author: Stevenson, V. C.

text:
    Minnie Lister v. George T. Lister.
    [Decided October 5th, 1915.]
    1. Extreme cruelty is not a ground for' a decree of absolute divorce in New Jersey.
    2. Evidence, in a wife’s suit for maintenance, Held to show that defendant’s absolute divorce ,in the State of Nevada had been fraudulently obtained on his false representations of his residence in that state.
    S. Jurisdiction of a court to grant a divorce cannot rest in the slightest degree upon the consent of the parties to the marriage, or both of them.

      4. A divorce suit is a “suit in rem,” the essential characteristic of which is found in the power of the state through the decree or judgment of its court to dispose of the subject-matter of the suit, the res, in accordance with the object of the suit, whether that subject-matter be physical property or the status of one or both of the parties litigant, which decree operates immediately and absolutely upon the status of the suitor which is the res in the suit without the necessity of execution, attachment or contempt proceedings to enforce it.
    5. The term “res” is one of somewhat wide content, and embraces not only lands and chattels, but also the status of individuals, as parent and child, husband and wife, guardian and ward, and also the status of an individual, as citizen and as a voter.
    6. A decree of divorce by a court in Nevada undertaking to dispose of the status in respect of marriage of spouses not resident in that state is a nullity, as that state is powerless either by an act of its legislature or by a decree of its court to fix the status of a person as married or unmarried when such person is only transiently commorant therein, as the spouse commorant there but actually resident in New Jersey has no power against that state to carry his status in respect of marriage from the State of New Jersey into the State of Nevada so as to subject such status to the power of the State of Nevada exercised through its court by an action quasi in rem.

    7. There is no principle of comity which interferes with the power of the State of New Jersey in accordance with its law, to deny the right of any court in Nevada to determine the matrimonial status of the defendant in this case, or to decree that he is an unmarried man unless he ceased to be a bona fide resident of New Jersey and became a bona fide resident of Nevada.
    8. Where a husband did not lose his residence in New Jersey and never became a bona fide resident of Nevada, and committed a fraud upon the laws of both states in falsely swearing that he was such bona fide resident of Nevada, the appearance of the wife in such suit and her litigation thereof did not give the Nevada court jurisdiction.
    9. There is no such thing as an action in personam for divorce, but every suit for divorce is necessarily an action in rem, or an action quasi in rem, in which the decree operates immediately and absolutely upon the res.

    10. Where the spouses are residents of different states there is a separate res which may be the subject-matter of a divorce suit in each state.
    11. Where a husband was a bona fide resident of Nevada so as to give its courts full jurisdiction therein of his status in that state in respect of marriage with a bona fide resident of New Jersey, who in good faith appeared and litigated the suit, this state, under the principle of comity, will permit the result of that suit in respect of the husband’s status in that state in many, but not in all, cases to determine the status of the wife in New Jersey.
    12. The requirement of the federal constitution that every state shall give full faith and credit to the judicial proceedings of every other state, does not expand the operation of a Nevada divorce decree which New Jersey must respect, but only compels New Jersey to recognize that the matrimonial status of a spouse resident in Nevada for all purposes within the State of Nevada, must be deemed as having been dissolved by a decree of divorce duly granted to such Nevada, spouse in a Nevada court as against the wife, a resident of New Jersey, and does not require New Jersey to recognize such decree as having any validity in New Jersey even although the wife appeared and litigated the Nevada suit in good faith, inasmuch as New Jersey need not allow its citizens to carry their matrimonial status to a foreign state and subject it to the decree of a foreign court except by changing their bona fide residence to that state, animo manendi; even after the plaintiff spouse became a bona fide resident of Nevada the wife's appearance and her bona fide litigation could not bring the Nevada decree within the full faith and credit clause, but would leave it to be treated as valid or invalid under the statutes and decisions of New Jersey.
    13. A case decides what the court in the discharge of its duty is obliged to and actually decides, and all else is "dictum."

    14. Under the Divorce act 1907 (2 Comp. Stat. 1910 p. 20J2 § S3), providing; that full faith hnd credit shall be given in all courts of the state to a decree of divorce by a court of competent jurisdiction in another state when its jurisdiction was obtained in conformity to the conditions prescribed in sections 5, 6 and 7 thereof, and that if any. resident of the state goes into another state to obtain a divorce for a cause arising while the parties resided in the state, or for a cause not a ground of divorce under the laws of the state, the decree shall be of no effect in the state, a decree of absolute divorce granted to a husband in Nevada, whence he had gone to obtain the divorce for a cause not a cause for absolute divorce in New Jersey, arising while they were domiciled in the state, as against the wife, never domiciled in any other state, was void.
    15. Such decree being void, the defendant, notwithstanding, was the husband of the complainant, charged with the duty of supporting her and subject to her action for non-support under the Divorce act 1907. P. L. 1907 p. m § 2ff.
    16. In a wife’s suit for maintenance under section 26 of the Divorce act, her release in consideration of $400 in full settlement of all her claims against the husband, agreeing to discontinue any suits against him, given after he had. obtained a fraudulent, and void decree of absolute divorce in another state, and when she was under great financial embarrassment and discouraged by her efforts to obtain justice from him, and greatly tempted by the opportunity of temporary relief, in view of its failure to provide for her future support, was not enforceable in equity, and hence no defence to the suit.
    17. All contracts between husband and wife are void in law, and in equity are only contracts sub modo, entirely within the control of courts of equity and are enforceable, especially against the wife, only to the extent to which they are equitable and fair.

      On suit for maintenance under section 26 of tlie Divorce act. Heard on bill, answer and proofs taken in open court.

      Mr. John I. Weller, for the complainant.

      Mr. J. W. Rufus Besson, for the defendant.
   Stevenson, V. C.

1. There axe two defences and two only which are set up' in the defendant’s amended answer, or in any way suggested by the evidence, viz.:

(1) That the defendant before the filing of the bill obtained an absolute divorce from complainant in the State of Nevada, and

(2) That after this suit was brought in this court the defendant paid the complainant' $400, which she agreed to receive “in full settlement of all claims.”

2. I shall not undertake to discuss in detail the evidence pertinent to the controversy between the parties in relation to the defendant’s Nevada divorce. That divorce, or attempted divorce, in my judgment was a perfectly plain case of gross fraud upon the laws of New Jersey, and also the laws of Nevada. The alleged divorce must be treated by the courts of the State of New Jersey as null and void on two grounds which will be hereinafter stated.

The couple were domiciled in New Jersey before their marriage, and after their marriage continued to be domiciled in this state until the month of January, 1908, when the defendant abandoned his wife and went to the State of Nevada, where he took up his abode in a hotel at Reno. About two days after the expiration of the necessary six months he commenced a suit for an absolute divorce in the Nevada court against his wife who remained in New Jersey, alleging as the ground for such divorce, extreme cruelty inflicted upon him by her. Although the defendant’s petition or complaint does not state where the alleged cruel acts were committed by his wife, the inference is absolute that such acts must have been committed in the State of New Jersey, so that the whole cause of action, whatever its nature might be, arose in the State of New Jersey. Extreme cruelty is not a ground for a decree of absolute divorce in New Jersey. The complainant, the defendant in the Nevada divorce action, was served with notice of the suit and a copy of the complaint in the State of New Jersey, and thereupon attorneys practicing in Nevada were retained to represent her in the suit. It is alleged on behalf of the complainant that the .Nevada attorneys, went beyond their instructions and appeared generally for the complainant and defended the suit, whereas their retainer was limited in its character. There certainly is evidence which indicates that the complainant’s interests were not wisely, if honestly, cared for in the Nevada suit, but in this case we must accept the proposition that the complainant, the defendant in the divorce suit, upon being served in New Jersey with.full notice of the Nevada suit against her, voluntarily appeared by Nevada attorneys and defended the suit on the merits.

The divorce suit came to a final hearing three or four months after its commencement, and the decree of divorce was granted on December 19th, 1908. Two days after the decree was granted the defendant left the .State of Nevada, met the woman in Colorado on whose account he deserted his wife, and went through a ceremony of marriage with her on the 24th day of December, 1908. The defendant has never returned to the State of Nevada, but has of late resided in the city of Chicago with his alleged new wife by whom he has had two children. The total period of the defendant’s sojourn in the State of Nevada for the purpose of obtaining a divorce was not more than six days in' excess of the statutory period of six months, and the period of a few months thereafter ending when the decree was obtained. No evidence, except the defendant’s own testimony was produced before this court to show that the defendant engaged bona fide in any business in the State of Nevada, or established any permanent relations with that state, or-its business, and the testimony of the defendant himself on these subjects was exceedingly meagre and altogether unsatisfactory. The following is part of his cross-examination: . 1

“Q. You were going to stay there [in Nevada] all your life?
“A. Not necessarily.
“Q. You were going to make that your home?
“A. Yes, sir; for awhile until I got well.”

The complainant is directly corroborated by two witnesses in her positive testimony that the defendant shortly before he deserted his wife in New Jersey, offered her money to induce her to submit to a divorce, and threatened that if she did not consent he would go to another state and get a divorce from her. This testimony outweighs the defendant’s uncorroborated denial.

Without stating further details it is sufficient for present purposes to state the conclusion of fact that this is a typical case of a fraudulent Nevada divorce based upon a false representation of residence in that state, and the record indicates that practically no effort is made in the Nevada courts to expose and repel these emigrants from other states, who by fraud and perjury impose themselves upon the State of Nevada as Iona fide residents, residents mimo manendi.

3. The first ground upon which this Nevada divorce will be held void in New Jersey is based upon our law as it now exists, and as it existed prior to the enactment of the Divorce act of 1907. It is, I think, the established law of this state that jurisdiction of a court to grant a divorce from the bond of matrimony cannot rest in the slightest degree upon the consent of either of the parties to the marriage, or of both of them. Any divorce granted by a court in a foreign state in which neither of the parties was a bona fide resident, would, I think, be treated as void by the courts of New Jersey even although neither of the parties was at any time a resident of this state. Of course it is not necessary to lay down such an extreme proposition in this case because the complainant was domiciled in New Jersey, the matrimonial domicile was here and the defendant’s pretended change of domicile and residence was a fraud and a sham.

A divorce suit is a suit in rem. The term “res” is one of somewhat wide content and it embraces not only lands and chattels but also the status of individuals, as parent and child, husband and wife, guardian and ward, and also the status of an individual, as a citizen and as a voter. The essential characteristic of an action in rem, I think, is to be found in the power of the state through the decree or judgment of its court to dispose of the subject-matter of the suit, the res, in accordance with the object of the suit, whether that subject-matter be physical property or the status of one or both of the parties litigant. See Amparo Mining Co. v. Fidelity Trust Co., 74 N. J. Eq. 197, 203. In actions in personam judgments or-decrees do not ipso facto accomplish the objects of the suits in which they are rendered. An execution follows which may be abortive, or proceedings may be taken to compel the defendant to do what he is directed to do by the decree, which proceedings may prove to be inefficacious. Suits for specific performance of contracts -to convey real estate, formerly were actions in personam, and the decree only operated upon the person and might never operate to give the complainant the relief which was awarded him1 by the decree. Subsequent legislation, however, has in many states made such a suit an action in rem or quasi in rem. At present such suits when brought in a foreign state where the land in question does not lie, are purely actions in personam although if the land lay in the state where the suit was brought the action might be in rem or quasi in rem.

A decree of divorce operates immediately and absolutely upon the status of the suitor which is the res in the suit. No execution, attachment or contempt proceedings are necessary in order to enforce the decree. Eronr the very nature of the case, however, a decree of divorce by a court in Nevada, undertaking to dispose of the status in respect of marriage of spouses who are not resident in the state, would be a decree in the air. A husband and wife domiciled in New Jersey, while passing through the State of Nevada on a railroad train, certainly could not get off at Reno and immediately give a Nevada court jurisdiction to determine their status in respect of marriage, and dissolve their marriage even if the legislature of Nevada should undertake to give the courts of the state such extraordinary powers. An act of the legislature of a state undertaking to divorce all married persons who pass through the state on a railroad train, would never be recognized by courts of other states as having the slightest trace of validity apart from all objections to such legislative action arising from federal or state constitutions. The State of Nevada is powerless by an act of its legislature, or by a decree of its court to fix the status of a man or woman as married or unmarried, when such man or woman is only transiently conxmorant within the borders of the state. The question whether a man is married; or is a citizen, or is a voter cannot arise in the State of Nevada unless the man is a bona fide resident of the state, for the reason that it is of the nature of such at status that it pertains to individuals who are permanently located in the place where the status is to be recognized or denied. A spouse commorant in Nevada but actually resident in New Jersey, has no more power as against the State of New Jersey to carry his status in respect of marriage, from the State of New Jersey into the State of Nevada so as to subject such status to the power and control of the State of Nevada, exercised through its courts by an action quasi in rem, than he has to lift up a tract of land in New Jersey which he owns and transport it to the State of Nevada, so as to subject it to an action quasi in rem in a Nevada court.- Where the res is land it is manifest that it cannot be moved out of the state where it lies. When the res consists of chattels it is equally clear that such res can he transported and located suecessivefy in very many states,' and thus made subject to the power of such states exercised through courts, legislatures or other governmental agents. When the res is a status in respect of marriage, it can be transported in a certain way, viz., by transporting, or in other words, changing the residence of the party whose status is under consideration.

The authorities I think all sustain the proposition that there is no principle of comity which interferes with the power of the State of New Jersey, in accordance with its well settled law, to deny the right of any court in Nevada to determine the status of the defendant in 'this case in respect of marriage, or to decree that he is an unmarried man unless he ceased to be a bona fide resident of New Jersey and became a bona fide resident of Nevada. Inasmuch, therefore, as I have found as a matter of fact that the defendant did not lose his residence in New Jersey —never became a bona fide resident of Nevada — and that he committed a fraud upon the laws of New Jersey and also the laws of Nevada, in falsely swearing that he was such bona fide resident of Nevada, it follows that the appearance of the complainant in the divorce suit, and her litigation of that suit, have no effect to give the Nevada court jurisdiction either of her own status, or that of her husband in New Jersey, in respect of marriage.

At this point it may be well to note that under the system of divorce law which we enforce and recognize in New Jersey, there is no such thing as an action in personam for divorce. Every suit for divorce of necessity is an action in rem, or to use perhaps a more accurate term, an action quasi in rem, in which, the decree operates immediately and absolutely upon the res.

4. Where the spouses are residents of different states, then there is a separate res which may be the subject-matter of a divorce suit in each state. Haddock v. Haddock, 201 U. S. 577; 50 L. Ed. 867, 873, per Chief-Justice White. It seems to me that confusion of thought and consequent error have arisen from the failure to recognize the fact that each state absolutely controls the status of its domiciled citizens with respect to marriage. There is nothing strange in the notion that a man may be a married man in one state, and an unmarried man in another state. A woman in New Jersey may be recognized by all the governmental agents of that state as married to a man in Illinois, while the man in Illinois may be recognized by all the governmental agents of that state as not married to the woman in New Jersey, but as unmarried or as married to some other woman. Each state enforces its own view within its own territory with regard to the status of its residents who are permanently subject to its power. Where one of the two states undertakes to divorce the spouse resident within its borders, the state where the other spouse resides under the principle of comity frames its own code determining how far the action of the foreign state shall be recognized as determining the matrimonial status of its own resident.

In the Haddock Case Chief-Justice White (p. 570, L. Ed. p. 870) in his comprehensive and illuminating opinion states that “it has been decided that where a bona fide domicile has been acquired in a state by either of the parties to a marriage, and a suit is brought by the domiciled party in such state for divorce, the courts of that state if they acquire personal jurisdiction also of tlie otlier party, have authority to enter a decree of divorce entitled to be enforced in every state by the full faith and credit clause.” Citing Cheever v. Wilson, 76 U. S. 108; 19 L. Ed. 604. This statement of the learned chief-justice seems to be made incidentally and to constitute no essential part of - his authoritative opinion.

If we accept as our fundamental premise that a. divorce suit is a suit in rem, and that no appearance or consent can give a 'court jurisdiction of the res involved in the suit, I am unable to perceive the soundness of the doctrine which is referred to by the learned chief-justice as something “decided” by the case above cited. If a woman, a resident of New Jersey, goes voluntarily into a Hevada court and litigates a divorce suit, brought in that court against her by her husband who is a bona fide resident of Hevada, I am unable to perceive how anything more than the original res, i. e., the status of the husband in respect of marriage in the State of Hevada, can be involved. The other res which is the status of the woman, in respect of marriage in the State of New Jersey, cannot be subjected to the jurisdiction of a Hevada court by any appearance or ptlier action on the part of the woman. According to the doctrine alleged to be sustained by the case of Cheever v. Wilson, the full faith and credit clause operates to permit the New Jersey spouse to subject her status in respect of marriage in New Jersey under the laws of New Jersey to the control of the Hevada court without regard to the laws or policy of New Jersey.

In this connection it may be noted that no New Jersey spouse under our present Divorce act can, by a voluntary appearance, subject his or her matrimonial status to the jurisdiction of a New Jersey court. Henry v. Henry, 79 N. J. Eq. 493; affirmed, 81 N. J. Eq. 512. It would be a strange result if, while the court of chancery of New Jersey can only “acquire” jurisdiction of the matrimonial status of a spouse resident in New Jersey, by service of process as prescribed by statute, a Hevada court could, under the full faith and credit clause, destroy the matrimonial status of the New Jersey spouse in New Jersey, in a suit in which jurisdiction of the defendant’s status in New Jersey was obtained by her voluntary appearance in the Nevada court.

Of course, if the husband is a bona fide resident of Nevada so as to give the Nevada court full jurisdiction in the State of Nevada of his status in Nevada in respect of marriage with his wife who is a bona fide resident of New Jersey, and the wife in good faith appears and litigates the Nevada suit, the State of New Jersey under the principle of comity has ordained that the result of the Nevada suit in respect of the husband’s status in Nevada, shall also in many, but by no means in all, cases determine the status of the woman in the State of New Jersey. This is a very different result from that which is reached by forcing the adjudication of the Nevada court upon the State of New Jersey under the full faith and credit clause simply because of the voluntary appearance of the New Jersey spouse in the Nevada divorce suit. New- Jersey must give full faith and credit to Nevada decrees where the Nevada courts have jurisdiction, but the constitutional mandate does not expand the operation of the Nevada decree which New Jersey must respect. The Nevadd. decree which the full faith and credit clause commands New Jersey at all times to respect, is the decree of the Nevada court that in Nevada where such decree can be enforced, the status of marriage has been destroyed. In other words, the full faith and credit clause compels the State of New Jersey to recognize that the status of marriage, in which its own resident in New Jersey is interested, must be deemed for all purposes within the State of Nevada, as having been dissolved. If the full faith and credit clause can apply so as to make the Nevada decree of divorce in the case under consideration, operate in the State of New Jersey without regard to the' New Jersey code based on comity, then it follows that the Nevada court has disposed not only of a res. within its jurisdiction, placed within its jurisdiction by the bona fide residence of one spouse, but also of a New Jersey res, the status of the New Jersey spouse under the laws of New Jersey, which in some mysterious manner the New Jersey spouse by voluntary action has succeeded in carrying from the State of New Jersejr and placing within the jurisdiction of the Nevada court. When the State of New Jersey lays down a code based on comity, tinder which a decree of divorce in a Nevada court, dissolving a marriage between a Iona fide resident of Nevada and a Iona fide resident of New Jersey, is recognized and enforced in New Jersey, this is merely an instance in which the State of New Jersey exercises its own power over a certain res the situs of which is in New Jersey, viz., the status in New Jersey of its own resident in respect of marriage. The power of Nevada to control and dispose of a Nevada res is not extended in such a case into the State of New Jersey so as to control a New Jersey res by the full faith and credit clause.

It has become a common practice in the eastern states among incompatible spouses, to arrange for a divorcé without scandal, taking advantage of the laws of some of the western states which seem to foster the divorce industry for the benefit of their legal practitioners. The scheme is a very simple one. One-spouse goes to a western state, Nevada, for instance, stays six months at a hotel, perhaps making frequent visits back to the east, and then institutes a suit for divorce in Nevada. The other spouse, the defendant, making no pretence of changing his or her domicile from the eastern state, retains a Reno lawyer who enters an appearance and files an answer, and thus makes' a show of defence. The trial often is a sham. The divorce is granted. The plaintiff spouse returns immediately to his or her eastern domicile, and both spouses, the mock combatants, assume that under the full faith and credit clause their status as husband and wife in their eastern domicile has been abolished. In my judgment the State of New Jersey will not recognize such a proceeding as having any validity in her territory where one of her residents, subject to her power and' governed by her laws, is one of the spouses in the affair. Nor do I think that if the emigrant spouse in fact becomes a resident of Nevada in good faith, animo manendi, and the New Jersey spouse in good faith litigates the Nevada suit, the full faith and credit clause can in the slightest degree affect the status in New Jersey of the New Jersey spouse. This clause is potent but it cannot enlarge the Nevada decree which when left unaided by New Jersey law can only affect the status of the spouses in Nevada. New Jersey will not allow her citizens to transport their matrimonial status to- a foreign state and subject that status to the decree of a foreign court, except by transporting their bona fide residence to such state, animo manendi. How far New Jersey will accept and enforce in her territory a Nevada decree divorcing a spouse resident in Nevada, from a spouse resident in New Jersey is a matter, I think, which New Jersey has a right to determine for herself. If the plaintiff has a bona fide residence in Nevada so that there is a res of which the Nevada court has full jurisdiction, then in large numbers of cases and under certain conditions New Jersey law ordains that the Nevada decree affecting the Nevada res shall in like manner affect the New Jersey res. Felt v. Felt, 59 N. J. Eq. 606. The full faith and credit clause, however, is in my judgment, entirely inoperative in this class of cases. - '

Nevada makes “habitual gross drunkenness” a ground for absolute divorce (2 Nels. Div. & Sep. 1040), and might at any time make “incompatibility” or “gross neglect of duty” a sufficient ground, or might, following a policy which formerly was adopted in some of the states, permit its courts to divorce its residents “for any cause deemed by the court sufficient.” If a man domiciled with his wife in New Jersey emigrates to Nevada and becomes a bona fide resident of that state, and obtains an absolute divorce from his New Jersey wife on the ground of drunkenness or incompatibility, or some other ground absurdly inadequate according to New Jersey law and policy, in a suit in which his New Jersey wife voluntarily appears and litigates in good faith, it may be that the full faith and credit clause will compel New Jersey to recognize the Nevada decree in its effect upon the Nevada res, but there is no suggestion in any New Jersey decision that such a decree would have any effect under the laws of New Jersey upon the New Jersey res. The exact contrary is plainly indicated. See Felt v. Felt, supra (at p. 610). Can it possibly be held by the supreme court of the United States that the full faith and credit clause compels New Jersey against her will and in flagrant violation of her policy in regard to the institution of marriage, to recognize the Nevada decree as disposing of the New Jersey res — as destroying the matrimonial status of her citizen — merely because her citizen saw fit to appear in the Nevada suit and thus attempt to transfer her status to that state? It may be noted that the case of Cheever v. Wilson, supra, cited by Chief-Justice White was decided nearly fifty years ago when the subject of the situs of matrimonial status as a res was involved in obscurity and affected by some juridical notions which since that time .have been repudiated by the courts, and it is also to be noted that the proposition which the eminent chief-justice says was “decided” in that case is found in the opinion of the court delivered by Mr. Justice Swain, and is contained in his discussion of questions raised by counsel in the argument but which were not within the issues “made in the pleadings.”

The learned justice having distinctly found that the parties seeking to attack the foreign decree were “precluded by the settled rules of equity jurisprudence from entering upon such an inquiry,”' and that their silence was an admission and that they were “bound” by the implication, proceeded without suggesting an amendment of the pleadings to express the “views” of the court updn the question, which was not properly in litigation before them, because that question had “been fully argued upon both sides” and might arise thereafter. Strictly speaking, the law of judicial decision cannot in this manner be evolved in advance by judges however exalted and learned. This is the appropriate method of legislation. A case “decides” what the court in the discharge of its duty is obliged to decide. All else is dictum. As that great jurist, Lord Halsbury, remarks, “A case is only an authority for what it actually decides.” Quinn v. Leathem (1901), A. C. 495, 506. Even the supreme court of the United States is powerless to decide with finality a question which is not a part of the issues presented by the pleadings or in some appropriate manner submitted for decision by the record merely because counsel see fit to argue that question and as the result of. such argument the court is induced to entertain “views.”

I ain pursuing this subject, however,, perhaps too far for present purposes because we are dealing with a ease where this court has found from the evidence that the Nevada court never obtained jurisdiction of the res which it undertook to dispose of, viz., the status in Nevada of the defendant in this suit, the husband, with respect to his marriage with the complainant who was at all times a resident of New Jersey. The correctness of this finding of fact by this court, however, may be challenged and therefore I have considered it proper and in fact the duty of this court to rest the decree in favor of the complainant in this cause upon the further ground that even if the defendant (the husband) became a bona fide resident of Nevada, the appearance in his divorce suit by his New Jersey wife and her bona fide litigation of that suit, cannot bring the Nevada decree within the operation of the full faith and credit clause, but leaves that decree to be treated as valid or invalid in New Jersey under the statutes enacted by the New Jersey legislature and the decisions rendered by the New Jersey courts.

5. The decree of the Nevada court is also void in New-Jersey under the provisions of section. 33 of the Divorce act of 1907. 1 Comp. Stat. p. 2042.

The evidence in this case has satisfied this court that the defendant being an inhabitant of this state, went into the State of Nevada “in order to obtain a decree of divorce for a cause which occurred while the parties resided in this state,” and also “for a cause which is not ground for divorce under the laws of this state,” and the statute declares that “a decree so obtained shall be of no force or effect in this state.”

As we have seen the proof is absolute that the entire cause of divorce set up in this Nevada suit, and attempted to be proved therein, must have arisen while the parties were domiciled in the State of New Jersey, for the wife, the complainant, has never been domiciled in any other state.

Of course the word “divorce” in the two members of the sentence quoted from the statute, means the same kind of divorce. In other words, it does not help the defendant’s case that the cause of absolute divorce which he set up in his Nevada suit, while not a cause of absolute divorce in New Jersey, is a cause of limited divorce or mere separation from bed and board. The fact is plain that the defendant obtained an absolute divorce in Nevada for a cause which is not ground for an absolute divorce in New Jersey. It is unnecessary to discuss the evidence which shows that the defendant went to Nevada “in order to” do the thing which he did — the only thing which appears to have been attempted or accomplished by him by virtue of his alleged residence in that state.

It will be seen that our statute is doubly applicable to the defendant’s Nevada divorce suit.

We need not consider whether our statute, which is substantially a copy of a prior Massachusetts statute, extends to every ease where the married person domiciled in New Jersey goes into another state in order to obtain a decree of divorce coming within either of the two categories described by the statute, but with the further bona fide intention of becoming a resident and acquiring a domicile in the state to which he goes, and in fact does acquire such residence and domicile. I shall not stop to inquire in this case whether the force of the words “inhabitant of this state” operates upon all parts of the transaction described by the statute. The Massachusetts statute was sustained by the supreme court of the United States in the case of Andrews v. Andrews, 188 U. S. 14; 47 L. Ed. 366, in a case where the court found that no bona fide residence had been acquired by the party who had procured the divorce, which under the Massachusetts law was held void in the State of Massachusetts. Whether the Massachusetts statute and our New Jersey statute may or might be construed to have been intended to apply to cases where the objectionable divorce has been obtained by a party who went from the state where he and his spouse resided, to the state where he obtained his divorce, with an actual bona fide intent to become a resident and citizen of the state Avhere he went as well as with intent to obtain such divorce, the above cited decision of the supreme court of the United' States is a cnritrolling authority sustaining these statutes in their application to cases like the one now before this court, where the court finds that the party obtaining the objectionable divorce in fact never intended to become and did not in fact become a bona fide- resident of the state where he obtained the divorce.

The New Jersey and Massachusetts statute in terms might be deemed to apply to several cases where after the emigration of one spouse in order to obtain a divorce, the other spouse thereupon, emigrates to the same state, or to a different state, and thus effects a bona fide change of residence. Incongruous and absurd results can be avoided by confining the statute by implication to cases where the matrimonial domicile has been in New Jersey, and the spouse deserted in New Jersey remains resident in the state until after the emigrant spouse has obtained his foreign decree of divorce. However that may be, it is, as we have seen, established law that in a case like this, where the State of Nevada had no jurisdiction of the matrimonial status of these parties, or the matrimonial status of either of them, the Nevada decree must be deemed “of no. force or effect in this state” under the provisions of our statute. I may add that in the absence of any direct decision of the supreme court of the United States to the contrary, I think we have the right to hold in New Jersey that in a case like this, even assuming that the- husband became a bona fide resident of Nevada, and the wife bona fide litigated the divorce suit there, this express statute, apart from all other laws of New Jersey, prevented the wife by her voluntary litigation of her husband’s suit from enabling the husband to obtain in Nevada a decree of divorce which shall have full “force and effect” in the State of New Jersey. The statute ordains that in the cases to which it applies, the New Jersey res shall not be transported to a foreign state and shall not be affected in New Jersey by a decree of divorce obtained in a foreign state to which.-one of the spouses may have emigrated with intent to obtain the divorce, even though the emigrant may become a bona fide resident of such foreign state.

6. The result of the foregoing considerations is that the courts of the State of New Jersey are bound to regard the defendant in this suit, notwithstanding his fraudulent Nevada decree, as the husband of the complainant, and as such charged with the duty of supporting her and subject to the action for non-support provided by the twenty-sixth section of our present Divorce act.

7. The second defence set up by the defendant in this suit if sustained is valid and effective even if it be assumed that the marriage relation still exists between the complainant and the defendant, and that the defendant was guilty of the matrimonial offence of abandonment and non-support for which the present suit brought under section 26 of the Divorce act is the appropriate remedy.

The defendant appears to have made voluntary payments of $30 a week until December 19th, 1908, when he obtained his Nevada divorce. Since that time he seems to have paid little or nothing except possibly some amounts which have been forced from him by proceedings in this court. The complainant is forty-seven years of age. The only living .child of her marriage with the defendant is a young man now about twenty-six years of age, who is married and works for the support of himself and his wife. The complainant practically has no property and seems to have no trade or capacity for earning money in any business in which she has had experience. The complainant was worn out and discouraged by the protracted litigation between herself and. her husband, which, commenced in March, 1909. In 1914 the defendant sent his son, the young man above mentioned, to the complainant, offering $400 for a release or settlement, the nature of which he described through the son. The complainant after conferring with her son, but without any advice from any other person, wrote out and delivered to the son for transmission to the defendant the.following paper:

“Paterson, N. J., Oct. 5th, 1914.
“Agreement.
“In consideration of four hundred dollars (the receipt of which is hereby acknowledged) in'full settlement of all claims I may have against Geo. T. Lister I agree to discontinue at once all and any suit or suits against the said Geo. T. Lister.
“Minnie Lister.”

As I understand the contention of counsel for the defendant, this paper is to be construed as a release of the complainant’s claims which were advanced in the action then pending, this present action for maintenance, or perhaps also of all claims for support up to the date of the receipt. If it had a wider scope and undertook to discharge the defendant from all future liability to support his wife, the complainant, it would be very much harder to sustain it as a i\elease from a wife to a husband than when it be confined within the narrower limit above mentioned. I shall therefore briefty consider the question whether this release can be held in equity as discharging the husband from all liability in this present suit, and as effecting in fact a discontinuance of this suit — a dismissal of the complainant’s bill.

At the very start it must be borne in mind that all contracts between man and wife are void in law, and in equity are only contracts sub modo and are entirely within the control of courts of equity, and are enforceable especially against the wife only to the extent to which they may be found equitable and fair. 3 Pom. Eq. § 1121; Demarest v. Terhune, 62 N. J. Eq. 663, 667.

It would perhaps clear up this subject of the status of so-called contracts between man and wife if such transactions were' not regarded as contracts even sub modo. A contract between a man and wife void at law may be deemed in equity as mere, conduct — a mere transaction out of which arise equitable rights and equitable duties. Without, however, indulging in any metaphysical discussion, it is enough to recognize in this ease that this paper produced by this husband cannot be enforced in a court of equity so as to' accomplish what is unfair, unjust or oppressive.

There can be no doubt in my judgment that to permit this man who had so greatly wronged his innocent wife to escape from this present litigation and discharge himself from all costs and expenses of this suit, and to secure the dismissal of this bill, would be to permit him to practice extortion and oppression upon the woman whom he has wronged. It will be observed that no provision is made in this paper for the future support of this impoverished and deserted wife. The testimony of the wife shows that she was under great stress of pecuniary embarrassment'and greatly discouraged in her effort to get justice from her derelict husband, and was tempted by the opportunity for temporary relief which was held out before her when she executed this paper. Hnder these circumstances she drew, partly at the dictation of her son, the so-called release, signed the same and delivered it to the son. The son delivered the paper to the father and brought back to the complainant the sum of $400 which had tempted her to attempt to perform an unwise and improvident act.

In my judgment the defendant’s answer — his supplemental answer setting up this release — exhibits a contract which a court of equity will not enforce, and that therefore the wife is entitled to a decree for maintenance upon her bill. The $400 paid by the husband will be credited upon any amount of past or future alimony or suit money which the court may order the husband to pay to the wife. The details may be arranged upon settlement of the decree.


source: Caselaw Access Project

author: Leaming, V. C.

license: Public Domain

text:
    Simon Dalsheimer et al. v. Graphic Arts Company et al.
    [Submitted February 18th, 1916.
    Determined March 23d, 1916.]
    1. Under the statutes touching dividends to stockholders and distribution of capital to stockholders, after payment of debts, a transaction whereby a New Jersey corporation, pursuant to resolution of directors, transferred all its property to a Delaware corporation of the same name, receiving in return stock in the Delaware company, which it, the New Jersey company, redistributed to its own stockholders in return for the surrender of their stock, was illegal, though the articles of incorporation of the New Jersey company provided that with the consent, and pursuant to the vote of the holders of the majority of its stock, the directors should have power to sell or otherwise dispose of the whole property of the corporation.
    2. On bill for relief by a stockholder of a New Jersey corporation which has been rendered insolvent by the transfer of its assets to a Delaware corporation in return for stock in the Delaware company, which it distributed to stockholders in return for their stock, the only practicable relief which can be afforded is the appointment of a receiver of the New Jersey corporation, legal title to the assets of the New Jersey company being in the Delaware corporation, the Delaware corporation and its directors being non-residents and not having appeared, and few if any of its assets being in New Jersey.

      3. A stockholder’s bill, in behalf of his corporation, to sot aside a contract which has been, made by the board of directors with its members, must be promptly filed, or it cannot be maintained for laches.
    4. Laches cannot be attributed to the creditor of a corporation, who is also a stockholder, seeking appointment of a receiver, for his failure to protest or make known his dissent to a transaction whereby the corporation, which is insolvent, has been unlawfully deprived of legal title to its assets by resolution of its board of directors, transferring them to another company, in return for stock to be distributed to stockholders.
    O. The usual governor’s proclamation iagainst the charter rights of the corporation for non-payment of taxes in no way interferes with the appointment of a receiver to collect the assets and wind up the affairs of an insolvent corporation.
    On final hearing. On bill for relief.

      Messrs. Grey & Archer, for the complainants.

      Messrs. Bourgeois & Coulomb, for the defendants.
   Leaming, V. C.

Complainant Dalsheimer is a stockholder and creditor of defendant Graphic Arts Company, a corporation of this state, and seeks relief against a transfer of the assets of the corporation, which transfer has been heretofore made to a corporation' of another state.

The transaction. of which complaint is here made may be briefly characterized as an attempt of the New Jersey corporation to abandon its New Jersey charter and to operate in the future under a Delaware charter in order to escape the burden of the New Jerse3r annual franchise tax. The method adopted was simple but unscientific. A Delaware corporation was formed of the same name and capitalization as the New Jersey corporation, and the directors of the New Jersey corporation, by resolution, then authorized a transfer of the entire assets of the New Jersey corporation to the Delaware corporation in consideration of the Delaware corporation assuming the debts of the New Jersey corporation and issuing its capital stock to the several stockholders of the New Jersey corporation upon such stockholders surrendering their New Jersey stock. A stockholders’ .meeting then approved the plan and the transfer of assets was made, and all stockholders of the New Jersey corporation, except two, surrendered their New Jersey stock and accepted an equal number of shares in the Delaware corporation. The former board of directors of the New Jersey corporation were made directors of the Delaware corporation, and that corporation has since operated without change or disturbance of the business or its methods.

Complainant, a large stockholder, and also a large creditor of the New Jersey corporation, has at no time consented to these proceedings. His bill seeks a decree declaring the proceedings unlawful and void and setting aside the transfer of the assets, and, in the event of this being found impracticable or impossible in this suit, praying for the appointment of a receiver to conserve the assets and rights of the New .Jersey corporation and its creditors.

The New Jersey corporation and the Delaware corporation, and all the directors of the Delaware corporation, are made defendants. The New Jersey corporation has answered; all the other defendants, except one director, are non-residents and have refused to submit themselves to this jurisdiction.

It is obvious that no legal justification can be fcflmd to support the proceedings which have been taken. It has been urged., in behalf of defendant, that the transfer of assets is authorized by the following provision of the articles of incorporation of the New Jersey corporation:

“With the consent in writing and pursuant to the vote of the holders of a majority of the stock issued and outstanding, the directors shall have power and authority to sell, assign, 'transfer or otherwise dispose of the whole property of this corporation.”

But this provision cannot be understood as authorizing a transfer of the assets without an. adequate consideration moving to the New Jersey corporation. The capital stock of the Delaware corporation was the primary consideration of the transfer or sale of the assets of the New Jersey corporation. That stock did not pass to the treasury of the New Jersey corporation; it was ordered issued to the several stockholders of the New Jersey corporation. The contemplation of the transaction was in general effect a delivery of the stock of the Delaware corporation to the New Jersey corporation, and. a distribution of that stock to the several stockholders of the New Jersey corporation contributes nothing to its vitality; our statutes touching dividends to stockholders from profits and distribution of capital to stockholders after payment of debts clearly render the entire transaction unlawful. In fact, no consideration passed, or was intended to pass, to the New Jersey corporation; that corporation was intended to be abandoned and set adrift without assets or stockholders, and its creditors were left to look to the obligation of the Delaware corporation to pay the debts of the New Jersey corporation under the contract of assumption.

It is apparent, however, that no relief can be administered in this' suit through a decree setting aside the transfer of assets or declaring the transaction void or holding the directors responsible for misconduct of official duties, for the legal title to these assets is in the Delaware corporation, which corporation is not subject to the jurisdiction of this court in this suit, and the several directors are non-residents and have not appeared in this suit, and few, if any, of the assets in question are within this jurisdiction." It seems clear, therefore, that the only practicable relief which can be afforded is the appointment of a receiver' of the New Jersey corporation, which is now in an insolvent condition, to the end that the receiver may pursue such remedies as are open to him to restore to the New Jersey corporation for the benefit of its creditors and stockholders the property and propert}r rights which have been unlawfully withdrawn from it.

It is urged that complainant should be denied relief by reason of laches. Complainant had notice of the stockholders’ meeting, at which the action of the directors authorizing the transfer of assets was approved, and failed to attend that meeting and thereafter learned of the action which,had been taken and for a considerable time failed to protest or make known his dissent. There can be no doubt that in some circumstances laches can be attributed to a stockholder and remedies to which he would be entitled but for his laches denied. A stockholder’s bill in behalf of his corporation to set aside a contract which has been made by a board of directors with its members must be promptly filed ■or it cannot be maintained. But, in the present case, there is brought before, this court an insolvent corporation which has been unlawfully deprived of the legal title of its assets, and a stockholder and creditor of that corporation asks for the appointment of a receiver to conserve those assets. Without here giving consideration to the question whether laches may be attributed to a stockholder which should deny to him a right of this nature, it seems entirely clear that such laches cannot be attributed to him as a creditor. This New Jersey corporation owed complainant a large sum of money at the time this unlawful transfer of assets was made. The assumption of the debt by the Delaware corporation is not payment, and patient waiting of a creditor of a corporation for money due him is not laches which denies to the creditor the right to seek the appointment of a receiver to protect his rights as a creditor.

It also appears that since the transfer of assets the usual governor’s proclamation has been made against the charter rights of defendant corporation for non-payment of taxes. This proclamation in no way interferes with the appointment of a receiver to collect the assets and wind up the affairs of the insolvent ■corporation.

I will advise a decree for the appointment of a receiver.


text:
    Collings Carriage Company v. German American Insurance Company et al.
    [Submitted April 18th, 1916.
    Determined April 19th, 1916.]
    1. An arbitrator who has signed an award should not be allowed to contradict his solemn act and testify against his award.
    2. Where, pursuant to terms of contracts of insurance, it was agreed that each party ^should appoint an appraiser, and that the two appraisers so appointed should appoint an umpire, to whom they would submit their differences, and that an award in writing of any two should determine the amount of loss, the signature of the umpire is without vitality unless and until the two appraisers have failed to agree.
    3. Where, pursuant to the terms of insurance contracts, two appraisers and an umpire were chosen and made an award as to the sound value of the property, which one of the appraisers signed without giving his consideration to or exercising his judgment on the subject, because he was told tfiat the appraisal of the sound value of the property was a mere matter of form, the award was invalid, since if, through fraud, accident or mistake, an award does not embody the real judgment of the parties who return it, because there has been no consideration or attempt at consideration, it is not their award nor a compliance with, the requirements of the agreement of submission.
    4. The court has no concern with errors of judgment on the part of appraisers making an award.
    On final hearing. On hill to set aside an award.

      Mr. Joseph Beck Tyler and Mr. Norman Grey, for the complainant.

      Messrs. James & Malcolm G. Buchanan, for the defendants.
   Leaming, V. C.

Complainant is the owner of certain buildings which have been partially destroyed by fire. Defendants are severally fire insurance companies who have insured complainant against the loss which he has sustained. Pursuant to the terms of the contracts of insurance the insured and insurers respectively entered into an agreement submitting to appraisers the determination of “sound value” and “loss and damage.” By the agreement of submission the parties agreed to each appoint an appraiser and that the two appraisers so appointed should appoint an umpire to whom they would submit their differences in case of failure to agree, and that the award in writing of any two should determine the amount of loss. By this agreement of submission two distinct matters are referred to the appraisers for their “estimate and appraisement” in the manner already stated, namely, “the sound value” „of the property and “the amount of loss or damage directly caused by the fire to and upon the same.” These two items, that is, “sound value” and “loss and damage,” are required to be stated separately in the award.

Pursuant to this agreement of - submission complainant appointed Patrick J. Earley as an appraiser and defendants appointed Erank Turner as an appraiser and the two appraisers appointed George Bachman as umpire. An award was thereafter signed by the three in which they certified that the “sound value” was $18,375.85 and that the “loss and damage” was $20,237.35.

By this suit complainant seeks to set aside the award.

Without entering upon a detailed discussion of the testimony I find the facts to be that after the appraisers had fully considered the subject of loss and damage and reached an agreement that the loss and damage amounted to $20,237.35, and before either of them had entered upon the consideration of or undertaken to ascertain the “sound value,” a statement was made, by Mr. Turner to Mr. Earley to the effect- that the appraisal of the sound value of the injured property was a matter of mere form and of no importance and without effect. This statement, though false in fact, was apparently made in good faith. The statement was believed to be true by Mr. Earley and was -operative to lead him to wholly withdraw from his consideration the subject of sound value and induced him to subscribe to an award which certified the sound value without in fact exercising his judgment on that subject. The two appraisers and the umpire accordingly signed an award which certified the loss and damage which had been ascertained and also certified that $18,375.85 was the sound value without Mr. Earley having made any effort whatever to ascertain the sound value and- without his having given any consideration to that subject. Mr. Turner and the umpire had figured the approximate cubical contents of the buildings and arrived a.t the sound value by an artificial rate per cubic foot. Mr. Earley was present when that calculation was made but did not participate or- exercise his own judgment in the slightest degree by reason of his belief that it was a wholly immaterial matter, and he accordingly signed the award under that belief.

In arriving at these findings of fact I am not unmindful of the necessity of certainty of proofs in matters of this nature. The evidence fully satisfies me that there can be no substantial doubt that the award was made in the manner here stated. It has also been held that an arbitrator who has signed an award should not be allowed to contradict his solemn act and that, in consequence, he should not be permitted to testify against his award. Whether that rule should be applied to proceedings of appraisers in appraisements of this nature and whether it should be applied, to a case in which either an arbitrator or appraiser has through misapprehension signed an award in a matter touching which he had not in fact participated need not be considered here, for the evidence other than that of Mr. Earley is, in-my judgment, adequate to fully establish the facts already stated. The matters which transpired immediately after the award was signed render it impossible to doubt that the award was made in the manner above stated.

The circumstance that the umpire and one appraiser gave some consideration to the subject of sound value and signed the award is immaterial. The signature of the umpire is without vitality unless and until the two appraisers have failed to agree. There was no disagreement between the two appraisers touching sound value.

The situation thus presented discloses an award signed by the two appraisers certifying to a sound value ascertained by them, whereas one of them did not in fact either appraise or ascertain or undertake to appraise or ascertain the sound value, but on the contrary gave no consideration whatever to that subject. '

There is one essential element which obviously must enter into any award, to give it inherent vitality. It must be a real award; it must correctly embody the real judgment of the parties who make it. If through fraud, accident or mistake the written instrument which is returned as an award is not the real award of the parties who return it, if through fraud, accident or mistake it does not embody the real judgment of the parties who return it, it is not their award. With errors of judgment on the part of the parties making the award this court has no concern; but if the award which is returned does not embody their real judgment on the matters submitted for their award this court should relieve against its operation as an award.

In the submission here in question the appraisers were required to ascertain and certify the sound value and the loss; the umpire was authorized to act only in case of the inability of the appraisers to agree. If the appraisers performed the' duties required of them in the agreement of submission and exercised their honest judgment on these two material matters submitted for their judgment, and the award returned embodies their judgment, there is in the present case no infirmity in the award which this court can’consider. But if either of these two material matters which were submitted to them for the exercise of their judgment was not in fact considered by both, or either of them, there was obviously not only a failure of duty on their part but no real award pursuant to the submission, for in such case the award certifies an exercise of judgment pursuant to the submission, which, in fact, was not exercised. The distinction between an error of judgment and a total failure to give any consideration whatever to the matter submitted is clear and dis-' tinct. In the one case, there is the honest exercise of a frail judgment; in the other, there is'no honest attempt to exercise any judgment, and the award is necessarily a false certification of judgment. In the latter circumstance the inquiry is not whether they gave mature consideration to the subject or whether they might have given more consideration to the subject, but is whether the subject was considered at all for the purpose of exercising a judgment. The submission is for their consideration .and judgment. There must be a consideration and judgment or the submission is not followed. If an appraiser does not act as an appraiser he cannot make an award. There can be no real award when there has been no consideration, or attempt at consideration, of the subject submitted; without an exercise of honest judgment there can be no award which is binding on the parties in interest.

In the absence of fraud, it is clearly immaterial why one appraiser failed to consider the subject of sound value. If he did not consider it, and signed the award without intending to thereby proclaim or certify his judgment touching it,' he has not oily failed to comply with the requirements of the agreement of submission through his failure to appraise, but has, through accident and mistake, executed a certificate contrary to his purpose and intent. The award which was signed was no more Mr. Earley’s award touching sound value than it would have been had it been signed by a stranger.

I am convinced that complainant should be relieved from the operation of this award. But I see no justification for doing more than require the appraisers to again meet and consider the subject of sound value. They have considered and determined the amount of loss and damage. The mistake of Mr. Earley in failing to consider sound value has no bearing upon that independent part of the award already considered and determined. If they cannot agree upon sound value after they have considered that subject, the umpire should be called in to act with them, and tire award then made on sound value will fully discharge their duties. This accords with the practice adopted in In re Dare Valley Railway Co., L. R. 6 Eq. 429.

The bill bases its claim for relief upon allegations of fraud. The bill should be amended to conform to the proofs. No injury will flow to defendants from that course, as all witnesses having knowledge of the matters in controversy have been fully examined.

I will advise a decree to-that effect.


text:
    Charles A. Lippincott and Isaac Lippincott, partners, trading as C. A. Lippincott & Brother, v. Harvey A. Shivers et al.
    [Submitted February 3d, 1916.
    Determined February 24th, 1916.]
    Under the statute requiring that the affidavit of consideration of a chattel mortgage shall state “the consideration of said mortgage and as nearly as possible the amount due and to grow due thereon,” where the affidavit to such a mortgage stated correctly that the consideration was three promissory notes given to the mortgagee for store account and money advanced, correctly stating the due dates of the notes, but misstating that one of them was due on demand, while failing to name the makers, a father having executed one and his son the others, and failing to state that the son had assumed his deceased father’s note pursuant to a plan to avoid administration and had given the other two for money and goods supplied himself and mother by the mortgagee, such affidavit was sufficient.
    On bill of judgment creditor to set aside lien of chattel mortgage for insufficiency of affidavit of' consideration. On hearing on return of order to show cause.

      Mr. George B. Evans, for the complainants.

      Messrs. Davis t& Davis, for the defendants.
   Leaming, V. C.

The single question here involved is whether the affidavit annexed to defendant’s chattel mortgage satisfies the requirements of our statute.

The affidavit is as follows:

“Geo. T. Middlteon, the mortgagee in the foregoing mortgage named, being duly sworn on his oath says that the true consideration of said mortgage is as follows, viz.: three promissory notes payable at the Moorestown National Bank as $307.26 with interest, $637.88 with interest and $40 With interest bearing date in order as follows: 10-26-1909, 4r-29-1915, 7-26-1915, on demand amounting to ten hundred and seventy-two dollars and twenty cents ($1,072.20), which was given to Geo. T. Middleton, mortgagee, for store account and money advanced, and that there is due on said mortgage the sum of ten hundred and seventy-two dollars and twenty cents (1,072.20) due one day from date besides lawful interest thereon from the thirtieth day of October, A. D. 1915.”

The statutory requirement is, that the affidavit shall state “the consideration, of said mortgage and, as nearly as possible, the amount due and to grow due thereon.”

The affidavits filed at the return of the order to show cause adequately establish that the chattel mortgage affidavit here in question was true and entirely accurate to the following extent: There was due to the mortgagee from the mortgagors at the time the mortgage was executed the sum named in the affidavit annexed to the mortgage, and that indebtedness was evidenced by three several promissory notes held by the mortgagee of the dates and/amounts specified in the affidavit, and these three promissory notes had been given to the mortgagee for “store account and money advanced.”

The details of the transactions between the parties to the-mortgage which disclose more specifically the origin and history of the notes and the indebtedness which they represent, and which are not included in the affidavit annexed to the mortgage, relate almost wholly to- the old note of October 26th, 1909. That note, it is now shown, was given to the mortgagee on the day it bears date by Joseph- C. Shivers for supplies from the store of the mortgagee. Joseph C. Shivers subsequently died intestate, leaving a widow, Bebecca Shivers, one of the mortgagors, and a son, Harvey A. Shivers, the other mortgagor. The deceased, at the time of-his death, still owed the present mortgagee the note referred to, and was also indebted to others in small amounts. The chattels covered by the present mortgage are farming implements and farm stock which were owned by Joseph C. Shivers at the time of his death. To save the necessity of administering the estate of Joseph C. Shivers in court the son and widow (present mortgagors) took oyer the chattels as their own and arranged with all the creditors to waive court administration of the estate by assuming the payment of all debts. Among the debts so assumed was the note of October 26th, 1909, referred to in the chattel mortgage affidavit. Middleton, the mortgagee, after the decease of Joseph C. Shivers, and tire assumption of payment of the note by his son and widow, continued to supply goods from his store to the son and widow as he had formerly extended credit to Joseph C. Shivers, and also assisted the son and widow in paying the debts of Joseph C. Shivers by supplying money for that purpose. The three notes named in the affidavit are the note of Joseph C. Shivers, the payment of which had been assumed by his widow and son (the present mortgagors) , and two other notes which had been made by the son after his father’s death for goods supplied to the son from the store and money advanced to assist the son and widow in discharging debts of Joseph C. Shivers.

There is also an inaccuracy in the mortgage affidavit in referring to the notes as “on demand.” The old note of Joseph C. Shivers was not a demand note; the two notes of the son were demand notes.

Had the foregoing illuminating details been embodied in the affidavit annexed to the mortgage, no question touching its sufficiency could now arise. The only question now is whether the omission of these details, or any of them, renders the affidavit insufficient to meet the requirements of the statute.

It will be observed that the affidavit annexed to the mortgage accurately states the amount of the indebtedness of the mortgagors to the mortgagee, and accurately states the dates and amounts of each of the three notes held by the mortgagee for that aggregate indebtedness and the place where the three notes are payable, and truthfully states, though not with detailed accuracy, that the three notes were given to the mortgagee for “store accounts and money advanced,” but does not specifically state the names of the makers of the notes or the fact that the store account represented by the old note was a store account of Joseph O. Shivers, for which the old note had been given by him and assumed by his son and widow.

The situation thus presented is that of an honest transaction between laymen who have sought to secure by a mortgage an honest indebtedness, and to that end the mortgagee has made and annexed to the mortgage an affidavit. stating the consideration of the mortgage as he understood it. The consideration was stated by him with substantial truth. It lacked details which would have been useful to enable a stranger to fully understand the course of dealings which had brought about the indebtedness, but it was an honest statement of substantial truth, so far as the consideration was concerned. That, I'understand, to be the test of sufficiency applied in Howell v. Stone, 75 N. J. Eq. 289. The error in the failure to limit the words “on demand” to the two later notes is not an error which goes to the question of consideration. The broad view of the situation, as it would almost necessarily appeal to laymen, was that the consideration of the mortgage was the three notes specified in the affidavit as having been “given to Geo. T. Middleton, mortgagee, for store account and money advanced.”

From the viewpoint of the mortgagee, that was the whole transaction; he had supplied the goods and money and had received for his goods and money the three specified notes, and the mortgagors owed him the amount and the mortgage was being executed to secure the amount. The legislation in terms exacts no more than the naked requirement that the consideration of the mortgage be stated in the affidavit of the mortgagee, and the statute is wholly silent as to the purpose of the requirement; in such circumstance, it seems impossible to determine that any fair and honest and reasonably accurate statement of the indebtedness which the mortgage is to secure is insufficient to meet the requirements of the statute. I am convinced that the affidavit here in question states the consideration of the mortgage with substantial truth-and must be held sufficient.

I will advise an order discharging the order to show cause.


text:
    Wilfred B. Wolcott, receiver, &c., v. Martin E. Waldstein et al.
    [Submitted October 25th, 1915.
    Determined February 16th, 1916.]
    1. While in valuing property future prospective profits may be considered, such profits cannot be made a basis of valuation for purposes of capitalization in a new enterprise where no earning capacity has been demonstrated; and where property of that kind for which only $70,000 was paid, was on incorporation capitalized at $250,000, it was obviously overvalued.
    2. Where incorporators to whom stock was originally issued received it without payment, they are liable to creditors of the corporation, notwithstanding their subsequent transfer.
    3. On bill to declare corporate stock unpaid and procure an assessment for payment of creditors, where the only defendants served asserted rights against persons not served, but such rights were merely to contribution, that fact will not defer a decree against such defendants for the benefit of creditors.
    4. On a bill to declare corporate stock unpaid and force assessments, where defendants were liable regardless of their transfer, the 6oí¡o fides of such transfer is immaterial.
    5. Where stock certificates were issued and placed in escrow, but were never delivered to persons for whom they were intended, there was no consummation of the stock issue.
    6. Upon insolvency of a corporation, the proportionate amount of un- ’ paid subscriptions and the amount necessary to satisfy debts and expenses may be ascertained by the chancery court either by original bill or by petition in the insolvency suit.
    On bill by a receiver in insolvency to declare corporate stock unpaid and to procure and enforce an assessment for the payment of creditors.

      Messrs. Berry & Biggins, for the complainant.

      Mr. George 17. W. Porter, for tlie defendants.
   Leaming, V. C.

1. It is impossible to escape the conclusion that the capital stock of this corporation was originally issued in payment for property purchased at a gross overvaluation.

The nearest approach to a justification of the valuation placed upon the property is to be found in the claim that the circumstances which existed at the time the valuation was determined upon may have justified a reasonable expectation that the cox*poration under proper management would develop an earning capacity proportionate to its capitalization. Euture prospects or prospects of future profits can never be properly ignored in any intelligent valuation of property; but it is well settled that under our statute such prospective future profits cannot be made the basis of valuation for purposes of capitalization in a new enterprise with neither present nor demonstrated earning capacity. The situation here presented bears no analogy to that presented in Railway Review v. Groff Drill Co., 84 N. J. Eq. 321, since affirmed on opinion below.

The property here in question was taken over by the corporation at a valuation of $300,000, and payment was authorized by stock to the amount of $250,000 (the entire authorized capital) and bonds for $50,000. Waldstein, the vendor and leading spirit in the newly organized corporation, had recently acquired the property at a valuation of $20,000. Of that amount $5,000 .had been paid by him in cash axxd $15,000 was to be paid in bonds of the new corporation to the amount of $15,000 and stock of the new corporation to the saixxe amount. Waldstein had also erected a tram on the property which had cost not more than $50,000. This estimate of $70,000 as the cost of the property to Waldstein 'is more than liberal, .and I am fully convinced that the property could not have been properly valued at that time at more than that amouxxt for purposes of capitalization. Any value in excess of that amount which may have appealed to the board must have been as anticipated future profits of an enterprise wholly untried and essentially experimental.

It is difficult, if not impossible, to accredit the members of the board who made the valuation with good faith in the action taken by them in determining the.“fair value” of the property purchased. The members of the board who determined upon the value and authorized the purchase were defendants Waldstein, Bomeisler and Cassidy. Whether Bomeisler and Cassidy at that time had an interest in the property with Wald-stein is a matter of dispute; but it is reasonably certain that if at that time they had not already acquired an interest in the property they at that time anticipated sharing with Wald-stein, through a settlement with him, a part of the stock the issuance of which they were authorizing. The personal interests and purposes of these three men were so far inconsistent with an impartial exercise of their statutory duty as to appropriately challenge the good faith of their valuation, especially in the light of all the circumstances disclosed by the evidence. The provision of the charter of the corporation authorizing directors to contract with the corporation cannot be understood to justify an invasion of the statutory requirements of bona fide valuation.

It seems reasonably apparent that the real plan of the members of the board was to turn the property over to the corporation at an artificial valuation adequate in amount to constitute the stock full jjaid and certify out bonds to the amount of $50,000 and to have $75,000 of the full-paid stock so issued placed in trust for delivery as a bonus, dollar for dollar, in the sale of the remaining $75,000 of bonds. Evidence of the plan to give full-paid stock as a bonus with bonds is to be found in the testimony of Gaspary and in the consideration expressed in the deed to Bomeisler and in the circumstance of placing $75,000 of the stock in trust with Cassidy.

I am fully convinced that the property conveyed to the company could not have been properly regarded by the parties fixing the valuation as actually worth more than $70,000 and that the-valuation in excess of that amount must be deemed either as deliberate and intentional overvaluation or'as an unlawful capitalization of prospective future profits. Eor the purposes of this case I think it immaterial which.

2. I think it immaterial in this case whether at the time the' property was purchased defendants Bomeisler and Cassidy had fully acquired an interest in the property. They at that time anticipated sharing with Waldstein, the vendor, the stock which was to be issued for the property and subsequently did share it. Assuming that their final determination to acquire this stock was reached after the purchase was authorized, they thereby became purchasers from Waldstein of stock issued for property which they had assisted him in overvaluing; in these circumstances it is doubtful whether the equitable rights of creditors against either of the three can be distinguished. But still assuming that Bomeisler and Cassidy purchased their stock from Waldstein after he had acquired it, and recognizing, for present purposes, a distinction between the liability of the person to whom such stock is originally issued and a person to whom it is transferred with notice of the infirmity, the liability of Waldstein to creditors would be for the entire overvaluation, notwithstanding the fact that he has since • disposed of part or all of his stock, and the liability of Bomeisler and Cassidy to creditors would be for the unpaid part of the stock acquired by them, notwithstanding the fact that they may have since parted with part or all of it. As $40,000 par value of stock was acquired by Bomeisler and $34,000 of stock was acquired by Cassidy the liability of each of them is far in excess of the amount which will be necessary to satisfy the debts and expenses of the receivership, and the only materiality as to whether they are to be treated on the footing of "original subscribers” or as transferees of an original' subscriber, relates to rights of contribution. As Bomeisler and Cassidy are the only defendants who have been served, contributory rights can be hereafter determined and need not defer a decree herein against them.

3. The view taken here touching the liability of defendants Bomeisler and Cassidy renders it unnecessary to determine whether their transfer of stock to Beale was Iona fide.

4. I am satisfied that the stock issue of August, 1905, was not consummated. The stock certificates were issued and placed in escrow, but were never in fact acquired by the person for whom they were intended.

5. Rear is expressed in the brief of defendant Cassidy that a decree herein ascertaining the amount that has been paid on the stock of the insolvent corporation and providing for an assessment for so much of the unpaid amount as may be necessary to pay creditors and the receivership- expenses may not be conclusive in a foreign jurisdiction in an action by the receiver to collect the unpaid amounts. The suggestion is that proceedings for assessment should be by petition in the suit-in which the receiver was appointed and not by independent bill, as herein. In view of the decisions of our court of errors and appeals I think it must be recognized as finally settled that the conclusive ascertainment of the proportionate amount of unpaid subscriptions and the amount necessary to satisfy debts and expenses may be had in this court at the instance of the receiver in insolvency either by original bill or by petition in the insolvency suit. Gilson v. Appleby, 79 N. J. Eq. 590, and Easton National Bank v. American Brick Co., 69 N. J. Eq. 326; 70 N. J. Eq. 722, were of the former nature, the latter ease having assumed that status by stipulation prior to the decree. Holcombe v. Trenton White City Co., 80 N. J. Eq. 122; 82 N. J. Eq. 364, is of the latter nature. But should defendants Bomeisler and Cassidy desire to satisfy their liability and seek contribution, from other stockholders there can be no difficulty in the decree adequately providing for them to enforce their remedy through the medium of the receivership at their own expense in such manner as they may be advised is necessary.

6. The amount of stock issued was $250,000. As the bonds for $50,000 were not issued a credit of $70,000 must be made as a payment on the stock, leaving a balance of $180,000 unpaid, or seventy-two per cent, of the par value of the stock. The debts were ascertained at the hearing. The probable expenses of the receivership must yet be ascertained. I will hear proofs and ascertain that amount on any motion day on notice. A decree* will then be advised for an assessment for sufficient to satisfy the debts and receivership expenses. Unless it can be then shown that some stockholders other than the two who have answered can be made to respond, the assessment must be made of a-percentage amount sufficient to enforce against each of the answering defendants the ascertained debts and expenses, and a decree entered against each of them for that amount, with the right of each to enforce proportionate contribution from the other.