author: Stevens, V. C.

text:
    The Mississippi Wire Glass Company v. Continuous Glass Press Company.
    [Decided October 18th, 1911.]
    1. Where a corporation manufacturing wire glass is the successor of one which controlled process patents for such product, the words “wire glass” are merely descriptive, and such corporation cannot restrain their use by another company manufacturing a similar glass, on the ground that their use to designate the product of the complainant while it had the exclusive right of manufacture has so identified them with its product as to give them a secondai*y meaning, and to give it a property right therein, where there is no showing that after competition was established by the expiration of the patents the name was generally used to designate complainant’s product in distinction to the product of other manufacturers.
    2. A corporation manufacturing wire glass has no exclusive right to use therein wire with a particular mesh, where the idea as to the construction of the glass and the use of that form of mesh is not original with it or its predecessors, and it has no patent thereon, as to give it that right would have the effect of destroying competition in the manufacture of unpatented articles.
    3. In a suit to enjoin the doing of acts alleged to ihave been designed to mislead the public and to induce the belief that wire glass produced by defendant was that of complainant, evidence held to show no attempt by defendant to mislead the public in making and marketing a'Similarly appearing- glass.
    Hearing on pleadings and proofs.

      ilfessrs. Griggs & Harding, for the complainant.

      Mr. Richard V. Lindabury and Mr. BtougMon, for the defendant.
   Stevens, V. C.

The complainant seeks to obtain an injunction against the defendant to restrain it, first, from using the term “wire glass” in connection with its manufacture; second, from using, manufacturing or selling glass plates with wire mesh imbedded therein, identical with or like that manufactured and sold by complainant; third, from doing any act or using any artifice calculated to induce the belief that any glass plates with wire mesh imbedded therein and not marketed by complainant are complainant’s.

Wire glass is a comparatively new product. It is useful because it prevents the glass in which it is embedded from falling, if cracked, and because it is a valuable fire retardant. Its history, so far as this country is concerned, is as follows: In 1891 a Mr. Eorrest showed Frank Shuman a small sample of wire glass having a hexagonal mesh about seven-eighths of an inch in diameter that had been found in a condemned express package, and asked him whether he could get up a-machine for making this kind of material on a large scale. He made and patented a process for so doing. “Everybody,” says Mr. Shuman in his evidence, “connected with the sample, and the men working at the experimental works instinctively called it 'wire glass.’ ” A commercial article was produced which Mr. Shuman says “was practically the same in form, size and shape of mesh” as the sample. The process patents for its manufacture were taken out in 1892. In that year the wire glass company and the American Wire Glass Manufacturing Compan}'' were incorporated in Pennsylvania to manufacture the article and the Shuman patents were transferred. They have now expired. In 1894, the complainant, the Mississippi Wire Glass Company, acquired the rights of the American Wire Glass Manufacturing Company, and has ever since been engaged in the manufacture of wire glass. Prior to 1901 three other companies began to manufacture it but were soon absorbed by the complainant. In June, 1901, the defendant company was incorporated. It first manufactured a wire glass which it called “Sinusoidal,” on account of the’ peculiar waviness of the wire. The wire went from face to face of the glass and did not lie in one plane through its centre. But its manufacture in this way was, according to Mr. Cox, its president, soon abandoned, because of a change in the rules of the National Board of Underwriters; the new rules requiring “the plane of the wire mesh to be practically midway between the two surfaces of the glass.”

The glass now manufactured by defendant is very similar to that manufactured by complainant. It has, however, two distinguishing marks: the so-called ghost mark, made by 'the introduction of the wire into the melted glass, and the cable strand or double wire, inserted for the purpose of identification and appearing at intervals of nine inches. Of these, the latter is the more easily seen. Unless pointed out they would, probably, not be remarked by the ordinary observer. As distinguishing marks, they enable the expert, be he manufacturer, engineer or architect, to identify the manufacture.

First. It seems to me plain that the complainant has no. property right in the name. It is accurately descriptive of the article. It has been its name, in this country, ever since it was made either by complainant or by others; and in Germany, (draht glass) for as long as, or longer than, it has been here.

But it is said that though originally descriptive, it has acquired a secondary meaning; that it means the product of complainant. As to this I need only refer to what was said in Cellular Clothing Co. v. Maxton & Murray (1899), A. C. 326. There the effort was to persuade the house of lords that the word “cellular” as applied to woven underwear had come to be understood as meaning the manufacture of plaintiff. After referring to the case of a fancy name which is capable of exclusive appropriation, Lord Shand says: “A wholly different principle must apply in the case of goods which are sold under a merely descriptive name. If a person employing a word or term of well known signification' and in ordinary use, though he is not able to obtain a patent for his manufacture and although he has not got the protection of a registered trade mark for the goods he is proposing to sell, is yet able to acquire the right to appropriate a word or term in ordinary use in the English language to describe his goods, and to shut others out from the use of this descriptive term, he would really acquire a right much more valuable than either a patent or a trade mark; for he and his successors in business would gain the exclusive right, not for a limited time as in the case of a patent, but for all time coming, to use the word as applicable to goods which others may be desirous of manufacturing and are entitled to sell and manufacture as well |as he.” And Lord Davey says: “There are two observations which must be made: one is that a man who takes upon himself to prove that words which are merely descriptive or expressive of the quality of the goods have acquired the secondary sense to which I have referred, assumes a much greater burden—and indeed a burden which it is not impossible but at the same time extremely difficult to discharge—a much greater burden than that of a man who undertakes to prove the same thing of a word not significant and not descriptive, but which has been compendiously called a Taney’ word.

. “The other observation which occurs to me is this: that where a man produces or invents, if you please, a new article and attaches a descriptive name to it—a name which as the article has not been produced before, has of course not been used in connection with the article—and secures for himself either the legal monopoly or a monopoly in fact of the sale of that article for a certain time, the evidence of persons who come forward and say that the name in question suggests to their minds and is associated by them with the plaintiff’s goods alone, is of a very slender character, for the simple reason that the plaintiff was the only maker of the goods during the time that the. monopoly lasted and therefore there was nothing to compare with it and anj'bodj’ who wanted the goods had no .shop to go to or no merchant or manufacturer to resort to except the plaintiff.”

These observations are directly applicable to the ease in hand. The article “wire glass” was necessarily understood to be of complainant’s manufacture while it alone manufactured it. But competitors soon appeared and called their product wire glass and sold it under that name. Aside from the difficulty on the score of time, the evidence fails to convince me that it has been generally used to denote complainant’s product in contradistinction to the product of others.

Second. Complainant’s next contention is that while it has no exclusive right to manufacture wire glass, it has the right to enjoin defendant from manufacturing glass with a mesh similar to or identical with complainant’s; in other words, that defendant- cannot put into its glass a wire mesh of the same form, size and thickness of wire as complainant puts into its glass. As I hare already said, the mesh used by complainant was not original with it. It was copied from a sample found in a condemned express package. If complainant’s contention be sound, then although it has no patent and could not obtain one, it has the right for all time, • exclusively to manufacture the article in a form which had been used before and which it only copied—a much more valuable monopoly than that which any patent could have given it. It is obviously not the law that different manufacturers may not manufacture the same unpatented article in competition.

We come, then, to the last contention, viz., that defendant is using artifice to induce the public to believe that its goods are complainant’s, and that it is endeavoring to pass off its goods as such. The mere fact that defendant makes and sells a similar article and calls it wire glass, is not, of itself, evidence of such an endeavor. I fail to find any proof of what may be called “unnecessary imitation”-—-imitation designed to mislead.

The evidence shows that variations in the form and appearance of the product must be slight if a merchantable article is to be manufactured at all. The rules of the national board of fire underwriters make this very clear.

Rule b, as found in the edition of 1901, reads as follows: “No glass shall be accepted of less thickness than one-ejuarter of an inch (full), if rough plate, ribbed or figured,” &c.

Rule c. “No glass shall be accepted with mesh larger than one inch, and with such mesh, no wire of smaller size than No. 22 B. & S. wire gauge shall be used.”

In the edition of 1906, rule c was altered. The maximum size of mesh was changed from one to seven-eighths of an inch, and the size of wire to “nothing smaller than 24 B. & S. gauge,” instead of 22 B. & S. gauge. In other words, permission was given to use a -wire whose gauge was very slightly, and to the ordinary observer, imperceptibly smaller than was prescribed before.

The evidence would indicate that the hexagonal shape has, in this country at least, been found to be the best in practice. Mr. Cox says that it tends to keep its shape and that the optical effect of it is better. Be this as it may, the hexagonal shape is that of the original sample and the complainant has no exclusive property in it.

Now, as'the glass is sold largely, if not principally, as a fire retardant, it is obvious that if it is to be put upon the market, compliance.with the rules of the underwriters is of the first importance, for it means reduced insurance rates to the consumer.

According to these rules the glass must be at least one-quarter of an inch thick. No manufacturer is likely to waste material in making it thicker, if he is not obliged to. Then the mesh must be of no greater diameter than seven-eighths of an inch and no smaller than gauge 24 B. & S. If the manufacturer would compete successfully with his rival, he is not going, willingly, to use a wire thicker and harder to cut or a mesh smaller than the laboratory experiments conducted by the underwriters have shown to answer the purpose. If this be conceded, and if the hexagonal shape may be used, then the limit of variation is very small indeed. It would be hardly noticeable by the ordinary observer. In this aspect of the case it is like that of two manufacturers selling-in competition the same product, be it glass, cloth or other staple article.

The correspondence with the Wickwire Brothers, so largely relied upon, is capable of a twofold construction. These gentlemen are1 manufacturers of wire mesh and they supplied the complainant with it. They also, in the beginning, supplied defendant with it, making for the defendant a slightly thicker wire. After awhile Mr. Cox wrote for a thinner wire (No. 24 Washburn and Moen gauge), “exactly the same mesh as the Mississippi company uses.” Now, Cox may have written this with intent to imitate or with intent merely to characterize and explain. He says it was with the latter intent—that he had found that the jobbers were complaining that his glass was harder to cut and that there having-arisen between himself and the Wickwire Brothers a misunderstanding as to what was meant by the appellation 24 B. & S.. lie wanted to make his meaning perfectly clear. Now, I take it, that if he had the right to úse the wire at all, he had the right to characterize it in terms that were unmistakable. If anything was going to deceive the public, it was the wire itself, after it was put into the glass—not the description of it, intended only for its maker. If it was lawful for defendant to use that kind of mesh, I am at a loss to understand how the order so given could, in the words of the prayer for injunction, be regarded as an. artifice calculated to induce in the public the belief that defendant’s glass was of complainant’s manufacture. The case comes down to this: could defendant lawfully use hexagonal wire mesh of the gauge 24 B. & S. ? If it could, it cannot be held that it was intending a fraud when it described it as it did to the "Wickwire Brothers.

Has the defendant, then, having the legal right to make the wire glass, put it upon the market under false colors ? There is no proof that it has. It labels each sheet with its own name, in the ordinary way, and it distinguishes it further by the ghost mark and by the cable strand inserted every nine inches—a method of differentiation acceptable to and accepted by the board of underwriters. There is some evidence that jobbers have occasionally substituted defendant’s glass for complainant’s, but the proof does not show that this kind of practice has been sanctioned or encouraged by defendant.

I think the bill should be dismissed, with costs.


source: Caselaw Access Project

author: Stbvbns, Y. C.

license: Public Domain

text:
    Thomas M. French et al., receivers, v. Edward A. Armstrong et al.
    [Decided January 26th, 1912.]
    3.. Evidence, in a suit by the receiver of a building and loan association against its former president and solicitor io recover money realized by him from the sale of stock which had been pledged to the association, held to show that defendant had charged himself with the duty of making a cash collection on the stock, and had failed to collect.

      2. A party who has not pleaded the statute oí limitations cannot set it up as a defence.
    8. Equity has jurisdiction of a bill by the receiver of a building and loan association against its former president, to recover moneys realized, or that ought to have been realized from a sale of stock pledged with the association which he had made but for which he had not accounted.
    4. A person who sustained no trust relationship to a building and loan association, and was a mere outsider, and was either himself the buyer, or the agent of the buyer, in purchasing stock pledged with the association, which had been taken by its president for collection, and sold and not accounted for, is liable in an action at law for the agreed price; and hence cannot be brought into equity for that purpose.
    On pleadings and proofs.

      Messrs. French, Bergen & Bobbins, for the receivers.

      Mr. Robert H. McCarter, for tbe defendants.
   Stbvbns, Y. C.

This is a suit instituted by the receivers of the State Mutual Building and Loan Association against Edward A. Armstrong, John J. Burleigh and two companies to recover the price realized, or that ought to have been realized, from the sale of sixty-five shares of the stock of the Atlantic Electric Light and Power Company.

This stock had been deposited as collateral security by one Moore, for money borrowed from the building association. It had been transferred to its secretary and general manager,Francis R. Fithian, who on January 28th, 1897, had executed a declaration of trust in favor of the association.

It appears that in the autumn of 1898, a Mr. Maloney proposed to Messrs. Morgan and Burleigh that they should acquire the stock of three electric companies, one in' Camden and two in Atlantic City, with a view to consolidating them. For the purposes of this case it is only necessary to say that on or about November 18th, 1898, it was agreed (inter alia.) that there should be paid for the stock of the Atlantic and Electric Power Company $62.50 per share. When fifty-one per cent, of the total issue was obtained by Mr. Burleigh • from those who held it, he was to take it to Philadelphia and receive a part of a total lump sum. With this he was to pay for the stock at the price mentioned. He obtained all- but one hundred and fifty out of a total of two thousand shares; he deposited the money with a Mr. Fowler, president of the Camden Trust and Safe Deposit Company, who opened a special account and then he gave orders to the stockholders upon Fowler, who in turn drew checks in favor of those stockholders for the stock delivered.

Armstrong was one of the directors of the building association, its president and solicitor, and a member of its executive committee. He was also president of the Atlantic Electric Light and Power Company. Burleigh had no official connection with the building association, but was secretary of the electric company.

Prior to November 17th, 1898, Armstrong was himself indebted to the building association, to which he had given, among other things, as security for the money borrowed, one hundred shares of the-electric company. On that day he took from the safe, with the knowledge of Fithian, the building association’s secretary, his own stock and also- the sixty-five shares pledged for Moore’s debt that stood in Fithian’s name, and that Fithian had endorsed in blank.

On November 22d, 1898, Armstrong received from Fowler a check for $25,000 in payment of his own stock and of certain other bonds and stock belonging to him,'which entered into the Maloney sale. He did not pay over any part of the amount received until April 19th, 1899. He excuses the delay by saying that there ivas no complete settlement with him for his own securities until July 18th, 1899; when he received $1,776.67 more. He never collected any part of the price of the. sixty-five shares pledged by Moore, although the evidence shows -that he might, for the mere asking, have done so either when he received the price of his own shares or at any time until. September 21st, 1899, when the Fowler account seems to have been closed. There is no satisfactory explanation of this neglect to collect. As the evidence stands, it seems to have been a case of- forgetfulness. Armstrong suggests that he expected Fithian to obtain the money and that for that reason, after delivering the stock to Burleigh, he gave, or may have given, the matter no more attention, but it is difficult to accept this explanation as a justification for his inaction. He specially undertook the duty of collection. He wrote on the back of the declaration of trust made by Fithian, on obtaining the papers from the association’s safe, “I have this to collect cash on. E. A. á.” To give more weight to his very vague recollection of a possible conversation with Fithian, than to this, his explicit undertalcing, would be altogether inadmissible. He had the stock in his possession endorsed in blank; he was the company’s president and solicitor; he did not assume to act as an errand boy for. Fithian, as counsel contends on his behalf, but took upon himself the duty of selling the stock and collecting its price. It was plainly incumbent upon him to see that the association got an equivalent for what he himself had parted with.

The record kept by Fow-ler does not indicate any check drawn to anybody for sixty-two and a half per cent, of the par of the sixty-five shares. The records of the Atlantic Electric Light and Power Company show that on April 12th, 1899, these shares were, $mong others, transferred to the Electric Company of America, and that tire stock certificate issued to that company was signed by Armstrong as president of the Atlantic company, so that Armstrong not only gave the certificates to Burleigh, but participated in the final act that vested the title to them in the purchaser. There is no doubt, on the evidence, that this purchaser had paid the agreed price of them to Burleigh.

On May 12th, 1900, Fithian wrote Armstrong a letter in which he tells him that on April 19th, 1899, he (Armstrong) had sent a cheek of $6,500, which

“we understood was for the D. L. Moore Atlantic City electric light and power stock of that amount pledged along with $11,000 of Cape May railway stock as collateral for loans.” •

To this Armstrong replied:

“That was a payment on my own personal account. The Atlantic City-Moore stock has never yet been paid for. When it is it will come to you.’’

Underneath, under date of May 15th, Fithian made the following memorandum: “5/15. E. A. A. says the D. L. M. payment is yet to come, about $4,000 in cash for the Atlantic City electric stock.”

While this indicates that Armstrong and Fithian must have talked about the matter of the price, for no mention of it is made in Armstrong’s above response, it also indicates that Fithian was expecting it to come as the result of Armstrong’s effort to collect it. Why, when Armstrong’s attention was thus pointedly directed to the fact that he had not collected the money, he did not take some step toward getting it, is inexplicable. Whether the cheek would have been drawn to the order of Fithian as the registered holder <or otherwises, is perfectly immaterial.

While Armstrong was, no doubt, a very busy man, as president of the Atlantic company he had participated in the deal and he had had, besides, a large personal interest in the outcome. He could not at that time have forgotten what the transaction was, or, if he had, the means of obtaining accurate information of its details were at hand. It is admitted on all sides that there was no favoritism; that all the stockholders were to be, and were in fact, treated alike and that, an application for the money would have been followed by prompt payment.

The evidence is conflicting as to whether Armstrong’s attention was again directed to the matter. Beeves says he wrote to him on June 12th, 1902, and produces a copy of the letter and he testifies further that the subject was brought to his attention at committee meetings. Armstrong says that he has no recollection of having received the letter, and he denies that the matter was so brought up. The conflict in the evidence is not important, for the fact remains that Armstrong had charged himself with the duty of collection and had not discharged that duty.

It seems, therefore, perfectly clear that he could have been sued by the association itself.

It is argued, however, that the cause of action is legal, and that the statute of limitations is a bar to a recovery in the law court, and that even if suit be maintainable here, equity is bound by the statute, just as the court of law would be. To this latter contention it is only necessary to say that the statute has not been pleaded. On the contrary, Armstrong, in his answer, after stating that lie has deposited with the receivers collateral to secure the company against loss, says:

“That his object in making such deposit was to indicate his willingness ■and ability to be responsible to the complainants for said sixty-five shares or their proceeds if ultimate liability on his part should be found to exist, and he takes the same'position yet.”

The question, then, is whether this court has jurisdiction to inquire into the merits of the controversy and make a decree. It seems to me plain that it has. The cases are numerous and uniform to the point that such a suit is maintainable. Ackerman v. Halsey, 38 N. J. Eq. (11 Stew.) 501; Williams v. McKay, 40 N. J. Eq. (13 Stew.) 189; Dodd v. Wilkinson, 41 N. J. Eq. (14 Stew.) 566; Campbell v. Perth Amboy Shipbuilding Co., 70 N. J. Eq. (4 Robb.) 40. In the case of the Citizens Loan Association v. Lyon, 29 N. J. Eq. (2 Stew.) 110, an action ivas sustained by a building loan association against its directors, even before insolvency, on the ground that, in the language of the chancellor, “where there has been a waste or misapplication of the funds of a corporation by its officers or agents a suit in equity ma3r be brought in the name of the company to compel them to account for such waste, misapplication or breach of trust.”

In Williams v. McKay, the case of a receiver of a savings bank against its managers, it Avas held by the court of errors that the receiver represents' no't only the corporation but its depositors and creditors, and that the managers stand to such depositors and creditors in the character of trustees; ' that the trust was direct and that as such it was exempt from the operation of the statute of limitations. It appears to me that building and loan associations stand on very much the same footing as savings banks. They are quasi public institutions, dealt Avith as such by the legislature (P. L. 1903 p. 457) and having very similar objects. The3r are both designed to conserve the scanty savings of wage earners and other people of small means. If the managers of savings banks are trustees of creditors and depositors, 3 see no reason why the directors of building and loan associations do not stand in precisely the same relation to their creditors and so-called stockholders. But even if they should not be deemed trastees of an express trust, this would not help Mr. Armstrong, for he would still, according to the above-cited cases, be suable in this court, and he could not take advantage of the statute of limitations for the reason that not only has he not pleaded it, but, as 1 understand his answer, he has expressly waived the benefit of it.

It is admitted that there is no ground for holding the two defendant companies liable. As to Mr. Burleigh, he sustained no trust relation whatever to the company. He was a mere outsider—either himself the buyer or the agent of the buyer, lie took the stock as purchaser, at an agreed price, and was under a.legal obligation to pay for it. He co-uld have been sued at law for this price. There does not seem to be any ground for holding him liable in equity.


author: Stevens, V. 0.

text:
    Thomas E. French et al., receivers, &c., v. Edward A. Armstrong.
    [Decided January 26th, 1912.]
    1. Defendant was president of a building and loan association, chairman of its executive committee, and its solicitor. It was the practice of the association on accepting an application for a loan to issue a check for the amount to defendant as its attorney, and he, on the conclusion of the transaction, would give his own check on a private bank account, in which the association’s check had been deposited, to the borrower for the amount of the loan.'—Held, that defendant thereby became a trustee of an express trust of the funds of the association so received and deposited.

      2. Where defendant as president of a building and loan association received from it various sums of money to pay to borrowers on the completion of various transactions, he being chargeable therewith as a trustee, the burden was on him to show that the money was either paid over to the borrowers as contemplated or returned to the association, and, in case of his inability to do so, he was personally liable therefor.
    3. Where the president of a building and loan association retained $10,000 received from it with which to make a loan to another after the negotiations for the loan had terminated without its having been made, and used such fund for more than eight years without paying any interest thereon to the association, he was chargeable with the amount so retained as a trustee with compound interest. •
    4. Where it was claimed that directors of a building and loan association had made certain ultra vires loans to persons not members, one of the directors, when sued alone on a different theory, could not, on the issue as framed, be held liable therefor, but such liability should be enforced in' a suit to which all the directors implicated should be joined.
    5. Where an attorney received money from his client which it was afterwards agreed should be applied to the attorney’s claim for iegal services, the attorney, when sued for an accounting, was entitled to a credit for the amount of his bill for services.
    On bill (No. 2).

      Messrs. French, Bergen & Robbins, pro se.

      Mr. Robert II. McCarter, for the defendant.
   Stevens, V. 0.

This is a bill filed by the receivers of the State Mutual Building and Loan Association against the defendant to recover moneys alleged to have been entrusted to him from time to time by the association to consummate loans made to its stockholders, and which, not having in fact been lent, were not returned to the company’s treasury.

Mr. Armstrong was the president of the company, one of its directors, chairman of the executive committee of the board and its solicitor. The association was one of the largest of its kind in the state. Its money was lent either to its stockholders in the way that building and loan associations commonly lend, viz., by pledge of the association’s stock fortified by other collateral, or to outsiders on simple bond and mortgage or other security.

The course of business was that the written applications of borrowers were presented to the executive committee, which met weekly, and if they approved, a check for the money to be lent was drawn to the order of E. A. Armstrong, attorney. He, or his office, then made the necessary searches and prepared the deeds or other instruments, and, if the title was satisfactory, paid over the money by giving his own cheek. The securities taken were returned by him to the association. The work in his office was done largely through a clerk and attorney named Shinn, who is dead. The secretary and general manager of the association, Fithian, is also dead, and so the testimony of the two witnesses, who of all others would have been most helpful, has been lost.

But while Shinn transacted a great deal of the business that passed through Armstrong’s office, Mr. Armstrong himself was by no means a figurehead. He and Fithian were unquestionably the most active and influential of the officers of the association. While he did not conform, literally, to the requirement of the bylaws that lie should have a desk at the association’s office, and should, daity, at a certain hour, attend there (in the words of the by-law) “to oversee the business of the association,” yet his office was just across the street and he regularly attended the meetings of the executive committee, which, as I have said, were held weekly, and at which most, if not all, the important business of the association was passed upon. He was required by the by-laws to sign all certificates of stock, drafts, orders, deeds, agreements and other instruments in writing, and he appears to have clone so.

It seems to me that in view of the decisions to which I have referred in my opinion in the case of bill No. 1 (another suit against Mr. Armstrong, ante p. 283), and especially of Williams v. McKay, 40 N. J. Eq. (13 Stew.) 189, his liability was that of a trustee of an express trust. Counsel argue with much earnestness that because he received the money entrusted to him as solicitor or attorney, he is chargeable only in that character, and can be sued only at law where he may plead the statute of limitations. This argument is manifestly unsound. If, as solicitor, he was negligent; if he made an improper use of the moneys of the association; if he mingled them with his own, then, as president, it was bis duty to call himself to account. His failure to do so was a breach of trust for which, in case of loss, he is responsible as president. It will hardly be contended that as president he did not have actual notice of his defaults as solicitor. But even if he should be regarded as an agent he certainly, under the evidence, bore a fiduciary relationship to the association, whose president and executive committeeman he was, and the law is that “wherever a fiduciary relation exists between a principal and his agent the statute of limitations does not apply in favor of the latter” while the relationship continues. Ev. Agency *293. The authorities cited in the case of bill No. J show that his liability as such can be enforced in this court.

Mr. Armstrong Avas, no doubt, engaged in many enterprises, but this made it the more incumbent on him to systematize his accounts and keep his various clients’ moneys separate from his OAvn. It is admitted that he kept no separate bank account for the association’s mone}r, and that lie was very unbusinesslike. No charge of dishonesty, in the ordinary sense of that Avord, is either made or intimated, but it is clear that be often used the association’s money for his OAvn purposes, when it could not immediately be applied to the purpose for which it Avas confided to him.

With this general view of the situation, I proceed to consider the numerous specific charges of the bill. These charges, with one or two exceptions, are that Armstrong received moneys for loans to stockholders and others, approved by the executive committee, which for one reason or other were never consummated, and that he did not return or account for the money. Many of these charges are uncontested and the. liability conceded. In explanation of this concession he says that his books and papers are lost or have been destroyed; that Mr. Shinn, his chief clerk, is dead, .and that while he is obliged to admit the receipt of the money, he is Avithout the means of discharging himself, either by shoAAdng its application to the purpose intended or its return. There was a bookkeeper and an assistant bookkeeper engaged in keeping the books. The gentlemen connected with the association were men of intelligence and business experience. There is not much reason to doubt that if the money had been so applied or returned, the association’s hooks would have shown it. No imputation'has been cast upon the good faith of those who made entries in them.

There are five items on which there is a contest:

First. The Parker loan. On June 8th, 1896, Rebecca E. Parker made written application for a loan in her character as stockholder, offering certain houses and lots as security. The application, as first drawn, was for $2,500, but, by interlineation, this was changed to $1,660, and as additional security, she offered ífthe Dr. E. L. Smith premises, Overbrook.” The loan was approved and a check of the association signed by Armstrong, president, and Fithian, secretary, dated June 19th, 1896, was made to the order of E. A. Armstrong, attorney, for $4,600. It was stated on the check that it was a “loan to R. E. Parker.” It was deposited to the credit of E. A. Armstrong in the New Jersey Trust and Safe Deposit Company. At the time this check was made, Armstrong held in his own name the above-mentioned Smith premises. E. L. Smith had mortgaged them to the association in 1894. The mortgage liad been foreclosed and the title taken in the name of Armstrong, who held it for the association at the time he. received the above cheek. By indenture made and acknowledged June 12th, 1896, but not recorded until July 6th, 1896, Armstrong, for the consideration, as therein stated, of $2,500, conveyed the property to Rebecca E. Parker. On June 16th, 1896, Rebecca E. Parker and her husband gave a mortgage to the association to secure $4,600, covering, among other things, the Overbrook property, which was, as l think, simultaneously deeded to her. Tlio'mortgage recites that the Overbrook property is the same premises conveyed to Mrs. Parker by Armstrong, “by deed dated June 12th, 1896, and intended to be forthwith recorded.” The mortgage was recorded on the day of its date. The books show that the association received the $4,600 mortgage, but do not show that it received the price of the land. It is admitted that the real consideration agreed to be given for the land was $2,100 and not $2,500.

Now, the transaction might have been closed in one of two ways. The delivery of the deed might have preceded the delivery of the mortgage and Mrs. Parker might have actually paid the consideration in cash. This is the theory of the defence which suggests (but without any proof) that this cash was paid to some officer of the association other than Armstrong, who neglected to enter its receipt in the association’s books. This theory is not only opposed to the usual course of business, and to the language of the papers, and to what we would, in the absence of proof, suppose to have taken place, but finds no support in the testimony of Mr. Armstrong himself. This is his evidence:

“Q. Did you ever have any of the balance that appeared, to be due on this Parker transaction?
“A. No. Parker never paid me a cent, and I am very sure Parker never paid anything into the office, because Parker didn’t pay.”

The other and probable alternative is that the deed and mortgage ’were delivered simultaneously; that Armstrong paid the borrower $3,500 in cash and that the price of the property made up the residue of the $4,600 secured by the mortgage. That the deed bears date on June 13th, does not militate against this conclusion for it was not recorded until July 6th, and could have been delivered at any time during that interval. The mortgage being dated and recorded on June 16th, the deed was probably delivered on that day. This conclusion is, moreover, borne out by the letter written two months after by Parker, in which he says, “The consideration for this property was $3,100 and it was included in the $4,600 mortgage.”

Now, it is ordinarily incumbent on a trustee charged with the receipt of money to show what he did with it. Armstrong is unable to prove that he returned this $3,100. He does not show a single fact which tends in that direction. No presumption of a return arises from his customary mode of doing business, for the evidence-indicates not only a failure on his part to keep an account, but shows affirmatively and beyond all question that he did 'retain large sums of the company’s money a long time after they should have been returned, and shows further a possible motive for this retention in the fact that he mingled the money with his own and used it as his own. But we have the further significant circumstance that this was one of the items entered by the bookkeeper in the account designated “S. F. 253.” This was a special account kept by Mr. Ware in the so-called Sinking Fund Loan Book, and it was designed, as he says, to answer the purpose of a memorandum for ready reference to such matters as remained unsettled in Judge Armstrong’s hands after the time when, in the usual course of business, they should have been closed. The account was opened in May, 1900, by direction of Mr. Reeves, the assistant secretary, and appears to have been, in part, a transcript of an earlier record. In this account, Armstrong is, among other things, charged $2,100 in respect of the Parker transaction. Mr. Reeves says that while he does not remember that Armstrong examined the account in the book, yet his attention was called to it through statements and correspondence and verbal communications. On May 13th, 1901, Armstrong wrote Reeves as follows:

“The examiners called my attention to a memorandum, ‘June 27, 1894, Van Booskirk, $700. * * * June 19, 1890. Smith house, $2,100.’ * * * I know nothing about these matters. Can you enlighten me? They say they are charged in the S. F. loan charge to me,” &c., &e.

It would appear probable from Mr. Reeves’ testimony that such information as the association had was furnished, but obviously the transaction having passed through Armstrong’s office its details were, or ought to have been, more thoroughly understood by Shinn and Armstrong than by Reeves. This correspondence appears to have had no result, and we have nothing more in writing until February, 1906, when Reeves wrote Armstrong:

“I enclose the statement you request. I think it contains some items you have questioned. Will you kindly mark such items or give me a list of them so I can investigate? Most of them were before my time.”

If Armstrong replied it must have been verbally. Now, what is noteworthy is that Armstrong does not appear, at any time, to have denied liability out and out, but merely to have taken the position, “I know nothing about these matters.” But how was it that he knew nothing? He had Shinn at hand, who, he says, knew all about them. How easy to have asked Shinn to refer to his account or cbeclc book and ascertain whether he had given -a check for the balance of the money. The fact that he did not, can only be accounted for on the supposition that he had, without keeping an account, so commingled the money of the association with his own that it had become a matter of difficulty to separate them and tell where the association’s money liad gone. In this situation it seems to me plain that even if there were more doubt as to whether he had failed to return the money than there seems to be, the negligent trustee should suffer a possible loss rather than the association. Bohle v. Hasselbroch, 64 N. J. Eq. (19 Dick.) 334.

Hecond. The Van Booskirk loan. The origin of this loan is found in the following extract from the minutes of the executive committee: "June 15th, 1894. App. John V. Booskirk, Colfingswood,. $2,500 approved, provided he give his entire interest as security.” On June 27th, 1894, a check for $2,500, signed by Armstrong, president,- and Eithian, secretary, was drawn payable to the order of E. A. Armstrong, attorney. On the check was written "Loan to John V. Van Booskirk (Collingswood).” It appears that on July 12th, 1894, Van Booskirk made a mortgage for only $1,800 on an undivided half interest in three tracts, on which in September, 1894, he repaid to the association $300, and in November, 1894, $1,500. Armstrong appears to have given to the company no statement of what he did with the balance. A memorandum of this loan was, like Parker’s, entered in the sinking fund loan account and Ann-strong was therein charged with $700. His attention was called to this charge at the same time that it was called to- the Parker charge, and it met with a like response. In his evidence, in answer to the question as to -what information or knowledge he had of the matter, he replied: “I have none whatever. I have no recollection of any such matter being in the office, and no knowledge concerning it at all.” As he admits receiving the $2,500 and fails to give any evidence or indication that he repaid the $700; as the item was called to his attention more than once when Shinn -was alive and when it ought to have been easy for him to have shown the return of the mone}y if it has been returned, it seems to me that here, too, he has failed to exonerate himself.

Third. The Brooks loan. While a great deal of evidence has been given in connection with this loan, the facts essential to a determination of the liability are neither obscure nor difficult of comprehension, however much some unessential particulars may be involved in doubt. On February 11th, 1897, Walter J. Brooks made a written application for a loan of $16,000 on projjertv at Stone Harbor, a seaside resort. The loan was approved, and two days after a stock certificate for one hundred and sixty-six shares was issued to him and assigned to the association as collateral. Brooks was not the owner of the Stone Harbor property. It was owned by the Stone Harbor Improvement Companjq which had, some time before, given a mortgage to secure $30,000. At the time of the application for the loan the mortgage appears to have been the property of Elizabeth Abbott, and had b3r her, or by her consent, been pledged as security for an indebtedness or claim then held bv one Avil, for $12,500, or thereabouts. Brooks applied for a loan to enable him to redeem this mortgage, ostensibly at least, on behalf of his mother-in-law, Mrs. Abbott. On February 12th, 1897, Armstrong received from the association $15,600, the amount of the Brooks loan, minus the premium. He obtained legal tender notes to the amount of $12,500, and went with Brooks, to Avil’s office in Philadelphia to make a lender. The tender was refused, and for some reason or other, not disclosed, was held insufficient both in this court and on appeal when the mortgage was subsequently foreclosed. Wright v. Stone Harbor Improvement Co., 69 N. J. Eq. (3 Robb.) 837. After this refusal, Wright seems to have lost all interest in his application, which he practically abandoned. He did not receive any part of the money lent, and he did not make any payment on his stock.

Shortly after, Charles F. Abbott, husband of Elizabeth Abbott, died, and Samuel I. Abbott was appointed his executor or administrator. He, in March, 1897, made an application for a loan of $20,000, and this application, to the extent of $16,000, was approved by Fithian, but no further steps were taken to consummate the transaction. No stock was issued, no security was given and no money was lent.

As I have already said, Armstrong had received $15,600 on account of the Brooks loan. He had tendered only $12,500. When the tender was refused he deposited the amount tendered in his own account. On November 10th, 1898, that is, one year and nine months after he received it, he opened what was called "The E. A. Armstrong special tender account” of $12,275, with the New Jersey Trust Company. Of this, $2,275 was a deposit of money and $10,000 was represented or secured by a note given by Armstrong to the company which bore interest at one per cent. Mr. Fowler, the then president, sajrs, and his evidence is conceded to be correct:

“that the arrangement was that this deposit was made and if needed before the money was drawn, securities were to be deposited and that the accoimt was marked that way when it was opened on the books.”

It is obvious, therefore, that Armstrong did not put $12,275 of the association’s money into the tender account, but only $2,275. He retained $10,000 in his own account, and as a substitute made the note for $10,000. The entry appeared to indicate that he had deposited $12,275, but the sum entered was not available until it had been secured by further collateral. In other words, it was a seeming tender account but not a real one. This account was continued until May 26th, 1905, when Armstrong closed it and returned the whole amount of it to the association. It thus appears that for more than eight years he had the use of $10,000 of the association’s money without paying any interest for it to the association. Under these circumstances it would seem that the rule laid down by the court of appeals in McKnight’s Executors v. Walsh, 24 N. J. Eq. (9 C. E. Gr.) 498, requires that he be charged compound interest for the money while retained. It is true that the trust company gave him a certificate of deposit which was shown to tire officers of the association. But this certificate, .while it might perhaps under some circumstances have estopped the trust company from denying that Armstrong had the money on deposit, does not change the fact that he was using the association’s money, and that he was doing it deliberately and intentionally for his own profit. It is questionable whether, under the proofs, he would have been justified in making even a proper deposit on behalf of a man who' had practically abandoned his application, but no such deposit was, in fact, made. •The transaction cannot be regarded as closed, for a part of the principal of the Brooks loan still remains to be accounted for.

This part is the difference between the amount agreed to be loaned ($15,600) and the amount tendered ($12,275). Armstrong used this for the benefit of the Stone Harbor Company without the formal authorization of the executive committee and without taking any obligation or security in the regular way. Whether Fithian and some of the others knew of it, is a matter in dispute. Whether they did or not, the use to which he applied the money was unjustifiable. Defendant’s counsel seeks to excuse it in this way: He says the committee authorized the loan to Brooks. Abbott took the place of Brooks and the Stone Harbor Company was really Abbott, because the Abbott family owned eighty per cent, of the Stone Harbor Company’s stock. This position is altogether untenable. In point of fact Abbott did not take the place of Brooks. He was not substituted as a stockholder and never himself, even in form, became the association’s debtor. That Abbott was not identical with the Stone Harbor Corporation is too obvious for argument. This company, was, besides, on the verge of insolvency. Mr. Felton, the association’s vice president, became its receiver on March 28th, 1899; Armstrong was employed as its counsel trying to save it, and he used the money that had been intended for Brooks to buy up the judgments and other claims against it.

With a view of protecting, as he says, the company’s moneys thus used, Armstrong, on May 27th, 1898, took an assignment of a mortgage made by one Eummell to secure $7,275. Whether it was a sufficient security is another question in dispute, but irrelevant to this inquiry. He took it under the following resolution of the Stone Harbor Company:

“Whereas, information has been received by lion. E. A. Armstrong, the company’s counsel, that the application (the first application as I understand) for a receiver has been dismissed and that the injunction has been removed; Resolved, that the mortgage for $7,000 held by the company against the excursion house be assigned as collateral security for moneys advanced and services rendered by said Hon. E. A. Armstrong, and that the assignment he made this day.’’

This assignment was signed, sealed, acknowledged and de-' livered without inserting the name of the assignee. Whether it was retained by Armstrong, who now disclaims all personal interest in it, until after the failure of the association, or at once handed by him, as he insists, to the association, it is certain that the association’s name, as assignee, was not inserted until after it had passed into the hands of the trustees appointed to wind it up. They then filled in the association’s name and shortly afterward, repenting of their act, offered to give it back to him. As I understand Mr. Armstrong’s position, it is that in taking this mortgage he took adequate security for the money of the association that lie had irregularly used for the benefit of the íátone Harbor Company, while he was acting as counsel for that company. He does not pretend that the association by any formal act approved what he had done, or that they ever released their claim upon him for the money. This being so, it seems dear that having no authority to use the money as he did, he is under a legal obligation to return it. When he does so, he is entitled to whatever collateral the receivers hold.

Fourth. The Grimwood loan. Grimwood, whom Armstrong had represented in some litigation, applied for a loan of $25,000, and offered as security the bonds and stock of the Union Traction Company. Eithian, so Mr. Armstrong says, expressed himself as satisfied with the collateral but objected to lending so large a sum to a stranger without having some other persons stand security. It was, therefore, agreed that a loan of $15,000 should he made to Finn, Armstrong’s clerk, who should appear on the books as the appfying stockholder, to be secured by tbe personal obligation of Fithian, Burleigh and Armstrong himself, and that $10,000 should be lent out of the sinking fund account. All the money went to Grimwood. These gentlemen, as an inducement to them to make the loan in this form, were to receive some stock of the traction company. The company failed and so did its srtccessor, but a small sum was ultimately realized in the winding up. The $15,000, less the amount realized, was ultimately paid by Armstrong, and it is only the $10,000 loan that forms the subject of controversy now. As to it the question is whether the money was lent to Armstrong or to Grimwood. The minutes of the executive committee contain the following: “Sept. 10, 1897, Exec. Com. met with present Adams, Casselman, Coles & Eithian. App’n Rec’d viz.: S. E. Loans E. A. Armstrong Atty. O. $10,000.” A check was, on September 31st, drawn “to the order of E. A. Armstrong Atty.” He endorsed it as attorney and deposited it in the Security Trust Company, which gave him a draft on the Camden National Bank. This he endorsed “Pay to the order of Thomas Grimwood, E. A. Armstrong Attorney.” There is no doubt but that Grimwood got the money. As collateral for the loan the association received a note of Grimwood for $5,000, payable to his own order, and endorsed by him; fifteen bonds of the Union Traction Company and some Union Traction stock. Why Grimwood did not give a note for $10,000 or two notes for $5,000 is not explained.

The bill charges as follows:

“Your orators further show and charge that the said Thomas Grim-wood never did apply to the said defendant as attorney for said association for said loan of ten thousand dollars, and that the making- of said loan upon such, collateral was ultra vires the association as said defendant well knew, and that said purported application was a pretext and fraud upon said association; that the sum of ten thousand dollars, or any part thereof, was not paid or advanced as a loan by said association through said attorney for Thomas Grimwood, but that the whole proceeds of said loan were taken and applied by said defendant to and for his own use and purpose, and that he holds said sum of ten thousand dollars in trust for said association and for your orators.”

There is no evidence whatever that the association intended to make Armstrong its debtor. It took neither his promissory note nor his bond. The loan authorized was to him as attorney, the check was drawn to him as attorney, and on the very day he received it he gave Grimwood the money. Mr. Reeves, one of the association’s principal witnesses, with, no bias toward Armstrong, says the loan wás understood to be a loan to Grimwood and not to Armstrong. When the security was found to be nearly worthless, it was, after discussion, as Mr. Reeves says, by the members of the executive committee at their meetings, put into the suspense account. On cross-examination, Mr. Reeves was asked this question:

“From your knowledge of the company would the loan have been put in the suspense account, as you have described it—practically written off as bad—would that have been done if the company looked upon Judge Armstrong as the borrower?*’

His reply was, “It would not.” There was no reason why it should have been, for Armstrong was able to pay it, and the committee were by no means dominated by him. Judge Gaskill’s evidence shows that they had no hesitation in demanding collateral from him to secure money in his hands and that they got it. Armstrong’s direct testimony that the money was not lent to him is borne out by all the other evidence on the subject.

But it is said that the transaction was ullra vires, in that, according to the by-laws, the funds could be loaned only to members. The statute in force at the time of the incorporation authorized the lending to members “or in such other ways as the constitution of the particular association shall provide.” Gen. Stat. p. 333 § 16. The constitution of this company provided (section 10) that “provisions for loans, fines, transferring of stock and the like shall be made in the by-laws.” The by-laws provided only for loans to members. This association seems to have had on hand very large amounts of money uninvested and not sought for by the members. Call loans were authorized by resolution and frequently made, and without objection. Whether the .directors who authorized such loans of sums that would otherwise have remained idle, are, in case of loss, responsible, is an important question involving not Armstrong alone but the entire board. While it is true that the liability of directors is several as well as joint, it is also true that in a case of this sort it would be both proper and desirable that all who concurred in making loans of this character should be before the court. The case was tried on the theory that the true issue -was whether Armstrong or Grimwood was the debtor. The defence was directed to that issue alone. If the bill had set forth the constitution and by-laws and had chaiged that no loans were authorized except to members, it is obvious that evidence, would have been given showing what the directors had resolved;. what the course of practice was; how uniform and long continued; and what the necessity for it. Little or no proof of that sort was given. I called attention to the difficulty on the argument and suggested .that the bill might be amended and the defendant given an opportunity to sot up these matters in his answer and to put in further proof. The counsel for the receivers said that they would elect to stand upon the issue as framed. Under these circumstances, it seems to me that the question raised should, if at all. be litigated in another bill to which all 'standing in like case should be parties.

The same considerations will apply with even greater force to the question whether the collateral taken was such as ought to have been accepted. Here the gentlemen primarily liable would probably be the individuals entrusted with the duty of passing upon the sufficiency of the security. On the issue, as made, I think complainants have failed.

Fifth. The Larzalere money. The defendant admits receiving this money and says that by arrangement between himself and Fithian it was agreed that it be retained to pay certain indebtedness of the association to him. This indebtedness consisted of charges made against it for legal business transacted. The bill for this business is produced. I do not see why credit should not be given to Armstrong's statement and why the adjustment thus made should not stand. The association has not been injured. The mere fact that proper entries were not made upon the books by Fithian, or under his direction, ought not to disturb it.

It is difficult to decide on what principal interest should be charged, except in the case of the $10,000, where, as I have said, it must be compounded, for the reason that there is clear proof of intentional appropriation. There is no such evidence as to the other money that "came into the hands of Mr. Armstrong. In the Stone Harbor Company’s case it affirmatively appears that he used the money, as he says he did, on behalf of the association. Its use, in the way he used it, was irregular and unauthorized, but he did not use it for himself. In the case of the Parker and Van Boos-kirk loans, there is no direct proof of, any user. All that appears is that he received the money and that he has not fully accounted for it. It is quite possible that he or Shinn may have put the money into his bank account, but this is mere inference or conjecture. Armstrong says he knows nothing about it. The executive committee gave him a wide latitude in reference to keeping funds of the association. They obtained collateral security for such money as they thought he had held too long (not, as I understand, including the money in question), but did not demand its immediate return. In other words, they treated it as a loan on collateral to Armstrong himself.

The evidence shows negligence on Armstrong’s part and perhaps on the part of the officers of the association, but not intentional appropriation. If lie was negligent in not repaying it, the association was negligent ill not demanding it. In Mayor of Berwick v. Murray, 7 De G. M. & G. 518, the chancellor distinguishes between impropriety of conduct and intentional appropriation. In the McKnight Case, supra, the legacy which ought to have'been invested for the cestui que trust, was used in the trustee’s business. Under the circumstances, it seems to me that what equity requires is that Armstrong- be charged with the legal rate of interest, uneompounded. Ashurst v. Potter, 29 N. J. Eq. (2 Stew.) 625, 648; 1 Lew. Trusts *341. Of course, on payment he will be entitled to the collateral.


author: Stevenson, V. C.

text:
    Christian Feigenspan, a corporation, v. Thomas P. O’Neill.
    [Decided October 19th, 1911.]
    There being no status to be preserved a preliminary injunction will not be granted enjoining' the breach by the defendant, a saloonkeeper, of a covenant to sell the complainant brewing- company’s beer exclusively for five years, the consideration of which was a loan payable on demand secured by a chattel mortgage, assignment of the saloonkeeper’s lease and license and .everything he had.
    On bill, &e. Motion on bill and affidavits and answering-affidavits for' a preliminary injunction, enjoining the breach by the defendant, a saloonkeeper, of a covenant to sell complainant’s beer exclusively for five years, the consideration of which was a loan secured by the chattel mortgage, &c., payable on demand.

      Mr. John F. Marion and Mr. Herbert Boggs, for the motion.

      Messrs. Hamill & Gain, contra.

   Stevenson, V. C.

(orally).

I shall dispose, first, of the application for an injunction in the case of Christian Feigenspan, a corporation, eonrplainant, against Thomas P. O’Neill. My conclusion is that this is not a case for a preliminary injunction. And I reach this conclusion without forming any positive opinion whatever in regard to the merits of the very important questions which have been argued— and very well argued—by counsel on both sides.

I did expect to state this morning, in as orderly way as possible, the questions which have been discussed and which will come up for further argument, of course, upon final hearing; but although I have the papers here before me, the facts have largely gone from my mind—very few of those facts being necessary for the determination of one or two points which I held under advisement. I can say, though, that my mind is quite open in regard to how this matter will be disposed of upon final ]) earing. The only point I now decide is, that this is not a case for a preliminary injunction.

There is no status to be preserved. The complainants, this brewing company, wish to prevent the defendant, the saloon-keeper, from selling any but their-—the complainants’—beer for five years from the date of this contract. If they have a right to this customer for the output of their beer they will be put to some loss by reason of being deprived of that advantage while this suit is pending, but the amount of their loss is ascertainable very closely indeed—very accurately. The number of barrels of beer which this man sells now is known to the complainant. In one of the affidavits on the part of the complainant, they state the number of barrels of beer he has sold during each of several months, and it is a matter of almost common knowledge that the profit on a barrel of beer is well known. It is a definite sum. The amount which the complainant stands to lose if it is deprived of this customer while this suit is pending is comparatively a small amount, easily ascertained. I do not. recall— although on this point I should need to look through the papers again—I do not recall that there is any very satisfactory evidence that the defendant, O’Neill, is not responsible for the largest amount that could be recovered.

Now, in that situation of affairs, with nothing burning up, nothing of value to be destroyed, no status to be altered, the court is asked, preliminarily, to practically adjudge all these questions in favor of the complainant and compel this man to elect either to return to the brewery from which he has separated himself and undertake to do business again with that brewery while the litigation between himself and the brewery is going on, or go out of business.

This is a very peculiar contract. It is not a contract which compels the defendant to buy the complainant’s beer while the defendant occupies premises under a lease from the complainant. It is not a covenant in partial restraint of trade which is attendant upon the sale of anything—the letting of anything. And, more than that, it is not a contract which compels the saloon-keeper to .sell only the beer of the brewery while the debt from the saloonkeeper to the brewery remains unpaid. Perhaps there can be no question whatever about the fairness of that sort of a contract, which is a very common one indeed.

The brewery loaned Mr. O’Neill, the saloonkeeper, $2,500 and took back a chattel mortgage and an assignment of his lease and license and everything he had, as security, the loan drawing six per cent, interest. If they had done as brewers used to do, the provisions .of the contract would have been that while the debt was unpaid O’Neill should sell exclusively the beer of the brewery.

But this contract goes beyond that and provides, in consideration of this loan, secured by chattel mortgage, note on demand, assignment of the lease and assignment of the license, that O’Neill shall sell the complainant’s beer exclusively in this place or any other place where he may move his business to—anywhere in the United States—for five years. And, more than that, it provides that he shall not, at any time within the five years, be permitted to sell his business—Ms own property-—four years after this debt has been paid perhaps, to anybody without exacting from that person a similar covenant.

Well,- it may be that this court will find itself obliged by the decision of Vice-Chancellor Pitney, in the case of Feigenspan v. Nizolek, 65 Atl. Rep. 703, to specifically enforce the negative provisions of, this contract by injunction. It may be that upon final hearing, whatever my own views may be in regard to what the law ought to be, I shall find my decision absolutely controlled by this Nizoleh Case.

I have grave doubts about the propriety of enforcing in courts of equity the specific performance of this sort of a contract in restraint of trade—a contract which does not attend upon the sale of anything and endures after it has ceased to secure or in any way protect a loan—a contract which puts a poor and ignorant retailer in a relation of commercial servitude to a rich and powerful wholesale dealer. It is somewhat startling to consider that a poor borrower, in consideration of a loan to him at six per cent, per annum, secured by all the -property that he has, may also lawfully bind himself for a term of years to buy beer, or bread, or clothing, or any other article of consumption from the lender exclusively. Yet it must be conceded that the case of Feigenspan v. Nizolek, as decided in this court and also in the court of errors and appeals, is very nearly on all-fours with the case now before this court, and it may, therefore, be the duty of this court merely to follow that case.

But I do not have to go into this question now, I do not have to make up my mind independent of authority what the rule ought to be; nor do I have to make up my mind how far I am controlled by the decision of Vice-Chancellor Pitney, in the Nizolek Case, because in this case there is a doubtful question of fact which did not arise in the Nizolek Case at all, and it is of a character that does not connect it in any way with a brewery contract case, but is a feature presented often in all sorts of injunction eases.

The defendant, O’Neill, and a witness—his lawyer—whose credibility is not impeached, testify in substance that they did not know there was any such contract executed, or to be executed, by O’Neill when the great bunch of papers—I think six in number—was presented to him for signature. We have a conflict of testimony on this point. This lies at the base of this whole case. It seems the contract is a blank form which lias gradually been evolved in the office of the brewing company or its counsel in Newark to meet the necessities of their business in the best and most practical way. It is evident the contract was'modified after the decision in the Nizolek Cose. In the Nizolek contract there was no covenant on the part of the brewery that they would sell beer at any price. That is pointed out by Vice-Chancellor Pitney. He implies a contract to that same effect, if I remember his decision light.

Now the blank has been changed'and a covenant has been inserted compelling the brewing company to sell the defendant beer. The object of that is, of course, perfectly plain. A man of common sense knows that that is no obligation which is a burden upon the brewing company. Of course, they will sell their beer, and want to sell their beer. The part of the contract which has practical binding force is the contract on the p'ait of (ne saloonkeeper to buy their beer. This contract, as I said, was elaborated and it is quite an elaborately drawn affair. It was filled out and sent to the attorney for the brewing company who attends to their business in Hudson county—in Jersey City. Besides that, the attorney drew the chattel mortgage, the assignment of the lease and the assignment of the license, and probably the note.

No, I think the note was on a printed form; it almost always is. I rather think the note came from Newark, too. But this contract’ came from Newark, containing these extraordinary provisions which made this man practically a slave of the brewery for five years wherever he did business and whether he owed this money to the complainant or not, and these papers are presented to him in a bunch in the office of the attorney of the brewing company in Jersey City.

O’Neill, it is true, had counsel with him, but this gentleman makes an affidavit, point blank, that he never saw this contract at all. He saw the other papers and they were explained to Mr. O'Neill when he signed them. Counsel for the brewing company testifies generally that he handed the papers to counsel for O’Neill and that he examined them; that is all. I looked very closely through the affidavits a week or two ago, I recollect, to see what the affidavits on the part of the complainant show on this sharp point—whether this particular contract was read to tins saloonkeeper or not—whether he was informed that he was signing in this great bunch of papers any such obligation. He swears positively that he knew nothing about it; that he never world have agreed to any such terms. He was attempting to make a similar deal with another brewery and, of course, we all know that these shifts and changes are made from time to time, and a successful saloonkeeper can get money of any one of the breweries. They are glad to make an arrangement with a new man and he allowed to step into the shoes of the former brewery.

This .man swears that he never understood he had personally tied himself down for five years whether the loan was paid back the day after or not, and he is supported in that by this affidavit of his lawyer—an intelligent man and a man who shows that he has had wide experience with this sort of contract, and in that course of dealing I think he said he had had one hundred and fitly cases and he never knew that this contract was among the papers which his client signed.

In that sort of case it is perfectly plain that the question must be tried out without regard to all the questions of law and equity referred to—this question of fact must be tried to a finish before the complainant will be allowed to come down with this destructive injunction on this man O’Neill, preventing him for five years from running a saloon anywhere in the world, and buying beer from anybody excepting these brewers with whom he is now in litigation.

Eor the reasons that I have indicated the application for a preliminary injunction will be denied.