author: Emeky, Y. C.

text:
    Melville S. Condit et al., executors of Andrew B. Cobb, deceased, v. George Bigalow et al.
    [Filed February 3d, 1903.]
    1. Testator devised the residue of his realty to four devisees, in equal shares, naming three of them as executors, and directing them to sell “all or any part” of such realty and divide the proceeds among the devisees. No sale was had, but a partition was effected by an exchange of conveyances, the deed to the share of one devisee being made by the executors to her husband.—Held, that the husband did not take an absolute title, on the theory of equitable conversion and reduction of the property to possession as personalty, as the discretionary character of the power of sale given the executors precluded equitable conversion.
    2. Even had there been an equitable conversion, the partition amounted to a reconversion.
    3. The conveyances made by the husband and wife, forming the consideration of that by the executors to the husband, and absolute title in the husband being inconsistent with the legal obligations of the parties, and recitals in a prior partition conveyance and in a chancery suit between the parties declaring that the husband took in right of his wife, a trust in the husband resulted to the wife and her heirs, subject to his tenancy by the curtesy.
    4. A purchaser from a husband of land conveyed to the husband by the executors of his father-in-law in consideration of $1 and. conveyances by the wife, the husband joining—the whole transaction constituting an exchange of conveyances to effect a partition of a devise to the executors and wife as tenants in common—is put on inquiry, by the recited consideration and notice that the husband’s actual interest as tenant by the curtesy was derived from the father-in-law, as to a trust resulting to the wife in the land, conveyed to him.
    5. A partition of lands between tenants in common under a will was effected by an exchange of conveyances, the deed to one tenant’s share being made to her husband. A prior chancery suit had been instituted by the husband and wife against the other tenants, who were also executors, the bill praying for a recovery of the wife’s interest in the devise. A receiver was appointed to lease, collect the rents and divide the property, and the partition conveyance to the husband was acknowledged before the receiver. The suit was still pending by receiver in behalf of the wife’s infant heirs at the time of a sale by the husband.—Held, to be notice to the purchaser that the husband’s interest arose under the will; that he had received the land in right of his wife, and that her heirs had succeeded to her interest; and this notwithstanding a ten years’ delay by the husband in prosecuting the suit.
    ' 6. A recital in a deed executed by a trustee, in derogation of his trust, of the payment of the purchase-money, is not sufficient evidence of payment in behalf of the grantee’s heirs, as against the cestui que trust.

    7. In effecting partition of lands held in common one tenant conveyed by warranty deed to the husband of the other, and afterwards purchased the interest of the wife’s heirs. In an action at law by such tenant against the husband’s grantee estoppel by the tenant’s warranty was pleaded, and decided adversely to defendant, judgment being given the tenant for a one-third interest, and he being remitted to equity for further relief.—Held, in the equitable suit thereupon instituted, that the judgment was res judicata, on the issue of estoppel.
    S. A grantor by warranty deed of lands impressed in the grantee’s hands with a resulting trust is not estopped by his warranty from acquiring the interest of the cestui que trust.

    9. On December 27th, 1838, a deed was made to a husband of realty impressed in his hands with- a resulting trust in favor of his wife. The wife died in 1841. On May 4th, 1848, the husband conveyed. The wife’s infant heirs came of age and conveyed their interests by deeds executed between February, 1855, and September, 1862. The husband died May 29th, 1884. In November, 1892, parties claiming under the wife’s heirs brought ejectment against parties claiming under the husband’s grantee, setting up an entire legal title to all the realty. They recovered a one-third interest, it being adjudged that, as to the balance, they had no title at law. On January 18th, 1895, suit was begun by them in- equity.—Held, that the latter suit was not barred, the statute of limitations not beginning to run against the wife’s heirs till the accrual to them of a right of entry on the husband’s death, and the action at law being to enforce the same rights as the suit in equity. -
    Heard on bill, answer, replication and proofs.

      Mr. Mahlon Pitney, for the complainants.

      Mr. John W. Iiarding, for the defendants.
   Emeky, Y. C.

The object of this bill is to establish a resulting trust in lands which were conveyed in fee to William C. H. Waddell, under whom defendants claim title. The complainants claim under the wife of Waddell, and allege that the conveyance to Waddell was made for the purpose of a partition or division between the ■devisees of one Lemuel Cobb, the father of Mrs..Waddell,, of some of the lands devised by him to Mrs. Waddell and others, and that the husband, on taking the conveyance of these lands in his name, must be held to have taken the conveyance as trustee for his wife. The legal title of the husband at the time of the conveyance was that of tenant by the curtesy initiate in the undivided interest (one-third) of the lands to which his wife was entitled. If the transaction in which the conveyance to the husband was made was, in fact, a partition or division by deed between the tenants in common of the fee, it is claimed that the deed should have been made to the wife, and that, if made.to the husband, he will (for the interest therein beyond his life estate) hol'd the legal estate conveyed by the deed as trustee for the wife. That a trust results in favor of the wife is the settled rule where the wife’s money or separate estate pays for land in which the husband takes title. Lathrop v. Gilbert, 2 Stock. 344 (Chancellor Williamson, 1855); City National Bank v. Hamilton, 7 Stew. Eq. 158 (Vice-Chancellor Van Fleet, 1881); Irick v. Clement, 4 Dick. Ch. Rep. 590 (Errors and Appeals, 1892). And the same rule applies on a partition or division of lands where the wife, as one of the tenants in common, is entitled to the conveyance and her husband takes title to her share. Weeks v. Haas, 3 Watts & S. 520; 39 Am. Dec. 39 (Chief-Justice Gibson, 1842); Freem. Co-ten. & P. § 406. On this branch of the case the defendants raise the question whether the transaction is to be treated as a partition among the devisees, and claim that, by reason of the directions of the will, it is not to be treated as a partition. The lands were part of the residue of Lemuel Cobb’s-estate, as to which his will was as follows:

“Third. I divide all the residue of my real and personal estate into four-equal parts or shares, one share thereof I give and bequeath to Benjamin Howell, of Troy, the husband of 'my daughter Elizabeth; one other share I give and bequeath to Walter Kirkpatrick, nevertheless in trust for Eugene Kirkpatrick, the. only son of my daughter Maria 0. Kirkpatrick, one other share I give and bequeath to my daughter Julia Ann [Mrs. Waddell] and the remaining share X give and bequeath to my son Andrew B. Oobb—to have and to hold to each of them their heirs and assigns forever. I do hereby nominate, constitute' and appoint my son Andrew B. Cobb, Walter Kirkpatrick and Benjamin Howell Executors to this my Testament and Last Will. I do hereby order and direct my executors hereinabove named or a majority or the survivor or survivors of them, to-grant, bargain and sell all or any part of the residue of my estate called the third item & divide the moneys arising therefrom among the legatees therein mentioned.”

It is claimed that this direction amounted to an equitable conversion of the residuary real estate, and that the partition of lands in question (which was the third partition between the devisees) should be considered in equity as a division of the proceeds of sale, and that the husband being, at the time of the partition (1838), absolutely entitled to the wife’s personal estate, he should bo considered as holding the lands as proceeds of sale and as the proceeds of his own money.

The doctrine of equitable conversion is a branch of the general equitable doctrine of trusts, and has been adopted solely for the purpose of executing trusts, and it is essential to the application of the doctrine of conversion that the property should be subject to a trust or imperative direction for conversion. Where, as in this case, there is no devise of the legal estate to the executors, and their control over the legal estate, which is vested in others, is solely that of a power of sale, the question is, whether it is a mere naked power of sale, the exercise of which must be discretionary, or whether it is a power in trust, the exercise of which is imperative. The execution of powers in trust may be required in equity for the benefit of the beneficiaries entitled, but when the trustee of the power is clothed with a discretion as to its execution, the court will not control the discretion. Brown v. Higgs, 8 Ves. 561, 569 (1803); 2 Pom. Eq. Jur. § 1002, and cases cited; 2 Story Eq. Jur. § 1601. And, in order to give rise to an equitable or constructive conversion, the direction to convert must be imperative and the conversion must not be left to. the option of the donee or trustee. Cook’s Executor v. Cook’s Administrator, 5 C. E. Gr. 375, 379 (Chancellor Zabriskie, 1869). In this 'will there is, first, an absolute devise in fee of the legal estate to the devisees, then an appointment of executors, with a direction to sell following this appointment. The direction is not a direction to sell all his residuary estate, but all or any, and these words “or any” necessarily imply, as it seems to me, the power or option of selling or not selling some of the land, in their discretion. If the power be construed to be imperative, it can only be upon the theory that all of the real estate must be sold by the executors. If as to any of the real estate the sale need not be made, then plainly an option as to conversion exists. Such option might be controlled by the court, in proper cases, for the benefit of the beneficiaries, but where an option or discretion to be exercised exists, the doctrine of constructive conversion is not applicable. Directions of most positive and imperative character would be required in this case to deprive the devisees •of the legal estate of the right to retain the land as land, because the proceeds of sale, if any sale be made, are, by the will, to go to the devisees of the land. It is the more rational conclusion, therefore, that the testator, by vesting an immediate fee-simple in all his lands in his devisees, by virtue of which they were entitled to immediate possession and enjoyment of the lands upon his death, intended them to have the lands, subject only to a power of sale of any of the lands if the executors (being three •of the four devisees) thought best for' the estate to sell, and, if such sale were made, the devisees, and no other persons, should receive the proceeds. This construction of the power to sell as a •discretionary, and not an imperative, power makes the will and every word of it operative, and harmonizes with its general plan.

Another reason why the doctrine of constructive conversion •cannot be held effective in this ease to convert the land into money is that, by the partition, an equitable reconversion, as it is called, took place. “By such reconversion the prior constructive conversion is annulled, and the converted property is restored in equity to its original actual quality.” 3 Pom. Eq. Jur. § 1175. Mrs. Waddell and the legatees of the proceeds of sale joined in the series of releases and conveyances which released from the power of sale the shares of the lands devised to the trustees and to Mrs. Waddell. There is no question that her deed, in which her husband joined, had this effect, and that thereafter the lands conveyed to the trustees were freed from the operation •of the power or trust. In consideration of the release to each of the other devisees Mrs. Waddell, was entitled to a release to herself of the remaining lands, and it must be presumed that the conveyance to the husband was intended to be for her benefit. The transaction cannot be considered as in any sense a sale to Waddell by the executors as trustees, for, treated as a sale, it would have been a breach of duty in all three concerned to have given Waddell the absolute interest in the share of lands to which his wife was entitled in consideration of her conveyance to the executors themselves as individuals of the wife’s interest in the other lands, which it was also their duty to sell for the common benefit of the devisees. The only view of the transaction consistent with an honest intention of the parties to protect the-rights of Mrs. Waddell is that a partition between all the parties interested was intended, and that, by ignorance or oversight, the-deed for Mrs. Waddell’s share was made to her husband without declaring her right. In one of the former partitions the deed toWaddell did declare that the conveyance was made to him in right of his wife, and in the chancery suit, hereinafter referred to, the final decree made the same declaration as to the lands included in the partition now in question.

The contention of complainant that the deed to Waddell from the other devisees, for the interest in the lands to which his wife was entitled on a partition, is to be treated in equity as a payment to the husband of money to which he was entitled as his own under this will depends, it will be observed, upon the establishment (1) of an equitable constructive conversion of the lands into money by the will; (2) a constructive sale by the executors, and (3) a constructive reduction to possession of the purchase-money by the husband, all accomplished by a transaction which, on the face of it, was plainly intended to be a simple partition of lands, removing them from the operation of the power of sale. The doctrine of equitable conversion as between husband and wife, in relation to the proceeds of sale of her lands, is never held to be applicable unless a valid sale has in fact taken place. Franks v. Bollans, L. R. 3 Ch. App. 717 (1868). It does not, in my-judgment, extend to a case like this. So far, therefore, as Waddell,,the husband, is concerned, and those claiming under him with notice, the land conveyed must, be impressed with a resulting trust in favor of the wife and those claiming under her.

As to- notice, I conclude upon the whole evidence in the case that John W. Bigalow, to whom Waddell conveyed the premises-in fee in 1848, after the death of- his wife, had notice that the ■conveyance to his grantor was made upon a partition or division in which his grantor’s wife furnished the consideration, the substantial facts which raise the trust. This notice he received by his own deed and the inquiries to which it necessarily led. The ■conveyances to the other devisees and tenants in common were referred to as the real consideration for the conveyance to Wad-dell, the other consideration, $1, being nominal. This statement of the consideration of itself suggested a partition or division so strongly as to put a purchaser on inquiry, and Bigalow was chargeable also with notice that the actual title which Wad-dell held and as to which his conveyance was altogether valid (that of a tenant by the curtesy in the lands) was derived from Lemuel Cobb. Mrs. Waddell had died in 1847, and the deed to Bigalow was made in 1848.

Notice to Bigalow was also given by chancery suit pending at the time of the purchase, brought in 1833 by Waddell and his wife against the executors, to assert their rights in the lands devised by Lemuel Cobb, the bill praying, among other things, that they might be let into- possession of a fair and just share of the testator’s real estate so devised to them by the residuary ■clause of the will, or that the executors or a master might be decreed to make a sale and that a receiver be appointed.

Walter Kirkpatrick was appointed receiver of the lands at the October Term, 1835, by an order in the cause which directed the receiver, among other things, to lease and collect the rents for the lands embraced in the residuary clause, and to divide the lands and personal estate among the persons in interest, according to their rights under the will of .Lemuel Cobb. The receiver was directed to report Iris proceedings under the order to the court. The deed to Waddell made in December, 1838, and now in question, was executed and acknowledged before Walter Kirkpatrick, the receiver, who died subsequently and before the conveyance to Bigalow.

Mrs. Waddell died in 1841, and in February, 1848, the suit was revived in the name of her infant heirs as co-complainants. This revivor was prior to Bigalow’s purchase (May 4th, 1848), and the suit was, in my judgment, notice to Bigalow at the time of his purchase, that his grantor’s interest in the lands in question arose under the will of Lemuel Cobb; that he had received the same on a division and in the right of his wife, and that the heirs of Mrs. Waddell had succeeded to the interest of their mother in the lands purchased from Waddell.

Mrs. Waddell died in 1841, within three years after the third partition of the lands made while the suit for accounting and division was pending. The suit was under the control of her husband, and as her children and heirs-at-law were infants, whose interests could not be impaired by a mere delay in the prosecution, I think the delay of the husband in the prosecution of the suit from 1838 to 1848 did not operate to deprive the suit of its effect as notice to persons claiming under the husband and adversely to the infant heirs of the wife.

Taking the entire circumstances of the case as disclosed by the paper-title of Waddell and the chancery suit at the time of the conveyance, there can be no reasonable doubt, I think, that Bigalow was put upon inquiry as to whether the title of Waddell, under this partition, was not held in trust for his wife. It should also be noted that Bigalow’s actual payment of the purchase-money has not been proved. The burden of proving such payment is on the purchaser, and the recital of the payment in the deed is not, as against the cestui que trust, sufficient evidence of the payment. 1 Perry Trusts § 219. Defendants are volunteers claiming under Bigalow as his heirs-at-law, and they stand, therefore, in his position as to the claim of bona fide purchase.

A third question, that 'of alleged estoppel, arises under the following circumstances: Andrew B. Cobb, one.of the executors and devisees under the will of Lemuel Cobb, and one of the tenants in common, joined in' the execution of the deed to Waddell, and in this deed, which, on its face, granted an absolute fee in the land, Andrew B. Cobb covenanted (along with the other grantors) to warrant and defend the lands against himself and all persons claiming under him. Andrew B. Cobb subsequently (and between February 6th, 1855, and September 18th, 1862) purchased the title and interest of the children of Mrs. Waddell in the lands. He died in January, 1873, and. the complainants, as his executors and devisees, are by this bill prosecuting his rights acquired by the deed of Mrs. Waddell’s heirs, subsequent to his own deed of warranty. The question is whether the subsequently acquired title of the grantor enures to the benefit of the grantee by reason of the warranty and by way of estoppel against the grantor.

In my judgment the doctrine of estoppel does not apply to this case, and for two reasons:

First. In an action at law brought by ■ complainants against defendants to recover possession of the lands, in which action an undivided one-third interest was recovered, the same question as to estoppel under the deed was raised and was decided adversely to* the defendants in reference to the one-third interest. This decision settles, as between the parties, the law of this case in reference to the alleged estoppel in a court of law, and upon a purely legal question, such as estoppel, this court would follow the decision at law made in a suit between the same parties upon the effect- of the deed as an estoppel. And even were not the question thus res adjudicate, the opinion of Mr. Justice Magie, that under this deed there was no estoppel at law, should be followed as an authoritative exposition of the law upon the subject under our decisions.

Second. The title now prosecuted is one claimed or derived originally under and from the grantee of the deed. The cesiuis que trust claim under the grantee as their trustee in equity, and an equitable title so derived from a resulting trust imposed on the grantee by the circumstances of the conveyance is a title derived from the grantee as clearly as if the grantee had, upon the conveyance to him, executed a declaration of trust or a conveyance to the beneficiaries. As to a title derived from the grantee himself, the doctrine of estoppel is even at law held not to be applicable. 11 Am. & Eng. Encycl. L. (2d ed.) 412.

This is not a question of applying in equity (and as following the law) the legal doctrine of estoppel by warranty for the purpose of increasing the grantee’s estate conveyed by the deed, but the fundamental question here is whether the conveyance of the legal estate was a conveyance in trust. If so, the controlling feature of the case is the enforcement of the equitable trust, and the general rule is that as against all except bona fide purchasers the trust will he enforced, and inasmuch as the rights of the cestuis que trust are assignable, the trust will be enforced in favor of the assignees. The precise question, therefore, is whether the subsequent assignment by the cestuis que trust of their equitable rights to the grantor operates in favor of the trustee grantee because of the grantor’s warranty. Estoppel by warranty is based on the fundamental principles of giving effect to. the manifest intention of the grantors appearing on the deed, as to the lands or estate to be conveyed, and of preventing the grantor’s .derogating from or destroying his own grant by any subsequent act. 2 Sm. Lead. Cas. (8th ed.) 855, &c.; Van Rennselear v. Kearney, 11 How. 297; Staffordville Gravel Co. v. Newell, 24 Vr. 412 (Errors and Appeals, 1890); Hannon v. Christopher, 7 Stew. Eq. 459 (Vice-Chancellor Van Fleet, 1881). The enforcement of the trust upon which the legal estate was conveyed to the grantee in this instance executes the entire purpose of the conveyance. The grantor, therefore, should no more be restricted by the doctrine of estoppel from fairly purchasing the cestuis que trusts’ rights against the grantee, Which arose from the conveyance and enforcing their rights, than he should be estopped by the warranty from directly aiding the beneficiaries against the trustee to have the trust declared, if the trustee repudiates the trust upon which the lands are conveyed.

That the legal title to the lands should be held by the husband in trust for the wife is the aspect in which a court of equity looks at the transaction as a whole, between all the parties, grantor, grantee and beneficiary. The enforcement of the trust in favor of the beneficiary against the grantee and those holding légal title under him with notice of the trust, is the controlling equitable aspect of the case, and the covenants of the grantor as to title and warranty cannot be made to operate by estoppel or otherwise to convey to the trustee any portion of the equitable interest or estates for which the legal title was, by the very circumstances and presumed intention of the conveyance, held in trust.

The remaining defence raised is that of laches in bringing the suit. It is claimed that the statute of limitations is a bar to the suit, and that even if this statute be not applicable, the delay is a bar. The deed to Waddell was made on December 27th, 1838, and Mrs. Waddell died in 1841. Hpon her death, Waddell became tenant by the cnrtesy, and on May 4th, 1848, conveyed the lands in question to John W. Bigalow. Mrs. Waddell’s infant children and heirs-at-law came of age subsequently, and conveyances of their interests in the land were made to their uncle, Andrew B. C'obb, by several deeds executed between Eebruary, 1855, and September, 1862. Andrew B. Cobb died in January, 1873, and Waddell, the tenant by the curtesy, died May 29th, 1884.

The statutes of limitations do not expressly, or in terms, affect equitable suits, but courts of equity, in enforcing equitable rights or remedies, give effect to the statute. The extent to- which effect is given to the statute depends somewhat on the nature of the equitable jurisdiction invoked. Where the suit is based on a legal right, and the appeal -is to the auxiliary jurisdiction of this court, and equitable aid is sought for the purpose of removing the obstructions to complainant’s legal right, a delay in the application for equitable aid will not, ordinarily, or in the absence of special equities, bar the equitable right, unless the legal right is barred. Burne v. Partridge, 16 Dick. Ch. Rep. 434, and cases cited at pp. 436, 437. Where the substantive right asserted is one as to which the jurisdiction in equity is concurrent with that at law, the statute of limitations is a bar in equity as well as at law. Conover v. Conover, Sax. 403 (1831); Marsh v. Oliver, 1 McCart. 259 (Chancellor Green, 1862).

Where the right asserted or the remedy sought is purely equitable, the applicability of the statute depends to some extent upon the, special character of the equitable right asserted or remedy sought. If the right claimed rests upon an express or direct and subsisting trust, clearly established, the statute of limitations is not held to be a bar, and such trust will be enforced unless there has been an express repudiation of the trust, and a holding adverse to the trust continued for the time-fixed by the statute of limitations. Allen v. Woolley, 1 Gr. Ch. 209 (1839); Starkey v. Fox, 7 Dick. Ch. Rep. 758 (Vice-Chancellor Green, 1894); affirmed on appeal, 8 Dick. Ch. Rep. 239; Stimis v. Stimis, 9 Dick. Ch. Rep. 17 (Chancellor McGill, 1895), and cases cited at p. 21.

If the jurisdiction is for the application of remedies purely equitable, such as specific performance, cancellation of instruments and the like, the period of delay which will be fatal does not depend upon the statute of limitations, but will be considered and determined with reference mainly to the circumstances and effect of the delay in the particular case, and the suit may be dismissed for delay less than the period fixed by the statute limiting the pursuit of legal remedies. The general equitable rule applicable to this class of cases is that which requires vigilance in the prosecution of rights. A late case in the court of errors and appeals—Lutjen v. Lutjen, 53 Atl. Rep. 625 (November, 1902)—collects and reviews our decisions illustrating the application of the doctrine of laches in cases of this character. The bill in this case was filed to set aside the release of a legacy given to. an administratrix upon the ground of fraud, and, under the circumstances, a delay of nine years and eight months was held fatal.

In cases of equitable titles to real estate courts of equity will .apply the period of limitation of the legal estates of an analogous character. 2 Story Eq. Jur. § 1520. Where the trust is an implied or constructive trust the statute is applicable (McLane v. Shepard, 6 C. E. Gr. 76), and where, by reason of an implied trust, a court of equity declares equitable estates to exist equity follows the law in applying the bar of the statute to the equitable, estates so created. Hoveden v. Lord Annesley, 2 Sch. & L. 607, at pp. 611, 632, 637 (Lord Redesdale, 1805), is the leading case upon the application of the statute to equitable estates.' Hall v. Otterson, 7 Dick. Ch. Rep. 522, and cases cited at p. 533 (Vice-Chancellor Green, 1894), for the rule that a cestui que trust whose equitable interest is reversionary is not bound to assert his title until it comes.into possession. Thompson v. Simpson, 1 Dr. & War. 489; Life Association, &c., v. Siddal, 3 De G. F. & J. 58; 2 Perry Trusts § 860.

The present ease is one where an implied or constructive trust is alleged and has been sufficiently proved. The trust arises from the payment of the purchase-money of land, and in equity this trust is made effective by holding that equitable interests or estates in the land, proportionate to, or‘dependent on, the proportion, of the purchase-money paid, are created, or, in technical language, result from the payment. In the present case an equitable estate in fee in Mrs. Waddell, subject to her husband’s tenancy by the curtesy, resulted, by operation of law, from her ownership, subject to this right. During the continuance of the marriage the statute of limitations did not run in equity against the wife and in favor of her husband (Yoemans v. Petty, 13 Stew. Eq. 495; Alpaugh v. Wilson, 7 Dick. Ch. Rep. 424; affirmed on appeal, 7 Dick. Ch. Rep. 589), and after the death of the wife the statute did not run against the children until they arrived at age. The tenancy by the curtesy did not expire until Waddell’s death, in 1884. In November, 1892, the complainants brought suit in ejectment against the defendants to■ recover possession of lands now in dispute, claiming the entire legal title to all of the lands. In that suit it was decided that the plaintiffs were entitled to recover the equal undivided one-third part, but that as to the other two-thirds they had no title at law. Einal judgment was entered in this action in Eebruary, 1894, and the present bill was died January 18th, 1895. The applicability of the statute depends on the question whether this suit is to be considered as substantially one where the object is to establish and enforce an equitable estate or interest in land. If it is, then, following the analogy of the statute of limitations applicable to legal estates, the action is not barred until the right of entry would have been lost on a legal title. Such right of entry accrued on the death of the tenant for life. Pickney v. Burrage, 2 Vr. 21. In my opinion the suit is essentially a suit to declare the equitable estate which'arose out of, and resulted from, the payment of the purchase-money of the conveyance, and to give to the cestuis que trust the enjoyment of these estates in the same manner and to the same extent they would have been entitled to the enjoyment of the legal estate had the legal title been made to. Mrs. Waddell, who paid the consideration. The statute should not be applied or begin to run against Mrs. Wad-dell’s heirs or their grantee until after the termination of the life estate of her husband. This relief from the operation of the statute against Mrs. Waddell and those claiming under her from 1838 to the death of the tenant by the curtesy, in 1884, is the exact situation which the transaction would have assumed had the conveyance of the legal title been made in 1838 to Mrs. Waddell, as it should have been, and neither Waddell nor those claiming under him in this case have shown any special equitable circumstances which entitle them to call upon this court to make the equitable titles or interests in the land in question less extensive than the legal title would have been had it been properly made.

I will advise a decree for complainants.


source: Caselaw Access Project

author: Emeby, V. C.

license: Public Domain

text:
    The Cumberland Lumber Company v. The Clinton Hill Lumber and Manufacturing Company.
    [Filed February 13th, 1903.]
    1. As a defence to an application by a receiver for an order authorizing an assessment on stockholders for unpaid subscriptions, the stockholders cannot set up the fact that the company never became a corporation de jure, or that the company never became a corporation de facto, or that the agreement to incorporate was abandoned1 and the subscriptions were canceled1 by the subscribers.
    2. Where insolvency proceedings have been instituted against a company and a receiver appointed, the final ascertainment in such proceedings of the amount of debts- owing by the company must be taken as final, and cannot be questioned in proceedings by the receiver for an order to authorize an assessment on stockholders or persons claimed1 to be such.
    3. When a receiver of an insolvent company shows, in proceedings for an order authorizing an assessment against delinquent subscribers to stock, a case which entitles him to test by suit the status of persons supposed to-be stockholders, but who allege that they are not, the court should direct the assessment, and leave the liability of the individual subscribers to be tested by suit, if necessary.
    4. Where the receiver of an insolvent company has no assets for the prosecution- of a disputed claim, and the stockholders of the company have not asserted the validity of the claim and- indemnified him against the expenses of a suit, he cannot be required to bring suit thereon before the court will be authorized to order an assessment on the stockholders.

      On application of receiver for assessment of stockholders for subscriptions.

      Mr. James B. Howell, for the receiver.

      Mr. Frank B. Bradner, contra.

   Emeby, V. C.

In this case I will advise an order authorizing the receiver to call upon the respondents as stockholders for such an amount of their subscriptions, not exceeding sixty per cent, of the subscriptions made by the individual respondents and William S. Ket'cham, Sr., as may be necessary to pay the debts against the company allowed by the receiver, including the costs and expenses of administration. If these amounts are not agreed upon I will settle them. The receiver will also be authorized to enforce payment of the unpaid subscriptions to this amount, by suit, if necessary, against each of the respondents claimed to be stockholders. The order will be made without prejudice to the rights of any of the respondents to any defence they may have to any action, legal or equitable, which might be brought against them for such alleged stock subscription.

The principal defences set up to the application are—first, that the company never became a corporation de jure, and the corporators never became liable on their subscriptions; second, that it never became a corporation de facto; third, that the agreement to incorporate was abandoned and the subscriptions were canceled by the subscribers; fourth, the statute of limitations; fifth, that the claim against the estate of William S. Ketcham is barred by a decree of the orphans court. All of these defences are, in my judgment, defences which must be set up and considered in an action to recover the subscription, and not on this application. In Dorris, Receiver, v. Sweeney, 60 N. Y. 463 (1875), cited 'by respondents’ counsel, the defence of no corporation was sustained in an action by the receiver to recover the subscription.

The whole of this court’s authority on an application of this character, as I understand it, extends, first, to the ascertainment of the amount of the debts which are valid as against the company itself; second, the ascertainment of the stockholders of the company who have not fully paid their subscriptions or for their stock, and third, the amount of the call for unpaid subscriptions or stock necessary to pay the debts, taking into account the assets of the company in the receiver’s hands and the solvency or insolvency of the stockholders liable, or claimed to be liable.. As to the first, the final ascertainment of the amount of debts in the insolvency proceedings itself must be taken as final against the company, and for the purpose of this proceeding, as against the stockholders or persons claimed to be such. As to the second point, if the status of the respondents as stockholders is disputed, and the receiver shows on his part a case which entitles him to test this question by suit, the court should direct the assessment, leaving the defences of any stockholder or alleged stockholder to be settled by suit, if necessary. The receiver does show such a ease here, and therefore should be allowed to test the liability of the respondents as stockholders by regular proceedings. The present proceeding is, in my judgment, neither intended for, nor adapted to, the settlement of the above defences' of the different stockholders or persons claimed to be stockholders, set up' in this proceeding against a recovery for unpaid subscriptions for stock. This is purely a judicial proceeding of an administrative character, intended to give to the receiver the same status which the company itself had, or might reasonably be claimed to have, to make a call for the payment of its debts against its stockholders or persons claimed to be such. In relation to the calls upon stockholders for the payment of debts, the receiver succeeds to the rights of the company. Falk v. Whitman Cigar Co., 10 Dick. Ch. Rep. 396 (Vice-Chancellor Stevens, 1897). It is objected that'by the provisions of the twenty-seventh section of the Corporation act the assessment by directors could only be made by the consent of two-thirds of the stockholders, but this express provision authorizing the directors, at their discretion, to make the call for any purpose, does not touch, the power or the duty of the directors to make a call, when necessary, for the payment of the debts, and in case of insolvency, the court of equity will execute this trust upon which the capital stock is held, by directing the assessment. 3 Thomp. Corp. ¶¶ 3386, 3537. ■

In reference to the third question to be settled on this proceeding, viz., the amount of the assessment, it is insisted that the receiver has a right of action or claim against the estate of William S. Ketcham for' the subsequent conversion to his own use of the goods and chattels, which, as the receiver claims, were conveyed to the company in payment of forty per cent, of the subscriptions of Ketcham and his two sons to the capital stock, and that he should exhaust this right of action before an assessment is made. There is, in my judgment, no substantial basis for this contention. The claim is disputed, the receiver has no assets for its prosecution, and could not be required to prosecute in aid of the stockholders, except upon their indemnification against the expenses. Kalmus v. Ballin, 7 Dick. Ch. Rep. 290, 295. In the absence of such indemnification and of the stockholders’ assertion of the validity of the claim, the receiver, for the purpose of the speedy settlement of the estate, as required by the general policy of the Insolvent Corporation law, should be authorized to call for the unpaid subscription, leaving to the stockholders the right, if they desire, to prosecute for their own indemnification hereafter in the receiver’s name, if necessary, any claim the company may have against the estate of Ketcham for this conversion of the goods.

The receiver will therefore be directed to make an assessment, and the form of the order will follow the order in Falk v. Whitman Cigar Co., supra.


author: Emery, Y. C.

text:
    The Cumberland Lumber Company v. The Clinton Hill Lumber Company et al.
    [Filed February 13th, 1903.]
    1. The stockholders of a corporation cannot intervene, in an insolvency suit against it, to interpose defences that the corporation itself cannot set up.
    2. AYhile the stockholders of a corporation cannot interpose any defences to an insolvency suit against it that the corporation itself cannot set up, they can have the validity of matters alleged as a defence to their liability as stockholders adjudicated in suits brought by the receiver to collect assessments levied against them.
    3. When a corporation has been decreed insolvent and a receiver appointed, interest on the corporation’s debt should be included in an assessment against the stockholders.
    4. A receiver of an insolvent corporation is entitled to have expenses incurred in suits brought pursuant to 'the court’s order included in an assessment against the stockholders, even though the costs paid in such suits went to persons to b? assessed as stockholders.
    5. The receiver of an insolvent corporation is entitled to have an allowance for his fees and those of his counsel included in an assessment against the stockholders.
    On application of receiver to assess stockholders, and application of stockholder to' open decree on bill, &c.

      Mr. Frank E. Bradner, for the stockholders.

      Mr. James E. Howell, for the receiver.
   Emery, Y. C.

The application to open the decree in the insolvency proceedings for the purpose of allowing the respondents, claimed to be stockholders,' the opportunity to litigate in that case, the questions presented by the petition must be 'denied.

That decree was made on. a bill filed by the Cumberland Lumber Company and Strie'by, Sprague & Company, creditors of the Clinton Hill Lumber and Manufacturing Company, an insolvent corporation, and the claims of complainants were based upon decrees of this court previously made in causes in which they were complainants and the Clinton Hill company was one of the defendants. The Clinton Hill company appeared in these suits and contested them, and, upon its appeal, the decrees were sustained. The company appeared by solicitor in the suits and on the appeal. Subsequently a receiver was appointed in insolvency proceedings against the company, on a bill filed April 9th, 1895, after service upon one William S. Kéteham, as the president of the company. He had in the previous suits against the company acted, or assumed to act, as such officer. Upon the application of the receiver to assess stockholders for the payment of debts, the present petitioners, who are stockholders, or alleged stockholders, of the company, apply to open the decree in the insolvency proceedings, for the purpose of allowing them as individuals to set up defences, which may be divided into the following classes: First, that the Clinton Iiill company was never a corporation de jure or de facto; second, that no certificates of stock were ever issued; third, that William S. Ketcham, Jr., appeared in the suits as an officer of the company without authority; fourth, that the decree in insolvency was entered without notice to the alleged corporation or any of the present alleged stockholders, except William S. Eetcham, Jr., and was made without authority, and that one of the complainants, Strieby, Sprague & Company, had knowledge, before instituting proceedings against the corporation, that it had no existence in law or in fact! Nothing is alleged against the other complainant, but its claim has been purchased since these proceedings for assessments were instituted by one of the respondents.

In my judgment none of these questions would have been triable in the insolvency proceedings had the present application been then made. So far as relates to the existence de facto of the alleged corporation, the decrees in chancery in the suits brought by the complainants were necessarily conclusive upon the point, so far as the corporation is concerned, and are still conclusive. If there was a corporation de facto, the court of equity would seem to have no jurisdiction to try the question whether there was a corporation de jure. Attorney-General v. American Tobacco Co., 10 Dick. Ch. Rep. 352, and cases cited at pp. 368, 369; affirmed on appeal, 11 Dick. Ch. Rep. 847. The corporation was the only defendant in the insolvency suit, and the stockholders, if they could be permitted to intervene for any purpose, would not be permitted to intervene in that suit, as parties or otherwise, to set up defences which the corporation itself could 'not have made. Unless there is a defence on the merits, the corporation itself would not be entitled to open the decree. The effect and finality, as against petitioners, of the decrees, either in the original suits or in the insolvency proceedings, is another matter, and, as against them, the validity of the present defences are matters for adjudication in the suits to be brought by the receiver to recover the assessments. This was the view which I took as to some of these defences, when they were presented as defences to the order for assessment, and a fortiori the decree in insolvency should not be opened for the purpose of trying them in that suit at this late day, after the time for appeal has passed and when the decree has been enrolled.

Second. The claims of creditors, with interest on them, are to be included in the amount to be assessed. As against a stockholder, interest is to be allowed to the same extent as if the action were against the corporation itself, not exceeding, however, the maximum liability of the stockholder for unpaid stock. Richmond v. Irons, 121 U. S. 27, 64 (1886); 6 Thomp. Corp. § 7314.

Third. The costs paid by the receiver in the suits at law authorized to be brought by the order of the court are to be included in the assessment. These will include his own taxed costs. The general rule'seems to be settled that the receiver is to be allowed for expenses in suits which have been incurred by the express direction or approval of the court appointing him. 2 Dan. Ch. Pr. (6th Am. ed.) *1747. The costs on appeal should also be allowed. These were expenses necessarily incurred in the performance of the receiver’s duties. The contention in this case is that the general rule as to the reimbursement of the receiver’s expenses should not apply, because the costs paid were paid to the persons now assessed as stockholders or alleged stockholders, and that therefore the order for assessment is, in effect, an order that they should repay the costs which have been made to them. But upon the question of the right of the receiver to reimbursement of expenses properly and necessarily incurred in executing his trust, the coincidence that the stockholders assessed for repayment, or some of them, are the persons to whom the payments were made, cannot, as it seems to me, vary the general rule. The right of the receiver to reimbursement from the trust fund depends on the necessity or propriety of the payments and expenses he has made or incurred in carrying out his trust, and to this extent he is entitled to protection and reimbursement. As to the bulk of the costs, viz., those incurred in the suits at law, these would, as it now turns out, have been unnecessary had the respondents appealed promptly from the original order of assessment, instead of delaying until after the suits had been brought and the statutory period for appeal had nearly expired. As to the costs on appeal, the receiver, having the order below in his favor, was entitled and, I think, bound to assert it in the court of appeal, and is entitled, as any other trustee would be, to the necessary and proper expenses of appeal.

Fourth. In addition to the costs, a proper allowance for counsel and receiver’s fees should be allowed, including an allowance for the probable litigation in prosecuting the assessments. The allowance for counsel fee will be $1,000, and for the receiver’s fee, $150.


author: Emery, V. C.

text:
    Alfred O’Brien et al. v. The Musical Mutual Protective and Benevolent Union, Local No. 14, National League of Musicians et al.
    [Filed February 11th, 1903.]
    1. Where the charter of a local voluntary society has been revoked by its superior general body, no court will, in the absence of a question of property right, exercise jurisdiction in the matter until the remedies by an appeal within the society have been exhausted.
    2. The rights of membership evidenced by a charter granted, to a local voluntary society by the general body are not, in any sense, themselves property rights.
    3. The rules and regulations as to membership in a voluntary association do not, in any proper sense, confer a property right.
    4. If a general voluntary association refuses to continue association with a local association, both being unincorporated, a court of equity cannot, in the absence of any question of property right, enforce the continuance of the relation voluntarily assumed.
    5. Where one of the alleged objects of a voluntary musical association was to secure, so far as practicable, the control of the employment of musicians within- the respective districts of the local societies, and the exclusion from such employment of those not members, the courts will not interfere to compel the continuance of association of the societies, or of membership therein, the object of which is an- unjustifiable interference with the freedom of contract and of trade.
    On application for preliminary injunction. Heard on bill and affidavits and answer and affidavits.

      Mr. Peter J. McGinnis, for the complainants.

      Mr. George 8. Hilton, for the defendants.
   Emery, V. C.

This is an application on behalf of complainants, claiming to be the local association in Paterson of the American Federation of Musicians (a labor union), to enjoin the defendants, who also claim to be the local association for Paterson, from acting or holding themselves out as members of the federation. The state of facts presenting the question for decision is substantially as follows:

On January 31st, 1902, the American Federation of Musicians, a general or national federation, granted to the seven complainants and one Shannon a charter as a local association (No. 179) of the federation, in Paterson. The American federation and the local were both unincorporated or voluntary associations.

In the application for the charter, jurisdiction or exclusive authority for the local association was claimed or asked for the territory within ten miles of the Paterson city hall in all directions, except in a southerly direction, and in that direction to the city line. The constitution of the federation (article 7) provides that the local shall be entitled to such jurisdiction ás they claim at the time of applying for the charter, but the “certificate of affiliation,” which is the only charter granted, purports to grant a certificate of affiliation to the applicants, the complainants, Shannon and their successors, “to constitute a local association for the purpose of a thorough organization of the federation of all musicians,” and the association, being duly formed, is authorized to initiate members according to its own by-laws. The certificate appears to have been issued by the executive council or board. This board (by-laws, section 6) has a general supervision of all matters pertaining to the federation. The executive board, after an investigation and report by the secretary as to the circumstances of issuing the charter, made an order on June 7th, 1902, that the charter for the local association (No. 179) be reopened for thirty days, to allow all musicians in its jurisdiction an opportunity to join as charter members. The privileges and fees of charter members are different from and more favorable than those'of members admitted subsequently. This order to reopen the charter was not at once obeyed by the officers of the local, but it was subsequently complied 'with, after the secretary of the federation, on September 18th, 1902, had directed the secretary of the local association to reopen the charter -for thirty days, publishing a notice in the local papers. The secretary of the federation further stated that failure to comply with the direction to reopen the charter would cause suspension of the charter. Complainants, in their bill, challenge the validity of this order to reopen the charter, but as they acquiesced in the order, published the notice required and did reopen the charter, this objection cannot be considered as a ground for preliminary injunction. It appears by the defendants’ affidavits that one object in reopening the charter was to allow the admission as charter members of a local association then existing in Paterson, known as Local 14, National League of Musicians, and whose members (one hundred and forty-nine in number) are defendants in this suit. This local No. 14 is incorporated under the laws of New Jersey. The reopening of the charter was for the purpose of allowing applications for admission of the defendants and other musicians on the basis of charter members of the association.

The certificate of affiliation was granted, as has been stated, to complainants, “for the purpose of a thorough organization of the federation of all musicians,” and the power to prescribe conditions of membership is in terms given by the constitution to the association duly formed. Under these terms the American Federation of Musicians would seem to have the-right to supervise the 'original organization for the purpose of procuring a charter, and would, as I am now inclined to think, have the right, in a proper case, to direct the opening of the charter and to supervise or review the proceedings for organization on the reopening.

The executive officer of the district in which the local is situated has (by-laws, section 8) charge of the organization of associations within his district, and this officer attended at Paterson for the purpose of supervising or giving directions as to the application for membership under the reopening of the charter. This officer, as he says in his affidavits, directed that the members of the association of musicians in Paterson, called the Musical Mutual Protective and Benevolent Union, Local No. 14, National League of Musicians, should be allowed to apply and be admitted in a body as charter members. Complainants •deny that these directions were given, but for the purpose of this application the defendants are entitled to the benefit of their statements under oath. The application was made in this form by the president and secretary of local No. 14 on behalf of the body, and thereupon the complainants, being the officers, or some of the officers named under the existing charter, refused or declined to allow the admission of the members of the musical union as charter members under this application. The claim of the complainants is that under the by-laws and charter of the American Federation of Musicians the admission must be of each person separately and under application of the form presented by the rules or by-laws of the association. By reason of this action refusing the admission of the members of the local No. 14 in a body, upon the reopening of the charter, the charter granted to complainants was revoked. By what officer the formal revocation of the charter was actually made does not appear with exactness by the affidavits on either side, but the fair construction of all of the affidavits is that the charter was revoked by the executive officer of the district, and that his action was approved by the president of the American Federation of Musicians, who> under the by-laws (section 1) exercises a general supervision over the affairs of the federation and decides cases of emergency. Under the by-laws (section 6) an appeal lies from the decision of an executive officer to the executive board, which is composed (constitution, article 8) of the president, vice-presidents, secretary and executive officers of the districts, and a further appeal lies from the decision of the executive board to the convention of the federation. No appeal from the decision revoking the charter has been taken, nor have complainants taken any steps or intimated any intention to prosecute an appeal within the association, although notice of the revocation, of the charter was received about November 1st, 1902, two- months before the filing of this bill. Subsequently to this revocation the American Federation of Musicians granted a charter (as local No. 248) to the defendants, the musical mutual, &c., association; and these defendants now claim to be members of the American Federation of Musicians for Paterson and vicinity. An opportunity was given to the complainants' association to join this local in a body, but they did not accept this offer. The complainants, being the original charter members (except Shannon), claiming under the original charter or certificate as Ho. 179, and that its revocation is illegal, now apply individually and on behalf of the members of their association (numbering about one hundred) to enjoin the local Fo. 14, and all of its individual members (about one hundred and fifty), parties to the suit, from organizing as a local of the American federation in Paterson, or in the territory claimed to belong exclusively to complainants, and from continuing this organization or advertising as such, and from applying to the trade unions of Paterson for recognitions as such association. The American federation is not a party to the suit, but one Bierre, the executive officer of the district, is made a party, and an injunction against him is asked. He is a non-resident of the state. While the complainants have paid the sum of $37.50 to the American federation as the charter fee, and this sum has not been tendered back, the complainants have had the privilege of coming in under the new association organized by defendants, under the direction of the American Federation of Musicians, without payment of any additional fee. This suit, however, is not brought by complainants against the American federation to recover this money, nor is it brought to assert against the defendant local association any right to funds or other property, or to the use or enjoyment of any property, real or personal. Fo right of property is therefore involved in the case, unless the right of membership is to be called property. It is claimed by the bill and affidavits that this membership of the American Federation of Musicians, through its local association, carried with it certain advantages and privileges to the individual members, resulting from the practice of labor or trade union organizations, especially in Paterson, to employ no musicians except those connected with the American federation, and it is also claimed that the deprivation of this membership will expose the individual members of complainants’ association to a pecuniary loss by reason of the subjection to posting or denunciation by trade unions as “scabs” or “unfair,” and to the penalty of being blacklisted by labor organizations generally throughout the United States and Canada.

If the association were incorporated there would be two valid objections to the use of an injunction for the purpose of compelling the American federation (if a party h> the suit) to continue and to recognize the membership which, rightfully or wrongfully, it has dissolved: First, rights of membership in incorporated voluntary associations are, under the settled practice in this state, and where no right of property of the alleged member is involved, to be determined by the supreme court on applications for mandamus to admit to membership. Sibley v. Carteret Club, 11 Vr. 295; Zeliff v. Knights of Pythias, 24 Vr. 536 (Supreme Court, 1891). These cases are cases where the individual member who was, as he claimed, wrongfully expelled applied for restoration. In the present case the local association is the member of the American federation, and the membership in the American Federation of Musicians is .effected only through membership in the local. The constitution (article 3, section 1) expressly provides that the local associations are the members of the American federation. In the second place, where the question is one of membership merely, and the decision involves a matter of discipline or application of the rules and regulations of the association and not of property right, no court, either of law or in equity, will exercise jurisdiction until the remedies by appeal to the authorities.of the association, under its rules, have been exhausted. Zeliff v. Knights of Pythias, supra. The only cases which have come, under my observation where the courts afford relief to a person claiming membership in an incorporated association, who has not exhausted his right of appeal upon the question of membership within the order, are those where the person claiming membership claims also, as a result of membership, some distinct individual property right, under a contract or other obligation of the association with him as a member. Supreme Lodge v. Eskholme, 30 Vr. 255 (Errors and Appeals, 1896). In these cases, which involve a recognized property right, the right of membership is decided by the court as incidental to the contract or obligation of the association; but where the question is one of settling the general status as to membership, for all purposes, as between the complaining party and an incorporated association, the remedies for restoring to membership provided by the association itself must be first exhausted. Where the association is unincorporated the personal relation between the members is analogous to that of partners, and the legal remedy by mandamus, which is appropriate for the purpose of restoring the relationship arising from membership in a corporate body, would seem to be inapplicable, and in such associations it may be that the proper procedure to protect the common property rights of a member expelled in violation of the regulations of the order is by an injunction -restraining interference with his use and enjoyment of such common rights. But the rule requiring prosecution of appeal or other remedies within the order or association itself, before application to a court of equity, is one which seems to be applicable to all associations, whether incorporated or unincorporated, where the question is one merely of membership, irrespective of the enforcement of a property right. In some- courts the exhaustion of the remedies within a voluntary association is required before a court of law or equity will interfere for their protection, even when a right of property is involved. Oliver v. Hopkins, 144 Mass. 175 (1887); Grand Lodge Knights of Pythias v. People, ex rel. Waldeck Lodge, No. 136, Knights of Pythias, 60 Ill. App. 550, cited in 49 L. R. Ann. 379. Other courts take a different view. Cases cited in Nibl. Acc. Ins. & Ben. Soc. 156, 215, inter al.; Loubat v. Leroy, 40 Hun 546.

Complainants claim that the charter confers a property right, the right being the exclusive right of membership in the federation within a certain district, and the right to the use of the name of the association. But manifestly the charter, or, more properly, “the certificate of affiliation,” does not convey, or purport to convey, any property right, -either in the name or otherwise, but is only the method by which, under their rules and regulations, the right of membership in the federal association and in the local is evidenced. These rights of membership evidenced by the charter are not, in my judgment, in any sense themselves property rights, but are personal rights only.

A member of a local association may have or acquire, as against the federation, rights which are recognized property rights, such as a right to a share of its funds,' or to the use or enjoyment of its common property, but the rules and regulations as to membership cannot, in any proper sense, be properly said to confer a property right, and are essentially, in their nature, only rules and regulations describing or defining the method of their voluntary association, with its terms and conditions. Being thus personal rights only, and being also purely voluntary, the enforcement of such rules and regulations governing mere membership, and such of the relations and privileges of the members and of the local and national associations as do not involve property rights, must be left entirely to the association itself, and the penalty of expulsion which it may enforce. But courts, either of law or equity, do not, on the application of either or any party, enforce, either by decrees for specific performance, injunction or otherwise, the continuance of the association or the performance of duties and privileges which, under their rules, the members or the association, national or local, as mere members, owe to each other. A recalcitrant member or local may be dismissed for violation of the rules of the association. A member of the association improperly expelled may, by action of the courts, be protected in his rights to the common property. But the mere continuance of the relationship itself, as between all concerned, is voluntary, not legal. If a member or local desired to withdraw, the withdrawal could not be prevented by injunction or otherwise, on the theory that the agreement of membership created a contract for the performance of the duties resulting from membership which a court would enforce by compelling the performance of-the rules regulating the duties. And if the national or general association refuses to continue association with a local, whether for a valid or an invalid reason, a court of equity cannot, in the absence of any question of property right, enforce the continuance of the relations voluntarily assumed. In this respect the rights of members of an unincorporated association differ from those of the members of an incorporated association. As was said by Lord Cranworth, in Forbes v. Eden, L. R. 1 H. L. Scotch App. 568 (1867): “Save for the due disposal and administration of property, there is no authority in the courts, either of England or Scotland, to' take cognizance of the rules of a voluntary association entered into merely for the regulation of its own affairs. * * * There is no direct power in the courts to decide whether A or B holds a particular station according to the rules, of a voluntary association. But if a fund held in trust has to be paid over to the person who, according to the rules of the society, fills that character, then the court must make itself master of the question necessary to enable it to decide whether A or B is the party entitled.” This was a case involving alleged rights of membership in a voluntary religious association, but the general principle thus laid down has ever since been followed in relation to the merely personal rights of membership in all voluntary associations. Rigby v. Connol, L. R. 14 Ch. Div. 482, 487 (Jessel, M. R., 1880); Baird v. Wells, 44 Ch. Div. 661, 675 (Stirling, J., 1890); 1 Bac. Ben. Soc. (2d ed.) § 108. There is another objection to giving the aid of a court of equity to the enforcement in any manner of this alleged privilege of exclusive membership. One of the objects, if not the principal object, of a labor union association, such as the complainants claim to be, and the main result of membership in it, is the control or regulation, by the association or combination, of the individual action of its members in matters of contract or trade relating to their occupation or profession. The design of these common regulations controlling individual members is to secure, so far as practicable, or as is deemed advisable by the common association or body, the control of the employment of musicians within the respective local districts, and the exclusion from- such employment of those who are not members—non-union men, as they are called. Complainants’ bill and affidavits allege the advantages and benefits of the membership for this purpose of excluding others from employment within this district, and that this membership gives to defendants these advantages which they wish to secure for themselves. If their claim is well founded, the court, by compelling the continuance of the membership and enforcing, by injunction or otherwise, the agreements as to exclusive jurisdiction and rights of membership adopted by this voluntary association, would, as it seems to me, give a compulsory legal sanction to those rules and regulations of a voluntary association or combination of individuals which are intended to impose restrictive conditions on the individual right of contract and on the conduct of a trade, and to secure, within a certain district, the monopoly, so far as possible, of a particular kind of labor. While these rules and regulations made between the members or the locals of a trade union association for the purpose of restricting, or tending to restrict, the freedom of contract or of trade, may not be unlawful, they are certainly altogether voluntary, as between the persons who enter into them, either .personally or through local associations, and courts will not, either directly or indirectly, compel their performance. To compel, by injunction or otherwise, the continuance of association or of membership in these voluntary trade unions, either local or general, would, in my judgment, result in enforcing the performance of their restrictive regulations, and it would therefore be an unjustifiable interference with the freedom of contract and of trade. For both these reasons the application for injunction will be denied.


author: Emeby, Y. C.

text:
    Wallace Wilson v. American Palace Car Company et al.
    [Filed February 13th, 1903.]
    A bill by a stockholder of a foreign corporation will lie against the corporation and others, where it could have sued as complainant in its own name; is a necessary party to the suit, and is made defendant only because controlled by the officers and directors, whose dealings with its assets are questioned by the bill.
    On bill and plea to jurisdiction.

      Mr. Robert II. McCarter, for the plea.

      Mr. Edward Q. Keasbey, for the complainant.
   Emeby, Y. C.

The hill in this case is filed by a stockholder of the American Palace Car Company (a Maine corporation) against a New Jersey corporation by the same name, against individual defendants, resident in New Jersey, and also against the Maine corporation; against a New York corporation of the same name and against defendant Denham. The Maine corporation, the New York corporation and Denham have filed a plea to the jurisdiction.

The bill, in its general aspects, is that of a bill filed by a stockholder of the Maine corporation, in the right of the company, and as representing its rights, to set aside a transfer of the assets of the company made to the New Jersey company, which assets, it is alleged, are to be, either wholly or in part, further transferred to the New York company, by the aid or contrivance of the defendant Denham, one of the officers of the New Jersey company. The transfer is alleged to be a fraud upon the Maine company and its stockholders. The plea to the jurisdiction is based upon the claim that neither the Maine corporation nor the New York corporation has 'been found within the state, nor served with process herein; that they transact no business here, have no place of business or agency here, and that the subject-matter of the suit is not within this state.

There can be no question that the Maine corporation could sue as complainant and in its own name upon the equitable right set up in this bill. The suit is really a suit on behalf of the Maine company, and that company is a necessary party to a suit of this character, and the only reason it is made defendant instead of complainant, is because the company itself is controlled by the officers and directors, whose dealings with its assets are questioned by the bill. The general right and obligation of a stockholder in such representative suit to make the company he assumes to represent, and whose rights are the subject for adjudication, a defendant to the suit, is clear; and if the company thus represented by complainant had been a New Jersey company, no question as to jurisdiction could have been raised.

In these cases of representative rights, the company represented, although made formally a defendant, is strictly and properly the real' complainant, and in matter of form could properly be made complainant. This is the usual practice in England. Duckett v. Gover, 6 Ch. Div. 82, 85 (Jessel, M. R., 1877). If the company applies to strike out its name as complainant the court will allow it to be made a defendant.

• In this country the company represented is usually made defendant in the first instance, where the defendants or officers, whose dealings on behalf of the company are attacked, and they also control the company’s action or defence.

In the present case, had I considered that there was an insuperable technical difficulty in making the Maine company a defendant, by reason of the impossibility of serving process or bringing the company into court, I should be inclined to direct that it be made a party complainant instead of defendant. But as the decree in the cause, if it should finally go for complainant, would be a decree in favor of the Maine company, I consider that company as now substantially the complainant in the suit, and that its plea to the jurisdiction cannot be sustained, except upon the theory that as against New Jersey defendants, whether individual or corporate, the stockholders of a foreign corporation cannot prosecute the company’s rights in any case without the consent of those who, for the time being, control the company’s formal appearance and defence. This would lead often to great inequity and injustice, and I am not willing to adopt such a rule.

As to the New York corporation, which is alleged to claim under the New Jersey corporation, if the complainant is entitled to a decree against the New Jersey corporation, the question whether a decree shall be made against the New York corporation, and to what extent, if that corporation does not appear, must be left for future decision. There is clearly no objection to giving the New York corporation an opportunity to come into the suit, if it desires to do so, and for this purpose to serve by publication.

The same reasons apply to the defendant Denham’s plea. The plea will be overruled.