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    The Macon Knitting Company et al. v. The Leicester Mills Company et al.
    [Filed July 6th, 1903.]
    1. A patentee, in granting a license to use the patented article, impliedly warrants that lie possesses the title to the patent-right, and that the licensee - will not be evicted therefrom; • but he does not warrant the validity of the letters-patent.

      2. A decree against a licensee of the patentee of a machine, which determines that the machine is an infringement of another patent, in so far as it includes the generic novelty of the latter, is an eviction of the licensee, which will relieve him from the payment of royalties.
    3.. Where a licensee of a patent-right receives information that-the patent is an infringement of the patent-right of a third person, he need not wait until he is actually evicted, but may abandon the license at once, and avoid the further payment of royalties.
    4. After a licensee of a patentee had been evicted by a decree enjoining the use of the patented machine as an infringement of a patent-right of a third person, an agreement was entered into between the latter and the licensor, by which the licensor was authorized to grant to his former-licensee the right to make such machines, and use them for the manufacture of a specified article; but for no other purpose. — Held, that the agreement nullified the effect of.the decree.
    5. Where an interval of time intervenes between an eviction by such a decree and the execution of the agreement annulling such an eviction, the court will decree specific performance by the licensee, with an allowance to him of pecuniary compensation for the loss of the use of the license during the interval.
    The following preliminary statement will disclose the.general features of the cause to be determined:
    On January 2d, 1896, and on November 18th, 1895, patents were allowed to Joseph Bennor for certain improvements in straight knitting jackets for making fashioned hosiery. On September 14th, 1894, Bennor conveyed a one-half interest in this invention to the Macon Knitting Company, the other complainant.
    On February 10th, 1896, the complainants entered into an. agreement with the defendant the Leicester Mills Company, by which they granted to the latter company an exclusive license to manufacture in the United States, for its own use therein, to the end of the term for which such letters-patent were, or might be, granted, knitting machines containing the above-mentioned patented improvements, granting it the sole right in the United States to use the said .machines in the manufacture of knitted goods of wool, worsted and merino, and of no -other material and for no other purpose.
    By said agreement complainant, contracted to build and. furnish to the defendants twenty knitting machines of the, construction specified in the application for said patents for a cstsh price ¿mounting to ten per cent, above the cost of. their construction, but not to exceed $200 each, which said machines the defendants were to have the right to use in the manufacture of the specified goods, and which .machines it was agreed should be practically operative and built in a workmanlike manner.
    Complainants agreed to assist the defendants in placing said machines in its factory and to impart, to a competent person, to be designated by said defendants,-proper instruction for operating the machines. ' ■ - "" •
    The defendant agreed that, upon the delivery to it of the twenty machines, and upon the practical operation of said machines, the defendants would forthwith assign to the complainant’fifty shares of the capital stock of the said Leicester Mills Company, of the par value of $100 per share, together with the bonds of the said company of the value of $5,000.
    The defendant also agreed that,, on January 1st,'-1898, or before that time, if it had constructed eighty machines, it would assign one hundred' more shares of its capital stock and the same amount of bonds. ’ ” •
    The first installment of stock and bonds was delivered, but the second installment has not been delivered, and it is to compel the delivery of the latter stock and bonds that this bill is filed.
    The answer, as well as the answer by way of cross-bill, sets upp that the defendant was induced to execute the agreement by the false representation of the complainants that the machines would produce stockings that would .be shaped in process of manufacture and would be marketable as first-class goods; that it delivered the first installment of stock and bonds, relying upon the contract and upon the further assurance already‘mentioned; that it cost $400 to make each machine; that they were not practically operative; that the manufactured product was not first class and merchantable, but had to be darned and sold as sec'ond-class goods.
    The cross-bill sets up the sanie facts, and prays that the stock and bonds already delivered may be redelivered to the defendants, and that'damages may be awarded for the expenditure made by defendants in reliahce upon the representations made and the written covenants executed by the complainant.'
    The supplemental answer sets up that fhe patents were infringements of a preceding patent owned by the Powells, and so the complainants had no title to convey, and that that question was then being litigated in a federal court.
    By a stipulation this last question was held in abeyance until a decision by the federal tribunal, which decision was to be regarded as decisive in this court. A decision has been rendered in favor of the defendants, the character and effect of which decree will be presently considered.

      Mr. Francis G. Lowthorp and Mr. Hector T. Fenton\ for the complainants.

      Mr. E¿hoard II. Murphy, Mr. Joshua Pusey and Mr. Joseph Jenkins, for the defendants.
   Reed, V. C.

Of the two complainants, the Macon Knitting Company and Joseph Bennor, each owning a one-half interest in the machines sold and in the right to manufacture and use like machines, Mr. Bennor was the inventor and patentee of the machines sold to the Leicester Mills Company. Previous to the sale the latter company was a dealer in woolen yarn, and for about two .years had been selling these goods to the Macon Knitting Company. Mr. Bennor, then interested in the business of the Macon Knitting Company, in his intercourse with the officers of the Leicester Mills Company concerning the purchase of woolen yarn, spoke to them about the knitting machines. In consequence of his talk with them, Mr. Wilson H. Brown, the vice-president and treasurer of the Leicester Mills Company, accompanied Mr. Bennor to Macon, and saw the machines in operation. The result of the conversation and of this visit was that 'the contract ■already mentioned was entered into between Mr. Bennor and the Macon Knitting Company, on the one side, and the Leicester Mills Company, on the other side.

Of the twenty machines sold, six were sent to Germantown, where the Leicester mills factory was located, on July 35th, six on September 11th, and eight on November 4th, 1896.

In the latter part of July, or the first part of August, of that year, Joseph N. Bennor, Jr., the son of the patentee, went to the Leicester mills to superintend the setting up and putting into operation the machines sold, and remained there until July, ■ 1897. The Leicester mills people constructed a shop for the purpose of building the additional machines mentioned in the contract. Mr. Bennor, who arrived at Germantown before the arrival of the first installment of machines, devoted his time to starting up the machines shipped, making the tools, putting in the shafting and preparing for the purpose of manufacturing machines. He says he set up the first arriving machines as soon as they got the shafting in, but that it took some time to get ready to run them; he had to experiment on yarns — some of it was twisted too hard, some had little pieces or burrs on it, and some was irregular in size, “and we had to get our samples of proper weights before we could start the machines.” It is to be remarked here that the machines, while at Macon, had run on cotton, excepting in those instances where samples were made from yarn sent to them. Mr.- Bennor further says that he got the first of these machines started in the latter part of September, 1896, and he had them all at work by the 1st of December. Much of Mr. Ben nor’s time was given to the machine shop, and therefore, -to assist him, Mr. James T. Hall was sent from the Macon Knitting Company about the 1st of February, 1897. Mr. Hall was the foreman of the knitting-room at the Macon mill. Mr. Hall ran the knitting machines from the time he came until he -left, which was some time in March. Before Mr. Hall came, Mr. Bennor had a boy, whom he taught to help him run the machines. This boy remained until the first week that Mr. Hall was there, and then another boy was hired, who remained two or three weeks after Mr. Hall left. He was discharged by the officers of the Leicester Mills Company. After Mr. Hall left the Leicester Mills Company employed Mr. Thomas W. Tustin, who began to work in the second week in Ma}r, and remained about one year. Mr. Bennor and he were there together from the second week in May until about July 4th, when Mr. Bennor left, and Mr. Tustin was alone until the Leicester Mills Company ceased using the machines. The machines ran until December. On December 21st, 1897, Mr. Wilson H. Brown, the treasurer of the Leicester Mills Compaq, wrote to Mr. Bennor, stating that the machines were not “practically operative,” and notifying him that the Leicester Mills Company rescinded the agreement, and asked him to reinstate them in the same position as before the agreement was made.

On December 24th Mr. Bennor replied, refusing to entertain the proposition.

On March 8th, 1898, Mr. Bennor and the Macon Knitting Company filed the bill in this cause, and on April 29th the defendants filed their answer and cross-bill.

The bill, as already observed, asserts "that the machines were “practically operative.” The answer and cross-bill charged that they were not “practically operativeand further charged that there were false representations made which induced the execution of the contract. In detailing these representations the answer states that the defendants were induced to enter into the contract by the statement that the machines would, could and should produce stockings that would be shaped in process of . manufacture, and would be marketable as first-class goods. The answer then states that the stockings produced required to be darned, which made them unsalable as first-class goods.

The prolonged operation of these machines by the defendants is explained by the statement that they notified Mr. Bennor in July, 1897, that the machines were not in accordance with the agreement, and that Mr. Bennor requested defendants to give them a further trial, and agreed that if they were not found to be satisfactory by January 1st, 1898, they would be taken back and the defendants would be reinstated in their original position.

The cross-bill charges that at the time of the execution of the agreement it was agreed that the words “practically operative” meant that the machines would produce fashioned stockings that would be marketable as first-class goods. It charges that all the stockings produced by the machines had holes in them, which required to be darned, and so made them unsalable as first-class goods; that frequent and constant complaints were made to the complainants of this state of affairs, and as frequent promises were made by them that the defects would be remedied and that the complainants would demonstrate that the machines Avould produce first-class goods. The cross-bill restates the conversation in July, already set out in the answer. The cross-bill also sets up that large sums of money were expended in buying-special tools, &c., to equip the shop and run the machines at a large expense, and that they also lost much in the manufacture of unsalable goods. It charges a failure of consideration and a failure to perform the conditions to be performed by the complainants. It asks that the complainants may be decreed to return the stock and bonds and interest already received, and also to pay the amount expended by the .defendants already mentioned.

It is to be observed that the cross-bill does not ask for the recision on the ground of fraud, nor do I find evidence of any fraudulent representation of any subsisting fact made by the complainants. Whether the machines were or were not “practically operative” in fact, in the sense in which the Avords are used in the contract, I am quite clear that Mr. Bennor thought the machines would do whát he said they would do. The primary question in the case is whether the machines delivered were “practically operative.” In that question is also invqlved the practical effectiveness of the machines to be manufactured, and consequently the value of the license to manufacture. Inasmuch as- the inoperativeness of the twenty machines is attributed to defects in design and not to defects in construction, the proof of the inefficiency of the first twenty machines carries with it the presumption of similar inefficiency in every machine which was to be built under the license'. Practical operativeness is to be tested by the purpose for which the machine is built and sold. A machine may operate practically to make bricks, but if sold for the purpose of making tiles it would be absurd to speak of it as “practically operative.” The contract itself recites the grant to Mr. Bennor of the patents for an improvement in stockings, and the art of making them, and improvements in straight knitting machines for making fashioned hosiery, and recites that the Leicester Mills Company were desirous of manufacturing knitting machines containing those improvements, and acquiring the exclusive right to manufacture thereon knitted stockings of wool, worsted and merino, together with other knitted goods of wool, worsted and merino. Then there follows a license to manufacture such knitting machines, with the sole right to use the said machines in the manufacture of knitted goods of wool, worsted and merino, but of no other material.

It thus appears that the machines were to be “practically operative” in making knitted woolen goods, including fashioned hosiery. It is apparent also that the machines were to make seamless hose. Now, a machine might make a fashioned seamless hose, and yet not be “practically operative.” Its operativeness must be measured by the work of other knitting machines in respect to the quantity and quality of the goods produced, the durability of the machine, its freedom from liability to disarrangement and its liability to waste yarn.

[Here follows a review of the testimony directed to the question whether the machines were practically operative, followed by the conclusion of the vice-chancellor that the machines were practically operative. This portion of the opinion is omitted by direction of the vice-chancellor.]

There are, however, other questions in the case. After the original cross-bill and answer were filed, mainly attacking the operativeness of the machines, a supplemental cross-bill and an answer were filed setting up, in substance, that the machines in question were, in some material part, infringements upon the rights of Messrs. Powell, the owners of a patent for an improvement in the web-holding actuating mechanism for automatic knitting machines; that on November 12th, 1898, the Messrs. Powell had begun a suit against the defendants because of such infringement. In the complainants’ answer to the cross-bill they admit the pendency of the suit, but denied the fact of infringement.

Upon the trial of the present case it was stipulated that the decisión of the issue raised by these supplemental pleadings should be suspended until after the decision of the federal court in the suit mentioned, and that the decree of the court in that case might be pleaded in this as to its legal effect in this court, subject to an appeal in the Powell Case.

On appeal to the circuit court of appeals, the decree of the circuit court holding that there had been no infringement was reversed and the record was remitted to the circuit court, where, on October 25th, it was decreed that the Browns had infringed the Powell patents and their exclusive right thereunder by the manufacture and use of knitting machines having web-holding actuating mechanism, substantially the same in construction and operation as in the Powell patents. This decree has been pleaded and is in evidence by stipulation in this suit. The conclusion of this decree of the federal circuit court is this: “It being shown to the court by stipulation this day filed and now made a part of this decree, that the intervening defendant, the Macon Knitting Company, has made settlement with complainants for said infringement, and has taken a license under said letters-patent, as in and by said stipulation appears, and complainants having thereupon waived an account of profits and damages and injunction, it is decreed that the complainants do recover of said defendant (Brown) and intervening defendant (Macon Knitting Company) the costs of suit.”

Now, this stipulation is not a part of the judgment, but is recited to show why there is no injunction, order and decree for an accounting, namely, because the complainant waives his right to such decree. The recital amounts to an admission in open court by the parties that the annexed stipulation had been executed. The decision of the circuit court of appeals was rendered on April 4th, 1901, and the stipulation annexed to the final decree is dated July 3d, 1901. The stipulation or agreement witnessed that the Powells, owners of letters-patent of the United States, No. 510,934, dated December 19th, 1893, for improvements in web-holder actuating mechanism for knitting machines for and in consideration of the sum of five thousand dollars ($5,000) and other good and valuable considerations us in hand paid, have authorized and empowered, and do hereby authorize and empower the Macon Knitting Company to sub-license and empower the Leicester Mills Compaq, and no other .party or parties, retroactively from the date of the said letters-patent, and hereafter during the remainder of the term thereof, to make for its own use only, and to use said patented web-holder actuating mechanism in or upon or as part of knitting machines heretofore employed or hereafter to be employed by the ■ said Leicester Mills Company, exclusively in the knitting of hosiery or other goods from woolen, worsted or merino yarns, and for no other purpose or purposes.

That the intent of this instrument was to authorize and license, subject to the terms, conditions and limitations hereinabove expressed, as well the use theretofore by the said Leicester Mills Company as the continued use thereafter during the term of said letters-patent No. 510,934 of said patented web-holder actuating mechanism to and upon twenty (20) knitting machines heretofore made by the said Macon Knitting Company and Joseph Bennor and by them sold and delivered to the said Leicester Mills Company under a certain license agreement made by and between the said Bennor and the said Macon Knitting Company, of the one part, and the said Leicester Mills Company and Wilson H. Brown, of the other part, dated the 10th day of February, a. d. 1896; and also to authorize and license the said Leicester Mills Company, subject to the same restrictions and limitations as to use, as well the manufacture and use by said Leicester Mills Company heretofore as also the manufacture and use hereafter, during the term of said letters-patent, of other specimens of said patented device in or upon or as part of any knitting machines made, or to be made and used, or to be used, by the said Leicester Mills Company under and in accordance with the terms of said agreement of February 10th, 1896, copy of which is hereto annexed, marked “Exhibit A” and for no other purpose or purposes; to the end that said Leicester Mills Company, as the sub-licensee of the said Macon Knitting Company hereunder, shall not be evicted, disturbed or interfered with by reason of said recited letters-patent No. 510,934, owned by said licensors herein, from and in the full enjoyment of all the rights and privileges granted to it, the said Leicester Mills Company, by the Macon Knitting Company and Joseph Bennor in and by said recited licensed contract or agreement, nor be held liable to the said licensors herein, in damages for'infringement or costs of suit in any action brought, or to be brought, by them under said recited letters-patent for any acts rightly done by the said Leicester Mills Company in the exercise of such license rights as by the said recited contract of February 10th, 1896, have been granted to or vested in them; it being the further declared intent and object of this instrument to settle and adjust the claim and demand for which a suit in equity was lately brought by the said licensors as complainants, in the circuit court of the 'United States for the eastern district of Pennsylvania, of October sessions, 1898, No. 20, against the said Leicester Mills Company and its officers as defendants, with the said Macon Knitting Company and Joseph Bennor as intervenors, and to discharge, release and acquit as well said defendants as also said intervening defendants of and from all liability for damages and costs which have been, 'or might be, adjudged, ascertained or assessed therein.

The question which presents itself is, what are the rights of the parties, in view of the decree coupled with the agreement just displayed?

It is first insisted by the defendants that they are assignees, and not licensees, and that the rule respecting the failure of consideration resulting from the invalidity of the patents should be applied as if the agreement for-the use of these patent rights was an assignment.

Whether the rule respecting the right of an assignee to set up the invalidity of a patent differs from the right of a licensee to do the same, is not to be considered; for the defendants are clearly licensees, and not assignees. Any assignment which does not transfer the whole patent, or an undivided part of the whole-patent, or an exclusive right to some part of the country, is a mere license. Waterman v. McKenzie, 138 U. S. 252.

This transfer did neither of these three things; it did not transfer the whole or an undivided part of the patent, and it did not transfer an exclusive right to use the same in the whole or any part of the United States. It only transferred the exclusive right to use the patented machine for one use, namely, for the manufacture of woolen goods.

What, then, is the privilege-of the defendants as licensees? There is a line of cases holding that a licensee cannot set up the invalidity of a patent, the right to use which he holds by license, unless there has been something equivalent to an eviction of the licensee. Judge Lowell, in White v. Lee, 14 Fed. Rep. 789, 791, said: “The law is, I think, that a plea or answer that a patent is void is not of itself a sufficient defence, but that evidence of what may be called an eviction is such defence. The difficulty is to ascertain what amounts to an eviction in patent cases. It is easily discovered whether the tenant of a certain piece of land has or has not been evicted; but if a patent is void, still the licensee may have had all the benefit- of a valid patent, because his exclusive title may never,have been disputed.”

In that case there was no suggestion that the exercise of the pretended right conferred by license was any violation of the rights of a patentee superior to the licensor. The invalidity of the licensor’s patent defeated the exclusive right of the licensee, and put him upon a footing equal with the world, but did not expose him to liability for infringement. He could still recognize and use his license and receive the protection of what the world might suppose or recognize as an exclusive license in fact.

In this group of cases, so long as a licensee recognizes the license and uses it, he must pay the royalties which accrue under the terms of his license. If, however, the patent was adjudged invalid, or was repealed by judicial decree, this amounts to an eviction.

In my judgment the decree of the circuit court of appeals must be regarded as an eviction.

It is, indeed, insisted that the Bennor patents have not been annulled. It is said that the decree in the infringement suit only established the fact that in some respects only the Bennor were infringements of the Powell patents.

It is true that the decree in the infringement suit only establishes the fact that the Bennor patent is invalid only so far as it includes the generic novelty already obtained by Powell. In no other' respect was the Bennor patent directly or inferentially annulled. But it is manifest that no one could use the Bennor machines without infringing the Bennor patent, as well as the Powell patent. It is obvious that the licensees could not use the machine without liability to Powell for damages for every days’ use; and I am unable to understand how the effect of a decree for infringement differs this from any other case, except in respect to the amount -of damages recoverable by the superior patentee. The decree for infringement amounted to an eviction.

. An eviction occurs whenever a licensee is enjoined from acting on it at the suit of the owner of a senior patent; and, by parity of reasoning, it occurs whenever a judgment or decree.is obtained by the owner of a senior patent against the licensee for an infringement which consists of acting under the license. Walk. Pat. (3d ed.) § 307.

It is clear, therefore, that putting aside for a moment the effect of the agreement entered into between the Bennors and the Macon. Mills Company, on the one part, and the Powells, on the other, that the complainants cannot compel the delivery to them of the remaining bonds and stock of what constituted the consideration for the license.

The question then recurs — what is the effect of the agreement ■thus referred to ?

• By this agreement the Powells licensed and empowered tire Macon Tvnitting Company to sub-license and empower the Leicester Mills Company to make for its own use only, and to use said patented web-holding actuating mechanism upon or-as a part of the knitting machines heretofore or hereafter employed by the Leicester Mills Company exclusively in the knitting of hosiery or other goods from woolen, worsted or merino yarn.

Now, the defendants insist that this agreement does not restore them to the position which they would have occupied had the original license protected them from all liability to a suit for an infringement. This appears to be so. First, the license purported to give the complainants the exclusive right to use ■the web-holding - actuating mechanism. The stipulation only confers the right to use' it in common with others -who may acquire the same rights from the Powells.

Again, the Powell patents expire before the Bennor patents, and so the use of the device mentioned will be thrown.open to the world before the end of the period of exclusive use which the original license granted to the complainants. What the stipulation does is to release the complainant from liability for past infringement, and to entitle it to use in future the Bennor machines free from any claim by the Powells.

But by doing this the agreement, I think, nullified the effect of the eviction proved by the decree of infringement. This is the effect of the rule, as I understand it, that while there is an implied warranty of title by the licensor, there is no warranty of the validity of the letters-patent. All that the licensor warrants is that the licensee shall not be evicted from his enjoyment of his rights under his license. Walk. Pat. 257.

The licensor deflected the force of the decree, which would have otherwise amounted to an eviction. By force of the agreement with the Powells the disturbing force of the decree was arrested at the moment of its birth.

Therefore, if the eviction rested solely upon the entry of the decree in the Powell suit, there would exist no defence whatever.

But there is another aspect of the case to be considered. The defendants ceased to use the license from the Macon Knitting Company in January, 1898. On November 21st, 1898, the defendants filed their supplemental answer and cross-bill praying for a recision of the contract, on the ground that the Bennor patents were invalid and because they infringed the Powell patent. From that date the cessation from use by the defendants of their license must be regarded, in part, at least, as caused by the paramount title claimed by the Powells.

It is perceived, therefore, that from November 21st, 1898, until October 25th, 1901, the date of the infringing decree, the defendants not only did not use the machines, but could not use them without being liable for infringement, .and it appears that they had asked for a recision of the license agreement upon that ground.

There is a class of cases in which a licensee can successfully defend against an action for royalties when there has been no eviction.

If the patent which he is licensed to use is an entire nullity— if it is inoperative, not merely in respect to some of its claims, but in all of its claims — the licensee need not wait until some act equivalent to an eviction occurs. In this class of cases the weight of authority is, that without an eviction, where there are no recitals in the license recognizing the validity of the patent, the licensee can cease to recognize and act under. the license by notice to the licensor of his determination to repudiate the license. Thereafter, if the patent proves to be invalid, the licensee is free to use and manufacture without liability to pay royalty; if the patent proves to be valid, the licensee thereafter is liable to the licensor for damages as -an infringer.

In Crossley v. Dixon, 20 Eng. Rul. Cas. 764; 10 H. L. Cas. 293, Lord-Chancellor Westbnry said: “The license being the foundation of the claim (for royalties) and being, of course, determinable by it, if he chooses to put an end to that license, it follows that the present appellant (the licensee) if he continues to use the machine, must treat him as a person infringing their patent rights.” Lord Chelmsford said: “He (the licensee) cannot act under the agreement and at the same time repudiate it. He majq if he pleases, put an end to the agreement, and he may use the machine which he has purchased from the appellants (the licensors),'but he must do so at his peril. He must do it under the liability to be treated as an infringer, and be subject to an action for damages for that infringement.”

In Marston v. Sweet, 82 N. Y. 526, 534, the rule laid down by Judge Earle in Lawes v. Purser, 38 L. & E. Rep. 48, was adopted, namely, that if the plaintiff believed the patent to be valid, and the defendant believed so too, the defendant must pay for the privilege until after he can show that the patents have been rescinded or revoked, or that notice has been given to the plaintiff that the defendant will not pay any.more under the contract.

And in Mudgett v. Thomas, 55 Fed. Rep. 645, the judicial language was that if the exclusive licensee, under a license which contained no recitals as to the validity of the patent, repudiates and abandons the license, he is not estopped from setting up the invalidity of the patent for lack of invention or want of novelty as a defence to an action for royalties alleged to have become payable subsequent to the repudiation. The cases are reviewed by Judge Sage in his opinion in this case. Upon this point are the eases of Harlow v. Putnam, 124 Mass. 553; Standard Button Fastening Co. v. Ellis, 159 Mass. 448; Edison General Electric Co. v. Thackara My. Co., 167 Pa. St. 530.

This rule seems inapplicable, however, when the patent, while invalid as to some of the points claimed, is valid as to others. The continued use of a license, received from such a patentee, would leave the licensee liable for royalties, and also responsible for infringing the rights of any paramount patentee.

But while he may not free himself from liabilities, if he continues to use the license, 1 am of the opinion that such a licensee can cease to use and repudiate his license-. He is not bound to wait until he is actually evicted by a paramount owner.

The doctrine of estoppel which is applied to a licensee is analogous to that applied to a tenant. The.well-known rule as to the latter is that, so long as he remains in undisturbed possession, he is estopped from attacking the title under which he entered, unless his entry was induced by the fraud of the landlord, or by mistake, or for some unlawful purpose. The fact that the lease is void, or that the lessor has no title whatever, makes no difference. If a lessee is in possession as a tenant, he must pay for what he enjoys. If his possession is disturbed by what amounts to an eviction, either by the landlord or by the ■owner of a paramount title, the right of the landlord to rent from that moment ceases. Nor is it necessary for the tenant to await the entry of a judgment against him. In case some ■claimant of a paramount title asserts his right against a tenant, the latter is not bound to remain in possession, and so become liable to pay rent to his landlord and also damages to the claimant.- He can abandon the possession of the leased premises, and take his chance of establishing his liability to be ejected by the paramount claimant. If he proves the existence of such liability, there can be no recovery for rent from the time of the tenant’s abandonment.

So a licensee, who may become aware of a claim of a right paramount to that of his licensor, may, upon the same principle, repudiate his license, abandon its use, and, if the existence of the paramount right is established, the licensee. is discharged from the payment of royalties subsequent to the date of his cessation from-use.

This, is the posture of the defendants. From November 21st, 1898, until October 28th, 1901, their abandonment of the use of the license discharged them from any liability to pay royalties for that period, •

The question then arises, what is the equitable course to be taken, in-dealing with this situation?

Should the court refuse to grant any relief, or should it decree specific performance, with an allowance to the defendants of a pecuniary compensation equal to the royalties which would -have accrued during the idle period?

The allowance-of compensation, in suits for specific performance, is a familiar feature in the administration of equity jurisprudence. When jurisdiction to decree a specific performance exists by reason of the character of the contract to be performed, a court, if it finds that it is beyond the ability of a party to specifically execute its terms, will compel him to do so, as far as he can, g,nd will compel him to compensate in money for so-much of the contract as he cannot specifically perform.

Even, if the party cannot perform any part of the contract, equity does not hesitate to decree compensation .for the whole.

'That this court has jurisdiction in this case is clear.

Jurisdiction rests upon two grounds — first, because the subject-matter of the contract is a patent, and second, because the-consideration was securities not listed, and so, without a market value. The power of this court to decree compensation in this-class of cases cannot be doubted.

. The instances in which this power has been exerted have been generally where the defendant has been unable to deliver what he had bargained to deliver, and the complainant is content to-accept pecuniary compensation. When, however, it is sought to-compel a defendant to accept that for which he has not contracted, the case presents quite another aspect. There must be-circumstances rare and peculiar to induce a court to so decree.

The present case is sui generis. The contract has been partially performed. The securities have been in part delivered. The license has been for a time enjoyed. There is nothing to indicate’that the existence of a paramount title in the Powells was suspected by the licensors until suit was brought for an infringement.

The conditions which its existence created were remedied as soon as it was judicially determined that there was a paramount right.

Then, too, it is to be particularly observed that the cessation from use began, not because of a knowledge of the claim made by the Powells, but because of defendant’s insistence that the machines were inoperative. It is quite likely that had the Powell claim been the only objection to the further use of the license, the licensor would have indemnified the defendant at once against liability for any infringement.

In'view of these conditions, I have concluded to advise a decree that the defendants shall deliver the remaining stock and bonds upon being compensated in.money for the loss of the use of the license for the period beginning when the defendant filed its amended answer and ending with the final decree in the Powell suit, at which time the defendants first had knowledge of the execution of the new license by the Powélls.

There will be a reference to a master to find the amount of such compensation.

A decree will be framed upon notice byr the counsel of the complainants'to the counsel of the defendants.


source: Caselaw Access Project

author: Reed, Y. C.

license: Public Domain

text:
    Ocean City Association v. William M. Chalfant.
    [Filed September 4th, 1903.]
    . 1. Where a vendor sells off an estate in lots, with restrictions upon the use of the lots sold, he will lose his right in equity to enforce the restrictions against one grantee, if he has knowingly permitted other grantees to violate the same restrictions, the effect of which violation is to abrogate the purpose of the restriction and alter the general scheme intended to be conserved by it.
    2. Upon the facts established — Held, that the complainant has waived its right to equitable assistance.

      Mr. S. Stanger Iszard and Mr. David; J. Pancoast, for the complainant.

      Mr. Albert A. Howell and Mr. Samuel W. Beldon, for the defendant.
   Reed, Y. C.

The purpose of this suit is the enforcement of a restrictive covenant in a deed made'by the Ocean City Association of lands now in the possession of William M. Chalfant.

The Ocean Oity Association is a corporation which purchased several thousand acres of land on Peck’s Beach, which land it laid out as a seaside resort of a religious character. It incorporated in all its deeds to purchasers of lots a covenant that no building should be used or occupied as a drug store without the written consent of the Ocean City Association; also, that no business of any kind whatever should at any time be carried on upon the Lord’s day, commonly called the Sabbath or Sunday; nor should any act, matter or thing be done that is a desecration of said Lord’s clay; and that the land conveyed should be under and subject to the conditions, restrictions and regulations as may be made to insure the original intention and purpose of said association in securing the whole island as a Christian resort.

The defendant, William M. Chalfant, occupies the building on the northeast corner of Eighth street and Wesley avenue, in Ocean City, ‘as tenant under Frederick Eapp, whose title to the-same is derived from the Ocean City Association through a deed containing the above-named restrictions. Mr. Chalfant keeps a drug store. He admits that in July and August, 1901, he sold on Sundays in said drug store soda water and like beverages from his fountain, and articles for family and • medicinal use. He admits that he occasionally sold candies and like merchandise, including a comb and brush, soap and other things that a drug store is supposed to sell. The defendant’s violation of the restrictive covenant is undenied.

His defence is that the association has waived its right to-enforce this covenant against him-, because it has permitted violations of the same covenants by other grantees.

The recognized doctrine is that where a vendor sells off an estate in lots, with restrictions upon the use of the lots sold, he will lose his right in equity to enforce the restrictions against one grantee, if he has knowingly permitted other grantees to violate the same restrictions, the effect of which violation is to abrogate the purpose of the restriction and alter the- general scheme intended to be conserved by it. Roper v. Williams, 1 Turn. & Russ. 18; Peek v. Matthews, L. R. 3 Eq. 515.

This rule is applicable whether the suit is brought by thecovenantee or by one of several grantees of land sold in accordance with the general scheme by the original covenantee.

It rests upon the equitable ground that if anyone who has a right to enforce the covenant and so preserve the conditions which the covenant was designed- to keep unaltered, shall acquiesce in material alterations of those conditions, he cannot thereafter ask a court of equity to assist him in preserving them.

The complainant may be in privity with the defendant, and have his action at law for a breach of covenant, but, nevertheless, in this situation, a court of equity will not assist him. Duke of Bedford v. Trustees of British Museum, 2 My. & K. 552.

Tlie question of waiver of the right to enforce a restrictive covenant by permitted violations of the covenant is dependent upon the character and materiality of the permitted breach. Knight v. Simmonds, 2 Ch. (1896) 294; German v. Chapman, 7 Ch. Div. 271.

A permitted limited breach may not conclude for all time in respect to a wider and more important breach. Lattimer v. Livermore, 72 N. Y. 174.

lt may be observed also that a permitted breach may be of one of two kinds of covenants, one class respecting erections upon, or a permanent physical change in the property subject to restriction, and the other class respecting the use of the property for certain occupations, without any physical changes in the property itself of a permanent character.

While the doctrine of waiver applies to both kinds of covenants, the propriety of the enforcement of the doctrine in particular instances may differ in 'each. This results from the fact that breaches of the first class usually permanently change the conditions which the covenant was designed to perpetuate, while breaches of the second class do not necessarily have that result.

It is only when the person in whom the right to enforce the covenant resides has permitted such infringement of its provisions as results in alterations that cannot be corrected, or which it is manifest thére is no intention to have corrected, that he is precluded from further enforcing the covenant.

When such a person has permitted a covenantor to spend money in the erection of buildings which are violative of the restrictions, he is estopped from successfully suing in a court of equity 'for a mandatory injunction to restore the siaiu quo, and the conditions having thus become- permanently changed, he cannot sue another covenantor upon a similar covenant.

When, however, the known breach consists in introducing upon the property some occupation interdicted by the covenant, and no considerable amount of money has been expended in .fitting the property for a particular business, or the character of the business is such that it constitutes an inconsiderable alteration of the conditions which the parties had in view, then the waiver of the right to restrain other and more considerable breaches may not result.

The first class of covenants are dealt with in the cases of the Duke of Bedford v. Trustees of British Museum, supra; Roper v. Williams, supra, and Peck v. Matthews, supra; and the second class in Knight v. Simmons, supra, and German v. Chapman, supra.

In the first three cases it was held that the complainants had waived their rights, but in the last two cases it was held that they had not.

The question involved in each case was, however, common to all, nameljq whether the complainant had permitted the situation, intended to be fixed by the covenant, to be materially and permanently altered.

The present case is one, as is perceived by the language of the covenant already displayed, dealing with occupations. The purpose of the covenant was to prevent the transaction of any kind of worldly business on Sunday. It was to put upon each lot owner, by contract, the same restriction in this respect as is imposed by the Yice and Immorality act.

It is proved that on Sundays- three bath-house keepers had, for a number of years, conducted their business of hiring bathing-suits and dressing-rooms. It is proved that on Sundays meat and ice cream were delivered; that hacks ran, and livery stables hired out horses and vehicles; that cigar and fruit stores did business, and newspapers were sold on the streets; that trolley' lines had run in the streets, and railroad trains ran through the city.

Some of these transactions must be put out of sight, because it does not appear that they were violative of the covenant. It does not appear how the railroads, the haekmen and the paper venders became subject to the restriction. In some of the other instances the violations were not brought to the knowledge of the officers of the association, and were not so frequent or of such character as to raise the inference that they must have known of them.

Then, in some instances, it appears that there were attempts, by action at law and by prosecutions, to stop acts which were infringements of the covenant.

If it appeared that the officers of the complainant had used reasonable diligence in repressing all of these violations of which they had knowledge, although it should appear that such prosecutions may have failed of their object, I do not think the complainant should be held to have waived its right to ask for the assistance of this court.

But it appears that the officers have not used reasonable diligence in preserving the character of the association which the covenant was calculated to secure.

They may not grant immunity to one, and prosecute other infringers of the same covenant.

Trolley cars and bath-houses are undoubtedly attractive and important features of seaside resorts at all times; but if their operations on Sundays conflict with the covenant, they stand, in respect to the covenant, on the same footing as any other business.

It appears that the trolley cars ran with impunity on Sundays. The use of the streets may not have been in violation of the covenant, but the power-house, in which the energy which runs the cars is generated, is admittedly upon land subject to the restriction.

Again, the bath-houses have been for years violating the covenant with increasing boldness and publicity.

Some three years before the institution of the present suit a bill was filed by the association against Samuel Schurch, one of the bath-house keepers, to enjoin him from violating the covenant. A preliminary injunction was refused by Vice-Chancellor Grey, whose opinion is reported in 12 Dick. Ch. Rep. 268. This case was never brought to final hearing. During these three years, as before, the bath-house keepers have been conducting a Sunday business without further contest.

In my judgment, the complainant has waived its right to equitable assistance, and the bill should be dismissed.


author: Eebd, Y. C.

text:
    Philip I. Marvel v. Nettie Fralinger et al.
    [Filed September 4th, 1903.]
    The circumstances adduced in a suit to compel specific performance of a contract — Held, to support the positive testimony of complainant that the contract was signed, and to overcome the negative testimony of the defendants in their sworn answers to interrogatories.

      Mr. George A. Bourgeois and Mr. Clarence L. Cole, for the complainant.

      Mr. Samuel II. Grey and Mr. E. Cooper Shapley, for the defendants.
   Eebd, Y. C.

This bill is filed to compel the defendant Nettie Fralinger to specifically perform a contract to convey a one-fonrth interest in a certain tract of land in Atlántie City.

This property appears to have been owned by Nettie Fralinger, John L. Young, Stewart McShea and the complainant, Dr. Marvel, each owning a one-fourth interest. There was a mortgage upon the property of $43,000. The alleged facts upon which the complainant’s suit is based are these: Prior to August 24th, 1899, there was a parol agreement between Dr. Marvel and the three other owners, by which these three were to convey their interest to Dr. Mar.vel. On the evening of August 25th' the parties met, confirmed the terms of sale, and Dr. Marvel gave a certified check for $10,000 as part of the consideration for the purchase. This check was dated August 24th, and was made payable to the order of Dr. Marvel himself and was endorsed by him. A receipt was given for the check by Mr. Young, one of the owners, in which it was stated that the check was given on account of the purchase of the tea property, this being admittedly the property in question. A formal agreement, in writing, was later prepared by Walter McShea, a lawyer and a son of Stewart McShea, one of the owners. This agreement was signed by Mr. Stewart McShea, by Young and Mr. and Mrs. Fralinger, and presented to Dr. Marvel by Walter McShea. Dr. Marvel refused to accept this agreement, because it recited that the consideration for the property was $200,000 and the mortgage of $43,000. Mr. Walter McShea then prepared another agreement, dated August 25th, 1899, which he presented to Dr. Marvel, and which Dr. Marvel refused to accept, because it recited that the consideration was $182,250 and the assumption of the mortgage of $43,000, while the real consideration for the three-fourths interest to be conveyed was $150,000, including the mortgage. Then a third agreement was prepared, which was-explanatory of, and supplemental to, the last-named agreement. This agreement was signed by Mr. and Mrs. Fralinger, in their store, in the presence of Dr. Marvel and Mr. Cole.

Dr. Marvel, upon the reception by him of ■ the explanatory agreement, accepted also the second agreement, which second agreement, as already remarked, stated the consideration to be $182,250 and the assumption of the $43,000 mortgage. The explanatory agreement recites that whereas the agreement of August 25th, 1899 (the second agreement just mentioned), fixed the consideration to be paid for the interests of McShea, Young and Fralinger by defendant at the sum of $182,250, and whereas the said parties have given a receipt to Dr. Marvel for $32,250, which sum has not, in fact, been paid, but was given for services rendered, according as agreed to, as a benefit to said Marvel; whereas $10,000 were paid at the time of signing the second agreement, now this agreement witnesseth, that the true consideration for the transfer of the property is the sum of $150,000, and not $182,250, as stated in said agreement, and that, upon the settlement under the terms of said agreement, only the sum of $150,000, less the mortgage, is to be paid.

Dr. Marvel’s explanation why he accepted the second agreement with the explanatory agreement instead of having the true consideration put in a single agreement is this: He had entered into an agreement to sell a one-half interest in the property to a Mr. Hamburg at the rate of $243,000 for the entire interest in the property, or $121,500 for one-half, and he wished it to appear that in purchasing the property, he, Marvel, had paid at the same rate. His purpose in doing this, he says, was that in case he should die before the transaction with Mr. Hamburg was consummated, the latter could not say that his agreement was to buy at the same rate that Dr. Marvel had purchased, and then rely upon the agreement for sale to Dr. Marvel as- evidence that the doctor had really bought at the rate of $200,000 for the whole property, or $100,000 for a half interest.

It may be remarked here that the sum of $182,250 is made up of three-quarter interests at the rate of $200,000 for the entire property', and three-fourths of the $43,000 mortgage, namely, $38,250. Dr. Marvel’s claim is that the true consideration is shown by the explanatory agreement, which he says was signed by Fralinger.

This agreement is not produced. Dr. Marvel explains its non-production by saying that after it was signed he handed it to Mr. Young, who placed it in his safe, and that subsequent search has failed, to discover it. The pivotal point in the case is whether this supplementary agreement was ever signed by Mr. and Mrs. Fralinger.

Dr. Marvel swears that an agreement, a copy of which is attached to the answer, and known in the case as Exhibit G 8, was signed by Mr. and Mrs. Fralinger.

Neither Mr. or Mrs. Fralinger, the defendants, was sworn as a witness upon the trial.

There.were attached to the bill, however, certain interrogatories propounded to them, which they have answered under oath. The answers to these interrogatories, so far as they are responsive, have, by the statute, the force of a sworn answer. To the interrogatory respecting the execution of the explanatory agreement, styled in tire interrogatories Exhibit B, the defendants answer that they have no knowledge of its existence; that it was never seen by them or either of them, and they aver that it was never executed.

The truth of the answers to the interrogatories is sworn to “to the best of the knowledge and belief” of the affiants.

The phraseology used by the affiants, it is contended, deprive their answers of the force which they would have had had they positively sworn that the explanatory agreement was never executed. It is insisted that the answers have no greater force than if they were sworn to on information and belief.

The strength of the affidavit sworn to in this language must depend upon the fact which is the subject of the affidavit. Where the fact is one concerning which the affiant may have had no knowledge, the affidavit amounts to no more than one made upon belief only. Where, however, as in this case, the fact is one concerning the affiant’s personal act, of which he must have had knowledge, had it existed, the affidavit is an assertion under oath that the affiant, using his best recollection, is unable to recall such an occurrence.

The attitude of the parties, then, is this: Dr. Marvel swears to a positive act occurring in his -presence, and the defendants swear that they have no recollection of such an act, after using their best endeavors to recall it.

Assuming, however, that the answer of the husband and wife has the strength of a single sworn answer, which throws upon the complainant the burden of supporting his testimony by that of another witness or by some corroborating circumstance, the query remains whether the complainant is so supported.

That an agreement similar in language to the explanatory agreement was actually drawn is supported by the testimony of Judge Thompson. Judge Thompson testifies that about the time mentioned he was one day about leaving his office when Walter McShea, who was seated trying to dictate an agreement, called to Judge Thompson and told him what he was doing. The result was that Judge Thompson himself sat down and dictated an agreement. Hpon being shown what purports to be a copy of the explanatory agreement, Judge Thompson said: “I have examined this paper, and I believe it to be the paper that I dictated, at Walter McShea’s suggestion, to my stenographer about that time.”

That a paper (which paper Dr. Marvel says- was the explanatory agreement) was about that time signed by Mr. and Mrs. Fralinger at their confectionery store, in Atlantic City, is proved beyond doubt by the testimony of Mr. Cole. He tells of Dr. Marvel’s calling upon him and asking him to go with the doctor to the Fralingers’ to witness a paper; that a writing was produced by Dr. Marvel; that Mr. Fralinger was there and Mrs. Fralinger was sent for, and in his, Mr. Cole’s- presence, and in the presence of Dr. Marvel, Mr. and Mrs. Fralinger signed the paper. Was this paper the explanatory agreement which Judge Thompson dictated? Dr. Marvel says it was. No other witness supports him directly in that assertion.

I think it may be assumed, however, that the paper then and there signed must have been either the second agreement, of August 25th or the explanatory agreement. There is nothing to show that there was any written dealing between Dr. Marvel and the Fralingers except in connection with the sale of this property. It does not appear at what place the Fralingers signed the first-mentioned agreement. The Fralingers were asked this question in the first interrogatory propounded, which was this: “When and where and by whom Exhibit A was executed.” The defendants answer that "Exhibit A was executed in September, 1899, as a final agreement between the parties. After execution a copy was delivered to each party.”

This answer, it is perceived, leaves unanswered that part of the interrogatory which asked for information as to where it was signed, as well as by whom it was signed.

If it had been signed at Fralingers’ store by the Fralingers it is highly probable that Mr. Fralinger, at least, would have recalled that fact, and if he had recalled it he would naturally have insisted that the complainant and Mr. Cole had confused the execution of Exldbii A with the supposed execution of the explanatory agreement. If Exhibit A was not signed when Mr. Cole visited the Fralingers, some other agreement certainly was signed, and the strong probability is that it was the explanatory agreement.

Another circumstance may have some significance. Dr. Marvel visited the Fralingers, .in company with Judge Thompson, on a later occasion, to make a tender to Mr. Fralinger of the amount due to Mrs. Fralinger under the terms of the explanatory agreement. He told Mr. Fralinger the purpose of his visit and asked him to call his wife. Mr. Fralinger said that was not necessary; that he would act for her; but, upon Judge Thompson insisting, she was called, and in her presence Judge Thompson began to count out the amount due, as they supposed, under the explanatory agreement. Judge Thompson says that Mr. Fralinger then remarked that he would not require the money to be counted, but would acknowledge that there was.that much money there. The judge then presented a deed, to be signed, and Mr. Fralinger said that he wanted to consult his solicitor, and did so over the telephone, after which he declined to sign the deed. The reason then assigned by Mr. Fralinger for his refusal was that Mr. Young, who had agreed to sell his interest in the property in concert with McShea and Fralinger, was not acting squarely with them, and did not intend to sell.

Now, the amount tendered was less by several thousand dollars than the amount due under the terms of the first agreement, and no .objection seems to .have been raised by the Fralingers on that account. It must be admitted, however, that the force of any inference to be drawn from this fact is blunted by the consideration that Mr. Fralinger’s mind, being intent upon a refusal of the tender upon the other ground, may have paid no attention to the amount.

There is another circumstance. Dr. Marvel says that the terms of the purchase were agreed upon at a meeting held on the evening of August 25th. At that meeting .Fralinger was undoubtedly present with Young and McShea. At that meeting, Dr. Marvel says, the question of giving a receipt for the $32,250 part of the consideration of $182,250 was discussed, and someone (he thinks Fralinger) was opposed to giving a receipt for money that was not paid. It was at this meeting that the check for $10,000, in part payment of the three interests of the three vendors, was handed to Mr. Young, for which Mr. Young at that time gave a receipt, dated August 25th. This receipt states for what the cheek was given; that it was given in consideration for part payment for this property, the full amount, including the mortgage, to be $200,000. This meant undoubtedly that the property was sold upon that basis for the whole interest. It was undoubtedly understood that Mr. Young received this check for himself and the three other selling owners. He had the cheek cashed or placed on deposit to his credit, and he paid McShea and Fralinger each one-third of its amount. He gave this receipt and memorandum as a part of the transaction which occurred on the evening of August 25th, and I have no doubt it represents the general understanding of the parties at that time. Mr. McShea conveyed his one-fourth interest for the consideration mentioned.

While this receipt would not control the terms of a different subsequent agreement, it is significant upon the question whether Fralinger would be likely to execute the explanatory agreement, which alone created a written contract in accordance with the terms of the receipt.

I am of the opinion that all the circumstances support the positive testimony of Dr. Marvel that such an agreement was signed, and overcome the negative testimony of the defendants in the sworn answers to the interrogatories.

I will advise a decree that the Fralingers specifically perform the contract as its terms appear in the two mentioned agreements.


author: Reed, V. C.

text:
    Frederick Hemsley v. The Marlborough Hotel Company.
    [Filed September 29th, 1903.]
    1. On bill filed to restrain the violation 'of two restrictive covenants respecting the land in question — Held, that, as to one covenant, complainant had no right to enforce the covenant, as assignee of Mary Disston, by virtue of the existence of any plan. Held, also, that, as a subsequent grantee of Mary Dissten, the complainant cannot successfully assert a right to enforce the covenant, as there was no evidence of an intention that such a covenant was inserted for the benefit of complainant’s property.
    2. In respect to the other covenant referred to — Held, that the benefit of the stipulation contained in the deed of Mary Disston to a predecessor in the title of the defendant did not become attached to the Disston cottage, and did not pass to the purchaser of that land.

      Mr. Joseph E. GasJcill, for the complainant.

      Mr. Clarence L. Cole, for the defendant.
   Reed, V. C.

The parties to this suit are the same as those in the case reported in 17 Dick. Ch. Rep. 164. The former suit was brought to enforce, by injunction, a restrictive covenant, and the purpose of this suit is to restrain the violation of two other restrictive covenants respecting the same property.

The facts upon which the relief is asked can be more quickly apprehended by the use of the diagram in the report of the preceding case.

The complainant is the owner of lot number one (1), the Disston cottage lot, and lots numbers two (2) and three (3), shown upon the diagram.

The defendant is the owner of lots fourteen to twenty-five, inclusive. Upon a part of this property the defendant has erected a hotel known as the “Marlborough.”

It is insisted that this hotel is so constructed as to infringe two covenants binding upon the owners of the land upon which it is erected. The first asserted violation is that the hotel has been built within fifteen feet of Pa,rk Place, and the second that the building has been extended more than two hundred feet beyond the southerly boundary line of a lot known as Amelia R. Sparks’ lot, looking towards the ocean.

There is no doubt that the defendant was bound bjr restrictions of the kind mentioned.

It seems, also, that, in erecting the building, the bay windows in the upper stories encroached, upon the fifteen-foot strip of land; that a pillar slightly extended beyond the two-hundred-foot limit, and that a walk, elevated from eleven to fourteen feet, has been built from the piazza of the hotel to the municipal boardwalk, entirely beyond the limit mentioned in the covenant.

The primary question (assuming that the covenant is enforceable by someone) is whether Mr. Hemsley has the right to compel its observance.

I will first speak of the fifteen-foot covenant, which appears in the deeds for the defendant's property in these words: “No building whatever shall ever be erected on said lot of ground within the space of fifteen feet from Park Place."

This covenant was never entered into with Mr. Hemsley, but was contained in deeds from the predecessors in the title which Mr. Hemsley holds, who made conveyances of portions of the land now owned by the defendant.

The complainant rests his right to enforce this covenant upon two grounds — first, upon the existence of a general plan that a fifteen-foot space upon Park Place should be kept clear of buildings; second, that he bought his property from Mary Diss-ton, after she had sold property to the defendant, by a deed in which the restriction was put for the benefit of her remaining property, now owned by the complainant.

To determine the question thus raised it is essential to trace the devolutions of. the titles of the properties involved.

The original tract of land, plotted upon the diagram, was •owned by Hamilton Disston and George F. Lee. On May 28th, 1879, they made a deed of dedication of a street, sixty feet in width, labeled “Park Place," and of a park labeled “Brighton Park.” Nothing was said in the deed respecting the present restriction.

Also, on May 28th, 1879, Disston and Lee sold lot one (1), the Disston cottage lot, to Mary Disston. This deed did not ■contain the fifteen-foot restriction. On the same day Hamilton Disston sold to Lee his undivided interest in lots two, three, four, five and six, north of the Disston cottage lot. In this deed there was no mention of the restriction. On September 11th, 1879, Lee conveyed these lots to Mary Disston, by a deed containing •this covenant. By deed of September 10th, 1879, but acknowledged by one of the grantors on September 11th, 1879, Disston and Lee sold lots fifteen and sixteen to Amelia R. Sparks, and tbe deed contained the covenant.

Mary Disston, it is perceived, then owned all the property on the east side of Parle Place, consisting of the Disston cottage, without restriction, and of lots two, three, four, five and six impressed with the restriction. Disston and Lee owned all the lots on the westerly side of Park Place, except lots fifteen and sixteen, which two lots had been sold to Amelia R. Sparks, impressed with the restriction.

Thereafter all the deeds from Mary Disston, or her representative, and all the deeds from Lee and Disston for property bounding upon Park Place, contained the fifteen-foot restrictive covenant.

Mary Disston sold the westerly half of lots four, five and six, bounding on Park Place, to E. A. Park, on February 10th, 1881, by deed containing the covenant. Her interest in lots one, two ‘and three passed to the complainant by a deed dated October 1st, 1893, made by the executors of Mary Disston, which deed contained the covenant.

. It is perceived that there is no evidence of a plan respecting the fifteen-foot retrocession from Park Place, except such as can be discovered in the deeds actually executed. Nothing of it appears in - the dedication deed or upon the map filed with it. Now, it is to be observed that if the plan can be evolved from the deeds themselves, it must be confined to the westerly side-of Park Place. The first deed, putting the title of lots two, three, four, five and six, which had been held in common by Disston and Lee, passing the title to Lee in severalty, contained no restriction. Nor was the restriction contained in the deed from Disston and Lee to Mary Disston for the Disston cottage-lots. The absence of the restriction from these deeds is fatal to the theory of the existence of a general plan covering the grounds including these lots.

Respecting the lots on the westerly side of Park Place, as-already observed, all the deeds from Disston and Lee contained the covenant. But, if it be conceded that this fact alone is-sufficient to establish the existence of a plan, the scope of which is evidenced by what was actually contained in the deeds (upon which question no opinion is expressed), it is apparent that, inasmuch as the scheme includes the lots on that side of Park Place .only, the right to enforce the covenant, by virtue of such a plan, resides only in a grantee of one of those lots. It follows, therefore, that the complainant obtained no right to enforce the covenant as the assignee of Mary Disston, by virtue of the existence of any plan.

The remaining question is whether, as a subsequent grantee of Mary Disston, the complainant can successfully assert a right to enforce the covenant.

The answer to this question depends upon the solution of another query, namely, whether 'the covenant contained in the deed of Mary Disston to the Female Academy was inserted for the benefit of the property now owned by the complainant. This query arose in the preceding ease, already mentioned, in respect to the dwelling-house covenant, which, in respect to the present question, seems to stand upon the same footing as the present covenant. In that case the conclusion was reached that there was no evidence of an intention that the covenant was made for the benefit of lots one, two and three. The same .consideration leads to a similar conclusion in this case.

If, however, Mrs. Disston or the complainant .had ever 'been equipped with the right to enforce this covenant, it would hardly seem equitable to do so now by means of a mandatory injunction. The encroachments of the main building are trivial and unintentional. The encroachments of the bay windows are substantial. But, in view of the encroachments of the porches of the other buildings upon the fifteen-foot strip, on the same side of Park Place, which have remained unmolested, I think that an injunction commanding the removal of the projections complained of should be refused.

The remaining question involves the other covenant. This covenant was contained in one deed only, that of Mary Disston to the Female Academy, a predecessor in the title of the defendant. The words of this covenant are:

“No building or improvement of any kind shall be erected on said lot of ground, more than two hundred feet, without tho consent of Mary Disston or her heirs, beyond the southernmost boundary line of the lot of Amelia R. Sparks looking towards the ocean.”

This stipulation seems to differ from the preceding, in the particular that the-erection upon the two hundred feet was forbidden without the consent of Mary Disston or her heirs. The last words, however, instead of exhibiting an understanding between the parties that the stipulation was for the benefit of the Disston cottage lot, in my judgment, indicates the direct opposite. It seems to me to exhibit an intention that Mary Disston should retain a limited control over the use of the two hundred feet for the benefit of herself and her heirs. It may be that the clause was inserted because Mary Disston expected to live in the Disston cottage, and that, while living there, she desired to be protected against any interception of view or air over the two hundred feet. But she retained in herself and her heirs the right to release the covenantors or its assigns from the burden of the covenant, whether she should or should not remain the owner of the Disston cottage. The permanence of the stipulation depended upon a subsequent agreement between Mary Disston or her heirs, and not upon the ownership of the two-hundred-foot strip. The benefit of the stipulation did not become attached to the Disston cottage, and did not pass to the purchaser of that land.

The bill should be dismissed.


text:
    The Colonial Woolen Company v. The Trenton Water Power Company.
    [Filed October 3d, 1903.]
    1. In a suit for an injunction to restrain defendant from discharging water into a tailrace, .running over complainant’s land, it appeared that the questions mooted were purely legal ones, and that an action at law was pending in which they could be determined, the injunction suit was retained until the questions at law were determined.

      2. In the meantime an injunction was granted restraining the discharge of the water to its full capacity, and an amendment to defendant’s answer was allowed, setting up the pendency of the action at law.

      Mr. John A. Montgomery, for the complainant.

      Mr. James.Buchanan, for the defendant.
   Reed, V. C.

The complainant is the owner of a woolen mill on the northeast corner of Union and Cass streets, in Trenton. The original mill, known as the Saxony mill, seems to have been a brick structure, built some sixty years ago. Frame buildings have also been used in connection with the brick structure for a period almost as long. Alongside of the easterly side of the original mill ran a stream of water, which had its origin up near Warren street, and ran near Federal street, by the mill, to the Delaware river. About the time the mill was built the canal of the water power company, now owned by the_ defendant, was extended down to the westerly side of the mill. The machinery of the mill was run by a water-wheel, fed by water, led in upon it from this canal through a raceway leading from the canal into the mill. The water, after use upon the wheel, was discharged into the stream already mentioned, and passed through it into the Delaware river. The unused water of the -canal was for many years discharged through a raceway which supplied water to the water-wheel of the New Jersey Iron and Steel Company. When the New Jersey Iron and Steel Company sold out to the American Bridge Company the raceway was closed, and since then the canal of the water power has been filled up south of the defendant’s mill. The canal now terminates just south of the raceway that leads to defendant’s mill, with no outflow at its southern end. About three years ago a thirty-six inch pipe was laid above the mill leading from the canal of the defendant into this stream, or the bed of what had been this stream. The purpose of laying this pipe was to draw off the debris, which settled in the canal when the water was not discharged through the raceway of the complainant, which debris would have otherwise settled to the bottom of the canal, lessening its depth, and in conse: quence its capacity as a reservoir. The complainant had complained that the quantity of water was insufficient to .run its wheel.

Last April, a disagreement'having arisen between the parties respecting the rate to be paid for water furnished to complainant, the gates of the raceway were closed and the complainant was deprived of its water-power. The only outlet from this branch of the canal was thereafter the thirty-six inch pipe. This pipe was at times opened to its entire capacity, and, by reason of the volume of water so sent down the bed of the stream, which had become a tailrace, the complainant insisted that the foundations of the frame portion of their mill were washed out, and at times its dyeing tubs were inundated, to the injury of goods in them, and to their damage in arresting the work of the mill.

It is to restrain the venting of this water through the thirty-six inch pipe into this stream or tailrace that this bill is filed.

The defendant asserts a right to vent its waters into this stream or tailrace, which runs through the complainant’s property.

It appears that in 1838 George M. and Benjamin Coates, who owned a tract of land adjoining the raceway of the water power company, then the Trenton Delaware Falls Company, had a map of the land plotted. This map was entitled “Plan of mill sites and building lots on the raceway of the- Trenton Delaware Falls Co., New Jersey.” Upon it was delineated a tailrace, running from the reservoir at Federal street to Cass street. This tailrace, as plotted, ran through the property of the complainant, where the water now flows, and so far as can be ascertained, in the same course as the original stream already mentioned. On September 1st, 1840, George M. and Benjamin Coates sold lots 50 and 51, as plotted upon this map, to Andrew Allinson. In his deed there is a reference to the map, although there is no direct mention of the tailrace plotted thereon. Upon these two lots Allinson built the Saxony mills, now owned by the complainant.

On August 27th, 1845, the Coates entered into an agreement with the water-power company, by which the latter were permitted to waste and discharge water from its canal into this tail-race, and to “widen, deepen and improve the same.” This agreement was never recorded, and was made, as is perceived, after the Coates had sold lots 50 and 51, now owned by the complainant. Afterwards other lots were sold by Coates, by reference to the plotting, some of which are now owned by the complainant. There is nothing to show that the complainant had notice of the rights of the defendant to vent its water through this tailrace other than the map itself, to which reference was made in the deeds, and the configuration of the ground itself. Defendant, however, insists that the delineation of the tailrace upon the map was notice to the complainant that there was a right of flowage through this tailrace, and that this tailrace was a conduit for the use of the waste-water from defendant’s canal.

Defendant also claims that the deed for lots 50 and 51 passed, no property rights in the tailrace itself, and therefore the complainant has no footing to complain of the fiowage of water through it.

These are purely legal questions, and, in my judgment, should be settled in an action at law. An action is now pending in which these questions can be determined. This suit will be retained until these questions are in this manner settled. In the meantime I am of the opinion that there should be an injunction against the use of the thirty-six inch pipe to its full capacity. From the testimony and from personal inspection of the tail-race since the hearing, through which was flowing a stream of water vented by the partly-open pipe, I am convinced that damage is likely to accrue to complainant’s property if water is ■discharged in quantities equal to the full capacity of the pipe.

I should think that not more than one-third of its capacity was in use when I saw it, and that seemed to be sufficient for all present needs of the water power. '

I will advise an- injunction against discharging a larger quantity than this until the determination of the right to discharge it all shall be adjudicated at law.

I will allow the amendment to the answer setting up the pendency of the action at law, upon payment of costs of the motion and the costs of filing a replication to the amended answer.


author: Stevens, Y. C.

text:
    Anna Spengler v. Charles Spengler et al.
    [Filed June 23d, 1903.]
    A benefit certificate provided that the member might, in writing, surrender all claim thereto and direct that a new certificate be issued to him, payable to the same or other beneficiary; * * * “the issuing of such new certificate shall cancel and render null and void any and all previous certificates issued to such member.” — Held, that the mere delivery of the original certificate to the member’s wife, who was the beneficiary named therein, did not enlarge her interest, such interest still continuing to be an expectancy dependent on the will of the member.- — Held, further, that payments made by her after such delivery did not enlarge her right, for they were made on a contract; one of whose terms was that it was .subject to change at the member’s will. — Held, further, that the wife was not entitled to have the premiums returned to her.

      Mr. Julius Rupprecht and Mr. Thomas Anderson, for the complainant.

      Mr. Harry Osh orne, for the defendants.
   Stevens, Y. C.

Contrary to my first impressions, based upon an erroneous idea that under the benefit certificate issued August 13th, 1894, there had been acquired a vested right such as was held to exist in Locomotive Association v. Winterstein, 13 Dick. Ch. Rep. 189, and such as may arise under an ordinary life insurance policy (Brown v. Murray, 9 Dick. Ch. Rep. 594), I have come to the conclusion that that certificate has been annulled and that the certificate issued November 15th, 1901, payable jointly to complainant and the three children of Adolph Spengler, is the one now in force. The adjudicated cases in this state appear to me to show this beyond question. In Golden Star Fraternity v. Martin, 30 Vr. 207, it is said by the court of errors: “The beneficiary may be changed by the mere will of the member and without the beneficiary’s consent. In such case the right of the beneficiary is not property, but a mere possibility or expectancy dependent on the will of the member to whom the certificate is issued. For this reason the beneficiary’s interest in the certificate and contract evidenced thereby differs totally from the interest of a beneficiary named in an ordinary life insurance policy containing no provision for the designation of a new beneficiary.”

The contract contained -in the certificate upon which complainant bases her claim reads as follows:

“And said Supreme Lodge hereby agrees to pay * * * [to complainant] the sum of $1,000, in accordance with and under the laws governing this order, upon satisfactory evidence by the beneficiaries of the death of said member and * ' * * up‘on the .surrender of this certificate; provided, that this. certificate shall not have been surrendered by said member or canceled at his reguest and another certificate issued in accordance with the laws of the order.”

The second section of article 9 of the constitution of the order provides that

“if the benefit certificate of a member be lost or beyond his control, the member may, in writing, surrender all claim thereto and direct that a new certificate be issued to him, payable to the same or other beneficiary, in accordance with the laws of this order. * * * The issuing of such new benefit certificate shall cancel and. render null and void any and all previous certificates issued to such member.”

Adolph Spengler, shortly before his death, made affidavit of the loss of the certificate issued in 1894 and complied with the other regulations of the constitution. Thereupon, the lodge issued the new certificate, attacked by the complainant’s bill.

It must be conceded that as between the new beneficiaries and the company the legal right of recovery is complete. It is said, however, that as between them and the complainant the case is different; that the prior certificate was given to complainant by her husband in the year 1894, shortly after her marriage, and that upon the strength of that gift she paid the premiums up to the time of her husband’s death. The testimony of complainant’s daughter is that in August, 1894, her •stepfather handed the certificate to her mother and said:

“Anna, 1 make you a present oí this paper. It is yours. Do with it wliat you please. I have no money to keep it up, so you pay it if you choose.”

The proof is that this certificate had itself been substituted for a prior certificate on which Adolph had paid the premiums from the year 1883. Now, if the certificate asserted to have been given to the complainant was, in terms, payable to her, its mere delivery did not change the right. In Landrum v. Knowles, 7 C. E. Gr. 594, Chief-Justice Beasley, speaking of an ordinary life insurance policy, says: “The interest in this policy was effectually transferred to those appellants, for, by its very terms, it is made payable to them, and it is difficult to perceive what ceremony or fact is wanting to the perfection of the gift to them.” So here the certificate being made payable to complainant, her custody of the paper was not improper, while she continued to be the sole beneficiary. The delivery to her was in accord with her expectancy. But what did she get by the so-called gift? Evidently the contract as it was embodied in the paper itself — “the expectancy dependent on the will of the member.” But there is this obvious distinction to be kept in mind. As between the member and the lodge, the contract embodied in the certificate continues to be the contract until varied in some lawful way by mutual consent. But there seems to be no reason why the member may not, by contract founded on valuable consideration, effectually assign his certificate to one or more of the class of persons whom he may, under the laws governing the lodge, designate to it as beneficiary, and why, in favor of such person, he may not covenant to make no new designation. If he does so assign, as between him' and the assignee, the assignments may be valid and enforceable — it may prevail as against any subsequent voluntary beneficiary named by him. It is on this distinction that such cases as Smith v. National Benefit Society, 123 N. Y. 85, appear to be founded. .

In the case in hand the question, then, is, may the so-called gift be deemed to possess the elements of a binding contract? Does the evidence warrant the inference of an agreement of this sort: “If you pay the premiums up to the time of my death, the money due on the certificate is yours absolutely?” Does it show payments made on the faith of this promise? It may be doubtful whether it does, but if it does there is this fatal defect in it. . It appears to have been a contract made on Sunday, and under the well-settled course of decision.in this state, absolutely void. Gennert v. Wuestner, 8 Dick. Ch. Rep. 302; Reeves v. Butcher, 2 Vr. 224; Cannon v. Ryan, 20 Vr. 314.

The case; then, is this: Mrs. Spengler pays on an expectancy dependent on the will of the member. The certificate, of which she has possession, itself so declares. She pays on a contract which expressly reserves to the member the right to make a new designation. She has notice that her husband may at any time change the beneficiary, and she has no lawful agreement binding him not to do so. If he does what he has a right to do and what she. knows he has a right to do, I do not see how, in a legal sense, she can' complain. Her payments are referable to the papers as-we find it, and to nothing else.

It is said, however, that the change was effected by fraud; that Adolph Spengler made an affidavit that the policy, was lost and that this was 'false, to his knowledge. I do not think the evidence -justifies the inference that he knowingly asserted ■ a falsehood. The delivery of the certificate to his wife occurred seven j^ears before. He may easily have forgotten it. The clause I have quoted from the ninth article uses the language: “Lost or beyond his control.” He could just as easily and with perfect truth have sworn to the latter of these alternatives. By the language of the article the legality of the issuance of a new certificate is made to depend upon the fact of loss or want of control, and not upon an evidence of the fact. The new certificate was issued, and its issue is warranted by the undisputed fact that it was beyond his control. Besides, the fraud, if any, was perpetrated upon the association, and it does not object to pay-

The final contention is that Mrs. Spengler is entitled to a return of the premiums paid before there is any division of the money between herself and the other beneficiaries. If the beneficiary first named pays premiums after the original certificate has been canceled and a new one issued in favor of another, in ignorance of the cancellation, or if, as in the case of Tepper v. Supreme Council, 14 Dick. Ch. Rep. 322, the beneficiary ignorantly paying cannot claim the benefit, because he is not included in the class of persons to which,' according to the law of the association, payment may be made, I can see why such premiums should, in equity, be returned; but, in the case at bar, all the payments were made while complainant was the nominee. They were made on a contract whose very essence was that it was subject to change at the will of the member. She is herself suing upon it and asking for its enforcement. ’Upon what principle can she recover the money ? As well might the legal representatives of’ a joint tenant obligee claim to have back money to be repaid with the chance of survivorship. It seems to me that Fisk v. Equitable Aid Union, 11 Atl. Rep. 84, is founded on principle, and that the decision is applicable to this case. Leslie v. French, 28 Ch. Div. 552. A defendant in equity may sometimes claim an allowance to which he would not be entitled as plaintiff, on the principle that the latter, asking equity, must do equity. Mrs. Spengler is not in a position to say that she should have the benefit of this maxim; she is plaintiff’ asking for the enforcement of what she considers to be her legal right. I think, therefore, the bill must be dismissed.