering the entire will in this case, general, legacies to her nephew and executor and others are chargeable on the realty mentioned in the residuary clause, despite the provision that, should the personal estate be insufficient ,to pay pecuniary legacies, the executor should sell certain specified land which the testatrix regarded as of great value,,but, in fact, was not, so that its proceeds were insufficient.
    4. In a suit to determine whether general leg'acies are chargeable on the residuary estate, a letter of the scrivener who drew the will, offered to have the same effect a^ if he had been called and testified, is inadmissible on the ground that what the testatrix told him to do and what he omitted to tell her is inadmissible.
    On bill, &c.

      Mr. David F. Fdwmds and Mr. Theodore Rurode, for the complainant.

      Messrs. Fdwmds & Smith, for 'the defendant John Eyau.

      Mem's. Treacy & Milton, for the general legatees. ■ -
   Griffin, V. C.

In this case, were it not. for the thirteenth paragraph of the will, the legacies would be clearly charged on the land. Corwine v. Corwine, 24 N. J. Eq. 579; Johnson v. Poulson, 32 N. J. Eq. 390.

In Johnson v. Poulson, supra, after stating that the personal property is the primary fund for the payment of legacies, Judge Dodd says: “The real estate is not charged with the payment of legacies unless the testator -intended it should be, and that intention must be either expressly declared or satisfactorily inferred from the language and dispositions of the will. This rule was held, in Corwine v. Corwine, to be met and its requirements satisfied by giving to the word 'residue’ its natural and proper force and effect. It .signifies what is left of a number or quantity after something has been abstracted. * * * The rule itself being a judicial interpretation of words, used with reference to the other conditions of the will, is subservient, as rules of construction in all cases are, to the cardinal and p-redo'minant one which seeks the purpose of the testator from all parts and provisions of the instrument considered together.” It is, therefore, apparent, from this ruling, in the absence of anything to the contrary, that the mere giving of general legacies and then passing real and personal property in a residuary clause makes the legacies a charge.

The thirteenth paragraph of the will is as follows:

“Thirteenth: Should my personal estate be insufficient to- enable the foregoing pecuniary legacies to be paid, then I direct my executor to sell either all or so.much of my land at Spuyten Duyvil, in the State of New York, as may be necessary, in such manner as in his judgment is deemed best, to produce funds to supply the deficiency.”

If the Spuyten Duyvil property was in New Jersey, this clause would weaken the view that the property in the residuary clause was charged. The Spuyten Duyvil property is not devised, it, passes by the residuary clause, subject to the whole or part- of it being taken and used for the payment of the legacies. Counsel for the general legatees, however, ;say that, under the decisions of the court of appeals of the State of New York (which, by stipulation, the parties agree may be- considered without formal proof), the rule of construction is different from ours; that there the rule is that the mere giving of general. legacies, followed by a residuary clause passing real and personal property, in the absence of a contrary intention, is-not sufficient to- charge the residue with the payment of legacies (Brill v. Wright, 112 N. Y. 129; 19 N. E. Rep. 628; and the later case of Carley v. Harper, 219 N. Y. 295; 114 N. E. Rep. 351); and as there is a presumption that the testatrix knew the law, it will be presumed that the will was drawn in compliance therewith (Walker v. Walker, 283 Ill. 11; 118 N. E. Rep 1014); and, therefore, in order that the Spuyten Duyvil property might be placed on a parity with the residue in New Jersey, she also designated this residuary property for sale to pay the legacies. There is some force in this argument. It is a circumstance tending to disclose her motive.

The case, however, may be decided without determining this question.

The residuary legatees, however, citing Johnson v. Poulson, supra, contend that, under the doctrine expresdone unius est ex-cludo alterivs, a mere direction to resort to the Spuyten Duyvil property to pay the deficiency, without further expression in the event of the proceeds of the Spuyten Duyvil property being insufficient, is a circumstance unfavorable to the charge, and must, under such circumstances, operate as an expression of her intent that, the remaining deficiency should not be paid out of the residue, but the legacies should abate ratably.

In this situation of affairs the court must sense up the will in its entirety and give effect to the intention of the testatrix, with the aid of extrinsic evidence as to the condition of the estate and the objects of her bounty.

It is quite plain that the testatrix intended that the legacies in the twelfth paragraph should be paid. After giving a number of specific legacies and a devise of the house and lot where she resided, in the twelfth paragraph she gave legacies aggregating $48,000. To Joseph G. Shannon, who is her nephew and executor, she gave specific legacies; to the son of Joseph she gave her father’s gold watch; and to the wife of Joseph sire also gave specific legacies; and she devised her residence to her cousin Mary F. Ryan. By this twelfth paragraph, in which passes all of the general legacies, she gives to Joseph $5,000; she gives for the education of Joseph’s son $5,000; she gives to the Sisters of Charity of St. Elizabeth, where she was educated, $10,000 to found two scholarships, one of which was to be known as “The Rita Scholarship,” as she puts it, “in loving memory of mry daughter, Rita Bosdevez Burke;” she also gives to Roberta Shannon, a daughter of John Hall Shannon (one of her residuary legatees), $5,000; and to her faithful servant, Margaret MeAneny, she gives $2,500. She also gives $1,000 to erect two chapels in memory of her parents, and $1,000 for the perpetual care ,of the family cemetery plot.

Apparently, her nearest kin were related as nephews and cousins.

Thus, it appears that, in this paragraph 12 she was bountiful to Joseph Shannon, one residuary devisee and legatee, and his family; and John Hall Shannon, while receiving nothing, his daughter was given $5,000; and the last residuary legatee, her nephew Robert Shannon, is nowhere mentioned in the will, excepting in the residuary clause.

The will was drawn on November 11th, 1916, and testatrix died November 28th of the same year, without, any change happening in her estate between the two dates. Her personal estate was inventoried at $30,827.37; the debts amounted to $1,000, leaving a net personal estate of approximately $29,827.37. The Spuyten Duyvil property was sold for about $3,500. The value of the New Jersey real estate, excluding that specifically devised, is approximately $1-1,750, leaving the total value of real and personal property, excluding the specific devises and bequests, about $18,000. The legacies amount to $18,000.

It must be assumed that the testatrix knew what property she was possessed of at the time she made her will, and would hardly give legacies amounting to $18,000 with but $30,000 of personalty and the Spuyten Duyvil property, of the value of $3,-500, to pay the same, with knowledge that she had some debts, and that there would be the expense of settling up her estate.

But it is argued that she conceived the Spuyten Duyvil property to be of great value. The property did have a speculative value, and she had endeavored to sell it. It consisted of land under water, unattached to the upland; and it is conceivable that, if taken for the purpose testified to, it might bring sufficient to make up the deficiency of personalty. But there is no evidence as to what the value of this property was, even for the use for which it was adapted and was likely to be taken.

The question, therefore, presents itself, Did the testatrix mean that this residue, consisting of real estate alone, should, in all events, pass to the residuary legatees? She knew what this real estate consisted of; and I am rather inclined to the view that, if she meant in any event to give the same to these,three legatees, she would have done so by specific devises, and then have put in a general residuary clause; and when it is considered that she made large provision for Joseph and his family, and the same'for Roberta, daughter of John, it would seem that she did not intend that their legacies should be cut down to enable Joseph and John to take in the residuary clause at the expense of such general legacies.

Another feature to be considered is, Did she intend that her will as to the Rita Scholarship* in memory of her daughter, the memorial chapels for her parents and the care of the family plot should fail for the benefit of the residuary legatees?

The whole spirit and tenor of this will, prior to* the thirteenth clause, seem to indicate clearly that the testatrix gave to everyone whom she regarded as an object of her bounty, and for every purpose that she desired to have fulfilled.

The specific bequests are ten in number. The general legacies number twenty-five. They run to relatives of the blood, a servant, and other persons strangers* to the blood, and for various purposes. It seems almost inconceivable that, in this wide distribution of her bounty, she should not mention her nephews John and Robert personally and yet intended that they should take in the residuary clause to the detriment of the general legatees. The whole will itself breathes an intimation that she intended that these legacies should be paid in full, even to the extent of taking the whole residue for the purpose. Carter v. Gray, 58 N. J. Eq. 411; 43 Atl. Rep. 711.

There is another feature of the will which tends to negative the inference arising from the thirteenth paragraph and leads strongly in the direction that she meant to have these legacies paid out of the residue, if 'necessary. By the first clause of her will she directs her executor to pay all her just debts and funeral expenses, and then proceeds:

“I authorize and empower’ my said executor to sell any and all of my real estate, save my home in Jersey City, on Fleet street, where I reside, which is hereinafter disposed of, at public or private sale, and upon such terms as, in his judgment, may be advisable.”

This power of sale, according to' the tenor of the will, could only apply to the residue, and this residue consisted of the Spuyten Duyvil property (or the balance of the proceeds of the sale thereof after paying the legacies) as well as the other real estate, undescribed, which passed by the residuary clause.

A thought which occurs is, Why did the testatrix give a power of sale, if she intended to limit the payment of legacies, after exhausting the personalty, to the Spuyten Duyvil property? The power of sale in the first paragraph could only affect what passed by the residuary clause. All of the residuary legatees were of full age. It was not for the purpose of paying her debts; she had ample for that. And unless this power of sale were given to enable the executor to sell this residue, if necessary to pay the legacies, then it was meaningless. Ely v. Megie, 219 N. Y. 112; 113 N. E. Rep. 800.

Taking the will in its entirety my conclusion is, that the general legacies in the twelfth paragraph are a charge upon the property contained in the residuary clause.

There was offered in evidence a letter of the scrivener who drew the will, with the same force and effect as if he had been called and testified. It was objected to, however, on the ground that evidence of what the testatrix told him to do, and what he omitted to tell her, was inadmissible. This letter was sent to me after the case was closed. The objection of counsel for the general legacies is sustained. Farnum v. Penna. Co. for Ins., &c., 87 N. J. Eq. 108 (114); Ibid. 652; 101 Atl. Rep. 1053.

A decree will be advised charging the general legacies in the twelfth paragraph upon the property mentioned in.the residuary clause.


author: Lane, Y, C. (orally).

text:
    Elihu B. Frost, as trustee, &c., v. Henry R. Carse et al.
    [Decided May 13th, 1919.]
    On a bill to remove a trustee of a voting trust, who was also the president of the company, on the ground that he extravagantly employed an agent to endeavor to obtain certain contracts, and paid him $40,000; that he participated with others in a distribution of the profits of the company in the form of bonuses, aggregating $400.000; that he violated the spirit of the voting trust agreement, in that he interfered with the technical force at the company’s plant, and that he insisted upon the resignation of one of the directors of the company, contrary to the spir't of the voting trust agreement — Meld, that while the charges, so far as they are proved, do not justify the granting of the relief prayed for, yet the situation of the voting trustees demands the appointment of one not interested in the company to fill a vacancy in such voting trustees, and that this court will make such appointment.
    On bill, &C.

      Messrs. McCarter & English and Mr. Maurice Deiches, for the complainant.

      Messrs. Pitney, Hardin & Skinner and Mr. William M. J. Stroch (of the .New York bar), for the defendants Henry R. Carse, Henry R. Sutphen and Thomas C. Dawson.

      Messrs. Stein, Stein & Hawnoch, for the defendant Submarine Boat Corporation.
   Lane, Y, C. (orally).

The bill is filed by Elihu B. Frost as trustee under an agreement made April 1st, 1915, between Henry R. Carse, Lawrence Y. Spear, Henry R. Sutphen, Stacy C. Richmond and Thomas C. Dawson, as trustees, as parties of one part, and such of the stockholders of the Electric Boat Company as should come in under the trust, as parties of the other part, under the conditions of which, for five years, the right to elect directors of the Electric Boat Company was to be exercised by the trustees. The case is fresh in the minds of all, and I am not going to relate the testimony in any considerable detail. I am going to express as briefly as I can the conclusion to which I have arrived and the reasons underlying it. The charge made by Frost is, that Carse, a co-trustee, and the president of the Electric Boat Company and the Submarine Boat Corporation, hereafter mentioned, since October 1st, 1915, has so conducted himself as trustee as that this court should remove him. The Electric Boat Company was incorporated in 1899 for the purpose of developing the submarine. The Holland Boat Company had preceded it and the Electric Boat Company took over the Holland business. I think the Electric Boat Company was incorporated at or about the time when Eice came into the proposition, induced to do so by reason of a debt due from the enterprise to him. From 1899 to 1914 the enterprise had very hard sledding. It was supported almost altogether by Eice and Frost; the keeping of the enterprise alive is due to no one living now more than to Frost, the complainant. Spear had come into the enterprise, about the time of the incorporation of the Electric Boat Company, as an engineer; he was a naval constructor and was converted by Frost to the idea of the submarine. He gave up his position in the navy and associated himself with the enterprise. The technical force had been established in New London. About the outbreak of the war the company was operating, as I have before indicated, with very uncertain chances of anything ever coming of it. Carse was the vice-president of the Hanover National Bank and came in contact with those who were behind the Electric Boat Company through its banking operations. Money to support the enterprise was borrowed by the company, or by Eice and Frost, from the bank from time to time, in large sums. There is no doubt but that both Eice and Frost sought the advice of Carse and that he gave them advice to the best of his ability. He was a director of the concern on two different occasions, I think, resigning, however, in February, 1913, so far as the testimony shows, because he thought at that time that there was very little hope. The war broke out, and as a result the company became a financial success. Rice, who had been its president, was ill and finally was compelled, in the year 1915, during a time that contracts were being performed by the company for various governments, to resign, and the company cast about for a successor. Carse had been called in as confidential adviser on or about October 1st, 1914, and continued to act in that capacity up until the time he assumed the presidency, October 1st, 1915. There is no doubt but that all concerned, including Erost, thought it would be most advantageous to the company to get Carse in as the chief executive officer. The letter of Erost to Carse, in which he invites Carse to become president, indicates quite clearly what was in Erost’s mind at the time. In 1915, it was conceived by those who were behind the company that, in order that it' might remain staple, its stock should be trusteed in such a manner as that the voting power should be in a few hands, and those hands the management. The result was that this voting trust agreement was entered into by the stockholders of the Electric Boat, in April, 1915, the avowed purpose being to prevent the voting power being acquired b3r interests which might be antagonistic to the corporate management and which might be antagonistic to the government, toi retain the management as it was for at least a period, of five years. In furtherance of the same scheme contracts were entered into by the various executive officers and the members of the technical force under which they agreed to serve the company for a period of five years, among whom, when he assumed the office of president, was Carse. Now, there is no evidence in this case whatever that Carse injected himself into this enterprise; no evidence whatever that he sought the office of president; the evidence is all to the contrary; all parties agree that, peculiar as the fact may be, the office sought him. He hesitated a considerable length of time before he agreed to accept it. He had an assured position, a life position, in the bank, at a salary of some $22,000 a year, and, undoubtedly, it was somewhat of a wrench for him to take an executive position of this kind in a concern of this nature, an entirely different kind of work from anything he had previously performed. I have no doubt whatever but that he, and all who were associated with him, acted in perfect good faith.

About the same time that the Electric Boat stock was trusteed, a corporation known as Submarine Boat was formed for the purpose of holding the certificates of trust of Electric Boat, the object being to reduce the par value of these certificates for trading purposes. The stock of Submarine Boat was trusteed in the same manner as that of Electric Boat. The' management of Electric Boat and Submarine Boat are the same. The details I have set forth in my conclusions on motion to strike out the bill and 'on motion of Submarine Boat for leave to file a counterclaim.

The charges made by Frost against Carse, which are of any importance, I think may be reduced to four. First, that during the month of December, 1915, Carse employed Malcolm Ross McAdoo, a. brother of William G. McAdoo, under an agreement by which certain moneys were to be paid by Carse to McAdoo, a portion to be used by McAdoo for the purpose of bribery, for that is what it amounts to, and that in order to cover up this transaction, he obtained from the corporation, in December, 1915, ostensibly, as a bonus, the sum of $'<'5,000; that $40,000 of this bonus represented money which he had been obliged to pay McAdoo. I here repeat what I said before the argument:' “I might say, here, that there has not been in this case a scintilla of evidence or anything shown from which any inference can be derived, that whatever the relations were between Mr. Carse and Mr. Malcolm McAdoo, that William G. McAdoo had any knowledge or information about it. There is nothing in the case which indicated or from which an inference of that kind might be drawn.” Whatever the fact may be^ and I am not going to determine the fact to-night, Frost had complete knowledge of the transaction at or about the time of its happening, and, although, according to his testimony, he protested, nevertheless, afterwards, Malcolm Ross McAdoo was retained, with the acquiescence of Frost, as a representative of this corporation. Carse denies absolutely that he ever told either Frost or Johnson, who was the counsel of the company (Johnson, corroborating Frost), that he had given McAdoo any amount, of money to pay to anybody else. His story of the transaction is that MeAdoo, whom he had known some years before, came into his office, in the fall of 1915, and represented to him that he had a contract for the disposition of certain war material and wanted Carse’s help. This deal of McAdoo’s came to naught. Carse then realizing Mc-Adoo’s ability, thought he might be a good person to investigate for him in Washington, in order to find out, as he puts it, the cause of antipathy of officials in Washington toward the company, and Carse says that when he took this up1 with MeAdoo, MeAdoo stated that it was necessary for him to have certain moneys in order to rehabilitate himself before he could properly represent the company, and that he, Carse, first gave him $100 to go to Washington in order that he might ascertain whether his brother had any objections to his representation of the company in Washington; that Ross MeAdoo reported that he,had seen his brother and that his brother had seen other officials of the government, and that they all agreed that there was no impropriety in Ross’ acting. Carse states that he gave MeAdoo $40,000, $15,000 on December 2d, 1914; $15,000 on January 14th, 1915, and $10,000 on January 20th, and that he took notes for these advances and copies are produced: Carse made no.' effort, so far as the testimony has disclosed, to ascertain whether in fact MeAdoo used the money to rehabilitate himself. The money was all advanced by Carse to MeAdoo in cash, so there is no written evidence of the transaction, although some such transaction, unquestionably, took place; no reports from MeAdoo are produced here, although the testimony is that such reports were made. Whether this history of Carse’s transactions with MeAdoo is correct or not, I am not now going to determine - — it is not necessary to determine it. Erost and Johnson both swear positively that Carse told them that he had paid this $40,-000 to MeAdoo for the account of the company, and that that was the reason why he insisted that he should get a bonus of such a large amount as $75,000. Of the $75,000 actually paid him Carse says that he gave Erost $15,000 in cash. Counsel for Carse argued that Erost and Johnson cannot be telling the truth, because it clearly appears that the amount of the bonus was not only actually fixed, but that the moneys were actually paid some time before the two advances to Mr. .McAdoo — one for $15,000 and the other for $10,000 — were made, and that is the fact. I might say in passing that, so far as I now recollect, the story with respect to this transaction is the only story that has been told during the entire case, upon which there is any substantial conflict of testimony; if there is any apparent conflict, in any of the others, the conflict can readily be attributed to matters of recollection or whatnot; in this particular instance there is a clear-cut issue of fact. However this may be, it seems to me that, assuming the story told by Erost and Johnson to be the true one, the fact that Carse acted in the manner in which they say he did is not sufficient cause at this time for removing him, nor do I think it sufficient in connection with the other charges made against him to warrant his removal. What a man did in 1915 I do not think can be urged now in 1919 as a ground for his removal as a trustee where his act had no connection whatever with the exercise of his duty as trustee, nor do I think that even if he had performed the acts, which it is charged that he did, it indicates such a state or condition of mind as that he should not be trusted to exercise the duty imposed upon him by this trust agreement.

The second charge is, that he participated in the distribution of a bonus at the end of December, 1915. It is a fact that some $400,000 of the profits of the company were distributed to the executive officers, by the vote of the directors, and that Carse was a member of the committee which advised the distribution of the bonus and which fixed the amounts. That distribution may have been illegal. I am not obliged to pass upon it at this time. If it were illegal, at least, the parties acted upon the advice of counsel. The directors authorized the distribution unless counsel advised otherwise, and counsel did no’t advise otherwise. It was a natural desire on the part of those who had stood behind this enterprise in its lean years to make some profit when the enterprise became successful. If Spear, Erost, or most of the others who participated in this bonus, had thrown up their hands three, two, or even one year before the war, there would have been nothing whatever for stockholders, or, practically, nothing. -Because of their faith in the enterprise and the work that they did the result was a great benefit to stockholders, an enormous profit for 1915, and they had a legitimate, at least, a reasonable — I am not saying whether it was legal or illegal — from a human standpoint, they had a legitimate desire to share in this extraordinary profit. Erost got out of the bonus either $125,000 or $140,000; Spear, who stood by the enterprise from 1899, $70,-000; Sutphen, $60,000; Dawson, I think, $60,000, and Johnson, who had acted as counsel for the company for years, $10,-000, and then upon hi.s protest an additional $10,000. The check to Carse was $75,000. Carse had only been connected with the company as an executive since October 1st, 1915, a period of some three months; he had, however, been associated with it in an advisory capacity from October 1st, 1914, and he had, undoubtedly, during the years in which he was a director preceding 1913, stood loyally bjr the company as a banker and helped it over some undoubtedly rough places. Now, whether he was entitled to the $75,000 or not is a matter which may admit of controversy, but the time that the controversy should have taken place was December, 1915. According to the testimony of Frost and Johnson, it did take place, and all concerned agreed that Carse’s $75,000 was not, under the circumstances as they existed at the time, exorbitant. Whether it was or whether it wasn’t is a matter I am not now called upon to determine. Of course, if Carse had used his position as president of the company to get a bonus which could not be justified upon any possible theory, a different situation would be at once created. No such thing as that took place. These men at that time were men who were fully aware of their own rights; none of them were infants, and whatever dispute arose was adjusted to the mutual satisfaction of all concerned. The mere fact that Carse may have gotten more out of the company than he was entitled to, if he did, is not sufficient to require his removal as voting trustee. ■

The third charge is, that he violated the spirit of the voting trust agreement, in that he interfered with the technical force in New London, to such an extent as that after he had been in office for a year and a. half the force was almost at the point of disruption. There is no doubt whatever but that interference of Carse with the technical force in New London created dissension. Spear and Cable had been supreme under the old management within their own restricted sphere. The New London plant was their baby, and they considered that any interference with New London was unwarranted and not to be tolerated. Spear said they would all resign in a body if there was any attempt made to interfere with New London. Carse, prior to his assuming the presidency of this corporation, had been vice-president, of a bank; he had been in this bank from the time he was twenty; he had gotten accustomed to banking ways, to the- spirit of absolute obedience from the head down to the bottom, and, undoubtedly, when he first went into the Electric Boat Company he carried with him his banking ideas. He had, undoubtedly, to learn to live with those who were in the company at that, time; who had been there for years before him; on the other hand, they had to learn to live with him; that they might make mistakes; and I can very readily appreciate that, during the first few months, there was friction — there was bound to be friction. Carse was endeavoring to introduce economy into the company; the technical force was, replying that economy in certain cases was false economy, and that conflict had to go on until some mutual basis was reached, and I have no dorrbt but. that both sides of the controversy were hot-headed, and that Erost rendered service to the company in endeavoring to keep peace. Whatever friction there was was due to their ideas that their own judgments were right, and which was right and which was wrong I am not obliged to determine. The parties determined which was wrong themselves, because it appears now that since the middle of 1917 there has been peace and harmony in that concern, that each gave in a little, with the result that the entire, enterprise has benefited. If Carse erred in judgment that is no cause for his removal, unless his error of judgment was such that no reasonable man would commit (and I cannot find that in this case), or unless he acted for some fraudulent purpose or whatnot, and I can find no evidence whatever in this case that Carse has ever acted in any manner other than what he considered to be for the best interests of the corporation. Prior to 1917, during the time that this friction was alive, there was considerable controversy between Erost and Carse; they could not get along together with the result that matters finally reached such a stage that, prior to the general meeting of the stockholders of the corporation in 1917, Carse put to the board of directors the proposition that either he or Erost must go, with the result that at the meeting of 1917, with the vote of-Carse, Frost and Johnson were dropped from the directorate of the- company, and it is fourthly charged that Carse’s action in talcing the attitude that he did at that time, in view of the voting trust agreement, which in spirit, at least, provided for the continuance of the entire management, and his retention of himself in the management of the Electric Boat by the use of his own vote should induce the court to remove him. Carse was in rather an unfortunate position. I have no doubt but that he was fully imbued with the idea that the best interests of this corporation required that there should not be dissension, and he was perfectly willing, I think, to get out, if necessary, and he had a fixed idea that it had to be Frost or himself. It is hard to- say what he could have done under the circumstances. He was obliged either to vote himself out or vote himself in, and it is not to be expected that he should vote himself out, yet that is what he would have had to do if he had not voted himself in, and it is because of the fact that the voting trustees in this particular instance are officers of the company, interested themselves in the result of the vote, that such a thing is necessary. I cannot say that Carse voted himself in merely because of a desire to stay in. I think he voted himself in because he considered that the best interests of this corporation required that he should stay in, and there is absolutely no evidence before me to show that the best interests of the corporation did not require that the management which is now in control should not have been continued. Upon the whole it seems to me to be quite clear that there has not been shown sufficient to warrant this court in interfering at this time and'removing Carse. I think, however, that the testimony demonstrates that there ought to be on this board pf trustees someone who has no interest in any manner in the management, and that a successor trustee to take the place of Richmond should be appointed by the court. As I have before indicated, it is impossible for the voting trustees to continue the management without voting in some way or another in their own interest. None of them, I think, are free from that criticism. Richmond is dead. There is a vacancy. The voting trust provides that á majority of the surviving trustees may elect his successor, but, because of the situation which has developed, it seems to me that the voting trustees ought not to exercise the power under that article of the agreement, but that the court should appoint an independent trustee.

Now, this comes at the end of a long day, and while, perhaps, I have not expressed myself as. clearly as I should have, I think that counsel have generally what my ideas axe.

(After colloquy between court and counsel all parties agreeing to the appointment by the court to a successor of Mr. Richmond, Mr. Edward D. Duffield was appointed as trustee.)


author: Gummere, Chief-Justice.

text:
    Auguste LaCombe, respondent, v. Hilda H. Headley et ux., appellants.
    [Decided November 17th, 1919.]
    It is the duty of an intending purchaser of land which is in the possession of a person other than the proposed grantor to inquire of the occupant and ascertain the rights under which he holds, and if he does not make such inquiry, he is chargeable with notice of such facts as the inquiry would have revealed.
    On appeal from a decree in chancery advised by Vice-Chancellor Lane, whose opinion is reported in 89 N. J. Eq. 364.

      Mr. I-Iarold W. Headley; for the appellant.

      Mr. W. Eugene Turton, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

This was a bill to quiet title. In February, 1909, the complainant purchased two lots of land located in the town of Irvington, adjacent to one another and abutting upon property already owned by him, at a sale made by the town authorities under the Tax Adjustment act of 1898. Comp. Stat. p. 5251. These lots at the time of the tax sale were owned by the heirs-at-law of one Alfred Tichenor. The sale purported to convey the fee, and a deed for the premises was executed in due course by the tax collector of the town and delivered to the complainant. This was not recorded.

In May, 1914, one William F. Headley purchased from the heirs of Alfred Tichenor all their right, title and interest in and to the lands in question. This deed was duly recorded. In October of the same year Headley and bis wife conveyed the premises to Hilda H. Headley, the defendant, and that deed was also recorded.

Hilda Headley claims to be a bona fide purchaser for value without notice of any right of the complainant in the premises, and asserts that the deed from the tax collector to the complainant is void as against her under the provisions of section 54 of the act concerning conveyances. Comp. Stat. p. 1553. That section provides that every deed shall, until duly recorded, or lodged for record in the clerk’s office, be void and of no effect against subsequent judgment «creditors without notice, and against subsequent bona fide purchasers and mortgagees for valuable consideration, not having notice thereof, whose deed or mortgage shall have been first duly recorded.

In the argument of the cause before the court of chancery the principal question mooted was whether a tax collector’s deed given to a purchaser at a tax sale under the Tax Adjustment act of 1898 was invalid as against a bona fide purchaser from the prior owner who had no notice of the tax sale, or of the deed made pursuant thereto, and whose deed is first recorded; the contention on the part of complainant’s counsel being that a tax deed was not within the purview of section 54 of the act concerning conveyances. The learned vice-chancellor, before whom the cause was heard, reached the conclusion that a tax deed did not come within the scope of the statute, and that although not recorded, it was valid and effectual as against subsequent judgment creditors, purchasers and mortgagees of the original owners, whether they had notice of its existence or not. The result of this conclusion led the vice-chancellor to advise a decree declaring the title of the complainant in and to the lands and premises involved in the litigation to be good, valid and effectual, and that the defendant had no estate, right, title or interest therein.

We do not find it necessary to determine the very interesting question whether or not an unrecorded tax deed is void and of no effect against a subsequent bom fide purchaser for valuable' consideration not having notice thereof, whose deed has been first duly recorded. And for this reason: The proof is convincing that shortly after the tax sale, in 1909, the complainant entered into possession of the two lots involved in this litigation, enclosed them with a fence, and used them in his contracting business, storing ashes, stones and other debris on the land, and keeping there his wagons used by him in his business. These wagons, all of them, had his name thereon. This use and occupation of the premises by the complainant continued without interruption from the year 1909 until the institution of this suit; it was open and notorious, obvious to every one visiting the premises.

The statute makes an unrecorded deed void only as against judgment creditors, bona fide purchasers and mortgagees' who have no notice thereof, and it is entirely settled, both in this state and elsewhere, that possession of land, if open, notorious and unequivocal, constitutes notice of the right, or claim of right, under which the party in possession occupies it; and this notice is effective, not only as to those who have actual knowledge of the occupation, but as to all the world. It is the duty of an intending purchaser of land which is in the possession of a person other than the intending grantor to inquire of the occupant and ascertain the rights under which he holds; and if he does not make such inquiry, he is chargeable with notice of such facts as the inquiry, if it had been in fact niade, would have revealed. Havens v. Bliss, 26 N. J. Eq. 363; Johns v. Norris, 27 N. J. Eq. 485; Hodge v. Amerman, 40 N. J. Eq. 99; Y/ood v. Price, '79 N. J. Eq. 624- In the present case, the fact that this land was in the possession of someone was, as we have already said, obvious. An examination of the wagons stored there would have disclosed the occupant. So, too, would inquiry made in the neighborhood; for the testimony indicates that it was generally known that Mr. LaOombe was using this land in his contracting business. Under the rule stated the defendant for her own protection was required to ascertain the rights under which LaCombe held; she made no effort to do so, and having failed in this regard she is chargeable with notice of what she'would have learned had she performed this duty, namely, that LaCombe was in possession of this land under a tax deed made by the tax collector of the town of Irvington in 1909. In this situation she is not within the protection of the statute — that is, she is not a bona fide purchaser without notice of the existence of the LaCombe deed. For this, reason the decree under review should be affirmed.

For affirmance — The Chief-Justice, Swayze, Trenohard, Parker,, Bergen, Minturn, Kalisoh, Black, White, HepPENHEIMER, WILLIAMS, TAYLOR, GARDNER, AcKERSON-14.

For reversal — None.


text:
    Alfred J. Keppelmann et al., trustees, complainants, v. Erich P. Keppelmann et al., respondents.
    [Decided November 17th, 1919.]
    1. Under the Trading with the Enemy act (U. S. Comp. Stat. 1918 § 3115½d) property held by a trustee under a will for the benefit of an alien enemy is subject to seizure by the alien property custodian.
    2. The right of the alien property custodian is not affected by the fact that before the war the alien enemy beneficiaries had executed powers of attorney to certain bankers, authorizing them to receive and receipt for such sums as might be distributed to them by the trustees.
    S. Trustees holding under a will trust funds for alien enemy beneficiaries are not entitled as a condition precedent to delivering such funds to the alien property custodian to receive a refunding bond as required by the New'Jersey Legacy act.
    Appeal of A. Mitchell Palmer, alien property custodian.
    On appeal from the court of chancery advised by Vice-Chancellor Lane, whose opinion is reported in 89 N. J. Eq. 390.

      Mr. Charles L. Garrick, Mr.' Mansfield Ferry (of the New York bar) and Mr. LaRue Brown, assistant attorney-general of the United States, for the appellants.

      Messrs. Eckuard M. & Runyon Golie, for the respondents Keppelmann trustees.

      Mr..Martin V. Bergen and Mr. Ruby R. Vale (of the Pennsylvania bar), for the respondents Schulz & Euckgaber.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The bill in this case was filed by the complainants as trustees under the will of the late Adolphus Keppelmann for the purpose of obtaining instructions from the court with relation to the execution by them of certain of the trusts imposed upon them b3r the will. The situation which the case discloses, so far as the disposition of the matters in controversy makes their recital necessary, is as follows: Adolphus Keppelmann, at the time of his death, was a resident of South Orange, in this state. He died in 1913. By Iris will he created certain trusts for the benefit respectively of three of his daughters, Bertha VonBorowsky, Pauline Adolphine Losch and Louise Pauline Schulz. Two of these daughters were residents of Germany, and the third lived in Austria. Some months after the death of their father each of these daughters executed a power of attorney to Schulz & Rucbgaber, bankers of New York City, authorizing them to receive and receipt for in the name of the principal such securities and sums of money as might be distributed to the principal from time to time by the trustees of their father’s will, and to deliver for the principal refunding bonds duly executed by the principal for such securities and such sums of money distributed to the principal under the last will and testament of Adolphus Keppelmann, and to collect for the principal all income upon such securities, and to do all other things on behalf of the principal in relation to such securities, or the receipt of such moneys; with full power and authority to do and perforin all other acts and things whatsoever requisite and necessary to be done in and ■about the premises as fully to all intents and purposes as the principal might or could do if personally present. Before the trusts created for the benefit of these three daughters had been executed war was declared by this country against Germany, and afterwards against Austria, and the alien property custodian, Mr. Palmer (appointed by the President, pursuant to authority conferred upon him for that purpose by the federal statute of October 6th, 1917, and commonly known as the “Trading with the Enemy act”), having concluded, after an investigation, that the three beneficiaries were alien enemies within the meaning of the federal statute, did, in pursuance of the provisions of that act, make demand upon Messrs. Keppelmann and Colie, trustees, for the payment to him of the shares of these alien enemies. Schulz & Ruckgaber, the attorneys in fact of the three daughters, protested to the trustees against their complying with Mr. Palmer’s demand, insisting that these shares were payable to them by force of the powers of attorney which, they held. The complainants have executed the trusts created by the will, except the turning over of the trust estates to the parties legally entitled to receive them; but being in doubt whether they should comply with the demand of Mr. Palmer, or recognize the claim of Messrs. Schulz & Euckgaber, they have filed this. bill.

The first question- argued before us is whether property held by a trustee under a will for the benefit of an alien enemy comes within the purview of the “Trading with the Enemy act;” the argument made on behalf of Messrs. Schulz & Euckgaber being that it is only property the legal title to- which is in the alien enemy that is subject to seizure by the alien property custodian. But this contention, as it seems to us> is in the face of the very language of the statute. The provision of section 7 (c) of the act is as follows:

“If the President shall, so require any money or other property owing or belonging to, or held for or on account of, or on behalf of, or for the benefit of an enemy, or ally of an enemy, * * * shall be conveyed, transferred, assigned, delivered or paid over to the alien property custodian

and the order necessary for the carrying into effect of this enactment was duly made by the President. The manifest jipóse of congress was that the statute should operate not only upon propertj’, the legal title to which is in the alien, hut on all property held for him, or for his benefit, whether the legal title be in him or in the person who holds it for his benefit. In the present case, th'e property is held in trust by the complainants- solely'for the benefit of these three daughters of the testator, and comes within the very words of the statute, for, although they are not the holders of the legal title to the trust estate, they are- the equitable owners thereof, the whole beneficial interest being lodged in them.

Reaching the conclusion that these trust estates are within the purview of the federal statute, we are called upon to consider the soundness of the claim made on behalf of Messrs. Schulz & Ruckgaber, that, even if it be held that as against the alien enemies themselves, Mr. Palmer, as alien property custodian, is entitled to the present possession and control of these trust estates, still he is not entitled to such possession as against them, the reason being that as tire letters of attorney were made before the declaration of war, they consequently remain in full force and effect, notwithstanding such declaration. Except for the fact that the point has been strenuously insisted upon by counsel for this firm of bankers, and the further fact that their contention was sustained to some extent by the court below, we should not refer to it, for it seems to us manifestly to be without substance. These gentlemen have no personal interest in the subject-matter of this litigation; they are merely the understudies of these three alien enemies. What the principals could do the attorneys in fact may do. What the principals are entitled to receive their attorneys-in-fact, as their represenatives, are entitled to receive. But it seems too plain for argument that the rights of the attorney cannot be superior to' those of the principal. The stream cannot rise higher than its source. If the principals are entitled to receive these funds from the trustees, the attorneys are, because they stand in the place of the principals; if the principals are not entitled to receive these funds, their attorneys are not, for they are mere representatives of the principals, only entitled to receive for them what they personally would receive except for the fact that they had created attorneys to represent them. If the principals are barred by the 'federal statute from the present receipt of the moneys held for their benefit by the complaining trustees, their attorneys in fact are equally barred. If the alien property custodian is entitled as against these alien enemies to the present possession and custody of these trust estates, that right is equally complete against any person who stands in their siróes.

The only other question discussed at the argument is whether the complainants are under a legal obligation to deliver over these shares in the testator’s estate to the alien property custodian, unless and until he has executed and delivered to them a proper refunding bond in accordance with the requirements of our statute concerning legacies. Comp. Stat. p. 3089 § 5.

We have no doubt as to the duty of the complainants. War having been declared, everything necessary to be done for the preservation of the nation, and to make the war effective, was within the power of congress. That body deemed it necessary, among other things, to take possession of all property of alien enemies located in this country, and so' prevent its use by the enemy for purposes inimical to our own safety. This, and all other war measures enacted by congress, necessarily overridp state statutes in conflict therewith.

So, too, every state law that imposes limitations upon the scope of the federal legislation must give way to it, provided that such an intent is to be gathered from the enactment. In the present case, such intent is apparent, for congress has declared, in section 7 (c) of the “Trading with the Enemy act,”, that any payment, conveyance, transfer, assignment or delivery of money or property to the alien property custodian hereunder shall be a full acquittance and discharge for all purposes of the obligation of the person making the same to the extent of the same.

We hold, therefore, that it is the duty of these complainants to deliver up to the alien property custodian the property which they hold for the benefit of these three alien enemies; and that they are not entitled, as against him, to receive as a condition precedent to such delivery a refunding bond such as is required by our Legacy act.

The decree under review will be reversed.

For affirmance — None.

For■ reversal — The Chief-Justice, Swayze, Trenchard, Bergen, Minturn, Kalisch, Black, White, Heppeni-ieimer, Williams, Taylor, Gardner, Ackerson — 13.


text:
    In the matter of the transfer inheritance tax assessed by the state comptroller on the estate of Ferdinand W. Roebling, deceased.
    [Decided November 18th, 1919.]
    1. The act of April 20th, 1909 (P. L. 1909 p. 325), provides for the imposition of a tax upon the transfer of the estates of decedents, and does not merely regulate the procedure to be followed in the settlement of such estates.
    2. The legislature cannot, by the exercise of its power to create statutory agencies as tribunals to review the action of taxing authorities, destroy the right of review resting in the supreme court in matters of taxation by designating as such agency a court of superior jurisdiction whose judgments or decrees rendered in the performance of its ordinary judicial functions are reviewable only by appeal to the eourt of errors and appeals.
    3. An appeal to the court of errors and appeals will not lie from a decree of the ordinary setting aside pro tanto an assessment of a transfer tax, such decree being reviewable only in the supreme court by certiorari.

    On appeal from a decree of the ordinary. On motion to dismiss appeal.

      Mr. John B. Hardin, for the appellants.

      Mr. Scott Scammell, Mr. Charles Besore• and Herbert Noble (of the New York bar), for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The appeal in this case was taken from a decree of the ordinary setting aside, pro tanto, the assessment of a transfer tax laid by the comptroller of the state treasury upon the estate of Ferdinand W. Roebling. deceased, who, at the time of his death, in March, 1917, was a resident of the state.

Our act to tax the transfer of property of resident and nonresident decedents (P. L. 1909 p. 325), after enacting in section 1 that a tax should be imposed upon the transfer of any property, real or personal, of resident and non-resident decedents in certain cases, provides in section 18 that the comptroller of the treasury shall assess and fix the cash value of the property of persons whose estates shall be liable to the payment of the tax, and levy the tax to which the same is liable.

The section then provides that any person or corporation dissatisfied with the appraisement or assessment may appeal to the ordinary of this state, and the twentieth section vests the ordinary with jurisdiction to hear and determine all questions in relation to any tax so levied.

In the present case, the comptroller of the treasury having assessed and levied a transfer tax upon the Roebling estate, the parties interested therein appealed to the ordinary, who, as has been already stated, reduced, the tax so assessed and levied. The state comptroller thereupon took this appeal from the decree of the ordinary, and the question to be determined is whether an appeal will lie directly to this' court.

That the legislative purpose exhibited by the statute is to provide the imposition of a tax upon the transfer of the estates of decedents, and not merely to regulate the procedure to be followed in the settlement of such estates, a matter cognizable by the ordinary, irrespective of the statute (as was suggested by counsel at the argument), we have no doubt. Mr. Cooley, in his work on Taxation, accurately defines taxes as the enforced proportional contribution of persons and property, levied by the authority of the state, for the support of government, and for all public needs. The present impost comes within the definition. It is an enforced contribution; it is levied for the use of the state; and it imposes a common burden upon all of the class of persons embraced in the statutory scheme," i. e., all transferees of the estates of decedents. But a discussion of this point seems hardly necessary. The constitution of the state requires the legislature to express, in the title of every statute, the object of the enactment, and the object expressed in the present statute is “to tax the transfer of property of resident and non-resident decedents.”

In the case of Dufford v. Decue, 31 N. J. Law 302, the supreme court, in an opinion by Chief-Justice Beasley, after pointing out that the power to review the action of statutory agencies, created for the purpose of assessing and levying taxes, was vested in the supreme court by the constitution, held that the court could not be deprived of that power by legislative enactment, or compelled to share it with any other tribunal. In the later case of Flanagan v. Plainfield, 44 N. J. Law 118, 124, it is said that, although the legislature cannot deprive the court of this power, it may create statutory agencies as tribunals to review the action of taxing authorities, for the reason that the action of these reviewing agencies majr in turn be passed upon by the supreme court under its certiorari power, and that in doing so, that tribunal necessarily considers the validity of the original assessment and levy. It is, of course, conceded that in providing such intermediate tribunal it is open to the legislature either to create an agency for the purpose or, in its wisdom, to select an existing agency, either administrative or judicial, and vest in it the power of original review. But it cannot, by the exercise of this power, destroy tire right of review resting in the supreme court in matters of taxation by designating as such agency a court of superior jurisdiction whose judgments or decrees rendered in the performance of its ordinary judicial functions are reviewable only by this court. In re Prudential Insurance Co., 82 N. J. Eq. 335.

It seems proper to add that we find nothing 'in the statute of 1909 to indicate a purpose on the part of the legislature to interfere with the power of review vested in the supreme court. The mere fact that it saw fit to designate the ordinary as the agency to pass upon the action of the state comptroller in assessing and levying the tax does not suggest such a purpose, particularly in view of the failure of the legislature to specify the method of reviewing the action of that judicial officer, and the knowledge of that body (which is to be imputed to them) that an attempt to transfer the power of review directly to this court would be in violation of one of the constitutional prerogatives of the supreme court.

On the argument of the cause counsel called our attention to four cases in each of which the order of the ordinarjr, passing on the validity of a transfer tax assessed by the state comptroller, was removed by appeal directly to this court, and that order either affirmed or reversed by us; and contended that these cases by implication determined that a party aggrieved by the order of the ordinary was entitled -to appeal directly to this court. The cases referred to are In re Vineland Historical Society, 67 N. J. Eq. 730; In re Rothchild's Estate, 72 N. J. Eq. 425; In re Jones Estate, 74 N. J. Eq. 447: Astor v. State, 75 N. J. Eq. 303. In the latter ease there was a reversal but no opinion was rendered by us.' In the Vineland Case there was an affirmance by a divided court, and, of course, no opinion was delivered. In each of the other two cases there was an affirmance on the opinion below. It seems clear to us from what has been said that the question of jurisdiction was neither mooted on the argument nor considered later by the court; for, it can hardly be conceived that a matter so vital as the power of the legislature to strip the supreme court of one of its most important functions would, have been passed over without a word indicative of the view of this court on the subject. The only explanation is, that none of the astute counsel who argupd these cases, and none of the members of the court as it was constituted at the time of the various ai’guments, perceived that the question of our jurisdiction was involved in the decisions, and that the court proceeded to the consideration of the causes without giving thought to so important a matter. In this situation we have no hesitation in declaring that our prior action provides no precedent which should be considered as controlling by us in the present case.

The case before us involving, as it does, a matter of taxation, is reviewable by certiorari only, notwithstanding the fact that the legislative agency created for the purpose of a primary review of the action of the tax assessor is a court of record whose orders and decrees ordinarily are reviewable only by an appeal to this court.

The motion to dismiss must prevail.