text:
    William Frey and Leslie H. Merritt, complainants, v. Edith Nielson et al., defendants.
    [Filed March 26th, 1926.]
    1. The courts of one state are not bound by comity to give effect to adoption proceedings of a child, had in another state.
    2. The common law of England as to descent of land is in force in New Jersey, except as it has been modified by statute.
    3. The statutes of New Jersey as to adoption of children give right of inheritance only to children adopted under its provisions.
    4. The rule of the common law that the heir must be born in lawful wedlock is recognized as a fundamental part of the law of descent, and the effect given to the statutory modifications of the rule is only within the precise limitations of the statutes.
    5. The statute of descent of New Jersey precludes inheritance by any except children born in wedlock, and the modification by statute permitting adopted children to; inherit applies only to children adopted under the provisions of the New Jersey statute, and the doctrine of comity should not, in this class of cases, be applied, because to extend this curtesy to the adoptive acts of other states would be in contravention to our own statute of descent.
    On bill, &c.

      Messrs. Lehlbach, Johnson & Ormond, for the complainants.

      Mr. Louis J. Beers, for the defendants.
   Church, V. C.

This is. a suit to determine whether Edith Nielson, a child of Christian Nielson, adopted under the laws of the State of New York, can inherit land in the State of New Jersey. Two questions are propounded by counsel — first, assuming the regularity of the adoption in New York, can this child inherit? second, if she can, are the proceedings regular under the New York statutes?

First. Can a child adopted in New York inherit land in New Jersey?

It has been suggested that under the so-called full faith and credit clause of the United States constitution (section 1, article 4) the courts of the state are bound to give effect to adoption proceedings of another state. This, however, has been definitely settled by the supreme court of the United States in Hood v. McGehee (1914), 237 U. S. 611. It was in this case held that they are not required so to do. This case followed Olmstead v. Olmstead (1909), 216 U. S. 386. Here it was held that the full faith and credit clause does not require the courts of one state to give effect to a statute of another state legitimatizing children born out of wedlock. In the Hood Oase the court rested its decision on the ground that the Alabama statute of descents, as construed by the supreme court of that . state, excluded children adopted by proceedings in other states. The court says, and this is significant: “Alabama is the sole mistress of the devolution of Alabama land by descent.”

The next question that arises is how far the public policy of this state will recognize as a matter of comity a foreign adpption in determining on whom its own law of descent devolves the title of lands within its boundaries. It should be noted that this question is one of novel impression in New Jersey. I have been unable to find any case directly in point in our reports, although in the case of Dayton v. Adkisson, 45 N. J. Eq. 603, this court dealt with a somewhat similar situation involving the right of a child rendered legitimate in Pennsylvania to inherit land in New Jersey. It was there decided that such child could inherit. This decision was rendered long before the United States supreme court cases cited above — that is, in 1889 — and never has been reviewed by our court of errors and appeals. “Comity between nations and states is not the right of one state to have its statutes and judicial decisions followed in another state, but a courtesy, as it were, extended by one state to another in the construction of statutes and decisions of a foreign state if not in contravention of its own statutes and decisions.” Corp. Jur. 1235, and cases cited.

An examination of the cases in other states reveals a decided conflict of authority as to how far courts shall go in the enforcement of this doctrine of comity. On this question see notes contained in Lawyers’ Reports Annotated to Irving v. Ford, 65 L. R. A. 177; to Brown v. Finley, 21 L. R. A. (N. S.) 679, and to Anderson v. French (1916A.), L. R. A. 666. The cases of Ross v. Ross (cited in Dayton v. Adkisson, supra) and Miller v. Miller, 91 N. Y. 315, rest squarely upon the application of the rule of comity. There is, however, another line of cases holding that only the law of the situs governs in matters of the descent of land. These cases all follow the principal laid down in Doe d. Birtwhistle v. Vardill, 2 Cl. & Fin. 571, 600; 5 Eng. Rul. Cas. (H. L., 1840) 748. A careful examination of these eases, both pro and con, indicates that the application of the doctrine of comity in each instance was largely governed by an analysis of the law of descent prevailing in the state where the opinion was rendered.

As our law of descent id so clearly an outgrowth of the English common law, a consideration of the Birtwhistle Gase is important. It was there held that a child born in Scotland, of parents domiciled there, who at the time of his birth were not married, but who afterwards intermarried in Scotland (there being no lawful impediment to their marriage either at the time of the birth or afterwards), although legitimate by the law of Scotland, is not by such marriage rendered capable of inheriting lands in England. The reason for the decision is given by Lord Chief-Justice Tindal as the unanimous opinion of the judges in whose presence the case was argiied before the lords (who adopted it as their own), as follows: "My lords, the grounds and foundation upon which our opinion rests are briefly these: That we held it to be a rule or maxim of the law of England, with respect to the descent of land in England from father to son, that the son must be born after actual marriage between his father and mother; that this is a rule jurispositivi, as are all the laws which regulate succession to real property, this particular rule having been framed for the purpose of excluding, in the descent of land in England, the application of the rule of the civil and canon law, by which the subsequent marriage between the father and mother was held to make the son born before marriage legitimate; and that this rule of descent being a rule of positive law annexed to the land itself, cannot be allowed to be broken in upon or disturbed by the law of the country where the claimant was bom, and which may be allowed to govern his personal status as to legitimacy, upon the supposed ground of the comity of nations.” The opinion goes on to apply the rule in the so-called "statute of Merton,” 20 Sen. III. ch. 9 (anno 1285), which is much discussed in the leading American cases on the subject. It should be noticed that this so-called “statute” was not a statute at all, but an entry on the minutes of parliament of the refusal by the English lords to comply with the prayer of the bishops that the rule of descent of lands in England be assimilated to the rale of the canon law above referred to, and "to change the laws of the realm, which hitherto had been used and approved.” It was therefore a legislative affirmation of the common law rule that the heir must be one bom in lawful wedlock. It thus appears that the rule of the statute of Merton has always been and is an inherent part of the English common law of descents.

Let us then turn to the consideration of our own law of descent. 2 Gomp. Stai. 1917. It should be observed that it does not begin to regulate descent until the intestate leaves "two or more lawful children.” The first section was undoubtedly enacted to do away with the English rule of primogeniture. Thus, it differs from the Descent act of Massaehusetts discussed in Boss v. Boss, supra, which on examination is seen to be all-embracing. -It is quite clear, then, that at the present day that which casts upon the only child of an intestate title to his lands in this state is not our statute of descent, but the common law of England as incorporated into our legal system. This leads to the inevitable conclusion that what is in force here is the common law of descents (with all of its incidents including that rule of the statute of Merton, which prescribes that the heir must be born in lawful wedlock) except so far as that law has been modified by statute.

In 1877 a statute was enacted in our state providing for the adoption, custody and maintenance of minors, giving them rights of inheritance. Bevision, P. L. 1902 p. 259. It is clear that this statute gives rights of inheritance only to children adopted under its provisions. That its effect is so limited appears to have been the opinion of Vice-Chancellor Howell, who said, in Stout v. Cook (1910), 77 N. J. Eq. 153 (a case involving the construction of a will): “Section 4 of the act of 1877 provides that a child [so adopted] shall be invested with every legal right * * * in respect to * * * the rights of inheritance to real estate * * * on the death of such adopting parent or parents as if bom to them in lawful wedlock.” His- decree on that branch of the case which involved this expression of opinion was affirmed by the court of errors and appeals in 79 N. J. Eq. 640.

The case of In re Book, 90 N. J. Eq. 549, contains a consideration by the highest court of the effect of the statute and an illuminating discussion by the chief-justice of the whole law of descent. In referring to the state of the law in 1824 he said: “At that time a testator could have no lawful children except those born to him in wedlock. A child born to him of a woman who was not his wife was not recognized by the law as having any claim to share in the real or personal estate of the father. At that time, too, the laws of this state recognized no power existing in any of its citizens to adopt a child of other parents, or by the act of adoption vest in it the right to share in the distribution of the estate of the adopting parent. In other words, the illegitimate child and the adopted child were neither of them recognized by onr law as a lawful child of the actual or the adopting parent.

“The act of 1902, providing for the adoption of ¿minors, was a revision of a statute originally enacted March 9th, 1877. P. L. 1877 p. 123. It materially changed the then existing law regulating the devolution of the estates of decedents. By its fourth section [which has remained unchanged by subsequent revision or amendment] it provided that the effect of the decree of adoption should divest the natural parents * * *, and that the child should be invested with * * * the rights of inheritance * *

That it was the chief-justice’s opinion that our law of descent was modified only to the extent of letting in children adopted under a decree of a New Jersey court and by virtue of the New Jersey statute appears not only from the foregoing language but also from the following (at p. 552) : “The act concerning wills, the statute of descents and the statute of distribution, composed the entire legislative system regulating the transmission of the estates of decedents, testate or intestate, prior to the passage of the act fox the adoption of minor children. By the enactment of this latter statute, that system, as we have just said, was, to some extent, changed. To determine the purpose of the legislature in making that change and the extent thereof, all of these statutes must be read together * *

It will be observed from the foregoing opinion that the rule of the common law that the heir must be bom in lawful wedlock is recognized as a fundamental part of the law of descent, and that effect is given to statutory modifications of the rule only within the precise limits of the modifying statutes.

This strict rule of statutory construction was expressed by Mr. Justice Minturn, speaking for the court of errors and appeals, in Dorsett v. Vought (1916), 89 N. J. Law 303. He said, (at p. 305): “The effect of these adjudications [certain cases in other states applying the general rule] is to determine that the right of a child by adoption to inherit is entirely of statutory creation; that the right being in derogation of the common law must be strictly construed, and will be denied unless the act of adoption shall have been consummated in strict accordance with the statute.”

My opinion is that our statute of descent precludes inheritance by any except children born in wedlock, and that the modification by statute permitting adopted children to inherit applies only to children adopted under the provisions of the New Jersey statute. The doctrine of comity should not, in this class of cases, be applied, because to extend this courtesy to the adoptive acts of other states would he in contravention of our own statute of descent. In other words, quoting from the United States supreme court in Hood v. McGehee, supra, “Alabama [in the instant case, New Jersey] is the sole mistress of the devolution of Alabama [New Jersey] land by descent.”

Having arrived at this decision, it is unnecessary to consider the second question raised, viz., the regularity of the New York adoption proceedings.

I will advise a decree in conformity with these conclusions.


source: Caselaw Access Project

author: Church, V. C.

license: Public Domain

text:
    Herman J. Koehler, complainant, v. George H. Koehler et al., defendants.
    [Decided March 26th, 1926.]
    1. Where a testator’s estate consists of capital stock in incorporated companies, the income whereof is given to one and the stock to another, the appreciation in value is held to be corpus, not income.
    2. Where a company owning shares in a number of other companies was ordered by the court to distribute these shares among its stockholders, such shares are capital, not income, when so distributed.
    3. Stock dividends represent an interest in both capital and surplus, and are apportionable in the ratio that the surplus at the time the stock was acquired bears to the surplus accumulated thereafter up to the time the dividend was declared.
    4. Rights to subscribe to stock when sold, should go to the corpus of the estate.
    5. Where a trustee receives as dividends upon the stock of a subsidiary corporation, stock in another corporation, such dividends should be treated in the same way as other dividends in the stock held by the trustee, and apportioned in kind.
    On bill, &c.
    Messrs. Lum, Tamblyn & Golyer, for the complainant.
   Church, V. C.

This is a bill for the construction of the will of Emily H. Koehler. The paragraphs of the will which the court is asked to construe are as follows:

“Fifth. All the rest, residue and remainder of ¡my estate, both real and personal, of whatsoever kind and wheresoever situate, including all stocks, bonds, evidences of debt and securities whatsoever, I give, devise and bequeath to my executors hereinafter named, in trust, nevertheless, upon the following terms and conditions, and to and for the following uses and purposes, that is to say:
“1. To hold all my shares of stock of the Standard Oil Co. as trustee during the life of the trust hereby created * * - *; to collect all annual or other dividends or income arising or accruing from said stock, and to apply the same from time to time to the purposes of the trust as hereinafter set forth * *

By. section 3 of this paragraph the testatrix made certain disposition of her real property in trust.

By section 3 of this fifth paragraph of her will the testatrix provides for an annuity for her sister, who was deceased before the filing of the bill.

By the fourth and fifth sections of this fifth paragraph of her will the testatrix makes provision for the distribution of the income and corpus of the trust estate, and we quote therefrom verbatim as follows:

“4. During the life of my said sister, unless she shall survive all of my children, to divide the remainder of the said rents, interest, dividend’s or other income into four equal parts during the life of the trust hereby created, and after her death, if she shall not survive all of my children, to divide the whole of the said rents, interest, dividends or other income into four equal parts and pay the same until the death of the last survivor of my four children hereinafter named, as follows: One part to my adopted son George H. Koehler; one part to my daughter Emily H. Greenough, widow of Walter Greenough; one part to my daughter Julia Noble, wife of Nicolson ¡Noble, and one part to my son Herman Koehler. On the death of each of my said children who shall die before the last survivor of them, his or her share of said income shall be paid in equal proportions to his or her heirs of the bodiy per stirpes and not per capita, during the continuation of this trust. If any of my children die leaving no issue his or her share shall lapse and be divided among the other then surviving beneficiaries, in like manner as above provided.
“5. On the death of the last survivor of my said four children to divide the principal of said trust fund into four equal parts, and divide one of said parts equally among the heirs of the body of each of my said children per stirpes and not per capita. But if there be then no issue surviving of any one or more of my said children, then the share of his or her issue shall lapse, and the said trust fund shall be divided into only so many equal parts as shall be necessary to give one part to the then surviving issue of each of my children.”

Erom the proofs submitted it appears that the testatrix left her surviving her adopted son, George H. Koehler; her daughter Emily H. Greenough, her daughter Julia Noble, and her son, the complainant. Her sister, although she survived testatrix, is now deceased.

The daughter Julia K. Noble, mentioned in the will, after the death of testatrix, married one Louis W. Merritt and thereafter departed this life intestate. Mrs. Merritt, now deceased, left her surviving the following children: Nicolson Noble and Daniel Noble and Elsie Noble Walsh. Mrs. Walsh has two infant children, Jean Noble Walsh and Robert Everett Walsh.

The daughter Emily H. Greenough has the following children: Walter Greenough, Emilie C. Stehli, Margaret J. King and Kathryn G. Hall.

The said Margaret J. King has three infant children— Margaret Greenough King and Emilie Mary King and Elizabeth G. King.

The said Kathryn G. Hall has two children — Kathryn Leighton Hall and Anne G. Hall.

The said Emily C. Stehli has an infant child, Frances Greenough Stehli.

The said George H. Koehler, the adopted son of the testatrix, has two children — Elsie Henrietta Koehler and Gertrude Helen Koehler.

The complainant, Herman J. Koehler, the son of the testatrix, has three children, to wit: Herman J. Koehler, Jr., Emily "Wilhelmina Koehler and Hans Yann Koehler.

Among other assets of the estate were one hundred shares of the Standard Oil Company of New Jersey. In the year 1911, after the probate of the will of the testatrix, by order of the Supreme Court of the Hnited States, the Standard Oil Company of New Jersey distributed shares of stock of subsidiary companies held by it among its stockholders in proportion to their holding in said company. All these shares have been retained as an investment by the executor and trustee by order of the orphans court.

The first question to be considered is whether the stock of the subsidiary companies distributed as above stated shall be declared to be income or corpus of the trust estate. There does not seem to be any case in New Jersey directly in point.

However, the leading case in New York is United States Trust Co. v. Heye, 224 N. Y. 242. The testator in this case, who died in 1899, created a trust by his will for the benefit of his children. At the time of his death the testator owned certain shares of the capital stock of twenty corporations, which had previously constituted the Standard oil trust created by agreement in 1882. This trust has been dissolved and the certificates for these shares were delivered by the executrix of the will to the trustee on May 10th, 1899. In that year the Standard Oil Company of New Jersey increased its capital stock for the purpose of taking over and absorbing the other standard oil concerns. Accordingly, the trustee surrendered to the Standard Oil Company of New Jersey the certificates of stock in the twenty companies and received in return shares of common stock of the Standard Oil Compaq of New Jersey. At this time the Standard Oil Company also owned and controlled other subsidiary companies and thereafter acquired more, so that in December, 1911, it owned and controlled all or a majority of the stock of thirty-three companies in the oil business.

■In the action brought by the United States government against the Standard Oil Company it was decreed in 1911 that the business as conducted was an unlawful combination, and the Standard Oil Company of New Jersey was restrained from exercising any control over the voting of stocks of the various companies. The decree provided that the defendants were not prohibited thereby from distributing ratably to the stockholders of the principal company the shares to which they were equitably entitled in the stock of the defendant ■corporations. The directors of the Standard Oil Company thereupon distributed ratably to the stockholders the shares of stock of each of the corporations owned by the New Jersey Company. On December 1st, 1911, all the stocks were thus distributed except the stock of the Anglo-American Oil Company, which was distributed on January 20th, 1912.

The plaintiff in this case, as trustee, received his proportion of stock in some thirty-three different companies.

When the United States Trust Company, as trustee rmder the will of Mr. Iieye, made an accounting, the life beneficiaries insisted that the entire distribution of stock made by the Standard Oil Company of New Jersey in December, 1911, and January, 1912, belonged to them as representing a distribution of profits, leaving the corpus of the trust of the same value as at the time of its creation.

In the course of the opinion of the New York court of appeals (at p. 252) the court says:

“The idea prevailing with these claimants seems to have been that the value of the principal at the time of the creation of the trust determines the rights of the life beneficiaries; that so long as the principal is in no wajr depleted or lessened, all the subsequent increase in value must be categoried as income, whether distributed as such or not.”

After referring to Matter of Osborne, 209 N. Y. 450, 477, the court proceeds as follows (at p. 258) :

“This does not mean that the principal of the trust 'fund is to remain at the same value, but that all increase belongs to the life beneficiaries. While the corpus of the fund may not be depleted, yet the corpus may accumulate or increase, and until there is some division in the nature of a dividend payable out of accumulated earnings or profits, there is nothing that can be awarded as income to the beneficiaries.”

Again the court says (at the bottom of p. 25k) :

■ “The fundamental principle involved in these questions is, whether there has been a distribution or division of the earnings, profits or accumulations of the corporation. Until there has been such division, 'the life tenant is not entitled to any increase in the value of the principal of the trust fund, or the capital and assets of the corporation, shares of which constitute the trust fund. But when there has been a division of the corporate property, no matter what, form it may take, that part thereof, which consists of accumulated profits or earnings, belongs to the life tenant, and that which is capital to the remainderman. Each case, necessarily, is determined by its own facts.”

The case thereupon proceeds to consider the facts of the case in relation to the principle laid down (at the bottom of p. 255) and says:

“Applying the rule as stated to the distribution made in December of 1911 by the Standard Oil Company of New Jersey, it is plainly to be seen that, as to the companies in existence at the time of the creation of the trust, there was no payment of a dividend or division of profits or distribution of sirrplus, although the shares of stock returned- and the New Jersey stock retained by the trustee may have greatly increased in value. The company gave back to the trustee what it had formerly possessed and also what had been represented in 1899 by the Standard Oil stock [New Jersey] owned by the testator. The trustee had exchanged the stock in twenty companies for the stock of the Standard Oil Company 'of New Jersey, which thereafter represented these. In December, 1911, the Standard Oil Company gave back seventeen of the twenty stocks, and thereafter the Standard Oil certificates no longer represented the interests of the seventeen. Neither did they continue to represent the seventeen other stocks also distributed to the trustee, which in 1899 were owned by the Standard Oil Company of New Jersey, and represented by its stock. The exchange of paper title, or the creation of one paper to represent twenty, or twenty to represent one, did not in any way increase or lessen the interest of ownership. The enhancement of value was not an increase of interest; the proportionate part owned by the trustee in- the Standard Oil- Company industries, whether two or many, also remained the same.
“We, therefore, hold that as to the various shares of a stock above classified and distributed in December, 1911, constituted a rearrangement of the principal and a readjustment of the indicia of ownership and not a division of accumulated profits or in any sense an extraordinary dividend.”

In the case of McCoy v. McCloskey, 94 N. J. Eq. 60, the court has this to say in regard to this subject:

“But if the book value at the death of the testator was the true value of the assets at that time, the advance realized by their sale three or four years later must have been due solely to their enhancement in value [the accumulation during that time had been divided], and under the authorities, -where a testator’s estate consists of capital stock in incorporated companies, the income whereof1 is given to one and the stock to another, the appreciation in value is held to be corpus, not income.” (Citing cases.)

It seems to me, therefore, that the stock of these subsidiary companies should be considered as corpus and not as income. The investment remained practically the same. The only difference being that, instead of owing one hundred shares of. one company, the estate now owns an equivalent amount of shares in several companies.

The second question to be considered is. with respect to the rights of the life tenants in the stock dividends which have been decleared by the subsidiary corporations. This subject was considered in the case of Ballantine v. Young, 79 N. J. Eq. 70. In this case it appears that the testator-owned certain shares of stock of a trust company, which increased its capital stock and gave to the stockholders the right to subscribe' at par for the new issue. At the same time the company declared a cash dividend sufficient to enable the stockholder to subscribe for the shares to which he was entitled. The trustees in this instance took this dividend and used it to pay for the new stock which they continued to hold.

In the course of the opinion the court proceeds as follows:

“The first question is, Who is entitled to the dividend of the Central Trust Company issued under the circumstances above described, the life tenants or the remaindermen?
“Ordinary cash dividends go, of course, to the life tenants. Is this an ordinary or extraordinary dividend? It seems to be extraordinary for three reasons — [1] it was declared in addition to the regular dividends; [2] it was much larger, and exceeded the net profits made in the preceding year, and [3] it was evidently made for the special purpose of enabling the stockholders to avail themselves of the new subscription. If these circumstances do not make the dividend extraordinary, for the purpose of apportionment, I do not know what could make it so. The distinction has been adverted to, apparently, with approval by the court of errors and appeals in the Lang Case, 57 N. J. Eq. 826, and I do not feel at liberty to disregard it. I, therefore, think, on the doctrine of that case, that the dividend is apportionable in the ratio that the surplus at testator’s death bears to the surplus accumulated thereafter up to the time the dividend was declared.”

In the case of Day v. Faulks, 79 N. J. Eq. 66, Vice-Chancellor Stevens further considered the rights of life tenants and remaindermen in the stock dividend.

In the course of the opinion (at p. 67) the court refers to the case of Ballantine v. Young, and says:

“I must start out with the assumption that stock dividends declared after the death of the testator go, in so far as they represent earnings made since his death, to the life tenants.”

At page 68 the court proceeds as follows:

“The principle of the Lang Case is to preserve the corpus of the estate intact, and such is the principle in analogous cases.
“In Ballantine v. Young it appeared that the stock of the Central Trust Company had been selling at a large premium. There was a large surplus. The directors declared a cash dividend of two hundred per cent., and, contemporaneously, directed a new issue of stock, which the stockholders were at liberty to take at par and pay for with that dividend. The question was, to whom the dividend and the option belonged —to the life tenants or to those in remainder? It was held that the cash dividend belonged to the life tenants [subject to the apportionment prescribed in the Lang Case], and that the option to purchase was part of the corpus, to be disposed of as such; but that inasmuch as the trustees had devoted the cash dividend to the purchase of the stock, the life tenant was entitled to a charge upon it for his proportion of that dividend.”

The decree made in Day v. Faulks was affirmed by the court of errors and appeals, and reported in 81 N. J. Eq. 173.

It would seem, therefore, that the condition of each one of the subsidiary companies must be considered as of the time the shares of stock were received by the trustee. Tn other words, the shares of stock in any particular company represent an interest in capital and surplus of said company at the time the same was received by the trustee. The stock dividend should be apportionable in the ratio that the surplus at the time the stock was acquired bears to the surplus' accumulated thereafter up to the time the dividend was declared, and the stock dividends should be apportioned between the income and the capital of the trust, and the life tenants are entitled to have their share of the earnings charged on the stock so far as said earnings were capitalized.

The third question arises from the fact that there accrued to the trustee rights to subscribe for certain shares of stock in subsidiary companies. The rale in this regard seems to be well settled.

In the case of Brown v. Brown, 72 N. J. Eq. 667 (at p. 677), the court considered such a situation. In the course of the opinion it is said:

“The next head upon which instruction is sought is with respect to various instances in which the testator had stock in corporations, which corporations, after his death, increased the authorized capital stock of the company and gave to the shareholders the right to subscribe to the increased issue, which rights were sold by the executors for substantial sums of money, and the question in each case is, whether the money realized from the sale of these rights becomes principal or goes to the life tenant. Hnder the case of Eisner’s Appeal, 175 Pa. St. 143, and Matter of Kernochan, 104 N. Y. 618, 630, it should go to principal.”

In McCracken v. Gulick, supra, in the opinion of the court of errors and appeals, reference is made to the fact that the market value of stock goes to the corpus, if the trastee chooses to sell to satisfy the charge. The court says:

“This is in harmony with the rule in Ballantine v. Young, 79 N. J. Eq. 70, which gave the value of an option to take new stock to the corpus of the trust fund.”

In Ballantine v. Young, supra, in the course of the opinion Vice-Chancellor Stevens refers to the fact that the trustees in that case took the extraordinary dividend declared and invested it in new shares of stock of the same company, which were selling at a very large premium. He then proceeds as follows at the top of page 73:

“And so the next question is, To whom does this premium belong, to the life tenant or to the remainderman? It has been held repeatedly that the right to subscribe for new shares, which commands a premium, is a part of the principal and belongs to the latter.”

I, therefore, find that these rights go to principal.

The final question .arises from the fact that the trustee has received dividends upon the stock of certain of the subsidiary corporations payable in the stock of another corporation. Such dividends should be treated in the same way as dividends payable in the stock of the company. Therefore, I find that the rule, as stated in the case of Ballantine v. Young, should be applied to these dividends.

There seems to be no New Jersey case bearing exactly on this point. The subject has, however, been treated in 24 A. L. R. 77, and the inference deduced from the cases there cited is as I have indicated.

This statement needs a little further amplification. If an extraordinary cash dividend is declared, then it is a very simple matter to apportion the same between the life tenant and remaindermen in accordance with the rules hereinabove laid down in the eases of Ballantine v. Young, Day v. Faulks and McCracken v. Gulick. However, in those cases, in so far as stock dividends were dealt with, the life tenant was only given a charge upon the stock to the extent of his interest, which has been capitalized.

When stock of another' corporation is distributed as a stock dividend, the reason for the rule referred to in those cases does not exist. Consequently, it would seem that the stock of another corporation, when issued in this manner as a dividend, could be apportioned in kind, so to speak, on the basis hereinabove indicated.

If so done, the relative rights of life tenants and remaindermen will not be disturbed. It is because the relative rights are disturbed when a stock dividend is declared in stock of the same company and such stock is divided proportionately as indicated. If the life tenant in such an instance received a proportionate portion of stock actually issued, as pointed out by Vice-Chancellor Stevens, he would receive more than he would be entitled to, and would, in fact, receive an interest in the remainder or corpus to which he is not entitled.

I will advise a decree according to these conclusions.


text:
    In the matter of the dissolution of the New Jersey Refrigerating Company.
    [Decided April 3d, 1926.]
    Where a purchaser at a judicial sale petitions to be relieved of his bid, this court has power to refuse the relief sought and to require the petitioner to perform his contract, and if he does not do so, to impress the amount of the purchase price, with interest, as a lien on said lands, so that they may be sold to satisfy the same, and if a deficiency arises, the petitioner must pay it.
    On petition to set aside sale of lands.

      Messrs. Gollins & Gorlin, for the petitioner.

      Mr. J. Henry Harrison, for the defendant.
   Church, V. C.

The facts relating to this motion are, briefly j these: At an auction 'sale of lands held January 8th, 1925, Francis F. Jasinski purchased from the receivers of the New Jerse.y' Re-' frigerating Company premises in Bayonne, New Jersey, for' which she agreed to joay' $22;800. The sale was confirmed by this court. Thereafter, Mrs. Jasinski filed a petition praying that the sale be set aside and that she be relieved from her contract on the ground of material misrepresentation. The receivers filed an answer which was in the nature' of counter-claim. They prayed that the petition be dismissed and that Mrs. Jasinski' be compelled to complete the contract. This court denied Mrs. Jasinski’s plea as to material misrepresentations.

When the matter came before me on the question1 of fixing the terms of the decree, it was argued that this court is without power to enter a decree directing the petitioner to consummate the purchase, because such relief can only be obtained as the result of a suit for specific performance.

The case of Umbach v. Umbach, 82 N. J. Eq. 427, was heard on petition of the purchaser and counter-claim of complainant. The purchaser sought to be relieved of his bid. The complainant sought to compel the purchaser to perform. The prayer of complainant was granted.

In the Union Building and Loan Association, &c., 2 Mis. R. 567, Vice-Chancellor Learning, in discussing the rights of a purchaser at a public sale, says:

“Unless that sale should be set aside by failure of confirmation or for other cause, the purchaser at the public sale can enforce a formal conveyance, and specific performance can be enforced against such purchaser either by petition in the foreclosure suit or by bill for specific performance.”

In the case of Silver v. Campbell, 25 N. J. Eq. 465 (at p. 466), it was held:

“Purchasers at sales under decrees of this court, if not already parties to the suit, are regarded, to a certain extent, as parties to it, to be under the control of the court on the one hand and its protection on the other. Such purchaser may,'therefore, be compelled to complete his purchase in a summary way by an order upon him, without a bill to pay the mono}7 or bring it into court.”

I, therefore, find that the court in this case can require the petitioner to perform under the pleadings as filed.

Several reasons are alleged as to why the petitioner should not be required to perform. One is that such a ruling would amount to a decree of specific performance without giving petitioner an opportunity to be heard. In this case the answer of the receivers was filed praying for specific performance. The petitioner filed no reply thereto, indicating why she should not be compelled to specifically perform, which, of course, had she wished, she could have done. She had ample opportunity. Another objection is that there is an adequate remedy at law. This seems to be disposed of in Law v. Smith, 68 N. J. Eq. 81, where the court said:

“The remedy by a suit at law to recover the whole purchase-money based on a contract and a tender of a conveyance, is the old answer set up to any suit for specific performance in equity by vendor against vendee. It has long since been abandoned.
"The difficulties in the way of using it are manifest. The vendor plaintiff at law ought not to be compelled to part with his title until he has received the purchase price. If he obtain a judgment for the whole price, he ought not to be permitted to collect the money from the defendant by execution thereon until the title is vested in the other. Here comes in the convenience, if not the necessity, for the machinery of this court. The parties meet in a master’s office and the decree is performed under his supervision.”

In Smith v. Smith, 84 N. J. Eq. 299 (at p. 309), this doctrine was approved.

The case of Henderson v. Henderson, 97 N. J. Eq. 761, has been referred to by counsel for petitioner. This can hardly be cited as authority, as it was reversed by the court of errors and appeals. 98 N. J. Eq. 369.

I shall therefore advise a decree that, should the purchaser fail to comply with the order directing her to perform, the balance of the purchase price, with interest, shall be impressed as a lien upon said lands so that they may be sold to satisfy such lien. Should a deficiency arise, the petitioner must pay it. This course was approved in Smith v. Smith, supra.

Another case is before me which involves practically the same questions which I have herein discussed. It is New Jersey Refrigerating Co. v. Henry B. O’Donohue and Gustav W. Lembeck. In this matter I will advise a similar decree for the same reasons, as I think the cases are practically identical.


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    In the matter of the dissolution of the New Jersey Refrigerating Company.
    [Decided May 4th, 1926.]
    AVhere receivers of a corporation have counsel of their own, no allowance of counsel f.ees can be made from the funds in the receiver’s hands to counsel for creditors, or individual stockholders, even though the services of such counsel have inured to the benefit of the estate.
    On application for allowance of counsel fees.

      Mr. Merritt Lane, for Sarah A. Lembeck, for the allowance.

      Messrs. Hudspeth & Demarest, for Catherine I. Lembeck, for the allowance.

      Messrs. Perlcins & Hrewin, for Thomas A. Lembeck, for the allowance.

      Mr. D. Eugene Blanhenhorn, for Albert Lembeck, for the allowance.

      Messrs. Fish & Fish, for Ida L. Bowen, against the allowance.

      Mr. Shirley N. Garr, for Betz interest, against the allowance.
   Church, V. C.

This matter comes before the court for the allowance of counsel fees to various solicitors who hav.e been from time to time connected with this litigation. The requests are as follows :

By Merritt Lane, solicitor for Sarah A. Lembeck and others, $5,000.

By Hudspeth & Demarest, solicitors for Catherine I. Lembeck and others, $4,000.

By Perkins & Drewin, solicitors for Thomas A. Lembeck, $1,750 and $2,500, the $1,750 being for services rendered in the McArnarney litigation, and the $2,500 for services in the receivership matter.

By D. Eugene Blankenhorn, solicitor for Albert Lembeck, $2,500.

This concern was forced into a receivership — although it' was in every way solvent — by the absolute refusal of two of the stockholders, together owning a majority of the stock, to agree on anything whatever.

The matter has been in litigation ever since the appointment of the receivers, nearly three years ago.

All the services rendered by counsel, for which they now ask allowances, have been rendered since the appointment of the receivers. The receivers have counsel of their own eminently qualified to handle all the legal matters arising in connection with the estate, and he has shown himself to be resourceful, practical and diligent. If the solicitors desired to participate in the various litigations on behalf of their respective clients, in my opinion, their respective clients should pay them.

In fact, this matter has been so decided in the case of Unger v. Newlin Haines Co., 95 N. J. Eq. 16, wherein Chancellor Walker held:

“Out of the funds in his hands a receiver will' be compensated for his services in such sum as they are fairly and reasonably worth, somewhat apportioned to the amount which he has received and administered; and allowances will be made to the counsel retained by him, for the services to the receiver in relation to the trust; but no allowance can be made to counsel for creditors, or bidders at the receiver's, sale, even though the services of such counsel have directly inured to- the benefit of the estate; they must look to their clients for their compensation."

I believe this court should do what can be done to wind up this estate and to discourage further litigation. If it were only a question between two large stockholders who, for reasons best known to themselves, insisted upon disagreeing when they could be getting together to settle their difficulties in the estate, the situation would be different. It must be borne in mind, however, that there are minority stockholders who are suffering and have suffered from this litigation and whose interest should be protected by the court.

I shall deny the motion for all these counsel fees.


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    Stanley Radoniewicz, complainant, v. Joseph Lazarowicz and Josephine Lazarowicz, defendants.
    [Decided April 10th, 1926.]
    1. Where property vested in a wife was purchased with the property of her husband under circumstances which render the transactions fraudulent as against the husband’s creditors, the wife will be treated as a trustee for the creditors, and the property sold for their benefit.
    2. Evidence examined, and held that the property in question was acquired with money properly belonging to the husband, and was acquired in the wife’s name to defraud the husband’s creditors.
    On bill, &c.

      2Iessrs. Biker & Biker, for the complainant.

      2Ir. Pearce B. Franklin, for the defendants.
   Church, V. C.

The complainant in this cause instituted a suit at law on June 2d, 1922, against the defendant Joseph Lazarowicz, to recover the sum of $1,500. On October 1st, 1925, judgment was entered for about that amount. Execution was issued and returned unsatisfied. While this suit was pending Lazarowicz sold a certain bake shop in Bloomfield, and the proceeds were eventually invested in a property -on Lincoln street, Newark, but in the name of his wife, the co-defendant.

The complainant insists that the Lincoln street property in reality belongs to the husband, and that the wife is merely a trustee. The defendants allege that the property belongs to the wife absolutely, and is not subject to an execution for the debt of her husband, because the money that went into it was hers.

It appears that Joseph and his wife were married in 1912, she being then about nineteen years old. In 1916 an account was opened in the wife’s name in the American National Bank with a deposit of $550. She testifies that she had this money at the time of her marriage and kept it hidden in a trunk until the time of the deposit. In 1919 a'property .on Jones street was purchased, the title being taken by the entirety in the name of husband and wife. The wife insists that all the consideration was earned by her, that it was her money and not in any sense her husband’s. She says she worked at washing and in a theatre. Whatevter he earned he gave to her and she used what was necessary for the family maintenance and deposited the balance in her own account. Joseph, the husband, started a bake shop in conjunction with the complainant, after the Jones street property was sold, and $2,700 was advanced by the husband as his share. After-wards, on or about January 28th, 1923, this bake shop' proposition was wound up and the husband gave to his wife $2,200. This was almost a - year after the complainant’s suit was started. This money she kept in her account until August, 1923, when the Lincoln street house was acquired in her name.

It seems to me' that in view of the above facts the property is really that of the husband and not of the wife. The only allegations of ownership in the wife are made by the wife herself and her husband. We have at least .one witness, a lawyer, who says the husband admitted that the money was his and not his wife’s.

In Belford v. Crane, 16 N. J. Eq. 265, the court says: “The fact that the legal title to the land was never in the husband cannot affect the substantial question at issue, though it may affect the mode of redress. If the property, vested in the wife, was purchased with the property of the husband, under circumstances which render the transaction fraudulent as against the husband’s creditors, the wife will be treated as a trustee for the creditors, and the property sold for their benefit.”

In Besson v. Eveland, 26 N. J. Eq. 472, the court says: “On the question of fact, whether the money used in the purchase of the land was or was not the property of the wife, I think the defense is without substance or merit. Claims of this kind should always be regarded with a watchful suspicion, and when attempted to be asserted against creditors upon the evidence of the parties themselves, uncorroborated by other proof, they should be rejected at once, unless their statements are so full, clear and convincing as to make the fairness and justice of the claim manifest. Any other cause will encourage fraud and multiply the hazards of most business ventures.” See, also, David Mayer Brewing Co. v. Sheridan, 91 N. J. Eq. 104. Also, Mertens v. Schlemme, 68 N. J. Eq. 549.

From a careful consideration of the facts in this case I am of the opinion that the property on Lincoln street was acquired with money properly belonging to the husband; was acquired in the wife’s name to defraud his creditors, and that the wife should be held to be merely a trustee.

I will advise a decree accordingly.


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    Yetta Pincus, complainant, v. United States Dyeing and Cleaning Works, a New Jersey corporation, defendant.
    [Decided April 20th, 1926.]
    1. The statute requires the affidavit attached to a chattel mortgage to be ‘'made and subscribed by the holder of the mortgage, his agent or attorney,” and where the affidavit reads that a corporation is duly sworn, this is not sufficient, as a corporate entity itself cannot make such an affidavit, and the signature of the secretary of the corporation attached to the affidavit is also insufficient, as it does not appear that by virtue of the office the secretary is the agent of the corporation for the purpose of making the affidavit, nor does it appear in the body, of the affidavit that the secretary was such agent, or was sworn as to the truth of its contents.
    2. Where the acknowledgment to a chattel mortgage shows that it was signed by the president and secretary of a corporation; that the president only was authorized to sign; that the president did not acknowledge, and there was no apparent authority for the secretary either to sign or acknowledge, and as a corporate proof the acknowledgment is equally defective, and the mortgage was not properly recorded.
    3. Where the statute requires a chattel mortgage to be recorded immediately, which means as soon as may be by reasonable dispatch under the circumstances of the case, a delay of fourteen days in the recording is not “immediately” in this case, within the meaning of the statute.
    On proceedings to set aside chattel mortgage.

      Messrs. Whiting & Moore, for the Ideal Filter Company.

      Mr. Israel B. Greene, for the receiver.
   Church, V. C.

This is an application by a receiver to set aside a chattel mortgage made by the insolvent corporation, dated and delivered February 19th, 1925, and recorded March 6th, 1925.

The first point of attack is that the statutory affidavit annexed to the mortgage is not made by the mortgagee, his agent or attorney, within the'meaning of the Chattel Mortgage act of this state.

The affidavit reads as follows:

“State of Missouri, l City of St. Louis. /
Ideal Filter Co., the mortgagee in the foregoing mortgage named, being duly sworn on oath, say that the true consideration of said mortgage is as follows, viz.:
1 Model R Ideal Duplex .............................. $508.00
2 500 gal. & 1 835 gal. underground tanks............. 459.00
Total ........................................ $967.00
And deponent further says that there is due on said mortgage the sum of $710.00, besides lawful interest thereon, from the fifteenth day of February, 1924.
Sworn and subscribed this 4th day of March, a. d. 1925, before me, at 'St. Louis, Mo.
Roy C. Godebey,
Notary Public, City of St. Louis, Mo.
Ideal Filtee Co.,
■By Ethel M. Long, Sec’y.
Roy C. Godebey,
Notary Public.
My commission expires October 16, 1928.”

The fourth section of the Chattel Mortgage act (Comp. Stat. p. 464) requires that the affidavit of the mortgagee be “made and subscribed to by the holder of the mortgage, his agent or attorney.”

The affidavit recites that the mortgagee, a corporation, swore to its contents. It is apparent that a corporate entity itself cannot make such an affidavit. The words “by Ethel M. Long, secretary,” are added. A secretary of a corporation is not, by virtue of his office, an agent for the purpose of making such an affidavit. Iron Co. v. Boyce, 71 N. J. Law 434.

It does not appear in the body of the affidavit that Ethel M. Long was secretary or agent of the corporation. It does not appear that she was sworn as to the truth of the contents.

In the case of Watson v. Rowley, 63 N. J. Eq. 195, it was held:

“Under the Chattel Mortgage act declaring chattel mortgages, where the mortgagor retains possession of the property absolutely, void, unless accompanied by an affidavit by the holder of the mortgage or his agent stating the true consideration for the mortgage, it must appear in the affidavit that the affiant is the holder of the mortgage or his agent or attorney.”

My attention has been called to the cases of American Soda Fountain Co. v. Stolzenbach, 76 N. J. Law 721, and Lessler v. Paterson National Bank, 97 N. J. Eq. 396, by counsel for the defendant.

In the American Soda Fountain Case the affidavit was made by the vice-president and his official position appeared in the body of the affidavit. In the Lessler Case the affidavit was made by the president. These cases differ from the case at bar in that they distinguish between the acts of a corporation through an agent and those of an executive officer. Acts of a president or vice-president of a mortgagee corporation are in legal contemplation the acts of the corporation. Those of a secretary or agent may or may not he. This affidavit is therefore defective.

The second point is that the mortgage was not properly acknowledged or proved. The form of the acknowledgment or proof under discussion is as follows:

“State of New Jersey» County of Essex, j ss'
Be it remembered, that on the 19th day of February, a. d. 1925, before the undersigned, a notary public within and for the county and state aforesaid, personally came 'Heyman Helman, secretary of the U. S. Dyeing and Cleaning Works, who is personally known to me to be the same person whose name subscribed to the foregoing ■chattel mortgage as a party thereto, and acknowledged the same to be the act and deed for the uses and purposes therein mentioned, and that Joseph Koppleon signed same as president of the corporation by order of the board of directors.
In testimony whereof, I have hereunto subscribed my name and affixed my official seal at my office, in Irvington, in said county and state, the day and year aforesaid.
John I. Middleton,
Notary Public of New Jersey.”

Both the president and secretary signed.

In Hopper v. Lovejoy, 47 N. J. Eq. 573, the court said:

“With regard to corporate .deeds he [the acknowledging officer] must, therefore, be satisfied that such person "is in the eye of the law the grantor mentioned in it- — -that is, authorized to represent the corporation in executing and achnowledging the conveyance.”

It appears that the president signed “by order of the board of directors.” He did not acknowledge. If there was any acknowledgment at all, it was by the secretary, and it does not appear that there was any authority for him either to sign or acknowledge. In fact, it is specifically stated that the president was the one authorized. As a corporate proof it is equally defective. Therefore-, the mortgage- was not entitled to record, its record was a nullity and it is void against the receiver and not legal notice to creditors. Partridge v. Mechanics National Bank, 77 N. J. Eq. 208.

The next point pressed by counsel for the receiver is that the affidavit does not set forth the true consideration of said mortgage, nor is the consideration set forth sufficiently within the meaning of the Chattel Mortgage act, in that it does not set forth how the relation between debtor and creditor arose between the parties thereto. I believe this objection is without merit. See American Soda Fountain Co. v. Stolzenbach, supra.

The final point is that the mortgage was not recorded immediately, as required by the statute. It was made and delivered on February 19th. It was recorded on March 6th, an interval of seventeen days.

In Stanber v. Sims Magneto Co., 98 N. J. Eq. 38 (later affirmed in 132 Atl. Rep. 922), the court set aside a mortgage because of a delay of four days in recording. “Immediately” was construed to mean “as soon as may be by reasonable dispatch under the circumstances of the case.”

I directed counsel for defendant at the argument to ascertain from their clients if there is any reasonable excuse for this delay and to inform me, when the brief was submitted— that is, within ten days. Counsel stated they were in communication with their clients and would follow the court’s direction. This they have not done. They say in their brief:

“Among other things, the receiver claims that the chattel mortgage was not recorded immediately, as required by the Chattel Mortgage act. It is also claimed that the affidavit does not set forth the true consideration of the mortgage. These two points, of course, will require the taking of testimony, and if the mortgage is sustained, in so far as the other points raised are concerned, the Ideal Filter Company will, undoubtedly, want to take testimony to show the circumstances surrounding the execution of the mortgage.”

Counsel cannot draw the fire of the court in this way. They should present their entire case in one brief, and not wait for the opinion of the court on one phase before taking up the others. They had their opportunity and have not availed themselves of it.

There is nothing before me, therefore, but the facts— first, of execution and delivery; second, recording. A lapse of seventeen days between these events is not “immediately” within the meaning of the statute.

For the reasons stated the mortgage should be set aside, and whatever claim the mortgagee has should be filed as a general claim.


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    Florence C. Crane, complainant, v. Fidelity Union Trust Company, as trustee under the last will and testament of George O. Leavitt, deceased, et al., defendants.
    [Decided May 7th, 1926.]
    1. Where property is left in trust for the testator’s son for life, with power of appointment in the son as to the oorpns, the legal debts of the son should be paid from the trust fund.

      2. Where a sum of money is specifically appointed by the son to a legatee, such sum should not bear its proportion of the son’s debts.
    3. The debts and advancements of the son should be apportioned between the trusts created by the son’s will under his power of appointment.
    -1. Where a fund of which there is a power of appointment is put in trust to be paid to one when she reaches the age of fifty, or if she should die before reaching that age, to such persons as she shall by will designate, or in default of such designation to her legal heirs, such disposition of the fund is a valid exercise of the power of appointment, and excludes a person to whom there is a devise over in the former will in case no appointment be made.
    On bill, &c.

      Messrs. Porter, Zink & Rafferty, for the complainant.

      Messrs. Hood, Lafferty & Campbell, for the defendant Fidelity Union Trust Company.

      Mr. Jeremiah P. Hoover, for the defendant Marjorie Crane.
   Church, V. C.

This is a bill asking for instructions as to the wills of George F. Leavitt and his father, George 0. Leavitt:

The facts, as agreed to between counsel, are as follows:

The Fidelity Union Trust Company was at the time of the death of George F. Leavitt, herein designated as the “son,” and the death of his mother, Ida M. Leavitt, trustee under the will of George 0. Leavitt, herein designated as the “father,” and then had in the estate of the father securities o<f the approximate value of $100,000.

By the will of the father, two-thirds of the fund Was held in trust for Ida M. Leavitt and one-third for the son. The son was given the power of appointment over the one-third held in trust for him, and over the two-thirds held in trust for Ida M. Leavitt, subject to the life estate of said Ida M. Leavitt. Ida M. Leavitt, his mother, survived him only a few days. The son, by his will, duly probated before the surrogate’s court of the county of New York — the county of his domicile — exercised the power of appointment as follows :

“Second. Whereas, under and 'by virtue of the power to me given under and by paragraph ‘Fifth,’ subdivision ‘e,’ of the last will and testament of my father, George O. Leavitt, deceased, dated on the 7th day of October, 1915, I am authorized and empowered to dispose of by will, absolutely and in all events, the trust fund created by the said paragraph ‘Fifth’ of the said last will and testament of the said George O. Leavitt, deceased.
“Now, therefore, under and by virtue of the said power in me vested, as aforesaid, in the event of my death before the death of my mother, Ida M. Leavitt, I give, devise and bequeath to the Fidelity Trust Company, of Newark, New Jersey, my executor and trustee hereinafter named, the one-third of the estate of my father, George O. Leavitt, deceased, now held in trust for me under the terms of his last will and testament, to have, hold and administer the same upon the following trusts, however, namely:
“To invest the same from time to time in its discretion, to reinvest the same, or any portion thereof; to collect the rents, issues, income and profits thereof, and to pay the same in equal quarterly paj'ments to my friend, Florence 0. Orane, of the borough of Manhattan, city of New York, during her natural life.
“Third. Under and by virtue of the said power in me so vested, as aforesaid, I direct that upon the death of my another, the said Ida M. Leavitt, the sum of twenty-five thousand dollars [$25,000] be paid, out of the principal of the trusts created in paragraph ‘Fifth’ of the said last will and testament of my father, the said George O. Leavitt, deceased, to Florence 0. Orane, as her ’sole and absolute property forever.
“Fourth. Under and by virtue of the said power in me so.’vested, as aforesaid, upon the death of my mother, the said Ida M: Leavitt, I give, devise and bequeath to Fidelity Trust Company of Newark, New Jersey, my executor and trustee hereinafter named, all the rest, residue and remainder of the estate of my father, the said George 0. Leavitt, deceased, now held in trust for my mother, the said Ida M. Leavitt, and for myself under and by virtue of the terms of the last will and testament of my father, the said George O. Leavitt, deceased, to have, hold and administer the same upon the following trusts, however, namely:
“To invest the same from time to time in its discretion; to reinvest the same, or any portion thereof; to collect the rents, issues, income and profits thereof, and to pay the same in equal quarterly payments to my friend, Florence C. Cfane, until she shall arrive at the age of fifty [60] years, when I direct that the trust created by this paragraph, of this, my last will and testament, shall terminate and come to an end, and that the principal of said trust then shall Ibe paid over to the said Florence <0. Orane, as her sole property, absolutely and forever.
“Fifth. In the event of the said Florence O. Crane predeceasing my mother, the said Ida M. Leavitt, or in the event of the said Florence C. Crane dying before she, the «.aid Florence C. Crane, shall have arrived at the age of fifty [60] years, then, and in either event, I direct that the principal of the trusts created by paragraphs ‘Second’ and ‘Third’ of this, my last will and testament, be paid and distributed in such proportions and to such person or persons as she, the said Florence C. Crane, may, 'by her last will and' testament, in writing, designate to receive the same, and in default of such designation, to her heirs and next of kin.”

The sou left debts aggregating, approximately, $34,000. One claim was made for approximately $20,000, upon which suit was brought in this court and settlement was made by and with the approval of this court on the payment of $10,000. There are still unpaid claims amounting to $14,597.40. The son’s estate did not exceed $500.

The Fidelity Union Trust Company, as trustee under the father’s will, paid to the complainant $22,500 of the $25,000 appointed to her by the will of the son, and suit was brought to recover the balance of said appointment and to accelerate the trust appointed by paragraph "Second” of the will of the son on the theory that the remainder in said fund had not been appointed, and that the complainant had procured an assignment of the interest of the remainderman therein.

The first question is, After the exhaustion of the estate of George F. Leavitt, the son, should the trustee apply so much of the estate of the father as may be necessary to pay the son’s debts? I think it should.

In Clapp v. Ingraham, 126 Mass. 200, the facts -were that Mi’s. Ingraham had the income from a trust fund with power of appointment by will. She exercised the power of appointment in favor of her children, but left debts. A bill was filed for instructions as to whether or not the debts should be paid from the trust estate. Chief-Justice Gray says:

"'It was well settled in the English court of chancery before the middle of the last century that where a person has a general power of appointment, either by deed or by will, and executes this.power, the property appointed is deemed in equity part of his assets, and subject to the demands of his creditors in preference to the claims of his voluntary ap>pointees or legatees. The rule, perhaps, had its origin in a decree of Lord S'o¿mers, affirmed by the house of lords, in a case in which the person executing the power liad, in effect, reserved the power to himself in granting away the estate. Thompson v. Towne, Prec. Ch. 52; S. C., 2 Vern. 319. But Lord Hardwicke repeatedly applied it to cases of the execution of a general power of appointment by will of property of which the donee had never had any ownership or control during his life; and, while recognizing the logical difficulty that the power, when executed, took effect as an appointment, not of the testator’s own assets, but of the estate of the donor of the power, said that the previous cases before Lord Talbot and himself [of which very meagre and imperfect reports have come down to us] had established the doctrine that when there was a general power of appointment, which it was absolutely in the donee’s pleasure to execute or not, he might do it for any purpose whatever, and might appoint the money to be paid to his executors if he pleased, and, if he executed it voluntarily and without consideration, for the benefit of third persons, the money should be considered part of his assets, and his creditors should have the benefit of it. Townshend v. Windham, 2 Ves. Sen. 1, 9, 10; Ex parte Caswall, 1 Atk. 559, 560; Bainton v. Ward, 7 Ves. 503, note; S. C., cited 2 Ves. Sen. 2, and Belt’s Supp. 243; 2 Atk. 172; Pack v. Bathurst, 3 Atk. 269. The doctrine has been upheld to the- full extent in England ever since. Chance Pow. ch. 5 2; 2 Sugd. Pow. (7th ed.) 27; Fleming v. Buchanan, 3 DeG. M. & G. 976.

“Although the soundness of the reasons on which the doctrine rests has been impugned by Chief-Justice G-ibson, arguendo, and doubted by Mr. Justice Storjr in his commentaries, the doctrine is stated by both Judge Story and by Chancellor Kent as well settled; and it has been affirmed by the highest court in New Hampshire, in a very able judgment delivered by Chief-Justice Parker, and applied to a ease in which a testator devised property in trust to pay such part of the income as the trustees should think proper to his son for life, and, after the son’s death, to make over the principal, with any accumulated income, to such persons as the son should by will direct. Commonwealth v. Duffield, 12 Pa. St. 277, 279, 281; Story Eq. Jiur. 176 and note; 4 Kent Com. 339, 340; Johnson v. Cushing, 15 N. H. 298.

“A doctrine so just and equitable in its operation, clearly established by the laws of England before our revolution, and supported by such a weight of authority, cannot be set aside by a court of chancery, because of doubts of the technical .soundness of the reasons on which it was originally established.”

The following cases also support this view: Vinton v. Pratt, 228 Mass. 468; 117 N. E. Rep. 919; L. R. A. (1918) D 343; O’Donnell v. Barbbey, 129 Mass. 453; U. S. v. Field, 255 U. S. 257 (opinion by Mr. Justice Pitney).

The second question is, Should the $25,000 appointed to complainant under paragraph third of the will of George E. Leavitt bear its proportion of such payment? I think not, for the reason stated in the case of McCook v. Mumby, 64 N. J. Eq. 394 (at p. 400).

“Upon the execution of a power of appointment of this sort, it is well said in law that the appointee takes, not from the person who appoints, but from the original donor or testator, or that the interest of any person in a fund acquired by appointment of George Lord Day was an interest which emanated from the original testator, Henry Day, George being only the indicator pointing out to whom the testator’s bounty should go.”

See, also, Legett v. Doremus, 25 N. J. Eq. 122, and Morse v. Hackensack Savings Bank, 47 N. J. Eq. 283.

The third and fourth questions are, Should the debts, and the sum of $7,000 advanced to George E. Leavitt, be charged against the trust fund appointed under the fourth paragraph of the son’s will, or be apportioned between that trust and the trust appointed by paragraph second of the son’s will? I think they should be apportioned, and McCook v. Mumby, supra, is authority for this conclusion.

The last question is, Has the complainant, by the assignment from Thomas C. Longley, acquired the remainder interest under paragraph second of the will of the son, and, if so, is‘she entitled to have the trust accelerated and the corpus paid to her? Longley enters the situation by reason of a clause in the father’s will, which reads as follows:

“Upon the death of my said son, George F. Leavitt, to pay and distribute the funds so held in trust for him, and upon the death of my said wife, if she survive him, the fund so held in trust for her, in such proportions and to such person or persons as he, my said son, George F. Leavitt, miay, by his last will and testament, in writing, designate to receive the same, and in default of such designation to his issue, if any he have, but should he die without issue him surviving, then to Thomas O. Longley.”

Although the son died without issue, he exercised the power of appointment.

I do not see, therefore, that Longley had any remainder in the trust fund created under paragraph two.

By the fourth paragraph of the son’s will he gives the remainder of the estate held in trust for his mother and himself to Fidelity Trust Company to pay the income to complainant until she reaches the age of fifty, at which time the principal is to be paid to her.

In the fifth paragraph he directs that the principal of the trusts created in paragraphs second and third, should complainant die before reaching the age of fifty, be paid to such persons as she may by will designate, and in default of such designation to her heirs and next of kin.

This is, undoubtedly, a mistake. There is no trust in paragraph third. He, undoubtedly, meant paragraphs second and fourth. The complainant is not yet fifty, and has a daughter, an infant. I am of the opinion that testator meant complainant to have the corpus only on condition that she reach the age of fifty; gave her the right of appointment in case she died before that time, and in default of such appointment to her heirs and next of kin. This gives complainant a life estate, and the infant has an interest which can be defeated only by the mother’s arriving at the age of fifty, or by ber death before that time, leaving a will im which there is an appointment. Winterbaum v. Deusel, 94 N. J. Law 480.

I agree with counsel that the $2,100 received from W. A. Morschauer by complainant, after testator’s death, was an executed gift, and the estate has no interest therein.

I will advise a decree in conformity with these conclusions.


author: Ingersoll, V. C.

text:
    Joseph M. Rowland Company, complainant, v. Naomi M. Sutton et al., defendants.
    [Submitted December 15th, 1925.
    Determined December 29th, 1925]
    1. A stipulation in a mortgage making the principal due for default in payment of taxes is not in the nature of a forfeiture, since the mortgagors are required by foreclosure to pay only the amount justly due, the time for payment being shortened by their default.
    2. The payment of a part of the interest on a mortgage, and the later offer to pay the balance is neither a legal or equitable defense in an action of foreclosure for default in the payment of interest.
    3. Parties to a mortgage may make the time of payment of interest of the essence of their contract, and agree that default therein shall render the principal immediately due and payable.
    4. That a foreclosure action was brought from improper motives is immaterial.
    On bill to foreclose. On final hearing.

      Mr. Joseph H. Carr, for the complainant.

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

The complainant files its bill to foreclose two certain mortgages upon a tract of land in Ocean City, Cape May county, title to which is in the two defendants, Naomi M. Sutton and Charlotte S. Chester.

These two defendant are the respective wives of the defendants, Edward M. Sutton and Ralph L. Chester. The defendants are the agents of the wives and transact all business in connection with the property in question.

In each of the mortgages there was contained a provision “that if default should be made in the payment of interest therein provided for the space of thirty days .after any semiannual payment should fall due, at the option of complainant, the whole principal debt secured thereby should become immediately due and payable, and also a provision that there should be produced to complainant, on or before the 31st day of December of each and every year, receipts for all taxes of the current year assessed upon the premises described in said mortgage, and, if default should be made in such production, then, at the option of the complainant, the whole principal debt should become immediately due and payable.” In the second mortgage there was a provision that if at any time default should be made in the payments of any installments (of principal) as therein set forth for the space of thirty days after the same should fall due, then, at the option of the mortgagee, the whole principal debt secured thereby should become immediately due and payable.

On January 2d, 1925, interest on the first of said mortgages to the amount of $2,100, interest on the second mortgage to the amount of $315, and an installment of $1,500 on the said second mortgage, aggregating in the total $3,915, became due and payable. The bill alleges that the sum of $1,957.50, one-half of the total of said items, was paid and credited, and that there remained unpaid the remaining amount of $1,957.50, and that the same remained unpaid for more than thirty days, and still remains unpaid.

That “default has likewise been made in tax receipts' for the year 1924, upon said premises, said receipts not having yet f at the time of the filing of the bill, March 5th, 1925] been produced to the complainant.”

It is proven that the “second half of the tax was not paid until the 18th day of March, 1925,” and, therefore, the receipt therefore could not have been produced to the complainant on or before December 31st, 1924.

The defendants claim that two checks, each being in the sum of $1,957.50 (one-half of the amount due), were mailed to the complainant, and that only one of said checks was by it cashed; that funds were on deposit in the bank upon which the second check was drawn, and that it would have been paid upon presentation; that the complainant had always theretofore accepted checks in payment of amounts due.The testimony concerning the mailing of said check or checks is: That of Samuel K. Ewen, the bookkeeper of Ralph Chester, who, upon a statement or bill of the amount due ($3,915), divided it by two, gave Mr. Sutton a blank cheek for $1,957.50, which he did, and gave to Ewen, who enclosed it in an envelope with the check made up by Ralph L. Chester for $1,957.50, addressed to Joseph M. Rowland, on January 15th, 1925.

Mr. Sutton says: “I firmly believe that I made out a check on one of their checks to Mr. Rowland for one-half the interest, nineteen hundred and some odd dollars, whatever it was.” Further, “I have my firm belief about it. I wouldn’t say I remember it; no, sir. I wouldn’t swear I made out that check; no, sir.”

Mr. Rowland, the president of the complainant, received by mail the statement mentioned by Ewen, personally opened the letter in which the statement was enclosed, and found one check of $1,957.50 (admittedly Corson’s check). He testifies that no other payment for interest, &c., then due was received. Mr. McCorkle, the bookkeeper for complainant, testified he received from Mr. Rowland the envelope containing the bill or statement, together with one check for $1,957.50.

No receipt was sent for the amount received, nor was the check deposited until February 25th, 1925.

This is explained by Mr. McCorkle, that Mr. Rowland told him to hold the check until the other half came in; that he (Rowland) left for Florida the day the check was received and returned on or about the 25th of February, when he directed the check to be deposited.

The bill in this cause was filed. March 5th, 1925, and the subpoenas issued March 26th, 1925, were served on the Suttons and Chesters on April 3d, 1925.

Chester, hearing that the bill had been filed, on March 18th, 1925, caused his clerk to write to Rowland stating that checks had been mailed aggregating $3,915, asking for receipt and enclosing the receipted tax bill, which upon that date had been paid.

' On March 27th, Mr. Carr, solicitor of Rowland, wrote Chester that this letter had been referred to him, and that no check of Mr. Sutton had been forwarded or received, and that he had been instructed to and had filed a bill to foreclose the mortgage.

Mr. Chester, on receipt of this communication, wrote under date of March 28th, 1925, a letter to Mr. Carr. This letter was read by Mr. Sutton, and, although he says he did not authorize it, “it was thoroughly understood he [Chester] was to write that letter, and the check therein was sent by bis [Sutton’s] permission.”

In this letter Chester said: “The bookkeeper had divided the amount of the statement in half, made out check for my share, and thought he had also received the same amount from Mr. Sutton, this being the customary way on property jointly owned.

“But in this particular case we had received $4,000 from the tenant, which was sufficient to pay the interest and reduction on mortgage, and we should have paid Mr. Sutton’s share.as well as our own.”

I am convinced that Mr. Ewen is mistaken in his statement that two checks 'were sent to Rowland, and find that only one check for $1,957.50, that of Mr. Chester’s, was sent, and that the balance of $1,957.50 remained due and unpaid for more than thirty days.

Weiner v. Cullens, 97 N. J. Eq. 523, is dispositive of the defenses raised in this case.

In that case it was held—

Eirst. A stipulation making principal due for default in payment of taxes and assessments (which cannot he regarded as differing essentially from a like stipulation touching the prompt payment of interest) held, not in nature of forfeiture, since mortgagors are required by foreclosure to pay only amount justly due, time for payment being shortened through their default.

Second. The payment of a part of the interest, and later offering the payment of the balance, can be neither a legal or equitable defense.

Third. It is competent for parties to mortgages to make time of payment of interest of the essence and to agree that default therein shall render principal immediately due and payable.

Eourth. Where, upon default in payment of taxes, foreclosure proceedings are brought, contention that proceedings were prompted by improper motives is immaterial.

The defendants cite DeGroot v. McCotter, 19 N. J. Eq. 531, as holding “the court will not enforce a forfeiture of credit if the complainant is himself in fault, or has misled the defendant.”

The court in that case, however, held: “That if the omission to pay interest within the time limited has .happened by the negligence of the defendant, the forfeiture has been incurred and the contract will be enforced.”

A decree in favor of the complainant will be advised.


text:
    H. Rae Scull Rosecrans, complainant, v. Paul C. Rosecrans, defendant.
    [Decided February 11th, 1926.]
    1. Where a husband procures real estate to be conveyed to his wife, a presumption arises that he intends to settle the property on her, and while such presumption may be rebutted, the proof offered to accomplish this must be certain, definite, reliable and convincing, leaving no reasonable doubt of the intention of the parties.
    2. The conveyance of lands to a husband and wife, endowed the wife with the capacity during their joint lives to hold in her possession, as a single female, one-half of the estate in common with her husband, the right of survivorship existing as at common law.
    3. Evidence examined and found to be insufficient to establish a resulting trust in land held by husband and wife as joint tenants.
    On bill for accounting. On final hearing.

      Mr. Robert H. McCarter, for the complainant.

      Mr. Lewis Stwrr, for the defendant.
   Ingersoll, V. C.

The complainant and defendant are husband and wife, living in Atlantic City, New Jersey.

The testimony indicates the defendant to be well versed in the hotel business; that while he is able to operate a hotel in an apparently successful manner, he had not, prior to the present venture, been able to conduct his business in a manner to show financial success.

The wife is an active and energetic woman-with the ability to save money, and appears to have considerable financial standing.

They first became associated after he had failed in the conduct of the Hotel .Lexington, in Atlantic City, and the creditors, or some of them, were operating the hotel with him as manager, and with her as cashier and auditor. Apparently, she was placed there as a check over or upon him.

They afterwards became connected, to some extent at least, in the operation of another hotel. The testimony showed that even before their marriage she had loaned him money. They were married September 10th, 1918.

Some time in the fall of 1919, an agreement was entered into between one Charles B. Prettyman and the complainant and defendant, wherein Prettyman agreed to convey to them a hotel in Atlantic City known as the Princess. This agreement resulted in a conveyance by Prettyman and wife to Paul C. Rosencrans and Rae Scull Rosencrans, his wife, of said hotel property, together with certain furnishings therein contained. This deed was dated December 1st, 1919, and recorded in the clerk’s office of Atlantic county, in book No>. 621 of deeds, page 14, &c.

The bill further alleges that the defendant is in actual control of said premises (with the exception of one bedroom occupied by the complainant), and that he is conducting therein the hotel business, and excludes “complainant from the use, enjoyment, rents, issues, profits or usufruct thereof,” and refuses “to pay complainant any sum of money as the proceeds of said business, or as the rental value of her one-half interest in said premises,” and prays:

1. For an accounting of all rents he has received.

2. For the rental value of the premises.

3. That a receiver be appointed.

4. That he be decreed to pay complainant amount found to be due.

The answer alleges that the property was purchased by the defendant, that he borrowed of the complainant approximately $8,000, and the title was taken in the joint names as security to her for the said loan, and that the complainant agreed to release same upon the payment of the amount loaned, and prays:

1. That it he decreed that the only right, title or interest the complainant has is as a mortgage.

2. That an accounting be taken, and complainant, upon the payment of amount found to be due, be required to execute a quit-claim deed; and in an amended answer further prays that it be decreed that a resulting trust arose in favor of defendant.

“The rule in this state is well settled, that where a husband procures real estate to be conveyed to his wife, he paying the consideration, a presumption arises that he intends to settle the property on her, and while such presumption may be rebutted, the proof offered to accomplish it must be certain, definite, reliable and convincing, leaving no reasonable doubt of the intention of the parties.” McGee v. McGee, 81 N. J. Eq. 190, and cases therein cited (at p. 194), and surely this rule- is not weakened by the wife furnishing a portion of the consideration.

The conveyance of the premises to the husband and wife endowed the wife with the capacity during their joint lives to hold in her possession, as a single female, one-half the estate in common with her husband, the right of survivorship subsisting as at common law. Buttlar v. Rosenblath, 42 N. J. Eq. 651; Vunk v. Raritan River Railroad Co., 56 N. J. Law 395.

In Hood v. Hood, 83 N. J. Eq. 695, the court of errors and appeals affirmed a decree appealed from, for the reasons stated by Vice-Chancellor Stevens, who said: “The evidence of a resulting trust is to be found only in the assertions and evidence of Mr. Hood, denied by his wife * * *. It being necessary to overcome the presumption of an advancement by evidence ‘certain, definite and convincing/ ” I cannot say that such evidence has been produced.

I would have little, if any, difficulty in this matter were it not for the testimony of the complainant herself.

While the reading of these excerpts from her testimony might seem to indicate that the complainant was testifying directly in variance with her claims, still, I am convinced by the testimony, the manner of the witnesses on the stand, and by the large amount of documentary evidence, that this money was advanced by the complainant as a part of the purchase-money of the property, and that title was intended to be taken by them as joint tenants.

A decree will be so advised.


text:
    Emily Freda Ballantine et al., complainants, v. Ferdinand L. Stadler et al., defendants.
    [Decided October 2d, 1924.]
    Evidence examined, and held that no sufficient proof of duress or fraud had been presented to justify the court in setting aside the written agreement of the complainant, signed and acknowledged by her before a master in chancery who read the paper to her.
    On bill, &c. On final hearing.

      Mr. Lee F. Washington, for the complainants.

      Messrs. Cole & Cole, for the defendants.
   Ingersoll, V. C.

(orally).

I cannot feel that it would be of any advantage to reserve by decision in this case. My attention has not been called specifically to any law except the one case cited. The situation is, to some extent, complex, in others quite plain of understanding. It seems from the evidence that some thirty-five years ago Mr. and Mrs. Stadler, Sr., both of whom were Germans with somewhat scant knowledge of English, came to Atlantic City and entered into a business, ice cream and bakery, or things of that sort; that after being in one location for a few years they moved' to what has been called Virginia and Atlantic avenues, where they rented for one year and later purchased a tract of land and built a plant for the conduct of their business near the last location, I think No. 10 South Virginia avenue. This couple were blessed with, I think it is, seven children, five girls and two boys. All of this family united as a unit in the conduct of this business and each continued in the business, each doing some certain part of the work required in the conduct of the business, the oldest son, Ferdinand, either was given or gradually acquired the general management of the business. He was, to that extent, the head of the business. As I have said, each of the children participated in this business alike, with this exception, that when the daughters married, or those of them who did marry, they ceased their activity in the conduct of the business. When the sons married they still continued their activity in the business, but left the home roof' and started homes of their own, and, evidently, they were paid salaries or allowances made to them, perhaps differently than they were before. There is no testimony as to whether specific salaries were paid to any or not.

The father makes his will giving to the wife a life interest in all the property, giving to two of the daughters who had previously married the sum of $1,000 each upon the death of the mother, and dividing all the property, after the death of the mother as life tenant, among the other children. Mrs. Ballantine, the present complainant, although having previously married, was not placed in the same list as the other two daughters, who had married and allowed or given the sum of $1,000, but she was placed in the same category as the sons and the remaining daughters who had not married. It is clear that from the time of her marriage, or, perhaps, shortly thereafter, she had, as had her other two sisters who had married, ceased active work in the concerns of the business. After the reading of the will, according to her testimony, at the time of the reading of the will and according to the testimony of at least some of the defendants at a later period, some discussion arose as to whether the will was just, and it was suggested to her, according to the testimony of the defendant, that if she desired to be in the position to take advantage of owning a certain part of that property or that estate after the death of the life tenant, she must participate in the work of carrying it on. According to her testimony she was told that Ferdinand, and, at least, one of his sisters, would not go ahead with the carrying on of this business, evidently for not only their benefit but for the benefit of the life tenant, if she was to continue to receive, or was to receive, her share of the benefits of that, business, and it was suggested or demanded of her that she consent to be placed in the same situation as the other married sisters — that is, to receive a thousand dollars at the time of her mother’s death and to waive any right in her father’s estate. She signed such an agreement, together with her husband, and likewise signed before a master in chancery, who, according to her story, read the paper to her and she acknowledged the contents of it.

The business after the father’s death was continued in exactly the same manner. Of course, technically, legally thg life tenant was receiving the benefit of it, it cannot be doubted, however, that this business was carried on during the mother’s lifetime as a partnership between Ferdinand, his brother Lewis and the sisters, who were supposed to receive that part. There can be no doubt in the court’s mind but what the business was carried on, the mother was supported, and they received, either by way of profit or by way of salaries, the proceeds of this business, and when I say that I am confident that the business was carried on as though it was actually their property, that the proceeds were in enlargement of the plant and in payment of the debts — in other words, it was not considered as an estate in that sense of the word, but it was considered as a partnership, they the active owners, together with the mother, claiming to be the only ones interested in it.

The mother dies, and, upon an effort by Ferdinand Stadler of the payment of the $1,000 to Mrs. Ballantine, he having either then or later paid, at least, one of the other heirs the $1,000, she refuses and says that she will not abide by the contract or agreement she has made.

I cannot find that there was such duress or fraud or misrepresentation, undue influence or other reason sufficiently proven to set aside an instrument made under seal and duly acknowledged as this particular instrument was. I appreciate fully that it was probably signed in the thought that a great advantage was gained to the mother by signing it, but I cannot see how Mrs. Ballantine could feel the responsibility, as was suggested by several witnesses, of the mother’s death in the case of this business going to pieces, because she would not accept an offer of the brother and sister and they giving as an ultimatum that they would withdraw from the business. If the withdrawal from the business would cause the death of the mother, they would be the responsible ones, and not Mrs. Ballantine, if she declined to release a right which was hers.

It is unfortunate that a matter of this sort should be brought into the courts between members of the same family, between members of a family, who, apparently, by their united efforts, have built up from a very small beginning a most successful business, as it must be from the testimony that has been presented, but, for the purposes of my decision, taking all the facts as they have been proven before me, I cannot feel that the complainant has produced sufficient for me to say that the solemn paper signed by her should be set aside and declared void. I am making these statements broad so that it will be unnecessary for me to write a further opinion. I am deciding the case entirely upon the facts as presented, and am not referring to any specific legal propositions, except as I have in a general way.